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How China Imported A Record $70 Billion In Physical Gold Without Sending The Price Of Gold Soaring

Tyler Durden's picture




 

A little over a month ago, we reported that following a year of record-shattering imports, China finally surpassed India as the world's largest importer of physical gold. This was hardly a surprise to anyone who has been following our coverage of the ravenous demand for gold out of China, starting in September 2011, and tracing it all the way to the present.

 

China's apetite for physical gold, which is further shown below focusing just on 2012 and 2013, has been estimated by Goldman to amount to over $70 billion in bilateral trade between just Hong Kong and China alone.

 

Yet while China's gold demand is acutely familiar one question that few have answered is just what is China doing with all this physical gold, aside from filling massive brand new gold vaults of course. And a far more important question: how does China's relentless buying of physical not send the price of gold into the stratosphere.

We will explain why below.

First, let's answer the question what purpose does gold serve in China's credit bubble "Minsky Moment" economy, where as we showed previously, in just the fourth quarter, some $1 trillion in bank assets (mostly NPLs and shadow loans) were created  out of thin air.

For the answer, we have to go back to our post from May of 2013 "The Bronze Swan Arrives: Is The End Of Copper Financing China's "Lehman Event"?", in which we explained how China uses commodity financing deals to mask the flow of "hot money", or the one force that has been pushing the Chinese Yuan ever higher, forcing the PBOC to not only expand the USDCNY trading band to 2% recently, but to send the currency tumbling in an attempt to reverse said hot money flows.

One thing deserves special notice: in 2013 the market focus fell almost exclusively on copper's role as a core intermediary in China Funding Deals, which subsequently was "diluted" into various other commodities after China's SAFE attempted a crack down on copper funding, which only released other commodities out of the Funding Deal woodwork. We discussed precisely this last week in "What Is The Common Theme: Iron Ore, Soybeans, Palm Oil, Rubber, Zinc, Aluminum, Gold, Copper, And Nickel?"

We emphasize the word "gold" in the previous sentence because it is what the rest of this article is about.

Let's step back for a minute for the benefit of those 99.9% of financial pundits not intimate with the highly complex concept of China Commodity Funding Deals (CCFDs), and start with a simple enough question, (and answer.)  

Just what are CCFDs?

The simple answer: a highly elaborate, if necessarily so, way to bypass official channels (i.e., all those items which comprise China's current account calculation), and using "shadow" pathways, to arbitrage the rate differential between China and the US.

As Goldman explains, there are many ways to bring hot money into China. Commodity financing deals, overinvoicing exports, and the black market are the three main channels. While it is extremely hard to estimate the relative share of each channel in facilitating the hot money inflows, one can attempt to "ballpark" the total notional amount of low cost foreign capital that has been brought into China via commodity financing deals.

While commodity financing deals are very complicated, the general idea is that arbitrageurs borrow short-term FX loans from onshore banks in the form of LC (letter of credit) to import commodities and then re-export the warrants (a document issued by logistic companies which represent the ownership of the underlying asset) to bring in the low cost foreign capital (hot money) and then circulate the whole process several times per year. As a result, the total outstanding FX loans associated with these commodity financing deals is determined by:

the volume of physical inventories that is involved

commodity prices

the number of circulations

A "simple" schematic involving a copper CCFDs saw shown here nearly a year ago, and was summarized as follows.


As we reported previously citing Goldman data, the commodities that are involved in the financing deals include copper, iron ore, and to a lesser extent, nickel, zinc, aluminum, soybean, palm oil, rubber and, of course, gold. Below are the desired features of the underlying commodity:

  • China is heavily reliant on the seaborne market for the commodity
  • the commodity has relatively high value-to-density ratio so that the storage fee and transportation cost are relatively low
  • the commodity has a long shelf life, so that the underlying value of the commodity will not depreciate significantly during the financing deal period
  • the commodity has a very liquid paper market (future/forward/swap) in order to enable effective commodity price risk hedging.

Here we finally come to the topic of gold because gold is an obvious candidate for commodity financing deals, given it has a high value-to-density ratio, a well-developed paper market and very long "shelf life." Curiously iron ore is not as suitable, based on most of these metrics, and yet according to recent press reports seeking to justify the record inventories of iron ore at Chinese ports, it is precisely CCFDs that have sent physical demand for iron through the proverbial (warehouse) roof.

Gold, on the other hand, is far less discussed in the mainstream press in the context of CCFDs and yet it is precisely its role in facilitating hot money flows, perhaps far more so than copper and even iron ore combined, that is so critical for China, and explains the record amount of physical gold imports by China in the past three years.

Chinese gold financing deals are processed in a different way compared with copper financing deals, though both are aimed at facilitating low cost foreign capital inflow to China. Specifically, gold financing deals involve the physical import of gold and export of gold semi-fabricated products to bring the FX into China; as a result, China’s trade data does reflect, at least partially, the scale of China gold financing deals. In contrast, Chinese copper financing deals do not need to physically move the physical copper in and out of China as explained last year so it is not shown in trade data published by China customs.

In detail, Chinese gold financing deals includes four steps:

  1. onshore gold manufacturers pay LCs to offshore7 subsidiaries and import gold from bonded warehouses or Hong Kong to mainland China – inflating import numbers
  2. offshore subsidiaries borrow USD from offshore banks via collaterizing LCs they received
  3. onshore manufacturers get paid by USD from offshore subsidiaries and export the gold semi-fabricated products to bonded warehouses – inflating export numbers
  4. repeat step 1-3

This is shown in the chart below:

 

As shown above, gold financing deals should theoretically inflate China’s import and export numbers by roughly the same size. For imports, they inflate China’s total physical gold imports, but inflate exports that are mainly related to gold products, such as gold foils, plates and jewelry. Sure enough, the value of China’s imports of gold from Hong Kong has risen more than 10 fold since 2009 to roughly US$70bn by the end of 2013 while exports of gold and other products have increased by roughly the same amount (shown below). This is in line with the implication of the flow chart on Chinese gold financing deals: the deals inflate both imports and exports by roughly equal size.

Given this, that the rapid growth of the market size of gold trading between China and Hong Kong created from 2009 (less than US$5bn) to 2013 (roughly US$70bn) is most likely driven by gold financing deals.

However, a larger question remains unknown, namely that as Goldman observes, "we don’t know how many tons of physical gold are used in the deals since we don’t know the number of circulations, though we believe it is much higher than that for copper financing deals."

Recall the flowchart for copper funding deals:

  1. Step 1) offshore trader A sells warrant of bonded copper (copper in China’s bonded warehouse that is exempted from VAT payment before customs declaration) or inbound copper (i.e. copper on ship in transit to bonded) to onshore party B at price X (i.e. B imports copper from A), and A is paid USD LC, issued by onshore bank D. The LC issuance is a key step that SAFE’s new policies target.
  2. Step 2) onshore entity B sells and re-exports the copper by sending the warrant documentation (not the physical copper which stays in bonded warehouse ‘offshore’) to the offshore subsidiary C (N.B. B owns C), and C pays B USD or CNH cash (CNH = offshore CNY). Using the cash from C, B gets bank D to convert the USD or CNH into onshore CNY, and trader B can then use CNY as it sees fit.
  3. Step 3) Offshore subsidiary C sells the warrant back to A (again, no move in physical copper which stays in bonded warehouse ‘offshore’), and A pays C USD or CNH cash with a price of X minus $10-20/t, i.e. a discount to the price sold by A to B in Step 1.
  4. Step 4) Repeat Step 1-Step 3 as many times as possible, during the period of LC (usually 6 months, with range of 3-12 months). This could be 10-30 times over the course of the 6 month LC, with the limitation being the amount of time it takes to clear the paperwork. In this way, the total notional LCs issued over a particular tonne of bonded or inbound copper over the course of a year would be 10-30 times the value of the physical copper involved, depending on the LC duration.

In other words, the only limit on the amount of leverage, aka rehypothecation of copper, was limited only by letter of credit logistics (i.e. corrupt bank back office administrator efficiency), as there was absolutely no regulatory oversight and limitation on how many times the underlying commodity can be recirculated in a CCFD.... And gold is orders of magnitude higher!

Despite the uncertainty surrounding the actual leverage and recirculation of the physical, Goldman has made the following estimation:

We estimate, albeit roughly, that there are c.US$81-160 bn worth of outstanding FX loans associated with commodity financing deals – with the share of each commodity shown in Exhibit 23. To put it into context, the commodity-related outstanding FX borrowings are roughly 31% of China’s short-term FX loans (duration less than 1 year) .

Putting the estimated role of gold in China's primary hot money influx pathway, at $60 billion notional, it is nearly three time greater than the well-known Copper Funding Deals, and higher than all other commodity funding deals combined!

Under what conditions would Chinese commodity financing deals take place. Goldman lists these as follows:

  • the China and ex-China interest rate differential (the primary source of revenue),
  • CNY future curve (CNY appreciation is a revenue, should the currency exposure be not hedged),
  • the cost of commodity storage (a cost),
  • the commodity market spread (the spread is the difference between the futures
  • China’s capital controls remain in place (otherwise CCFD would not be necessary).

All of these components are exogenous to the commodity market, except one – the commodity market spread. This reveals an important point that financing deals are, in general, NOT independent of commodity market fundamentals. If the commodity market moves into deficit, or if the financing demand for the commodity is greater than its finite supply of above ground inventory, the commodity market spread adjusts to disincentivize financing deals by making them unprofitable (thus making the physical inventory available to the market).

Via ‘financing deals’, the positive interest rate differential between China and ex-China turns commodities such as copper from negative carry assets (holding copper incurs storage cost and financing cost) to positive carry assets (interest rate differential revenue > storage cost and financing cost). This change in the net cost of carry affects the spreads, placing upward pressure on the physical price, and downward pressure on the futures price, all else equal, making physical-future price differentials higher than they otherwise would be.

* * *

That bolded, underlined sentence is a direct segue into the second part of this article, namely how is it possible that China imports a mindblowing 1400 tons of physical, amounting to roughly $70 billion in notional, demand which under normal conditions would send the equilibrium price soaring, and yet the price not only does not go up, but in fact drops.

The answer is simple: the gold paper market.

And here is, in Goldman's own words, is an explanation of the missing link between the physical and paper markets. To be sure, this linkage has been proposed and speculated repeatedly by most, especially those who have been stunned by the seemingly relentless demand for physical without accompanying surge in prices, speculating that someone is aggressively selling into the paper futures markets to offset demand for physical.

Now we know for a fact. To wit from Goldman:

From a commodity market perspective, financing deals create excess physical demand and tighten the physical markets, using part of the profits from the CNY/USD interest rate differential to pay to hold the physical commodity. While commodity financing deals are usually neutral in terms of their commodity position owing to an offsetting commodity futures hedge, the impact of the purchasing of the physical commodity on the physical market is likely to be larger than the impact of the selling of the commodity futures on the futures market. This reflects the fact that physical inventory is much smaller than the open interest in the futures market. As well as placing upward pressure on the physical price, Chinese commodity financing deals ‘tighten’ the spread between the physical commodity price and the futures price .

Goldman concludes that "an unwind of Chinese commodity financing deals would likely result in an increase in availability of physical inventory (physical selling), and an increase in futures buying (buying back the hedge) – thereby resulting in a lower physical price than futures price, as well as resulting in a lower overall price curve (or full carry)." In other words, it would send the price of the underlying commodity lower.

 

We agree that this may indeed be the case for "simple" commodities like copper and iron ore, however when it comes to gold, we disagree, for the simple reason that it was in 2013, the year when Chinese physical buying hit an all time record, be it for CCFD purposes as suggested here, or otherwise, the price of gold tumbled by some 30%! In other words, it is beyond a doubt that the year in which gold-backed funding deals rose to an all time high, gold tumbled. To be sure this was not due to the surge in demand for Chinese (and global) physical. If anything, it was due to the "hedged" gold selling by China in the "paper", futures market.

And here we see precisely the power of the paper market, where it is not only China which was selling specifically to keep the price of the physical gold it was buying with reckless abandon flat or declining, but also central and commercial bank manipulation, which from a "conspiracy theory" is now an admitted fact by the highest echelons of the statist regime. and not to mention market regulators themselves.

Which answers question two: we now know that of all speculated entities who may have been selling paper gold (since one can and does create naked short positions out of thin air), it was likely none other than China which was most responsible for the tumble in price in gold in 2013 - a year in which it, and its billionaire citizens, also bought a record amount of physical gold (much of its for personal use of course - just check out those overflowing private gold vaults in Shanghai.

* * *

This brings us to the speculative conclusion of this article: when we previously contemplated what the end of funding deals (which the PBOC and the China Politburo seems rather set on) may mean for the price of other commodities, we agreed with Goldman that it would be certainly negative. And yet in the case of gold, it just may be that even if China were to dump its physical to some willing 3rd party buyer, its inevitable cover of futures "hedges", i.e. buying gold in the paper market, may not only offset the physical selling, but send the price of gold back to levels seen at the end of 2012 when gold CCFDs really took off in earnest.

In other words, from a purely mechanistical standpoint, the unwind of China's shadow banking system, while negative for all non-precious metals-based commodities, may be just the gift that all those patient gold (and silver) investors have been waiting for.  This of course, excludes the impact of what the bursting of the Chinese credit bubble would do to faith in the globalized, debt-driven status quo. Add that into the picture, and into the future demand for gold, and suddenly things get really exciting.

 

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Sat, 03/22/2014 - 21:50 | 4581437 novictim
novictim's picture

Just remember.  Gold only maintains a value in a well functioning economy/society.  In a post-catastrophe world then gold is just a soft metal not very good for making arrow heads.

When the shit hits the fan and our civilization folds, ask yourself: "How many pounds of gold buys me a juicy fat rat?".

I'm long on rats.

Sat, 03/22/2014 - 21:58 | 4581453 JohnnyBriefcase
JohnnyBriefcase's picture

That's why I diversify my investments.

Gold, lead, copper, steel, brass.

Sat, 03/22/2014 - 22:29 | 4581511 knukles
knukles's picture

If the above is even reasonably accurate, and boy, oh boy, it connects a whole buncha dots for me, there are two very, very big risks sitting out there which cannot be ignored and will cause pure havoc when finally realized. (reality wise, somewhere past discovery and first notice ((bad pun, notice, did you notice))... sheesh)
First, there's an even bigger short in gold paper relative to real non-tungsten, salted, leaded, deliverable shiny than ever thought, much of it "wrapped up" in said CCFDs, and
Two, said CCFDs are one hell of a serious complex bit of financial engineering reeking with a veritable plethora of already rotting corpses of counter-party, rehypothecation, fraud and associated scam/ripoff risks to name but a few.

But, nonetheless, somebody somewhere in China is long a lot of phizz, good delivery phizz at that, that once the multiplicity of paper vs real ownership becomes moot to the point of he who has it wins (the ownership/99% rule) there could be one hell of a lot of
1.) gold in demand to satisfy "owners"
2.) losses as the fallibility of the complex financial engineering falls apart (Goldman been here?)

All this happening in an environment of the most egregious global monetary debasement in the form of excess fiat creation on record.

Y'all guess the consequences.

Many thanks, Tyler.  Well done.

Sat, 03/22/2014 - 22:51 | 4581546 DoChenRollingBearing
DoChenRollingBearing's picture

Well written knuks!  You are very right, the Tylers put up a great article for this weekend´s reading.

Sat, 03/22/2014 - 23:02 | 4581570 NoDebt
NoDebt's picture

Agreed.  This is a seminal article regarding..... well, really, MONEY.  Unless I miss my guess.  

My take-away is that the "paper" market for anything of real value is the anti-matter of the actual thing of value itself- for a while.  Offsetting paper positions can be created to neutralize normal market forces until a certain point is reached when, fairly suddenly, the paper side of the equation disssolves and only the "real" side is left standing.  Who ACTUALLY owns it.  Posession being 9/10ths of the law, who possesses it at that moment, owns it (unless somebody else takes it by force).

Sat, 03/22/2014 - 23:13 | 4581592 strannick
strannick's picture

University of Zerohedge.

Somebody make a sweatshirt and put me town for 2.

Earlier I listened to Jim Grant waxing wistful on Henry Haszlit. Bliss.

Sat, 03/22/2014 - 23:26 | 4581609 kliguy38
kliguy38's picture

This deal was hammered out with Timmy G years ago when China agreed to hold our rotting Treasuries as reserves and the promise was made to get physical into their reserves. Much of the Yamashita hoard was divested from several sources (mainly bullion banks but some out of shadow stores) .. Geithner essentially made a deal with the devil so the Western Bankers could exit the petrodollar with as many real assets as possible.........leaving the peeps with paper prizes and IOUs.....ie broke......who cares after they get finished with the suckers........they have new killing fields to move into........

Sat, 03/22/2014 - 23:37 | 4581636 Soul Glow
Soul Glow's picture

Remember when Geithner was laughed at in China?  This by Chinese students!

https://www.youtube.com/watch?v=X2AEiYEei3o

Sun, 03/23/2014 - 00:04 | 4581677 nope-1004
nope-1004's picture

Just remember:  Gold has served as a currency for over 2,000 years, before the printing press, before scripts and bonds, and before Christ.  If you think this little half-century experiment is unique or will heal itself, you haven't done any research.

Geithner's a moron.  He's been kicked out for a reason - beeker no good for the boss anymore.

Imagine any reputable government having a Treasury Sectretary that was accused of tax evasion.  Shows how corrupt Obama's gang really is.

 

I agree, good post ZH.  Makes complete sense and Koos Jansen also has said that he believes it to be China that caused the price to decline in 2013.

 

Sun, 03/23/2014 - 00:07 | 4581701 Oh regional Indian
Oh regional Indian's picture

Goaled!

An esoteric look at Gold. Sunday ponderings...

 

http://aadivaahan.wordpress.com/2012/01/19/shattering-midass-curse-gold-...

 

;-)

ori

 

Sun, 03/23/2014 - 01:12 | 4581773 Squid-puppets a...
Squid-puppets a-go-go's picture

love goldman's take:

When china buys, the price of gold goes down.

When China sells, the price of gold goes down

hmmm ok, interesting dynamics. Hey goldman, shouldnt gold be $0 by now?

Sun, 03/23/2014 - 05:03 | 4581920 Squid-puppets a...
Squid-puppets a-go-go's picture

i also wonder if this debunks the not uncommon theory that the US and China had an 'agreement' to keep gold at wholesale so that china can accumulate phyz, as a form of compensation for the chinese surplus.

The theory is yet to be disproven, but this article shows how china may have done it without western consent/knowledge and has outsmarted the west at its own games.

serves them bloody right - given that the complexity of the financial sphere is a deliberate strategy to obfuscate fraud

its like if bernie madoff pulled the plug on his operation only to find his accountant had buggered off with the proceeds

Sun, 03/23/2014 - 06:28 | 4581957 ParkAveFlasher
ParkAveFlasher's picture

Gold bitchez

Sun, 03/23/2014 - 07:16 | 4581964 GetZeeGold
GetZeeGold's picture

 

 

If you purchase or sell a dore bar in space....can anyone hear you scream?

 

Gold is anonymous....which is one of it's best properties.

Sun, 03/23/2014 - 09:55 | 4582115 FEDbuster
FEDbuster's picture

In the end, I don't see China.gov letting all that physical gold flow out of their Country.  They tend to bail out every deal to keep the ship from sinking.  Holding on to the physical gold now parked in country seems like a no brainer.  Help cover the paper shorts and demand delivery of the physical to Ft. Knox, China.

Sun, 03/23/2014 - 10:07 | 4582122 Bendromeda Strain
Bendromeda Strain's picture

Why not - it's what the Owners would do, proven time after time. How's that working out for you Deutschland? How's that working out for you Venez.. err Chavez?

Sun, 03/23/2014 - 14:59 | 4582878 Pinto Currency
Pinto Currency's picture

 

The LBMA sees trading volume every day of 9,000 tonnes of gold before end of day netting-out between the bullion banks.

You can absolutely have as much of this gold as you wish as long as you don't want physical gold of size.  Load up on paper gold until you vomit.

Chinese appear to have said Fine - you guys want to run a racket in London and NY, go ahead.  We are going to source physical gold wherever we can before it blows up.

 

Sun, 03/23/2014 - 23:11 | 4584263 remain calm
remain calm's picture

Anyone who trusts anything Goldman writes is a fucking idiot. They want your gold, and they want to buy it cheap. Fuckyou Goldman Sucks, may you die and burn in hell.

Mon, 03/24/2014 - 05:21 | 4584733 AldousHuxley
AldousHuxley's picture

 It looks to me as if our society is moving into a pre-revolutionary situation. (By that I don't mean a situation in which revolution is inevitable, but one in which it is a realistic possibility.) The majority of people are pessimistic or cynical about existing institutions, there is widespread alienation and directionlessness among young people.... Perhaps all that is needed is to give these forces appropriate organization and direction.

 

- Ted Kaczynski  '98


Sun, 03/23/2014 - 05:24 | 4581929 Tall Tom
Tall Tom's picture

When China buys Physical it hedges the price by buying Naked Shorts on the Paper Market.

 

This is no different than any competent Coin Dealer Trade except on a much larger scale. That is why the Coin Dealer does not care about the Price Direction. His profit is locked in by the small premiums which he charges. That is how the Coin Dealer can afford to keep Gold in inventory. He hedges short on his inventory in the Paper Market.

 

China's shadow Bank Gold Dealers used the Gold as collateral to finance trade and hide the "Hot Money" flowing into the Shadow Banks. The owners of this collateralized  Gold insured themselves that even if there were a price decline in the inventory the increese in price of the Short Paper Position would net zero balance.

 

So Goldman Sachs is stating that the Chinese were naked shorting the market. I suspected that last year.

 

But I am not a Goldman Sachs apologist by any means. While some of the naked shorting of the Gold Market is attributable to the Chinese Shadow Financers I am not anywhere near convinced that most of the naked shorting of the Gold Market was attributable to the Chinese Shadow Financers.

 

April 12, 2013 and April 15, 2013 are dates which will live in infamy. However those takedowns were not a Chinese originated takedown. The Chinese were legitamitely HEDGING, using the Futures Market responsibly and to the purpose for which it was designed on a grand scale. There is absolutely nothing nefarious about the Chinese Shadow Financing operatives in that aspect.

 

JPM Chase and others, I believe, saw an opportunity to CRUSH the price of Gold. And that was the origination of the massive short sale postions on those two dates, either through subsidiary actors or directly by themselves.

 

Thanks Tyler Durden for publishing this article. It yields a clarity to what was mere supposition. But the only question which I have was that the policy of the Chinese Government was not to allow any Gold Exporting whatsoever.

 

But I guess that the Shadow Banking Financers are not too much different than our own regular Banking Criminals and act to violate the laws as they please for profits.

 

Stupid me. I was under the assumption that since there is a law that they will follow it, that somehow they are better. I am still trying to abandon that programming as I cognitively know better. But I am still in denial that violations happen. I guess that I think that violations happen only here and the rest of the World are saints...which is just not the case. People are the same Globally. Stupid me.

 

Sun, 03/23/2014 - 08:54 | 4582055 new game
new game's picture

well stated tom. i remain sidelined to and til the great wooosh(xtrem patience-xp). then fiat in wheel barrow to a dealer(or backpack): i kid you not, p-hyz in person, no mail delivery acceptable. line may be annoying. the drive home will be a rear view mirror driving experience. may just go fishing with a shinny anchor:)

Sun, 03/23/2014 - 10:25 | 4582148 Bendromeda Strain
Bendromeda Strain's picture

Much like the preflash of a nuke, when you hear the Great Whoosh you have waited too long. The actionable whoosh already happened (2008). However, you should still be able to take your wheelbarrow of fiat to the nearest storm drain.

Sun, 03/23/2014 - 03:05 | 4581863 Soul Glow
Soul Glow's picture

all growth happens in Darkness

Mold grows in the dark.  Most great plants grow in the light.

Sun, 03/23/2014 - 04:16 | 4581902 Oh regional Indian
Oh regional Indian's picture

False. It's all about the roots (in the dark). No roots no tree.

How about humans? we are conceived and grow in darkness first. From the moment we come "out" we are dying.

Fecundity, a word that embodies creation and growth is a combination of warm, moist and dark.

ori

Sun, 03/23/2014 - 07:44 | 4582007 Sam Clemons
Sam Clemons's picture

Always much deeper than that...Red light seems protective of the organism.  Blue light does not.

Sun, 03/23/2014 - 12:34 | 4582469 donsluck
donsluck's picture

Huh? No leaves no roots either. 

Huh? I conceived my first borne outside in broad daylight.

Huh? We don't start "dying" (loss of muscle, slowing of healing) until around 35.

Fecundity depends on the species. Try growing cabbage where it's warm and dark.

In fact, "it's" all about BALANCE.

Sun, 03/23/2014 - 16:43 | 4583143 Soul Glow
Soul Glow's picture

People have been shown to be able to keep their strength and endurence well into their 50's.

Sun, 03/23/2014 - 20:32 | 4583806 klockwerks
klockwerks's picture

69 and still pumping iron. Muscle never leave you just have to encourage it. PS, not crazy about it but need to be physically fit for what is coming. Put us old folks up front as we don't have anything to lose

Sun, 03/23/2014 - 13:15 | 4582632 Abitdodgie
Abitdodgie's picture

The biggest Gold mine on the planet is , wait for it ----The City of London , over a 1000 tons comes out of there every year and no one knows where it comes from.

Sun, 03/23/2014 - 15:30 | 4582998 FeralSerf
FeralSerf's picture

"no one knows where it comes from."

It's captured (stolen) booty from all the wars and other grand thefts perpetrated by City's owners.

Sun, 03/23/2014 - 19:48 | 4583691 lasvegaspersona
lasvegaspersona's picture

If just to hedge, why would China sell more futures than it buys physical?

Gold is down and that means that there was more selling than buying pressure. The paper gold market is HUGE. The physical market, even with China is tiny. This explanation has holes in it.

Sat, 03/22/2014 - 23:45 | 4581653 Stuck on Zero
Stuck on Zero's picture

It's an absolutely brilliant strategy by the Chinese.  They get our gold with IOUs.  It circulates their currency so that it trades at a lower price benefitting their industries.  If anything goes wrong they walk away with our physical metal.  And what do we get?  Landfills full of Chinese crap.

 

Sun, 03/23/2014 - 07:21 | 4581988 prains
prains's picture

Agreed, so the question is then, How are Goldman and JPM in on this fraud because where ever there's a financial fraud being perpetrated their alien slime can be found in the room....same as it ever was

Sun, 03/23/2014 - 14:57 | 4582904 Pinto Currency
Pinto Currency's picture

 

Not that we've sent any of our IOUs that are going to be worthless to the Chinese.

Mon, 03/24/2014 - 01:13 | 4584509 fockewulf190
fockewulf190's picture

There has been some kickback against this article. I wonder what some of you, even the Tylers if they are still scaning this post, have to say about this rebuttle: http://investmentresearchdynamics.com/zerohedge-is-wrong/

Sun, 03/23/2014 - 00:33 | 4581732 Ranger4564
Ranger4564's picture

kliguy,

It's my understanding that the financial crisis of 2008 was precipitated by the Russians / Chinese, to stop the US $ from ravaging the globe any longer. The IMF 2010 treaty was the result of the negotiations. In the process, gold and other hard assets were promised, to convince the Chinese / Russians to keep the US debt. It's notable that gold / property / resources / productive capacity are all part of the asset pool... our labor. Slave?

Now that is the narrative on the national level. I believe that the banking cartel that is facilitating all of these national level transactions actually has its own agenda that is secretly being implemented without the nation's noticing. Destruction of the nations, banking cartels end up owning everything. Ultimately, we're going to have to cut off the head of the banking cartel to strangle the oligarchs.

Maybe the Chinese and Russians know this and are using the banking cartel to destroy them ultimately. I get the feeling the Chinese and Russians are not going to cooperate with the bankers as the Spanish, Dutch, Swiss, British, Portugese, Belgians, Americans have... the Chinese and Russians seem to be interested in building a more equitable global economy... an honest economy, not one of looting and exploitation that's historically existed.

We'll see, but keep your knife sharpened.

Sun, 03/23/2014 - 02:49 | 4581850 Squid-puppets a...
Squid-puppets a-go-go's picture

sorry, dude. China and russia did nothing to instigate 2008. The streetcar named desire race for yield/risk on dynamic of the merchant banks was the singular catalyst required

Sun, 03/23/2014 - 07:56 | 4582020 weburke
weburke's picture

the idea of independent nations making their own smart self interest decisions continues despite reality.

Sun, 03/23/2014 - 14:54 | 4582893 Pinto Currency
Pinto Currency's picture

 

The Fed running cheap money for more than a decade was the singular catalyst for the blow-up in 2008.

Sun, 03/23/2014 - 05:47 | 4581940 Tall Tom
Tall Tom's picture

No. The Russians and the Chinese did not inflate US Property Values. That was pure domestic homegrown greed (pun intended).. They had nothing to do with the Financial Collapse of 2008

 

The failure of supposedly "prime" Mortgage Backed Securities, actually subprime and nonperforming, caused a major selloff. The collaterial of Banks simply became depleted, vanished, as the Bubble burst which caused Bank Balance Sheet Insolvency. US Bank Reserves went from Positive to an extreme Negative OVERNIGHT. It was one hell of a Cliff Chart. Since Banks could not trust other Banks, as they probably were insolvent, the Credit Markets froze.

 

And Credit Freeze II, caused by Chinese Bank insolvency due to a Chinese Housing Bubble is coming to a theater near you and opening very soon. That is what the collapse of the Shadow Banking in China will do. So have your popcorn ready and sit back. It promises to be a spectacular show.

Sun, 03/23/2014 - 07:43 | 4582006 SilverDOG
SilverDOG's picture

... and the credit banking system balloon popped when the Central American and South American drug cartels demanded an inflationary adjustment... to their dollar washing. The only microcosm liquidity keeping Bankasauruses alive. Now its printing and Heroin, Afghanistan supplied.

Sun, 03/23/2014 - 15:54 | 4583048 Urban Redneck
Urban Redneck's picture

The Chinese & Russians did not start the financial crisis, but the Chinese commodity acquisition and hypothecation bonanza started soon afterwords. Since I'm in a self plagiarizing mood tonight (this would be the most recent post which touches on all the relevant aspects)...

http://www.zerohedge.com/contributed/2014-02-12/china-what-happened-gold...

BLAH BLAH BLAH PBOC BLAH BLAH BLAH GOLD BLAH BLAH BLAH

The Chinese are probably laughing their asses off at the gold bugs placing bets on their game of follow the lady...

But if people insist on playing three card monte, here's some simple advice- STOP TRYING TO CHOOSE FROM AMONG THE CARDS YOU'RE BEING DELIBERATELY SHOWN.

There are more options than just PBOC or SAFE, and if one wants to go back to Chinese declarations and policy changes made in 2008-2009, it might be helpful to start by turning over the STATE RESERVE BUREAU card, you might find about a million tons of aluminum, several bukkake tons of copper, and even 200 tons of atomic number 49 (and this was before the Jim Henson show started pumping (not so) rare earth elements).

More important than the publicly disclosed items on the SRB shopping list is the breadth of effective "front companies" used by SRB to implement acquisition policy and how the execution of SRB policy by those companies feeds the bottomless rabbit hole of shadow banking/warehouse receipt/re-hypothecation/disappearing inventory/expat bureaucrat kleptocracy/ and accounting practices that would make Arthur Andersen proud.

The rabbit hole is so deep they can hide more gold in it than anyone can accuse them of hoarding. However, the 64 trillion dollar question is when they finally go to pull the gold out of their ass- do they retrieve a huge stash of good delivery bars, some of chinatungsten.com's finest counterfeits, or a single fortune cookie with a message that reads "You now be Corzined BEACHES!" in some bankster princeling's hand writing...

Sun, 03/23/2014 - 21:53 | 4584001 frank650
frank650's picture

The financial crisis was perpetraed by our own central bank and policymakers.  This is natural when you incentivize risk with low rates, cheap credit and implicit government backing of the secondary mortgage market.

Fri, 04/18/2014 - 22:18 | 4674752 X_mloclaM
X_mloclaM's picture

that was a great lecture

Sat, 03/22/2014 - 23:29 | 4581619 Soul Glow
Soul Glow's picture

You mean I gotta finish it this weekend?

Sun, 03/23/2014 - 00:01 | 4581685 DoChenRollingBearing
DoChenRollingBearing's picture

I just emailed the link to myself in case I do not re-read and understand this article before I get back to the states.

"Soul Glow" has the Central Bank DoChenRollingBearing´s endorsement  to finish this article as he sees fit.

Sat, 03/22/2014 - 23:30 | 4581622 seek
seek's picture

Indeed, the article and Knuks' post are spot on.

It's long been my belief that when Au unwinds... it's going to be a crazy, crazy event.  This added information just supports the notion. I'm not holding my breath that it will happen any time soon, but I know it will eventually happen, and it will have people slack-jawed and saying WTF, and it will be on the covers of every financial and news magazine for weeks.

Sat, 03/22/2014 - 23:57 | 4581678 DoChenRollingBearing
DoChenRollingBearing's picture

.

 

"...but I know it will eventually happen, and it will have people slack-jawed and saying WTF, and it will be on the covers of every financial and news magazine for weeks."

Another excellent comment.  At some point it´s going to get ugly.  But, I have been waiting a long time.  It gives me more time to prepare.

Sun, 03/23/2014 - 14:08 | 4582767 RockyRacoon
RockyRacoon's picture

If gold unravels as dramatically as discussed here, the event will be a footnote.  Think about it:  If gold goes stratospheric, the cost of a loaf of bread will be the headline of the day, not the price of gold.   This event will not happen in an economic vacuum.  Only then will the true role of gold become apparent to the financial elite, and I hope too late for them to partake of the bounty.

Sun, 03/23/2014 - 02:25 | 4581838 zionhead
zionhead's picture

BUT who the fuck cares? WHo actually owns any paper-gold?

Let's see we can't talk about MH-370, but we can beat this dead horse to death, talk about GOLD, but in actuality its never gold its always some fucking paper derivative of gold.

OK ASIA is different, and sure as shit, GOLDMAN-SACKS has had their asses kicked out of ASIAN, cuz nobody wants anything they aer selling.

*

Time is passing by, the depression is getting deeper the WEST is unloading more and more PHYS-GOLD to eat, the asians are still doing just fucking fine.

 

Sun, 03/23/2014 - 04:25 | 4581909 UselessEater
UselessEater's picture

you n ZH have talked plenty about MH-370...stop looking for a punch up with yourself

Sun, 03/23/2014 - 06:46 | 4581965 GetZeeGold
GetZeeGold's picture

 

 

Let's see we can't talk about MH-370

 

Freescale Semiconductor, Diego Garcia.....it would be crazy to risk a planted crash scene now....but who says intelligence is sane.

Sun, 03/23/2014 - 09:53 | 4582109 jerry_theking_lawler
jerry_theking_lawler's picture

The headlines will read "Where's the Gold?".....

Unfortunately for me, the little bit I had is at the bottom of a local lake due to past boating incident.

Sun, 03/23/2014 - 18:41 | 4583481 RaceToTheBottom
RaceToTheBottom's picture

It is not the readers of ZH that you must convince. It is the tax federales that you must convince.

Sat, 03/22/2014 - 22:59 | 4581565 TimmyM
TimmyM's picture

Oh the possibilities. A litle force majeure on the comex to complete the plan.
Or maybe this is how gold and US rates go up at the same time.

Sun, 03/23/2014 - 09:21 | 4582073 GetZeeGold
GetZeeGold's picture

 

 

I see the lone junkster has graced us with his presence this morning.

Sat, 03/22/2014 - 23:48 | 4581647 gimme-gimme-gimme
gimme-gimme-gimme's picture

This is the part that gets me:

"Goldman concludes that "an unwind of Chinese commodity financing deals would likely result in an increase in availability of physical inventory (physical selling), and an increase in futures buying (buying back the hedge) – thereby resulting in a lower physical price than futures price, as well as resulting in a lower overall price curve (or full carry)." In other words, it would send the price of the underlying commodity lower."

If I understand this correctly, the gold is already in China and has probably been "leased" to a third party who took delivery and moved it to private storage? (PBOC, billionaires, PM sellers, etc...)

So Goldman thinks that should these contracts unwind and the poop hit the fan that this will result in the Chinese having to sell the physical gold and thereby flooding the market with all that gold they tricked the markets to buy in the first place -- resulting in a drop in the price of physical gold?

Seems like quite a naive thing to say. At best I can see people defaulting and offering to settle in the paper market spot price. (which will probably be pennies on the dollar in such a scenario)

Seems like the Chinese are playing Chinese checkers while the West is playing regular checkers.

Sun, 03/23/2014 - 02:21 | 4581835 zionhead
zionhead's picture

GS will continue this myth that paper gold has value.

Fonestar will continue to tell you that BITCOIN has value,

If the SHIT HITS THE FAN

Only real PHSY in your fucking possession has value, ... all else is 100% bullshit.

*

When ever I see the words "GS" I sure as shit know they're NOT selling PHSY-GOLD, if I see Goldman-Sacks, I know they're selling paper to chumps.

Does GS paper-gold change the underlying value of real gold? Who gives a fuck.

Just like BITCOIN, I don't give a fuck what they say its worth, I just know its impossible to get your REAL MONEY out cuz the exchanges are NOT liquid.

Same with all paper gold, when the STHF then GS or anybody sitting on paper-gold ain't going to be fucking liquid, and to add insult to injury that paper ain't backed by shit, other than the GOOD WORD of TEAM-GS.

 

Sun, 03/23/2014 - 06:37 | 4581952 Tall Tom
Tall Tom's picture

GS will continue this myth that paper gold has value.

 

What is value? (Rhetorical) Value means UTILITY.

 

Does the Paper Gold Market, used LEGITIMITELY, have a utility? Emphatically YES.  Precious Metals Dealer and Miners can use the Market for legitamite means...to HEDGE for or against actual existing INVENTORIES of Physical Gold. When used LEGITIMITELY it serves an invaluable purpose. It keeps Dealer and miners insulated from Market Shocks. It insures their INVENTORY. It allows them to STAY IN BUSINESS through lean times.

 

Mining Operations are expensive. So is running a Preious Metals warehouse.

 

WITHOUT AN OPERATIONAL FUTURES MARKET the Price Shocks would force many out of business and allow for a complete monopolization of both industries. The lack of competiton would guarantee SCRACITY and cessation of production. There would be no advancement allowed.

 

We cannot have that environment in a Capitalist Society. That type of Policy would only fit into a Fascist Corporatist Economic Model which will ensure that a reigning Oligarchy will maintain their supremacy.

 

Likewise Paper Contracts currently have a PRICE because there are those that VALUE the Contracts. They are PROMISES TO DELIVER at a PRICE. There is a marked difference between PRICE and VALUE.

 

HOWEVER...

When the Paper is issued by DISHONORABLE PEOPLE;

When the system is loaded with GRAFT and CORRUPTION;

When TRUST and CONFIDENCE are eroded through NEFARIOUS ACTION and MANIPULATION,

When the system has been so thuroughly ABUSED; 

THEN THE PAPER CONTRACT LOSES any LEGITIMITE UTILITY,,,any REAL VALUE.

 

Obviously the Gold Futures Market currently has a VALUE. But Jeffery Christian and CME Group, and the LBMA, have corrupted the Futures Market.

 

So I am eagerly looking forward to the establishment of the Singapore Gold Exchange with Jim Sinclair and other honorable people at the helm.

 

That will serve to reestablish CONFIDENCE and those Paper Contracts will have REAL VALUE, a REAL Utility, as it is NOT A MYTH.

 

The MYTH is that the Comex and LBMA contracts will continue to have value. But since they are currently the only game on the Planet (with VOLUME)...

Sun, 03/23/2014 - 06:37 | 4581962 zionhead
zionhead's picture

COMEX is just MT-GOX on steroids.

Liquidity killed MT-GOX, and Liquidity will kill COMEX, just like it killed MF.

All ponzi's end this way.

*

There are no shortage of people on ZH that will defend paper-gold ( in all its fucking forms ), or BITCOIN ( in all its forms ),

Frauds will always defend the worthless.

What has value? Like the man said, its worth what you can get for it, but for COMEX/MT-GOX the price set are virtual, hardly 'on the street prices'.

Trouble is, if something can't be sold on the street, then when TSHT it can't be sold.

*
The Value of Paper-Gold or BITCOIN, is first of all valuable to SUCKERS, real critical thinks would NOT purchase either ... ever.

 

Sun, 03/23/2014 - 08:44 | 4582048 fiftybagger
fiftybagger's picture

You say that Bitcoin is not liquid.  That's pure bullcrap and you know it.  Bitcoin trades 24/7 all over the world.  It is the most liquid investment of anything possible because it is digital.  What is not liquid is dollars.  Why do you think you have FINCEN and every other alphabet soup agency breathing down the neck of anyone trying to trade Bitcoin for dollars?

You compare Gox to Comex, and that's pure bullcrap as well.  Gox was selling real Bitcoin for real money because there's no such thing as paper Bitcoin.  Get it?  Probably not.  Gox simply got robbed.  It is the equivalent of someone coming in and stealing all the metal out of the Comex warehouses.

And that's the key difference.  99% of all the metal sold on the Comex doesn't exist.  Yet there is never a "run on the bank" because the scam is officially sanctioned.  What Gox proved is that Bitcoin is legit and that the market itself took out the crooked players.  Would that gold and silver should be so lucky!

Silver For The People - since 2007

The Bitcoin Channel - since 2011

 

Sun, 03/23/2014 - 14:31 | 4582830 mkkby
mkkby's picture

The Chinese still have vacant cities they can hypothecate around in circles to keep the debt train rolling.  This ponzi has a long, long way to go.

Mon, 03/24/2014 - 08:31 | 4584881 Tall Tom
Tall Tom's picture

The Value of Paper-Gold or BITCOIN, is first of all valuable to SUCKERS, real critical thinks would NOT purchase either ... ever.

 

Most Coin Dealers participate in the Gold Futures Market, the Paper Gold Market, if they want to stay in business. Most Gold Miners participate in the Gold Futures Market if they want to stay in business. 

 

Tulving just collapsed due toi improperly hedging of their Gold Inventories.

 

If you want to read about this method you can at

 

http://www.investopedia.com/ask/answers/06/futureshedge.asp

 

Futhermore you can have many sources of reading by doing the following search...

 

http://search.yahoo.com/search;_ylt=A0SO800rHjBTzEwAvGZXNyoA;_ylc=X1MDMjc2NjY3OQRfcgMyBGFvA2FvBGNzcmNwdmlkAzdHQVZSVEl3T0M1TnBaN0VVcVZLX3dtQk5qZ3VPRk13SDZEXzB5cDQEZnIDeWZwLXQtMzIzBGZyMgNzYnRuBG5fZ3BzAzQEb3JpZ2luA3NycARwcXN0cgNHb2xkIERlYWxlcnMgaGVkZ2UgdXNpbmcgZnV0dXJlcwRxdWVyeQNHb2xkIERlYWxlcnMgaGVkZ2UgdXNpbmcgZnV0dXJlcwRzYW8DMg--?p=Gold%20Dealers%20hedge%20using%20futures&fr2=sb-top&fr=yfp-t-323&pqstr=Gold%20Dealers%20hedge%20using%20futures

 

It is really apparent that you are not involved in anything Financial as you lack a rudimentary understanding about how these markets actually trade.

 

Now you may own Physical Gold and that is a good bet. I most certainly own it outright, without any counterparty risk.

 

So why are you commenting on something which you do not know about?

 

(To the reader...The next time that you deal with your Local Coin Dealer ask him about his hedges on the Futures Market if you want to impress him about your interest in his well being.)

 

I guess that you cannot differentiate between legetimacy and illegitimacy. It is okay that you cannot understand this fact as you are obviously neither a Coin Dealer or a Gold Miner.

 

As for BTC I am not into that Market for the reasons behind the unsustainable BLOCKCHAIN Growth. I have written about that previously and there has been no valid information presented which has given me an incentive to change my position.

 

The Future's Market is like a gun. A gun is neither evil or good. It can be used for legitimate or illegitamite purposes.

 

As there are bad actors whom use guns there are also bad actors involved in the Futures Markets.

 

The bad actors with guns, however, are much more likely to be prosecuted than the bad actors in the Futures Market. That is where the problem exists.

Sun, 03/23/2014 - 03:24 | 4581881 Bill Shockley
Bill Shockley's picture

The Chinese Fed will do exactly what we did.

 

Create digital money to cover the debt.

 

The Chinese bankers have been admitted to the club.

 

Just don't forget the words of the Chairman, Mao said, "Change will come through the barrel of a gun." Every day more people get fucked over by the system. People are fat and fucked, when they are skinny and fucked things will change.

 

   bill

Sun, 03/23/2014 - 09:59 | 4582117 SWRichmond
SWRichmond's picture

Knuks, 

+1.  the implications of the re hypothecation discussed in the article are mind-boggling.  the thought that struck me was has the gold that has been used in this manner been effectively taken off the market by virtue of its ownership being clouded through re hypothecation?  the article certainly states that the import numbers have been inflated buy this cycle so how much gold does China really have?  should a rush to physical possession occur what happens to this gold?  does the first jackass to sell leave everyone else holding the bag?

someone smarter than me once said "if you don't hold it you don't own it". 

Sun, 03/23/2014 - 16:13 | 4583089 FreedomGuy
FreedomGuy's picture

Nice post, nukies.

As an Austrian, free market guy, Let me suggest also that this is a result of government manipulation, controls and artificial rules. Because of monetary controls including fixed exchange rates not tied to common measure you will find these kinds of shenanigans. No one in his right mind would engage in these paper masquerades if they were serious about trading the underlying commodity. I am sure they are not stupid and they know the risks. However there are some benefits on the other side or some risks they fear more than these trades.

One day, a few centuries from now, when we give up the multiple myths that government can control infinitely complex systems and that they will do it to OUR benefit versus their own...we will stop seeing this kind of stuff.

Sun, 03/23/2014 - 22:21 | 4584093 BeanusCountus
BeanusCountus's picture

Hoping you are on the money. But actually a little more concerned if you are.

Mon, 03/24/2014 - 08:28 | 4584892 s-logic
s-logic's picture

This analysis is a bunch of junk and does not explain anything. Don't forget, its Goldman - the same Goldman who projected that the price of gold will hit $1000 within this year. So they produced this load of bullshit who nobody will be able or care to understand (it's called "produce bullshit" in consulting") and than made a conclusion which may or may not have any connection to what was written above, making a bunch of wild assumption in the process.

For example, one assumption: the Chinese bought phyz and hedged with paper. But we all know that the sellers of phyz don't own the phyz, they sold the Chinese the leased phyz that they took from the central banks etc. So doesn't anybody think that the sellers of phyz would have counter-hedged their short phyz position? And on and on it goes, until it becomes a wild ass guess and pure speculation.

Another assumption: when unwinding their CCFDs, you can view China as a bunch of entities or as a single entity. One could argue that viewing a centrally planned communist economy as a single entity might have made more sense. Now, as a single entity, China has $1 trillion worth of worthless treasuries of a broke country, and $70 bililon worth of phyz gold. Now, imagine yourself a Chinese. Would you rather dump the excess of treasuries to support your currency and repay your loans, or the only safe collateral you have? After all, whether the chinese are a net debtor or creditor of the US in dollars I don't know but I am willing to bet on them being the creditor. They can just unwind their long treasury position. I don't think they are shipping all thay phyz back to the broke west. I know I wouldn't.

Of course. Goldman would argue that they would sell their safe collateral and keep the treasuries. That's because they are Goldman, and they need everyone to sell gold.

Sat, 03/22/2014 - 22:57 | 4581514 HardlyZero
HardlyZero's picture

Silver is nice to have around for change.   Bling is a chick magnet...some day you may need a harem or small village to defend your family.

To the rat quote...many French dishes have rat versions...during the dark ages many times there was only rat meat.   

Anyway how ever you choose to store wealth, build a family and town, and roust up the vittles.

 

The review has a lot of important points which round back to fiat and shadow banking making for a way to counter market forces while obtaining physical shiney.  A method which only works best at the very end of the debt super-cycle.

It is a race between the banking collapse, the stock market collapse, and physical commodities to the moon -- and Gold is the most popular physical portable durable store of wealth.

Personally: 50% physical precious metals, and the other 50% into either Cash, Shorting stocks, or eventually physical precious metals.

Sat, 03/22/2014 - 23:12 | 4581590 Curiously_Crazy
Curiously_Crazy's picture

That explains why they'd be crazy enough to look at a snail and think "oh yummy".

Sat, 03/22/2014 - 22:38 | 4581528 fxrxexexdxoxmx
fxrxexexdxoxmx's picture

What no rats. They breed like crazy and with a dash of hot sauce taste great.

Sat, 03/22/2014 - 23:34 | 4581628 Jim in MN
Jim in MN's picture

The Larousse Gastronomique has a nice recipe from the Siege of Paris in 1870.

I plan to catch up on my reading after the Collapse.  While there's daylight.

People slept 10 hours on average before electric lighting, didjaknow?  Sounds nice.

Sun, 03/23/2014 - 10:35 | 4582164 skepsis101
skepsis101's picture

More likely they fucked for three or four and slept the rest.  Life was more sane then.

Sat, 03/22/2014 - 23:48 | 4581659 ILLILLILLI
ILLILLILLI's picture

Detective John Spartan encounters a burger grill in the underground world...


Lenina Huxley [grimacing]: Just don't ask them where the meat comes from...

John Spartan: Huxley, what's that supposed to mean?

Lenina Huxley: Do you see any cows around here, detective?

John Spartan [to vendor]: Que es este carne? [What is this meat?]

Hamburger stand vendor: Este carne es de rata. [This meat is from rats]

John Spartan: Rat?? This is a rat burger? [vendor nods]

John Spartan [chewing, considering]:  Not bad! Matter of fact, this is the best burger I've had in years!

Hamburger stand vendor [nods, smiling]: Gracias, Senor!

John Spartan: You're welcome. See ya later...

Sat, 03/22/2014 - 22:45 | 4581542 DoChenRollingBearing
DoChenRollingBearing's picture

 

 

Add water & food (etc.) in case you a serious SHTF.

***

A small central like the Central Bank of DoChenRollingBearing is too small a player to engage in the above games that China plays.  Indeed, our combined brainpower will need to re-read the article at least one more time to even understand it.

So, cautious small central banks like ours suggest buying physical gold as income permits.

JohnnyBriefcase is correct above re lead (don´t forget the lead delivery devices).  If you want to be your own central bank, you must be able to protect your reserves!

Sat, 03/22/2014 - 23:51 | 4581669 pitz
pitz's picture

The SUKI (tm) RELIGION (motherfucking religion) has way too much in Japanese equities.  Probably time to unload, eh? 

Sun, 03/23/2014 - 12:59 | 4582568 JohnnyBriefcase
JohnnyBriefcase's picture

Of course food and clean water are the fist things to stockpile. Only when you have a comfortable supply of those can you afford to work on metals and the means to defend them.

My issue is trying to gather a nice pile of preparations while trying to maintain a ceteain level of mobility. All that shit is worthless if you get overrun by people who were not as prepared as yourself.

 

 

Sat, 03/22/2014 - 23:32 | 4581625 kchrisc
kchrisc's picture

What about "rope?"

Sun, 03/23/2014 - 18:52 | 4583518 T-Silver
Sun, 03/23/2014 - 19:46 | 4583681 HyperinflatmyNutts
HyperinflatmyNutts's picture

1

Sat, 03/22/2014 - 21:58 | 4581455 Troll Magnet
Troll Magnet's picture

I'm no fan of China but if they can bring down this cancerous Jewish paper debt-driven financial system we're living in, I will root for them without hesitation.

Sat, 03/22/2014 - 22:17 | 4581487 TahoeBilly2012
TahoeBilly2012's picture

What about the wars? I suppose you will want those ended next. How boring, a peaceful existence with sound money, horrifying. 

Sun, 03/23/2014 - 03:58 | 4581895 conork
conork's picture

The global power will shift to China, going by the history books, they are even more ruthless than the US

Sun, 03/23/2014 - 04:03 | 4581897 zionhead
zionhead's picture

If that were true, then LONDON would be in ASIA.

Britain hooked the chinese on opium, the chinese never hooked the British on anything.

The USA is a fucking  colony of hair-lips, there never was a revolution, the USA is/was cleverly managed by ZIO's by their anglo-saxon masters in LONDON been this way for 100's of years.

Sun, 03/23/2014 - 09:03 | 4582061 fiftybagger
fiftybagger's picture

Ever heard of Hong Kong?  How about Singapore?

Sun, 03/23/2014 - 09:15 | 4582067 shovelhead
shovelhead's picture

Your usual incandescent ignorance just went plasma.

Tea.

Read a book.

Mon, 03/24/2014 - 11:59 | 4585717 matrix2012
matrix2012's picture

"The USA is a fucking  colony of hair-lips, there never was a revolution, the USA is/was cleverly managed by ZIO's by their anglo-saxon masters in LONDON been this way for 100's of years."

 

EZRA POUND (1885–1972) did WARN many decades ago!!

 

"The Nomadic Parasites will shift out of London and into Manhattan. And this will be presented under a camouflage of national slogans. It will be represented as an American victory. It will not be an American victory.

    Until you know who has lent what to whom, you know nothing whatever of politics, you know nothing whatever of history, you know nothing of international wrangles."

 

"The monopoly of money, or the restriction of its circulation, is merely a variation of this simple form of monopoly. That is all. The stupid fall into the trap. Wars are provoked in succession, deliberately, by the great usurers, in order to create debts, to create scarcity, so that they can extort the interest on these debts, so that they can raise the price of money (i.e., the price of the various monetary units controlled by, or in the possession of, the same autocrats), altering the prices of the various monetary units when it suits them, raising and lowering the prices of the various foodstuffs when it suits them, completely indifferent to the human victim, to the accumulated treasures of civilization, to the cultural heritage."

 

      ~ EZRA POUND
Sat, 03/22/2014 - 23:10 | 4581586 Siouxwestern
Siouxwestern's picture

Troll Magnet = anti-Semitic. Not acceptable.

Sun, 03/23/2014 - 00:03 | 4581691 European American
European American's picture

Without "Googling" it, Siouxwestern, what is a Semitic?

Sun, 03/23/2014 - 00:16 | 4581710 Rock On Roger
Rock On Roger's picture

Citi mes

Must be banksters.

Sun, 03/23/2014 - 01:47 | 4581808 holgerdanske
holgerdanske's picture

acceptable to whom?   - look at the uppers and downers!  

Sun, 03/23/2014 - 03:30 | 4581884 Kirk2NCC1701
Kirk2NCC1701's picture

I'd wager that he's merely anti-Imperialist-Zionist, and quite possibly PRO-Semitic -- given that Palestinians are Semites.

In many if not most genetic cases, they are probably more 'Semitic' than most modern "Jews", whose gene pool has been grossly diluted the last 2,000 years, i.e. since being scattered to the Four Winds by the Romans.

Gotta love the Goebbels-like propaganda, whereby a small subset of psychos and sociopaths wrap themselves in the flag of an entire Nation/People, in a clever trick of verbal sophistry: Convert the Special case as a General case.

However, given that 99.5% of other "Jews" and "Christians" fall for this, is a testament to the evil brilliance of the few, and the well-meaning stupidity of the many.

Sun, 03/23/2014 - 06:26 | 4581955 Squid-puppets a...
Squid-puppets a-go-go's picture

fuck me that was succinctly eloquent

Sun, 03/23/2014 - 07:00 | 4581973 Zero-risk bias
Zero-risk bias's picture

Sometimes working my way through these threads, I'll take a sip of tea and ponder the truth.

As I had a nap earlier, (complex article), and though the original accusation being well off topic, I had to give that responce a thumbs up. Only to find 10 more had done the same.

Good history lesson Kirk =)

Sun, 03/23/2014 - 07:14 | 4581984 holgerdanske
holgerdanske's picture

However, given that 99.5% of other "Jews" and "Christians" fall for this, is a testament to the evil brilliance of the jew, and the well-meaning stupidity of the many.

There, fixed it for ya!  ;-)

Sun, 03/23/2014 - 09:48 | 4582103 BandGap
BandGap's picture

"Convert the Special Case as the General Case."

The very fuel for the most recent Hope nd Change initiative, used effectively for millenia.

Sun, 03/23/2014 - 10:40 | 4582170 chemystical
chemystical's picture

I've been considering getting a group of friends to join me in converting to Shamanism.  Then we: 

  • move to the Black Hills of South Dakota, 
  • infiltrate a tribe,
  • promote only ourselves,
  • take over the tribal leadership,
  • kill off most of the original tribe but blame it on everyone else,
  • publish and broadcast books promoting our viewpoint,
  • infiltrate the education system of non-tribe people to continue promoting our viewpoint,
  • infiltrate all levels of non-tribal peoples' governments - most importantly the intelligence community
  • hijack the non-tribal people's monetary system
  • threaten every major food manufacturer to pay us tribute and mark their packaging with our symbols - lest our tiny minority of would-be consumers won't buy their products.  (And then, um, what?  Starve to death.  Oh to dream)
  • promote decadence off all sorts to the non-tribal people in order to rot their cores and increase the ease with which they are manipulated and addlepated
  • Leverage people worldwide to erect buildings in memory of our fallen tribesman (whose deaths we orchestrated) - despite that these worldwide peoples didnt have a fucking thing to do with that
  • ad fucking nauseum

The blueprint has already been printed.  One need only be a soulless sociopath to carry it out. 

Sun, 03/23/2014 - 01:28 | 4581784 Joenobody12
Joenobody12's picture

Our finanacial system need no help from anyone. It is self destructing at an ever increasing pace. The destructioin process cannot be stopped anymore since we need to print just to pay the incresing burden of interest and to fund our jobless existence.

Sat, 03/22/2014 - 22:04 | 4581469 EatYourCornTake...
EatYourCornTakeyourPill's picture

Gold is a good asset to have in any portfolio. The idea of a Post-catastrophic world is a pure stupidity. What you want to do is attempt to retain as much of your wealth as possible in the case of a black swan event. Hedging for doomsday makes no sense unless you want to live in a 1 room shelter for 40 years with canned food.

Sat, 03/22/2014 - 22:19 | 4581491 TahoeBilly2012
TahoeBilly2012's picture

Oh trust me, us forest preppers plan on doing just fine, thermo nuclear aside and all. Don't plan on stopping by, we are full!

Sat, 03/22/2014 - 22:25 | 4581501 jagercali
jagercali's picture

You still hiding in your forest bunker ???? come out 2012 has passed......what a joke ??? Who would want to join you and your stank family in the woods....no thanks I'm gong out to eat a nice fat steak....enjoy your acorn dinner.....

Sat, 03/22/2014 - 22:25 | 4581502 jagercali
jagercali's picture

You still hiding in your forest bunker ???? come out 2012 has passed......what a joke ??? Who would want to join you and your stank family in the woods....no thanks I'm gong out to eat a nice fat steak....enjoy your acorn dinner.....

Sat, 03/22/2014 - 22:48 | 4581551 TahoeBilly2012
TahoeBilly2012's picture

I keep feeding the local deer...they won't know hit them.

Sun, 03/23/2014 - 06:11 | 4581948 samcontrol
samcontrol's picture

and not in Tahoe!?

Sat, 03/22/2014 - 22:16 | 4581486 rubiconsolutions
rubiconsolutions's picture

"I'm long on rats."....and short on brains

Sun, 03/23/2014 - 00:58 | 4581762 Buck Johnson
Buck Johnson's picture

The same fat rat that poor in Rome where eating (even some "middle class") and still wanting gold and silver to be rich.  You see precious metals and stones (shiny bright things and soft metals that where able to be rolled formed into elaborate shaped and sizes and even being worn so that you can be noticed as a royal/rich person.  How pretty a gold leaf dome looked when the sun hit it on a roof or temple.  It looked like it was from the gods.  That is why those things where used as a store of value.

Sun, 03/23/2014 - 02:58 | 4581855 Kirk2NCC1701
Kirk2NCC1701's picture

You say you're "long on rats".

Which kind for dinner: the four-legged or two-legged kind?

I'd expect the latter to be related to the Rattus Fiat Papyrus, which brought about the Financial Plague, and to be the 'meatier' target.

Sun, 03/23/2014 - 09:18 | 4582071 SSN715
SSN715's picture

You're long on stupidity - that's for sure.

Sun, 03/23/2014 - 09:41 | 4582097 zionhead
zionhead's picture

You are correct, but I guess that not many of the keyboard army has ever eaten a rat, so you got -122 :(

The truth is that if the SHTF and food was scarce, your GOLD wouldn't BUY shit.

The whole deal is you have to hide your GOLD and wait for the re-construction, then your GOLD will BUY a town.

But yes, ... if you stick around for a civil-war, in the heat of battle surrounded by 1,000's of dead and dying men, without any kind of pain medicine or any sanitary modern medicine, and no fucking 'food' of any kind ... your are right, the "RAT SELLER" is king.

Sun, 03/23/2014 - 10:53 | 4582193 chemystical
chemystical's picture

the "RAT SELLER" is king.

King Rat (1965)

http://www.imdb.com/title/tt0059358/?ref_=fn_al_tt_1

"The Japanese prisoner-of-war camp Changi in Singapore, which houses Allied POWs, is a living hell. The great mass of POWs are living at a sub-human subsistence level. US Army Corporal King has been living up to his surname, through his control of the camp's black market, and by scamming the officers and other POWs. King has a facility for making deals with the Japanese to obtain the contraband he sells to the POWs.

Included among the prisoners is the American Cpl. King, a wheeler dealer who has managed to established a pretty good life for himself in the camp. While most of the prisoners are near starvation and have uniforms that are in tatters, King eats well and and has crisp clean clothes to wear every day.

One of the schemes that King devises is to sell the meat of mouse deer, a native delicacy, to sell to the high-ranking POW officers.

This is another one of King's scams, as the "mouse deer" meat is actually from rats, the breeding stock for which have been the rats that have fed off the corpses of dead POWs."

and what actor portrayed Corporal King?  George Segal.  Oy the cohencidence.

Sun, 03/23/2014 - 12:03 | 4582390 EINSILVERGUY
EINSILVERGUY's picture

The book was a lot better than the movie

Mon, 03/24/2014 - 06:47 | 4584772 Bearwagon
Bearwagon's picture

I will upvote you just for mentioning "King Rat"!  ;-)

Sun, 03/23/2014 - 10:24 | 4582146 ms8172
ms8172's picture

@Novictim...... you just go ahead and hold your paper then... see where that gets you when shit hits the fan.  You'll be eating off my front portch! ;)

Sun, 03/23/2014 - 12:37 | 4582488 ejmoosa
ejmoosa's picture

So that's why the Aztec civilization fell?  Because all that gold was worthless???

On the contrary.  Someone else wanted ot so bad, they effectively invaded a soverign people to get it.

 

Mon, 03/24/2014 - 07:48 | 4584825 Perfecthedge
Perfecthedge's picture

Seriously.  I don't know why this answer has so many 'red arrows'? He is joking or being cynical, but I do not understand why there is such a horniness around ZH for Gold? Let me explain or ask, I am no expert and would like to learn what your rationale is behind this.

We (most ZH readers) assume fiat is going to crash and burn (which it will) and then there is nothing of worth around - beside Gold. 

Man, we are talking here about the Apocalypse! If the Petrodollar goes down, the world will go into "Walking dead"-modus.

If that happens, what do you imagine?

- You go downtown with your physical Gold coin/bar and try to buy bread or milk.  There will be no bread or milk available. I imagine this situation to be a lot like WWII.  Nazi Germany: people where eating cats AND rats!

- IF, there is a guy that is selling bread and milk...IF...why do you suppose that he will not put a bullet between your eyes and take your Gold and keep his stuff?  Why do you suppose that the roaming hordes of criminals or government soldiers will not put a bullet between your eyes and rob your Gold? This is exactly what happened to jews that tried to "buy" their way out of Germany.  Trying to bribe a well armed SS officer was never a good idea.  He even took the Gold teeth out and stored them in Swiss vaults.

Not to pop anyones bubble here.  If you are storing up on Gold - more power to you.  But personally I would rather store Whiskey and Ammunition.

Tue, 03/25/2014 - 02:53 | 4589064 X_mloclaM
X_mloclaM's picture

TD, Ill run the numbers, but after reading this it clicks you subtact reexports from HK from exports from HK to China to discover 'net' ?

Sat, 03/22/2014 - 21:53 | 4581443 Truther
Truther's picture

Better get some PHIZZ bitchez.

Sun, 03/23/2014 - 03:49 | 4581891 Kirk2NCC1701
Kirk2NCC1701's picture

Let's crunch some numbers regarding the Chinese gold purchases...

At 31.1 grams (0.0311kg) per Troy Ounce, there are 32.15 Toz. per kg., or 32,150 Toz/Ton.

At $1,350/Toz, 1 Ton = $43,400,000.

25 tons ~ $1Billion, 1000 tons ~ $43.4B.

This does not reconcile with the cost and weights in this article, hence...
The Chinese are either paying a huge premium for the actual phyz, or they have WAY more than proclaimed, since hundreds of billions in USD translates into tens of thousand of tons. Which is it?

Sun, 03/23/2014 - 04:39 | 4581913 StychoKiller
StychoKiller's picture

D@mmit Jim, why'd you let yer science officer remain on Vulcan for P'on F'aar?

Sun, 03/23/2014 - 06:34 | 4581958 Squid-puppets a...
Squid-puppets a-go-go's picture

during the course of the year gold was working its way down from $1800 to $1200 - the median price after the big sudden drops probably being around $1500

back o' the napkin stuff, though

Sun, 03/23/2014 - 07:50 | 4582012 Being Free
Being Free's picture

If I did the maths right ... at $70bn value of gross imports in 2013 the 1369 Tons (from above bar chart) works out to an average of ~$1590/oz. 

Sat, 03/22/2014 - 21:53 | 4581444 unrulian
unrulian's picture

I'm guessing anyone with so much as a gold filling will soon be toothless in that post collapse world you're talking about

Sat, 03/22/2014 - 22:00 | 4581459 Truther
Truther's picture

Yeah...Always wanted to be a dentist

Sun, 03/23/2014 - 02:03 | 4581819 Citxmech
Citxmech's picture

Is it safe?

Sun, 03/23/2014 - 09:23 | 4581970 GetZeeGold
GetZeeGold's picture

 

 

Long clove oil and lidocaine.

 

None for you lone junkster.

Sun, 03/23/2014 - 09:24 | 4582077 shovelhead
shovelhead's picture

Shit.

Da bruthas be grill-huntin'. Pop yo haid an yanks dem teef.

Sun, 03/23/2014 - 04:18 | 4581905 pitz
pitz's picture

Gold hasn't been in significant use for fillings in decades.  I truly doubt there's much supply there. 

Sun, 03/23/2014 - 06:36 | 4581959 Squid-puppets a...
Squid-puppets a-go-go's picture

yer and i think Switzerland got most of that supply off hitlers mob

OOWWW!!! Biatchahhh!

Sun, 03/23/2014 - 07:52 | 4582016 toys for tits
toys for tits's picture

Except for the African-American music community.

Mon, 03/24/2014 - 09:29 | 4585094 Tall Tom
Tall Tom's picture

You'd be amazed at how much Dental Gold I buy at Yard Sales.

 

How much are yer teeth? I charge fer Extractions and don't use no carbocaine.

 

Seriously it is out there.

Sat, 03/22/2014 - 21:53 | 4581445 quasimodo
quasimodo's picture

Flip that chart if your the USSA

Sun, 03/23/2014 - 00:15 | 4581708 zionhead
zionhead's picture

Exactly,... orderly acquistion and orderly redistribution.

The other major problem with talk of "GOLD" is that here in ASIA, we mean GOLD, when we say GOLD.

In the west when they say "GOLD" they mean paper derivative of the real thing.

Nobody in ASIA would ever be so stupid as to BUY paper-gold.

Yet the hair-lip western man buys paper-gold, ...

Yep, flip the chart, when the show is over the ASIAN's will have all the gold, and the western hair-lip will have all the worthless paper.

 

Sat, 03/22/2014 - 21:54 | 4581447 ebworthen
ebworthen's picture

Sounds like a plan to accumulate a lot of physical Gold before crushing the petrodollar.

Sat, 03/22/2014 - 22:41 | 4581515 knukles
knukles's picture

Yeah... Tyler's earlier article, the trade/energy Chalice between Roosha and da Chinee

Now, wouldn't it be just ironic if most of said gold holdings (the imported phizz, real stuff, not the paper) are really being physically in the possession of the Goober-mint and Oligarchs, so that when the petro-dollar meltdown comes....

Kinda like insider information...
As if the energy deal talked about just popped up the other day, out of the blue clouds cannot be seen in Beijing...

Oh yeah...

..CONNECT..THEM..DOTS!..

Sun, 03/23/2014 - 01:17 | 4581777 TheReplacement
TheReplacement's picture

Except for the reports of the Chinese government encouraging their citizens to buy gold and hold it privately.  They are certainly looking out for themselves but they are also looking out for their people to a degree not seen in the west.

Sun, 03/23/2014 - 02:14 | 4581830 zionhead
zionhead's picture

excellent point, MUST be repeated over & over not only do the little people have ton's gold, probably added up MORE than gubmint,

But in CHINA the gubmint really does care about the people, something would be unheard of in the west, and if heard would only be heard from the PELOSI's or Feinsteins to secure votes, but these bitch-witches sure as shit don't care about the cattle.

Everywhere in ASIA you can buy GOLD with cash, almost 24/7 with no fucking paperwork, and nobody would think about it any other way.

Sun, 03/23/2014 - 09:54 | 4582113 Its_the_economy...
Its_the_economy_stupid's picture

Chinese looking after their own people? That's a laugh.

They are encouraging gold ownership now, maybe to ourtlaw it later. Maybe just a way of magnifying the the nationalization of gold holdings.

Sun, 03/23/2014 - 06:51 | 4581968 Squid-puppets a...
Squid-puppets a-go-go's picture

dead right, knux

the fact that the US is melting scrap and exporting it to germany and dubai instead of sending proper 99.99%ers dont necessarily mean that fort knox is empty - it could well mean that the US govt  would rather piss off their key allies than give up the gold they know they will need to prevent the lights and heaters turning off

Sun, 03/23/2014 - 03:07 | 4581865 Kirk2NCC1701
Kirk2NCC1701's picture

Perhaps. They could also use it to force huge relative % participation in the SDR, when the Great Monetary Reset occurs.

Remember, you heard it from Kirk first. Actually, I made this hypothesis a year ago.

Sun, 03/23/2014 - 07:24 | 4581990 Winston Churchill
Winston Churchill's picture

The US will never give up control of the IMF.

SDR's are a western pipe dream,not a precursor to a one world currency.

The US current belligerance has finally kicked the RoW into action,Expect the

wheels to start spinning at ludicrous speed ,after a very glacial start on the

BRICS alternative.

Sat, 03/22/2014 - 21:55 | 4581448 NoDebt
NoDebt's picture

"The answer is simple: the gold paper market."

Those tricky bastards.  Using the west's own paper market against them to acquire the physical at bargain-basement prices.  

Nice to know the specific linkages to acomplish this (and that's a heluva piece of financial sleuthing- I was riveted to every sentance), but the general path and conclusion remain the same for any regular ZH reader. Physical gold was on sale last year.

Sat, 03/22/2014 - 22:44 | 4581539 zionhead
zionhead's picture

Thank god somebody can translate this into plain english.

100+

Sat, 03/22/2014 - 23:29 | 4581615 willwork4food
willwork4food's picture

Well, I have to admit my eyes glazed over about half way. I thought I actually knew something about modern finance. Turns out I'm still in school.  I still don't understand how China can phisically bring in phiz gold and not have the actual gold prices go up. I am assuming you all mean it's because of the blatant manipulation of the comex prices. But then, if they HAD the gold, and by all reports they do,  wouldn't the CYN be SKYROCKETING in value? That is not happening. Why?

Sun, 03/23/2014 - 00:10 | 4581702 zionhead
zionhead's picture

GOLD with my own eyes in CHINA,

Allow me to explain, but first I need to tell you that I live  in CHINA, so I see it with my own eyes.

Also quite often my opinion (EYES) offends the unwashed masses on ZH, but they need to have a diverse opinion about the world.

*

Simply GOLD would be at $600-$800, if the ASIANS had not been buying, after the greatest GOLD boom in history the last ten years, GOLD should have retracted $400-$800, but definelty $600 would be a strong BUY.

GOLD has been Acquired by ASIAN's on all dips's below $1200/ounce. It's not just government of CHIAN, everywhere in ASIA people who have any excess CASH are buying GOLD and its easy to find here on every corner there are shops selling for CASH, and their is no paperwork or camera, totally anonymous.

Lastly, the target for DUMPING gold here is around $1550, so there is this $800-$1600 window.

The HAIRLIPS in the west have been the seller, as they're in a DEPRESSION (GOLD GOES DOWN) in deflation. The asians have been BUYERS, but yes they don't BUY more than drive it up much than $1200, so its been a sweet spot, but that's still 50% premium over where it should be.

 

Sun, 03/23/2014 - 00:51 | 4581752 willwork4food
willwork4food's picture

thxs. or should I say shayshaynee?

Sun, 03/23/2014 - 06:59 | 4581972 Squid-puppets a...
Squid-puppets a-go-go's picture

do you not put any truck by the reports that suggest the wholesale price to mine and smelt gold comes to around $1250 / oz ?

what gives you confidence that the historical link between gold price and monetary supply has been broken?

what makes you think that each ounce  of rehypothecation through various mechanisms doesnt distort the supply/demand equation?

etc etc

Sat, 03/22/2014 - 23:24 | 4581611 Jim in MN
Jim in MN's picture

Otherwise known as buy low (via corruption and cheating) and sell high (via more corruption and cheating).

 

All admittedly aided and abetted by our friendly neighborhood idiotic, psychopathic central bank.

Sat, 03/22/2014 - 21:55 | 4581449 gonetogalt
gonetogalt's picture

Gold, Bitchez

Do NOT follow this link or you will be banned from the site!