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New York Times on Benefits of Gold as Geopolitical Weapon in Currency Wars

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New York Times on Benefits of Gold in Currency Wars
The New York Times published an important article this week in which the benefits of gold to nation states during a period of currency wars was highlighted. The article was noteworthy as the New York Times has rarely covered gold in a positive manner.




The article, entitled ‘The Golden Age’ is about the growing use of gold in geopolitical affairs. They drew attention to the gold repatriation movements in Europe and to the accumulation of the precious metals in vast quantities by the central banks of the East - particularly Russia and China.

The Times attempts to get into the mind-set of the central banks who are buying gold or attempting to repatriate their current stocks of the metal. It presents two major rationales for the current trend.

"Some that've interpreted the metal's mini-comeback as an indication that financial Armageddon, in the guise of runaway inflation, is approaching. Others have read the recent move as a symbolic way for central banks and governments to make a show of strength in nervously uncertain economic times."

The first point is one which we have covered here consistently. The article quotes Jim Rickards who interprets the policies of China and Russia as "they understand who fragile things are and they are getting ready for the demise of the dollar."

The Times refers to the unprecedented waves of money printing by central banks in recent years "which in theory can devalue sovereign currencies." Despite the fact that massive money printing programs have always led to high inflation the Times seems to believe that this time it may be different - famous last words in economic terms.

The other side of the argument as put forward by the Times does not really hold water. It suggests that the accumulation of gold is a largely symbolic act . It is being used to induce a "culture of stability."

It quotes a professor from the University of Southern California, "I doubt that the Russians or the Chinese actually believe that gold is such a great investment in terms of pure returns," he says -"But if they are trying to suggest that they are unhappy with the dollar or that they want to become a global player, then gold is very powerful."



He does not seem to realize that these two countries already are global players whose influence is growing as that of the U.S. declines. They may not view gold as an investment in the classic sense how they clearly view gold as an important monetary asset as seen in their declarations and in the enormous volumes they have been accumulating.

The New York Times is the paper of Paul Krugman and the Federal Reserve and central banks. It rarely has a critical word to say about central banks and the current fiat monetary system. Conversely, it rarely has a positive word to say about gold.

The article is thus noteworthy and suggests a realisation that currency wars are set to intensify with gold again becoming an important monetary and geo-political asset.



A new Golden Age cometh. The golden rule - those who have the gold will make the rules ...


‘Golden Age’ is worth a read and can be read
here

Must read guide to Currency Wars here

 

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Sun, 12/14/2014 - 15:11 | 5550789 kchrisc
kchrisc's picture

"Some that've interpreted the metal's mini-comeback as an indication that financial Armageddon, in the guise of runaway inflation, is approaching. Others have read the recent move as a symbolic way for central banks and governments to make a show of strength in nervously uncertain economic times."

Competing departments of the Rothschild bankster system are starting to realize that, "If you don't have it, you don't got it."

I.e. they understand that if they don't want to end up a backwater in the Rothschild bankster system, they need to get their hands on as much gold, silver, and other "hard" stuff as they can.

Watching with popcorn and guillotines.

An American, not US subject.

Sun, 12/14/2014 - 15:06 | 5550773 kchrisc
kchrisc's picture

I wonder if the author of this article knows, realizes, cares, that the NYT is the mouthpiece of the CIA?

An American, not US subject.

 

"All the news, that fits power's agenda, to print."

Sun, 12/14/2014 - 15:14 | 5550793 epicurious
epicurious's picture

I can tell you with confidence from actual first hand knowledge that almost every media source has an employee, usually very high up like an editor who is a CIA operative.  These people are not employed by the CIA they are just obligated in one way or another.  Most of them do not feel uncomfortable with this obligation, but once you are associated with that organization you never leave it's grip.

Sun, 12/14/2014 - 14:47 | 5550723 f16hoser
f16hoser's picture

ZIonists Rothschild Pigs will not give-up the dollar for gold. War is assured. Will we support that war??? Hell No, We Won't Go! Let the Zionist Pigs fight their own wars!!!

 

 

Sun, 12/14/2014 - 14:25 | 5550630 Lumberjack
Lumberjack's picture

I was looking for material that would help the commmon person understand derivatives when this came up...

 

http://www.edhec-risk.com/events/other_events/Event.2014-01-22.6397/attachments/Till_CAIA_History_of_Derivatives_Final_with_PRMIA.pdf
------
Go to pages 49-52 and that really freaked me out regarding gold and other commodities. Is this why there has been so much manipulation among other things?

Sun, 12/14/2014 - 15:07 | 5550777 epicurious
epicurious's picture

"Lumberjack"  Your link to edhec does not work.  Comes up corrupted.  Do you know which event you were looking at and can you tell us what was so scarry?

Sun, 12/14/2014 - 15:56 | 5550910 Lumberjack
Lumberjack's picture

III. The Emergence of Over-the-Counter Derivatives

F. 1. Questionable Incentives and Leverage

c) Leverage

• Prior to 2008, “[t]he biggest underwriter of [over-the-counter

credit] default swaps was AIG, the world’s largest insurer.

• Without that reserve-requirement limitation, it was free to

underwrite as many swaps as it could print. And that was

just what it did: AIG’s Financial Products unit underwrote

more than $3 trillion worth of derivatives, with precisely zero

dollars reserved for paying any potential claim.”

• Later, the firm became the recipient of a “$185 billion …

government bailout.”

 

Source: Ritholtz (2012).

Sun, 12/14/2014 - 15:25 | 5550824 Lumberjack
Lumberjack's picture

IV. Possibility that we are Coming Full Circle

• “J.P. Morgan expects to accept additional precious metals

and commodities as collateral …”

• “LCH.Clearnet Group Ltd. has … been using gold as

collateral since 2011.”

• In August 2012 CME Clearing Europe “announced it has

extended the range of eligible collateral types to include gold

bullion.”

Sources: Hoyle (2011), MacDonald (2012), and CME (2012).

 

A. Exchanges Now

 

----------

I could only copy some of the material. This is a legit doc and Adobe doesn't like it for some reason. I am using a mac and had to trust the source to read it. No problems thus far. It will not allow me to copy paste 2 other pages but if you are willling as I have been, it is quite a read. If you have another old computer, and and are concerned about viruses, feel free to use it. Again, no problem here.   

Sun, 12/14/2014 - 15:43 | 5550864 Lumberjack
Lumberjack's picture

Pg 46:

 

III. The Emergence of Over-the-Counter Derivatives

F. 2. The Dodd-Frank Act: Re-engineering the OTC Marketplace

and the Futurization of Swaps, Blurring of the Distinctions of

Transparency and Counterparty Risk

• “The $700tn global swaps market will change dramatically

when regulations emerging from the Dodd-Frank act take

effect.”

• “The act mandates increased transparency and requires firms

to execute potentially 90 per cent of swaps electronically,

either on a designated contract market or a Swap Execution

Facility (SEF), a new type of trading venue.

• Trades will then clear through a central counterparty (CCP)

to reduce counterparty exposure and systemic risk.”

 

Source: Moeller and Walsky (2012).

==========

 

Pg 47:

 

III. The Emergence of Over-the-Counter Derivatives

F. 2. The Dodd-Frank Act: Re-engineering the OTC

Marketplace and the Futurization of Swaps, Blurring of the

Distinctions of Transparency and Counterparty Risk

“Once Dodd-Frank

reforms take effect,

most swaps trading will

clear through four

designated CCPs:

CME Group,

IntercontinentalExchange,

 

LCH.Clearnet and Eurex

Sun, 12/14/2014 - 15:46 | 5550874 Lumberjack
Lumberjack's picture

Pg 48:

 

III. The Emergence of Over-the-Counter Derivatives

F. 2. The Dodd-Frank Act: Re-engineering the OTC

Marketplace and the Futurization of Swaps, Blurring of the

Distinctions of Transparency and Counterparty Risk

• That said, the trend is for swaps to be “transformed into

futures contracts as Dodd-Frank Act regulations … will

impose higher margins and capital for swap users compared

with futures …”

• “… [T]he goal of the regulations … [is to] simplify the

derivatives market and its regulatory oversight through

standardization and consolidation.”

 

Sources: Leising (2012) and Sussman (2012).

Sun, 12/14/2014 - 15:44 | 5550868 Lumberjack
Lumberjack's picture

Pg 48:

 

III. The Emergence of Over-the-Counter Derivatives

F. 2. The Dodd-Frank Act: Re-engineering the OTC

Marketplace and the Futurization of Swaps, Blurring of the

Distinctions of Transparency and Counterparty Risk

• That said, the trend is for swaps to be “transformed into

futures contracts as Dodd-Frank Act regulations … will

impose higher margins and capital for swap users compared

with futures …”

• “… [T]he goal of the regulations … [is to] simplify the

derivatives market and its regulatory oversight through

standardization and consolidation.”

 

Sources: Leising (2012) and Sussman (2012).

Sun, 12/14/2014 - 15:46 | 5550877 Lumberjack
Lumberjack's picture

Pg 49:

 

IV. Possibility that we are Coming Full Circle

A. Exchanges Now Taking Gold as Collateral, Particularly in

Europe

B. “The re-establishment of a new and widely accepted reserve

currency with a stable valuation benchmark may take a long

 

time.”

Sun, 12/14/2014 - 15:48 | 5550883 Lumberjack
Lumberjack's picture

Pg 50:

 

IV. Possibility that we are Coming Full Circle

A. Exchanges Now Taking Gold as Collateral, Particularly in

Europe

• “In October 2009, CME Group Inc.

said it would allow physical gold to

be used as collateral for margin

requirements [in London], a move

that was followed by rival

IntercontinentalExchange Inc. in late

2010” at ICE Clear Europe.

• “In February … [2011], JP Morgan

Chase & Co. announced its decision

to accept physical gold as collateral

in some financial transactions.”

 

Source: Freeman (2011).

Sun, 12/14/2014 - 15:42 | 5550859 Lumberjack
Lumberjack's picture

Pg 46:

 

III. The Emergence of Over-the-Counter Derivatives

F. 2. The Dodd-Frank Act: Re-engineering the OTC Marketplace

and the Futurization of Swaps, Blurring of the Distinctions of

Transparency and Counterparty Risk

• “The $700tn global swaps market will change dramatically

when regulations emerging from the Dodd-Frank act take

effect.”

• “The act mandates increased transparency and requires firms

to execute potentially 90 per cent of swaps electronically,

either on a designated contract market or a Swap Execution

Facility (SEF), a new type of trading venue.

• Trades will then clear through a central counterparty (CCP)

to reduce counterparty exposure and systemic risk.”

 

Source: Moeller and Walsky (2012).

Sun, 12/14/2014 - 15:53 | 5550904 Lumberjack
Lumberjack's picture

IV. Possibility that we are Coming Full Circle

Therefore, in the meantime, it is likely a good idea to

understand how to use financial derivatives, probably for “a

long time”!

Source: Xiaochuan (2009).

B. “The re-establishment of a new and widely accepted reserve

currency with a stable valuation benchmark may take a long

 

time.”

Sun, 12/14/2014 - 14:43 | 5550705 Fun Facts
Fun Facts's picture

just think of derivatives[futures] as contractual [paper] proxies for the real thing, whatever the real thing may be.

There are also derivatives which are based on derivatives in an endless leveraged house of cards pyramid.

You can sell it but you dont have to own it because you are dealing with a contract for a future date. You can do this in perpetuity by rolling over the contract before the delivery period [buy back the one you sold and sell a new future delivery period].

You can also buy it but you don't have to take delivery of it [typically in most markets almost no one does].

You can also buy/sell put/call options on derivatives [most markets] just like stocks. The option pricing model however is slightly different due to the mechanics of the market.

It's a zero sum game [negative sum after slippage and brokerage fees]. That is, there are two parties to every contract, one wins and one loses.

The only one who always wins is the broker which is probably related to the derivation of the word "broker". Ie you are "broker" from dealing with him.

That said, one essential feature is that you can take delivery of it. If you couldn't take delivery of it, there would be no way to arbitrage the cash market against the futures market and the exchange would have no legitimate function [the price would become an arbitrary widget].

Furthermore you can trade these contracts typically with 95% or more leverage [near 100 percent in some cases]. Interestingly that's about the same percentage of traders who lose all their money.

Using gold as an example, a "run on the bank" would be more people standing for delivery of buy positions in a delivery period for a contract than gold was available.

In this case, the exchange would have to float some sort of "cash settle only" rule, which is equivalent to a default.

Sun, 12/14/2014 - 13:56 | 5550551 James .T .Bond
James .T .Bond's picture

We 'll see Iron Age before Golden Age.

 

Sun, 12/14/2014 - 13:37 | 5550503 Fun Facts
Fun Facts's picture

Then there's this.

Molotov Q Public proofing?

Chicago Fed Reserve bank - Biggest Bank vault in the country bricking up windows on first floor

https://www.youtube.com/watch?v=4VczkTD2AHM

Sun, 12/14/2014 - 13:59 | 5550554 JohninMK
JohninMK's picture

That's the ground floor over here. Looks like a defensive move, stops possible uninvited guests armed with bricks throughing them through the windows from the sidewalk or pavement here.

Sun, 12/14/2014 - 14:27 | 5550636 Fun Facts
Fun Facts's picture

Little do the plebes know, the only thing of actual value in the bank are a few nickels and maybe a little bit of gold left, probably rehypothecated to infinity and beyond.

Maybe they're on the lookout for unrehypothecaters?

Sun, 12/14/2014 - 13:33 | 5550490 Bemused Observer
Bemused Observer's picture

If you like your currency you can keep your currency...

As for me? I'll use the crap as long as I can, and prepare for the inevitable. My friends may make fun of me because I go for those shiny relics, but who will be better off should the currency collapse? Them, with their wallets full of FRNs in line at the rapidly emptying grocery stores? Or me, with my pillowcase full of scrap PMs in line at the refiners?

So, maybe YOUR wealth is all neat and folded, and I look like I just raided Lindsfarne, but I'll be wealthier than you at the end of the day.

Sun, 12/14/2014 - 13:15 | 5550437 AdvancingTime
AdvancingTime's picture

Currencies are IOUs, glorified and pretty pieces of paper printed and handed out by governments. Whether because of modern printing options or in an effort to thwart counterfeiters most of us will admit countries have raised the bar concerning the appearance of their currency.

This has almost become a full blown beauty contest and taken our minds off what is really behind these pretty little tokens.

A piece of paper with great power, based only on faith, they are mere promises of stored value and wealth, and the value of these promises can change in an instant. With this in mind currencies may not be the best place to store your wealth. The article below delves deeper into currencies as a great "Trojan horse" for governments to fleece the average citizen of their wealth.

 http://brucewilds.blogspot.com/2014/10/currencies-are-ious.html  

Sun, 12/14/2014 - 13:01 | 5550389 fauxhammer
fauxhammer's picture

I need to have this Greensplain'd to me again

Sun, 12/14/2014 - 12:45 | 5550350 Seasmoke
Seasmoke's picture

GOT GOLD ?

Sun, 12/14/2014 - 11:47 | 5550225 Fun Facts
Fun Facts's picture

Greenspans remarks about gold at the CFR was the signal for our elite masters. He basically told them in greenspeak to buy gold.

This is also why the CFR censored his remarks until they were leaked....don't want the donkeys getting any dangerous ideas.

Sun, 12/14/2014 - 12:26 | 5550304 Arius
Arius's picture

"censored his remarks"

 

You really think so?  Do you really believe these people just say what they think and just share it with everybody?

 

Why would they would do that?  ohhh yeah ... worried about their legacy ... thats the line about actions of president etc... legacy right...

Sun, 12/14/2014 - 12:40 | 5550336 Fun Facts
Fun Facts's picture

I would not disagree with your sentiment but specifically I was speaking to the fact that the CFR minutes were published, but the remarks Alan Greenspan made about gold were omitted.

Once an audio transcript emerged [and I believe leaked first here at ZH], then the CFR was forced to cook up a bogus reason as to why Greenspans comments were censored in the first place, and then subsequently added them back.

So in typical internet fashion, the attempted CFR cover up backfired and the story went viral.

Sun, 12/14/2014 - 12:55 | 5550379 farragut
farragut's picture

Just curious--do you happen to know whether other portions of his comments were omitted or was it only the remarks about buying gold?

Sun, 12/14/2014 - 14:31 | 5550659 Tinky
Tinky's picture

His remarks about Andrea's unusual sexual preferences were also omitted.

Sun, 12/14/2014 - 12:36 | 5550328 Clint Liquor
Clint Liquor's picture

I think Greenspan had a 'Gruber'.

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