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The Euro Tragedy & Its Consequences For Gold
Submitted by Alasdair Macleod via GoldMoney,
Despite the uncertainties ahead of the Greek general election, the European Central Bank (ECB) went ahead and announced quantitative easing (QE) of €60bn per month from March to at least September 2016.
What makes this interesting is the mounting evidence that QE does not bring about economic recovery. Even Jaime Caruana, General Manager of the Bank for International Settlements and who is the central bankers' central banker, has publicly expressed deep reservations about QE. However, the ECB ploughs on regardless.
The Keynesians at the ECB are unclear in their thinking. They are unable to answer Caruana's points, dismissing non-Keynesian economic theory as "religion", and they sweep aside the empirical evidence of Keynesian policy failures. Instead they are panicking at the spectre of too little price inflation, the continuing fall in Eurozone bank lending and now falling commodity prices. To them, it is a situation that can only be resolved by monetary stimulation of aggregate demand applied through increased government deficit spending.
This is behind the supposed solution of the ECB's QE, most of which will involve national central banks in the euro-system propping up their own national governments' finances.
The increased socialisation of the weaker Eurozone economies, especially those of France, Greece, Italy, Spain and Portugal, will inevitably lead to unnecessary economic destruction. QE always transfers wealth from savers to financial speculators and other early receivers of the new money. Somehow, the impoverishment of the working and saving masses for the benefit of the central bankers' chosen few is meant to be good for the economy.
Commercial banks will be corralled into risk-free financing of their governments instead of lending to private enterprise. This is inevitable so long as the Single Supervisory Mechanism (the pan-European banking regulator) with a missionary zeal is discouraging banks from lending to anyone other than governments and government agencies. So the only benefit to employment will come from make-work programmes. Otherwise unemployment will inevitably increase as the states' shares of GDP grow at the expense of their private sectors as the money and bank credit shifts from the former to the latter: this is the unequivocal lesson of history.
It may be that by passing government financing to the national central banks, the newly-elected Greek government can be bought off. It will be hard for this rebelling government to turn down free money, however angry it may be about austerity. But this is surely not justification for a Eurozone-wide monetary policy. While the Greek government might find it easier to appease its voters, courtesy of easy money through the Bank of Greece, hard-money Germans will be horrified. It may be tempting to think that the ECB's QE relieves Germany from much of the peripheral Eurozone's financing and that Germans are therefore less likely to oppose the ECB's QE. Not so, because the ECB is merely the visible head of a wider euro-system, which includes the national central banks, through which there are other potential liabilities.
The principal hidden cost to Germany is through the intra-central bank settlement system, TARGET2, which should only show minor imbalances. This was generally true before the banking crisis, but since then substantial amounts have been owed by the weaker southern nations, notably Italy, to the stronger northern countries. Today, the whole of the TARGET2 system is being carried on German and Luxembourg shoulders as creditors for all the rest. Germany's Bundesbank is owed €461bn, a figure that is likely to increase as the debtors' negative balances continue to accumulate.
The currency effect
The immediate consequence of the ECB's QE has been to weaken the euro against the US dollar, and importantly, it has forced the Swiss franc off its peg. The sudden 20% revaluation of the Swiss franc has generated significant losses for financial institutions which were short of the franc and long of the euro, which happens to have been the most important carry-trade in Europe, with many mortgages in Central and Eastern Europe denominated in Swiss francs as well. The Greek election has produced a further problem with a developing depositor run on her banks. Doubtless both the carry-trade and Greek bank problems can be resolved or covered up, but problems such as these are likely to further undermine international confidence in the euro, particularly against the US dollar, forcing the US's Fed to defer yet again the day when it permits interest rates to rise.
This was the background to the Fed's Open Market Committee (FOMC) meeting this week, and the resulting press release can only be described as a holding operation. Statements such as "the Committee judges that it can be patient in beginning to normalise the stance of monetary policy" are indicative of fence-sitting or lack of commitment either way. It is however clear that despite the official line, the US economy is far from "expanding at a solid pace" (FOMC's words) and external events are not helping either. For proof of that you need look no further than the slow-down of America's overseas manufacturing and production facility: China.
The consequences for gold
Until now, central banks have restricted monetary policy to domestic economic management; this is now evolving into the more dangerous stage of internationalisation through competitive devaluations. We now have two major currencies, the yen and the euro, whose central banks are set to weaken them further against the US dollar. Sterling, being tied through trade with the euro, should by default weaken as well. To these we can add most of the lesser currencies, which have already fallen against the dollar and may continue to do so. The Fed's 2% inflation target will become more remote as a consequence, and this is bound to defer the end of zero interest rate policy. So from all points of view competitive devaluations should be good for gold prices.
This is so far the case, with gold starting to rise against all major currencies, including the US dollar, with the price above 200-day and 50-day moving averages in bullish formation. To date from its lows gold has risen by up to 13% against the USD, 18% against the pound, 30% against the euro, and 32% against the yen. The rise against weaker emerging market currencies is correspondingly greater, fully justifying Asian caution about their government currencies as stores of value.
We know that Asian demand for bullion has absorbed all mine production, scrap and net selling of investment gold from advanced economies for at least the last two years. Indeed, the bear market in gold has been a process of redistribution from weak western into stronger eastern hands. So if there is a revival in physical demand from the public in these advanced economies it is hard to see how it can be satisfied at anything like current prices, with physical bullion now in firm hands.
The gold price is an early warning of future monetary and currency troubles, and it is now becoming apparent how they may transpire. The ECB move to give easy money to profligate Eurozone politicians is likely to have important ramifications well beyond Europe, and together with parallel actions by the Bank of Japan, can now be expected to increase demand for physical gold in the advanced economies once more.
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Gold bitchez
Gold fitshes.
Gold fishes.
Gold wishes to be left alone and shine on in someones' basement, a legitimate banks vault, or the bottom of the lake.
Gold and silver prices are about to reset:
http://seekingalpha.com/article/2871836-lbma-data-points-to-gold-and-silver-default-video
The sabre rattling, currency 'wars', etc. are consequences of a market, banking, and monetary fraud coming undone.
If I'd held my breath waiting for this one I'd have died long ago. Not saying it won't happen. Just that it's probably another flurry of "buy gold and silver" marketing.
Alternate source:
http://www.safehaven.com/article/36534/lbma-data-points-to-gold-and-silver-default
Silver appears to be the weak link given the massive open interest.
Please name a legitimate bank vault.
We were dreaming of a better day, a day when Keynesianism was thoroughly discredited, when a young rebel preaching its' virtues would be taken into the alley and pummelled real good, you know, for the children.
Mine. You can't afford the storage fees so don't ask.
floatation devices
for kilo gold bars....
for the zero hedge
boating with bullion fleet....
I personally have friends in Europe who missed the gold train completely because they were focused on a USD collapse. Since they couldn't distinguish between fiat and real money, but rather focused on USD vs Euro, I can't say I feel sorry for them bitchez.
Is a goldfish the creature that eats gold bugs?
Going to a Eurologist is painful without Greece
Either way finger action is guaranteed.
Cough!
Now say Ah.
(Arrowflinger owes me a new keyboard....I just spit coffee all over this one....)
Zing! Good one!
Eh...the Morgue and the Squid will just have to work a little harder to suppress it.
They will just sell 4 times the yearly mining production at 8:30 am instead of 3 times
buying and owning gold is a vote of NO CONFIDENCE. it is a protest more than an investment. and it is peace of mind in a time of counter-party worry, and I've never seen a more worrisome time in my life.
I guess the real question is: how much longer can the world's debt be rolled over and expanded? if you think it is limitless, by all means, buy those stocks and bonds, and keep all your wealth in financial instruments.
QE is not about economic recovery
QE is about saving insolvent banks
Yes, but by extending the life of zombie banks they also exend the life of the thereof-dependent economy.
That's why QE should be seen as a blessing in that it gives the plebs more time to stack. How ready were you in 2008? If people aren't prepared by now, what can I say.
Once the insolvent banks are "saved" the con continues to robbery of the muppets. The Greek muppets have revolted so now a new con must be developed to continue the robbery. Watch and learn.
The Greek muppets are revolting? Now that I believe...otherwise they are sheep.
QE is about our handlers to create fiat at will and with it buy everything of value at no cost to them and manipulating all markets and economies in the world. The banks are only one of the tools.
I'd even go a step further. QE is aout stealing wealth from the people and giving it to the bankers. The banks get first access to the newly created cheap money. They get to gamble with it. If they place a bad bet (like the housing market in '08/'09 or the fracking industry in '14/'15) the central banks just print more currency for them to play with. The dollars (or euros) that we the people are left with is worth less each time they inflate the currency. They will print until every currency is wothless!
Do not hold your savings in dollars (or dollar related assets)! Store your wealth in gold and silver! I recommend buying silver right now since it is available at such a discount. Continue sounding the alarm to your friends and family! They cannot un-hear what you tell them. If they are hesitating to save real money, these candles with silver coins might help them: https://www.etsy.com/shop/ScentSavers?ref=hdr_shop_menu They will be curious of want the value of their coin is and learn about real money in the process.
I love Gold and Silver, and believe in the idea that a currency should be tied to PM's - as they are TANGIBLE stores of value.
I have a creeping and gnawing suspicion that the tangible which Keynsenian Bankster Vampires tie a currency to is human lives (ours).
That's why the answer to the question "What's backing currency X?" is:
"The confidence and usage of the people using it".
TPTB and their minions in politics, media and Enforcement are there to make sure that it stays that way.
And don't forget that all is fair in love, war and banking.
Lead, Brass Silver & Gold
Plus primers....don't forget the primers.
Remember also that wiping your ass with a lead bar or hand full of silver eagles is quite uncomfortable, so stock up on TP too........
"In an interview with CNN’s Fareed Zakaria, Barack Obama acknowledged that the United States had "brokered a deal to transition power in Ukraine," thus admitting to the highest level of democratic impropriety imaginable.
Before we consider Obama’s stunning remarks, and how the Ukrainian people sold their country for a song, let’s rewind to November 2013, when then-President Viktor Yanukovich had shocked western capitals (and, more importantly, western markets) by suspending plans for an association agreement with the European Union."
http://rt.com/op-edge/228379-obama-power-transition-ukraine/
Regime change bitchez
Having reviewed the gold charts in EUR and CAD and RUB, etc, one *might conclude that you could have made some good money buying gold. Except you wouldn't have. You see, the USD is the center of the universe and for every uptick in the gold price in those currencies has been met with a devaluation of that currency.
USD is the center of the universe - only in usa citizens brain
You write that like today is the last day of the contest. Since neither gold nor the dollar has died yet, this ain't over.
"What makes this interesting is the mounting evidence that QE does not bring about economic recovery."
"Mounting evidence" is not necessary; the consequences of QE can be demonstrated through reasoning alone. It seems that every generation must learn this the hard way. There is nothing new here, just the name, QE, as if it were the latest high-tech formulation from the "experts." All it is is balance sheet bullshit and I'm sick of it and sick of listening to assholes from the FRB and their fanboys like Krugman.
Went through customs in Mid East back in the 90's. Had to pay currency to the officials to clear customs due to bringing in an extra laptop for a co-worker already in country. Filled out my expense report and placed bribe in spreadsheet because that what it was. Sent to boss, boss replied change to facilitating payment. Maybe the next round of QE can be called FP.
When Puff Daddy is pawning his teeth I'll become mildly interested.......
Exactly, otherwise this is just another King World News powder puff news reel flash.
He brokered the USA to banksters, so why not broker Ukraine. We must note that Ukraine's gold got brokered out ASAP.
Anything which boosts the prospects for gold and silver and brings the current banking system closer to implosion is fine by me. Print away, world! Striking my currency will only make my gold and silver more powerful than you could possibly imagine (special thanks to Obi-Wan Kenobi for that).
This banking system needs to crash. We have too many fast talking spivs and not enough people who know what they are talking about in this diseased industry. 2008 should have seen an end to these low-lives, but bailouts and QE kept them in the game, but their time will come and when it does, hopefully, we'll be there to pick up the pieces and build something better. ...
It seems that over the last month, every ZH article about GOLD can be summed up with the following statement -
"Well Thank You, Captain Obvious!"
Even the KWN cheerleaders seem like sages right now compared to what ZH has been offering on PM topics.
Sign of the end? Probably Not.
Heh heh, we always run article like this before drop gold. You see we drop gold price big this week. Hope you short GLD.
Going Up
So, was in Kroger earlier. A freakin' mad house! Almost twenty checkout lanes that were each 10 to 12 people deep. Stooper Bowl Sunday! Bread and circuses to keep the masses placated. As I witnessed shoppers jockey for positions up and down the packed aisles for the best snack foods, it makes you realize how fragile our Just-In-Time inventory mgmt system is. People were ready to gouge each other's eyes out for a bag of tortillia chips and beer. We are nothing more than trained sheep being fattened for the slaughter.
p.s. - I hope Katy Perry falls off the stage and breaks her leg at half time.
edit: not really anything to do with gold per se.... just an observation.
I noticed the mad-house atmosphere today, too, so much so that I had to go to the pistol range for some therapy. I picked the right day because the place was empty. I suppose that the pre-game show is more important. 150 rounds later, I felt better.
#optingoutofthebullshit
we always run article like this before drop gold. You see we drop gold price big this week. Hope you short GLD.
Oh good I need some more..........Yep, and here's the other side of this:
The author claimed that "gold is in a bullish formation."
No it isn't. Lower highs and lower lows is NOT bullish. Gold has several more key resistance levels to pound through to the upside before it can be declared as being in "a bullish formation" versus the authors bullshit formation.
The western central banks are acting in cartel, the price is gold isn't going to spike until someone breaks ranks. Who are the major buyers of gold going to be? The sheeple dont care, governments are broke, and the central banks like the idea that their toilet paper is backed by their mates toilet paper; it gives the whole thing credibility.
It's a confidence game...always has been and always will be.
QE sure does bring about economic recovery. Just like the rooster's crowing makes the sun rise.
If those in the EU holding physical haven't exported it yet..the time is now...I'd go to Singapore IMHO
Complexity of the situation aside I think the ECB is in desperate need for a slush-fund also known as 'bad bank'. And with Europe's collapsing economy they are going to need it. Debt write off's are on the agenda as we speak. Lazard Says 50% Greek Haircut "Reasonable" http://www.zerohedge.com/news/2015-02-01/tide-turning-obama-expresses-sy...
The German government’s “bad bank” model https://www.bundesbank.de/Redaktion/EN/Downloads/Publications/Monthly_Report_Articles/2009/2009_05_bad_bank_model.pdf?__blob=publicationFileQE is waterboarding the middle class.
I would take waterboarding if I could avoid to pay my underserved share of the government debt.