Socio-Economics History Blog

Socio-Economics & History Commentary

NYSE Runs Out of 1 Kg Gold Bars ?

  • We all know by now that the world is facing a tight supply of gold. Demand has gone up any where between 3-5 fold. So much so that gold mints are unable to supply gold coins :
     
    American Eagle Gold Proof Coins
    Production of United States Mint American Eagle Gold Proof and Uncirculated Coins has been temporarily suspended because of unprecedented demand for American Eagle Gold Bullion Coins. Currently, all available 22-karat gold blanks are being allocated to the American Eagle Gold Bullion Coin Program, as the United States Mint is required by Public Law 99-185 to produce these coins “in quantities sufficient to meet public demand . . . .” 
     
  • See also :
      
    World Mints Report Soaring Demand for Gold Coins
    US Mint Suspends Production of More Gold and Silver Coins
     
  • Now we hear the New York Stock Exchange (NYSE) Liffe futures exchange is running out of 1 Kg gold bars! Avery Goodman reports :
      
    The NYSE-Liffe futures exchange has, it seems, run out of 1 kg bars of gold. Futures markets, like NYSE-Liffe and COMEX, try hard to maintain the fiction that they will deliver physical gold, in completion of executed contracts. Indeed, to prevent fraud, U.S. law requires clearing members to keep a stockpile, of one kind or another, consisting of a minimum of 90% of metal. Up until October, 2008, it didn’t matter. Only about 1% of long buyers of paper gold futures contracts typically took delivery. Now, the situation is very different. Demand has surged and, it appears, one major futures exchange, NYSE-Liffe, and by extension, the COMEX gold warehouses it shares with its larger cousin, are unable to meet the requirements of their contracts, visa vi, delivery of 1 kg bars.
       …..
    In summary, there is now so much demand for delivery of the mini-contracts that the exchange can no longer deliver 1 kg bars. 
     
  • Will the supply situation improve? Will the bears be right about gold? Will gold price plunge back to the US$700/ounce as some say? Avery Goodman again :
      
    There has been a lot of talk, over the past year, by bearish gold commentators, claiming that the shortage of gold and silver is merely a fluke of the retail market. However, one kg bars of gold are NOT a retail denomination. They are the primary unit used in most commodity futures markets. Unlike the American exchanges, the 1 kg bar dominates deliverable contracts, for example, on the Tokyo Commodities Exchange, as well as many other commodities exchanges around the world. They were also the primary unit of the mini-gold contracts (YG), offered by NYSE-Liffe, prior to the technical default. In other words, the retail gold shortage has spread into the wholesale market. What’s next? Will there be a shortage of 100 ounce bars? No exchange rule can be used to hide from a technical default on delivery of 100 ounce bars. But, vast numbers of 100 ounce bars are stored at the iShares COMEX gold trust (IAU). So, a default in delivery of 100 ounce bars will take a while.
     
    All that said, however, given that the Fed printing press is running overtime, things are going to get tighter. It will take only a few months of delivery percentages similar to those seen in December, 2008, before all the 100 ounce gold bars are gone. What will the futures exchanges do? Hand out little slips of paper entitling contract holders to a ¼ interests in 400 ounce banker’s bars? There is no rule that allows that. What happens when people start taking mass delivery of the 400 ounce bars? Will they hand out fractional shares in gold mines, along with picks and shovels?
     
    The only way that remaining supplies can be rationed is by a rise in price sufficient to deter some of the buying. For some reason, the supply and demand for gold on the futures market is significantly out of synchronization. This implies that those who claim that the price of gold is manipulated are probably correct, because the situation could not happen in a completely free market. But, even if the gold market is manipulated, the manipulators cannot stop this from happening if the demand for delivery continues. In a more practical sense, coupled with the nearly complete removal of all small retail denominations of gold from store shelves around the world, demand is clearly outstripping supply by a considerable measure.
     
    With the U.S. and the U.K. now engaged in quantitative easing (printing new dollars and pounds), and other central banks ready to join, we can reasonably assume that the desire to exchange paper money for gold will get stronger. If the price does not rise significantly, and quickly, it is only a matter of time before this shortages reach the 100 ounce bars, and, then, on to the 400 ounce banker’s bars. That is what happened, back in the 1930s, and it is happening again. The main difference is that, in the 1930s, the price was fixed by the government, so the conversion of dollars to gold could not be controlled by a rise in price. Now, however, the price of gold can go up until, potentially, it is high enough to discourage more buying by the public. It is impossible to say whether or not this means a rise to $2,000 or $2,500 per ounce by the end of 2009, as some have predicted. But, it does mean that the price will surely rise, that the rise is going to be huge, and, probably, that it will be fast and furious, at some point in the near future.

     
  • The more central banksters manipulate the price of gold to make gold unattractive, the bigger the supply dislocation will be. When price rise, demand contracts and supply expands. This market mechanism automatically adjust demand and supply. But because price is kept artificially low for gold, demand is still there and supply did not increase. Gold is somewhat different when it comes to the demand curve. When people realize that gold is real money and expects gold price to increase, people will hoard gold. So, on expectations of rising prices supply will contract but demand will increase. Those who buy and sell gold are more than aware that Comex paper gold prices are highly likely manipulated. Thus, we see physical gold selling at a large premium to paper gold.

Disclaimer – I am not a financial advisor. This is not an advice to buy, sell or hold any stocks or bonds or any precious metals.

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March 28, 2009 Posted by | Economics | | 10 Comments

The Inescapable Inflationary Realities of Quantitative Easing and Economic Stimulus

  • Is the world economy on the road to recovery? Many seem to think that the government’s fiscal stimulus and Quantitative Easing actions are taking traction and economy should rebound in 2010. Really?
     
  • Ty Andros comments :
     
    $14 million, million, or stated another way $14 trillion. The annual GDP of the US is approximately $14 trillion or $46,666 for every man, woman and child in the US – either way you view it, this is the INCONCEIVABLE amount that has been spent, printed or guaranteed since January 2007 in the US; it does not include the government machinations in other G7 countries. And what have you and your family received from that $46,666 per person? MOSTLY nothing and you will get mostly nothing from the next $46,000 and the next $46,000; but you will get one thing from it:
    the bill.
     
    The greatest transfer of wealth from those who hold their money in paper to those who don’t has commenced. A “Crack-up Boom” approaches.
     
    So far, the governments and central banks of the US , UK and Switzerland have embarked upon QUANTITATIVE easing, aka “printing money out of thin air,” to liquefy their financial systems, generate financial system bailout funds and devalue their currencies for competitive reasons. This is set to continue indefinitely as public serpents socialize the costs of their follies and transfer the benefits of it to their elite special interest campaign supporters.
     
    The Euro zone shall soon be forced to do so in a defensive measure and as a practical response to the credit markets increasingly ceasing to function;and the bulk of the problems have not been addressed, so future efforts will dwarf what has gone before. The demise of the G7 financial and currency systems is, as some would say, “baked in the cake”. The only thing we do not know are the various roads we will travel in reaching the ultimate destination. It is a battle between Mother Nature, the government and banking elites. I know who will win this battle, and it is not man.
     
    The Federal Reserve balance sheet has expanded from under a trillion dollars to over $2 trillion since September, and with last week’s announcement of an additional $750 billion MBS (mortgage backed securities) and $300 billion long-dated US treasuries in the next six months, it can be expected to rise to over $4 trillion during this period. Before this crisis is over, this balance sheet EXPANSION will probably approach $15 to 20 trillion. Bill Gross of Pimco estimates another $5 trillion is needed; unfortunately, that is just what is needed in the next two years;and they will tax you to death and print it to SAVE you.
     
    This has rightfully provoked outrage by the groups holding dollars or treasuries, most notably the Chinese, Japanese and Russians. Less than a week after Obama assured the world of the soundness of US issues, the US Fed threw another $1.3 million, million ($1.3 trillion) into the pool of FIAT US currency. An instant stealth tax on all dollar holders as their money SITS in the bank and dollar-denominated bonds. Contrary to government assertions, this $1.3 trillion of printed money and all printed money everywhere is a TAX on the poor, middle class and everyone’s earnings and savings.
     
  • Isn’t it great the FedRes has decided on QE to monetize treasury bonds, so that interest rates will be lower and consumers will benefit? The FedRes say this is their reason for buying 2-30 years treasury bonds. How altruistic ?!? I don’t think helping American consumers with their mortgage payments and credit card debts is the real reason. Ty Andros again :
     
    Of course, the Federal Reserve HAD TO, as the TIC’s data (treasury flow of foreign funds data) revealed that foreign buyers of US treasuries and agency bonds went negative to the tune of approximately $149 BILLION, and signaling the growing rejection of debt offerings by increasingly INSOLVENT issuers. As the US Congress makes mincemeat of the international belief that we have the rule of law and honor our contracts, the fed will increasingly have to step in to fund the deficits and mortgage markets because no one will buy those issues. Now much of the deficit spending will be financed by printing money just as BANANA republics do. An additional note is the failure of a recent Gilt auction by the UK government, echoing a similar failure at a Bund auction in Germany . These are just anecdotes as investors increasingly shun G7 Bond offerings in FIAT currencies. 
     
    The spending excesses of the current Congress and administration in Washington DC are dwarfing any seen in the recent past. The federal government’s share of the GDP is poised to explode from approximately 21% to over 28% in less than a year. …..  Additionally, the private debt markets will be significantly starved, so corporations will be starved for cash and funding on an increasing basis, which is not a recipe for economic growth. 

      
  • G7 governments are running their economies to the ground and enslaving their population for many generations to come. Worse is yet to come.
     
    The G7 governments are at war with their citizens, only the citizens are largely unaware of it. Citizens have been dumbed down and the media spins the government line to dupe the public into believing that government is for them rather than against them in this period of time. The DARWINIAN struggle to survive and grow is now a showdown between the public sectors, government elites and special interests versus the private sectors and the public at large. As the governments increasingly DESTROY the ability to create wealth in the private sector, incomes have and will continue to collapse, as will tax receipts on the endless list of taxes and fees now imposed.
     
    As these sources of income recede, the only options will be to borrow from future generations through treasury issuance to the central banks, aka “PRINTING THE MONEY”. Since there is this little timeless truth known by non-governmental economists as “there is no such thing as a free lunch”, we are headed toward the demise of the G7 financial systems.
      …..
    Look no further than recent LOUD outbursts by the G7’s largest creditors such as the Chinese, Russians, Indians and Brazilians, illustrating their dismay. They should, because when the debasement occurs, it is a theft of the purchasing power they store in G7 currencies and bonds. The rallies in stock indexes are nothing more than bounces in ongoing bear markets. 
        ……
    There is no way to avoid the unfolding, ultimately inflationary great depression because public servants are incapable of doing what is right for their constituents, rather than what is politically beneficial. But profits and opportunities will abound for the astute and informed investor. The abuse of the ability to issue debt and print money will be abused until such time that the financial, currency and banking systems collapse and are shunned by the world publics
    .
      …….
    So it is once again: Hi ho, Hi ho, off to the printing press they go; selling treasuries to create the money and sending you and your children the obligation to pay for it 

     
  • See also :
     
    ECB About to Activate Quantitative Easing !
    Quantitative Easing – Death Knell for Dollar, Re-Igniting the Gold Rocket !
    Let the Currency Wars Begin?
    World Financial System in a State of Insolvency !
    Global Financial & Economic Meltdown
    Global Monetary Meltdown in 2009 ?
    Dollar Devaluation, Debt Default & Gold

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March 28, 2009 Posted by | Economics | , , , , , , , , , | 1 Comment

ECB About to Activate Quantitative Easing !

  • US and UK have plunged wholesale into Quantitative Easing. Now it looks like the ECB will be announcing QE soon. This will mean massive re-inflation. When the inflation monster is out of the cage, I wonder whether these idiots (or geniuses depending on your point of view) will be able to tame it? Will we see the Weimar republic across the EU ?
     
  • The Telegraph UK reports :
     
    Europe fetches the monetary helicopters, at long last
     

    Rejoice. After much pious posturing – and criminal wastage of time – the European Central Bank at last seems ready join the Anglo-Saxons, Japanese, Swiss, and Isrealis in printing money to fend off disaster. 
     
    Two key governors tipped us off today that the bank is ready to buy assets outright on the open market, including mortgage debt. This is a huge development, exactly what is required to help restore the animal spirits of global investors.
     
    Until now the ECB has offered unlimited liquidity in exchange for collateral from banks. That is not the same thing at all. It is sterilized stimulus. The bank has adamantly refused to cross the Rubicon by scattering money through the economy in real blast of QE. (quantitative easing) 
        ……….
    It has taken a long time to get here: a lot of damage has been done. A German contraction of 6pc to 7pc (Commerzbank forecast) is already baked into the pie this year. German unemployment may reach 5m in 2010 (RWI Institute).
     
    Ireland’s GDP has already dropped 7.5pc (year-on-year to Q4). Eurozone Industrial output fell 17.3pc in January (y/y). It was down 31pc in Spain. This is a greater fall than anything suffered in Spain over a 12-month period during the 1930s.
     
    Sadly I have little confidence that the ECB will undertake QE with adequate dispatch, but at least they seem willing to swallow their pride and start to do their part to mitigate the global depression that we are already in. If they move fast enough they may even prevent the eurozone breaking. Big if.

     
  • Writer is obviously pro QE. I am not a fan of all these central banks especially the FedRes. If they had done their job, we would not have come to this. This is largely a consequence of their ineptitude. To believe that they can tame the inflation monster seems naive to me. Fiat currencies will tank. World is heading towards monetary meltdown! See also :
     
    Quantitative Easing – Death Knell for Dollar, Re-Igniting the Gold Rocket !
    Let the Currency Wars Begin?
    World Financial System in a State of Insolvency !
    Global Financial & Economic Meltdown
    Global Monetary Meltdown in 2009 ?
    Dollar Devaluation, Debt Default & Gold

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March 28, 2009 Posted by | Economics | , , , , , , , , | 2 Comments

Vaccination – The Hidden Truth

Part   6   ,   Part  7   ,   Part  8  

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March 28, 2009 Posted by | Medicine & Health | 6 Comments

Threat of War in 2009 ?

  • What are the chances of the Shanghai Cooperation Organization (SCO) getting involve in the war in Afghanistan and Pakistan? SCO consists mainly of Russia,  its allies and China.
     
  • Since NATO and US got involved in Afghanistan, drug production has increased in that region. Makes you wonder why? Will US escalate the war against Pakistan? Will Israel attack Iran?  YouTube :
     
    On March 27, Moscow held a meeting of the Shanghai Cooperation Organization on efforts to bring peace to Afghanistan. As the United States is sinking deeper into the Afghan quagmire, the SCO seems to be seeking a bigger role in determining the future of this country.
     
    What could Russia and its allies including China do to help Afghanistan? We’ll be talking about it with Vladimir Ovchinsky, an adviser to the chairman of the Russian Constitutional Court and the former head of the Russian Interpol bureau.

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March 28, 2009 Posted by | GeoPolitics | , | Comments Off on Threat of War in 2009 ?

A World Currency Moves Closer After Geithner’s Slip

  • The drums for a single world currency is beating louder. The USD is about to cause the world massive problems when it tanks. The Telegraph reports :
     
    US Treasury Secretary Tim Geithner confessed on Wednesday that he had not read the plans by China’s central bank governor for a “super-sovereign reserve currency” run by the International Monetary Fund, but nevertheless let slip that Washington was “open” to the idea. Whoops. 
     
    This is how matters quickly escalate in geo-finance. China’s suggestion – backed by Russia, Brazil, and India, and clearly aimed at breaking US dollar hegemony – is making its way onto the agenda of the G20 Summit next week. ‘Dollar-dämmerung’ no longer looks so far-fetched.
     
    China’s paper, by Governor Zhou Xiaochuan, is couched in understated language – more a ‘thought experiment’ than a declaration of monetary war. His ideas could be mistaken for the musings of an academic theorist. Nobody should be fooled by decorum. 
     
    It comes days after premier Wen Jiabow demanded US action to safeguard the value of China’s holdings of US bonds – $740bn of US Treasuries and a further $600bn or so of other debt. “We have lent huge amounts of money to the US. Of course we are concerned about the safety of our assets,” he said.
     
    China’s Communist Party seems to fear that the Federal Reserve is orchestrating a beggar-thy-neighbour devaluation – and a disguised default on America’s foreign debt – by resorting to the nuclear option of printing money to buy US Treasury bonds.
     
    China’s proposal is to activate the IMF’s power to issue Special Drawing Rights (SDRs). The IMF would be groomed as de facto central bank for the planet. The SDRs would gradually become an “accepted means of payment”. Call it the ‘globo’. 
        ……..
    The pitfalls of a world central bank are obvious. It is hard enough for the European Central Bank to run policy for 16 states in a region with a shared history, and shared EU institutions (Commission, Court of Justice, competition police, etc). The politics of global monetary management would be poisonous.
     
    The heads of the Fed, the ECB, and the Bank of England, must all testify before parliaments and answer to democracy. There is no world parliament, no world government. Who would control a super-IMF?
     
    In theory, this world reserve bank would be above politics. China’s plan suggests a resource currency along the lines of the “Bancor” floated by Keynes at Bretton Woods. This was anchored on 30 commodities, giving it a broader base than the Gold Standard. Such a currency would prevent the “credit-based” debauchery of today’s fiat system, says Mr Zhou.
     
    True, but this would be jumping from frying pan to fire. If the world is running out of oil, metals, freshwater, and arable land – as many believe – then the price of commodities must rise over time. The ‘globo’ would become a deflation machine, like the late 19th Century gold as it asphyxiated endebted US farmers. 
        ……..
    For all its bluster, Beijing must move with care. After years of export-driven mercantilism China is even more dependent on US markets than America is dependent on Chinese capital. The risks of currency and trade conflict are not symmetric. The hegemon must prevail.
     
    But 10 years hence the picture may look different. If the G20 opens the door wide enough next week, a world currency may yet come into being. 
     
     
  • See also :
     
    End of the US Dollar Era?
    EU President – US Plan is a Way to Hell !
    Single Global Currency
    China calls for New Reserve Currency – 1 World Currency ‘666′ Just Around the Corner
    China Backs Russia’s Call for New World Reserve Currency!
    London G20 Summit: Last Chance Before Global Geopolitical Dislocation – 1 World Central Bank & 1 World Currency
    The End of Money -> 666 !
    Towards A One World Currency, One World Central Bank & One World Government !
    Lindsey Williams – Global Bankruptcies and One World Government
    Bob Chapman – Economic And Financial Systems Deliberately Destabilized

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March 28, 2009 Posted by | Economics | , , , , , , | 16 Comments