Fed Appeals Decision To Disclose Recipients Of Bailout Loans, Threatens With "Run By Depositors"
It has been about a month since the Fed last threatened with mass extinction events if it were forced to disclose whose crony interests it had been propping with taxpayer money, as it was ordered to do in the Bloomberg (Mark Pittman) v Federal Reserve case (08-cv-9595) on August 24. Today, the Chairman is out, guns blazing, and is appealing the decision.
From Bloomberg:
The Federal Reserve is appealing a judge’s order requiring the central bank to identify the financial institutions that benefited from its emergency loans, according to a lawyer representing Bloomberg LP.
The central bank refused to divulge details about the companies participating in its 10 remaining lending programs, saying that doing so might set off a run by depositors. The Fed had until today to seek a reversal of the Aug. 24 decision by Manhattan Chief U.S. District Judge Loretta Preska, who ruled the Fed must release the identities, as well as disclose loan amounts and the assets put up as collateral.
And as the second circuit already showed its true colors in the Chrysler fiasco some months ago, it is likely that this case will once again reach the Supreme Court, probably about a month from now. October will thus likely be a very critical month for the Chairman, who will be besieged on two front - the legislative and the judicial, as Congress will be pushing for passage of HR 1207 at about the same time that the Supreme Court does it best to pretend that it is the last bastion of non-corrupted, Wall Street uninfiltrated interests, yet, as is always the case, only to show its true colors at the end of the day, once again confirming just which firms run the United States of America.
Read Entire Article
Wednesday, September 30, 2009
The Secret to Goldman's Good Fortune
So, is this how Goldman Sachs does it?
"It," of course, is making gobs of money even when nobody else on Wall Street can.
And those profits then go into outrageous bonuses to employees, which cause rancor on Capitol Hill and on Main Street.
You've heard the old saying, "It's not what you know, but who you know."
Goldman Sachs knows lots of important people. That fact is indisputable, mainly because former Goldman employees are scattered around the country, and the globe, in important, decision-making financial positions.
But I'd like to make an addendum to that old saying, which I'll explore for you today: Who you know is only important if you can get them on the phone anytime you want.
Today's column is about Thursday, Sept. 18, 2008.
It's also about the unparalleled access that Goldman Sachs had to Treasury Secretary Hank Paulson, whose mission -- according to his own words -- was to bring Wall Street and market regulators (not to mention decision makers) together, so that they were "seeing the same issues, the same problems and working toward the same solutions." On Wednesday, Sept. 17, 2008 -- the day before the one I am writing about -- the stock market performed horribly.
By the end of the session the Dow Jones industrial average tumbled 449 points as investors worried about the nation's financial system. The next morning, Sept. 18, Paulson placed his first call of the day at 6:55 a.m., to Lloyd Blankfein, who succeeded Paulson as CEO of Goldman. It's unclear whether the two connected because Blankfein called Paulson minutes later.
And then Blankfein placed another call to Paulson at 7:05 a.m. for what looks like a 10-minute conversation.
After that Paulson called Christopher Cox, Securities and Exchange Commission Chairman twice; British Chancellor Alistair Darling and New York Federal Reserve head (and now Treasury Secretary) Tim Geithner two times.
Then Paulson took another call from Goldman's Blankfein.
It wasn't even 9 a.m. yet -- 30 minutes before the stock market was to open -- and Paulson and Blankfein had already exchanged three phone calls.
This wasn't particularly unusual.
On Wednesday, Sept. 17, the day the stock market was in trouble, Paulson spoke with Blankfein five times, including a pair of calls at 7:20 p.m. and 8:45 p.m. One of the earlier calls -- at 12:15 p.m. -- is listed on Paulson's log in the same five minute interval as a call to Geithner, which could indicate that this was a conference call.
If Paulson did set up a conference call, it would have been an extreme instance of putting someone who wielded a lot of power -- Geithner -- together with someone -- Blankfein -- who could profit from that connection.
And all of this doesn't include possible cell phone calls. The Treasury turned over to me Paulson's official schedule and phone records after I made a request under the Freedom of Information Act.
There's no way for me, or anyone else, to know what Blankfein and Paulson talked about during those first three calls on Sept. 18.
But it would be reasonable to assume that the conversation, coming as it did in a period of market turmoil, had something to do with what was happening on Wall Street.
So no matter how you slice, dice or excuse it, Blankfein by 9 a.m. would have had information that was not available to anyone else who makes their money trading securities. And, as you can imagine, there is a whole lot of value in that kind of inside access.
Robert Scully, a co-president of Morgan Stanley, called Paulson at 8:50 a.m. on the 18th.
But he appears to be the only Wall Street type who was in contact with Paulson until Larry Fink, head of the private investment firm Blackrock, called at 12:40 p.m.
By then the stock market was going down again. But the decline wouldn't last long.
By John Crudele
New York Post
Tuesday, September 29, 2009
Read Entire Article
"It," of course, is making gobs of money even when nobody else on Wall Street can.
And those profits then go into outrageous bonuses to employees, which cause rancor on Capitol Hill and on Main Street.
You've heard the old saying, "It's not what you know, but who you know."
Goldman Sachs knows lots of important people. That fact is indisputable, mainly because former Goldman employees are scattered around the country, and the globe, in important, decision-making financial positions.
But I'd like to make an addendum to that old saying, which I'll explore for you today: Who you know is only important if you can get them on the phone anytime you want.
Today's column is about Thursday, Sept. 18, 2008.
It's also about the unparalleled access that Goldman Sachs had to Treasury Secretary Hank Paulson, whose mission -- according to his own words -- was to bring Wall Street and market regulators (not to mention decision makers) together, so that they were "seeing the same issues, the same problems and working toward the same solutions." On Wednesday, Sept. 17, 2008 -- the day before the one I am writing about -- the stock market performed horribly.
By the end of the session the Dow Jones industrial average tumbled 449 points as investors worried about the nation's financial system. The next morning, Sept. 18, Paulson placed his first call of the day at 6:55 a.m., to Lloyd Blankfein, who succeeded Paulson as CEO of Goldman. It's unclear whether the two connected because Blankfein called Paulson minutes later.
And then Blankfein placed another call to Paulson at 7:05 a.m. for what looks like a 10-minute conversation.
After that Paulson called Christopher Cox, Securities and Exchange Commission Chairman twice; British Chancellor Alistair Darling and New York Federal Reserve head (and now Treasury Secretary) Tim Geithner two times.
Then Paulson took another call from Goldman's Blankfein.
It wasn't even 9 a.m. yet -- 30 minutes before the stock market was to open -- and Paulson and Blankfein had already exchanged three phone calls.
This wasn't particularly unusual.
On Wednesday, Sept. 17, the day the stock market was in trouble, Paulson spoke with Blankfein five times, including a pair of calls at 7:20 p.m. and 8:45 p.m. One of the earlier calls -- at 12:15 p.m. -- is listed on Paulson's log in the same five minute interval as a call to Geithner, which could indicate that this was a conference call.
If Paulson did set up a conference call, it would have been an extreme instance of putting someone who wielded a lot of power -- Geithner -- together with someone -- Blankfein -- who could profit from that connection.
And all of this doesn't include possible cell phone calls. The Treasury turned over to me Paulson's official schedule and phone records after I made a request under the Freedom of Information Act.
There's no way for me, or anyone else, to know what Blankfein and Paulson talked about during those first three calls on Sept. 18.
But it would be reasonable to assume that the conversation, coming as it did in a period of market turmoil, had something to do with what was happening on Wall Street.
So no matter how you slice, dice or excuse it, Blankfein by 9 a.m. would have had information that was not available to anyone else who makes their money trading securities. And, as you can imagine, there is a whole lot of value in that kind of inside access.
Robert Scully, a co-president of Morgan Stanley, called Paulson at 8:50 a.m. on the 18th.
But he appears to be the only Wall Street type who was in contact with Paulson until Larry Fink, head of the private investment firm Blackrock, called at 12:40 p.m.
By then the stock market was going down again. But the decline wouldn't last long.
By John Crudele
New York Post
Tuesday, September 29, 2009
Read Entire Article
Tuesday, September 29, 2009
FDIC Discloses Deposit Insurance Fund Is Now Negative
(ZeroHedge) In an unprecedented disclosure, the FDIC has highlighted that it expects the DIF reserve ratio to be negative as of September 30. As there are a whopping 48 hours before that deadline, one can safely assume that the DIF is now well into negative territory: as of today depositors have no insurance courtesy of a banking system that has leeched out all the capital of the Federal Deposit Insurance Corporation. Let's pray there is no run on the bank soon.
Pursuant to these requirements, staff estimates that both the Fund balance and the reserve ratio as of September 30, 2009, will be negative. This reflects, in part, an increase in provisioning for anticipated failures. In contrast, cash and marketable securities available to resolve failed institutions remain positive.
Additionally, the FDIC has now raised its expectation for bank failure costs from $70 billion $100 billion. Feel free to expect this number to continue growing.
Staff has also projected the Fund balance and reserve ratio for each quarter over the next several years using the most recently available information on expected failures and loss rates and statistical analyses of trends in CAMELS downgrades, failure rates and loss rates. Staff projects that, over the period 2009 through 2013, the Fund could incur approximately $100 billion in failure costs. Staff projects that most of these costs will occur in 2009 and 2010.
Approximately $25 billion of the $100 billion amount has already been incurred in failure costs so far in 2009. Staff projects that most of these costs will occur in 2009 and 2010.
First Mary Schapiro has failed at her task of "regulating" anything on Wall Street, and now Sheila Bair presides over a newly insolvent institution. Chalk one up to Washington's success at "containing" the crisis. Zero Hedge wishes Ms. Bair all the luck in the world in returning the DIF to its statutory minimum requirement of 1.15% of all insured deposits (a shortfall of a mere hundred billion or so). Maybe she can convert the FDIC to a REIT and have Merrill Lynch do a concurrent IPO and follow-on offering (while Goldman raises it to a Conviction Buy which incorporates the firm's expectations for 10% GDP growth in 2010 coupled with projections for $1,000 per barrel of crude)?
FDIC's full memorandum outlining its failure can be found here.
Read Entire Article
Pursuant to these requirements, staff estimates that both the Fund balance and the reserve ratio as of September 30, 2009, will be negative. This reflects, in part, an increase in provisioning for anticipated failures. In contrast, cash and marketable securities available to resolve failed institutions remain positive.
Additionally, the FDIC has now raised its expectation for bank failure costs from $70 billion $100 billion. Feel free to expect this number to continue growing.
Staff has also projected the Fund balance and reserve ratio for each quarter over the next several years using the most recently available information on expected failures and loss rates and statistical analyses of trends in CAMELS downgrades, failure rates and loss rates. Staff projects that, over the period 2009 through 2013, the Fund could incur approximately $100 billion in failure costs. Staff projects that most of these costs will occur in 2009 and 2010.
Approximately $25 billion of the $100 billion amount has already been incurred in failure costs so far in 2009. Staff projects that most of these costs will occur in 2009 and 2010.
First Mary Schapiro has failed at her task of "regulating" anything on Wall Street, and now Sheila Bair presides over a newly insolvent institution. Chalk one up to Washington's success at "containing" the crisis. Zero Hedge wishes Ms. Bair all the luck in the world in returning the DIF to its statutory minimum requirement of 1.15% of all insured deposits (a shortfall of a mere hundred billion or so). Maybe she can convert the FDIC to a REIT and have Merrill Lynch do a concurrent IPO and follow-on offering (while Goldman raises it to a Conviction Buy which incorporates the firm's expectations for 10% GDP growth in 2010 coupled with projections for $1,000 per barrel of crude)?
FDIC's full memorandum outlining its failure can be found here.
Read Entire Article
Monday, September 28, 2009
World Bank Says Don't Take Dollar's Place for Granted
(Reuters) - World Bank President Robert Zoellick said the United States should not take the dollar's status as the world's key reserve currency for granted because other options are emerging.
In excerpts released on Sunday from a speech that he is to deliver on Monday, Zoellick said global economic forces were shifting and it was time now to prepare for the fact that growth will come from multiple sources.
"The United States would be mistaken to take for granted the dollar's place as the world's predominant reserve currency," he said. "Looking forward, there will increasingly be other options."
Zoellick said that a meeting of Group of 20 rich and developing countries in Pittsburgh on Thursday and Friday had made "a good start" toward increased global cooperation but they will have accept global monitoring of their activities.
"Peer review will need to be peer pressure," he said.
Read Entire Article
In excerpts released on Sunday from a speech that he is to deliver on Monday, Zoellick said global economic forces were shifting and it was time now to prepare for the fact that growth will come from multiple sources.
"The United States would be mistaken to take for granted the dollar's place as the world's predominant reserve currency," he said. "Looking forward, there will increasingly be other options."
Zoellick said that a meeting of Group of 20 rich and developing countries in Pittsburgh on Thursday and Friday had made "a good start" toward increased global cooperation but they will have accept global monitoring of their activities.
"Peer review will need to be peer pressure," he said.
Read Entire Article
The Price of Pretense in Pittsburgh
(Europac.net) As another G20 meeting rolls around, this time on home soil, the time comes once again for the economically curious but politically unconnected to wonder what is really happening behind closed doors. But while admiring the pageantry, chuckling at the awkward group photos, and parsing the joint communiqués like newly found Dead Sea scrolls, the overwhelming majority of observers will miss the meeting’s dominant theme: hypocrisy.
Everyone agrees that the principal agenda item in Pittsburgh will be the need to rein in the ‘global imbalances’ that created the late economic crisis. Everyone also agrees that these imbalances involve too much spending and borrowing by Americans and too little of both by the Chinese and other developing nations. In his remarks this week at the United Nations, President Obama used his peerless rhetorical skill to frame the issues clearly and plainly. Noting that a return to pre-crisis economics is impossible, the president assured the world that his administration will pursue policies to increase savings and decrease spending at home and challenged his Chinese counterparts to enact measures with the opposite effect in their own country.
While this is roughly what needs to happen, President Obama is actually doing everything in his power to prevent it. In point of fact, every policy move undertaken by his administration has exacerbated the very imbalances he supposedly wants to curtail. To so seamlessly profess one goal while simultaneously undermining it is an impressive piece of political theater. Unfortunately, this particular drama is likely to have an unhappy ending – and the ticket price will be staggering.
What exactly are the federal fiscal stimuli other than deliberate, but clumsy, efforts to get people, companies, and governments to spend money they don't have? Programs like tax credits for new homebuyers or ‘cash for clunkers’ are intended to encourage consumers to spend money that they otherwise might have saved. Grants to municipalities allow them to hire workers and spend money locally that they otherwise would have forgone.
Federal intervention in the mortgage and credit card debt markets, where they are now nearly the sole buyer, has been specifically undertaken to keep interest rates low and financial firms solvent – so that Americans can keep buying homes and using their credit cards. While the Fed will continue to hand out free money to any and all borrowers for an “extended period,” the abysmally low interest on deposits that such a policy creates disincentivizes personal savings even further.
In 2009, despite the tilted playing field, the American people have heroically managed to increase their savings (although clearly not as much as they would have in a free market). But President Obama’s runaway deficit spending is undermining their efforts. The simple truth is that government debt is our debt. So if a family manages, at some cost to their lifestyle, to squirrel away an extra $1,000 in saving this year, but the government adds $20,000 in new debt per household (each family’s approximate share of the $1.8 trillion fiscal 2009 deficit), that family ends up owing $19,000 more than they did at the beginning of the year!
So much for our end of the bargain. How about on the other side of the Pacific? Will the Chinese restore balance by increasing their spending? How can they while they are lending us all their money? Remember, any money the Chinese spend is money they cannot loan to us. So, if China really wanted to spur domestic consumption, the best way to do so would be to stop buying our debt. Even better, they could sell Treasuries they already own and distribute the proceeds to their citizens to spend.
However, the Obama administration is heavily lobbying the Chinese to get them to step up to the plate and buy record amounts of new Treasury debt. Obama cannot have it both ways. He cannot claim he wants the Chinese to spend more, but then beg the Chinese government to take money away from Chinese consumers and loan it to the United States Treasury.
In the end, Obama will get precisely what he publicly claims to desire but privately dreads. The Chinese government will come to its senses and stop buying Treasuries. This will cause the U.S. dollar to collapse, but it will also allow Chinese citizens to fully enjoy the fruits of their labor.
Once the Chinese begin consuming more of their own products, those products will no longer be available to Americans. Once they start spending more of their incomes on themselves, those funds will no longer be available for us to borrow. Unfortunately, that is when our real economic crisis will begin. The worst part is that the longer these imbalances are allowed to continue, the larger they grow and the more painful the ultimate adjustment process becomes.
But for now, it’s all pomp, circumstance and hypocrisy in Pittsburgh. Why yes, Madam Finance Minister, I'd love another of those crab cakes!
By: Peter Schiff author of the Little Book of Bull Moves in Bear Markets - Candidate for U.S. Senate - Conn.
Read Entire Article
Everyone agrees that the principal agenda item in Pittsburgh will be the need to rein in the ‘global imbalances’ that created the late economic crisis. Everyone also agrees that these imbalances involve too much spending and borrowing by Americans and too little of both by the Chinese and other developing nations. In his remarks this week at the United Nations, President Obama used his peerless rhetorical skill to frame the issues clearly and plainly. Noting that a return to pre-crisis economics is impossible, the president assured the world that his administration will pursue policies to increase savings and decrease spending at home and challenged his Chinese counterparts to enact measures with the opposite effect in their own country.
While this is roughly what needs to happen, President Obama is actually doing everything in his power to prevent it. In point of fact, every policy move undertaken by his administration has exacerbated the very imbalances he supposedly wants to curtail. To so seamlessly profess one goal while simultaneously undermining it is an impressive piece of political theater. Unfortunately, this particular drama is likely to have an unhappy ending – and the ticket price will be staggering.
What exactly are the federal fiscal stimuli other than deliberate, but clumsy, efforts to get people, companies, and governments to spend money they don't have? Programs like tax credits for new homebuyers or ‘cash for clunkers’ are intended to encourage consumers to spend money that they otherwise might have saved. Grants to municipalities allow them to hire workers and spend money locally that they otherwise would have forgone.
Federal intervention in the mortgage and credit card debt markets, where they are now nearly the sole buyer, has been specifically undertaken to keep interest rates low and financial firms solvent – so that Americans can keep buying homes and using their credit cards. While the Fed will continue to hand out free money to any and all borrowers for an “extended period,” the abysmally low interest on deposits that such a policy creates disincentivizes personal savings even further.
In 2009, despite the tilted playing field, the American people have heroically managed to increase their savings (although clearly not as much as they would have in a free market). But President Obama’s runaway deficit spending is undermining their efforts. The simple truth is that government debt is our debt. So if a family manages, at some cost to their lifestyle, to squirrel away an extra $1,000 in saving this year, but the government adds $20,000 in new debt per household (each family’s approximate share of the $1.8 trillion fiscal 2009 deficit), that family ends up owing $19,000 more than they did at the beginning of the year!
So much for our end of the bargain. How about on the other side of the Pacific? Will the Chinese restore balance by increasing their spending? How can they while they are lending us all their money? Remember, any money the Chinese spend is money they cannot loan to us. So, if China really wanted to spur domestic consumption, the best way to do so would be to stop buying our debt. Even better, they could sell Treasuries they already own and distribute the proceeds to their citizens to spend.
However, the Obama administration is heavily lobbying the Chinese to get them to step up to the plate and buy record amounts of new Treasury debt. Obama cannot have it both ways. He cannot claim he wants the Chinese to spend more, but then beg the Chinese government to take money away from Chinese consumers and loan it to the United States Treasury.
In the end, Obama will get precisely what he publicly claims to desire but privately dreads. The Chinese government will come to its senses and stop buying Treasuries. This will cause the U.S. dollar to collapse, but it will also allow Chinese citizens to fully enjoy the fruits of their labor.
Once the Chinese begin consuming more of their own products, those products will no longer be available to Americans. Once they start spending more of their incomes on themselves, those funds will no longer be available for us to borrow. Unfortunately, that is when our real economic crisis will begin. The worst part is that the longer these imbalances are allowed to continue, the larger they grow and the more painful the ultimate adjustment process becomes.
But for now, it’s all pomp, circumstance and hypocrisy in Pittsburgh. Why yes, Madam Finance Minister, I'd love another of those crab cakes!
By: Peter Schiff author of the Little Book of Bull Moves in Bear Markets - Candidate for U.S. Senate - Conn.
Read Entire Article
Friday, September 25, 2009
This is How a Congressman Does His Job
You Tube
Watch Alan Grayson question the general counsel for the Federal Reserve:
Enter Remainder of Article Here
Read Entire Article
Watch Alan Grayson question the general counsel for the Federal Reserve:
Enter Remainder of Article Here
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Another Dire Warning on ETF's Like GLD, SLV
Sprott's Embry warns investors to make sure ETFs backed by precious metals
Investors should confine their exposure to actual physical metal or only to paper products with regular audits that support precious metals backing.
(Mineweb) As precious metals investment demand "is exploding on a worldwide basis," Sprott Asset Management Chief Investment Strategist John Embry urged investors to make sure "your exposure to gold and silver is what it is represented to be..."
"Very simply there are far too many proxies for the real thing," he warned retail and institutional investors at the Silver Summit in Spokane Thursday. "Thus I would confine my exposure to actual physical or only those paper products where a regular audit is conducted to irrefutably support the precious metals backing."
Nevertheless, Embry feels "gold and silver have presented remarkable refugees" during the current global economic crisis.
"The gold price to date represents just the tip of the iceberg," he stressed. "What is truly important at this moment is to have a good position in gold and silver and their respective shares."
"I'll stick to a target of $1,500 in the next six months but I am comfortable with the notion of it trading at several multiples of the current price before the bull market runs its course."
Meanwhile, Embry asserted, "I cannot over emphasize the magnitude of the impact that is going to be felt in the gold market when central banks can no longer supply the gold needed to meet burgeoning demand." The decision of central banks to accumulate 14 tonnes of gold during the second quarter of this year is evidence of the possibility, he added.
"Most observers do not realize how much central banks...fill the huge and growing gap between true demand and mine and scrap supply," he noted. Embry estimated the size of demand-supply gap exceeds 1,000 tonnes of gold per annum, which represents 25% of the physical gold supply.
The gap "virtually guarantees that the western central banks are getting dangerously short of available reserves...to continue dumping gold on the market," he suggested. In the meantime, a number of eastern central banks-who are awash in U.S. dollars-"are accumulating and will continue to accumulate gold as one avenue to diversify their resources away from the U.S. dollar."
Meanwhile, Embry forecasts that the gold-silver ratio, which is currently just under 60, to decline precipitously as the bull market in precious metals gathers steam."
Author: Dorothy Kosich wwww.mineweb.com
Read Entire Article
Investors should confine their exposure to actual physical metal or only to paper products with regular audits that support precious metals backing.
(Mineweb) As precious metals investment demand "is exploding on a worldwide basis," Sprott Asset Management Chief Investment Strategist John Embry urged investors to make sure "your exposure to gold and silver is what it is represented to be..."
"Very simply there are far too many proxies for the real thing," he warned retail and institutional investors at the Silver Summit in Spokane Thursday. "Thus I would confine my exposure to actual physical or only those paper products where a regular audit is conducted to irrefutably support the precious metals backing."
Nevertheless, Embry feels "gold and silver have presented remarkable refugees" during the current global economic crisis.
"The gold price to date represents just the tip of the iceberg," he stressed. "What is truly important at this moment is to have a good position in gold and silver and their respective shares."
"I'll stick to a target of $1,500 in the next six months but I am comfortable with the notion of it trading at several multiples of the current price before the bull market runs its course."
Meanwhile, Embry asserted, "I cannot over emphasize the magnitude of the impact that is going to be felt in the gold market when central banks can no longer supply the gold needed to meet burgeoning demand." The decision of central banks to accumulate 14 tonnes of gold during the second quarter of this year is evidence of the possibility, he added.
"Most observers do not realize how much central banks...fill the huge and growing gap between true demand and mine and scrap supply," he noted. Embry estimated the size of demand-supply gap exceeds 1,000 tonnes of gold per annum, which represents 25% of the physical gold supply.
The gap "virtually guarantees that the western central banks are getting dangerously short of available reserves...to continue dumping gold on the market," he suggested. In the meantime, a number of eastern central banks-who are awash in U.S. dollars-"are accumulating and will continue to accumulate gold as one avenue to diversify their resources away from the U.S. dollar."
Meanwhile, Embry forecasts that the gold-silver ratio, which is currently just under 60, to decline precipitously as the bull market in precious metals gathers steam."
Author: Dorothy Kosich wwww.mineweb.com
Read Entire Article
New World Economic Order Takes Shape at G20
(Reuters) - The Group of 20 is set to become the premier coordinating body on global economic issues, reflecting a new world economic order in which emerging market countries like China are much more relevant, according to a draft communique.
Leaders of the G20 developed and developing nations also agreed to make the International Monetary Fund more representative by increasing the voting power of countries that have long been under-represented in the world financial body, said the draft G20 communique obtained by Reuters.
It called for a shift in IMF voting by at least 5 percent, although several G20 representatives said it was a 5 percentage point shift from developed to under-represented countries. Currently, the split in voting power is 57 percent for industrialized countries and 43 percent for developing countries. The shift would make the split nearly 50-50.
The G20 was formed in 1999 for finance ministers and central bank chiefs following the Asian financial crisis. The idea was to help the G7 -- the United States, Germany, Britain, France, Italy, Canada and Japan -- talk with the wider world.
Read Entire Article
Leaders of the G20 developed and developing nations also agreed to make the International Monetary Fund more representative by increasing the voting power of countries that have long been under-represented in the world financial body, said the draft G20 communique obtained by Reuters.
It called for a shift in IMF voting by at least 5 percent, although several G20 representatives said it was a 5 percentage point shift from developed to under-represented countries. Currently, the split in voting power is 57 percent for industrialized countries and 43 percent for developing countries. The shift would make the split nearly 50-50.
The G20 was formed in 1999 for finance ministers and central bank chiefs following the Asian financial crisis. The idea was to help the G7 -- the United States, Germany, Britain, France, Italy, Canada and Japan -- talk with the wider world.
Read Entire Article
Wednesday, September 23, 2009
Insider Selling Sky Rockets - Anyone Listening?
TrimTabs' CEO Charles Biderman Discusses Massive Insider Selling
"Insider selling is 30x insider buying, while corporate stock buybacks are non-existent. Companies are saying they don't want to touch their own stocks."
"I don't know where the money is coming from to keep the markets from not plunging."
We would recommend that Charles look towards the Plunge Protection Team, aka the Presidents Working Group on Financial Markets.
Enter Remainder of Article Here
Read Entire Article
"Insider selling is 30x insider buying, while corporate stock buybacks are non-existent. Companies are saying they don't want to touch their own stocks."
"I don't know where the money is coming from to keep the markets from not plunging."
We would recommend that Charles look towards the Plunge Protection Team, aka the Presidents Working Group on Financial Markets.
Enter Remainder of Article Here
Read Entire Article
Bank President Admitted that All Credit Is Created Out of Thin Air With the Flick of a Pen Upon the Bank’s Books
Washington’s Blog
Wednesday, Sept 23rd, 2009
In First National Bank v. Daly (often referred to as the “Credit River” case) the court found: that the bank created money “out of thin air”:
[The president of the First National Bank of Montgomery] admitted that all of the money or credit which was used as a consideration [for the mortgage loan given to the defendant] was created upon their books, that this was standard banking practice exercised by their bank in combination with the Federal Reserve Bank of Minneaopolis, another private bank, further that he knew of no United States statute or law that gave the Plaintiff [bank] the authority to do this.
The court also held:
The money and credit first came into existence when they [the bank] created it.
Justice courts are just local courts, and not as powerful or prestigious as state supreme courts, for example. And it was not a judge, but a justice of the peace who made the decision.
But what is important is that the president of the First National Bank of Montgomery apparently admitted that his bank created money by simply making an entry in its book, which means – as we have previously pointed out – that the story we’ve all been told that bank deposits and reserves precede loans is false.
Read Entire Article
Wednesday, Sept 23rd, 2009
In First National Bank v. Daly (often referred to as the “Credit River” case) the court found: that the bank created money “out of thin air”:
[The president of the First National Bank of Montgomery] admitted that all of the money or credit which was used as a consideration [for the mortgage loan given to the defendant] was created upon their books, that this was standard banking practice exercised by their bank in combination with the Federal Reserve Bank of Minneaopolis, another private bank, further that he knew of no United States statute or law that gave the Plaintiff [bank] the authority to do this.
The court also held:
The money and credit first came into existence when they [the bank] created it.
Justice courts are just local courts, and not as powerful or prestigious as state supreme courts, for example. And it was not a judge, but a justice of the peace who made the decision.
But what is important is that the president of the First National Bank of Montgomery apparently admitted that his bank created money by simply making an entry in its book, which means – as we have previously pointed out – that the story we’ve all been told that bank deposits and reserves precede loans is false.
Read Entire Article
Tuesday, September 22, 2009
"Look Out Below" - Uncle Sam
Neal Kimberley: Global rebalancing to weaken dollar quietly
LONDON -- Twenty-four years ago today, major nations called for depreciation of the dollar to rebalance the global economy. Now, as another effort at rebalancing looms, the dollar will again bear the brunt -- though officials will try to ensure that its fall is less dramatic this time.
That's the implication of U.S. President Barack Obama's announcement this week that he will push world leaders for a new global "framework" in which the United States would cut its huge trade and budget deficits.
Agreeing on this framework would be politically difficult, since it would require policy changes by many countries -- China, for example, would probably have to rein in its explosive export-led growth.
This time, with the world shakily emerging from a financial crisis, policymakers are likely to try to manage the dollar's drop in a more low-key fashion.
They are unlikely to issue an explicit call for the dollar to fall. In fact, the U.S. Treasury may continue proclaiming its "strong dollar policy" in an attempt to keep the markets calm.
No one in the G20 wants to risk a freefall of the dollar that could disrupt global trade as it recovers from recession. And in contrast to the 1980s, developing nations such as China are now challenging the dollar's long-term role as the world's top reserve currency.
The dollar's premier status helps the United States to obtain foreign capital and in order to keep that access, Washington is likely to encourage central banks around the world to continue holding dollars. This would require slow depreciation of the currency rather than a panicky slide. So unless policymakers completely lose control of the forex markets -- which cannot entirely be ruled out -- the dollar's slide is likely to be slower and smaller than it was after the Plaza Accord, when the currency sank about 50 percent versus the yen between Sept. 22, 1985 and the end of 1987.
The overall direction of the dollar does not look in doubt, however. Top presidential adviser Lawrence Summers has said he wants a U.S. economy that is "more export-oriented and less consumption-oriented."
A lower dollar is a logical tool to achieve that goal, and letting the currency weaken would probably be faster and easier than most other big policy steps to reshape the U.S. economy, such as tax changes and health reform.
The International Monetary Fund, which is advising G20 nations on economy policy, is hinting heavily at the need for currency realignment.
In a report released this week, it said "current policies and the assumed constellation of exchange rates may not be sufficient for the needed rebalancing of demand."
It added that policy reforms by the world's big economies to restore growth "would be more effective if accompanied by a real effective renminbi appreciation, offset by euro and dollar depreciation".
An international understanding on dollar depreciation may well not be reached in Pittsburgh. A French official said last Friday that Pittsburgh would merely set the stage for future talks on foreign exchange rates.
"At this stage there will not be currency discussions, but the framework that we hope to put in place ... is a way of discussing later the question of exchange rates," said the official, who declined to be named.
But giving China and other developing countries more power in the IMF and the World Bank could be part of an informal quid pro quo in which China quietly undertook to resume appreciating the yuan against the dollar.
Today's rise of the euro as high as $1.4821, breaking the December 2008 peak of $1.4719, is a technical signal that the market thinks the dollar is increasingly vulnerable.
For many traders, the break suggests a good chance of a rise to at least the psychologically important level of $1.50 in coming weeks or months.
The European Central Bank might seek to limit speculation against the dollar by expressing concern about such a move. But the market does not appear to worry that the ECB could actually intervene to support the dollar.
Read Entire Article
LONDON -- Twenty-four years ago today, major nations called for depreciation of the dollar to rebalance the global economy. Now, as another effort at rebalancing looms, the dollar will again bear the brunt -- though officials will try to ensure that its fall is less dramatic this time.
That's the implication of U.S. President Barack Obama's announcement this week that he will push world leaders for a new global "framework" in which the United States would cut its huge trade and budget deficits.
Agreeing on this framework would be politically difficult, since it would require policy changes by many countries -- China, for example, would probably have to rein in its explosive export-led growth.
This time, with the world shakily emerging from a financial crisis, policymakers are likely to try to manage the dollar's drop in a more low-key fashion.
They are unlikely to issue an explicit call for the dollar to fall. In fact, the U.S. Treasury may continue proclaiming its "strong dollar policy" in an attempt to keep the markets calm.
No one in the G20 wants to risk a freefall of the dollar that could disrupt global trade as it recovers from recession. And in contrast to the 1980s, developing nations such as China are now challenging the dollar's long-term role as the world's top reserve currency.
The dollar's premier status helps the United States to obtain foreign capital and in order to keep that access, Washington is likely to encourage central banks around the world to continue holding dollars. This would require slow depreciation of the currency rather than a panicky slide. So unless policymakers completely lose control of the forex markets -- which cannot entirely be ruled out -- the dollar's slide is likely to be slower and smaller than it was after the Plaza Accord, when the currency sank about 50 percent versus the yen between Sept. 22, 1985 and the end of 1987.
The overall direction of the dollar does not look in doubt, however. Top presidential adviser Lawrence Summers has said he wants a U.S. economy that is "more export-oriented and less consumption-oriented."
A lower dollar is a logical tool to achieve that goal, and letting the currency weaken would probably be faster and easier than most other big policy steps to reshape the U.S. economy, such as tax changes and health reform.
The International Monetary Fund, which is advising G20 nations on economy policy, is hinting heavily at the need for currency realignment.
In a report released this week, it said "current policies and the assumed constellation of exchange rates may not be sufficient for the needed rebalancing of demand."
It added that policy reforms by the world's big economies to restore growth "would be more effective if accompanied by a real effective renminbi appreciation, offset by euro and dollar depreciation".
An international understanding on dollar depreciation may well not be reached in Pittsburgh. A French official said last Friday that Pittsburgh would merely set the stage for future talks on foreign exchange rates.
"At this stage there will not be currency discussions, but the framework that we hope to put in place ... is a way of discussing later the question of exchange rates," said the official, who declined to be named.
But giving China and other developing countries more power in the IMF and the World Bank could be part of an informal quid pro quo in which China quietly undertook to resume appreciating the yuan against the dollar.
Today's rise of the euro as high as $1.4821, breaking the December 2008 peak of $1.4719, is a technical signal that the market thinks the dollar is increasingly vulnerable.
For many traders, the break suggests a good chance of a rise to at least the psychologically important level of $1.50 in coming weeks or months.
The European Central Bank might seek to limit speculation against the dollar by expressing concern about such a move. But the market does not appear to worry that the ECB could actually intervene to support the dollar.
Read Entire Article
Monday, September 21, 2009
U.S. Dollar at Greatest Risk in ‘Decades’, Says Morgan Stanley
(Bloomberg) -- The probability of the U.S. dollar
falling more than seven percent over the next four quarters is
the most since 1974, according to Morgan Stanley.
Risk to the U.S. dollar “from deteriorating U.S.
fundamentals is the greatest in decades,” Sophia Drossos, co-
head for global foreign-exchange strategy at Morgan Stanley in
New York, wrote in a research note dated yesterday. Morgan
Stanley models “indicate 91 percent probability” of a greater
than seven percent decline, Drossos wrote.
A “key risk” is increasing investor concern over “how
U.S. authorities will transition to a more sustainable policy
path, particularly with respect to the fiscal budget,” Drossos
wrote.
The federal budget deficit will total $1.6 trillion this
year as revenue falls and the U.S. government spends at the
fastest pace in 57 years, according to the nonpartisan
Congressional Budget Office. Next year’s deficit will total $1.4
trillion, according to the agency.
“We continue to project another 6 percent decline in the
trade-weighted dollar through end 2010,” Drossos wrote.
By Morwenna Coniam
Read Entire Article
falling more than seven percent over the next four quarters is
the most since 1974, according to Morgan Stanley.
Risk to the U.S. dollar “from deteriorating U.S.
fundamentals is the greatest in decades,” Sophia Drossos, co-
head for global foreign-exchange strategy at Morgan Stanley in
New York, wrote in a research note dated yesterday. Morgan
Stanley models “indicate 91 percent probability” of a greater
than seven percent decline, Drossos wrote.
A “key risk” is increasing investor concern over “how
U.S. authorities will transition to a more sustainable policy
path, particularly with respect to the fiscal budget,” Drossos
wrote.
The federal budget deficit will total $1.6 trillion this
year as revenue falls and the U.S. government spends at the
fastest pace in 57 years, according to the nonpartisan
Congressional Budget Office. Next year’s deficit will total $1.4
trillion, according to the agency.
“We continue to project another 6 percent decline in the
trade-weighted dollar through end 2010,” Drossos wrote.
By Morwenna Coniam
Read Entire Article
A Market Rally in Monopoly Money
(Seeking Alpha) When priced in US dollars, the US stock market appears to have rallied significantly since the beginning of the year - it's now up 18.31% since January 1st. However, since the dollar has fallen 5.82% since the beginning of the year, if we subtract the dollar decline during this same time period, the 18.31% gain drops to a 12.49% gain. This is a more honest means of interpreting this rise, for as we all know, a gain in real wealth is not determined by solely having a greater amount of a certain currency but also by adjusting for the increase or decrease of that currency’s purchasing power.
Looking at the below graph, since gold has been considered a currency for thousands of years, if we price the behavior of the S&P 500 in terms of gold, the gain in the S&P 500 since the beginning of the year shrivels to a 3.92% rise.
Silver, too is deemed a currency by many countries - many countries also mint silver coins. When we price the behavior of the S&P 500 in terms of silver, as we can see above, the gain in the S&P 500 evaporates and becomes a 21.36% loss.
So depending on what currency you would like to hold in the future, your perspective of the current rally in US markets will change dramatically based upon the currency lens through which this rally is viewed (even if you don’t believe the compelling evidence that the US Federal Reserve and government have been tampering excessively in US stock markets this past summer to artificially manufacture this current rally. Personally, for the past several years, I’ve preferred to hold currencies with zero counterparty risk).
Silver, too is deemed a currency by many countries - many countries also mint silver coins. When we price the behavior of the S&P 500 in terms of silver, as we can see above, the gain in the S&P 500 evaporates and becomes a 21.36% loss.
So depending on what currency you would like to hold in the future, your perspective of the current rally in US markets will change dramatically based upon the currency lens through which this rally is viewed (even if you don’t believe the compelling evidence that the US Federal Reserve and government have been tampering excessively in US stock markets this past summer to artificially manufacture this current rally. Personally, for the past several years, I’ve preferred to hold currencies with zero counterparty risk).
Finally, I’ve produced one chart above where I’ve superimposed the the US dollar (daily) over the chart of the S&P 500 (daily) since the beginning of the year. I haven’t taken the time to adjust the scales of both graphs to accurately represent percent moves for comparative purposes because I only wish point out that the chart patterns of the S&P 500 and the US dollar have been near perfect inverse images of each other for this entire year.
By: J.S. Kim, Seeking Alpha
Read Entire Article
Looking at the below graph, since gold has been considered a currency for thousands of years, if we price the behavior of the S&P 500 in terms of gold, the gain in the S&P 500 since the beginning of the year shrivels to a 3.92% rise.
Silver, too is deemed a currency by many countries - many countries also mint silver coins. When we price the behavior of the S&P 500 in terms of silver, as we can see above, the gain in the S&P 500 evaporates and becomes a 21.36% loss.
So depending on what currency you would like to hold in the future, your perspective of the current rally in US markets will change dramatically based upon the currency lens through which this rally is viewed (even if you don’t believe the compelling evidence that the US Federal Reserve and government have been tampering excessively in US stock markets this past summer to artificially manufacture this current rally. Personally, for the past several years, I’ve preferred to hold currencies with zero counterparty risk).
Silver, too is deemed a currency by many countries - many countries also mint silver coins. When we price the behavior of the S&P 500 in terms of silver, as we can see above, the gain in the S&P 500 evaporates and becomes a 21.36% loss.
So depending on what currency you would like to hold in the future, your perspective of the current rally in US markets will change dramatically based upon the currency lens through which this rally is viewed (even if you don’t believe the compelling evidence that the US Federal Reserve and government have been tampering excessively in US stock markets this past summer to artificially manufacture this current rally. Personally, for the past several years, I’ve preferred to hold currencies with zero counterparty risk).
Finally, I’ve produced one chart above where I’ve superimposed the the US dollar (daily) over the chart of the S&P 500 (daily) since the beginning of the year. I haven’t taken the time to adjust the scales of both graphs to accurately represent percent moves for comparative purposes because I only wish point out that the chart patterns of the S&P 500 and the US dollar have been near perfect inverse images of each other for this entire year.
By: J.S. Kim, Seeking Alpha
Read Entire Article
Thursday, September 17, 2009
Kinross Says Gold Industry Faces Reserve Crisis
Sept. 16 (Bloomberg) -- Kinross Gold Corp., Canada’s third- largest producer of the precious metal, said the gold industry is facing a crisis of declining reserves as investor demand outpaces supply.
“We may be in the midst of a perfect storm in terms of price and industry dynamics,” Tye Burt, chief executive officer of the Toronto-based company, said at a conference in Denver today. “Globally production has been in decline since the peak of 81 million ounces in 2001 to 77 million ounces last year, and we see that decline continuing long term.”
Gold climbed to an 18-month high in New York and London today on concern that a global economic recovery may stoke inflation and on a drop by the dollar that boosted demand for the metal as an alternative investment. Gold for December delivery advanced as much as $17 to $1,023.30 an ounce on the New York Mercantile Exchange’s Comex division. The precious metal reached a record $1,033.90 an ounce on March 21, 2008.
Kinross said in June that it’s considering as many as 50 investments in all countries where the company has operations, including Russia. The company wants to acquire “development- stage” or “active” projects and is likely to take on local partners for any investments in Russia, Vice President James Crossland said in a June 4 interview.
Read Entire Article
“We may be in the midst of a perfect storm in terms of price and industry dynamics,” Tye Burt, chief executive officer of the Toronto-based company, said at a conference in Denver today. “Globally production has been in decline since the peak of 81 million ounces in 2001 to 77 million ounces last year, and we see that decline continuing long term.”
Gold climbed to an 18-month high in New York and London today on concern that a global economic recovery may stoke inflation and on a drop by the dollar that boosted demand for the metal as an alternative investment. Gold for December delivery advanced as much as $17 to $1,023.30 an ounce on the New York Mercantile Exchange’s Comex division. The precious metal reached a record $1,033.90 an ounce on March 21, 2008.
Kinross said in June that it’s considering as many as 50 investments in all countries where the company has operations, including Russia. The company wants to acquire “development- stage” or “active” projects and is likely to take on local partners for any investments in Russia, Vice President James Crossland said in a June 4 interview.
Read Entire Article
Wednesday, September 16, 2009
Ron Paul - The Federal Government is a Giant Toxic Asset
Whatever you think of Ron Paul, you have to admire his great quotes.
As he writes in his new book "End the Fed":
The entire federal government is one giant toxic asset at the moment.
[The Fed] is bigger than the Congress, [it] has more power than the Congress. The Fed Chairman probably is more powerful than our president, and yet we refuse to look at it. The time has come for us to look at the Fed.
Enter Remainder of Article Here
Read Entire Article
As he writes in his new book "End the Fed":
The entire federal government is one giant toxic asset at the moment.
[The Fed] is bigger than the Congress, [it] has more power than the Congress. The Fed Chairman probably is more powerful than our president, and yet we refuse to look at it. The time has come for us to look at the Fed.
Enter Remainder of Article Here
Read Entire Article
Tuesday, September 15, 2009
Headlines From a 1930 Wall Street Journal
* Brokers, businessmen, and even the general public more optimistic; over 75% of brokerage houses now advise buying stocks.
* Offering of $334.2M in 2 3/8% one-year Treasury certificates is oversubscribed by almost 4:1.
* B. Anderson, Chase Natl. Bank economist, says Fed policy of easy money will not be sustainable when business revives; suggests moderate tightening now to avoid shock of a sudden severe tightening later.
* Florida Bondholder's Adjustment Committee calls on owners of defaulted local bonds to accept arbitration with principle that local govt. should “pay to the full extent of its ability to pay” when fairly determined, and no more. Says full payment in many cases impossible due to string of problems in past few years including collapse of real estate boom, bank failures, storms, and Med. fly scare; local feeling is that many bonds were voted in due to high-pressure tactics by outsiders.
* Roger W. Babson (economist, made perfectly timed bearish call in fall 1929) optimistic on immediate future, sees possible “stampede of orders” due to underproduction; says it's as evident now that business is bound to improve as it was clear a year ago that it must deteriorate.
* The great debate: Bears argue that past month's rally has already discounted the mild improvement in business, and that decline in steel production in past week indicates weakness. Bulls counter that steel decline was due to Labor Day, that August steel and car loading figures show more than seasonal improvement, and that recent retail figures and company outlooks have been improved. On the technical side, bulls believe the recent rally has “definitely broken” the downtrend since last Sept., indicating future support should come in well above the June bottom of 212.
* “While the recovery in business will undoubtedly be gradual, and characterized by confusing uncertainties, the fact remains that all indices that have pointed to revival in the past are now existent. As the stock market is usually some months ahead of trade, observers ... think there is a good chance that Wall Street will be the outstanding bright spot of the country during the winter months.”
Read Entire Article
* Offering of $334.2M in 2 3/8% one-year Treasury certificates is oversubscribed by almost 4:1.
* B. Anderson, Chase Natl. Bank economist, says Fed policy of easy money will not be sustainable when business revives; suggests moderate tightening now to avoid shock of a sudden severe tightening later.
* Florida Bondholder's Adjustment Committee calls on owners of defaulted local bonds to accept arbitration with principle that local govt. should “pay to the full extent of its ability to pay” when fairly determined, and no more. Says full payment in many cases impossible due to string of problems in past few years including collapse of real estate boom, bank failures, storms, and Med. fly scare; local feeling is that many bonds were voted in due to high-pressure tactics by outsiders.
* Roger W. Babson (economist, made perfectly timed bearish call in fall 1929) optimistic on immediate future, sees possible “stampede of orders” due to underproduction; says it's as evident now that business is bound to improve as it was clear a year ago that it must deteriorate.
* The great debate: Bears argue that past month's rally has already discounted the mild improvement in business, and that decline in steel production in past week indicates weakness. Bulls counter that steel decline was due to Labor Day, that August steel and car loading figures show more than seasonal improvement, and that recent retail figures and company outlooks have been improved. On the technical side, bulls believe the recent rally has “definitely broken” the downtrend since last Sept., indicating future support should come in well above the June bottom of 212.
* “While the recovery in business will undoubtedly be gradual, and characterized by confusing uncertainties, the fact remains that all indices that have pointed to revival in the past are now existent. As the stock market is usually some months ahead of trade, observers ... think there is a good chance that Wall Street will be the outstanding bright spot of the country during the winter months.”
Read Entire Article
Are Foreign Purchases of U.S. Treasury Bonds Being Faked?
Washington’s Blog
Tuesday, Sept 15th, 2009
Everyone knows that the American government is gaming the market for treasury bonds to some extent.
For example, the government has itself bought some U.S. Treasuries.
Some writers, such as Rob Kirby and Ellen Brown, go much further, alleging that Bernanke and the boys have also used hedge funds in the Cayman Islands to secretly buy huge sums of U.S. treasuries using dollars printed by the Federal Reserve, while pretending that independent "Caribbean banks" are doing the buying. See this, this and this. I have no idea whether or not they are right.
Perhaps most dramatically, Keith Fitz-Gerald (Contributing Editor to Money Morning, Investment Director of the Money Map Report and editor of the New China Trader) - who has seemed like a very level-headed guy in the past - is now claiming that the U.S. government has recently changed the rules so that the Fed can itself buy U.S. treasuries but claim that the buyers are foreign:
The U.S. Government wants the public to believe that China, Japan and Europe are still happily buying U.S. debt to fund the American economic turnaround. The only problem is - they're not...
The reality is that the Treasury changed the way U.S. debt is accounted for when purchased on the open market. U.S. debt selling on the open market can be considered as having been sold to "foreigners" even if the purchaser was the Federal Reserve! Voila! A sleight of hand by the U.S. Government, and China and Japan can appear to be buying debt while at the same time selling debt.
If Fitz-Gerald is right, then the story that China was a net seller of U.S. Treasury bonds for the first time ever in June takes on added significance. And the claim that China's bond purchases have increased recently loses credibility.
It is obviously important to quickly either debunk or verify Fitz-Gerald's claim. Can anyone at Treasury or one of the relevant market makers tell us one way or the other?
Read Entire Article
Tuesday, Sept 15th, 2009
Everyone knows that the American government is gaming the market for treasury bonds to some extent.
For example, the government has itself bought some U.S. Treasuries.
Some writers, such as Rob Kirby and Ellen Brown, go much further, alleging that Bernanke and the boys have also used hedge funds in the Cayman Islands to secretly buy huge sums of U.S. treasuries using dollars printed by the Federal Reserve, while pretending that independent "Caribbean banks" are doing the buying. See this, this and this. I have no idea whether or not they are right.
Perhaps most dramatically, Keith Fitz-Gerald (Contributing Editor to Money Morning, Investment Director of the Money Map Report and editor of the New China Trader) - who has seemed like a very level-headed guy in the past - is now claiming that the U.S. government has recently changed the rules so that the Fed can itself buy U.S. treasuries but claim that the buyers are foreign:
The U.S. Government wants the public to believe that China, Japan and Europe are still happily buying U.S. debt to fund the American economic turnaround. The only problem is - they're not...
The reality is that the Treasury changed the way U.S. debt is accounted for when purchased on the open market. U.S. debt selling on the open market can be considered as having been sold to "foreigners" even if the purchaser was the Federal Reserve! Voila! A sleight of hand by the U.S. Government, and China and Japan can appear to be buying debt while at the same time selling debt.
If Fitz-Gerald is right, then the story that China was a net seller of U.S. Treasury bonds for the first time ever in June takes on added significance. And the claim that China's bond purchases have increased recently loses credibility.
It is obviously important to quickly either debunk or verify Fitz-Gerald's claim. Can anyone at Treasury or one of the relevant market makers tell us one way or the other?
Read Entire Article
Monday, September 14, 2009
Stiglitz Says Banking Problems Are Now Bigger Than Pre-Lehman
Sept. 13 (Bloomberg) -- Joseph Stiglitz, the Nobel Prize- winning economist, said the U.S. has failed to fix the underlying problems of its banking system after the credit crunch and the collapse of Lehman Brothers Holdings Inc.
“In the U.S. and many other countries, the too-big-to-fail banks have become even bigger,” Stiglitz said in an interview today in Paris. “The problems are worse than they were in 2007 before the crisis.”
Stiglitz’s views echo those of former Federal Reserve Chairman Paul Volcker, who has advised President Barack Obama’s administration to curtail the size of banks, and Bank of Israel Governor Stanley Fischer, who suggested last month that governments may want to discourage financial institutions from growing “excessively.”
A year after the demise of Lehman forced the Treasury Department to spend billions to shore up the financial system, Bank of America Corp.’s assets have grown and Citigroup Inc. remains intact. In the U.K., Lloyds Banking Group Plc, 43 percent owned by the government, has taken over the activities of HBOS Plc, and in France BNP Paribas SA now owns the Belgian and Luxembourg banking assets of insurer Fortis.
While Obama wants to name some banks as “systemically important” and subject them to stricter oversight, his plan wouldn’t force them to shrink or simplify their structure.
Stiglitz said the U.S. government is wary of challenging the financial industry because it is politically difficult, and that he hopes the Group of 20 leaders will cajole the U.S. into tougher action.
G-20 Steps
“We aren’t doing anything significant so far, and the banks are pushing back,” he said. “The leaders of the G-20 will make some small steps forward, given the power of the banks” and “any step forward is a move in the right direction.”
G-20 leaders gather next week in Pittsburgh and will consider ways of improving regulation of financial markets and in particular how to set tighter limits on remuneration for market operators. Under pressure from France and Germany, G-20 finance ministers last week reached a preliminary accord that included proposals to claw-back cash awards and linking compensation more closely to long-term performance.
“It’s an outrage,” especially “in the U.S. where we poured so much money into the banks,” Stiglitz said. “The administration seems very reluctant to do what is necessary. Yes they’ll do something, the question is: Will they do as much as required?”
Read Entire Article
“In the U.S. and many other countries, the too-big-to-fail banks have become even bigger,” Stiglitz said in an interview today in Paris. “The problems are worse than they were in 2007 before the crisis.”
Stiglitz’s views echo those of former Federal Reserve Chairman Paul Volcker, who has advised President Barack Obama’s administration to curtail the size of banks, and Bank of Israel Governor Stanley Fischer, who suggested last month that governments may want to discourage financial institutions from growing “excessively.”
A year after the demise of Lehman forced the Treasury Department to spend billions to shore up the financial system, Bank of America Corp.’s assets have grown and Citigroup Inc. remains intact. In the U.K., Lloyds Banking Group Plc, 43 percent owned by the government, has taken over the activities of HBOS Plc, and in France BNP Paribas SA now owns the Belgian and Luxembourg banking assets of insurer Fortis.
While Obama wants to name some banks as “systemically important” and subject them to stricter oversight, his plan wouldn’t force them to shrink or simplify their structure.
Stiglitz said the U.S. government is wary of challenging the financial industry because it is politically difficult, and that he hopes the Group of 20 leaders will cajole the U.S. into tougher action.
G-20 Steps
“We aren’t doing anything significant so far, and the banks are pushing back,” he said. “The leaders of the G-20 will make some small steps forward, given the power of the banks” and “any step forward is a move in the right direction.”
G-20 leaders gather next week in Pittsburgh and will consider ways of improving regulation of financial markets and in particular how to set tighter limits on remuneration for market operators. Under pressure from France and Germany, G-20 finance ministers last week reached a preliminary accord that included proposals to claw-back cash awards and linking compensation more closely to long-term performance.
“It’s an outrage,” especially “in the U.S. where we poured so much money into the banks,” Stiglitz said. “The administration seems very reluctant to do what is necessary. Yes they’ll do something, the question is: Will they do as much as required?”
Read Entire Article
Friday, September 11, 2009
Canary in the Coal Mine
(Europac.net)Like a battering ram in a medieval siege, gold keeps hammering away at the gate. For the third time in less than twelve months, the yellow metal is once again crashing into the $1,000 per ounce level. As of press time, it looks like gold will close above that level today and will set a new record in the process. Even if the breach is fleeting, who can doubt that it will mount another assault soon? In the meantime, there is no shortage of market analysts who are not buying gold while questioning the motives of those who are. Although they offer a variety of strained reasons, they nearly all agree that it has nothing to do with inflation, which is nearly universally considered dead and buried. As a self-confessed gold bug, I can assure all that inflation is the only reason I buy gold. And recently, I'm buying a lot.
When individuals choose to accumulate savings in the form of gold rather than interest-bearing paper deposits in government-insured accounts, there is only one reason for doing so: they fear that the interest will not be enough to compensate for their expected loss of purchasing power through inflation. This fear reflects both current inflation and the expectation for future inflation. While there are those who buy gold to speculate on its appreciation, the underlying factor that drives that appreciation in the first place will always be inflation. If governments were not creating inflation, there would be little investment advantage to owning gold.
Some believe that gold investors are primarily motivated by fear. It is often assumed that gold is the one asset class that holds its value when all other asset classes are falling due to market uncertainty. But this explanation brings us right back to inflation. When economies move into recession, there is always political pressure for governments to intervene. Their one tool is the printing press.
When governments act to prop up sagging markets, or bailout investors or depositors of failed institutions, they create inflation (print money) to pay for it. This, in effect, transfers capital from prudent investors to speculators. At the same time, it pulls the rug out from under the safest vehicles of traditional investment – bonds and cash. It becomes hard for investors to protect their principal, much less grow their wealth. Some turn to gold, with its historically guaranteed ‘floor’ against losses, and others start making ever riskier investments to try to ‘beat’ the inflation rate.
Gold’s appeal as an asset of choice during times of political uncertainty, particularly during wartime, is again a function of its being a hedge against inflation. Wars are always expensive. They are also often unpopular, which makes paying for them through tax increases politically dangerous. As a result, they are almost always financed through the ‘secret tax’ of inflation. For a nation that loses a war, or suffers revolution or systemic civil conflict, there is always the chance that its currency could become worthless. While this may not be the kind of inflation that we read about in the business section, it is the ultimate form of the monetary malady – whereby a currency loses all of its purchasing power.
Whenever the price of gold rises sharply, I always take it as an early warning sign that inflation expectations are rising. If those expectations are not met, its price will fall. If the market is correct, gold will maintain its gains. And if the inflation continues to intensify, so too will gold’s rise. Most analysts, however, simply look at the dubious CPI to determine the presence of inflation and inflation expectations. They perennially forget that prices are a lagging indicator and only a symptom of inflation, and may in fact not be rising at the moment when inflation kicks into high gear.
The anti-gold camp takes their greatest solace from the bond market, where things have been eerily quiet. They maintain that since bond yields have not risen much, inflation must not be a problem, and so the gold bugs are simply paranoid. The bond market, they tell us, is populated by ‘vigilantes’ who sound a bugle call at the first whiff of inflation. But this argument ignores the fact that central bankers themselves are the biggest bond buyers and are in effect ‘vigilantes-in-chief.’ Their outsized participation in the market has led to gross distortions. When the Fed or another central bank buys treasuries, real returns are not considered. Purchases are made for political reasons rather than investment merit, which renders meaningless the signals current bond prices are sending.
The gold-bashers also believe that reduced consumer demand due to unemployment will keep inflation pressures at bay for the foreseeable future. However, inflation will ultimately act to reduce the supply of goods much faster than unemployment reduces demand for goods, sending prices up despite lower demand. The stagflation of the 1970s is an example of such an outcome.
The bottom line is that gold is continuing its long-term bull run, and those who dismiss the message behind its rise do so at their own financial peril. When it comes to inflation, gold is the canary in the economic coal mine. Just as unseen toxins kill the canary before the miners succumb to the fumes, a spike in gold is a harbinger of reckless monetary devaluation. Our leading commentators think that since they can’t see or smell the gas, all those canaries (gold prices, commodity prices) must be dying of natural causes. Good luck to them when the toxins flood the mine.
By Peter Schiff www.europac.net
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When individuals choose to accumulate savings in the form of gold rather than interest-bearing paper deposits in government-insured accounts, there is only one reason for doing so: they fear that the interest will not be enough to compensate for their expected loss of purchasing power through inflation. This fear reflects both current inflation and the expectation for future inflation. While there are those who buy gold to speculate on its appreciation, the underlying factor that drives that appreciation in the first place will always be inflation. If governments were not creating inflation, there would be little investment advantage to owning gold.
Some believe that gold investors are primarily motivated by fear. It is often assumed that gold is the one asset class that holds its value when all other asset classes are falling due to market uncertainty. But this explanation brings us right back to inflation. When economies move into recession, there is always political pressure for governments to intervene. Their one tool is the printing press.
When governments act to prop up sagging markets, or bailout investors or depositors of failed institutions, they create inflation (print money) to pay for it. This, in effect, transfers capital from prudent investors to speculators. At the same time, it pulls the rug out from under the safest vehicles of traditional investment – bonds and cash. It becomes hard for investors to protect their principal, much less grow their wealth. Some turn to gold, with its historically guaranteed ‘floor’ against losses, and others start making ever riskier investments to try to ‘beat’ the inflation rate.
Gold’s appeal as an asset of choice during times of political uncertainty, particularly during wartime, is again a function of its being a hedge against inflation. Wars are always expensive. They are also often unpopular, which makes paying for them through tax increases politically dangerous. As a result, they are almost always financed through the ‘secret tax’ of inflation. For a nation that loses a war, or suffers revolution or systemic civil conflict, there is always the chance that its currency could become worthless. While this may not be the kind of inflation that we read about in the business section, it is the ultimate form of the monetary malady – whereby a currency loses all of its purchasing power.
Whenever the price of gold rises sharply, I always take it as an early warning sign that inflation expectations are rising. If those expectations are not met, its price will fall. If the market is correct, gold will maintain its gains. And if the inflation continues to intensify, so too will gold’s rise. Most analysts, however, simply look at the dubious CPI to determine the presence of inflation and inflation expectations. They perennially forget that prices are a lagging indicator and only a symptom of inflation, and may in fact not be rising at the moment when inflation kicks into high gear.
The anti-gold camp takes their greatest solace from the bond market, where things have been eerily quiet. They maintain that since bond yields have not risen much, inflation must not be a problem, and so the gold bugs are simply paranoid. The bond market, they tell us, is populated by ‘vigilantes’ who sound a bugle call at the first whiff of inflation. But this argument ignores the fact that central bankers themselves are the biggest bond buyers and are in effect ‘vigilantes-in-chief.’ Their outsized participation in the market has led to gross distortions. When the Fed or another central bank buys treasuries, real returns are not considered. Purchases are made for political reasons rather than investment merit, which renders meaningless the signals current bond prices are sending.
The gold-bashers also believe that reduced consumer demand due to unemployment will keep inflation pressures at bay for the foreseeable future. However, inflation will ultimately act to reduce the supply of goods much faster than unemployment reduces demand for goods, sending prices up despite lower demand. The stagflation of the 1970s is an example of such an outcome.
The bottom line is that gold is continuing its long-term bull run, and those who dismiss the message behind its rise do so at their own financial peril. When it comes to inflation, gold is the canary in the economic coal mine. Just as unseen toxins kill the canary before the miners succumb to the fumes, a spike in gold is a harbinger of reckless monetary devaluation. Our leading commentators think that since they can’t see or smell the gas, all those canaries (gold prices, commodity prices) must be dying of natural causes. Good luck to them when the toxins flood the mine.
By Peter Schiff www.europac.net
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Hedge Fund Sees Gold at US$1600
LONDON (Reuters) - The price of gold could rise as high as $1,600 an ounce as investors opt for assets with lasting value rather than volatile currencies, says one hedge fund manager who has increased his exposure to the precious metal.
"All the fundamentals are in place. If it breaks last year's high it can go to $1,200 to $1,400 quite quickly," Pedro de Noronha, managing partner of Noster Capital told Reuters in an interview on Tuesday.
Spot gold rose through the psychologically significant barrier of $1,000 an ounce on Tuesday -- its highest since March 2008 when it hit a record $1,030.80.
The precious metal was helped by a weaker dollar and expectations that government measures to revive economic growth will boost demand for basic resources.
"If you adjust the gold price for inflation, to retest the early 80s highs gold would need to be at $1,600. I don't think this figure is inconceivable, especially given the fundamentals that are behind this move in gold," de Noronha said.
Nearly 50 percent of the $45 million Noster Capital fund is now exposed to gold derivatives after it raised its exposure last week.
Quantitative easing by governments has increased the attraction of gold, de Noronha said, while leading global currencies are under pressure due to high levels of borrowing.
"People say they hate the U.S. dollar, but is the euro or (British) pound any better?" he said.
"Do you want to own the stock certificates of a country burning cash year in, year out, or own something that, no matter what, you can't produce more of?
"I think it's a third-quarter or fourth-quarter story -- it's just getting into the time of year when gold performs best. All the stars are aligned for gold to work."
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"All the fundamentals are in place. If it breaks last year's high it can go to $1,200 to $1,400 quite quickly," Pedro de Noronha, managing partner of Noster Capital told Reuters in an interview on Tuesday.
Spot gold rose through the psychologically significant barrier of $1,000 an ounce on Tuesday -- its highest since March 2008 when it hit a record $1,030.80.
The precious metal was helped by a weaker dollar and expectations that government measures to revive economic growth will boost demand for basic resources.
"If you adjust the gold price for inflation, to retest the early 80s highs gold would need to be at $1,600. I don't think this figure is inconceivable, especially given the fundamentals that are behind this move in gold," de Noronha said.
Nearly 50 percent of the $45 million Noster Capital fund is now exposed to gold derivatives after it raised its exposure last week.
Quantitative easing by governments has increased the attraction of gold, de Noronha said, while leading global currencies are under pressure due to high levels of borrowing.
"People say they hate the U.S. dollar, but is the euro or (British) pound any better?" he said.
"Do you want to own the stock certificates of a country burning cash year in, year out, or own something that, no matter what, you can't produce more of?
"I think it's a third-quarter or fourth-quarter story -- it's just getting into the time of year when gold performs best. All the stars are aligned for gold to work."
Read Entire Article
Thursday, September 10, 2009
After 21 Years, Barrick Will Finally Wean Itself off Gold Hedging
More than two decades ago, Barrick transformed the international mining industry with its new-fangled policy of hedging gold production. Now Barrick admits it's finally time to let its hedgebook go.
RENO, NV -
With Tuesday's announcement by Barrick that it was eliminating gold hedges and floating contracts, a 21-year old policy--which transformed the former one-gold mine company into a global gold mining success , but subsequently was derided by analysts, investors and GATA-may finally be put to rest.
As late as 2003, Barrick credited hedging for bring in a total of $2.2 billion in profit. That same year, however, analysts and even the New York Times were complaining the biggest liability to Barrick's stock price was related to its hedging book.
By February 2007, Barrick announced it would eliminate all non-project related hedge contracts, but retain 9.5 million ounces of project-related gold forward sales contracts. The announcement was made by then-CEO Greg Wilkins shortly after Citigroup metals analysts had taken the company to task for not eliminating or aggressively reducing its hedge book.
Citigroup had suggested a move to aggressively reduce the hedgebook would likely drive the gold price higher in the short term; remove a longstanding barrier to ownership for thematic investors; and signal to others that "the last bears have thrown in the towel."
Wilkins responded at the time that the company needed the hedges to help finance its burgeoning project pipeline.
As of September 7, 2009, however, Barrick gold sales contracts-which include both gold hedges and floating contracts have a mark-to-market value of negative $5.6 billion. Barrick finally agreed Tuesday "the gold hedges and floating contracts were adversely impacting the company's appeal to the broader investment community and hence, its share price performance."
On Tuesday, Barrick, now headed by CEO Aaron Regent, announced it had entered into an agreement with a syndicate of underwriters, led by RBC Capital Markets, Morgan Stanley, J.P. Morgan and Scotia Capital, for a bought deal public offering of gross proceeds of US$3 billion representing 81.2 million common shares of Barrick at a price of $36.95 per share.
"The gold hedge book has been a particular concern among our shareholders and the broader market which we believe has obscured the many positive developments within the company," Regent said in a news release Tuesday."As a result of today's decision, we have addressed that concern and maintained our financial flexibility."
Barrick intends to use $1.9 billion of the net proceeds to eliminate all of its fixed price gold contracts within the next 12 months, as well as $1 billion to eliminate a portion of its floating spot price gold contracts. A $5.6 billion charge to earnings will be recorded in the third quarter as a result of the change in the accounting treatment of the hedges.
The company's current gold hedges include 3 million ounces of fixed price contracts where Barrick does not participate in gold price movements. The contracts have a negative mark-to-market position of $1.9 billion as of September 7th. In addition the company has 6.5 million ounces of floating contracts where Barrick fully participates in gold price movements. The current negative $3.7 billion MTM position of the gloating contracts does not change with gold prices. No activity in the gold market is required to settle these floating contracts.
Read Entire Article
RENO, NV -
With Tuesday's announcement by Barrick that it was eliminating gold hedges and floating contracts, a 21-year old policy--which transformed the former one-gold mine company into a global gold mining success , but subsequently was derided by analysts, investors and GATA-may finally be put to rest.
As late as 2003, Barrick credited hedging for bring in a total of $2.2 billion in profit. That same year, however, analysts and even the New York Times were complaining the biggest liability to Barrick's stock price was related to its hedging book.
By February 2007, Barrick announced it would eliminate all non-project related hedge contracts, but retain 9.5 million ounces of project-related gold forward sales contracts. The announcement was made by then-CEO Greg Wilkins shortly after Citigroup metals analysts had taken the company to task for not eliminating or aggressively reducing its hedge book.
Citigroup had suggested a move to aggressively reduce the hedgebook would likely drive the gold price higher in the short term; remove a longstanding barrier to ownership for thematic investors; and signal to others that "the last bears have thrown in the towel."
Wilkins responded at the time that the company needed the hedges to help finance its burgeoning project pipeline.
As of September 7, 2009, however, Barrick gold sales contracts-which include both gold hedges and floating contracts have a mark-to-market value of negative $5.6 billion. Barrick finally agreed Tuesday "the gold hedges and floating contracts were adversely impacting the company's appeal to the broader investment community and hence, its share price performance."
On Tuesday, Barrick, now headed by CEO Aaron Regent, announced it had entered into an agreement with a syndicate of underwriters, led by RBC Capital Markets, Morgan Stanley, J.P. Morgan and Scotia Capital, for a bought deal public offering of gross proceeds of US$3 billion representing 81.2 million common shares of Barrick at a price of $36.95 per share.
"The gold hedge book has been a particular concern among our shareholders and the broader market which we believe has obscured the many positive developments within the company," Regent said in a news release Tuesday."As a result of today's decision, we have addressed that concern and maintained our financial flexibility."
Barrick intends to use $1.9 billion of the net proceeds to eliminate all of its fixed price gold contracts within the next 12 months, as well as $1 billion to eliminate a portion of its floating spot price gold contracts. A $5.6 billion charge to earnings will be recorded in the third quarter as a result of the change in the accounting treatment of the hedges.
The company's current gold hedges include 3 million ounces of fixed price contracts where Barrick does not participate in gold price movements. The contracts have a negative mark-to-market position of $1.9 billion as of September 7th. In addition the company has 6.5 million ounces of floating contracts where Barrick fully participates in gold price movements. The current negative $3.7 billion MTM position of the gloating contracts does not change with gold prices. No activity in the gold market is required to settle these floating contracts.
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Wednesday, September 9, 2009
The Dollar Collapses
Commodities, stocks and foreign currencies all rise as investors sell dollars.
(Forbes) The U.S. dollar reached its lowest point against the euro this year due to a myriad of forces including rising global stocks and commodities prices, low interest rates, and investors diversifying out of Treasury debt and into other assets including U.S. stocks with the Dow Jones industrial average approaching 9500 in late afternoon trading.
Stocks in Asia and Europe saw big gains, and gold topped $1,000 an ounce. (See "Stocks, Commodities Rally After Long Weekend.") Oil also gained 4.9%, or $3.31, to $71.33, on the New York Mercantile Exchange, due in part to Goldman Sachs affirming its year-long outlook. By midday trading one euro traded for $1.45, meanwhile the Dollar Index, which tracks the greenback against a basket of currencies, fell to its lowest level since September of 2008.
"It isn't as if the fundamentals are better in Europe," said Jessica Hoversen, a foreign exchange and fixed income futures analyst at MF Global. "There are other factors outside of economic growth taking hold in the market."
Japan's special drawing rights holdings hit a record $18.5 billion, from $3 billion in July. SDRs are the currency of the International Monetary Fund and other international institutions. It's a basket of currencies composed of the dollar, euro, sterling and yen in a fixed weighting determined by the IMF and World Bank every five years.
One of the reasons cited for the rise is an increased in commitment in overseas aid, but Hoversen noted that to a certain degree it speaks to the general demand for the dollar, and that scares the market. "It doesn't necessarily mean diversification away from the dollar, but there is a heightened sensitivity about the topic," Hoversen said.
Currency investors have been obsessed with the prospect of central banks diversifying out of the dollar. (See "Spotlight On The Dollar.") The fixation has been fueled by meetings under the G20/G8 framework, as well as candid comments from some of the largest reserve managers, namely Russia and China. The prospects of a massive diversification are low though, at least in the short-term, because most of the alternatives, including using SDRs as a global reverse currency are unrealistic.
The three-month London Interbank Offer Rate, commonly known as the Libor, which reached a record low of 30 basis points and that also contributed to the dollar's slide. "It makes the dollar the cheapest interest rate differential in the G10 on a Libor basis," Hoversen said.
The dollar's fall follows a United Nations report released Monday calling for a reduced role of the dollar as the world's primary reserve currency.
"This is not the first time the U.N. has called for this, but it's the most recent," Hoversen said. The report, which was produced by the U.N. conference on Trade and Development, stated that a viable solution to the exchange-rate problem would be a system of managed flexible exchange rates targeting a rate that is consistent with a sustainable current-account position.
"What the U.N. may be trying to do is eliminate global dependence on the dollar," Hoversen said. "However, more details would be needed on the mechanism for adjustment to judge how it would affect the global currency markets."
By Carl Gutierrez
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(Forbes) The U.S. dollar reached its lowest point against the euro this year due to a myriad of forces including rising global stocks and commodities prices, low interest rates, and investors diversifying out of Treasury debt and into other assets including U.S. stocks with the Dow Jones industrial average approaching 9500 in late afternoon trading.
Stocks in Asia and Europe saw big gains, and gold topped $1,000 an ounce. (See "Stocks, Commodities Rally After Long Weekend.") Oil also gained 4.9%, or $3.31, to $71.33, on the New York Mercantile Exchange, due in part to Goldman Sachs affirming its year-long outlook. By midday trading one euro traded for $1.45, meanwhile the Dollar Index, which tracks the greenback against a basket of currencies, fell to its lowest level since September of 2008.
"It isn't as if the fundamentals are better in Europe," said Jessica Hoversen, a foreign exchange and fixed income futures analyst at MF Global. "There are other factors outside of economic growth taking hold in the market."
Japan's special drawing rights holdings hit a record $18.5 billion, from $3 billion in July. SDRs are the currency of the International Monetary Fund and other international institutions. It's a basket of currencies composed of the dollar, euro, sterling and yen in a fixed weighting determined by the IMF and World Bank every five years.
One of the reasons cited for the rise is an increased in commitment in overseas aid, but Hoversen noted that to a certain degree it speaks to the general demand for the dollar, and that scares the market. "It doesn't necessarily mean diversification away from the dollar, but there is a heightened sensitivity about the topic," Hoversen said.
Currency investors have been obsessed with the prospect of central banks diversifying out of the dollar. (See "Spotlight On The Dollar.") The fixation has been fueled by meetings under the G20/G8 framework, as well as candid comments from some of the largest reserve managers, namely Russia and China. The prospects of a massive diversification are low though, at least in the short-term, because most of the alternatives, including using SDRs as a global reverse currency are unrealistic.
The three-month London Interbank Offer Rate, commonly known as the Libor, which reached a record low of 30 basis points and that also contributed to the dollar's slide. "It makes the dollar the cheapest interest rate differential in the G10 on a Libor basis," Hoversen said.
The dollar's fall follows a United Nations report released Monday calling for a reduced role of the dollar as the world's primary reserve currency.
"This is not the first time the U.N. has called for this, but it's the most recent," Hoversen said. The report, which was produced by the U.N. conference on Trade and Development, stated that a viable solution to the exchange-rate problem would be a system of managed flexible exchange rates targeting a rate that is consistent with a sustainable current-account position.
"What the U.N. may be trying to do is eliminate global dependence on the dollar," Hoversen said. "However, more details would be needed on the mechanism for adjustment to judge how it would affect the global currency markets."
By Carl Gutierrez
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Tuesday, September 8, 2009
China Alarmed by US Money Printing
(London Telegraph) The US Federal Reserve's policy of printing money to buy Treasury debt threatens to set off a serious decline of the dollar and compel China to redesign its foreign reserve policy, according to a top member of the Communist hierarchy.
"Gold is definitely an alternative, but when we buy, the price goes up. We have to do it carefully so as not to stimulate the markets," he added.
"We hope there will be a change in monetary policy as soon as they have positive growth again," he said at the Ambrosetti Workshop, a policy gathering on Lake Como.
"If they keep printing money to buy bonds it will lead to inflation, and after a year or two the dollar will fall hard. Most of our foreign reserves are in US bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen, and other currencies," he said.
China's reserves are more than – $2 trillion, the world's largest.
"Gold is definitely an alternative, but when we buy, the price goes up. We have to do it carefully so as not to stimulate the markets," he added.
The comments suggest that China has become the driving force in the gold market and can be counted on to
buy whenever there is a price dip, putting a floor under any correction.
Mr Cheng said the Fed's loose monetary policy was stoking an unstable asset boom in China. "If we raise interest rates, we will be flooded with hot money. We have to wait for them. If they raise, we raise.
"Credit in China is too loose. We have a bubble in the housing market and in stocks so we have to be very careful, because this could fall down."
Mr Cheng said China had learned from the West that it is a mistake for central banks to target retail price inflation and take their eye off assets.
Read Entire Article
"Gold is definitely an alternative, but when we buy, the price goes up. We have to do it carefully so as not to stimulate the markets," he added.
"We hope there will be a change in monetary policy as soon as they have positive growth again," he said at the Ambrosetti Workshop, a policy gathering on Lake Como.
"If they keep printing money to buy bonds it will lead to inflation, and after a year or two the dollar will fall hard. Most of our foreign reserves are in US bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen, and other currencies," he said.
China's reserves are more than – $2 trillion, the world's largest.
"Gold is definitely an alternative, but when we buy, the price goes up. We have to do it carefully so as not to stimulate the markets," he added.
The comments suggest that China has become the driving force in the gold market and can be counted on to
buy whenever there is a price dip, putting a floor under any correction.
Mr Cheng said the Fed's loose monetary policy was stoking an unstable asset boom in China. "If we raise interest rates, we will be flooded with hot money. We have to wait for them. If they raise, we raise.
"Credit in China is too loose. We have a bubble in the housing market and in stocks so we have to be very careful, because this could fall down."
Mr Cheng said China had learned from the West that it is a mistake for central banks to target retail price inflation and take their eye off assets.
Read Entire Article
Friday, September 4, 2009
Gold Rush by Many Investors Could Push Price Up to $1,200
Investors wary of other investment choices are taking physical possession of gold in a move that could drive the metal to historic heights.
Gold prices could make a run at $1,200 and beyond this year as investors look for safe places to put their money amid continued turmoil not only in the economy but also the stock market and the US political structure.
"When you have such a large part of US population convinced we're running to hell in a handbasket with federal spending, you're going to have a large part of the population buying and taking possession of gold out of fear of what's going on," says Jim DiGeorgia, commodities analyst for Gold and Energy Advisor.
Investors can buy gold in a variety of ways—through futures contracts, mutual funds, exchange-traded funds, as well as actual ownership.
Owning gold [US@GC.1 985.5 -10.30 (-1.03%) ] is primarily done through purchases of gold bars, which can be stored in safe deposit boxes in banks. Other investors can buy solid-gold coins or even use jewelry as an investment. Gold bars, though, are generally considered the best investment because they can be bought at retail prices instead of the markups that other gold investments carry.
"I would recommend the average investor, if they want to get into hard assets, put 3 percent to 5 percent of their money in gold and hope they never have to use it," says Burton Rothberg, a former senior trader with Commodities Corporation, who has invested in the gold markets for decades.
Read Entire Article
Gold prices could make a run at $1,200 and beyond this year as investors look for safe places to put their money amid continued turmoil not only in the economy but also the stock market and the US political structure.
"When you have such a large part of US population convinced we're running to hell in a handbasket with federal spending, you're going to have a large part of the population buying and taking possession of gold out of fear of what's going on," says Jim DiGeorgia, commodities analyst for Gold and Energy Advisor.
Investors can buy gold in a variety of ways—through futures contracts, mutual funds, exchange-traded funds, as well as actual ownership.
Owning gold [US@GC.1 985.5 -10.30 (-1.03%) ] is primarily done through purchases of gold bars, which can be stored in safe deposit boxes in banks. Other investors can buy solid-gold coins or even use jewelry as an investment. Gold bars, though, are generally considered the best investment because they can be bought at retail prices instead of the markups that other gold investments carry.
"I would recommend the average investor, if they want to get into hard assets, put 3 percent to 5 percent of their money in gold and hope they never have to use it," says Burton Rothberg, a former senior trader with Commodities Corporation, who has invested in the gold markets for decades.
Read Entire Article
Thursday, September 3, 2009
Gold Rises to Three-Month High as Weaker Dollar Spurs Demand
Gold has climbed to a three-month high in London as a weakening dollar boosted demand for the metal as an alternative investment.
The metal advanced by 2.3pc yesterday, the biggest gain since March 18, as equities and the dollar declined. The American currency fell as much as 0.4pc against the euro today. Gold, which rose for a third day, tends to gain when the dollar weakens.
“The euro has picked up again,” David Barclay, a metals analyst at Standard Chartered, said. “The dollar is going to be the main driver for gold strengthening for the rest of the year.”
Bullion for immediate delivery advanced by $5.80, or 0.6pc, to $984.30 an ounce by 10am, the highest since June 3. December gold futures were 0.7pc higher at $985.60 an ounce on the New York Mercantile Exchange’s Comex division.
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The metal advanced by 2.3pc yesterday, the biggest gain since March 18, as equities and the dollar declined. The American currency fell as much as 0.4pc against the euro today. Gold, which rose for a third day, tends to gain when the dollar weakens.
“The euro has picked up again,” David Barclay, a metals analyst at Standard Chartered, said. “The dollar is going to be the main driver for gold strengthening for the rest of the year.”
Bullion for immediate delivery advanced by $5.80, or 0.6pc, to $984.30 an ounce by 10am, the highest since June 3. December gold futures were 0.7pc higher at $985.60 an ounce on the New York Mercantile Exchange’s Comex division.
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Chinese Sovereign Wealth Fun Dumping Dollars for Strategic Investments Like Gold
Reports suggest that China's main sovereign wealth fund and other state entities are under pressure to invest in strategic Western assets as the country tries to offload its dollars for firmer-based wealth including gold and oil.
(MineWeb)Several reports are coming out of China that there is pressure on state-controlled organisations - notably the country's main sovereign wealth fund, China Investment Corporation (CIC) to rapidly build investment in non-Chinese enterprises. While the CIC itself, with apparent access to some $300 billion in funds - and the possibility of more from the government - may be concentrating on hedge funds and other investment entities, there is another sector for Chinese state-owned companies looking at major investment in commodities. Indeed with the funds available as China seems to be dumping its US dollars in favour of more concrete assets, virtually no minerals sector is safe from Chinese participation.
While CIC was set up only two years ago, funded with $200 billion in initial capital, a report to the U.S. Congress noted that according to top Chinese officials, it was created to improve the rate of return on China's $1.5 trillion in foreign exchange reserves and to soak up some of the nation's excess financial liquidity. Depending on its performance with the initial allotment of $200 billion, the CIC might be allocated more of China's growing stock of foreign exchange reserves - and this has already proved to be the case.
Probably the most interesting of the recent reports of what is happening with Chinese sovereign wealth fund investment outside China has come from Paul Mylchreest's Thunder Road Report where an ex-U.S. intelligence service member is quoted. He reports that he has a friend who is in the Chinese Sovereign Wealth fund sector who says - hearsay I know and it wouldn't stand up in court - indicated that the wealth fund analysts were working all hours of the day and night trying to put investment deals together - particularly in the oil and precious metals sectors. The conclusion is that China recognises that the U.S. dollar is going to tank and it wants to convert as much of its trillions of dollars of holdings into strategic assets as possible before the collapse really takes hold.
The trouble is there is too much money available chasing too few assets - and too little time available - or such is the conclusion. As a result the Chinese government seems to be doing its utmost in trying to persuade the Chinese public to buy gold and silver by relaxing the restrictions - it's now easier to buy precious metals in China than in the U.S. - and by pushing gold and silver investment on state-owned television. If this continues the likelihood is that China will permanently overtake India as the world's biggest buyer of gold and silver, while the country's store of wealth will help shield it against further western economic collapse.
If this is indeed the case then it must be likely that the country is also building its own gold reserves - perhaps surreptitiously - through creative accounting by buying by a state entity, but not through the Central Bank itself where such sales would need to be reported. Positive for gold looking forward.
Returning to the Sovereign Wealth Funds angle though, CIC's chairman, Lou Jiwei, is reported by the WSJ as saying that investment in CIC's global portfolio for "one month this year equalled that of the whole of last year" and that given that the fund is expecting a positive return on its investments this year it may well ask the government for additional funding. Where it is going to place additional funding, who knows but there seems little doubt that China is using the western recession to buy up assets on the cheap and the funds available to do this are virtually unlimited by Western standards. But the Chinese won't buy up any old rubbish. They'll be looking for the crème de la crème.
Already CIC has bought 17% of Canada's last real remaining diversified miner - Teck Corporation - smartly buying when the latter was only just beginning to recover from last year's collapse and it has to be likely that more minerals-strategic investments are on the cards or being negotiated, either by CIC or other state organisations. Chinalco's ultimately thwarted move into Rio Tinto would have been another such instance and the Chinese investments and takeovers of Australian miners and promises of huge funding for minerals rich African countries are other examples.
Read Entire Article
(MineWeb)Several reports are coming out of China that there is pressure on state-controlled organisations - notably the country's main sovereign wealth fund, China Investment Corporation (CIC) to rapidly build investment in non-Chinese enterprises. While the CIC itself, with apparent access to some $300 billion in funds - and the possibility of more from the government - may be concentrating on hedge funds and other investment entities, there is another sector for Chinese state-owned companies looking at major investment in commodities. Indeed with the funds available as China seems to be dumping its US dollars in favour of more concrete assets, virtually no minerals sector is safe from Chinese participation.
While CIC was set up only two years ago, funded with $200 billion in initial capital, a report to the U.S. Congress noted that according to top Chinese officials, it was created to improve the rate of return on China's $1.5 trillion in foreign exchange reserves and to soak up some of the nation's excess financial liquidity. Depending on its performance with the initial allotment of $200 billion, the CIC might be allocated more of China's growing stock of foreign exchange reserves - and this has already proved to be the case.
Probably the most interesting of the recent reports of what is happening with Chinese sovereign wealth fund investment outside China has come from Paul Mylchreest's Thunder Road Report where an ex-U.S. intelligence service member is quoted. He reports that he has a friend who is in the Chinese Sovereign Wealth fund sector who says - hearsay I know and it wouldn't stand up in court - indicated that the wealth fund analysts were working all hours of the day and night trying to put investment deals together - particularly in the oil and precious metals sectors. The conclusion is that China recognises that the U.S. dollar is going to tank and it wants to convert as much of its trillions of dollars of holdings into strategic assets as possible before the collapse really takes hold.
The trouble is there is too much money available chasing too few assets - and too little time available - or such is the conclusion. As a result the Chinese government seems to be doing its utmost in trying to persuade the Chinese public to buy gold and silver by relaxing the restrictions - it's now easier to buy precious metals in China than in the U.S. - and by pushing gold and silver investment on state-owned television. If this continues the likelihood is that China will permanently overtake India as the world's biggest buyer of gold and silver, while the country's store of wealth will help shield it against further western economic collapse.
If this is indeed the case then it must be likely that the country is also building its own gold reserves - perhaps surreptitiously - through creative accounting by buying by a state entity, but not through the Central Bank itself where such sales would need to be reported. Positive for gold looking forward.
Returning to the Sovereign Wealth Funds angle though, CIC's chairman, Lou Jiwei, is reported by the WSJ as saying that investment in CIC's global portfolio for "one month this year equalled that of the whole of last year" and that given that the fund is expecting a positive return on its investments this year it may well ask the government for additional funding. Where it is going to place additional funding, who knows but there seems little doubt that China is using the western recession to buy up assets on the cheap and the funds available to do this are virtually unlimited by Western standards. But the Chinese won't buy up any old rubbish. They'll be looking for the crème de la crème.
Already CIC has bought 17% of Canada's last real remaining diversified miner - Teck Corporation - smartly buying when the latter was only just beginning to recover from last year's collapse and it has to be likely that more minerals-strategic investments are on the cards or being negotiated, either by CIC or other state organisations. Chinalco's ultimately thwarted move into Rio Tinto would have been another such instance and the Chinese investments and takeovers of Australian miners and promises of huge funding for minerals rich African countries are other examples.
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Wednesday, September 2, 2009
The Coming Deposit Insurance Bailout
Another lesson that federal guarantees aren't free.
(WSJ)Americans are about to re-learn that bank deposit insurance isn't free, even as Washington is doing its best to delay the coming bailout. The banking system and the federal fisc would both be better off in the long run if the political class owned up to the reality.
We're referring to the federal deposit insurance fund, which has been shrinking faster than reservoirs in the California drought. The Federal Deposit Insurance Corp. reported late last week that the fund that insures some $4.5 trillion in U.S. bank deposits fell to $10.4 billion at the end of June, as the list of failing banks continues to grow. The fund was $45.2 billion a year ago, when regulators told us all was well and there was no need to take precautions to shore up the fund.
The FDIC has since had to buttress the fund with a $5.6 billion special levy on top of the regular fees that banks already pay for the federal guarantee. This has further drained bank capital, even as regulators say the banking system desperately needs more capital. Everyone now assumes the FDIC will hit banks with yet another special insurance fee in anticipation of even more bank losses. The feds would rather execute this bizarre dodge of weakening the same banks they claim must get stronger rather than admit that they'll have to tap the taxpayers who are the ultimate deposit insurers.
It isn't as if regulators don't understand the problem. Earlier this year they quietly asked Congress to provide up to $500 billion in Treasury loans to repay depositors. The FDIC can draw up to $100 billion merely by asking, while the rest requires Treasury approval. The request was made on the political QT because, amid the uproar over TARP and bonuses, no one in Congress or the Obama Administration wanted to admit they'd need another bailout.
But this subterfuge can't last. Eighty-four banks have already failed this year, and many more are headed in that direction. The FDIC said it had 416 banks on its problem list at the end of June, up from 305 only three months earlier. The total assets of banks on the problem list was nearly $300 billion, and more of these assets are turning bad faster than banks can put aside reserves to account for them. The commercial real-estate debacle is still playing out at thousands of banks, even as the overall economy bottoms out and begins to recover.
Meantime, even as it "resolves" and then sells failed banks, the FDIC is also guaranteeing the buyers against losses on tens of billions of acquired assets. This is known in the trade as "loss sharing," which is another form of taxpayer guarantee that taxpayers aren't supposed to know about. Most of the losses won't be realized if the economy recovers. But this too is a price of taxpayers guaranteeing deposits. Even as Treasury and the press corps broadcast that the feds are making money on TARP repayments, these guarantees go largely unnoticed.
FDIC Chairman Sheila Bair continues to say that deposits will be covered up to the $250,000 per account insurance limit, and of course she's right. But we wish she'd force Congress—and the American public—to face up to the reality of what deposit insurance costs. Amid the panic last year, Congress raised the deposit limit from $100,000. While this may have calmed a few nerves—though the worst runs were on money-market funds, not on banks—it also put taxpayers further on the hook.
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(WSJ)Americans are about to re-learn that bank deposit insurance isn't free, even as Washington is doing its best to delay the coming bailout. The banking system and the federal fisc would both be better off in the long run if the political class owned up to the reality.
We're referring to the federal deposit insurance fund, which has been shrinking faster than reservoirs in the California drought. The Federal Deposit Insurance Corp. reported late last week that the fund that insures some $4.5 trillion in U.S. bank deposits fell to $10.4 billion at the end of June, as the list of failing banks continues to grow. The fund was $45.2 billion a year ago, when regulators told us all was well and there was no need to take precautions to shore up the fund.
The FDIC has since had to buttress the fund with a $5.6 billion special levy on top of the regular fees that banks already pay for the federal guarantee. This has further drained bank capital, even as regulators say the banking system desperately needs more capital. Everyone now assumes the FDIC will hit banks with yet another special insurance fee in anticipation of even more bank losses. The feds would rather execute this bizarre dodge of weakening the same banks they claim must get stronger rather than admit that they'll have to tap the taxpayers who are the ultimate deposit insurers.
It isn't as if regulators don't understand the problem. Earlier this year they quietly asked Congress to provide up to $500 billion in Treasury loans to repay depositors. The FDIC can draw up to $100 billion merely by asking, while the rest requires Treasury approval. The request was made on the political QT because, amid the uproar over TARP and bonuses, no one in Congress or the Obama Administration wanted to admit they'd need another bailout.
But this subterfuge can't last. Eighty-four banks have already failed this year, and many more are headed in that direction. The FDIC said it had 416 banks on its problem list at the end of June, up from 305 only three months earlier. The total assets of banks on the problem list was nearly $300 billion, and more of these assets are turning bad faster than banks can put aside reserves to account for them. The commercial real-estate debacle is still playing out at thousands of banks, even as the overall economy bottoms out and begins to recover.
Meantime, even as it "resolves" and then sells failed banks, the FDIC is also guaranteeing the buyers against losses on tens of billions of acquired assets. This is known in the trade as "loss sharing," which is another form of taxpayer guarantee that taxpayers aren't supposed to know about. Most of the losses won't be realized if the economy recovers. But this too is a price of taxpayers guaranteeing deposits. Even as Treasury and the press corps broadcast that the feds are making money on TARP repayments, these guarantees go largely unnoticed.
FDIC Chairman Sheila Bair continues to say that deposits will be covered up to the $250,000 per account insurance limit, and of course she's right. But we wish she'd force Congress—and the American public—to face up to the reality of what deposit insurance costs. Amid the panic last year, Congress raised the deposit limit from $100,000. While this may have calmed a few nerves—though the worst runs were on money-market funds, not on banks—it also put taxpayers further on the hook.
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Turning Point for Gold as Central Banks Become Buyers
With the possibility of Central Banks becoming net gold buyers and the speculation that the IMF gold may be sold "off market" gold analyst Jeff Nichols remains bullish on the precious metal's prospects.
(Mineweb) In his latest deliberation on the gold market, specialist gold analyst Jeff Nichols believes that gold has reached a turning point with purchases from official sources - Central Banks and sovereign wealth funds - perhaps outweighing sales as attitudes to the metal as a reserve asset become much more positive.
In particular Nichols points to China and Russia as two key nations with relatively low proportions of gold in their reserves as likely to be net buyers in the future - even if only soaking up gold from their own domestic production which otherwise would come on to the market. China announced earlier this year, for example, that it had moved 454 tonnes of gold into its reserves since 2003 - but still has only about 1.5% of its assets in gold. China's accounting system is complex. The gold is, apparently bought by one government entity, but need not show up in its reserve statements until an internal transfer has been made into reserves - or so it says. This in effect means that its real gold reserve position is far from transparent and there is certainly a view that China is continuing to buy gold from domestic sources - Nichols surmises at a rate of around 75 tonnes a year, but again this has not shown in official reserve figures as yet and would only do so when it suits China to announce changes in holdings.
Russia too, with only around 2% of its assets in gold, has been making purchases from domestic output - and with prime Minister Putin stating publicly that the country should hold 10% of its reserve assets in gold there is considerable scope for ongoing purchases. According to Nichols, some reports suggest the country has added some 40 to 50 tons to its official reserves so far this year while other reports put purchases this year at 90 to 100 tons.
The key, though, has to be the attitude of the European Central Banks, which have been selling significant quantities of gold onto the market over the past ten years. The U.K. is the prime example of this when then Chancellor of the Exchequer, Gordon Brown, who has, despite this financial disaster for country, built up a decidedly unwarranted reputation for financial prudence, sold half the U.K.'s gold reserves right at the bottom of the market, costing the country some several billions of dollars by some estimates.
Overall, the European banks are said by Nichols to hold on average about 55% of their reserve assets in gold - way above while Asian nations only about 1.5 - 2% - hence the big scope for purchase increases in the areas where economic growth has the highest potential. Be this as it may, Nichols reckons European Central Bankers' attitudes are changing towards gold as an asset with the recent sharp fall in gold sales from official sources representing a renewed respect for gold as a reserve asset and reliable store of value.
But perhaps key to the perception of bankers seemingly renewed confidence in gold will be the fate of the IMF sales programme of 403.3 tonnes scheduled to help support lending to the poorest countries. IMF membership is expected to approve these prospective sales before its annual meeting this October.
IMF strategists have suggested sales might occur gradually over two or three years - and generally within the new Central Bank Gold Agreement (CBGA) quota of a maximum sales level of 400 tonnes a year. However Nichols notes that others believe all 403 tons of IMF gold may be sold "off the market" directly to one or a few central banks - with China, Russia, India, Brazil, or the Gulf states mentioned as possible buyers. If this happens this would be a huge boost for the perception of gold's position as a monetary asset.
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(Mineweb) In his latest deliberation on the gold market, specialist gold analyst Jeff Nichols believes that gold has reached a turning point with purchases from official sources - Central Banks and sovereign wealth funds - perhaps outweighing sales as attitudes to the metal as a reserve asset become much more positive.
In particular Nichols points to China and Russia as two key nations with relatively low proportions of gold in their reserves as likely to be net buyers in the future - even if only soaking up gold from their own domestic production which otherwise would come on to the market. China announced earlier this year, for example, that it had moved 454 tonnes of gold into its reserves since 2003 - but still has only about 1.5% of its assets in gold. China's accounting system is complex. The gold is, apparently bought by one government entity, but need not show up in its reserve statements until an internal transfer has been made into reserves - or so it says. This in effect means that its real gold reserve position is far from transparent and there is certainly a view that China is continuing to buy gold from domestic sources - Nichols surmises at a rate of around 75 tonnes a year, but again this has not shown in official reserve figures as yet and would only do so when it suits China to announce changes in holdings.
Russia too, with only around 2% of its assets in gold, has been making purchases from domestic output - and with prime Minister Putin stating publicly that the country should hold 10% of its reserve assets in gold there is considerable scope for ongoing purchases. According to Nichols, some reports suggest the country has added some 40 to 50 tons to its official reserves so far this year while other reports put purchases this year at 90 to 100 tons.
The key, though, has to be the attitude of the European Central Banks, which have been selling significant quantities of gold onto the market over the past ten years. The U.K. is the prime example of this when then Chancellor of the Exchequer, Gordon Brown, who has, despite this financial disaster for country, built up a decidedly unwarranted reputation for financial prudence, sold half the U.K.'s gold reserves right at the bottom of the market, costing the country some several billions of dollars by some estimates.
Overall, the European banks are said by Nichols to hold on average about 55% of their reserve assets in gold - way above while Asian nations only about 1.5 - 2% - hence the big scope for purchase increases in the areas where economic growth has the highest potential. Be this as it may, Nichols reckons European Central Bankers' attitudes are changing towards gold as an asset with the recent sharp fall in gold sales from official sources representing a renewed respect for gold as a reserve asset and reliable store of value.
But perhaps key to the perception of bankers seemingly renewed confidence in gold will be the fate of the IMF sales programme of 403.3 tonnes scheduled to help support lending to the poorest countries. IMF membership is expected to approve these prospective sales before its annual meeting this October.
IMF strategists have suggested sales might occur gradually over two or three years - and generally within the new Central Bank Gold Agreement (CBGA) quota of a maximum sales level of 400 tonnes a year. However Nichols notes that others believe all 403 tons of IMF gold may be sold "off the market" directly to one or a few central banks - with China, Russia, India, Brazil, or the Gulf states mentioned as possible buyers. If this happens this would be a huge boost for the perception of gold's position as a monetary asset.
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