The trials of Job indeed!
To that end, I do not recall taking a day off from writing in the past two years – and given the horrific immolation the world’s Central banks are foisting on the world’s population, I don’t anticipate slowing down any time soon. Following the past two days’ violent, post-FOMC precious metals attacks, my principal thought is not if, but when this “Cartel Suicide” yields an utter explosion of global physical buying. That is above and beyond this year’s current pace of equaling last year’s record level – inevitably, catalyzing dramatic product shortages (especially silver), as we experienced in 2008, 2011 and 2013.
As I wrote in yesterday’s “BS to the Nth power,” Wednesday’s FOMC statement – in pretending to be “bullish” about the labor market outlook – was not just “misleading” and “disingenuine” but a flat out lie, ahead of Tuesday’s mid-term elections. That said the fact their incremental words were not backed up by actions (they still expect to hold rates low for a “considerable time”) is all one needs to know about their true intentions – which in fact, even the beholden cheerleading MSM is starting to understand.
Meanwhile, amidst yesterday’s excitement of the “Dow Jones Propaganda Average” surging due to Visa’s “great news” that Americans are borrowing more than ever at usurious interest rates; as well as the “better than expected” GDP report, due solely to government “defense” spending to bomb ISIS; and the rehashing of a 12-day old rumor that Japan’s pension fund will increase its equity allocation in the most overvalued market since the internet bubble peak (care of the Bank of Japan holding debt yields near zero); interest rates actually declined on the day and didn’t budge overnight.
As for the day’s “other” news, which obviously the money printing, market-goosing algos don’t care about, they included the largest-ever increase in non-performing loans at the world’s largest bank, ICBC of China; an utter implosion of Greek stocks and bonds, as its inevitable default moves closer to the realm of imminence; and Citibank restating its earnings lower due to pending Department of Justice and CFTC “legal investigations.” And don’t forget the “gold-negative” announcement (LOL) that one of Germany’s oldest banks has imposed an actual negative interest rate of 25 basis points on deposits above €500,000. Considering that 20% of Europe’s banks failed the most passable stress test imaginable this week, how many investors will feel comfortable holding large deposits in German banks now – particularly when just last year, the largest German bank was deemed “so horribly undercapitalized, it’s ridiculous?” Not to mention, foreign depositors, now that the ECB’s QE program has caused the Euro to implode?
Given all this wildly PM-bullish news – not to mention, as I write, September consumer spending “unexpectedly” declined whilst personal income barely rose (weren’t plunging gas prices supposed to fuel surging consumption increases?); TPTB were hell-bent on creating the opposite reaction. To wit, not only did they need to foster the impression that the FOMC statement was “America-bullish” ahead of the elections; but with the upcoming “Save our Swiss Gold” referendum gaining momentum, the last thing they need is surging PM prices to positively influence sentiment. That said, the physical reaction to their paper shenanigans was immediate, per this interview with Andrew Maguire – and the more they “push the envelope,” the more rapidly their “paper dominion” over price discovery will end. To wit, the HUI is nearly down to its 2008 low, the TSX-Venture is dead and buried, and mining capital spending died years ago. In other words, there has been essentially no incremental exploration spending for years; and in my 12½ years in the sector, exactly one major discovery – which, per this article, may never be developed. Throw in indefinite delays in major developments the world round – the poster child being Barrick’s Pascua Lama project; and the outlook for global mine production has never been bleaker.
On last week’s “Miles Franklin Silver All-Star Webinar Panel,” we discussed the inadequate concepts of “cash costs” and “all-in sustaining costs”; as in the former case, few companies with “low” cash costs actually generate profits; while in the latter case, few companies with “low” all-in costs actually replace reserves. Long-time readers know how vehemently I despise mining shares – and generally speaking, all “paper PM investments,” and this is exactly why. Poorly managed, woefully undercapitalized, and operating in the world’s most difficult industry; with a Cartel not only suppressing gold and silver prices, but naked shorting the shares into oblivion. And no company characterizes this misery better than the world’s second largest miner, Newmont Mining – which, in fact, inspired the latter half of today’s article title.
Newmont, whose stock is back to 2001 levels – when gold was $275/oz. – reported last night that 3Q earnings declined 50% year-over-year, despite an average gold price decline of just 4%. And amidst the mining jargon, utilized to spin this earnings disaster positively is the irrefutable facts that one of the best capitalized gold miners not only generates an utterly miserable return on equity (worse if you consider last year’s $1.6 billion write-off), but is experiencing steadily declining production and a dramatically weakening reserve base.
As you can see below, Newmont’s proven and probable reserves are essentially the same as seven years ago, when gold prices averaged $575/oz. This year’s production is expected to be 6%-11% lower than 2007; and given last year’s reserve write-down with a $1,400 gold price assumption, I can only imagine the killer this year’s write-down will be assuming prices remain near current levels. Heck, as we learned last year, prices don’t even need to decline to yield write-offs – when the world’s sixth largest gold miner, Kinross, reduced its reserves by an astounding 33%, despite no change to its $1,200 price assumption.
Comically, Newmont claimed its “all-in sustaining” cost is $1,020-$1,080/oz., despite not increasing reserves over a seven year period in which gold prices more than tripled. This year, capital spending was reduced by nearly 60% from 2013’s levels, and gold prices have declined further. Thus, when reserves (and production estimates) are slashed again at year-end, be sure to have Newmont’s management explain how their business is “sustained” at $1,020-$1,080/oz. In other words, such estimates are but a sham, as the real cost of sustaining the mining industry is far closer to the $1,500/oz. espoused last year by the CEO of Goldfields, the world’s fourth largest gold miner.
And now, for the main event – and perhaps, the denouement of the most vicious paper PM raids since 2008. As I write at 9 AM EST, gold and silver are down to $1,162/oz. and $15.85/oz., respectively; in other words, so far below their actual costs of production, both cash and sustaining, that my recent estimate of a 25%+ drop in global PM production is likely far more imminent than inevitable. This morning’s raids were, as usual, initiated at the 2:15 AM EST open of the London paper pre-market session followed by the 8:20 AM EST open of the New York COMEX, despite the aforementioned wildly-PM bullish events; in the latter case, due to “idiot longs” being forced to sell following gold’s breach of its “triple-bottom” level of $1,180/oz. And I do mean fools, as why anyone would continue to fight the Cartel in rigged paper markets is beyond me.
However, I haven’t even discussed the former part of today’s article title, which could not be more PM-bullish – or “world-bearish.” Which is that overnight, the Bank of Japan not only increased its “Abenomics” bond monetization target from ¥70 billion to ¥80 billion (in other words, essentially all government bond issuance), but tripled its Nikkei equity ETF buying program from ¥1 billion to ¥3 billion. Global stocks are exploding higher – on the prospect of potential hyperinflation; yet interest rates haven’t budged and oil prices down to $79.60/bbl. are on the verge of breaking below the July 2012 European sovereign crisis low of $77.50 – when Spanish banks were bailed out, and Draghi was forced to make his infamous “whatever it takes” speech. Note bene, take a look at where Europe – and the Euro – are today, and tell me if you think he was “successful.”
Back to Japan, where everything negative we have ever written – from “demographic hell” (July 2012), to “final currency war” (January 2013), “the real Yen bomb starts – NOW” (May 2013) and “the Japanese Noose is tightening” (February 2014) are coalescing in a hyperinflationary crescendo, which must end in complete financial cataclysm. To wit, if you think this chart depicting the unmitigated failure of U.S. QE is bad just think where it stands for Japan – now that it has been “QEing” for two decades with a 240% debt/GDP ratio, multi-year high in CPI inflation, and dramatically negative GDP growth; and oh yeah, another sales tax increase slated for 2015. Yes, this is what the “weak yen” the Bank of Japan so desperately wanted has brought to the “Land of the Setting Sun”; well, that and a 140% surge in corporate bankruptcies since Abenomics commenced 18 month ago. Actually, scratch that – as the 140% bankruptcy increase is just in 2014 alone!
As I write, the yen has not only breached the long-time “line in the sand” of 110/dollar, but plunged to more than 112/dollar, down a whopping 2.6% today alone. Before today, the Yen’s “real effective exchange rate” had already plunged to its weakest level since 1982. However the financial death sentence Shinzo Abe has just unleashed on his population will make today’s Yen levels look like the “good old days” in hindsight. Remember, the Yen traded between 200 and 300/dollar in the 1970s and 1980s – which is exactly where we believe it’s going now, enroute to being the first “first world” nation to experience 21st century hyperinflation. And heck, I haven’t even noted this morning’s broad-based dollar surge – not because the U.S. economy is doing so well (LOL), but because global fear is causing a liquidity surge into the reserve currency. Which, of course, we deem the “single most PM-bullish factor imaginable” due to the global inflation, currency wars and geopolitical tensions such devaluations cause. Not to mention, the massively detrimental impact on U.S. corporate earnings of a “strong dollar.”
Again, we cannot emphasize enough our belief that we are back in “2008, with the temporary exception” of manically PPT-supported equity markets in TPTB’s desperate attempt to prevent universal recognition of what global economic data, commodity prices, bond yields, and the desperate actions of Central banks like the PBOC, Bank of Japan and ECB are screaming loud and clear. For those holding mining shares and other “paper PM investments,” is to pray they are not permanently destroyed – which frankly, many already are. And for those wise enough not to speculate in the world’s most naked-shorted securities; but instead, save in history’s only proven money, all we say is one word – RELAX. Global physical demand was already sitting at all-time highs before this month’s Cartel paper raids; and now that the mining industry is all but destroyed, the upcoming production declines will be equally violent as the inevitable – perhaps imminent – physical demand explosion.
Silver Eagle sales are going through the roof, but the demand is not U.S. retail centered. There are rumors of a big buyer in Europe. At these prices, silver sales are very robust (See article in Jim Sinclair’s column today).
I was talking to Andy Hoffman this morning and he said the paper market is in total control of the prices. I said I disagree – sort of. The paper market is in control until it isn’t. The minute that physical gold or silver can’t be sourced at the suppressed (paper) prices, the physical market will control the price. Can that time be far off? I think not. And when it turns, there will be a large number of hedge funds that will be in a hurry to exit their positions and the way back up should be as rapid, or even faster, than the way down.
In today’s Featured Articles section, there are several good reports on Alan Greenspan. I think the best of the bunch is in the Money Morning section. Be sure and check it out.
For those of our readers who remember Jim Sinclair saying that the Fed will never be able to stop QE, here is his latest thought on the subject:
I read today that the stimulus program was halted. I believe in QE to infinity, so do you see this as a temporary reprieve and/or propaganda to try to calm down Americans?
It will be reinstated under a different name in 3 months.
-jsmineset.com, October 30, 2014
And finally, be sure and check out the first Featured Article from King World News about a report from Switzerland that money donated to help pass the gold initiative via a PayPal account set up to transfer it has been frozen – PayPal is silent on the matter. To what lengths will these criminals stoop to?
On his weekly podcast, Andy Hoffman discusses gasoline and oil prices, manipulation of all the markets, the Dow Jones Propaganda, unemployment rate, the housing market, gold and silver. To listen to the audio, please click below.
Download the Audio File: Janet In Wonderland
Video: Janet In Wonderland
Hopefully, readers understand just how much resource we put into the Miles Franklin Blog, both financial and human. Fortunately, we love what we do; and from a personal perspective, my work gives meaning to my life in an increasingly chaotic world. However, we cannot emphasize enough that we have a business to run; and thus, we humbly ask that if you are considering buying, selling, trading or storing precious metals, please call us at 800-822-8080 and give us a chance to earn your business.
Business has been difficult since TPTB embarked on the unprecedented raids of April 2013; and whilst Miles Franklin continues to soldier on – due to the goodwill generated, and exceptional service offered over 25 years in business – many of our competitors, for example, Tulving and Merit – have either folded or on the verge of such. Per this chart, the U.S. is essentially the only place on Earth where people have purchased less gold since the 2008 crisis, care of history’s most maniacal market manipulation and propaganda campaign.
This dichotomy between America and the rest of the world is even more shocking when one realizes true gold demand is significantly larger than reported. To wit, China reports its 2013 physical gold demand was a whopping 2,199 tonnes, or twice the level the nefarious U.S.-based “World Gold Council” reports. Thus, as annual gold production is roughly 2,700 tonnes, the Chinese are purchasing roughly 80% of the total. And while this theft is occurring right under the noses of Americans – literally, as such demand has undoubtedly been satiated by surreptitious sales of official U.S. gold reserves – clueless miners continue to fund the World Gold Council. At current prices, it won’t be long before the gold mining industry implodes; starting with year-end reserve write-downs, if prices remain anywhere near the current historically depressed levels. Given my experience as a sell-side analyst covering the energy sector in 1999 – when oil prices briefly plunged below $10/bbl. – I expect 2015 to be the year the mining industry completely halts due to “merger paralysis”; starting with the inevitable combination of two of the three largest gold miners, Barrick Gold and Newmont Mining, whose stocks have plunged to lows last seen in 1993 and 2001, respectively.
Moreover, the past two years of Western silver sales records are decidedly not due to Americans and Canadians, given the aforementioned sales trends we have observed. In other words, Easterners are not only draining the gold vaults at the COMEX, GLD and LBMA, but the silver vaults of the U.S. and Royal Canadian Mints – not to mention, the Shanghai Futures Exchange, which has lost 90% of its inventory in the past 18 months. Thus, the only thing more outlandish than the sky-high gold/silver ratio, is the fact silver prices are way, way below their cost of production. And thus, with base metal prices in steep decline as well (two-thirds of silver production is by-product from base metal mines), if you think the upcoming gold write-downs, mergers and production declines will be historic, get ready for truly cataclysmic occurrences in the global silver mining industry – which undoubtedly, is headed for a shortage situation that will make the 2008, 2011 and 2013 shortages pale in comparison.
And cataclysm will surely be the buzzword of the coming years, particularly now that the Fed has “set the table” for all-out collapse. Which, as you might have guessed, is the subject of today’s article; as what they perpetrated this week, culminating with yesterday’s FOMC statement was “BS to the Nth Degree.”
Think about it. It’s nothing short of “miraculous” how the “unemployment rate” fortuitously fell to a multi-year low of 5.9% last month, whilst QE3 fortuitously ended yesterday, six days before the mid-term elections. The fact that real unemployment – not just in the States, but worldwide – is at its singular low point of the century should not be considered, according to Washington and Wall Street. Or, for that matter, that QE is more necessary now than ever. With the global economy in such horrific shape and U.S. economic data falling as rapidly as anywhere else, record high stock and bond prices could not be more ominous. Debt is rising parabolically everywhere; and now that oil prices and currencies are serially collapsing, the inflationary and geopolitical ramifications will be devastating – including here in the States, where the ballyhooed shale boom is on the verge of an historic collapse.
Yesterday, the Fed culminated a month of blatant collaboration with the PPT, gold Cartel and Exchange Stabilization Fund, with one of the biggest pieces of economic propaganda in history – exceeding in brazenness even last month’s “new home sales” figures, which we deemed the “all-time biggest lie.” Not to mention, claiming to “end QE” with its final “POMO” – or Permanent Open Market Operation” – on October 27th; yet, producing a prototypical “dead ringer” algorithm on the “Dow Jones Propaganda Average” the very next day, proving its printing presses are as active as always.
In accompanying such chicanery with the outright lies in its statement, they elevated themselves to Pinocchio-like status. As Zero Hedge eloquently put it, the Fed pretended to be optimistic in its quest to “justify” ending QE and satiate its Washington and Wall Street masters ahead of the election. In reality, it again said “Nothing!” incremental about its policy stance – including its ongoing “data dependency” and intention to maintain ZIRP for a “considerable time.” However, in stating “the Committee judges there has been a substantial improvement in the outlook for the labor market” and it “continues to see sufficient underlying strength in the broader economy to support ongoing progress toward maximum employment, in a context of price stability,” they literally “broke the mold” on BS.
Recall, it was only July when Whirlybird Janet lamented of “significant underutilization of labor resources – which was promptly followed by a miserable August NFP report, and a September report depicting the overall Labor Participation Rate at a 36-low; and for males, a record-low – as when the gold standard was abandoned in 1971, millions of woman were forced to work to offset the massive inflation unleashed. And I won’t even waste space speaking of the fact that any actual jobs created – outside of the fictitious “birth/death model” type – are largely part-time, minimum wage, non-benefits paying jobs in non-productive industries, entirely for 55+ year olds that can no longer afford retirement. Heck, it was just two weeks ago when, in response to plunging stock markets, six separate Fed governors were calling for a delay to QE’s end. That is, before the PPT engineered its most blatant equity-goosing operation yet enabling the FOMC to publish such drivel and continue its “QE-ending” ruse. Yes, with economic data in freefall the world round, the aforementioned trends are sure to yield “maximum employment” and “price stability” in the very near future.
As for the “market reaction,” just how ridiculous could the manipulations be? As occurs every time the Fed speaks, precious metals were mercilessly bombed – as they are every moment of every day recently. Meanwhile, the stock market’s initial decline was, as always, halted within minutes; and even a second wave of selling was met by staunch PPT support, enabling modest losses by the close. And contrary to the Fed’s “bullish” hype, interest rates ended the day lower – and even following this morning’s “better than expected” GDP reading (ENTIRELY due to government spending as personal consumption spending growth was not only lower than expected, but lower than the first quarter’s “weather” related plunge ), rates are lower still. As are global equities, which either don’t buy the BS are historically overvalued, or both. Of course, the PPT reversed an entire morning’s worth of Dow future weakness at the NYSE open – compared to plunging European markets; as well as commodities, currencies, and essentially everything the U.S. PPT doesn’t control. As for the benchmark 10-year Treasury yield, for all the Fed’s hype, it sits at 2.29% as I write, enroute to breaching its new 2.20% line in the sand – and eventually, Japanese and German rates below 1.0% before hyperinflation inevitably arrives. Remember, just because QE3 is over, it doesn’t mean QE is over; certainly not covertly – and as we will likely learn next year, overtly as well. Remember, fiat currency is by definition a Ponzi scheme – and thus, QE must continue to “infinity” to prevent instantaneous collapse. As Peter Schiff puts it, QE is an “economic roach motel” – in that once you get in, you can never get out!
Last but not least, I’d be remiss if I didn’t highlight what “Maestro” Greenspan said this week, as part of his ongoing campaign to whitewash his legacy of having sold his soul – and staunch beliefs in real money – for the power of being Fed Chairman. Having watched Greenspan speak this week, Bill Holter described this transformation in greater detail, but the simple quote below describes his heresy completely. This, from the man I consider more responsible for the unfolding economic catastrophe than any other…
Gold is a good place to put money these days, given its value as a currency outside of the policies conducted by governments.
-Wall Street Journal, October 29, 2014
Hopefully, you too will listen to what this “ultimate insider” is saying, now that he is not beholden by the corridors of Washington in the twilight of his sorry pathetic life. I’d say gold at $1,200/oz. is the bargain of a lifetime. However, seeing silver at $16.65/oz. – with an average production cost of $20-$25/oz.; an industry-sustaining cost of $25-$30/oz.; record-high global demand; record-low global inventory; and the prospect for not only an imminent production implosion but long-term industry impairment, it’s difficult not to “pound the table” at such prices.
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In part one, I recounted Alan Greenspan’s one on one interview with Gary Alexander. Later in the day Saturday, Alan Greenspan was part of a round table with Porter Stansberry and Dr. Marc Faber, moderated by Mr. Alexander. While both Stansberry and Faber had a couple of good “zingers” for Mr. Greenspan early on and they both had good points and additions to the discussion, I want to concentrate on what Alan Greenspan had to say. Before getting to part 2, I do want to make one correction to yesterday’s piece. I heard Mr. Greenspan’s reply to the question “where will interest rates and gold be five years from now?” as “higher…considerably.” I have been corrected several times, his exact word was “measurably,” I apologize for the misquote.
If you remember, in part one Alan Greenspan told several white lies. One regarding the leasing of gold by central banks, the Fed never speaks with the Treasury regarding debt/deficit levels, while another was diverting the blame for the housing crisis to Fannie and Freddie amongst other factors…but not the Fed. The key from GATA and the gold community’s point of view was Greenspan’s denial of gold leasing and the question “do you recall testifying before Congress where you stated central banks stand ready to lease gold in increasing quantities should the price of gold rise?” This question by Gary Alexander was flubbed miserably and we may never get this opportunity again, I will finish with what and “how” I think it happened but first I’d like to lay out what the former chairman had to say.
While Mr. Greenspan spoke of many topics, there were too many and some even irrelevant in my opinion to recount them all, the following is what I found important. The talk began with the topic being “the savings rate.” Alan Greenspan went back to his old spiel of “productivity” and said that the system of entitlements was crowding out savings. He used an equation of “more benefits=less growth” and there is no way out or around this, we have been eating our seed corn. I agree as it is the common sense which is so “un” common in Washington but I guess one must leave the beltway before it hits them in the forehead?
Next, the conversation shifted to government spending. Greenspan continued his attempt at cleansing his legacy by saying “it’s Congress’s fault for spending, the Fed HAS to buy Treasury debt or else interest rates will explode.” Gary Alexander then asked him, “So you are saying the Fed is not independent?” and the reply much to my surprise was “I never said it was independent.” Before going any further, I think this point is important for several reasons. First, why should interest rates explode if the economy is self-sustaining and government is spending within its means? Was the economy (and Treasury) being bottle fed even all those years ago through the late 80′s and 90′s? What would have happened if the Fed was not so accommodative? Higher savings, less debt, a lower standard of living then but a higher one in the future? Would any of the bubbles have been blown and subsequently popped or would we have had lower yet more sustainable growth? I think we all know the answers to this.
The question of China’s growth was next, Greenspan called it “phenomenal.” He said much of the growth was due to “stolen technology” and that productivity would necessarily be slowing in the future. He touched on the “shadow banking” system within China and suggested it to be a huge problem, as you know, I have harped on this topic for quite some time myself.
The next question was very interesting, the panel was asked what will happen to the Fed’s $4.5 trillion balance sheet with QE winding down, what will Fed policy be? Porter Stansberry was quite blunt and said there is “mathematically no way out” (does this sound familiar to readers?) and that we will live with QE forever. Faber agreed and added that real interest rates would have to remain negative indefinitely. He added that central banks all over the world have “distorted” financial markets and QE cannot be withdrawn. Alan Greenspan took a pass on this one and posted a “no comment” as he said Paul Volcker never spoke publicly or second guessed him while chairman and he would do the same. He did say “the Fed is very smart” and they know everything “we” do. What was really interesting to me was when he added that “a lot of money can be created until everything blows up”. He talked again about how huge bank balance sheets are the kindling wood (he used the word “tinder”) for hyperinflation if and when velocity does pick up…”no one can forecast 5 years out.” I guess my question to him would be as follows “could banks carry such huge balance sheets if the Fed did not facilitate it with blowing their own balance sheet past the moon and then offering a free 1/4% interest to any bank willing to play?” Mr. Greenspan was given a pass here in my opinion.
Porter and Marc were then allowed to ask Mr. Greenspan one question each. Sad to say the two questions were somewhat soft and certainly NOT what I would have asked. They asked “you have said that bubbles are very hard to spot, are we in one now?” and “would you do anything differently now if you had the chance?” Greenspan’s answer to Porter was pretty much the “non speak” gobbledygook he used to play for Congress. He talked about commercial real estate being dead for years and now rising on very low volume which is a real potential danger. He also said stocks are valued “average” historically and that much current and future economic demand has been eliminated. Importantly, he did add that much future demand has been pulled forward and thus now eliminated. This is an important admission in my opinion, he was saying that easy money works for today rather than tomorrow.
He replied to Marc Faber by saying again “bubbles are very hard to spot” and that “no one” has been able to forecast the timing of a bubble bursting except by accident. When I heard this I just started laughing out loud! I must be “no one” because in late 2006 I left a very high paying job, sold my real estate, shipped my gold outside of the country and packed my family up to leave the country. Did I do this on a whim? No, I saw what was coming, I wrote about what was coming (it is still all archived as proof) throughout 2007 and 2008 and was surprised it took as long as it did. I must admit that what I did not see coming was the Treasury and Fed’s response by bankrupting themselves to prolong the game. This is a story for another day but hearing “no one” saw it coming is laughable as I can name more who saw it coming than I have fingers and toes to count them on …it’s just that they were not on CNBC or visible via other mainstream media pabulum for the public to see.
As for the very last question, it was supposed to have been regarding his testimony to Congress in 1998 where Mr. Greenspan said, “Central banks stand ready to lease gold in increasing quantities should the price rise.” Gary Alexander substituted “buy” for the word “lease” which obviously changes the meaning and allowed Greenspan to truthfully say “No, I don’t recall that.” I know that many believe Mr. Alexander let Greenspan off the hook and did not want to embarrass “the Maestro,” I disagree. I watched as Alexander furiously tried working his IPad, he had been e-mailed the quote 4 days earlier by Chris Powell and others and then again “re” e-mailed between sessions so the question could be asked. This is where “caveman techniques” would have worked better using a pen and piece of paper, he could have simply stuffed it in his shirt pocket …ready for use. He (we) dropped the ball. I saw it with my own eyes and believe it was an honest error, one that may never be corrected and could have had very significant historical ramifications but it is now water over the dam. Alexander held two good interviews where he did not serve up softball questions and did actually get some truthful (and surprising) answers. The problem as I see it is this question could have opened many cans of worms for the cartel as it is at the center of the suppression scheme and thus one of the core supports to a fraudulent fiat financial system. As I said, I believe it was an honest mistake but a mistake of epic proportions in the scheme of things.
Before finishing I would like to ramble just a bit. Had I been allowed to ask questions, I would have been much more specific with the questions he was asked. I would have asked him (since it was born under his watch) which markets and “how” the PPT manages markets? I would have asked him if there is ANY mathematical way out of where we are now. If there is, what is it? If there is not (there is not) does it bother him that he was at the helm while this ship headed toward the iceberg? I would ask him “since you obviously understood and still understand gold versus fiat money, what in the world enticed you to captain a ship you knew would mathematically hit an iceberg? Have you no conscience sir? Enough said.
While deciding how to write this piece regarding the interviews of Alan Greenspan, it dawned on me that has to be done in 2 parts. GATA followers had very high hopes Mr. Greenspan could be pinned down with nowhere to go regarding the central banks forays into the gold market, these hopes were dashed …sort of. In this piece I will try to relate to you what was said in the first of two interviews of Alan Greenspan by Gary Alexander. Along the way I plan to give my opinions of what was said and where injected logic might be helpful.
The interview started off with questions of Mr. Greenspan’s early years as a follower of Ayn Rand. She was described as “pure logic,” and with her reason was everything. The former chairman described his time working with Rand as living in a theoretical world. He admitted to his written piece in 1966 in the support of gold as money and the gold standard. Leaving the private sector and joining the public he said was “leaving the theoretical world and entering the practical world.” He told of an early paper he wrote where he suggested agricultural subsidies made no sense, not even to farmers. He said Washington was up in arms over the paper and it was this that opened his eyes. He realized he had to “conform” his actions even if he did not change his philosophy. It was at this point Mr. Greenspan said “I couldn’t work in today’s world” and everything must be compromised. What he politely was saying is either “sell out or stay out.”
When asked about his time on the Social Security board under Ronald Reagan, Greenspan said he was then and is still now in favor of privatizing the program but it “had to funded.” He made two comments in this segment which I am not sure how connected they were to the current topic of Social Security, he said he “believes he has changed the world” and “printing money makes systems fall apart.” These are both true statements and in my opinion the beginning moves to “cleanse his legacy.” My opinion of this first of three parts was Mr. Greenspan trying to explain that he had to conform to Washington where his (Rand’s) idealism could not work. He did say and I quote, “I never changed my philosophy or views, I had to change my actions to conform.” Ayn Rand had many famous quotes, the one which I believe would drain the blood from Mr. Greenspan’s face is as follows: “There is a level of cowardice lower than that of the conformist: the fashionable non-conformist.” This is exactly how I believe Mr. Greenspan is trying to portray his legacy, the fashionable non-conformist.
The 2nd part of the interview, Gary Alexander asked several questions of Mr. Greenspan’s chairman years. The question regarding going back to a gold standard was answered with “a gold standard is not possible in a welfare state.” Without saying it, you can understand his thought process here, under a gold standard there is no way for politicians to conjure (free) money out of thin air to give away, only with debt based money can this be done. When asked if the Fed or central banks tried to control the price of gold he answered a flat “no” and then added “only other central banks.” This to me was curious as “other central banks” during those years were strict puppets of the Fed. So there was no admission of Fed intervention but at least he “pointed a finger” so to speak.
Finally, Gary asked about “bubbles” and whether or not the low rates from 2001-2004 which he presided over were the cause of the housing crisis? Greenspan morphed into his old Congressional testimony form and passed the buck on this one. He said the major cause to the housing bubble were Fannie Mae and Freddie Mac. He said they were “subsidized” federally and built up loan portfolios too high. HUD, MBS and affordable housing issues along with the loosening of credit standards were the root cause of the bubble, not abnormally low rates. He also mentioned the adjustable rate market as what in his words “blew the market apart.” Without any further comment, I will just say one word …”disingenuous.”
The final part of the interview dealt with his years after the Fed. Mr. Greenspan recounted how Paul Volcker never spoke publicly while he was in office regarding monetary policy and neither would he. He was asked about 0% interest rates and inflation. His answer was true in my opinion and one which I have written of many times (even though we certainly have much higher inflation “leaking out” than is being reported). He said very low interest rates, massive credit creation and money supply growth have not translated to hyperinflation (yet) because of low “velocity”. The banks so far are sitting on massive quantities of money supply and are earning a “risk free” .25 basis points. As long as the banks don’t begin to lend or use the cash, inflation will remain subdued but the balances are like “kindling wood” which if ignited could start a raging fire. He also mentioned there is much capital coming in from European banks thirsting for positive yields as Europe is inverted.
Close to the end was the best part because the former chairman in my opinion was given a couple of tough questions where he was forced to lie and also told part truths. He was asked if there were any discussions between the Fed and the Treasury regarding deficits and our national debt. In my notes I wrote “never” as being the answer to which I can only say “REALLY???” You never, ever, ever spoke to the Treasury Secretary or an underling regarding the country’s debt? Isn’t that what you “purchase” day in and day out …”Treasuries?” You never, ever were given a heads up as to “how much” of this debt was going to be issued by the Treasury in case the Fed had to step up and purchase in their role as lender of last resort? Actually, I can remember Greenspan testifying before Congress that monetary policy “couldn’t solve all problems,” the budget needed to be more in balance (a Congressional job) and the deficits needed to be lessened. I won’t bother to do the research but I am sure there are records of phone calls and meetings between the chairman and Treasury secretary, there are plenty of records between Geithner and Bernanke. Did he and Robert Rubin ask how each other’s family were doing and whether or not it was going to rain the next day? Like I said, “really?”
His answer to the “too big to fail” question was very good and I say BRAVO…except he did not have the backbone to let it happen on his watch! He postulated that TBTF was the recipe to stagnation and that “creative destruction” is a necessary evil for capitalism. Creative destruction, meaning “bankruptcy” as punishment for a poor business decision or decisions. He went on to recount how well the RTC worked in the early 1990′s and actually ended up costing less than projected by letting the markets heal and clean the wounds. In his opinion, the RTC cannot be duplicated now.
I do want to point out the obvious here and why the RTC can never be duplicated again. The 2008 crisis and now any new crisis cannot ever be allowed the punishment of pure Mother Nature… although this is exactly what will happen, let me explain. Even though this is exactly what should have been allowed in 1991, 2001 and again in 2008, “they” wouldn’t let it happen. They wouldn’t (couldn’t) let it happen because the financial system itself was getting bigger and bigger, so big that a daisy chain of bankruptcies was feared would cascade into an outright deflation and take government finances with it. You see, in a fiat/deficit world the government must have the ability to borrow …in order to pay…interest that is. If markets were to go totally dysfunctional it would mean the Treasury would have no way of actually paying current interest and settling maturing debt.
So, there can now never be this “creative destruction” that Mr. Greenspan is speaking of these years later. “Inflate or die” lived and breathed down his neck while chairman of the Federal Reserve. He tried to talk a good game but if you know and understand financial and economic history, his modus operandi today is merely to cleanse his legacy before the final collapse and reset of the global financial system. In my opinion, he had a perfect opportunity in 1991 to allow “creative destruction,” he missed it and we went to war with Iraq to help the reflation. His last and final chance was 2001 but by then, the odds favor that it would have been the total destruction of the financial system due to size and leverage. Since 2001 there has been and can never be a “creative destruction.” 2008 saw TARP, ZIRP, $16 trillion of secret Fed loans and all the rest to forestall the destruction…next time there will be nothing available to hold back Mother Nature’s wrath.
Finally, he was asked if interest rates and gold 5 years from now would be higher or lower to which he answered “higher and higher.” When asked “how much?” he replied “considerably!”
This finishes part one, the second interview was much more interesting to me and there was much more discussion of gold, stay tuned!
Q: I have two $5.00 rolls of Mercury Dimes. If I know the spot price for silver, how do I figure what each dime should be worth if I ever need to use them for barter?
David Schectman’s Answer:
Two $5.00 rolls of 90% silver dimes equal $10.00 face value. There are 100 dimes in $10.00 worth of dimes. A bag of pre-1964 90% “junk” silver equals $1,000 face value (in any combination of dimes, quarters and half dollars). $10.00 is 1/100th of a bag. A bag of junk silver, melted down, equals 715 oz. 715 divided by 100 equals 7.15 oz. If spot silver is $20.00 then the silver in two $5.00 rolls of dimes is worth $143.00.
But you are assuming that in a barter situation that the dimes will only be worth spot. They may well be worth much more. And spot could be worth $50 or $100 or $250/oz. or more. Your silver is now worth about $1.50 per dime. Two dimes buys a gallon of gas today.
In early 1980 when silver reached $50/oz. a single silver dime would buy one gallon of gas at many locations around the country. That did happen.
In 1980 silver was more than twice today’s price, so it would take only one dime in 1980 instead of two dimes now, with spot at around $20.
So think of it this way, for a simple guide – your dimes would be worth at least 100 gallons of gas, (100 dimes and one dime buys one gallon of gas) regardless of how much it was selling for – and that would be a LOT of dollars but the dollar would be worth very little. That’s why there would be barter; people would not want paper dollars so their value would be minimal.
Just remember that a bag is $1000 face value and is the equivalent of 715 ounces of silver. Multiply the spot price times 715 and divide it by the number of ounces you have – or divide 1,000 by the number of dollars in silver coins you have and multiply that number by the spot price.
Q: I wrote to Miles Franklin a couple of months ago asking why the mining companies don’t get together to deal with the price of silver. Your response was that it would be illegal. However now I see Keith Neumeyer of First Majestic Silver Corp. is asking other mining companies to join him in holding back some of their production. What is the story with this collusion? Is this legal? If it is, why didn’t the mining companies do this a long time ago? Either way I am really glad to see that someone has a pair to take an active role in dealing with the paper manipulators.
Bill Holter’s Answer:
I am not a lawyer but as I understand it, companies cannot “collude” together in the U.S. to fix prices either up or down. I do not know the international laws but OPEC is an example of an out in the open cartel which nudges prices in various directions while acting in unison with supply considerations. That said, I suggested last month in “An open letter to the mining industry” that people contact their companies and act in their own best interest by selling only what is necessary for operations and withhold the rest until prices are better. I spoke with the CIO of First Majestic while at the New Orleans investment conference, I was told their action had been discussed prior to my letter going out. But, he said they had (as have other companies) received many letters (thank you everyone!) requesting this. I asked because I was curious, if the letter made any difference, he told me “no, we would have done it anyway.” …Upon greeting him he said, “Oh, you’re the one behind the letter” so I’m guessing they did get quite a few.
Q: Is it smarter to buy numismatic gold coins or gold bars/ Why?
Andy Hoffman’s Answer:
Bullion coins and bars are the preferred form of investment for the purpose of asset protection and/or financial insurance. They account for nearly all Miles Franklin’s business, as we believe strongly in the merit of buying as close to the product’s “intrinsic value” as possible. This way, you get as many coins for your money as possible, with absolutely zero “subjective” value. Some firms guide neophyte PM investors toward numismatics with promises they are rare, confiscation-proof, or other speculative beliefs. However, for the most part, they are simply attempting to sell them because their wider spreads yields higher commissions – which, by the way, has been a particularly prevalent practice since gold and silver prices started falling three years ago. Many of these firms are desperate for business – and thus, are “doubling up” their aggressiveness in marketing these highly risky assets.
Essentially, numismatics are little different than baseball cards, rare art or even real estate – in that a significant percentage of their “value” is entirely subjective. Generally speaking, we believe numismatics are principally for experienced coin collectors – in most cases, because it’s actually their hobby. However, in the rare case where coins with actual scarcity or other unique characteristics trade at a very low premium to underlying bullion intrinsic value, we actively market them – given they may have some “option value” that you get essentially for free. A great example is some of the Royal Canadian Mint limited edition Maple Leaf series, which from time to time trade at prices not significantly different from generic Maples Leafs.
Andy Hoffman joins John Stadtmiller of the Republic Broadcasting Network to discuss the U.S. job market, oil prices, the state of the economy, retail sales, gold and silver. To listen to the interview, please click below.
In July 2012, Barrack Obama catered to the “99% on his campaign trail” – knowing full well elections are no longer about progress (let alone, “hope” or “change”) but which candidate promises the most entitlements. Two years later, with the nation in vastly worse shape both economically and financially, Hillary Clinton is doing the same, rehashing Obama’s “you didn’t build that” quote by saying, “don’t let anybody tell you it’s corporations and businesses that create jobs”; like Obama, suggesting big government is the foundation of America’s “success.” Frankly, it’s difficult to decide whether to scream with rage or cry with sorrow at just how far our great nation has fallen. Government no longer governs but controls our lives – whilst our top politicians are no longer wise businesspeople but simple “heirs.” Who’s next after Hillary? Jeb Bush? Chelsea Clinton? Ronnie Reagan? Amy Carter?
As the Fed meets to decide how to propagandize tomorrow’s FOMC statement, there are simply too many “horrible headlines” to keep track of. The world has become a very dangerous and scary place with countless political, economic, and social bonfires burning simultaneously – in our view, catalyzed first and foremost by the inflation created by four-plus decades of history’s most destructive Ponzi scheme. Look no further than the raging blaze of serial currency collapses – which we deem the “single most bullish precious metal factor imaginable”; which sadly, the brainwashed MSM not only ignores but doesn’t understand. As I write, countless currencies sit at or near multi-year lows – like the Russian Ruble, Indonesian Rupiah, South African Rand and Brazilian Real; yielding dramatic cost pressures for hundreds of millions of people, whilst Western propagandists spew lies regarding the “deflation” that not only does not exist, but cannot in a fiat currency regime.
In the latter case, Brazilian stocks are crashing as rapidly as the Real, as this week’s Presidential election cast further doubt on the nation’s tenuous future. However, politics are immaterial when contrasted with the humanity behind them. And in Brazil’s case, this horrifying article about the drought we have highlighted all year depicts a nation on the verge of catastrophic tragedy – as its largest city, Sao Paolo, may have less than a month of fresh water left. If the drought doesn’t abate soon, not only will global sugar, soybean, coffee and beef prices continue to surge, but countless thousands of Brazilian lives could be lost. And since this story is horrifying enough, we won’t even update you on the equally terrifying prospects for California’s economy and population if its own historic drought doesn’t shortly abate.
Again, despite historic manipulation, TPTB cannot prevent “Economic Mother Nature” from baring her claws. Ultimately, her wrath will be fully felt – and as they say, “hell hath no fury like a woman scorned.” Currently, her presence could not be more obvious in said currency markets nor crude oil, as it continues to flirt with $80/bbl; and of course, Western bond markets – where plunging rates attest to the “most damning proof yet of QE failure.” She still hasn’t been able to overcome the naked shorting of paper gold and silver, as well as the surreptitious dishoarding of the vast majority of physical reserves in the name of maintaining a destructive, distorting, inequality engendering status quo. But don’t worry, all good things to those who wait. And reading of how a single hedge fund – Red Kite, who I actually had dealings with in my prior life in the mining business – has cornered up to 90% of the London copper market; much less, gold and silver forward rates again turning negative, we could not be more confident that the two-decade suppression of precious metals is nearing its inglorious end. And when it does, this “Achilles Heel of the financial world” may well be the catalyst to blow it sky high.
In the run-up to tomorrow’s supposedly “historic” FOMC decision to end QE – at least, overtly – we have NEVER seen such blatant market manipulation. Remember, the Fed’s objectives have NOTHING to do the economy; but instead, saying what it takes to support financial markets (and “adjunct” markets like real estate) – and doing the same, even if its deeds are diametrically opposed to its words. To wit, it was just two weeks ago when markets were plunging in front of the key “propaganda events” of this week’s FOMC meeting and next week’s elections. And thus, the Fed resorted to a chaotic combination of “manipulation, jawboning, and prayer.” This week, with markets “stabilized” they have simply stepped up the manipulation and thrown in several “rumors” – like increased ECB QE – to fan the flames, enabling the Fed as much leeway as it needs. Bad economic data plus strong markets is their best possible scenario – as it allows them to be uber-dovish in a non-crisis environment. And voila, look at what they’ve created!
In the past three days, we have seen horrifying across-the-board economic misses – starting with Friday’s “all-time biggest lie” when August’s New Home Sales data was revised massively downward; to yesterday’s decline in the PMI service index; to today’s massive “unexpected” durable goods order plunge and fourth straight “unexpected” decline in the Case-Shiller national home price index. The fact that Washington’s book cookers published the highest “consumer confidence” report since October 2007 (based solely on “expectations”) only proves TPTB’s propaganda tactics are running on fumes – as at this point, it’s becoming laughable to believe recovery is even possible, especially when the entire world is openly in recession.
And thus, all that remains in the TPTB’s “arsenal” of deceit is money printing – which ultimately, must catalyze hyperinflation – and exponentially increased market manipulation. To wit, take a look at the past two days’ “trading action”; utilizing the same exact tried-and-true algorithms we have described for years – whilst commodities, currencies and even European stocks plunged.
And no, this is not an illusion – they actually represent data from two different days; featuring the eighth straight “Dow Jones Propaganda Average” dead ringer algorithm; PM attacks at the 10:00 AM EST “key attack time #1”; and requisite DLITG or “Don’t Let it Turn Green” algorithms for the remainder of both days.
BTW, today is no different – as following a third straight “2:15 AM” EST attack, PMs have been driven down by prototypical “Cartel Herald” algorithms at 10:00 AM EST when the global physical markets close – whilst stocks again surge higher, despite not only the aforementioned durable goods and home price data but yet another plunge in a bellwether stock – Twitter; which for once, I agree with a “top Saudi cleric’s” assessment as being the “source of all evil.” Well, maybe not all evil; but certainly, the dumbing down of Western society – including those that listened to Jim Cramer’s September prediction that Twitter, GoPro, Tesla and Netflix will be “irresistible” stocks through year-end. And since that prediction? Twitter is down 17%, GoPro 20%, Tesla 18% and Netflix 21% – whilst the NASDAQ composite index is…drum roll please…unchanged. Gee, I wonder why CNBC’s ratings are at an all-time low.
And speaking of CNBC, here’s the perfect lead-in to today’s primary topic; the laughable “end of QE” that it and other cheerleading MSM outlets have been spinning. Steve Liesman, CNBC’s “Chief Economist” demonstrated a “consensus” timeline forecasting the Fed’s first rate hike in June 2015 (nine months from now, despite being seven years into a “recovery”); its first balance sheet reduction in October 2015; and a “terminal Fed Funds rate” of 3.3% or barely half the historical average in December 2017. Wow, that’s quite a precise chronology – incorporating the Fed’s ambiguous “considerable time” language, world-class economic forecasting abilities, and “just right” conclusion of an interest rate “higher” than today, but just low enough to not destroy history’s largest debt edifice – or so they hope. I’m sure the “consensus” inflation forecast is 2.0% as well, mirroring the Fed’s expectation exactly.
Hence, the historically unparalleled game of money printing, market manipulation and propaganda that started April 11th, 2013, when Obama had a “closed-door” meeting with the top ten “TBTF” bank CEOs. A day later, gold and silver were violently attacked, and two weeks later, rates surged from record low levels as the amorphous “tapering” campaign commenced. Since then, all objective measures of U.S. and international economic activity have dramatically declined, currency and commodity markets have crashed, social unrest has exploded, and of course, precious metal prices have been pushed below their respective costs of production. Conversely, stock prices have surged to record levels – at least, the handful within the major indices the PPT supports; whilst interest rates remain at or near record lows. In other words, whilst the global economy has crashed and burned, the “1%” holding stocks and bonds in the nations with the most advanced “manipulation operatives” have grown significantly richer. And of course, those who appropriately protected themselves with precious metals have been punished – particularly those that speculated in “Paper PM Investments” like mining stocks, ETFs and closed-end funds.
Of course, all conversations lead back to “Economic Mother Nature” – who in time always wins. The Fed will probably end overt QE3 tomorrow; but make no mistake, covert QE goes on indefinitely, depending on the day’s needs. Trust me, when you see the Dow’s “dead ringer” pattern continuing at 10:00 AM EST each day – despite the supposed “end” of QE “POMO” operations – you’ll know exactly what we mean. And more importantly, the “end” of QE3 doesn’t mean the end of overt QE; but simply, QE3. In other words, QEs 4, 5 and infinity are just around the corner waiting for their catalyst. And when they do inevitably arrive – as the “countdown to the Yellen reversal” continues, if you don’t have your gold and silver already, you may never get the chance; certainly not at prices even remotely close to today’s historically suppressed levels.