Wednesday, May 27, 2015

Gold Daily and Silver Weekly Charts - How Unusual: Precious Metals Hit on Option Expiration

"June is a big, active month for gold on the Comex.

And today was the option expiration for the precious metal June contracts.

Le voilà, comme prévu.

What else might we have expected?  Honesty?  Price discovery?  A market clearing price between users and suppliers?  

These are markets that have been willfully overwhelmed and misdirected by speculation.  There are no fundamentals in The Bucket Shop, just what is essentially full time market rigging, with little to no product changing hands between long term investors and suppliers.

And similarly, like healthy nourishment in a snack cake, so there is still little to no recovery in The Recovery™.  

When the reckoning for this protracted folly and organized plunder finally comes, they will all be so amazed.
 
It is so very modern to think that things are just as we say they are, because we say so.  And nowhere is this psychosis more apparent than in modern economics and money.  
 
 It is the ultimate tyranny of selfishness and egoism, and will last as long as the masters can keep extending their power and their will, crushing all dissent and all others in their path,
 
And then comes the downfall, the sickening plunge, and the moment of terrible lucidity when the music stops.  And the illusion dies.

Have a pleasant evening.


Who Would Win A Conflict In The South China Sea: The Infographic

"As regular readers are no doubt aware, the US and China areracing towards a maritime conflict stemming from Beijing’s construction of what Washington has condescendingly called “sand castles” in the Spratly archipelago. 
Atop these man-made islands are cement plants, air strips, and soon-to-be lighthouses, as China boldly asserts its territorial claims on what are heavily-contested waters though which trillions in seaborne freight pass each year.
Now, with Beijing set to enforce what is effectively a no-fly zone over its new sovereign ‘territory’ we bring you the following graphic from WSJ which shows that when it comes to sheer size, China’s air force and Navy are beyond compare.

More, from WSJ
China’s promise to beef up its naval capabilities to prevent further “meddling” and “provocative actions” by rivals in the South China Sea is a daunting prospect for most of its neighbors, which already view Beijing’s fast-improving armed forces with trepidation...

As a recent Pentagon review of China’s military modernization drive noted, “China is investing in capabilities designed to defeat adversary power projection and counter third-party—including U.S.—intervention during a crisis or conflict.” In practice, that means hundreds of ballistic and cruise missiles positioned near the coast to deter Japanese or American warships from coming anywhere near Chinese territory. China has a substantial submarine fleet as well, piling on more risk for enemy ships."

at  http://www.zerohedge.com/news/2015-05-27/who-would-win-conflict-south-china-sea-infographic

Is The 505 Trillion Dollar Interest Rate Derivatives Bubble In Imminent Jeopardy?

"All over the planet, large banks are massively overexposed to derivatives contracts.  Interest rate derivatives account for the biggest chunk of these derivatives contracts.  According to the Bank for International Settlements, the notional value of all interest rate derivatives contracts outstanding around the globe is a staggering 505 trillion dollars.  Considering the fact that the U.S. national debt is only 18 trillion dollars, that is an amount of money that is almost incomprehensible.  When this derivatives bubble finally bursts, there won’t be enough money in the entire world to bail everyone out.  The key to making sure that all of these interest rate bets do not start going bad is for interest rates to remain stable.  That is why what is going on in Greece right now is so important.  The Greek government has announced that it will default on a loan payment that it owes to the IMF on June 5th.  If that default does indeed happen, Greek bond yields will soar into the stratosphere as panicked investors flee for the exits.  But it won’t just be Greece.  If Greece defaults despite years of intervention by the EU and the IMF, that will be a clear signal to the financial world that no nation in Europe is truly safe.  Bond yields will start spiking in Italy, Spain, Portugal, Ireland and all over the rest of the continent.  By the end of it, we could be faced with the greatest interest rate derivatives crisis that any of us have ever seen..."

at http://theeconomiccollapseblog.com/archives/is-the-505-trillion-dollar-interest-rate-derivatives-bubble-in-imminent-jeopardy

Rising Gold Price Could Set Off Derivative Nightmare-Bill Murphy

"Bill Murphy, Chairman of GATA (Gold Anti-Trust Action Committee), says precious metal prices have been relentlessly rigged by central banks and governments.  Murphy contends, “If gold were to just to have kept pace with inflation, forget all the QE, it would be double what it is today.  That’s how artificially low the price of gold is today, and also silver.  Once they lose control of silver, it will go from $22 to $100 per ounce very fast.”
Murphy claims that one reason precious metal prices are suppressed is central banks are afraid of what Murphy calls “a derivative nightmare” touched off by a rising gold and silver prices.  Murphy explains, “We saw some of this before in 2008.  There is counter-party risk all over the place, and it could set off like a nuclear reaction where there is one default after another.   Derivatives have exploded to $250 trillion, or just pick a number.  They don’t know what the outcome could be if they start getting this kind of reaction.  So, they are maniacal in trying to keep the gold and silver prices in line.”
at http://usawatchdog.com/rising-gold-price-could-set-off-derivative-nightmare-bill-murphy/

U.S. Scared To Death As China Just Secured Larger Flow Of Gold As Part Of Its Plan To Back The Yuan With Gold

"Today one of the top money managers in the world warned King World News that the United States is now scared to death as the Chinese have just signed a historic deal to further increase the flow of physical gold into China as part of their plan to back the yuan with gold.  He also warned it will be "game over" for the United States dollar and U.S. world dominance once this nightmare unfolds.
Stephen Leeb:  “The Chinese are planning to make gold an active and meaningful part of the monetary system.  This will send the price of gold skyrocketing….


“This is why I keep telling KWN readers that they should own a meaningful amount of physical gold.  Meanwhile, not one United States bank sells any physical gold.  Whereas over in China and the Middle East, virtually every bank sells physical gold.

China's State-Owned Company Signs Historic Deal To Secure Larger Flow Of Gold
Eric, you pointed out to me before this interview began that China’s state-owned gold company, Zijin Mining Group, just signed two deals, one of them with Barrick Gold — the largest gold mining company in the world.  This deal with Barrick Gold is to secure an even greater flow of gold into China..."

at http://kingworldnews.com/u-s-scared-to-death-as-china-just-secured-larger-flow-of-gold-into-china-as-part-of-plan-to-back-the-yuan-with-gold/

Rising Dollar and the New Silk Road Gold Fund

"...Gold Positioning and the Gold Fund
The managed money net combined gold positions jumped a whopping 140% to 86,672 contracts during the week ending May 19 with the short contracts declining 29% and the long contracts rising 26%. Still, the net positions only rose back to the level in early March. In India, the government has announced further details on its gold monetization scheme. The bigger news is China’s establishment of a new gold fund to raise about $16 billion to develop gold mining projects along the New Silk Road and to facilitate other central banks to purchase gold for their reserves."

at http://news.sharpspixley.com/article/rising-dollar-and-the-new-silk-road-gold-fund/231248/

Sunday, May 24, 2015

The Happiness Industry: How Government and Big Businesses Manipulate Your Moods For Profit

"Yves here. We’ve long focused on the role of propaganda in creating the consent, or at least the appearance of consent, for policies that often serve very narrow interests. This post discusses a broader phenomenon, how businesses and governments try to foster more intense involvement while at the same time implementing programs that create disengagement and anomie.
One thing I find intriguing is the emphasis in the US on “happiness” which I see as an illusory goal. Happiness American style is giddiness or euphoria and is by nature a fleeting state. Contentment is more durable and more attainable, but being content is the opposite of the dissatisfaction, insecurity, and anxiety that is what drives most people to perform.
By William Davies, a Senior Lecturer at Goldsmiths, University
of London, where he is Director of the Political Economy Research Centre. His
weblog is at www.potlatch.org.uk. Originally published at Alternet
The following is an excerpt from Davies’ new book The Happiness Industry: How the Governmen and Big Business Sold Us Well-Being (Verso Books, 2015)
Since the 1960s, Western economies have been afflicted by an acute problem in which they depend more and more on our psychological and emotional engagement (be it with work, with brands, with our own health and well-being) while finding it increasingly hard to sustain this. Forms of private disengagement, often manifest as depression and psychosomatic illnesses, do not only register in the suffering experienced by the individual; they are increasingly problematic for policy-makers and managers, becoming accounted for economically.
Yet evidence from social epidemiology paints a worrying picture of how unhappiness and depression are concentrated in highly unequal societies, with strongly materialist, competitive values. Workplaces put a growing emphasis on community and psychological commitment, but against longer-term economic trends towards atomization and insecurity. We have an economic model which mitigates against precisely the psychological attributes it depends upon.
In this more general and historical sense, then, governments and businesses ‘created the problems that they are now trying to solve.’ Happiness science has achieved the influence it has because it promises to provide the longed-for solution. First of all, happiness economists are able to put a monetary price on the problem of misery and alienation. The opinion-polling company Gallup, for example, has estimated that unhappiness of employees costs the US economy $500 billion a year in lost productivity, lost tax receipts and health-care costs. This allows our emotions and well-being to be brought within broader calculations of economic efficiency.Positive psychology and associated techniques then play a key role in helping to restore people’s energy and drive. The hope is that a fundamental flaw in our current political economy may be surmounted, without confronting any serious political–economic questions.
Psychology is very often how societies avoid looking in the mirror. The second structural reason for the surging interest in happiness is somewhat more disturbing, and concerns technology. Until relatively recently, most scientific attempts to know or manipulate how someone else was feeling occurred within formally identifiable institutions, such as psychology laboratories, hospitals, workplaces, focus groups, or some such. This is no longer the case. In July 2014, Facebook published an academic paper containing details of how it had successfully altered hundreds of thousands of its users’ moods, by manipulating their news feeds. There was an outcry that this had been done in a clandestine fashion. But as the dust settled, the anger turned to anxiety: would Facebook bother to publish such a paper in future, or just get on with the experiment anyway and keep the results to themselves?
Monitoring our mood and feelings is becoming a function of our physical environment. In 2014, British Airways trialled a ‘happiness blanket’, which represents passenger contentment through neural monitoring. As the passenger becomes more relaxed, the blanket turns from red to blue, indicating to the airline staff that they are being well looked after. A range of consumer technologies are now on the market for measuring and analyzing well-being, from wristwatches, to smartphones, to Vessyl, a ‘smart’ cup which monitors your liquid intake in terms of its health effects. One of the foundational neoliberal arguments in favor of the market was that it served as a vast sensory device, capturing millions of individual desires, opinions and values, and converting these into prices. It is possible that we are on the cusp of a new post-neoliberal era in which the market is no longer the primary tool for this capture of mass sentiment. Once happiness monitoring tools flood our everyday lives, other ways of quantifying feelings in real time are emerging that can extend even further into our lives than markets.
Concerns about privacy have traditionally seen it as something which needs to be balanced against security. But today, we have to confront the fact that a considerable amount of surveillance occurs to increase our health, happiness, satisfaction or sensory pleasures. Regardless of the motives behind this, if we believe that there are limits to how much of our lives should be expertly administered, then there must also be limits to how much psychological and physical positivity we should aim for. Any critique of ubiquitous surveillance must now include a critique of the maximization of well-being, even at the risk of being less healthy, happy and wealthy.
To understand these trends as historical and sociological does not in itself indicate how they might be resisted or averted. But it does have one great liberating benefit of diverting our critical attention outward upon the world, and not inward upon our feelings, brains or behavior. It is often said that depression is ‘anger turned inwards.’ In many ways, happiness science is ‘critique turned inwards’, despite all of the appeals by positive psychologists to ‘notice’ the world around us. The relentless fascination with quantities of subjective feeling can only possibly divert critical attention away from broader political and economic problems. Rather than seek to alter our feelings, now would be a good time to take what we’ve turned inwards, and attempt to direct it back out again. One way to start would be by turning a skeptical eye upon the history of happiness measurement itself."

at http://www.nakedcapitalism.com/2015/05/the-happiness-industry-how-government-and-big-businesses-manipulate-your-moods-for-profit.html

China Establishes World's Largest Physical Gold Fund

"While many eagerly await the day when China will finally reveal its latest official gold holdings, a number which when made public will be orders of magnitude higher than its last 2009 disclosure of just over 1,000 tons, or less even than Russia, China continues to plough ahead with agreements and arrangements to obtain even more gold in the coming years.
Exhibit A: two weeks ago, Xinhua reported that China National Gold Group Corporation announced it has signed an agreement with Russian gold miner Polyus Gold to deepen ties in gold exploration. The companies will cooperate in mineral resource exploration, technical exchanges and materials supply, the largest gold producer of China said.
Polyus Gold is the largest gold producer in Russia and one of the world's top 10 gold miners.

The agreement between the two gold miners is one of many deals signed between China and Russia in energy, transportation, space, finance and media exchanges during President Xi Jinping's visit to Russia from May 8 to May 10.

"China's Belt and Road Initiative brings unprecedented opportunities for the gold industry. There is ample room for cooperation with neighboring countries, and we have advantages in technique, facilities, cash, and talents," said Song Xin, general manager of China National Gold Group Corporation.
In light of such developments, it is little wonder there has been increasing chatter in recent months that Russia and China are setting the stage for a gold-backed currency, in preparation for the day the Dollar reserve hegemony finally ends (a hegemony whose demise is accelerating with every incremental physical gold repatriation such as those of Germany, the  Netherlands, and now Austria).
And now, Exhibit Bovernight Xinhua also reported that a gold sector fund involving countries along the ancient Silk Road has been set up in northwest China's Xi'an City during an ongoing forum on investment and trade this weekend. (read more about the "New Silk Road" which could change global economics forever here). The fund, led by Shanghai Gold Exchange (SGE), is expected to raise an estimated 100 billion yuan (16.1 billion U.S. Dollars) in three phases. The amount of capital allocated to nothing but physical gold purchases (without plans for financial paper intermediation a la western ETFs) will be the largest in the world.
The billions of dollars in allocated funding will come from roughly 60 countries that have invested in the fund, which will in turn facilitate gold purchase for the central banks of member states to increase their holdings of the precious metal, according to the SGE.
As Xinhua notes, China is the world's largest gold producer, and also a major importer and consumer of gold. Among the 65 countries along the routes of the Silk Road Economic Belt and the 21st-Century Maritime Silk Road, there are numerous Asian countries identified as important reserve bases and consumers of gold.
"China does not have a big say in gold pricing because it accounts for a small share of international gold trade," said Tang Xisheng of the Industrial Fund Management Co. "Therefore, the Chinese government seeks to increase the influence of RMB in gold pricing by opening the domestic gold market to international investors."
As a reminder, the reason why China has been aggressively building out and expanding its Shanghai Gold Exchange is precisely that: to shift the global gold trading center away from London (and certainly the US where only paper gold is relevant these days) and to its own native soil: China's ambition is nothing short of becoming the world's new gold trading hub.
In other to do that, it is already setting up the regional infrastructure to facilitate such a goal: according to Tang, the fund will invest in gold mining in countries along the Silk Road, which will increase exploration in countries such as Afghanistan and Kazakhstan.
The good news for China is that with the BIS and virtually all "developed" central banks in desperate need of keeping the price of gold as low as possible while they debase their own paper currencies to unprecedented levels over fears of faith in fiat evaporating, China's gold fund will be able to procure gold for its members at a very reasonable price until such time as the lack of physical gold supply can no longer be swept away by mere paper shorting of the yellow metal."

at http://www.zerohedge.com/news/2015-05-24/china-establishes-worlds-largest-physical-gold-fund

Leader Of Germany’s Gold Repatriation Movement Confirms Austria To Repatriate 50% Of Its Gold Held Abroad, 80% Of Which Is Held In London

"Today Peter Boehringer, who led the movement to repatriate Germany's gold, notified King World News that he has seen credible reports that Austria intends to repatriate 50% of its gold reserves held abroad, 80% of which are held in London.

This is a huge blow to the West's fractional reserve gold system, which is leveraged 100/1.  The fractional reserve gold system is operated out of London and is supported by the United States.  It will be interesting to see how the gold market trades in coming weeks as London will have to send a large amount of gold back to Austria.  It's the leverage that makes coming up with the physical gold so tricky..."

at http://kingworldnews.com/leader-of-germanys-gold-repatriation-movement-confirms-austria-to-repatriate-50-of-its-gold-held-abroad-80-of-which-is-held-in-london/

Billionaire Eric Sprott On The Shocking Financial Dangers Facing The World Today

"Today billionaire Eric Sprott spoke with King World News about the shocking financial dangers facing the world today.
Eric Sprott:  “Here we have this ludicrous situation in Greece, where the ECB had to put in $80 billion to support their banking system.  I think the (total) assets of the banking system are about $135 billion.  And yet the entire discussion is whether or not they will put $7.2 billion in to support the government.  So obviously the bias is there — they care more about the banking system than they care about the government because they don’t want the domino effect to start..."

at http://kingworldnews.com/billionaire-eric-sprott-on-the-greatest-financial-dangers-facing-the-world-today/

We Have Officially Entered The Final Phase Of Every Market Bubble

"On the heels of another chaotic trading week in major markets, today one of the top economists in the world sent King World News an incredibly powerful piece warning that we have officially entered the final phase of every market bubble.  Below is the fantastic piece from Michael Pento.
May 23 – (King World News) – At the beginning of every quarter Wall Street places its overly optimistic GDP forecasts on parade. And by the end of the quarter, those same carnival barkers line up a myriad of excuses as to why the numbers fell short. Port strikes, a stronger dollar and snowier winters (supposedly caused by global warming) are among their current favorites.
But the anemic data in the first quarter of 2015, followed by the not so much better data in the first month and a half of Q2, has rattled the optimism of not only the usual Wall Street cheerleaders, but even many at the Federal Reserve…."

at http://kingworldnews.com/we-have-officially-entered-the-final-phase-of-every-market-bubble/

Sunday, May 17, 2015

The Economist "Buries" Gold

"A Proven Contrary Indicator
In early May, the Economist has published an editorial on gold, ominously entitled “Buried”. We wanted to comment on it earlier already, but never seemed to get around to it. It is still worth doing so for a number of reasons.
The Economist is a quintessential establishment publication.It occasionally gives lip service to supporting the free market, but anyone who has ever read it with his eyes open must have noticed that 70% of the content is all about how governments should best centrally plan the economy, while most of the rest is concerned with dispensing advice as to how to expand and preserve Anglo-American imperialism. We are exaggerating a bit for effect here, but in essence we think this describes the magazine well. In other words, its economic stance is essentially indistinguishable from that of the Financial Times or most of the rest of the mainstream financial press.
Keynesian shibboleths about “market failure” and the need to prevent it, as well as the alleged need for governments to provide “public goods” and to steer the economy in directions desired by the ruling elite with a variety of taxation and spending schemes as well as monetary interventionism, are dripping from its pages in generous dollops. It never strays beyond the “acceptable” degree of support for free markets, which is essentially book-ended by Milton Friedman (a supporter of central banking, fiat money and positivism in economic science, who comes from an economic school of thought that was regarded as part of the “leftist fringe” in the 1940s as Hans-Hermann Hoppe has pointed out). Needless to say, the default expectation should therefore be that the magazine will be dissing gold – and indeed, it didn’t disappoint.
Another reason is that the magazine has one of the very best records as a contrary indicator whenever it comments on markets. If a market trend makes the cover page of the Economist, it is almost as good as if it were making the front page of the Mirroror the Daily Mail. If you do the exact opposite of what an Economist cover story prediction indicates you should do, you can actually end up being set for life.
A famous example was the “Drowning in Oil” cover story which was published about two months after a multi-decade low in the oil price had been established, literally within two trading days of the slightly higher retest low. The article predicted that crude oil would soon fall from then slightly over $10/bbl. to a mere $5/bbl. – a not inconsiderable decline of more than 50%. Instead it began to soar within a few days of the article’s publication and essentially didn’t stop until it had risen nearly 15-fold – a gain of almost 1,400%..."

at http://www.zerohedge.com/news/2015-05-16/economist-buries-gold

Stephen King Warns "The Second Great Depression Only Postponed, Not Avoided"

"Reading like his name-sake's horror novels, HSBC's Chief Economist Stephen King unleashes a torrent of truthiness about the Titanic-like economic ocean liner that is headed for an iceberg except this fragile ship doesn’t have lifeboats. As ValueWalk's Mark Melin notes, what is different with this economic recovery is that, unlike most, "the recovery phase has not marked a return to economic growth," nor has it ushered in a return to policy "normality." From King’s point of view, the normal recovery“typically allows policymakers to rebuild their stocks of ammunition, providing them with room to fight the next economic battle.” Problem is, under the regime of quantitative easing, the central bank central planners are now out of bullets as the economic recovery and the stock bull market is long in the tooth.

Stephen King: Economy is like Titanic except without lifeboats
In his research piece titled “The world economy’s titanic problem: Coping with the next recession without policy lifeboats,” King notes it has been six years since the last recession. Without specifically saying it, those who follow quantitative market probability note that bullish stock market environments last, on average, 67 months. The current bullish economic environment, depending on where you call the low point, is nearly 72 months old..."

at  http://www.zerohedge.com/news/2015-05-16/stephen-king-warns-second-great-depression-only-postponed-not-avoided

Belligerent US Refuses To Cede Control Over IMF In Snub To China

"One story that’s been covered extensively in these pages over the past several months is the emergence of the China-led Asian Infrastructure Investment Bank. The bank began to attract quite a bit of attention in early March when the UK decided, much to Washington’s chagrin, to make a bid for membership. The dominoes fell quickly after that and within a month it was quite clear that The White House’s effort to discourage its allies from supporting the new institution had failed in dramatic fashion. 
Since then, China has been careful not to jeopardize the overwhelming support the bank has received. While Beijing is keen on expanding China’s regional influence and promoting the widespread use of the yuan, downplaying the idea that the new bank will become a tool of Chinese foreign policy is critical if it hopes to enjoy the long-term support of the many traditional US allies who have become early adopters so to speak. Similarly, China must be sensitive to the perception that the AIIB is the first step towards usurping the dollar as the world’s reserve currency and although Beijing has dispelled the notion of “yuan hegemony” as nonsensical, it’s clear that the renminbi will play a key role in loans made from the new bank. 
So while the AIIB certainly represents an attempt on China’s part to realize its regional ambitions (what we’ve described as the establishment of a Sino-Monroe Doctrine) and carve out a foothold for the yuan on the global stage, it’s also a product of Washington’s failure to adapt to a changing world. That is, the establishment of new supranational lenders suggests the US-dominated multilateral institutions that have characterized the post-war world are proving unable (for whatever reason) to meet the needs of modernity.
Nowhere is this more apparent than the IMF, where reforms aimed at making the Fund more reflective of its membership have been stymied by Congressional ineptitude for years. As Bloomberg reports, the US has apparently learned very little from the AIIB experience:
The Obama administration signaled it won’t jeopardize the U.S. power to veto IMF decisions to achieve its goal of giving China and other emerging markets more clout at the lender, according to people familiar with the matter.

That message was delivered at the International Monetary Fund’s spring meetings in Washington last month, the people said, where officials discussed how to overcome congressional opposition to a 2010 plan to overhaul the lender’s voting structure.

A solution backed by Brazil would have enabled an end-run around Congress -- while potentially sacrificing the veto the U.S. has held since World War II. With that option off the table, the people said, IMF member nations are considering a watered-down proposal that risks alienating China and India, which are already challenging the postwar economic order by setting up their own lending and development institutions…

The 2010 plan calls for increasing the emerging markets’ sway through a doubling of the IMF’s capital, with the U.S. contribution subject to approval by Congress. Without that approval, the plan wouldn’t have the support of the required 85 percent of members’ voting shares, because the U.S. has 16.7 percent. Voting rights are proportional to capital shares at the fund.

China, the world’s second-largest economy, currently ranks sixth in its voting shares at the IMF, behind Japan, Germany, France and the U.K. Under the 2010 plan, China would jump to third, while India would climb to eighth from 11th and Brazil would move up four spots to 10th.

The option backed by Brazil and other countries would have pushed through the changes without requiring Congress to ratify them. The catch was that the U.S. veto over major IMF decisions may have been at risk if Congress failed to react by approving the 2010 plan, because America’s voting share would potentially fall below the 15 percent threshold needed to maintain the power…

The fund is now considering a capital increase of just 10 percent, said the people familiar with the matter, who asked not to be identified because the discussions are confidential. Most of the boost would go to emerging nations that are underrepresented based on the size of their economies.

The solution is unlikely to satisfy some emerging economies because the capital increase is too small, said Truman, now a senior fellow at the Peterson Institute for International Economics in Washington.

In a column last month, former U.S. Treasury Secretary Lawrence Summers cited Congress’s failure to pass the IMF reforms as one of the reasons why China is pushing to reshape the global economic order with new institutions such as the Asian Infrastructure Investment Bank..."

at  http://www.zerohedge.com/news/2015-05-17/belligerent-us-refuses-cede-control-over-imf-snub-china

Why Are Exchange-Traded Funds Preparing For A ‘Liquidity Crisis’ And A ‘Market Meltdown’?

"Some really weird things are happening in the financial world right now.  If you go back to 2008, there was lots of turmoil bubbling just underneath the surface during the months leading up to the great stock market crash in the second half of that year.  When Lehman Brothers finally did collapse, it was a total shock to most of the planet, but we later learned that their problems had been growing for a long time.  I believe that we are in a similar period right now, and the second half of this year promises to be quite chaotic.  Apparently, those that run some of the largest exchange-traded funds in the entire world agree with me, because as you will see below they are quietly preparing for a “liquidity crisis” and a “market meltdown”.  About a month ago, I warned of an emerging “liquidity squeeze“, and now analysts all over the financial industry are talking about it.  Could it be possible that the next great financial crisis is right around the corner?
According to Reuters, the companies that run some of the largest exchange-traded funds in existence are deeply concerned about what a lack of liquidity would mean for them during the next financial crash.  So right now they are quietly “bolstering bank credit lines” so that they will be better positioned for “a market meltdown”…
The biggest providers of exchange-traded funds, which have been funneling billions of investor dollars into some little-traded corners of the bond market, are bolstering bank credit lines for cash to tap in the event of a market meltdown.
Vanguard Group, Guggenheim Investments and First Trust are among U.S. fund companies that have lined up new bank guarantees or expanded ones they already had, recent company filings show.
The measures come as the Federal Reserve and other U.S. regulators express concern about the ability of fund managers to withstand a wave of investor redemptions in the event of another financial crisis. They have pointed particularly to fixed-income ETFs, which tend to track less liquid markets such as high yield corporate bonds or bank loans.
So why are Vanguard Group, Guggenheim Investments and First Trust all making these kinds of preparations right now?
Do they know something that the rest of us do not?
Over recent months, I have been writing about how so many of the exact same patterns that we witnessed just prior to previous financial crashes seem to be repeating once again in 2015.
One of the things that we would expect to see happen just before a major event would be for the “smart money” to rush out of long-term bonds and into short-term bonds and other more liquid assets.  This is something that had not been happening, but during the past couple of weeks there has been a major change.  All of a sudden, long-term yields have been spiking dramatically.  The following comes from Martin Armstrong
The amount of cash rushing around on the short-end is stunning. Yields are collapsing into negative territory and this is the same flight to quality we began to see at the peak in the crisis back in 2009. The big money is selling the 10 year or greater paper and everyone is rushing into the short-term. There is not enough paper around to satisfy the demands. Capital is unwilling to hold long-term even the 10 year maturities of governments including Germany. This is illustrating the crisis that is unfolding and there is a collapse in liquidity.
There is that word “liquidity” once again.  It is funny how that keeps popping up..."

at http://theeconomiccollapseblog.com/archives/why-are-exchange-traded-funds-preparing-for-a-liquidity-crisis-and-a-market-meltdown

US Nearing Recession, Dollar Falling Hard

"The dollar soars by a record amount versus the euro and the yen in 2014. And economists predict strong growth in 2015. Really? If a country can have a rapidly-appreciating currency with all the benefits that that confers, and strong economic growth with all the obvious advantages that that confers, why wouldn’t everyone be going for powerhouse currencies?
Because the two things, a strong currency and accelerating growth, tend to be mutually exclusive in the short run, with a strong currency acting like rising interest rates, slowing growth and making debts harder to service.
So it shouldn’t be a surprise that the latest batch of US numbers are somewhere between disappointing and catastrophic. First-quarter GDP was flat and is about to be revised negative. Retail sales were flat in April, the first month of the second quarter, with business inventories and import prices pointing in the same grind-to-a-halt direction.
US retail sales May 2015
The US is now looking at zero growth for the entire first half of 2015. Six years into a recovery, with record low interest rates and a recent doubling of government debt, that’s a bit of a dilemma. Especially given the Fed’s threat to raise interest rates in the next few months.
Rates clearly are not going to be raised, at least not on purpose. On the contrary, slow growth always and everywhere leads panicked governments to break out the stimulus. And the dollar is reacting to this prospect exactly as one would expect, by falling like a stone in the past month.
US dollar May 2015
Gold, meanwhile, is acting like the reciprocal of the dollar, adding $30 an ounce in the past two days.
Gold price May 2015
At the risk of excess repetition, the US is obviously losing the currency war and will soon be forced into a new offensive. Negative interest rates, here we come."
at http://dollarcollapse.com/currency-war-2/us-nearing-recession-dollar-falling-hard/

No Money, No Growth

"Last August, the US Fed stopped creating new currency out of thin air and dumping it into the banking system. Which is another way of saying the US money supply stopped growing. Here’s the adjusted monetary base — a proxy for the amount of new currency the Fed is creating — over the past eight months:
Monetary base 2015
Then a whole bunch of other things started happening. First, the dollar soared, becoming by far the world’s strongest currency. And Americans started buying less stuff:
US retail sales past year 2015
And then US factories started making less stuff:
US industrial production May 2015
The latest batch of economic reports now implies zero growth for the entire first half of 2015. What conclusions should we draw from this?
1) Beyond a certain point, an over-indebted society can’t function without continued infusions of new cash. Turn off the spigot and you grind to a halt. The world, in other words, is one big Ponzi scheme..."
at http://dollarcollapse.com/war-on-cash/no-money-no-growth/

David Stockman – We Are Now Entering The Terminal Phase Of The Global Financial System That Will End In Total Collapse

"Today David Stockman, the man President Ronald Reagan called upon along with Dr. Paul Craig Roberts to help save the United States from disaster in 1981, warned King World News that we are now entering the "terminal phase" of the global financial system that will end in total collapse.

Eric King:  “David, I wanted to get your thoughts on gold in the midst of this big deflation you think is in front of us.  When you look at the collapse of 2008 – 2009, gold was one of the best performing asset classes.  Gold went down but it went down much less relative to virtually everything else.  Contrast that to 1973 – 1974, where we had a 47 percent stock market collapse.  But during that time we had skyrocketing gold and silver.  What’s in front of us because it looks like gold and silver may be ending a 4 year bear market and ready for a 1973 – 1974-style up-move?”
David Stockman:  “Yes.  I think the two periods are quite different.  Although at the bottom it’s central bank errors that underlie each.  But remember that in the 1970s we had just finally exited a semi-stable Bretton Woods Gold Exchange Standard system.  There still was, at the end of the day, an anchor on the central banks that was thrown overboard by Nixon in 1971…."

at http://kingworldnews.com/david-stockman-we-are-now-entering-the-terminal-phase-of-the-global-financial-system-that-will-end-in-total-collapse/

Disaster For Markets And Economies Worldwide And Chaos On A Global Scale

"On the heels of another chaotic trading week in major markets, today one of the top economists in the world sent King World News an incredibly powerful piece warning people to expect disaster for markets and economies worldwide and chaos on a global scale.  Below is the fantastic piece from Michael Pento.

May 16 – (King World News) – Central banks are incapable of saving economies or creating growth. The only thing a central bank can do is create inflation. These market manipulators set forth on a journey seven years ago to save the world by engaging in massive monetary manipulation, euphemistically called Quantitative Easing (QE), and a zero interest rate policy known as (ZIRP)….

As I could have told them, all this easy money failed to create real growth. The economy, held back by massive debt levels, initially clocked in at 0.2% for the first quarter. This number is set to be revised down to negative territory due to a huge increase in the trade deficit during March. And the second half isn’t setting up to be much better.
But the Fed was successful in re-inflating the housing and equity bubbles and creating another new massive bubble in the bond market.
Despite tepid growth, most at the Fed have become eager to wave the “Mission Accomplished" banner and to move toward interest rate “normalization.” Ceremoniously, they have set goals for the economy to reach in order to begin that long journey: unemployment around 5% and inflation at 2%.
As the Fed’s luck would have it, discouraged would-be workers have dropped out of the labor force and many employees have found it more profitable to sit home than to work, which has allowed the unemployment rate to approach the Fed’s target. The unemployment rate has finally returned to the 2008 bubble level of 5.4%. But when we look more closely, (at the chart below) employment-to-population ratio is nowhere near where it ought to be.
Employment-To-Population Ratio & Labor Force Participation Rate
KWN Pento I 5:16:2015
But those at the Fed stand determined to never let real data points get in the way of the narrative that printing money saved the economy. In fact, San Francisco Fed president John Williams was recently touting a new way to calculate GDP that he called "GDP Plus." It appears when you take out everything he defines as “noise,” first-quarter GDP would have come in at exactly 1.7%. Perhaps a better term would be "GDP Minus": GDP minus all the things we wish didn’t happen in the economy this quarter..."

at http://kingworldnews.com/disaster-for-markets-and-economies-worldwide-and-chaos-on-a-global-scale/