It’s Official: Gold Is Now The Most Hated Asset Class
by Zero Hedge - May 18th, 2013 9:37 pm
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
Submitted by Pater Tenebrarum of Acting-Man blog,
Full Court Press
Not a day passes without the financial media denouncing gold as an investment option and hailing the bureaucrats heading the world's monopolist monetary central planning agencies as superheroes. It began prior to gold's recent breakdown, with widely cited bearish reports on gold published by Credit Suisse and Goldman Sachs, among others. Never mind that most of their arguments were easily unmasked as spurious. It should be no wonder though: gold's rise was the most conspicuous evidence of faith in central banking being slowly but surely undermined. The banking cartel relies on the fiat money system remaining intact; the legal privilege of fractional reserve banking provides it with what is an essentially fraudulent profit center unparalleled by any other in the world (fraudulent in terms of traditional legal principles, but not in terms of the current law of course). Not surprisingly, ever since the completely unrestrained fiat money system became operational in the early 1970s, the financial sector's share of corporate profits has inexorably risen and finally eclipsed all other sectors of the economy.
The share of financial profits of total corporate profits – a direct result of the fractional reserve banking privilege and the central bank monopoly on money (via Ed Yardeni) – click to enlarge.
In other words, the banks have to protect a major franchise. It is a good bet that if gold had continued to rise in the face of money printing being accelerated all over the world, the inevitable loss of faith in central banks would have happened sooner rather than later. That it will eventually happen is unavoidable – the modern monetary system was fated to self-destruct the moment it was conceived. This is so because central planning and price controls cannot work in the long run, even though central banks are socialistic institutions adrift in a capitalist sea, so to speak. They can to some extent observe prices in the market, but the problem is that the market price most relevant to them – namely the ratio of future against present goods as expressed in interest rates on the credit markets – is…
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What Did Obama Know About The IRS (And When)?
by Zero Hedge - May 18th, 2013 8:30 pm
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
Amid the sound and fury of yesterday's IRS hearing were a few small tidbits which raise significant questions about who knew what and when within the Obama administration. While getting the answer (the real honest truth) is highly unlikely, as the Wall Street Journal notes, the IRS's watchdog told top Treasury officials around June 2012 (when Republican lawmakers were complaining publicly about alleged IRS targeting of tea-party groups) he was investigating allegations the tax agency had targeted conservative groups, for the first time indicating that Obama administration officials were aware of the explosive matter in the midst of the president's re-election campaign. The revelation nonetheless raised a fresh set of questions about who was aware of the problem within the Obama administration. However, the hearing left numerous other fundamental questions unanswered, including who ordered the targeting and why it continued so long, pointing to a protracted investigation ahead as Rep. Paul Ryan exclaimed, "how can we not conclude that you misled this committee?" As Doug Ross' full timeline below suggests, this is fascism on the part of the IRS and White House…
Via Doug Ross of Director Blue blog,
Reading this timeline, I have come to three conclusions:
1. Steve Miller lied to Congress
2. Lois Lerner lied to Congress
3. Barack Obama lied to the American peopleThis scandal has the fingerprints of Axelrod, Jarrett and/or the Chicago Machine all over it.
This is fascism on the part of the IRS and the White House. It is fascism, straight up.
Or, as I call the IRS: Organizing for Revenue.
The Internal Revenue Service's watchdog told top Treasury officials around June 2012 he was investigating allegations the tax agency had targeted conservative groups…
…
The revelation nonetheless raised a fresh set of questions about who was aware of the problem within the Obama administration.
…
the agency had taken "absolutely inappropriate" actions in targeting conservative groups seeking tax-exempt status for often heavy-handed scrutiny.
…
The hearing left numerous other fundamental questions unanswered, however, including who ordered the targeting and why it continued so long, pointing to a protracted investigation ahead. Mr. Miller conceded the agency likely disciplined the wrong employee in one effort to
…
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The Bermuda Triangle Of Economics
by Zero Hedge - May 18th, 2013 7:30 pm
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
Excerpted from Jacob Steen’s Chronicle blog at Tradingfloor.com,
The mystique of the Bermuda Triangle has caught the imagination and interest of generations. In much the same way it has also caught my attention and I feel that now there is a Bermuda Triangle of economics – a space where everything tends to disappear without radar contact, a black hole in which rationality and science is replaced by hope, superstition and nonsense pundits like myself pretending to understand the real drivers of the economy.
The Bermuda Triangle in real life runs from Bermuda to Puerto Rico to Miami. The economic one runs from high stock market valuations to high unemployment to low growth/productivity. Just like the real Bermuda Triangle, in the Bermuda Triangle of economics there is plenty of scientific evidence that can explain most, if not everything, of what is going on. But that does not suit Hollywood, sorry, the US Federal Reserve.
Neither does it suit mainstream banking analysis or the media in dealing with reality and facts: the mystique simply sells better! After all, there is a reason why people leave science education for PhDs in apps and virtual reality.
There is a myth that the sunken Atlantis could be in the middle of this triangle. It has been renamed Modern Monetary Theory (MMT) to make it suit the black hole’s main premise of ensuring there is a fancy name for what is essentially the same economic recipe: print and spend money, then wait and pray for better weather.
The economic Bermuda Triangle, or EBT, is getting harder and harder to justify – if for nothing else because the constant reminders of crisis keep us all defensive and non-committed to investing beyond the next quarter. We all naively think we can exit the “risk-on” trade before anyone else. A less cynical person than me could think that some things in life need to be experienced – not talked about.
Where to from here?
A long time ago, policymakers entered a one-way street where reversing is, if not illegal, then impossible. Enough though about the polices. What is more important is what is next?
If a political scientist should create a simple model for how this Bermuda Triangle works, the first action point would be to test the premise of the policy. No…
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Visualizing The Silver Squeeze
by Zero Hedge - May 18th, 2013 6:30 pm
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
Despite ‘crashes’ in the market, the demand for physical silver continues to rise. “Buyers are already outpacing sellers by a stunning 50-to-1 ratio. We are seeing the beginning of shortages; but this will only accelerate if Western governments continue with this raid on paper gold and silver.”
The Silver Squeeze – An infographic by the team at The Silver Squeeze Free Infographic
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Guest Post: Why Bonds Aren’t Dead & The Dollar Will Get Weaker
by Zero Hedge - May 18th, 2013 5:33 pm
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
Submitted by Lance Roberts of Street Talk Live,
There have been quite a few bold predictions, since the beginning of the year, that the dollar was set to soar and that the great “bond bull market” was dead. The primary thesis behind these views was that the economy was set to strengthen and inflation would begin to seep its way back into the system. Furthermore, the “Great Rotation” of bonds into stocks, on the back of said economic strength, would push interest rates substantially higher.
While I have no doubt that at some point down the road that inflation will become an issue, interest rates will rise and the dollar will strengthen – it just won’t be anytime soon. A wave of “disinflation” is currently engulfing the globe as the Eurozone economy slips back into recession, China is slowing down and the U.S. is grinding into much slower rates of growth. Even Japan, despite their best efforts through a massive QE program, cannot seem to break the back of the deflationary pressures on their economy. This is a problem that has yet to be recognized by the financial markets.
The recent inflation reports (both the Producer and Consumer Price Indexes) show deflationary forces at work. Wages continue to wane, economic production is stalling and price pressures are falling. More importantly, there are downward pressures on the most economically sensitive commodities such as oil, copper and lumber all indicating weaker levels of economic output. The battle against deflationary economic pressures has been what the Federal Reserve has been forced to fight since the financial crisis. The problem has been that, much like “Humpty-Dumpty”, the broken financial transmission system, as represented by the velocity of money, can’t be put back together again.
The weak level of economic growth, global deflationary pressures, demographic trends and excess indebtedness which derails productive investment are keeping inflationary pressures suppressed. The chart below shows the Composite Inflation Index (CII), an average of the consumer and producer price indexes, versus interest rates. With inflationary pressures turning lower it is highly unlikely that we will see interest rates rising anytime soon
Our long term view on the 10-year Treasury remains at 1%. Despite the Federal
…
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The Quiet Triumph Of Oil And Gas In Obama’s Policies
by Zero Hedge - May 18th, 2013 4:53 pm
Courtesy of ZeroHedge. View original post here.
Submitted by testosteronepit.
Wolf Richter www.testosteronepit.com www.amazon.com/author/wolfrichter
It was announced Friday afternoon, when no one was supposed to pay attention: after years of controversy, heated rhetoric, intense lobbying, and stiff opposition from some unlikely bedfellows, with multinational industrial and chemical companies weighing down one side of the bed, and environmentalists tossing and turning on the other, the Obama Administration decided in favor of the US oil and gas industry. With geopolitical ramifications.
The Department of Energy “conditionally authorized” Freeport LNG Expansion LP and FLNG Liquefaction LCC (Freeport) to export domestically produced liquefied natural gas to countries with which the US does not have Free Trade Agreements (PDF, 132 pages). Already allowed are exports to the 20 countries with FTAs – most of them in the Americas, but also Australia, Korea, Singapore, Israel, Jordan, Bahrain, Oman, and Morocco. But exports to the remaining 180 or so countries have to jump through some hoops.
So Freeport’s LNG Terminal on Quintana Island, Texas, is now authorized to export 1.4 billion cubic feet per day (Bcf/d) of LNG for 20 years to those non-FTA countries. Freeport joins Cheniere Energy Inc.’s Sabine Pass terminal in Cameron Parish, Louisiana, with an export capacity of 2.2 Bcf/d. Freeport’s and Cheniere’s combined capacity would amount to 5.2% of US production (estimated at 69.3 Bcf/d in 2013). Other companies are cooling their heels in line at the DOE, which would, as it said, “process the applications currently pending on a case-by-case basis.” At snail’s pace. The administrations sole concession to environmentalists.
“DOE has had the remaining applications on its desk for months and should ensure that these applications are approved without any further delay,” groused Erik Milito, of the American Petroleum Institute, a trade association representing over 500 oil and gas companies.
Hurdles remain. DOE approval is just another step. The plants will have to get a permit from the Federal Energy Regulatory Commission (FERC) and must pass an environmental review, which could be a nail-biter. And none of the plants are up and running yet.
Then there is an unknown: how will world markets react to this additional supply that competes with at least 63 LNG export terminals currently planned or under construction worldwide? US production can rise to meet that new demand, as the gas glut in recent years has…
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“Boldly They Rode And Well”, Or Why Japan Is Not America
by Zero Hedge - May 18th, 2013 3:30 pm
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
Submitted by Daniel Cloud
Boldly They Rode And Well
I believe that Shinzo Abe has made a very serious strategic miscalculation. I used to be confused in much the same way he now seems to be, but I was cured of my confusion by thinking about Chinese inflation.
For a long time, I was puzzled by the fact that America’s endless multi-stage QE program seemed to have no effect on measured inflation, on the CPI and the PPI. But then I realized that by only looking at the United States and their three hundred million-plus people, I was missing the big picture, missing the most important part of its aggregate impact on the Earth’s seven billion inhabitants.
QE may never have much of an effect on the inflation rate in the fifty states of the United States of America, because it is workers in the developing world, and in particular, in China, who are the marginal hires in our still-globalizing, still-offshoring world economy. There is no distinct American economy, now, there is no Chinese economy, there is only the world economy, and the Fed makes policy for large parts of it. China has the kinds of structural rigidities in its labor, goods, information, and asset markets that make inflationary psychology very probable. It already had an ongoing and stubborn problem with inflation before QE started, so the required psychology already existed. And, perhaps most importantly, much of the money the Fed is printing doesn’t actually end up in the United States. It ends up being added to the reserves, and therefore the domestic money supply, of countries like China, who want to keep their currencies pegged, or quasi-pegged, to the dollar.
Why? Simply letting their currency appreciate would do to the Chinese what it did to Japan in the late ‘80’s. But to keep the yuan from appreciating against the dollar as a result of the increased supply of dollars from QE, the government of China must buy all the dollars anyone shows up with, at the pegged exchange rate. To pay for them, China must issue yuan, and pay them out to the holders of those dollars. That makes the supply of yuan in circulation increase by the same amount – as the dollars are added to the country’s reserves, the domestic…
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Saturday Humor: The Fed Is Hiring
by Zero Hedge - May 18th, 2013 1:34 pm
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
Now that the Federal Reserve has hired every single pennystock trader and momentum-chasing algo in the world (or at least is enjoying Citadel’s helping hand in regards to the latter) it is time for the Fed’s human resources department to branch out and fill those really important gaping holes.
Great job opportunity! Penetration Tester: rfer.us/FRS5ERsd.
— Federal Reserve Jobs (@FedReserveJobs) May 18, 2013
h/t @shark_wahlberg
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Italy’s New Government Approval Rating Plummets From 43% To 34% In Three Weeks, Protests Return
by Zero Hedge - May 18th, 2013 1:20 pm
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
It was less than a month ago that the new Italian government of the pseudo-technocrat Letta, of Bilderberg 2012 and Aspen Institute fame, was voted in by a majority of the PD and the PDL parties (the latter agreeing so Berlusconi would get an extension of his much needed political immunity from assorted prison sentences). It may not last too long. As Reuters reports, it took just 20 days for Letta’s approval rating to plunge by 25%, dropping from 43% at the start of the month to 34%, according to an SWG institute poll. It would appear the Italian people (unlike their Japanese peers who at least according to government-controlled media data could not be happier with PM Abe, supposedly because of the bubblelicious 50% rise in the Nikkei225 year to date, even though under 20% are actually invested in the stock market making one wonder just how credible polling, and all other data in Japan actually is) don’t have Mrs. Watanabe’s childish fascination wth soaring stock bubbles, sexy bonds, mini skirts and 2% inflation bras, and instead demand real economic results. Which also means the protests are once again back.
Thousands of people protested in Rome on Saturday against austerity policies and high unemployment, urging new Prime Minister Enrico Letta to focus on creating jobs to help pull the country out of recession.
“We hope that this government will finally start listening to us because we are losing our patience,” said Enzo Bernardis, who joined the sea of protesters waving red flags and calling for more workers’ rights and better contracts.
Less than a month in power, Letta is trying to hold together an uneasy coalition between his center-left Democratic party and the center-right People of Freedom, led by former prime minister Silvio Berlusconi.
Confidence in the government, cobbled together after inconclusive elections, is already falling, with one poll on Friday by the SWG institute showing its approval rating had dropped to 34 percent from 43 percent at the start of the month.
“We can’t wait anymore” and “We need money to live” were among slogans on banners held up by the crowds.
Letta promised to make jobs his top priority when he came to
…
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Spot The Odd Continent Out: Total Bank Assets As % Of GDP
by Zero Hedge - May 18th, 2013 11:07 am
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
There is a reason why in Europe, no matter how much some want to deny it, the Cyprus deposit confiscation “resolution” has become the norm. Quite simply “Europe’s economy struggles with too many banks, too much debt and too little growth. A long history of empire, trade, war and commerce means a long history of banking. The world’s first state-guaranteed bank was the Bank of Venice, founded in 1157, and the world’s oldest bank today is also Italian, Monte Paschi di Siena (founded 1472). In many European countries, bank assets dwarf the size of the local economy and are far in excess of other regions in the world. This is similarly reflected in the local stock exchanges: even now financials account for 42% of the Spanish stock market and 31% of the Italian stock market versus ust 16% in the US.”
Visually, this translates as the following dramatic chart, which shows why Europe no longer has a choice in kicking the can, and what we have said from the very beginning, a Mellonesque asset liquidation of bad “assets” is the only option:
It is in Europe that the biggest debt burden lies, and it is Europe that is desperate for the biggest inflation impulse to purge away the debt in the absence of liquidation, or a spike in asset quality. However, as we showed yesterday with Europe’s €500 billion NPL timebomb, the asset quality of Europe’s banking sector is imploding at an unprecedented pace, and is correlated most tightly to the surging unemployment in the periphery, which intuitively makes much sense: without jobs, consumers can’t pay off their debt.
NPLs:
… compared to unemployment:
This means that the only resolution to a massively overlevered banking sector, where inflation just refuses to arrive and assist in the bad-asset “cleansing”, is the start of liability impairment, which will allow the long overdue process of balance sheet restructuring, instead of merely can kicking, to commence. Whether this implies deposit confiscation, well that matters in which country one is, and how many NPLs have been accumulated.
And another problem: the reason why core inflation is gone from Europe is that not only is the hot central bank money not targeting European assets (except for new Japanese Yen chasing after peripheral bonds for as…
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