Sorry, You Can’t Have Your Gold

We warn regularly of the risk involved in storing wealth in banks. They’ve made the removal of your deposits increasingly difficult in addition to colluding with governments to allow them to legally freeze or confiscate your money. To add insult to injury, they’re creating reporting requirements with regard to the contents of safe deposit boxes and restricting what can be stored in them – again, at risk of confiscation.
More and more, banks are becoming one of the more risky places to store wealth in any form. Not surprising, then, that many people are returning to those facilities that treat wealth storage the way the first banks did millennia ago – vault facilities that store your wealth for a fee but engage in no other banking activities.
But, in suggesting to our readers that such facilities are a better bet, I’ve also repeatedly warned readers that many such facilities don’t store actual, physical gold. They instead provide a contract to you that states that they will deliver an agreed-upon amount of gold upon demand. The trouble with this idea is that it becomes tempting for such facilities to sign such a contract with you and collect the purchase price but never actually purchase and store any gold. It’s been estimated that the total worldwide value of such contracts equals 150 times the amount of gold in existence in the world.
Uh-oh.

This post was published at Zero Hedge on Sep 12, 2016.

Recovery Rates In E&P Bankruptcies Hit “Catastrophic” Levels: Moody’s

Back in March, this website first point out how the current default cycle is so different from previous ones: as we reported half a year ago, the key difference was that recovery rates of defaulted debt had plunged to record lows. JPM’s Peter Acciavatti confirmed as much, noting that “recovery rates in 2016 are extremely low… for high-yield bonds, the recovery rate YTD is 10.3% (10.5% senior secured and 0.5% senior subordinate), which is well below the 25-year annual average of 41.4%. Final recovery rates in 2015 for high-yield bonds were 25.2%, compared with recoveries of 48.1%, 52.7%, 53.2%, 48.6%, and 41.0% in full-years 2014, 2013, 2012, 2011, and 2010, respectively.”
The low recovery theme was also observed by credit guru, Edward Altman, who in an interview with Goldman’s Allison Nathan said that “we are expecting a higher default rate in 2016 and even 2017, then we would expect a lower recovery rate. Already in 2015, the recovery rate dropped dramatically relative to 2014 even though the default rate was below average; we saw a 33-34% recovery rate versus the historical average of 45%, measured as the price just after default. This is primarily due to the heavy concentration of energy companies whose recovery rates depend on their ability to liquidate their assets at reasonable prices, which in turn depends on the price of oil. Low oil prices have pushed recovery rates in the energy sector below 25% and even into the single digits for some companies. And that’s going to continue. So this year I expect recovery rates much below average, producing a double-whammy of high default rates and low recovery rates for credit investors.”

This post was published at Zero Hedge on Sep 12, 2016.

SEPT 12/STOCKS SOAR AND GOLD/SILVER REBOUND ON FED’S BRAINARD DOVISH SPEECH TODAY/SHANGHAI GOLD FIX CONTINUES TO HAVE A PREMIUM OF $3.00 OVER LONDON/NY GOLD/THE 10 YR REPO FAILS AGAIN AS COLLATER…

Gold:1321.10 down $9.10
Silver 18.91 down 37 cents
In the access market 5:15 pm
Gold: 1328.00
Silver: 19.13
THE DAILY GOLD FIX REPORT FROM SHANGHAI AND LONDON.
The Shanghai fix is at 10:15 pm est and 2:15 am est
The fix for London is at 3 am est (first fix) and 10 am est (second fix)
Thus Shanghai’s second fix corresponds to 45 minutes before London’s first fix.
And now the fix recordings:
Shanghai morning fix Sept 9 (10:15 pm est last night): $1330.61
NY ACCESS PRICE: $1327.50 (AT THE EXACT SAME TIME)
Shanghai afternoon fix: 2: 15 am est (second fix/early morning):$1331.23
NY ACCESS PRICE: 1328.50 (AT THE EXACT SAME TIME)
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
London Fix: Sept 12: 3: am est: $1327.50 (NY: same time: $1329.42: 3 AM)
London Second fix Sept 8: 10 am est: $1324.60 (NY same time: $1325.20 , 10 AM)
It seems that Shanghai pricing is higher than the other two , (NY and London). The spread has been occurring on a regular basis and thus I expect to see arbitrage happening as investors buy the lower priced NY gold and sell to China at the higher price. This should drain the comex.
Also why would mining companies hand in their gold to the comex and receive constantly lower prices. They would be open to lawsuits if they knowingly continue to supply the comex despite the fact that they could be receiving higher prices in Shanghai.
For comex gold:The front September contract month we had 0 notices filed for nil oz
For silver: the front month of September we have a total of 169 notices filed for 845,000 oz
Let us have a look at the data for today

This post was published at Harvey Organ Blog on September 12, 2016.

Supervisor Of “Massive Fraud” At Wells Fargo Leaves Bank With $125 Million Bonus

There was a burst of righteous populist anger anger last week, when it emerged that Wells Fargo had engaged in pervasive, “massive” fraud since at least 2011, including opening credit cards secretly without a customer’s consent, creating fake email accounts to sign up customers for online banking services, and forcing customers to accumulate late fees on accounts they never even knew they had. For this criminal conduct, Wells was fined $185 million (including a $100 million penalty from the CFPB, the largest penalty the agency has ever issued). In all, Wells opened 1.5 million bank accounts and “applied” for 565,000 credit cards that were not authorized by their customers.
As “punishment” Wells Fargo told CNN that it had fired 5,300 employees related to the shady behavior over the last few years. The firings represent about 1% of its workforce and took place over several years. The fired workers went to far as to create phony PIN numbers and fake email addresses to enroll customers in online banking services, the CFPB said. What was hushed away is that not a single employee will go to prison, and that ultimately it will be Wells Fargo’s shareholders – such as Warren Buffett – who will end up footing the bill.
What Wells did not disclose publicly to anyone is that the head of the group responsible for Wells’ biggest consumer fraud scandal in years, is quietly leaving the bank with a $125 million bonus, a bonus which asFortune’s Stephen Gandel writes today will not see even one cent clawed back as part of the dramatic revelations.

This post was published at Zero Hedge on Sep 12, 2016.

Jim Grant Rejects Rogoff’s “Curse Of Cash”, Warns “Government Wants To Control Your Money”

If there is a curse between the covers of this thin, self-satisfied volume, it doesn’t have to do with cash, the title to the contrary notwithstanding. Freedom is rather the subject of the author’s malediction. He’s not against it in principle, only in practice.
Ken Rogoff is a chaired Harvard economics professor, a one-time chief economist at the International Monetary Fund and (to boot) a chess grandmaster. He laid out his case against cash in a Saturday essay in this newspaper two weeks ago. By abolishing large-denomination bills, he said there, the government could strike a blow against sin and perfect the Federal Reserve’s control of interest rates.
‘The Curse of Cash,’ the Rogoffian case in full, comes in two parts. The first is a helping of monetary small bites: a little history (in which the gold standard gets the back of the author’s hand), a little central-banking practice, a little underground economy. It’s all in the service of showing where money came from and where it should be going.
Terrorists traffic in cash, Mr. Rogoff observes. So do drug dealers and tax cheats. Good, compliant citizens rarely touch the $100 bills that constitute a sizable portion of the suspiciously immense volume of greenbacks outstanding – $4,200 per capita. Get rid of them is the author’s message.

This post was published at Zero Hedge on Sep 12, 2016.

Get Ready for a New Crisis – in Corporate Debt

Imposter Dollar
OUZILLY, France – We’re going back to basics here at the Diary. We’re getting everyone on the same page… learning together… connecting the dots… trying to figure out what is going on.
We made a breakthrough when we identified the source of so many of today’s bizarre and grotesque trends. It’s the money – the new post-1971 dollar. This new dollar is green. You can buy things with it.
Yes, it has lost more than 80% of its buying power since it was put in place. But still, it’s not so bad. Compared with the Argentine peso (current inflation rate: 47% a year), it is splendidly solid.
But the new dollar is an imposter. The old one was connected to gold at a fixed rate. And gold was anchored in the real economy. The new dollar has no gold backing.
Billionaire investor Warren Buffett believes it’s silly to pay someone to take gold out of the ground, and then put it back in the ground and pay someone to guard it for you.
But Buffett misses a vital point: Real money is essential to building real wealth. It’s what makes the economy operate smoothly. It helps us all decide when to buy and when to sell, when to invest and when to refrain from investing, and where to apply our scarce time and resources.

This post was published at Acting-Man on September 12, 2016.

BofA Financial Stress Index Spikes As Central Bank Fears Mount (Fed Hike In Play For December)

It is Monday afternoon and markets are still processing the news from Mario Draghi and the ECB.
Here is what we know. The BofA Merrill Lynch Global Financial Stress Index just soared upwards by the most since China’s yuan devaluation in August last year.
And the VIX short index fell as well.

This post was published at Wall Street Examiner by Anthony B. Sanders ‘ September 12, 2016.

Nothing Should Interrupt the Rise in Gold, Silver & Mining – Jordan Roy-Byrne Interview

The following video was published by VictoryIndependence on Sep 12, 2016
Back on today is a gold/silver/mining technical analyst and market trader who is extremely bullish on this sector and he’ll tell you why. January we saw a historic bottom for the metals & mining and since then it’s been a wild ride. With the proper seasonality now in place, the end of 2016 is looking spectacular for gold/silver & mining stocks.

Forward-Looking Data Show Growing Risks of Recession

In our latest Big Picture podcast (see The Recession That Isn’t), Jim goes through a large number of indicators that show economic growth has weakened and also repeated his forecast for a possible US recession in 2017 based on current economic and financial trends.
Here’s a look at our own recession model, which is sitting at some of the most elevated levels we’ve seen during this entire economic cycle. At a few points below 20, it is very close to crossing into recessionary territory.

This post was published at FinancialSense on 09/12/2016.

THE FED PLANS FOR THE NEXT CRISIS

In her recent address at the Jackson Hole monetary policy conference, Federal Reserve Chair Janet Yellen suggested that the Federal Reserve would raise interest rates by the end of the year. Markets reacted favorably to Yellen’s suggested rate increase. This is surprising, as, except for one small increase last year, the Federal Reserve has not followed through on the numerous suggestions of rate increases that Yellen and other Fed officials have made over the past several years.
Much more significant than Yellen’s latest suggestion of a rate increase was her call for the Fed to think outside the box in developing responses to the next financial crisis. One of the outside the box ideas suggested by Yellen is increasing the Fed’s ability to intervene in markets by purchasing assets of private companies. Yellen also mentioned that the Fed could modify its inflation target.
Increasing the Federal Reserve’s ability to purchase private assets will negatively impact economic growth and consumers’ well-being. This is because the Fed will use this power to keep failing companies alive, thus preventing the companies’ assets from being used to produce a good or service more highly valued by consumers.

This post was published at The Daily Sheeple on SEPTEMBER 12, 2016.

Follow the Money

A Small and Lonely Group
PARIS – It’s back to Europe. Back to school. Back to work. Let’s begin by bringing new readers into the discussion… and by reminding old readers (and ourselves) where we stand.
US economic growth: average annual GDP growth over time spans ranging from 120 to 10 years (left hand side) and the 20 year moving average of annual GDP growth since 1967. Note that the bump in the 70 year average is actually distorted by the output growth boost recorded during WW2 (the charts were made in 2009) – which is actually a prime example of how useless GDP can be as a measure of prosperity. Nevertheless, it is serviceable for the illustration of long term economic growth trends. Exponential credit expansion since the adoption of the pure fiat money system, the associated relentless growth of the welfare/warfare state and persistent declines in average economic growth rates have been going hand in hand, which is no coincidence – click to enlarge.
As a Diary reader, you join a small and lonely group. But we know something others don’t. We understand the real cause of our economic malaise. What malaise, you ask?
Well – how could the richest, most technologically advanced, and most scientifically sophisticated economy stop dead in its tracks? The rate of economic growth has gone steadily downhill for the last 30 years. By some measures, after accounting for the effects of inflation, we’re back to levels not seen since before the Industrial Revolution.
And how could such a modern, 21st-century economy make the average person poorer? As we saw recently, when you measure actual inflation, rather than the government’s crooked numbers, the median U. S. household income is 20% lower today than when the century began.
And why would our modern economy concentrate wealth in the hands of so few, so that only the richest 1% make any real progress
You may also ask a question with an obvious answer: Why are the richest and most powerful people in the country overwhelmingly supporting Ms. Clinton in the presidential race?
You find the answer to all these questions the same way: Follow the money.

This post was published at Acting-Man on September 12, 2016.

Krugman versus Krugman: Tax Rates versus Tax Revenues

Taxes are a contentious issue, the debate over which often generates more heat than light. Disagreements over taxes cause people on both sides of the political divide pitch to make snide remarks. Most of the debate over taxes among economists is, fortunately, relatively civil and productive. There is a good reason for relative civility: Economists have arrived at some generally accepted propositions about the effects of taxes on economic conditions. That is to say, the field of public finance in economics has progressed to a point where economists generally agree about basic propositions regarding the effects of taxes, and disagree over small or precise details.
Economists think that tax hikes will at some point cause revenue to decline. (This position is often referred to as “supply side” economics.) And why do economists generally agree on this? They agree because it is generally – and correctly – accepted that tax increases discourage productive trading. Of course, simple revenue maximization is not a legitimate goal, and the true tax-rate/revenue relation is difficult to estimate. Government officials should collect only as much tax as is necessary to fund true examples of ‘public goods’ – and this fact makes taxation questionable. Yet public debate cannot even get past the more basic point about the limits of governmental powers to increase revenue.
Public debate over taxes remains acrimonious largely because the public has not learned the lessons of economics. For example, New York Times columnist Paul Krugman refers to those who accept these down-sides of taxation as ‘ignorant.’ Krugman asserts that this “supply side” economics is ‘snake-oil,’ a virus which ‘however often it may be eradicated from the settled areas, is always out there in the bush, waiting for new victims.’
But the economist Krugman seems to disagree with the columnist Krugman. According even economist Krugman, supply side economics works better than columnist Krugman thinks. The Krugman-Wells economics text explains how supply-side economics works.

This post was published at Ludwig von Mises Institute on Sept 12, 2016.

Another Big Central Bank Warns on Housing Bubble, Frets about Risks to Banks, Blows Whistle on Stimulus

PBOC: ‘Put a brake on the excessive bubble expansion.’
For Chinese households, owning residential property serves as a mix of risk-free savings account (on the premise, valid in the US as well, that ‘you can’t lose money in real estate’) and highly leveraged speculative betting game. Some people own vacant apartments like Americans own stocks. A report in 2014 showed that 75% of household wealth had been sunk into real estate. Whatever the percentage is today, it’s high, to where major declines in house prices have caused uproars.
Uproars are exactly what Chinese authorities fear more than anything. But they also fear bubbles, having seen how they implode – and cause uproars.
So they tweak the housing market with various policies, ranging from local measures to central-bank monetary policies, trying to contain the bubbles. And then, when these efforts begin to implode the bubbles and people get restless, authorities step in once again to keep the market from collapsing, which has the effect of re-inflating the bubbles. Hence the yo-yo effect of government policies.
And now the People’s Bank of China is fretting again.
‘Measures should be taken to put a brake on the excessive bubble expansion in the property sector, and we should curb excessive financing into the real estate sector,’ warned Ma Jun, chief economist of the PBOC’s research bureau, in an interview with China Business News cited by Bloomberg.

This post was published at Wolf Street by Wolf Richter ‘ September 12, 2016.

8 Reasons Why One Hedge Fund Is Keeping A Long VIX Position On

With stocks soaring, now that the “Brainard” risk factor has been fully unwound after the Fed governor’s surprisingly dovish speech which has essentially killed any probability of a September rate hike and unleashing today’s “”Violent Rally In Risk” Today” as predicted earlier, one would expect that there is only smooth sailing not only until the September 21 FOMC meeting, leaving only the post-election December 13-14 Fed meeting potentially in play.
Still, at least according to one advisor, GS Banque’s Loic Schmid, it is prudent to keep some volatility protection on after the recent risk-off episode. As a reminder, in mid-July Schmid suggested buying the VIX, a trade that has been profitable ahead of the Friday surge…

This post was published at Zero Hedge on Sep 12, 2016.

SWOT Analysis: Are Gold and Silver Stocks the Best Area for ‘New Money Right Now’?

Strengths
The best performing precious metal for the week was gold, up 0.22 percent. According to Bloomberg, gold traders and analysts were bullish for the first time in three weeks on the back of the Federal Reserve outlook. In fact, holdings in ETFs backed by the metal climbed by 13.8 metric tons in the first two days of the week, as seen in the chart below.

This post was published at GoldSeek on 12 September 2016.

12/9/16: Fiscal Policy in the Age of Debt

In recent years, there has been lots and lots of debates, discussions, arguments and research papers on the perennial topic of fiscal stimulus (aka Keynesian economics) on the recovery. The key concept in all these debates is that of a fiscal multipliers: by how much does an economy expand it the Government spending rises by EUR1 or a given % of GDP.
Surprisingly, little of the debate has focused on a simple set of environmental factors: fiscal stimulus takes place not in a vacuum of environmental conditions, but is coincident with: (a) economies in different stages of fiscal health (high / low deficits, high/low debt levels etc) and (b) economies in different stages of business cycle (expansion or contraction). One recent paper from the World Bank decided to correct for this glaring omission.
‘Do Fiscal Multipliers Depend on Fiscal Positions?’ by Raju Huidrom, M. Ayhan Kose, Jamus J. Lim and Franziska L. Ohnsorge (Policy Research Working Paper 7724, World Bank) looked at ‘the relationship between fiscal multipliers and fiscal positions of governments’ based on a ‘large data-set of advanced and developing economies.’ The authors deployed methodology that ‘permits tracing the endogenous relationship between fiscal multipliers and fiscal positions while maintaining enough degrees of freedom to draw sharp inferences.’
The authors report three key findings:

This post was published at True Economics on September 12, 2016.

Poor Demand For 3, 10 Year Paper Ahead Of Brainard Speech

Nobody was expecting strong auctions into today’s double issuance of 3 and 10Y paper (despite a near-fails repo rate on the 10Year), and nobody got them.
Moments ago, the Treasury announced it sold $24 billion in 3 Year paper and $20 billion in 10 Year paper, both of which were sold in weak auctions, with the 10 Year tailing the When Issued 1.691% by 0.8 bps, printing at 1.699% at a 2.35 Bid to Cover, in line with recent averages. More notable was the jump in the Dealer bid which rebounded from 20.2% to 34.5%, as Indirects declined from last month’s near record 72.2%. Notably, the Direct bid in the 10Y auction was only 3.4%, the lowest since 2011 as US financial institutions and retail buyers decided to step away from this one.

This post was published at Zero Hedge on Sep 12, 2016.