Gold Daily and Silver Weekly Charts – As Old As Babel

“Every sovereign nation has the right to legislate its own debt terms, and the coming currency re-alignments and debt write-downs will be much more than mere ‘haircuts.’ There is no point in devaluing, unless ‘to excess’ – that is, by enough to actually change trade and production patterns.
That is why Franklin Roosevelt devalued the US dollar by 41% against gold in 1933, raising its official price from $20 to $35 an ounce. And to avoid raising the U. S. debt burden proportionally, he annulled the ‘gold clause’ indexing payment of bank loans to the price of gold. This is where the political fight will occur today – over the payment of debt in currencies that are devalued.”
Michael Hudson, The Coming European Debt Wars
“Whatever truths or fables you may find in a thousand books, it is all a tower of Babel, unless love holds it together.”
Johann Wolfgang Von Goethe
I liked this quote from Michael Hudson today, although the beginning of the very first sentence is patently not supported by history. Few sovereign nations have the ‘right’ to legislate their own debt terms to their external creditors, or even to issue their own fiat currency in any manner that they may choose without limitation, to the extent that they wish to have commerce with any other nations and groups not under their direct political control.
In this case, modern monetarists tend to conflate the power of exceptional ‘force’ and with the rights of any and all sovereigns. In other words, might can make right, but only in exceptional circumstances. A nation that is large and powerful enough certainly does have the ability to enforce some of its judgements, and not just those regarding debt and money, on the rest of the world, at least for some period of time that it is tolerated.

This post was published at Jesses Crossroads Cafe on 21 SEPTEMBER 2016.

Why The Fed’s Window For A Rate Hike This Year Has Almost Closed

Janet Yellen would like you to believe she wants to raise interest rates. The labor and inflation numbers explain why she won’t.
When looking at the data, the most important things to consider are measures of how close officials are to achieving mandates on full employment and price stability. According to Fed projections, unemployment may fall as low as 4.4% in 2018. By that time, inflation may reach the 2% target.
That means the economy has spare capacity. By remaining on hold Yellen endorsed that view. While the FOMC doesn’t want output to overheat, the greater risk is tightening too soon will choke off growth in a still-tender economy.

This post was published at Zero Hedge on Sep 21, 2016.

The BIS Warns on China

I’ve been saying for the past couple years that the next recession here in the US will probably be triggered by an external macro event or cascade of events, coming out of Europe or China. Today’s Outside the Box sharpens our focus on China, which had already got quite a lot sharper with Michael Pettis’s piece in Outside the Box on Sept. 2.
Today’s post comes from Ambrose Evans-Pritchard of the London Telegraph. He is commenting on the recently released quarterly report of the Bank for International Settlements (‘the central banks’ bank’), in which the BIS repeats Pettis’s warning that China faces escalating risk of a major debt and banking crisis.
The BIS is also rightly concerned about spillover from China to the global economy. After noting that outstanding loans in China have reached $28 trillion – as much as the commercial banking loan books of the US and Japan combined – Ambrose adds, ‘The scale is enough to threaten a worldwide shock if China ever loses control. Corporate debt alone has reached 171pc of GDP, and it is this that is keeping global regulators awake at night.’
Total Chinese debt reached 255% of GDP at the end of 2015, a jump of 107% in the past eight years – and still rising fast. Every year, China’s leadership promises to rein in debt growth, and every year the growth just keeps accelerating. That is because China’s GDP growth is fueled by debt, and that debt is becoming increasingly inefficient in producing GDP.

This post was published at Mauldin Economics on SEPTEMBER 21, 2016.

IRS Chief Requests Not To Be Impeached Despite Admitting He Misled Congress

IRS Commissioner John Koskinen expressed “regret” to Congress on Wednesday for his agency’s past mistreatment of tea party groups, but ahead of a hearing before the House Judiciary Committee, the top IRS official said he has cooperated with congressional investigators “and does not deserve to be impeached.”
In his prepared remarks, Koskinen said that impeaching him would be “improper” adding that “it would create disincentives for many good people to serve” not to mention that his impeachment would “slow the pace of reform and progress at the IRS.”
Ostensibly he was refering to reform whereby conservative groups are no longer targeted by the IRS under due political pressure.
His request to remain at the IRS took place even as Koskinen acknowledged that the IRS bungled tea party applications, and that he himself gave wrong information to Congress. As the Washington Examiner reported earlier, at a hearing designed to lay the ground for his possible impeachment, Koskinen pulled the John Stumpf defense, suggesting he was let down by his subordinates, who allowed hundreds of backup tapes to be destroyed, losing tens of thousands of emails from former senior executive Lois Lerner.

This post was published at Zero Hedge on Sep 21, 2016.

FOMC, Not Surprisingly, Holds on Interest Rates Again

The Federal Open Market Committee (FOMC) decided yet again today to hold off on raising the target federal funds rate. Not much changed in the language of the FOMC statement, with the Fed believing that the labor market continues to strengthen and that economic activity is picking up. The FOMC continues to see economic activity expanding, the labor market strengthening, and thus a stronger case for an increase in the federal funds rate. Perhaps the only shocking part of today’s FOMC statement was that there were three dissensions from the decision.

This post was published at Ludwig von Mises Institute on Paul-Martin Foss, Originally posted the Carl Menger Center/ Sept 21, 2016.

When The Music Stops: Why The US Consumer Will Cause The Next Crisis

The market is materially mispricing the strength of the US consumer whose weakness will lead the US economy into a recession in Q117. The divergence is a result of the top 40% of earners who have accrued 84% of all new income and only 34% of new debt since 2013. This strength has driven headline sales figures and accounted for nearly all deleveraging since the financial crisis.
That said, the market has extrapolated the health of top 40% to all consumers, as it corresponds to the current narrative of low unemployment and rising average hourly earnings leading to higher rates of consumption and balance sheet strength.
Due to this misconception, we believe the market has overlooked the deterioration of lower and middle income households who have historically preceded the fall of the top.
We see this disparity being corrected over the next 6-9 months, as a series of disappointing retail sales and consumption figures lead market participants to the realization that their thesis is imperfect.
This will drive yields lower and handcuff the Federal Reserve, which we see as a very supportive backdrop for gold.
We outline this thesis below.
The True Rate of Unemployment
The consumer bull thesis has been predicated on robust job growth and declining unemployment leading to higher wages, in turn driving consumption and GDP. We believe this premise is false, as it fails to correspond to the facts. For example, since 1980, when the unemployment rate was at or below 5.1% (currently 4.9%), nominal GDP averaged 5.35% and average hourly earnings (AHE) grew at 4.4% y/y. Over the trailing twelve months (TTM), we have seen nominal GDP print 2.87% and AHE growth of 2.3%, which is a 46% and 48% discount to historical precedents. This is also the case for discretionary consumption, which over the TTM grew at a 42% discount (3.7%) to its historical average of 6.42%. While we would expect growth rates to come down over time from a higher base, we believe the current spreads indicate that the unemployment rate is not an accurate reflection of the labor market, which is due to those that have left the labor force.

This post was published at Zero Hedge on Sep 21, 2016.

Something Is Brewing And It Might Be The Catalyst That Ignites The Economic Collapse – Episode 1081a

The following video was published by X22Report on Sep 21, 2016
34% of Americans have $0 saved up. The US Government manipulated the wage earnings for the elections and to keep the illusion alive that economy recovered. Gallup CEO destroys the idea that the economy has improved and recovered. US freight and rail traffic has declined which shows the economy is continually deteriorating. Corporations are hoarding 2.5 trillion dollars overseas. Something massive is about to happen, the dollar is rising and the last time we saw that was the BREXIT.

SEPT 21/FOMC: STANDS PAT/BANK OF JAPAN BASICALLY STANDS PAT/OPERATION TWIST WILL COME INTO FORCE/GOLD AND SILVER TAKE OFF/HUGE AMOUNTS OF GOLD ENTER THE GLD/ RUSSIA IMPORTS A HUGE 21.77 TONNES OF…

Gold $1326.90 up $13.20
Silver 19.69 up 49 cents
In the access market 5:15 pm
Gold: 1336.00
Silver: 19.85
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 5:30 am est (first fix) and 10 am est (second fix)
Thus Shanghai’s second fix corresponds to 195 minutes before London’s first fix.
And now the fix recordings:
Shanghai morning fix Sept 21 (10:15 pm est last night): $ 1319.10
NY ACCESS PRICE: $1315.05 (AT THE EXACT SAME TIME)
Shanghai afternoon fix: 2: 15 am est (second fix/early morning):$ 1323.76
NY ACCESS PRICE: 1317.60 (AT THE EXACT SAME TIME)
HUGE SPREAD TODAY!!
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
London Fix: Sept 21: 5:30 am est: $1319.60 (NY: same time: $1319.60: 5:30AM)
London Second fix Sept 16: 10 am est: $1326.10 (NY same time: $1326.00 , 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.

This post was published at Harvey Organ Blog on September 21, 2016.

Mexican Peso Plunges against Dollar, in Toxic Cocktail of Forces

On Monday morning the world’s tenth most traded currency, the Mexican peso, set a historic precedent that few Mexicans will welcome. For the first time ever, one US dollar fetched as many as 20 Mexican pesos in some of the nation’s banks, including its biggest, Bancomer, following eight consecutive days of losses.
Of all the international currencies tracked by Bloomberg, only the Surinamese dollar fell more against the U. S. dollar last week. The peso also holds the dubious distinction of being the worst performing major emerging market currency of 2016, having lost close to 12% of its value.
So far this week things have only got worse, as the peso’s value slumped from $19.64 on Monday morning to $19.83 at the close of Tuesday’s trading, while the cost of covering against a depreciating peso has reached historic levels in the derivatives market.
There are plenty of reasons for Mexico’s peso woes, including the nation’s slowing economy, the government’s tightening fiscal strains, and the recent resignation of the Minister of Finance and Public Credit, Luis Videgary Caso, after being blamed for arranging an impromptu meeting between Mexico’s Premier Enrique Pea Nieto and the Donald Trump.

This post was published at Wolf Street by Don Quijones ‘ September 21, 2016.

Is Yellen Worried That She Is Causing Asset Bubbles? Here Is What She Said

While the most anticipated moment in today’s Yellen presser was her response to Donald Trump that the Fed is political (which as we showed previously, she denied even as her actions confirmed his specticism), another notable moment came when she was asked if she is “worried about bubbles in the economy because of our prolonged low interest rates?”
This is her response:

This post was published at Zero Hedge on Sep 21, 2016.

“The System Is Rigged, Racist” Don King Urges “Black People Need Donald Trump”

“Everybody counts,” explained boxing promoter Don King to an African-American church, stating that “every white woman should cast their vote for Donald Trump.” But then King took it to ’11’ as he raged “the system is corrupt; the system is rigged; the system is sexist; the system is racist,” concluding that ‘we need Donald Trump to create a new system – especially black people.’
As black American consumer comfort plunges most in 4 years…

This post was published at Zero Hedge on Sep 21, 2016.

Wall Street’s Next Ticking Time Bomb: Pensions

Make no mistake, the criminality and fraud of most, if not all, DC politicians that is being exposed now is also occurring in corporate America and at pension funds, especially with regard to fraudulent financial reporting. As an example, Exxon is now being investigated by the SEC over its asset valuation and accounting practices. The same concept can be applied to pension funds (public and private). The Dallas Fireman and Police Pension fund is the postcard example of both investment and accounting fraud: LINK.
The pension time bomb has been activated for a long time but it’s now in the final countdown. Pensions are woefully underfunded even if we give them the benefit of doubt on their current use of market-to-market. Every pension fund under the sun in this country – because rates are so low – has monthly negative outflows of cash: beneficiaries are being paid more money than is flowing into the fund. If the stock market declines more than 10% for an extended period of time, nearly every pension fund in the country would blow up. This is why the last two stock plunges, which took the S&P 500 down over 10%, were met by heavy, if not blatant, Fed intervention which produced a steep V-bounce in the stock market both times.
Yesterday I spoke to a friend/colleague who works at a public pension fund. He said the latest fad in pension management land is to shift money out hedge funds – which are woefully underperforming the market – and to put even more money into private equity funds. This allows the pension funds to subject that capital to a quarterly mark to market test rather than an daily or monthly valuation accounting. The only problem: private equity investments are highly illiquid and the valuation of the underlying investments is an ‘art’ that is not at all based on actual market transactions. This private equity investment mark-to-market ‘Picasso’ leads to extreme ‘over-marking’ of private equity investment valuations at pension funds.

This post was published at Investment Research Dynamics on September 21, 2016.

SP 500 and NDX Futures Daily Charts – Come As You Are

“O Jerusalem, Jerusalem, you who kill the prophets and stone those sent to caution you, how often I have longed to gather your children together, as a hen gathers her chicks under her wings. And you were not willing.”
Matt 23:37
The Fed did nothing as expected.
The soonest they will be raising rates will likely be December.
The central banks will keep feeding liquidity into a broken and corrupt financial system until it derails.
They will do everything in their power to avoid any semblance of responsibility for the collateral damage they and their friends are causing.
Let’s see if stocks have hit a high note yet, or have more room to continue higher squeezing the shorts.

This post was published at Jesses Crossroads Cafe on 21 SEPTEMBER 2016.

Fed Chickens Out: 3 Presidents Dissent As Fed “Decides To Wait For Further Evidence” Of Strengthening Before Hiking

With rate hike odds tumbling post-J-Hole thanks to Brainard (but up to 24% today), macro data deteriorating, European banks tumbling, and China money markets turmoiling, expectations were low for a ‘surprise’ rate hike today. And sure enough, they didn’t…
*FED: DECIDED TO WAIT ‘FOR THE TIME BEING’ FOR MORE EVIDENCE *FED SAYS GEORGE, MESTER, ROSENGREN DISSENTED IN FAVOR OF HIKE (most dissents sine Sept 2014) No addition of “Risks are balanced” language and cuts the long-run growth rate for the US economy below 2% for the first time ever.
Pre-Fed: Dec 59.1%, S&P Futs 2134, 10Y 1.695%, Gold $1327

This post was published at Zero Hedge on Sep 21, 2016.

Fed Now Sees Only Three Rate Hikes Thru End Of 2017; Cuts Long-Run US GDP Potential

While the Fed’s dot plot, which last December predicted four rate hikes in 2016, has lost virtually all credibility, there are those who still keep track of its as a forward guidance indicator. So here is what it said:
the median target for end-2016 is now 0.625% vs 0.875% in June, with three Fed members expecting no more rate hikes in 2016 the median target for end-2017 is 1.125% vs 1.625% in June the median target for end-2018 is 1.875% vs 2.375% in June The 2019 median dot debuts at 2.625% The Long-run target falls to 2.875% from 3% As a result of the revised dot plot, the Fed now sees one rate hike in 2016, supposedly in December and only two rate hikes next year, down from their June median projection of three. Also as r-star continues to plauge the Fed, the long-run interest rate is now seen at 2.875%, down from 3.0% three months ago.
Here is the comparison of the June and September dot plots:

This post was published at Zero Hedge on Sep 21, 2016.

Season’s Greetings

Announcements, announcements, announcements!
What a terrible way to die,
A terrible way to die,
A terrible way to be talked to death,
A terrible way to die.
Announcements, announcements, announcements,
Ohhh…
On the doorstep of yet another much-heralded Fed announcement and in the wake of the BOJ’s tinkering last night, the US dollar sits fittingly at a crossroads: spring back to its stoic uptrend nearly 19 months dormant – or fall back through intermediate support just a few percent below. As circumstance would have it, today is also the last official day of summer, to which we say – get on with it. Bring on the Fed, bring on fall and bring on the fall in the US dollar.
While there’s certainly no shortage of bubble soothsayers these days, one that’s arguably on the precipice of deflating and which has followed the structure of exuberance – is the US dollar. And although we’ve written extensively of why, historically speaking, we believe the dollar is as extended as it became and remains (see Here, Here, Here, Here), it largely has been motivated by the Fed, or more precisely – the markets expectations with future policy.
Framing the dollar as a proxy of confidence in the golden age of central banks, where it discretely took flight as the Fed led policy makers in the wake of the financial crisis and soared to icarus heights on misplaced expectations with more contemporary tightening cycles – we’d argue the apparent indecisiveness in the dollar’s technical structure today aptly represents the unresolved tensions in the market that we believe will ultimately become unwound, as challenging economic conditions largely limit the reach of the Fed going forward.

This post was published at GoldSeek on 21 September 2016.

Yellen Responds To Trump

The one question everyone was waiting for at today’s Yellen presser, namely the accusation by Donald Trump that the Fed is keeping rates low to prevent a market crash and make Hillary’s reelection easier, came moments ago from the WSJ’s Jon Hilsenrath who said “Donald Trump has charged that the feds are keeping interest rates intentionally low for the Obama administration.”
Her response:

This post was published at Zero Hedge on Sep 21, 2016.

Gold Prices Rise Before Fed as Yen Defies Bank of Japan’s Urgent New Inflation Plan

Gold prices rose sharply against all major currencies except the Yen on Wednesday, touching 1-week Dollar highs ahead of the US Fed’s long-awaited September decision on interest rates as world stock markets rose after the Bank of Japan removed all time limits on its QE money-creation scheme and vowed to push inflation above its 2.0% target.
Chinese gold prices fixed higher on quiet volume before the Dollar price hit almost $1330 per ounce in London trade.
Silver prices rose faster, adding almost $1 per ounce from last Friday’s finish to hit 2-week highs of $19.72, as crude oil rallied for a second day, pulling broad commodity indices 0.8% higher against the Dollar ahead of the US Fed’s announcement, due at 13:00 Washington time (UTC -4).
Leaving its deposit interest rate at -0.1% and keeping QE asset purchases at 80 trillion per year ($780bn), the Bank of Japan on Wednesday said this summer’s “comprehensive assessment” of policy has led to a new regime of “Quantitative and Qualitative Monetary Easing with Yield Curve Control”.

This post was published at FinancialSense on 09/21/2016.