The Illustrated Guide To Keynesian Vs Austrian Economics

There has been an unsettled debate among economists for a century now of whether government intervention is beneficial to an economy. The heart of this debate lies between Keynesian and Austrian economists (though there are other schools as well). In order to get a full understanding of the two schools of economic thought, the following infographic should help…

This post was published at Zero Hedge on 09/22/2014.

Existing Home Sales Take Another Dump

The DJUSHB (Dow Jones Home Construction Index) is down 2.6% today. Several individual homebuilder stocks are down over 3%, which is more than the HUI gold stock mining index is down.
August existing homes sales as compiled by the National Association of Realtors were released this morning. Once again, despite a Wall Street forecast for a 1% increase in sales over July, existing home sales dropped nearly 2% month to month and 5.3% year over year. This is based on the statistically manipulated and annualized rate. Using the not-adjusted numbers, sales dropped 3% month to month and 7.5% year over year. July’s initial estimate of sales was revised lower. Inventory expressed as ‘months supply’ spiked up 10%. The inventory right now – at the end of the selling season – is as high as was going all the way to 2011.
When you look at the internal statistics, the report is even more bleak…

This post was published at Investment Research Dynamics on September 22, 2014.

sept 22/record level of Open Interest on silver (176,501 contracts)/Gold rises/silver falls/ GLD falls by 1.79 tonnes to 774.65 tonnes/Shanghai brings in another huge 41 tonnes/silver still in ba…

Gold closed up 1.50 at $1216.80 (comex to comex closing time ). Silver was down 8 cents at $17.70
In the access market tonight at 5:15 pm gold: $1215.00
silver: $17.75
GLD : we lost 1.79 tonnes of gold at the GLD (inventory now at 774.65 tonnes)
SLV : no change in silver inventory/note the difference between gold and silver. Physical gold that arrives from the Bank of England is sent down to Shanghai who lately has been receiving greater than 40 tonnes per week with the lower gold prices. In silver, there is no reason to raid the SLV because there is no physical silver to provide India or China.
Shanghai brings in a massive 41 tonnes of gold this week Shanghai silver still in complete backwardation
We will discuss these and other stories
So without further ado………………
Let’s head immediately to see the data has in store for us today.
First: GOFO rates/
All months basically moved towards the negative needle as they must have found a few bars to lease. On the 22nd of September the LBMA stated that they will not publish GOFO rates. However we still received today’s GOFO rates
London good delivery bars are still quite scarce.
Sept 22 2014
1 Month Rate: 2 Month Rate 3 Month Rate 6 month rate 1 yr rate
.106000% .1060000% .110000% .11800% .224000%
Sept 19 .2014:
1 Month Rate 2 Month Rate 3 Month Rate 6 month Rate 1 yr rate
1300% .128000% .132000% .1400% .22400%
Let us now head over to the comex and assess trading over there today,

This post was published at Harvey Organ on September 22, 2014.

US Treasury Cracks Down On Tax Inversions

One of the key drivers of the recent spike in M&A deals (and sellside advisory fees) has been the surge in tax inversion transactions, deals in which a U. S. company reincorporates for tax purposes in a tax-friendlier country such as the U. K. or Ireland, while maintaining its real headquarters in the U. S. Traditionally such deals have involved a merger between a U. S. firm and a smaller foreign firm. The reason for such deals is simple: to lower the corporate tax payments by avoiding the venue of the one country with the highest corporate tax rate in the world: USA, and leave more cash available for distribution to private shareholders. And since every such deal lowers the cumulative tax that the US collects from corporations, Obama, helpless to change the legislation that ushered in these deals in the first place, came out a few months ago, with a heartfelt appeal to corporate patriotism, calling inversions “wrong”, and demanding “corporate patriotism.” He failed. Which is why moments ago the Treasury released its new rules meant to “Reduce Tax Benefits of Corporate Inversions.”
Per the US Treasury: “Today, Treasury is taking action to reduce the tax benefits of – and when possible, stop – corporate tax inversions. This action will significantly diminish the ability of inverted companies to escape U. S. taxation. For some companies considering mergers, today’s action will mean that inversions no longer make economic sense.“
As the WSJ explains, in a multipronged attack, the administration took action under five separate sections of the tax code to make so-called inversions harder to accomplish and less profitable.

This post was published at Zero Hedge on 09/22/2014.

This Is About As Good As Things Are Going To Get For The Middle Class – And It’s Not That Good

The U. S. economy has had six full years to bounce back since the financial collapse of 2008, and it simply has not happened. Median household income has declined substantially since then, total household wealth for middle class families is way down, the percentage of the population that is employed is still about where it was at the end of the last recession, and the number of Americans that are dependent on the government has absolutely exploded. Even those that claim that the economy is “recovering” admit that we are not even close to where we used to be economically. Many hope that someday we will eventually get back to that level, but the truth is that this is about as good as things are ever going to get for the middle class. And we should enjoy this period of relative stability while we still can, because when the next great financial crisis strikes things are going to fall apart very rapidly.
The U. S. Census Bureau has just released some brand new numbers, and they are quite sobering. For example, after accounting for inflation median household income in the United States has declined a total of 8 percent from where it was back in 2007.
That means that middle class families have significantly less purchasing power than they did just prior to the last major financial crisis.
And one research firm is projecting that it is going to take until 2019 for median household income to return to the level that we witnessed in 2007…

This post was published at The Economic Collapse Blog on September 22nd, 2014.

Has The Gold Price Drop Ran Its Course?

The gold price dropped on Monday September 22nd to USD 1212 and EUR 942. Dollar gold is close to retest its bottom for the third time since mid-2013, a price level which was seen only in the summer of 2010. For readers seeking to understand what is going on, we are providing a comprehensive view on the gold market. We take all perspectives into account: price and chart patterns, the technical picture, sentiment, the fuures market, physical demand, gold miners, the influence of the dollar, correlation with commodities, monetary policy and inflation/deflation. We also compare several indicators with the low price points in April, June and December 2013.
With 20 different charts, it should be clear that we have only used market data in our analysis. In other words, this article contains the necessary information for readers to put the current gold price decline in its right context and explain the most likely scenarios going forward.
Gold price pattern
The daily USD gold chart clearly shows a downtrend since its top in September 2011, with two large trading ranges. The current trading range, between USD 1180 and 1450, is about to undergo a serious test: the bottom of the trading range is being tested. In case the USD 1200 to 1180 price level does not hold, the gold market is heading (significantly) lower.

This post was published at GoldSilverWorlds on September 22, 2014.

Facebook Fraud 2.0: Academic Study Exposes “Like Farms”

Six months ago the topic of click fraud at Facebook hit the headlines but was rapidly dismissed as the company’s share price rose implying that the world is great and we should not worry. With Facebook increasingly becoming the advertising outlet of choice for many of the world’s companies, MIT Technology Review reports on a study to dig deeper into just where the “likes” come from. As the authors note, recently, the number of likes of a Facebook page has become a measure of its popularity and profitability, and an underground market of services boosting page likes, aka “like farms,” has emerged. While careful to avoid pointing the finger too aggressively, the findings show that one “like” is not like another as the use of “honeypot” pages to generate “likes” attracts ‘users’ (bots) that are significantly different from typical Facebook users (i.e. non-human money-spending users).

This post was published at Zero Hedge on 09/22/2014.

#OccupyAndOrFloodWallStreetForClimateChange Takes On NYSE TV Studio – Live Feed

It has been several years since the disjointed, confused, and extremely disorganized Occupy Wall Street movement made any headlines. Alas, in the interim, the career prospects of those who comprise its up prime age demographic have gone nowhere but down while inversely impacting the nominal free time of said cohort, which is why we were somewhat surprised it took as long as it did for the same individuals, best known for camping out in Zucotti Park (until it started snowing of course), to stage a daring comeback. Which they did today, following a weekend in which New York City was overrun with “The People’s Climate March”, protesting against climate change by… leaving behind them tons of non-biodegradable garbage.
It is this same group that has once again made its way all the way down into the Financial district, and specifically in front of the TV studio formerly known as the NYSE.

This post was published at Zero Hedge on 09/22/2014.

Bidding Wars Stop; Millennials Leave Their Parents’ Basements, But Not For Homes; Pent Up Demand?

Bidding Wars StopWith cash-paying investors on full retreat, existing home sales dropped 1.8% in August, according to the National Association of Realtors. Lawrence Yun, NAR chief economist says that’s a good thing because “first-time buyers have a better chance of purchasing a home now that bidding wars are receding and supply constraints have significantly eased in many parts of the country.’While I agree it’s a good thing that bidding wars stopped, the fact of the matter is home prices are once again in la-la land, especially for cash-strapped millennials loaded up with student debt, in low-paying jobs. Pent Up Demand?Yun states, “As long as solid job growth continues, wages should eventually pick up to steadily improve purchasing power and help fully release the pent-up demand for buying.’There is arguably a pent-up demand for homes by millennials if wages do catch up, but that assumes millennials have the same value-set and attitudes towards debt as their parents. In reality, median wages have not gone up much but home prices have. More importantly, attitudes of millennials are not the same as that of their boomer parents. Millennials Leave Their Parents’ Basements, But Not For Homes…

This post was published at Global Economic Analysis on September 22, 2014.

“Smart Money” BTFATH At Most Furious Pace In Over A Year, 2Y Short-Squeeze Possible

Positioning among “smart money” participants in the markets continues to show major divergences. While large speculators bought S&P 500 contracts at their strongest weekely pace in more than a year – shifting to a net long position – they also increased the net short Russell 2000 position to its ‘most short’ in five years. Large speculators also bought crude oil after eleven consecutive weeks of selling. In the rates complex, hedge funds maintained their 10Y Treasury long exposure while large speculators sold 2-Y Treasuries at the fastest weekely pace in more than three years to the biggest net short position in five years. – leaving, as BofA warns, 2Y susceptible to a squeeze pull-back. This potential squeeze extends all the way to 5Y as repo rates indicate a massive shortage into month-end.

This post was published at Zero Hedge on 09/22/2014.

Gold Daily and Silver Weekly Charts – Unchanged

“For all that has been, thanks. For all that will be, yes.”
-Dag Hammarskjld
Gold and silver finished the day largely unchanged. There were the usual overnight and early morning antics. The mining sector was taken out behind the woodshed and beaten up a bit. The Shanghai Gold Exchange is now open for business. Some are concerned because of the participation of the ‘usual suspects’ on the exchange. I am not so concerned, because China is quit to issue some fairly draconian judgments for those that engage in non-sanctioned official and business corruption. Luckily Bill Holter speaks to this issue in his latest missive, so let him say it as he does so well. This Thursday, 25 September, is the options settlement for October metals contracts on the Comex. October is not an active month on the Comex for either gold or silver, but they may find a more lively turn in overseas trade.

This post was published at Jesses Crossroads Cafe on 22 SEPTEMBER 2014.

The Geopolitical Situation In Europe

The geopolitical situation of Europe
After the end of the cold war, the United States dominated world affairs for nearly twenty years. However, the situation of a unipolar world has changed since the financial crisis of 2008 to a now multipolar world that includes China, Russia, India, Brazil and South Africa. These powers are influencing and manipulating the conflict zones we have today to their advantage. By analysing and dissecting the issues concerning the major conflict zones on our world map, as well as illustrating the parties involved, this article will explain what political and strategic interests are at play and how the development in major hotspots shape the big picture. This will identify the geopolitical forces that affect the European continent and what future concerns and worries await us.
Conflict zones in the world
There are now five conflict zones that affect the geopolitical situation of Europe:

This post was published at Zero Hedge on 09/22/2014.

SP 500 and NDX Futures Daily Charts – First Day of Fall – Nature’s Doxology

Today is the first day of Autumn. This is the season to give thanks for all, our blessings and sorrows. There was another down day on Wall Street as the post-Alibaba retrenchment set in. Late in the trading day UK retailer Tesco’s stock was knocked down on news that they have overstated their profits significantly.
“Tesco has suspended four executives, including its UK managing director, after the supermarket overstated its half-year profit guidance by 250m. That would be almost a quarter of its expected profit for the period. It has launched an investigation headed by Deloitte, and says it is now working to establish the impact of the issue on its full-year results.. The news prompted a plunge in Tesco’s share price, which closed 11.6% lower at 203p.”
Tesco trading in NY remained largely unchanged. The economic news this week is the usual, and the third revision of 2Q GDP which is dead fish now, unless there is a major unexpected revision.

This post was published at Jesses Crossroads Cafe on 22 SEPTEMBER 2014.

Death-Crossed Russell Suffers Biggest 2-Day Plunge In 5 Months

Death crosses; Hindenburg Omens; PBOC, BOJ, and ECB hinted at removing the punchbowl; crappy US housing data; and a Chinese IPO takeout hangover weighed on stocks with Russell 2000 the biggest loser (suffering its biggest high-to-low drop from Friday in over 5 months). The Dow is the only index holding post-FOMC gains (Russell down over 2%). Homebuilders are now down 4% from last week’s FOMC statement, post-FOMC high-flyer financials have tumbled red (catching down to credit), and only safe-haven healthcare is holding any gains post-FOMC (Biotech -3%). Treasury yields fell led by the short-end (3Y -3.5bps, 10Y -2bps) back under FOMC levels. The USD recovered European session losses to end almost unchanged as considerable AUD and CAD weakness outweighed GBP strength. Despite being clubbed like a baby seal in Asia, Silver rebounded through the day to end -0.3%, gold unch, oil down, and copper -1.6% as China stimulus hopes faded. S&P 500 lost 2,000; Russell is down 2.6% year-to-date (-6.8% from July highs); VIX jumped most in 2 months to ~14. BABA pinned at $90, HLF smashed -10%.

This post was published at Zero Hedge on 09/22/2014.

In a Hyper-inflation Scenario, What Would the Value of Gold Be?

Letter from the women of Cologne, Germany addressed to the ‘Women of the British Empire’ November 12, 1914 ‘During the times of passive resistance we existed, not by industry, but through the paper money doles sent from unoccupied country. Now these have ceased and we face starvation. Industry cannot recover, and there are millions, literally out of work…tens of thousands of our leading citizens have been banished or imprisoned…our newspapers have been suppressed…armed hordes of adventurers have now been let loose on our disarmed and helpless population in the name of separatism and Republicanism… Winter is before us, and we have no coal.’
What will it take for hyper-inflation to occur? Why hasn’t it already occurred? and What would the real value of gold be in this scenario?
Americans today have never experienced the severe inflation that German citizens experienced after World War 1, but as we are bombarded with images of hip-hop artists throwing up limitless amounts of paper bills ‘in da club’ and the Federal Reserve printing trillions of dollars in financial stimulus money, known academically as Quantitative Easy, one gets the sense that there may soon come a time where we too are sweeping paper bills into the fireplace to heat our homes. Currently, there are 47 million Americans on food-stamps and 91 million people not in the labor force. These numbers are similar to the economic stagnation experience in the late 70’s when inflation was running consistently over 10%, but today we have difficulty reaching the Fed target of 2%. So what is going on?
Well, truth is, if we were to calculate inflation the way we did in 1980, then the inflation rate would actually be 10%. So inflation is running much higher than what is officially being reported.
The Fed is under-reporting inflation because they do not want to be politically responsible for causing the economic disparity and income inequality between the 1% and the 99%. This is being commented on and reported widely, but for the most part the fingers are not being pointed at the Fed so their plan is working.
So with inflation at 10% why isn’t the price of gold skyrocketing?
Turns out inflation numbers aren’t the only thing the Fed is manipulating. Even the price of gold is being manipulated.

This post was published at The Burning Platform on 22nd September 2014.

Where the long term silver cycles are now

I described certain significant political cyclic effects in precious metals prices in previous blog essays.
(If you missed them: Gold & 2nd Term US Presidents ; War Cycles and The Price of Gold ; An In-Depth look at a Major Cycle in Spot Silver ; Silver Market Cycles )
In particular for those contributions I focused on the 2 year cycle which corresponds to congressional electoral process. I also looked at and emphasized the 4 year cycle which corresponds to US Presidential elections. A third period that I looked at carefully is the seven to eight year cycle which corresponds to the cycle of duration of reelected US presidents. This cycle, in it’s eight year version may correspond to a model used by Martin Armstrong which he classifies at 8.6 years and considers to govern or to track general economic confidence.
Among large cycles which I have not covered in this series of articles is a seasonal effect in pretty much all financial markets, and that could be described alternatively as a 1 year cycle, if one wished to do so, and that would be an accurate characterization of the seasonal effect.
Another cycle which I like to keep track of is a central bankers’ cycle which tends to come in at approximately five years length. Precious metals traders will be able to come up with some of the banking organizations five year deals, agreements, or plans. It is also common for sovereign states to operate economic plans and targets with this timespan, and large corporations are candidates too.
I thought I might show a picture of this 5 year cycle today, and also put several cycles together to see how they all interact with each other during Q4 2014.
So let’s take the five year swing to see what it does:

Now in order to be straight up about this, the existence of a five year cycle is a debatable point, and statistically it has a weak score. So this is an alleged cycle, or a possible cycle in the price of silver. You take a look, do your own examination of the facts, make up your own mind. I merely provide an illustrated interesting direction in which you might focus your gaze for a while to see whatever you can see.
Of course there a a lot of possible cycles in silver, so a question that regularly comes up is what are the others saying?

This post was published at TF Metals Report on September 21, 2014.

The Federal Reserve Explains How Its Crystal Ball Works

Forecasting with the FRBNY DSGE Model
Marco Del Negro, Bianca De Paoli, Stefano Eusepi, Marc Giannoni, Argia Sbordone, and Andrea Tambalotti
First in a five-part series This series examines the Federal Reserve Bank of New York’s dynamic stochastic general equilibrium (FRBNY DSGE) model – a structural model used by Bank researchers to understand the workings of the U. S. economy and provide economic forecasts. The Federal Reserve Bank of New York (FRBNY) has built a DSGE model as part of its efforts to forecast the U. S. economy. On Liberty Street Economics, we are publishing a weeklong series to provide some background on the model and its use for policy analysis and forecasting, as well as its forecasting performance. In this post, we briefly discuss what DSGE models are, explain their usefulness as a forecasting tool, and preview the forthcoming pieces in this series.
The term DSGE, which stands for dynamic stochastic general equilibrium, encompasses a very broad class of macro models, from the standard real business cycle (RBC) model of Nobel prizewinners Kydland and Prescott to New Keynesian monetary models like the one of Christiano, Eichenbaum, and Evans. What distinguishes these models is that rules describing how economic agents behave are obtained by solving intertemporal optimization problems, given assumptions about the underlying environment, including the prevailing fiscal and monetary policy regime. One of the benefits of DSGE models is that they can deliver a lens for understanding the economy’s behavior. The third post in this series will show an example of this role with a discussion of the forces behind the Great Recession and the following slow recovery.

This post was published at Zero Hedge on 09/22/2014.

Destroying the Dollar a Penny at a Time

A recent article on the Wall Street Journal’s blog draws attention to the high cost of producing a single penny – 1.6 cents each, to be exact. They blame this unsustainable price on the high cost of zinc, which makes up 97.5% of every American penny. The online publication Quartz ran with this story, giving it a new headline: ‘It costs 1.6 cents to make one penny because of the rising price of zinc’. Time for a short economics lesson.
An alternate, more accurate headline for this story would be, ‘It cost 1.6 cents to make a penny because of currency debasement.’ Rather than pondering whether or not the United States should simply stop producing pennies to save money, Americans should really be thinking about the long-term effects of currency debasement that has been going on for generations.
To debase a currency is to weaken its purchasing power. This is often done by inflating the money supply through quantitative easing, which the Federal Reserve has been practicing for years. When a currency is debased, a unit of that currency doesn’t buy the same amount of stuff that it once did. The US dollar has been seriously debased over the last hundred years or more. Just take a look at the handy infographic at the end of this blog post to see how bad it has become.

This post was published at GoldSeek on 22 September 2014.

China’s Economy Slams On The Brakes: 30% Of Coal Miners Unable To Pay Employees On Time

The thing about any debt-funded Ponzi scheme is that it is like a great white: it has to keep moving, or else it dies. The problem with China is that for the past decade, in order to fund the most rapid period of industrialization and modernization in history, it has been moving at an absolutely torrid pace. And by moving we mean creating credit, which always takes us back to our favorite chart comparing the US and Chinese financial systems, that of total bank assets in the two countries. Spot which one is poised for a horrendous crash the second credit creation slows down from the breakneck pace of $3.5 trillion in inside money creation per year…
Still, what China has successfully done in recent years, is maintaining the facade that all is well in the economy, despite ever sharper gyrations in its credit markets, gyrations which have finally put enough pressure on the economy to send China’s core driver of economic growth, fixed investment which accounts for over 50% of GDP, sharply lower, something we explained a month ago when we observed that the Chinese commodity crash is not only continuing but accelerating at a record pace, and in fact as wereported overnight, Singapore iron ore futures just tumbled to a record low.

This post was published at Zero Hedge on 09/22/2014.