Apr 16, 2012

The Case For Cheap Gold

From Gold speculator, April 15, 2012:
By Robert M. Williams www.unpuncturedcycle.com

All human situations have their inconveniences. We feel those of the present but neither see nor feel those of the future; and hence we often make troublesome changes without amendment, and frequently for the worse. - Benjamin Franklin
I want to spend a lot of time talking about gold and looking at it from a different perspective. For years many analysts and gold bugs have made the claim that gold is cheap relative to just about anything else, but they never tell you why. In today’s report I want to deal with the “why” because I think it’s important to understand that if you purchase gold at $1,400, $1,500, $1,600 or even $1,700, it is totally irrelevant. As a first step toward understanding why it’s undervalued, you need to look at the creation of fiat currency in the United States from 1980 to date:

undervalued, you need to look at the creation of fiat currency in the United States from 1980 to date. In 1980 the money supply stood at +/- US $500 billion and today it’s at approximately US $8 trillion, a staggering sixteen-fold increase over a thirty-two year period!
Now lets look at how prices increased over that same time period. Here you have a chart of the Consumer Price Index published by the US Federal Reserve:

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In 1980 the CRB Index was trading around 77 versus today where it trading around 235. That is close to a three-fold increase and that’s with the usual Fed games being played. When I say the Fed plays games I mean that they change the weighting of each commodity when it’s in their best interest in order to keep inflation artificially lower.
Now let’s look at one more chart before we discuss gold. This is a chart of US Federal Debt as prepared by the Federal Reserve:

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Here you can see that in 1980 the Federal debt was at US $400 billion whereas today it stands at US $15.5 trillion. That’s an amazing thirty-five-fold increase in debt! So there you have it; money supply, prices and debt are off the charts.
Now let’s take a look at what gold has done since 1980 and I think you’ll be a bit surprised:

Here you can see that gold has risen from 850.00 to Friday’s close at 1,660.40 for a slightly less than 100% increase. So by comparison to prices, the supply of money, and debt we can see that gold is way behind the curve. Finally, just in case if you think that gold is expensive compared to other commodities, take a look at this:
COMMODITY 1980 2012 % INCREASE
Oil 34.00 104.00 205%
Copper 1.20 3.85 196%
Corn 2.55 6.29 146%
Soybeans 6.45 14.36 122%
Gasoline 1.25 3.34 167%
Sugar 8.36 24.50 193%
Lumber 90.00 357.00 296%
These are all things that we use/need in our everyday life and they’ve all gone up a lot more than gold. So the only logical conclusion that you can draw from all of this is that everything else from commodities, to currencies, and even debt is grossly over done, orgold is grossly undervalued. Admittedly gold is not something that we need in our everyday life, but it does fulfill one purpose that no other paper or tangible asset can accomplish. Gold acts as a store of value/wealth!
Why then is gold undervalued? There are two reasons and they are joined at the hip.The media paints gold as an extravagant, unnecessary and high-risk investment so the public will shy away from it. Then there is the manipulation. Bullion banks and central banks, especially the US Federal Reserve, have been selling gold for more than a decade to cap the rally. That softens the rise that would normally occur when central banks print excessively as they’ve been doing for the better part of that decade. That makes gold’s rise over the last ten years even more impressive!

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Lately it seems to me that the Fed is becoming desperate because the manipulation has been become obvious, out in the open, and timed to some Fed orchestrated event. The sell-off on February 29th serves as a perfect example. In spite of that gold continues to hold it’s own as you can see here:

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After topping out on August 22nd with a close at 1.900.40 gold declined to test strong support at 1,522.20. It traded as low as 1,523.90 on December 29th and then began to move higher. The initial move up took it as high as 1,792.70 on February 28th and then came yet another decline, this time down to good support at 1,622.80. Many now expect the next shoe to fall and gold to fall back down to test support at 1,522.20 yet again, but every time gold approaches 1,622.80 buyers come out in force.
Finally, I want to show you a picture of what manipulation looks like. This is a 15-minute chart of gold on Friday:

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Gold had been trending higher since 10:45 am until noon and then comes a huge spike in volume at noon and gold is 18.00 lower in thirty minutes. On nothing I might add, no news, nothing! We see this behavior day after day, usually around 6 am, and if not about one hour before the New York close. Then they let it go and it finishes 10.00 above the low. A typical day at the office, and yet they still can’t break it down!

This image has been resized. Click on image to view full size.

Often selling in gold will be timed to buying in the US dollar and preceded by selling in silver, and we saw all of that on Friday. In spite of attempts to support the dollar it cannot sustain a rally and in the previous chart you can see that we seem to have completed a head and shoulders formation. Both shoulders topped out at good resistance around 80.00 and the neckline comes in at +/- 78.90. Sooner or later we’ll break the neckline and go on to test strong resistance at 78.25. Once it’s broken the party will be over.
CONCLUSION
I know a lot of people are proclaiming an end to the bull market in gold, just like they did with the 2007 top, and I know they’ll be wrong again. How do I know that? I demonstrated that debt and fiat money creation far surpass the rise in the price of gold. There is every indication that trend is going to not only continue, but will only accelerate. Under those circumstances gold can only go higher. You can manipulate until hell freezes over, but you are manipulating paper markets, while the rise in gold’s price is all about physical demand. The more you print and the more debt you create, the greater the demand for physical gold because it’s a store of wealth! What’s finally going to happen is the manipulators will destroy the paper market and then gold will really explode. Could the bull market in gold end today? Yes! It’s very simple; stop printing dollars and stop creating debt and gold will drop like a stone. Now here’s a question for you: what do you think the chances of that are? Better off to buy gold!!

Robert M. Williams
April 15, 2012
www.unpuncturedcycle.com
rmw@unpuncturedcycle.com

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The Trouble with Money

Casey Asks For and Turk Delivers the Evidence of Gold Market Manipulation

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Physical vs. Paper: The Real War

Whats the central bank endgame in gold?

Two Scenarios For Next Precious Metals Rally, Part II

IMF Exploits Euro-Crisis to Create Global Money Power

From The Daily Bell, Monday, April 16, 2012 – by Staff Report

Euro Area Seeks Bigger IMF War Chest on Spanish Concerns ... European officials travel to Washington this week seeking a bigger global war chest to combat the debt crisis as Spain's government battles to quell renewed market turmoil over its finances. Three weeks after European leaders unveiled emergency euro- area funding exceeding the symbolic $1 trillion mark, concerns about Spain's position have ratcheted the nation's borrowing costs to the highest levels this year. Crisis-fighting resources will dominate talks at the International Monetary Fund's spring meeting in Washington from April 20-22. – Bloomberg

Dominant Social Theme: Austerity would work if Europe would just cooperate.

Free-Market Analysis: Almost unnoticed, the world's leaders now speak in terms of trillions rather than billions (or millions) as they used to, and the IMF and central banks are leaders in this trend (see above excerpt).

The goal of the elites running these facilities is world government and the European Union is a stepping-stone to this consolidation. Austerity, the program that is supposedly stabilizing European finances, is actually an elite dominant theme that does the opposite of its stated intent.

As part of this globalist thrust, the power elite seeks to empower certain international facilities with additional funding and authority. Out of chaos ... order, as the article excerpted above once again illustrates:

Bowing to international pressure to do more while stopping short of a bolder proposal, European governments agreed last month that 500 billion euros ($654 billion) in fresh money would be placed aside 300 billion euros already committed to create an 800 billion-euro defense against contagion.

By also offering to give the IMF 150 billion euros, "European governments have done their part," ECB Executive Board Member Joerg Asmussen said April 13. "I would now expect our non-European friends and partners to contribute their part to IMF resources."

This kind of problem/solution formula is easy to understand for anyone who wants to look. The elites pursue their goals via dominant social themes, fear-based promotions that frighten people into giving up power and wealth to globalist facilities. In this case the mechanism is the "sovereign debt crisis" and the solution is to puff up the IMF with more resources.

The longer the so-called sovereign debt crisis goes on, the more the globalists utilize it to expand the power of their chosen institutions. We wrote about this phenomenon just the other day in an article entitled, "Debt Crisis Plotted to Deliver the Euro to the IMF?" Here's how we explained the genesis:

One has to keep in mind the artificiality of the current economic construct. The economy of the world is run via monopoly fiat/paper money printed by central banks. It is this system that has seemingly crashed half of the world's economy and is well on the way to delivering China into the same situation ...
The EU crisis itself, as we have often pointed out, started when certain poorer countries were given large amounts of money by Brussels to "equalize" the economy. These funds were supposed to allow the bureaucracies to address native imbalances and create fiscal health.

Of course, this money was nothing but a kind of bribe. The elites of the given nation pocketed the funds and then made sure their countries entered the EU. After this occurred, further lending took place via the elite's top, European commercial banks.

After the 2008 crash, it became clear that the EU's PIGS couldn't repay the loans. This was likely the plan all along. After this realization set in, the power elite that orchestrates this sort of thing ensured that the solution to this manipulated dilemma was "austerity."

The idea is evidently and obviously to make people so miserable that they will eventually welcome world government and world money. The power elite orchestrating this has been using what we call directed history for at least a century and probably closer to three – within the context of the modern globalist conspiracy.

The article we are analyzing today from Bloomberg suggests an expanded IMF based on the Euro crisis. But the IMF is also promoting a US$500 billion expansion via developing countries.

The justification is that the European crisis might spill over into other continents and nations. The IMF has to be prepared for via a half billion-dollar transfer from the very countries it claims to be protecting. Reuters reports the following:

Euro Area Seeks Bigger IMF War Chest on Spanish Concerns ... International Monetary Fund (IMF) Managing Director Christine Lagarde said that she is hoping to make "real progress" at this week's meetings ...

In January, the IMF said it would need $600 billion in new resources to help "innocent bystanders" who might be affected by economic and financial spillovers from Europe ... On Friday, officials from the Group of 20 nations told Reuters the world's major economies were likely to agree to provide the IMF with somewhere between $400 billion and $500 billion.

A G20 official said the fundraising effort would likely raise about $50 billion from Japan and a similar amount from China and Saudi Arabia, in addition to the $250-300 billion already committed by EU countries. Smaller amounts will likely come from countries such as Russia, Mexico and Brazil.

Thus it is that the IMF expands. It is receiving at least US$150 billion from Europe and hundreds of billions from mostly "developing" countries. It is interesting that the Reuters article and the Bloomberg article don't quite match up on the European contributions. What's a few hundred billion among friends?

In fact, nobody REALLY knows how much money is flowing at the top, or where it is headed. The point of the reports is promotional and has little to do with accuracy. The idea is to throw vast sums around as to imbue government officials with godlike powers.

Often, we discover the announcements made about funds prove not to be true. The European sovereign debt crisis was supposed to have been solved years ago, when the first announcements were made that funds had been delegated to "fix" the problem by leading European sponsors.

In fact, we have come to realize this crisis – like other crises around the world – are often manufactured ones. This is no doubt why they often last so long. The longer the crisis lasts, the more possibilities for a transformative effect.
In this case it seems obvious to us that the intent is to make citizens of the West so miserable (via "austerity") that they will welcome virtually any change, even globalism, that promises to make their lives better.

Seen through this admittedly cynical lens, the 20th century with all its "isms" and arguments for expanding government via socialism, etc., was the first part of a promotion that is now nearing its latter stages. Having successfully made people dependent on government, the powers-that-be are now removing those props in order to further their internationalist aims.

No doubt global governance will be sold the same way as were the initial governmental solutions of the 20th century – as a panacea that will somehow reduce the world's afflictions and rectify the wrongs of the "market."

Conclusion: We are not yet sure the IMF is destined to become the world's central bank – complete with an SDR global currency – but the IMF is continually showing up at the center of things as world economic chaos blossoms. More that the Bank for International Settlements or even the World Bank, it appears to be the Chosen One.
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Related:

IMF: Euro Break-up Cannot Be Ruled Out

Money Dramas and the IMF

Washington Leads World Into Lawlessness

By: Paul Craig Roberts| April 12, 2012

The US government pretends to live under the rule of law, to respect human rights, and to provide freedom and democracy to citizens. Washington’s pretense and the stark reality are diametrically opposed.

US government officials routinely criticize other governments for being undemocratic and for violating human rights. Yet, no other country except Israel sends bombs, missiles, and drones into sovereign countries to murder civilian populations. The torture prisons of Abu Gahraib, Guantanamo, and CIA secret rendition sites are the contributions of the Bush/Obama regimes to human rights.

Washington violates the human rights of its own citizens. Washington has suspended the civil liberties guaranteed in the US Constitution and declared its intention to detain US citizens indefinitely without due process of law. President Obama has announced that he, at his discretion, can murder US citizens whom he regards as a threat to the US.

Congress did not respond to these extraordinary announcements with impeachment proceedings. There was no uproar from the federal courts, law schools, or bar associations. Glenn Greenwald reports that theDepartment of Homeland Security harasses journalists who refuse to be presstitutes, and we have seen videos of the brutal police oppression of peaceful OWS protestors. Chris Floyd describes the torture-perverts who rule the US.

Now Washington is forcing as much of the world as it can to overthrow international treaties and international law. Washington has issued a ukase that its word alone is international law. Any country, except those who receive Washington’s dispensation, that engages in trade with Iran or purchases Iran’s oil will be sanctioned by the US. These countries will be cut off from US markets, and their banking systems will not be able to use banks that process international payments. In other words, Washington’s “sanctions against Iran” apply not to Iran but to countries that defy Washington and meet their energy needs with Iranian oil.

According to the Christian Science Monitor, so far Washington has granted special privileges to Japan and 10 European Union countries to continue purchasing Iranian oil. Requiring countries to shutdown their economies in order to comply with Washington’s vendetta against Iran, a vendetta that has been ongoing ever since the Iranians overthrew the Washington-installed puppet, the Shah of Iran, more than three decades ago, was more than Washington could get away with. Washington has permitted Japan to keep importing between 78-85% of its normal oil imports from Iran.

Washington’s dispensations, however, are arbitrary. Dispensations have not been granted to China, India, Turkey, and South Korea. India and China are the largest importers of Iranian oil, and Turkey and South Korea are among the top ten importers. Before looking at possible unintended consequences of Washington’s vendetta against Iran, what is Washington’s case against Iran?

Frankly, Washington has no case. It is the hoax of “weapons of mass destruction” all over again. Iran, unlike Israel, signed the non-proliferation treaty. All countries that sign the treaty have the right to nuclear energy. Washington claims that Iran is violating the treaty by developing a nuclear weapon. There is no evidence whatsoever for Washington’s assertion. Washington’s own 16 intelligence agencies are unanimous that Iran has had no nuclear weapon’s program since 2003. Moreover, the International Atomic Energy Agency’s weapons inspectors are in Iran and have reported consistently that there is no diversion of nuclear material from the energy program to a weapons program.

On the rare occasion when Washington is reminded of the facts, Washington makes a different case. Washington asserts that Iran’s rights under the non-proliferation treaty notwithstanding, Iran cannot have a nuclear energy program, because Iran would then have learned enough to be able at some future time to make a bomb. The world’s hegemon has unilaterally decided that the possibility that Iran might one day decide to make a nuke is too great a risk to take. It is better, Washington says, to drive up the oil price, disrupt the world economy, violate international law, and risk a major war than to have to worry that a future Iranian government will make a nuclear weapon. This is the Jeremy Bentham tyrannical approach to law that was repudiated by the Anglo-American legal system.

It is difficult to characterize Washington’s position as one of good judgment. Moreover, Washington has never explained the huge risk Washington sees in the possibility of an Iranian nuke. Why is this risk so much greater than the risk associated with Soviet nukes or with the nukes of the US, Russia, China, Israel, Pakistan, India, and North Korea today? Iran is a relatively small country. It does not have Washington’s world hegemonic ambitions. Unlike Washington, Iran is not at war with a half dozen countries. Why is Washington destroying America’s reputation as a country that respects law and risking a major war and economic dislocation over some possible future development, the probability of which is unknown?

There is no good answer to this question. Lacking evidence for a case against Iran, Washington and Israel have substituted demonization. The lie has been established as truth that the current president of Iran intends to wipe Israel off the face of the earth.

This lie has succeeded as propaganda even though numerous language experts have proven that the intention attributed to the Iranian president by American-Israeli propaganda is a gross mistranslation of what the president of Iran said. Once again, for Washington and its presstitutes, facts do not count. The agenda is all that counts, and any lie will be used to advance the agenda.

Washington’s sanctions could end up biting Washington harder than they bite Iran.
What will Washington do if India, China, Turkey and South Korea do not succumb to Washington’s threats?

According to recent news reports, India and China are not inclined to inconvenience themselves and to harm their economic development in order to support Washington’s vendetta against Iran. Having watched China’s rapid rise and having observed North Korea’s immunity to American attack, South Korea might be wondering how much longer it intends to remain Washington’s puppet state. Turkey, where the civilian and somewhat Islamist government has managed to become independent of the US- controlled Turkish military, appears to be slowly coming to the realization that Washington and NATO have Turkey in a “service role” in which Turkey is Washington’s agent against its own kind. The Turkish government appears to be reassessing the benefits of being Washington’s pawn.

What Turkey and South Korea decide is basically a decision whether the countries will be independent countries or be subsumed within Washington’s empire. The success of the American-Israeli assault on Iran’s independence depends on India and China.

If India and China give the bird to Washington, what can Washington do? Absolutely nothing. What if Washington, drowning in its gigantic hubris, announced sanctions against India and China?

Wal-Mart’s shelves would be empty, and America’s largest retailer would be hammering on the White House door.

Apple Computer and innumerable powerful US corporations, which have offshored their production for the American market to China, would see their profits evaporate. Together with their Wall Street allies, these powerful corporations would assault the fool in the White House with more force than the Red Army. The Chinese trade surplus would cease to flow into US Treasury debt. The offshored-to-India back office operations of banks, credit card companies, and customer service departments of utilities throughout the US would cease to function.

In America, chaos would reign. Such are the rewards to the Empire of globalism.

The White House moron and the neoconservative and Israeli warmongers who urge him on to more wars do not understand that the US is no longer an independent country. America is owned by offshoring corporations and the foreign countries in which the corporations have located their production for US markets. Sanctions on China and India (and South Korea) mean sanctions on US corporations. Sanctions on Turkey mean sanctions on a NATO ally.

Do China, India, South Korea and Turkey realize that they hold the winning cards? Do they understand that they can give the bird to the American Empire and bring it down in collapse, or are they brainwashed like Europe and the rest of the world that the powerful Americans cannot be resisted?

Will China and India exercise their power over the US, or will the two countries fudge the issue and adopt a pose that saves face for Washington while they continue to purchase Iranian oil?

The answer to this question is: how much will Washington pay China and India in secret concessions, such as eviction of the US from the South China Sea, for their pretense that China and India acknowledge Washington’s dictatorial powers over the rest of the world?

Without concession to China and India, Washington is likely to be ignored while it watches its power evaporate. A country that cannot produce industrial and manufactured goods, but can only print debt instruments and money is not a powerful country. It is a washed-up two-bit punk that can continue to strut around until the proverbial boy says: “the Emperor has no clothes”.

Update: China is responding to the sanctions by taking advantage of the drop in demand for Iranian oil to negotiate lower prices for its purchases. The result of Washington’s sanctions on Iran is to lower the cost of energy for China and to raise it for everyone else.

Europe merry-go-round: Spain debt crisis & Portugal bailout-On the Edge with Max Keiser-04-13-2012

From PressTVGlobalNews, Apr 14, 2012

In this edition of the show Max interviews Mike “Mish” Shedlock from Sitka Pacific Capital. He talks about the European Commissioner for Economic and Monetary Affair’s warning about the need for another bailout for Portugal and also the soaring yields on Spanish debt. Mike “Mish” Shedlock is an investment advisor at Sitka Pacific Capital. He writes the widely read Mish’s Global Economic Trend Analysis.