Category Archives: Market Manipulation

The West Is Collapsing As The East Ascends

The 24 Mega Green City infrastructure project in India will connect Delhi with Mumbai, creating a commerce corridor incorporating 21st century technologies and amenities. – Interview with ZincOne Resources’ Jim Walchuck, The Daily Coin

It seems absurd that Asia is willing and able to build high-speed “bullet” trains to connect large population centers while the United States struggles with an antiquated Amtrak rail system often beset with service interruptions and lethal accidents.   The truth of the matter is that the major U.S. metropolitan areas are beset with massive loads of debt, including a ticking-time debt-bomb in the form of several trillion dollars in unfunded public pension funds.

The Delhi-Mumbai Industrial Corridor is a major infrastructure project that India is developing with Japan. The project will upgrade nine mega industrial zones as well as the country’s high-speed freight line, three ports, and six airports. A 4,000 MW power plant and a six-lane intersection-free expressway will also be constructed, which will connect the country’s political and financial capitals.  – The Daily Coin

The 24 Mega City project underscores the economic, political and cultural contrast between the eastern and western hemisphere countries, with the sun setting in the west and rising in the east.  The west is mired in a catastrophic web of Government-heavy economies that exist on the life support of trillions in money printing and debt issuance. True, some countries like China have relatively high debt levels but they are offsetting that form of fiat currency debasement with massive gold accumulation.  The heart of the problem is highlighted by the graphic below (click to enlarge):

The budget for the U.S. Government will primarily be spent on social security, defense, medicare/medicaid and interest on the Government’s debt. Those five items will burn more two-thirds of the Government’s budgeted expenditures in Fiscal Year 2017.

But don’t bother asking how the Government plans on paying for that.   The funds will come from oldest forms of currency debasement: money printing and debt issuance.  And Trump’s proposed spending agenda will accelerate the growth rate of both .

It’s amazing that the U.S. Government seems to have unlimited funds available to spend on guns, bullets and surveillance of the citizenry.   Ranked in order of expenditures, The U.S. spends more on its military than the next 14 highest ranked countries.  “On the books,” the U.S. spent $597 billion in 2015.  That was 4x more than China and 9x more than Russia (source:  International Institute for Strategic Studies).

While the west, led by the United States, advances its collapse with rampant currency debasement and unbridled imperialism, the east is investing its resources in the future – in the advancement of its civilization.  Perhaps the hallmark of this contrast is best represented by the flow of physical gold from west to east.  The Shadow of Truth has devoted today’s episode discussing some of the signs pointing to the collapse of the west and the rise of the east:

The Big Short Part Two

Truth is like poetry. And most people f*cking hate poetry. – from “The Big Short”

Ron Paul was on Fox Business last week explaining that stocks and bonds are in a big bubble. He said that, “you need to short this market.” As is my modus operandi, I had the volume muted so I didn’t get hear the Fox hosts’ exasperation. Interestingly, it was reported last week that the short interest in the S&P 500 ETF (SPY) hit an all-time low on March 7th. This is a fantastic contrarian indicator. It also removes the general “short-squeeze” risk from the risk of shorting the market.

Perhaps more curious than Ron Paul’s comments was the warning about the stock market issued by Robert Shiller, who is typically a Wall Street apologist, in an interview on Bloomberg this past Tuesday: “The market is way over-priced,’’ he says. “It’s not as intellectual as people would think, or as economists would have you believe.” Shiller is noted for his warnings about the tech bubble in 1999 and the mid-2000’s housing bubble before it collapsed.

Extreme levels in consumer confidence, investor sentiment, valuations and a steep incline in stock prices have historically marked market peaks. A week ago Investor’s Intelligence bullish sentiment among investment advisors hit its highest level in 30 years. That previous peak corresponded to the market peak in 1987 (the 1987 stock crash was the steepest in history). Consumer confidence hit a 16-year high. The prior peak in consumer confidence occurred right before the tech bubble crashed in 2000.

As detailed in recent Short Seller Journals, the retail mom & pop investor has been piling into the market since the beginning of the year. When the realization that Trump’s campaign promises will never become reality and the “music stops” in the stop market, there will be a broad base of retail stock geniuses looking for seats that don’t exist.

The stock market is perhaps the most disconnected from the underlying fundamental systemic reality than at any time in history. This is true if we were to evaluate the total amount of debt as a percentage of GDP, which is about 345%. At the beginning of 2000, it was about 270%. If we were to adjust the current level of GAAP earnings for the S&P 500 using the GAAP standards applied in 2000, it’s likely that current p/e ratio for the SPX would be at least as high as it was in 2000. And recently it was revealed that retail traffic at malls across the country has fallen off a cliff (15% in February and another 13% so far in March). Used car prices are plunging, which reflects both an oversupply of used cars and a big fall-off in demand. This will quickly spill over into the new car market, which faces a record level of dealer inventory. And bank loan creation has begun to rip in reverse:

Bank loan creation is a product of both demand and supply. A drop of the magnitude shown above occurs because borrowers have stopped forming new businesses or expanding current businesses (except for real estate developers, who will borrow relentlessly until the banks cut them off) and banks have determined that, in the current economic environment, the risk of losing money from lending to businesses and consumers exceeds the potential return (real estate developers are finally getting cut off).

In short, based on the above fundamental data the economy for the most part has fallen off a cliff.

Extreme levels in consumer confidence, investor sentiment, valuations and a steep incline in stock prices have historically marked market peaks. A week ago Investor’s Intelligence bullish sentiment among investment advisors hit its highest level in 30 years. That previous peak corresponded to the market peak in 1987 (the 1987 stock crash was the steepest in history). Consumer confidence hit a 16-year high. The prior peak in consumer confidence occurred right before the tech bubble crashed in 2000.

Most of the above commentary is excerpted from the latest issue (released Sunday) of IRD’s Short Seller’s Journal.  The primary short idea presented is down  4.7% from last Friday’s close.  I just closed out a put position from an idea I presented (including the put otion I would be buying)  two weeks ago for an easy 30% gain.  If you are interested in learning how to make money shorting the most overvalued market in history, click here: Short Seller’s Journal subscription.

I have a feeling, in a few years people are going to be doing what they always do when the economy tanks. They will be blaming immigrants and poor people. – from “The Big Short”

Is Demand For Physical Gold Really Collapsing?

Seriously? “Simon Black” (it’s a nom de plume) wrote an article titled “Demand For Physical Is Collapsing.”  He focused on retail bullion demand numbers. The headline and the content is largely fake news as it focuses on the demand for minted coins vs the paper gold market. We’re not really sure about the intent of article, but the content was devoid of any relevance to the actual global demand for physical gold.

While the retail minted coin and small-size bar demand is down from last year’s levels, there’s two factors to explain this. First is price. The price of gold and silver was lower in early 2016 than it is now. The price of gold in February 2017 averaged $1230-$1240 while the price of gold a year ago February averaged $1175. Retail buyers of gold/silver coins are highly sensitive to price and tend to chase the price higher, up to a point. On this basis, it’s not surprising that more minted coins were sold a year ago compared to this year. This “price effect” on the demand for retail gold and silver coins likely explains about 25% of the demand comparison between 2016 and now.

The second factor is the economy. Remember, the end user of minted bullion products is largely the retail buyer.  In the first two months of 2017, real wages have declined. Even more negative for retail sales of any sort is the fact that real disposable income has been declining on a year over basis since December 2015:

While we at the Shadow of Truth do not consider buying and owning bullion to be “discretionary,” retail sales, including sales of bullion coins, is highly dependent on the relative level of real disposable income. Thus once again it should not surprise, based on just looking at retail demand for physical bullion, that retail bullion sales are falling.

On the other hand, the Black article purports the idea that retail bullion sales represents global demand for gold and silver. Nothing could be further from the truth. Retail demand at the margin has no affect on price other than maybe the price premiums in the coin market based on mint supply and retail demand.

The majority of gold bullion demand comes from the jewelry industry, eastern hemisphere Central Banks and sophisticated wealthy and institutional investors. India and China alone import more gold than is produced from mines globally. This is why Black’s “paper gold” price is rising. It’s why the BIS and western Central Banks have failed to eliminate the significance of gold in the global monetary system.

Gold imports into India jumped 175% in February from February 2016 to 96.4 tonnes (LINK). In fact, official gold imports into India have been rising since December.  And that does not include dore bars or smuggled gold.  179 tonnes of gold was withdrawn from the Shanghai Gold Exchange in February.  This is 60% higher than February 2016.  The Russian Central Bank gold reserves have been rising almost monthly since mid-2007.

To claim that the global demand for physical gold is collapsing is seeded in either ignorance or  mal-intent.  But either way, the assertion is outright idiotic when the facts are examined, which we do in today’s episode of the Shadow of Truth:

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Gold & Silver Soar After The Fed’s Clown Show

Stocks rally as the Fed once again shows how clueless they are at trying to manage the economy. – from @Stalingrad & Poorski

The Federal Reserve’s FOMC predictably nudged the Fed Funds rate up 25 basis points (one quarter of one percent) to set its “target” Fed Funds rate level at .75%-1%.   Nine of the faux-economists voted in favor of and one, Minneapolis Fed’s Neil Kashkari, voted against the meaningless rate hike.

Or is it meaningless?  Ex-Goldman Sachs banker Neil Kashkari was one of the Treasury’s Assistant Secretaries when the Government made the decision to bail out Wall Street’s biggest banks with nearly $1 trillion in taxpayer money.   It was also when the Fed dropped the Fed Funds rate from about 5% to near-zero percent.  Despite Yellen’s official stance that  the economy is expanding and the labor market is “tight” (with 37% of the working age population not considered part of the Labor Force – a little more than 94 million people) Kashkari voted against the tiny bump in interest rates.  This is likely because he is fully aware of risk to the banking system – perched catastrophically on hundreds of trillions in debt and derivatives – of moving interest rates higher.

The Fed’s goal is to “normalize” interest rates.  The financial media and Wall Street analysts embrace and discuss this idea of “normalized” interest rates but never define exactly what that means.  For the better part of the Fed’s existence, the “rule of thumb” was that long term rates (e.g. the 10-yr Treasury rate) should be about 3% above the rate of inflation.  And the Fed Funds rates should be equal to or slightly above the rate of inflation.

Using the Government’s highly rigged CPI index, it implies the Fed Funds rate would be “normalized” at approximately 2.7% and the 10-yr bond around 6% based on Wednesday’s CPI report.  Currently the Fed Funds rate is 3/4 – 1% and the 10-yr is 2.5%.  Of course, since the early 1970’s, the CPI calculation has been continuously reconstructed in order to hide the true rate of price inflation.  For instance, the current CPI index does not properly account for the rising cost of housing, education, healthcare and automobiles.

John Williams’ of Shadowstat.com  keeps track of price inflation using the methodology used by the Government to calculate the CPI in 1990 and 1980.  Using just the 1990 methodology, the rate of price inflation is 6.3%.  This would imply that a “normalized” Fed Funds rate would be around 6.5% and the 10-yr bond yield should be around 9.5%.    So much for this idea of “normalizing” interest rates.  Using the Government’s 1980 CPI methodology, Williams calculates that the stated CPI would be 10.3%.

Most of the hyperinflated money supply has been directed into stocks, bonds and real estate. But based on the cost of a basket of groceries, healthcare and housing alone, price inflation is accelerating.    If the Fed were to “normalize” interest rates at 6.3%, it would crash the financial and economic system.  In other words, the Fed is powerless to  use monetary policy in order to promote price stability, which is one of its mandates.

In today’s episode of the Shadow of Truth, we discuss the insanity that has gripped the markets as symbolized by the Federal Reserve’s FOMC meetings:

Indian Gold Imports In February Tripled

Mehul Choksi, chairman of jewellery store chain Gitanjali Gems Ltd., is quoted as saying: “We expect some heavy buying in April as a large number of weddings are expected to take place. – LINK

Legal Indian gold imports jumped up to 96.4 tonnes in February vs. February 2016. These numbers come from the finance ministry and not the World Gold Council or bullion banks. This reinforces the observations by many that the BIS-directed attempt to curtail Indian gold demand by removing cash from the financial system has failed.  Gresham’s Law in action.   This number also does not include smuggled gold which, based on the increase in airport arrests so far in 2017, has ramped up considerably.

Amusingly, Cititgroup is forecasting total 2017 demand in India to be 725 tonnes.  This number is laughable.  Smuggling alone is thought to account for about 300 tonnes per year of gold going in to India.  As a bullion bank with an untenable paper gold short position, Citigroup can only dream that India’s gold importation will be that low in 2017.

There will be a big “snap-back” effect on India’s gold demand after the brief intervention by the Government in late 2016.  Based on yesterday’s response in the paper gold market in NYC after the Fed’s rate hike announcement, it seems that the western Central Banks/bullion banks are losing control of the bullion market.

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Gold & Silver Manipulation: The Biggest Financial Crime In History

Investment Research Dynamics is pleased to present another truth-seeking missile launched by Stewart Dougherty:

This crime is already 285 times bigger than the LIBOR scandal, and 500 times bigger than Madoff’s swindle. It is, in fact, the largest, most destructive financial crime in history.

According to the mainstream financial media (MFM), the biggest financial frauds in history are the Bernie Madoff Ponzi scheme, with roughly $20 billion in net investor losses, and the Bank State rigging of LIBOR, which resulted in 16 guilty banks paying $35 billion in fines, which supposedly equated to their theft.

The MFM have conveniently ignored a far larger financial crime that has been perpetrated for 37 years and counting, and that has netted its orchestrators more than $1,000,000,000,000.00 ($1 trillion) in stolen profits. This crime is so powerful that it can produce fraudulent proceeds of $1+ billion on demand and in minutes, making it unique in the annals of theft. It is a crime that has been committed literally thousands of times since 1980, and is now being committed in the most blatant and brazen manner ever. This crime is already 285 times bigger than the LIBOR scandal, and 500 times bigger than Madoff’s swindle. It is, in fact, the largest, most destructive financial crime in history.

To read the rest of this, please click here:  Gold & Silver Manipulation

 

Can Valeant Go To Zero?

Valeant (VRX) stock is now at $10. After a brief, Roman Candle launch to $260, $10 is the level where it traded in early 2009. It may be one of the few stocks that has gone back its financial crisis trading level. It is now likely on a long, slow death march to zero.

It was reported that Bill Ackman has completely liquidated his Pershing Square hedge fund position in VRX.  Any institutional investment manager or pension fund who left its investment in Pershing Square long enough to see this happen should be investigated for breach of fiduciary duty.   Ackman’s fund reportedly lost over $4 billion in VRX.  I suspect that number was massaged to the low side for public consumption purposes.

I began to look at VRX with a fine-tooth comb just about 12 months ago.  On March 15, 2016, I wrote:  “The SEC Should Suspend VRX Trading: The Company Smells Like Enron.” The stock had dropped fro $260 to $37 in less than a year:

The initial triggers were concerns over the Valeant’s drug-pricing policies and questions surrounding its methodology for booking revenues. However, with just a casual “look under the hood” at VRX’s SEC-filed financials, there is likely a great deal of fraud lurking beneath what’s already been questioned. In fact, this is starting to smell a lot like Enron or Bear Stearns. The only component missing from this story is a CNBC rant from Cramer issuing a table-pounding buy on VRX stock. That may yet occur.

To begin with, the Company is carrying $30.2 billion in long term debt against just $9 billion of tangible assets. $39 billion of VRX’s assets is in the form of goodwill and intangibles. VRX’s self-assessed book value is $6.4 billion. But VRX’s tangible book value is negative $32.6 billion.

On March 18, 2016, I wrote: “Valeant (VRX): ‘Hope’ Is Not A Valid Investment Strategy,” after the stock had dropped another 28% from March 15th:

VRX will not default because the banks will grant as much leeway to VRX as is needed to keep the corpse alive. At this point in time, VRX’s assets likely are worth enough to cover the bank debt obligations. Just like a vampire would want to keep a body warm and the pulse ticking while sucking out the blood, the banks will hold up VRX in order to get as much money out as possible.

Of course, the longer this drags out, the uglier it will become for all economically interested parties. Because there’s accounting and disclosure fraud involved, we can expect the class-action shareholder lawsuits to pile up once the lawyers get a whiff of the blood being sucked out by the banks.Untitled

But keeping VRX alive for creditor purposes won’t help the stock. At this stage in the game, VRX stock will descend – sometimes quickly, sometimes slowly – below $10. In other words, VRX’s stock has entered the Irreversible Debt Spiral.

On April 5, 2016, I wrote: “Valeant (VRX): The Short Seller’s ATM Machine” after the stock popped up on news that an “internal review” showed that its books were clean. There’s that “hope” trade again:

The Company’s declaration that its financials are now valid is based on a review of the matter conducted by a committee that was composed of VRX’s board of directors. In no way can the case be made that this review was in any respect independent or “arm’s length.” This is another trait of a Company that is on the ropes: self-declared exoneration.

Without a doubt, the path of VRX’s stock to much lower stock prices will be littered with news-driven price-spikes like today. This is why VRX stock is a short-seller’s ATM. Every spike can be shorted for short-term profits. Make sure to hold on to some amount of a “core” position in order to profit from the next eventual new-driven waterfall. This is how similar stocks before VRX – like Enron, Bear Stearns, Countrywide FInancial, etc – traded until they finally dropped below $10.

Over the next few months I followed the VRX drama including its attempted asset sales. The Company was unloading “core” businesses for a fraction of the price it had paid for them over the previous few years. To this day I can not understand how:  1) Ackman continued to throw good money after bad in an attempt to prop up a house of cards and 2) how Ackman’s investors allowed him to continue throwing good money after bad. It only took one detailed review of VRX’s business history and 10-K to see that VRX was quite similar to Enron.

The Valeant saga is emblematic of the entire U.S. political, economic and financial system. The entire system is enveloped by the criminality of the people and entities running it – a criminality cloaked in catastrophically unpayable debt and now blatant fraud. It was a similar environment in this country when Enron imploded and those of us who understood what was happening had hoped that Enron would be the warning signal to everyone that would inspire the badly needed reform. Unfortunately, Greenspan inflated an even bigger fraudulent asset bubble than the one he had previously inflated that had led to Enron. You know the rest of the story from there.

Now our system is beset with a monetary and debt bubble that has inflated all asset classes beyond any conceivably recognizable “intrinsic” value. The Valeants and Enrons were fair warning and no one listened. The next collapse is going to dwarf the implosion of the two asset bubbles that preceded it. Fortunately, for those who are willing to “see” and accept this inevitable fate, gold and silver (precious metals) is the one asset class that has been fraudulently held down well below their intrinsic value.

If you are still holding on to some Valeant stock, let go of that insanely irrational “hope,” sell your shares and use the money to buy some gold and silver.

Bank Loans Take A Dive: It’s The Economy, Stupid

I am compelled to correct a report posted on Zerohedge about the cliff-dive going on in commercial, industrial and consumer loans.  The report in ZH suggested the plunge is connected to two possibilities:  1)  this one from a Wall Street sleazebag from Barclays: “it is possible that companies have shifted from the loan to the bond market, and are selling more bonds to lock in cheap financing before rates rise, while not encumbering assets with issuing unsecured debt;” and 2) political uncertainty connected to Trump.

The first possibility could have some small amount of legitimacy except that if you parse through all the data available at the Fed, you’ll see that bank credit has plunged across the entire spectrum of U.S. business (I used size of loan as the proxy). Smaller businesses do not have access to public credit markets and thus the first explanation is the typical apology for a negative economic report that we would expect from a Wall Street con-artist. The second possibility is part of the anti-Trump narrative found in the fake news reports coming from the ignorant.

“It’s The Economy, Stupid”

That quote was created by James Carville as one of Bill Clinton’s campaign slogans in 1992. Those words ring even truer today. A primary example is the restaurant industry numbers discussed above. “Hope” and “confidence” do not generate economic activity. And “hope” is not a valid investment strategy. A better guide to what’s happening to economic activity on Main Street is to see what banks are doing with their lending capital. I borrowed the two graphs below from the @DonDraperClone Twitter feed (click to enlarge):

Commercial bank lending is a great barometer of economic activity. The top graph above shows the year over year percentage change in commercial and industrial loans for all commercial banks. You can see that the rate of bank lending to businesses is falling doing a cliff-dive. These are primarily senior secured and revolving credit loans that sit at the top of the capital structure. If bank lending is slowing down like this, it means two things: 1) the ability of businesses to repay new loans is declining and 2) the asset values used to secure new loans will likely decline. In fact, it is highly probable that the tightening of credit by the banks is a directive from the Fed. Yes, the Fed.  Despite its public commentary suggesting otherwise,  the Fed knows as well as anyone that the economy is tanking.  This is why the Fed can’t hike rates up to a level that would bring real interest rates up to at a “neutral” level (using a real price inflation measure, Fed Funds needs to be reset to at least 6%, and likely higher, to get the real rate of interest up to zero).

The only reason the Fed might “nudge” interest rates higher next week is for credibility purposes. Everyone knows inflation is escalating, which makes it difficult for the Fed to keep interest rates so close to zero. In addition, a rate hike now, even though it will be insignificant in magnitude, will give the Fed room to take rates back to zero when the public and Congress begin to scream about economy.

The second graph shows the year over year percentage change in auto loans. The implications there are fairly self-explanatory. Auto sales are slowing down because the “universe” of potential prime and subprime rated car buyers, new and used cars, has been largely exhausted. In fact, with the default rate on subprime auto loans beginning to hit double-digits, the next phase in the automobile credit market will likely be credit implosion crisis.

The above commentary was an excerpt from the latest issue of the Short Seller’s Journal.

Hugo Salinas Price: The World Will Hyperinflate Into A Gold Standard

If one can only see value in paper currency terms, one cannot see value at all

Hugo Salinas Price – website link – posted a couple of comments on Stewart Dougherty’s guest post earlier this week. I concluded that his insights needed to be shared on the front of this blog and he gave me permission to edit them together to make them easier to read for everyone.  “I know my comment was complex but I wanted to condense the thoughts I have developed over three decades:”

I would like to take this chance to share a few of my thoughts on this. To me it is pretty clear that the American gold is encumbered. Not because of the usual reasons found on the web but because America defaulted on its gold under the Nixon administration. There are still, many foreign claims on that gold.  If America starts to use that gold officially, the gold vultures, like the bond vulture funds, will be out en masse and with force.  So it is in America’s best interest to ignore that gold – and gold in general.

The world has (finally) realized that a country with the reserve currency is not something a country should want and that the dollar can fail. The danger is that it will fail to soon. That is why the euro was created for example. The currencies from the individual countries were all issued from the US treasury.  Meaning that if the dollar went the way of the dodo, the European currencies would die with it. Enter the euro, issued from gold [the euro was originally partially backed by gold].  The gold held by the ECB is priced on a mark to market basis. You can check the website of the ECB, its number one asset is listed as gold and, sadly, gold receivables [meaning that gold is leased out].  Most of the Eurasian landmass followed this initiative [pricing Central Bank gold on a mark to market basis] – for instance, the BRICS countries.  All that is needed a rebalancing of the gold holdings of major countries. Enter China. They had way too little gold and way too many dollars. But last year they also started to mark their gold holdings to market.

Seems to me the world is ready to hyperinflate into gold.  After all, all currencies have already hyperinflated in the financial world.  When the run on real things happens, as a system operator, you don’t want that since a functioning printing press is worth way more than gold. So you want to guide the hyperinflation into a useless metal and use this gold to help equalize the tradeflows. They cannot implement a global political & economic system when things are unstable because it will fail again and soon.  Just as all reserve currencies did since late 1400.  If I were in the position of the globalists, I would aim for the Roman model. Split the money concept. Currency for spending and settling debts but use gold and silver as a final debt extinguisher.  This would function to prevent the kind of mess the EU countries are now  in. The debts of the south are the assets of the North. This is a recipe for disaster.

Let me elaborate on why I think that the world is ready to hyperinflate in gold terms. The Western public will not hold an asset that goes nowhere, at least in currency terms. The public in the East were never fooled that way. Some  – I think rightly – joke “if one can only see value in paper currency terms, one cannot see value at all”.  I also think gold is wealth and not money. Gold has always been funny in that way. So many people worldwide think of it as money even though its supply tends to dry up as the price rises.

First the Comex will be thrown under the bus to destroy the paper leverage (price suppression) game. Maybe the LBMA as well though I would not be surprised as well if it’s allowed to stay alive. Then the prices can rise and the message will sent:  “gold is the new wealth reserve to balance trade imbalances and then the Western hyperinflation will be killed.”  Central banks lose most of their gold reserves (and that is good) and gold can do what it did for millennia again, settle trade imbalances.

As usual, in historical terms, most of the average people wont have it besides a few grams. But it will be people, not institutions that control it and will help to create a decentralised counterforce to the centralized system we live in that is hopelessly out of touch with reality.

A last thing, courtesy of JS mineset, of the countries that value their gold on a  mark to market basis (a few others may have followed since this graph was created:

 

Gold And Silver: Legal Weapons Against The Deep State

  • Question:  Why do Central Banks and Governments hate gold?
  • Answer:  Because they can’t print it

“An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense – perhaps more clearly and subtly than many consistent defenders of laissez-faire – that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other.”  – Alan Greenspan, “Gold and Economic Freedom”

Just like everything else in the western financial system, the paper trading markets are leveraged beyond redemption.   The amount of paper “claims” on actual physical gold was estimated to be 100:1 in 2010.   We can assure you that ratio is much higher now.  On the Comex alone, for instance, if more than 9% of the  April open interest in gold futures were to stand for delivery – based on the currently declared 1.4 million ounces of gold reported as being “available for delivery” (registered) – the Comex would default.  The entire open interest in gold futures is 60x greater than the amount of gold available for delivery.

This is just the publicly traded paper gold derivatives.  There’s also the shady world of OTC gold derivatives.  We have no idea what kind of leverage is embedded in these contracts.  But the total notional amount of OTC “precious metals” derivatives according to the OCC’s latest quarterly report on OTC derivatives (Office of the Comptroller of the Currency) is over $28 billion.  Just to highlight the degree to which the Government goes in order to hide the facts about the gold and silver market, the OCC used to break out OTC precious metals derivatives into the categories of “gold” and “silver and other.”  Now the OCC  reports just “precious metals.”  What is it that the Government and banks are hiding?

The amount of leverage embedded in a Comex futures contract, based on the current amount of margin required, is about 25:1.  There’s no telling how much leverage is embedded in the OTC derivatives agreements.  All we know is that the disclosure requirements are becoming increasingly more opaque.

Silver futures began trading on the CBOT in 1969.   But gold futures were not around until 1974, three years after the U.S. closed the gold window, completely disconnecting the dollar from gold.   Gold futures were developed to enable the Fed and the U.S. Treasury to control the price of gold as a means of reinforcing the legitimacy of the dollar as a fiat currency used as the world’s reserve currency.

While the price of gold has been heavily manipulated since at least the 1960’s, when the U.S. was running out of enough gold to fulfill its obligations under Bretton Woods, the manipulation and “shock and awe” price attacks are used as a form of propaganda that is designed to discourage investors from converting fiat dollars into gold and silver.  It’s a powerful weapon used by the Deep State against gold and economic freedom.

In today’s episode of the Shadow of Truth we discuss the manipulation of gold and silver and how it’s used by the Deep State to increase the Government’s control over the population: