Tag Archives: Federal Reserve

Russia Stockpiles Gold To Prevent A Currency Attack By The U.S.

“Countries stockpile gold for strategic and defensive reasons — for instance, in case relations between nations are damaged and their currencies lose their value,” Gabriel Rubinstein, a financial consultant and former representative of the Argentine Central Bank (source link is below)

Russia has been accumulating a significant gold reserve for over a decade, along with China and most if not all of the BRIC/SCO/Silk Road countries.  This is a fact that has been either unnoticed or intentionally ignored by the western mainstream media.  Of course, gold is a barbarous relic that just “sits there and does nothing” (Warren Buffet).

The graphic above, courtesy of goldchartsrus.com, shows the monthly gold holdings of the Russian Central Bank.  One has to wonder why Russia is willing to make this information public, unlike China or the United States.  Having said that, I suspect that – like China – the public information does not show Russia’s true gold holdings, which I would bet is significantly greater.  Conversely, it’s commonly accepted by those of us who have studied this issue for many years that the actual amount of physical gold held by the Federal Reserve on behalf of the U.S. is substantially less than the official number.

GATA posted an interesting article from Sputnik which asserts that part of the motivation for Russia making gold a significant part of this currency reserves is to protect itself from currency and financial system attacks from the U.S.

Gold, this eternal financial resource, has a real value if compared to other financial assets. The Russian government believes that it’s better to have more gold resources than dollars. Hypothetically speaking, if Russia holds tons of US dollars and the US wanted to damage its economy, this would be possible through currency manipulations,”  Rubinstein said, adding that gold guarantees against such a scenario (from the Sputnik article linked in the previous paragraph).

Russia has increased the value of its gold reserves by a factor of 10x over the last decade. It has also reduced its euro holdings from 40% of its Central Bank reserves to 26%. Russia has also been aggressively unloading its Treasury holdings.

You’ll note that there’s an inflection point in the graph above (my edit) which shows that the rate of accumulation of gold increased in 2014.  As the Sputnik article points out, this point of inflection coincided with the sanctions imposed by the U.S. and the EU on Russia in 2014.  Senator McCain is currently imploring Trump to ramp up those sanctions.

It’s been my view that the U.S. tried to attack Russia’s currency in 2014 – in conjunction with the sanctions – in order to affect the the value to Russia of its energy exports, as Russia is the world’s largest oil exporter:

The graph above shows the RUS/$ currency pair (from xe.com).  Gold and silver investors are familiar with the waterfall formation that occurred in early 2014.  That plunge in the ruble vs the dollar  has the unmistakable footprints of a currency attack and the U.S. is the only country with motive.

This would explain one of the primary reasons that Russia accelerated the conversion of its dollar and euro reserves in yen.  I would argue that one of the other primary reasons is that, along with China, the gold accumulation activity precedes an eventual re-introduction of gold into the global monetary system.   My fear is that the U.S. is willing to start a global military conflict before it would be willing to let a reserve currency reset occur.

The Fed’s Latest Comedian: Stanley Fisher

Stanley Fisher embarrassed himself and the Fed today by regurgitating the standard Fed threat to raise rates in 2016. The Fed officials are starting to sound like that teacher on the Peanuts cartoon:

We are close to our targets,” Fischer said in a speech at the Aspen Institute in Aspen, Colorado on Sunday. “Looking ahead, I expect GDP growth to pick up in coming quarters, as investment recovers from a surprisingly weak patch and the drag from past dollar appreciation diminishes,” he added, without giving explicit views on his rate outlook.  LINK

Someone needs to put a muzzle on these guys. The economy is meeting the Fed’s goal of what, creating the lowest labor force participation rate in history? I have to believe the Fed is looking at the real economic data reports and not the seasonally manipulated annualized rate garbage fed to us by the likes of the Government, auto industry and housing industry. Retail sales, including and especially restaurant sales, are declining and possibly on the verge of collapsing. Same with housing. I have been reviewing the real data in-depth in my weekly Short Seller’s Journal.

It’s especially funny that Fisher is bragging about a strong in economy from his perch at the Aspen Institute in Aspen, Colorado. Why? Because Aspen real estate is collapsing: Brokers At A Loss To Explain Sudden, Precipitous Drop In Aspen Real Estate: (LINK)

High-end sales that fuel Aspen’s $2 billion-a-year real estate market are evaporating, pushing Pitkin County’s sales volume down more than 42 percent to $546.45 million for the first half of the year from $939.91 million in the same period of 2015

I was just in Aspen two weeks ago.  I wandered into the Ralph Lauren store and it was a morgue.  The salesperson was hounding me like a starving wild animal.  It was uncomfortable.

I’d love to see the Fed hike rates next month at their next FOMC circus.  In fact, hike them 50  basis points instead of the gratuitous one-quarter of one percent they teased us with at the end of 2015.   A rate hike might finally put the hammer on Clinton’s Presidential aspirations.  We already can see that her supporters could give a shit about her psychopathic criminal behavior.

Fisher apparently thinks the Fed has “neared its goals” for the economy.   If he thinks falling housing, retail and auto sales – combined with shrinking jobs market – are worth goals, hell raise rates 1%.

The the truth is that the only goal the Fed has accomplished is an almost daily delivery of good belly-laugh.

Yellen vs. Mr. Magoo

I’m not sure which is more off the rails:  the stock market bubble that is being inflated or the Chairman of the of the organization that is doing the inflating:

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Hmmm…”Well, let me start — let me start with the question of the Fed’s credibility. And you used the word “promises” in connection with that. And as I tried to emphasize in my opening statement, the paths that the participants project for the federal funds rate and how it will evolve are not a pre-set plan or commitment or promise of the committee. Indeed, they are not even — the median should not be interpreted as a committee-endorsed forecast”

SoT – Peter Schiff: The U.S. Is One Gigantic Bubble Economy

The admission that the economy is so weak that it needs more QE is going to destroy the narrative that the U.S. economy is in great shape and it’s no longer going to be the safe haven for capital around the world…it’s going to prick the bubble in the dollar…and people are going to realize that we’ve never recovered from anything, the economy is sicker than ever, the Fed’s going to make it even sicker with more of its toxic monetary policy, the dollar’s going to tank and the price of gold is going to skyrocket – and people need to prepare for that now.  – Peter Schiff on the Shadow of Truth

When Mt. Vesuvius blew, no one knew when it would happen or how big the eruption would be.  Everyone knew a volcanic event was going to occur and yet, the magnitude of the event caught a lot of people by surprise. The eruption destroyed two Roman cities and several surrounding settlements.  It killed an estimated 16,000 people.  The question is, how come more people didn’t leave the area surrounding Vesuvius when they knew that something was going happen at some point?

The United States financial system – including the viability of the U.S. dollar – is analogous to the eruption of Mt. Vesuvius.  A lot of people know something is wrong – evidenced by the growing support for the Trump candidacy – and yet 99.5% of the population is ignoring the warning signs of a systemic eruption of unknown magnitude.  It’s an event that draws closer with each passing day.

The warning signals of the coming financial markets collapse are in full view.  The warning signal from the junk bond market, triggered by but not limited to the collapsing energy sector, is beginning to spread into and infect the rest of the financial markets like an uncontrollable virus. If you are an investor or a professional money manager, what more of a warning do you need that this:

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That chart resembles a giant tsunami that has coiled offshore and is getting ready to slam into the the nearby beach. Only in this case millions of people remain on the “beach” to watch the horror show unfold without leaving for safer ground. It’s as if everyone knows a catastrophe is about to occur and yet most remain embalmed with the hope that it can’t really happen.

The willingness of people to park their paper in financial assets like bonds is simply a function of their lack of understanding of the problems that exist and their false confidence in Central Banks.  – Peter Schiff

The systemic causes of the financial crisis that hit in 2008 – and which was really a de facto financial system collapse – were never properly treated. Rather, they were medicated by heavy doses of money printing and free money, the latter which is otherwise known as ZIRP. The moral hazards of this monetary policy have fomented in impending systemic eruption which will be the financial market’s equivalent of the historic Mt. Vesuvius volcanic blast. The timing of this is just as unpredictable as the consequences.

The Shadow of Truth hosted a conversation with Peter Schiff to discuss to discuss the impending financial market eruption and the inevitable dollar crisis, which will ultimately rip apart the U.S. financial and economic system:

The FOMC Meeting Is A Complete Joke

The result has become as predictable as the sun rising in the east and setting in the west:

  • Federal Reserve leaves interest rates unchanged
  • Fed signals rate hike still possible at ‘next meeting’
  • Fed says economy expanding at a moderate pace
  • Fed says inflation continues to run below Committee’s long run objective

A monkey sitting a type-writer could write that script.  The Fed isn’t going to raise rates at the next meeting and the economy is getting worse, not better.  Everyone knows that.  It’s appalling that the members of the FOMC – supposedly highly educated economists and experienced financial market professionals – choose to blatantly insult our intelligence with these statements.

If the FOMC members actually believe that the economy is “expanding at a moderate pace,” I’d love to see the data upon which they are basing this conclusion.  Because the real-world data streaming from just about every source of information other than the Federal Government shows that the economy is already mired in a recession.  Perhaps the FOMC members ARE the monkeys sitting at the type-writer writing those headlines…

John Williams of Shadowstats.com does by far the most thorough dissection and analysis of the primary economic data of anyone of whom I’m aware.  Here is his assessment of the the U.S. economy and the Fed’s unwillingness to raise rates even one-quarter of one-percent:

Indeed, symptomatic of a financial system in serious distress, the FOMC remains unable or unwilling to move decisively on raising interest rates, to move the financial system towards monetary normalcy. Continued inaction or waffling by the Fed has begun to shift the focus and concerns of domestic and global investors away from what appears increasingly to be perpetual moribund economic activity into the areas of systemic instabilities, prospective or otherwise, that are so troubling to the U.S. central bank…

The U.S. economy remains in contraction (see Commentary No. 747, Commentary No. 751 and Commentary No. 755), with a variety of key indicators, such as industrial production, real retail sales and revenues of the S&P 500 companies continuing to show recession. Although formal recognition could take months, consensus recognition of a “new” recession should gain relatively rapidly, in tandem with a variety of monthly, quarterly and annual data reflecting the downturn in business activity.  LINK

I keep coming back to these graphics, but for me they encapsulate everything about the Federal Reserve, the zoo known as the Federal Open Market Committee and the insidious, catastrophic corruption that has completely engulfed the U.S. economic, financial and political system:

PCR5

 

SoT #55 – Peter Schiff: When The Dollar Collapses China Won’t Be There To Catch It

Paper money eventually returns to its intrinsic value – zero. – Voltaire

The value of fiat currencies is based on faith – faith in the entity that is issuing the currency. In the case of the dollar, it’s issued by the Treasury and backed by the “full and faith and credit of the U.S. Government.”

In reality the dollar is simply a debt instrument which the Government issues to the public. There is no real objective measure of the dollar’s value.   But let’s examine the “credit” of the U.S. Government.  The Government has issued $18 trillion in Treasury debt.  When the debt ceiling limit eventually is raised, that number will likely quickly jump north of $19 trillion.  It also guarantees about $7 trillion Fannie Mae and Freddie Mac debt.  It also backstops about $1.3 trillion in student debt.

These are just the “funded” liabilities issued to the parties who loaned this money to the Government.  There’s also an estimated $200 trillion of “unfunded” liabilities in the form of promises to make payments associated with Government pensions, entitlement programs, Social Security, etc.

Ultimately headed for a dollar crisis – next time when the dollar falls it will fall vs. the yuan. The next currency crisis will be much worse because when the dollar falls, China won’t be there to catch it.  – Peter Schiff on Shadow of Truth

The average lifespan of a fiat currency over history is 27 years.  The British pound sterling has lasted 300 years but it was originally backed by 12 ounces of silver per unit.  The pound is now worth .5% of its original value.  The U.S. dollar as a fiat currency has lasted, so far, 44 years since Nixon removed entirely the gold-backing.  Since the Fed was founded in 1913, the dollar has lost over 97% of its value.  (Note: the value of fiat currencies are measured vs. gold).

The Shadow of Truth hosted Peter Schiff today.  One of the primary topics was China’s move to begin devaluing currency and to “de-peg” it from the dollar.   Historically, when the dollar plummeted – see 2002 – 2009, for instance – China had to buy dollars and sell yuan in order to maintain the $/yuan peg.  Over the years this cost China a lot of money but it enabled China to continue building its export economy.

The purpose of de-pegging is part of a process that has been initiated by China to prepare the world for a post-U.S. global economy, as we discussed in our China Braces For Impact SoT Market Update.  The next time the dollar starts to head lower, China will let the dollar fall…

…This will also mean that the biggest foreign buyer of Treasury bonds will likely be sitting on its hands when deteriorating U.S. finances force the Treasury to begin issuing trillions of new bonds annually. So when the U.S. needs China’s help the most, it will be unwilling to provide it.

Paul Craig Roberts: Free Financial Markets Are A Hoax

There are no free financial markets in America, or for that matter anywhere in the Western word, and few, if any, free markets of any other kind. The financial markets are rigged by the big banks, the Federal Reserve, and the Treasury in the interests of the profits of the few big banks and the dollar’s exchange value, which is the basis of US power.

There is a contradiction between a strong currency on one hand and on the other hand massive money creation in order to sustain zero and negative interest rates on the massive debt levels. This inconsistency is revealed by rising gold and silver prices.

When gold hit $1,900 an ounce in 2011 the Federal Reserve realized that the precious metal market was going to limit its ability to provide enough liquidity to keep the thoughtlessly deregulated financial system afloat. The rapid deterioration of the dollar in terms of gold and silver would sooner or later spill over into the exchange value of the dollar in currency markets. Something had to be done to drive down and to cap the gold price.

The Fed’s solution was to take advantage of the fact that the prices of gold and silver are determined in the futures market where paper contracts representing gold and silver are traded, and not in markets where the physical metal is actually purchased by people who take possession of it. The Fed realized that uncovered short sales provided enormous leverage over the prices of the metals and that it would be profitable for the bullion banks, such as JPMorgan, Scotia, and HSBC, to short the market heavily and then cover their shorts at lower prices produced by selling as a result of triggering stop-loss orders and margin calls.

Dave Kranzler and I have shown on numerous occasions that the bullion banks and the Federal Reserve make profits and protect the dollar by suppressing the prices of gold and silver. They do this by illegally selling huge numbers of uncovered shorts in the futures market. This illegal operation is supported by the so-called “regulatory authorities” who steadfastly refuse to intervene.

It has just happened again. Dave Kranzler describes it in detail here: http://investmentresearchdynamics.com/bullish-news-for-precious-metals-and-goldsilver-get-paper-smashed/

If memory serves, Matt Taibbi explained a few years ago how Goldman Sachs got position limits removed from speculators, so that now speculators can dominate market forces.

You can read the rest of Dr. Roberts’ commentary here:  www.paulcraigroberts.org