Saturday morning cartoons

(But) look at these sexagenarian dogs! Their dog-teeth get sharper at every moment. The hairs drop from the fur of an old dog; (but) see these old (human) dogs clad in satin! See how their passionate desire and greed for women and gold, like the progeny of dogs, is increasing continually! Such a life as this, which is Hell’s stock-in-trade, is a shambles for the butchers (executioners) of (the Divine) Wrath; (Yet) when people say to him, “May your life be long!” he is delighted and opens his mouth in laughter.
He thinks a curse like this is a benediction: he never uncloses his (inward) eye or raises his head once (from the slumber of heedlessness). If he had seen (even as much as) a hair’s tip of the future state, he would have said to him (who wished him long life), “May thy life be like this!”
–Rumi, The Mathnawi, Book VI, circa 1270 A.D.

The cartoons at the link below should be required viewing (and understanding!) in school, especially any history or economics class. These cartoons are all from 100 years ago or more. They clearly describe the cementing into law–pending at the time– of the rigged banking, currency, and stock markets that financially enslave almost everyone on the planet to the endless hunger for humongo-profits of the few. They show that at least a some people understood the game then. Sadly, few understand the game even now. How do we get this understanding to everyone so that we can end this vicious travesty? How do we bring in the logic and compassion that clearly show the primitive and self-defeating nature of systematically-enshrined greed? Continue reading

Currency Balloons

Given the state of most media reporting, it’s sometimes tough to know whether to laugh or cry. Here’s a story from last week about a surge in gold bullion purchasing in Germany in August and September:

     German Bullion Dealers Report Major Increase in Sales

Christian Brenner, Chief Executive of Philoro Edelmetalle GmbH: “Already in August we noticed an increase on orders compared to the previous months, but September… September beats it all. From a German viewpoint it’s the strongest month of 2014.”. At their head office in Austria they also register an “overproportional high level” of revenue.

At the end of the article, there is a stumbling attempt to explain the recent surge with no mention of its real reason. Here’s a chart of the Euro showing it losing over 7% of its “value” in August and September, in the context of a 10% loss since May:
Euro2014107

It would seem clear that at least some people in Germany and Austria noticed that someone was letting the air out of their Euros and decided to convert to real money.

It was the same for the Japanese in August and September, but much worse overall since the Japanese government has been hellbent on devaluing the Yen for two years. Here’s a chart showing the loss in “value” of the yen of more than 31% in the last three years:

Yen20141007Since these losses in “value” are measured against the biggest balloon of them all, the US Dollar, this is the source of what you may have been hearing lately about the “strong Dollar”! In other words, the “strong Dollar” is simply the result of other major governments succeeding in intentionally letting air out of the balloons known as their currencies.

They are doing this in an attempt to create inflation! Unlike regular people, who like it when prices drop and they can get good deals, governments, being the largest debtors on the planet, want inflation so that their debts can be repaid in cheaper and cheaper currency as time passes. In case you haven’t noticed, that’s a form of grand theft: I’ll borrow money from you today, and pay it back with cheaper money later.

Well so what, you might say. If they are all doing that, what’s the big deal? Continue reading

What’s up with the metals? Part 2

Someone asked me whether I “was still in favor of gold.” The answer is an unqualified Yes. One easy reason is that almost every country on the planet is trying to drive down the value of their paper currency. So if you live in the US, it looks like this, and this is based on the US Government’s statistics for price inflation and we all know that they have every reason to play games to make this number look a lot lower than it really is, so you can safely increase each of these number by 50%:

CPI_Since_2000

The first column, CPI, says plenty: That if you live in the US, since the year 2000, the purchasing power of your money, of your salary, has lost 39%. And this is during a period that they claim has had “low inflation”! And the US Federal Reserve is currently on record as saying they are trying to create more inflation. So when you own US Dollars, or items denominated in Dollars such as US stocks and bonds, or items in currencies pegged to the US Dollar, realize that this is only going to get worse. The same is true for the purchasing power of the other currencies.

* * *

The post What’s up with the metals? Part 1 showed that some notable gold bears had turned bullish and that unprecedented demand for physical gold continued. Despite the strong demand, gold then had the bargain price of $1,237 per ounce, having just bounced up from $1,181 on the last day of 2013. Price went to $1,355 Monday and has pulled back to $1,338 today.

The strong demand for physical bullion, coins, and jewelry, documented in Part 1, has continued. Despite record-breaking demand in 2013, Chinese demand year-to-date is 51% higher than demand to this point in 2013. Mints around the world are working overtime:

     U.K. Royal Mint Runs Out of Sovereign Gold Coins on Demand

The U.K.’s Royal Mint, which traces its history back more than 1,000 years, ran out of 2014 Sovereign gold coins as prices near a six-month low led to “exceptional demand.”

     Gold Mint Runs Overtime in Race to Meet World Coin Demand

Austria’s mint is running 24 hours a day as global mints from the U.S. to Australia report climbing demand for gold coins…

Austria’s Muenze Oesterreich AG mint hired extra employees and added a third eight-hour shift to the day in a bid to keep up with demand. Purchases of bullion coins at Australia’s Perth Mint rose 20 percent this year through Jan. 20 from a year earlier. Sales by the U.S. Mint are set for the best month since April, when the metal plunged into a bear market.

Global mints are manufacturing as fast as they can…“The market is very busy,” Lang said. “We can’t meet the demand, even if we work overtime.

So, if demand for physical gold is so strong, how could there possibly be such a price drop as happened in 2013?  The answer is simple really. They have created a paper gold market that is hundreds of times larger than the physical gold market. By larger I mean in terms of the dollar value of trading in these two markets. People trade paper that has more or less of a connection with gold (sometimes none at all), and it is in these large markets that the price of gold is set. Most of the participants in these paper gold markets believe that they could, if they wished, convert these pieces of paper into physical gold, that the pieces of paper are claims on real gold. But in reality, only a tiny fraction of them could succeed in converting their claims into real metal. There just isn’t enough metal to go around.

If you think I exaggerate, check this chart, which I’ll explain below. It describes the action at the COMEX, the primary gold price-setting exchange in the US:

COMEX_OwnersPerOz

The key phrase on the chart is “Owners Per Ounce,” which for the COMEX is now at 111 owners per ounce of gold in the vault! That is, for each ounce of gold in the COMEX vaults (the blue line in the upper section of the chart), 111 contracts exist that allow the owners of those contracts to demand delivery of that single ounce of gold. We all understand that banks operate with only a little cash on hand for all the deposits they’ve taken, called a fractional reserve system. The COMEX is the same, worse actually: percentagewise, they keep a lot less gold around than the banks keep cash on hand.

(Please skip this paragraph if you already understand what 111 owners per ounce means!) Let me explain: The COMEX is a futures trading exchange where people trade gold and other commodities. Futures exchanges were created to be a meeting place between producers of a commodity and its end users. In January of any year, for example, a producer of wheat can agree to sell wheat in the future, in September, at a specified price to a cereal company. Both the wheat farmer and the cereal company know that they can make a reasonable profit on their operations if the farmer supplies, and the cereal maker takes delivery of, wheat at the pre-arranged price when that wheat is ready in September, so they make the deal. That’s called a futures contract. It promises both delivery and payment in the future at set price, and that’s great. But the futures exchanges are now dominated by big money speculators who have no intention of producing or taking delivery of anything. The chart above reflects this reality. The COMEX vault is supposed to have gold to back up the gold trading that takes place on that exchange. As you can see in the upper panel of the chart, back in 2006 they had over 5 million ounces backing up the contracts. Now that amount has fallen by 93% to only 370,000 ounces as more people realize that they better stop trading paper and get their hands on the real stuff.  Currently, for all the futures contracts to buy and sell gold on the exchange, they only have 1 ounce for every 111 contracts in existence. These contracts are paper gold, a huge synthetic supply of fake gold.  If everyone decided to make their claim for real gold (similar to a run on bank), only 1 ounce would be available for every 111 claims. Such an attempt would drive the price of physical gold into the stratosphere. On a typical day last week, 55,000 of these paper contracts traded hands. That represents 5,500,000 ounces of paper gold traded each day just at the COMEX. That trading sets the price for gold in the US. But it’s possible that no one demanded delivery of gold from the COMEX on that same day. So the trading that sets the price is really for cash, not for gold. And this paper trading involves a lot of borrowing, that is, leverage.  One can easily prove this crazy situation by contacting a futures broker and creating an account with $8,000 in that account. One could then buy or sell (they call it selling short) a futures contract for 100 ounces of gold. At today’s price of $1,338 per ounce, 100 ounces of gold is worth $133,800. So as far as COMEX is concerned, you are using your $8,000 gambling stake to control $133,800 worth of gold. And this “gold” can be sold, driving down the price. Seems crazy, but it’s literally true.

So if you or I can control 100 ounces for $8,000, imagine what JP Morgan and Goldman Sachs can control with the many billions of printed money they receive from the Federal Reserve, printed money that has not been lent out to boost the economy but is being used as collateral for trading. They can push markets in whatever direction they want. The same is true for central banks, but on an even greater scale: They have no limit on the amount of cash they can print up, so they can overwhelm any market anytime they wish.

The COMEX sets the price in the US. In London, it’s the LBMA (London Bullion Market Association) which is more than 7 times larger than the COMEX in terms of the dollar value of daily paper gold trading. The LBMA admitted a couple of years ago that, like the COMEX today, their leverage ratio was over 100 to 1. And the gold market in Switzerland is just as large as the LBMA, but it is run privately by the Swiss banks, so they publish no statistics. All told there are 40 futures exchanges in the world for trading paper gold.

Another form of paper gold is certificates for gold accounts with banks. Several of these banks have been caught charging people fees for storing gold when they are actually storing nothing at all. The banks figured they could quickly meet any claims for the gold, but when the claims came in, it took them weeks to procure the gold in the open market.

And there are stocks that hold gold, options on both those stocks and on the futures described above, gold leases, and swaps contracts. The latter are private contracts and they may actually dwarf all of the rest of the paper gold claims in terms of their stated dollar value (their “notional value,” as it is called) because the central banks, like the US Federal Reserve and the Bank for International Settlements, often use swaps for their trading. What, central banks trading gold? In September, the French Central Bank admitted:

We are still active in the gold market for our own account…meaning that we are in the market nearly on a daily basis.

In that same paper, the Bank of France said they owned 2,500 tons of physical gold and that they had no plans to sell it. So what are they trading daily? Paper gold, for profit.

Sometimes people go way too far with these contracts. People thought that Bear Stearns went bankrupt in 2008 because of the mortgage market. But the astute article What Really Happened to Bear Stearns by Ted Butler explains that it was actually bad trading in gold and silver that took them down: they had massive bets that the prices of gold and silver would go down, but instead the prices shot up by a lot over a few months instead. 

BearStearnsGold

The chart above is the price of gold from 2004-2008. Notice how the price was moving up strongly prior to the collapse of Bear Stearns. Guess who picked up all of the assets and trading positions of Bear Stearns as it went bankrupt. Why our “good friends” at the company implicated in, and fined for, manipulating just about every market around since then: JP Morgan. They picked up Bear’s assets for about 6 cents on the dollar. Notice the smashdown of the gold price as soon as Morgan was in charge. The price smashdown was even worse in silver. Here’s the chart from 2004-2008 for silver:

BearStearnsSilver

It sure makes one wonder whether JP Morgan was involved in both moving the price up to bankrupt Bear Stearns, and then smashing it down once they had taken over Bear and inherited all those bets that the prices of gold and silver would drop.

Getting back to our discussion. All of these contracts taken together are called derivatives because they derive their value from the underlying value of gold. Guess who owns most of them now:

     Market Cornered: JPMorgan Owns Over 60% Notional Of All Gold Derivatives

What? Isn’t it illegal to corner a market? Don’t the regulators come down hard on anyone trying to corner a market? Yes, but as long as it isn’t gold or silver. JP Morgan is allowed to corner gold and silver because it serves the interests of those who still want the US Dollar to dominate the world so that the US can continue to exercise its “exorbitant privilege” of printing paper to trade for the real goods of other countries. So if someone like Morgan and the central banks weren’t suppressing the prices of gold and silver, it would make the Dollar and the other paper currencies look bad, and those in charge won’t allow that.

To show you how off base these government people and economists are, when Nixon took the world off of what remained of the gold standard in 1971, his chief economist was the “great” Milton Friedman. Friedman told Nixon and others that gold was deriving its value from the US Dollar, not the other way around, and that as soon as Nixon severed the link between gold and the Dollar, that the price of gold would actually fall quite a lot. He was entirely wrong, as government economists so often are, as gold never looked back again at its then-current price of $35 per ounce.

These government types have always hated gold for one reason: it inhibits their ability to wage war. We’ve covered it before: governments started going off the very-successful gold and silver standards in order to fight World War 1. That war would have been over in a few months, but that wasn’t good enough for the warmongers, they had to kill off millions of people over four years to serve their greed.

We’ll talk more about governments and gold later, including their failed attempts to suppress gold in the past, in Part 3. But you know that comment above about the gold price going into the stratosphere when people with all these paper contracts rush to convert them to physical gold? That will happen. It’s inevitable, as more and more people lose confidence in governments, banks, and the blizzard of paper claims they have created. That COMEX chart above–where it shows that the physical gold backing up the paper trading is down by 93%–says that the process is already well underway. Best to get your gold and silver before all those folks with the paper contracts try to get some because, at that point, it will be tough to find real gold at any price.

What’s up with the metals? Part 1

First, a digression right off the bat: let me say that I hope everyone who is interested in the precious metals is doing their own research on this topic so that they can make truly informed decisions, especially since I am not a registered financial advisor of any type, these are just my views of the world. One of the best ways I know to become informed on the metals is to get the free e-mails issued by GATA, the Gold AntiTrust Action Committee. You can sign up for their e-mails here. They send out links daily pointing to the best articles about gold and related topics from across the web. OK, end of digression.

*  *  *

Since I was wrong last Spring about when gold would make its next move up, let’s look at the views of three very capable market commentators who were correctly bearish on the gold price during 2013, that is, they thought that the price would drop. They were right, and perhaps their analytical work will continue being right. So let’s look at what they are saying now, and throw in the opinion of the head of the largest gold refinery in Switzerland as well.

Tom DeMark

The first analyst is Tom DeMark. Tom has been a trading advisor to the big institutions for decades. It’s rare for him to give his advice in advance to us commoners, though in his defense, he has published many of his techniques for those who wish to spend the time to learn them.

What DeMark said on December 16, 2013 about the metals is in the last minute of the short interview at this link. He said:

We’re looking for a huge move in gold next year, beginning next year. We think the bottom will occur with the tax loss selling this year.

So what he is saying is that, as soon as those who want to take trading losses on their gold positions for tax purposes (to balance off other gains they had) finish that activity, then price will begin that “huge move” up that his firm is expecting. His price projection, for a long time, for the downside in the gold price had been $1180. In the interview, he said they had revised that to somewhere between $1155 and $1180. The price went down to $1181.40 on the last day of 2013, the last possible day for tax loss selling for the 2013 tax year. That’s probably plenty good for meeting his price target, but we’d have to be institutional clients of DeMark to know whether he now thinks price might still move down to $1155. In any case, by DeMark’s famous work, the price low is already behind us or will be here very soon. There will be evidence below that JP Morgan may have been following DeMark’s advice precisely.

William Kaye

The second fellow who was right about the gold price dropping in 2013 is veteran money manager and former Goldman Sachs employee, William Kaye. Kaye repeatedly gave interviews in 2013 on King World News where he would point out movements of physical gold in the markets that indicated the next phase of price manipulation down by the Fed and the big banks would happen promptly. And it would unfold as he predicted. In this December 31, 2013 interview, Kaye said he thought the gold price could be manipulated down one more time in January, followed by a large, fast move up for the gold price to somewhere between $2,000 and $2,500 in 2014:

My guess is we are now looking at mid-to-late January of 2014 as a probable and absolute bottom, after which it is going to be difficult for sidelined investors to gain a position because gold and silver will then move very, very quickly in the other direction.  That is why most people are going to miss this move…

While all of the Western media is filled with anti-gold stories, China continues to buy virtually all of the available physical gold at these levels, and will continue to do so on any further price declines.  Also, the flow of gold into India has continued because of increased smuggling.  But none of the smuggled gold is being reported in the official import numbers.

One of the primary reasons this gold flowing into India is not being reported is because the politicians themselves control the smuggling rings.  The reason India has such a large current account deficit and a loss of confidence in the Indian currency is because of the bad government policies.  The people of India see this and so they seek refuge, as they always have throughout history, in gold…

As you know, Eric, I have extremely good sources and contacts in India because we’ve done business there for years. If our sources are correct, this year the gold imports into India are very close to 1,200 tons, which is a staggering figure.

On top of that, we have the Chinese importing a mind-boggling 2,200 tons of gold for 2013. That figure actually totals the entire global mine supply for all of 2013 outside of China…

You also have to remember that we have enormous demand from other countries around the world such as Russia, Brazil, just to name two…

Regardless, 2014 is going to be an extremely good year for the precious metals.  I believe we could easily see new highs in nominal terms in both gold and silver.  We may see $2,000 to $2,500 in gold, and $50 to $60 in silver, maybe even higher.  The bottom line is that 2014 will be the year that the cartel gets broken.

Martin Armstrong

Our third commentator is Martin Armstrong. The guy has done some of the best financial cycles work in modern history. As examples, due to his real estate cycle work for the US, he was telling clients–in the 1990’s to give them ample time to act–to be out of all US real estate investments by February, 2007; that real estate prices would then fall from 2007 into 2012, then rise into 2015 in a snapback rally that would sucker a lot of people back into real estate, and then fall again through 2033. (Yes, real estate folks, you read that right, a 26 year bear market in real estate that started in 2007.) A summary of that work published in 2009 is here, and a look at the chart from the first page tells the story very well:

ArmstrongRealEstate

To say that this was good advice, at least so far, would be quite an understatement. Also in the 1990’s, he told his clients that interest rates/mortgage rates would fall till January 2013 and then start an inexorable rise for many years to come. He was only off by six months, interest rates went to their lowest level in mid-2012 and have been generally rising since.

So the guy is very smart. But I don’t have a link to his site on the Thundering Heard home page because it is nearly unbearable to read him daily. Anyone else’s views on anything, he calls those opinions, and pelts them with ridicule and insults if they disagree with his own opinions, which he claims are not opinions, but actual facts.  His cycles work is fabulous, his knowledge of history is formidable, but when he strays from those, as he often does, you have to put your boots on and wade through it. That’s a worthwhile exercise, but you have been warned.

Anyway, Armstrong is our third analyst who was bearish on gold all year, to the point where he called anyone advising buying gold during 2013 to be a fool, criminal, and worse. But all year, he has expected a Directional Change (his capitalization) for gold in this month of January, 2014.

So with DeMark, Kaye, and Armstrong, you have three very capable analysts who think this price downmove is over, or will be in over in this month of January. If I were a person with savings denominated in fiat currency, I would be jumping all over this opportunity. But of course, people need to make their own decisions. As mentioned above, getting the free e-mails from GATA is a great place to start. And no, they don’t sell your e-mail address to others.

So what does the head of the largest Swiss gold refinery have to say about all this?

     Alex Stanczyk: Physical Supply Never Been Tighter

I’ll let the article speak for itself:

Refineries in Switzerland are still working 24 hours a day to cast bars for China, sometimes having difficulties sourcing the gold…

We met with the managing director of the largest refinery in Switzerland and spend about two hours talking to him…Now, this gentleman we were talking to probably has a better idea of physical gold flow than anybody else globally. He sees what is coming from the mines, he sees what is coming from the UK, and all over the world, as well as where its going. He indicated the price didn’t make sense because he has got so much fabrication demand. They put on three shifts, they’re working 24 hours a day, and originally he thought that would wind down at some point. Well, they’ve been doing it all year. Every time he thinks its going to slow down, he gets more orders, more orders, more orders. They have expanded the plant to where it almost doubles their capacity. 70% of their kilobar fabrication is going to China, at apace of 10 tons a week. That’s from one refinery, now remember there are 4 of these big ones [refineries] in Switzerland.

…At this Swiss refinery there have been several times this year on which they were unable to source gold, this shocked me. They’re bringing in good delivery bars, scrap and dore from the mines, basically all they can get their hands on. This gentleman has been in the business for 37 years, he was there during the last bull market in the late seventies. I asked him when was the last time this has happened, that he was unable to source gold, he said never. And I clarified it, I asked: let me make sure if I understand what you’re saying to me, in the last 37 years you’ve worked in the gold industry this has never happened? He said: this has never happened.

When do think the price is going to rise?

“I’m not comfortable to put a time on this. What I do know is that we are on the threshold of a situation that has never occurred before. A squeeze is imminent, it could take 3 months or 6 months, but all I know is that it’s coming, and I know that with 100% certainty.”

What Stanczyk is talking about is shown on the next chart, which has only been updated through the end of October. Hong Kong has imported more gold from Switzerland in 2013 than in all prior years combined!

HK-Swiss-gold-trade-10-2013

(Chart source: China Mainland Gold Import Accelerating )

Here’s a way to look at the overall Chinese gold imports from Hong Kong:

Gold_HK_to_China_2011_2012_2013

(Chart source: China Imports More Gold Via HK In 2013 Than 2011 & 2012 Combined)

And here is a chart of total Chinese imports from Hong Kong by month since Autumn 2011. And this chart doesn’t show imports from other sources or China’s own mine production, which is now the largest of all countries and which is keeping six large refineries busy in China. There have been reports (blatant lies is what they are) in the Western media that Chinese gold imports have been falling. Does this look like falling to you? Each of those numbers are tons.

China Gold Imports to October 2013 Gross

(Chart source: China October Gold Imports Surge To Second Highest Ever)

Despite strong government disincentives to buying gold in India, as we heard from Kaye above, the flow of gold can’t be stopped. Here’s a typical story:

     Smugglers smile as NRI carriers bring gold into country legally

It was evident last week when almost every passenger on a flight from Dubai to Calicut was found carrying 1kg (2.2 pounds) of gold…

This strong buying is a worldwide story:

     Scarcity of Gold in Mexico

Including Canada, Australia, and the US, as reported here by the Wall Street Journal:

Sales of gold coins are booming even as the metal’s price is falling…at mints and coin shops around the world, gold continued flying off the shelves…

Sales of Gold Maple Leaf coins by the Royal Canadian Mint surged 82.5% to 876,000 ounces in the first three quarters of 2013 from the same period of 2012. The Perth Mint, Australia’s national coin and bar producer, saw sales rise 41% to 754,635 ounces last year, while the U.S. Mint sold 14% more American Eagle gold coins than it did in 2012, along with a record amount of silver coin.

Even JP Morgan, big sellers of their own horde of physical gold earlier, which helped to drive prices lower, has been rebuilding their cache, perhaps guided by Tom DeMark’s work, or perhaps to simply be the manipulating elephant that they have been caught being in so many other markets:

     JPM’s Quiet Scramble To Refill Its Gold Vault

JPM Eligible

In Part 2, we’ll talk about how it is possible to have extraordinary worldwide demand for physical gold and still have a falling price.

Finally, a Fed Whistleblower

The claim has been made repeatedly here and elsewhere–a claim derided as conspiracy theory by the mainstream–that the US Federal Reserve has one purpose: to protect the game of the big banks. Everything else they say and do is cover for that single goal.

Thankfully, a Fed insider has offered excellent confirmation, including apologies to taxpayers for his actions. Everyone with the slightest interest in how the world actually works should read the full article by this fellow.

As background: Talk about an insider, this guy was in charge of the program through which the Fed purchased $1.2 trillion of mortgage backed securities (MBS) from the banks in 2009-2010. The Fed conjured up new electronic currency to pay for this. They call that Quantitative Easing (QE) instead of money printing because such lying does succeed in fooling most of the people most of the time.

In 2009, these MBS “assets” were called toxic assets by anyone with a fondness for truth because they were large packages of mortgages backed by sub-prime and other mortgage loans that were not being re-paid, and by residential real estate collateral that was plummeting in value. In other words, the big banks peddling and holding these assets were insolvent, bankrupt, in part because of the plunging value of their MBS. So, the Fed came to the rescue, of course, buying up toxic MBS from the big banks and paying many times the pennies-on-the-dollar actual street prices of these securities (Don’t you just love the BS terminology that pervades the financial sector?) to make the banks appear less bankrupt.

Here are some choice quotes from Andrew Huszar, a true Wall St and Federal Reserve insider:

We went on a bond-buying spree that was supposed to help Main Street. Instead, it was a feast for Wall Street.

I can only say: I’m sorry, America. As a former Federal Reserve official, I was responsible for executing the centerpiece program of the Fed’s first plunge into the bond-buying experiment known as quantitative easing. The central bank continues to spin QE as a tool for helping Main Street. But I’ve come to recognize the program for what it really is: the greatest backdoor Wall Street bailout of all time

My part of the story began a few months later. Having been at the Fed for seven years, until early 2008, I was working on Wall Street in spring 2009 when I got an unexpected phone call. Would I come back to work on the Fed’s trading floor? The job: managing what was at the heart of QE’s bond-buying spree—a wild attempt to buy $1.25 trillion in mortgage bonds in 12 months. Incredibly, the Fed was calling to ask if I wanted to quarterback the largest economic stimulus in U.S. history.

This was a dream job, but I hesitated. And it wasn’t just nervousness about taking on such responsibility. I had left the Fed out of frustration, having witnessed the institution deferring more and more to Wall Street…

In its almost 100-year history, the Fed had never bought one mortgage bond. Now my program was buying so many each day through active, unscripted trading that we constantly risked driving bond prices too high and crashing global confidence in key financial markets. We were working feverishly to preserve the impression that the Fed knew what it was doing.

It wasn’t long before my old doubts resurfaced. Despite the Fed’s rhetoric, my program wasn’t helping to make credit any more accessible for the average American. The banks were only issuing fewer and fewer loans. More insidiously, whatever credit they were extending wasn’t getting much cheaper. QE may have been driving down the wholesale cost for banks to make loans, but Wall Street was pocketing most of the extra cash.

From the trenches, several other Fed managers also began voicing the concern that QE wasn’t working as planned. Our warnings fell on deaf ears. In the past, Fed leaders—even if they ultimately erred—would have worried obsessively about the costs versus the benefits of any major initiative. Now the only obsession seemed to be with the newest survey of financial-market expectations or the latest in-person feedback from Wall Street’s leading bankers and hedge-fund managers. Sorry, U.S. taxpayer.

Trading for the first round of QE ended on March 31, 2010. The final results confirmed that, while there had been only trivial relief for Main Street, the U.S. central bank’s bond purchases had been an absolute coup for Wall Street. The banks hadn’t just benefited from the lower cost of making loans. They’d also enjoyed huge capital gains on the rising values of their securities holdings and fat commissions from brokering most of the Fed’s QE transactions. Wall Street had experienced its most profitable year ever in 2009, and 2010 was starting off in much the same way.

You’d think the Fed would have finally stopped to question the wisdom of QE. Think again. Only a few months later—after a 14% drop in the U.S. stock market and renewed weakening in the banking sector—the Fed announced a new round of bond buying: QE2…

Where are we today? The Fed keeps buying roughly $85 billion in bonds a month, chronically delaying so much as a minor QE taper. Over five years, its bond purchases have come to more than $4 trillion. Amazingly, in a supposedly free-market nation, QE has become the largest financial-markets intervention by any government in world history…

And the impact? Even by the Fed’s sunniest calculations, aggressive QE over five years has generated only a few percentage points of U.S. growth. By contrast, experts outside the Fed, such as Mohammed El Erian at the Pimco investment firm, suggest that the Fed may have created and spent over $4 trillion for a total return of as little as 0.25% of GDP (i.e., a mere $40 billion bump in U.S. economic output). Both of those estimates indicate that QE isn’t really working.

Unless you’re Wall Street. Having racked up hundreds of billions of dollars in opaque Fed subsidies, U.S. banks have seen their collective stock price triple since March 2009. The biggest ones have only become more of a cartel: 0.2% of them now control more than 70% of the U.S. bank assets…

So the big-bank rich got very much richer. What a surprise. A perfect strategy, still in full implementation in plain site, by a Fed fulfilling its real goal. The full article is here.

The quotes above might as well be directly from those derided for years as Fed conspiracy theorists. The latest survey I saw said that 74% of US citizens favor a full audit of the Fed, which is a private bank masquerading as a quasi-government agency, owned by the big banking families of the world, and which has the concession from the US Congress to print money. (Nice concession, eh?) But those 74% will likely be ignored. 90% of US citizens were against the TARP bank bailout in 2009, but it became law anyway. The people’s wishes are meaningless when it comes to the criminal partnership between Wall St and Washington DC.

Huszar didn’t name names or produce documents, so unlike other US whistleblowers, he likely won’t be jailed or hauled into endless court proceedings. But maybe this will encourage others to speak up about the Fed, perhaps even to reveal the truly nefarious aspects of this organization and its owners. And maybe someday the politicians who take millions from Wall St will become whistleblowers and tell us what marching orders they are given when they pocket those funds. Hey, a person can imagine! There’s no law against that….Is there?

An Important Whistleblower Event in the Metals

The news came out Friday at 2:00pm (circled on the chart below) that two JP Morgan employees have submitted to the government strong documentary evidence about how JP Morgan illegally manipulates prices in the precious metals markets:

     Morgan Whistleblowers Confess Bank Manipulates Gold & Silver

As you can see on this chart of Friday’s price action in gold from Kitco.com, those few traders who remained at their posts late Friday afternoon thought this was a big deal, and they ran the price of gold up $20 in the final three hours of trading:

Gold Friday13thedThey are right. This is a big deal. Why?

1. The last time compelling evidence of JP Morgan’s price suppression of the metals emerged into public view was March, 2010 when London trader Andrew Maguire told everyone that he had submitted hard evidence to the government about such manipulation, including sitting with them and showing them in real time just when and how the manipulation is carried out:

It was no coincidence gold didn’t look back from that day and it moved up over $800, from under $1,100, to (over) $1,900.  And silver moved up (an astonishing) $33, from under $17, to almost $50 in the same (time) period.

Someone tried to run Maguire down with a car two days later; he was hit by that car, but survived.

2. Many people have supplied evidence of manipulation of the metals to the US government agency that is supposed to take action about such crimes, the CTFC (Commodity Futures Trading Commission), but none, at least not that I know of, were employees of JP Morgan with direct inside information.

3. The CFTC has stonewalled the evidence received to date by staging an investigation of these allegations. The problem is, it’s been in progress for almost five years now. They haven’t taken a single action from this “investigation.” And why should they? Anyone known by Wall St to support such an action would be prevented from entering the “revolving door” and getting a cushy and highly-paid job at one of the Wall St firms as soon as their CFTC gig is over. And it is more than highly likely that the government itself is in collusion regarding the suppression of metals prices, so how can a lesser known agency point out that the US Treasury and Federal Reserve are involved in the scheme. But what was revealed Friday was that the CFTC received the data from the Morgan employees more than a year ago, in June 2012, and still they have taken no action. This will substantially increase pressure on the agency to take at least some sort of public action.

4. Allegations of price suppression in the metals markets have long been greeted as conspiracy theory by the mainstream despite the fact that government participants from the infamous Gold Pool of the 1960s admitted that they manipulated the gold price on a regular basis, though as with almost all government people, they only admitted to this after retirement or posthumously.  But with so many conspiracy theories recently being shown as conspiracy fact, and with JP Morgan getting caught in multiple illegal actions over the last few years, it is now getting tougher for anyone to claim that Morgan is not acting illegally in any market in which they participate.

The “paper gold” market (futures, options, ETFs, etc.) has been used for years to manipulate prices in the physical gold market, so much so that increasing demand for physical gold is often met by a falling paper gold price, turning all economic theory of supply and demand upside down.

The Powers That Be of the USA will do whatever they can to maintain what is rightly called the “exorbitant privilege” of having the US Dollar as the world reserve currency, which enables the US to print money to purchase real goods from the rest of the world. Part of their strategy has been to suppress the price of the precious metals to mask the deteriorating value of the Dollar. Another aspect is to keep the price of the metals very volatile to scare people out of the metals; they want to make the metals look unstable and the Dollar look comparatively stable.

Last year, the State of South Carolina considered adding gold as an investment to the state’s coffers and rejected the idea because their research showed that the precious metals are a manipulated market so they could not trust the metals as an investment. The state treasurer told the legislature this:

“Similar to other commodities, the value of gold and silver is determined by supply and demand, as well as speculation. The Federal Reserve, London Bullion Market Association, JP Morgan Chase, and HSBC Holdings have practiced fractional-reserve banking and engaged in naked short selling causing artificial price suppression.

So this testimony from JP Morgan employees is a major step toward gold and silver trading freely without government interference. No matter how old you are, gold has traded freely during your current lifetime for at most a few months at a time on a couple of rare occasions. If you hang in here for awhile longer, you will see it trade freely. And its price will be, to quote a great friend, magnificent.

Waterfall of Emerging Truth

Really, what’s happening is, it’s a change in the rules of the game, which means that your cash is increasingly at risk of ending up in the government’s hands.
–Philippa Malmgren, former Special Assistant to the President of the United States for Economic Policy

So, acceleration of US government scandals, acceleration of truth emerging from the shadows into the mainstream, acceleration of clear signs of governments desperate to hold onto power. Wow, if you’ve been reading the news, you know that things are starting to move very quickly:

NSA collecting phone records of millions of Verizon customers daily

NSA PRISM program taps in to user data of Apple, Google and others

–The US has extensive offensive cyber warfare capabilities. According to a US intelligence source, “We hack everyone everywhere.”:

     Obama orders US to draw up overseas target list for cyber-attacks

–Youtube gets a video of a former Canadian Defense Minister saying that UFOs and extra-terrestrials are real, that some of them work in and with the US government, and that there is a worldwide cabal that runs the planet for their own purposes:

Who are these vested interests, and what are they up to? …I have broadened and deepened my definition to cabal, and the cabal comprises members of the Three Sisters—the CFR, Bilderbergers, and the Trilateral Commission—the international banking cartel, the oil cartel, members of various intelligence organizations, and select members of the military…who together have become a shadow government of not only the United States, but of much of the Western world. The aim of the game is a world government comprising members of the cabal who are elected by no one and accountable to no one. And according to Mr. Rockefeller, the plan is well advanced. Does this help you to understand why our civil rights are being taken away from us?

–And weather wildness continues to accelerate, Oklahoma seems to get more than its share:

The National Weather Service reported Tuesday that the killer tornado that struck near Oklahoma City last Friday was a ferocious EF5 twister, which had winds that neared 295 mph… The weather service also said the twister’s 2.6-mile width is the widest ever recorded. According to the National Severe Storm Laboratory, the tornado blew up from one mile to 2.6 miles wide in a 30-second span… There have only been eight F5/EF-5 tornadoes in Oklahoma since 1950, the Weather Underground reports, and two of them have hit in the past two weeks. The other hit Moore on May 20, killing 24 people.

We’ll have more comments on all of that government stuff soon, but today, as part of observing this waterfall of emerging truth, let’s review material from an interview with a true insider. As stated in the post Accelerating Truth, more insiders seem willing, finally, to speak publicly about what is going on.

The insider for this post is Philippa Malmgren. She has served in the White House as the liason between the White House and the Federal Reserve, as the person responsible for all financial market issues for the President, and perhaps most importantly for our discussion today, she was part of what is officially called the President’s Working Group on Financial Markets, but which is known on the Street as the Plunge Protection Team. The PPT was created in early 1988 in reaction to the stock market crash of 1987. This crew goes to work when markets aren’t doing what the White House wants them to be doing and they interfere in whatever way they deem necessary. While the details are not disclosed, these people are said to have access to a very large pile of cash to push markets where they want them to go.

Philippa gave an amazing interview this weekend to King World News.  Here are some quotes:

…the magnitude of the debt that is held by the United States, and indeed by all of the industrialized economies that have a debt problem, is so great it cannot be paid down. The human suffering involved would be so far beyond our capacity to withstand, so it has to be defaulted on.

* * *

Look, we are in a world where every major industrialized government doesn’t have the funds to deliver on the promises they’ve made to the public. So they are going to reach for the public’s cash in different ways…. Some of it is through higher taxes. Some of it is what I would call ‘expropriation,’ although taxation and even inflation are a version of that. But for example, Portugal, about a year ago, announced that they were nationalizing three of Portugal Telecom’s pension funds and placing the assets on the government’s balance sheet so that the government’s balance sheet would look better for the purposes of negotiating with the EU.

Now, were those pensioners expropriated? Yes. It made page 14 of the Wall Street Journal and the Financial Times, as if it was a non-event. But I think what we saw in Cyprus, a really overt expropriation, we are going to see that come in lots of different forms (going forward). Some of it will be obvious like Cyprus. Some of it will be subtle like Portugal, but what’s sure is that it’s happening.

So, yes, we have a really important political, philosophical battle now as states (and governments) try to find a way to take your cash in order to fund themselves, and not necessarily to the citizens best interest.

Really what’s happening is it’s a change in the rules of the game, which means that your cash is increasingly at risk of ending up in the government’s hands. So this is what we need to be alert to around the world.

* * *

You just have to whisper at it (the price of gold), and you can move it big time. Are governments good at that? Yes, they are good at that.

* * *

It is true that governments hate it when gold starts going through the roof, especially when they are in the midst of the largest devaluation, currency debasement strategy ever known…. We have never seen so many large industrialized economies all adopt this strategy simultaneously.

* * *

…this is one reason that many of the institutions that I’m advising are very wary about gold is because they do feel it’s subject to manipulation. That (as a result) the volatility is too heart-stopping to withstand.

And they are looking at other options. One option is definitely the world of diamonds. I see lots of private wealth moving in that direction. That’s one reason we see diamonds hitting absolutely record high prices. It’s because you can move an immense amount of value across a border with this thing in your pocket that a metal detector cannot find.

By the way, I was in charge of anti-money laundering policy for the U.S. government, so I’m not condoning this. I’m just saying it’s a fact. In a world where inflation pressures are definitely ripping through emerging markets, people want to move ‘value.’ And in a world where currencies are being debased, they want to hang on to value.

I’ve said a number of those things on this site, some in almost precisely the same words. The web sites listed on the Blogroll for this site published most of these things earlier than I did. These things are not complex. They are easy and clear. But I thought that perhaps these things would mean more to readers if they heard it from a true big-time insider. Let’s summarize:

1. Governments made lots of financial promises they cannot keep.

2. Governments have borrowed way more money than they can ever pay back.

3. They will try to disguise Points 1 and 2 by printing a lot of money because they see this as the most palatable way to default on their obligations, that is, they will pay their debts in money that is worth less and less and less…

4. Governments are going to do whatever they can to confiscate money from people to remain in power, in both subtle and overt ways.

5. Governments who are debasing their currency hate it when the gold price rises as a direct reflection of people trying to defend themselves from the money printing and the confiscations. So they will try to keep you in their confiscation system by scaring you away from gold. By having the price of gold and silver move wildly when priced in dollars, what governments are trying to do is to convince you that an unbacked currency that can be created digitally in infinite quantities is stable…and that gold and silver, honored as money for thousands of years, is not.

Philippa mentioned diamonds for wealth preservation and that has not been mentioned at all on Thundering Heard. The reasoning is threefold: I am not an expert on diamonds; I have heard of other non-experts who attempt to preserve wealth via diamonds and get fleeced by those who are experts; and the diamond market is a cartel run by DeBeers and the Russians where price is falsely supported by these suppliers withholding huge supplies of diamonds from the open market, so in my view, if their cartel ever gets broken, the price crash in diamonds will be epic.

However, Philippa is right: at least for now, for hiding portable wealth, diamonds are very tough to beat. And her clients are large institutions, sovereign wealth funds, etc. These people can afford to hire experts to make sure they don’t get fleeced when they buy diamonds. So if you have such expertise yourself, or access to it through friends, diamonds might be a very good way to go. But if you do not have access to such expertise, in my view, gold is far better because if you buy minted bullion coins from a reputable dealer, you don’t need to be an expert. Though I guess it is best to mention that the following quote was the advice for getting through the financial collapse from a book mentioned in What is the Transition? Conclusion, that is, the Sanctus Germanus Prophecies Volume 1, published in 2003:

Buy minted gold and silver coins, other precious metals or color gemstones. This is your 100 percent guarantee against the financial collapse. Store them in a safe place other than a bank, as bank failures will multiply. Few, if any, will survive. The US and other country currencies will collapse just as the Confederate currency did after the Civil War in the US.

The overall message here is: if you have savings in bank or brokerage accounts, governments are trying to figure out how to grab that money. They are making this very clear, as I will show shortly in separate posts on the threats to bank accounts and brokerage accounts that have recently been clearly announced by governments.