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Month: September 2017

China Catalyst To Send Gold Over $10,000 Per Ounce?

China Catalyst To Send Gold Over $10,000 Per Ounce?


Jim Rickards is on record forecasting $10,000 gold.

But is China about to provide the catalyst to send gold even higher? And by how much?

Today, we fare forth in the spirit of speculation… follow facts down strange roads… and arrive at a destination stranger still…

China — the world’s largest oil importer — struck lightning through international markets recently.

According to the Nikkei Asian Review, China has plans to buy imported oil with yuan instead of dollars.

Exporters could then exchange that yuan for gold on the Shanghai Gold Exchange.

Not only would the plan bypass the dollar entirely… it would restore gold’s role in international commerce for the first time since 1971, when Nixon hammered the last nail through Bretton Woods.

If the rumors hold true, China’s plan could enter effect by the end of this year.

Billionaire business magnate and sound money advocate Hugo Salinas Price ran China’s plan through his calculator.

It turned up a basic math problem that spells drastically higher gold prices — if the plan is to work.

Details to follow.

But first some background on oil and gold… a brief detour down Bretton Woods Lane…

Price:

By 1970, it was evident to those running the U.S. that it would very soon be necessary to import large quantities of oil from Saudi Arabia. Under the Bretton Woods Agreements of 1945, the immense quantities of dollars that would shortly flow to Saudi Arabia in payment of their oil would be claims upon U.S. gold, at the time quoted at $35 an ounce. Those claims would surely deplete the remaining gold held by the U.S. Treasury in short order.

Washington found itself on the sharp hooks of a dilemma…

Dramatically raise the price of gold to limit redemptions — and devalue the dollar in the process — or repudiate its commitments under Bretton Woods.

Dishonor, that is… or dishonor.

It chose dishonor.

Price again:

To continue under the Bretton Woods monetary system would have meant that the U.S. would have been forced to raise the price of gold to an enormous figure in order to reduce the amount of gold payable to the Saudis to a tolerable level. But raising the dollar price of gold in that manner would have constituted a great devaluation of the dollar and collapsed its international prestige; that in turn would have ended the predominance of the U.S. as the No. 1 power in the world. The U.S. was not willing to accept that outcome. So Nixon “closed the gold window” on Aug. 15, 1971.

If China is willing to trade gold for oil under its latest plan, a similar dynamic enters play.

Consider:

China takes aboard some 8 million barrels of oil a day.

That’s 2.92 billion barrels per year — nearly 3 billion in all.

But China holds only a few thousand metric tons of gold (officially about 1,850. Some estimate the true figure much higher).

You see the problem, of course.

China rapidly depletes its gold reserves if too many oil exporters choose to exchange yuan for gold.

If the plan’s to be sustainable at all, gold must rise — drastically — in order to balance the vast amounts of oil it’s supporting.

As Price explains, “To balance the mass of oil received by China against a limited amount of available gold… it will be necessary for gold to skyrocket upward in yuan terms and, necessarily, in dollar terms as well.”

Price crunched the numbers…

One ounce of gold (about $1,300) currently fetches 26 barrels of oil (about $50 per).

One barrel of oil is worth 1.196 grams of gold.

Price calls this ratio “an unsustainably low purchasing power of gold vis-a-vis oil.”

Only a drastically higher gold price would render the plan plausible.

How far would gold have to climb before the relationship was stable in Price’s estimate?

Ten times. Thus, Price arrives at a reasonable gold price:

$13,000 per ounce.

Price:

At $13,000 per gold ounce, one barrel of oil, at $50, will be bought with 0.1196 grams of gold; perhaps we may see $13,000 per oz gold in the not distant future.

Here, a road map to $13,000 gold.

We don’t know if Price’s figure is correct.

But if not $13,000, it seems gold would have to rise dramatically if Price’s thesis is correct — or else China’s plan collapses.

We can only conclude that China knows the implications of the math.

$13,000 gold also means a massive devaluation of the yuan.

China prefers a weak yuan to goose exports. But a worthless yuan?

The plan may prove a mirage in the end for all we know.

But if the plan does proceed… Jim Rickards’ $10,000 gold prediction might be vindicated — fully and then some.

By Brian Maher, Managing editor, The Daily Reckoning

 

Gold Prices (LBMA AM)

28 Sep: USD 1,284.30, GBP 961.04 & EUR 1,091.40 per ounce
27 Sep: USD 1,291.30, GBP 963.83 & EUR 1,099.54 per ounce
26 Sep: USD 1,306.90, GBP 969.59 & EUR 1,105.38 per ounce
25 Sep: USD 1,295.50, GBP 957.89 & EUR 1,089.26 per ounce
22 Sep: USD 1,297.00, GBP 956.15 & EUR 1,082.09 per ounce
21 Sep: USD 1,297.35, GBP 960.56 & EUR 1,089.00 per ounce
20 Sep: USD 1,314.90, GBP 970.53 & EUR 1,094.79 per ounce

Silver Prices (LBMA)

28 Sep: USD 16.82, GBP 12.53 & EUR 14.28 per ounce
27 Sep: USD 16.89, GBP 12.58 & EUR 14.38 per ounce
26 Sep: USD 17.01, GBP 12.67 & EUR 14.43 per ounce
25 Sep: USD 16.95, GBP 12.57 & EUR 14.27 per ounce
22 Sep: USD 16.97, GBP 12.52 & EUR 14.18 per ounce
21 Sep: USD 16.95, GBP 12.58 & EUR 14.24 per ounce
20 Sep: USD 17.38, GBP 12.84 & EUR 14.48 per ounce


Recent Market Updates

– Financial Advice From Man Who Made $1+ Billion in 1929 – Importance Of Being Patient and “Sitting”
– “Gold prices to reach $1,400 before the end of the year” – GoldCore
– Commodities King Gartman Says Gold Soon Reach $1,400 As Drums of War Grow Louder
– Bitcoin “Is A Bubble” but Gold Is Money Says World’s Biggest Hedge Fund Manager
– Pensions and Debt Time Bomb In UK: £1 Trillion Crisis Looms
– Gold Investment “Compelling” As Fed May “Kill The Business Cycle”
– “This Is Where The Next Financial Crisis Will Come From” – Deutsche Bank
– Global Debt Bubble Understated By $13 Trillion Warn BIS
– Bitcoin Price Falls 40% In 3 Days Underlining Gold’s Safe Haven Credentials
– Gold Up, Markets Fatigued As War Talk Boils Over
– Oil Rich Venezuela Stops Accepting Dollars
– Massive Equifax Hack Shows Cyber Risk to Deposits and Investments Today
– British People Suddenly Stopped Buying Cars

Important Guides

For your perusal, below are our most popular guides in 2017:

Essential Guide To Storing Gold In Switzerland

Essential Guide To Storing Gold In Singapore

Essential Guide to Tax Free Gold Sovereigns (UK)

Please share our research with family, friends and colleagues who you think would benefit from being informed by it.

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Roadside bombs in Afghanistan kill cop, civilian

Author: 
AP
Sat, 2017-09-30 03:00
ID: 
1506796456371145300

KABUL: At least two people including a police officer were killed by roadside bombs in Afghanistan’s western Herat province, a provincial official said Saturday.
Gelani Farhad, spokesman for Herat’s provincial governor, said another officer was wounded when a police vehicle triggered the explosive in the Adraskan district.
In a separate incident, Farhad said a civilian motorcycle hit a roadside bomb, killing one civilian and wounding another in the Shindand district.
In yet another report from northern Kapisa province, at least nine civilians were wounded when a bicycle bomb exploded in a bazaar, said Qais Qaderi, spokesman for the provincial governor. Two small children were among the wounded, including one who was in critical condition, he said.
No one immediately claimed responsibility for the attacks in Herat or Kapisa.
In a separate report from southern Kandahar province, a woman was killed after a civilian vehicle came under attack by unknown gunmen, said Niamat Khan, director of the regional Kandahar hospital. He said five others were wounded in the attack that took place in Shah Wali Kot district.
Late on Friday, Daesh on its Amaq news agency claimed responsibility for a suicide bombing outside a mosque in Kabul after Friday prayers. It said Zaid Al-Khorasani, an Afghan, carried out the attack in which authorities say at least five people were killed and 29 others wounded.
Najib Danish, spokesman for the Interior Ministry, said three people suspected of being involved in the attack have been arrested, and an investigation was underway.
The attack took place two days before the day of Ashura, but Afghanistan has faced a series of large-scale attacks in recent months targeting minority Shiites. Last month, militants stormed a packed mosque in Kabul during Friday prayers in an attack that lasted for hours and ended with at least 20 worshippers killed and another 50 seriously wounded many of them children. Daesh claimed it was responsible.
Additional police forces have been deployed by the Interior Ministry, especially around mosques in different provinces of the country, ahead of the Ashura holy day Sunday.

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Journalism Is Broken – Twitter, Trump, & The NYTimes

Authored by Chris Arnade via Medium.com,
Leaving Twitter means people send you articles about others who leave Twitter, so I saw the story of a NY Times reporter leaving Twitter, and then the follow-up analysis of what that means. That analysis article…

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Oxford college removes Suu Kyi portrait

Author: 
AFP
Sat, 2017-09-30 13:43
ID: 
1506796144591113900

LONDON: The Oxford University college where Aung San Suu Kyi studied said Saturday it had taken down a portrait of the Myanmar leader, a decision that follows widespread criticism of her over the Rohingya crisis.
The portrait, which was on display in the main entrance of St. Hugh’s College, has been placed in storage and was replaced on Thursday with a new painting gifted by Japanese artist Yoshihiro Takada.
Nobel Peace Prize laureate Suu Kyi studied at St. Hugh’s, graduating in philosophy, politics and economics in 1967 before completing a masters in politics in 1968.
“We received a new painting earlier this month which will be exhibited at the main entrance for a period,” the college said in a statement.
“The painting of Aung San Suu Kyi has meanwhile been moved to a secure location.”
The university did not say whether the removal was linked to the ongoing crisis in Myanmar’s western Rakhine State.
Communal violence has torn through the state since Muslim minority Rohingya militants staged deadly attacks on police posts on Aug. 25.
An army-led fightback has left scores dead and sent around half a million Rohingya fleeing the mainly Buddhist country into neighboring Bangladesh.
The UN describes the situation as “ethnic cleansing.”
The removal of the 1997 portrait by the Chinese artist Chen Yanning comes a few days before new students arrive at the college to start their courses.
The portrait belonged to Suu Kyi’s husband, the Oxford academic Michael Aris, and was bequeathed to the college after his death in 1999.
St. Hugh’s also counts British Prime Minister Theresa May among its alumni.

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Meanwhile, Bitcoin Soars 40% From Post Dimon, China Lows

Whatever doesn’t kill bitcoin – and many have tried in the past month to do just that – has a habit of making it stronger, and two weeks after the cryptocurrency crashed 40% from an all time high of $5,000 to less than $3,000 when first China banned ICOs and exchange trading of cryptocurrencies, then Jamie Dimon called it a fraud, the BIS said it has no future unless it is subsumed by central banks, days after South Korea likewise ordered an end to ICOs, the SEC filed the first ever civil charges against companies raising capital through ICOs and Switzerland announced it too was cracking down on ICOs, bitcoin has soared over 40% from its lows, and its price is now back where it was before the Chinese crackdown.

… while ethereum, now back over the resistance level of $300, has staged a similar remarkable rebound despite constant attempts to crush both cryptocurrencues and end ICOs (which as we said several months ago, will likely make ethereum more attractive in the long run as the outright criminal scams associated with ICOs become a distant memory).

As Mate Cser points out, Bitcoin is “getting closer to the $4400 resistance after leaving behind the $4150 level, with the most valuable cryptocurrency being in the forefront of the advance yet again. BTC is the closest to its all-time high among the majors, as it is up by more than 40% since hitting the bottom. With several strong support/resistance levels already below the current price, $4000, $3800, and $3500, the coin looks poised to test the all-time high near $5000 in the coming weeks.”

Meanwhile, as if responding directly to a recent report from Macquarie’s Viktor Shvets who said that “modern finance” – with global financial instruments of $500 trillion, or 5x global GDP, not bitcoin, is the true fraud...

 

… and that the real danger is not bitcoin, but the reserve status of the dollar, on Friday, Philly Fed president Harker said that Bitcoin and other cryptocurrencies are “unlikely to weaken the Fed Reserve’s influence on the U.S. economy.” He is right: the Fed is perfectly capable of doing that on its own, especially if Yellen makes a few more admissions how inflation is a mystery.

Harker spoke at a fintech event hosted by the Philadelphia Fed.

While some have worried that the rise of a cryptocurrency would make it harder for the Fed to manage the rate of inflation, Harker showed that he isn’t concerned about the prospect. Onstage, he went so far as to contend that bitcoin has yet to be tested by a real catastrophe, but that when one happens, people will be more likely to flock to government-backed money.

The paper that’s in your pocket, that we call money, only has value because we believe it has value, because we believe the government stands behind it. It’s all trust issues,” Harker said.

“And so, when cryptocurrencies and other forms of currency emerge, I think the basis of that has to be how do they create that trust?”

Some could counter that the Fed’s $4.5 trillion in QE has also yet to be tested by a real catastrophe, and should it fail the test, the consequences for the US currency would be catastrphic.

Harker also acknowledged that while citizens have put varying degrees of trust in what he called the “sovereign states” that stand behind currencies today, other currency models might be possible. This includes, he said, ways in which trust might come from another “large player,” or as in the case of bitcoin, an algorithm.

But, as Coindesk noted, his most pertinent critique was perhaps that cryptocurrencies have not been significantly tested enough to ensure confidence. Despite issues such as the collapse of Mt. Gox, once the bitcoin’s network’s largest exchange, or the ongoing bitcoin scaling debate, Harker argued that cryptocurrency has been largely insulated from “bad times.”

“Everything can work in good times,” he added, although he may have been envisioning the global stock market which is at all time highs only thanks to trillions in liquidity injections by central banks.

This leads to the second reason Harker said he’s not concerned about cryptocurrency hamstringing the Fed’s monetary influence: If – and, according to Harker, when – things go wrong, the Federal Reserve and other state agencies will likely be asked to get involved anyway.

“When things really go bad, where do Americans turn?” he asked “Well, they’re going to come back to the government. That’s the history of the country.”

Translated: when, not if, a new crisis comes it will be up to US taxpayers to inject trillions to keep the system going. Again.

Separately, Harker also discussed cryptocurrency regulation. The Philly Fed president was asked how the Federal Reserve might assist or advise on such a strategy. (The Federal Reserve has previously noted that it does not have the authority to directly regulate the technology.) On this point, he was inconclusive, suggesting any ideation is today in early stages.

“How do you regulate an algorithm?” he asked, drawing laughs from the audience. “I don’t know yet. The answer is we have to continue to study this.”

Still, that doesn’t mean there aren’t possible next steps. For example, those studies might include looking more closely at how another algorithm, perhaps one created by the Federal Reserve, might ensure fairness in mathematical form, something Harker said is crucial to any potential cryptocurrency controls.

He concluded: “Before we even think about how you regulate an algorithm, how would you even build an algorithm that would have that sense of fairness in it? It is a fairly deep technical question.”

Ah yes, the Fed which itself admitted last week it has made America’s “Top 1” 70% wealthier than the “Bottom 90%”

 

… opining on matters of fairness. Brilliant.

Meanwhile, the cryptosurge continues.

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Bitcoin thieves abduct bizman, rob him of Rs 36L

The woman in the gang contacted him posing as a Bitcoin dealer and asked him to meet her at mall in east Delhi. She told him to get actual currency …The post Bitcoin thieves abduct bizman, rob him of Rs 36L appeared first on bitcoinmining.shop.

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Trump Administration Expresses Bullish Stance on Blockchain

TheMerkle Trump Administration Bullish BlockchainAlthough most people would not expect it, the Trump administration is pretty keen on blockchain technology. In fact, the team purports to be more committed to the blockchain than ever before. Improving US governmental operations is the first priority in this regard, and distributed ledger technology is considered “essential” to domestic policy and strategy development. It’s a surprising turn of events, but certainly a welcome change of pace. Trump Administration Loves Blockchain Technology Government operations are not as streamlined as they could be right now. That is only to be expected, considering it takes a lot of time, effort, and communication

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The Financialization Of America… And Its Discontents

Authored by Charles Hugh Smith via OfTwoMinds blog,

Labor’s share of the national income is in freefall as a direct result of the optimization of financialization.

The Achilles Heel of our socio-economic system is the secular stagnation of earned income, i.e. wages and salaries. Stagnating wages undermine every aspect of our economy: consumption, credit, taxation and perhaps most importantly, the unspoken social contract that the benefits of productivity and increasing wealth will be distributed widely, if not fairly.

This chart shows that labor’s declining share of the national income is not a recent problem, but a 45-year trend: despite occasional counter-trend blips, labor (earnings from labor/ employment) has seen its share of the economy plummet regardless of the political or economic environment.

Down, Down, Down

Given the gravity of the consequences of this trend, mainstream economists have been struggling to explain it, as a means of eventually reversing it.

The explanations include automation, globalization/offshoring, the high cost of housing, a decline of corporate competition (i.e. the dominance of cartels and quasi-monopolies), a failure of our educational complex to keep pace, stagnating gains in productivity, and so on.

Each of these dynamics may well exacerbate the trend, but they all dodge the dominant driver of wage stagnation and rise income-wealth inequality: our economy is optimized for financialization, not labor/earned income.

What does ‘our economy is optimized for financialization’ mean?

It means that capital and profits flow to the scarcities created by asymmetric access to information, leverage and cheap credit — the engines of financialization.

Financialization funnels the economy’s rewards to those with access to opaque financial processes and information flows, cheap central bank credit and private banking leverage.

Together, these enable financiers and corporations to get the borrowed capital needed to acquire and consolidate the productive assets of the economy, and commoditize those productive assets, i.e. turn them into financial instruments that can be bought and sold on the global marketplace.

Labor’s share of the national income is in freefall as a direct result of the optimization of financialization.

Meanwhile, the official policy goal of the Federal Reserve and other central banks is to generate 3% inflation annually. Put another way: the central banks want to lower the purchasing power of their currencies by 33% every decade.

In other words, those with fixed incomes that don’t keep pace with inflation will have lost a third of their income after a decade of central bank-engineered inflation.

But in an economy in which wages for 95% of households are stagnant for structural reasons, pushing inflation higher is destabilizing.

There is a core structural problem with engineering 3% annual inflation. Those whose income doesn’t keep pace are gradually impoverished, while those who can notch gains above 3% gradually garner the lion’s share of the national income and wealth.

Wages for the bottom 95% have not kept pace with official inflation (never mind real-world inflation rates for those exposed to real price increases in big-ticket items such as college tuition and health care insurance).

Most households are losing ground as their inflation-adjusted ( real) incomes stagnate or decline.

The stagnation of wages is structural, the result of multiple mutually reinforcing dynamics.

These include globalized wage competition (everyone in tradable sectors is competing with workers around the world); an abundance/oversupply of labor globally; the digital industrial revolution’s tendency to concentrate rewards in the top tier of workers; the soaring costs of labor overhead (health care insurance, etc.) that diverts cash that could have gone to wage increases to cartels, and the dominance of credit-capital over labor.

The only possible output of pushing inflation higher while wages for the vast majority are stagnating is increasing wealth-income inequality — precisely what’s happened over the past decade of Federal Reserve policy.

The stagnation of wages isn’t supposed to happen in conventional economics. Once unemployment drops to the 5% range, full employment is supposed to push wages higher as employers are forced to compete for productive workers.

Alas, conventional economics is incapable of grasping the fluid dynamics of labor, automation, capital, globalization and cost structures dominated by monopolies and cartels in the 4th (digital) industrial revolution.

In sector after sector, employers can’t afford to pay more wages as labor overhead costs march ever higher while prices are held down by competition and oversupply. In other sectors, the rigors and supply, demand, stagnant sales and productivity push employers to automate whatever can be automated, and push tasks that were once performed by employees onto customers.

So why are central banks obsessed with pushing inflation higher?

The conventional answer is that a debt-fueled economy requires inflation to reduce the debtors’ future obligations by enabling them to pay their debts with constantly inflating currency.

This same dynamic enables the central state to pay its obligations (social security, interest on the national debt, etc.) with “cheaper” currency.

After a decade of 3% inflation, a $100 debt is effectively reduced to $67 by the magic of inflation. If wages rise by 3%, the worker who earned $100 at the start of the decade will be earning $133 by the end of the decade, giving the worker 33% more cash to service debts.

The government benefits from inflation in another way: incomes pushed higher by inflation push wage earners into higher tax brackets, and their higher incomes generate higher taxes.

All this wonderfulness of inflation is negated if wages can’t rise in tandem with inflation. In the view of the central banks, deflation (i.e. wages buy more goods and services every year) is bad, and it’s not hard to understand why.

The private banking sector benefits from inflation as well. The lifeblood of banking profits is transaction and processing fees from issuing new credit. Since inflation enables households to buy more stuff with credit and service more debt, banks benefit immensely.

Deflation, on the other hand, is Kryptonite to bank profits – households earning less every year are more likely to default on existing debt and eschew new debt. As wages stagnate, an increasing percentage of the populace becomes uncreditworthy, i.e. a marginal borrower who isn’t qualified to borrow (and thus spend) more.

Unfortunately for the Fed and other central banks, there is no way they can push wages higher to keep pace with inflation. Short of creating $1 trillion in new currency and sending a check for $10,000 to every household (something central banks aren’t allowed to do), central banks can’t force employers to pay higher wages or force customers to pay higher prices to enterprises.

Pushing inflation higher while wages stagnate can be charitably called insane. Less charitably, it’s evil, as it strips purchasing power and wealth from all whose income isn’t keeping pace with central bank-engineered inflation.

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