Au prime
Federal reserve stewardship
The Gold Dinar: Saving the world economy from Gaddafi 5.6.11 RT cf video
http://www.globalresearch.ca/the-gold-dinar-saving-the-world-economy-from-gaddafi/24639
Some believe it is about protecting civilians, others say it is about oil, but some are convinced intervention in Libya is all about Gaddafi’s plan to introduce the gold dinar, a single African currency made from gold, a true sharing of the wealth.
“It’s one of these things that you have to plan almost in secret, because as soon as you say you’re going to change over from the dollar to something else, you’re going to be targeted,” says Ministry of Peace founder Dr James Thring. “There were two conferences on this, in 1986 and 2000, organized by Gaddafi. Everybody was interested, most countries in Africa were keen.”
Gaddafi did not give up. In the months leading up to the military intervention, he called on African and Muslim nations to join together to create this new currency that would rival the dollar and euro. They would sell oil and other resources around the world only for gold dinars.
It is an idea that would shift the economic balance of the world.
A country’s wealth would depend on how much gold it had and not how many dollars it traded. And Libya has 144 tons of gold. The UK, for example, has twice as much, but ten times the population.
“If Gaddafi had an intent to try to re-price his oil or whatever else the country was selling on the global market and accept something else as a currency or maybe launch a gold dinar currency, any move such as that would certainly not be welcomed by the power elite today, who are responsible for controlling the world’s central banks,” says Anthony Wile, founder and chief editor of the Daily Bell.
“So yes, that would certainly be something that would cause his immediate dismissal and the need for other reasons to be brought forward from moving him from power.”
And it has happened before.
In 2000, Saddam Hussein announced Iraqi oil would be traded in euros, not dollars. Some say sanctions and an invasion followed because the Americans were desperate to prevent OPEC from transferring oil trading in all its member countries to the euro.
A gold dinar would have had serious consequences for the world financial system, but may also have empowered the people of Africa, something black activists say the US wants to avoid at all costs.
“The US have denied self-determination to Africans inside the US, so we are not surprised by anything the US would do to hinder the self-determination of Africans on the continent,” says Cynthia Ann McKinney, a former US Congresswoman.
The UK’s gold is kept in a secure vault somewhere in the depths of the Bank of England. As in most developed countries, there is not enough to go around.
But that is not the case in countries like Libya and many of the Gulf States.
A gold dinar would have given oil-rich African and Middle Eastern countries the power to turn around to their energy-hungry customers and say: “Sorry, the price has gone up, and we want gold.”
US and its NATO allies literally could not afford to let that happen.
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ongoing informal dialogue re motives for & process of buying bullion retail :
A. Au price April 2013 breakdown is irrelevant. http://abcnews.go.com/blogs/business/2013/04/gold-investors-exit-amid-price-collapse/
Demand is so high that there is no retail availability at spot price even with a 20% "premium" (commission). http://wallstcheatsheet.com/stocks/the-u-s-mint-halts-american-gold-eagle-sales.html/ This headline, however, is misleading.
Next time you're south of the border, after betting at Caliente, visit the place that sells gold retail in Tijuana or Tecate, which you found by doing your Net homework.
Q. Way too much hassle for a $1000 to $2000 buy. Out of pocket expenses to make such a purchase is bothersome. Yes, I'll double my money in a decade or so but not enough profit to make a difference in my bottom line. If I had $400,000 laying around it would be a different story. And please spare me the "it may be all the store accepts for bread to keep your family alive" scenario.
A. The logic of bullion purchase & ownership is not as a trading commodity. It is strategic, very long term insurance, the opposite end of the diversification scale from intraday swing trading.
Q. paltry $2000 of gold and silver as insurance for what ? Stock market liquidity following the hacked AP tweet 4.23.13 had "never dropped that quickly and that far that fast—ever" aka "tweet retreat" http://bit.ly/12LbVDF
A. "paltry $2000" = $20K or $200K when a market that "never dropped that quickly and that far that fast — ever" doesn't come back, or banks let you get robbed 100% over the weekend, making you the new flavor of Cypriot http://www.occupycorporatism.com/malware-uses-windows-to-extract-customer-data-from-cash-registers-atms/ http://truth-out.org/news/item/15401-it-can-happen-here-the-confiscation-scheme-planned-for-us-and-uk-depositors OR when the BRICs break the dollar as global reserve currency in the process of writing the thousandth OPEC delivery contract with payment via gold yuan or gold dinar. http://www.globalresearch.ca/the-gold-dinar-saving-the-world-economy-from-gaddafi/24639 Of course, you can always rely on a sequestered U.S. military to save you. Oh, that's right, your bank account isn't big enough to qualify, and the National Guard is too busy running terror "training exercises" to justify keeping their budget, so it will be awhile until they get to your neighborhood. http://theminorityreport.forummotion.com/t1335-identity-of-the-khaki-wearing-boston-bombing-operatives-revealed Or the bank just won't cash your paycheck because they already know the bank against which it is drawn is so debt laden, no tax payer bailout can fix the problem http://www.alternet.org/economy/wall-street-ticking-time-bomb-could-blow-your-bank-account Food riots & bank runs will be the symptoms, not the cause. By then you will have no way to acquire gold or silver to buy your escape from involuntary slave status to the County state of emergency authorities conscripting "rescue & recovery" battalions from the "shelter in place" detention camps. Au & Ag are disaster insurance, not swing traded investments. Why do you think your mortgage servicer requires you to keep enough insurance to rebuild ? Oh, I forgot, you know nothing about "your" mortgage you pay. Remember what my mom & David Stockman say : Hide in cash, except that cash is depreciating in purchasing power faster than NEWL http://finance.yahoo.com/blogs/daily-ticker/stockman-bubbles-over-hide-cash-150205492.html
Q. Food riots & bank runs - just saw a documentary on the History channel about how the soon to die in Pompeii were clutching on to their gold coins as the deadly dust descended upon them. If there are food riots in America, than a couple of grand of gold/silver won't mean a pinch of shit.
A. In saying so, you extrapolate a worst case or singular scenario from a sole example of validation, anecdotal evidence. Logic alone indicates Au & Ag in hand offer substantially more salvation potential than a lack of them. Some bankers will survive the apocalypse. They will offer a higher rate of exchange for bullion than other commodities, like your back breaking labor or wife's sexual favors, for the same reason they always have : Au & Ag are a highly concentrated, easily transported medium of exchanging wealth. As for Pompeii, the mummies you tout are the ones who failed to escape disaster with their bullion. What archeologists can't show you are all the survivors who did successfully escape with their bullion.
Gangster State America — Paul Craig Roberts
5.13.13 http://www.paulcraigroberts.org/2013/05/13/gangster-state-america-paul-craig-roberts/
Collusion between federal authorities and banksters in a criminal conspiracy to rig the markets for gold and silver.
My explanation that the sudden appearance of an unprecedented 400 ton short sale of gold on the COMEX in April { 2013 }was a manipulation designed to protect the dollar from the Federal Reserve’s quantitative easing policy has found acceptance among gold investors and hedge fund managers.
The sale was a naked short. The seller had no gold to sell. COMEX reported having gold only equal to about half of the short sale in its vaults, and not all of that was available for delivery. No one but the Federal Reserve could have placed such an order, and the order came from one of the Fed’s bullion banks, one of the entities “too big to fail.”
Bill Kaye of the Greater Asian Hedge Fund in Hong Kong and Dave Kranzler of Golden Returns Capital have filled in the details of how the manipulation worked. Being sophisticated investors of many years of experience, both Kaye and Kranzler understand that the financial press runs with the authorized story planted to serve the agenda that has been put into play.
Institutional investors who have bullion in their portfolio do not want the expense associated with storing it securely. Instead, they buy into Exchange Traded Funds (ETF) and hold their bullion in the form of a paper claim. The largest, the SPDR Gold Trust or GLD, trades on the New York Stock Exchange. The trustee and custodian is a bankster, and only other banksters are able to turn investments into delivery of physical bullion. Only shares in the amount of 100,000 can be redeemed in gold.
The price of bullion is not set in the physical market where individuals take delivery of bullion purchases. It is set in the paper futures market where short selling can drive down the price even if the demand for physical possession is rising. The paper gold market is also the market in which people speculate and leverage their positions, place stop-loss orders, and are subject to margin calls.
When the enormous naked shorts hit the COMEX, stop-loss orders were triggered adding to the sales, and margin calls forced more sales. Investors who were not in on the manipulation lost a lot of money.
The sales of GLD shares are accumulated by the banksters in 100,000 lots and presented to GLD for redemption in gold acquired at the driven down price.
The short sale is leveraged by the stop-loss triggers and margin calls, and results in a profit for the banksters who placed the short sell order. The banksters then profit again as they sell the released gold into the physical market, especially in Asia, where demand has been stimulated by the sharp drop in bullion price and by the loss of confidence in fiat currency. Asian prices are usually at a higher premium above the spot prices in New York-London.
Some readers have said “don’t bet against the Federal Reserve; the manipulation can go on forever.” But can it? As the ETFs such as GLD are drained of gold, their ability to cover any of their obligations to investors diminishes. In my opinion, these ETFs are like a fractional reserve banking system. The claims on gold exceed the amount of gold in the trusts. When the ETFs are looted of their gold by the banksters, the gold price will explode, as the claims on gold will greatly exceed the supply.
Kranzler reports that the current June futures contracts are 12.5 times the amount of deliverable gold. If more than 8 percent of these trades were to demand delivery, COMEX would default. That such a situation is possible indicates the total failure of federal financial regulation.
What the Federal Reserve has done in order to maintain its short-run policy of protecting the “banks too big too fail” is to make the inevitable reckoning more costly for the US economy.
Another irony is the benefactors of the banksters sale of the gold leeched from the gold ETFs. Asia is the beneficiary, especially India and China. The “get out of gold line” of the US financial press enables China to unload its excess supply of dollars, accumulated from the offshored US economy, into the gold market at a suppressed price of gold.
Kranzler points out that not only does the Fed’s manipulation permit Asia to offload US dollars for gold at low prices, but the obvious lack of confidence in the dollar that the manipulation demonstrates has caused wealthy European families to demand delivery of their gold holdings at bullion banks (the bullion banks are essentially the “banks too big to fail”). Kranzler notes that since January 1, more than 400 tons of gold have been drained from COMEX and gold ETF holdings in order to satisfy world demand for physical possession of bullion.
digital currency also cf. http://sjcite.info/ct.html
US seizes top Bitcoin exchange as crackdown begins 5.15.13
http://rt.com/usa/bitcoin-exchange-seized-crackdown-begins-334/
The US Department of Homeland Security seized a payment processing account Tuesday belonging to Mt. Gox, the largest international Bitcoin trader, claiming the monetary exchange service falsified financial documents.
The American government has previously made it clear that officials are watching Bitcoin, a decentralized economic currency that international regulators have not yet been able to control. Many of those who favor Bitcoin use Dwolla, an Iowa-based startup that allows customers to transfer their dollars into Bitcoins.
Unfortunately for those consumers, the Department of Homeland Security issued a warrant Tuesday effectively shutting down Dwolla’s ability to process Bitcoin payments, as reported by CNET. Whether because of the DHS’ charge of operating an “unlicensed money transmitting business,” the sudden timing of the allegations, or another reason, Dwolla and Mt. Gox officials have been reluctant to comment.
“In order not to compromise this ongoing investigation being conducted by ICE Homeland Security Investigations Baltimore, we cannot comment beyond the information in warrant, which was filed in the District of Maryland [Tuesday],” said Nicole Navas, a representative for US Immigration and Customs Enforcement.
The warrant claims Mt. Gox CEO Mark Karpeles did not disclose he operated a financial transfer site when he opened a new bank account for the business. Money transmitting services, according to Gawker, are required to register with the Department of Treasury’s Financial Crimes Enforcement Network (FinCen). Mt. Gox, which is involved in roughly 63 per cent of all Bitcoin purchases, has not done so.
Despite the technicalities skeptics are wondering if Bitcoin’s friction with the Treasury department is the cause of this recent scrutiny. Senator Chuck Schumer (D-New York) said the anonymity afforded by the service provided an “online form of money laundering” and campaigned for its downfall.
“Literally, it allows buyers and users to sell illegal drugs online, including heroin, cocaine, and meth, and users do sell by hiding their identity through a program that makes them virtually untraceable,” Schumer said during a 2011 news conference. “It’s a certifiable one-stop shop for illegal drugs that represents the most brazen attempt to peddle drugs online that we have ever seen. It’s more brazen than anything else by light years.”
Most notably, proponents have asserted that Bitcoin would be impermeable in instances where WikiLeaks, for example, saw its funding evaporate as the federal government pressured PayPal to cut off the whistleblower site’s support network. Bitcoin would be more resistant to a crackdown of that nature.
Jerry Brito, a scholar at the libertarian Mercatus Center at George Mason University, told the Washington Post Bitcoin could reduce the cost of financial services by pioneering new business formats.
“Bitcoin has the potential to be a boon to the economy and a boon to merchants,” he said, adding that it could “disrupt traditional payment networks that have not been innovative for a very long time.”
A blind governmental crackdown would only serve to push Bitcoin further underground, Brito argued.
“You can’t put the genie back into the bottle,” he continued. “I hate to say it, but the Bitcoin community needs to start lobbying. It needs to start educating policymakers, lobbyists and influencers about the pros of Bitcoin and the impossibility or the difficulty in getting rid of all the bad uses.”
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Gold and Bitcoin: the Currencies of the Future — James Turk
5.15.13 Source: JT Long of The Gold Report
http://silverdoctors.com/gold-and-bitcoin-the-currencies-of-the-future-james-turk/
The Gold Report: James, from your perspective in Europe, is the region in as bad a financial crisis as it appears in the headlines here in the U.S.?
James Turk: Yes, it really is. However, Europe is a big place, and you have to look at the individual countries one by one to understand the situation. Generally speaking, the Mediterranean countries are in the worst shape. Germany has been in the best shape, although recent economic data indicate it may be falling into a recession again. France is not quite as bad as the Mediterranean countries, but in economic activity, it is worse off than Germany and the rest of Northern Europe.
TGR: What role does the euro play in all this, and where might the next crisis take place?
JT: Most of the problems we have seen in Europe are not really euro crises; they are banking crises. That was clearly the case in Cyprus.
The hot spot now is Slovenia, a small Alpine country that is part of the European Union and the Eurozone. Its banks are overleveraged and under scrutiny because of the number of bad loans they carry.
The banks in Luxembourg and Malta are also very highly leveraged relative to the size of those countries’ gross domestic product (GDP). This concern follows on what happened in Iceland, Dubai and Cyprus, where the perception was that the banks were potentially vulnerable to “hot money” withdrawals due to the banks’ high percentage multiple to the country’s GDP. In other words, if depositor money were to flee, those banks might experience liquidity squeezes too big for the government to manage. That is what happened when the European Central Bank (ECB) pulled the plug on Cypriot banks after Russian depositors pulled out large sums.
Economic activity is the second part of the problem. Italy is probably the most vulnerable at the moment, and that is saying quite a bit, given how bad off Spain is. But Italy has more political uncertainty.
TGR: Italy has a new coalition government. Could that calm things down?
JT: It could calm things down for a while, but there is so much difference of opinion as to what is needed to solve Italy’s problem, the various groups are too polarized. I do not see this coalition government lasting very long.
TGR: What will it take to cure this banking crisis?
JT: Capital. The banks are overleveraged and have too many bad assets on their balance sheet. Capital has been wiped out, even accounting for reserves set aside by the banks. That was clearly the case in Cyprus and is the case in most other countries.
The banks look solvent because the ECB is keeping them afloat with liquidity. If the ECB removes that liquidity, as it did with Cyprus, it will soon become apparent which banks are truly insolvent. Bank crises occur overnight for that reason: When the liquidity is gone, the bank closes up because it is not solvent. It lacks quality liquid assets that can be sold into the market to raise cash to meet depositor withdrawals.
Capital cannot be created out of thin air, which is something that politicians have yet to learn. They think that by borrowing more money from the market they can save the banking system. But they are just adding fuel to the fire because most European countries are already overleveraged.
TGR: Looking to the east, Japan just announced its own quantitative easing (QE). Will it win the currency race to the bottom?
JT: We seem to have a horse race going on that no one should want to win. Which is going to the fiat currency graveyard the quickest: the yen, the dollar, the euro or the pound? Right now, Japan is leading the race with its debasement of the Japanese yen through QE and government spending programs. This is astounding because when you look at economic activity around the world, Japanese GDP growth is better than most, and it has one of the lowest unemployment rates in the industrialized world. Japan was in pretty good shape until its new prime minister took over and laid out his policy to debase the yen.
TGR: Why has the dollar remained so strong despite QE here?
JT: Is the dollar really strong? When you look at the dollar against gold—which is what it should be measured against—the dollar has lost 16% per annum on average for 12 years in a row. At any moment, the dollar might look OK compared to the euro or vice versa, but you have to measure the dollar against something meaningful. I do that by looking at the dollar relative to the gold price.
I expect this multi-year weakness in the dollar to continue because, just as in Europe, Japan and in the U.K., the U.S. government and the Federal Reserve are following destructive monetary policies that are eroding the dollar’s purchasing power.
TGR: Will that lead to hyperinflation and is there a tipping point for that to happen?
JT: I think it will lead to hyperinflation. There have been signs for quite a number of years.
You have to keep a couple of things in mind. One is that the inflation numbers released by the U.S. government and most governments around the world have been massaged and doctored to make inflation look lower than it really is. I rely on the inflation statistics that John Williams of ShadowStats.com puts together. Right now inflation in the U.S. is running about 9.5%. For example, commodity prices and the cost of things like property taxes and insurance premiums have been running much higher than what the U.S. government reports inflation to be.
Second, hyperinflation always comes from one cause: excessive government spending, forcing it to borrow. When a government borrows, it can only borrow what the market is willing to lend or what the market has the capacity to lend. If the government is borrowing more than the market is saving, it is, by definition, debasing the currency.
When no one is willing to lend to the government, it tells the central bank to buy its debt and turn it into currency. The central bank then puts this newly “printed” money into the government’s checking account, which the government then spends.
We are headed for hyperinflation—not necessarily the paper-currency hyperinflation that occurred in Germany’s Weimar Republic or in Zimbabwe—but a deposit-currency hyperinflation, like Argentina 12 years ago. There is not a lot of paper currency being printed, but there is a lot of money in bank accounts; this is currency that people spend with checks, wire transfers and plastic cards.
TGR: Recently, you talked on the “Keiser Report” about Bitcoin. Does it matter if digital currency has no value beyond accounting? Are there parallels between gold and Bitcoin?
JT: Bitcoin is not only a digital currency, it is a crypto-currency, a technological innovation we have not seen before.
The parallels to gold are quite interesting. I did a study recently for the GoldMoney Foundation showing that the aboveground stock of gold grows by about 1.8% per annum, year after year after year. That number is approximately equal to world population growth and new wealth creation, so gold’s purchasing power has been consistent over long periods of time. Gold mining does exactly what Milton Friedman recommends in his K-rule: it grows the gold money supply by the same amount year after year after year.
Bitcoin is designed in essentially the same way, but instead of mining the earth you are mining mathematical formulas to arrive at a very consistent growth of Bitcoin until 2040, when approximately 21 million Bitcoins will be in circulation.
Bitcoin and gold each have advantages and disadvantages. The piece of gold you hold in your hand has 5,000 years of history. Bitcoin has maybe four years of history. On the other hand, because you can hold gold in your hand and store it in vaults, it can be confiscated by governments. Bitcoin, because it is a crypto-currency based on mathematical formulas stored in computers all around the world, cannot be confiscated.
Bitcoin has value to people who understand that confiscation is a real risk. In the last century, Lenin, Mussolini, Hitler and Roosevelt all confiscated gold to increase the power of the state. Once the state controls the money we use, it can control economic activity, which explains what we are seeing today around the world.
Crypto-currencies are here to stay and should be looked at closely by everybody, particularly those who understand sound money and appreciate the value and usefulness of gold.
TGR: Is Bitcoin an investment vehicle?
JT: No, because neither gold nor Bitcoin generates cash flow. Both are sterile assets. Investments generate cash flow. You put your money at risk in the hope of getting cash flow from your investment.
Gold is money. When the price of gold goes up, you are simply taking wealth that is already created and in the hands of people who own fiat currency, and transferring that wealth to people who own gold.
The same concept applies to Bitcoin. Bitcoin is money, not an investment. Its exchange rate can go up or down just like the price of gold. In that sense, Bitcoin could be called a store of value just like gold. The difference is that gold has a 5,000-year history; Bitcoin is much younger. We will have to see how Bitcoin plays out as a store of value in the years ahead, but regardless, Bitcoin is a useful currency because it makes possible low-cost global payments. It is a technological advancement that leaves bank payment systems in the dust.
TGR: Will governments see Bitcoin as a threat because it is an alternative currency not under their control?
JT: They may see it as a threat, but there is nothing they can do about it unless they seize every personal computer in the world. People are studying it, becoming familiar with it. Some day there may be a Bitcoin2 or a Bitcoin3 that is even better than the original.
That is the beauty of technology. Technology enables society to move forward and improve everyone’s standard of life. Crypto-currencies may be the technological innovation that gets us out of our current monetary malaise arising from state control of money and enables us to return to vibrant economic activity that results when we use sound money.
TGR: Based on your Fear Index and the Gold Money Index, would you explain the difference between value and price?
JT: Price is the measurement we use when we enter into an exchange with someone else in the marketplace. Value is what something is truly worth.
In other words, I might have a house worth $500,000, but I sell it at $400,000. The purchaser is buying it at a price below its true value. On the other hand, I might sell that house at $600,000, in which case the purchaser is buying the house above its true value.
To correctly analyze gold, we must look at its value. We can measure gold’s value by comparing it to national currencies.
I use the Fear Index to compare gold to the dollar and the Gold Money Index to compare gold’s role in international trade and finance against all of the foreign exchange reserves held by the world’s central banks. Gold is undervalued by both of those measures. Even though its price has been rising for 12 consecutive years against the U.S. dollar, it remains undervalued because the dollar itself is being debased at almost as rapid a rate as the gold price is rising.
The other thing about gold is that its value is not only expressed numerically. Gold is money that is outside the banking system. Because it is tangible, it has no counterparty risk. It is not money that depends on a bank or a government promise.
Given what happened in Cyprus and the fragility of many banks around the world, I think everybody should have some gold to protect themselves from the eventuality of a much larger banking crisis than what we have seen so far.
TGR: In light of all the volatility of gold and silver recently, how are you adjusting your portfolio? What roles do cash, physical gold, mining stocks and exchange-traded funds (ETFs) play?
JT: When you buy gold, you have to first identify your objective. Do you want to profit from movements in the gold price, or do you want a safe haven as protection from monetary and banking turmoil? You want the right tool for the right job, which depends on your objective.
If investors want a safe haven, physical gold with no counterparty risk is the way to go—you want to hold gold bars and coins. If investors want to trade to profit from fluctuations in the gold price, then you can look at what I call paper-gold instruments. These would be futures, options and ETFs. In this case, you do not own gold; you own exposure to the gold price and that exposure comes with counterparty risk.
I recommend focusing on gold as a safe haven: own physical gold and leave paper-gold to the professional traders and the speculators. Gold is part of the cash—the liquidity part—of your portfolio.
Mining shares go into the investment part of portfolios. Investors need to look at mining shares using the same process they do when buying any equity. What is the quality of management? What does the balance sheet look like? What do the assets look like? What is the political risk where the company operates? And so forth.
If you are prepared to shoulder those investment risks, you might then decide to have some mining shares in your portfolio as well. Generally speaking, I have never seen mining share prices this undervalued in relation to the cash flow they are generating, and, as a result, many mining companies have increased their dividends. If I am correct that the gold price will go much higher, I think mining company shares will rise much higher as well.
TGR: Is the TSX Venture Exchange a bargain basement right now?
JT: Everything is pretty much on sale. The question is when the mining shares go up, which ones will go up first?
There are a couple of characteristics that may give us a clue. Good dividend payers with secure cash flow will probably rise first. I would stay away from any mining shares that have any hedge positions, because those hedge positions will cut into profit as we have seen in the past.
I also would look to the mining shares with management teams that have proven themselves. There were a number of disasters over the past few years caused by companies focusing on growth rather than cash flow. They overpaid for investments and diluted their shareholders. Many of those executives have left and their successors have, I hope, learned the lessons of those departures. You always have to look at management first and have complete confidence in management before investing in any company.
TGR: Some people have predicted that hundreds of junior miners will be gone by year-end. Do you agree, or are you more optimistic?
JT: It is possible that a lot of them will go by the wayside and disappear, simply because capital is very hard to come by today. A lot of these little companies are the explorers looking for a resource, but even those that have a resource cannot always find the capital they need to develop it.
A lot of the smaller companies are at bargain-basement prices, but they come with a lot of risk. The less risky play would be companies that have a dividend record, a good management team and a strong, solid cash flow that will likely continue into the future.
TGR: Based on the five standard deviation decline that occurred in mid-April, what would the technical analysts predict for the price of gold this summer and the rest of 2013?
JT: The present drop in prices is very similar to what occurred in 2008, although it is not as severe a percentage decline. And remember, within one year of the low of 2008, gold made a new record high above $1,000/ounce ($1,000/oz) and silver more than doubled within 12 months.
I think history will repeat. Within the next 12 months a new record high in gold above $2,000/oz is possible, and I think silver will double.
TGR: Any last advice for investors looking to preserve or increase their wealth?
JT: When you are preserving wealth, you want a safe haven. Physical gold has been the best safe haven over the past 12 years, and I expect that to continue. You just need to make sure you store it with a professional storage firm where you have the assurances of integrity, that your gold is safe.
If you want to grow your wealth, you have to focus on investments, not the money in your portfolio. Here, you might want to look at the mining companies because there are some very good opportunities because of today’s low prices.
I guess it comes down to a question of age. If you are older, you want to be more conservative and take less risk. If you are younger, you might want to take more risk. For me, the rule of thumb is that you should have gold bullion equal to your age. A 65-year-old pursuing a less-risky portfolio strategy should have 65% of his or her assets in gold bullion and the rest in various investments. A 25-year-old can have 25% of his or her assets in gold bullion and invest the remaining 75%, which means the portfolio has less liquidity and more risk.
Whether you are the 65-year-old investing 35% or the 25-year-old investing 75%, look at the gold mining shares because they are extremely undervalued right now. I do not think the gold mining industry is going to disappear, for the same reason that gold, with its 5,000-year record, is not going to disappear.
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malware global takedown circa 4.13
US seizes top Bitcoin exchange as crackdown begins 5.15.13
http://rt.com/usa/bitcoin-exchange-seized-crackdown-begins-334/
The US Department of Homeland Security seized a payment processing account Tuesday belonging to Mt. Gox, the largest international Bitcoin trader, claiming the monetary exchange service falsified financial documents.
The American government has previously made it clear that officials are watching Bitcoin, a decentralized economic currency that international regulators have not yet been able to control. Many of those who favor Bitcoin use Dwolla, an Iowa-based startup that allows customers to transfer their dollars into Bitcoins.
Unfortunately for those consumers, the Department of Homeland Security issued a warrant Tuesday effectively shutting down Dwolla’s ability to process Bitcoin payments, as reported by CNET. Whether because of the DHS’ charge of operating an “unlicensed money transmitting business,” the sudden timing of the allegations, or another reason, Dwolla and Mt. Gox officials have been reluctant to comment.
“In order not to compromise this ongoing investigation being conducted by ICE Homeland Security Investigations Baltimore, we cannot comment beyond the information in warrant, which was filed in the District of Maryland [Tuesday],” said Nicole Navas, a representative for US Immigration and Customs Enforcement.
The warrant claims Mt. Gox CEO Mark Karpeles did not disclose he operated a financial transfer site when he opened a new bank account for the business. Money transmitting services, according to Gawker, are required to register with the Department of Treasury’s Financial Crimes Enforcement Network (FinCen). Mt. Gox, which is involved in roughly 63 per cent of all Bitcoin purchases, has not done so.
Despite the technicalities skeptics are wondering if Bitcoin’s friction with the Treasury department is the cause of this recent scrutiny. Senator Chuck Schumer (D-New York) said the anonymity afforded by the service provided an “online form of money laundering” and campaigned for its downfall.
“Literally, it allows buyers and users to sell illegal drugs online, including heroin, cocaine, and meth, and users do sell by hiding their identity through a program that makes them virtually untraceable,” Schumer said during a 2011 news conference. “It’s a certifiable one-stop shop for illegal drugs that represents the most brazen attempt to peddle drugs online that we have ever seen. It’s more brazen than anything else by light years.”
Most notably, proponents have asserted that Bitcoin would be impermeable in instances where WikiLeaks, for example, saw its funding evaporate as the federal government pressured PayPal to cut off the whistleblower site’s support network. Bitcoin would be more resistant to a crackdown of that nature.
Jerry Brito, a scholar at the libertarian Mercatus Center at George Mason University, told the Washington Post Bitcoin could reduce the cost of financial services by pioneering new business formats.
“Bitcoin has the potential to be a boon to the economy and a boon to merchants,” he said, adding that it could “disrupt traditional payment networks that have not been innovative for a very long time.”
A blind governmental crackdown would only serve to push Bitcoin further underground, Brito argued.
“You can’t put the genie back into the bottle,” he continued. “I hate to say it, but the Bitcoin community needs to start lobbying. It needs to start educating policymakers, lobbyists and influencers about the pros of Bitcoin and the impossibility or the difficulty in getting rid of all the bad uses.”
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Gold and Bitcoin: the Currencies of the Future — James Turk
5.15.13 Source: JT Long of The Gold Report
http://silverdoctors.com/gold-and-bitcoin-the-currencies-of-the-future-james-turk/
The Gold Report: James, from your perspective in Europe, is the region in as bad a financial crisis as it appears in the headlines here in the U.S.?
James Turk: Yes, it really is. However, Europe is a big place, and you have to look at the individual countries one by one to understand the situation. Generally speaking, the Mediterranean countries are in the worst shape. Germany has been in the best shape, although recent economic data indicate it may be falling into a recession again. France is not quite as bad as the Mediterranean countries, but in economic activity, it is worse off than Germany and the rest of Northern Europe.
TGR: What role does the euro play in all this, and where might the next crisis take place?
JT: Most of the problems we have seen in Europe are not really euro crises; they are banking crises. That was clearly the case in Cyprus.
The hot spot now is Slovenia, a small Alpine country that is part of the European Union and the Eurozone. Its banks are overleveraged and under scrutiny because of the number of bad loans they carry.
The banks in Luxembourg and Malta are also very highly leveraged relative to the size of those countries’ gross domestic product (GDP). This concern follows on what happened in Iceland, Dubai and Cyprus, where the perception was that the banks were potentially vulnerable to “hot money” withdrawals due to the banks’ high percentage multiple to the country’s GDP. In other words, if depositor money were to flee, those banks might experience liquidity squeezes too big for the government to manage. That is what happened when the European Central Bank (ECB) pulled the plug on Cypriot banks after Russian depositors pulled out large sums.
Economic activity is the second part of the problem. Italy is probably the most vulnerable at the moment, and that is saying quite a bit, given how bad off Spain is. But Italy has more political uncertainty.
TGR: Italy has a new coalition government. Could that calm things down?
JT: It could calm things down for a while, but there is so much difference of opinion as to what is needed to solve Italy’s problem, the various groups are too polarized. I do not see this coalition government lasting very long.
TGR: What will it take to cure this banking crisis?
JT: Capital. The banks are overleveraged and have too many bad assets on their balance sheet. Capital has been wiped out, even accounting for reserves set aside by the banks. That was clearly the case in Cyprus and is the case in most other countries.
The banks look solvent because the ECB is keeping them afloat with liquidity. If the ECB removes that liquidity, as it did with Cyprus, it will soon become apparent which banks are truly insolvent. Bank crises occur overnight for that reason: When the liquidity is gone, the bank closes up because it is not solvent. It lacks quality liquid assets that can be sold into the market to raise cash to meet depositor withdrawals.
Capital cannot be created out of thin air, which is something that politicians have yet to learn. They think that by borrowing more money from the market they can save the banking system. But they are just adding fuel to the fire because most European countries are already overleveraged.
TGR: Looking to the east, Japan just announced its own quantitative easing (QE). Will it win the currency race to the bottom?
JT: We seem to have a horse race going on that no one should want to win. Which is going to the fiat currency graveyard the quickest: the yen, the dollar, the euro or the pound? Right now, Japan is leading the race with its debasement of the Japanese yen through QE and government spending programs. This is astounding because when you look at economic activity around the world, Japanese GDP growth is better than most, and it has one of the lowest unemployment rates in the industrialized world. Japan was in pretty good shape until its new prime minister took over and laid out his policy to debase the yen.
TGR: Why has the dollar remained so strong despite QE here?
JT: Is the dollar really strong? When you look at the dollar against gold—which is what it should be measured against—the dollar has lost 16% per annum on average for 12 years in a row. At any moment, the dollar might look OK compared to the euro or vice versa, but you have to measure the dollar against something meaningful. I do that by looking at the dollar relative to the gold price.
I expect this multi-year weakness in the dollar to continue because, just as in Europe, Japan and in the U.K., the U.S. government and the Federal Reserve are following destructive monetary policies that are eroding the dollar’s purchasing power.
TGR: Will that lead to hyperinflation and is there a tipping point for that to happen?
JT: I think it will lead to hyperinflation. There have been signs for quite a number of years.
You have to keep a couple of things in mind. One is that the inflation numbers released by the U.S. government and most governments around the world have been massaged and doctored to make inflation look lower than it really is. I rely on the inflation statistics that John Williams of ShadowStats.com puts together. Right now inflation in the U.S. is running about 9.5%. For example, commodity prices and the cost of things like property taxes and insurance premiums have been running much higher than what the U.S. government reports inflation to be.
Second, hyperinflation always comes from one cause: excessive government spending, forcing it to borrow. When a government borrows, it can only borrow what the market is willing to lend or what the market has the capacity to lend. If the government is borrowing more than the market is saving, it is, by definition, debasing the currency.
When no one is willing to lend to the government, it tells the central bank to buy its debt and turn it into currency. The central bank then puts this newly “printed” money into the government’s checking account, which the government then spends.
We are headed for hyperinflation—not necessarily the paper-currency hyperinflation that occurred in Germany’s Weimar Republic or in Zimbabwe—but a deposit-currency hyperinflation, like Argentina 12 years ago. There is not a lot of paper currency being printed, but there is a lot of money in bank accounts; this is currency that people spend with checks, wire transfers and plastic cards.
TGR: Recently, you talked on the “Keiser Report” about Bitcoin. Does it matter if digital currency has no value beyond accounting? Are there parallels between gold and Bitcoin?
JT: Bitcoin is not only a digital currency, it is a crypto-currency, a technological innovation we have not seen before.
The parallels to gold are quite interesting. I did a study recently for the GoldMoney Foundation showing that the aboveground stock of gold grows by about 1.8% per annum, year after year after year. That number is approximately equal to world population growth and new wealth creation, so gold’s purchasing power has been consistent over long periods of time. Gold mining does exactly what Milton Friedman recommends in his K-rule: it grows the gold money supply by the same amount year after year after year.
Bitcoin is designed in essentially the same way, but instead of mining the earth you are mining mathematical formulas to arrive at a very consistent growth of Bitcoin until 2040, when approximately 21 million Bitcoins will be in circulation.
Bitcoin and gold each have advantages and disadvantages. The piece of gold you hold in your hand has 5,000 years of history. Bitcoin has maybe four years of history. On the other hand, because you can hold gold in your hand and store it in vaults, it can be confiscated by governments. Bitcoin, because it is a crypto-currency based on mathematical formulas stored in computers all around the world, cannot be confiscated.
Bitcoin has value to people who understand that confiscation is a real risk. In the last century, Lenin, Mussolini, Hitler and Roosevelt all confiscated gold to increase the power of the state. Once the state controls the money we use, it can control economic activity, which explains what we are seeing today around the world.
Crypto-currencies are here to stay and should be looked at closely by everybody, particularly those who understand sound money and appreciate the value and usefulness of gold.
TGR: Is Bitcoin an investment vehicle?
JT: No, because neither gold nor Bitcoin generates cash flow. Both are sterile assets. Investments generate cash flow. You put your money at risk in the hope of getting cash flow from your investment.
Gold is money. When the price of gold goes up, you are simply taking wealth that is already created and in the hands of people who own fiat currency, and transferring that wealth to people who own gold.
The same concept applies to Bitcoin. Bitcoin is money, not an investment. Its exchange rate can go up or down just like the price of gold. In that sense, Bitcoin could be called a store of value just like gold. The difference is that gold has a 5,000-year history; Bitcoin is much younger. We will have to see how Bitcoin plays out as a store of value in the years ahead, but regardless, Bitcoin is a useful currency because it makes possible low-cost global payments. It is a technological advancement that leaves bank payment systems in the dust.
TGR: Will governments see Bitcoin as a threat because it is an alternative currency not under their control?
JT: They may see it as a threat, but there is nothing they can do about it unless they seize every personal computer in the world. People are studying it, becoming familiar with it. Some day there may be a Bitcoin2 or a Bitcoin3 that is even better than the original.
That is the beauty of technology. Technology enables society to move forward and improve everyone’s standard of life. Crypto-currencies may be the technological innovation that gets us out of our current monetary malaise arising from state control of money and enables us to return to vibrant economic activity that results when we use sound money.
TGR: Based on your Fear Index and the Gold Money Index, would you explain the difference between value and price?
JT: Price is the measurement we use when we enter into an exchange with someone else in the marketplace. Value is what something is truly worth.
In other words, I might have a house worth $500,000, but I sell it at $400,000. The purchaser is buying it at a price below its true value. On the other hand, I might sell that house at $600,000, in which case the purchaser is buying the house above its true value.
To correctly analyze gold, we must look at its value. We can measure gold’s value by comparing it to national currencies.
I use the Fear Index to compare gold to the dollar and the Gold Money Index to compare gold’s role in international trade and finance against all of the foreign exchange reserves held by the world’s central banks. Gold is undervalued by both of those measures. Even though its price has been rising for 12 consecutive years against the U.S. dollar, it remains undervalued because the dollar itself is being debased at almost as rapid a rate as the gold price is rising.
The other thing about gold is that its value is not only expressed numerically. Gold is money that is outside the banking system. Because it is tangible, it has no counterparty risk. It is not money that depends on a bank or a government promise.
Given what happened in Cyprus and the fragility of many banks around the world, I think everybody should have some gold to protect themselves from the eventuality of a much larger banking crisis than what we have seen so far.
TGR: In light of all the volatility of gold and silver recently, how are you adjusting your portfolio? What roles do cash, physical gold, mining stocks and exchange-traded funds (ETFs) play?
JT: When you buy gold, you have to first identify your objective. Do you want to profit from movements in the gold price, or do you want a safe haven as protection from monetary and banking turmoil? You want the right tool for the right job, which depends on your objective.
If investors want a safe haven, physical gold with no counterparty risk is the way to go—you want to hold gold bars and coins. If investors want to trade to profit from fluctuations in the gold price, then you can look at what I call paper-gold instruments. These would be futures, options and ETFs. In this case, you do not own gold; you own exposure to the gold price and that exposure comes with counterparty risk.
I recommend focusing on gold as a safe haven: own physical gold and leave paper-gold to the professional traders and the speculators. Gold is part of the cash—the liquidity part—of your portfolio.
Mining shares go into the investment part of portfolios. Investors need to look at mining shares using the same process they do when buying any equity. What is the quality of management? What does the balance sheet look like? What do the assets look like? What is the political risk where the company operates? And so forth.
If you are prepared to shoulder those investment risks, you might then decide to have some mining shares in your portfolio as well. Generally speaking, I have never seen mining share prices this undervalued in relation to the cash flow they are generating, and, as a result, many mining companies have increased their dividends. If I am correct that the gold price will go much higher, I think mining company shares will rise much higher as well.
TGR: Is the TSX Venture Exchange a bargain basement right now?
JT: Everything is pretty much on sale. The question is when the mining shares go up, which ones will go up first?
There are a couple of characteristics that may give us a clue. Good dividend payers with secure cash flow will probably rise first. I would stay away from any mining shares that have any hedge positions, because those hedge positions will cut into profit as we have seen in the past.
I also would look to the mining shares with management teams that have proven themselves. There were a number of disasters over the past few years caused by companies focusing on growth rather than cash flow. They overpaid for investments and diluted their shareholders. Many of those executives have left and their successors have, I hope, learned the lessons of those departures. You always have to look at management first and have complete confidence in management before investing in any company.
TGR: Some people have predicted that hundreds of junior miners will be gone by year-end. Do you agree, or are you more optimistic?
JT: It is possible that a lot of them will go by the wayside and disappear, simply because capital is very hard to come by today. A lot of these little companies are the explorers looking for a resource, but even those that have a resource cannot always find the capital they need to develop it.
A lot of the smaller companies are at bargain-basement prices, but they come with a lot of risk. The less risky play would be companies that have a dividend record, a good management team and a strong, solid cash flow that will likely continue into the future.
TGR: Based on the five standard deviation decline that occurred in mid-April, what would the technical analysts predict for the price of gold this summer and the rest of 2013?
JT: The present drop in prices is very similar to what occurred in 2008, although it is not as severe a percentage decline. And remember, within one year of the low of 2008, gold made a new record high above $1,000/ounce ($1,000/oz) and silver more than doubled within 12 months.
I think history will repeat. Within the next 12 months a new record high in gold above $2,000/oz is possible, and I think silver will double.
TGR: Any last advice for investors looking to preserve or increase their wealth?
JT: When you are preserving wealth, you want a safe haven. Physical gold has been the best safe haven over the past 12 years, and I expect that to continue. You just need to make sure you store it with a professional storage firm where you have the assurances of integrity, that your gold is safe.
If you want to grow your wealth, you have to focus on investments, not the money in your portfolio. Here, you might want to look at the mining companies because there are some very good opportunities because of today’s low prices.
I guess it comes down to a question of age. If you are older, you want to be more conservative and take less risk. If you are younger, you might want to take more risk. For me, the rule of thumb is that you should have gold bullion equal to your age. A 65-year-old pursuing a less-risky portfolio strategy should have 65% of his or her assets in gold bullion and the rest in various investments. A 25-year-old can have 25% of his or her assets in gold bullion and invest the remaining 75%, which means the portfolio has less liquidity and more risk.
Whether you are the 65-year-old investing 35% or the 25-year-old investing 75%, look at the gold mining shares because they are extremely undervalued right now. I do not think the gold mining industry is going to disappear, for the same reason that gold, with its 5,000-year record, is not going to disappear.
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malware global takedown circa 4.13
Stockman: There are Bubbles All Over, Hide in Cash 4.2.13 Lauren Lyster Daily Ticker
Last week, the Dow (DJI) and S&P 500 (^GSPC) both beat their all-time closing highs set back in 2007. In a Sunday New York Times op-ed, David Stockman, President Reagan’s budget director and former Republican Congressman, writes “instead of cheering, we should be very afraid.”
Stockman goes on to lay out a case for his prediction: “This latest Wall Street bubble, inflated by an egregious flood of phony money from the Federal Reserve rather than real economic gains, will explode” in the next few years.(His concern over Fed-fueled bubbles is one theme from his new book The Great Deformation: The Corruption of Capitalism in America.)
Stockman tells The Daily Ticker that “the bond market, stock market, all risk assets - they’re totally driven by the Fed."
He argues that the Fed is largely responsible for the market’s trajectory. This comes in the context of measures of overvaluation such as Robert Shiller’s CAPE ratio, which shows stock valuations are similar to where they were in 2007, but far from the levels reached in the late 1990s.
With the Fed leading the charge, he suggests the result is a mispricing of risk.
“I think the markets are not discounting risks, the real economy, the headwinds coming at us from the world,” he says. These headwinds include China’s construction boom ending, Japan falling into “old age bankruptcy,” the Eurozone crisis, and baby boomers retiring in the U.S.
“When the Fed loses confidence in the market I think that will be the beginning of the end,” he notes, “and it will start in the bond market."
Yet, when it comes to the bond market, it’s been remarkably resilient in the face of $16 trillion public debt. Yields for the 10-year Treasury have been hovering near historic lows. Stockman argues it’s a result of the “market front-running the Fed.”
Stockman advises people in his op-ed to “get out of the markets and hide out in cash.” But this isn’t the first time he has issued a warning like this. Last March, for example, he was quoted in an interview talking about the dangers of the stock market and saying he had his money in cash. However, if you had followed his recommendation, you could have missed out on some solid stock market gains. Total returns for the S&P 500 were close to 14% in the last year.
In that context, stocks seem like a pretty good place to be.
“That’s what they told me in late 2007 and early 2008,” Stockman says in response. “About seven months later people had lost 45% to 70% of their net worth. If you were in the Russell 2000, which is where Bernanke wants you, you were crushed – it dropped by 60% within 15 trading days.”
As for his advice to hide in cash he says, “I would rather have capital preservation, be safe. I don’t think another two, four, 10 percent is worth losing 50, 60, 70 percent when the crash comes.”
Bitcoin
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