Guest Post: How Could We Be So Wrong?, by "Icarus"

By popular demand, I decided to turn this very well-written comment by "Icarus" into it's own, stand-alone guest post.

In the first half of his essay, Icarus lists off eleven, separate items that should have been precious metal positive over the past two years. (I'd encourage all readers to add into the comments any events that he might have missed.) In the second half, Icarus makes some reasonable conclusions and connects the current price decline to the ongoing shenanigans with the GLD, the Comex, GOFO and other ongoing events that TPTB are attempting to portray as one-offs.

I'm confident you'll enjoy reading and discussing this excellent commentary.

TF

How Could We Be So Wrong

by, "Icarus"

Let's take a trip down memory lane. Assume it's August of 2011.  Gold has hit $1900 an ounce.  Now assume we had a time capsule that could catapult us two years into the future.  Let's jump in our time machine and jump from the present (August 2011) to July 2013 shall we?  Once we get there we will learn a few things:

  1. The bank depositors of Cyprus have been 'bailed in'.  This means that their depositors have had their deposits stolen taken, to pay off other banks in the banking system.  This template is then benchmarked by all the other major Reserve banks in the world.  Message?  Your money is no longer safe in the banking system.
  2. The United States, owner of the world's reserve currency, has been downgraded by Standard and Poors to AA+ from AAA.  For the first time in history the world's reserve currency is not one of the safest places to put your money.  It's debt to GDP ratio is soaring and in spite of a total flooding of 17 trillion dollars into the economy there is no substantial recovery.  No data point in existence shows a recovery yet.  They all just show us bumping along the bottom with economic stagnation.
  3. QE 2 is announced.  Followed by QE to infinity.  These two programs are euphemisms for outright money printing to pay our bills.  The amount of money 'printed' by the Federal Reserve increases the money supply by a factor of 4 over a few short years.  This is outright money debasement and will eventually result in massive amounts of inflation.  We are just throwing trillions of trees with ink on them at the economy.  This has stemmed the decline for a short time, but it has not turned the longest recovery in history around.  We should be booming with this flood of money, in reality we are just treading water at the bottom of the toilet bowl.
  4. The Swiss announce that they will print to oblivion to keep the Swiss Franc from rising too high against the Euro.  The world's safe haven in the 20th century (the place where the world went to protect the value of their savings thru a great depression and two world wars),  the bastion of stability, has now become for the first time in centuries, just another currency in the worldwide currency war.
  5. The Federal Reserve puts the United States on a zero interest rate policy (ZIRP).  In essence this steals 8 Trillion dollars of potential interest payments (assuming a normalized rate of 5.8%) from savers and gives it to the banks who save interest that they should have paid to savers.  Savers, and retirees, and the economy in general, lose 8 trillion dollars, over 2.5 trillion a year.  Things have value today because they can generate income in the future.  What the FED is saying with ZIRP, is that dollars have little value in the future.
  6. Venezuela becomes the first country to repatriate its gold from the vaults under the Federal Reserve Bank in New York (most countries store part of their gold hoard in NY).  The Germans become the second country to ask for their gold back.  They are told that you can only have one third of their gold, and they must wait 7 years to get it.  Why? Could the German gold not be there?  Could the Federal Reserve have absconded with this sovereign gold and they need 7 years to replace it?  Is there now a gold shortage?
  7. The Euro is crumbling. Portugal, Spain, Greece, Cyprus and now Italy, are in full blown DEPRESSION. They are experiencing total economic collapse.
  8. China has increased its purchases of gold on the open market by 10X.  In May and June they purchased 100% of global mine supply.  They will be the largest purchaser of gold in the world in 2013, surpassing India.
  9. Politically, the Middle East is as unstable as it's ever been. Iran continues to develop nuclear weaponry.  We had the Arab Spring which deposed dictators throughout the region. The United States has been involved in conflicts in Libya, Yemen, Pakistan, and Afghanistan, and we are now selling arms to terrorists in Syria, where there is a full scale civil war that pits the Russians on one side and the U.S. on the other. And we now have boots on the ground in Jordan.
  10. The Congress has done nothing to fix the problems that caused the meltdown of 2009. They passed Dodd-Frank which has more holes than Swiss cheese (of course, it was written by the banks, for the banks).  They continue to run up 1 trillion dollar deficits, and the sequester (which was very painful to both sides of the aisle) cuts less than 3% of the budget.  And this "savings" is now totally wiped out by the interest rate increases of just the last 4 weeks.  The Volcker Rule, keeping the banks from trading in their proprietary accounts against clients has been eviscerated. So in effect we have had no movement on increased fiscal responsibility. We still have done nothing to solve the problems of the 2009 meltdown.
  11. Fraud in the financial system goes into overdrive.  Sentinel brokerage steals customer accounts, no one goes to jail. Politically connected John Corzine steals 1.4 Billion from his clients at MF Global, and no one goes to jail.  HSBC bank, money lauders trillions of dollars from Mexican drug cartels, pays a fine worth three days profit, and no one goes to jail.  Barclays and now JP Morgan is fined over a billion dollars for manipulating energy markets, and no one goes to jail.  Every bank in the country committed hundreds of thousands of felony offenses by lying in court to judges and forging signatures on foreclosures, and no one goes to jail.  And the biggest of all; the major banks are caught with their hands in the cookie jar manipulating LIBOR (London Interbank Overnight loan rates) which sets the cost of money EVERYWHERE (in essence they stole money from everyone in the world), and no one goes to jail.

Now let's get back into our time capsule, and return to 2011. We have a decision to make.  Knowing the future events of the next two years, how do we position our portfolios in 2011 after learning about these eleven facts to come?

I submit that a prudent man would stay far, far away from the stock and bond markets.  The bubbles here are getting worse, and the fraud (which increases when no one is punished) is terribly destabilizing.  The degradation of the world economic output is staggering.  The money printing is irresponsible.  In this environment the only acceptable place to be is in something safe. The strategy should be to get a return OF your assets, not a return ON you assets. We must find a safe haven to protect us until this storm clears up.  Until now, in the history of the last 120 years, that would indicate that we invest in the US dollar, the Swiss Franc, and gold.  Well as mentioned, with massive money printing by both the Swiss National bank and the U.S. Federal Reserve, we are both debasing our currencies unmercifully, that leaves those two safe havens out.  The only historic safe haven left for protection in 2011 is gold and other hard assets.  As a matter of fact in some circles we could have been considered totally irresponsible for not putting 50 to 80% of our assets in this metal of kings.

That's what we did in 2011, without knowing these 11 items. Well, so far, we blew it.  Gold, even after these 11 absolutely tremendous gold positive developments, has cratered from $1900 to $1200.  The markets on the other hand proceeded to march on to all-time highs.  What happened?

I think what happened can be summed up in a statement by Paul Volcker, Chairman of the Federal Reserve, back during the last crisis in 1980.  When asked if he would have done anything different when he raised interest rates to 18% and destroyed the inflation of the day, he stated, referring to that time:

"Joint intervention in gold sales to prevent a steep rise in the price of gold, however, was not undertaken. That was a mistake."

Bernanke has not made the same mistake.  He has obviously intervened in the gold market to keep the price down (learning from Volcker), and thus keep the dollar as an attractive alternative to gold (generating demand for dollars, that keeps our interest rates low). The FED, by law, cannot sell our countries gold to flood the world with supply and keep the price from reaching its normal market clearing value.  But they can surreptitiously loan our gold out, and have the bullion banks (like JP Morgan) sell the gold into the market to hammer the price.  They can also do this with German gold they hold.  No one is the wiser until someone asks for their gold back.  This leasing shenanigans game is why Ron Paul wanted to audit the FED and got over 250 Congressmen and Senators to cosponsor his Audit the FED bill.  You think the gold not being there anymore might be the reason why the Germans have to wait 7 years to get their gold back???

As for the stock markets, Bernanke is ON THE RECORD with his famous 'wealth effect' policy.  If we can get the stock and housing markets up, people will spend more money and we will jump start a recovery.  Sounds like some kind of trickle down economics offshoot to me, and we know how that turned out...........Obviously they are depressing gold and pumping up the markets at the same time to further their current policy agenda.  THERE IS NO MARKET PRICE DISCOVERY LEFT when interventions like this occur.  The prices of both, like their balance sheets, are simply made up.

Well I think the game is afoot and is now about to collapse.  The gold used to manipulate is now all gone.  Sold. There is no more gold to flood the market with.  The boyz are now stealing gold from every nook and cranny they can find, to keep this ponzi scheme going.  Just look at the following graph from July 2013:


The yellow is the amount of physical gold available on the Commodity Exchange (COMEX).  Note that these are two graphs, the data points are not cumulative, the yellow graph and the green graph stand on their own.) Notice the severe drawdown of available metal since January of this year from 11 million ounces to seven million ounces on the COMEX.  The green is the drawdown of gold from Gold Exchange Traded Funds (ETF's).  Notice the drawdown of gold from 9 million ounces to less than 6 million ounces since January 2013.  This depletion of gold is UNPRECEDENTED!  Looks like a panic to me.

Note that the main stream media reports that the drawdowns are simply investors selling their ETF gold shares because they don't want to hold gold.  Well think about this.  Gold and Silver are kissing cousins.  They are both considered monetary metals and they both have a very high correlation to each other.  What gold ALWAYS does, silver does, albeit more violently, because it is a smaller market.  They are opposite sides of the same coin.

Now explain to me, main stream media, why the silver ETF's have had substantial net gains in inventory since January.  Silver is not being drained, only gold.  If this were Joe average investor selling, he'd sell both at the same time!!!  That's not happening!  Someone is pulling gold out of these vehicles while silver is going in. And by the way, where is all this physical going?  That would be China, to satisfy their insatiable increased demand for the hard stuff.

Ladies and Gentleman we have a run on the bank going on.  Physical gold is going from West to East. The Bullion Banks are out of physical gold available to sell into the market to suppress the price, and now they are raiding the ETF's and the COMEX to get physical gold to suppress the price of gold.  It's only a matter of time before our strategy of using gold as our insurance against collapse (a la Greece) will be vindicated.  They can play these games for a while, but they cannot fool Mother Nature forever.  The market and its price discovery mechanism will eventually win.  You cannot manipulate markets and ignore the law of supply and demand forever.

Regards,

Icarus

Thanks to Eric Sprott, Turd Ferguson and Grant Williams for the basic ideas presented.
 

70 Comments

onealpha's picture

Nice

Great Post

**Scratch "First on TFMR" off bucket list.

Peoples Front of Judea's picture

1ST MAYBEE

KEEP THE FAITH TURDITES

Howard Roark's picture

Turd, 3th???

Now to the reading. Just this once...

HR

Igiveup2's picture

Top Ten Twice Today,

Totally terrific

Turd Ferguson's picture

And...it's gone.

MODERATOR

Let's make this #12!

12. The city of Detroit files for bankruptcy. How are those "safe haven" municipal bonds working out for you?

http://www.detroitnews.com/article/20130718/METRO01/307180103/Detroit-files-Chapter-9-bankruptcy?odyssey=mod|breaking|text|FRONTPAGE

That_1_Guy's picture

Great Post Icarus. Popcorn ready.....

Excellent overview. No reason to fret..paper is what they are selling. You all know what they are buying.

I never sold an ounce. I wont sell one, to them. I may barter some for something of equal value...time will tell.

You sneaky turd...you stole the story....new graphic for ya. ;)

LOL

Guy

Edit: Before anyone gets butthurt....Im just kidding on the theft. lol

Exbroker's picture

Detroit

My mama and daddy told me long ago that promises were made to be broken. So, why would I buy a bond? I have no ability to question the ability of the of the people who manage my  retirement savings. So....how do I save myself from these frauds? I buy my Silver, and I buy my Gold....and I stick it up my ass where only a Government employee would look.  

wildstylechef's picture

To Top it off with more BS

(Reuters) - Moody's Investors Service on Thursday stood down from the possibility of cutting the U.S. sovereign credit rating in coming months, affirming the country's top Aaa rating and noting the resilience of the economy.

Moody's raised the U.S. sovereign outlook to stable from negative, noting that the federal government's debt trajectory is on track with criteria previously laid out by the rating agency.

The economy is growing moderately, but it is still "progressing at a faster rate compared with several Aaa peers and has demonstrated a degree of resilience to major reductions in the growth of government spending," Moody's said in a statement.

http://tinyurl.com/nhc7azp

SilverFocker's picture

Detroit

Turd ya beat me to it.........Next it may be the whole state of Cali.

There is no law in big money dealing.

Wizard's picture

In the last Hour

It was announced that Detroit has filed for Bankruptcy

Being Called By Local Media Outlet

Largest Municipal Bankruptcy in American History.

W

Edit: Oops Late to the game, Damn that Turd is Fast, No need to even turn on Local News Anymore LOL

Howard Roark's picture

After this

Excellent post from Icarus, consider the difference to this article: http://www.commodityonline.com/news/gold-climbs-in-surprise-move-despite-positive-us-job-data;-flare-up-before-the-dousing-55513-3-55514.html

And consider the dousing part... from a technical analyst.

Keep strong,

HR

meegoreng1's picture

I strongly believe that when

I strongly believe that when gold does go up, it will not be allowed to rise in price much above the last high ($1900). If it does, the sheeple will be awaken!

The EE will not allow these well controlled and trained 'subjects' around the world to wake up. This will hinder their plans going forward. Through newer regulations and additional taxes that will be imposed on gold transactions in the future, they will keep the pressure on its ascent. It will also work together with other central banks around the world to to release more of their gold if demand accelerates. Remember, they all work together, even China and Russia. These nefarious governments including ours and most of if not all of Western Europe have a common agenda. I'm not going to get too much into detail about this as it would be a subject all on its own! 

But...

Silver, because of its additional industrial supply and demand issues, will not be able to be controlled! Unless the EE can find a cheaper substitute, they really don't have a choice but eventually let the real price be discovered in our markets. Silver's rise will just be an anomaly and this will ensure the sheeple stay asleep.

I encourage eveeyone to join the Silver Pledge and encourage others to do the same. I have made a contribution there that will increase the prizes for silver winnings per month.

tmosley's picture

This is really great

This is really great analysis.  Thanks Icarus!

Nigel Black's picture

Exceptional piece!

Thank you for sharing this with us.

Bollocks's picture

Well deserved Icarus!

Well, I'm reminded of some humorous madness here in the UK:

Yes, that's right folks...

"MONKEY WORLD TANK MUSEUM"

surprise

That_1_Guy's picture

Santa and FDIC

Turd,

Was watching all the Debtroit calamity. Knew it was a matter of time. Many to follow this path. So we have ZIRP, MUNIS are junk and metals *paper* getting crushed. People are sitting in cash...cause its "safe".

I hear all kinds of commotion that its all FDIC insured. Well today I saw Sinclairs piece on the FDIC being insolvent. I had no idea people dont know this. Ill include this great infographic for you all.

http://demonocracy.info/infographics/usa/fdic/fdic.html

Maybe you could drop this on Sinclair.

Stack ON!!

GUY

Sad-descent's picture

RE: Muni's

I have always believed that muni's will signal when we are edging close to the "end".  Not saying that Detroit is the signal, but it may start waking people up to interest rate risk, the fact that GO bonds actually have risk, and that there is no money to cover promises made.

Nick Elway's picture

India Jewellery and Bullion retailers

Surprise, the article de-emphasized that retailers responsible for almost 2/3 of bullion sales have NOT put their gold coin and bar sales on hold.

http://timesofindia.indiatimes.com/business/india-business/Gold-coin-bar-sales-on-hold-for-6-months/articleshow/21012214.cms

_____________________________________________

Gold coin, bar sales on hold for 6 months

5778683.cms
 
The measure is aimed at helping the government curb imports and keep the current account deficit under check.

NEW DELHI:In an unprecedented move, top jewellery retailers and bullion traders across the country have decided to suspend sale of gold coins and bars for six months. The measure is aimed at helping the government curb imports and keep the current account deficit under check.

Several prominent chains, including TBZ, Gitanjali and Tanishq, will voluntarily stop sales. Coins and bars account for more than a third of gold sales in the country. India is the world's largest gold buyer, at 860 tonnes a year. Market estimates suggest that the demand for coins and bars surged 150% in the past four years.   (more at the link)

jezfry's picture

Graph from July 2013

If the current rate of depletion continues it looks to me as though there will be zero gold in ETF's or COMEX within months! Fabulous post.

JY896's picture

GOFO rates with little commentary

Thank you for that very thoughtful, poignant essay, Icarus -- a prime example of the many reasons this community is special. Thanks to Turd for putting this up.

As far as I can tell:

- never* (*in the last 24 yrs. for which LBMA provides data) has it been this low, this long

- never* has it stayed negative this long

- if this were just a chart without labels and no Y axis, would one say the colored lines are bottoming? Poised for a breakout or a breakdown?

_______________________________________________________________________________

It might be beneficial to know... that in most cases of CB gold leases the gold doesn't move. Then perhaps one can contemplate who is holding the paper claims. -- Motley Fool

I am sure the PBOC, the CBRF and assorted other CBs who have stepped up purchases in recent years are now unhappily sorting through the ashes of the paper receipts that were created when their imported 'gold' was put through the refining and assaying process, right?

Dagney Taggart's picture

What Happens Next?

The satanic psychopaths, who sold all the gold that they didn't own to begin with, blow up the world to cover their criminal theft and murder. Literally. Stolen nuke terrorism (Edit: to be blamed on Iran, Syria, Cuba, N. Korea, etc) by the globalist elite in 10, 9, 8, ......

Everybody ready?

Motley Fool's picture

jy896

"I am sure the PBOC, the CBRF and assorted other sovereing CBs are unhappily sorting through the ashes of the paper receipts that were created when their imported 'gold' was put through the refining and assaying process, right?"

What?

A question. Do you know who has government gold leases? (your comment implies not, or you are simply trying to put words in my mouth.)

That_1_Guy's picture

Dagney.. exactly.

Hat tip. +10

This planet needs an Enema. Jack says it well.

Guy on extended camping trip in ....10..9...8....

GUY

JY896's picture

Wow... that was QUICK

So, by inference, you DO know who has government gold leases. Please share. Documentation is also nice, if available.

As would be a refutation of my alternate thesis (theoretical, to be sure) that significant volumes of gold have been sold into the marketplace in the last 10-15 years that could only have been sourced from existing CB stockpiles. The mechanism being -- CB leases gold to BB (or arranges swap), BB sells into market.

"32.      What is described in this passage is a circumstance where a legal change of ownership has occurred, but an effective, economic change of ownership has not, as the cash provider has not acquired full and untrammeled exposure to the instrument, including the right to the income from the underlying asset and the right to on-sell it. However, in many cases, under current market practice, effective ownership rights have been transferred to the cash provider because it does usually have the right to on-sell without  constraint." -- IMF on the Macroeconomic Statistical Treatment of Reverse Transactions

The idea that Western CBs have all of the physical gold they claim in their accounting is an interesting, and noteworthy one. Would love to hear more details -- especially about WHERE these CBs think their physical bars are, exactly. Seems to me the last EU CB that tried to make headway on a definitive answer to this question met with some difficulty.

To elaborate my (I thought simple & obvious) point, the purchasers of gold in the marketplace today (see: central banks of 'developing' nations mentioned above) are in fact (or at least presumably) buying gold for physical delivery to their vaults. They are NOT storing gold swap agreements or future delivery contracts in their vaults.

Just stupid, I assure you -- what's your excuse?

Goldfinder's picture

What if the USA runs out of

What if the USA runs out of gold and storms the Middle East for their gold, much like Germany did to Europe.

alan2102's picture

meegorengi1

meegorengi1: "The EE will not allow these well controlled and trained 'subjects' around the world to wake up. This will hinder their plans going forward. Through newer regulations and additional taxes that will be imposed on gold transactions in the future, they will keep the pressure on its ascent. It will also work together with other central banks around the world to to release more of their gold if demand accelerates. Remember, they all work together, even China and Russia. These nefarious governments including ours and most of if not all of Western Europe have a common agenda."

Beg to differ. Remember geopolitics. It's the sea powers -- the U.S./U.K./Japan/OECD/Israel -- against the land powers: BRICs and Southeast Asia, and Iran, and the muslim nations of the ME. These are the warring blocs.  As "our" side loses, the dollar fades and PMs rise.  It is an ongoing process, already underway, with much more to come. It is like the movement of a tide: slow, but inexorable, and devastatingly powerful.

Bollocks's picture

"thank you"

I'm watching BBC Newsnight tonight, as I do most weekday evenings here in the UK.

At the end of every interview, I've noticed, the presenters always end with "thank you". That's pretty common everywhere isn't it.

Seems just being polite.

Ok, so the definition of "thank you" in the Oxford English Dictionary is:

"An instance or means of expressing thanks"

The definition of "thanks" is:

"an expression of gratitude"

"gratitude" is defined as:

"the quality of being thankful; readiness to show appreciation for and to return kindness"

Note - 'To show appreciation for'.

"appreciation":

"recognition and enjoyment of the good qualities of someone or something"

SO...

When someone in the MSM says "thank you" at the end of an interview they are subtly saying they agree, even if the point of the interview is making it appear as though they are presenting a case of disagreement.

This isn't a small point. This is how the MSM use language to keep injecting doubt into the mind of the viewer (or listener).

On the whole we all say "thank you" whether we really agree or not. We've been taught to say that. It's polite to say thank you.

Being polite is dishonest. This is relentlessly used (not knowingly, but because it's learnt) by the MSM - and we also do it amongst ourselves.

Politeness creates self-doubt.

Politeness is a tool that is used by those who know how to manipulate. It's used to  cover up the truth.

Never say "thank you" unless you know what it really means to say that.

Rant off. smiley

 

AlienEyes's picture

GOFO is a MOFO

At this time, I think it's safe to say we are all the screwees and the banksters are the screwers. 

Further, we have not been screwed equally. Some have been screwed far more than others. So much so that it threatens our equality. This is why the MSM tries to avoid reality as much as possible. Recently, reality has been butt ugly and this would deeply offend the "All Is Well" and PC people that are currently running the show. I know. If I say all is screwed-up, then I am a defacto doomsayer and that is very bad because it is not PC.

The part that I can’t follow is I can still remember when telling the truth was a good and noble thing to do. Not anymore. Today, unless you adhere to the newspeak, PC and “All Is Well”  B.S., you are a bad person for telling the truth since the truth is no longer a good thing. What if I was of the opinion that PC = BS ?

I’m going to shut up now because that damn drone thing is coming back this way.

BTW, the essay was nothing short of Excellent !

Wizard's picture

@Goldfinder

What if the USA runs out of gold and storms the Middle East for their gold ?

Didn't that already happen ?

Iraq and Libya:

I was under the assumption that one of the first things to happen was for their Gold to be disappeared.

SteveW's picture

@ Bollocks

Thank you.

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