Macro

520
Fri, Sep 16, 2011 - 9:46am

Gold is recovering today and is actually green on my screen. Wow! How unusual! Let's see if we can rally today and crawl back above 1800 before we call it a week. There's been some very interesting "news" rolling around for the last 24 hours and I wanted to take a minute to give you my non-educated opinion.

The crux of the matter is summarized quite well below:

https://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100011987/china-to-liquidate-us-treasuries-not-dollars/

Between these comments and the wikileaks cables, one can quickly conclude that the Chinese are considering (if not already actively engaging in) further "diversification" of their vast U.S. treasury holdings. In the article above, Mr. Pritchard makes this sound as if there will be some happy and pleasant side effects of these moves. "Don't worry", he seems to say, "those dollars will flow into hard assets like stocks, land and gold". As if it's a zero-sum, no-big-deal event. On this point, he is dreadfully wrong.

As you know, I have long maintained that the real purpose of Quantitative Easing is not to promote economic growth. It is to promote low interest rates. Remember how rates on U.S. treausries are set...through auctions. Simply stated, if you need to borrow $50B and there are no takers at 2%, then you have to try 3%. If no one wants your bonds at 3%, then maybe they'll take them at 4%. Low or no demand means higher interest rates. Period.

With U.S. borrowing needs at all-time high levels, the rest of the world must be induced to buy treasuries. But, rates cannot be allowed to rise. As Mark Steyn points out in his new book, if long-term rates were to return to 5.7% (the average for the period 1990-2010), debt service projections for 2015 would increase from $290B to $850B! Additionally, the only "way out" of our current fiscal disaster is to magically increase tax revenues through economic growth. A return to higher rates would stifle and crush any potential "recovery".

So, what's a Boy Wonder to do? The answer: MORE QE MORE QE MORE QE.

The U.S. has managed to cover its necessary funding needs since June by managing the headlines. Have you noticed that nearly every time a treasury auction arises or the POSX moves down toward critical support, some type of intervention takes place. Whether it's a foreign central bank devaluing their currency or a rash of suddenly scary headlines out of Europe, events seem perfectly timed to keep money flowing into treasuries. This can work in the short-term and it obviously has. The yield on the 10-year note has actually declined since the end of QE2 in June. This won't and can't continue. A recent study from the University of Wisconsin showed that, by 2020, U.S. funding needs will soak up nearly 20% of the total annual global GDP! Do you really think that that is possible? There can be no world GDP when world economic growth is crushed under that type of debt burden.

But, that's in the future. What about the near term? Eventually, rates will rise when buyers (like China) disappear. Faced with an immediate funding crisis, QE will resume with vigor. Left with no other government funding option, the Federal Reserve will be forced into creating trillions of new greenback, simply to keep the social security checks flowing, the doctors paid and the military shooting. The dollar will resume its long-term decline into obscurity.

In the end, all of the central bank intervention in the world will not be able to suppress the global demand for true safe haven financial protection. Gold will rise to heights that even you, my dear reader, may currently think are unattainable. Silver will most certainly come along for the ride. Therefore, do not be fearful. If you use the time left to prepare...mentally, financially and spiritually...you will survive, and even prosper, in the days ahead.

Here are your updated charts. Unfortunately, both have taken on the appearance of range-bound markets. This can be managed as it affords us the clear opportunity to buy at the bottom of the range and sell at the top but it certainly isn't as much fun as runaway efforts to the upside. For today, don't get too excited until/unless either metal is able to firmly trade through the blue trendlines I've drawn inside the ranges.

I'm going to be away and unavailable for most of the day today so, just as John said to Yoko, "looks like you're on your Ono". I will be monitoring things from afar, however, and will attempt to update if conditions warrant. Have a great day and a relaxing weekend! TF

p.s. Another preparatory move for the opening of PAGE:

https://www.reuters.com/article/2011/09/16/cjina-gold-idUSL3E7KG1IG20110916

About the Author

Founder
turd [at] tfmetalsreport [dot] com ()

  520 Comments

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Sep 17, 2011 - 5:37pm

RowdyBoy

Nope...be my guest.

The ESF is one of those 3 letter agencies or organizations that just gets lost in the mix. They like it that way.

Kenscott Eric Original
Sep 17, 2011 - 5:37pm

Silver - Industrial or Monetary

I agree with you on this. Personally, I look at it from how I think it is actually being used. Based on my limited knowledge, I think it is more industrial than monetary.

If the entire world economy goes digital, and I think it will, then I think the question will finally be answered.

For now, just wondering where silver prices may end in the next month or so. I have a bit in physical silver seeing it has done better than silver stocks or the like.

Thank you for your reply.

Kenscott

Animal Sacrifice
Sep 17, 2011 - 5:37pm

@Kenscott

EricO is, as usual correct. Silver has thousands of years of history (I have a really nice collection of ancient Roman silver coins I did as a kid) as currency and a relative blink of the eye as an industrial metal. But it is both today.

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Sep 17, 2011 - 5:45pm

Dripping with false idol symbolism/ Why would they guard that?

Police officers guard a bull statue at Bowling Green park.

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Sep 17, 2011 - 5:48pm

Silver Facts: History of Silver

Silver Facts: History of Silver

History of Silver | Old World Silver (4000 BC - 1500 AD) | New World Silver (1500 - 1875) | The Rise Of North America (1876 - 1920) | The Modern Era (1921 - Present)

A major watershed of silver production was the discovery of the New World in 1492, which was followed by the opening of major silver mines in Mexico, Bolivia, and Peru, leading to a rapid rise in the annual world production of silver. This rise, coupled with improved techniques for extracting silver from ore, broadened both the quality and quantity of ore that could be exploited. Later improvements, particularly in the late 19th and early 20th centuries, vastly enhanced the base of silver production and accelerated the exploitation of silver as a byproduct of base-metal mining.

Only about 25 percent of cumulative world silver production occurred before the 1770s. Records remain incomplete for the periods before 1900, however they play a critical part in determining cumulative historical production. To learn more, select from the following periods of time. This material has been adapted in part from the Silver Institute's Stocks of Silver Around the World publication.

https://www.silverinstitute.org/

rowdyboy Kenscott
Sep 17, 2011 - 5:52pm

Kenscott - welcome

Kenscott, welcome to the board. You will find many diverse opinions here, but I believe we all think Silver will increase in price over the next 6 months, 1 year, etc. Short term is anyones guess.

I like the fact the demand for silver is Price Inelastic, which means that as the price of silver increases, industry will still use silver in virtually the same quantities. Industrial uses of silver are increasing. Many of its properties have few substitutions. I would recommend you do some research on industrial uses of silver, its unique properties, and supply/demand of silver. You will then get a feel for its value.

My personal opinion is that the supply/demand equation is definitely not in equilibrium, primarily due to the silver price manipulation story you can read about here. That means there is a good chance for the price of silver to correct to the upside as there is not enough supply to meet growing demand.

Yes, industrial demand for silver could decrease with the slowing global economy, but I believe investment demand will take up most of the slack.

I believe silver is real money, and I believe its dual use in industry makes it even more valuable, due to increased demand. I am bullish silver long term, phyz and undervalued producing miners.

MisesFan
Sep 17, 2011 - 6:01pm

Shameless plug - RP 2012

NPR Interview - 8/31/2011

Ron Paul on NPR "Talk of the Nation" 8/31/11

https://www.ronpaul2012.com/

Sorry for the distraction.....

RE: the Morgue......some history via Rothbard.

"

Rothbard's point serves to introduce a story within the larger story of Morgan influence. Benjamin Strong, the Governor of the New York Federal Reserve Bank, was by far the most influential figure in the entire Federal Reserve system from its inception until his death in 1928. He entered into close association with Montagu Norman, Governor of the Bank of England. Both men had enlisted in the Morgan camp: "While the close personal relations between Strong and Norman were of course highly important for the collaboration that formed the international monetary world of the 1920s, it should not be overlooked that both were intimately bound to the House of Morgan" (p. 374).

"

Full article:

https://mises.org/misesreview_detail.aspx?control=216

A strong enemy, tis the Morgue.

rowdyboy ¤
Sep 17, 2011 - 6:05pm
cpnscarlet
Sep 17, 2011 - 6:08pm

Back for more

Been out all day at a toy train estate auction. Now reading and enjoying all your posts.

Here's another little funny foto for ya. This is a loading platform on my layout which is near a nuke reactor and rocket base (this is NOT a model railroad). The platform is stacked with traditional Lionel "Radioactive Waste" canisters (design c. 1957) marked for various nasty things. With the info, the rest is obvious -

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Sep 17, 2011 - 6:24pm

2011 A YEAR IN PICTURES

2011 - A Year In Pictures, 9/11 Memorial, Tahrir Square, Cairo, Santiago, Chile, Cemetery Vukovar, Croatia, US Soldiers, Attack in Kabul, MemoryMan1964, Slideshow, Pics, Wildfire Texas, Hurricane Irene, IFA Berlin, Demonstration, Greek, Egypt, Italy, Spain, Rebel Fighter, Tripoli, Graffiti Festival, Suicide Bomber, Kabul, Terrorist Attack Abuja, Nigeria, Pope Bededict XVI, Space Shuttle, Riots in Tottenham, London, Amy Winehouse, Ramadan, Kenya, Mogadishu, Golden Gate Bridge, Bhutan, Buddha Statue, Mount Etna, Christ Of Good Death, Somali Soldier, Rebel Fighter, Slovenian Troops, Plane Crash, Russia, Beirut, Lebanon, America, Africa, Europe,

Video unavailable
Shill
Sep 17, 2011 - 6:26pm

(No subject)

Simon & Garfunkel - Cecilia
atarangi
Sep 17, 2011 - 8:14pm

Silver --- takes the gold medal

Silver has been outperforming all other known asset classes for years. Who cares what you can or cannot do with it. When something else overtakes it and can stay in the lead for a year or so I'll go with that. Their is no reason to believe the current leadership of silver is going to end anytime soon. To not be say 80 --- 100% in silver at this point in time would be just plain silly. It is incredible how the mainstream propaganda machine is able to keep people in the dark . Good luck all

Bohemian
Sep 17, 2011 - 8:25pm

Oh my, are we playing

Oh my, are we playing Jeopardy, philosophy for $200? Okay. I will bite.

If a tree goes down in a forest and we are not there to hear it, does it make a sound? A similar question: If you switch off the light and there is full darkness, no other light coming in, are you sure that your T-shirt is really red? If you look at it, but can't see as everything id dark or black, is it red?

It depends on what you mean by sounds and colors. We have "sensory detectors" and brain that process various waves (and pressure) of particular frequencies, and only the processed outcome is what we perceive as sounds (a complex of sounds) and colors (a complex of colors), right?

cpnscarlet
Sep 17, 2011 - 8:28pm
Stormdancer
Sep 17, 2011 - 8:31pm

@Kenscott Factors affecting industrial valuations of silver

Quote:

First Post - Good Source of Info Here

Submitted by Kenscott on September 17, 2011 - 5:21pm. Hat Tip! 0

Hello All,

This is my first post here. I already know I am outgunned by some of the comments I have read here. Yet, I thought I would jump in with some questions with hopes you can help. I love to learn and this seems like the place to do so.

My first question is whether or not a decline in industrial demand will likely effect the price of silver in a negative way. I am wondering if a weaker world economy will mean less demand for things created with silver and therefore less industrial demand for silver. Even if such is the case, are there other aspects of silver which will keep it in line with gold?...


Later,

Kenscott

Kenscott, it may help you to step back and take a 30,000 foot aerial view of the fundamentals underlying the silver market. I would encourage you to get out a calcualtor and give this information a workout:

World Silver Supply and Demand

First, allow me to point out some problems with this info. Note the exact duplication of the "Total Supply" and "Total Demand" numbers. Note the "Implied Net Investment" and "Implied Net Disinvestment" line items. Understand that in some ways you're looking at accounting artifacts used to "force" the numbers to balance which means that these numbers are "derived" and do not represent boots-on-the-ground movement of silver metal.

Second, note that "Producer Hedging/Dehedging" are included in the supply/demand calculations and those activities will influence how much silver is available for purchase in the market at a given time, they DO NOT increase or decrease the amount of above-ground refined silver in the world.

Understanding the limitations of the information, we can still derive useful insight if we focus on how these supply and demand statistics increase or decrease the amount of above-ground, refined silver that is available.

Take the "Mine Production" number for 2010 (circled in red) - 735.9 million troy ounces. That is the only number on the table that adds to the above-ground, refined stocks of silver. That is the "true" supply number for the year...period.

Now take the "Total Demand" figure of 1,056.8 million troy ounces and subtract the 735.9 million ounces of mine supply from that:

1,056.8 - 735.9 = -320.9 million

The first glaring conclusion is that we used 320.9 million more ounces of silver than were pulled out of the ground and refined in 2010. That is a structural deficit in the market that implies that the total amount of above ground refined silver declined by that amount in 2010. All of that 320.9 million ounces had to come to market from hoards that already existed prior to 2010 in order to balance supply and demand.

If you do the same math for previous years you'll find we've been running a deficit for the past ten years. It's much longer than that but hey, these are enough to make the point.

ANNUAL DEFICITS

2001 -270.9 mm oz

2002 -274.4 mm oz

2003 -284.2 mm oz

2004 -266.7 mm oz

2005 -292.2 mm oz

2006 -281.8 mm oz

2007 -241.6 mm oz

2008 -222.6 mm oz

2009 -203.9 mm oz

2010 -320.9 mm oz (!)

TOTAL DEFICIT OVER TEN YEARS

-2.659 billion ounces

AVERAGE ANNUAL DEFICIT

-265.92 million ounces


_______________________________________________________________________________

Something else to consider. 70% of annual mine supply of silver comes as a byproduct of mining zinc, copper and lead. Only 30% of new silver production comes from mines that derive their primary income from mining silver.

You can see from the Silver Institute chart what effect the global downturn since 2007 has had on demand for "Industrial Applications". There was a significant drop in industrial demand from 2008 to 2009, but both new mine supply and overall demand continued to rise.

Early indications are that new mine supply may increase by another 155 tonnes (5 million ounces or so) in 2011 due to some massive expansions at Fresnillo and a couple other primary silver miners coming on line this year.

The point is, what will happen to production of lead, zinc and copper in a protracted economic decline? If, as I suspect, production of those minerals declines substantially in a downturn, then that means 70% of the newly mined silver supply will decline proportionately. That would seem to indicate that if there is a decline in industrial demand, the total supply of silver is going to eventually decline with the declining demand. Very price supportive supply and demand metrics. Zinc miners will not mine millions of tonnes of uneconomic zinc just to get at a few million ounces of silver.

I'm going to stop here to avoid writing a book, but this is just the tip of the iceberg.

To answer your question directly, I believe a crash in industrial demand will probably temporarily drop prices some, but the effect will be muted by decreased production of silver over the longer haul.

A drop in industrial demand is unlikely to overwhelm and reverse the structural deficit that has plagued the silver market for well over ten years.

Since national solvency and the survival of currencies is on the line in these times, investment demand for silver is likely to continue to rise precipitously as part of the race into hard assets, even if there is a significant decline in industrial demand.

Long term, higher silver prices seem an incredibly safe bet to me.

Edit to add: Another little factiod: GFMS estimates that 220 million ounces of silver was used in electronics last year. That's about half of that total "Industrial Application" category. Even in a severe downturn, I suspect people will still be finding ways to buy TV's, cell phones, computers and other electronic consumer goods.

The military is a huge consumer of silver, both in electronics and other categories. Missiles, aircraft, bombs, artillery shells and even some explosives contain silver. Wars consume silver, and I bet we've got a bunch more of those in our near future.

redwood
Sep 17, 2011 - 8:44pm

Kenscott, Stormdancer has

Kenscott, Stormdancer has given you a great response. I would just like to expand on the many uses of silver that perhaps many are not aware of. Although I'm using a link to firstmajestic, it offers as a good a description as I've seen anywhere.

https://www.firstmajestic.com/s/SilverUses.asp

Eric Original
Sep 17, 2011 - 9:30pm
ScottJ
Sep 17, 2011 - 9:56pm

Latest Post

My latest post. I never noticed that the picture I chose was the icon of SilverTree here. The Ying and the Yang indeed! I think I will post it in the general forums since I have hijacked quite a few threads :).

https://thehardrightedge.com/letter/

A Letter to my Oppressors

You have misled many of my brothers and sisters in an ever-expanding and all-encompassing illusion,

You have poisoned our minds with lies and greed,

You have altered our food with disease inducing products,

You have contaminated our water with damaging chemicals,

You have flooded our souls with the curse of desire,

You have invaded our freedom in the name of our own good,

You have held back technology that could revolutionize the world,

You have labeled truth as if it were treason,

You have gravely mis-allocated human energy, life, and potential for your personal expenditures,

And you have cheated yourselves of what it means to be human.

Yet in the ying and the yang of life, you have provided the tools to see what life could become.

You have taught us that we cannot trust a few to look out for all,

You have taught us that we must unite as a people, or fall as individuals.

You have taught us that understanding must be more powerful than apathy,

You have taught us that war will not solve any problems,

You have taught us that there is more to life than currency,

You have taught us that there is no difference between any man, woman or child,

You have taught us that we must look within before we can change the outside,

You have taught us that man must be aware in order to be alive,

And maybe most invaluably to me, you have taught me that my biggest oppressor has always been myself.

Through your injustices we can see the blueprint of the world, and what never to follow again.

For we the people are the writers of history, and I am certain that the coming days will prove, as always in history, that man will free itself from the grips of oppression, no matter how dark the days may get. And this time, it may just free itself completely.

May you live in interesting times.

-

Respectfully and Humbly,

Scott J

If Not Now, When? - Incubus
beardeus
Sep 17, 2011 - 10:54pm
Hammer
Sep 17, 2011 - 11:29pm

http://finance.senate.gov/hea

https://finance.senate.gov/hearings/hearing/?id=ba387157-5056-a032-5252-...

Couple of early points made in the video but I urge people to watch the whole thing (note, 2 hours)

1) Currently retirees receive 14,000 usd a year, not enough to survive by itself

2) In 1980, over 80% of those in The US employed by large or medium sized companies participated in pension plans.

2) In 2007, it is less than 30%

3) Average retiree retires with 60,000 usd between the age of 60-64.

4) Many will be retiring with insufficient funds to last through to the end.

5) Private employer based pension scheme is the greatest wealth creator for the middle class in US history especially through 401K plans or IRAs running into the trillions.

Social security holds 2.6 trillion usd in Treasury Securities (Mandatory Programme since 1935)

Private Employer Based Defined Contribution plan s hold 4.7 trillion usd

IRAs hold 4.9 trillion usd (voluntary program since 1974 and holds almost double the Social Security Government program and that is just in IRAs)

Average American will face 200,000 usd in retirement medical costs alone.

Many recent ideas lead towards limiting the amount people can invest in these defined programs. National Commission on Fiscal Responsibility suggest capping to 20,000 the pre tax amount of contribution.

US Congressional Budget Office proposed reducing annual contributuions to the 401K by some 7,000 usd.

These are examples of proposals to reduce contributuions to private defined contribution systems for retirement funds at a time when you would think they should be encouraging people to save more would you not ?

That takes things up to the 30 minute mark. If this affects you in America, i would recommend a cup of tea, coffee or whatever and a sharp clear mind and listening to the rest of this meeting. I found it interesting and useful to listen in 5 minute bursts and then to go back and make notes, listen again and check my notes.

I can't help but think that there are proposals out there being made to limit what people can put into private pension funds like IRAs and 401Ks in order to push them somewhere else ?

If there is a pensions expert out there, it would be very good to hear from you.

(I am not a US citizen)

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Sep 18, 2011 - 12:14am
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Sep 18, 2011 - 12:18am
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Sep 18, 2011 - 12:20am
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Sep 18, 2011 - 12:28am

Economic Collapse a Mathematical Certainty

The dollar collapse will be the single largest event in human history. This will be the first event that will touch every single living person in the world. All human activity is controlled by money. Our wealth,our work,our food,our government,even our relationships are affected by money.

No money in human history has had as much reach in both breadth and depth as the dollar. It is the de facto world currency. All other currency collapses will pale in comparison to this big one. All other currency crises have been regional and there were other currencies for people to grasp on to.

This collapse will be global and it will bring down not only the dollar but all other fiat currencies,as they are fundamentally no different. The collapse of currencies will lead to the collapse of ALL paper assets. The repercussions to this will have incredible results worldwide.

Video unavailable
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Sep 18, 2011 - 12:42am
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Sep 18, 2011 - 12:47am

Hyperinflation Nation Part 1/3

Hyperinflation Nation Part 1/3
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Sep 18, 2011 - 12:48am

Hyperinflation Nation Part 2/3

Hyperinflation Nation Part 2/3
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Sep 18, 2011 - 12:49am

Hyperinflation Nation Part 3/3

Hyperinflation Nation Part 3/3
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Sep 18, 2011 - 12:52am

End of Liberty

End of Liberty
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Sep 18, 2011 - 12:55am

Fall of the Republic HQ full length

Fall of the Republic HQ full length version

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Key Economic Events Week of 4/22

4/22 10:00 ET Existing Home Sales
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4/25 8:30 ET Durable Goods
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Key Economic Events Week of 4/15

4/16 9:15 ET Cap Util and Ind Prod
4/17 8:30 ET Trade Deficit (Feb)
4/17 10:00 ET Wholesale Inventories
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4/18 10:00 ET Business Inventories (Feb)
4/19 8:30 ET Housing Starts and Building Permits

Key Economic Events Week of 4/1

4/1 8:30 ET Retail Sales (Feb)
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4/2 8:30 ET Durable Goods (Feb)
4/3 9:45 ET Markit & ISM Services PMIs
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