Building Pressure

462
Thu, May 9, 2013 - 1:07pm

As if my head wasn't swimming enough, I spent about an hour on the phone with Jim Willie this morning.

As you might imagine, we had a free-wheeling conversation that drifted from topic to topic. Of all the things we discussed, I'd like you to consider this:

Did you even know that this meeting was taking place this week? Have you seen coverage in the mainstream press? Did CNBS send LIESman or Headiromo over for live reports? Here's the summary and source link: https://www.4-traders.com/news/G-20-Group-of-Twenty-Finance-Ministers-and-Centr-Global-Finance-in-Transition-conference-to-take--16735638/

"On May 7-8, 2013, Istanbul (Turkey) will host the Global Finance in Transition conference. The event is organized by the Central Bank of the Republic of Turkey jointly with the Reinventing Bretton Woods Committee and the Russian Ministry of Finance.
Representatives of G20 finance ministries and central banks, international organizations, research institutions and businesses will take part in the conference. Head of Turkey's Central Bank Erdem Basci, Deputy Minister of Finance of Russia Sergey Storchak and Executive Director for the Reinventing Bretton Woods Committee Marc Uzan will give the opening remarks at the conference.
Five panel discussions are planned as part of the event. They will cover the international financial architecture, in particular, changes in the flow of global investments, local bond markets and growth in emerging economies, incentives and determinants of investment and other issues. In addition it is expected that new instruments and incentives for making the global financial system safer will be suggested during the forum."

Did you know there was such a thing as the "Reinventing Bretton Woods Committee"? Wouldn't you like to know how the panel discussions of "international financial architecture" or "flow of global investments" went? Also, it was "expected that new instruments and incentives for making the global financial system safer will be suggested". Oh, really? That sounds interesting. But of course, CNBS doesn't care. Their main story right now is "Forget Software. Hardware Is Where It's At!" https://www.cnbc.com/id/100716901 Nero fiddles while Rome burns...

Much appears to be taking place while hiding in plain sight. You see the events and wonder if they are all, somehow, interconnected. I would suggest to you that they are. The problem is, like anything else, you and I won't clearly see how they connect until after the fact, after all is said and done. But suffice it to say, there are connections to be made from just these examples:

  • Western and Japanese debt monetization and QE to
  • Chinese direct currency swaps to
  • LBMA member default to
  • German gold repatriation to
  • China gold imports to
  • Shanghai gold deliveries to
  • Cyprus to
  • Gazprom to
  • The Tamar gas field to
  • Israel bombing Syria and, by proxy, Iran to
  • Netenyahu visiting Beijing to
  • The end of the petrodollar to
  • The historic April raid on gold price and draining of the GLD to
  • The BRICs Development Fund to
  • The latest FOMC language about "raising" QE to
  • .......

I could continue but I'll stop there. I think you get the picture. As it relates to the precious metals, I think we all understand that there is currently a growing rush to get physical possession of metal. Whether it is from/out of Western central bank vaults, from LBMA vaults, from Comex vaults, from the GLD, from the U.S. Mint and other global mints...whatever/wherever...the push is on to redeem paper certificates for actual physical metal. Why now? Who cares?!? In a crisis of confidence, the initial cause is of no import. What matters is the escalating belief and fear that "If I don't act now, I'll be left holding the bag".

And so we've seen:

  1. Comex inventories plummet to the lowest levels since 2008.
  2. GLD inventory plummet to lowest level since 2009.
  3. JPM New York vault nearly emptied.
  4. German gold repatriation plan.
  5. 470 metric ton reduction of Comex Commercial net short position since 9/12.
  6. 800 metric ton Chinese import for 2012. 233 metric ton import for just March 2013.

And this is seeming to accelerate. Look at this chart of Comex inventories:

And look at the increasing rate of Chinese imports:

And then check this out. The GLD has now shed almost exactly 300 tonnes of its "inventory" since the first of the year. That's about 22% in just a little over four months! But did you know that it took:

  • Two months to drain the first 100 tonnes (1/2- 3/7)
  • Six weeks to drain the next 100 tonnes (3/8-4/15)
  • And just three weeks to siphon the next 100 tonnes (4/16- 5/8)

And this week's CoT will almost assuredly show a further drop in the Comex net short position of the bullion banks. I posted this yesterday but it's worth repeating:

  • On 9/11/12, two days before QE∞ was announced, The Gold Cartel was net short 237,091 contracts. That's 23,709,100 troy ounces or a whopping 737 metric tonnes of paper gold.
  • As of last Tuesday, April 30, The Gold Cartel is now net short 95,563 contracts, a reduction of nearly 60%! And they've reduced their potential delivery obligation by 440 metric tonnes to 297!

We'll get another CoT tomorrow and, for the reporting week, gold was down $23 while total OI was UP by nearly 17,000 contracts. I'll be stunned if almost all of the OI increase doesn't come from Spec shorting and Cartel buying.

Again, all of the things I've mentioned are spectacular in their own right. For example, the German repatriation story or the drawdown in the GLD. Taken in concert, however, it becomes quite clear that something significant is coming over the horizon. But what??? THAT is the question we must attempt to answer in the days ahead.

Anyway...time to wrap this up, I suppose. First, some charts. Note that gold and silver are marking time here. Silver is particularly interesting as it is clearly caught in a pennant that is rapidly closing. Keep a close eye on this as it portends a breakout sometime very soon.

And since I mentioned my friend, The Jackass, many of you are probably clamoring to hear from him, too. No, I don't have a podcast for you but Kerry Lutz does. A link is below. Jim and I may record something in a couple of weeks. https://financialsurvivalnetwork.com/2013/05/jim-willie-the-us-land-of-the-fascists-and-the-debt-serfs/

OK, that's all for now. Have a great day!

TF

About the Author

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  462 Comments

Down Range
May 9, 2013 - 1:09pm

Early

Early post of nothing important.......

Somewhere in the top 10....

Howard Roark
May 9, 2013 - 1:09pm

3!!!

3!!!

Salut,

HR

DeaconBenjamin
May 9, 2013 - 1:15pm

When the Sovereign Debt Bubble Bursts, Things Will Get Nasty

What do Greece and an unemployed homeowner in Arizona have in common? They are both bankrupt with no hope of ever being able to pay back what they owe.

As I wrote this, I realised it sounded as though I were making a joke (and a bad one at that). The reality is, unfortunately, not funny in any sense, but actually far more worrying.

When Lehman Brothers fell off the proverbial cliff, everyone suddenly realised that lending money to people who have no money doesn't make a huge amount of sense. Due to central banks having decided that they could 'end' the normal business cycle, they decided to make a lot of money available in the early 2000s thinking this would avert a recession. It did, for a few years. Bankers, in the search for money to pay for their ferraris, lent this free money from the central banks to anyone who asked for it.

On that dark day back in 2008, it suddenly became apparent that not only did this money never really exist in the first place (because it was printed out of thin air by the central banks) but that this fake money would never get paid back.

Cue the recession, soaring unemployment and successive attempts, with mixed results, to encourage people to pay down debt.

How does this relate to Greece? In much the same way that banks were give incentives to lend to people who had no money, countries like Greece suddenly looked a whole lot more attractive after the introduction of the euro.

One happy European family, all sharing a (fake) currency! Its introduction led to countries suddenly being able to go to the bank to borrow a lot of dosh at ultra low interest rates. This belief was based on the clearly misguided impression that a common currency would lead to a common way of running a country, i.e. like Germany.

And then the crisis hit. As with individual homeowners who had no money, suddenly it became apparent that Greece (and Cyprus, Italy, Spain, Portugal, Ireland, France, Slovenia and much of the rest of Europe) had no money either.

Cue the sovereign debt crisis, soaring unemployment and successive, definitely failed, attempts by governments to pay down debt.

The sinister thing here is that whereas an individual going bankrupt won't really have much impact in the long run on the global economy, a lot of individuals doing so will. This is why banks are being so kind and generous in letting individuals pay back the money they owe in stages over longer period of times.

In fact it's simply because banks are sh*t scared of what will happen to their share prices if it becomes apparent that a lot of money they lent to people is never coming back.

And the same principle goes for countries. The reason our wise and level-headed politicians decided to 'save' Greece from bankruptcy was simple. The banks who had lent money to the Greek government would have gone insolvent overnight, which would have required other governments to bailout their banks, which would have in turn led to those governments becoming insolvent as well.

Instead we have austerity programmes being implemented in most countries that are designed to bring their finances onto sustainable footings. In the same way a bank will sometimes give an individual a second chance to repay their credit card bill, this is what is happening in Europe. Future growth, induced by that catch-all term 'structural reform', means more tax revenue, which means the ability to pay off these massive debts.

However let's look at the facts. Europe is in decline. Its population is ageing and shrinking, which means ever more expensive healthcare systems and less tax revenue. Its industries are gradually migrating to warmer climes to take advantage of cheap slave labour in China and elsewhere. Where is the money to pay back so much debt going to come from?

The answer, at the moment at least, is 'the central banks'. It is they who are keeping the whole system afloat. But with what? The money they create has no intrinsic value, only the value we place on it. It isn't real.

Why then are stocks and shares the highest they've ever been? Why are countries able to borrow at such low interest rates? Europe is mired in the deepest recession, let's call it a depression actually, since the 1930s. How can this be?

A glance over the past few decades would suggest that, if we look hard, we might spot a bubble developing. A bubble is simply when a group of investors become willing to spend more money on something that it is actually worth. On this basis, sovereign debt is the new bubble.

Are we really claiming that Italy, after several months without a government, deserves to be charged next to nothing to borrow money to pay for the debt it already owes? The intrinsic value of Italy is pretty hard to identify these days. Similarly with most of the developed world, we are living beyond our means and the only thing that's keeping us afloat is a credit card given to us by the central bank.

Who knows when investors will wake up and realise that the money they have lent to the governments of the western world is not coming back. But when they do and the sovereign debt bubble bursts, as the mortgage bubble did in 2008, and the tech bubble in 2000, things could get rather nasty.

Urban Roman
May 9, 2013 - 1:15pm

Number ... ??

whatever number this is. I read the article before posting.

Thinking maybe I'll go hit up TPM for some more silver while the price is still low.

Howard Roark
May 9, 2013 - 1:18pm

The meeting

No sign of the meeting in the MSM: just the ManUni coach stepping down, the saga (I call it novela) of the women hostages and Dow bubbling... (CNN, BBC not mentioning my national news channels...)

It´s just a bright (as bright as it gets!) of the manipulative nature of the state capitalism worldwide...

I would love to read more info on the conversation with Mr. GoldenJackass. It must be explosive. Right?

Salut,

HR

Nana
May 9, 2013 - 1:19pm

Paper Contracts

and diminished physical.

Reams of paper.

Very little physical.

Jeff Christian They Trade in the Multiples of a Hundred Times the Underlying Physical
Edward G
May 9, 2013 - 1:20pm

Yeah....

.....forget software, hardware is where it's at!!!!

May 9, 2013 - 1:21pm

First

to hat-tip the post. After reading it.

Ccanuck
May 9, 2013 - 1:23pm

Fiveith

Been reading the boards all morning, stumble by and hit a Fifth...time to feed the Turd!

This is absolutely the best all around metals/preparation site, a hat tip all contributors!

Edit: Just signed up for monthly subscription,...don't know why I waited so lonnng?

The information I get here is well worth the small fee.

Hey Gold Dog how about a contest for subscriptions...just a though to help spread the word for TURD.

Ccanuck

Howard Roark
May 9, 2013 - 1:25pm

About the meeting - again

Not even on the Bloomberg, Yahoo internet sites ("front page"). Just a piece from Peter Schiff on gold and it´s fundamentals (which it´s always good to see/read and remember).

Salut,

HR

Key Economic Events Week of 10/14

10/15 8:30 ET Empire State Fed MI
10/16 8:30 ET Retail Sales
10/16 10:00 ET Business Inventories
10/17 8:30 ET Housing Starts and Bldg Perms
10/17 8:30 ET Philly Fed MI
10/17 9:15 ET Cap Ute and Ind Prod
10/18 10:00 ET LEIII
10/18 Speeches from Goons Kaplan, George and Chlamydia

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Key Economic Events Week of 10/14

10/15 8:30 ET Empire State Fed MI
10/16 8:30 ET Retail Sales
10/16 10:00 ET Business Inventories
10/17 8:30 ET Housing Starts and Bldg Perms
10/17 8:30 ET Philly Fed MI
10/17 9:15 ET Cap Ute and Ind Prod
10/18 10:00 ET LEIII
10/18 Speeches from Goons Kaplan, George and Chlamydia

Key Economic Events Week of 10/7

10/8 8:30 ET Producer Price Index
10/9 10:00 ET Job Openings
10/9 10:00 ET Wholesale Inventories
10/9 2:00 ET September FOMC minutes
10/10 8:30 ET Consumer Price Index
10/11 10:00 ET Consumer Sentiment

Key Economic Events Week of 9/30

9/30 9:45 ET Chicago PMI
10/1 9:45 ET Markit Manu PMI
10/1 10:00 ET ISM Manu PMI
10/1 10:00 ET Construction Spending
10/2 China Golden Week Begins
10/2 8:15 ET ADP jobs report
10/3 9:45 ET Markit Service PMI
10/3 10:00 ET ISM Service PMI
10/3 10:00 ET Factory Orders
10/4 8:30 ET BLSBS
10/4 8:30 ET US Trade Deficit

Key Economic Events Week of 9/23

9/23 9:45 ET Markit flash PMIs
9/24 10:00 ET Consumer Confidence
9/26 8:30 ET Q2 GDP third guess
9/27 8:30 ET Durable Goods
9/27 8:30 ET Pers Inc and Cons Spend
9/27 8:30 ET Core Inflation

Key Economic Events Week of 9/16

9/17 9:15 ET Cap Ute & Ind Prod
9/18 8:30 ET Housing Starts & Bldg Perm.
9/18 2:00 ET Fedlines
9/18 2:30 ET CGP presser
9/19 8:30 ET Philly Fed
9/19 10:00 ET Existing Home Sales

Key Economic Events Week of 9/9

9/10 10:00 ET Job openings
9/11 8:30 ET PPI
9/11 10:00 ET Wholesale Inv.
9/12 8:30 ET CPI
9/13 8:30 ET Retail Sales
9/13 10:00 ET Consumer Sentiment
9/13 10:00 ET Business Inv.

Key Economic Events Week of 9/3

9/3 9:45 ET Markit Manu PMI
9/3 10:00 ET ISM Manu PMI
9/3 10:00 ET Construction Spending
9/4 8:30 ET Foreign Trade Deficit
9/5 9:45 ET Markit Svc PMI
9/5 10:00 ET ISM Svc PMI
9/5 10:00 ET Factory Orders
9/6 8:30 ET BLSBS

Key Economic Events Week of 8/26

8/26 8:30 ET Durable Goods
8/27 9:00 ET Case-Shiller Home Price Idx
8/27 10:00 ET Consumer Confidence
8/29 8:30 ET Q2 GDP 2nd guess
8/29 8:30 ET Advance Trade in Goods
8/30 8:30 ET Pers. Inc. and Cons. Spend.
8/30 8:30 ET Core Inflation
8/30 9:45 ET Chicago PMI

Key Economic Events Week of 8/19

8/21 10:00 ET Existing home sales
8/21 2:00 ET July FOMC minutes
8/22 9:45 ET Markit Manu and Svc PMIs
8/22 Jackson Holedown begins
8/23 10:00 ET Chief Goon Powell speaks

Key Economic Events Week of 8/12

8/13 8:30 ET Consumer Price Index
8/14 8:30 ET Retail Sales
8/14 8:30 ET Productivity & Labor Costs
8/14 8:30 ET Philly Fed
8/14 9:15 ET Ind Prod and Cap Ute
8/14 10:00 ET Business Inventories
8/15 8:30 ET Housing Starts & Bldg Permits

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