Monday, May 20, 2019

Do You Know What Is In The Tax Bill That Congress Is About To Pass?

by Michael Snyder, The Economic Collapse Blog:

A conference committee has been merging the tax bills that were passed by the House of Representatives and the Senate, and even though we could still see some minor changes, it looks like the major parameters of the final bill have now been agreed upon.  The final bill will be known as the Tax Cuts and Jobs Act, and we are being told that it will be one of the largest tax cuts in U.S. history.  Unfortunately, the impact on our tax bills will be relatively minor, but at least it is a step in the right direction.  The following summary of the major provisions in the final bill comes from AOL

  • A less generous corporate rate cut: Republicans may cut the corporate rate to 21% from the current federal rate of 35%, instead of the 20% proposed in both the house and Senate bills. The new rate would start in 2018.
  • A lower top individual tax rate: The top individual bracket would drop to 37% instead of the 38.5% proposed in the Senate bill. It would still be down from the current 39.6%.
  • Keep the estate tax, but raise the threshold to qualify: Instead of phasing out the estate tax over time, like the House bill, the compromise bill would instead simply increase the threshold for an estate to qualify — from $5.6 million to around $11 million. That aligns with the Senate bill.
  • Repeal the corporate alternative minimum tax (AMT): The corporate AMT in the Senate bill was a sore spot for many companies because it would have negated the effects of many popular deductions and credits, like the research and development credit.

The reduction in the corporate tax rate is probably the most important provision in this tax overhaul package.  For decades, the United States has had a much higher corporate tax rate than much of the rest of the world, and this has given large corporations an incentive to locate operations elsewhere.  By making the corporate tax rate more competitive with everyone else around the globe, it is hoped that this will mean more good jobs for American workers.

This bill also reduces individual tax rates, but not by that much.  So you will notice a reduction in your tax bill, but don’t expect anything “game changing” in nature.

In addition, this bill will eliminate the Obamacare individual mandate.  This is something that should have been done back in January, and I am very happy that Congress is finally getting it done.

It is anticipated that both the House and the Senate will vote on the final version of this tax bill next week.

Sadly, it is not a slam dunk that this bill will actually get through the Senate.

Senator Bob Corker voted against the original Senate bill, and he may vote against this version too.

Ron Johnson of Wisconsin and Susan Collins of Maine have also expressed reservations about this bill, and it is unclear how they will vote at this point.

And let us not forget that Senator John McCain’s health is rapidly failing.  Hopefully he would be present for any vote, but there is no guarantee that will happen.

In the end, Republicans can only lose two votes in the Senate, and so this is going to come down to the wire.

But President Trump is quite optimistic that this bill will succeed, and he says that it will “breathe new life into the American economy”

“Our tax cuts will break down — and they’ll break it down fast — all forms of government and all forms of government barriers and breathe new life into the American economy,” Trump said.

“They will unleash the American people, they will tear down the constraints on discovery, innovation and creation, and they will restore the hopes and dreams of the American family. Millions of middle class families will win under our plan.”

Of course even if this bill passes, our tax code will still be a complete and utter nightmare.

The tax code will still be over two million words, and the regulations will still be more than seven million words.  Our system will still greatly favor those that can hire accountants and tax attorneys to find every conceivable loophole possible, and it will still be a tremendous burden on the middle class.

If I am elected to Congress, I am going to fight to completely abolish the IRS and the income tax.  As I travel around Idaho and speak to groups, many are extremely receptive to these proposals, but they wonder how we would fund the government without an income tax.

Well, the truth is that the individual income tax only accounts for about 46 percent of all federal revenue, so we could definitely eliminate the individual income tax but we would also have to dramatically reduce the size of the federal government at the same time.

And we have a historical precedent for what this would look like.

Between 1872 and 1913 there was no federal income tax, and it was the best period of economic growth in U.S. history.

Of course the Democrats are not just going to roll over and allow us to cut the size of the federal government in half, so in the short-term we can focus on some other solutions.  A flat tax or a fair tax would both be far superior to the system that we have today, and there are some very good proposals already out there that just need to be implemented.

Read More @ TheEconomicCollapseBlog.com

Fed’s Janet Yellen: Stock Market Bubble Not Seen as Major Risk Factor

by Pam Martens and Russ Martens, Wall St On Parade:

The outgoing Chair of the Federal Reserve, Janet Yellen, held her last press conference yesterday following the Federal Open Market Committee’s decision to hike the Feds Fund rate by one-quarter percentage point, bringing its target range to 1-1/4 to 1-1/2 percent.

Given the growing reports from market watchers that the stock market has entered the bubble stage and could pose a serious threat to the health of the economy should the bubble burst, CNBC’s Steve Liesman asked Yellen during the press conference if there are “concerns at the Fed about current market valuations.”

Yellen gave a response which may doom her from a respected place in history. She stated:

“So let me start Steve with the stock market generally. Of course the stock market has gone up a great deal this year and we have in recent months characterized the general level of asset valuations as elevated. What that reflects is simply the assessment that looking at price-earnings ratios and comparable metrics for other assets other than equities we see ratios that are in the high end of historical ranges. And so that’s worth pointing out.

“But economists are not great at knowing what appropriate valuations are. We don’t have a terrific record. And the fact that those valuations are high doesn’t mean that they’re necessarily overvalued.

“We are in a – I’ve mentioned this in my opening statement and we’ve talked about this repeatedly – likely a low interest rate environment, lower than we’ve had in past decades. If that turns out to be the case, that’s a factor that supports higher valuations.

“We’re enjoying solid economic growth with low inflation and the risks in the global economy look more balanced than they have in many years.

“So I think what we need to, and are trying to think through, is if there were an adjustment in asset valuations in the stock market, what impact would that have on the economy and would it provoke financial stability concerns.

“And, I think when we look at other indicators of financial stability risks, there’s nothing flashing red there or possibly even orange.

“We have a much more resilient, stronger banking system and we’re not seeing worrisome buildup in leverage or credit growth at excessive levels. So, this is something that the FOMC [Federal Open Market Committee] pays attention to, but if you ask me is this a significant factor shaping monetary policy now, while it’s on the list of risks it’s not a major factor.”

Yellen makes at least one unassailable admission in this statement: her economist predecessors at the Fed certainly “don’t have a terrific record” in calling out bubbles – Alan Greenspan being the worst offender.

After presiding over the worst subprime mortgage and derivatives bubble in history on the belief that Wall Street was fully capable of policing itself, former Fed Chair Alan Greenspan had this to say at a House Oversight Committee hearing on October 23, 2008 after his blunder had helped usher in the greatest financial collapse since the Great Depression:

“So the problem here is something which looked to be a very solid edifice. And, indeed, a critical pillar to market competition and free markets, did break down. And I think that, as I said, shocked me. I still do not fully understand why it happened and, obviously, to the extent that I figure out where it happened and why, I will change my views. If the facts change, I will change.”

In the same hearing, Henry Waxman, the Chair of the Committee, had no problem understanding “why it happened.” It was, plain and simple, regulatory capture. Waxman explained:

“In each case, corporate excess and greed enriched company executives at enormous cost to shareholders and our economy. In each case, these abuses could have been prevented if Federal regulators had paid more attention and intervened with responsible regulations…

“For too long, the prevailing attitude in Washington has been that the market always knows best. The Federal Reserve had the authority to stop the irresponsible lending practices that fueled the subprime mortgage market, but its long-time chairman, Alan Greenspan, rejected pleas that he intervene. The SEC had the authority to insist on tighter standards for credit rating agencies, but it did nothing, despite urging from Congress.

“The Treasury Department could have led the charge for responsible oversight of financial derivatives. Instead, it joined the opposition. The list of regulatory mistakes and misjudgments is long, and the cost to taxpayers and our economy is staggering.

Read More @ WallStOnParade.com

BHP Billiton: World’s Largest Mining Company To Exit Its $50 Billion Shale Oil Blunder

by Steve St. Angelo, SRSrocco:

BHP Billiton, the world’s largest mining company, has finally decided to exit the shale energy industry entirely.  In a recent statement, BHP Billiton has asked four investment banks to assist in either selling or spinning off its underperforming U.S. shale oil and gas assets.  Unfortunately, for BHP, the company sunk nearly $50 billion on its shale assets and will be lucky to receive $10 billion.

Something must have changed at corporate headquarters because the company stated last month that they were considering selling their shale assets over the next two years.  However, the company now wants to make a decision and get the ball rolling by early 2018.  So, there seems to be a motivating factor to unload their shale assets sooner than later.

What a change in the company’s strategic position from just a year ago when they decided to stick with their U.S. shale assets for the long haul.  According to the article published in October 2016, BHP Billiton Bets Long On Its Shale Assets:

Yet the head of BHP’s petroleum business says the company remains committed to its shale assets, which he believes can outstrip its conventional oilfields and plug a supply gap that it sees emerging from the industry-wide investment drought brought about by the collapse in crude prices since mid-2014.

“We admit straight away that we didn’t get the timing right [of the shale deals],” says Steve Pastor in an interview in London. “But what we did pick up were fantastic assets.”

Interestingly, the head of BHP’s petroleum business says they were committed to their “fantastic” shale assets.  Amazing how one year’s time will change a “fantastic asset” to one that needs to be unloaded .. ASAP (As Soon As Possible).

I knew back in 2011 when BHP Billiton was buying up their U.S. shale assets that it was going to a BIG MISTAKE.  However, the company thought it had purchased some of the best “Shale Energy Jewels” the U.S. had to offer.  According to their 2011 Investor Presentation on their shale assets, the company had big plans:

The management running BHP’s petroleum business stated that they had acquired a “World class accessible resource, material to BHP Billiton Large, long-life, low cost, with significant future development.  Out of those four strategies; world-class resource, long-life, low-cost, and significant future development, only one was true.  Which one?  Well, BHP did spend one hell of a lot of money on “significant future development of its shale resources.  I believe I came across a $15 billion capital investment figure that BHP sunk to develop, drill, and extract shale oil and gas from its resources.

Read More @ SRSrocco.com

Canadian Homeowners Take Out HELOCs to Fund Subprime Buyers Unable to get a Mortgage

by Steve Saretsky, Wolf Street:

The Housing & Debt Bubble ascends to the next level of risk.

The HELOC (Home Equity Line of Credit) has been a blessing and a curse for Canadian households. While it has helped spur house prices and simultaneously provided consumers the ability to tap into their new found equity, it has also crippled many Canadian households into a debt trap that seems insurmountable.

Between 2000 and 2010, HELOC balances soared from $35 billion to $186 billion, according to the Financial Consumer Agency of Canada, an average annual growth rate of 20%. As of 2016, HELOC balances sit at $211 billion, a 500% increase since the year 2000. While also pushing Canadian household debt to incomes to record highs of 168%.

Scott Terrio, a debt consultant, says the situation is a full blown “extend and pretend,” meaning borrowers are just continuously refinancing or taking on more and more debt in order to sustain their lifestyle. Canadians can extend their debt repayment terms and pretend to live a lifestyle they can’t otherwise obtain.

What the HELOC has also been able to do is help spur the private lending space which has ultimately supported rising house prices. Seth Daniels of JKD Capital, one of the most astute Canada-Watchers, says there’s a growing trend where “a homeowner acts as a sub-prime lender by drawing a HELOC at 3% interest only, and lends it to a subprime borrower at 8-12% for one year (interest only).”

This is something I’ve been hearing on an ongoing basis from mortgage brokers and lawyers who help facilitate these deals. Especially since mortgage lending conditions tightened, starting with OSFI’s first mortgage stress test back in November, 2016. The financial regulator required “high-ratio” borrowers (those with less than 20% down payment) to qualify for a mortgage at the borrowing rate plus 2%. So basically you’re getting qualified on what you can borrow at 5% even though you’re borrowing at 3%.

Rising interest rates pose special risks in Canada because most mortgages come with adjustable rates. Many of them adjust very quickly to rate increases. Others have a five-year fixed portion and then adjust. Meaning a rising interest rate environment is much more impactful. Hence the new stress tests, and new ways to get around them, including using private lenders that source their funds from taking out HELOCs.

This strategy has been bulletproof, because, well, prices can only go up. The lender makes a juicy return, and the borrower gets his house. The borrower then transitions into a traditional mortgage once his home equity rises after the one year expires.

Read More @ WolfStreet.com

GOLD RISES BY $6.40 UP TO $1246.30/SILVER RISES 20 CENTS UP TO $15.85

by Harvey Organ, Harvey Organ Blog:

COMEX GOLD ISSUES 11,300 EFP CONTRACTS AND SILVER 2500 EFP CONTRACTS AS DEMAND CONTINUES TO RISE/FOMC RAISES RATES BY 1/4%/DEMOCRAT JONES WINS THE ALABAMA SENATORIAL RACE BUT WILL NOT TAKE OFFICE UNTIL THE END OF THIS MONTH/REPUBLICANS REACH CONSENSUS ON A TAX DEAL/MORE SWAMP NEWS

GOLD: $1246.30 UP $6.40

Silver: $15.85 UP 20 cents

Closing access prices:

Gold $1255.50

silver: $16.07

SHANGHAI GOLD FIX: FIRST FIX 10 15 PM EST (2:15 SHANGHAI LOCAL TIME)

SECOND FIX: 2:15 AM EST (6:15 SHANGHAI LOCAL TIME)

SHANGHAI FIRST GOLD FIX: $1254.20 DOLLARS PER OZ

NY PRICE OF GOLD AT EXACT SAME TIME: $1243.80

PREMIUM FIRST FIX: $10.40

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SECOND SHANGHAI GOLD FIX: $1253.58

NY GOLD PRICE AT THE EXACT SAME TIME: $1242.10

Premium of Shanghai 2nd fix/NY:$11.18

SHANGHAI REJECTS NY /LONDON PRICING OF GOLD

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LONDON FIRST GOLD FIX: 5:30 am est $1241.60

NY PRICING AT THE EXACT SAME TIME: $1241.10

LONDON SECOND GOLD FIX 10 AM: $1242.65

NY PRICING AT THE EXACT SAME TIME. 1242.65

For comex gold:

DECEMBER/

 NUMBER OF NOTICES FILED TODAY FOR DECEMBER CONTRACT:  416 NOTICE(S) FOR 41600 OZ.

TOTAL NOTICES SO FAR: 6722 FOR 672,200 OZ (20.908 TONNES),

For silver:

DECEMBER

44 NOTICE(S) FILED TODAY FOR

220,000 OZ/

Total number of notices filed so far this month: 5528 for 27,640,000 oz

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Bitcoin: BID $17,120/OFFER $17,240, UP $171 (morning) 

BITCOIN : BID $16,600 :  OFFER 16,72  DOWN $389 (CLOSING)

end

Let us have a look at the data for today

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In silver, the total open interest SURPRISINGLY ROSE BY A GOOD SIZED 2526 contracts from 200,271 RISING TO 202,797 DESPITE YESTERDAY’S FAIR  SIZED 11 CENT FALL IN SILVER PRICING.    WE HAD SURPRISINGLY NO REAL  COMEX LIQUIDATION AND ON TOP OF THIS, WE WERE AGAIN NOTIFIED THAT WE HAD ANOTHER GIGANTIC NUMBER OF COMEX LONGS TRANSFERRING THEIR CONTRACTS TO LONDON THROUGH THE EFP ROUTE :  2503 EFP’S FOR MARCH (AND ZERO FOR DEC AND OTHER MONTHS) AND THUS TOTAL ISSUANCE OF 2503 CONTRACTS.   I GUESS WHAT THE CME IS STATING IS THAT THERE IS NO SILVER (OR GOLD) TO BE DELIVERED UPON AT THE COMEX AS THEY MUST EXPORT THEIR OBLIGATION TO LONDON. YESTERDAY WITNESSED 2940 EFP’S FOR SILVER ISSUED.

ACCUMULATION FOR EFP’S/SILVER/ STARTING FROM FIRST DAY NOTICE/FOR MONTH OF DECEMBER:

29,845 CONTRACTS (FOR 9 TRADING DAYS TOTAL 29,845 CONTRACTS OR 149.22 MILLION OZ: AVERAGE PER DAY: 3,316 CONTRACTS OR 16.580 MILLION OZ/DAY)

RESULT: A GOOD SIZED RISE IN OI COMEX DESPITE THE  11 CENT FALL IN SILVER PRICE.  HOWEVER  WE HAD ALL OF OUR COMEX LONGS WHICH EXITED OUT OF THE SILVER COMEX  TRANSFERRED THEIR OI TO LONDON THROUGH THE EFP ROUTE:  FROM THE CME DATA 2503 EFP’S  WERE ISSUED TODAY  FOR A DELIVERABLE CONTRACT OVER IN LONDON WITH A FIAT BONUS. IN ESSENCE THE  DEMAND FOR SILVER PHYSICAL INTENSIFIES GREATLY. WE REALLY GAINED 5029 OI CONTRACTS i.e. 2503 open interest contracts headed for London (EFP’s) TOGETHER WITH A INCREASE OF 2526 OI COMEX CONTRACTS. AND ALL OF THIS INCREASED DEMAND  HAPPENED WITH THE  FALL IN PRICE OF SILVER BY 11 CENTS AND A LOW CLOSING PRICE OF $15.65 YESTERDAY. YET WE STILL HAVE A MASSIVE AMOUNT OF SILVER STANDING AT THE COMEX.

In ounces AT THE COMEX, the OI is still represented by just OVER 1 BILLION oz i.e. 1.015 BILLION TO BE EXACT or 145% of annual global silver production (ex Russia & ex China).

FOR THE NEW FRONT DECEMBER MONTH/ THEY FILED: 44 NOTICE(S) FOR 220,000 OZ OF SILVER

In gold, the open interest FELL BY FAIR SIZED 4577 CONTRACTS DOWN TO 446,618 WITH THE FAIR SIZED FALL  IN PRICE OF GOLD YESTERDAY ($5.15).  HOWEVER,  THE TOTAL NUMBER OF GOLD EFP’S ISSUED YESTERDAY FOR TODAY  TOTALED ANOTHER  11,317 CONTRACTS OF WHICH THE MONTH OF DECEMBER SAW 0 CONTRACTS AND FEB SAW THE ISSUANCE OF 11,317 CONTRACTS. The new OI for the gold complex rests at 446,618. DEMAND FOR GOLD INTENSIFIES GREATLY AS WE WITNESS THE HUGE NUMBER OF EFP TRANSFERS TOGETHER WITH THE MASSIVE AMOUNT OF GOLD OUNCES STANDING FOR DECEMBER. EVEN THOUGH THE BANKERS ISSUED THESE MONSTROUS EFPS, THE OBLIGATION STILL RESTS WITH THE BANKERS TO SUPPLY METAL BUT IT TRANSFERS THE RISK  TO A LONDON BANKER OBLIGATION AND NOT A NEW YORK COMEX OBLIGATION. LONGS RECEIVE A FIAT BONUS TOGETHER WITH A LONG LONDON FORWARD.  THUS, BY THESE ACTIONS, THE BANKERS AT THE COMEX  HAVE JUST STATED THAT THEY HAVE NO APPRECIABLE METAL!! THIS IS A MASSIVE FRAUD: THEY CANNOT SUPPLY ANY METAL TO OUR COMEX LONGS BUT THEY ARE QUITE WILLING TO SUPPLY MASSIVE NON BACKED GOLD (AND SILVER) PAPER KNOWING THAT THEY HAVE NO METAL TO SATISFY OUR LONGS. LONDON IS NOW SEVERELY BACKWARD IN BOTH GOLD AND SILVER.  IN ESSENCE WE HAVE A HUGE GAIN OF 6840 OI CONTRACTS: 4577 OI CONTRACTS LEFT THE  COMEX  BUT  11,317 OI CONTRACTS NAVIGATED OVER TO LONDON. THE CME HAS BEEN VERY TARDY IN THEIR REPORTING OF EFP ISSUANCE.  THEY ARE IMMEDIATELY REMOVING COMEX OPEN INTEREST NUMBERS BUT DELAYING RELEASE OF EFP’S FOR 24 HOURS OR GREATER AS NO DOUBT THEY ARE NEGOTIATING WITH THE LONGS FOR A FIAT BONUS.

YESTERDAY, WE HAD 7704 EFP’S ISSUED.

ACCUMULATION OF EFP’S/ GOLD(EXCHANGE FOR PHYSICAL) FOR THE MONTH OF DECEMBER STARTING WITH FIRST DAY NOTICE:  119,242 CONTRACTS OR 11.924 MILLION OZ OR 370.88 TONNES(9 TRADING DAYS AND THUS AVERAGING: 13,249 EFP CONTRACTS PER TRADING DAY OR 1.3249 MILLION OZ/DAY)

Result: A GOOD SIZED DECREASE IN OI WITH THE FALL IN PRICE IN GOLD TRADING  YESTERDAY ($1.45). WE  HAD A LARGE  NUMBER OF COMEX LONG TRANSFERRING TO LONDON THROUGH THE EFP ROUTE: 11,317. THERE OBVIOUSLY DOES NOT SEEM TO BE MUCH PHYSICAL GOLD AT THE COMEX AND YET WE REACHED THE HUGE DELIVERY MONTH OF DECEMBER. I GUESS IT EXPLAINS THE HUGE ISSUANCE OF EFP’S…THERE IS HARDLY ANY GOLD PRESENT AT THE GOLD COMEX FOR DELIVERY PURPOSES.  IF YOU TAKE INTO ACCOUNT THE 11,317 EFP CONTRACTS ISSUED, WE HAD A NET GAIN IN OPEN INTEREST OF 6840  contracts:

11,317 CONTRACTS MOVE TO LONDON AND 4577 CONTRACTS LEFT THE  COMEX.

we had:  416  notice(s) filed upon for 41600 oz of gold.

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With respect to our two criminal funds, the GLD and the SLV:

GLD:

Today, SURPRISINGLY NO CHANGES in gold inventory at the GLD/

Inventory rests tonight: 842.81 tonnes.

SLV

OH OH!!/ WITH SILVER DOWN AGAIN TODAY BY 11 CENTS/WE HAD ANOTHER HUGE INVENTORY GAIN OF 1,415,000 OZ.  SILVER HAS BEEN DOWN  FOR 10 CONSECUTIVE DAYS AND YET SLV INVENTORY RISES??/

INVENTORY RESTS AT 326.714 MILLION OZ/

oh oh!!!TODAY WE HAD ANOTHER HUGE CHANGE IN SILVER INVENTORY AT THE SLV: A ‘DEPOSIT” OF 944,000 OZ DESPITE THE CONSTANT RAID ON SILVER. SILVER HAS BEEN DOWN 9 STRAIGHT TRADING DAYS.

INVENTORY RESTS AT 325.299 MILLION OZ

end

First, here is an outline of what will be discussed tonight:

1. Today, we had t
he open interest in silver ROSE BY A GOOD SIZED  2526 contracts from 200,271 UP  TO 202,497 (AND now A LITTLE CLOSER TO THE NEW COMEX RECORD SET ON FRIDAY/APRIL 21/2017 AT 234,787) DESPITE THE TINY FALL IN PRICE OF SILVER AND CONTINUAL BOMBARDMENT (A FALL OF 11 CENTS ). HOWEVER,OUR BANKERS  USED THEIR EMERGENCY PROCEDURE TO ISSUE ANOTHER HUGE  2503  PRIVATE EFP’S FOR MARCH (WE DO NOT GET A LOOK AT THESE CONTRACTS AS IT IS PRIVATE BUT THE CFTC DOES AUDIT THEM).  EFP’S GIVE OUR COMEX LONGS A FIAT BONUS PLUS A DELIVERABLE PRODUCT OVER IN LONDON.  WE HAD ZERO COMEX SILVER COMEX LIQUIDATION. ON TOP OF THIS, IF WE TAKE THE OI GAIN AT THE COMEX 2526 CONTRACTS TO THE 2503 OI TRANSFERRED TO LONDON THROUGH EFP’S  WE OBTAIN A NET GAIN OF  5029  OPEN INTEREST CONTRACTS, AND YET WE STILL HAVE A  HUGE AMOUNT OF SILVER OUNCES THAT ARE STANDING FOR METAL IN DECEMBER (SEE BELOW). THE NET GAIN TODAY IN OZ: 25.14 MILLION OZ!!! 

RESULT: A GOOD SIZED INCREASE IN SILVER OI AT THE COMEX DESPITE THE  11 CENT FALL IN PRICE (WITH RESPECT TO FRIDAY’S TRADING).  BUT WE ALSO  HAD ANOTHER 2503 EFP’S ISSUED TRANSFERRING  COMEX LONGS OVER TO LONDON . TOGETHER WITH THE HUGE AMOUNT OF SILVER OUNCES STANDING FOR DECEMBER, DEMAND FOR PHYSICAL SILVER INTENSIFIES DESPITE THE CONSTANT RAIDS.

(report Harvey)

.

2.a) The Shanghai and London gold fix report

(Harvey)

2 b) Gold/silver trading overnight Europe, Goldcore

(Mark O’Byrne/zerohedge

and in NY: Bloomberg

3. ASIAN AFFAIRS

i)Late TUESDAY night/WEDNESDAY morning: Shanghai closed UP 22.22 points or 0.68% /Hang Sang CLOSED UP 428.20 pts or 1.49% / The Nikkei closed DOWN 108.10 POINTS OR 0.47%/Australia’s all ordinaires CLOSED UP 0.16%/Chinese yuan (ONSHORE) closed DOWN at 6.6200/Oil DOWN to 57.34 dollars per barrel for WTI and 63.82 for Brent. Stocks in Europe OPENED ALL MIXED . ONSHORE YUAN CLOSED DOWN AGAINST THE DOLLAR AT 6.6200. OFFSHORE YUAN CLOSED DOWN AGAINST  THE ONSHORE YUAN AT 6.6250 //ONSHORE YUAN SLIGHTLY WEAKER AGAINST THE DOLLAR/OFF SHORE MUCH WEAKER TO THE DOLLAR/. THE DOLLAR (INDEX) IS  WEAKER AGAINST ALL MAJOR CURRENCIES. CHINA IS  VERY HAPPY TODAY.(STRONG MARKETS)

Read More @ HarveyOrganBlog.com

The US Government Is Spending Money Like a Drunken Sailor

by Peter Schiff, SchiffGold:

The US federal government is spending money like a drunken sailor.

And that’s probably unfair to drunken sailors.

In November alone, the US government reported a $139 billion deficit.

Pause for just a moment and think about what that actually means. Last month, the government spent $139 billion (billion – with a B) more than the revenue it took in. In other words, it put $139 billion on a credit card.

In one month.

Of course, this is nothing new. In November 2016, the feds reported a $137 billion deficit.

Economists polled by Reuters projected a $134 billion deficit last month. So, the government actually managed to spend $5 billion more than expected. But what’s a few billion dollars between friends, right?

Through the fiscal year to date, the US government has run up a $202 billion deficit, compared to $183 billion in the comparable period for fiscal 2017. You might be thinking, oh, well that’s not too bad for the whole year. But you have to remember the fiscal year for the US government starts in October. So that’s $202 billion in two months.

Receipts last month totaled $208 billion, up 4% from one year ago, while outlays came in at $347 billion, a 3% increase from November 2017.

No wonder the national debt has risen to more than $21 trillion.

All of this debt has significant ramifications.

The national debt is already over 105% of total GDP. That’s the highest level in history except for a two-year spike at the end of World War II. Studies have shown GDP growth decreases by an average of about 30% when government debt exceeds 90% of an economy. On top of that, the federal government has to service all of this debt in an environment of increasing interest rates. This could crush future US budgets under massive interest payments.

And it’s about to get worse.

The Republican tax cut plan will increase the debt by an estimated $1.5 trillion over the next decade. That’s what happens when you cut revenue and don’t do anything about spending. Peter Schiff called it “government on a credit card.” With the increasing debt dragging down growth, it seems highly unlikely the GOP tax plan will deliver on the economic promises advertised.

And as Peter explained during a recent RT Boom Bust interview, even with tax cuts, we still end up paying for the cost of big government.

Read More @ SchiffGold.com

EU To Restrict Movement of Cash

by Martin Armstrong, Armstrong Economics:

The EU is now developing strict rules for carrying cash when traveling to non-European countries and returning to Europe. The revision of the First Cash Control Regulation from 2005, which stipulated that EU citizens should register cash in excess of € 10,000 when leaving the EU or when returning to the customs authorities have to, is what is under review. They want to lower the number and include gold, gemstones, and cash debit cards.

Interestingly, cryptocurrencies are not to be regarded as cash. Why? They are not sure how to detect them. The EU explanation reads: “Despite the high risk emanating from cryptocurrencies like Bitcoin, these are not added to the cash. The reason for this is that the customs authorities lack the technical means to discover cryptocurrencies. “

The customs authorities can now seize any amount of cash less than € 10,000 if they suspect that the money is somehow involved in any criminal activity. This is authorizing the Civil Asset Forfeiture that has been so profitable to the United States. Hence, the EU does not clearly define what suspicion is required to classify as a possible criminal activity. That will be avoiding taxes.

The EU is also extending the new rules to any freight shipment involving cash. Already, one cannot send cash by mail. This is now freight shipments. A friend used the service where you can send your baggage ahead of you for a trip. He was called down and had to remove $2.75 cents that were in a suitcase headed back to London. So there is no amount too small.

Read More @ ArmstrongEconomics.com

Silk Road fever grips the Russian Far East and boosts economy

by Pepe Escobar, Asia Times:

China’s Belt and Road Initiative heralds a new era with mega infrastructure projects dotting the landscape

If  you are looking for the latest breakthroughs in trans-Eurasian geoeconomics, you should keep an eye on the East – the Russian Far East. One interesting project is the new state-of-the-art $1.5 billion Bystrinsky plant. Located about 400 kilometers from the Chinese border by rail and tucked inside the Trans-Baikal region of Siberian, it is now finally open for business.

This mining and processing complex, which contains up to 343 million tonnes of ore reserves, is a joint venture between Russian and Chinese companies. Norilsk Nickel, Russia’s leading mining group and one of the world’s largest producers of nickel and palladium, has teamed up with CIS Natural Resources Fund, established by President Vladimir Putin, and China’s Highland Fund.

But then, this is just the latest example of Russian and Chinese cooperation geared around the New Silk Roads or the Belt and Road Initiative (BRI). Beijing is the world’s largest importer of copper and iron ore, and virtually the entire output from Bystrinsky will go to the world’s second largest economy.

 

Naturally, to cope with production, a massive new road and rail network has been rolled out, as well as substantial infrastructure, in the heart of this wilderness. Yet there is another major BRI initiative about 1,000km east of Bystrinsky. Work started on the Amur River Bridge, or Heilongjiang as the Chinese call it, in 2016 and the road and rail links should be finished in 2019.

The project is being developed by Heilongjiang Bridge Company, a Russia-China joint venture, along a crucial stretch of the Russian-Chinese border. It will also be part of a huge trade corridor, which will transport iron ore to China from the Kimkan mine, owned by Hong Kong’s IRC Ltd,  in Russia.

The Amur River Bridge, linking Heihe, in Heilongjiang province, with Blagoveshchesnk in the Russian Far East, is a natural part of the New Silk Roads program. It is well connected to one of BRI six major corridors – the China-Mongolia-Russia Economic Corridor, or CMREC, via the Trans-Siberian Railway all the way to Vladivostok.

CMREC’s additional importance is that it will connect BRI with the Russia-led Eurasia Economic Union, or EAEU, as well as the Mongolian Steppe Road program. CMREC has two key links. One involves China’s Beijing-Tianjin-Hebei to Hohhot before winding on to Mongolia and Russia. The other is from China’s Dalian, Shenyang, Changchun, Harbin and Manzhouli to Chita in Russia, where the Bystrinsky plant is located.

Numerous aspects of the Russian-Chinese intranet were extensively discussed at the Third Eastern Economic Forum in Vladivostok in September. CMREC involves closer cooperation, especially in energy, mineral resources, high-tech manufacturing, agriculture and forestry. Chinese Vice-Premier Wang Yang had already announced even closer economic cooperation with Russia, including a $10 billion China-Russia Investment Cooperation Fund in yuan for BRI and EAAU projects.

Monetary integration

Part of this will include Russian-Chinese investment funds, known as Dakaitaowa, or “to open a matryoshka doll”. Monetary integration and energy cooperation are all part of an ambitious Russian-Chinese package. This will allow trade to be settled in yuan, instead of US dollars, in Moscow via the Industrial and Commercial Bank of China. Products promoted under the http://www.madeinrussia.com “Made in Russia” brand are bound to get a boost.

According to the China General Administration of Customs, Russia continues to be the country’s leading crude oil supplier, exporting more than one million barrels per day, ahead of Saudi Arabia and Angola. Exports of Russian oil to China have more than doubled during the past six years.

Last month, the Russian parliament approved the draft of a conservative 2018-2020 Russian federal budget at $279 billion. This included increased spending in the social sector, a higher minimum wage, and increased salaries for teachers and healthcare workers.

Manufacturing in Russia has actually grown in absolute terms during the past decade along with a slight rise in GDP. Contrary to Western perceptions, energy revenue in Russia amounts to only around 30 percent of the federal budget. In absolute terms, it actually fell from 2014 to 2016, while non-oil and gas income has increased steadily since 2009.

Those were the days when Saudi Arabia and the Gulf petro-monarchies were dumping excess capacity on the oil market in a price war that was bound to ruin Russia’s finances. The draft budget assumes the price of oil will stay around at least $40.80 a barrel during the next few years. In fact, it may actually rise from its current $61.03 for the OPEC basket. Of course, that would boost Russia’s reserves.

Natural resources

As for exports, oil accounts for around 26 percent of Russia’s GDP. Oil and gas as a percentage of total exports fell during the past two years from 70 percent to 47 percent, but they are still the country’s top export money earners. When you add other commodities, such as iron, steel, aluminum and copper, revenue from natural resources come to more than 75 percent of Russia’s total exports.

Read More @ ATimes.com

Could Central Banks Dump Gold in Favor of Bitcoin?

by Charles Hugh Smith, Of Two Minds:

All of which brings us to the “crazy” idea of backing fiat currencies with cryptocurrencies, an idea I first floated back in 2013, long before the current crypto-craze emerged.

Exhibit One: here’s your typical central bank, creating trillions of units of currency every year, backed by nothing but trust in the authority of the government, created at the whim of a handful of people in a room and distributed to their cronies, or at the behest of their cronies.

And this is a “trustworthy” currency?

Exhibit Two: central banks can’t become insolvent, we’re told, because they can create as much currency as they want, whenever they want. And this is a “trustworthy” currency?

Exhibit three: and here’s what happens when trust in the currency is lost due to excessive currency issuance: the currency goes from 10 to the US dollar to 5,000 to $1 and then to 95,000 to $1, on its way to 2,000,000 to $1:

Yes, this was once a “trustworthy” currency.

While many people expect China to issue a gold-backed currency some day, they overlook the inconvenient reality that China is creating far more fiat currency than it is adding in gold reserves. They also overlook that gold-backed means nothing if the currency isn’t convertible into gold.

If it isn’t convertible, it isn’t gold-backed. Claiming there’s gold somewhere in a vault doesn’t make a currency gold-backed, as the central bank can devalue the currency it issues at will. Gold-backed means the currency is pegged at X units of currency to 1 unit of gold, and X units of currency can be exchanged for 1 unit of gold.

All of which brings us to the “crazy” idea of backing fiat currencies with cryptocurrencies, an idea I first floated back in 2013, long before the current crypto-craze emerged: Could Bitcoin (or equivalent) Become a Global Reserve Currency?(November 7, 2013)

Since there is no real-world commodity backing the digital currency, its value must be based on scarcity and its ubiquity as money. The two ideas are self-reinforcing: there must be demand for the digital money to create scarcity, and the source of demand is the digital currency’s acceptance as money that can be used to buy commodities, goods, services and (the ultimate test) gold.

Speaking of gold, correspondent Liberty Philosopher recently posed a scenario that was new to me: if gold continues losing value, could central banks dump their gold in favor of cryptocurrencies?

Read More @ OfTwoMinds.com