Wednesday, November 13, 2019

SILVER INVESTMENT: Outperformed Gold In This Major Sector

by Steve St. Angelo, SRSrocco

Precious metals investors may not be aware, but silver investment has seriously outperformed gold in this major market sector.  Even though precious metals sentiment and sales are currently lower than they were over the past several years, this is only temporary pause before the market surges as the highly inflated stock market finally cracks and plunges lower.

When we start to witness a huge correction or crash in the broader stock markets, there only be a few physical assets worth owning to protect wealth.  Investors moving into the precious metals at this time, will see their asset values increase significantly.  However, silver will likely out perform gold as investors and speculators move into the more undervalued precious metal.

Actually, we have already witnessed this as physical silver investment versus jewelry demand has outperformed gold in the same market.  Let me explain.  While industrial demand is the largest consumer of silver in the market, silver jewelry demand has ranked second for quite some time.  But, this all changed after the 2008 U.S. Banking Industry and Housing Market collapse.

For example, global silver jewelry demand in 2007 was 182 million oz (Moz) versus 62 Moz in silver bar and coin demand.  Thus, physical silver bar and coin demand was only 34{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of world silver jewelry demand:

However, during the U.S. market meltdown in 2008, physical silver bar and coin investment surged more than three times to 197 Moz, while silver jewelry demand stayed flat at 178 Moz.  In just one year (2007 to 2008), physical silver investment accounted for 110{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of global silver jewelry demand.

While silver investment demand fluctuated over the next seven years, it hit a record high of 291 Moz in 2015 as investors took advantage of low prices not seen since 2009.  As physical silver bar and coin demand reached a new record in 2015, accounting for 128{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of global jewelry demand that year.

Even though physical silver demand declined in 2016, it was still neck and neck with jewelry demand of 207 Moz each.  Now, if we compare physical silver investment to jewelry demand versus gold, we can plainly see how silver has outperformed gold in this market.

Before the 2008 market meltdown, global gold physical investment of 14.4 Moz accounted for 18{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of world gold jewelry demand of 79.5 Moz:

Read More @ SRSrocco.com

Bitcoin: Fake Asset or Security?

by Chris Whalen, The Daily Reckoning

“I came of age on Wall Street when the Chairman of the Federal Reserve Board—he was William McChesney Martin — condemned even trace amounts of inflation as an economic and moral evil.  In the interval of 1960-65, there was not one year in which the CPI registered a year over year rise of as much as 2{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}.”
—Grant’s Interest Rate Observer

Below is my latest commentary on housing finance reform in American Banker, “Fannie, Freddie are irrelevant to a government-backed mortgage system.” I’ll be participating at the CoreLogic Risk Summit next week in Dana Point, California. Come say hello!

We’ve all heard of fake news, but consider the growing possibility of fake or at least virtual assets.  Investors face a deliberately orchestrated shortage of real investments c/o global central banks in markets such as stocks and real estate.

Is there any wonder that the financial engineers of Wall Street have again begun to manufacture new derivatives leveraging the real world?

Case in point, bitcoin.  The most recognized “digital currency,” bitcoin is a form of high-tech gaming instrument that fulfills just one of the traditional roles of money, but is among the world’s fastest appreciating – and most volatile– “asset” classes.

Adherents call the limited supply of bitcoin the ultimate expression of Milton Friedman style monetarist discipline.  They view the digital medium as a rational response to the fiscal and monetary chaos visible in most of the industrial nations.

But despite the huge gains seen in bitcoin vs conventional currencies, Jim Rickards says he’s sticking with his preferred investments: gold, cash and silver.  “I don’t own any bitcoin, but for those who have a preference for bitcoin, good luck,” he told Kitco News.

Bitcoin has been blessed by a federal regulatory agency in Washington.  “On Monday, a bitcoin options exchange called LedgerX won approval from the U.S Commodity Futures Trading Commission (CFTC) to clear bitcoin options, making it the first U.S. federally regulated platform of its kind,” reports The Wall Street Journal.

LedgerX’s chief executive Paul Chou is on the CFTC’s Technology Advisory Committee.  Not surprisingly, a CFTC spokeswoman said “no committee, including the Technology Advisory Committee, plays any role in any registration decision.”  OK.

Regardless of whether you view bitcoin as an investment or the electronic version of tulip bulbs, the fact of a traded options contract is intriguing.  It allows speculators to take a flutter on bitcoin without actually touching the ersatz currency or the varied folk who are said to traffic in this ethereal world.

To be fair, drug dealers, terrorists and members of organized crime organizations in nations like China, Russia and North Korea are not ideal counterparties for a US bank or fund.  But a US traded option contract may allow you to play the bitcoin game, pay your taxes, and sleep at night.  A lot of managers may find that degree of separation attractive.

Of note, less than 24 hours after the CFTC announcement, the Securities and Exchange Commission has declared that “tokens” such as bitcoin can be considered securities, and therefore, may be need to be registered unless a valid exemption applies,” Reuters reports.

“The innovative technology behind these virtual transactions does not exempt securities offerings and trading platforms from the regulatory framework designed to protect investors and the integrity of the markets,” said Stephanie Avakian, the co-director of the SEC’s enforcement division.

Part of the “problem” with bitcoin is that it is not easy for an individual to move in and out of the stateless, “offshore” market.  It will be interesting to see which financial institutions are willing to provide the infrastructure to allow a bitcoin options contract to settle in dollars and in size large enough to satiate institutional players.

But the more interesting question is how investors will deploy capital in this volatile and entirely opaque market.

The idea of an option on bitcoin certainly seems to have some utility.  Bitcoin may not be a store of value or a unit of account, but it serves that same purpose as the dollar in terms of acting as a means of exchange.  Like the dollar, bitcoin promises to pay, well, nothing, so the two moneys have rough equivalence in that regard.

Read More @ DailyReckoning

Leaked: EU Plans to Freeze Deposits to Prevent Bank Runs

by Don Quijones, Wolf Street

Following a spate of drastic banking interventions in Spain and Italy earlier this summer, the European Commission is preparing new legislation to prevent bank runs from completely wiping out Europe’s hordes of zombified lenders. According to an Estonian document seen by Reuters, that legislation would include measures allowing EU governments to temporarily stop people withdrawing money from their accounts, including by electronic fund transfers.

The proposal, which has been in the works since the beginning of this year, comes less than two months after a run on deposits pushed Banco Popular over the brink in Spain. In its final days, Popular was bleeding deposits at a rate of €2 billion a day on average. Much of the money was being withdrawn by institutional clients, including mega-fund BlackRock, Spain’s Social Security fund, Spanish government agencies, and city and regional councils.

The European Commission, with the support of a number of national governments, is determined that what happened to Popular does not happen to other banks. “The desire is to prevent a bank run, so that when a bank is in a critical situation it is not pushed over the edge,” a source close to the German government said.

Not everyone supports the new regulatory push. Some national governments and lenders fear the legislation will have the opposite of the desired effect, hastening frantic withdrawals at the slightest rumor of a bank being in trouble. “We strongly believe that this would incentivize depositors to run from a bank at an early stage,” said Charlie Bannister of the Association for Financial Markets in Europe (AFME).

Until now legislative proposals by the European Commission aimed at strengthening supervisors’ powers to suspend withdrawals had excluded from the moratorium insured depositors (those below €100,000 euros). If the new proposal is passed, pay-outs to insured depositors could be suspended for five working days. The freeze could even be extended to a maximum of 20 days in “exceptional circumstances.”

Desperate Times, Desperate Measures

It’s not hard to see why the European Commission is so worried about the prospect of bank runs triggering disorderly bank collapses in the Eurozone. What happened to Banco Popular could happen to any number of banks in any number of Eurozone countries, including Germany where some of the regional banks (landesbank) are hanging on by the skin of their teeth. And the risk of contagion in the Eurozone is higher than ever.

Many of the problems that plagued Europe’s banks during the last financial crisis have not been resolved despite the trillions of euros conjured up to save the system by the European Central Bank. Nowhere is this more apparent than in Italy, which over the last month has tidied up two failing banks in the Venice region and the even bigger Monte dei Paschi di Siena. The deals will cut large amounts of deadwood from the sector, and have lifted confidence in what remains of it.

However, as the IMF’s country report on Italy shows, while the sector’s biggest problem, its non-performing loans, may have shrunk “marginally” in recent months they are still equivalent to a staggering 21{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of GDP. As for bad loans — those that will likely never be repaid and where repossessing the collateral, if any, is the only hope of any kind of recovery — they “remained high at about €203 billion in April 2017 despite bad loan sales of about €8 billion.”

While the recent banking interventions in Italy may have briefly boosted confidence in the sector, there are clearly still massive unresolved issues. As the collapse of Banco Popular showed, it doesn’t take much to push a teetering bank over the brink: consistent bad news and rumors, spliced with falsely soothing words and an occasional untimely dose of reality from regulators, can be enough. Once the momentum gets going, it’s virtually impossible to stop.

 

Read More @ WolfStreet.com

Our Brave New ”’Markets”’

by Chris Martenson, Peak Prosperity

One thing is clear: These aren’t your daddy’s markets anymore.

Why?  Because about 10 years ago the Rise of the Machines (aka high frequency trading algorithms) completely altered the terrain of what we call the ‘capital markets.’ 

Let’s look at this as a before and after story.

Before the machines, markets were a place that humans with roughly equal information and reflexes set the prices of financial assets by buying and selling.  Fundamentals mattered. 

After the machines took over, markets became dominated — in terms of volume, liquidity and pricing — by machines that operate in time frames of a millionth of a second. The machines and their algorithms use remorseless routines and trickery — quote stuffing, spoofing, price manipulations — to ‘get their way.’ 

Fundamentals no longer matter; only endless central bank-supplied liquidity does. Because such machines and their coders are very expensive and require a lot of funding.

The various financial markets are so distorted that I first resorted to putting that word in quotes – “markets” – to signify that they are not at all the same as in the past.  In recent years I’ve taken to putting double quote marks – “”markets”” – in attempt to drive home their gross distortion.  Not only are todays “”markets”” something the human traders of a generation ago would fail to recognize, they’re no longer a place where human actions of any sort have much of a remaining role.

Why care about this? Two big reasons:

  1. Such “”markets”” are easily manipulated by central banks and other state actors by virtue of their automated responses to liquidity injections. Are the markets going down when you don’t want them to?  Just use any one of several highly leveraged means of signaling to the computers that it’s time to buy instead of sell.  Common leverage points include the Japanese Yen-to-USD price level, selling VIX to lower volatility, and buying massive quantities of index futures ‘all at once.’
  2. These manipulations will work until they don’t.  When they fail, they may well fail spectacularly — resulting in shattered markets that have to be shuttered until the damage can be assessed.  Investors will not be able to access their capital, either to buy or sell, while things get sorted out.  When the markets finally do reopen, valuations will be a whole lot lower due to the loss of the huge block of (phantom) volume previously supplied by the now-shut down algos.

The main predicament were facing is that by jamming the “”markets”” ever higher, the central banks have created an enormous gap between current prices and reality.

An easy to  see example of this is the housing market in San Francisco, where average income earners cannot afford average houses — at all.  The only way the SF housing market can re-balance to a sustainable level is either for salaries to shoot up massively (while house prices remain flat) or for house prices to fall.

Equities are no different; their prices current suffer from a similar “reality gap”. The same is true for bonds.

Obvious Price Manipulations

Just to show that I’m an equal opportunity critic and don’t just think gold and silver are manipulated  — and they have been and continue to be, which is now a matter of fact — I warn that the same dynamics that infest the precious metals “”markets”” at the COMEX indeed happen elsewhere.

My conclusion is that the HFT computer algos are in complete control of the “”market” action, and play with and off of each other to create massive sudden price movements that have nothing to do with anything except book order saturation.

Today’s recent example comes to us courtesy of the WTIC oil market on the NYMEX:  

Starting around 6:30am, oil futures started drifting slightly lower. A little volume came in around 6:40 a.m. and then — BAM! — right at 6:44 a.m. EST, a super spike of volume to the downside occurred.   I happened to be watching this in real time and began counting off seconds.  Before I got to 3 seconds it was over. (These are one minute bars so those three seconds are obscured in a full sixty second long bar).  

So…8 thousand contracts in 3 seconds. Staggering.

For fun, amortize this out over a full trading year. It’s a preposterous figure.

The point being, these volume spikes (especially to the downside) have an intensity that is simply overwhelming for the market structure.

Which is entirely the point of the operation. That’s the very essence of price manipulation.

Let’s try to look at this rationally. Let’s define intensity as “volume of more than 2 standard deviations above the recent 1-hour average, divided by the duration of the volume event.”

If we do this, an analysis of the oil chart above would go like this: 

Say the average volume was 200 contracts/min. The normal ‘intensity value’ would be 0, because there are no moments above 2 std before the big volume spike (0/0)

Making a guess of a std of 300 for the normal period, at the height of the spike, the value would be ~7,400. Then divide the 3 second episode (expressed in minutes) and you get 148,000.  

So from an intensity value of 0, thing spiked up to 148,000 in a matter of seconds.

The Perfect Crash Indicator Is Flashing Red

0

by John Rubino, Dollar Collapse

What’s the last big toy you buy when things have been good for a really long time and you already have all the other toys? An RV, of course. A dubious thing to own if you already have a house, but when the good times seem likely to roll on forever, why the hell not?

And what’s the first thing you sell when you lose your job and your stocks are tanking? That very same RV. Which makes new RV sales a useful indicator of our place in the business cycle.

What does it say now? Here you go:

Notice the mini-spike in the late 1990s and the major spike in mid-2000s, both of which were followed by corrections. Now note the mega-spike from 2010 and 2016.

And how are things going so far this year? Well, the space is on fire:

 

‘The RV space is on fire’: Millennials expected to push sales to record highs

(CNBC) – RV shipments are expected to surge to their highest level ever, according to a forecast from the Recreation Vehicle Industry Association.

 

It would be the industry’s eighth consecutive year of gains.

Thor Industries and Winnebago Industries posted huge growth in their most recent earnings report.

Those shipments are accelerating, and should grow even more next year, the group said. Sales in the first quarter rose 11.7 percent from 2016.

Much of the growth can be attributed to strong sales of trailers, smaller units that can be towed behind an SUV or minivan, which dominate the RV market. The industry also is drawing in new customers.

As the economy has strengthened since the Great Recession, and consumer confidence improved, sales have picked up, said Kevin Broom, director of media relations for RVIA.

Two of the major players in the industry, Thor Industries and Winnebago Industries, both manufacturers of RVs, reported huge growth in their most recent earnings report. Thor saw sales skyrocket 56.9 percent to $2.02 billion fromlast year. Winnebago’s surged 75.1 percent last quarter to $476.4 million.

Gerrick Johnson, an analyst at BMO Capital Markets, attributed much of that growth to acquisitions. Thor bought Jayco, then the No. 3 player in the industry, last June; Winnebago bought Grand Design in October.

Thor stock has experienced strong growth over the past year of almost 40 percent. Winnebago tells an even better story: Its shares are up 56 percent over the past 12 months.

“They’ve done massively well because they’ve made massively creative acquisitions,” said Johnson. “Wall Street didn’t realize how creative those deals were. Each quarter they came through. The RV space is on fire, and the demand metrics are quite positive.”

What we have here is another classic short. During the past couple of recessions, RV stocks plunged as everyone came to their senses and stopped buying $60,000 motel rooms. Based on the above chart that’s a pretty good bet to repeat going forward. Let’s revisit this play in a couple of years.

Estimated Chinese Gold Reserves Surpass 20,000t

by Koos Jansen, BullionStar

My best estimate as of June 2017 with respect to total above ground gold reserves within the Chinese domestic market is 20,193 tonnes. The majority of these reserves are held by the citizenry, an estimated 16,193 tonnes; the residual 4,000 tonnes, which is a speculative yet conservative estimate, is held by the Chinese central bank the People’s Bank of China.

I’m aware I’ve been absent from writing about the Chinese gold market for a long time, so for some of you it can be burdensome to pick up where we left a few months ago. It is not feasible for me to explain the entire structure of the Chinese gold market again; my suggestion would be to follow the links provided in the text for more background info. Most knowledge is covered in previous BullionStar posts, Mechanics Of The Chinese Domestic Gold MarketChinese Cross-Border Gold Trade RulesWorkings Of The Shanghai International Gold Exchange

To substantiate my estimates on above ground gold reserves in China mainland, we’ll first discuss private gold accumulation in China through the Shanghai Gold Exchange (SGE), after which we’ll address official purchases by the People’s Bank of China (PBOC) and its proxies that operate in the international over-the-counter market.

Chinese Private Gold Accumulation

A few days ago, you could read on the BullionStar Gold Market Charts page that withdrawals from the vaults of SGE in June accounted for 156 tonnes. Year to date SGE withdrawals have reached 984 tonnes, which is 16 {5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} shy of the record year 2015 when 1178 tonnes were withdrawn by this time. Since 2013 gold demand in China has remained extremely elevated – don’t let the World Gold Council tell you anything different – which exposes spectacular years of physical gold accumulation by the Chinese.

The amount of SGE withdrawals provides a fairly good proxy for Chinese wholesale gold demand, although not all gold passing through the SGE adds to above ground reserves. In China, most scrap supply and disinvestment flows through the Shanghai bourse as well, next to mine output and imports. Needless to say, recycling gold within China doesn’t change the volume of above ground reserves. So, simply using SGE withdrawals won’t fly for calculating above ground reserves. What we’re interested in are net imports and mine production in the Chinese domestic gold market.

Although gold exports from the Chinese domestic market are prohibitedexports from the Shanghai Free Trade Zone (SFTZ) where the Shanghai International Gold Exchange (SGEI) is located, are permitted. Before calculating Chinese net imports, let’s have a brief look at exports from the SFTZ – which reflects to what extent the SGEI is developing as a physical gold hub in Asia. As far as I can see, China’s gold bullion export from the SFTZ is still negligible. From the United Nations’ international merchandise trade statistics service COMTRADE, it shows the only countries that have imported tiny amounts from China in 2017 are the UK and India. But the amounts are so small, they carry little importance for our analysis.

There is one region that is importing significant amounts of gold from China, which is Hong Kong, though, this likely isn’t exported from the SFTZ but from the Shenzhen Free Trade Zone. The vast majority of China’s jewellery manufacturers are in Shenzhen, and for quite some years gold jewellery, ornaments, industrial and semi-manufactured parts are being exported from this Chinese fabrication base to Hong Kong. These events haven’t got anything to do with the SGEI in my opinion. Thereby, Hong Kong exports far more gold to China than vice versa.

For computing net gold export from Hong Kong to China we’ll subtract “imports into Hong Kong from China” from “exports and re-exports from Hong Kong to China” (as you know China doesn’t disclose gold trade statistics itself). Imports into Hong Kong accounted for 23 tonnes, while exports and re-exports to China accounted for 333 tonnes. Accordingly, China net imported 311 tonnes from Hong Kong in the first five months of 2017.

4 Financial Components to Improved Russian Relations

by Jim Rickards, Daily Reckoning

With the U.S. preparing to confront China and go to war with North Korea, Russia is an indispensable ally for the U.S.

There are huge implications on capital markets as these hegemonic powers continue to edge toward war.

Here’s an overview of some of the financial implications of improved relations with Russia…

1: The End of OPEC and the Rise of the Tripartite Alliance

On energy, a new producer alliance is being created to replace the old OPEC model. This new alliance will be far more powerful than OPEC ever was because it involves the three largest energy producers in the world — the U.S., Russia, and Saudi Arabia. This Tripartite Alliance is being engineered by former CEO of Exxon and Secretary of State Rex Tillerson, with support from Trump, Putin and the new Crown Prince of Saudi Arabia, Mohammad bin Salman.

This alliance is perfectly positioned to enforce both a price cap ($60 per barrel to discourage fracking) and a price floor ($40 per barrel to mitigate the revenue impact on producers). Supply cheating by outsiders, including Iran and Nigeria, can be discouraged by directing order flow to the alliance members, which denies the cheaters of any revenue.

As a result, energy will trade in the range described. Traders can profit by buying energy plays when prices are in the low 40s and selling when prices hit the mid-to-high 50s.

2: Improved U.S. Relations with Russia and Sanctions Relief

Following Russia’s annexation of Crimea and intervention in eastern Ukraine, President Obama imposed stringent economic sanctions on Russia, its major banks and corporations, and certain political figures and oligarchs. The EU joined these sanctions at the behest of the U.S. Russia responded by imposing its own sanctions on Europe and the U.S. in the form of banning certain imports.

The sanctions have been a failure. They have had no impact on Russian behavior at all. Russia still acts freely in Crimea, eastern Ukraine, and in other spheres of influence such as Syria.

This failure was predictable. Russian culture thrives on adversity. Russians understand that their culture is distinctly non-western and has its roots in Slavic ethnicity and the Eastern Orthodox religion.

The benefits to Europe from sanctions relief would amplify what is already solid growth and monetary policy normalization there. This paints a bullish picture for the euro and the ruble as trade and financial ties expand beginning in 2018.

A review of Russia’s place in the world and its prospects would not be complete without an analysis of its monetary policies and positions.

Russia’s hard currency and gold foreign exchange reserves have been on a roller coaster ride since mid-2008, just before the panic of 2008 hit full force. Reserves were $600 billion in mid-2008 before falling to $380 billion by early 2009 at the bottom of the global contraction.

Reserves then expanded to over $500 billion by mid-2011, and remained in a range between $500 billion and $545 billion until early 2014.

Russia’s reserves nosedived beginning in mid-2014 due to the global collapse of oil prices, which fell from $100 per barrel to $24 per barrel by 2016. The Russian reserve position fell to a low of $350 billion by mid-2015, about where they were at the depths of the 2008 crisis.

Reserves then began a second recovery in late 2015 and today stand at around $420 billion. This recovery is a tribute to the skill of the head of the Central Bank of Russia, Elvira Nabiuillina, who has twice been honored as the “Central Banker of the Year.”

When U.S.-led sanctions prohibited Russian multinationals, such as Gazprom and Rosneft, from refinancing dollar- and euro-denominated debt in western capital markets in 2015, those giant companies turned to Nabiullina. They requested access to Russia’s remaining hard currency reserves to pay off maturing corporate debt.

Nabiullina mostly refused their requests and insisted that the reserves were for the benefit of the Russian people and the Russian economy and were not a slush fund for corporations partially controlled by Russian oligarchs.

Nabiullina’s hard line forced the Russian energy companies to make alternative arrangements including equity sales, joint ventures, and yuan loans from China (which could be swapped for hard currency) to pay their bills. As a result, Russia’s credit was not impaired and its reserve position gradually recovered.

3: Watch Russia’s “Gold-to-GDP” Ratio

Another critical aspect of Russia’s reserve management under Nabiullina is that, even at the height of the oil-related drawdown in mid-2015, the Central Bank of Russia never sold its gold. In fact, it continued expanding its gold reserves. This meant that gold reserves as a percentage of total reserves continued to grow.

The Russian reserve position today consists of approximately 17{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} gold compared to only about 2.5{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} for China. (The U.S. has about 70{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of its foreign exchange reserves in gold; a surprisingly high percentage to most observers who never hear any positive remarks about gold from U.S. Treasury or Federal Reserve officials).

More important as a measure of Russia’s gold power are gold reserves as a percentage of GDP. If we take GDP as a metric for the economy, and gold as a metric for real money, then the gold-to-GDP ratio tells us how much real money is supporting the real economy. It is the inverse of leverage through government debt.

For the United States, that ratio is 1.8{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}. For China the ratio is estimated at 1.5{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} (China’s ratio is an estimate because China is non-transparent about the amount of gold in its reserves. The actual ratio is likely in a range of 1{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} to 3{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}).

For Russia, the gold-to-GDP ratio is a whopping 5.6{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}, or three times the U.S. ratio. The only other economic power that comes close to Russia is the Eurozone. It consists of the 19 nations that use the euro and they collectively have just over 10,000 metric tonnes of gold.

The gold-to-GDP ratio for the Eurozone is 3.6{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}; not as high as Russia, but double the U.S. ratio. On the whole, Russia is the strongest gold power in the world.

Chinese Leverage to Kill Petro-dollar

by Jim Willie, Goldseek

 

The Chinese Govt is greatly irritated by the requirement to use USDollars in payment for crude oil in the global market. The Beijing officials finally have some leverage in arranging for a major deal to pay for crude oil in RMB currency, their Yuan. The negotiations have been in progress for a couple months. The development is not covered well in the financial press, not even in the alternative media. It will happen, just a matter of time. Its effect will be far reaching and likely devastating.

 

The global currency reserve status for the USDollar is at severe heightened risk. It will not be deposed via financial markets, like with a bond market failure or a COMEX gold market default with bust. Such is folly to imagine as likely to occur. The Western bankers are expert at rigging the financial markets, one and all. Their central bank bond support has extended to stock market support, soon to corporate bond wide support also. The USGovt is hanging onto its power base in increased isolation. The assaults are on many flanks and platforms.

 

ESSENCE OF PETRO-DOLLAR

Its essence is the sale of crude oil universally in USDollar terms. Typically the payment form is the USTreasury Bill. The OPEC crew typically sock their surplus petro dollars in USTreasury Bonds. The sale proceeds never exit the USD form. The deal was struck in 1973 by the Rockefeller agent named Heinz Kissinger. It came in the wake of the abrogated Bretton Woods Gold Standard, which Nixon violated with force and audacity. In fact, the arrangement was suggested by the US side of the table. Nevermind that it was Rockefeller who hatched the idea of a tripled oil price, the exact opposite of what has been inscribed in the historical annals. The other little item in the Petro-Dollar defacto standard treaty is that the Saudis, along with the Gulf Arab neighbors, would buy USMilitary hardware exclusively. The USGovt would provide them with plenty of regional conflict. Over the four decades since, the Arabs have accumulated a few cool $trillion in USTBonds. The TIC Report on foreign bond assets is a gigantic fabrication. Most Saudi bond holdings have been hijacked and stolen, used as the core to the USDept Treasury’s vaunted Exchange Stabilization Fund. They will never see at least $3 trillion in sequestered bonds. A joke here, since the ESFund is the most secretive multi-$trillion fund in human history.

 

WEAK LINK IN GLOBAL CURRENCY RESERVE

The global currency reserve consists of the trade payments done in USD terms, together with the banking systems holding USTBonds as core assets. The West controls the financial markets, but the East increasingly controls the global manufacturing capacity. The USEconomy is heavily dependent upon imported goods within its massive supply chain. To some extent the producers in Asia, the Pacific Rim, and the Emerging Markets can dictate terms on trade payment.

 

SAUDI VULNERABILITY

The Saudis are the subject of occasional debate for a failed kingdom, a collapsed monarchy, a bankrupted nation, with finances bleeding red ink like never before in its brief history. Infighting has occurred to wrest the title of crown prince for Mohammed bin Salman (MbS), certain to have caused internal resentment and worse. The kingdom is depleting it financial reserves faster than it is the oil reserves. Deficits are at astounding levels. The lower crude oil price has resulted in half as much in revenues, while the filthy Yemen War has aggravated the costs within the financial ledger. The Saudis have issued bonds to finance their deficits, breaking new ground and angering some hardline Moslems. Their currency swaps are occasionally showing danger signals. The incidents with Qatar have left the Saudis with few if any friends, even in the Arab world. The arms deal charade with President Trump was one for the comic books. Even Langley is angry, as MbS screwed up their plans to stabilize the kingdom and region, with the goal of less terrorism. The other violent clown, Mohammed bin Zayed (MbZ) is the crown prince of Abu Dhabi in the UAE. Both might soon become expendable.

 

LIAR LIAR OILFIELDS ON FIRE

The big fat liars in the oil room are the Saudis. They have lied about their spare production capacity since the year 2000 or so. Such lies are used in attempts to move and to control the oil price. They have lied about their oil reserves for years also. That they have depleted oil reserves is the perfectly fitting motive for their predatory war in Yemen. They wish to steal the Yemeni oil & gas reserves, which are enormous and plentiful, even as not ever mentioned in the dutiful lapdog Western press. After 50 years of oil production, the Ghawar field is pumping over 98{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} water and brine. Other elephant fields are equally tapped out. The Saudis do have several smaller fields in production, but they do not compensate for the vacated elephants. Not at all. The Saudis are liars on oil reserves.

 

ENTER THE ARAMCO DEAL

The Saudis wish to conduct an IPO stock deal on 10{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of the ARAMCO assets and income. They laughingly estimate the total petro-chemical corporation to be worth US$2 trillion. In response, the Western energy analysts hopped on the wagon to provide financial analysis of value. Well, surprise surprise! The analysts estimate the ARAMCO giant to be worth $500 billion or less, at least four times less than the bloated exaggerated value posted by the Saudi liar princes. The IPO deal is stalled, possibly since underwriting brokerage houses might not wish to be the object of lawsuits in the near future. Meanwhile, the Saudis are sweating badly, very worried about not having their $200 billion payday. They will be lucky to have $50 billion in the tainted IPO deal. Below is just one site of the sprawling state owned complex.

Chile’s Silver Production Down A Stunning 32{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}

by Steve St. Angelo, SRSrocco Report

In an interesting change of events, the world’s fifth largest silver producer saw its production plunge 32{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} in May versus the same month last year.  Chile, a country which produced a record high of 54 million oz of silver in 2014, is forecasted to see its mine supply decline to less than 40 million oz in 2017.

According to the most recently released data by COCHILCO – Chile’s Ministry of Mines, the country’s silver production in May fell to 97.1 metric tons (3.1 million oz) versus 141.9 metric tons (4.6 million oz) in the same month last year:

Part of the reason for the decline was a union strike and shutdown at the huge by-product silver Escondida Copper Mine.  However, by-product silver production at Escondida was only down 38 metric tons (1.2 million oz) during the first six months of the year (BHP Billiton).  This is only a small percentage of the overall 170 metric tons (5.5 million oz) decline in Chile’s copper production in the first five months of 2017 versus the same period last year:

According to COCHILCO’s preliminary production figures, Chile produced 655 metric tons of silver Jan-May 2016 versus 485 metric tons Jan-May 2017.  Again, this a difference of 170 metric tons…. or a 26{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} decline year to date.

Furthermore, preliminary results from the top silver producers show that mine supply continues to decline from the global peak in 2015.

Top Silver Producers JAN-APR 2017:

Mexico = -3{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}

Peru = -3{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}

Australia = -5{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}

If the declining silver production trend continues in the world’s top producers for the remainder of 2017, global mine supply will fall for a second consecutive year.  Global silver production reached a peak of 891 million oz in 2015, and then fell to 886 million oz last year:

The Elites Are Jumping Ship As The Financial Collapse Draws Near

by Mac Slavo, SHTFPlan

It’s easy to think of the political and financial elites who run our world as lofty and all powerful. They command dangerous governments that can wield devastating weapons, central banks that treat our economy like a rigged casino, media conglomerates that pacify the minds of the public, and unbelievably wealthy corporations that have concentrated wealth to an unprecedented degree.

However, they’re certainly not invincible, and the systems of control that they’ve created are rapidly diminishing. Most notably, they seem all to aware of the fact that the global economy is headed for a crash. On the rare occasion where you can catch one of the elites in a moment of candor, they’ll tell you that the party is almost over.

Mohamed A. El-Erian is a bona fide member of the global power elite (a former deputy director of the IMF and president of the Harvard Management Co.). Yet he writes in a fairly accessible style on the popular Bloomberg website. When El-Erian talks, we should all listen.

In a recent article he raises serious doubts about the sustainability of the bull market in stocks because of reduced liquidity resulting from simultaneous policy tightening by the Fed, European Central Bank (ECB) and the Bank of England.

He says stocks rose on a sea of liquidity and they may crash when that liquidity is removed. This is a warning to other elites, but it’s also a warning to you.

Their actions are quite telling as well. Sovereign wealth funds, which are largely funded and owned by powerful governments to invest in domestic industries, are jumping ship.

Among sovereign wealth funds, the Government of Singapore Investment Corp. (GIC) is one of the largest, with over $354 billion in assets. So what does the head of GIC say about markets today?

Lim Chow Kiat, CEO of GIC, warns that “valuations are stretched, policy uncertainty is high” and investors are being too complacent.

GIC allocates 40{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of its assets to cash or highly liquid bonds and only 27{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of its assets to developed economy equities.

Meanwhile, the typical American small retail investor probably has 60{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} or more of her 401(k) in developed economy equities, mostly U.S.

In other words, the investment arms of wealthy nations are pulling out of the stock market and out of companies in their own economies (developed economy equities), and putting their money into assets that can be quickly turned into cash. It’s practically an admission by the elites, that they think the economy is completely unstable.

But this is just the latest warning sign that the elites are getting nervous. Corporate executives have been selling their stocks at an unprecedented rate for several months. Meanwhile, ordinary people are still placing their faith and their bets on a stock market that most experts agree is completely unsustainable.