Wednesday, December 8, 2021

LBMA Gold Vault Data – How low is the London Gold Float?

by Ronan Manly, BullionStar:

The London Bullion Market Association (LBMA) has just released a first update on the quantity of physical gold and silver holdings stored in the ‘LBMA’ London vaulting network. The LBMA press release explaining the move, dated 31 July, can be read here.

This vaulting network, administered by the LBMA, comprises a set of precious metals vaults situated in London that are operated by the Bank of England and 7 commercial vault operators. For simplicity, this set of vaults can be called the LBMA London vaults. The 7 commercial vault operators are HSBC, Brinks, ICBC Standard Bank, Malca AmitJP Morgan, Loomis and G4S. ICBC Standard outsources its vault management to Brinks. It’s possible that to some extent HSBC also outsources some of its vault management to Brinks.

Strangely, the LBMA’s initial reporting strangely only runs up to 31 March 2017, which is 4-months prior to the first publication date of 31 July. This is despite the fact that new LBMA vault holdings data is supposed to be published on a 3-month lagged basis, which would imply a latest report coverage date of 30 April.

At the end of April 2017, the Bank of England separately began publication of gold vault holdings for the gold bars that the Bank stores in custody within its own vaults. The Bank of England reporting is also on a 3-month lagged basis (and the Bank actually adheres to this reporting lag). See BullionStar article “Bank of England releases new data on its gold vault holdings”, dated 28 April 2017, for details of the Bank of England vault reporting initiative.

Currently, the Bank of England is therefore 1 month ahead of the LBMA vault data, i.e. on 31 July 2017, the Bank of England’s gold page updated with Bank of England gold custody vault holdings as of 30 April 2017.

Ignoring the LBMA 3-month lagged vs 4-month lagged anomaly, the LBMA’s first vault reporting update, for vault data as of 31 March 2017, states that the 8 sets of vaults in question (which includes the Bank of England gold vaults) held a combined 7449 tonnes of gold and a combined 32078 tonnes of silver.

Also included in the first batch of LBMA data are comparable London vault holdings figures for gold and silver for each month-end date from July 2016 to February 2016 inclusive. Therefore, as of the 31 July 2017, there is now an LBMA dataset of 9 months of data, which will be augmented by one month each month going forward. Whether the LBMA will play catch-up and publish April 2017 month-end and May 2017 month-end figures simultaneously at the next reporting date of 31 August 2017 remains to be seen.

  One of the Bank of England gold vaults
One of the Bank of England gold vaults

The New Vault Data – Gold and Silver

For 31 March 2017, the LBMA is reporting 7449 tonnes of gold stored across the 8 sets of vault locations. For the same date, the Bank of England reported 5081 tonnes of gold held in the Bank of England vaults. Therefore, as of 31 March 2017, there were 2368 tonnes of gold ‘not in the Bank of England vaults’ (or at least 2368 tonnes of gold not counted by the Bank of England data).

Of the gold not in the Bank of England vaults, about 1510 tonnes of this gold in London was held by gold-backed Exchange Traded Funds (ETFs), mainly with the custodians HSBC and JP Morgan. These ETFs include the SPDR Gold Trust and various ETFs from ETF Securities, Source, iShares, and Deutsche Bank etc. This 1510 tonnes figure is taken from an estimate calculated at the end of April 2017 using data from the GoldChartsRUs website. See BullionStar article “Summer of 17: LBMA Confirms Upcoming Publication of London Gold Vault Holdings” dated 9 May 2017 for details of this ETF calculation.

Subtracting this 1510 tonnes of ETF gold from the 2368 tonnes of gold stored outside the Bank of England vaults means that as of 31 March 2017, there were only about 858 tonnes of gold stored in the LBMA vaults outside of the Bank of England vaults that was not held by gold-backed ETF holdings. See Table 1 below.

The lowest gold holdings number reported by the LBMA within its 9 months of vault data is actually the first month, i.e. July 2016. At month-end July 2016, the LBMA report shows total vaulted gold of 7283 tonnes. There was therefore a net addition of 166 tonnes of gold to the LBMA vaults between August 2016 and the end of March 2017, with net additions over the August to October 2016 period, followed by net declines over the November 2016 to February 2017 period.

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Western Central Bank Fear Of Gold Is In The Air

by Dave Kranzler, Investment Research Dynamics:

Ballooning open interest, heavy fix selling, aggressive post-settlement selling, flash crashes – this all seems a lot of bother. Perhaps the Other Side is afraid of something.– John Brimelow from his Gold Jottings report

Wednesday  evening at 7:06 EST, at one of the least liquid trading periods of the 23 hour trading day for Comex paper gold, a “motivated” seller unloaded 10,777 August gold contracts into the CME’s Globex trading system, knocking the price of gold down $9 in 25 minutes.  There were no obvious news or events reported that would have triggered any investor to dump over 1 million ozs of gold with complete disregard to price execution.

Rather, the selling was the act of an entity looking to push the price of gold a lot lower in “shock and awe” fashion.  The 10.7k contracts sold were just the August contracts.   There was also related selling in several other contract months.  To be sure, the total number of contracts unloaded included  hedge fund selling from stop-losses triggered in the black boxes of momentum-chasing hedge funds.

In addition to the appearance of frequent, strategically-timed “fat finger” flash crashes, the open interest in paper gold on the Comex has soared by 23,000 contracts since last Friday. This added 2.3 million paper gold ounces to the Comex open interest, which represents nearly 27{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of the total amount of alleged physical gold ounces sitting Comex vaults.   In fact, the total paper gold open interest on the Comex is 455,605 contracts, or 45.5 million ounces of gold. This is 530{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} more paper gold than the total amount of gold reported to be sitting in Comex vaults.

The dramatic rise in open interest accompanied gold’s move in price above the 50 dma.  It’s typical for the bullion banks on the Comex to start flooding the market with additional paper contracts in order to suppress strong rallies in the price of gold.  Imagine what would happen to the price of gold if the regulatory authorities forbid the open interest in Comex gold contracts to never exceed 120{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of the total amount of gold in the Comex vaults.  This is unwritten “120{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} rule” is de rigeur with every other commodity contract except, of course, silver.

The “flash crash” and “open interest inflation” are two of the obvious signals that the western Central Banks/bullion banks are worried about the rising price of gold.  The recent degree of blatant manipulation reflects outright fear. I suspect the fear is derived from two sources.  First is a growing shortage of physical gold that is available to deliver into the eastern hemisphere’s voracious import appetite.  Exports from Swiss refineries have been soaring.   India’s appetite for gold has not been even slightly derailed by the 3{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} additional sales tax imposed on gold.

Speaking of India, the World Council has put forth a Herculean effort to down-play to amount of gold India has been and will be buying.  After India’s 351 tonnes imported in Q1, the WGC tried to shove a 90 tonne per quarter forecast down our throats for the rest of the year. India’s official tally for Q2 is 167.4 tonnes.  Swing and a miss for the WGC.  Now the WGC  is forecasting  at total of 650-750 tonnes for all of 2017.

The WGC forecast is idiotic given that India officially imported 518.6 tonnes in 1H and 2H is traditionally the best seasonal buying period of the year AND a copious monsoon season means that farmers will be flush with cash – or rupees, rather – which will be quickly converted into gold.  Two more swings and misses for Q3 and Q4 and the WGC is out of excuses for why India likely will have imported around 1,000 tonnes, not including smuggled gold, in 2017.  This aggressive misrepresentation of India’s gold demand reeks of propaganda.  But for what purpose?

Back to the second reason for the banks to fear a rising price of gold:  the inevitable collapse of the largest financial bubble in history inflated by Central Bank money printing and credit creation.   The trading action in the gold and silver markets resembles the trading activity in 2008 leading up to the collapse of Lehman and the de facto collapse of Goldman Sachs.

One significant  difference is the relative effort exerted to keep a lid on the price of silver.   In early 2008, with the price of silver trading between $17 and $19, the open interest in Comex silver peaked at 189k contracts (Feb 29th COT report).   Currently the open interest is 206k contracts and it’s been over 240k.    In late 2008, the Comex was reporting over 80 million ozs of “registered” silver in its vaults. “Registered” means “available for delivery.” There were thus roughly 3 ozs of paper gold for every reported ounce of physical gold available for delivery.  Currently the Comex is reporting 38.5 million ozs of registered silver. That’s 5.3 ozs of paper silver for every ounce of registered silver.

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Toronto Housing Bubble Pops. “Genuine Fear” of Price Collapse


from Wolf Richter, Wolf Street:

Sales volume crashes, prices plunge from April peak.

In the Greater Toronto Area, sales of homes of all types in July plunged 40.4{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} compared to July last year to 5,921 transactions. By type:

  • Detached houses -47.4{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}
  • Semi-detached houses -38.6{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}
  • Townhouses -36.5{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}:
  • Condos -30.5{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}.

At the same time, as sales volume was plunging and potential buyers were staying away in droves, the number of new listings rose 5.1{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}, according to the Toronto Real Estate Board. This left total active listings 65{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} above the level a year ago.

“Clearly, the year-over-year decline we experienced in July had more to do with psychology, with would-be home buyers on the sidelines waiting to see how market conditions evolve,” said TREB President Tim Syrianos. Alas “psychology” is precisely what causes house price bubbles – not fundamentals, such as 2.3{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} annual wage increases. And when that “psychology” turns, it pricks those bubbles.

And prices reacted. The TREB refuses to publish median prices though it has the data. It publishes its own proprietary Home Price Index based on “benchmark” prices – a theoretical price based on an algorithm that creates theoretical homes in various neighborhoods. And it publishes the average price.

Home prices had surged through April. The market was going nuts, with year-over-year price increases of over 30{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}! In April, the average selling price in the Greater Toronto Area (GTA) soared to C$920,761. But that home-price peak in April is now a distant memory.

April 20 was the day the government of the Province of Ontario announced its “Fair Housing Plan” – a laundry list of measures, including a 15{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} levy on foreign speculators – to prick the house price bubble in Greater Toronto and surrounding areas. The Bank of Canada has been warning home buyers about risks and losses too.

After which all heck has broken lose. By July, in just three months, the average selling price plunged 19{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} to C$746,218.

“Summer market statistics are often not the best indicators of housing market conditions,” said TREB CEO John DiMichele. The whole industry appears to be stunned.

“We generally see an uptick in sales following Labor Day, as a greater cross-section of would-be buyers and sellers start to consider listing and/or purchasing a home,” he said. “As we move through the fall, we should start to get a better sense of the impacts of the Fair Housing Plan and higher borrowing costs.”

Given the crazy price surge through April, the average price was still up 5{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} from July last year. And the composite “benchmark” price, which too has plunged since April and declined another 5{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} since June, is still up 18{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} year-over-year.

“The market is stalled despite what TREB is saying,” boots-on-the-ground observer in Toronto told me. “Hardly anything is moving. Houses are taken off the market. Some of the desperate ones are placed back on the market at a reduced price.”

“I’ve been speaking with bankers, mortgage brokers, and real estate agents,” he said. “There is a genuine fear that a collapse in prices is at hand if buyers don’t show up in the fall. This is what I heard from them:

  • Many Johnny-come-lately speculators bought new homes within the last year which have not been built yet. They were hoping to flip them before moving in. I suspect this will be a drag in 2017 and 2018 as it will add to the supply.
  • Mortgage rates for second and third mortgages have jumped by several points. I am told by brokers that rates for second mortgages are in the 6{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} to 8{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} range, and that rates for third mortgages exceed 10{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} (of course, it depends on individual cases).
  • HELOCs have been all the rage the last 12 months, mainly used for paying off credit card debts. But now it’s already getting difficult to get HELOCs.

Housing bubbles cannot go on forever, despite what participants may think. Toronto’s house price bubble has been one of the most magnificent in the world, barely even dipping during the Financial Crisis. These sky-high prices create all kinds of problems, from the debt load becoming an albatross around the neck of households to millennials not being able to move out from their parents’ homes.

The risks associated with the debts that this bubble has been funded with have become immense. Now the government and the Bank of Canada are hoping for some sort of slow and orderly wind-down of the bubble that doesn’t cause too much disruption in the overall economy and too much damage among the banks. And that would be a great thing to hope for.

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Toronto Housing Market Implodes: Prices Plunge Most On Record


from ZeroHedge:

Until mid 2017, it appeared that nothing could stop the Toronto home price juggernaut:

And yet, In early May we wrote that “The Toronto Housing Market Is About To Collapse“, when we showed the flood of new home listings that had hit the market the market, coupled with an extreme lack of affordability, which as we said “means homes will be unattainable to all but the oligarchs seeking safe-haven for their ‘hard’-hidden gains, prices will have to adjust rather rapidly.

Exactly three months later we were proven right, because less than a year after Vancouver’s housing market disintegrated – if only briefly after the province of British Columbia instituted a 15{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} foreign buyer tax spooking the hordes of Chinese bidders who promptly returned after a several month hiatus sending prices to new all time highs – just a few months later it’s now Toronto’s turn.

On Thursday, the Toronto Real Estate Board reported that July home prices in Canada’s largest city suffered their biggest monthly drop on record amid government efforts to cool the market and the near-collapse of Home Capital Group spooked speculators.

The benchmark Toronto property price, while higher 18{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} Y/Y, plunged 4.6{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} to C$773,000 ($613,000) from June. That was biggest monthly drop since records for the price index began in 2000, according to Bloomberg calculations, and brought prices down in the metro area to March levels.

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Our European Tour – Part II – Seizing All Bank Accounts Throughout EU

by Martin Armstron, Armstron Economics:

Many financial firms in London claim to be looking to move to Frankfurt or Paris with BREXIT. They are going to have a very rude awakening. The proposition to demand all euro clearing takes place inside the EU will be the death of Europe – not the rebirth. The dominating position in Brussels among the majority is control the financial markets to prevent any free market movement against the designs of the EU Commission. Additionally, this position of draconian absolute dictatorial control over European markets includes a pan-European freezing of all bank accounts in the event of an impending banking crisis. The EU Commission is deeply concerned what happens when the EU stops its life-support for Eurozone government debt. They are actually considering the way in which multi-day cash disbursements can be practically implemented in order to resolve emergency measures for banks. Their plan is looking at a prolonged banking and financial crisis that would be 20 to 30 days in duration. If government debt crashes with rising rates, then the reserves of banks will decline and this could result in a banking crisis unleashed when the EU stops its life-support program.

The EU Commission will freeze al bank accounts for one week and up to one month if the crisis continues. When Banco Popular went into crisis in Spain, there was a Bankrun which unfolded as a contagion against other banks in Spain. In Greece, accounts were frozen and cash withdrawals were limited for extended periods. This is an ongoing proposition since not all EU members agree. Some countries already have legislation allowing for a total bank freeze such as Germany. Instead of bailouts, we have now move even beyond bail-ins, and into the realm of just total seizure. It is more likely that such a freeze will not preserve banks, but will result in more bank failures.

Clearly, people should be fully aware of the thinking process in government. Brussels will become authoritarian when the free markets rain on their parade. I strongly recommend that everyone should keep 30 days worth of cash to cover your basic needs.

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Full of it


by Bob Rinear, The international Forecaster:

So, if we’re getting some late stage run for glory which sends us ever higher, I don’t buy for a moment that it’s the general population finally diving in. I could however see it being the bankers printing even more than they acknowledge they are.

Being and investor, I certainly read as much as I possibly can by other people and get their opinions about the market. Recently I read an article suggesting that we’re about to see the market really kick into gear with a spectacular run even higher than the DOW 22K we’re presently at. A late surge of “panic buying” that sends us hurtling higher.

I don’t have an argument with the idea that we might “melt up” in some form of spectacular run. What I do have an issue with is their “reason” for it happening. In the article, they point to the run up of the late 90’s and how it went parabolic as everyone and his brother put all their chips in the market. They also point to the almost parabolic run from 2006 through 2007.

What they’re suggesting is that at some point all the people that aren’t in the market are going to think that they “have” to jump in no matter what and it will be a mad scramble as stocks soar and soar higher. Well they certainly have some history behind their theory, as indeed, we did see the market go parabolic in both instances.

But if we see some form of meteoric rise from here, I don’t for a minute think it’s mom and pop going “all in”. See, frankly…mom and pop are either broke, making wages that haven’t risen since about 87, are thinking about retiring, or simply got wiped out in the 2008 crash.

Think about it like this. In the 1993 – 1999 run, our economy was indeed humming along pretty well. Jobs were plentiful and for most people they were getting their first taste of the market. But, not from going to see a broker, not from reading a paper and thinking they best start investing…the Internet was the vehicle that exposed millions of new people to the stock market.

Before the Internet, trading stocks was NOT a crowd drawing exercise. Before the net, people had to try and find ticker symbols on the back page of the newspaper. Then call your broker and try and make your buy. “daytrading” so to speak, didn’t exist. But when the Internet came around, people of any and all skill levels from first timers to experienced pro’s could buy and sell a stock with the click of a mouse.

That alone got a ton of people to start thinking about stocks. Then as the market kept going up and up and up, more and more people started thinking that they should learn something about this “stock thing”. I remember back in those early days of say 1995 and 1996, every day my phone would ring with someone wanting to take my “one on one” training course to learn where to start. The phone rang a lot.

Then sure enough, by late 1998 the madness had spread. I remember being in a Burger King getting a Whopper and the kids behind the counter were talking about the stocks they bought. Yahoo, AOL, etc. It was a wild time. So yes, there was more and more people coming into the market, more and more with money from a decent economy, and more watching it just “go up” and they piled in. Sure, many if not most got creamed in 2000 – 03, but we had a “melt up”.

Something similar took place in the 05 – 07 madness. If you remember, that was the housing bubble days. People were flipping houses like mad, and much much money was being made. People were gaining income like never ever before. Houses that people bought for 125K in 2002 were getting bought out for 300, 400K, by 2006.

So the speculative people, were taking a lot of that “instant” money and pumping it into the stock market. Soon enough, not only was the housing market “stupid crazy” the stock market was soaring right along with it. But then… 2008 happened. That’s when the housing bubbles sins hit the fan and the whole house of cards fell like a rock. Once again, a large portion of people got hurt, but this time, many lost not only their market gains…but the overpriced, over mortgaged house they bought.

The run from the crash lows of 2008 to this insane level we’re at right now was NOT caused by “people piling in”. Sorry. The people are broke. 93 million aren’t in the workforce. The Baby boomers are close to or are retiring.

What we did get however, was the Federal Reserve with QE1, QE2, The Twist, QE 3, with trillions printed to suck up toxic assets. Bail outs. We got the Bank of Japan printing trillions of yen. The it was Mario Draghi’s turn. Don’t forget folks, way back in January of 2015 the European Central bank began their QE program, pushing 60 BILLION Euro’s per month into the system. That soon then morphed into 90 Billion during parts 0f 2016. Add it all up. Umpteen Trillions has been printed by the world’s Central bankers to keep the economies from imploding.

That and that alone is the ONLY reason we’re at DOW 22K. Not mom and pop, not the general public afraid to “miss the train leaving the station”. Why do you think they’re so paranoid when they hear rumblings about Draghi thinking about cutting the program? Or Yellen talking about hiking rates and working off the balance sheets? Because they KNOW that if the banks stopped the printing presses, we’d CRASH. Not fall. Not wobble. We’d spectacularly crash.

So, if we’re getting some late stage run for glory which sends us ever higher, I don’t buy for a moment that it’s the general population finally diving in. I could however see it being the bankers printing even more than they acknowledge they are. Why? Because only one of two things can happen from here out. One is that they just print and print forever, we give up on the idea of economics as it’s been known through history, and morph into some bizarre world where they just print trillions for ever and hand it out like candy.


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The Wealthiest Country in the World Is in Crisis


by Nick Giambruno, International Man:

“300 people and a TV station.”

This is Qatar, according to a common and accurate refrain in the Middle East.

Qatar sits on the world’s largest natural gas field. This has made it the wealthiest country in the world on a per capita basis.

Qatar also hosts the largest and most important US military base in the Middle East. Al Jazeera, the influential international TV network, is based there, too.

Most importantly, this tiny Persian Gulf country is home to one of two “crisis investing” opportunities I’ll tell you about today.

Qatar recently popped up on the Crisis Investing Value Radar, next to our sweet spot (circled in red in the box below).

Here’s how Value Radar works…

Value Radar Opportunity No. 1: Qatar

As you’ve likely heard, Qatar is in crisis.

In June, Saudi Arabia and some of its regional cohorts started a land, sea, and air blockade of Qatar for “supporting terrorism.” They’ve also threatened military action.

The whole situation is a total farce.

The Saudis, of all people, blackballing Qatar for “supporting terrorism” is just too rich.

It’s not a false accusation. Qatar does support Islamic radicals. But Saudi Arabia is without a doubt the world’s largest purveyor of radical Islam.

The real issue is the larger geopolitical story.

Instead of falling in line with the Saudi position that Iran is the source of all evil in the world, Qatar took a slightly more nuanced position. This annoyed the Saudis.

So, the Saudis took a gamble…

They thought pressuring Qatar would make the country fall in line.

So far, that hasn’t happened. In fact, Qatar has actually grown closer to Iran. (The Saudis are terrible strategists.)

We don’t yet know who will win this geopolitical tug of war.

In the meantime, Qatar’s stock market has tanked. That’s why it’s on my Value Radar.


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Lies, Damnable Lies And Downright Dangerous Lies

by Janet Phelan, Activist Post:

The founders of the United Nations would be heaving convulsively in their graves. A vision, forged out of the carnage of WWII for a world at peace, a world where disputes could be solved by dialogue and diplomacy rather than by bombs, has apparently succumbed to the duplicity of its moving party.

When US President Franklin Roosevelt drafted the initial Declaration of the United Nations in 1941, he penned a document that was a rallying cry for the Allies, in the face of what he termed “savage and brutal forces seeking to subjugate the world.”  The document boldly stated that “complete victory over their enemies is essential to defend life, liberty, independence and religious freedom, and to preserve human rights and justice in their own lands as well as in other lands…”

In the intervening seventy plus years, the UN has grown in scope and in reach, with divisions and treaty bodies to address trade, commerce, health, communications, human rights, disarmament, food security, refugees, education and more. It now employs over 44,000 people in offices and satellites across the globe.

However, the primary vision of the UN has been subverted by the actions of the leader of the free world. For the US is now actively misleading the UN as to the true nature of her activities.

US Lies about Human Rights

In an earlier article, the attempts by the US to create a false perception to the world human rights community were discussed relevant to  specific official statements made by US authorities during the Universal Periodic Review of the Human Rights Record (UPR) of the United States, a cyclical review process held at the UN in Geneva.  At the convening of the most recent review in 2015,  US officials were found to repeatedly and substantially tweak pivotal statistics and reports in order to cast a false (and benevolent) light upon activities which were uncomfortably redolent of human rights deprivations rather than successes.

Now, we come to assess the truthfulness of the US’s reports to the pivotally important UN 1540 Committee. As in reports on her human rights activities, the US has omitted or falsified critical information in her multiple reports to this body.

The 1540 Committee was established as part of the UN Security Council’s 1540 Resolution, which attempts to address proliferation of weapons of mass destruction. The 1540 Resolution, which was unanimously adopted on April 28, 2004, calls upon state parties to take several levels of action in order to halt proliferation of chemical, biological, radiological and nuclear weapons. In this article, we will primarily be looking at the US’s compliance with non-proliferation of chemical and biological weapons.

Biological Weapons Lies

Much has already been written about the efforts by the US State Department to lead the Biological Weapons Convention around by its nose. In 2001, just months before the anthrax attacks of September, the US delegation boycotted the efforts by an ad hoc committee to develop a verification protocol for the BWC. Due to this, the BWC remains with no way to verify compliance by its member parties and no real way to assure that violations can be reported and dealt with.

In other words, the BWC is a whole lot of words, blowin’ in the wind.

Rather than any externally verifiable reporting mechanisms, the BWC now relies on “Confidence Building Measures,” wherein each state must faithfully self-report to the Convention at large its activities surrounding bioweapons, including any changes in legislation or any stockpiles. It was confirmed by US Department of State delegate Chris Park in 2011 that the US simply “forgot” to inform the Convention that the Expansion of the Biological Weapons Statute, passed into law as part of the USA PATRIOT Act, gave the US government immunity from violating its own bioweapons laws.

Of equal concern is that the US has actively lied to the BWC. In addition, top UN Disarmament Affairs officials have refused to accept documentation that the US has launched a covert delivery system.

In looking at the US’s reports to the 1540 Committee, we find a similar pattern of omissions and outright falsehoods. Nowhere in the US’s 1540 National Reports is any mention of the aforementioned legislation, passed in the wake of September 11, giving the US government immunity from violation its own bioweapons laws. Rather, the US’s initial 1540 Report, filed in 2004, claims:

In accordance with its obligations under several international agreements, the United States has enacted national implementing statutes, which prohibit the illegal possession or transfer of such weapons. In addition,conspiracies, attempts, or threats to use such weapons are also proscribed.

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The One Safe Haven Left


by Jim Rickards, Daily Reckoning:

The U.S. in the midst of partisan political turmoil. China is about to fight an all-out trade war with the U.S., Russia hunkering down for a new Cold War with the west, North Korea forcing a new world war, and emerging markets vulnerable to capital flight as confrontations escalate.

In the middle of all this, is there one investor safe haven left in the world?

The answer is, “yes.” It’s Europe.

I expect the euro to soar from $1.17 to $1.25 and higher in the months ahead.

The U.S. and UK media have bombarded U.S. investors with nothing but bad news on the euro and the EU since 2009. This began shortly after the global financial crisis of 2007–2008.

One of the aftershocks was the bankruptcy of the quasi-sovereign wealth fund DubaiWorld the day after Thanksgiving in November 2009. Even as Americans were recovering from the turkey dinners, the financial world was turned upside down by this black swan from the Middle East.

The contagion quickly spread from Dubai to Europe. A liquidity crisis arose. The sovereign bonds of the EU “periphery” of Greece, Italy, Ireland, Portugal and Spain (“GIIPS”) were called into question. A major bailout of the GIIPS countries was quickly organized.

This bailout involved money printing by the European Central Bank (ECB), conditional lending by the International Monetary Fund (IMF), and new lending and guarantees by the European Union (EU) based in Brussels and led by Germany. The ECB, IMF and EU became known as the Troika, and were responsible for a series of bailouts between 2010 and 2015.

At this point, early in the crisis, the critics of the euro came out in force. Led by Nobel Prize winners Paul Krugman and Joseph Stiglitz, and with support from many others including Nouriel Roubini, they screamed that the euro was doomed!

Their argument was that the GIIPS should quit the euro, go back to their original currencies such as the Greek drachma and Italian lira, immediately devalue to lower their labor costs, and grow their economies with cheap labor, cheap exports, and imported inflation.

In the estimation of Krugman, Stiglitz and the rest, the EU should split into a “northern tier” of strong economies such as Germany and the Netherlands. There would also be a “southern tier,” consisting of mostly GIIPS and possibly France. Only the northern tier would be eligible for a common currency.

In effect, the critics said the euro was certain to fail and the sooner it was buried in its grave, the better.

Everything about this forecast was wrong, and I said so at the time in a long series of TV and radio interviews from 2010 to 2016.

To begin with, the intellectual critics of the euro paid no attention to what people in Europe actually wanted.

Despite complaints about heavy-handed tactics by Brussels and “austerity,” the people of Italy, Greece and Spain had no interest in returning to their former currencies.

Citizens remembered that former currencies such as the drachma and lira had continually devalued. They were an easy way for governments to steal money from savers by such constant devaluation.

The euro was the first stable currency that most of the citizens of Europe had ever experienced in their lifetimes. Polls showed citizens of Greece and the other GIIPS consistently supported the euro, notwithstanding their complaints about austerity.

The other development the critics ignored was that the EU was moving quickly to fix the flaws in the design of the Eurozone, the 19 countries that use the euro.

Originally, the Eurozone had a common monetary policy administered through the ECB. But, there was no common fiscal policy.

This led to fiscal abuses. Countries like Greece and Portugal ran huge deficits with money borrowed cheaply in euros. Eventually they could not meet their obligations, which led to the European sovereign debt crises of 2010 to 2015.

For intellectuals such as Paul Krugman and Joe Stiglitz, the solution was to break-up the euro.

But for political leaders in Europe, the solution was always to move toward a common fiscal policy to go alongside the common monetary policy. This is what leaders such as Angela Merkel meant when they proposed “More Europe.”

The EU has always been a political project more than an economic project. Europe had come through four hundred years of constant violence and warfare — from the counterreformation, the Thirty Years War, the wars of Louis XIV, the Seven Years War, the Napoleonic Wars, the Franco-Prussian War, World War I, World War II and the Holocaust.

By 1945, Europe was politically, morally, and financially exhausted. The project of European economic integration that culminated in the EU and the euro was an effort to put an end to war forever by integrating the member nations as closely as possible.

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Why We’re So Risk-Averse: “We Can’t Take That Chance”


by Charles Hugh Smith, Of Two Minds:

If our faith in the future and our resilience is near-zero, then we can’t take any chances.

You’ve probably noticed how risk-averse Hollywood has become: the big summer movies are all extensions of existing franchises–mixing up the superheroes in new combinations, or remaking hit films from the past–all safe bets.

The trend to “playing it safe” is not limited to Hollywood:–we see risk aversion in every sphere of the economy and society.

The unfailingly stimulating Ben Hunt of the Epsilon Theory newsletter has been highlighting the connection between super-easy-money financial policy and the avoidance of risk that’s so apparent in Corporate America: rather than take a chance that an investment in new technology, worker productivity etc. will increase sales and profit margins, corporations are borrowing super-cheap money and using this “nearly free money” to buy back their own shares in the stock market. ( Gradually and Then Suddenly).

This reduction of outstanding shares boosts sales and profits per share, creating higher earnings per share without actually boosting sales or profits.

Hunt’s point is that easy-money policies actually reduce the incentives to take risks to improve productivity/ profitability, and this ends up crippling our economy, as growth and productivity require taking on some risk. No risk-taking = no productivity gains and thus no gains in wealth, prosperity, social mobility, etc.

I agree with Hunt’s description of the perverse incentives created by easy-money policies, but I don’t think that’s the only driver of risk aversion, or even the primary driver.

We see this pervasive avoidance of risk in other areas as well–for example, in what college students are choosing as majors and what policy makers at the highest levels (the Federal Reserve, for example) are saying, in word and deed, “We Can’t Take That Chance.”

In the case of the Fed, the Fed is saying “We Can’t Take the Chance” that a recession would be positive, i.e. that a normal business-credit-cycle recession would do its intended job: clear out the deadwood of defaulted loans and eliminate marginal borrowers, lenders and enterprises.

This clearing of deadwood then sets the stage for healthy expansion of credit and business.

The Fed is clearly fearful that even a mild recession will cascade into something much worse–and something beyond their control.

This gives us some insight into the dynamics of risk avoidance: when we’re confident that we can handle whatever comes our way, then we’re free to take a risk on something that could yield long-lasting, important gains.

In other words, if we’re confident we can handle the downside of a risk not paying off, then we’re able to accept some risks as the necessary means of reaping major gains.

But if we’re afraid that any loss might collapse our world, then “We Can’t Take the Chance.”

Put another way–if our faith in the future and our resilience is near-zero, then we can’t take any chances. We are restricted to taking only the safest path, even if it means foregoing all the really big gains that are reserved for those willing to accept some risk.

This is an enormously important dynamic, for it hollows out the entire society and economy, one “we can’t take any chances” at a time.

One of points in this essay on Survivorship Bias is that “luck” is not just a matter of belief or some sort of magic: those who feel lucky are confident enough to absorb a wide range of contexts and opportunities. They don’t cross off most of a list, they scan it with an open mind. The lucky are lucky because they don’t arbitrarily narrow the opportunities they happen upon out of fear, i.e. we can’t take any chances.

It’s the confidence of the lucky that’s lacking in risk avoidance, and the terrible irony is avoidance of risk is also avoidance of opportunity.

There’s one more irony at work in this dynamic: as systemic risk of collapse rises, participants intuitively shun risk and start “playing it safe.” But since risk is now systemic, risk avoidance by enterprises and households won’t lower the risk of the whole rickety financial system giving way.

Rather, each individual decision of “we can’t take the chance” further weakens the economy’s resilience to financial disruption by removing the gains that are only possible by taking on risk.

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