Thursday, October 6, 2022

One of the Largest Banks in the World Just Accused of Laundering Millions for Drug Cartels

by Claire Bernish, The Free Thought Project:

Commonwealth Bank of Australia stands accused by the Australian Transaction Reports and Analysis Centre (AUSTRAC) of a stupefying 53,700 violations of money laundering and counter-terrorism-financing laws, in which the financial institution failed to notify in a timely fashion — and, sometimes, not at all — transactions topping a mountainous A$77 million.

As the case unfolds, it should be noted, each breach of the act carries a jaw-dropping potential penalty of A$18 million — meaning Commonwealth Bank could be slapped with an astonishing level of fines.

Alleging ‘serious and systemic non-compliance’ with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act), the regulator commenced civil penalties proceedings against CommBank on Thursday, after the tentative conclusion of an investigation — the heft of which focused on the bank’s use of intelligent deposit machines (IDMs) — revealed rampant breaches of the act, according to acting CEO Peter Clark.

“The effect of CommBank’s conduct in this matter has exposed the Australian community to serious and ongoing financial crime,” asserted AUSTRAC in a statement.

Bloomberg notes of IDMs, “Commonwealth Bank’s automated cash deposit machines, which allow anonymous deposits to recipient accounts that can then be funneled offshore or to other domestic accounts, Austrac said in documents lodged with the Federal Court in Sydney on Thursday. The cash deposit machines were used by drug rings to move the proceeds of crime, the agency said […]

“The automated machines were introduced in May 2012, and the amount of cash flowing though them grew exponentially, the court documents say. In the six months to November 2012 about A$89.1 million was deposited. By May and June 2016 this had risen to more than A$1 billion per month. About A$8.9 billion in cash was put through the system before the bank conducted any assessment of the money laundering risk, Austrac said.”

 

In this post-9/11 world, Western governments take seriously the tracking of larger banking transactions, under the premise that watching the money by moved terrorists and other high-level criminals through such institutions could stem the spread of violence. But machines like those at the center of the controversy make apparent avenues for significant anonymous banking indeed still exist — if skirting the lines of legality — or, at least, did until recently.

Five money laundering syndicates opportuned CommBank’s IDMs, AUSTRAC claims, with just one drug case totaling A$21 million distributed across eleven separate accounts. Even an alert from the Australian Federal Police to the bank about multiple accounts used for illicit purposes failed to provoke a substantial response — with several tacitly permitted to continue operating afterward.

Suspect accounts attempted to divert suspicion by keeping deposits small and inconspicuous, as well as by moving funds into offshore accounts.

“CommBank permitted several of the accounts to remain open even after this time and further transactions occurred. Eight individuals have been charged with dealing in proceeds of crime, with 6 of these individuals already having been convicted,” the Guardian reports.

“In another case,” Bloomberg continues, the agency “alleges A$20.6 million was deposited into 30 accounts, 29 of which were in fake names, which shortly after was transferred abroad. After the bank identified ‘repeated, suspicions and connected’ patterns of cash deposits, it permitted a further approximately A$9.1 million to be transferred from these accounts to Hong Kong, Austrac said.”

By statement, cited by the Sydney Morning Herald, CommBank contends, “On an annual basis, we report over 4 million transactions to Austrac in an effort to identify and combat any suspicious activity as quickly and efficiently as we can.”

Read More @ TheFreeThoughtProject.com

 

Follow the money

by Alasdair Macleod, GoldMoney:

Since 2009, equities and other financial assets have climbed a wall of worry. Initially, it was recovery from the threat of a complete financial collapse, before the Fed saved the system once again.

Systemic collapse continued to be on the cards, with European banks at risk of bankruptcy. We still talk about this today. More walls of worry to climb.

The global economy has not imploded, as the bears have consistently warned. Systemic and other dangers still exist. The bears now point to excessive valuations as the reason for staying out of the market. But this misses the point: the general level of asset valuations depends not on fundamentals, but on credit flows. It matters not whether there is cash sitting on the side-lines, or whether speculators borrow to invest, so long as the credit keeps flowing into financial assets. Just follow the money.

It is all about credit, and when you have central banks suppressing interest rates and causing bank credit to expand, they create a credit cycle. Modern credit cycles have existed since Victorian times, the consequence of fractional reserve banking. The cycle varies in length and the specifics, but its basic components are always the same: recovery, expansion, crisis and destruction. Today, central banks reckon their mission is to stop the destruction of credit, and to keep it continually expanding to stimulate the economy.

The economic and financial community fails to understand that the sequence of booms and slumps is not a free market disorder, but the consequence of a credit cycle distorting how ordinary people go about their business. It is a waste of time trying to understand what is happening in the economy without analysing credit flows. It is Hamlet without the Prince. This article walks the reader through the phases of the credit cycle, identifying the key credit flow characteristics, whose starting point we will take to be the end of the great financial crisis. It will conclude with a summary of what this tells us about current credit flows, and prospects for the near future.

The seeds of recovery

In a modern credit-driven economy, central banks see their role as preventing recessions, slumps, and depressions. The need to preserve the banking system, to stop one bank taking out the others in a domino effect, is paramount. To prevent the weakest banks collapsing takes financial support from the central bank by increasing the quantity of base money, while at the same time discouraging banks from calling in loans, particularly from their larger customers.

Central bank priorities will have switched from fear of price inflation ahead of the crisis to fear of deflation. They are still informed by Irving Fisher’s description of how an economic crisis develops from financial flows. When businesses start to fail, banks call in their loans, causing otherwise sound businesses to collapse. The banks liquidate collateral into the market, undermining asset prices in a self-feeding downward spiral. The way to prevent it is to backstop the banks by issuing more money.

We saw this at its most spectacular in the great financial crisis. The Fed effectively wrote open cheques to any bank that needed money, and for some that didn’t. The most important rescue was of Fannie Mae and Freddie Mac, the two private-public entities that dominated the residential property market, with some $5 trillion of agency securities outstanding. The Fed’s initial involvement was to buy up to $500bn of agency debt through quantitative easing, supporting the remaining mortgage debt values and injecting a matching quantity of money into the banks in the form of excess reserves.

This didn’t stop with Fannie and Freddie. AIG, Bear Sterns and Lehman were just a few of the names associated with the crisis. Term Auction Facility, Primary Dealer Credit Facility, Asset-backed Commercial Paper, Money Market Mutual Fund Liquidity Facility, Commercial Paper Funding Facility, and Term Asset-Backed Securities Loan Facility entered the financial language as new rescue vehicles financed with raw money from the Fed.

It wasn’t just the US. Most major jurisdictions were locked into the same credit cycle, and by 2007-08 they were all on the edge of the crisis. Consequently, the financial crisis in America was replicated in the UK and the Eurozone. Including Japan, the sum of the balance sheets of their four central banks increased from about $6.5 trillion to nearly $19.5 trillion today.

The increase in the liability side of central bank balance sheets has been substantially in the reserves of commercial banks. This is the most pronounced feature of the current credit cycle, potentially fuelling substantial levels of bank lending when the banks eventually become more confident in their lending to the non-financial sector.

The recovery phase has now been in place for an extended period, lasting eight years so far. It has been characterised, as it always is, by an increase of financial asset prices. This is partly driven by the suppression of interest rates, which creates a bull market for bond prices, and partly by banks buying government bonds.

Government bonds are always accumulated by the banks in large quantities during the recovery phase of the credit cycle. The shortfall in fiscal revenue and the increased cost-burden on government finances leads to a general demand for credit to be switched from private sectors to governments. For the banks, investing in government debt is a safe harbour at a time of heightened lending risk, further encouraged by Basel regulatory risk weightings. On the back of falling bond yields, other financial assets rise in value, and therefore banks increasingly make credit available for purely financial activities.

In the current credit cycle, the boom in financial assets has been exaggerated by central banks buying government bonds as well. The result is a bond bubble far greater than would otherwise be the case. Consequently, when an economy moves from recovery into expansion, the price effect of the credit flows as they wash out of bonds into lending is likely to be more dramatic than we have ever seen before.

We appear to be on the cusp of this change into a phase of economic expansion for much of the world, though the situation in America is less clear. To understand the implications of this change, we must first examine the underlying credit flows.

Expansion – credit hidden then in plain sight

The stability that returns in the recovery phase, coupled with fading memories of the previous crisis, engenders growing confidence in the non-financial economy, which demands credit in increasing quantities for expansion of production. While interest rates remain suppressed, financial calculations, such as return on capital, make investment in even unwanted production appear profitable. It is the bankers which impede this early demand for money, because they still retain memories of the previous crisis and are determined not to repeat the errors of the past. Furthermore, bank regulators are still closing stable doors long after the horses have bolted.

Banks will have continued lending to big business throughout the recovery phase. Under pressure from large corporates, this lending also extends to their consumers, currently evident with car, or auto loans, financing most of the products of major motor manufacturers. Without this consumer credit, vehicles cannot be sold, and manufacturers would be forced to close factories. That is not where the problem under discussion lies: it is in the other 80{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of the economy, the small and medium-size enterprises (SMEs), which the banks see as too risky. However, gradually at first, the banks begin to reassess the risk of lending to non-financial entities relative to owning the government bonds on their balance sheets.

Read More @ GoldMoney.com

Keiser Report: Mergers & Monopolies (E1105)

from RT:

Holding the show at Freedom Fest in Las Vegas, Max and Stacy discuss mergers, monopolies and antitrust.  Max interviews early bitcoin adopter Charlie Shrem about the state of play in the bitcoin market. This interview took place a week before the hard fork.

How The Fed Enabled Corporate Kingpins To Scalp Billions

by David Stockman, Daily Reckoning:

Here’s a comparison that is surely vertigo inducing. On the one hand, the financial system is implicitly held to be so incredibly stable and healthy that volatility on the S&P 500 has been driven to 50-year lows.

Indeed, that lovely condition is apparently expected to persist indefinitely as signaled by implied volatility. During the last 6,000 trading days (since the early 1990s), the VIX Index closed below 10 on 26 occasions or just 0.4{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of the time. No less than 16 out of those 26‘below-10’ closes occurred in the last three months!

Yet this insensible bullish calm is happening even as Wall Street is showing itself to be in the throes of unhinged leveraged speculation.

With respect to the unhinged part, consider an incisive post by Wolf Richter on the present carnage in the retail sector. His point was that virtually every one of the rash of companies filing bankruptcy in the sector during the recent past had been strip-mined by private equity operators:

Nearly every retail chain caught up in the brick & mortar meltdown is an LBO queen – acquired in a leveraged buyout by a private equity firm either during the LBO boom before the Financial Crisis or in the years of ultra-cheap money following it.

But Richter’s real point is that the private equity operators in the retail space brought down a double-whammy of leverage on the companies they ransacked. That is, they first loaded up the companies with buyout debt, and then came back for second and third helpings.

Accordingly, since 2010, retail chains controlled by private equity firms issued $91 billion in junk bonds and leveraged loans.

Needless to say, in drastically falsifying debt prices in order to stimulate housing and other investments, the Fed had no clue about the collateral effects of its massive and persistent intrusion in the delicate clockwork of capital markets pricing.

So when Janet Yellen & Co profess to see no bubbles they prove their own clueless incompetence. Do they actually think that this would happen in a free market with honest money and market-clearing interest rates?

The question answers itself.

In fact, the asset stripping pattern is every bit as irrational and toxic as were the slicing and dicing of subprime mortgage pools in the run-up to the 2008 financial crisis.

Needless to say, so-called “investors” piled into the flood of dodgy paper because they were desperate for yield. In the dollar fixed income markets, $3.5 trillion of the Fed’s U.S. Treasury and other securities purchases after September 2008 drove real interest rates so low that it virtually forced money managers to scramble out the risk curve in order to find minimally attractive yields.

So doing, they enabled strip-mining transactions that resulted in the eventual destruction of the debt issuers and vast windfall distributions to a few hundred corporate kingpins.

What possessed institutional investors such as state pension funds to invest in such shaky operations?

The answer to this seeming mystery is simply that institutional investors have been completely corrupted by the casino environment that has resulted from three decades of Bubble Finance. In clamoring for yield, institutions have been induced to embrace sweetheart deals for the kingpins that would be laughed out of court in an honest market.

For example, Payless Inc, which was a shoe retailer with 22,000 employees and 4,000 stores, filed for bankruptcy last April. That was less than five years after its original $670 million LBO in 2012. But it was not at all surprising since the company was heading for the wall from the get-go.

But the Payless bankruptcy was apparently dismissed as a victim of bad luck and timing.

I don’t think so. The two LBO firms that did the deal — Golden Gate Capital and Blum Capital Partners — are serial asset strippers and crony capitalist rip-off outfits.

The latter was founded in 1975 by one Richard Blum of San Francisco. He is a classic crony capitalist who parlayed his contacts in the world of California and national democratic politics — ranging from Jimmy Carter to his wife, Senator Diane Feinstein, into billions of funding from political controlled institutions.

Thus, upwards of $1 billion in capital was supplied to Blum’s fund by the California Public Employees’ Retirement System, the California State Teachers’ Retirement System and the Los Angeles County Employee Retirement System, among others. That Blum served as a long-time regent of the giant University of California System is surely not coincidental.

Nor is the fact that his fund was among a pack of hedge fund jackals that ran up the stock prices of for-profits education companies to absurd heights based on growth momentum that was totally unsustainable. In fact, these outfits harvested hundreds of billions of student loans from hapless enrollees — of which 33{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of the tuition proceeds went to selling bonuses and expenses, 33{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} to operating profits and the left-overs to the purported cost of education.

Read More @ DailyReckoning.com

Trump Will Now Become the War President

by Paul Craig Roberts, Paul Craig Roberts:

President Trump has been defeated by the military/security complex and forced into continuing the orchestrated and dangerous tensions with Russia. Trump’s defeat has taught the Russians the lesson I have been trying to teach them for years, and that is that Russia is much more valuable to Washington as an enemy than as a friend.

Do we now conclude with Russia’s Prime Minister Dmitry Medvedev that Trump is washed up and “utterly powerless?” I think not. Trump is by nature a leader. He wants to be out front, and that is where his personality will compel him to be. Having been prevented by the military/security complex, both US political parties, the presstitute media, the liberal-progressive-left, and Washington’s European vassals from being out front as a leader for peace, Trump will now be the leader for war. This is the only permissible role that the CIA and armaments industry will permit him to have.

Losing the chance for peace might cost all of us our lives. Now that Russia and China see that Washington is unwilling to share the world stage with them, Russia and China will have to become more confrontational with Washington in order to prevent Washington from marginalizing them. Preparations for war will become central in order to protect the interests of the two countries. The situation is far more dangerous than at any time of the Cold War.

The foolish American liberal-progressive-left, wrapped up as they are in Identity Politics and hatred of “the Trump deplorables,” joined the military/security complex’s attack on Trump. So did the whores, who pretend to be a Western media, and Washington’s European vassals, not one of whom had enough intelligence to see that the outcome of the attack on Trump would be an escalation of conflict with Russia, conflict that is not in Europe’s business and security interests.

Washington is already raising the violence threshold. The same lies that Washington told about Saddam Hussein, Gadaffi, Assad, Iran, Serbia and Russia are now being told about Venezuela. The American presstitutes duly report the lies handed to them by the CIA just as Udo Ulfkotte and Seymour Hersh report. These lies comprise the propaganda that conditions Western peoples to accept the coming US coup against the democratic government in Venezuela and its replacement with a Washington-compliant government that will permit the renewal of US corporate exploitation of Venezuela.

As the productive elements of American capitalism fall away, the exploitative elements become its essence. After Venezuela, there will be more South American victims. As reduced tensions with Russia are no longer in prospect, there is no reason for the US to abandon its and Israel’s determination to overthrow the Syrian government and then the Iranian government.

Read More @ PaulCraigRoberts.org

GOLD RECOVERS FROM LAST NIGHT’S 7 PM FLASH CRASH BUT STILL DOWN $3.65/SILVER DOWN 10 CENTS

by Harvey Organ, Harvey Organ Blog:

DESPITE THE DROP IN PRICE OF GOLD YESTERDAY, OPEN INTEREST RISES BY OVER 7,000 CONTRACTS/WAR OF WORDS BETWEEN INDIA AND CHINA INTENSIFY AS INDIAN TROOPS ARE STATIONED ON DISPUTED CHINESE LANDS/TRUMP TO ANNOUNCE A TRADE WAR WITH CHINA TOMORROW: CHINA IS FURIOUS!

In silver, the total open interest FELL BY A TINY 1023 contracts from 207,258 DOWN TO 206,233 WITH THE FALL IN THE PRICE THAT SILVER TOOK WITH RESPECT TO YESTERDAY’S TRADING (DOWN 5 CENT(S). WHEN YOU COMPARE THE HUGE GAIN IN OI FOR GOLD THEN YOU MUST ADMIT THAT IT SURE LOOKS LIKE BOTH THE SPECULATOR SHORTS AND THE BANKER SHORTS ARE HAVING SEVERE PROBLEMS TRYING TO COVER THEIR SHORTFALL WHICH CANNOT COME TO FRUITION. THE LONGS REMAIN STOIC AND NOTHING WILL BUDGE OUR SILVER LEAVES FROM DEPARTING OUR SILVER TREE. YESTERDAY’S TRADING IS EVIDENCE OF THAT.

 In ounces, the OI is still represented by just OVER 1 BILLION oz i.e.  1.030 BILLION TO BE EXACT or 147{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of annual global silver production (ex Russia & ex China).

FOR THE NEW FRONT MAY MONTH/ THEY FILED: 2 NOTICE(S) FOR 10,000OZ OF SILVER

In gold, the open interest ROSE by A MONSTROUS 6,896 despite the FALL in price of gold ($0.65 yesterday.)  The new OI for the gold complex rests at 455,605. Yesterday we had the bankers supplying a major amount of short paper to newbie longs who entered the arena again like gangbusters.  The specs shorts covered what they could. .No wonder a flash crash was orchestrated at 7.01 pm last night with the intention of cooling gold’s jets. It seems that the raid failed again.  The bankers are losing control over the precious metal markets

we had: 73 notice(s) filed upon for 7300 oz of gold.

Read More @ HarveyOrganBlog.com

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.

Read More @ BullionStar.com

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.

Read More @ InvestmentResearchDynamics.com

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

0

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.

Read More @ WolfStreet.com

Toronto Housing Market Implodes: Prices Plunge Most On Record

0

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.

Read More @ Zerohedge.com

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.

Read More @ ArmstrongEconomics.com