Tuesday, September 17, 2019

Hegemony is a Three-Player Game

by Jim Rickards, DailyReckoning: Three-player games are easy to model — it’s always two against one. The art of geopolitics and examining hegemony powers in such situations is to be part of a duo that pressures the remaining player, or, at a minimum, keep the other two players separated.

This is basic balance-of-power politics as practiced since the rise of Napoleon (1799), with antecedents in the Treaty of Westphalia (1648), and Machiavelli’s The Prince (1532).

The case for normalizing relations between Russia and the U.S. rests on the coming confrontation between the U.S. and China. This confrontation stems from China’s refusal to help the U.S. deal decisively with North Korea, which is pushing the U.S. toward a pre-emptive war on the Korean peninsula.

Other flashpoints with China include conflicting claims in the South China Sea, currency manipulation, trade subsidies, theft of intellectual property, and cyber-warfare.

These conflicts were held in abeyance while China was given “100 days” (from the Mar-a-Lago summit on April 6, 2017 to July 15, 2017) to help with North Korea. Now that the 100 days are up and China has failed to deliver, the gloves are off. The months ahead will witness increasing tension and specific actions by the U.S. aimed at China.

To secure the U.S. position in this conflict and as a simple matter of statecraft, the U.S. needs improved relations with Russia as an offset to deteriorating relations with China.

Russia can assist the U.S. is numerous ways. First and foremost is Syria. Russia and the U.S., along with indigenous forces from Iraq, Jordan and the UAE, are well down the path of eliminating ISIS as a political entity. (ISIS will remain as a terrorist incubator along with Al Qaeda franchises and their respective sympathizers).

A modus vivendi can be reached where Russia and their Ba’athist allies, U.S.-backed rebels, Kurds, and Turkey all have separate spheres of influence in Syria. The loser in this scenario is Iran, which has been a leading backer of Syrian dictator Bashar al-Assad.

Russia can also help the United States on the North Korean dossier even though China has proved unable or unwilling to do so. Russia has enormous economic leverage in North Korea. Private intelligence service STRATFOR reported the following on July 11, 2017:

Russia shipped $2.3 million worth of oil products to North Korea between January and April 2017, a 200 percent increase, Yonhap and Korea Times reported July 11. Last year, North Korea reportedly turned to Russia after experiencing difficulty securing oil supplies from China. A North Korean defector suggested Russia supplies North Korea with 200,000 to 300,000 tons of fuel annually via a company in Singapore. North Korea’s increased dependence on Russian fuel indicates its anticipation of tougher international sanctions following its recent intercontinental ballistic missile launch on July 4.

By stepping into China’s shoes as a supplier to North Korea, Russia has increased its leverage over North Korea and therefore has increased its ability to assist the United States. This type of leverage is one of the few paths to a resolution of the North Korean nuclear issue without resorting to war. It is of enormous value to the U.S. and argues in favor of improved U.S.-Russian relations.

The foregoing is an overview of the greatest political struggle in the world today. The nationalists and realists want to improve U.S. relations with Russia. The globalists are horrified at the prospect and want to maintain warm relations with China while isolating Russia.

Hegemony and Geopolitical Struggle

The White House has already decided in favor of Russia. The problem is how to execute that plan in the face of withering attacks about phony scandals from the media, Democrats, resistance and globalists.

Read More @ DailyReckoning.com

GOLD UP $ 10.45 WITH SILVER UP 13 CENTS/GOLD/SILVER EQUITY SHARES FLOUNDER AT THE END OF THE DAY SIGNALLING A POSSIBLE RAID TOMORROW

EU IS FORCING 3 COUNTRIES TO ACCEPT MIGRANTS AGAINST THEIR WISHES/SWITZERLAND FOR ITS 2ND CONSECUTIVE MONTH EXPORTS MORE GOLD THAN IT IMPORTS: IT HAS 0 MINING OPERATIONS IN ALL OF SWITZERLANDfrom Harvey Organ:

In silver, the total open interest surprisingly ROSE BY 1352 contracts from 206,347 UP to 207,699 DESPITE THE FALL IN PRICE THAT SILVER TOOK WITH YESTERDAY’S TRADING (DOWN 9 CENT(S). YESTERDAY AGAIN THE COMMERCIALS TRIED IN VAIN TO COVER BUT TO NO AVAIL. EVEN WITH THE HELP OF OPTIONS EXPIRY THEY COULD NOT GET THE SILVER LONGS TO LEAVE THE SILVER TREE. THE SPECS SHORTS ALSO DESPERATELY TRIED TO COVER THEIR SHORTFALL. RELUCTANTLY THE BANKERS CONTINUED TO SUPPLY THE SHORT PAPER.

In ounces, the OI is still represented by just OVER 1 BILLION oz i.e. 1.04 BILLION TO BE EXACT or 148{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of annual global silver production (ex Russia & ex China).

FOR THE NEW FRONT MAY MONTH/ THEY FILED: 112 NOTICE(S) FOR 560,000 OZ OF SILVER

In gold, the total comex gold AFTER A ONE DAY HIATUS FELL BY A WHOPPING 13,506 CONTRACTS WITH THE FALL IN THE PRICE OF GOLD ($2.25 with YESTERDAY’S TRADING). The total gold OI stands at 450,321 contracts. The liquidation in the front month has now resumed where we left off on Tuesday as spec longs liquidated their comex contracts FOR EFP CONTRACTS which gives them a fiat bonus plus a future delivery product which most likely is a London based forward. (It was extremely strange yesterday to witness WEDNESDAY’s huge OI gain..maybe an error from the CME.)

we had 4 notice(s) filed upon for 400 oz of gold.

Read More @ Harveyorganblog.com

The Most Precious Metals Bullish I’ve Ever Been

by Andy Hoffman, Miles Franklin:

Today is a very big day for me – at least, in my mind. As, at five years, nine months, my employment with Miles Franklin has officially tied the previous longest job of my career – at Salomon Smith Barney, from May 1999 through February 2005. After which, I spent five years working for numerous mining companies – all of whom, either went bankrupt or otherwise failed. Thus, when I was afforded the opportunity to “move up the totem pole” of stability in October 2011 – as Marketing Director of one of America’s oldest, most trusted bullion dealers – I jumped at the chance. Since then, the partnership I formed with the firm’s owners, David and Andy Schectman; and brokerage and back office team – most of whom, have been with the firm for decades – has been, in my view, extremely successful. To that end, I look forward to serving the Precious Metals community for “as long as it takes,” until the war we are fighting with the powers that be is inevitably – and hopefully, imminently – won.

That said, I intend to make significant waves on this day of extremely important personal achievement. As, per today’s title, I am departing significantly from my “box” of industry commentator – with a more forceful statement of what I anticipate. Sure, I could be wrong; but as the title of my July 18th SGT Report podcast states – taped when gold was $1,240/oz – I foresee “no more downside to Precious Metals.” And no, I don’t mean they can’t go down at all; but instead, that the supply/demand fundamentals have become so positive on an absolute basis; and more so, relative to their historically suppressed prices; that I view their all-in risk/reward profiles as the most favorable in the 15 years I have been watching this sector, tick for tick.

Yes, I know four pieces of economic propaganda – I mean, “data” – are coming out an hour from now; and the “all-important” GDP report tomorrow, rivaled only by the CPI and NFP jobs report in the amount of politically-motivated accounting gimmickry they are subject to. However, it’s starting to feel like gold and silver are becoming “immunized” to “bad news” like “better than expected” economic data. And now that Janet Yellen “sealed the deal for no rate hikes until at least December (expectations fell to 0{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} for September and 48{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} for December) after yesterday’s uber-dovish FOMC policy statement; it’s difficult to envision the dollar demonstrating material strength any time soon, unless something really bad occurs in Europe.

Which of course, would be wildly PM-bullish. As irrespective, per what I discussed in the five “if a nuclear bomb destroyed Europe” articles penned over the past three years, the “dollar index”; which is largely a proxy for the dollar/Euro exchange rate; is in reality, immaterial to the dollar-priced gold and silver. To the contrary, they are determined by supply/demand factors in dollars; and given the accelerating tsunami of dollar-negative events coming our way; as PM prices trade at all-time inflation-adjusted lows; it’s difficult to envision an environment where prices do not, at the least, challenge last year’s post BrExit highs in the coming months, en route to much higher levels thereafter.

Amidst the historic price suppression, and most violently PiMBEEB – or Precious Metal bullish, everything-else-bearish” – environment in memory, PM sentiment has been driven to levels not experienced in my entire 15 years in the sector. And yet, gold is, on average, no more than 15{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} below its all-time high in nearly all fiat currencies. Not to mention, it – and silver – are up roughly 20{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} from their ultimate bottoms of December 2015; “coincidentally,” the week the Fed first raised rates. This, as the most manic COMEX “commercial” short covering ever is ongoing – to the point that in both metals, their cumulative net short positions are at lows last seen in…drum roll please…December 2015 – when gold and silver prices were significantly lower than today.

Everywhere I look, lies, propaganda, and manipulation have caused chaos in the world of Precious Metal “analysis” – particularly from those incented to pretend markets are freely traded, who literally ignore “sixth sigma” price movements in their pursuit of remaining mainstream. For instance, this “veteran trader” – who claims gold’s value will never be “allowed” to be realized. Or the top Bitcoin technical analyst – who is actually quite good in Bitcoin; who is constantly calling for sub-$1,000 gold due to the “weak technicals” the charts paint – despite his admission that he has always been wrong about this prediction; and that frankly, gold’s enigmatic price moves have him “puzzled.” Or, best of all, “wrong way Harry” Dent – who a year ago, predicted “$700 gold by mid-2017.” And then there’s Wall Street – which considers gold its mortal enemy; and the Precious Metal “newsletter writers” who pretend they have proprietary technical knowledge. And of course, Central bankers, which view gold the way vampires view the light of day.

The problem is, that essentially everything their “research” is predicated on is either fatally flawed or purposely influenced. As no matter what angle one takes, of how the world has “changed” or whatnot, Precious Metals always have, and always will be, effective stores of value; particularly when this, the most egregious price suppression scheme ever concocted, runs its course. And in my view, per what I have been writing of endlessly in recent weeks, this scheme is nearing the end of its rope. Supply-wise, gold and silver production – platinum, too – are expected to plunge in the coming decade, have decidedly peaked in 2015. This, as the malignant, terminal stage of history’s largest, most destructive fiat Ponzi scheme causes Central bank money printing – already, at record-high levels – to go parabolic. Not to mention, as the inventories of above-ground, available-for-sale metal have been taken down to mere fumes by Central banks and governments – most notably, the United States – in misguided, unwinnable efforts to prolong the dying status quo.

And then there’s the actual news flow; starting with the ugliest global economic environment of our lifetimes, save a few “deer in headlights” moments post-9/11, and at the height of the 2008 Financial Crisis – featuring all-time high, parabolically rising debt that can only be serviced with record low; in many cases, negative; interest rates. Next, the historic wealth inequality a decade of historic money printing and market manipulation has caused – which in turn, has catalyzed social upheaval the world round; even in the U.S., where Donald Trump was elected President.

Read More @ MilesFranklin.com

Keiser Report: MAGAnomics (E1102)

from RT:

In this episode of the Keiser Report’s annual Summer Solutions series, Max and Stacy talk to JP Sottile of Newsvandal.com about whether or not MAGAnomics will help make America Great Again. They discuss trade deals and automation: which has played more in making American jobs not so great. They also look at the role of opioid addiction and whether or not a universal basic income might help the likes of Mark Zuckerberg maintain monopoly-style control over the internet.

Time For More Physical Silver… And Zinc?

by SGT, SGT Report:

I’m buying more silver …and I’m following Keith Neumeyer’s lead by also increasing my exposure to zinc at these suppressed levels. The dwindling supply VS. growing demand gulf in silver, gold and zinc has grown too large because mining companies have been decimated by the cartel’s rigging of the prices of gold and silver.

Bogus Fed Research Claim: “Gold Standard Didn’t Really Tame Inflation”

by Mish Shedlock, Mish Talk: The Wall Street Journal reports Gold Standard Didn’t Really Tame Inflation, New Research Says.

The research was by St. Louis Fed economist Fernando Martin. Curiously, his study precisely shows that the gold standard did indeed tame inflation.

Let’s investigate Martin’s bogus claim and his peculiar logic in making it.

In his email to the WSJ, Martin stated: “Most of the price increase in the period starting with World War II is due to two specific episodes.”

WWII was the first episode and the “1970s inflation episode was unambiguously the result of Fed policy blunders.” Supposedly, “the lessons learned from the experience helped central bankers start a multi-decadelong effort to lower inflation to historically low levels.”

I cannot tell if the second set of quotes is the WSJ view or Martin’s.

Martin’s Peculiar Logic

Here is Martin’s peculiar logic in explaining why the gold standard does not work: “You can still have high inflation with a metallic standard” because history shows governments regularly go off such regimes.

Got that? The gold standard won’t tame inflation because … the government won’t stick with it!

This is what constitutes critical research and absurd posting of said research by the Wall Street Journal.

CPI Since US Founding

Policy Error by the Fed

The article cited a “policy error” by the Fed as the cause of the stagflation period.

Actually, the policy error was Nixon closing the gold window on August 15, 1971, ending convertibility of gold for dollars. Our balance of trade soon went haywire, as did the explosion of credit and debt.

Balance of Trade

Read More @ MishTalk.com

Gold A Good Store Of Value – Protect From $217 Trillion Global Debt Bubble

by Mark O’Byrne, Gold Core:
– ‘Mother of all debt bubbles’ keeps gold in focus
– Global debt alert: At all time high of astronomical $217 T
– India imports “phenomenal” 525 tons in first half of 2017
– Record investment demand – ETPs record $245B in H1, 17
– Investors, savers should diversify into “safe haven” gold
– Gold good ‘store of value’ in coming economic contraction

Stocks and Precious Metals Charts – Nocturne

from Jesse’s Café Américain:

“A horse walks into a bar, the bartender says, ‘Why the long face?'”

And so we had both an FOMC and a precious metals option expiration on the Comex today.

Let’s see if we get any post-FOMC, post-expiration shenanigans for the rest of the week.    Once gold breaks out it could be tough to stop, although I am not liking the small advances it has been making on such steady dollar weakness.

Risk has been Abolished, According to Institutional Investors

by Wolf Richter, Wolf Street:

Why? Wall Street sells “more financial products and generates more profits when investors are bullish.”

“Covenant-lite” loans – risky instruments issued by junk-rated borrowers, with few protections for creditors – set an all-time record at the end of the second quarter.

They’re part of the risky universe of “leveraged loans,” and they’re secured by some collateral, but they don’t come with the protections and restrictive maintenance requirements in their covenants that traditional leveraged loans offer creditors.

Even leveraged loans with more restrictive covenants are so risky that banks just arrange them and then try to off-load them to institutional investors, such as pension funds or loan funds. Or they slice and dice them and package them into Collateralized Loan Obligations (CLOs) and sell them to institutional investors. Leveraged loans trade like securities. But the SEC, which regulates securities, considers them loans and doesn’t regulate them. No one regulates them.

The amounts are not trivial. Total outstanding leveraged loans in the US reached nearly $1 trillion ($943 billion) at the end of the second quarter, according to S&P Capital IQ LCD. And covenant lite loans made up 72.5{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of them, the highest proportion ever.

That’s up from 69{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} at the end of the fourth quarter. This chart shows the surge in the proportion of covenant-lite loans to total leveraged loans over the past three years, from about 55{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} at the end of Q2 in 2014 to 72.5{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} at the end of Q2 2017:

So what’s the big deal? When there is no default, there is no difference. And since there is apparently no longer any risk of default, it’s, well, no big deal. That’s what investors are thinking.

But when defaults do occur – as they have a nasty tendency to do – or before they even occur, investors have less recourse and fewer protections, and losses can be much higher.

The Fed and the OCC have been jawboning banks into backing off with leveraged loans for three years. Banks can get stuck with leveraged loans. They did during the Financial Crisis, which helped sink the banks. That’s when investors found out that leveraged loans are not exactly, as they say, as good as gold. But back then, the proportion of covenant lite loans was much smaller. So next time, the ride will be wilder.

Why do investors do this? They’re chasing yield, little else matters, and companies take advantage of that. LCD about the covenant lite loans:

For obvious reasons, they are more attractive to issuers, and have gained steady acceptance from loan arrangers [banks] and investors, particularly since 2012, when the US leveraged loan market found a higher gear after the financial crisis of 2007-08.

Then again, as naysayers are fond of pointing out, they’ve never comprised this much of the market before, so they will be under scrutiny once the current credit cycle turns.

Read More @ WolfStreet.com