Q: When the spot price of a metal goes down but the premium goes up.  Who makes the profit from the increase in the premium?

David Schectman's Answer:

Our mark up (the retail dealer) remains the same. Our cost from the wholesaler rises. When the wholesaler has too much inventory, they lower the premium. When they don't have enough inventory, like now with junk bags and other silver items, they raise their bid to attract more inventory and pass the cost on to us - and then on to you.

It is determined by supply and demand and is not arbitrary. Andy Hoffman has been detailing the rise in the premium on junk silver as the price is falling. Because of the low (too low) price of silver, fewer people are selling and the wholesalers have to raise their bids to attract inventory so they have product to sell.  

That is one of the interesting things that happen when the spot price of gold and silver falls too low. What good is silver spot at $8 if you have to pay $15 to buy coins and bars - which is exactly what happened in 2008?

Q: Can Obama give away the reserve currency status?

Bill Holter's Answer:

WOW!  What a fun question!  The answer of course legally no he can't.  Now "practically," that's another story altogether.  I suppose he could come out on national TV and tell the world "we don't have any gold left and we sold everyone's gold we were custodian for."  That would do the trick right?  Or how about if he woke up a 2 AM and decided to nuke the world, would the dollar ...or anything else for that matter be the reserve currency?  Or what if he fired Yellen and Jack Lew, then decided not to nominate anyone to replace them. What would happen then?  In my opinion, the man has spent the last 6 years "trying" to give the reserve status away with his actions and the world is near ready to take it from us, one way or another it will come to pass but it will not be the result of one man's actions.

Q: Of all the coins minted in the US each month, what percent are purchased by US citizens?

Andy Hoffman's Answer:

Ah, the $64,000 question!

The Mint, like any other retail business, doesn't release information about its clients - and thus, we can only speculate.  However, it doesn't take rocket science to realize that since the U.S. bullion business - Miles Franklin included - has seen a significant slowdown during the 2013 and 2014 record years for U.S. Mint sales, that it wasn't U.S. customers buying them.   

Without having any "evidence" to support my views, I believe the vast majority of the recent growth has been from international customers - principally from the Eastern Hemisphere, where overall physical PM demand is at or near record highs.  And if the Chinese are the largest buyers, I wouldn't be a bit surprised - as yet again, the U.S. government hands them the keys to global leadership on a silver platter.  

David Schectman

Deflation Is On Our Doorstep

November 5, 2014

I have been reading many articles that state deflation is on our doorstep and inflation is no longer a concern. Harry Dent is one of the strongest proponents of deflation. And the Elliott Wave crown has re-surfaced. They have logical arguments. Should that be of concern to our readers who have large positions in precious metals?

There is one thing I continue to focus on. It is our money supply and how the Fed will react to deflation, which implies falling asset prices - i.e. real estate, the stock market and of course the economy. If the economy implodes, the interest on our debt will become a serious problem for the Treasury since tax receipts will fall and more bonds will have to be issued. More than likely, the Fed will become the major buyer in this situation. That leads to currency debasement.

Jim Sinclair maintains that this is exactly what will happen and the (hyper) inflation that will follow will not be demand driven; it will be due to currency debasement.

I discussed this with my friend Trader David R. He is the most experienced and most talented trader of precious metals I know of. Here is his latest reply...

Something has to give on this chart and it's not $5 Trillion of money supply.

In other words, gold must rise because the money supply will not implode.

Japan has changed the entire dynamics of the game. They are exporting deflation (destroying the yen to increase their exports, which will be cheaper, which is deflationary.) That will put pressure on other Asian countries to weaken their currencies to stay competitive, which is deflationary. Our export industries will have to cut prices as well to stay competitive. All deflationary events.

I do not see how our stock market can thrive in this situation, or the real estate market either. Should the stock market tank, which is not an unreasonable expectation, and with interest rates being so low, gold will become an attractive asset. It's all very unsettling now. I expect things will become much clearer in the next few months.

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Quotes of the Day

Based upon the larger degree count, the majority of this 3+-year decline is just about completed, as we are left with a series of 4's and 5's, to be completed over the next two to three months.  So, get your shopping lists in order, as the metals are now on sale.  And, it is coming at a time when sentiment on metals is in the absolute toilet.  Some sentiment matrices are even suggestive that it is worse now than at the 2008 lows, which would make sense from a wave perspective, as I am expecting a larger degree 3rd wave to begin off the lows we make in the metals over the next few months, which should last for many years to come.

As a warning, I want everyone who is serious about this market from a long term perspective to understand that even though I have been right about this decline, and have been right about the count, it does not mean that I will always be right.  I can clearly be wrong, and the potential exists that the next lows we make MAY be the final lows in this long-term correction.  While my count and expectations are still that we will see a wave IV rally before those final lows are made into the end of the year, I want anyone who is serious about the long term prospects of this market to begin scaling into long term positions.  As I have said many times before on my daily Live Video, anyone that is not taking the opportunity to load up on silver when it is below $17 is not considering the long-term opportunity before them, at least in my humble opinion.

- Avi Gilburt, Elliott Wave Trader

With USD rates so low I don't get the gold price currently.... Just a real lack of liquidity and money is ruling FOR NOW.

Q3 GDP was all defense spending, so still no growth. The market is way too bearish and too short here, so I am getting friendly down here.

- Trader David R

The ongoing devastation in both WTI and Brent, which were trading at $76.70 and $82.50 at last check, both down almost 3% as the plan to use Saudi Arabia to crush Russia has instead backfired and the Saudi princes are now openly looking at destroying the US shale infrastructure, as we forecast in the worst, for Obama, scenario.

- Zero Hedge, November 4, 2014

As I sort of expected, there was another big sales report from the U.S. Mint to start off the new month.  They sold 12,000 troy ounces of gold eagles---2,500 one-ounce 24K gold buffaloes---and 625,000 silver eagles.  If I had to bet ten bucks, I'd bet on the fact that these sales were made on Friday, but were shoved into the new month.  If they'd been included in October sales, they would have pushed silver eagles sales well over the 6 million mark---and further into record territory---and that would just never do, would it? - Ed Steer, Casey Research, November 4, 2014

Of course with both gold and silver this far below their respective 20, 50 and 200-day moving averages, the price could remain comatose for many weeks or months before the Managed Money traders are forced to cover as moving averages are penetrated to the upside.  However, it could happen anytime for other reasons and, as always, the timing is unknown.

- Ed Steer, Casey Research, November 4, 2014

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Today's Featured Articles

Peak Prosperity (Chris Martenson Interviews Silver Analyst Ted Butler: Silver Nightmare will be over soon)

Sprott's Thoughts (Jim Rickards Exclusive Interview: The Fed Basically Still Uses LTCM�€™s Financial Models)

Zero Hedge (How The Petrodollar Quietly Died, And Nobody Noticed) (Where Is Swiss Gold? - Location, Location, Location) (China's Gold Strategy) (Bill Gross Warns, "Global Economy & Financial Markets Are Insecurely Grounded") (Saudi Arabia Raises Asia, Europe Prices; Cuts US Prices)

David Stockman (The BOJ Jumps The Monetary Shark--Now The Machines, Madmen And Morons Are Raging)

Gold Stock Analyst (GOLD BELOW $1,200/OZ FOR FOURTH TIME IN LAST 18 MONTHS. NOW WHAT?)

Bill Holter

Has The West Been "Cornered?"

November 5, 2014

Has the West been cornered?  It's an odd question isn't it?  This can be interpreted in several different ways.  "Cornered" as in financially?  Militarily?  Economically or even from a production standpoint.  How about "morally" or even religiously?  Or even intellectually?  Let me explain with hopefully few side tracks.

I first thought about writing this because I believe the West has allowed itself to be "cornered" in both the gold and silver markets.  You know by now that it's my belief the Chinese are the longs in the COMEX silver and have actually "carried" us along time wise so we would divest more and more of our gold.  In order to keep the game going, China put forward 1,000+ tons of silver in their Shanghai inventory which has been 90% drawn down and more than likely used to keep the game going.  But after thinking about this for a little bit, it occurred to me that it's not just the precious metals markets "we have let go of" ...it's pretty much everything!

Think about it, we have "cornered" ourselves within a $1.4 quadrillion (with a capital Q!) derivatives market.  Like it or not, the U.S. is at the epicenter of this.  (We didn't have to be but "rulers" like Alan Greenspan lobbied for it).  We are now financially in a position where there is no way out because there must be a loser for every winner and when the loser is busted so badly and cannot make settlement ...even the winner becomes a loser.  Without a huge explanation, we live in a "zero sum" financial casino where if someone wins, someone also must lose.  This has become the "American way," the Chinese mindset is different as they believe in business as a "win, win" process.  Maybe this is why China announced within the last year "they reserve the right for any state agency to default on any derivative"? 

How about militarily?  Are we cornered here?  First, how many bases and how many different fronts can we afford?  I don't know the answer but I do know the "direction," less.  Finance and military are connected at the hip, in order to "reflate" the economy and markets, wars have always been started because they are "good for business."  The problem is that over time, we actually had to start skirmishes in order to get wars started... but the world has wised up to this...and alliances are shifting.  Maybe the word "cornered" is wrong in this instance, instead maybe it should be "isolated" as we have proposed for Russia.

Next, has the U.S. been cornered from an industrial or productive standpoint?  What is it exactly that we make for export?  Unfortunately the answer is "not much".  We do however grow a lot of food and foodstuffs ...but much of this is of the GMO variety.  What exactly will we be exporting if other countries decide they will not import GMO foods?  What if foreigners decide to no longer accept dollars?  How will we buy shoes or underwear?  How about TV's, smartphones, computers and let's not forget our kids video games?  Where will we get these from?  How about simple things like wrenches, screwdrivers or even a saw or an ax?  We don't make this stuff anymore...where will we get it from if we can't trade dollars for them and no one wants to accept GMO's in trade?

How about religiously?  I'll bet you haven't thought much about this one.  All over the world, Islamic populations are migrating to western nations with the intent of imposing Sharia law.  Just look to Europe, Muslims can block a busy street in prayer with no consequences.  Can you imagine were a group of Christians, Jews or Hindus to try this?  They would all be hauled off for "disturbing the peace".  Don't get me wrong, I am completely tolerant when it comes to religion, anyone has the right to pray to any God they choose but they do not have the right to impose their views, beliefs or laws on anyone else.  Particularly if the country was not based on Islam at its creation.  In this instance, religion, Europe in particular is being cornered, maybe a better term is "boxed in".  As today is Election Day in the U.S., I might as well mention that "religion" is not a requirement to vote, however, what will happen if a single religion grows so populous that they "vote" to change the land's laws from top to bottom.  Scary thought huh?

Speaking of Election Day, what about our "morals?"  In my opinion, we have outright "cornered ourselves" from a moral standpoint which directly affects us from the financial standpoint, let me explain.  We have become a nation that no longer believes in self-reliance.  We are now at the point where half or more of our population receives some type of support or stipend from the government.  Does anyone really believe that the "receivers" will ever vote to have their benefits "turned off"?  I will give you my opinion on this and if you don't like it then "oh well."  In my opinion, anyone under the age of 65 years old who receives any benefit whether it be for housing, food, medical or disability (other than military), should not be able to vote.  Once you are 65 years old and receiving Social Security, theoretically this is the repayment of monies already deposited (even though we know the money was spent years ago).  The only people who should be allowed to vote are those who "pay in" to the system.  They should be the ones who have a say as to how it is spent.  I am sure I will get all sorts of liberal pabulum telling me I'm not a nice guy for saying what is obvious and what most who think fairly are thinking.  Bring it on!

As for my definition of "corner," I believe we have slowly put ourselves in a position where nearly no movement is possible.  We chose this road years ago and it started out harmlessly enough when our prosperous post WWII parents wanted a better and "easier" life for their children.  What happened is that this began to weaken the backbone of a once strong nation.  Don't get me wrong, much damage has been done by "politicians" along the way always offering "free this and free that" but we should have known better.  We should have known that nothing in life is free.  The population of the U.S. will probably vote incumbents out of office like unwanted trespassers, it's not going to work and it's too late.  We have a two party system of wolves in the same sheep's clothing.  Voters can choose door number one or door number two but both corridors lead to very same corner we have allowed ourselves to be painted in. 

The above was written prior to the election results.  Americans stood up and "threw the bums out" as the Republicans have taken over the legislative process.  I say "bravo" to Americans as they did the only thing they could do in protest.  Unfortunately I believe this to be one last shrill of protest before collapse and chaos.  As I said prior, we live in a two party system where each party serves the same master, there is no door number three.  One can hope but "hope" is the vestige of fools.  We can hope that America returns to that of a rule of law.  One can hope we go back to strictly following The Constitution.  One can hope for investigations into what has happened over the last six years (and prior administrations) to hold accountable all sorts of wrongs and outright crookedness.  At least we can hope the new Congress will thwart a dictatorial executive branch and hold the Attorney General accountable for actions and the inaction of looking the other way. In my opinion it is now far (as in many years) too late.  Changing Congress at this point is like flying in a new crew to the Titanic after hitting the iceberg.  The damage has already been done in every way possible.  We are taking on water quickly, a new crew, and a new captain, a new anything will not fix the gaping hole in our hull.  Only a new ship (system and currency) will do.  May God bless America, she needs it! 

The Three "Death Trends"

November 4, 2014

Ladies and Gentleman, a handful of sociopaths have declared war on the rest of the world. And no, they are not all collaborating in a single room in New York, London or Tokyo - but instead a handful of rooms in "reserve currency" capitals, whose "leaders" have the most to lose. In other words, the bankers controlling the printing presses and their "partners" in government have taken economic "can-kicking" to unprecedented levels - aided by the horrifying "financial weapons of mass destruction" invented over the past decade.

Back in 2002, when I went "all-in" the precious metals sector, I knew I was on the side of a major global trend change. However, I could never have imagined how enmeshed the entire world was to the spreading cancer of fiat money - and certainly, that a mere 12 years later, it would be on the verge of all-out collapse. We have not a doubt that the end of history's largest Ponzi scheme is at hand; which is why, amidst its final, tortuous death throes, we warn 100% "financial defense," no matter how you define it.

For me, it started with the sale of my last mining stock in Spring 2011, going 100% physical with the proceeds. Before then, the periodic Cartel attacks - and ongoing sector erosion, regardless of PM prices - caused me a significant lack of sleep, given that the horrific portfolio losses I experienced might be permanent. Instead, I now sleep the "sleep of the just"- aided by the exhaustion of minding my beloved Sylvie, who we adopted last summer; as no matter how hard the Cartel huffs and puffs they can't take my invaluable metal.

But I must say, they are doing everything imaginable to make me miserable; not only in suppressing the prices of my savings and slowing the pace of my business (ironic, given record overseas demand), but doing so in such ignominious form. Watching "them" take stocks to unprecedented overvaluations amidst the worst economic environment and financial footing of my lifetime is bad enough; but when QE takes toxic, worthless bonds to record high prices as well, it makes one want to pull their hair out. Throw in the widening wealth inequality caused by such policies, in which Wal-Mart dramatically reduces expectations, yet Maserati reports a doubling of sales and you can see why anyone would be angry - much less, the writers of the Miles Franklin Blog, who have been as dead-on right about the unfolding economic calamity as anyone in the financial universe.

However, as difficult as such manipulations have been to fathom the "good news" is that everything we write of is "self-correcting" by nature. In other words, the more TPTB suppress precious metals, support stocks and bonds or devalue their currencies, the more they accelerate their mathematically certain demise. Perhaps it will in fact be precious metals - i.e., the "Achilles Heel of the Financial World" - that supply the direct catalyst to the "big one." But if not, take heart that something else inevitably will; and when it does, if you haven't protected yourself already it will be too late. And given the unquestioned, near parabolic acceleration of the three "death trends" this article takes its namesake from, it's quite difficult to believe said "big one" is too far off.

To that end, we have written endlessly of the catastrophic ramifications of collapsing oil, crashing currencies, and the competitive currency devaluations that are rapidly destroying the fragile smoke and mirrors-supported, fiat currency-fueled "world order." And right now, these "death trends" are reaching a fever pitch, yielding the potential for one or more to explode on any given day.

Regarding oil prices, we recently wrote of the "unspeakable horrors" such a rapid plunge would portend - and this month's plunge to $76/bbl. will likely put the large majority of global production in the red; let alone, the socialist societies of countless oil exporters. Yesterday's news that Saudi Arabia is cutting prices for Western hemisphere exports is a loud and clear signal that it intends to "smoke out" the U.S. shale oil industry - which due to massive capital costs, depletion, and Wall-Street funded leverage could experience a production collapse as precipitous as what the Wall Street-starved gold and silver mining industry is about to experience. We warned of this in April 2013's "unending energy independence hype"; and fortunately for the Democrats, mid-term election day has arrived just beforehand - as unless oil prices explode higher in the coming months, their boasts of the "shale oil boom" will be memorialized with the likes of the "new paradigm" of internet prosperity circa 1999, or stocks reaching a "permanently higher plateau" in 1929. But more important than the economic cataclysm plunging oil prices will create for the world's numerous energy exporters is the expanding geopolitical tension that will arise from it - particularly in a world of hyper-monetary inflation causing the cost of living to rise despite plunging oil prices.

And speaking of economic pain, the U.S. will ironically be impacted as negatively as some of the world's most backward emerging economies. Remember, the only real "recovery" America has seen in the past six years was in high-end real estate -which has since rolled over, despite record low mortgage rates; and shale oil drilling, which undoubtedly contributed a significant amount to recent years' GDP, as well as a (slightly) declining trade balance. Well, this morning it was reported that the trade deficit "unexpectedly" surged anew; and this, before the recent catastrophic oil price plunge. Moreover, even more ominously, the trade deficit excluding energy has never been higher - portending an utter explosion in the trade deficits in the coming months. Which, of course, will need to be funded with additional Federal Reserve printed debt.

Throw in today's negative factory orders number - rounding out a trifecta of such negative numbers, following yesterday's construction spending and last week's durable goods orders disasters - and we have an economy likely running at negative nominal speed as we speak. Recall, Goldman Sachs reduced its 4Q GDP estimate from 3.0% to 2.2% this weekend; and following this data, I wouldn't be surprised if the "consensus" falls below 2.0% before next weekend. Of course, given that it's Election Day, the "Dow Jones Propaganda Average" was immediately goosed by a prototypical "dead ringer" algorithm (as it was yesterday). You know, the type that theoretically should no longer occur given the Fed's 10:00 AM EST "permanent open market operations" were suspended following last week's "end of QE (LOL)." And forgive me if I was off by 10 basis points, given the chaos of the October 15^th "liquidity vacuum" when Treasury yields freefell to 1.9%; as clearly, on the topic of the Fed's new "line in the sand for the world's most important interest rate, not 2.2%, but "2.3% is the new 2.6%."   

Of course, the Fed's "death" will ultimately be at the hands of real money, as all Central banks have experienced throughout history. So I'll simply follow up on what Bill Holter focused on today - of how the Cartel is on the verge of being blown away in the physical silver market. Yes, just as "inexplicably" as the 2% "Sunday Night Sentiment" raid on paper silver following Friday afternoon's news that the U.S. Mint had its best-ever non-January month of Silver Eagles sales, is today's paper raids following yesterday afternoon's news that the U.S. Mint sold a whopping 625,000 Silver Eagles on November's first business day. Or that "junk silver" premiums are starting to rise as are silver bullion delivery times. Or, per below, that COMEX open interest has not been this high relative to price since literally the price bottom of the equally orchestrated 2008 plunge!

Report on Greenspan's Legacy Tour

November 4, 2014

Bill Holter joins Kerry Lutz of the Financial Survival Network to discuss Fed Chief Alan Greenspan at the New Orleans Money Show and a debate between GATA's Chris Powell and Doug Casey about precious metals manipulation.  To listen to the interview, please click below.

Ted Butler: The Silver Nightmare Will Be Over Soon - www.peakprosperity.com

The argument for a near-term monster rally

by Adam Taggart

Saturday, November 1, 2014, 1:20 PM

Hallowe'en couldn't have been more terrifying for silver investors. The gray metal cracked under $16/oz on Friday, a price not seen for nearly half a decade.

For years now, it has seemed like silver has been beaten down so badly its price couldn't go lower. But then it has.

Why has silver seen such a gut-wrenching price decline? (now down 2/3 compared to its high in late 2011). And will it ever see brighter days again?

This past weekend, Chris had a long discussion with silver expert Ted Butler on the real culprit behind the wild price slams that have plagued silver: unfairly concentrated positions within the derivatives market.

Continue reading on PeakProsperity.com.

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Jim Rickards Exclusive Interview: The Fed Basically Still Uses LTCM's Financial Models - sprottglobal.com

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How The Petrodollar Quietly Died, And Nobody Noticed - www.zerohedge.com

Submitted by Tyler Durden on 11/03/2014 23:42 -0500

The Petrodollar, long serving as the US leverage to encourage and facilitate USD recycling, and a steady reinvestment in US-denominated assets by the Oil exporting nations, and thus a means to steadily increase the nominal price of all USD-priced assets, just drove itself into irrelevance.

A consequence of this year's dramatic drop in oil prices, the shift is likely to cause global market liquidity to fall. 

This decline follows years of windfalls for oil exporters such as Russia, Angola, Saudi Arabia and Nigeria. Much of that money found its way into financial markets, helping to boost asset prices and keep the cost of borrowing down, through so-called petrodollar recycling. But no more: "this year the oil producers will effectively import capital amounting to $7.6 billion.

Continue reading on Zero Hedge.com.

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Where Is Swiss Gold? - Location, Location, Location - www.zerohedge.com

Submitted by Tyler Durden on 11/03/2014 11:38 -0500

With the Swiss gold stored at the Bank of Canada, now having been transferred out of the Bank of Canada's Ottawa vault to an unknown location, the Swiss public would be wise to question the SNB on this move.  

With the Swiss gold stored at the Bank of England in London seemingly being 'actively managed' one of the world's largest centres for unallocated gold trading, the Swiss public would also be wise to enquire on this issue. And with significant historical quantities of Swiss gold that were stored with the US Federal Reserve Bank in New York no longer there after the SNB seemingly brought their US vaulted gold holdings to zero, the Swiss public need to question why these particular holdings were targeted for sales from 2000-2005 and not domestically held gold.

Continue reading on Zero Hedge.com.

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China's Gold Strategy- www.zerohedge.com

Submitted by Tyler Durden on 11/03/2014 19:33 -0500

China first delegated the management of gold policy to the People's Bank by regulations in 1983.

To my knowledge this subject has not been properly addressed by any private-sector analysts, which might explain why it is commonly thought that China's gold policy is a more recent development, and why even industry specialists show so little understanding of the true position. But in the thirty-one years since China's gold regulations were enacted, global mine production has increased above-ground stocks from an estimated 92,000 tonnes to 163,000 tonnes today, or 71,000 tonnes; and while the west was also reducing its stocks in a prolonged bear market all that gold was hoarded somewhere.

Continue reading on Zero Hedge.com.

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Bill Gross Warns, "Global Economy & Financial Markets Are Insecurely Grounded" - www.zerohedge.com

Submitted by Tyler Durden on 11/03/2014 12:04 -0500

"Perhaps sooner rather than later, investors must recognize that modern day inflation, while a necessary condition for survival, is not a sufficient condition for increasing wealth at a rate necessary to satisfy future liabilities associated with education, health care, and a satisfactory retirement. The real economy needs money printing, yes, but money spending more so, and that must come from the fiscal side - from the dreaded government side - where deficits are anathema and balanced budgets are increasingly in vogue. Until then, deflation remains a growing possibility - not the kind that creates prosperity but the kind that's the trouble for prosperity."

Continue reading on Zero Hedge.com.

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Saudi Arabia Raises Asia, Europe Prices; Cuts US Prices - www.zerohedge.com

Submitted by Tyler Durden on 11/03/2014 13:36 -0500

It appears, just as we warned two weeks ago, that the 'dumping strategy' designed to punish Obama's nemesis Putin could have morphed into a Saudi Arabian strategy to keep its foot on the neck of the US Shale Oil industry. In an awkward headline for mainstream media to explain, The Kingdom has raised prices of its Arab Light crude exports to Asia and Europe but cut prices to the USA significantly, potentially pressuring domestic suppliers with foreign 'cheap' imports. While not a primary course of US oil, we suspect the signaling of this move is more worrisome for Shale capex  (especially as we noted Saudi Arabia can survive 7.9 years at lower prices) Forget currency wars, meet oil wars...

Continue reading on Zero Hedge.com.

The BOJ Jumps The Monetary Shark--Now The Machines, Madmen And Morons Are Raging - davidstockmanscontracorner.com

by David Stockman * November 2, 2014

This is just plain sick. Hardly a day after the greatest central bank fraudster of all time, Maestro Greenspan, confessed that QE has not helped the main street economy and jobs, the lunatics at the BOJ flat-out jumped the monetary shark. Even then, the madman Kuroda pulled off his incendiary maneuver by a bare 5-4 vote. Apparently the dissenters--Messrs. Morimoto, Ishida, Sato and Kiuchi--are only semi-mad.

Never mind that the BOJ will now escalate its bond purchase rate to $750 billion per year--a figure so astonishingly large that it would amount to nearly $3 trillion per year if applied to a US scale GDP. And that comes on top of a central bank balance sheet, which had previously exploded, to nearly 50% of Japan's national income or more than double the already mind-boggling US ratio of 25%.

In fact, this was just the beginning of a Ponzi scheme so vast that in a matter of seconds it's ignited the Japanese stock averages by 5%. And here's the reason: Japan Inc. is fixing to inject a massive bid into the stock market based on a monumental emission of central bank credit created out of thin air. So doing, it has generated the greatest front-running frenzy ever recorded.

The scheme is so insane that the surge of markets around the world in response to the BOJ's announcement is proof positive that the mother of all central bank bubbles now envelopes the entire globe. Specifically, in order to go on a stock-buying spree, Japan's state pension fund (the GPIF) intends to dump massive amounts of Japanese government bonds (JCB's). This will enable it to reduce its government bond holdings-built up over decades-- from about 60% to only 35% of its portfolio.

Needless to say, in an even quasi-honest capital market, the GPIF's announced plan would unleash a relentless wave of selling and price decline. Yet, instead, the Japanese bond market soared on this dumping announcement because the JCBs are intended to tumble right into the maws of the BOJ's endless bid. Charles Ponzi would have been truly envious!

Accordingly, the 10-year JGB is now trading at a microscopic 43 bps and the 5-year at a hardly recordable 11 bps. So, say again. The purpose of all this massive money printing is to drive the inflation rate to 2%. Nevertheless, Japanese government debt is heading deeper into the land of negative real returns because there are no rational buyers left in the market--just the BOJ and some robots trading for a few bps of spread on the carry.

Continue reading on David Stockman's Contra Corner.

GOLD BELOW $1,200/OZ FOR FOURTH TIME IN LAST 18 MONTHS. NOW WHAT? - www.goldstockanalyst.com

November 2, 2014 by John Doody

Gold and Gold stocks are volatile, as long time precious metal investors know and recent participants now know. You cannot expect outsize returns to the upside from any sector without seeing some big downside moves as well.

We continue to believe the excess money printing by the world's central banks will find its way into the inflation data as they finally achieve their universally stated 2% inflation goal... which should cause Gold to soar. To wit:

   - The US Fed may have stopped buying debt, but it will continue to rollover and reinvest as its portfolio matures to maintain its current $4.5 trillion balance sheet, more than five times larger than when the financial crisis began in 2008.

   - The European Central Bank begins its own Quantitative Easing 1 trillion (US$11.25 trillion) bond buying program to combat double-digit unemployment rates and an 0.3% inflation rate that appears headed to deflation. Deflation is the worst of all scenarios... just ask Japan.

   - Japan's Central Bank in an October 31 surprise announcement said it will increase its annual bond buying program from �65 trillion to �80 trillion (from US$580 billion to US$715 billion/year).

   - China's Central Bank is pumping 700 billion Yuan into its 25 largest banks to stimulate growth, as it will miss its 7.5% target for 2014.

All the while, China is soaking up Gold like a sponge from the rest of the World. There's disagreement on whether its accumulating at ~33 mil oz/yr, or double that at ~66 mil oz/yr. But the data shows the Chinese are willing buyers when the world is selling. China's Central Bank holdings have not been announced since 2009. But we know China wants the same reserve currency status for the Yuan that's held by the US Dollar as it allows a nation to pay its foreign debts with a printing press.

Gold is a cornerstone asset for any reserve currency. According to the World Gold Council, in October, 2014 Gold was 72% of US Reserve Assets and 28% of the ECB's. China's 34-mil oz is only 1% of its Reserve Assets, so it has a long way to grow. The potential for a Chinese surprise in its Gold holdings is significant.

Please re-read our recent commentary related to Gold price here:

November 1, GSA-Pro cover article: http://www.goldstockanalyst.com/sample/GSA-Pro_November_2014.pdf

October 5, GSA blog post:

http://www.goldstockanalyst.com/sub.lasso?f=blogDetail&blogids=49

No one has a crystal ball, but we have always profited by holding on and staying the course. If you don't have the needed courage, then sell half your Gold and Gold stock holdings. You are sure to be half right.

Answering many subscribers' question: What if Gold goes to $1000/oz and stays there for a year before recovering? How will the Top 10 be affected?          We don't think this will happen...

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