Bill Holter

The "Core Four" Nordic Bank Run!

December 16, 2014

 

To say that events are now taking place at the speed of light is an understatement.  It was just last Monday, I wrote a missive entitled "The Mother of all Bank Runs".  In it I wrote about the German and Dutch repatriations of gold which was then followed by the Belgians beginning discussions on the same topic.  As a final speculation, I mentioned that "logically the Austrians would be next."  There was no way you could have told me it would be less than one week until the same news would actually come out of Austria!  Unlike the Germans, Dutch and Belgians who have gold held in N.Y., Paris and London, Austria holds 80% of their 280 tons of gold concentrated in London.  This is truly big news for several reasons which we will explore and it certainly brings up a few more questions. 

These four countries represent the core of the European Union.  The EU is located in Brussels and the ECB is located in Frankfurt so the "power centers" (or financial centers) if you will are located within this "block" of countries, let's call them the "Nordic bloc".  These four are the strength of the euro, they are the highest rated credits and for the most part they alone dictate policy.  ...And now, ALL of them will be asking for their gold to be returned to them.  The same questions I asked last week still apply, even more so now because of the addition of Austria.  Why do they want their gold returned and why now?  There are other questions which we can look at shortly.

First, "why?"  Why is there all of a sudden this rush by Holland, Belgium and Austria to follow Germany's lead in asking for their gold back?  The obvious answer is trust, or better said, lack of trust.  For years there have been questions as to whether or not "official gold" has been leased into the markets.  These questions have arisen because of the simple math of supply and demand.  If China, India and Russia have been gobbling up 100% of current mine supply... then where is the supply coming from to meet the demand from the rest of the world?  If there was no trust issue whatsoever, these central banks would not "bother" with where this gold is being held because it brings up questions central banks would prefer you not think about.  These questions would obviously include "why" move the gold if it is already "safe?"  It also brings up the question of why bother if gold is really not important in today's financial world ...as many central banks will have you believe. 

You see, for central banks to ask for their gold must mean it has some importance to them, right?  For that matter, why have these countries not asked for dollars, pounds or euro's (from France) for the values of the gold held?  Why are these central banks asking for the actual metal?  The answer of course is because they know gold is real money and there is no substitute... in other words, there is nothing "as good as gold" when it comes to money.  I cannot stress enough how big these actions are because these are central banks bringing publicity to gold in a manner showing just how important the gold really is to them!  Let's move on to other questions rather than rehash last week's missive.

Why and why now are the main questions but I believe these two are wrapped up by "why these four countries?"  What this obviously leads us to is the very real potential that the Eurozone which is an imperfect union, will now be "split table!"  These four countries are the center of the "have's" with the rest of Europe being "have nots" for the most part.  These four country's gold reserves amount to roughly 4,000 tons.  Officially they would be number two in the world behind the U.S., assuming the U.S. has not already divested their gold (I believe we have), "unofficially" this 4,000 tons would make them number two behind China if you believe they 8,000 tons of gold or more (which I do). 

These four countries with reserves of 4,000 tons will have the ability to set up a northern or "Nordic euro" ...especially if China revalues gold and re sets the world's financial system which looks very probable in my eyes.  Repatriating their gold also does something else which few have thought of so far.  Actually having their gold in hand may just allow them to purchase energy from Russia.  Remember, Russia is testing their own clearing system to bypass the West's SWIFT system.  Would Russia possibly refuse Western currencies for their energy exports if they had a system up and running which could clear rubles and yuan?  You bet they would, especially during a time of financial war.  Is gold a western currency?  Is it an eastern currency?  No, gold is the ULTIMATE currency, even Alan Greenspan concedes this! 

This theory of a possible European breakup into northern and southern euros has more legs if Russia were to accept the new Nordic" for trade but refuse the "southern euro."  Would Russia have more "confidence" and thus be more likely to accept the northern euro ...if it is supported by gold?  Gold that is actually accounted for and held within these countries own vaults as opposed to vaults controlled by N.Y. and London? 

The answer of course is "yes" but it also brings up another question which has a very humorous answer!  For a little background before I ask the question, do you remember why all of this gold was moved to London and New York all those years ago?   That's right, there was a fear Stalin or one of his successors would roll tanks across Europe and take the gold ...so the further away from Russia this gold was ...the better!  Fast forward to present day, isn't Mr. Putin and Russia the "scary and aggressive" potential invaders of Europe?  Why would these countries want their gold within their borders at this EXACT point in time if they have any worries of an aggressive neighbor called Russia?  Does this make any sense at all?  It does, and the humor is that these four countries apparently trust Mr. Putin and Moscow more than they do the U.S., Britain and the West!

Let me wrap this up and speculate a little as to what I believe is happening because it is clear something IS happening.  It can be no coincidence these four core European countries want to repatriate their gold.  It is also clear this action signals a change of some sort in their "relations".  For this "block" of countries (which is exactly what I believe they will be seen to be) to remove gold from the West and placing it within marching distance from Moscow tells me they trust "us" less than they fear Russia.  I also believe they know where this whole game is headed and who is leading it.  I believe China will back their currency with a "re marked" price of gold with Russia as their right hand energy man.  The game is going toward gold, not away, this Nordic group is simply positioning themselves for when the starting gun is fired.

While the West has tried to "isolate" Russia, we will have succeeded only in isolating ourselves and creating the "cause" for a run on our own banking system.  I am not talking about the paper Ponzi scheme banking system as this will also fall, I am talking about an old fashioned and REAL run on the bank!  This "run" started slowly and ran for years as China accumulated what we foolishly "gave away".  Now, it looks like the "run" is accelerating and the "core four" are taking the attitude "he who panics first panics best!"  None of this had to happen but it has and is, simply because the West has done dirty business and ruined credibility.  There is absolutely no rationale whatsoever for these banks to ask for their gold back if it is truly safe and they have full and complete faith in the U.S. as custodian and enforcer of the rule of law.

Please understand, the "core four" IS Europe.  Other than Britain, Europe is supposed to be America's number one ally.  It is obvious allegiances all over the world are changing.  It is also obvious what is considered as "important" as far as money and currencies are concerned is also changing, otherwise these countries would accept dollars in lieu of their gold.  The West has bled gold, trust and thus credibility while the East (and new northern Europe partners?) has accumulated gold, trust and thus also credibility.  "Power" has always followed gold wherever it went.  If gold is leaving London and New York, it is for a very good reason.  I believe we may very well see a "Nordic euro" that trades primarily with Russia and China as opposed to the U.S. and Japan.   No one has ever run their bank "just for fun," there has to be a reason.  I can see no reason for these four countries to act in unison on this issue unless trust is being questioned and/or a break away from the other deadbeat EU nations is planned ...we will see shortly. 

End of the Gold "Bear Market"

December 15, 2014

The beauty of the Miles Franklin blog is one never knows how it might start. In fact, I often don't know myself, until I sit down and start typing. Moreover, now that the world is rapidly devolving to 2008-style crisis mode, there are so many "horrible headlines" to address, it sometimes becomes difficult to determine what's most urgent.

To that end, you probably expected me to start with this week's horrifying, expanding oil price crash; which, quite obviously, has jumped to the "head of the list" of potential black swan candidates. In other words, the odds that six years of can-kicking will be overwhelmed by the collapse of the high-cost energy production bubble appear higher than all other issues - at least for now. And have no worry, I'll get to it momentarily.

However, another topic has just as much potential to destroy "history's greatest fraud" in short order; but if it does, it would be difficult to deem it a "black swan," as it has been lurking "in plain sight" for nearly four years. Which is, of course, this month's Greek "snap elections" - which per the below passage from our April 2013 article,"Greek Tragedy" could catalyze all-out destruction of the Euro, irrespective of Draghi's promise to do "whatever it takes."

The majority of Greek citizens would likely vote for "GrExit" (i.e, Greek secession from the Eurozone and Euro currency) if a referendum were held today.

-Miles Franklin, April 10, 2013

In fact, that quote was gleaned from a September 2012 article, just as Draghi was making the aforementioned infamous "whatever it takes" speech. Of course, those were the "good old days" compared to today; as by all objective measures, Greece's economic and social backdrop has dramatically weakened. Thus, the most likely outcome of the "snap election" process - commencing Wednesday, but incorporating three separate votes, the most important of which occurs December 29^th; is the "anti-austerity" Syriza party achieving its goal of dissolving Parliament, yielding comprehensive 2015 elections that would likely put them in power. And as we wrote earlier this week, "anti-austerity" is a euphemism for "pro-default" and "anti-Euro." In other words, the reason the Greek stock market plunged 20% in the past three days, and the Greek bond market nearly 30% is anticipation of an imminent "GrExit."

However, what really gets my goat is this article - of how the Vampire Squid itself, Goldman Sachs is "warning" Greeks of the potential for a "Cyprus-style" prolonged bank holiday if they "vote wrong." In other words, Goldman is playing its role as protector of the fiat Ponzi scheme it helped to create; in this case, particularly intimately, as it was their own accounting chicanery that enabled Greece's debt to explode to unsustainable levels over the past decade. To us, such propaganda rings eerily similar to last month's rhetoric from the modern-day "Lady Macbeth" herself - Thomas Jordan of the Swiss National Bank - in "protesting too much" the evils of linking the Swiss Franc to gold. Only this time around, it will fall on deaf ears; as unlike Switzerland, where a wealthy population of stock holders were led to believe the record-high Zurich stock market would crash if the referendum passed, Greece is one of the most impoverished "first world" nations, with a stock market down 82% from its September 2007 highs - and 38% this year alone!

Adding insult to injury, European banks are enormous swaths of Greece's €400+ billion of sovereign debt, putting the entire European monetary system at risk. And thus, given that French banks have the most exposure to Greek debt, does it surprise anyone that Fitch downgraded France yesterday (Friday) afternoon from AA+ to AA?

As for the oil price crash, what more can we say except "2008 is back, with one temporary exception?" And even that "exception" - of PPT-supported stock markets - is becoming decidedly less exceptional; certainly in Greece and major energy-producing nations - and even the U.S., where following Friday's bloodbath, the Russell 2000 is down for the year. Objectively, it's pretty safe to say global stock markets have rarely, if ever been more overvalued; and now that the economy is in freefall, there's no telling how "undervalued" they might become.

Incredibly, $550 billion of "high-yield" (read junk) bonds and "leveraged loans" lie beneath the quicksand foundation of the U.S. shale oil industry - in our view, catalyzed by six years of unprecedented Federal Reserve monetary policy. At Friday's closing WTI crude price of $57.50/bbl., it's estimated that less than 20% of all shale plays are economic - and likely, once sunk costs are factored in, less yet. Even the International Energy Agency knows it's "game over" for the global economy, in averring that "oil price drops are sometimes described of as a tax cut and boon for the economy - but this time round, their stimulus effect may be modest."

"Modest" indeed, as when all is said and done, our thesis that "2015 shale oil equals 2008 subprime mortgages" may, if anything, understate the carnage. And worse yet, this time around it's not principally an American phenomenon, but one encompassing all high-cost oil production. Thus, when considering that just days from now, with sovereign bond yields crashing; "inflation expectations" down to 2008 lows; and the potentially devastating Greek elections; the fact that anyone believes the Fed will espouse "hawkishness" is beyond us. Heck, an incredible 80% of S&P 500 companies reduced their earnings guidance in the third quarter; and that was before oil prices plunged 25%, which will substantially reduce employment and earnings expectations in the sector accounting for a third of all U.S. capital expenditures.

Japan, too, faces "snap elections" this weekend - amidst Shinzo Abe's record low approval ratings. But don't worry, Abenomics lovers - as like the Swiss, Japanese investors have been "threatened" with falling stock markets if they don't solidify Abe's mandate - which I'm sure they'll kowtow to, guaranteed hyperinflation notwithstanding.

Moreover, I don't have time to discuss the ugly nation-destroying "Cromnibus" spending bill - which not only puts American taxpayers on the hook for hundreds of trillions of inevitable derivative failures, but was literally written by Wall Street. Or Austria joining the ranks of nations considering repatriation of the "barbarous relic" that is their overseas-held gold reserves. Or Andrew Maguire claiming "the paper and physical gold markets have fully broken apart...irreversibly." Or the U.S. "economic lie machine" having the gall to publish the highest "consumer confidence" report in eight years - whilst not only U.S., but global economic activity and equity markets plunge. Or despite yesterday's ugly market results, the fact that the blatant rigging of Wednesday's trading activity - as described in Wednesday afternoon's "desperation tutorial" - didn't hold a candle to that of Thursday's rigging; which, in turn, was dwarfed by Friday's. Gold and silver DLITG - or "Don't Let it Turn Green" algorithms, anyone?

Here in the States, where the collapsing global economy has yielded a liquidity surge to the zombified dollar, even history's most vicious paper raids have not been able to push gold down. To that point, as of Friday afternoon, dollar-priced gold was up 1% for the year, having bounced off the "quadruple-bottom" level of roughly $1,180/oz. Reading the MSM or Wall Street research reports, one would believe gold was not only down, but miserably so. However, its 1% gain is barely below the 4% gain of the perpetually green "Dow Jones Propaganda Average" - and above the Russell 2000's 1% loss. By the way, the average mining stock is down 20%-30% - but hey, how much more vehemently can we warn you of the dangers of "paper PM investments?"

Back to gold, we have for years written of how more than 95% of the world's population views gold in currencies other than the U.S. dollar. And thus, when gauging gold's progress, it's important to do so through the eyes of the world's 7.2 billion denizens - as opposed to just 300 million Americans. As you can see below, gold is not only higher in nearly all currencies this year, but in many cases, significantly so. The weighted average gold change of nations encompassing 75% of the world's population is a positive 5% - with only one nation, Pakistan, in the red at all. And no, that's not a typo; as Russian Ruble priced gold is in fact up 79% year-to-date - as you can imagine, to an all-time high.

Enough Already

December 16, 2014

Andy Hoffman joins Kerry Lutz of the Financial Survival Network to discuss gold and silver, oil prices, currencies collapsing around the world, the FOMC meeting Wednesday and U.S. economic data declining.  To listen to the interview, please click on link below.  

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