David Schectman

January 26, 2015 

Unless the Authorized Participants and sponsor in SLV are just looking to draw unnecessary negative attention to themselves, the most plausible explanation for why silver was not deposited into SLV was because the metal was not available. Most astounding of all is that this is a circumstance with a precedence, in that it has occurred on many occasions in the past in SLV and, according to my memory, never or hardly ever in GLD. I'm not trying to trick you (or myself), but the word used to describe the inability to deliver a physical commodity in a required timely manner is shortage. Please look up the definition yourself.

If this was a one-off circumstance, I might be justly accused of unnecessarily inflaming an otherwise innocent situation for my own advantage. After all, exaggeration seems to be the norm in precious metals commentary. But the failure or delay in making this metal deposit into SLV, along with the series of counter-intuitive deposits/withdrawals in this and other silver ETFs, goes hand in glove with all the other unusual happenings in the wholesale physical silver market. - Silver analyst Ted Butler 

Up until the [previous] COT report, the bulk (80%) of the commercial selling in silver since November has been long liquidation on the part of the raptors (the smaller commercials apart from the big 8), rather than new shorting by the big 4 and 8. But with not many raptor long contracts left to liquidate (12,500 in the last COT report), any new commercial selling beyond that must be new short selling by the big 8---or new shorting by the raptors. Since the raptors haven't gone significantly short in years, it looks like any heavy commercial selling from this point would come from the big 4 and 8. If that were to occur, everyone should have a problem with that.

With the price of silver below the average primary cost of production, the number of legitimate hedgers looking to sell and lock in current prices should be as rare as a hen's teeth. So, if there is a notable increase in short selling by the big 4 and 8, those short sales can only be designed to cap and manipulate the price. No greater proof of manipulation is possible than one or a few traders being the sole short sellers. I suspect that will be the case but maybe I'll be wrong. [He wasn't! - Ed] - Silver analyst Ted Butler  

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2015 Omni-dimensional crisis: protecting oneself in stormy weather

The enormous dangers weighing on the banking and financial systems, especially in the West, but also on social and geopolitical peace, leads our team to warn the readers to be on their guard.

The issue is protecting one's assets creatively, with diversification of solutions always the principal instruction [...] The purchase of gold especially, but also jewelry, precious metals, remains our first recommendation, up to 20% to 30% of one's portfolio; for the remaining assets at the banks, think about the safest foreign banks as well, especially Chinese, which now have branches in Western countries; stay liquid: cash, cash, cash, in several currencies outside banks...

GEAB No 91 (Global Europe Anticipation Bulletin) 

I discussed this topic on Friday. Here are a couple of charts that make it very easy to see what rising gold and rising dollar means in other currencies for gold.

This Is What Gold Does In A Currency Crisis, Euro Edition

Submitted by John Rubino via Dollar Collapse blog,

Yesterday the European Central Bank acknowledged that the currency it manages is being sucked into a deflationary vortex. It responded in the usual way with, in effect, a massive devaluation. Eurozone citizens have also responded predictably, by converting their unbacked, make-believe, soon-to-be-worth-a-lot-less paper money into something tangible. They're bidding gold up dramatically.

So after falling hard in 2013 and treading water for most of 2014, the euro price of gold has gone parabolic in the space of a couple of months. This sudden rather than gradual awakening is the standard pattern for a currency crisis, mainly because it takes a long time for most people to figure out their government is clueless and/or lying. But once they do figure it out, they act quickly.

Europe's gold chart isn't as dramatic as Russia's because Europe doesn't depend on oil exports and the euro, while dropping versus the dollar, isn't yet in free-fall. But with another trillion euros due to hit the market in the coming year, and a series of currency union-threatening political crises in the pipeline, the flight to safety could easily become a stampede.

Europe and Russia, meanwhile aren't the only countries with incipient currency crises. Here's gold in Canadian dollars:

Just to be clear, this isn't a prediction about the immediate future, but an attempt to illustrate the nature of gold. It behaves this way in crises because it is sound money, which can't be created in infinite quantities by panicked central banks as can euros, Canadian dollars and all other fiat currencies. These charts illustrate what happens when this difference starts to matter.

Right now, the fear is country-specific. Europeans start to distrust their government and shift to gold, without necessarily questioning foundational concepts like big, activist government and central bank management of fiat currencies. They still assume that the euro would be fine if managed correctly.

The next stage will begin when enough local currencies blow up to make people realize that the problem isn't with specific governments or national forms of money, but with the idea of fiat currency itself. When that happens the global gold chart will look like Europe's - but with more zeros.

 

And here is more information on this important topic...

 

This is What Gold Does in a Currency Crisis, Euro Edition 

Yesterday the European Central Bank acknowledged that the currency it manages is being sucked into a deflationary vortex. It responded in the usual way with, in effect, a massive devaluation. Eurozone citizens have also responded predictably, by converting their unbacked, make-believe, soon-to-be-worth-a-lot-less paper money into something tangible. They're bidding gold up dramatically.

So after falling hard in 2013 and treading water for most of 2014, the euro price of gold has gone parabolic in the space of a couple of months. This sudden rather than gradual awakening is the standard pattern for a currency crisis, mainly because it takes a long time for most people to figure out their government is clueless and/or lying. But once they do figure it out, they act quickly.

Europe's gold chart isn't as dramatic as Russia's because Europe doesn't depend on oil exports and the euro, while dropping versus the dollar, isn't yet in free-fall. But with another trillion euros due to hit the market in the coming year, and a series of currency union-threatening political crises in the pipeline, the flight to safety could easily become a stampede.

 

FEATURED ARTICLES

 

LeMetropole Caf� (The bet here is that JPMorgan won't be able to suppress the price of silver like they did last year.) (Middle East War Coming, Iran Russia Unite, Ferguson Cop Cleared) (2015 Black Swans abounding - Safe Haven gold to benefit. Global economic uncertainty may prompt return to safe haven gold buying.)

 

Richard Russell (In a bear market, everybody loses, and the winner is he who loses least.) 

 

Ed Steer (The powers that be still have the entire commodities complex in full lockdown) (2 additional critical reads)

 

Zero Hedge (Gold, Dollar "Disruption", And Central Banks' Miscalculated Insanity) (6 additional critical reads)

Bill Holter

THE "NEUTRAL" SWISS JUST CHANGED SIDES!

January 26, 2015

The Swiss have been known for many things.  They are renowned chocolate and watch makers as well as financiers.  They are well known as a very low crime society where nearly everyone has a gun (maybe this is why crime is low?) but their greatest claim to fame has been their "neutrality.  They did not participate in either World War I or WWII,  They did however do business with both sides during World War II and profited handsomely.  If you recall, many accounts they had held went unclaimed for years because many of the "depositors" were killed during the holocaust.   

Swiss bank money repaid to Holocaust victims

When the settlements were made some 15+ years ago, the survivors and heirs received "paper" settlement for their gold deposits.  It is also highly likely Switzerland still has untold tons of gold in their vaults from the Nazi Germany regime which was stolen from overrun people and even nations.  I bring this up because it is important you are fully aware that Switzerland "knows" gold.  Not only do they know gold, they know which is better, paper or gold ...which is why they reimbursed claims with paper rather than gold.

With the above in mind, the Swiss National Bank as you know were very big "supporters" if you will of the European paper currency unit, amassing nearly 600 billion euros on their balance sheet.  They shook the financial world last week when they announced a drop to the peg floor of 1.20 after publicly confirming it just three days earlier.  In fact, the ripples (unintended consequences) have yet to fully play out or be disclosed as derivatives of all sorts were affected.

We asked the question "why", last week.  Why did they drop the peg, especially after confirming it just 72 hours earlier?  The common sense reason was because they had to.  Euros were piling up on the SNB's balance sheet with the current 60 billion per month more staring them right in the face.  Why accumulate more of something the issuer publicly and purposely wants to dilute?

Fast forward less than one full week and another, maybe the BIGGEST piece to the puzzle has emerged!  It appears the Swiss may have been given an offer they couldn't (shouldn't) refuse? 

Do you think this deal just came out of the blue?  Did the Chinese request, or offer, a renminbi hub AFTER the Swiss announced the end of their euro peg?  Or, do you believe the louder Mr. Draghi became and the closer the date of QE announcement came, the Chinese and the Swiss were meeting behind closed doors?  As an earth shattering side note, the Chinese publicly and formally also announced yesterday of their intentions for the yuan to be an internationally traded currency!

The obvious takeaway from these announcements is twofold.  One we could have certainly speculated on, the other a surprise.  First, it is and has been common sense that the yuan (renminbi) was going to eventually become an internationally tradable currency with the speculation of eventually becoming "a" if not "the" reserve currency.  This, we could have expected, the timing though was unknown.  The not so obvious take and maybe just my own opinion, the Swiss just took and changed sides!  I know this is a big statement so I will try to explain my thinking here.

The Swiss surely had to know when they dropped their peg, speculators, financial institutions and even some central banks would be offside and take losses, BIG losses.  They could have dropped the peg differently.  They could have even moved the peg slightly and not forecast further moves.  In other words, they could have made the move slower.  They chose not to and according to Christine LaGarde, they gave no prior notice to the IMF.  I was not sure last week but now, after the Swiss/Chinese alliance I believe her.  I believe this was a bolt of lightning out of the blue to the Western banking system and probably a shot across the bow by the Chinese.

Going just a bit further, the Swiss have actually injured the Western financial system with their overnight and sudden move.  Derivatives have taken hits and very well could have set off a chain reaction behind the scenes ...which have not yet surfaced?  They did this AND moved Eastward at the same time.  In my opinion, the Swiss "know" the direction where the power structure is moving.  You see, Switzerland has "re" refined several thousand tons of gold over the last few years.  They know where the gold came from, they know they received London good delivery gold, they know they recast this gold into "kilo" bars which is good delivery in the East ...and they know where they shipped all of this gold.  You would not have to be as bright and precise as the Swiss to understand what is happening.  They have seen the flow, done the math and watched as "power" (gold) has been moved from West to East. 

Before finishing I would like to comment on their "neutrality".  The Swiss have always been connected to the Anglo banking and financial systems.  Over the last 3-5 years they (the Swiss financial institutions) have been attacked time and again by Washington DC. with new rules and regulations, FATCA being the obvious.  Their institutions have been blackmailed and strong armed into breaking secrecy laws which stood for well over a century.  Do you think they liked or enjoyed this?  Would they have changed their practice unless they were forced to?  Of course not.

So, "what's in it for them" you ask?  This is easy!  Switzerland by allying with China is simply following "the power".  They will also be doing business in a "respectful" manner with the Chinese rather than with the disrespect they have worked under with the West.  They also will now have another way to transact business, they will be entitled to and even enticed to use the new clearing system that Russia has formed... and not under the watchful eyes of SWIFT!  As a speculation on my part, I believe the Swiss fully understand "what" it is that is coming.  They can see as well as we can, the collapse is coming.  A banking collapse, a derivatives collapse, a trade "war" and collapse, and a currency/credit collapse.  If it is obvious to people like us who are not plugged in, it is more than obvious to them being at the heart of global finance.  I believe they are simply positioning themselves ahead of collapse and "gittin' out while the gittin' is good"!  I might add, they are doing this on their own terms and timing, not terms, conditions and timing which are forced on them! 

In my opinion, when we look back at what the Swiss are doing and have done, we will simply look at it as "the Swiss did what they had to do and what was best for the Swiss".  They have changed sides so to speak and done so in a front running and hands on manner.  This is simply Switzerland doing what it does best ...business!   

Regards,  Bill Holter

THE MOST OMINOUS QUOTE OF THE YEAR

January 26, 2015 

It's 2:30 AM MST Friday morning, on my "day off." However, I couldn't sleep because too much is going through my head - as I digest the second "financial big bang" in just a week's time. Many more are coming this year - perhaps as early as Monday, following Sunday's Greek elections; and no doubt, several will be of the "black swan" variety. As discussed in yesterday's MUST LISTEN audio blog, the two guaranteed to "rock the world" are the inevitable "Yellen Reversal" - i.e., when Janet Yellen admits the U.S. needs more QE as well; and, more calamitous yet, when the surging dollar forces the Chinese to de-peg the Yuan. In other words, whilst the Swiss National Bank and ECB got the party started this week, it's not even 7:00 PM on New Year's Eve. I have little doubt "midnight" will be reached in the not too distant future, perhaps this year; and when it does, Richard Russell's expectation of the end of the gold Cartel - or as I deem it, the "New York Gold Pool," will be forever destroyed.

"There is a giant secret stirring under today's market. China, India, Russia and almost every central bank is buying physical gold. I'm guessing that within another year, physical gold will be swept off the market." 

Masked by unprecedented PPT support of global equity markets - to ensure Mario Draghi's "QE suicide" is perceived positively - is the stark fact that the announcement failed miserably. What terrifies me most, and was unquestionably interpreted likewise by the world's big money, was just how transparent the ECB's desperation was. To wit, in "leaking" a €50 billion/month program a day earlier, and watching the Euro fail to fall lower than the eleven-year low versus the dollar of 1.16, the ECB, like chickens with their heads cut off, said "oh my god, it's not enough! Let's do €60 billion instead - and for good measure, lower the TLTRO loan spread to ZERO, to ensure banks borrow for free!" I mean, these are the stewards of the world's most widely utilized currency - acting like terrified children, and playing god with the life's savings of hundreds of millions of people. Or more appropriately, billions, given the widespread, horrifying ramifications of stirring up the global "final currency war" to DEFCON 1.

Yes, the "Dow Jones Propaganda Average" rose 259 points yesterday - although you'd have to be brain-dead to not realize the moved was entirely due to PPT support, via the same "dead ringer" algorithm I've written of for three years. And yes, similar European goosing (and hyperinflation fears) caused European stocks to surge to a record-high P/E ratio. And naturally, gold's advance was maniacally capped at the Cartel's latest "line in the sand" at the key round number of $1,300/oz; with the high of the day achieved at - yep, you guessed it - the 12:00 PM EST "cap of last resort" I identified a decade ago.

However, the "footprints of failure" were as big as those of the Sasquatch - starting with the fact that a parabolic surge in the dollar index caused gold to explode worldwide. By day's end, the Euro had collapsed all the way to 1.134, whilst the dollar rocketed 1.8% higher, to a new 12-year high. Consequently, Euro and Rupee gold are now just 16% from their all-time high, whilst Canadian and Australian gold are just 10% from theirs, to name a few high profile currencies. That said, the day's "big winner" was Yen Priced gold, which officially achieved a new all-time high. Cumulatively, such movements will cause dramatic, parabolic growth in worldwide physical demand; until ultimately, Richard Russell's forecast is met - and then some!

To that end, I noted yesterday how the Fed is desperately trying to goose equities, bond yields, and oil ahead of next Wednesday's FOMC meeting, in order to have a "position of strength" in its desperate goal of maintaining the illusion of a potential rate tightening. Well, after pushing WTI crude up to $49/bbl early in the morning, it plunged all the way back to $46.30/bbl by day's end; and even after the "convenient" death of Saudi King Abdullah died right after the market close caused prices to spike (for what reason, I have no idea), as I write early Friday morning prices have dipped back down to $46.50/bbl. Worse yet, as I write - it's now 3:15 AM MST - copper has plunged another 1.2% to $2.53/lb; and get this, the dollar index is up another 0.7%, to an incredible 94.90 - as the Euro is down another cent, to 1.1228, another 12-year low. Per the chart below, the Euro is clearly headed to its all-time lows below parity, enroute to its inevitable dissolution in the coming years - or perhaps, months. And putting the cherry on the cake of Central bank failure, the blatant Fed rate goosing of the past two days has decidedly failed; with the 10-year Treasury yield having peaked at 1.96% yesterday morning (from 1.77% 36 hours earlier) - and as I write at 3:45 AM MST, nearly "round-tripped" all the way back to 1.80%!

Speaking of Central bank failure, just two days ago I highlighted how even the lackey MSM is turning tail, in viciously attacking Central bank policies on the heels of the catastrophic Swiss National Bank actions. On Monday alone, the New York Times, Bloomberg, and CNBC published scathing articles criticizing the Swiss National Bank and ECB; and following yesterday's announcement, Reuters "joined the herd" in noting how "central bankers lurch from 'whatever it takes' to 'whatever next.' Better yet, Wall Street joined in as well, with none other than Societe Generale - the French bank that will undoubtedly be one of the first to demand a bailout when Europe collapses - claiming "since the ECB's QE will fail, it will need to be increased to €3 Trillion (i.e., tripled), and include stocks." However, the coup de gras came at the hands of William White, the former Chief Economist of the Bank of International Settlements - of GATA fame, for in 2005 claiming the BIS' primary goal is "the provision of international credits and joint efforts to influence asset prices (especially gold and foreign exchange) in circumstances where this might be thought useful." In claiming "QE in Europe is doomed to failure, and may draw the region into deeper difficulties," he screamed to the world that the Central banking cabal is coming apart at the seams - as said "final currency war" turns nuclear.

That said, these statements pale compare to the "most ominous quote of the year" from U.S. Commerce Secretary Penny Pritzker; fittingly, made from the annual Davos, Switzerland conference of the world's most sociopathic bankers, politicians, financiers and industrialists. For the past three years - and particularly throughout the past three months' historic currency crash - I have "shouted from the rooftops" of the calamitous political backlash an exploding dollar will provoke amidst the backdrop of a plunging global economy; let alone, its dramatically negative impact on the earnings of the multi-national corporations that run America. In other words, just as the Chinese are being pushed toward "de-pegging" the Yuan to avoid it rising too sharply (yes, I believe it will fall if de-pegged, for the same reason all currencies are falling versus the dollar), the U.S. government cannot, and will not, allow the dollar to continue rising. Quite ironic, wouldn't you say, as the "code name" for the past two decades of gold suppression was Robert Rubin's "strong dollar policy?"

Anyhow, when asked whether a climbing greenback could drag down U.S. trade and economic expansion, Pritzker said "it's a factor, and something to keep an eye on." As regards to said "final currency war," no more ominous words could be spoken - irrespective of how innocuous they appear at the surface. In this case, I'll defer to Zero Hedge's analysis thereof, describing exactly what is going on behind the scenes.

"(The political and economic impact of the dollar's surge) is something Pritzker knows too well. So the question is - how long until she speaks to none other than Jack Lew, who in turn conveys a message to Janet Yellen, forcing her to 'patiently' remind the market the U.S. never has, and never will, decouple from the rest of the world; and that, unless the US wants to go straight from 5% Obamacare-boosted 'growth' to recession, it too will have to join the devaluation party. Moreover, considering that everyone is now long the dollar, the macro devastation that would result if the Fed pulls an SNB and surprises the market (with additional QE), will be one for the generations."

So there you have it, in a nutshell. The global economy is collapsing; the "final currency war" has reached its terminal stage; and the political and geopolitical backlash is about to be unleashed full force. Consequently, no matter what Central bankers do, four-plus decades of monetary sin have sentenced the entire world to "death by deflation"; which, what do you know, CNN, too, just posted an eviscerating article about.

In a world of historic, parabolic debt accumulation; and Central banks void of both credibility and "dry powder," the near-term ramifications will be horrifying. As gold and silver are not "commodities" but the world's only real money, they are rocketing higher in all currencies; as in the 1930s and 2008-09, proving their historic safe haven status. It won't be long before gold (and eventually, silver) trades at an all-time high in all currencies; and lastly, "dollar-priced gold" when the Big Kahuna, the Federal Reserve, joins the overt devaluation party.

Consequently, we at the Miles Franklin Blog can only plead with you to protect yourself whilst you still can; which, if you wisely choose to do, we hope you'll give us a call at 800-822-8080, and "give us a chance" to earn your business.

LeMetropole Caf� 

You may recall that the gold open interest was around five year lows, while silver was near its record highs.

What does it mean? Hard to say, but my guess is it signals JPM and allies have done their thing with their effort to destroy the price of silver, and take gold into oblivion with that effort. Now, they are going to try and keep the price under control, but are not going to pressure it like they did last year. That game is over, which is why the price is acting so differently so far this year. The bet here is THEY are in trouble and won't be able to prevent the price of silver from making all-time highs.

*Spoke to our STALKER source this afternoon. Some bullet points...

-In the first 30 minutes after the Swiss announcement, the losses in various U.S firms was 1 1/2 to 2 billion. Losses elsewhere were 7 1/2 billion to 8 1/2 billion. Some of that carnage has not been felt yet.

-The place to buy commercial gold is in the U.S. The market is tight, but supply is always there for the right premium. It is MUCH tighter elsewhere in the world.

-Of interest ... up to 45% of the Indian population owns gold. Only 1% to 2% of Americans do.

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WNW 174-Middle East War Coming, Iran Russia Unite, Ferguson Cop Cleared 

By Greg Hunter January 23, 2015

Several top stories are all coming out of the Middle East, and they all show war is approaching. Yemen has fallen into the hands of Islamic radicals, and there is total chaos and anarchy in the country, which now has no formal government. This is an ominous development as it borders Saudi Arabia where staunch U.S. ally, King Abdullah, just died. A successor has been named, and he faces a country on its Southern border overrun with rebels that oppose America and its allies. President Obama has called Yemen a success story, and now it is a disaster that can and will further destabilize the Middle East. My question is when will the anti-American rebels try to overthrow Saudi Arabia? That is coming. The U.S. can't let that happen because if they do, it's lights out for the petro-dollar. The U.S. has been moving men and machinery to the region to fight ISIS. Will they be diverted to Saudi Arabia?

Israel attacked positions in Syria and killed the son of a Hezbollah leader and an Iranian General. Iran and Hezbollah say they are going to invade northern Israel in a counterattack. The Israelis say an attack on Israel was already in the planning stages, and it attacked preemptively. This could get ugly and very bloody. Hezbollah has been amassing thousands of missiles, and they could rain down so many missiles on Israel it could swamp the Iron Dome missile defense system. A missile attack by Hezbollah could make what Hamas did in the south look tame. This might ratchet up the violence as Israel moves to stop such an attack.

Meanwhile, Iran just signed a defense pact with Russia that could send sophisticated S-300 missiles to Iran. These missiles are defensive and might thwart a possible air strike from Israel over Iran's nuclear program. Here's a big question, if Israel attacks Iran, will Russia feel obligated to then attack Israel? Who knows, but this news clearly shows tensions on the rise and peace is being pushed further out of the picture. A direct attack on Iran by Israel would surely cause a wider way. On top of that, Israel has released satellite photographs that it says shows Iran has what appears to be a new ballistic missile. The Israelis claim it is capable of hitting targets far beyond the Middle East.

Closer to home, Congress has invited Prime Minister of Israel Benjamin Netanyahu to address a joint session of Congress. The White House was bypassed, and now the Obama Administration says it will not meet with Netanyahu while he is in town. The official reason is that the Prime Minister is too close to his election, and the White House does not want to appear to be showing favoritism to a candidate or a party. Others say President Obama is furious the White House was bypassed. Speaker John Boehner has voiced his displeasure over how the talks have dragged on with Iran over its nuclear program and says "hell no" to Obama signing a bad deal. President Obama threatened to veto any legislation that intensifies sanctions on Iran. My prediction is the House will have bipartisan legislation for more sanctions and so will the Senate. There may be enough Democrats that will vote to override a veto. This is what I predicted after the mid-term elections, and this is what is happening. More and more Democrats will vote against the President as time goes on.

On the financial front, the European Central Bank (ECB) started its own "open-ended" money printing, or QE program. It will be spending $70 billion a month buying bonds, but the ECB says it is only picking up 20% of the tab. It wants other central banks to pick up the other 80%. I don't think any other banks can afford it, and Germany certainly will not be chipping in 20%. I don't see how it will work. The euro has been sinking in value, and the U.S. dollar has been rising. At least two USAWatchdog guests predicted the dollar would rise, and that may indeed force the Fed to start another round of money printing to knock down the dollar. U.S. companies, which get much of their revenue from sales abroad, are hurting because of the spiking dollar. The Fed will not let that happen, so expect more money printing to devalue the dollar.

There are also plenty of signs that say the economy is not in a so-called "recovery" but a downward spiral. This is another excuse to start another round of money printing to prop up the economy a little longer. Oil and energy companies have been laying off workers by the tens of thousands. Other parts of the economy are also announcing they are shedding jobs such as eBay, American Express, plenty of retailers and even big banks like Bank of America. The President touted that the economy was strong, but out here in the real world, it looks weak and getting weaker.

Finally, Ferguson police officer Darren Wilson has been exonerated by the U.S. Justice Department. This means the entire "hands up, don't shoot" movement was based on a gigantic lie. White police officers are not hunting down unarmed black men and executing them. More than 5,000 blacks a year are murdered by other blacks in America, and those lives don't seem to matter to people like Al Sharpton. Much of the city of Ferguson, Missouri, was burned to the ground based on hype and lies. That is a tragedy for the business owners, most of them minority owned, who suffered because their town was being used as a political pinata.

Join Greg Hunter as he analyzes these stories and more in the Weekly News Wrap-Up.  

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2015 Black Swans abounding - Safe Haven gold to benefit

Global economic uncertainty may prompt return to safe haven gold buying.

Lawrence Williams   January 23, 2015  

John Kerry and King Abdullah of Saudi Arabia  

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Zero Hedge

 

Gold, Dollar "Disruption", And Central Banks' Miscalculated Insanity 

Submitted by Tyler Durden January 23, 2015

 

"It isn't really about interest rates or "inflation", obviously as gold is rising as inflation "expectations" dramatically sink here, so much as gold is insurance against central banks being wrong. That seems to be the common theme all over the world ever since June when the ECB placed its desperation and impotence on full display. Everything that has occurred since then has only confirmed the monetary illusion being exactly that, including the US and its central bank's place at really the central point of the miscalculated insanity."

The $9 Trillion US Dollar Carry Trade is Blowing Up

The US Dollar rally, combined with the ECB's policies are at risk of blowing up a $9 trillion carry trade.

When the Fed cut interest rates to zero in 2008, it flooded the system with US Dollars. The US Dollar is the reserve currency of the world. NO matter what country you're in (with few exceptions) you can borrow in US Dollars.

And if you can borrow in US Dollars at 0.25%... and put that money into anything yielding more... you could make a killing.

A hedge fund in Hong Kong could borrow $100 million, pay just $250,000 in interest and plow that money into Brazilian Reals which yielded 11%... locking in a $9.75 million return.

This was the strictly financial side of things. On the economics side, Governments both sovereign and local borrowed in US Dollars around the globe to fund various infrastructure and municipal projects.

Simply put, the US Government was practically giving money away and the world took notice, borrowing Dollars at a record pace. Today, the global carry trade (meaning money borrowed in US Dollars and invested in other assets) stands at over $9 TRILLION (larger than the economy of France and Brazil combined).

This worked while the US Dollar was holding steady. But in the summer of last year (2014), the US Dollar began to breakout of a multi-year wedge pattern:

Why does this matter?

Because the minute the US Dollar began to rally aggressively, the global US Dollar carry trade began to blow up. It is not coincidental that oil commodities, and emerging market stocks took a dive almost immediately after this process began.

This process is not over, not by a long shot. As anyone who invested during the Peso crisis or Asian crisis can tell you, when carry trades blow up, the volatility can be EXTREME.

The market drop in October was just the start. Once the US Dollar rally really begins picking up steam, we could very well see a crash.

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