China gold

China and Russia have taken the lead in establishing the Asian Infrastructure Investment Bank (AIIB), seen as a rival organisation to the World Bank and the Asian Development Bank, which are dominated by the United States with Europe and Japan.  These banks do business at the behest of the old Bretton Woods order. The AIIB will dance to China and Russia’s tune instead.
The creation of the AIIB is a masterstroke of tactical genius. The outstanding issue now is China and Russia will need to come up with a credible plan to make their currencies a slam-dunk replacement for the dollar. We know that gold may be involved because the SCO members have been accumulating bullion; but before we get there China must manage a deliberate deflation of her credit bubble, which will be a delicate and dangerous task.
Unlike the welfare-driven economies in the west, China has sufficient political authority and internal control to survive a rapid deflation of bank credit. When this inevitably happens the economic consequences for the west will be very serious. Japan and the Eurozone are already facing economic dislocation, and despite over-optimistic employment numbers, the US economy is faltering as well. The last thing America and the dollar needs is a deflationary shock from China.

Fed monkey

The Federal Open Market Committee (FOMC) statement released on Wednesday was notable for deferring interest rate rises to some unspecified time in the future.
It appears the Fed is boxed in, and raising the Fed funds rate would probably only serve to increase excess reserves. If so, the Fed would have to shell out interest payments to the banks at a rate it really cannot afford, given its own balance sheet is geared over 70 times. Markets seem to be slow to understand this problem: if the Fed is unable to raise interest rates (i.e. the Fed funds rate) the dollar itself is at risk.

smash
Play

With massive currency volatility & a big jump in gold & silver in the wake of the FOMC statement, Alasdair Macleod joins the show this week discussing:  

  • Massive moves in the dollar are justified, as The Federal Reserve has effectively thrown in the towel on any raise in interest rates! 
  • Is the dollar’s parabolic moon shot over?  Alasdair explains why he is a “Seller of the Dollar” here 
  • A BIG RESET is coming- “Something is about to break” 
  • UK, Germany, France, Italy, & Australia join Chinese/Russian-led Asian Infrastructure Investment Bank… as  founding members!Putin has played the most extraordinarily brilliant move I have ever seen!” 
  • Alasdair states that when the US tries to join the Asian Infrastructure Investment Bank IT WILL BE REFUSED, and the days of the dollar are basically gone! 
  • SHORT SQUEEZE!  Gold & silver rip higher Friday
  • Macleod explains that “The dollar will begin to weaken when the market begins to realize what has occurred!”

The SD Weekly Metals & Markets With The Doc, Eric Dubin, & Alasdair Macleod is below: 

nuclear bomb

In this interview with Finance & Liberty’s Elijah Johnson, Alasdair Macleod discusses:

  • How will the change in London gold fix affect the physical gold market?
  • China to control the gold market
  • Gold is a “financial nuclear weapon”
  • Will the Euro currency survive?Macleod’s full interview is below: 
Bernanke

To the Austrians inflation is an increase in the quantity of money and credit.  Inflation is not defined as rising prices; this is the long-run result of inflation in the quantity of money and bank credit.
Common jargon confuses the effect for the cause.

It seems our modern Central bankers believe something quite different entirely…

gold vault

When you visit with Alasdair Macleod you should be prepared for a lesson in global economics.
Our visit started with the very explosive new London Gold fix and discussed the implications of how this will effect, not only traders, but the retailer buyers as well:

silver rocket down

Precious metals have been pinned down in the Currency Wars cross-fire.
At the root of this currency war is a strong dollar, contributing to weak commodity prices, and since western analysts are generally uncertain of the role of precious metals in modern financial markets, they see no reason to recommend buying gold and silver.
Over the week the gold price fell over 3% to $1166 by early-morning trading Friday, and silver by 5% to $15.85. However, the detail in market action suggests physical demand continues to be reasonably strong on falling dollar prices, and westerners are still emptying their vaults to supply it.

Finance ministers in the Eurozone appear to have had a free lesson in game theory from Professor Yanis Varoufakis, the Greek finance minister.
It appears that under the Lisbon Treaty, Eurozone states cannot expel Greece: she can only leave with everyone’s unanimous agreement, including her own.
And they probably didn’t realize that playing hardball against Greece would force the ECB to write off debts approaching ten times her equity capital of only €10.8bn.

Game, Set, Match?

cliff edge

The euro’s future could become an important factor.  In today’s analysis I point out that the euro’s inherent weaknesses may undermine its credibility in coming months. This will have two effects: firstly, and most obviously, it increases economic and systemic risks for the Eurozone and therefore the rest of the world; and secondly, it is likely to lead to a new source of demand for physical gold.
It is easy to forget that Europeans have a long history of being avid gold hoarders in troubled times.

warning

The largest source of exported physical goods is China. Demand from other countries for China’s goods is declining, confirmed by the Baltic Dry Index* which is plumbing new lows. This slow-down in economic activity could easily burst the bubble of bank credit, which is in danger of collapsing under the massive burden of bad debts.
The signals are clear: the world has already entered a downturn in economic activity.
Therefore we can expect accelerated money-printing and the imposition of more negative interest rates in a forlorn attempt to avert economic reality.

down fall plunge

In last Friday’s Market Update I commented that it is easy for bullion banks with deep pockets to move markets and change sentiment.
This week’s trading in precious metals was a text-book example, with all precious metals falling sharply during New York trading on Tuesday, setting up gold for a test of the $1200 level the following day:

Even according to the BLS numbers 102 million adults deemed not in the labor force or officially unemployed.
Then there are those who are only partially employed, but counted by the BLS as employed. If we add these 34.7 million people to the BLS’s 102 million figure, only 44.2% of US adults are actually employed for 30 hours or more per week; in other words fully employed by any common-sense definition.
This is the true indication of the state of employment in the US. The BLS could be more up-front in presenting its numbers, however, they are completely open about their methodology.

Assuming caveat emptor should apply, the fault for accepting the BLS headline without question lies with the investing public, careless enough to be egged on by sell-side analysts and the media.