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Li Ka-shing, a Hong Kong businessman and the wealthiest person of Chinese descent, with a net worth of $27 billion, is investing heavily in gold.

He has partnered with Canadian Imperial Bank of Commerce to form a new holding company that will acquire gold mining companies and other gold-related assets.

Larry Edelson expects gold to bottom out by the September 26 to October 3 time frame.

He correctly points out that gold takes off when interest rates rise.  The logic being that rising interest rates are a reaction to inflation.  Indirectly, that is correct.  The Fed’s QE to Infinity Money Creation Machine is scaring away foreign buyers of our Treasuries.  Japan and China, the two largest buyers of our debt, have lately been net SELLERS of our bonds.  This is what is pushing up interest rates and this is what will pressure gold UP.  It will also pressure the dollar DOWN.

Glory be!  Someone at the Fed is finally telling the truth.

According to Zero Hedge:

Fed Uberdove Admits Policy Causes Asset Bubbles (And They’re Here To Stay) – Full Speech

Submitted by Tyler Durden on 09/09/2013 11:12 -0400

San Francisco Fed head John Williams – known for his extremely dovish views on monetary policy (and support of record accomodation)  – appears to have taken some uncomfortable truth serum this morning. In a speech reminiscent of previous “froth” discussions and “irrational exuberance” admissions, Williams explained:

  • *WILLIAMS SAYS POLICY MAY YIELD ASSET BUBBLES, UNINTENDED RESULT
  • *WILLIAMS: ASSET-PRICE BUBBLES AND CRASHES ‘ARE HERE TO STAY’
  • *WILLIAMS: ASSET-PRICE BUBBLES ARE ‘CONSEQUENCE OF HUMAN NATURE’

His words appear to reflect heavily on the Fed’s Advisory Letter (from the banks) from 3 months ago – warning of exactly this “unintended consequence.” This, on the heels of Plosser’s recent admission that the Fed was responsible for the last housing bubble, suggests with the black-out period before September’s FOMC about to begin, the Fed is sending us a message that Taper is coming – as we know they are cornered for four reasons (sentiment, deficits, technicals, and international resentment).

We’re being “jobbed”

The latest jobs report shouldn’t be taken seriously.  The labor force participation rate slumped to a 35-year low of 63.2 percent last month.

According to Shadowstats.com, John Williams:

The drop in the unemployment rate didn’t result from strong hiring; it stems from job seekers giving up and leaving the work force.

As for payrolls, they are still 1.9 million jobs shy of the pre-recession high. And payroll gains were revised downward for June and July. “Net of prior-period revisions, the monthly [August] gain would have been 95,000.

The 169,000 payroll gain is “about half of what we would need under normal circumstances, and we’re not even normal in circumstances.

Three-fourths of the new jobs were part-time positions. Essentially employers are dividing up full-time jobs and creating multiple part-time jobs.

Shadowstats.com, September 9, 2013

Last night on 60 Minutes, they ran a segment on robotics.

Outsourcing jobs to China and India may be a thing of the past.  We can do much of the labor-intensive work here now – but robots, not by people, will do it.

If Employment Is So Great, Why Are Withholding Taxes Declining?

Zero Hedge published an article that adds to the argument that the economy is not improving.  And if it isn’t, how can the Fed even consider tapering off on their bond purchases?

Guest Post: If Employment Is So Great, Why Are Withholding Taxes Declining?

September 9, 2013

Submitted by Charles Hugh-Smith of Of TwoMinds blog,

It’s difficult to have a meaningful national debate about economic policy when “headline numbers” are juiced to make things appear rosier than reality.

Since unemployment statistics are either suspect or blatantly bogus, we must look for other less manipulated statistics for some modicum Key statistics of employment, income and production are vital propaganda tools for the status quo, and the temptation to adjust them to manage perceptions is irresistible. 

Here in the U.S., unemployment statistics are a travesty of a mockery of a sham:

We should look at withholding taxes as a more accurate measure of employment than the ginned-up official numbers. Withholding taxes are payroll taxes, and as such they are a direct measure of payrolls and earned income. (Self-employed people who don’t issue themselves monthly or weekly paychecks pay their withholding taxes quarterly.)

In other words, withholding taxes (i.e. Social Security, Medicare and estimated income taxes) are a very broad and accurate measure of the earned income of both employees and self-employed.

Since many high-earning professionals such as attorneys and accountants are self-employed, the earnings reported by the self-employed are significant. The self-employed have some control over when and how they report earnings, and many chose to report income in late 2012 rather than in 2013 to avoid the tax increases that kicked in on January 1, 2013.

This accounts for the spike in wages and withholding taxes in late 2012.

Here is a chart of wages/salaries and withholding receipts:

Wages/salaries have trended up since early, but growth has flattened recently. Withholding taxes are declining.

Here are employment and withholding receipts. Civilian employment has increased by some 2.5 million jobs since January 2012, but withholding receipts are actually lower than January 2012. This strongly supports what many others have already observed: the substitution of lower-wage part-time jobs for full-time employment. It’s difficult to conjure up any other explanation for employment rising and payroll taxes declining. Massive cuts in wages would have the same consequence, but there is no evidence of widespread reductions in hourly wages.

Here are employment and wages/salaries. We see the same basic dynamic here: the number of jobs continues increasing but wages/salaries are trending flat to down.

The con being played here is the assumption that more jobs means more wages which means things are getting better and better in every way, every day. If payroll withholding taxes are declining, and wages/salaries are flat lined, things are not getting better and better in terms of earned income flowing into household bank accounts, purses and wallets.

About 20 million working-age adults have supposedly dropped out of the U.S. labor force (and therefore become zombies who are not counted in tallies of unemployment) since January 2001. This is roughly comparable to the entire workforce of Italy (22.8 million) or South Korea (25 million).

If we drop another 15 million unemployed from the labor force, the unemployment rate will fall to near zero. “Unemployment rate drops to 1%” will make a warm and fuzzy headline, but it won’t mean there are more jobs or higher earned incomes. An official account of the economy based on 20+ million unemployed people not counted as unemployed is a shameful lie.

Record 90.5 Million Out Of Labor Force As Half A Million Drop Out In One Month (Zero Hedge)

It’s difficult to have a meaningful national debate about economic policy when perceptions and “headline numbers” are juiced to make things appear rosier than reality.

More Gold Buyers Are Starting to Take Delivery

James Turk (GoldMoney) urges people to take possession of their gold. He has concluded that there is a steady pressure from gold buyers to take delivery of paper contracts for gold.

He offers this as evidence. The price of gold today is higher than the future delivery. Normally, the commodity futures price is higher for any commodity. Why? Because the seller wants to get paid for gold storage fees and the interest rate. But when there is heavy demand for delivery, the price of a commodity reverses. This is called backwardation. Today’s gold market in in backwardation. The one-month forward price is lower. Turk says we have seen this before: late 2008.

After the Lehman collapse there was a rush for liquidity, and gold is one of the most liquid assets. So it was aggressively sold into November of 2008, when the selling pressure ended as gold went into backwardation for a couple of days. And as proof that the baby was thrown out with the bath water, gold climbed from $717, at its November 2008 low, to $1,000 by February 2009. And it kept climbing for two more years.

This condition did not last long.

In contrast, the backwardation that ended Monday prevailed for a totally unprecedented and record breaking 40 trading days. During that time, gold rose from $1,200 to over $1,430. It was a spectacular jump in price. But with gold again below $1,400, the backwardation has re-appeared.

Why does this situation exist? On the surface, it does not make sense. There are no free lunches in life, such as storage fees.

Where are the arbitrageurs? Why haven’t they stepped in to take the easy profits? All they have to do, Eric, is sell their physical metal and simultaneously buy it back for future delivery at a cheaper price. Plus, they have use of the proceeds from their sale to invest. They also avoid storage costs while they own paper gold — a promise to pay gold in the future — instead of physical metal. For the big gold players it is easy money laying right there on the table, in plain sight for everyone to see. So why don’t the big players take the advantage of the arbitrage?

Is it because they fear the promise to deliver physical gold to them in the future will be broken? Do they value a tangible asset more highly than a financial asset? Do they believe the reward for holding physical metal is greater than the potential of a short-term profit?

We of course do not know the answer to these questions, but one thing is clear, this new backwardation illustrates that physical metal remains scarce, or in other words, it is being held in strong hands. It is therefore going take much higher gold prices to entice these strong hands to part with their metal and instead hold some depreciating national currency.

King World News, September 5, 2013