Before I get to today’s titled topic, we have several very important matters to discuss. To start, it appears another of our long-time competitors is closing its doors, just as Tulving did last year. We cast no aspersions on our competition, but remind readers that in the essentially unregulated bullion business, one must be very careful who one deals with. There’s a reason we’ve been around 25 years with an A+ Better Business Bureau rating and zero registered complaints. Competitive pricing is certainly a mainstay of our “skill set,” but experienced brokers, honest dealing and industry-leading customer service are what have distinguished us in this highly commoditized business. And oh yeah, perhaps the internet’s best free economic blog and newsletter!
Next up, a very important update from Steve St. Angelo of the SRS Rocco Report, who has been closely following the world’s largest physical delivery market, the Shanghai Futures Exchange. We have for some time highlighted how Shanghai silver inventories started plummeting following the blatant April 2013 New York paper raids commencing one day after Obama had a “closed door meeting” with the top TBTF bank CEOs. Steve’s last update showed that 90% of said inventory had been depleted through July; but per below, August has seen still steeper declines. Another 29% of inventory was withdrawn in the past three weeks alone, leaving a measly 103 tonnes left worth just $65 million – or $69 million, when incorporating the record high 6% premium over fraudulent London prices. No, that’s not a typo; just $69 million of silver remains on the world’s largest physical delivery exchange care of an accelerating run catalyzed by Cartel naked shorting. Given the world experienced major silver shortages in 2008, 2011 and 2013, I’m not sure how much more loudly we can emphasize that silver is the “financial world’s Achilles Heel” – and thus, extremely likely to see additional more dramatic shortages in the coming years – perhaps, as soon as next week’s COMEX options expiration.
Third, we just couldn’t resist the non-irony of our “sixth sigma precious manipulation proof” article that published the same day as a nearly identical one from the great James McShirley, titled “MOAMOPE” or the “Mother of all Management of Perspective Economics.” James, Bill Holter and I were three of the “four horseman” of GATA content for many years, along with “CIGA” Dave from Denver – as recognized by none other than “Admiral Sprott” at his 2011 keynote speech at GATA’s London conference. Like myself, James has analyzed the Cartel’s day-to-day machinations for more than a decade. In his article, he focused specifically on the 6:00 PM EST open of the Globex market, whilst we wrote of both the 6:00 PM EST and 4:00 PM EST attack algorithms – in the latter case, as we saw just yesterday.
Fourth, we felt the need to display a perfect picture of what we long ago deemed the “most damning proof of QE failure” – i.e., plunging interest rates amidst the so-called highly propagandized “recovery.” That article, one of our most important yet focuses on the U.S., whilst the picture below depicts what has occurred in two other leading Western economies Germany and Japan; both of which have today seen their benchmark 10-year yields achieve new all-time lows. We cannot emphasize enough our view that U.S. rates will follow this course as well, as the entire world “front runs” the inevitability of “QE to Infinity.”
The promise of free Central bank “liquidity” and necessity to chase yield will accomplish this misallocation of capital in spades – until eventually, all fixed income markets collapse with the onset of hyperinflation. All one needs to do to realize this is read the daily MSM headlines; which, by the way, should make it clear that the only reason PMs aren’t soaring is massive Cartel suppression.
We could go into numerous other PM-bullish topics as well – like this morning’s horrible ex-transportation durable goods number, a second straight monthly decline in the Case-Shiller home price index, dissolution of the Ukrainian Parliament, horrors of the expanding California drought, the plunging 10-year Treasury yield, down to 2.37% this morning; or this ugly chart of how corporate “earnings” are more fraudulent than ever.
But instead, I’ll simply finish with today’s topic regarding the “irrelevancy” of gold – or more specifically, as Gary Christenson describes in this fine article, the irrelevancy of whether the supposed U.S. gold at Fort Knox is gone, encumbered, or fully intact. Christenson discusses the giant pink elephant in the room we have long noted regarding said “reserves”; i.e., even if all 8,134 tonnes were still around, they’d only we worth $340 billion. Such a tiny amount represents barely 10% of China’s currency reserves, less than 2% of the U.S. national debt (or 1% including “off balance sheet” liabilities), and an infinitesimal percentage when accruing unfunded liabilities. QE3 alone added $340 billion in just its first four months, and the government deficit is at least twice that annually, at best. It’s also just 7% of the Fed’s balance sheet, 8% of the published U.S. monetary base, and god knows how small a percentage when compared to the actual amount of printed, but not published money supply. In other words, even if the U.S. – and all the world’s Central banks, for that matter – held the amount of gold they claim, it would pale in comparison to the gargantuan amount of printed money and debt cumulatively in circulation. Consequently, we believe gold has never been more undervalued in the history of mankind – and don’t even get us started on silver. In our view, now is the time to secure your personal cache – as when the “big one” inevitably hits,” the odds of protecting your assets with real money will be slim to none.
Can you explain why the falling 10 year rates equate to hyperinflation. Are you stating that people are indeed buying government paper which is causing the rates to go down? Why would people seek refuge in government paper… tradition? Can you elaborate a little bit more on this subject?
I have said that rates are falling because of a combination of Central bank monetization (Japan, shortly the ECB); and more importantly, the expectation of “QE to Infinity” – especially here in the States, where the Fed says it is about to end QE. This is what I meant when I wrote “the most damning proof yet of QE failure” – i.e., falling rates amidst a so-called, propagandized recovery.
Inflation is at record highs nearly everywhere, but money managers and sovereign funds alike will continue to buy bonds knowing more QE is coming – a la Japan. Of course, when all the money printing inevitably yields hyperinflation, all bonds will be destroyed. Money managers CANNOT be wrong and short, so they will all perish wrong and long.
Andy: cannot agree with you more on the relevance of Ft Knox (or NYFED, West Point) actual gold reserves. I would. however, like to live to see the shakeup and the proliferation of nooses and guillotines after a true audit is done.
LOL, I’d say the odds of the Pope converting to Judaism are better than those of a Ft. Knox audit.