If Central Banks Believe in Paper Money Why Are They Loading Up On Gold?

Posted by: Phoenix Capital Research

Post date: 07/08/2011 - 12:54

Let’s consider this. If you’re a central bank and you actually believe in the value of paper money and your ability to create wealth by printing it…why would you be loading up on Gold? The answer is simple: you see the writing on the wall. These guys know that the financial system is broken. They’ve known it for over a decade (Greenspan even admitted that derivatives could “implode” the market in 1999) 

Guest Post: Boiling Frog Alert: Congress Wants Automatic Wage Deductions To Pay Down The Debt 

Folks… you just can’t make this stuff up. On July 6th, just two days ago, at least a dozen busybody Congressmen sponsored the introduction of HR 2411, the “Reduce America’s Debt Now Act of 2011.” They always come up with fantastic names for these pieces of legislation… and rest assured, the better/more patriotic the name, the more ominous the bill. This one follows the pattern. HR 2411 states that every worker in America should be able to voluntarily have a portion of his/her wages automatically withheld and sent directly to the Treasury Department for the purposes of paying down the federal debt. “Every employer making payment of wages shall deduct and withhold upon such wages any amounts so elected, and shall pay such amounts over to the Secretary of the Treasury…” That’s right. Uncle Sam is so broke that he wants to give all the good little Americans out there the opportunity to contribute an even greater portion of their paychecks to finance government largess. Desperate? Hmmm…. Don’t worry, it gets better. 

Mike Krieger Explains Why QE 3 Will Merely Keep The Lights On 

The Bernank has already gone too far and there is no turning back. There will be QE to infinity until the point where the system collapses on itself, which is probably not too far off once the next round of official QE is started. What form this may take is anyone’s guess but as I mentioned in a recent email, the whole rate cap idea makes the most sense since it will allow infinite QE to occur without having to announce subsequent iterations. The simple fact that they tried to pretend QE would end and then tried to raid commodities to create the justification for it later on demonstrates to me how much trouble we really are in. If The Bernank had merely gone ahead and continued the program he had a CHANCE of perpetuating Disneyland for a little longer at least. Instead, he is praying that the economy can stand on its own, which of course it can’t and so then when he launches into QE3 after the economy weakens and proves QE1 and QE2 did nothing to create a self-sustaining recovery the entire mindset and understanding going into the next money printing party will be entirely different from a psychological standpoint. QE3 will not lead to confidence or anything even similar to the last rounds. Rather it will be used to basically “keep the lights on.” More than anything it will serve as that proverbial “bell” that will ring and in the minds of the savviest and wealthiest people on the planet to get the hell out of the system while they can. This is inevitable. It is already happening. The stampede is yet to come. But come it will. It is time for everyone to take additional steps whatever that may mean for you personally. I know I am. Don’t get gorged. 

The Birth/Death Adjustment Was Responsible For Over 50% Of The Payroll Gains In The Past Year 

Despite the endless din from the clueless economist brigade attempting to couch the impact of the Birth Death adjustment on actual non farm payroll numbers, there is a workaround which confirms that of the 1 million "job gains" in the past year, well over 50% of these have come from the statistical fudge factor known as the Birth Death Adjustment. We wonder when anyone in the administration will mention that of the 1 million jobs "created" in the past year, 606,000 have been purely the product of overzealous excel models. 

As Traders Leave The Building, RISK-ES Spread Comes Galloping Back 

Submitted by Tyler Durden on 07/08/2011 15:56 -0400

Now that every carbon-based trading life form has long since left the building, and only the robots and Brian Sack's NYU interns are left loading up bags, the good old ES-RISK divergence has once again opened up to the same 10 point spread which prompted us to advise for a compression trade yesterday. Sure enough, like clockwork, the vacuum tubes come crawling with limited dry powder, and can only bid up ES while leaving everything else in the dust.A compression bet here will likely close the same way it always closes once some rationality returns and the PPT steps back.

Guest Post: The Shape Of Things To Come 

Submitted by Tyler Durden on 07/08/2011 12:27 -0400

Yesterday I laid out why the U.S. will inevitably experience The Great Reset. What comes after that systemic devolution/crisis is unknown, but we can speculate on the shape of things to come. Though we cannot know the outcome, we can certainbly discern the outlines of the crisis itself. These destabilizing conditions will force a crisis at some point and will be resolved one way or another. The resolution of these brewing instabilities could be orderly or disorderly. In an orderly scenario, a new Constitutional Convention is convened, and a leadership backed by an enlightened public hammers out a consensus to limit the political and financial dominance of Financial Power Elites and corporate cartels. The new consensus reorients the Central State to its original purpose of limiting predation of the citizenry by Elites and criminals, defending the nation and imposing the rule of law as defined by the Constitution. The Savior State would be dismantled in an orderly process. In a disorderly resolution, the Status Quo and the public both refuse to deal with reality and instead cling to the Titanic, demanding magical solutions that will keep the doomed ship from sinking. There is no such magic, of course, and so the ship will go down, and disorder will reign. It might take the shape of a financial crisis such as a devaluation or hyperinflation, or it might take a political crisis such as a "Quiet Coup" by Elites or an outbreak of resistance to the heavy-handed Central State. 

US Needs To Generate 254,000 Jobs A Month For 65 Months To Get To Pre-Depression Employment By End Of Obama Second Term 

Submitted by Tyler Durden on 07/08/2011 11:23 -0400

Every time we update the projection chart of how many jobs have to be created by the end of Obama's now improbable second term, the number goes up.  First it was 245,500 in April, then 250,000 in June, now it is 254,000: it seems to increase by 5,000 each month. As a reminder this chart looks for the breakeven number that has be attained to restore (not surpass) the jobs that the US economy had back in December 2007 as the Depression started, when accounting for the natural increase of 90,000 people/month in the labor force. Needless to say, there is no way in hell the US economy can create a quarter million jobs per month from now for the next 65 months, as long as the president continues to pander to Wall Street's "wealth creation" via asset returns instead of directing capital into actual economically viable projects that focus on wealth creation through labor.

 

Meanwhile In Europe... 

Submitted by Tyler Durden on 07/08/2011 10:37 -0400

The Only Chart You Need To See From Today's Wholesale Inventories: GM Channel Stuffing Goes Auto Industry-Wide 

Submitted by Tyler Durden on 07/08/2011 10:24 -0400

Today we got another confirmation that the only "growth" in the economy comes courtesy of inventory stocking for that eventual day when the economy picks up and inventory can be sold at an actual profit, after wholesale inventories printed at 1.8% on expectations of 0.6%, up from 1.1% previously. We get it: economic growth now comes at the assumption that there will be economic growth in the future, thank you I in the GDP calculation. But the only chart that matters, and in keeping with our observations of pervasive channel stuffing at GM, is the following: the inventory to sales ratio for the car industry, which just surged to 1.62, or a level not seen since the summer of 2009. This is a 16.55% rise in the ratio or the biggest ever relative jump in the auto inventory/sales ratio in history. Translated: nobody is buying already built cars. But yes, keep blaming the collapse in auto "production" on Japan.

Jim’s Mailbox

July 8, 2011, at 11:49 am
by Jim Sinclair in the category Jim's Mailbox |  Print This Post |  Email This Post

 

High quality gold deposits becoming more precious 

CIGA Eric

Investors riddled with doubts will be relieved of their high quality gold shares by those that understand gold and the dynamics behind it.
Headline: High quality gold deposits becoming more precious
Global gold production may have hit a record last year, but that doesn’t mean the stuff is getting easier to find. Clarus Securities analyst Laurie Curtis wrote that the growing difficulties in finding gold suggest that high-grade deposits will command a stronger premium over time.
Citing data from the Society of Economic Geologists, Ms. Curtis noted that the number of deposits and total ounces found peaked in the 1980s “and have been steadily declining ever since.”
Additionally, the cost of discovery has increased from US$10 per ounce in the 1980s to more than US$47 an ounce in 2009, and there has been a decline in the average gold mining grade from 10 grams per tonne (in 1965-1975) to less than one gram in 2008, according to the data.
Source: http://business.financialpost.com/2011/07/07/high-quality-gold-discoveries-becoming-more-precious/
 
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