I discussed these irregularities with a very informed source [the same one who informed me of specific [allocated] trades settled last week] and the reply I received was as follows:
“What can I tell you that you don't already know?
They are all scrambling big time since a number of large interests have demanded audits. Independent auditors are NOW descending onto the various vaults to verify, validate and certify.
They can move this as many times in circles as they like to try to fool people.
In an Asian depository they’ve found “Good Delivery” bricks that had been gutted and filled with tungsten.
Soon, there will be xxxx hitting the fan all over place.”
Speaking of fraud and the grim reaper…doctored gold bars
Dear Bill,
That was quite the bombshell from Rob Kirby yesterday about the "good delivery" bars filled with tungsten. When I was a bullion dealer, I was always on the lookout for counterfeits and tampered bars. In the last PM bull market, some 100 oz silver bars were drilled and filled with lead. However, this can be easily detected by weighing with a decent scale, as lead has a different density than silver.
However, the tungsten filled gold bars indicate a very sophisticated fraud. Not only is tungsten cheap, it has the SAME density as gold - 19.3 g/cc. Assuming the ends are sealed smoothly, you can touch and weigh the bars all you want, you can't be sure they are pure gold without cutting into them. Panic is likely to break out among professionals as the news of this fraud spreads. If you can't trust the "good delivery" bars what can you trust? These are supposed to have a guaranteed purity and then never leave the custody of trusted individuals so that investors don't have to assay them. Who knows what will be found as more large investors demand full audits?
It's amazing how lately so many gold stories back up GATA research. GATA has pointed out repeatedly that swapping, leasing, and paper games were necessary to keep the gold price down as the central banks didn't have the metal they claimed. Here is yet another instance of investors believing they hold X amount of bullion but in reality owning a mere fraction. It's a Ponzi scheme just like the Madoff scandal, and will end just as badly.
All the best,
Jennifer Barry
www.globalassetstrategist.com
Dave from Denver...
Some thoughts on Rob Kirby's GLD article Someone on my blog asked me if I had any more info/insight on the Rob Kirby/GLD scandal. This was my response:
I don't know any specifics on that situation other than what Rob Kirby has reported. I have exchanged emails with Rob about the delivery situation he reported last week. I know enough about how deliveries work and have experienced delays in silver from the Comex via HSBC to know that what he reported about the delivery situation with gold on the LME is most likely 100% authentic.
We also know that China has publicly announced that they are recalling ALL gold being safekept in London and other cities and moving it to Hong Kong. If there is a game of musical chairs being played with 400 oz. bullion bars, that may be related to the China situation. There is absolutely no doubt in my mind that a massive trend of legal owners of physical bullion are seeking to take actual physical possession of the gold they own, or at least move it to a depository they can monitor. Given the size of the "paper short" position vs. physical supply, I suspect we are on the cusp of seeing the massive shortage of physical vs. paper outstanding exposed, masssive defaults on paper obligations, and a MASSIVE move higher in the price of gold.
I also suspect that China's announcement that they may default on oil derivatives a few weeks ago may be related to the risk they feel they are exposed to of the UK and US banks defaulting on gold/silver contracts.
***
*The large specs increased their longs by 18,335 contracts and increased their shorts by 4,048.
*The commercials increased their longs by 4,493 contracts, but increased their shorts by 18,555, as The Gold Cartel continues to pile on their positions.
*The small specs decreased their longs by 6,174 contracts and reduced their shorts by 5,949.
The dollar rose .18 to 75.61. The euro fell .0059 to 1.4895. The pound was a little higher, the yen a little lower.
The yield on the 10 yr T note is 3.41%.
The CRB made another new high for the move, rising
Crude oil turned higher after a selloff early, finishing up 95 cents per barrel to $78.53, another high for the recovery move.
Friday, October 16, 2009
Goldman Sachs Tightens Its Grip On Our System
SEC Said to Hire Goldman’s Storch to Be Chief Operating Officer here's the link from Bloomberg News:LINK
Call me cynical, but does anyone really believe that this 29 yr. old would ever go after his own firm? We see how much money Goldman will be paying its employees this year. What does this kid get in exchange for taking a Government job? How about the possibility that this kid shuts down operations at firms that compete with Goldman, for Goldman's benefit? Please tell me this is some kind of joke.
I'm sorry, but I have to believe that with all the public criticism that the Obama Administration has received for basically being seen as a lapdog for Goldman Sachs, I have to believe that the SEC's Mary Shapiro could have found another source for hiring a COO.
Seems like everyday I wake up to find more news that blows my mind and further convinces me that a few firms on Wall Street are running our Government. Something is VERY wrong in our system and I am convinced now more than ever that we really have no idea who this person is that was elected on a platform of "Hope and Change," because I have yet to see anything that Obama has done for the benefit of anyone except Goldman Sachs and JP Morgan (for the record, I originally supported Obama but did not cast a vote for him).
09:01 Aug total net TIC flows $10.2B
Jul revised to ($107.7B) from ($97.5B). Net long-term TIC flows $28.6B vs. consensus $30.0B.
* * * * *
US August net capital inflows rebound to $10.2 bln
NEW YORK, Oct 16 (Reuters) - Net overall capital inflows into the United States rebounded to $10.2 billion in August from a revised outflow of $107.7 billion the previous month, the Treasury Department said on Friday.
The department originally reported outflows of $97.5 billion for July.
Net long-term capital inflows, excluding swaps, rose to $28.6 billion from a $15.3 billion inflow in the previous month.
The inflows, however, were not enough to cover the U.S. trade deficit of $30.7 billion for the same month.
-END-
U.S. industrial output up 0.7 pct in September
WASHINGTON, Oct 16 (Reuters) - U.S. industrial production rose in September for a third consecutive month, Federal Reserve data showed on Friday, suggesting the economy closed out the third quarter with surprisingly strong growth.
The 0.7 percent increase was much greater than the 0.2 percent advance that economists polled by Reuters had expected. The report also showed August's gain was revised up to 1.2 percent from the originally reported 0.8 percent.
For the third quarter as a whole, output advanced at a 5.2 percent annual rate, the first quarterly gain since the first quarter of 2008 and the largest increase since the first quarter of 2005.
The figures will likely reinforce the view that the longest recession since the Great Depression ended in the third quarter. Economists in a Reuters poll released on Thursday pegged the third-quarter growth rate at 3.1 percent.
Capacity utilization, a measure of slack in the economy, rose to 70.5 percent in September from 69.9 percent a month earlier, although it was still 10.4 percentage points below its 1972-2008 average.
-END-
09:55 Oct Univ of Michigan preliminary figure 69.4 vs consensus 73.3
The final Sep reading was 73.5.
* * * * *
US Oct consumer sentiment falls unexpectedly-survey
NEW YORK, Oct 16 (Reuters) - U.S. consumer sentiment fell unexpectedly this month on persistent worries that the "dismal" state of personal finances would not recover quickly from the worst recession in decades, a report showed on Friday.
The Reuters/University of Michigan Surveys of Consumers said its preliminary index of sentiment for October fell to 69.4, from September's 73.5.
That was below economists' median expectation of a steady reading of 73.5, according to a Reuters poll.
"While consumers still anticipated gains in the general economy and now think that the unemployment rate is close to its cyclical peak, there has been no improvement in consumers' dismal assessments of their personal financial situation," the report said.
"Indeed, personal finances have undergone the longest and deepest decline in the 60-year history of the surveys, and few consumers expect their finances to improve anytime soon."
The report said diverging prospects for the general economy and personal finances would have a negative impact on the pace of the recovery, with consumers eager to increase their savings and pay down debts.
-END-
Volcker: Fed can't wait too long for policy shift
* No inflation threat now but if "wait, it's too late"
* China unlikely to dump U.S. assets
* Says China partly influenced by lack of alternatives
CAMBRIDGE, Mass., Oct 15 (Reuters) - The enormous amounts of liquidity pumped into the U.S. financial system by the Federal Reserve are not inflationary "at the moment" but will become so at some point, Paul Volcker, the former Fed chairman and a White House adviser, said on Thursday.
Volcker, now an economic adviser to President Barack Obama, said it was difficult, but necessary, to start draining the billions of dollars in liquidity even while unemployment rates remained high as the U.S. battles out of recession.
"You have to act against what seems like common sense. If you wait, it's too late," Volcker said while answering questions after a speech on financial markets at Harvard University's Kennedy School of Government.
Volcker is best known for bringing down raging inflation in the United States after he was appointed Fed chairman in 1979 -- chiefly by pushing the federal funds rate, the central bank's key policy tool, to a peak of 20 percent in 1981…
Answering a question from the audience, Volcker said he doubted China would embark on a major reduction of its U.S. dollar-denominated assets, partly because the alternatives to the dollar, including the euro and the Japanese yen, do not look that great either.
China has "a great interest in the stability of the
dollar," he said…
-END-
Garic...
Bill,
In the month of August the Treasury just reported Foreign Official holders of Treasury Notes and Bills rose $13.9B. http://www.ustreas.gov/press/releases/tg321.htm
During the month of August the Federal Reserve reported that Custodial Holdings of Treasuries for Foreign Central Banks and other Official Institutions rose $45B.
http://www.federalreserve.gov/releases/h41/
Over the past 12 months the discrepancy is now $200B. Between the fact that the Federal Reserve refuses to disclose information to the public and is fighting a Congressional audit, I think it is only prudent to believe the Fed is monetizing debt at a much higher rate than is commonly perceived.
In this morning’s Financial Times, Julian Robertson is asked:
“What is your economic outlook right now?” His answer: “ I prefer to run scared through here. I think that if the Chinese stop buying our debt, it is virtually the end of the financial world as we know it.” “How likely is a Chinese boycott of American debt?” “ The conventional thinking is that they will continue buying. But I don't think it's logical to assume somebody will continue to buy paper which declines in value. Our dollar is declining in value, and it's been pretty shocking over the last four or five months.”
http://www.ft.com/cms/s/0/4dc15c60-b9ea-11de-a747-00144feab49a.html
From this morning’s TICS data:
Major holders of U.S. Treasuries position over the last 4 months:
| AUG | JUL | JUN | MAY | |
| China, Mainland | 797.1 | 800.5 | 776.4 | 801.5 |
| **Japan | 731.0 | 724.5 | 711.8 | 677.2 |
| United Kingdom 2 | 225.8 | 219.9 | 214.0 | 163.7 |
| Oil Exporters 3 | 189.2 | 189.2 | 191.2 | 192.8 |
http://www.ustreas.gov/tic/mfh.txt
**This is before the Japanese election which a logical person would be concerned about further support from.
I now believe the entire U.S. Bond market is a bubble. We have record public buying this year through mutual fund purchases. The Fed is promoting these purchases with their zero interest rate policy pushing unaware investors into an incredibly low reward high risk investment. The media is misleading the public about foreign participation. Wall Street is unloading their junk at a record pace. Total Credit Market Debt to GDP is approaching 400%. Between Julian’s warnings and my own analysis, I think it is time to watch all bond markets for the next bubble pop. For the sake of this nation it is time for Larry, Ben and Tim to resign and admit their errors so we can fix this country’s financial condition for our children’s sake.
***
Please note above, what the famed writer of the Financial Times Julian Robertson wrote on his outlook for the economy.
Here is Bill Holter's commentary for today where he warns us that the USA may attempt another deflationary scare into the markets:
Deflation scare coming
To all; I must say that the rise in the stock market has gone higher and the time span of the bounce has lasted longer than I thought it could. That said, the risks involved in owning general equities at this point are higher than they were at this time last year. Last year we had plans A-Z introduced to "fix" the system. Other than inventory rebuilding which is a short term phenomenon, I don't see any improvement at all on a structural basis. In fact, the big difference now is that the Treasury is tapped out.
Last year we were told that the Fed and Treasury would ride to the rescue and life would shortly return to "normal". Fast forward one year and foreclosures are at all time record levelshttp://money.cnn.com/2009/10/15/real_estate/for
eclosure_crisis_deepens/?postversion=2009101507, commercial real estate has begun to collapse, unemployment has set multi decade records, the banks are no more solvent than they were last year despite the bookeeping tricks they are using, and most importantly the Fed and Treasury have gotten to what I believe are tipping points.
The Fed is already monetizing massive amounts of Treasury and Agency debt yet the Treasury still has need for more, much more borrowed capital to keep the "recovery facade" alivehttp://www.bearishnews.com/post/2420. Hyperinflation is a loss of faith or confidence in a fiat currency that occurs once investors figure out that the issuer cannot mathematically grow fast enough to make good on their promises. The U.S. is at this point now mathematically, it is only a matter of time before global investors connect these dots.
What I think we have immediately in front of us is the failure of the Treasury to attract enough capital to function. The only and last buyer of Treasuries is the Fed, I can only think of one pool of capital left that can "get us" another 3-6 month reprieve. The stock market! The Treasury will need to "dislodge" equity investors from their positions with some sort of panic in order to "scare" capital back into the "safety" of Treasury paper. Whether or not this works remains to be seen but I see this as the only alternative at this point.
This "necessary panic" as I see it will be VERY easy to achieve, what won't be easy is holding enough confidence together to keep the Dollar as a viable currency. There is again like last year a massive short position in the Dollar which may or may not be able to be spooked into covering. When all is said and done it does not matter. Whether the Treasury and Fed have "one last gasp" and can survive another 6 months does not matter because the end result will be a busted currency and a bankrupt Treasury. If the "con" of sell your stock and buy Treasuries can be pulled off, physical metal in massive amounts will be needed to be dumped on the market to keep the pesky loose ends from unraveling. Treasury CANNOT allow Gold off of the leash while "creating" a deflation scare.
Does this physical metal exist? I don't know. I do know that "monkey business" has been taking place on the COMEX judging by their lack of inventory movement despite contracts standing for delivery. I believe we will shortly find out that "inventories" from the COMEX to ETF's to Fort Knox etc., do not and have not existed for some time. If I'm right, THIS panic will not satisfy the Treasuries need to attract "scared capital". The "push to safety" may just backfire! Scary times these are if viewed with common sense. Regards, Bill H.
end.
Harvard Professor, Niall Ferugson gave this TV commentary yesterday on the dollar's demise:
Dollar May Drop 20% More on Deficit, Harvard’s Ferguson Says
Oct. 16 (Bloomberg) -- The dollar will extend its drop versus the euro over the next two to five years, falling as much as 20 percent to an all-time low under a widening U.S. budget deficit, Harvard University’s Professor Niall Ferguson said.
Policy makers favor the dollar’s slide as a means of supporting a recovery from the worst economic slump since the Great Depression even as they voice support for a strong greenback, Ferguson said in an interview on Bloomberg Radio.
A weak dollar is “the simplest solution to most of America’s problems right now,” said Ferguson, author of “The Ascent of Money: A Financial History of the World.” “We are likely to see 1 percent to 2 percent growth unless exports take off, and that’s what everyone in Washington is quietly hoping: If the dollar keeps sliding, then maybe we can get some traction on exports.”...
‘Terrible News’
The weakening of the dollar is “terrible news for practically all of the rest of the world’s economies,” except the U.S. and China, said Ferguson. China, which manages the yuan’s appreciation, will “intervene to make sure the dollar does not weaken” relative to its currency, Ferguson added.
Treasury Secretary Timothy Geithner said on Oct. 3 after attending a meeting of Group of Seven finance officials that it’s “very important” for the U.S. to have a strong dollar.
The administration of President Barack Obama pushed the nation’s marketable debt to an unprecedented $6.78 trillion in an effort to spur economic growth and support the financial system. The U.S. government ended its 2009 fiscal year with a deficit of $1.4 trillion, the biggest since 1945, the Congressional Budget Office reported.
end.
Earnings reports from GE and Bank of America were not good at all:
-General Electric - 3rd Quarter earnings down 44 percent; the Financial Unit’s profit dropped 87 percent in the 3rd quarter
-Bank of America – $9.6 Billion in credit losses for 3rd quarter; Net Loss $1 Billion
-Halliburton – 61 percent drop in Quarterly Profit
Did someone say "Green Shoots"?
end.
How on earth did CNBC let this guy on TV?
Recession Will Be ‘Full-Blown Depression’: Strategist
Published: Friday, 16 Oct 2009 | 8:03 AM ET
This global recession will turn into a "full-blown depression," Nicu Harajchi, CEO of N1 Asset Management, said Friday, adding that global stimulus hasn’t come down to Main Street.
Wall Street is making money, while consumers aren’t, Harajchi told CNBC.
"We have seen the G20 coming out with cross border capital injections of $5 trillion this year… But a lot of this money hasn’t really come down to Main Street," he said.
"When it comes down to corporate America, corporate Europe or even in Asia, in Japan, we are not seeing Main Street making any money," he said. "Consumers are losing their jobs. They are struggling with their mortgages, with their credit. And we are just seeing this continuing."
The $5 trillion injection is "monetary expansion," according to Harajchi. "At some point, which we believe to be 2010/11, some of the central banks are going to recall some of that money and that will turn from monetary expansion to monetary contraction."
In another strange development, there were no bank failures reported yesterday. I guess the FDIC has no money to bail out depositors so the failed banks just keep on ticking
like that bunny with the battery.
I hope you all have a grand weekend,
see you on Monday.
Harvey.
