I came across some more information, and thought I’d share it with you all.
Originally posted on Money Matters Too:
However, I have also been critical of Governments who use legitimized counterfeiting (QE) to stem the natural economic downturns that occur in all mature markets as producers fight for market share, and prices are forced down as a result when the growth in incomes is stagnant, or falling, or savings rise in preparation for retirement, because this fixes one part of the economy at the expense of others, and that is never a good thing, as it merely transfers wealth to the few from the many.
The markets boom or bust as people switch their buying habits, change their tastes, or prepare for their retirements, and either begin borrowing, or saving at different times in their lives. And the demographics of the population (the average age, sex and range) determines what is likely…
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Originally posted on Money Matters Too:
Particularly as the Ukraine, gets its gas from Russia, and currently owes the Russian Gas Giant – Gazprom over $2.2 BILLION in unpaid bills.
However, all this turbulence in eastern Ukraine, with Russian defenders of their cultural identity, that have stormed Local and Regional government offices, will possibly force Putin’s hand to defend these ethnic Russians which could draw in western forces to defend its supported government in the west of Ukraine.
For Ukraine whose currency has depreciated in value by 27%, since the troubles began, this could spell disaster for the country and its people. The gas bought from Russia was purchased at the highly advantageous gas prices that Gazprom gave to…
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I am reminded of the above childhood refrain from days spent playing “Hide and Seek”, with regard to the economic malaise that I and many others foresee coming to a country near you in the not too distant future – whether YOU are ready or not.
Harry Dent, of Dent research, thinks we are in for a period of deflation, and even prophesizes that the markets and Gold price will tank with Gold possibly heading down to $750.00/oz, with a major stock-market correction in 2014. And Goldman-Sachs has re-iterated its forecast that Gold will drop to $1050.
Seven years ago, Mike Maloney of GoldSilver.com, had a more nuanced grasp on monetary matters, even if Harry Dent perhaps understands economics and Demographics better. Mike Maloney suggested we would have minor inflation first, followed by a period of deflation, which will initiate a Central Bank helicopter drop of currency, and THAT would bring about the final epic period of inflation which will bring about the new financial order and even perhaps the New World Order, that so many seem to have been prophesizing.
Former Fed Governor, Ben Bernanke was famously called Helicopter Ben, for suggesting that in extremis, a committed government or Central Bank could create inflation by dropping currency from a helicopter. It is a tag he has never quite lost. And Janet Yellin seems to be Bernanke’s biggest protégé.
For me, I choose to follow my instincts and try to wind my way through the differences of opinion. I am also a great believer in history repeating itself. Especially when the same or similar circumstances prevail.
Demographics drives personal spending patterns, as Dent has proved, but Central Banks and Governments have a habit of reacting to those events. Some, like the Americans and Europeans, lend that newly minted Central Bank money to the Senior Banking sector, in the vain hope that the banks will lend that money into the economy. (Or merely to prop up those banks?)
Governments spend money on infrastructure projects, which they are pretty certain will boost the economy. Witness the Tory Government of Margaret Thatcher giving the go ahead on the Channel Tunnel project during the 1980′s, and Britain’s New Labour Government giving the go ahead to the group that built the “Millennium Dome” (now the O2 Arena). And the current coalition’s attempts to make big infrastructure gestures with the HS2 – High Speed rail Link from London to the North West, and a new Airport for London, or an extra runway at London’s Heathrow are also in the mix.
But of course we know that when politician’s spend with one-hand, they take in taxes with the other. And that usually means you and me get to spend less on things we consider important to us.
Of course there can be an antidote to all this, and that is to improve one’s lot by saving and good investing, particularly in tax efficient investments.
The last time we had a similar set of circumstances was in 1975/76, as the inflation rate that had risen to almost 27% the previous year, fell to 8-9%, considered acceptable by many at the time.
Of course back then, this inflation prompted Tesco, to ditch the Green Shield Stamps of yesteryear, and to plan a new strategy with deep discounting, which was planned for 6th July 1977 in “Operation Checkout”.
Over the Week-end of the 4th and 5th all their stores were re-priced, and the stores became like a light to moths and other night-time flying insects. Turnover all but doubled in many stores. But of course it was the demographics that was driving the economy.
Given TESCO’s recent results, will they repeat this exercise to compete with the new kids on the block – Lidl, and ALDI?
During the late sixties, western countries had large numbers of retirees, born at the turn of the century in the late Victorian and early Edwardian eras, who fought in the 1914-18 war, and again in 39-45. These 60+ year olds were now retired and retiring in droves, spending their retirement proceeds, as they sold their pension accounts to buy bonds, driving down interest rates and stock prices with equal aplomb. These retirees who had fought – some in TWO World Wars, felt they deserved the relaxed retirement that they were promised. The world fit for heroes.
However, just as recently, in April 2012, the number of retirees in the U.S. reached 10,000 per day as those born in the aftermath of the second world war – the baby-boomers, began retiring in huge numbers, but the early retirers had already been selling their stock portfolios (or their pension companies were) as early as 2003, as the oldest ones retired at 55 or just after.
Those with a fixed lump sum to spend, put deposits down on the already rising property market, and helped in the “buy-to-let” boom of that period, and just as the profits made by the NASDAQ investors in the late 90s, also put their winnings into property, Banks were lending outrageous multiples to people in low income areas.
The Fed and government’s actions have been an attempt to mitigate these affects on the economy since. And foreign wars in foreign lands (as long as not too many of “OUR” boys get killed), is one way of keeping the economy ticking along. Economists call this the “guns and butter economy”, as an economy cannot direct resources to both with equal measure.
Anyway, as I was reading another blog, that talked about investments and the US Bond Markets, it mentioned the Fed’s requests to other nations – Belgium – to be precise – who apparently have been pressed into supporting the dollar by buying T-Bills, in the absence of the Fed, to keep interest rates from spiking, which would cause another recession, but as I read this, something crossed my mind.
What if Russia and China now decide to abandon the dollar for commodities sales to non-western aligned countries – say with Vietnam? Iran? Or how about Brazil? India? And what if others followed suit causing a run on the dollar?
This could cause an all out dollar crisis, necessitating a hike in interest rates, that would be painful to watch. But it might also stress the system and induce the hyperinflation that many fear – myself included.
Of course, if you read the book “The Coming Battle” you will know that the Fed made surreptitious loans to 20 major Banking groups in Europe of $15 TRILLION, in total – interest FREE, during the heat of the last financial crisis, and they may be now calling in that favour – requesting that these Banks buy Fed debt, to support the dollar, keeping the Gold price in check.
But, if Russia decides to avoid the dollar, then all bets are off
In my last post, I mentioned that Gazprom, would under different circumstances be possibly a good investment opportunity, and then I remembered the sage advice of Baron Rothschild in his oft quoted phrase: “Achetez aux canons, vendez aux clairons”.
For those who don’t speak french, it means figuratively – Buy on the sounds of the cannons, sell on the sounds of triumphalism (or trumpets). Put more simply, “Buy when the war starts, sell when it ends.”
Now I’m not suggesting you put 100% of your portfolio into Gazprom. But if you do your due diligence, and research the MICEX,(Moscow International Commodities Exchange) there will be opportunities, and/or some of the other Russian behemoths, that might benefit from “the return to the mean”, and there could be money to be made.
Anyone who has been investing for any length of time, knows, or will have heard, that on the average, stock prices rise in line with growth in the economy. When they temporarily exceed this price, they fall, and where they are below the average they will at some point return to the average (the mean).
Of course as many of my recent posts will no doubt have showed, the amount of currency being injected into the economy at any particular point in time, can affect certain asset prices. Of course when cash is tight (as in a recession) bank lending goes down, and thus asset prices reflect that lowering of available capital. And when banks have money to burn (so to speak) then lending goes up, and so do asset prices – particularly stocks and property.
Of course the banks take advantage of this, by lending when asset prices are cheap, and forcing foreclosure (where they have to) when interest rates become high. (which of course, they control)
Warren Buffet also known as “The Sage of Omaha” advises to buy when an asset is cheap, and to sell when the asset is dear, and has said – “Be greedy when others are fearful, and fearful when others are greedy”.
Of course the good sage also buys businesses that will never be sold, but ensures good management manage the business and give a good return on his investment. His last maor purchase that I am aware of was H. J. Heinz, of 57 varieties fame.
He also made major purchases in American Rail infrastructure, in light of the production of tar-sands, and shale oil and gas from the Bakken oil fields in Montana, and Wyoming, and north of the border in Canada which will have to be moved to refineries in the south. And given the size of the finds, this will guarantee regular shipments for years to come.
Another of Russia’s behemoths, and one slightly less well known than its bigger brother but also worth a look is Rosneft.
However, a precipitous fall in the dollar will force many stocks into freefall on international valuations, and force those who hold dollars to flee the dollar also, but into what? Probably GOLD and SILVER.
Grant Williams, who is portfolio manager of the Vulpes Precious Metals Fund, also spoke about exactly what will cause this historic rise in the gold price, as well as what it will mean for the global financial system.
There are reports out this week that the BRIC nations are going to set up a version of the IMF and a BRICs Development Bank, which could trigger the collapse. The amount of trade now being done in Yuan directly between the Chinese and their trading partners, is all a move away from the dollar, which will over time weaken the dollar’s rule as world reserve currency, and with it the U.S. Empire.
Williams also thinks the Russians want to swap oil for gold because they want to bring back gold as a monetary asset. They just want gold, and rather than swap their oil for dollars or roubles, they would rather have gold for it, and they are absolutely right to do that.
From the view, from 30,000 feet as a Central Bank, they can make those decisions. And Williams guarantees the Russian central bankers, who are in charge of their gold policy, are not worrying about whether the price of gold is $1,300, $1,200, or $1,500. They don’t care about that. They just want to own the gold. And so they are going to keep doing these deals that enable them to acquire more physical metal.
At some point, when all the smoke is cleared in the paper markets, like it did during the London Gold Pool in the late 1960s, once that gets righted, then we will know what the right price is for gold.”
We know the London Gold Pool ended finally when France and then Britain asked for $3billion dollars worth of Gold in place of the depreciating dollars, just 4 days before Nixon closed the Gold window for good (even though, he said it was temporary).
Will that happen this time? I doubt it, the U.S. and European Banks are too intertwined.
But Russia’s and China’s Banks?
Now they could do some serious damage.
But an even bigger threat comes courtesy of a number of major actors in the formation of the internet – though they didn’t know it at the time…
As events in Ukraine spiral out of control, it is possible that in the absence of a thawing of relations between Russia and the U.S., over the Ukraine, a new cold war could be about to emerge.
Particularly as the Ukraine, gets its gas from Russia, and currently owes the Russian Gas Giant – Gazprom over $2.2 BILLION in unpaid bills.
However, all this turbulence in eastern Ukraine, with Russian defenders of their cultural identity, that have stormed Local and Regional government offices, will possibly force Putin’s hand to defend these ethnic Russians which could draw in western forces to defend its supported government in the west of Ukraine.
For Ukraine whose currency has depreciated in value by 27%, since the troubles began, this could spell disaster for the country and its people. The gas bought from Russia was purchased at the highly advantageous gas prices that Gazprom gave to former CIS/Soviet states.
As Gazprom increased its prices to above market rates to Ukraine, to reflect the risk of failure to pay, and to recoup lost income, it is obvious that naturally Ukraine would be upset. Wouldn’t anyone if their energy bill went up 300%? And this has implications for Ukrainian industry, already not as well developed or efficient as their western counterparts.
Aleksey Miller – CEO of Gazprom, Russia’s biggest energy supplier, which in different circumstances would be a huge investment opportunity, suggested that Russia should abandon the Dollar and use the Euro for the international sale of GAS.
Even Christine Lagarde, Managing Director of the IMF, weighed in on the subject of Ukraine, by admitting in an interview on 2nd April, that the problems in Ukraine could affect the global economy.
Of course the Soviet state, went through its own internal challenges in the late 80s, as the commodities prices fell. Russian tanks and soldiers were embroiled in Afghanistan, and the Soviets spent more than they earned, the end result was the end of the Soviet Empire.
Are there parallels today for the U.S. empire? I suspect so – only their printing press has saved them. But will Chinese Gold cause the U.S. empire to collapse? We shall see…
As American and other nation’s troops are stationed in the Far East to – as Hilary Clinton put it – pivot Washington to the Far East, which drew the statement from a senior Chinese military figure, that “Chinese containment” was not possible.
As the raw materials of life have become more important, both Russia and China have used different strategies to achieve similar results.
Russia and the Global Metals Supply Chain
Both Russia and China have large land-masses, and the potential for commodities production. Russia is an important commodities giant. and Russian output is critical to the global supply chain for many items.
Russia is a major producer and exporter of oil, natural gas, ores, refined metals and industrial minerals. According to a recent analysis by the British firm Roskill, the extractive, energy and chemical sectors are vital to the Russian economy and accounted for an estimated 80% of Russian export revenues in 2013.
It’s important to recognise though, that Russia’s commodities are important on several levels. Russia is more than a major producer and exporter of energy and materials; Russia is an important player within Western supply and product chains. So, targeting Russian companies has the potential to provide blow back on Western businesses and economies.
For example: Nickel is much more than a 5 cent piece in people’s pockets. Nickel is critical to manufacturing stainless steel and a lot more. Nickel prices have pulled back in recent years as supplies have had to adapt to lower global demand, but picked up in recent weeks as commodites prices turned around, and Indonesia, imposed restrictions on exporting raw ore.
One of Russia’s big players, Norilsk Nickel, extracts ore in Russia but refines its product in Finland. Overall, Russia is the world’s second-largest producer of nickel, after China. But since China consumes most of its nickel domestically, this leaves Russia as the world’s key “swing” supplier. In 2013, Russia accounted for 26% of global nickel cathode exports, or around 13% of total world consumption of nickel. Without Russian nickel, the world’s steel industry would be quickly disrupted and prices on international markets would rise, possibly steeply.
Cobalt: Although Cobalt is found in many African countries, Russia is an important supplier. Cobalt, is used in steel and alloys increasingly with military applications as it is used to harden steel based alloys for armour piercing shells, and military vehicles as armour re-inforcement.
Russia accounts for about 6% of global mine output of ore and 3% of global refined output. Most Russian cobalt production is related to Norilsk operations in Finland, where cobalt comes out of nickel production. At 6% and 3%, as noted, Russian cobalt numbers are relatively low overall, but the point is that if Western sanctions somehow choke off Norilsk operations in Finland, we’ll see the impact on global availability of refined cobalt which would only add to military hardware costs.
Vanadium: Russia is the world’s third-largest producer of vanadium – providing about 10% of the world’s supply. Vanadium is critical to hardening steel and other alloys and is a key element for the future of utility-scale storage batteries. If vanadium supply takes a hit, all manner of metal and energy projects could be disrupted. Though a small miner – American Vanadium – is about to commence mining operations in the U.S..
Tungsten: Russia is the world’s second-largest producer of tungsten (behind China) and accounted for about 6% of global supply in 2013. Don’t be fooled by that low raw number, though, because about 70% of global tungsten is a Chinese play. So that Russian 6% “global” statistic is really about 20% of what’s available to the world outside of China. Tungsten is critical to building machine tools as well as manufacturing drill bits. In essence, tungsten is used for requirements that call for hard, dense metals with high melting points. Europe is a major tungsten importer from Russia, and much European industry will have to scramble to make up for any loss due to sanctions.
Titanium: Russia is a large supplier of aerospace-grade titanium to both the U.S. and Europe, accounting for about 12% of imports. Two important buyers are Boeing and Airbus, whose operations could be slowed by lack of titanium supply, certainly in the short term. I’m guessing you can see a trend here?
Rare Earth metals may also be included in this list of essential resources that modern economies cannot do without and that are sourced, at least in part in the former Soviet Empire.
Will Russia Look More to the East?
I could go on with other energy and materials that come out of Russia, but you get the point. Western politicians may feel like they have to “do something” about Russia annexing Crimea. but they have to be careful to not bite the hand that feeds them.
For our purposes, on the investment front, one potential result of Western sanctions will be to give Russian leadership even more incentive to look east, toward Chinese markets. China is a major consumer of many raw materials and refined products and would likely be able to buy and use Russian materials that no longer move west.
Different commodities will move in different ways, of course; some more than others…
Is China’s growth story about to unravel?
David Stockman writer for the Daily Reckoning, says: China is in the greatest construction boom and credit bubble in recorded history. An entire nation of 1.4 billion has gone mad building, borrowing, speculating, scheming, cheating, lying and stealing.
The source of this demented outbreak is not a flaw in Chinese culture or character – nor even the kind of raw greed and gluttony that afflicts all peoples in the late stages of a financial bubble.
Instead, the cause is a kind of monetary madness with an oriental face. Chairman Mao was not entirely mistaken when he proclaimed that political power flows from the end of a gun barrel – he did subjugate a nation of one billion people based on that principle. But it was Deng Xiao Ping’s discovery that saved Mao’s tyrannical communist party regime from the calamity of his foolish post-revolution economic experiments.
Just in the nick of time, as China reeled from the Great Leap Forward, the famine death of 40-60 million people – depending on whose figures you use, and the mass psychosis of the Cultural Revolution, Mr. Deng learned that power could be maintained and extended from the end of a printing press – just as Western Bankers did 200+ years ago. And that’s the heart of the so-called Chinese economic miracle. Its not about capitalism with a red accent, as the Wall Street and London gamblers have been braying for nearly two decades; its a monumental case of monetary and credit inflation that has no parallel.
Will Hutton who wrote “The Writing on the Wall.” (an ironic play on the Great Wall of China) suggested back in 2007, that the mixture of capitalism and political direction, would eventually lead to a collapse in China’s economy, when investments, and prices were centrally controlled, because the market mechanism of the free flow of information in markets – the price signal – and “Contract Law” is a requirement for all modern capitalist economies to function properly.
Perhaps our own politicians and Bankers would do well to remember that too, as they force Bullion Banks into manipulating currency prices by manipulation of interest rates, and precious metals prices, but I digress.
At the turn of the millennium, credit market debt outstanding in the US was about $27 trillion, and they’ve hardly been slouches in attempting to borrow their way to prosperity. Total credit market debt is now $59 trillion; so America has been burying itself in debt at nearly a 7% annual rate.
But America has been out-banked – to coin a phrase. In 2000, China had about $1 trillion of credit market debt outstanding, but after a blistering pace of “borrow and build” for 14 years it now carries nearly $25 trillion. BUT, this stupendous 25X growth of debt occurred in the context of an economic system designed and run by elderly party apparatchiks who learned their economics, when Chairman Mao was still alive. That said, the country sent highly educated senior communist figures around the world to study other cultures, and political and economic systems, so it is possible they have learned something since then.
However, it is probable, that there is no legitimate banking system in China – just giant state banking bureaucracies which are run by party operatives and a modus operandi of parcelling out quotas for national credit growth from the top, and then water-falling them down a vast chain of command to the counties, townships and villages.
There have never been any legitimate financial prices in China – all interest rates and Foreign Exchange rates have been pegged and regulated to the decimal point; nor has there ever been any honest accounting either – loans have been perpetual options to extend and pretend. Even the Yuan was pegged to the dollar at 8 to the dollar, until an agreement to enter the World Trade Agreement meant they had to freely float their currency by 2015, and China has allowed the Yuan to strengthen to circa RMB6.5:$1 – and is also behind their drive to collect as much gold as they can.
However, in two short decades, China has erected a monumental Ponzi economy that is economically rotten to the core. And, needless to say, there is no system of financial discipline based on contract law. China’s GDP has grown by $10 trillion dollars during this century alone — that is, there has been a boom across the land that makes the California gold rush appear pastoral by comparison. Yet in all that frenzied prospecting there have been almost no mistakes, busted camps, empty pans or even personal bankruptcies. When something has occasionally gone wrong with an “investment” the prospectors have gathered in noisy crowds on the streets and pounded their pans for relief – a courtesy that the regime has invariably granted.
Since 2000 China has 1.5 billion tons of steel capacity, but “sell-through” demand of less than half that amount and, on-going demand for sheet steel to go into cars and appliances and rebar into replacement construction meaning the other half is produced merely to go into surplus storage – once the current pyramid building binge finally expires.
The same is true for its cement industry, ship-building, solar and aluminum industries – to say nothing of 70 million empty luxury apartments and vast stretches of over-built highways, fast rail, airports, shopping malls and new cities.
Will this ultimately lead to a price and economic collapse? Probably, but WHEN?
In short, the flip-side of the China’s giant credit bubble is the most massive malinvestment of real economic resources – labor, raw materials and capital goods – ever known.
Effectively, the country-side pig sties have been piled high with copper inventories and the urban neighborhoods with glass, cement and steel erections that can’t possibly earn an economic return, but all of which has become “collateral” for even more “loans” under the Chinese Pyramid scheme.
China has been on a wild tear heading straight for the economic edge of the planet – that is, monetary “Terrain Unknown” – based on the circular principle of borrowing, building and borrowing. In essence, it is a giant re-hypothecation scheme where every man’s “debt” become the next man’s “asset”.
Thus, local government’s have meager incomes, but vastly bloated debts based on stupendously over-valued inventories of land. Coal mine entrepreneurs face collapsing prices and revenues, but soaring double digit interest rates on shadow banking loans collateralized by over-valued coal reserves. Shipyards have empty order books, but vast debts collateralized by soon to be idle construction bays. Speculators have collateralized massive stockpiles of copper and iron ore at prices that are already becoming ancient history.
Is this factored into China’s Plans for Empire, so that if – IF – a third world war begins, most of the materials will already have been purchased and produced, and once their currency is re-flated due to their large Gold holdings, they can buy what they need with the world’s strongest currency?
So China is on the cusp of the greatest margin call in history? Or the precipice of the biggest long term plan for global domination the world has ever seen?
Only the Chinese political class know the answer to that one.
But a Chinese market collapse would seriously affect all the world’s economies, and the Chinese have the biggest savings on the planet.
Cracks began showing in this edifice when a bank run began at Jiangsu Sheyang Rural Commerce Bank last month, as worried citizens clamoured for their money when a withdrawal for RMB200,000 (about $32,000) was refused at the Sheyang branch.
This was on the heels of the failure of several shadow banking institutions whereby several rural co-operatives and Farmer’s Credit Unions failed in recent months.
However, once asset values starting falling, these pyramids of debt will stand exposed to withering performance failures and melt-downs. Undoubtedly the regime will struggle to keep its printing press prosperity alive for another month or quarter, but the fractures are now gathering everywhere because the credit rampage has been too extreme and hideous. Maybe Zhejiang Xingrun Real Estate which went belly up last week was the final catalyst, but if not, there are thousands more to come. Like Mao’s gun barrel, the printing press has a “sell by” date, too.
Worryingly, a Chinese man was arrested for spreading rumours/information about these financial problems.
Of the more than US$562 million (RMB3.5 billion) that it owed to debtors, US$112 million was borrowed from 98 private parties with annual interest rates of up to 36%, according to recent revelations from Chinese media. Under that kind of pressure, the only surprise is that the default didn’t happen sooner. The company struggled to find capital for years; the chairman is suspected of borrowing up to US$38.6 million with “fake mortgages.”
But before Xingrun gets branded as China’s worst small, private homebuilder, it’s important to understand how it ended up in the mess in the first place, and what specific factors brought the operation down, or at least to the brink of collapse (local government officials insist it hasn’t officially defaulted yet).
Xingrun’s business in Fenghua, a county-level city that is part of Ningbo in a manufacturing belt on China’s east coast, ran into trouble through a renovation project starting in 2007, Chinese media pointed out. The company attempted, after securing government support and taking over for another distressed local property company, to build high-rise apartment blocks in a village called Changting. The project required the company to build homes for the original residents before the existing village could be torn down and the new buildings built. Construction was slated to start in the first half of 2012. Xingrun projected that it could pay off its debts within three years.
The project never got to the construction phase. In fact, the small village homes are still standing. Xingrun built the replacement homes for the villagers but there’s no sign of its main housing product, high-rises. Nothing has happened because the residents of the village have tangled the project and the company in a lawsuit that has stretched for years.
High risk is something no one seems willing to stomach these days – in stark contrast to just a year ago. That explains why Xingrun was unable to pay back its loans. But why has it come so close to keeling over now? Its troubles with the Changting project persisted for years but the company simply rolled over loans and borrowed at high rates from private lenders.
One problem for capital-strapped developers in the Ningbo area is that private lenders no longer want to lend to highly risky companies. In fact, they are calling in their loans. This is just one of the problems afflicting Xingrun. The value of property in some areas of Fenghua is decreasing and that trend has lowered confidence in developers’ ability to pay dizzyingly high interest rates.
Banks aren’t hot on lending to this kind of developer either. In the past, a developer such as Xingrun could ask the local branch of a commercial bank for more credit. The local branch would take that risk because loan officers there knew that, somewhere much higher up the chain, officials promoted the lending.
That support exists no longer. Now, when small developers beg local banks for credit, they will likely be turned away. Local bank managers are reportedly being told that they may lend to risky borrowers if they wish, but they will be held accountable.
High risk is something no one seems willing to stomach these days – in stark contrast to just a year ago.
Fenghua is a small town, and Xingrun’s reach beyond that area is limited. Analysts have come out strong in saying that such a default has little systemic risk. The bigger picture in the region, however, can’t be ignored.
Xingrun’s woes are still the woes of the local authorities. The default will add US$305 million (RMB1.9 billion) to Fenghua province’s non-performing loan portfolio, pushing up the rate of toxic assets to 5.27% and making it Zhejiang province’s most indebted government, according to calculations by The Economic Observer newspaper.
Add Fenghua’s problems to those of the The greater Ningbo Liberty Silver region. The area reportedly has at least six years of housing stock either sitting empty or under construction. The massive buildout will put small developers under great pressure to pay back loans, especially if private debtors are calling in high-interest loans. A slowdown in property prices won’t help either. Without a rescue from provincial-level banks, Fenghua won’t be the last local government stuck in a jam.
So what is The Coming Battle?
It will be between depositors (the people) and the Bankers when the next economic collapse occurs – far sooner than most people think. Crypto-Currencies, do not rely on Banks to transfer value between individuals, or between people and businesses, and will increasingly mean the Banks wield less power over the economy, and the state, but this means that many governments will want to outlaw them. However, if you feel you want to find out a little more on the subject at Review Outlaw.
And, you can get some free currency – HERE.
Of course if you have spare capital, putting some of it into precious metals with no counter party risk – that is – hold in your hands metal… would be considered sound advice, and if you want to know where you can buy these wonderful metals – try HERE.
Addendum: 12 April 2014
Since this piece was researched and written, the PBoC (People’s Bank of China) has agreed to provide RMB1,000,000,000,000 (1 Trillion – Renminbi/Yuan) about $153 Billion to provide increased infrastructure in rural communities, improving roads, agriculture and local amenities. So the end speculated on, won’t be happening soon; but someday the spending has to stop. (or not rise quite as much) to rein in inflation, which will probably now happen circa 2018-20.
The west too will probably make one last attempt to stave off the inevitable collapse, resulting in the final outburst of inflation. Bankers will be held to account by the people, and the result will not be pretty.
And the final analysis, will compare Precious Metals with the number of Dollars, Yen, Yuan, Pounds, and Euros in circulation.
Silver which is my favourite precious metal, is so oversold as to be the best buying opportunity for anyone with money to invest, and time to wait.
The above chart tells its own story. The MACD (Moving Average Convergence Divergence) shows when we can expect a turn in prices. When it’s high, the price turns down, and when it is low, the price turns up… You have been shown the future.
The below film, tells of The Coming Battle.
And here’s more evidence of what’s likely to follow.
“There are none so blind,
as those who will not see.”
What do YOU see?
That depends on who you ask.
If we look at the major market indicators:
House Prices at all time highs in London. (Being chased up by Chinese buyers apparently)
Stock & Commodities Markets
- Dow Jones Industrial Average – 16,572,
- FTSE 100 – 6,673,
- Gold down slightly over recent days to – 1292.72
- Silver ($/oz) – 19.97
- Brent Crude ($/bbl) – 106.57
- NYMEX Crude ($/bbl) – 101.02
- Copper ($/tonne) – 304.75
Looking at the above prices which were a snapshot on 4/4/14 – Friday lunch -time, you’d certainly think so.
Janet Yellen Fed Chair, has begun tapering – now we’re only getting $75billion QE this month, probably down another few billion next month, and lowering towards the Autumn, to zero. With employment numbers up on both sides of the Atlantic, in U.S., Euroland, and Britain.
David Cameron and George Osborne, as the two senior figures in the UK coalition are now walking around with a swagger as the next election looms just over 12months away, and the economy seems to be improving.
UK unemployment is lowering with figures heading to the 2 million mark again, and growth whilst subdued in the last month against the same month last year, probably owes more to the fact that this year, Easter is a month later, so the mini-boom that occurs as people begin sprucing up their homes which feeds through into the manufacturing sector with new kitchens and bathrooms: new electrical equipment, new plumbing, shower cubicles, flooring, furniture, kitchen cabinets, and taps getting installed.
And American Jobs seems to be improving too – albeit at variable rates. Today’s numbers though were below expectations.
But the structural mess the west has got itself into over the last twenty plus years, has not really been resolved, just as a new threat appears on the horizon.
For a few years recently, I worked in recruitment and employment services, and visited dozens of small and not so small employers selling our services, and the thing that stood out for me visiting the shop floors of engineering companies, and talking to warehouse managers, large and small, was the age range of the technical staff that worked there. They were all baby-boomers.
That’s right. These millers, maintenance fitters, service engineers, vertical borers, turners, technically skilled and semi-skilled staff were almost all without exception over 50.
They have accumulated decades of experience and wisdom, and time spent honing their skills. They have survived the countless recessions and financial booms over the time since the 1970s. They learned the basics in school in metalwork or woodwork classes. They went to Technical Colleges to do a HND, or OND in some engineering discipline or other, and learned technical drawing. They got their hands dirty messing about with things – tinkering if you will.
Many of today’s youngsters want to be TOWIE members, walk around in designer clothes, appear on X-Factor, Britain’s Got Talent, work in the Media, and Music, and be overnight successes as the 24/7 media channels focus on vox-pop issues, and makes “Celebs” of people who really shouldn’t be.
Their only real talent being for self publicity, and a willingness to make fools of themselves – on camera, and their personal lives become a mess as their rise to prominence and their fade to obscurity, wreak havoc with their self-esteem, and their relationships with those around them. But there’s only so much of that the viewing public can take.
In Britain, we are at last starting to offer apprenticeships to the young to learn skills that can’t be learned in the classroom – like turning up on time every time, as Woody Allen once observed which is 90% of success.
And keeping your nose clean (metaphorically speaking) at least until you know what you’re talking about – and even then, speaking out of turn can damage your chances of success.
But social commentary is not our beef. Political and Economic commentary is.
As the events in Ukraine of recent weeks seem to recede into the media background. And even the missing Malaysian Airlines flight MH370 seems to have gone quiet, as Australian Ships now search using SONAR technology, we need to look deeper at events worldwide, that will have an economic impact.
This morning we learn that Israel is sabre-rattling again, as Palestinians fire small rockets into that country, and the Palestinian leader discusses openly pursuing a “two-State” solution, outside the normal negotiation channels, as both the West-Bank developments, and the wall surrounding the Israeli state makes it almost impossible for ordinary Palestinians to make a living.
Of course if so few Palestinians have money to support their families, you have to ask: “Where are they getting the money for arms and munitions?”
And well you might.
Last week unmarked cargo planes, arrived in a sand lashed airfield just a short 45minute drive away from Amman. One of many such touchdowns in Sunni controlled Jordan.
The plane, one of approximately 150+ such flights in both Turkey and Jordan since the Syrian crisis began in early 2013. was filled with military equipment, approximately 3,500 tonnes in total. And this was directly authorised by the American President.
This military hardware is supposed to go to anti-Assad moderate groups who are fighting to overthrow Basher Al-Assad, President of Syria after years of dominance by the Assad regime.
Of course, not all the groups fighting for their freedom, are what they claim to be. Some contain Al-Qaeda operatives, who use their time there to get much needed experience of military hardware, and divert some of that to fights in other parts of the region.
Of course the US. media channels are prone to hide these disturbing facts from most Americans, who like the British are distracted by the media equivalent of MUSAK – that inane music that used to be so common in lifts and public spaces where they didn’t want to play anything that would distract you from shopping and spending money.
Of course Israel has its own reasons for being paranoid – almost 70 years have elapsed since 1947, when they were granted the state of Israel under a UN charter, and they have had to defend their territory from their Islamic neighbours ever since, having fought several wars, particularly during the 60s and 70s when their newly enriched neighbours decided to launch attacks on Israel for their own political agendas.
In 1967 the six days war was fought as Jordan, Syria and Egypt prepared a sneak attack on Israel, who took the opportunity to get their revenge in first, and after six short days captured the high ground in the Golan Heights, pushed the Jordanians back to the Jordan River, and the Egyptians back across the Syniai peninsula. The Arabs were humiliated, and a fresh war in 1973 – the Ramadan War was their attempt to take their revenge. The two wars helped push up oil prices already rising from increased demand, and it was this that was the major driver of the price rises that raged that winter of 73 and into 1974 pushing inflation to 26.9% in late 74 in the UK. Then the Iranian revolution in 1979, when the Shah of Iran was ousted and chased overseas allowing Ayatollah Khomeini to return from exile in Paris, and the scene was set for 21% inflation the next year, as oil prices once more reacted and the west would again be mired in recession.
As the war in Iraq and Afghanistan comes to an end, and troops begin returning home to bases closer to home, those troops were keeping a lid on sectarian violence that goes back 1300 years.
These wars are similar in effect to the Vietnamese war where Americans lost 56,000 personnel, and spent countless billions of dollars on arms and equipment for their forces stationed there.
These American involved wars were both funded by a government able to buy goods and services essentially for FREE as the Central Bank – The FED, creates money out of thin air, and this allows America to throw its weight around in places it shouldn’t really be, and where it lacks the knowledge of the culture to make improvements in the country without first destroying much that was there already.
In the middle east, this lack of knowledge has cost it dear with rises in Terrorism. The Islamic world also suffers a schism, divided just as Christianity is into two major factions, but this divide began one day in 629 A.D. as the prophet Mohammed sat down to a lamb or goat dinner that would begin the split that has affected middle-eastern politics ever since.
The meal was poisoned, and while Mohammed tasted the poison and spat it out, he had already bitten off more than he should chew, and on his demise which was sudden, no one could agree on who should replace him. The two views of Islam, one backward looking, one more progressive, became like Catholicism, and the Church of England who split apart when King Henry VIII decided he wanted a divorce in 1533, so he could father a child with yet another new bride who he married when it became obvious his bride-to-be was pregnant. (Divorce was a taboo of Catholicism)
The Islamic split though is the reason we may yet be plunged into another economic malaise.
The Shia population consists of about 70million Iranians, 22million Iraqis, 2million Lebanese, 4million Syrians, 10million Yemenis, and in the Arabian Peninsula populations of 700,000 Kuwaitis, half a million Bahrainis, 300k in Oman, 400k in UAE and another few hundred thousand dotted about the middle-east, with upto 11million in Turkey, 7million in Azerbaijan, and upto 30million in the hills of Afghanistan and Pakistan – between 145-160 million in total.
Many of those Shia side with their Palestinian brethren in the eastern Mediterranean, and the split I mentioned harks back to a time that Iran was called Persia, which many will remember ruled the Persian empire in the centuries around the time of the Holy Roman Empire and beyond.
Iran, according to Byron King a Harvard geologist, a former US Navy pilot, and Military intelligence officer with high military clearance, believes the real reason Iran wants a nuclear device is because its near neighbour the Kingdom of Saudi-Arabia dominates the region thanks to oil and American military support, and with Iran’s growing population of upwards of 88million, and one of the largest oil reserves in the world, Iran nurtures a yearning to return to its former glory days of the Persian Empire.
And, lest we forget, the Persians invented Chess, Algebra, traded with China and built the hanging gardens of Babylon, invented bricks and before the Islamic rules against alcohol – invented wine.
And as Iran recently launched its second naval vessel into the Caspian Sea as oil resources there become important, this is just repeating what they did 1500 years ago when they held off Roman armies.
Iran if you know your geography well, sits on one side of the Persian Gulf, where 40% of the world’s oil gets to market, and where 90% of the oil exported from the middle east passes through the narrowest point, at just 21 miles wide – the Straits of Hormuz.
But, what most people don’t know is that middle-eastern oil was first found in Iran in 1908, and Western oil majors swooped in to fuel Western growth and the war machine that would be so important in the war that was to come in Europe, so there is bitter resentment still.
On the other side of the Gulf is Saudi-Arabia, Oman, UAE, Qatar and both North and South Yemen who are mostly Sunni muslims. Yemen covers the whole of the Southern Arabian peninsular to the Red Sea, across from which, sits the Horn of Africa, and the narrowest point known as Bab El-Mandeb – or “The Gates of Tears”.
These shia controlled nations have over the last 50 years surrounded Iran’s mortal enemy – the Kingdom of Saudi-Arabia, who helped fund Saddam Hussein for 8 years, during the Iran/Iraq War in the 1980s, in which Saddam launched Scud missiles into Iran, and gassed thousands of his Shia citizens.
To the west of the Saudi peninsula sits the Red Sea, facing Egypt, Sudan, South-Sudan, Ethiopia, Eritrea, and other hotbeds of unrest.
On the south of the Saudi peninsula -Yemen, has a particular section of the Shia population who are the Huthis. In a recent incident in the Indian Ocean, off the coast of Yemen, a US naval vessel stopped an arab Dhow – a small sailing ship with a broad trangular sail, and the sailors found not fish as might be expected from such a small vessel, but military hardware destined for Huthis, Al-Qaeda operatives now headquartered in Yemen.
This hardware wasn’t just a few rifles, and handguns, but military binoculars, sophisticated explosives, detonators, and both ground to ground rockets, and heat-seeking portable anti-aircraft missiles – Not the kind of stuff you find in a military hardware supplies’ shop. And the source of this booty? You guessed it – probably Iran.
So, why is Iran selling armes to rebel groups or giving them away?
Who is funding Al-Qaeda?
It is just possible, that to maintain its grip on the society, Iran needs a high oil price and fomenting unrest in the region, to heighten the perceived risks in the area, is one way to achieve that, or is it really just part of a master plan to unseat KSA from its dominance in the region.
And if Iran and the Kingdom of Saudi-Arabia DO go to war, the battle would embroil all who depend on middle-eastern oil to make their economies run, as the price of oil would spike on International markets.
If a new battle between the Sunnis and Shia erupts, the Arab Spring 2.0 will seem like a cakewalk, and the oil price could hit $200+/barrel. Is this why Abu-Dhabi recently spent $17bn on anti-missile hardware? And UAE and Saudi-Arabia have also splurged on weapons and British Fighter Aircraft.
Is this the real reason America is pursuing shale oil and gas with such fervour?
Recent reports suggest that U.S. now holds the biggest energy reserves on the planet.
In the Bakken oil fields alone in north-western America, the US Geological Survey suggested there might be 500+ billion barrels of oil, and a more recent survey, suggests that there is even more oil buried beneath the already huge Bakken field.
This with the West Texas shale oil-field – the Eagle Ford basin, the Monterey shale in California, the Utica shale gas and liquids finds in Ohio, the Mississippi basin oil find and the shales in the North East – could add upto 2 Trillion barrels. Enough for 100 years, and the U.S. could already be the world’s biggest producer.
And as I’ve mentioned on a previous occasion, the U.S. intends liquifying some of these natural gas finds and exporting them at international prices.
Companies way ahead of the rest of the industry are – Cheniere Energy, (NYSE:LNG) who signed a 25 year deal with Centrica – owner of British Gas, to supply LNG and similar contracts with 4 others including Spain’s “Endesa Generacion S.A.” and Indonesia’s “PT Pertamina” from its Corpus Christie liquifaction plant, via its new export facility it is building in Sabine, Louisiana.
Together with Cameron LNG who obtained approval from the U.S. Department of Energy (DOE) to export up to 12 Mtpa, or approximately 1.7 Bcf per day, of domestically produced LNG to all current and future Free Trade Agreement countries and on February 11, 2014 received conditional authorization from the DOE to export LNG to non-Free Trade Agreement countries, including those in Europe and Asia. It should also be noted that the Panama Canal is being widened and due to open in 2015, to allow the huge LNG cargo ships that will be needed to carry all this oil and gas to China.
Cameron also has an application under review with the Federal Energy Regulatory Commission, the lead agency responsible permitting the new facilities. This new facility in Hackberry, Louisiana was an import terminal, but it is being specially adapted for export. This company therefore faces long-term growth as their facility sits alongside major pipelines from most of the major sources of Gas.
The completed liquefaction facility will comprise three liquefaction trains capable of exporting up to 12 million tonnes per annum (Mtpa), or approximately 1.7 billion cubic feet per day of liquefied natural gas. In addition, a new 21-mile natural gas pipeline, a compressor station and modifications to existing pipeline interconnections are proposed. Construction on the project is already underway, with the first LNG production in 2017, and full commercial operation in 2019.
The new and existing facilities will be wholly owned by Cameron LNG Holdings, LLC, a joint-venture with 50.2 per cent indirectly owned by Sempra Energy (NYSE: SRE) and the remaining owned by GDF SUEZ S.A. (GDF SUEZ), Japan LNG Investment, LLC (a joint venture entity that has been formed by subsidiaries of Nippon Yusen Kabushiki Kaisha (NYK) and Mitsubishi Corporation (Mitsubishi)) and Mitsui & Co., Ltd. (Mitsui) each owning a further 16.6 per cent.
Sempra Energy, based in San Diego, is a Fortune 500 energy services holding company with 2010 revenues of $9 billion. The Sempra Energy companies’ nearly 16,000 employees serve about 26 million consumers worldwide.
And if you’re wondering who is going to build this new facility – on March 17, 2014 Cameron LNG, LLC announced the joint venture between CB&I and Chiyoda International Corporation, a U.S. based wholly-owned subsidiary of Chiyoda, a Japanese Oil Services Major, had been awarded the contract valued at approximately $6 billion. – CB&I (NYSE: CBI) and Chiyoda Corporation (TSE: 6366; ISIN: JP3528600004) – I wonder what that contract will do to their bottom line?
Also, a recent off-shore find in an area called “Tubular Bells” basin in the Mississippi Canyon – Gulf of Mexico, has given Hess Corporation (NYSE:HES) an independent oil major a fillip.
The company estimates that the field will have a peak production of 40,000-45,000 boe/day. The field holds more than 120 million boe of reserves and possibly as much as 200 million barrels, according to Hess, but as these finds add to the US output, we may yet see oil prices level off (in the absence of Middle-Eastern turmoil), though it is likely that output will not begin for a year or so.
The prospects for these companies is all the more important if the disruption in the middle-east curtails output, or raises tensions there, as the value of the reserves and any output, will merely add to the bottom line of these American Corporations.
However, any prolonged rise in oil prices would raise the QE question again, and cause major problems for importing nations such as Japan, and Germany which does not have any major oil fields.
And if the price of oil rises, then it is inevitble that Gold and Silver will follow suit, whether China decides to announce its Gold reserve position this month or not. (See my last post)
If any more currency gets printed by the Fed, as a result of all this oil money sloshing around the world? Then you better get yourself some alternative currency, as thes crypto-currencies become more widely accepted, and for those who are interested in a new business that mines for currency, and makes an initial deposit, and daily top-ups into your account – with referral fees for any new members found, you can get details and membership for free by clicking —>> HERE.
If you liked this post then please like it, post it to family or friends, or copy and paste, but remember the discussion of the above companies is not a recommendation to purchase. But merely to offer a starting point for your own research. Share prices can go down as well as up, and any investment may be at risk.
It has been two weeks since my last post, and to be honest, I am not quite sure, which of the many topics, that are concerning me, (and perhaps you), that I should devote my attention to.
Since I last wrote, the Crimea has indeed seceded from Ukraine, just as I suspected it would, and Kaiser Putin, has signed a treaty granting citizenship to the Russian speakers of that particular peninsula. And the Tartars, and Ukrainian nationals who resided there – but NOT the Ukrainian military members, who were stripped of their munitions, and sent packing back to the motherland. Was all that to ensure the Russian Black Sea port of Sevastopol remained in Russian hands?
Those other former CIS satellite nations with large ethnic Russian populations will no doubt be preparing themselves for similar secession requests, and perhaps even more military turmoil that has beset that particular part of the world.
The financial commentators, watching over the financial health of the economy in China, have in some ways been almost apoplectic as China’s GDP growth, fell to a mere 6.5% p.a. against the Political class’ expectations and demand for 7.5% (Oh, that Europe, Britain and America should suffer such a poor growth rate) and the expectation there is that this may cause a financial calamity as some large financial institutions succumb to the stresses and strains of a planned economy.
In Europe news arrives of a rash of Bankers committing suicide – King World News interviewed Gerald Celente, who discussed a Wall Street Journal story, about a Mr Brokesmith a senior executive of Deutsche Bank who was found hanging in his home, with several suicide notes being found – but their contents kept secret by the media – who it is believed are colluding with senior bankers to keep these stories under wraps. And over forty such deaths have been noted, though largely unreported in mainstream media, but as the Financial Regulators finally do their jobs and scrutinize the actions of these Banks some are obviously running scared.
Celente, who founded Trends Research, is also seriously concerned at the amount of unrest arising around the world as interest rates start to rise, and the Bankers extract their pound of flesh severely constricting economies as money disappears from the economies of the West and has created a new organisation he refers to as the “Occupy Peace” movement.
Last year, the largest Banks of the U.S. – the big six – JPMorgan Chase, Goldman-Sachs, Citigroup, Wells Fargo, Morgan Stanley and Bank of America, earned collectively $76 billion, just shy of the peak attained in the last boom year of 2006, just before the market seized up, and the world monetary system almost ground to a halt. Just before Bear Sterns, Lehman Bros, Fannie Mae (FNMA – Federal National Mortgage Association), Freddie Mac (FHLMC – Federal Home Loan Mortgage Corporation) Royal Bank of Scotland, Lloyds TSB, Northern Rock and all the other smaller banks disappeared or were bailed out, in the frenzy that followed.
The Banks we must remind ourselves have paid $100 billion in legal settlements since the start of this crisis some 5 years + ago, and we must ask ourselves WHY senior banking figures have not been prosecuted. Despite rising evidence of market manipulations of several market sectors – LIBOR, Gold, Silver, and other commodities forcing several funds into negative situations for the last few years.
And in America class action law suits have been filed against these market manipulators, who lest we forget, are allegedly doing this at the behest of the Federal Reserve. As these law suits come to court, perhaps we will hear more from the mainstream media, or perhaps we won’t, until it is too late .
Some commentators are already suggesting a market peak is close and a full-blown market pull-back is eerily close. Gold and Silver have reacted to those who want to keep those two precious metals from showing their true value against a currency that is being inflated by Senior Banks.
Portuguese citizens are calling on their Government to renege on their international debts and to use that money to support the citizenry in Education, Health and other social systems.
I suppose they see Iceland, who put some of their Bankers on trial, and avoided many of the problems besetting the west by avoiding the requirement to meet the interest rate returns demanded by the bankers, as the model they should follow. Incidentally, I heard recently that Iceland has created a crypto-currency, and is distributing it to all Icelandic citizens free of charge so that people can become knowledgeable, and use these new currencies uncontrolled as they are by Banking Institutions – The wave of the future?
And one of RT’s flagship financial news programmes – Keiser Report – hosted by Stacy Herbert and Max Keiser, commented on how the Bank of England’s Governor – Mark Carney, who is the former governor of the Bank of Canada and a senior executive of Goldman Sachs let slip that it is not the Central Bank that creates new money, but the Senior Banks themselves who do so. Every time a citizen arrives at a senior bank to borrow some money – say for a mortgage – or to buy a company, that money gets created as a credit on the borrower’s account and a debit on the Bank’s account. The Bank gets an asset, and the debtor gets a liability. Thus a debt becomes both an asset and a liability – each taking their role in the scheme of things.
That money that then gets paid to the seller of the property, and deposited elsewhere in another Bank. As a result, the deposited funds are loaned out into other uses – People, borrow it for cars, and furniture, caravans and holidays and those car showrooms and furniture stores deposit it in their banks, who lend it out to… (You get the idea) Thus this initial borrowed money grows both the debt and the economy. This is the multiplier effect, and all currency in existence is a leverage on debt.
However, every debt has to be repaid with interest. And the more debt, the more interest is taken from the general population to go to fund the lifestyles of senior bankers and to pay off this debt. And eventually this will destroy the economy, and the population. At no time in history has this ever – EVER – ended otherwise.
The only antidote to this, is for all people to save their wealth, not in Bank-notes sitting on a Bank’s ledger (that don’t in reality exist) but in hold in your hands physical metal – GOLD and Silver. Most people fail to realise, that as depositors in a Bank, they are all unsecured creditors, and even in some cases the Insured element of their deposits is at risk in the event of a full economic collapse as might be coming your way.
The Chinese and the Russians, the South Africans, Turks, Iranians, Vietnamese, Indians, Indonesians and many others recognise this, and when the inevitable happens, the dollar’s role as world reserve currency will cease. But temporarily, the Chinese want a strong dollar, because at the moment the Chinese hold $4trillion in currency reserves, most of which is denoted in either dollars, or dollar bonds. So the Chinese are effectively hedging their finances with enough gold so that when this happens, they will not lose the value that their success has earned them.
Some time ago, I predicted that Gold would ultimately rise to around the $8,500/oz level. In the Jim Rickards audio below, he mentions $9,000 Gold. Are we both so far from the truth? And if so, what of Silver‘s ultimate high? It is not outside the bounds of possibility this will reach the dizzying heights of $500 as Gold and Silver return to their historic ratios of around 16:1. Though given how little Silver is being mined, this could get as close as 10:1, which is in line with the ratio coming out of the ground.
And with it, much of the unrest that is promulgated behind the scenes by shady political characters for their own ends by people who don’t have to pay for things with REAL money, will cease. Recent reports have also emerged that Turkey, perhaps aided by some of those same forces, was planning to raise a “False Flag” event in an attempt to give them reason to enter Syria, to assist in the overthrow of President Assad, who has steadfastly refused to stand down in spite of provocation, and much western criticism of his policies, particularly as has been mentioned previously of the agreement to allow a pipeline from Iranian controlled gas fields to the Mediterranean, through his country, and Lebanese controlled territory.
Perhaps a few words should be borrowed from John Lennon, Paul McCartney, George and Ringo all those years ago when we faced similar circumstances: – “All we are saying, is give peace a chance” – Save Gold and Silver.
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On or about, April 24th, 2014, China is going to do something, that will likely directly steal up to 40% of your wealth… IF, you do nothing about it.
It is probably going to affect you, your job, your family, your investments, your savings, your retirement, your home, and your whole future.
What happens, will be like the earthquake that happens 5 miles down on the floor of the Pacific Ocean, that lifts the ocean floor a few feet on one side of the tectonic plate, and that event will not be felt for hours, days or even weeks later. Hardly anyone will notice it immediately. Nobody will wake you up one morning, and say you need to do ‘X’, and no-one will protect you from what is going to happen.
That surge of water, will start out slow at first, but with gathering strength, it will travel across the ocean, and as the sea becomes shallower towards the shore, so the wall of water will rise – higher and higher, until like a tsunami it eventually crashes ashore. Like the tsunami, that created the Fukushima disaster in 2011, nothing will be the same ever again.
Interest rates around the world, will probably rise a little at first, then alarmingly. Mortgage rates will go up in the U.S., Europe, and Britain, as the value of the dollar, then your currency – falls. House prices – which have risen so much in recent years – will fall, perhaps by 40% in many areas, and as much as 60% or more in the worst affected areas, and the economic turnaround, that so many have pinned their hopes on, will grind slowly to a halt, and possibly even reverse. Bond prices will plummet. And the stock-market will lose the gains made in recent years.
Nothing will stop this, and there isn’t anything you can do to stop it.
A decade in the making, this event will disrupt many aspects of normal British, European and American life, with potentially devastating results.
The United States is stuck with an enormous debt, that they can never realistically repay… and Britain and Europe are almost as bad. China (by far the US’s largest creditor), now holds nearly $1.5 trillion worth of loans to the federal government, and is stuck with an outstanding loan they can neither get rid of, nor collect on. The Chinese and the Americans realize they are both trapped in a mutually executable stranglehold, and neither can easily let go.
So the Chinese government is now taking a somewhat secretive and radical approach.
Maybe you don’t care about international debt, currency wars, or battles between the world’s most powerful central bankers. (And if so – why have you read this far?) But this is one time you should.
There’s one very important reason for you to be concerned about what China is planning next. This plan will extract enormous sums from both the United States government, and ordinary hard-working, mortgage paying, credit-card spending people like you.
And you may be thinking, “How could the Chinese government actually keep something as big, important and potentially game-changing as this a secret?”
Well, the truth is, they haven’t.
And pretty soon, the world will see that China has been playing the U.S. like a fiddle.
For more than a decade, the Chinese government has published reports about the existence of this secret program in official, state-controlled newspapers and wire services. Officials have even publicly demanded more money for its development.
In fact, in early 1990s, the Chinese government began quietly laying the groundwork for their new financial weapon, making a series of dramatic changes to their financial system. The moves were announced in China’s official newspaper, but were barely noticed in the West. In a review of hundreds of articles in a historical database, the only mention was a 148-word item published in the Wall Street Journal on October 1st, 1993.
In 2000, they made the development official as part of China’s Quinquennial [five-year] plan, the country’s most important policy document. China’s CCTV called it a “pivotal year”.
A top private sector official with close ties to the government program called the developments from 2000-2008 “staggering.” Then came the biggest announcement
In April 2009, Chinese officials shocked the world with their announcement of the advancement of this new financial weapon, which had all but doubled its capabilities in six years, taking its place as one of the most powerful weapons of its kind in the world.
In 2011, the People’s Daily – an official propaganda mouthpiece for the Communist Government – reported plans for the program to accelerate even further.
In January 2013, a senior Chinese official was quoted by Bloomberg as saying the already powerful financial weapon was “too small” and should be built up further.
And, in October 2013, the Chinese government made its most shocking statement yet. The government used an editorial in its state-run news agency, Xinhua, to call for a “de-Americanised world” – a thinly veiled message about its intent to use this new and radical weapon against the United States – and with it – Europe and Britain.
But here’s what the Chinese government DOES NOT want you to know and what most major news outlets are afraid to tell you…
I believe that China could unveil this powerful “secret weapon” as early as April 24th, 2014.
Some financial commentators have said China’s financial attack will be “an earthquake.”
Business Insider called it “the elephant in the room” for one of the world’s most powerful market forces.
The Huffington Post wrote, “It’s amazing how little of the wider public are aware of what China is really up to here.”
Barron’s reports that the idea that China is developing this “ultimate stealth weapon” – once limited to a few obscure blogs – now “has a mainstream following.”
The US. government has essentially backed the Chinese into a corner, and they have left them no choice. The main thing the Chinese have kept secret is just how big their secret weapon is.
It is revealed in government documents that must be published, by law, in Hong Kong (now a Chinese territory) and by looking at where billions, even trillions of dollars are being shifted inside China – As any journalist will tell you, “Follow the money.”
Many believe we’ll see a major shift in the world’s monetary system. We will probably see a precipitous fall in the U.S. stock market, and a major disturbance of the U.S. mortgage and bond markets.
Most people are either too young to know, or too old to remember this, but the US., experienced something similar (although on a much smaller scale) in the late 1960s and early 1970s
After World War II, the U.S. dollar was actually backed by something real – instead of just a government promise. Back then, their currency was backed by real gold, and as a result, the U.S. government-owned two-thirds of the world’s gold – over 20,000 tons.
It wasn’t just a powerful national asset… It also formed the basis of the world’s financial system.
Every world currency was defined in terms of the dollar. And the dollar, in turn, was defined as 1/35th of an ounce of gold. In other words, it took 35 dollars to buy one ounce of gold.
This was supposed to keep the US., government from money-printing: Since dollars could literally be exchanged for gold, the government couldn’t just print all the money it wanted.
After the Kennedy administration, the Fed and the Treasury, asked the European Central Banks, to help prevent the dollar price of gold bullion on the open market from rising above $35.20. That is, whenever the free market price of bullion threatened to hit $35.20 the United States and the West European central banks would sell gold. If the price of bullion fell below $35 an ounce, they would buy gold.
But France would be the first to leave this pool.
It began in 1965, when French President Charles de Gaulle in a speech in February of that year, said that the US. owed the rest of the world a duty of care, to maintain its currency in parity with the agreed dollar price, and to not produce too many dollars. He later took $150 million of his country’s dollar reserves, and demanded that the paper currency be exchanged for U.S. gold from Ft. Knox.
(Here he predicts the crisis in 1965)
Of course, De Gaulle was simply doing the rational thing. even though he knew it would financially hurt so close an ally.
In 1971, De Gaulle actually sent a French battleship to New York, loaded with $191 million in cash to withdraw gold from the New York Federal Reserve bank vault.
And France was not alone. Spain also, redeemed $60 million of U.S. dollar reserves for gold. And many other nations followed suit. By March of 1968, gold was flowing out of the United States at an alarming rate.
It’s estimated that during the 1960s and early 1970s, the US., essentially gave away about 2/3rds of the nation’s gold reserves – around 400 million ounces.
And the news didn’t stop there…
On August 11th 1971, the British ambassador in Washington received instructions from London to redeem $3 billion of gold from the United States Bullion Depository at Fort Knox.
Then just four days later, August 15th, 1971, President “Tricky Dickie” Nixon, made an announcement that would send shockwaves around the world.
He announced to the American population, that he would “Close the Gold Window – Temporarily” and this Temporary Suspension notice has lasted 43yrs – so far.
Within about three years, America was in its worst recession since WWII, with an oil crisis, skyrocketing unemployment, a 30% drop in the stock market, and soaring inflation. And millions of Americans got a lot poorer, practically overnight.
In Britain in 1973, Labour Unions such as the Mineworkers, and Electricity power generation unions went on strike. Power cuts became commonplace as the three-day week took its toll on the British economy.
Inflation raged, reaching 26.9% in late 1974, just as the new Labour and Liberal government started their period in office – the Lib-Lab pact… Does this sound vaguely familiar?
By the end of the decade, Britain was watching helplessly, as government workers tried to maintain their living standards, and bodies piled up in morgues, while council workers let rubbish pile up over 3-4 feet high in London’s streets.
Shell Tanker drivers were the first to then beat the government’s pay restraint agreements, followed quickly by Ford’s car workers, and others would follow.
And the events of the 70s will probably be repeated, as that is EXACTLY what China is doing today, except this time, the stakes are much, much higher, because China is a much more powerful adversary.
China is now engaged in a fully-fledged “currency war” with the United States and the U.S. dollar.
China isn’t hiding this fact at all. A top Chinese central banker recently told China’s official, state-run news agency that the country is “fully prepared” for the coming currency war.
The ultimate goal, as the Chinese have publicly stated, is to create a new financial system, to dislodge the U.S. dollar from its current reserve role. Doing so will enable the Chinese to get back as much of that $1.5 trillion that the U.S. government has borrowed.
And here’s the most important part…
Understanding how the Chinese will execute this “currency war” over the next few years will likely mean the difference between the opportunity to make extraordinary sums of money, and potentially losing a fortune.
For the past 30 plus years, China has piled up a MASSIVE amount of U.S. dollars and other foreign currency reserves.
At first, the dollar inflows were small because trade between the two countries was tiny. In 1980, for example, China’s foreign currency reserves stood at approximately $2.5 billion. But since then, the amount of foreign currency held by the Chinese government has gone up nearly every year… and now stands at $3.7 TRILLION.
That’s a 146,300% increase! It’s simply astonishing, to look at the chart of the increase in currency reserves since the early 1980s…
When a Chinese business earns dollars by selling overseas, it hands that money over to the People’s Bank of China (or PBOC, the country’s central bank), in exchange for Chinese currency (called either the ‘Yuan’ or the ‘Renminbi’) at a fixed rate.
The group that manages these massive reserves is the “State Administration of Foreign Exchange” or SAFE.
And for the past few years, SAFE has had one big problem: What to do with so much money?
What SAFE decided to do with most of these reserves is to buy U.S. government securities (notes, bills, and bonds). Since 1980 their currency reserves have ballooned by 146,300%. Digest that figure…
China knows that as long as the US., continues to print and borrow unfathomable amounts, their U.S. dollar holdings will be worth less and less. So the Chinese want to trade their depreciating dollars for any “real” asset they can find that will better hold its value.
Last year, SAFE did something absolutely remarkable.
They opened an office on Fifth Avenue in New York. This office had one purpose: “To invest in private equity, real estate and other U.S. assets.”
Not paper promises, but real things with real value that can’t be manipulated.
“The move by [SAFE], which oversees the world’s largest stockpile of foreign-exchange holdings, comes as it steps up its diversification away from U.S. government debt,” the Wall Street Journal reported.
Chinese companies are wise to this strategy, too. In 2012, the Chinese conglomerate Dalian Wanda bought AMC theaters for $2.6 billion. In September 2012, a Chinese company bought America’s largest pork producer, Smithfield, for a whopping $7 billion.
And now they have changed their target. Starting from a low base, the Chinese have been quietly accumulating Gold, to the point that in 2011, China became the world’s biggest Gold producer – producing 400 tons per year, and the world’s biggest consumer, importing more Gold than India, which has for generations been the world’s biggest consumer of Gold.
And every single ounce that gets produced in China – whether it’s dug out of the ground by the government or by a foreign company – must by law be sold directly back to the government. Not one ounce legally leaves their shores.
I believe China is trying to “corner” the gold market.
Richard Russell, a great financial historian, recently wrote: “China wants the Renminbi to be backed with a huge percentage of gold, thereby making the renminbi the world’s best and most trusted currency.”
The scale of China’s gold initiative is unprecedented in world history. This alone should make YOU take notice. And, China is signalling that the currency wars of the past decade are changing. Soon, the battle will be influenced by gold.
Here in Britain, America and Europe, Politicians and Central Bankers cling to the notion that their experiment with floating exchange rates and unbacked currencies will somehow save the day – but China suffers from no such delusion. It is voting with its wallet that the experiment has failed. It is preparing for the demise of the U.S. dollar, and with it the British Pound, and the Euro.
And what the Chinese government is doing right now will affect nearly EVERY Briton, European and American, in a big, big way.
Over the next few years, this may cause some assets to skyrocket, and others to plummet. Even if you decide to buy some gold itself, you need to know what to buy and this will obviously have major implications for you and me.
I believe with 100% certainty that the Chinese are now clearly on a path to accumulate as much gold as possible – as much as 10,000 tonnes, so that one day soon they will be able to restore the convertibility of their currency into a precious metal, just as they were able to do a century ago when the country was on the silver standard.
And China’s increased gold reserves will act as a model and lead other countries towards reserving more gold. Large gold reserves are also beneficial in promoting the internationalization of the Renminbi. [RMB - China's currency].
China’s entry into the World Trade Agreement meant they have to float their currency by 2015, and the strength of that currency will depend to a large extent on how it is perceived on international currency exchanges.
China imports food, wheat, metals, oil and gas from all over the world, and a weak currency would sky-rocket inflation in the country, making angry Chinese people turn on their government in riots and with major social unrest. A strong currency will make food and raw materials cheaper, and Chinese autocrats fear the uprising of 1.4 billon people more than they fear anything or anyone else – which is why they crushed the Tiananmen Square riots with such ferocity in 1989.
In November 2010, China signed a currency deal with Russia for bi-lateral trade in their respective currencies, and China has signed similar agreements with a rising number of other countries – UAE, Australia, Hong-Kong, Turkey, Japan, South-Africa, and Brazil to name but a few. And as of 19th March 2014, China added in the New Zealand dollar, as China begins trading in the national currency of yet another trading partner.
In a November 2010 report, HSBC, reported that by 2015, fully 50% of Chinese trade with emerging nations, will be conducted in their own currencies.
And to fully internationalize, their currency, China is importing over 100 metric tons of gold a month through Hong Kong. As Reuters reported, “China’s net gold imports from Hong Kong hit a record high of 136.185 tonnes in March. 2013″
Net Imports through Hong Kong exceeded 100 tons a month almost every single month in 2013.
They also imported well over 1,000 tons of gold from Hong Kong alone in 2013 – not including Shanghai. That number is up from 2012, when China imported a record 834 tons – in turn, nearly double the imports in 2011.
This data, of course, comes from the Census and Statistics Department of the Hong Kong government. The Chinese government, on the other hand, does not make such information public.
As Mineweb puts it: “China also imports gold through other routes, and total import figures now look likely to be nearer 2,000 tonnes. Some analysts put them even higher.”
When China last reported their gold reserves in 2009, they had “official” holdings of 1,054 tons. They’re now importing nearly double that amount in a single year.
And that doesn’t include the Gold purchased from the mining outfits that Chinese investment houses own outside of China, nor the alleged purchases from artisanal miners throughout sub-Saharan Africa, reputedly at 40 tonnes per month.
And as Business Insider put it last year, “China’s undeclared official gold reserve purchases remains an elephant in the room in the gold market with very little coverage of or analysis of the People’s Bank of China’s quiet and un-transparent accumulation of gold.”
China even had the audacity to partner with a U.S. company as it builds the gold stockpile that will torpedo the dollar. A company called Coeur d’Alene mines is selling gold produced at a huge new Alaskan mine directly to the Chinese.
“The gold concentrates produced at Kensington will be processed by China’s largest gold producer China National Gold through an agreement that is the first of its kind between a state-owned corporation of the People’s Republic of China and a U.S. precious metals mine,” Mineweb reports.
Keep in mind, Coeur d’Alene isn’t doing anything unpatriotic. They’re just selling their gold where it’s most in demand – China.
In fact, China offered the company a very sweet deal. Most gold producers have to wait 3 months while gold is processed and refined to receive payment. Coeur d’Alene is getting paid just seven days after shipment for raw “gold concentrate.”
Of course, not every ounce of gold that’s imported goes directly into the People’s Bank of China’s storage vaults. Some of it goes to industrial uses, individual investors, and China’s flourishing jewelry trade almost exclusively in 24 carat gold.
But no one knows how much the PBOC is absorbing. I believe it is at least 5,000 tonnes in total, since 2009, but could be as high as 7,000 tonnes.
What the markets do know is that China is importing thousands of tonnes and exporting ZERO. Every ounce of gold that goes into China stays there, like a black-hole, it just swallows up all that goes there..
And the Chinese government is now in the process of quietly buying up part or all of dozens of the best gold mining companies around the globe.
The government basically has a slew of investments in the gold markets, which it reveals as little information about, as possible.
For example, very few investors realize that China National Gold Group Corp (CNGGC) owns circa a 40% stake in an overseas investing arm, China Gold International. Resources Corp (listed in Toronto: CGG).
China National Gold Group is trying to vacuum up gold assets in Canada, Australia and Africa. Its latest move is a potential bid to take over the $1.7 billion Platreef mine in South Africa from a Canadian company, Ivanhoe Mines. It also bought a 95% stake in another Canadian company, Mundoro Mining, a few years ago. Even tiddler companies like Mwana Africa – quoted on the AIM Market in London, received a large investment for its Zimbabwean operations from the Chinese Gold investment community and investing in infrastructure to enable these reserves to be got to market – Chinese markets…
Most investors also don’t know that the China Investment Corporation, which manages $575 billion worth of government money, has major stakes in some of the best mining companies in the world, including:
* Anglogold Ashanti: 100,000 shares
* Kinross Gold Corp: 250,000 shares
* Gold fields Ltd: 350,000 shares
* Teck Resources: 101 million shares
Forbes ran a story following China’s 2009 announcement that stated China could amass some 5,000 tons of gold over 5 years. I would not be surprised if China amasses double that amount.
And, Jim Rickards, the currency expert who called China’s coming gold announcement “an earthquake,” believes they’ve already surpassed 5,000 tons.
He told an interviewer on RT:
“I have spoken to a number of sources in Asia. I’ve spoken to a number of people who are very close to the physical market, I’ve done my own investigations, etc. Every time I have an estimate and try to verify it, what I get back is that I’m wrong on the low side.”
The point is, when you look at the gold China already has in reserve… and look at what it controls that’s still in the ground… the Chinese might already have more gold than any other nation on Earth.
And , the Chinese government is reinventing both their own internal gold markets and also the international gold markets as well. Over the last few years they’ve purchased the London Metals Exchange, home of Gold and other metals buying, for over 120 years.
Also, in 2011, the Chinese made available the first yuan-denominated spot gold contract, called the Renminbi Kilobar Gold. Dow Jones MarketWatch reported that analysts see it as “a step toward making the Yuan a global reserve currency.”
In 2012, the Shanghai Gold Exchange (SGE) became the largest trading platform for physical gold in the world.
And in the last two years, they bought the LME for $2.1 billion, and even the former Headquarters of Chase Manhattan Bank – Chase Manhattan Tower, built in the 1950s by David Rockefeller.
What you might also not know, is that the building houses the largest gold vault in the world. Longer than a football field and anchored to the bedrock five stories beneath the city’s streets – and stong enough to withstand a nuclear hit.
How much more evidence do you need?
And when the inevitable happens, the price of gold will soar in all currencies. And now that more than 7/9ths of the world’s silver’s usage is for industrial use, the limited amount of available silver for investment purposes, will mean that when Gold rises, as it inevitably must, the silver price will be like it is attached on an elastic band to Gold’s coat-tails.
You can get a fuller picture of this in “The Coming Battle”, and you can still buy silver at VAT free prices from Here. And many expect silver to be an even better investment than Gold, with a climb towards a 10:1 price ratio between Silver and Gold a distinct probability – ten ounces of silver equal to one ounce of Gold.
Once China announces its Gold reserves, on or about 24th April 2014 – exactly 5 years since it last did so, the blue touch-paper will have been lit, and the explosion that follows, is all but guaranteed.
Gold will rise inexorably like it did 40+ years ago, and silver, platinum, and other commodities will follow suit, including: wheat, corn, oil, gas, tin, lead, copper and all the other precious, and semi-precious metals that make up this modern world, and for a time, it will be hell, before the world adapts, just as it did almost 6, and 40 years ago.
But those banks that have extended mortgages in their tens of thousands, these last ten years, may be forced to go to their respective governments, “Cap in hand” or face the same fate as Bear Sterns and Lehman Brothers in 2008.
And if you look at the image below, the chart of the Gold price, in the last fourteen years, is almost identical in shape to the chart of the mid-1960s to 1970s. And if the chart continues its replication, until 1980 and beyond… then you should be able to guess where the Gold price is heading next.
The time to act is now.
Until next time…
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