Gold short position has been transferred to weak hands, Maguire tells King World News
Submitted by cpowell on Sat, 2013-02-23 05:59. Section: Daily Dispatches
9:55p PT Friday, February 22, 2013
Dear Friend of GATA and Gold:
London metals trader and silver market whistleblower Andrew Maguire tells King World News today, in the third segment of his interview, that bullion banks have managed to offload much of their gold short position to weak hands, that premiums for real gold in Shanghai are enormous, and that he expects a rapid upward reversal in the gold market. An excerpt from the interview is posted at the King World News blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Gold Anti-Trust Action Committee Inc.
Maguire: Smashdown was aimed to avert gold and silver breakout and BIS arranged it
Submitted by cpowell on Fri, 2013-02-22 21:16. Section: Daily Dispatches
1:12p PT Friday, February 22, 2013
Dear Friend of GATA and Gold:
In the second installment of King World News' interview with him today, London metal trader and silver market whistleblower Andrew Maguire describes a vast scheme of naked shorting of gold in the futures markets, asserts that the recent smashing of monetary metals prices was done to avert their upward breakout, and charges the Bank for International Settlements with coordinating the scheme. An excerpt from the interview is posted at the King World News blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Gold Anti-Trust Action Committee Inc.
Powerful contra-indications for gold from whistleblower Maguire and GGR's Arensberg
Submitted by cpowell on Fri, 2013-02-22 20:36. Section: Daily Dispatches
12:34p PT Friday, February 22, 2013
Dear Friend of GATA and Gold:
London metal trader and silver market whistleblower Andrew Maguire today tells King World News that Eastern central banks have used the recent smashdown in gold to acquire hundreds of tonnes and that the smashdown is actually a "bubble short position" likely subject to a "violent" reversal. An excerpt from the interview is posted at the King World News blog here:
Meanwhile over at the Got Gold Report, Gene Arensberg notes the recent big reduction in gold holdings by the exchange-traded fund GLD and finds that the four most recent big reductions in GLD holdings were quickly followed not by a "death cross" apocalypse but by rising gold prices. Arensberg's commentary is posted in the clear at the Got Gold Report here:
And market analyst Al Jolson's outlook has been posted at YouTube here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Gold Anti-Trust Action Committee Inc.
and Harvey Organ......
http://harveyorgan.blogspot.com/2013/02/moodys-lowers-boom-on-ukspain-comes-in.html
SATURDAY, FEBRUARY 23, 2013
Moody's lowers the boom on UK/Spain comes in with a huge 10.2% Deficit/GDP.Gold deliveries up to 40.3 tonnes/Silver at record levels of OI surpassing 156,000
Good morning Ladies and Gentlemen:
Gold closed down $5.80 to $1572.40 . Silver lost 24 cents to $28.46.
However in the access market gold zoomed higher as did silver due to Moody's lowering the credit rating on the UK. (see below)
Here are the final closing prices of gold and silver:
Gold: $1581.50
Silver: $28.76
During the comex session, the bankers no doubt were very disturbed with silver's high open interest. The bankers get to see the figures Thursday night before we see them at 1:30 pm, the following day, as these are the rules of the house.
It is totally incompatible in the silver comex market to see tightness in supplies, record levels of silver eagle sales, high deliveries of silver in active months as well as higher deliveries than normally seen in non active delivery months, and finally record levels of open interest for the entire silver comex complex and yet see falling prices for that metal. Below you will see that gold deliveries now exceed 40 tonnes of gold, and silver is at 2.25 million oz. The holders of silver longs seem to be impervious to pain. How can they withstand the huge continual drubbing of silver and still stand in there? We will surely find out next week.
Gold closed down $5.80 to $1572.40 . Silver lost 24 cents to $28.46.
However in the access market gold zoomed higher as did silver due to Moody's lowering the credit rating on the UK. (see below)
Here are the final closing prices of gold and silver:
Gold: $1581.50
Silver: $28.76
During the comex session, the bankers no doubt were very disturbed with silver's high open interest. The bankers get to see the figures Thursday night before we see them at 1:30 pm, the following day, as these are the rules of the house.
It is totally incompatible in the silver comex market to see tightness in supplies, record levels of silver eagle sales, high deliveries of silver in active months as well as higher deliveries than normally seen in non active delivery months, and finally record levels of open interest for the entire silver comex complex and yet see falling prices for that metal. Below you will see that gold deliveries now exceed 40 tonnes of gold, and silver is at 2.25 million oz. The holders of silver longs seem to be impervious to pain. How can they withstand the huge continual drubbing of silver and still stand in there? We will surely find out next week.
In other news, the big story occurred late in the day when Moody's downgraded the UK and thus another country is knocked off it's triple A rating.This sent the pound spiraling down. Spain, early Friday morning was greeted with a huge 10.2% deficit to GDP. The stock market (Ibex) rejoiced with a big gain of 165 points or 2.05%..Go figure!!!
Late last night another big withdrawal of gold of some 9.7 tonnes leaves the GLD gold vaults . Something big is going on over there, where Peter must pay Paul and that Paul may be Paul Chan.
In silver, the reverse, where 2.03 million oz was added.
Early in the session, the putback in the second LTRO was only 61 billion euros.
That set the Euro/USA currency cross down and it never regained.
On Sunday/Monday we will have the Italian election and see if a hung parliament is the order of the day.
Before we examine the major stories which will have an influence on gold and silver, let us now head over the comex and see how trading fared today:
Late last night another big withdrawal of gold of some 9.7 tonnes leaves the GLD gold vaults . Something big is going on over there, where Peter must pay Paul and that Paul may be Paul Chan.
In silver, the reverse, where 2.03 million oz was added.
Early in the session, the putback in the second LTRO was only 61 billion euros.
That set the Euro/USA currency cross down and it never regained.
On Sunday/Monday we will have the Italian election and see if a hung parliament is the order of the day.
Before we examine the major stories which will have an influence on gold and silver, let us now head over the comex and see how trading fared today:
The total comex gold open interest as expected rose by 62 contracts from 446,758 up to 446,820.
The comex has burnt too many players so not too many are entering the paper gold arena. The active contract month of February saw it's OI surprisingly rise by a huge 667 contracts from 1106 up to 1773. We had only 22 delivery notices filed yesterday so in essence we gained 689 contracts or a monstrous gain of 68,900 additional gold ounces will stand in February, The gain is 2.14 tonnes of gold. The non active March contract saw it's OI rise by 11 contracts up to 1276. The next big active delivery month is April and here the OI fell by 742 contracts from 262,295 down to 261,533. The estimated volume Friday was relatively weak at 130,504. The confirmed volume on Thursday was a huge 237,586.
The total silver comex OI stunned the living daylights out of our bankers by rising by a huge 1548 contracts up to 156,435 from Thursday's level of 154,887. No doubt a raid was signaled by the banking cartel once last night's silver OI was read to the boys. The non active February silver contract month saw it's OI fall from 11 contracts down to 2 for a loss of 9 contracts. We had 8 delivery notices filed on Thursday so in essence we lost 1 contract or 5000 oz of silver standing. We are 4 trading days away from first day notice on the March silver contract month. Here the OI fell by 7,142 contracts from 41,729 down to 34,587. The March OI is still very high and is a great concern to the bankers as they must force these silver leaves to either fall or roll into May. The estimated volume on the silver comex was good at 51,646. The confirmed volume on Thursday was enormous at 105,536.
The comex has burnt too many players so not too many are entering the paper gold arena. The active contract month of February saw it's OI surprisingly rise by a huge 667 contracts from 1106 up to 1773. We had only 22 delivery notices filed yesterday so in essence we gained 689 contracts or a monstrous gain of 68,900 additional gold ounces will stand in February, The gain is 2.14 tonnes of gold. The non active March contract saw it's OI rise by 11 contracts up to 1276. The next big active delivery month is April and here the OI fell by 742 contracts from 262,295 down to 261,533. The estimated volume Friday was relatively weak at 130,504. The confirmed volume on Thursday was a huge 237,586.
The total silver comex OI stunned the living daylights out of our bankers by rising by a huge 1548 contracts up to 156,435 from Thursday's level of 154,887. No doubt a raid was signaled by the banking cartel once last night's silver OI was read to the boys. The non active February silver contract month saw it's OI fall from 11 contracts down to 2 for a loss of 9 contracts. We had 8 delivery notices filed on Thursday so in essence we lost 1 contract or 5000 oz of silver standing. We are 4 trading days away from first day notice on the March silver contract month. Here the OI fell by 7,142 contracts from 41,729 down to 34,587. The March OI is still very high and is a great concern to the bankers as they must force these silver leaves to either fall or roll into May. The estimated volume on the silver comex was good at 51,646. The confirmed volume on Thursday was enormous at 105,536.
Comex gold/February contract month:
Feb 22.2013
Ounces
Withdrawals from Dealers Inventory in oz
nil
Withdrawals from Customer Inventory in oz
127,637.056 (HSBC, Scotia)
Deposits to the Dealer Inventory in oz
nil
Deposits to the Customer Inventory, in oz
59,321.10 (, HSBC)
No of oz served (contracts) today
1582 (158,200 oz)
No of oz to be served (notices)
191 (19,100) oz
Total monthly oz gold served (contracts) so far this month
12,872 (1,287,200 oz)
Total accumulative withdrawal of gold from the Dealers inventory this month
63,755.606
Total accumulative withdrawal of gold from the Customer inventory this month
210,692.31
We had huge activity at the gold vaults.
The dealer had 0 deposits and 0 withdrawals.
We had 1 big customer deposits:
1) Into HSBC: 59,321.1 oz
total deposit: 59,321.1 oz
We had 2 huge customer withdrawals and they were dandies:
i) Out of Scotia; 64,099.975 oz
ii) Out of HSBC; 63,537.081 oz
total customer (eligible) withdrawals 127,637.056 oz
We had 2 humdingers of adjustments:
i) out of JPMorgan vault, 35,233.300 oz was adjusted out of the customer account and into the dealer account at JPM
ii) out of HSBC vault, 99,710.512 oz was adjusted out of the customer account and into the dealer account at HSBC
Thus the dealer inventory rests tonight at 2.702 million oz (84.01) tonnes of gold.
The CME reported that we had 1582 notices filed for 158,200 oz of gold today. The total number of notices so far this month is thus 12,872 contracts x 100 oz per contract or 1,287,200 oz of gold. To determine how much will stand for February, I take the OI standing for February (1773) and subtract out Friday's notices (1582) which leaves me with 191 notices or 19,100 oz left to be served upon our longs.
Thus the total number of gold ounces standing in this active month of February is as follows:
1,287,200 oz (served ) + 19,100 oz (to be served upon) = 1,306,300 oz or 40.63 Tonnes.
we gained 68,900 oz of gold standing for the February delivery month and thus we have almost the amount standing from the beginning of the month. Somebody on Friday was in great need of gold.
February 21.2013: The February silver contract month
Silver
Ounces
Withdrawals from Dealers Inventory nil oz Withdrawals from Customer Inventory 474,597.610 oz (Brinks, CNT, JPM,Scotia) Deposits to the Dealer Inventory nil Deposits to the Customer Inventory 871,417.93 (JPM, CNT, No of oz served (contracts) 0 (nil oz) No of oz to be served (notices) 2 (10,000 oz) Total monthly oz silver served (contracts) 448 (2,240,000 oz) Total accumulative withdrawal of silver from the Dealers inventory this month 1,829,181.4 Total accumulative withdrawal of silver from the Customer inventory this month 2,821,925.9
Today, we had some activity inside the silver vaults.
we had 0 dealer deposit and 0 dealer withdrawal.
We had 2 customer deposits of silver:
i) Into CNT: 25,296.67 oz
ii) Into JPM: 846,121.26 oz
total customer deposit: 871,417.93 oz
we had 3 customer withdrawals:
i) out of Brinks: 172,864.07 oz
ii) Out of CNT: 240,420.86 oz
iii) Out of JPM: 992.80 oz
iv) Out of Scotia; 60,319.88 oz
we had 0 adjustments:
When you see massive deposits and withdrawals you know that there is turmoil inside the silver vaults.
Registered silver remains today at : 37.274 million oz
total of all silver: 160.813 million oz.
The CME reported that we had 0 notices filed for nil oz of silver for the February contract month. To obtain what is left to be served upon our longs, I take the OI standing for February (2) and subtract out today's notices (0) which leaves us with 2 notices or 10,000 oz left to be served upon our longs.
Thus the total number of silver ounces standing for delivery in silver is as follows:
2,240,000 oz (served) + 10,000 oz (to be served upon) = 2,250,000 oz
We lost 5,000 oz of silver standing for February.
total customer withdrawal: 474,597.610 oz
* * *
And now the COT report which is always from a Tuesday until Tuesday night.
Thus the report is from February 15 through until the Feb 22.
Let us now head over to the gold COT:
Gold COT Report - Futures
Large Speculators
Commercial
Total
Long
Short
Spreading
Long
Short
Long
Short
195,870
92,219
30,882
158,900
290,982
385,652
414,083
Change from Prior Reporting Period
1,929
25,113
6,361
4,327
-24,244
12,617
7,230
Traders
187
100
74
60
45
276
197
Small Speculators
Long
Short
Open Interest
61,638
33,207
447,290
-415
4,972
12,202
non reportable positions
Change from the previous reporting period
COT Gold Report - Positions as of
Tuesday, February 19, 2013
This is an explosive report.
Our large specs:
Those large specs that have been long in gold added 1929 contracts to their long side
Those large specs that have been short in gold added a monstrous 25,113 contracts to their short side.
Our commercials:Those commercials that have been long in gold added 4327 contracts to their long side
Those commercials that have been short in gold covered a monstrous 24,244 contracts and the supplier of that paper was the large specs.
Our small specs:
Those small specs that have been long in gold added a tiny 415 contracts to their long side
Those small specs that have been short in gold added another 4972 contracts to their short side.
Conclusion: hugely bullish for two reasons:
1: the commercials went net long by a wide margin of 28,571 contracts. This must be a record..
2. the large specs went hugely net short and they will be annihilated.
Gold will rise next week.
And now for our silver COT:
Silver COT Report: Futures
Large Speculators
Commercial
Long
Short
Spreading
Long
Short
39,057
12,601
34,909
54,208
92,164
-1,148
4,468
1,162
2,026
-6,815
Traders
74
40
54
39
39
Small Speculators
Open Interest
Total
Long
Short
155,353
Long
Short
27,179
15,679
128,174
139,674
496
3,721
2,536
2,040
-1,185
non reportable positions
Positions as of:
137
114
Tuesday, February 19, 2013
© SilverSeek.com
Silver COT Report: Futures
Large Speculators
Commercial
Our large specs:
Those large specs that have been long in silver decided to cough up 1148 contracts from their long side
Those large specs that have been short in silver added a huge 4468 contracts to their short side
Our commercials;
Those commercials that have been long in silver added 2026 contracts to their long side
Those commercials that have been short in silver from the beginning of time covered 6815 contracts from their short side.
Our small specs;
Those small specs that have been long in silver added 496 contracts to their long side
Those small specs that have been short in silver added a huge 3721 contracts to the short side.
Both large and small specs provided the necessary paper.
Conclusion: Hugely bullish for silver for again 2 reasons:
1. the commercials went net long by 8851 contracts
2. the specs went net short by a huge margin.
the specs will be annihilated.
Silver will advance in price but the commercials are very worried about the deliveries.
Let us see how this will play out next week.
* * *
selected news items.....
FEBRUARY 21ST, 2013 15:07
Gold’s Death Cross is a buy signal for China
Gold price has dropped below $1,600 for first time in six months
It is a treacherous moment for gold bugs.
The first whiff of future tightening from the US Federal Reserve has sent bullion into a nose-dive, triggering a much-feared “Death’s Cross” sell signal on gold futures.
Gold has dropped by over $100 an ounce in ten days, touching $1556 this morning. The HUI index of gold mining stocks broke down weeks ago – as so often leading gold itself by a few weeks – and has already crashed to levels last seen in 2009.
Goldman Sachs has cut its long-term forecast to $1,200. Credit Suisse and UBS are bearish.
Citigroup says the great bull market of the last 12 years is over. The “long cycle” has peaked. Economic recovery has yanked away the key support. So long as there… Read More
Spain's "Inverse Austerity" Leads To Multi-Year High Budget Deficit
Submitted by Tyler Durden on 02/22/2013 08:01 -0500
- Bad Bank
- Bond
- Budget Deficit
- European Central Bank
- European Union
- Gross Domestic Product
- Housing Starts
- Unemployment
For a country that laments the imposition of draconian "austerity" measures, now allegedly in their third year, which have so far seen government revenues slide, while spending rises, Spain sure has a problem with figuring out how it is supposed to work. Yet while the world was shocked back in December 2011 when Spain quietly announced its budget deficit would jump from 6% to 8.5%, before finally settling on 8.9% of GDP, today's announcement that the 2012 Spanish deficit was a whopping 10.2% of 2012 GDP hardly caused any commotion. Apologists will quickly say that this budget gap was boosted by the 3.2% increase due to setting up the bad bank, and rolling bank bailouts, and of course they will be right: just as all those economists were right to say that when one excludes all the negatives, US Q4 GDP was in fact positive. Or, indeed, as Goldman said to ignore this week's negative initial claims and new housing starts data: after all they too were negative. In fact, when one excludes all the negative trading days in 2013, the stock market has not had a down day yet. As for Spain, too bad the country can't have its broke bank cake and eat the budget surplus that would result "if only" things were different.
From Bloomberg:
Rescuing lenders including Bankia SA (BKIA) added 3.2 percentage points to the budget gap last year while rising unemployment and falling asset prices crimped government income, the commission said today. The deficit will narrow to 6.7 percent of gross domestic product this year before growing in 2014 to 7.2 percent -- more than twice its 2.8 percent target -- as temporary austerity measures expire.
European Union Economic and Monetary Affairs Commissioner Olli Rehn will comment on the economic outlook at a Brussels news conference starting at 11 a.m. as Spain lobbies for more time to reorder its finances. The nation has missed all its deficit targets since overspending surged to 11.2 percent of GDP in 2009 after the end of a decade-long property-fueled boom.
Spain escaped a full bailout last year after the European Central Bank pledged to backstop the single currency, causing the yield on its 10-year benchmark bond to drop about 250 basis points from a euro-era high of 7.75 percent in July.
The commission also said “the budgetary performance in 2012 was blighted by considerable shortfalls of both indirect and direct tax revenues.”
The commission raised its budget-deficit forecasts from November, when it saw shortfalls of 6 percent and 6.4 percent for 2013 and 2014. European officials left unchanged their view that the Spanish economy will contract by 1.4 percent this year and forecast a 0.8 percent expansion in 2014. Unemployment will rise to 27 percent this year from 25 percent in 2012 and remain at that level in 2014, the commission said.
Further confirming Spain's confusion vis-a-vis just what "austerity" is, and how it is supposed to work was the debt:
Spain’s debt load more than doubled to 88 percent of GDP last year compared with its pre-crisis level. It will surge to 101 percent next year, according to the commission.
Here's the thing: in austerity debt goes down, not up, so can we please stop attributing to austerity what simple political malfeasance, kickbacks and outright criminality will explain any day?
Finally, Europe's response - give it more time to do the opposite of what it is supposed to be doing:
In July, euro finance chiefs gave Spain an extra year to bring the shortfall back within the European limit of 3 percent of GDP. The plan was to achieve 6.3 percent in 2012, 4.5 percent this year before complying with the rules in 2014.
So to summarize: do more of what has failed to work for the past three years, in fact encourage Spain to do so, pretend the country is cutting its deficit when it is in fact ballooning it, and avoid all structural reforms. Surely this will end well in a time when the banks are supposedly repaying the ECB's excess trillions in liquidity (if at a far lower pace than originally expected). And when the ECB's house of cards support beneath the European bond market fails next, everyone will again be absolutely shocked to find that things are worse than ever before.
Comments from the Italian/Reuters/WallStreet/Financial times/ N.Y.Times/newspapers on the Italian election:
Italy:
Monti's comments further dim prospects for coalition with center-left: The FT noted that an outburst by outgoing technocrat Prime Minister Mario Monti on Thursday seemed to further dim the prospects for a coalition with the center-left. Monti branded his center-left opponents as communist "reincarnations". The paper added that earlier, Freedom Party head Nichi Vendola dismissed the chances of forming a coalition that would include Monti and his centrists. Recall that analysts believe that such a coalition represents the best chance for Italy to maintain its structural reform push.
Last flurry of election stories do not break any new ground:
"Leftist may hold key to stable rule in Italy": Reuters
"Italy risks voting for more instability": FT
"Italian Voters Face Chances of Chaotic Results": WSJ
"Monti’s Austerity Pushes Italians Toward Parliamentary Upheaval": Bloomberg
"Plastered, Rome Is Ready for the Elections": WSJ
"The Rise of a Protest Movement Shows the Depth of Italy’s Disillusionment": NYT
Farewell Eng£AAAnd: Moody's Downgrades The UK From AAA To Aa1
Submitted by Tyler Durden on 02/22/2013 16:36 -0500
- Bank of England
- Bond
- Global Economy
- Gross Domestic Product
- Monetary Policy
- Rating Agency
- ratings
- recovery
- Reserve Currency
- Sovereign Debt
- Sovereigns
- Tax Revenue
- United Kingdom
And another AAA-club member quietly exits not with a bang but a whimper:
- MOODY’S DOWNGRADES UK’S GOVERNMENT BOND RATING TO Aa1 FROM AAA
Someone must have clued Moody's on the fact that the UK is about to have its very own Goldman banker, which means consolidated debt/GDP will soon need four digits. In other news, every lawyer in the UK is now celebrating because come Monday Moody's will be sued to smithereens.
Cable not happy as it tests 31 month lows, which however also explains why the Moody's action has another name: accelerated cable devaluation. Those who heeded our call to short Cable when Goldman's Mark Carney was appointed are now 1000 pips richer. Also, please sacrifice a lamb at the altar of Goldman: It's the polite thing to do.
Full report below:
see zero hedge for the full report.
By Midyear, Europe 'Can No Longer Live With This Euro'
Submitted by testosteronepit on 02/22/2013 12:27 -0500
- Central Banks
- European Central Bank
- Eurozone
- France
- Germany
- Monetary Policy
- Reality
- Sovereign Debt
- Switzerland
- Yen
Wolf Richter www.testosteronepit.com www.amazon.com/author/wolfrichter
“I’m sitting on cash,” Felix Zulauf said when he was asked in aninterview where he was putting his money. With decades of asset management experience under his belt, he’d founded Zulauf Asset Management in Switzerland in 1990. But now he was worried—and has turned negative on just about everything.
In Europe, growth would be weak. In the US, “everyone” was expecting decent growth, but he saw the possibility of a “great disappointment.” Developing nations wouldn’t grow as fast as in recent years. The Chinese were taking their money out of the country. “They have antennas for problems at home,” he said. The markets were expecting the world economy to recover, but he suspected that neither the economy nor corporate earnings would develop as hoped. Once the distance between “wish” and “reality” became apparent, “it could cause a crash.”
Timeframe? This year. Optimism might hang in there for a while; the second quarter would be more problematic. Over time, downdrafts in some markets could reach 20% to 30%. Despite the incessant insistence by Eurozone politicians that the worst was over, he didn’t see “any normalization.” The structural problems were still there, they’ve only been hidden, “drowned temporarily in an ocean of new liquidity.”
“Look at the economic data,” he said. “There is no visible improvement.” As if to document his claim, the Eurozone Purchasing Managers Index was released. It dropped again after three months of upticks that had spawned gobs of hope that “the worst was over.” Business activity has now declined for a year and a half. New orders, a precursor for future activity, fell for the 19th month in a row. While Germany was barely inpositive territory, France’s PMI crashed to a low not seen since March 2009 and was on a similar trajectory as in 2008—when it was heading into the trough of the financial crisis!
Sure, the financial markets calmed down, but only because the ECB pulled the “emergency brake” by declaring that it would finance bankrupt states so that the euro would survive. It was a signal for the banks to buy sovereign debt. Borrowing from the ECB at 1%, buying Spanish or Italian debt with yields above 5%, while the ECB took all the risks—”a great business for the banks,” he said. As a consequence, the banks were once again loaded up with sovereign debt. “The problems weren’t solved but kicked down the road,” he said.
Politicians would muddle through. Government debt would continue to rise. But next time something breaks, the pressure would come from citizens, he said. Standards of living have been deteriorating. Many people have lost their jobs. Real wages have declined. “We’ve sent millions into poverty!” People were discontent. And it was conceivable that “someday, they could go on the street and attack these policies.”
But, but, but... hasn’t Chancellor Angela Merkel emphasized that the euro would be important for peace in Europe? “The euro doesn’t create peace,” he said, “but discontent.”
Countries were devaluing their currencies to gain an advantage. This “race to the bottom” could escalate to where governments would impose limits on free trade. The devaluation of the yen would hit other countries. In Germany, it would pressure automakers, machine-tool makers, and others. By midyear, he said, “Europe will reach a point when it can no longer live with this euro.”
It would have to be devalued. France’s President François Hollande was already agitating for it. “And he has to because the French economy is in a catastrophic condition. It’s no longer competitive. France is becoming the second Spain.”
But didn’t the ECB emphasize that the exchange rate was irrelevant for monetary policy? And wasn’t the Bundesbank resisting devaluation?
“The policies of the Bundesbank are unfortunately dead,” he said, and its representatives were only “allowed to bark, not bite.” Monetary policy at the ECB was made by Draghi, “an Italian.” He’d push for the “lira-ization of the euro,” he said, “not because he likes it, but because he has no choice.” It was the only way to keep the euro glued together. “Mrs. Merkel knows that too, but she cannot tell the truth; otherwise citizens would notice what’s going on.”
Given this dreary scenario, what could investors do? Long-term, equities were a good choice, he said, but this wasn’t the moment to buy.
Gold? That it was down from its peak a year and half ago was “normal,” he said. Currently, gold funds were forced to liquidate, which could cause sudden drops, but it also signified “the end of a movement.” He expected the correction to end by this spring. “Long-term, the uptrend is intact,” he said.
Bonds? They had a great run for 30 years but were now “totally overvalued”—in part due to central banks that had bought $10 trillion in debt “with freshly printed money” over the past five years. Debt markets were completely distorted, but central banks would be able to hold the bubble together for “a while longer.” So he admitted, “Last summer, I sold all long-term debt.”
But where the heck was he putting his money now? That’s when he made his sobering remark, “I’m sitting on cash.”
The Fed is growing deposits far faster than banks can deploy them, or than the economy can use them. It is growing them far faster than anybody wants or needs. And now there are “hundreds of billions of dollars of potential fuel unused,” as Bloomberg pointed out. A potential for big problems. Read....The Fed Is Blowing A Dangerous Bank Deposit Bubble.
The Best Thing to Happen to America in a Long Time
Submitted by Bruce Krasting on 02/22/2013 11:08 -0500
- Federal Tax
- Gross Domestic Product
- None
- Reality
- Recession
- Social Security Trust Fund
- Unemployment
- Withholding taxes
It’s hard to describe how happy I am to see Walmart facing a slump. I’m delighted to see that the cause of Walmart’s problem is the 2% increase in Social Security withholding taxes.
It’s not just Walmart that is feeling the pinch from higher payroll taxes. According to today’s WSJ (link) damn near every company that has a retail sales base is getting nicked.
We are witnessing what happens when tax rates go up. There is (new) definitive evidence that raising taxes decreases consumption. That notion is an old one, but I think the reality that is now being proven out in real time has to make a difference in how people think about taxes, government spending and the real economy.
Who is responsible for the increase in payroll taxes that is causing all the damage? Don’t blame the evil Republicans for this one. The liberal wing of the Democratic Party INSISTED that payroll taxes had to go up on January 1. Want to blame someone for the slump in retail? Blame Harry Reid (D-NV).
Why would liberal Democrats want to whack their base with higher taxes? Easy answer. Because they love Social Security more than anything else. They would sacrifice anything, including the economy and their political base, to protect SS from the criticism that it was no longer “Off budget and self financed”.
What an idiotic position. And now those who fought to get the full 12.4% tax reinstated are going to have to pay the price. The evidence is overwhelming; higher payroll taxes hurt the economy.
I've felt alone the past 4 years while writing articles on a weekly basis trying desperately to make the point that SS is at the heart of America’s economic problems. I have been vindicated.The ranks of those who will point fingers at SS is going to swell. Those opposed are now going to include all of the big retailers (and their shareholders). That will be a tremendous boost for those who are crying for substantial changes in America’s biggest entitlement program. I can’t wait for ‘them” to publicly come on-board to the opposition.
We are living with a program that was designed 75 years ago. Everything has changed – but not SS. The assumptions that were used in the 1930’s are no longer valid today. The ratio of workers to beneficiaries has fallen by 70%. The ratio of worker’s income to GDP has fallen steadily (the rise of the robots). We have substantial changes in expected life. The most significant challenge to SS is the Baby Boomers. Not one of the Boomers was a twinkle in the eye when SS was created.
1935 Plymouth - the year SS was created
America is driving a 77-year-old car. The car is dangerous. It has none of the modern safety devices; it burns leaded gas and has asbestos brake pads. It weighs twice as much as a new car, and only gets 8 miles to the gallon. Yet a small portion of the Deciders in D.C. have blocked any chance of bringing SS up to date, and making it safe to drive for the next 20 years.
The Social Security Trust Fund has said that to “fix” SS would require an immediate and permanent increase in PR taxes of 2.2% (above the 12.4% today). Based on the evidence of the past few months it’s easy to conclude that a tax increase of that magnitude would push the economy into a recession – Once in a slump, the economy would be hard pressed to recover.
Not only would higher PR taxes kill the economy, it would hurt lower paid workers the hardest. The evidence from Walmart reconfirms the fact that SS taxes are very regressive. They hurt the base of people that the liberals claim they are trying to protect. How can Senator Reid defend that outcome? He can’t.
There is an alternative. It would mean that we would have to junk the old clunker and get new, safe, energy efficient car. The new car would be expensive, but the payoff would be worth it.
SS taxes can’t be eliminated. The program is too big and very hard to unwind and IT IS needed. But SS taxes could be reduced by 3% if changes were made (Employer taxes would remain the same, worker’s payroll tax would fall from 6 to 3%).
The changes required to achieve the reduction in taxes have been discussed for years. There has to be changes in age eligibility over a longer period of time. Changes to inflation adjustments have to be made. There has to be an immediate means tax on benefits to fill the Baby Boomer bucket. The means test HAS to be based on both income AND assets. You can’t be a multimillionaire and get SS checks. That has to stop.Now. SS is, and always has been insurance. If you don’t need the insurance, you don’t get paid.
IMHO if individual payroll taxes were cut 50% from the current level, the economy would prosper. Unemployment would fall, incomes would rise. Federal tax revenues would increase, in the process, the deficits would fall. A permanent reduction in payroll taxes is the only chance I see for a sustained expansion of the economy.
So to the Execs at Walmart, and all of those other retailers that are feeling the SS pinch, I say "Welcome to the club". You can be the wind behind the sails for the changes that are needed. Just this once I will say that what is good for Walmart, is also good for America.
Note: Stan Druckenmiller (ex Duquesne Capital) was on TV last night with Maria Bartiromo . Stan is a very sharp guy. He said the same as I have. It’s idiotic that he gets a check from SS. The $200k he might get back in his life is not going to change his spending one bit. But it would make a world of difference to those who are making $40k a year. The Zero Hedge link to the Druckenmiller interview: Link
Ounces
| |
Withdrawals from Dealers Inventory in oz
|
nil
|
Withdrawals from Customer Inventory in oz
|
127,637.056 (HSBC, Scotia)
|
Deposits to the Dealer Inventory in oz
|
nil
|
Deposits to the Customer Inventory, in oz
| 59,321.10 (, HSBC) |
No of oz served (contracts) today
|
1582 (158,200 oz)
|
No of oz to be served (notices)
|
191 (19,100) oz
|
Total monthly oz gold served (contracts) so far this month
|
12,872 (1,287,200 oz)
|
Total accumulative withdrawal of gold from the Dealers inventory this month
|
63,755.606
|
Total accumulative withdrawal of gold from the Customer inventory this month
| 210,692.31 |
We had huge activity at the gold vaults.
The dealer had 0 deposits and 0 withdrawals.
We had 1 big customer deposits:
1) Into HSBC: 59,321.1 oz
total deposit: 59,321.1 oz
We had 2 huge customer withdrawals and they were dandies:
i) Out of Scotia; 64,099.975 oz
ii) Out of HSBC; 63,537.081 oz
1) Into HSBC: 59,321.1 oz
total deposit: 59,321.1 oz
We had 2 huge customer withdrawals and they were dandies:
i) Out of Scotia; 64,099.975 oz
ii) Out of HSBC; 63,537.081 oz
total customer (eligible) withdrawals 127,637.056 oz
We had 2 humdingers of adjustments:
i) out of JPMorgan vault, 35,233.300 oz was adjusted out of the customer account and into the dealer account at JPM
ii) out of HSBC vault, 99,710.512 oz was adjusted out of the customer account and into the dealer account at HSBC
i) out of JPMorgan vault, 35,233.300 oz was adjusted out of the customer account and into the dealer account at JPM
ii) out of HSBC vault, 99,710.512 oz was adjusted out of the customer account and into the dealer account at HSBC
Thus the dealer inventory rests tonight at 2.702 million oz (84.01) tonnes of gold.
The CME reported that we had 1582 notices filed for 158,200 oz of gold today. The total number of notices so far this month is thus 12,872 contracts x 100 oz per contract or 1,287,200 oz of gold. To determine how much will stand for February, I take the OI standing for February (1773) and subtract out Friday's notices (1582) which leaves me with 191 notices or 19,100 oz left to be served upon our longs.
Thus the total number of gold ounces standing in this active month of February is as follows:
1,287,200 oz (served ) + 19,100 oz (to be served upon) = 1,306,300 oz or 40.63 Tonnes.
we gained 68,900 oz of gold standing for the February delivery month and thus we have almost the amount standing from the beginning of the month. Somebody on Friday was in great need of gold.
Thus the total number of gold ounces standing in this active month of February is as follows:
1,287,200 oz (served ) + 19,100 oz (to be served upon) = 1,306,300 oz or 40.63 Tonnes.
we gained 68,900 oz of gold standing for the February delivery month and thus we have almost the amount standing from the beginning of the month. Somebody on Friday was in great need of gold.
February 21.2013: The February silver contract month
| Silver |
Ounces
|
| Withdrawals from Dealers Inventory | nil oz |
| Withdrawals from Customer Inventory | 474,597.610 oz (Brinks, CNT, JPM,Scotia) |
| Deposits to the Dealer Inventory | nil |
| Deposits to the Customer Inventory | 871,417.93 (JPM, CNT, |
| No of oz served (contracts) | 0 (nil oz) |
| No of oz to be served (notices) | 2 (10,000 oz) |
| Total monthly oz silver served (contracts) | 448 (2,240,000 oz) |
| Total accumulative withdrawal of silver from the Dealers inventory this month | 1,829,181.4 |
| Total accumulative withdrawal of silver from the Customer inventory this month | 2,821,925.9 |
Today, we had some activity inside the silver vaults.
we had 0 dealer deposit and 0 dealer withdrawal.
We had 2 customer deposits of silver:
i) Into CNT: 25,296.67 oz
ii) Into JPM: 846,121.26 oz
total customer deposit: 871,417.93 oz
we had 3 customer withdrawals:
i) out of Brinks: 172,864.07 oz
ii) Out of CNT: 240,420.86 oz
iii) Out of JPM: 992.80 oz
iv) Out of Scotia; 60,319.88 oz
i) Into CNT: 25,296.67 oz
ii) Into JPM: 846,121.26 oz
total customer deposit: 871,417.93 oz
we had 3 customer withdrawals:
i) out of Brinks: 172,864.07 oz
ii) Out of CNT: 240,420.86 oz
iii) Out of JPM: 992.80 oz
iv) Out of Scotia; 60,319.88 oz
we had 0 adjustments:
When you see massive deposits and withdrawals you know that there is turmoil inside the silver vaults.
Registered silver remains today at : 37.274 million oz
total of all silver: 160.813 million oz.
The CME reported that we had 0 notices filed for nil oz of silver for the February contract month. To obtain what is left to be served upon our longs, I take the OI standing for February (2) and subtract out today's notices (0) which leaves us with 2 notices or 10,000 oz left to be served upon our longs.
Thus the total number of silver ounces standing for delivery in silver is as follows:
2,240,000 oz (served) + 10,000 oz (to be served upon) = 2,250,000 oz
We lost 5,000 oz of silver standing for February.
Thus the total number of silver ounces standing for delivery in silver is as follows:
2,240,000 oz (served) + 10,000 oz (to be served upon) = 2,250,000 oz
We lost 5,000 oz of silver standing for February.
total customer withdrawal: 474,597.610 oz
* * *
And now the COT report which is always from a Tuesday until Tuesday night.
Thus the report is from February 15 through until the Feb 22.
Let us now head over to the gold COT:
Gold COT Report - Futures
| ||||||
Large Speculators
|
Commercial
|
Total
| ||||
Long
|
Short
|
Spreading
|
Long
|
Short
|
Long
|
Short
|
195,870
|
92,219
|
30,882
|
158,900
|
290,982
|
385,652
|
414,083
|
Change from Prior Reporting Period
| ||||||
1,929
|
25,113
|
6,361
|
4,327
|
-24,244
|
12,617
|
7,230
|
Traders
| ||||||
187
|
100
|
74
|
60
|
45
|
276
|
197
|
Small Speculators
| ||||||
Long
|
Short
|
Open Interest
| ||||
61,638
|
33,207
|
447,290
| ||||
-415
|
4,972
|
12,202
| ||||
non reportable positions
|
Change from the previous reporting period
| |||||
COT Gold Report - Positions as of
|
Tuesday, February 19, 2013
| |||||
This is an explosive report.
Those large specs that have been long in gold added 1929 contracts to their long side
Those large specs that have been short in gold added a monstrous 25,113 contracts to their short side.
Our commercials:Those commercials that have been long in gold added 4327 contracts to their long side
Our small specs:
Those small specs that have been long in gold added a tiny 415 contracts to their long side
Those small specs that have been short in gold added another 4972 contracts to their short side.
Conclusion: hugely bullish for two reasons:
1: the commercials went net long by a wide margin of 28,571 contracts. This must be a record..
2. the large specs went hugely net short and they will be annihilated.
Gold will rise next week.
And now for our silver COT:
Silver COT Report: Futures
| |||||
Large Speculators
|
Commercial
| ||||
Long
|
Short
|
Spreading
|
Long
|
Short
| |
39,057
|
12,601
|
34,909
|
54,208
|
92,164
| |
-1,148
|
4,468
|
1,162
|
2,026
|
-6,815
| |
Traders
| |||||
74
|
40
|
54
|
39
|
39
| |
Small Speculators
|
Open Interest
|
Total
| |||
Long
|
Short
|
155,353
|
Long
|
Short
| |
27,179
|
15,679
|
128,174
|
139,674
| ||
496
|
3,721
|
2,536
|
2,040
|
-1,185
| |
non reportable positions
|
Positions as of:
|
137
|
114
| ||
Tuesday, February 19, 2013
|
© SilverSeek.com
| ||||
Silver COT Report: Futures
| |||||
Large Speculators
|
Commercial
| ||||
Our large specs:
Those large specs that have been long in silver decided to cough up 1148 contracts from their long side
Those large specs that have been short in silver added a huge 4468 contracts to their short side
Our commercials;
Those commercials that have been long in silver added 2026 contracts to their long side
Those commercials that have been short in silver from the beginning of time covered 6815 contracts from their short side.
Our small specs;
Those small specs that have been long in silver added 496 contracts to their long side
Those small specs that have been short in silver added a huge 3721 contracts to the short side.
Both large and small specs provided the necessary paper.
Conclusion: Hugely bullish for silver for again 2 reasons:
1. the commercials went net long by 8851 contracts
2. the specs went net short by a huge margin.
the specs will be annihilated.
Silver will advance in price but the commercials are very worried about the deliveries.Let us see how this will play out next week.
* * *
selected news items.....
FEBRUARY 21ST, 2013 15:07
Gold’s Death Cross is a buy signal for China
Gold price has dropped below $1,600 for first time in six months
It is a treacherous moment for gold bugs.
The first whiff of future tightening from the US Federal Reserve has sent bullion into a nose-dive, triggering a much-feared “Death’s Cross” sell signal on gold futures.
Gold has dropped by over $100 an ounce in ten days, touching $1556 this morning. The HUI index of gold mining stocks broke down weeks ago – as so often leading gold itself by a few weeks – and has already crashed to levels last seen in 2009.
Goldman Sachs has cut its long-term forecast to $1,200. Credit Suisse and UBS are bearish.
Citigroup says the great bull market of the last 12 years is over. The “long cycle” has peaked. Economic recovery has yanked away the key support. So long as there… Read More
Spain's "Inverse Austerity" Leads To Multi-Year High Budget Deficit
- Bad Bank
- Bond
- Budget Deficit
- European Central Bank
- European Union
- Gross Domestic Product
- Housing Starts
- Unemployment
For a country that laments the imposition of draconian "austerity" measures, now allegedly in their third year, which have so far seen government revenues slide, while spending rises, Spain sure has a problem with figuring out how it is supposed to work. Yet while the world was shocked back in December 2011 when Spain quietly announced its budget deficit would jump from 6% to 8.5%, before finally settling on 8.9% of GDP, today's announcement that the 2012 Spanish deficit was a whopping 10.2% of 2012 GDP hardly caused any commotion. Apologists will quickly say that this budget gap was boosted by the 3.2% increase due to setting up the bad bank, and rolling bank bailouts, and of course they will be right: just as all those economists were right to say that when one excludes all the negatives, US Q4 GDP was in fact positive. Or, indeed, as Goldman said to ignore this week's negative initial claims and new housing starts data: after all they too were negative. In fact, when one excludes all the negative trading days in 2013, the stock market has not had a down day yet. As for Spain, too bad the country can't have its broke bank cake and eat the budget surplus that would result "if only" things were different.
From Bloomberg:
Rescuing lenders including Bankia SA (BKIA) added 3.2 percentage points to the budget gap last year while rising unemployment and falling asset prices crimped government income, the commission said today. The deficit will narrow to 6.7 percent of gross domestic product this year before growing in 2014 to 7.2 percent -- more than twice its 2.8 percent target -- as temporary austerity measures expire.European Union Economic and Monetary Affairs Commissioner Olli Rehn will comment on the economic outlook at a Brussels news conference starting at 11 a.m. as Spain lobbies for more time to reorder its finances. The nation has missed all its deficit targets since overspending surged to 11.2 percent of GDP in 2009 after the end of a decade-long property-fueled boom.Spain escaped a full bailout last year after the European Central Bank pledged to backstop the single currency, causing the yield on its 10-year benchmark bond to drop about 250 basis points from a euro-era high of 7.75 percent in July.The commission also said “the budgetary performance in 2012 was blighted by considerable shortfalls of both indirect and direct tax revenues.”The commission raised its budget-deficit forecasts from November, when it saw shortfalls of 6 percent and 6.4 percent for 2013 and 2014. European officials left unchanged their view that the Spanish economy will contract by 1.4 percent this year and forecast a 0.8 percent expansion in 2014. Unemployment will rise to 27 percent this year from 25 percent in 2012 and remain at that level in 2014, the commission said.Further confirming Spain's confusion vis-a-vis just what "austerity" is, and how it is supposed to work was the debt:Spain’s debt load more than doubled to 88 percent of GDP last year compared with its pre-crisis level. It will surge to 101 percent next year, according to the commission.Here's the thing: in austerity debt goes down, not up, so can we please stop attributing to austerity what simple political malfeasance, kickbacks and outright criminality will explain any day?Finally, Europe's response - give it more time to do the opposite of what it is supposed to be doing:In July, euro finance chiefs gave Spain an extra year to bring the shortfall back within the European limit of 3 percent of GDP. The plan was to achieve 6.3 percent in 2012, 4.5 percent this year before complying with the rules in 2014.So to summarize: do more of what has failed to work for the past three years, in fact encourage Spain to do so, pretend the country is cutting its deficit when it is in fact ballooning it, and avoid all structural reforms. Surely this will end well in a time when the banks are supposedly repaying the ECB's excess trillions in liquidity (if at a far lower pace than originally expected). And when the ECB's house of cards support beneath the European bond market fails next, everyone will again be absolutely shocked to find that things are worse than ever before.
Comments from the Italian/Reuters/WallStreet/Financial times/ N.Y.Times/newspapers on the Italian election:
Italy:
Monti's comments further dim prospects for coalition with center-left: The FT noted that an outburst by outgoing technocrat Prime Minister Mario Monti on Thursday seemed to further dim the prospects for a coalition with the center-left. Monti branded his center-left opponents as communist "reincarnations". The paper added that earlier, Freedom Party head Nichi Vendola dismissed the chances of forming a coalition that would include Monti and his centrists. Recall that analysts believe that such a coalition represents the best chance for Italy to maintain its structural reform push.
Last flurry of election stories do not break any new ground:
"Leftist may hold key to stable rule in Italy": Reuters
"Italy risks voting for more instability": FT
"Italian Voters Face Chances of Chaotic Results": WSJ
"Monti’s Austerity Pushes Italians Toward Parliamentary Upheaval": Bloomberg
"Plastered, Rome Is Ready for the Elections": WSJ
"The Rise of a Protest Movement Shows the Depth of Italy’s Disillusionment": NYT
Farewell Eng£AAAnd: Moody's Downgrades The UK From AAA To Aa1
- Bank of England
- Bond
- Global Economy
- Gross Domestic Product
- Monetary Policy
- Rating Agency
- ratings
- recovery
- Reserve Currency
- Sovereign Debt
- Sovereigns
- Tax Revenue
- United Kingdom
And another AAA-club member quietly exits not with a bang but a whimper:
- MOODY’S DOWNGRADES UK’S GOVERNMENT BOND RATING TO Aa1 FROM AAA
Someone must have clued Moody's on the fact that the UK is about to have its very own Goldman banker, which means consolidated debt/GDP will soon need four digits. In other news, every lawyer in the UK is now celebrating because come Monday Moody's will be sued to smithereens.
Cable not happy as it tests 31 month lows, which however also explains why the Moody's action has another name: accelerated cable devaluation. Those who heeded our call to short Cable when Goldman's Mark Carney was appointed are now 1000 pips richer. Also, please sacrifice a lamb at the altar of Goldman: It's the polite thing to do.
Full report below:
see zero hedge for the full report.
By Midyear, Europe 'Can No Longer Live With This Euro'
- Central Banks
- European Central Bank
- Eurozone
- France
- Germany
- Monetary Policy
- Reality
- Sovereign Debt
- Switzerland
- Yen
Wolf Richter www.testosteronepit.com www.amazon.com/author/wolfrichter
“I’m sitting on cash,” Felix Zulauf said when he was asked in aninterview where he was putting his money. With decades of asset management experience under his belt, he’d founded Zulauf Asset Management in Switzerland in 1990. But now he was worried—and has turned negative on just about everything.
In Europe, growth would be weak. In the US, “everyone” was expecting decent growth, but he saw the possibility of a “great disappointment.” Developing nations wouldn’t grow as fast as in recent years. The Chinese were taking their money out of the country. “They have antennas for problems at home,” he said. The markets were expecting the world economy to recover, but he suspected that neither the economy nor corporate earnings would develop as hoped. Once the distance between “wish” and “reality” became apparent, “it could cause a crash.”
Timeframe? This year. Optimism might hang in there for a while; the second quarter would be more problematic. Over time, downdrafts in some markets could reach 20% to 30%. Despite the incessant insistence by Eurozone politicians that the worst was over, he didn’t see “any normalization.” The structural problems were still there, they’ve only been hidden, “drowned temporarily in an ocean of new liquidity.”
“Look at the economic data,” he said. “There is no visible improvement.” As if to document his claim, the Eurozone Purchasing Managers Index was released. It dropped again after three months of upticks that had spawned gobs of hope that “the worst was over.” Business activity has now declined for a year and a half. New orders, a precursor for future activity, fell for the 19th month in a row. While Germany was barely inpositive territory, France’s PMI crashed to a low not seen since March 2009 and was on a similar trajectory as in 2008—when it was heading into the trough of the financial crisis!
Sure, the financial markets calmed down, but only because the ECB pulled the “emergency brake” by declaring that it would finance bankrupt states so that the euro would survive. It was a signal for the banks to buy sovereign debt. Borrowing from the ECB at 1%, buying Spanish or Italian debt with yields above 5%, while the ECB took all the risks—”a great business for the banks,” he said. As a consequence, the banks were once again loaded up with sovereign debt. “The problems weren’t solved but kicked down the road,” he said.
Politicians would muddle through. Government debt would continue to rise. But next time something breaks, the pressure would come from citizens, he said. Standards of living have been deteriorating. Many people have lost their jobs. Real wages have declined. “We’ve sent millions into poverty!” People were discontent. And it was conceivable that “someday, they could go on the street and attack these policies.”
But, but, but... hasn’t Chancellor Angela Merkel emphasized that the euro would be important for peace in Europe? “The euro doesn’t create peace,” he said, “but discontent.”
Countries were devaluing their currencies to gain an advantage. This “race to the bottom” could escalate to where governments would impose limits on free trade. The devaluation of the yen would hit other countries. In Germany, it would pressure automakers, machine-tool makers, and others. By midyear, he said, “Europe will reach a point when it can no longer live with this euro.”
It would have to be devalued. France’s President François Hollande was already agitating for it. “And he has to because the French economy is in a catastrophic condition. It’s no longer competitive. France is becoming the second Spain.”
But didn’t the ECB emphasize that the exchange rate was irrelevant for monetary policy? And wasn’t the Bundesbank resisting devaluation?
“The policies of the Bundesbank are unfortunately dead,” he said, and its representatives were only “allowed to bark, not bite.” Monetary policy at the ECB was made by Draghi, “an Italian.” He’d push for the “lira-ization of the euro,” he said, “not because he likes it, but because he has no choice.” It was the only way to keep the euro glued together. “Mrs. Merkel knows that too, but she cannot tell the truth; otherwise citizens would notice what’s going on.”
Given this dreary scenario, what could investors do? Long-term, equities were a good choice, he said, but this wasn’t the moment to buy.
Gold? That it was down from its peak a year and half ago was “normal,” he said. Currently, gold funds were forced to liquidate, which could cause sudden drops, but it also signified “the end of a movement.” He expected the correction to end by this spring. “Long-term, the uptrend is intact,” he said.
Bonds? They had a great run for 30 years but were now “totally overvalued”—in part due to central banks that had bought $10 trillion in debt “with freshly printed money” over the past five years. Debt markets were completely distorted, but central banks would be able to hold the bubble together for “a while longer.” So he admitted, “Last summer, I sold all long-term debt.”
But where the heck was he putting his money now? That’s when he made his sobering remark, “I’m sitting on cash.”
The Fed is growing deposits far faster than banks can deploy them, or than the economy can use them. It is growing them far faster than anybody wants or needs. And now there are “hundreds of billions of dollars of potential fuel unused,” as Bloomberg pointed out. A potential for big problems. Read....The Fed Is Blowing A Dangerous Bank Deposit Bubble.
The Best Thing to Happen to America in a Long Time
- Federal Tax
- Gross Domestic Product
- None
- Reality
- Recession
- Social Security Trust Fund
- Unemployment
- Withholding taxes
It’s hard to describe how happy I am to see Walmart facing a slump. I’m delighted to see that the cause of Walmart’s problem is the 2% increase in Social Security withholding taxes.
It’s not just Walmart that is feeling the pinch from higher payroll taxes. According to today’s WSJ (link) damn near every company that has a retail sales base is getting nicked.
We are witnessing what happens when tax rates go up. There is (new) definitive evidence that raising taxes decreases consumption. That notion is an old one, but I think the reality that is now being proven out in real time has to make a difference in how people think about taxes, government spending and the real economy.
Who is responsible for the increase in payroll taxes that is causing all the damage? Don’t blame the evil Republicans for this one. The liberal wing of the Democratic Party INSISTED that payroll taxes had to go up on January 1. Want to blame someone for the slump in retail? Blame Harry Reid (D-NV).
Why would liberal Democrats want to whack their base with higher taxes? Easy answer. Because they love Social Security more than anything else. They would sacrifice anything, including the economy and their political base, to protect SS from the criticism that it was no longer “Off budget and self financed”.
What an idiotic position. And now those who fought to get the full 12.4% tax reinstated are going to have to pay the price. The evidence is overwhelming; higher payroll taxes hurt the economy.
I've felt alone the past 4 years while writing articles on a weekly basis trying desperately to make the point that SS is at the heart of America’s economic problems. I have been vindicated.The ranks of those who will point fingers at SS is going to swell. Those opposed are now going to include all of the big retailers (and their shareholders). That will be a tremendous boost for those who are crying for substantial changes in America’s biggest entitlement program. I can’t wait for ‘them” to publicly come on-board to the opposition.
We are living with a program that was designed 75 years ago. Everything has changed – but not SS. The assumptions that were used in the 1930’s are no longer valid today. The ratio of workers to beneficiaries has fallen by 70%. The ratio of worker’s income to GDP has fallen steadily (the rise of the robots). We have substantial changes in expected life. The most significant challenge to SS is the Baby Boomers. Not one of the Boomers was a twinkle in the eye when SS was created.
1935 Plymouth - the year SS was created
America is driving a 77-year-old car. The car is dangerous. It has none of the modern safety devices; it burns leaded gas and has asbestos brake pads. It weighs twice as much as a new car, and only gets 8 miles to the gallon. Yet a small portion of the Deciders in D.C. have blocked any chance of bringing SS up to date, and making it safe to drive for the next 20 years.
The Social Security Trust Fund has said that to “fix” SS would require an immediate and permanent increase in PR taxes of 2.2% (above the 12.4% today). Based on the evidence of the past few months it’s easy to conclude that a tax increase of that magnitude would push the economy into a recession – Once in a slump, the economy would be hard pressed to recover.
Not only would higher PR taxes kill the economy, it would hurt lower paid workers the hardest. The evidence from Walmart reconfirms the fact that SS taxes are very regressive. They hurt the base of people that the liberals claim they are trying to protect. How can Senator Reid defend that outcome? He can’t.
There is an alternative. It would mean that we would have to junk the old clunker and get new, safe, energy efficient car. The new car would be expensive, but the payoff would be worth it.
SS taxes can’t be eliminated. The program is too big and very hard to unwind and IT IS needed. But SS taxes could be reduced by 3% if changes were made (Employer taxes would remain the same, worker’s payroll tax would fall from 6 to 3%).
The changes required to achieve the reduction in taxes have been discussed for years. There has to be changes in age eligibility over a longer period of time. Changes to inflation adjustments have to be made. There has to be an immediate means tax on benefits to fill the Baby Boomer bucket. The means test HAS to be based on both income AND assets. You can’t be a multimillionaire and get SS checks. That has to stop.Now. SS is, and always has been insurance. If you don’t need the insurance, you don’t get paid.
IMHO if individual payroll taxes were cut 50% from the current level, the economy would prosper. Unemployment would fall, incomes would rise. Federal tax revenues would increase, in the process, the deficits would fall. A permanent reduction in payroll taxes is the only chance I see for a sustained expansion of the economy.
So to the Execs at Walmart, and all of those other retailers that are feeling the SS pinch, I say "Welcome to the club". You can be the wind behind the sails for the changes that are needed. Just this once I will say that what is good for Walmart, is also good for America.
Note: Stan Druckenmiller (ex Duquesne Capital) was on TV last night with Maria Bartiromo . Stan is a very sharp guy. He said the same as I have. It’s idiotic that he gets a check from SS. The $200k he might get back in his life is not going to change his spending one bit. But it would make a world of difference to those who are making $40k a year. The Zero Hedge link to the Druckenmiller interview: Link
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