WA Times: Volcker sees US Economic Disaster by March 2014

From the Washington Times dated October 25, 2012. All bolded emphasis is mine.

The central problem is that America is the bank of the world. What this means, simply, is that the dollar is the world’s currency (often termed the “reserve currency”). Throughout the world, nearly all traded goods, oil, major commodities, real estate, etc., are denominated in dollars. The world needs dollars, and the U.S. provides them and provides confidence that the dollar is the “safest” currency in the world. Countries get dollars by trading with us on attractive terms, which enables Americans to live very well. Countries support this system and cover their risk by investing in dollars through T-bill auctions and other mechanisms, which enables us to run budget deficits — up to a point.
The central issue is confidence in America, and the world is losing confidence quickly. At a certain point, soon, the United States will reach a level of deficit spending and debt at which the countries of the world will lose faith in America and begin to withdraw their investments. Many leading economists and bankers think another trillion dollars or so may do it. A run on the bank will start suddenly, build quickly and snowball.

The Dollar After the Fed's Decision Not To Taper

Egon von Greyerz via KWN (Bold emphasis is mine):

Eric King:  “Egon, astonishingly, you correctly predicted that there would be no Fed tapering this week.  That Fed decision certainly shocked the world and shocked the financial markets.  Where do we go from here?”

Greyerz:  “Yes, Eric.  It did not surprise me at all that the Fed did not taper because for a patient on life support that is not the time to turn off the machine because that machine is what keeps the patient alive artificially.  So how can the Fed possibly slow tapering? 

The US is a country with a total government debt of $220 trillion, unemployment at 23%, the job participation rate at the lowest level since the 1970s, median household incomes at multi-decade lows, and real-GDP declining since 2006.  We have also seen federal debt double since 2006, and consumer credit has been exploding.  So the picture is clear....    

Shanghai Slam Breaks Gold Market

I haven't posted for a while because I've been working on progress towards making the first Gold Bullion Debit Card a reality. If you're interested in learning more you can check out the beta website being developed at http://goldbulliondebitcard.cloudaccess.net/

Now to Shanghai. From ZeroHedge:

There was a time when, if selling a sizable amount of a security, one tried to get the best execution price and not alert the buyers comprising the bid stack that there is

(substantial) volume for sale. Of course, there was and always has been a time when one tried to manipulate prices by slamming the bid until it was fully taken out, usually just before close of trading, an illegal practice known as "banging the close." It appears that when it comes to gold, the former is long gone history, and the latter is perfectly legal. As the two charts below from Nanex demonstrate, overnight just before 3 am Eastern, a block of just 2000 GC gold futures contracts slammed the price of gold, on no news as usual, sending it lower by $10/oz. However, that is not new: such slamdowns happen every day in the gold market, and the CFTC constantly turns a blind eye. What was different about last night's slam however, is that this time whoever was doing the forced, manipulation selling, just happened to also break the market. Indeed: following the hit, the entire gold market was NASDARKed for 20 seconds after a circuit breaker halted trading!

Western central banks are running out of gold to deliver into the system

William Kaye is back on KWN. Emphasis is mine. This is a must read interview:

Kaye:  “Investors need to be focused on the numbers that are involved in the gold market.  The available feedstock of gold and other precious metals that is necessary to prevent the paper market from being bifurcated from the physical market is being rapidly depleted.

This gets no attention in any of the mainstream media.  It’s absolutely amazing.  You are not going to read about this in the Financial Times or the Wall Street Journal or any bank sell-side reports for that matter..

“But the people who do serious work, whether it’s Grant Williams or Andrew Maguire, people like us and a handful of others, the numbers speak for themselves.  Mine production is plummeting rapidly.  If metals prices were, for some bizarre reason, to stay where they are today, roughly 25% of mine production would be taken out of the market.  That’s a staggering number.

2,600 tons of gold were produced and sold into the market in 2012.  At current run-rates, we believe that only 2,200 tons of gold will be sold into the market.  The production numbers have gone down rapidly because of depressed prices.  Those numbers will continue to fall if gold prices don’t rise dramatically from where they are today.

At existing prices, as I said, roughly 25% of production or what is equivalent to the entire junior mining industry today would cease to exist by this time next year.  So, to be clear, this would be an additional 25% reduction from the already reduced 2,200 ton number.  This is potentially a very, very serious situation for the Western price manipulators because supply would continue to disappear at a rapid pace.

You also have the World Gold Council weighing in with scrap production falling on their estimates.  Scrap production has declined 25% alone in 2013.  Well, that’s pretty interesting because none of our contacts in the scrap industry report that their numbers are down anywhere close to that.  So the only way you can arrive at that conclusion, Eric, is, as so many insiders have been telling us, the scrap number is just a ‘plug’ for what the central banks do (in terms of supplying physical gold from Western vaults).

You have to remember that if you look at the World Gold Council reports, there is no line item for gold which is sold into the system that was leased from central banks.  Now this is amazing because we know this occurs.  The central banks themselves have admitted it.

The central banks control more gold than any other entity in the world, so how can the World Gold Council ignore such an important factor in the market?  But they do.  So central bank gold supply into the market is concealed through the scrap side of the business.

Interestingly, Thomson Reuters confirms the World Gold Council’s scrap numbers.  But Thomson Reuters will not share, and neither will the World Gold Council, their numbers with us.  They won’t tell us where their sources are.  They won’t document the numbers.  They will just say, ‘take it or leave it.’  Well, I prefer to leave it.  When someone says, ‘take it or leave it,’ and I’m paying for their service, I’ll leave it.

I just don’t trust people that won’t come clean.  We said, ‘Prove to us that you didn’t just make them up,’ and they refused to do it.  So I am very suspicious of those (scrap) numbers.  And I now side entirely with our sources, and we have more than one, who have said for some time now that ‘They just make this stuff up.’

So this is how they attempt to camouflage what the central banks are doing in the physical gold market.  Well, the Western central banks, as you and I have discussed in several interviews, are running out of gold.  So, naturally the (scrap) number is going to drop markedly because the central banks are cutting back on their delivery of gold into the system because they are simply running out of gold. 

The Western central banks are running out of gold to deliver into the system, and the Eastern central banks and the emerging market central banks are net-buyers and they have no interest in selling.  Take a look at India:  India has a crisis going on.  They bitch about having a current account deficit and their currency being attacked, but you don’t see the Indian Reserve Bank selling their gold, do you?  The Reserve Bank of India only buys gold.

The Indians could mount a very powerful defense of the rupee if they wanted to by simply selling central bank gold.  But they refuse to do that.  India is trying very hard to keep their citizens from buying gold, but all the central bank does is buy.  They never sell.

My advice to the KWN readers around the world is they should take their cue from what powerful entities like the Reserve Bank of India, which is one of the ultimate insiders in this game, are doing.  Don’t pay attention to what they are saying.  They are saying, and in particular to 1.1 billion Indians, to ‘Sell gold.  And whatever you do, don’t buy gold.’  But meanwhile, all they do is buy gold and they don’t sell a single ounce.  They won’t even do it to defend the currency.  To me that’s a very powerful message about where they know the price of gold is headed.”

William Kaye Explains Gold Suppression & How it Works (And Ends)

Excerpts of the interview are below but I highly suggest listening to the entire interview yourself.

You can listen to the 24 minute interview here. 

Kaye brings together all of the elements that I knew were there but just wasn't sure how they all fit together, from the Federal Reserve, JP Morgan, the Bank of International Settlements (BIS) and the GLD exchange traded fund and its true purpose (hint: its not for the benefits of retail investors). In this one interview Kaye, essentially explains everything I've written about for the last few years and provides everything you need to know about protecting your wealth (And maybe even making a lot of money) investing in gold.

And here is the original interview with KWN that prompted the follow up interview (Also an amazing interview).


Below is a partial transcript:

JP Morgan is Scrambling for Gold

Via Zerohedge:

 The Color-Coded Comex Crunch: Behind The JPMorgan Golden "Musical Chairs" Scramble

Submitted by Tyler Durden on 08/12/2013 17:16 -0400

• Musical Chair
  

First, it was JPM asking HSBC for assistance and getting a handout of over 6k ounces of gold.

The next day, following a shut out by HSBC, JPM had no choice but to go to the second largest vault, that of Scotia Mocatta and get more than triple times that, or just over 20k ounces.

Today, the Comex gold crunch has gotten so confusing, nothing short of a color-coded schematic can do it justice.

How Central Banks Manipulate Gold Markets

Watch from 2:25 to 11:20.

Though many people are aware that central banks intervene in currency markets, far less are aware that central banks consider gold as just another currency and regularly intervene to cap gold's price relative to a currency.

It should be obvious as to why. Since the end of Bretton Woods the USD, along with other major currencies, is not directly backed by gold. The "exchange rate" between gold and other currencies now floats rather than being fixed. If the US dollar or other currencies were declining in value relative to gold (i.e. the price of gold goes up in that currency) then people may choose to hold gold as a store of value rather than a paper currency. Fiat currency only has value if people believe it does.