Presidential Insider Information?

Last Thursday, the heads of the biggest banks in the US met with President Obama and White House representatives. As far as I can tell this type of meeting is unprecedented. Even during the peak of the financial crisis in 2008 there was never any meeting I'm aware of between the commander in chief and the heads of the largest banks. True, there were meetings with the same banks and the head of the Federal Reserve, Ben Bernanke. Meetings with the Fed make some sense during times of economic crisis when the risk is systemic to the entire banking system. But the President? That would to me imply a political component that was being coordinated with economic policy and the largest banks.

Zerohedge points out this:

Correlation is not causation; but coincidence means you're on the right path. Looking at the charts of Stocks, Commodities, and Precious Metals, we wonder just what it was that President Obama said at his 11am ET White House meeting last Thursday...

Equity markets soared out of the gate on the 11th. Jobless claims beat expectations handily (shaking off the previous week's concerns) and all was well in the world... until just after 11am ET (when the CEOs of Wall Street's big banks - for no apparent reason - met with President Obama)... and this happened...

as did Crude oil...

 So what did Obama tell them?

In addition, I saw a brief story today about all the big banks. It was being pointed out how they all had HUGE capital reserves even in excess of the coming Basel III requirements. Theses are the same banks that usually love to be levered 30 to 1 and use midnight Repo to meet capital requirements for just a few moments at midnight to be in compliance.

So why are they suddenly so conservative? Perhaps Obama gave them a heads up that some "political decisions" have been made. My guess, and its pure speculation, is that its about a Euro member that's about to be given the boot out of the EU. Or perhaps there is finally a recognition that we are in a recession/continued depression and they want to coordinate what's to come.  Either way,the Gold sell off was a pre-emptive attack to push the price down before its taken much higher on central bank fear trades.

Has anyone else EVER heard of this type of meeting taking place before? In any administration?

As the Gold Smash Continues, This is all You Need to Know

As I write this Sunday night, PST, the Asian market has opened and gold is at $1,441 continuing its decline from Friday. As I mentioned in the previous post, this was to be expected. Margin calls are going out all over the world, and people and banks will be selling to raise cash and playing into the hands of the Western central banks who do not want you to own gold.

Of course the Chinese are probably laughing their asses off as they wait just a little longer to hit the BUY button.

All you, my readers, truly need to know is the graph above. Gold is highly correlated to both the US debt and the global supply of currency. With most all Western central banks printing like crazy (Almost $1 Trillion this year in the US alone) there can be no doubt which direction gold should go.

When the market price deviates from its instrinsic value by this much, you've got to take notice. There's an old trader saying that you buy when there is blood in the streets.

And by the way, stocks may go a similar direction very soon.

Gold Smash, Desperation & Goldman's Muppets

Friday was an amazing smash in Gold orchestrated by Western central banks and help from Goldman Sachs who encouraged their client's (who they derisively refer to as "muppets") to go short gold even as they're own traders were likely accumulating.

I've discussed for the passed two years that I was anticipating a "bifurcation" between gold and silver's paper price vs. its physical price as a result of price manipulation by central banks and bullion banks to artificially keep the price low. Readers may recall this is directly related to the quantitative easing that is now prevalent around the world. Central banks do not want people to see gold and silver as a viable alternative to fiat money as they, in effect, devalue money through ongoing printing. A rising gold price is a clear message to even unsophisticated investors that their savings are declining in value.

Bad Employment Numbers are a Shock?

For some time now we've had a mainstream financial media that touted an "economic recovery" and a stock market that had been hitting new all time highs without any real evidence that the underlying economic fundamentals supported the claim. Just two weeks ago the discussion was centered around when the Fed would stop its $85 billion per month quantitative easing program now that things were going so well.

Turns out, they're not.

Greece or Iceland? Cyprus Must Choose

Last year I examined here and here how Iceland who took a very different approach than Greece. The result has been that Iceland, after a short period of pain and economic disruption has resumed economic growth, reduced unemployment and once again has an investment grade bond rating. What was the primary difference?

Unlike the US and several countries in the Eurozone, Iceland allowed its banking system to fail in the global economic downturn and put the burden on the industry’s creditors rather than taxpayers.

 Today, Cyprus must decide, do they want to follow Greece or follow Iceland?

"When it becomes serious, you've got to lie"

“When it becomes serious, you have to lie." -Jean Claude Juncker

President and Finance Minister of the European Union

Government Theft

Ever since the run on banks that started the Great Depression Western countries have always protected the depositors of banks knowing full well that if depositors do not have faith in the banking system, the banking system can't function. And without a banking system, commerce comes to a halt.

What is so remarkable about the theft of depositors money in Cyprus is that is breaks that trust. The results will range from bad to possibly catastrophic. The latest agreement between the EU and Cyprus is that they will forgo confiscation of deposits 100k Euros or less. Even if this becomes the case (And with the disappearance of all those Cyprus deposits that exited through Cypriot bank branches in London which stayed open last week it is unlikely the money is still there to confiscate.) retirees and small businesses will be effected.

Stephen Leeb at KWN:

“Cyprus is truly a disaster for the West.  It basically says to every citizen of the West, if your country runs into trouble the governments can come along and just take your money.  That’s basically what is says.”

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“What worries me is if you have an individual who is retired with let’s say 300,000 or 400,000 euros in the bank, and they suddenly find they have had some of their money or a great deal of their money stolen by governments.  Let’s say they are not retired and just run a small business and need to make a payroll.  What happens in that situation?

The funds are frozen and then part of it is stolen.  This is outrageous....

“This could happen now in Spain, Italy, or any of these other countries which are in financial trouble.  It seems like the only country in Europe which is not suffering right now is Germany.

Germany is in a power position in terms of exports because their currency is lower than what it should be because of the Eurozone construct.  So they can export like crazy.  People have to remember that what brings about chaos and extremism in countries is depressions.

People think this can’t happen here in the United States, well, I beg to differ.  What would happen if we all woke up tomorrow morning and some disaster has happened and the Suadi oil fields were out of commission?  What’s to say that the US government and the Federal Reserve can’t do the same thing that the ECB, EU, and the IMF just did to Cyprus?  They could end up freezing and seizing our deposits.

What if instead of JP Morgan making a $6 billion bad derivative bet, they make $600 billion in bad derivative bets?  Has anybody asked that question?  All of the sudden there would be no JP Morgan.  Again, what’s to say that they won’t steal our money here in the United States?

This is absolutely the worst precedent that the West could have set.  The fundamental freedom that people in the West enjoy, and that includes Cyprus, Spain, Italy, Ireland, etc, is that the government cannot without any warning confiscate their money.  Call it what it is, this is clear theft and outright confiscation.

That’s the thing to worry about.  I’m incredibly concerned when I see money being confiscated.  This tells me that we are already seeing the makings of totalitarianism in some form.  It’s getting very, very frightening at this stage.”

Leeb had this to say regarding gold:  “Gold continues to see a war going on at the $1,600 level.  It is not in the best interest of the West to see gold do any type of move that would increase its exposure as being an alternative currency.

Once gold begins its next magnificent rise and breaks to new all-time highs there will be even more demand for gold and the people in charge of the West know this.  That’s why they are battling so hard to keep the price suppressed.

This latest series of events in Cyprus just shows how desperate Western central planners have become.  They are not letting the markets trade freely because they would reveal the horror of what has just taken place.  But gold will have its day and so will silver.  Just make sure you have physical gold and silver and not paper.”

What I find really disturbing is the unelected Euro-crats are forcing this on Cypriots. Here in the US we started a revolution against the British citing taxation without representation. What we have today is confiscation without representation. The Cypriot government voted down the original "tax" the EU demanded. So now, instead, the EU is describing the theft as a "restructuring" that does not require the consent of the governed in Cyprus. Cypriots who have their deposits stolen will have no day in court, no appeal, no due process of any kind. Is this not a return to serfdom? The Cypriot people should demand to leave the Euro-zone default on their debt and return to their own currency. With this they could devalue their currency to make themselves more competitive and follow the successful example of Iceland.

Oh, and for those who have money deposited in US banks, here is a reminder that as of December 31st, 2012:

As scheduled, the unlimited insurance coverage for noninterest-bearing transaction accounts provided under the Dodd-Frank Wall Street Reform and Consumer Protection Act expired on December 31, 2012