EurAnalysis

Going to get some booze myself for the time between now and trading

http://ca.mg6.mail.yahoo.com/ya/down...d=YahooMailNeo

USD/JPY spent most of the week not very far from 81.00 as the crosses hogged most of the excitement. The market spent most of the week convincing itself that the BoJ will increase its bind purchasing at the meeting on the 27th April .
Despite a generally better offered EUR/GBP over the week Cable could not get back over 1.60.

"Truth has to be repeated constantly, because Error also is being preached all the time, and not just by a few, but by the multitude. In the Press and Encyclopaedias, in Schools and Universities, everywhere Error holds sway, feeling happy and comfortable in the knowledge of having Majority on its side." Goethe



"People who shut their eyes to reality simply invite their own destruction, and anyone who insists on remaining in a state of innocence long after that innocence is dead turns himself into a monster" - James Baldwin (1924-1987), Fiction Writer, Essayist, Social Critic



"The truth that makes men free is for the most part the truth which men prefer not to hear." - Herbert Sebastien Agar



"To be ignorant of one's ignorance is the malady of the ignorant." - Amos Bronson Alcott

http://www.johnmauldin.com/images/up.../mwo041412.pdf

I fully intended to ignore Spain this week. Really, truly I did. I had my letter all planned, but then a few notes drew my attention, and the more I reflected on them, the more I realized that the inflection point that I thought the ECB had pushed down the road for at least a year with their
recent €1 trillion LTRO is now rushing toward us much faster than ECB President Draghi had in mind when he launched his massive funding operation.So, we simply must pay attention to what Spain has done this week – which, to my surprise, seems to have escaped the attention of the major media. What we will find may be considered a tipping point when the crisis is analyzed by some future historian. And then we’ll get back to some additional details on the US employment situation, starting with a few rather shocking data points. What we’ll see is that for most people
in the US the employment level has not risen, even as overall employment is up by 2 million jobs since the end of the recession in 2009. And there are a few other interesting items. Are we really going to see 2 billion jobs disappear in the next 30 years?

Read On...

http://www.financialsense.com/contri...e-of-hurricane

What an incredibly complex confusing and treacherous month. It can be safely said that 80% of the activity is almost totally kept from the public.

The financial system is breaking in an accelerated fashion. Compare to some grisly horror movie where a man is strapped in a chair. The more he moves, the tighter the bindings pull on his gasping throat and pressed nether stones. The most significant two factors at work are the Iran sanctions and their powerful backfire, and the futile efforts in Europe to stem the banking center collapse. The anti-USDollar federation that spans widely across the globe is gathering strong momentum. Financial aggression is being met by financial alternative development. As Greece moved off the daily news fabrication factory, the reality of a collapse in Spain and Italy has moved to the front center of observations. Meanwhile, the American nitwits continue to argue over Quantitative Easing when it never stopped, and in fact, went global under their noses. The US news machine, dominated by the syndicate, churns out absurdities after more nonsensical bites on an economic recovery. The subprime loan machinery has ramped up. The retail factor does not tell of strength, but of weakness. Spending on consumption does not indicate strength, but a path to ruin still not well recognized. The gap between reality and reports is diverging.

Back at the gold desk, another cartel member kill is in progress. A string of UBS-type gold arena deaths is the biggest untold story of the new decade. The UBS rogue trader story was a total fabrication, written and staged to conceal the removal of all UBS gold from their reserves inventory. They are a dead gold player. The gold community, even LeMetropole Cafe and GATA, appears to be missing the coalition kills taken place in sequence with each paper gold ambush. If the cartel wishes to drive down the paper gold price, then they must deal with the consequences of having one more cartel member bank offered on the physical altar in a death sacrifice. They are vulnerable from sovereign bond positions and weak currency positions. In the margin call vise, they must forfeit their gold, but in a long slow process as truly enormous physical gold orders are being filled over a pyramid of prices lower than the cartel bank wishes. Details are scanty, but the trail can be followed to some extent by false stories to cover the damaging tracks. The press did a wretched job in checking the facts on the UBS rogue story. The loss was over $6 billion. The trades were all approved at VP level. The trap was laid and UBS entered with both feet, the consequence for which was being expelled from the gold arena, probably forever, in a total loss of its gold bullion. No wonder the press did not report the actual story. It would have been a monster bull story for gold. If Barclays or Royal Bank of Scotland or Bank of America were having their golden blood removed on a table, with straps in place for directors of their gold desks, and hot pokers applied by coalition forces to extract their gold, the outcome dictated by incredibly insolvency and margin call vulnerability, the effect on the gold market would be magnificent. Such events are in progress in my opinion, based on some juicy information feeds. Rather than divulge the entire details of the cartel kill, the coalition prefers to move to the next victim in the Wall Street & London cesspool of finance.

What follows will not be presented in great detail. That is saved for the Hat Trick Letter reports, where research has come across magnificent events in progress. As the calm spreads like a fog over the financial sphere, the level of risk rises. As the phony recovery stories propagate like a disease from the host, the level of risk rises. As the US political race takes center stage and the stakes increase, the level of risk rises. Events are catapulting in a loose coordination that is very difficult to observe, except for the quicksand in Spain.

Spain is on the verge of rejecting the austerity measures and maybe the Euro currency. Refusal to swallow the poison pill might have some benefits, like not pulling the rug from under the economy in vast spending cuts. But the reality bites hard, as the Spanish Govt Bond yield will revisit its old high levels. Funding problems will become acute. Think NO WAY OUT. The 23% jobless rate in Spain is written like an unusual figure in the West, but it equals the United States. The US simply has better liars in the economic trenches and more thorough press control. The strain in Spain will likely rain chaos on the bond plains, sufficient to cause their leaders to show disdain for remaining within the strained Euro domain.

The USFed and Euro Central Bank are guilty of $5 trillion in paper binges in the last several months alone. The US Federal Reserve and the European Central Banks are operating like desperate siamese twins in the frantic rescue attempt to prevent a Western banking system collapse. ECB head Draghi might have expressed reluctance to trade in bad PIGS debt paper, but he has been the champion in EUR 3.1 trillion in window activity over just the last six months. Notice nothing is fixed despite the massive effort that has been no more than glorified paper mache application. It is a futile battle akin to the task of Sisyphus, who was forced to push a stone uphill, but every time he rested, it rolled back down the hill. Since the central bank paper merchants can only apply paper bandages to the paper wounds, the rotten limbs and appendages cannot distinguish between the old rot and the new fester that begins immediately upon treatment. Nothing is fixed, no remedy in place, none even attempted, nor is recognition of the problem part of the debate.

The hidden factor in the systemic ruin was the China card played in the last decade. The decision to send US factories to Asia, starting in the 1980 decade with Intel to the PacRim, followed by a climax to China in the 2010 decade, will serve as the basis of a chapter in history that led to the US systemic ruin. The gold card was played within the Most Favored Nation status deal granted in 1999, since the Rubin team ran out of US gold, ran out of European gold, and needed fresh gold meat. The Chinese committed their gold hoard and promised to recycle trade surplus, just like the Saudis did with oil money. The Gold Carry Trade began but did not end with Fort Knox raids. The carry trade is the singlemost financial factor that pushed the nation to ruin. Nothing backs the USGovt debts, not with an empty Fort Knox, never to be audited, the home of nerve gas storage if truth be told. The deep storage gold on the USGovt balance sheets does not fool many people anymore, the subject of ridicule. The US is insolvent without collateral, facing a margin call, soon to lose control over its own currency. American life savings are at risk, while pensions have been gutted, but the sirens are silenced.
Gold Consolidates in Revolving Door

Since October, the pressure has been squarely on the US and EU central bankers to print money, to direct it to insolvent giant banks, and to prevent a collapse. They reacted to sovereign bond pressures. But at the same time they had to exert extreme force on the gold market, so it did not reflect the extreme debasement of money itself. Thus the huge naked short ambushes of gold. But during these past six months, a new coalition has emerged to exact a heavy cost on the gold cartel. They will lose one additional cartel member to the gold war battlefield with each and every illicit paper ambush. A big order is being filled in the last two weeks, a very big order, at a low price, by brute force. The result will be another dead cartel member. Its completion will be followed by another nice price rise.

Whether the cartel is willing to lose another member bank afterwards as the cost of yet another paper ambush, hard to know. But the unshakable fact is that the global monetary system is being ruined. The confidence in sovereign bonds is at rock bottom. In Europe it is more clearly in the open, but in the US it is more hidden, as the safe haven ruse plays on.

http://imagesize.financialsense.com/...1-apr-2012.jpg

Somehow a $200 billion single month deficit for the USGovt credit card line does not juxtapose well with any claim of being a safe haven, no more than a metal flagpole is during a lightning storm. The biggest buyers of the USTreasury Bonds are the USFed and its handy printing press, used and abused frantically and at high volume speeds. Distrust of the monetary system will bring about the rise of a new system, backed by gold.

However, the old system cannot be permitted to fall unless and until the new system is ready, in place, and fully wired. That day is coming soon. The signposts are in place, the painted messages legible.

So true. I am too arrogant when trying to pick tops and bottoms. Because of the 'i think this is it, buy now or sell now.' Which is why i am down some percentage on Friday alone... Did not follow the trend and did not see the S&R areas. Too biased and arrogant, while not respecting my SL.. But when i do follow the trend, i am more humble and ride the wave.... See where the market opens and ill cut my losses. Just have to see if it passes a major resistance area then im out of the trades.

Meh, one bad day trumps one good month. Learning lesson. Great article, thanx for sharing!!

Thanx guys. I will try to contribute, but i believe everyone here is doing a great job. I dub Sunday my reading day and will catch up to this great thread.

Ditto on 'oneself is your great enemy.' This business is known to be cut throat, and weak people tend to be eaten fast. Hope i wont be eaten.. Again, heh.

Once again thanx Goldman. Reading how you developed your basic strategy that you still use now is humbling. Sticking with it is the hard part, and boy did i find that out this past week.

Time to put my learning cap on again!

Go go go Power rangers...

I'm really interested in the performance of EG, it a currency pair that I always trade up and down, not as a hedge but as 2 stand alone accounts.

I'll start by saying that I consider this to be an interesting analysis and I also think that the end of all economic market structures is far from near; but there is something that i'd like to add:

Let us not forget that change can happen rapidly:
-communist revolution in Russia, transition to communism after the WWII in many countries including my own affected the lives of people drastically (the "reorganization of property"; incarcerations and executions of houndreds of thousands of people that stood against change etc.).
-Fall of URSS and change to democracy that followed in ex communist block
-Internet and communications changed the world dramatically

The reason why I don't think free market economy is about to dissapear is because it's in nobody's interest for that to happen: free market economy is the most efficient system and it just cannot be replaced especially taking into consideration the level of globalization that world has come to (internet, communications, english is almost a global language, travel time has greatly been reduced by technology)

One more point that i'd like to make is: there might be some change, but it won't be that drastic that nobody will be making money (major reorganization, siezing of property, war etc.) but it will be slow and mild enough that you could profit from it. An anology would be the difference between selling EUR/USD and one hour later getting some news that pushes it 100 pips down (case 1) and getting and announcement that euro will be dissolved.

The first three currency pairs on my trading platform are EUR/USD, EUR/JPY and USD/JPY.

There is very good reason for this. When USD/JPY gets stronger which means movement towards 75.00 then it moves the cross pair EUR/JPY and that then moves EUR/USD up or down depending on the direction of EUR/JPY.

Trading EUR/JPY and EUR/USD is almost like trading the same pair. I only trade EUR/USD and use EUR/JPY as my leading indicator. I have pointed this out many times on this thread.

USD/JPY is interesting in that it had served as a carry trade currency more so when it was around 118.00 a few years ago and the interest rates were higher for the other currencies such as Euro and US Dollar.

Now it trades as more of a safe haven currency since now it is the US Dollar with the ZIRP Policy. We call it QE to Infinity Policy. Jim Sinclair gave it that name.

If USD/JPY goes below 80.00 (80.89) and I HAVE NO IDEA at the moment if it will then the odds are good that EUR/JPY will move from 1.0577 to near 1.0500.

That should be enough to move EUR/USD down at least 50 PIPS. EUR/USD might go down for other reasons as well such as a sell off in the Dow (Risk Off) or more BAD news on the problems in Spain and Italy.

I hope you find my post helpful. Please reply if you care to. All comments are welcome.

I got a PM question on this topic and answered it. In case anyone has interest in this topic I will paste my reply here.



http://www.forexpros.com/rates-bonds...vernment-bonds




Here is how it works. I follow the 2 Year, 10 Year and 30 Year US Bonds.

When there is Risk Off which usually means the Dow is going down then money from the Risk Off Assets such as Euro and some commodities. Oil has other factors sometimes as does Gold. When the money from the asset classes is converted to US Dollars then these US Dollars seek SAFETY and YIELD so they are used to buy the US Bonds. When the US Bonds are purchased then the price of the US Bonds go up and the Yields come down as they are the INVERSE of each other.

As happens now in Spain and Italy when the BONDS are sold they go down in price and THUS the Yields Go UP...

When you watch the US Bonds and their Yields you can TRACK where the Money is Flowing and that lets you see the CHARTS change as they do.

I will be glad to answer any follow up question that you have.

I would NOT TRADE forex if I did not have my EDGE with the Money Flow Formula. Having an EDGE is KEY !!! You can have the same edge if you learn and understand it. I am here to teach you if you want. The cost is your time, energy and interest in learning how to make money trading forex.

http://www.gordontlong.com/disclosur...art-2011-12-cc

Click On


YOUR DIRECT PDF DOWNLOAD
>> CLICK>> :http://www.gordontlong.com/disclosur...art-2011-12-cc

Kno's Comments:

Then you will understand what most have no clue about including most of the politicians.

History always repeats. Now we have a situation that never occured before with the FED, ECB, GRIDLOCK in the USA and Europe and the Euro....

It will NOT end well and we will all be affected. Those that prepare will be ahead of those that ignore the FACTS.

Of course there will be a continuation however in what form is unknown.

Peace Out and thanks for your views.

Now On To The Expert Gordon T Long...

ECB's LTRO Won't Stop Collateral Contagion!

(The unabridged research report can be found at GordonTLong.com.)

How long can the European media keep the EU credit implosion a secret? The disgraced former IMF Director, Demonic Strauss Kahn said on Tuesday December 12th, 2011 that No 'Firewall' Exists and Europe Has 'Only Weeks'. Of course within minutes of this Financial Times news release which detailed his vent on EU leadership and the perilous situation in Europe, the article disappeared.

The details of the European liquidity crisis are generally reported, but for some reason no media source wants to pull the pieces together so everyone can see the magnitude and futility of the crisis. A growing Collateral Contagion is being shrouded in the apparent belief that the solution to the European Financial and Banking crisis is a grand change in Treaty governance. Obviously the European Central Bank (ECB) was well aware of the reality, when it was forced to deploy a historic and unprecedented LTRO (Long Term Purchase Operations) on Wednesday December 21, 2011. 560 banks desperately and immediately grabbed what they could, to the tune of €489B.

The LTRO bought the EU private banks some time. It did nothing to solve the EU Sovereign Debt Crisis. After less than one week, the cash held at the ECB surged €133B to a new record €347B. Since the net LTRO was only €210B, it tells you that the EU banks not only have a cash problem, but more specifically, as ECB President Mario Draghi says : "hoarding at the ECB signals that the problem afflicting the Eurozone is not so much about the amount of liquidity but that this liquidity is not circulating around the region's banks".

I would argue that the problem short term is a shortage of real collateral and that US dollar cash, versus 'encumbered' cash flow, is now king. It is clear that the rampant advancing Collateral Contagion will quickly eat this futile attempt like ravenous wolves. A well circulated Tweet from PIMCO bond king Bill Gross said it all: " What does LTRO stand for? 1- A shell game; 2-Cash for trash; 3 Three-card Monti; or 4. All of the above."

Here is the stark reality of what forced the ECB to offer unprecedented three year loans at absurd rates and most alarmingly, the acceptance of collateral that no other financial institutions will accept. The ECB has sacrificed its balance sheet in yet another EU "kick at the can".

1. COLLATERAL CONTAGION: There is a cascading Collateral Contagion crisis in which secured lending, based on sound assets, has replaced unsecured lending based on future expected cash flows.

2. WHOLESALE LENDING: Wholesale bank lending, which is a unique cornerstone of European banking, has completely frozen since the failure of Dexia and US Money Market Funds will no longer risk short term capital having learned their lesson in 2008.

3. BANK RUNS: Bank Runs are quietly and insidiously occurring throughout the peripheral EU countries as corporate and private depositors seek safe havens for their cash holdings.

4. SHADOW BANKING SYSTEM: The European Shadow Banking System off balance sheet and unreported
leverage structures, such as SIV (Structured Investment Vehicles) is collapsing due to non performing
loans which must finally be rolled nearly 3 years since the financial crisis began.

5. GLOBAL INVESTORS PULLING SOVEREIGN EU INVESTMENTS: Net outflows from the euro-zone’s
financial account reached €32.1 billion in October alone, on an unadjusted basis. The drop reflects the sale
by foreign investors of €53.3 billion in euro-zone debt instruments and €6.6 billion in equities.

6. INTERBANK LENDING: Prior to LTRO, overnight interbank lending was impaired as LIBOR, LIBOR-OIS
and TED spread yields were going almost straight up on a percentage change basis.

7. INVERTED YIELD CURVES: Prior to LTRO, yield curves in the EU peripheral countries were either
inverted or nearing inversion prior to LTRO.

8. US DOLLAR SWAPS: A shortage of US dollar denominated loans forced the US federal Reserve and other
global central banks to intervene and offer what is turning out to be unlimited US dollar SWAPs for
minimal interest rates and unprecedented, extended durations, not previously considered.

9. SOVEREIGN BOND MARKET: The EU Sovereign Bond Market is being avoided by almost all Global
financial institutions. The only participant are Central Banks desperate to buy more time until confidence is
restored.

10. GERMAN BUND SCARE: You cannot have a currency without a risk free bond. The German Bund had
become a proxy for this, but recently even the Bund has come under pressure as selling escalated in a
flight from Europe.

11. YEN CARRY TRADE: The YEN Carry Trade which has been a major financing source for the EU, even prior
to its inception, is being forced to unwind due to a significantly weakening Euro and the threat of a serious
drop.

12. BASEL BOX: The Tier 1 Core Capital requirements have forced many banks to actually shrink lending to
meet requirements. A significant
withdrawal from lending in Central
and Eastern Europe and many
Emerging countries is now clearly
seen as a direct result.

13. CREDIT DOWNGRADE
ONSLAUGHT: S&P placed the longterm
sovereign-debt ratings of 15
euro-zone nations, including
struggling Italy and Spain, on
negative watch. That typically means
there is at least a 50% chance of a
downgrade within 90 days. France is
likely to soon lose its coveted AAA
rating, which will impact the
European Financial Stability Fund
(EFSF) borrowing costs.

The list is even longer, but it will need to
suffice for this shorter article.

The above issues suggests, minimally, an
immediate €4-8 Trillion EU problem.
The EU has no ability to solve this problem
short of simply printing Euros, which unlike
the US Federal Reserve, Bank of England and
Bank of Japan, the ECB presently (I stress
presently) refuses to do.

Let's briefly discuss a few of these so we can
appreciate the seriousness of the EU problem
and what lays behind a first half 2011 surge
of $107 TRILLION in derivative SWAPS.

CONCLUSION
It is very hard to conclude anything other than:
1- EURO BELOW 1.20: The Euro currency is exposed against most currencies and likely headed for a currency cross of less than 1.20 against the US dollar. A cross of 1.15 to 1.20 would not be a surprise. We have already seen technical 'death crosses', suggesting this is in the works as the Euro has broken below its 200 DMA in a downward trend channel.

FINANCIAL REPRESSION
Let us close by saying that it is critical that you fully appreciate that which would appear as a chaotic situation in Europe is in fact a very well crafted and executed global central bank strategy, using the macro prudential practice of Financial Repression in an attempt to achieve Global Re-Balancing and adjustments in standards of living. I lay all this out in "Thesis 2012: Financial Repression".

Sign-Up for your FREE copy of "Thesis 2012: Financial Repression" that lays bare how this is being executed and what lies ahead in 2012 and 2013.

http://www.fgmr.com/some-answers-to-...questions.html

Some Answers to Doug Casey’s Questions

April 13, 2012 – In the April edition of The Casey Report, Doug Casey tackles the matter of gold price manipulation. He does this in an excellent article comparing gold’s bull market today with the one in the 1970s, which both he and I remember well given that we are about the same age and both were active participants in it.

Doug writes: “The great bull market broke out in earnest on August 15, 1971, when Nixon reneged on the US promise to redeem foreign-owned dollars for gold at $35 an ounce.” Gold then “gradually built momentum until reaching a final peak in 1980 over $800. It was a wonderful time to own gold.”

I wholeheartedly agree with his assessment. He then goes on to complete his comparison of then and now before presenting his view on gold price manipulation, about which he remains skeptical. He concludes by asking some questions he would like answered in order to convince him that the gold price is manipulated. Because Doug is a friend, I have prepared this response to him to provide my perspective on this matter.


US government gold holdings reached an all-time high in 1952, at 20,663 metric tonnes, or 665 million ounces…From there, official US holdings fell consistently, to 459 million ounces in 1962 and 276 million by the end of 1971. They have stayed about there ever since.
Or have they? In recent years, there’s been controversy about whether that gold is really sitting in Ft. Knox, in that there hasn’t been an independent audit for many decades. Congressman Ron Paul has been asking for an audit for years and can’t get one. It’s an entirely reasonable request; it’s simply correct and proper business to ascertain the amount and quality of assets from time to time. There are some who allege the gold isn’t there, perhaps because it’s been sold to suppress the market – or to prop up the banks alleged to be doing so.

I severely discount that possibility, simply because if it’s true, it would be, by far, the biggest and most scandalous theft in history…
It would indeed be the biggest theft. But is it any more scandalous than the lies surrounding the Gulf of Tonkin incident or the search for weapons of mass destruction in Iraq? My point is that governments are not truth-machines. It took 30+ years for the true Tonkin story to emerge. Isn’t it therefore possible that the truth about the US gold reserve has yet to emerge?

For many years now, a meme has been floating around that the prices of gold and silver are being manipulated, which is to say suppressed, by various powers of darkness. This is not an unreasonable assertion. After all, the last thing the monetary powers-that-be want is to see is the price of gold skyrocketing. That would serve as an alarm bell, possibly panicking people all over the world, telling them to get out of the dollar. It’s assumed, by those who believe in the theory, that the US Treasury is behind the suppression scheme, in complicity with a half-dozen or so large bullion banks that regularly trade in the metals.

Not the US Treasury, but rather, the Secretary of the Treasury. Only he and the President have authority to operate the Exchange Stabilization Fund (ESF), which is an important point. The Secretary of the Treasury can do basically whatever he wants using the ESF as his vehicle, or as an article in Slate puts it: “What's the Exchange Stabilization Fund? A pile of cash that can be used for whatever.”
An article by the New York Federal Reserve confirms this point of essentially unlimited authority. Noting that the ESF was created by the Gold Reserve Act of 1934, which itself dealt with the book ‘profits’ arising from FDR’s gold confiscation and subsequent 69.3% devaluation of the dollar, it states: “The Act authorized the Secretary of the Treasury, to deal in gold, foreign exchange, securities, and instruments of credit, under the exclusive control of the Secretary of the Treasury subject to the approval of the President.” The key word here of course is “exclusive”, which means outside the control of Congress or anyone else.

I recommend reading “Time to Abolish the International Monetary Fund and the Treasury's Exchange Stabilization Fund” by Anna Schwartz, Christopher Whalen, and Walker Todd, which was published by the Committee for Monetary Research and Education, Inc. in 1998.

Also, it is also generally believed that there are only four bullion banks involved. Two are American, with one each from Germany and the UK, which together represent the three countries involved. These banks act as an agent for their respective governments, executing trades on their behalf. By knowing government plans, these banks can profit from them, in a scam normally called “front-running”, which Wikipedia defines as “the illegal practice” of a broker executing orders “for its own account while taking advantage of advance knowledge of pending orders from its customers.” In short, participation in this scheme can be very profitable for the bullion banks, even if illegal because in this case, the government and the bullion banks have the shared interest to keep their intervention secret.

The assertion is bolstered by the fact that governments in general, and the US in particular, are always intervening in all kinds of markets. They try to control the price of wheat and corn with various USDA programs. They manifestly manipulate the price of credit (interest rates), now keeping it as low as possible to stave off financial collapse. And they may well be active, through the so-called Plunge Protection Team, in propping up the stock market. They were largely responsible for the boom in property, through numerous programs and parastatals like Fannie Mae and Freddie Mac. Why, therefore, shouldn’t they also be involved in the monetary metals? Central banks regularly intervene in (i.e., manipulate) each others’ currencies. So it’s not unreasonable to imagine they’d try to manipulate gold as well.

Well, yes. That’s exactly the point isn’t it? The lifeblood of the State is money. It is money, not votes or popular consent that gives the State power, particularly in our present fiat currency system. To put it bluntly, the State needs bullets to stay in power. It cannot create bullets out of thin air. So it has formed an unholy alliance with the banks, to which the State grants monopolistic power to create money out of thin air that the State then borrows to buy bullets. Government actions today – like the 2008 bank bailout that was granted despite popular opinion overwhelmingly against it – are aimed at preserving this relationship. Intervention in the gold market is just one part of it.

In fact, the US and other governments did try to suppress the gold price from 1961 to 1968 through what was known as the London Gold Pool. The US alone persisted in trying to do so until Nixon devalued the dollar and closed the gold window in 1971.

But if it was ever doable, that was the time. Although nobody knows exactly how much gold there is above ground, a reasonable guess might be six billion ounces. There was a possibility of controlling the price, in the days of the London Gold Pool, when there were only three billion ounces in existence and when all the gold in the world was worth only $105 billion ($35 x 3 billion = $105 billion).
I think there is less gold in the world today than you suspect, probably 5 billion ounces. Regardless, the weight of gold in central bank hands, both in relative and absolute terms, is an important point. It is a point that was well-learned in the 1960s price suppression, which you acknowledge existed, when the US government dishoarded over 300 million ounces in a futile attempt to keep the gold price at $35 per ounce. The point is that there is only so much physical gold in existence. It is therefore a valuable resource, to be used in interventions only sparingly, if at all. In contrast, propaganda is cheap and unlimited.

This observation explains why Gordon Brown announced in advance his intention to sell Britain’s gold reserves. Clearly, the propaganda impact was important, and much less costly than allowing physical metal to leave its vault, although over time the gold did go. The importance of propaganda also explains why there were repeated calls earlier this decade for the IMF to sell its gold, ostensibly to help the poor. Propaganda is often wrapped in a noble cause.

Today, however, the value of the world’s gold is around $10 trillion ($1,650 x 6 billion = $10 trillion), nearly 100 times as much. And governments own about a billion ounces, only 16% of it, whereas the last time they tried to control the price they owned about 1.1 billion ounces, which was about 35% of the world supply. And the governments, their central banks and almost all large commercial banks are bankrupt; they have vastly less financial power than they did in the days of the London Gold Pool. Why would they try to do something that’s so obviously a losing game?

Yes, governments have vastly less power today, but they have much greater control of the corporate media. And you are right, it is a losing game for the government, but what is their alternative? Go back to sound money, as required by the Constitution, with the result that the federal government shrinks in size to become the quaint institution it was in the 19th century that did little except operate the Post Office? Ron Paul would like that to happen, as would his army of supporters. But in my view it is not going to happen until the losing game now being played is finally over. When that is going to happen, no one knows, but governments will pull out all the stops to continue playing this losing game to keep the present system going.

PLEASE READ ON IF YOU ARE INTERESTED - I ONLY POSTED TWO SNIPPETS: Kno...

Take the case of whistleblower Andrew Maguire, who was aware of one bank’s plan to manipulate the silver market. In a telephone call with a CFTC official, he explained how the silver price was about to move because of manipulation. The price moved exactly as he forecast. Andrew Maguire was subsequently the victim of a hit-and-run accident that threatened his life, an event that has probably discouraged other whistleblowers. In any case, many of the 20-something traders that banks employ don’t have a clue about the big picture. They just do what they are told, and enjoy the profits paid to them in their year-end bonus.

Q: If, as alleged, these banks have been short gold from the bottom of the gold bear market at $255 in 2001 and the silver bear market at $4.25, also in 2001, how can they possibly absorb tens or hundreds of billions of losses? Did they expect to take the metals to a fraction of their 1971 lows?

Trading desks make mistakes. But they don’t stay short in one of history’s great bull markets – it’s not the way traders earn bonuses. How stupid are the supposed “not for profit” sellers of gold supposed to be?

The banks are being backstopped by the government. They always have been, and always will be. That is why the banks always get bailed out.

As noted above, the interests of the banks and the US government conflated. Neither one wants to see a higher gold price. So the government intervention is designed to accomplish two objectives.

First, the government aims to cap the gold price to let the banks trade out of their predicament over time. The objective is to avoid any losses. So as the banks unwind their gold position, they use the government’s unlimited capacity to create paper-gold to move the market to their advantage. I wrote about this phenomenon in “Picking the Market's Pocket Again” and also in “Picking the Market's Pocket, Part Two”.

Second, by keeping the gold price under control, the US government makes the dollar look worthy of being the world’s reserve currency when we all know that it is not. On a related point, a capped gold price also has the added advantage of containing inflationary expectations, an objective often stated by Federal Reserve officials.
Q: Exactly where and how do they supposedly get the capital to cover these losses? Haven’t they ever heard the old saw, “He who sells what isn’t his’n must give it back or go to prison”? No bank can tie up billions in capital fighting the market for a decade.

The banks don’t tie up capital because they operate in the paper-gold and paper-silver markets, creating various financial derivatives that are not regulated and carried off their balance sheet. They are contingent liabilities and do not require bank capital.

Q: Exactly who originated this idea of trying to suppress prices using the futures markets? Here a well-known writer on this subject suggested the following to me, via an email, when I asked: “The big commercials, starting some 25 years ago, discovered they could dominate the market and force technical traders in and out of the market when they wished at great profits to the commercials. But they miscalculated and stayed in too long, and now they are trapped.”…But one thing is for certain: nobody (certainly not commercials) allows himself to get in so deep he’s trapped for 12 years in one of history’s greatest bull markets.

I agree that the writer you quote misses the point. The banks are trapped only to the extent that they owe physical gold that was borrowed to fund dollar assets, as explained above. But the gold market intervention gives them time to unwind these positions and control losses that would otherwise occur if gold prices were not capped.

One aspect of the quote though is correct. In my two articles I mention above, “Picking the Market's Pocket Again” and “Picking the Market's Pocket, Part Two”, the banks trade around the technical traders and trend followers, both big and small. They do this to make profits to offset the losses accrued on their gold liabilities as the gold price rises. But in the end if the banks fail to repay or hedge the physical gold they borrowed from central banks, the central banks will let the banks off-the-hook and take the loss, rather than forcing the banks to take it. Governments (meaning taxpayers) and anyone holding the currency that is depreciating because of these policies favorable to banks will take any losses incurred – not the banks.

Q: Why fight the market, and get trapped, in just gold and silver? Why aren’t they trying to suppress copper, platinum and palladium as well? For that matter, every commodity?

These other markets don’t matter, as I explain above. Only gold and silver are money. Only gold and silver have an interest rate and always therefore trade in contango (except in extremis, meaning when the currency in which their price is being quoted is near collapse). Gold and silver have unique attributes not shared with any other commodities.

Q: Why would the US Treasury (if it’s behind a gold suppression scheme) make things easier for the Chinese, the Russians, the Indians and numerous other developing countries by suppressing the gold price? They simply take advantage of the lower price to buy more.

Was the US government acting in the country’s best interests back in the 1960s when it allowed over 300 million ounces of gold to be withdrawn from Fort Knox and exchanged for $35 per ounce? Do you really think that the people intervening in the gold market care about acting in the country’s best interests? They care about keeping the system going.

If anyone could answer these questions, I’d appreciate it. I advise readers to buy gold – even at current levels – but I’d like to see them do it for the right reasons. And it seems to me the arguments about gold manipulation are more redolent of religious belief than economic reasoning.

I wouldn’t say that there is any religious belief involved, but I have replied to a lot of Doug’s questions with questions of my own. So I haven’t really “answered” all of his issues, which highlights an important point.

The investigation into the inner workings of the gold market that are out of public view and decided behind closed doors in central banks is an ongoing effort. It has been that way for years, and fortunately, the Gold Anti-Trust Action Committee has been there relentlessly compiling the mounting evidence that something is amiss, that gold trading is influenced by government intervention aimed at keeping the price from rising to its fair value. Or to put it another way, by allowing the gold price to climb higher year after year in what I have dubbed a “managed retreat”, governments hope that people will not notice what is happening to the ongoing debasement of the US dollar, which Doug and I can both remember was once “as good as gold”.

NIce thread...I will follow it from now....Just awesome i must say..)

Anyone can tell me what possible thing (news release or other...) can make EUR more weak.People are saying that E/U will fall like rock next week as china yuan band decision will be executed on monday and also US unemployment rate also expected to come lower so what about euro is their anything positive for euro...?

From OandafxTradeNews April 15, 2012 2:07 PM EST

The PBOC, China's central bank, sets a daily rate for the yuan against the U.S. Dollar which is called The Parity Rate. China until now has allowed investors to push the yuan's value 0.5% in either direction from that rate in daily trading.

On Friday, for example, the PBOC set a parity rate of 6.2879 yuan per U.S. Dollar, meaning during the day the yuan was allowed to trade in a range of 6.2564 to 6.3193 per dollar, or about 15.8 U.S. cents to 16 cents per yuan.

On Saturday, the central bank said that it widened the trading band, allowing the currency to move up or down by 1% daily.

Kno's Comments: This is a very important development and research and monitoring is adviseable.

So that means USD is getting stronger and when it will be executed usd will rally...? If so then e/u will fall i think.

knoholygrail,thank you very much for vouching me.i am humbled and thanks one more time.
the whole financial system revolve around only one pivot and that is INTEREST RATE and it is nothing but commoditization of 'TIME' at the most abstract and philosipical level.
from interest rate every thing fan out including commodities,stock,bonds and at the tail end we have foreign ecxhange markets.hence there is only one real market that market is interest rate and all other markets are secondary to it.
historically there are two economic system at work.1,based on interest and 2.non interest based. most of the ancient philosphers,including socrates,aristotle and all the religions (judaism,christianity,hinduism,buddishm,and islam) favour non interest based system as it is beneficial to 98% of people.all the religions have condemn taking interest(usury) in various degrees and islam is harshest in its condemnation.
Interest rate base system are usually prefer by people who r in power and rule.the defination of freedom is one being debt free and if we look at the people more than 95% are in debt in one kind or the other and thus enslave all thier lives paying back mortgage debt,student loan or credit card debt and sufffering thier whole life,once this reach critical level u will have revolution and struggles.
i hope i am wrong but i can see we are all reaching that point and the future conflict going to be between these two streams of thought one side usury based system and on the other non usury taking system( which is also a histolrical conflict) and this time its not going to be confine to pockets of planet earth but will be global.i hope our kids are safe and be on the right side of the struggle.

There is much more to life than just making money. Your comments direct and to the point state the issues and why we will need new solutions. The internet has really made this world a global village.

The powers that be abhor truth and knowledge. There are so many good humans on earth and on this thread.

United we Stand and Divided we Fall !!!

PipTrapper understands that and it is though his initative and his free will that we start to understand and learn and hopefully make money also however retain our goodness and our human values.

Each one of us is responsible for our actions and we can stand together in harmony and those that try to control and benefit from the misery of others will one day see their power taken away from them.

It just takes one man or one woman and then others join in and eventually evil goes and good comes. It will take time and effort and not be easy however it is all about the journey and the struggle.

Thanks for your views and you are most welcome here. PipTrapper will direct you to the first page created on September 25, 2011 to understand the rules that allow order to have a chance. We have rules in the world and they are called the Golden rules and whoever has the Gold for the time being makes the rules.

Here We The People Rule. This is our Global Village.