Gold manipulation, Part 2: How they do it (and a suggestion to hedge it)

by Martin sibileau

This is the second of three articles I am posting on the suppression of gold. In the first article I showed that, under mainstream economic theory, the suppression of the gold market is not a conspiracy theory, but a logical necessity, a logical outcome. This second article will show how that suppression takes place. Those familiar with the gold market will likely find nothing new. The third article will examine the implications of this suppression and support the claim of the gold bugs, namely that physical gold will trade at a premium over fiat gold or gold paper is also not a conspiracy theory, but the logical outcome of the current paradigm.

How they do it: The concept

The popular notion, which central bankers would love to destroy, is that gold is a good hedge against inflation. In its simplest form, gold cannot be printed and, as its supply remains anchored, its price should spike if the supply of fiat money increases. The implicit math behind can be represented as follows:

Given a constant demand for money…

Did These Hidden Forces 'Elect' the President?

by Bill Bonner

 
Today, on the Ides of February, we hold our hat in our hand... we bow our head... and let our mouth fall open in amazement. Our Lenten program of fasting, prayer and meditation is producing results. We are lightheaded from near-starvation and alcohol deprivation. But our thoughts are clear. Or else, we are hallucinating.
In the last two days, we've taken a look at what promises to be the biggest bust-up of all time.
It began in stealth when a small group of big bankers boarded an unlisted train in the middle of the night. They all knew each other. All were from powerful New York banking families. But they didn't even use their own names when talking to one another... so afraid were they that word of their meeting would leak out.
Then the strange little group traveled in complete secrecy to a small island compound off the coast of Georgia. There they could talk freely. But the conversation wasn't about hunting or sports... or politics... or religion.

The Stateless Equilibrium

by Predrag Rajsic

The stateless market society—a peaceful social arrangement based on voluntary relations among individuals in which the state is not present—is not a popular idea. Many people believe that this society would lack the capacity to define and enforce property rights, and that this would result in chaos, tyranny of the rich or in a reversal to a state. This belief has led to a widespread dismissal of the stateless society paradigm.
Murray Rothbard is by many considered the champion of the stateless society doctrine. However, even Rothbard conceded that “there can be no absolute guarantee that a purely market society would not fall prey to organized criminality.” 
While it is true that absolute guarantees for any social outcome are generally inappropriate, I argue that there are good reasons to believe that outcomes like chaos, tyranny of the rich, or even “organized criminality” in the absence of a state are unlikely.

China Preparing To Impose Bretton Woods II Gold Standard

by King world News

The flow of power and gold is going from West to East.  China may have accumulated a staggering 1,500 tons of gold last year alone.  China’s growth is now picking up steam as well.  What is really stunning is how much the yuan has increased in terms of international transactions.”

“The usage of the yuan in international transactions has been increasing at an unbelievable 170% per year.  That’s how fast the yuan has been increasing in terms of international transactions.  So goes the gold, so goes the power, and you can see it in the prominence the yuan is gaining.

The Chinese definitely have a plan here and that is to get control of gold....

“We are headed for another Bretton Woods.  It is unsustainable for currencies to continue to lose their purchasing power while median incomes, especially in the US, continue to go down in the West.

Reversal of Fortune: Why the Power Elite Will Lose Power

by Gary North

Remnant Review

The best description of the reversal of fortune is Mary's Magnificat, recorded in the Gospel of Luke, chapter 1, verses 46-55. "He hath put down the mighty from their seats, and exalted them of low degree" (v. 52).
This was a fundamental theme in the Old Testament. We are told that those who hold their position by means of political power and corruption always lose their position. They are always overthrown. They look unbeatable. They are always defeated. The prophets of Israel came before kings and commoners with this message. Isaiah 1 is a good example. Isaiah even identified a major technique of the power elite: inflation. "Thy silver has become dross, thy wine mixed with water" (Isa 1:22).
The more things change, the more they stay the same.

THE POWER ELITE

What do I mean by the power elite? The phrase was coined by Leftist sociologist C. Wright Mills in 1956. His book remains a classic. Its main chapter is here. Liberal columnist Richard Rovere in 1956 called it the American Establishment. Conservatives refer to it as the Insiders or the Conspiracy. David Rothkopf, writing from inside, calls them the superclass. Sometimes they are called the PTB: the Powers that Be. I think conservative journalist and historian Otto Scott said it best: the behind-the-scenes fellows who are too clever by half.

Bubble trouble: Is there an end to endless quantitative easing?

By Detlev Schlichter

The publication, earlier this week, of the Federal Reserve’s Federal Open Market Committee minutes of January 29-30 seemed to have a similar effect on equity markets as a call from room service to a Las Vegas hotel suite, informing the partying high-rollers that the hotel might be running out of Cristal Champagne.  Around the world, stocks sold off, and so did gold.

Here is the sentence that caused such consternation:

“However, many participants also expressed some concerns about potential costs and risks arising from further asset purchases (the Fed’s open-ended, $85 billion-a-month debt monetization program called ‘quantitative easing’, DS). Several participants discussed the possible complications that additional purchases could cause for the eventual withdrawal of policy accommodation, a few mentioned the prospect of inflationary risks, and some noted that further asset purchases could foster market behaviour that could undermine financial stability.”

The End of Honest Money

by Bill Bonner

You shall not crucify mankind upon a cross of gold.

~ William Jennings Bryan

The season of fasting is upon us. No more high living. It's time to cinch up our belts... to put on a gaunt face and a smug look. Alone among friends and associates, we will keep Lent.
So neglected is Lent that even Google has forgotten about it. When we searched for it, it proposed "lentil soup."
Lent is meant to rehearse the 40 days and nights that Jesus spent fasting in the desert before going public. We remember the lean days with prayer, meditation and self-denial. No alcohol will cross our lips from Ash Wednesday till Easter Sunday. (Except on Sundays. And saints' days. And national holidays. And days that begin the letter "T" or have a date that is a prime number.)
Yes, dear reader, we will be true to the church calendar, with a few emendations of our own.

The Errors of Keynes's Critics

 by Steven Kates

I was intrigued by the review that Philipp Bagus wrote of The Errors of Keynes (Los Errores de la Vieja Economía), a book written in Spanish by Juan Ramón Rallo, part of which deals with Say’s Law.
An important understanding is taking hold, that the road to unwind Keynesian economics travels through Say’s Law. Keynes himself could not have been clearer about the significance of Say’s Law to the entire structure of his argument. Keynes emphasized, over and over again, in The General Theory (TGT) that he was reversing the conclusions of those who believed Say’s Law to be true. Thus, there are two things that need to be done if you are going to refute Keynes. First, you have to know what Say’s Law is. Then you have to show it is valid.

The Core of American Liberty

by Bill Bonner

I've been at the beck and call of rich men all my life. But I'll be damned if I'll be at the beck and call of every son-of-a-bitch with a 3¢ stamp.
~ William Faulkner on losing his job at the Oxford, Miss., post office
One of the rarely cited advantages of having money is that you're less beholden to others who have it too. The more you have, at least in theory, the more you can ignore the other fellow with it, and go about your business. Nor need you drink the same cocktail or rush to the same mall so you can outfit yourself in the same duds.
In short, with a little capital of your own you can do what you want.

Jim Rogers On Why He Moved To Asia

by hudsonunionsociety.com

The Hudson Union Society www.hudsonunionsociety.com is where today's leaders come to discuss tomorrow's ideas. If you live not to far from New York, please join us in person. 

n 1973, Jim Rogers co-founded the The Quantum Fund. During the following 10 years, the portfolio gained 4200% while the S&P advanced about 47%. The Quantum Fund was one of the first truly international funds. From 1990 to 1992, Rogers traveled around the world world on motorcycle, over 100,000 miles across six continents, which was picked up in the Guinness Book of World Records. Between January 1, 1999 and January 5, 2002, Rogers did another Guinness World Record journey through 116 countries, covering 245,000 kilometers with his wife, Paige Parker, in a custom-made Mercedes. The trip began in Iceland, which was about to celebrate the 1000th anniversary of Leif Eriksson's first trip to America. In December 2007, Rogers sold his mansion in New York City for about 16 million USD and moved to Singapore.

The Myth of Fed Independence

by Murray N. Rothbard
 

By far the most secret and least accountable operation of the federal government is not, as one might expect, the CIA, DIA, or some other super-secret intelligence agency. The CIA and other intelligence operations are under control of the Congress. They are accountable: a Congressional committee supervises these operations, controls their budgets, and is informed of their covert activities. It is true that the committee hearings and activities are closed to the public; but at least the people’s representatives in Congress insure some accountability for these secret agencies.

The Serf Society

By Bill Bonner

Stocks, bonds, gold – all bounced around last week.

And as we mentioned on Friday, Americans continue to turn into "neo-serfs."

"Wall Street is running a new profit game," writes Shabnam Bashiri at Salon.com, "by buying foreclosed houses and renting them back to their former owners."

Yes... nice business. Even better than it looks. It's why the rich get richer... and the 1% are way ahead of the other 99%. Writes Bashiri:

Every day, it seems a new report comes out praising the ongoing housing recovery. In Georgia, home prices are up 5% over last year, a year in which we also had one of the highest foreclosure rates in the country. Seems a little odd, doesn't it? Don't foreclosures usually drive down the market?

Failure of Leadership

By Bill Bonner

 

Poor Chuck Hagel. Every day, The Wall Street Journal wallops the fellow. He is whacked for not knowing what he is doing…smacked for not appreciating the threat of a nuclear Iran…and slapped hard for not bending over quickly enough to kiss neo-con butts.

John McCain and Lindsay Graham went to work on him in the Senate. They went at it clumsily and disgracefully — like a pair of goons with lead pipes. And then, in the WSJ, Dorothy Rabinowitz hammered him last Monday; she was so hysterical we couldn’t follow what she was talking about. Then, on Tuesday, Brett Stephens took over…and began pounding away in a more usual, ham-fisted way.

Gold manipulation: The logical outcome of mainstream Economics

This is the first of three articles I will post on the suppression of gold. What drives me to write about the topic? I am tired of seeing endless proof of suppression (i.e. the typical take downs in the price at either 8:20am ET or at 10am-11am ET, with impressive predictability) and at the same time, it is unfair that anyone who voices this suppression be called a conspiracy theorist. Therefore, these three letters will give a rigorous theoretical support to the claim.

The first letter will show that, under mainstream economic theory, the suppression of the gold market is not a conspiracy theory, but a logical necessity, a logical outcome.From the publication of this letter onwards, the onus to prove the contrary will fall upon mainstream economists. The conspiracy theory will actually be the opposite: To claim that suppressing gold is not necessary.

The second letter will show how that suppression takes place. For those familiar with the gold market, this letter will offer nothing new and perhaps, it will even be incomplete. But at the macro level, I will seek to offer an insight.

The third letter will examine the consequences of this suppression and rigorously, prove that the claim of the gold bugs, namely that physical gold will trade at a premium over fiat gold or gold paper is also not a conspiracy theory, but the logical outcome of the current paradigm.

Before I begin, I would like to say that I think proving the logical implication from mainstream economics that gold needs to be suppressed is perhaps comparable to Von Mises demonstration of the impossibility of economic calculation under socialism. Both are very intuitive, of consequence, and a necessary intellectual step. Without further ado, let’s start with the first thesis: The suppression of gold is a logical necessity, under mainstream economics.

The Fed in 2012

by David Howden

The Federal Reserve Board recently announced the preliminary and unaudited results of its 2012 operations. For those of us cautioning against the Fed’s increasingly dramatic operations, the results come as no big surprise. For those who think the Fed is fighting to save the economy, the results deserve a closer look.

Bernanke's 'Inflation' Record

  

 by Tyler Durden

Addressing a question yesterday, from Senator Bob Corker, on his "being the biggest dove since World War II" and the "degrading effects that he's having on society," Bernanke responded proudly that be believed his "inflation record is the best of any Federal Reserve Chairman in the post-war period." Of course that is by his measure. We suggest, he and few of his transitory colleagues look at the chart below for a sense of just what his 'dovishness' looks like to the rest of the food- and energy-consuming world... or perhaps by 'best' he means 'most'.

CORKER: So I think that, you know, I don't think there's any question that you would be the biggest dove, if you will, since World War II. I think it's something you're rather proud of.... Just wondering if you -- if ya'll talk at all in your meetings about the degrading effect that's having on our society.

BERNANKE: You called me a dove. Well, maybe in some respects I am, but on the other hand, my inflation record is the best of any Federal Reserve Chairman in the post-war period, or at least one of the best, about two percent average inflation.

 The Bernanke Era Inflation...

Italy Is Not Spain - It's Worse

With Rajoy quietly gloating at his political fraud being off the front-pages thanks to Italian elections, it seems the more we dig into Italian reality, the weaker the story becomes. The meme of the last few years has been that "at least we're not as bad as Greece" and rightly so, for as Bloomberg's Niraj Shah notes today, Greece's poverty rate is a stunning 31% (against Holland's 15.7%). However, while all eyes have been focused on Spain's dismal economy, the sad reality is that Italy is worse than Spain in that its poverty rate is a breath-taking 28.2% (relative to Spain's 27%) - even though the unemployment rates in the two nations are vastly different (Spain 26% and Italy 11.2%). Given this fact it is perhaps not surprising that the 'people' voted against austerity and furthermore, that Italy's CDS has pushed above Spain's for the first time in over a year.

by Tyler Durden

Currency Vs Money

How Government “Works”, Part II

 Bill Bonner

By Bill Bonner

by Bill Bonner

In the case of Egypt, people listened and obeyed — at least, as much as they did — because Pharaoh was, in theory, a god. In the case of Rome — with the exception of Caligula’s claims — and the Mongol empires, the theory was similarly simple, though different. Tamerlane made no claim to divinity. He merely made it clear what he would do to you if you resisted him. Towns that submitted were generally governed passably, according to the standards of the day…and taxed, but not razed to the ground. Those that contested his authority were destroyed, often with all the inhabitants killed.

US Debt - Visualized in physical $100 bills