Guest post by Gold SIlver Worlds.
GoldSilverWorlds had the honour to do a Q&A with Dimitri Speck who is the author of the best-selling book “Geheime Goldpolitik”. He is chief financial engineer of Staedel Hanseatic and runsSeasonalCharts.com, offering a wealth of intraday trend charts. He is also one of the people who increased the pressure to create transparency in the German’s gold holdings.
A lot has been written lately about the gold price manipulation and the real amounts of gold reserves of the central banks. There are several views on the same topic, the most rational one being purely statistical. As it’s easy to get caught by emotions, we have chosen in this article to let the figures and the charts tell the story.
As a seasoned mathematician, Dimitri Speck is focused on what the charts are revealing. He looks both into intraday charts as well as seasonal charts, the former being one specific variant of the latter. Based on years of chart analysis, he could clearly pinpoint the manipulation in the gold market. In his book, he explores the subject of gold holdings of the central banks, in particular the Bundesbank. Interestingly, there is a link between all the different topics we just mentioned, which was the topic of our Q&A.
As central banks continue dictating the Markets, Hussman of Hussman funds shares his views.
The enthusiasm of investors about central-bank interventions has reached a pitch that is already well-reflected in market prices, and a level of confidence that with little doubt, investors will ultimately regret. In the face of this enthusiasm, one almost wonders why nations across the world and throughout recorded history have ever had to deal with economic recessions or fluctuations in the financial markets. The current, widely-embraced message is that there is no such thing as an economic problem, and no such thing as risk. Bernanke, Draghi and other central bankers have finally figured it out, and now, as a result, economic recessions and market downturns never have to happen again. They just won’t allow it, printing more money will solve everything, and that’s all that any of us need to understand. And if it doesn’t solve everything, they can just keep doing more until it works, because there is no consequence to doing so, and all historical evidence to the contrary can finally, thankfully, be ignored. How could anyone ever have believed, at any point in history, that economics was any more complicated than that?
Unfortunately, the full force of economic history suggests a different narrative. Up to a certain point, which seems to be about 100-120% debt-to-GDP, countries can pull themselves from the brink of sovereign crisis through a combination of austerity (spending reductions), restructuring (putting insolvent financial institutions into receivership and altering the terms of unworkable private and public debt), and monetization (relief of government debt through the permanent creation of currency). Austerity generally reduces economic growth (and corporate profits) in a way that delivers less debt reduction benefit than expected, restructuring is often stimulative to growth because good new capital no longer has to subsidize old misallocations, but is politically contentious, and monetization of bad debt produces clear but often quite delayed inflationary pressures. None of these choices is simple.
Hudson nails it down.
Europe’s three needs: a debt write-down, a real central bank, and a more efficient tax system
Brussels Talk, Madariaga College, Governing Globalisation in a World Economy in Transition, June 27, 2012
What can Europe learn from the United States?
First, the United States – like Canada, England and China – have central banks that do what central banks outside of Europe were created to do: finance the budget deficit directly.
I have found that it is hard to explain to continental Europe just how different the English-speaking countries are in this respect. There is a prejudice here that central bank financing of a domestic spending deficit by government is inflationary. This is nonsense, as demonstrated by recent U.S. experience: the largest money creation in American history has gone hand in hand with debt deflation.
China has warned its banks of rampant illicit borrowing by steel companies, a development that underscores the financial dangers for the country as the government mulls a new stimulus effort to support the slowing economy. Some Chinese steel trading companies have borrowed excessively from banks and then used the funds to speculate on property and stocks, the bank regulator said in a directive that was seen by the Financial Times. The regulator added that banks must be more vigilant in lending to the companies. http://www.ft.com/intl/cms/s/0/12763b2c-ae29-11e1-b842-00144feabdc0.html#axzz1wnSfNRli
The Reserve Bank of India has “elbow room” to cut interest rates to boost the country’s waning growth, said Subir Gokarn, deputy central bank governor. His comments came days after India became the latest emerging market to see its once buoyant growth suffer a sharp slowdown, sparking fears that the country could face an economic crisis. The slowdown and rising inflation had lead many analysts to believe there was little room for manoeuvre from the RBI. http://www.ft.com/intl/cms/s/0/8179a5ce-ae1d-11e1-94a7-00144feabdc0.html#axzz1wnSfNRli
The Portuguese government will inject €6.6bn into three of the country’s largest banks, becoming the latest eurozone country to tap international bailout funding for an undercapitalised financial sector. Vítor Gaspar, Portuguese finance minister, said the funds would ensure that Banco Commercial Portugues, Banco BPI and state-owned Caixa Geral de Depósitos met tough new capital requirements set by the European Banking Authority. http://www.ft.com/intl/cms/s/0/a24af554-ae37-11e1-94a7-00144feabdc0.html#axzz1wnSfNRli
Asian markets edged forward on Tuesday as the heavy sell-off abated in the absence of fresh negative news, allowing investors to look ahead to forthcoming key policy meetings. A cluster of Group of Seven finance ministers and central bankers will hold a teleconference on Tuesday to discuss developments in the euro-zone, with Spain expected to be a focus of discussion. The softening in the yen helped Japan’s Nikkei, which was up 0.5% early on Tuesday. Both South Korea’s Kospi and Hong Kong’s Hang Seng Index climbed 0.8%, the China Shanghai Composite gained 0.2%, and Singapore’s Straits Times was 0.8% higher. http://online.wsj.com/article/SB10001424052702303830204577447163702975088.html?mod=WSJEurope_hpp_LEFTTopStories
Two of the best-known business dynasties in Europe and the US will come together after Lord Jacob Rothschild’s listed investment trust and Rockefeller Financial Services agreed to form a strategic partnership. RIT Capital Partners is to buy a 37 per cent stake in the Rockefeller’s wealth advisory and asset management group for an undisclosed sum, giving Lord Rothschild’s London-listed trust a much sought-after foothold in the US. The transatlantic union brings together David Rockefeller, 96, and Lord Rothschild, 76 – two family patriarchs whose personal relationship spans five decades. http://www.ft.com/intl/cms/s/0/efe93494-a9a3-11e1-a6a7-00144feabdc0.html#axzz1w8XyzKzt
A Spanish plan to recapitalise Bankia, the troubled lender, by indirectly tapping the European Central Bank for cash, was bluntly rejected as unacceptable by the ECB, European officials said. News of the rejection came as Spain faces elevated borrowing costs in the bond markets, tries to persuade investors it can contain problems in a banking sector weighed down by €180bn of bad property loans and, on Tuesday, saw its central bank governor stand down early. Madrid had floated the unorthodox idea over the weekend of recapitalising Bankia by injecting €19bn of sovereign bonds into its parent company, which could then be swapped for cash at the ECB’s three-month refinancing window, avoiding the need to raise the money on bond markets. http://www.ft.com/intl/cms/s/0/7730ca10-a9b4-11e1-9772-00144feabdc0.html#axzz1w8XyzKzt
The decline in Facebook’s market value since its initial public offering earlier this month increased to 24 per cent as the social network’s shares dropped a further 9.6 per cent on Tuesday to a new low of $28.84. Facebook’s stock options, which traded for the first time on Tuesday, indicated that the stock’s volatility is expected to continue. The stock options were already among the most heavily traded in the US market, demonstrating the frenzy around the eight-year-old company and its May 18 IPO. http://www.ft.com/intl/cms/s/0/6769765c-a9a2-11e1-a6a7-00144feabdc0.html#axzz1w8XyzKzt
Russian billionaire Mikhail Fridman has resigned as chief executive of BP’s Russian joint venture TNK-BP, plunging relations between the UK oil group and its local partners into fresh turmoil. A person close to Alfa-Access-Renova (AAR), the consortium of Russian shareholders that owns 50 per cent of the company, said Mr Fridman quit due to a “breakdown in governance at TNK-BP”. “The Russian shareholders have lost faith in BP as a partner,” the person close to AAR said. “This partnership appears to have run its course and we are most likely heading towards some kind of disengagement.” http://www.ft.com/intl/cms/s/0/f334b2e4-a8aa-11e1-a747-00144feabdc0.html#axzz1w8XyzKzt
Spain’s prime minister has insisted his country will not need an international rescue for its banks as investors recoiled at a €19bn rescue of Bankia, sending the country’s borrowing costs over Germany’s to the highest level since the start of the euro. Bankia, Spain’s second-biggest bank by local deposits, would have collapsed if Madrid had not agreed to the rescue last week, Mariano Rajoy warned, adding that this would have risked bringing down Spain itself. http://www.ft.com/intl/cms/s/0/27f29710-a8a3-11e1-a747-00144feabdc0.html#axzz1w8XyzKzt
Steep declines in the euro symbolise the woes of Europe’s monetary union but could have a silver lining: the boost to exporters may offer some much-needed support to economic growth across the 17-country region. Last year, even as the euro crisis escalated, the currency’s value remained remarkably steady. In recent weeks, however, financial market sentiment towards the euro has turned decisively for the worse. http://www.ft.com/intl/cms/s/0/269aa5b8-a7dd-11e1-b8a9-00144feabdc0.html#axzz1w8XyzKzt
The technocratic government of Mario Monti has made significant progress towards overhauling Italy’s economy since it came to office last year, but has not done enough to combat tax evasion and the country’s sizeable black economy, an EU finding to be released this week has determined. The European Commission report, which is still in draft form and was obtained by the Financial Times before its publication on Wednesday, carries significant weight under new EU rules that give Brussels the right to fine and sanction eurozone countries that do not follow its recommendations.http://www.ft.com/intl/cms/s/0/960e4250-a7f2-11e1-b8a9-00144feabdc0.html#axzz1w8XyzKzt
In a country where wealth matters more than most – if only because of its extreme shortage – being a teacher once meant making a decent living. However, as salaries for corporates ector jobs have soared and those for professors have stagnated, the respect afforded to academics – and the subsequent desire of students to become them – seems to have done the same. A government panel said recently that India’s shortage of faculty staff could be “significantly higher” than the 40 per cent widely estimated. While the prestigious Indian Institutes of Management and Indian Institutes of Technology – which cater to less than 40,000 of India’s roughly 16m college students – are largely immune to the overall shortage, even they have come under fire for lacking top-quality professors.http://www.ft.com/intl/cms/s/2/6e5725ee-7cd0-11e1-9d8f-00144feab49a.html#axzz1w8XyzKzt
Newedge, a leading broker, is abandoning the Greek stock market in a sign of mounting concern over the country’s future in the eurozone. The broker has told clients that it will process only sell orders, and stop extending margin loans for existing positions in Greek securities, according to a memo obtained by the Financial Times. A list of securities subject to the new restrictions include foreign-listed shares and American depositary receipts for Greek companies including Alpha Bank, Coca-Cola Hellenic Bottling and Paragon Shipping, a New York-listed shipowner that is headquartered in Greece. http://www.ft.com/intl/cms/s/0/a2123114-a690-11e1-aef2-00144feabdc0.html#axzz1w8XyzKzt
Germany refused to share the debt burden of stressed eurozone peers on Tuesday, ignoring two of the most influential international economic bodies which offered support for proposals championed by Paris, Rome and Brussels ahead of a summit. Angela Merkel, Germany’s chancellor, has argued that any co-mingling of eurozone debt would remove incentives for southern economies to adopt structural reforms. The calls from the International Monetary Fund and the Organisation for Economic Co-operation and Development came on the eve of Wednesday’s EU summit.
Asian shares retreated as hopes of fresh measures to tackle Europe’s debt crisis faded ahead of a meeting of European leaders while weak trade figures weighed on Japanese exporters. The MSCI Asia Pacific index slid 1.2 per cent with Japan’s Nikkei 225 Stock Average 1.2 per cent lower, Australia’s S&P/ASX 200 index down 1 per cent and South Korea’s Kospi Composite index off 1.3 per cent. Hong Kong’s Hang Seng index fell 1.5 per cent while China’s Shanghai Composite index slipped 0.2 per cent. http://www.ft.com/intl/cms/s/0/b71e7fe0-a2ee-11e1-826a-00144feabdc0.html#axzz1vfG4GISL
Western powers are prepared to offer Iran an “oil carrot” that would allow it to continue supplying crude to Asian customers in exchange for guarantees it is not building an atomic bomb. As the five permanent member of the United Nations Security Council, Germany and the European Union prepare for talks with Iranian officials in Baghdad on Wednesday, diplomats and oil executives said Washington and Brussels were likely to hold out the prospect of a possible suspension of an EU insurance ban on ships carrying Iranian oil. They added that the US and EU are not prepared to lift other sanctions – including an EU import ban on Iranian oil – and also cautioned that a deal is unlikely to be agreed at the meeting. http://www.ft.com/intl/cms/s/0/149b7962-a433-11e1-84b1-00144feabdc0.html#axzz1vfG4GISL
European leaders are drawing up a series of crisis-fighting proposals to raise at an informal EU summit this week that have in the past been rejected by Germany putting further pressure on Chancellor Angela Merkel. The proposals, which could include empowering the eurozone’s €500bn rescue fund to directly recapitalise faltering European banks and commonly backed eurozone bonds, have been backed by some leaders in the past but forced off the agenda by the German chancellor’s objections. http://www.ft.com/intl/cms/s/0/0cc191dc-a293-11e1-a605-00144feabdc0.html#axzz1vTdMAajU
Hedge funds and private equity firms have amassed almost €60bn to buy loans from stricken European banks in coming years as many of the continent’s lenders seek to shrink their way to health, according to a PwC survey. PwC, which is advising many banks on asset sales, estimates European banks have almost €2.5tn of “non-core” assets they could sell. http://www.ft.com/intl/cms/s/0/10e07114-a105-11e1-aac1-00144feabdc0.html#axzz1vTdMAajU
Chinese consumers of thermal coal and iron ore are asking traders to defer cargos and – in some cases – defaulting on their contracts, in the clearest sign yet of the impact of the country’s economic slowdown on the global raw materials markets. The deferrals and defaults have only emerged in the last few days, traders said, and have contributed to a drop in iron ore and coal prices. http://www.ft.com/intl/cms/s/0/a1f5ddda-a26b-11e1-a605-00144feabdc0.html#axzz1vTdMAajU
Asian markets moderated gains after an early bounce in early trading Monday as investors digested comments by leaders of the Group of Eight major economies affirming they want Greece to remain in the euro and Chinese Premier Wen Jiabao raising hopes of further policy easing. Japan’s Nikkei was up 0.3%, Australia’s S&P ASX 200 gained 0.3%, and Korea’s Kospi climbed 0.8%. Other key markets bucked the trend, with Singapore’s Straits Times Index dropping 0.2%, Hong Kong’s Hang Seng Index was down 0.7%, and the China Shanghai SE Composite falling 0.3%.http://online.wsj.com/article/SB10001424052702304019404577417051172580454.html?mod=WSJASIA_hpp_LEFTTopWhatNews
…and much more below.