whether the price of gold is manipulated on not is difficult to say, i don’t want to enter that discussion. Take it at face value, i think that if you look at it is there a reason why the gold price is trading down? And i think we can find these reasons, these short term reasons,  i think what is happening is that so far the policy of all this money printing has not lead to substantial rises in consumer price inflation, which is what most people look at.  It is leading to rises in asset prices  but not in consumer prices. So this is something that holders of gold leads to some of them getting nervous, this is not leading to the inflationary impact that many of them expected.

And secondly i think the central bankers are enjoying a little bit of a sweet-spot right now in the markets in the sense that the money that they’re creating is leading  to these  asset price appreciation and that sucks more and more people into the equity market and i think a lot of investors find it difficult to sit on gold when the equity market is rallying  and the bond market is rallying and all financial assets are going up. So i think we have these phenomena, inflation is fairly contained right now because the economy isn’t picking up, financial assets are booming again and so people feel that gold is a little bit of a dead weight in their portfolio.

I don’t think this will last because as we said before this policy doesn’t get us out of our problems it will created new problems as we go along.  

And on behind the scenes gold becoming increasingly more important:

I think gold is becoming more important and will continue to become more important  for people simply  as a self defence asset i call it the essential self defence asset to protect your own assets and your own wealth from inflation and further financial crisis and all this manipulation that we’re discussing here

Well worth a listen:

Detlev Schlichter on the gold price drop

Here’s Marcus Grubb, Managing Director Investment at the World Gold Council talking about what the numbers mean.

Take aways include:

• Gold demand down 13% (entirely driven by paper selling – see this)
• Gold demand in India UP 27%
• Indian investment demand up 52%
• India still the biggest buyers of gold on the planet
• Chinese demand UP 20%
• Chinese investment demand UP 22%
• Expecting Chinese demand to be very strong going forward
• ETF demand fell by 177 tonnes
• Bars and coin demand in the US rose 40%
• Central bank buying remains strong
• Overall supply of gold was flat
• Since the April price drop on the COMEX the WGC has seen strong physical demand
• April has also seen shortages and waiting lists from refiners

All-in-all an incredibly bullish report for gold and gold demand. However NONE of this has been reflected in the ‘paper’ price. When reality does emerge from its slumber in the ‘paper’ gold price we expect the reaction to be sharp and sudden to reflect this huge physical gold demand.

Read the full report from the World Gold Council here.

Q1 2013 demand for gold from the World Gold Council

During the rather long titled “Workshop for senior editors: The future of Europe in a time of crisis (with the participation of Group presidents)” seminar held in Brussels yesterday, Farage in a little over 5 minutes broke down just how serious the problems with Europe is.

He starts off by asking quite a fundamental point, just what is Europe? Is it the flag, the anthem or is even it its glass and steel structures? Farage concludes that it is none of these things, and that in fact the word ‘Europe’ has been highjacked – just like many other words in the English language (inflation anyone?):

I think the word Europe has been highjacked by a political project, and these people claim to represent Europe when i don’t think they do. I think Europe is a vibrant, exciting, by far the most exciting part of the Earth’s surface,  where we have a huge multiplicity of languages and cultures and histories and talents and individuality.

And what is happening here, this attempt to drive everybody together, to forge one new state… but the way it has been done has been utterly dishonest from the start.

He then goes on to give a pretty stark prediction:

It [the €) doesn’t work and it can’t work… i don’t see things getting better, in fact every week that goes by i think they are getting much worse, so what we have is a battle, economic logic says breakup the Eurozone, let those countries go free, give them devaluation and a chance as the Icelandic nation proved that they can get back to prosperity, but against that we have the Iron political will refusing to admit failure.

I think the Eurozone will end in large scale violence, i think it will end in political extremism, i think it will end, sadly, in the Southern nations and the Northern nations hating each other, ironic that a project supposed to stop nationalism has is breeding it.

We hope that he is wrong in his assessment that the Euro will end in large scale violence – but we have a sinking feeling he might just be right.

Nigel Farage: I think the Euro will end in large scale violence

On the topic of Bitcoins, Ron Paul was out this week discussing its creation in a Bloomberg interview.

Firstly he was asked about gold’s recent drop:

 ‘I am concerned about the erraticness of the dollar. The dollar is up, the dollar is down. We print a lot of dollars. The dollar gets devalued. That is really the concern. If people think the gold price up and down is a reflection of something wrong with gold, no, I say it is something wrong with the dollar. People have been expressing concerns over the past couple of months about gold, but compared to what? Compared to where gold went from when the Fed took over where it was $20 per ounce compared to what has happened in the past?…I remember in the 1970′s when they finally allow people to own gold and it went from $35 to $200 rather rapidly, and then it lost 50%. Then it went up to $800. To compare a couple of months or a couple of weeks and forget about a bull market in gold price in relationship to the dollar for 12 years.

‘I would say the comparison is not an authentic comparison. What you have to look at is the inflation. Inflation is an increased supply of money. Since 2008 they have quadrupled the supply of Federal Reserve credit and are buying $85 billion per month of treasury bills. At the same time last week they bought $60 billion. That is the inflation. That is the distortion of the market and that’s why we’re not getting economic growth‘.

He was then asked about the inflation in the US:

‘It depends on how you define it. Inflation is when you increase the supply of money. Bond prices go up. Stocks are going up. Housing prices are starting to go back up again. Education costs are going up, but the gross distortion is the effect that the inflation of the money does on the price of money and interest rates and how it causes economic problems and why you don’t get economic growth. You have to look at the malinvestment and destruction that occurs when you mess around with the price of money. It’s not just the CPI because the CPI is not reliable. The government fudges that as well. They change the way they measure it. Free-market economists say it is going up about 8%. A lot of deception going on out there. I was just talking to someone on getting social security, they’re not happy with the purchasing power of the dollar and you can’t tell me there is no inflation’.

And what is the value of gold?

‘No one knows it other than what is happening at that moment. The Supply and demand of gold is very important. That is why it is money, because gold is used elsewhere and it is commodity. The supply and money of paper is the culprit. That is the one that is causing all the trouble. People ignore the supply and demand of paper. Yes, paper goes up and goes down, but look at the long term purchasing power of the dollar. It has been devastating. At the rate they are printing the money, you will see a continual devastation of the value of the dollar. You will not see economic growth until you liquidate the debt and liquidate the malinvestment out there. Sure, you will see housing go up again, but you will see more bubble formation because prices go up does not mean there is economic growth.

Ron Paul goes on to talk about what we’ve been saying for the past few years. Namely that this financial crisis will not be over until the debt is liquidated:

‘We are a long way from the correction, mainly because they ignore the definition of inflation and ignore the need to liquidate debt and the need to liquidate and get rid of all the malinvestment. One good comparison is look at the price of stocks and gold. Although in the past couple of weeks it has changed a bit. The price of the stock market has crashed, because you used to be able to buy the Dow with 44 ounces of gold. Now it is under 10 ounces of gold. It will probably go a lot lower’.

‘I think the way gold is acting it acts like a market does. You get ahead of itself, there has to be a correction. The amazing thing is not the correction, the amazing thing is the biggest bull market of the century when one commodity went up for 12 years straight. You cannot ignore that. To say, well there has to be an adjustment because prices are subjectively decided by many factors so you cannot predict exactly where the money will go. Unfortunately right now the money that the Fed creates goes into reserves, further distorting the markets and pumping up prices of bonds, further building a bubble that will burst because our economic growth is not there and we are in every bit as much trouble of Europe and Greece. Someday there will be a lack of confidence in our dollar and you will see the correction in the paper a lot more severe than you see the correction in the dollar-gold ratio’.

And Ron Paul had some very interesting things to say about Bitcoins:

‘To tell you the truth, it’s little bit too complicated. If I can’t put it in my pocket, I have some reservations about that. But it has been designed in the free market. If it is a means of exchange, it would not ever be illegal. You shouldn’t regulate it in the free market, but I do not think it fits the definition of money, which has been around for 6000 years. People want to see something they can know what it is, they can define it, touch it and put in their pocket. If you do not have a computer and someone running the computer and calculations, you don’t have it. I am not a big supporter of that, but I am not opposed to it. I admit, I do not fully understand what is going on with it’.

Ron Paul on Bitcoins: If I can’t put it in my pocket, I have some reservations about that

Finally a mainstream media outlet has decided to take a look at the constant manipulation in the gold and silver market – credit in this case goes to the Canadian broadcaster CBC.

Whilst followers of these pages wont find anything too shocking in the below 45 minute documentary it does mark the first time that this topic has been given the airing it very much deserves to a wider public audience.

The most important sections are the one’s featuring the ‘London whistle blower‘ Andrew Maguire. In the documentary he talks about his warnings of ongoing manipulation in the silver market to the CFTC – the Commodity Futures and Trading Commission – the group charged with ensuring that illegal manipulation doesn’t happen in the commodity market in general and the gold market specifically.

Maguire likens his conversations with the CFTC as someone that is able to tell police that a bank ATM will be robbed at a specific time and place. The investigation by the CFTC is still ongoing to this day.

For those that want to get an insight to the more murky side of gold trading and its history can do a lot worse than start off with the below documentary.

We hope that this isn’t a one-off and that other mainstream outfits follow suit and also start looking at the very important, but woefully under-reported, aspect of the gold market.

The Secret World of Gold: Finally the mainstream media take a look at the manipulation in the gold and silver market

In the video below the author and Austrian economist Tom Woods does a brilliant job in explaining just what GDP is, and more importantly why it isn’t a particularly good measure of the health of an economy.

It should always be remembered what GDP isn’t. It isn’t a measure of a country’s ethical behaviour, it isn’t a measure of your success and it sure as heck certainly isn’t a measure of your happiness.

What GDP has really become is just another fudged data point that any government can point to and try and inspire confidence that the economy is doing just fine.

Just how useful is GDP anyway?

The financial crisis that started in 2008 is still in full swing some 5 years later, the fact that the UK is the verge of a so-called ‘triple-dip’ recession is testament to that fact.

That’s five years of essentially treading water economically speaking and alarmingly with no end in sight. Five years of time waisted, that’s 7% of the average human’s life. Perhaps it would’ve been far better to bite the bullet back in 2008 and flush the debt from the system and move on.

Would GDP have fallen further faster? Perhaps. Would unemployment have spiked higher if we didn’t bailout the banks? Probably. But it would’ve been over with, done, finito, and we would’ve got an actual recovery by now and be posting much stronger GDP numbers with much lower unemployment – in short we would’ve been able to move on with our lives after learning a very hard but valuable lesson, namely that the banking system is set-up to fail.

This was certainly the advice of one of the best historians of the 20th century and a giant of an economist compared to the pygmy economists offered to the world today. That man was Murray Rothbard.

See below for a his opinion on how government’s should deal with recession.

“Once you have an inflationary boom you have to have a recession, recessions are necessary product of the boom, therefore the best thing to do is to get over with fast, then you have a recovery situation.”

http://youtu.be/QWgtmjVLMbM

Instead we’ve got a government that is hell-bent on drawing this recession out for an agonisingly long time. Which is totally futile because the recession will come whether the government like’s it or not. All that is happening is guaranteeing a much tougher ‘bust’ when it finally comes.

Here’s what another giant of the economics world, Ludvig von Mises, had to say about drawing out recessions and not allowing for the necessary correction:

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved”

Re-read that quote by Mises from 1949 and tell us how that doesn’t perfectly sum-up where we are financially in the world today.

Murray Rothbard: Recessions are best dealt with quickly

The biggest unintended (or intended for the more conspiracy minded folks) consequences of the now hourly farce coming out of Cyprus is the obliteration of confidence in the banking sector in European countries specifically and ALL banks globally.

People that keep yelling that Cyprus isn’t a big deal because it is only 0.2% of total European GDP seem to have hopelessly missed the point of what is happening in Cyprus.

To clarify what has happened. After the near total collapse of the financial system back in 2008 government worldwide rushed to instil CONfidence in the banks by guaranteeing the cash of depositors up to a certain amount. In the EU this amount was set at €100,000.

This meant that people with €100,000 or less in an EU based bank were covered in the event that their bank went bust. This guarantee scheme in Europe is supposedly still in place today – INCLUDING in Cyrpus.

However the events out of Cyprus in the past few days have shown this guarantee to not be worth the paper it is written on. This is because ANYONE with LESS than €100,000 of cash in a Cypriot bank has had 6.7% of their deposits stolen from them. And it is theft because the law (which is looking like NOT passing) allowing the taking of 6.7% of depositor cash has yet to even come to the floor of the Cypriot parliament, let alone be voted on.

So just how will people in other countries on the verge of their own bank bailout (Spain and Italy jump to mind) feel about the €100,000 guarantee in their own countries now that the Cypriot farce has proved that at anytime the EU and IMF want they can come in and take your private property (bank deposit) anytime they wish? We’ll go out on a limb here and suggest that the trust in that guarantee across Europe has just instantly evaporated.

So what is the logical move for people with bank accounts in Europe? Take the cash out and stick them under the mattress or buy gold – it’s not as if that money is earning any rate of interest so the ‘cost of carry’ to sticking it in a mattress or buying gold is effectively zero.

What this means in simple terms is the makings of the mother off all bank-runs in Europe. So what is the best way to deal with such a glaring problem? Pretend it isn’t there! And this is exactly what appears to be happening in Italy.

According to the below CNBC piece, the main Italian newspapers have relegated the Cypriot bombshell to pages 15 and 19 of the national newspapers.

I’ve spoken to 9 people since i arrived in Rome last night and 8 of them didn’t know what was going on in Cyprus and it’s interesting because the papers this morning there is a small caption on the front page of Le Republica, you have to get to page 16 to even find anything out about Cyrpus… [and another paper] it’s on page 19. Nothing on the front of the papers

And when you bury news of this magnitude so deeply in the bowls of the mainstream press you know its serious.

How to prevent a bank run – Step #1: Bury news of Cyprus on pages 16 and 19 of the Italian national newspapers

Now we have Rick Santelli of CNBC who sums up the difference between the two in under 3 minutes.

Frank Lesh: One of the biggest changes we’ve seen in the [gold] market is the fact that it has turned into a security with the evolution of the ETF which encourages a lot of people to participate in this gold market who would’ve never be in it. There’s a few people that only want to own gold bars but how many coins do you really want to have? And what do you do with them, do you pay for storage… with the evolution of the ETF there is a lot of people who took the complication out of it, you can buy it, its on paper.

Rick Santelli: But didn’t it take the point away to some extent? Back when i was trading gold the newspapers used to have on the front page of the Tribune the ‘gold watch’, the ‘silver watch’, people were taking antique silver sterling that was past down and melting it – it’s not the same now, if you’re trading in paper the notion of many who trade gold, Ayn Rand’ers, if the financial world comes to an end, they’re going to have the gold, if you’re playing an ETF you’re going to have a piece of paper. So it takes away some of what i perceive some of the driving forces and the run up in the early stages after the crisis.

Frank Lesh: Yeah, all of this is true.

And that ladies and gentleman is the difference between owning physical and owning a claim on the physical. When you need it the most will and ETF really provide the insurance that physical gold give you? No.

The difference between owning gold ETFs and physical gold explained in under 3 minutes

Q. What’s the downside of this, you’re putting all this money into the system, what’s the danger?

A. You desist and you don’t make an investment, and that in turn means there is less flow of capital, less exports taking place. Fundamentally that’s a negative.

You’re going to restrict trade basically.

Then there was a comment about ‘old style’ central bankers that we can’t distinguish from the current crop of central bankers:

If we take a look at the old style central bankers, that is you can not devalue your way to prosperity…

If people acknowledge this fact so easily then why are central bankers trying to tell us that you can?

The interview continues:

Q. What are the reasons for not doing this[more QE]?

A. Clearly after a weak currency inflation is going to be a significant problem a loss of credibility of the central banks is going to be an issue.

And this is where it starts to get interesting because one of the solutions to the problem talked about on Bloomberg is a return to some form of gold standard:

Q. Inflation and constriction in trade is what your saying – but what is the solution?

A gold standard is no different today than how good it was between 1945-71, it worked, the world was in prosperity, there was economic growth, there was clearly certainty in terms of what the exchange rates were… Even in the short term there is nothing to be gained from devaluing.

The benefit of that [previous gold standard] was the certainty of the exchange rate and a dollar was defined as a unit of currency, 35 units of which bought you an ounce of gold.

But then came the same tired argument against moving forward to a gold standard – ‘there isn’t enough gold’.

When are people going to start to realise there is always enough gold – even if there was just one ounce there would be enough gold, it is the PRICE that simply rises to accommodate the amount of gold. Something that is then partially admitted:

The value of gold would have to be astronomically high to be able to back the money supply.

Bingo. This is exactly the point, and it is for this reason that gold will eventually take a slingshot to the moon in price terms.

And just how ‘astronomically high’ would the price have to go in the UK to cover the money supply? Something around £16,000 would do it.

Gold standard discussed on Bloomberg: The value of gold would have to be astronomically high to be able to back the money supply