central banks Archives - Page 2 of 2

Russia Buys More Gold Reserves

SINGAPORE, Jan 27 (Reuters) – Russia extended its buying spree of gold to a ninth straight month, and the price of gold rose for the first time in five months, data from the International Monetary Fund showed on Tuesday.

The global financial institution later on Tuesday confirmed the Netherlands did not increase its bullion holdings in December, contrary to the IMF’s earlier report that the bank had raised gold holdings for the first time in 16 years.

The Dutch central bank, the world’s ninth-biggest official sector gold holder, has kept its holdings unchanged since late 2008. The bank earlier on Tuesday denied that it bought more gold last year.

Central bank buying and selling can have a significant influence on gold prices. Central banks became net buyers in 2010 after two decades as net sellers, driven by an increased interest in gold in the wake of the 2008 global economic crisis.

Gold prices rose nearly 1 percent in December, the first monthly rise in five, possibly on support from central bank purchases.

“It has been the emerging market central banks that have been doing the buying over the past few years, so it is encouraging for gold markets to see the Dutch additions,” said Victor Thianpiriya, an analyst with ANZ in Singapore, speaking before the IMF’s data correction.

The Dutch central bank in November moved to repatriate more than 120 tonnes of gold from vaults in the United States.

Net purchases by the euro area totaled 9.55 tonnes in December, at a time of heightened jitters over the economy and speculation over stimulus measures by the European Central Bank, which just last week announced a bond-buying programme.

Meanwhile, Russia added 20.73 tonnes to the world’s fifth-biggest gold holdings, bringing its total to 1,208.23 tonnes.

Russia’s gold-buying spree comes amidst a bearish outlook for its economy, which is expected to slide into recession this year on low oil prices and the fallout from sanctions over Ukraine.

Ratings agency S&P cut Russia’s sovereign credit rating to junk status on Monday, bringing it below investment grade for the first time in a decade.

PAUSE IN UKRAINE SALES

Ukraine, which has seen renewed conflict with pro-Moscow separatists and is also struggling with economic growth, seems to have taken a pause in selling its gold holdings.

It sold about 16 tonnes of gold in October and November, but Tuesday’s data showed that its bullion reserves were steady at 23.64 tonnes in December.

Turkey, however, lowered gold holdings by 3.86 tonnes to 529.12 tonnes. Turkey counts gold held on deposit with commercial banks as part of the central bank’s bullion holdings.

Other buyers included Kazakhstan, Belarus and Malaysia. (Additional reporting by Jan Harvey in London; Editing by Ed Davies)

Article originally posted at Reuters.com.

Capitalism and Creditism and Corporatism, Oh My!

submitted by jwithrow.

Journal of a Wayward Philosopher
Capitalism and Creditism and Corporatism, Oh My!

December 26, 2014
Hot Springs, VA

The S&P opened at $2,084 today. Gold is flat around $1,198 per ounce. Oil is still checking in at $56 per barrel. Bitcoin is at $326 per BTC, and the 10-year Treasury rate opened at 2.24% today.

All is quiet in the markets this holiday season. We may look back on this time period in a few years and say that we were presented with a tremendous opportunity to buy beaten down energy and commodity stocks during the tax-loss selling season of 2014. We probably will say that we had a great opportunity to accumulate some gold throughout 2014 as well. Just be sure to follow your asset allocation model if you decide to capitalize on these opportunities.

Yesterday we examined our current economic circumstances and realized that we were employing capitalism but we had no capital! Today we must ask the question: How can you have capitalism without any capital?

The obvious answer is you can’t. It’s like making potato soup without potatoes – try as you might it just won’t work.

So if we don’t have capitalism then what do we have? My answer is that we have some weird blend of creditism and corporatism. Governments have colluded with large corporate interests, especially in the commercial banking sector, to rig the economy in their favor.

Though we could go back further, let’s start our story (from the American perspective) at the end of World War II. Prior to the war governments didn’t think they could do everything they wanted due to financial constraints. That didn’t stop them from doing half of what they wanted to do but it forced them to make a choice. Did they want guns (warfare) or butter (welfare)?

The U.S. came out of WWII looking like gold… literally. The U.S. economy was the least damaged by the war which ravaged Europe and it came out holding the world’s largest stash of gold reserves. This relative economic strength gave U.S. politicians the wrong idea: they started to think they might not need to make any choices. Then President Lyndon Johnson came along and he wasn’t shy about it – guns and butter it will be!

So we got the Vietnam War and the Great Society together! And gold steadily flowed out of the U.S. Treasury until President Nixon pulled the switch-a-roo in 1971 and closed the gold window. All of a sudden the international monetary system became elastic. With no more gold restraint, dollars and yen and pounds started to pile up as central banks and commercial banks discovered they could conjure money into existence largely at will. But this was a different kind of money than the gold-backed variety – it was credit-based.

This credit-based money was extremely popular and the money supply grew 50-fold between World War II and 2008. Everyone got used to a constantly expanding money supply and now both the economy and asset prices are dependent upon it. It is the expansion of credit, not real capital, that supports all of the federal spending programs, all of the wars in the Middle East, the mass imports from China and Vietnam, the new housing developments and shopping malls in Middle America, the massive car lots across the country, most of the skyscrapers dotting the city skies, and current real estate and stock market valuations.

Here’s a fun example: do you know how much debt is still owed on the tax-funded Meadowlands Sports Complex in New Jersey? I’ll tell you: more than $100 million is still owed on the facility. Oh, and I am talking about the old Meadowlands Stadium that was closed and demolished in 2009 to make way for a new $1.6 billion facility now known as MetLife Stadium. New Jersey taxpayers are still on the hook for $100 million on a sports complex that no longer exists! New Jersey built the stadium, used the stadium, and demolished the stadium but never bothered to pay for it.

Such nonsense can only occur in a world of ever-expanding credit-based funny money.

This applies to the massive bank bailouts and banker bonuses that one side of the fictitious aisle rails against just as it applies to the massive welfare programs that the other side of the false political-divide takes issue with. None of it exists without perpetual credit expansion; none of it exists without creditism and corporatism.

Capitalism would have nothing to do with any of it.

It is important to understand that we have only seen one side of the credit cycle within the current monetary system. Credit has been expanding constantly for more than forty years now. But if we look around our world we can clearly see that nothing expands forever. Waves rise then fall. Trees grow then mature. Balloons inflate then pop.

One day credit will have to contract; it is inevitable. What happens when that day comes? Ludwig von Mises, the late Austrian School economist, offered some insight:

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

Was he right? Time will tell.

More to come,

Joe Withrow
Wayward Philosopher

For more of Joe’s thoughts on the “Great Reset” and the fiat monetary system please read “The Individual is Rising” which is available at http://www.theindividualisrising.com/. The book is also available on Amazon in both paperback and Kindle editions.

Capitalism Without the Capital

submitted by jwithrow.

Journal of a Wayward Philosopher
Capitalism Without the Capital

December 25, 2014
Hot Springs, VA

Merry Christmas!

The markets are closed today in honor of this wonderful holiday so we have no updates for you in this entry. Check back in with us tomorrow for market updates. We do have an important entry for you today, however. It’s not nearly as important as spending time with your family on Christmas Day but, since you are here nonetheless, we will carry on.

Earlier this month we watched as the U.S. national debt came up behind $18 trillion, whipped into the passing lane without signaling, and sped off into the distance. Where is the national debt going in such a rush? I’m not sure, but I’d wager it’s someplace not worth going to.

As the national debt raced past we noted that total credit market debt has ballooned up to 330% of GDP with considerable help from the Fed’s efforts to pump in $4.3 trillion worth of hot air.

The television analysts accept it all as normal but we must ask the question: How in the world did we get to this point?

Much of the apparent prosperity we have enjoyed over the last several years has been borrowed from the future. The world’s three major central banks – The Federal Reserve, the European Central Bank, and the Bank of Japan – have each been engaged in an outrageous financial experiment; they have been creating massive amounts of currency out of thin air to purchase government debt by the boat-load.

Remember, debt is nothing more than a promise to pay for present spending with future earnings. These central banks, in collusion with their respective government, are really engaged in a scheme to transfer massive amounts of wealth from the public in the future to themselves in the present. There will be serious consequences to this madness.

It is important to realize that none of this chicanery has anything to do with capitalism… there’s no capital even in sight! The money created by the central banks of the world may act much like real capital, but it is just a clever impersonator.

Capital, according to the Ludwig von Mises Institute, is defined as the goods that were produced by previous stages of production but do not directly satisfy consumer’s needs. In short, capital is real savings and real resources.

Capital formation is actually quite simple – just save more than you consume and you will have capital.

We are currently doing the opposite – we are consuming way more than we produce. That’s how you end up with debt piled to the ceiling. This is true on the macro level (governments, multi-national corporations, etc.) and it is true on the micro level (individuals, local communities). The credit-based money and the massive debt have driven capital into hiding… we suspect for fear of being called a greedy capitalist.

And that, in a nutshell, is the answer to our question: we got to this point by embracing central banking and fiat money thus abandoning capitalism and its sound monetary system.

Sound Money once kept debt and the central planners at bay.

What was the secret?

Sound Money was like your grumpy friend that just won’t ever agree to do anything. You ask him to go to the movies and he says nope. You ask him to go to the ball game and he says he’ll watch it on T.V. You ask him to go to the bar and he says he has beer in the fridge at home already. Eventually you learn there’s nothing you can talk him into doing so you stop trying. That’s why governments and central banks hated Sound Money; it would never agree to any of their best laid plans.

You see, Sound Money could not be infinitely printed by governments or central banks. Originally, before governments got into the money business, money could not be printed at all; it had to be dug out of the ground and then minted into a coin. Later, governments took it upon themselves to stockpile gold in a vault and create paper currencies 100% backed by the gold. Always one to offer something it doesn’t have at a price it cannot sustain, Government reduced the gold backing of its currency over time and then, in 1971, it cut ties to gold altogether. That was the requiem for Sound Money and ever since then there has been absolutely no limits on the amount of currency central banks can create. Which means there has also been absolutely no limit on how much debt governments can rack up.

So here we are.

But just because there have been no limits to all of this economic madness in the short run does not mean there will never again be any limits. History shows that market forces cannot be perpetually suppressed and distorted – eventually the market will win out. The Day of Reckoning will come.

Until the morrow,

Joe Withrow
Wayward Philosopher

IBC – What’s it all about?

by R. Nelson Nash
Author of Becoming Your Own Banker
Article originally published in the October issue of BankNotes

It should be evident to most people that the last 100 years have been very violent in the financial world. Why? What happened to cause all this turbulence?

During this period we have witnessed the bloodiest century of all time. Two World Wars. Endless smaller wars all over the earth. An influenza epidemic after WWI. Nations formed and then self-destructed. New diseases coming into existence. Endless turmoil in the Mid-East. Empires coming apart. Financial euphoria followed by inevitable busts. Unbelievably powerful weapons and weapon systems. Propaganda perpetrated on an unsuspecting public such as man-made global warming. The list could take several pages to itemize them.

So, what’s going on? All of these actions are preceded by thoughts of the people involved at any time and place. Or, maybe it could be best described as lack of thought! It appears to me that people have forgotten how to live. It could be that they never learned how to live in the first place. Maybe it could be because of the way people feel. We seem to have a generation of “touchy-feely” folks that are in places of leadership and they influence the actions of every-day people.

Wars make absolutely no sense, but it is evident that this behavior is a common denominator throughout this time frame. Nothing good came from them. Yet, wars are glorified in the minds of many people. Things like Tom Brokaw’s book, The Greatest Generation. In reality it was a disaster — because of what it did to the minds of the people. They heard lies and came to believe them. Our country had already adopted Socialist ideas a number of years earlier, but this head-long plunge gained tremendous momentum during this period. I was there to witness it as a teenager and have seen it unfold to become the monster that we have today.

The historian, Dr. Clarence B. Carson wrote a masterful book entitled, The World In The Grip Of An Idea back in the 1970’s. He did a great job of explaining how we got into this abominable situation. The book needs to be re-published and Dr. Paul Cleveland and Dr. L. Dwayne Barney are in the process of re-writing it at this time. The world needs this book very much and so I encourage you to get a copy when it becomes available.

From my own perspective, money is the real common denominator in human action. The great Austrian Economist, Ludwig von Mises points out that the business cycle is caused by central banks. They inflate the money supply dramatically and people can’t tell the difference between “real money” and the “counterfeit money” (fiat money has no real basis). They feel that it is real wealth and so they do things that are totally irrational. This creates booms in the economy. In due course of time, reality rears its ugly head, and the bust follows.

This pattern has a long history, but it seems that every generation during the boom years feels that “Yes, those things happened in the past – but, this time it’s different!” This is nothing but hubris in its purest form. It is the “Arrival Syndrome” that I describe in my book, BECOMING YOUR OWN BANKER. It is the worst thing that can happen to the human mind!

Government debt all over the world is huge. But, consumer debt in these nations is approximately equal in volume. Bankers have created a mind-set in people that “you don’t have to save money– just spend, spend, spend! We are going to take care of your financial needs.” A local Credit Union advertises “Get a Legacy Lifestyle Loan from us.” Translated: “If you don’t like your present lifestyle, then get a loan from us so you can live the way you want to today! Don’t worry about having to repay the loan.”
We are bombarded with such stuff every day. If you listen to financial advertising very long then it becomes “hourly!”

Your local, commercial banks are the primary source of inflation. They lend money that doesn’t exist. If anyone else did that they would be put in jail! But, this chicanery has been going on so long that most everyone considers it normal.

In the video, Banking With Life, Dr. Paul Cleveland points out that people confuse money with wealth. Wealth is your productivity, and things that you own. Money is just the medium of exchange that we use to acquire wealth. Creating a pool of money from which to buy wealth is a necessary function in an economy. This pool of money is known as banking! We could not live the way we do today without the concept of banking! It is sovereign! Some party in your life is going to be the banker whether you recognize it or not!

That party should be you! John Donne (1572-1631) gave us the thought, “No man is an island.” Therefore, this Infinite Banking Concept must involve other people in the form of a contractual relationship. The perfect financial instrument to accomplish this has been in existence for over 200 years. It is known as Dividend-paying Whole Life Insurance (Preferably with a Mutual Company – one that is owned by the policy owners). Your medium of exchange must be warehoused somewhere! There are no exceptions!

This is a place that cannot inflate the money supply. This Infinite Banking Concept has been taught through my book, Becoming Your Own Banker and the follow-up book, Building Your Warehouse of Wealth. Further explanation is provided by How Privatized Banking Really Works by Carlos Lara and Robert P. Murphy, PhD.

Through these books and seminars that are taught all over the USA and Canada, there are now thousands of people who will never have to make loans from an institution that inflates the money supply and creates “booms and busts.” You, too, can become your own banker!

Please see the October issue of BankNotes for the original article and others like it.

The Middle-Class is Fading

submitted by jwithrow.

The middle-class is fading. Fast.

The jobs that have been lost since the financial system teetered on implosion in 2008 have not come back. Those jobs are not coming back. More education won’t bring them back. More laws won’t bring them back.

The government’s job report says that more and more jobs are being created, but guess what? They are mostly low paid part-time or temporary jobs; they are not the middle management jobs in the high rise buildings.

As for why the middle-class is being wiped out, it’s no mystery. This very same scenario has occurred all throughout history. One can look back as far as the time of the Roman Empire and see that there is nothing new under the sun. History rhymes and those ignorant of history are doomed to repeat its mistakes.

You see, every time the currency of the land has been inflated and debased, the middle-class has been destroyed. Inflation transfers value from those who must work to earn currency to those who control the currency supply.

They don’t tell you this in school. They don’t tell you this in college. They don’t even tell you this if you major in finance or economics. They probably don’t know themselves. So most people never understand what is happening. Their paycheck gets bigger and bigger so they can’t figure out why they can never get ahead. They don’t realize that their bigger paycheck is buying less and less. They don’t understand the difference between nominal income and real income.

In Roman times it was the government that controlled the currency supply. The Romans would collect taxes and tributes from citizens and conquered peoples and they would then melt the precious metal coins and add in cheaper metals such as copper to re-mint more coins of lower value. They would then pay the Roman army with these cheaper coins and pretend that they had the same value as before. The general market caught on to this process and began to charge higher prices for food and goods in response. The middle-class was destroyed over time and eventually the economy collapsed. Then the Empire fell.

In modern times it is the Federal Reserve and the other central banks of the world that control the currency supply. They do this by simply creating currency units from nothing and using the new currency as they see fit. They inject some of this new currency into the banking system, they use some of the new currency to buy government debt, and they inject some of the new currency into the IMF and foreign central banks. This directly leads to more and more debt and an increase in consumer prices across the board.

They are printing currency at will so why is the middle-class working so hard for 2% annual raises?

The rules of the game have changed and those unable to recognize this and adjust accordingly will be wiped out with the middle-class – just as has happened throughout history.