The currency wars are continuing at an accelerating pace...
Since October, we have had Japan add 25 Trillion Yen and Great Britain create 125 billion Pounds to inject into their financial systems. The U.S. has pushed over $500 billion into Treasuries and MBS's.
The first LTRO in October added 489 billion Euros and the next LTRO, which is scheduled for Feb 29th is expected to push between 680 billion and 2 trillion Euros of liquidity into the European banking system.
Of the largest 33 Central Banks, 16 have eased since the fourth quarter of 2011.
Last week, the Bank of England announced a further GBP 50bn of gilts purchases, to take place over the next 3 months. On Tuesday, the Bank of Japan upped the target of its Asset Purchase Program by 50%, from JPY 20trn to JPY 30trn, with the increment concentrated exclusively on JGB purchases. Sweden’s Riksbank will pick up the baton from the Bank of Japan in the next day or so and cut it's repo rate by 25 basis points.
I'm starting to hear the term "Global Weimar" being tossed about. The commodity price increases are pushing at us again, oil is pushing above $102.50/bbl as I write. The government can say whatever it wants about inflation but most of us know that prices are on the rise... Ben Bernanke just keeps hitting "Ctrl + P" like a rat in a cage...
It is sheer idiocy to assume that the printers will stop here... or anywhere for that matter. They simply can't, now that the marginal utility of every new dollar is sub $1.00 relative to GDP creation. This means that by the time the "Global Weimar" is in full swing, we will see much, much more competitive easing by nearly all Central Banks.
This is one of those things that does not matter until it does. It is a self re-enforcing spiral that feeds on itself in an exponential progression where one day, when the curve finally goes vertical it seems to happen overnight.
This is only part of the reason I was selling Put's on AUY again this month.
What a ride!
Two new developments:
Venezuela devalued its currency by 46%! WOW
China has created the equivalent of 2 Trillion Dollars!
So yes it makes sense for them to be buying gold.
Sentiment: Strong Buy
Great Britain joined the chorus of Central Banks today in signaling that it is ready to ease without limitation in the Great Currency War.
Imagine how foolish they feel now for selling their gold reserves at the market lows...
Sentiment: Strong Buy
Finally this topic hits the mainstream airwaves!
Gold (of course) becomes the currency standard of universal value during the escalation stage of all currency wars. They can print trillions of their Yen, Dollars, Euros, Rial, Dinars, Yuan or Rubles. The treasuries of foreign nations will want to convert those currency reserves into something tangible and with universal convertibility...
Think of the Japanese investors who had the foresight to buy and hold gold as they watch the value of the Yen collapse and their gold holding soar.
I've said it before here, "If I were a Japanese investor I would convert the majority of my investable funds into gold".
Sentiment: Strong Buy
The ink is barely dry on QE4 and Europe's central bank is making noise about easing to counter the appreciation of it's currency.
None of this matters to the price of gold... Until it DOES!!!
Sentiment: Strong Buy
88% of the FR's QE program funds are sleeping away in money center bank balance sheets and vaults or swinging back and forth into low yield Treasury issues. The cost is 1%, the T Bills offer a minor yield. There is near ZERO velocity in these EQ funds. Velocity of money makes for inflation, not quantity. The 1.7T from Ben's helicopter isn't circulating anywhere...Thats why gold is static, no other reason.
We have very little buy side pressure in anything albeit kitchen sinks, houses or Cadilacs. When more money chases less goods, then , we will see inflationary pressure. In fact this era is almost deflationary.
Sorry I missed your post.
The wall of oil is not just the 22 million bbls in the 11 tankers that were being loaded and are now out of harms way. At present there are 489 tankers of various size currently full and in transit or waiting to offload their cargoes. This puts a staggering 750+ million barrels of oil inventory in the tanker fleet plying the worlds oceans.
Us refinery inputs are 14.5 million barrels/day but only a small fraction of that comes from the middle east. Plus we export about 1.5 million barrels/day of refined products making our true usage 13 million bbls/day.
Domestic production is 6.1 million bbls/day.
Total imports are 8.8 million barrels/day
Canada and Mexico supply us with 3 million of those bbls/day.
The middle easts shipments to us are as follows:
Saudi Arabia * 1.41 million
Iraq * .71 million
Kuait * .23 million
Total * 2.35 milion barrels/day or only 18% of our oil.
The 3.5 million bbl/day comes from other sources like Nigeria, Venezuelia, Angola, Columbia, Brazil etc.
(I pulled these numbers from the EIA April 27th 2012 report).
Either way the attack did not happen (yet) and we are adequately stocked if a hot war commences...
Europe is slowing fast, Brazil is slowing, China's growth is slowing, and most other nations are slowing their growth or entering recession. It is no wonder that crude fell $4.00 today.
So the currency war will commence again as the stimulus pours out of the Central Banks to get things rolling again. The Central Bankers have the choice of printing or social unrest...
Both are good for the price of gold...
@goldman... Are your "wall of oil" figures correct? 11 tankers delivering 2 million barrels of oil each = 22 million barrels. The U.S. consumes about 19 million barrels a day. We'd consume that entire delivery in less than 30 hours. ???
Alan Abelson said something similar last Saturday; that the central banks of the brics and others were trading dollars for gold. It doesn't seem to have gotten around or the metal would be up
Another tidbit from the Currency Warfront:
Sunday evening the news came out that Timmy Geithner returned from China stating that the U.S. has effectively agreed to back China’s bid to have the International Monetary Fund give the yuan global reserve currency status.
The dollar is now more vulnerable than ever before. Besides the forward march of the yuan — the dollar is being saddled and ridden into the ground by our Federal Reserve who stands ready to print up trillions more dollars at the drop of a hat.
The strange thing is that we have nearly $200 billion in unfunded liabilities coming to the funding trough in the next 15 - 20 years. That means that inflating the old debt away will only make that unfunded liability number grow faster.
The cure for reducing todays debt burden through inflation may be worse than the disease...
On the currency war front, Japan is telling the world that it is targeting inflation to be 1% and that it will be "very aggressive" in easing credit to achieve that number. They really want to de-value the Yen so they can be competitive again but with their population of older people holding economic growth in check I think that they will remain in decline for the foreseeable future.
China is easing currency controls for the yuan and giving it a greater trading range by doubling the amount it can move from 0.5% to 1%...
In other China news: China is negotiating with the Argentine Government to take over the management of Repsol's former oil subsidiary. This is big because it is an "In your face" nationalization for the west... I guess that is what happens when you burn a nation so badly they reach to the far side of the earth to build and alliance.
China is also pushing to have the London Metals Exchange (LME) trade gold in contracts settled in Yuan.
Interesting times for sure!!!
“…I am not saying it is right, but it is my opinion that our "faith-based" fiat money system mandates the management of the price of gold as a matter of fiduciary responsibility for those in power. Think about what would happen to their world if gold were suddenly to spike up to $5,000 an ounce. …”
The perspective here is that counterfeit fiat monopoly money’s greatest benefit to those who “manage” its value is to steal from every human on the face of the earth through what these criminals term “inflation”. Long ago they stole the backing of the dollar and pocketed it, leaving mere paper in its place for everyone else. So none need to worry what might happen to “their world” since they plundered what they now consider as “their” assets.