The Fed Basically Still Uses LTCM�s Financial Models

The models that LTCM was using the 1990�s were the same models that Wall Street was still using in the early 2000�s and, for that matter, the same models being used today. They are called �dynamic stochastic general equilibrium models� and also risk management models like �value at risk� or VaR models. They were the ones that we used in the 90�s and have continued to use for the last 16 years. They�re still being used now. They do not correspond with how markets actually work or to actual human behavior. They have failed in the past and they will fail again. If you have the wrong model, you will get the wrong policy and you will be negatively surprised by results every single time.

According to Greenspan, the Fed expanded its balance sheet not to boost the economy or to keep inflation moving higher. It was because the Federal government had such large expenditures that it would have �crowded out� private borrowers if the Fed had not increased the size of its balance sheet. Do you think that�s true? Is the Fed directing the economy? Or just reacting to the capital demands of the US government?

I think both things are true. I think Greenspan is right that we are seeing monetization of debt. This is what Frederick Mishkin, the former member of the Federal Reserve board of governors refers to as �fiscal dominance.� Yes, I think Greenspan is right about that but it�s also true that they�re trying to fulfill the dual mandate of price stability and creating jobs. As between the two, the Fed is willing to tolerate higher inflation if they can create more jobs. They don�t talk about �fiscal dominance� and they don�t explicitly say they�re monetizing the debt. In fact they deny that they�re monetizing the debts.

Greenspan�s right. When the credit demands of the Federal government are that great, you either have to accommodate the demands or somebody is going to be crowded out. I think that the result would be deflationary. Governments cannot tolerate deflation. So rather than choose between stimulus from monetary ease and monetization of debt, I think that they are doing both.

- Source Jim Rickards, via Proactive Investor

Why Lower Gas Prices Are NOT �Bullish Indicators�

I don�t think the data is bullish at all.Lower gas prices put more money in consumers� pockets.

But there�s an alternative to spending� Which is saving or reducing debt � which is the same thing.

I don�t consider these bullish indicators. They tell me an economy is running out of steam.

An economy is nothing more than two things: How many people are working and how productive are they?

Labor force participation is going down � which means fewer people are working. And productivity is also going down. Real wages are stagnant. 50 million people are on food stamps. 7 million people have part-time jobs who wish they had full-time jobs.

These data points are not bullish indicators.

We�re in a global depression.

There�s a slow down in Japan, China, Europe and the U.S. � the whole world is in a global depression.

There�s enough fights to go around, but in a fight between the ECB (European Central Bank) and Germany, Germany wins.

The ECB is only doing $2.5 billion worth of asset buying, while the FED has been doing almost $1 trillion a year. So the ECB is going through the motions but they�re not doing anything like QE. They�re not buying soveirgn debt. They�re buying some asset-backed securities, but there aren�t even enough of those to have much of an impact.

The ECB�s Mario Draghi is the best Central Banker in the world. He understands that Central Banks are essentially impotent.

When you�re impotent you have to talk a good game � so Draghi says little and does less.

The U.S. FED is the opposite. They don�t understand how impotent they.

China is the biggest credit bubble in the world.

The U.S. has created a bubble in housing and stocks with easy money, but there�s no bigger bubble in the world than China. They have a greater capacity to keep it going because their investors have fewer alternatives.

Bank for International Settlements is Manipulating the Gold Market

Regulators were asleep at the switch. They either have an interest in turning a blind eye. In the US, the futures markets are regulated by the Commodity Futures Trading Commission. They�ve had vacancies that the president has been in no hurry to fill.

So it almost looks like the cops are in the doughnut shop, as far as that�s concerned, and a lot of the manipulation�s actually being done by governments. We know this because they operate through something called the BIS. That�s the Bank for International Settlements, based in Basel, Switzerland.

The BIS is an interesting organization. It was formed in the 1930s, partly to do gold operations for other central banks. It�s sort of the central bankers� treehouse or clubhouse or whatever you want to call it. But notoriously during World War II, the BIS was run by an American named Thomas McKittrick and they were brokering Nazi gold.

So here you had an American brokering gold for the Nazi�s. So that tells you where the BIS is coming from and they�re still alive and well. And if you read the footnotes to their annual financial statements, they say that they conduct gold sale and leasing transactions on behalf of central banks and commercial banks.

But I disguise the identity of course, and so between the statistical evidence, the disclosures in the BIS, the fact that we know central banks have leased and sold gold from time to time, IMF dumping gold on the market.

In my new book, The Death of Money, I�ve actually uncovered some formerly classified documents which have been declassified from the 1970s. I�ve got some of these from the Gerald Ford Presidential Library that are explicit. Letters from the President of the United States to the Chancellor of Germany saying, �Hey, we want you guys not to buy any gold, because we want to keep the price down.�

So it�s historic. It�s blatant. There�s statistical evidence. It�s very, very clear what�s going on and I�m a gold investor. I manage portfolios by investing in gold. I recommend it to clients, but you do have to understand that if you�re investing in gold you�re fighting every central bank in the world.

- Source, Sprott Money:

http://www.sprottmoney.com/news/ask-the-expert-james-rickards-march-2014

Manipulation of Gold Market is No Longer Debatable

The manipulation of the gold market is not something that�s really debatable any longer. The evidence for it is very clear and I talked about this in my new book, The Death of Money: The Coming Collapse of the International Monetary System, particularly in Chapter 9 which is about gold, but also in other parts of the book.

Now the particular class action lawsuit that you�re referring to is aimed at the five members of the London Gold Fix, which is a London-based process whereby the price of gold is set twice a day by kind of an interaction indication of interest among these five major dealers and we�ll see how that plays out.

Now these lawsuits can take years to work out because the defendants typically come in, and file a motion to dismiss and that has to be argued and then decided by the judge. If the plaintiff gets to go forward, you get into discovery and then that opens up a lot emails and so forth. So the cases take years to play out.

But beyond the London Fix, there are other forms of manipulation that may be even more important to gold investors, particularly on the COMEX, that�s the commodities exchange based in New York. And there are some very interesting recent statistical studies. I�ve seen some of them myself.

One is about to be published. It will promulgated out, but I�ve see some private research on this and what it shows is that, for example, if you could go back ten years and have two hypothetical accounts, then one of them would buy the open on the COMEX every day and sell it at close, so you would basically own the COMEX trading hours.

And the other account would buy the spot market after COMEX closes and sell in the spot market just before COMEX opens the next day. So one account, in effect, was on the COMEX trading day and the other account would own the afterhours.

Now what�s interesting is that over a ten year period those accounts should perform almost identically. On any given day there could be some differences or some volatility based on the timing of particular events, but that�s going to even out and over ten years they should be the same. In fact, they were nowhere near the same.

The COMEX accounts showed massive losses and the afterhours accounts showed massive gains, both deviants from the overall market. And what that tells you is that the COMEX is being manipulated, and the price is being suppressed, mostly with large sell orders at the close. Then it would pop back up again in the afterhours. So this is a smoking gun.

This is like if you find a body with a bullet hole in it that you didn�t see the crime, detectives say �Who has the motive� and they look for DNA. So this statistical evidence is like the DNA. It proves the manipulation, even if you didn�t actually see it happen. Although sometimes, you do see it happen with these larger�

So if I were running the manipulation I would actually be embarrassed at this point because it�s so blatant. So I think the London Gold Fixing cases are important, but they�re not the only evidence. The weight of evidence is clear that the gold market is being very heavily manipulated.

- Source, Sprott Money:

http://www.sprottmoney.com/news/ask-the-expert-james-rickards-march-2014

They May Have to Go to a Gold Standard

People are going to have to pay attention to that. And either the Chinese are dopes, which they�re not, or people will start to get gold, which they will.

But if there�s a run on paper currencies (which is entirely possible) and there�s borderline hyperinflation (which is entirely possible), they may have to go to a gold standard� Not because they want to, but because they find it necessary to calm the markets.

- Jim Rickards via Wall Street Pit:

http://wallstreetpit.com/100623-your-personal-gold-standard/

Wipe Out the FED's Capital

"The Fed has capital of about $60 billion and assets approaching $3 trillion. If the Fed�s assets declined in value by just 2 percent, that decline applied to $3 trillion in assets produces a $60 billion loss�enough to wipe out the Fed�s capital. A 2 percent decline is not unusual in today�s volatile markets."

- James Rickards

The FED Looks Like a Poorly Run Hedge Fund

"The United States now has a system in which the Treasury runs huge deficits and sells bonds to keep from going broke. The Fed prints money to buy those bonds and loses money owning them. Then the Treasury takes IOUs back from the Fed to keep the Fed from going broke. This arrangement resembles two drunks leaning on each other so neither one falls down. Today, with its 50-to-1 leverage and investment in volatile securities, the Fed looks more like a poorly run hedge fund than a central bank."

- Jim Rickards

Japan Enters the Currency Wars in Full Force

By Erin McCarthy of  The Wall Street Journal

"Investors and economists concerned about the current central bank battle to weaken their currencies might want to get comfortable, because this so-called �currency war� isn�t ending any time soon, warns veteran financier and author of the 2011 book �Currency Wars: The Making of the Next Global Crisis� James Rickards.

In an interview on the DJ FX Trader podcast, Rickards says the continuing currency battle will likely last until 2014 or 2015, and in the meantime rising inflation across the globe remains a key risk.

�We�re not in currency wars all the time, but when we are they tend to last for a very long time,� he says.

He contends that Japan�s battle to weaken the yen also has a much longer way to go, since the yen would have to reach 110 or 120 yen per dollar to achieve improved growth and to fix the country�s deflation problem.

Listen below for more of Rickard�s views on currency policy and why it will be a topic on the agenda at next week�s Group of 20 meeting, and to hear from DJ FX Trader strategist and columnist Vincent Cignarella on how to trade foreign exchange amid this latest currency skirmish."

Listen to the full podcast here: 

http://blogs.wsj.com/economics/2013/02/07/podcast-james-rickards-on-currency-wars/?mod=WSJ_latestheadlines

31 Days to Survival: A Complete Plan for Emergency Preparedness

US Economy, Gold and Currency Markets

"James Rickards, senior managing director at Tangent Capital, talks about the U.S. economy, investment in gold and global currencies. Rickards speaks with Sara Eisen on Bloomberg Television's Money Moves."

- Source, Bloomberg TV:

http://www.bloomberg.com/video/83336658-james-rickards-on-u-s-economy-gold-currencies.html

There is Nothing Left to Say

"Part of the Bernanke genius is we will now stop talking about QE because there's nothing left to say. Purchase details are for technicians."

- Jim Rickards in a recent twitter post. Referring to the FED's recent QE announcement:

http://twitter.com/JamesGRickards

The Treasury and the Fed are Robbing Savers

"Casey Research's Chief Technology Investment Strategist, Alex Daley sits down with James Rickards, Senior Managing Director at Tangent Capital Partners and author of "Currency Wars", at the latest Casey Research Conference, "Recovery Reality Check" in Weston, Florida."

- Source:

http://bit.ly/Caseys_Daily

The Real Reason Ben Bernanke Resists the Gold Standard

The fact that the chairman devoted substantial time to the subject suggests that the idea of a new gold standard is gaining traction and that some public rebuttal was required. That's interesting because for decades mainstream economists of the Bernanke type have disparaged the role of gold. If a new consensus is emerging that gold has some role to play, this is a threat to the beliefs of Bernanke and others such as Paul Krugman who take the view that money-printing capacity is essentially unlimited.

Bernanke's public attack on gold comes down to two propositions, both demonstrably false...

- Read the full article here:

http://www.usnews.com/opinion/blogs/economic-intelligence/2012/04/30/the-real-reason-ben-bernanke-resists-the-gold-standard