JP Morgan sees 'most extreme excess' of global liquidity ever

If you think there is far too much money sloshing through the global financial system and causing unstable asset booms, you are not alone.
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A new report by JP Morgan says the bank's measure of excess global money supply has reached an all-time high.
"The current episode of excess liquidity, which began in May 2012, appears to have been the most extreme ever in terms of its magnitude," said the report, written by Nikolaos Panigirtzoglu and Matthew Lehmann from the bank's global asset allocation team.
They said the latest surge is far beyond anything seen in the last three episodes of excess liquidity: 1993-1995, 2001-2006, and during the Lehman emergency response from October 2008 to September 2010, all of which set off a blistering rise in asset prices.

This is not a problem right now. The bank says there is enough juice to keep the boom going for several more months, but it stores up bigger problems for later. "It could be a warning if fundamentals are out of whack. Markets could be vulnerable next year if that liquidity starts to disappear," said Mr Panigirtzoglu.
My own view on all this is somewhat different, so I pass on the report's findings for readers to make their own judgment.
They are argue that the global M2 money supply has risen by $3 trillion this year, up 4.6pc in just nine months to $66 trillion. Roughly $1 trillion is showing up in the G4 bloc of the US, eurozone, Japan, and the UK.
The lion's share, some $2 trillion, is showing up in emerging markets where credit continued to surge at $170bn a month in July and August despite the Fed Taper scare earlier that hit the Fragile Five (Brazil, India, Indonesia, South Africa, and Turkey). Mr Panigirtzoglu said there is an internal credit boom in emerging markets that is running in parallel to QE in the West.
My guess is that China has accounted for a fair chunk of the latest growth since it has reverted to excess credit yet again, shovelling loans at the state behemoths, hoping to squeeze a lit more juice out of that exhausted catch-up model. I also think that this $2 trillion jump is linked to QE by the Fed, Bank of England, the Bank of Japan, and to the ECB's backdoor support for Club Med bonds. Money has been pushed out into Asia, Latin America, and Africa, but this can be overstated.
Determining levels of excess money is no easy task. The devil is in the detail. JP Morgan measures "broad liquidity" held by firms, pension funds, households (etc) as well as banks. They say correctly (a crucial point often missed) that QE bond purchases from banks do not necessarily boost the broad money supply. You have to buy outside the banks.
In very crude terms, excess liquidity is the gap between "money demand and money supply". When confidence returns, demand for money falls, so it finds a home elsewhere in stocks, property, and such.
If JP Morgan is right, you can see why the BIS, the IMF, and Fed hawks are biting their fingernails worrying about the next train wreck. There is clearly a huge problem with the way QE has been conducted.
The wash of money has set off another asset boom, yet the world economy has failed to achieve "escape velocity", and is arguably still in a contained depression. Global trade volumes contracted by 0.8pc in August. (It would have been a lot worse without QE of course, though we can never prove it).
If we ever need more QE it should go straight into the veins of the economy by direct deficit financing of big investment projects (fiscal dominance) and damn the torpedoes, and the taboos. Just print money to build houses for the poor, and solve two problems at once. Remember, I said "if", before you Austro-liquidationists and coupon rentiers all scream abuse at once.
Interestingly, JP Morgan also said that Norway's sovereign wealth fund ($800bn) stopped buying equities in the third quarter, becoming net sellers.
It is currently 63.6pc invested in equities, above its 60pc target. This implies more selling. Other such funds are likely to be in the same position. Interpret that as you want. Sounds to me like there is now a sovereign wealth fund "call" on global equities markets. They will sell into the rallies.

Food stamps in US to be reduced by $5 billion, more cuts to follow

The US food stamps system is set to be reduced starting November. The average benefit is set to shrink, and the number of people who receive it will drastically diminish – by millions.

Currently, the program costs about $80 billion per year and provides food aid nearly 15 per cent of all US households – over 45 million people.
A big automatic cut is expected on November 1, taking $5 billion from federal food-stamp spending over 2014. The benefit is set to shrink by 5 per cent.
One of the reasons for the reduction is the temporary expansion of the food-stamp program in 2009 as part of the Recovery Act.
Thus, the maximum monthly benefit for a household of four will drop by $36 a month, by $29 for a family of three, and by $20 for two people, according to a report published by the Center on Budget and Policy Priorities.
That bill spent $45.2 billion to increase monthly benefit levels to around $133.

Now, almost 45 million people get food stamps – compared to 26.3 million, or 8.7% of the population, in 2007.
However, it isn’t the last reduction the program will see over the next few months, with the Congress set to resume the negotiations over the five-year farm bill.
The Senate has so far approved the version of the farm bill that would make only minor changes to the food-stamp program, saving $4.5 billion over 10 years.
House Republicans, though, voted on a bill that takes $39 billion from the program over the decade, planning to remove 3,8 people from the program over 2014.
First, the Republicans are going to limit the benefits for able-bodied, childless adults aged 18 to 50, with the critics stating that employment options are scarce across the country, which will virtually let people starve.
Second, the House bill would restrict states’ abilities to determine a person’s eligibility for food stamps based in part on whether they qualify for other low-income benefits, The Washington Post reported.
This is called “categorical eligibility” and has generally allowed families just above the poverty line to get food stamps if they have unusually high housing costs or are facing other difficulties.
These changes are not set in stone because the Congressmen may not adopt them. However, the states may act on their own, putting some restrictions into practice.
In 2013, 44 states qualified for federal waivers that would allow more able-bodied adults to receive food stamps if unemployment in the area was particularly high.
Kansas already let its waiver expire at the start of October, a change that could affect as many as 20,000 people. Oklahoma passed a bill to add a similar work requirement to its food-stamp program. Ohio is also going to apply similar restrictions starting January 1, and Wisconsin will follow suit next July.

Source: RT

Watchdog: Five Years After Wall Street Meltdown, ‘Toxic Culture of Greed and Risk’ Remains

“At the core of the 2008 financial crisis was a pervasive culture at institutions of rampant risktaking and greed combined with significant unchecked power,” says SIGTARP. And five years later, that culture is alive and well.According to the government watchdog created to guard over the federal bailout of the Wall Street banking industry in the wake of the 2008 housing collapse and financial crisis, all of the sinister ingredients that created the crisis five years ago—including “rampant risktaking” “greed” and “significant unchecked power”—remain pervasive throughout the “toxic” corporate culture that rules the financial industry.
When the industry was on the verge of total collapse in late 2008, the Treasury Department, Congress, and the Federal Reserve stepped in to backstop teetering Wall Street banks with a cash infusion of $700 billion in taxpayers funds under a program call the Troubled Asset Relief Program (or TARP). Subsequent to the allocation of those funds, Congress established an oversight agency, the Office of the Special Inspector General for the Troubled Asset Relief Program (or SIGTARP), designed to monitor the program, make sure the funds were used appropriately, and offer feedback to lawmakers and Treasury officials.
Released on Tuesday, SIGTARP’s latest public quarterly report paints a picture of ongoing dysfunction, systemic risk, and complains that much of the advice it has offered to government agencies regarding the restructuring of the financial system and possible ways to help still-struggling homeowners have been ignored.
According to the report (pdf):

The financial system has stabilized in part due to five years of the TARP bailout, but the toxic corporate culture that led up to the financial crisis and TARP has not sufficiently changed. At the core of the financial crisis was a pervasive culture at financial institutions throughout the country of rampant risk-taking and greed combined with significant and unchecked power. SIGTARP has uncovered, stopped, and investigated crime related to TARP in the banking, housing, and securities industries. The crimes we have detected serve as an important lesson to be learned from the financial crisis: that toxic corporate cultures can serve as a breeding ground for criminal activity.

Lauding itself for the level of abusive practices it has been able to halt and the number of criminal fraud charges initiated by their oversight work. As the report states:

Today 65 individuals have been sentenced to prison for their crimes investigated by SIGTARP and its law enforcement partners, 112 individuals have been convicted and await sentencing, 154 individuals have been criminally charged and face trial on those charges, and 60 individuals have been banned from their industries.
Many of these defendants were at the highest levels of banks or companies that applied for or received TARP bailout money. They were trusted to exercise good judgment and make sound decisions. However, they abused that trust.

However, SIGTARP was critical of other financial oversight agencies that have repeatedly refused to treat bankers and other financial service corporations with the same kind of aggression. As Agence France-Press reports:

The watchdog was harshly critical of the Treasury’s oversight of the Hardest Hit Fund, set up in February 2010 to help families in places hurt the most by the housing crisis.
The Treasury allocated $7.6 billion in TARP funds for the HHF program in 18 states and Washington, DC, administered by local authorities.
But states have reduced their proposed numbers of homeowners needing help, and the Treasury has ignored the SIGTARP’s conclusions of an audit reported in April 2012.
“Rather than fix the problem that SIGTARP warned Treasury about in its audit, Treasury allowed the problem to get worse. Rather than following SIGTARP’s recommendations, which were designed to make Treasury and states set goals and work hard to achieve those goals, Treasury is refusing to hold itself or the states accountable to any goal of the number of homeowners to be assisted in HHF, and the result has been that the program is reaching far fewer homeowners than the states expected,” the agency said.

Senator Elizabeth Warren, who rose to prominence by demanding accountability for Wall Street crimes in the wake of the 2008 financial meltdown, recently said that SIGTARP should be an example to the Treasury Department and the Security and Exchange Commission—both of which have significantly larger budgets and staffs—that tough oversight and criminal prosecution of financial crimes are possible.
In a letter written to the Fed Chairman Ben Bernanke, SEC Chair Mary Jo White, and Comptroller General Thomas Curry last week, Elizabeth presented SIGTARP statistics as a way to pressure those agencies to do more. She also requested that they comply with her request for specific statistics from each agency, including the number of criminal and civil charges filed and an update on successful prosecutions.
“As you know,” Warren wrote, “last month marked the fifth anniversary of the 2008 financial crisis. The crisis took an enormous toll on this country’s economy. According to a recent analysis by the Federal Reserve Bank of Dallas, the crisis cost the U.S. up to $14 trillion in lost economic activity. “While we must continue working to create jobs and accelerate economic recovery, we must look back to ensure that those who engaged in illegal activity during the crisis and its aftermath are held accountable.”
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Source: Common Dreams

Thomson Reuters to trim 4,500 jobs by end of 2014

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Thomson Reuters headquarters in Times Square, New York City, on September 19, 2013 (AFP Photo/Mario Tama)

New York City (AFP) - The global financial information group Thomson Reuters said Tuesday it would cut some 4,500 jobs in its finance operations by the end of 2014 after reporting a drop in profits.
The cuts, outlined in documents accompanying its quarterly results, are deeper than the expected 2,500 jobs the company said earlier this year would be eliminated by the end of 2013.
The company, which also operates the Reuters news agency, is in the midst of a vast restructuring which is notably hitting its financial information division which provides terminals for traders and other market professionals.
The company said its net profit for shareholders for the third quarter slumped 39 percent from a year ago to $271 million and revenued dipped three percent to $3.1 billion.
Chief executive James Smith said nonetheless that the company is showing "positive momentum," citing higher net sales in its financial division for the first time since the second quarter of 2011.
"Though we continue to expect challenging conditions in the coming quarters -- particularly with the largest global banks -- these are significant steps in returning our financial business to a growth footing," he said in a statement.
"Our improving track record on execution gives me the confidence to now move even faster in our transformation work. We will pick up the pace of efforts to simplify and streamline our organization, to shift resources behind the most promising growth opportunities and to use every tool at our disposal to drive value creation for all our stakeholders."
The company said in February it would eliminate some 2,500 jobs in its Finance & Risk operations.
Earlier this month, Smith warned employees of "tough decisions" ahead for the media and financial information group.

The great olive oil fraud - Why your extra virgin olive oil may not be virgin at all

(NaturalNews) You thought you were making an informed health choice by using extra-virgin olive oil in place of cheaper, low-quality cooking oils, right? You probably never thought that a tiny, expensive bottle of EVOO might be cut with crap or doctored with chlorophyll to make it taste like olive oil -- when in fact it was soybean or another health-compromising, cheap oil. According to Tom Mueller, the fearless author of Extra Virginity: The Sublime and Scandalous World of Olive Oil, 70 percent of the extra virgin olive oil sold worldwide is watered down with other oils and enhancers making them far from virgins and more like sidewalk hookers on the corner of 10th and Main -- not exactly good for your health or your pocketbook.

Mueller exposes the billion dollar industry, showing how EVOO is compromised world-wide. During volunteer testing by suppliers to authenticate what they thought were pure extra virgin olive oils, every brand submitted in Australia during 2012 failed the tests and none gained certification for being pure. Authentication tests at UC Davis in 2011 uncovered similar results.

How to recognize genuine extra virgin olive oil

It's difficult to tell by taste if the brand of olive oil you buy is truly extra virgin. Even the experts get stumped during taste tests. There are two ways that give a hint whether you have the real thing or a fake. Neither is absolutely fool proof; however, they will rule out the hardcore fakes.

Extra virgin olive oil solidifies when it's cold. When the bottle is placed in the refrigerator, it should become cloudy and thicken or even solidify. As it warms on the counter, it becomes liquid again. Any oil that doesn't thicken in the fridge is not pure EVOO -- simple as that.

Additionally, the real McCoy is flammable and should be able to keep a wick from an oil lamp burning. If your oil doesn't, it is not pure EVOO.

Buying genuine extra virgin olive oil

The best place to buy the real thing is from local producers whom you know. Of course, not everyone lives in Italy or near an olive orchard. The next best way to find genuine, extra virgin olive oil from companies or online is to look for those whose products have been tested and certified as pure and organic. (http://www.foodrenegade.com/real-food-resources/#fats) Pure EVOO is not cheap, but then neither is fake EVOO; so you may not notice much of a difference in price, just in taste and health effects.

Alternatives to using olive oil

As delicious and healthful as extra virgin olive oil is, some people do not like the taste; and of course, it's not meant for cooking at high temperatures. There are other delicious and healthy unrefined fats and oils available that make great alternates for health-conscious individuals.

Coconut Oil -- The best virgin or expeller pressed coconut oil is made without the use of high heat during processing. It's a highly nutritious food packing a wide range of health benefits. Virgin coconut oil can be heated for cooking or consumed straight out of the jar on a spoon.

Red Palm Oil -- Red palm oil is made from the palm fruit rather than the palm kernel, and in its unrefined state, it is high in vitamin E, tocopherols, tocotrienols and beta-carotene. It has no trans-fats and is stable when heated during cooking. It contains oleic acid, the main fatty acid found in olive oil and is monounsaturated.

Other healthful oils and fats

· Sesame Seed Oil
· Nut oils
· Avocado oil
· Flax seed oil
· Fermented cod liver oil
· Ghee

Sources for this article include:

http://articles.latimes.com/2011/apr/14/news/la-olive-oil-20110414
http://www.wildernessfamilynaturals.com
http://www.radiantlifecatalog.com
http://www.radiantlifecatalog.com
Mueller, Tom, Extra Virginity: The Sublime and Scandalous World of Olive Oil. P. 41. New York, NY: W.W. Norton & Company, 2012

About the author:
READ MORE OF JEAN (JB) BARDOT'S ARTICLES AT THE FOLLOWING LINKS:

The JB Bardot Archives: www.jbbardot.com
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JB Bardot is an herbalist and a classical homeopath, and has a post graduate degree in holistic nutrition. Bardot cares for both people and animals, using alternative approaches to health care and lifestyle. She writes about wellness, green living, alternative medicine, holistic nutrition, homeopathy, herbs and naturopathic medicine. You can find her at The JB Bardot Archives at www.jbbardot.com and on Facebook at https://www.facebook.com/jbbardot23 or on Twitter at jbbardot23 or https://twitter.com/jbbardot23

Learn more: http://www.naturalnews.com/036509_extra_virgin_olive_oil_fraud_bottle.html##ixzz2jD0krufT

SNAP: 3 Big Changes Coming November 1st

Alan Greenspan owes America an apology

The former Fed chair is promoting his new book. He should admit his role in the housing crisis, not insult our intelligence

Former Federal Reserve chair Alan Greenspan. Photograph: Kevin Lamarque/Reuters

Alan Greenspan will go down in history as the person most responsible for the enormous economic damage caused by the housing bubble and the subsequent collapse of the market. The United States is still down almost 9m jobs from its trend path. We are losing close to $1tn a year in potential output, with cumulative losses to date approaching $5tn.
These numbers correspond to millions of dreams ruined. Families who struggled to save enough to buy a home lost it when house prices plunged or they lost their jobs. Many older workers lose their job with little hope of ever finding another one, even though they are ill-prepared for retirement; young people getting out of school are facing the worst job market since the Great Depression, while buried in student loan debt.
The horror story could have easily been prevented had there been intelligent life at the Federal Reserve Board in the years when the housing bubble was growing to ever more dangerous proportions (2002-2006). But the Fed did nothing to curb the bubble. Arguably, it even acted to foster its growth with Greenspan cheering the development of exotic mortgages and completely ignoring its regulatory responsibilities.
Most people who had this incredible infamy attached to their name would have the decency to find a large rock to hide behind; but not Alan Greenspan. He apparently believes that he has not punished us enough. Greenspan has a new book which he is now hawking on radio and television shows everywhere.
The book, which I have not read, is ostensibly Greenspan's wisdom about the economy and economics. But he also tells us that his problem as Fed chair was that he just didn't know about the flood of junk mortgages that was fueling the unprecedented rise in house prices during the bubble years. He has used this ignorance to explain his lack of action – or even concern – about the risks posed by the bubble.
Greenspan's "I didn't know" excuse is so absurd as to be painful. The explosion of exotic mortgages in the bubble years was hardly a secret. It was frequently talked about in the media and showed up in a wide variety of data sources, including those produced by the Fed. In fact, there were widespread jokes at the time about "liar loans" or "Ninja loans". The latter being an acronym for the phrase, "no income, no job, no assets".
The fact that banks were issuing fraudulent mortgages by the millions, and that the Wall Street crew was securitizing them as fast as they could get them, was not top secret information available only to those with special security clearance. This was the economy in the years 2002-2006.
It was impossible to look at the economy in these years and not see the role of the housing bubble and the tsunami of bad mortgages that fueled it. The run-up in house prices led to a near record pace of construction. Typically housing construction is around 4.5% of GDP. It peaked at 6.5% in 2005. Greenspan didn't notice? Who did he think was going to live in all these units, the building of which had created record vacancy rates as early as 2003?
And he didn't notice that the spike in house prices had led to a surge in consumption pushing saving rates to nearly zero? He actually co-authored several pieces on exactly this topic with another Fed economist. Between the 100% predictable collapse of residential construction and the plunge in consumption that would follow the loss of the housing wealth that was driving it, we were looking at a loss of more than $1tn in annual demand. What did Greenspan think would fill this gap, purchases of Ayn Rand's books?
Greenspan had all the information that he could have possibly needed to spot the housing bubble and to know its collapse would be really bad news for the economy. More than anyone else in the country he was in a position to stop the growth of the bubble.

Suppose that, instead of extolling the wonders of adjustable rate mortgages, Greenspan used his public addresses to warn people that they were buying into an overpriced housing market; and he warned investors that the subprime mortgage backed securities they were buying were filled with fraudulent mortgages. Suppose further that he used the Fed's research staff to document these facts.
Greenspan could have used the regulatory powers of the Fed to crack down on the bad mortgages being issued by the banks under the Fed's jurisdiction, as his fellow governor Edward Gramlich urged. And, he could have arranged to have a meeting with other federal and state regulators to see what they were doing to prevent mortgage fraud in the financial institutions under their jurisdictions as well.

Those are the actions that we had a right to expect from a Fed chair faced with the growth of a dangerous asset bubble. That is what Alan Greenspan would have done if he had been earning his salary. Instead, he did nothing. He cheered on the bubble until it burst and then he said it wasn't his fault.

This man has nothing to tell the country about the economy and the media is not doing its job to imply otherwise. If Greenspan doesn't have the decency to keep himself out of public view after all the damage he has done to the country, then the media should do it for him. The only thing he has to say that would be newsworthy is that he's sorry.

Put big bank CEOs in jail – Senator Elizabeth Warren

This past weekend, the Department of Justice slapped a record fine on JPMorgan Chase for packaging and selling the mortgage-backed financial products that helped cause the financial meltdown. But Sen. Elizabeth Warren (D-Mass.) wants the administration to know that fines are not enough. On Wednesday, she called on Wall Street regulators to hold all those responsible for the 2008 crisis accountable.

HANG THE BANKERS

Sen. Elizabeth Warren (D-Mass.)

In a letter to the Federal Reserve, the Securities and Exchange Commission (SEC) and the Officer of the Comptroller of the Currency (OCC), Warren lauded the overseer of the TARP bailout program for cracking down on financial industry players who wasted, stole, or abused the federal emergency funds doled out to banks during the financial crisis, and implied that the three banking regulators should also punish individuals who helped cause the financial meltdown.
Although the budget for TARP’s inspector general was “a small fraction of the size of the budgets and staffs at your agencies,” Warren pointed out, the program’s watchdog has brought criminal charges against nearly 100 senior executives; obtained criminal convictions on 107 defendants, including 51 jail sentences; and suspended or banned 37 people from working in the banking industry.
How about you guys, Warren asked. She called on the Fed, the SEC, and the OCC to provide records on the number of people the agencies have charged criminally and civilly, the number of convictions and prison sentences they have obtained, the number of people banned or suspended from working in the industry, and the total amount of fines leveled against Wall Street ne’er-do-wells.
Warren knows the answer to most of these questions, but wants to shame the agencies into action. Yes, big banks have been forking over billions of dollars in civil settlements for bad behavior in the lead up to the crisis. There have been prosecutions of various smaller mortgage brokers, and some civil charges and settlements against executives who helped cause the crisis. But zero Wall Street CEOs are in jail for bringing down the economy, and no CEOs have faced criminal charges.
Earlier this year, U.S. Attorney General Eric Holder seemed to concede that some banks are “too big to jail.” But Warren doesn’t buy it. “There have been some landmark settlements in recent weeks for which your agencies and others deserve substantial credit,” Warren said in the letter. “However, a great deal of work remains to be done to hold institutions and individuals accountable for breaking the rules and to protect consumers and taxpayers from future violations.”

“Screen Traded Fiat Gold Could Get a Violent Wake-Up Call”

by GoldCore

Today’s AM fix was USD 1,346.75, EUR 978.81 and GBP 837.06 per ounce.
Yesterday’s AM fix was USD 1,351.00, EUR 978.28and GBP 833.69per ounce.

Gold climbed $1.50 or 0.11% yesterday, closing at $1,353.00/oz. Silver slipped $0.05 or 0.22% closing at $22.47. Platinum rose $9.20 or 0.7% to $1,382.00/oz, while palladium climbed $6.50 or 0.9% to $707/oz.

Gold for immediate delivery gained as much as 0.6% to $1,360.76/oz, prior to a sharp bout of  concentrated selling just before European markets opened at 0800 GMT, that saw gold fall to just above $1,340/oz .

Gold had been near the highest level in five weeks after U.S. economic data showed how weak the U.S. economy remains leading to concerns that the Fed will continue with ultra loose monetary policies.

Gold in US Dollars, 10 Days – (Bloomberg)

Gold is currently 1.3% higher in October. Gold fell into the middle of the month (see chart below) and then as U.S. lawmakers wrangled over the nation’s budget and debt ceiling, triggering a 16-day partial government shutdown, gold began to recover and is now nearly $100 above the low seen mid October at $1,252/oz.

U.S. factory output trailed forecasts in September, while pending sales of previously owned homes fell the most in three years, separate reports showed yesterday.
Asian demand remains robust and holdings in the SPDR Gold Trust, the biggest gold  exchange traded product, held steady at 872.02 metric tons yesterday.

Gold in US Dollars, 1 Month – (Bloomberg)

In the Financial Times, veteran financial journalist and gold watcher, John Dizardnoted the increasing strain in the physical gold market and detailed how that should lead to much higher
gold prices.

“Something is unsettling the animals in the forest of the gold market. Usually there is a chorus of chirrups and squeaks that are significant, momentarily, for one species or another, such as a few cents of arbitrage between Zurich and London, or a dollar-an-ounce rise in India caused by a dealer’s near insolvency. Then the noise settles down to the murmur of wind through the trees

However, the continuing high level of premiums for physical gold over the kinds you can trade on a screen suggests that the next move in the major gold indices or the various exchange traded funds could be discontinuous and dramatic. It would be much better for the financial world if gold were just bumping along, with only enough volatility and liquidity to keep a few dealers’ lights on. That would mean electronic or paper assets have retained their essential credibility with the public …”

“This could turn into a very violent wake-up call for [screen-traded gold]. People talk about ‘fiat currencies’, but we also have ‘fiat gold.’ Volatility is too cheap right now.”

Taken together, this collection of persistent microeconomic signals in gold could flag macro trouble to come. These noises worried me in August. They worry me more now.

Dizard’s article, ‘Strange gofo cry heralds trouble for gold’ in the Financial Times can be read here.

He has previously warned that ETF gold holdings and central bank gold reserves may be being lent to bullion banks, who then re lend that gold into the market.

Owners of gold exchange traded funds (ETFs) would be surprised and worried to discover that certain banks might be lending out gold that they have bought and believe that they own.

The leading gold ETF, GLD has been criticised by many analysts for its extremely complex structure and prospectus. There have also been warnings about the possible conflict of interest and overall lack of transparency.

If as has been suggested, banks are lending gold into the market that has come from exchange traded funds then this would validate the many concerns raised about the gold ETF market.

Questions would again be asked as to whether many of the ETFs are fully backed by the gold that they claim to own in trust on behalf of clients.

Gold Prices / Fixes /Rates /Volumes – (Bloomberg)

Already more prudent hedge fund, investment and pension fund managers have liquidated their ETF positions in favour of allocated physical bullion.

We would expect that trend to accelerate as prudent investors rightly seek to avoid the high level of counterparty and systemic risk associated with exchange traded gold and other forms of unallocated gold and paper gold.