Wednesday, November 5, 2014

It begins: German bank charging NEGATIVE interest to its

central bank negative interest rates
November 4, 2014
Santiago, Chile
Don Quixote is easily one of the most entertaining books of the Renaissance, if not all-time. And almost everyone’s heard of it, even if they haven’t read it.
You know the basic plot line- Alonso Quixano becomes fixated with the idea of chivalry and sets out to single-handedly resurrect knighthood.
His wanderings take him far across the land where he gets involved in comic adventures that are terribly inconvenient for the other characters.
He famously assaults a group of windmills, believing that they are cruel giants. He attacks a group of clergy, believing that they are holding an innocent woman captive.
All of this is based on Don Quixote’s completely delusional view of the world. And everyone else pays the price for it.
Miguel de Cervantes’ novel is brilliantly entertaining. But the modern-day monetary equivalent is not so much.
Central bankers today have an equally delusional view of the world. Just three months ago, Mario Draghi (President of the European Central Bank) embarked on his own Quixotic folly by taking certain interest rates into NEGATIVE territory.
Draghi convinced himself that he was saving Europe from disaster. And like Don Quixote, everyone else has had to pay the price for his delusions.
On November 1st, the first European bank has passed along these negative interest rates to its retail customers.
So if you maintain a balance of more than 500,000 euros at Deutsche Skatbank of Germany, you now have the privilege of paying 0.25% per year… to the bank.
We’ve already seen this at the institutional level: commercial banks in Europe are paying the ECB negative interest on certain balances.
And large investors are paying European governments negative interest on certain bonds.
Now we’re seeing this effect bleed over into retail banking.
It’s starting with higher net worth individuals (the average guy doesn’t have half a million euros laying around in the bank). But the trend here is pretty clear– financial repression is coming soon to a bank near you.
It almost seems like an episode from the Twilight Zone… or some bizarre parallel universe. That’s the investment environment we’re in now.
Bottom line: if you’re responsible with your money and set some aside for the future, you will be penalized. If you blow your savings and go into debt, you will be rewarded.
If we ask the question “cui bono”, the answer is pretty obvious: heavily indebted governments benefit substantially from zero (or negative) rates.
Case in point: the British government just announced that they would pay down some of their debt that they racked up nine decades ago.
In 1927, then Chancellor of the Exchequer Winston Churchill issued a series of bonds to consolidate and refinance much of the debt that Britain had racked up from World War I and before.
This debt is still outstanding to this day. And the British government is just starting to pay it down– about $350 million worth.
Think about it– $350 million was a lot of money in 1927. Thanks to decades of inflation, it’s practically a rounding error on government balance sheets today.
This is why they’re all so desperate to create inflation… and why they’ll stop at nothing to make it happen. (It remains to be seen whether they’ll be successful, but they are willing to go down swinging…)
What’s even more extraordinary is how they’re trying to convince everyone why inflation is necessary… and why negative rates are a good thing.
On the ECB’s own website, they say that negative interest rates will “benefit savers in the end because they support growth and thus create a climate in which interest rates can gradually return to higher levels.”
I’m not sure a more intellectually dishonest statement could be made; they’re essentially telling people that the path to prosperity is paved in debt and consumption, as opposed to savings and production.
These people either have no idea how economies grow and prosper, they’re outright liars, or they’re completely delusional.
I’m betting on the latter. Either way, this assault on windmills has only just begun.
As Don Quixote himself said, “Thou hast seen nothing yet.”
Our goal is simple: To help you achieve personal liberty and financial prosperity no matter what happens.

If you liked this post, please click the box below. You can watch a compelling video you'll find very interesting.

Will you be prepared when everything we take for granted changes overnight?

Just think about this for a couple of minutes. What if the U.S. Dollar wasn't the world's reserve currency? Ponder that... what if...

Empires Rise, they peak, they decline, they collapse, this the cycle of history.

This historical pattern has formed and is already underway in many parts of the world, including the United States.

Don't be one of the millions of people who gets their savings, retirment, and investments wiped out.

Click the button below to watch the video.

Charles Nenner – Gold First Stop $2100.00 Oz Read more at

Published on Oct 31, 2014
GoldSeek Radio’s Chris Waltzek talks to Charles Nenner, of the Charles Nenner Research Center

The information, opinions, and financial data presented are for educational purposes only and are not intended as investment advice. No guarantees are made as to the accuracy of the information provided herein. Situations can change from day to day. Every investor should do their own due-diligence to determine which investments are best for them.
You must assume the responsibility and liability for all decisions that you make on the basis of the information herein contained., makes no warranties, expressed or implied, as to the fitness and accuracy of the information provided or for the results obtained by using the information. Those making investment decisions based on any of the information presented should do so in the knowledge that they could experience significant losses. In no event shall be liable for direct, indirect, or incidental damages resulting from the use of the information.

Growth in US house prices is decelerating

View image on Twitter
growth in US house prices is decelerating: source: @NickatFPUS

Silver Signaling Oncoming Deflation? Mike Maloney

Join Mike Maloney for a sneak preview of his latest ‘Insider Update’, recorded on Oct 31 2014. Deflation and market sentiment are discussed, if you have an Insider account you can log in now to watch the whole update:…
Hidden Secrets Of Money is a world-leading educational series that is sponsored by, and also based on the priciples of WealthCycles. It shows the evolution of gold and silver as money, and teaches the historical economic mistakes that all societies repeat. The first series (Episodes 1-5) features bonus content that is available completely free of charge at
From Season 2 onwards, all bonus content is reserved exclusively for members of
We would like to thank everyone for their support of this series, and also for the loyalty shown to our sister company We look forward to the continued success of this series and encouraging people to take control of their own financial future.
For more information about investing in Gold & Silver or Mike Maloney, visit the Why Gold & Silver channel and subscribe:

Dollar/yen up from 109.30 Friday to 114.20 today. It hasn’t rallied 5 big figures in two days for almost quarter of a century.

View image on Twitter
Dollar above 114 yen, now up almost 40% since 'Abenomics' was launched only two years ago:

Sprint plans to cut 2,000 more jobs as subscriber losses continue to mount

View image on Twitter
Sprint plans to cut 2,000 more jobs as subscriber losses continue to mount 

DWP orders man to work without pay for company that let him go

John McArthur is sanctioned by jobcentre after refusing ‘forced labour’ at firm where he was previously paid minimum wage

John McArthur makes his one-man protest outside LAMH in Motherwell
John McArthur makes his one-man protest outside LAMH in Motherwell after having his jobseeker’s allowance cut. Photograph: Alan Watson/HE Media/South West News
A man who was let go at the end of a temporary job has been ordered by the Department for Work and Pensions (DWP) to work for the same firm for six months without pay.
Electronics specialist John McArthur, now unemployed, says he is living off 16p tins of spaghetti and without heating after being sanctioned by a jobcentre for refusing to work unpaid for LAMH Recycle in Motherwell, a Scottish social enterprise.
He says he was happy to work for LAMH under the now-defunct future jobs fund for the minimum wage in 2010-2011, but refuses on principle to do the same job unpaid.
McArthur, 59, says he is surviving on a monthly pension of £149 after the DWP stopped his unemployment benefit until January as punishment for his refusal to go on the 26-week community work placement (CWP).
For almost three months, McArthur has spent two hours each weekday morning parading outside the plant wearing a placard reading: “Say no to slave labour”.
“It was simply a case of: ‘Go here, work for nothing and if you don’t we’ll stop your subsistence level benefit,’” he said.
McArthur, who says he has been applying for 50 jobs a week without joy, said the CWP programme was “entirely exploitative” and came at the “expense of poor people who’ve got absolutely no choice”. He added: “They [the government] deny it’s forced labour, that you can say no, but forced doesn’t always mean physical, it can be psychological or economic.
“The person who is trying to survive already on subsistence level welfare has absolutely no choice in the matter … especially if they’ve got young children to look after.”
LAMH confirmed it has 16 people working for six months without pay under CWP but added that since the end of June, six had progressed into paid employment.
The social enterprise, which repairs computers and recycles tin and cardboard, says it helps dozens of people each year who are long-term unemployed, many of whom have health issues.
Joe Fulton, the operations and development manager, said he believed the scheme “worked for people who want to make it work for them”. He added that out of the organisation’s paid workforce of 39, 25 had previously been unemployed.
McArthur said there were no jobs for someone his age in the Lanarkshire area. He said support for his placard demonstration had been overwhelming and just one person had objected.
Following conversations with local councillors, North Lanarkshire council passed a motion in October strongly objecting to forced employment schemes saying it would not get involved itself. “This council will not provide jobs or placements without pay as a condition of receiving benefits unless it is truly voluntary,” the motion read.
“We do not support any mandation of unemployed people to work without pay that puts their benefits at risk.”
The motion added such measures were ineffective and could “further stigmatise and demotivate” the unemployed in their search for work.
Last Wednesday, the DWP continued to battle the information commissioner and hostile court judgments ordering it to reveal where possibly hundreds of thousands of people are being sent to work without pay, sometimes for months at a time.
At the tribunal, the DWP argued that if the public knew exactly where people were being sent on placements political protests would increase, which was likely to lead to the collapse of several employment schemes and undermine the government’s economic interests.
The DWP confirmed some of the UK’s biggest charities, including the British Heart Foundation, Scope, Banardo’s, Sue Ryder, and Marie Curie had withdrawn from the CWP scheme, causing a significant loss of placements.
Giving evidence, senior civil servant Jennifer Bradley confirmed that numerous charities and businesses were receiving cash payments as an incentive to take on the unemployed.
She said several DWP schemes used mandatory unpaid work as a tool to help people but stressed that it was written into the terms that charities and businesses could not use people out of work to replace their paid workforce.
The DWP said it could not comment on individual cases but added that community work placements “help long-term unemployed people to gain work experience which increases their confidence, helps them to gain vital skills and crucially, improves their chances of getting a job.
“We are not naming the charities and community groups involved in the scheme in order to protect them from those who seem intent on stopping us helping people into work.”

The government is already in a soft default and is addicted to low interest rates: Government expenses at $3.87 trillion while receipts enter at $3.29 trillion.

The term default has varying definitions depending on whether you are an individual, a big bank, or the government. For you as an individual, default will occur when you are unable to pay your debts with the income you are generating. You are constrained by your income. As we saw with the housing crisis, when you are unable to pay your mortgage a bank will foreclose on your home. Unable to pay your auto debt? Repossession is the likely next step. Not making those college loan payments? Garnishment of wages is a typical course of action. Yet for the government, they have the ability to print their way out of problems courtesy of our fiat money system. The end result is inflation in the real economy which ultimately impacts families. Banks of course have the ability to restructure debt and circumvent accounting rules to their own convenience. If we applied the same rules of default that individuals follow to the government, we would already be in a soft default. This does not happen but what ultimately occurs is inflation in items that are financed via debt (i.e., housing, student loans, cars, etc).

Government spending versus tax revenues
Government is merely a collection of people reflecting the goals and wants of the overall population. We elect representatives to serve our interests once in office. If they choose to deviate from the path, we ideally would punish them at their re-election campaign. The issue we have currently is that power is bought in politics. Power comes from money and most Americans are flat broke. The government is running major deficits each and every year. This is how big money in finance is able to have generous corporate welfare while the public endures the bitter pill of forced austerity.
Take a look at income versus expenses here:
government spending
The government had $3.87 trillion in expenses in the last reportable quarter with $3.29 trillion in tax receipts. In other words, the U.S. government spent $580 billion more than it brought in. Of course this gets pushed into the corporate government credit card and our expense on the debt keeps rising. Even with record low interest rates courtesy of central banks racing to the bottom, we still spend a large amount on interest payments. Payments on principal that will never be paid back. Let me repeat, we will never ever pay back the principal we owe.   
Debt to the penny and interest expenses (why interest rates have to stay low while inflation will occur)
As of today, we currently owe $17.93 trillion:
debt to the penny
Source: U.S. Treasury
This debt comes at a cost just like borrowing on a credit card. The only difference is the government gets fantastic rates. Take a look at what it costs to service our debt:
interest expense on debt
We currently spend $415 billion per year just to pay the interest on this debt. You’ll notice that in previous years we paid more but that is because the blended interest rate was higher. Today, we are at record low rates but this has come at the expense of the Fed ballooning their balance sheet to uncharted territory:
fed balance sheet
The Fed’s balance sheet is now up to over $4.4 trillion. There is talks of tapering and unwinding but the chart above says otherwise. We are forced into a corner with low interest rates now. Even if rates slightly went up to historical standards we would be spending nearly $1 trillion a year simply on paying interest on the debt. We are essentially in a soft default and that is why inflation is raging in items financed by debt, the elixir of choice of central banks.
It would be nice to spend more than you earn into infinity but of course as we all know, there is no free lunch, including for governments.

Crude oil at four-year low after Saudi Arabia price cut

Oil rigs in California  
US oil production has been booming as a result of fracking in places such as North Dakota and Oklahoma

Crude oil prices have hit a four-year low after Saudi Arabia unexpectedly cut the price of oil sold to the US.
Brent crude fell to near $82 (£51.24) a barrel as worries about global growth also spooked investors.
Earlier, the European Commission reduced its growth forecasts for the eurozone.
Investors are concerned about the US oil industry in the face of slowing growth and lower prices.
Some worry that low oil prices could hurt domestic US producers dependent on high prices for profitability.
The price cut also sent shares in many energy firms lower, pushing down all three US share indexes.
Trade help Surging revenues from the US oil boom have led to calls on the government to remove regulations restricting the sale of US crude oil abroad.
In the interim, the growth in domestic oil production has helped the US trade deficit, as the US has become less dependent on importing foreign oil.
Separately on Tuesday, the Commerce Department's latest release showed that the US trade deficit unexpectedly widened in September as exports hit a five-month low, mostly due to economic weakness in Europe.
The Commerce Department said the trade gap increased by 7.6% to $43.03bn, as China and eurozone orders decrease and the strength of the US dollar hurt exports.

Q3 GDP Alert: US trade deficit widens in Sept to $43 bln, deficit with China hits record $35 bln. JPM, BofA, DB, Barclays all cut U.S. Q3 GDP by 0.5%

Q3 GDP Alert: US Trade Deficit Worse Than Expected As Exports, Goods Imports Drop

Some of the highlights:

About That Soaring Dollar: US Trade Deficit Excluding Oil Has Never Been Worse

Remember that in a beggar thy neighbor world, where currency warfare has once again broken out between the US, Europe and Japan, for every winner there is a loser. In this case, the loser is the one country that has decided that a strong currency is a great thing for its economy (if only for the time being): that would be the US. There is a problem with that, however: because in Q3 the trade deficit rose by 7.6%, virtually identicaly to how much stronger the US Dollar basket, the DXY, increased by in the same period which surged by 7.7% the most since Q3 2008 when Lehman blew up!

Two Charts On Why the Obama Economy Sucks

Source: Ian Welsh

The Employment-Population Ratio (from the BLS):

Median Household Income:
All of the blather about how the unemployment rate has decreased, the stock market is up, and so on, conceals the fact that there are less jobs for ordinary people, and they pay less.  Yes, the rich are doing great, but that’s all.
Why are Democrats losing the Senate?  I won’t say it’s just this, it’s not.  But if the economy was actually good for most people, they probably would be holding it.

Germany’s Third Largest Political Party Sells €1.6 Million of Gold In Two Weeks

by GoldCore
Disillusionment with Europe’s single currency continues to grow with the cracks beginning to show in it’s heartland, Germany, where the third largest political party is now selling gold coins and bars to raise funds.

In a poll in September Alternative for Germany (AfD) were found to be Germany’s third most popular party. The rise of the Alternative for Germany (AfD) party saw it receive 10.6% of the vote in Thuringia and 12.2% in Brandenburg on 14 September. Two weeks earlier it secured its first regional government seats in Saxony.
AfD are not anti-EU per se and have distanced themselves from other eurosceptic parties. They see a future for Germany in the EU and embrace common markets but wish to see the European Monetary Union (EMU) and the euro itself wound up and a return to the Deutschmark.
In the past two weeks, in a bid to gain as much state funding as possible they have entered the gold bullion market with quite a degree of success. In Germany, the federal government will match, up to a value of €5 million, any funds raised privately by a political party. In a bid to get the full allocation of state funding, AfD have started to sell gold bullion online.
In the two weeks since the scheme was announced they have sold gold coins and bars worth a sizable €1.6 million.
There has been strong, broad based demand for precious metals in Germany in recent weeks and months due to concerns about the Eurozone, the Euro, the conflict with Russia and global uncertainties.
AfD have managed to sell a large volume of bullion bars and coins despite being unable to undercut the well established bullion dealers with whom they have been competing. This indicates that their customers are motivated to buy gold from them specifically because they support the party and it’s policies.
“I have always warned that we can not compete with the prices of the competition,” federal executive of the party Konrad Adam told Spiegel newspaper.  “People should not feel deceived by our offer.”
The smash on silver and gold on Thursday and Friday of last week played into the AFD’s hands as it saw German people, both investors and savers, entering the market in droves to take advantage of the low prices.
Gold brokers across Germany described the manner in which demand for precious metals exploded last week as “a run.”  Many have seen a sharp increase in demand and found their inventories insufficient to meet demand according to Goldreporter.
Germans have become more knowledgeable vis-a-vis precious metals in the last few years and indeed have a cultural affinity for gold due to the hyperinflation and to Hitler’s banning of gold ownership.
The benefits of owning a tangible, divisible asset that cannot be printed at will by a government is strong in the folk memory. The lack of a response of the Merkel government following the scandal which arose when the Federal Reserve refused Germany’s request to have it’s sovereign gold repatriated has also motivated many Germans to take matters of wealth protection into their own hands.

They, like many people in the world today, are electing to become their own central bank.
The prudence and patience for which Germans are admired are worthy of emulation in these times. It is wise to do ones own research into owning precious metals and if one does take a position in gold  – be sure to own coins and bars in segregated, allocated vaults in safe jurisdictions such as Switzerland
Trust in one’s decision and your judgement and view the volatility of the market with equanimity.
The fragile global financial and monetary system is teetering on the edge of collapse and serious inflation and stagflation is very possibly on the cards.
In the event of a crisis it will be there to help protect you which may not necessarily be the case for paper money and digits on a computer screen.
Gold was gold at the dawn of time and will continue to be.
Get Breaking News and Updates on the Gold Market Here 
Today’s AM fix was USD 1169.25, EUR 933.91 and GBP 730.55 per ounce.
Yesterday’s AM fix was USD 1,170.75, EUR 936.90 and GBP 731.90 per ounce.
Gold fell $5.50 or 0.47% to $1,166.90 per ounce yesterday and silver remained unchanged at $16.16 per ounce.
Importantly, for European buyers, gold has remained quite robust in euro terms and seen only slight falls in recent days. Gold in euros remains up 8% for the year so far. Given the problems in the eurozone – it looks very well supported above the €900 level.

Gold in Euros – Year to Date 2014 (Thomson Reuters)
Gold inched up higher today in London, as the U.S. dollar retreated from multi year highs and alleviated recent pressure on the yellow metal.
Bullion traded below a key support level of around $1,180 an ounce on Friday as investors weighed the Fed’s announcement of the end of QE and the news that the Bank of Japan vastly increased increased its money printing and debt monetisation experiment in a surprise move, lending strength to the dollar.
This downward pressure on gold triggered stop loss selling and sent gold down to $1,161.25, its lowest since July 2010. Traders are now awaiting the U.S. non-farm payrolls report on Friday for its impact on the dollar and ramifications for monetary policy.
Technical analysts show support for gold at $1,155 an ounce, the 61.8% retracement of gold’s rally from its 2008 lows to its 2011 record high at $1,920.30, and $1,180.
Unusually, Chinese buyers who normally buy on the dips did not appear to do so yesterday as measured by local premiums – an indicator of demand –  which have failed to pick up in any big way.
Shanghai Gold Exchange premiums had fallen to a discount to the global price on Monday but recovered to a premium of $1-$2 an ounce today showing a pickup in demand. They are still far short of the $50 plus premiums seen last year but demand remains very robust with 60 tonnes taken delivery of on the SGE last week. Chinese gold demand alone is heading for some 2,000 metric tonnes again this year.
See Essential Guide to  Storing Gold and Silver In Switzerland here

Silver Coin Sales At U.S. Mint Soar To Highest In Two Years

Tyler Durden: It never fails: any time there is a dump in precious metals through their paper representation (GLD, SLV, or futures) typically as a hedge to a rally in the dollar (because last week Japan materially increasing its fiat monetary base was also somehow negative for gold and silver) or to meet margin demands from cross-asset liquidation, demand for physical PMs soars confirming yet again that any connection between paper prices and physical demand no longer exists.
Whether it is China buying every ounce of gold it can find (whether to facilitate Commodity Funding Deals or to meet pure consumer or central bank demand), or US consumer rushing into retail outlets, the surge in physical metal buying is there like clockwork. Such as US Mint silver orders. As reported on Friday, sales of American Eagle silver coins by the U.S. Mint jumped 40 percent in October to the highest in 21 months, defying a slump in New York futures to the lowest in more than four years.

Sales surged to 5.79 million ounces, the most since January 2013, the month that set an all-time high at 7.5 million, Bloomberg reports. “Today, sales jumped 33 percent in one of the busiest times this year”, Tom Jurkowsky, a spokesman at the Washington-based mint, said in an interview. Last month’s total was 4.14 million.
“We saw demand surge over the past two days,” Michael Kramer, the president of New York-based MTB Inc., a dealer authorized to purchase coins directly from the mint, said in a telephone interview. “Business was almost triple than what it has been over the past few months.”
Logically, as a result of the surge in physical demand, silver futures for December delivery dropped 1.9 percent to close at $16.106 an ounce on the Comex in New York. Earlier, the price touched $15.635, the lowest for a most-active contract since Feb. 25, 2010.
Because when it comes to precious metals, thanks to the BIS and the central banks, Paper beats Rock every time.
The flipside, of course, is that continued selling of paper metals provides buyers of physical metals with ever lower entry prices, even if, or rather especially if it means, that quite soon, if not already, most gold miners will be selling gold below production cost as we showed back in 2013.


Needless to say, it would be quite fitting of the New Normal for gold (and silver) miners to suffer a cascade of bankruptcies, ultimately leading to zero physical extraction of precious metals even as the relentless naked shorting of gold and silver paper pushes the price of the metal to triple digits, or lower.
This article is brought to you courtesy of Tyler Durden From Zero Hedge.