Thursday, February 25, 2016

Here’s why (and how) the government will ‘borrow’ your retirement savings

According to financial research firm ICI, total retirement assets in the Land of the Free now exceed $23 trillion.
$7.3 trillion of that is held in Individual Retirement Accounts (IRAs).
That’s an appetizing figure, especially for a government that just passed $19 trillion in debt and is in pressing need of new funding sources.
Even when you account for all federal assets (like national parks and aircraft carriers), the government’s “net financial position” according to its own accounting is negative $17.7 trillion.
And that number doesn’t include unfunded Social Security entitlements, which the government estimates is another $42 trillion.
The US national debt has increased by roughly $1 trillion annually over the past several years.
The Federal Reserve has conjured an astonishing amount of money out of thin air in order to buy a big chunk of that debt.
But even the Fed has limitations. According to its own weekly financial statement, the Fed’s solvency is at precariously low levels (with a capital base of just 0.8% of assets).
And on a mark-to-market basis, the Fed is already insolvent. So it’s foolish to think they can continue to print money forever and bail out the government without consequence.
The Chinese (and other foreigners) own a big slice of US debt as well.
But it’s just as foolish to expect them to continue bailing out America, especially when they have such large economic problems at home.
US taxpayers own the largest share of the debt, mostly through various trust funds of Social Security and Medicare.
But again, given the $42 trillion funding gap in these programs, it’s mathematically impossible for Social Security to continue funding the national debt.
This reality puts the US government in rough spot.
It’s not like government spending is going down anytime soon; it already takes nearly 100% of tax revenue just to pay mandatory entitlements like Social Security, and interest on the debt.
Plus the government itself estimates that the national debt will hit $30 trillion within ten years.
Bottom line, they need more money. Lots of it. And there is perhaps no easier pool of cash to ‘borrow’ than Americans’ retirement savings.
$7.3 trillion in US IRA accounts is too large for them to ignore.
And if you think it’s inconceivable for the government to borrow your retirement savings, just consider the following:
1) Borrowing retirement funds is becoming a popular tactic.
Forced loans have been a common tactic of bankrupt governments throughout history.
Plus there’s recent precedent all over the world; Hungary, France, Ireland, and Poland are among many governments that have resorted to ‘borrowing’ public and private pension funds.
2) The US government has already done this with federal pension funds.
During the multiple debt ceiling fiascos since 2011, the Treasury Department resorted to “extraordinary measures” at least twice in order to continue funding the government.
What exactly were these extraordinary measures?
They dipped into federal retirement funds and borrowed what they needed to tide them over.
In fact, the debt ceiling debacles were only resolved because the Treasury Department had fully depleted available retirement funds.
3) They’ve been paving the way to borrow your retirement savings for a long time.
Two years ago the government launched a new initiative to ‘help Americans save for retirement.’
It’s called MyRA. And the idea is for people to invest retirement savings ‘in the safety and security of US government bonds’.
Since then they’ve gone on a marketing offensive involving the President, Treasury Secretary, and other prominent politicians.
(Most recently Nancy Pelosi published an Op-Ed in the San Francisco Chronicle a few days ago promoting the program.)
They’ve also proposed a number of legislative reforms to ‘encourage’ American businesses to sign their employees up for MyRA.
Just last week, Congress introduced the “Making Your Retirement Accessible”, or MyRA Act, which would charge a penalty to employers whose workers don’t have a retirement account.
The proposed penalty is $100. Per worker. Per day.
Imagine a small business with, say, 10 employees who don’t have retirement accounts. The penalty to Uncle Sam would be a whopping $30,000 PER MONTH.
There’s a word for this. It’s called extortion.
Obviously when facing a $30,000 monthly penalty, an employer will pick the easiest option.
Given the absurd amount of government regulation on the rest of the financial industry, MyRA is the fastest choice.
This isn’t about fear or paranoia. It’s about facts.
And the reality is that the government in the Land of the Free is moving in the direction of borrowing more and more of your retirement savings.
If you still remain skeptical, remember that last year the government stole more from its citizens through Civil Asset Forfeiture than thieves in the private sector.
Or that just 45-days ago a new law went into effect authorizing the government to strip you of your passport if they believe in their sole discretion that you owe them too much tax.
No judge. No jury. No trial. They just confiscate your passport.
This is happening. It’s a reality that rational, thinking people should plan for.
And yes, there are solutions for now.
For example, it’s possible to set up a more robust retirement structure that protects your savings and gives you much greater influence over your funds.
This is something that may make sense no matter what; it may be a good idea regardless to do some long-term financial planning that increases your influence over your own retirement savings and expands your investment options.
And if you want to learn more about the risks and solutions for your retirement savings, click here to access our free black paper.
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Graham Summers: 2008 was just a warm up for what is ahead!

by FRA
Graham Summers is the Chief Market Strategist with Phoenix Capital Research in Washington, DC. Phoenix capital research is an investment research firm, that has clients in 56 countries around the world, specializing in investment research on a subscription basis.

Japan‘s NIRP announcement & the US$

Japan is at the forefront of the Keynesian central planning that has been in the markets for the past few decades. The federal reserve first went to ZIRP and launched quantitative easing in 2008. The European central bank went to ZIRP and they launched QE in 2015. The bank of Japan first went to ZIRP in 1999, in which they then launched quantitative easing in 2000. They’re much more experienced in seeing what these sorts of policies can accomplish.
A week or two before NIRP was announced, Kuroda, the head of the Bank of Japan announced that Japan’s potential GDP growth was 0.5% or lower, which is an astounding admission, implicitly admitting that no matter how much money is printed or what monetary policy will be used, Japan’s GDP will not and cannot break above 0.5%.
Graham states, “From a psychological perspective, this is like a central banker saying, ‘we don’t have the tools required to generate economic growth’ – Similar to a doctor saying, ‘no matter how much medicine you take you won’t possibly get better’.”
That was the beginning of the end. “It wasn’t too surprising for me that shortly thereafter when the Bank of Japan went to NIRP, the market reaction was terrible. When you reach the end game for central banking omnipotence, there are no longer positive results from central bank policy.”
“Anytime you cut interest rates, or launch quantitative easing, there will always be negative as well as unintended consequences. The one positive consequence since 2008 is that when these policies are launched, stocks go up” “None of these policies really generate economic growth, they’re all about the bond bubble”
Graham mentions that when Kuroda launched NIRP, the positive consequences of that policy which is the Japanese stocks rising, only lasted one day. The negative aspects exist, and Japan has since had to cancel a bond auction due to a lack of interest, which in Japanese history, has never happened. Meaning that Japan was not able to sell it’s debt on the markets because investors did not want to buy bonds at a negative yield. “When the crisis hit in 2008, all central banks coordinated their responses, however, this was in a fiat world, where everything was relative. All the policies consisted of currency debasement,  with the idea of inflating away debt payments.” The problem with this is that when any one country launches any policy, it has an adverse effect on the currency against which their currency trades.  The most obvious example being the euro vis-à-vis US federal reserve and the dollar. The euro represents 56% of the value against which the dollar trades, if the ECB does anything to push the euro down, the dollar would naturally go up. The bank of Japan and the European Central Bank employing NIRP, should be very dollar positive. However, for years hedge funds have been betting very large leveraged sums that are shortening the yen and going long on the Nikkei, when the Bank of Japan implemented NIRP and the negative consequences occurred, that trade began to surge, as did the yen, and the Nikkei collapsed. What this has done is forced very many institutions and hedge funds to liquidate their positions.
“We are seeing the yen soaring and the dollar is falling as a result. That is not based on any fundamentals, that is just liquidity sloshing around the system. From a global perspective, what the bank of Japan did should be very dollar positive and I believe it will be proven to be the case”
“We are in such a central planning oriented world that what has been driving markets in the short term is perspective on what central banks are going to do.”

An Imploding Bond Bubble

The bond bubble is the bedrock of the financial system, it is over $100 Trillion in size, and is going to take years to deflate. The first wave of deflation was the high yield bond market, which has begun to implode. It will also feature emerging market corporate debt defaulting. Slowly, one by one each foot will fall until we will reach the sovereign bond default but it will take months, if not years.
“Oil experiencing a 60% price collapse in about a 6 month period in 2014, was really the bond bubble, the junk bonds in the energy sector blowing up. The bubble we’re dealing with right now is the crisis to which 2008 was the warm-up, and it will take much longer to unfold than people think.”


Gold was in a bit of a bubble in 2011, it was so far overextended above it’s overall bull market trend line, it was bound to collapse. When that collapse is combined with central bank manipulation and the effort to suppress gold, you’re going to see an asset class struggle for years to find it’s legs again.
Since China devalued the Yuan in August – September, gold has begun to outperform stocks. Since Japan went to NIRP this process has accelerated dramatically. It appears for the last 6-7 years, investors were loading into stock as a hedge against central bank policy, and gold would also benefit from this. This trend reversed in 2011, investors continued to use stocks as a hedge against central bank policy, but they abandoned gold. That seems to have reversed, investors are now moving into gold as a hedge against central bank error and stocks are suffering. The reason gold is having such a dramatic move is that the gold market is so much smaller than stock, that when you start seeing large scale chunks of capital moving into gold, the movements become very significant.

Custodial Risk

Graham explains that custodial risk is the question of what an individual actually owns. He uses the example of buying stock and how individuals no longer receive a paper certificate, and the assets are held digitally, usually in a broker’s account.  If the financial institution who is sitting on these assets for you, goes out of business, what are people to do with their money? Graham illustrates that gold and physical cash is so appealing due to the lack of custodial risk.
“Central banks hate physical cash because the custodial risk does not exist”

Update: Fresnillo, the world’s largest primary silver producer announces sales were up 11% in 2015 as Silver and Gold output increased.

 Update: Fresnillo, the world’s largest primary silver producer announces sales were up 11% in 2015 as Silver and Gold output increased.
Fresnillo intends to increase silver production again in 2016 – as much as 8%
Further Reading:
Global Silver Mining Production Increased in 2015
North American Silver Miners Report Record Silver Production
The Tiny Silver Market in Perspective
chart showing relative value of silver mining production and JP morgan fines

The value of annual global silver mining production is about $13.1 billion as of February 2016.

The 80:1 Silver to Gold Ratio – Is it about to change?

Chris Kotowski – Banks Basically Have To Be Ready For The 100-year Flood Every Single Year; David Stockman – This Is The Largest Credit Bubble The World Has Ever Seen, The Entire Fed Should Resign

Bets On The Fed Going ‘Negative’ Are Soaring

The market appears to be losing complete faith in The Fed’s current narrative as bets on NIRP have reached record levels – with 2017 now more likely than 2016 (QE first?).

Fed to raise the bar in bank stress tests

Thirty-three bank holding companies with at least $50bn in assets will take the test this year, up from 31 last year. The newcomers are BancWest, a San Francisco-based bank owned by BNP Paribas, and the US unit of Canada’s TD Bank.
Submissions are due in April, and results will be published in June.
“Banks basically have to be ready for the 100-year flood every single year,” said Chris Kotowski, analyst at Oppenheimer & Co.
He likens the banking industry today to the tobacco industry in the 1980s, which was dominated by a handful of solidly profitable businesses throwing off lots of cash – but with limited growth prospects. “The banks’ business horizons are becoming increasingly constrained,” he said.

This Is The Largest Credit Bubble The World Has Ever Seen – The entire Fed should resign – David Stockman

Marc Faber – “I Would Rather Want To Own Some Solid Currency, In other Words Gold.”

Faber: “Leave a million dollars with a bank, & in a year, you get only something like $990,000 back”

Bill Holter – Negative Rates Guaranteed Loss – Buy Gold

If you go back & look at it on a chart, gold & silver began their upward movement right about the time Japan started negative interest rates. The big scare was the Fed is going to tighten. The Fed is going to tighten, which is ridiculous.

Willem Middelkoop – Global Economy Continues to De-Dollarize

Willem says he believes the bear market is over although there will be corrections & volatility along the way as precious metals prices move higher.

Steen Jakobsen – The End Of The Debt Cycle



As we’ve been watching closely, something is wrong with the big banks. Their shares have lost 25-33% of their market value since the beginning of the year. What’s going on?
New market storm could catch euro zone unprepared
Global market turmoil since the start of the year has helped set warning lights flashing in euro zone sovereign bond markets.

This Crash Will Be Bigger Than 2008 – Here’s Why
The world has never seen this & there is no one that knows the eventual consequences of this? This is desperation! The central banks have run out of ammunition & tools?all they have now is just talk.







Abenomics Fail – Safe Sales Soar in Japan as People Move to Store Cash Amid Negative Interest Rate Turmoil

by Michael Krieger,
Screen Shot 2016-02-18 at 3.57.54 PM
Their imminent departure from evening news programmes is not just a loss to their profession; critics say they were forced out as part of a crackdown on media dissent by an increasingly intolerant prime minister, Shinzo Abe, and his supporters.
Only last week, the internal affairs minister, Sanae Takaichi, sent a clear message to media organizations. Broadcasters that repeatedly failed to show “fairness” in their political coverage, despite official warnings, could be taken off the air, she told MPs.
Momii caused consternation after his appointment when he suggested that NHK would toe the government line on key diplomatic issues, including Japan’s territorial dispute with China. “International broadcasting is different from domestic,” he said. “It would not do for us to say ‘left’ when the government is saying ‘right’.”
– From the post: Japanese Government Cracks Down Hard on the Media Amid Pitiful Economic Performance
Just in case you still remain confused as to why global economists, technocrats and elitist thieves the world over are suddenly rushing to ban cash, today’s article from the Wall Street Journal should make their intentions perfectly clear. *Hint, it has nothing to do with stopping crime.
Here are a few excerpts from the piece, Japanese Seeking a Place to Stash Cash Start Snapping Up Safes:
TOKYO—Look no further than Japan’s hardware stores for a worrying new sign that consumers are hoarding cash—the opposite of what the Bank of Japan had hoped when it recently introduced negative interest rates.
Signs are emerging of higher demand for safes—a place where the interest rate on cash is always zero, no matter what the central bank does. Cash languishing in safes could thwart the Bank of Japan’s move to get money circulating more vigorously in the economy. 
Shimachu Co., which operates a chain of stores selling hardware and home products, said Monday that sales of safes in the week that ended Sunday were 2½ times higher than in the same period a year earlier.
One safe that costs about $700 is now out of stock and won’t be available for a month, the chain said.
“I am a bit worried about what will happen next,” said Kazuo Matsumoto, a customer at one of the Shimachu stores in Tokyo. While he didn’t buy a safe, the 64-year-old said he might turn some of his cash into gold and keep it inside a safe-deposit box he rents.
“According to the BOJ theory, they should have moved their funds into riskier but higher-earning assets. Instead, they moved into pure cash that earned nothing,” wrote the newsletter’s author, Richard Katz.
It doesn’t take a brain surgeon to see what’s going on here. Our so-called global “leaders” understand that while the public may be stupid, it isn’t stupid enough to keep money in the bank once it starts charging them a percentage of their money just for holding deposits. Of course, there hasn’t been a surge in “criminals” using cash over the past year; rather, the powers that be want to ensure the slaves are forced to keep money in the bailed out, thieving banking system no matter what it does to them.
That’s the only reason for the current push to ban cash. It’s beyond transparent and must be stopped if you want to protect some semblance of financial and economic liberty.

New Sentry Electronic Fire Safe Opened in Seconds with No Sign of Entry ...

Biggest Story Of Your Life Time – The Global Reset Is Set To Occur Everywhere But In The USA. The Dollar Will Go Up And Up And Up And Vanish.

What Could Go Wrong? Brazil Plans To Kill Zika With Gamma Radiation Burst

Having "nailed it" with the feces-infused water for the Olympics, killed the golden goose of its economy, and unable to crackdown on widespread corruption, Brazil now has a 'great' idea to solve its utterly disastrous Zika epidemic... by zapping millions of male mosquitoes with gamma rays from drones to sterilise them.

As The Telegraph reports, Brazil is planning to fight the Zika virus by zapping millions of male mosquitoes with gamma rays to sterilise them and stop the spread of the virus linked to thousands of birth defects.
Called an irradiator, the device has been used to control fruit flies on the Portuguese island of Madeira. The International Atomic Energy Agency said on Monday it will pay to ship the device to Juazeiro, in the northeastern state of Bahia, as soon as the Brazilian government issues an import permit.

"It's a birth control method, the equivalent of family planning for humans," said Kostas Bourtzis, a molecular biologist with the IAEA's insect pest control laboratory.
Brazil is scrambling to eradicate the Aedes mosquito that has caused an epidemic of dengue and more recently an outbreak of Zika, a virus associated with an alarming surge in cases of babies born with abnormally small heads.

The new epidemic threatens to scare visitors away from the Rio 2016 Olympic Games in August. A Brazilian non-profit organisation called Moscamed will breed up to 12 million male mosquitoes a week and then sterilise them with the cobalt-60 irradiator, produced by Canadian company MDS Nordion, said Dr Bourtzis.
After an initial programme in a dozen towns near Juazeiro, the Brazilian government would have to decide on scaling up the sterile mosquito production with more funding for use in cities, where they would be released from the air, possibly from drones, said Dr Bourtzis.

With no cure or vaccine available for Zika, which has spread to more than 30 countries, mostly in the Americas, the only way to contain the virus is to reduce the mosquito population.

Brazilian researchers are also experimenting with radiation. The Fiocruz biomedical research institute has released 30,000 sterile mosquitoes on an island 217 miles off the coast of northeast Brazil.
What could possibly go wrong? And the question now is - will Olympic athletes be 'tested' for performance-enhancing gamma-radiation?

Crumbling American Economy Headed for Venezula-Style Collapse: “Worthless Cash; Nothing To Buy”

This article was written by Tom Chatham and originally published at his Project Chesapeake website.
Editor’s Comment: System breaks down. Lines form, doors shut, shelves go empty. Currency self-implodes. Scarcity, starvation, submission kick in for those who aren’t prepared with resources or barter items.
These conditions routinely plague the often poor developing countries, and Venezuela has been the perfect vehicle for disaster socialism, and sadly, the population must now pay the price for their mis-leaders and the failures of pushing to the max with a deeply flawed system. Nevertheless, these problems are being repeated around the world, and especially in Obama’s America. Under a Cloward-Piven strategy, the feds are handing out foods stamps like candy, and opening up the floodgates to unlimited immigration and infiltration. No doubt the barbarians are at the gate. In doing so, Obama and his cohorts are facilitating the demise of the country – and bottoming out its living standard under a cruel and calculated controlled demolition.
For greenie environmentalists, it is knocking back the negative impact of Western civilization and forcing austerity within the confines of carbon credits/carbon taxes. For oligarchs, it is a great leveling, and a re-situating of the once well-adjust Middle Class, who must now fit in among a crowded global plantation filled with 21st Century serfs. Run for the hills and take defense measures to survive and avoid the major damage.
Venezuela Could Be The Future of Western Civilization
by Tom Chatham
If anyone wants to see where western civilization is headed they need only to look at Venezuela today. The Bolivar has gone from 6.3 per dollar to 1,000 per dollar in the past few years. Last year farmers were ordered to turn over certain crops to the government for dispersion in government owned stores. About 100 shopping malls are now having their power cut for several hours a day as power shortages become a problem. But, as one citizen said, it doesn’t really matter because there isn’t anything to buy anyway. Last year their economy dropped 10% and this year it is expected to drop another 8%. They just had 36 747 cargo aircraft deliver newly printed cash to keep up with inflation.
This is the price of socialist programs and lack of sound economic practices. With currency inflating at this rate it is impossible for anyone to save from one year to the next. With government taking farm commodities how long will farmers continue to produce crops they will not get paid for or be paid in increasingly worthless currency. With power shortages commerce cannot continue in any serious way.
Gold has begun its move upwards in reaction to failing bank policies and the realization by the public that all is not well. If you do not get resources before they are gone you will not get them or you will pay dearly for them. Empty stores and closed banks make resource acquisition difficult if not impossible and life becomes much more difficult to survive on a daily basis. Nothing can create shortages like socialist policies and global war.
Saudi Arabia, Turkey the UAE and other actors in the Mideast are massing troops to intervene in the Syrian crisis. They must move soon or rebel forces which include Al Qaeda and ISIS troops will be destroyed by Syrian, Russian and Iranian forces that now threaten Aleppo and soon Raqqa which will end the civil war in Syria once and for all. The latest reports indicate about 350,000 troops, 2,000 tanks, 2,400 airplanes and over 400 helicopters are massing in northern Saudi Arabia. If this force invades Syria it is possible Russia may be forced to utilize tactical nukes to stop them. Once that line has been breached there is no telling where it might end.
One thing that is certain is that bankers and politicians will welcome an escalation to distract the people from the fact that they are about to loose everything they have. Major banks around the world are on the verge of bankruptcy which will trigger a massive derivatives meltdown. When that happens you can kiss any paper assets you have goodbye forever.
In times like this it is only prudent to protect yourself from the machinations of those that push the buttons of global commerce and banking. The rise in gold and silver indicate people are becoming aware of the dangers and are taking defensive positions. Those that realize inflation and shortages of consumer goods are on the horizon are taking the necessary steps to get through the times ahead. They are also taking steps to get through any dangers that governments and bankers are orchestrating to cover their illegal actions.
Let the difficulties in Venezuela be a fair warning of what can happen when the system no longer works properly and you are left to your own devices to get by. The ability to care for yourself is critical when large systems fail. When they fail everything you normally depend on stops and no amount of wishful thinking will change things. If you cannot touch it, you will not have it. A smart man learns from his mistakes. A genius learns from other peoples mistakes. Learn now or pay dearly later.
This article was written by Tom Chatham and originally published at his Project Chesapeake website.

Central banksters say outlawing cash will stop criminals … while stealing trillions from everyone by ‘printing’ money out of thin air

by: J. D. Heyes
Cashless society
(NaturalNews) The push by the world’s central bankers to essentially ban the use of cash is intensifying, but it belies another truth that is hard to escape: Even as they advocate a cashless society, which they say is necessary to reduce theft and stop criminals, these same central bankers are printing money like crazy.
As noted by Simon Black at Sovereign Man, the push for a cashless society is not just growing, it’s disturbing, and for a number of reasons. First, the obvious reason is the control it would give central banks and governments over their citizens; the second is that, in the event of a societal collapse or acyber attack on global finances, a person’s wealth would be wiped out with a few computer keystrokes.
Black noted in his Feb. 17 column:
The momentum to “ban cash”, and in particular high denomination notes like the 500 euro and $100 bills, is seriously picking up steam.
On Monday the European Central Bank President emphatically disclosed that he is strongly considering phasing out the 500 euro note.
Yesterday, former US Treasury Secretary Larry Summers published an op-ed in the Washington Post about getting rid of the $100 bill.
Prominent economists and banks have joined the refrain and called for an end to cash in recent months.
The reasoning is almost always the same: cash is something that only criminals, terrorists, and tax cheats use.


Summers, in his op-ed, cites recent research from a Harvard University paper entitled,Making it Harder for the Bad Guys: The Case for Eliminating High Denomination Notes, which Black says generally sums up conventional central bank thinking these days. Among other things the paper recommends abolishing the 500 euro bill and the $100 bill.
The study’s authors say that “without being able to use high denomination notes, those engaged in illicit activities – the ‘bad guys’ of our title – would face higher costs and greater risks of detection.
“Eliminating high denomination notes would disrupt their ‘business models,'” the paper continued.
Black says he finds those conclusions “comical.”
“I can just imagine a bunch of bureaucrats and policy wonks sitting in a room pretending to know anything about criminal activity,” he wrote – which is very true; it does sound a bit incredulous that academics would presume to know much about the adaptive nature of criminal enterprises.
The fact is, as Black points out, there has been criminal activity since man first walked on earth. Indeed, crime began occurring long before humans devised and exchanged moneyfor goods and services. And if a monetary ban ever really takes place, crime will continue.
“Perhaps even more hilarious is that many of these bankrupt governments have become so desperate for economic growth that they now count illegal drug activity and prostitutionin their GDP calculations, both of which are typically transacted in cash,” Black wrote. “So, ironically, by banning cash these governments will end up reducing their own GDP figures.”

It’s all about control

But isn’t something else really behind this push to eliminate cash? What’s the rush to ban something that is used for criminal purposes by a very tiny minority of people on the planet?
Cash, it seems, “is the Achilles’ Heel of the financial system,” says Black, whose company helps guide people into a life free from normal societal constraints, like poverty and an inability to be mobile.
Black notes that central banks around the world have managed to keep interest rates at zero or near zero for almost eight years now – which is unprecedented. All that has happened is that such policies have created massive financial bubbles as well as extraordinary amounts of debt. But the worst has yet to materialize.
Read Black’s entire column here.

Greek Attempt To Force Use Of Electronic Money Instead Of Physical Cash Fails

While the "developed world" is only now starting its aggressive push to slowly at first, then very fast ban the use of physical cash as the key gating factor to the global adoption of NIRP (by first eliminating high-denomination bills because they "aid terrorism and spread criminality") one country has long been doing everything in its power to ween its population away from tax-evasive cash as a medium of payment, and into digital transactions: Greece.
The problem, however, is that it has failed.
According to Kathimerini, "Greek businesses are not ready for the expansion of plastic money through the compulsory use of credit and debit cards for everyday transactions."
Unlike in the rest of the world where "the stick" approach will likely to be used, in Greece the government has been more gentle by adopting a "carrot" strategy (for now) when it comes to migrating from cash to digital. The government has told taxpayers that they will have to spend up to a certain amount of their incomes via bank and card transactions in order to qualify for an annual tax-free exemption.
This appears to not be a sufficient incentive however, as a large proportion of stores still don’t have the card terminals, or PoS (Points of Sale), required for card payments, while plastic is accepted by very few doctors, plumbers, electricians, lawyers and others who tend to account for the lion’s share of tax evasion recorded in the country.

Almost as if the local population realizes that what the government is trying to do is to limit at first, then ultimately ban all cash transactions in the twice recently defaulted nation as well. It also realizes that an annual tax-free exemption means still paying taxes; taxes which could be avoided if one only transacted with cash.
For the government this is bad news, as the lack of tracking of every transaction means that the local population will pay far less taxes: a recent study by the Foundation for Economic and Industrial Research (IOBE) showed that increasing the use of cards for everyday transactions could increase state revenues by anything between 700 million and 1.6 billion euros per year, and that the market’s poor preparation means that the tax burden has been passed on to lawful taxpayers. As a reminder, in Greece, the term "lawful taxpayers" is not quite the same as in most other countries.
What is more surprising is that according to data seen by Kathimerini, PoS terminals in Greece amount to just 220,000, and that despite the fact these were effectively forced on enterprises with the imposition of the capital controls, an estimated half of all businesses do not have card terminals.
Almost as if the Greeks would rather maintain capital controls than be forced into a digital currency by their Brussles overlords.
According to Finance Ministry calculations , the number of terminals the market requires for a satisfactory geographical coverage in the basic categories of small enterprises and of the self-employed to 450,000-500,000, which appears impossible for 2016.
As for consumers, the increase in the number of debit cards after the government imposed the capital controls has brought their total to 1.7 million across Greece.
And yet, despite the aggressive push to force everyone out of physical cash and into digital money, the experiment has so far failed. How long until the IMF, Troika, or Quadriga or whatever it is called these days, uses Greece as the Guniea Pig for the next monetary experiment, and "advises" the Syriza government that if it wants the bailout money to flow, it will have to do away with all physical cash within its borders. A successful implementation, first in Greece, would then mean that the global decashification process can continue in other western nations.

Liquidity Crunch: Subprime Auto Loans Implode (in Your Bond Fund)

Wolf Richter,

“Fears of an impending liquidity crunch in that asset class.”

“What is happening in this space today reminds me of what happened in mortgage-backed securities in the run-up to the crisis,” U.S. Comptroller of the Currency Thomas Curry warned in October about the auto loan bubble.
And his warning is now becoming reality.
Subprime auto loans aren’t big enough to take down our megabanks, the way subprime mortgages had done. But they’re big enough to take down specialized auto lenders and cause a lot of tears among investors that bought the highly rated structured securities backed by subprime and deep-subprime auto loans that are now defaulting at a rate last seen during the days of the Financial Crisis.
And they’re big enough to knock the auto industry, one of the few booming sectors in the otherwise lackadaisical economy, off its record perch. An auto-loan implosion would start at subprime and work its way up, just like mortgages had done.
The business of “repackaging” these loans, including subprime and deep-subprime loans, into asset backed securities has also been booming. These ABS are structured with different tranches, so that the highest tranches – the last ones to absorb any losses – can be stamped with high credit ratings and offloaded to bond mutual funds designed for retail investors.
Deep-subprime borrowers are high-risk. Typically they have credit scores below 550. To make it worth everyone’s while, they get stuffed into loans often with interest rates above 20%. To make payments even remotely possible at these rates, terms are often stretched to 84 months. Borrowers are typically upside down in their vehicle: the negative equity of their trade-in, along with title, taxes, and license fees, and a hefty dealer profit are rolled into the loan. When the lender repossesses the vehicle, losses add up in a hurry.
Auto loans in general have been in a huge boom that reached $1.04 trillion in the fourth quarter 2015:
Equifax reported last year that 23.5% of all new auto loans where to subprime borrowers. So unlike the mortgage crisis, subprime auto loans aren’t in the trillions, but in the neighborhood of $200 billion. Many of them have been repackaged into asset backed securities. And these securities are starting to implode.
Auto loan ABS delinquencies reached 4.7% in January, the highest since February 2010, according to data from Wells Fargo, cited by Bloomberg. During the Financial Crisis, delinquencies topped out at 5.4%. During normal times, they range from 2% to 3%.
John McElravey, head of Consumer ABS Research at Wells Fargo Securities, warned that these delinquencies would entail a wave of defaults. The default rate is already skyrocketing. It hit 12.3% in January, up from 11.3% in December, the highest since 2010.
He pointed a several factors, including initial jobless claims in oil states like Texas. The data are worth watching closely, he said, “especially against the backdrop of sub-par economic growth.”
Skopos Financial in Texas is a master at securitizing subprime auto loans. Private Equity firm Lee Equity Partners owns a 97% stake. When Skopos “opened its doors” in 2011, it had “one goal in mind,” as it says on its website, namely, “making tough, deep subprime auto loans easier to finance for dealers.”
In November, it securitized $154 million of subprime and deep-subprime auto loans. Citigroup was the lead underwriter. Over three-quarters of the loans are to borrowers with credit scores under 600. And another 14% have no credit score at all. The highest tranche was awarded lofty ratings of A from DBRS and AA from Kroll Bond Rating Agency.
In this manner, thinly capitalized lenders that came out of nowhere, like Skopos, are offloading the risks to institutional investors, such as your bond mutual fund.
But now, only three months later, Asset-Backed Alert reported that the securities have already “experienced enough collateral defaults to approach a ‘cumulative net loss ratio trigger event’ set by Kroll. Should losses reach that level, Skopos would have to stop collecting excess cash flows and redirect the money to bondholders.”
This would make it “difficult” for the company to keep “doing business as usual” and “virtually impossible” to raise more capital through securitization of its subprime loans.
Sources said other deep-subprime lenders including Go Financial and United Auto Credit face similar pressures due to rising losses among the loans underpinning their securitizations.
And this lightning-fast deterioration of the collateral for these securities is “feeding fears of an impending liquidity crunch in the asset class.”
“For these smaller firms, securitization is their only source of funding in this space,” one source said. “It only takes one deal of theirs to go sideways in terms of performance and they can impact the whole subprime-ABS market.”
The point of building a net-loss-ratio trigger into a deal is to protect bondholders, so investors holding Skopos’ paper aren’t likely to be affected by weakening collateral. But increasing delinquencies and losses among deep subprime borrowers across the board are adding to concerns that the industry is vulnerable to a “perfect storm” of market forces including deteriorating credit quality, declining vehicle-resale values, and rising interest rates.
Hedge funds are already smelling the next “Big Short.” And they’re trying to figure out – though it won’t be easy – how to bet against these securities and against those bond mutual funds that hold them, and that may eventually be forced to dump them into an illiquid market.
“The views expressed are those of the speaker and should not be attributed to the Federal Reserve Bank of Dallas or the Federal Reserve System,” it says on the front page of the presentation. Institutional CYA. We get that. Read… “Prelude to Recession”: the Dallas Fed’s Unsettling Charts


The Central Bank of the Russian Federation added 700,000 ounces (21.77 tonnes) of gold to its reserves in January.

Submitted by Smaulgld:
Russia now has 1,437 tonnes of gold in reserve; the sixth most of any nation.

Russian Gold Reserves

After adding 6,700,000 ounces (208 tonnes) of gold to her reserves in 2015, the Central Bank of the Russian Federation announced today that it had added another 700,000 ounces of gold (21.77 tonnes) to its reserves in January 2016. The report indicated that Russian gold reserves increased by 700,000 ounces from its December 2015 report to 46.2 million ounces (1,436.98 tonnes).
russian gold reserves from 2015 -2016
Since 2009 Russia has added more than 813 tons of gold to its reserves more than China who added (724 tons) during the same time period.
Gold vs. Roubles
Increasingly, Russia has been buying up more of their gold mining production, in effect converting roubles into gold.
Russian gold mining vs gold reserves 2006-2016
Adding gold to reserves has helped offset the loss of value in the rouble vs gold.
gold vs russian rouble feb 19 2016
From August to January 2016 China added 101 tonnes of gold to its reserves, while Russia added 149 tonnes, or 48% more.
Russia and China additions to gold reserves 2015-2016
gold reserves by country top ten feb 19 2016

Russian Monthly Gold Purchases June 2014 – January 2016

Russia added 11.5 million ounces of gold (35.77 tonnes) to its reserves from June 2015 to January 2016.
Russian Gold reserves June 2015 January 2016
Russian Central Bank Gold Reserves
Russia’s massive additions to its gold reserves come at a time when they are seeing their biggest decline in wages and retail sales since 1999 and a massive drop in the value of the rouble.
Russia’s top central banker Elvira Nabiullina said recently “Regarding gold and foreign currency reserves, we have the desired benchmark of $500 bln, and not in the three-year term, it could be 5-7 years and more. We believe it is necessary in terms of creating additional financial cushion for the state in the face of such external uncertainties.”
Russia has been rebalancing its foreign reserves to favor gold vs. U.S. Treasury Bonds. Russia’s gold buying binge had coincided with a steady sell off of her U.S. Treasuries.
It might be expected that as Russia increases its foreign reserves it would do so at least in proportion with that of its current gold reserves.
In December 2015, Russia added 700,000 ounces of gold to its reserves while also adding $6 billion of U.S. Treasuries.

Russian U.S. Treasury Holdings

Russia’s U.S. Treasury Bond Holdings January 2014-December 2015
As of December, 2015, Russia held $92.1 billion in U.S. Treasury Bonds down from $131.8 billion in January 2014 but up from $66.5 billion in April 2015.
russian treasury bond holdings as of January 2014 - december 2015

It’s Us – Not Politicians Or Rich People – Who Create Jobs And Drive Economy

by GoldCore
When business lobbies warn that voting left would lead to a period of political instability that would hurt the economy, it’s easy to understand cynicism from left-wing parties. Someone should remind business lobbies, corporations and banks that it was the people at the commanding heights of banks and business who ruined the economy last time.
GoldCore: David McWilliams
David McWilliams, a respected economist and commentator, has written an interesting article ahead of the election in Ireland where he points out the importance of normal everyday people and businesses and indeed of “animal spirits” and psychology:
Politicians should understand that they do not create jobs; nor do rich people. Jobs are created by general demand. Rich people don’t create demand. You and I create demand. Demand is what happens when the society has enough income to buy goods and services.
How does that happen? Where does income come from?
It comes from investment. It comes from people, you and me, going out and risking capital into projects today that we believe may deliver fruit in the morning. These are animal spirits unleashed. So if we are opening a shop, café or online business today, we believe that we will be able to gain enough business to make the returns to that business better in the future for us than if we did nothing today. In short, we back ourselves, our ideas and our own personal energy, drive and talent to create something out of nothing now that will be worth something far more than nothing tomorrow.
McWilliams’s article can be read on the Irish Independent 
David McWilliams is one of the many speakers at Cantillon 2016, ‘FINTECH – Disrupting the Landscape’, taking place this Thursday in Tralee, Co Kerry. Mark O’Byrne of GoldCore will be speaking about “Future Of Money – Savings, Payments, Asset Backed Digital Currencies & Gold”.

LBMA Gold Prices
24 Feb: USD 1,232.25, EUR 1,122.33 and GBP 885.52 per ounce
23 Feb: USD 1,218.75, EUR 1,106.62 and GBP 863.43 per ounce 
22 Feb: USD 1,203.65, EUR 1,088.17 and GBP 849.21 per ounce
19 Feb: USD 1,221.50, EUR 1,101.14 and GBP 853.35 per ounce
18 Feb: USD 1,204.40, EUR 1,082.41 and GBP 841.19 per ounce

Gold and Silver News and Commentary

Gold inches lower but stays supported on risk-off mood – Bullion Desk
Gold keeps gains above $1,200 on safe-haven bids – Reuters
Gold’s Bull-Market Flirtation Has Investors Swooning Over ETFs – Bloomberg
Consumer confidence falls to seven-month low – Marketwatch
Video: Manipulation In The Gold Market? – CNBC
Why is Gold Rising Again – Goodman
Technical analysis is just a weapon against the gold market – Profit Confidential
GLD continues to astound – Norcini – Gold Seek
Click here

Why Negative Rates Can’t Stop the Coming Depression

A bird in the hand is worth two in the bush.
– Anonymous.
BALTIMORE – The Dow was more or less flat on Friday. After all the excitement early in the year, stock markets seemed to have settled down.
In our upcoming issue of The Bill Bonner Letter (due to hit inboxes on Wednesday), we explore the strange territory of “NIRP” – negative-interest-rate policy.
About $7 trillion of sovereign bonds now yield less than nothing. Lenders give their money to governments… who swear up and down, no fingers crossed, that they’ll give them back less money sometime in the future.
Is that weird or what?

Into the Unknown

At least one reader didn’t think it was so odd.
“You pay someone to store your boat or even to park your car,” he declared.
“Why not pay someone to look out for your money?”
Ah… we thought he had a point. But then, we realized that the borrower isn’t looking out for your money; he’s taking it… and using it as he sees fit.
It is as though you gave a valet the keys to your car. Then he drove it to Vegas or sold it on eBay.
A borrower takes your money and uses it. He doesn’t just store it for you; that is what safe deposit boxes are for.
When you deposit your money in a bank, it’s the same thing. You are making a loan to the bank. The bank doesn’t store your money in a safe on your behalf; it uses it to balance its books.
If something goes wrong and you want your money back, you can just get in line behind the other creditors.
The future is always unknown. The bird in the bush could fly away. Or someone else could get him.
So, when you lend money, you need a little something to compensate you for the risk that the bird might get away.

A New Level of Absurdity

That’s why bonds pay income – to compensate you for that uncertainty.
Inflation, defaults, depression, war, and revolution all raise bond yields because all increase the odds that you won’t get your money back.
That’s why countries with much uncertainty – such as Venezuela – have higher interest rates than countries, such as Switzerland, where the future is probably going to be a lot like the past.
Venezuelan 10-year government bonds yield 11%. The Swiss 10-year government bond yields negative 0.3%.
The interest you earn on a bond is there to compensate you for the risk that you won’t get your money back. Or that the money you do get back when the bond matures will have less purchasing power than the money you used to buy the bond in the first place.
You never know. Maybe the company or government that issued the bond will go broke. Or maybe the Fed will cause hyperinflation. In that case, even if you get your money back, it won’t buy much.
With interest rates at zero, lenders must believe that the future carries neither risk. The bird in the bush isn’t going anywhere; they’re sure of it.
As unlikely as that is, negative interest rates take the absurdity to a new level.
A person who lends at a negative rate must believe that the future is more certain than the present.
In other words, he believes there will always be MORE birds in the bush.

Boneheaded Logic

The logic of lowering rates below zero is so boneheaded that only a PhD could believe it.
Economic growth rates are falling toward zero. And at zero, it normally doesn’t make sense for the business community – as a whole – to borrow. The growth it expects will be less than the interest it will have to pay.
That’s a big problem…
Because the Fed only has direct control over the roughly 20% of the overall money supply. This takes the form of cash in circulation and bank reserves. The other roughly 80% of the money supply comes from bank lending.
If people don’t borrow, money doesn’t appear. And if money doesn’t appear – or worse, if it disappears – people have less of it. They stop spending… the slowdown gets worse… prices fall… and pretty soon, you have a depression on your hands.
How to prevent it?
If you believe the myth that the feds can create real demand for bank lending by dropping interest below rates, then you, too, might believe in NIRP.
It’s all relative, you see. It’s like standing on a train platform. The train next to you backs up… and you feel you’re moving ahead.
Negative interest rates are like backing up. They give borrowers the illusion of forward motion… even if the economy is standing still.
Or something like that.

Michael Snyder: Real Economic Activity Grinding To a Halt


In Odd Twist, Canadian Bullion Dealer Offers To Pay Interest On Gold And Silver

(Zero Hedge)  There are three certain things in life: death, taxes and paying vault storage fees to keep your gold safe. Or at least there were: recently the third of these certainties got somewhat muddied when, over the past year the government of India unleashed an attempt to soft-confiscate the nation’s publicly held gold, by offering to pay interest for said gold. Incidentally, the effort has failed miserably as India has been able to collect only a few tons of gold as part of this gold monetization scheme.
Where India succeeded was to finally quash the old saying that gold does not pay dividends. It does, but until now the dividend was only available in one country.
That has now changed and as of this moment, a Canadian physical gold distributor, Canadian Bullion Services (profiled recently by the Globe and Mail) has boldly gone where only India has gone before, and is offering to pay interest to its gold and silver customers if they hold their precious metals at the bullion dealer.  In fact, based on the tiering of interest, CBS will pay as much as 4.5%/year if the gold deposited for at least 3 years.
Surprised? Wait until you see the full offer:
Earn Interest on Your Bullion
Canadian Bullion Services is happy to introduce a new service exclusively to our clients. Purchase gold and silver and hold gold and silver in secure storage; and earn interest just by keeping gold and silver in the Boost storage account.
What is The Boost Storage Account?
The Boost Storage Account is a proprietary program developed exclusively by Canadian Bullion Services.  In a nutshell, the program allows investors to:
  • Purchase gold and silver;
  • Hold gold and silver in secure storage; and
  • Earn interest just by keeping gold and silver in the Boost storage account.
Is this a new idea?
We would like to say we thought of it ourselves, but the idea is very popular in the Eastern parts of the world, where governments, banks, and bullion dealers have a variety of storage interest bearing accounts for their hard assets.
Benefits at a glance:
  1. Purchase physical gold and silver for safety and growth.
  2. Have your gold and silver secure in a vault.
  3. Earn interest while your gold and silver is safely in storage.
  4. Get full transparency – receive monthly audited statements.
The Program is right for you if:
  • You desire the safety of hard assets like bullion but want your bullion working for you;
  • You wish to participate in the potential growth of the bullion markets (hard assets only, no paper assets);
  • You would like to receive interest payments while storing your gold and silver;
  • You believe in a buy-and-hold strategy; and
  • You want your bullion stored safely and securely.
How does the Boost Program work?
  • Purchase a minimum of 500 ounces of silver or 10 ounces of gold (does not matter which Mint)***
  • Store the gold and silver at one of Canadian Bullion Services secure depository vaults.
  • The Boost accounts are yearly accounts. Interest earned is based on holding time:
    • Store your bullion for 1 year and earn 2.5%/annum on your bullion*
    • Store your bullion for 2 years and earn 3.5%/annum on your bullion*
    • Store your bullion for 3 years and earn 4.5%/annum on your bullion*
  • At the end of the term you can renew your Boost Program or have your bullion delivered**
  • Your interest is earned monthly with actual physical bullion.
Getting interest on your gold: that sounds suspiciously close to what fractional reserve banks do to incentivize depositors to fund them with the unsecured liability known as cash; a liability which as Europe is learning the hard way can be bailed in at any given moment. But that is impossible, because as Ben Bernanke will attest, gold is not money, it is tradition. So how can this be?
Well, a quick look at footnote one, and some loud alarm bells should promptly go off:
*Liquidity is at the end of your term only; you may not receive the exact bullion you purchased; the interest will accrue monthly with the purchase of more bullion, any funds remaining will be credited as cash in your account.
At least the company is honest and warns you upfront that the gold you “receive” may not be the exact bullion you purchased, in other words this is nothing but the first incarnation of a bullion dealer rehypothecation scheme.
But why? After all Canadian Bullion Services is a small dealer which allegedly only had a few million in revenue.
Perhaps the answer can be found in the following recent press release, in which CBS announced it was now collaboration with precious metal vaulting legend, Brinks.
Introducing Local Pick Up at Brinks-Revolutionary Service for Gold and Silver
Canadian Bullion Services Inc. has now introduced its leading on-time pick up option at Brinks in Toronto.
“With this new feature, clients can secure their price of gold and silver bullion and now pick up their order at Brinks in Toronto.” said Jamie Cohen, Chief Strategy Officer of Canadian Bullion Services.
This new service was created to help individuals accelerate their precious metals holdings. Clients will no longer need to wait for their deliveries. This helps drive more business value for Canadian Bullion Services by lowering insurance costs and delivery costs while enabling clients to receive their product faster.
In the future, this service will be rolled out to all products and to Brinks in most major cities in Canada. For more information, please contact Jamie Cohen at Canadian Bullion Services.
We wonder if CBS’ generous precious metal interest payment scheme is funded by Brinks or one of the other prominent names in the business such as Scotia Mocatta, HSBC or even JPM, all of which as we have documented in recent months, have been running precariously low on physical gold in their gold vaults.
After all what better way to promptly replenish physical stores than to not only not demand gold storage fees but to offer to pay interest to the public for the “privilege” of holding its gold.
In retrospect we can’t help but have flashbacks to FDR’s infamous executive order 6102, which promptly and overnight confiscated all physical U.S. gold.  At least this time around the “confiscation” of gold is on a voluntary, “handover” basis and those who part with their hard money are incentivized to do so with promises of some future paper money interest payment.
At least for now.
And if, like in India, dealers are unable to procure much needed physical, things just might escalate. Unless of course, there is nothing ulterior or sinister about this scheme, in which case those who are interested should call 416 214 4299 for further details.