The Hong Kong Mercantile Exchange, which is the gold and silver commodities trading house in Hong Kong is immediately stopping/discontinuing and will be settling all gold and silver trades in cash that are in house at this time. Besides that, they will determine what amount/price they will settle the trades/contracts at.
This is the exchange that began trading gold and silver in 2011 for the Pacific areas. This is the one we had all hoped would break the gold and silver manipulation. It seems the manipulation and physical amounts, broke them and they are not able to provide the physical.
On May 18, 2011, HKMEx formally began trading with a US Dollar gold futures contract. [9]In an interview with Reuters, Helmig said it plans to launch gold and silver futures contracts denominated in renminbi. He also said HKMEx will follow precious metals products with contracts in base metals, and then energy and agriculture.[10] On July 22, 2011, the exchange launched a second product, a US Dollar silver futures contract.[11]As of 5pm on February 13, 2012 trading on HKMEx’s gold and silver futures reached 1,003,210 contracts, representing total turnover of over US$50 billion (around HK$390 billion).[12] Trading on the exchange's US-dollar gold futures for the first time surpassed the 10,000 contract mark on June 4, 2012.
You have to wonder if people in Asia were demanding the physical metals, compared to the paper as the Comex people are happy with. It seems to me they ran out of physical and can no longer operate with physical gold and silver as a commodity.
They are using the excuse of commodity trading not providing enough money for them. But lets face it. The fact that gold and silver have been hit super hard the last couple of months and the fact that the Asian's have been buying all the physical they can get their hands on..... doesn't leave much to the imagination of what the truth is.
It seems we now have an official Default of an exchange for gold and silver! When will the Comex put something out like this?
It will reapply later to trade gold and silver again with the Renminbi, but is ceasing all trading immediately.
There is no physical metals to be had from the exchange for anyone who put trades on it.
Via hkmerc.com, 18 May 2013 - HONG KONG, 18 May, 2013 – The Hong Kong Mercantile Exchange (HKMEx) announces today it has decided to voluntarily surrender the authorisation to provide automated trading services (“ATS”) granted by the Securities and Futures Commission (“the SFC”).
With immediate effect, no new orders may be placed and all open positions will be financially settled at the settlement price determined by HKMEx and its designated clearinghouse.
The voluntary surrender decision was made to enable the Exchange to re-align its strategy with the new industry environment since its trading revenues have not been sufficient to support operating expenses and, as a result, its inability to meet the required regulatory financial conditions. While trading on the Exchange will discontinue, HKMEx as an organisation will continue to operate with its existing staff, and will focus on developing new products including renminbi-denominated precious and base metals contracts that will better meet customer needs. It also intends to re-apply at an appropriate time for an ATS authorization to launch these products with stronger and more effective market maker programs.
“The favourable conditions under which HKMEx was founded have not changed. Global commodity demand continues to shift towards Asia as the region undergoes sustained growth, presenting great opportunities that we will continue to exploit,” said Barry Cheung, Chairman of HKMEx. “Our priorities now are to protect members’ interests by ensuring effective closing of open positions while strengthening our shareholding base and developing new products that play to our distinctive strengths.”
In closing out the open positions, the Exchange has developed a plan in consultation with the SFC to ensure the process is orderly and that investors are well informed of the matter. The Exchange will disseminate settlement prices to its members the morning of next Monday, 20 May 2013. Investors may contact the Exchange’s hotline at +852 3900 9898 for any assistance or enquiry.
A look at the situation with precious metals at the moment and the manipulation of prices. Here is an interesting quote from part of the conclusion near the bottom,
"It means that we are entering a period when there will be unprecedented volatility for precious metals. There will be tremendous ups and downs as this crisis plays out and the bankers try to keep the paper gold scam from completely unraveling.
Meanwhile, nations such as China continue to stockpile gold as if the end of the world was coming."
Via theeconomiccollapseblog.com, 8 May 2013 (Thanks Troy) - The legal claims on physical gold far exceed the amount of physical gold that the banks actually have by a very, very wide margin. And right now the bankers are scared out of their wits because their warehouses are being drained of physical gold at a frightening rate. So what happens when their physical gold is gone but they still have lots and lots of people with legal claims to gold?
When that moment arrives, it will represent the end of the paper gold scam. Many believe that the recent takedown of the price of paper gold was a desperate attempt by the bankers to put off that day of reckoning, but it appears to have greatly backfired on them. Instead of cooling off demand for precious metals, it has unleashed a massive "gold rush" all over the globe. Meanwhile, word has been spreading among wealthy families in both North America and Europe that they had better grab their physical gold out of the banks while they still can.
This is creating havoc in the financial community, and at least one major international bank has already declared that it will only be settling those accounts in cash from now on. The paper gold scam is starting to unravel, and by the time this is all over it is going to be a complete and total nightmare for global financial markets.
For years it has been widely known that the promises that banks have made regarding their gold far exceed their actual ability to deliver, but we have never reached a moment of such crisis before.
Posted below are quotes from people that know precious metals far better than I do. What these experts are saying is more than a little bit disturbing...
-CME President Terry Duffy: What’s interesting about gold, when we had that big break two weeks ago we saw all the gold stocks trade down significantly, we saw all the gold products trade down significantly, but one thing that did not trade down, was gold coins, tangible real gold. That’s going to show you, people don’t want certificates, they don’t want anything else. They want the real product.
-Billionaire Eric Sprott: So we see all of these paper (trading) volumes going through that bear absolutely no relationship to what’s going on in the physical markets. As you know I have always been a proponent of the fact that supply in the gold market was way less than demand, and by a very large factor. I think demand exceeds supply by at least 60%. The central banks are surreptitiously supplying that gold, and ultimately they will be running on fumes.
When we hear about the LBMA not willing to deliver gold, and JP Morgan’s inventories at the COMEX have gone from 2.4 million (ounces) down to 160,000 ounces, it just makes you realize that all of this paper trading means nothing. It’s the real physical market that you have to rely on.
-JS Kim: FACT #1: COMEX gold vaults were recently drained of 2 million ounces of physical gold in one quarter, the largest withdrawal of physical gold bullion from COMEX vaults in one quarter during this entire 12-year gold and silver bull. There has been speculation about the reasons that spurred these massive withdrawals of gold from COMEX vaults, but the most reasonable speculation is that no one trusts the bankers to hold on to their physical gold anymore, especially in light of Fact #2. Note below, that both registered AND eligible stocks of gold had heavily declined in recent months. Such an event signals a general distrust of the banking system from everyone holding gold in registered COMEX vaults.
FACT #2: One of the largest European banks, ABN Amro, defaulted on their gold contracts and informed their clients that they would only settle their gold bullion contracts in cash and not in physical. So much for the supposed legality of financial contracts as a "binding" contract. So whether Fact #1 caused Fact #2 or vice versa is irrelevant. What IS apparent is that the level of trust in bankers to safekeep physical gold and physical silver is disappearing, as it should be, and as it should have already been for years now. But truth always takes some time to catch up to banker spread lies and that is what is happening now. I have been warning people never to trust bankers in deals involving gold and silver for years now, as in this article I wrote nearly four years ago informing the public that the SLV and GLD are likely a banker invented scam as well.
FACT #3: Silver fraud whistleblower and London trader Andrew Maguire stated that the LBMA was having trouble settling gold contracts in bullion as well and stated that institutions that asked for physical settlement “were told they would be cash settled instead by a bullion bank.” In plain English, this is a default. So Andrew Maguire reported that the LBMA had already gone into default. In light of Fact #1 and Fact #2, the dominoes were starting to tumble and the house of cards that the bankers had built in gold and silver paper derivatives to deceive and hide the true fundamentals of the physical gold and physical markets from the entire world was rapidly starting to crumble. A financial earthquake of magnitude 2.5 was quickly threatening to evolve into one of the biggest financial earthquakes of all time in which the world’s confidence in all global fiat currencies would effectively have a well-deserved funeral.
-Jim Sinclair: I think the reality is the supply situation is extremely volatile at this point, and even discussing it is like rubbing a raw nerve to the people who are in charge. The amount of discussion on the subject of warehouse supply, supply that is represented by the gold leases, indicated to the central planners that the demand for physical was going to continue to effect the exchanges.
Although they did not expect any grandstand delivery, the mere continued draining of physical inventories was threatening the very functioning of the paper exchange. That threatening of the paper exchange and its ability to continue functioning is really taking off the blinders and revealing the truth behind the critical question, ‘Where is the gold?’
The question now is, ‘Where has the gold gone?’ Who has all of this gold? Because of the nature of gold leasing, all of this gold has been purchased and it has gone somewhere. The reality of the empty vaults reveal that the gold has gone missing.
-Ronald Stoeferle: We’re seeing this rush to physical gold not only in the retail market, but also for the institutional players...[it's] just overwhelming…I [estimate] a 130-to-1 [ratio of paper to physical gold]…and I think in the last week we were really close to [triggering] a default of the paper market.
-Gerhard Schubert, head of Precious Metals at Emirates NBD: I have not seen in my 35 years in precious metals such a determined and strong global physical demand for gold. The UAE physical markets have been cleared out by buyers from all walks of life. The premiums, which have been asked for and which have been paid have been the cornerstone of the gold price recovery. It is very rare that physical markets can have a serious impact on market prices, which are normally driven solely by derivatives and futures contracts…
I did speak during the week with several refineries in the world, of course including the UAE refineries, and the waiting period for 995 kilo bars is easily 2-3 weeks and goes into June in some cases. A large portion of the 995 kilo bars in the UAE goes normally into the Indian market, but a lot of the available 995 kilo bars are destined for Turkey, at this time. We heard that premiums paid in Turkey have reached anything between US $ 20 and US $ 35 per ounce.
-James Turk: Another indication of the demand for large bars is the huge drawdown in the gold stock in COMEX warehouses. It is noteworthy that COMEX reports show the drawdown is largely the result of dealers removing their inventory, their working stock. When that happens, you know the availability of supply is constrained.
What all of this means, Eric, is one thing. If the central planners want to keep the precious metals at these low prices, to meet the demand for physical metal they will need to empty more metal from central bank vaults, or borrow metal from the ETFs as some have suggested is happening. Otherwise, the central planners will have to step back and stop their intervention, thereby letting the price of gold and silver rise so that demand tapers off, bringing demand and supply of physical metal back toward some kind of balance.
We've seen this same situation several times over the last twelve years. It is what I have been calling a “managed retreat.” Despite the current weakness, I firmly believe we have again entered a critical period where the central planners will need to retreat once again in order to let the gold and silver prices climb higher.
-The Golden Truth: And then I get a call from a close friend in NYC last Friday. His career has been in private wealth management in the private bank department of the Too Big To Fail banks. He's been looking for work and chats with old colleagues all the time. He called my Friday and told me he just got off the phone with a very high level private banker from a big Euro-based TBTF bullion bank, but who was at JP Morgan until about six months ago.
This guy told my friend that there is a scramble by many very wealthy European families/entities to get their 400 oz bars out of the big bank vaults. He knows this personally, for a fact. He said the private banker community is small over there and the big wealthy families all talk to each other and act on the same rumors/sentiment. The Bundesbank/Fed and the ABN/Amro situations triggered this move. He knows for a fact JPM tried to calm fears about 3 months ago by sending a letter to it's very wealthy clients assuring them their bars were safe, in allocated accounts. He said right now those same families are walking into the big banks like JPM and demanding delivery of their bars or threatening to take their $100's of millions in investment portfolios to competitors. His wording was "these people are putting a gun to the heads of private banks and demanding their gold."
I know this information is good because I know my friend's background and when he tells me his source is plugged in, the guy is plugged in. Not only that, my friend's source said that there's no doubt that someone like a John Paulson, not necessarily specifically him, but entities like him or it may include him, have held a gun to GLD and demanded delivery of physical in exchange for their shares.
Regarding the Bundesbank/Fed situation, recall that the Bundesbank asked to have some portion of its gold sitting - supposedly - in the NY Fed vault in NYC sent back Germany. The total amount is 1800 tonnes. After behind the scenes negotiations, the Fed agreed to ship 300 tonnes back over seven years. To this day, the time required for that shipment has never been explained. Venezuela demanded the return of its 200 tonnes held in London, NYC and Switzerland and received it all within about four months.
And regarding the ABN/Amro situation. ABN/Amro offered a gold investment account product that offered physical delivery of the gold in the investment account when the investor cashes out. About a week before the gold price smash, ABN sent a letter to its clients informing that the physical delivery of the bullion was no longer available and that all accounts would be settled with cash at redemption.
I believe it was these two events that triggered the big scramble for physical gold by wealthy families/entities who were suspicious of the integrity of their bank vault custodial arrangement anyway.
*****
So what does all of this mean?
It means that we are entering a period when there will be unprecedented volatility for precious metals. There will be tremendous ups and downs as this crisis plays out and the bankers try to keep the paper gold scam from completely unraveling.
Meanwhile, nations such as China continue to stockpile gold as if the end of the world was coming.
According to Zero Hedge, Chinese gold imports set a brand new all-time record high in March...
Quite the contrary: as export data released by the Hong Kong Census and Statistics Department overnight showed, Chinese gold imports in March exploded to an all time record high of 223.5 tons.
And the number for April is expected to be even higher.
Does China know something that the rest of us do not?
We are also seeing a rapid decoupling between spot prices and physical prices. In fact, it is quickly getting to the point where the spot price of gold and the spot price of silver are becoming irrelevant.
For example, demand for silver coins has become so intense that some dealers are charging premiums of up to 30 percent over spot price for silver eagles.
That would have been regarded as insane a few years ago, but people are now willing to pay these kinds of premiums. People are recognizing the importance of actually having physical gold and silver in their possession and they are willing to pay a significant premium in order to get it.
We are moving into uncharted territory. The paper gold scam is rapidly coming to an end. In the long-term, this will greatly benefit those that are holding significant amounts of physical gold and silver.
Gold smugglers around the globe have been smuggling gold into countries and Iranian buyers are especially prevalent in this scheme.
In August alone, $2-billion worth of gold was shipped to Dubai on behalf of Iranian buyers, according to Turkish trade documents. Now, we've received news from London indicating that Iranians have purchased at least $10 million worth of silver this year as well.
In September, an additional $1.4 billion worth in gold and silver was carried in simple luggage bags from Turkey to Iran, UAE and Middle East.
Iran is doing this to avoid strict Western sanctions in preparation for whatever emergency situation may ensue as we inch closer to the Fiscal Cliff with each passing day.
According to a top Turkish official, Iranians over in Turkey are stocking up on silver bars and jewels, paying with the Turkish lira – the currency of Turkey – and they're crossing the border to make this happen on the regular.
People are smuggling gold and silver in suitcases on planes to Dubai. Then, it is probable that they're crossing the Persian Gulf by boat in order to get the precious metals into Iran.
With billions worth of gold and silver being transported in “secret”, analysts believe an extremely large number of carriers, taking several trips, are behind the silver smuggling.
Analysts also suspect these activities prove that Iran is not only stockpiling billions worth gold and silver, but also preventing the export of gold from Iran. They're likely doing this in a desperate attempt to defend the value of its currency.
Meanwhile, central banks are in on this too. Reports suggest that wealthy Iranians in Turkey are hoarding gold on behalf of the Iranian central bank. They are exporting that gold to Iranians in Dubai and have admitted to exporting billions worth of precious metals to Iran this year...
This is the scenario nobody thinks is possible but really at
the end of the day, it’s not like the US can print money and live on debt
forever right so when something cannot go on forever what happens when it
stops?
So says Mark Jeftovic (http://wealth.net/) in
edited excerpts of his introduction to a 7 minute video (see below) presented
by www.inflation.us entitled The First 12 Hours of a US Dollar
Collapse.
Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com (A
site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making
Money!), request that this paragraph must be included in any article re-posting
to avoid copyright infringement.
Timing the U.S. debt implosion in advance is virtually
impossible. Thus far, we’ve managed to [avoid such an event], however, this
will not always be the case. If the U.S. does not deal with its debt problems
now, we’re guaranteed to go the way of the PIIGS, along with an episode of
hyperinflation. That is THE issue for the U.S., as this situation would affect
every man woman and child living in this country. [Let me explain further.]
…The US Government and its catastrophic fiscal morass are
now viewed by the world as a ‘safe haven’. This would easily qualify for a
comedy shtick if it weren’t so serious….[but] the establishment is thrilled
with these developments because it helps maintain the status quo of the dollar
standard era. However, there are some serious ramifications that few are paying
attention to and are getting almost zero coverage from traditional media. [Let
me explain what they are.]
With the U.S. election just months off, political pressures
will mount to favor fiscal stimulus measures instead of restraint. Such action
can only accelerate higher domestic inflation and intensified dollar debasement
culminating in a Great Collapse – a hyperinflationary great depression – by
2014. [Let me explain why that is the inevitable outcome.] Words: 2766
Whether our current economic crisis will end with massive
inflation or in a deflationary spiral (ultimately, either one results in a
Depression) is more than an academic one. It is the single most important
variable for near and intermediate term investing success. It is also important
in regard to taking actions which can prepare and protect you and your family.
[Here is my assessment of what the future outcome will likely be and why.]
Words: 1441
Daniel Thornton, an economist at the Federal Reserve Bank
of St. Louis, argues that the Fed’s policy of providing liquidity has
“enormous potential to increase the money supply,” resulting in what The
Wall Street Journal’s Real Time Economics blog calls “an inflation inferno.”
[Personally,] I think it’s too soon to make significant changes to a portfolio
based on inflation fears. Here’s why. Words: 550
The developed economies of the world have opened the money
spigots…[and this] massive money and credit creation is sitting in the banking
system like dry tinder just waiting for a spark to set it ablaze. How quickly
it happens is anyone’s guess, but once it does we are likely to be enveloped in
a worldwide inflation unlike anything before ever witnessed. [Let me explain
further.] Words: 625
Evidence shows that the U.S. money supply trend is in the
early stages of hyperbolic growth coupled with a similar move in the price of
gold. All sign point to a further escalation of money-printing in 2012…followed
by unexpected and accelerating price inflation, followed by a rise in nominal
interest rates that will bring a sovereign debt crisis for the U. S. dollar
with it as the cost of borrowing for the government escalates…[Let me show you
the evidence.] Words: 660
The U.S. already has more government debt per capita than
the PIIGS (Portugal, Italy, Ireland, Greece and Spain) do and it just keeps
getting worse and worse thanks to both political parties. We are on the road to
national financial oblivion yet most Americans don’t seem to care. They don’t
realize that we have enjoyed the greatest prosperity we will ever see…and that
when the debt bubble bursts there is going to be an immense amount of pain.
That is a very painful truth, but it is better to come to grips with it now
than be blindsided by it later. [Let me explain.] Words: 1140
I keep wondering to myself, do our money-printing central
banks and their cheerleaders understand the full consequences of the monetary
debasement they continue to engineer? [Below is what I think awaits us.] Words:
1013
For over two years now, I’ve been warning that the 2008
Crash was just a warm up and that the REAL Crisis would occur when the stock
market realized that the Central Banks, lead by the US Federal Reserve could
NOT actually hold the financial system together. Well, the Crisis I’ve been
warning about is here. [Let me explain.] Words: 306
There are several variations of Long Wave theory, but the
most famous is based on the work of Nicolai Kondratieff, a Russian economist
who gave the various stages seasonal names, with summer and autumn denoting the
peak of financial speculation and winter the aftermath of the resulting crash.
The conditions for a global catastrophic failure are in place. Snow (in the
form of trillions of new dollars and euros) is falling. There’s no way to know
which dollar (or which external event) will start the avalanche, but without
doubt something will. [Let me expand on why I hold that view.] Words: 888
Industrialised countries today face serious risks – for
their financial sectors, for their public finances, and for their growth
prospects. This column explains how, through our financial systems, we have
created enormous, complex financial structures that can inflict tragic
consequences with failure and yet are inherently difficult to regulate and
control. It explains how this has happened and why there are more and worse
crises to come. Words: 2434
In an environment of ultra expansionary monetary
policies…the long-term trend for gold is higher and as inflation surges, gold
will go ballistic resulting in the Dow-Gold ratio touching one. [Let me explain
why that will indeed be the case.] Words: 760
In an environment of ultra expansionary monetary
policies…the long-term trend for gold is higher and as inflation surges, gold
will go ballistic resulting in the Dow-Gold ratio touching one. [Let me explain
why that will indeed be the case.] Words: 760
There will be a catalyst coming soon, probably some
concerted action of money printing between the Fed, IMF and the ECB. That will
happen as a result of the economies, worldwide, collapsing….The catalyst could
come from anywhere but the money printing will be part of the next move in
gold, that’s for certain….[and it] will lead to collapsing currencies, and
investors buying gold at any price…I see gold reaching $3,500 to $5,000 in the
next 12 to 18 months. Within 3 years, I see the gold price reaching at least
$10,000
The Western world is going to need even more easing, more
money. All of this is incredibly bullish for gold longer-term. I do think you
have to navigate the end of the euro before the next massive move in gold, but
that’s coming. It’s possible that gold may get hit initially as the euro fails,
but you have to buy it if it does.
My Fractal Gold chart work is a direct comparison of Gold,
today, to the late 70’s Gold Parabola. Thus, “timing” is taken directly from
the late 70’s cycle, with price targets created from a combination of the late
70’s Gold price and different technical analysis techniques. We developed a
price target back in 2006/ 2007 for Gold to reach the $10,000 to $12,000 range
during this Gold Bull and we still stand by that forecast. Let me explain where
we are at this point in time.
According to my 2000 calculations, if interest rates and
inflation stay constant over the next 2 years, we could expect to see (with
95.2% certainty) a parabolic peak price for gold of $4,380 per troy ounce by
then! Let me explain what assumptions I made and the methods I undertook to
arrive at that number and you can decide just how realistic it is. Words: 740
Lately analyst after analyst (161 at last count) has been
climbing on board the golden wagon with prognostications as to what the
parabolic peak price for gold will eventually be. That being said, however,
only 51 have been bold enough to include the year in which they think their
peak price estimate will occur and they are listed below. Take a look at who is
projecting what, by when and why. Words: 644
According to a recent Elliott Wave theory analysis gold is
about to go parabolic reaching $3,495 in June 2013, $6,233 in April 2014,
$10,899 in Sept. 2014, $18,712 in December 2014 and culminating in a parabolic
peak price of $31,672 on January 16th, 2015! See the chart below. Words: 600
According to my 2000 calculations, if interest rates and
inflation stay constant over the next 2 years, we could expect to see (with
95.2% certainty) a parabolic peak price for gold of $4,380 per troy ounce by
then! Let me explain what assumptions I made and the methods I undertook to
arrive at that number and you can decide just how realistic it is. Words: 745
We now have a really strong probability that the correction
which started at $1913 on 23 August 2011 has been completed both in terms of
Elliott waves and also in terms of time elapsed. If this is correct, the gold
price should soon be expressing itself in violent upside action as it moves
into the third of third wave which is still targeted to reach $4,500. [Let me
explain in detail (with charts) how and why my most recent analyses confirm my
earlier target of $4,500.] Words: 1085
Personally, based on the fundamentals at hand and the fact
that Gold doubled its log channel around this point in the cycle; I expect
Silver to bust up out of its log channel in 2013. Initially, I look for Silver
to reach the $60 to $68 level, first and hold open the possibility for Silver
to do much more on the upside as the 70’s Silver Chart reflects.
This article was prompted by a question enquiring what the
silver price might be if my gold forecast of $4,500 proved to be correct [see
my article entitled "Alf Field: Correction in Gold is OVER and On Way to
$4,500+!" and I have settled on] a target price of $158.34 for silver.
[Let me explain how I came to that specific price.]
It seems the market – or the collection of pre-programmed
heuristic biases that make up the equity investing public (and machines) – is
slowly but surely realizing the confidence trick that is the Fed’s Quantitative
Easing programs. The following chart should clarify – to anyone placing
their gambling chips on the hopes of another round of easing from the Fed – why
the game is up. To wit, the reverse geometric progression of S&P 500
performance during each Fed action: QE1 +50%, QE2 +30%, Twist +18%, QE3 &
Twist +8%… so QE4 +4%, QE5 +2%, and QE6 +1%…
Chart: SocGen
Save this chart, so when all your pathetic Facebook
“friends” ask why the stock market crashed 30%, you can post this chart and
show them how the Fed created their latest bubble! So easy, even an Obama phone
using, EBT card using, food stamp using, facebook junkie can get it!
As they struggle to save for retirement, a growing number of
middle-class Americans plan to postpone their golden years until they are in
their 80′s.
Nearly one-third, or 30%, now plan to work until they are 80
or older — up from 25% a year
ago, according to a Wells Fargo survey of 1,000 adults with income less
than $100,000.
“It is so tough for Americans to save for retirement that
the answer seems to be to work longer,” said Joe Ready, director of Wells Fargo
Institutional Retirement and Trust.
Ron Paul: “Never in American history have we needed to adopt
a policy of laissez faire more desperately; never has government seemed more
determined to artificially prop up an industry”
The ultimate result of these interventions by our caring
friends in Congress and the Fed has been the biggest housing bubble and crash
in US history, leaving millions of Americans underwater on their mortgages if
they have not already lost their houses altogether. Congress and the Fed
are directly responsible for millions of shattered lives, and almost unknowable
economic damage in the form of trillions of dollars in mortgage backed
securities.
The only solution to this mess is to allow the US housing
market to clear. All of the bad mortgage debt must be liquidated, whether
via foreclosure or bankruptcy. Banks holding substantial mortgages or
mortgage backed assets must face the music and adjust their balance sheets to
reflect today’s reality. Undoubtedly this will force many banks into
immediate insolvency, but such banks must be allowed to fail without receiving
another nickel of taxpayer money. Banks took the risks and made money
during the bubble years; those who exercised bad judgment must now accept the consequences
of their actions.
Never in American history have we needed to adopt a policy
of laissez faire more desperately; never has government seemed more determined
to artificially prop up an industry. But only by allowing the
housing market to clear can we hope to rebuild our shattered economy from a
stable foundation. Clearly there will be pain in the short term, but we
owe it to younger Americans and future generations to allow the reemergence of
a rational housing market.
During the presidential debates and on the campaign trail,
former Governor Mitt Romney has focused many of his attacks on China. Accusing
them of “manipulating their currency” to gain and unfair trade advantage
against the U.S., Romney has promised to isolate China on his first day in his
office in part of a broader hawkish policy towards China. But not only is
Romney wrong to demonize China, he completely ignores the real currency
manipulators: the U.S. Federal Reserve.
In classic politician doublespeak, Romney’s accusations
against China are a few truths mixed in with a lot of lies, pandering and
propaganda. While it is true that China has been keeping the value of its
currency artificially low over the last decade, this has been largely in
response to the U.S. doing essentially the exact same thing for four decades
now.
Since 1971 when President Nixon infamously defaulted and cut
all gold ties from the dollar, the U.S. government and the Federal Reserve have
been printing trillions of dollars as part of a deliberate strategy to boost
U.S. exports and harm nations exporting goods to the U.S. China holds hundreds
of billions worth of U.S. government bonds of debt and has been repaying its
creditors, like China, with increasingly devalued dollars.
