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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: carranza2 who wrote (97110)	12/13/2012 12:28:02 PM
From: RJA_	Respond to of 217593

Paul Craig Roberts (former Assistant Treas Sec under Regan) on Fed manipulation of gold price, begin at about 13 min mark: Apparently, Fed has infinite supply of electrons, but modified their use about a year ago: youtube.com! Roberts says this can continue until USD breaks. ------------------------------

To: carranza2 who wrote (97110)	12/14/2012 3:51:41 AM
From: TobagoJack	3 Recommendations Respond to of 217593

No overlap, so one does not get conflicted :0) thereformedbroker.com The saddest venn diagram Joshua M Brown December 11th, 2012 Come across this one yet?

To: carranza2 who wrote (97110)	12/14/2012 4:07:19 AM
From: TobagoJack	1 Recommendation Respond to of 217593

Just in from Ken Landon, J.P.Morgan Strategy, NY (Dec 11, 2012) (This is the last Lowdown of 2012. Reports will resume in 2013.) * GOLD - Attached chart OFFICIALGOLDHOLDINGS.gif shows official gold holdings (in millions of troy ounces) from 1970 throgh 2012. Despite the relative softness in the price of gold in recent months, central banks have been steadily accumulating the precious metal in order to diversify their reserve holdings. Between Sep 2011 and Sep 2012, central banks added 1.4% to their gold holdings, which is the highest annual increase since they began to aggressively accumulate gold from March 2009, which is the month when the Fed announced "QE1". Several official holders of FX reserves have been choosing to buy gold rather than just other currencies when selling USDs. Gold is the opposite of paper currencies. Fiat paper currencies only have value because of legal tender laws that force people to accept them "for all debts, public or private" (to use the words that are printed on every USD). By contrast, the acceptance of gold is voluntary on the part of transacting parties. There is no coercion involved. Furthermore, the supply of gold is strictly limited to existing above ground inventories (approximately 170,000 tonnes) and annual mine production (around 2,500 tonnes per year, or 1.5% of above-ground inventories). The supply of fiat paper currencies is theoretically unlimited. The supply curve of gold barely shifts from year to year (because of the massive above ground inventories relative to new mine production). The supply curve of fiat paper currencies can shift radically depending upon the decisions of small Committees of men and women (i.e., central bankers). According to IMF-provided data, central banks' purchases of gold have not been uniform across countries and across time. For example, India actively bought gold in Nov 2009, but has since refrained from doing so. China increased its official holdings of gold by 75% in 2009, but added nothing in 2012. Latest reported data indicate that South Korea added 79% to gold holdings in the past year. The Philippines boosted its gold holdings by 36% over that same period. Official holdings of gold amount to around 20% of total above-ground inventories. I find it significant that issuers of fiat paper currencies are seeking the protection of gold. They want protection from the potential inflationary policies of their fellow central bankers around the world. Of course, the USD is the largest reserve holding, which means that EM central banks are seeking protection from the policies of Washington. But the fact remains that they are now diversifying into gold as well as other currencies. If they had strong confidence in the policies of developed-market central banks, then they would not be so eager to accumulate gold. This is just one of many signs that convince me that commodities-based investments will outperform for a long period of time. Commodities-currencies such as AUD should perform well over long-term even if global growth remains sluggish. A shift in preference for gold and away from paper currencies is a sign of higher inflation to come. * PURCHASING POWER OF THE USD - Although it is convenient to sum up the reason for central banks' shift of reserves as "diversification," the underlying motivation is the same as it is for individual investors who seek protection from the deprivations of Fed policy. Namely, the Fed is on course toward the deliberate debasement of the purchasing power of the dollar. Attached chart USDPURCHASINGPOWER.gif shows the purchasing power of the US dollar as measured by the Department of Labor Statistics' (BLS) consumer price index. The BLS is kind enough to provide this series, which is the inverse of the CPI index. As noted in previous Lowdowns, gold has a proven track record of providing stable purchasing power over many decades and centuries. True, there can be fluctuations from year to year, but the long-term record is clear: an ounce of gold today can buy the equivalent basket of goods that it could either 100 or 200 years ago. The same can not be said of the paper dollar, which is illustrated in the chart. Notice that once President Roosevelt ended the gold standard in 1933, the purchasing power of the dollar started an inexorable decline. In the 79 years since that fateful day in 1933, the purchasing power of the dollar is down 96%. Notice that the dollar lost 56% of its value during the 26 years of the Bretton Woods system, which was a pseudo gold standard (dollars were not convertible into gold by US citizens, but only by foreign central banks). In the 26 years after Bretton Woods ended, the dollar lost an additional 75% of its value (1971-1997). The point that I am making with this chart is that if the Fed continues to undermine the value of its currency, then all prices will have to rise. This is why I closely monitor the dollar price of gold because it tells me how much the Fed is inflating away the value of its paper currency. And it is obvious to me that other central banks are also aware of the potential for further debasement of the dollar given their steady accumulation of gold. (As an aside, it is interesting that central bankers normally deprecate against the role of gold in the monetary system, but they turn toward it, like most intelligent investors do, to protect the purchasing power of their capital. For my last report of 2012, I leave you with the above message. Protect your capital. The incentives for politicians to take your capital through inflation is extraordinarily high given the inability of governments to finance huge fiscal deficits through taxation alone. Other than the normal fluctuations around the trend, gold should continue to move higher in 2013. With that, I wish you a Happy Holiday and $ucess in the New Year. Kenneth Landon, Dec 11, 2012 J.P. Morgan's Full disclaimer -https://mm.jpmorgan.com/DisclosureServlet?disclosure=americasOther