How physical capital differs from human capital with respect to the relationship with the owner? How do you think of the argument on the limited role of increasing human capital in economic growth? Physical capital is independent of its owner; that is to say that physical capital can be separated from its owner and can change ownership over the course of it development. Human capital on the other hand, is inherent to its owner and the two cannot be separated, both ensuring the owner has the possibility of enjoying benefits of investment in this type of capital, but also placing inherit limits on the quantity and potential transferability of this type of capital. The argument that the upper limits on human capital investment limits eventual marginal returns to future investment suggests that investment in human capital has a limited, or decreasing over time, impact on economic growth. We should be cautious to discredit human capital investment, however, because human capital investment also has an indirect impact on the efficiency and productivity of physical capital: as technology advances and the efficiency of physical capital depends more and more on technological advancement, human capital advancement, such as quality of schooling, becomes more and more important in the full utilization of the so called endless driving power of physical capital. Yes, our current scales of health are top censored and one can only enjoy so many years of schooling, but health standards improvements and quality of schooling are both constantly advancing targets.
Productivity is the “left over” part of differences in output after accounting for the factors of production If factors of production are not properly measured, so would be the productivity estimates Some problems in the measurement of physical and human capitals k and h Example: when failed to consider the quality of schooling, using the simple number of years would tend to reduce or underestimate the true difference between the rich and poor economies, leading to overestimated effect of productivity on income variations.
'Military-Style' Raid on California Power Station 'Military-Style' Raid on California Power Station Spooks U.S. When U.S. officials warn about "attacks" on electric power facilities these days, the first thing that comes to mind is probably a computer hacker trying to shut the lights off in a city with malware. But a more traditional attack on a power station in California has U.S. officials puzzled and worried about the physical security of the the electrical grid--from attackers who come in with guns blazing. Around 1:00 AM on April 16, at least one individual (possibly two) entered two different manholes at the PGE Metcalf power substation, southeast of San Jose, and cut fiber cables in the area around the substation. That knocked out some local 911 services, landline service to the substation, and cell phone service in the area, a senior U.S. intelligence official told Foreign Policy. The intruder(s) then fired more than 100 rounds from what two officials described as a high-powered rifle at several transformers in the facility. Ten transformers were damaged in one area of the facility, and three transformer banks -- or groups of transformers -- were hit in another, according to a PGE spokesman. Cooling oil then leaked from a transformer bank, causing the transformers to overheat and shut down. State regulators urged customers in the area to conserve energy over the following days, but there was no long-term damage reported at the facility and there were no major power outages. There were no injuries reported. That was the good news. The bad news is that officials don't know who the shooter(s) were, and most importantly, whether further attacks are planned. "Initially, the attack was being treated as vandalism and handled by local law enforcement," the senior intelligence official said. "However, investigators have been quoted in the press expressing opinions that there are indications that the timing of the attacks and target selection indicate a higher level of planning and sophistication." The FBI has taken over the case. There appears to have been some initial concern, or at least interest, in the fact that the shooting happened one day after the Boston Marathon bombing. But the FBI has no evidence that the attack is related to terrorism, and it appears to be an isolated incident, said Peter Lee, a spokesman for the FBI field office in San Francisco, which is leading the investigation. Lee said the FBI has "a couple of leads we're still following up on," which he wouldn't discuss in detail. There has not been any published motive or intent for the attack, the intelligence official said, and no one has claimed credit. Local investigators seemed to hit a dead end in June, so they released surveillance footage of the shooting. But that apparently produced no new information. The FBI says there have been no tips from the public about who the shooter might be and what he was doing there. The incident might have stayed a local news story, but this month, Rep. Henry Waxman, the California Democrat and ranking member of the Energy and Commerce Committee, mentioned it at a hearing on regulatory issues. "It is clear that the electric grid is not adequately protected from physical or cyber attacks," Waxman said. He called the shooting at the the San Jose facility "an unprecedented and sophisticated attack on an electric grid substation with military-style weapons. Communications were disrupted. The attack inflicted substantial damage. It took weeks to replace the damaged parts. Under slightly different conditions, there could have been serious power outages or worse." The U.S. official said the incident "did not involve a cyber attack," but that's about all investigators seem to know right now. ATT, which operates the phone network that was affected, has offered a $250,000 reward for information leading to the arrest and conviction of the perpetrator or perpetrators. "These were not amateurs taking potshots," Mark Johnson, a former vice president for transmission operations at PGE, said last month at a conference on grid security held in Philadelphia. "My personal view is that this was a dress rehearsal" for future attacks. At the very least, the attack points to an arguably overlooked physical threat to power facilities at a time when much of the U.S. intelligence community, Congress, and the electrical power industry is focused on the risk of cyber attacks. There has never been a confirmed power outage caused by a cyber attack in the United States. But the Obama administration has sought to promulgate cyber security standards that power facilities could use to minimize the risk of one. At least one senior official thinks the government is focusing too heavily on cyber attacks. Jon Wellinghoff, the chairman of the Federal Energy Regulatory Commission, said last month that an attack by intruders with guns and rifles could be just as devastating as a cyber attack. A shooter "could get 200 yards away with a .22 rifle and take the whole thing out," Wellinghoff said last month at a conference sponsored by Bloomberg . His proposed defense: A metal sheet that would block the transformer from view. "If you can't see through the fence, you can't figure out where to shoot anymore," Wellinghoff said. Price tag? A "couple hundred bucks." A lot cheaper than the billions the administration has spent in the past four years beefing up cyber security of critical infrastructure in the United States and on government computer networks. "There are ways that a very few number of actors with very rudimentary equipment could take down large portions of our grid," Wellinghoff said. "I don't think we have the level of physical security we need." __________________
Is This Why Gold Is Spiking Submitted by Tyler Durden on 08/14/2013 10:56 -0400 That JPMorgan has been scrambling day after day in the past week to meet gold delivery requests directed to its vault located deep under 1 CMP is no secret, at least not to our frequent readers. This peaked on Monday when, courtesy of a color-coded Comex scheme, we showed how panicked the lateral moves between various Comex gold vaults had become to preserve the illusion of physical availability. However, as yesterday's Comex report showed , instead of tapering, JPM was just slammed with yet another 70K delivery (registered to eligible warrant detachment), which will likely appear on either today's or tomorrow's settlement. And since the other gold vaults appear to have no more freely transferrable gold to hand over to JPM as everyone is now scrutinizing their every move under a microscope, JPM may no longer have the option of ignoring the mess its vault is in. Which means it has one option: to start buying the metal in the open market. And sure enough, breaking from the "standard" of the past 8 months, in which JPM was drowning in Issues, for both House and Customer accounts, the firm's House accounts just saw the largest Stop (i.e. taking delivery) since December of 2012, amounting to over 210K oz. Has JPM, flooded with demands for physical, finally thrown in the towel, and seeing that the deluge in delivery requests is "untapering", had no choice but to turn to the one place it has left to replenish its stocks: the market? Still, here is the big picture - until the 2103 August Stop, the balance for JPM House accounts was: Issues: 15,293 Stops: 636 And Clients: Issues: 17,458 Stops: 1,444 In other words, there is a ways to go. Source: CME Average: 4.78125 Your rating: None Average: 4.8 ( 32 votes) !-- -- Tweet !-- - advertisements - .AR_2 .ob_empty {display: none;} .AR_2 .rec-link {color: #565656;text-decoration: none;font-size: 12px;} .AR_2 .rec-link:hover {color: #565656;text-decoration: underline;font-size: 12px;} .AR_2 {float: left;width:50%} .AR_2 li {list-style: none outside none !important;font-size: 10px;padding-bottom: 10px;line-height: 13px;margin:0;} .AR_2 .ob_org_header {color: #000000;text-decoration:bold; margin-left: 0px; font-size:14px;line-height:35px;} .AR_3 .rec-link {color: #565656;text-decoration: none;font-size: 12px;} .AR_3 .rec-link:hover {color: #565656;text-decoration: underline;font-size: 12px;} .AR_3 .rec-src-link {font-size: 12px;} .AR_3 li {padding-bottom: 10px;list-style: none outside none !important;font-size: 10px;line-height: 13px;margin:0;} .AR_3 .ob_dual_left, .AR_3 .ob_dual_right {float: left;padding-bottom: 0;padding-left: 2%;padding-top: 0;} .AR_3 .ob_org_header {color: #000000; text-decoration:bold; margin-left: 0px; font-size:14px;line-height:35px;} .AR_3 .ob_ads_header {color: #000000; text-decoration:bold; margin-left: 0px; font-size:14px;line-height:35px;} -- - advertisements - Login or register to post comments 30814 reads Printer-friendly version Send to friend Similar Articles You Might Enjoy: Goldman's Head Gold Trader On The Recoupling Between Gold (Which Is Up 14% YTD) And Money, And Why This Is 2008 All Over Again Is This Why Gold Is Outperforming? Is This Why Gold Is Selling Off? Is This Why Gold Dumped And Stocks Pumped Today? Is This Why Gold (And Europe) Is Underperforming US Stocks (For Now)?
Are We On The Verge Of Witnessing The Death Of The Paper Gold Scam? Submitted by Tyler Durden on 05/09/2013 17:25 -0400 Central Banks China default Eric Sprott Fail Germany Hong Kong John Paulson KIM Physical Settlement Precious Metals Reality recovery Switzerland Too Big To Fail Turkey Volatility Submitted by Michael Snyder of The Economic Collapse blog , 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... just overwhelming…I a 130-to-1 …and I think in the last week we were really close to 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. Average: 4.77049 Your rating: None Average: 4.8 ( 61 votes) Tweet - advertisements - Change is about to catch Republicans by surprise. A financial journalist says a scandal brewing in DC will catch most Republicans by surprise, and will alter the political system. Login or register to post comments 36266 reads Printer-friendly version Send to friend Similar Articles You Might Enjoy: 2012 Year In Review - Free Markets, Rule of Law, And Other Urban Legends Eric Sprott: "When Fundamentals No Longer Apply, Review the Fundamentals" Eric Sprott: The Real Banking Crisis, Part II Eric Sprott On The Real Banking Crisis: Global Depositor Bank Runs And Why Gold Is Going Much Higher As A Result The $700 Billion U.S. Funding Hole; Desperately Seeking A Very Indiscriminate Treasury Buyer
JPMorgan Accounts For 99.3% Of The COMEX Gold Sales In The Last Three Months Submitted by Tyler Durden on 04/26/2013 19:28 -0400 Ben Bernanke Citigroup Exchange Traded Fund Fortress Balance Sheet Jamie Dimon Lloyd Blankfein President Obama Testimony Submitted by Mark McHugh from Across The Street Jamie Dimon Has Issues When just one firm accounts for 99.3% of the physical gold sales at the COMEX in the last three months it’s not what most of us on this side of the rainbow would consider “broad-based” selling. Of course discovering this kind of relevant information requires an internet connection, 2nd grade math and reading skills, and the desire to do a teeny-weeny bit of reporting. Sadly they’ve wandered so far down the rabbit hole that the concept of “physical demand” (i.e. people actually wanting to takepossessionof the stuff) is puzzling to them because the vast majority of the world’s so-called “gold-trading” takes place in the realm of make believe (which is their natural habitat). It’s all fun and games until somebody loses their metal and “somebody” has lost one hell of a lot of metal in the last 90 days. This is the CME Group’s COMEX metals issues and stops year-to-date report, which can be found here everyday for free. It chronicles the physical delivery notices of various metals, including gold. Let’s have a look: “I” is for “Idiot” That’s how I remember it, anyway. “I” actually stands for “issues,” meaning the firm parted with its metal (@ 100 troy ounces a shot), and “S” stands for “stops,” meaning the firm took delivery of gold. “C” is for customer accounts, “H” is house accounts. The first thing you should notice is that most transaction net out to zero in a given month (blue boxes), meaning the firm’s gold holdings didn’t change. What they delivered one day they got back the next, or vice versa. The green boxes show firms who received more than they delivered and the red boxes indicate firms who coughed up gold for Bernanke bucks (aka idiots). Note that Deutsche Bank’s massive take in February more than offsets its deliveries in December and April. Notice one more thing before we move on: Despite Goldman’s much ballyhooed “Gold Sucks!” call a few weeks ago, the squid has not parted with any yellow metal whatsoever in 2013. Hmmm. Now for the main event: J P Morgan has fumbled ownership of 1,966,000 Troy ounces of gold since February 1. That’s 74% more gold than the US mint delivered through the US mint’s American Eagle program in all of 2012. I mention this because there’s little doubt in my mind that the US government is one of JPM’s gold “customers.” So (if I am correct) the same US government who just let the Morgue dump its gold on the COMEX floor will once again be suspending gold sales to peasants. Maybe Jamie Dimon figures he’ll buy back all that gold on the cheap when the rest of the world realizes how smart he is. Or maybe he’s once again displaying that his firm doesn’t have the slightest idea what “hedging” is and isteeteringon the brink of collapse. That would explain the April 11th meeting between President Obama and the Pig 5 bank CEOs, wouldn’t it? And you just have to get a little misty that Lloyd Blankfein was nice enough to provide some hot-air cover for his competitor, don’t you? One thing’s very clear: When it comes to selling physical gold, J P Morgan is acting alone. The 130 contracts NOT delivered by JPM in the last three months (of which 110 were fromABN AMRO) are but a footnote. If Jamie’s right, he’ll look like a genius in a few months, if not he should be able to recycle his quote regarding the infamous “London Whale” losses: “Just because we’re stupid, doesn’t mean everybody else was.” Time will tell. 100 years ago John Pierpont Morgan famously testified to Congress, “Money is gold, and nothing else.” (Note: That is the exact quote, the full testimony can be found here ) . One has to wonder what the big guy would think of his legacy’s disregard for sound money, $70 Trillion derivatives book, and "House of Cards" "Fortress" balance sheet. One more very, very important thing. Anybody who says there’s been gold selling in the GLD is a freaking moron (Bob Pistrami, I’m looking in your direction). The GLD works much like a coat check. Unless you think checking your coat constitutes a real transaction of some kind you shouldn’t think of changes in the GLD’s gold holdings as sales. They’re not. When you check your gold into the GLD you get shares (like a claim check). Where it gets wierd is you can sell these claim checks to nimrods who seem to think they’ve bought your coat, but aren’t actually allowed to wear it. What nobody seems to appreciate is that every share of GLD is allowed to be sold TWICE (long and short, and it’s really important to understand that). If you’re foolish enough to doubt me (and foolish enough to short gold), go short GLD shares and see if anyone knocks on your door demanding gold. Saying the GLD is 100% backed by gold is a bold face lie because they’re can be twice as many shares in play as gold backing them, which means GLD shares may be only 50% backed by gold before any rules are broken. When GLD (or any ETF for that matter) shares sold exceed the existing shares PLUS all the shortable (double-sold) shares, legitimate shares can not be found for settlement and that must be reported to the SEC’s “Fails to Deliver” list, which is published twice a month with about a four-week delay ( here ). April 15, 2013 was this biggest volume day ever for GLD (93.7mm) and I’ll guarantee you right now that record fails to deliver will be reported on or around that date, which should have required more gold to be deposited with the GLD (but that didn’t happen). So instead of the half-assed explanation Pistrami offered ( here ) of how he thinks the GLD works, he should have raised the question of whether or not there were enough legitimate shares of GLD to facilitate trading (I say no way in hell). Gold continues to be pulled from the GLD (which really means people want their coats back) and still no one’s concerned about the number doubled-owned shares. Worse yet, the responsibility for sorting this unholy mess out falls to SEC chief Mary Jo White who is celebrating her 16th day in office. I can’t wait to see what happens next…. Notes for Nerds: This piece is not intended to describe the inner workings of the COMEX or GLD in detail, so don’t bust my balls withminutiae, unless it is relevant to the discussion of JPM’s massive gold sales or the double-ownership of ETF shares. Double-owned ETF shares are huge problem with ETFs in general, but the misrepresentation (by omission) of this fact by ETFs supposedly backed by tangible assets like gold and silver seems moreegregious to me. In addition to the YTD CME Group metals report, you can track the hilarity on a day-by-day basis here . The February 1 to April 25 delivered gold contracts info referenced included only transactions between firms. For that reason Morgan Stanley’s 307 contractstransferredfrom house account to customer account was excluded from the calculations. Total Net gold deliveries Feb 1 to April 25: Vision Financial – 1 contract R J O’Brien – 2 ADM Investor Services INC – 2 Marex – 5 Citigroup Global Markets – 10 ABN AMRO – 110 JP Morgan – 19,660 Average: 4.887325 Your rating: None Average: 4.9 ( 71 votes) Tweet - advertisements - Login or register to post comments 37180 reads Printer-friendly version Send to friend Similar Articles You Might Enjoy: Comment viewing options Flat list - collapsedFlat list - expandedThreaded list - collapsedThreaded list - expanded Date - newest firstDate - oldest first 10 comments per page30 comments per page50 comments per page70 comments per page90 comments per page150 comments per page200 comments per page250 comments per page300 comments per page Select your preferred way to display the comments and click "Save settings" to activate your changes. Fri, 04/26/2013 - 14:31 | 3503335 kliguy38 Is this manipulation??? I'm shocked I tell you SHOCKED Login or register to post comments Fri, 04/26/2013 - 14:37 | 3503350 hedgeless_horseman For me to look really smart, someone else usuallyneeds to look really dumb. Login or register to post comments Fri, 04/26/2013 - 14:40 | 3503366 Big Slick You Real World fools and your insistance on Physical. Jamie Dimon will show you all. That's why he's richer than you. http://www.zerohedge.com/news/2013-02-27/jamie-dimon-thats-why-i-am-richer-you Login or register to post
Eric Sprott: Do Western Central Banks Have Any Gold Left? Submitted by Tyler Durden on 10/02/2012 18:49 -0400 From Eric Sprott and David Baker of Sprott Asset Management Do Western Central Banks Have Any Gold Left??? Somewhere deep in the bowels of the world’s Western central banks lie vaults holding gargantuan piles of physical gold bars… or at least that’s what they all claim. The gold bars are part of their respective foreign currency reserves, which include all the usual fiat currencies like the dollar, the pound, the yen and the euro. Collectively, the governments/central banks of the United States, United Kingdom, Japan, Switzerland, Eurozone and the International Monetary Fund (IMF) are believed to hold an impressive 23,349 tonnes of gold in their respective reserves, representing more than $1.3 trillion at today’s gold price. Beyond the suggested tonnage, however, very little is actually known about the gold that makes up this massive stockpile. Western central banks disclose next to nothing about where it’s stored, in what form, or how much of the gold reserves are utilized for other purposes. We are assured that it’s all there, of course, but little effort has ever been made by the central banks to provide any details beyond the arbitrary references in their various financial reserve reports. Twelve years ago, few would have cared what central banks did with their gold. Gold had suffered a twenty year bear cycle and didn’t engender much excitement at $255 per ounce. It made perfect sense for Western governments to lend out (or in the case of Canada – outright sell) their gold reserves in order to generate some interest income from their holdings. And that’s exactly what many central banks did from the late 1980’s through to the late 2000’s. The times have changed however, and today it absolutely does matter what they’re doing with their reserves, and where the reserves are actually held. Why? Because the countries in question are now all grossly over-indebted and printing their respective currencies with reckless abandon. It would be reassuring to know that they still have some of the ‘barbarous relic’ kicking around, collecting dust, just in case their experiment with collusive monetary accommodation doesn’t work out as planned. You may be interested to know that central bank gold sales were actually the crux of the original investment thesis that first got us interested in the gold space back in 2000. We were introduced to it through the work of Frank Veneroso, who published an outstanding report on the gold market in 1998 aptly titled, “The 1998 Gold Book Annual”. In it, Mr. Veneroso inferred that central bank gold sales had artificially suppressed the full extent of gold demand to the tune of approximately 1,600 tonnes per year (in an approximately 4,000 tonne market of annual supply). Of the 35,000 tonnes that the central banks were officially stated to own at the time, Mr. Veneroso estimated that they were already down to 18,000 tonnes of actual physical. Once the central banks ran out of gold to sell, he surmised, the gold market would be poised for a powerful bull market… and he turned out to be completely right – although central banks did continue to be net sellers of gold for many years to come. As the gold bull market developed throughout the 2000’s, central banks didn’t become net buyers of physical gold until 2009, which coincided with gold’s final break-out above US$1,000 per ounce. The entirety of this buying was performed by central banks in the non-Western world, however, by countries like Russia, Turkey, Kazakhstan, Ukraine and the Philippines… and they have continued buying gold ever since. According to Thomson Reuters GFMS, a precious metals research agency, non-Western central banks purchased 457 tonnes of gold in 2011, and are expected to purchase another 493 tonnes of gold this year as they expand their reserves. 1 Our estimates suggest they will likely purchase even more than that. 2 The Western central banks, meanwhile, have essentially remained silent on the topic of gold, and have not publicly disclosed any sales or purchases of gold at all over the past three years. Although there is a “Central Bank Gold Agreement” currently in place that covers the gold sales of the Eurosystem central banks, Sweden and Switzerland, there has been no mention of gold sales by the very entities that are purported to own the largest stockpiles of the precious metal. 3 The silence is telling. Over the past several years, we’ve collected data on physical demand for gold as it has developed over time. The consistent annual growth in demand for physical gold bullion has increasingly puzzled us with regard to supply. Global annual gold mine supply ex Russia and China (who do not export domestic production) is actually lower than it was in year 2000, and ever since the IMF announced the completion of its sale of 403 tonnes of gold in December 2010, there hasn’t been any large, publicly-disclosed seller of physical gold in the market for almost two years. 4 Given the significant increase in physical demand that we’ve seen over the past decade, particularly from buyers in Asia, it suffices to say that we cannot identify where all the gold is coming from to supply it… but it has to be coming from somewhere. To give you a sense of how much the demand for physical gold has increased over the past decade, we’ve listed a select number of physical gold buyers and calculated their net change in annual demand in tonnes from 2000 to 2012 (see Chart A). CHART A Numbers quoted in metric tonnes. † Source: CBGA1, CBGA2, CBGA3, International Monetary Fund Statistics, Sprott Estimates. †† Source: Royal Canadian Mint and United States Mint. ††† Includes closed-end funds such as Sprott Physical Gold Trust and Central Fund of Canada. ^ Source: World Gold Council, Sprott Estimates. ^^ Source: World Gold Council, Sprott Estimates. ^^^ Refers to annualized increase over the past eight years. As can be seen, the mere combination of only five separate sources of demand results in a 2,268 tonne net change in physical demand for gold over the past twelve years – meaning that there is roughly 2,268 tonnes of new annual demand today that didn’t exist 12 years ago. According to the CPM Group, one of the main purveyors of gold statistics, the total annual gold supply is estimated to be roughly 3,700 tonnes of gold this year. Of that, the World Gold Council estimates thatonly 2,687 tonnes are expected to come from actual mine production, while the rest is attributed to recycled scrap gold, mainly from old jewelry. 5 (See footnote 5). The reporting agencies have a tendency to insist that total physical demand perfectly matches physical supply every year, and use the “Net Private Investment” as a plug to shore up the difference between the demand they attribute to industry, jewelry and ‘official transactions’ by central banks versus their annual supply estimate (which is relatively verifiable). Their “Net Private Investment” figures are implied , however, and do not measure the actual investment demand purchases that take place every year. If more accurate data was ever incorporated into their market summary for demand, it would reveal a huge discrepancy, with the demand side vastly exceeding their estimation of annual supply. In fact, we know it would exceed it based purely on China’s Hong Kong gold imports, which are now up to 458 tonnes year-to-date as of July, representing a 367% increase over its purchases during the same period last year. If the imports continue at their current rate, China will reach 785 tonnes of gold imports by year-end. That’s 785 tonnes in a market that’s only expected to produce roughly 2,700 tonnes of mine supply, and that’s just one buyer . Then there are all the private buyers whose purchases go unreported and unacknowledged, like that of Greenlight Capital, the hedge fund managed by David Einhorn, that is reported to have purchased $500 million worth of physical gold starting in 2009. Or the $1 billion of physical gold purchased by the University of Texas Investment Management Co. in April 2011… or the myriad of other private investors (like Saudi Sheiks, Russian billionaires, this writer, probably many of our readers, etc.) who have purchased physical gold for their accounts over the past decade. None of these private purchases are ever considered in the research agencies’ summaries for investment demand, and yet these are real purchases of physical gold, not ETF’s or gold ‘certificates’. They require real, physical gold bars to be delivered to the buyer. So once we acknowledge how big the discrepancy is between the actual true level of physical gold demand versus the annual “supply”, the obvious questions present themselves: who are the sellers delivering the gold to match the enormous increase in physical demand? What entities are releasing physical gold onto the market without reporting it? Where is all the gold coming from? There is only one possible candidate: the Western central banks. It may very well be that a large portion of physical gold currently flowing to new buyers is actually coming from the Western central banks themselves. They are the only holders of physical gold who are capable of supplying gold in a quantity and manner that cannot be readily tracked. They are also the very entities whose actions have driven investors back into gold in the first place. Gold is, after all, a hedge against their collective irresponsibility – and they have showcased their capacity in that regard quite enthusiastically over the past decade, especially since 2008. If the Western central banks are indeed leasing out their physical reserves, they would not actually have to disclose the specific amounts of gold that leave their respective vaults. According to a document on the European Central Bank’s (ECB) website regarding the statistical treatment of the Eurosystem’s International Reserves, current reporting guidelines do not require central banks to differentiate between gold owned outright versus gold lent out or swapped with another party. The document states that, “ reversible transactions in gold do not have any effect on the level of monetary gold regardless of the type of transaction (i.e. gold swaps, repos, deposits or loans), in line with the recommendations contained in the IMF guidelines.” 6 (Emphasis theirs). Under current reporting guidelines, therefore, central banks are permitted to continue carrying the entry of physical gold on their balance sheet even if they’ve swapped it or lent it out entirely. You can see this in the way Western central banks refer to their gold reserves. The UK Government, for example, refers to its gold allocation as, “Gold (incl. gold swapped or on loan)”. That’s the verbatim phrase they use in their official statement. Same goes for the US Treasury and the ECB, which report their gold holdings as “Gold (including gold deposits and, if appropriate, gold swapped)” and “Gold (including gold deposits and gold swapped)”, respectively (see Chart B). Unfortunately, that’s as far as their description goes, as each institution does not break down what percentage of their stated gold reserves are held in physical, versus what percentage has been loaned out or swapped for something else. The fact that they do not differentiate between the two is astounding, (Ed. As is the “including gold deposits” verbiage that they use – what else is “gold” supposed to refer to?) but at the same time not at all surprising. It would not lend much credence to central bank credibility if they admitted they were leasing their gold reserves to ‘bullion bank’ intermediaries who were then turning around and selling their gold to China, for example. But the numbers strongly suggest that that is exactly what has happened. The central banks’ gold is likely gone, and the bullion banks that sold it have no realistic chance of getting it back. CHART B Sources: 1) http://www.bankofengland.co.uk/statistics/Documents/reserves/2012/Aug/tempoutput.pdf 2) http://www.treasury.gov/resource-center/data-chart-center/IR-Position/Pages/08312012.aspx 3) http://www.ecb.int/stats/external/reserves/html/assets_8.812.E.en.html 4) http://www.boj.or.jp/en/about/account/zai1205a.pdf 5) http://www.imf.org/external/np/exr/facts/gold.htm 6) http://www.snb.ch/en/mmr/reference/annrep_2011_komplett/source Notes: ECB Data as of July 2012. Bank of Japan data as of March 31, 2012. * European Central Bank reserves is composed of reserves held by the ECB, Belgium, Germany, Estonia, Ireland, Greece, Spain, France, Italy, Cyprus, Luxembourg, Malta, The Netherlands, Austria, Portugal, Slovenia, Slovakia and Finland. ** Bank of Japan only lists its gold reserves in Yen at book value. Our analysis of the physical gold market shows that central banks have most likely been a massive unreported supplier of physical gold, and strongly implies that their gold reserves are negligible today. If Frank Veneroso’s conclusions were even close to accurate back in 1998 (and we believe they were), when coupled with the 2,300 tonne net change in annual demand we can easily identify above, it can only lead to the conclusion that a large portion of the Western central banks’ stated 23,000 tonnes of gold reserves are merely a paper entry on their balance sheets – completely un-backed by anything tangible other than an IOU from whatever counterparty leased it from them in years past. At this stage of the game, we don’t believe these central banks will be able to get their gold back without extreme difficulty, especially if it turns out the gold has left their countries entirely. We can also only wonder how much gold within the central bank system has been ‘rehypothecated’ in the process, since the central banks in question seem so reluctant to divulge any meaningful details on their reserves in a way that would shed light on the various “swaps” and “loans” they imply to be participating in. We might also suggest that if a proper audit of Western central bank gold reserves was ever launched, as per Ron Paul’s recent proposal to audit the US Federal Reserve, the proverbial cat would be let out of the bag – with explosive implications for the gold price. Notwithstanding the recent conversions of PIMCO’s Bill Gross , Bridegwater’s Ray Dalio and Ned Davis Research to gold, we realize that many mainstream institutional investors still continue to struggle with the topic. We also realize that some readers may scoff at any analysis of the gold market that hints at “conspiracy”. We’re not talking about conspiracy here however, we’re talking about stupidity. After all, Western central banks are probably under the impression that the gold they’ve swapped and/or lent out is still legally theirs, which technically it may be. But if what we are proposing turns out to be true, and those reserves are not physically theirs; not physically in their possession… then all bets are off regarding the future of our monetary system. As a general rule of common sense, when one embarks on an unlimited quantitative easing program targeted at the employment rate (see QE3), one had better make sure to have something in the vault as backup in case the ‘unlimited’ part actually ends up really meaning unlimited. We hope that it does not, for the sake of our monetary system, but given our analysis of the physical gold market, we’ll stick with our gold bars and take comfort as they collect more dust in our vaults, untouched. 1 http://www.bloomberg.com/news/2012-09-04/central-bank-gold-buying-seen-reaching-493-tons-in-2012-by-gfms.html 2 See notes in Chart A. 3 http://www.gold.org/government_affairs/reserve_asset_management/central_bank_gold_agreements/ 4 http://www.imf.org/external/np/exr/faq/goldfaqs.htm 5 Mine supply estimate supplied by World Gold Council; YTD gold mine production data suggests that total 2012 gold mine supply will come in lower around 2,300 tonnes, ex Russia and China production.In addition, Frank Veneroso has recently published a new report that warns that the supply of recycled scrap gold could drop significantly going forward due to the depletion ofthe inventories of industrial scrap and long held jewelry over the past decade. 6 http://www.ecb.int/pub/pdf/other/statintreservesen.pdf Average: 4.875 Your rating: None Average: 4.9 ( 40 votes) Tweet Login or register to post comments 18111 reads Printer-friendly version Send to friend Similar Articles You Might Enjoy: “Gold Ponzi Schemes” Revealed - Physical Gold Favored Over Derivatives Sprott's John Embry:“The Current Financial System Will Be Totally Destroyed“ Barclays Opens Massive Brand New Precious Metals Vault In London Guest Post: Does Central-Bank Gold-Buying Signal The Top Is Near? 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