Guest Posts by Jesse
Gold Breaks Out – Whoomp, There It Is
In addition to the breakout, I have circled a potential pattern of which we might be mindful.
This breakout seems to have more power behind it, and is tied to the fail of a major market currency rig of the Swiss Franc to the Euro. And that may be a sign of further euro declines and troubles to come.
As you may recall the SNB put the Swiss-Euro peg on about the time that gold started the sideways chop and recent bear market.
But the markets have not suddenly become honest and transparent, and the currency war goes on.
So let’s see how gold handles this breakout, and the kind of follow through that we get.
But for now, whoomp, there it is.
Can you dig it? I knew you could.
Gold has broken resistance, like Patton’s 6th Army in Normandy.
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Up, Up, and Away! It’s gold bitchez. Thanks SNB !!!
What’s going on with the Fed’s emergency meeting today?? I hear they’re going to announce a bail-in, in the form of negative interest rates. Anyone hear anything?
Never mind… ZH is reporting it’s a hacking job. Should have checked ZH first.
Gold has had one hell of a week. I’m not sportin’ wood just yet though, our owners have pretty strong motives for keeping it in check. They let it run to $1900 once before and beat it back so I’m sure they can do it again. When you see the price run AND chaos in the streets from sea to shining sea, that will be the time to get excited.
Of course I don’t care if it goes to $10,000/oz or $1,000,000/oz…………what am I gonna do, sell for $1,000,000 worthless fiat dollars? The trick will be to come out the other side with wealth intact but I’m not so sure the oligarchs will allow that either. I’d be happy if I could just make it to the next paradigm, borrow against gold as collateral and then default. A loan is not taxable (I’m sure that will change) but selling gold is.
Seems our rulers are losing control of their farce.
Those with physical in hand will probably stay warm and eat for a while longer.
Those with paper and FDIC guarantees might want to pull their heads from their asses and see what the East has been doing for the past 6 years while the EU and we have quadrupled our problems.
Black swans and “we couldn’t see us coming!” dead ahead.
IS –
Hate to break it to you, man, but the statement about a loan not being taxable is just ‘effin wrong…especially that part of the plan regarding defaulting on it.
Google “1099-C”.
You default, then you’ll get one and what you thought was debt that you had skipped on turns into “income”. Fully taxable at ordinary income rates.
Trust me, I do this with ALL bad debt. Really pisses off the deadbeats.
DaP
Well I don’t intend to default on it. Besides, they’d have my gold as collateral and probably at a significant discount to spot. People default on collateralized debt all the time without being taxed on it.
IS –
I must have misunderstood this part of your post:
“I’d be happy if I could just make it to the next paradigm, borrow against gold as collateral and then default.”
Further, unless the debt is structured as a “No recourse” (meaning that taking possession of the collateral is the ONLY satisfaction required in the face of default) then one can still face the issue of “deficiency”. That’s the difference between value of the collateral and the face value of the debt.
Not meaning to get on your case but just think it unwise to generalize on tax issues. It’s a good way to get yourself in deep doo-doo.
DaP
No worries DaP. I’m hep to the myriad ways da man has for fucking us, even after death.
Unless seizing collateral is their only recourse, I’d never agree to it.
I have had a couple of friends over the last decade that financed their final years using nothing but credit cards and SS. One of them racked up over $300,000 in credit card debt in seven years before dying. He used to smile when reading his statements knowing that the bank would be getting nothing. They both lived quite well and did not worry about $$$. I object to that kind of thing in principle but I can see the attraction.
DaP said:
“Fully taxable at ordinary income rates.”
That would still be a better deal than the “collectible” tax rate they currently apply to gold.
IS , That pain in your foot must have logged in your head .Gold is not real money either. It’s just a measuring stick for what the government says is real money.
Admin ,that was Patton’s 6th army.
didn’t he command the 3rd army?
All Manipulations Fail, and Sometimes With a Bang
“The basic tool for the manipulation of reality is the manipulation of words. If you can control the meaning of words, you can control the people who must use the words.”
Philip K. Dick
“All through history the ways of truth and love have always won. There have been tyrants, and murderers, and for a time they can seem invincible, but in the end they always fall. Think of it–always.”
Mohandas K. Gandhi
I am not so optimistic about the short term winning odds for truth and love, things being what they are these days. If goodness paid off like a cash machine, everyone would be virtuous, as some theories like to assume.
But in thinking about the more mundane, day to day world, common economic reality has a way of asserting itself against abusive and foolish human power, and sometimes with a vengeance.
Gold broke out of its downtrend today with a higher high. There was intraday commentary, with a strong cautionary note on this, here.
There were more explanations for what happened this week with regard to the foreign exchange markets. Zerohedge featured a menu of reasons for this.
I sorted them out to the ‘what’ and the ‘when.’ And most of them were about ‘when.’ What caused the Swiss franc to Euro peg to fail at this particular time. And most of them were good guesses.
But that is not what is really the most important thing, the real reason.
The Swiss National Bank had to stop their protracted rigging of the currency markets because it was no longer practically sustainable. That is what happened.
Well, it *could* have gone on longer if the ECB were cooperating more aggressively, and willing to sacrifice its own people to the needs of the Swiss. After all, this is what the US has been doing cooperatively with its client states like Japan for quite some time.
But with its own QE looming, and a desire to create monetary inflation by buying bad debts at non-market prices, the ECB seems bent on sustaining the unsustainable, the existing European Union as it is currently constituted, by printing money. In this sense they are following the US, which is pursuing a similar strategy with regards to the preeminence of the US dollar as a global reserve currency par excellence.
I forget now who said it, but all that is unsustainable will not be sustained.
Yes it is a tautology, but a good reminder nonetheless that the overestimation of the power of central banks is yet another illusion of the modern era.
A central bank that is willing to expand its Balance Sheet and buy sovereign debt at non-market prices, even if it passes through an illusion of marketplace discipline with the cooperation of crony banks, is operating a money machine. And history informs us that this is unsustainable.
This is not stimulus. QE is not good for the overall real economy. It is a subsidy for the financial sector. It is, at best, a very inefficient form of ‘trickle down’ stimulus. For the most part it fosters corruption, malinvestments, and inequality.
This is wealth transferal through the use of money and the financial system. It is a policy error of the first order, the self-serving abuse of power by the well positioned and the well to do. Yes, well-meaning people may go along with this sort of folly, in the vain hope that the people who create the money will distribute the majority of it to the poor and the unfortunate. But it rarely works out that way.
The Swiss franc was under pressure because economic reality was inducing the currency to become stronger relative to the euro. And the Swiss National Bank resolved in September 2011 to fight this with a currency peg, for the benefit of their export industry.
As late as the time of the gold referendum last year, the Swiss National Bank pledged to print practically unlimited amount of currency to fight the appreciation of the franc. No one with any knowledge of history believes that a central bank can do this. And so it was just a dodge, to get past a threat to their personal power, even if it was somewhat awkwardly and over broadly conceived.
The US has been leading a cartel of banks, not unlike the old London Gold Pool, to manipulate gold as a currency, seeking to artificially peg it lower to the Dollar. That is what has been happening for some time now.
China and a few other countries are taking up that wager, and draining the global inventory of gold at artificially low prices. This is not all that unlike the play that Soros and the Swiss Bankers made against the Bank of England when it sought to hold the British Pound at an artificial valuation. And so they sold the quid, over and over, until the artificial peg was no longer sustainable and the Bank of England folded.
We see the collateral damage that the failure of the Swiss peg has caused to some traders and their firms, and I suspect that it is a bit more widespread than has been disclosed.
When the gold to the dollar rig fails, and it will, the resulting dislocation in the financial markets could be even more disruptive to some institutions and trading firms. One can easily imagine the government becoming involved to shelter them from their folly.
But it will fail. That is beyond doubt, as long as anything like a market economy and individual freedom remains.
JESSE
AU has really had a great week. CEF is a closed end gold and silver fund in Canada. Its 52 wk low was 10.90 and yesterday it closed at 12.92 a share. For most of 2014 it has had a discount of 7.5 to 10.2 %, and yesterday it was only a -5.6% discount.
I hope AU is on the re-bound and we can thank SNB for giving the ECB the finger on their QE program, which will fail in the long run.