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Yellen Translated: "Let Them Eat Cake"

Zerohedge - Fri, 10/17/2014 - 16:08

ECRI's Lakshman Achuthan is not happy at Janet Yellen's speech this morning...

According to the Fed's triennial Survey of Consumer Finances, the top 10% of U.S. families are doing just fine, and those in the bottom fifth are essentially being kept afloat by transfer payments; but the inflation-adjusted median family income has shrunk by one-eighth since 2004. Quite simply, middle-class incomes are being gutted.

[C]iting that same survey, Ms. Yellen expressed concern about "lower-income families without assets" that "can end up, very suddenly, off the road." She therefore advised families to "take the small steps that over time can lead to the accumulation of considerable assets." She did not, however, explain how they were to accumulate these assets, in light of falling incomes and zero interest rates.

This uncomfortable disconnect between theory and reality also came out during her Senate confirmation hearings last fall. Given the predicament of "the little person out there who is just trying to pay the bills and maybe put a buck away for retirement," Ms. Yellen was asked to "explain to the senior citizen who is just hoping that CD will earn some money" the impact of "a policy that says, for as far as the eye can see ... keep interest rates low." She replied: "I understand ... that savers are hurt by this policy, [but] savers wear a lot of different hats... They may be retirees who are hoping to get part-time work in order to supplement their income."

In essence, despite a zero interest rate policy that mainly helps the wealthy, struggling families with falling incomes ought to take steps to accumulate "considerable assets," as retirees take part-time jobs to make ends meet. Let them eat cake, indeed.

John Tamny Needs to Stop Lecturing People on Mises’ Monetary Views

Mises Canada - Fri, 10/17/2014 - 16:04

John Tamny has an unfortunate habit of criticizing Austrian economists by citing the legacy of Ludwig von Mises, when it is clear that Tamny doesn’t know what he’s talking about. Let me be clear: I am all for people criticizing Austrians; perhaps we’re suffering from a blind spot on some key issue, and only an outsider can set us straight. But it will confuse the general public about what Mises’ views actually were, when guys like Tamny continually write articles “explaining” Mises that are utterly wrong. One these pages, I’ve previously dealt with Tamny’s confused writings on banking–where he also argued that Mises would disavow current Austrian School economists–and in the present post, I’ll address his recent finger-wagging of David Gordon.

It all started when Gordon criticized the new book by Steve Forbes and Elizabeth Ames, arguing that they erroneously conceived of money as a “measuring rod” of value. This is an absolutely standard component of Austrian economics, and it comes straight from the mouth of Mises–as I’ll document soon.

Yet astonishingly, John Tamny then rushed to the defense of Forbes and Ames by arguing that Gordon was defying the teachings of Mises. (!) Moreover, Tamny actually got sarcastic in his response, and argued that the Forbes/Ames/Tamny position was self-evident, a tautology flowing out of the definition of money as a means to facilitate exchange. Let me here just quote a bit of Tamny’s piece to reassure the reader that I’m not misrepresenting him:

Last week Mises Institute senior fellow David Gordon reviewed Money, the book released last summer by Steve Forbes and Elizabeth Ames…What struck this writer [Tamny--RPM] as odd is that in lightly attacking Forbes and Ames, Gordon only succeeded insofar as he perhaps unintentionally revealed a strong disagreement about money with the intellectual father of the Institute which employs him, Ludwig von Mises.

Gordon has a problem with the Forbes and Ames assertion that money is merely a measure meant to facilitate exchange. Notable here is that the authors are simply stating what’s obvious, something that surely predates even Adam Smith (“the sole use of money is to circulate consumable goods”), that money isn’t wealth. It’s what we use to exchange actual wealth.

Rather than viewing money as a concept, meaning a measuring rod of value meant to foster the exchange of actual value, Gordon sees money as a floating commodity that is most useful when it’s scarce.In short, Mises saw money just as Forbes and Ames do, as a measure that fosters the exchange of actual economic goods...Sorry, but per Mises’s very definition, money is most useful if its value isn’t changing; as in if it has the properties that are the opposite of the floating commodity-money that Gordon desires. Gordon surely knows this, at least implicitly.

I don’t mean to be histrionic about it, but for anyone who is intimately familiar with the work of Mises, the above musings from Tamny are simply breathtaking. It’s hard for me to come up with analogy to do it justice, but here goes: Imagine a scholar working for the Albert Einstein Institute wrote a blog post arguing that gravity actually reflected the curvature of space-time. Then someone writes a rebuttal in Forbes, saying, “This is an odd claim, because Einstein himself taught us that everything is relative. One man’s curvature is another’s straight line.” Well, that analogy probably won’t do much for most readers, but I tried…

Now I don’t want come off as too harsh on Tamny. This is a tricky and nuanced area, and one’s natural reaction against massive government inflation is to rush for refuge in the idea of a “stable” money. Nonetheless, it was Mises himself who taught me (through his writings of course) that the idea of stabilization in this sense is a chimera.

In a future post I’ll come back to this topic, and explain the proper way–consistent with Misesian theory–to think about the gold standard, government inflation, and the purchasing power of money. (If you’re dying of suspense, here’s Joe Salerno on these matters.) But for now, I just want to make sure that people realize Tamny really is horribly misreading Mises.

To that end, the rest of this post will consist of quotes I’ve grabbed from the Scholar’s Edition of Human Action. (Note that in his own response to Tamny, Gordon highlighted a clear statement by Mises from The Theory of Money and Credit.) Note in the page numbers that these span a large section; I’m not highlighting something that is a random footnote. This is actually one of the (minor) themes of the book, which is why it’s so shocking that Tamny could have gotten things backwards. Without further ado, here we go:

However, the spurious idea that values are measurable and are really

measured in the conduct of economic transactions was so deeply

rooted that even eminent economists fell victim to the fallacy implied.

Even Friedrich von Wieser and Irving Fisher took it for granted

that there must be something like measurement of value and that economics

must be able to indicate and to explain the method by which

such measurement is effected. Most of the lesser economists simply

maintained that money serves “as a measure of values.” (205)

The money equivalents as used in acting and in economic calculation

are money prices, i.e., exchange ratios between money and other

goods and services. The prices are not measured in money; they

consist in money…There is nothing in prices which permits one to

liken them to the measurement of physical and chemical phenomena. (218)

  1. Stabilization

An outgrowth of all these errors is the idea of stabilization.

Shortcomings in the governments’ handling of monetary matters

and the disastrous consequences of policies aimed at lowering the

rate of interest and at encouraging business activities through credit

expansion gave birth to the ideas which finally generated the slogan

“stabilization.” One can explain its emergence and its popular appeal,

one can understand it as the fruit of the last hundred and fifty years’

history of currency and banking, one can, as it were, plead extenuating

circumstances for the error involved. But no such sympathetic

appreciation can render its fallacies any more tenable.

All methods suggested for a measurement of the changes in the

monetary unit’s purchasing power are more or less unwittingly

founded on the illusory image of an eternal and immutable being who

determines by the application of an immutable standard the quantity

of satisfaction which a unit of money conveys to him…The layman,

laboring under the ideas of physics, once considered

money as a yardstick of prices….Eagerness to

find indexes for the measurement of purchasing power silenced all

scruples. Both the doubtfulness and the incomparability of the price

records employed and the arbitrary character of the procedures used

for the computation of averages were disregarded. (220-221)

In the field of praxeology and economics no sense can be given to

the notion of measurement. In the hypothetical state of rigid conditions

there are no changes to be measured. In the actual world of

change there are no fixed points, dimensions, or relations which could

serve as a standard. The monetary unit’s purchasing power never

changes evenly with regard to all things vendible and purchasable.

The notions of stability and stabilization are empty if they do not

refer to a state of rigidity and its preservation. (223)

The significance of the fact that the gold standard makes the increase

in the supply of gold depend upon the profitability of producing

gold is, of course, that it limits the govcrnment7s power to

resort to inflation. The gold standard makes the determination of

money’s purchasing power independent of the changing ambitions

and doctrines of political parties and pressure groups. This is not

a defect of the gold standard; it is its main excellence. Every method

of manipulating purchasing power is by necessity arbitrary. All

methods recommended for the discovery of an allegedly objective

and “scientific” yardstick for monetary manipulation are based on

the illusion that changes in purchasing power can be “measured.”

The goId standard removes the determination of cash-induced changes

in purchasing power from the political arena. Its general acceptance

requires the acknowledgment of the truth that one cannot make a11

people richer by printing money. (471)

Notice that last quotation in particular. It’s ironic because Tamny himself quoted from this very same part of the book, in his critique of Gordon. Yet Tamny completely misunderstood Mises’ views on gold. Mises was saying IT IS IMPOSSIBLE to maintain a constant purchasing power of money, because economic calculation ultimately translates back into subjective valuations, which by their very nature do not consist of cardinal units that can be measured. Nonetheless, Mises says that the gold standard is virtuous precisely because it keeps politics out of the game.

(For an analogy, you wouldn’t want political officials telling you whom you could date. That doesn’t mean that love is therefore measurable.)

In conclusion, I hope I’ve made an unassailable case that John Tamny had things completely backwards when he wagged his finger at David Gordon on the use of money as a “measuring rod” of value. I welcome Tamny’s future criticisms of today’s Austrians; it will keep us on our toes. Yet I implore Tamny to be more careful the next time he plans on telling the readers at Forbes and elsewhere “what Mises said on the subject.”

Joanna grows lavender on her small farmstead in northern Poland. She makes cream...

Natural Homes - Fri, 10/17/2014 - 15:59
Joanna grows lavender on her small farmstead in northern Poland. She makes creams, essential oils, scented bags and syrups. Her green spruce log house originally came from the mountains of southern Poland where it was built in 1927. Sadly many of these mountain homes are unloved but Joanna moved and rebuilt one making it her home.

Living Naturally with Lavender
This is Joanna's home in Poland where she grows lavender and lives in a cabin she saved from ruins.

Peak Ebola? Even Goldman Is Now Warning About The Ebola Fear Factor

Zerohedge - Fri, 10/17/2014 - 15:42

News about the spread of the Ebola virus has been an increasing focus for market participants in recent days. Despite rising media coverage, Ebola seems to have had little discernible effect on consumer sentiment to date. However, as Goldman Sachs notes, the "fear factor" associated with Ebola appears more significant than in past instances of pandemic concern. While expert opinion sees the likelihood of a significant outbreak of Ebola in the US as very low, it is likely any negative macroeconomic consequences are most likely to be transmitted through fear or risk-aversion channels.


Via Goldman Sachs' Jan Hatzius,

News about the spread of the Ebola virus has increasingly been a focus for market participants in recent days. Prompted by client questions, our equity analysts have written on the effect of Ebola on airline stocks in the US and Europe, as well as hotel and cruise line stocks. The most important cost of the Ebola outbreak in West Africa has been the tragic and rising loss of human lives. In today's Daily, however, we focus on the potential for broader US macroeconomic effects of Ebola fears.

Exhibit 1 shows that public concern about Ebola—as reflected in Google searches—spiked around the time the WHO declared an Ebola emergency in August and again after the first case was reported in the US at the end of September. However, despite rising public interest in the disease, there has been no discernible effect on high frequency measures of consumer sentiment. The daily Rasmussen confidence index has been relatively range-bound since early September. The daily economic confidence index from Gallup (not shown) has actually risen over this period.

Despite limited impact on consumer sentiment to date, the "fear factor" associated with Ebola appears more significant than past instances of pandemic concern. A recent Gallup poll revealed that 22% of Americans worried about personally contracting the disease. This is similar to the percent of respondents who worried about contracting the swine flu virus in 2009, even though the number of confirmed cases of swine flu in the US was orders of magnitude higher at that time. A recent Washington Post-ABC News poll indicated that two-thirds of Americans were worried about an Ebola epidemic in the US.

In contrast, expert opinion suggests that the likelihood of a significant Ebola outbreak in the US is remote. President Obama summed up this sentiment at a recent press conference, stating that "the dangers of a serious outbreak are extraordinarily low." Not being epidemiologists, we assume that expert opinion is correct, as a baseline scenario. As such, the probability of a disaster such as the 1918 Spanish Flu—which killed an estimated 675,000 Americans and coincided with a recession—appears low at this stage. Instead, we focus on potential negative macroeconomic consequences transmitted through fear or risk-aversion related channels, such as avoidance of airplane travel or mass transit more generally, or reduced shopping activity due to fear of public places.

Exhibit 2 shows the behavior of two metrics, retail sales in the left panel and tourist arrivals (as a proxy for willingness to fly) in the right panel. Each line represents a different example of pandemic concern or heightened travel/public space-related risk aversion, with each line indexed to 100 in the month immediately before the precipitating event or outbreak. Recent episodes of pandemic concern in the US—including SARS in 2003, bird flu (H5N1) in 2005, and swine flu (H1N1) in 2009—resulted in little if any discernible effect on retail sales or tourist arrivals. We would consider a similar relatively limited economic effect to be the most likely scenario for the current episode of Ebola concerns at this stage.

However, it is worth considering two additional scenarios: (1) a downside scenario, and (2) a tail risk scenario.

For the downside scenario, we think the example of the September 11 terrorist attacks could be informative. In the aftermath of the attacks, demand for air travel temporarily dried up, while some people reportedly preferred to avoid crowded public places such as subway stations, shopping malls, etc. At the time, concerns were further exacerbated by limited-scale anthrax attacks unrelated to the September 11th attacks themselves. If the Ebola situation was to worsen much more than expected, it is possible to imagine that a similar atmosphere of fear could arise. In terms of broader macroeconomic effects, Roberts (2009) estimates the drag on GDP growth from the September 11 attacks at roughly 0.5 percentage point for the year 2001. Some of this drag was certainly due to direct destruction of factors of production, and as such we would view this as an upper-bound on the drag from fear/risk-aversion effects.

In terms of worst-case tail risk scenarios, the example of the SARS outbreak in Hong Kong during 2003 is worth considering. During this time, Hong Kong retail sales dropped roughly 10% from their peak, while air traffic plummeted even more than that seen after the September 11 attacks. Lee and McKibbin (2004) estimate that the SARS outbreak reduced Hong Kong GDP growth in 2003 by 2.6 percentage points. Incidentally, the World Bank cites shopping centers in Lagos, Nigeria—which has largely contained the Ebola outbreak at 19 confirmed cases—reporting sales down 20 to 40%, an even larger decline than that seen in Hong Kong during the SARS outbreak. Again, we believe a fairly limited economic outcome for US growth is most likely, and we present the examples of September 11 and the Hong Kong SARS outbreak only as examples of downside or worst-case tail risk scenarios.

Finally, we assess the possible effects of the Ebola outbreak in West Africa on the global supply chain. The outbreak has been concentrated almost exclusively in three countries: Liberia, Sierra Leone, and Guinea. The most important global export from these countries is iron ore, and according to the World Bank large international firms have active mining operations in these countries. However, Liberia, Sierra Leone, and Guinea account for only about 3% of seaborne supply of iron ore in a global market that our commodities analysts view as fundamentally oversupplied. As such, we see limited direct effects on the global supply chain at this point. The potential for Ebola-related fears to more broadly disrupt global air or sea travel of course remains a concern.

LBMA gets 8 proposals to replace century-old gold fixing

GATA - Fri, 10/17/2014 - 15:18

By Nicholas Larkin
Bloomberg News
Friday, October 17, 2014

LONDON -- Intercontinental Exchange Inc., the London Metal Exchange, and CME Group Inc. and Thomson Reuters Corp. are among firms shortlisted to develop and run a replacement for the century-old London gold fixing benchmark.

Autilla Ltd. (Sapient) and EBS are also on the short list, the London Bullion Market Association said in a statement today. Ten companies submitted eight proposals, some of them joint.

The LBMA, which said last week firms will present at a seminar on Oct. 24, expects a market consensus to emerge next month and the chosen method adopted by year-end or early 2015. ...

... For the remainder of the report:


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Here's what one of our generationally wealthy clients has to say about AFE:

To get started, please visit:

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Wednesday-Saturday, October 22-25, 2014

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Monday-Friday, December 1-5, 2014

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How To Recognize Them: A Visual History Of The Most Popular Market Tops And Bottoms

Zerohedge - Fri, 10/17/2014 - 15:17

In the aftermath of the volatility from the past week, there is one question on everyone's lips: is this the bottom and, corresponsidnly, was the BABA IPO the top? Because if nothing else, all the churning action from the past week has only provided a great opportunity for banks to pad their flow business revenues since collapsing trading volumes over the past few years have finally reversed and in fact, exploded higher, if only for the time being.

Still, few are the market makers that make money no matter what the market does (especially since HFT firms, long since exposed for merely frontrunning big order blocks instead of providing liquidity, are now disappearing at an accelerating pace), and there are those who, rigged casino analogies notwithstanding, still want to place their money in the market betting on either more upside or downside. For their benefit a few days ago we posted "The "Crazy Ivan" Playbook: How To Time A Near-Term Market Bottom" however, we realize that most people are visual learners, so for them, here is the Investor Business Daily's compendium of the most notable market tops and bottoms in recent market history.

First, the market bottoms:

Market bottoms are deciphered by your observing the daily price and volume action on the four major indices: the S&P 500, Nasdaq Composite, New York Stock Exchange (NYSE) Composite and Dow Jones Industrials. After the market makes a low, look for the first day the market closes up from the previous day. This is normally day one of a rally attempt. As long as the index is able to remain above the previous low, the attempted rally is in place.

The next step is to wait and watch for one or more of the four market indices to show a “follow-through day.” This is a day where the index closes up significantly on volume heavier than the previous day. The S&P 500 or NYSE Composite typically need to close up 1.7% or either the Nasdaq Composite or Dow Industrials need to close up 2.2% or more. The first three days of an attempted rally are too soon to judge if the market confirms its new uptrend by having a follow-through day. Follow-through days can happen on the fourth day or later of the rally attempt.

It is important to note that not all follow-through days lead to sustained new market uptrends. About 20-30% of the time they may fail fairly quickly. However, no bull market has ever started without a follow-through day…and it will occur when most people are unsure and afraid because the news during the decline was so negative that people become doubtful and hesitate to act on the confirmed new uptrend.













And the the market tops:

After a sustained market uptrend, there will always be signs when the advancing phase is over. These signs will come as the market is still advancing. The key signal the market may be in a topping process is an increase in the number of distribution days in at least one major market index. A typical distribution day is one that closes down from the previous day (at least -0.2%) on higher volume than the prior day. This is your first clue institutional investors are selling stocks.

Up to five distribution days over a period of four or five weeks usually signals that the market is beginning to top. In addition to days down, you should also look for stalling days. When you suspect a stalling day, be sure to observe the price action for the previous day. The day before a stalling day will show a significant price increase when compared to its previous day. The stalling day will show only a tiny amount of price progress compared to its previous day and volume either increases or remains heavy. This I call heavy volume without further price progress up.

Another thing to watch is the action of the leaders. As the market is topping many of your market leaders may also show topping signs themselves. In addition, you may find you need to sell a stock because it drops 7-8% below your purchase price. Pay attention when the market starts forcing you out; it can help you protect your capital.











And now that you read and saw all of that... forget everything and remember: in this rigged, manipulated "market" the only thing that matters is what the central banks do, which in turn only matters until the central banks finally destroy what little credibility they have left.

Chart Of The Day: Bullard Bulls#*t

Zerohedge - Fri, 10/17/2014 - 15:00

Welcome to the Dow-Data-DependentTM Fed. Because What a difference 1,100 Dow points makes!


October 9th:

“When there is a mismatch between what the central bank is thinking and the market is thinking, that sometimes doesn’t end well, because there can be a surprise later on,” Mr. Bullard told reporters.


Right now, “the markets are making a mistake” and expect the Fed to maintain its ultra-easy policy stance longer than Fed officials themselves currently expect, Mr. Bullard said. When it comes to these expectations, “I would prefer that those be better aligned than they are.”


We should act on good news. We’ve got a pretty good performing economy. We should be willing to remove some accommodation,” and it would be better to get this process started and not wait too long, he said.

October 16th:

Mr. Bullard said Thursday that “U.S. macroeconomic fundamentals remain strong” and his forecast for 3% annualized growth in the second half of 2014?remains intact.”


“Inflation expectations are dropping in the U.S., and that is something that a central bank cannot abide,”


“We could just end the program in December. But if the market’s right and this is portending something more serious for the U.S. economy, then the committee would have an option of ramping up QE at that point.”

*  *  *

And this is who Americans 'entrust' the planning of an entire economy to?

So is it a Dow-Data-Dependent-Fed?

Calling The Fed's Bluff

Zerohedge - Fri, 10/17/2014 - 14:53

Via ConvergEx's Nick Colas,

If U.S. stocks have stabilized – granted, a big “If” - you can thank the fact that markets don’t believe the Federal Reserve’s outlook on interest rates.

 According to the latest CME Group’s contract pricing, Fed Funds rates will end 2015 at 43 basis points. That essentially signals a less-than-100% chance of being at 50 bp in 14 months; the Fed’s own estimates are for Fed Funds to reach 127 basis points by that time. Only three of 17 Fed officials who submit estimates for inclusion in the now-famous “Dot Plot” are lower than the market’s own estimate of future monetary policy.  Looking at 2016, the disparity between market expectations and Fed estimates is even broader.  Policy makers at the Fed believe rates should be at 2.17%; the Fed Funds futures contract sits at 1.27%. In the everlasting debate about whether markets want good or bad economic news, we seem to have a winner. Bad news will keep the doves “Fed” (yes, a pun…  it’s Friday) and the hawks at bay. A spate of good U.S. news while the rest of the developed world slows is the worst potential outcome in this narrative.

When should you bluff while playing poker?  Common wisdom has it that you should only occasionally – and randomly – bet as if you have a superior hand even if you don’t. The logic is straightforward: you want to induce some persistent sense of doubt among your competition.  Maybe you have a strong hand, and maybe you don’t.  The incremental uncertainty will drive pots higher and, when you do have that full house kings high, the payoff will be that much greater.

Of course, calling another player’s bluff has its own psychic rewards. You tell them that they have a lousy ‘Poker face’ and recommend they never, even lie to their spouse. Maybe you also mess with them by saying they always sneer subconsciously when they pretend to have a stronger hand than they actually do. Then watch them try to keep their face absolutely still over the next dozen hands. Good times… Good times…

If you’re wondering why equity markets have stabilized in the past 24 hours – after a fashion, anyway – you can chalk a large part of the rebound to the market essentially calling the Federal Reserve’s bluff on the future path of interest rates. Sure, the Fed has been fairly bold though 2014, throwing its Rolex into the pot and even threatening to find the title to the Ferrari if it comes to that, just to show it is serious about staying in the game. “Short term rates will begin to normalize in 2015 and beyond…  You can bet on it.”

For much of 2014, markets accepted the Fed’s take on the U.S. economy and the future path of interest rates. But in the last two weeks – not so much.  A few points here:

As of the date of the last Federal Open Market Committee meeting (September 17), futures contracts pegged the most likely Fed Funds rate as of the end of 2015 at just over 75 basis points (77.5 to be exact). This was lower than the Fed’s own consensus estimate of future rates, which the dot plot of “Appropriate pace of policy firming” in the minutes of the meeting showed to be 127 basis points. Still, it reflected the belief that the Fed would move several times to increase interest rates in 2015, with some possibility of getting to an even 1 percent before year end.


Since the beginning of October, the Fed Funds futures contract for December 2015 has repriced its expectations – the new point estimate is 43 basis points. Since the Fed typically moves in 25 point increments, this essentially points to a market belief that the Fed Funds rate will be less than 50 bp in 14 months.  Looking at the different expiration dates for Fed Funds futures contracts, it appears that the market is discounting one move of 25 bp at the August 11-12 meeting.  And then maybe – but just maybe - another 25 basis points at either the September 22-23 meeting or the November 3-4 meeting.  And that’s it for rate hikes in 2015. 


Looking out further to 2016, the disparity between market expectations and Fed projections widens considerably.  Fed Funds futures peg the expected rate at 1.275%; the Fed’s “Dots” averaged 2.70% at the September Fed meeting.  At the beginning of October – before all the drama in capital markets really hit its stride – Fed Funds futures were expected year end 2016 rates at 1.8%. No, not at the Fed’s projections. But closer than today’s price of essentially 1.3%.


When Wall Street Journal reporter Jon Hilsenrath asked Fed Chair Yellen at the FOMC meeting press conference what she made of the disparity between market prices of future Fed policy and the central bank’s own guidance, she said “I don’t frankly think that it’s completely clear that there is a gap”.  That was in September, when the difference was smaller.  Now, the gap presumably appears more obvious.  She did go on to say that markets may simply have a different economic forecast than Fed members. That certainly does appear to be the case – in spades, actually.

The bet that markets are making is clear: global economic weakness and concurrent threats of cross-border deflation will temper the Fed’s ability to increase short term interest rates.  Recent data from China to Germany to the U.S. support that thesis, and the weakness in capital markets this week buttresses that perspective even further.  Equity investors know that periods of rising interest rates can engender price volatility.  Now, Fed Funds futures seem to hold out the hope that the Fed will make only token moves to increase interest rates in 2015 and 2016. Some simple math shows that Fed Funds futures only expect 5 increases of 25 basis points apiece over the next 18 FOMC meetings.  Not much headline risk there…

This analysis also solves the most-asked capital markets question of the last 7 years: “Do we want good economic news, or bad?”  The answer is (for now) unequivocally “Bad news, please”.   Equity markets want the Fed to back away from the table – the stabilization in stock prices over the last 2 days as Fed Funds futures repriced the cadence and amplitude of rate increases shows that relationship.  So does the rally in the long end of the yield curve, for that matter.  The yield on the 10-year Treasury note was 2.60% at the last FOMC meeting. It is now 2.15%.

 To be fair to the poker analogy at the top of this note, the Fed never actually has to lose a hand.  There is ample reason to believe that the FOMC will raise interest rates in line with their current projections.  Just consider how weak the U.S. central bank’s hand is if there is a sudden economic shock to the system.  Short rates at zero are like that Spinal Tap guitar amp that goes to 11 – once you are the extremes, there is nowhere else to go.  Consider one example from recent history.  At the end of August 2001, Fed Funds were 3.52%. They got to 1.00% in early 2004, and it was great that the Fed could play a role in stimulating the U.S. economy at a time of tremendous national need.  What would happen now in a similar situation?  The monetary toolbox is empty, and the Fed would very much like to fill it as quickly as possible.

In short, one side of this debate/card game is going to win, and one will lose.  And it isn’t so clear who is bluffing.  Also don’t forget the old maxim: the house always wins.

Seared Albacore with Ginger, Garlic and Green Onions

Nourished Kitchen - Fri, 10/17/2014 - 14:53

I grew up by the ocean, spending my earliest years on the beaches of South Texas before moving with my family to the tiny island of Okinawa where I spent my grade school years.

I remember late nights at shacks in Texas, seasoned and boiled crabs dumped from enormous buckets onto newspaper-lined tables.  It’s there that, before kindergarten, I learned to smash my way through bright red, wild-armed creatures and pluck out every bit of their juicy, sweet flesh.

Later, in Japan, I remember pacing through the markets with my mother and younger sister.  Alongside pots of fermented vegetables, strange herbs, and bags of rice, I remember the freshly caught fish: their eyes still glassy from the sea.

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Copyright 2007 to 2014, all rights reserved. Nourished Media, LLC. No part of this content may be republished or reposted without express written permission. Posts on may contain affiliate links and links to sponsors.

Officials Responding To "Possible Ebola Situation" Near Pentagon

Zerohedge - Fri, 10/17/2014 - 14:27



Arlington County Fire Department and Fairfax County HAZMAT Teams are on the scene after a woman - alleged to have recently traveled from Liberia - fell ill and started vomiting in The Pentagon parking lot this morning. Arlington Public Health has activated its Emergency Operations Center to manage the incident.

Police, Feds, Health officials holding bus passengers after W Africa passenger vomited. #dc #ebola @wusa9

— Bruce Leshan (@BruceLeshan) October 17, 2014

Bus from possible #Ebola case now held at 7th & I SE DC.

— Bruce Leshan (@BruceLeshan) October 17, 2014

As WUSA9 reports,

"During the response, the individual allegedly indicated that she had recently visited western Africa. Out of an abundance of caution, all pedestrian and vehicular traffic was suspended around the South Parking lot, while Arlington County responded to the scene," Arlington officials said.


The situation started at around 9:10 a.m. when the woman started vomiting in the Pentagon Parking Lot around lanes 17-19, officials said.


Arlington County Fire Department transported the woman to the Virginia Hospital Center, but she did not exit the ambulance there. She was then taken to Fairfax Inova Hospital, officials said.

*  *  *

PHOTOS possible #Ebola patient moved to #Fairfax hospital from the Pentagon #BREAKING #BreakingNews

— Brad Freitas (@NewsChopperBrad) October 17, 2014

As ARL Now reports, just before noon, the county issued the following press release.

Arlington Responds to Possible Ebola Case


At about 9:10 a.m. today, Pentagon Police officers identified a woman in the Pentagon South Parking Lot, around lanes 17-19, who was ill and vomiting. Arlington County Fire Department (ACFD) was notified and responded immediately with both emergency medical aid and HazMat response team.


During the response, the individual allegedly indicated that she had recently visited western Africa. Out of an abundance of caution, all pedestrian and vehicular traffic was suspended around the South Parking lot, while Arlington County responded to the scene. At 9:53 a.m, the patient was taken to the Virginia Hospital Center; however she did not exit the ambulance. ACFD then transported the patient to Fairfax Inova Hospital.


Arlington Public Health is directing the public health response to this incident. Arlington County has activated its Emergency Operations Center (EOC) and a Joint Information Center (JIC) to manage the incident.


At the Pentagon


Out of an abundance of caution and to allow the investigation to proceed, pedestrian and vehicular traffic around the Pentagon South Parking lot’s lanes 7-23 will remain restricted until further notice. The Corridor 2 entrance to the Pentagon is also closed.


More information will be released when it becomes available.

We hope Obama got the memo that the lawyer/lobbyist whom he appointed as the new Ebola czar isn't actually supposed to have Ebola.

Free Not to Vote

Mises Canada - Fri, 10/17/2014 - 14:16

The 2014 U.S. midterm elections are coming up, and I don’t intend to vote. A vote is like virginity: you don’t give it away to the first flower-bearing suitor. I haven’t been given a good reason, let alone flowers, to vote for any candidate, so I will stay home, as well I should.

This month, my wife, a Brazilian citizen, drove from Auburn, Alabama, to Atlanta, Georgia, on a Sunday morning to cast her vote for the presidential election in Brazil. She arrived at the Brazilian consulate and waited in a long line of expatriates only to be faced with a cruel choice: vote for the incumbent socialist Dilma Rousseff of the Workers’ Party, for the socialist Aécio Neves of the Brazilian Social Democracy Party who is billed as a center-right politician, for the environmentalist socialist Marina Silva of the Socialist Party, or for any of the other socialist candidates who were polling so low that they had no chance of victory. Brazil maintains a system of compulsory voting in addition to other compulsory schemes such as conscription for all males aged 18.

Logan Albright recently wrote about the folly of compulsory voting, support for which is apparently growing in Canada. He criticized the hypocrisy of an allegedly democratic society mandating a vote and then fining or jailing those who do not follow the mandate. He also pointed out the dangers of forcing uneducated and uninformed citizens to vote against their will. This problem is particularly revealing in Brazil, where illiterate candidates have exploited election laws to run absurd commercials and to assume the persona of silly characters such as a clown, Wonder Woman, Rambo, Crazy Dick, and Hamburger Face, each of which is worth googling for a chuckle. The incumbent clown, by the way, was just reelected on the campaign slogan “it can’t get any worse.” Multiple Barack Obamas and Osama bin Ladens were also running for office, as was, apparently, Jesus. The ballot in Brazil has become goofier than a middle-school election for class president.

Even in the United States, as the election of Barack Obama demonstrates, voting has become more about identity politics, fads, and personalities than about principle or platform. Just over a decade ago, Arnold Schwarzenegger became the Governor of California amid a field of second-rate celebrities while a former professional wrestler (the fake and not the Olympian kind of wrestling) Jesse “the Body” Ventura was winding up his term as the Governor of Minnesota. Today comedian Al Franken holds a seat in the United States Senate. It turns out that Brazil isn’t the only country that can boast having a clown in office.

No serious thinker believes that a Republican or Democratic politician has what it takes to boost the economy, facilitate peace, or generate liberty. The very function of a career politician is antithetical to market freedom; no foolish professional vote-getter ought to have the power he or she enjoys under the current managerial state system, but voting legitimates that power.

It is often said, “If you don’t vote, you can’t complain.” The counterpoint is that voting ensures your complicity with the policies that elected politicians will enact. If you don’t vote, you lack complicity. You are not morally blameworthy for resisting the system that infringes basic rights or that offends your sense of justice and reason. You have not bestowed credibility on the government with your formal participation in its most sacred ritual. The higher the number of voters who participate in an election, the more legitimacy there is for the favored projects of the elected politicians, and the more likely those politicians are to impose their will on the populace by way of legislation or other legal means.

Refusing to vote can send a message: get your act together or we won’t turn out at the polling stations. Low voter turnout undermines the validity of the entire political system. Abstention also demonstrates your power: just watch how the politicians grovel and scramble for your vote, promise you more than they can deliver, beg for your support. This is how it ought to be: Politicians need to work for your vote and to earn it. They need to prove that they are who they purport to be and that they stand for that which they purport to stand. If they can’t do this, they don’t deserve your vote.

Abstention is not apathy; it is the exercise of free expression, a voluntary act of legitimate and peaceful defiance, the realization of a right.

There are reasonable alternatives to absolute abstention: one is to vote for the rare candidate who does, in fact, seek out liberty, true liberty; another is to cast a protest vote for a candidate outside the mainstream. Regardless, your vote is a representation of your person, the indicia of your moral and ethical beliefs. It should not be dispensed with lightly.

If you have the freedom not to vote, congratulations: you still live in a society with a modicum of liberty. Your decision to exercise your liberty is yours alone. Choose wisely.

Obama Fights Ebola With A Czar and Soldiers — Paul Craig Roberts

Paul Craig Roberts - Fri, 10/17/2014 - 14:14


Obama Fights Ebola With A Czar and Soldiers

Paul Craig Roberts

The public continues to be reassured that ebola is not a problem for the US, but CNN reports that Obama has appointed an Ebola Czar. The Czar is not a medical person but an insider lawyer who served as chief of staff to Vice President Biden.

Little wonder ebola conspiracy theories are spreading faster than ebola. And as far as any of us know, the conspiracies could be true.

University of Illinois law professor Francis Boyle, an expert of the perfidies of the US government, reminds us that Sierra Leone and Liberia, the countries most affected by the ebola outbreak, are two West African countries that host US biological warfare laboratories. Professor Boyle asks how the disease, which is mainly associated with equatorial Congo reached West Africa thousands of kilometers away.

Washington’s response is itself peculiar. The Obama regime sent 4,000 US soldiers to West Africa to fight ebola. Soldiers don’t have training or equipment with which to combat ebola. Why expose 4,000 Americans to an epidemic? This seemingly pointless decision has raised suspicions that Washington is exposing troops to ebola so that vaccines or treatments can be tested on the troops.

Other commentators have noticed that West Africa is an area of Chinese investments. They wonder if Washington is using the cover of ebola to occupy the countries or even set the disease loose in order to drive out the Chinese. The new US Africa Command was formed to counteract Chinese economic penetration in Africa.

The incompetence of US public health authorities in responding to ebola gives legs to these theories. Real conspiracies abound. Those who say “it’s just a conspiracy theory” need to look up the meaning of conspiracy. As one commentator observed, the CDC’s response to ebola is too stupid for stupid.

The CDC’s protocol is based on assumptions about ebola that do not seem to be true for the current strain. A nurse, who treated the ebola patient in Dallas who died, was given the green light to fly commercially even though she reported to CDC that she had symptoms. She exposed 132 passengers on the flight, and these passengers have since been in contact with thousands of other people. The Daily Mail has published photographs of an American with a clipboard and without protective suiting boarding the nurse on a private airplane on way to hospital quarantine.

US public health authorities have imposed no quarantine on travel to the US from infected countries. US airlines continue to fly to and fro from the infected countries despite the risk of introducing new infections into the US.

African countries are doing a much better job than the hegemonic superpower. They have closed borders, prevented air travel, and tracked down infected persons and those exposed to them.

Instead of taking sensible precautions, the Obama regime appoints an Ebola Czar and sends 4,000 Americans into the areas where the disease rages.

Little wonder that Americans have no confidence in their government.

As the Republicans want to privatize and outsource everything, why not close down Washington and outsource our governance to a more competent country?

Note: And there is this view also:

The post Obama Fights Ebola With A Czar and Soldiers — Paul Craig Roberts appeared first on

FBI To America: "Let Us Spy On You"

Zerohedge - Fri, 10/17/2014 - 14:08

"If you like your phone secretly spied on, you can keep it," appears to be the message from the FBI, as Bloomberg reports, FBI Director James Comey said yesterday that companies like Apple and Google should be required to build surveillance capabilities into their products to help law enforcement with their probes. Technology has become “the tool of choice” for terrorists and other dangerous criminals, Comey fears(and so Americans should willingly give up their privacy?) "we are struggling to keep up with changing technology and maintain our ability to actually collect communications we are authorized to collect." Concluding with his M.A.D. "it's for your own good" propaganda, Comey warned "if the challenges of real time data interception threatened to leave us in the dark, encryption threatens to lead us all to a very dark place."


As Ars Technica reports,

The expanding options for communicating over the Internet and the increasing adoption of encryption technologies could leave law enforcement agents “in the dark” and unable to collect evidence against criminals, the Director of the FBI said in a speech on Thursday.


In a post-Snowden plea for a policy more permissive of spying, FBI Director James B. Comey raised the specters of child predators, violent criminals, and crafty terrorists to argue that companies should build surveillance capabilities into the design of their products and allow lawful interception of communications. In his speech given at the Brookings Institute in Washington DC, Comey listed four cases where having access to a mobile phone or laptop proved crucial to an investigation and another case where such access was critical to exonerating wrongly accused teens.


All of that will go away, or at least become much harder, if the current trend continues, he argued.


“Those charged with protecting our people aren’t always able to access the evidence we need to prosecute crime and prevent terrorism even with lawful authority,” Comey said in the published speech. “We have the legal authority to intercept and access communications and information pursuant to court order, but we often lack the technical ability to do so.”

And as Bloomberg adds,

Technology has become “the tool of choice” for terrorists and other dangerous criminals and default encryption settings on devices and networks are becoming an obstacle for law enforcement, Comey said.


Providers of new communication services should create a “front door” method to intercept data as certain technology isn’t covered by legislation that requires telecom companies to have monitoring capabilities, FBI Director James Comey said yesterday at a Brookings Institution event in Washington.


“We are struggling to keep up with changing technology and maintain our ability to actually collect communications we are authorized to collect,” Comey said.


“If the challenges of real time data interception threatened to leave us in the dark, encryption threatens to lead us all to a very dark place,” Comey said.

Not everyone is buying into the idea that we all need to sacrifice our privacy for the good of the whole... (as Bloomberg reports)

Some data security experts, including Jonathan Turley, a constitutional-law professor at The George Washington University Law School, say assertions that new technology hampers law enforcement are exaggerated because police can still obtain evidence through traditional court warrants. Much of the data sent to or from the devices can also still be captured and investigators can hack software to collect evidence.


“Now, more than ever, we need strong security to combat malicious hackers and deter overly intrusive government surveillance,” Nuala O’Connor, president of the nonprofit Center for Democracy and Technology in Washington, said in response to Comey’s speech yesterday. “Law enforcement already has many legitimate ways to obtain the data stored on our devices,” O’Connor said in a statement.

*  *  *

Google have not responded (yet) but Apple's Tim Cook wrote:

“We have never worked with any government agency from any country to create a backdoor in any of our products or services. We have also never allowed access to our servers. And we never will.”

Democracy In Action

Zerohedge - Fri, 10/17/2014 - 13:56

This is a riot: watch the gubernatorial debate in Florida as the two candidates have a pissing match over.............a fan. One of the candidates wanted a fan for a little bit of cooling, and the other guy insisted it was against the rules of the debate (in point of fact, the rules forbid "electronics" like, oh, say, having a personal computer or iPhone during the debate, which makes sense - - - most folks agree a small electric fan does not qualify as "electronics"). Pull up a chair, grab a Coke and popcorn, and enjoy:

Despite Rally & Propaganda, Fed To Launch Historic QE-Infinity

King World News - Fri, 10/17/2014 - 13:52
On the heels of a massive rally in the stock market, today one of the brightest minds in the financial world warned King World News that despite the current rally and increased propaganda, a key event is going to create panic and allow the Fed to launch its final plan of “QE-Infinity.”

Russians and Chinese are ditching the dollar as Europeans start using renminbi in their reserves

Simon Black - Fri, 10/17/2014 - 13:44

October 17, 2014
New York, USA

At present, US dollar accounts for roughly 61% of the world’s foreign exchange reserves.

It’s still a safe bet for most, not because the currency is actually strong, but because so many others are already so reliant on it.

Between those with reserves in and pegs to the US dollar, many countries have given their allegiance, and now have a vested interest in the health of the currency.

Due to this common interest, a sort of unofficial, involuntary alliance has been formed between them all.

Together, they’re all playing along, pretending that everything is fine. If the dollar collapses, they’re all screwed, so they’ve got to get each other’s backs.

From the throne of the world’s reserve currency, the Federal Reserve, with the power to print the US dollar, feels dangerously omnipotent.

They can get away with just about anything. For now.

The central bankers get to print dollars and spend them at current prices, before the stuff hits the wider market and diminishes its overall value.

And for the time being they don’t really face any consequences. The whole world just absorbs it. Other countries really have no other choice.

But they’re getting tired of putting up with this abuse, and the unrest is growing. New alliances are being made, this time to dethrone the dollar.

Just this week yet another currency swap agreement was made between the Chinese and Russian central banks. This time for 150 billion renminbi.

Trade volume between China and Russia will reach $100 billion (600 billion renminbi) next year, and is expected to reach $200 billion in 2020. This latest currency swap agreement will greatly reduce the need for dollars in their transactions.

Currently, 75% of trade between the two countries is settled in dollars. When they signed the agreement for the bilateral currency swap, Russian deputy Prime Ministers said this will “encourage companies from the two countries to settle trade in local currencies and avoid the use of a third country’s currency.”

Who do you think that was aimed at?

Threatened by the growing strength of China and Russia, the US is actively working to vilify the two. Between the headlines of war, both cyber and military, the government is unsubtly trying to bring back the days of yellow peril and the red scare.

However, it can’t use the same tactics on its longstanding ally—Europe.

Even the European Central Bank has started discussions on the possibility of including the renminbi as one of its reserve currencies.

And the euro and the renminbi are already directly tradable as of this month.

On Tuesday the UK also became the first country besides China to issue a sovereign bond in renminbi.

This coincided with the issuing of 180 million renminbi of corporate bonds by China’s ICBC in South Korea. Another first. South Korea is firmly on the renminbi train as renminbi deposits in the country jumped 55-times in just one year.

It’s very clear where the trend is going. All these news items are pieces of the same puzzle. The US dollar’s throne is shaking as it’s losing its importance and status as the preeminent currency in the world. Renminbi is on the way up.

The whole existing order of a single ruling currency is currently being challenged.

A new financial era is coming.

Why Nations (And Organizations) Fail: Self-Serving Elites

Zerohedge - Fri, 10/17/2014 - 13:42

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

For those who doubt that America is ruled by a narrow elite: three charts.

The book Why Nations Fail: The Origins of Power, Prosperity, and Poverty neatly summarizes why nations fail in a few lines:

(A nation) is poor precisely because it has been ruled by a narrow elite that has organized society for their own benefit at the expense of the vast mass of people. Political power has been narrowly concentrated, and has been used to create great wealth for those who possess it.

Sound like any countries you know? Perhaps we should flip this question around and ask: how many nations don't fit this profile?

I submit that this dynamic of failure--the concentrated power and wealth of self-serving elites-- is scale-invariant, meaning that it is equally true of communities, towns, cities, states, nations and empires alike: all fail when they're run for the benefit of a narrow elite.

There is a bitter irony in the ease with which American pundits discern this dynamic in developing-world kleptocracies while ignoring the same dynamic in America. One would imagine it would be easier to see the elites-inevitably-cause-failure in one's home country, but the pundits by and large are members of the Clerisy Upper Caste, well-paid functionaries, apparatchiks, lackeys, factotums, toadies, sycophants and apologists for the very elites that are leading America down the path of systemic failure as the ontological consequence of their self-serving consolidation of wealth and power.

For those who doubt that America is ruled by a narrow elite: I don't have charts for standard-issue third-world kleptocracies, but I doubt the concentration of wealth and political power is much more extreme than in America:

In a simulacrum democracy where the highest bidders control the state, who do you think can readily buy political power?

And the policies of the elites have really spread the prosperity around in the past few years (sarcasm-off):

What's truly interesting about the authors' exhaustive survey of the inevitability of failure in elite-dominated nations is how cities dominated by narrow elites fail, states controlled by narrow elites fail, and indeed, any organization that serves the interests of a few at the expense of the many fails for the same reasons.

HaZMaT SeX, EBoLa CZaR, HaZMaT WooKie, GoLF EBoLa, GRiM FaRTeR...

Zerohedge - Fri, 10/17/2014 - 13:26
































“Save Our Swiss Gold ” - Game Changer For Gold?

Zerohedge - Fri, 10/17/2014 - 13:03

“Save Our Swiss Gold ” - Game Changer For Gold?

by Ronan Manly, GoldCore Consultant

- Foreword
- Introduction
- Success of Swiss People’s Party (SVP)
- Direct Democracy and Popular Initiatives
- Petition Filing
- Initiative Launch
- Motivation for the Initiative
- Gathering the People’s 100,000 Signatures
- Gold Initiative Gets Over 107,000 Signatures
- Selling The Swiss Family’s Gold 

Swiss Flag in the Swiss Alps


We believe that the “Save Our Swiss Gold” campaign has the potential to be a game changer in the gold market - both in terms of the ramifications for the current global monetary system and in terms of higher gold prices. 

There has been a lack of coverage of this important story and there is therefore a lack of awareness about the possible implications for the gold market. Thus, in the weeks prior to the referendum on November 30th, we are going to analyse the referendum, the important context to the referendum and the ramifications of a yes or a no vote.
- Mark O’Byrne, Head of Research GoldCore


In less than six weeks, on November 30th a federal referendum is being put to the Swiss electorate, which, if it passes, will have very significant ramifications for the Swiss currency and the global gold market.

If it passes it will force the Swiss National Bank to substantially increase Switzerland’s monetary gold reserves and make it harder for Swiss monetary policy to informally peg the value of the Swiss Franc to the Euro below 1.20.

Even if it does not pass, it has the potential to be a “wedge issue” and lead to a fractious debate about gold and monetary policy in a leading industrial nation. This has the potential to create a new found awareness of gold’s importance as a monetary asset and as a safe haven asset.

The upcoming referendum on Switzerland’s gold has evolved via a Swiss popular initiative, which is a form of direct democracy campaigning by citizens in Switzerland. In this case, the initiative is called the “Save Our Swiss Gold (Gold Initiative)”.

To really understand the “Save Our Swiss Gold (gold Initiative)” and the upcoming Swiss gold referendum on 30 November, it’s important to understand how this initiative arose and what its motivations are.

It’s also important to understand the Swiss political system, since this provides a framework to explain how the initiative proceeded through the Swiss political system to a referendum, and how the referendum voting system works in the Swiss Confederation.
Success of Swiss People’s Party (SVP)

The Swiss gold initiative was launched by members of the Swiss People’s Party (SVP) in 2011. Politically, the SVP is considered to be a conservative or right-wing nationalist populist party, although it’s also known as the Union Démocratique du Centre in French (Democratic Union of the Centre).

Ideologically, the SVP is nationalist, conservative, Eurosceptic and against mass immigration. The SVP were the party that successfully brought the anti-immigration popular initiative to a successful referendum outcome in Switzerland in February 2014. This happened despite the majority of the Swiss body politic and Switzerland’s other political parties calling for a ‘no’ vote in that referendum. 

This highlights the fact that popular referendum results in Switzerland do not necessarily follow party voting lines.

The SVP grew to be the largest political party in Switzerland in the late 1990s, with a notably strong power base in German speaking Zurich, and it continued to strengthen across Switzerland in the 2000s. 

Currently, the SVP has one elected representative on Switzerland’s seven member governing Federal Council, 5 representatives in the upper house of parliament, and 54 representatives (the largest grouping) in the lower house of parliament.
Direct Democracy and Popular Initiatives  

Switzerland’s political system is world renowned for including many of the features of direct democracy including direct initiatives and referenda. Initiatives are campaigns via a petition which aim to bring a proposal to a vote by an electorate.

In Switzerland, a ‘popular initiative’ is a form of initiative that can be activated by Swiss citizens to propose a change to a law. 

According to the Swiss Federal Administration, popular initiatives are the driving force behind direct democracy. Since the Swiss political system is structured along federal, cantonal, and communal (municipal) lines, there can be federal popular initiatives, as well as popular initiatives on a canton and commune level [1].

Federal Palace of Switzerland

Federal popular initiatives aim to change an aspect of the Federal Constitution. Cantonal popular initiatives aim to change an aspect of that canton’s constitution (each canton has its own constitution in addition to the Federal Constitution).

Switzerland is a Confederation made up of 26 cantons and half-cantons and over 2,600 communes (local communities) [2].

A canton is analogous to a state of the Confederation. On the cantonal level, there are 20 full cantons and 6 half-cantons, a point which comes into play in federal referendums under the concept of ‘double majority’, which is explained below. The 6 half-cantons were created at various times in Swiss history when three previous full cantons each split in half.

The requirement of a federal popular initiative calls for the collection of more than 100,000 signatures among the Swiss electorate over an 18 month period in order to advance the popular initiative to a federal referendum [3].

Petition Filing

The SVP filed their initiative petition with the Swiss Government on 26 August 2011, and a preliminary review of the initiative was approved on 6 September 2001 by the Federal Chancellor, Corina Casanova, who concluded that “the title of the Swiss federal popular initiative ‘Save our Swiss Gold (Gold) initiative’ meets the legal requirements of Article 69 Paragraph 2 of the Federal Act of 17 December 1976.”

As part of the legal process for federal popular initiatives, the text of the initiative was then published on 20 September 2011 in an official government publication called the Federal Gazette. At that time, the Federal Chancellery listed 17 creators and authors of the initiative, namely:

Toni Bortoluzzi, Yvette Estermann, Hans Fehr, Sylvia Flückiger, Patrick Joyous, Oskar Freysinger, Thomas Fuchs, Andrea Geiss Buhler, Alfred Army, Hans Kaufmann, Lukas Reimann, Ernst Shibli, Ulrich Schlüer, Jürg Stahl, Luzi Stamm, Christoph von Rotz, and Walter Wobmann [4].
Initiative Launch

The Swiss gold initiative was launched by the SVP at a press conference on 20th September 2011, in Bern where it was stated that the initiative had been launched by four members of the Swiss parliament, including SVP National Councillor Luzi Stamm.

The title of the initiative was, at that time, stated to be “Gold Initiative: A Swiss Initiative to Secure the Swiss National Bank’s Gold Reserves”, although the official name of the initiative was filed as ‘Save Our Swiss Gold initiative’. 

Luzi Stamm stated that there were three parts of the initiative, namely:
- The gold of the Swiss National Bank must be stored physically in Switzerland
- The Swiss National Bank does not have the right to sell its gold reserves
- The Swiss National Bank must hold at least twenty percent (20%) of its total assets in gold.
Motivation for the Initiative

The SVP said at their launch campaign that they had various motivations in launching the initiative. 

Firstly, given that the European Central Bank and Federal Reserve had rapidly expanded their money supplies, thereby devaluing the Euro and the US dollar, this impacted the relative strength of the Swiss Franc, and put pressure on the Swiss Franc to also devalue. 

To counteract these pressures, holding a certain percentage of reserves in gold would allow the Swiss Franc to act as a strong, gold-backed currency, and constrain its devaluation.

Secondly, according to the SVP, Switzerland’s gold had always been considered to be the “property of the Swiss people”. 

This historical right was severed in 2000 via a Constitutional change, after which the Swiss National Bank proceeded to sell 1,550 tonnes of the country’s original 2,590 tonnes of gold reserves. 

The SVP maintain that selling these gold reserves was a mistake and that the Swiss National Bank and Swiss politicians should not have this right to sell the nation’s gold.

Lastly, to increase transparency, the SVP reasoned that the Swiss National Bank should be forced to reveal where the Swiss gold reserves are located and to repatriate any gold reserves held abroad back to Switzerland (since at that time in 2011 the Swiss National Bank would not comment on the locations of the remaining gold reserves).

In summary, the SVP said that having transparency and a currency which does not continually devalue would become a model example to other countries and central banks around the world [5].
Gathering the People’s 100,000 Signatures

Article 139 of the Swiss Constitution is titled “Popular Initiative for Partial Revision of the Federal Constitution” and it states that any 100,000 citizens may request a partial revision of the Federal Constitution. Article 139 also details the rules under which a popular initiative proceeds through and is treated by the Federal parliament.

Initiative campaigners request a revision via collecting signatures on an official form, and can collect signatures anywhere, for example in households, workplaces, public places, and at public events. The signatures are then verified locally by local government offices who issue certificates of authenticity for the signature lists [6].

The signatures and their certificates are then handed in to the Federal Chancellery for ‘verification of petitions’.

Credit Suisse Gold Bar

Gold Initiative Gets Over 107,000 Signatures

The Swiss gold initiative committee filed their signatures with the Federal Chancellery on 20 March 2013.

The gold initiative committee and their campaigners managed to collect 107,380 signatures. Of the 107,380 signatures submitted, 106,052 were said to be valid and on 16 April 2013, the Chancellor Corina Casanova deemed that the “Save Our Swiss Gold (gold Initiative)” had arrived at 100,000 valid signatures in accordance with Article 139.

This information was then also published in the Federal Gazette. Given the specific wording of the suggested constitutional change, the initiative was classified as a specific draft as opposed to a general proposal. This is important since a specific draft initiative has to attain a double majority of voters and cantons if it is to pass.

The signatures were collected across all 26 cantons and represent just over 2% of the most recent total electorate figure of 5.22 million Swiss voters. 

Over 27,000 signatures were collected in Zurich, representing 3% of the Zurich electorate, over 15,000 signatures from Bern, representing 2.1% of the Bern electorate, and over 13,300 from Aargau, representing 3.25% of the Aargau electorate.

Aargau is a canton in the north of Switzerland between Basel and Zurich. In total these three cantons represent 40% of the Swiss electorate. Overall the signature total per canton was in the range of 0.22% to 3.32% of the canton electorate total [7].

Selling The Swiss Family’s Gold 

The SVP’s concerns with the previous sale of Swiss gold reserves refers to two distinct periods between 2000 - 2005 when the Swiss National bank sold 1,300 tonnes of gold, and following that, between 2007 -2008, when the Swiss National Bank sold a further 250 tonnes of Swiss gold reserves.

The gold sales between 2000 - 2005 are especially contentious since they arose after a substantial series of legal changes were introduced between 1997 – 1999 by the Swiss government and parliament with substantial advice and planning by the Swiss National Bank.

In 1997 the previous requirement that the Swiss Franc be 40% backed by gold was replaced with a 25% backing, as a precursor to the demonetisation of gold.  

An ‘Expert Group’ compromising Swiss National Bank and Swiss Federal Administration staff then recommended in 1997 that Switzerland should sell 1,300 tonnes of gold.

They did this by revaluing the gold reserves from a historical fixed price to a higher market related price, and then argued that the 2,590 tonne gold holdings was excessive as part of the SNB’s reserve portfolio.

In April 2000, further legal changes occurred for the Swiss currency, when constitutional amendments were passed by the Swiss electorate which severed the link between the Swiss Franc and gold, and dropped the 25% gold backing for the currency.

The Swiss parliament also passed new Federal currency laws which demonetised gold. Taken together, all of these changes then left the door open for the Swiss National Bank to begin gold sales.

The SNB sold 120 tonnes of gold over a six month period from May 2000 until September 2000. This was followed by a sale of 200 tonnes over the following 12 months from October 2000 until September 20)1.

The majority of these sales (220 tonnes) were conducted by the Bank for International Settlements on behalf of the SNB.

The SNB then began direct gold sales, selling 980 tonnes over four years from October 2001 until September 2005. 

In total, this amounted to 1,300 tonnes. Of the total, 730 tonnes were sold to 25 counterparties, with the physical gold sale trades settling at the Bank of England. 

The other 350 tonnes were sold using derivative overlays in tranches of approximately 50 tonnes each. These Swiss gold sales formed part of the first and second Central Bank Gold Agreements on coordinated gold sales.    

The proceeds of the Swiss gold sales were paid out as distributions in the ratio of one third for the Swiss Confederations and two thirds for the cantons. 

The additional 250 tonnes gold sales over the years 2007 and 2008 were said by the Swiss National bank to be due to a need to rebalance the reserve portfolio between currencies and gold.

In total, these sales between 2000 and 2008 amounted to 1550 tonnes of Swiss gold.

End of Part 1

by Ronan Manly, GoldCore Consultant
Editor, Mark O’Byrne, Head of Research


See Essential Guide To Gold and Silver Storage In Switzerland



Today’s AM fix was USD 1,238.00, EUR 966.89 and GBP 769.61 per ounce.
Yesterday’s AM fix was USD  1,241.00, EUR  969.38 and GBP 775.87 per ounce.
Gold climbed $1.70 or 0.14% to $1,239.50 per ounce and silver slipped $0.05 or 0.29% to $17.38 per ounce yesterday.

Gold in U.S. Dollars - 2 Years (Thomson Reuters)

Gold edged higher on Friday and was poised for a second straight week of gains as growing 
fears over the health of the world economy took a toll on global equities and the dollar, leading to safe haven gold buying.

Platinum and palladium were the biggest precious metal gainers of the day, recovering about 2% from sharp overnight losses.
Gold is up about 1.4% for the week after reaching a one-month high of $1,249.30 on Wednesday. 

Gold has seen safe haven buying along with U.S. Treasuries on increasing concerns over financial markets, the Eurozone, the emergence of Ebola and the global economy

Weak data from China and Europe have in particular badly spooked markets, though U.S. jobless claims and industrial output data on Thursday were slightly better than expected.

Dollar weakness has also supported gold and silver as the sluggish data stoked worries that the U.S. Federal Reserve would have to delay the long threatened increase in higher rates.

SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings rose 0.24 percent to 760.94 tonnes yesterday. 
In the world’s largest gold buyer China, premiums recovered to $2-$3 an ounce from $1-$2 overnight, showing higher demand and lending support to global prices. SGE gold withdrawals were very high this week and saw a very large rise for the week of 68.4 tonnes with most of the buying after their Golden Week holiday.

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And The Market Breaks Again...

Zerohedge - Fri, 10/17/2014 - 13:01

OTC Markets says FINRA has halted all trading in OTC Equity securities...




"FINRA has imposed a quoting and trading halt in all OTC equity securities as of 11:05:06 a.m. ET due to a lack of current quotation information currently available in the marketplace for OTC equity securities.


FINRA will notify the market when quoting and trading in all OTC equity securities may resume."

Update: FINRA has halted trading in OTC equity securities. Updates to follow.

— OTC Markets Group (@OTCMarkets) October 17, 2014

For the second day in a row, retail is unable to sell...due to broken markets...


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