Cyprus Bank Heist for Dummies

Easy enough at first glance to consider this gent a bit off.  On closer reflection, perhaps he's the only one I've seen exhibit a rational (and aware) response.

Just two thoughts on Cyprus.  First, a "one time" event is only one time until the next time.  Second thought is really a question.  While it's Cyprus now, can any of us really believe that Spain, Ireland, France, (insert more countries here) and the USA will not face the same fate, a little sooner or a little later?

It all goes back to rule #1.  Protect the banks, the bankers, and the elites at all costs.  And that leads to rule #2.  If you don't hold it, you don't own it.

Cyprus Confiscates Gold!

Mark Grant, writing for ZeroHedge, reports on a move that precious metals holders everywhere have long feared.

"Please note that until yesterday all depositors in Cypriot banks were insured up to the value of €100,000 with any one bank. Today that solemn governmental promise has been shown for what it is; a lie. Worse and actually far worse and quite scary in fact is that the European Union and the European Central Bank and the IMF has not just allowed violation of the deposit insurance but demanded it. One thing is certain here; if they can void deposit insurance in Cyprus then they can void it in any country in Europe. Further; if they can void deposit insurance then they can void bond covenants with the scratch of a pen on paper. Nothing now; Nothing is safe!"

What's that   You missed the part about gold confiscation?  So did I, and that's the point.  Cash in a bank is a remarkably easy target for politicians and bureaucrats eager for a fix.  To be clear, so are ETFs purporting to hold gold, and even mining shares.

When things get bad, really bad, the safest counter-party is no counter-party at all.  Parents, it's 10:00.  Do you know where your gold is?

Is China buying gold?

Steve Sjuggerud in his Daily Wealth lays out a very credible scenario in which China passes up IMF gold so as to avoid driving up the price while snapping up gold miners around the globe.

Instead of buying physical gold in the open market (where China would be the 800-pound gorilla in the room), China plans to buy gold mines around the world.

An official from the China Gold Association told The China Daily that rather than buy gold from the IMF, China would buy gold directly by buying gold mines "abroad."

If true, it's not hard to imagine this pushing up prices of both gold and gold stocks.  Before you load up on gold shares though, you might want to look at the chart for GDX (Market Vectors Gold ETF) in 2008.  In that meltdown, gold stocks were crushed like all the rest. 

Do I own gold stocks now?  Absolutely.  Am I "all in?"  Not a chance.



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China says no to IMF gold?

Well, maybe.

China may not buy gold from the International Monetary Fund to avoid causing market volatility, the China Daily reported, citing an indentified official from the country’s gold association.

It is unfeasible for China to buy the bullion as any purchase would “trigger market speculation and volatility,” the paper reported, citing the China Gold Association official.

Of course, if it's true, the interesting part would be the reason why.  China has already indicated it's desire to diversify its reserves out of the dollar, but let's be open minded and consider a range of reasons China might say no to the IMF gold.

1. They feel gold is simply too pricy at the moment.
2. They foresee prices dropping based on some combination of supply/demand (perhaps another worldwide meltdown?)
3. They don't want to spook others into bailing out of the dollar while they still hold huges reserves.
4. They've had a change of heart and plan to stand by the dollar.

Of these four, I can get my head around 1, 2, and 3, but 4 seems laughable.  Am I being too hard on the dollar?



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