Gold, Bitcoin and the Blockchain Replaces the Banks - Realists Guide To The Future

Published here: http://www.zerohedge.com/news/2017-12-27/gold-bitcoin-and-blockchain-replaces-banks-realists-guide-future

Gold, Bitcoin and the Blockchain Replaces the Banks - Realists Guide To The Future

- Futurist guide to 2028 shows a world of uncertainty and disruption
- One scenario suggests cybersecurity attacks will result in bitcoin and blockchain's dominance of financial systems
- Cybersecurity threat will still loom large and wreak havoc. Gold, silver and other real assets will benefit.
- Adoption of cryptocurrencies and blockchain will send gold price soaring
- Use of cryptocurrencies to take advantage of world systems will see investors turn to safe havens such as gold bullion and coins

The media is filled with predictions for 2018. Will Trump survive another year? How will Brexit negotiations play out? Can bitcoin recover from its recent fall? What fake news will create the next disruption to the apparent status quo?

No one knows the answers to any of theses questions. If the past year to eighteen months has taught us anything it is that the polls and predictions are almost a waste of time. Arguably it is better to look further into the future and at a range of scenarios so one can consider the opportunities and threats that may lie ahead.

Bloomberg has done just this, with their 'Pessimists Guide to 2028'. In it the authors consider eight scenarios. Each scenario could very easily begin to take place in 2018, but the full impact will play out over the following decade.

The scenarios put forth are:

Scenario 1
Trump wins second term

Scenario 2
Fake news kills Facebook

Scenario 3
Bitcoin replaces the banks

Scenario 4
North Korea launches an attack

Scenario 5
Corbyn makes socialism great again

Scenario 6
Generational Warfare Destroys Europe

Scenario 7
China begins a trade war

Scenario 8
Electric Cars end the oil era

Below we bring you the Scenario 3: Bitcoin replaces the banks

Each scenario is deserving of attention in its own right but it is the third one which we believe is the most pertinent and arguably realistic. This is the assumption that bitcoin will replace the banks and gold will benefit. Arguably gold would benefit as a result of many of the scenarios put forward. But, given the interest in bitcoin this year it is an important reminder that both bitcoin's growth and weaknesses will see gold and other real assets shine.

2018
A U.S. regional lender announces that its systems have been taken down in a cyberattack and all its deposits have vanished. Regulators around the world reassure account holders that their deposits are safe. Bitcoin jumps to $40,000 as deep fears set in about the safety of the financial system. Gold surges too, but by less.

2021
China’s Alibaba adopts its own cryptocurrency for use inside its vast e-commerce network, establishing the mass-market viability of digital money. Following Venezuela’s lead, Greece and a few African countries adopt bitcoin, which hits $100,000.

2023
Rogue coders inside a regulatory-compliance software company inject a Trojan malware program called Worm Hole into scores of banks around the world. Undetected, it siphons data and cash from accounts in fractional increments.
2026
A 10-year-old schoolgirl in Pittsburgh discovers Worm Hole and exposes it on social media, triggering a run on the global banking system. Shares in Old Wall Street crash as major central banks embrace blockchain technology, bypassing the banks, and issue digital money directly to households.
2028
Many commercial lenders break apart. The global financial system gives way to a fragmented patchwork of digital currencies and payment systems dominated by such players as Alipay and Amazon.com. Bitcoin hits $1 million.

In light of this scenario's end, Bloomberg offers Nightberg's advice for the investor:

Vanished bank deposits would likely drive a major disbelief in all things digital, even bitcoin. Owning real physical assets, such as gold, luxury real estate for high net worth individuals, artwork, and safety vault producers in general as individuals seek to store more of their wealth within their private residences. The cyber-insurance sector would benefit as the world would scramble to find a solution to decimated trust in the financial sector. Nightberg macro research.

Bloomberg's analysis and Nightberg's conclusion bring up a fear which is not just for the future but is a very real one today: cybersecurity attacks. the scenario begins because of a cybersecurity attack and it this issue is still not resolved ten years into the future.

Cyber attacks are not something which can be overcome by cybersecurity. Like any form of attack there will be new approaches and strategies. The year of 2017 has been a very serious wake-up call as to how cyber power can flip the status quo on its head. Consider the apparent meddling by Russia in Western politics or North Korea's (occasionally successful) attempts to steal bitcoin.

The invisible threat is very much on our doorstep.

This Christmas weekend HMS St Albans was forced to shadow a Russian warship in the North Sea. According to reports the warship was showing interest in 'areas of national interest'. What is there apart from oil? The UK's communication cables.

Air Chief Marshal Sir Stuart Peach, the chief of the UK's defence staff, has recently expressed concerns over the security of the cables. Should they be cut (or service disrupted) then the damage would "immediately and potentially catastrophically" hit the economy.

Prepare for uncertainty, not the rise of bitcoin 

This weekend's posturing by the Russians or Bloomberg's scenario planning should serve as a timely reminder as to what can and will survive such times. Physical gold cannot be made to disappear at the touch of a few buttons or by the cutting of cables.  Should there be a global cyberattack on the financial system, the primary wealth would no longer be primarily digital (bitcoin, cash, stocks and bonds etc).

Gold and silver allocated and segregated bullion is important because of both its tangible nature and its role as a safe haven in times of geopolitical upset. Bitcoin, or any other cryptocurrency, cannot be considered safe when cyberattacks are a daily reality. They are also new and still untrusted by the majority of the system.

When seeking to diversify your portfolio in order to protect from uncertain scenarios you should consider the risks posed to digital gold providers who do not allow clients to interact and trade on the phone and are solely reliant for pricing and liquidity from online portals and online trading platforms.

Those who have outright legal ownership of physical gold and silver coins and bars outside the banking system will be far better prepared for cybersecurity attacks and uncertain times.

You can read more on the other seven scenarios here. Whilst reading them it is worth reminding oneself of how easily the world can change and how uncertain we are as to whether they may or may not happen.

Related reading

http://www.goldcore.com/ie/gold-blog/cyber-wars-crash-markets-threat-hum...

http://www.goldcore.com/us/gold-blog/cyber-attacks-show-vulnerability-di...

http://www.goldcore.com/us/gold-blog/cyberwar-risk-u-s-navy-victim-hacki...

News and Commentary

Gold eases from 3-week top as dollar holds steady (Reuters.com)

Gold Miners ETFs Set to Bounce Back in 2018 (ETFTrends.com)

Bitcoin $1 million, Amazon $1 trillion: Bold calls of 2017 are worth watching now (MarketWatch.com)

Oil prices slip away from 2015 highs, but market remains tight (Reuters.com)

Apple and its suppliers weigh on Wall Street (Reuters.com)

Source: Bloomberg

First English gold coin worth just a penny will sell for unbelievable amount (Mirror.co.uk)

Sudan sharply devalues its pound against U.S. dollar (Xinhuanet.com)

Israeli regulator seeks to ban cryptocurrency firms from stock exchange (Reuters.com)

Let regions go bankrupt, Chinese central bank official says (Bloomberg.com)

World's Wealthiest Became $1 Trillion Richer in 2017 (Bloomberg.com)

Gold Prices (LBMA AM)

27 Dec: USD 1,285.40, GBP 958.78 & EUR 1,081.54 per ounce
22 Dec: USD 1,268.05, GBP 947.74 & EUR 1,069.85 per ounce
21 Dec: USD 1,265.85, GBP 945.97 & EUR 1,065.09 per ounce
20 Dec: USD 1,265.95, GBP 944.27 & EUR 1,068.21 per ounce
19 Dec: USD 1,263.10, GBP 944.93 & EUR 1,070.10 per ounce
18 Dec: USD 1,258.65, GBP 943.11 & EUR 1,067.71 per ounce
15 Dec: USD 1,257.25, GBP 937.41 & EUR 1,065.52 per ounce

Silver Prices (LBMA)

27 Dec: USD 16.50, GBP 12.30 & EUR 13.87 per ounce
22 Dec: USD 16.18, GBP 12.08 & EUR 13.65 per ounce
21 Dec: USD 16.15, GBP 12.08 & EUR 13.61 per ounce
20 Dec: USD 16.19, GBP 12.09 & EUR 13.67 per ounce
19 Dec: USD 16.16, GBP 12.08 & EUR 13.68 per ounce
18 Dec: USD 16.09, GBP 12.04 & EUR 13.64 per ounce
15 Dec: USD 15.99, GBP 11.93 & EUR 13.55 per ounce

Recent Market Updates

- Goldnomics Podcast – Gold, Stocks, Bitcoin in 2018. Everything Bubble Bursts?
- What Peak Gold, Interest Rates And Current Geopolitical Tensions Mean For Gold in 2018
- New Rules For Cross-Border Cash and Gold Bullion Movements
- ‘Gold Strengthens Public Confidence In The Central Bank’ – Bundesbank
- WGC: 2018 Set To Be A Positive Year For Price of Gold and Investors
- Year-end Rate Hike Once Again Proves To Be Launchpad For Gold Price
- UK Stagflation Risk As Inflation Hits 3.1% and House Prices Fall
- Buy Gold, Silver Time After Speculators Reduce Longs and Banks Reduce Shorts
- Bitcoin – Plan Your Exit Strategy Now – Maybe With Gold
- Gold Demand Increases Along with Uncertainty Thanks to Trump, Brexit and North Korea
- UK Pensions Risk – Time to Rebalance and Allocate to Cash and Gold
- Bailins Coming In EU – 114 Italian Banks Have NP Loans Exceeding Tangible Assets
- Silver’s Positive Fundamentals Due To Strong Demand In Key Growth Industries

Read More

The Bitcoin Effect, Gold and Silver Report 24 Dec 2017

Published here: http://www.zerohedge.com/news/2017-12-26/bitcoin-effect-gold-and-silver-report-24-dec-2017

Merry Christmas to our American friends. Happy Christmas to the rest of the Anglosphere. Felicem natalem Christi to our Latin-speaking audience, and góðr jól to those who are reviving Old Norse as a great language!

Let’s address two themes about the gold price trend that are increasingly in popularity the past few months—as the price of gold has been falling. Blame bitcoin. And blame rising interest rates.

There is no direct mechanism—no arbitrage—that pushes up bitcoin and down gold. As there is, for example, with changes in relative palladium or platinum demand if diesel engines gain or lose market share from gasoline engines.

Nor do we give truck to the idea that the dollar has been pushed from ?1.00 to ?0.000053 (we don’t think even the bitcoin bugs who say it, really believe it). What are you going to believe: a B.S. theory, or your own lying eyes?

There is arguably an indirect bitcoin-gold price connection mechanism. Those who own gold for the price appreciation may be attracted to bitcoin. While gold does not seem to be going up, bitcoin obviously is. If someone wants to make dollars quick, bitcoin sure seems to be a better vehicle to ride than gold.

However, we think bitcoin’s effect on the gold price is likely, if anything, to be in the other direction. For everyone selling gold to buy bitcoin, there are surely two who made big bucks in bitcoin and want to diversify into gold. With the price up so much, many people are sitting on 20X gains (or more). In order for new people to buy, SOMEone has to be selling. We think it is likely the diversification trade. It certainly is not anyone saying to himself, “well now that bitcoin has hit my price target, it is fully valued and I am out.”

Gold would be the logical diversification asset, for those seeking anti-Fed money. Once someone becomes aware of the problem with the dollar, which most bitcoin owners are, he will not become unaware. He will be looking for other alternatives. Gold is not only not a dollar, but it is not the wild ride of bitcoin either. For that portion someone wants to take off the table, gold’s stability is a feature, not a bug. The more that bitcoin rises, the more people have more capital to take off the table.

One could call this a kind of reflexivity, where bitcoin’s rising price tends to drive a rising price of gold. And this is likely a ratchet; a bitcoin crash does not seem likely to cause selling of gold to buy bitcoin.

It is a fact that the gold price has been in a downtrend since September (though the price picked up the last week and a half). If not bitcoin, what is the driver?

We have written a number of pieces on the topic of interest rates and the gold price (bottom line: there is no clear correlation). Let’s not forget that the gold price was rising in the 1970’s while the rate was rising, and again in the 2000’s while it was falling. Here is a graph of the Fed Funds Rate and the gold price from 1970.

There looks like a correlation while the Fed Funds Rate was rising in the 1970’s. But it is hard to argue that they’re correlated during the big run up in price from 2000 through 2011. This could mean that rising rates causes a rising price, while falling rates do not cause a falling price. Or it could mean something else.

At this point, many would say it’s not the nominal but the real rate. If you add apples, oranges, rent, fuel, etc. you get a hypothetical measure of consumer prices. No one agrees on what should go in to the basket, or the weights given to each item (some people eat more apples than others). But change in consumer prices gives us inflation. So we use hypothetical inflation to adjust the actual rate at which lending occurs. The adjusted number, is called the real rate, apparently without intending any irony.

Perhaps people buy gold when the real rate is rising or falling or too high or too low?

We think that real rate is the wrong concept. The inflation number is rather arbitrary, and it’s invalid to subtract consumer prices from interest. It’s wrong to ignore the rate at which actual lending occurs in favor of a rate at which lending does not occur. And finally, it’s wrong to try to measure money (or even irredeemable currency) in consumer prices. Do feel free to try this at home. How many rubber bands long is your child’s plastic yard stick?

However, there’s a grain of truth in that, which should be identified explicitly. Time preference is that grain of truth. Central banks can manipulate the market interest rate. For proof, just look at a long-term historical chart of the interest rate on the 10-year Treasury bond. There is an obvious difference between pre- and post-Fed.

However, central banks cannot manipulate the time preference of the people.

In a normal world, interest must be greater than or equal to time preference. Central banks turn normalcy upside down, literally. They can invert the time preference – interest spread.

Time preference, by the way, can change too. Not by central planners’ diktats, but in response to changes in the market. For example, people who have little debt in a market of skyrocketing consumer prices will increase their time preference. Whereas people who are loaded up with debt in a lethargic or falling market decrease their time preference.

The upshot of this is that interest at 10% might, at one time, be totally insufficient. And another time, interest of 2% might be more than enough. One would be hard-pressed to plot a graph showing time preference against interest. It’s certainly much easier to plot interest – inflation.

We would suggest that people are impelled to buy gold much more when their time preference is violated by too-low interest rates. And less inclined (or even induced to sell) when interest is above time preference.

Well, today, we have rising rates (at least short-term rates, the long bond is a different story). And yet debt saturation is not changing any time soon. It could be that the Fed is now giving people an inducement to give up their gold: restoring some interest to paper, even if only a small amount.

If so, then we are obliged to mention that we offer A yield on gold, paid in gold.

---

The prices of the metals moved up $29 and $0.34 respectively. As typically occurs, the price of silver moved more in proportion.

Let’s look at the only true picture of the supply and demand fundamentals of both gold and silver. But first, here are the charts of the prices of gold and silver, and the gold-silver ratio.

Next, this is a graph of the gold price measured in silver, otherwise known as the gold to silver ratio. The ratio dropped.

In this graph, we show both bid and offer prices for the gold-silver ratio. If you were to sell gold on the bid and buy silver at the ask, that is the lower bid price. Conversely, if you sold silver on the bid and bought gold at the offer, that is the higher offer price.

For each metal, we will look at a graph of the basis and cobasis overlaid with the price of the dollar in terms of the respective metal. It will make it easier to provide brief commentary. The dollar will be represented in green, the basis in blue and cobasis in red.

Here is the gold graph showing gold basis and gold price on Friday, as there was some interesting price action.

What a nice correlation between price and basis (until late in the day). We hold our breaths, waiting for conspiracy theorists to argue that this is manipulation. Whether it is, or isn’t, it is buying of futures and it pushed up the price of gold.

Despite the rise in market price, our Monetary Metals Gold Fundamental Price fell $35 this week, to $1239.

Now let’s look at silver.

We see the same thing. A beautiful correlation between price and basis. Yessiree, it’s the naked longs buying silver futures on leverage, planning to make dollars when the price rises.

The Monetary Metals Silver Fundamental Price dropped 25 cents from last week, to $16.12.

 

© 2017 Monetary Metals

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Twelve Days Of Christmas Fed’s QE Gave To Me – by Michael Carino, Greenwich Endeavors

Published here: http://www.zerohedge.com/news/2017-12-23/twelve-days-christmas-fed%E2%80%99s-qe-gave-me-%E2%80%93-michael-carino-greenwich-endeavors

On the 12^th day of Christmas Fed’s QE Gave To Me:

TWELVE Fed
Districts Dancing

ELEVEN Bubbles
Bubbling - (11 – Crypto Currencies like the recently famous soon to infamous
Bitcoin, Bonds (every one of them), Stocks, Intra-day leverage from high volume
trading, Emerging Markets, Short Volatility Trades in a temporarily suppressed
volatility environment, Liquidity Risk from enormous Alternative Funds – LTCM was
only 4bl, a fraction of the current day behemoths, Spread Products, Farm Land,
Commercial Real Estate, Residential Real estate, Yellen’s Champagne Flute)

TEN th Year US
Economy Expanding - (longest expansion ever!?!)

NINE Trillion
Treasuries Issued – (only 5 Trillion existed in 2008, now 14 Trillion!!!)

EIGHT High
Frequency Treasury Trading Hedge Funds – (In 2015 BrokerTec published a list of
interdealer market Treasury trading volumes showing 8 of top ten traders by
volume were hedge funds, not dealers. This represented up to 70% of Treasuries
traded.  In a market that can have daily
volumes of 1 Trillion when incorporating cash and futures markets – dictated by
high volume traders that manipulate prices –– yet somehow the world believes
yields reflect a consensus outlook for growth and inflation instead of the will
of 8 traders – is no different from the Hunt Brothers cornering the silver
market.  This ended catastrophically for
the Hunt brothers and the silver market.  High volume strategies by a few are currently
cornering the Treasury market and therefor the global bond market.  As the strong economic fundamentals make
current low yield levels look comical and cash rates rise high enough to
encourage rotation away from bonds, this manipulation will collapse and along with
it bond prices.)

SEVEN Hundred
Billion Federal Budget Deficit (potentially going to 1 Trillion in 2018 with
the new tax reductions passed)

SIX Central Banks
Pursued QE (US, UK, Switzerland, EU, Japan and China all pursued quantitative easing
programs in order to monetize debt, competitively depreciate their currency for
trade advantages and fund at subsidized rates ever expanding government
deficits that normally lead to soaring interest rates)

FIVE Fed Funds
rate hikes (at this pace there will be five more years of hikes and one heck of
a bubble to burst –if the monetary policy insanity lasts five more years, the
global financial and economic system will be imperiled)

FOUR Trillion
Bonds on the Fed’s Balance Sheet (was only appx. 700 billion in 2008, now 4.4
trillion!)

THREE Egg Nogs
for Big Ben (Academics love to party and Fed Chairman Bernanke, as the father
of excessive and highly impaired QE policies, had all the Fed members over-imbibing)

TWO Dissenting
Doves – (Fed Presidents Evans – Chicago and Kashkari – Minneapolis both want to
revel into the new year and voted not to raise rates and continue to normalize
Fed policy at the recent December 17 Federal Reserve meeting. It was rumored
they were overheard calling Yellen a Grinch!)

AND A Powell In the
Fed’s chair seat – (Jerome Powell will replace Fed Chair Yellen February 3,
2018. A prior article I wrote, will Trump dance or be a dunce is looking like
he has his dancing shoes on. Let’s stay in the holiday spirit and dance the
night away with a new Fed Chairman that will stick with the status quo and keep
the party going!  Chairman Greenspan decided
to keep the party going at all costs and let the music stop on someone else’s
watch.  This practice has been followed
by Chairman Bernenke and Chairman Yellen. 
Chairman Powell now seems prepared to practice what everyone else
preached. Let’s do whatever it takes, regardless of future economic costs (and
these costs will be catastrophic) and let this monetary policy experiment end
with a thundering boom on the next person’s watch!

 

 

by Michael Carino, Greenwich Endeavors, 12/23/17

Michael Carino is the CEO of Greenwich Endeavors and has
been a fund manager and owner for more than 20 years.  He has positions that benefit from a
normalized bond market and higher yields. 

 

 

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It's A Wonderful Life Is A Wonderful Lesson To Hold Gold Outside of The Banking System

Published here: http://www.zerohedge.com/news/2017-12-23/its-wonderful-life-wonderful-lesson-hold-gold-outside-banking-system

It's A Wonderful Life Is A Wonderful Lesson To Hold Gold Outside of The Banking System

- Christmas film serves as reminder that savings are not guaranteed protection by banks
- Savers are today more exposed to banking risks than ever before
- Gold and silver investment reduce exposure to counterparty risks seen in financial system
- Basket of Christmas goods has climbed since 2016 thanks to 11% climb in gold price

 

 

 

Frank Capra's 1946 film It's A Wonderful Life is one that many families will be settling down to watch this Christmas weekend. A story that is ultimately about a suicidal man is one of the most watched holiday films of all time.

Interestingly it wasn't all that big a hit upon its release (despite garnering five Academy Award nominations) and was disliked by some of the highest intelligence authorities and political thinkers.

Ayn Rand worked with the FBI to identify Hollywood Communist propaganda and helped them to conclude that the Christmas film contained several subversive tendencies, including "demonising bankers" and "attempting to instigate class warfare", and was "written by Communist sympathisers".

'Demonising bankers' is an interesting accusation and one that doesn't have to come from an anti-communist perspective. In the 70-odd years since the film's release there has been a growing level of evidence for bankers (and banks) to absolutely be demonised.

There are some important lessons to be learnt from the film's protagonist George Bailey. For us the main takeaway for cautious investors and savers is in reference to trusting banks and deposit companies with your hard earned cash.

It is a lesson on how exposing your wealth to various counterparties is exposing it to an incalculable level of risk. Furthermore it should be a lesson on the importance of having savings and learning how best to protect them.

"The money's not here"

A famous scene early on in the film sees James Stewart's George Bailey confront a mob of customers who are demanding their money back from his Bailey Building and Loan community bank. It is implied that there is an larger economic crisis going on and Bailey's savers are panicking about the security of their assets.

Bailey tells them that they can't have their money for at least two months.

...you’re thinking of this place all wrong.
As if I had the money back in a safe. The money’s not here.
Your money’s in Joe’s house...that’s right next to yours.
And in the Kennedy House, and Mrs. Macklin’s house, and, and a hundred others. Why, you’re lending them the money to build, and then, they’re going to pay it back to you as best they can.

Whilst Bailey's bank is unlikely to operate using a fractional reserve system the lesson for depositors today is the same. At a simple level our banking structure and finances are deeply interwoven so when a bank, big or small, fails, lots of people will feel the pain.

Viewers should pay attention to this quick lesson in economic fragility. It's a Wonderful Life shows that the economy at both a national and international level can seemingly change from a healthy position to a dangerous and costly one based on the sort of collective, self-fulfilling beliefs that John Maynard Keynes called "animal spirits".

For those of you who have seen the scene of Bailey trying to prevent a run on his bank you will recall how similar his customers' lack of understanding as to how a bank works is similar to the majority of those who use the banking system we have today.

As we saw with the Northern Rock crisis depositors are convinced their money is sitting there in the safe. And, they are sure it is still 'their' money (it isn't). Additionally they fail to question how the banks are able to distribute so much money, such as for mortgages or car loans.

Are the banks and their failures something we should be worried about?

Today a bank run looks quite different to the one we see in It's A Wonderful Life. The sign of a bank run is usually indicated by a long line of people queuing at an item (as per Northern Rock). But, the fear is the same.

The fear and threat of too much leverage in the system is still very real. The fear that one big loss could take down an entire bank and wipe out the life savings of many—is arguably even scarier than it was back in 1948. Bank failures today are far more serious than Depression-era failures.

This is because so many banks are national and international entities, so intertwined with one another. The collapse of Washington Mutual in 2008, triggered by deposit withdrawals, was the largest failure in U.S. banking history.

This year marked ten years since both the start of the financial crisis and the first bank run in the UK in 140 years. The Bank of England, UK government and regulators rushed to salvage what they could. It made little difference, the financial system was terminal. Afterwards then Bank of England Governor, Mervyn King, reflected:

“In the end the big story, when you look back 10 years, is none of this made any difference at all to the ultimate outcome of what was wrong with the banking system...Whatever we did made no difference to the fact that in the autumn of 2008 the entire banking system failed. Although Northern Rock was a great story in the UK it was little more than a bubble on the boiling sea of the failure of the banking system crisis in 2008.”

In a major critique of the stress tests carried out on UK banks Kevin Dowd, a professor of finance and economics at Durham University writes, “The stress tests are about as useful as a cancer test that cannot detect cancer. They seek to demonstrate a financial resilience on the part of UK banks that simply isn’t there...Our banking system is an accident waiting to happen..“It is disturbing that 10 years on from Northern Rock, the best measures of leverage – those based on market values – indicate that UK banks are even more leveraged than they were then,”

Savers more exposed than ever

Savers are exposed to the huge leverage in the system partly thanks to the huge pensions and debt time bombs that are just looking for a spark to light their short fuse.

Currently in the UK savers are exposed to a £1 trillion debt time bomb hanging over the country. We are nearing the end of the timebomb’s long fuse and it looks set to explode in the coming months.

It is made up of two major components.

• £710 billion is the terrifying size of the UK pensions deficit
• £200 billion is the amount of dynamite in the consumer credit time bomb

Why is this?  It's because we apparently didn’t learn from the massive man made crisis that was the 2008 financial crisis.

The ‘we’ is referring to UK individuals who are holding over £1.5 trillion of household debt. It refers to the pension fund managers who are ignoring the fact they hold more liabilities than assets. It refers to banks and mortgage and loan providers who give loans to people who are already indebted and who will struggle to pay the debt back. It refers to a compliant media who do not have ask hard questions about irresponsible lending practices and cheer lead property bubbles due to getting significant revenues from the banking and property sectors.

And, ultimately the ‘we’ is the government who peddled such terrible monetary policy that it has brought us as close to nuclear financial disaster as we have been since 2008.

Risks from all sides for savers

Sadly it is not just struggling borrowers and pensioners who are exposing savers to increased risks and expense. 10 million savers here in the UK have been royally screwed over by a government announcement that they will be taxed on their savings.

Buried deep in the 2017 Autumn budget is a a £1.8billion stealth tax raid, discovered by Royal London who explain:

'...one group of victims of the tax increase will be those who have savings products such as endowments and 'whole of life' policies with insurance companies. Under current rules, when these investments grow, tax is paid only on the 'real' return, stripping out the effects of inflation. This tax is collected by the insurance companies and passed on to the government. But from January 2018 tax will be payable on the whole return, including anything which simply keeps pace with inflation. Royal London estimates that this could affect up to three million of its own policy holders and many millions more across the whole insurance sector. Yet the Treasury documents accompanying the announcement wrongly claim that it has 'no impact on individuals or households'...This is a 'stealth tax' on millions of people who have made sacrifices and saved hard and are now penalised with extra tax.'

Even if you don't have one of the affected financial products you are still being screwed over by the banks. Interest rates in the UK have been increased to 0.5% in recent months. One would naturally expect to feel the benefit of this should they have savings. However, research by the Daily Mail's money arm found that  'hardly any savers in popular easy-access accounts or in easy-access cash Isas with Barclays, NatWest, RBS, Lloyds, HSBC, Halifax and Santander have benefited from the full rise.' Many will experience just a sixth of the rate hike seen last month.

What with the tax liability, inflation and negative real rates of interest it is of little question that savers are exposed to risks. The ECB doesn't care too much about this though and is looking to use individuals' savings to help prop up the banking system thanks to unprotected deposits and bank bail-ins.

 

So it seems there is little savers can do rather than look out for number one.

It's a Wonderful Life or It's a Horrible Mess?

With best wishes I do hope you really do wake up to think that It's a Wonderful Life. But beyond the Christmas cosiness of your own home it really is seemingly a Horrible Mess.

According to the PNC's calculations the true cost of the Twelve Days of Christmas basket climbed by 0.7% when (US) inflation-adjusted. The main culprits were the Pear Tree, the Lords-a-leaping and the Five Gold Rings.

Of those three it was the Gold Rings which saw the biggest increase in price this last year thanks to gold climbing by over 11% in the last twelve months. This is something to take advantage of and to ensure that yours can be a Wonderful Life and not one of the holiday kind.

Savers and prudent spenders can do very little about the current mess of things. All we can do is protect our own finances. This isn't something to be done by rushing to the bank when things go wrong in the hope that you'll be able to withdraw all of your money by some miracle.  The level of debt in the financial system in the UK and most western countries is completely unsustainable.

For the majority of savers this means personal finances and savings held in deposit accounts are at risk from banks' over-leveraging. This in turn puts them at risk of bail-ins. Bank bail-ins and negative rates seem increasingly inevitable.

Make sure your savings are not exposed to these risks by diversifying into counterparty risk free gold and silver coins and bars for insured delivery and secure storage.

 

 

Related reading

Why Surging UK Household Debt Will Cause The Next Crisis

UK Pensions and Debt Time Bomb: £1 Trillion Crisis Looms

Protect Your Savings With Gold: ECB Propose End To Deposit Protection

 

News and Commentary

Gold holds steady as U.S. data leaves dollar stable (Reuters.com)

Gold struggles for direction as investors sort out tax-cut implications (MarketWatch.com)

U.S. third-quarter economic growth trimmed; jobless claims rise (Reuters.com)

Leading economic indicators rise 0.4 percent, meet expectations (CNBC.com)

FHFA: Home prices continue to soar on West Coast (HouseingWire.com)

Source: Bloomberg

Ted Butler: A 10-year-deal to let JPM rig silver? (Gata.org)

U.K. Consumer Confidence Hits a Four-Year Low (Bloomberg.com)

This Dollar Shortage Isn’t Likely to Last (Bloomberg.com)

WATCH: Chinese Gold Market Developments and Insights (Youtube.com)

Bitcoin is No Substitute for Gold, says CNBC Mad Money Host Jim Cramer (CryptoVest.com)

Gold Prices (LBMA AM)

22 Dec: USD 1,268.05, GBP 947.74 & EUR 1,069.85 per ounce
21 Dec: USD 1,265.85, GBP 945.97 & EUR 1,065.09 per ounce
20 Dec: USD 1,265.95, GBP 944.27 & EUR 1,068.21 per ounce
19 Dec: USD 1,263.10, GBP 944.93 & EUR 1,070.10 per ounce
18 Dec: USD 1,258.65, GBP 943.11 & EUR 1,067.71 per ounce
15 Dec: USD 1,257.25, GBP 937.41 & EUR 1,065.52 per ounce
14 Dec: USD 1,255.60, GBP 935.67 & EUR 1,062.49 per ounce

Silver Prices (LBMA)

22 Dec: USD 16.18, GBP 12.08 & EUR 13.65 per ounce
21 Dec: USD 16.15, GBP 12.08 & EUR 13.61 per ounce
20 Dec: USD 16.19, GBP 12.09 & EUR 13.67 per ounce
19 Dec: USD 16.16, GBP 12.08 & EUR 13.68 per ounce
18 Dec: USD 16.09, GBP 12.04 & EUR 13.64 per ounce
15 Dec: USD 15.99, GBP 11.93 & EUR 13.55 per ounce
14 Dec: USD 16.01, GBP 11.92 & EUR 13.54 per ounce

Recent Market Updates

- Goldnomics Podcast – Gold, Stocks, Bitcoin in 2018. Everything Bubble Bursts?
- What Peak Gold, Interest Rates And Current Geopolitical Tensions Mean For Gold in 2018
- New Rules For Cross-Border Cash and Gold Bullion Movements
- ‘Gold Strengthens Public Confidence In The Central Bank’ – Bundesbank
- WGC: 2018 Set To Be A Positive Year For Price of Gold and Investors
- Year-end Rate Hike Once Again Proves To Be Launchpad For Gold Price
- UK Stagflation Risk As Inflation Hits 3.1% and House Prices Fall
- Buy Gold, Silver Time After Speculators Reduce Longs and Banks Reduce Shorts
- Bitcoin – Plan Your Exit Strategy Now – Maybe With Gold
- Gold Demand Increases Along with Uncertainty Thanks to Trump, Brexit and North Korea
- UK Pensions Risk – Time to Rebalance and Allocate to Cash and Gold
- Bailins Coming In EU – 114 Italian Banks Have NP Loans Exceeding Tangible Assets
- Silver’s Positive Fundamentals Due To Strong Demand In Key Growth Industries

 

Important Guides

For your perusal, below are our most popular guides in 2017:

Essential Guide To Storing Gold In Switzerland

Essential Guide To Storing Gold In Singapore

Essential Guide to Tax Free Gold Sovereigns (UK)

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WORLD SILVER PRODUCTION: 3 Charts You Won’t See Anywhere Else

Published here: http://www.zerohedge.com/news/2017-12-22/world-silver-production-3-charts-you-won%E2%80%99t-see-anywhere-else

By the SRSrocco Report,

The rate at which global silver production increased over the past century is quite astonishing.  When Columbus arrived in America (1492), the world was only producing 7 million oz of silver a year.  Today, the world's largest primary silver mine, Fresnillo's Sauicto Mine, produced three times that amount in just one year (22 million oz, 2016).  Yes, we have come along way in 500 years.

Just think about that for a minute.  One silver mine last year produced three times the global amount in 1493.  According to the U.S. Bureau of Mines 1930 Report on Summarized Data of Silver Production, the average annual silver production in the world from 1493 to 1600 was 6.9 million oz (Moz).  If we look at the following chart, we can see how world silver production increased over the past 500+ years:

As we can see, average annual world silver production increased from 6.9 Moz during 1493-1600, to 13 Moz from 1600-1700, 18 Moz from 1700-1800, 51 Moz from 1800-1900, 274 Moz from 1900-2000 and a stunning 722 Moz from 2000-2017.  Again, these figures represent the average annual silver production for each time period.

In the current period, 2000-2017, the world has produced 103 times more silver per year than from 1493-1600.  However, the next chart shows the total silver production for each period.  From 1493-1600, the world produced a total of 747 Moz of silver, compared to 13,000 Moz (13 billion oz) in just 18 years from 2000-2017:

Now, the reason the last silver bar on the right of the chart is lower than the previous one has to do with comparing 18 years worth of silver production (2000-2017) versus 50 years (1950-2000).  It took 50 years to produce 17,061 Moz during 1950-2000 versus 13,000 Moz in the 18 years from 2000-2017.

If we compare world silver production from the different periods, here is the result:

Percentage Of World Silver Production (1493-2017)

2000-2017 = 26.4%

1950-2017 = 61%

1900-2017 = 82%

While a little more than a quarter of all world silver production (1493-2017) was produced in the past 18 years, 82% were produced since 1900.  That is a lot of silver.  It turns out that 40.4 billion oz was produced from 1900-2017 out of the total 49.3 billion oz produced since 1493.  Interestingly, more than half of that silver was consumed in industrial silver applications.  I will be writing more about that in future articles.

The last chart I find quite interesting.  If we go back a little more than a century, the United States was the largest silver producer in the world.  In 1915, the U.S. produced 75 Moz of silver out of the total 189 Moz mined in the world that year:

Thus, in 1915, the U.S. produced 40% of all world silver production.  Mexico came in second in 1915 by producing 39.3 Moz.  However, U.S. silver production in 2017 will only be 34 Moz versus the estimated 870 Moz globally.  Thus, U.S. silver production only accounts for 4% of world mine supply versus 40% back in 1915.  What a change in 100 years.

Lastly, the U.S. imports approximately 22% of world mine production each year.  That is 193 Moz of the total 870 Moz in 2017.  While domestic mine supply is only 34 Moz, the United States has to import more than a fifth of global mine production to meet its silver market demand.

If you haven't checked out our new PRECIOUS METALS INVESTING section or our new LOWEST COST PRECIOUS METALS STORAGE page, I highly recommend you do.

Check back for new articles and updates at the SRSrocco Report.

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Bitcoin: Gold Rush in the Wild Wild Math Game

Published here: http://www.zerohedge.com/news/2017-12-22/bitcoin-gold-rush-wild-wild-math-game

By EconMatters

 

Bitcoin has become a buzz word in the investing community, not as an alternate currency unit replacing the fiat money, but as an asset class with a spectacular 1,600%+ return this year, valuation almost doubled just in the December month alone. Bitcoin was heading towards $20,000 before pulling back to $15,000 level on 12/21/2017, and . The entire cryptocurrency market capitalization rose above $600 billion for the first time on Dec. 18, 2017.

 

Bitcoin Chart Dec. 21, 2017 

 

Despite what you might have heard people raving about the "money of the future," the fact is that bitcoin and other cryptocurrencies are very expensive and experimental as well.

 

Existed Since 2009

 

Bitcoin is a form of digital or virtual currency and is not as “new” as you might think. It has existed since 2009. In January 2009, a programmer implemented the bitcoin software as open source code and released it under the alias of Satoshi Nakamoto. There have been many rumors regarding the true identity of Nakamoto, but nothing conclusive so far.

A Mining Math Game for All

 

With many companies adopting it as form of payment and many others getting ready to, bitcoins are an extremely fast-spreading “currency”.

 

Unlike fiat currency controlled by world’s central bankers and partly backed by gold reserve, Bitcoin is based on mathematics and totally decentralized. That is, much like the precious metal, bitcoin can only be “mined”, not “printed”. All Bitcoin transactions, including Bitcoin creations, are recorded and verified on the blockchain, also originally developed by Satoshi Nakamoto. Today, around the world, people and companies are using software programs and computers following a mathematical formula to produce bitcoins around the world.

1,000+ Rival Crytocurrencies 

 

It was not until 2011 when other rival crypocurrencies emerged partly due to bitcoin’s increasing popularity. Currently there are over 1,000 cryptocurrencies in circulation with new ones frequently appearing.

 

How Many Bitcoins Are There to “Mine”?

 

It seems anyone, with proper equipment, can “mine” bitcoins. The logical question would be is there a limit to how many bitcoins can be mined? According to Bitcoin.org, the bitcoin protocol – the rules that make bitcoin work – say that only 21 million bitcoins can ever be created by miners.

Silk Road Anonymous

 

Because Bitcoin was purposely designed with anonymity and lack of control in mind, it is quite attractive for criminals. Heard of Silk Road, the darknet black market, best known as a platform for selling illegal drugs? Though the U.S. government shut down Silk Road in 2013, Bitcoin benefited from Silk Road’s headlines and front pages of the mainstream media.

Gone in 60 Seconds at Mt. Gox

 

The lack-of-control nature of Bitcoin also comes with some security issues. In January 2014, the world’s largest Bitcoin exchange Mt. Gox went offline, and its total of 850,000 Bitcoins disappeared. Investigations are still trying to figure out exactly what happened. At today’s prices, those missing coins would be worth about $12 billion. Nevertheless, the bottom line is that those owners never saw their Mt. Gox Bitcoins again.

Bitcoin Futures Launched

 

Despite debacles at Silk Road and Mt. Gox, Bitcoin futures debuted on CME Group late on Sunday, Dec. 17, 2017, and on CBOE a week earlier. Many hailed this recognition by major exchanges as the pivotal moment of bitcoin to legitimacy. However, as Reuters reports:

 

“…. an almost twentyfold increase [of Bitcoin] since the start of January has also led to increasing warnings about the dangers of investing in an immature, opaque and largely unregulated market.”

1,000+ Whales Control the Market

 

The Bitcoin market cap is about $215 billion, but 40% of that “immature, opaque and unregulated” market is held by about 1,000 users/whales. What is even more disturbing about this market structure as Bloomberg reports:

 

“….the whales can coordinate their moves or preview them to a select few. Many of the large owners have known one another for years and stuck by bitcoin through the early days when it was derided, and they can potentially band together to tank or prop up the market.”

 

Late Does Not Mean Never

 

In other words, whales can easily make or break the market by colluding and manipulating the Bitcoin prices. This is akin to the Hunt Brothers cornering the silver market back in the ‘70s. It was illegal what the Hunt Brothers did, do you think regulatory agencies around the world would just sit idly by and watch the same thing happen in the new Bitcoin market?

 

Regulations are notorious for lagging way behind technology. Nevertheless, it is inevitable that sweeping regulations will catch on in the near future. France’s finance minister already said his country would propose that the G20 group of major economies discuss regulation of bitcoin next year.

 

"Gold Rush in the Wild Wild West"

 

To sum up,

 

• Bitcoin is “created” or “mined” by a math program written by an unknown person.
• The program protocol caps the creation at 21 million bitcoins.
• 40% of the market is controlled by 1,000 whales who know and communicate with each other regarding buying and selling of Bitcoins.
• There are over 1,000 cryptocurrencies in circulation rival to Bitcoin with new ones frequently appearing.

 

The current Bitcoin Market lacks the proper structure that a healthy asset market should have, that is,

• Reasonable transparency,
• Long and short players (Bitcoin right now is a long only market),
• A diversified pool of producers (supply) and users (demand)
• Appropriate regulations/portocols to prevent collusion and market manipulation.

 

Bitcoin Investment

 

Right now, much of the hype is about getting rich by trading Bitcoin. One thing to remember is that just like any other exotic asset class, Bitcoin is even more vulnerable to the boom-and-bust cycle. Bitcoin’s first crash took place in 2013 when the price of one Bitcoin reached $1,000 for the first time, but then the price quickly plummeted to around $300. It took more than two years before Bitcoin reached $1,000 again.

 

Many traders are on the sideline right now waiting for a significant pullback to get in on Bitcoin. The key is to buy low and not develop a sentimental/emotional attachment thus missing the proper selling point. Before jumping in, it is also important to understand risks and opportunities in the bitcoin market. Expect much higher than normal volatility and sweeping regulations that could drastically change the market landscape.

 

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Published here: http://www.zerohedge.com/news/2017-12-21/prominent-names-within-crypto-space-cash-out-their-positions

 

 

Prominent Names Within the Crypto Space Cash Out Their Positions

Written by Nathan McDonald, Sprott Money News

 

 

Last week, I penned an article about the history of Bitcoin and how the community around it has dramatically changed. This isn't just Bitcoin, however; it is all Cryptos. In the beginning, as I discussed last week, the Bitcoin community was all about helping each other grow and prosper. It had its own micro-economies, and because of this, it boomed.

 

Fast-forward to today, and the landscape is nothing like it once was. "Getting rich quick" topics are all the rage on Bitcointalk, and small businesses can no longer even use Bitcoin as a form of payment, due to skyrocketing fees.

 

As I mentioned, this has led to a large number of original veterans of the Crypto space leaving altogether, as the vision they once saw is long dead. Little did I know a mere week ago just how over-the-mark I was in this assessment.

 

The trend appears to be continuing and is now moving to high profile names within the Crypto space. Two in particular have now cashed out of their cryptocurrency positions almost entirely.

 

The first is Charlie Lee, the founder of Litecoin, often referred to as “Bitcoin’s silver.” As it is closely linked to the success of Bitcoin, Litecoin has skyrocketed in value over the course of the year.

 

In fact, this time last year, it was trading at a mere $3.67 USD per Litecoin. Today it sits at roughly $320 USD per Litecoin, a phenomenal gain of well over 9000% in less than one year!

 

You cannot blame Charlie Lee for cashing out, but what is shocking is the fact that Lee has been one of the biggest promoters and pushers of Litecoin in the past. Still, there are those stating the price can never go down. A warning sign noticed by any contrarian investor.

 

Charlie Lee, of course, had an explanation that had nothing to do with the parabolic rise of Litecoin, stating that he suddenly now believes his ownership to be a "conflict of interest." You can read his full reddit post here.

 

The second prominent figure to cash out of the cryptocurrency markets is the founder of the original Bitcoin.com website.

 

Emil Oldenburg, of Sweden, has been a massive supporter of Bitcoin, and it comes as a shock to many to learn that he now dismisses it as a valid form of money. He even went so far as to state that Bitcoin is currently "the most risky investment a person can make.

During his interview with Breakit, Oldenburg goes on to explain why he sold out of his Bitcoin position. His reasoning will come as a surprise to many, but not myself, as it is exactly what I have been talking about in this article and preceding ones:

 

“It’s a group of fanatic bitcoin talibans who themselves do not use bitcoin everyday to want it like this. They see bitcoin like digital gold and a technical experiment, not something you should actually use. It will never be a currency used in everyday life or for people who run companies.”

The markets have simply not priced this in yet. The ones who had the foresight to be a part of Bitcoin from inception are sending up red flags and even publicly stating they are cashing out of their positions.

 

Yet, the price of Cryptos continues to trend higher. Perhaps these announcements will be looked upon as the beginning of the top for Cryptos; perhaps not. Only time will tell, but what is certain is the fact that high profile names are taking notice of what I have been stating for close to half a year now: the community around Cryptos has dramatically shifted and changed. What sparked its meteoric rise is no longer in place, and sadly, is likely never coming back.

 

Questions or comments about this article? Leave your thoughts HERE.

 

 

 

Prominent Names Within the Crypto Space Cash Out Their Positions

Written by Nathan McDonald, Sprott Money News

 

 

Check out these other articles by our contributors:

 

 Kite in a Tree - Jeff Thomas (21/12/2017)

The Dorothy Chronicles - Gary Christenson (21/12/2017)

Gold Will Move Much Higher in 2018 (20/12/2017)

Eric Sprott Talks Lows in Gold, Comex Shenanigans, and Answers Your Questions (Weekly Wrap-Up, December 15, 2017)

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