The Government Is Going To Steal Your Money

On the heels of yesterday’s drubbing in the gold and silver markets, MEP Nigel Farage spoke with King World News about recent turbulence in key markets, and also warned KWN readers to expect more government theft as Cyprus is used as a template to steal money from citizens in the future. Below is what Farage had to say in part II of his powerful interview series.

Eric King: “I wanted to ask you about your thoughts on the propaganda coming out of the Federal Reserve (as we go through this orchestrated smash in gold and silver).”

Farage: “The fact is that America is living massively beyond its means. Pursuing policies that really are not in the interests of America. They are just a means of keeping the whole thing (financial system) propped up.

I thought we had learned the lessons in the past. Money printing leads to disaster….

“And Bernanke saying, ‘We might ease back towards the end of the year,’ doesn’t get away from the fact that we’re still borrowing and we’re still printing. It’s just astonishing to me that the great public doesn’t seem to be engaged in this debate.

The Chancellor in Britain goes on commercial and national BBC television and radio, and tells us that, ‘he’s cutting.’ He talks about the cuts to the budget deficit. Well, we’re still adding to our national debt at nearly 10% per annum. So I think there is really an entirely false debate going on on both sides of the Atlantic.

But what we do know is that the next time a country gets into trouble, what we saw in Cyprus a few months ago is going to be used as a template. And the German, Finnish and the Dutch taxpayers are not going to be happy with lots more of their money being transferred to the Mediterranean countries, and so they will use the template for Cyprus and just steal the money from investors.”


State Street: Now, Never or Forever — Gold After the Fall

After falling sharply over two days in mid-April, many investors are beginning to question the role that gold should play in their portfolio.

Putting this sell-off into context will comfort some, but others will ask if they can still count on gold to be the all-weather asset that they expected it to be. Gold’s recent decline was certainly steep, but it wasn’t unprecedented. In fact, gold has seen seven pullbacks of more than 10% since 2001. After each drop, gold went on to not only rebound but to post new highs. This trend highlights the need to understand both the short-term and long-term drivers of the price of gold in order to see why gold remains a key element to a diversified portfolio.

Market pundits and analysts have attributed a multitude of explanations for April’s declines. One such explanation concludes that the sell-off of Cyprusgold reserves would lead to other highly indebted European countries having to do the same and consequently cause gold to fall aggressively. Considering that this would require changes to current arrangements, such as the Central Bank Gold Agreement, even if this was to occur, the Cypriot contagion argument may not capture the full picture. The economic slowdown in China has also been cited as a plausible reason for the sell-off in gold. While the Chinese GDP print did come in below consensus expectations, 7.7% growth is nothing to be ashamed of in today’s environment, and would still lead to continued demand for gold from China. Another explanation puts blame on the recent outflows from exchange traded funds (ETFs) as a major influence. Considering gold ETFs and other related investments comprise only 7% of annual gold demand, this argument appears weak.

Others contend that the strength of the US dollar is the main culprit for gold’s recent weakness. Based on gold’s negative correlation to the dollar over the long-term, this may be a more plausible explanation. In 2013, gold has declined at the same time as the dollar has rallied. However, as seen in Figure 1, this correlation doesn’t do an excellent job of explaining April’s drop, because while both assets generally moved in opposite directions, the way they did so differed tremendously.

Yet, in light of the recent unprecedented, and extraordinary monetary policy measures that have been undertaken around the globe, many investors expected to see inflation run rampant. However, due to a lack of velocity, inflation has been downright subdued in many developed markets, especially in the US. In turn, near-term inflation expectations have decreased considerably. The relationship between gold and US inflation expectations this year has been strong. Considering that some investors purchase gold for its inflation-fighting characteristics, if prices are sideways or downwards, investors may begin to question an allocation to gold because they feel that gold is no longer needed as an inflation hedge, therefore providing no real utility in their portfolio.

Should the dollar continue to outperform relative to its largest trading partners, gold could face additional headwinds. At the same time inflation may be low for the time being, but the long-term impacts of quantitative easing and balance sheet expansion are unknown. While subject to controversy, there’s strong evidence to suggest that gold can protect investor’s purchasing power.

Former White House Official – Expect More Government Theft

Today the former Special Assistant to the President of the United States for Economic Policy and former member of the U.S. President’s Working Group on Financial Markets issued a disturbing and even frightening warning to King World News to expect more government theft going forward.  While in the White House, Dr. Philippa “Pippa” Malmgren served as financial market advisor in the White House and functioned as the liaison between the White House and the Federal Reserve.  

Dr. Malmgren formerly headed the Global Asset Management business for Bankers Trust in Asia, out of Hong Kong, and was also Chief Currency Strategist for Bankers Trust Company, and former Head of Global Investment Strategy at UBS.  Dr. Malmgren was also a senior consultant to Deutsche Bank, and currently advises the largest sovereign wealth funds, hedge funds, and pension funds in the world.  Below is what Dr. Malmgren had to say in the third and final of a remarkable three part interview series which has now been released on King World News. 

Dr. Malmgren spoke about government theft going forward:  “Look, we are in a world where every major industrialized government doesn’t have the funds to deliver on the promises they’ve made to the public.  So they are going to reach for the public’s cash in different ways….

“Some of it is through higher taxes.  Some of it is what I would call ‘expropriation,’ although taxation and even inflation are a version of that.  But for example, Portugal, about a year ago, announced that they were nationalizing three of Portugal Telecom’s pension funds and placing the assets on the government’s balance sheet so that the government’s balance sheet would look better for the purposes of negotiating with the EU.

Now, were those pensioners expropriated?  Yes.  It made page 14 of the Wall Street Journal and the Financial Times, as if it was a non-event.  But I think what we saw in Cyprus, a really overt expropriation, we are going to see that come in lots of different forms (going forward).  Some of it will be obvious like Cyprus.  Some of it will be subtle like Portugal, but what’s sure is that it’s happening.”