The Savage Gold War Behind The Scenes

With global stocks, the US dollar, and gold all surging, today one of the savviest and well connected hedge fund managers in the world sent King World News the most amazing chart concerning what is happening in the gold market.  Outspoken Hong Kong hedge fund manager William Kaye also spoke with KWN about what is really going on behind the scenes in the gold war.  Kaye, who 25 years ago worked for Goldman Sachs in mergers and acquisitions, had this to say in part II of his remarkable interview.

Kaye:  “As you and I are talking now, we’re a little bit below $1,250 on gold which is ridiculously low.  On the numbers we are looking at that would mean that roughly half of the production of the mining community of the world is unprofitable, which is stunning when you think about it.

What is going on is unprecedented….

“It’s unsustainable, and like anything that is unsustainable it won’t be sustained.  So this is a great opportunity for people who do have an interest in possibly adding to or initiating new positions in gold or precious metals.  We are at levels that I think are extremely attractive, Eric.”

Eric King:  “Bill, what about this chart that you sent me going over the various entities out there that hold gold for retail and institutional investors?  Can you talk about that?”

Kaye:  “Yes, I’m happy to.  Pick up the Wall Street Journal, the Financial Times, watch CNBC if you want to have your brain damaged, you’ll get the same narrative (regarding gold).

And it’s a scary narrative, which is that people are panicked — there is a bear market in gold.  And they (the mainstream media) never make a distinction between the paper market in gold and the physical bullion market.  That is a very important distinction for your listeners (and readers) to make.

But the narrative is that people are panicked, and because they are panicked they are selling into the market to whoever will buy.  And this is why the gold inventories, the Spyder Gold Trust and the other major exchange traded funds (gold holdings) have been so rapidly reduced.


Brace For Financial Destruction & Sovereign Defaults

On the heels of Friday’s gold and silver smash, Marc Faber warned King World News about the extraordinary dangers that will cause destruction in the global financial system.  This is part II of a series of written interviews that will be released today on KWN in which Faber discusses the end game, government theft, how investors can protect themselves, gold, silver, bail-ins, central planner actions, global markets, and much more.

Eric King:  “What is the biggest danger in the financial world as you see it?”

Faber:  “I think we have many dangers.  The biggest danger is governments themselves with their interventions into free markets, and their fiscal policies….

“In other words, increasing or decreasing government spending.

Usually it’s an increase, and as a result the government becomes larger and larger.  Of course the larger a government becomes, the less economic growth you will have.  The extremist, socialist-to-communist economy that we had in the Soviet Union and China, it was a complete failure economically speaking.


Gold, Financial War & The Fed’s Dangerous Exit Strategy

With the United States celebrating Independence Day, oil still trading over $100 a barrel, and continued uncertainty in the Middle-East, today King World News interviewed the director of international economics at the Council on Foreign Relations in New York. Dr. Benn Steil warned KWN about the Fed’s exit strategy, and also spoke about China’s large hoard of U.S. dollars, and their massive accumulation of gold.

Eric King: “What we are looking at right now is a financial war between the U.S. and China.”

Dr. Steil: “That’s right. In the 1940s the U.S. was the world’s largest international creditor, and Britain was the world’s largest international debtor. Today, China is the world’s largest international creditor, and of course the United States is the world’s largest international debtor.

And it’s fascinating to see that the United States today takes the same position in terms of identifying the flaws in the global monetary architecture that Keynes and the British took in the 1940s. For example, former Treasury Secretary Tim Geithner, in 2010, proposed imposing caps on persistent current account surpluses. Of course that was aimed at disciplining Chinese economic behavior….

“This was exactly the sort of position that Britain was taking in the 1940s, Harry Dexter White and the FDR administration condemned. So where you stand depends on where you sit at the time.”

Eric King: “This is also a quote (from Dr. Steil) ‘At present, the United States has no need to accommodate calls for it to sacrifice its exorbitant privilege (having the world’s reserve currency) to some vague vision of the global good. It will only waver when the market initiates a clear shift toward alternatives.” What about that (Dr. Steil)?”

Dr. Steil: “Well, in the 1940s there was a deal to be done between the United States and Britain. It was a harsh deal, and it was an imbalanced deal as I explained, but nonetheless it was a deal to be done. Britain needed financing to get through the war, and the Americans needed British acquiescence to make the dollar the global unit of account.

But the situation with China today is not the same, and let me give you just one little anecdote to illustrate this: In 1956, the Eisenhower administration forced the British out of (the) Suez (Canal) by threatening to withhold emergency IMF support.

Now, the United States, at the time, could afford to provoke a sterling crisis at no cost to itself because in 1956 U.S. holdings of British securities amounted to only one dollar per U.S. resident. Now, compare that to today, where Chinese holdings of U.S. securities amount to over (a remarkable) $1,000 per Chinese resident.

So China cannot afford to provoke a dollar crisis today because it would be hurting itself at least as much as it would be hurting the United States. And that’s why there is really not, in my view, a deal to be done right now between the United States and China to remake the global international architecture … As you quoted, China has a vast stash of dollar-denominated assets, and it doesn’t want to do anything that would undermine the global purchasing power of this hoard. So they are in quite a bind.”