A subscriber to Zero Hour Alert wrote in recently, with an intriguing story I’m compelled to share.
I am an avid reader of your Zero Hour Alert, just love it.
I wanted you to know, recently attending a luncheon full of politicos, I asked a question concerning Target 1 and 2 concerning the EU, stating the UK did not sign up to Target 2. The panel were senior banking figures, politicians, London Corporation senior people and more. When it came to answering my question, nobody was prepared to do so. In fact the London Corporation representative just looked at me with contempt in the eye and replied, “I AM NOT PREPARED TO ANSWER THE T2 QUESTION”. The others didn’t even acknowledge the question. After the luncheon a card was thrusted into my palm. With the words, ‘email me’. Weird. I had countless people asking me what the hell is T2 and how I ruffled feathers.
Bizarre.
Are we really living in a world when real issues are unable to be discussed…
If you’ve been reading Capital & Conflict for a while, you’ll know our prediction that Italy will default on its debt centres around the Target2 system that all eurozone members are locked into. This problem was highlighted to us by “the maestro” central banker Alan Greenspan, and continues to worsen over time. Italy now owes almost half a trillion euros to countries like Germany through the Target2 system, which short of drastic European Central Bank intervention or a taxpayer bailout is not going to be paid back.
Thanks to the complexity of the euro framework, the problem has flown under the radar of most people, much to the benefit of the folks running the show. And when confronted with the issue, as this subscriber has done, they just don’t want to talk about it – at least, not in public.
The Target2 issue is one of those problems that won’t matter, until it matters. It’s a real issue, that’s not going away – even if isn’t considered politic to discuss it.
Speaking of issues rarely discussed, Charlie Morris over at The Fleet Street Letter recently responded to one of his own subscribers on the subject of gold price manipulation, something rarely spoken of in the mainstream. I share the question (bold) and his response below.
I invested in gold at the end of 2012, and couldn’t understand why the price kept going down when economic fundamentals suggested otherwise. Gold commentators were unable to offer convincing explanations for the downward price movements. I found a book called The Big Reset by Willem Middelkoop. It’s exhaustively researched and presents a very persuasive argument that a US government agency is trying to manipulate the gold price downwards in order to maintain confidence in the USD as the global reserve currency. I don’t understand why commentators on the gold market never seem to talk about this alleged manipulation, even to dismiss it as a myth.
Many gold commentators love these conspiracy theories and rant about them. I am not one of them because, as I have shown, gold collapsed in 2013 because real interest rates rose. And of course, there was a bubble that had to unwind as many people had bought into the gold market in the hope of riches.
Once the Fed ended quantitative easing, which was good for gold, and started to tighten monetary policy, investors focused on financial assets, especially growth stocks. That shift was entirely rational. You could argue that the Fed hiking rates is manipulation. But it is just doing its job.
Some central bankers would say that when gold is rising in their currency, they are doing a bad job and had better act, as policy has become too easy. I would point towards Argentina or Turkey where the central bankers need to tighten policy in order to stabilise their currencies.
The key point is that it is impossible to suppress the price of anything in the long term, even for the Fed. I know the gold trading teams at the large banks, and I can promise you, these are not Ernst Blofeld (Bond villain) types in cohorts with the Fed. They are decent people, who help to make the gold market the success it is.
You can trade vast amounts of gold at the touch of a button because the liquidity is so vast. Central banks, from all over the world, trade with funds, speculators, private individuals and industry (miners, jewellery etc). The gold market functions very well.
Gold is the simplest investment of them all as it is just a weight of metal. Yet it has the most conspiracy theories of any asset I can think of. Bitcoin would come a close second.
What economic issues do you feel we’re not allowed to discuss these days? Let me know: [email protected].
All the best,
Boaz Shoshan
Editor, Southbank Investment Research
PS
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Category: The End of Europe