3 Times As Many Americans Supported King George During the Revolutionary War than Support Our OWN Congress Today

When Congress’ approval rating was in the double-digits, polls showed that it was less popular among the American public than cockroaches, lice, root canals, colonoscopies, traffic jams, used car salesmen, Genghis Khan, Communism, North Korea, BP during the Gulf Oil Spill, Nixon during Watergate or King George during the American Revolution.

An October poll by Public Policy Polling showed that Congress is less popular among the American people than zombies, witches, dog poop, potholes, toenail fungus and hemorrhoids.  That was when Congress’ approval rating was 8%.

A new Economist/YouGov.com poll shows that Congress has hit an all-time low: only 6% of the American public approves of Congress.

To put this in perspective, Wikipedia notes:

Historians have estimated that between 15 and 20 percent of the European-American population of the colonies were Loyalists.

In other words, around 3 times as many colonists supported King George as the 6% which support our own Congress today.

Moreover, a May 2013 poll by Fairleigh Dickinson University found that 29% of registered voters think that armed revolution may be “necessary” in the next couple of years. In other words, the number of Americans who think that armed revolution may be “needed” dwarf the number of Americans who approve of the job that Congress is doing.

Even back in 2010, Rasmussen noted that only a small minority of the American people think that the government has the consent of the governed, and that the sentiment was “pre-revolutionary”.

Bonus: 


    






3 Times As Many Americans Supported King George During the Revolutionary War than Support Our OWN Congress Today

When Congress’ approval rating was in the double-digits, polls showed that it was less popular among the American public than cockroaches, lice, root canals, colonoscopies, traffic jams, used car salesmen, Genghis Khan, Communism, North Korea, BP during the Gulf Oil Spill, Nixon during Watergate or King George during the American Revolution.

An October poll by Public Policy Polling showed that Congress is less popular among the American people than zombies, witches, dog poop, potholes, toenail fungus and hemorrhoids.  That was when Congress’ approval rating was 8%.

A new Economist/YouGov.com poll shows that Congress has hit an all-time low: only 6% of the American public approves of Congress.

To put this in perspective, Wikipedia notes:

Historians have estimated that between 15 and 20 percent of the European-American population of the colonies were Loyalists.

In other words, around 3 times as many colonists supported King George as the 6% which support our own Congress today.

Moreover, a May 2013 poll by Fairleigh Dickinson University found that 29% of registered voters think that armed revolution may be “necessary” in the next couple of years. In other words, the number of Americans who think that armed revolution may be “needed” dwarf the number of Americans who approve of the job that Congress is doing.

Even back in 2010, Rasmussen noted that only a small minority of the American people think that the government has the consent of the governed, and that the sentiment was “pre-revolutionary”.

Bonus: 


    






Supply and Demand 1 December

Let’s consider speculation and arbitrage, and look at what it really means when the cobasis is deeply negative, in that light. This is the case in silver.

Per the definition of cobasis = Spot(bid) – Future(ask), it means either that physical metal is being dumped on the bid, pressing it down, or that people are aggressively buying futures, thus lifting the ask in that market.

The price of silver has been falling all year, with a sharp correction in the first three weeks of August. The cobasis has been low and/or falling most of that time (though it has come up a little in the past few weeks). We suspect that both market actions are occurring in silver right now. That is, at times silver metal is being dumped in quantity in the spot market, and at other times paper silver is being bought aggressively in the futures market.

Who might be selling physical silver? The data does not tell us, but looking around at the world economy, we can guess that smaller inventories may be needed at manufacturers of electronics. People may be bringing their metal to “cash4gold” companies to get dollar cash to pay their bills. For whatever reason, in the world of the physical stuff supply is coming to market. In contrast, the demand for the paper stuff—futures—is still strong at the moment.

Readers may have a different experience—we would love to hear about it—but we see continued optimism in comments on investor sites, Facebook groups, etc. Surely, “the bottom is in” and as the prices of the metals takes off once again, silver will rise faster than gold.

As we have written before, analysis of the open interest in COMEX futures is not so simple, but in the context of the present discussion it is interesting to take a look at the open interest for both monetary metals.

            The Open Interest of Gold and Silver

Open Interest in Gold and Silver

 

The graph supports our theory that leveraged speculators (which comprise a large percentage of the change in open interest) have gotten much more excited about silver since July. By contrast, the graph suggests that they are less exuberant about gold.

Thus we have a much higher cobasis in gold at this point. The question is: will demand for silver turn around first, or will leveraged speculators capitulate first?

We would not bet our money that it will be the former.

This week was punctuated by the major American holiday, Thanksgiving. Volumes were lighter than normal and liquidity less. We take with a grain of salt both the price moves and the basis moves. The prices ended up slightly on the week.

Here is the graph of the metals’ prices.

            The Prices of Gold and Silver

Prices

 

We are interested in the changing equilibrium created when some market participants are accumulating hoards and others are dishoarding. Of course, what makes it exciting is that speculators can (temporarily) exaggerate or fight against the trend. The speculators are often acting on rumors, technical analysis, or partial data about flows into or out of one corner of the market. That kind of information can’t tell them whether the globe, on net, hoarding or dishoarding.

One could point out that gold does not, on net, go into or out of anything. Yes, that is true. But it can come out of hoards and into carry trades. That is what we study. The gold basis tells us about this dynamic.

Conventional techniques for analyzing supply and demand are inapplicable to gold and silver, because the monetary metals have such high inventories. In normal commodities, inventories divided by annual production can be measured in months. The world just does not keep much inventory in wheat or oil.

With gold and silver, stocks to flows is measured in decades. Every ounce of those massive stockpiles is potential supply. Everyone on the planet is potential demand. At the right price. Looking at incremental changes in mine output or electronic manufacturing is not helpful to predict the future prices of the metals. For an introduction and guide to our concepts and theory, click here.

Here is a graph of the ratio of the gold price to the silver price. This shows how many ounces of silver one needs, to buy an ounce of gold. There was a small gain in the ratio this week. 

            The Ratio of the Gold Price to the Silver Price

Gold to Silver Ratio

 

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 terse commentary. The dollar will be represented in green, the basis in blue and cobasis in red.

Here is the gold graph. The February cobasis flirted with backwardation this week.

            The Gold Basis and Cobasis and the Dollar Price

Gold

 

The rising cobasis, now in backwardation, combined with a basically flat price of the dollar—just under 25mg—means that some selling of gold futures is balanced by buying of gold metal. There is nothing extreme in this graph, and as we noted above, volume and liquidity were not normal this week, especially the latter part of the week.

Now let’s look at silver.

The Silver Basis and Cobasis and the Dollar Price

Silver

 

We see a sharp rise in the cobasis, though it’s impossible to tell if this is just the poor liquidity or if this is the start of a major move (the move is not pronounced in farther-out futures). This bears monitoring in the coming week.

 

© 2013 Monetary Metals


    






Supply and Demand 1 December

Let’s consider speculation and arbitrage, and look at what it really means when the cobasis is deeply negative, in that light. This is the case in silver.

Per the definition of cobasis = Spot(bid) – Future(ask), it means either that physical metal is being dumped on the bid, pressing it down, or that people are aggressively buying futures, thus lifting the ask in that market.

The price of silver has been falling all year, with a sharp correction in the first three weeks of August. The cobasis has been low and/or falling most of that time (though it has come up a little in the past few weeks). We suspect that both market actions are occurring in silver right now. That is, at times silver metal is being dumped in quantity in the spot market, and at other times paper silver is being bought aggressively in the futures market.

Who might be selling physical silver? The data does not tell us, but looking around at the world economy, we can guess that smaller inventories may be needed at manufacturers of electronics. People may be bringing their metal to “cash4gold” companies to get dollar cash to pay their bills. For whatever reason, in the world of the physical stuff supply is coming to market. In contrast, the demand for the paper stuff—futures—is still strong at the moment.

Readers may have a different experience—we would love to hear about it—but we see continued optimism in comments on investor sites, Facebook groups, etc. Surely, “the bottom is in” and as the prices of the metals takes off once again, silver will rise faster than gold.

As we have written before, analysis of the open interest in COMEX futures is not so simple, but in the context of the present discussion it is interesting to take a look at the open interest for both monetary metals.

            The Open Interest of Gold and Silver

Open Interest in Gold and Silver

 

The graph supports our theory that leveraged speculators (which comprise a large percentage of the change in open interest) have gotten much more excited about silver since July. By contrast, the graph suggests that they are less exuberant about gold.

Thus we have a much higher cobasis in gold at this point. The question is: will demand for silver turn around first, or will leveraged speculators capitulate first?

We would not bet our money that it will be the former.

This week was punctuated by the major American holiday, Thanksgiving. Volumes were lighter than normal and liquidity less. We take with a grain of salt both the price moves and the basis moves. The prices ended up slightly on the week.

Here is the graph of the metals’ prices.

            The Prices of Gold and Silver

Prices

 

We are interested in the changing equilibrium created when some market participants are accumulating hoards and others are dishoarding. Of course, what makes it exciting is that speculators can (temporarily) exaggerate or fight against the trend. The speculators are often acting on rumors, technical analysis, or partial data about flows into or out of one corner of the market. That kind of information can’t tell them whether the globe, on net, hoarding or dishoarding.

One could point out that gold does not, on net, go into or out of anything. Yes, that is true. But it can come out of hoards and into carry trades. That is what we study. The gold basis tells us about this dynamic.

Conventional techniques for analyzing supply and demand are inapplicable to gold and silver, because the monetary metals have such high inventories. In normal commodities, inventories divided by annual production can be measured in months. The world just does not keep much inventory in wheat or oil.

With gold and silver, stocks to flows is measured in decades. Every ounce of those massive stockpiles is potential supply. Everyone on the planet is potential demand. At the right price. Looking at incremental changes in mine output or electronic manufacturing is not helpful to predict the future prices of the metals. For an introduction and guide to our concepts and theory, click here.

Here is a graph of the ratio of the gold price to the silver price. This shows how many ounces of silver one needs, to buy an ounce of gold. There was a small gain in the ratio this week. 

            The Ratio of the Gold Price to the Silver Price

Gold to Silver Ratio

 

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 terse commentary. The dollar will be represented in green, the basis in blue and cobasis in red.

Here is the gold graph. The February cobasis flirted with backwardation this week.

            The Gold Basis and Cobasis and the Dollar Price

Gold

 

The rising cobasis, now in backwardation, combined with a basically flat price of the dollar—just under 25mg—means that some selling of gold futures is balanced by buying of gold metal. There is nothing extreme in this graph, and as we noted above, volume and liquidity were not normal this week, especially the latter part of the week.

Now let’s look at silver.

The Silver Basis and Cobasis and the Dollar Price

Silver

 

We see a sharp rise in the cobasis, though it’s impossible to tell if this is just the poor liquidity or if this is the start of a major move (the move is not pronounced in farther-out futures). This bears monitoring in the coming week.

 

© 2013 Monetary Metals


    






The Other Great Rotation – From Hope To Change

"Peak Hope"...?

 

(h/t @Not_Jim_Cramer)


    






Central Banker Admits Faith In "Monetary Policy ‘Safeguard’" Leads To "Even Less Stable World"

While the idea of the interventionist suppression of short-term 'normal' volatility leading to extreme volatility scenarios is not new, hearing it explained so transparently by a current (and practicing) central banker is still somewhat shocking. As Buba's Jens Weidmann recent speech at Harvard attests, "The idea of monetary policy safeguarding stability on multiple fronts is alluring. But by giving in to that allure, we would likely end up in a world even less stable than before."

 

Excerpts from Jens Weidmann - Europe's Monetary Union

Harvard, 11/25/13 (Full speech here)

In the eyes of many politicians, economists, at least if they are central bankers, cannot have enough arms now - arms with which they are to pull all the levers to simultaneously deliver price stability, lower unemployment, supervise banks, deal with sovereign credit troubles, shape the yield curve, resolve balance sheet problems, and manage exchange rates.

 

It is probably safe to say that this change in attitude is not just due to a sudden surge in the popularity of economists and central bankers. Rather, it reflects the widespread view that central banking has come to be the only game in town. And quite a few economists seem to agree with this notion.

 

To some, the notion that the primary goal of central banks is to keep prices stable has become old-fashioned. Against the backdrop of the financial crisis, they argue that financial stability has become just as important, if not more so, than price stability.

 

...

 

By tearing down the walls between monetary, fiscal and financial policy, the freedom of central banks to achieve different ends will diminish rather than flourish. Put in economic terms: Monetary policy runs the risk of becoming subject to financial and fiscal dominance.

 

Let me explain these mechanisms a bit more in detail, starting with financial dominance.

 

The financial crisis has provided a vivid example of how financial instability can force the hand of monetary policy. When the burst of an asset bubble threatens a collapse of the financial system, the meltdown will in all likelihood have severe consequences for the real economy, with corresponding downside risks to price stability.

 

In that case, monetary policy is forced to mop up the damage after a bubble has burst. And, confronted with a financial system that is still in a fragile state, monetary policy might be reluctant to embrace policies that could aggravate financial instability.

 

...

 

Public debt and inflation are related on account of monetary policy's power to accommodate high levels of public debt. Thus, the higher public debt becomes, the greater the pressure that might be applied to monetary policy to respond accordingly.

 

Suddenly it might be fiscal policy that calls the shots - monetary policy no longer follows the objective of price stability but rather the concerns of fiscal policy. A state of fiscal dominance has been reached.

 

Technically, fiscal dominance refers to a regime where monetary policy ensures the solvency of the government. Practically, this could take the form of central banks buying government debt or keeping interest rates low for a longer period of time than it would be necessary to ensure price stability. Then, traditional roles are reversed: monetary policy stabilises real government debt while inflation is determined by the needs of fiscal policy.

 

...

 

A lender-of-last-resort role would violate this principle of self-responsibility - in that same way as Eurobonds in this setting are at odds with it. Therefore, it would aggravate, rather than alleviate, the problems besetting the euro area.

 

...

 

The idea of monetary policy safeguarding stability on multiple fronts is alluring. But by giving in to that allure, we would likely end up in a world even less stable than before. This holds true especially for the euro area, where a Eurosystem acting as a lender-of-last-resort role for governments would upend the delicate institutional balance.

 

To disentangle the euro area's fiscal and financial conundrums, we should practice the art of separation - especially with regard to the sovereign-bank doom loop. Or let me put it this way: Rather than for monetary policy to waltz with fiscal and financial policy, we need to erect walls between banks and sovereigns.

 

Of course, Taleb's somewhat seminal piece on vol suppression remains a concerning glimpse of the inevitable.

ForeignAffairs


    






Jeff Bezos Unveils Amazon PrimeAir – Drone Delivery

While the fundamentals continue to deteriorate, we are sure the idea of drone-based delivery (which fits with the 7500 drones the FAA expects within the next few years) will add a few multiple points to Amazon's share price valuation. On a side note, with increasing awareness of the government's surveillance, what better way for the NSA to keep an eye on everyone up close and personal (and to get an occasional invoice by the company that has made burning cash from operations into an art form).

 

The Amazon PrimeAir Drone...

 

 

 

In Action...

 

We suggest not buying fine glassware...

 

The flying machine already has its own twitter account - @AmazonDrone


    






Ukraine On The Edge: The 7 Minute Video Summary

The following seven minutes of mayhem look eerily reminiscent of the violent pre-ambles to the middle-east's recent coups or non-coups. As anti-government protesters demonstrated against the shunning of a European trade agreement (President Yanukovych - "I will not allow any serious economic losses and decline of living standards"); the clashes became ever more violent as the police cracked down. Following heavyweight boxing champion (and opposition leader) Vitali Klitschko's call for a new government - "our main task is Yanukovych’s resignation. But the first step is the resignation of Azarov’s government" - the clashes left at least 265 people injured. The crackdown followed Interior Minister comments that they "won’t allow Ukraine to become another Libya or Tunisia, where uprisings toppled governments in recent years." Of course, the main difference is the Ukraine is now squarely under Putin's sphere of influence.

 

0:20 Initial fireworks followed by police flash-bangs and tear gas...

1:45 Some standard police beatings

3:00 Ubiquitous projectile exchange

3:30 Police charge...

4:30 Serious police beatings handed out

5:30 The two fronts stare each other down

6:00 Serious police reinforcements

 


    






UK Royal Mint Working On Plans To Issue Gold-Backed Physical Bitcoins

The implicit, and ever more explicit, institutional acceptance of the dominant cryptocurrency Bitcoin (we say dominant because as we pointed out last week, there has been an unprecedented spike of digital currencies one can pick and choose from) continues when following the surge in vendors willing to transact in BTC over Thanksgiving, the latest news comes from the birthplace of the modern central bank, the UK, where we learn that none other than the UK Royal Mint has been working on plans since this summer to issue physical Bitcoins in collaboration with the Channel Island of Alderney.

But where the story gets downright surreal is that as the FT reports, the same symbolic Bitcoin token issued by the Royal Mint "would have a gold content – a figure of £500-worth has been proposed – so that holders could conceivably melt and sell the metal if the exchange value of the currency were to collapse." In brief: a perfect, and utterly incomprehensible, fusion of (opposing) hard, soft and digital currencies all rolled into one...

From the FT:

The tiny Channel Island of Alderney is launching an audacious bid to become the first jurisdiction to mint physical Bitcoins, amid a global race to capitalise on the booming virtual currency.

 

The three-mile long British crown dependency has been working on plans to issue physical Bitcoins in partnership with the UK’s Royal Mint since the summer, according to documents seen by the Financial Times.

 

It wants to launch itself as the first international centre for Bitcoin transactions by setting up a cluster of services that are compliant with anti-money laundering rules, including exchanges, payment services and a Bitcoin storage vault.

So, convert a digital currency into fiat, issue plastic (or some other material) tokens (appropriately covered in some goldish color) representing "value" because suddenly the currency (supposedly) has the blessing of central banks, and then store them in some basement? Brilliant.

Just how is the UK Royal Mint involved?

The special Bitcoin would be part of the Royal Mint’s commemorative collection, which includes limited edition coins and stamps that are normally bought by collectors. It would have a gold content – a figure of £500-worth has been proposed – so that holders could conceivably melt and sell the metal if the exchange value of the currency were to collapse.

Wait, what: gold-backed Bitcoins? If so, that would be truly revolutionary because for the first time a Treasury (and by implication, a central bank) is effectively hinting that not only are they willing to fiat-ize Bitcoin, but also have the symbolic BTC token (after all Bitcoin is a digital currency by definition) serve as a commodity trap. Because once enough gold-backed physical Bitcoins are locked up in some basement in the UK, who has the master key? That's a rhetorical question by the way.

Naturally, the UK Mint is not quite eager to disclose full details while the plan is still being finalized:

David Janczewski, head of new business at the Royal Mint confirmed it had been approached by the finance minister of Alderney to “explore the possibility of manufacturing a physical commemorative coin with a Bitcoin theme”.

 

“Discussions have not progressed further and at this stage it remains nothing more than a concept,” he added.

 

But the controversy around Bitcoin has made the Alderney plan a sensitive subject. The Treasury, which owns the Royal Mint, declined to comment on the plans. George Osborne, the British chancellor, also holds the title of Master of the Mint.

Since there is understandably much confusion over what the minting process of a physical gold-backed token representing a digital currency, with the backing of an entity that does the bidding of an issuer that only believes in fiat currencies, here is the FT with the blow by blow.

An independent company will provide the Bitcoins. If the price plunged, neither Alderney nor the Royal Mint would lose anything.

 

The company would put the Bitcoins in an escrow account at an agreed price.

 

Meanwhile, the Royal Mint would take customers’ orders for its minted Bitcoins and receive money from those coin sales.

 

The virtual Bitcoins backing the physical coins would be held in digital storage facilities by Alderney.

 

The Mint would issue the commemorative Bitcoin, paying for the value of the gold content itself. Alderney would receive royalties from sales of the coins.

 

Coins could be redeemed for sterling at any point in Alderney for the price of a Bitcoin on that day.

All we can do at this point is sit back in wonder and amusement as we hit the pinnacle of monetary confusion, whereby the UK Royal Mint, willing to take full advantage of retail confusion, will mix hard, soft and digital currency, and produce a product... that is locked away on an island that belongs to the UK.

And all we can say is "brilliant", because if there is a better plan to meld the sentiment of both hard and digital-currency (and hence, anti-fiat) advocates, and to redirect it in a "fiat" pathway, we have yet to hear it.


    






The Iran "Deal" In One Cartoon

More promises...

 

(h/t Sunday Funnies)