American Bases In Germany And The Gold Basis

[Polish_Silver]

Re: GG the first to enlist!

Juju,

what is the simplest explaination for Germany's decision?

The real reason is likely unspeakable, because it would show discontent with the status quo.

[BadJuju]

Re: GG the first to enlist!

Did you not read what GRG wrote, sir?

[GRG55]

Re: GG the first to enlist!

So GG,

I take it you would have been the first to volunteer for fighting in Serbia?

Or perhaps you encouraged your children to join up?

And what threat was it to Germany?

Your comment is beyond absurd, and what I would expect only from someone who apparently cannot mount a sound defense of their original contention (that the German nation packs quite a military punch).

The Balkan/Yugoslav war was a European war, and a European problem. Yet the leadership to deal with the crisis fell largely to the Americans, diplomatically through Secretary of State Warren Christopher and former Secretary of State Cyrus Vance (who worked with the EU's Lord Owen in an attempt to negotiate a peace accord), and then to the US military which played by far the dominant role in NATO that finally forced the Serbs to the table and agree to the Dayton accord. The Germans sat it out.

To repeat my point: "...speaks volumes about Europe's ability to solve its own problems..."

Not that it's any of your business but one of my brothers, a military pilot, served with NATO forces in Bosnia.

[don]

Re: GG the first to enlist!

2010 TO&E (note German population is roughly 1/4 the US, easy to extrapolate and compare armed forces):

GERMANY

Population Defence budget 2010 GDP 2009 Land area Capital Life expectancy Population growth rate 82 million Euros 31.1billion (US$37.9 billion) Euros 2,280 billion (US$2,781billion) 357,500 sq kms (137,200 sq miles) Berlin (Population 3.3 million) 79 years 0.3 per cent ARMY NAVY AIR FORCE Total Armed Forces Army NavyAir Force 160,000 including about 40,000 conscripts (plus about 130,000 reserves) 24,000 including about 3,500 conscripts (plus about 4,000 reserves) 50,000 including about 10,000 conscripts (plus about 12,000 reserves) The Bundeswehr (the generic name for the German Armed Forces) is currently restructuring. During early 2010 conscription was reduced from 9 to 6 months and it is possible that there are longer term plans to abolish conscription entirely. We believe that under the current limitations imposed by the German constitution it is unlikely that the Armed Forces are capable of deploying more than about 10,000 personnel on overseas missions. MINISTRY OF DEFENCE Contact Details Ministry of Defence Stauffenberg Strasse 18 D-10785 Berlin Germany The Operations Division at the Federal Ministry of Defence includes the newly formed Response Forces Operational Command. The German Armed Forces are being restructured and by 2012 there should be three categories of forces - Response Forces, Stabilisation Forces and Support Forces with all three armed services contributing forces as required. There is a Joint Forces Support Service and a Central Medical Service. ARMY ORGANISATION Restructuring By late 2011 the following formation reductions will have been achieved.: Divisional headquarters reduced from 8 to 5 Active brigades reduced from 17 to 12 Battalions reduced from 120 to around 70 (depending on future planning assumptions) These reductions will result in a force grouped around: Response Forces Special Operations Division 1 (GE) Armoured Division Stabilisation Forces 10 (GE) Armoured Division 13 (GE) Mechanised Division Airmobile Division (DLO) Support Forces Army Support Command Army Strength: approximately 160,000 including about 40,000 conscripts (plus about 130,000 reserves). There are plans to reduce the strength of the German Army to around 132,000 within two or three years. Outline Army Structure: In general terms and available for immediate operations are: 2 x Armoured Divisions 1 x Mechanised Division 1 x Airmobile Division 1 x Special Operations Division German element of the Franco/German Brigade GERMAN ARMY OUTLINE STRUCTURE Notes: (1) Expect brigades to have their integral artillery, engineer, logistic, maintenance and medical support. (2) The Army Office is responsible for doctrine, future concepts, training, army schools, colleges and administration. (3) In the following references to divisional formations all German divisions are prefixed by GE to avoid confusion with other national formations. Overall there are approximately 70 battalions (major units). The following diagram illustrates the possible composition of a German Brigade - In this case the 12th Armoured Brigade. 12TH ARMOURED BRIGADE OUTLINE STRUCTURE Specialist units such as artillery and air defence would be allocated depending upon the operational requirement. Multinational operations Significant elements of the Germany are earmarked for multi-national operations in support of either NATO (Article V – General War) or the European Union as follows. I (German/Netherlands) Corps This corps headquarters in Munster deploys 1 (GE) Armoured Division and the Dutch 1 (NL) Division under NATO Article V arrangements. Multinational Corps North East (MNC NE) With its headquarters located in Sczcecin this Corps has a Mechanised Division assigned. Both Denmark and Poland contribute forces to this formation as equal partners. 2 (German/US) Corps Located in ULM this headquarters is a NATO HQ available as a force headquarters for Article V operations. In a purely national context this HQ assists with training and national planning tasks. 5 (US/German) Corps With its headquarters located in Heidelberg this corps has German formations assigned for Article V operations. Eurocorps This headquarters is located in Strasbourg and the main German contribution is 10 (GE) Armoured Division as well as the German units assigned to the Franco/German Brigade. Other national contributions are from Belgium, France, Luxembourg and Spain. The Eurocorps organisation is covered in detail in earlier chapters. European Union Battlegroups Germany has agreed to participate in the following 4 x European Union Battlegroups that are to be operational by 2012: a. France, Germany, Belgium, Luxembourg b. Germany, the Netherlands and Finland c. Germany, Austria and the Czech Republic d. Poland, Germany, Slovakia, Latvia Allied Command Europe Rapid Reaction Corps (ACE ARRC) This multi-national Corps with its headquarters in The United Kingdom has German formations assigned. Should 7 (GE) Armoured Division be deployed under ARRC command, the Polish 10 Armoured Brigade would be assigned to under command 7 (GE) Armoured Division. MAJOR ARMY EQUIPMENT Main Battle Tanks About 1,000 x Leopard operational with 350 to be upgraded to A6. Running down to a force of 852 x Leopard in total. Reconnaissance (Recce) 80 x TPz-1 Fuchs (NBC) (Wheeled) 222 x Fennek (Wheeled) Armoured Infantry Fighting Vehicle 410 x Puma (Tracked – replacing Marder) 170 x Wiesel (Tracked) Armoured Personnel Carrier (APC) 900 x M-113 (Tracked – estimate) 900 x TPz-1 Fuchs (Wheeled) 200 x Dingo (Wheeled – 598 on order) Self Propelled Artillery 490 x 155 mm M-109A3G (Tracked and majority in store) 165 x 155 mm PzH 2000 Towed Artillery 50 x 105 mm M-101 (estimate – in reserve) 60 x 155 mm FH-70 Multiple Rocket Launchers 130 x 227 mm MLRS Mortars (Mor) 400 x 120 mm Tampella/Brandt (estimate) Anti-Tank (Atk) 1000 x Milan ATGW (estimate in service) 100 x TOW ATGW (SP on Wiesel – estimate) Low Level Air Defence (LLAD) 30-40 x Roland SAM (in-service) 50 x ASRAD-R SP SAM 1,000 x Stinger SAM (estimate) 28 x PAC-3 Patriot SAM 147 x 35 mm Geppard 1,000 x 20 mm (approximately) Army Aviation 150 x BO-105 with TOW ATGW (Attack) 90 x CH53G Stallion (Support) 13 x EC-135 (Utility) 15 x SA 313 Alouette II (Utility) 100 x UH-1D Iroquois (Utility) 80 x Tiger (Attack - on order) 80 x NH-90 (Support – on order) Note : Expect overall armoured vehicle totals to be cut by approximately 25 per cent by end 2012 NAVAL ORGANISATION Navy Strength: approximately 24,000 including about 3,500 conscripts (plus about 4,000 reserves) Principal units: 12 x Submarines 15 x Frigates 10 x Patrol Craft 19 x Mine Warfare Vessels Published plans suggest that the future German Navy will consist of about 90 vessels. This total will probably include 8 x submarines, 14 x frigates, 14 patrol and 20 x mine countermeasures vessels. German Navy Outline Structure Note: The Naval Office is responsible for policy, doctrine, security, training, schools, personnel, medical services, armaments, supply and maintenance. MAJOR NAVAL EQUIPMENT Submarines Tactical (SSK) 8 x Type 206 4 x Type 212 (2 more on order – possible total of 8) Frigates (FF) 3 x Sachesen Class 4 x Brandenburg Class 8 x Bremen Class Corvettes (FS) 3 x Braunschweig (2 more awaiting delivery) Mine Countermeasures (MCM) 9 x Frankenthal (Type 332) 5 x Kulmbach (Type 333) 5 x Ensdorf (Type 352) with Seehund ROV Patrol and Coastal Combatants (PCC) 10 x Geppard (Type 143A) Miscellaneous 6 x Landing craft 18 x Support vessels (tankers, cargo, barracks etc) Naval Aviation 4 x DO 228 (Tpt) 8 x P-3C Orion (MR) 22 x Sea Lynx Mk 88A (ASW/ASuW) 21 x Sea King Mk 41 (SAR) 38 x NFH 90 on order AIR FORCE ORGANISATION Air Force Strength: approximately 50,000 including about 10,000 conscripts (plus about 12,000 reserves) Future Plans Germany will purchase 180 x Eurofighter Typhoon Aircraft (deliveries in progress) at a cost of 19.5 billion Euros and up to 60 x A400M Transport Aircraft at a cost of 8.2 billion Euros. First deliveries for the A400M are planned for 2010. Up to 42 x NH 90 Helicopters are also on order. We expect to see about 250 x combat aircraft in the German Air Force inventory by 2012. OUTLINE AIR FORCE STRUCTURE BREAKDOWN OF AIR OPERATIONS COMMAND Note:Ground Based Air Defence is an integral pert of each of the 3 x Air Divisions BREAKDOWN OF THE AIR FORCE OFFICE Note: The Air Force Office is responsible for policy, doctrine, security, training, schools, personnel, medical services, armaments supply and maintenance. Support Command provides logistical an d maintenance support services. AIR DEFENCE OPERATIONS The assets of the German Air Force are an important element in the NATO air defence organisation in the Central Area. The Tactical Command North’s ICAOC (Interim Combined Air Operations Centres) at Kalkar, and the Tactical Command South’s ICAOC at Messtellen both report to the NATO CAOC at Uedem (Germany). Overall air defence operations are coordinated from the NATO Joint Force Component Command HQ (JFCC Air) at Ramstein (Germany). Land based air defence is structured around six squadrons equipped with Patriot SAM, six squadrons equipped with Hawk SAM and 14 squadrons equipped with Roland SAM. These SAM units are also embedded in the NATO early warning and air defence network. GERMAN AIR FORCE FLYING WINGS Designation Aircraft Type Location Fighterbomber Wing 31 Tornado Norvenich Fighterbomber Wing 32 Tornado Lechfeld Fighterbomber Wing 33 Tornado Buchel Reconnaissance Wing 51 Tornado Kropp Air Transport Wing 61 Transall C-160D, UH-1D Penzing Air Transport Wing 62 Transall C-160D, UH-1D Holzdorf Air Transport Wing 63 Transall C-160D, UH-1D Hohn Fighter Wing 71 F-4F Phantom/Typhoon Wittmundhaven Fighter Wing 73 Tornado/Typhoon Laage Fighter Wing 74 Tornado/Typhoon Neuburg/Donau Flight Service 1 Airbus A 310 and Challenger Koln-Bonn Flight Service 3 AS 532U2 Cougar Berlin-Tegel Test & Evaluation Wing 61 All types Manching/Ingolstadt Training Wing Tornado Hollman AFB, New Mexico, USA German Air Force Wings can have large numbers of aircraft – some Tornado Wings have as many 48 aircraft. MAJOR AIR FORCE EQUIPMENT Fighter (Ftr) 40 x Typhoon (140 more on order) 44 x F-4F Phantom II (until 2012) Reconnaissance (Recce) 41 x Tornado IDS Fighter Ground Attack (FGA) 90 x Tornado IDS (in service) Suppression of Enemy Air Defence (SEAD) 32 x Tornado ECR Transport (Tpt) 7 x Airbus A 310 (some tanker configuration) 80 x C-160D Transall 6 x CL-601 Canadair Challenger Training (Trg) 35 x T37B 40 x T-38A Helicopters (Hel) 75 x UH-1D Iroquois (majority SAR) 3 x AS 532U2 Cougar Up to 42 x NH 90 on order Air launched missiles (ALM) AIM-9 Sidewinder (AAM) ASRAAM (AAM) Iris T (AAM) AGM-88A Harm (ARM) AGM-65 Maverick (ASM) AS-34 Kormoran (ASM) Surface to Air Missiles (SAM) 36 x Patriot SAM fire units 24 x Hawk SAM fire units (in store) 45 x Roland SAM fire units (in store) CURRENT UNIT DEPLOYMENTS (over platoon strength – 30 personnel. These are approximate figures) NATO (ISAF) Afghanistan 4,665 NATO (ISAF) Uzbekistan 175 ENATO (KFOR) Kosovo 1,500 EUFOR Bosnia 138 UNIFIL II – Lebanon 450 Note: Considerable numbers of German Armed Forces personnel (both Army and Air Force) train at various locations in the United States using pre-positioned equipment.

[Polish_Silver]

Bosnia vs. Just War theory

The Balkan/Yugoslav war was a European war, and a European problem. Yet the .

I don't see how it was Germany's, or any other nations business, to get involved.

You are telling the soldiers that they have to risk thier lives to protect the ethnic minority in some neighboring country?

Is that what soldiers agree to when they enlist?

I thought it was "protect the country from all enemies foreign and domestic".

Or the german version:

"I pledge to faithfully serve the Federal Republic of Germany and to bravely defend the right and the freedom of the German people."

How were the serbs or croats a threat to the "right and freedom" of the German people?

[lakedaemonian]

Re: GG the first to enlist!

Your comment is beyond absurd, and what I would expect only from someone who apparently cannot mount a sound defense of their original contention (that the German nation packs quite a military punch).

The Balkan/Yugoslav war was a European war, and a European problem. Yet the leadership to deal with the crisis fell largely to the Americans, diplomatically through Secretary of State Warren Christopher and former Secretary of State Cyrus Vance (who worked with the EU's Lord Owen in an attempt to negotiate a peace accord), and then to the US military which played by far the dominant role in NATO that finally forced the Serbs to the table and agree to the Dayton accord. The Germans sat it out.

To repeat my point: "...speaks volumes about Europe's ability to solve its own problems..."

Not that it's any of your business but one of my brothers, a military pilot, served with NATO forces in Bosnia.

The way I kinda look at it when it comes to both Germany and Japan, they've been locked into very much a "self defense" mode of military thinking since WWII ended and their military forces were slowly rebuilt.

Japan especially even going to far as to call their respective military branches "Self Defense Forces".

I would think if there was an equal but Asian problem, such as say the Philippines imploding and busting apart it would be exceptionally difficult for the Japanese to become involved even if openly invited.

Too many Filipinos(and many other races) murdered in an orgy of violence and counter insurgency doctrine that would make Vlad the Impaler sick.

Same goes for the Germans with former Yugoslavia.......Nazi Germany faced some of it's worst insurgency/patisan/guerrilla activity from the area......and responded with incredibly brutal tactics.

I would completely agree that Germany could have and should have played a far more significant role in the former Yugoslavia.........but as far as deployment of combat units for peace enforcement it would have been cause for considerable concern.

Looking at Yugoslavia from a topographical/geographical perspective, as well as a socio/ethnic perspective....it is a counter insurgency and peace enforcement nightmare.

I think Germany did a very credible job of rebuilding it's military forces under the aegis of US/NATO to counter any genuine threat from USSR/Warsaw Pact......but it was, and remains....short of credibility when it comes to force projection as it's military has been quit slow in responding to a changing global security climate by way of creating a more multi-dimensional military. Germany's military was(and sort of still is) configured to kill Russians flooding through the Fulda Gap.

Germany has been the 3rd largest contributor in total headcount for ISAF in Afghanistan, but Germany's efforts have been often(and accurately in my opinion) described as more politically motivated than operationally relevant.

Not a poor reflection on German soldiers, but on their political leadership as well as the leftist/passive foreign policy views held by many with sway in Germany.

Libya was a FAR easier topo/geo, socio/ethnic intervention than former Yugo...and Germany recused itself from involvement there as well.

To me, Libya seemed like a giant dog pile, everyone(seemingly but Germany) got in on that "easy" one.

Although, the hard part starts with the governance the day after your side wins.

On one hand you could argue Germany made the right move with Libya, on the other hand, you could argue it's another failure of Germany to take appropriate leadership in regional geopolitical crisis.

Libya continues to prove no regime change is ever "easy" in the form of the lasting governance problems as well as the virus that spreads from a former strongman ruled state being knocked over and infecting the region in the form of experienced insurgents and easy access to large quantities of weapons.

Personally, I think Germany did the right thing in NOT actively supporting the mission against Libya.

But I do think Germany could have taken a far bigger leadership role in the former Yugoslavia......but acknowledge that no way in hell would I have ever wanted to have the job of convincing the peoples of former Yugoslavia that German troops in former Yugo was a good thing.

THAT would have been an information operations/propaganda dream for anyone trying to stir up trouble.

[metalman]

Re: GG the first to enlist!

So GG,

I take it you would have been the first to volunteer for fighting in Serbia?

Or perhaps you encouraged your children to join up?

And what threat was it to Germany?

nice going, polish. you got grg riled up... & that ain't easy.

do i hear the bouncer knocking on the door?

[lakedaemonian]

Re: Bosnia vs. Just War theory

I don't see how it was Germany's, or any other nations business, to get involved.

You are telling the soldiers that they have to risk thier lives to protect the ethnic minority in some neighboring country?

Is that what soldiers agree to when they enlist?

I thought it was "protect the country from all enemies foreign and domestic".

Or the german version:

"I pledge to faithfully serve the Federal Republic of Germany and to bravely defend the right and the freedom of the German people."

How were the serbs or croats a threat to the "right and freedom" of the German people?

Be aware that "faithfully serve the Federal Republic of Germany" also includes execution of democratically elected government foreign policy.

I'm not saying I agree or disagree with any particular deployment, but the military do not have the option of refusing a lawful order, or choosing only that which is directly related to the defense of the state.

About the best the military can do is advise government on how the military can be used as "A" tool of diplomacy in a crisis, communicate their concerns about likelihood of mission success/failure, if ordered to deploy attempt to negotiate a deployment with a clear exit strategy and parameters conducive to force success and safety, and try to bring everyone home.

Yugoslavia was a stability/security, peace enforcement nightmare.

It was a collection of countries held together under the iron fisted rule of Tito(WWII partisan leader). Once he went, and the strongman vacuum was created, it was inevitable that things would deteriorate.

Simply putting a fence around the country, hoping for the best, and letting them sort it out amongst themselves is not really a valid option.

The transnational crime and regional stability concerns were, and are, very real.

[lakedaemonian]

Re: GG the first to enlist!

2010 TO&E (note German population is roughly 1/4 the US, easy to extrapolate and compare armed forces):

If you know what to look for you can see that Germany, 20+ years after the fall of the Berlin Wall, Warsaw Pact, and USSR, is still heavily configured towards large scale conventional combined arms operations in Europe.

While you can see signs of the Bundeswehr shifting from a conscript based and armor/artillery heavy conventional force to a professional force capable of providing rapid response and highly capable/flexible units(SOF), it still lacks any/all capability it getting it's people into even a semi-permissive environment much beyond Germany's borders.

Just look at it's airlift......C160's. Which can only carry stuff half as far as a C130 Hercules.

A400m is being built.....but this has been a problem for decades.

Only now with its introduction will Germany have an aircraft that can exceed the capability of the 50+ year old C130.

I don't necessarily think Germany should be sending troops all over the place.

But their inability to send troops all over the place, if compelled to do so by their democratically elected government, would seriously hinder German foreign policy options.

I have a LOT of respect for Switzerland and their tendency towards geopolitical neutrality.......but when it comes to the likes of Libya.......the Swiss were held hostage by Qaddafi.....in the form of significant economic retaliation because they arrested one of his sons for beating his wife(Libya cutting the Swiss off from their main oil supplier and withdrawing bank funds, as well as holding a number of Swiss nationals hostage).

But I don't think Germany, as the main economic engine of Europe, can afford to be as geopolitically neutral-ish like little Switzerland.

[cobben]

Re: GG the first to enlist!

nice going, polish. you got grg riled up... & that ain't easy.

do i hear the bouncer knocking on the door?

Reminds me of my wife & 5 year old daughter going after each other for no particular reason, does that mean I can call in the US military to keep the peace (Latvia is after all a member of Nato) , or do I have to "bounce" one of them myself?


The US problem in Europe is the residual expectation still left from WWII that the US has the role of policeman.

The EU does not have but would like to have a supranational police force, the problem getting there is as usual herding cats.

It seems only France currently has the capacity to "police" the neighborhood, e.g. the unilateral French actions in Africa.

Sweden has reduced its military capacity to the extent that only one area of Sweden can be defended for one week, and they need 3 weeks notice to get organized?

The Swedish prime minister Reinfeldt has just declared that defense is a "special interest".

Note the "only in Sweden" nature of some of this, but there must be similar discussions going on throughout the EU.
The prime Swedish econblogger has written a novel about how the Russian Federation tries to take over the island of Gotland.
The entire Swedish air force can be neutralized in a matter of minutes by one or two Russian backfire planes firing cruise missiles from within RF airspace.

Oh, and the Riksbank has not checked on its foreign held gold either, but their is no problem with that, and now there is a official proposal to sell it all to help reduce the amount of capital required by the Riksbank? It would seem that all is right with the world and future peace and prosperity are guaranteed for all time.

Reinfeldt irritated by Sweden's defence debate

Published: 29 Jan 13

Prime Minister Fredrik Reinfeldt has described as "strange" an ongoing debate about the country's defence capabilities, noting that Sweden was very unlikely to come under attack.

• Security probe into 'one-week defence' claim (25 Jan 13)
• 'Sweden can't count on help from Nato' (14 Jan 13)
• Defence Minister 'sets the bar too low': critics (9 Jan 13)

Reinfeldt was speaking in response to the furore surrounding comments made by armed forces chief Sverker Göransson, who earlier this month claimed Sweden's defences would hold out only for a week if tested by an invading force.

Göransson's statements prompted reactions from far and wide, with Swedish security service Säpo launching an investigation last week into whether he had revealed classified information.

He has since gone on sick leave for exhaustion.


. . .

[globaleconomicollaps]

Gold Leaps Into Backwardation

So... you guys all ready for the end of civilization? I'm attaching the Fekete article "last contango in Washington" for your reading pleasure.

http://www.financialsense.com/contri...-backwardation

Gold Leaps Into Backwardation
By Keith Weiner

Since late January, the February gold contract has been in backwardation. This means that one could make a profit by simultaneously selling a gold bar and buying a February contract. One would still have one’s gold plus a little extra. I coined the term “temporary backwardation” (http://monetary-metals.com/temporary...d-from-2008-3/), to describe this curious and very recent phenomenon. In our “new normal”, most gold and silver contracts go into backwardation as they get close to expiry.

When the Feb contract first jumped into backwardation, it was well within the “contract roll” period. The roll is when naked longs sell the expiring contract and buy a contract for a more distant month. This heavy selling of the expiring contract pushes down its price. Since cobasis is Spot minus Future (oversimplified slightly), the cobasis rises purely due to the mechanics of this selling.

But today something more serious occurred. The April contract, which is not yet being “rolled”, fell into backwardation. See the chart.

gold cobases


The market is offering a free profit to anyone who will sell a gold bar and buy an April contract. For whatever reason, no one is either able or willing to take the bait. This is proof that the market for physical gold metal is drying up. Speculators in the futures markets may believe that the gold price “should” fall because the central banks say they are not going to competitively devalue their irredeemable paper currencies. Owners of real metal are increasingly reluctant to part with it at the current price.

We don’t recommend that anyone ever naked short the monetary metals. Instead, we always advise to use an arbitrage position such as long gold / short silver.

Using the basis theory, we have been bearish on silver this year, against the consensus: http://monetary-metals.com/is-silver...ade-right-now/ and http://monetary-metals.com/the-comin...er-correction/.

Using the basis theory on gold today, we would suggest that now is a great time and a great price to buy gold.

And to those who may be shorting gold due to downward momentum, we would say this. Caveat venditor.







http://www.safehaven.com/article/529...-in-washington


The Last Contango in Washington
By: Antal E. Fekete | Sat, Jun 3, 2006

When the silver corpse stirs, money doctors run

People from around the world keep asking me what advance warning for the collapse of our international monetary system, based as it is on irredeemable promises to pay, they should be looking for. My answer invariably is: "watch for the last contango in silver".

It takes a little bit of explaining what this cryptic message means. Contango is that condition whereby more distant futures prices are at a premium over the nearby. The opposite is called backwardation which obtains when the nearby futures sell at a premium and the more distant futures are at a discount. When contango gives way to backwardation in all contract spreads, never again to return, it is a foolproof indication that no deliverable monetary silver exists. People with inside information have snapped it up in anticipation of an imminent monetary crisis.

"Last contango" does not mean that the available supply of monetary silver has been "consumed" by industrial applications, as trumpeted by the cheerleaders of the get-rich-quick crowd. Such a notion is at odds with the fact that silver has always been, and still is, a monetary metal. Huge stores of monetary silver still exist, but are kept out of sight and availability by their current owners who, for obvious reasons, want to remain anonymous. "Last contango" is the endgame of the grand tug-of-war between the money doctors and "We, the People". The doctors exiled silver from banking to the futures market hoping that it will drown there in a sea of paper silver. But the silver corpse stirs. People withdraw ever greater chunks of cash silver from exchange-approved warehouses. The money doctors run scared. If futures trading in silver is unsustainable and must end in default, then the flimsiness of the house of cards built of irredeemable promises will be exposed for all to see. Following the last contango in Washington the money doctors, led by Helicopter Ben, will follow the example set by the 18th century Scottish adventurer John Law of Lauriston. He left Paris in a hurry. In a disguise. Disguised as a woman.

Don't kill the goose laying silver eggs

My main argument justifying the claim that the bulk of monetary silver has not been consumed is that silver, just as gold, is far more useful in monetary than in industrial applications. Provided, I hasten to add, that you know what a monetary metal is, and you also know how to make it yield a return. Admittedly very few people do, and fewer still are willing to share their knowledge with others. Nevertheless, monetary applications of silver are real. Industrial applications kill the goose that lays silver eggs. We must also remember that silver consumption is a relative concept. In Newfoundland tiny silver pieces half the weight of a silver dime with 5 cent denomination had been in circulation before 1949. After the country was absorbed into Canada, these pieces were threaded onto a chain to form bracelets and necklaces. You may, of course, say that silversmiths have "consumed" silver but, clearly, these pieces could re-enter circulation if circumstances warrant it, as quickly as overnight. While the labor component of the price of silver cutlery and plate may be greater, again, this is relative. At a higher silver price it may become negligible. There is hardly any form of silver consumption the product of which could not be recycled, provided only that the silver price is high enough.

The hairy tale of naked short interest

Every time the silver price rallies, selling appears and the price falls back. "Aha", the cheerleaders cry, "the 'silver managers' are at it again. They are selling silver naked!" Since the silver managers issue no denial, it is taken as a confirmation of the hairy tale of naked short selling.

According to this fable the silver managers gang up against silver investors in an effort to drive down the silver price, so that they may cover their naked short positions at a profit. But if this were true, wouldn't they sell into weakness rather than into strength? The fact that an increase in the short commitment invariably occurs on rallies and it is then reduced on subsequent dips clearly indicates the absence of malicious intent. Traders simply take advantage of the variation in the silver price in order to derive profits from it, much the same way as hydro plants take advantage of the tides in order to harness its energy. Nobody suggests that the tide-ebb cycle is caused by the hydro plants. It is interesting that the cheerleaders don't complain when the silver managers buy on dips. They put a different spin on it. Purchases are described as the last desperate attempt of the silver managers at short covering.

Soon enough this fable of a huge phantom naked short position will be put to the test. According to the cheerleaders the short interest should cave in under the burden of unbearable losses. The silver managers will throw in the towel, and panic-covering will cause the silver price to go to four digits, non-stop. "Patience, fellow silver investors, patience! Hang on just a wee-bit longer! After this last sell-off the price will go straight up!" Well, we have heard that battle-cry often enough, long enough. It is getting monotonous, perhaps a little boring as well.

So where do we go from here? The cycle of profit-taking/bargain-hunting/short-covering will, of course, continue as before. Volatility will grow, quite possibly faster than the moving averages, maybe far exceeding anything we have seen so far. The silver price could be up $100 one day, and down $100 next day, so that a relative top may be indistinguishable from an absolute top. Lots of investors will be bumped from the band-wagon prematurely, and they may find it impossible to climb back. But silver to go to four digits in one fell swoop? No way. Unless Helicopter Ben's deeds are as good as his bluffing, and the air-drop of Federal Reserve notes does start in earnest.

Hedging or streaking?

I do not deny that naked short sellers exist. They do. I prefer to call them "streakers". Remember "streaking", the fad of the 1970's? Young men derived excitement through exhibitionism as they ran short distances stark naked in busy streets. If the commercial traders ever run naked, it is likewise for fleeting moments only. They cover at the first opportunity. Then they may streak again and cover again. It must be exhilarating. I am not so sure about its profitability, though.

I go further. What passes as "hedging" by gold and silver mining concerns is also streaking. If the miners were hedgers, then they would plow output into a monetary metal fund and write covered call options against it. But this is not what they do. They sell forward their future output, essentially selling naked, sometimes going out as many as 5 years. Then they cover part of their short position through purchases of call options. You can hedge cash gold, but you cannot hedge gold locked up in ore deposits deep underground that will take 5 years to bring up and unlock!

"Hungry pig dreams of acorn"

To call the gold miners' forward selling "hedging" is a gross abuse of language. It should not be permitted by the watchdog agencies. It is an instance of wilfully misinforming the public. According to a Hungarian proverb "hungry pig dreams of acorn". The wheat farmer selling wheat futures before harvest is not hedging. He is selling forward in order to lock in a favorable price. He is barred from selling anything in excess of his current crop. It would be tantamount to selling dreams. Likewise, the gold miner should also be limited to selling forward one year's production.

In any case, it is not the producer who hedges but the warehouseman. If the producer calls his forward sales "hedges", then he is obfuscating. He wants the buyers of futures contracts to believe that they are buying something more substantial than the dreams of a hungry pig.

Streaking as practiced by gold and silver mining concerns, in contrast with hedging proper, is a deeply flawed strategy animated by Keynesian and Friedmanite precepts. The basic assumption is that spikes in the gold and silver price are an aberration and, hence, must be temporary. Prices, as everything in economics, are bound to revert to the mean. The regime of irredeemable currency is here to stay. The money doctors have perfected methods whereby we can avoid the pitfalls into which the early pioneers of fiat currency fell. Take, for instance, the helicopter. The money doctors of the French Revolution had to labor without the benefit of air drops of assignats.

Helicopter and guillotine in aid of monetary policy

This is not the place to refute Keynesian and Friedmanite fallacies. Suffice it to say that the helicopter is a dubious asset in the hands of the Federal Reserve Chairman anxious, as he is, to get his freshly printed "I-owe-you-nothing" notes into the hands of the public instantaneously. On the liability side the Chairman does not have the benefit of another great invention readily available to the managers of the assignat, namely the guillotine. As is known, during the French Revolution the guillotine was used, among others, for the purpose to cap the price of gold with good effect. So much for hi-tech. As for lo-tech, absolutely nothing has been learned by monetary science during the past 200 years to justify the claim that money doctors can indefinitely entice people to give up real services and real goods in exchange for irredeemable promises to pay. The dictum of Lincoln still stands: you can fool some people all the time; you can even fool all the people some of the time; but you cannot fool all of the people all of the time.

Money is not what the government says it is but what the market treats as such. Silver and gold have been demonetized by the government through trickery and chicanery: silver in the 1870's and gold a century later, in the 1970's. Markets have never ratified these government measures and, presumably, never will in view of the disastrous record of fiat currencies. Witness the helicopter and the guillotine, the carrot and stick of monetary policy.

The principle of reversal to the mean doesn't work for monetary metals. Silver and gold mining concerns will find to their chagrin that their streaking strategy is backfiring. They are facing horrible losses on their naked short positions. They can thank their plight to their Keynesian and Friedmanite mind-set, and to the brainwashing that passes as research and education in economics departments at all the universities and think tanks of the world today.

Basis, the best kept secret of economics

How many gold mining executives are familiar with the concept of basis? Maybe one in ten. And how many can use it effectively in marketing gold? Maybe one in a hundred. Don't look for a chapter on basis in Samuelson's Economics. It is not there. Don't try to find its definition in Human Action of Mises. It is not there either. You have to go to obscure manuals on grain trading produced by professionals for the benefit of professionals to learn what it is. As far as I can tell no economist has ever written about it for the benefit of laymen.

The basis earns its name by serving as the most basic trading tool and precision instrument of the grain elevator operator. In buying and selling grain he is not guided by the price and its variation. He is guided by the basis and its variation. He stands ready to buy or sell 24 hours a day, 7 days a week. If you wake him up in the dead of the night with an offer, he won't ask your price. He will ask your basis. If he likes it, then it's a deal, regardless of the price. Professional buyers and sellers of grain do not quote their bid/asked price. They have no use for it. They quote their bid/asked basis.

Recall that basis is the spread between the nearest futures price and the cash price. The grain elevator operator buys cash grain during the harvesting season to fill his elevators to the brim. He tries to buy cash grain at the widest possible basis (known as carrying charge). He is planning to sell it when the basis is getting narrower. His profit is just the shrinkage of the basis. What is the explanation of this peculiarity? When the grain elevator operator buys cash grain, he sells an equivalent amount in the futures market. He must hedge his inventory because the capacity of his elevator storage space is so huge that even a minor fall in the grain price will wipe out his entire capital, if his cash grain is left unhedged.

During the growing season the basis keeps falling as inventories are being drawn down. The grain elevator operator tries to sell cash grain at as low a basis as possible, because he expects to replace it at a wider basis when the new crop becomes available. It goes without saying that in tandem with selling cash grain he lifts his hedges, i.e., buys back his contracts to deliver cash grain in the future. I repeat, from the point of view of profitability, the prices at which he bought and sold cash grain don't matter. The only thing that matters is the variation of the basis. Sometimes he buys cash grain at a higher and sells it profitably at a lower price. How can he get away with this prestidigitation? Well, he has correctly anticipated that the basis will shrink faster than the price will fall. He is aware that he cannot predict the variation of the price, which is at the mercy of nature. But he may divine the variation of the basis that depends on human need, which is more predictable.

Rationing warehouse space

Moreover, the basis also helps the grain elevator operator to decide what type of cash grain to buy and store. Other things being the same he will buy the grain with the higher basis, and sell the one with the lower. In this way he can maximize his profit derived from the shrinking basis. If the basis is higher for wheat than for corn, then he will keep buying cash wheat in preference to corn until the basis for corn catches up. Or, suppose, the news is that corn blight has hit the growing regions. The astute grain elevator operator will respond by accelerating his sales of cash wheat, in order to make room for more corn in his elevators.

The best way to think about the business of the grain elevator operator is to assume that he is marketing warehousing services, including the rationing of warehouse space between competing uses. His guiding star is the basis. High and rising basis tells him for which purposes the demand for scarce public warehouse capacity is the most urgent. Low and falling basis tells him for which purposes the demand is slack, as people prefer non-public solutions for their storage problem, e.g., by keeping supplies closer to home, as often happens in troubled times. Including digging holes in one's own backyard.

The idiosyncracies of the basis with regard to monetary commodities, since they can be buried in holes, are quite different from those with regard to non-monetary commodities, which cannot. This will be the subject of the last of this 3-part series on the basis.

Acknowledgement

I am grateful to Dr. Theo Megalli for calling my attention to the work of the German monetary scientist Heinrich Rittershausen (1898-1984) who apparently was the first to make the distinction between monetary and non-monetary commodities, observing that the former fails to follow the conventional demand/price schedule, in his treatise Monetary Theory, now also available in English translation, see: http://www.reinventingmoney.com/Ri_MT.php

Dr. Megalli also quotes the remark that has earned many enemies to Rittershausen in banking, commercial, and industrial circles, not to mention political circles, a remark that deserves to be better known: "It was not the gold standard that failed, but those to whose care it had been entrusted".

Correction

I want to thank several readers, too numerous to mention by name, who pointed out to me an error in my last piece Monetary vs. Non-Monetary Commodities, see: http://www.safehaven.com/showarticle.cfm?id=5241 Under the caption Big Lie Number Two, in discussing the strategy of writing covered options, I mistakenly suggested that stop-buy orders, placed at points where the call options would be exercised, would kick in as the gold price fell. However, a stop-buy order would in fact kick in as the gold price rose. The tenor of the paragraph is also misleading. It suggests that the strategy can be put on auto-pilot, which is a rhetoric exaggeration. In fact, the strategy calls for careful management.

Author: Antal E. Fekete

[astonas]

Re: Who's blowing smoke: 1933, 1971, and 2019?

I'm not sure I agree with the Balkans-war-role portion of this argument: the best explanation for that is to simply note that Germany tends to be far more pacifist (again, considerably overcorrecting for the past) than other regional powers. It even recently dumped the mandatory military service requirement that Polish Silver referred to, which even before that point allowed for a non-military service option. So Germany's non-interventionist stance isn't so much paralysis, as a prolonged and strategic withdrawal from the military side of the power balance.

One is certainly free to distain that view, of course, but the non-interventionism does seem to be working out pretty well for them. They get to remain safe and invest in their infrastructure, while simultaneously letting more arrogant elements who feel a strong need to throw their weight around to excess (primarily the US) do the heavy military lifting. If the US (or France, or...) insists on being in charge of every military intervention anyway, why bother to compete for that dubious distinction?

On the whole, however, I think that GRG55 seems pretty close to the mark (if you'll pardon the pun) with the bulk of his reasoning:

You state your presumed motives for German repatriation of gold with great conviction. But all the arguments I have seen, including the one bolded above, are firmly in the realm of conjecture. None of the commentators has a shred of first hand solid evidence or proof from the Germans to support their rabid theories...hence the blow smoke comment.

Here's an equally speculative, equally lacking-in-proof, equally smoke filled, but equally plausible alternate explanation for Germany's action to announce a repatriation of gold reserves:

• Central Banks are political institutions, living in a fictional world of "independence", but just as subject to pressure as any elected politician;
• The Fed blatantly so, the ECB and the Bundesbank no exceptions;
• The greater EU economy is imploding, with severe contractions underway in the "austerity" countries which now threatens to envelope the major players of France and Germany, both of which are now measured to be in recession;
• After the Weimar hyperinflation episode, the German public have long been conditioned to fear inflation, and German politicians have pandered to that (some dogmatically so) for several generations;
• Germany is in an election year, with Mrs. Merkel scheduled to go to the polls seeking a third term in September - recessions and rising unemployment rarely play well in election campaigns, even in inflation-phobic Germany;
• The rising relative exchange rate of the Euro currency is exacerbating the economic contraction, and current ECB policy (relative to other major Central Banks) is largely responsible for this trend;
• The last time Germany fell into recession the ECB was "allowed" to pursue a rather loose monetary policy (which is one of the reasons the catastrophes now unfolding in Greece, Spain and elsewhere in the Euro currency zone are so acute);
• This presents German politicians currently in power with a severe dilemma - they need an increasingly reflationary policy from the ECB to counter the politically damaging effects of further debt de-leveraging induced contraction, but they cannot be seen to openly support such a policy with an electorate that is conditioned to fear exactly that;
• The Bundesbank knows it is going to come under pressure to again "allow" the ECB to pursue added reflationary policy, but it too has that oh so German reputation to protect;
• Anticipating that, what better way for politicians and Bundesbankers to burnish their "hard money" credentials than issuing a very public, but fundamentally meaningless pronouncement about the custody and management of the nation's gold reserves;
• And that will provide the cover the Bundesbank, with the full support of the election campaign bound politicians, needs to give a wink and a nod to Mario Draghi to "do whatever it takes" to reflate.
• It wouldn't be the first time that politicians and Central Bankers, even those with German passports, are deliberately two-faced about what they are up to.

German politicians should be thankful there's an Italian in charge of the ECB...can you imagine the dog fight if Axel Weber was running the place

I do think that there is a certain ambivalence, wanting to have both moderate stimulus, and a strong anti-inflationary stance. I attribute most of this to fairly standard electioneering, as it is seen in all representative governments. And physical gold-in-hand has an almost mystical allure to the older generations, which is easy to appeal to/manipulate for electoral gain.

The truth will lie in what happens after the elections. I suspect that Germany will give the ECB a little more leash at that time.

[lektrode]

Re: Gold Leaps Into Backwardation

must say, gec - you DO come up with some great stuff....

http://www.financialsense.com/contri...-backwardation

..... Owners of real metal are increasingly reluctant to part with it at the current price.

interesting to note the premiums seem low all of a sudden:
http://www.gainesvillecoins.com/prod...condition.aspx
"Available now for as low as $65.99 over spot!"

and rolls of silver eagles at +2.75 or 2.99 for singles is typical....

[Polish_Silver]

Re: Who's blowing smoke: 1933, 1971, and 2019?

. . .
And physical gold-in-hand has an almost mystical allure to the older generations, which is easy to appeal to/manipulate for electoral

If "gold in hand" has allure, is it not because it is perceived as safer in Berlin or Bonn, than in New York?

I think Germany would fight to defend it's citizens, boundaries, or gold. I don't think they wanted to fight in Bosnia, because there was no clear national interest.

I wish the USA would use it's military only where it's borders or citizens within those borders were at stake.

[lektrode]

Re: Who's blowing smoke: 1933, 1971, and 2019?

....because there was no clear national interest.

I wish the USA would use it's military only where it's borders or citizens within those borders were at stake.

+1
and a shout out to mr astonas - nice to see you and your great writings.