Buckle Up!

Gold has broken higher out of the Pennant Formation discussed in my December 13th post:

http://goldharvest.blogspot.com/2007/12/pennies-from-heaven.html . It is difficult to say "this is it" at this time as the week between Christmas and New years is historically "thin" in the trading pits. But make no mistake, this is VERY GOOD to see. Perhaps now we can begin to put a little fear into our Nemesis at the COMEX in New York, and encourage a short squeeze to close out the year at a new monthly closing high!

Seasonally things look bright for both Gold and Silver going into January. Particularly Silver. I have posted two "seasonality charts" above. [I have misplaced the link to the essay I found these on.] Both metals look poised to head higher in the new year. And by the looks of things in the global banking system, there will be plenty of reasons to buy Gold, and few to sell.

Also above I have posted a daily chart of the Euro. Beautiful... The next leg down in the US Dollar may be fast approaching, if not already in motion.

Toilet Paper Money

With Christmas now behind us, and 2007 soon to be in the rear view mirror, we can begin to look forward to a new year of very bad news for the world financial community. Bad news, that "should" translate into good news for those that believe in the virtues of the Precious Metals. The imminent implosion of the commercial bond market may be just the spark to reignite Gold's run to $1000. For Gold is the truthsayer, and the light at the end of a very long and dark tunnel for bond investors...

The financial turmoil just keeps getting worse. This week S&P slashed the rating of small bond insurer ACA Capital from triple-A to junk, stating that mortgage-related losses could exceed its $650 million capital cushion by more than $2 billion. ACA has provided guarantees on billions of dollars of securities including $26 billion of CDOs. Since in almost all of these cases the triple A ratings of the guaranteed securities depends on the guarantees, these securities are likely to be subject to writedowns as well, leading to a new wave of additional writedowns at banks and other institutions.

But wait—there is more. While ACA is relatively small, S&P yesterday put two large bond insurers—MBIA and Ambac---on negative watch, meaning that it may downgrade their ratings in the near future, although it confirmed their triple A status for now. In addition MBIA, in a surprise move, indicated that it guarantees $8.1 billion of so-called CDOs-squared that have chances of losses. CDOs-squared repackage other CDOs and securities linked to subprime mortgages. If leading bond insurers were downgraded some $2 trillion of insured securities would lose their triple A rating, leading to another surge of massive writedowns at financial institutions throughout the globe along with additional severe credit problems in the world financial system. --Bob Chapman, The International Forecaster

http://news.goldseek.com/InternationalForecaster/1198512682.php

Ratings Collapse

by Martin D. Weiss Ph.D.

...since lower-rated bonds are invariably lower-valued bonds, when they're downgraded, there will be an across-the-board downward adjustment in bond prices — a bond market crash.

...investors may begin to seriously question Wall Street's entire system for rating the nation's $2.6 trillion in municipal bonds ... $10.6 trillion in corporate bonds ... and $1.9 trillion of commercial paper and other money market instruments.

In short, this crisis could raise doubts about the true value of all non-Treasury securities — whether insured or uninsured, long term or short term, at risk or not at risk.

The net result:

An Unprecedented FlightFrom Risk to Safety

Investors will rush to sell any bond or money market instrument in doubt — not only the mortgage-backed securities and CDOs that are already pariahs of the investment world today, but also ...

• Local and state tax-exempt bonds


• A wide range of corporate bonds


• Government-sponsored agencies like Fannie Mae and Freddie Mac


• Commercial paper


• Bond market mutual funds, and even ...


• Certain money market funds, such as those that have invested heavily in commercial paper.

At the same time, investors will rush to buy ...

• Treasury securities


• Treasury-only money market funds


• Safe-haven foreign currencies like the Japanese yen and the Swiss franc


• Gold, gold ETFs and mining shares, plus ...


• Virtually any investment perceived to be immune from the ratings collapse.

Needless to say, the Fed will respond with massive money pumping. And if MBIA can receive a massive capital infusion, a bond market panic may be avoided for now.

But any capital infusion is unlikely to be more than a temporary band-aid. No matter how the crisis is ultimately resolved, you're bound to see a substantial flight to safety. http://www.moneyandmarkets.com/Issues.aspx?NewsletterEntryId=1301

Give GOLD This Christmas

"Why would anyone buy dollars?" -- Jim Rogers of Quantum Fund

Five years ago, 86 US cents could buy one euro. Today one needs some 147 US cents to buy one — meaning, in terms of euro, the dollar has fallen by 75 per cent in five years. Benchmarked with gold, less than $275 could get an ounce of gold in 2002; today $800 cannot. So, the dollar, rated with gold, has depreciated by over 290 per cent.

Take the black gold — crude. One needed, as 2002 turned, $21 to buy one barrel of crude which now costs $90. Rated in crude prices, the dollar has fallen by 430 per cent.
As of the second quarter 2007, the total forex reserves held by different countries is $5.7 trillion.

Assuming two-thirds of it is invested in dollars, the global forex reserves invested in the dollar will top $3.8 trillion. That others hold $3.8 trillion means that they hold US securities or assets. Like bank deposits are to a bank, the $3.8 trillion held by others is a debt, a liability of the US to other countries.

Why did this huge debt occur? In one word: the Fed. In less than 15 years, by calibrated strokes of the pen, the US Fed has habituated the once responsible American households to spend beyond their current income and turned them into reckless gluttons.

See how the US Fed achieved this result. By repeated interest cuts, from 20 per cent to just 1 per cent in 20 years from 1981 to 2001, the US Fed got US households addicted to buying regardless of needs. At rates of 1 per cent interest, US households saw no meaning in saving. No wonder they felt justified in spending beyond their income.

The fallout? The US savings rate to GDP, which was 18 per cent in 1970s, first came down to 9 per cent in 1990, then to an average of 2.8 per cent in 10 years from 1996 to 2005 and finally to a negative figure of 0.6 per cent in 2006. This drift directly led to households getting addicted to borrow and to spend.

The US household dues on credit cards rose from $338 billion in 1990, when the Fed rates were around 8 per cent, to $1.5 trillion in 2003, when the Fed rate became 1 per cent. Today the dues on credit cards are over $2.46 trillion and the number of credit cards in use is 1.2 billion.

An average American is addicted to 13 credit obligations, nine credit cards and four instalment loans! It is difficult to de-addict them today. The result, in just 15 years, US households have handed over all their money to the corporates and become indebted.

The Fed’s spend-beyond-incomes policy risked domestic inflation. To de-risk against it, the US government had to go for liberalised imports, cut the import tariffs and make import of foreign goods cheap in the US. So trade liberalisation became more a domestic compulsion of the US rather than, as it pretends, a global obligation.

Consequently, the US began buying more goods and services from the rest of the world, than it supplied to them. This led to in increasing deficit on the US current account with the rest of the world. Once this trend started, it intensified like virus.

The numbers are startling. For the 10-year period from 1990 to 1999, the aggregate deficit of the US was $300 billion.

In the subsequent five years from 2000 to 2004 alone, the deficit had aggregated to $2.5 trillion – more than eight times the aggregate for the previous 10 years! Meaning that during the five years 2000-2004, the US has borrowed $2.5 trillion from other countries to settle its current account deficit.

Yes, it is true that today US consumption drives global economy. But who funds the US consumption? The very countries that sell goods to the US, like China and Japan, Korea and Taiwan, Malaysia and Indonesia, Hong Kong and Singapore, and finally, India too.

Their dollar reserves represent moneys lent to the US to help the US buy goods from them, like a shopkeeper lending money to his clients and asking them to buy his goods. It’s worse in fact. It is more like the shopkeeper selling his goods on credit against the client’s pro-notes.

After all, in the end, the $3.8 trillion securities held by other countries are merely pro-notes of the US. So all that those who exported goods or securities to the US have on hand are the accumulated pro-notes for $3.8 trillion. Are they not just unpaid vendors? The pro-notes held by them are losing value by the day and hour against the euro, gold, oil and also against the rupee.

Startling statistics aren't they? To see how all these pieces of debt fit together, and spell the demise not only of the US Dollar, but perhaps our "American way" of life, please read the entire essay The $3.8 trillion pro-notes depreciating by the hour by S. GURUMURTHY here:
http://www.thehindubusinessline.com/2007/12/21/stories/2007122150250800.htm

What is perhaps most staggering is the insignificance of the World's Dollar Reserves when stacked up against the towering mountain of derivatives debt that is about to go nuclear in a Financial Armageddon never imagined. A conservative estimate by Jim Sinclair puts the "shaking mountain of derivatives debt" at $20 trillion. In effect, the debt bomb the US has unleashed on the planet is almost three times the size of the World's Dollar reserves. The World's Dollar reserves combined with the US $13 Trillion economy barely equal two thirds of that. How in God's name are we going to come up with the cash to extinguish the Debt Bomb? Print it? Yeah, that's the ticket!

Consider this: The $500 Billion that the European Central Bank "loaned out" [yeah right, loaned out, LOL] this past week equals 13% of the World's US Dollar reserves. As if $500 Billion would even put a dent in a cancer that is $20 Trillion strong. You have got to be kidding. That $500 Billion would be akin to giving a death bed patient morphine to ease their pain as they slipped into the afterlife. It will neither solve or save the World's Banking System from it's inevitable demise caused be The Death Of The US Dollar.

Most often in a currency collapse, the last ones to realise their is a problem with their money, are those that use it every day and take it for granted. Americans, as a whole, have little understanding and even less of an idea of what is about to literally destroy their "way of life". Few if any realise that they don't work for "their boss", they work for their
creditors...indentured servants of their banks. The least of Americans worries should be "terrorists", for the real terror is just over the horizon: Financial Armageddon. American's need not worry abouta collapse by being attacked from the outside, they're doing a good enough job from within, via the Death Of The Dollar.

Ah, but what the hell! It's Christmas damn it! Get out that platic and spend, spend, spend. It may be the last spending we do for a long, long, long time. Very soon it will be time to pay for all that spending.
______________________________

I'd like to thank everybody and anybody that reads these blog entries of mine. I love writing them as it allows me to get this stuff out of my head. I hope everybody benefits and profits from the information I pass along. What good is information, if it isn't shared?

Merry Christmas! I hope your Holiday Season is filled with Silver and Gold!

Butterfly Bandages And Carpet Bombs

Bumbling Big Ben Bernanke and his Band of Blundering World Bankers have decided that fighting the global credit crisis with money dropped from helicopters might be more successful if the money were dropped by B-52's in a wave of carpet bombing instead. Yeah, and a butterfly bandage will stop the bleeding of a severed limb... Folks, the term "inflation" is being redefined before our very eyes. An arsonist would have a better chance of putting out the fire he started by pouring gasoline on it, than these Wizards of Economic Destruction will have by pouring more money into a system that is already flooded by it. Easy money created the problem, creating more easy money is only going to make the problem bigger, not make it go away.


Investors Stunned by ECB's E350 Billion

Short-term market interest rates in the eurozone plunged at their fastest rate for more than a decade on Tuesday after the European Central Bank stunned investors by pumping a record E348.6 billion worth of funds into the markets.

The size of the injection -- which was intended to calm the markets over the critical year-end period -- was twice as big as the ECB had indicated would have been needed in normal circumstances.

The bank said some 390 private-sector banks in the eurozone had requested funds, which have been offered for two weeks at 4.21 per cent, well below the previous prevailing market rate.

"The sheer magnitude of the operation caught the market off guard," said Win Thin, Brown Brothers Harriman's senior currency strategist, who said there was talk that banks from the US and UK might have taken funds at lower rates than they could secure from their own markets.

The emergency operation, which followed last week's co-ordinated effort by Western central banks to ease pressures in the financial system, prompted the two-week euro London interbank offered rate (Libor) to fall a record 54 basis points to 4.40 per cent. The one-month and three-month rates recorded their biggest falls for nearly six years.
http://gata.org/node/5853


Fed Loans Banks $20 Billion

WASHINGTON (AP) -- Cash-strapped banks took the Federal Reserve up on its offer of $20 billion in short-term loans to help them overcome credit problems, but the interest rate wasn't as low as some had hoped.

The central bank said Wednesday that it had received bids for $61.6 billion worth of loans, more than three times the amount that was made available. The loans carried an interest rate of 4.65 percent, which is slightly less than the 4.75 percent the Fed charges banks on emergency loans through its "discount" window.

There were 93 bidders for the loans, the Fed said. Each bank could submit up to two bids. The auction for the 28-day loans was conducted on Monday, and the results released on Wednesday.

Asked how the first auction fared, T.J. Marta, a fixed-income strategist at RBC Capital Markets, replied: "I was standing next to two seasoned traders and one thought this auction was fantastic and another one thought it was horrible."

For his own part, Marta said it was "unsatisfying" because investors had thought the rate on the loans would have been lower, around 4.30 percent or 4.40 percent, rather than 4.65 percent.

"There was a hope that things really weren't that bad and that the market would have been able to bid down the Fed and take the money at a cheaper rate," Marta explained. "The fact that the market wasn't really willing to, was evidence of the stress."
http://biz.yahoo.com/ap/071219/fed_credit_crunch.html


GOLD AND SILVER – Green Flags!

Throughout history, once a nation embarked on the inflationary route, there has only ever been one final outcome: total destruction of the currency. Since 1913 the Fed, (supposedly created to protect the US dollar – must read: ‘The Creature of Jekyll Island”), has managed to destroy 95% of the purchasing power of the dollar. Does anyone really believe the remaining 5% is safe?

Currencies in a number of countries are being inflated at double digit rates, while the gold supply can only be increased at about 1.6% per year. All the gold ever mined, piled up, would form a cube of less than 20 meters, growing by 12 cm per year. Most of the gold in this hypothetical cube is in the form of jewelry. The driving force behind the current bull market in gold is the fact that fiat money is being created some twelve times faster than gold. In 1980, when gold topped out at 850.00, the US M3 money supply was 1.8 trillion dollars. Today gold is pegged at 800.00, but M3 is now 13 trillion dollars (www.nowandfutures.com). A ratio similar to 1980 puts the potential gold price at $5,600.00.
http://news.goldseek.com/GoldSeek/1198080270.php


Morgan Stanley's Subprime Submergence

On Wednesday, the investment firm announced a jaw-dropping $9.4 billion in write-downs for the fourth quarter.

Before, the opening bell, Morgan Stanley said it lost 3.6 billion, or $3.61 a share, versus a profit of $2.0 billion, or $1.87 a share, a year earlier. It also announced it was turning to China to help shore up its balance sheet.

The rapidly depreciating value of mortgage-related assets and the general turmoil in the credit markets has punished Morgan Stanley and most of the rest of Wall Street. On Wednesday, the firm said it took $5.7 billion in write-downs in November. This loss is on top of the $3.7 billion already announced, putting the total for fourth quarter write-downs at $9.4 billion. The new batch of write-downs will be in addition to the $940 million announced in the third quarter.

Meanwhile, Morgan Stanley is mobilizing to improve its cash position. As investment firms lick their wounds, a bevy of foreign investors from China and Middle East have swooped in with cash infusions. On Wednesday, the investment firm also announced that the Chinese government-owned, China Investment will be injecting $5 billion into Morgan Stanley, for a maximum 9.9% stake in the company. The company said CIC will have no special rights of ownership and no management role. Morgan Stanley is far from alone. Last month, the an Abu Dhabi investment fund injected $7.5 billion into Citigroup.
http://www.forbes.com/markets/economy/2007/12/19/morgan-stanley-subprime-markets-equity-cx_er_1219markets22.html


WILL THE VICIOUS CREDIT VIRUS AFFECT THE REAL ECONOMY?
By Dr. Marc Faber

WILL THE VICIOUS CREDIT VIRUS AFFECT THE REAL ECONOMY?By Dr. Marc Faber
Will rate cuts be of much help to the asset markets and the economy? I believe we are in a war between two major adversaries. On the one side we have the Fed (and other central banks) pumping liquidity into the system in a desperate attempt to support the asset markets and the economy. On the other side we have the private sector, which, as Hatzius explained, is being forced to curtail lending due to heavy losses in the credit market and to fight the Fed's reflation efforts by widening credit spreads. Complicating matters is the fact that both adversaries have powerful allies.

The Fed has the Treasury and the government, as well as the Wall Street elite, as allies. The government could implement massive tax cuts in order to stimulate economic activity; the Treasury could bail out financial institutions, which in reality should be punished by bankruptcy; and the monied Wall Street elite will ensure that politicians and the Fed make it possible for them to continue their con-game. The private sector has allies in the form of inflation, a weak dollar, and a dissatisfied public (declining consumer confidence and lack of trust in government, which is reflected by the strong showing of Ron Paul), all of which form a powerful phalanx when battling the Fed's reflation attacks. Inflation is a powerful ally for the private sector because it squeezes corporate profits and curbs personal consumption.

According to David Rosenberg, with 90% of companies reporting, third quarter operating EPS fell 8.5% year-on-year; while reported earnings, which include charge-offs, fell 28% year-on-year! Rosenberg also notes that "at $15.29 reported EPS for the S&P 500 in the third quarter of 2007, the P/E multiple on this basis is a lofty 23x - not the 18x 'cheap' multiple (or 14x on forward estimates) that is constantly being bandied about in the media." He adds dryly: "[T]he current $15.29 estimate for reported EPS is the lowest level of earnings since the fourth quarter of 2004. And where was the S&P 500 trading at that time? Answer: It averaged about 1,162 that quarter - just in case you were thinking of buying this dip." (I can't wait to hear the Goldilocks' crowd's positive spin on these dismal earnings.)

The war between the Fed and the private sector will, in my opinion, be very protracted. The Fed will win some battles, which - along with much brouhaha in the media - will see Pyrrhic victories such as the stock market rally of August to early October, which led in dollar terms to new highs but failed to do so in Euro and gold terms, and was followed in Euro terms by renewed severe weakness. (Just for the record, as of this writing, the S&P 500 is down 9% year-to-date in Euro terms, having peaked out in June.)

Other battles will be won by the private sector, which through its contraction (recession) amidst inflation will lead to sharp downward movements in equity prices.

I am well aware that the Bureau of Labor Statistics and the Bureau of Economic Analysis will continue to use bogus figures when reporting inflation, and hence real GDP growth, but they won't be able to hide the squeeze on corporate profits and the consumer from rising prices. I am writing this report at Thanksgiving, an opportune time to point out that the American Farm Bureau Federation has calculated that the cost to feed ten people dinner in 2007 is US$42.26, up 10.9% from last year and the biggest year-on-year increase in over ten years (David Rosenberg has compiled a Thanksgiving cost-of-giving index, which amalgamates the prices of turkey, sweet potatoes, cranberries and gifts, as well as travel expenses: it rose this year by 7.9%.) I don't suppose these indexes took into account the rise in heating and electricity costs for the festivities, or the cost of a nice Bordeaux wine and bottle of Cognac, due to the weakness of the dollar. (I might add that in Switzerland it wouldn't be possible for ten people to be served Christmas dinner for that amount.)

But the point is simply this: cost-of-living increases vastly exceed the reported inflation figures and are squeezing the consumer, which leads to revenue pressure for the corporate sector. (According to the Kaiser Family Foundation, health insurance premiums have risen 78% since 2001, while wages have gained only 19% and "the government's inflation measure during that stretch was 17%".) At the same time, corporations are faced with a squeeze on margins due to rising costs.

Pressure on revenues and cost increases contributed to the dismal performance of earnings in the third quarter of 2007. For example, Starbucks (SBUX) increased prices by an average of 9 cents a cup in July. However, customer visits to US stores fell 1% for the quarter ended September 30. Starbucks' CFO noted that a "similar decline may occur in the fourth quarter although they will be positive for the full year". (This would seem to indicate that the economy slowed down considerably in the second half.) According to him, "unbeknownst to us, we saw economic headwinds that quite frankly came up probably stronger than I thought." Earlier, Starbucks' CEO had remarked: "The consumer is being faced with rising costs in every sector of their lives, and so part of that is reflecting on us." An informed friend of ours suggested that declining traffic at Starbucks stores in the US is of particular concern, since Starbucks serves all income levels.

Therefore, declining traffic is not just a "sub-prime problem"! I should now like to reiterate what I have explained on a number of previous occasions. Rather than paying too much attention to the media and to analysts' positive spins, it will pay to watch the market action of equities as a forecaster of business prospects. Starbucks' stock made a double top between May 2005 and November 2006. After that its shares went downhill, although the stock market continued to rise to its final peak in mid-October 2007. This should have been a warning sign that Starbucks fundamentals were deteriorating.

Similarly, the fact that retail stocks failed to better the July high in the recent August 16 to October 11 rally, which led to a new all-time high for the S&P 500 in dollar terms (but not, as we have shown, in Euro terms), isn't a good omen for retail sales, consumption, and the economy. I am not the only person who questions the economic statistics published by the US government: writing recently for Kate Welling (welling.weedenco.com), Lee Quaintance and Paul Brodsky of QB Partners observed:

"…the credit markets finally clogged towards the end of Q2 2007, closing the major private sector artery policymakers had been using to synthesize domestic output (expressed in nominal dollar terms through nominal GDP growth). True to form, they began creating U.S. dollars out of thin air at an accelerated rate in Q3 2007 (14.7% annualized). The Bureau of Economic Analysis (BEA) published nominal U.S. GDP growth at an annualized rate of 4.7% in Q3 2007. Taking the BEA's figure at face value and subtracting the annualized rate of monetary inflation, we believe inflation-adjusted U.S. GDP contracted at about a 10% annual rate in Q3 2007. This rate of economic contraction would seem to be consistent with the analysis of the corporate profit slump discussed above, and with the observations made in earlier reports that the US economy is already in recession.


One in Five Expect to Borrow to Heat Homes This Winter

For perhaps as many as 27 million American adults, keeping warm this winter will mean borrowing money and 20 million will use credit cards to be able to afford their heating bills, according to a CreditCards.com poll.

Nearly 12 percent of Americans say they will need to borrow money to pay winter heating bills; 9 percent will need to use credit cards to be able to afford their heating bills.
http://finance.yahoo.com/banking-budgeting/article/104038/One-in-Five-Expect-to-Borrow-to-Heat-Homes-This-Winter

A world-wide credit crisis has only just begun. A world wide Bull Market in Gold has only just begun. Ignore the spin. Stick to your convictions. Gold Bulls are taking year end profits. Dollar Bears are taking year end profits. Nothing, absolutely NOTHING, has changed fundamentally that will lend support to the US Dollar, or steal it from Gold. If the PPT and the Gold Cartel could really suppress Gold, it would still be $260 an ounce. Take advantage of the Holiday Sale Prices, back up the truck, and hang on for the most profitable ride of your life.

Another Shot In The Dark

ECB's $500 Billion Loan Won't Help Solvency Problems

The cost to borrow in euros through the end of the year plunged after the European Central Bank added an unprecedented $500 billion to the banking system as part of a global effort to ease credit-market gridlock:

The amount banks charge each other for two-week loans in euros dropped a record 50 basis points to 4.45 percent, the European Banking Federation said today. The rate had soared 83 basis points in the past two weeks as banks anticipated a squeeze on credit through year-end.

"These are strong-arm tactics intended to show the market they're seriously committed to breaking the deadlock," said Marc Ostwald, a fixed-income strategist at Insinger De Beaufort SA in London. "The ECB is helping to bankroll banks out of a problem that they themselves created."

"$500 billion is an enormous amount of money. To put it into perspective, $500 bln is 5% of total US banking system assets.

Furthermore, everyone should remember that the $500 bln is funding just through year end. Come January this will need to be refinanced or rolled over."

If this $500 billion "emergency funding" was just a year-end phenomenon, that would be one thing. But this is not a liquidity issue this a solvency issue and a growing solvency issue as well.

You can't cure drug addicts by giving them more drugs nor can you cure insolvent credit junkies by dramatically increasing the size of the loans. I suspect the "emergency" is going to last a lot longer than the ECB thinks.

http://www.minyanville.com/articles/ECB-loan-solvency/index/a/15261

Another dark day for the Global Economy, and another red letter day for Inflation. Buy Gold and Silver while the sale, AND supplies, last.

Pay Attention Class

Class, today you have but one assignment: Read the essay posted below.

MARKET INTERVENTION ACCELERATING, Stunning Data Releases show Risks, Consequences, and The Cartel End Game

“The fact that the December 13 and 14, 2007 jumps in the PPI and CPI inflation numbers were accompanied by substantial drops in the gold price is quite significant. After examining all the evidence, how can a rational observer conclude anything other than that the price of gold is manipulated?” -- DEEPCASTER LLC

http://news.goldseek.com/GoldSeek/1197904020.php

Surge in Gasoline Prices Pushes Consumer Inflation Higher While Economy Slows
Friday December 14, 7:15 pm ET
WASHINGTON (AP) -- Led by higher gasoline prices, consumer inflation shot up in November by the largest amount in more than two years.

In a troubling juxtaposition, the rise in inflation is coming at a time when economic growth is slowing sharply under the weight of a steep slump in housing and a severe credit crunch.

"We are in store for a period of very weak if not recessionary growth and uncomfortably high inflation," said Mark Zandi, chief economist at Moody's Economy.com. "People are going to get hit with both a weaker job market and having to pay more to fill their gas tanks and buy groceries."

It's called STAGFLATION, and it is absolutely Dollar negative, and Gold positive. In speech Sunday night by former Fed Chairman Alan Greenspan, Mr Obvious said that "stagflation" -- simultaneous inflation and economic slowdown -- is a possibility, given last week's data showing spiking consumer prices. I guess now that the messiah has spoken, people will begin to listen?

There are four important data points released today. All should be Dollar negative, much as all of last weeks cost and inflation headlines were. These data points are The Current Account, The Treasury International Capital (TIC) flows report, the National Association of Home Builders is scheduled to release its housing market index, and The NY Empire State Manufacturing Index.

Not one iota of news in the past ten days has been Dollar positive, unless you believe the spin: "higher inflation will stop Fed interest rate cuts". Look, if you have been short the Dollar, long Gold, and/or long stocks just because the Fed may continue to cut interest rates you are a fool. The Dollar is going to go down no matter what the Fed does from this day forward. The Fed has completely lost control of the interest rate markets and the Dollar. The only thing holding the Dollar up right now, today, is year end short covering AND European Central Bank intervention. The ECB is desperate to take some of the strength out of the Euro to save the regions export markets. The US Fed is desperate to prop up the Dollar. A lot more was talked about at last weeks "big meeting" than the Fed/treasury sending a few billion Dollars across the pond to help increase liquidity in the European banking system in a feeble attempt to lower the LIBOR rate.

The fact is, Gold has risen in a rising Dollar environment before, case in point, the second half of 2005. Gold is under pressure today, because of this Sucker's Rally in the Dollar. Silver is testing critical support on the back of Gold's "perceived" weakness. This Sucker's Rally in the Dollar is within hours of a complete reversal. Stick to your convictions! If you have the resources, buy more of both Gold and Silver at these Holiday Sale Prices.

Even A Blind Man Can See The Fraud

Shocking! It's 8:30 PM and Gold is once again back above 800, Silver on the rise. Oh? Yes the criminals that sustain the NY COMEX must be home in bed. What a joke today was. Sell all your Gold. Sell all your Silver. Sell all your mining shares. Retail Sales were up the most in six months. LOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOL!!!

Buy the Dollar, the American consumer still has some room left on his credit cards. What a crock. Number one, retail sales were up because the price of gasoline was up substantially in the month of November. Number two, retail sales were up because every fool and his credit card couldn't pass up the fire sales following thanksgiving. Number three, when you add it all up and take into account that retail sales only tracks "dollars spent" and not the "volume" of sales, you get this ridiculous number.

There were other more important headlines today. And the buffoons on Wall Street chose to completely ignore them. These headlines, coupled with those from the past three days only make the case for owning Gold more compelling.

Wholesale Prices Up 3.2 Percent in November, Most in 34 Years, Propelled by Energy Costs
Thursday December 13, 10:11 am ET
http://biz.yahoo.com/ap/071213/inflation.html

US Nov import prices up 2.7 pct vs 2.0 pct expected, largest rise since Oct 1990
Wed, Dec 12 2007, 13:49 GMT
http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=7da44dca-b46d-49e6-bf5e-1bae314d4bb9

U.S. Trade Deficit Hits Highest Level in 3 Months

Tue, December 12, 2007
http://www.canadianbusiness.com/markets/headline_news/article.jsp?content=b1212107A

Now, somebody please correct me if I'm wrong, but don't these three headlines from the past three days portend the US Dollar's demise? "Yes they do, but nobody wants to see that happen, so we ignore that awful news." "And beside you fool, with retail sales soaring and rampant inflation, the Fed won't cut interest rates any more and the Dollar will be saved. Buy it before everyone else does." And this folks is why we are doomed...and it is why you must stick to your convictions, and ignore every attempt to dissuade you from owning Gold.

Now speaking of Gold. The games theses crooks are playing with gold on the Comex are becoming so obvious on the charts that even Ray Charles could see them. What is occurring on the Comex in the metals pits almost every morning now is an act of desperation. These criminals are so desperate now that they risk commiting their crimes openly, fearlessly hatcheting the Gold price in a effort to convince the public that there is nothing to fear from these headlines. "Look, Gold is weak, how can there be an economic crisis?" Soon, very soon, these crooks are going to be ground into dust...

Despite the efforts of these crooks, Gold and Silver weathered today's assault, their charts intact, and this Bull only more enraged. The Moon is still up there...

Pennies From Heaven

So the Fed has a "novel" approach to liquefying the global banking system? How exciting. And I thought Capt. Ben was only joking about dropping money from helicopters. LOL, now he's going to drop it from HOT AIR balloons too. Does anybody remember the Hindenburg? These clowns with the Axis Of Arrogance absolutely refuse to admit the truth...they're F*#ked! Damn, why don't they just print up 300 million $1 million checks and send one to each of us Americans for Christmas. That should solve everything! Idiots...

Every effort will now be made to contain Gold below 813...count on it, ignore it, and stick to your convictions.

Fed, top central banks to flood markets with cashMarketWatch - 1 hour agoBy Greg Robb, marketwatch WASHINGTON (marketwatch) -- The Federal Reserve and other top central banks will flood the financial system with as much as $80 billion in extra cash in the next few weeks in an effort to unblock the jammed credit markets, ...

Axis of Arrogance

The US Federal Reserve today, under the guidance of the US treasury, and with the help of Goldman Sachs pushed the US Economy one step closer to the Threshold Of Death. Once again the Axis of Arrogance has conspired to pull the rug out from under investors and pocket tidy profits in another manipulative foray into the twilight zone of high finance.

To believe, even for an instant, that today's market carnage wasn't set up in advance by this group of conniving international criminals would be an admission that there really is a Santa Clause. Everything that happened today was devised in a manner that would allow these crooks to fleece the US markets on the short side in a desperate effort to profit in an environment that they themselves created, lost control of, and only offers huge and potentially destructive losses for anyone and everyone, including, the criminals that have perpetrated this FRAUD upon the world's financial system.

With today's pathetic effort by the Fed to "save the US Economy", the Fed has said to the world, "We have lost control..." The Fed has decided to throw the US Banking system, perhaps even the entire world's Banking system, under the bus...along with the US Dollar and the "good faith and credit of the United States". The US Dollar is about to get an ass whopping like none you would've imagined.

If you were completely foolish enough to dump your Gold and Silver, and related assets, into this afternoon's carnage, you certainly deserve to end up penniless, living under a bridge. It is hugely amusing the faith citizens of this once great nation, not to mention all those in the world have put into the parochial US Federal Reserve. Despite what clowns like Alan Greenspan and his many minions have preached over the past 20 years, THE FED IS NOT THE VOICE OF GOD ON EARTH. Today, for all the world to see, the king is wearing no clothes. Ben Bernanke, the resident Fed Shaman is a sham. The US Treasury is a front for what is perhaps the greatest criminal enterprise to exist on earth: Goldman Sachs. In time, this Axis Of Arrogance will burn in Hell. Rest assured that, in the end, these pillars of deceit, manipulation, and grand theft will be destroyed, and banished from existence.

At 6PM est, gold prices turned on a dime, and as I type this at 8PM Gold has rebounded $10 an ounce. My suspicion is that by this time tomorrow Gold, and Silver will be significantly higher, and the US Dollar substantially lower. The Fed has completely lost control, and it's now time for the world financial markets to do their job.

From Money and Markets Martin D. Weiss Ph.D. and Mike Larson newsletter update at 4PM this afternoon:

Too Little, Too Late For the U.S. Economy

Meanwhile, the U.S. economy is being dragged down by the housing bust, the mortgage meltdown and the spreading credit crunch.

And today's meager quarter-point cut in rates will barely make a dent in this mess.

Despite all the Fed's rate cutting over the past few months, the key interest rate the Fed does not control — the London Interbank Offered Rate (LIBOR) — is striking out on a different path.

Today, LIBOR is the rate that drives most adjustable rate mortgages in the United States.

LIBOR is the rate that sets the standard for many corporate loans, a big chunk of the interbank borrowing by U.S. banks, even local government borrowing.

LIBOR is easily the single most important interest rate in the world.

But LIBOR is not controlled by the Federal Reserve. It's the rate international banks charge each other on short-term loans.

Those banks don't know where the bodies lie or who's going to be the next victim of the subprime disaster. So no matter what the Fed does or says, they're hoarding their capital. And they're not cutting their rates.

Here's the key:
Even if the Fed lowered its target for fed funds to zero ... if the LIBOR rate fails to decline in tandem, or worse, actually goes up, the Fed's power to avert an economic decline in the U.S. will be shot to pieces.

And that's exactly what's beginning to happen...

To read this newsletter in it's entirety, please follow this link: http://www.moneyandmarkets.com/Issues.aspx?NewsletterEntryId=1263

PHIT!

Oh Joy of Joys, another Fed meeting is now before us. The Fumbling Fed, now falling ever farther behind the bond markets, will be dragged kicking and screaming to the table to pound out another Federal Funds interest rate cut. The only issue open to compromise is the number of basis points, 25 0r 50. Since the Fed has now fallen close to 150 points behind the curve on interest rates, perhaps they should just cut a full 100 and be done with all this plodding drama. They're going to cut at the very least that much over the next six months, why not just get it over with now? The great and all powerful OZ is broken. PHIT! Up in smoke goes the US Banking Industry. It is inevitable, can we just get it over with? The more the Fed tries to deter the inevitable, the worse the final act is going to be...FOR ALL OF US CITIZENS of the decaying empire.

This just in:

UBS to Sell Stakes After $10 Billion in Writedowns

Dec. 10 (Bloomberg) -- UBS AG will write down U.S. subprime mortgage investments by $10 billion, the biggest such loss by a European bank, and replenish capital by selling stakes to investors in Singapore and the Middle East.
Europe's largest bank by assets plans to raise 13 billion francs ($11.5 billion) selling bonds that will convert into shares to Government of Singapore Investment Corporation Pte. and an unidentified Middle Eastern investor, Zurich-based UBS said in a statement today.

http://www.bloomberg.com/apps/news?pid=20601085&sid=aTEBcKLcytXw&refer=europe

Shocking news, huh? The sub prime contagion is spreading like a wildfire across the the global financial infrastructure. And once again somebody shows up with a garden hose and attempts to put out the fire with a paltry splash of cash. How futile! Soon every bank in the Western World will be owned by the Chinese or the oil producing Arabs. What a fitting end for the Fiends Of Greed that have destroyed our nations wealth.

For some real insight into the depths of desperation the Fiends of Greed are going to, to save their sinking ship, read the latest from Bob Chapman, The International Forecaster.

Well, the PPT started the month of December off with yet another "Puff the Fluff" extravaganza, cocking the gold suppression gun and pushing bullets into its chambers, ready for the next round of market-crashing hits on gold. With the Fed making ready to bail out the Wall Street pirates and brigands on December 11 with another dollar-killing rate cut of at least .25%, and perhaps even .50%, on both the Fed funds rate and its discount rate, we could have expected no less. The PPT always helps the Fed keep on top of its number one priority - gold suppression. Capping the price of gold is JOB ONE at the Fed, and if certain markets have to suffer collateral damage so that gold can be squelched, the Fed does not even bat an eyelash. Because spot gold will shortly be threatening to take out its all-time high of 850, the cartel is once again presented with a scenario, which in their collective minds must be avoided at all costs. Once 850 is taken out, gold will become a self-propelling force! The shattering of its all-time high will be big news that the elitist-controlled press can no longer ignore without losing all credibility. When 850 is taken out, the pros will jump in first with both feet to grab what they can before they start promoting it to the public. They will do this so they can envision the killer profits they will make as they reach for the Rolodex. Once the public comes in, you can all wish the cartel "Auf Wiedersehen!" as their gold shorts implode everywhere. The CEO's of the evil cartel's insider banks will then get their cyanide pills ready as they consider all the gold they sold for next to nothing, gold that might have saved their institutions which are about to explode and go down in flames as the credit-crunch compels them to do a reenactment of the Hindenburg.

For those of you who continue to entertain doubts that stock markets suffer on account of a tiny little market where "barbaric relics" are traded, we have put together five scenarios that will show you in spades how stock market crashes and carry trade unwindings have directly corresponded in time to all gold rallies for the entire year of 2007 thus far...

http://news.goldseek.com/InternationalForecaster/1197239378.php

A full reading of Bob's wonderful essay is essential reading. His attack on the PPT is scathing and quite revealing. One would have to believe that these Rat Bastids days are soon to be numbered in hours. There may be little left of this nation to lead come the November elections of 2008. It is little wonder that Ron Paul's electoral efforts to save our nation and constitution are stifled by the Networks and leading News Organizations.

For the BIG Big Picture please click on the charts above for further insight:

JOBS. IT IS ONLY AN ESTIMATE!

The whole world awaits the November "Jobs Report" due this morning at 8:30 AM. They wait on the edge of their seats to be spoon fed more lies and deceit from the US Government. Anybody that believes these monthly jobs reports actually represent real jobs needs to have their head examined. Please bear in mind that ANY jobs "created" last month are temporary seasonal jobs to help usher the crush of shoppers flocking to shopping malls, plastic in hand, to purchase goods marked down to fire sale prices just to "turn a buck" in this most precious of annual retail sale periods. None of these jobs are high paying jobs that can support a family. Last months "jobs report" was so full of malarkey that it claimed jobs in the financial sector were created by the thousands...and that after reading all month about the layoffs in the mortgage sector. The jobs report is a monthly joke. It ceases to amaze me how the pawns on Wall Street eat it up.

How many of you folks realize that most retailers, excluding food stores and home improvement stores, get at least 50% of their annual sales from the shopping period between the day after Thanksgiving and Christmas Eve. 50%! It's do or die time for the likes of Macy's , Target, Wal-Mart and Best Buy. The government PR machine is going to work overtime to spin the daily news into cotton candy in an effort to keep a halcyon induced smile on everybody's face.

No Quick Fix for Subprime Mortgages- AP
Be ready to wait if you want to get information from a toll-free hot line about freezing the interest rate on your subprime mortgage.

Case in point this hokey subprime mortgage freeze. Last summer Mr Bush comes out and says everything will be alright because subprime borrowers can refinance their mortgages with an FHA loan. There was joy in the streets, the President said exactly what the peeps wanted to hear. LOL! Never happened. You can't get a loan from the FHA with bad credit. And you can't get a rate freeze with bad credit either. More HOT AIR from Washington.

The Dollar has caught a tiny bid overnight in anticipation of this revered jobs report. Estimates are for 70K jobs in November. The overrated ADP payroll report claims 189k jobs were created. This number is trotted each month to help justify the jobs created by the Labor Departments "birth/death" model used to ESTIMATE job growth. These are "phantom" jobs the government "thinks" were created in the prior month. And that in a nutshell is the real truth about the monthly jobs report: IT IS ONLY AN ESTIMATE! How many jobs are actually created each month in the USA, nobody really knows.

Data Grim for U.S. Buck
So what about the greenback? Despite the talk of a bottom for the greenback—including the contrarian signal of The Economist cover—the commercial traders in U.S. dollar index futures have now reduced their net long position to a historically extreme low. The latest COTs data gives my dollar setup a renewed bearish signal. This caps a 10-week fall in the commercial net long position, which peaked in the Sept. 18 COTs report. This renewed signal is somewhat striking because it’s the first signal of any kind for this setup since the initial bearish signal that came way back in Oct. 2006. Look out below!
http://www.kitco.com/ind/roslin/dec032007.html

Gold and Silver mostly sat idle overnight awaiting the COMEX reaction to the lies out of Washington this morning. Gold sits poised to rocket higher on a break of 807. Silver did well yesterday to close above 14.40 and the neckline on our 4-hour head & shoulder reversal bottom. Today should be interesting as we close out the week in anticipation of next weeks sacred Fed meeting. A bid for both metals is building. Today, just another day in the noisy adventures of Gold & Silver's Trip To The Moon.

Sell Now, Pay More Later

In the early hours of Thursday, December 6th, 2007 the Bank of England and the European Central bank will decide if a change in their prevailing interest rates is necessary. It is expected that both will keep their rates unchanged. The same was believed in Canada before the surprising cut in interest rates there on December 4th.

The Canadian Central Bank [CCB] cut rates in an effort to come to the rescue of Canadian Exporters getting crushed by the strength of the local currency vs. the floundering US Dollar. So, in an effort to weaken the Loonie relative to the US Dollar the CCB choose to cut interest rates. European Exporters have been up in arms over the "strength" in the Euro and how this strength has eaten into their profits because of the dismal exchange rates. The answer: devalue the local currency by cutting interest rates.

The race is on now to cut interest rates globally to "rescue" local currencies from the weakness in the US Dollar. This global gutting of local currencies will only exacerbate an accelerating global inflation. The effect of these interest rate cuts will also create a bid for the US Dollar, as strange as that may seem. It will be temporary.

What has Gold done since the Fed began cutting interest rates back in September here in the States? It has risen. Why? Because interest rate cuts create liquidity. Excess liquidity creates inflation. Inflation creates a rising Gold price...IN ALL CURRENCIES.

The entire planets system of central banks are now intent on devaluing their currencies to keep their exports competitive in the global economy. This action will only create a demand for Gold in ALL currencies.

At 5AM est. on December 4th, the European Union reported a surprising increase in their PPI. Global inflation rears it's ugly head. This report immediately translated into a rise in the price of Gold. Gold quickly rose over $10 following this report, and tacked on another $5 that same morning when news of the surprising Canadian interest rate cut hit the wires:

U.S. woes hit home as Bank of Canada cuts rates

http://www.theglobeandmail.com/servlet/story/LAC.20071205.RECONOMY05/TPStory/Business

The ubiquitous Gold Cartel has been falling all over themselves since to keep the price of Gold contained. They know all to well of the buy-stops sitting at 807. They know all too well that if Gold breaches the line at 807 the horses will have left the barn.

Don't be misled by the Gold Cartel PR of the past 48 hours that implies that the Dollar has bottomed and that Gold is going to collapse in 2008. Nothing could be further from the truth. The world's credit crisis has not been solved...it has only just begun. Five of America's largest banks are a cat's whisker away from destruction...and nobody will admit it. The Fed could drop interest rates to ZERO, and it would not fix anything...only make things worse.

OPEC scoffed at the suggestion that they increase production. The PPT has lost a key ally in their manipulative cog. OPEC is tired of being lead around by the nose by the USA and their worthless Dollars. Not only has OPEC ceased to "pump more Oil on demand", they have ceased purchasing US Treasuries. China has ceased purchasing US Treasuries as well. The Dollars fate is sealed. A global economic time bomb is ticking...an implosion of the US Dollar is imminent...financial mass destruction is assured. Buy Gold and Silver now...while supplies last.

A Lot Of HOT AIR

Perhaps global warming is caused by all the hot air that blows out of Washington, the Fed, and the US Treasury Department. George Bush does NOT have a plan to halt the "housing crisis". Hank "I'm a buffoon" Paulson does NOT have a plan to stop foreclosures. The Federal Reserve is absolutely clueless and essentially powerless to stop the global economic meltdown smothering the alter of the almighty dollar. If you think that they do have a plan...and know what they're doing, perhaps now would be a great time to dump all your Gold, all your Silver, and all your mining stocks and pick up some Countrywide or Citibank shares. Heck, just sell everything you own for US Dollars...you are destined to be rich!

Treasury Plan to Rescue Home Loan Borrowers Not a Solution for All, Experts Say
WASHINGTON (AP) -- If lenders temporarily freeze low introductory interest rates on home loans made to risky borrowers before they soar, it would be a modest fix for the country's fractured housing market.

The problems are so far-reaching, analysts say, that an emerging Bush administration-backed plan -- nicknamed "teaser-freezer" by one economist -- won't spare many borrowers, or bankers, from the pain of escalating foreclosures and defaults.

Edward Yardeni, an economist who runs Yardeni Research in Great Neck, N.Y., called the plan "better than doing nothing," but added that it is "not necessarily going to make a big dent in the foreclosure problem that's facing us" because thousands of borrowers still might not be able to make their monthly payments.

As a result, the plan, which could be announced as soon as this week, is unlikely to quell worries that the housing market's ongoing problems will drag the economy into a recession.

http://biz.yahoo.com/ap/071202/subprime_bailout.html

WOW! For once the experts might be right.

Goldman Sachs would love gold to drop to $650...that's where they shorted the metal. Goldman Sachs is underwater and sinking fast. Do you think they're going to step forward and tell you the price of Gold will be rising? If you've dumped any of your Gold or Silver positions because Goldman Sachs has suggested a lower Gold price YOU ARE A FOOL. In six weeks you'll be looking back on the last week of November with a sore ass from kicking yourself.

"I see the declines today as further profit-taking into month's end and trade off of a dollar that continues to firm today," said Zachary Oxman, a senior trader at Wisdom Financial, in emailed comments.

The dollar was higher against the euro Thursday, in what analysts said was a largely technical trading move rather than a reflection of fundamental conditions.

"Both oil and the dollar will remain key facts for gold's direction in the coming sessions," said James Moore, an analyst at TheBullionDesk.com, in a research note. Further long liquidation can be expected in the coming sessions, as the end of the month and the year approach, Moore said.

"However, the backdrop of dollar weakness, high energy costs and worries about the credit sector are still favorable for gold and will continue to draw investment demand into the market," he said.

This is reflected in the holdings in the StreetTRACKS Gold ETF which reached a record 609.33 tons, "now eclipsing China's 600-ton central bank holding and making it the 10th single largest holding of gold," Moore said.

http://www.marketwatch.com/news/story/gold-sinks-closing-below-800/story.aspx?guid=%7B6A1E5072-EC42-451D-B063-8A6F340D5ABF%7D

Investors know a bargain when they see one. And savvy investors are backing up the truck to take advantage of these sale prices in Gold and Silver. Everyone and their mother believes the Fed will be cutting interest rates further on December 11th. I doubt this bodes well for the fortunes of the US Dollar. The Fed has cut interest rates by 75 basis points since September, and I've yet to see a rally in the Dollar as a result of a Fed rate cut. The price of Gold certainly has risen though...and will continue to rise into 2008.