Monday, September 29, 2008

What if the emperor has no Gold?

How refreshing to see the US Congress stand up [for once] for the will of the people and defeat this obnoxious bailout of Wall Street's Crooked Boys Club. It's high time somebody told Bumbling Ben Bernake and Hanky Panky Paulson to "stick it where the sun don't shine". Now we can expect the stock market to plummet like a stone in the ocean as the PPT pulls their "support" of the stock markets in a pathetic attempt to sway public opinion in the hopes that the people will scream in agony as their 401ks go up in smoke and demand that the "government" do "something" to stop the pain. Suck it up America, what's left of your financial future rests with your resolve here. Do not be fooled by these carpet baggers bag of tricks. Contact your Congressman immediately and DEMAND an accounting of the Federal Reserve, the US Treasury, and the President's Working Group On Financial Markets. It is the cronyism in these three houses that lead to this financial crisis. Do Not let these crooks convince you that they should be allowed to fix the mess they created. All of them should be pushed as far away from the banking system as is possible. In fact, DEMAND that the Federal Reserve either by abolished, or at the very least be placed under crushing regulation. The constitution NEVER intended for the Federal Reserve to exist, and it is time their theft of the wealth of this nation be STOPPED!

And once again the Dollar is up in the face of economic disaster? Yes, but it won't be for long. Never forget, until otherwise, the US Dollar is "still" the reserve currency of the world. With assets being sold globally, it would only stand to reason that the demand for Dollars would rise, temporarily, as people seek "refuge" for their investment cash. The rise in the Dollar IS NOT a flight to quality, it is a flight to refuge. As the dust settles, the Dollar will begin to fall, and Gold will begin to rise as people recognise the TRUTH, and shun the LIE that is the US Dollar.

What if the desperation of the Fed and the Treasury is because the US has sold or leased out ALL of it's Gold? What if the emperor has no Gold? Perhaps we should demand that Congress sanction an audit of the US Gold Reserves. What if the Fed and the Treasury has sold the nations entire Gold Reserve. Imagine the carnage...

Ron Paul - Bailout Fails! Plus: You're Going To Destroy the Dollar! [video]
Congressman Ron Paul gives us his thoughts on the failure of the bailout bill just minutes after leaving the floor.

This is a must see. The man is the VOICE OF TRUTH.

So why isn't the gold price running?
“We have argued for many, many years, as was the case in the late 1960s and early 1970s, the western central banks, particularly the US painted the tape, so to speak, to convey the image that the US dollar is better than gold,” said Murray Pollitt from Pollitt & Co. in Toronto.

“One way or another, the descendents of those bankers are doing the same thing…. They don’t want gold rallying when there are major bankruptcies. They don’t want people to flee into gold. They want them to flee into treasury bills, which is exactly what’s happening,” Pollitt told Miningmx.

The US government bonds are up two points on the day, he said. “They’ve just taken over Fannie Mae… and are throwing more money at the system. And people are buying bonds. It’s breathtaking. They should be buying gold.”

I have posted "weekly" charts of the Yen, Euro, Gold, and Silver. The "big picture" if you will. Weekly charts eliminate the noise of the daily charts and help put these markets into perspective relative to one and other.

Sunday, September 28, 2008

Say A Prayer For America

It should come as no surprise that the initial reaction from the metals markets on the news that this mother of all shit sandwiches will be force fed to the American public is for them to go down, and the US Dollar up. What a freaking joke! No single event in the history of mankind could be more negative for a "local currency" than the events of the past 10 days. To even suggest that this shit sandwich will taste good and fill the bellies of the poor boys on Wall Street is to invite public stoning. Folks, the end of life as we know it in the Western World is at hand. Grab you ankles and kiss your ass goodbye.

It is with stunning realization that our entire way of life is one giant Wimpy Burger. "I'll gladly pay you Tuesday, for a hamburger today." Our entire way of life exists by way of one insurmountable mountain of debt. Nothing is ever really bought, and nothing is ever really sold. The entire economy is an Alice in Wonderland world of make-believe and I.O.U.'s. How pathetic we are to boast that we are the most powerful nation on earth. Humpty Dumpty has a better chance of getting his act together than the US Financial System does.

Isn't it amazing that after countless bailouts, with promises of "this will fix everything", nothing has been fixed, and the price of Gold drops with each one. Truly stunning the shear stupidity of all that we have witnessed over the proceeding six months. Lies, Lies, Lies, and more Lies from a government that boasts truth and democracy. I don't know what is worse, the US Governments LIES, or the rest of the Worlds failure to call the lies into the open, and then kick the USA to the curb for stealing from the world community. The USA is a pillar of lies, learn to live with that fact, and you may survive the coming Mega Depression.

$700 BILLION? The Fed dumped over $1 TRILLION into the financial system over the past week, and never "asked" for a penny of it from the taxpayers...and NOTHING was fixed. $700 BILLION more? It ain't gonna make a damn bit of difference just because the asked if it was OK.

Oh Stop It! You're Killing Me...

WE LOVE THIS NUGGET of irony, idiocy or just plain cant so much, we have to repeat it – clutching our sides and doubling-up in laughter, tears streaming down our disbelieving faces:

"The reality of the situation is that an open, competitive, and liberalized financial market can effectively allocate scarce resources in a manner that promotes stability and prosperity far better than governmental intervention..."

So said Henry Paulson, US Treasury secretary and ex-Goldman Sachs chief, in Shanghai on 7th March 2007. Hank was lecturing Chinese officials (who this week allowed short-selling on their domestic equity markets for the first time) at the so-called China-US Strategic Dialogue summit.

Making a Deal with the Devil
The urgency for passing this bailout bill is based on the claim that the American economy will collapse if nothing is done. If the government were to stay out, and allow the market to function, there will certainly be a great deal of economic pain. Companies will go bankrupt, banks will fail, real estate and stock prices will keep falling, and many people will lose their jobs. However, government action will not prevent any of this. At best, it will merely delay the inevitable, but only at the cost of increasing the severity of the underlying problems, thus making their ultimate resolution that much more painful to endure.

The bottom line is that there is no way to resolve our economic problems without a severe recession, and our politicians need to level with the public. As a nation, we gambled on the alluring riches of real estate and we lost. The price must be paid. Contrary to the Bush Administration rhetoric, the fundamentals of our economy are not sound. If they were, we would not be in this mess. Recessions are meant to restore balance, purge excess, and liquidate mal-investments. On that score we have a lot of work to do.

We are being told that this plan will help the economy by keeping the spigots of consumer credit flowing. However, to really address the fundamental problems, those spigots must be tightened. Since we have already borrowed and spent ourselves into bankruptcy, the last thing we need is for consumers to borrow more.

What $700B won't buy: a quick fix for the economy
SAN FRANCISCO (AP) -- Not even $700 billion will be enough to spare the United States from more economic anguish if the government's proposed banking bailout pans out like similar desperation moves during the past two decades.

It usually takes years to recover from a financial crisis severe enough for politicians to ride to the rescue with truckloads of taxpayer money.

Take, for example, the U.S. government's August 1989 bailout of the savings-and-loan industry.

The stock market fell by 12 percent within the first 14 months of the rescue plan while the economy slipped into an eight-month recession that began in July 1990. Housing prices that had just begun to erode continued to fall for another three years.

There's little reason to believe it will be dramatically different this time around, particularly since this bailout involves harder-to-value assets and comes with the U.S. economy already on the edge of a recession, if one hasn't begun already.

The government is hoping its intervention will unclog the lending pipeline, but that isn't a certainty either, said Sung Won Sohn, an economics professor at California State University, Channel Islands.

"If I am a medium-sized bank on Main Street, simply because the government is bringing a bailout package to Wall Street doesn't mean I am suddenly going to change my mind and start lending money again," Sohn said.

Best outlook for silver since the days of the Hunt brothers
Not since the Hunt Brothers tried to corner the silver market in the late 1970s has there been more dramatic news for silver prices than last week’s confirmation from the Commodity Futures Trading Commission enforcement division is investigating the silver market.

Retail investors have recently been big buyers of silver bars and coins, while something fishy has been happening in the futures market with short positions. Silver investors have written hundreds of emails to US federal regulators and the result is a fresh investigation.

‘We take the threat of manipulation in the futures and options markets very seriously and employ a number of measures to prevent, identify and prosecute it,’ says Stephen Obie, acting director of enforcement.

The argument from silver bugs is that a small number of US banks have been holding a large portion of short positions — or bets that silver prices will fall — on the New York Mercantile Exchange. And indeed data shows that two US banks increased their short positions between July and August by 450 per cent and controlled 25 per cent of the market.

This time it is the enforcement rather than oversight division of the CFTC that is tackling the investigation. The oversight division performs overall market surveillance. The enforcement division looks at activities in a specific time period.

It may be that the CFTC enforcement division investigation reveals no wrong doing over the summer. Silver has always been a volatile commodity, and price swings can also be to the upside and benefit investors. But this investigation also puts the spotlight on silver at a very interesting moment in the precious metals bull market.

All traders should have stops in to protect positions against theft by the CRIMEX should Gold fall below 860, and Silver 12.60. Catching a falling knife is dangerous. Breaks above 920 Gold and 14 Silver are signals to add to positions on the way up.

Say a prayer for America.

Thursday, September 25, 2008

Ron Paul Answers The President

My Answer to the President
By: Dr. Ron Paul, U.S. Congressman

Dear Friends:

The financial meltdown the economists of the Austrian School predicted has arrived.

We are in this crisis because of an excess of artificially created credit at the hands of the Federal Reserve System. The solution being proposed? More artificial credit by the Federal Reserve. No liquidation of bad debt and malinvestment is to be allowed. By doing more of the same, we will only continue and intensify the distortions in our economy - all the capital misallocation, all the malinvestment - and prevent the market's attempt to re-establish rational pricing of houses and other assets.

Last night the president addressed the nation about the financial crisis. There is no point in going through his remarks line by line, since I'd only be repeating what I've been saying over and over - not just for the past several days, but for years and even decades.

Still, at least a few observations are necessary.

The president assures us that his administration "is working with Congress to address the root cause behind much of the instability in our markets." Care to take a guess at whether the Federal Reserve and its money creation spree were even mentioned?

We are told that "low interest rates" led to excessive borrowing, but we are not told how these low interest rates came about. They were a deliberate policy of the Federal Reserve. As always, artificially low interest rates distort the market. Entrepreneurs engage in malinvestments - investments that do not make sense in light of current resource availability, that occur in more temporally remote stages of the capital structure than the pattern of consumer demand can support, and that would not have been made at all if the interest rate had been permitted to tell the truth instead of being toyed with by the Fed.

Not a word about any of that, of course, because Americans might then discover how the great wise men in Washington caused this great debacle. Better to keep scapegoating the mortgage industry or "wildcat capitalism" (as if we actually have a pure free market!).

Speaking about Fannie Mae and Freddie Mac, the president said: "Because these companies were chartered by Congress, many believed they were guaranteed by the federal government. This allowed them to borrow enormous sums of money, fuel the market for questionable investments, and put our financial system at risk."

Doesn't that prove the foolishness of chartering Fannie and Freddie in the first place? Doesn't that suggest that maybe, just maybe, government may have contributed to this mess? And of course, by bailing out Fannie and Freddie, hasn't the federal government shown that the "many" who "believed they were guaranteed by the federal government" were in fact correct?

Then come the scare tactics. If we don't give dictatorial powers to the Treasury Secretary "the stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet." Left unsaid, naturally, is that with the bailout and all the money and credit that must be produced out of thin air to fund it, the value of your retirement account will drop anyway, because the value of the dollar will suffer a precipitous decline. As for home prices, they are obviously much too high, and supply and demand cannot equilibrate if government insists on propping them up.

It's the same destructive strategy that government tried during the Great Depression: prop up prices at all costs. The Depression went on for over a decade. On the other hand, when liquidation was allowed to occur in the equally devastating downturn of 1921, the economy recovered within less than a year.

The president also tells us that Senators McCain and Obama will join him at the White House today in order to figure out how to get the bipartisan bailout passed. The two senators would do their country much more good if they stayed on the campaign trail debating who the bigger celebrity is, or whatever it is that occupies their attention these days.

F.A. Hayek won the Nobel Prize for showing how central banks' manipulation of interest rates creates the boom-bust cycle with which we are sadly familiar. In 1932, in the depths of the Great Depression, he described the foolish policies being pursued in his day - and which are being proposed, just as destructively, in our own:

Instead of furthering the inevitable liquidation of the maladjustments brought about by the boom during the last three years, all conceivable means have been used to prevent that readjustment from taking place; and one of these means, which has been repeatedly tried though without success, from the earliest to the most recent stages of depression, has been this deliberate policy of credit expansion.

To combat the depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about; because we are suffering from a misdirection of production, we want to create further misdirection - a procedure that can only lead to a much more severe crisis as soon as the credit expansion comes to an end... It is probably to this experiment, together with the attempts to prevent liquidation once the crisis had come, that we owe the exceptional severity and duration of the depression.

The only thing we learn from history, I am afraid, is that we do not learn from history.

The very people who have spent the past several years assuring us that the economy is fundamentally sound, and who themselves foolishly cheered the extension of all these novel kinds of mortgages, are the ones who now claim to be the experts who will restore prosperity! Just how spectacularly wrong, how utterly without a clue, does someone have to be before his expert status is called into question?

Oh, and did you notice that the bailout is now being called a "rescue plan"? I guess "bailout" wasn't sitting too well with the American people.

The very people who with somber faces tell us of their deep concern for the spread of democracy around the world are the ones most insistent on forcing a bill through Congress that the American people overwhelmingly oppose. The very fact that some of you seem to think you're supposed to have a voice in all this actually seems to annoy them.

I continue to urge you to contact your representatives and give them a piece of your mind. I myself am doing everything I can to promote the correct point of view on the crisis. Be sure also to educate yourselves on these subjects - the Campaign for Liberty blog is an excellent place to start. Read the posts, ask questions in the comment section, and learn.

H.G. Wells once said that civilization was in a race between education and catastrophe. Let us learn the truth and spread it as far and wide as our circumstances allow. For the truth is the greatest weapon we have.

In liberty,

Ron Paul

Wednesday, September 24, 2008

Repeal The Federal Reserve Act

Bumbling Ben Bernanke is a pompous ass. Here's Proof:

Ron Paul Confronts Bernanke at Joint Economic Hearing [Video]

Congressman Ron Paul takes Bumbling Ben to the woodshed, and dares to ask under what authority The Federal Reserve believes they can print money and create credit out of thin air. Bumbling Ben eludes the question and hides behind the "constitutionally illegal" Federal Reserve Act. If the Congress were serious about ending this "financial crisis", they would allow the banks to fail, and then disband the Federal Reserve for their failure to "regulate" the banking system. Bernanke and Paulson are fascist swine and both should be imprisoned.

Bob Chapman, The International Forecaster
After over 40 years of financial reporting and analysis, we can say, without hesitation, that the 700 billion bailout plan proposed by Fed Chairman Buck-Busting Ben Bernanke and Treasury Secretary Hanky Panky Paulson, on behalf of the Caligula Administration, is the most abusive and piggish fascist scheme we have ever heard proposed. This is the living, freaking, end. We sit here stunned and stupefied at the sheer arrogance of a corporatist, fascist plan, so saturated with moral hazard, that it can only be described, to use the words of Jean-Pierre Roth, president of the Swiss National Bank, in his description of the breakdown in American lending standards, as "unbelievable!"

The International Forecaster hits a home run with this essay and touches all the bases. Please read in its entirety and forward to your address book. This "bailout" MUST BE STOPPED!

Proposed $700 Billion Bailout Is Too Little, Too Late to End Debt Crisis
JUPITER, FL, September 24, 2008 — The proposal before Congress for a $700 billion financial industry bailout will not only fail to end the massive U.S. debt crisis but could actually aggravate the crisis by driving up interest rates, according to a white paper submitted to Congress and banking regulators today by Weiss Research, Inc. Therefore, Weiss recommends limiting and reducing the bailout as much as possible, while bolstering existing safety nets for consumers.
Based on recently released FDIC and Federal Reserve data, Weiss Research finds that:

1. 1,479 U.S. banks and 158 U.S. thrifts are at risk of failure, with total assets of $3.6 trillion, or 36 times the assets of banks on the FDIC's list of troubled institutions.

2. Among those with $5 billion or more in assets, 61 banks and 25 thrifts are heavily exposed to nonperforming mortgages.

3. The bailouts announced and proposed to date, although expected to cost over $1 trillion, are too small to rescue most institutions at risk, let alone address multiple problems with U.S. interest-bearing debts outstanding of $51 trillion and derivatives held by U.S. banks of $180 trillion.

Martin D. Weiss, president of Weiss Research, comments: "There should be no illusion that the $700 billion estimate proposed by the Administration will be enough to end the crisis. Nor should there be any false hopes that the market for U.S. government securities can absorb the additional burden of a $700 billion bailout without putting major upward pressure on U.S. interest rates, aggravating the very debt crisis that the government is seeking to alleviate."

This is another absolute must read. Martin Weiss hits the nail squarely on the head. Again, please read in its entirety, and forward to your address book. EVERYONE should be on the phone to their Congressman expressing their disgust with this fascist bailout plan the swine Bernanke and Paulson are trying to force feed the Congress. It is high time this Congress stand up to these crooks. And it's high time this Congress recognize the US Constitution and shut these crooks down and delete the Federal Reserve Act from existence. The country faces "grave consequences to it's financial system" BECAUSE of the US Federal Reserve. It will not be saved by assured of that people.

I will return next week from my vacation to "The Land Of 10,000 Lakes" next week. Until then, be wary of the lies emanating from Washington and Wall Street, and make every effort to spread the TRUTH.


Tuesday, September 23, 2008

The Sky's The Limit

I have been vacationing in the "Land Of 10,000 Lakes". I apologize to readers who have missed my bold commentary.

Hasn't this blow up of the financial system been outlandishly rewarding for those of us that have stood beside the Truthsayer Gold thru thick and thin? The government sponsored bailout proposed by the Three Stooges of High Finance is absurd. Paulson, Bernanke, and Cox have got to be joking. $700 BILLION will not even begin to fix this mess. Not to mention the fact that they don't even have the money. They're fear mongering aimed at strong-arming the Congress into giving them authority they do no deserve is probably the most alarming aspect of this entire event. The US Congress has been completely derelict in their duties to the American people since the beginning of this "financial crisis". It is high time they stand up to these crooks and defend what is left of the wealth of this nation lest it be stolen and squandered by these flim-flam men of Wall Street.

Q. Will these new government actions end the crisis?

A. No. It may buy a bit of time for some banks. But now that the nation's $47-trillion debt balloon and $180-trillion derivative bubble have burst, no amount of legislation can restore them. Nor can the government legislate a bull market in stocks or an end to the recession.
- Martin D. Weiss, Ph.D.

Why the Magnitude of the Mortgage, Debt and Derivatives Crisis Overwhelms The $700 Billion Bailout Plan Now Under Discussion in Congress
Last week, the President, the Treasury Secretary and the Federal Reserve Chairman announced their view that Congress must get to the root of the debt crisis in America by providing a broad solution that truly puts the crisis to an end.

However, the magnitude of the crisis afflicting mortgages, other debts and derivatives clearly overwhelms the $700 billion bailout proposal currently under discussion. To better understand the magnitude of the problem ... First and foremost, we urge members of Congress to disregard data based on the list of troubled banks maintained by the Federal Deposit Insurance Corporation (FDIC).

The FDIC's list has only 117 institutions with $78 billion in assets. But given the current proposal for a $700 billion bailout, it is clear that Administration officials tacitly recognize that the FDIC list understates the problem. There are many more financial institutions at risk or in need of assistance with their toxic paper.

How many more? We believe a more accurate count comes from our analysis of: (a) the derivative risks assumed by major banks, (b) the mortgage holdings of the largest regional banks and (c) all banks and thrifts with's financial strength rating of D+ (weak) or lower. Based on this analysis, we believe:

1,479 FDIC member banks are at risk of failure with total assets of $2.4 trillion.

In addition, 158 savings and loans are at risk with $756 billion in assets.

In sum, banks and S&Ls at risk have assets of $3.2 trillion, or over 36 times the assets of banks on the FDIC's watch list.

These numbers alone indicate that the $700 billion contemplated for the bailout plan could be severely inadequate.

Second, Congress should seriously consider the facts ...

US Government to secure mortgage market
The U.S. Treasury Department has promised “hundreds of billions” to save the US markets using its own reserves.

President Bush approved the use of existing authorities by Treasury secretary Hank Paulson to make available as necessary the assets of the Exchange Stabilisation Fund for up to $50 billion to buy more illiquid mortgage assets.

When the Government bailed out the the Government Sponsored Enterprises it promised to buy illiquid mortgage backed securities, but this announcement extends that pledge.

The ESF was created after the Great Depression and uses the US gold reserve as collateral for financial stability.

The plan will involve Fannie Mae and Freddie Mac increasing their purchases of mortgage assets. The Government will also expand its own purchase programme for mortgage backed assets, which was announced recently, to help increase the availability of capital for more mortgages.

I found this brief story to be quite revealing, and alarming. It prompted me to research the "ESF", Exchange Stabilization Fund. For that we turned to Wikipedia. It was most interesting to learn that the ESF as of August 31, 2008 has TOTAL ASSETS of ONLY
$ 49,966,629,808.33 . As in LESS THAN $50 BILLION Dollars. I guess that would explain then the "availability" of "up to $50 Billion to buy more illiquid mortgage assets. " The Exchange Stabilization Fund, the PPT's market manipulating kitty, has less than $50 BILLION in it? YUP! It says so right here on it's government web site:

Exchange Stabilization Fund

The Exchange Stabilization Fund (ESF) consists of three types of assets: U.S. dollars, foreign currencies, and Special Drawing Rights (SDRs)1. The financial statement of the ESF can be accessed through the links on the right hand side to either "Latest Financial Reports" or "Finances & Operations."

The ESF can be used to purchase or sell foreign currencies, to hold U.S. foreign exchange and Special Drawing Rights (SDR) assets, and to provide financing to foreign governments. All operations of the ESF require the explicit authorization of the Secretary of the Treasury ("the Secretary").

The Secretary is responsible for the formulation and implementation of U.S. international monetary and financial policy, including exchange market intervention policy. The ESF helps the Secretary to carry out these responsibilities. By law, the Secretary has considerable discretion in the use of ESF resources.

The legal basis of the ESF is the Gold Reserve Act of 1934. As amended in the late 1970s, the Act provides in part that "the Department of the Treasury has a stabilization fund …Consistent with the obligations of the Government in the International Monetary Fund (IMF) on orderly exchange arrangements and an orderly system of exchange rates, the Secretary …, with the approval of the President, may deal in gold, foreign exchange, and other instruments of credit and securities."

Exchange Stabilization Fund
From Wikipedia, the free encyclopedia

The Exchange Stabilization Fund (ESF) is a branch of the United States Treasury Department which manages a portfolio of domestic and foreign currencies for the purpose of foreign exchange intervention. This particular arrangement (as opposed to having the central bank intervene directly) allows the US government to influence the exchange rate without affecting domestic money supply.

The U.S. Exchange Stabilization Fund was established at the Treasury Department by a provision in the Gold Reserve Act of 31 January 1934. It was intended as a response to Britain's Exchange Equalisation Account[2]. The fund began operations in April 1934, financed by $2 billion of the $2.8 billion paper profit the government realized from raising the price of gold to $35 an ounce from $20.67. The Act authorized the ESF to use its capital to deal in gold and foreign exchange in order to stabilize the exchange value of the dollar. The ESF as originally designed was a creature of the Executive Branch not subject to legislative oversight.

The Gold Reserve Act authorized the ESF to use such assets as were not needed for exchange market stabilization to deal in government securities. The Fund had no statutory authority, however, to engage in other activities that it began to undertake. The principal such extraneous activity it devoted itself to was lending dollars to politically favored governments.

In 1938-40, the director of the Division of Monetary Research, Harry Dexter White, worked on a proposal for loans to Latin America and participated in plans for an Inter-American Bank, which did not materialize. The plan for an Inter-American Bank, however, inspired White’s first draft of the subsequent plans for the International Monetary Fund and the World Bank that White prepared in 1941 at Secretary of the U.S. Treasury Henry Morgenthau’s direction.

The US Government clearly has it's back against the wall now. The weight of this "financial crisis" to heavy to bear, and clearly overwhelming the governments resources. One must ask how the government is going to bail out the bad debts of all these banks using the country's Gold Reserves as collateral.

As discussed in my post For What It's Worth on September 11, 2008, the value of the US Gold Reserves is hardly equal to it's debt load. Let alone large enough to use as collateral in further loans to stabilize the world financial markets. It is absurd to even suggest it is possible, or lead the public to believe that these Three Stooges of High Finance can fix anything.


According to the International Monetary Fund’s Official World Gold Holdings report, the U.S., at December 2007, held 8,133.5 tonnes of gold, or 75.3% of the world’s central bank holdings. That’s 261.5 million troy ounces, valued at $209.2 Billion at US$800 per ounce.

With $10 Trillion of Debt already on the books following the Fannie/Freddie bailout, it's clear beyond a shadow of a doubt that the US Governments debt to equity ratio hardly qualifies it to borrow $1 TRILLION more that it doesn't have the collateral to cover. It would stand to reason then, if the US Government is going to back this gigantic bailout with the country's Gold Reserves, it is going to need a much higher Gold price in order to raise the value of the collateral it wishes to borrow against. One would have to believe then that the days of suppressing the price of Gold may have finally ended, and judging by the Governments growing debt load, the sky may be the limit as to the future price of Gold.

Gold and Silver have now entered areas of technical price resistance on their respective charts. Gold at 892, and Silver at 13.75. Both are seeing some profit taking early this morning in Asia. Dips in price are buying opportunities at 860 Gold, and 12.60 Silver. A small bounce in the Dollar and retreat in Oil prices here may briefly cap recent gains in the Precious Metals. Look to add to positions or establish new positions on reactions in price.

Wednesday, September 17, 2008

We Have Lift-off

Gold prices post biggest 1-day gain ever

NEW YORK (AP) -- Gold prices exploded Wednesday -- posting the biggest one-day gain ever in dollar terms -- as fears of more credit market turmoil unnerved investors and triggered a flood of safe-haven buying.

OH MOMMA! Can you say short squeeze?

Treasury bails out Fed; now who bails out Treasury?
WASHINGTON -- The Federal Reserve has announced a series of lending and liquidity initiatives during the past several quarters intended to address heightened liquidity pressures in the financial market, including enhancing its liquidity facilities this week. To manage the balance sheet impact of these efforts, the Federal Reserve has taken a number of actions, including redeeming and selling securities from the System Open Market Account portfolio.
The Treasury Department announced today the initiation of a temporary Supplementary Financing Program at the request of the Federal Reserve. The program will consist of a series of Treasury bills, apart from Treasury's current borrowing program, which will provide cash for use in the Federal Reserve initiatives.

Announcements of and participation in auctions conducted under the Supplementary Financing Program will be governed by existing Treasury auction rules. Treasury will provide as much advance notification as possible regarding the timing, size, and maturity of any bills auctioned for Supplementary Financing Program purposes.

The Fed is broke?

Federal bank insurance fund dwindling
The Federal Deposit Insurance Corp., whose insurance fund has slipped below the minimum target level set by Congress, could be forced to tap tax dollars through a Treasury Department loan if Washington Mutual Inc., the nation's largest thrift, or another struggling rival fails, economists and industry analysts said Tuesday.

"We've got a ... retail bank run forming in this country," said Christopher Whalen, senior vice president and managing director of Institutional Risk Analytics.

Treasury Secretary Henry Paulson said Monday that the country's commercial banking system "is safe and sound" and that "the American people can be very, very confident about their accounts in our banking system." FDIC officials also have said 98 percent of U.S. banks still meet regulators' standards for adequate capital.

But fear is growing on Main Street as well as Wall Street about the likelihood of multiple bank failures and the strain that would put on the FDIC.

The fund, which is marking its 75th anniversary this year with a "Face Your Finances" campaign, is at $45.2 billion -- the lowest level since 2003. At the same time, the number of troubled banks is at a five-year high.

FDIC Chairman Sheila Bair has not ruled out the possibility of going to the Treasury for a short-term loan at some point. But she has said she does not expect the FDIC to take the more drastic action of using a separate $30 billion credit line with Treasury -- something that has never been done.

The FDIC's fund is currently below the minimum set by Congress in a 2006 law. The failure of IndyMac Bank in July cost $8.9 billion.

Henry Paulson has lied since DAY ONE of this financial crisis. He's lying now too...

The events unfolding literally by the hour before our very eyes should come as a surprise to no one reading this. However the rapidity of the unfolding events, and the crumbling of the house of cards is a bit shocking. One might even consider this scary,...and it is. The financial system is imploding, and there are not a enough Fed and Treasury lies to save the sinking ship this time. I'm still trying to figure out how an $85 BILLION "loan" is going to suppress a multi-TRILLION Dollar Catastrophe. LOL, judging by the world's reaction today, it is unlikely to have much of an effect in solving or delaying anything past the end of the month...if we're lucky.

Gold Bugs rejoice. But temper your enthusiasm. We have a lot of work ahead of us. It would be foolish to believe that the road ahead is paved and bump free. Prepare for battle, we're going for the high ground.

Tuesday, September 16, 2008

Faith, Hope And CHARITY

Treasury Secretary Henry Paulson said Monday the American people can remain confident in the "soundness and resilience in the American financial system."

The Ultimate Wall Street Nightmare
by Martin D. Weiss, Ph.D.
In the wake of Lehman's demise, Fed Chairman Bernanke and Treasury Secretary Paulson will try to put out the word that it's no great trauma.

But it's a lie and they know it. If they openly admitted that the Lehman collapse will paralyze Wall Street, torpedo the stock market and sink the economy, they'd have to pony up $100 billion or more to support it. Instead, their agenda was to push big banks to put up the money. And they failed to do so.

We've lost count of how many times the authorities have virtually sworn on a stack of Bibles that "our financial system is fundamentally sound."

But no one could possibly lose count of their recent desperate efforts to prevent the system's collapse — actions which directly belie their words:

One — the coordinated efforts by central banks to flood the global economy with liquidity in the summer of 2007.

Two — the hasty bailout of Bear Stearns in March of this year.

Three — the giant Fannie and Freddie rescue announced just eight days ago.

Each time they intervene, they say "we must not reward CEOs who deceive the public and walk off with multibillion dollar bonus checks." And each time they say it's the "last time we'll make an exception to that rule."

But then they go ahead and do it anyhow, not only breaking their own word ... but also trashing the long tradition of restraint established by their predecessors since the Great Depression.

Why? Because they had neither the courage nor the audacity to confront Wall Street's ultimate nightmare: A collapse in the giant mountain of derivatives.

Here's the great dilemma: The tangled web of bets and debts linking each of these giant players to the other is so complex and so difficult to unravel, it may be impossible for the Fed to protect the financial system from paralysis if just one major player defaults. And if Lehman is not that player, the next one will be.

To understand why, put yourself in the shoes of a senior derivatives trader at a big firm like Morgan Stanley (which has $7.1 trillion in derivatives on its books and about $10 billion in capital).

Let's say you're personally responsible for $500 billion in derivatives contracts with Bank A, essentially betting that interest rates will decline.

By itself, that would be a huge risk. But you're not worried because you have a similar bet with Bank B that interest rates will go up.

It's like playing roulette, betting on both black and red at the same time. One bet cancels the other, and you figure you can't lose.

Here's what happens next ...

Interest rates go up, reflecting a 2% decline in bond prices.

You lose your bet with Bank A.

But, simultaneously, you win your bet with Bank B.

So, in normal circumstances, you'd just take the winnings from one to pay off the losses with the other — a non-event.

But here's where the whole scheme blows up and the drama begins: Bank B suffers large mortgage-related losses. It runs out of capital. It can't raise additional capital from investors. So it can't pay off its bet. Suddenly and unexpectedly ...

You're on the hook for your losing bet. But you can't collect on your winning bet.

You grab a calculator to estimate the damage. But you don't need one — 2% of $500 billion is $10 billion. Simple.

Bottom line: In what appeared to be an everyday, supposedly "normal" set of transactions ... in a market that has moved by a meager 2% ... you've just suffered a loss of ten billion dollars, wiping out all of your firm's capital.

Now, you can't pay off your bet with Bank A — or any other losing bet, for that matter.

Bank A, thrown into a similar predicament, defaults on its bets with Bank C, which, in turn, defaults on bets with Bank D. Bank D has bets with you as well ... it defaults on every single one ... and it throws your firm even deeper into the hole.

So now do you understand why bookies belong to the Mafia and why gamblers who welsh on their debts wind up at the bottom of the East River? It's because defaulting gamblers are a grave threat to the entire system, just like Lehman Brothers is today.

...and that's just from the collapse of Lehman Brothers. Now consider the ramifications of the collapse of AIG. AIG insures all the pays when the betting parties can't. AIG fails, nobody pays and nobody collects, but everybody loses. The biggest loser? The American taxpayer. Billions of non-existent dollars are tossed around by the Fed and the US Treasury like confetti at a New York City parade. NONE of this money has been appropriated by the US Congress...the sole government authority authorized to appropriate the American taxpayers money. The Federal reserve is NOT A GOVERMENT ENTITY. Yet they throw the taxpayers money all over Wall Street. The US Treasury prints money and dispenses it globally, yet they have absolutely NO authority to do so. Where is the US Congress? Why are they not looking out for the interests of the American taxpayers? These dumb asses need a wake up call NOW. The ENTIRE US CONGRESS is up for re-election this fall. Consider it your civic duty to vote OUT the incumbent in your district. Every congressman on the Hill, except Ron Paul, should be arrested and held for dereliction of duty and treason.

Lehman collapse means all bets for the financial system are now off
Lehman Brothers' bankruptcy has dealt the money markets another crippling blow, incapacitating them for who knows how long. Since the crunch struck last year, the markets have been in seizure. But, with the careful nursing by governments and central banks, they appeared to be on the slow road to recovery. No longer.

Fears about other banks' exposures to Lehman and renewed uncertainty as to where the crisis may strike next will freeze the wholesale markets up again. The crunch is back with a vengeance.

It's not hard to see why. Lehman's collapse into bankruptcy protection is the biggest corporate debt default in history and, in the complex interwoven world of modern banking, no one properly understands where the risks lie.

Lehman bonds and loans that were trading at 80 cents to 90 cents in the dollar last week on fears of collapse are this morning worth little more than 40 cents, according to credit market experts.

In other words, about $70bn of Lehman debt held by other institutions has been wiped out. The holders of that debt, therefore, are facing huge potential losses with untold ramifications of their own.

The scale of the potential crisis is exacerbated by the credit default swap (CDS) markets. CDS's are insurance contracts for holders of corporate debt that guarantee to pay back the loan in the event of the company's bankruptcy.

Most of these products are offered by other banks to low-risk institutions like pension funds. Sandy Chen, a banks analyst at Panmure Gordon, reckons this is "where the real stress will come from".

He estimates that the "CDS market as a whole had notional contracts worth four times greater than the underlying debts issued". By his calculations, which differ slightly to the credit analyst's above, that would make "$350bn in CDS's written on Lehman debts".

As to the size of the counterparty risk - defined as other banks that have complex financial instruments held through Lehman - no analyst or credit market expert could hazard a guess as to the likely cost. Mr Chen said Lehman had $729bn of "notional derivatives contracts" that

Lehman believed in May were worth $16.6bn.
Again, any losses will have to be punched into the complex, interlaced banking system to work out where the liabilities ultimately may lie.

At the very least, the collapse of Lehman is potentially as costly as the $200bn initial estimate of the US sub-prime mortgage fall out.

Given where that has left the world's banks - in terms of losses, writedowns, capital raisings and share price falls - there's every reason to be worried.

Do you feel confident in the American financial system now? LOOOOOOOOOOOOOL!!! People, the fuse has been lit, the big bang is all that remains. Helicopter Ben has the fleet airborne. Billions are being dropped around the clock. Billions of Dollars of taxpayer money never appropriated by the the US the US Federal Reserve has effectively STOLEN from the American taxpayer. I don't know about you, but I'm volunteering for the Lynch Mob. The criminals have got to pay for destroying the country.

Anxious central banks pump billions more into markets
FRANKFURT (AFP) — Central banks pumped billions into money markets for a second day Tuesday as worries grew that US insurance giant AIG might follow investment bank Lehman Brothers into bankruptcy and spark a global meltdown.

A day after Lehmans collapsed and Merrill Lynch, another Wall Street titan once considered invincible, was sold, central banks in Europe and Japan provided a desperately needed 160 billion dollars in liquidity.

In the United States, the Federal Reserve injected 50 billion dollars, adding to Monday's 70 billion dollars and taking the total amount injected by central banks since the weekend to more than 300 billion dollars.

The collapse of Lehmans, the fire-sale of Merrill Lynch and worries about AIG have contributed to concerns that money markets, where banks secure short term financing, might dry up.

To counter this the European Central Bank said it allotted 70 billion euros (100 billion dollars), more than double the 30-billion-euro injection it had provided on Monday.

It also said it had lent 150 billion euros to commercial banks in a regular weekly refinancing operation in which markedly higher lending rates reflected increased market tensions.

The Bank of Japan meanwhile carried out two injections, the first of 1.5 trillion yen (14 billion dollars, 10 billion euros) and the second of 1.0 trillion yen.

In Britain, the Bank of England injected 20 billion pounds (35.9 billion dollars), four times Monday's total.

Switzerland's central bank said it would supply liquidity "in a flexible manner and generously" to money markets. On Monday the Swiss National Bank injected twice as much liquidity as usual to the market.

After the Fed's latest 50-billion-dollar injection all eyes were on whether the US central bank might reverse its policy and cut interest rates to prevent the US financial system from toppling and dragging the economy down with it.

And I'm supposed to have faith in the financial system? Yeah right. Was I surprised to see the price of Gold plummet at the open of the CRIMEX this morning? NO. Was I surprised to see the price of Oil plummet? NO. Was I surprised to see the Dollar rise again? NO. These crooks are so desperate to save their asses I'm not surprised by anything anymore. Sadly, I now expect it. I think everybody does. And when everybody begins to expect the Dollar to rise when it should fall, and Gold to fall when it should rise...then it is just about time for "fundamentals" to finally reassert themselves and send the Dollar down and Gold soaring. The pressure to hold the beach ball under water has become to great. The impending destruction of the US Dollar is going to be massive. The rise of Gold, shocking.

Treasury International Capital (TIC) Data for July
Net foreign purchases of long-term securities were $6.1 billion.

Net foreign purchases of long-term U.S. securities were negative $25.6 billion. Of this, net purchases by private foreign investors were negative $20.7 billion, and net purchases by foreign official institutions were negative $4.9 billion.

U.S. residents sold a net $31.7 billion of long-term foreign securities.

Net foreign acquisition of long-term securities, taking into account adjustments, is estimated to have been negative $8.2 billion.

Foreign holdings of dollar-denominated short-term U.S. securities, including Treasury bills, and other custody liabilities decreased $8.4 billion. Foreign holdings of Treasury bills decreased $4.4 billion.

Banks’ own net dollar-denominated liabilities to foreign residents declined $58.1 billion.
Monthly net TIC flows were negative $74.8 billion. Of this, net foreign private flows were negative $92.9 billion, and net foreign official flows were $18.2 billion.

These numbers are shocking to say the least, and they were completely ignored by the Forex markets today. Monthly net TIC flows were negative $74.8 billion. The global mass exodus from the US Dollar has begun. This data is grossly US Dollar negative. The US needs $2 BILLION every day from foreigners to finance the nations debt. In the month of July the country cam up $132 BILLION short. And the Dollar was up today? Absurd! The DEATH OF THE DOLLAR is clearly at hand. Prepare for the worst.

Fed Keeps Rates Steady; No Signal Of Imminent Cut
WASHINGTON -(Dow Jones)- The U.S. Federal Reserve on Tuesday held interest rates steady and, in a disappointment to Wall Street, didn't appear to signal that rate cuts are forthcoming anytime soon.

Officials continued to warn about inflation risks, and they also suggested that economic concerns have intensified in the wake of the collapse of Lehman Brothers Holdings Inc. (LEH) and a steep sell-off in equity markets Monday.

"The downside risks to growth and the upside risks to inflation are both of significant concern to the Committee," the Fed said in a statement that largely mirrored its previous one in August.

The Federal Open Market Committee voted unanimously to keep the target fed-funds rate for interbank lending unchanged at 2% for a third-straight meeting. The Fed took no action on the discount rate for loans to brokers and commercial banks, which stands at 2.25%.

The Fed said it will "act as needed" to promote economic growth and stable prices. But it didn't refer to "timely" action, a word Fed watchers usually associate with a willingness to cut rates between meetings. Financial markets had also hoped that officials would adopt an explicit bias toward economic weakness, which they didn't do.

"The statement could have largely been written before the events over the past week," said Marc Chandler, currency strategist at Brown Brothers Harriman.

One wrinkle is that Tuesday's statement said the Fed will monitor economic and financial developments "carefully." It didn't say "carefully" last month, just that it would monitor developments.

"Act as needed"? "Timely"? "Carefully"? As if their "choice" of words is gonna make a damn bit of difference in all this. LOOOOOOOOOOOOL!

God, Bless America!

Back To Basics

We'll keep it simple today. I think we all know the reason by now that Gold and Silver are our ONLY protection against financial Armageddon lurking on the horizon. The charts above are self explanatory.

Thursday, September 11, 2008

Pooh Pooh Pah Doo

Oil falls as Ike strengthens toward Texas
VIENNA, Austria AP) — Oil prices slipped further Thursday despite concerns about Hurricane Ike's potential to harm refinery operations in the Gulf of Mexico, falling U.S. crude inventories and an OPEC decision to cut production by 500,000 barrels a day.

On Thursday, Ike was a Category 2 storm with winds near 100 mph (161 kph). It was churning about 645 miles (1,038 kilometers) east of Brownsville, Texas, and moving west-northwest at near 9 mph (14.5 kph), after tearing through Cuba and killing at least 80 people in the Caribbean.

Texas is home to 26 refineries that account for one-fourth of U.S. refining capacity, and most are clustered along the Gulf Coast in such places as Houston, Port Arthur and Corpus Christi. Exxon Mobil Corp.'s plant in Baytown, outside Houston, is the nation's largest refinery.

Refineries are built to withstand high winds, but flooding can disrupt operations and — as happened in Louisiana after Gustav — power outages can shut down equipment for days or weeks.

700 PM CDT THU SEP 11 2008




Hurricane Ike is being pooh-pooh and ignored by far too many ignorant Oil traders and the financial media mouth pieces of the US Government. This storm is far more dangerous, and much larger than Hurricane Gustav. With 24% of the US total refining capacity at home along the Texas coastline, one would think that this Hurricane Ike would be sending shivers up the spines of those in the Oil Industry. Houston's Gavelston Bay is a major international port as well. A lot is at stake should Hurricane Ike strike with maximum potential.

Thursday, September 11, 2008
Ike - Big, Slow & Dangerous
Unlike Hurricane Gustav, which sped through the Gulf of Mexico at nearly 18 miles per hour, Hurricane Ike is moving much more slowly. According to the Hurricane Center, "Ike is traveling west-northwestward at 10 mph [8.7 kt] with maximum sustained winds of 100 mph [87 kt]."

In addition to moving slowly, Ike is a very large storm:

Ike is a very large Category 2 hurricane. Hurricane-force winds extend 115 miles outward from Ike's center. Tropical storm-force winds extend outward up to 255 miles.

The circulation of Ike is so large that it is already causing water levels to rise 1-3 feet across the entire Gulf Coast from South Florida to Texas. Parts of southern Louisiana will have a 3- to 5-foot water rise with tropical-storm conditions Thursday. From 2-4 inches of rain is expected along the immediate coastline of Louisiana today, along with isolated weak tornadoes right along the coast.

Beyond Ike's huge expanse and slow forward movement, Ike is also now likely to take a more dangerous course, both in terms of offshore and onshore assets that will be in its path:

The recent slower speed of Ike means there is a better chance for it to take a track farther north, bringing the center closer to Galveston. The best estimate right now is for landfall somewhere between Matagorda Bay and Galveston, Texas. Nonetheless, a devastating storm surge is expected for more than 100 miles east of landfall.

With the National Hurricane Center predicting that Ike will be on the verge of being a Category 4 Hurricane when it makes landfall, Ike is poised to be a much greater threat to life and property than Gustav turned out to be.

US July trade deficit widens to $62.2 bln vs $58.0 bln expected
The increase in petroleum products imports was driven by both price and volume. The average price of an imported barrel of oil rose 6.4% in July to a record high $124.66.

But the US also imported just over 342 million barrels of oil in July, the most since June 2004 and up 15% from last month. This led the US trade deficit with OPEC countries to surge 33.6% to $24.2 bln.

The politically sensitive US trade gap with China was up 16.1% to $24.9 bln, and the US trade deficit with Europe and the entire Pacific Rim also grew sharply, by 19.6% and 22.5% respectively.

July trade deficit widens on surge in oil imports
The trade figures are seasonally adjusted but are not adjusted for price changes. After adjusting for inflation, the real trade deficit rose by 2.7% in July from a seven-year low in June.

The real trade gap is what counts for gross domestic product. The increase in July indicates trade may not contribute as much to growth in the third quarter as it did in the second.

Exports have been keeping the economy afloat, as consumer spending and business and housing investment slumped. Net exports contributed to second-quarter GDP more than at any time in the past 28 years.

This latest trade deficit report should have sent the Dollar reeling. But it was pooh-poohed by the media because since July Oil prices have been falling, and the deficit should soon begin shrinking. If the US Economy is being held together by it's exports, and global growth is slowing, why do people believe export growth will continue. Particularly in light of the Dollars recent strength? I don't know. I'll ask Dorthy when she gets back from Oz.

Lay Offs Coming?
The evidence that sales at many companies are struggling and that employment will suffer are almost everywhere. Recently, a division of GMAC said it would let 5,000 people go. According to MSNBC, "Job cuts announced by U.S. employers last month jumped 12 percent over a year ago to cap the busiest summer of downsizing in six years." Job cuts through October could top what they were for all of 2007.

The economy is beginning to look like it did during the deep recessions in the early 1990s and 1973. Eric Rosengren, the president of the Boston Federal Reserve Bank, sees the situation getting much darker in the second half. Speaking of deteriorating financial conditions he said, "It may push the unemployment rate up to 6%, with more than 2 million people losing their jobs since the financial turmoil began last summer.".

If the economy tips closer to what it looked like in '73, unemployment could be closer to 8% or 9%.

Don't Rule Out Another Fed Rate Cut This Year
Though there’s virtually no chance the Fed will change interest rates at its meeting next Tuesday, there’s a growing likelihood it will make subtle changes in the language of its policy statement, placing greater emphasis on the risks to growth than the threat of inflation.

And that may be the first step in a stunning policy reversal that could lead to yet another interest rate cut at the end of this year or early 2009, a move widely considered out of the question as little as a week ago.

With both the labor market and consumer spending behaving worse than expected and the economic growth of the second quarter likely to peter out sometime in the following two quarters, the Fed’s aggressive rate cutting earlier this year looks unlikely to achieve a soft landing.

The FOMC statement could “set the stage and give themselves some flexibility,” says veteran money manager James Awad, managing director of Zephyr Management. “I think they absolutely could” cut rates, particularly if things looked "dire" around the holiday shopping season.

And from the "I Thought The Fannie/Freddie Bailout Fixed Everything" Department:

Washington Mutual stock falls 14 percent Thursday 10:24 AM CTDallas Morning News, TX - 2 hours agoBy BRENDAN M. CASE/The Dallas Morning News Washington Mutual Inc., a Seattle bank with 2500 employees in this area and three prominent North Texans on its ...
Washington Mutual plummets below $2 a share Reuters
Washington Mutual Shares Down 29% New York Times

Wachovia shares falter as investors remain on edgeForbes, NY - 1 hour agoAP 09.11.08, 12:16 PM ET Shares of Wachovia Corp. dropped Thursday, as Wall Street's anxiety about the stability of the financial sector - specifically ...
Stocks manage a modest gain
Lehman's New Dive Signals Financials Still In Eye Of Storm Investor's Business Daily
US close: Dow sinks as euphoria fades ShareCast

Lehman Brothers shares plunge 40%BBC News, UK - 2 hours agoShares in troubled US bank Lehman Brothers have plunged again on fears over the future of the bank. Lehman announced the biggest loss in its history on ...
Lehman, WaMu tumble at market open on capital fear Forbes
Washington Mutual stock falls on investor fears International Herald Tribune
The Vultures Keep Circling Wall Street Journal Blogs

Yep, better get up again tomorrow and sell all my Gold and Silver, buy the US Dollar, and invest in financial stocks. Yeah, that's the ticket. Wow, this is a long line...I hope there is some of this stuff left when I get to the window.

The Dow, Nasdaq, and S&P mostly fell in early trade on more financial worries as Lehman fell another 40% on news that CEO Dick Fuld is trying to sell off the entire company in order to keep any or all of it operational. Washington Mutual was also a notable weak stock as it fell about 10% to near $2 a share, but all three stock indices rose in late trade and ended with over 1% gains on optimism that a deal to save or acquire Lehman will be announced soon.

Good Luck, and have a pleasant tomorrow.

For What It's Worth

According to the International Monetary Fund’s Official World Gold Holdings report, the U.S., at December 2007, held 8,133.5 tonnes of gold, or 75.3% of the world’s central bank holdings. That’s 261.5 million troy ounces, valued at $209.2 Billion at US$800 per ounce.

Fannie and Freddie will be run by the government indefinitely, with the government investing up to $100 billion in each of the government- sponsored enterprises to keep them solvent, among other measures announced over the weekend.

Hanky Panky Paulson claimed when announcing the Fannie/Freddie bailout that it was necessary to prevent a "crisis of confidence" in the US Financial System. Hank buddy, if there wasn't a crisis of confidence already, there may never be. The statistics above regarding the US Gold Reserves are shocking...and quite revealing.

At a value of $800, the US Treasury hoard of Gold is ONLY worth $209.2 BILLION? That's it? Of course through government sponsored suppression schemes it is today worth less than that, but it certainly isn't worth much on the big government balance sheet.

The US prior to the Fannie/Freddie takeover had $5 TRILLION of debt. With these two twin manufacturers of toxic mortgage waste now on the governments books, the nation has effectively doubled it's debt to $10 Trillion. And the Gold held (supposedly, nobody knows for sure, it hasn't been audited since the 1950's) by the US is barely worth $200 Billion?

The US debt is now 50 times greater than the value of it's Gold...if it has any. FIFTY TIMES GREATER! And Hanky Panky Paulson was worried about a crisis of confidence in the US Financial System. PEOPLE! This is far worse than a crisis, this is a CATASTROPHE!

On CNBC on Monday morning, when asked about how big the Fannie/Freddie bill might be, Mr. Paulson replied, “We didn’t sit there and figure this out with a calculator." I guess not.

By choosing to absorb Fannie and Freddie onto the US Governments books, Hanky Panky Paulson has effectively devalued the US Dollar by 25 times. And yet everyday now for the past eight weeks the "value" of the US Dollar has been rising?

The US Gold holdings, and for the sake of argument we will assume they have the Gold, DO NOT even cover the $100 BILLION Hanky Panky Paulson has promised each of these black holes. It is beyond absurd to even pause for a moment and believe that this government bailout of Fannie/ Freddie has averted a crisis. The US Government is flat broke, and the US Dollar is worth less than NOTHING. How much longer must this charade of financial life support be allowed to continue?

Consider this: If all the Gold in the US Treasury were to have a value equal to the governments $10 TRILLION debt, Gold would have to equal $37, 250 AN OUNCE. You read that right. The price of Gold would have to rise 50 times over to equal the value of the government debt. Yet the price of Gold is falling. Why?

I'm convinced it's falling, at the governments behest, because the US Government wants, no needs, to have the world believe that the safest place for it's money is in US Treasury Bonds and thus the US Dollar. If foreign nations stop funding the US debt, the US will cease to exist. What escapes me is why the rest of the World doesn't see that they are just flushing their money down the toilet by "borrowing" it to the US Government. Does the rest of the World really need the US? The rest of the world is a whole lot larger than the USA. The USA is less than 10% of the world population. We use 25% of the World's resources. The World could get along just fine without us. Yes, the US Government owes a lot of money to the rest of the World. And I'm sure the rest of the World would like to get their money back, but I don't see how giving a country more money is going to get you the money back you may have already lost.

What is really most amusing to me in light of these shocking and revealing statistics, is the US Government's determination to keep the "value" of Gold from rising. By suppressing the rise in the price of Gold, are they not suppressing the value of the single asset that will save them from becoming a third world beggar nation? What happens to people that don't pay their debts? Some go to jail, some live on the streets, and some get beat up, or killed. I doubt the rest of the world is going to sit idly by while the US Government rips them off. Nothing good is going to come out of this "game" Bumbling Ben and Hanky Panky Paulson are playing with the World Financial System. Life in America, as we've known it, is over now. Begin to accept that. America was broke before September7, 2008, and she was a whole lot broker the day after.

Have you ever pushed a beach ball under water? I'm keeping my bets on Gold and Silver.

Tuesday, September 9, 2008

Laughter Is The Best Medicine

Looking for some satisfaction today in the face of ANOTHER pathetic take down in the Precious Metals, I found great amusement in watching the Dow give back EVERYTHING it gained in Mondays euphoric reaction to the Fannie/Freddie bailout/scam. I guess everything ain't fixed after all.

Wall Street ends lower on concerns over Lehman
NEW YORK (AP) -- Stocks tumbled Tuesday, nearly erasing the previous session's big gains, after fresh concerns about the stability of Lehman Brothers Holdings Inc. punctured a sense of optimism about the financial sector. Each of the major indexes lost more than 2 percent. The Dow Jones industrials fell nearly 300 points.

"We're back to the fundamentals again," said Denis Amato, chief investment officer at Ancora Advisors in Cleveland, referring to investors' mentality a day after sending stocks higher. "These financial maneuverings don't create prosperity," he said of the government's moves to aid Fannie and Freddie. "Just because you make some financial change doesn't mean all the sudden the economy gets better."

You've got that right Denis. I'd swear Wall Street had bamboozled maintstreet yesterday into believing that the Fannie/Freedie bailout was going to lower the price of potatoes, gasoline, and leave Big Macs at 99 cents again. I guess not.

Mortgage bailout unlikely to lift US out of slump
WASHINGTON: If the government bailout of Fannie Mae and Freddie Mac is a salve to help heal what is ailing the U.S. economy, it is likely to be a slow-acting medicine that may not stop the infection before it gets worse.
Analysts predict the vicious cycle where housing, credit and financial problems force Americans to hunker down further — hobbling the economy and in turn aggravating those very troubles — won't be easily broken.

"The negative psychology has become embedded and will take time to unwind," said Brian Bethune, economist at Global Insight. "It is not instant coffee."

A growing number of analysts believes the economy will be thrown into reverse in the final three months of this year and perhaps in the first three months of next year, meeting a classic definition of a recession.

Howard Chernick, economics professor at Hunter College, predicts: "The U.S. economy will continue to spiral down."

The economy shrank late last year and barely budged at the start of this year. Growth picked up in the spring, thanks to brisk exports and the government's tax rebates, which energized shoppers at home. But that rebound wasn't expected to last.

Slower growth overseas will probably cause exports to fall off just as Americans are cutting their spending and the benefits of the rebates disappear.

Fannie, Freddie Plan Signals Open Raid on Federal Treasury
WASHINGTON, Sep 08, 2008 (BUSINESS WIRE) -- The U.S. Treasury announced yesterday that it is taking temporary control of floundering mortgage lenders Fannie Mae and Freddie Mac. The move is the latest chapter in a sorry story of regulatory failure, accounting fraud, and political cronyism.
Treasury Sec. Henry Paulson stated Sunday, "I attribute the need for today's action primarily to the inherent conflict and flawed business model embedded in the GSE structure," yet he still offers no plan to fundamentally reform this flawed structure and inherent conflict. Sec. Paulson's latest plan actually expands Fannie and Freddie's risky mortgage guarantee activity and delays the decision to even begin to reduce their size to 2010.

With this plan, the U.S. government is borrowing more money from foreign creditors, in order to buy equity and mortgage-backed securities in a convoluted way in an attempt to guarantee Fannie and Freddie bonds. This is not a sustainable or rational economic policy."

"With this plan, U.S. taxpayers are making an equity investment in two public companies so that those companies can continue to pay subordinated debt dividends to insider banks and Wall Street investors, and to prop up the mortgage-backed securities market."

AIG shares fall on fresh mortgage market concerns
NEW YORK (Reuters) - Shares of American International Group Inc (NYSE:AIG - News), the world's biggest insurer, fell 16 percent on Tuesday on fears that the company's large exposure to the mortgage markets could trigger the need to raise fresh capital.

AIG, which has recorded unrealized losses of more than $20 billion over the past three quarters on credit default swaps that guarantee mortgage-linked securities, raised more than $20 billion earlier this year, severely diluting shareholders' investments.

Investors are growing increasingly skittish ahead of a special meeting called for later this month. Those fears are compounded by worries that more losses may be in the pipeline, stoked by signs that other financial services firms, including Lehman Brothers Holdings Inc (NYSE:LEH - News), may be hit anew by mortgage losses.

Budget deficit expected to reach a near-record $407B under new congressional estimates
WASHINGTON (AP) -- The federal government will run a near-record deficit of $407 billion this year, according to the latest Capitol Hill estimates.
The Congressional Budget Office released figures Tuesday that indicate the red ink will spill over into next year, when the deficit would reach a record $438 billion -- and could go even higher as the government takes over mortgage giants Fannie Mae and Freddie Mac.

Home mortgage rate cut not enough to revive US housing
NEW YORK, Sept 9 (Reuters) - The fall in home mortgage rates this week, after the U.S. government took over giant lenders Fannie Mae and Freddie Mac, has stoked home buyer interest, but the massive inventory of unsold homes on the market and fears of job losses may keep house prices falling.
The government took over Fannie Mae and Freddie Mac on Sunday aiming to stabilize the two-year fall in house prices, the worst since the Great Depression, and ease the credit crunch in global markets.

In just one day though on Monday, average 30-year mortgage rates fell by half a percentage point to about 6.0 percent. In some areas home shopping has already picked up but it will take a few weeks to get a good read on buyer traffic, real estate executives say.

"It's enough to turn the starter, but I don't know that it keeps the engine running," said A.W. Pickel, chief executive of LeaderOne Financial Corporation in Overland Park, Kansas.

Why The Fannie-Freddie Bailout Will Fail

With yesterday's announcement of the most massive federal bailout of all time, it's now official: Fannie Mae and Freddie Mac, the two largest mortgage lenders on Earth, are bankrupt.

Some Washington bigwigs and bureaucrats will inevitably try to spin it. They'll avoid the "b" word with vengeance. They'll push the "c" word (conservatorship) with passion. And in the newspeak of 21st century bailouts, they'll tell you "it all depends on what the definition of solvency is."

The truth: Without their accounting smoke and mirrors, Fannie and Freddie have no capital. The government is seizing control of their operations. Their chief executives are getting fired. Common shareholders will be virtually wiped out. Preferred shareholders will get pennies. If that's not wholesale bankruptcy, what is?

Some Wall Street pundits and pros will also try to twist the facts to their own liking. They'll treat the bailout like long-awaited manna from heaven. They'll declare that the "credit crisis is now behind us." They may even jump in to buy select financial stocks. And then they'll try to persuade you to do the same.

The reality: This was the same pitch we heard in August of last year when the world's central banks made a coordinated attempt to rescue credit markets with massive injections of fresh cash. It was also the same pitch we heard in March when the Fed bailed out Bear Stearns. But each time, the crisis got progressively worse. Each time, investors lost fortunes.

Together, both Washington and Wall Street are trying to persuade you that, "no matter what, the government will save us from financial disaster." But the real lessons already learned from these events are another matter entirely:

Paulson’s Quick Draw
By: Peter Schiff, Euro Pacific Capital, Inc.
Treasury Secretary Henry Paulson, the man who said that subprime was contained and that the Bazooka in his pocket would never be used, now assures us that the bailout of Fannie Mae and Freddie Mac will be costless to taxpayers. Despite the near euphoria that the plan has sparked on Wall Street, the move will go down in history as the biggest policy blunder of all time, and will be credited as a pivotal point in the financial collapse of the American economy. The ultimate cost to Unites States citizens will be in the range of hundreds of billions of dollars, perhaps more.

Six Situations to Monitor for the Rest of 2008
When IndyMac Bank collapsed in early July, USAGOLD-Centennial Precious Metals logged the largest single week volume in its 35 year history. And that was just the beginning. By mid-August gold coin demand had become so strong globally that U.S. Mint and South Africa's Rand Refinery announced they could no longer keep up with their orders and promptly shut down operations. Soon thereafter, the U.S. mint resumed gold coin production, but explained that they would now be forced to ration output. Much of the demand that spawned the mints' problems came from individuals around the globe concerned about the safety of their banks and financial institutions -- a worry not likely to dissipate anytime soon.

Hang Tough
The technical evidence is pouring in that gold is making a secondary test of its Aug. 15 low. This means that we are at an important buy point for gold, and people who have been watching from the sidelines now have an opportunity to enter the market.

What we have just been through is a central bank dollar support operation. The paper aristocracy badly injures the economy under the rationalization that they are creating wealth out of nothing. You remember the description of Greenspan as a miracle man. This is because he was able to create money and ease credit, and thus push up the stock market, without causing (much of) a rise in consumer prices.

This appeared to be a miracle to the paper aristocracy. He was creating wealth for them, and there were no bad consequences. But you can’t create something out of nothing. You can’t create real wealth by printing up pieces of paper. And a person who believes in miracles is not a scientist..

Right now the big picture tells us that, from time to time the establishment declares war on gold bugs. Currently we are in one of these wars, as there has been a central bank support operation in favor of the dollar which has pushed it up above 79. Indeed, the current situation looks a lot like November 1978 when Jimmy Carter declared war on the gold bugs and knocked the price of gold down by 20%. What a buy opportunity was there my friends. Gold went from $200 to $875 in the next 14 months. You have to make a decision. Are you going with the lemmings, or are you going with the winners?

I like many of you reading this, and thank you for doing so, am at my wits end. Loses in my portfolio have been mounting, both paper and real. I have stuck to my convictions regardless because I am convinced that the Precious Metals offer the only hope of keeping ones financial head above water in the quickly deteriorating financial environment we live in. This Fannie/Freddie bailout is less about saving the financial system and more about exposing the dire situation that envelops it. The government did not want to go down this road, assuredly not. But the rapidly evolving whirlpool about to suck the US Financial System down the drain is gaining strength. The Fed and the Treasury had to do something, even if it was just to put a butterfly bandage on a sucking chest wound.

As often as I can, I share with you the headlines that convince me daily that the fed and treasury are losing their "game" with the markets. I have to keep a position in the Precious Metals because I just don't know when the day will come that Bumbling Ben and Hanky Panky Paulson will finally lose control and all hell breaks lose.

It is increasingly frustrating to "keep my chin up" as every reason to own Precious Metals is shot down by another metals take down on the CRIMEX. And folks, it is at the CRIMEX, in collusion with the US Government, that Precious Metals investors are being robbed almost daily, in spite of news and events that should have Gold and Silver well on their way to "infinity and beyond".

Posted above is a four hour chart of Gold. On this chart I have placed vertical blue lines to highlight each four hour period of maximum CRIMEX involvement in the Gold market: 8AM to 12PM est. Just like this morning, it is shocking how many days Gold has been taken down at the open since the middle of July when IndyMac blew up and Hanky Panky Paulson conned the US Congress into giving him a blank check to bailout Fannie/Freddie. This chart is all the evidence of a crime that I need. At no time in the past seven weeks has the price of Gold been hammered overseas like it has been on the CRIMEX. How much longer will the world allow these criminals to dictate price in the Precious Metals markets?