Surprised to see Gold and Silver down this morning? You shouldn't be. Both have floundered so much during this Mother of All Financial Crisis' that nothing should be surprising any more. Gold this week has now hit ALL-TIME highs in the Euro, British Pound, Canadian Loonie, and Australian Dollar. Why not in US Dollars? Damn good question. Perhaps it is because of the recent "strength" in the US Dollar and the destructive weakness in the currencies above. I would suggest then that Gold in US Dollars is weak this morning on further strengthening in these currencies and profit taking in Gold in those currencies as well. The Yen is off it's recent highs this morning, and that is probably pressuring US$ Gold as well. If the Yen can be kept below 101.50, Gold in US$ should remain supported here, and continue to move higher, much higher, shortly. It has been a strange week indeed with Gold moving higher with a rising Dollar, and now falling with a falling Dollar. Focus on 920 Gold now. That is the launch pad. Do not be surprised to see a big move in Gold following the London close this morning at 11AM est.
7 Trillion Reasons to Own Gold
The first $700-billion bailout is already perceived as a failure. At some point, Uncle Sam will have to mount ANOTHER bailout to recapitalize the banks or risk the entire system falling apart.
That second (or third … or fourth … ) bailout is probably going to be very expensive. The question is, how much.
Part of last week’s bailout package included a provision to raise U.S. Federal Insurance Deposit Corporation insurance to $250,000 per individual per bank.
This means the FDIC is now insuring about $5.2 trillion in deposits … but it only has $45 billion in its insurance fund.
And while $250,000 may seem like a lot, nearly a third of small-business accounts still won’t be entirely covered!
...the U.S. may follow the lead of central banks in Ireland and Greece and guarantee ALL deposits in ALL banks while it sorts out the good banks from the bad banks and recapitalizes the good ones.
That is enormously expensive and potentially very inflationary.
Remember, there is about $7 TRILLION deposited in U.S. banks.
Even if the U.S. doesn’t have to pay up on all or even most of that money, providing blanket coverage would send the potential debt of the U.S. soaring.
That, along with recapitalizing the banks deemed worthy enough to save, could send U.S. printing presses into overdrive.
And a lot more dollars in the system should drive up the price of gold.
Bullion lending by central banks all but dries up
Central banks have all but stopped lending gold to commercial and investment banks and other participants in the precious metals market, in a move that on Tuesday sent the cost of borrowing bullion for one-month to more than twenty times its usual level.
The one-month gold lease rate rocketed to 2.649 per cent, its highest level since May 2001 and significantly above its five-year average of 0.12 per cent, according to data from the London Bullion Market Association.
Gold lease rates for two, three and six months and for a year also jumped to levels not seen in the last seven years.
Traders said the jump reflects the fact that central banks – mostly European – have almost completely stopped lending gold in the last few days and are not rolling forward old leases after maturity. This is because of fears that some borrowers might not repay their bullion loans if they are engulfed by the financial crisis.
This is huge news! Particularly the rise in Gold lease rates. It should be noted that when Gold was taken down following the Bear Stearn's bailout, Gold lease rates briefly went negative. The banks were literally giving Gold away to the bullion banks be sold in an effort to suppress the price of Gold and raise much needed cash. That nonsense appears to have finally come to an end. The banks must now be terrified that the Gold they leased out over the past seven years may NOT be returned as there appears to be little to buy to replace that which was borrowed and sold by the bullion banks. Could the banks begin to demand delivery from the CRIMEX forcing a default? One can only imagine the heights to which Gold could rise should that scenario unfold.
Bataan Death March Tickertape
By Jim Willie CB
GOLD DEFAULT DEAD AHEAD: The COMEX and London Metal Exchange are living on borrowed time in their corrupt gold game. They sell paper gold, and precious little actual gold metal. See a refreshing straightforward interview aired on CNBC of all places (click here). It is by Jurg Kiener, CEO of Swiss Asia Capital. He points out the dual market for gold, one paper and one metal. He expects soon the US ‘gambling price’ gold market in COMEX and LME to default. By that he means a return suddenly to physical price determination. He is quoted to say THE GOLD PRICE WOULD DOUBLE VERY QUICKLY, LIKE IN DAYS AFTER THE EXPECTED METAL DEFAULT. One should expect the interview to be lifted and removed from their website within days, after they realize the explosive nature of his words.
USDOLLAR RALLY AS SIGNAL OF DEATH: Few seem to comprehend that the USDollar is rallying recently as a result of the imminent death of itself and the USTreasury Bond. A vast liquidation is underway of speculative trades, and of US bank assets. For years many analysts properly understood that the USEconomy is debt dependent. Now credit is drying up, and being denied even to good credit risk customers. The USEconomy is falling off the cliff, and evidence mounts. See car sales in September, down almost 30% by Toyota, down 34% by Ford. Layoffs by the tens of thousands are next, right down the vertically integrated car industry layers. As the USEconomy and US bank system continues in death spiral, the USDollar rallies, during unspeakable ruin to US fundamentals. Recall that the tide went out along the shores in Indonesia and Thailand right before the great tsunami hit almost three years ago. Ditto here! The banking crisis and extreme distress that remains stubbornly unfixable in the Untied States urgently motivates foreigners to quickly assemble, implement, and announce a replacement world currency basket. Watch for a euro currency split soon, where Nordic version will compete viciously against the dead USDollar.
HUGE RISK OF LOSING WORLD RESERVE CURRENCY: As preface, the world banking structure rests atop a world currency foundation denominated in USDollars, with USTreasury Bonds and USAgency Mortgage Bonds serving the primary role as financial instruments. These toxic building blocks are all really bad lego blocks. Foreigners must respond very soon, to replace the US$ as global reserve currency, or else risk a similar implosion to their banking systems. Many USAgency Bonds have been replaced by USTBonds, not much of an upgrade. If the USTreasurys soon suffer in the heart attack seizures underway, foreign economies will be at risk of serious deterioration. So foreigners are working toward a solution. One might be announced soon, with a new world reserve basket announced, based upon the Euro, Russian ruble, Japanese yen, and newly crowned Gulf dinar. The common theme is these are all currencies from nations boasting export surplus. They are taking action, but behind the scenes, like in Berlin. The consequence to the USEconomy is dire. The beleaguered nation would be forced to attract foreign capital, and bid up foreign currencies in order to purchase crude oil. The word inflation would soon be replaced in the press networks with the word “hyper-inflation” as the Untied States enters the Third World overnight. It seems that the vast majority will be caught blindsided.
Jim Willie touches ALL the bases in this recent essay. Please read it in full. If you questioned that the USA was doomed, you will now be convinced that it is. Only God can save us now...
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