Friday, January 30, 2009


"Gold is the thing you buy when you suspect that monetary authorities are making a mess of things. The fixers are fixing more than ever before. What are the odds that some of the fixes go bad? We don’t know...but our guess is that gold is looking forward to it."
-Bill Bonner, The Daily Reckoning

Obama calls $18B in Wall Street bonuses shameful
WASHINGTON (AP) -- President Barack Obama issued a withering critique Thursday of Wall Street corporate behavior, calling it "the height of irresponsibility" for Wall Street employees to be paid more than $18 billion in bonuses last year while their financial sector was crumbling.

"It is shameful," Obama said from the Oval Office. "And part of what we're going to need is for the folks on Wall Street who are asking for help to show some restraint, and show some discipline, and show some sense of responsibility."

The president's comments, made with new Treasury Secretary Timothy Geithner at his side, came in swift response to a report that employees of the New York financial world garnered an estimated $18.4 billion in bonuses last year. The figure, from the New York state comptroller, drew prominent news coverage.

Yet Obama's stand also came just one day after he surrounded himself with well-paid chief executives at the White House. He had pulled in those business leaders and hailed them for being on the "front lines in seeing the enormous problems in our economy right now."

The president said the public dislikes the idea of helping the financial sector, only to see the hole get bigger because of lavish spending. The comptroller's report found that Wall Street employees got paid about the same amount of bonuses as they did in the boom time of 2004.


"You should be ashamed, don't ever do that again. Now go pick up your mess."

Give me a freakin' break! These guys are thieves, pure and simple. The President gives them a little slap on the wrist and a "No, no, no..." speech and expects these thieves to repent and change their evil ways? Mr. Obama, boy have you got a lot to learn...and you better be learning it fast. The American people have contained their anger to this point. You're on your Honeymoon with them "now". The honeymoon will be over sooner than you think if this "kid glove" approach to these banking criminals continues.

$18.4 BILLION is 5.25% of the $350 BILLION TARP payout last fall. Henry Paulson allowed this to happen, he should be held accountable. These clowns that got this money should be forced to return it immediately to the taxpayers, or the FED loans will be recalled immediately by the taxpayers. It is high time somebody puts a gun to these crooks heads, and makes them realize that financial welfare comes with a steep price.

These "bankers" are not interested in "what's happening on main street" because
of their industry's mistakes and greed. They are only interested in getting their money. They could care less about the Taxpayers. The bankers always get paid first. They run the casino...the house always wins. The gamblers, the investors that brought their money to a game that was rigged in the houses favor, leave the game with nothing in return, I.O.U.'s at best.

It's shocking how few of the loser's are upset about their financial losses. Their money, their wealth, has literally been stolen from them, their families, and friends in broad daylight, ...and they all sit there hoping for the best, confident that Uncle Sam and his Team will fix everything. If this financial crisis were a leaky pipe, the homeowner would have to cash in his flood insurance long before the leaky pipe is fixed and this financial crisis is stopped.

The Global Financial System [aka: the US Dollar] is a train wreck, and the American Taxpayer is an unfortunate passenger along for the ride; forced to watch the disaster unfold in slow motion. The American Taxpayer is the proverbial "deer in the headlights". By the time he realizes what is happening to him in real time, he will be roadkill.

There are way too many people in America today that believe President Obama is the answer to all our prayers. May God have mercy on all their souls. The ship is sinking ya'll. It is sinking faster than most of you know. One man can not save a sinking ship. And certainly not with the players he's got his team. These player's shill for the house money. They are there "specifically" to look out for the houses money, NOT the Taxpayer's money. The more money they spend, the worse this crisis will be in the end.

The delusion being spoon fed to these lost souls via the financial media, is that Uncle Sam and You can fix this financial calamity together, and do it while "spending your way to prosperity". Absurd notion that, but these people believe it. If we spend all this money now, particularly if it is money we "take from the rich", we can fix this little fiscal bump in the road, and soon be rich again...and maybe, even make a profit.

Is this really happening?

Look around you, listen... It really is happening.

America will be lucky if this financial folly is resolved within the next two generations. The next two generations will be lucky if there is any America left to inherit should they be lucky enough to pay-off her debt. The children of today AND tomorrow are having their futures stolen from them as the government we elected, and with our embrace, "SPENDS OUR WAY TO PROSPERITY".

Fed ready to provide fresh aid to revive economy
WASHINGTON (AP) -- The Federal Reserve signaled Wednesday that it stands ready to use new unconventional tools, or expand existing ones, to spur lending and consumer spending that could help lift the economy out of a painful recession.

The Fed also agreed to keep the targeted range for the federal funds rate between zero and 0.25 percent for "some time" to help brace the economy. Economists predict the Fed will keep the funds rate, the interest banks charge each other on overnight loans, at that record low level through the rest of this year.

With its key lending rate to banks already near zero, the Fed pledged anew to use "all available tools" to revive the economy.

Specifically, the Fed said it is "prepared" to buy longer-term Treasury securities if the circumstances warrant such action. At its previous meeting in December, the Fed said it was merely evaluating that option.

That head line should read Fed ready to provide fresh [band] aid [s] to revive economy. These guys really don't get it. "...spur lending and consumer spending..."? Who are they gonna lend to? The American consumer is now, for the most part, a giant credit risk. Americans collecting unemployment now exceeds 4.5 million. A number of unemployed not seen since 1967. And that is just the number of Americans collecting unemployment, how many are out of work and not receiving a government handout? How many are afraid they may joining the unemployed ranks soon? Again I ask, who are they going to lend to? If the government is really serious about keeping this game going, they should just send each "consumer" a check every month, and forget about lending, and just get right to the spending. I mean, are we serious about spending our way to prosperity, or not?

Monetization Mania: Federal Reserve Ready to Start Buying Treasuries
Goldman Sachs says the Fed is ready to to bring out the Daisy Cutter of monetary tools:
In our view, it is highly likely that the Federal Reserve will eventually decide to purchase longer-term Treasuries. First, even a 0% nominal federal funds rate is likely to look much too high by 2010 if our forecasts for inflation and the unemployment rate are roughly on the mark ... Fed officials will therefore have to pedal harder and harder to “mimic” the effects of cuts in short-term interest rates via unconventional monetary policy options, and buying longer-term government securities is one of the most conventional of these unconventional options.

Bernanke: Game Over?
...Bernanke is "contemplating" buying the long end of the Treasury Curve due to "bond market instability."

There is nothing "unstable" about any of this. Rates are going higher. Why? Gee, let's see, Obama says he's going to blow $1 trillion on a "stimulus" package, the other $350 billion of the TARP was released, the GAO says we're going to run well north of a Trillion in deficits, and people are wondering why the bond market expects the government to pay up in higher interest rates for the right to borrow more than 10% (and that's almost certainly a LOW estimate) of the total outstanding debt in one freaking year after having added 16% in the last one?

You're kidding, right? America is acting like a subprime credit-card customer who has decided to go nuts in the local "bigbox" electronics retailer, and the market is (appropriately) reacting to that by repricing RISK.

Bernanke thinks he will simply cap the market by intervening?

If Bernanke actually attempts to suppress the Treasury Market's interest rates, that is, "support the long end of the curve's price", then he will wind up having to buy all, or essentially all, of the supply. People who own Treasuries will sell to him, surmising that he is overpaying, and gleefully taking what is an "extra" profit from his hands.

If you're wondering why the commercial and consumer lending market has gone straight to hell, this is the reason. Bernanke has interfered with the private credit market in virtually every area, and in each place where he has "supported" the price of debt instruments (suppressing yields) he has wound up as effectively the only buyer in short order.

This is bad when we're talking about the private credit markets but if it shifts to Treasuries then the game is literally over immediately, because at that point you have just created a circle jerk.

Treasury prints Ts to finance its operations but the guy who buys them is the guy who prints the money in exchange. Therefore every additional Treasury sale is no longer a debt sale, it is an act of printing money by the Central Bank and destroys the standard of living of everyone in The United States.

This, should Ben engage in it, is a willful act of destruction of your private property rights, your wealth, and your income. It is not an accident, it is not "necessary" and it solves exactly nothing.

It is simply an attempt to defraud - yet again - the American People, this time by attempting to "make ok" the financing of deficit spending that the market simply will not support at the price Treasury wishes to pay.

Bonds sink on supply worries, tepid 5Y auction
NEW YORK, Jan 29 (Reuters) - U.S. Treasury debt prices fell on Thursday, prompted by weaker-than-expected demand for $30 billion of five-year notes amid heightened anxiety about the deluge of government debt needed to revive the economy.

On the other hand, gloomy data on housing, jobless claims and durable goods reinforced the notion of a prolonged recession. The latest wave of grim economic news helped to spur safety bids and mitigate bond losses.

"Treasuries are extending their losses a bit since the auction," said Mary Ann Hurley, senior Treasuries trader at D.A. Davidson in Seattle. "The auction seems a bit sloppy."

The record amount of five-year debt sold on Thursday garnered mediocre demand with the high yield coming in higher than expected, traders and analysts said.

Did anybody else notice that bond prices were down yesterday along with equity prices? Bond and equity prices usually move in opposite directions. Bonds down, stocks down and Gold UP. Interesting how that works. Why the Dollar was up is any body's guess I suppose. Currency manipulation? Nah, the US would never involve themselves in currency manipulation. That's what the Chinese do... What if the whole world were selling their local currencies [to make their exports cheaper] and buying US Dollars, and then taking those Dollars and using them to buy Gold? Because in Dollars, Gold is still cheap. Gold is is at new all-time highs in Euros, and the Pound. Oh, this is exciting, isn't it?

Stocks fall on fresh worries about economy
NEW YORK (AP) -- Two glaring signs that the economy remains in a deep slump sent stocks reeling Thursday.

News that unemployment claims reached a record high and that new home sales hit a record low forced the major stock indexes to give back all of Wednesday's gains, and then some. The Dow Jones industrial average sank 226 points, or 2.7 percent, while other indicators tumbled more than 3 percent.

Volatility still has a grip on the Street. While stocks had soared Wednesday on hopes that the government will take bad debt off banks' books, investors retreated in response to some harsh reminders that it might be a while before the nation's 14-month-old recession ends, even if banks get more aid.

The Labor Department said the number of people continuing to receive unemployment benefits reached a seasonally adjusted 4.78 million week ending Jan. 17 -- the highest level on records that go back to 1967. As a proportion of the work force, the total is the highest since August 1983.

Jeez, and I thought the TARP legislation Paulson mugged the Congress to get was going to fix everything. I can't wait to see how bad things get once we get The Obama Plan steamrolled past the sleeping US legislature.

Spending our way to prosperity. Can it get any better than this? For a Gold Bug anyways...

Tuesday, January 27, 2009

Money Out Of Thin Air

Nation's economic mood darkens as more jobs vanish
NEW YORK (AP) -- This is one recession Americans aren't going to spend their way out of.
Americans are in no mood to spend their way out of this recession.

The Conference Board said Tuesday its Consumer Confidence Index edged down to 37.7 this month, a record low, from a revised 38.6 in December. It stood at about 87 just a year ago.

Americans are battered by headlines about massive job cuts, including thousands at Home Depot, Corning, General Motors and Caterpillar in just the past two days, and are still watching the values of their homes and retirement funds dwindle.

"Virtually, there is no confidence out there," said Bernard Baumohl, chief global economist at The Economic Outlook Group LLC. "Household anxiety has reached a point that we can count them out to get us out of the recession."

Economists believe Americans will remain in a financial funk until they start seeing fundamental improvements in the economy, including a turnaround in the housing and job markets. And two other reports Tuesday suggested that's unlikely to come soon.

The Labor Department announced that state unemployment rates shot up nationwide in December, with Indiana and South Carolina racking up the largest monthly increases. South Carolina's jobless rate bolted to 9.5 percent, more than 2 percentage points above the national rate.

And the Standard & Poor's/Case-Shiller 20-city housing index dropped by a record 18.2 percent in November from the same month a year earlier -- the sharpest annual rate since the index's inception in 2000.

...and so the price of Oil fell again because of "recession fears". Whatever... And of course falling Oil prices pressure commodities in general, so Gold and Silver MUST be sold. What a joke! Gold is NOT a commodity. Gold is money! When will this foolishness end? It will end when the Crimex is destroyed!

Dollar weakness which set in the middle of last week has carried into the middle of this week. With the Dollar teetering on it's 50 day moving average here, substantial gains in Gold may be imminent. With the spectre of raging inflation on the financial horizon, substantial gains in Gold, and Silver, are inevitable.

All the talk today of "Deflation" is pure bull sh*t. There is no deflation. Today's deflation is a fiction of the fundamental economist's mind and the incessant babbling of the financial media. Today's deflation "vibe" is merely a cover for a monetary inflation never before witnessed in human history.

Big Inflation Coming [MUST READ!]
Adam Hamilton
Inflation and deflation are purely monetary phenomena. Inflation is not just a rise in prices, lots of things can drive prices higher. Inflation is the very specific case of a rise in general price levels driven by an increasing money supply. If the money in an economy grows at a faster rate than the pool of goods and services on which to spend it, general prices are bid higher as a result. Only money creates inflation.

Similarly deflation is not just falling prices, but falling prices driven by a contraction in the money supply. It is true that most modern economists would add contracting credit to this definition as well, but money is very different from credit. Would you rather receive a gift of $100k cash or a new $100k credit line? While you can spend both, money is very different from credit which is short-term debt.

We witnessed a stock panic in late 2008, an exceedingly rare event. The dictionary definition of this is “a sudden widespread fear concerning financial affairs leading to credit contraction and widespread sale of securities at depressed prices in an effort to acquire cash.” Panics are bubbles in fear which drive investors to liquidate everything they can at any price. They get so scared they only want to hold cash.

When all investment assets are sold heavily in a short period of time, prices naturally collapse. But this is not deflation if it is not driven by a contraction in the money supply. For stocks, commodities, and houses, prices fell sharply in the second half of 2008 because there was a sudden huge oversupply relative to demand. Many more investors wanted out than wanted in, so prices plunged. They had to fall until a new equilibrium was reached, low enough to retard supply (investors too disgusted to sell anymore) and raise demand (from other bargain-hunting investors).

Deflationists argue these price drops are proof of deflation, and most people today believe this. But they are only deflationary if they were driven by a contraction in the money supply. Stocks and commodities are generally cash markets. Credit such as stock margin can be used, but it is trivial relative to the market sizes. And real commodities purchased for industrial uses are paid for in cash or near-cash (short-term trade loans), not multi-decade loans like houses. So the money supply during 2008’s slides is the key.

If available money to spend indeed contracted, then the deflationists are right about seeing deflation in 2008. But if the money supply fell by less than stocks and commodities plunged, was flat, or even grew, then deflationists are wrong. When prices fall simply because demand declines (too much fear to buy anything immediately), this is merely supply and demand. If money didn’t drive it, then it isn’t deflation.

The bottom line is inflation and deflation are and always have been purely monetary in nature. Supply and demand can drive prices all over the place, but it is only a changing money supply that can truly spawn inflation or deflation. And the money-supply data is crystal clear. The Fed is growing the fiat-dollar supply by frightening rates, all the way from double-digit broad-money growth down to a scary doubling of the monetary base!

This means big inflation is coming, it’s already baked into the pipeline. Too distracted by deflationists who have no dictionaries and hence don’t even know what the word “deflation” really means, Wall Street hasn’t realized the real threat is inflation yet. But when it does, capital should rapidly flood into investments that thrive in inflationary times. Of these, gold remains the king. Its bullish potential in the years ahead is vast.

The post above is only a small snippet of an essay explaining the coming Inflation Event by the brilliant Adam Hamilton. In very easy to understand terms, Adam explains why today's Deflation scare is a lie, and tomorrows inflation potential should have all investors scared and profit immensely from it. Please read it in it's entirety.

Below, Robert P. Murphy elaborates further on the coming Big Inflation, and the perils that come will come with it for Bumbling Ben Bernanke and the US Government.

by Robert P. Murphy
Normally, when the Fed wants to engage in “loose” monetary policy, it engages in open-market operations by buying assets from the public. For example, the Fed might buy $10 million worth of government securities from private-sector holders. In the transaction, the Fed acquires the $10 million worth of Treasury debt, and writes a check on itself for $10 million.

This is the precise spot where money is created “out of thin air.” When the Fed writes a check on itself, the recipient deposits it at his bank, and the bank in turn deposits it with the Fed. So the Fed bumps up that particular bank’s account balance by $10 million; in other words, that bank’s reserves with the Fed have gone up by $10 million. Yet there is no counterbalancing debit anywhere else in the system.

Because of the fractional reserve nature of our banking system, an injection of new reserves can lead to a multiple increase in the overall money stock. For example, if the reserve requirement is 10%, then the bank depositing the $10 million is able to make new loans of up to $9 million. Businesspeople may come in and win approval for loans, and receive new checking accounts with a total of $9 million in their balances. They can go out into the community and start writing checks on these balances, pushing up prices. At the same time, the original person who sold Treasurys to the Fed, still thinks he has $10 million more in his checking account too. Thus, while the monetary base has increased by $10 million (i.e. that’s how much total bank reserves have increased), M1 has increased by $19 million.

And the process continues. The merchants who receive payments from those taking out new loans will in turn deposit the checks with their own banks, and some of the “excess reserves” (i.e. the $9 million that the original bank held over and above the legal minimum needed to back up the first person’s deposit) are transferred to other banks. They in turn can now make new loans, because the 10% reserve rule applies to their new reserves as well.

In the end, if we assume a 10% reserve requirement, and that all of the banks are fully “loaned up,” then the original purchase of $10 million in Treasurys will yield an increase of $100 million in total checkbook balances in the community. Prices for goods and services will be higher than they otherwise would have been, because there is now an extra $100 million in household “cash” chasing them.

What is happening is that the Fed has allowed its balance sheet to explode during the last year, from $920 billion in December 2007 to $2.3 trillion in December 2008. (See this excellent summary article.) Yet because of general fear, as well as various gimmicks (such as paying interest on reserves held with the Fed), the banks are sitting on these huge injections of reserves, rather than granting new loans to their customers. This is why prices have been falling, even amidst this unprecedented expansion in the monetary base.

Even though increases in the demand for U.S. dollars can offset increases in its supply – so that its market value doesn’t plummet – this observation is no cause for comfort. Using back-of-the-envelope calculations, the year/year growth in demand deposits (i.e. checking account balances) was about 38% in December. In contrast, the year/year growth in reserves was more than 1,400%. If the banks became optimistic about the future of the economy and began loaning out their excess reserves, right now there is enough slack in the system for the public’s money supply to increase by a factor of 14.

Analysts simply assume that once the recovery begins, Bernanke will wisely suck the excess reserves back out of the system, in time to tame price inflation.

But is that really going to be politically feasible?

The Federal Reserve under Ben Bernanke’s leadership has painted itself into a very tight corner. He has cleverly managed to stave off utter disaster so far, but he is running out of options. Ironically, the effects of his incredible injections of new reserves have been masked simply because the financial sector is still paralyzed. If and when the economy begins to improve, Bernanke will have to decide whether to allow double-digit price inflation or instead contain prices by strangling the incipient recovery.

Currency Manipulation?
USAGOLD VideoBrief
Pete Grant and Jonathan Kosares discuss new U.S. Treasury Secretary Timothy Geithner calling China a currency manipulator. The gold market responded almost immediately, climbing $50 in price. While domestic economic concerns in both the U.S. and China present a scenario of competitive currency devaluation, price inflation becomes the single most likely feature regardless of the exchange-rate outcome. If Asia plays its "trump card" in reversing its pattern of buying U.S. Treasuries, a worst-case inflation scenario would involve the Federal Reserve attempting to pick up the slack through its own program of purchasing those bonds -- thereby directly monetizing the U.S. Government debt.

Monday, January 26, 2009

Bond Boycott Or Gold Breakout?

U.S.–China Currency Spat Threatens Treasury Auction, Powers Gold
By James West
Timothy Geithner’s first major fumble as incoming Treasury Secretary could be a big one. Accusing your number one creditor of tampering with their currency in a very public way is downright dumb. Especially when the country you’re making accusations from is the most notorious manipulator of currencies, commodities, derivatives and precious metals in the history of humanity.

And with a major Treasury auction coming up this week, don’t be surprised if China decides to vent its displeasure by boycotting the sale. And if China doesn’t buy, there are a lot of other sovereign investors who are going to pass on this most fragrant of U.S. exports.

It is that awareness and its associated anticipation that is lighting a fire under and giving serious legs to the gold and silver markets this week. If that does indeed come to pass, it will be the catalyzing event that both sends gold to $1500 before the summer, and sends the U.S. Dollar index to below 50 in the same time frame.

While admittedly a brazen statement, there are interesting developments to support it.

Barack Obama has now hit up Congress for $1 trillion in bailouts, with the caveat that he might be back for more before that bill even wends its way through the legislative process. There’s only one thing that can prevent Obama from achieving his goal more effectively than congressional resistance – an empty bank account and the cutting up of the national credit card.

If U.S. Treasury auctions begin to fail, not only will the U.S. be incapable of kiting checks to itself – it will trigger a global flight to safety in gold and silver, while initiating a stampede for the exits in U.S. denominated assets. Foremost among those will be Treasuries.

The problem is that there is a Mexican standoff developing, where the world’s biggest holders of U.S. T-bills are nervously eyeing each other across the oceans, waiting to see who is sidling up to the sell trigger. The entire worth of the United States dollar is predicated on a confidence that is rapidly becoming ethereal. When that confidence transforms thoroughly into panic, the dollar will collapse so fast it will make the Weimar inflationary period look like so many feathers swirling in a gentle breeze.

This will be the event that plunges the United States into the deepest depression in its history, and will essentially be the catalyzing event that dethrones America from its position of number one in the world in ALL things, and transform the citizenry into a nation of beggars.

The only hope for Americans with any net worth left whatsoever, is a flight NOW to gold and silver coins and bullion, followed by producing miners, with a healthy smattering of advanced quality junior precious metals explorers thrown in for maximum leverage.

Treasuries Decline as TIPS Auction Opens a Week of Debt Sales
Jan. 26 (Bloomberg) -- Longer-term U.S. debt fell for a sixth day as an $8 billion sale of 20-year inflation-indexed bonds drew a higher yield than bond dealers forecast and the government prepared to sell $70 billion in notes this week.

Thirty-year bond yields touched the highest in almost two months as investors sold longer-term securities on concern new debt will cheapen their value...

The auction of 20-year Treasury Inflation Protected Securities, or TIPS, drew a yield of 2.50 percent, compared with an average forecast of 2.37 percent by seven bond-trading firms in a Bloomberg News survey before the sale.

Investors bid for 1.92 times the amount of debt on offer, below the average bid-to-cover ratio of 1.98 for the previous five auctions. Indirect bidders, a class of investors that includes foreign central banks, were awarded 54 percent of the securities. The average for the previous five sales was 57.2 percent.

The U.S. will sell $40 billion of two-year notes tomorrow and $30 billion of five-year debt on Jan. 29.

“We’ve got lots of supply coming over the next few weeks,” said Theodore Ake, head of U.S. Treasury trading at Mizuho Securities USA Inc. in New York, one of 17 primary dealers that trade with the Federal Reserve.

“We’ve got lots of supply coming over the next few weeks,” said Theodore Ake, head of U.S. Treasury trading at Mizuho Securities USA Inc. in New York, one of 17 primary dealers that trade with the Federal Reserve. “The economic data came out less terrible today than people were looking for, but I think it’s more about supply than anything else.”

The government will likely sell $32 billion of three-year securities, $22 billion of 10-year notes and $15 billion in 30- year bonds Feb. 10-12, according to Wrightson ICAP, a Jersey City, New Jersey-based research firm that specializes in government finance.

The U.S. will probably borrow a record $2.5 trillion this fiscal year ending Sept. 30, almost triple the $892 billion in notes and bonds sold in the prior 12 months, Goldman Sachs Group Inc., another primary dealer, said last week

“I see supply really dominating the Treasury marketplace right now,” said David Coard, head of fixed-income trading in New York at Williams Capital Group, a brokerage for institutional investors.

Fed policy makers meeting tomorrow and the next day are exploring the purchase of longer-maturity Treasury securities in an effort to push up their price and bring down the yield.

So, if China and "other sovereign nations" decide to pass on purchasing more US Debt, the Fed will step up to the plate, and buy the Treasuries themselves in a futile effort to keep interest rates low. The Fed will "in effect" monetize the country's in print money to refinance our own debt. Ah, spending our way to prosperity...BRILLIANT! Joe Biden is more right than he may know. Things are going to get worse before they get better...much worse. Keep a close eye on these Treasury auctions this Tuesday and Thursday. Gold may not react positively to "news" that the auctions went "better than expected".

Gold had a nice follow through this morning following Friday's stellar breakout of resistance at 885. However, Gold's failure to hold onto this mornings gains have given that breakout the look of a short squeeze running out of gas at the top of the uptrend channel. If real buyers were coming into the market, Gold would have had a much stronger close today. As suggested yesterday, a reaction here would be technically constructive. The Shorts in Gold clearly have their backs against the wall here, and it is now up to the Gold Bulls to put pressure on the Shorts by buying into any dips here. The big money sitting on the sidelines is waiting patiently for the "golden cross signal" when Gold's 50 day moving average crosses over its 200 day moving average.

It should also be noted that, "seasonally", Gold is approaching a "weak season" in February and March that is much like the "weak season" we just endured in October and November. Please click on the chart posted above. Seasonal charts are pictures of the "average" seasonal movements in a given market. Though there is no guarantee that Gold will move down in February and March, we must respect the "law of averages", and prepare for the potential of just such a move down. This is the Crimex we're dealing with people, and until they're put out of business, anything is possible in this Gold Market.

Silver of course will continue to shadow Gold.

Gold Market Update
By: Clive Maund
Gold is now in position to break out to new dollar highs and embark on a very powerful run. It is not its action on Friday which gives rise to this positive view, although that was certainly impressive enough, but the extremely bearish action in the dollar last week, which suggests that it is on the verge of a breakdown and savage decline.

Restoring Sound Money in America
By: James Turk
...the mandates of the Constitution requiring gold and silver currency were clear.

The new Congress and President Washington obviously understood those mandates when they passed into law in 1792 the Coinage Act, one of the first acts of the newly formed federal government. It established the Silver Dollar, weighing 371-1/4 grains of fine silver, as the monetary unit of account of the United States. This Act also defined the value of gold in terms of silver, namely, 15 grains of silver were deemed to equal one grain of gold. By setting this rate of exchange between gold and silver, the new Congress and President Washington were fulfilling their Constitutional duty as required in Article I, Section 8, which states: “To coin Money, regulate the Value thereof…”

This clause – “regulate the Value thereof” – is often misunderstood today, but its intent was clear to the framers. It meant only one thing. Congress was required to fix the rate of exchange between gold and silver, and by so doing, determine whether the country would be on a gold or silver standard. A silver standard was established by the 1792 Act and remained the monetary standard until the Gold Standard Act was passed and signed into law in 1900.

To “regulate the Value thereof” did not mean that Congress and the president could change the value of the dollar or debase it with inflation. The dollar is supposed to be an unchanging unit of measure like a ‘foot’, a ‘pound’ or a ‘gallon’. The federal government has no Constitutional authority to change the ‘size’ of the dollar, just like it has not been granted the power to change any other measure.

As evidence for this conclusion, note that clause 5 of Article I, Section 10 reads in its entirety: “To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures.” The framers understood that money is no different from other units of measure, and accordingly, they placed these items within the same clause by granting to Congress the power to establish these standards. And so it was, until 1933 with the confiscation of gold by Franklin Roosevelt, which began the process – which continues to this day – of debasing the dollar and moving it further from the requirements of the Constitution.

No Depression
by Howard S. Katz
The first thing you need to understand is that, in the long run, money and credit move together. If the central bank wants to ease credit, the only mechanism it has is to buy U.S. Treasury bills (or related instruments). Since the central bank has no savings and no earnings, then, when it buys T-bills, it pays for them by counterfeiting the money. Thus an easing of credit is accompanied by an increase in money (2008 being a good example). The period of the 1930s was just the opposite. Credit tightened, and the money supply dropped by 30% from 1930-33. It is possible to have minor discrepancies for short periods of time. For example, Greenspan kept on easing credit in the late 1990s, but the private banks fought him by offsetting his increase in the money supply, and the net money supply for that period was flat. But such discrepancies between money and credit are rare and not of long duration.

The second thing you need to understand is what is happening in the immediate future. Is credit easing and money going up, or is credit tightening and money going down? These are directly opposite economic events. The first case is bullish for gold; the second case is bearish for gold (and most other goods). You cannot protect yourself from both events at the same time. So you have to know which is coming.

The problem is complicated by the fact that establishment economists speak with forked tongue. Instead of calling a contraction of money and credit what it is, terms such as “deflation,” “recession” and “depression” are used. These terms are not well defined, and the intention is to arouse your emotions, not to appeal to your reason. You can see this when you are in a discussion with an establishment person, and he says to you, “Don’t you have any concern for the unemployed?” He is trying to make you feel ashamed because you are not a person of love. It is a blatant appeal to emotion and an attempt to embarrass you. And it has nothing to do with economic truth. In essence, “deflation” and “depression” refer to a money/credit contraction. “Recession” is an inbetween state best defined as a mild depression.
What is happening right now is that the establishment is screaming at us: “RECESSION,” “DEPRESSION,” “DEFLATION.” But the only evidence they can offer us are economic statistics which are the result of their (earlier) screaming.

In contrast with what the establishment is saying, we get a completely different picture when we look at what they are doing.

Starting in September (about the time that the Wall Street bailout bill was working its way through Congress), the Federal Reserve started to create money, in the form of Federal Reserve Credit. At this time, the level of Fed credit has multiplied by 2½. Much of this has already flowed into the monetary base, and this has doubled during the same period. From the monetary base, the money will next flow into the money supply proper. We can thus be fairly well assured of a doubling in the U.S. money supply, or worse, and this only if the Fed does not further increase its credit.

To put these numbers in context, the U.S. money supply more than doubled during WWII between 1941 and 1945. It almost doubled during the Reagan Administration (1981-89). Here we are threatened with a doubling of the money supply in approximately 1-2 years time. This is the worst money infusion in American history. Such events have always caused a corresponding increase in prices.

Sunday, January 25, 2009

Gold Explodes!

China denounces U.S. currency accusation
BEIJING (Reuters) - A Chinese central banker denounced accusations by U.S. Treasury Secretary-designate Timothy Geithner that China was manipulating its yuan currency, calling them misleading and warning against "excuses" for protectionism.

Su Ning, a vice governor of the People's Bank of China, called the comments by Geithner "out of keeping with the facts" and said they were "misleading in analyzing the causes of the financial crisis," the official China News Service reported on Saturday.

Su also warned against trade protectionism.

"We believe that faced with the financial crisis there should be a spirit of self-criticism," Su said while visiting a business newspaper office in Beijing, according to the report.

"The international community is currently working together in actively responding to the financial crisis, and it must avoid exploiting different excuses for renewing or encouraging trade protectionism," Su said, adding that such steps would harm global economic recovery.

Obama touts aid plan's impact on average Americans
"Our economy could fall $1 trillion short of its full capacity, which translates into more than $12,000 in lost income for a family of four. And we could lose a generation of potential, as more young Americans are forced to forgo college dreams or the chance to train for the jobs of the future," Obama said in a five-minute address released Saturday morning by radio and the Internet.

"In short, if we do not act boldly and swiftly, a bad situation could become dramatically worse."

Were we not spoon fed the same steaming bowl of bull sh*t by the Mother Of All Liars, Hanky Panky Paulson, while twisting the arms of Congress in an effort to justify the TARP legislation?
This financial freak show is far worse today than it was the day that misguided legislation was passed by the cowering Congress in defiance of the American people who demanded it not be passed. The "Obama Plan" is just more financial folly, and a bigger band aid to slap on the terminal patient in the hope that it will bring the patient back from the dead. Not likely.

Republicans: Obama plan bad medicine
President Obama’s $825 billion economic stimulus plan targets the right problems with the wrong solutions and likely would damage the economy rather than save it, several Georgia Republican congressmen argued Saturday.


Democrats: Stimulus plan no quick fix for economy
WASHINGTON (AP) -- The White House warned Sunday that the country could face a long and painful financial recovery, even with major government intervention to stimulate the economy and save financial institutions.

"We're off and running, but it's going to get worse before it gets better," said Vice President Joe Biden, taking the lead on a theme echoed by other Democratic officials on the Sunday talk shows.

A lot worse...worse than he can even imagine. But chalk one up for honesty!

The World Won't Buy Unlimited U.S. Debt
As absurd as this may appear on the surface, it seems inconceivable to President Obama, or any respected economist for that matter, that our creditors may decline to sign on. Their confidence is derived from the fact that the arrangement has gone on for some time, and that our creditors would be unwilling to face the economic turbulence that would result from an interruption of the status quo.

But just because the game has lasted thus far does not mean that they will continue playing it indefinitely. Thanks to projected huge deficits, the U.S. government is severely raising the stakes. At the same time, the global economic contraction will make larger Treasury purchases by foreign central banks both economically and politically more difficult.

The root problem is not that America may have difficulty borrowing enough from abroad to maintain our GDP, but that our economy was too large in the first place. America's GDP is composed of more than 70% consumer spending. For many years, much of that spending has been a function of voracious consumer borrowing through home equity extractions (averaging more than $850 billion annually in 2005 and 2006, according to the Federal Reserve) and rapid expansion of credit card and other consumer debt. Now that credit is scarce, it is inevitable that GDP will fall.

Neither the left nor the right of the American political spectrum has shown any willingness to tolerate such a contraction. Recently, for example, Nobel Prize-winning economist Paul Krugman estimated that a 6.8% contraction in GDP will result in $2.1 trillion in "lost output," which the government should redeem through fiscal stimulation. In his view, the $775 billion announced in Mr. Obama's plan is two-thirds too small.

The International Forecaster
By: Bob Chapman
Our Treasury is going to have to raise over $2 trillion to fund fiscal needs in the next six months, which will be no easy feat. Will foreigners continue to fund such massive reckless spending? We do not know. We do not believe they want too, but do they have much choice? They are holding 64.5% of their foreign reserves in US dollars. The US Treasury’s needs for funds are enormous and fulfilling those needs will be very difficult. Are US Treasuries still the world’s safest investment? We do not believe they are. Today this is a false perception, as it has been several times in our history. History is replete with other major nations defaulting on their bonds and arbitrarily devaluing their currencies in the last 150 years. The bottom line is there are no safe bonds or currency from any nation. Gold always has been and always will be the only safe option.

Today we have zero interest rates or for that matter negative rates if you consider the loss via real inflation. Owners of US debt are losing at least 10% annually on their investment. Our unprecedented expansionary monetary policy can only end in disaster via hyperinflation and default and devaluation. Even a 10% yield in today’s market cannot compensate for the loss in buying power.

The creation of American debt is totally out of control and there will come a time when foreigners will be forced to say no – no more. They will be under enormous pressure from their own constituents. Besides, who is capable of funding such debt? China and Japan are loaded up. Oil producers are in a bind. England is on the edge of bankruptcy, as are Ireland and Spain. Perhaps Germany and France can help. We do not know who’ll attempt to help, but more than $2 trillion in a year is a lot of money. We do not think it can be done and that means the Fed buys the Treasury’s bonds, bills and notes by creating more fiat money monetizing the debt and sending inflation straight into the stratosphere. That means much higher gold prices are in our future.

There is no flight to the dollar. There has been a flight from other currencies to the dollar for several reasons and those reasons are now history. We could see the dollar again test the upper limits on the USDX at about 88, but that should be it. We expect the dollar to firmly put in a double top. In fact, we may well never get to 88, which often happens in situations like this. The dollar has gone up as much as it is going too. Can you imagine what a dollar at this level will do to exports? It will probably cut GDP ½% to 1%, and at this stage that would be most unwelcome.

The dollar is going lower versus other major currencies, which have all just fallen versus the dollar over the past five months. Next all the currencies will take a bath versus gold.

Friday, January 23, 2009

The Pot Calling The Kettle Black

"We are deep in the pickle jar, and it seems likely that, in terms of economic pain, 2009 will be the worst year in the lives of the majority of Americans, Brits, and others. So break a leg, everyone!" - Jeremy Grantham

Alert! Alert! Beginning with the close of business on January 16 thru the close of business on January 22, over 3 MILLION ounces of Silver has left the CRIMEX Warehouse.

Geithner Says China Manipulates Its Currency
As Timothy F. Geithner moved closer yesterday to confirmation as Treasury secretary, he signaled a more confrontational approach toward China, bluntly stating that the new administration thinks Beijing is "manipulating" its currency and it will act "aggressively" using "all the diplomatic avenues" to change China's currency practices.

Geithner's comments are almost sure to anger China, which has bristled at less aggressive comments by outgoing Treasury Secretary Henry M. Paulson Jr. Answering U.S. charges, China in the past has countered that lax regulation and faulty policies are to blame for the U.S. crisis. It has cautioned that China should not be made a scapegoat in a time of crisis.

It remains unclear, however, whether the Obama administration intends to go one step further and declare to Congress that China is manipulating the yuan to gain an unfair trade advantage. Such a move could spark punitive action and countermeasures from China.

"It was very interesting to see that Geithner has stated that China is manipulating its currency," said Eswar Prasad, a senior fellow at the Brookings Institution. "Things are going to get quite heated on the China-U.S. front this year. This statement was clearly a shot across the bow, signaling that this administration does not plan to mollycoddle the Chinese."
Geithner's comments to the Senate Finance Committee came just before the panel approved his nomination as the next Treasury secretary, despite concerns about errors on his tax returns in recent years.

How do you spell dumb ass? When your country is bankrupt, it is not the most brilliant of ideas to run around and accuse your biggest creditor of being a currency manipulator. In fact, it is a bit hypocritical, don't you think? Probably the Mother Of All Currency Manipulators would undoubtedly be the United States Of America. It sounds a bit like the pot calling the kettle black, eh?

It's time to get one fact straight about Timothy "I don't pay my taxes" Geithner. He is NOT a financial wizard, never has been, never will be. He is quite simply a political horse head. He is a puppet for the new administration that will be used to run around and point the finger of blame anywhere and everywhere in an effort to deflect this global financial crisis' cause from being laid at the feet of the US Fed and Treasury. He will defend ALL actions, past and present, of both the Fed and Treasury with regard to this global financial crisis, and attempt to blame others in the global financial community for causing the meltdown and not doing enough to help end the crisis.

It is so typically American to point the finger of blame. It is so typically Liberal Democrat to shirk responsibility and play the blame game. Look no further than the trial lawyers lobby. It is "always" somebody else's sue The American Way. Just ask McDonald's how hot their coffee is.

China IS NOT the Problem. China did not cause the Problem. The Problem is the US Federal Reserve, the US Treasury, greed, and a mountain of stupidity named Financial Derivatives. Blaming the Chinese, or any other nation for that matter, will not solve the will only make it exponentially worse. When you're facing a one TRILLION dollar PLUS fiscal deficit, you don't piss off your biggest source of credit. Not unless you're planning to go hungry...for a very long time.

China notes U.S. yuan charge, to hold anger in check
SHANGHAI/BEIJING, Jan 23 (Reuters) - China will make clear its displeasure at U.S. accusations of currency manipulation but hold its anger in check in the belief that President Barack Obama is simply posturing, Chinese analysts said on Friday.

Under U.S. law, formally labelling China a currency manipulator would require the Treasury to begin "expedited" negotiations with Beijing to reduce China's huge trade surplus with the United States and eliminate any "unfair" currency advantage.

"China is going to be extremely unhappy, to say the least," Tao Xie, an expert on Sino-U.S. relations at the Beijing Foreign Studies University. "For administration officials, I do not think any one has ever pointed a finger so strongly at China."

Chinese anger at Geithner's choice of words, written in response to questions at his Senate nomination hearing, will add to simmering tensions over the global financial crisis.

Chinese officials have accused the United States of regulatory failings that sparked the meltdown. When Henry Paulson, former U.S. Treasury chief, said that the high Chinese savings rate had helped sow the seeds of the crisis, a firestorm of criticism ensued in China.

How the Financial Crisis Was Built Into the System
In 1910, seven men held a secret meeting on Jekyll Island off the coast of Georgia. It's estimated that those seven men represented one-sixth of the world's wealth. Six were Americans representing J.P. Morgan, John D. Rockefeller, and the U.S. government. One was a European representing the Rothschilds and Warburgs.

In 1913, the U.S. Federal Reserve Bank was created as a direct result of that secret meeting. Interestingly, the U.S. Federal Reserve Bank isn't federal, there are no reserves, and it's not a bank. Those seven men, some American and some European, created this new entity, commonly referred to as the Fed, to take control of the banking system and the money supply of the United States.

In 1944, a meeting in Bretton Woods, N.H., led to the creation of the International Monetary Fund and the World Bank. While the stated purposes for the two new organizations initially sounded admirable, the IMF and the World Bank were created to do to the world what the Federal Reserve Bank does to the United States.

In 1971, President Richard Nixon signed an executive order declaring that the United States no longer had to redeem its paper dollars for gold. With that, the first phase of the takeover of the world banking system and money supply was complete.

In 2008, the world is in economic turmoil. The rich are getting richer, but most people are becoming poorer. Much of this turmoil is directly related to those meetings that took place decades ago. In other words, much of this turmoil is by design.

U.S. Mint discouraging gold ownership
Coin market analyst Michael Zielinski, editor of the Mint News Blog, has analyzed the actions of the U.S. Mint over the last six months and gotten awfully suspicious. Zielinski concludes:

"Whether or not it was the U.S. Mint's intention, every significant action they have taken since August has either limited gold availability, eliminated gold product options, or increased the cost of acquiring gold. Has it all just been a consequence of surging global demand for gold, supply chain mismanagement, and bad timing for policy decisions? Or is there something else going on here?"

The Mint's explanation -- a gold shortage -- isn't terribly persuasive if one believes the claim of its parent agency, the U.S. Treasury Department, that it still owns more than 8,000 tonnes of gold. Further, federal law requires the Mint to produce as many gold and silver coins as are necessary to meet the public's demand, and rather than diminish production or draw down the Treasury's gold stock the Mint could simply buy more gold, as on the New York Commodity Exchange.

Of course that would drive up the gold price, the surreptitious suppression of which lately has seemed to be the Treasury Department's first priority.

Gold is shifting from West to East – along with the balance of power
What other free market shows such a consistent behaviour over time? Unless, of course, it's not a free market and the invisible hand of Big Brother is getting involved. Many of you will have read about manipulation of the gold price, and heard that there is a deliberate conspiracy to suppress the price of gold.

Every time I hear the words 'manipulation' or 'conspiracy', my every instinct screams 'No'. There must be a less Machiavellian solution – most conspiracy theories are poorly researched and facile. But several people have done excellent research into this one, including James Turk of Goldmoney, the people at GATA and Paul Mylchreest in his Cheuvreux-Credit Agricole Report.

Why would anyone want to manipulate the gold price? Well, despite the fact that is is of barely any industrial use, gold is a highly political metal and a runaway gold price – which, by the way, we will eventually see, I am sure – tells you 'something is rotten in the state of Denmark'. If people are rushing to buy gold, it shows they do not trust the government to maintain the value of paper currency. So the aim of the manipulators, the theory goes, is to devalue gold and preserve the status of unbacked government currencies such as the dollar.

One reason for the theory is that there is more gold and silver sold on the Comex (the US commodities exchange) than is actually possible to deliver. In the case of silver, more is sold than is actually mined on an annual basis.

And certainly, the remarkable trading pattern of the London PM and AM fix adds more weight to the theory that the West is selling gold during Comex opening hours, possibly to suppress the price.

On the other hand, of course, we have Occam's Razor – lex parsimoniae. This is the principle that the simplest solution is the best. So, rather than resorting to some mass conspiracy theory, could the answer be that Asians are buying gold and Westerners are selling just because Asians like, value and appreciate gold more than we do?

Whatever the reason for this price pattern, this transfer of gold from West to East is yet another demonstration, if you needed it, of the generational shift in wealth and power that is taking place. After all, they say that 'he who owns the gold makes the rules'.

Tuesday, January 20, 2009

Gold IS Money

Did you here the news?

We have a new president.

God bless him.

Did anybody remember to tell him that one man cannot save a sinking ship?

Banks sink deeper into crisis on Obama's first day
NEW YORK (AP) -- The banking crisis took an ugly turn for the worse Tuesday.

Shares of major banks plunged as investors feared that Washington's bailout efforts were stalling, potentially forcing President Barack Obama's newly installed government to take far more dramatic steps to prop up the U.S. financial system.

No major bank was spared the carnage. Bank of America's shares plunged 29 percent; Citigroup's 20 percent. State Street Corp., which reported sharply lower earnings, saw its shares plummet 59 percent.

"The financial stocks got murdered," said Jack A. Ablin, chief investment officer at Harris Private Bank in Chicago. "They were basically cut in half."

At the core of the free fall in bank shares were concerns that U.S. officials would need to overhaul their program of shoring up financial institutions, a day after Britain announced its second financial bailout package for its own struggling banks in three months.

Oil reversed early losses and ended higher “on wintry weather in the northern hemisphere and on reports that OPEC was tightening supply.”

The U.S. dollar index rose as other world currencies fell on the view that their host countries are worse off than the US going forward. The United Kingdom’s sterling was perhaps the weakest on concerns over the UK’s banking sector and the loonie also dropped markedly after the Bank of Canada cut their rate to just 1% and indicated they may need to cut rates further in the near future.

Treasuries fell on concerns over whether or not the market will be able to absorb the massive supply of debt coming out in the near future in order to attempt to resuscitate the economy.

The Dow, Nasdaq, and S&P fell over 4% on continued worries over problems in the banking sector.

-The Gold Seeker Report

Now those of us who have been accustomed to watching the action of gold on a daily basis would have generally expected gold to drop alongside of the Euro especially as the Dollar went on another of its rip-roaring short squeezes amid panic buying. However, something happened related to this currency movement that caused a complete reversal of the norm. Gold in Sterling terms shot to a brand new all time high at the London PM Fix coming in at 612.307 while Gold priced in Euro terms came in at 661.383 coming in just shy of its all time high PM Fix of 663.352 made back in October of last year. Gold traders in New York looked over at that and decided that they needed to get out if they were short or get in if they were out! In other words, what looks to be a genuine flight to the safety of gold has begun in Europe. And why not? With US Treasuries paying next to nothing and several European nation government bonds being downgraded, where else can those who are fearful of what is occurring go with their life’s savings? If I were a bond holder and looked ahead at the plethora of new debt being issued, supply of such magnitude that the numbers send the mind reeling, I would seriously doubt that demand would be able to keep up with it.

What we are seeing is gold trading as a currency – something that has repeatedly been echoed at this site now for years especially in the face of repeated deflationist claims that gold would sink alongside of the rest of the commodity world. Keep this important fact in mind. Gold is a currency; it is only a commodity when there is general trust in paper money. Any fears or concerns about the stability or trustworthiness of any fiat currency will send money scurrying into gold. It is now evident that is occurring in Europe. It WILL OCCUR here in the US at some point in the not too distant future.

- Dan Norcini, More at

To All My Valued Employees,

There have been some rumblings around the office about the future of this company, and more specifically, your job. As you know, the economy has changed for the worse and presents many challenges. However, the good news is this: The economy doesn't pose a threat to your job. What does threaten your job however, is the changing political landscape in this country.

However, let me tell you some little tidbits of fact which might help you decide what is in your best interests.

First, while it is easy to spew rhetoric that casts employers against employees, you have to understand that for every business owner there is a back story. This back story is often neglected and overshadowed by what you see and hear. Sure, you see me park my Mercedes outside. You've seen my big home at last year's Christmas party. I'm sure; all these flashy icons of luxury conjure up some idealized thoughts about my life.

However, what you don't see is the back story.

I started this company 28 years ago. At that time, I lived in a 300 square foot studio apartment for 3 years. My entire living apartment was converted into an office so I could put forth 100% effort into building a company, which by the way, would eventually employ you.

My diet consis ted of Ramen Pride noodles because every dollar I spent went back into this company.. I drove a rusty Toyota Corolla with a defective transmission. I didn't have time to date. Often times, I stayed home on weekends, while my friends went out drinking and partying. In fact, I was married to my business -- hard work, discipline, and sacrifice.

Meanwhile, my friends got jobs. They worked 40 hours a week and made a modest $50K a year and spent every dime they earned. They drove flashy cars and lived in expensive homes and wore fancy designer clothes. Instead of hitting the Nordstrom's for the latest hot fashion item, I was trolling through the discount store extracting any clothing item that didn't look like it was birthed in the 70's. My friends refinance d their mortgages and lived a life of luxury. I, however, did not. I put my time, my money, and my life into a business with a vision that eventually, some day, I too, will be able to afford these luxuries my friends supposedly had.

So, while you physically arrive at the office at 9am, mentally check in at about noon, and then leave at 5pm, I don't. There is no "off" button for me. W hen you leave the office, you are done and you have a weekend all to yourself. I unfortunately do not have the freedom. I eat, and breathe this company every minute of the day. There is no rest. There is no weekend. There is no happy hour. Every day this business is attached to my hip like a 1 year old special-needs child. You, of course, only see the fruits of that garden -- the nice house, the Mercedes, the vacations... you never realize the back story and the sacrifices I've made.

Now, the economy is falling apart and I, the guy that made all the right decisions and saved his money, have to bail-out all the people who didn't. The people that overspent their paychecks suddenly feel entitled to the same luxuries that I earned and sacrificed a decade of my life for.

Yes, business ownership has is benefits but the price I've paid is steep and not without wounds.

Unfortunately, the cost of running this business, and employing you, is starting to eclipse the threshold of marginal benefit and let me tell you why:

I am being taxed to death and the government thinks I don't pay enough. I have state taxes. Federal taxes. Property taxes. Sales and use taxes. Payroll taxes. Workers compensation taxes. Unemployment taxes. Taxes on taxes. I have to hire a tax man to manage all these taxes and then guess what? I have to pay taxes for employing him. Government mandates and regulations and all the accounting that goes with it, now occupy most of my time. On Oct 15th, I wrote a check to the US Treasury for $288,000 for quarterly taxes. You know what my "stimulus" check was? Zero. Nada. Zilch.

The question I have is this: Who is stimulating the economy? Me, the guy who has provided 14 people good paying jobs and serves over 2,200,000 people per year with a flourishing business? Or, the single mother sitting at home pregnant with her fourth child waiting for her next welfare check? Obviously, government feels the latter is the economic stimulus of this country.

The fact is, if I deducted 50% of your paycheck you'd quit and you wouldn't work here. I mean, why should you? That's nuts. Who wants to get rewarded only 50% of their hard work? Well, I agree which is why your job is in jeopardy.

Here is what many of you don't understand ... to stimulate the economy you need to stimulate what runs the economy. Had suddenly government mandated to me that I didn't need to pay taxes, guess what? Instead of depositing that $288,000 into the Washington black-hole, I would have spent it, hired more employees, and generated substantial economic growth. My employees would have enjoyed the wealth of that tax cut in the form of promotions and better salaries. But you can forget it now.

When you have a comatose man on the verge of death, you don't defibrilla te and shock his thumb thinking that will bring him back to life, do you? Or, do you defibrillate his heart? Business is at the heart of America and always has been. To restart it, you must stimulate it, not kill it. Suddenly, the power brokers in Washington believe the poor of America are the essential drivers of the American economic engine. Nothing could be further from the truth and this is the type of change you can keep.

So where am I going with all this?

It's quite simple.

If any new taxes are levied on me, or my company, my reaction will be swift and simple. I fire you. I fire your co-workers. You can then plead with the government to pay for your mortgage, your SUV, and your child's future. Frankly, it isn't my problem any more.

Then, I will close this company down, move to another country, and retire. You see, I'm done. I'm done with a country that penalizes the productive and gives to the unproductive. My motivation to work and to provide jobs will be destroyed, and with it, will be my citizenship.

So, if you lose your job, it won't be at the hands of the economy; it will be at the hands of a political hurricane that swept through this country, steamrolled the constitution, and will have changed its landscape forever. If that happens, you can find me sitting on a beach, retired, and with no employees to worry about....


Your boss

Monday, January 19, 2009

The LAST Party in Washington

What Recession? The $170 Million Inauguration
The country is in the middle of the worst economic downturn since the Great Depression, which isn't stopping rich donors and the government from spending $170 million, or more, on the inauguration of Barack Obama .

The federal government estimates that it will spend roughly $49 million on the inaugural weekend. Washington, D.C., Virginia and Maryland have requested another $75 million from the federal government to help pay for their share of police, fire and medical services.

And then there is the party bill.

"We have a budget of roughly $45 million, maybe a little bit more," said Linda Douglass, spokeswoman for the inaugural committee.

But there are plenty of rich donors willing to pick up the tab.

The biggest group of donors were none other than the recently bailed-out Wall Street executives and employees.

"The finance sector is well represented, despite its recent troubles," Ritsch said. "Those who worked in finance still managed to pull together nearly $7 million for the inauguration."

Stop already! I think I am going to puke! Hey, I voted for Ron Paul with my I'm entitled to bitch here. Let's see now, the country is broke...and getting more broke by the hour...the President-elect says we are in the midst of a VERY serious financial crisis that demands IMMEDIATE attention...1 in 22 homes in the US are in foreclosure...the unemployment rate is going parabolic...the country is "at war"... And these knuckleheads running the government not only condone, but gladly allow this frivolous expense to be added to the tab of the US Government.

Folks look no further. This nation is DOOMED! The blind are leading the blind now...and the're leading the nation right over a cliff. I don't know who to laugh at any more...the clowns in Washington that believe the nation can "spend it's way to prosperity" or the jackasses buying this country's debt and currency.

And speaking of the US Dollar... I'd like to go on the record right here, and right now: The US DOLLAR IS AND WILL BE THE BIGGEST JOKE OF 2009. Imagine the genius that drives traders to buy the US Dollar because the banking crisis is growing and spreading in Europe.

"Oh calamity! I better run out and buy up the currency of the country that created and caused the global financial meltdown."


LOOOOOOOOOOOL! As bad as things are in Europe, you can still get 2% on your money. The US Dollar offers you NOTHING!

Gold of course is down this evening because the Dollar had such a wonderful day today at the expense of the Euro. The Euro is a colossal joke as well. Actually it is probably a bigger piece of flotsam than the US Dollar. In a nutshell, ALL fiat currencies are a joke! Gold and Silver are the only REAL money. And ALL efforts are being used to suppress this fact and TRUTH!

I'm climbing down from my soapbox now. I haven't said anything my faithful readers don't know already...pardon my aggression. But I am enraged, and you should be also.

The more black holes D.C. fills, the more open up
Black Hole #1 — Federal Home Loan Banks following Fannie, Freddie, private banks over a cliff?

Unless you follow the banking industry closely, you probably haven’t heard of the Federal Home Loan Banks. But the FHLBs are vitally important as a source of funding for U.S. banks both large and small. There are 12 of them spread around the country — in Atlanta, Boston, Chicago, Cincinnati, Dallas, Des Moines, Indianapolis, New York, Pittsburgh, San Francisco, Seattle, and Topeka.

FHLBs sell debt into the capital markets to raise money, using their AAA ratings to borrow cheaply. They use that money to make advances to banks that are members of the system and take collateral in exchange — often mortgages or mortgage-backed securities.

The banks use the money they get from the FHLB, along with cash raised elsewhere from their own debt sales and depositors, to make loans. The banks are required to own stock in the FHLBs, and that stock helps capitalize the regional FHLBs.

So what’s the problem?

The FHLBs own billions and billions of dollars worth of mortgage backed securities. Those securities have plunged in value. So just like their banking customers, FHLBs are facing potentially huge write-downs on their portfolios. They may also be losing money on derivatives they employ.

Black Hole #2—Insurance industry’s capital and surplus cushions are eroding fast …

It’s not just the banks that are in trouble. The insurance industry is taking a pounding, too. Losses on residential mortgage securities, commercial real estate investments, and other holdings are hammering capital levels throughout the sector.

The insurers are also getting hit because they guaranteed minimum returns on variable annuities — and the market subsequently tanked.

One estimate says the insurance industry may have to raise up to $50 billion in capital. Unless market conditions ease up, that kind of money just won’t be available from private investors. And that means we’re staring square in the face at yet another black hole— one that Washington is already being called upon to fill.

Black Hole #3—Pension funding picture deteriorates dramatically …

States, corporations, municipalities … they’ve all promised benefits to retirees based on assumptions about the returns for various asset classes. But those returns are being blown to smithereens, causing funding shortfalls of epic proportions.

The consulting firm Mercer recently estimated that the pension funds of big U.S. companies are underfunded to the tune of $409 BILLION! At the end of 2007, they were running a $60 billion surplus. That huge swing could drive up corporate borrowing costs and drive down corporate earnings.

It could also lead to reduced business investment as companies are forced to divert money from equipment and facilities budgets to their pension funds. Advisory firm Watson Wyatt recently estimated that U.S. corporations will have to boost pension fund contributions to $111.2 billion in 2009 from $50.5 billion last year.

Now it’s true that the government-backed Pension Benefit Guaranty Corporation (PBGC) insures the basic benefits for more than 29,000 plans. But with so many companies falling into bankruptcy these days, it’s increasingly likely the insurance premiums the PBGC receives won’t be enough to cover its obligations.

The agency was already running a deficit of more than $11 billion as of September 30. And that number is poised to rocket higher.

But hey now! There's a party going on! We're walking on sunshine! Don't worry, BE HAPPY!

The Federal Reserve’s Blueprint for Market Intervention
By: James Turk
An important document buried in the Federal Reserve’s archives has been discovered by writer and researcher Elaine Supkis.

The document, which is marked “Confidential”, is from the papers of William McChesney Martin, Jr., and this collection is held by the Missouri Historical Society.

Martin was the longest-serving chairman of the Board of Governors of the Federal Reserve System, and worked there under five U.S. presidents from April 1951 to January 1970. It was during his tenure that the dollar devolved from “as good as gold” to a perennially inflated fiat currency backed by nothing but government promises, which makes one ponder what could have happened to the dollar had Martin been an advocate of sound money dedicated to preserving the dollar’s link to gold. Instead, during his tenure the US Gold Reserve declined by nearly one-half from 633.2 million ounces to 339.5 million ounces, while M3, the total quantity of dollar currency, soared more than three-fold from $190.0 billion to $616.1 billion.

... As this document makes clear, the government realized that the monetary course it was pursuing could not be sustained. Consequently, policy makers realized that something would need to be done, and this “Confidential” Federal Reserve memo was obviously prepared to analyze one of the alternatives available to policy makers.

In short, it lays out what the Treasury and Federal Reserve needed to do in order to begin intervening in the foreign exchange markets, but there is even more. This document plainly shows what happens when government operates behind closed doors. It also makes clear the motivations of the operators of dollar policy long described by GATA and its supporters, namely, that the government would pursue intervention rather than a policy of free markets unfettered by government activity. The run to redeem dollars for gold had put the government at a crossroads, forcing it to make a decision about the future course of dollar policy. This paper describes what the government would need to do by choosing the interventionist alternative.

A heady read, but very interesting indeed. The World does not today find itself reeling amidst this financial Armageddon by accident. The world financial system was, and has been, destroyed, by the ill conceived, and Constitutionally illegal, US Federal Reserve ably assisted by co-conspirators the US Treasury Department. The global financial community should NOT be buying the US should be shunning the US Dollar as if it were a leper and demanding immediate reparations for the theft of global wealth.

Wednesday, January 14, 2009

You've Got Homework

I don't know about you, but I'm freakin fed up with the CRIMEX!

A letter to congressmen about silver price suppression
Dear Friend of GATA and Gold:

Our friend Chris Kniel in California has sent to his U.S. senators and representative a letter like the one below in regard to the silver price suppression scheme on U.S. commodities exchanges. U.S. citizens might want to send a similar letter to their own congressmen.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

Dear ----:

For months now the U.S. Commodity Futures Trading Commission (CFTC) has been unable to explain what I perceive to be enormous manipulation of the price of silver. I would like to know why it is not manipulative for one or two banks trading on the commodities exchanges to hold a short position equal to 25 percent of annual world silver production, data found in the CFTC's own reports.

The CFTC seems to be stalling, not investigating this matter. It is infuriating that qualified market participants can see the silver manipulation clearly yet those responsible for enforcing the law pretend otherwise.

Enough is enough. This situation has never occurred in any other commodity. How could this not be manipulative?

Please require the CFTC to do its job now. No more delays. Let's enforce regulations for an honest market and stop the silver price manipulation.


It is high time these clowns in Washington start working for the people that put them there...US! Either we have "representative government" OR we have NO government at all.

Tuesday, January 13, 2009

Sometimes, Doing Nothing Is Doing A Lot

“If all the effort to bring down the COMEX gold & silver futures markets this past December, by taking delivery of the metal, were just focused on silver - the goal of much higher silver AND GOLD prices would have been achieved for the following reasons: 1. Both COMEX inventories for gold and silver were depleted over 45% - but the COMEX silver market is much smaller (in USD$) than COMEX gold and would have been easily exceeded. 2. There is no Fort Knox or New York basement full of the stuff to replenish COMEX inventories. 3. The shutting down of base metal mines due to low prices will greatly effect silver inventories (70% of its annual mine supply). 4. The gold-silver ratio is at near historic highs - making it much more undervalued. 5. There are numerous new industrial and medical uses for silver that will increase consumption. This makes silver the obvious choice to focus on.

When the COMEX silver inventories are depleted and the contract defaults, it will cause the price to rapidly rise. Gold will follow for the same reasons - because the paper price for each will be proven invalid.”

– Charles Rapp

I have no idea who Charles Rapp is. I stumbled on this quote this evening, and it made sense to me... Unlike the markets this week... they don't make much sense at all. That is why we focus on the big picture. The consequences...the consequences of the foolish actions of the world governments in their vain attemts to correct this long overdue correction in world financial markets. That is what we focus on. And those consequences are going to play a major role in the eventual explosion upward in the prices of Precious Metals, Oil, and ALL the price of EVERYTHING.

The IMF says it may need another $150 billion to fight the worldwide slowdown. Chickenfeed, really. This thing has gotten so big, $150 billion won’t even be noticed.

The World Bank says global trade is shrinking – for the first time in 25 years. And here, is where we pick up the trail. With so many much data – so much noise! – it’s easy to get lost. But here we have a lead we can work with. Let us begin here.

World trade is shrinking. Across borders, at least, people are buying and selling less. Why would they do that?

We were afraid you would ask that. Because the answer requires more time than we have this morning. So we will simplify. Economies naturally expand and naturally contract. In an expansion, world trade increases. In a contraction, it diminishes. Typically, the big increases in global trade correspond with the rise of imperial powers – armed forces large enough to protect trade routes...guarantee the safety of merchants...and enforce a uniform, reliable commercial code. Trade expanded greatly during the Roman Empire...then contracted sharply when it fell. The Mongol Empire too created a huge free trade area in Eurasia. Then, the British and other European powers expanded their sphere trade along the shipping lanes...throughout most of the world...until they were rolled back from much of Eurasia by the advance of other hostile empires – the Soviet Union and China.

The last major boom in world trade came with the Reagan Administration. The free-marketers in the ’80s – both in England and America – lowered taxes and reduced barriers to commerce. Then, a remarkable thing happened – the Soviet Union collapsed, leaving its member states and client countries free to enter into trade with the West. China also realized that its rice bowl would be fuller if it too began selling to the West, rather than threatening it.

That Golden Age of ebullient world trade is now over. It could, of course, be nothing more than a temporary setback to system of imperial finance that is otherwise in good shape – a mere runny nose and sore throat...nothing to worry about. But the noise we hear sounds more like a death rattle than a head cold.

But the quacks are at work, busily making the situation worse.

Looking at the essentials of the economic situation, we see it in 3D:

A natural Deflation of asset prices in the financial world...

...leading to a natural Depression in the economic world....

...with an army of public officials Determined to turn things around.

Their approach is the old ‘hair of the dog that bit him’ technique. The world has had too much credit; they propose to give it even more. With $10 trillion in “stimulus” efforts all over the planet, they’re not giving only a hair of the dog; they’re throwing in the whole damned kennel.

These efforts are not going to work. Why not? Because you can’t help an obese man by giving him another helping of dessert. And you can’t cure an alcoholic by offering him free drinks.

If the feds were paying attention, they should listen up here:

The cure for a slump is a slump.

A real correction corrects. Cold turkey. Rehab. Debts are paid off, worked off, or written off. Prices fall to the point where they make sense again. Consumer items become affordable; an ordinary person can buy a house. An ordinary investor can buy a stock...or an apartment building...and get a decent return on his money. An ordinary businessman can make a profit from operations; he doesn’t have to count on stock options and rising share prices in order to make a living.

The way to cure a correction, we repeat, is to let it do its work. But that’s not going to happen.
-Bill Bonner, The Daily Reckoning

The bond bubble is an accident waiting to happen
"Get out of Treasuries. They are very, very expensive," said Mohamed El-Erian, the investment chief at the Pimco, the world's top bond fund, in a Barron's article last week.

It is lazy to think that China, Japan, the petro-powers and the surplus states of emerging Asia will continue to amass foreign reserves, recycling their treasure into the US and European bond markets.

These countries are themselves bleeding as exports collapse. Most face capital flight. The whole process that fed the bond boom from 2003 to 2008 is now going into reverse.

Woe betide any investor who misjudges the consequences of this strategic shift.

Russia has lost 27pc of its $600bn reserves since August. The oil and metals crash has left the oligarchs prostrate. China's reserves fell $15bn in October. Beijing has begun to fret about an exodus of hot money – disguised as foreign investment in plant. The exchange regulator is muttering about "abnormal" capital flows out of the country.

China's $1,900bn stash of foreign bonds is a by-product of holding down the yuan to boost exports.

This mercantilist ploy is no longer necessary, since the currency is weakening. Beijing needs the money at home in any case to prop up the Chinese economy – now in trouble. Even Japan has slipped into trade deficit.

Clearly, the US and European governments cannot rely on Asia to plug the $3,500bn hole in their budgets this year.

Asians are just as likely to be net sellers of their bonds. Which implies that central banks may have to "monetize" our deficits.

Obama presses lawmakers to OK new bailout funds
WASHINGTON (AP) -- Tested before taking power, President-elect Barack Obama privately delivered a pre-inauguration veto threat to fellow Democrats on Tuesday, saying they would not deny him use of the remaining $350 billion in federal bailout funds.

Obama coupled his threat with a promise to revise elements of the original bailout program that have drawn widespread criticism, pledging that billions will go toward helping homeowners facing foreclosure. Several Democrats said his commitments, to be made in writing, would be enough to prevent an embarrassing pre-inauguration drubbing for the president-elect when the Senate votes this week.

"Those who control our politicians and our media ultimately have control over the stimulus that is used to shape and control the psychological desires of the masses, which they manipulate for the calculated purpose of effecting emotional mass reactions, which are the expected behavioral responses anticipated by those who wrote the script."
-Anthony Wile