Sunday, April 26, 2009

Eye Of The Storm

I drew the chart of Silver posted above near the close of trading Friday. This evening [Sunday], Silver is trading strongly higher at 13.15 and strongly outpacing Gold. This is very unusual on a Sunday evening.

I have a Monday Gold target of 916. Failure to break and close above 916 could result in a very brief pullback in price before proceeding higher. Support is at 904 with 895 below that.

Silver support rests at 12.75 and 12.60.

Volcker says economy recovery a "long slog"
NASHVILLE, Tenn (Reuters) – Paul Volcker, senior economic adviser to President Barack Obama, said on Saturday that the U.S. economic recovery will be a "long slog" but that the rate of decline "is going to slow."

The United States may not be in a Great Depression but it is "in a great recession for sure," following the economy's unprecedented tumble in late 2008, Volcker said at a financial markets conference at Vanderbilt University in Nashville, Tennessee.

Volcker, a former chairman of the U.S. Federal Reserve, did not give a time-frame on his expectations for when the United States will pull out of the recession that started in December 2007.

"None of us has seen a decline in economic activity at the rate of speed seen late last year," Volcker said.

For now, troubles in the financial system continue to plague the economy, and vice versa.

"The lack of a good strong recovery works against a strong financial system," he said. The financial system "is not quite comatose, but it's on life support."

Volcker said a review the Federal Reserve's role, something traditionally regarded as taboo, now seems inevitable given the fallout from the long-running financial crisis.

"For better or worse, we are at a point where the Federal Reserve Act is going to be reviewed," said Volcker.

Summers Says U.S. Economy to Decline ‘For Some Time’
April 26 (Bloomberg) -- The U.S. economy will continue to contract “for some time to come,” said Lawrence Summers, director of the White House National Economic Council.

“I expect the economy will continue to decline,” with “sharp declines in employment for quite some time this year,” Summers said today on “Fox News Sunday.”

Summers said the economy will pick up as manufacturers rebuild depleted inventories and consumers replace aging cars. “These imbalances can’t continue forever,” he said. “When they are repaired they will be a source of impetus for the economy.”

I drive a 20 year old Mustang GT...and I drive a 16 year old Ford Ranger pick-up. What makes Mr. Summer so sure consumers will replace aging cars. It's stoopid to buy a new car every five years. Besides Larry, where are all these unemployed people going to get the money to buy all these new cars?

These clowns running the government best wake up soon to the fact that the consumer is going to be playing possum for years to come. Consumer demand for anything is going to be weak for the next 3-5 years at the VERY LEAST. It will take that long just to pay down their albatross of debt. And considering the inflation the financial wizards are in the process of "engineering", who'll even be able to afford a new car...even if they have a job?

Larry Summers is a buffoon. He should be banished from government and indicted for crimes against the American Public and the US Constitution.

I can only hope to live to see the day that the US Federal Reserve is investigated and subsequently disbanded.

Peter Schiff hits it out of the park in the public speech at an Anti-Fed Rally in New York city:

Peter Schiff Addresses End the Federal Reserve Rally in New York City[video]

Debt Issuance is a Rapidly Growing Problem
The Congressional Budget Office has projected a $1.85 trillion budget deficit in 2009 and that may prove to be a rather conservative estimate. While the government is pumping trillions of dollars into the economy in the form of fiscal stimulus and various bailouts, more and more American workers are finding themselves without jobs.

As the unemployment rate has risen, tax receipts have plummeted. At the same time, government spending on safety-net programs -- like unemployment insurance, food stamps and various Health and Human Services plans -- has soared.

It is likely that Treasury will need to issue more than $2 trillion in new bills, notes and bonds in FY2009 to cover the shortfall. So far, interest in US Treasury auctions remains pretty good as a result of the safe-haven appeal of US debt in an environment of global economic uncertainty.

A fair amount of that faith may be misplaced. I think the Chinese and Japanese realize that reduced participation in US auctions puts their existing reserve portfolios in substantial jeopardy.

Nonetheless, one has to wonder; at what point does supply completely overwhelm demand?

If -- or perhaps it's really a question of when -- that happens, Treasury, the Fed and the Obama administration are faced with a rather interesting set of choices:

Do you slash spending, thereby reducing the amount of debt issuance necessary to reduce supply? Or, do you raise interest rates to increase investor demand for US debt?

Either choice presents substantial risks to growth and recovery for an economy already on the ropes. Further blows to the economy will likely result in more job losses, which in turn will lead to an increased need for debt issuance for all the reasons already outlined. It is doubtful that there is sufficient political will in Washington to take either path.

The third alternative, which may unfortunately be the most politically expedient option, is to artificially increase demand for our debt. In other words, ramp up the quantitative easing operations that are already underway. Print more dollars and use them to buy more of our own debt.

This of course puts us ever deeper in debt. The secret to getting out of a hole is to first stop digging. That simple fact seems to be lost on those who work inside the beltway.

IMF head says it will sell bonds to raise funds
WASHINGTON (AP) — The International Monetary Fund will sell bonds as a way to raise funds to lend to struggling nations, the head of the organization said Saturday, in a victory for developing countries.

Emerging economies such as China, Brazil and India pushed for the move as an alternative to providing longer-term loans to the IMF. Those countries want a greater voice in the institution before providing additional resources.

IMF Managing Director Dominique Strauss-Kahn said China and other countries have expressed interest in purchasing the bonds. The IMF has never issued bonds before, although the idea was explored in the 1980s.

The move, announced after the IMF's annual spring meeting, indicates the world's leading economies are having difficulty following through on a pledge made in London April 2 to boost an IMF emergency lending facility by $500 billion. The bonds will contribute toward that goal but will provide shorter-term financing than the loans that Japan, the European Union and the United States have promised.

The Group of 20 nations, which includes wealthy and developing countries, pledged in London to provide a total of $1.1 trillion to the IMF and other international lending institutions.

"The major emerging markets have made it clear that they ... will no longer be pushed around by the advanced economies," said Eswar Prasad, an economics professor at Cornell University and former IMF official. While "the net effect" on IMF resources of loans or bond sales is the same, Prasad said, "the symbolic difference between these two types of contributions is huge."

Interest in Gold Surges as Investors Seek Diversification
“One reason the financial crisis has been so devastating for investors is that many alternative assets did not deliver on the promise that they would provide portfolio diversification,” said Natalie Dempster, Head of Investment, North America for World Gold Council and author of GID. “The same cannot be said for gold. Gold has been one of the few assets that has genuinely provided investors with diversification throughout the financial crisis.”

For the first quarter 2009, the gold price ended at US$916.50/oz, on the London PM fix, representing a moderate increase of 5%, contrasted against a 12% decline in US stock prices during the period.

Regarding the broader economic backdrop, commentators expressed two distinct views with respect to where consumer prices are headed. One sees inflation coming, as a consequence of the staggering increase in public spending and the quantitative easing measures being put in place by central banks around the globe. The other view argues that deflation is the more likely prospect, pointing to recent inflation figures - US consumer prices were unchanged on an annual basis in January for the first time since 1954 - and the continued deterioration in consumer confidence and spending. Both scenarios have possible positive implications for gold:

“Gold is not just effective during a financial crisis. The unique and diverse drivers of gold demand and supply mean that changes in the gold price do not correlate with changes in the prices of other financial assets, regardless of the health of the financial sector or broader economy,” Dempster said. “Gold is an effective portfolio diversifier regardless of the stage of the economic cycle.”

GDP Probably Shrank as Companies Cut Back: U.S. Economy Preview
The U.S. economy probably plunged again in the first quarter, reflecting a drop in inventories that may set the stage for a return to growth later this year.

“The more forward-looking you are, the better the world looks,” said Ethan Harris, co-head of U.S. economic research at Barclays Capital Inc. in New York. “Almost half of the drop in GDP is due to a collapse in inventories, and once they fall far enough, production has to rise back up to meet sales.”

Data in recent weeks, including signs of stability in home sales, residential construction and demand for business equipment, signal the world’s largest economy may contract at a slower pace this quarter. Finance chiefs from the Group of Seven nations last week predicted a “weak” economic recovery will start to take hold in coming months as evidence mounts that the worst of the recession is over.

Wishful thinking at best. Basing ones "hopes" for a recovery to take hold soon on US Government data isn't even's absurd. I'd call "current events" the "eye of the storm". The front side of a hurricane is bad enough, but it's the back side that knocks everything down. Today's financial hurricane is FAR FROM OVER. Hope must be destroyed before this US Federal Reserve induced financial disaster passes. Recall that it was lost hope following a financial disaster in the very early 1900s that led to demands from the public for a central bank to prevent financial crisis in the future. Obviously that idea has been a repeated disaster. When all hope is lost, the people will demand the disillusion of the US Federal Reserve. Then and only the can the "All Clear" be given.

The US Federal Reserve must be destroyed!

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