Tuesday, August 4, 2009

Bye-bye Miss American Pie

US Income Tumbles In June By Most In Four Years
WASHINGTON -(Dow Jones)- The income of Americans took the largest tumble in four years during June, reflecting the rising unemployment that is challenging the economy as it struggles out of recession.

Personal income decreased at a seasonally adjusted rate of 1.3% compared to the month before, the Commerce Department said Tuesday. Wages and salaries and transfer payments both fell.

The drop, the biggest since 2.3% in January 2005, was a payback for May income increasing 1.3%. Federal government stimulus of the economy had driven the surge, involving a large sum of transfer payments, including temporary benefits for older people. The 1.3% gain marked a revision down from an originally reported 1.4%.

Consumer spending in June climbed, but the gain seems to have been driven by rising gasoline prices. Spending increased 0.4% compared to the prior month. Adjusting for inflation, though, spending dipped by 0.1%. U.S. Energy Department data show retail gas hit a 2009 peak, at $2.69 a gallon, the week ended June 22. The last time inflation-adjusted spending rose was in February, up 0.1%, echoing recent reports on lackluster spending by consumers.

Fort Knox, Fort Hocks or Fort Shocks: Three United States Gold Scenarios [MUST READ]
By Stewart Dougherty
For 72 years, the building at the intersection of Bullion Boulevard and Gold Vault Road in Fort Knox, Kentucky has symbolized the financial strength of the United States of America. The United States Bullion Depository, better known as Fort Knox, is said to contain 147.3 million troy ounces of gold, over half the nation’s total reported gold bullion holdings of 261.5 million troy ounces. The remaining 114 million ounces are said to be stored at the Denver and Philadelphia Mints, the West Point Bullion Depository, and the San Francisco Assay Office. Assuming a price of $1,000 / ounce, the nation’s gold is worth $261.5 billion. If the metal is actually there, it represents the largest sovereign stockpile of gold bullion in the world.

However, the gold holdings of the U.S. have not been audited in more than 50 years. One reason given for the lack of an audit is that it would be “too expensive” to conduct one. An audit would cost a few million dollars, at most, so using cost as a reason for not performing it strains belief when placed in the context of the country’s Fiscal Year 2009 deficit of $2,000,000,000,000.00+, and federal debt of $11,600,000,000,000.00+. It is curious that one of the few places within the government where costs appear to be of concern relates to an audit of the one, true monetary asset possessed by the American people.

Even the Treasury Department’s clandestine $50 billion Exchange Stabilization Fund (ESF), which is only one-fifth the value of America’s reported gold holdings, undergoes an annual audit. For fiscal year 2008, this audit was conducted by KPMG, a well-known, independent CPA firm. KPMG’s 2008 ESF audit uncovered “significant deficiencies,” “material weaknesses,” a “weak control environment,” and “several control deficiencies.” If a Treasury organization subject to annual audits could fail its recent exam as broadly as that, what are we to assume about the safety and security of the people’s gold supply, which, like the national money geyser, the Federal Reserve Bank is never audited? And if the ESF is audited each year, what legitimate rationale can there be for not auditing the nation’s gold supply? Something isn’t adding up. In such a situation, inferential analysis can provide value, which you will see as this article progresses.


Cenbank sales under gold pact well below limit: WGC
LONDON (Reuters) - Official sector gold sales under the Central Bank Gold Agreement (CBGA) have totalled only 140 tonnes so far in the pact's final year, well short of the maximum 500 tonnes allowed, the World Gold Council said.

France and Sweden are the two principal remaining sellers, the WGC said in an emailed statement on Wednesday, although the possibility exists for a further sale by the European Central Bank.

The 15 signatories of the pact, which also include the central banks of Spain, Germany and Italy, agreed in 2004 to limit gold sales to the market to 500 tonnes in any one year.

"With 140 tonnes of sales, according to our numbers, it looks like we have had over 100 tonnes less than was sold over the same period of last year," said Barclays Capital analyst Suki Cooper.

"Given the current pace, it is likely this is going to be the lowest annual sales-per-quota year since the start of the very first agreement."


Curious. If central bank Gold selling has been a leading source of Gold price suppression over the past 8 years, why hasn't a slowing in sales resulted in a much higher Gold price? Well of course, REAL Gold must be being substituted with PAPER Gold on the CRIMEX in an effort to give the appearance of a large overhead supply of Gold. This is called a scam...

Upside Down and Backwards: Is Central Banking on Death’s Door Step?
By: Rob Kirby
Federal Reserve Chairman, Benedict Benjamin ǝʞuɐuɹǝq appeared before lawmakers to give sworn testimony about the state of the nation’s monetary policy. In one of his most telling pieces of testimony, Sir Benedict attempted to explain to Congressman Alan Grayson [D- Fla.] the significance of ½ TRILLION in currency swaps which recently appeared on the Fed’s balance sheet:


In his concluding remarks, Grayson asks Mr. ǝʞuɐuɹǝq if he felt the creation of these “currency swaps” had anything to do with the $U.S. Dollar’s strengthening immediately after or whether this temporary strengthening in the Dollar was coincidental?

ǝʞuɐuɹǝq responded that it was his opinion that the Dollar strengthening [at the time] was just a coincidence.

The questioning concludes with Congressman Grayson laughing in s,ǝʞuɐuɹǝq face.

Under oath, you can listen to Benedict Benjamin ǝʞuɐuɹǝq make the claim that these currency swaps were made for the benefit of ‘customers’ of foreign Central Banks.

Well, let’s take a look at this.

USGovt Yuan Bond Threat
By: Jim Willie CB, GoldenJackass.com
The tables are fast turning against the deeply indebted USGovt officials. USA Inc is in deep trouble. Its productive engines in both finance and industry are either wrecked or sputtering, even as its debt burden grows exponentially. Debt default litters the landscape. Next its sovereign bonds will be have to be sold to some extent outside the US$ Sphere, which will put at great risk its stock, namely the USDollar itself. Let’s call them USGovt Dragon Bonds. The custodians desperately seek creditors to supply much needed capital in order to fund the gigantic and growing USGovt debts, which by the way are grossly understated. The last resort is to monetize the USTreasury Bond issuance, a process well along. With the aid of the USDollar Swap Facility, the USFed has been able to secretly bid on USTBonds from foreign soil, have it appear like foreign bids, and conceal the continued and broadening monetization initiative. The United States is boldly defying the creditor nations, printing money, and buying its own debt. When more fully revealed, the USDollar will suffer the consequences. A sense of betrayal will surely come, much like discovery that the CIA has been flooding the globe with counterfeit $100 bills, or Wall Street has been flooding the globe with counterfeit Fannie Mae Bonds. Closer to home, it is akin to selling lemonade has been secretly watered down, or putting lawn mower clippings into the reefer batch before sale.

Andy Xie is a former colleague of Stephen Roach at Morgan Stanley, and now a board member of Rosetta Stone Advisors. He is an Asian financial expert. He believes the USFed is locked in a tight corner, while the investment community suffers from a massive blind spot. He wrote, “The United States has no way out but to print money. Dollar weakness reflects the market’s wavering confidence in the Fed. If the wavering continues, it could lead to a dollar collapse. Markets are trading on imagination. The world is setting up for a big crash, again.” Contrast with a comment made by Jeffrey Immelt, the CEO of General Electric. He believes the US should take a cue from the Chinese, who are growing fast, invest in industry, and make things. Wow, what wisdom! So the great financial engineering movement promoted by Greenspan and Wall Street mainly produced big bond fees and a wrecked banking system. Yes, without any equivocation or doubt, tragically. The financial engineering devices were based upon innovation in leverage and fraud without benefit of tangible production, serving as the vast illusory machinery atop a gigantic system totally dependent upon inflation. It imploded. Another alternative exists, beyond Xie’s radar. In addition to hidden monetization will come issuance of USGovt bonds outside the US$ Sphere. When the news breaks, it will hit like a tsunami.

The concept can be described in very simple terms. The vehicle is devastating in its effects and consequences. What are they exactly? The USGovt might soon issue bonds, except not in US$ denomination, but rather in Yuan currency. Out of the gate (with debt signposts), the USGovt must purchase gigantic swaths of Yuan and pay with USDollars. The result is a quantum decline in the US$ exchange rate relative to everything holding the Yuan together. The Chinese decided in 2005 to tie their Yuan currency to a basket of currencies, led by the US$, the Euro, the Yen, the British Pound, and a small additional group. So the direct purchase of Yuan by the Untied States, the newest upcoming member of the Third World, will have numerous profound effects to lift other currencies.

The direct consequences of USGovt Yuan Bonds would be vast, visible, lethal:

-The USDollar exchange rate would fall with each debt issuance

-The loan balance in USGovt debt would rise with a declining USDollar

-The Yuan currency would be further established as a global reserve alternative

-Continued trade settlement in Yuan terms would be enabled

-Rise in entire cost structure to the USEconomy from commodity pricing

-The risk of USTreasury Bond default grows with each passing new issuance

The Chinese want protection and assurance against the falling USDollar and even the growing principal risk of USTreasurys. Higher bond yields mean principal bond loss. Both currency and bond loss mean a powerful combined loss. Beijing wants protection and security in exchange for continued debt support. A Yuan-based bond issuance by the USDept Treasury, sold by the USFed would accomplish this to some degree.

Rearranging Deck Chairs On The U$$ Titanic
America’s paper empire is slowly sinking into the sea, and all the powers that be can do about it is rearrange the deck chairs for a while as they wait for the inevitable. Increasingly, more and more people are comparing the US to Japan, and it’s 20-plus year bear market / economic doldrums, realizing try as they might, the prognosis for American is a match. This is of course why the stock market trading patterns are a match, because once you bubblize the real estate market (Japan peaked in 1990) it’s all over, as this assures a structural high in credit creation that cannot be fixed as easily as floating a new CDO, or throwing a trillion or two at the bond market. Nope – once you play that card, as Sir Allen did back in 2002 to counter the negative effects of the tech wreck, yet another bubble he inspired, there’s nothing left to do but inflate with abandon and hope nobody notices.

Why don’t the powers that be increase monetary debasement rates even more if that’s all it takes to bail out the economy again? Answer: Because although it may not appear they have much going for them in this department, they do know what inflation really is (their currency printing); and, they also know what would happen if they stepped up printing press speeds even more. And US officials are getting
regular warnings from their (creditor) trading partners now reminding them that the days of US Dollar ($) hegemony dominance are numbered due to such policy, where again, the faster they print, the faster the end shall come. So this is why the US bureaucracy is creating new agencies and generally doing anything they can to distract attention away from such activities (shuffling deck chairs) in order to buy time. http://news.goldseek.com/CaptainHook/1248717181.php

MoneyNews: Doug Casey - America has died
“As the Obama administration has taken over the car industry, the banking industry, and the insurance industry, some experts now believe that American style capitalism is dead. Doug Casey, a free market capitalist and founder and chairman of Casey Research, is one of them.

“‘Unfortunately, the idea of America has died and it’s been replaced by another political entity called the United States, which in essence is no different from the 200 other countries spread across the globe,’ he says.

“In an exclusive interview with Dan Mangru of Newsmax TV and Moneynews.com, Casey tells why he sees American capitalism on the decline and why other countries such as China will eclipse the United States.

“‘The average entrepreneur in China has a lot more freedom than the average entrepreneur does in the United States. He pays a lot less taxes … he’s got a lot less regulation,’ says Casey.

“Casey goes on to tell Mangru that Communism is a ’scam’ and is designed to cheat workers.

“Casey also believes that the United States has not seen the worst of the economic crisis. ‘We’re just starting to see the beginning of what’s going to happen,’ Casey says.

“The United States has already entered what Casey calls the Greater Depression, one that will be much more serious than the 1930s. ‘This depression can be as long and as deep as you can possibly imagine,’ he says.

“The reason most people don’t realize this is that the majority of those giving economic opinions aren’t economists describing how the world actually works but political apologists describing how they think it ought to work, Casey notes.

“‘Everyone’s looking to the government for a solution, but all the government does is tax and regulate and inflate the currency,’ Casey says.

“Trillions of dollars of phony inflationary capital people believed were real assets have disappeared, says Casey. That’s going to continue to deplete the value of the dollar and guarantee catastrophic inflation in the future.

“‘If you’re relying on the US dollar, you’re relying on a figment of the US government’s imagination,’ says Casey. ‘To me, holding US dollars for the long term is about the most stupid thing you can do. Gold is the only financial asset that isn’t someone else’s liability.’”
MoneyNews, July 29, 2009.

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