Friday, September 25, 2009

Ain't This Grand???

"Ain't no power like the power of the people, 'cause the power of the people don't stop."
-G20 protesters in Pittsburg

I find it amusing that as the G20 countries come together for another pow-wow about the Global Financial Mess, the news media chooses to focus almost entirely on the protesters. Is that the story? Perhaps, inevitably, the common mans complete disenchantment with their governments will be the story, but not today. The story today is the fate of the US Dollar. And it's fate looks sealed.

A number of events this week are conspiring with the CRIMEX goons to keep the Precious metals in check. Options on commodity futures expired, the weekends G20 pow-wow, a major election in Germany Sunday, futures contracts expire on Monday the 28th, and the 3rd quarter ends on Tuesday the 30th as does the fiscal year for many mutual funds and banks. Volatility in the markets has been limited, but caution must be used the balance of the period.

Sale prices on Gold and Silver are beginning to look attractive, but we could see better by the 1st of October. It will be interesting to hear the blah-blah coming out of the G20, and the Dollars reaction to it. NONE of the World's largest currency producers wants to see a collapse in the Dollar. Will there be a backroom agreement to "slow" it's descent? Or will the BRIC nations simply tell Little Timmy, "you made your bed, now lie in it." Be prepared to react to market signals accordingly on Monday morning.

'Da Boyz' Are Back in Town! But For How Long?
Between the opening in the Far East yesterday morning, right up until shortly before 9:00 a.m. in Comex trading in New York, gold managed to tack on about 12 bucks. And, for a microsecond, the gold price had the audacity to poke it's nose briefly above $1,020 the ounce. Then the lights went out.

From that point... and in the hour leading up to the London p.m. gold fix at 3:00 in their afternoon... 10:00 a.m. in New York, gold got sold off $10 by the usual not-for-profit sellers. But once the p.m. fix was in, the N.Y. bullion banks pulled their bids, and gold fell over $20 in less than half an hour. Its low was $989.70. So, from it's high of $1,020.20 [spot]... gold got clocked for a hair over $30... all in less than two hours.

Silver's pattern followed gold's in virtual lock-step... and when the smoke cleared at the end of New York trading yesterday, silver had 'lost' another 55 cents, and closed on its low of the day. Silver is the centre of the precious metals universe for da boyz, and that's why it gets hit as hard as it does. Gold they got lots of... silver they've got none.

You will carefully note that Thursday's U.S. dollar began it's rally at the precise moment that gold and silver began their respective declines. Not five minutes later, or twenty minutes later... or an hour. But precisely at the same moment. Was this whole thing orchestrated? You betcha! Like I said yesterday... "If it happens, we'll know who did it, why... and how."

The other thing that was going on in the silver world yesterday, that was below everyone's radar screen, involved the huge short position that the SLV ETF managers currently have. As I mentioned on several occasions, Ted Butler felt the SLV ETF was owed about 30 million ounces. When the bullion banks were covering their short positions on the Comex, the SLV managers were [at the same time] covering their short positions in SLV shares... because they couldn't get the metal, they're forced to short their own shares. If the price correction is deep enough [courtesy of JPMorgan, the biggest silver short on the planet, who just happens to be the custodian of all the silver in the SLV], then the fund can cover its short position and not have to deliver a single ounce of metal into the fund... which they don't have [and can't get] without driving the price to the moon. Ain't this grand???

G-20 plans to approve greater role for Asia
PITTSBURGH (AP) -- The G-20 summit on Friday plans to approve a greater voice for Asian countries, while European leaders were also expected to secure a limit on bankers' bonuses.

The leaders of the world's 20 largest economies began a two-day meeting Thursday dedicated to fostering a healthy global recovery with a historic shift recognizing the rising influence of countries such as China, South Korea and India.

The leaders decided the G-20 will serve as the board of directors on global economic cooperation, a function that for more than three decades had been performed by a smaller club: the U.S., Japan, Britain, Germany, France, Italy, Canada and later Russia.

The G-8 will, however, continue to meet on matters of common importance such as national security. President Barack Obama initiated the move, to be announced Friday, according to a White House fact sheet.

The measure underscores how the world's balance of power has shifted since a small club of wealthy, industrial countries began meeting in the mid-1970s in an effort to respond to oil shocks, stagflation and other economic crises of that period.

The Pittsburgh meeting marked the third G-20 leaders summit in less than a year as the countries continued to grapple with a debilitating downturn that has resulted in millions of unemployed around the world, the loss of trillions of dollars in wealth and massive amounts of government stimulus spending designed to jump-start economic growth.

Election in Germany to shape economy's direction
FRANKFURT — Economic recovery is the main issue in Germany's elections Sunday, and Chancellor Angela Merkel says tax cuts should be used to spur more growth — something her challenger disputes.

The conservative leader's current government — a "grand coalition" with the center-left Social Democrats — has won respect for taking a levelheaded approach to the crisis in Europe's biggest economy, launching massive bank bailout and stimulus packages and keeping unemployment down.

But Merkel says her Christian Democrats need a different political partner to get the economy back on track — the pro-business Free Democrats. Polls suggest that the combination may win a thin majority Sunday, but it is far from certain.

The economy returned to modest growth in the second quarter and business confidence is rising, but Germany's gross domestic product is still expected to shrink by 5 percent or more this year — easily the worst performance since World War II.

"I am pleased with the positive signals, but the crisis is not over when we reach the bottom," Merkel said recently. "The crisis will be over when we are back where we were before the crisis."

New Deadly Dollar Carry Trade
By: Jim Willie CB,
Welcome a new carry trade to town! Here in the present, the new carry trade has begun to take root with the USDollar as its basis. Its requirements are simply stated. It needs a crippled bank system that offers a reliable 0% interest rate, a crippled currency that offers little risk of a rise in exchange rate, and plenty of targeted opportunities to invest in rising asset groups in competition. The gold asset is one such object asset. One is hard pressed to identify a sovereign bond security pitched by a government with any credibility. Their deficits, boatloads of bond issuance, and public statements in desire of weaker currencies tend to rule them out. So Govt Bonds are not a viable object. They are too busy ruining their currencies in the midst of the Competing Currency War. Why just two weeks ago, the Swiss Govt announced their frustration at a rising currency, despite all efforts to undermine their Franc currency. They will be forced to redouble their destructive efforts. The Europeans did NOT want to reduce interest rates a year ago, but they did, a correct Jackass forecast that went directly against some banker contacts. That shows the power of the Competing Currency War, since the Euro currency had risen to 160, sufficient to render considerable harm to the European Union Economy in its export trade. With numerous currencies ‘frozen’ from programmed destruction, the time is ripe for the USDollar Carry Trade to be launched. It has been launched. THIS CARRY TRADE WILL PUNISH THE USDOLLAR BADLY AS IT WEARS A BADGE OF SHAME!

The ruinous bursted bubble from Japan around 1990 and the seemingly endless years of 0% Japanese money enabled the Yen Carry Trade against a backdrop of a chronically insolvent Japanese bank system. A critical characteristic of that carry trade was that heavy leverage applied enormous pressure in a way so as to maintain the low Yen currency and the high US$ currency. In the summer 2008 when the USFed took the official interest down to 0.25% and stuck it there, the USDollar Carry Trade was assured of a vigorous run through the financial factories. Here is what is so important about its upcoming entrenchment. The US$ exchange rates will be heavily subdued, with any rebounds totally smothered, resulting in a relentless Gold rise with gusto. The shorting of the US$ is key for the supply of funds. It comes as borrowed US$ funds used outside the US Sphere, thus net bearish. It comes as leveraged instruments designed to capitalize on a continued US$ decline integrated into securities like with short DX contracts.

The coordinated and systematic ruin of major currencies, through monetizations, through vast federal deficits, through sustained near 0% official rates, and through chronically insolvent national bank systems, will assure that the Gold asset will be a favorite for the USDollar Carry Trade for at least a couple years, maybe more. Furthermore, installation of the USDollar Carry Trade will assure that No Exit Strategy will be available to the USFed also. Wall Street firms will participate in this free lunch carry trade, just like all others. Wall Street will not permit a USFed rate hike to firm the US$ exchange rate. Talk about a strong perverse factor behind the USDollar. This is every bit as powerful as the ‘Beijing Gold Put’ analyzed in the Hat Trick Letter issued in September.

Continued forces will be at work in a variety of ways to continue the thrust and duration of this new USDollar Carry Trade, sure to keep it badly subdued. The risk is so great that a USTreasury Bond default could even become the last stop on its pathogenesis pathway. Just today, the compromised erudite spokesman Lawrence Meyers actually said the USFed will probably remain on hold for its near 0% interest rate until the end of 2011. That is NOT a misprint!!! The USFed will justify its decision not to hike rates, not to halt money creation, all the while discussing theoretically an Exit Strategy. Try not to laugh too hard! Also, the US$ Swap Facilities are scheduled to end in October 2009. Their extension should be very harmful for the USDollar, from the bad publicity and the understood urgent implicit desperate need. The next wave of US bank losses will arrive to coincide with the falling of the leaves in autumn, an apt parallel. The inability of the USFed to conduct and execute any Exit Strategy at all is powerful impetus behind the development of the USDollar Carry Trade, and the powerful lift it gives the Gold price. They cannot raise interest rates. The Stimulus Bill has run its measly course. The monetary stimulus must remain in place. The Uncle Sam patient is imprisoned in the Intensive Care Ward.

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