Sunday, November 29, 2009

Just A Bump Along The Way?

Is it just me, or is the media focusing too much attention on "Black Friday"? Never in my lifetime has the media droned on endlessly about the volume of sales the "day after" Thanksgiving. This story drowns the local evening news broadcast. They even use it to promote the evenings upcoming broadcast. IT's SICK!

UAE to back banks amid Dubai meltdown
DUBAI, United Arab Emirates (AP) -- The United Arab Emirates has pledged to stand behind foreign and domestic banks in the country, offering additional money while extolling the strength of the Gulf nation's financial sector as world markets brace for a potential day of reckoning Monday over Dubai's crushing debt.

The UAE's immediate priority was arguably to avert any run, however unlikely, on banks by panicked depositors. But the promise of cheap funds also signaled to global investors that the country's federal government -- backed by oil money -- will do what it can to limit the fallout from its indebted emirate's woes.

In a statement Sunday, the UAE's central bank said it had sent notice to Emirati banks and foreign banks with branches in the country making clear they would have access to "a special additional liquidity facility."

Sounds like money printing to me...

A Defiant Iran Details Plan for 10 Enrichment Plants
Iran warned Sunday that it would reduce its cooperation with United Nation’s nuclear agency and in a gesture of defiance it ordered the construction of 10 new uranium enrichment plants.

Iran’s warning and its announcement for building new plants appeared to be its first reaction to the demand by the United Nations nuclear watchdog demand on Friday to immediately suspend enrichment activities at a newly disclosed site called Fordow, near the city of Qum. Iran had told the agency that it planned to complete the half-built plant, which is tunneled into the side of mountain, by 2011.

Iran’s defiance to comply with the demand could further damage the already strained ties with the West and lead the United Nations Security Council to impose tougher sanctions on Iran over its controversial nuclear program, and threatens to heighten tensions with Israel, which has hinted at the possibility of attacking Iranian nuclear operations if diplomacy fails.

How and Why China Will Flood the Gold Market
By Jeff Clark, Editor, Casey’s Gold & Resource Report
What would happen to the gold price if China increased its gold reserves to just 5%? What about 10%? To overtake the U.S. as king of the gold hill, it would have to buy all the gold held by the governments of France, Italy, and Germany combined. Can China really do any of that?

At $1,000 gold, to push China's gold holdings to 5% of reserves would take $55.3 billion; to 10% would cost $144.4 billion; to be the world's top gold dog would run $227.6 billion.

Chinese reserves are approaching $2.3 trillion, of which almost 70%, or $1.6 trillion, are denominated in U.S. dollars. The cost to become the world's biggest holder of gold would be a pittance compared to the amount of money China has available. In other words, money is not a problem.

Combining the country's massive holdings of dollars and the very real likelihood those dollars are going to lose much of their value, the motivation to buy tangible assets is urgent.

Further, keep this in mind: China's reserves continue to grow. Therefore, the country must continue buying gold (or consuming its own production) just to maintain the small gold-to-reserves ratio it has, let alone increase it.

In addition to the government buying precious metals, Chinese citizens will continue gobbling them up, too. Demographics alone tell us why.

Government statistics show the average urban household in China has about US$1,300 in disposable income. Multiply that by the number of urban households in China and you come up with roughly $36 billion in available capital.

According to precious metals consultancy CPM Group, about 9.5 million ounces of gold will be turned into coins this year (including "rounds" and medallions). At $1,000 gold, that's $9.5 billion, or only about one-third of the capital available in China.

The number is more striking for silver: Total coin production this year is expected to hit 35 million ounces, equaling $615 million or just 1.7% of the available capital in China. Of course, a lot of Chinese people want cars and refrigerators, etc., but it won't take much of a shift of this capital into gold and silver to have a major impact on the global retail precious metals market. It may already be under way.

And long-term projections show the demographic trend won't slow down: The middle class in China is expected to increase by 70% by 2020. So over these next 10 years, more Chinese and more money will be coming into the precious-metals markets, all at a time when inflation is almost certain to be high, adding to gold and silver's appeal. Couple this with China's long-standing cultural affinity for gold and you have the makings for a potentially life-changing gold rush.

If I were a crime detective, I'd say China has the motive, means, and opportunity to push gold and gold stocks much higher.

China, gold, and the civilization shift
By Ambrose Evans-Pritchard
Stephen Jen from the hedge fund Blue Gold Capital has a warning for those who think that gold has risen far too high, is necessarily in a speculative bubble, and must soon come clattering back down.

Mr Jen is an expert on sovereign wealth funds from his days at Morgan Stanley. The gold story — essentially — is that the rising economic powers of Asia, the Middle East, and the commodity bloc are rejecting Western fiat currencies. China, India, and Russia have all been buying gold on a large scale over recent months.

Why should that stop when the AAA club of sovereign debtors is pushing towards the danger threshold of 100pc of GDP?

These new players account for almost all the accumulation of foreign currency reserves worldwide over the last five years, so what they do matters enormously.

After crunching the numbers, Mr Jen found that the share of gold in their reserves is just 2.2pc compared to 38pc for the Old World (perhaps we should just call them the deadbeats from now on). They would have to buy $115bn of gold at current prices to raise their bullion to just 5pc of total reserves, and $700bn to reach just half western levels.

The killer-term here is at current prices since any such move in the tiny global market for gold would send prices into the stratosphere.

India-IMF Deal: Tipping Point for Gold
By Frank Holmes
India's deal to buy 200 metric tons (6.4 million troy ounces) of gold from the International Monetary Fund (IMF) is a huge deal - not just the fact that the New Delhi government is handing over $6.7 billion for the metal, but what it may mean for gold going forward.

India, the world's largest gold jewelry market, is making a rational and bullish call on gold. The supply of gold continues to decline - the biggest supply is from governments with socialist policies that are selling their gold to pay for social welfare and bailout programs. The IMF is a classic case of this.

What's particularly interesting in this case is that the buyer is a developing economy that's the largest democracy in the world. I see this as another sign of the wealth shift away from the developed markets of North America and Western Europe toward the emerging world.

A decade ago, many of the major emerging markets were in shambles, with contracting economies and huge current account deficits - now many of them have large surpluses to deploy, and they're thinking beyond Treasuries.

What Has Government Done to the Dollar?
By Mike Hewitt
The U.S. dollar has changed from being a paper certificate for a tangible asset to a fiat currency - a paper note declared legal tender. By looking at the history of American paper money one can clearly see the distinction.

For years now, (at least since the U.S. Congress authorized establishment of the Working Group on Financial Markets in 1987) the evidence has become increasingly convincing that a Fed-led Cartel* has been intervening in most Major Markets, and not just in the Gold and Silver Markets.

But The Cartel’s Special Focus has been Intervention in the Precious Metals Markets, regularly successfully taking down the prices of Gold and Silver. The Motivation for this is clear. To the degree that Gold and Silver become increasingly Widely recognized as the Ultimate Measures and Stores of value, they delegitimize the Cartel’s* Fiat (Colored Paper – Intrinsic Value Zero) Currencies and Treasury Securities.

To Date, The Cartel has not lost a round in their repeated attacks to take down Gold and Silver prices, or in their Interventions in other Major Markets either, for that matter.

BUT, The Cartel’s Interventional Regime is now under unprecedented pressure.

Does the recent all-time-nominal high in Gold indicate the Cartel is finally losing Control?

Bernanke Says Curbing Fed Powers Would Impair Economy
Nov. 28 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke said curbing the central bank’s authority to supervise the banking system and tampering with its independence would “seriously impair” economic stability in the U.S.

“A number of the legislative proposals being circulated would significantly reduce the capacity of the Federal Reserve to perform its core functions,” the Fed chairman said in a commentary released yesterday on the Web site of the Washington Post. The measures “would seriously impair the prospects for economic and financial stability in the U.S..”

“There is a strong case for a continued role for the Federal Reserve in bank supervision,” Bernanke said. “Because of our role in making monetary policy, the Fed brings unparalleled economic and financial expertise to its oversight of banks.”

“Now more than ever, America needs a strong, nonpolitical and independent central bank with the tools to promote financial stability and to help steer our economy to recovery without inflation,” Bernanke said.

Not only is Bumbling Ben desperate, HE IS ABSOLUTELY FULL OF SHIT. Promote financial stability? Yeah right Ben. The US Dollar has ONLY lost 95% of its purchasing power since the Fed showed up. The Fed is at the center of financial INSTABILITY. The Fed must ultimately be destroyed.

Isn't it ironic that it was public outcry over the poor condition of the banks in 1907 that led to Congress adopting the Fed as the "great banking overseer" in 1913 ...only to hear public outcry once again over the poor condition of the banks, and demanding an end to the Fed. The Fed is a near 100 year experiment that has clearly failed. NOW is the time to shut down the experiment and move on.

"Ben Bernanke Has Never Gotten Anything Right," Peter Schiff Says: Fed Officials Respond
Putting Peter Schiff on a panel with St. Louis Fed President James Bullard and former Fed Vice Chair Alan Blinder is asking for trouble or, at the very least, a heated debate.

That's just what occurred last Sunday night in New York at an event sponsored by Princeton's Business Today.

Predictably, Euro Pacific Capital's Schiff disagreed with Bullard and Blinder on just about everything, including the government's role in causing the crisis, and the outlook for the economy and the dollar.,%5EGSPC,SPY,TBT,TIP,GLD,FXI

Alan Blinder vs. Peter Schiff: When Will the Dollar Lose Its Reserve Status?
The almighty dollar ain't what it used to be.

The decline of the dollar was one of the topics of debate Sunday night when St. Louis Fed President Jim Bullard and former Federal Reserve Vice Chairman Alan Blinder faced off against longtime gold bug and dollar bear Peter Schiff at a panel hosted by Princeton's Business Today.

Bullard, who doesn't often discuss the dollar, does have hope for the greenback. When the world was in full panic mode last year, Bullard notes the dollar actually gained value in a "flight to safety" trade, even though the Fed was flooding the market with supply.

While that may be true for now, Blinder "can imagine the Chinese currency being the dominant reserve currency in the world in 30, 40, 50 years from now."

Peter Schiff, in predictable fashion, says the dollar's day of reckoning is coming much sooner than they think, citing artificially low interest rates and America's rising debt obligations.,udn,spy,dia,gld,gdx

Friday, November 27, 2009

With Gold having hit a new all-time high on Wednesday, and the US Dollar at a 15 month low, I bagged the markets for a little holiday R&R. With the Thanksgiving Holiday "usually" quiet, I figured a 36 hour break from the markets would be refreshing. Imagine my shock when I tuned back in early this morning and discovered Gold down $50 an ounce, and Silver whacked for over a dollar. What could possibly take Gold down like that?

An Arab financial institutions default on $60 BILLION of debt? Why of course, happens every day. NOT! Debt problems at Dubai World, a government investment company, caught the global financial markets by surprise late Wednesday. The knee jerk reaction was to the Dollar, sell your risky Gold investments, and buy those "ultra-safe short-term US Treasuries.

Knee-jerk reaction...exactly. The bid in the Dollar, and the dump in Gold today lasted all of six hours. Though the global financial media would have you believe that "THE DOLLAR" was up, up, up all day today. Hardly. The Dollar caught a bid last night around 9PM est, and Gold sold off hard...until about 3AM est. And then the panic subsided. The Dollar finished the day +0.04. LOL! Gold closed at ANOTHER new weekly high in spite of today's "sell-off". Where's the safe-haven now?

We mustn't belittle today's events. This "default" by a major financial entity in the Middle East could be just the tip of the iceberg of the second wave of the "global financial meltdown". We'll know more when the markets open in Asia Sunday evening here. My concern is that this "event" could call into question the majority of "emerging market" investment globally. Much of that investment recently fueled by the now popular US Dollar carry trade. Should these investments begin to unwind, the Dollar is certain to gain a rather powerful bid that "could" pressure the present rise in Gold. However, it is more likely that this event might accelerate the rise in Gold as people come to fully realize the sham that global fiat currencies really are, not to mention how at risk the global financial system is to a complete systemic implosion.

Be prepared. Protect recent profits, and use price retreats to add to positions in Precious Metals. Today's events do NOT lessen the developing shortages of physical Gold and Silver. These shortages, in the face of mounting demand, may well overwhelm any strength the Dollar might have relative to the rise in Precious Metals prices.

$59bn Dubai Debt Default Risk To Pull Stock Markets Down
By: Peter Cooper, Arabian Money
The carry trade of borrowing in US dollars and investing in emerging markets for high returns is a liquidity bubble and an accident just waiting to happen. Perhaps the situation in Dubai should be regarded as a wake-up call.

Investor perception of stock market risk has just hit a five-year low in the United States. Any contrarian investor would have to conclude that such monstrous complacency could only come before a market crash, as indeed it did last autumn.

Shocks in emerging markets like Dubai are the flutter of butterfly wings that produce a hurricane elsewhere, and $59 billion is a bit more than a butterfly. Investors should exit all stock markets and buy bonds or precious metals or short emerging markets. Gold hit $1,195 as this article was written.

The Essence Of Dubai’s Request For Debt Payment Delay
By: Jim Sinclair
What is the essence of the Dubai request for debt payment delay (a technical default)?

1. Will an implied Dubai Federal Guarantee of the debt of state owned corporations be honored in Dubai and elsewhere?

2. How many more financial problems are there out there hidden in plain view in the West as well as the Middle East?

3. Will the Middle East see to the bailouts of its own problems or is there a stampede of camel trains into the desert, devoid of cell phones and Mercedes?

4. Will this event cause other developing market country debt to default in a domino effect?

In terms of gold this event is further proof that paper and promises are NOT the stuff money is made of anymore.

Those that will come out of the woodwork to call a top in the gold price have little experience in what a top looks like in gold. Let me assure you the action of today contained zero evidence of a top.

The USA has become a giant FDIC and will have to finance in strange ways (QE) to meet its obligation prior to June of 2011.

Other than transitory technical factors there is nothing whatsoever positive in a collapse anywhere for the US dollar. When the snow falls here on the east coast of the USA the dollar will come under more pressure and fall much further.

The major immediate financial problem, hidden in plain view, is that 2009 financial entity earnings are CASHLESS. They are more than 75% due to the permission of FASB (Financial Audit Standard Board) who sold their souls to the financial sector to again mark up toxic paper to values self determine by the financial institution. The profits of their trading is toxic paper mark up accounting.

The inviting conclusion is the over the top greed in plain view by financial institutions is their own knowledge of the cashless nature of their earning and the fact that the junk is marked up now as much as one can do without either starting a riot or doing time. Therefore the earning prosperity is behind them, nothing is fixed and that makes this year the last opportunity for a long time to cash in for themselves.

Dubai has reminded us that there has been NO cure to the systemic financial problems of the West and those like Dubai that not only tried to mimic the West, but overdo them in a garish manner.

You can be sure that the US Fed and the ECB are chasing the sheiks into the desert today like Lawrence of Arabia in an attempt to get them to pay up and support their own problem. That means more international QE, as the Fed is not in the mood to tank a $12 trillion dollar bailout operation over an $80 to $110 billion dollar failure of a stupid and garish real estate project in Dubai. This concept would contain the domino effect, putting it off until later in 2011.


The dollar will not reverse out of the bear market it is in, nor will gold top here and now. In fact the bear market in the US dollar and the bull market in gold is not only alive and well but in terms of price, young.

Dubai seeks to assure markets shaken by debt move
DUBAI, United Arab Emirates (AP) -- Debt-burdened Dubai insisted that it took into account market fallout from its appeal to delay paying creditors, but offered no specifics and did little to ease worries that dragged down global markets for a second day Friday.

Sheik Ahmed bin Saeed Al Maktoum, the chairman of Dubai's Supreme Fiscal Committee, stressed that the call to defer for at least six months at least some of $60 billion owed to creditors by Dubai World, the emirate's chief investment arm, was "carefully planned" and aimed at taking decisive action.

But the announcement appeared to reinforce worries that Dubai's rulers are fueling a crisis of confidence from world markets with their policies of keeping tight control over information on their fiscal standing and deal making. The timing of the announcement worsened the concerns, since it came ahead of a three-day Islamic holiday.

Ahmed's statement, issued late Thursday, came a day after the Dubai government announced a restructuring of Dubai World and said it would ask creditors to delay debt repayment until at least May. The announcement came Wednesday, on the eve of a three-day Islamic holiday, apparently aimed at blunting the impact of the move in the region.

The sharp reaction in equity markets worldwide apparently forced the taciturn rulers of Dubai to come forward with a bit more information.

"Our intervention in Dubai World was carefully planned," Ahmed said in the statement. "The government is spearheading the restructuring of this commercial operation in the full knowledge of how the markets would react."

"We understand the concerns of the market and the creditors in particular," Ahmed also said.

Ahmed called the Dubai World's debt freeze request a "sensible business decision" and said Dubai's leadership had to intervene when it did "because of the need to take decisive action to address its particular debt burden."

Tuesday, November 24, 2009

What Bubble?

Welcome to Stage Two of Gold's Bull Market
By James Turk
November 23, 2009 – Bull markets are marked by three distinct stages, and when gold climbed above $1,000, it only entered its second stage. In other words, gold has much further to climb in the months and years ahead.

So don’t be misled by what you may hear or read in the mainstream media and even much of the alternative media. After all, how many commentators have correctly identified gold’s bull market, now a decade old?

As Robert Blumen cogently argues: “Many of the financial media have a pronounced anti-gold bias. Of the writers and news anchors now calling gold a bubble, not only did they fail to identify the stock market bubble in the 90s or the subsequent housing market boom as a bubble, they actively promoted the excesses of those unsustainable booms, encouraging their viewers or readers to participate. For the most part, these pundits have failed to identify a rising gold price as an investment trend at any point in the past ten years (during which gold had a positive return each and every year).” Robert then goes on to observe the silly incongruity of their warnings about gold: “Witness the irony of the financial media transformed from hypesters who never saw a bubble they couldn’t promote into bubble vigilantes, issuing concerned warnings to ‘get out [of gold], now, before you get hurt.’”

Viva la Restoration
This is an excellent must read work by one of GATA's earliest supporters. Robert K. Landis, partner of Reginald H. Howe in Golden Sextant Advisors, gave the keynote speech at last week's gold conference in Zurich. Landis addressed the most basic [but seldom acknowledged] financial question... the question of what money is or should be, and how the choice inevitably leads humanity toward liberty or totalitarianism.

Because bad ideas have bad consequences.

11/20/2009 - Recent Speech by Bob Landis

New gold bugs making gold investments mainstream
SAN FRANCISCO (MarketWatch) -- Gold has long been favored by a fringe of the investment world, but this year some of the world's leading hedge-fund managers have loaded up on the precious metal amid concern government efforts to avoid another Great Depression that could undermine major currencies and fuel rampant inflation.

"I have never been a gold bug," Paul Tudor Jones, chairman of hedge-fund giant Tudor Investment Corp., wrote in an Oct. 15 letter to investors. "It is just an asset that, like everything else in life, has its time and place. And now is that time."

Hayman Advisors, a Dallas, Tex.-based hedge fund firm run by Kyle Bass, became another proponent of holding physical gold this year.

Most precious-metal investing has historically been done via paper futures contracts on COMEX, part of the New York Mercantile Exchange, owned by CME Group.

However, Hayman expects more demand for physical delivery of precious metals. That could cause problems because there are only enough inventories in COMEX warehouses to supply 15% to 30% of open interest on futures and options contracts, the firm explained in a presentation to investors earlier this year.

"It is prudent to focus efforts on obtaining physical delivery of metals backing paper contracts 'while supplies last,'" Hayman wrote in its presentation, a copy of which was obtained by MarketWatch.

Gold Contrarians Will Get Killed
By Jordan Roy-Byrne, CMT
In the last ten years, the financial world has experienced quite a few bubbles. Ten years ago there was the tech bubble. Then the housing bubble. And then the credit bubble. There was an Oil bubble too. With all these bubbles popping up, so to has an increase in bubble calling and contrarian thinking. As a result, sentiment analysis has become more popular.

One has to look at three things: fundamentals, technicals and sentiment. For contrary thinking (in terms of sentiment) to be most powerful, either technicals or fundamentals need to agree. As an example, I anticipate a reversal when sentiment is overly bullish and that market is running into technical resistance. Just because sentiment is bullish, doesn’t mean a reversal is coming.

The reality however and this is very important to understand, is that sentiment follows the trend most of the time. A secular bull market evolves as more and more people become bullish and invest in that market. Over time, sentiment is going to be more bullish because there are more participants in that trend. That is what causes higher prices. It is the very nature of a major bull market for sentiment to be bullish.

How can anyone call Gold a bubble when gold production continues to decrease? How can anyone call Gold a bubble when monetization is rampant? How can anyone call Gold a bubble when the FHA and FDIC will need to be bailed out? How can anyone call Gold a bubble when the US deficit is in the trillions of dollars? The deflationary forces plaguing us are bullish for Gold. That is what the market is saying and that is how traders and investors are reacting.

There is a reason the recognition phase in a bull market comes after that major breakout. Humans are reactive and when it comes to the markets, they follow the herd. It is only after price breaks out do the fundamentals become so obvious. The views of the bubble callers and wanna be contrarians are baseless, misguided and ironically, coming at the worst possible time.

Why Silver’s Breakout Could Bring It Out of Gold’s Shadow
The Sovereign Society
From a speculator's perspective, the total return potential now in silver is probably greater than gold.

On a percentage basis, the price of silver can easily outpace gold over the next few years as both metals hit record highs after adjusting for inflation since 1980. Silver might achieve that goal far more quickly than gold.

Birds of a feather flock together.

This old adage is especially true in the precious metals arena whereby gold and silver tend to rise or fall in tandem. Silver has lagged gold over the last several weeks as the latter has hit fresh nominal highs this year while silver remains $2.07 an ounce below its highs this decade. Silver hit an all-time high of $50 an ounce in 1980.

Adjusted for inflation since 1980, silver prices should trade north of roughly $128 an ounce now…while gold should fetch at least $2,200 an ounce.

The Dollar Bubble [Video] excellent!
The Dollar Bubble starring Peter Schiff, Ron Paul, Marc Faber, Gerald Celente, Jim Rogers, and others. Prepare now for the U.S. dollar collapse.

Monday, November 23, 2009

Fed Secrecy At Waterloo?

Sunday night in Asia has once again spawned gaps higher in the Precious Metals. Gold last night opened up $8 above Friday's New York close. Silver opened up .18 above Friday's New York close breaking a three day trend of lower prices as Gold powered higher. A break above 18.87 opens Silver to a major move into the 20s, that should prove unabated.

Caution is advised with options expiration today, but the CRIMEX Cabal looks to have their backs firmly against the wall, powerless to thwart the "big money" pouring into Gold now.

As Le Metropole Café's Bill Murphy put it on Friday in his characteristically conspiratorial way: "The Gold Cartel's traders don't realize, or don't know how to handle, the 'new buyers.' In days of old, they would suck in the spec longs, getting shorter and shorter as the price went higher and higher. Then they would pull the plug by dumping physical gold into the market and bombing the derivatives paper market. Eventually fund longs would sell as the technicals turned bearish. The market would cascade down with a number of funds eventually going short. The Gold Cartel would cover and up we would go again."

"This time the buyers are the biggest of money ... countries, largest hedge funds, etc. They are competing against each other and want to buy more gold on any dips the Gold Cartel hands to them. It shows in the price action."

War games in Iran and recent Congressional defeats for the Fed could fuel far higher moves in the Precious Metals as traders AND investors thumb their noses at the CRIMEX goons games in the futures pits. Both central banks AND investors want possession of REAL gold now, and have tired of the the derivative, paper based, version of a Gold "safety net". The Mother Of All Short Squeezes continues in earnest, and tightens it grip on the balls of the CRIMEX crooks that have stolen from Precious Metals traders AND investors for years. May they all die a horrible, painful, and penniless death.

Fed Beaten: Bill To Audit Federal Reserve Passes Key Hurdle
In an unprecedented defeat for the Federal Reserve, an amendment to audit the multi-trillion dollar institution was approved by the House Finance Committee with an overwhelming and bipartisan 43-26 vote on Thursday afternoon despite harried last-minute lobbying from top Fed officials and the surprise opposition of Chairman Barney Frank (D-Mass.), who had previously been a supporter.

The measure, cosponsored by Reps. Ron Paul (R-Texas) and Alan Grayson (D-Fla.), authorizes the Government Accountability Office to conduct a wide-ranging audit of the Fed's opaque deals with foreign central banks and major U.S. financial institutions. The Fed has never had a real audit in its history and little is known of what it does with the trillions of dollars at its disposal.

The amendment expressly blocks Congress from interfering with the independence of monetary policy decision-making, but opponents of the measure said that the political pressure would inevitably follow.

The GOP broadly backed the amendment, though Frank chided them for finding their love of Fed transparency only after they lost power, noting that Paul has been introducing some version of the measure since 1983.

Frank said he was opposing the Paul amendment because it could be perceived as influencing monetary policy, which can have inflationary pressure. "Perception is very important in monetary policy," said Frank.

He urged a no vote, yet 15 Democrats bucked him, voting with Paul. Key to winning Democratic support was a letter posted early Thursday from labor leaders and progressive economists. The letter, organized by the liberal blog, called for a rejection of the Watt substitute and support for Paul.

Grayson was able to show Democratic colleagues that the liberal base was behind them.

"Today was Waterloo for Fed secrecy," a victorious Grayson said afterwards.

Iran war games to defend nuclear sites
Iran has begun five days of large-scale war games to simulate attacks on its nuclear sites, officials said, warning it will retaliate if provoked.

The head of Iran's air defence said the aim of the exercises was to thwart aerial reconnaissance and air attacks.

Another official warned Tehran would retaliate with a missile strike on Tel Aviv, if it was attacked by Israel.

Iran is under intense pressure over its nuclear programme, which critics say is intended to produce nuclear weapons.

The US and Israel have not ruled out the prospect of a military attack to prevent Iran developing nuclear bombs. Tehran insists its programme is peaceful.

The head of Iran's air defence, Brig Gen Ahmad Mighani, told state media the aim of the war games, which will cover an area of 600,000 sq km (230,000 sq miles), was "to display Iran's combat readiness and military potentials.

"Due to the threats against our nuclear facilities it is our duty to defend our nation's vital facilities," he said.

Meanwhile, Mojhtaba Zolnoor, an aide to supreme leader Ayatollah Ali Khamenei, warned Iran would respond to any Israeli attack.

"If the enemy attacks Iran, our missiles will strike Tel Aviv," he was quoted as saying by the official Irna news agency.

The commander of the elite Revolutionary Guards' air force wing said Iran's air defence forces would "annihilate" Israeli warplanes if they attacked.

"Their [Israeli] F-15 and F-16 fighters will be trapped by our air defence forces and will be annihilated," Amir Ali Hajizadeh told Iran's Fars news agency.

"Even if their planes escape and land at the bases from which they took off, their bases will be struck by our destructive surface-to-surface missiles."

Is $6,300 Fair Value for Gold?
The last parabolic spike in gold took off when central banks joined the fray in the 1970s, hoarding bullion with the same enthusiasm as gold bugs. Dylan Grice from Société Générale says it smells much the same today. He sees an eery similarity between the decision of India's central bank to buy half the IMF's entire sale of gold, and the move by France's central bank to start converting dollars into gold in 1965 - which was, of course, the start of the slippery slope leading to the collapse of Bretton Woods and the closure of the US gold window under Nixon. In the gold mania that followed, the price rose to levels that matched the US dollar monetary base (it reached 140% at the peak). If that were to occur today after Ben Bernanke's go at the printing press, gold would have to reach $6,300 an ounce. The US owns 263 million ounces of gold while the Fed's monetary base is $1.7 trillion. Simple equation. Gold has had its ups and downs, of course. It is trading today at roughly the same real price as in the mid-13th Century - when an ounce bought a light suit of chain mail. It doubled in the late Medieval bubble, before crashing 90% over the next 500 years after the Spanish gold discoveries by Cortes and Pizarro in the New World, and then the finds in California, Australia, and South Africa - bottoming around 1930. "Gold isn't intrinsically safer than any other asset. There is nothing mystical about it either," said Mr. Grice. However, precisely because gold is almost useless, it makes the perfect currency, and that is the role it is playing right now as flight from fiat paper leads to fresh records each day ($1150 yesterday). - UK Telegraph

Pure fiat currency, as we have today, is an unnatural manipulation of the market, counterfeiting if you like. The monetary elite keeps the balls in the air for as long as they can and eventually drop one, then two, then three. And gold and silver begin their relentless rise.

It happened in the 1970s and it's happening today. It is not luck, nor inflation, nor the jewelry market exploding. It has to do with the fiat bust and the resultant bull market for honest money. First the physical gets bid up, then funds and paper of all kinds, and finally even the stocks of junior mining companies. It is not rocket science, dear reader. Just go back to the 1970s and find out the kinds of multiples at which juniors were trading in the late 1970s, the last time a bull market in precious metals peaked. Then allow for inflation and make your calculations. When valuations hit those highs again, or come near them, you will know the market is probably peaking this time around. We have a suspicion there is a ways to go. (We're NOT giving you investment advice, this is just our opinion.)

Of course those in the mainstream want to make it a lot more complex. For them, the rise in gold and silver prices is oh-so-mysterious. They never learned this part in business school. Keynesian texts never explained it. They got ‘A's and graduated with honors, but somehow, someone left a hole in their education as valuable as a box-car of buillion.

Hm-mm ... Is it part of a general run toward commodities? Is it the Chinese and Indians buying for their wives? Are people just ... ah, diversifying for the hell of it? On and on. A million different explanations come to mind for why gold is going up (and silver too). And then when they run out of them, they just sort of fall silent. Because there is nothing to say. (And, yes, we await that blessed moment, even if it only lasts a few hours before the yammering starts again.)

WE know. We "get it" as, doubtless, you do, too. The free-market has simply reasserted itself. The central bankers and their monetary elite parent-surrogates are in retreat, depressed by the ferocity of the crisis and panicked by the Internet - a communications device the likes of which they haven't had to contend with since the Gutenberg press. Aye, the Internet ... It must be driving the monetary elite absolutely crazy.

Look for yourself. Just in the past couple of weeks the news has come that the Copenhagen Treaty that was supposed to usher in a new era of carbon rationing to control global warming has gone bust. Then there was the article we presented yesterday that showed that over 50 percent of Americans had no intention of getting the swine flue vaccine - a vaccine that had been HEAVILY promoted by the mainstream press. And now as gold continues its relentless climb, there will be more and more articles like this one, delving into the reality of gold (and silver) and attempting to figure out just why people are still attracted to it.

Here's some more from the Telegraph article:

The Fed Backed Itself into a Corner
By Tim Duy
The Fed's independence should have allowed it to be a leader, not a follower. Ideological objections to regulation, apparently, prevented the Fed from looking for problems in their own backyard. Rapid debt creation was justified as a response to asset appreciation, with little concern that the connection might just be a bit more self-reinforcing.

The resulting crisis left the Fed struggling to keep the ship afloat - and in that struggle the Fed stepped too deep into the realm of fiscal policy in an effort to keep the trains running on time. But that mission creep was simply incompatible with the Fed's desire for secrecy. This was all too predictable: Like it or not, you cannot commit literally billions of dollars of taxpayer money and in the process secretly funnel money through AIG to the investment banking community without expecting just a little blowback. The last I checked, this was still a democracy.

Worse now for the Fed is the impression that monetary authorities work first and foremost for Wall Street. Of course, Fed officials see this a bit differently - they see supporting Wall Street as their mechanism for supporting Main Street. Ultimately, without the former, the latter is locked out of capital markets, and economic chaos follows. The purpose of Wall Street is supposed to be to channel investment funds into Main Street. But most Americans no longer view Wall Street as ultimately working in their best interests - maybe correctly. This is the same Wall Street that aggressively pushed garbage loans onto the American people as policymakers praised the wonders of financial innovation. When did the purpose of finance evolve into simply a mechanism to enrich the relative few at the expense of many? And when did policymakers embrace this view? As Paul Krugman has noted, the Fed cannot envision a world not dominated by the magic of structured finance. Yet this is a world that failed us completely.

Ultimately, can you really blame Americans if they have lost their faith in the supposedly omnipotent Federal Reserve?

Now the Fed's relationship with the public is a mess. And I suspect it is going to get much worse.

Thursday, November 19, 2009


Silver's breakout Monday was confirmed Wednesday with a third successive close above 17.75. Silver prices are poised to explode upwards from here. Analysis of the Gold to Silver Ratio suggests a potential move of over $5 an ounce may have been ignited with Monday's breakout. Silver's daily chart, She's Breaking Up posted Monday, clearly shows Silver with plenty of room to run based on RSI and MACD. There will be dips in price along the way to the 20s. THEY SHOULD BE BOUGHT.

Probably the most compelling evidence to suggest Silver is poised for a MAJOR move higher is the Gold to Silver Ratio (GSR). Please see the chart posted above. Please note when looking at a chart of the GSR, a falling chart represents bullish action in Silver prices. The chart clearly makes a strong case for rising Silver prices over the next six weeks. The bearish MACD crossover has historically signaled powerful moves up in the price of Silver. With an average gain of 34% at these MACD turns over the past year, NOW is the time to be long Silver.

Near-term support in Silver for those seeking to buy the dip [should we get one] is 18.13 / 17.92 / 17.70. 16.45 remains key intermediate support for Silver. Based just on the GSR alone, Silver now projects to 22.79 by Christmas. A coinciding price in Gold would be $1322.

Let the show begin!

COMEX commercial shorts in retreat for silver
By Gene Arensberg
At now just under 9,000 tonnes (287,880,359 ounces) of silver metal held, some analysts believe that SLV controls up to a quarter of all the existing good-delivery bar silver available in London. What we find interesting about that is that all the silver held by SLV only amounts to a little less than $5 billion as of Friday’s close.

In today’s global-market world, $5 billion isn’t really all that much. As just one comparison, the U.S. government utilized 36 times that much ($180 billion) just to bail out one large U.S. insurance company (AIG) in 2008. Do we have to point out that we are talking about the holdings of just one silver fund?

It wouldn’t take very much of an increase in the amount of global investment demand to put material upward price pressure on the rest of the remaining silver inventory in the tiny silver market. With gold at $1,100-plus now, we believe it is merely a question of time before a new surge of investment demand for silver erupts worldwide.

Now that China has re-legalized precious metal bullion and is encouraging its citizens to accumulate physical metal, it is also just a question of time before people begin to realize the relative scarcity of actual physical silver metal compared to gold.

As we have pointed out in previous reports, today versus 1980 we have 51% more humans using 1,000% more dollars-yen-euro-yuan, etc. to chase 50% less real silver metal in a world where anyone can buy the metal with a mouse click in their study, in their underwear.

If the world holds it together and we manage to avoid a second brush with systemic financial system collapse, the new rush into silver that Jim Rogers now predicts could make the one in 1979-1980, when silver briefly tested $50, look like a warm-up.

Faber Says `Sky Will Be The Limit' for Rising Gold Price[video]
The well respected and oft quoted Dr. Marc Faber discusses the future of the financial system and the Dollar, demand for commodities and the RISING price of Gold. This is very well worth your time.

Gold Rally Could Reach $1,400: CEO[video]
Investors are moving out of paper gold and into physical gold due to increased risk aversion, James Turk, chairman and founder of GoldMoney, told CNBC Wednesday. "In this current run I think you're going to see 1,200 to 1,400 (dollars per troy ounce) by the end of this year and next year I think it's going to continue," he said.

Fed officials play down impact of weak dollar
By Kevin Plumberg and Neil Chatterjee
HONG KONG/SINGAPORE (Reuters) - Federal Reserve officials on Thursday downplayed the consequences of the falling U.S. dollar, underscoring that deflation is still a threat, especially with commercial real estate prices falling.

Dallas Fed President Richard Fisher said in an interview with Market News International that the weakening dollar, which hit a 15-month low against major currencies on Monday, is only one of the factors the Fed watches when setting policy.

"You pay attention to this," Fisher said in reply to a question about the effects of a weaker dollar.

"On the other hand, in terms of its inflationary input, unless it becomes disorderly, a depreciating dollar -- a gradually depreciating dollar -- doesn't necessarily add an enormous inflation impulse."

Fisher will become a voting member of the Fed's policy-setting committee in 2011.

The dollar has fallen 7 percent so far this year and likely has become a funding vehicle for bets on higher-yielding currencies in growing emerging markets.

Philadelphia Fed President Charles Plosser, answering journalists' questions after a speech in Singapore, was also not worried about dollar weakness.

"There's no particular reason you wouldn't expect the dollar to go back to where it was before the panic set in -- that is essentially all it has done at this point. I don't view that as anything particularly of concern," he said.

Plosser will also in 2011 become a voting member.

Sounds to me like these fellows don't mind seeing the Dollar head even lower...and Precious Metals even higher.

Tuesday, November 17, 2009

Are the CRIMEX Rat Bastids Cornered?

With the Dollar teetering on the 75 handle of the US Dollar index, Gold today thumbed it's nose at yet more gum flapping by US Fed and/or US Treasury officials attempting to talk the US Dollar off the ledge. With the Dollar poised to jump to depths unknown, several government stooges have futilely tried to convince anybody that will listen of the necessity of a "strong dollar". Actions speak louder than words, and all these financial saviours have to offer is hot air.

Last Wednesday, Little Timmy Geithner got the "strong dollar" chat started while speaking with a group of "reporters" in Tokyo, "I believe deeply that it's very important to the United States, to the economic health of the United States, that we maintain a strong dollar."

"We bear a special responsibility for trying to make sure that we are implementing policies in the United States that will sustain confidence ... in investors around the world that as growth recovers and growth strengthens that we're going to bring our fiscal position back to a sustainable balance," he said

Implementing policies that will "sustain confidence"...

The Dollar rallied on Geithner's vote of confidence, and then resumed it's descent.

On Monday, in remarks to the Economic Club of New York, Bumbling Ben Bernanke tried to bolster confidence in the dollar without taking any real action.

"We are attentive to the implications of changes in the value of the dollar," Bernanke said in rare remarks about the greenback. The Fed, he said, will continue to "monitor these developments closely."

"...tried to bolster confidence..."

"Bernanke is trying to use words — not interest rates — to prevent the dollar from going even lower," said Jay Bryson, global economist with Wells Fargo Securities.

The Dollar rallied on Bernanke's vote of confidence, and then quickly resumed it's descent.

Today, Tuesday, Jeffrey Lacker, the president of the Richmond Federal Reserve Bank and an outspoken anti-inflation hawk, said that the U.S. central bank must remain vigilant about keeping inflation in check and not let patchy economic weakness deter it from beginning to withdraw extraordinary levels of support.

Also today, San Francisco Fed chief Janet Yellen told a panel in Hong Kong that the Fed knows it cannot maintain its easy money policy for too long once the economy has healed.

"We all understand very well that we cannot have an accommodative policy for too long. That once these conditions no longer prevail, it is a core responsibility of the Federal Reserve to preserve price stability," she said.

With the implied "threat" that interest rates could rise sooner, rather than later, the Dollar rallied, and then quickly resumed it's descent.

The Dollar bears know that it is "politically" unacceptable to raise interest rates because of the negative effect it would have on the "recovery". The Fed instead promises to "take away the punch bowl" if and when economic growth is strong enough and well established to accept rising interest rates. Of course they have no idea when or if that will happen anytime soon. They just hope it will eventually. In the mean time, the Dollar will continue to drift lower, Gold will continue to drift higher, and the hot air will continue to spill forth from the mouths of hopeful government officials.

Gold bulls are gaining confidence now as they realize the Fed has painted themselves into a corner and have been reduced to trying to talk their way out of it. "Buying a recovery" can only result in inflation no matter what the Fed would have you believe. The Gold bulls read the writing on the wall and have stepped forward to apply maximum pressure to the CRIMEX goons who insist on throwing evermore naked short postions at the market. The Mother of All Short Squeezes is about to make global headlines.

Silver moved another step closer to confirming the breakout witnessed yesterday at 17.75. Two dips to 18.06 have been met with strong buying. Another close above 18.06 tomorrow confirms the breakout and projects a move to 19.80.

Volatility may increase for the balance of the week as we move towards expiration of the December Gold futures contract next Monday, the 23rd. The goons are getting desperate with Gold having cleared the $1100 strike price where 100,000 contracts sit representing 10 million ounces of Gold. As of yesterday the CRIMEX warehouses only held 9.5 million ounces of Gold. Things could get ugly real quick for the goons if Gold continues higher the balance of this week.

Casey Research's Ed Steer notes:
From the beginning of 1985... and until the end of 2003... the silver price was virtually ruler-flat. It didn't make any difference what supply/demand was... or inventory levels... or economic conditions... silver never strayed much more than 50 cents either side of this line for 18 straight years!. I defy anyone to find a commodity chart [any commodity chart] that bears even a passing resemblance to this graph... and between those years mentioned. Not even gold's long-term graph looks like this. This is a graph of a price in virtual lock-down.

And this is the exact reason why the silver market is about to blow sky high. The supply/demand fundamentals have grown so far out of whack in the last couple of generations, that virtually every last bar of good delivery silver left out there, is almost worth its weight in gold.

Even with JPMorgan short 40% of the Comex silver market, they still can't keep the price down. One can only imagine where the price would be if JPMorgan et al were forced to cover... or if [by government magic] these short position in silver [and gold] could be made to disappear overnight by closing the Comex markets in both metals. That latter possibility exists if the 'powers that be' decide that the corner they are painted into can only be resolved in this manner.

Strong Dollar Policy: What??
By: Axel G. Merk, Merk Investments
The Fed has been buying hundreds of billions worth of government bonds and mortgage-backed securities (MBS) by printing dollars – not currency in circulation, but virtual dollars by entering a few keystrokes on the Fed’s computers; in Fed talk, we talk about an expanded Fed balance sheet, as the size of the Fed’s balance sheet represent the dollars that have been “printed”. Generally speaking, when you increase the supply of something – be that gadgets or dollars – the value of any one gadget – or dollar – should fall assuming constant demand. Our interpretation – Fed actions do not support a strong dollar.

The Fed’s action to weaken the dollar goes beyond printing money. By printing money to buy MBS and government bonds, interest rates may be low, but these securities are now intentionally overvalued; rational investors – not just foreigners, but also domestic investors – may be inclined to take their money overseas in search of less manipulated returns. Our interpretation – Fed actions do not support strong dollar.

Talking about low interest rates: a policy to keep short-term rates near zero is, in our humble opinion, not action that supports a strong dollar. A strong dollar policy would, in our view, include higher interest rates.

U.S. Dollar Has A Long Way To Fall
Michael Berry
Raising interest rates in the U.S. would be extremely painful and would derail the recovery. The U.S. needs at least 5% growth in GDP to support its huge and increasing debt load. Raising U.S. rates to defend the dollar is political nonstarter.

There is a growing global fear that the U.S. greenback is beginning a longer and inexorable slide and that the reserve position of the U.S. currency will come under pressure. There is no replacement for that dollar reserve role today, and there may not be for a long time.

The U.S. needs inflation more than any country in the world. Bergsten recently said that given current relentless spending plans in Washington by 2030 the CBO projects the net debt will rise to $50 trillion and servicing that debt will require $2.5 trillion each year. At some point this service is unsustainable. The dollar will fall, long rates must rise to attract new capital, and inflation will reassert itself.

Why does the Fed want inflation? It is very simple: If you carry a lot of debt, inflation is your friend. The dollar will not be.

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Monday, November 16, 2009

Actions Speak Louder Than Words

A nation can survive its fools, and even the ambitious. But it cannot survive treason from within. An enemy at the gates is less formidable, for he is known and he carries his banners openly. But the traitor moves among those within the gate freely, his sly whispers rustling through all the galleys, heard in the very hall of government itself. For the traitor appears not a traitor - he speaks in the accents familiar to his victims, and wears their face and their garment, and he appeals to the baseness that lies deep in the hearts of all men. He rots the soul of a nation - he works secretly and unknown in the night to undermine the pillars of a city - he infects the body politic so that it can no longer resist. A murderer is less to be feared.
∑ Cicero, 42 B.C.

Silver Prices to Hit New Highs in 2010
By: Marc Davis,
Silver may yet outshine gold in 2010 as spot prices for the white metal respond to the prospect of a surge in industrial demand. With a little additional help from investment demand, silver may even rally into the $25 an ounce range.

So says Chintan Parikh, a commodity analyst at the CPM Group – a leading New York-based commodities research, consulting, asset management and investment banking organization.

“Prices may spike as high as $25,” he says. At the very least, it should breach its most recent high, which was set at $20.79 in the spring of 2008, he adds.

Parikh says much of this impetus for higher prices is being driven by the fact that traditional industrial end users of silver, such as the ever-burgeoning global electronics industry, have in recent weeks begun to replenish severely depleted inventories.

In fact, silver inventories became so run-down during the financial crisis that it may take up to six months to fully rebuild them to normal levels. Parikh also notes that demand from the industrial sector tends to be quite price inelastic, meaning that buyers have few options other to pay prevailing prices.

Bernanke: Fed will keep eye on sliding dollar
WASHINGTON — Federal Reserve Chairman Ben Bernanke on Monday said the central bank will monitor the sliding U.S. dollar but pledged anew to keep interest rates at record lows to nurture the economic recovery.

In remarks to the Economic Club of New York, Bernanke engaged in a delicate dance. He tried to bolster confidence in the dollar without taking any real action.

"Bernanke is trying to use words — not interest rates — to prevent the dollar from going even lower," said Jay Bryson, global economist with Wells Fargo Securities.

Bryson and other analysts said they didn't think Bernanke was signaling that the Fed would join with central bankers in other countries to intervene in markets to strengthen the dollar. But that is an option for the Fed if the dollar were to start plunging.

Bernanke's remarks gave a brief lift to the dollar in trading Monday. But it resumed its fall after traders focused on his assertion that the central bank would hold interest rates low for an extended period. The dollar has posted double-digit declines against other major currencies since spring.

Low interest rates could put additional downward pressure on the dollar. And economists say a free-fall in the value of the dollar, while unlikely, can't be entirely dismissed. Still, low rates are needed to encourage consumers and businesses to spend more and fuel the economic rebound.

"We are attentive to the implications of changes in the value of the dollar," Bernanke said in rare remarks about the greenback. The Fed, he said, will continue to "monitor these developments closely."

Debt dynamics will hold back economy
We believe that U.S. government and private debt levels will diverge over the next four or five years as the authorities attempt to use government debt to replace the private debt that is almost certain to decline substantially. U.S. total debt is presently just under $55 trillion, comprised of public (government) debt of about $15 trillion and private debt (U.S. corporations and individuals) of about $40 trillion. The similarities to Japan at its 1989 economic and market peak leads us to believe that we are close to the same road map that Japan was on starting at that time and continuing until today. With that said, we expect current U.S. government debt of $15 trillion to double to about $30 trillion and private debt to drop in half to about $20 trillion over the next 4-5 years.

We expect private debt, particularly that of households, to decline sharply, correlating to patterns following the Great Depression and Japan in 1989. The consumer won’t soon go back to the old ways of borrowing and spending that led to the internet bubble and the housing and stock market bubble of a few years ago.

Only after the private sector rebuilds its balance sheet can we expect them to resume normal levels of spending and saving. However, we still won’t be out of the woods since the government’s balance sheet will be the next dilemma for the country. The government will have to rebuild its balance sheet just as the private sector is doing now. The government expansion of debt will more than likely drive their debt to over 200% of GDP. This is where Japan’s debt is now, and just this week Fitch warned that they may have to lower the ratings on Japanese sovereign debt. Hopefully, Japan and the U.S., after the government debt build- up, will both be able to unwind the debt without inflation becoming a major problem (Granted, that is a big assumption). As you can see this is a very precarious situation that every country will experience after going on a speculative binge where they wind up borrowing more than $5 of debt to generate $1 of GDP.

The bottom line of all this is that we expect the government debt to explode to $30 trillion from $15 trillion presently and the private debt to contract to about $20 trillion from the present $40 trillion. This process we expect will be associated with a weak economy and the continuance of the secular bear market in stocks which started in 2000.

The Day Gold’s Fate was Sealed
By Andrew Mickey, Q1 Publishing
Back in March, when the S&P was sliding back to 1997 levels and wiping away years of gains every couple of weeks, the prospects for gold became more attractive than ever.

In March the Fed officially announced it would be monetizing government debt. In an official announcement the Fed announced it would “purchase up to $300 billion of longer-term Treasury securities over the next six months.” This was in addition to its purchases of more $1 trillion worth of agency debt and mortgage-backed securities.

On top of all that, Chairman Bernanke forthrightly declared in a 60 Minutes interview the Fed was “printing money.”

There’s no turning back from this point. The U.S. government continues to set record deficits. Even the rosiest projections – those from the Whitehouse – have the annual deficit remaining at $700 billion a decade away. The U.S. dollar is in a big hole and there are no responsible (i.e. non-inflationary) ways out of it. And gold is becoming an increasingly attractive save haven.

“Every few decades, the right conditions come along to make an absolute fortune in gold and gold stocks. Right now the conditions are right.”

Everything is in place for gold. And as gold makes incrementally new highs and rebounds from the eventual and unexpected corrections, there will be more opportunity.

But at this stage in gold’s run, there’s a simple two step strategy to make a fortune in gold in the next few years.

Step 1) Make a plan to buy gold and gold stocks over the next three to five years
Step 2) Stick to the plan

Paper promises, golden hordes
TWO hundred metric tonnes of gold would occupy a cube of a little more than two metres on a side; it would fit into a small bedroom. But India’s purchase of that volume of gold from the IMF last month has had an outsize impact on the markets, helping push the price well above $1,100 a troy ounce.

For bullion bulls, the implication is clear: central banks no longer trust the creditworthiness of other governments. And if they have lost confidence, private investors should do the same. The next step in this chain of reasoning is to assume a stampede (or at least a quick trot) by other central banks into holding the yellow metal. Gluskin Sheff, a Canadian asset-management firm, suggests that if China followed India’s lead, bullion could hit $1,400 an ounce.

Job Losses Demystified
By: Peter Schiff, Euro Pacific Capital, Inc.
As the unemployment rate crossed the double digit barrier for the first time since Michael Jackson learned to moonwalk, President Obama announced that he will convene a “jobs summit” to finally bring the problem under control. Using all the analytic skill that his administration can muster, the President is determined to figure out why so many people are losing their jobs and then formulate a solution. That's a relief; for a while there, I thought we were in real trouble! In fact, the absolute last thing our economy needs is more federal government interference. If Obama really wants to know what's behind entrenched joblessness, he should start by looking at the man in the mirror.

Obama is pursuing, with unprecedented vigor, the same policies that have for decades undermined our industrial base and yoked us to an unsustainable consumer/credit driven economy. This doubling down on Washington's past failures is destroying jobs at an alarming rate. Today we learned that the September trade deficit surged by 18.2%, the largest gain in ten years. Much of the deficit resulted from Americans spending Cash-for-Clunkers stimulus money on imported cars – or “American” cars loaded to the sunroof with imported parts. In exchange for more domestic debt, we have succeeded only in creating foreign jobs.

An article in this week's New York Times by veteran writer Louis Uchitelle confirmed a fact that I have been alleging for years. Uchitelle pointed out that foreign outsourcing of component manufacturing has led to consistent overstatement of U.S. GDP and productivity. The connection goes a long way to explain why we keep losing jobs even as GDP is apparently expanding.

As our economy becomes less competitive due to higher taxes, burdensome and uncertain regulations, and capital flight, more manufacturing and services will be outsourced to foreign firms. However, the flaw in GDP calculation allows the output of those foreign workers to be included in our domestic tally. Since we count the output but not the worker responsible for it, government statisticians attribute the gains to rising labor productivity. To them, it looks like companies are producing more goods with fewer workers.

The reality is that we are producing less with fewer workers. The added “productivity” comes from higher unemployment and larger trade deficits. This is a toxic formula that will have lethal economic consequences.

Ganesha and the Price of Gold
By Ron Hera
Central bank gold is the proverbial elephant in the room that no one wants to talk about. With official gold holdings of 29,633.9 tonnes of gold worldwide, compared to world gold production of roughly 2,400 tonnes per year, central bank gold sales, leases and purchases, have a huge influence over the gold price. Central banks are changing their reserve asset compositions and a number of central banks, led by India and China (which has been the world’s largest gold producer since 2008), are buying gold. Evidently, the full faith and credit of the United States of America isn’t what it used to be. Faced with a weakening world reserve currency, the questionable status of the world’s largest economy, and unsustainable US government spending, central banks are rendering a quiet vote of no confidence on the US dollar.

The US economy, the US government, US banks, and US stock markets exhibit various problems including unemployment, looming commercial real estate defaults, the US budget deficit, a massive public debt and huge unfunded liabilities, residual toxic assets on bank balance sheets, mounting mortgage defaults and credit card delinquencies, an emerging stock market bubble, etc. Unless the economic problems of the US can be addressed, the US dollar will quite probably loose its status as world reserve currency. Whether a transition to a new world reserve currency would take place in a cooperative manner, e.g., a managed retreat of the US dollar, or in a more disruptive way is unclear.

The proverbial elephant in the room is on the move and the room is not very big in comparison. It seems likely that Western central banks are holding off further gold sales, at least while discussions on a new world reserve currency, i.e., IMF Special Drawing Rights (SDRs), are taking place. Led by India and China, key IMF members want gold included as a component of the a world reserve currency. As long as using gold as a component of a new world reserve currency is a possibility, not only are central bank gold sales on hold but central banks will almost certainly continue to buy gold in the foreseeable future.

There is no fundamental reason for the current gold price trend to reverse in the foreseeable future, and, despite the steep rise of the gold price in 2009, gold does not appear overvalued. It seems possible, although unlikely, that if gold were to again be marginalized in a new world reserve currency regime, as it was under the US dollar standard after 1971, central banks might again start selling and more aggressively leasing gold at some point in the distant future. In that case, the gold price would eventually fall, perhaps to some stable, lower level, once again reflecting the conflicting desires of central banks to both leverage their gold reserves and also maintain their value. However, given the global financial crisis stemming from of the US dollar’s 64-year reign as world reserve currency, it seems much more likely that central banks will guard their hoards jealously in coming decades.

Alternatively, if a new world reserve currency were to emerge having a significant gold component, what would then be a certainly higher gold price would likely remain at a higher level indefinitely. It also remains possible that the decline of the US dollar could accelerate or that the apparent differences between Eastern and Western central banks could become more acute, in which case the gold price could rise more rapidly and the process of deploying a new world reserve currency might be accelerated as well as potentially disruptive.

The Hindu deity Ganesha, widely revered as the Remover of Obstacles, is readily recognizable because he has the head of an elephant. Gold languished from 1971 until 2009 as a commodity that central banks had little better to do with than to systematically dissipate through sales and leases, while the most significant problem they thought they faced was the risk of dishoarding too much too quickly. From 1971 until 2009, central bank gold entering the market was a factor of the gold price and a risk for investors. After 38 years, the effective termination of central bank gold sales has rather abruptly removed that obstacle.

Desiring to mitigate risks associated with the US dollar, central banks, led by India and China, have, in effect, promoted gold from its 38-year status as a non-financial commodity once again to its historical role as the premier global financial asset. This historic change in central bank policy signifies a profound break with the past and broadcasts a clear message: gold is a world-class financial asset fairly valued at more than $1,000.00 per troy ounce. With this momentous event, the words “as good as gold” again have meaning.

An analysis of supply and demand fundamentals suggests that the current gold price does not indicate an asset price bubble, and the historic change in the status of gold by central banks implies a major revaluation not yet reflected in the gold price. As the restructuring of the global economy continues, particularly with respect to the world reserve currency, there is a clear possibility that the gold price will move up sharply from current levels.

How Will Niagara Falls Fit Through a Garden Hose?
By Jeff Clark, Senior Editor, Casey’s Gold & Resource Report
While physical gold will protect our wealth, it’s the gold stocks that can potentially make us wealthy.

Once again, to get a sense of the Lilliputian size of the gold industry, I compared it to several other leading industries and stocks.

The value, as measured by market capitalization, of all gold producers around the world is less than Walmart’s. Every gold stock would need to nearly double just for the industry to match ExxonMobil. The oil and gas industry is about 12 times bigger.

When your neighbors and relatives and co-workers and friends all start clamoring to buy gold stocks, the pressure on prices will be enormous, rocketing our positions upwards.

Meanwhile – and admitting we’re first and foremost gold bugs – the picture for silver is even more dramatic. The potential for silver stocks is jaw-dropping.

If the gold industry is tiny, then silver’s $9 billion market cap makes it a nano industry. The entire silver industry is over 21 times smaller than gold’s! If gold explodes, silver will go supernova.

Consider these macro-facts about a micro-market and what they reveal about silver’s enormous potential:

There are over 200 companies in the S&P 500 with a market cap larger than the entire market of silver producers

There are five times more gold stocks than silver.

Total silver production in 2008 was valued around $10.3 billion (at today’s prices). That represents just 1.5% of the $700 billion bailout last year, and 0.006% of the current U.S. monetary base.

Of the 20 largest silver producers, only five actually call themselves a “silver” company, due to the fact that about 73% of all silver mined is a byproduct of other metals mining.

Any flood into the silver market would overwhelm it. In other words, the rise will be stunning. While it’s not going to happen tomorrow, I strongly suggest you get on board before that rocket ship takes off.

“There’s no doubt in my mind that we’ll have a mania in gold. And because the gold and especially silver markets are so tiny, the rush into them will be like trying to push the contents of Hoover Dam through a garden hose. Our positions will go absolutely ballistic.” –Doug Casey, September 2009

She's Breaking Up

Gold rose higher AGAIN overnight in Asia as the President's trip to the region is scoffed at by the locals as the USA was widely criticized for inflating asset bubbles with their low interest rate policies and hammered on the lack of a free trade policy during the APEC Summit. Gold touched 1132.95 for an overnight high, and Silver reached 17.85.

Dollar Falls on APEC Pledge to Keep Stimulus; Gold Hits Record Bloomberg
Obama's Free-Trade Credentials Draw China, APEC Scrutiny Bloomberg

Of course, as the CRIMEX opens this morning both Gold and Silver are taken lower from the open. It is amusing that after the region of the world that holds the future of the global economy within it's borders buys Gold all night, the buffoons that pretend to manage our economy turn right around and sell it...believing they made a profit and tricking the Asians. This has been happening for weeks now. The Asians have to be laughing all the way to the bank. Every morning they walk into the office and see that the stupid Americans have marked down the price of Gold again. Too bad for the stupid Americans that are selling Gold they don't even possess, let alone own, the rest of the world is onto their scam. The Mother Of ALL Days Of Reckoning is creeping closer.

Silver is the Precious Metal to focus on this week. Silver appears to be on the cusp of a major break higher this morning. A close above 17.75 today could spell BIG trouble for the CRIMEX goons short millions of ounces of Silver they don't possess. $20 Silver is calling...

Major League Reckoning
By Dan Denning
Of course, a flaccid job market is not all that hinders the world’s largest economy. Far from it…

The supply of new US debt is growing even faster than the Congress makes plans to spend the money. The US Treasury is auctioning off $81 billion in new debt this week. It will sell $40 billion in three-year notes on Monday, $25 billion 10-year notes on Tuesday, and $16 billion in 30-year bonds on Thursday (which is pretty ambitious).

You have to wonder who is willing to loan money to the United States government – given the state of its fiscal and monetary policies – for thirty years at below 5%. But the Treasury is anxious to auction as much long-term debt now as it can, locking in what it believes are low rates. This is another way of saying the Treasury thinks rates will rise (creditors will ask for higher rates when lending to Uncle Sam).

In the report from the Treasury’s borrowing committee to the Secretary, the committee said it was getting a wee bit worried that the maturity schedule of the Treasury debt portfolio could be in trouble if rates go up. Specifically, it wrote that, “The potential for inflation, higher interest rates, and roll over risk should be of material concern.”

Perhaps this is why the Treasury and the Fed are considering whether to “move out on the interest rate” curve and try and set rates for longer-term debt. If the market is going to push them up, the Fed will have to push them down (as it has been doing anyway with its purchase plans). Rules are made to broken!

Take the statutory US debt ceiling for example. The Treasury’s borrowing committee writes that, “Based on current projections, Treasury expects to reach the debt ceiling in mid- to late- December. However, the government’s cash flows are volatile, and forecasting a precise date is difficult. Treasury is working closely with Congress to pass legislation to increase the debt ceiling. We will keep financial market participants apprised of developments as the debt outstanding approaches the statutory limit.”

In other words, the jackasses in the US Congress will have to pass a new law allowing the Treasury to borrow more. This would be comical if it weren’t so disgraceful. US monetary authorities continue to tell the world’s savers that the US standard of living is not negotiable, even if it means increasing public sector debt to over 100% of GDP.

But the world’s creditors may not be in the mood to negotiate anyway. We think the rise in gold is one example of creditors deciding there are better things to do with their money. And in the meantime, take a look at the graph below from the Quarterly Refunding Statement of the Treasury’s Office of Debt Management. It’s a doozy!

Normally, that debt is simply rolled over as a new (or often the same) buyer refinances it. But what do you think will happen in the next five years? The US will be borrowing more and more and probably at higher rates. Our guess? It won’t be good for the dollar.

U.S. Treasury Confident Congress Will Increase Debt Ceiling
Nov. 13 (Bloomberg) -- The Obama administration is confident Congress will raise the country’s debt limit by year end to avert a showdown similar to the one that shuttered parts of the government in 1995, administration officials said.

The White House wants an increase of at least $1 trillion to $1.5 trillion, according to a person familiar with the deliberations between lawmakers and the administration. Record budget deficits are pushing the national debt closer to the $12.1 trillion statutory limit.

The administration’s request, higher than a proposed increase already passed in the House of Representatives, would get the government through the November 2010 midterm congressional elections without needing another increase. Earlier this month, Treasury officials acknowledged they’ll need more borrowing room by year-end to avoid market disruptions.

“Market participants still remain on edge, especially since many have concerns over the rising debt loads that were kicked off this year,” said George Goncalves, chief fixed- income rates strategist in New York at primary dealer Cantor Fitzgerald LP.

The administration officials said the White House is open to any legislative vehicle that will raise the debt limit, by any amount. Although the Obama administration has pledged to bring deficits down to “sustainable” levels in the longer term, Treasury Secretary Timothy Geithner has focused recently on the need to keep up spending on economic assistance programs until the unemployment rate, which reached a 26-year high of 10.2 percent in October, comes down.

Eric Sprott: Gold Momentum's Picking Up Dramatically[Interview]
TGR: At The Gold Report we don't get a sense that the average investor is buying gold. Is that your sense as well?

ES: Yes, I agree that very few people have gone there. In fact, one of the funny things about the physical gold market and even mining stocks, for that matter, is that there is not a lot of room for everybody. Almost everything is spoken for. It's not as if gold is not owned by someone already. There is very little produced each year.

When I first got into gold, it was suggested there was a shortage of physical gold, and the only reason the price did not go up substantially then was because the central banks kept selling it. Now the central banks do not sell and you have all these new buyers. I have no idea where this gold is physically coming from. Even the array of gold stocks available to the world is not that large. We are very lucky to be based in Toronto, sort of the gold mining financing capital of the world. Everybody in the world of gold tends to come through here. There is not a big sense of gold mining in the United States for sure, but it's quite a topic in Toronto.

TGR: How likely are we to get into a gold mania if indeed people in some countries aren't even talking about it yet?

ES: You just have to watch the gold price. We are probably at a very significant level right now. Finance people looking at it have to be wondering what is going on. I do not think it is a secret now. You can hardly pick up a financial newspaper where they are not talking about the potential weakness of the U.S. dollar.

TGR: As you say here, we're trading around $1,100 as of this interview. What catalyst is going to come up? I clearly think that India stepping up to the plate, making that buy—frankly, I expected China to do it before India.

ES: If the Chinese come in now, we all have a story. I am sure they will, and/or somebody else will. It is not a lot of money—$6 billion or $7 billion is a drop in the bucket for the Chinese. That could happen. I have always believed there could end up being some problems in the physical market some day, regarding the settlement of contracts. We have these huge concentrated short positions in both the silver and gold on the Comex. There was a day when the price of gold went up $25; those shorts lost $1 billion dollars that day—serious dough now. So there could be things happening in the physical markets.

Audio interview with Jim Sinclair
Mining entrepreneur and longtime gold trader, Jim Sinclair, was interviewed for almost 40 minutes this week by Eric King of King World News... and discussed his life on Wall Street, the doom facing the gold price suppressors now that they are being challenged by governments taking delivery of metal, the stupidity of major mining companies, and the extraordinary potential of junior mining companies. The interview is a tour de force...
Martin A. Armstrong's latest essay is about Gold, it's history, political malfeasance, and the future of the price of Gold. It is a timely piece and well worth the read.

Gold $5000+ [must read]
The primary trend in gold remains bullish because it is the only hedge against global fiscal (political) mismanagement.