Monday, December 14, 2009

Somebody Call The Cops!

-Ludwig von Mises, Austrian Economist (1881- 1973)

Gold and Silver have both endured a constructive consolidating reaction over the past week. Both have retraced almost 38% of their most recent up legs. They now appear poised to resume their respective marches higher. Silver took the lead today, and I suspect that in the very near-term Silver may be the leader as these two Precious Metals resume their up trends. Watch the Gold to Silver Ratio [GSR] closely. Should the GSR fall below its 50Day moving average, expect a quick acceleration in the price of Silver.

With respect to seasonality, Gold and Silver have historically been strong in the second half of December. Also, Triple Witching options expiration this week should open the door to new advances in the Precious Metals. Dip buyers, now is the time to act. Traders with short positions should tighten their stops here, and be thankful for the bone they were tossed.

Senate passes $1.1-trillion spending bill
Washington - The Senate on Sunday passed a $1.1-trillion spending bill with increased budgets for major sections of the federal government, including health, education, law enforcement and veterans programs.

The spending bill passed Sunday consists of $447 billion for departments' operating budgets and about $650 billion in mandatory payments for federal benefit programs such as Medicare and Medicaid. Those programs under immediate control of Congress would see increases of about 10%.

The FBI gets $7.9 billion, a $680-million increase over 2009; the Veterans Health Administration budget becomes $45.1 billion, from $41 billion; and the National Institutes of Health receives $31 billion, a $692-million increase.

All but three Democrats voted for the bill. All but three Republicans opposed it.

The bill also approves a 2% pay increase for federal workers.,0,3675856.story

A $1.1 TRILLION spending bill is passed by The Senate of a bankrupt nation. Wonderful! And with a 2% pay raise for federal workers, but NO cost of living raise for the nations senior citizens. What an insult. Where is the outrage?

Harry Reid demands that China fix its economic policies
The U.S.-China relationship is a carefully calibrated dance, especially in this the first year of the Obama administration. That’s why one has to wonder what prompted Senate Majority Leader Harry Reid to write a scathing letter to Chinese President Hu Jintao calling on China to move faster to reform its economic policies.

In the letter, sent to Chinese and U.S. officials Wednesday, Reid lashes out at China on two issues, its still-inflexible currency and its failure to do more to protect intellectual property rights.

"There is widespread agreement that China’s currency policy is a major source of imbalance in our relationship– indeed, in the global economy. The de facto peg is set at a level that for many years has not reflected economic reality," Reid wrote. "Your currency policy is not in the long-term interest of China: it creates inflationary pressure, promotes over-investment, and feeds asset bubbles within China. In short, it is one of the most serious economic problems in the world today."
Harry, the US Dollar is "one of the most serious economic problems in the world today." I don't believe Harry understands that IF China allows it's currency to will force our Dollar to fall further, faster. The only thing holding the Dollar above water right now is the Chinese
unwillingness to let it fall by allowing their currency, the Juan, to rise.

Goldman Fueled AIG Gambles
Goldman originated or bought protection from AIG on about $33 billion of the $80 billion of U.S. mortgage assets that AIG insured during the housing boom. That is roughly twice as much as Société Générale and Merrill Lynch, the banks with the biggest exposure to AIG after Goldman, according an analysis of ratings-firm reports and an internal AIG document that details several financial firms' roles in the transactions.

In Goldman's biggest deal, it acted as a middleman between AIG and banks, taking on the risk of as much as $14 billion of mortgage-related investments. Then Goldman insured that risk with one trading partner—AIG, according to the Journal's analysis and people familiar with the trades.

The trades yielded Goldman less than $50 million in profits, which were mostly booked from 2004 to 2006, according to a person familiar with the matter. But they piled risks onto AIG's books, which later came to haunt the insurer and Goldman. The trades also gave Goldman a unique window into AIG's exposure to losses on securities linked to mortgages.

When the federal government bailed out the insurer, Goldman avoided losses on its trades with AIG covering a total of $22 billion in assets.

A Goldman spokesman says that up until AIG was rescued by the government, the insurer "was viewed as one of the most sophisticated financial counterparties in the world. It wasn't until the government intervened in September 2008 that the full extent of AIG's problems became apparent."

"What is lost in the discussion is that AIG assumed billions of dollars in risk it was unable to manage," the Goldman spokesman added.

In light of this "revelation", it is hard to believe Goldman Sachs was not aware of the potential risks AIG had taken on, and the threat these risks posed to the financial system. Somebody, please, where are the prosecutors? This is a crime scene that needs to be revisited.

Paul Introduces Legislation Requiring Congressional Approval of Treasury Gold Dealings
Washington, DC: Congressman Ron Paul of Texas this week introduced legislation designed to curb the ability of the President or the Treasury Secretary to manipulate worldwide gold prices. The "Monetary Freedom and Accountability Act" restores proper congressional authority over gold policy by requiring that body to vote its approval before the President or Secretary buys or sells gold.

"The Constitution grants authority over monetary policy specifically to Congress alone, not to the executive or the administration," Paul stated. "Yet Congress has neglected its duty for decades, and now our foolish fiat money system is run without challenge exclusively by unelected Treasury and Fed bureaucrats. As a result, the Treasury has been able to engage in the buying and selling of gold to manipulate the worldwide market price. Gold is very important to markets and investors in America and across the globe, and Congress should not allow the administration to interfere in the gold market behind closed doors."

"The Fed wants all of us to think the stock market is not overvalued, and that credit and monetary expansion can create lasting prosperity," Paul concluded. "My bill will make it harder for the Fed and the Treasury to manipulate gold prices, which should always serve as an unbiased indicator of the true health of world markets."

It's high time Congress started doing its job again, why is legislation necessary to put Congress back to work if the job is given to them, and ONLY them, by the US Constitution. Don't all these knuckleheads up on Capitol Hill swear to uphold The Constitution when they take their oath of office? I wonder when last any of them has read The Constitution? Thank you Congressman Paul.

Obama's Big Sellout [MUST READ!]
By MATT TAIBBI, Rolling Stone
The president has packed his economic team with Wall Street insiders intent on turning the bailout into an all-out giveaway.

Barack Obama ran for president as a man of the people, standing up to Wall Street as the global economy melted down in that fateful fall of 2008. He pushed a tax plan to soak the rich, ripped NAFTA for hurting the middle class and tore into John McCain for supporting a bankruptcy bill that sided with wealthy bankers "at the expense of hardworking Americans." Obama may not have run to the left of Samuel Gompers or Cesar Chavez, but it's not like you saw him on the campaign trail flanked by bankers from Citigroup and Goldman Sachs. What inspired supporters who pushed him to his historic win was the sense that a genuine outsider was finally breaking into an exclusive club, that walls were being torn down, that things were, for lack of a better or more specific term, changing.

Then he got elected.

What's taken place in the year since Obama won the presidency has turned out to be one of the most dramatic political about-faces in our history. Elected in the midst of a crushing economic crisis brought on by a decade of orgiastic deregulation and unchecked greed, Obama had a clear mandate to rein in Wall Street and remake the entire structure of the American economy. What he did instead was ship even his most marginally progressive campaign advisers off to various bureaucratic Siberias, while packing the key economic positions in his White House with the very people who caused the crisis in the first place. This new team of bubble-fattened ex-bankers and laissez-faire intellectuals then proceeded to sell us all out, instituting a massive, trickle-up bailout and systematically gutting regulatory reform from the inside.

If after reading this expose you are not shaking with rage, then YOU are a Zombie. Matt Taibbi has out done himself with this revelatory essay. PLEASE take the time to read it in its entirety, and then pass it along to friends and family. Barack Obama, ...the man who sold his country down the river.

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