Thursday, January 7, 2010

Paper Money Going Up In Smoke

Gensler: 'Seriously consider' position limits
NEW YORK, Jan 6 (Reuters) - Commodity Futures Trading Commission Chairman Gary Gensler said on Wednesday position limits on commodities futures trading needed to be seriously considered, and that U.S. swaps reforms closely resembled efforts elsewhere.

The CFTC has said it is considering a crackdown on excessive speculation in energy and commodity trading by restricting the holdings, or positions, of big players.

"We need to seriously consider (position limits) best promote fair and orderly markets, and ensure that they work in a way without concentrated outside postilions," Gensler said at the Council on Foreign Relations in New York.

Gensler also said governance of trading and clearing venues should not be controlled by dealers.

He added that dealer-to-dealer over-the-counter (OTC) swaps markets, and "some portion of end users," must be exchange-traded and cleared as part of wider U.S. efforts to regulate derivatives.

The CFTC is a key part of the Obama administration's revamp of financial markets, meant to avoid a repeat of the financial crisis.

The United States, Europe, Japan, China and Canada were "largely walking along the same path on this derivatives reform," Gensler said, noting the "five or six largest Wall Street firms" were the primary opponents of proposed changes.

There is some concern that if the United States imposes position limits, without overseas regulators adopting similar measures, that trading business could shift to other markets to circumvent the U.S. controls.

Gensler, under mounting political pressure, has pledged to be more aggressive on position limits amid a broader market revamp. But the industry has lobbied against them, and some of the five CFTC commissioners are not enthusiastic about new rules.

"Seriously consider position limits..."? Gary, there are position limit rules ALREADY on the CFTCs books dating back to 1981. Unfortunately, these rules were circumvented in 1991 when the CFTC gave a trading exemption to Goldman Sachs affiliate J. Aron & Company. Upon hearing of this, other large trading banks requested similar exemptions. It would be no surprise to learn that "the five or six largest Wall Street firms" opposed to changes in position limits hold exemptions to current position limit rules.

And Gary, if you are so serious about these position limits, why do you continually delay their implementation? Or should I ask, why do you refuse to enforce the commodity laws already on the books, and cancel the existing exemptions to these laws? Is it because you are nothing more than a government shill, and an ex employee of Goldman Sachs? Your job as mandated in it's creation by the SEC is to PROTECT investors interests in the Commodity markets. Well Gary, how about doing your damn job...ENFORCE THE LAWS ALREADY ON YOUR BOOKS!

Kan jolts yen on first day as Japan finance chief
TOKYO (AP) -- Japan's new finance minister is wasting little time making waves, jolting the foreign exchange market Thursday by calling for a weaker yen as doubts surface about his ability to guide a recovery in the world's No. 2 economy.
In unusually explicit remarks for a Japanese finance minister, Naoto Kan vowed to work closely with the central bank to steer the currency toward an "appropriate" level around 95 yen to the dollar.

He welcomed the yen's recent retreat from the 14-year high of 84.83 to the dollar hit in November but indicated it hadn't fallen far enough. "I hope currency markets correct themselves further, weakening the yen," he said.

That sent the dollar surging to a high for the day of 92.87 yen from 92.20 yen just before the comments.

Prime Minister Yukio Hatoyama formally installed Kan as new finance minister Thursday, replacing an experienced fiscal conservative with a popular politician known more for candor and mettle than crafting economic policy.

Kan takes over from Hirohisa Fujii, whose health problems led the 77-year-old to resign Wednesday after just four months as the top finance official.

Kan, who will retain his post as deputy prime minister, is an unlikely appointment. While the choice may lift the government's sagging public approval ratings, his background and outspoken views are already causing anxiety about Japan's fragile recovery.

This "announcement" is the SINGLE source of US Dollar strength overnight and this morning. The weak Dollar Bears can't stomach the news and have "run for cover". I pity the fools.

The race to the bottom has now officially started. The finance minister of the World's second largest economy [on the verge of sovereign debt default] has declared that his nations currency MUST BE DEBASED. Competitive currency devaluation amongst nations is a sure sign the end times are near for paper money.

This announcement should be viewed as further confirmation of Gold as the Future Money Of The World.

"Gold can never go to zero. The dollar is well on it’s way."
-Warren Bevan

Unemployment-claims data signal job gains are near
WASHINGTON (AP) -- A government report Thursday on claims for unemployment aid signaled that layoffs are easing and that the economy could be on the verge of posting the first monthly gain in jobs in two years.

The number of people claiming unemployment benefits for the first time barely rose last week, after two weeks of sharp drops. But the four-week average of claims, which smooths fluctuations, fell for the 18th straight week to 450,250. That figure is nearing the roughly 425,000 that many economists say would be a sign the economy will start creating jobs.

The Labor Department said initial claims for jobless benefits rose by 1,000 to a seasonally adjusted 434,000 last week. That's lower than the 447,000 that analysts expected, according to Thomson Reuters.

Funny, the US Dollar lost its bid just as this "great news" hit the wires.

This is patently absurd reasoning. For one thing, when was the last time any of these "economists say" clowns got a damn thing right? "Less than expected", "Lower than expected", "More than expected", "Higher than expected", "it signals a", "is a sign of". What the hell are these media phrases but code words for "hope"? Cluelessness perhaps? How can ONLY 425,000 NEW claims for unemployment be good for ANY economy? A "jobless recovery" is economically IMPOSSIBLE!

The ONLY thing this economy is on the verge of is an economic disaster of unrivalled proportions. Not until ALL "hope" is lost will this economy begin to turn the corner. And as long as the government continues to throw money at the problem, hope will persist. Do you want to get serious about ending this financial calamity? End the governments deficit spending, stop the bailouts, and close the US Federal Reserve FOREVER!

December retail sales show signs of life- AP

There it is again, "signs of"... My father always told me, "You can't polish a turd."

In 1975 Ronnie Montrose and Sammy Hagar wrote and recorded a song called "Paper Money". Who would have ever thought that in 1975, two hard rocking party animals were paying attention to the destruction of REAL MONEY by the US Government.

Paper Money
Songwriters: Montrose, Ronnie; Hagar, Sammy

I play the game of a rich boy,I buy everything I can.
My bankroll is a foot thick,I'm a wealthy man.
A million dollar reserve note is right there in my hand
And I can't stand to's all that I've got.
Take away all my silver
Take away all my gold
And hand me a stack of paper
Paper money don't hold.
Paper money don't hold.
Well, you act as though you don't remember
The way it all used to be.
Now one man, he locks up the money
Another man holds the key.
My car cost me fifteen grand,
Some say I got a deal.
Melt it down, I've got a thousand pounds of junk
And ten dollars worth of steel.

Ain't it the TRUTH?

"It's amusing that the fiscal health of the developed world now hinges on the amount of ink cartridges that are accessible to the world's two main central banks... the United States and Britain."
- "Tyler Durden" - - January 5, 2010

Global bear rally will deflate as Japan leads world in sovereign bond crisis
By Ambrose Evans-Pritchard
As the great bear rally of 2009 runs into the greater Chinese Wall of excess global capacity, it will become clear that we are in the grip of a 21st Century Depression – more akin to Japan's Lost Decade than the 1840s or 1930s, but nothing like the normal cycles of the post-War era. The surplus regions (China, Japan, Germania, Gulf ) have not increased demand enough to compensate for belt-tightening in the deficit bloc (Anglo-sphere, Club Med, East Europe), and fiscal adrenalin is already fading in Europe. The vast East-West imbalances that caused the credit crisis are no better a year later, and perhaps worse. Household debt as a share of GDP sits near record levels in two-fifths of the world economy. Our long purge has barely begun. That is the elephant in the global tent.

We will be reminded too that the West's fiscal blitz – while vital to halt a self-feeding crash last year – has merely shifted the debt burden onto sovereign shoulders, where it may do more harm in the end if handled with the sort of insouciance now on display in Britain.

Yields on AAA German, French, US, and Canadian bonds will slither back down for a while in a fresh deflation scare. Exit strategies will go back into the deep freeze. Far from ending QE, the Fed will step up bond purchases. Bernanke will get religion again and ram down 10-year Treasury yields, quietly targeting 2.5pc. The funds will try to play the liquidity game yet again, piling into crude, gold, and Russian equities, but this time returns will be meagre. They will learn to respect secular deflation.

Weak sovereigns will buckle. The shocker will be Japan, our Weimar-in-waiting. This is the year when Tokyo finds it can no longer borrow at 1pc from a captive bond market, and when it must foot the bill for all those fiscal packages that seemed such a good idea at the time. Every auction of JGBs will be a news event as the public debt punches above 225pc of GDP. Finance Minister Hirohisa Fujii will become as familiar as a rock star.

Once the dam breaks, debt service costs will tear the budget to pieces. The Bank of Japan will pull the emergency lever on QE. The country will flip from deflation to incipient hyperinflation. The yen will fall out of bed, outdoing China's yuan in the beggar-thy-neighbour race to the bottom. By then China too will be in a quandary. Wild credit growth can mask the weakness of its mercantilist export model for a while, but only at the price of an asset bubble. Beijing must hit the brakes this year, or store up serious trouble. It will make as big a hash of this as Western central banks did in 2007-2008.

I guess Japanese Finance Minister Hirohisa Fujii couldn't deal with stardom. Feigning illness, perhaps an upset stomach, he chose yesterday to step aside and allow Naoto Kan, Japan's "new" finance minister deliver the nations knockout blow.

PIMCO Sees UK Rating Downgrade Probability At 80%, Gilts Higher By 100 Bps
The end of QE will be a big problem in the US. Yet what happens in the UK, where the BOE is openly monetizing, once their free liquidity ends, could be a watershed event. Couple this with the likelihood of a downgrade, and the UK's fiscal and monetary future in 2010 is looking quite shaky. Today PIMCO's Scott Mather told Dow Jones his expectation for a rating downgrade of the island nation: "It's just a question of when on the current trajectory, not if. Based on what we know today about the debt trajectory and about the inability to adjust that, I think it's greater than a 50% likelihood for sure. Call it more like 80%." And according to Mather, rates on gilts will shoot up by 100 bps once the bond-buying program ends.

"Common sense would tell you that if you had a buyer in the market place which was taking the majority of the sector repeatedly... and then they disappeared, would expect a reprising, and it could be quite significant," he said in a telephone interview. "The estimates vary. They're really all over the map, but it could be 50 basis points, it could be 100 basis points, in that range."

US Avoids Technical Default By Three Days
by Tyler Durden
On December 24, the Senate passed a vote by a razor thin margin (with not a vote to spare) to raise the Federal debt ceiling from $12,104 billion to $12,394 billion. The actual debt ceiling increase took effect on December 28. And as the chart below shows, the Treasury's cash flow projections were spot on: 3 days later, and the debt subject to limit surged to $12,254, a jump of over $200 billion in 2 days, and a whopping $150 billion over the old debt ceiling. Three days is all the buffer the administration's reckless spending spree has afforded this country to avoid bankruptcy. Had one more Democratic vote dissented from the stopgap measure, the US would now be in technical default. There is just $140 billion left before the revised debt ceiling is breached. We hope for the country's sake that Bill refunding in January is massive, because as we already pointed out, on January 7th we expect another ~$130 of new Treasuries to be announced for auction by January 15th. And then there are two more weeks in January... Which is why the Treasury better be using that TARP money to pay down all it can, because if the general population understands how close this nation was to the fiscal brink, many more answers may be demanded out of the ruling party as to how it could allow things to get so out of hand.

The Biggest Financial Deception of the Decade
By Jeff Clark, Editor, Casey’s Gold & Resource Report
To quote my favorite sleuth, Hercule Poirot, “When all the facts are laid before me, the solution becomes inevitable.”

Here are a few clues…

Federal Reserve Chairman Ben Bernanke said on July 16, 2008, that Fannie Mae and Freddie Mac are “adequately capitalized” and “in no danger of failing.” Then-Secretary Treasurer Henry Paulson declared on August 10, 2008, “We have no plans to insert money into either of those two institutions.”

►Both Fannie and Freddie were nationalized 28 days later, on September 8, 2008.

Ben Bernanke claimed on February 28, 2008, “Among the largest banks, the capital ratios remain good and I don’t expect any serious problems of that sort among the large, internationally active banks...” Henry Paulson added on July 20, 2008, that “It’s a safe banking system, a sound banking system. Our regulators are on top of it. This is a very manageable situation.”

►Since the recession started in December, 2008, 144 banks have failed.

Paulson informed us on April 20, 2007, that “All the signs I look at show the housing market is at or near the bottom.”

►The number of foreclosures skyrocketed shortly thereafter and will now any day surpass those during the Great Depression.

Ben Bernanke announced on June 20, 2007, that “[The sub prime fallout] will not affect the economy overall.”

►Less than one year later, the stock market crashed, losing 53% of its value, and is still down 25% despite one of the biggest bounces in history.

Those in charge of our country’s finances not only failed to see the crises developing and then bungled the handling of the recovery, they’ve deliberately misled us about what they’re doing to our currency. In spite of emphatic promises, flowery speeches, pat-on-the-back assurances, and continual reassurances, here’s what they’ve actually done to the dollar:

Since September 1, 2008, the monetary base has ballooned from $908 billion to $2.0 trillion. The current monetary base is now equal to bailing out General Motors 23 times.
Bailout funds in 2008 and 2009 total $8.1 trillion. That’s almost 78 WorldComs. It’s over 123 Enrons.
U.S. debt has risen sharply, from $6.2 trillion in 2002 to $12.1 trillion today. That’s over $39,000 per citizen.
David Walker, the comptroller general of the Government Accountability Office from 1998-2008, warned that the U.S. is on the hook for $60 trillion in unfunded liabilities. Independent analysts peg the figure at near twice that. Whatever the number, it is incomprehensibly large. The only way we will meet these liabilities is to print the money and inflate them away.
We’re bailing out corporations that should fail, making financial promises we can’t keep, and adding layers of debt we can’t possibly repay. And the real killer is, if we don’t have the cash, we just print it. It is, by any reasonable account, the “blunder that will plunder” the next several generations. It is changing America permanently, and the problems will persist long after you and I are laid to rest.

Bottom line: after all the bailout programs, housing initiatives, rescue efforts, stimulus schemes, bank takeovers, wars, unemployment benefit extensions, and numerous other promises, the biggest financial deception of the decade is what the U.S. government is doing to the dollar. Nothing else even comes close.

Well, I can't disagree with that commentary, but the current pricing in the Silver market might give the US Dollar Deception a run for the decades biggest financial deception:

Precious Metals Derivatives: Louder Music, Fewer Chairs
by Reg Howe
Mr. Butler as well as others have taken their concerns about manipulation of silver prices on the COMEX to the Commodity Futures Trading Commission, which opened an investigation into the matter in 2008 but so far has not taken any action to reduce or limit the concentrated short positions, which have in fact grown. Any resemblance to the SEC's ineffective investigation of Bernard Madoff is probably not purely coincidental. Of course, as the CFTC has on occasion noted, short positions on the COMEX may be covered or hedged in other markets.

Indeed, they may. Even more problematic than the figures on OTC gold derivatives reported by the BIS are those related to other precious metals, primarily silver. In dollar terms, total derivatives on other precious metals reached a new peak at $203 billion. Expressed in ounces of silver, forwards and swaps on other precious metals increased by 2.8 billion ounces -- more than four years of annual silver production at the 2008 rate -- to 7.25 billion ounces, or over 10.5 years of new mine production.

Against these numbers, the COMEX appears as much or more of a sideshow in silver than it is in gold, where forwards and swaps are not yet quite as out-of-line with annual production and known stockpiles as they are with silver. But the same large bullion banks dominate the markets for both, and there is no obvious reason to suppose that the extremes reached in silver could not be reached in gold.

Here the BIS reports on silver having a total derivative new peak at 203 billion usa dollars. The total forwards and swaps in silver equate to 7.5 billion oz of silver, with a like amount of options.

The silver forwards increased by 2.8 billion oz in the past 6 months which equates to 4 times annual silver production. The entire forwards for silver of 7.5 billion oz equates to 10 and 1/2 yrs production.

To my knowledge this level of concentration has never happened in any commodity anywhere on earth!

Also, the BIS only records risk to its bankers. It does not concern itself with mining operations. If a bank were to be long in one market and short in another market, the BIS would cancel the risk.

Thus the short of silver by JPMorgan cannot be a hedge as you sometimes articulate!

10.5 years to cover their short on Silver? The CRIMEX goons are up the creek without a paddle. How could there ever be a "peak" in Silver prices again? This is a volcano just waiting to erupt. Talk about deception...O, MOMMA.


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