Solve The Problem: End The Fed

Deflation in assets that have been bought with debt put the banks at risk, and thus the Fed's bailout of the banks. Inflation in essential goods and services put the public at risk, and thus the Fed's suppression of the price of Gold. In either case the Fed talks out of both sides of it's mouth, and looks to have it's cake and it eat too.

The Fed claims to "fight inflation" when in fact their existence is predicated on the creation of it. The Fed is, to put it simply, a money machine. It might attempt to stop the "effects" of inflation [rising prices], but under the old definition of inflation, an artificial increase in the supply of money or credit, it's job is clear: Create MORE inflation, not less of it.

The essence of the Federal Reserve Act, passed by a vote in Congress in 1913, is that the government conferred legal legitimacy on a cartel of the largest bankers that permitted them to inflate the money supply at will while providing for themselves and the financial system liquidity in times of need. This ability to "inflate at will" then insulated the bankers from bad loans and the overextension of credit.

The Federal Reserve Act guaranteed the banks could have their cake and eat it too. It privatized profits and socialized losses. It created a form of financial socialism that has benefited the rich and the powerful, and stolen from the masses. Since the inception of the Fed, the US Dollar has LOST 95% of it's purchasing power. If that isn't inflation, I don't know what is.

What excuse could the cartel of bankers have given Congress to pass such a law that was in direct conflict with the Constitution's definition of money, and who controlled and created it? The bankers claimed that the Fed would protect the monetary and financial system against inflation and violent swings in market activity. It would stabilize the system by providing stimulus when it became necessary and pulling back on inflation when the economy became overheated. Or so they were lead to believe.

In 1914 the Comptroller of the Currency made an incredible promise by way of defending the Federal Reserve Act:

"Under the provisions of the new law the failure of efficiently and honestly managed banks is practically impossible and a closer watch can be kept on member banks. Opportunities for a more thorough and complete examination are furnished for each particular bank. These facts should reduce the dangers from dishonest and incompetent management to a minimum. It is hoped that the national bank failures can hereafter be virtually eliminated."

History has proven that may have been the Mother Of All Empty Promises. Shockingly, the colossal bank failures of the 1930s Great Depression didn't open the eyes of Congress and persuade them to repeal the Federal Reserve Act then and there. If today's growing number of bank failures don't persuade the Congress to at the very least audit the Federal Reserve, then our financial system is indeed doomed to destruction.

Hans F. Sennholz (February 3 1922 – June 23 2007) was an economist from the Austrian school of economics who studied under Ludwig von Mises. He has called the Fed "the most tragic blunder ever committed by Congress. The day it was passed, old America died and a new era began. A new institution was born that was to cause, or greatly contribute to, the unprecedented economic stability in the decades to come."

The Federal Reserve Act of 1913 has done exactly the opposite of what it promised when passed. Our financial system lay today in virtual ruin, the country hopelessly consumed by ever expanding debt. Only one path can lead to financial freedom for America and that is the path that leads to the destruction of the US Federal Reserve.

(Information in the above essay was found in JUST the first two chapters of Ron Paul's best selling book End the Fed. I suggest you obtain a copy of this book and read it today.]

Gold Imports by India Jump Before 1 Million Weddings
March 29 (Bloomberg) -- Gold imports by India, the world’s biggest consumer, jumped this month as jewelers stockpiled the metal to meet wedding-season demand, a trade group said.

Purchases until March 25 were between 28 tons and 30 tons, up from 4.8 tons a year earlier, said Suresh Hundia, president of the Bombay Bullion Association.

Demand may stay strong, fueled by as many as one million marriages planned for April and May, he said, supporting a 21 percent gain in global prices in the past year. Gold is bought during marriages as part of bridal trousseau or gifted in the form of jewelry by relatives. The wedding season in India runs from November to December and from late March through early May.

“Even a marginal increase in the global price won’t hurt demand as the rupee is gaining” shielding local buyers from variation in prices of gold denominated in dollars, Hundia said.

India’s rupee rose to its strongest level since September 2008 today on speculation the nation’s pace of economic growth is luring overseas investors to domestic equities. Gold on the Multi Commodity Exchange of India has dropped 1.7 percent this year, compared with the 1.3 percent gain in the global price.
http://www.bloomberg.com/apps/news?pid=20601012&sid=aLyMWMLmqyZE

China Gold Demand May Double Within Decade, WGC Says
March 29 (Bloomberg) -- Gold consumption in China may double within the next 10 years, boosting prices as supplies fail to keep pace with booming demand from investors and the jewelry industry, the World Gold Council said.

“China has an insatiable appetite for gold, which looks likely to continue in an environment where domestic mine supply lags behind demand,” the council said in a report today.

Chinese demand from investors and the jewelry industry, which account for 80 percent of purchases in the country, reached 423 tons in 2009, while domestic mine supply was 314 tons, according to the group’s data.

The output shortfall will create a “snowball effect” as the country’s production fails to keep pace with the annual leap in consumption, the report said. China’s gold output rose 8 percent a year from 2006 to 2009, it said.

Higher mine development costs, potential supply disruptions, tougher safety regulations and depleting ore bodies could put a much higher floor under the gold price, according to the council.

“Near-term inflationary expectations and rising income levels are likely to support the investment case for gold as an asset class, especially given that Chinese consumers are high savers and are looking to gold to protect their wealth,” the council’s report said. “Jewelry and investment growth are expected to be the chief drivers of demand.”

IMF rejects investment house bids for gold
Dear Friend of GATA and Gold:
Today we welcome Frank Holmes, CEO of U.S. Global Investors in San Antonio, Texas, to the ranks of tin-foil hat wearers, rent-seeking parasites, and charlatans, on account of the interview he has just given to Alex Steele of Kitco News.

First, Holmes disclosed that his friend Eric Sprott, CEO and senior portfolio manager for Sprott Asset Management in Toronto, who may own Canada's largest collection of tin-foil hats, recently tried to buy gold from the International Monetary Fund and was refused. Coincidentally, GATA learned this week on the best authority that a financial house far bigger than Sprott also recently tried to purchase gold from the IMF, also was refused, and wasn't very happy about the refusal.
http://gata.org/node/8471

Gold Cartel Acting like a Cornered Rat
By Andy Hoffman
All, Things are coming at me at a whirlwind pace, but I just wanted you to know how maniacal, blatant, and dangerous the Gold Cartel (read: US Gov’t) is getting as it gets backed into its final corner.
http://goldtent.net/wp_gold/2010/03/28/andy-hoffman-from-lemet-tonitesums-it-up/

Supply fears start to hit Treasuries
The bond vigilantes are finally flexing their muscles. A long period of stability for the US government bond market showed signs of cracking this week as a lack of investor appetite for new debt sent the benchmark 10-year yield to its highest level since last June.

For more than a year, analysts have been warning that record sized debt sales by the US Treasury were at odds with a 10-year yield sitting comfortably below 4 per cent. This week, the yield on 10-year notes jumped from 3.65 per cent to a peak of 3.92 per cent on Thursday. On Friday it was 3.87 per cent.

Falling inflation, rising unemployment, the housing market slump, the Federal Reserve’s policies of a near zero overnight borrowing rate and its purchase of up to $1,700bn in bonds have all helped keep Treasury yields near historic lows.

But this week the mood shifted as yields for $118bn of new US debt were much higher than forecast, sparking overall selling of Treasuries. Sentiment also deteriorated in the UK bond market after the government’s budget ahead of a general election expected in May failed to resolve doubts over future spending and debt reduction.

The term “bond vigilantes” was coined in the 1980s when bond investors pushed up long-term yields to force central banks into taking action to curb inflation. This time, bond investors are less worried about inflation: they are fretting about huge fiscal deficits and the looming bond supply needed to finance them.

“Everyone thought we would see rising rates due to higher inflation, but it appears the bond vigilantes are demanding a higher real rate due to concerns about Treasury issuance,” says George Goncalves, head of fixed income strategy at Nomura Securities.

Worries about the debt loads of developed economies have come into focus this year amid the crisis threatening Greece and other members of the eurozone periphery.

The fact that German Bunds have outperformed both Treasuries and gilts in recent months highlights this increasing worry over public debt. Germany’s budget deficit is much lower than the US and UK and inflation there is also expected to remain low.

“The spotlight on Greece only helped to reveal that the US’s kitchen – with Federal and state budget balances – was itself full of cockroaches,” says William O’Donnell, strategist at RBS Securities.

It hasn’t helped that the US announced a big overhaul of its healthcare system this month, adding to worries about the scale of US spending.

Moreover, the Fed completes its bond buying programme next week, leaving the market to absorb the supply of new debt on its own. Next week’s March employment report, which economists say could see 150,000 jobs created, also looms as a test for bond market sentiment.

“The environment for debt auctions has turned negative,” says Rick Klingman, managing director at BNP Paribas. “Long-term rates are rising and it is no coincidence that this has occurred after the passage of healthcare reform and the end of Fed buy-backs.”
http://www.ft.com/cms/s/0/c51fbbce-3908-11df-8970-00144feabdc0.html

CBO report: Debt will rise to 90% of GDP
President Obama's fiscal 2011 budget will generate nearly $10 trillion in cumulative budget deficits over the next 10 years, $1.2 trillion more than the administration projected, and raise the federal debt to 90 percent of the nation's economic output by 2020, the Congressional Budget Office reported Thursday.

In its 2011 budget, which the White House Office of Management and Budget (OMB) released Feb. 1, the administration projected a 10-year deficit total of $8.53 trillion. After looking it over, CBO said in its final analysis, released Thursday, that the president's budget would generate a combined $9.75 trillion in deficits over the next decade.

"An additional $1.2 trillion in debt dumped on [GDP] to our children makes a huge difference," said Brian Riedl, a budget analyst at the conservative Heritage Foundation. "That represents an additional debt of $10,000 per household above and beyond the federal debt they are already carrying."

The federal public debt, which was $6.3 trillion ($56,000 per household) when Mr. Obama entered office amid an economic crisis, totals $8.2 trillion ($72,000 per household) today, and it's headed toward $20.3 trillion (more than $170,000 per household) in 2020, according to CBO's deficit estimates.

That figure would equal 90 percent of the estimated gross domestic product in 2020, up from 40 percent at the end of fiscal 2008. By comparison, America's debt-to-GDP ratio peaked at 109 percent at the end of World War II, while the ratio for economically troubled Greece hit 115 percent last year.
http://www.washingtontimes.com/news/2010/mar/26/cbos-2020-vision-debt-will-rise-to-90-of-gdp/

Treasury says it will begin selling Citi shares
NEW YORK (AP) -- The Treasury Department said Monday it will begin selling the stake it owns in Citigroup Inc., which could result in a profit to the government of about $7.5 billion.

The government received 7.7 billion shares of Citigroup in exchange for $25 billion it gave the bank during the 2008 credit crisis. It said it will sell the shares over the course of this year, depending on market conditions.

Like any investor, the government will likely hold on to its shares if prices fall steeply. However, Citi shares have steadily been rising with the broader market in recent months, which means the Treasury Department stands to pocket a hefty profit.

The government has been trying to unravel the investments in made in banks under the $700 billion Troubled Asset Relief Program, or TARP, that came in at the height of the financial crisis. Citi, one of the hardest hit banks during the credit crisis and recession, received a total of $45 billion in bailout money, one of the largest rescues in the program. Of the $45 billion, $25 billion was converted to the government's ownership stake in the bank.

The Treasury paid $3.25 a share for its stake.

New York-based Citi repaid the other $20 billion it owed the government in December.

The Treasury had been planing to sell 20 percent of its stock at the time when Citi was selling new shares late last year. At a price of $3.15 a share, the government would have lost $158.7 million on the sale, so it opted not to participate in the deal at that time but to unload all of its 7.7 billion shares over the course of this year.
http://finance.yahoo.com/news/Treasury-says-it-will-begin-apf-3313922124.html?x=0&sec=topStories&pos=8&asset=&ccode=

Sell the shares to whom?! In order to sell something, you must have a buyer. 7.7 Billion shares? Selling all that would depress the price, who would by? The Fed? Of course!

Consumer Confidence in US Improves on Job Prospects BusinessWeek
Consumer confidence rebounds in March MarketWatch
Consumer Confidence Up in March Atlantic Online
The consumer confidence index rose to 52.5 in March from 46.4 in February. Confidence had dropped significantly in February from 56.5 in January. Read complete survey.

The gain in confidence was above forecasts. Economists expected the index to rebound to 51.0. See forecasts for major U.S. indicators.

The February confidence index was revised up from the initial estimate of 46.0.

The present situation index rose to 26.0 from 21.7, while the expectations index improved to 70.2 from 62.9.

Lynn Franco, director of the Conference Board's consumer research center was cautious about the pick-up, saying that consumers continue to express concern about current business and labor market conditions.

"Their outlook for the next six months is still rather pessimistic," Franco said.

Only 18.3% of consumers expect better conditions in six months. More than 67% believe conditions will be the same in September.

Consumers' assessment of the labor market was also pessimistic. Those saying jobs are "hard to get" declined to 45.8% in March from 47.3% in February while those saying jobs are "plentiful" increased to 4.4% from 4.0%.

This is further proof that the headlines are meant to deceive, and the financial press is merely a propaganda tool of the government. We are lead to believe that "consumer confidence" is up on "job prospects". What a load of rubbish. Statistical anomalies at best. In reality, consumer confidence hasn't budged and remains mired in despair. Part-time, Tempoary Census Takers jobs do not an economic recovery make. Avoid the Kool-Aid.

The Inconvenient TRUTH

"Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the Bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst yourselves, and when you lost, you charged it to the Bank... Beyond question this great and powerful institution has been actively engaged in attempting to influence the elections of the public officers by means of its money...

You tell me that if I take the deposits from the Bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin. Should I let you go on, you will ruin fifty thousand families, and that would be my sin. You are a den of vipers and thieves. I intend to rout you out, and by the grace of the Eternal God, I will rout you out."
-Andrew Jackson on The Second Bank of the United States

Stop the madness! End The Fed! America will never get past this financial crisis unless and until the US Congress gets off their asses and passes legislation auditing the Fed, and subjecting it and the Treasury to scrupulous investigation.

Good-Bye: Truth Has Fallen and Taken Liberty With It [MUST READ]
Paul Craig Roberts
There was a time when the pen was mightier than the sword. That was a time when people believed in truth and regarded truth as an independent power and not as an auxiliary for government, class, race, ideological, personal, or financial interest.

Today Americans are ruled by propaganda. Americans have little regard for truth, little access to it, and little ability to recognize it.

Truth is an unwelcome entity. It is disturbing. It is off limits. Those who speak it run the risk of being branded “anti-American,” “anti-semite” or “conspiracy theorist.”

Truth is an inconvenience for government and for the interest groups whose campaign contributions control government.

Truth is an inconvenience for prosecutors who want convictions, not the discovery of innocence or guilt.

Truth is inconvenient for ideologues.
http://www.prisonplanet.com/good-bye-truth-has-fallen-and-taken-liberty-with-it.html

Gold is TRUE money, therefore Gold is the Truth. Is it any wonder then that Herculean effort has been expended by government to suppress the price of Gold, and silence the TRUTH?

For the better part of the last century, the United States led the industrialized nations through an unparalleled period of growth. These days, the only things in the developed world growing with any certainty are bureaucracies and the debts and deficits they invariably inflict upon those they were elected to serve.

After fifty years of credit expansion, the era of first world dominance is drawing to its climactic finale. And, as the characters turn and the plot twists, it is those in the developing nations who have some of the best seats in the house.

Let's peruse the program...

According to a report from the Congressional Budget Office released this week, Social Security will pay out more in benefits this year than it receives in payroll taxes. Last year's annual Social Security report projected revenue would more than cover payouts until at least 2016. The shortfall, this year, will be in the realm of $29 billion.

Unsurprisingly, economists expected a quicker, more robust recovery from the 2007-08 crisis, with unemployment to average just 8.2% last year, eventually rising to 8.8% in 2010. As one in ten working age Americans now know, those figures were far too optimistic. Official unemployment is now near 10% and, as we mentioned earlier in the week, the "U6" metric, which includes "discouraged" and "marginally attached" workers, is currently north of 17%. As always, it is difficult to overstate the magnitude of the feds' forecasting ineptitude.

Nevertheless, Stephen C. Goss, chief actuary of the Social Security Administration, expects we'll again see small surpluses in the safety net...but not until at least 2014...and only then on the provision that the economy recovers briskly from here on out.

But even if such a recovery were to magically materialize, Social Security still faces some insurmountable problems. Over the long haul, the scheme is nothing short of a ticking time bomb, with more and more retirees coming to depend on fewer and fewer taxpayers entering the work force.

As The New York Times reports: "[D]emographic forces are expected to overtake the fund, as more and more baby boomers leave the work force, stop paying into the program and start collecting their benefits. At that point, outlays will exceed revenue every year, no matter how well the economy performs."

Taken alone, the impending implosion of the Social Security Ponzi scheme is bad enough. Coupled with a few other prevailing economic headwinds of the day, it makes for a rather large iceberg in a very narrow pass. Perusing the news just this week, we came across the following data points of interest:

Figures from the United States Department of Commerce showed that, during the month of February, new home sales decreased 2.2% to an annual pace of 308,000 - a record low.

Still on the housing front, the Office of the Comptroller of the Currency revealed Friday that more than half (51.5%) of delinquent borrowers who've received loan modifications defaulted again after nine months. Why are they defaulting, you ask?

Figures from that same department made official what any person living above ground for the past year already knew - that personal income in 42 US states fell in 2009. Nevada and Wyoming were the worst hit, down 4.8% and 3.9% respectively. The District of Columbia, of course, snared a nice little gain.

Ever on the case when it comes to spending other people's money (after they've secured their own marbled cut), Washington proposed allowing borrowers who've lost their jobs to make substantially reduced repayments - or in some cases, no payments at all - for up to six months. TARP - read: you - will help cover those costs.

Still trying to plug the gap between the government's champagne taste and its malt liquor budget, the Treasury auctioned $74 billion in 5- and 7-year notes this week. Demand was flaccid, pushing the yield on the 10-year note up to 3.9%, it's highest since June. Think that's bad? Wait until they push another $1.6 trillion through this year...IN ADDITION to the debt that already needs to be rolled over.

Ah yes...we almost forgot: The Federal Government - the same Federal Government that carries around $100 trillion in unfunded liabilities for its existing welfare promises - pushed a $1 trillion healthcare bill through the House, adding the care of 35 million people to its books.

And yet, from this fetid swamp of economic filth sprouts a fêted stock market recovery. How can this be? In short, it can't. The apparent divergence between the realities of Main Street and Wall Street is only visible when viewed under the microscope of day-to-day trading activity. The telescopic lens of (even relatively recent) history gives a better perspective.

Certainly, from a stock market perspective, the last decade has been a veritable cipher...a zero.

The Dow Jones Industrial Average, for example, began the decade a few points shy of 11,500, almost 700 points above where it sits today...even after the past year's momentous rally. After factoring in inflation, fees and commissions, most investors in US stocks would be happy to have achieved a zero return on their money over the past ten years.

Meanwhile, on the other side of the stage, many of the world's emerging markets have provided investors with some very handsome, money multiplying years.

India's Sensex 30 Index, for instance, more than tripled over the past decade. From around 5,000 back on January 1, 2000, the measure of India's 30 bluest chip companies now hovers around 17,000. Brazil's Bovespa has similarly outpaced the more mature US markets. Kicking off the new millennium a shade above 16,000 points, South America's largest index was lately seen bumping up against the 70,000-point mark. South Korea's Kospi has more than doubled during the same time. Argentina's Merval quintupled. The list goes on...

Although the intraday volatility is typically higher in emerging markets, it is clear that these developing countries have more than just a gentle breeze at their backs. Gone are the days, therefore, when an investor could afford to simply dismiss out of hand the wealth generating potential that lies on foreign shores.

Slowly, the tides of economic fortune are turning. During the fifty- year post-war credit flood, developing nations got busy building ships. The developed world simply looked on, laughing as they filled their own vessels with junk they couldn't afford. A lot of good it will be at the bottom of the ocean.
-Joel Bowman for The Daily Reckoning

14 Facts About The Federal Deficit That Will Blow Your Mind[SCARY]
by Michael Snyder
The U.S. government is currently creating one of the most colossal monuments in the history of the world. It is the U.S. national debt, and it threatens to literally destroy the American way of life. For decades now, this generation has been recklessly spending the money of future generations and has been convinced that they have been getting away with it.

Americans have been enjoying an obscenely high standard of living, but the party is almost over and the day of reckoning is fast approaching. It has been a great party, but it was fueled by the biggest mountain of debt in the history of the world. As many of us know, it can be extremely fun running up a huge credit card bill, but it can be even more painful to pay it off. Now our national "credit card bills" are starting to arrive and nobody really seems to know what to do. The U.S. national debt will forever be a lasting reminder of the greed and recklessness of this generation. The truth is that the United States is NOT the "richest and most powerful nation" in the world. Rather, we are a spoiled, bloated, greedy nation that has run up a debt so big that words simply do not do it justice.

In fact, the U.S. national debt is so bizarre that it is hard to know whether to laugh about it or cry about it. For today at least, we will have some fun with it.
http://www.businessinsider.com/facts-about-the-deficit-2010-3

THE Most Important Chart of the CENTURY[MUST SEE]
By Nathan Martin
This is a very simple chart. It takes the change in GDP and divides it by the change in Debt. What it shows is how much productivity is gained by infusing $1 of debt into our debt backed money system.

Back in the early 1960s a dollar of new debt added almost a dollar to the nation’s output of goods and services. As more debt enters the system the productivity gained by new debt diminishes. This produced a path that was following a diminishing line targeting ZERO in the year 2015. This meant that we could expect that each new dollar of debt added in the year 2015 would add NOTHING to our productivity.

Then a funny thing happened along the way. Macroeconomic DEBT SATURATION occurred causing a phase transition with our debt relationship. This is because total income can no longer support total debt. In the third quarter of 2009 each dollar of debt added produced NEGATIVE 15 cents of productivity, and at the end of 2009, each dollar of new debt now SUBTRACTS 45 cents from GDP!

This is mathematical PROOF that debt saturation has occurred. Continuing to add debt into a saturated system, where all money is debt, leads only to future defaults and to higher unemployment.

This is the dilemma created by our top down debt backed money structure. Because all money is backed by a liability, and carries interest, it guarantees mathematically that there will be losers and that the system will eventually reach the natural limits, the ability of incomes to service debt.
http://fedupusa.org/2010/03/20/the-most-important-chart-of-the-century/

The Asians/Indians Are Aggressively Buying Gold While America Sells on the Cheap
by Dave Kranzler, The Golden Truth
"JB" is an articulate, witty and perspicacious metals market professional who shares news and insight on the eastern hemisphere physical gold/silver markets with subscribers to http://www.lemetropolecafe.com/. Below I've pasted his commentary on the eastern markets - he gets his information directly from traders and news reports:

Here's Thursday's commentary based on the overnight markets in the east:

Intriguingly, so also may be China [buying aggressively]. Mitsui-HK today explicitly says: "While euro tried to pull the yellow metal lower, Chinese buying wanted to push it higher”...More concretely, the Shanghai market closed at a $6.08 premium to world gold of $1,091.98, the second day of unusually high premiums. Indian ex-duty premiums: AM $8.18, PM $7.85, with world gold at $1094.91 and $1098.04. Lavish for legal imports.

[please note, the presence of premiums this high in China and India is consistent with the fact that buyers in those countries are scrambling to buy as much gold as they can. While premiums are required for importation, premiums this high are not common. Same with Viet Nam]

Here's the overnight action reported this morning:

Early on Friday morning local Vietnam gold stood at a $29.10 premium to world gold of $1,091.80 (Thursday $27.89/$1,087.20). Private communications today suggest that Chinese gold imports have indeed grown appreciably lately. Also since last Friday Istanbul gold premiums (which are awkward to measure) have been clearly supportive of Turkish gold imports: the kilo bar premium today was an import-friendly $9.42..

Jewellers across Asia chased gold bars after bullion prices dropped more than $10 this week, while main consumer India was stocking up as the wedding season begins again in April, dealers said on Friday…"We are actually running out of stocks. There's not enough time to replenish gold bars. Thailand is the hottest buyer. Their demand is really good because they are quite price-sensitive," a physical dealer in Singapore said…Premiums were steady at 80 cents to $1 an ounce to the spot London prices in Singapore, their highest since early February, but they could rise next week because of the strong demand and tight supplies.”

The quote underlined above comes from this reuters report: Asia chasing gold while it's under $1100

All of the above market color is backed up by this report out of Mumbai, which was posted at http://www.commodityonline.com/two days ago:

Gold refineries are facing a strange problem in India now. There is no yellow metal for them to process now. When the gold boom was at its peak in 2008 and 2009, the quantity of scrap gold used to come to the market was very high and many refiners had increased the capacity to process the scrap gold. But, time has changed and the scrap gold flow to these refineries has halted. (Here's the link: LINK)

The moral of this is that just because the U.S.-centric media, financial advisors, brokers and politicians believe that gold is a useless, barbaric relic not worthy of investment, the rest of world is accumulating as much as they can before the REAL fireworks begin in the price. Don't forget, gold has appreciated, in the face of extreme Fed/BOE/ECB intervention, every year for NINE YEARS against ALL fiat currencies - and an average of about 16%/yr. at that.
http://truthingold.blogspot.com/2010/03/asiansindians-are-aggressively-buying.html

Gold Cheerleader
by Adam, Gold Versus Paper
Things are as bullish as ever in the Gold market. I continue to believe that we are on the threshold of a major move higher in Gold and Gold stocks and that the fall was just a warm up. The correction has certainly dragged on longer than I thought it would, but Gold is simply building a bigger and stronger base for a more powerful upward move in my opinion.

Unlike most, I see Gold and Gold stocks launching higher and I think the general stock market will be falling during this time. It happened in 2007-March 2008, the 2001-early 2003 time frame, 1973-1974 and 1930-1932. In other words, Gold and Gold stocks' biggest cyclical bull market moves in the last century were during nasty bear markets. All those who say Gold stocks are going to fall with the general markets are thinking only of the Great Fall Panic of 2008 and forgetting the illustrious history of Gold during secular stock bear markets like the one we are in now.

The foreign physical markets are getting tight in Gold again, always a good sign. The U.S. Dollar is strenuously overbought and yet Gold has held its ground in U.S. Dollar terms. The long end of the U.S. bond market looks like it wants to break down over the short to intermediate term. Everything is lined up for a big bull run in Gold, the ultimate money. Someone accused me of being a Gold cheerleader the other day - Lord knows we could use a few more in this mad paperbug world. From my point of view, why would one not be a Gold cheerleader during a secular Gold bull market after a healthy correction?
http://goldversuspaper.blogspot.com/2010/03/gold-cheerleader.html

A London trader walks the CFTC through a silver manipulation in advance
Additional Statement by Bill Murphy, Chairman
Gold Anti-Trust Action Committee

to the U.S. Commodity Futures Trading Commission
Washington, D.C., March 25, 2010

On March 23, 2010, GATA Director Adrian Douglas was contacted by a whistleblower by the name of Andrew Maguire. Maguire is a metals trader in London. He has been told first-hand by traders working for JPMorganChase that JPMorganChase manipulates the precious metals markets, and they have bragged to how they make money doing so.

In November 2009 Maguire contacted the CFTC enforcement division to report this criminal activity. He described in detail the way JPMorgan Chase signals to the market its intention to take down the precious metals. Traders recognize these signals and make money shorting the metals alongside JPM. Maguire explained how there are routine market manipulations at the time of option expiry, non-farm payroll data releases, and COMEX contract rollover, as well as ad-hoc events.

On February 3 Maguire gave two days' warning by e-mail to Eliud Ramirez, a senior investigator for the CFTC's Enforcement Division, that the precious metals would be attacked upon the release of the non-farm payroll data on February 5. On February 5, as market events played out exactly as predicted, further e-mails were sent to Ramirez while the manipulation was in progress.

It would not be possible to predict such a market move unless the market was manipulated.
http://www.gata.org/node/8466

AND THEN THIS HAPPENED the very next day:

GATA Whistleblower Andrew Maguire Injured in Hit and Run Car Accident
from Adrian Douglas, Le Metropole Cafe
On March 25th at the CFTC Public Hearing on Precious Metals GATA made a dramatic revelation of a whistleblower source, Andrew Maguire, who has first hand evidence of
gold and silver market manipulation by JPMorganChase and who has even tipped off the CFTC in advance of manipulative attacks on gold and silver. Just as in the Madoff case the regulator has done nothing to stop such manipulation.

On March 26th while out shopping with his wife, Mr. Maguire's car was hit by a car careening out of a side road. The driver of the vehicle then tried to escape. When a pedestrian eye-witness attempted to block the driver's escape he accelerated at him and would have hit
him had the pedestrian not jumped out of the way. The car then hit two other cars in escaping. The driver was apprehended by the police after police helicopters were called in and following a high speed chase.

Andrew and his wife were hospitalized with minor injuries. They were discharged from hospital today and should make a full recovery.

Former Goldman Commodities Research Analyst Confirms LMBA OTC Gold Market Is "Paper Gold" Ponzi[a must, MUST READ]
from Zero Hedge
When we put up a link to last week's CFTC hearing webcast little did we know that it would end up being the veritable (physical) gold mine (no pun intended) of information about what really transpires in the commodities market. First, we obtained direct evidence from Andrew Maguire (who may or may not have been the target of an attempt at "bodily harm" as reported yesterday) of extensive manipulation in the silver market. Today, Adrian Douglas, director of GATA, adds to the mountain of evidence that the commodities market, and the CFTC, stand behind what is potentially the biggest market manipulation scheme in the history of capital markets (we are assuming for the time being that all allegations of the Fed manipulating the broader equity and credit markets are completely baseless). Using the testimony of a clueless Jeffrey Christian, formerly a staffer at the Commodities Research Group in the Goldman Sachs Investment Research Department and now head and founder of the CPM Group, Douglas confirms that the "LBMA trades over 100 times the amount of gold it actually has to back the trades."

Christian, who describes himself as "one of the world’s foremost authorities on the markets for precious metals" yet, in the words of Gary Gensler, said "that the bullion banks had large shorts to hedge themselves selling elsewhere- how do you short something to cover a sale, I didn’t quite follow that?" and proves that current and former Goldman bankers are some of the most arrogant people alive, assuming that everyone else is an idiot and will buy whatever explanation is presented just because the CV says Goldman Sachs. Yet Christian confirms that the gold market is basically a ponzi: "in the “physical market” as the market uses that term, there is much more metal than that…there is a hundred times what there is." And there you have it: as Douglas eloquently summarizes: "the giant Ponzi trading of gold ledger entries can be sustained only if there is never a liquidity crisis in the REAL physical market. If someone asks for gold and there isn’t any the default would trigger the biggest “bank run” and default in history. This is, of course, why the Central Banks lease their gold or sell it outright to the bullion banks when they are squeezed by high demand for REAL physical gold that can not be met from their own stocks" and concludes "Almost every day we hear of a new financial fraud that has been exposed. The gold and silver market fraud is likely to be bigger than all of them. Investors in their droves, who have purchased gold in good faith in “unallocated accounts”, are going to demand delivery of their metal. They will then discover that there is only one ounce for every one hundred ounces claimed. They will find out they are “unsecured creditors”.

For those of you who missed the CFTC hearing, here are two of the must-watch clips. In the first one, Adrian Douglas introduces the underlying concerns about the Ponzi nature of the LBMA hedging situation, in which a wholesale rush to "physical delivery" would result in a one hundred fold dilution of gold holdings, and a 99% result of unsecured creditor claims (good luck collecting on that particular bankruptcy). We also meet Jeffrey Christian, formerly of Goldman and currently of CPM, in which not only does the "expert" state that a bullion bank short is hedged by further shorting, but confirms Douglas' and GATA's previous claims that the "physical" market, as defined, is a joke, as the OTC market treats gold purely as a financial asset, essentially conforming to the precepts of fractional reserve banking. As Douglas notes "He confirms that the LBMA trades hundreds of times the real underlying physical. This is even a higher estimate than I have previously made! It is, as I asserted before the Commission, a giant Ponzi Scheme."
http://news.goldseek.com/GoldSeek/1269815740.php

US Debt Worth Less Than Toilet Paper

Eurozone agrees on bailout plan for Greece
BRUSSELS (AP) -- Heavily indebted Greece won a major pledge of financial support from the other countries that use the euro and the International Monetary Fund in a deal that aims to halt the government debt crisis undermining Europe's currency union.

The joint eurozone and IMF bailout program comes with strict conditions, making no money available to Greece right now. It could be tapped only if Greece -- or other financially troubled eurozone members -- cannot raise funds from financial markets and would require the unanimous agreement of the 16 eurozone countries to release the loan funds.

The agreement at a Thursday meeting of European Union leaders was a clear victory for German Chancellor Angela Merkel, who demanded that a rescue for Greece only come when the country runs out of other options. She also insisted that any backstop must include the IMF.

It was also a comedown for the French and the European Central Bank, which had opposed turning to the IMF out of fear it would damage the euro's prestige and show that Europe was unable to solve its own financial woes. The eurozone has never turned to the IMF.

ECB President Jean-Claude Trichet said he had wanted a program that emphasized governments' "maximum responsibility" to limit debt, praising the program as a "workable solution" that would "normally not need to be activated."

He said Greece should now "progressively regain the confidence of the market" and be able to borrow at lower interest rates. Trichet said that he assumes markets will end recent volatility. "That's my working assumption," he said.
http://finance.yahoo.com/news/Eurozone-agrees-on-bailout-apf-1325706734.html?x=0

Greece To Benefit As ECB Extends Easier Collateral Rules Into 2011
(RTTNews) - European Central Bank President Jean-Claude Trichet said Thursday emergency collateral rules will be extended beyond this year, helping to relieve the mounting pressure on debt-ridden Greece.

The ECB will keep the minimum credit threshold in its liquidity-providing operations at investment grade level (BBB-) beyond the end of 2010.

"Until today, the minimum was set to revert back to A- at the start of next year as conditions were judged to be improving. This would have been particularly damaging to Greek banks due to their heavy reliance on ECB funding and because Greek Government debt (currently rated BBB+) would no longer be eligible as collateral under the new requirements," said Jennifer McKeown, Senior European Economist at Capital Economics.

"Today's announcement is an encouraging sign that the ECB will proceed gradually in removing its unconventional support for the banking sector," McKeown added.

The move represents a divergence from the ECB's current exit strategy, as the temporary widening of eligibility criteria was supposed to be phased out this year.
http://www.rttnews.com/Content/ForexTopStory.aspx?Node=B3&Id=1251071

So, German Chancellor Angela Merkel blinks and ECB President Jean-Claude Trichet extends ECB quantitative easing all in an effort to put out the flames of fear engulfing Greek Debt. Toss in a week of dreadful US Treasury Bond auctions and the Dollar appears poised for a good ass whupping. [see chart above]

Treasury 10-Year Yield Rises Most in 2010 After Note Auctions
By Cordell Eddings

March 27 (Bloomberg) -- Treasuries fell, pushing 10-year note yields up the most since December, as lower-than-average demand at $118 billion in note auctions raised concern that investor interest is waning as the deficit climbs to a record.

U.S. interest-rate swap spreads plunged to the lowest levels in more than two decades as investor focus shifted from the plight of financial institutions to the ability of nations to finance rising fiscal deficits. Bill Gross, manager of the world’s biggest bond fund, said the almost three-decade bond rally may be ending. Two-year notes dropped for a fourth week in the longest stretch of decreases since August before next week’s March payrolls report.

“Supply and the realization that there is more to come is starting to weigh on Treasuries,” said Larry Milstein, managing director of government and agency debt trading in New York at R.W. Pressprich & Co., a fixed-income broker and dealer for institutional investors. “Swap spreads turning negative forced investors to cover shorts and dump Treasuries going into the auction, exacerbating the weakness.” A short is a bet that a security will decrease.

The 10-year note’s yield rose 15 basis points, or 0.15 percentage point, to 3.85 percent, according to BGCantor Market Data. The price of the 3.625 percent note due in February 2020 decreased 1 7/32, or $12.19 per $1,000 face amount, to 98 5/32.

The increase in the yield was the biggest since an advance of 27 basis points for the week that ended Dec. 25. The yield touched 3.92 percent on March 25, the highest level since June 11. The two-year note’s yield rose 5 basis points to 1.04 percent and reached 1.12 percent this week, the highest level since Jan. 4.
http://www.businessweek.com/news/2010-03-27/treasury-10-year-yield-rises-most-in-2010-after-note-auctions.html

The Day Of Reckoning is fast approaching. The anti-Euro bid in the Dollar has peaked. Now fundamentals will begin to sap the life out this corpse as the reality that the USA has a debt problem exponentially worse than Greece. Within weeks, the "great Bernanke exit plan" will be exposed for the dead end that it is and always has been. There is no exit plan, only continued money printing in a pointless effort to prop up dead banks and try and deceive the public further that a "recovery is just up ahead". Confidence in the currency cracks leading up to the November elections...

Bernanke: Record-low rates needed to aid economy
WASHINGTON (AP) -- Record-low interest rates are still needed to rev up the economic recovery, Federal Reserve Chairman Ben Bernanke told Congress on Thursday.

Bernanke, in testimony to the House Financial Services Committee, essentially repeated the rationale behind the Fed's decision last week to hold rates near zero. He cited still-fragile economic conditions, and noted that inflation is low, which gives the Fed leeway to keep rates at rock-bottom levels.

The Fed chief didn't offer new clues about when the central bank might reverse course and start tightening credit. He said that would need to happen when the "expansion matures." Some investors and analysts think higher rates could come in the fall.

Deciding when to tighten credit is the biggest challenge facing Bernanke, whose second term started in February. Moving too soon could short-circuit the recovery. Waiting too long could unleash inflation and sow the seeds for new speculative bubbles in stocks or commodities or other assets.

One of the reasons the Fed is holding rates so low is because of stubbornly high unemployment, Bernanke said. It's now at 9.7 percent, a potential restraining force on the economy's rebound.

Bernanke said the Fed "will not be able to wait until things are completely back to normal" before it starts to boost rates. But the Fed wants to make sure that the economy is on a sustainable growth path and that jobs are being created, he said.

The Fed also wants to see more lending by banks before it starts tightening credit, Bernanke said.

"The key point ... is that the Fed is no closer to implementing its exit strategy," said Paul Dales, an economist at Capital Economics. Bernanke's remarks suggest "he is in no hurry" to raise rates, Dales said.
http://finance.yahoo.com/news/Bernanke-Recordlow-rates-apf-1919371045.html?x=0&sec=topStories&pos=5&asset=&ccode


CBS Poll: 62% of the Country Want the Republicans to Fight the Healthcare Bill
Too bad democracy is dead:

"A CBS News poll released Wednesday finds that nearly two in three Americans want Republicans in Congress to continue to challenge parts of the health care reform bill" Here's the news link: Americans to Congress: Get rid of this bill

Please note that 41% of those who want the fight to continue are Democrats. Anyone who thinks that the CBS poll is biased toward the right is nothing more than a blind Obama follower. Please note that CBS is controlled by Sumner Redstone, a big Democratic supporter.
http://truthingold.blogspot.com/2010/03/cbs-poll-62-of-country-want-republicans.html

"This is what change looks like," Obama said later in televised remarks that stirred memories of his 2008 campaign promise of "change we can believe in."

"We proved that this government -- a government of the people and by the people -- still works for the people."

Hmmmm...I guess not Mr President...the "people have spoken"

Bond Market Verdict: Treasuries Riskier Than Toilet Paper!
by Mike Larson
I have a lot of respect for Warren Buffett. As Nilus has noted before, he’s one of the world’s best long-term investors. He has a knack for buying low and selling high. And his Berkshire Hathaway holding company has been a great multi-year performer for investors.

It has amassed stakes in everything from the Geico insurance firm to the manufactured home company Clayton Homes to the Dairy Queen restaurant chain.

But Buffett can’t levy taxes on Americans. He can’t wage war in far corners of the world. He isn’t responsible for your Social Security checks. He doesn’t operate the National Park System or make sure the drugs we take are safe. That’s the job of the federal government.

And yet, a remarkable thing occurred recently in the bond market …

Berkshire’s cost of borrowing fell BELOW Uncle Sam’s! Ditto for Procter & Gamble, the company behind brands like Tide detergent and Charmin toilet paper … Lowe’s, the home improvement retailer … and Johnson & Johnson, the firm that makes Band-Aids, medical devices, and baby shampoo, according to Bloomberg.

Bottom line: Bond investors are now viewing Treasuries as riskier than a vast array of corporate debt. They’d rather own bonds backed by sales of toilet paper than the full faith and credit of the United States. If that’s not a sign of how low we’ve sunk, I don’t know what is!
http://www.moneyandmarkets.com/bond-market-verdict-treasuries-riskier-than-toilet-paper-2-38456

U.S. Is Riskier Than Euro Zone; So Says CDS Market
By MICHAEL CASEY
NEW YORK -- Something troubling has occurred in the market for default protection on the debt of the world's biggest borrower.

As the folks at Standard Poor's Valuation and Risk Strategies division noted in a research note Monday, the difference between the spread on U.S. sovereign credit default swaps and an equivalent benchmark for AAA-rated euro-zone sovereigns flipped into positive territory March 12. As U.S. CDS spreads expanded to their widest levels in two years, that cross-region gap blew out to 5.7 basis points last Friday before narrowing to 4.7 Tuesday.

Wider CDS spreads indicate that sellers of insurance against a particular issuer's default are charging more for it. In effect, the positive U.S.-versus-euro zone spread means investors think the risk of a U.S. default--however remote--is greater than that on euro-denominated sovereign debt.

So much for the view that low inflation and loose monetary policy make for a rosier debt outlook for Treasurys than for the debt of crisis-hit euro-zone sovereigns.

"We've seen CDS on U.S. Treasurys break with euro CDS before, but never to the degree we have here," said Michael Thompson, head of research for S&P's

Valuation and Risk Strategies group. "If we sit on this precipice for a time, I think a lot of market participants would see this as a bit of a shot across the bow, a bit of a wakeup" for anyone who's complacent about U.S. debt.

Wouldn't it also challenge U.S. Treasurys' status as the so-called "risk free" benchmark? S&P didn't go there. But the report did say the trend "reflects increasing market anxiety surrounding the U.S.'s credit quality." In other words, a fiscal deficit worth 10% of gross domestic product--in the absence of a clear plan to reduce it -- matters.
http://online.wsj.com/article_email/SB10001424052748703312504575142112712294450-lMyQjAxMTAwMDIwNDEyNDQyWj.html

Unemployment benefits set to expire April 5
By Ben Pershing
Friday, March 26, 2010
Unemployment benefits are set to expire for at least a week on April 5, as Congress plans to break for two weeks without agreeing on an extension of the program.

Last week, the House approved a $9 billion measure containing one-month extensions of unemployment insurance, COBRA health benefits and federal flood insurance. Senate Democrats hoped to have their chamber approve the same bill Thursday. But Republicans refused, complaining that the bill is not offset with spending cuts elsewhere.

They said the same thing in early March, when Sen. Jim Bunning (R-Ky.) brought the chamber to a halt for five days over another extension that wasn't offset.

Senate Democrats and Republicans spent hours negotiating among themselves and with each other to find a compromise. Senate Majority Leader Harry M. Reid (D-Nev.) and Senate Minority Leader Mitch McConnell (R-Ky.) discussed the possibility of a one- or two-week extension of benefits that would be fully paid for, but Speaker Nancy Pelosi (D-Calif.) was opposed to the idea, according to two Senate aides.

As a result, the House and Senate will leave town without further action. COBRA and flood insurance will expire March 30, and unemployment benefits will expire April 5. The Senate will return to session April 12.
http://www.washingtonpost.com/wp-dyn/content/article/2010/03/25/AR2010032504424.html

Funny how they found all kinds of time to shove a health care bill up the country's collective ass that half the country can't afford. Repeat after me: "VOTE THE BUMS OUT IN NOVEMBER"

OK, the REAL news for all of us this week was the CFTC hearings in Washington Thursday regarding position limits in the futures markets. I congratulate anyone that sat through the entire five hour hearing. It was indeed fascinating AND revealing. The bad guys have been fingered and they know it. The question now is will the CFTC do anything about it.

Harvey Organ, whose Harvey Organ's - The Daily Gold I reference often, has a great collection of prose in his Saturday March 27th offering that I believe everyone should take the time to peruse in it's entirety. Harvey was a panel member at the hearings and his insight into the proceedings is priceless.

Make a particular note of the GATA revelation of a whistle blower purporting to have revealed the truth about Precious Metal manipulations by JP Morgan to the CFTC, being refused a seat at the table for these hearings, and his subsequent decision to go public with his knowledge after receiving the cold shoulder from the regulators. Can you say deja vu all over again Bernie Madoff? This is fascinating stuff and you can [and I urge you to] read it all here:
http://harveyorgan.blogspot.com/2010/03/saturday-march-2710-commentaryextremely.html

CFTC Webcast link:

The U.S. Commodity Futures Trading Commission today posted an Internet link planned for video broadcast of the commission's hearing Thursday on futures and options trading in the precious metals markets. The hearing is scheduled to start at 9 a.m. ET. Here's the link:

http://www.capitolconnection.net/capcon/cftc/032510/CFTCwebcast.htm

The Vultures Are Circling

For how much longer can the US Dollar continue to "catch a bid" on JUST the weakness in the Euro? There is no fundamental reason for the Dollar's continued illusion of strength. The US Dollar is no better, or worse, a fiat currency than the Euro. They are both completely worthless and irredeemable for nothing but the faith, hope, and charity of their prospective issuing governments. Their race to the bottom of the currency barrel may currently be lead by the Euro, but ultimately BOTH will lay at the bottom of the cliff shattered into oblivion.

How Perceptions Have Changed
by Claus Vogt, Money and Markets
Not long ago the euro was rising, and everybody seemed to hate the U.S dollar. During that market phase I constantly asked a rhetorical question: Why do you think the euro is any better than the dollar?

Now the European sovereign debt problems are making headlines, and everybody seems to hate the euro. Again I ask a rhetorical question: Why do you think the dollar is any better than the euro?

The Dollar Is Not Better Than the Euro,
And the Euro Is Not Better Than the Dollar

Both currencies, the euro and the dollar, are backed by nothing but politicians’ promises to finally return to some kind of serious fiscal and monetary policy. Both currencies are being inflated in lockstep. And both, the U.S. and Euroland, have mountains of explicit and even larger mountains of implicit sovereign debt.

The former is debt officially issued in the form of treasury notes and bonds. The latter is debt in the form of promises of the social welfare state.

...the sovereign debt problem is not contained to some minor countries at Europe’s periphery. Quite to the contrary, all major western countries and Japan have huge debt problems! This trap began many years ago. And now we are getting closer to pay day.

When thinking through this frightening debt situation, you can even find a structural argument in favor of the euro … the Europeans have at least formulated some rules concerning budget deficits and sovereign debts. That tells me they are aware that some monetary and fiscal prudence is necessary to guarantee sound money.

Unfortunately, they don’t obey these rules.

In the U.S., politicians and economists don’t even contemplate having any rules. They just decide as they go … not very assuring, is it?
http://www.moneyandmarkets.com/how-perceptions-have-changed-2-38443

Trader Dan Comments On Total Government Debt
By: Dan Norcini
I am sending this short series of charts to detail in picture form a picture of the US Federal Government total indebtedness in comparison to nominal GDP (Gross Domestic Product). The last chart is a ratio of the two overlaying total GDP against total government debt.

I think it is interesting to note the decline in the ratio which is occurring even as the government goes madly and hopelessly into further debt. Keynesians should take note.
http://jsmineset.com/2010/03/22/trader-dan-comments-on-total-government-debt/

Fitch downgrades Portugal on budget concerns
LISBON, March 24 (Reuters) - Fitch Ratings cut Portugal's sovereign credit rating by one notch to AA- on Wednesday, citing budgetary underperformance in 2009 and warning that further underperformance this year and next could cause another downgrade.

The change underlined concerns that the debt troubles that have afflicted Greece will move to other of the euro zone's weaker economies, and it drove European stocks and an already battered single currency lower EUR=.

But the premium Portugal has to pay on its bonds compared to German bunds actually fell after the announcement and analysts said the move had been well-flagged by Fitch and still left the rating comparable with other agencies.

Fitch also said the government's long-term budget austerity plan was broadly credible and it did not expect political instability to upset the passage of the necessary legislation.

"The downgrade has more of an impact on the wider sovereign debt crisis, rather than Portugal at the moment," said Peter Chatwell, bond analyst at Credit Agricole in London.

"Fitch were in the middle of Moody's and S&P in terms of their rating, so this downgrade has minimal material impact, and doesn't necessarily mean others will follow," he added.
http://www.reuters.com/article/idUSLDE62N19320100324?type=marketsNews

A CLASSIC case of "market psychology" dictating direction. A debt downgrade of one of the PIIGS? Pile on your shorts of the Euro whether warranted or not.

How Much Capital Does it Take to Lift a Dollar?
03/22/10 Baltimore, Maryland – On March 18, 2010 the Gold Anti-Trust Action Committee (GATA) wrote CFTC Chairman Gary Gensler a letter calling to his attention evidence that suggests an anti-gold cartel consisting of the U.S. Treasury, the Fed, and the bullion banks has been suppressing the gold price, and that this action is coordinated to further the “strong dollar” policy established by former U.S. Treasury Secretary Lawrence Summers.

If indeed this is the case, since all interventions end badly, a valuable question to answer is whether there are signs that the intervention has gotten long in the tooth. The most obvious would be that the capital required to rescue the ailing buck would be significantly higher than it was prior to the meltdown of the credit markets in 2008. Indeed, Peter Schiff speculated the dollar rally would end badly just three days before the GATA letter was published.


It may be years before a Fed audit or Freedom of Information Act filings reveal the extent of capital market manipulation that is occurring. Even if it were known, economists would be apt to cite “seen” over “unseen” effects. We can simply point to anecdotal evidence. It would be convenient to know if the intervention is nearing an end, sinking of its own weight. Here is one clue that might support the case that manipulation of our currency has become a Sisyphean task: Trading volume in the U.S. dollar ETFs, which necessarily captures a small percentage of foreign exchange trading volume, is exhibiting a huge imbalance.

When there was a strong consensus in 2009 that the buck was burning, trading volume in the UDN derivative, which is short the U.S. dollar, picked up and averaged just fewer than 2 million shares weekly. In some weeks, volume got close to 6 million.

In contrast, once the dollar rally began, volume in the UUP, which is long the U.S. dollar, suddenly jumped from levels similar to the UDN to 20 million or more shares weekly. Moreover, its underlying assets have swelled to ten times that of the UDN, weighing in at over $2 billion compared to UDN’s slight excess over $200 million. So nearly ten times as much money has been spent to send the dollar up about 10% as was placed to make it fall by some 25%.

All this has happened even though arguably there was somewhat more unanimity of opinion that the dollar would weaken in 2009 than there is it should strengthen now. Naysayers will claim that what is happening in this small pocket of foreign exchange trading is not terribly relevant. Or they might say it only reflects retail investor sentiment. But more than a few hedge funds participate in the ETF market, so there is an institutional presence there, and arbitrage is possible.

If the theoretical case being built by GATA is correct, then we may be witnessing reduced effectiveness of Fed and Treasury intervention, with the result being Mudville’s aging relief pitchers are certain to get pounded again. We may not be in the final innings yet, because we have not yet seen a series of rate hikes – which are sure to be a drawn out affair of meaningless 25 basis point increments – and simply because the counter rally in the dollar has only gone on for a few months. When you are dealing with irrationality, whether it is trading exuberance or the modern day application of busted economic theories, calling an inflection point is more an art than a science.
http://dailyreckoning.com/how-much-capital-does-it-take-to-lift-a-dollar/

Time Is Running Out for the US Dollar
Jeffrey Nichols, Senior Economic Advisor to Rosland Capital
What is important to remember is that gold will often react to short-term items like actions in Europe and India. To the extent that these two developments -- euro skepticism and monetary tightening by India's central bank -- were indeed responsible for this week's gold-price decline, we think the market has again got it wrong in the short term. But no matter how wrong the market is in the short run, in the long run, it is always right.

First, the US dollar is appreciating not because the American economy is the picture of health or because US monetary and fiscal policies are instilling confidence in the long-term value of our currency. Indeed, the race between the greenback and the euro is a race to the bottom, not to the top. And, regardless of which one win's the race to the bottom, gold will be moving up in both currencies.

Rather, it is the euro that is depreciating against the dollar because the European economic situation is even worse than ours and because the euro's very survival is now being questioned. In India, the Reserve Bank's objective is to keep the economy growing at a healthy pace over the long term. A sustainable expansion in economic activity with rising household incomes and increasing prosperity will result in more demand for gold jewelry and investment across India, and over a longer period.
http://www.prnewswire.com/news-releases/time-is-running-out-for-the-us-dollar-88999582.html

New-Home Sales Unexpectedly Fall in Feb; Durable Good Orders Up- Reuters
Sales of newly built U.S. homes fell for a fourth straight month to a record low in February, but another rise in new orders for durable goods offered hope that the economic recovery remained on course.

More "hope"... "Hope" will never force a recovery in the economy no matter what "signals" are devined from all the rigged economic data.

Home loan demand down 2nd week as rates rise
NEW YORK (Reuters) - U.S. mortgage applications fell for a second straight week, with demand for home loan refinancing sinking to its lowest level in a month as interest rates jumped, data from an industry group showed on Wednesday.

Demand for purchase loans, a tentative early indicator of home sales, edged higher, but activity was down from a year earlier, further evidence that the housing market has hit a lull after showing signs of a recovery late last year.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended March 19, decreased 4.2 percent.

The four-week moving average of mortgage applications, which smooths the volatile weekly figures, was up 1.9 percent.

Harsh winter weather has taken a hefty toll on home sales, while stricter lending standards, higher fees, and declining incomes have made it tougher on borrowers.

Michael Moskowitz, president of Equity Now, a direct lender based in New York that does business in nine states, said unemployment and underemployment are also weighing on sales.

"There is a lot of nervousness right now and people are uncertain about their financial future," he said. "If you do not have a job, looking to buy a home is not high on your priority list."

Another huge obstacle is that many mortgages are "underwater," he said. Negative equity, when the amount owed on a mortgage exceeds the current value of the home, has been one of the biggest banes of homeowners, making many unqualified for home loan refinancing and preventing some from selling.
http://finance.yahoo.com/news/Home-loan-demand-down-2nd-rb-2625903904.html?x=0&sec=topStories&pos=3&asset=&ccode

And Bernanke wants to end the purchases of Fannie and Freddie debt? Good luck with that plan Bumbling Ben. There is no housing recovery, there is no economic recovery, all there is is government stimulus. The private sector is in the fetal position, the vultures are circling.

Ignoring systemic risk and financial collapse will not make them go away.

Once again this morning Gold appears to be taken in and capped on the fanning of the flames of fear of Greek Debt Collapse. Nary a peep about California debt default, or New York state, or Illinois, or Kansas, or...well you get the picture. Better to focus on the pimple on the elephants ass, than the tumor between his ears.

Of course we know better. Gold is being bottled up below 1100 because of Thursday's options expiration in the April contract. Seen it before, probably see it again. Coincidentally, options expire on the exact same day as the CFTC hearings on position limits in Precious Metals. How convenient.

The Dollar on the other hand appears to be capped at 81.50. God bless anybody dumb enough to buy this Mother Of All Toxic Assets. Is there any better currency then? Yes, that's easy...GOLD!
A Ruinous Meltdown
By BOB HERBERT
A story that is not getting nearly enough attention is the ruinous fiscal meltdown occurring in state after state, all across the country.

Taxes are being raised. Draconian cuts in services are being made. Public employees are being fired. The tissue-thin national economic recovery is being undermined. And in many cases, the most vulnerable populations — the sick, the elderly, the young and the poor — are getting badly hurt.

Arizona, struggling with a projected $2.6 billion budget shortfall, took the drastic step of scrapping its Children’s Health Insurance Program. That left nearly 47,000 low-income children with no coverage at all.

In New Jersey, the newly elected governor, Chris Christie, has proposed a series of budget cuts that, among other things, would result in public schools receiving $820 million less in state aid than they had received in the prior school year. Some well-off districts would have their direct school aid cut off altogether.

“We’ve talked in the past about revenue declines in a recession,” said Jon Shure of the Center on Budget and Policy Priorities, “but I think you have to call this one a revenue collapse. In proportional terms, there has never been a drop in state revenues like we’re seeing now since people started to keep track of state revenues. We’re in unchartered territory when it comes to the magnitude of the impact.”

Massachusetts, which has made a series of painful cuts over the past two years, is gearing up for more. Michael Widmer, president of the Massachusetts Taxpayers Foundation, told The Boston Globe: “There’s no end to the bad news here. The state fiscal situation is already so dire that any additional bad news is magnified.”

California has cut billions of dollars from its education system, including its renowned network of public colleges and universities. Many thousands of teachers have been let go.

In the first two months of this year, state and local governments across the U.S. cut 45,000 jobs. Additional layoffs are expected as states move ahead with their budgets for fiscal 2011. Increasingly these budgets, instead of helping people, are hurting them, undermining the quality of their lives, depriving them of educational opportunities, preventing them from accessing desperately needed medical care, and so on.

As Mr. Shure of the Center on Budget noted, “The cruel irony is that in a recession like this, the people’s needs go up at the same time that the states’ ability to meet those needs goes down.”

Budget cuts also tend to weaken rather than strengthen a state’s economy, especially when they entail furloughs or layoffs. Government spending stimulates an economy in recession. And wise spending is an investment in everyone’s quality of life.

All states have been rocked by the Great Recession. And most have tried to cope with a reasonable mix of budget cuts and tax increases, or other revenue-raising measures. Those that rely too heavily on cuts are making guaranteed investments in human misery.
http://www.nytimes.com/2010/03/20/opinion/20herbert.html

Yeah, bad scene across the nation... But man, Greece is about to default on it's nations debt, how can you be worried about budget shortfalls in the United States of America? WAKE UP! The crisis is here at home in your own backyard. This is big trouble, real trouble... And the US Dollar is not going to save the day...it is going to be the goat.

Bubbling on the sidelines, ignored almost completely by the financial media [of course] are the recent revelations regarding the demise of Lehman Brothers and subsequent threat to the "entire financial system". Revelations indeed. Dave Kranzler at The Golden Truth has done a small series of essays encapsulating these revelations. Our seated Treasury Secretary, Turbo-tax Tim Geithner has a lot to answer for. Our seated President, Mr. Obama, and his administration, The Oracle Of Orwell have a lot to worry about:

Tuesday, March 16, 2010
Repo 105 is LEHMANGATE: Systematic Fraud and Geithner Knew About It

(Note: I'm going to post two parts to this post. I think it's important for all who are interested to really understand what happened, why and who's to blame. It's easier to eat an elephant one bite at a time).

You'll see that Geithner was unequivocally involved with knowledge about Repo 105, LEHMANGATE. But the real question is, at what point in time did Obama know? And if Obama did not know, then he's unworthy to be President because it means he lacks the political strength, depth and experience demanded by the job (what did he run before being elected?). I believe we are watching another "Watergate" unfold. The difference between then and now is that we may not have political leaders in Congress who are willing to do what's required to make the full truth known.

I finally spent some time dissecting exactly what Lehman did and how they got away with what they were doing. Let me say this: If all of Lehman's upper management PLUS the relevant Ernst&Young people PLUS the relevant people at the NY Fed - including Tim Geithner - do not do jail time over this, it's time to either start organizing a revolution or move out of the country. If these guys get away with this without serious legal and financial punishment, it is the clearest indication that our country is no longer held accountable by the Constitution OR Rule of Law in any respect. It means that full-scale mob-style criminality has invaded every aspect of our Banking, Corporate and Government systems, starting at the top with the White House and Congress.

Just to summarize briefly and coherently what Lehman did: Lehman engaged in repo transactions which, at the surface appeared to be standard repo maneuvers used by banks to raise short term financing by taking Treasury securities and sending them to a counterparty, who takes the Treasuries as collateral and gives Lehman cash to use on a short term basis - usually overnight to two weeks. Lehman then unwinds the repo by sending the cash plus a little more - representing interest paid on the transaction - back to the lending entity and the lender sends back the Treasury collateral back to Lehman. The transaction is accounted in a way which does not change any aspects of Lehman's balance sheet for accounting, regulatory and financial purposes.

What Lehman did is exploit a rule that says if Lehman sends collateral representing 105% of the cash they borrow, under accounting regulations, Lehman can account for the transaction as a "sale of securities" and use the cash taken in to repay other short term debt, making Lehman's balance sheet looking less leveraged - i.e. of much higher quality - to regulators and investors at the end of each quarter. As Lehman approached bankruptcy, it started including risky, worthless securities as part of the "repo" collateral package - toxic assets that Lehman could not get off its balance sheet at any price. Using this type of collateral is unconventional in the extreme and could NEVER be considered a "sale" of securities under any non-fraudulent accounting ruling. NEVER.

The Treaury collateral Repo 105 would be okay if it were done once or twice, but Lehman did it repeatedly and systematically every quarter since at least 2007. Anyone with an accounting 101 background from a good school knows that Ernst&Young should have raised a red flag and disallowed the treatment of the transaction as a "sale" the second time Lehman used it. Afterall, doing this once without reversing the transaction could for sure be considered a bona fide sale. Maybe even with the reversal (the unwind of the repo). But to engage in this systematically and serially every quarter would raise an objection over the accounting treatment as "sale" and any accounting firm doing its job properly and ethically would not sign off on the accounting treatment. This is especially true once Lehman started using toxic waste as collateral. Clearly pure manipulative fraud.

To think that E&Y did not know any better is to ask us to believe that the E&Y people either are complete idiots or do not know accounting rules. Stupidity and ignorance notwithstanding, we can only conclude this situation was pure nefarious intent to fraud in which E&Y participated. Remember Arthur Anderson/Enron if you think this is not probable.

In fact, just this morning, clusterstock.com has posted an article from Andrew Ross Sorkin who says that the SEC and the Federal Reserve Bank of NY (Tim Geithner's NY Fed) were all over Lehman during the heart of the "Repo 105" period (here's the link: Geithner knew about Repo 105).

Almost two years ago to the day, a team of officials from the Securities and Exchange Commission and the Federal Reserve Bank of New York quietly moved into the headquarters of Lehman Brothers. They were provided desks, phones, computers — and access to all of Lehman’s books and records. At any given moment, there were as many as a dozen government officials buzzing around Lehman’s offices.

These officials, whose work was kept under wraps at the time, were assigned by Timothy Geithner,then president of the New York Fed, and Christopher Cox, then the S.E.C. chairman, to monitor Lehman in light of the near collapse of Bear Stearns.

What this tells us is that not only are all of the Lehman's upper management AND the E&Y people involved are guilty of direct fraud and corruption, but that everyone from the NY Fed and the SEC who were involved either were complete idiots with respect to basic accounting rules and reguations (and should be fired immediately with no pension benefits) OR that they enabled the fraud to persist by looking the other way. This would include Tim Geithner, who should no longer be given the benefit of using the "I can't recall" or the "I had no idea" defense. He is clearly knee-deep in this. Geithner's motivation to look the other way would be to keep the market from seeing the extent of Lehman's insolvency.

PLEASE KEEP IN MIND THAT LEHMAN CEO RICHARD FULD WAS A MEMBER OF THE BOARD OF DIRECTORS OF THE NY FED AT THIS TIME AND THUS HAD DIRECT INFLUENCE OVER GEITHNER.

For starters I would call on Obama to force Geithner to either resign from his Treasury position or outright fire him. Fool us twice - cheating on taxes and getting away with it plus his story about not knowing about AIG/Goldman - shame on us. Fool us again, time to impeach Obama unless he gets rid of Geithner immediately.

Wednesday, March 17, 2010
Lehmangate Part 2: What Is the Rest of Wall Street Hiding?
THAT is the question that should be investigated at this point. What other kinds of frauds are being perpetrated by the thieves on Wall Street and which highly placed public officials are enabling that fraud to continue?

Clearly, upon examing all of the evidence and connecting the dotted lines, Lehman committed Enron-esque fraud with its Repo 105 maneuvers and was aided and abetted by its accountant, Ernst & Young and by Federal Reserve officials, at the time, specifically Tim Geithner. At the very least all of the upper executive management team at Lehman, the board of directors at Lehman, all relevant professionals and senior management at E&Y should eventually be under indictment. I would settle for the forced resignation of Geithner, but he should be thoroughly investigated and indicted as well. Don't hold your breath for this, recall that current Attorney General Eric Holder is the guy who wrote the pardon letter for Marc Rich that Bill Clinton signed just before leaving the White House. Holder is no stranger to the enablement of criminal activity and tax evasion.

I'm starting to wonder if gold's unusual relative strength in the face of the aggressive, unmitigated manipulation attempts to get it lower over the past month is a signal that Lehman's fraud is just the tip of the iceberg. Ernst & Young signed off on a balance sheet accounting maneuver that was clearly and unequivocally illegal. Even an accounting 101 student could make that determination. It leads one to wonder "what the hell else is hiding in Wall Street's accounting closet that is being approved by our "trusted" accounting firms and ignored or enabled by the Fed? We know that Goldman is involved in all kinds of non-transparent, at a minimum unethical, and likely fraudulent OTC derivatives activities. They roll out their 10-K every quarter with their accountant's stamp of approval and Lloyd "I'm God" Blankfein smiling and pontificating at how great Goldman is at making profits and managing risk. But what is really going on behind the curtain. And even worse, to what extent are Bernanke, Geithner and even Obama aware of just how fraudulent and corrupt everything is on Wall Street - and the manner of accounting for it?

And now we have Banana Ben begging Congress, and the public, to sign-off on handing even MORE oversight and regulatory responsibilities to the Fed. Just today Bernanke is making the case that "the Fed’s 'wide range of expertise' makes it 'uniquely suited to supervise large, complex financial organizations and to address both safety and soundness risks and risks to the stability of the financial system as a whole'” Bloomberg link.

Set aside the fact that Bernanke never saw the housing bubble, mortgage bubble, toxic asset bubble, banking system collapse - his "uniquely suited" oversight abilities cost the Taxpayers of this country trillions. Let's examine Bernanke's statement in the context of Lehmangate and Repo 105.

Where was Bernanke's oversight abilities while his team was in Lehman's office for two years with full access to all books and records? Let me quote again from Andrew Ross Sorkin's statement yesterday:

Almost two years ago to the day, a team of officials from the Securities and Exchange Commission and the Federal Reserve Bank of New York quietly moved into the headquarters of Lehman Brothers. They were provided desks, phones, computers — and access to all of Lehman’s books and records. At any given moment, there were as many as a dozen government officials buzzing around Lehman’s offices (link in the post below).

The Fed WAS in a position of unfettered and direct oversight at Lehman for two years leading up to Lehman's collapse and yet Lehman still pulled off massive fraud - right under your nose, Ben. Either you are a complete moron or you are a psychopathic liar. Which one is it Ben?

Now that Lehman has collapsed under a massive weight of fraud and corruption - and all of surviving Wall Street was allowed to feed greedily, with the help of TARP, off the carcass, the real question is just how much fraud is being currently covered up and papered over? It would seem to me that after Enron, and the ensuing series of massive, ever-larger financial collapses that have occurred (Refco,Bear Stearns, AIG, Fannie Mae, Freddie Mac, GMAC, etc), that our political leaders and those charged with regulations and oversight, including the Fed, would be interested in cleaning up this mess and putting those who created and participated in this mess in jail.

Will this ever happen? Not if the Fed is given greater powers, not if Geithner and Larry Summers remain in the White House and not if the current crooks leading Congress are allowed to remain in power. At the margin, it's up to the public to do something about this. If we allow this to continue, the problems will only grow larger and the U.S. will eventually collapse under the sheer weight of too much debt and fraud. Otherwise, I hope everyone who understands this is accumulating as much gold and silver as they can.

Friday, March 19, 2010
A Smoking Gun Emerges in Lehmangate
In a development that is reminiscent of the whistleblower and star witness that emerged in the Enron collapse, AP is reporting that a a former Lehman Sr. VP had alerted upper management that Lehman was underreporting its amount of outstanding debt each month by billions. He was promptly fired and reached a termination agreement which stopped paying after Lehman collapsed. He is now a creditor in the liquidation proceedings.

"A Lehman Brothers whistleblower warned his bosses that accounting gimmicks the bank used before its collapse may have been illegal, his lawyer said Friday." Here's the Yahoo News link: LINK

Lee wrote in his letter that "I believe the manner in which the firm is reporting these assets is potentially misleading to the public and various governmental agencies," Lee wrote. "If so, I believe the firm may be in violation of the code."

Clearly there is a huge scandal/cover-up here that goes all the way up at least to then NY Fed Chairthief, Tim Geithner, and probably all the way up to Bernanke. Chris Dodd has called on Attorney General Eric Holder to investigate. As per my post below "Lehmangate Part 2," I explain that Holder is no stranger to enabling fraud and corruption as a public official, so I'm not holding my breath that he will do anything. Please email your relevant House Rep and both Senators if you are angered by this and want to see justice.

BUT, there is a smoking gun, it's still smoking and there can now be NO QUESTION in the minds of skeptics that this is a huge scandal unfolding.

Monday, March 22, 2010
Geithner Caught Breaking the Law Again at the NY Fed
Tax-evasion, covering up the fraudulent accounting of the banks he was supposed to be overseeing, lying under oath in front of Congress, and now warehousing junk loans at the NY Fed for Lehman - WHERE DOES IT END? Here's the latest from the HuffPo:

As Lehman Brothers careened toward bankruptcy in 2008, the New York Federal Reserve Bank came to its rescue, sopping up junk loans that the investment bank couldn't sell in the market, according to a report from court-appointed examiner Anton R. Valukas. The New York Fed, under the direction of now-Treasury Secretary Tim Geithner, knowingly allowed itself to be used as a "warehouse" for junk loans, the report says, even though Fed guidelines say it can only accept investment grade bonds. (HuffPo Link)

There you have it. Geithner was aiding and abetting illegal activity and assisting Richard Fuld - who was a on the board of directors of the NY Fed at the time - in hiding the full extent of Lehman's insolvency. Geithner should immediately be fired and all of his email accounts, phone records and files from the NY Fed and his office at the Treasury should be seized. He needs to be investigated.

The other, bigger issue, as raised by the HuffPo article, is to what extent is the entire Federal Reserve system hiding toxic assets. This isn't just related to Lehman and this is one of the main reasons that Bernanke and Geithner vigorously oppose all Congressional attempts to force an audit of the Fed (Bernanke's Fed is spending millions to fight this):

Without an audit, the Fed is able to conceal the specifics of what it holds on its balance sheet. If the Lehman deal is any indication, the Fed is hiding billions of dollars in toxic loans on its books. "The Fed legally is forbidden from taking such assets. There's a legal requirement that the Fed's assets be investment grade," Rep. Alan Grayson (D-Fla.) told HuffPost.
This will continue and get worse until either the system collapses under the sheer weight of the fraud and corruption or the Fed continues to cover-up the fraud by hyperinflating the currency. I guess we ultimately collapse either way. The least Obama could do is throw us a bone and get rid of Geithner.

And all the financial press wants to blather about is Obamacare and Greek debt? Can you say smoke screen? Ignoring systemic risk and financial collapse will not make them go away.