Monday, May 31, 2010

Timeline To Financial Destruction

With the markets closed today as we honor those that have fallen defending our nation, I've taken the opportunity to further my research of the Gold and Silver markets and the inevitable disintegration of the US Dollar. It turns out the sub-prime mortgage blowup has very little to do with the meltdown of our financial system. A meltdown that began with decisions made long-long ago in the middle of the 19th century.

I found the timeline of monetary malfeasance posted below while googling "US Gold Reserves + value". I have a sneaking suspicion that recent "revelations" of a collapse in the US M3 money supply is a prelude to an across the board US Dollar devaluation announcement by the government, ...but more on that later. First we need a little history:


The first United Nations Monetary and Financial Conference, held in Bretton Woods, New Hampshire, from July 1 to July 22, 1944, which was under the direction of Harry Dexter White (CFR member, and undercover Russian spy), established the policies of the International Monetary Fund. Its goals were to strip the United States of its gold reserves by giving it to other nations; and to merge with their industrial capabilities; as well as their economic, social, educational and religious policies; to facilitate a one-world government.

Because of paying off foreign obligations and strengthening foreign economies, between 1958 and 1968, the amount of gold bullion in the possession of the U.S. Treasury dropped by 52%. Of the amount remaining, $12 billion was reserved by law for backing the paper money in circulation. Our money had been backed by a 25% gold reserve in accordance to a law that was passed in 1945, but it was rescinded in 1968. The amount of gold slipped from 653.1 million troy ounces in 1957, to 311.2 million ounces in 1968, which according to the Treasury Department, was due to sales to foreign banking institutions, sales to domestic producers, and the buying and selling of gold on the world market to stabilize prices. This was a loss of 341.9 million troy ounces. In August, 1971, gold was used only for world trade, because foreign countries wouldn't accept U.S. dollars. As of November, 1981, sources had indicated that the gold reserve had dropped to 264.1 million troy ounces.

Title 31 of the U.S. Code, requires an annual physical inventory of our gold supply, but a complete audit was never done, so officially, nobody knows what has occurred. After World War II, America had 70% of the World's supply of loose gold, but today, we may have less than 7%. Sen. Jesse Helms seemed to think that the OPEC nations have our gold, while others believe that 70% of the world's gold supply is being held by the World Bank, which is dominated by the financial grip of the Rothschilds and the Rockefellers.

Gold and Silver Price Manipulation Efforts Failed This Week
By Patrick A. Heller
The tactics used to suppress gold prices have long become so blatant that professionals in the gold commodity trading pits can easily identify the times when prices are being manipulated.

One event where gold prices are regularly suppressed is at the monthly expiration of gold and silver option contracts. There are two different expiration dates each month. Normally, the COMEX options expire on a Tuesday followed the next day by the expiration of Over The Counter (OTC) options contracts. The larger options market is on the COMEX, though there are ten to fifteen banks and brokerages in New York, London, and Zurich that make markets in the OTC contracts.

Up until they expire, call options give the owners the right to demand delivery of the gold or silver at the contract’s strike price. Should the price of gold rise above that level (referred to as being “in the money”), owners of call options can pay the strike price and other expenses and demand delivery of the physical gold from the party who sold them the contracts. Should this occur, that would squeeze gold supplies as the gold inventories on the COMEX are only sufficient to cover a small percentage of outstanding contracts. A supply squeeze likely would have the impact of pushing up prices.

The COMEX options expired this week on Tuesday. As I had predicted last week, the prices of gold and silver were suppressed below the strike prices where there were the largest number of call options—gold at $1,200 and silver at $18.00.

The pattern for the past several months has been for gold and silver prices to be suppressed until after the OTC options expired upon the close of the COMEX the next day. Once the monthly options have expired, the pattern has been for a quick recovery in both gold and silver prices.

That is not what happened this week. The first part of the manipulation to keep gold below $1,200 and silver under $18 through Tuesday’s COMEX close was successful. However, almost as soon as the COMEX closed, gold and silver prices climbed above those levels.

On Wednesday, it looks like the US government, which largely acts through its US and foreign trading partners, was unable to push down gold and silver prices below the critical $1,200 and $18 at the COMEX close! Where this manipulation tactic has worked for many months in a row, this time the surge in demand for physical gold and silver overcame the resistance.

The failure this week of these manipulation efforts is a huge signal that we are closer to the day when the floodgates will give way and we see gold and silver prices surging more quickly and by greater percentages than we have seen in decades. Once again, I recommend that you not wait to protect your assets with some physical gold and silver. Most forms of bullion-priced physical gold and silver are still readily available at attractive premiums. I don’t know how long I will be able to keep saying so.

Thursday, May 27, 2010

Ignorance Is Bliss

Sometimes the most interesting news of the day is the news that got ignored. The Gulf Oil Spill currently dominates the general news. The Obama's bribe of Pennsylvania senate hopeful Joe Sestak currently dominates the political news. All economic news today was trumped by China's denial that they were selling European debt. But what about today's GDP revision/report?

There was a GDP revision today? Yes, there was...and it was bad. I guess that's why it was ignored.

First-quarter growth revised down to 3.0%
By Jeffry Bartash, MarketWatch
WASHINGTON (MarketWatch) -- The U.S. economy grew at a 3.0% pace in the first quarter -- lower than previously estimated -- owing to slightly smaller increases in consumer spending and purchases of business software.

The Commerce Department last month originally reported that gross domestic product expanded at a 3.2% clip in the first three months of 2010. The latest revision incorporates data that is not available for the first reading of GDP.

Economists surveyed by MarketWatch expected first-quarter growth to be revised up to 3.5%.

US growth slows as stimulus wears off
Alexandra Frean, US Business Correspondent, Times Online
Economic growth in the United States slowed more than expected in the first quarter of this year as the boost received from the Government’s fiscal stimulus started to fade and the rate of corporate profit growth declined.

The economy grew at an annualised rate of 3 per cent between January and March, according to the US Department of Commerce in its second estimates for the period.

The pace was slower than the estimated 3.2 per cent growth rate published last month and the 3.4 per cent expected by economists.

It was also significantly less than the 5.6 per cent recorded in the fourth quarter of last year, when growth surged as businesses restocked inventories and the Government spent heavily to stimulate the economy.

It's always rewarding to read "the news" from various sources to get a true perspective of the story behind the news. In the Marketwatch post from Wall Street, you get the sanitized version of the GDP revision. While in the Times Online post from London you get the dirty truth about the GDP revision.

First and second quarter GDP growth were both more about federal government stimulus than they were about true economic growth. In fact, both quarters numbers are probably more reflective of "growth in inflation", than they are in legitimate economic growth from manufacturing and spending. Like almost, if not all, government economic statistics released these days, these GDP numbers are just phony enough to the upside to keep the "hope" of a recovery alive, and the confidence of the public in the governments ability to steer us clear of this Great Recession [Depression].

It just looks like today, nobody seemed to care about the economy.

25 Questions To Ask Anyone Who Is Delusional Enough To Believe That This Economic Recovery Is Real
Contributed by The Economic Collapse Blog
If you listen to the mainstream media long enough, you just might be tempted to believe that the United States has emerged from the recession and is now in the middle of a full-fledged economic recovery. In fact, according to Obama administration officials, the great American economic machine has roared back to life, stronger and more vibrant than ever before. But is that really the case? Of course not. You would have to be delusional to believe that. What did happen was that all of the stimulus packages and government spending and new debt that Obama and the U.S. Congress pumped into the economy bought us a little bit of time. But they have also made our long-term economic problems far worse. The reality is that the U.S. cannot keep supporting an economy on an ocean of red ink forever. At some point the charade is going to come crashing down.

And GDP is not a really good measure of the economic health of a nation. For example, if you would have looked at the growth of GDP in the Weimar republic in the early 1930s, you may have been tempted to think that the German economy was really thriving. German citizens were spending increasingly massive amounts of money. But of course that money was becoming increasingly worthless at the same time as hyperinflation spiralled out of control.

Well, today the purchasing power of our dollar is rapidly eroding as the price of food and other necessities continues to increase. So just because Americans are spending a little bit more money than before really doesn't mean much of anything. As you will see below, there are a whole bunch of other signs that the U.S. economy is in very, very serious trouble.

Any "recovery" that the U.S. economy is experiencing is illusory and will be quite temporary. The entire financial system of the United States is falling apart, and the powers that be can try to patch it up and prop it up for a while, but in the end this thing is going to come crashing down.

But as obvious as that may seem to most of us, there are still quite a few people out there that are absolutely convinced that the U.S. economy will fully recover and will soon be stronger than ever.

So the following are 25 questions to ask anyone who is delusional enough to believe that this economic recovery is real...

America biggest security risk: our debt
By Frank Ryan
As Milton Friedman said in “Capitalism and Freedom”: “Ever since the New Deal, a primary excuse for the expansion of governmental activity at the federal level has been the supposed necessity for government spending to eliminate unemployment. ... This view has been thoroughly discredited by theoretical analysis, and even more by actual experience.” Friedman concludes that the arguments deployed for fiscal stimulus are part of economic mythology, not the demonstrated conclusions of economic analysis or quantitative studies.

Until the federal government returns to the authority defined for it in the Constitution Article 1, Section 8 and further refined in the Ninth and 10th Amendments to the Constitution, we are likely to be vulnerable to an economic attack.

If we act now, the decision is ours. If our nation waits, the decision of our fate is in the hands of our mainly overseas creditors.

Deficit spending is not leadership
This week, Congress is to vote on a spending extension bill, complete with a price tag of nearly $200 billion in tax increases and deficit spending. Also this week, our national debt is forecast to hit the $13 trillion (with a 't') mark — another sad and ignominious milestone.

In 1987, when the national debt was approaching $1 trillion, President Ronald Reagan called it "out of control." I shudder to think what he would say now that we're about to cross the $13 trillion threshold.

The federal government continues its binge spending at an astonishing pace — running up our national debt and leaving our children, grandchildren and great-grandchildren with an ever-expanding IOU. Words like "billion" and "trillion" are thrown around with little regard for the impact these staggering numbers will have on our nation's economy — both now and in the years to come.

In coming months, Congress is poised to contribute to the problem with several proposals that add to our nation's financial instability.

One such piece of legislation is this week's spending extension bill, which would temporarily extend unemployment benefits and other programs. We should provide temporarily relief for the neediest among us — but we need to find a way to pay for it without taxing or resorting to more borrowing.

The fact is, we could easily pay for this extension by cutting unnecessary spending or by using the nearly $50 billion of unused and obligated stimulus funds.

We could also demand a clawback of some of the hundreds of millions in overpayments made to federal contractors. Fraud in Medicare and Medicaid costs the taxpayers more than $60 billion annually.

The Government Accountability Office has investigated numerous programs that are failing to fulfill their missions, and yet get more money from Congress year after year. No respectable business would be run this way.

The leadership in Congress wants to pay for the extensions by raising taxes on Americans to the tune of $56 billion in new permanent taxes and by adding $132 billion in new debt — largely borrowed from China.

This push for higher taxes and more dependence on government debt leads us down the path of the discredited European model that is decaying before our eyes. Just look at Greece, where massive spending has threatened the stability of the entire European Union.

Instead, we need to address our fiscal crisis the way America always has: by keeping government in check and lowering taxes to spur growth and private enterprise.

This spending extension bill is just another example of the "anything goes" mentality when it comes to Washington. Consider this staggering statistic: During the past 18 months, this administration and this Congress have spent more money than the previous administration spent on Iraq, Afghanistan and the Katrina recovery combined. Yet with a straight face they promised to usher in a new era of responsibility.

Last year, President Barack Obama and Congress pushed through an omnibus appropriations bill that included an 8 percent increase in discretionary spending. This was followed by the infamous nearly trillion "stimulus" bill that has not led to one new net job. In fact, the unemployment rate has increased in Massachusetts since the passage of the stimulus.

Then the president signed another omnibus spending bill, with a 12 percent annual increase and jammed through the trillion-dollar government-run health care bill that was clearly opposed by the American people.

Congress and the president pledged to operate under the "pay as you go" rules. However, in the 111th Congress, Democrats have voted to circumvent those rules by labeling $1 trillion as "emergency" deficit spending.

That's why Sen. Judd Gregg (R-N.H.) has aptly labeled the Democrats' version of these rules "Swiss cheese-go" — the holes are everywhere.

The president has said he'd like to go through the federal budget — line by line — to identify wasteful programs. In his budget, Obama has identified programs for termination and cuts that would save about $25 billion next year alone. This could help pay for some of these emergency extensions. I challenge all of us to live up to the promise of eliminating wasteful spending, so we can pay for worthy programs like the unemployment benefit extension.

Both parties bear guilt for this sorry state of affairs. The interest alone on our $13 trillion national debt is due to exceed $700 billion per year by 2019 — an increase of $500 billion from current levels.

To put this large sum in perspective, $500 billion is more than what it will take this year to fund our missions in Iraq and Afghanistan and the departments of education, energy and homeland security.

Simply put: We must start offsetting the cost of worthy programs by cutting wasteful spending. If we do not, taxes and our national debt will continue spiraling upward. If we do not, our status as the world?s superpower — even our very economic stability — is at risk.

There is no shortage of ways that Washington can rein in its excessive spending habits while also funding worthwhile programs. But it's going to require elected officials making hard, even unpopular decisions.

If we begin using common-sense steps to get our fiscal house in order, we will put our country back on a path to fiscal sanity and get our appetites for spending and borrowing under control.

Both are crucial for the fiscal stability of our country's future.

Scott Brown (R- Mass.) is on the Subcommittee on Oversight of Government Management.

Wednesday, May 26, 2010

Gold Cartel: "Up The Creek Without A Paddle"

Options on the June Precious Metals contracts expired last night at 5PM est. Today's surge higher in both Gold and Silver should be all the proof one needs that the recent reaction in the metals prices was tied directly to this option expiration period. Every effort was made by the crooks at the CRIMEX to bottle up Gold below 1200 and Silver below 18.00.

Well, there wasn't a snowball's chance in hell that the bullion banks were going to allow gold price to stay above $1,200 during the Comex trading session yesterday... and they didn't. The gold price edged over the $1,200 mark a couple of times during floor trading on Tuesday... but there was always a not-for-profit seller there to knock it gently down again. Gold did manage to close above $1,200... but that was in electronic trading after the Comex close... and that didn't matter, because option expiry had already passed. Once again it was "mission accomplished" for the bullion banks... as all those tens of thousands of call options expired out of the money.
-Ed Steer,

In spite of the Gold Cartel's limited success in capping Gold below 1200, options expired with Gold at 1196.97, several thousand contracts [30,000] still expired "in the money" yesterday. There were 18,000 contracts sitting between 1155 and 1195.

Harvey Organ's - The Daily Gold reports on the open interest remaining in the June gold contract:

In gold, in the front month of June there is 202,000 contracts standing with tomorrows reporting left to go. (remember we are 24 hrs back).

Adrian Douglas reports on this huge number of June contracts standing:

"There is a massive open interest in JUN gold of 202,208 contracts. There is only one trading day left before this is the front month. It will be interesting to see how much of this stands for delivery. This currently represents 20 million ozs which is exactly 10 times what the dealers have in their inventory!"

If the dealers do not get significant rolling they are in deep trouble.

Is the CRIMEX about to get nuked by BIG MONEY seeking Gold? The Gold Cartel according to CRIMEX inventory stats has 2.62 Million ounces of Gold in inventory. They have sold 20 Million ounces of Gold contracts. These knuckleheads have redefined "Up The Creek Without A Paddle". Gold prices have moved steadily higher since the June contract expired yesterday as the weeping CRIMEX goons seek Gold to cover their sorry asses.

In Silver, the CRIMEX remains on the hook for 22 Million ounces of March Silver deliveries, and 24 Million ounces of May deliveries. They may have succeeded in capping Silver below 18 for options expiration, but the CRIMEX currently owes Silver longs that have demanded delivery a total of 46 Million ounces of Silver. Very little of this Silver has reached those waiting for delivery...particularly those STILL waiting for 22 Million ounces of Silver that was due on demand by March 31, and has yet to be delivered. As of last night, the CRIMEX goons only had 52 Million ounces of Silver in their inventory. Making good on the 46 Million ounce claim of Silver on the Crimex for March and May would effectively WIPE OUT the CRIMEX.

In light of the obvious pressure on supply to meet demand in both Gold and Silver at the CRIMEX, it is reasonable to expect an explosion in the prices of both very soon. Gold will first meet resistance at 1217, and Silver at 18.90, before they make an assault on recent highs.

Taking a quick look at the US Dollar, all I see is the biggest joke in finance staring back at me. Present strength in the Dollar is the direct result of weakness in the Euro as 57% of the US Dollar Index is derived from the Euro's relationship to the Dollar. There is absolutely NO fundamental reason for the US Dollar's present strength.

Technically, the Dollar looks exhausted on the daily chart. The "Three Black Crows" strung together last week off the recent high are a major bearish reversal indication. Yesterdays high in the Dollar is beginning to appear to be a "double top" in the World's Tallest Midget. Clearly Gold is gaining strength as the World's Reserve Currency of choice here...despite efforts by the Gold Cartel to the contrary.

The Euro appears exhausted to the downside here, and a retest of last weeks lows looks to be in progress. Fears of a collapse in the Euro amplified by the naked shorts in European debt will be difficult for traders to maintain. Certainly the common currency will remain under pressure, reacting negatively to "events as they occur", but the worst for now in the Euro should be over. Next in line for attack will be the UK Pound and/or the US Dollar.

The uptrend in Gold and Silver should soon become relentless, and shock many of the talking heads in financial media.

"No doubt about it; the global monetary system is facing a crisis of confidence...and for good reason. Most of the governments that funnel currencies into this system provide little basis for confidence. These governments spend what they do not have...year after year...and conjure currency out of thin air...year after year."
-Eric Fry, The Daily Reckoning

Seriously, how can more debt solve a debt crisis? Is Goldman Sachs a financial terrorist and an enemy of the state?

This 20-minute interview with Sprott Asset Management CEO Eric Sprott is the hammer hitting the nail on the head. This guy sees the financial system and the markets for what they are, a FARCE...and he minces no words with regards to them. I highly recommend you take the time to watch this must listen/watch interview here.

The essay he mentions: The Financial System Is A Farce can be found here:

Jim Rickards Discusses Financial Warfare
Some critical insight from Rickards in terms of European geopolitics is the following: "People get so hung up on economics, and efficient markets, and all that which has been largely discredited at this point. But these are NATO allies. Greece controls the ceiling of the Eastern Mediterranean and the Aegean, they have a very robust military budget. Same thing with Spain. Spain's been a very important NATO ally throughout the cold war, Italy etc. Can you imagine if during the cold war the Soviet Union had undermined all the countries, it would have been the start of World War III. And yet we are letting investment banks do the same thing. We are letting investment banks undermine the finances, cast doubt on the credibility, create civil unrest, riots, death. It's the kind of thing that in a military frontal assault would be repelled, but somehow we let Wall Street attack the countries and do nothing about it. I am glad that someone is finally standing up, and I expect that Merkel will be joined by others. I am not against speculation. Let speculators put up some money, let them do on an exchange, let the pricing be transparent, let them do variation margin... This no money down shadow credit default swap market is completely destructive."

Priceless Quote From Richard Russell
On Larry Summers: This doofus practically ruined Harvard when he headed it. I can't think of a worse choice to be chief economic advisor. I wouldn't trust Summers to manage a Starbucks franchise.

Bernanke Says Central Banks Must Be Free of Pressure
By Scott Lanman
May 26 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke said central banks must be free from political pressure as they bolster regulation and try to prevent future financial crises.

“In undertaking financial reforms, it is important that we maintain and protect the aspects of central banking that proved to be strengths during the crisis and that will remain essential to the future stability and prosperity of the global economy,” Bernanke said today in a speech at the Bank of Japan in Tokyo.

"...protect the aspects of central banking that proved to be strengths during the crisis and that will remain essential to the future stability and prosperity of the global economy."? What a load of rubbish!

The Fed is at the root cause of the financial crisis. If they have nothing to hide, why do they vigorously fight an audit of their activities? If the Fed has so many strengths, why did they not see this crisis coming before it exploded in our faces? Home prices rose 100% while wages only grew by 2%, an economic 101 student could have seen disaster ahead in the housing market, and the Fed only encouraged further use of "derivatives" to "spread risk around". Brilliant! Protect the central banks? Close every damn one of them. A financial system based on perpetual debt is no financial system at all. It is a Ponzi Scheme.

Geithner to confer with European leaders
A senior Treasury official, who spoke on condition of anonymity because he was not authorized to speak publicly, said Geithner wanted to discuss with Trichet and Schaeuble "the package of measures designed to promote confidence in Europe."

"Measures designed to promote confidence in Europe". This is what is know as "pulling the wool over ones eyes". Once again, the first three letters in the word confidence spell --- CON! We can only imagine what insight an American tax cheat can offer the finance ministers of Europe. Judging by the rise in the price of Gold, confidence appears to be slipping with regards to the worlds fiat money system.

Greece -- What Just Happened
By Howard S. Katz
All central banks in the world today create money out of nothing. This has a set of consequences which transfer wealth from one group to another, as follows:

The most important task of any central bank is the manipulation of the rate of interest away from its free market level. Prior to the 1780s, charging interest was banned in all countries. (In 1786-87, it was legalized in the northern U.S. and Britain.) Since there are always many people who want to go back to the past, there is always a political force for zero interest rates, and it is the bias of all central banks to lower the (real) rate of interest below its free market rate (which was about 5% real for over a century during the period when the U.S. had little or no central banking).

The way it manipulates interest rates is by buying government securities, Treasury bills being a good example. A one-year T-bill is redeemed at par (100). It is issued at some price below par, and the interest consists of the difference between the issuing price (or current price) and par. For example, a T-bill may be issued for 95. It is redeemed at 100. Thus the interest received by the buyer is 5/95 = 5.26%. The current U.S. rate for the 1 year T-bill is 0.35%.

Modern central banks have no capital of their own (although historically central banks started out as ordinary banks and then got special privileges from the government). The only way that a modern central bank gets money is by printing it (although this is usually covered over with a collection of lies. For example, modern American money contains the words “Federal Reserve Note.” But a note is a credit instrument. It certifies that one party owes money to another, and all notes specify the interest rate which the borrower has agreed to pay to the lender.

It can be proven in economic theory and has been the case in every society in which money has circulated that notes (or other credit instruments) cannot circulate as money. This is because people will not use them as money. When a person has both a note and ordinary money and wants to buy something, he decides to keep the note (because it pays interest). He pays for his purchase with (non-interest bearing) money. Thus, it is the non-interest bearing instrument which circulates and acts as a medium of exchange. In other words, a “Federal Reserve Note” is not a note. And calling it a note was simply one of many lies which emanated from the group around J.P. Morgan at the time they slipped over the Federal Reserve System on a country which had regressed badly in its knowledge of economics.

In modern central banking, pieces of paper, which have been printed up by the central bank (emblazoned with all kinds of fancy words and symbols to impress the ignorant), are declared to be money by the government (in what is known as a legal tender law). This says that you must treat this fancy paper as though it had more economic value than similar pieces of paper. The original paper dollars issued by the Federal Reserve in 1933 were required to be treated as though they had the same value as 1/20 oz. gold. This value does not come from it being a note or a security. It comes because the government has “blessed” this piece of paper with the words “legal tender.”

It should be noted that, although the situation may differ from country to country, here in the U.S. the legal tender enactments by Congress are illegal, hence null and void. This is because we have two levels of law in the U.S. There is the government’s law, imposed on the people. And there is the people’s law, imposed on the government. The people’s law is the Constitution. This is the supreme law, and any statute law which conflicts with it is null and void. (Those interested may read the debates of the constitutional convention, Aug. 16, 1787, in The Madison Papers. The authors of the Constitution were very hostile to the paper money which had been issued during the 1770s and early 1780s and intended to ban it. The vote to ban paper money in America was 9 states to 2 states, and this has never been changed.) Thus, our current government is illegal. This is not a laughing matter because the Coinage Act of 1792 imposes the death penalty for debasement of the currency, a fact which should give Ben Bernanke, Alan Greenspan and Paul Volcker serious pause.

“SEC. 19. And be it further enacted, That if any of the gold or silver coins which shall be struck or coined at the said mint shall be debased or made worse as to the proportion of fine gold or fine silver therein contained, or shall be of less weight or value than the same ought to be… every such officer or person who shall commit any or either of the said offences, shall be deemed guilty of felony, and shall suffer death.”

Our current U.S. money has not only been made worse as to the proportion of gold therein contained. It has been made zero.

As the central bank buys Treasury Securities with its printed money, it forces their price up, and, as we have seen, this forces the interest rate down. But low interest rates are beneficial to borrowers (which are primarily the nation’s large corporations). They are harmful to savers (who are primarily the middle class). In this regard, the central bank is stealing enormous amounts of wealth from the nation’s middle class and giving it to the very rich.

As noted, as a side effect of the lowering of interest rates, the central bank acts like a counterfeiter, printing money out of nothing. This causes all prices to rise. However, they do not rise equally. The wages of labor rise more slowly than the prices of goods. Thus real wages go down. Because of this, real wages have been declining in this country since 1972 (one year after Nixon completed the abolition of the U.S. gold standard). Since real wages are declining, real corporate profits go up.

I call the people who benefit from the printing of money and easing of credit the paper aristocracy. The paper aristocracy always wants more paper money and is trying at all times and in all countries to urge the central bank to issue more money. To accomplish this, there have to be a continuous series of crises (real or imagined) to serve as an excuse.

Obama expected to boost offshore drilling oversight Washington Post

Now that's grabbing the bull by the horns!

Sunday, May 23, 2010

Euro Weakness: A Cheap Magician's Trick

"Keeping up with today’s dysfunctional markets is very difficult because they change hour by hour. The problems of Europe have stolen center stage from US problems. The focus is on Europe, but we all should remember trillions of dollars have been injected into the US financial system since mid-2007. All are attempting to maintain the façade that all is well, when in fact all is not well."
-The International Forcaster

“U.S. Remains the Proverbial Elephant in the Bathtub”
“…reporting of contained CPI inflation by the U.S. government should be relatively short-lived, as global financial market concerns eventually shift from systemic solvency issues in Europe to those in the United States. Concerns for U.S. stability eventually should dominate most other market issues…

Indeed, the greatest risk to global markets and systemic stability and solvency remains the United States. Already in the midst of an intractable fiscal disaster (see the Hyperinflation report), the U.S. economy is on the brink of an intensified/renewed economic downturn. Such is signaled by annual contraction in real (inflation-adjusted) M3, a solid leading indicator to U.S. economic activity…

As the federal budget deficit and Treasury funding needs explode in the year-ahead, eventually domestic and foreign balking at buying U.S. Treasuries should become widespread, with Fed becoming the buyer of last resort, monetizing that federal debt. Coincident with that likely will be heavy dumping of the U.S. dollar and dollar-denominated paper assets. Such should spike U.S. money supply and dollar-based oil prices. The pace of inflation would tend to pick up significantly in response to these circumstances, setting the stage for the hyperinflation referenced earlier.”
-John Williams’ Shadow Government Statistics, Commentary Number 297, 5/19/10

Markets Warnings & Opportunities Alert!
Gold has recently reached a nominal high of $1,237/oz, whereas Silver, although up too, has lagged somewhat behind. And there are Manifold Causes for Gold, the Ultimate World’s Reserve Currency, to have hit record highs. Among them are the increasingly threatening Sovereign Debts bubbles, the as-yet-unresolved System-Threatening Financial Regulation Issues, and a Middle Class and Housing Market that are not recovering.

But in spite of all the Causes for Gold and Silver to continue to skyrocket, they have pulled back recently – Gold is down by nearly $60/oz as we write. In light of all the aforementioned Gold-price positive, Market-Negative developments, Why?!

The Major Factor is the Active Suppression of Gold and Silver Prices (as we and other commentators have increasingly noted in recent years), effected by a Fed-led Cartel of Major Banks and their agents and allies, whose main motivation is to prevent the increasing recognition of Gold and Silver as ultimate Stores and Measure of Value (as the World’s Reserve Currencies), so that their Fiat Currencies and Treasuries Securities have greater legitimacy, and the Mega-Bankers’ Profits remain unimpaired.

Until a few weeks ago, that Cartel* had considerable success in periodically taking down Gold and Silver prices with relative ease, especially at certain times at which Revelations of a weakening financial system have indicated that Gold and Silver should skyrocket.

One case in point is the Bear Stearns collapse in the Spring, 2008, which, given that it reflected the increasing fragility of the Financial System, should have been accompanied by a Gold launch. Instead there was a considerable Gold Price takedown catalyzed by The Cartel.

Even so, notwithstanding Cartel Manipulation, when priced in ounces of Gold, the U.S. S&P has lost a whopping 78% of its value since 2002, as J.S. Kim points out.

Moreover, in recent weeks, as the evidence (collected over many years by the Gold Anti-trust Committee Action and others) of Cartel Manipulation Gold and Silver markets has been increasingly reported, even recently in the Mainstream Media, we have seen a significant Reduction in the Potency of the Cartel.

One other Cause of the Reduction of that Cartel Potency (a Cause which is also very Gold- prices friendly), is the allegations which have been given increasingly broad distribution that not all the major Gold funds and Repositories actually have as much Real Physical Gold as they claim. This of course has been surely been communicated to Major Buyers, who now are much more likely to demand to take physical possession, a Wise Strategy in our view.

In light of this, what are the prospects for Gold and Silver prices? Indeed, in our view, not only are Gold and Silver prices clearly on a bullish trend, for reasons we indicated in our recent Alerts, but, with one Major Caveat, we expect that Trend to continue.

The Caveat is that the aforementioned Revelations and the consequent dramatically increased demand for “Physical” does not mean The Cartel cannot still effect Takedowns and ongoing Price Suppression. This week’s Takedown ($60/oz as we write) bears witness to this continuing Cartel Potency.

The aforementioned Revelations merely mean that it is now more difficult for them to achieve Takedowns of the Depth and Duration of their Takedowns in earlier days.

"A recent poll reported on Bloomberg showed 97% of all money managers were STILL bearish on the euro and bullish on the dollar. How come no one is talking about the short euro/long dollar trade being too crowded? Given that the big banks have been buying all the euros being sold by funds, and selling dollars to all the buyers, the higher probability bet here is to get long the euro and short the dollar. I can't recall since the internet stock bubble when fund manager/public sentiment was this massively skewed in one direction."
-Dave Kranzler, The Golden Truth

Euro Panic Buying Op
By: Adam Hamilton, Zeal Intelligence LLC
Fear has to be extreme to drive a panic, and we are certainly seeing the euro plagued by extreme fear today. But extreme emotions are never sustainable. Excessive fear quickly burns itself out. Soon everyone who wants to sell has already sold, and when selling pressure climaxes the panic is over. And somehow the world marches on as the news that whipped up the emotional frenzy quickly fades from memory. The more extreme the emotions the less sustainable they are, and hence the shorter the event.

This is why panics, and the ridiculously-low prices they generate, represent the best buying opportunities ever witnessed in the financial markets. In early
March 2009, I was railing against the same type of fear extreme in the US stock markets. I wrote, “Despair reigns supreme and seemingly only fools hold out hope that things will materially improve anytime soon. … When things look the bleakest is exactly when we need to hold our noses and buy. …all the ingredients are in place for a monster rally.”

And indeed between that very week and late April 2010, the SPX rocketed 79.9% higher in one of the biggest stock-market rallies of modern times. The brave contrarians like our subscribers not afraid to buy into extreme fear made fortunes, but the vast majority of investors lacked the courage and missed most of the upleg. Due to the euro’s deeply-oversold technicals and extreme fear, I believe a similar epic buying opportunity exists in it today.

Most would laugh derisively at this heretical assertion. They would bludgeon it with many fundamental arguments on why the euro has to continue plunging. Yet the majority said the same thing at the March 2009 stock-market lows. They argued fundamentally that a new depression was upon us, and that the new big-government-socialist regime in Washington would suck the life out of any recovery. But despite these popular and seemingly-logical arguments, the stock markets still soared 80% in just over a year.

Lows driven by extreme fear are never sustainable because extreme fear itself is never sustainable. Investors faced with a new situation today that terrifies them will quickly adapt to that new reality. And within weeks this very same situation will no longer terrify them. Their extreme fear will evaporate as the threat becomes old news and routine. If you are scared of snakes now, a few weeks working in a reptile garden will largely eliminate that visceral fear response.

Europe has problems, no doubt. But big government and out-of-control spending has been a problem all over the world for centuries. And it has grown far worse in the decades since gold’s iron discipline was kicked out of the world currency system. Yet somehow, over the past decades and centuries life has soldiered on despite endless government excesses. No matter what happens in Greece, it doesn’t matter! At less than 3% of Europe’s GDP, Greece is trivial. So are the other troubled countries.

The incredibly bullish outlook on the euro today is not based on fundamentals, but technicals and sentiment. There is no better time to buy anything than when everyone thinks it is heading to zero in the heart of a panic. Nathan Rothschild’s famous quote of “buy when there’s blood in the streets” is one of the core tenets of contrarianism. With today’s wild popularity of the euro-to-zero trade, and the universal extreme fear, this time-proven wisdom has never been more appropriate for the euro.

As of this week, the euro was back down to early-2006 levels. Is this rational? Given the euro’s superior fundamentals (slower monetary growth, more conservative monetary policy, higher interest rates, under-allocation by central banks), does it make any sense for this currency to erase several years’ worth of bull-market gains in several months? Is it rational to see the euro now trading below its lows from the stock panic, when global investors really feared a new worldwide depression? No way.

On the other side of this coin, today’s dollar levels look just as irrational. The USDX is back up near its panic highs! We are talking about places it went when the VXO fear gauge was running in the high 80s in October and November 2008 and the mid-50s in early March 2009. Lately it has only been in the low 30s, so general fear isn’t even close to as high as the last time the USDX saw these levels.

And given Washington’s out-of-control spending, the asinine zero-rate policies of the Fed, the Fed’s incredibly
inflationary monetary growth, central banks’ massive over-allocation in US dollars, and the terrible yields on US Treasuries, does it make sense for the US dollar to be trading at levels last sustained in early 2006? Nope. Today’s dollar highs are merely an emotionally-driven anomaly just like they were during the stock panic. The extreme fear hammering the euro and driving the dollar buying will be no more sustainable than the stock-panic fear was.

Investing and speculating are about buying low and selling high. The reason contrarians are the most successful at this game is because we ignore our own emotions and buy into extreme fear and sell into extreme greed. Extreme fear and greed manifest themselves on the charts as exceedingly large moves in short periods of time. The faster and more anomalous any move, the more intense the emotions that drove it and hence the less sustainable it is.

As I wrote last week in an essay on
euro gold challenging €1000 for the first time ever, I am no fan of the euro. Like the US dollar, it is a fiat currency backed by nothing but faith in its issuing governments. It will slowly devalue towards zero just like all paper currencies. But fundamentally it is the lesser of these two fiat-paper evils. It has been in a strong secular bull while the dollar has languished in a long secular bear. These fundamentals didn’t suddenly evaporate due to little Greece’s sovereign-debt problems.

The euro is radically oversold today while the dollar is radically overbought. Fear permeates every aspect of the euro while greed clouds traders’ fundamental judgment on the dollar. Neither of these emotions, nor the extreme price anomalies they have recently driven, are sustainable. Going long the euro today is as good of bet as going long the SPX was near its March 2009 lows. When everyone expects anything to go to zero, when the entire financial media harps on this incessantly, it is an epic buying opportunity.

Interestingly, I suspect this euro-plunge causality might not be working in the direction everyone assumes. Today everyone thinks Greece fears are driving Europe worries which are hammering the euro, commodities, and stock markets while the dollar rallies as a consequence. But perhaps, just like during the euro’s late-2008 plunge, the US stock markets are the stealthy dominant driver.

The bottom line is the recent precipitous plunge in the euro was either a panic or panic-like event. It was driven by extreme fear that simply isn’t sustainable. The fate of Greece, or the other small peripheral debtors, is irrelevant. The euro fell too far too fast and hit totally irrational levels that have nothing to do with fundamentals, and everything to do with runaway emotions. Odds are this will soon reverse with a big and fast euro rally.

This has widespread implications for the US dollar, the US stock markets, and commodities stocks. A fast-rallying euro will directly hammer the dollar and calm Europe fears, leading to new stock-market and commodities buying. The commodities stocks, many very oversold thanks to this SPX pullback, have the potential for exceptional gains. But as usual, only the emotionally-neutral contrarians will capitalize.

The Dollar Rally Is Hugely Bullish For Precious Metals
By: Stewart Dougherty
The current Dollar rally proves without question that enormous sums of money are running to safety. Big Money knows that the Dollar does not represent genuine safety, but it is the only storm port it knows, at least for now. What is significant is that gold has risen from $250 to $1,200 per ounce without Big Money; that move was engineered by Little Money, which is early, quiet and smart. When Big Money wakes up to the paucity of viable options, and sees the large opportunity precious metals represent, the flood of money into the sector will become a torrent.

To put the opportunity in context, one statistic is illustrative. At $1,200 per ounce, the total gold reserve of the United States of America is worth around $314 billion. The country’s fiscal year 2010 deficit is projected to be $1.6 trillion. In other words, this year’s deficit will amount to more than FIVE TIMES the value of the nation’s gold. To fund the deficit, the government and Federal Reserve will have to create that $1.6 trillion out of thin air, and over the next decade, it will have to create, at minimum, an additional $7.5 trillion to cover projected federal deficits. This is above and beyond the existing national debt of $13 trillion, which alone is FORTY-ONE times the value of the nation’s gold.

To put this in another way, the fiscal year 2010 deficit in the United States alone would purchase, at today’s price, 30% of the gold ever mined since the beginning of civilization. In other words, one nation just lost, in one year, the equivalent of one-third of the total global value of the gold that has been mined worldwide over the past 5,000 years. That same nation has promised to lose, over the next decade, far more than the current total value of all gold in existence. Do you think there might be a supply issue when more and more people figure out what is really going on?

Nations throughout the world face the same deficit and debt pandemic. They can print money high into the sky, but they cannot print precious metals. Big Money is going to do its sums, and it is going to like what it sees.

Not to mention that Golden Swans are aloft, and are preparing to land any time. We estimate the probability that America’s Fort Knox gold reserve exists as-stated by the government to be between 0 – 5%. In other words, there is a 95+% probability that some or all of America’s gold is gone. The Federal Reserve’s panic about being audited, and its outright refusal to audit the nation’s gold supply can ONLY be cause for grave concern; or, optimism, if you have traded Federal Reserve Notes for gold. What is the Fed so worried about? America’s gold supply (or what is left of it, if anything) belongs to the people, not The Federal Reserve, the Treasury, JP Morgan Chase, Goldman Sachs, HSBC, the White House, or Congress. Why won’t the government show its citizens their gold? The likely reason is that it is not there any longer, because it was peddled away by a Fed that got in way over its head, and played derivative and swap games that blew up in its face. If that particular Golden Swan comes in for a landing, which we view as inevitable, the price of gold will go in the opposite direction, skyward.

Gold Is In a Classic Cup and Handle Formation Targeting 1,450
Jesse's Café Américain
A "Cup and Handle" is a bullish continuation pattern in an uptrend.

The 'cup' is best shaped as a "U" and the broader the bottom the better. The 'handle' is a retracement when the right side of the 'cup' reaches its prior highs. The handle often resembles a bullish pennant.

The retracement usually does not exceed 1/3 of the advance of the cup to its second high, although it can go as deep as 1/2 in a volatile market.

Here is the daily chart of Gold. It is in a classic cup and handle formation, with the handle having dropped down today near the 1/3 retracement target of 1183. A number of technicians have been watching it form. The advance to a new high, and the subsequent pullback, have made it now worth noting.

The handle has been shaping for four days from the peak at 1249.30. The handle generally takes from four days to two weeks to form before price advances again with fresh buying to retest the resistance around the prior high.

One might watch for the current Comex option expiration to pass next Tuesday, given the large concentration of calls around the 1200 level before gold can make its move higher. There is always the possibility of a counter squeeze, but it is difficult to fight paper with paper given the wide availablility of derivatives, and the laxness of regulation by the CFTC despite recent noises made about reform. Nothing has changed yet.

Thursday, May 20, 2010

Gold falls Victim To CRIMEX Options FRAUD

"I firmly believe the Fed (via swaps) financed the ECB for today’s intervention in the euro under the assumption that if they did not, a second move down 1000 points would occur."
-Jim Sinclair

On May 11 I suggested the ECB would use US Dollar swaps to defend the Euro and squeeze the speculators betting against the European Common Currency. Has this squeeze begun, and for how long can it last?

Currency interventions are almost always unsuccessful in the long wrong. Their impact is generally short and swift, and ONLY buy some time for the currency being defended. Expect the same from this Euro intervention. Unless other nations like Japan, China, and Russia resort to buying the Euro to prop it up can this squeeze gain any traction beyond the short term. They would all have to sell Dollars and buy Euros to have an impact. I can only imagine the line forming to dump Dollar at these prices.

Now let's take a close look at the past couple of days in the Gold market. Recall we expected Gold to drop initially with any drop in the Dollar as the pressure on the Euro was lifted. This certainly has occurred. However, the blatant criminal activity on the CRIMEX that has accompanied the descent in Gold has been not only OBVIOUS, but absolutely absurd.

Below is a chart of Gold for the past three weeks representing the height of the Euro Debt Crisis. Overlayed on this chart in red is the price of the Euro relative to the US Dollar. Clearly, Gold has risen steadily as the Euro has fallen from 1.34. That is until May 14 when the Euro collapsed below 1.25. Strangely, Gold began to fall as the Euro completely fell apart. Why? [The cross hairs on the chart mark this "turning point". Please click on chart to enlarge.]

I don't have an answer, only speculation. My first guess is that the Gold cartel was determined to silence the "canary in the Gold mine" as a continued rapid rise in Gold not only would send the wrong "psychological message" to the public, but it would wipe out a number of the bullion banks hugely short bullion they never owned.

My second guess is that Gold was being sold with other commodities as the Dollar continued to run higher and computer trading algorithms set in motion a dumping of all "commodities" as indexes were rebalanced to compensate for the rising Dollar. [Even though the rising Dollar represented no "value", just a mirror reaction to a crumbling Euro.]

These speculations are both plausible, and we have seen these scenarios many times when Gold threatened to break it's leash and run wild. But how do we explain/understand Gold's performance the past two days in particular?

First, let us note on the chart, Gold relative to the Euro at the time this chart was drawn at 7:30PM est. The Euro is trading at the exact same price now as it was on May 14 at 2AM est., 1.2518. The price of Gold however is significantly lower. On May 14, Gold was trading at 1239.78 vs 1.2518 Euro. And now on May 20, Gold is trading at 1183.60 vs 1.2518 Euro. Gold is trading $56.18 lower today, and the Euro relative to the US Dollar is exactly the same?

Yep, it's right there on the chart, pure, unadulterated price suppression by your US Government backed Gold suppression cabal at the CRIMEX. It's so obvious it all but reaches up off the chart and chokes you. Crime in broad daylight. I would imagine CFTC Chairman Gensler sees nothing, as he is blind as a stump when it comes to the CRIMEX.

To add a little icing on the cake, and broaden the crime being committed, we must take note of the price of Gold calls in the coming May 25th June Gold Options Expiration. This is the real reason the CRIMEX goons are hammering the price of Gold. They have sold far more Gold that they do not own, to cover the demand as the Euro Debt Crisis accelerated, than they could ever hope to deliver if called.

Harvey Organ offered these Gold call position numbers and commentary on his blog Harvey Organ's - The Daily Gold:

In the option department for gold contracts, it is a disaster zone for our cartel members;

In case you hadn't checked yet, the June Options Expiration is coming up next Tuesday, May 25:

price calls
1100 7,105
1150 4,976
1200 18,103 - W-O-W !
1250 4,781
1300 5,306
1400 6,227
1800 5,814 - W-o-w again: at +1800+ !

PLUS +another+ 18,000 (or so, aggregated) from 1155 to 1195.

That sets up a task for the Cartel to take gold down to 1150 if they want to neutralize some 41,000 potential calls for delivery. Alternatively: if they fail, perhaps the melt-up will finally start. High stakes...

This is the reason for gold's relentless hits by our cartel members are they desperately try and shake the gold bugs from taking delivery.

This is very ominous indeed.

This is blatant THEFT. There is no other word for it. The Gold cartel willingly sold futures contracts to buyers with no Gold backing them up.

This in and of itself is a crime in any part of society. It's as if I walked up to you on the street as you admired a Lamborghini, and offered to sell it to you because I thought you liked it, but I DON'T OWN THE CAR OR EVEN KNOW THE OWNER. It is against the law to sell something you don't own in probably EVERY corner of the World. It's called FRAUD...except on Wall Street.

Now that the price has risen by as much as $100 an ounce, and these contract holders can now purchase a 100 ounce bar of Gold at a $100 an ounce discount, the Crimex goons are not happy. They want to take their Gold bars they don't own, AND YOUR PROFITS and go home. What a great business!

Can you imagine the losses these goons face if Gold were to close at expiration OVER $1250 an ounce and every one of these contracts stood for delivery? Not only would they have to go into the market and buy the Gold to make delivery, but they'd be paying upwards of $100 an ounce more for it than they "sold" it for when they opened the contract. With the "physical" Gold market tightening by the day, their buying to cover their illegal short would only drive the price of Gold higher [or it should in a real market].

This is why there is a $56 disconnect in the price of Gold vs the Euro this evening. With options expiration looming, and the cartel facing losses in the BILLIONS, a raid on the price of Gold that flies in the face of global financial events today only makes sense in the context of the crime that has been, and is being, committed.

The CFTC is supposed to prevent this sort of market manipulation and theft. It is their JOB to protect investors. What about investors that bet on a rising Gold price, were correct, and now have to watch their profits being stolen from them because the seller can't/won't deliver on his contract with the buyer? We are all witness to this crime. How many times in the past 10 years have we been witness to this crime? How can this government of ours demand justice for terrorists, and ignore justice for investors being terrorized by a criminal Gold cabal operating on Wall Street?

If you need any more proof that there is next to no Gold available in quantity for sale in the world today, look no further than this weeks action at the CRIMEX. Take advantage of these discount prices an snap up any bullion you can find. An explosion in the price of Gold is just up ahead.

Another observation I made today that is a bit befuddling, but understandable when put in the context of the looming June Gold Options Expiration, is Golds reaction to the losses in the equity markets the past three days.

On May 6, the DOW was down almost 1000 points before closing down 347 points on the day. On May 6, in reaction to this carnage in the equities markets, Gold closed up $33 on the day. TODAY, the DOW closed down 376 points, and Gold LOST $14? Say what? Yes, that is a bit odd isn't it? Particularly when you consider todays "shocking" INCREASE in new jobless claims. The difference is easily explained...there was no Gold options expiration looming on May 6.

F***ing CRIMINAL! What more can you say? That's simple...BUY!

Shock increase in US unemployment
Alexandra Frean, US Business Correspondent, Times Online
New claims for unemployment benefit in the US rose unexpectedly last week, leading to fears that the job market could prove one of the biggest barriers to economic recovery.

The US Labor Department said that new jobless claims rose to 471,000 for the week ending May 15, an increase of 25,000 from the previous week’s revised figure of 446,000 and the largest rise in three months.

The four-week moving average of claims was 453,500, an increase of 3,000 from the previous week’s unrevised average of 450,500.

The rise broke a four week run of weekly declines in initial claims and confounded economists polled by Thomson Reuters who had been expecting a slight drop in initial claims to 440,000.

The figures further highlight the fragility of the economic recovery as unemployment, currently running at 9.9 per cent, remains one of the biggest obstacles to a sustained domestic recovery.

Dan Greenhaus, chief economic strategist with the New York research firm Miller Tabak & Co, said that the level of jobless claims was higher than anticipated, given the length of time of the recovery.

“We remain concerned about income growth and stabilisation in the pace of equity market appreciation, both of which are likely to slow the pace of consumption in the coming quarters,” he said.

Ian Shepherdson, chief US economist, described the latest jobless figures as “horrible”.

As the Labor Department said there were no special factors lifting claims, “we are left with the uncomfortable possibility that the trend in claims has not only stopped falling, but may be turning higher”, he said.

THERE IS NO RECOVERY, it all a bald faced lie, and today's claims number is proof. I have not believed for one minute that there was, or has been a recovery. I a very short time I am going to relish the Oracle Of Orwell eating these words: "We avoided a second Great Depression." The again may they did avoid a second Great Depression, only to walk smack into The GREATER Depression. America has been lied to, and boy is she getting pissed!

The Pitchfork Primaries: Will Washington Get the Message?
By David Von Drehle
The kelly green golf course, the limpid lap pool, the khaki slacks and crisp sundresses all seemed to murmur Establishment, but unhappiness is so widespread this year that revolutions are stirring in the strangest places. At a country club in Bowling Green, Ky., a handsome ophthalmologist named Rand Paul lobbed another missile Tuesday night toward the battered fortress of Washington's elite. "I have a message, a message from the Tea Party," Paul announced after crushing the old guard's favored candidate for his state's Republican Senate nomination. "A message that is loud and clear and does not mince words: We have come to take our government back."

Before the votes were counted May 18 in Kentucky, Pennsylvania and Arkansas, a few jaded members of the capital's insider clique — the Permanent Party — still sniffed that they'd heard all this before. In 1994, in 1980, in 1966. Someone's always coming to take the government back. Ho-hum.

But no one was yawning the morning after, as the insistent notes of rebellion throbbed on the hollow drum of official power. The natives are restless. Americans of all persuasions at last agree on something. It is a message to their leaders that starts with F and ends with u.,8599,1990574,00.html

The German Government Has Had Enough
Courtesy of Karl Denninger at The Market Ticker
If you thought the German government was going to be a lapdog for Sarcozy, or worse, was going to fellate Brussels and the ECB, you got a rude shock today.
It appears that the German Government has just plain had enough of the crap that the banksters have tried to pull, and has decided to do what Barack Obama should have done in early 2009.That is:

No more naked credit crap, especially against sovereigns but not only against sovereigns. No insurable interest, no CDS - period.

Naked shorting will now be actually stopped in 10 leading financial institutions.

Germany has had it with naked shorting of Gold, and specifically noted bank manipulation of gold prices via naked shorts beyond intent or ability to deliver.

Germany has also said that they're not going to permit Euro derivatives that are not a "bonafide" FX hedge. That is, no more naked bets on Euro movements either.

Hedge funds are going to be regulated, position size limits mandated and enforced, reporting enhanced and a transaction tax is coming.

It's about damn time.Oh, and it appears that instead of telling all the banksters what they were going to do and "getting permission" first, or even discussing it with other governments, the German Government did what all governments should do - make up your mind and then do it without giving a good damn whether the banksters or other governments like it - and without giving them input into the decision or notice that it's coming.

The bid rigging, the game-playing and the rest are all a bunch of crap. I've been hollering about this now for more than three years and yet our governmentspends it's time fellating the bankers and their dogs instead of enforcing the law.It is illegal to defraud people.It is illegal to rig markets, including the massive bid-rigging that I wrote about this morning, the Jefferson County Alabama scam and dozens if not hundreds more - all committed, it is alleged (and in some cases proved) by the major banks.It is illegal to short stocks with no intention or ability to deliver.And it is illegal to bribe government officials, no matter how you accomplish it.These are not "isolated incidents" or even a pattern of conduct - as the bid-rigging report this morning makes clear ripping people off has become an institutionalized practice and policy throughout the entire banking system.Many said that the Germans were not "really" arm-twisted by Sarcozy and the French Banking interests a week or so back. I think we can put that to rest here and now, as it's pretty clear that the truth is something else entirely.

Now Barack, about your willingness to get up off your knees and kick these banksters in the nuts?Better late than never.

I just learned that my US Senator, Kay Hagan [D-NC] voted against the Vitter Amendment in the Senate to Audit the Fed. I'd like to share the letter I sent to her in regard to her failure to uphold her oath of office:

Senator Hagan,

It came to my attention today that you chose to vote against the Vitter Amendment to audit the Federal Reserve. How unfortunate for America.

As a Senator in the US Government you have taken an oath of office to uphold and protect the US Constitution. By voting against the Vitter Amendment you stand derelict in your duties as a US Senator and in direct conflict with the wishes of the overwhelming majority of the public, not to mention 2/3 of US Congressman that support Congresman Ron Paul's seperate audit the Fed bill.

The US Federal Reserve by itself is an unconstitutional entity. Nowhere in the Constitution are there provisions for a "private central bank" to control the money supply of the United States. In fact, the Constitution is clear in demanding that ALL of the nation's money is to be backed by Gold and Silver. The Federal Reserve notes we pretend are money today are nothing more than colored pieces of paper representing US Government DEBT, and it's promise to repay.

By voting no you show your support for an un-Constitutional Federal Reserve shaded in secrecy. The agency will be allowed to continue printing money at will without Congressional oversight, distribute the money to its friends and withhold it from its enemies, and do so at the whims of a very small group of people. This is so very dangerous it simply baffles me any Senator could vote against. But like Ron Paul says - the government could not spend money at will (i.e. get re-elected) or fight oil wars or run up the deficit if it was not for the ability of the Federal Reserve to print un-Constitutional money.

As America falls further into the sink-hole of her $13 TRILLION and growing DEBT, you can look in the mirror each morning and see someone who supports the destruction of her Country. Your no vote on the Vitter Amendment means a continuation of fiat American currency. It means a continuation of members of Congress to disavow their oaths of office to uphold the Constitution and hard money (based on gold and silver). Therefore, it will lead to devaluation of the U.S. dollar, higher inflation, a currency crisis, and a huge runup in gold prices.

Your no vote on the Vitter Amendment vote is a sad indication of what is ahead for America - a loss of sovereignty, and a devaluation of our currency. Keep your head stuck in the sand, in time you will be held accountable for your inaction on this crucial issue of auditing the US Federal Reserve...the real root of all the financial ills in America [and the World] today.

God Bless Anerica,

-greg maurer

Tuesday, May 18, 2010

Up Is Down, and Down Is Up

I think Jim Sinclair said it best last evening when he commented for his readers on yesterdays Gold action:

Tomorrow is the first day Greece receives a tranche of emergency funding which of course caused some euro short covering from below 1.2236 to the present 1.2394. Recall I gave you the 121 1/2 to 122 1/2 as support under the break of 126.

The present relationship, although short term, is that gold is moving in the same direction, of the US dollar. That means that as the US dollar falls markets interpret that as a relief of the euro crisis which results in longs taking profits and shorts establishing positions in gold. A softer dollar today as a product of short covering in the euro for very modest technical and fundamental tidbits means temporarily lower gold as the euro crisis has caused a rush to gold by euro holders. That relationship will stop, but the euro must cease first.

As I explained to you in detail, the next target of credit default derivatives after battering the euro is to batter the US dollar.

After the euro is done within a few sessions the relationship between the dollar and gold will return to inverse in a very big way. This I assure you. With more than 50 years in markets you learn a few things about the madness that goes on.

Clearly, the US Dollar's "strength" over the past 30 days can be directly attributed to the weakness in the Euro. This is the underlying fallacy of the rush into Dollars as a "safe-haven". The only other choice currency traders had was Gold, and obviously, many chose Gold over the past 30 days in spite of the Dollars rise.

Gold is now rising in ALL major currencies. This can not be dismissed. However, because Gold has been rising along with the Dollar "recently", it would only stand to reason that as the Dollar begins to roll over as pressure on the Euro eases, Gold would dip in price also. But only temporarily.

The inverse relationship of Gold to the Dollar remains intact, it has only temporarily been skewed by the crisis in the Euro. Note that as the Dollar has risen over the past month, commodities prices in general have fallen, particularly Oil and Copper. Commodities have maintained their inverse relationship to the Dollar. Noteworthy also are the headwinds Silver has faced as it has tried to keep pace with Gold.

Gold is too often regarded as a commodity, and not a currency, and in the past has fallen with the CRB Index as the Dollar has risen. Not so anymore as the currency characteristics of Gold move to the forefront. However as the Dollar "rally" reached blow-off levels this week, Gold came under pressure with all the commodities. The disconnect between the inverse of the Dollar and Gold is about to be reestablished as this false rally in the Dollar receives the hatchet job it much deserves.

In this instance, Silver may pick up the leadership role in the Precious Metals here. I still expect Gold to peak in this Spring upleg near 1300, with Silver hitting new bull-run highs in the low 20s. The Precious Metals typically rest through the month of June into July. It remains to be seen if 2010 will be a "typical year" for the Precious Metals. That matter rests squarely on the misfortunes of the US Dollar going forward from here.

Wholesale prices dip 0.1 percent in April
WASHINGTON (AP) -- Prices at the wholesale level fell in April, reflecting declines in energy and food.

The Labor Department said Tuesday that wholesale prices edged down 0.1 percent last month, the second decline in the past three months. Core inflation, which excludes energy and food, rose 0.2 percent, slightly faster than expected. But over the past year, core prices are up just 1 percent.

The absence of inflation pressures means the Federal Reserve can continue to keep interest rates at record lows to bolster the economic recovery.

The financial news media never fail to amuse me. Today we are lead to believe that inflation at the wholesale level [costs to manufacture] are down. The "headline number" says so. What is amusing is how this month's "core" number is overlooked, and dismissed.

In past inflation reports, a "core" number that is smaller than the "headline" number is often used to dismiss a "worse than expected" headline number. The core number is always used as a "true reflection" [so they say] of inflation because it excludes food and energy costs [because, of course, nobody uses food and energy]. So when the headline number reports high inflation, the core number is trotted forward to make it go away.

This month, core inflation is higher than headline inflation. In other words, excluding food and energy, inflation was UP, not down. But of course, our government spoon fed media does not want to give the public the "impression" that prices are rising, so they use the "least reflective" number in their headline to mislead you into believing the opposite of what's true. This is known as Orwellian Reporting. Up is down, and down is up... see how simple it is.

They then expand on their Orwellian broadcast by throwing in a couple of lines of misdirection to quell any "inflation expectations" the public might have:

"But over the past year, core prices are up just 1 percent.

The absence of inflation pressures means the Federal Reserve can continue to keep interest rates at record lows to bolster the economic recovery."

Core prices may be up "just" 1 percent, but wholesale price are up 5.5%...and that folks is inflationary. The Fed isn't keeping interest rates low to bolster the economy, if that were true the economy would be roaring along at a breakneck pace. The Fed is keeping interest rates low for ONLY one reason: To keep the borrowing costs on $13 TRILLION of debt low.

The Fed is desperate to get some inflation into the financial system. It is the ONLY way they can hope to make a dent in the federal governments expanding debt burden. This debt can NEVER be repaid, but it can be inflated away by devaluing the currency.

The Fed and Treasury are facing a very serious problem hidden within this $13 TRILLION debt mountain. 40% of that debt is financed for one year or less. The Treasury holds the biggest adjustable rate loan in the history of the planet. Rolling over 40% of $13 TRILLION annually will get VERY expensive to finance if/when interest rates start to rise. By making excuses for the Fed to keep interest rates low because "core" inflation is just 1%, the illusion that America can easily "manage" her debt is perpetuated to a gullible public.

In essence, the Fed has to keep inflation expectations low, in the hopes that this will keep interest rates low, so that the Treasury can keep it's borrowing costs low. This charade can not last too much longer. America's ever expanding debt will see to that.

Do you see now why today's PPI report is so amusing. The financial press dodges the truth and perpetuates a myth all in three paragraphs. The sad part is how so many people believe the reporting. It's also amusing that one of Greece's overriding debt issues is that it has so much "short maturity" debt to roll over, and it can no longer afford the costs to roll over that debt. This is primarily why the EU and IMF had to bailout Greece. It's not so amusing when one stops to consider, who is going to bail out the USA?

US faces one of biggest budget crunches in world – IMF
By Edmund Conway
Earlier this week, the Bank of England Governor, Mervyn King, irked US authorities by pointing out that even the world’s economic superpower has a major fiscal problem -“even the United States, the world’s largest economy, has a very large fiscal deficit” were his words. They were rather vague, but by happy coincidence the International Monetary Fund has chosen to flesh out the issue today. Unfortunately this is a rather long post with a few chunky tables, but it is worth spending a bit of time with – the IMF analysis is fascinating.

"Gold Is Increasingly Being Viewed As A Currency Of Its Own"
By David Rosenberg
Here’s the deal on gold. When we had the post-Lehman collapse, gold fell from $900 to $720 an ounce but it still managed to outperform other commodities and rise in many other currencies
, outside the U.S. dollar. That post-Lehman collapse phase was a giant margin call where investors sold their winners, like precious metals, and on top that, there was insatiable appetite for dollars from the global banking system caught short of greenbacks.

What is happening today is truly fascinating. Gold has broken out to the upside even as the U.S. dollar has done likewise on the back of a renewed flight-to-safety bid. What this means, of course, is that gold has managed to hit new highs even as, (i) the U.S. dollar has risen, which means gold is breaking out against all major currencies; and, (ii) other industrial commodities, such as oil and copper, have slumped from their recent highs. So what this all means is that gold is no longer being considered as part of a resource complex that is outperforming the segment but is increasingly being viewed as a currency of its own.

Moreover, with the growth rate of fiat currencies globally being met with a skeptical eye by investors, especially now that we know that if the ECB, of all central banks, can engage in debt monetization (those clinging to the belief that this was modeled after the Bundesbank have been clearly duped), the one thing we do know about gold is that most of it is already above ground and that production peaked a decade ago. In other words, investors have more faith in what the shape and direction of the supply curve for bullion looks like relative to individual country money supply growth. This is why deflation is good for gold — the reflationary efforts provide a big boost. Even without the interventionist efforts to monetize the debts, as long as policy rates are near-zero, gold leasing rates will do likewise.

While FDR fixed the dollar price of gold in the 1930s, we know that bullion doubled in Sterling terms during that deflationary cycle. Gold is a hedge against instability of all kinds — don’t think for a second that deflation does not engender instability whether it be financial, economic or political. To be sure, gold is also a hedge against inflation — but that is going to come much, much later and will be the icing on the cake.

$3,000 gold price “may yet prove conservative"
by Prieur du Plessis
Although gold bullion is both a commodity and currency, it has lately become the world’s currency of choice, i.e. a vote of no confidence in fiat paper. This is evident in the fact that the gold price has not only just made an all-time high in US dollar terms ($1,249 on Friday), but also in just about every other currency one cares to mention.

David Rosenberg, chief economist and strategist of Gluskin Sheff & Associates, shares my enthusiasm for the “barbarous relic”, as it was once described. “While I am concerned near-term that gold is overbought and could be ripe for a setback; however, unlike the equity market, bullion is in a secular bull market, which means dips, when they occur, are to be bought. Gold can trade down to $1,130 an ounce and none of the trendlines would be broken,” he said.

Here is the real interesting part of his analysis: “More to the point, secular bull markets usually end in parabolic blow-offs and we are nowhere near that point... And, as we have said in the past, if central banks were ever to be compelled to hold the same share of gold in reserves to back up their respective monetary aggregates, the gold price would rise to $3,000 an ounce.”

Rosenberg concluded: “Believe it or not, $3,000 an ounce on gold may yet prove to be a conservative forecast. If the gold price to world GDP ratio were to ever scale up to the peak three decades ago, it would imply an ultimate peak of $5,300 an ounce. Even better, if the relationship between gold and the M3 money measure where to revert to the 1990 high, gold would move to $5,700 an ounce. A more cautious projection would merely put gold on the same footing as the CPI, and heading back to the previous peaks in this ratio would suggest $2,300 as the peak in gold – only a double from here. Or perhaps the gold price-M1 ratio is one that should be considered and even here gold would go to $3,100 per ounce under the proviso that prior highs get re-established.”

“We Don’t Need Central Banks”
an interview with J.S. Kim
Mr. Kim, in your point of view our current fiat money system does not only belong to the root causes for the financial/economic crisis we’re going through, but also that it is fraudulent per se. Why so?

Well, the reason I believe it’s fraudulent is because our current money system is a system that creates money as debt. If we had no debts in our global monetary system, no money could exist. That’s a fairly ludicrous concept if you think about it. It’s also a system in which central banks are allowed to print money – and when I say “print money” I use this term very loosely, because the predominant amount of money today is created as digital debits and credits. So when we think of fiat money, most people think of paper money, but in reality most paper money doesn’t even exist. It’s just digital credits credited from central bank to regional banks to commercial banks and then to the various creditors and debtors in the system. So there’s virtually zero labour that’s being performed and banks charge consumers interest on this absence of labour. Centuries ago, we used to call that usury and fraud. Today we just accept it as that’s the way the system works.

Do you believe that a gold standard could have worked given the real economic growth?

I don’t see why not. The arguments against a gold standard are mostly propelled by bankers that want the status quo and fraud to continue. There’s nothing about a gold standard that would hold back economic growth. In my opinion a gold standard would keep money honest. If we look at some of the most prominent central bankers in the past, for example, Alan Greenspan – he said a gold standard would set interest rates in the economy on its own at a proper rate and regulate economic growth to contribute to steady growth without the boom-and-bust cycles that we experience every few years. I definitely believe that it could work.

Is actual the “fraudulent monetary system” the problem or rather the “fraudulent money men”?

That’s a very interesting question and I’ve heard arguments on both sides. There are people who say it doesn’t matter if money is sound or unsound if criminals run the system as they do today. I disagree with that. Under a sound monetary system, people will ultimately control the value of money. With the unsound system, that we have today, “the money masters”, “the money men” or whatever you want to call them, they control the value of money.

For example if people look to Bretton Woods and say that it is an example of the gold standard not working, that’s simply not true. Under Bretton Woods, a true gold standard never existed. That’s what happened: the bankers were basically lying to the people about maintaining a true gold standard. France called the US bankers’ bluff in not maintaining the gold standard and that’s why it fell apart. So this is an instance where we had a relatively sound monetary system and even though the bankers were committing fraudulent practices under this system, the people ultimately were still able to control the value of money. That’s why President Nixon had to close the gold window – because the people were forcing the bankers to lose money when they committed fraud. And that’s why the financial oligarchs do not want a sound monetary system because they lose control over the value of money.

Saturday, May 15, 2010

Stop Spending To "Secure America's Economic Future"

Obama pushes Wall Street reform with populism
(Reuters) - President Barack Obama on Saturday called for swift Senate action on a sweeping overhaul of Wall Street rules to "secure America's economic future" as a reform bill moves into the decisive stage next week.

With months to go before November's pivotal congressional elections, Obama pressed a populist theme of helping the "folks on Main Street" as he urged approval of tighter regulations to prevent a repeat of the 2008-2009 financial crisis.

Obama's Democrats and opposition Republicans are continuing to haggle over a slew of amendments, but the bill could come up for a vote in the U.S. Senate by the end of next week and is widely expected to pass.

"The reform bill being debated in the Senate will not solve every problem in our financial system -- no bill could," Obama said in his weekly radio and Internet address.

"But what this strong bill will do is important, and I urge the Senate to pass it as soon as possible, so we can secure America's economic future in the 21st century."

75 years of "financial reform" and regulations could not prevent the "near financial collapse" of 2008. How can "swift Senate action" today solve, fix, or prevent further financial catastrophe? It can't, and it won't.

If President Obama is "serious" about securing America's economic future and helping the "folks on Main Street", then it's high time he and all the other self interested political clowns in Washington get serious about the REAL threat to America: Her DEBT.

All the financial reform in the world, no matter the wizardry behind it, is not going to pay off America's DEBT. Financial reform is a smoke screen to deflect attention on the real threat to Americans on Main Street and the country's economic future. It is an obvious political ploy being used in an attempt to win back voters confidence going into the November mid-term elections.

America is suffocating under a mountain of DEBT that grows heavier to bear by the day. Americans know this to be fact. Main Street has cut up its credit cards and embarked on a journey of debt reconciliation.

It was a hard lesson learned. "Spending your way to prosperity" is a one way ticket to the poor house. By cutting spending and paying down debt, Main Street is focused on it's economic future, and doing something about it. Unfortunately, the Federal Government in Washington has failed to see the light.

Washington's answer to every problem is "spend more money". Washington's answer to paying it's debt is to roll the debt over, and pay it later. Printing money and pushing the obligation to repay debt further into the future is not going to "secure America's economic future". It is setting it up for destruction.

Don't believe a word of what the President, members of his administration, or this Congress tells you they are doing to "secure America's economic future" and help the "folks on Main Street". The speak half truths at best, and promote deception at every opportunity.

Without concrete efforts to cut spending and actual debt reduction America's economic future is certain to be bleak. New financial regulations are merely an attempt to find a new way to continue with "business as usual". The financial system is broken beyond repair. It is long past time to develop a new financial system.

Today's financial system is one colossal cluster of multiple generations of debt derivatives. Each generation designed to push the actual payment of the debt further into the future. This is how Greece hid it's debt obligations from the European Monetary Union so that it could qualify for induction. This is how states in America have hidden their annual budget deficits so that they could meet their state laws to have a balanced budget every year. And this is how the banks the taxpayers of America bailed out hide their losses year after year in an effort to show huge profits and earn their money managers obscene annual bonuses.

A world of exploding debt is about to bring a world of hurt upon us all, and no government sponsored financial regulations are going to stop, or slow it down. America, and the World, can not continue down this path of perpetual debt refinancing. Playing Kick The Can has it's limits, and those limits have now been met.

Despite what many might like to believe, America has never made any payments to reduce its debt. The US Government's debt today is the biggest bad loan in World history. We can't possibly pay it off. The government's tax base in "a good year" is ONLY $2.5 TRILLION. Total government debt is now close to $13 TRILLION and rapidly rising towards $14 TRILLION by year end 2010. It would take six years to pay off this debt if 100% of the tax base was directed towards debt reduction. And that assumes interest rates stay at current ridiculously low levels. If interest rates here rose the way have in Greece, the government would have a hard time just paying the interest on this debt.

These debt statistics are the TRUTH the President and his ill conceived administration wish to obscure. This is the creature best kept under the bed, or locked in the closet, and never talked about. Let's talk about "financial regulation" and the recovery that isn't instead. There is no recovery, and there never will be until the US Government admits it has a debt problem. And the first step to dealing with this debt problem isn't raising taxes, it's dealing with the governments addiction to spending. And since we live in "Bailout Nation", good luck with that...

Cash For Clunkers, $3 BILLION. The $300 million 'Cash for Appliances' program. The $6 BILLION Home Star Energy Retrofit Act , aka "cash for caulkers". Three government programs funded by money that doesn't exist. All three small, but prime, examples of a US Government spending addiction. We won't even stop to discuss the "off budget spending" used to fund the "War on Terror". Proposals to spend even more money that doesn't exist appear in the news daily:

NEW YORK ( May 13, 2010 -- President Obama and several members of Congress are drafting legislation for a new, $30 billion fund that would infuse community banks with capital specifically earmarked for small-business lending.

(ABC News) May 14, 2010 -- The Obama administration came out Thursday in support of emergency education funding legislation that would provide $23 billion to preserve teacher jobs in the face of massive impending layoffs across the country.

5/13/10 -- The Senate Appropriations Committee on Thursday moved forward a $59 billion spending bill, even as some panel members expressed skepticism about pouring more funds into the Afghanistan war.

More than half the money – $33.5 billion – would fund President Barack Obama's plan to increase U.S. troops by 30,000 in Afghanistan, as well as continuing military operations in Iraq. Much of the remainder would go toward foreign aid and assistance to Haiti and U.S. states hit by natural disasters.

Staring at you in red ink above is just $112 BILLION in spending proposals made in the space of 48 hours. Do you need any more proof that the US Government has a spending addiction? Our debt hangover will never be overcome unless this spending addiction is eradicated.

Presidents are elected to lead in time of trouble, not hide from the truth. It's long past time Mr. Obama quit blaming Mr. Bush for this nation's spending addiction, and actually do something about it. Shortly, there will be a spending proposal that will be the straw that breaks the bank, reveals the truth about government finances, and sends the US Government into default. This will have history making consequences, and blow today's economic recovery con to smithereens.

US faces inflation or default
By Nouriel Roubini, Project Syndicate
There are only two solutions to the sovereign debt crisis — raise taxes or cut spending — but the political gridlock may prevent either from happening.

Today there is a lot of talk about "de-leveraging", yet the data shows that de-leveraging has barely begun. Debt ratios in the corporate sector as well as households in the US have essentially stabilised at high levels.Image Credit: NIÑO JOSE HEREDIA/©Gulf NewsFinancial crises have occurred very often in history. They are caused by unsustainable bubbles that go bust, and from excessive risk-taking and debt-leveraging by the private sector during the bubble. Then in the wake of, and as part of the response to, the economic downturn, government debts and deficits grow to unsustainable levels that can lead to default or inflation if not corrected. The crisis we are going through now follows this pattern.

Today there is a lot of talk about "de-leveraging", yet the data shows that de-leveraging has barely begun. Debt ratios in the corporate sector as well as households in the US have essentially stabilised at high levels.

At the same time, we are seeing a massive "re-leveraging" of the public sector with budget deficits on the order of 10 per cent of GDP. The IMF and OECD are projecting that the stock of public debt in advanced economies is going to double and reach an average level of 100 per cent of GDP in the coming years.

This is all actually quite typical of what happens in a financial crisis. What explains this re-leveraging? First, "automatic stabilisers" (such as unemployment compensation) came into play during the recession. Second, countercyclical fiscal policies (such as tax cuts and spending increases) have been implemented by government to avoid depression because private demand is collapsing. Third, we have decided to socialise some of the private losses in the financial, corporate and housing sectors and put them on the balance sheet of the government.

GM wants more subprime buyers; will lender agree?
DETROIT (AP) -- If your credit isn't good, General Motors Co. still wants to sell you a car.

The problem is, it can't. At least not in big numbers. That's why the automaker wants more control over its lending again.

GM's top North American executive Mark Reuss, under pressure to quickly sell more cars and boost GM's value as it gets ready to sell stock to the public, said a shortage of subprime lending is holding back sales in the U.S.

So much for learning your lesson... Don't forget, the US Government owns GM.

"A government big enough to give you everything you want is a government big enough to take from you everything you have."
- Thomas Jefferson

The World's Fiat Currency System Risks Collapse
FORT LEE, N.J., May 10 /PRNewswire/ -- The National Inflation Association today released the following inflation update to its http://inflation.usmembers:

On February 12th, NIA released an article entitled, "Greece Distracting from Real Debt Crisis in U.S." in which we said, "We hope that Greece doesn't get bailed out, because a bailout would cause foreign investors to become more irresponsible than ever and create even greater moral hazards. Unfortunately, not only is it likely that Greece will get bailed out, it's possible our own Federal Reserve will get involved. The U.S. Federal Reserve has the ability to make loans to foreign central banks without disclosure to the U.S. public. European banks have already benefited $50 billion from the U.S.'s bailouts of AIG, so it's not out of the realm of possibility that the Federal Reserve will intervene due to eurozone countries being key U.S. trading partners."

NIA was right; late Sunday evening the Federal Reserve announced the re-establishment of U.S. dollar liquidity swap facilities with foreign central banks, as a part of the European Union (EU)'s nearly $1 trillion bailout plan. The Federal Open Market Committee has authorized swap lines through January 2011 with the Bank of Canada, the Bank of England, the European Central Bank (ECB), the Swiss National Bank, and the Bank of Japan.

While the Federal Reserve may say these swap lines are necessary "to help improve liquidity conditions in U.S. dollar funding markets and to prevent the spread of strains to other markets and financial centers," NIA recognizes that this is nothing more than another transfer of wealth from the American middle class to bankers around the world through inflation. This program was originally enacted in 2008 when the Federal Reserve loaned $582.8 billion to foreign central banks without any disclosure of which central banks got the money.

NIA believes it is unconstitutional for the Federal Reserve to make loans to foreign central banks. Most likely, the Federal Reserve was pressured by Wall Street to re-establish the swap facilities because Bank of America, Citigroup, JP Morgan, Goldman Sachs and Morgan Stanley have about $2.5 trillion in exposure to Europe, and Wall Street doesn't want to see their bets go bad.

Not only will Americans now be exposed to the European debt crisis through the Federal Reserve's swap lines, but the U.S. will be giving money away to Europe through the IMF. The IMF is contributing up to 220 billion Euros as a part of the bailout, which equals $283.1 billion at the latest exchange rate. The U.S. represents approximately 20% of IMF funding, which means the bailout is costing U.S. taxpayers $56.7 billion, not including the potential losses from loans made by the Federal Reserve and the inflation it will create.

The moral hazards of the EU bailout are immeasurable. It sets a dangerous precedent that the ECB won't allow any eurozone nations to fail, just like the Federal Reserve won't allow any major financial institutions on Wall Street to fail. Eventually, if you don't allow the free market to punish countries and financial institutions that recklessly speculated and made poor financial decisions, the financial crisis we are preventing will turn into a currency crisis that the western world will never be able to recover from. Although NIA still believes the U.S. dollar will win its race to the bottom with the Euro, we are now at risk of a total collapse of the world's fiat currency system.

Europe Bailout The Worst $1 Trillion Ever Spent his excellent Gartman Letter, trading guru Dennis Gartman asked essentially, What is the propensity of the reserve banks of China and India to add euros to their reserve assets now? We have to think it is somewhat reduced from what it was only a short while ago... On the other hand, what is their propensity to own gold now? Almost certainly it is enhanced.

The numbers are showing it...

Gold is hitting highs in BOTH dollars and euros. In short, paper money really lost credibility over the weekend.

The euro is now a garbage currency. It deserves even less credibility than the U.S. dollar. But the U.S. dollar doesn't deserve a lot of credibility, either...

It's easy to sit in the States and see the problems over there. But the thing is, we have the same problems. We have too much government spending... and we have too many future promises we can't fulfill, like Social Security.

What makes our government's problems that much different than the countries of Europe? They're just ahead of us.

What we need is change... We need countries to commit to changing their ways.

You don't fix a drug addict by giving him more money. He'll go spend it on more drugs. Instead, you need to get him to rehab, to give him a fighting chance to change his ways.

You don't fix someone who's overspent on their credit cards and is living beyond his means by giving him more money. He'll simply get himself deeper in debt. Instead, you need to cut up the credit cards and force him to live lean for a while.

The International Forcaster
$5,000 invested in gold in 1913, the year the Federal Reserve Act was passed, is now worth $287,500.

We want to remind you that less than 1% of Americans own gold and silver or the shares, so we have some upside. Just remember be patient and stay long.