Tuesday, August 10, 2010

Hyperinflation Is At The Door

The Federal Reserve today moved the country one step closer to Hyperinflation in their desperate effort to stay ahead of the perceived threat of a deflationary death spiral for the economy.

The Fed today kept interest rates in their record low range of 0.00% to 0.25% and said they would keep them there for an extended period as they have been for months now. Analyst opinions were mixed as to whether or not the Fed would announce new asset purchases or other supposedly stimulative measures ahead of the Fed announcement this afternoon, so it was a surprise to some at when the Fed announced that they will keep holdings of their securities at the current level (maintain its balance sheet) and reinvest mortgage bond proceeds into government bonds rather than more mortgage debt.

In effect the Fed will be using funds to purchase long dated Treasuries that have seen a dearth of buyers. This in an effort to maintain "demand" for Treasury Debt, and hopefully keep borrowing costs low. This could be summed up as a stealthy move towards "recognized" quantitative easing. It is no secret that the Fed has been buying US Treasury Debt "undercover" for months now and attributing it to purchases by the UK and astonishingly, American "households". Jim Willie lays bare this little game in a recent Internet expose.

U.S. Treasury Bond Fraud and Debt Monetization
By: Jim_Willie_CB

This story is a gem. USTreasury bond issuance exceeds even the gargantuan USGovt deficits. The gap is $1.5 trillion over four years. One could guess that Wall Street is selling bonds and squirreling the money in foreign banks, a basic counterfeit in a syndicate operation. The operation might bring new meaning to monetization. At least a parallel exists. The majority of home mortgages have their income stream used in more than one mortgage bond. That is the real reason why home loan modification is a thin farce. The MERS database conceals the game, but the public has the satisfaction of knowing that MERS has no legal standing. The state courts are declaring no legal standing, and foreclosure procedures are blocked as a result. People cannot be removed from their homes when the database is used in handoffs of notes and titles.

Under Goldman Sachs rule, the USDept Treasury is running some bold kind of racket game, whose purpose is unclear, except clearly that it aint honest. The USGovt borrowing through debt issuance was $142 billion more than the June USGovt federal deficit, which means they are doing more than financing the deficit. They are funding a syndicate. In chronic fashion, excess issuance has been the pattern, as the USGovt has issued $1.5 trillion more in debt securities than its budget deficit in the past four years. During the past 45 months, the USGovt has accumulated an incremental $4.7 trillion in new debt, but the federal budget deficit has grown by $3.2 trillion, much less but still a mammoth amount. Nobody asked why so, and nobody asks where the bond proceeds go. One is left to speculate that a vast bold new syndicate technique is simply selling bonds beyond newly formed debt, stealing the funds as proceeds, and tucking the bonds in foreign locations for syndicate usage on rainy days or retirement days. The June USGovt official budget deficit was logged at $68.4 billion. During the same month, the USGovt borrowed a staggering total of $210.9 billion. These are not refinances of USTreasury debt in rollover. On a consistent basis, the USGovt has borrowed much more in each deficit month than was required to close the deficit and finance the debt accrued. The differential of excess debt issuance for the first six months of 2010 comes to a hefty $290 billion, a pattern in continuance.

Perhaps the US syndicate maestros figure that with large numbers, nobody will notice, or given the hidden monetization, they might as well put the bond presses in hyper-drive. The cumulative data, as well as the mindboggling differential (dotted line) between the two series is shown on the attached chart. Perhaps it is for war funding far in excess of the stated costs, to save embarrassment and questions. Perhaps it is for enormous vertically integrated business investment in Afghanistan for industrial processing of poppy into heroin. Perhaps it is for the heavily rumored underground cities under construction for elite resident purposes. Perhaps it is extra costs for additional new military bases scattered across the globe. Perhaps the answer is simpler, in that it is just being counterfeited and stolen by the financial syndicate led by Goldman Sachs that controls the USGovt financial ministries, and operates criminally with full impunity (except for meager fines). My sincere belief is that all the above are part of the destinations for the money. This is a smoking gun.


So the Fed today admits to a little quantitative easing, but gets away with a whole lot more, but not for long. The cat is out of the bag, and it's tail is on fire. The US Dollar's dead cat bounce reached it's apogee upon the Fed's announcement this afternoon, expect another test of support at 80 on the USDX quickly. Gold and Silver rose furiously on the Fed's announcement before the usual suspects at the bullion banks stepped up to halt the Precious Metals advance. For how much longer can these busted banks prevent the inevitable run on Gold AND Silver?

By: Jim_Willie_CB
Significant numbers of gold futures contracts have settled in cash in London since December. Often the event occurs with a 25% cash bonus incentive. Stories are widespread of gold bullion being borrowed by London from the SPDR exchange traded fund vaults, known by symbol GLD. Also, London short gold futures contracts have routinely been satisfied by GLD shares, a double-sided dirty debauchery of the fund itself. But then again, that is how it was designed. Some recent stories of thefts at the LBMA inventory warehouses have sprung up. The public is being set up in my opinion for a cover story of huge proportions, a false story. They must shield the truth of absent gold & silver supply in inventory. Any story that brings attention to absent inventory supply will aid the gold & silver prices, whether true or not. Whether from theft or huge delivery demand, no matter. Either way, the delivery of gold & silver from the LBMA and COMEX has never been greater, demanded by contract holders. Even the Bank For Intl Settlements has entered the picture, with a mammoth Gold Swap of highly suspicious origin and unstated motive. The gold shortage at bullion banks and the metals exchanges is acute. The dry London gold inventory and extreme pressure to drain the London metals exchange were not a factor one year ago, but now the gold price is pressured upward from pure shortage standpoint. Demand for gold will continue in direct response to the monetary presses that keep running full tilt during monetization (QE2), which will force the gold price to $2000, all in time.

Jim Willie has been interviewed by Max Keiser. I think you will find this interview both informative and entertaining. The interview is in two parts and I strongly suggest you take the time to watch it.

Part 1 http://www.youtube.com/watch?v=RA7q_bDr9eU

Part 2 http://www.youtube.com/watch?v=6k_TPWdM0gI

I have been beating the Deflation myth to death of late, and for good reason. The Deflation myth is a complete load of crap that has reached a crescendo because of a piece in the New York Times last month by the always backwards looking Robert Prechter. He of the backward looking Elliot Wave Theory. If there is going to be a period of Deflation in the US Economy, we have already seen it, and we are now on the cusp of a Hyperinflationary event imho.

Chuck Cohen's recent commentary for Le MetropoleCafe members summed the cry of Deflation up perfectly:

"When the New York Times published its apocalyptic interview with Bob Prechter a month ago, it is as though an invisible switch was flipped on. The mainstream media summarily jumped on the deflationary bandwagon and "deflation," once just a word used only in Scrabble, has now become a core part of everyone's vocabulary. I heard that the on the new immigration tests you must spell and define "deflation" in order to get your citizenship. If you think I am exaggerating, "google" deflation over the past month and check out the results. There might be more references to it than to President Obama, or even Lady Gaga."

Consider food prices. Do these headlines portend Deflation ahead?

Russian export ban tied to drought could boost price of grain this ...‎ - 11 hours ago
The price of America's daily bread and meat could soar this fall as surging wheat prices in anticipation of a Russian ban on exports stoked fears about ...

Canada Wheat Output to Fall 17% After Excessive Rain‎ -BusinessWeek
July 30 (Bloomberg) -- Canada, the world's second-largest wheat exporter, will harvest 17 percent less than a year earlier after unusually wet weather ...

China's Worst Floods Since 1998 to Cut Farm Output, Lift Prices‎Bloomberg - 6 days ago
Chinese Premier Wen Jiabao called on local authorities to strengthen rescue ... Rice production may drop by about 10 percent this year because of floods, ...

Decision Time Looms for Wheat Farmers‎ -Wall Street Journal
On Monday, an Australian commission warned that a hatching of a huge locust plague with the potential to devastate winter crops, including wheat, ...

Of course to hear the US Government tell it, none of us eats, and food prices are irrelevant to consumer prices. Oh, the geniuses that we chose to lead us...over the cliff.

While Gold and Silver Languish, US Dollar Plummets and Other Commodity Prices Soar
By Patrick A. Heller
In the five weeks from June 28 through August 3, the US Dollar Index fell 5.9%!

This Index reports the relative value of the dollar against a basket of other major currencies. Over that time, the dollar has fallen 7.2% against the Euro, 5.3% versus the British pound, 4.4% to the Swiss franc, 4.4% compared to the Australian dollar, 4% versus the Japanese yen, 3.9% against the South Africa rand, and 3.8% to the Chile peso.

The best result for the US dollar when compared to the 22 currencies I regularly track was no change to the India rupee. The dollar declined against the other 21, including 0.3% to the Chinese yuan, 1.1% to the Canadian dollar, and even 1.0% against the Mexican Peso.

In normal markets, when the value of the US dollar plummets so quickly, gold and silver prices take off.

Not this time.

In the same time period, the price of gold was down a significant 4.3% and silver fell 1.4%! This does not make sense. After all, other commodity wholesale prices have soared in US dollar prices during these five weeks:


Mr. Obvious has concluded the the recent suppression in the prices of Gold and Silver are for the express purpose of lending support to those running through the streets crying "Deflation is coming!" Deflation has already paid it's visit, Hyperinflation is standing at the door now. And like the Big Bad Wolf, he's here to huff and puff and blow your financial house down. Protect yourself with Gold and Silver NOW!

Ready, Set, Gold: The Best Months Are Just Ahead
By Frank Holmes
Looking at more than four decades of seasonality, September has been the best month of the year for gold and gold stocks.

The clear trend can be seen on the seasonality chart for spot gold. In a typical year, the September price rises 2.5 percent above the August price. And to make the case even more compelling, the gold price has risen in 17 of the 21 Septembers since 1989, by far the best success ratio of any month of the year.

In September 2009, the gold price jumped nearly 6 percent, well above the long-term average.

September is historically an even better month for gold stocks as measured by the NYSE Arca Gold Miners Index.

After the typically weak months of June and July, the gold miners start moving up in August and make an 8.3% leap in September. In September 2009, the jump was 14.5%. Since 1993, the GDM has been up 12 times in September and down just five times.

The gold price has climbed an average of 12.4% during the 2001-09 seasonal rallies even as the price steadily moved into four digits. As good as that result was, the impact on gold stocks was even stronger – their annual jump averaged more than 26%.

In 2010 the trend could be shaping up right on schedule. From a recent bottom of $1,157 per ounce in late July, spot gold had risen more than 4% through mid-afternoon on August 6 and the TSX/S&P Global Gold Index had gained more than 6%.

Bank of America-Merrill Lynch recently called for $1,300 gold by October-November 2010 as a result of the seasonal demand, and the gold watchers at CIBC World Markets in Toronto see $1,400 gold next year due to strong investment demand and inadequate supply response.

Given the current economic weakness, CIBC pointed out that during the Great Recession, “gold was one of the only investment classes that provided positive returns. This fact will not be forgotten if the next recession materializes."

Its analysts also say that gold equities look relatively cheap compared to bullion, adding that, for the first time ever, some of the big producers are trading at price-earnings ratios below the S&P 500 Index average.

Going back to 1971, when President Nixon ended dollar convertibility into gold and deregulated the price of gold, gold stocks have tended to outperform the S&P 500 when the federal government runs budget deficits. Through 2019, the annual federal deficit is projected to average around $1 trillion, creating the potential for gold stocks to remain an attractive investment relative to the broader market for years to come.

Based on the long-term record, this may be a good time for investors to consider establishing or adding to a gold or gold-stock position in advance of seasonal demand growth. Historical patterns may be a useful guide and improve the chances for investment success, but of course, there are no guarantees that the fall of 2010 will follow the well-established trend.


Inventory Fraud Increases in Silver Market[MUST READ]
By Jeff Nielson
Generally, the supply/demand equation for a commodity is very simple: “supply” is the total amount produced, while “demand” represents consumption. When supply exceeds demand, the remainder is added to inventories, while when demand exceeds supply, the deficit must be taken from inventories.

Reporting of supply and demand for the silver market is totally different. While I originally deferred to such reporting as reflecting the different nature of the silver market, it has now become obvious that the convoluted manner in which supply and demand is reported is simply another deliberate attempt at deceit in this market. In fact, when we look at the numbers closely we see a clumsy sham which should not be able to fool a reasonably perceptive 12-year-old.

Regular readers are already familiar with one facet of this fraud, since I have mentioned it frequently in previous commentaries. All of the “silver” (supposedly) held by bullion-ETFs has been added to silver inventories – the major ruse used to hide the fact that silver inventories are over 90% lower than they were 20 years ago. Since I still get questions and remarks from readers who express doubt about my characterization of this as “fraud”, let me explain this scenario slightly differently.


1 comment:

  1. That's all cool but there's more: twitter.com/squidly77