Tear Down The Wall!

I don't know about you, but this holiday season is wearing me out...

The Precious Metals have been stuck the past two weeks. That is, until today.

BOOMOLA!

Gold and Silver climbed higher through the night and into the early CRIMEX trading as the US Dollar swooned overnight. However, beginning at 6:30AM the Dollar began a surprising rally that lasted throughout the day. The rally in the Dollar however did not undermine the overnight rally in the Precious Metals. It did appear to stop the rally in it's tracks though.

The US Dollar rally off a six week low this morning appears to have been entirely based on weakness in the Euro as both the Japanese Yen and the Chinese Yuan rose today to near 7 week highs versus the US Dollar.

The euro fell against 15 of its 16 major counterparts after the European Central Bank said it failed to fully neutralize the extra liquidity created by its bond purchases for a second time since the program began in May.

Claims that the US Dollar recovered today on rising interest rates is wishful thinking. Interest rates rose to 3.5% on the 10 year treasury note today following a miserable $35BILLION 5-year US Treasury offering.

With US home prices falling for a fourth straight month, and consumer confidence tipping over in December, it is difficult to fathom any strength in the US Dollar today.

The Precious Metals certainly weren't selling off on the Dollars amazing strength today. The TRUTH is out there.

There were countless headlines today touting "record holiday spending" this Christmas season. Tell that to Best Buy. Strangely, none of the holiday spending reports offered numbers that were adjusted for inflation. Growth in spending is just a myth perpetrated by a desperate retail industry in an effort to convince Americans that everybody is "still" spending money...why aren't you?

Best News So Far? Consumers' Holiday Spending Tops Pre-Recession Level‎ - NPR (blog)

Retail sales during holiday season rise 5.5% over last year‎ - Los Angeles Times

Holiday spending nears a record in overtime‎ -msnbc.com

Holiday Retail Sales Surge For Second Straight Year‎ -The Consumerist

Funny, there wasn't much hiring done in December to account for all this spending. Maybe everything just costs more this year, OR maybe the discounts were so deep that Americans couldn't pass up the "bargains". It is doubtful that retailers "giving away merchandise" will amount to much in the way of profits on their bottom lines. Just ask Best Buy.

The REAL story of this week is the one receiving the most ignorance. The interest rate increase that China announced on Christmas Day. If you want to know the real reason why Gold and Silver lifted off today, look no further than this news.

Rising interest rates in China will inevitably lead to a rising Yuan. And as I have shown in the past, a rising Yuan results in a rising Gold price.

Analysis: As China raises rates, don't forget the yuan
(Reuters) - China was Grinch-like in raising interest rates on Christmas Day, but in fact investors have good reasons to be grateful.

The government provided much-needed reassurance that it was determined to rein in price pressures -- and a salutary reminder that more yuan appreciation than the market expects could be in the offing.
http://www.reuters.com/article/idUSTRE6BQ16Q20101227


Richard Russell - We Will Have an Upside Explosion in Gold

+74% later, Wall St. Journal notices silver only to try to talk it down

Class action against Morgan, HSBC specifies silver manipulation mechanism

US FED INDICATES DESPERATION

Gold and Silver were stonewalled for a second day today at downside resistance of their early December highs. The banking cartel aligned against the Precious Metals have thrown everything they've got that is made out of worthless paper at these harbingers of truth to prevent their technical breakouts amidst options expiration in their futures contracts today. Gold and Silver bulls refuse to succumb to these CRIMEX goons now typical monthly efforts to rob futures trades of their deserved profits at options expiration.

Gold and Silver both broke their intermediate downtrend lines yesterday. Gold at $1385 and Silver at $29.25. Today they were forced to retest those down trendlines, did so successfully, and our now poised to race higher into the close of 2010. Though it would be foolish to rule out a take down in the precious Metals from here, it appears unlikely that either metal will move lower from here before year end. Today's strong moves higher in Platinum and Palladium may be a signal of what is to come in the very near term for Gold and Silver...higher prices into the year end.

The fundamental case for owning Precious Metals grows stronger by the day. In case you missed Sunday evening's 60 Minutes expose on the festering Municipal Bond Crisis here in America you can catch up on it here:

State Budgets: The Day of Reckoning
By Steve Kroft
(CBS) By now, just about everyone in the country is aware of the federal deficit problem, but you should know that there is another financial crisis looming involving state and local governments.

It has gotten much less attention because each state has a slightly different story. But in the two years, since the "great recession" wrecked their economies and shriveled their income, the states have collectively spent nearly a half a trillion dollars more than they collected in taxes. There is also a trillion dollar hole iln their public pension funds.

The states have been getting by on billions of dollars in federal stimulus funds, but the day of reckoning is at hand. The debt crisis is already making Wall Street nervous, and some believe that it could derail the recovery, cost a million public employees their jobs and require another big bailout package that no one in Washington wants to talk about.

"The most alarming thing about the state issue is the level of complacency," Meredith Whitney, one of the most respected financial analysts on Wall Street and one of the most influential women in American business, told correspondent Steve Kroft

Whitney made her reputation by warning that the big banks were in big trouble long before the 2008 collapse. Now, she's warning about a financial meltdown in state and local governments.

"It has tentacles as wide as anything I've seen. I think next to housing this is the single most important issue in the United States, and certainly the largest threat to the U.S. economy," she told Kroft.

Asked why people aren't paying attention, Whitney said, "'Cause they don't pay attention until they have to."

Whitney says it's time to start.
http://www.cbsnews.com/stories/2010/12/19/60minutes/main7166220.shtml?tag=currentVideoInfo;segmentTitle

Of course the US Government would dispute MS. Whitney's claim. A mushrooming municipal bond crisis threatens the confidence of the American public that the US Government has stroked delicately and endlessly since the global financial crisis broke in 2007. If the government losses the confidence of the American public to "always fix things", then all bets are off, and financial catastrophe becomes a real possibility. Therefore, the US Government sent it's financial media lapdog CNBC out in it's defense immediately on Monday morning. "Municipal Bond Crisis? What Municipal Bond Crisis?"

Muni Bond Crisis Overblown?[CNBC VIDEO]
Benjamin Thompson of Samson Capital tells CNBC why he thinks Meredith Whitney is overstating the municipal bond crisis.
http://www.cnbc.com/id/15840232?video=1704670814&play=1

Well of course the muni-bond crisis is all just a figment of everybody's overactive imagination. How can there be a muni-bond crisis? We are in the middle of an economic recovery!

...EXACTLY.

U.S. Faces Tough Future Without Build America Bonds
By Lisa Lambert
WASHINGTON (Reuters) - U.S. state and local governments face a surge in borrowing costs after lawmakers refused to renew the federally subsidized Build America Bonds program used to fund infrastructure projects and create jobs.

Lawmakers had considered the $858 billion deal on the so-called Bush tax cuts the best vehicle for extending BABs, which expire with the stimulus plan at year end. The U.S. House of Representatives killed the possibility of an extension when it approved the deal late Thursday. President Barack Obama signed it into law on Friday.

With the end of BABs, the $2.8 trillion municipal bond market could see depressed prices and greater volatility. The bonds made up more than a quarter of all new municipal debt sold this year and have been largely attributed with restarting stalled municipal credit markets.
http://abcnews.go.com/Business/wireStory?id=12422021

Headlines Confirming Troubled Times Are Here
By Greg Hunter’s USAWatchdog.com
Some people see the Internet as an electronic world of wires and computers run at speeds measured in nanoseconds. I tend to see the Internet as an electronic extension of human biology. Sample enough of the Internet in the right places and you can get a snapshot of what people are generally feeling. One of my own readers, Alyce, commented recently, “It’s easy for people to become lulled into a false sense of security. The term normalcy bias keeps popping up in articles I read lately. It is when people interpret warnings in the most optimistic way possible. Happens all the time…human nature to believe that since a disaster has never occurred in one’s lifetime, that it just never will. Trust your instincts.”
http://usawatchdog.com/news-headlines-confirm-troubled-economic-times-are-here/

U.S. Fed balance sheet swells on bond purchase

Position limits proposal under private scrutiny

Are U.S. metal-shorting banks moving to hide their positions outside the country?
Dear Friend of GATA and Gold (and Silver):
GATA Director Adrian Douglas, publisher of the Market Force Analysis letter, today published a letter he has sent to U.S. Commodity Futures Trading Commission member Bart Chilton, disclosing that even as the gold and silver short positions of U.S. banks have been declining over the last year, gold and silver short positions lately have been increasing dramatically among banks headquartered outside the United States. The strong implication is that the major shorting banks are moving their activities behind foreign fronts, as your secretary/treasurer speculated a week ago well could happen:
http://www.gata.org/node/9420

Douglas' letter to Chilton is headlined "Letter to CFTC Commissioner Chilton on Trends in Bullion Bank Gold and Silver Short Positions" and has been posted at the Market Force Analysis Internet site here:
https://marketforceanalysis.com/article/latest_article_112010.html

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

Copper hits record high; gold ends with gains

Food stamp use spikes: One in seven rely on them

Fed Authorizes Extension Of US Dollar Swaps With Foreign Banks
By Jeff Bater
WASHINGTON (Dow Jones)--The Federal Reserve authorized an extension of dollar swap lines with major foreign central banks, reviving a rescue program set up to ease strains from the European debt crisis.

The Fed on Tuesday announced an extension into next summer of its temporary U.S. dollar liquidity swap arrangements with the Bank of Canada, the Bank of England, the European Central Bank, the Bank of Japan, and the Swiss National Bank.

A Fed press release Tuesday said the Federal Open Market Committee has authorized an extension through Aug. 1, 2011.

The swap arrangements were established in May 2010 and had been authorized through January 2011. The program was set up as fears rose that Greece's debt crisis could sweep through other European countries. European banks need dollars to lend to companies across Europe.

The swap facilities announced in May followed re-emergence of strains in short-term funding markets in Europe. The Fed said the tool is designed to improve liquidity conditions in global money markets and to minimize the risk that strains abroad could spread to U.S. markets.

Under swap lines, the Fed makes loans to foreign central banks, which in turn use the funds to make U.S. dollar loans to financial institutions in their home markets.
http://online.wsj.com/article/BT-CO-20101221-706641.html

The global financial crisis must not be getting better as widely advertised by the US authorities. Could these "swaps" be being extended to put newly printed US Dollars into the hands of foreign central banks to buy US Treasuries as the Fed's efforts to buy them and keep interest rates low appears to be failing?

Let's look at what happened in the currency and bond markets following the introduction of these "emergency swap agreements" back in mid-May of this year.

Now this is interesting:

Following the announcement by the US Federal Reserve that "emergency dollar swap arrangements" with foreign central banks was announced May 11, 2010, interest rates on the 10 year US Treasury note began to fall, and fall precipitously through the summer, to reach new all-time lows in October at 2.40.

You can see a chart of 10-year treasury yields here: http://finance.yahoo.com/echarts?s=%5ETNX+Interactive#chart1:symbol=^tnx;range=1y;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

It is noteworthy that the yield on the 10-year US Treasury bottomed as the US Fed announced their QE2 plans to buy US Debt the day after the November mid-term elections.

It is also noteworthy that following the Fed's "emergency swap arrangements" announcement in mid-May 2010, that the Greek Debt inspired rally in the US Dollar soon peaked and rolled over at the beginning of June 2010. The US Dollar fell over the summer and bottomed with the Fed's QE2 announcement following the November mid-term elections.

You can see a chart of the US Dollar here: http://stockcharts.com/h-sc/ui?s=%24usd

With this announcement that these "temporary" emergency swap agreements that were due to expire in January 2011 have been extended into August 2011, has the Fed indicated a desperation in their efforts to control interest rates? Is the recent Irish Debt crisis induced rally in the US Dollar really just a dead cat bounce in a secular bear market descent in the US Dollar?

Are interest rates on US Debt about to be forced lower through stealth buying by foreign central banks with money freshly printed by the Fed? Is the US Dollar about to be forced lower by the printing presses at the Fed? Are the prices of the Precious Metals about to explode?

It would appear that the answer to all these questions is YES!

The Reality Is...

Upon looking at California’s books, newly elected Governor Jerry Brown said, “We've been living in fantasy land. It is much worse than I thought. I'm shocked.”

U.S. House Passes Tax-Cut Extension, Sends to Obama
Ryan J. Donmoyer and Peter Cohn
The U.S. Congress passed an $858 billion bill extending for two years all Bush-era tax cuts, sending the measure to President Barack Obama for his signature.

The vote concluded a debate over the expiring tax cuts that dominated the 2008 and 2010 U.S. election campaigns. As the renewed tax cuts will expire at the end of 2012 they are certain to be a focus of the next presidential campaign.

Majorities of both parties supported the bill. Voting in favor were 139 Democrats and 138 Republicans, while 112 Democrats and 36 Republicans voted against it. Eight lawmakers didn’t vote.
http://finance.yahoo.com/news/US-House-Passes-TaxCut-bloomberg-3692812945.html?x=0&sec=topStories&pos=1&asset=&ccode=

And there you have it, a Congressional sponsored increase in the ballooning debt of a fiscally inept nation. The US Congress has knowingly passed into law a tax package that guarantees a further increase in the Federal deficit at at time when nations around the world are being forced to increase taxes and slash spending in an effort to prevent sovereign debt default. How can the US Government get away with this? By with their printing presses, of course.

Does the US Government really believe they can avoid sovereign debt default themselves by simply printing money and borrowing to buy their own debt?

Stop and think how completely moronic the US government really is. Not only do they print money like it is going out of style, but they pay interest on it to borrow it? How freaking stoopid is this arrangement? Seriously? The Fed prints money to buy debt from the Treasury, and the Treasury pays the Fed interest on the money they print? Why doesn't the Treasury just print the money themselves and cut out the middleman, the Fed?

But that is another can of worms altogether. The fact is, this "tax package" [ IT IS NOT A TAX CUT] is about as Gold and Silver positive as any government legislation could ever unwittingly be.

Unfortunately there is a delusion in the bond markets right now that proving to be "temporarily" a negative for Gold and Silver. Interest rates have been rising. The reason they have been rising has been open to much debate.

The financial media talking heads proclaim rising interest rates as a "sign of growth" for the economy moving forward because of all the "jobs that will be created" because this tax package was passed. And of course, let us not forget the "improved signs of growth" going forward because this "tax package" was passed. Both jobs growth and economic growth are based on wishful thinking. Where is all the jobs growth and economic growth that was promised when the Bush tax Cuts were first enacted? If these Bush tax Cuts have been so helpful, why must they be extended?

The answer to that question is simple. If the Bush tax Cuts were allowed to expire, the result would have been a tax INCREASE. And a tax increase in a failing economy would only crush what little "government spending induced" economy we have presently. The passage of this "tax package" will not improve a damn thing in jobs growth or economic growth. With luck it will help maintain the illusion of an economic recovery, which itself will be difficult, as there really isn't one.

This new "tax package" could not be more US Dollar negative. Interest rates are not rising because of "signs of growth" going forward. Interest rates are rising because the US Governments ability to repay it's debt is now being called into question from EVERY corner of the world. Interest rates are rising in the US for exactly the same reasons interest rates rose in Greece, and precipitated a debt crisis for the Greek government and it's sister Euro nations last Fall. Interest rates are rising on US Government debt for exactly the same reasons interest rates rose in Ireland, and precipitated a debt crisis for the Irish government and it's sister Euro nations this Fall.

Interest rates rise for heavily indebted nations when their ability to pay back their present debts come into question as their need for more and future debt is revealed. The US is the WORLD"S most indebted nation, and is seen adding to it's debt load by the BILLIONS every week of every month for as far into the future as anyone dares to look.

Interest rates are not rising in the US because of a rosy economic growth picture, the US economy is stagnant at best. Interest rates on US Government debt are rising because the US debt burden is colossal, and rising, ...with no honest effort to contain it. US Interest rates on government debt are rising because financial Armageddon is staring the US government in the face, and the only bullets she has left in her defense are more debt.

The Fat Lady Of Debt is about to sing people. And with Gold and Silver as the harbinger of that TRUTH, all efforts by the financial media are to obfuscate that TRUTH, and foster an environment for the continuation of the CRIMEX Precious Metals Fraud.

Be right, and sit tight. The TRUTH is on your side.

I've screamed at my quote screen enough this week. I think I'll add some Palladium to my portfolio this morning...and maybe a few more shares of my favorite junior mining stocks. Join me.

U.S. Tax Policy Will Push Gold and Silver Much Higher
by James West
The Obama administration’s inability to obtain an improved tax revenue for federal coffers is the latest farce in the comic American tragedy unfolding before our very eyes. This government appears incapable of understanding that printing increasing amounts of currency while realizing deteriorating tax revenues and generally lethargic economic conditions is the direct path toward default.

It would be excellent entertainment for the rest of us were it not for the fact that this bumbling government is likely to precipitate an even broader economic meltdown than that of 2008 with its arrogant insistence on unilateral financial dis-incentives. Future generations are now further encumbered by a debt and deficit load that is growing exponentially.

Forget the feel-good reports coming out the main stream media. They are nothing more than post-meal flatulence from a body fed on the gassy and rosy statistics generated by payroll economists. Ridiculous new configurations in the English language are evidence of the totality with which financial journalism has been compromised. Who ever heard of something so utterly vapid and oxymoronic as a “jobless recovery”?

Bankruptcies loom at the state, county and municipal level throughout the U.S. Even wealthy jurisdictions, like New York’s Nassau County, home to some of the most expensive schools in the United States, faces a fiscal crisis.

California is battling insolvency on an almost daily basis, and the U.S. Federal Reserve is forced to buy T-bills from the Treasury department just so the government can continue kiting checks to itself to stay operational.

While America heads blindly towards third world status, there is immense opportunity for investors in gold and silver in such pig-headed policy. For the more money the government prints, the more the jobs market limps, the more homes half-built linger on disinterested markets, the more gold and silver will rise in price relative the U.S. dollar, which is increasingly representative of nothing, and now, less than nothing.
http://www.midasletter.com/index.php/u-s-tax-policy-will-push-gold-and-silver-much-higher-10121401/

Market alarm as US fails to control biggest debt in history
By Liam Halligan
Some say that growing signs of a US economic recovery are positive for stocks, which means money is being diverted out of Treasuries, so lowering their price, which pushes up yields. That’s wishful thinking. Sovereign borrowing costs have just surged in the US – and therefore elsewhere – because a politically-wounded President Obama caved-in and extended the Bush-era tax cuts, combining them with a $120bn payroll tax holiday.

Lower taxes, and the certainty of lower taxes, may bolster business investment and growth. That’s the logic employed by those painting last week’s global yield spike in a positive light. Government borrowing costs rose in America and elsewhere, they say, as a re-bounding US economy is now drawing investors’ cash away from sovereign bonds and towards more productive uses.

The reality is, though, that the market is increasingly alarmed at the rate of increase of the US government’s already massive liabilities. America’s government debt is set to expand by a jaw-dropping 42pc over the next few years, reaching $19.6 trillion by 2015 according to Treasury Department estimates presented (amid very little fanfare) to Congress back in June. Since then, government spending has risen even more. So US debt service costs, like those of many other Western nations, are expanding rapidly in terms of both the volumes of sovereign instruments outstanding, and the yields on each bond.

The new worry in the market is that this latest round of tax cuts could add another $1 trillion to the US deficit, on top of the already horrendous numbers produced in June. With opinion now deeply split about the wisdom of yet another round of QE, bond investors are getting increasingly worried that the Fed will turn off the funny-money and the sugar-rush will fade. Meanwhile, the US has very few plans – and none of them remotely credible – to get to grips with the biggest debt in history.

America has lately been very happy for small eurozone members to endure most of the adverse publicity related to the sovereign bond crisis. But, as of last week, the Western government debt debacle has entered the big league. We’re going to hear a lot more about the US government’s borrowing costs over the coming months – and the related “contagion” of other countries’ treasury bills, as America’s funding issues focus attention on the scale and ratcheting interest costs of sovereign debts in other large economies too.

Until now, market attention has oscillated between the eurozone and the States, with one region’s debt instruments benefiting from the woes of the other. Last week marked a turning point. Western sovereign instruments were hammered across the board – with traders making little distinction between the debts of Germany or Japan. There’s a lot more of this to come.
http://www.telegraph.co.uk/finance/comment/liamhalligan/8196283/Market-alarm-as-US-fails-to-control-biggest-debt-in-history.html

Easter Egg Out Of The BIS: US Banks Are On The Hook To The PIIGS By Over $350 Billion
by Tyler Durden
Last night, the BIS released its latest quarterly review, as always chock full of useful information. The one major item that caught our eye was the updated exposure toward the PIIGS countries by various foreign banks. And specifically the brand new category that had never been disclosed before by the BIS, namely the "other exposures" category, which per a rather closeted footnote is defined as: "other exposures consist of the positive market value of derivative contracts, guarantees extended and credit commitments." This is exposure that appears for the first time in an official BIS document. And it is sizable: while total foreign claims stood at $2,281 billion, the newly disclosed category accounts for a whopping two thirds of a trillion: $668 billion. How generous of the BIS to share this data which as recently as 2 years ago may have been considered as material, and these days is merely dismissed with a laugh. After all who cares unless the potential loss has at least 12 zeroes in it. Yet what is most significant for the US taxpayer, who is now dead set on proving that St Sebastian was an amateur when it comes to (in)voluntary martyrdom, is that US exposure to the P(I)IGS (Italy excluded, for the time being - give it a few months), has just tripled as a result of this revelation. While before it was "common knowledge" that US banks have nothing to lose should Europe go down the drain, it has now been revealed that US banks actually have $353 billion in exposure, of which $233 billion is of this newly revealed "other category."

And now that it is pro forma common knowledge that should the PIGS fails, that at least a few domestic banks would be wiped out, it also should be appreciated why the ECB will do everything to prevent an impairment to bondholders: with just under $2.3 trillion in potential partial or full losses on total exposure, the domino effect would blow up Europe overnight, then promptly wipe out the US and the rest of the world with it.
http://www.zerohedge.com/article/easter-egg-out-bis-us-banks-are-hook-piigs-over-350-billion

Everything is Under Control?
By Greg Hunter’s USAWatchdog.com
There are some big messages being put out by the government that appear to be for the sole purpose of reassuring the public that everything is under control. Bernanke appeared on “60 Minutes” 10 days ago to tell the public that he is “100 percent” sure inflation is not going to be an issue, and that it’s a “myth” the Fed is “printing money.” I am not going to touch on the veracity of his statements. I did that in a recent post called “CBS Allows Fed to Spread Disinformation Unchallenged.” I want to explore why the Fed Chief felt it necessary to go on nationwide television to, basically, tell America and the world that he’s on top of the economy? He could have gone on Bloomberg, CNBC or held a press conference at the Fed and got coverage for his message. Why didn’t Mr. Bernanke ask to be on “60 Minutes” when he announced an unprecedented second round of more than $600 billion of Quantitative Easing in early November? That was a big announcement–what he did 10 days ago was not.

Economist John Williams of Shadowstats.com has been tracking plunging tax receipts and soaring Federal deficits. He has been predicting that chances are increasing the U.S. could experience a sudden and severe dollar sell-off. This, in turn, could lead to hyperinflation. In his latest report, Williams says this about extending the Bush tax cuts, “The proposed package would not trigger a recovery, and it would not forestall the intensification of the double-dip recession.”

The more government spin doctors give the public reassuring words and contrived images that project an air of serenity and confidence, the less I feel “everything is under control.” I get the feeling that something bad is coming–and soon. I hope I am just being too pessimistic.
http://usawatchdog.com/fed-is-printing-money-aka-quantitative-easing/

The Most Important Commentary You Will Read All Year
By Dave Kranzler, The Golden Truth
Now that the Asians have begun to convert their dollar-based reserves and assets into physical gold and silver, the world will soon understand the degree to which U.S. and European banking systems have issued to investors an absurd amount of paper claims on gold/silver which does not exist to be delivered. This imbalance - of which the paper amount outstanding is several 100 multiples (including OTC derivatives per the BIS quarterly bank reports) the amount of actual supply of gold/silver - will be resolved such that price of gold/silver in all currencies will soar to levels that take even the most ardent goldbugs by surprise..."

[T]he basic problem is that government and banking debt around the world are both rapidly moving towards default, and since governments are guaranteeing the lot, the pace of monetary creation is accelerating. The consequence is that the gold suppression schemes, which have existed for the last one hundred years in one form or another, are finally coming to an end. We are trying to guess how dramatic that end will be. It will be difficult enough to stop a run by unallocated account holders on the bullion banks, without forcing a cash-payout amnesty. But if the central banks themselves cannot supply the necessary bullion to prevent this, the prospect of a total collapse of paper money will be staring us all in the face."

Here's the link: MUST READ MATERIAL

That essay should be read in conjunction with this:

It’s [meaning the paper manipulation vs. physical bullion supply] eventually going to blow because at some point these buyers will say, ‘I’m indexed, but I actually want to get all of this physical gold and silver now.’ When that happens, the game is over.

Here's the LINK

...for anyone long gold and silver that is actually in their possession - or appropriately safekept at a safe distance from all Governments - the shock and awe of the upward price revaluation will be breathtaking.
http://truthingold.blogspot.com/2010/12/most-important-commentary-you-will-read.html

Ron Paul Appears Poised to Irk the Fed Chief
By FLOYD NORRIS, The New York Times
A congressman from Texas, long a dissident critic of the Federal Reserve, is scheduled to become the chairman of a House panel with jurisdiction over the central bank. It promises to be a miserable time for the Fed chairman as he is peppered with hostile questions at oversight hearings and with legislation to force complete audits of Fed operations.

So it is now, with Representative Ron Paul about to take over as chairman of the Domestic Monetary Policy Subcommittee of the House Financial Services Committee. Mr. Paul campaigned against big banks, arguing that concentrated financial power goes hand in hand with concentrated political power.

If the Fed were abolished, he wrote last year, “the national wealth would no longer be hostage to the whims of a handful of appointed bureaucrats whose interests are equally divided between serving the banking cartel and serving the most powerful politicians in Washington.”

It is not hard to imagine Mr. Paul lecturing the president of the Federal Reserve Bank of New York in a committee room: “You can absolutely veto everything the president does. You have the power to veto what the Congress does, and the fact is that you have done it. You are going too far.”

And so it was back in 1964, when that lecture was actually given by the then-new chairman of the House Banking Committee, a Texas congressman named Wright Patman. As Time magazine then wrote: “For three decades, Wright Patman has fumed and fussed that the Federal Reserve system is too secretive, too independent, too insensitive to the hopes of small borrowers. A sharecropper’s son, he often charges that it is a tool of Wall Street bankers.”

A joke during Mr. Patman’s tenure was that the reason he chose a bright red carpet for his office was to hide the blood stains after William McChesney Martin Jr., then the Fed chairman, emerged from private meetings.

Mr. Paul is well aware of the precedent. His 2009 best-selling book, “End the Fed,” quotes Patman’s lecture and then adds, “I actually consider this an understatement, because in the past year or so during this bailout process, the Federal Reserve has garnered an unbelievable amount of power, making it much more influential around the world than the Congress or the president has ever been.”
http://finance.yahoo.com/news/Ron-Paul-Appears-Poised-to-nytimes-2023922519.html?x=0&sec=topStories&pos=9&asset=&ccode

The Feds Final Days
By Darryl Robert Schoon
THE TEMPLE OF PAPER MONEY IS UNDER SEIGE

In 2008, America suffered a massive economic heart attack. Its doctors, thought to be the world’s best, believed the US to be in good health, having recovered from a similar though smaller crisis in 2000.

But America hadn’t recovered. In fact, the Fed’s palliative for the 2000 crisis, i.e. lower interest rates, soon created an even larger crisis, i.e. the 2002-2006 US housing bubble whose collapse caused global credit markets to contract and investment banks to fall, necessitating government intervention on such a massive scale it led to today’s sovereign debt crisis as private losses were absorbed onto public balance sheets; and, now, in 2010, the crisis continues to fester and spread.

Fed Chairman Ben Bernanke’s solution for our current problems is but a more extreme version of the Fed’s near fatal prescription in 2001, i.e. lower interest rates, but this time combined with a new iteration of voodoo economics, a witch’s brew called QE II, a monetary gesture as futile and impotent as a Hail Mary pass thrown by an atheist as time runs out.

The end of central banking in the US will come in one of two ways: (1) Through a constitutional amendment that bypasses the US Congress, or (2) through the complete collapse of the monetary system that leaves the Federal Reserve and all central banks bankrupt.

The latter is perhaps the most probable as fiat money systems have an average lifespan of 40 years. It was in 1971 that President Nixon removed the gold backing from the US dollar and all currencies became fiat. Do the math: 1971 + 40 = 2011.

If the historical mean is any reassurance, the collapse of paper money and central banking is imminent.

The Federal Reserve is now the largest holder of US debt. Not only are China and Japan vulnerable to a US default, so, too, is the Federal Reserve. It would indeed be justice if the Federal Reserve collapsed because those they indebted were unable to pay them back.

A less drastic alternative, however, is a constitutional amendment that bypasses the US Congress. This is necessary because powerful interests would prevent the US House or Senate from ever repealing the Federal Reserve Act.

Only by using state legislatures could the US Congress and powerful banking interests be circumvented: …The second method prescribed is for a Constitutional Convention to be called by two-thirds of the legislatures of the States, and for that Convention to propose one or more amendments. These amendments are then sent to the states to be approved by three-fourths of the legislatures or conventions. This route has never been taken, and there is discussion in political science circles about just how such a convention would be convened, and what kind of changes it would bring about. http://www.usconstitution.net/constam.html

But for this to happen, conservatives and liberals would first have to join forces in order to overcome the powerful elites that will seek to maintain the status quo. Special interests in both parties have a vested interest in the present monetary system and will do everything possible to save the Federal Reserve, no matter how destructive it is to America.

If Americans want to end the Fed, they will either have to cooperate in what would be the greatest political undertaking since the American Revolution—or wait for a cataclysmic economic collapse to make that choice for them.
http://www.24hgold.com/english/news-gold-silver-the-feds-final-days.aspx?article=3254960248G10020&redirect=false&contributor=Darryl+Robert+Schoon

Chinese Take-Out (of USEconomy)
By: Jim Willie CB, GoldenJackass.com
The Chinese really must think the American strategy and behavior to be braindead and self-destructive. The US helped them assemble a manufacturing industry, replaced US income with debt, and finally faces the Grim Reaper in a national episode of systemic failure. The US leadership is as stupid and mindless as the population is driven by compulsive consumption over the cliff, as the nation faces ruin.
http://news.goldseek.com/GoldenJackass/1292446800.php

U.S. Commodity Regulator Delays Speculation Caps Plan
Ed Steer, Gold & Silver Daily
Well, the CFTC's meeting on Thursday ended suddenly with the main issues not really resolved. I listened to a Bloomberg interview with CFTC Chairman Gary Gensler... and I got the distinct impression that the meeting was ended because the silver position limit issue had reached an impasse. A rock had come up against a very hard place... and no one was blinking. So Gensler ended the meeting rather than put it to a vote. He was careful to point out on a couple of occasions during the press scrum that followed, that although the meeting was over... this issue was still very much on the table.

Ted Butler made it absolutely clear to me yesterday that the bone of contention was 100% the silver position limits issue... and I agree totally. He also said that whatever stories that showed up in the main-stream media on this issue, would not reflect the titanic forces that ran head-on into each other at this historic meeting yesterday. But, as Ted said, they now both know exactly where each other stands.

Gensler, who is nobody's fool, tried to do all of this above board and attempt to reach a consensus... but, when push became shove, the 'fine folks' at the CME and JPMorgan/HSBC circled the wagons. Both Gensler and CFTC Commissioner Bart Chilton tried to put as positive a spin on it as they could... but the fight is now on.

The linked Bloomberg story is headlined "U.S. Commodity Regulator Delays Speculation Caps Plan". After you've read the story, you can click on the video tab and listen to what both CFTC Chairman Gary Gensler and Commissioner Bart Chilton had to say. This story is worth spending some time on... and the link is here.

Oh, The Games People Play

"It's the US Government Rigged Economic Data News Hour. Everyday, at 8:30AM est, the US Government shovels another spoonful of bullshit into the mouths of the talking heads on financial TV. Join us as we point out the obvious fallacies embedded in their BS."

Oh look, this morning we get our hedonically contrived Consumer Price Index. And wonder of wonders, consumer prices rose 0.8% [ex Food and Energy which nobody uses] last month. How convenient, yesterday the US Government reported that retail sales were up [are you sitting down?] 0.8%! Ding-ding! We have a match...and PROOF that retail sales increases are brought to you by higher prices in care of inflation. Wondrous isn't it?

Not to beat a dead horse this early in the morning, but I'd like to share with you Dave Kranzler's commentary on yesterdays Retail Sales fantasy that every financial media talking head and scribe touted as "signs of an economic recovery".

Inflation And The Retail Sales Fantasy...
The Golden Truth
Once again this morning the markets were greeted by the bubblehead's in the media victoriously announcing that November's retail sales were better than expected and October's were revised higher.

And once again, we have to look behind the Government wizard's curtain to see the golden truth about what is really going on with the numbers. If you dissect the numbers today, you'll find the biggest boost came from gasoline sales. Within a certain range of tolerance, I consider gasoline to be of inelastic demand, which means people will consume at least a constant amount until the price goes over a certain price level, of which we are not there yet. We know the price of gasoline rose in November, which means that a big portion of the retail sales increase from October to November was from gasoline inflation.

My point is that most of the gleefully reported retail sales increase in November was derived from price increases - retail sales includes food and Walmart is a big componenent as it sells food and gas but does not break out gas sales on a monthly basis. Specifically, in November, gasoline prices were the primary stimulant for the better sales reported.

Make no mistake, there's no question that the Black Friday weekend sales were much better than expected. However, I have been of the view that the extreme discounting, especially at places like Macy's, essentially "pulled forward" a substantial amount of future retail sales, as polls indicated that shoppers took advantage of pricing deals to purchase both discretionary holiday items PLUS necessities.

If you think I'm off base, you can read about Best Buy's earnings report for its quarter ending Nov 30, which was released, ironically, just before the retail sales report. Best Buy stock is down 15% right now because its sales came in well below expectations and the company reduced its full-year forecast for sales and profits. Even more stunning, its U.S. same-store-sales fell 5% in the quarter. In retail that kind of number is an unequivocal disaster. Here's a summary: Best Buy Link

The moral of the story is that the economy is much weaker than the highly manipulated Government reported numbers would have you believe. With true unemployment continuing to increase and price inflation starting to rear its ugly head, we can expect a further deterioration in the condition of the real economy.

The good news is that gold and silver are still inexpensive relative to the dollar-price levels to which they are headed.
http://truthingold.blogspot.com/2010/12/inflation-and-retail-sales-fantasy.html

I love the smell of honesty in the morning!

But apparently the CRIMEX goons do not care much for the smell of honesty. Look, the price of the Precious Metals have been hit at the knees on the report that prices are rising despite the Fed claims that "measures of underlying inflation are somewhat low". Or is it because this news will incur more loses in the bond market and higher interest rates? OR is it because the ratings agency Moody's warned that it may lower Spain's credit rating. Probably all of the above, in particular the Precious Metals disposition to herald the TRUTH.

TREASURIES-Bonds trim gains after CPI, N.Y. Fed data at Reuters

Moody’s Warns on Spanish Rating at New York Times

And if it's in the New York Times, it is gospel!

Funny how the Euro can tank on news that a US debt ratings agency [an organization that rated US mortgage debt derivatives as AAA by the way] says that it MAY downgrade Spanish Debt. How shocking! Who knew spain had a debt problem? LOOOOOOOOOOOL!

What's really funny is how just two days ago Moody's warned that it may lower the US' credit rating if the new tax package is passed into law, and the reaction in the US Dollar was a cliff dive. And then miraculously, on the fantasy of "sales growth" the Dollar turned on a dime the next day. Oh, the games people play...

Senate set to pass $858 bln tax cut measure- Bloomberg

Speaking of games, this morning I came across this headline and story of pure BS from the mouthpiece of misinformation and blatant lies, Bloomberg.

Gold Declines as Stronger Dollar Curbs Demand for Alternative Investments
By Nicholas Larkin and Sungwoo Park
Gold declined for the first time in three days in London as a stronger dollar curbed demand for the metal as an alternative investment.

The dollar gained against the euro after Moody’s Investors Service said Spain’s debt rating is on review for a possible downgrade, and before data forecast to show growth in U.S. industrial production, backing Federal Reserve comments that the world’s largest economy is recovering. Gold, which usually moves inversely to the greenback, reached a record $1,431.25 an ounce on Dec. 7.

“Bullion prices have been under pressure this morning as a result of the stronger dollar,” James Moore, an analyst at TheBullionDesk.com in London, said in a report. Still, “ongoing uncertainties surrounding euro-zone debt, inflation and the effects of quantitative easing will continue to prompt pockets of diversification towards the safe-haven asset types.”
http://www.bloomberg.com/news/2010-12-15/gold-may-decline-as-signs-u-s-recovery-is-gaining-strength-reduce-demand.html

Where and when did the Fed say that the US Economy is recovering? Below is the first paragraph of the FOMC statement yesterday:

Information received since the Federal Open Market Committee met in November confirms that the economic recovery is continuing, though at a rate that has been insufficient to bring down unemployment. Household spending is increasing at a moderate pace, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to be weak. Employers remain reluctant to add to payrolls. The housing sector continues to be depressed. Longer-term inflation expectations have remained stable, but measures of underlying inflation have continued to trend downward.

There are a lot of "buts" in the Fed's statement as they continue to hedge their bets on an otherwise nonexistent economic recovery here in the US. Yet Bloomberg would have you believe that the US is "on the road to recovery" and owning Gold is just foolish. They do give the gold bulls a nod, but only as lip service.

The Fed goes on to say in their statement that:

To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to continue expanding its holdings of securities as announced in November. The Committee will maintain its existing policy of reinvesting principal payments from its securities holdings. In addition, the Committee intends to purchase $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month. The Committee will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability.

And the price of the Precious Metals goes down? $75 BILLION a month of US Treasury purchases is proclaimed, and the price of Precious Metals drops and investors buy the Dollar because Spanish debt "may" get downgraded? The Fed completely ignores the $300 BILLION of rollover money they previously promised to spend buying up debt. Add that tiny sum into the game, and the Fed will be spending $125 BILLION a month buying up US debt because nobody else will. How much more are they going to have to spend to pick up all the US debt now being unloaded onto the bond market forcing interest rates higher by leaps and bounds? What will it take in monopoly money to halt the 10 year Treasury's rise above 4% to save JP Morgan and the Fed?

What FOMC Statement Didn't Say‎ - Seeking Alpha

European Fears Weigh on Wall St.- AP
Renewed worries about Europe's debt problems set a grim tone for Wall Street on Wednesday, even as investors were getting fresh reports on the U.S. economy.

Where are the fears regarding the debt problems in the USA? The US' debt problems are far, far, FAR worse than all of Europe's combined, yet we are continually force fed bad news regarding European debt while the problems with US debt are continually ignored by the financial media.

Oh, the games people play.

Moody's: U.S. Credit Rating Outlook Could Be Affected By Tax Package
Moody's warned on Monday that it could move a step closer to cutting the U.S. Aaa rating if President Barack Obama's tax and unemployment benefit package becomes law.

The plan agreed to by President Barack Obama and Republican leaders last week could push up debt levels, increasing the likelihood of a negative outlook on the United States rating in the coming two years, the ratings agency said.

A negative outlook, if adopted, would make a rating cut more likely over the following 12-to-18 months.

For the United States, a loss of the top Aaa rating, reduce the appeal of U.S. Treasuries, which currently rank as among the world's safest investments.

"From a credit perspective, the negative effects on government finance are likely to outweigh the positive effects of higher economic growth," Moody's analyst Steven Hess said in a report sent late on Sunday.

After Obama announced his plan, Treasury prices fell sharply in volatile trade last week and yields have hit a six-month high, in part due to concerns over the effect the package will have on government debt levels.

If the bill becomes law, it will "adversely affect the federal government budget deficit and debt level," Moody's said.
http://www.huffingtonpost.com/2010/12/13/moodys-us-credit-rating-o_n_796101.html

But hey, the US Government says that Industrial Production was up last month...

Gold is now rebounding from the hit at the open of the CRIMEX this morning, and the realization that yesterday's "sales growth" was a fantasy made possible only by rising prices.

U.S. Retailers Canary in the Coal Mine
By: James_Quinn
Some people have contested my statement that there are thousands more retail stores in the US today than there were in 2007. Yes, many mom and pop stores have gone out of business, but the big boys continued to expand in the face of reality. The mall based mega-retailers dominate the retail landscape in this country.

Just these nine well known retailers alone, have added 6,435 stores since 2007. Some of the stores were international, but the vast majority were opened in the U.S. This increase in store counts in the face of reality is the ultimate in CEO hubris. Inflation adjusted retail sales since 2007 in the U.S. are down 19%. This is a recipe for disaster. Americans must deleverage over the next decade. They have no choice. Their retirement savings levels are pitiful. They will be forced to stop buying crap. The boomers are leaving their high spending years and entering the forced saving phase of their lives, whether they like it or not. Every retail CEO in the country should recognize these facts. But still, they relentlessly expand. A fool and his company are soon parted.

The lifeblood of retail expansion is same store sales. If same store sales do not increase, any store count expansion becomes a death march.

Now for the kicker. Inflation since 2006 according to the BLS has been 10%. Therefore, on an inflation adjusted basis, sales for these retailers since 2006 are down by 7% to 17%.

Today, Best Buy reported atrocious 3rd quarter sales figures. Best Buy is rightly considered one of the best run retailers in America. The Apple iPad is a mass sensation. Consumers are supposedly spending again. The age of austerity is over according to the mainstream media. Best Buy's biggest competitor, Circuit City, went out of business two years ago. The world was its oyster. But somehow, the yellow brick road turned from gold to piss.

In the U.S., Best Buy’s same-store sales dropped 5%, while total sales fell 3% to $8.7 billion. The company estimated that its market share declined 1.1 percentage points, losing traction in TVs and gaming software, and it also expects its share for the year to decline. By categories, U.S. sales of consumer electronics, which make up more than a third of Best Buy’s total domestic business, fell 11%, while entertainment software sales, which make up 15% of the total, slid 14%.

It seems that the storyline being sold to the American public by the media is a load of bull. Best Buy is the first of many retailers to be blindsided by reality. Americans are running out of money. They've used up all the equity in their houses. The credit cards are maxed out. Wages are stagnant. Retirement years in a brown cardboard box awaits delusional Boomers unless they stop spending and start saving.
http://www.marketoracle.co.uk/Article25006.html

Economic Recovery Nonsense Continues
By: Moses Kim
For the duration of what I estimate to be a 10 year economic slowdown (we are entering year 4), you will hear countless experts proclaim that the economy has recovered. Economic recovery evangelists were temporarily silenced earlier in the year, but they have now come out in force. In today’s FOMC statement, the Fed actually had the chutzpah to say: “The economic recovery is continuing, though at a rate that has been insufficient to bring down unemployment”. That the Fed can continually get away with saying such asinine comments this far into the recession is very surprising.

The economic recovery crowd will no doubt point you to the rise in retail sales. However, they will probably leave out a couple of key points. They probably won’t tell you that wholesale prices rose 0.8% in November, the most in 8 months. They also won’t tell you that the rise in retail sales was driven largely by the rise in food and energy costs. I keep hearing that oil prices are rising show that the economy is recovering. In that case, would $10 gasoline evidence an economic recovery for the ages? Is the weak dollar, not demand, not driving wholesale prices higher?

Retail sales are denominated in dollars, so you would expect a rise in sales year after year on a nominal basis. Also, core inflation has been relatively stable compared to headline inflation, which includes the price of the goods that retailers are selling. Given the relatively muted inflation figures of our government, this implies some core prices are falling.

Retailers announced a “surprising ” jump in apparel sales. Well let me tell you that this shouldn’t be so surprising since apparel was one of the few items in the CPI that went down year-over-year. Revenues (sales) may be up, but margins are down. Discounts started earlier this holiday season and lasted longer. Please see Best Buy, which was down 15% this morning on weak earnings figures. So all in all, let’s not get too bent out of shape about buoyant retail sales.

The government will never tell you that it is inflation that is driving economic statistics higher. The strong rise in commodities reflect an undercurrent of inflation that is eased away via government statistics. People will consistently be puzzled by the phenomenon of high unemployment and supposedly rosy economic statistics because the data has becomes so skewed at this point. This is why I always say to focus on the gold, dollar. and bond markets. Focus on gold first and foremost, since it is a globally traded asset that is not easily manipulated by central banks, especially since they have drained there reserves over the years. Government statistics are just noise in this ongoing economic drama.
http://news.goldseek.com/GoldSeek/1292360546.php

I encourage everyone to watch this interview with John Williams from Shadow Stats below. Watch it not so much for his insightful commentary on the possibility of hyperinflation roaring to life in the next 6-9 months here in the US as he predicts, but watch it to hear those interviewing him laugh off the hyperinflation prospects in disbelief that anything as absurd as he predicts could EVER happen here in the US. A doomsday scenario is just too much for these talking heads to grasp within their closed minds I guess...

John Williams calls for the “Great Collapse” in 2011[VIDEO]
Blaming decades of fiscal abuse, John Williams of Shadow Stats calls for hyperinflation in the U.S. in 2011, starting with gasoline and food prices.
http://www.investmentpostcards.com/2010/12/12/john-williams-calls-for-the-“great-collapse”-in-2011/

The Precious Metals remain under pressure at 10:20AM as the value of US Government and financial news media misinformation flogs the TRUTH. This pressure will only set the stage for the coming explosion in prices as the TRUTH trumps lies everytime.

Oh, the games peole play.

Perpetuating The Lie That Is Economic "Growth"

U.S. Retail Sales Rise Above Forecast as Consumers Recover
By Shobhana Chandra and Bob Willis
Sales at U.S. retailers rose more than forecast in November as holiday shopping got under way, a sign consumers will play a bigger role in the recovery.

Purchases increased 0.8 percent, following a 1.7 percent gain in October that was larger than previously estimated, Commerce Department figures showed today in Washington. The median forecast of economists surveyed by Bloomberg News called for a 0.6 percent rise. Excluding autos, gasoline and building materials, which are the figures used to calculate gross domestic product, sales climbed 0.9 percent, the most since August.

A report from the Labor Department showed wholesale costs rose in November by the most in eight months, led by higher prices for gasoline, heating oil and fruit. The producer price index increased 0.8 percent from the prior month after a 0.4 percent rise. Excluding more volatile food and energy costs, the so-called core measure posted the smallest year-over-year gain in five months.

“Consumers are on fire relative to expectations in the last three months,” said Brian Jones, an economist at Societe Generale in New York. The “revisions are equally important. Typically, when the revisions start moving in one direction, it’s a clear sign of a pickup or a turning point.”
http://www.bloomberg.com/news/2010-12-14/u-s-retail-sales-rise-more-than-economists-forecast-as-consumers-recover.html

Only Bloomberg, the masters of financial media goat tripe, could spin up a story about retail sales that is more misleading. Once again it is necessary for me to point out that "retail sales" are a measure of sales "receipts", and NOT a measure of goods sold. Gasoline sales were the largest contributor with a 4.0% gain. Excluding gasoline, total retail sales rose by a modest 0.5%. If prices are rising [I know, the government says they are not...but WE ALL KNOW they are] then sales receipt totals will rise also.

Retail sales are only rising in the world of make believe, as higher prices are ignored by the financial news media. But then, who in the world today uses energy products or eats? And are these retail sales representative of actual "spending", or an increase in consumer debt?

U.S. Oct. consumer credit up $3.4 bln
Dec. 7, 2010
By Greg Robb
WASHINGTON (MarketWatch) -U.S. consumers increased their debt in October by the largest amount since July 2008, the Federal Reserve reported Tuesday. Total seasonally adjusted consumer debt increased $3.4 billion, or a 1.7% annualized rate, in October to $2.4 trillion. Economists had expected a decrease. September consumer credit was revised down to a 0.6% increase compared with the initial estimate of a 1.1% rise. The increase in October was led by non-revolving credit, such as auto loans, personal loans and student loans, which rose $9.0 billion or 6.8%. Revolving debt decreased $5.64 billion or 8.4%. This is the twenty-sixth straight monthly drop in credit card debt.

The Treasury market senses the "inflationary" impact of these retail sales numbers, and are selling off this morning raising yields to the horror of the Fed. The Fed by the way meets today to further discuss their plans to print money [despite what Bumbling Ben claims to the contrary] to buy Treasuries in an effort to keep interest rates low. It is imperative they keep interest rates low, not to help the consumer borrow more money [as Bumbling Ben claims], but to keep JP Morgan's interest rate swaps game from blowing them [and the Fed] off the face of the map. And lower interest rates makes it cheaper for the Treasury to continue borrowing money.

Gold and Silver were up strongly over night, only to be shot down by the "misrepresented" retail sales numbers. These numbers sent the bond market lower, and the trigger happy black box players were once again duped into selling their Precious Metals into fundamentally sound gains recognized overseas. The CRIMEX is as active as ever in stonewalling the rise in Precious Metals. Of course we should again note that there is a Fed Meeting today, and the Fed can't have rising Precious Metals prices ahead of their proclamation on monetary policy.

I wouldn't be surprised if the Fed not only reiterated their intention to buy Treasuries, but somehow find a way to sneak between the lines that they will spend whatever it takes to keep interest rates low. It is imperative that they keep interest rates low not so much for the economy, buy very much so for their, and JP Morgan's survival.

Fed expected to dampen rate rise expectations
By Kirsten Donovan
(Reuters) - Dollar Libor rates were steady on Tuesday as Federal Reserve officials met to assess their controversial bond buying program against a backdrop of fresh tax cuts that could lift U.S. economic growth.

The central bank is not expected to signal any shift away from its intention to buy $600 billion in government debt but markets are already bringing forward expectations of when the Fed may start to raise interest rates.

Eurodollar futures fell to three-month lows this week and two-year Treasury yields are at their highest level in five months.

"We think the increase in Fed hike expectations is overdone, the market has priced in a possibility of hikes as early as the second half of 2011," Barclays Capital strategists said.

"The FOMC is likely to reiterate its message of extremely easy policy ... and that could be a catalyst for reversal of some of the recent outsized moves."
http://www.reuters.com/article/idUSTRE6BD2Y520101214

The Silver Lining[MUST READ!!]
By: Eric Sprott & David Franklin
Given its seemingly evident market imbalances, you might wonder why silver hasn’t performed better over the last year. The answer, we believe, lies in the way silver is priced. The silver spot price is dictated by paper contracts that trade on the COMEX exchange in New York. Paper contracts can be purchased "long" or sold "short". If more participants sell "short" than purchase "long", the paper market price for silver will decline. Often these contracts have little to no relationship with actual physical silver, and yet they are the most influential contract in determining silver’s physical spot price. Go figure.

In studying the silver market we owe a great debt to the work of silver analyst, Ted Butler. Mr. Butler has been writing about the silver market for fifteen years and has done much to inform investors about the reality of silver’s physical fundamentals. Butler provides some insight into the "short" positions that exist in silver today, highlighting the fact that the eight largest silver traders currently hold a net short position of over 66,000 contracts, representing more than 330 million ounces of silver.11 This means that the eight largest COMEX traders are net short the equivalent of 48.5% of the world’s total annual silver mine production of 680.9 million ounces. None of these traders are in the silver business by the way – they’re all financial institutions. In addition, the COMEX silver short position held by the eight largest traders on May 3, 2010, represented 33% of total world silver bullion inventory, estimated by Butler to be approximately one billion ounces. There is no real comparison with gold, as the 24.5 million ounce concentrated net short position held by the eight largest traders represents a mere 1.2% of the 2 billion+ ounces of world gold bullion inventory as reported by the World Gold Council.12 So in comparison to total world bullion inventories, the concentrated short position in silver is 27 times larger than that for gold. In every comparison possible, the short position in COMEX silver contracts is off the charts, and if you think the short positions sound potentially disruptive, you’re not alone. In September 2008 the CFTC confirmed that its Division of Enforcement has been investigating complaints of misconduct in the silver market. This investigation is ongoing and we look forward to its resolution.13

Because we believe the demand for precious metals will continue to increase in this environment, we’re always interested to know the total supply available in today’s physical bullion market. According to the best estimates from the USGS and current mining statistics, approximately 46 billion ounces of silver have been mined since the dawn of civilization.14 In comparison, approximately 5 billion ounces of gold have been mined throughout history.15 Reading this, a casual observer might conclude that gold is currently justified in being worth more than silver based on its relative scarcity. But the current price discrepancy ($1,250/oz gold vs $19/oz silver) is misleading.

As mentioned above, there are only 1 billion ounces of silver left above ground in bullion form today. That is a surprisingly small number in relation to the 46 billion ounces mined throughout history. The reason is due to silver’s consumption in manufacturing. Just like other industrial minerals, silver has been consumed in various processes over the course of history. Silver’s superiority in heat transfer, conductivity and light reflectivity make it unique, and it boasts anti-microbial properties that make it ideal for surgical instruments, clothing materials and certain medical applications. The key point to remember with all these applications is that once the silver is consumed it is typically never recycled. Many of its industrial applications require such small amounts in each surgical tool, electronic device or clothing item that it isn’t economic to recover from garbage dumps. For comparison, there are currently approximately two billion ounces of gold above ground in bullion form compared with the 5 billion ounces of gold mined throughout history.16 So despite being more heavily mined over time, silver bullion is now the more scarce "precious" metal than gold bullion is from an investment supply perspective.

This is where the silver story gets interesting for us. At today’s prices you have $19 billion dollars of silver ($19 x 1 billion ounces) and $2.5 trillion dollars of gold ($1250 x 2 billion ounces) above ground in bullion form. The size of the investment market for gold is therefore 131 times larger than that for silver. And yet, on a market relative dollar basis, investors are actually buying more silver than they are gold today. At today’s metals prices, in dollar terms, the US mint has sold approximately three times more value in gold than in silver thus far in 2010 coin sales. But there should be 131 times more gold sold than silver for the market to stay in balance. None of the largest gold and silver investment vehicles reflect the 131:1 ratio, suggesting that investors have a disproportionately large interest in owning physical silver.

For example, the largest gold ETF today, the SPDR Gold Trust ("GLD"), is currently ten times the dollar value of the largest silver ETF, the iShares Silver Trust (SLV). Since the SLV began trading in April 2006, the GLD has increased by $8 for every $1 increase in SLV’s NAV. Again, given the choice, investors are voting with their dollars and putting disproportionately more dollars into silver than gold from a relative market size perspective. It appears that no investors are anywhere close to buying 131 times more gold than silver, which market metrics would suggest if the demand for gold and silver were relatively equal – all of which brings us to silver’s ‘supply conundrum’: If on the supply side, as Ted Butler calculates, there are only one billion ounces of silver left in bullion form available for investment; and if, on the demand side, we were able to identify the holders of 500 million ounces spread across a mere seven investors - it implies that there is only 500 million ounces of silver left for everyone else to invest in! As large holders of silver bullion ourselves, we can tell you that 500 million ounces is not that much from a global perspective, and certainly won’t be enough to satiate the world’s investment demand for silver going forward. Also let us not forget the large silver short position on the COMEX that will almost undoubtedly require the purchase of 330 million ounces of silver to eventually cover. Assuming that happens, most of the silver available for investment will essentially already have been spoken for.

It also serves to mention that there will be no government silver stocks capable of covering this impending supply shortfall. According to the latest audit, the US treasury currently has 7,075,171 oz of silver in storage, which is about enough to handle two months of silver eagle coin production. If the COMEX silver short sellers are ever forced to cover, they won’t be able to lean on the government for a physical bailout.
http://www.industrymailout.com/Industry/View.aspx?id=245442&q=264546678&qz=3f9465

JPMorgan cuts back on US silver futures
By Jack Farchy in London and Gregory Meyer
JPMorgan has quietly reduced a large position in the US silver futures market which had been at the centre of a controversy about its impact on global prices for the precious metal.

The decision by JPMorgan was an attempt to deflect public criticism of the bank’s dealings in silver, a person familiar with the matter said. The person added that the bank’s position in silver would from now on be “materially smaller” than in the past.

A group of small precious metals investors has alleged that large short positions – or bets on lower prices – in silver futures held by several banks, including JPMorgan, are keeping prices artificially low.

The US regulator, the Commodity Futures Trading Commission, announced in September 2008 that it was investigating complaints of misconduct in the silver market, although it did not name specific entities.

However, JPMorgan said in a statement: “It is absolutely incorrect to say or imply that the Nymex, CFTC or any other exchange or regulator has instructed or asked us to reduce our position.” The bank declined to comment on whether it had reduced its position in the silver market.
http://www.ft.com/cms/s/0/7d699ca4-06ea-11e0-8c29-00144feabdc0.html#axzz186kZ0bcK


Market riggers are feeling the heat, so help GATA turn it up

Submitted by cpowell on 06:51PM ET Monday, December 13, 2010. Section: Daily Dispatches
10p ET Monday, December 13, 2010

Dear Friend of GATA and Gold (and Silver):

As you read with delight tonight's Financial Times story about the difficulty in which J.P. Morgan Chase & Co. apparently has found itself with silver (http://www.gata.org/node/9419), it may be worth remembering the remark variously attributed to those most cynical statesmen Metternich and Talleyrand during the Congress of Vienna, which reorganized Europe in 1815. Told by an aide that the Russian ambassador had just died, Metternich -- or Talleyrand -- supposedly responded: "I wonder what his motive was."

Tonight's FT story, reporting that Morgan Chase has substantially reduced its silver futures position, is attributed to an anonymous source, "a person familiar with the matter." Of course it is unlikely that anyone outside Morgan Chase itself would be so familiar with the matter, just as it is unlikely that anyone except Morgan Chase itself would want such information, or misinformation, to be broadcast as widely as the FT could broadcast it.

The FT story acknowledges that Morgan Chase means to "deflect public criticism" of its silver dealings, and at least that much is plausible. But as the himself pseudonymous Tyler Durden remarks tonight at Zero Hedge (http://www.zerohedge.com/article/jp-morgan-admits-defeat-cuts-silver-sho...), any suggestion that Morgan Chase now has covered its silver shorts is "pure and total" effluent. If Morgan Chase really had covered its silver shorts, the investment bank could say so itself, on the record, and not have to operate through the usual compliant plants at the FT. But then, of course, Morgan Chase would have some liability in lying.

Manipulative as it is, the FT story does signify something important: that clamor from the rabble about market rigging -- starting so many years ago with silver market analyst Ted Butler and continuing with GATA and hundreds of ordinary investors and a few courageous investment houses like Sprott Asset Management and Hinde Capital and now including that clever provocateur Max Keiser and that modern American patriot, U.S. Commodity Futures Trading Commission member Bart Chilton -- is making things hot for the market riggers, and they would like to get the hounds off their tail.

Keiser and some others think that exploding the silver rig will explode the great parasite of an investment bank that is behind it. More likely we will find that the investment bank is the U.S. government and the U.S. government is the investment bank and that any silver shorts supposedly covered on Morgan Chase's books will materialize someplace else and be well-hidden there for as long as possible.

But no matter -- the riggers are having big trouble if they aren't quite yet on the run, and in a few weeks U.S. Rep. Ron Paul, R-Texas, will become chairman of the House Financial Services Committee's Subcommittee on Domestic Monetary Policy and Technology, with jurisdiction over the Federal Reserve. Paul wrote today (http://www.gata.org/node/9418)that "Fed transparency will be the cornerstone of my efforts as subcommittee chairman." As subcommittee chairman with much more time to speak, Paul at last may ask the right questions of the right people on the record -- something the Financial Times has yet to do -- thereby bringing forth what Morgan Chase and the bankers who control the U.S. government may already dimly perceive as the End Times.

In the meantime, please remember that it was GATA -- particularly GATA Chairman Bill Murphy, GATA board member Adrian Douglas, and GATA whistleblower Andrew Maguire -- who thrust the silver market manipulation issue in the face of the CFTC and the financial news media at the CFTC's public hearing in Washington last March 25. That's exactly when the silver rig started coming apart. Please remember also that it is GATA and not some mining industry group that is suing the Federal Reserve in U.S. District Court for the District of Columbia for access to the Fed's gold records and particularly for access to the records the Fed admits having of gold swap arrangements with foreign banks, arrangements that are the primary mechanisms of gold market rigging. Exposing the market riggers and sustaining the agitation for free markets in the monetary metals requires the financial support of those who believe in GATA's work. We're making good progress against nearly all the money and pow er in the world. If you'd like to help us, please visit:

http://www.gata.org/node/16
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

Audit the Fed in 2011
By Ron Paul
Since the announcement last week that I will chair the congressional subcommittee that oversees the Federal Reserve, the media response has been overwhelming. The groundswell of opposition to Fed actions among ordinary citizens is reflected not only in the rhetoric coming out of Capitol Hill, but also in the tremendous interest shown by the financial press. The demand for transparency is growing, whether the political and financial establishment likes it or not. The Fed is losing its vaunted status as an institution that somehow is above politics and public scrutiny. Fed transparency will be the cornerstone of my efforts as subcommittee chairman.

Thanks to public pressure earlier this year, Congress did pass legislation that requires the Fed to disclose some information about its bailout of select industries and companies following the 2008 financial crisis. So two weeks ago the Fed released data concerning more than $3 trillion of assistance it offered to banks through its bailout facilities. After reviewing this data, however, we are left with many more questions about the Fed's “lending”.

In the “Term Securities Lending Facility”, the Fed was supposed to have loaned against AAA-rated securities-- yet over half of the collateral put up by banks to obtain loans had no listed credit rating. Should we assume that the Fed accepted absolute junk rated securities as collateral for loans? Presumably these securities were so bad that they wouldn’t even publicize their credit rating. So why should our central bank, backed up by your taxes, accept such collateral?

On another note, of the $1.25 trillion purchased under the Fed’s “Mortgage-Backed Securities Purchase Program,” only $877 billion in purchases have been publicized. What happened to the remaining $400 billion?

These kinds of limited disclosures by the Fed only underscore the need for a full and complete audit of the Fed’s financial books. This audit should be done by an independent third party, in the same manner that public companies are audited. The Fed should make public its balance sheet, income statement, and perhaps most importantly its cash flow statement. It also should publicize the notes explaining those financial statements.

We seem to forget sometimes that Congress created the Fed-- it is a government-created banking monopoly, and its top decision-makers are appointed by the President and confirmed by the Senate. If the Fed does not perform satisfactorily in the eyes of these politicians and their constituents, the Chairman and Governors may not be re-nominated.

In theory, Congress could even repeal the Federal Reserve Act altogether since it has the authority to do so. Obviously Congress is within its authority to audit an organization it created by statute, and it is time to assume that responsibility.

With 320 Members of Congress cosponsoring my legislation to fully audit the Fed in the 111th Congress, my hope is that we can build on our broad bipartisan coalition in 2011 and continue the push for greater Fed transparency going forward.
http://paul.house.gov/index.php?option=com_content&view=article&id=1807:audit-the-fed-in-2011&catid=31:texas-straight-talk

Why Are The Lambs Screaming Clairice?

The Precious Metals were held in check Friday on "fears" of a Chinese interest rate increase. Instead, the Chinese once again raised banks required reserves ratio. This is the wise way to combat excess liquidity in the financial system. The Chinese have learned a great deal from the mistakes of the US Federal Reserve. Manipulating interest rates is a fools game, and leaves your banks exposed to collapse...unless of course theyare bailed out by the taxpayers.

China raises banks' reserve ratios again
By Zhou Xin and Simon Rabinovitch
(Reuters) - China's central bank on Friday increased the amount of money that lenders must keep on reserve for the third time in one month, a move to mop up excess cash in the economy and rein in inflation.

But the decision to raise banks' required reserves rather than interest rates means that officials have opted for a milder form of monetary tightening for the time being, suggesting that they believe prices pressures are still well within their ability to control.

The 50 basis point increase, which takes effect on Dec 20, will leave required reserve ratios at 18.5 percent, a record high for the majority of the country's banks.

The People's Bank of China offered no explanation.

"We expected the RRR rise this time, and I think it is perfectly timed to help manage excessive liquidity," said Lu Zhengwei, chief economist at Industrial Bank in Shanghai.

"There is still much scope for the central bank to raise reserve ratios next year. We expect several increases in the first quarter of next year and the ratio could reach as high as 23 percent in 2011," he added.
http://www.reuters.com/article/idUSTRE6B91QU20101210

China Interest-Rate Speculation Splits Analysts, Former PBOC Official Wu
By Bloomberg News
China can’t raise interest rates because of the risk of attracting inflows of cash that would fuel inflation, said Wu Xiaoling, a former deputy governor of the central bank.

“The global low interest-rate environment prevents China’s central bank from raising interest rates,” Wu said in a speech at a hedge fund conference in Shanghai today. Emerging markets face capital inflows and “excessive money supply is one of the important reasons for China’s inflation,” she added.

Economists at firms including Australia and New Zealand Banking Group Ltd. and UBS AG. have, in contrast with Wu’s view, said that China is likely to raise rates this weekend. China’s central bank yesterday increased lenders’ reserve requirements for the sixth time this year as part of efforts to curb inflation that rose to a 28-month high in November.

In October, the central bank pushed up lending and deposit rates for the first time since 2007.

Analysts have focused on the possibility of another increase this weekend because of today’s release of November data. Consumer prices rose 5.1 percent from a year earlier and producer prices jumped 6.1 percent, a statistics bureau report showed.
http://www.bloomberg.com/news/2010-12-11/china-interest-rate-speculation-splits-analysts-former-pboc-official-wu.html

China vows stable growth, inflation management
By Elaine Kurtenbach
SHANGHAI (AP) -- China's leaders wrapped up an annual economic planning meeting Sunday with a pledge to cool surging inflation while shifting the economy toward more stable, balanced growth.

The vow to keep the economy on an even keel came a day after the government reported that inflation jumped to a 28-month high in November, despite a crackdown on speculation and repeated moves to curb the flood of money circulating in the economy from massive stimulus spending and bank lending.

A statement announcing the end of the conference, held each year in early December, reiterated previous pledges to support farmers, fight poverty, promote clean energy and various other sweeping goals. But the broad policy blueprint included no specific new policy measures.

The statement also reiterated Beijing's earlier promises to carry on with reforms of its tightly controlled currency regime -- a longtime source of friction with the U.S. and other trading partners that contend the Chinese yuan is undervalued against other major currencies, giving its manufacturers a price advantage in other markets.

Offering no hint of a change in policy direction, it just said China will keep the exchange rate "basically stable at a reasonable and balanced level."
http://finance.yahoo.com/news/China-vows-stable-growth-apf-3756796436.html?x=0&sec=topStories&pos=3&asset=&ccode=

The Fed may buffalo Americans into believing there is no inflation, but they exporting it around the globe. Chinese inflation is a direct decendent of Fed money printing. To protect themselves, China is going to have to allow their currency, the Yuan, to appreciate faster than they might desire. A rising Yuan will lead to rising Precious Metals prices. You can take that to the bank.

NOTHING would give Precious Metals Bulls more to cheer about than the destruction of JP Morgan. JP Morgan, the long arm of the US Federal Reserve, are today staring at the possibility that they may be vaporized within weeks. Not only is their massive short position in Silver about to blow a hole in them, but the tumbling US Treasury market may be about to expose the fraud they represent at the Fed.

A question often asked is, "Who will bail out the Fed?"

A CRIMEX default coupled with a 4% yield on the 10 year Treasury might be just the combination of events to overwhelm JP Morgan, and blow them off the face of the planet.
Only then can we speculate on who will bailout JP Morgan [The Fed] ...the Chinese?

Something’s Wrong in the Silver Pit: But It’s Much Bigger than J.P. Morgan
By: Rob Kirby
Question: There are a total of 417 Billion notional in Gold derivatives outstanding – AND THE GOLD / SILVER Price RATIO is 49:1 – then WHY are outstanding notional silver derivatives 127 Billion???? These BIS numbers suggest that the proper gold / silver ratio should be roughly 3.3:1 or silver priced TODAY at 1,400 / 3.3 = 424.00 per ounce.

Now, let’s take a peek at what the U.S. Office of the Comptroller of the Currency tells us about “other precious metals” held by U.S. Commercial Banks:

OCC data tells us that J.P. Morgan and HSBC constitute 13.5 billion worth of the BIS’s reported total of 127 billion of derivatives in “other precious metals”. That’s about ONE TENTH of the total. WHAT ABOUT THE OTHER 90 % ??????

Note: Even if we compare the OCC totals for silver versus gold derivatives from the table above – OCC data is supportive of a “proper” gold / silver ratio of 131.6 / 13.6 = 9.7 This implies a silver price of 1,400 / 9.7 = 144.00 per ounce of silver.

Coincidentally, or perhaps not, COMEX open interest in gold futures is roughly 600K contracts @ 100 oz. per contract that is roughly 60 million oz of gold open interest. COMEX open interest in silver futures happens to be about 135k contracts @ 5,000 oz per contract which is roughly 650 million oz of silver open interest [note that silver open interest is not quite 11 times the open interest of gold]. So, again I ask, why is the gold / silver ratio at 48: 1?????

***For those who are not aware, silver naturally occurs in the earth’s crust approximately 7 – 10 times more frequently than gold.

Now, let’s take a look at ALL Derivatives of U.S. Commercial Banks as reported by the OCC:
Total Derivatives at $223.376 TRILLION!

Take note and remember that the breakout provided – above - by the OCC was for Commercial Banks ONLY.

Finally, let’s now look at the ONLY OCC data table depicting ALL Derivatives held by U.S. Bank Holding Companies: $294.750 TRILLION!

Conclusions:

Conclusions:

The BIS tells us that total global outstanding “other precious metals” derivatives are 127 billion.
General market wisdom [gleaned from OCC Commercial Bank data] suggest that J.P. Morgan and HSBC are the two dominant players in silver [other precious metals]

Yet, the U.S. OCC tells us that J.P. Morgan and HSBC combined – make up 13.577 billion of the 127 billion BIS total [roughly 10 %].

The U.S. OCC tells us that Morgan Stanley and B of A and Goldman have an additional combined 70 TRILLION in derivatives – at the Bank Holding Company level – but they give us NO HINT as to what portion of these totals consist of precious metals activity. We are left to assume that this is because the OCC is only mandated to regulate Commercial Banks – while Bank Holding Companies fall under the purview of the Federal Reserve.

Unless J.P. Morgan and HSBC are LYING to regulators as to the extent of their silver market activity – there are other MASSIVE players in the silver price suppression game. Who ever these ‘players’ are – metaphorically, they MUST BE BLEEDING FROM EVERY ORIFICE with silver’s parabolic run up in price over the past few months.

Most likely among American entities are MORGAN STANLEY, B of A and Goldman Sachs – since together they are operating a 70 Trillion derivative “BLACK BOX” about which we know LITTLE to NOTHING as it pertains to precious metals.

Any way you slice it – precious metals data reporting on the part of American regulators is atrocious. Simple MATHEMATICS tells us a gold / silver ratio at 48:1 is EXTREMELY contrived and REEKS of manipulation on the part of the Federal Reserve and the Banks they are charged with regulating.

Got any physical Gold and/or Silver yet?
http://news.silverseek.com/SilverSeek/1292004828.php

The Elephant In The Room
by Rob Kirby August 4, 2009
This following article was an address by Rob Kirby at the Gold Anti-Trust Action Committee Inc., GATA Goes to Washington -- Anybody Seen Our Gold?, at the Hyatt Regency Crystal City Hotel, Arlington, Virginia, Saturday, April 19, 2008. The original address has been updated and added to since new information has come to light.

My name is Rob Kirby – proprietor of Kirbyanalytics.com, proud GATA supporter and frequent contributor to Bill Murphy’s LeMetropolecafe.com. I would like to extend a warm welcome to GATA delegates from all over the world to Washington, D.C.

I’d like to delve into the numbers, or math, showing how J.P. Morgan’s derivatives book cannot be ‘hedged’.

As per their call reports filed with the Comptroller of the Currency’s Office, we know J.P. Morgan’s derivatives book grew by a cancerous 12 Trillion from June 07 to Sept. 07. The OCC’s Quarterly Derivatives Report serves as the public’s only peek into the opaque and murky world of derivatives-flim-flammery.

Flim Flammery is the understatement of the century. In fact, dealer notionals have EXPLODED parabolic-ally in recent years while END USER demand has been static and virtually non-existent.
http://www.financialsensearchive.com/fsu/editorials/kirby/2009/0804.html


Global bond rout deepens on US fiscal worries
By Ambrose Evans-Pritchard
Agreement in Washington on a fresh fiscal package has set off dramatic rise in yields of US Treasuries and bonds across the world, threatening to short-circuit any benefits of stimulus. The bond rout raises concerns that the US authorities may be losing control over events.

The yield on 10-year Treasuries – the benchmark price of money worldwide and the key driver of US mortgages rates – has rocketed to 3.3pc, up 35 basis points since President Barack Obama agreed on Monday to compromise with Senate Republicans on tax cuts.
The Treasury sell-off has ricocheted through the global system, triggering bond sell-offs in Asia, Europe and Latin America. Japan's finance ministry braced as borrowing costs on seven-year debt jumped by a sixth in one trading session, while German Bunds punched through 3pc.

David Bloom, currency chief at HSBC, said it is hard to disentangle whether investors are shunning bonds because they expect US stimulus to boost growth next year, or whether they are losing patience with profligacy in Washington.

"If this is all about growth, that's brilliant. But if yields are rising because people think Amirca's fiscal situation is unsustainable, then its armaggedon," he said.

"The US can get away with this only because it is the world's reserve currency. This would be totally unacceptable in any other country. We think these problems will start to crystallise for the US in the second half of 2011, once the European debt crisis has stabilised," he said.

The warnings were echoed by Li Daokui, a rate-setter for China's central bank. "The focus of the market is still in Europe, but we must be aware that the US fiscal situation is much worse than in Europe," he said.

The US tax deal adds $1 trillion of stimulus over two years, according to BNP Paribas. America's budget deficit will remain stuck near 10pc of GDP, not just in 2011 but also in 2012. This will push gross public debt to 110pc of GDP under the IMF definition, near the brink of a debt compound spiral. The contrast with fiscal tightening in Europe has become starkly evident.
http://www.telegraph.co.uk/finance/economics/8190059/Global-bond-rout-deepens-on-US-fiscal-worries.html

On Dec 8th, Li Daokui, an advisor to China’s central bank warned, “we should be clear in our minds that the fiscal situation in the United States is much worse than in Europe. When the European debt situation stabilizes, attention of financial markets will definitely shift to the United States. At that time, US Treasury bonds and the US-dollar will experience considerable declines,” he said. “Oh what a tangled web we weave, when first we practice to deceive,”-- Sir Walter Scott.
http://news.goldseek.com/GoldSeek/1291842000.php

Harvey Organ sums up bond "armaggedon" in his Daily Gold & Silver Report:

JPMorgan is by far the largest derivative player in the world and they are the largest player in interest rate derivatives. Most of these are in the field of interest rate swaps .In simple terms, our hero JPMorgan, on orders from the Fed buys a trillions of dollars of long bonds in the future and at the same time sells or shorts trillions of dollars of short term money of say 30 days or 90 days also in the future. The long bond was purchased at say a yield of3.4% to 4% and the short term money was shorted at a yield of .05% per annum or roughly par.

The huge purchases of these swaps (buy long term bonds in the future and short 90 day treasuries in the future) lowers the price of real treasury bonds as this stimulates the purchase of these bonds at the present time. This is why the bond vigilantes were nowhere to be seen in the states. It will also explain why our camp knew it was impossible for interest rates to rise as this would blow up JPMorgan.

Now we see that the long bond yield is rising which is putting much pressure as losses mount on JPMorgan. They gain nothing from the short end as they shorted at 100 cents on the dollar and that is today's price.

The real risk to JPMorgan is the speed of which long bond yields rise as they cannot get out of their contracts. This will probably be the spark that ignites inside a coal mine. A yield of say 5% would create a 1.6% loss of over 640 billion dollars (they state, I believe, a notional 90 trillion interest rate swaps so 45 trillion on the long end and 45 trillion on the short end). That would blow up JPMorgan and create havoc and collateral damage equal to a neutron bomb in the financial area of Wall Street.

Say goodbye to the bond bull market
By Bill Fleckenstein, MSN Money
Signs of a top in bond prices could set the tone for investors in 2011. The government may start having trouble funding its debt, taking away the Fed's printing press.

A funding crisis refers to the inability of a country to finance itself without resorting to outright money-printing. This can lead to a vicious cycle of currency depreciation, rising interest rates, poor economic performance and poor investor sentiment, all of which feed on each other in a downward spiral. A funding crisis can end when proper monetary and fiscal discipline is restored, usually at the expense of severe economic hardship."

I have been using the term "funding crisis" regularly since the fall of 2008, and I penned the following definition in May 2009:

"If the dollar is called into question . . . and if the Fed's monetization cannot lower rates (and in fact causes them to rise, due to the consequences of money printing), then the Fed is trapped. The more it tries to solve the problem with money printing, the worse it all becomes."

Not to labor excessively over defining terms, but I think it is critical for investors to be able to identify the signs of a funding crisis.

To do that, they need to know what it means in the financial world -- in this case, the bond market, an arena that can be confusing to follow.

The key concept to understand is that a funding crisis occurs when the appetite of debt buyers (that is, bond buyers, aka lenders) for what the debt seller has to offer falls off significantly, or when potential buyers will risk lending the money (buying the bonds) only at a much higher interest rate.

Thus, a funding crisis is very much the free market's assessment of the debt seller's financial state of affairs.
http://money.msn.com/investing/say-goodbye-to-the-bond-bull-market-fleckenstein.aspx

KWN Source - Gold Will Move $150 Higher Within 5 Weeks
By Eric King, KingWorldNews.com
The contact out of London has updated King World News on the massive Asian buyers which have been accumulating both gold and silver. The London source stated, “A bunch of the weak hands are now on the short side of this market. We are very close to a floor because of the massive Asian buying. People have to remember these Asian buyers are now controlling the gold and silver markets, it is not the little guy.”

The London source continues:

“It’s all about the bond auctions, the bond fell off a cliff. In the derivatives market you’ve got JP Morgan playing the bond market at the behest of the Fed, going long 30 years versus selling short-term paper. They buy 30 year paper and then immediately hedge themselves by selling the 30, 60 and 90 day paper. It’s how they keep interest rates down, it’s how you do it.

The only reason interest rates are not in double digits in the US is because of this game. These guys are short front month paper. If this (the bond market) actually fell much longer, JP Morgan could be wiped out, I mean they would be liquidated. The Fed cannot allow them to do that. We’re witnessing history here.

Money flowing out of bonds is going into precious metals. So what they are doing is trying to paint the tape and make it look like a double-top in gold, with silver also retreating. Open interest went up into the decline, this is a gift (the decline). Asian buyers are laughing, we’re like a cartoon to them. They cannot believe how orchestrated this is.”

Where do you see a floor on silver?

“I think to go through $27 is virtually impossible, it would be suicide. I don’t think it will even get there. They are getting very cheeky even taking it below $28. They are not going to push it below $27 because they would just lose too much physical.

All that’s happening here is the Fed is freaking out because the bond market is collapsing and they want to indicate that everything is fine, and certainly that precious metals is not your alternative. Meanwhile, the Asians will continue to buy any dip and keep adding to their position. For what it is worth, Jim Rickards is correct, the Asians are doing their buying through secret agents.”

What about gold?

“As far as the gold market is concerned, gold will be $150 higher from here within five weeks.” http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2010/12/9_KWN_Source_-_Gold_Will_Move_$150_Higher_Within_5_Weeks.html

Long Term Interest Rate Rises Should Support Higher Gold Prices
http://www.goldcore.com/
There is some non-evidence-based analysis that asserts that gold prices will fall when interest rates rise. History and markets would suggest otherwise. Gold is correlated with interest rates - meaning that over the long term when gold prices rise, interest rates tend to rise also. Conversely, when gold falls, interest rates tend to fall.

This makes economic sense as gold prices and interest rates rise when there is challenging inflationary, monetary or systemic macroecnomic conditions and fall when these conditions are more benign.

Evidence and market history would suggest that gold prices will continue to rise until interest rates return to more normal levels. Real interest rates - the yields investors earn over the actual rate of inflation (not the artificially low numbers provided by government bureaucrats) - will have to be solidly positive. Which, of course, is a big problem given the sheer magnitude of the outstanding consumer, mortgage, municipal, state and Federal debt in the US and other debt laden major economies. Rising rates will see debt servicing costs increase and possibly more government debt, it will likely lead to property markets coming under severe pressure again and a snuffing out of the already fragile economic recovery.

Also, it is worth remembering that the US was the world's largest creditor nation in 1980. Today the US is the world's largest debtor nation with a national debt which is surging to nearly $14 Trillion. When President Bush took power in 2000, the US National Debt was only some $5.7 trillion - it has surged by some 145% in just 10 years. Meanwhile, since 2001, long-term unfunded liabilities to Medicare, Social Security Trust Fund and other long term commitments have ballooned from about $20 trillion to an unaffordable more than $54 trillion.

The fiscal problems facing the US today are far larger than those in the 1970s and this is why gold is extremely likely to at least surpass its adjusted for inflation high in 1980 of $2,300 per ounce and to comparitive price levels in other fiat currencies in the coming years.
http://news.goldseek.com/GoldSeek/1291903200.php