Thursday, June 30, 2011


Is it just my imagination, or was that ANOTHER "contrived" Precious Metals take down ahead of the London PM price fix [10AM est] today?

In the theater of the absurd, do you expect anything but the absurd?  Could another ill-advised release of SPR Oil be behind this "sell-off"?

IEA may decide on extending oil release by mid-July
(Reuters) - The International Energy Agency could decide by mid-July whether the release of strategic oil reserves needs to be extended for a month or two, an official said.

The 28-member IEA announced last week a plan to release 60 million barrels over an initial 30 days to fill the gap in supplies left by the disruption to Libya's output.

Richard Jones, deputy executive director of the IEA, said he believed the release would be temporary since demand would likely drop in the fourth quarter.

"We do believe it could be temporary but we have to see how the market evolves. There could be other disruptions, for example, we are compensating for the losses in Libya," Jones said at an event in Mexico City.

A decision on whether to extend the release could be made around the third week of July, he said.

"It will be up to our member countries, they could decide to continue it for a month or two. I don't see that we'll need to continue it for very long because we see demand declining in the fourth quarter, so we think it's a temporary measure."

Talk is cheap.  With the already approved release of 60 million barrels of Oil already proven to be an utter failure at containing Oil and gasoline prices, the IEA at the risk of looking stoopid, must now pretend that further releases may be imminent in an effort to get more mileage [pun intended] out of their foolish plan to "control the price of Oil" and save the world economy.

Of course we must also consider the implications of tomorrows Non-farm Payrolls Report.  This number is likely to by abysmal.  The Precious Metals are routinely hit ahead of this report.  It is just the blatant obviousness of these contrived attacks on the Precious Metals that are so frustrating.  But at the same time laughable, as they only offer the physical metal to investors at discount prices...further pressuring those that are foolish short the Precious Metals in unavailable quantities.  Where are my thank-you cards?

[Regarding tomorrows Payrolls Report:  Should there be a "take down" ahead of the 8:30AM report tomorrow, I suggest buying in to the news as soon as it hits, as the lows for Silver and Gold in July will be witnessed at that time imo.]

Eric Sprott has a new essay out in which he swings a large heavy stick at the tyranny of a rigged paper monopoly over silver price discovery.  This is a MUST READ essay for any and all investors in Silver, particularly those that have been scared out of, or away from,  this latest episode of high volatility in this rigged market:

Caveat Venditor!
From Eric Sprott and Andrew Morris
The recent bear raid on silver has left many concerned about the sustainability of its historic run. Silver, being a relatively obscure market for most mainstream commentators, attracted much attention in the ensuing days following the May 1 takedown. Indeed, though the 30% drop in silver occurred over only four days, seemingly all eyes were on silver, with commentators who could’ve cared less about the silver market only a couple of months ago, suddenly tripping all over one another to make the bubble call. Silver bubble 2.0? Hardly. Anyone who has been fortunate to have been invested in silver over the past few years would unfortunately be used to such blatant takedowns. The Chinese don’t call it the "Devil’s Metal" for no good reason. With so much talk these days about the risks of investing in silver, we think that perhaps it may be timely for us to weigh in on the matter. The silver market is riskier than ever, but for reasons the vast majority of pedestrian commentators have failed to grasp.

There is no doubt that speculative dollars have been flowing into the silver market. We note that in April record trading volumes were registered in the SLV1, Comex futures2, LBMA transfers3, and the Shanghai Gold Exchange futures4. In fact, converting the average daily trading volume in the aforementioned silver instruments to the amount of ounces of silver they are supposed to represent, there were on average, over 1.1 billion ounces worth of silver traded every day in the month of April5. Truly a staggering number when contrasted against the actual amount of silver available for investment. To wit, the world will only supply about 979 million ounces this year from mine and recycling of scrap, of which it is estimated that 657 million ounces will be used up for non-investment purposes6. So in effect, that leaves roughly only 322 million ounces available this year for investment purposes. Converting to days (recall that at least 1.1 billion ounces traded each day) it leaves only about 1.3 million ounces per trading day of available supply. So, we are essentially trading the amount of physical silver actually available for investment, 891 times over each day! It really begs the question; just what are people trading in these markets?
  Read more here.

Let there be no mistake, we view the current setup as extremely bullish. In our view, whatever froth and excess was present in the paper markets has likely been shaken out in the recent selloff. The remaining longs do not seem willing to part with their silver at these prices. These are the strong hands with longer time horizons that are likely not overly leveraged or are willing and able to withstand substantial volatility. Moreover, perhaps the "game" on the paper silver markets which has been meticulously documented over decades by Ted Butler14 and others, will soon be coming to an end.

What is perhaps most important is that despite what has recently transpired in the paper silver markets, the robust demand fundamentals for silver have not changed in our view. For confirmation of this, look no further than the physical silver market (i.e. the real silver market) which is providing us with evidence almost daily of a sustained bull market for physical silver. The US Mint recently stated that, "demand for American Silver Eagle Coins remains at unprecedented high levels."15 Likewise for the Perth Mint16, the Austrian Mint17, and the Royal Canadian Mint18 as well. The Chinese, who were net exporters of silver only four years ago, imported 300% more silver in 2010 than 2009 and such large quantities of imports are expected to continue19. Last year, Indian silver imports increased nearly six-fold, and this year consumption is expected to rise nearly 43% according to the Bombay Bullion Association20. In Utah, silver (along with gold, of course) will now be accepted in weight value as legal tender21. According to Hugo Salinas-Price, a prominent Mexican billionaire, there is now "very strong support for the monetization of silver" in the Mexican congress22. We suspect the Europeans are likely to account for an increasing amount of silver purchases going forward as well. In fact, we just can’t imagine a better outlook for silver fundamentals. This really makes us question who could be short such massive quantities of silver and why? Particularly in those leveraged paper silver markets, where as we demonstrated, only a fraction of the outstanding notional ounces are actually available in physical quantity.

We have a very tough time understanding those bearish arguments against silver. We look at the real silver market, and based on the supply and demand data coming from the real, physical markets for silver, the fundamentals are only getting stronger. And yet there exists another silver market, which as we’ve shown, is not very connected to the physical realm at all. And though silver investors have for decades suffered the tyranny of a rigged paper monopoly over silver price discovery, it appears to us that the tides are turning. In the age of QE to infinity, investors are being more scrupulous with their capital and as such they are demanding physical silver in quantity. With more and more dollars flowing into the silver markets and a finite supply of physical to meet that demand, the theoretical losses for the paper silver short-sellers are near infinite. And with such a skewed and obvious risk/reward payoff vastly favoring the longs, we pose the following question. Who is most at risk in the silver markets: the buyers of a scarce and real asset that serves a growing multitude of purposes, or the sellers, who are short a quantity of silver which may very well not even be obtainable at anywhere near current prices? Let the Seller Beware!

The Screaming Fundamentals For Owning Gold And Silver  [MUST READ]
by Chris Martenson

This report lays out an investment thesis for gold and one for silver. Various factors lead me to conclude that gold is one investment that you can park for the next ten or twenty years, confident that it will perform well. My timing and logic for both entering and finally exiting gold (and silver) as investments are laid out in the full report.

The punch line is this: Gold and silver are not (yet) in bubble territory, and large gains remain, especially if monetary, fiscal, and fundamental supply-and-demand trends remain in play.

For how much longer are the taxpayers in America going to sit silently as their central bank funnels money to the European banks?  The US Congress?

Fed Extends Lending Program for Central Banks
WASHINGTON—The Federal Reserve, amid persistent worries about Europe's sovereign debt crisis, last week quietly approved the extension of a crisis-lending program that allows the European Central Bank to tap the U.S. for dollars, Federal Reserve Bank of St. Louis President James Bullard said.

The Fed's dollar-lending agreements with the ECB—as well as the central banks of England, Canada, Japan and Switzerland—were scheduled to expire Aug. 1. The Fed and other central banks haven't yet disclosed renewal of the agreements, known as swap lines.

Fed officials voted to extend the program, which was first launched during the financial crisis, at their latest Federal Open Market Committee meeting June 21-22, Mr. Bullard said in an interview Tuesday.

Under the agreement, the Fed can lend an unlimited amount of dollars to foreign central banks for a fee, and they in turn lend them to local commercial banks. The program was launched during the crisis because many foreign banks, especially those in Europe, had trouble tapping short-term dollar loans in credit markets, yet they needed access to dollars to fund their holdings of mortgage bonds and other U.S.-dollar-denominated debt.

The Fed says it takes no risk in these swap lines because foreign central banks, not the commercial banks, are obligated to return the dollars. At the height of the financial crisis, foreign central banks tapped the Fed for more than $600 billion of these loans.

QE2 may have "officially" come to an end today, but the fed will not stop buying US Treasury debt anytime soon:

Fed May Buy $300 Billion in Treasuries After QE2
The Federal Reserve will remain the biggest buyer of Treasuries, even after the second round of quantitative easing ends this week, as the central bank uses its $2.86 trillion balance sheet to keep interest rates low.

While the $600 billion purchase program, known as QE2, winds down, the Fed said June 22 that it will continue to buy Treasuries with proceeds from the maturing debt it currently owns. That could mean purchases of as much as $300 billion of government debt over the next 12 months without adding money to the financial system.

The central bank, which injected $2.3 trillion into the financial system after the collapse of Lehman Brothers Holdings Inc. in September 2008, will continue buying Treasuries to keep market rates down as the economy slows. The purchases are supporting demand at bond auctions while President Barack Obama and Republicans in Congress struggle to close the gap between federal spending and income by between $2 trillion and $4 trillion.

“I don’t think the Fed wants to remove accommodation in any way, shape or form,” said Matt Toms, the head of U.S. public fixed-income investments at Atlanta-based ING Investment Management, which oversees more than $500 billion. “It’s quite natural for them to reinvest cash,” he said. “That effectively maintains the accommodative stance.”

Zero Hedge updates us below on this weeks bond auctions as QE2 comes to an end:

Dealers Rescue Very Weak 2 Year Auction As Indirects Flee From Short End, Despite Record Low Yield

Horrible 5 Year Auction Sends Treasury Complex Into A Tailspin, 5 Year Yield Surges 22 Bps In Two Days

Ugly 7 Year Auction Caps Miserable Week For Bond Bulls
Treasury Complex Collapses To Celebrate Last QE2 POMO
The biggest question of who will buy bonds now that Primary Dealers will be unable to roll debt to the Fed remains, judging by today's carnage in bonds, completely unanswered.
And Greece is the World's biggest debt problem? 

We'll give our tax dodging US Treasury Secretary the last word as we head into the nation's annual Fourth of July Celebration Of Freedom:
"There is no credible budget plan under which a debt limit increase can be avoided."

 -Treasury Secretary Timothy Geithner

Wednesday, June 29, 2011


“Summer Doldrums,” The Biggest Load of C–p Ever! [entertaining and insightful read]

By Andrew C. Hoffman, CFA
As for the summer doldrums, I agree that in the general equity markets (at least before the PPT took
over daily support operations), it is common for indices to languish in the summer months due to
reduced trading volumes. Moreover, given that nearly all American investors – retail, institutional, and government – have lost money in essentially every market they’ve traded in since 2008, and that we are currently in the early stages of the “Greater Depression”, it is certainly reasonable to believe that stock trading will decline this summer, with no reasonable expectation for higher prices any time soon (outside of additional “QE” turbo boosts).

But in gold and silver?

You’re kidding, right?

Gold and silver are not “investments”, they are MONEY, and simultaneously INSURANCE against the horrific stagflation and economic collapse that currently plagues the entire Western World, at an
accelerating rate of speed each day, I might add. Imploding economic data, soaring inflation, the
imminent collapse of the Euro, Japanese economic catastrophe, rocketing U.S. debts (not to mention
breaching the debt limit), and a dozen other “black swans” threatening to destroy the financial system at any time, etc., etc., etc., to the point that the great Jim Sinclair THIS WEEK stated that a currency crisis could commence any MINUTE...

And yet, even distinguished gold “analysts”, including one very famous one whom I won’t name so as to avoid a conflict, are already attributing this week’s decline (actually, gold and silver were very strong until OPERATION POST FED PM/OIL ANNIHILATION on Thursday) to the beginning of summer doldrums, and that we could see more pain until the “seasonal” start kicking in in August.

I can’t find words to describe my anger at this garbage, which only serves to further the Cartel’s attempt to create FEAR in the PM community. I can GUARANTEE that NO ONE, ANYWHERE ON EARTH, sold ANY material amounts of PHYSICAL GOLD AND SILVER in response to the Fed announcement, or to the IEA oil announcement. This was purely a Cartel attack on PAPER gold and silver, and per the charts at the same times of day as always. Not to mention, per the table above this was a MAJOR CARTEL OFFENSIVE to ensure that the Fed’s money‐printing announcement would not appear to be gold bullish, just as the SUNDAY NIGHT PAPER SILVER MASSACRE last month, which occurred, not coincidentally, two trading days after a Fed money‐printing announcement caused gold and silver to rocket to new ALL‐TIME HIGHS!

Attributing “seasonality” in gold is as archaic and ridiculous as any concept in the investment world. For example, many “analysts” point to the Diwali festival in India, which occurs each fall, as some type of  "catalyst” for gold prices, as Indians tend to buy a lot of jewelry during this period. So JEWELRY DEMAND is now cited as a major catalyst for gold prices, in a market in which INVESTMENT DEMAND accounts for 75%+ of all global buying? Only the retarded/evil World Gold Council and GFMS (Gold) and CPM Group (Silver) are supposed to make such silly projections regarding jewelry, or even industrial demand, in an asset class with 5,000 years of evidence suggesting it is MONEY, NOT an INVESTMENT! But no, we even get our most famous “allies” spouting the same bulls—t as well.

Seasonal Gold Price Trends Favor Summer Purchases
By Jonathan M. Kosares

The combination of the escalating sovereign debt crisis in Europe, the unknown future of the Fed’s quantitative easing program, the ongoing debt ceiling debate, the early warning signs of inflation, especially in food and commodities (as illustrated in our latest newsletter), and ongoing geopolitical instability promise to make the second half of 2011 very interesting for the gold market. Whether or not a meaningful pullback will manifest in the next two months is unknown, but the past ten years do make one thing abundantly clear: If you’re looking to add gold to your portfolio, taking advantage of the summer doldrums can be a reliable and rewarding strategy.

GOLD Seasonal 40 Years
Looks like up to me!

Gold Price "Got to Be a Bubble"
By Geoff Candy, Bullion Vault
Joining me on the line to discuss this today [Mon 20 June 2011] is the head of research at BullionVault, Adrian Ash. You recently wrote a piece that looked to explode a few of the gold bubble myths. Why would you say that gold isn't in a bubble given its rise over the last 10 years?

Adrian Ash: You can understand why journalists and commentators who don't follow the gold market very closely look at it and see there's a bubble. We have just had the second highest weekly close ever in US Dollar terms and the highest ever weekly close in both Euro and Sterling terms – but what a lot of people get confused, I think, is they look at the gold rise over the last 10 years and particularly over the last five years and they confuse longevity with speed. Bubbles really are about that parabolic rise, that parabolic blow off but most typically what you are also looking for is for that to be happening at the same time as the fundamentals no longer hold true.

Aside from whether one thinks gold is a good investment for the long term or whatever, there are just a couple of points which people who look at it and say "It's got to be a bubble because it's gone up" are really missing. The first as I say is that it's steady, it's been rising by about 16% year-on-year for Dollar and Sterling and new investors over the last half decade. That's hardly parabolic. In terms of volatility you anticipate a bubble top, a bubble blow-off being very volatile. But gold's volatility is incredibly low at the moment and it has been over the last few years. Every time it's taken out a new level – whether its $1200, $1300, $1400 or $1500 – volatility on gold on a daily basis has been very low. Right now its running below 11% and that's versus a four decade average of 16.5%. Compare that with silver where you've currently got daily volatility after the big top of last month running over 45% and that compares to silver's average daily roll over the last four decades of 29%. So silver looks a bit hotter, theres no denying it.

Another reason that people say gold must be a bubble is that they then start looking for what's going to blow it up. What's going to take it down – and my favourite really – is when people say "When the economy settles down, gold will come off." You've got to love that when first of all, but more germane is the fact is that gold doesn't have anything to do with GDP. If you look at it against US GDP, the Dollar price versus US GDP, the correlation is slightly negative but it's not specifically significant. The same is true of Chinese growth. Chinese GDP shows zero correlation with the Gold Price. The Indian economy has a slight positive correlation with the Gold Price, but again it's not really specifically significant. The bottom line is, because gold is not an industrial metal, gold's use is social not industrial, and its social use is as a store of value, a store of wealth when people need it – gold's not exposed to the economic cycle. It's not like crude oil or copper or even silver to an extent. It's not exposed to industrial demand.

Geoff Candy: I suppose the corollary to that is the fact that people were perhaps concerned about the rise in Gold Investment demand and the fact that it happened at the same time as perhaps a fear about the global economy and I suppose the concern was whether or not, if that investment demand came off, there would be enough fundamental demand for gold to sustain the higher prices. That does seem to be happening at the moment. What is your view on that?

Adrian Ash: You have to look at what is driving that demand. Yes – fears about prolonged stagflation, fears of a true depression, which we may or may not have been through over the last couple of years (it's been impossible to tell with the amount of money which governments have thrown at it and particularly central banks have thrown at the problem as well). But what is really driving demand there, it's not about GDP, it's about real interest rates. Very boring but it happens to be true with gold.

Obviously people Buy Gold when they fear the inflation ahead and personally [I believe] they are right to do that. But on a big boring and technical level it is about negative real interest rates so when the return on cash is below zero after you account for inflation people will Buy Gold. It's just a fact. It is what happened in the 1970s and its what's been happening progressively over the last decade and particularly in the last three or four years now. The reason that happens is because obviously – the word savings – that still means cash in the bank for most people and if you're getting less than zero, if you know if you put money on deposit today that it will lose purchasing power, including the interest rate over the next 12 months, eventually you start to get sick of this. People need to find something else; I need to find a better way of storing value and gold is a stand-out candidate for that, primarily because of its use across five thousand years of history.

Wherever gold's been discovered in the world and throughout time, it has been used as the ultimate store of value par excellence. People again are doing that today. They are looking at something which is rare, it's tightly supplied, and it's indestructible – and that really makes it stand aside from cash, and debt instruments, bond investments where those are paying you less than inflation.

Why GDP Is Useless and Deceptive: There Was No Recovery
by Econophile, via Zero Hedge
The concept of GDP was developed during the New Deal by economist Simon Kuznets, a pioneer in econometrics. The New Dealers liked the concept because, as advocates of central economic planning, they believed they could control the economy and needed something to measure the efficacy of their meddling. Austrian theory economics rejects the notion of "national accounts" and the government's ability to "manage" the economy. This argument goes back almost 200 years, but let's say that history has not been very kind to economic meddlers. Especially to Keynesians.

What it all comes down to is the Keynesian belief that a lack of spending is what ails the economy, and conversely, spending, any spending, is good for the economy. If we consumers aren't spending enough, according to this idea, it is the duty of the government to spend in our stead. And if the government doesn't have the money, it is OK to borrow and spend.

Economic growth doesn't start with spending: it starts with saving and production and ends with spending. And that is why we should not rely on GDP to measure the health of the economy.

If spending were the key to economic growth, then, after running Federal deficits of more than $4.8 trillion since 2008, why haven't we recovered? According to Keynesian theory, at least as defined by Paul Krugman, Brad DeLong, Ben Bernanke, Larry Summers, and Tim Geithner, it should have worked. Of course Krugman would say that we haven't spent enough, but he always says that when evidence shows that it doesn't work.

So when the conventional wisdom says that the economy recovered in June 2009, it didn't.

The Strategic Petroleum Reserve Release Has Now Been Fully Priced In As Crude, Gasoline Surge
By Zero Hedge
Remember how 4 very long days ago, the 60 million barrel SPR release was vaunted as being the reason for the second consumer renaissance after it was largely expected it would lead to sub $90 crude, and low $3/gallon gas, and result in every Joe Sixpack going out and buying 3 houses at least? Well, so much for that: the IEA's action has now been fully priced in and WTI is back to precisely where it was before the IEA announcement on Thursday. Which means that what some said was a shadow QE (and don't get us started on all the mainstream media "journalists", among which Bloomberg and CNN, who continue to confuse QE Lite with something they call QE 2.5) had a half life of just over 3 days. Expect future intervention half lives to continue declining, as the criminal banking cartel's ammunition is now down to just one thing, the only thing, printing.

IEA's Big Mistake [MUST READ]
Commentary from
Reportedly the reserve release was decided upon after high-level discussions with Saudi Arabia. After the OPEC meeting failed to change the output quotas Saudi, Kuwait and the UAE said they would immediately increase crude production by a total of 1.5 million barrels per day over the coming months in order to offset the expected 1.5 mbpd production shortfall in the third quarter. Oil demand increases in the summer and fall thanks to summer driving and the use of oil to generate electricity in places like Saudi Arabia in order to run air conditioners in the sweltering hot summer temperatures. Saudi Arabia alone is expected to burn as much as one million additional barrels per day to generate electricity for cooling. This is a temporary three month demand period but it is still demand.

Saudi can pump its own oil to burn for electricity. In theory it has the additional capacity to produce up to 12.5 mbpd. That theory has never been tested until now. In May Saudi claimed it produced 8.8 mbpd and would boost that to 10.0 mbpd in July. On the surface that sounds like a significant increase but after subtracting their additional demand of up to 1.0 mbpd for electricity the actual amount of new oil to market is a very small 200,000 bpd. Add in Kuwait and the UAE, which are expected to increase production by possibly as much as 200,000 bpd and the net gain for the market was only 400,000 bpd despite all the bluster and big promises.

I am sure the "high-level" discussions with Saudi covered what additional oil would (could) actually be produced and of what flavor. In the initial Saudi comments after the OPEC meeting they said the extra oil would be sour crude and be sold to China where EPA rules are less stringent. China's demand has increased by something on the order of 800,000 bpd since the same period in 2010.

The IEA ran the numbers and saw a shortfall of light sweet crude. Libya's missing 1.6 mbpd of oil production is light sweet crude. There are no other countries other than the U.S., Canada and Brazil with any material new production of light crude. In every other country the supply is dwindling so the loss from Libya is serious. The IEA believes some production will be resumed once Qaddafi is gone but that as much as 1.0 mbpd may not be back online until 2015. Nigeria has some excess light capacity but they are constantly suffering outages from terrorist attacks and work stoppages. The situation is so bad the international companies like Shell are attempting to sell their operations in Nigeria to avoid the problems. A successful sale will only make matters worse because companies in Nigeria currently bidding on the assets don't have the expertise to grow operations.

The IEA has been warning for months of the impending shortage in world production in Q3. Nobody has been listening. They repeatedly begged OPEC to increase production to head off high prices. OPEC refused either because they did not want to push prices lower or because they don't really have any excess capacity that does not belong to Saudi, Kuwait and the UAE.

The IEA saw the impending collision of increased demand meeting insufficient supply and panicked. You have to wonder just how much information Saudi Arabia actually gave the IEA to push the group to make such a big decision. The IEA really can't fix the problem. This is only a band-aid on a wound that will eventually fester and become infected. Oil supplies are declining, OPEC does not have the excess capacity it claims and global demand is growing.

Sunday, June 26, 2011

Do NOT Be Deceived, Falling Gas Prices To Be "Transitory"

Fascinating how "all of a sudden" the headlines are littered with "Falling Gas Prices" headlines:

Average Price for US Gas Falls to $3.63

Gas Prices Drop under $3.50 per Gallon

Price of gas drops 11 cents in the last two weeks

Gas Prices Fall Nationally

Drivers catch a break as gasoline prices fall

Gas Prices Fall Giving Drivers a Much-Needed Break

Gas Prices Expected to Drop to $3.40 a Gallon By July 4 weekend

Next we will be "treated" to headlines touting the "growing economy" now that gas prices have fallen.  Because, don'tcha know, all of the US Government and US Federal Reserve efforts to "boost the economy" have failed just because those damn gas prices have been rising.  LOOOOOOOOOOL!!!  If it were only that simple people,  but the sheep will believe anything as they are lead to slaughter. 

Bumbling Ben Bernake will tell anybody who is listening that rising gas prices have caused the economy to slow and begin to stall.  Great excuse Ben, but it ain't the truth.  Then we are told by Pinnochio it is only a temporary setback.  "Gas prices will fall soon, and we will be right back on the path to economic growth..."

Ben, if it wasn't for the rising energy and food prices...and rising prices in general...there would be ZERO growth in the economy.  The whole premise of growth in our economy is based on rising prices.  This it why it is so important that the Fed "meet its mandate" for an inflation rate that is two percent or less.  Hey, a two percent rate of inflation equals a two percent rise in growth...don'tcha know?

It is high time Americans wake up to the fact that over the last 40 years...the only real "economic growth" has been in the US Money Supply.  Rising prices = rising receipts = growth.  The greatest scam ever perpetrated on the human race.

And now "suddenly" gas prices are falling just as the great wizard predicted when he stated repeatedly that rising gas prices would be temporary.

In Bernanke's statement before his press conference last Wednesday he said the following:

In the medium term, the Committee also seeks to achieve a mandate-consistent inflation
, which participants’ longer-term projections for inflation suggest is 2 percent or a bit less.
Although the recent surge in commodity prices has led inflation to pick up somewhat in the near
term, the Committee continues to project inflation to return to mandate-consistent levels in the
medium term, as I have discussed. Consequently, the short-term increase in inflation has not
prompted the Committee to tighten policy at this juncture. Importantly, however, the
Committee’s outlook for inflation is predicated on longer-term inflation expectations remaining
stable; if households and firms continue to expect inflation to return to a mandate-consistent
level in the medium term, then increased commodity prices are unlikely to induce significant
second-round effects, in which inflation takes hold in noncommodity prices and in nominal
wages. Thus, besides monitoring inflation itself, the Committee will pay close attention to
inflation expectations and to possible indications of second-round effects.

Decide for yourself.  Inflation expectations are flying off the charts in my world.  And rising oil prices always get the blame for rising inflation...  BOOM!  Bomb the Oil markets, and suddenly falling Oil and gasoline prices are in the headlines.  Bernake was right!  High gas prices were only temporary...  Unfortunately, low gas prices might be even less temporary.

By Yra
Yesterday, it was such an easy game to play but now the IEA had entered and made it so much harder and it looks as though they’re to stay.

The early morning entry of the IEA into the market pricing of oil has given rise to a slew of conspiracy theories. I care not a damn about the theories but want to analyze the impact of the action and the effect upon the markets. Government actions, no matter how ill-advised, are to be understood and analyzed in the real and potential outcome on world markets.

The Obama Administration has been floating the idea of opening the SPR in an attempt to break the back of financial speculation in the energy and food sectors. It appears that the unilateral move by the Obama Administration would not go down well as many in Congress and elsewhere would have attacked it as an electioneering gimmick to drive down gas pump prices and attack the “locusts” on Wall Street. It seems that the move then became to internationalize the decision by using that “august” body the IEA.

In order to get the major participants to go along I am wondering what deals were made and what potential impact it will have on markets as we go forward. One analyst on TV I think had it very correct: Whoever crafted the action waited until the price of oil was already moving lower and when WTI was at the 200-day moving average, released the announcement so as to get the most price action, as so many long-term traders are geared to that 200-day moving average.

The rationale was that the Libyan crisis had removed 140 million barrels of oil from the market so the supply had to be provided by an international consortium of reserves. A grand alliance and a good headline. Interesting, though, that the U.S. contribution was almost exactly what the BUSH ADMINISTRATION released post-Katrina.

I am not making a statement about the Obama Administration, only trying to understand the market impact. The fact is that POLITICIANS OF ALL LABELS will use whatever tools are at their disposal to maintain power.

This type of action of not from the book of Saul Alinsky but from Richard Nixon. It is incumbent upon us as traders to analyze the events and look toward its potential impact:

As The IEA-OPEC Nash Equilibrium Collapses, Is A 1973-Style OPEC Embargo Next?
by Tyler Durden, Zero Hedge
Indeed, if Obama's reelection campaign is such an emergency that it requires tapping the SPR, what will happen when there is a real emergency: such as a repeat of the 1973 OPEC embargo, which set the stage for Volcker's last minute and very painful intervention to prevent the US economy from tailspinning into an inflationary supernova?

And just to make sure things get even more polarized, Dow Jones reports that the "International Energy Agency consulted Saudi Arabia, China and India before it authorized the release of some of its emergency reserves, the agency's executive director said Sunday."

"They understand, and they appreciate the action," Nobuo Tanaka said on the sidelines of the second Global Think Tank Summit in Beijing.

The release of some of IEA's strategic stockpiles is meant only to fill the gap in supply until higher crude volumes from Saudi Arabia reach the global market, he added.

Oddly enough, the leadership at the IEA is just as clueless as that of the US:

Separately, Tanaka said he asked China once again to join the IEA on Saturday. Although there hasn't been any official response, Tanaka said he was encouraged by China's recent statement publicly welcoming the IEA's strategic stockpiles release.

Of course they welcome it you idiot, because they will be buying everything your member countries have to sell, and thanks to your stupidity, at a welcome discount. And why the hell would China want to join the IEA when it gets all the benefits of participation, without any of the obligations of being a member (i.e., adhering to your retarded politically-motivated agenda).

Good luck buying it back at the same price when OPEC fires its own warning shot and announces it is reducing crude output for all remaining OPEC countries (ex. Saudi) by 10-15%.

You have to begin to releasing Oil from the SPR to suppress the price of oil as foolish as central bank selling of Gold to suppress the price of gold? Look at how that plan has backfired... Could last week's SPR release signal a new leg in the secular Oil bull market is near on the horizon? Both Oil and Gold will be more expensive to replace going forward from here...much more expensive.

DOE Announces Details Of Strategic Petroleum Reserve Firesale
by Tyler Durden, Zero Hedge
Following the earlier general announcement that the SPR would sell 30 MM barrels of oil a lot of questions were left unanswered, such as what kind of crude will be sold, where will it be sold from, and at what price. The wait for answers is now over: The DOE has just released all the missing data. Per Reuters: "Under the terms of the U.S. sale that were issued by the department, the government does not plan to stagger the sale of the oil and will offer all 30 million barrels in one bid sale. The department will offer "sweet" crude oil from three of the reserve's storage sites: Bryan Mound and Big Hill in Texas and West Hackberry in Louisiana. The oil will have a base price of $112.78 a barrel, a spokeswoman for the SPR said." Which does not however mean that this is the price at which the oil will be sold: "Traders can bid above or below the "Base Reference Price" of $112.78, which is derived from the last five days of trading of Light Louisiana Sweet crude oil, as assessed by energy pricing agency Argus. Companies will submit their bids for the oil through a special department website. Delivery of the oil to the winning companies would take place over the month of August. Winning companies would pay for their oil during the month after the crude is delivered." Which simply means that China will convert quite a bit of America's trade deficit from dollars into oil.

Or maybe this SPR release was just the first of MANY US asset sales used to drum up cash to make debt payments.  30 million barrels at $112.78 a barrel = $3.38 BILLION.  Nah, not really...the US borrows $4 BILLION a day...drop in the bucket.

Bankers Declare War on Commodities
Written by Jeff Nielson
Paper “fiat” currencies are humanity’s oldest Ponzi-scheme, and the current incarnation – the first global version in history – is about due to implode. Put another way, in the first 40 years of this Ponzi-scheme, the bankers have managed to reduce the value of our currencies by roughly 75% (thereby “confiscating” 75% of our wealth), and they are working even harder to destroy (i.e. steal) that last 25%.

Adding further weight to this argument is the obvious fact that there was no possible justification for dumping 60 million barrels of oil onto the global market at this time. The price of crude was not merely stable, it was moving lower – and even the higher quote for “Brent” crude was roughly 25% below its previous peak. Inventories are (at worst) stable, if not abundant. So where was the “emergency”?

Indeed, half of the oil came from the U.S. “Strategic Reserve”, which is explicitly (and obviously) intended to be used only in the event of a bona fide “emergency” in the oil market. The fact that there was no emergency, and the fact that prices were already falling indicates unequivocally that the only “purpose” for the IEA (and the Obama regime standing behind it) was to damage the oil market as much as possible. This would (did) illegitimately drag all other commodities down with it – effectively causing the banksters’ (worthless) paper currencies to rise in value.

We can further demonstrate the illegitimate basis for this assault on commodities by pointing to the wide assortment of vocal critics of this move. The U.S. business community, “Big Oil”, the Republican Party, and OPEC all severely criticized the IEA and the Obama regime immediately after this move was announced. When even such a collection of “strange bedfellows” can reach a consensus in their criticism of this oil-dump, it strongly suggests that the argument this was “pure manipulation” is both clear and conclusive.

This attack on the oil market, and by extension the entire commodities complex is as desperate as it is transparent. As with most manipulation of markets, any short-term benefits which are gained by bankers manipulating prices in accordance with their own, evil plans are lost when supply/demand fundamentals inevitably reassert themselves. Here even a Wall Street banker should be able to connect-the-dots.

As I mentioned earlier on, a drop in the price of oil is highly “stimulative” for all economies. What will this do? It will cause more economic activity, and more consumption all over the world, significantly increasing the demand for all commodities. Similarly, pushing down commodity prices inevitably impacts supply.

A farmer trying to decide whether to plant seed in one more field, or leave it fallow will now do the latter. An oil company trying to decide whether or not to drill a few more wells will now decide “not”. A lead/zinc miner which was considering a mine expansion, or construction of a new mine will now choose to delay that capital expenditure. Simultaneously “squeezing” supply and stimulating demand for commodities can have only one, possible long-term consequence: even higher prices than if this short-term manipulation had not taken place.

How gas price controls sparked ‘70s shortages
By -The Washington Times, 2006
Proposals to control gasoline prices and tax producers’ windfall profits were popular ideas that were tried — without much success — during the oil shocks of the 1970s and 1980s.

The era of price controls is most remembered for long lines at gas stations. The controls were put in place by the Nixon and Ford administrations in reaction to a jump in fuel prices caused by cuts in production by the newly formed international oil cartel, the Organization of Petroleum Exporting Countries.

Back then, “price controls turned a minor adjustment into a major shortage,” said Thomas Sowell, author of “Basic Economics: A Citizen’s Guide to the Economy.”

Mr. Sowell says that although the best response would have been to let prices rise, giving oil companies an incentive to produce more and consumers an incentive to conserve, “this basic level of economics is seldom understood by the public, which often demands ‘political’ solutions that turn out to make matters worse.”

The public — as it does today — wanted low prices. But the artificially depressed pump prices imposed during the oil crisis of 1973 — which stayed in place in various iterations through 1980 — brought about lines at gas stations and an artificial shortage of gas, he said.

If you thought things couldn't get any worse, think again.

Wednesday, June 22, 2011

Silver Is And Remains The Best Investment Opportunity Of Our Lifetime

How many times did Bumbling Ben Bernanke say "uh" or "um" while answering questions at his press conference today?  Watch it.  I swear that "uh" and "um" were every other word out of his mouth.  The guy is freaking clueless!  Princeton professor?  Is it topo late for his students to get a refund? 

I fell asleep listening to him...[no, really, I did].  The economy is going to get better because Ben Bernanke says it is going too?  Unemployment is going to improve because he says it is going too?  What fool believes this jibber-jabber?  Ben Bernanke has been 100% wrong about everything he has "predicted".  E-V-E-R-Y-T-H-I-N-G!!! 

Bernanke must go
The problem with rewarding incompetence and failure in high places is that even a well-regulated financial system — which we are still very far from achieving — cannot serve the public interest if the chief regulators don’t do their jobs. Secrecy, lack of accountability, and incompetence — these are weapons of mass destruction for America’s economy.

Enough of Bumbling Ben's blah-blah...if you are reading this blog, you are already well aware of this mans incompetence...

Of course Gold and Silver were pressured after the "genius" gave his pep talk to prove that he is "on the job"... and the poor results of all his efforts are "temporary"...

Let's take a look at Silver today.  What are the prospects for Silver moving forward from here?  The following is an assortment of stories and essays I have been collecting since late May:

Silver Should Be $150 Today
By Eric King,
King World News interviewed one of the top ranked money managers in the country, Dr. Stephen Leeb, Founder of Leeb Capital Management.

Stephen Leeb:
...Another critical metal, silver, which the Chinese have been accumulating is vital. Vital for building out anything resembling solar energy. You really cannot produce solar without silver really becomes a critical metal. What are we doing with silver? We raise margin requirements on the commodity exchanges and we think we’ve solved the silver requirement.

...We are stuck in a world of resource scarcity and unless we figure out a way around this we won’t even be able to build out renewable resources...and if we are not careful, sooner or later the Chinese will control most of the silver.”

When asked about the seriousness of the silver situation Leeb stated, “I think it’s desperate, literally. I’m using that word in a well-measured way. I think when you look at Japan right now in the wake of that horrible nuclear accident, Japan is on record as saying that they are going two ways with their energy situation. They are going to try to conserve, and that leaves renewables. Well we know they are very limited in terms of wind, why? Because of the rare earth situation, they can’t get those high temperature rare earths from China.

That leaves solar and in order to really build out solar in any meaningful way you need silver, and silver becomes a very, very critical metal. Yes it is, silver is an extremely special metal as you said Eric...You need it across the board in military applications, in electronic applications and especially in my view of the world, building out renewable energy.”

When asked where silver is headed in terms of price Leeb responded, “I could just look at it from a monetary point of view, forget about all of the industrial applications. The ratio of silver to gold in the world is about ten to one, maybe seven and a half to one, above and below ground if you look at reserves. So as a monetary metal you could make a case that silver should already be no more than a ten to one ratio with gold.”

When asked with the ten one ratio putting silver $150, is that an outrageous price for silver today Leeb responded, “No it isn’t, it’s not at all outrageous. Silver at $150 is in no way outrageous. I’m not counting the critical applications in the industrial and renewable areas.”

Hi-Lo Silver

By: Neeraj Chaudary, Investment Consultant and Hemant Kathuria, Managing Director
In nominal dollars, silver peaked at roughly $50/oz in 1980. But in inflation-adjusted terms, silver would have to reach $131/oz just to get back to its 1980 high. And that only counts inflation to the present day. With The Fed seemingly determined to debase the US dollar for the foreseeable future, the ultimate destination for a new inflation adjusted high becomes hard to estimate.

Of course, no market moves in a straight line. Recent gyrations should remind us that silver can be a wild ride, with movements often exacerbated by possible market manipulation. But in our view, the moves in the silver market over the last two months do not invalidate our long-term outlook. For those who can stomach the thrills, silver remains a means to simultaneously gain protection from dollar devaluation while harnessing the benefits of global economic growth. The big boys may push and pull the market to their own temporary advantage, but they can't alter its fundamental direction.

Silver to move towards $50, reach nominal all time highs
Commodity Online
Because silver has been so undervalued for so long with a gold/silver ratio averaging north of 50 for the past century, most silver produced in recent decades has been consumed by industrial purposes and there are actually much larger inventories of gold available above ground today. Most likely we will probably see the gold/silver ratio overcorrect to the downside, possibly down to 10 or lower. Only 10 times more silver has been produced in world history than gold so a gold/silver ratio of 10 is actually a very realistic possibility. This means those who own silver will likely more than quadruple their purchasing power from current levels this decade, while Americans with savings in U.S. dollars lose all of their purchasing power.

COMEX registered physical silver inventories have declined 30% over the past six weeks down to 28.8 million ounces or just $1 billion worth of silver. A major shortage of physical silver is developing. A COMEX default is likely coming in the near-future as those holding futures contracts demand physical delivery and COMEX can't deliver. This could cause an explosion in silver prices, possibly to $100 per ounce overnight.

Silver Shift Shows Defensive Bent
By Alix Steel
NEW YORK (TheStreet) -- A significant decline in levels of registered silver suggests major investors are taking a defensive stance when it comes to the metal.

There are two kind of inventories on the Comex -- registered and eligible. Registered is available silver not yet spoken for. Eligible is silver that investors have purchased, but is stored by the CME for them, otherwise known as taking phsyical delivery.

Since the beginning of 2011, the amount of registered silver has fallen almost 38% with a steep drop coming in mid April. Registered silver now stands at 28.7 million ounces as of June 8th while eligible silver has risen 23% to 72 million ounces.

Part of the explanation for this shift was that Scotia Mocatta, one of the banks that holds the Comex' silver, reclassified a large portion of their silver from registered to eligible, which means more silver was being taken off the shelf and being claimed by investors.

This shift occurred when the silver price was at $43.26 and continued as silver rallied to nearly $50 an ounce, which means investors might have been scared of supply crunch and grabbed the metal while they could, leaving less silver in the marketplace for everyone else.

"More and more people are taking delivery of the product," says Phil Streible, senior market strategist at Lind-Waldock. The silver futures market is also in backwardation, meaning that the most current month trades higher than future months. Backwardation often indicates that investors are worried about an immediate supply crunch.

Mark O'Byrne, executive director of Goldcore, a bullion dealer, says the small amount of registered silver is dangerous because if a "tiny fraction of those in the futures decide to take delivery, there is the potential to default." If the Comex can't make good on their commitments, O'Byrne predicts there would be a huge rush into the physical metal or allocated storage and out of paper silver. He also wonders if the steep and aggressive margin hikes silver saw in May, which led to a more than 30% correction in the silver price, were a way of the Comex shaking out investors to prevent them from taking physical delivery.

650 Years of Silver Prices
This is a 650 year graph of silver prices and silver/gold ratio.
[Silver is cheaper today than you can even imagine!]

Silver Preparing For Another Shock And Awe Move
By Eric De Groot
Money flows reflect a bullish setup despite the negative headlines and growing pessimism towards silver.

Open interest continues to decline as the weak hands are flushed. This action is consistent with paper operations in which the weak hands are flushed in an environment of headline fear.

Accumulation by strong hands has achieved statistical concentration. Statistical concentration tends to precede tradable bottoms.

The only hitch in the setup at this point is retail money. Retail money with its tendency to be concentrated on the wrong side of the trade near inflection points remains relatively neutral as of June 7th. Short side concentration by retail money would galvanize the bullish setup. Watch for it in the coming weeks.

Silver’s next move has the potential to be “shock and awe”. Smart money is buying long contracts hand over fist. This type of concentrated buying has not been seen since late 2008. The concentrated buying of 2008 foreshadowed nearly a doubling and quadrupling in price by early 2009 and 2011. In other words, the money flow setup foreshadowed a ‘shock and awe’ run that few experts saw coming.

Silver Will Trade Like an Internet Stock to the Upside
Eric King,
King World News interviewed one of the most street-smart pros in the resource sector, Rick Rule Founder of Global Resource Investor.

Rick Rule:
“The interesting thing about silver is that it doesn’t respond to fundamentals very well in the sense that most silver that’s produced, is produced as an adjunct to mining other metals. What you are seeing is a slight increase in pure silver supplies as a consequence of the high price bringing production in place at the same time that you are seeing capital constraints in the base metals industry constraining the byproduct supply of silver.

Investment demand for silver has been extraordinarily robust. Both James Turk and Sprott Money have indicated that on a dollar for dollar basis, demand for silver bullion is outpacing demand for gold bullion...It suggests that the silver demand relative to gold demand is extraordinary. And ironically as a consequence of fabrication, silver supplies are lower than gold supplies with demand much, much higher. That would seem to be supportive of a higher silver price to me.”

The Case For Silver
By Prieur du Plessis
To me the most important factor to watch in the silver market to get a lead where the silver price is heading is the open interest in derivatives in silver on Comex. The commitment of traders is given on Tuesdays. In the graph below I plotted the open interest (futures and options combined) with the closing price of silver the week prior to the announcement of the open interest. Amazing stuff! The week before the silver price plummeted in the closing week of April, the open interest fell by 24 000 contracts equal to 120 million ounces of silver! Somebody made big bucks at the expense of others.

What the relationship suggests is that when the open interest is trending upwards you should be buying silver and conversely, when it trends down you should cut your longs and if you are brave enough you can even short the market with some confidence. The current situation is a clear bottoming of the open interest and that, together with increased interest in physical silver interest is indicating to me that the current bounce in the price of silver is likely to be extended.

The 2011 Silver Quiz
by Jeff Clark, BIG GOLD
If you’re a silver investor, or are concerned about the recent selloff, you may find the following data very compelling. It provides an inside track on the market and will certainly make us all more knowledgeable investors.

4) Silver represented what percent of global financial assets at the end of 2010?


D. In spite of last year’s record-high prices, silver is, by any account, a miniscule portion of the world’s wealth.

The ratio’s high occurred in 1980, reaching 0.34% of financial assets. Silver as a percentage of global assets would have to grow over 48 times to match the record. It is true that many more paper assets exist today than 30 years ago, but the renaissance in silver will continue to increase its portion of worldwide assets.

At the close of business on the CRIMEX today:

The registered CRIMEX Silver inventory rests tonight at 27.72 million all time low.  Silver Open Interest in the front silver delivery month of July is 33,656.  These contracts, at 5000 ounces each, is the equivalent of 168.28 MILLION ounces of Silver.  First Notice Day of intent to take delivery of a July Silver contract is one week from today.  Ray Charles is phoning in the supply versus demand shortfall to the CFTC as I type this.

No matter the diarrhea that drips from the lips of our bumbling Fed Chairman, Silver is and remains the best investment opportunity of our lifetime.  Accumulate! Accumulate! Accumulate!

Tuesday, June 21, 2011

Gold And Silver Fueled And Ready For Lift-off

The Gold and Silver charts below were drawn just after the close of CRIMEX trading at 1:30PM est. 

Both Gold and Silver have been consolidating gains made off of their respective lows in late January over the last six weeks.  These gains culminated in highs reached at the end of April that were new highs for the Bull Market runs in both of these two Precious Metals that began in 2001.  Gold, in fact, was at a new All-time high when Silver, threatening to take out a 30 year old high at $50 an ounce was shot down by the CRIMEX banking criminals with the aid of multiple margin increases courtesy of the CRIMEX's CME landlords.  This "drive-by-shooting" of Silver began not only a correction in all commodities, but in general equities as well.  Coincidently, the US Dollar was staring at the possibility of breaking below three year lows when this hit on Silver occurred, and the Euro was banging it's head once again on the 1.50 EUR/USD wall that European exports demand be defended.

Today, financial headlines are wrapped around the Greek Debt Crisis.  Tomorrow, the news media have little choice but to focus on a little debt crisis at the US Treasury, and the Constitutionally illegal US Federal Reserve.  Gold and Silver are poised for launch following tomorrow's Fed babble, and a new spotlight that will be shone on the real global debt crisis at the US Treasury.

Sinclair - You’re Out of Your Mind If You Sell Gold Assets Now
By  Eric King,
Jim Sinclair: "...Where gold is concerned you are dealing with the condition of the international banks, with the balance sheets of the financial entities of the world.

So the potential right now, right here, right at this point for an error in judgment that would set off a loss of confidence is present, clear and in all probability something that we are going to be facing well into the summer months. Yeah, gold can rally (here), contrary to the opinions of those who believe in seasonality in monetary items.”

“The problem is so serious, the problem is so present time, the problem is so real that it has inherent in it the probability that the economy is not going to have a significant recovery for more than a decade. And the standard of living in the United States, the standard of many who are reading this now, especially those who have taken no measures whatsoever to protect themselves, who simply look at it as reading something of interest but not really acting on it, is going to be so significantly impacted as to make the middle-class or higher middle-class join the serf class. This is as serious as it gets.

...This has gone so far that there is no solution that can be applied and the only practical method is to continue to expand their (the Fed’s) monetary aggregates to continue to hold down interest rates. And hopefully kicking the can down the road until somebody else is in charge and that’s exactly what they are doing.

Well let’s just assume for a moment that QE is in fact limited to June 30th and let’s assume for a moment that the central bank of the United States would take a conservative restrictive approach towards monetary policy, I would suggest to you that the stock market would peel off 4,000 points so fast you would get wind burns. I suggest that if anything like that happened exposing the balance sheets of the financial institutions, that you would have to return to QE with a vengeance, unparalleled, unprecedented in history...."

Jim Sinclair laid out with remarkable precision just how dangerous the situation is today.  You can listen to the entire interview at this LINK.  And I suggest that if you haven't heard it already, you listen to it now.  I have never heard Mr. Sinclair speak more passionately about the ongoing global financial crisis than he does in this powerful and informative interview.

Monday, June 20, 2011

The Real Global Debt Crisis Is At The US Treasury

WE ALL KNOW Greece has a debt problem.  Specifically, Greece cannot pay the interest on the debts that it owes.  Greece needs €12bn in financial aid, or it will default on its sovereign debt in mid-July.  But what about the debt woes of the United States of America? 

Treasury Secretary Tim Geithner is calling on Congress for a $2 TRILLION financial aid package so that the USA can avoid a sovereign debt default of its own on August 2nd.  Headlines in the financial press around the globe are focused on the debt woes of Greece.  They should be focused 24/7 on the debt woes of the USA.

Greece is asking for a $17 BILLION loan to "keep the party going", and put off their inevitable debt default to a time that is more convenient for the European banks.  The USA is looking for $2 TRILLION to extend the road it's kicking the can down, and nobody seems to want to talk about it?

Debt ceiling: Time's running out
It's T minus two weeks until July 1. That's the chosen deadline for the small bipartisan group of lawmakers negotiating a debt-reduction "framework" to accompany an increase in the country's debt ceiling.

Even that deadline, however, will make it hard to end the debt ceiling drama by Aug. 2, when the Treasury Department says it will no longer be able to pay all the country's bills in full without being allowed to borrow.

If Greece and the United States, or any sovereign nation for that matter, needs to borrow money to pay it's debts, haven't they already technically defaulted on their debts?  If you don't have the money to pay your debts you are broke...end of story. 

"I have written to Congress on previous occasions regarding the importance of timely action to increase the debt limit in order to protect the full faith and credit of the United States and avoid catastrophic economic consequences for citizens," Geithner wrote. "I again urge Congress to act to increase the statutory debt limit as soon as possible."

How does borrowing money to pay off debt protect the full faith and credit of the United States?  Wouldn't the need to borrow money to pay off debt be a red flag to a creditor?  If the United States must borrow money to pay it's debts, and that money is "backed by the full faith and credit of the United States" wouldn't the value of the money they needed to borrow come into question immediately by those that held or were were being asked for a loan?


Greece is asking for a $17 BILLION bridge loan.  The United States is, by asking to raise it's debt ceiling, seeking a $2 TRILLION bridge loan.  Which of these two countries should really be in the financial headlines associated with "debt default'?

US Is in Even Worse Shape Financially Than Greece: Gross
By: Jeff Cox
When adding in all of the money owed to cover future liabilities in entitlement programs the US is actually in worse financial shape than Greece and other debt-laden European countries, Pimco's Bill Gross told CNBC [last] Monday.

Much of the public focus is on the nation's public debt, which is $14.3 trillion. But that doesn't include money guaranteed for Medicare, Medicaid and Social Security, which comes to close to $50 trillion, according to government figures.

The government also is on the hook for other debts such as the programs related to the bailout of the financial system following the crisis of 2008 and 2009, government figures show.

Taken together, Gross puts the total at "nearly $100 trillion," that while perhaps a bit on the high side, places the country in a highly unenviable fiscal position that he said won't find a solution overnight.

"To think that we can reduce that within the space of a year or two is not a realistic assumption," Gross said in a live interview. "That's much more than Greece, that's much more than almost any other developed country. We've got a problem and we have to get after it quickly."

China Has Divested 97 Percent of Its Holdings in U.S. Treasury Bills

( - China has dropped 97 percent of its holdings in U.S. Treasury bills, decreasing its ownership of the short-term U.S. government securities from a peak of $210.4 billion in May 2009 to $5.69 billion in March 2011, the most recent month reported by the U.S. Treasury.

Treasury bills are securities that mature in one year or less that are sold by the U.S. Treasury Department to fund the nation’s debt.

Mainland Chinese holdings of U.S. Treasury bills are reported in column 9 of the Treasury report linked here.

Until October, the Chinese were generally making up for their decreasing holdings in Treasury bills by increasing their holdings of longer-term U.S. Treasury securities. Thus, until October, China’s overall holdings of U.S. debt continued to increase.

Since October, however, China has also started to divest from longer-term U.S. Treasury securities. Thus, as reported by the Treasury Department, China’s ownership of the U.S. national debt has decreased in each of the last five months on record, including November, December, January, February and March.

Russia Joins China In Rejecting U.S. Debt, Buys Gold Instead
From Gold and Silver Blog
On Saturday, the Wall Street Journal reported that Russia also decided that holding U.S. debt has become too risky. In comments to Dow Jones, Arkady Dvorkovich, chief economic adviser to Russian President Medvedev, said "The share of our portfolio in U.S. instruments has gone down and probably will go down further." According to the Wall Street Journal, Russia has already reduced its holdings of U.S. debt from $176 billion last fall to $125 billion in April of this year.

The Dollar at a Crossroad
By Thomas G. Donlan
Contrary to well-nurtured popular belief, the U.S. has defaulted before without the dire consequences Bernanke outlined in his speech. In 1933, the government defaulted on its debt backed by gold by abrogating the gold clause in Treasury securities.

Wall Street, the record shows, was delighted. The Dow Jones Industrial Average was at about 53 the day before Franklin Delano Roosevelt was inaugurated. By July, it was over 100, and 1933 remains the second-best annual percentage gain ever recorded for the dear old Dow.

A remnant of the gold standard was in the system widely accepted after World War II, by which the dollar was accepted as good as gold by all other countries. Then, in 1971, Richard M. Nixon explicitly defaulted on this gold exchange standard, withdrawing the American promise to pay gold for dollars held by foreign governments.

Our creditors hardly blinked. The world moved on to floating rates for paper currencies and floating prices for gold as for other commodities, but the dollar remained the reserve currency, as if it were good as gold.

Can we be three times lucky?

However insincere the full faith and credit of the U.S. government is, it's based on the productive capacity of its people and the enormous value of their physical property and real estate. It's not about whether we can pay; it's about whether we will pay.

Credit is character, and the American character is being tested this summer.

Some may ask, "is the US Government really at risk of defaulting on their debt?" 

Well not if the US Government is willing to print the money to cover it.  But printing money to pay off it's debt is "in effect" a default on it's debt obligations as they are paying the debt back with money that is worth less than the day their creditors borrowed it to them.  So, technically, the United States can avoid defaulting on it's debt by paying back the Dollars it borrowed, by printing and then borrowing more,...but it will be cheating it's creditors to do it by paying them back in devalued Dollars.  Is it any wonder then, that the Chinese, the Russians, and Bill Gross, the world's largest bond fund manager [just to name a few], have ALL decided to cut their exposure to US debt?

So then, is Treasury Secretary Geithner's warning that it would be "disastrous" to not raise the debt ceiling simply another ruse by the Treasury to scare the Congress into authorizing "funding" much like the ruse used to get Congress to pass the $800 BILLION TARP program to "rescue the too big to fail banks"?

Charles Krauthammer, in his syndicated column, suggests that although Secretary Geithner's warning may be accurate, "he is disingenuous when he suggests that we must do so by August 2 or the sky falls.  There is no drop-dead date. There is no overnight default."

"What scares Geithner is not that we won’t be able to pay our creditors but that his Treasury won’t be able to continue spending the obscene amounts of money (about $120 billion a month) it doesn’t have and will (temporarily) be unable to borrow."

The United States can't miss any debt payments, it cannot afford to.  The threat that the US might default on "some of it's debt obligations to "force" spending cuts is foolish.  The US government will not miss any interest payments on it's debts anytime soon because doing so would make future borrowing costs increase, and effectively cancel out any "supposed" gains from the forced spending cuts.

There's No Such Thing as a Temporary U.S. Default
The Atlantic, (Daniel Indiviglio), On Thursday June 9, 2011
What if the debt ceiling debate causes the U.S. to miss just a couple of interest payments, say for the months of August and September? As long as the Treasury resumes payments in October, then no harm done, right? This misconception was put to rest by the rating agency Fitch in a statement yesterday. The firm makes clear that there's effectively no such thing as a temporary default: the nation's rating will not quickly bounce back.

At this time, the Treasury is already taking "extraordinary measures" to meet its debt obligations, since the debt ceiling needed to be raised in May. In August, those extraordinary measures won't be enough, and the Treasury must prioritize debt payments above its other obligations to avoid default. At that time, the U.S. will be in "technical default" even if it doesn't miss a payment.

But if the Treasury is forced to (or chooses to) skip a debt payment at that time, serious consequences will follow. If that occurs, real, tangible, lasting harm to the U.S. economy will follow. In past weeks, the rating agencies Moody's and Standard and Poor's have both cautioned that the debt ceiling fight could have serious consequences. But no warning has been quite as clear as that issued on Wednesday by Fitch. Walter Brandimarte at Reuters reports:

"Even a so-called 'technical default' would suggest a crisis of 'governance' from a sovereign credit and rating perspective," Fitch said in a statement.

"Clearly the political signals which are coming (from Washington) are a source of concern," David Riley, head of sovereign ratings at Fitch, told Reuters in an interview.

Treasury bonds could be rated "junk" by Fitch Ratings if the government misses some $82 billion in debt payments by Aug. 15 due to disagreement over the debt ceiling.

The ratings would go back up once the government fulfills its debt obligations but probably not to the current AAA level, Fitch said.
If an interest payment is missed, the U.S. will have more expensive debt for years, until it manages to convince the agencies to restore its top rating. For that time period, it will be even harder for the U.S. to get its fiscal house in order, because some of its tax revenue that could have been used to pay down debt will instead have to go towards higher interest payments than would have been required on AAA-rated debt.

The threat of a Greek debt default may be the most immediate threat to the global banking system, but it is the growing US Debt, and it's costs to finance that debt, that are the biggest long term threat to not only the global banking system, but to the value of what the world considers to be money at this time.

$17 BILLION for the Greeks is chump change.  $2 TRILLION for the US Government that's worthy of some headlines

“Gold is not an investment. It is money,” says James Turk
James Turk of the GoldMoney Foundation speaks about currency devaluation and the rising gold price. He also explains why gold should be considered money and not an investment. “When you’re looking at gold, it goes into the bottom part of your portfolio, the liquidity part of your portfolio. And when you’re evaluating whether you want to own gold, you evaluate it against other currencies of the world, other monies of the world,” he said.

Tuesday, June 14, 2011

Greek Debt Crisis Rests On A Foundation Of US Banking Fraud

For the past seven weeks now, the financial markets [and the Precious Metals] have been held hostage by a "push me/pull me" effect tied to the fate of Greek Debt.  "Renewed fears" of Greek Debt Default push the Euro down, and pull the US Dollar up.  Announced consensus on how to "prevent" a Greek Debt Default conversely pulls the Euro up, and pushes the US Dollar down.

How can the debt default of a tiny little country like Greece hold such sway over the global financial markets?  Greece's $532 BILLION debt as a portion of "global external debt" is only 0.009% of the global total of $59 TRILLION.  The USA's $14.3 TRILLION of external public debt is equal to a whopping 24% of the total global external debt outstanding.  Shouldn't the massive public debt of the USA be of grave concern to the global financial markets instead of Greece's tiny debt?  Obviously it should be, but it is not.  Why not?

Perhaps because, at this moment in time, Greek Debt has the shortest fuse before exploding in default, and represents the most immediate risk to the global banking system.  Who has the most exposure to a Greek Debt Default?  What if the PIIGS Debt Crisis has less to do with a $532 BILLION  Greek Debt Default, and more to do with the potential for a $120 BILLION credit default swap payout by US Banks to the European banks holding the PIIGS Debt that defaults?  Could the US Banks "afford" a $120 BILLION payout to the European banks should the PIIGS begin to default on their debts?

It is no secret that the banks in the US and in Europe have been the single biggest recipients, and beneficiaries, of global government bailouts and monetary stimulus since the Global Financial Crisis broke in 2008.  Would it be so shocking to learn that these banks have used all of this monopoly money created and distributed by the Federal Reserve to not make the global financial system stronger, but to in fact make it weaker?

Without mincing words, the world does not face a crisis of liquidity, nor a crisis of insufficient debt, but one of entirely too much debt. That's the entire predicament in three words: too much debt.
More debt is only going to compound the predicament, yet that is what the world's central banks and political structures are busy manufacturing. More debt.
 -Chris Martenson

Time to Get Outraged by the Banks
By John Mauldin, Millennium Wave Advisors, June 13, 2011
Long-time readers know I continuously pound the table that credit default swaps [CDS] need to be put on an exchange. The Frank-Dodd bill failed in so many ways to deal with the last crisis and prevent the next one, it is hard to start a list.

I have openly speculated that US banks were selling CDS to Europe but had no idea how much. Now we do.

An analysis by economist Kash Mansori, at, tears apart the mind-numbing 146-page report from the Bank of International Settlements:

First, the BIS data very helpfully breaks exposures into two pieces: direct exposures, which basically means creditors who own bonds issued by one of the PIGs; and indirect exposures, which for the most part means agents who sold default insurance to creditors, primarily through credit default swaps. As summarized in the following table, it seems that approximately 30% of total potential exposures to debt from the PIGs are covered by default insurance. Put another way, if one of the PIGs defaults, creditors who actually hold bonds from that country will absorb about 70% of the losses, while agents (primarily banks and insurance companies) that sold insurance against the possibility of default will have to cover the remaining 30%. That's not a trivial amount.

“The table above also hints at striking differences between how European and US creditors would be hit in the case of default by one of the PIGs. If Greece were to default, for example, approximately 94% of the direct losses would fall on European creditors, and only 5% would fall on US creditors. However, US banks and insurance companies would have to make about 56% of the default insurance payouts triggered by such an event, while European agents would make only 43% of those payouts.

“The next table illustrates this difference even more starkly. In the case of Greece and Portugal, the vast majority of the losses that would be borne by creditors in Europe would be direct losses. In fact, French and German creditors would almost certainly be substantial net recipients of default insurance payments. (That's less clear in the case of Ireland.) Meanwhile, US financial institutions would have to make substantial net default insurance payments, which would account for between 80% and 90% of all losses borne by the US in the case of default.

“Finally, it's worth noting that once you account for the substantial payouts that US agents will have to make to European creditors in the case of a default by one of the PIGs, financial institutions in the US have roughly as much to lose from default as those in France and Germany.  The apparent eagerness of US banks and insurance companies to sell default insurance to European creditors means that they will now have to substantially share in the pain inflicted by a PIG default.

“This has some important implications. First, US and European financial institutions are likely to have very different incentives as negotiations regarding debt restructuring and reprofiling proceed. US banks and insurance companies are surely delighted with the "soft restructuring" that is currently being discussed. Such a partial default would probably not trigger default insurance payments, and so the pain would be borne almost exclusively by European institutions. On the other hand, some time soon it seems likely that European creditors will begin to prefer a "hard restructuring" that would require default insurance payouts from the US institutions that sold such insurance. Given how strikingly one-sided the net default insurance payments will be (from the US to Europe), it's easy to imagine how that could shape future negotiations over debt relief for the PIGs.

“Second, there's an interesting puzzle here. Why have European and American financial institutions behaved so differently when it comes to the PIGs? Specifically, why have American firms been so willing to sell default insurance to the Europeans, though they have not bought much PIG debt? And conversely, why have the Europeans systematically been so eager to buy insurance for their PIG debt, even at the very high price such insurance now commands? In essence, European firms have been betting that a PIG default will happen sooner rather than later, while US firms have been betting that default would happen later or not at all.”

If I read those tables correctly, that means US banks have sold some $120 billion of credit default swaps to European banks. Let’s think about that for a minute.

When, not if, Greece defaults, US banks are going to have to dip into capital to pay those commitments. Capital that should be available for loans to businesses but will have to be paid to European banks instead. Will it be a 100% Greek default, or only 50%? If it is a default, do you have to pay all or just the defaulted portion, and when?

Why, oh why, are banks putting American taxpayers at risk, as these too-big-to-fail banks certainly are?

GREED!  The banks are putting American taxpayers at risk purely for profit.  With the US Government still standing at the ready to bailout the bad bets of the banks, how can the banks lose insuring PIIGS Debt?  Some would argue that without the "insurance" offered by the American banks to those European banks buying the debt of Greece and the other PIIGS to keep them solvent, the PIIGS would have long ago defaulted on their debt already. 

Curiously one wonders aloud, "Why would the European Banks loan money to the PIIGS for use in paying the interest on their already existing debt?"  Seriously, how dumb is that?  The European banks are loaning their EU debtor nations money so that these EU debtors can pay back the interest due on loans they already owe the European banks.  What kind of a circle jerk have we got goin' on here?

The Phony Argument Against Debt-Default
by Jeff Nielson
Quite obviously, if (when) Greece’s bankrupt government defaults on its bond-debt, then the #1 reason/need for using those foreign credit markets will be gone: to borrow more money simply to pay interest to bond-parasites. When we accompany this premise with the obvious point that much of this bond debt is fraudulent, then defaulting on such debt is not only the most economically advantageous path for Greece’s government to take, but also the only morally just one.

The debts are “fraudulent” in many respects. To begin with, several of the Euro debt-sinners deliberately “fudged” their accounting – in Greece’s case as a pretext for gaining entry into the EU. Naturally when these governments were looking for sleazy accounting gimmicks which would effectively allow them to lie about their sovereign “balance sheets” they went to Wall Street.

However, the Wall Street fraud regarding the accumulation of these bond debts goes much further. Using two of their “financial weapons of mass destruction”: credit default swaps and interest rate swaps, they duped governments all over the world (but especially in Europe and North America) into using these fraud devices – which, in fact were nothing but (more) Wall Street scams.

Here is how the scamming worked. The banksters would approach these governments and tell them they had come up with a “magical” way for them to not only borrow more money than ever before, but to also permanently pay a much lower rate of interest on all that debt. Obviously these governments should have responded exactly as they would have if some shyster offered to sell them a “perpetual motion machine”, or perhaps the “secret” to cold fusion.

However, being a group of weak-willed opportunists (who were also incredibly incompetent), all of these politicians allowed themselves to be seduced by the banksters’ phony promises. In fact, these derivatives were not a “magic” means of negating the laws of economics (and the rules of arithmetic), but they were merely a malevolent “trap” set by the banksters.

I have already explained how both of these scams worked in previous commentaries. Interest-rate swaps were simply governments betting on interest rates against the same bankers who were writing-up these interest rate swap contracts. Understand the magnitude of stupidity here: on every interest rate swap there must be a “winner” and a “loser”. The only way that these governments could have saved money on these interest rate swaps is if the Wall Street banksters lost on the other side of the bet (and what kind of fools bet against their own “bookie”?).

We thus have a situation where Wall Street approached all of these governments, offering to make bets on $trillions of dollars worth of these interest rate swaps. There was only two possible outcomes on these bets (since the bankers all bet the same way): either the countries would “win” all their bets, Wall Street banks would be bankrupted by their losses – and all the “savings” would instantly disappear; or (as did happen) the bankers won all the bets, costing these governments (and other institutions all over the world) $trillions in losses.

One would have thought that these “leaders of the free world” would have taken a moment to contemplate Wall Street’s offer to “save these governments money”, since the only way the bankers could have done so was through their own bankruptcy. It was a scam which shouldn’t have fooled any reasonably astute child, but it was “clever” enough to dupe all of our leaders.

The credit default swap sham was even more transparent. Once again it was a scam where (viewed as a whole) the numbers could never possibly add up. This was “pretend insurance” (again in the form of a ‘bet’). Wall Street conned our governments into believing they could permanently lower interest rates by loading all this fantasy “insurance” onto these debts – to create the illusion that they were “backed” against any default.

As with the interest-rate swap scam, the parties to these deals were never capable of “performing” on these contracts – since (as with interest rate swaps) the banksters literally wrote up $trillions in these extremely leveraged contracts.

How leveraged? In a bankster vs. bankster lawsuit between Citigroup and Morgan Stanley, Citigroup had to sue Morgan Stanley to force it to “make good” on one, tiny CDS contract. Even after Morgan Stanley had liquidated the “collateral” which supposedly “backed” this fraudulent deal it was faced with a 300:1 pay-out. Obviously, it would take only a small number of “claims” on these $trillions in phony insurance to vaporize all of the chumps holding such insurance (like AIG).

In this scam, Wall Street needed to find two sets of chumps: an entity willing to borrow excessively, and then an even bigger chump to actually write-up the pretend insurance. Then, when the made-in-Wall Street “crash” occurred in markets, the Wall Street vampires placed massive bets against those credit default swaps.

Consider for a moment how outrageous this is. Instead of “debt insurance” for bonds, let’s think of the credit default swaps as “fire insurance” for a home. The analogy then is that not only did Wall Street place huge bets that all of these houses would burn-down, but they had already doused all of these houses with gasoline – so that all they had to do was light a match.

We have already seen the evidence of the banksters’ crimes here. While the U.S. is clearly more totally insolvent than any of the Euro debt-sinners, and with its state governments especially vulnerable, U.S. deadbeat governments are only paying roughly half the rate of interest as is being paid by European debtors – all due to the “attacks” by Wall Street’s economic terrorists in the credit default swaps market.

These added percentage-points on this $trillions of bond debt translates into $100’s of billions in added interest every year – interest that the Wall Street vampires guaranteed all of these governments that they would never have to pay. Thus there cannot be the slightest doubt that much of these $trillions in bond debt is totally illegitimate – and there cannot be the slightest moral or economic argument made that such debts should be honoured.

It is the bankers who conned these (idiot) governments into taking on this excessive debt, and the bond-parasites who recklessly lent-out these additional $trillions (which could never be repaid). Yet despite being the obvious cause of these debt-crises, these are the only “players” in this drama who have yet to absorb a single penny of pain (i.e. their own “austerity”). Instead, 100% of the “sacrifices” have been forced upon the ordinary citizens of these nations – despite the fact that these victims bore 0% of the responsibility for these crises.

The Too Big Too Fail Banks, the root of all evil...the root of the global financial crisis past, present, and future.  Why don't the PIIGS just give the banks the finger?  It is becoming increasingly obvious that the "supposed" sovereign debt crisis unfolding in Europe today and the US tomorrow was conceived by the US banking industry purely for profit.  How is it that the fate of entire nations is allowed to rest in the hands of greedy and wicked bankers? 

It is the US Federal Reserve's responsibility to "regulate" the US banking industry.  Failure to do so has left the US Federal Reserve responsible for a debt fraud that stretches around the globe.  Recognizing it's failure to regulate the US investment banks, and now it's responsibility for cleaning up this global financial mess these investment banks have created, the US Federal Reserve has embarked on an ambitious fraud of it's own to transfer all of the global banking losses onto the backs of the American taxpayer.  As purveyors of the world's reserve currency, the US Dollar, the US Federal Reserve through sleight of hand, a printing press, and word games have duped the American taxpayer into paying for the losses of the greatest banking fraud in the history of the world.

Exclusive: The Fed's $600 Billion Stealth Bailout Of Foreign Banks Continues At The Expense Of The Domestic Economy, Or Explaining Where All The QE2 Money Went  [MUST READ]
by Tyler Durden of Zerohedge
Courtesy of the recently declassified Fed discount window documents, we now know that the biggest beneficiaries of the Fed's generosity during the peak of the credit crisis were foreign banks, among which Belgium's Dexia was the most troubled, and thus most lent to, bank. Having been thus exposed, many speculated that going forward the US central bank would primarily focus its "rescue" efforts on US banks, not US-based (or local branches) of foreign (read European) banks: after all that's what the ECB is for, while the Fed's role is to stimulate US employment and to keep US inflation modest. And furthermore, should the ECB need to bail out its banks, it could simply do what the Fed does, and monetize debt, thus boosting its assets, while concurrently expanding its excess reserves thus generating fungible capital which would go to European banks. Wrong. Below we present that not only has the Fed's bailout of foreign banks not terminated with the drop in discount window borrowings or the unwind of the Primary Dealer Credit Facility, but that the only beneficiary of the reserves generated were US-based branches of foreign banks (which in turn turned around and funnelled the cash back to their domestic branches), a shocking finding which explains not only why US banks have been unwilling and, far more importantly, unable to lend out these reserves, but that anyone retaining hopes that with the end of QE2 the reserves that hypothetically had been accumulated at US banks would be flipped to purchase Treasurys, has been dead wrong, therefore making the case for QE3 a done deal. In summary, instead of doing everything in its power to stimulate reserve, and thus cash, accumulation at domestic (US) banks which would in turn encourage lending to US borrowers, the Fed has been conducting yet another stealthy foreign bank rescue operation, which rerouted $600 billion in capital from potential borrowers to insolvent foreign financial institutions in the past 7 months. QE2 was nothing more (or less) than another European bank rescue operation!

The implications of this allegation are profound.  The Federal Reserve has been filling liquidity holes in European Bank balance sheets so that "when" the PIIGS default on their debt the European Banks will be fully protected from an ensuing capitalization shortfall.  Unfortunately it would appear the Fed has the left the US Banks holding the credit default swaps on PIIGS debt under capitalized as a result.  Will this capitalization shortfall at the US Banks be the catalyst for QE3 to be announced?

Bet on Gold and Silver, Not U.S. Treasuries
by Jeff Nielson
The market’s perspective is a simple one, borne entirely of naked greed: it simply wants to see more and more and more money-printing, which it can then use to pump-up valuations even higher. The American public wants to see more jobs, and more purchasing-power in the banker-paper they carry in their wallets (i.e. less erosion in the value of the dollar, which has translated to much higher prices for necessities). Ordinarily, those two desires are opposite in our debt-based economic systems (you can only have one or the other), however Ben Bernanke has accomplished the unique achievement of having mismanaged the U.S. economy to the point where he can (and will) fail in both of the Fed’s legislative mandates.

Of course “failure” is nothing new for the Federal Reserve. Indeed, it is only success which has managed to elude the Fed throughout its entire 98-year existence. Tasked with the twin (conflicting) responsibilities of “promoting” employment and maintaining price stability, it inherited an economy which not only created vast numbers of jobs, but more good-paying jobs than any other economy in history. Along side that, the “strong” U.S. dollar was viewed so favorably by the rest of the world that it was soon to become the global “reserve currency”.

Ninety-eight years later, the anemic U.S. economy can’t even produce enough (net) new jobs to keep up with population growth, long-term (“structural”) unemployment is at its highest level in history, while wages for the average worker (in “real” dollars) have been falling for 40 years.

In terms of “price stability” the dollar has lost roughly 98% of its value in those ninety-eight years, or (put another way) prices have increased by a factor of fifty.

Despite this 98-year record of unmitigated failure, B.S. Bernanke is treated with the utmost reverence in financial markets – in what can only be viewed as a real-life reenactment of “The Emperor’s New Clothes”. Understanding the next move of this unrepentant charlatan requires nothing more than understanding how the Federal Reserve has managed to destroy the value of the dollar: through relentless, excessive money-printing.

"Monetizing debt", or "quantitative easing", or simply "buying" your own debt can be illustrated by an easy example.

Imagine you're a deadbeat looking to borrow money. NO ONE will lend to you any longer - because everyone has finally figured out that you're a deadbeat and IF they lend any more to you they will never get it back.

So you WRITE YOURSELF an "IOU" - payable to YOURSELF.

THIS is what the U.S. is currently doing: it's "buying" worthless paper with other worthless paper - and then PRETENDING to the world that it has "financed" its debt.