Saturday, July 30, 2011

Seriously? Where Are The Spending Cuts?

“If we don’t come to an agreement, we could lose our country’s AAA credit rating, not because we didn’t have the capacity to pay our bills -- we do -- but because we didn’t have a AAA political system to match our AAA credit rating,” Obama said earlier yesterday at the White House.

IF, and that is a gargantuan if, we had the capacity to pay our bills Mr President...why do we need to borrow $2.5 TRILLION to do so?  Do you even listen to the drivel that drips from your lips?  

The stupidity of these clowns in Washington is beyond amusing. This country's debt has not "really" been "AAA" for a couple of years now. It "is" presently AAA, ONLY because the "government sanctioned" rating agencies rubber stamp US Treasuries as AAA. The "threat" of a down grade is all hot air...and part of a government led effort, stoked by the lapdog mainstream media, to scare Americans into contacting their respective congressmen and senators, demanding a resolution. Remember the great Armaggedon scare tactics used by then US Trerasury Secretary, John Paulson, to strong arm the Congress into passing the ILL ADVISED T.A.R.P. program?  No one in the country wanted their representative in Washington to pass that bill...recall it failed on its original vote...AND THEN THE STOCK MARKET CRASHED [how convenient] and scared all the spineless politicians in Washington to vote to pass the TARP bill.

To date we have had headlines "warning" of calamity if the debt ceiling isn't raised fueled by the blah
-blah from Capitol Hill. is ALL a ruse!  No country with 3% Long-Term interest rates gets a downgrade...the BOGUS rating agencys are "threatening" a downgrade at Washington's request to fan the flames of fear...  America does not have the capacity to pay it's bills UNLESS it borrows more money...the piggy bank is empty...but the ratings agencies will not downgrade the a downgrade would cause far more chaos than a default. [Think about money market funds that can ONLY hold AAA debt because of the by-laws]


America doesnt have a debt problem, as much as it has a spending problem. Finally, somebody in Washington is DEMANDING the spending problem in Washington be addressed...Because we spend far more than we take in...and raising taxes IS NOT THE ANSWER.

Judson Phillips, founder and chief executive of Tea Party Nation, had this to say about the current debt-ceiling debate:

Why is the Tea Party intransigent on the debt ceiling? Why is the Tea Party pushing congressional Republicans so hard that we have a crisis?

As the founder of Tea Party Nation, I feel confident in saying that the Tea Party understands what so many in Washington seem to have forgotten: We do not have a debt crisis. We have a spending crisis. There is only one way you get to a debt crisis — you spend too much money.

Average Americans understand that the federal government is bloated. The government funds too many wasteful programs. There are too many programs and spending bills that exist only to help get senators or representatives reelected.

The Tea Party movement understands that if we allow Congress to borrow more money or raise taxes, all we are doing is funding the endless expansion of government.

Americans are angry at the federal government and do not want their taxes raised. Nor do they want Congress to borrow more, considering how poorly lawmakers have managed the money we give them.

The Government Accountability Office released a report in March outlining billions of tax dollars that were being squandered in duplicative, wasteful programs or ones that had completely failed or were fraudulent. Republicans in Congress should have been having cage fights to see which representative could be first on the House floor to introduce the legislation to end that spending.

We are still waiting.

The GAO found in 2008 that more than 40 percent of the purchases made with government cards were improper, fraudulent or constituted embezzlement. These credit cards are being used to purchase Xboxes, lingerie and more.

Americans rightly think there is something wrong when our government has spent $2.6 million to teach Chinese prostitutes how to drink responsibly. Americans are tired of “bridges to nowhere,” ferries to nowhere, neon light museums, cowboy poetry readings and cow flatulence studies — all of which are being paid for with our tax dollars.

The left has accused the Tea Party of wanting America to default on its debt obligations. Nothing could be further from the truth. The Tea Party wants America to stop incurring debt obligations and to cut back on the wasteful spending already in place.

We in the Tea Party understand a basic concept that Washington has forgotten: When you are in a hole, quit digging. Every time we have approached the debt ceiling, we have been told the same thing: If we do not raise the debt limit, it will be the end of the world as we know it. A couple of years later, when we find ourselves facing the same crisis, we’re told the same thing.

At some point, this will end. America cannot keep borrowing money it does not have. There is a common fate for those who spend too much money. If you doubt that, visit a bankruptcy court sometime.

Tea Party Senator Rand Paul opposes the Boehner and Reid Debt Plans, and suggests that thePresident has manufactured this debt crisis by threatening default on the debt. 

In a discussion with Fox's Gretta Van Susteren, Paul told her (transcript of remarks):

VAN SUSTEREN: What can the president do to show to your satisfaction that he's leading on this issue?

SEN. RAND PAUL: Well, the first thing, if the president were true leader he would take default off the take. It shouldn't even be considered. It is really an obligation, a constitutional obligation to pay for your debt, to pay the interest on your debt.

VAN SUSTEREN: How do you take that off?

SEN. RAND PAUL: It is interesting that we actually do. We bring in $200 billion a month in tax revenue. Our interest payment is 20 billion. We have more than enough that comes every month in tax revenue to pay the interest on our debt. We can't pay for everything. We can pay for Social Security. He should quit scaring seniors. And we can pay for our soldiers' salaries. And we can pay for another $70 billion or $80 billion worth of government.

But he could take default off the table then this wouldn't be such a crisis situation. He's manufactured a crisis, and if we don't have an arrangement by August 2nd, and there is a dip in the stock market, the blame lies squarely on his shoulders for allowing this crisis to happen and actually encouraging this crisis.

What will happen if we don't "truly" cut spending?  Inflation or rising taxes will be the result, probably both!  If government spending isn't "truly" cut, we can look forward to years of economic stagnation and a new class of citizens called the Permanently Unemployed.

The spending cuts in both the House and Senate plans are a mirage.  They pay little more than lip-service to cutting spending by the US Government. 

Michael Tanner, a senior fellow at the Cato Institute, suggests the spending cuts in both the Boehner and Reid Debt Plans are hardly austere, and actual federal spending will continue to rise as Rand Paul pointed out in his interview above:

"It is clear we must enter an age of austerity," House minority leader Nancy Pelosi mourned as she endorsed Harry Reid's proposal for raising the debt ceiling. Austerity? Really?

The Reid plan would theoretically cut spending by $2.7 trillion over ten years. Even if that were true, it would still allow our national debt to increase by some $10 trillion over the next decade. But, of course, the $2.7 trillion figure is mostly fiction. About $1 trillion of the savings would come from the eventual end of the wars in Iraq and Afghanistan, savings that were going to occur anyway. Senator Reid might just as well have added another $1 trillion in savings by not invading Pakistan.

Another $400 billion comes not from cuts but from assuming reduced interest payments. And, of course, there are $40 billion in unspecified "program-integrity savings," meaning the "waste, fraud, and abuse" that is the last refuge of every phony budget cutter. The plan rejects any changes to Medicare and Social Security, despite the fact that the unfunded liabilities from those two programs could run as high as $110 trillion. But those liabilities generally fall outside the ten-year budget window, so Reid — unlike our children and grandchildren — doesn't have to worry about them.

That leaves about $1.2 trillion in discretionary and defense spending reductions over the next ten years. Let's put that in perspective. This year the federal government will spend $3.8 trillion. Our deficit is roughly $1.6 trillion. Our national debt exceeds $14.3 trillion, not counting unfunded entitlement liabilities. We are talking about raising the debt ceiling to $16.9 trillion. This month alone the federal government will borrow $134 billion. Reid's cuts would average roughly $120 billion per year.

This is austerity?

Of course, the House Republican plan as announced by Speaker John Boehner is only marginally more austere.

Boehner proposes a two-stage increase in the debt ceiling, with each stage accompanied by spending cuts. The first $1 trillion debt increase would be accompanied by $1.2 trillion in spending cuts over ten years, pretty much the same as Senator Reid's plan. The big difference is that instead of Sen. Reid's phony Iraq and Afghanistan savings, the speaker's plan would appoint a commission — now there's an exciting new idea — to propose $1.8 trillion in savings from entitlement programs. To be fair, Senator Reid would also appoint a commission — because that's what Washington does — to recommend additional deficit reductions, presumably including entitlement changes. The difference is that the Boehner commission has teeth. If Congress rejects its recommendations, the president doesn't get a second $1.6 trillion hike in the debt ceiling.

But $1.8 trillion in entitlement savings over ten years is still too small to encompass real structural reforms of the type envisioned by Rep. Paul Ryan and others. It is much more likely to simply be more tweaking around the edges, perhaps raising the eligibility age or changing the way the cost-of-living formula is calculated. True, changes such as these will have a real impact out beyond the ten-year budget window, but they fall far short of what is necessary to deal with the shortfalls to come.

Making matters worse, both Reid and Boehner are using the time-honored Washington dodge of "baseline budgeting," meaning that the proposed cuts are not actual reductions in spending from year to year, but cuts from projected future increases. Thus, under both the Reid and Boehner plans, actual federal spending will continue to rise.

With the clock running out, we are now down to fifth- or sixth-best options. But let's not pretend that this is austerity.

July 30, 2011
While our incompetent and corrupt mainstream media has been proclaiming there are major differences between the two bills proposed by House Speaker John Boehner and Senate Majority Leader Harry Reid, NIA believes John Boehner might as well be a Democrat and Harry Reid could easily pass himself off as a Republican. There are absolutely no meaningful fundamental differences between Boehner's plan that was approved by the House of Representatives yesterday evening, before being killed by the Senate two short hours later, and Reid's bill, which was just rejected by the House today in a pre-emptive vote before the Senate even had a chance to vote on it.

Both bills are estimated to reduce the U.S. budget deficit by approximately $900 billion over the next 10 years. Of the $900 billion only about $750 billion are actual discretionary spending cuts with the rest being an expected reduction in interest payments on the national debt as a result of either bill passing. When you have an unstable fiat currency that is rapidly losing its purchasing power and could collapse at any time, it is impossible to accurately project what our budget deficits will be 5 or 6 years from now, let alone 9 or 10 years from today. As far as the next two fiscal years are concerned, both proposed bills from Boehner and Reid are estimated to only cut spending by a total of about $70 billion in fiscal years 2012 and 2013 combined.

The budget that former President Bush submitted to Congress in early-2007, projected the deficit to decline in each of the following four fiscal years. Not only did the deficit not decline the next four years in a row, but it nearly tripled in 2008 and from there more than tripled in 2009. Shockingly, Bush's budget actually projected a $61 billion surplus in fiscal year 2012, but instead we will have a budget deficit of $1.1 trillion based on President Obama's latest budget, which takes into account unrealistic GDP growth next year of 4.86%.

U.S. GDP growth for the first quarter of 2011 was just revised down yesterday by 81% from 1.91% to 0.36%. The advance estimate of second quarter GDP growth came in at 1.28%, well below the consensus estimate of 1.8%. NIA is going to really go out on a limb and predict that second quarter GDP growth will soon be revised downward as well. If this is the highest GDP growth the U.S. could muster after the Federal Reserve's $600 billion in QE2 money printing, this should prove once and for all that monetary inflation does not create real economic growth and employment.

The U.S. Treasury as of Thursday night had $51.6 billion in cash, with its cash position declining by $15.2 billion during the previous 24 hours. It expects to bring in $172.4 billion from August 3rd through August 31st in tax receipts, but is scheduled to pay out $306.7 billion during this time period for an estimated deficit of $134.3 billion. The U.S. is scheduled to make its next interest payment on the national debt on August 15th and it will equal approximately $30 billion. Over the last 9 months the U.S. has spent a total of $385.9 billion on interest payments on the national debt, which means it is on track to spend a record $514.5 billion this year on interest payments alone. Just a tiny 30 basis point increase in the interest rate on the national debt would totally wipe out the deficit reductions proposed by both Boehner and Reid.

The U.S. Treasury has been able to pay its bills in recent weeks by using many different accounting gimmicks. However, come Tuesday, there will be no more accounting tricks left to play and the U.S. won't be able to meet all of its obligations. Without a raise in the debt ceiling, the U.S. government will have to prioritize who it pays using the tax receipts coming in, which will probably include the $30 billion interest payment on the national debt (to avoid a default), $49.2 billion in Social Security payments, $50 billion in Medicare/Medicaid payments, $31.7 billion in defense payments, and $12.8 billion in unemployment benefits. With $23 billion of the $49.2 billion in Social Security payments due to be paid on August 3rd and $59 billion in t-bills due on August 4th, the U.S. Treasury's remaining cash balance could dissipate very quickly.

The 10-year bond yield reached a new 2011 low yesterday of 2.785%, its lowest level since November 30th of last year. It is approaching its record low of 2.08% from December of 2008 during the middle of the financial crisis. With threats of a U.S. debt default making headlines across the world, investors are once again rushing into U.S. bonds as a safe haven. It is almost as if the whole world has gone insane. The world is fearful of the U.S. government defaulting on its debt and not being able to pay off maturing bonds, so as a safe haven let's just all rush into the very asset that will soon be worthless due to either an honest default or default by inflation. The U.S. dollar bubble is the largest and longest running bubble in world history and U.S. bonds are currently mispriced big time.

U.S. dollar-denominated bonds should be the last asset in the world to benefit from fears of a U.S. debt default. One positive sign that NIA members are having success at spreading our message to the world is that gold reached a new all time high yesterday, rising $15 to $1,631 per ounce, with silver rising $0.31 to $40.10 per ounce. Thanks to the efforts of NIA members who worked tirelessly to spread the word about NIA's economic documentaries including 'Meltup', 'The Dollar Bubble', and 'Hyperinflation Nation', a larger percentage of the global population than ever before is educated about the global currency crisis that is ahead.

During the financial crisis of late-2008/early-2009, gold and silver prices declined along with all other assets. Today, NIA estimates that half of the world's investors seeking a safe haven are buying dollar-denominated assets like U.S. Treasuries and the other half are seeking safety in precious metals. By mid-2012, investors will most likely no longer look at U.S. bonds and other dollar-denominated assets as a safe haven. During future times of uncertainty, NIA believes that precious metals will receive nearly 100% of safe haven buying, just like the U.S. dollar received 100% of safe haven buying in late-2008/early-2009.

Once the debt ceiling is inevitably raised, the U.S. Treasury will have a lot of catching up to do in order to get its house in order, and we will likely see the largest amount of debt ever sold by the U.S. government in a single month. With QE2 having finished at the end of June, the U.S. will be relying on foreigners in these upcoming record Treasury auctions. In our opinion, we are likely going to see interest rates rise at an unprecedented rate that will shock the world.
by Peter Coy
If Washington is deadlocked now, how will it deal with the much bigger debt problems that lurk in the decades to come?

There is a comforting story about the debt ceiling that goes like this: Back in the 1990s, the U.S. was shrinking its national debt at a rapid pace. Serious people actually worried about dislocations from having too little government debt. If it hadn't been for two wars, the tax cuts of 2001 and 2003, the housing meltdown, and the subsequent financial crisis and recession, the nation's finances would be in fine condition today. And the only obstacle to getting there again, this narrative goes, is political dysfunction in Washington. If the Republicans and Democrats would just split their differences on spending and taxes and raise the debt ceiling, we could all get back to our real lives. Problem solved.

Except it's not that way at all. For all our obsessing about it, the national debt is a singularly bad way of measuring the nation's financial condition. It includes only a small portion of the nation's total liabilities. And it's focused on the past. An honest assessment of the country's projected revenue and expenses over the next generation would show a reality different from the apocalyptic visions conjured by both Democrats and Republicans during the debt-ceiling debate. It would be much worse.

That's why the posturing about whether and how Congress should increase the debt ceiling by Aug. 2 has been a hollow exercise. Failure to increase the borrowing limit would harm American prestige and the global financial system. But that's nothing compared with the real threats to the U.S.'s long-term economic health, which will begin to strike with full force toward the end of this decade: Sharply rising per-capita health-care spending, coupled with the graying of the populace; a generation of workers turning into an outsize generation of beneficiaries. Hoover Institution Senior Fellow Michael J. Boskin, who was President George H.W. Bush's chief economic adviser, says: "The word 'unsustainable' doesn't convey the problem enough, in my opinion."

Even the $4 trillion "grand bargain" on debt reduction hammered out by President Barack Obama and House Speaker John Boehner (R-Ohio) -- a deal that collapsed nearly as quickly as it came together -- would not have gotten the U.S. where it needs to be. A June analysis by the Congressional Budget Office concluded that keeping the U.S.'s ratio of debt to gross domestic product at current levels until the year 2085 (to avoid scaring off investors) would require spending cuts, tax hikes, or a combination of both equal to 8.3 percent of GDP each year for the next 75 years, vs. the most likely (i.e. "alternative") scenario. That translates to $15 trillion over the next decade -- or more than three times what Obama and Boehner were considering.

You start to see why, absent signs of a serious commitment to deficit reduction, the rating services are warning they may downgrade the federal government's triple-A rating even if Congress does meet the Aug. 2 deadline. Fortunately, our debt hole is escapable. But digging out requires that leaders of both parties come to terms with just how deep it is.

As per Harvey Organ:


The front delivery month of August saw a massive 12,124 contracts of open interest and this is the amount of gold standing for August representing 1.212 million oz of gold.

Thus to start the August month we officially have only 2.027 million oz of registered gold but I will bet that most of it is encumbered.  (registered = dealer gold) [encumbered = unavailable to those dealers short Gold that need to make deliveries.]

Expect massive cash settlements as the comex does not have anywhere close to this [1.212 million oz of gold] in unencumbered gold.


The front August options exercised month saw an OI fall slightly from 319 to 312.  This represents the number of silver ounces standing (1.56 million oz) which is very large for a non delivery month.  It is almost 30% of the total of July's silver oz standing. registered silver fell to an all time low of 26.729 million oz of silver inventory.

Our CRIMEX/Banking Cartel has some serious supply issues in Gold as we head into August.  August, on average, sees Gold move sideways with a downard bias to open the month, but quickly bottoms and launches higher thru September and into October.  The rise in July this summer has caught many by surprise.  The rise we may see into late Summer/early Fall, though expected, may shock even the diehard Gold Bulls. 

Silver will tag along for the ride in Gold's shadow, with the usual CRIMEX induced volatility.  However, keep a very close eye on the 40 level of the Gold to Silver Ratio.  As the ratio falls below 40, expect Silver's advance to accelerate relative to Gold as we move into late summer.  It would not be unexpected to see Silver at new ALL-Time highs near Labor Day.

Thursday, July 28, 2011

And then all hell breaks loose...

"The bigger the pile of debt gets, the more it stinks."
 -Bill Bonner

The headlines are cluttered with dire warnings regarding the debt-ceiling debate.  Judging by the headlines alone, the sky is about to fall, and the world is about to be thrust into a permanent darkness.  The common theme of the stories below the headlines goes something like this:

"With brinkmanship over the ideologically charged dispute seeming likely to go on through the weekend, investors and ordinary Americans are increasingly nervous that a previously unthinkable U.S. default could spark a new financial crisis."

"Spark a "new" financial crisis"? Why is the media so hell bent on this "threat"? The US is STILL in the middle of the same financial crisis that has led us to this debt debate. Raising or not raising the debt ceiling is not going to "fix" or "prevent" a damn thing. The PRESENT financial crisis is going to get much worse all on its own. 20% of Americans are unemployed or underemployed. Over 44 MILLION Americans are using food stamps. Millions of Americans have lost their homes completely, many more have lost the equity in their homes, or owe much more on them than they are worth. There has been no recovery from the financial crisis, so there can be no "new" financial crisis.

My favorite headline of the week was this one witnessed yesterday afternoon:

BBC News
The new head of the International Monetary Fund (IMF), Christine Lagarde, has warned the "clock is ticking" on a deal to tackle the US deficit and raise its debt ceiling.

Genius ALERT!  How lucky for the world that Mrs. Obvious was chosen to lead the International Monetary Fund.

I think what irritates me the most about this entire debate is the insistence by the Republicans AND the Democrats that their respective "plans" "if passed" will put the economy on "firmer footing".  What an utter load of hogwash!  They would like you to believe raising the debt ceiling will guarantee the economy recovers "quickly", but the simple fact [and the simple math] is that the economy will only SUFFER from any rise in the debt ceiling.  THE COUNTRY'S DEBT IS THE PROBLEM!  Adding to that debt is NOT going to help the economy is any way, shape or form.

The most absolutely amusing development in the entire debate this week, is that the "rating agencies" are now back tracking on their credit downgrade threats of US Debt.

NEW YORK (Dow Jones)--U.S. Treasury debt would remain the world's bond benchmark, even if a ratings agency cuts its rating on the U.S. government in the coming weeks, Fitch Ratings said in a new report Wednesday.

Credit Agency Tells Congress a Default Is Unlikely
WASHINGTON — The United States is unlikely to default on its debt obligations but its credit rating could still be lowered if it doesn’t come up with an adequate plan to address spending and its soaring budget deficit, an official from one of the country’s largest credit rating agencies told a House panel Wednesday.

In the words of Alex Johnson, head of portfolio management at Fischer Francis Trees & Watts:

"The US dollar is a fiat currency. At heart, it represents a claim on the productive capacity of the U.S. economy. What does a rating even mean in the context of the United States?"

Quite. But because so many investment decisions are rules based and embedded into the financial system, markets have suffered considerable volatility and weakness because of the perception that a ratings cut was all but inevitable.

There is no liquid alternative to U.S. Treasuries, so their status in finance will continue - as will the benefits that brings to funding a massive budget deficit.

Well Alex, there is this stuff they call Gold...

It is somewhat amusing that amidst all the squabbling over raising the debt ceiling, few have asked: "Who is going to buy [fund] all this new debt?"

If the US can't boost confidence in its currency anytime soon, we could be standing at the gates of a long anticipated dollar crisis.

This ongoing charade regarding the debt ceiling is less about "preventing a new economic crisis" and more about delivering a message that Washington hopes will prop up confidence in the US Dollar.  Unfortunately, globally, confidence in the US Dollar has already been lost.  Sadly, the politicians in Washington will be the last to realize this fact, as once the debt ceiling is raised [and it will be raised], any remaining confidence in the US Dollar will quickly evaporate as the realization sets in that the only way the US will be able to fund their new debt "needs" is by the Federal Reserve printing the money to buy the debt themselves.  The current economic crisis will only get worse.  The only thing "new" to come from all of this will be the all-time highs of the Precious Metals as investors drop US Treasuries and Dollars in exchange for REAL MONEY.

This next headline below might just be the silliest of them all this week.  "Mainstream" economists seem to confuse the supply and demand fundamentals of the economy, with the supply and demand fundamentals of the currency ALL commodities are priced in, US Dollars.  Demand for commodities, other than Gold and Silver, may drop "physically" because of a slowing in the global economy, but that will not "automatically" cause the prices paid for them to drop.  If the demand for US Dollars drops, and with it the value of the Dollar, the prices paid for commodities will rise because they are priced in Dollars, even though physical demand for them may wane, a depreciating US Dollar will make them cost more. 
"With the exception of precious metals, we still think that commodity prices will fall sharply in the event of an actual U.S. downgrade or default," Julian Jessop, chief international economist at Capital Economics, said in a research note.

Commodities have risen since Standard & Poor's put the U.S. on watch for a possible downgrade, but Jessop said not to read too much into those moves.

"We would be wary of interpreting such small moves as evidence of strong safe haven demand," he said. "Crucially, other asset prices have been relatively stable over this period, with U.S. equities and government bonds little changed and the dollar down only 2 percent or so on a trade-weighted basis."

In Jessop's view, commodities are trading in line with equities and will continue to do so.

"The prices of industrial metals in particular remain as closely tied as ever to equity prices. Correspondingly, if equities fall in response to a U.S. downgrade or default, as they surely would, industrial metals prices should drop back too," he said.

Capital Economics is predicting the S&P 500 will end the year at 1,200, falling 10 percent from its current levels.

That would mean bigger losses for commodities, according to Jessop.

"This would be consistent with a drop of at least 20 percent in the prices of industrial metals. In the case of copper, this would imply a price target of no more than 8,000 dollars per tonne, which happens to be our end-year forecast too," he said.

Gold and silver could be major beneficaries of a downgrade of U.S. debt as investors search for tangible assets, Jessop said, but he can't make the same case for other commodities.

"While this is a compelling argument in favor of gold, and perhaps silver, it makes much less sense for other commodities," he said.

Jim Willie, CB
The economic theory in textbooks must be updated to account for Fiat Soft Science. An important third factor determines price. It is not demand, as most Deflationist Knuckleheads claim. It is not supply, as the moronic followers of Laffer Curve advocates insist. Instead, it is the falling USDollar since all commodities are priced in US$ terms. Lower demand will not result in lower commodity prices, since the monetary effect trumps all. The twist lies in the pricing denomination units, not in the Price Demand dynamics. An inflationary recession is deeply rooted in progress, with a depression next to occur. The price effects continue to confuse the dullard economists who have actually foreseen almost nothing in the current ongoing crisis. Their collective value is far less than garbage collectors who tend to the landfills, or landscapers who improve the appearance of home lawns. The crisis toward wreckage all occurs like a wrecked house floating over a waterfall for all to observe in sheer horror, as wealth evaporates and national sovereignty is forfeited to creditors.

What follows is my analysis of the erroneous path taken by the myopic Deflationist fools. The entire table of commodity prices is rising. Since the advent of QE, QE-Lite, and QE2, the full price structure has been rising steadily and noticeably. As the USDollar declines in value, the price of any commodity priced in US$ terms rises. The USDollar is not the constant, as they along with Wall Street mavens believe. Gold is constant, and the USDollar is falling versus Gold. This is basic science, but something that demand side Deflatinionist fools miss, and something that supply side Laffer fools miss. It is best to offer some solid evidence to these people with dull intellectual capacity, and move on without waiting for their awakening. Sadly, it is over their heads. Gold is the constant, as the USDollar moves in shifting patterns within its stable golden sphere. The commodities therefore all change in US$ terms as a result. The Knuckleheads miss utterly basic principles, spout nonsense repeatedly, remain steadfastly ignorant of their errors, learn nothing in the process, sound arrogant while on the wrong path, and continue to litter the landscape with their drivel and mental excrement. They are an annoyance, even inside the gold community.


As the USDollar (and all major currencies) lose value from grand debasement, the vertical scale loses its price delineation markings. The entire vertical price scale itself suffers from inflation. The numbers blur, only to come into better focus with different numbers tied to the vertical tick markings. What used to be $8 is suddenly $10. What used to be $40 is suddenly $50. What used to be $120 is suddenly $150. The Deflationist Knuckleheads expect that slower economic activity will reduce demand, and thus bring about lower price. But they miss the bigger effect of price scale alteration and decay. The fiat paper monetary system, based upon denominated debt rather than sacrosanct inert metal with no counter-party risk, is decaying into a international scrap heap. All price dynamics change. It is that simple. It is that complex.

Turd Ferguson pitched in with a comment that sets the tone. He said,"Remember Econ 101. Increasing the supply of an item decreases its value.More dollars equals a less valuable dollar. A declining dollar causes all things denominated in dollars (gold, oil, corn) to rise. The dollar is going to be declining farther with the advent of QE3. So the way must be prepared by smashing commodities first, so that they start their next upleg from a lower point. Thus, the fundamentals are overridden." Neither the demand siders nor supply siders can observe that the USDollar itself is subject to Supply & Demand dynamics, with the commodity prices as victims. The bad science artisans focus only upon Supply & Demand for the commodity, steeped in myopia. Note tragically that wages have not risen during the hyper-inflation episode that began with Quantitative Easing.

Economists say the debt ceiling debate has already damaged the U.S. economy, and many worry that a deadlock could send the country hurtling into a double-dip recession.

"Economists say."  How many of these economists, that are so often quoted in the press and on financial TV, even saw the current financial crisis we have been in since 2008 coming?  How many of them have been right about anything?

It is almost as if this entire "debt debate" has been staged to "eventually" be used to blame "the next recession" on it instead of blaming it on the facts.  Nothing that caused the Financial Crisis in 2008 has been fixed...NOTHING! ...and the bandages that were used to stem the loss of money from the system have become ragged...the Fed has been pumping money into a corpse for over three years now...if the system is dead, is it any wonder that bandages and money infusions have NOT brought the system back to life?

Consequently...confidence in the physicians [The US Federal Reserve and the US Treasury] to revive the patient [the financial system] is beginning to fade, and will soon turn to anger: "YOU SAID YOU COULD SAVE THE ECONOMY!"

And then all hell breaks loose...

Ranting Andy has a "weekend scenario" as to how this debt debate will end.  I wish to share it with all of you.  Recall that this past weekend we were warned of the dire consequences of what will happen if this debt debate was not resolved before the Asian Markets opened up Sunday evening in the US.  That was just a primer for the REAL THING this weekend:

By Andy Hoffman
The way I see it, there is no substantive plan AT ALL being proposed by either the Republicans or Democrats. The GOP is grandstanding with draconian (and impossible) spending reduction targets, whose only real target is to fool Americans into thinking they are fiscally “conservative.” They know very well that such plans could never pass into law, and frankly if they did you’d see immediate social unrest that would make what we’ve seen in Athens thus far look like Romper Room. As for the Democrats, they frankly have no plan at all, grandstanding conversely by pretending they are a champion of the people by proposing tax increases for the “rich.” Such tax increases, too, have no chance of being passed, and if they did business activity would immediately plummet. Corporate tax rates in America are already the highest of any industrialized country, and raising such rates further (on the companies and their “rich” owners”) would likely cause the same type of reaction as the communist doctrines instituted by the fictional U.S. government in “Atlas Shrugged”.

Now that we’ve passed this period of peacock-strutting, with both parties lamely making their points, we are faced with the real issue; there is NOTHING substantive on the table, and time is running out. Heck, Congress doesn’t seem capable of passing a bill that is less than 1,000 pages long, and with just five days left there no longer exists the time to even TYPE 1,000 pages, much less the most important 1,000 pages of this generation. We are now in the “deer in headlights” stage, where both parties don’t know what to do at all, it seems. Following his pathetic, nationally televised speech on Monday, Obama has been eerily quiet, praying for someone to come up with something, while Boehner and Reid are displaying their complete lack of competence for the entire world to see. No substantial plans, and just five days left!

So what do I expect to happen, as well as the ramifications? I recognize, of course, that making short-term predictions can be hazardous to one’s reputation, but it shouldn’t matter too much in this case because the impact on GOLD AND SILVER will be the same no matter what these buffoons decide.

I expect yet another weekend of suspense, where as usual nothing gets done during the week so an EMERGENCY SOLUTION needs to be crafted around a large boardroom table in Washington on Saturday and Sunday.

Remember those fun days in 2008 and 2009, when weekend bailouts (AIG, FNM/FRE, Merrill Lynch, Wachovia, Citigroup, etc.) were crafted on Sunday night, to be released just in time to prevent “market meltdowns” in “Asian trading”? Such acts of desperation are ominous signs that FINANCIAL CRISIS #2 is nearly upon us, and if you remember last weekend we experienced the same propaganda that something MUST be done by Sunday night, OR ELSE. Nothing was done, of course, due to the aforementioned political grandstanding, but then again we really had another week to get things done, which appears to have been largely squandered (as I write, headlines are hitting the tape that ABOLUTELY NO PROGRESS is being made).

I assure you, this weekend WILL BE a true crisis, as a debt limit extension must be signed by Tuesday night or the U.S. will officially default on its obligations, spurring a massive financial conflagration that will likely be sparked by everyone’s favorite WMD’s, the hundreds of billions of outstanding CREDIT DEFAULT SWAPS betting that the U.S. will default (and, just a guess, likely still backed by AIG).

As we head into tomorrow (Friday) afternoon, I expect a heightened level of rhetoric about how dangerously close the U.S. government (and by proxy, hundreds if not thousands of other sovereigns and municipalities) is to such an event, and subsequently a fever pitch of mass media focusing on how a deal MUST be announced by Sunday night before Asian trading commences. This event will gain vastly more attention this weekend than last, and I fully believe that, going INTO the weekend, there will be essentially nothing substantial on the table from either party (or the suddenly quiet “Tea Party”).

But come Sunday night, I expect a triumphant, “bipartisan agreement” to “temporarily” raise the debt limit by roughly $1 trillion, to $15.3 trillion, with essentially ZERO spending cuts or tax increases to back it up – in essence, the worst possible scenario for the dollar and the U.S.’s credibility. However, a carefully crafted communiqué, possibly accompanied by a press conference, will state that “we are confident that a more substantive agreement will be reached by year-end, and thus we are creating a no holds barred, bipartisan committee to investigate a solution.”

The White House propaganda machine will then turn up the jets to involve interviews with every possible biased media outlet in America, from “60 Minutes” to CNBC to the Wall Street Journal to even the ultimate sell-out, Warren Buffet, to convince the sheeple that government is competent and working for their best interests. And, if they’re lucky, the PPT/Cartel/ESF/HFTs will be able to buy them a day or so of “positive market reaction” before reality sets in.

And that reality will be the mother of all GOLD and SILVER rallies, as international (and possibly U.S.) rating agencies start to downgrade U.S. Treasuries, while even the average investor will start to realize the U.S. debt has not a chance in hell of ever being repaid, or for that matter of even contracting. Interest rates will become involved in an incredible battle between the bond vigilantes of the real world and the covert plus overt QE of the manipulative world, a standoff that will be long and strong, but likely eventually won by reality. Remember, even the SLIGHTEST increase in interest rates spells certain, immediate catastrophe for America, so do not underestimate how much printed money (U.S. plus Japan/EU/BOE, etc.) will be put forth in this WAR OF ALL WARS, which will rage on until the bad guys are defeated.

Tuesday, July 26, 2011

Deal Or No Deal: Gold And Silver Will Continue To Rise

It should be a shock to no one early this morning that Gold and Silver prices are being pressured lower as options futures contracts at the CRIMEX expire today.  Look no further than today's crumbling US Dollar to confirm the ongoing manipulation of the Precious Metals markets.  Gold and Silver should be rising today as the Dollar is falling, but not if their is an options expiration and 20,000 Gold calls are sitting at the $1600 strike price.  A close above $1600 will make the line for delivery next month very long for the banks that do not have the Gold they sold to the holders of these contracts.

Eric King, King World News interviewed James Turk. When asked about the action in gold Turk replied, “Today’s action was very significant Eric as both gold and silver closed above previous resistance points. In the interview that we did last week, I said $1,640 to $,1650 is the near-term target. That is the level we should be focusing on, but readers have to remember that option expiry starts tomorrow. Given the recurring downward price pressure that we normally see during option expiry, the action over the next two days should be watched closely.”

Turk continues:

“If gold cannot be pushed back below $1,600 during option expiry, we should take that to mean that the shorts are losing control. The consequences of that would be the potential for an upside explosion, which as you know is consistent with what I have been expecting for the gold price this summer.

Here is another interesting development Eric, the support under $1,600 regardless of how you measure it looks solid. Asian buying has been following the market up since gold went over $1,000. I was surprised to see how quickly the bids under $1,600 developed. So my view of market conditions at the moment is that as bullish as I am, even I might be surprised by how quickly gold accelerates from here.

When asked about silver specifically Turk remarked, “The situation is just as bullish. The fact that we are breaking through $40, which has provided overhead resistance for so long, is a clear sign that the shorts are losing control. The upper hand is shifting to the buyers of physical silver.

My near-term target is still something in the mid $40’s, but if gold starts moving higher as I expect, silver will be testing that $50 level by next month. That is going to spoil the summer vacations of many of the silver shorts who will be left shocked and in disbelief as they buy hand over fist to limit their losses.”

CRIMEX trading opened yesterday with 193,611 Gold contracts still open for August delivery.  At 100 ounces per cntract that is equivalent ot 19,361,100 ounces of Gold.  As of Friday, July 22, total CRIMEX Gold Warehouse stocks were listed at 11,432,710.  Unfortunately for the CRIMEX, less than 1/2 of the total warehouse stocks are actually "registered for delivery".  This obviously poses a very big problem for the bankers that have been selling mountains of paper Gold the past 10 days to halt the rise in the price of Gold.  Could we see a string of margin increases in the Gold futures early in August, ala the May Silver margin increases, to help aleviate the CME from the threat of a CRIMEX Gold delivery default?  Time will tell...

The other question many financial media pundits have been asking as Gold continues it's relentless rise this month is, will a debt ceiling settlement cause the price of Gold to fall?   It's a very good question, but their expectations that a debt ceiling settlment will certainly be bad for Gold is not only wrong, but proves once again thei complete ignorance of Gold as the ultimate alternative currency.  Case in point:

The following CNBC roundtable on Gold and the debt celing is quite amusing.  The way the CNBC talking heads dismiss their guests answer to their question, AND his predictions for the price of Gold is truly pathetic, and just more proof of the financial media's culpability in the governments efforts to suppress the price of Gold.

The question, "will the price of gold drop on debt deal?" can easily be answered by this one simple chart of the US debt, the "debt ceilings", and the price of Gold posted below:

NO, the price of Gold will NOT DROP on a debt ceiling deal.  Now, it might dip briefly on the news of a debt ceiling deal...we have seen that occur at least three times in the last week, but the price of Gold is not "going to go down" because the US Congress has agreed to raise the debt ceiling.  NOTHING about raising the debt ceiling is negative for the price of Gold.  In fact, it could not be more positive.  The nation is $14.3 TRILLION in debt now, does adding more debt make the nation's debt problem go away?  Hardly!  Besides, look again at the chart posted just is simple to understand!  Raise the debt limit, and the price of Gold will has for the past 10 years!

And Silver will follow the price of Gold higher...  Silver has moved through the month of July so far just as we had expected.  Yesterday Silver met yet another expected roadblock at the $41 level, and Prices were reversed quickly by our ever vigilant CRIMEX/ Banking Cartel.

By Keith Fitz-Gerald, MoneyMorning
If you're still bearish on long-term silver prices, you'd better reconsider your stance.

Dollar-denominated Chinese silver futures were scheduled to begin trading on the Hong Kong Mercantile Exchange early Friday. This development will grant Asian investors direct access to the metal, and will blunt the U.S. dominance in silver-bullion trading.

It's also highly bullish for long-term silver prices.

Let me explain ...

...yesterday I spoke to Christian from and he pointed me to a link on YouTube by someone using the nom de plume Brother John F. I watched this video in stunned disbelief. This man had a live streaming video from the Commercial Mercantile Exchange (COMEX) for the minute by minute trades. Silver contracts were selling higher and at about 1:40PM they started to sell off for no reason. Then at 2:03PM there was a trade for 50,000 contracts of silver sold. (This would lead anyone to conclude that the sale was known 23 minutes before it occurred.) This is not a typo. That is 50,000 contracts in one minute! If you are not aware each contract is for 5,000 ounces of silver. So if we do the math 50,000 contracts X 5,000 ounces per contract equals 250,000,000 ounces of paper silver contracts. If you're getting dizzy reading all of those zeros I will spell it out for you. That is Two Hundred Fifty Million ounces of paper silver traded in one minute. If we do some further math and we multiply two hundred fifty million contracts by the proxy price of silver yesterday which was $40.00 per ounce. That trade was for 10 billion dollars in one minute.

...the amount of silver produced per year in the entire world is roughly around 680 million ounces of silver and the amount mined in the united state last year was 50 million ounces. The amount that was traded on the CME yesterday was approximately one third of all of the silver mined in the world. It was 5 times the amount mined in America. So how can this be? So you may ask why this is so troubling. The reason is that I have been writing for some time now that there are rumors that the silver ETF (SLV) is rumored to not have the silver that the paper purports to represent. There are reports that if SLV was ever called upon to produce the underlying asset it represents it would be unable to do so. Is there any wonder why this commodity is so volatile?

The fact is that the silver market is being incredibly manipulated. Well that is about to change. On Friday July 22nd the Hong Kong Mercantile Exchange will start trading dollar denominated silver futures contracts with the hopes of tapping into the growing demand for the metal in China and India. The new contact will enable buyers and sellers in China to trade effectively with their counterparts across the world, while at the same time allow investors to gain exposure to silver price movements and broaden their investment portfolio. The exchange also plans to roll out a Yuan-priced gold and silver futures to capitalize on growing investor demand for China's strengthening currency. They also have ambitions for products in base metals, energy and agriculture.

This was the missing piece of the puzzle I could not find. Starting tomorrow Friday July 22nd the Anglo American monopoly on silver is over. This will be the first time that Asians can buy and take future delivery of silver in Asia. No longer can the CME raise margins close to 100% in eight days. The silver shorts are and should be afraid of the hundreds of millions of Asians that will be entering this small market. China alone has trillions of dollars and they could drop 0.01% of that money into silver and explode silver beyond the control of the American elite.

By Andy Hoffman
...many worry that since silver peaked at $50 in early 1980 (again due to blatant government manipulation), and then again at that same level earlier this year, that somehow this means the $50 level is insurpassable. This thesis is patently absurd, trying to equate what happened 30 years ago, on frankly another financial planet, as if the trading back then has even the slightest relationship to what is happening today, with a global money supply (on and off-balance sheet) AT LEAST 10x larger and growing exponentially!

Moreover, as immaterial as I consider SHORT-TERM charts is how material I consider LONG-TERM charts. In fact, I believe long-term charts to be EVEN MORE IMPORTANT than EVER thanks to the massive resistance/support phenomenon described above, PARTICULARLY when occurring at a MAJOR ROUND NUMBER such as $50/oz.

Looking at the below 37-year silver chart, I see perhaps the largest reverse head and shoulders/cup and handle formation of all time, one with such an incredibly powerful base that I believe a move to hundreds of dollars per ounce is IMMINENT, even without looking at the aforementioned money supply figures.

Perhaps it will take a few more months to break through $50 for good, and perhaps the “consensus” will be taken off guard if it blows through $50 later this summer, which as noted above I place a high probability on.

To conclude, all I can say is that the Western World financial system is coming down all around us in rapid motion. Whether the Cartel/PPT/ESF can engineer a “soft landing” during the second half of 2011 is still in question (I do not believe they can), but irrespective PHYSICAL silver and gold are poised to move up markedly, if not parabolically, during this period.

I can't help comment now on the President's address of the nation last night.  [Not that many American's bothered to watch it.]  Does this guy really believe the the words on the telprompter before him?  Or is he really just reading the script?

Here is a link to the teleprompted delivery of the President's address last
night to the nation:

Here is the link to the written transcript of the President's address:

I always look for the transcript because it is easier to pick apart the
written word than the spoken.

The first 2/3 of this speech was a pathetic distortion of history where the President tries to rewrite history and blame President Bush for the debt without using his name...the true mark of a loser is to "blame sombody else for your problems  The last 1/3 of the speech he focuses on the stalemate and uses scare tactics to "call the country" to action and phone your representative...LOOOOOOL, like that will solve anything...these
clowns in DC NEVER listen to their voting constituents, they only listenen to their "paying" constituents. And I can't believe he stooped to using a Ronald Reagan this Obama guy desperate or what?

Below I will cut and paste the last third and insert my "comments" on the Presidents assertions:

"Would you rather reduce deficits and interest rates by raising revenue from those who are not now paying their fair share, or would you rather accept larger budget deficits, higher interest rates, and higher unemployment? And I think I know your answer."

Those words were spoken by Ronald Reagan. But today, many Republicans in the House refuse to consider this kind of balanced approach - an approach that was pursued not only by President Reagan, but by the first President Bush, President Clinton, myself, and many Democrats and Republicans in the United States Senate. So we are left with a stalemate.

Now, what makes today's stalemate so dangerous is that it has been tied to something known as the debt ceiling - a term that most people outside of Washington have probably never heard of before.

Understand - raising the debt ceiling does not allow Congress to spend more money. [BULLSHIT! THERE IS NOTHING BEING SAID ABOUT A SPENDING FREEZE GOING FORWARD FROM AUGUST 2ND.] It simply gives our country the ability to pay the bills that Congress has already racked up. [THIS IS CALLED BORROWING MONEY TO PAY YOUR DEBTS, WHERE I COME FROM YOU DO THIS BECAUSE YOU ARE BROKE.] In the past, raising the debt ceiling was routine. Since the 1950s, Congress has always passed it, and every President has signed it. President Reagan did it 18 times. George W. Bush did it 7 times. And we have to do it by next Tuesday, August 2nd, or else we won't be able to pay all of our bills. [BEGS THE QUESTION: WHY DO WE HAVE A DEBT CEILING, IF RAISING IT IS "ROUTINE"?]

Unfortunately, for the past several weeks, Republican House members have essentially said that the only way they'll vote to prevent America's first-ever default is if the rest of us agree to their deep, spending

If that happens, and we default, we would not have enough money to pay all of our bills - bills that include monthly Social Security checks, veterans' benefits, and the government contracts we've signed with thousands of businesses. [BUT I THOUGHT SOCIAL SECURITY MONIES WERE HELD IN A "LOCKBOX"? DO YOU REALLY THINK AMERICANS WILL SIT IDLY BY WHILE YOU PAY THE CHINESE INTEREST ON THEIR LOANS AND NOT PAY AMEICANS THEIR SOCIAL SECURITY MONEY?]

For the first time in history, our country's Triple A credit rating would be downgraded, leaving investors around the world to wonder whether the United States is still a good bet. [THE REST OF THE WORLD ALREADY HAS REALIZED THAT AMERICA IS A BAD BET, WASHINGTON IS THE LAST TO FIGURE THAT OUT] Interest rates would skyrocket on credit cards, mortgages, and car loans, whichamounts to a huge tax hike on the American people. [HIGHER BORROWING COSTS ARE NOT A "TAX HIKE", QUIT WITH THE SCARE MONGERING.] We would risk sparking a deep economic crisis - one caused almost entirely by Washington. [WE ARE IN A "DEEP ECONOMIC CRISIS ALREADY, DESPITE YOUR CLAIMS TO THE CONTRARY, WE DID NOT AVOID THE SECOND GREAT DEPRESSION...DENY IT ALL YOU WANT, WE ARE IN THE MIDST OF THE GREATER DEPRESSION RIGHT NOW AS YOU SPEAK AND SQUABBLE WITH CONGRESS...AND IT WAS CAUSED ALMOST ENTIRELY BY WASHINGTON'S CUDDLING WITH THE BANKING INDUSTRY THE PAST 25 YEARS.]

Defaulting on our obligations is a reckless and irresponsible outcome to this debate. And Republican leaders say that they agree we must avoid default. But the new approach that Speaker Boehner unveiled today, which would temporarily extend the debt ceiling in exchange for spending cuts, would force us to once again face the threat of default just six months from now. In other words, it doesn't solve the problem. [NO, IT DOESN'T. AND NEITHER WILL ADDING ANOTHER 12 MONTHS TO THE SPEAKERS PLAN. THE FACT IS MR PRESIDENT, AMERICA HAS ALREADY DEFAULTED ON ITS OBLIGATIONS, YOU CLOWNS ARE JUST TRYING TO FIND A BUTTERFLY BANDAGE TO COVER UP THIS SUCKING CHEST WOUND.]

First of all, a six-month extension of the debt ceiling might not be enough to avoid a credit downgrade and the higher interest rates that all Americans would have to pay as a result. [WHAT GUARANTEE DO YOU HAVE THAT THERE WON'T BE A DEBT DOWNGRADE EVEN IF YOU DO RAISE THE DEBT CEILING. FOR THAT MATTER, WHAT MAKES YOU THINK THE WORLD BELIEVES THE "AMERICAN" RATING AGENCIES AAA RATING RIGHT NOW AS YOU SPEAK?] We know what we have to do to reduce our deficits; there's no point in putting the economy at risk by kicking the can further down the road. [HEY DUMBASS! RAISING THE DEBT CEILING IS "KICKING THE CAN DOWN THE ROAD!]

But there's an even greater danger to this approach. Based on what we've seen these past few weeks, we know what to expect six months from now. The House will once again refuse to prevent default unless the rest of us accept their cuts-only approach. Again, they will refuse to ask the wealthiest Americans to give up their tax cuts or deductions. Again, they will demand harsh cuts to programs like Medicare. And once again, the economy will be held captive unless they get their way. [TAX THE RICH...IS THAT YOUR ANSWER TO EVERYTHING THAT AILS THIS COUNTRY? DID THE RICH RUN UP THE CREDIT CARD OR DID THE CONGRESS?]

That is no way to run the greatest country on Earth. It is a dangerous game we've never played before, and we can't afford to play it now. [WHAT A STUPID THING TO SAY. THE COUNTRY HAS BEEN RUN LIKE THIS FOR THE PAST 40 YEARS! AFTER THE LAST TIME WE DEFAULTED ON OUR OBLIGATIONS BY CLOSING THE GOLD WINDOW ON THE REST OF THE WORLD, AUGUST 15, 1971.] Not when the jobs and livelihoods of so many families are at stake. We can't allow the

Congress now has one week left to act, and there are still paths forward. The Senate has introduced a plan to avoid default, which makes a down payment on deficit reduction and ensures that we don't have to go through this again in six months. [A GIMMICK THAT SIMPLY SWEEPS THE PROBLEM UNDER

I think that's a much better path, although serious deficit reduction would still require us to tackle the tough challenges of entitlement and tax reform. Either way, I have told leaders of both parties that they must come
up with a fair compromise in the next few days that can pass both houses of Congress - a compromise I can sign. [BECAUSE I AM ONLY WORRIED ABOUT THE NEXT ELECTION CYCLE] And I am confident we can reach this compromise. Despite our disagreements, Republican leaders and I have found common ground before. And I believe that enough members of both parties will ultimately put politics aside and help us make progress. [AND KICK THE CAN A LITTLE FURTHER DOWN THE ROAD.]

I realize that a lot of the new members of Congress and I don't see eye-to-eye on many issues. But we were each elected by some of the same Americans for some of the same reasons. Yes, many want government to start living within its means. And many are fed up with a system in which the deck seems stacked against middle-class Americans in favor of the wealthiest few. But do you know what people are fed up with most of all? [YES, HAVING AN UNQUALIFIED COMMUNITY ORGANIZER AS THE PRESIDENT OF THE UNITED STATES.]

They're fed up with a town where compromise has become a dirty word. They work all day long, many of them scraping by, just to put food on the table. And when these Americans come home at night, bone-tired, and turn on the news, all they see is the same partisan three-ring circus here in
Washington. They see leaders who can't seem to come together and do what it
takes to make life just a little bit better for ordinary Americans. They are offended by that. And they should be.

The American people may have voted for divided government, but they didn't vote for a dysfunctional government. So I'm asking you all to make your voice heard. If you want a balanced approach to reducing the deficit, let our Member of Congress know. If you believe we can solve this problem
through compromise, send that message.

America, after all, has always been a grand experiment in compromise. As a democracy made up of every race and religion, where every belief and point of view is welcomed, we have put to the test time and again the proposition at the heart of our founding: that out of many, we are one. We have engaged
in fierce and passionate debates about the issues of the day, but from slavery to war, from civil liberties to questions of economic justice, we have tried to live by the words that Jefferson once wrote: "Every man cannot have his way in all things...Without this mutual disposition, we are disjointed individuals, but not a society."

History is scattered with the stories of those who held fast to rigid ideologies and refused to listen to those who disagreed. But those are not the Americans we remember. We remember the Americans who put country above self, and set personal grievances aside for the greater good. We remember
the Americans who held this country together during its most difficult hours; who put aside pride and party to form a more perfect union. [THE ONLY THINGS YOU CLOWNS REMEMBER IN WAHINGTON IS WHO GAVE YOU MONEY AND THE DATE OF THE NEXT ELECTION...NOT A ONE OF YOU (EXCEPT RON PAUL) CAN HOLD A CANDLE TO THE THE FOUNDING FATHERS OF THIS NATION.]

That's who we remember. That's who we need to be right now. The entire world is watching [AMERICA GO DOWN THE TOILET AN REVELING IN IT]. So let's seize this moment to show why the United States of America is still the greatest[INDEBTED] nation on Earth - not just because we can still keep our word and meet our obligations [BY PRINTING MONEY TO PAY OUR DEBTS], but because wecan still come together as one nation. Thank you, God bless you, and mayGod bless the United States of America.
By Daniel Gross , Daily Ticker
Despite the hand-wringing about American decline and the constant refrain that the U.S. is the next Greece, the bond markets remain remarkably permissive. The U.S. government is currently borrowing for 10 years at almost exactly 3 percent, an extraordinarily low rate that is within spitting distance of a historic low. Look at the chart from the past six months. The Federal Reserve has stopped buying bonds, the political stalemate has worsened, inflation hasn't disappeared. And yet interest rates are contained. Why? As John Tamny and I discuss in the accompanying video, nobody really believes the U.S. government is going to default, even if it pierces the debt ceiling next week.

Wednesday, July 20, 2011

It is almost comical now, these CRIMEX raids.

On yesterday's Silver chart posting, I noted the following:

"A dip back towards the low/mid $39s would be a great reward, buy it.  The $38s would seem unlikely now, but back up the truck if so lucky."

I hope your trucks are full!

With Gold stalled at $1600 yesterday morning, and Silver at $40 it seemed likely a dip would develop.  Who knew that a coordinated bear raid by our government funded heroes on the CRIMEX would appear?  The "news" that a debt ceiling deal was near just as the CRIMEX closed up shop for the day offered our "unregulated" banking criminals the opportunity to work their black magic in the NY Globex market and assault the Precious Metals to celebrate the promise of an economy saving debt ceiling deal.

Another farce it would appear.

I really don't understand the equity market euphoria regarding any "settlement" of the debt ceiling debate.  I stand by my comments in my blog post August 2, 2011 is financial system D-day :

"August 2, 2011 is financial system D-day. Raise the debt ceiling, and the US Dollar implodes. Fail to raise the debt ceiling, and the US Dollar implodes. The countdown has begun.

It's The Debt, Stupid."

Jim Sinclair said it best on his JSMineSet page this afternoon:

"The idea that an increase in the debt ceiling is a solution to anything is nonsense. The event would be simply a can kick forward for a very short period of time. Increasing debt is not a solution to a debt problem. It actually makes the problem worse. It is an act of extending your Federal credit card borrowing line so you can use it to pay your mortgage.

Calling increasing the debt ceiling a solution to a debt problem is too stupid to be stupid."

It has been expected that a debt ceiling settlement announcement will be hailed as the "next saving grace for our economy".  Quite unlikely.  We will be told that this "deal" will stave off an Aug. 2 deadline to avoid a default that Treasury Secretary Timothy Geithner and other experts warn would shake the markets, drive up interest rates and threaten to take the country back into a recession.  BULLSHIT!

Just as the Great Obama assured the nation that his $850 BILLION stimulus program in the Spring of 2009 would help keep the unemployment rate below 8% [as it subsequently rose to over 10%], the raising of the debt ceiling will fail to avert another recession.  Of course, as we slip back into a recession [in the middle of a Depression that Mr. Obama claims we avoided with his grand $850 BILLION Stimulus] who and/or what will get the blame?  George Bush?

But I digress...  We will be told by the politicians and assured by the media that the debt ceiling deal will fix everything.  Stocks will soar, Gold and Silver will fall, and the bond market will continue to "just sail along".  I have a hunch yesterday was proof that great expectations for the debt ceiling deal will be quickly squashed as the realization quickly sets in that more debt in an economy drowning in debt is NOT A GOOD THING.  It's a very bad thing.

Congressman Ron Paul summed up the debt ceiling debate rather eloquently before the house voted on their ill fated Cut, Cap and Balance Act yesterday:

Mr. Speaker, I rise to speak against HR 2560, the Cut, Cap, and Balance Act. This bill only serves to sanction the status quo by putting forth a $1 trillion budget deficit and authorizing a $2.4 trillion increase in the debt limit.

When I say this bill sanctions the status quo, I mean it quite literally.

First, it purports to eventually balance the budget without cutting military spending, Social Security, or Medicare. This is impossible. These three budget items already cost nearly $1 trillion apiece annually. This means we can cut every other area of federal spending to zero and still have a $3 trillion budget. Since annual federal tax revenues almost certainly will not exceed $2.5 trillion for several years, this Act cannot balance the budget under any plausible scenario.

Second, it further entrenches the ludicrous beltway concept of discretionary vs. nondiscretionary spending. America faces a fiscal crisis, and we must seize the opportunity once and for all to slay Washington's sacred cows-- including defense contractors and entitlements. All spending must be deemed discretionary and reexamined by Congress each year. To allow otherwise is pure cowardice.

Third, the Act applies the nonsensical narrative about a "Global War on Terror" to justify exceptions to its spending caps. Since this war is undeclared, has no definite enemies, no clear objectives, and no metric to determine victory, it is by definition endless. Congress will never balance the budget until we reject the concept of endless wars.

Finally, and most egregiously, this Act ignores the real issue: total spending by government. As Milton Friedman famously argued, what we really need is a constitutional amendment to limit taxes and spending, not simply to balance the budget. What we need is a dramatically smaller federal government; if we achieve this a balanced budget will take care of itself.

We do need to cut spending, and by a significant amount. Going back to 2008 levels of spending is not enough. We need to cut back at least to where spending was a decade ago. A recent news article stated that we pay 35 percent more for our military today than we did 10 years ago, for the exact same capabilities. The same could be said for the rest of the government. Why has our budget doubled in 10 years? This country doesn't have double the population, or double the land area, or double anything that would require the federal government to grow by such an obscene amount.

We need to cap spending, and then continue decreasing that cap so that the federal government grows smaller and smaller. Allowing government to spend up to a certain percentage of GDP is insufficient. It doesn't matter that the recent historical average of government outlays is 18 percent of GDP, because in recent history the government has way overstepped its constitutional mandates. All we need to know about spending caps is that they need to decrease year after year.

We need to balance the budget, but a balanced budget amendment by itself will not do the trick. A $4 trillion balanced budget is most certainly worse than a $2 trillion unbalanced budget. Again, we should focus on the total size of the budget more than outlays vs. revenues.

What we have been asked to do here is support a budget that only cuts relative to the President's proposed budget. It still maintains a $1 trillion budget deficit for FY 2012, and spends even more money over the next 10 years than the Paul Ryan budget which already passed the House.

By capping spending at a certain constant percentage of GDP, it allows for federal spending to continue to grow. Tying spending to GDP creates an incentive to manipulate the GDP figure, especially since the bill delegates the calculation of this figure to the Office of Management and Budget, an agency which is responsible to the President and not to Congress. In the worst case, it would even reward further inflation of the money supply, as increases in nominal GDP through pure inflation would allow for larger federal budgets.

Finally, this bill authorizes a $2.4 trillion rise in the debt limit. I have never voted for a debt ceiling increase and I never will. Increasing the debt ceiling is an endorsement of business as usual in Washington. It delays the inevitable, the day that one day will come when we cannot continue to run up enormous deficits and will be forced to pay our bills.

In conclusion, Mr. Speaker, while I sympathize with the aims of this bill's sponsors, I must vote against HR 2560. It is my hope, however, that the looming debt ceiling deadline and the discussion surrounding the budget will further motivate us to consider legislation in the near future that will make meaningful cuts and long-lasting reforms.

Obviously raising the debt ceiling is going to be a bust for America no matter how you add it up.  The CRIMEX/Banking Cartel are desperate to make you believe otherwise, and equally desperate to silence Silver and Gold from revealing the TRUTH that raising the debt ceiling is NOT going to fix a damn thing that is wrong with our economy...and thus their premeditated raid on the Precious Metals yesterday afternoon.

Andy Hoffman, of growing Ranting Andy fame, had this to say about yesterday's pathetic CRIMEX raid in the NY Globex after hours market immediately following the close of the CRIMEX for the day in New York:

By Andy Hoffman
RANTING ANDY – Alright CARTEL, you think you’re in the driver’s seat, right?

Do you think that by bashing PAPER gold and silver late on a quiet summer afternoon, with President Moron speaking, that you will somehow influence holders of PHYSICAL gold and silver to sell?

Or that ANYONE ON EARTH will believe what he is saying is BULLISH for STOCKS and TREASURY BONDS and BEARISH for gold?

Or that ANYONE with half a brain will be “worried” that something said regarding the “debt ceiling negotiations” was “important”?

After eleven straight up days in the gold market (not a single one of more than 1%, of course), culminating in yet ANOTHER ALL-TIME HIGH price earlier this morning, sentiment in the PM sector is, AMAZINGLY, closer to its all-time LOWS than its highs. There are some aspects of “summer doldrums” that are meaningful, such as that many traders are out of the market (causing exceedingly low VOLUME), but I think I’ve proven that my June 27th RANT, “Summer Doldrums – The Biggest Load of C—p Ever” was correct, in that gold and silver can certainly soar in July if the Cartel is overpowered.

Anyhow, with temperatures well over 90s for much of the country, gold up for eleven straight days, every moron “chartist” claiming that gold was “due for a fall”, and every moron “strategist” calling for a “relief rally” when a debt ceiling settlement was eventually made, it was the PERFECT time for a patented Cartel attack.

Sure enough, President Moron makes a statement regarding some drivel about a “Group of Six” plan to cut the deficit (and, of course, dramatically raise the debt ceiling, but that didn’t seem to get any press), and voila U.S. stocks and Treasuries SOAR while gold and silver are VIOLENTLY SMASHED, per the two charts below.

And what a shock, right at the ROUND NUMBER $1,600!

Never mind that no real details about such a plan were released or voted on, or that what they are discussing, even in general terms, was exactly what the market has been expecting.

And pay no mind to the fact that “higher than expected spending cuts”, if this is indeed being discussed (I have no idea if it is) will be DECISIVELY BEARISH for U.S. stocks while a dramatic increase in the U.S. debt ceiling, particularly one predicated on proposed spending cuts 5-10 years from now, will be DECISIVELY BEARISH for U.S. Treasury Bonds.

Or the fact, that, immediately after this “News” (if you can even call it that), Moody’s stated that it might still downgrade the U.S.’s credit rating.

Or the minor footnote that, whether they cut the deficit to the bone (creating a massive depression that will certainly lead to a Treasury default) or increase the debt ceiling to infinity (guaranteeing a Treasury default by inflation), the GOLD PRICE WILL RISE DRAMATICALLY in either case (as it did during both the 1930s Depression, using mining stocks as a proxy, and the 1970s inflation scare)!

Again, why let facts get in the way of a good story, particularly when you have the PPT, Exchange Stabilization Fund (no, it was not shut down – LOL) and Gold Cartel all working in unison to manipulate the PAPER markets. Heck, looking at Yahoo Finance, ZeroHedge, and other sites right now, I can’t even find a “story” to explain the market moves, and I probably won’t as ABSOLUTELY NOTHING HAPPENED!

Today’s attack was no different than the July 11th raid, a premeditated orgy of NAKED SHORTING in the PAPER gold and silver markets, in INCREASING AMOUNTS by many multiples, to try and put off the inevitable gold EXPLOSION long enough to pass a sizable debt ceiling increase, which I assure you will occur.

Ranting Andy minces no words.  This guys keyboard is as sharp as a tack as he once again nails what everybody who watches these Precious Metals markets daily sees themselves, and wishes they could express.  Ranting Andy screams for us all!

That's right folks, what you have witnessed on July 1, July 11, and July 19 has been pure market manipulation by a VERY DESPERATE banking cartel that is quickly losing control of the muzzle they have kept on the Truthsayers, Silver and Gold.  The global fiat money system is collapsing before our very eyes under an avalanche of debt, and these criminal stooges honestly believe they can prevent the inevitable by suppressing the prices of Silver and Gold?  PITY THE FOOLS.

Their are two sides to every story, and Precious Metals writer Jeff Nielsen quite creatively explains in his essay below how if you were paying attention to the headlines "explaining" the recent 11 DAY rally in Gold, you would have seen this CRIMEX/Banking Cartel raid coming...and realized quickly that it would be an utter failure...,but it his observation that there can be NO BEARISH implications for Precious Metals once the debt ceiling debate is settled that Precious Metals Bulls should be alert too:

Written by Jeff Nielson
With respect to the U.S.’s debt-ceiling tango, the theatrics are even more absurd. As the world’s biggest deadbeat, with the world’s biggest structural deficits, the United States has two “choices”. It can raise its debt-ceiling substantially, or it can put a gun to its head and pull the trigger. You don’t have to be a “psychic” to figure out how this is going to end.

What is far, far more ridiculous however is that once Republicans and Democrats have finished their posturing for the cameras and actually announce a done-deal this will be proclaimed as somehow having “fixed” the U.S. economy. Back in the real world however, any “solution” will be no different than how an alcoholic “solves” his own “problem” when he finds the key to his liquor cabinet.

More debt (for the largest deadbeat the world has ever seen) means imminent bankruptcy just as surely as more booze for a hardcore alcoholic means an early grave. Even more absurd, authorizing more debt means B.S. Bernanke will immediately crank-up his printing press and churn-out Bernanke-bills at an even more reckless rate.

In short, any rational analysis of these economic parameters means that it is utterly impossible to construe any bearish implications for either gold or silver. Instead, the opposite is true. In keeping with their addictive behavior, any/all “solutions” of these debt-addicts always involve more debt. Since none of these deadbeats (on either side of the Atlantic) can actually finance more debt, each and every incremental increase in debt corresponds to an identical ratcheting-up of their reckless money-printing.

In other words, every “solution” proclaimed by these charlatans directly makes gold and silver more valuable.
This means that when we see gold get knocked back by $30/oz, and silver get pushed-down by roughly $2/oz in this scenario (both of which are now small moves in percentage terms) we again have conclusive proof of “manipulation”. The actions of U.S. and European officials have unequivocally made gold and silver more valuable – and yet the paper-pirates in New York have been able to push bullion prices lower.

The “last laugh” will always belong to the gold and silver bulls. With the banking cabal running out of plausible anti-gold/anti-silver propaganda just as quickly as they are running out of actual bullion, their capacity to manipulate the market through “jawboning” alone continues to diminish. Simultaneously, their leverage and vulnerability (on the short side) is exploding exponentially as their minimal reserves of bullion continue to dwindle.

It is almost comical now, these CRIMEX raids.  The desperation each raid now represents is actually profitable for the Precious Metals Bulls as each raid only increases the demand for the "physical" Precious Metals themselves.  The CRIMEX/Banking Cartel are literally shooting themselves in the foot with each raid they conjure up.

I said it before, and I will say it once more:

"August 2, 2011 is financial system D-day. Raise the debt ceiling, and the US Dollar implodes. Fail to raise the debt ceiling, and the US Dollar implodes. The countdown has begun.

It's The Debt, Stupid."

After the FAILED CRIMEX raid on July 1, Silver rose 10% over the following six trading days.  After the July 11 FAILED CRIMEX raid, Silver rose 17% over the following six trading days.  Six trading days from today takes us to the last trading day in July, and First Notice Day for August Gold Delivery.  Silver in Gold are on the launching paid, and taking on fuel as I type this...BUY THE DIPS!