Absent the [un]timely margin hikes in London, New York, and Shanghai...has anything [but the price] changed fundamentally for the Precious Metals with regards to their standing within the financial global financial system?
The quick response to that simple question is a loud, "NO!"
But everything has changed fundamentally for the Precious Metals. The World's financial system is worse off this Monday morning than it was a week ago. The fundamental reasons to OWN the Precious Metals is stronger today than it has ever been...and that is why the prices of the Precious Metals have been savaged over the past 72 hours.
The Gold and Silver markets had to be "flushed" ahead of the recognition by the global banking system that the system is broken and insolvent. A recapitalization of the banks is now being set in motion to prop them up ahead of their ultimate implosion.
From GATA alum Dave in Denver:
Here We Go - This Is Why They Wanted To Annihilate The Metals This Week
G20 sources: all efforts behind the scenes (by G20 members) are now going into recapitalising banks, preparing economies for default.
Zerohedge posted this. Here's the LINK
So it sounds like Greece will be allowed to default and the bigger news regarding gold/silver is that the ECB is prepared to print plenty of money of keep the banking system from collapsing. Sort of like what happened here in 2008. That's why the LBMA raised margins on OTC gold forwards by substantial margin. They wanted to "flush" the market ahead of this. Ultimately this is uber-bullish for the metals. Don't let them shake you out of your positions. An even better move would be to man-up and buy even more Monday and save room to add more if they take it lower. The European banks can ONLY be recapitalized in the same way they were "propped up" here in the US in 2008...by PRINTING MONEY.
CLEARLY, the harder the Precious Metal's prices are hit, the more bullish their prospects become going forward.
Gold Slides More Than Comex Margins as Investors Cover Losses
By Nicholas Larkin and Glenys Sim
“Gold is one of the few assets that remain in positive territory this year, in a sense it is one of the last assets standing, and because of this as investors head for cash they sell the assets that have performed,” Edel Tully, a London- based analyst at UBS AG, wrote today in a report. “While gold’s retracement was not really a surprise, the depth of its plunge certainly was.”
“A rising fear factor coupled with sinking confidence levels should be helping gold, but this isn’t happening because of overriding concerns about liquidity, European bank funding and margin calls amid a stronger U.S. dollar,” UBS’s Tully said. Physical demand and investor buying after recent declines may “point to a floor being nearby,” she said.
The decline in speculative positions “may mean that short- term longs are being cleaned out of the market,” said HSBC’s Steel. “This could leave bullion well-placed to trade higher when the current selling cycle winds down.”
If you think, or have been lead to believe, that Gold and Silver's plunge the last three trading days is because of a surge in the US Dollar, you need to get your facts straight. The US Dollar has been trading in a very tight range of less than a point since 12AM est Thursday September 22:
This entire blame for this recent "episode" in the Precious Metals lies at the feet our illustrious, and blatantly bankrupt, global bankers. Contrived margin hikes that scatter Precious Metals speculators because of margin calls on their positions can be pointed to as the cause of much of the recent crash in prices of the Precious Metals. However, the trigger that began the fall in prices that lead to the global metals exchanges raising margin requirements may lie at the feet of sovereign states desperate to raise cash:
What You Must Know about Gold & Silver Selloff
Eric King, KingWorldNews.com
With turbulence in the gold and silver markets, Michael Pento, of Pento Portfolio Strategies, explains for King World News readers globally why the metals plunged and what investors must know about the selloff, “There are two reasons why the gold market, and indeed the entire commodity sector, got stuffed last week. First off, the Counterfeiter in Chief, Ben Bernanke, managed to disappoint the gold market by deciding to sterilize the bond purchases made on the long end of the yield curve."
Michael Pento continues:
“By offsetting the purchases of short-term Treasuries with sales of shorter duration notes, Bernanke will not increase the supply of money or dilute the currency to a greater extent than he already has in performing ‘Operation Twist.’
But make no mistake, the global economy is faltering and QE III isn’t far off. However, the gold market was expecting the Fed to do more in the way of easing during this two-day meeting—like ceasing to pay interest on excess reserves....
“Therefore, in the short-term, there will be selling pressure on all commodities. Number two, and this is conjecture on my part at this juncture, but I believe sovereign states in Europe that are flirting with insolvency have resorted to dumping gold in the open market.
When under duress, these countries are forced to dump what they can, and there just isn’t any asset that has performed better in the last dozen years than gold and commodities.
But the good news here is that gold is moving from a very few, weak hands, to a diffused group of strong ownership. Ultimately, this will be beneficial for gold prices in the long-run and this recent selloff should be a welcomed opportunity for investors to accumulate a more substantial position.”
If central banks are selling their Gold to raise cash, can the state of the Global Financial System be more dire?
Hinde's Ben Davies tells King World News of central bank intervention against gold
Central banks are intervening in currency markets all over the place
Avoid counterparty risk as financial system topples, Turk tells King World News
Now the question must be asked? Will the margin increases of the global metals exchanges stop the slide in prices as even more metal moves from weak hands to strong hands, and those banks short the Precious Metals rush to cover at these aberrant prices?
Marc Faber: "Gold Is Quite Oversold. I Will Consider Buying Gold Over The Next Two Days"
From Zero Hedge
Anyone trading gold and silver most likely had a heartattack this morning. Of that subset, anyone who survived and traded with conviction made a killing, following an impressive surge in both metals, which saw silver soar from $26 all the way back to $30, after it was made clear that there was no behind the scenes liquidation of the metal but merely more piggybacked margin hikes this time out of China as was first reported by Zero Hedge. Another factor that helped was Marc Faber's appearance on CNBC earlier, who said that gold is now "quite oversold" and that he would be adding to the yellow metal in the "next two days." In retrospect, he should have been adding today to his existing holdings. However, since he already has 25% in gold, he is forgiven. Mutual funds which, however, have about 1% in gold, are not.
LISTEN UP PEOPLE! If you have often wished you, or know people that have wished they could, go back and buy Gold and Silver when they were cheap, NOW IS YOUR CHANCE! The fundamental reasons for owning the Precious Metals to protect your wealth from the coming TOTAL global financial meltdown have only improved in the last three trading days. You have been given a gift from our criminal bankers in the form of discount prices in the Precious Metals only dreamed about this year.
I myself purchased more metal on Friday afternoon fearful that there might not be any available to purchase by Monday morning as global Precious Metals investors rushed to take advantage of the shocking sale prices being offered on the REAL THING.
Sprott Money Temporarily Runs Out of Physical Silver
Eric King, KingWorldNews.com
Larisa Sprott, President of Sprott Money told KWN, “It’s been pretty wild, especially the last three or four days because of the price drop. People are trading in their paper money for gold and silver, but we are seeing more purchases of silver net. In fact the buying has been really skewed in favor of silver, there is tremendous demand.”
“We have completely run out of physical silver, so we are temporarily out of stock. You have to remember, Eric, that like Dubai, we only sell product that is on our shelves, that we have in stock. We do expect a shipment later today, which will allow us to restock and give us more product to sell.
Our clients are very savvy, sophisticated and when a price drop of this magnitude occurs, they step in and buy very aggressively. Right now there is dramatically increased volume and what we are seeing is buying across all spectrums in terms of the size of the orders.
To clarify, we may have some client buying a single tube of silver maples, while at the same time, another client is buying $5 million of 100 ounce silver bars or gold maple leafs. The bottom line here is the drawdown in price is creating a tremendous amount of demand.”
Once again, a contrived fall in prices does not encourage investors to dump their Precious Metals holdings. It only offers them an opportunity to buy more at lower prices, and further pressure the supply side of the Precious Metals markets. The crash in prices we are witnessing is all about getting the banks out from under their crushing naked short positions in these markets. If the banks really believe that actual physical metal is going to flood the markets on this price crash they will be sadly mistaken. If anything, their pathetic and desperate attempt to save themselves, and dissuade investors of the benefits of physical Precious Metals ownership, will only make their situation worse in the long run.
The global banking system is broken beyond repair. Stuffing the prices of Precious Metals is hardly the answer to their problems:
Five Banks Account For 96% Of The $250 Trillion In Outstanding US Derivative Exposure; Is Morgan Stanley Sitting On An FX Derivative Time Bomb?
From Zero Hedge
The latest quarterly report from the Office Of the Currency Comptroller is out and as usual it presents in a crisp, clear and very much glaring format the fact that the top 4 banks in the US now account for a massively disproportionate amount of the derivative risk in the financial system. Specifically, of the $250 trillion in gross notional amount of derivative contracts outstanding (consisting of Interest Rate, FX, Equity Contracts, Commodity and CDS) among the Top 25 commercial banks (a number that swells to $333 trillion when looking at the Top 25 Bank Holding Companies), a mere 5 banks (and really 4) account for 95.9% of all derivative exposure (HSBC replaced Wells as the Top 5th bank, which at $3.9 trillion in derivative exposure is a distant place from #4 Goldman with $47.7 trillion). The top 4 banks: JPM with $78.1 trillion in exposure, Citi with $56 trillion, Bank of America with $53 trillion and Goldman with $48 trillion, account for 94.4% of total exposure. As historically has been the case, the bulk of consolidated exposure is in Interest Rate swaps ($204.6 trillion), followed by FX ($26.5TR), CDS ($15.2 trillion), and Equity and Commodity with $1.6 and $1.4 trillion, respectively. And that's your definition of Too Big To Fail right there: the biggest banks are not only getting bigger, but their risk exposure is now at a new all time high and up $5.3 trillion from Q1 as they have to risk ever more in the derivatives market to generate that incremental penny of return.
These US banks derivative exposure in Precious Metals is peanuts compared to the nuclear device they sit upon in outstanding US derivative exposure. There isn't close to $250 TRILLION of US Dollars in the entire global money supply...the mess the global banking system finds itself in can ONLY be resolved by default...the global banks could not print $250 TRILLION if they tried...and it would appear that they are intent on trying...if so, the only direction for Precious Metals prices is skyward. The banks seem to believe that if the Precious Metals launch from a lower platform, they won't go as high as if they launched from their recent highs. That is ridiculous. The further down the precious Metals are pushed...the higher they ultimately will go. We should be standing in line thanking the knucklehead bankers for this "shocking" discount in Precious Metals prices today.
The US Dollar: an IOU Nothing
From Bullion Vault
Why the Dollar Gold Price "should probably be a lot higher than it is"...
THE WORLD will hit catastrophe when everybody realizes that the Dollar is an "IOU nothing", according to Casey Research Chairman Doug Casey.
The Gold Report: You've been talking about two ticking time bombs. One is the trillions of Dollars owned outside the US that investors could dump if they lose confidence. And the other is the trillions of Dollars within the US that were created to paper over the crisis that started in 2007. Are these really explosive circumstances that will bring catastrophic results? Or will it just result in a huge, but manageable, hangover?
Doug Casey: Both, but in sequence. One thing that's for sure is that although the epicenter of this crisis will be the US, it's going to have truly worldwide effects. The US Dollar is the de jure national currency of at least three other countries, and the de facto national currency of about 50 others. The main US export for many years has been paper Dollars; in exchange, the nice foreigners send us Mercedes cars, Sony electronics, cocaine, coffee — and about everything you see on Walmart shelves. It has been a one-way street for several decades, a free ride — but the party's over.
Nobody knows the numbers for sure, but foreign central banks, and individuals outside the US, own US Dollars to the tune of something like $6 or $7 trillion. Especially during the recent crisis, the Fed created trillions more Dollars to bail out the big financial institutions. At some point, foreign Dollar holders will start dumping them; they are starting to realize this is like a game of Old Maid, with the Dollar being the Old Maid card. I don't know what will set it off, but the markets are already very nervous about it. This nervousness is demonstrated in gold having hit $1,900 an ounce, copper at all-time highs, oil at $100 a barrel — the boom in commodity prices.
Some countries are already trying to get out of Dollars, but it could become a panic if the selling goes from a trickle to a flood. So, yes, it's a time bomb waiting to go off, or maybe a landmine waiting to be stepped on. If a theatre catches fire and one person runs out, soon everybody rushes toward the door and they all get trampled. It's a very serious situation.
And what will it take to set the collapse of the US Dollar in motion? Why a collapse in the US Treasury market, of course. And upon the detonation in US Treasuries, you are going to look back on today's outrageous sale prices in Gold and Silver and be ecstatic that you came forward in a market crash and lifted some Precious Metals from the hands of the weak into your bone crushing paws:
Precious Metals vs. U.S. Treasuries [MUST READ]
Written by Jeff Nielson
Today, thanks to the banksters flooding our markets (and economies) with more of their worthless paper than at any time in history, and thanks to the banksters rendering all of our governments insolvent with their scam-financing, both gold and silver are more undervalued today than they were ten years ago. While the fundamentals for gold and silver are (much) stronger today than ever before, the same cannot be said for their current “competition”: U.S. Treasuries.
U.S. Treasuries are worthless. U.S. Treasuries are the largest Ponzi-scheme (and “bubble”) in the history of humanity. We now have the Federal Reserve openly admitting to “buying” $100’s of billions per year of this worthless paper with their other worthless paper (U.S. dollars) merely to keep this bubble inflated. No one (outside of the Fed) knows how many $100’s of billions they have secretly bought (with their counterfeited money). As the infamous Jeffrey Christian of the CPM Group (and formerly of Goldman Sachs) observed during “The Great Gold Debate”, manipulation works best if the market doesn’t “see you coming.”
Manipulation of the Treasuries market only implies that Treasuries are grossly overvalued. It is the “fundamentals” for U.S. Treasuries which make it obvious that their actual value is near-zero. To begin with, the U.S. is a hopelessly insolvent debtor. The current banner-carrier for this argument is Professor Lawrence Kotlikoff. He calculates “total indebtedness” of the United States government at $211 trillion, or roughly fifteen times the $14 trillion fantasy-number which the government calls “the national debt”.
He calculates that the U.S. is significantly more insolvent than Greece (by roughly 20%) despite the fact that Greece’s government is currently being forced to pay more than ten times the interest rate on its debt as the U.S. pays on its own debts. As I’ve pointed out in my own previous work, Greece’s interest rates have been fraudulently manipulated to these usurious rates through the “economic terrorism” perpetrated by Wall Street in the credit default swap market.
That same “market” (i.e. Wall Street) has been recently asserting that the probability of Greece defaulting on its own debts is already at 98%. This puts the risk of a U.S. default at somewhere above 100%.
It is common knowledge, however, that the preferred approach of the U.S. government to avoid repaying its creditors is a “stealth default” – to “default” on its debts by repaying those debts with currency only worth a tiny fraction of its original value. In other words, if the U.S. government drives down the value of the U.S. dollar by 90% and then repays its creditors it will have cheated them out of 90% of the obligation owed to them, in “real dollars”.
By now, everyone should be able to connect the dots: “competitive devaluation” is “stealth default”. Our (insolvent) governments have now explicitly decided to cheat all of their creditors by repaying all of them with grossly diluted paper. Put another way, they have taken the “stealth” out of stealth default.
However, at least with the other governments who are in the process of cheating their bond-holders they are currently paying interest on these mountains of debt. The chumps holding U.S. Treasuries are not getting any interest, and are paying the highest prices in history for this worthless paper.
Buying Treasuries at the highest prices in history at a time when the explicit economic policy of the U.S. government is to drive down the actual value of those Treasuries is a form of behavior which would seem to provide conclusive proof that the buyers are not “of sound mind”. But that is not the whole “message” which the propaganda machine was sending during the latest ambush of gold and silver.
Media talking-heads were telling us that (supposedly) investors were “fleeing” gold and silver, and “rushing toward the safe haven of U.S. Treasuries”. They are rushing out of a “hard asset” which (as I just recounted) is grossly undervalued, and at a time when the official policy of all of our governments is to drive up the value of all such hard assets. They are (supposedly) rushing to buy the debts of the world’s biggest deadbeat-debtor, whose “total indebtedness” exceeds all the other debts of every other nation on Earth – combined. They are doing this at a time when the explicit economic policy of the U.S. government is to drive down the actual value of its own bonds.
Selling gold and silver and buying U.S. Treasuries at the highest prices in history? The legendary “Jack” (of “Jack and the Beanstalk” fame) got much better value when he traded the family cow for “magic beans”.
Recapitalizing the US banks in 2008 only put off their inevitable demise. As the insolvency of the global banking system has been been now recognized in Europe, it will come full circle and destroy the banks here in the USA once and for all. Is it any wonder then, that the prices of the Precious Metals had to be shattered ahead of this "event". The only unknown now, is "when" the banks will finally collapse globally, and stop the current fiat money system in it's tracks. The global banks and their henchmen at the global Precious Metals Exchanges in London, New York, and Shanghai have given everyone "one last opportunity" to protect themselves from the inevitable global default of money and debt.
Protect yourself now! The beginning of the end is now upon us.
The quick response to that simple question is a loud, "NO!"
But everything has changed fundamentally for the Precious Metals. The World's financial system is worse off this Monday morning than it was a week ago. The fundamental reasons to OWN the Precious Metals is stronger today than it has ever been...and that is why the prices of the Precious Metals have been savaged over the past 72 hours.
The Gold and Silver markets had to be "flushed" ahead of the recognition by the global banking system that the system is broken and insolvent. A recapitalization of the banks is now being set in motion to prop them up ahead of their ultimate implosion.
From GATA alum Dave in Denver:
Here We Go - This Is Why They Wanted To Annihilate The Metals This Week
G20 sources: all efforts behind the scenes (by G20 members) are now going into recapitalising banks, preparing economies for default.
Zerohedge posted this. Here's the LINK
So it sounds like Greece will be allowed to default and the bigger news regarding gold/silver is that the ECB is prepared to print plenty of money of keep the banking system from collapsing. Sort of like what happened here in 2008. That's why the LBMA raised margins on OTC gold forwards by substantial margin. They wanted to "flush" the market ahead of this. Ultimately this is uber-bullish for the metals. Don't let them shake you out of your positions. An even better move would be to man-up and buy even more Monday and save room to add more if they take it lower. The European banks can ONLY be recapitalized in the same way they were "propped up" here in the US in 2008...by PRINTING MONEY.
CLEARLY, the harder the Precious Metal's prices are hit, the more bullish their prospects become going forward.
Gold Slides More Than Comex Margins as Investors Cover Losses
By Nicholas Larkin and Glenys Sim
“Gold is one of the few assets that remain in positive territory this year, in a sense it is one of the last assets standing, and because of this as investors head for cash they sell the assets that have performed,” Edel Tully, a London- based analyst at UBS AG, wrote today in a report. “While gold’s retracement was not really a surprise, the depth of its plunge certainly was.”
“A rising fear factor coupled with sinking confidence levels should be helping gold, but this isn’t happening because of overriding concerns about liquidity, European bank funding and margin calls amid a stronger U.S. dollar,” UBS’s Tully said. Physical demand and investor buying after recent declines may “point to a floor being nearby,” she said.
The decline in speculative positions “may mean that short- term longs are being cleaned out of the market,” said HSBC’s Steel. “This could leave bullion well-placed to trade higher when the current selling cycle winds down.”
If you think, or have been lead to believe, that Gold and Silver's plunge the last three trading days is because of a surge in the US Dollar, you need to get your facts straight. The US Dollar has been trading in a very tight range of less than a point since 12AM est Thursday September 22:
What You Must Know about Gold & Silver Selloff
Eric King, KingWorldNews.com
With turbulence in the gold and silver markets, Michael Pento, of Pento Portfolio Strategies, explains for King World News readers globally why the metals plunged and what investors must know about the selloff, “There are two reasons why the gold market, and indeed the entire commodity sector, got stuffed last week. First off, the Counterfeiter in Chief, Ben Bernanke, managed to disappoint the gold market by deciding to sterilize the bond purchases made on the long end of the yield curve."
Michael Pento continues:
“By offsetting the purchases of short-term Treasuries with sales of shorter duration notes, Bernanke will not increase the supply of money or dilute the currency to a greater extent than he already has in performing ‘Operation Twist.’
But make no mistake, the global economy is faltering and QE III isn’t far off. However, the gold market was expecting the Fed to do more in the way of easing during this two-day meeting—like ceasing to pay interest on excess reserves....
“Therefore, in the short-term, there will be selling pressure on all commodities. Number two, and this is conjecture on my part at this juncture, but I believe sovereign states in Europe that are flirting with insolvency have resorted to dumping gold in the open market.
When under duress, these countries are forced to dump what they can, and there just isn’t any asset that has performed better in the last dozen years than gold and commodities.
But the good news here is that gold is moving from a very few, weak hands, to a diffused group of strong ownership. Ultimately, this will be beneficial for gold prices in the long-run and this recent selloff should be a welcomed opportunity for investors to accumulate a more substantial position.”
If central banks are selling their Gold to raise cash, can the state of the Global Financial System be more dire?
Hinde's Ben Davies tells King World News of central bank intervention against gold
Central banks are intervening in currency markets all over the place
Avoid counterparty risk as financial system topples, Turk tells King World News
Now the question must be asked? Will the margin increases of the global metals exchanges stop the slide in prices as even more metal moves from weak hands to strong hands, and those banks short the Precious Metals rush to cover at these aberrant prices?
Marc Faber: "Gold Is Quite Oversold. I Will Consider Buying Gold Over The Next Two Days"
From Zero Hedge
Anyone trading gold and silver most likely had a heartattack this morning. Of that subset, anyone who survived and traded with conviction made a killing, following an impressive surge in both metals, which saw silver soar from $26 all the way back to $30, after it was made clear that there was no behind the scenes liquidation of the metal but merely more piggybacked margin hikes this time out of China as was first reported by Zero Hedge. Another factor that helped was Marc Faber's appearance on CNBC earlier, who said that gold is now "quite oversold" and that he would be adding to the yellow metal in the "next two days." In retrospect, he should have been adding today to his existing holdings. However, since he already has 25% in gold, he is forgiven. Mutual funds which, however, have about 1% in gold, are not.
LISTEN UP PEOPLE! If you have often wished you, or know people that have wished they could, go back and buy Gold and Silver when they were cheap, NOW IS YOUR CHANCE! The fundamental reasons for owning the Precious Metals to protect your wealth from the coming TOTAL global financial meltdown have only improved in the last three trading days. You have been given a gift from our criminal bankers in the form of discount prices in the Precious Metals only dreamed about this year.
I myself purchased more metal on Friday afternoon fearful that there might not be any available to purchase by Monday morning as global Precious Metals investors rushed to take advantage of the shocking sale prices being offered on the REAL THING.
Sprott Money Temporarily Runs Out of Physical Silver
Eric King, KingWorldNews.com
Larisa Sprott, President of Sprott Money told KWN, “It’s been pretty wild, especially the last three or four days because of the price drop. People are trading in their paper money for gold and silver, but we are seeing more purchases of silver net. In fact the buying has been really skewed in favor of silver, there is tremendous demand.”
“We have completely run out of physical silver, so we are temporarily out of stock. You have to remember, Eric, that like Dubai, we only sell product that is on our shelves, that we have in stock. We do expect a shipment later today, which will allow us to restock and give us more product to sell.
Our clients are very savvy, sophisticated and when a price drop of this magnitude occurs, they step in and buy very aggressively. Right now there is dramatically increased volume and what we are seeing is buying across all spectrums in terms of the size of the orders.
To clarify, we may have some client buying a single tube of silver maples, while at the same time, another client is buying $5 million of 100 ounce silver bars or gold maple leafs. The bottom line here is the drawdown in price is creating a tremendous amount of demand.”
Once again, a contrived fall in prices does not encourage investors to dump their Precious Metals holdings. It only offers them an opportunity to buy more at lower prices, and further pressure the supply side of the Precious Metals markets. The crash in prices we are witnessing is all about getting the banks out from under their crushing naked short positions in these markets. If the banks really believe that actual physical metal is going to flood the markets on this price crash they will be sadly mistaken. If anything, their pathetic and desperate attempt to save themselves, and dissuade investors of the benefits of physical Precious Metals ownership, will only make their situation worse in the long run.
The global banking system is broken beyond repair. Stuffing the prices of Precious Metals is hardly the answer to their problems:
Five Banks Account For 96% Of The $250 Trillion In Outstanding US Derivative Exposure; Is Morgan Stanley Sitting On An FX Derivative Time Bomb?
From Zero Hedge
The latest quarterly report from the Office Of the Currency Comptroller is out and as usual it presents in a crisp, clear and very much glaring format the fact that the top 4 banks in the US now account for a massively disproportionate amount of the derivative risk in the financial system. Specifically, of the $250 trillion in gross notional amount of derivative contracts outstanding (consisting of Interest Rate, FX, Equity Contracts, Commodity and CDS) among the Top 25 commercial banks (a number that swells to $333 trillion when looking at the Top 25 Bank Holding Companies), a mere 5 banks (and really 4) account for 95.9% of all derivative exposure (HSBC replaced Wells as the Top 5th bank, which at $3.9 trillion in derivative exposure is a distant place from #4 Goldman with $47.7 trillion). The top 4 banks: JPM with $78.1 trillion in exposure, Citi with $56 trillion, Bank of America with $53 trillion and Goldman with $48 trillion, account for 94.4% of total exposure. As historically has been the case, the bulk of consolidated exposure is in Interest Rate swaps ($204.6 trillion), followed by FX ($26.5TR), CDS ($15.2 trillion), and Equity and Commodity with $1.6 and $1.4 trillion, respectively. And that's your definition of Too Big To Fail right there: the biggest banks are not only getting bigger, but their risk exposure is now at a new all time high and up $5.3 trillion from Q1 as they have to risk ever more in the derivatives market to generate that incremental penny of return.
These US banks derivative exposure in Precious Metals is peanuts compared to the nuclear device they sit upon in outstanding US derivative exposure. There isn't close to $250 TRILLION of US Dollars in the entire global money supply...the mess the global banking system finds itself in can ONLY be resolved by default...the global banks could not print $250 TRILLION if they tried...and it would appear that they are intent on trying...if so, the only direction for Precious Metals prices is skyward. The banks seem to believe that if the Precious Metals launch from a lower platform, they won't go as high as if they launched from their recent highs. That is ridiculous. The further down the precious Metals are pushed...the higher they ultimately will go. We should be standing in line thanking the knucklehead bankers for this "shocking" discount in Precious Metals prices today.
The US Dollar: an IOU Nothing
From Bullion Vault
Why the Dollar Gold Price "should probably be a lot higher than it is"...
THE WORLD will hit catastrophe when everybody realizes that the Dollar is an "IOU nothing", according to Casey Research Chairman Doug Casey.
The Gold Report: You've been talking about two ticking time bombs. One is the trillions of Dollars owned outside the US that investors could dump if they lose confidence. And the other is the trillions of Dollars within the US that were created to paper over the crisis that started in 2007. Are these really explosive circumstances that will bring catastrophic results? Or will it just result in a huge, but manageable, hangover?
Doug Casey: Both, but in sequence. One thing that's for sure is that although the epicenter of this crisis will be the US, it's going to have truly worldwide effects. The US Dollar is the de jure national currency of at least three other countries, and the de facto national currency of about 50 others. The main US export for many years has been paper Dollars; in exchange, the nice foreigners send us Mercedes cars, Sony electronics, cocaine, coffee — and about everything you see on Walmart shelves. It has been a one-way street for several decades, a free ride — but the party's over.
Nobody knows the numbers for sure, but foreign central banks, and individuals outside the US, own US Dollars to the tune of something like $6 or $7 trillion. Especially during the recent crisis, the Fed created trillions more Dollars to bail out the big financial institutions. At some point, foreign Dollar holders will start dumping them; they are starting to realize this is like a game of Old Maid, with the Dollar being the Old Maid card. I don't know what will set it off, but the markets are already very nervous about it. This nervousness is demonstrated in gold having hit $1,900 an ounce, copper at all-time highs, oil at $100 a barrel — the boom in commodity prices.
Some countries are already trying to get out of Dollars, but it could become a panic if the selling goes from a trickle to a flood. So, yes, it's a time bomb waiting to go off, or maybe a landmine waiting to be stepped on. If a theatre catches fire and one person runs out, soon everybody rushes toward the door and they all get trampled. It's a very serious situation.
And what will it take to set the collapse of the US Dollar in motion? Why a collapse in the US Treasury market, of course. And upon the detonation in US Treasuries, you are going to look back on today's outrageous sale prices in Gold and Silver and be ecstatic that you came forward in a market crash and lifted some Precious Metals from the hands of the weak into your bone crushing paws:
Precious Metals vs. U.S. Treasuries [MUST READ]
Written by Jeff Nielson
Today, thanks to the banksters flooding our markets (and economies) with more of their worthless paper than at any time in history, and thanks to the banksters rendering all of our governments insolvent with their scam-financing, both gold and silver are more undervalued today than they were ten years ago. While the fundamentals for gold and silver are (much) stronger today than ever before, the same cannot be said for their current “competition”: U.S. Treasuries.
U.S. Treasuries are worthless. U.S. Treasuries are the largest Ponzi-scheme (and “bubble”) in the history of humanity. We now have the Federal Reserve openly admitting to “buying” $100’s of billions per year of this worthless paper with their other worthless paper (U.S. dollars) merely to keep this bubble inflated. No one (outside of the Fed) knows how many $100’s of billions they have secretly bought (with their counterfeited money). As the infamous Jeffrey Christian of the CPM Group (and formerly of Goldman Sachs) observed during “The Great Gold Debate”, manipulation works best if the market doesn’t “see you coming.”
Manipulation of the Treasuries market only implies that Treasuries are grossly overvalued. It is the “fundamentals” for U.S. Treasuries which make it obvious that their actual value is near-zero. To begin with, the U.S. is a hopelessly insolvent debtor. The current banner-carrier for this argument is Professor Lawrence Kotlikoff. He calculates “total indebtedness” of the United States government at $211 trillion, or roughly fifteen times the $14 trillion fantasy-number which the government calls “the national debt”.
He calculates that the U.S. is significantly more insolvent than Greece (by roughly 20%) despite the fact that Greece’s government is currently being forced to pay more than ten times the interest rate on its debt as the U.S. pays on its own debts. As I’ve pointed out in my own previous work, Greece’s interest rates have been fraudulently manipulated to these usurious rates through the “economic terrorism” perpetrated by Wall Street in the credit default swap market.
That same “market” (i.e. Wall Street) has been recently asserting that the probability of Greece defaulting on its own debts is already at 98%. This puts the risk of a U.S. default at somewhere above 100%.
It is common knowledge, however, that the preferred approach of the U.S. government to avoid repaying its creditors is a “stealth default” – to “default” on its debts by repaying those debts with currency only worth a tiny fraction of its original value. In other words, if the U.S. government drives down the value of the U.S. dollar by 90% and then repays its creditors it will have cheated them out of 90% of the obligation owed to them, in “real dollars”.
By now, everyone should be able to connect the dots: “competitive devaluation” is “stealth default”. Our (insolvent) governments have now explicitly decided to cheat all of their creditors by repaying all of them with grossly diluted paper. Put another way, they have taken the “stealth” out of stealth default.
However, at least with the other governments who are in the process of cheating their bond-holders they are currently paying interest on these mountains of debt. The chumps holding U.S. Treasuries are not getting any interest, and are paying the highest prices in history for this worthless paper.
Buying Treasuries at the highest prices in history at a time when the explicit economic policy of the U.S. government is to drive down the actual value of those Treasuries is a form of behavior which would seem to provide conclusive proof that the buyers are not “of sound mind”. But that is not the whole “message” which the propaganda machine was sending during the latest ambush of gold and silver.
Media talking-heads were telling us that (supposedly) investors were “fleeing” gold and silver, and “rushing toward the safe haven of U.S. Treasuries”. They are rushing out of a “hard asset” which (as I just recounted) is grossly undervalued, and at a time when the official policy of all of our governments is to drive up the value of all such hard assets. They are (supposedly) rushing to buy the debts of the world’s biggest deadbeat-debtor, whose “total indebtedness” exceeds all the other debts of every other nation on Earth – combined. They are doing this at a time when the explicit economic policy of the U.S. government is to drive down the actual value of its own bonds.
Selling gold and silver and buying U.S. Treasuries at the highest prices in history? The legendary “Jack” (of “Jack and the Beanstalk” fame) got much better value when he traded the family cow for “magic beans”.
Recapitalizing the US banks in 2008 only put off their inevitable demise. As the insolvency of the global banking system has been been now recognized in Europe, it will come full circle and destroy the banks here in the USA once and for all. Is it any wonder then, that the prices of the Precious Metals had to be shattered ahead of this "event". The only unknown now, is "when" the banks will finally collapse globally, and stop the current fiat money system in it's tracks. The global banks and their henchmen at the global Precious Metals Exchanges in London, New York, and Shanghai have given everyone "one last opportunity" to protect themselves from the inevitable global default of money and debt.
Protect yourself now! The beginning of the end is now upon us.
everybody ought to be in a location to connect the dots: “competitive devaluation” is “stealth default”
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