HOPIUM Fuels Euro Squeeze as US Dollar Crashes

Markets cheer euro deal but questions remain
By Luke Baker and Julien Toyer
After a summit in Brussels, governments announced an agreement under which private banks and insurers would accept 50 percent losses on their Greek debt holdings in the latest bid to reduce Athens' massive debt load to sustainable levels.

Reached after more than eight hours of hard-nosed negotiations between bankers, heads of state and the IMF, the deal also foresees a recapitalization of hard-hit European banks and a leveraging of the bloc's rescue fund, the European Financial Stability Facility (EFSF), to give it firepower of 1.0 trillion euros ($1.4 trillion).

But economists noted that key aspects of the deal, including the mechanics of boosting the EFSF and providing Greek debt relief, would take weeks to pin down, meaning the plan could still unravel over the details.

"There is plenty of room to doubt whether each of the key aspects of the package will deliver within its own space," said Malcolm Barr, an economist at J.P. Morgan. "The hope of EU policy makers is that the whole will be perceived as more than the sum of its rather questionable parts."

Three months ago, euro zone leaders unveiled another agreement that was meant to draw a line under the debt woes that threaten to tear apart the 12-year old currency bloc. But they realized within weeks that it was inadequate given the depth of Greece's economic problems and the vulnerability of their banks.

The new deal aims to address these holes.

The punch bowl at this party has been spiked with an overdose of Hopium.

"The hope of EU policy makers is that the whole will be perceived as more than the sum of its rather questionable parts."

HOPIUM.

EU policy makers continue to "hope" they can fix their gapping soveriegn debt wounds with a couple of gauze pads and some surgical tape.

Gold is being pressured this morning because of this "hope" that EU has come to a decisive conclusion to it's debt woes.  It has not.  The US Dollar is getting clubbed this morning as the squeeze on the Euro shorts tightens...and Gold is down?  Why of course it is.  Who needs Gold if all the debt problems in Europe have been fixed with Hopium?

The commodities complex is ALL UP, but Gold is Down on a falling US Dollar.  Hey that makes sense to me...need anymore proof the Gold market is rigged to support western government "intentions"? 

"This EU plan is genius, see...even the Gold market agrees!"

Yeah, right...

A $1.4 TRILLION rescue fund, the EFSF, is no small amount of money.  In fact it is a gargantuan sum that is highly inflationary.  This is hardly a negative event for Gold, and an even less positive event for Europe and the World.

Consumers, Businesses Pump up U.S. Q3 Growth- AP

U.S. economic growth increased at its fastest in a year in the third quarter as consumers and businesses set aside fears about the recovery and stepped up spending, creating momentum that could carry into the final three months of the year.

Consumer confidence fell in October to the lowest since March 2009.  How can this GDP number be reported with claims that consumers have "set aside fears about the recovery" when clearly that is NOT the case.

Bloomberg Comfort Index Shows Economic Expectations Lowest Since March 2009.


GDP was reportedly up 2.5% because of consumer spending.  Is there any mention that the bulk of consumer spending this summer was on INCREASED food and energy prices?  Hello!  Any GDP that is reported is merely a reflection of the inflation that is mushrooming in our economy despite the denials of its existence by the government.

Recent inflation statistics show that "according to the government" the CPI is running around 3.9%.  If inflation is at 3.9% and GDP is at 2.5% the REAL growth in the economy is at NEGATIVE 1.4%.  There is NO "real" economic growth in the USA.  The only growth that exists is the result of debt fueled inflation.

Shadowstats.com has inflation running at 11.5%...that would put "real" growth at NEGATIVE 9%.

US Government CPI data that measures only "core inflation"  [inflation minus food and energy] is running at 2% [up from 0.6% a year ago].  2.5% GDP is hardly exemplary growth when considered even against the messaged "core inflation" number.

I hardly see how this GDP number creates "momentum" going into the fourth quater as claimed above.

Q3 Advance GDP Prints At 2.5% In Line With Expectations; 100% Debt-To-GDP Threshold Postponed By 45 Days



Inflation Peaking in U.S. With Most Prices Tumbling: Commodities
By Whitney McFerron
Oct. 25 (Bloomberg) -- The biggest rout in commodities since the global recession may be a sign that the fastest U.S. inflation in three years is peaking.


The Standard & Poor’s GSCI Index of 24 commodities entered a bear market last month after sliding more than 20 percent from a two-year high in April, on concern that slower growth will cut demand. A slump in the gauge from a 2008 record preceded a drop in inflation, while a 2009 rebound caused the consumer price index to climb. Raw materials fell 12 percent in September as the CPI rose 3.9 percent from the same month a year earlier, the most since 2008.


“There is a sense that headline inflation is receding,” said Stephen Stanley, the chief economist at Pierpont Securities LLC, a government-bond broker in Stamford, Connecticut. “Things have been a little more tame the last few months than they were earlier in the year, when you had this relentless push higher, in energy prices especially.”

Is Bumbling Ben Bernanke's claim that high commodity prices were only "transitory" proving prophetic?  Yes, if he were hoping for lowing commodity prices so that he could unleash the much needed [and anticipated] QE3.  Funny how commodity prices fell after Bumbling Ben so confidently repeated that they would, isn't it?  But have they really fallen?  Has Ms. McFerron looked at the CRB Index recently?

Commodity prices have risen 10% since the first of October.  But headlines like Ms. McFerron writes are just what Benny and the Inflationistas want to see so that they may comfortably announce a new round of QE to again try and jumpstart our stagnant economy, AND bailout Europe.

Gold has sprung to life mid-morning, and caught up to the rest of the commodity sector surging on the falling US Dollar.  Silver has been stout all day and has cleared the $34 level with some authority.

Silver has cleared resistance at $34.68.  Next line of resistance at $36.76...A retest of the major breakout at $32.62 can not be ruled out in this perpetually rigged market.

Gold has cleared resistance at $1722.  Next line of resistance at $1766...A retest of the major breakout at $1677 can not be ruled as these CRIMEX crooks will do anything and everything to try and take your Gold from you.

The world's monetary and financial system is flat assed broke!
From Bill Holder for GATA on Oct. 25
They can't see it?

To all; as the title implies, I just don't understand how ANYONE "can't see it". "It" being the most blatant and obvious fact that the world's monetary and financial system is flat assed broke! Europe is absolute toast, fair value on Greek bonds is less than 50% of par value and everyone knows it. Their banks are insolvent even without any haircut from Greek holdings and everyone knows this. Italy, Portugal and Spain are all beyond fiscal sanity or repair and this also passes as common knowledge. The real estate markets are deflating across Europe (and the entire globe) after previously being blown to huge overvaluation levels with the help (prodding) of European banks and this is also widely known. The European Central Bank does not have enough money, muscle, options (or even competent leaders it seems) to even flatten out the path much less pull out of it's nosedive and even mainstream media is reporting on this. If you add these "well knowns" together then you can logically make the leap that the Euro currency is done, it's life ended and will be replaced.
Then you "cross the pond" to the U.S.A. and guess what? Same thing! The banks are insolvent if they actually marked assets to market, everyone knows this.

Municipalities and States are fiscal beggars on their way to bankruptcy courts and this is already widely known and visible in the last couple of weeks with the first actual filings. Next you turn your eyes to Uncle Sam and his finances, yep another deadbeat here and even the "hometeam" rating's services have taken notice of this. You could do a poll from any inner city to remote corner of the country and EVERYONE knows deep down that the U.S. is financially (and morally) broke beyond any repair. EVERYONE knowa that EVERYTHING is broke, busted and insolvent!

So what is my point? My point is this, THIS is how every financial panic in all of history has happened. THIS is how the children's tale of "The King with no clothes" was penned. So if everyone knows that everything is broke then why do hear on CNBC et al that "we can work our way through this and muddle along"? Because as Jack Nicholson said in A Few Good Men, "you can't handle the truth!". This has to be it. I cannot think of anything else because to me it has been MORE THAN obvious for quite some time. I have heard plumbers, farmers, bankers, real estate agents, city workers, you name it, tell me that "the government is broke" yet when I ask "what are you doing about it?", they say, Ï have my money in an FDIC insured bank account". Yes, some are now getting around to buying some physical Gold and Silver but mostly because "they are going up". The point is this, people "know" but they just can't make the leap to acting on what they know.

I believe that this phenomenon along with "you can't handle the truth" is a function of very long term brainwashing and "false education", it must be. Using ANY logic at all would lead you to "pull" as much of your investable assets OUT of the system. "Out" meaning out and away from the obvious damage that the broken fiat system will inflict. "OUT" meaning into physical metals and assets, OUT meaning into the companies that produce these physical metals and assets. To me, it is so, so sad to see people who have worked, lived and saved their entire lives within this fiat system like "good little boys and girls", about to get completely wiped out. When I say "wiped out", I mean penniless!

Think about it, everything, and I do mean EVERYTHING within the current fiat, paper, fraudulent system is going to be valued at what it is truly worth...ZERO. If you can wrap your head around this (admit it to yourself), you can act accordingly. The day is coming when EVERYTHING "paper" is going to stop. Banks will not open, credit cards not function, (I believe physical Dollars will actually spend for anywhere from 2-10 days until they too become unacceptable) and the entire system will sieze up and into a barter society until a NEW and "acceptable" (from a confidence standpoint) is issued and circulated.

We are very, very close as there are now calls for a new "World Central Bank". This has been floated in recent days by none other that The Vatican. I do not want to get into religion here, I bring this up because there is very credible evidence that The Vatican accumulated massive amounts of Gold during and especially toward the end of WWII. It is possible that they are actually the largest holders of Gold in the world. I mention this because any new currency MUST have some tie to Gold and the limited Gold that is above ground MUST be revalued higher as there is not enough at current prices to support a 7 Billion person global economy...but I digressed didn't I? Long story short... how can anyone not see what is about to happen? The whole fiat episode is like your crazy Aunt in the basement, everyone knows she is there but no one is willing to talk about it. Those who do are branded as crazy and no one wants to believe it anyway. Regards, Bill H. P.S. maybe there are a few more investors who "do see it", Gold is up nearly 3% today and thus violating it's decade+ long 2% collar!

You can read more from Bill and the folks at GATA here: http://www.lemetropolecafe.com/ .  And I encourage you to do so.

Emotions In Motion - Western Banks Face Their Fear Of Failure

“The American Republic will endure, until politicians realize they can bribe the people with their own money.”
― Alexis de Tocqueville

It's good to be back!  If you missed my market musings, thank you.  It was a pure joy to get away from these crooked markets.  Obviously I didn't miss anything.  Europe is still in denial, Gold and Silver are still wearing choker chains, and the Occupy Wall Street protesters continue barking up the wrong tree.

Ten days away from these farcial financial markets has given me a new perspective on them: Emotions influence the markets more than fundamentals do today.  And the emotion of the day is FEAR.  The fear of failure.

FEAR NOT if your are tuned into the Gold and Silver markets.  Despite the CRIMEX games we have been forced to endure the past three months, these markets are poised to move higher still, and mover higher than any of us can imagine.

In fact, as I type this post this morning, Gold has broken from it's shackles is a huge way and it's little brother Silver is along for the ride.

Gold is up $30 and 2% on the day...the CRIMEX crooks go on red alert whenever Gold is up 2%.  Silver is up $0.50 and above key resistance at $32.  A fast and furious move in the Precious Metals this morning.  What brought on this explosion in prices?

The time line [courtesy of ZeroHedge]:

Is The Euro Summit Already A Failure Following An Early EcoFin Meeting Cancellation? -08:45

No Housing Bottom As Case-Shiller Declines For 4th Consecutive Month; Misses YoY Expectations -09:30

Consumer Confidence Plunges To 39.8 From 45.4 On Expectations Of A Bump; Lowest Since March 2009 - 10:08


FT Reports Italian Government On Brink Of Collapse - 10:31

Gold broke out at 10:08AM with a break of the overnight cartel induced down trend at $1657. 

When price cleared last nights cartel double stop at $1663, Gold exploded. 

Silver at this point is tagging along for the ride.  A close today above $32 will give Silver Bulls something to smile about, but Silver must close above $32.62 to pressure the foolish shorts in the Silver arena.

Silver futures data most bullish in 8 years, Arensberg says at GGR
Gene Arensberg of the Got Gold Report reports tonight that silver futures market data is the most bullish it has been in eight years, since silver was priced at about $4.40 per ounce. That is, the large commercial shorts have dramatically reduced their positions.

Long wait for silver delivery in manipulated market, trader tells King World News 
Silver supplies are tight, there are long waits for delivery, and market participants increasingly realize that the silver futures market is manipulated and has little bearing on the price of real metal, the King World News London trader source reports today.

Fed manipulates with propaganda, dollar is at risk, Rickards tells King World News
Geopolitical analyst James G. Rickards tells King World News that the Federal Reserve increasingly is trying to manipulate markets with mere propaganda and that the United States risks the collapse of the dollar if it doesn't drastically change its fiscal, monetary, and tax policies.

Preemptive Strike Against Precious Metals Nears End
Written by Jeff Nielson
The overriding principle here is a very simple one: the lower prices go in the short term, the higher they will go in the long term. Period. The reason the banksters have tried to scare investors “witless” is precisely so that they will forget that fundamental principal.

Given that the extreme move downward guarantees (at least) as extreme a move upward in these markets, this begs the question: why have the banksters (and our governments) colluded in an extreme but ultimately futile endeavour at the present time?

The answer is staring us in the face, now merely days away: another massive infusion of Western money-printing – into the ocean of Western banker-paper which has already flooded markets. Most likely this will be an even larger single burst of printing-press activity than what took place immediately following the Crash of ’08.

This morning's headlines ahead of Golds breakout support Jeff's observation above.  The Western banks have hit the wall at the end of the road...if they hope to kick their can over that wall, they are going to have to stand it on a pile of money as high as the wall.  QE to infinity is about to be unleashed.  The fear of failure for the fiat money system we now endure is peaking.  The only option left for the Western Central Banks is to print, print, print...

I love the smell of new money in the morning.

Ignore the CRIMEX...It Is A Lie, ...A Cornered Rat, ...Soon To Be Irrelevant

Please excuse my recent absence...I have been on my Fall Vacation.

Suffice it to say there is little to comment on...other than the obvious:  The Gold and Silver markets are a complete JOKE.  They are rigged beyond any simple explanation.  It is IMPERATIVE that our crooked bullion bankers and their masters at the US Federal Reserve not allow Gold and Silver to expose the truth about the collapsing global banking system.

In today's world of financial travesty, with regards to Gold and Silver, ...black is white and white is black.  The more financial news fundamentally supports the prices of Gold and Silver, the more their prices rise, the more their price rises must be disrupted.

I have grown weary of the games the bankers are playing with paper representations of Gold and Silver.  I have purposely chosen to ignore them and, like the Asians, have chosen to simply accumulate PHYSICAL metal as sales prices present themselves.

Any effort to trade this pathetic example of a free market is not only foolish and stupid, it aids and abets the enemy. 

F*CK THE CRIMEX! 

If you have been patiently waiting for the CFTC to pass "position limit" rules to end this phony paper manipulation of the Gold and Silver markets...get comfortable, NOTHING will be changing with regards to position limits anytime soon:

Its All in the Fine Print: CFTC Ruling Gives Exemptions for Prior Positions Established in Good Faith, Final Position Limits Won't Be Determined for 12 MONTHS!
Before everyone gets too excited over today's 3-2 CFTC vote in favor of position limits in commodities, we need to examine WHEN the shorts will be forced to comply with the new rules, the size of the new position limits implemented, as well as what loopholes might be available to the cartel in order to continue business as usual.
Those who have been skeptical of the CFTC should enjoy this as we examine the fine print of today's CFTC position limits regulations.

Exemptions to be given for prior positions without describing how or who qualifies for exemptions: Check.
No defined date for required compliance to short positions: Check. (60 days from the time the term "swap" is defined)
No defined position limits to allow easy identification of whether an entity is in excess of said limits: and CheckNon-spot month position limits will be implemented AFTER ONE YEAR OF OPEN INTEREST DATA!?! Nice work guys!

So what are your thoughts Blythe, sure not as bad as that could have gone, huh?

Establishment of speculative limits on Referenced Contracts will occur in two phases:

o Spot-month position limits. Spot-month limits will be effective sixty days after the term "swap" is further defined under the Dodd-Frank Act. The limits adopted at that time will be based on the spot-month position limit levels currently in place at DCMs. Thereafter, the spot-month limits will be adjusted biennially for agricultural contracts and annually for energy and metal contracts. These subsequent limits will be based on the Commission’s determination of deliverable supply (developed in consultation with DCMs).

o Non-spot-month position limits (i.e., limits applied to positions in all contract months combined or in a single contract month). For the nine "legacy" agricultural Referenced Contracts that currently are subject to Commission administered limits, the new non-spot-month limits will go into effect sixty days after the term "swap" is further defined under the Dodd-Frank Act. These limits will be set equal to the levels described in the final rulemaking. For all other Referenced Contracts (that currently are not subject to Commission administered limits), the limits will be made effective by Commission order after the Commission has received one year of open interest data on physical commodity cleared and uncleared swaps under the swaps large trader reporting rule. The non-spot-month limits will be adjusted biennially based on Referenced Contract open interest.

Spot-month position limit levels will be set generally at 25% of estimated deliverable supply. These spot-month limits will be applied separately for physical-delivery Referenced Contracts and cash-settled Referenced Contracts in the same commodity.

Non-spot-month position limits (i.e., limits applied to positions in all contract months combined or in a single contract month) will be set using the 10/2.5 percent formula: 10 percent of the contract’s first 25,000 of open interest and 2.5 percent thereafter. These limits will be reset biennially based on two years open interest data.

Open interest used in determining non-spot-month position limits will be the sum of futures open interest, cleared swaps open interest, and uncleared swaps open interest.

Exemptions for bona fide hedging transactions based on the Dodd-Frank Act’s new requirements for such transactions. These exemptions have been broadened to include certain anticipated merchandising transactions, royalties, and service contracts in the final rulemaking to reflect concerns by commercial firms.

Exemptions for positions that are established in good faith prior to the effective date of the initial limits established by the regulations.
Establishment of account aggregation standards consistent with the Commission’s current position limits aggregation policy, including the Commission’s long-standing independent account controller exemption.

A position visibility reporting regime to assist the Commission in its surveillance program.

Acceptable practices for DCMs and swap execution facilities for setting position limits for the 28 Referenced Contracts, as well as position limits or accountability rules in all other listed contracts, including excluded commodities.

Full CFTC Decision can be found here:

This is another example of abject failure by the CFTC to protect the US investing public from the crooked US banking system. Oh, I'm sorry...the CFTC is working with the banks to screw the public. Senator Bernie Sanders seems to believe so:

Senator Bernie Sanders to the CFTC: Exemptions to Position Limits Are Unacceptable
It is my understanding that your current proposal contains major loopholes to allow Goldman Sachs, Morgan Stanley, and other major financial institutions to receive bona-fide hedging exemptions so that they would not have to abide by the positions limit rule.

This is simply unacceptable and has got to change...

It is my understanding that under your current proposal, aggregate position limits would not go into effect until mid to late 2013 at the earliest to allow the CFTC to collect more data on the over the counter derivatives market.

Paper raids on metals just drive them east faster, Embry tells King World News
“We just had the PPI released today at .8%, that translates to roughly 10% inflation annually. This was a bit of a surprise because the mantra from the powers that be is that inflation is under control and if anything it’s moderating. The fact that gold was down so much in the wake of that release just shows the degree that they kick the gold market around in a counter-intuitive sense.

So much of this volatility has been created by this ridiculous paper trading on COMEX, I mean each time that this thing gets smashed, the premium on physical rises. So I think we are getting real close to this thing taking off.

You can only take a credit cycle so far. Once you reach the point where you can’t create credit productively you’ve got to stop. They (central planners) apparently have no intention of stopping. They seem to think that we can bail ourselves out by adding even more debt to a situation that is created by excessive debt that’s not serviceable. I just don’t think that’s going to work....

“What will happen if they continue to go down this road, which I believe they will, is we will head towards some form of hyperinflation. That is worse than a depression for the simple reason that it’s so corrosive to a society.

I mean a depression is horrible, but the fact is that 75% of the people are still working and at least there’s some sort of structure to the system. America made it through the depression in the 30’s, Zimbabwe is having a little more trouble coming through their hyperinflation.

The average German person [during the hyperinflation], he lost everything. In a depression you don’t lose everything. A certain segment of society does, but that’s the price that has to be paid for the excesses that went before.

The founder of Austrian Economics, Ludwig von Mises said, ‘You can either take the pain now and get it over with and start it up again or you can continue to kick the can down the road and what will result is a complete destruction of the currency system.’

I think this is a tragedy unfolding for us Westerners. I’m a Westerner, I grew up in North America and I love North America and what I see happening is tragic. The vast majority of our gold, which is real wealth, is going to be transported to the East before this is over.
These continued raids, these paper raids on gold that knock the price down, it just makes it that much easier for the Chinese to buy gold at a bargain price and they are doing it.”

From Ted Butler on the silver raid these past 2 days:


(courtesy ted Butler/Ed Steer)

I decided to steal another paragraph from silver analyst Ted Butler's weekly commentary on Saturday.


"Most disturbing of all of this deliberate day to day manhandling of the silver price, is that it is occurring under the constant watch of the regulators, both the criminal enterprise also known as the CME Group and the federal watchdog, the CFTC. Only they seem to be oblivious to what many can see with their own eyes. The regulators’ failure to perform their most basic mission should not, however, dissuade investors from owning silver. There has been a consistent effort by the commercials for more than a decade or two to discourage outside investors from buying silver. Despite this discouragement, owning silver has been among the very best of investments to own. Instead of fretting about the rotten daily price action, focus on why anyone would go to such lengths to make any investment look bad. The only plausible answer is because the commercials don’t want you to buy silver so that they can buy it in your place. That has been the long-term message from COT data. I wish we could snap our fingers and cause JPMorgan and the CME to cease and desist from their manipulative activities, but the most effective remedy is to do the opposite of what they intend you to do. Look to the real facts surrounding silver and not to the false-flag agenda of the crooked COMEX commercials."

Ignore the CRIMEX!!!  Buy physical Gold and Silver, buy it now, buy it before it all disappears to Asia.

And now...back to my vacation.  If anything, I urge everyone to take a vacation from the CRIMEX...

...and we wonder why Gold and Silver are down

The U.S. dollar index erased early gains today and ended slightly lower as the euro reversed early losses and ended higher on easing tensions over European banks.

...and Gold and Silver are BOTH lower?

S&P downgrades Spain's debt rating on weak economy- AP

...and Gold and Silver are BOTH lower?

Foreigners Dump $74 Billion In Treasurys In 6 Consecutive Weeks: Biggest Sequential Outflow In History- Zero Hedge

...and Gold and Silver are BOTH lower?

Fitch may downgrade BofA, Morgan Stanley, Goldman- AP

...and Gold and Silver are BOTH lower?

For how much longer must we endure this bullshit?  The barometer of TRUTH must be set free!

Key regulator calls for limits on speculation in commodities markets

Exclusive: CFTC has votes to pass position limits

CFTC May Finish Curbs on Speculation Oct. 18, Gensler Says

SPECIAL REPORT: Position Limit Scenarios
By Bix Weir
The new Bank Participation Report for September has been posted and it looks like the top 3 or less US Banks that had offside silver short positions are closing in on being under the proposed position limit law just in the nick of time!

Here's the numbers

9/6/2011 = 23,859 net short

10/6/2011 = 14,388 net short.

http://www.cftc.gov/MarketReports/BankParticipationReports/index.htm

Basically, the top 3 or less banks were able to cover 9,471 short contracts by orchestrating the latest silver slam from $42/oz down near $28/oz. Many suspect the majority of this short position resides at JP Morgan. That may be but if this is split evenly between 3 banks they are now under 5,000 contracts each or quickly nearing the proposed position limit formula of around 4,500 contracts at the moment. The timing of this short position being congruent with the expected position limit proves beyond a doubt that the many delays in implementation of this rule were orchestrated to give the banksters time to cover.

JP Morgan Covered 36 Million Ounces of Naked Silver Shorts Since Sept 6th
From SilverDoctors
We have speculated previously that JP Morgan was attempting to extricate itself from its 120 Million ounce naked short silver position during silver's most recent sell-off.
The CFTC's October Bank Participation Report seems to substantiate this fact.

On September 6th, 4 large US banks held 24,584 short silver contracts, the equivalent of a 122,920,000 ounce short silver position.
The 4 large US banks' silver shorts had grown every month since silver's May smash-down, during which the same 4 banks had massively covered into the take-down and reduced their short position to 20,613 contracts.
The latest CFTC Bank Participation Report for October indicates that these same 4 large US banks (chiefly JP Morgan and HSBC) covered 7,177 silver shorts or 35,885,500 ounces during the September silver smash-down!
This means that effectively, JP Morgan and the other 3 major US banks (mostly JP Morgan) have reduced their naked silver shorts by approximately 29% during the latest PAPER FUTURES take-down.
At 17,407 contracts, the naked short COMEX futures position has now been reduced to 87,035,000 ounces- the smallest short position JP Morgan has held since it acquired Bear Stearns' silver shorts in 2008. While this leaves JP Morgan and the other shorts in a much better position than several weeks ago when they held over 122 million ounces short, obviously this is still nowhere near a respectable cap should the CFTC ever actually implement position limits mandated by the Frank-Dodd act.

...and we wonder why Gold and Silver are down...IT'S OBVIOUS WHY!!!!!

The US Federal Reserve Is A Complete Failure Per Their "Mandate"

Federal Reserve Mandate: Conduct the nation’s monetary policy by influencing money and credit conditions in the economy in pursuit of full employment and stable prices.

Every picture tells a story...

Debasing the currency of the USA does NOT promote "stable prices".  Prices rise as the value of the US Dollar falls:

Full employment through the debasement of the currency?  Hardly:

The United States Congress created the Federal Reserve with the Federal Reserve Act of 1913.  Ultimately, the US Congress is responsible for the Federal Reserve...and it's actions. 

Failure of the US Congress to recognize the failure of the Federal Reserve to "meet it's mandate" borders on dereliction of duty.  Further failure of the US Congress to address this failure of the Federal Reserve borders on treason.

The current Congression Oath Of Office [1884]:

I do solemnly swear (or affirm) that I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; that I take this obligation freely, without any mental reservation or purpose of evasion; and that I will well and faithfully discharge the duties of the office on which I am about to enter: So help me God.

The US Federal Reserve is "the enemy within".  Clearly, the US Congress avoids addressing the failure of their Federal Reserve because it is that Federal Reserve which writes the blank checks that keeps them in public office. 

The Federal Reserve's failure to meet it's "mandate" is preventing the citizens of the United States from pursuing life, liberty, and happiness.

The "monetary policies" of the US Federal Reserve are the root cause of today's Global Financial Crisis..they are not the solution. 

If the US Congress is serious about "job creation", they must first get serious about the failure of the US Federal Reserve.  Not until the US Congress does their job, and defends the Constitution by disbanding the Federal Reserve...returning monetary policy to the US Treasury where it belongs..., will the US rise from the depths of this pervasive economic crisis caused by the Federal Resreve and the Congress' lack of "true oversight" of an entity that their institution created almost 100 years ago.

The Fed Pays a King's Ransom to China
By Richard Benson
So what else could the Fed possibly do to keep our economy moving in the right direction? Why not go to the Chinese and promise to pay them a big fat premium on their current long term treasuries (that were purchased at much higher interest rates) and let them swap them into short term treasury bills and notes. Indeed, looking at the prices of US Treasury notes and bonds, most are trading at premiums of 10 to 15 percent for recent issues, and 50 percent or more for those issued just a few years ago. By allowing other countries to get out of longer term treasuries at a time of record low interest rates, it will give them an extraordinarily large gift and potentially enormous profits that can be used in several ways: China would likely use the profits to offset currency losses when the Fed goes back to printing money in QE3 to fund our deficit; and, in Europe, the profits could be used to help recapitalize their banks which are loaded up with Greek, Irish, Italian, and Spanish debt.

When foreign countries have fewer treasury notes and bonds left in their arsenal to sell, when they do get around to selling their dollar holdings it’ll push the dollar down without pushing interest rates up. (Note: Short term treasuries will not go down in price if sold. Indeed, they can only go down if the Fed raises rates, and even then they quickly adjust back to a par price of 100.) At that point, America can dare China to sell the dollar, because pushing the dollar down is our policy.

So basically now you know what the Fed’s recent “Operation Twist” is all about (a more appropriate name might be “Operation Payoff”). We are paying a King’s Ransom to pave the way to devalue the dollar in the next QE3 and beyond. Just remember the downside of a falling dollar will be higher import prices and higher inflation.

Quantitative easing, or when there's nowhere left to run
By Alasdair Macleod
"The idea that QE is primarily to help the economy recover is Keynesian guff, a cover for the true reason. Without it, the U.S. and U.K. would have to compete for global savings at far higher interest rates. What price $2 trillion in new Treasuries with no QE? What price L175 billion in new gilts? The debt trap has already sprung. And few investors yet seem aware of the irony that loading up banks with Treasuries and gilts is exactly what the eurozone banks have already done for the PIIGS. Whatever the current difficulties faced by European banks and the U.S. and U.K. governments and their banking systems, there is only one option for all of them: Buy time by printing yet more money. This is why the banking system in the eurozone and elsewhere will survive. Banks need governments as much as governments need them. The cost of this survival will be borne by the unwitting saver, who has been frightened into cash only to find it being debased more rapidly than before."

Gold rush in India has now become a sprint
According to a JPMorgan report, India is home to more than 18,000 tonnes of gold (about 11 per cent of the global stock), worth about $1.1 trillion (versus an equity market cap of $1.2 trillion). Gold holdings are also more evenly distributed across Indian households as compared to stocks.

"The Indian retail investor, through thick and thin, has invested a substantial quantity in the best performing asset class in the last two-three years, which is gold. Indians always have this fascination for gold and rightly so.

It has done well for them," says Bharat Iyer, head of India equity research at JPMorgan.

Silver eagle bullion sales move into record territory [...but the price of Silver is down on the year]
Mike Zielinski reports at Coin Update that demand for U.S. Silver Eagle coins this year has already surpassed last year's demand with three months still to go this year. Zielinski's commentary is headlined "Silver Eagle Bullion Sales Move into Record Territory" and you can find it posted at the coinupdate.com website.

When?
By Greg Hunter
When?  That’s the question that is on the minds of people following the economy.  When will the “you know what” hit the fan and we start another global meltdown.  I am not going to string you along.  I will tell you right now, I don’t know.  I will tell you the headlines I read and the things I am hearing from people in power around the globe say we are in deep danger.  The time is close.

Eurozone QE Courtesy Of The US Federal Reserve

Shocking...  Prelude to a government sponsored Precious Metals massacre

CFTC lets Morgan get away with rigging silver market
By Ned Naylor-Leyland
On September 12th 2011, JPMorgan were served an explosive amended Class-Action lawsuit, detailing the individuals accusedof effecting the Silver manipulation and also the methodology used in doing so. The evidence within this document is exactly what the CFTC have sat on since the hearing of May 2010. With this incriminating evidence now in the public domain some very strange things took place. Firstly, the CFTC again decided to delay their vote on Speculative Position Limits, from October 4th2011 to October 18th. Then, on September 16th – 4 days after this lawsuit was served on JPMorgan - the CFTC released thefollowing on their website:

September 16, 2011
CFTC’s Division of Market Oversight Provides Temporary Relief from Large Swaps Trader Reporting for PhysicalCommodities
Washington, DC– The Commodity Futures Trading Commission’s (Commission’s) Division of Market Oversight(Division) today issued a letter providing temporary relief from the requirements of the Commission’s regulationsregarding large trader reporting of physical commodity swaps (§§20.3 and 20.4). Because this is the first time thatswaps data is being collected, this temporary relief is intended to provide sufficient time to enable both the industryand the Commission to develop and refine systems and processes that will be able to report these complextransactions.

On July 22, 2011, the Commission published large trader reporting rules for physical commodity swaps andswaptions. The rules require daily reports from clearing organizations, clearing members and swap dealers, andbecome effective on September 20, 2011. The letter issued today provides temporary relief from reporting, as long asparties are making a good faith attempt to comply with the reporting requirements, until November 21, 2011, forcleared swaps, and January 20, 2012, for uncleared swaps. Upon the conclusion of applicable relief periods, suchreporting parties must become fully compliant.

This extraordinary and inexplicable ‘free-pass’ from reporting by the CFTC allowed major players (such as JPMorgan)to go beyond speculative position limits so long as they ‘make a good faith attempt to comply with reporting requirements’. What this means in real terms is that the CFTC loosened reporting requirements – where previouslyany position beyond the concentration limit must be proven to be hedged elsewhere, no longer would this be thecase. Just 1 day after this ‘relief’ was granted, the Silver (and Gold) price went into a tailspin. How the CFTC thinks it is appropriate to continually delay the vote imposing the will of Congress with respect to position limits is anyonesguess, but to provide ‘temporary relief’ from reporting while the Silver manipulation is still under investigation ismalfeasance under any definition of the word. I look forward to seeing how higher Regulatory and Judicial authoritiesin the US deal with this behaviour by the CFTC, presumably the CFTC itself can look forward to being dragged infrontof Congress to account for itself.

Global QE is ALIVE & WELL

Load Up On Gold and Silver as Bernanke Dives Off the Deep End
By Martin Hutchinson, Global Investing Strategist, Money Morning
I first thought U.S. Federal Reserve Chairman Ben Bernanke was being deceitful when he denied the existence of inflation - but now I'm beginning to think he's simply delusional.

Anyone who watched or listened to Bernanke's Oct. 4 congressional testimony must have reached the same conclusion.

"Persistent factors continue to restrain the pace of recovery," Bernanke said. Then the Fed Chairman promised to consider yet more stimulus "to promote a stronger economic recovery in a context of price stability."

The irony, of course, is that we don't actually have price stability, but Bernanke refuses to believe this - thus the added stimulus. And that says nothing of the fact that the first $2 trillion of "stimulus" did little or nothing for the overall economy.

This is the same kind of delusion that led the Fed Chairman to proclaim in 2007 that the "the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained."

So, with a delusional central bank chairman, an anemic economic recovery, and every indication that prices across the board will continue to soar higher, there's really only one place to put any loose change you have lying around: gold and silver.

So far the only thing the Fed's loose monetary policy has succeeded at doing is pushing gold and silver prices steadily higher.

Gold has risen by more than 30% this year, and silver at one point in April was trading 300% higher than it was a year earlier.

These metals have stumbled lately, but with over-expansive monetary policy still intact, they are likely to experience a strong rebound.

Remember, it's not just Bernanke: The European Central Bank (ECB) also has stopped raising interest rates because of the Eurozone's problems. And the Bank of England (BOE) has indicated that it may well drop rates from their current 0.5% level - even though British inflation remains around 5%. The undeniable result will be a renewed surge in gold and silver prices, meaning the present pullback is an outstanding buying opportunity.

If gold matches its 1980 peak adjusted for inflation, it will hit $2,500 an ounce. If it matches its 1980 peak adjusted for the world economy's growth since then, it will hit $5,000 an ounce. Similarly, if silver were to match its 1980 peak adjusted for inflation, it could climb as high as $150 an ounce.
Ranting Andy makes it clear QE is not just Bumbling Ben Bernanke:

Today the Bank of England left interest rates at 0.5% this morning and announced a new 75 billion pound QE program, or roughly $120 BILLION. Given that England’s economy is just one-seventh the size of America’s, their announcement is the equivalent of the Fed announcing an $840 BILLION QE3 program.

http://www.zerohedge.com/news/bank-england-expands-qe-%C2%A375-billion-total-%C2%A3275-billion-keeps-rate-unchanged

Similarly, the ECB left rates unchanged at the piddling level of 1.5%, only doing so because it is compromised in trying to maintain Germany’s support of the PIFIGS banking system. Irrespective, under the radar it, too, announced another 40 Billion Euro, or $55 BILLION QE program to buy ECB sovereign bonds, and per comments all over the tape this past week (including from Germany), is ready, willing, and able to save any and all banks with more PRINTED MONEY BAILOUTS.

http://www.zerohedge.com/news/watch-trichets-last-ecb-press-conference-live

Yet Bumbling Ben assures that there is no inflation here in the US...

BOE King: UK Inflation Likely To Peak Above 5% Next Month

LONDON (Dow Jones)--Inflation will likely peak at above 5% in November, Bank of England Governor Mervyn King said Thursday.

"The number for inflation that we'll see published in two weeks' time is likely to be over 5%. But that, we think, is the peak," King said in a television interview with broadcaster ITV.

"We are past the worst. And from now on, we should be in a position where slowly but gradually living standards, real take-home pay, will be able to pick up. That's the world we want to get back to," King said.

The BOE's Monetary Policy Committee voted Thursday to expand the central bank's bond buying program by GBP75 billion to GBP275 billion, in an effort to aid the U.K.'s faltering economy. It also kept its key interest rate unchanged at 0.5%, a record low.

The central bank said the U.K. economy is threatened by a slowdown in global activity and the sovereign debt problems of the euro zone. Official statistics published Wednesday showed the U.K. economy expanded just 0.1% in the second quarter.

"I can't guarantee that the world economy won't change in a way that will make our position very difficult," King told ITV.

"But what I do know is taking this measure will make it better than it would have been otherwise. This is the right thing to do and it will improve the position of the U.K. economy."

QE goes global, and inflation is obvious...except to our delusional Fed Head.

Follow the Money: Behind Europe’s Debt Crisis Lurks Another Giant Bailout of Wall Street
By Robert Reich
Today Ben Bernanke added his voice to those who are worried about Europe's debt crisis.

But why exactly should America be so concerned? Yes, we export to Europe -- but those exports aren't going to dry up. And in any event, they're tiny compared to the size of the U.S. economy.

If you want the real reason, follow the money. A Greek (or Irish or Spanish or Italian or Portugese) default would have roughly the same effect on our financial system as the implosion of Lehman Brothers in 2008.

Financial chaos.

Investors are already getting the scent. Stocks slumped to 13-month low on Monday as investors dumped Wall Street bank shares.

The Street has lent only about $7 billion to Greece, as of the end of last year, according to the Bank for International Settlements. That's no big deal.

But a default by Greece or any other of Europe's debt-burdened nations could easily pummel German and French banks, which have lent Greece (and the other wobbly European countries) far more.

That's where Wall Street comes in. Big Wall Street banks have lent German and French banks a bundle.

The Street's total exposure to the euro zone totals about $2.7 trillion. Its exposure to to France and Germany accounts for nearly half the total.

And it's not just Wall Street's loans to German and French banks that are worrisome. Wall Street has also insured or bet on all sorts of derivatives emanating from Europe -- on energy, currency, interest rates, and foreign exchange swaps. If a German or French bank goes down, the ripple effects are incalculable.

Get it? Follow the money: If Greece goes down, investors start fleeing Ireland, Spain, Italy, and Portugal as well. All of this sends big French and German banks reeling. If one of these banks collapses, or show signs of major strain, Wall Street is in big trouble. Possibly even bigger trouble than it was in after Lehman Brothers went down.

That's why shares of the biggest U.S. banks have been falling for the past month. Morgan Stanley closed Monday at its lowest since December 2008 -- and the cost of insuring Morgan's debt has jumped to levels not seen since November 2008.

It's rumored that Morgan could lose as much as $30 billion if some French and German banks fail. (That's from Federal Financial Institutions Examination Council, which tracks all cross-border exposure of major banks.)

$30 billion is roughly $2 billion more than the assets Morgan owns (in terms of current market capitalization.)

But Morgan says its exposure to French banks is zero. Why the discrepancy? Morgan has probably taken out insurance against its loans to European banks, as well as collateral from them. So Morgan feels as if it's not exposed.

But does anyone remember something spelled AIG? That was the giant insurance firm that went bust when Wall Street began going under. Wall Street thought it had insured its bets with AIG. Turned out, AIG couldn't pay up.

Haven't we been here before?

Republicans and Wall Street executives who continue to yell about Dodd-Frank overkill are dead wrong. The fact no one seems to know Morgan's exposure to European banks or derivatives -- or that of most other giant Wall Street banks -- shows Dodd-Frank didn't go nearly far enough.

Regulators still don't know what's happening on the Street. They have no clear picture of the derivatives exposure of giant U.S. financial institutions.

Which is why Washington officials are terrified -- and why Treasury Secretary Tim Geithner keeps begging European officials to bail out Greece and the other deeply-indebted European nations.

Several months ago, when the European debt crisis first became apparent, Wall Street banks said not to worry. They had little or no exposure to Europe's problems. The Federal Reserve said the same. In July, Ben Bernanke reassured Congress the exposure of U.S. banks to European nations in trouble was "quite small."

Now we're hearing a different tune.

Make no mistake. The United States wants Europe to bail out its deeply indebted nations so they can repay what they owe big European banks. Otherwise, those banks could implode -- taking Wall Street with them.

One of the many ironies here is some badly-indebted European nations (Ireland is the best example) went deeply into debt in the first place bailing out their banks from the crisis that began on Wall Street.

Full circle.

In other words, Greece isn't the real problem. Nor is Ireland, Italy, Portugal, or Spain. The real problem is the financial system -- centered on Wall Street. And we still haven't solved it.

The answer is so simple: TARP - EuroStyle

EU Says It "Will Propose" Bank Recapitalization Action
BRUSSELS (Dow Jones)--The dire situation facing Dexia S.A. (DEXB.BT) and rising turmoil in financial markets have convinced European Union authorities that more forceful action is needed to shore up the bloc's banking system.

Just last week, European officials said the 24 banks that failed or came close to failing this summer's stress tests might need more capital--but that other banks are in good shape and shouldn't need more help.

One of the banks given a clean bill of health was Dexia, the Belgian-French lender that will almost certainly be broken up in the coming weeks. Dexia is facing a liquidity squeeze, sparked by a warning by Moody's Investors Service Inc. on Monday that the bank's heavy reliance on wholesale funding and its large euro-zone sovereign debt portfolio threaten its stability.

Dexia's problems, combined with levels of economic pessimism and fear not seen since the collapse of Lehman Brothers three years ago, have led officials to concede that governments will need to prepare to recapitalize banks beyond the 24 identified as shaky by the stress tests.

"There is a change of course," said an EU official. "The Dexia situation is not an isolated incident, as some would like to believe. We could have more Dexias in the short or medium-term."

The European Commission, the EU's executive arm, will propose "coordinated action" on the recapitalization of banks in the EU, a spokesman said Thursday.

The "commission will propose coordinated action on bank recapitalization to member states," a spokesman for the commission's President Jose Manuel Barroso said during a regular press briefing.

"We now need to take a step beyond [the finalization] of the process of cleansing balance sheets of impaired assets, which has been under way since 2008," he said.

It's still unclear what the commission's proposals will be. One option, the EU official said, would be for national governments to strengthen the "backstops" for banks that they are supposed to have in place. The commission is also seeking to improve coordination between governments over how to deal with problems at large cross-border banks that are common in Europe.

Fighting between Belgium and France over how much of Dexia's debt guarantees will be provided by each country shows the process still needs to be improved three years after the rash of EU bank failures following the collapse of Lehman Brother, the official said.

...and the price of Gold doubled following TARP - USA Style. 

Could the bottom be in for Gold and Silver prices as physical supply continues to disappear?

Physical silver running out because its spot price does not reflect true investment demand
By: Peter Cooper, Arabian Money
Several readers of ArabianMoney have written to us over the past two weeks to express their astonishment at the current price of silver because demand where they live is so high that stocks have run out.

Consider this comment: ‘I used to buy silver from a shop in Kobar in Saudi. From the last four weeks they said they ran out of silver. I cannot find anyone who sells silver in Saudi now. I asked them from where do they get their silver. They said the UAE. The problem is they only have 1kg bars…and I still cannot find any supplier.’

No stock

Well don’t bother coming to the UAE. Our information is that the 1kg bars mentioned here and featured in a video on the website last month (click here) are all sold out too. We’ve also had feedback about low or no stock in Texas and Australia from big private bullion dealers there.

Now what would normally happen when a commodity is in short supply is that the price would go up to encourage sellers to put some more into the market. That is presently not happening because the silver price is being artificially suppressed in the Comex futures market by the bullion banks acting on instructions from the Fed presumably, so why would you sell that silver cheaply if you happened to own some?

But something has to give and it is the price of physical silver rather than the Comex price of the shiniest of metals. If you can find any silver these days you will pay quite a substantial premium over the spot price. But pay it because that is probably still a bargain compared to where silver prices are going.

The truth is that silver is a rare metal, more rare than gold. Silver reserves have been estimatated at one-hundredth of gold reserves. Silver is after all consumed by industrial processes and reserves have dwindled over the years because the price has been kept so low for so long by market manipulation. Why is that?

Silver price fixing

This market manipulation dates back to the last silver boom of the late 70s and the spectacular $50 spike in the price in 1980. The central banks then saw suppression of the silver and gold price as a part of their war on inflation. They clearly lost that war but kept gold and silver prices down until this decade.

Thirty-one years later and we are still not back to those silver prices despite a seven-fold increase in the global money supply. On that reckoning silver ought to be $350 an ounce, not $30 today.

However, the snap back for silver prices now has the capacity to be sensational, and far beyond the mini-spike in the first few months of this year from $30 to almost $50 again. So those who go seeking out physical silver to buy at current prices are going to be very well rewarded and soon, not in 31 years!

Silver & Gold Plunge: The Simple Explanation Is The Fraudulent Manipulation Of Markets

"The Good News Is: September Is Over. The Bad News Is: October Has Begun"
 -Art Cashin

Why is the gold price down when there is so much financial turmoil?
From Seabridge Gold management
First, last week's Federal Reserve FOMC meeting did not produce a plan for further expansion of the Fed's balance sheet. Some investors in gold clearly expected such a development. The aggressive selling of gold began on Wednesday after the FOMC statement was released.

Secondly, as the debt situation in Europe continued to deteriorate, European securities fell sharply, forcing European gold holders to liquidate in order to reduce leverage. Much of the selling pressure on gold over the past week has originated in Europe. Widespread reductions in Euro Zone growth estimates and open disagreement and confusion over the next tranche of Greek bailout funding contributed to an abrupt downturn in markets. Gold performed its traditional role of providing emergency liquidity.

Perhaps most importantly, investors began to anticipate a disorderly Greek default and interpreted it as a possible Lehman moment. Investors, like generals, tend to fight the last war. All of us remember that, in the fall of 2008, the authorities let Lehman go into an unplanned bankruptcy with immense unintended consequences. Gold fell in response. When the Troubled Asset Relief Program (TARP) passed Congress, it recapitalized the banking system, contained the Lehman contagion effect and gold began to recover, closing higher on the year. Would a Greek default or the failure of a major European bank trigger a similar crisis of confidence in the financial system? And would a dysfunctional Euro Zone be able to produce a TARP response quickly enough? Anticipating that gold could fall in such a circumstance before effective money printing could be implemented, gold was sold.

It looks to us as if gold is waiting at the cross-roads to see what happens in Europe.

MONEY
From Bill Holder, for GATA
Gold is now signalling that the long forecasted currency crisis is here and now. Believe me when I say that if "they" could have held Gold down further "they" would have. The physical off take of late has been remarkable and a primary reason that Wall St.'s paper games have done so little damage. Yes, the recent correction has been painful but pales in comparison to the 2002, '04,'06 and '08 smackdowns. Gold is finally being "seen" for what it really is...money and THE safe haven that it is.

It has been said that Gold's recent correction was in part caused by traders selling Gold to pay margin calls on other assets which I believe is partly true (along with cartel help). But, think about what "they" are really admitting. "They" are telling you that investors are looking to Gold for liquidity and selling what is "up". "They" are admitting that Gold is doing what it always has done, namely allow holders liquidity during "hard times". The next step in my opinion is a mass awakening to Gold. This "awakening" has already happened but it is still very early and has been obscured by the Fed's purchases of Dollars. These Fed purchases are the only reason that the Dollar has any "safe haven" perception OR bids. This will not last for long because the currency crisis is already so big that Treasury bonds will be called upon for liquidity.

This sell down will occur while the Treasury is in maximum "borrowing mode" as it is now. Treasuries cannot be a safe haven as they are THE most over owned asset in the history of the planet AND the most over issued. Treasury bonds ARE the definition of supply and potential future supply. Gold on the other hand is very very finite in it's supply. I might add that it is much more "finite" than those in power would want you to think. Gold also has real demand as evidenced by the real off take as opposed to paper trading back and forth.

It is important to understand this role that Gold is displaying. Gold is being "voted" on every day as all assets are by investors. It has now taken on the role as the ultimate metal and has for 10 years been acting as the ultimate "money". Anyone can say what they want but Gold has for 10 years outperformed ALL paper monies and only recently become "the most expensive" metal. Gold is telling you that the currency crisis has arrived . The fact that everything is now computerized and "much faster" than ever before tells me that the unwinding of the currency markets cannot be far behind AND will end in a "lightening fast event!

To get more from Bill Holder and GATA go here: http://www.lemetropolecafe.com/

Consider for a moment what Bill Holder has just suggested.  "If" Gold is really being sold because it is "up" to raise "cash", what will be left to sell for "cash" once all the "available" Gold is sold? 

The only other "liquid" asset that is "up" are US Treasuries.  If the majority of global debt is denominated in US Dollars, and US Dollars are becoming hard to come by, will US Treasury debt be sold next to raise "cash"?

Will the global debt crisis become so severe that the debt of the US Treasury, held by central banks around the world, have to be sold to raise the cash to cover the sovereign debt that has come due?  Will mutual funds have to sell their Treasury holdings to raise "cash" to cover redemptions?

Bumbling Ben at the Fed is not as concerned about deflation in asset prices, as he is concerned about a deflation of DEBT. 

"Deflation" is defined as a "drop" in the money supply, "Inflation" is defined as a "rise" in the money supply.  If all money is created by way of debt, is it any wonder that Bumbling Ben is going to such great lengths to lower interest rates in the hope that it will create more debt [money]?

No wonder the central banks are determined to use "new debt" to replace the old debt.  No wonder the central banks are so scared of "debt default".  A default on the debt would remove debt [money] from the system.  This can not be allowed to happen or a "great deflation" WILL occur.  Thus, dying debt MUST be replaced with fresh debt.

Old, or new, it is still DEBT!  Money created out of thin air, by issuing debt.  That in a nutshell is our monetary system.  That is why, though interested parties may have been forced to sell their Gold to raise cash, ultimately the price of Gold will rise further whether the debt supply shrinks or grows.  That is why Gold is THE asset to own in an inflationary environment AND a deflationary environment.  GOLD IS MONEY.

The Great Commodities Heist [ABSOLUTE MUST READ]
Written by Jeff Nielson
It is all so very simple when we view “the big picture”. Bankrupt and near-bankrupt Western governments are stealing billions of dollars worth of various commodities from commodity-producers around the world. The evidence goes well beyond merely suggestive – into the realm of absolutely conclusive.

What makes this scenario so unequivocal is that we have the equivalent of “signed confessions” of the crimes these governments are committing. Exhibit “A” is the monetary policy titled with the vile euphemism “competitive devaluation”. It is the deliberate attempt by governments to destroy the value of their currencies – as fast as possible (i.e. “competitively”).

Destroying the value of our currencies as rapidly as possible means exactly the same thing as raising prices as fast as possible. Which brings us to global commodity markets. If our governments (primarily Western governments) are deliberately trying to raise prices as fast as possible with their excessive money-printing, how can commodities prices have tumbled so far?

Arithmetic tells us there is only one possible answer. Global commodity markets have been fraudulently manipulated lower through the use of the primarily “paper” futures markets. Given the scope and magnitude of this commodities take-down, it can only be the result of coordinated actions by many governments and (of course) the multinational bankers who pull their strings.

The “prime suspects” are all of the Western deadbeat-debtors (who are nearly all large importers of commodities) and any/all major commodity importers – with Japan and now China being the obvious culprits. The arithmetic here is absolute: as long as our governments engage in competitive devaluation all prices of everything can only go higher.

There is but one exception to this simple equation: any good and/or service for which there is excessive supply. The obvious example here is the U.S. housing market. With the most grossly over-supplied housing market in human history (and in addition a market saturated with fraud), the downward price-pressure caused by this massive housing glut currently exceeds the upward inflationary pressures of competitive devaluation.

The situation in commodity markets is also unequivocal: stockpiles of virtually all commodities are either at historical averages, below historical averages, or already at critical levels. In other words, in terms of economic fundamentals there is no downward pressure on prices – only (additional) upward pressure. There can be no rational/economic explanation for the severe plunges in commodity prices other than the fraudulent manipulation of markets.

Indian Silver Demand Leads to Supply Issues, Capacity Stretched, Higher Premiums - Asian Bullion Demand Remains Strong
From Zero Hedge
Physical demand for silver remains high and is being reflected in a slight uptick in premiums. GoldCore have seen continuing coin and bar demand and physical buyers are not being deterred by the latest sell off on the COMEX market. Those buying silver continue to expect silver to rise to $50/oz and many expect silver to rise to over $140/oz which is the real record (CPI inflation adjusted) high from 1980.

Demand from western buyers remains minimal as buyers remain a contrarian few with the majority of investors and savers having no allocation to silver whatsoever.

However, this is not the case in Asia where both gold and silver are held in far higher esteem and appreciated for their wealth preservation qualities.

Indian demand has been very significant in months and has accelerated in recent days after the sell off and tentative signs of a bottoming.

Heightened physical demand for silver from the Indian subcontinent is causing “supply issues” according to UBS this morning. UBS note that airline capacity to deliver the precious metal is being “stretched” and premiums are unsurprisingly on the rise.

With gold having risen 17% year to date but silver flat so far in 2011, many in Asia are seeing silver as better value at these price levels. Also, many buyers in Asia cannot afford gold at these prices and thus are buying silver instead as silver again fulfills its roles as “poor man’s gold”.

The physical silver market remains tiny vis-à-vis equity, bond and currency markets and even a small increase in allocations to silver could lead to sharply higher prices. As ever buyers should focus on value rather than price and use silver as a wealth preservation tool rather than simply for capital gains.

John Embry - Silver is Completely Flushed out to the Downside

"My coin guy came over to see me yesterday and I asked him, ‘How’s your silver market these days?‘ He said, ‘I just got three boxes of maple leafs in or about 1,000 coins.‘ I asked him how they were selling and he said, ‘They are going out the window, all but 50 coins are gone.‘ I asked him what price he was selling them and he said, ‘$38 an ounce.‘ That’s with the paper price $30 to $31. So the smart guys know this is a rig job and they are getting their hands on what silver is available as fast as they can.”

London Trader - Physical Demand for Gold has Been Insatiable
The Asians have been buying like crazy, all through this take down they have been buying. We have seen massive premiums and bottlenecks in supply, they simply cannot get enough physical metal as the prices have dropped. The demand has literally been insatiable. As I have stated before, the central bank gold, which was used to sell the market down, has gone to vaults in Asia. That’s a one way trip, it doesn’t come back into the market....

“There is also strong demand from India. If we get a pit close above $1,705, there are a massive amount of shorts that will be tripped up and be forced to cover. This will give additional impetus to the upside.

So the Western central banks got together, leased out some gold and the bullion banks sold the gold. The central bank gold being unloaded by the bullion banks is not to get the best price, but to smash the price. The smartest way to sell the gold would be to do it in the liquid sessions. But the pattern during the decline was they were selling it in the overnight session when things are quiet. This was no different that what we saw at the end of April, beginning of May on that coordinated smash.

You have to ask the question, why would anyone sell at the most illiquid times? It is not to get the best price, it is to move the market in the direction you want to move it. The commercials are now competing with funds that are coming in to buy and they are continuing to compete with the physical buyers and those buyers have been accumulating in size during the entire decline since gold dropped below $1,775.

As it stands today, there are an unbelievable amount of physical orders that have not been filled. Some of the buyers might have believed there would be more downside action. When gold was briefly down at $1,530, almost no one got any physical gold. No one was even getting fills at $1,585 on the second and third dip, the orders down there were not filled. Those physical buyers are watching right now and if they lose patience, they may very well move their orders higher. If that turns out to be the case, it will put even more pressure to the upside in gold.”

Is a Move Up in Precious Metals Likely at the Moment?
By P. Radomski
There is no doubt that like everything else, the bull run in gold will eventually come to an end, but we’re still a long way off. We see the sharp decline as an opportunity rather than a warning. It is a good time, for those who wished all along that they had bought gold, to do it on dips. Nothing that has taken place over the past weeks lessens our long-term optimism about gold. The same fundamentals are still in place. The situation in Europe continues to deteriorate daily. Greece is on the cusp of default and larger EU members look sure to follow. Meanwhile, political gridlock is the situation in Washington and QE III is coming, and with it, further decline in the purchasing power of the dollar (not necessarily right away, of course). The Swiss National Bank just instituted a peg with the Euro to slow down inflows of global investors seeking a safe haven – costing franc holders 25% of their position in the course of a week. Central banks are still buyers and not sellers of gold.

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