Tuesday, June 1, 2010

Wednesday, May 12, 2010

Gold Rises to Record as Investors Seek Alternative to Currency

By Pham-Duy Nguyen

May 12 (Bloomberg) -- Gold futures rose to a record for the second straight day as financial turmoil in Europe spurred demand for an alternative to currencies.

Gold priced in euros, British pounds and Swiss francs also rallied to all-time highs on concern that a plan to rescue Europe’s indebted nations will slow the region’s economic recovery and devalue the 16-nation common currency.

“Gold is expensive, but people in the euro zone are moving out of their currencies and forcing themselves into gold,” said Adam Klopfenstein, a senior market strategist at Lind-Waldock in Chicago. “There’s a lot of fear on the part of the Europeans that moves to mitigate their debt crisis will only lead to more problems. People want to be in the currency of last resort.”

On the Comex in New York, gold futures for June delivery rose $22.80, or 1.9 percent, to $1,243.10 an ounce. Earlier, the price reached $1,247.70, the highest ever.

The euro has dropped 12 percent against the dollar this year on concern that budget deficits in Greece, Spain and Portugal will escalate. Over the weekend, the European Union and the International Monetary Fund announced a rescue package of almost $1 trillion.

Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, have advanced 5.2 percent this year to a record.

“The whole bailout is quantitative easing across all of Europe,” said Michael Guido, the director of hedge-fund sales at Macquarie Bank Ltd. in New York, who expects gold to rise to $1,500 by the end of the year. “You’re seeing this big rush into gold ETFs, physical bars and coins out of Europe that’s supporting the thesis that gold is the default currency.”

Read Entire Article

The Second Leg of the Great Depression Was Caused by European Defaults

(George Washington Blog)- Many Americans know that the Great Depression was started by the bursting of the giant Wall Street bubble of the 1920's (fueled by the use of bank deposits on speculative gambling, which is why Glass-Steagall was passed) , which in turn caused a run on American banks.

But most Americans don't know that the second leg of the Depression was caused by European defaults.

As Yves Smith reminds us:

Recall that the Great Depression nadir was the sovereign debt default phase.

The second leg down of the Depression was larger than the first, as shown by this chart of the Dow:



The second leg down was primarily initiated by the failure of the Creditanstalt bank in Austria. Creditanstalt (also spelled Kreditanstalt) declared bankruptcy in May 1931.

As Time Magazine noted on November 2, 1931:

May 14 [1931]: First thunderclap of the present crisis: collapse in Vienna of Kreditanstalt, colossal Rothschild bank, which is taken over by the Austrian Government, shaking confidence in related German banks.

A book written by Aurel Schubert, published by Cambridge University Press, points out that:

Austria played a prominent role in the worldwide events of 1931 as the largest bank in Central and Eastern Europe, the Viennese Credit-Anstalt, collapsed and led Europe into a financial panic that spread to other parts of the world. The events in Austria were pivotal to the economic developments of the 1930s ....

As Megan McArdle points out:

The Great Depression was composed of two separate panics. As you can see from contemporary accounts ... in 1930 people thought they'd seen the worst of things.

Unfortunately, the economic conditions created by the first panic were now eating away at the foundations of financial institutions and governments, notably the failure of Creditanstalt in Austria. The Austrian government, mired in its own problems, couldn't forestall bankruptcy; though the bank was ultimately bought by a Norwegian bank, the contagion had already spread. To Germany. Which was one of the reasons that the Nazis came to power. It's also, ultimately, one of the reasons that we had our second banking crisis, which pushed America to the bottom of the Great Depression, and brought FDR to power here.

Not that I think we're going to get another Third Reich out of this, or even another Great Depression. But it means we should be wary of the infamous "double dip" that a lot of economists have been expecting.

Way to go, guys ... you're re-creating history.

Tuesday, May 11, 2010

The Gold Standard, A Case For Another Look

By Sean Fieler and Jeffrey Bell
The Wall Street Journal
Friday, May 7, 2010

Washington's elites are quietly preparing a post-election fiscal compromise that will fund much of President Barack Obama's domestic spending agenda with huge tax increases. They aim to create a value-added tax and will argue that there is no alternative even though doing so will leave the United States resembling the stagnant, bureaucratic nations of Western Europe.

But there is an alternative. The U.S. could return to a gold standard, a system that would not only prevent the government from running chronic budget deficits but would also curb attempts to manipulate the value of the dollar for political reasons.

The value of a gold standard was proven in the 19th century. Following the English parliament's passage of the Coinage Act in 1816, which created a gold standard in England in collaboration with the semi-private Bank of England, gold gradually displaced copper and silver to become the world's sole final currency. In doing so, gold established ground rules for international trade and integrated the world's economy. Countries that adopted the international gold standard prospered. This remarkably successful monetary system only blew apart with the outbreak of World War I in 1914.

Read Entire Article

Monday, May 10, 2010

Will Silver (And Gold) Prices Rise Now that the Feds Are Launching Criminal and Civil Investigations Into Manipulation of the Silver Market?

(George Washington Blog) The Feds are launching criminal and civil investigations into manipulation of the silver market by JP Morgan.

As the New York Post points out:

Federal agents have launched parallel criminal and civil probes of JPMorgan Chase and its trading activity in the precious metals market, The Post has learned.

The probes are centering on whether or not JPMorgan, a top derivatives holder in precious metals, acted improperly to depress the price of silver, sources said.

The Commodities Futures Trade Commission is looking into civil charges, and the Department of Justice's Antitrust Division is handling the criminal probe, according to sources, who did not wish to be identified due to the sensitive nature of the information.

The probes are far-ranging, with federal officials looking into JPMorgan's precious metals trades on the London Bullion Market Association's (LBMA) exchange, which is a physical delivery market, and the New York Mercantile Exchange (Nymex) for future paper derivative trades.

JPMorgan increased its silver derivative holdings by $6.76 billion, or about 220 million ounces, during the last three months of 2009, according to the Office of Comptroller of the Currency.

Regulators are pulling trading tickets on JPMorgan's precious metals moves on all the exchanges as part of the probe, sources tell The Post.

The probes stem from testimony from whistleblower Andrew Maguire - a London metals trader formerly of Goldman Sachs - saying that gold and silver bullion markets are rigged that (and see this). One of his specific allegations is that JP Morgan has been fraudulently suppressing the price of silver.

Omnis' Jim Rickards, GATA's Adrian Douglas and others have also demonstrated that the big bullion dealers and ETFs don't have nearly as much as physical bullion as they claim.

This could cause a rise in the price of silver (and gold) if either one of the following occurs:

(1) The investigations cause the price suppression schemes to stop, as the price manipulators know that someone is watching. If the suppression stops, the prices will naturally rise.

or

(2) The investigations cause enough investors to lose confidence and demand physical delivery of silver (or gold). Because there is less physical metals than claimed (and more paper derivatives), enough demand for physical delivery would reveal the game of musical chairs for what it is, driving the price of physical metals higher.

Of course, if enough investors hear about the investigations, that alone could cause more people to buy silver (and gold), thus driving up prices.

Wednesday, May 5, 2010

Mystery Abounds With IMF's Latest Gold Sale

(GATA) - Another unexplained sale of gold by the International Monetary Fund turned up today in another Reuters story based on another statement from the World Gold Council.

This time the sale is said to have been 18.5 tonnes unloaded in March. Two weeks ago the WGC reported that the IMF had sold 5.6 tonnes in February. (See http://www.gata.org/node/8578.)

Once again the IMF apparently has issued no formal statement about the most recent sales, disclosure coming only because the WGC thumbed through the IMF's monthly International Financial Statistics report and mentioned it to a select reporter or two. (No press release about the sales seems to have been posted at the WGC's Internet site either.)

But then the IMF isn't talking much about its supposed gold lately, having refused last month to respond even cursorily to some pointed questions from Business Insider's Vince Veneziani (see http://www.gata.org/node/8583), questions that were similar to questions put to the IMF by GATA itself in April 2008 and evaded just as badly. (See http://www.gata.org/node/6242).

GATA knows of two investment houses that recently applied to the IMF to purchase some of its supposed gold and were refused, one of them being Sprott Asset Management in Toronto. (See http://www.gata.org/node/8511.) Since the money of those investment houses presumably is as good as anyone else's, since the IMF for years has been issuing dozens of statements about selling gold for every actual sale made, and since the IMF as recently as last November issued a detailed statement about its supposed sale of 200 tonnes to India (see http://www.gata.org/node/7971), the IMF's unusual silence about its two most recent sales invites suspicion and speculation about where the gold is going.

If it's not going to investment houses that want to buy it and if its destination cannot be disclosed lest the markets figure out what is happening, is the gold being used to plug holes in the increasingly leaky dike of Western central bank and bullion bank gold price suppression?

Is the gold being rationed to members of the London Bullion Market Association, whose impossibly short positions in gold and silver were disclosed over the last six months in reports by GATA board member Adrian Douglas (see http://www.gata.org/node/7908, http://www.gata.org/node/7911, and http://www.gata.org/node/8388) and then candidly confirmed by CPM Group founder Jeffrey M. Christian at the March 25 hearing of the U.S. Commodity Futures Trading Commission (see http://www.gata.org/node/8478)?

It's too bad that the World Gold Council, which reportedly has an annual budget above $60 million, doesn't press these questions after thumbing through those subtle IMF reports. But then it's too bad that the World Gold Council exists mainly to ensure that there never is a world gold council.

Today's Reuters story is appended.

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

* * *

IMF Sold 18.5 Tonnes of Gold in March vs 5.6 Tonnes in February

From Reuters
via Yahoo News
Tuesday, May 4, 2010

http://asia.news.yahoo.com/rtrs/20100505/tbs-gold-imf-sale-7318940.html

NEW YORK -- The International Monetary Fund sold 18.5 tonnes of gold in March under the second phase of its gold sales program, industry group World Gold Council said on Tuesday.

The IMF's sales, which totaled 5.6 tonnes in February, are taking place under the umbrella of the third Central Bank Gold Agreement, which began in September 2009. Signatories of the CBGA are largely euro zone central banks, the largest gold holder of which is Germany.

Natalie Dempster, WGC's director of government affairs, said IMF released the data in its monthly International Financial Statistics publication.

Total sales under the pact, which limits signatories' gold sales to 400 tonnes a year, were just 7.2 tonnes to April 20.

The IMF began its planned sales of 403.3 tonnes of gold last year. It sold 200 tonnes to India and smaller amounts to Sri Lanka and Mauritius last year.

The price of gold gained almost 6 percent in April, its biggest one-month rise since November, as the credit ratings downgrades of Greece, Spain, and Portugal, sparked a flight to safety into the metal.

Mark Faber - All Currencies are Doomed

Ron Paul - Think Financial Crisis Was Bad? Wait for the Currency Crisis.

Trends Forecaster Gerald Celente - Currency Crisis Has Begun

Peter Schiff - Chaotic Hyperinflation on Horizon

Jim Rogers Forecasts End of Euro

Gerald Celente: The Bailout Bubble is Bursting

“The world markets will have gone through a severe economic crash before 2011 begins. We’re going to see country after country go through this kind of turmoil.”

Celente forecasts people around the world bailing out of their fiat currencies and getting into gold. He predicts defaults on sovereign debts coming and advises against investing in the the stock market. “There is no safe risk to take,” says Celente. “When you take a risk, you gamble.” Personally, the trends forecaster keeps 80% of his assets in gold and his cash is hedged between US dollars and Canadian dollars.

Tuesday, May 4, 2010

Republicans Sound Alarm on Administration Plan to Seize 401(k)s

(Human Events) - In February, the White House released its “Annual Report on the Middle Class” containing new regulations favored by Big Labor including a bailout of critically underfunded union pension plans through “retirement security” options.

The radical solution most favored by Big Labor is the seizure of private 401(k) plans for government disbursement -- which lets them off the hook for their collapsing retirement scheme. And, of course, the Obama administration is eager to accommodate their buddies.

Vice President Joe Biden floated the idea, called “Guaranteed Retirement Accounts” (GRAs), in the February “Middle Class” report.

In conjunction with the report’s release, the Obama administration jointly issued through the Departments of Labor and Treasury a “Request for Information” regarding the “annuitization” of 401(k) plans through “Lifetime Income Options” in the form of a notice to the public of proposed issuance of rules and regulations. (pdf)

By: Connie Hair

Read Entire Article

Monday, May 3, 2010

If Gold Poised for Take-Off Then Silver Should Do Even Better Better

The current gold: silver ratio of 63:1 suggests there could be some good catch up for silver ahead

Author: Lawrence Williams

LONDON -

(MineWeb)Investors are beginning to move back into silver as there is a perception that the metal's more volatile price patterns will lead to better returns if gold also continues to improve.

If last week's surge in the gold price indicates that momentum is truly building to push the yellow metal into testing its December high point (in dollar terms) of $1226 an ounce, then an investment in silver looks a pretty good gamble.

Silver prices move pretty well in line with gold, but there tends to be much more volatility on both the downside and the upside, so if gold is in an upwards trend, as many observers think, then a parallel rise in the silver price could be much greater in percentage terms. Gold is currently only around 2% off its high, while silver is some 7.5% off its 2008 peak, suggesting that a run up in precious metals prices in general would likely see silver dominate in its rate of increase - and this could benefit silver holders even more should some of the other gold forecasts - say of $1500 by the year-end - be achieved.

Consider also the gold silver ratio. At the current price levels for each the ratio is around 63:1. Historically this price ratio has mostly been between 45 and 50 in recent years, again suggesting there could be a good catch up from silver ahead. Even at the current gold price level a ratio of 50:1 would put silver at over $23 an ounce which would represent a very sharp percentage increase from current values - although this is not a change which would likely happen quickly.

Silver also has a strong industrial element in its consumption pattern - much more so than gold - so the state of the global economy, and the apparent lack of growth outside Asia, has partly held it back. In particular its growing usage as a biocide in wound treatment, water purification, general hospital usage etc. could eventually replace declining photographic usage as a key element in silver demand - and is far less subject to recycling than the latter.

Read Entire Article

Wednesday, April 28, 2010

Sprott: Gold Looks Better Than It Ever Has

By: Julie Crawshaw

(MoneyNews.com) Sprott Asset Management CEO Eric Sprott is very long on gold and not very optimistic about cyclical metals like copper.

“Gold looks better today than it ever did before,” Sprott says, because of ongoing sovereign debt concerns in Greece and other "PIIGS" nations — Portugal, Italy, Ireland, Greece and Spain — as well as easy monetary policies across the globe.

“Some of the smartest investors in the world” are bullish on gold, the Canadian hedge fund manager says.

Tuesday, Gold for June delivery jumped $8.20 to settle at $1,162.20 an ounce on the Comex division of the New York Mercantile Exchange.

Meanwhile, “I still have a deep, deep concern over leverage in the banking system,” Sprott said, noting the inability of governments who are spending vast amounts of money to generate much growth in GDP.

Read Entire Article

Tuesday, April 20, 2010

Sprott's John Embry Discusses Gold Manipulation

Tyler Durden
ZeroHedge

"While on the subject of gold manipulation, last month I referred to the cartel's specific modus operandi on those days when its members choose to take gold lower. However, this is only one of their ploys.

Another page in their playbook relates to keeping enthusiasm in the gold sector as subdued as possible. Gold is seldom, if ever, allowed to rise more than two percent on a given day. If strong buying propels gold higher, massive selling inevitably appears when it has risen two percent and continues until gold is stopped dead in its tracks. The next day, to ensure that there is no follow-through fervor, any further upside is capped at a one percent gain.

Following that, gold is held in check until the long speculators who propelled the original rise lose patience. At that point, the cartel looks for an opportunity to clean them out. I realize this sounds pretty Machiavellian but I can only point to the trading patterns as confirmation." John Embry of Sprott Asset Management

Read Entire Report

Monday, April 19, 2010

Now We Know the Truth. The Financial Meltdown Wasn’t a Mistake — It Was a Con

By: Will Hutton
The Observer

The global financial crisis, it is now clear, was caused not just by the bankers’ colossal mismanagement. No, it was due also to the new financial complexity offering up the opportunity for widespread, systemic fraud. Friday’s announcement that the world’s most famous investment bank, Goldman Sachs, is to face civil charges for fraud brought by the American regulator is but the latest of a series of investigations that have been launched, arrests made and charges made against financial institutions around the world.

Big Finance in the 21st century turns out to have been Big Fraud. Yet Britain, centre of the world financial system, has not yet levelled charges against any bank; all that we’ve seen is the allegation of a high-level insider dealing ring which, embarrassingly, involves a banker advising the government. We have to live with the fiction that our banks and bankers are whiter than white, and any attempt to investigate them and their institutions will lead to a mass exodus to the mountains of Switzerland. The politicians of the Labour and Tory party alike are Bambis amid the wolves.

Just consider the roll call beyond Goldman Sachs. In Ireland Sean FitzPatrick, the ex-chair of the Anglo Irish bank was arrested last month and questioned over alleged fraud. In Iceland last week a dossier assembled by its parliament on the Icelandic banks – huge lenders in Britain – was handed to its public prosecution service. A court-appointed examiner found that collapsed investment bank Lehman knowingly manipulated its balance sheet to make it look stronger than it was – accounts originally audited by the British firm Ernst and Young and given the legal green light by the British firm Linklaters. In Switzerland UBS has been defending itself from the US’s Inland Revenue Service for allegedly running 17,000 offshore accounts to evade tax. Be sure there are more revelations to come – except in saintly Britain.

Read More

Wednesday, April 14, 2010

Gold Specialist Exclusive - Emergency Release

Please feel free to forward this on to your friends and family so they too may take advantage of what I am about to tell you. Some of the signs that we are seeing are very foretelling but unfortunately, the future doesn’t look very good. Of course, you won’t hear any dismal warnings from the Mainstream Media and certainly not from the District of Criminals in Washington, but you will hear it here at the Gold Specialist Blog.

If you did spend your time listening to the Mainstream Media and those in Washington, it might sound something like this:

“[1930 will be] a splendid employment year.” — U.S. Department of Labor, New Year’s Forecast, December 1929

“I am convinced that through these measures, we have reestablished confidence.” — Herbert Hoover, U.S. President, December 1929.

“While the crash only took place six months ago, I am convinced we have now passed through the worst — and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us.” — Herbert Hoover, U.S. President, May 1930.

“This is the time to buy stocks. This is the time to recall the words of the late J. P. Morgan ... that any man who is bearish on America will go broke. Within a few days there is likely to be a bear panic rather than a bull panic. Many of the low prices as a result of this hysterical selling are not likely to be reached again in many years.” — R. W. McNeel, market analyst, as quoted in the New York Herald Tribune, October 30, 1929

“The Wall Street crash doesn't mean that there will be any general or serious business depression ... For six years American business has been diverting a substantial part of its attention, its energies and its resources on the speculative game ... Now that irrelevant, alien and hazardous adventure is over. Business has come home again, back to its job, providentially unscathed, sound in wind and limb, financially stronger than ever before.” — BusinessWeek, November 2, 1929

“For the immediate future, at least, the outlook (stocks) is bright.” — Irving Fisher, Ph.D. in Economics, in early 1930

The problem with this thinking is that the depression didn’t end until the 1940’s maybe longer depending on who you talk to. Had you heeded the words of the Mainstream Press, Pundits and Talking Heads, you would have been in for a decade of financial disaster.

The Government Wants Your 401K’s and IRA’s, What’s Next?
Some of our more frequent readers might remember last month’s warning that the Federal Government wants your 401K’s and IRA’s – well this month I can report to you that the Government also wants your pensions. This should send chills down the spine of the supporters of a free and open society. It’s almost an immediate answer to the proverbial question of “what’s next” well what’s next is that the Government is wanting to use your pension funds to prop up the assets of failed banks. Take a minute and give that last sentence a second look, then take the time to read the Bloomberg article entitled “Failed Banks May Get Pension-Fund Backing as FDIC Seeks Cash.”

The Real Story on Inflation
It is becoming increasingly obvious that the reckless spending by Governments around the world will lead to an inflationary crisis, perhaps on a scale never before seen. One example is the price of steel. A recent report put out by MSN money, shows that the price of steel is set to rise by more than 1/3 over the next year, a serious indicator of inflation.

Furthermore, since 1996 the Government has changed the way it calculates CPI nine times. The United State Constitution specifies the importance of using just weights and measures. If the calculation of one of the most important economic indicators available has been changed nine times in fourteen years, does that in any way reflect a system of “just” weights and measures? Of course not. But the reasoning behind the change is simply to fleece the public and cover the truth.

In fact, when a broader index of inflationary indicators like the commodity index are included in the CPI it shows that inflation is SOARING and is nowhere near the benign numbers that the Government is reporting.

Make sure to consider the articles “Inflation Warning Etched in Steel” and “The Coming Inflation Wave.”

“Wake Up Fools” – The Bond Market
Houston, we have a problem. The Budget deficit of the United States just hit a record high; the problem though is the interest on Public Debt is at an all time low. In order to finance our ever-growing Nanny State, the endless bailouts of Wall Street and the takeover of the Medical System, Uncle Sam must be able to easily sell its bonds, but this isn’t the case. In fact the recent selloff in United States Treasury’s have risen Sovereign Debt Fears – translation: What happened in Greece could very well, and most likely will, spread Worldwide. Consider the article entitled “Selloff in Treasuries Raises Sovereign Debt Fears.”

Many of us know that the Dow Jones just busted throughout the 11,000 level for the 3rd time in the last decade, but how many of you know that the bank of International Settlements just put out a report saying that here in the land of the free our Debt to GDP level will exceed 400% by 2040? Friends, a Debt to GDP ratio of 400% equals instant, guaranteed default. With a scenario like this brewing does it make sense to own stocks? Consider the article entitled “Bank Of International Settlements Sees US Debt/GDP At Over 400% By 2040.”

How can this news be good for stocks? It isn’t. Moody’s took note and actually put out a warning regarding the profitability of companies, specifically the financials in the years to come. These details are further verified in the article entitled “Moodys Warns of Pain Ahead For Financials; Profitability Concerns Due to Record Charge Offs.”

Since markets never lie, these facts have led to some interesting revelations the most important of which is that according to the bond market, it is currently safer to lend money to Warren Buffet than it is the United States of America. Yup, you read that right, the market says that lending to the United States is more risky than lending to Warren Buffet meaning lending to the United States is sheer lunacy. How did this happen?

Well, Moody’s just issued another separate report warning what we have been warning for the last 12 months - that the United States could be destined to lose its triple AAA Rating. It says that the United States is heavily leveraged adding that acute challenges lie ahead for the United States and other developed nations. Did you ever think you would see the day when the richest most powerful nation on the face of the planet would be seen as a bigger credit risk than Warren Buffets Berkshire Hathaway? That day has come. With evidence such as this, tell me, what foreigners are stupid enough to keep financing our consumption through buying our bonds? Not many.
For more on the unfolding crisis in the Bond Markets, consider the Articles “Obama Pays More than Buffett as US Risks AAA Rating,” “Kiss AAA Goodbye Says Moodys,” and “As Budget Deficit Hits Record High, Interest On US Public Debt Hits Record Low.”

How Does This Effect the Gold and Silver Markets?
Just to recap what we have learned up to this point – Government Officials and the Mainstream Media are lying to you, they want a portion of your IRA’s, and 401K’s forced into annuities based on bonds and they would like to have your Pension Funds to back up the assets of failed banks, inflation numbers are far off base, and the Bond Markets are signaling a crash ahead. All of these events point to much higher Gold and Silver prices in the future, but there is more. Much more.

We told you last year that Central Banks were buying Gold instead of selling it, this has been further verified in the article entitled “Central Bank Gold Holdings Expand at Fastest Pace Since 1964.” We have also warned you that the issue of “peak” Gold was on the horizon, meaning that the readily available Gold in the World had already been mined and was quickly diminishing, this can be researched further in the article entitled “World Gold Council Sees New World of Opportunity as Peoples Bank of China Expected to Buy Gold as their Mines Become Depleted.”

What does this mean for the Gold Market? Well a very respectable General Counsel for a huge hedge fund – Long Term Capital Management – says that a $5,500 Gold price would be fair value based on the economic conditions that are currently in place. Saying there is “Little Time to Avoid Catastrophe and Almost No Exit.” There are others that say Gold can go much higher than that and in the section below, you will find out just how that might happen.

And, don’t forget Silver. Silver has been soaring of late and it is oftentimes overlooked as the poor man’s Gold. Let me assure you though, the market forces setting up for Silver look to be even stronger than that of Gold. I recently read one of the most important articles on Silver in some time, in it the author unveils an amazing fact:

According to the Act that set up the Gold and Silver Eagle programs in the United States, in order to mint Gold and Silver Eagles the United States Mint MUST buy only Gold and Silver minted in the United States. The problem is that Silver Eagle sales are soaring to near 40 Million Ounces of Silver per year which is exactly the amount produced by U.S. mines each year. Couple that information with the fact that 40% of Silver is used for industrial applications, 30% Jewelry, 20% for Photography, with a small fraction being left over for investment. However, according to U.S. mine production 100% of the Silver mined in the United States is being used strictly to mint Silver Eagles.

I shouldn’t have to tell you that this is a perfect setup for a Silver explosion. During the bull market of the 70’s when Gold leapt by 700% it was Silver that took the cake – it went up 1400%. Take the time to read the article entitled “Silver Sales are Soaring,” you will be glad that you did.

None Dare Call it a Conspiracy
We at the The Gold Specialist blog rarely talk about the concerted effort by Governments around the World and Banks working on their behalf, to suppress the price of Gold and Silver. Although the evidence of this is clear and there are many voices within the industry that have been crying foul for many years, we chose not to cover it because the evidence was technically un-provable. Not anymore. The developments of this conspiracy were the driving force behind this emergency mid month release.

Thanks to the insider “whistleblower” Andrew McGuire, it’s going to be extremely hard to put the Gold and Silver Price Manipulation Conspiracy genie back in the bottle. During a recent hearing into the manipulation that was held by the Governmental Regulating Authority the Commodities Futures Trading Commission, Mr. McGuire confirmed the obvious – that the London Bullion Market Association is a Paper Gold Ponzi Scheme. According to McGuire the LMBA is engaging in fraud that is detrimental to both Gold and Silver Markets, claiming that the London Bullion Association is trading over 100 TIMES the amount of Gold that it actually has to back the trades. Within days of his testimony, Mr. McGuire and his family were involved in a hit and run car crash, which is purely coincidence we are sure. Here is more on the subject from the Gold Anti Trust Action Committee:

“On March 23, 2010, GATA Director Adrian Douglas was contacted by a whistleblower by the name of Andrew Maguire. Maguire is a metals trader in London. He has been told first-hand by traders working for JPMorganChase that JPMorganChase manipulates the precious metals markets, and they have bragged to how they make money doing so.

In November 2009 Maguire contacted the CFTC enforcement division to report this criminal activity. He described in detail the way JPMorgan Chase signals to the market its intention to take down the precious metals. Traders recognize these signals and make money shorting the metals alongside JPM. Maguire explained how there are routine market manipulations at the time of option expiry, non-farm payroll data releases, and COMEX contract rollover, as well as ad-hoc events.

On February 3 Maguire gave two days' warning by e-mail to Eliud Ramirez, a senior investigator for the CFTC's Enforcement Division, that the precious metals would be attacked upon the release of the non-farm payroll data on February 5. On February 5, as market events played out exactly as predicted, further e-mails were sent to Ramirez while the manipulation was in progress.

It would not be possible to predict such a market move unless the market was manipulated.”


So what did our strong “REGULATORS” do about the absolutely provable manipulation? Nothing. Not yet anyway.

We have been warning for years to stay away from “Paper” gold like the ETF’s GLD, SLV, and other similar “investment vehicles” if you dare call them investment vehicles. With the testimony of Mr. Mcguire we now know that these ETF’s play a critical role in the manipulation scheme. In fact, the numbers are so dubious that if all exchange traded funds that were supposedly storing gold on your behalf were faced with a demand for delivery from their clientele there would be no Gold left anywhere in the World.

This “rigging” of the market is commodity wide dealing with both Gold and Silver. The problem with trying to rig markets is that NOTHING is stronger than the free market and that market manipulation, 100% of the time, without fail, will eventually blow up into the face of the manipulators. Through trying to suppress the metals markets, the manipulators are trying to hold a beach ball underwater, it’s inevitable that beach ball is going to come rocketing out of the water at some point, and at that point, it’s possible that Gold could soar through $10,000/oz according to some analysts. The same results could be said for Silver. Again, the word is out, the genie is out of the bottle, there is no putting it back in.

Furthermore, this isn’t an isolated event. A recent audit of the Canadian Bullion Bank showed that the vaults are practically empty as well. Although they are supposedly the custodians of a very large ETF, and should be flush with Gold, but they aren’t. It even led one of the men that entered the vault to comment - "The game ends when the people who own all these paper obligations say enough and take physical delivery, and that's when the mess will occur."

Consider the Articles “Former Goldman Analyst Confirms LMBA Gold Market is ‘Paper Gold’ Ponzi Scheme,” “Will Fraud Lift Gold Prices to $10,000 Per Ounce, ” “National Inflation Association Says Silver Short Squeeze Immanent” and “The Latest Gold Fraud Bombshell: Canada’s Only Bullion Bank Gold Vault is Practically Empty.”

Your Open Invitation to Attend!
Mr. McGuire mentioned that the End Game with Paper Gold is near, and that a “mess” is on the horizon. The problem is that the so called “mess” isn’t on the horizon. It is already here, and it seems to be one of the main drivers of the recent surge in Silver and Gold. This massive fraud unfolding could be the instigator of a BIG run in precious metals and now is the time that you can take advantage of it.

Even absent the abysmal fraud and manipulation scheme, the events covered in the first 2/3 of this report should be enough to send Gold and Silver soaring – combine the two and we have the makings of an event that someday will be looked back upon in history. Judging from the evidence, that event will likely include huge advances in the prices of Gold and Silver. An event that could make $3,000 Gold and $100 Silver seem cheap.

Monday, April 12, 2010

Will Fraud Lift Gold Prices to $10,000/Ounce?

Geena Paul
CommodityOnline
April 6, 2010

After the sub-prime catastrophe in banking and realty sector, which led to the global recession in 2008-09, it is the turn of bullion markets now.
‘FRAUD’, that is the one word which comes to any investor’s mind when s/he reads about the Commodity Futures Trading Commission (CFTC) hearing on manipulations in bullion market by gold cartels.

So, the small and clean investors have been short-changed by big cartels during the past many years, especially during the recent boom time in bullion markets. Otherwise, how will you explain the biggest boom in paper gold (Exchange Traded Funds, ETFs) in the recent past with hardly any gold available in the market.

In fact, there is no gold left in this world if all the Gold ETFs ask for physical delivery. And, if that happens only god knows what will be the gold prices in the coming months — $10000 per ounce? Maybe, even more. Because, price of a commodity which is not available at all can go up to any level due to the sheer fact that it is not there in the market.

Read entire article

Silver Sales Are Soaring

Tyler Durden
ZeroHedge

Submitted By Jeff Clark, Senior Editor, Casey's Gold & Resource Report

The U.S. Mint just reported another record, but this time it wasn’t for gold. The Mint sold more Silver Eagles in March and in the first quarter of the year than ever before. A total of 9,023,500 American Silver Eagles were purchased in Q110, the highest amount since the coin debuted in 1986.

While this is certainly bullish, there’s something potentially more potent developing in the background. Namely, how this matches up with U.S. silver production. Like gold, the U.S. Mint only manufactures Eagles from domestic production. And U.S. mine production for silver is about 40 million ounces. In other words, we just reached the point where virtually all U.S. silver production is going toward the manufacturing of Silver Eagles.

Yikes.

This is especially explosive when you consider that roughly 40% of all silver is used for industrial applications, 30% for jewelry, 20% for photography and other uses, and only 5% or so for coins and medals.

To be sure, mine production is not the only source of silver. In 2009, approximately 52.9 million ounces were recovered from various sources of scrap. Further, the U.S. imported a net of about 112.5 million ounces last year. (Dependence on foreign oil? How about dependence on foreign silver!) So it’s not like there’s a worry there won’t be enough silver to produce the Eagle you want next month.

Still, why so much buying? The silver price ended the quarter up 15.5% from its February 4 low – but it was basically flat for the quarter, up a measly 1.9%. We tend to see buyers clamoring for product when the price takes off, so the jump in demand wasn’t due to screaming headlines about soaring prices.

I have a theory.

For some time, silver has been known as the “poor man’s gold.” Meaning, silver demand tends to increase when gold gets too “expensive.” The gold price has stubbornly stayed above $1,000 for over six months now and spent much of that time above $1,100. You’d be lucky to pay less than $1,200 right now for a one-ounce coin (after premiums), an amount most workers can’t pluck out of their back pocket. But Joe Sixpack just might grab a “twelve-pack” of silver.

What would perhaps lend evidence to my theory is if gold sales were down in the face of these higher silver sales.
The U.S. Mint reported a decline in gold bullion sales of 20.8% this past quarter vs. the same quarter in 2009. Further, other world mints have seen sharp declines in gold bullion coin sales as well: the Austrian Mint reported an 80% drop in sales for the first two months of the year and the Royal British Mint a 50% decline in gold coin production for the first quarter.

What’s even more dramatic is the difference in the dollar value of the sales. Gold Eagle sales in the U.S. dropped $10,263,500 from a year earlier – but silver sales increased by $61,855,290. So, not only did silver sales make up the drop in gold sales, they exceeded them by $51,591,790.

Is the rush into “poor man’s gold” underway?

Why the answer to that question is significant is that a shift toward silver for this reason could signal we’re inching closer to the greater masses getting involved in the precious metals arena. And that – for those of us who’ve been invested for awhile now – would be music to the ears. Because when they start getting involved, the mania will be underway, and from that point forward, it’s game on.

I’m not saying the mania is starting, and I actually think we could see another sell-off before things take off for good. Gold could dip to $1,000 and maybe even $950, with silver going to the $14-$15 range. But as clues like these begin to build up, we’ll know we’re getting closer. (And any drop to those ranges would clearly be a major buying opportunity.)

Everyone talks about gold, myself included, but a meaningful portion of one’s precious metals portfolio should be devoted to silver. The market is tiny, making the price potentially explosive. Remember that in the ‘70s bull market gold advanced over 700%, but silver soared over 1,400%.

Don’t be a “poor man” by ignoring gold’s shiny cousin.

Saturday, April 10, 2010

LTCM General Counsel On Debt Denial: "There Is Little Time To Avoid Catastrophe And Almost No Exit", Suggests Gold Price Of $5,500

Debt Denial, by James Rickards in The Daily Caller

The sovereign debt crisis has crossed a threshold. It’s no longer about economics. It’s about math and a complex system whose dynamics tell us there is little time to avoid catastrophe and almost no exit. Going forward, elections and policies will matter less as the debt plague takes hold and dictates hard outcomes.

It is the case that real debt cannot be repaid through any feasible combination of growth and taxes. We will soon arrive at the point where it cannot be rolled over. Debt includes contingent liabilities as well as bonds. In the U.S., this means social security, healthcare and housing obligations estimated at over $60 trillion. That does not include unfunded pension obligations of the states whose plans use fanciful 8% growth assumptions to limit contributions. Pension debt grows exponentially; a toxic brew of increased benefits, contribution shortfalls and anemic performance.

Even what we call money is debt. Paper money is a contract between citizen and government. As with any contract, it pays to read the fine print. Embossed on each U.S. bill is the phrase “Federal Reserve Note.” Give the Fed credit for full disclosure; these notes are liabilities. If the Fed’s mortgage assets were marked-to-market the Fed itself would be insolvent. In short, it’s all debt. Wealth is illusory if it involves a claim payable in dollars which are but a claim on an insolvent central bank backed only by its ability to print more debt. The situation is worse in the UK, Europe and Japan. The global financial system is a rope of sand.

If this system is illusory, how has it prospered over centuries? The answer is that for many years governments ran surpluses and at times had no debt at all. Growth was robust providing support to the tax base. Governments had the trust of bond markets to rollover maturing obligations. With some fits and starts, tangible wealth creation outpaced debt creation. And until recently paper money was backed by gold at fixed rates of exchange. Today all four legs of the table – surpluses, growth, trust and gold are gone or damaged.

There is no prospect for surpluses; nations hit the brink of disorder at the mere mention of 3% deficit-to-GDP ratios. Growth prospects are likewise dim given current policy. Obama grew spending on a feed-the-beast theory that forces taxes to rise to match spending. If Obama does not get his way, deficits will be ruinous. If he does get his way, taxes will stifle growth. You cannot tax your way to solvency in a world of low growth and compound interest.

As for market trust, go ask the Greeks. Each bond buyer has a critical threshold where he will not buy another bond. Picture bond buyers as theatre patrons. The image of someone yelling “fire” and patrons rushing out in a panic is familiar. More intriguing is the case in which just a few patrons rush out for no apparent reason. Do those remaining follow suit or stay seated? It depends on their individual thresholds. If high enough, everyone remains seated. But if some thresholds are low, those patrons leave too triggering other thresholds and so on until a cascade of exits empties the theatre.

In markets, the array of individual thresholds is immensely complex. The scale, interdependence and adaptability of market participants today are greater than ever. It would take very little to trigger a wholesale revulsion with sovereign debt.

What about gold? The view is that systems on a gold standard system cannot increase money supply as needed; of course, that’s the whole idea. Increasing money beyond the modest levels at which gold supply grows is the Keynesian remedy. But empirical evidence shows the so-called Keynesian multiplier is fractional and therefore a wealth destroyer. Another attack on gold is that there’s not enough of it to support money supply; but of course there’s always enough gold; it’s just a question of price.

The U.S. has never truly gone off the gold standard. The U.S. gold hoard today has a dollar value equal to about 20% of U.S. M1 money supply – a respectable ratio even in the heyday of the fractional gold standard. A gold price of $5,500 per ounce would comfortably support a broader U.S. money supply on a one-to-one ratio and maintain confidence in the dollar and U.S. sovereign debt.

Is there an exit? One path involves hyperinflation to destroy the real value of debt followed by redenomination and a new paper money game. The other path involves a gold backed currency at a non-deflationary price. This is a choice between denial and frank talk. Sound money leads to sound growth and the creation of real, not illusory, wealth.

James G. Rickards is a director of Omnis, Inc. and former general counsel of Long-Term Capital Management. Follow him at twitter.com/JamesGRickards.

Friday, April 9, 2010

BOMBSHELL: Bank Of International Settlements Sees US Debt/GDP At Over 400% By 2040

Tyler Durden
ZeroHedge

It's one thing to hear fringe bloggers raving breathlessly against the collision course that the US economy is on. It is something else to see the Bank of International Settlements call for the baseline projection for US debt/GDP to hit over 400% by 2040. And this excludes the bankrupt GSEs, bankrupt Social Security, and the soon to be bankrupt Medicare. In a must read report, the BIS (of the central bankers' central bank) provides the much needed segue to the work of Reinhart and Rogoff, and in not so many words confirms that the entire developed world is now bankrupt on a discounted basis.

With Debt/GDP ratios for virtually everyone expected to jump to over 400% in the bank's baseline scenario, it is no surprise why the Dow may well hit 1 quadrillion on nothing but Weimar and Zimbabwean ponzification, before it crashes instantaneously to zero. We exaggerate about the quadrillion, we do not exaggerate about the sovereign default. The current and previous administrations have doomed this country, just as all other administrations of the developed world have done the same, in order to bail out the banking system, in the greatest fatally flawed private-public risk transfer experiment ever attempted. Those who will walk out of it with virtually infinite wealth are about 0.1% of the US population (the same people who tell you now that all is well, and that their bonuses are fully justified). Those who won't, and will end up doing bad things to the aforementioned cohort, is everyone else. And the "everyone else" is getting angrier by the day, as they realize just how massive the wealth transfer scam truly is... if only they could tear themselves away from the iCrap, watching Tiger Woods' nonsensical Nike ads, or glower in schadenfreude as Simon Cowell rips another wanna be singer from head to toe.

Some key snippets from the BIS report:

Should we be concerned about high and sharply rising public debts? Several advanced economies have experienced higher levels of public debt than we see today. In the aftermath of World War II, for example, government debts in excess of 100% of GDP were common. And none of these led to default. In more recent times, Japan has been living with a public debt ratio of over 150% without any adverse effect on its cost. So it is possible that investors will continue to put strong faith in industrial countries’ ability to repay, and that worries about excessive public debts are exaggerated. Indeed, with only a few exceptions, during the crisis, nominal government bond yields have fallen and remained low. So far, at least, investors have continued to view government bonds as relatively safe.

But bond traders are notoriously short-sighted, assuming they can get out before the storm hits: their time horizons are days or weeks, not years or decades. We take a longer and less benign view of current developments, arguing that the aftermath of the financial crisis is poised to bring a simmering fiscal problem in industrial economies to boiling point. In the face of rapidly ageing populations, for many countries the path of pre-crisis future revenues was insufficient to finance promised expenditure.

There is no need to repeat just how horrendous the fiscal deficit picture is. Yet we will:

Overall fiscal balances have been deteriorating sharply – by 20–30 percentage points of GDP in just three years. And, unless action is taken almost immediately, there is little hope that these deficits will decline significantly in 2011. Even more worrying is the fact that most of the projected deficits are structural rather than cyclical in nature. So, in the absence of immediate corrective action, we can expect these deficits to persist even during the cyclical recovery.

Based on a very comprehensive data set, Reinhart and Rogoff (2009a) report that three years after a typical banking crisis the absolute level of public debt is on average about 86% higher than prior to the crisis. In those countries where the crisis was most severe, debt almost trebled. This time around, several countries are beyond this historical average: Ireland with increases in public debt of 98% between 2007 and 2009; and the United Kingdom with projected rises of 111% by 2011. Meanwhile, the United States and Spain – with projected increases of 75% and 78%, respectively, by 2011 – are not far behind.

We doubt that the current crisis will be typical in its impact on deficits and debt. The reason is that, in many countries, employment and growth are unlikely to return to their pre-crisis levels in the foreseeable future.8 As a result, unemployment and other benefits will need to be paid for several years, and high levels of public investment might also have to be maintained

Read Entire Article

Thursday, April 8, 2010

Inflation Warning Etched in Steel

Bill Fleckenstein
MSN Money
April 5, 2010

Pretend it’s 1933, as so many in the deflation camp think it is or soon will be (at least from the price-of-everything standpoint). If last Wednesday you reached for a copy of that day’s Financial Times, would you have expected to see the following headline — “Steel prices set to soar: Everyday goods will cost more” — in large print above the fold?

I don’t think so.

The newspaper went on to say: “Global steel prices are set to rise by up to a third, pushing up the cost of everyday goods from cars to domestic appliances, after miners and steelmakers yesterday agreed to a ground-breaking change in the iron ore price system.”

All along, as I’ve talked about money printing, I have said it was not possible to explain in advance which goods would climb in price (or when). I just knew that as the new money was put into circulation, prices would ultimately rise. Now they have, to some degree, for various items. Steel is a great example along with other base metals, oil, health care, insurance and taxes.

Read Entire Article

Conventional Wisdom

Quotes From 1929-1930: Buy, Buy, Buy

Tyler Durden
ZeroHedge

A good friend of ours at UBS, Robert Procaccianti, periodically emails us his pithy market thoughts, and yesterday he sent us the following. Great digging into some now infamous quotes after the 1929-30 bear market and the widespread view at the time that the worst was over because, of course, Mr. Market said so … erroneously as it turned out.

“[1930 will be] a splendid employment year.” — U.S. Department of Labor, New Year’s Forecast, December 1929

“I am convinced that through these measures, we have reestablished confidence.” — Herbert Hoover, U.S. President, December 1929.

“While the crash only took place six months ago, I am convinced we have now passed through the worst — and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us.” — Herbert Hoover, U.S. President, May 1930.

“This is the time to buy stocks. This is the time to recall the words of the late J. P. Morgan ... that any man who is bearish on America will go broke. Within a few days there is likely to be a bear panic rather than a bull panic. Many of the low prices as a result of this hysterical selling are not likely to be reached again in many years.” — R. W. McNeel, market analyst, as quoted in the New York Herald Tribune, October 30, 1929

“The Wall Street crash doesn't mean that there will be any general or serious business depression ... For six years American business has been diverting a substantial part of its attention, its energies and its resources on the speculative game ... Now that irrelevant, alien and hazardous adventure is over. Business has come home again, back to its job, providentially unscathed, sound in wind and limb, financially stronger than ever before.” — BusinessWeek, November 2, 1929

“...despite its severity, we believe that the slump in stock prices will prove an intermediate movement and not the precursor of a business depression such as would entail prolonged further liquidation...” — Harvard Economic Society (HES), November 2, 1929

“The end of the decline of the Stock Market will probably not be long, only a few more days at most.” — Irving Fisher, Professor of Economics at Yale University, November 14, 1929

“For the immediate future, at least, the outlook (stocks) is bright.” — Irving Fisher, Ph.D. in Economics, in early 1930

“... the outlook continues favorable...” - Harvard Economic Society Mar 29, 1930

Wednesday, April 7, 2010

The Latest Gold Fraud Bombshell: Canada's Only Bullion Bank Gold Vault Is Practically Empty

Tyler Durden
ZeroHedge

Continuing on the trail of exposing what is rapidly becoming one of the largest frauds in commodity markets history is the most recent interview by Eric King with GATA's Adrian Douglas, Harvey Orgen (who recently testified before the CFTC hearing) and his son, Lenny, in which the two discuss their visit to the only bullion bank vault in Canada, that of ScotiaMocatta, located at 40 King Street West in Toronto, and find the vault is practically empty.

This is a relevant segue to a class action lawsuit filed against Morgan Stanley, which was settled out of court, in which it was alleged that Morgan Stanley told clients it was selling them precious metals that they would own in full and that the company would store, yet even despite charging storage fees was not in actual possession of the bullion. It appears that this kind of lack of physical holdings by all who claim to have gold in storage, is pervasive as the actual gold globally is held primarily in paper or electronic form.

Lenny Organ who was the person to enter the vault of ScotiaMocatta, says "What shocked me was how little gold and silver they actually had." Lenny describes exactly how much (or little as the case may be) silver was available - roughly 60,000 ounces. As for gold - 210 400 oz bars, 4,000 maples, 500 eagles, 10 kilo bars, 10 one kilogram pieces of gold nugget form, which Adrian Douglas calculates as being $100 million worth, which is just one tenth of what the Royal Mint of Canada sold in 2008, or over $1 billion worth of gold. As Orgen concludes: "The game ends when the people who own all these paper obligations say enough and take physical delivery, and that's when the mess will occur."

Also note the interesting detour into what Stephan Spicer of the Central Fund Of Canada, said regarding his friend at a major bank, who wanted access to his 15,000 oz of silver, and had to wait 6-8 weeks for its to be flown in from Hong Kong.

It is funny that central bankers thought they could take the ponzi mentality of infinite dilution of all assets coupled with infinite debt issuance, as they have done to fiat money, and apply it to gold, in essence piling leverage upon leverage. They underestimated gold holders' willingness to be diluted into perpetuity - when the realization that gold owned is just 1% of what is physically deliverable, you will see the biggest bank run in history.

Monday, April 5, 2010

National Inflation Association: "Silver Short Squeeze Could Be Imminent"

Tyler Durden
ZeroHedge

A press release from the NIA finally picks up where everyone else has been for about two weeks. It is too bad, that those who brought the story to the foreground are getting exactly zero acknowledgement, but such is the media world.

Silver Short Squeeze Could Be Imminent

LEE, N.J., April 3 /PRNewswire/ -- The National Inflation Association today issued a silver update to its http://inflation.us members:

On December 11th, 2009 NIA declared silver the best investment for the next decade. In our December 11th article, we said that it wasn't a coincidence that the very day Bear Stearns failed was the same day silver reached its multi-decade high of over $21 per ounce. We went on to say, "The reason why we believe the Federal Reserve was so eager to orchestrate a bailout of Bear Stearns, is because Bear Stearns was on the verge of being forced to cover their silver short position."

JP Morgan took over the concentrated short position in silver from Bear Stearns and gained complete control over the paper price of silver. Within weeks, JP Morgan was able to manipulate the price of silver down to below $9 per ounce. NIA believes they were able to drive the price of silver down through "naked short selling," selling paper silver that is unbacked by physical silver.

On February 5th, we witnessed another sharp decline in silver prices, which NIA described on February 7th as being "just a temporary wash out, before a huge surge in silver prices later in 2010." Since then, silver prices have rebounded by 18%. The temporary wash out that occurred on February 5th was predicted by independent metals trader Andrew Maguire, who came out this week exposing the fraud that is taking place in the paper silver market.

On February 3rd, Andrew Maguire wrote Eliud Ramirez, a senior investigator for the CFTC's Enforcement Division, giving him the "heads up" for a "manipulative event" signaled for February 5th. He warned the CFTC that JP Morgan was about to manipulate down the price of silver after the release of non-farm payroll data on February 5th. Andrew said that the takedown would happen regardless of if employment was better or worse than expected and the price of silver would be flushed to below $15 per ounce. During the next couple of days, silver was crushed from $16.17 per ounce down to a low of $14.62 per ounce.

Despite all of the evidence given by Andrew Maguire to the CFTC of gold and silver manipulation, Andrew wasn't allowed to speak at last week's CFTC hearing on limiting gold and silver positions held by banks like JP Morgan. Bill Murphy of the Gold Anti-Trust Action Committee (GATA) was allowed to speak (within a five-minute time constraint) and present some of Andrew Maguire's evidence, but right when his presentation began there was a technical failure of the live television broadcast, which was mysteriously fixed as soon as he was done speaking. Bill Murphy was scheduled for several mainstream media television interviews after the CFTC hearings, but they were all abruptly cancelled at once.

A couple of days after the CFTC meeting, Andrew Maguire and his wife were involved in a bizarre hit-and-run car accident in London where a second car coming out of a side street struck their vehicle, which resulted in a police chase using helicopters and patrol cars before the suspect was nabbed. Andrew and his wife were released from the hospital with minor injuries. (NIA does not believe in conspiracy theories but when you consider that this is a potential multi-trillion dollar fraud that could bring down the world's financial system, it really makes you think.)

The silver market provides a window into what is happening in the gold market. Because the silver market is very small and its short position is so concentrated, its price is easier to manipulate than gold, but the same manipulation is taking place in gold on a much larger but less noticeable scale. In our opinion, the CFTC is under pressure not to do anything about the manipulation because the lower gold and silver prices are, the stronger the U.S. dollar appears to be. If we saw an explosion to the upside in gold and silver prices, it would result in a complete loss of confidence in the U.S. dollar.

NIA believes the precious metals markets are currently being artificially suppressed by paper gold and silver that doesn't physically exist. At last week's CFTC hearings, Jeffrey Christian of the CPM Group admitted that banks have leveraged their physical bullion by 100 to 1. This means for every 100 ounces of paper gold/silver that trade, there could be as little as 1 ounce of physical gold/silver in the vaults backing it. However, Mr. Christian sees no problem with this because he says "it has been persistently that way for decades" and there are "any number of mechanisms allowing for cash settlements."

What Mr. Christian fails to realize is, most investors around the world holding paper gold/silver believe they own physical gold/silver. There will come a time when these investors don't want cash settlements in U.S. dollars, but they will want the physical precious metals themselves. When investors around the globe eventually call for physical delivery of their precious metals, NIA believes it will result in the biggest short squeeze in the history of all commodities.

The physical silver market is now more tight than ever before. In the first quarter of 2010, the U.S. mint sold 9,023,500 American Silver Eagles, the most since the coin debuted in 1986 and up from 8,299,000 sold in the fourth quarter of 2009. All U.S. silver mines combined are currently producing only 40 million ounces of silver annually. This means the U.S. needs to use almost all of its silver production just to keep up with the demand for American Silver Eagle coins.

Silver closed this week at a 10-week high of $17.89 per ounce and a major short squeeze to the upside could be imminent. With the spotlight now on JP Morgan, NIA believes they will be less likely to naked short silver at these levels and manipulate the price down like in February. With the mainstream media blackout, it is important for NIA members to work harder than ever to spread the word and help expose what could be the largest fraud in the history of the world.

The Costs Of Socialism

Tyler Durden
ZeroHedge

For all who doubt the Obama administration will raise tax rates into the stratosphere in the very near future, here is a chart created by dshort.com which compares the total level of debt to GDP with Federal tax brackets over the past century. The correlation between the two isunmistakable . Unless the administration promptly finds a way to reduce the massive amount of debt that it continues to issue (in March alone the US Treasury issued a massive $333 billion in net debt), tax rates will have no option but to spike to levels not seen since the 50's. And that means a tax bracket for the highest earners of about 90%... You didn't think socialism comes cheaply now did you?



Here are some additional charts that correlate major moves in the Debt-GDP ratio with key external events...Is it time for WW3 yet?

Friday, April 2, 2010

Jim Grant Presents A Prospectus For The United States, Discusses The Death Penalty For US Coinage Debasers

Tyler Durden
ZeroHedge

Jim Grant joins Morgan Stanley (and contrary to Rosenberg's expectations) in anticipating US rates to rise promptly, primarily due to the world's negative "reappraisal of the US Treasury." This is not so much a debate on inflation or deflation, as it is a call on the (un)trustworthiness of the US as a lender. To that end, Grant has put together a Treasury prospectus (which we will post as soon as we procure it) which as Jim puts it "is a compendium of the salient facts about the Treasury as if it were an issuer that did not have a printing press... All you need to know about the credit risk of the US."

The first risk factor, via the GAO, "improper payments that should not have been paid by the Treasury totalled $98.7 billion, equivalent to 5% of Treasury outlays." Keep in mind the UST raised $333 billion in net debt in March, as we pointed out yesterday. Grant also discusses the Coinage Act of 1792, whose section 19 stipulates "that the penalty for anyone who would debase the coinage of the US, is death." By that logic, a firing squad may soon need to be sequestered to Washington. Grant's concludes that there is a "great suspension of disbelief in out US monetary system on behalf of the world over. One wonders when people will say no."

Wednesday, March 31, 2010

The Coming Inflation Wave


By Daryl G. Jones, contributorMarch 31, 2010: 6:05 AM ET


(Fortune) -- Whether the American economy is in an inflationary or deflationary environment sounds like it should be a fundamental and settled question. But due to the unprecedented financial crisis, the answer is actually subject to intense debate among economists.

Making economic projections is far from a scientific process, so it's not surprising to find valid arguments on both sides of the divide. The economists who are right will help investors drive returns over the next three years.

Inflation can be a positive or negative, depending on the level and duration of it in our economy. The main negative associated with inflation is a drop in purchasing power of money, and therefore, consumers. In extreme cases, consumers may actually start hoarding if they fear continued and aggressive price increases. The positive side of inflation is to decrease the real value of debt, or essentially provide debt relief.

How do we measure the level and duration of inflation, to know whether it will help or hurt? In basic terms, inflation is a rise in prices of basic goods and services over a given period of time. In the United States, the government generally tracks inflation using the Consumer Price Index, or CPI.

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Sell-off in US Treasuries Raises Sovereign Debt Fears

By Ambrose Evans-Pritchard

The yield on 10-year Treasuries – the benchmark price of global capital – surged 30 basis points in just two days last week to over 3.9pc, the highest level since the Lehman crisis. Alan Greenspan, ex-head of the US Federal Reserve, said the abrupt move may be "the canary in the coal mine", a warning to Washington that it can no longer borrow with impunity. He said there is a "huge overhang of federal debt, which we have never seen before".

David Rosenberg at Gluskin Sheff said Treasury yields have ratcheted up 90 basis points since December in a "destabilising fashion", for the wrong reasons. Growth has not been strong enough to revive fears of inflation. Commodity prices peaked in January and US home sales have fallen for the last three months, pointing to a double-dip in the housing market.

Mr Rosenberg said the yield spike recalls the move in the spring of 2007 just as the credit system started to unravel. "The question is how the equity market is going to handle this back-up in rates," he said.
The trigger for last week's sell-off was poor demand at Treasury auctions, linked to the passage of the Obama health care reform. Critics say it will add $1 trillion (£670bn) to America's debt over the next decade, a claim disputed fiercely by Democrats.

Read Entire Article

Monday, March 29, 2010

WGC Releases China Gold Report - "A New World Of Opportunity" As PBoC Expected To Buy Gold, Chinese Gold Mines Become Depleted

Tyler Durden
ZeroHedge

The World Gold Council spares no praise for the imminent surge in demand in China.

"The World Gold Council (WGC) believes that gold consumption in China will continue to catch up with the rest of the world following the deregulation of the Chinese gold market in 2001. Demand from China’s two largest sectors (jewellery and investment) reached a combined total of 423 tonnes in 2009 but domestic mine supply contributed only 314 tonnes during the same year. This Shortfall creates a “snowball” effect as China’s gold industry may not be able to keep pace with the annual leap in domestic consumption despite rising to be the world’s largest gold producer since 2007. Although the country’s appetite for gold has grown, making China the second largest consumer in the world, demand in China per capita has a lot of catching up to do to equal that of Western economies. In jewellery, the Chinese per capita consumption is one of the lowest at 0.26gm when compared to countries with similar gold cultures. If gold were consumed at the same rate per capita as in India, Hong Kong or Saudi Arabia, annual Chinese demand could increase by at least 100 tonnes to as much as 4,000 tonnes in this sector alone. Nearterm inflationary expectations and rising income levels are likely to support the investment case for gold as an asset class, especially given that Chinese consumers are high savers and are looking to gold to protect their wealth."

Keep an eye out on what the PBoC will do if and when it finally decides to readjust its gold holdings.

"The People’s Bank of China (PBoC) is also playing an increasingly supportive role for gold on the demand side. PBoC’s gold holdings are currently at 1.6% of its US$2.4tn total reserves – a fraction by international standards. If PBoC decides to rebalance its books to its recent peak gold holding as a proportion of reserves of 2.2% in Q4 2002, WGC estimates it could account for a total incremental demand of 400 tonnes at the current gold price."

Will supply meet demand at current prices? Negatory ghost rider. Existing gold mines are expected to be exhausted in six years. Oops.

"WGC analysis shows that, structurally, supply growth in China could be challenging unless there is more funding directed to exploration. Assuming the US Geological Survey’s figures are correct, China may exhaust existing gold mines in just six years. Despite the strong Yuan, total production costs have also risen by more than 30% in the last six years due to higher input costs (such as energy and labour) and lower ore grades. The outlook for gold in China remains positive and WGC believes that the balance between demand and supply in the Chinese gold market will continue to be in disequilibrium. In the longer term, if China continues to grow at near to the current rate in economic and wealth terms, gold consumption in China will continue to expand and has the potential to double during the next decade."

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It's Official - America Now Enforces Capital Controls

Tyler Durden
ZeroHedge

It couldn't have happened to a nicer country. On March 18, with very little pomp and circumstance, president Obama passed the most recent stimulus act, the $17.5 billion Hiring Incentives to Restore Employment Act (H.R. 2487), brilliantly goalseeked by the administration's millionaire cronies to abbreviate as HIRE. As it was merely the latest in an endless stream of acts destined to expand the government payroll to infinity, nobody cared about it, or actually read it.

Because if anyone had read it, the act would have been known as the Capital Controls Act, as one of the lesser, but infinitely more important provisions on page 27, known as Offset Provisions - Subtitle A—Foreign Account Tax Compliance, institutes just that. In brief, the Provision requires that foreign banks not only withhold 30% of all outgoing capital flows (likely remitting the collection promptly back to the US Treasury) but also disclose the full details of non-exempt account-holders to the US and the IRS. And should this provision be deemed illegal by a given foreign nation's domestic laws (think Switzerland), well the foreign financial institution is required to close the account. It's the law. If you thought you could move your capital to the non-sequestration safety of non-US financial institutions, sorry you lose - the law now says so. Capital Controls are now here and are now fully enforced by the law.

Let's parse through the just passed law, which has been mentioned by exactly zero mainstream media outlets.

Here is the default new state of capital outflows:

(a) IN GENERAL.—The Internal Revenue Code of 1986 is amended by inserting after chapter 3 the following new chapter:

‘‘CHAPTER 4—TAXES TO ENFORCE REPORTING ON CERTAIN FOREIGN ACCOUNTS
‘‘Sec. 1471. Withholdable payments to foreign financial institutions.
‘‘Sec. 1472. Withholdable payments to other foreign entities.
‘‘Sec. 1473. Definitions.
‘‘Sec. 1474. Special rules.
‘‘SEC. 1471. WITHHOLDABLE PAYMENTS TO FOREIGN FINANCIAL INSTITUTIONS.

‘‘(a) IN GENERAL.—In the case of any withholdable payment to a foreign financial institution which does not meet the requirements of subsection (b), the withholding agent with respect to such payment shall deduct and withhold from such payment a tax equal to 30 percent of the amount of such payment.

Clarifying who this law applies to:

‘‘(C) in the case of any United States account maintained by such institution, to report on an annual basis the information described in subsection (c) with respect to such account,
‘‘(D) to deduct and withhold a tax equal to 30 percent of—

‘‘(i) any passthru payment which is made by such institution to a recalcitrant account holder or another foreign financial institution which does not meet the requirements of this subsection, and

‘‘(ii) in the case of any passthru payment which is made by such institution to a foreign financial institution which has in effect an election under paragraph (3) with respect to such payment, so much of such payment as is allocable to accounts held by recalcitrant account holders or foreign financial institutions which do not meet the requirements of this subsection.

What happens if this brand new law impinges and/or is in blatant contradiction with existing foreign laws?

‘‘(F) in any case in which any foreign law would (but for a waiver described in clause (i)) prevent the reporting of any information referred to in this subsection or subsection (c) with respect to any United States account maintained by such institution—

‘‘(i) to attempt to obtain a valid and effective waiver of such law from each holder of such account, and
‘‘(ii) if a waiver described in clause (i) is not obtained from each such holder within a reasonable period of time, to close such account.

Not only are capital flows now to be overseen and controlled by the government and the IRS, but holders of foreign accounts can kiss any semblance of privacy goodbye:

‘‘(c) INFORMATION REQUIRED TO BE REPORTED ON UNITED STATES ACCOUNTS.—
‘‘(1) IN GENERAL.—The agreement described in subsection (b) shall require the foreign financial institution to report the following with respect to each United States account maintained by such institution:
‘‘(A) The name, address, and TIN of each account holder which is a specified United States person and, in the case of any account holder which is a United States owned foreign entity, the name, address, and TIN of each substantial United States owner of such entity.
‘‘(B) The account number.
‘‘(C) The account balance or value (determined at such time and in such manner as the Secretary may provide).
‘‘(D) Except to the extent provided by the Secretary, the gross receipts and gross withdrawals or payments from the account (determined for such period and in such manner as the Secretary may provide).

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Former Goldman Commodities Research Analyst Confirms LMBA OTC Gold Market Is "Paper Gold" Ponzi

Tyler Durden
ZeroHedge

When we put up a link to last week's CFTC hearing webcast little did we know that it would end up being the veritable (physical) gold mine (no pun intended) of information about what really transpires in the commodities market. First, we obtained direct evidence from Andrew Maguire (who may or may not have been the target of an attempt at "bodily harm" as reported yesterday) of extensive manipulation in the silver market.

Today, Adrian Douglas, director of GATA, adds to the mountain of evidence that the commodities market, and the CFTC, stand behind what is potentially the biggest market manipulation scheme in the history of capital markets (we are assuming for the time being that all allegations of the Fed manipulating the broader equity and credit markets are completely baseless). Using the testimony of a clueless Jeffrey Christian, formerly a staffer at the Commodities Research Group in the Goldman Sachs Investment Research Department and now head and founder of the CPM Group, Douglas confirms that the "LBMA trades over 100 times the amount of gold it actually has to back the trades."

Christian, who describes himself as "one of the world’s foremost authorities on the markets for precious metals" yet, in the words of Gary Gensler, said "that the bullion banks had large shorts to hedge themselves selling elsewhere- how do you short something to cover a sale, I didn’t quite follow that?" and proves that current and former Goldman bankers are some of the most arrogant people alive, assuming that everyone else is an idiot and will buy whatever explanation is presented just because the CV says Goldman Sachs. Yet Christian confirms that the gold market is basically a ponzi: "in the “physical market” as the market uses that term, there is much more metal than that…there is a hundred times what there is." And there you have it: as Douglas eloquently summarizes: "the giant Ponzi trading of gold ledger entries can be sustained only if there is never a liquidity crisis in the REAL physical market. If someone asks for gold and there isn’t any the default would trigger the biggest “bank run” and default in history. This is, of course, why the Central Banks lease their gold or sell it outright to the bullion banks when they are squeezed by high demand for REAL physical gold that can not be met from their own stocks" and concludes "Almost every day we hear of a new financial fraud that has been exposed. The gold and silver market fraud is likely to be bigger than all of them. Investors in their droves, who have purchased gold in good faith in “unallocated accounts”, are going to demand delivery of their metal. They will then discover that there is only one ounce for every one hundred ounces claimed. They will find out they are “unsecured creditors”.

For those of you who missed the CFTC hearing, here are two of the must-watch clips. In the first one, Adrian Douglas introduces the underlying concerns about the Ponzi nature of the LBMA hedging situation, in which a wholesale rush to "physical delivery" would result in a one hundred fold dilution of gold holdings, and a 99% result of unsecured creditor claims (good luck collecting on that particular bankruptcy). We also meet Jeffrey Christian, formerly of Goldman and currently of CPM, in which not only does the "expert" state that a bullion bank short is hedged by further shorting, but confirms Douglas' and GATA's previous claims that the "physical" market, as defined, is a joke, as the OTC market treats gold purely as a financial asset, essentially conforming to the precepts of fractional reserve banking. As Douglas notes "He confirms that the LBMA trades hundreds of times the real underlying physical. This is even a higher estimate than I have previously made! It is, as I asserted before the Commission, a giant Ponzi Scheme."

Monday, March 22, 2010

Obama Pays More Than Buffett as U.S. Risks AAA Rating

March 22 (Bloomberg) -- The bond market is saying that it’s safer to lend to Warren Buffett than Barack Obama.

Two-year notes sold by the billionaire’s Berkshire Hathaway Inc. in February yield 3.5 basis points less than Treasuries of similar maturity, according to data compiled by Bloomberg. Procter & Gamble Co., Johnson & Johnson and Lowe’s Cos. debt also traded at lower yields in recent weeks, a situation former Lehman Brothers Holdings Inc. chief fixed-income strategist Jack Malvey calls an “exceedingly rare” event in the history of the bond market.

The $2.59 trillion of Treasury Department sales since the start of 2009 have created a glut as the budget deficit swelled to a post-World War II-record 10 percent of the economy and raised concerns whether the U.S. deserves its AAA credit rating. The increased borrowing may also undermine the first-quarter rally in Treasuries as the economy improves.

“It’s a slap upside the head of the government,” said Mitchell Stapley, the chief fixed-income officer in Grand Rapids, Michigan, at Fifth Third Asset Management, which oversees $22 billion. “It could be the moment where hopefully you realize that risk is beginning to creep into your credit profile and the costs associated with that can be pretty scary.”

Moody’s Warning

While Treasuries backed by the full faith and credit of the government typically yield less than corporate debt, the relationship has flipped as Moody’s Investors Service predicts the U.S. will spend more on debt service as a percentage of revenue this year than any other top-rated country except the U.K. America will use about 7 percent of taxes for debt payments in 2010 and almost 11 percent in 2013, moving “substantially” closer to losing its AAA rating, Moody’s said last week.

“Those economies have been caught in a crisis while they are highly leveraged,” said Pierre Cailleteau, the managing director of sovereign risk at Moody’s in London. “They have to make the required adjustment to stabilize markets without choking off growth.”

Advanced economies face “acute” challenges in tackling high public debt, and unwinding existing stimulus measures will not come close to bringing deficits back to prudent levels, said John Lipsky, first deputy managing director of the International Monetary Fund.

Unprecedented Spending

All G7 countries, except Canada and Germany, will have debt-to-GDP ratios close to or exceeding 100 percent by 2014, Lipsky said in a speech yesterday at the China Development Forum in Beijing. Already this year, the average ratio in advanced economies is expected to reach the levels seen in 1950, after World War II, he said.

Obama’s unprecedented spending and the Federal Reserve’s emergency measures to fix the financial system are boosting the economy and cutting the risk of corporate failures. Standard & Poor’s said the default rate will drop to 5 percent by year-end from 10.4 percent in February.

Bonds sold by companies have returned 3.24 percent this year, including reinvested interest, compared with a 1.55 percent gain for Treasuries, Bank of America Merrill Lynch index data show. Returns exceeded government debt by a record 23 percentage points in 2009.

By: Daniel Kruger and Bryan Keogh

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Thursday, March 18, 2010

Central Bank Gold Holdings Expand at Fastest Pace Since 1964

March 18 (Bloomberg) -- Central banks added the most gold to their reserves since 1964 last year amid the longest rally in bullion prices in at least nine decades, data compiled by the World Gold Council show.

Combined holdings rose 425.4 metric tons to 30,116.9 tons, an increase worth $13.3 billion at last year’s average price, according to the data. India, Russia and China said last year they added to reserves. The expansion was the first since 1988, the data from the London-based council show

Central banks, holding about 18 percent of all gold ever mined, are expanding their holdings for the first time in a generation as investors in exchange-traded funds amass bullion as an alternative to currencies. Holdings in the SPDR Gold Trust, the biggest ETF backed by the metal, are at 1,115.5 tons, more than the holdings of Switzerland.

“There’s clearly been a renaissance of gold in central bankers’ minds,” said Nick Moore, an analyst at Royal Bank of Scotland Group Plc in London. “It’s not just been central banks taking on gold, but a general shift for physical gold in the investment sector.”

Official reserves of central banks and governments may expand by another 187 to 218 tons this year, CPM Group forecast last month. The council’s data also includes the holdings of the International Monetary Fund, European Central Bank and other international and regional bodies.

Gold climbed 24 percent last year, reaching a record $1,226.56 an ounce in December. World holdings rose 527 tons in 1964 and climbed 832.7 tons the year before that, according to the London-based industry group.

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Wednesday, March 17, 2010

Kiss AAA Goodbye - Moodys

March 15 (Bloomberg) -- The U.S. and the U.K. have moved “substantially” closer to losing their AAA credit ratings as the cost of servicing their debt rose, according to Moody’s Investors Service.

The governments of the two economies must balance bringing down their debt burdens without damaging growth by removing fiscal stimulus too quickly, Pierre Cailleteau, managing director of sovereign risk at Moody’s in London, said in a telephone interview.

Under the ratings company’s so-called baseline scenario, the U.S. will spend more on debt service as a percentage of revenue this year than any other top-rated country except the U.K., and will be the biggest spender from 2011 to 2013, Moody’s said today in a report.

“We expect the situation to further deteriorate in terms of the key ratings metrics before they start stabilizing,” Cailleteau said. “This story is not going to stop at the end of the year. There is inertia in the deterioration of credit metrics.”

The pound fell against the dollar and the euro for the first time in three days, depreciating 0.8 percent to $1.5090, while the dollar index snapped a four-day drop, adding 0.3 percent to 90.075.

The U.S. government will spend about 7 percent of its revenue servicing debt in 2010 and almost 11 percent in 2013, according to the baseline scenario of moderate economic recovery, fiscal adjustments in line with government plans and a gradual increase in interest rates, Moody’s said.

Under its adverse scenario, which assumes 0.5 percent lower growth each year, less fiscal adjustment and a stronger interest-rate shock, the U.S. will be paying about 15 percent of revenue in interest payments, more than the 14 percent limit that would lead to a downgrade to AA, Moody’s said.

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