Monday, September 26, 2005

Silver's Price Gap

Silver last week on Monday of that week gapped up in price from the prices on Friday of the week before. Monday of last week was also 4 up days in a row. So the odds of prices going back down to fill that gap were good. That gap was filled Friday of last week. Good. Another job silver got done.

Today, Monday, silver traded intra day below Friday's prices and intra day above Friday's prices. Additionally silver closed above Friday's close. That is a bullish outside day. Very nice to see in addition to the gap getting closed.

Today's outside day for silver can be seen on this daily bar chart

"I love the poor. It's cheaper to buy 'em. And, they're grateful." - a certain covert operative [if there were no poor in the world there would be no governments or governments would be tiny in size and power]

Thursday, September 22, 2005

Danger Signs of Global Crisis and Clyde Prestowitz

Danger signs of global crisis

Author and member of former President Ronald Reagan’s administration Clyde Prestowitz says the United States is "being completely irresponsible" with its growing budget deficit, which spells a crisis bigger than the Great Depression, unless it takes charge. HARDEV KAUR writes. "I AM less worried about Malaysia than the US," Clyde Prestowitz, author of Three Billion New Capitalists: The Great Shift of Wealth and Power to the East said.

The US, the world’s greatest consumer, the world’s largest economy and the only driver of world economic growth, "was being completely irresponsible" and endangering the world economy.

Clyde, who was in Kuala Lumpur recently, suggested that perhaps America may consider "outsourcing management of the US economy to Asia".

It is not as simple as blaming China, India and other Southeast Asian economies for the woes of the American economy. Prestowitz, who took a year to complete the book, points out that it involves the US government’s failure to develop and promote a clear industrial policy.

It is time American administrators and policy makers woke up to the fact that the world has changed. What worked for the US previously will not work in the future. Washington must be prepared for a new world that is very competitive, aggressive and well educated.

In the book, which covers China, India and Russia with a combined population of three billion pursuing market economies, he argues that these "new capitalists" will give Americans a new perspective and a run for their money.

But America is over consuming and is "being completely irresponsible" with its growing budget deficit. It does not worry and as Vice-President Dick Cheney said we "can just print these things (money)". This however means that other nations do not have to be fiscally responsible either as they have US dollar reserves. And this spells danger.

While Asia saves, the US continues to consume. America thus continues to absorb global savings, which Prestowitz estimates is 80 per cent. And with the growing American appetite for consumption, the figure could reach 100 per cent "and when this happens the music stops".

The resultant problems confronting the global economy would be on a scale that would dwarf the Great Depression of the 1930s, Prestowitz warns.

A member of former President Ronald Reagan’s administration, Prestowitz says there is no one in charge of fixing the economic problems. There are danger signs on the horizon and warnings of impending problems including that from Paul Volker, the former head of the US Federal Reserve. Volker forecasts a 75 per cent chance of a global financial crisis in the next five years. And yet, there appears to be no one "in charge".

"To pre-empt the gathering financial crisis and ensure a sounder basis for the third wave of globalisation, the United States should take the lead in a global effort to reduce the role of the dollar," he writes in the book.

"It must do so gradually and cautiously. Because the whole system now depends on US consumption and dirty floating of the dollar, any sudden or unilateral change could precipitate disaster."

Indeed there are already moves by Opec and Russia to reduce their exposure to the US dollar. If other nations also reduce their dollar holdings, Prestowitz believes that the US standard of living will quickly decline as America does not have the physical capacity to eliminate its trade deficit, and instead will have to cut consumption.

In the absence of a strategy in the US, the decisions are made elsewhere — in Beijing for example — and Prestowitz points out that Beijing may not always make decisions that are "best for the US".

"My point is not to say that China is bad or evil or that we ought to be afraid of China. It is much more to say that we need to understand the game China is playing and then play our game so that we maintain our position," he said.

He makes a plea that America must educate its people and get them ready to be competitive intellectually and in their work ethic with countries like India and China, or "we will become a second rate power".

Even now jobs are moving out to more competitive regions. Twenty-four hour work shifts have taken on a totally new meaning — outsourcing. The job can be done thousands of kilometres away and at a fraction of the cost in the US. And the Chinese can do the job for 20 per cent less, Prestowitz says.

"Now a strong (and more confident) China has decided to open its doors itself and join the global trade game in order to level the playing field. As the world’s low cost manufacturer, China was about to turn globalisation into a whole new ball game."

This poses challenges to Washington which finds that "… Its relative economic superiority and power are rapidly slipping away. Far from leading the world on a global march to freedom, the United States could find itself hard-pressed to maintain a reasonable standard of living and defend its vital interests," Prestowitz says. And this will have consequences for the rest of the world.

Saturday, September 17, 2005

Real Bills vs. Rothbard's 100% Gold System

Real Bills vs. Rothbard's 100% Gold System
by Nelson Hultberg
September 6, 2005

In two recent articles, Fool's Gold and Real Bills, Phony Wealth, Sean Corrigan and Robert Blumen of the Mises Institute have put forth attempted rebuttals to Antal Fekete's work on the Real Bills Doctrine as a necessary accompaniment to a gold monetary system. They offer numerous economic arguments as to why real bills are supposedly dangerous instruments that will ignite inflation, and why Murray Rothbard's 100% gold standard is the only answer. There are four basic flaws in their analyses that I will cover in this essay. These are far from the only flaws, but I will leave a further and more theoretical examination to Dr. Fekete himself.

For the rest of this essay

News on the US Fed meeting about credit derivatives settlement

According to the BIS, total otc derivatives in the world are somewhere around $250 trillion or the best part of $300 trill. I doubt that the BIS, at any point in time, can really know the true amount of derivatives out there in the world. I think that these things have the potential to ultimately freeze up the world's financial system at least for a little while. Can you imagine how useful real money will be for those that have it at a time like that, and had the forsight to buy real money dirt cheap? Now a days most people's wealth is just digital bits on a hard drive representing liabilities. Most people think they own their "money" (a term from the old days which is now commonly used to mean digtal bits. Hey, how did that happen? It's a long story.) in a bank. "money" in a bank is mostly nothing but digital bits. You can't **own** something if you do not have real control over it. The bank's system administrator has control over the bits on a hard drive of a computer. A system administrator is controled by his employer. Lets call the employer a financial institution. Governments control financial institutions. Guess who **owns** your "money"? Oh, but I "own" stocks and bonds you say. Sorry. Most of those are just digital bits, too. Funny how the world's financial system has come such a long long long way in changing who really controls (read **owns**) what.

Thursday, the crooks agreed to police themselves.
The foxes agreed to protect the chickens.

It ain't a pretty picture out there.

Dealers Vow to Enforce
Tougher Rules in CDS Market

By Karen Brettell and Dean Patterson
Thursday, September 15, 2005

NEW YORK -- Fourteen credit derivative dealers met with the New York Federal Reserve Bank on Thursday and vowed to police the booming market themselves to keep regulators from doing it, a meeting participant said.

This will entail dealers eventually refusing to do business with clients, namely hedge funds, that do not adopt standard systems and practices that stop delays in trade confirmations and lax disclosure of contract transfers, according to the meeting participant, who is a dealer.

"Dealers have the resolve and unity to do whatever it takes to resolve these issues," the dealer said. "We will be firm with the hedge funds. We are willing to do it."

The dealers also agreed to produce a standard set of statistics that will be supplied to regulators to show whether back office operations are improving, the dealer said.

The dealers also agreed to set up special desks to deal with lags in trade confirmations and disclosure of contract transfers, the dealer said.

All 14 dealers endorsed new protocol announced earlier this week to reduce confusion regarding contract transfers, the dealer said. Dealers will "unquestionably" be able to comply with the new protocol by its target date of Oct. 24, the dealer said.

"We will enforce the protocol with hedge funds," he added.

The U.S. credit derivatives market has grown more than eight-fold over the last three years to $8.42 trillion at the end of 2004, according to industry groups.

At issue were lags in the processing of trades and delays in informing involved parties when contracts change hands, which regulators believe has the potential to throw the market into confusion if it comes under stress.

Delays in processing trades could lead to disputes over payments in the event of a default, as well as confusion over the amount of exposure banks have to counterparties.

The Fed is concerned that delays in communicating to involved parties when contracts change hands could spill into systemic problems in the global financial system.

"Industry participants outlined a number of concrete steps," to address the back office issues, the Fed said after the meeting. "The Federal Reserve and other members of the supervisory community will continue to monitor developments in this market very closely."

Investors use credit default swaps, the most common credit derivative, to protect against borrowers defaulting on their debt. They are also used to speculate on the future direction of a debt issuer's credit quality.

U.K. regulator Financial Services Authority, which was expected to attend the meeting along with regulators from Switzerland and Germany, as well as other U.S. regulators, first raised concerns about operational risk in the credit derivatives market in February.

The 14 banks invited to the meeting, which started at 4 p.m. EDT at the New York Fed's offices, were Bank of America Corp., Barclays Capital, Bear Stearns, Citigroup, Credit Suisse's Credit Suisse First Boston, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan Chase & Co., Lehman Brothers, Merrill Lynch, Morgan Stanley, UBS, and Wachovia Corp.


Friday, September 16, 2005

Gold's Gap Up In Price

Yesterday, Thursday, September 15, gold gapped up in price on the COMEX.
The December contract
Normally in a case like this, a bull market, prices would go back down to the bottom of that gap to close that gap before turning around and going back up.

It would not surprise me if this does not happen with gold here as the US Treasury notes and bonds were down substantially yesterday. In other words the bond vigilanties may be back in the note and bond markets due to fear of loss of purchasing power of USD denominated debt instruments. It looks like notes and bonds are making double tops to this most recent rally attempt.
A chart of the 10 year notes
A chart of the 30 year bonds

"We hang the petty thieves and appoint the great ones to public office." - Aesop, Greek fableist

Wednesday, September 14, 2005

Market dislocation in US Treasury bonds

U.S. Treasury Sees `Market Dislocation' in 2012 Notes

If an interest rate sensitive derivative nuetron bomb goes off, gold and silver prices should explode upwards. It is hard to see how tie wire and chicken fencing can continue to hold up the appearance of a healthy US economy.

Also, tomorrow is when Greenspan has a special meeting with the 14 largest credit derivatives players in the US.

"Gold’s honesty is derived from the fact that it is an asset free of debt acting as a measure of value, a storehouse of value with universal acceptability as a medium of exchange. " - Anonymous

Time to roll out the safe havens?

Even the establishment Economist magazine is suggesting all hell (inflation) is going to break loose shortly:

"Alan Greenspan has achieved the remarkable feat of suspending disbelief in America’s gerrymandered finances for the past few years. On his departure, watch the gold price soar."

Pump panic, gold glee (September 13)

Strange, today, September 14, gold recovered all of yesterday's loss.

"How fortunate for governments that the people they administer don't think" - Adolf Hitler

Saturday, September 10, 2005

Monty Guild

Monty Guild is one smart cookie and a money manager.

Friday, September 09, 2005, 12:31:00 PM EST


Author: Monty Guild

Several years ago, we became bullish on energy and precious metals for our clients. Our bullishness was a creature of long term economic and social events, which will continue to affect the world for at least one generation and probably longer.

The most important event is the entry of about one billion new people into the developed world's economic system. On top of the generational trend, there are shorter-term trends as well. They may be connected to the election cycle in a country or to seasonal or other cycles, which are a function of local events within an individual country (i.e. changes of government, wars, political instability).

We did not become bullish on energy because of terrorism and Middle-East tension, although it is a secondary reason to see oil and gold go higher.

There are six billion people on earth and about one billion live in the parts of the world with somewhat developed economies. They live in Europe, Canada, U.S., Japan and small parts of Asia, South America and Africa.

We became bullish on oil and gold because several years ago we saw that two major population blocks were joining the world economic system. We began to ask how they would make themselves felt. If they were to add 40% of their population to the world economic system - that is, if China and India were successful in lifting only 40% of their people out of subsistence economics into the world economic system - the size of the system would double in a generation.

If in twenty years the number of individuals participating in the industrialized world doubled, it would take a 4%+ compounded growth rate for the entire world economy to accommodate that growth. The world economic system would grow at 10% in some sectors and at 1% in others. China and India have been growing at about 9% and 7% respectively.

We saw two possible avenues for their expression in the world economy and concluded the growth would cause big changes in the way the world used resources and held its wealth:

1. The Southeast countries would collect and use raw materials, especially energy and industrial minerals (i.e. iron ore, coal, copper etc.). In order to create an economic base, raw materials, labor, capital and technological know-how were necessary. These countries had labor in excess, they had technological know-how, and the developed world was happy to give them capital. What they needed was raw materials to build the economic system.

2. Once assets were acquired as a result of creating and selling products and services, they would acquire gold and strong currencies to hold their accumulated assets. They would acquire gold and other precious metals as a store of value to protect their newly acquired wealth. We must remember that India has a history of thousands of years of holding their wealth in the form of gold jewelry and gold bullion.


Accumulated wealth can be reinvested in the country. It can also be hoarded to protect a family's assets or it can be invested for interest. The demand for gold is both for hoarding and for investment. Gold pays no interest, but if it is rising versus, say, the U.S. dollar at 10%, it is better than collecting 4% interest in U.S. dollar bonds.

The weakness in the dollar over the last few years, and the policies of the U.S. government, have caused China and India to hold a larger proportion of their hoarding and income earning assets in gold and other currencies, and less in U.S. dollars.

These people are very intelligent and their long history has taught them to count on the family, rather than the government for good advice on how to hold on to your assets. They prefer something portable that cannot be debased, manipulated and easily confiscated. Gold represents this type of asset. As their assets grow, their demand for gold grows.


In our opinion, in the short run, currency speculators look at real interest rate differentials between competing currencies. In the intermediate period, they look at balance of trade figures. In the long run, GDP growth rates and budget deficit figures are of concern.

In the case of the U.S. dollar, none of these figures look good. If you monitor these statistics,you know the U.S. dollar and many foreign currencies are not the place to hold assets. Gold is the place. As wealth increases in China and India, we expect a bigger and bigger percentage of assets to be held in gold.


How industrialized are China and India?

We estimate that about 5 -10% of people in these countries may be approaching middle class living standards. Their objective is 40%. They have a long way to go, and as long as they want to grow, they will consume energy and industrial minerals and they will hold gold and non-U.S. currencies for their savings.

Plantation Capitalism

A little history on the big picture from Sanders Research Associates
When investing, it is good to try and keep the big picture in mind.
This article might be helpful:


September 7, 2005

Plantation Capitalism

[a big picture of Bush in front of the White House surrounded by his three military advisors]

"Above all, the idea of democracy and majority rule must be deligitimised....But at the same time, and still more importantly, a positive alternative to monarchy and democracy ─ the idea of a natural order ─ must be delineated and understood."

Hans-Hermann Hoppe (221) Democracy, The God That Failed
New Brunswick (USA), Transaction Publishers, ISBN0-7658-0088-8, pp. 70-71

Hurricane Katrina has torn the last shreds of veil off the militarised state in America. Of all the pictures stage managed by the minders of the White House, that of Bush surrounded by his head of state security, Joint Chiefs chairman and secretary of war is the most revealing. The absence of the civilian leadership of the cabinet says it all. It is the militarists who are in charge.

[a picture of Marine Major General Smedley Butler]

Some seventy years ago, the US narrowly missed a coup attempt, thanks to the unwillingness of the putative caudillo to play the role assigned to him by the right wing backers of the putsch. Retired Marine Major General Smedley Butler, the most decorated soldier in American history with two Medals of Honour, turned down the proposition that he lead 500,000 veterans in a march on Washington. Butler came to the view late in life that war is nothing more than an extension of the rackets, a view that is sorely missed in Washington today.

The US increasingly resembles the banana republics in which Butler forged his military career, where the national budget is controlled by a corporate and military elite supported if not controlled by foreign allies with financial and strategic interests to be served. Its economy runs structural deficits with the rest of the world, thanks to the domination of its politics by interests whose chief concern is quick and certain profits. Their preference is for real estate and stock markets as opposed to the long term payback of heavy industry, for the legislated competitive advantage as opposed to building better products. In a word, they prefer gaming the system as opposed to building one, which is the best reason of all for supposing that the dispossessed of New Orleans remain so, and water-stressed Las Vegas is replaced by casinos on the Gulf with a colonial theme when the developers take over.

This sort of economy is not suited for republican democracy, because no one with a vote other than those who stand to profit would endorse such a program. Since so few do stand to profit, democracy is just a pose, a theme for an advertising campaign. This is coming as a shock to those who are surprised by the government’s insouciance and used to the idea that government for the people and by the people means all the people, and not just a few. But in fact the democratic experiment in North America was always just that, an experiment, and always subject to assault from those who found it convenient only as a way to buy influence. From its beginnings four centuries ago, North America was a colonial project just as were Butler’s banana republics, so the resemblance is neither new nor especially surprising when you think about it. In the intervening centuries industrialisation and the spread of public sanitation and healthcare changed the dynamics of the relation between capital and labour, with the pendulum of power swinging from the former to the latter far enough to scare the hell out of the former. The result by the middle of the 20th century was a historic compromise between the two, leading to the incorporation of labour in the form of unions that collaborated with management. Labour peace was traded for a piece of the action.

This was not just an American phenomenon, but one generalised with national differences across the euphemistically labelled Free World, financed by American credit, policed by the American military, and fuelled by American or American-guaranteed oil. Those were the days alright, and the prosperity that resulted for the survivors of World War Two rebuilding a shattered industrial world has led to tremendous misconceptions as to the nature of that prosperity and its source. Missing from the generally middle class conception of the period as a golden age is a consciousness of what it meant for those who did not enjoy a piece of the action, whether they were non-union workers in the US, American blacks (often the same thing) oppressed by Jim Crow laws, or Vietnamese, Algerians, Africans or Latin Americans fighting for their piece of the action. Hurricane Katrina has changed that.

[a chart starting in 1983 showing constantly increasing federal national security spending which really zooms up starting in 2000 with the notation "It doesn't buy much security, so what does it buy?"]

A more recondite misconception arises in economics, in which the establishment view is that “free” trade is good and “managed” trade is bad. Leaving aside notions of good and bad one is left with no notion at all since the dichotomy of free versus managed trade is a false one in the first place. Modern free traders have no more in common with Adam Smith than with the man in the moon, their real pedigree being from the colonial businessmen of four centuries ago who set out from Amsterdam and London to build empires based on the exploitation of mineral and animal resources and commodified agricultural produce in the form of sugar, tobacco and opium as a means of generating gold and silver with which to trade with Asia. North America being populated with aboriginal peoples whose attitudes made them ill suited to the money economy, a labour problem arose. Since no one in their right minds would leave a fertile and temperate country like England for an uncertain future in the back of beyond months away by sea and then some, the solution to this problem early on was based on coercion. This was political in the case of some of the early religious groups to found colonies and prisoners of war from the English Civil War and penal in the case of civil criminals and others dragooned into indentured service in the colonies. This was never going to be enough in the tropical and semi tropical climates in which tobacco and sugar production thrived, and the African slave trade was born.

So free trade from the start was based on some very unfree foundations. These amounted to international labour arbitrage to acquire the productive capital needed to justify the enormous up-front investment of money capital required to start the ventures in the first place. The economics also only worked in a global context, being ultimately a way to pry out of the world’s wealthiest country, China, its gold and silver reserves.

[a chart starting in 1995 showing continually increasing US balance of trade in goods and services deficits with the notation "Free to trade, free to go broke".]

The US found itself at the end of the Second World War in possession of most of the world’s gold, which it used with abandon to finance the construction of a global political economy that would guarantee American access to raw materials. This lasted twenty five years before the inevitable happened and those reserves of gold ran out, or would have had the US not defaulted on its pledge to redeem dollars at a fixed rate to gold in 1971. With this event, the deal with organised labour was no longer affordable, at least in the United States, and something needed to be done about it. A program to do this was instituted with dispatch. At first this took forms such as the absorption of women into the workplace in the name of feminism, which at first at least was really no more than a wheeze to get more taxable work out of each household. But it was also necessary to break the unions, a task which began in the former slave states of the US by dangling the bait of “right to work” in front of labour and tax holidays for capital. Thus southern non-union workers were pitted against northern unionised workers. This was followed by NAFTA, really no more than the internationalisation of the same program. In the event, the unions were broken alright, and labour is well and truly adrift on makeshift rafts with every man for himself. Not for nothing is Hurricane Katrina the very symbol of workers’ despair.

People are quick to judge, and it is easy from today’s perspective to assume that the losers in this tragedy are the good guys and the winners the bad guys. The real culprit is human nature, and until more of us are honest about this the chances of really doing anything about it are unlikely. What is so interesting about events in New Orleans is the frankness with which America’s governors are going about arranging things to their liking, a frankness which implies either their conviction that they are invulnerable, or their desperation in the face of collapse.

Which do you think it is?

Chris Sanders

The US Dollar

Monday of this week the US dollar finished down 4 days in a row **and** stopped on the 50% Fibonacci dollar rally retracement level. The dollar has also well established a good down trend over the last 2 months as well as a down channel. The Fib level that the dollar stopped at is just above the bottom of the channel. Between the Fib level, the 4 down days in a row and the location/level of the channel bottom, it makes sense that the dollar took a breather from going down. If it continues to go up, it would hit the top of the channel about the end of next week. The top of that channel is an important down trend line.

The US dollar is the most important element to what gold and silver do.

I don't know what is going to happen next week but it could get really interesting when you consider that the psychology or attitude of leading influential market minds is changing:

On Richard Russell:

By Peter Brimelow
Friday, September 9, 2005

NEW YORK -- A legendary bear may have turned bullish, sort of. But he and the authors of a remarkable new report still harbor suspicions about market manipulation -- something that could end very badly for investors.

Dow Theory Letters' Richard Russell was artfully qualifying his sudden bullishness on Thursday night. He's just suggesting that "those willing to speculate" should buy Spyders, the S&P 500 tracking stock And it may not work. (Russell played the 2003 bounce this way too.)

Russell's also making bullish noises on gold. And his comment that really got my attention late Thursday was this:

"You can be sure that the central banks don't want to see an upside breakout in gold. ... The primary trend of gold is bullish, however, and the primary trend is stronger than all the central banks in the world taken together. When gold's time comes, gold will brush by the manipulations of the central banks and their friends, the gold banks."

This suspicion of covert market manipulation by governments in alliance with favored private-sector firms has been voiced with increasing frequency by Russell and other letters.

Indeed, several letters muttered about suspicious late-day rallies as detailed in our June 27, 2002, column. Of course, it's too wild an idea for most of the mainstream media.

On David Gartman:

(GATA) Dennis Gartman Takes a Black Helicopter Ride

5:13p ET Friday, September 9, 2005

Dear Friend of GATA and Gold:

Surreptitious government intervention in the financial markets has gotten just too obvious. Even respectable people can see it now.


"Turning to gold, we are much impressed with the fact that gold is firm even as the U.S. dollar too has strengthened over the past two or three days. For a very brief moment yesterday, spot gold traded to $448 before being turned back.

"We can never be certain who the sellers were at that level. GATA would have us believe that it was the always-nefarious government and Wall Street entities who work in collusion to try to keep the price of gold down. Others would have us believe that it was the selling on the part of those who are short large numbers of $450 calls. Others still would have us believe it was small sums of hedging on the part of gold producers, and others would have us believe it was "profit taking" on the part of recent long position takers.

"We believe it was a bit of all of them, and we might be persuaded that some small part of what GATA has said may even have an even smaller kernel of truth to it, for their data is persuasive."

Information about subscribing to The Gartman Letter can be obtained by writing to [email protected]. You probably can't afford it -- GATA finds out what's in The Gartman Letter only because of the occasional black helicopter airdrop -- but let's welcome our new convert.

Who's coming over to our side next -- Alan Greenspan?

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

Hey, the HUI (the US Amex market gold and silver stock index) made a new 5 month high. A 12 month chart of the HUI

Silver and the silver shares are lagging gold but should end up being more explosive than gold since silver is now more rare than gold. And, like gold, silver is actual money (nobody's liability).

Gold priced in Yen made a new bull market high.
Gold priced in Euro is just a tad below making a new bull market high.

Gold has just a little to go to make it above late 2004's high.
A 2 year weekly bar chart of gold

All and all, not a bad week.

Tuesday, September 06, 2005

The Rarity of Silver

Ted Butler's friend Israel Friedman has written a piece on the rarity of silver. Israel made the big gains in the last bull market in gold and silver and he's about to do it again it looks like. Yes, he is no spring chicken. He has been around. I would read him.

The Rarity of Silver

Ted Butler is currently the world's expert on silver.

Monday, September 05, 2005


John Embry and Andrew Hepburn of Sprott Asset Management in Canada have written a report of enfluences in the US stock markets. It is going to be a sight to behold when the iron laws of economics, the note and bond markets and the FX (foreign exchange) markets impose discipline on the US government and Americans in general for having their heads in the sand for too long. There is not much in the way of free markets left in the US.

"The Visible Hand of Uncle Sam

Executive Summary

This report examines information indicating that the U.S. government has surreptitiously intervened in the American stock market. Important findings include the following:"
1.45 MB (1,521,797 bytes)
41 pages

Friday, September 02, 2005

US Dollar

Yesterday, Thursday, September 1, the USD Index broke below a second lower neckline of the head and shoulder topping pattern of the US dollar rally. Another confirmation of the topping rally pattern of the US dollar.

Wednesday the Index went down about 1. Thursday the Index went down about 1.

This is awful dollar action.

The Index could produce a 3rd lower neckline down around 84 on the index. I can't see how this dollar rally is not over. Gold and silver move the opposite of the dollar.

What is striking about gold is that the last time it got knocked down, it took about a month to recover. This time gold took 2 days. Probably the first time this has happened in the history of the current gold bull market. A bull market that most Americans are completely unaware of because the US mass media and financial media will not talk about this bull market, on top of the distracting "bread and circuses" act going on in the US.

The government mostly controls the media in the US and does not want Americans to be aware of what gold (the canary in the coal mine, the inflation barometer) is saying about the US Treasury and Fed having created massive amounts of USD out of thin air in direct competition with counterfeiters. After all, doing what counterfeiters do is the whole point behind governments having central banks, why the Fed in the US is screamingly unconstitutional. Unfortunately, Americans could care less about their constitution or their freedom. And there is a huge price for them to pay because of that. At some point, real soon it looks like, gold will no longer be able to be ignored; and the piper will be there demanding payment from debtors, and if the debtor can not pay, then from the debtor's creditors. There is going to be a terrible downside in the US to much higher gold prices.

The oil/gold ratio:
Historically, in the long long run it has been about 15:1 (barrels of oil to buy an ounce of gold). Right now it is about 6:1. You can buy an ounce of gold for a lousy 6 barrels of crude. The ratio has been as high as 33:1. Looks like a lot of upside left to the price of gold and silver.

Right now the bulk of the growing demand for **physical** gold is from India, China, Middle East, Russia, Turkey, and Argentina.

"Remember, democracy never lasts long. It soon wastes, exhausts, and murders itself. There never was a democracy yet that did not commit suicide." -- John Adams

Thursday, September 01, 2005


Silver's price over the last couple of weeks or so has broken down below its long term bull market uptrend as well as down through its upward sloping bottom to its big triangular flag formation that started in the early part of 2004.

Myself, I'm taking this as "chart painting" by the cartel (bullion and money center banks/US Treasury/Fed). I believe silver scares the cartel more than gold does since its potential to explode to the upside is so great since over decades the above ground supply of silver has declined a huge amount relative to increasing usage. Silver's deficit keeps on increasing. On top of that, silver is a strategic metal where as gold is not. If silver were to explode, that would put a lot of upward pressure on gold. If gold explodes, people who currently have their heads buried in the sand over inflation will no longer be able to say/believe that inflation is not a problem.

Silver's MACD and momentum are still negative, but they could be turning up real soon. Silver's MACD is no lower than its previous MACD low of early July despite the silver price being lower. This is bullish. On top of that silver was down 6 days in a row when the markets closed on Tuesday. Bullish. It didn't form a "hammer" that day, but it came close to one.

Some of the silver stocks traded strong all day long yesterday, moving up in the last 30 minutes of trading. I suspect something is up with silver. That it has put in an important bottom. I hope I'm not wrong. We'll see.

On the down side, I don't know, but word is that Warren Buffet has legal difficulties with one of his companies and has been pressured to sell from his big silver holdings to stay out of hot water with the government. We'll see.

"I think the subject which will be of most importance politically is Mass Psychology... Its importance has been enormously increased by the growth of modern methods of propaganda... Although this science will be diligently studied, it will be rigidly confined to the governing class. The populace will not be allowed to know how its convictions were generated." ---Bertrand Russell