LBMA's Integrity in Question

http://www.lbma.org.uk/Deep_Storage_Bars_20060609.pdf

> Most of these bars will still be acceptable in the London bullion
> market, even if they are not fully compliant with the LBMA’s current Good Delivery Rules,

...

> However, some of these “deep storage” bars may no longer be regarded as acceptable, either
> because of physical defects or poor marking.

What are "deep storage" bars?

The phrase is not in their definitions list:
http://www.lbma.org.uk/london_glossary.html

Be your own banker. Keep value in your own hands.

Lowest Short Position

In the December 27 session on the TOCOM Goldman Sachs covered a huge 1,722 short contracts and went long 2 contracts to bring their net short to 6364 contracts. This is the lowest net short position they have held since January 2006.

To put this number in perspective, their biggest net short positon was about 52,000 back in the second quarter of 2006.

It looks like the boyz, the big time insiders, are getting out of Dodge.

http://www.tocom.or.jp/souba/gold/torikumi.html

Silver Review

It seems about time again for a review of silver. Here is one from October 25, 2006. The current gold:silver ratio is a little different, but not by much.





The gold price is in for a big change relative to the silver price. The gold price to silver price ratio now is about 50:1. Historically it was more like 16-17:1. Who knows, it could go to 1:1. The current world's financial system since 1971 is unlike it has ever been in history in that almost all of the world uses nothing but government fiat tokens redeemable in nothing. And almost all of those are nothing but digital bits on a computer's hard drive which is not in the hands of the alledged owner of the bits.

Silver is found in the earth's surface about 16-17 times more often than gold. For hundreds/thousands of years, the above ground supply of silver was a lot more than gold. So, naturally it was cheaper than gold, no matter how silver was related to some thing in order to get its price in order to compare it to gold's price. For instance, silver has a copper price or a milk price just like gold does. You can compare the relative values of gold and silver by pricing those metals in weights, or sometimes volumes, of milk, gasoline and many other things.

Over time man has found plenty of unique (there is no substitute) uses for silver. This mostly has not happened with gold. This explains a lot of the decrease in the above ground supply of silver. So much so that the above ground supply of silver is now substantially more rare than gold.

There are many products that simply must have silver or the product can not be made. Usually the product has only a tiny amount of silver in it so that the price of silver hardly matters to the overall price of the product that contains the silver. This means that a much higher price of silver can be tolerated for many industrial uses. There happens to also be huge amounts of silver being used that is consumed, meaning it is not recoverable. The amounts per product are incredibly small and the silver price is too low to make it worth while trying to recover these incredibly small amounts of silver per product unit.

Also, there seems to be a lot of politics involved in how the above ground supply of silver has gotten so low. Be that as it may, the above ground supply of silver has gotten into an opposite situation than it used to be relative to gold.

Right now estimates of the above ground supply of gold are about 4 billion ounces. Some estimates are as high as 5 billion ounces. 4 billion ounces times $600 = $2.4 trillion dollars.

Right now estimates of the above ground supply of silver are about 4-600 million ounces. Let us be conservative and call it an even 1 billion ounces. This compares to about 10 billion ounces available during WWII. 1 billion ounces times $12 = $12 billion dollars.

So, the market value of the supply of gold is 200 times greater than the market value of silver, right now. Or, the current USD value of gold is 200 times greater than the current USD value of silver. Or, the total value ratio is an historically whacky 200:1.

Historically this ratio is hugely different than what it was for 100s/1,000s of years. Considering all the increasing industrial uses of silver and the fact that it is also actual money like gold is, silver has more fiat price increase potential to the upside than gold does.

It is normal or it is human nature that most players in financial markets do not have respect for items that are low priced. Thus silver has no respect right now. It could be said that people think gold is more rare than silver because of gold's much higher price relative to silver.

It would not take much for people to change their perceptions.

All that is needed is for 1/2 of 1%, or less, of gold owners to decide to switch to silver. That would be the equivalent of the total USD value of silver in the world buying, going into, silver. For silver, that would be incredible demand and a huge massive silver price increase. There would be a radical reduction/decline in the gold price to silver price ratio.

Make sure you have some silver while you are waiting for the world to catch on to the real silver situation/story. Eventually world markets will force price rationing to happen in the silver world. That is just one of the iron laws of economics. Given enough time, there is nothing governments can do about it.

Never mind under $5. At $12/ounce, silver is still the Rodney Dangerfield of metals. It's current price is still "just this side of stealing". If you want to make huge percentage gains, buy something when nobody wants it, when it can't get any respect. In financial markets, the crowd is always wrong. Right now the crowd could care less about silver.

-------------------

"...a man may see straight and clearly and yet become impatient or doubtful when the market takes its time about doing as he figured it must do." - Jesse Livermore, in Edwin Lefevre's 1923 classic "Reminiscences of a Stock Operator"

"A stock operator has to fight a lot of expensive enemies within himself" - Jesse Livermore

Think about the below when thinking about the US dollar:

"A democracy cannot exist as a permanent form of government. It can only
exist until the voters discover that they can vote themselves money from the
public treasure. From that moment on the majority always votes for the
candidates promising the most money from the public treasury, with the result
that a democracy always collapses over loose fiscal policy followed by a
dictatorship.

The average age of the world's great civilizations has been two hundred years.
These nations have progressed through the following sequence: from bondage
to spiritual faith, from spiritual faith to great courage, from courage to liberty,
from liberty to abundance, from abundance to selfishness, from selfishness to
complacency from complacency to apathy, from apathy to dependency, from
dependency back to bondage." - Alexander Tyler

Teddy Roosevelt put it well:

"Not because of the ambition of Caesar or Augustus, but because it had already long ceased to be in any real sense a republic at all. When the sturdy Roman plebian, who lived by his own labor, who voted without reward according to his own conviction, and who with his fellows formed in war the terrible Roman Legion, had changed into an idle creature who craved nothing in life save the gratification of a thirst for vapid excitement, who was fed by the state, and who directly or indirectly sold his vote to the highest bidder, then the end of the republic was at hand. Nothing could save it. The laws were the same as they had been. But the people behind the laws had changed, and so the laws counted for nothing."

"How did you go bankrupt?"
"Two Ways. Gradually, and then suddenly."
- Ernest Hemingway, The Sun Also Rises

Gold Break Out

Today, the day after Christmas, gold made a break out of it's consolidation triangular flag. This week was supposed to be a quiet one. Guess not. A little Christmas present.

(click charts for larger views)














The US Dollar went down, not that it broke its short term 2 month up trend line, but it got real close to it.











Silver did similar to gold in that it broke up and out of its rectangular flag.

The US Treasury 10 year made a significant top about 3 weeks ago with a 2b signal and a 4+ (7 actually) up days in a row signal a week earlier. The 2b confirming the 4+ day signal. The 30 year treasury made a similar significant top minus the 2b. Both today made new lows today in their 2 week long new down trend.

Gold goes up. The Dow and S&P were steady. Debt (10 and 30 years) went down, and the US dollar went down. Looks likes a possible shift to the ultimate safe haven, gold, as apposed to the early and erroneously perceived safety of government debt instruments.

Remember, markets, not government central banks, control interest rates further out along the yield curve. Declining debt prices (increasing interest rates/yields) mean a perception of increasing risks to value stored in the debt instruments. Watch for much higher interest rates in the future as faith in paper financial instruments goes down.

There is no fever like a gold fever which has yet to happen.

Goldfinger

The movie Goldfinger, like gold, is known far and wide.












































Shirley Bassey singing Goldfinger



Goldfinger
He's the man, the man with the Midas touch
A spider's touch
Such a cold finger
Beckons you to enter his web of sin
But don't go in

Golden words he will pour in your ear
But his lies can't disguise what you fear
For a golden girl knows when he's kissed her
It's the kiss of death ...

From Mister Goldfinger
Pretty girl, beware of his heart of gold
This heart is cold

Golden words he will pour in your ear
But his lies can't disguise what you fear
For a golden girl knows when he's kissed her
It's the kiss of death ...

From Mister Goldfinger
Pretty girl, beware of his heart of gold
This heart is cold
He loves only gold
Only gold
He loves gold
He loves only gold
Only gold
He loves gold


Colonel Smithers to 007:

'The great thing to remember about gold is that it's the most valuable and most easily marketable commodity in the world. You can go to any town in the world, almost to any village, and hand over a piece of gold and get goods or services in exchange. Right?' Colonel Smithers's voice had taken on a new briskness. His eyes were alight. He had his lecture pat. Bond sat back. He was prepared to listen to anyone who was master of his subject, any subject. 'And the next thing to remember,' Colonel Smithers held up his pipe in warning, 'is that gold is virtually untraceable. Sovereigns have no serial numbers. If gold bars have Mint marks stamped on them the marks can be shaved off or the bar can be melted down and made into a new bar. That makes it almost impossible to check on the whereabouts of gold, or its origins, or its movements round the world. In England, for instance, we at the Bank can only count the gold in our own vaults, in the vaults of others banks and at the Mint, and make a rough guess at the amounts held by the jewellery trade and the pawn-roking fraternity.'

'Why are you so anxious to know how much gold there is in England?'

'Because gold and currencies backed by gold are the foundation of our international credit. We can only tell what the true strength of the pound is, and other countries can only tell it, by knowing the amount of valuta we have behind our currency. And my main job, Mr Bond-'Colonel Smithers's bland eyes had become unexpectedly sharp - 'is to watch for any leakage of gold out of England - out of anywhere in the sterling area. And when I spot a leakage, an escape of gold towards some country where it can be exchanged more profitably than at our official buying price, it is my job to put the CID Gold Squad on to the fugitive gold and try get it back into our vaults, plug the leak and arrest the people responsible. And the trouble is, Mr Bond-'Colonel Smithers gave a forlorn shrug of the shoulders-'that gold attracts the biggest, the most ingenious criminals. They are very hard, very hard indeed, to catch.'

'Isn't all this only a temporary phase? Why should this shortage of gold go on? They seem to be digging it out of Africa fast enough. Isn't there enough to go round? Isn't it just like any other black market that disappears when the supplies are stepped up, like the penicillin traffic after the war?'

'I'm afraid not, Mr Bond. It isn't quite as easy as that. The population of the world is increasing at the rate of five thousand four hundred every hour of the day. A small percentage of those people become gold hoarders, people who are frightened of currencies, who like to bury some sovereigns in the garden or under the bed. Another percentage needs gold fillings for their teeth. Others need gold-rimmed spectacles, jewellery, engagement rings. All these new people will be taking tons of gold off the market every year. New industries need gold wire, gold plating, amalgams of gold. Gold has extraordinary properties which are being put to new uses every day. It is brilliant, malleable, ductile, almost unalterable and more dense than any of the common metals except platinum. There's no end to its uses. But it has two defects. It isn't hard enough. It wears out quickly, leaves itself on the linings of our pockets and in the sweat of our skins. Every year, the world's stock is invisibly reduced by friction. I said that gold has two defects.' Colonel Smithers looked sad. 'The other and by far the major defect is that it is the talisman of fear. Fear, Mr Bond, takes gold out of circulation and hoards it against the evil day. In a period of history when every tomorrow may be the evil day, it is fair enough to say that a fat proportion of the gold that is dug out of one corner of the earth is at once buried again in another corner."

"The history of the great events of this world are scarcely more than the history of crime." –Voltaire

Good sources of information:

Grandfather Economic Report http://mwhodges.home.att.net/
Shadow Government Statistics for a second source for a reconstructed M3.
http://www.shadowstats.com/alternate_data
"A world of possible financial futures" http://nowandfutures.com/index.html
Jim Sinclair (Mr. Gold) at jsmineset.com
http://lemetropolecafe.com/

Liquidity Review

For a variety of reasons, central banks having been increasing "money" supply like gangbusters recently, the ultimate future effect being even more increases of the price of the stuff we need for every day survival. In April of 2005, Jim Sinclair (jsmineset.com) wrote a piece on liquidity which is good to review now since this action is going to extremes right now:


"Tonight, let’s talk about liquidity. Liquidity in the traditional sense is a product of Federal Reserve money market activities.

In the case of open market operations, the Fed constantly buys and sells U.S. government securities in financial markets, which in turn influences the level of reserves in the banking system. These decisions also affect the volume and the price of credit (interest rates).

The term "open market" means that the Fed doesn't independently decide which securities dealers it will do business with on a particular day. Rather, the choice emerges from an open market where the primary securities dealers compete. Open market operations are the most frequently employed tool of monetary policy.

In the non-traditional sense, liquidity became not a national equation but an international phenomenon. As the Bernanke Electric Mayhem Money Printing Press began to function, there was no consideration of bank reserves as a major tool of monetary policy nor was the dealership traded with just the Wall Street crowd. Also included were the City in London, the Banhofstrasse and all others willing to offer US Treasuries across all maturities.

The funding for this operation was not an internal exercise of the normal Fed blank check but rather the huge intervention Japan was practicing in order to maintain a non market related dollar/yen level.

Liquidity under the definition of the non-traditional method was international and in a practical sense out of control. That conclusion is best explained by the fact that the US Treasury instruments purchased cannot be sold nor can the liquidity injected into the system be withdrawn.

Liquidity is not the grease of the wheels of business but rather the grease of the wheels of the market that it selects to chase. When a particular market's wheels are greased, it moves faster on the UPSIDE.

In the 1930s when there was a de-linking of currency from gold and international liquidity was increased, a huge rally in the equities market took place. Today, the excess liquidity in the system has selected the equity market to follow.

The thesis pointed out by Chairman Greenspan is that liquidity injections affect the equities market which in turn impacts the thinking and actions of consumers and business executives producing a business activity recovery.

You just experienced that and during the Bernanke experiment, the equities market achieved its high water mark in this counter-trend rally in a long term equities bear market. This is a simple replay of the 1930s with one major difference: Today, the largest amount of liquidity ever injected into the world monetary system in the shortest time in history CANNOT BE WITHDRAWN.

As the equities market was making new highs, the shift began in this liquidity juggernaut from equities into commodities and the CRB was making new highs as equities made new highs. That is an unsustainable phenomenon because of the impact on profits as raw material rise in price. Something had to give.

What may well have given up the ghost is the equity market but the liquidity is STILL OUT THERE now looking for a new home. The difference between the huge equity rally of the 30s and today is the critical component of NO PRACTICAL METHOD OF LIQUIDITY WITHDRAWAL. Indeed, it will also be the MAJOR FACTOR in forming the future.

The inability of the Federal Reserve to drain liquidity negates any possible increase in the cost of money to dampen the impact of a mountain of Bernanke-produced liquidity. While that liquidity was pleasant at first, it will now blast any commodity with positive fundamentals up to heights that cannot be easily explained. Look at crude today as one example.

It is this mountain of liquidity that will pounce on the dollar and ram gold through $480 and to $529 and in time to over $1650. The reason is that there is no tool or policy to drain this international liquidity until it exhausts itself in its own bubble. That bubble will form from this moment forward to blow its top between 2011 and 2013. The game has just begun!

A few salient points:

1. Liquidity is the placement of cash into the hands of financial institutions - not businesses or the common man.
2. Those financial entities will put this new found cash to work in some form or another.
3. It is normal that their first target will always be the equities market.
4. The positive action of the equity markets impacts the decision making powers of the consumer and the companies that provide them with consumer products.
5. The positive decisions of consumers and producers will produce a recovery in economic indices.
6. In time, this liquidity - sensing that the equities market should be distributed and profits taken - will begin to accumulate cash again.
7. As cash is accumulated by the now Fatter Cats, it transitions to the commodities market with positive basic fundamentals.
8. For sometime, both the equity and commodities markets move up in tandem.
9. The cost of basic goods increase and profits are reduced as the cost of goods produced climb.

In normal circumstances, the Fed steps in draining liquidity in the traditional sense thereby increasing the cost of money and killing the entire party.

However, now the international explosion of liquidity cannot in any practical sense be drained, so anything with a clear fundamental case in commodities will be blasted to the moon beyond the capacity and knowledge of talking heads to understand. No one outside of you will understand why this locomotive of inflation, which does not depend on business activity, can be blunted in its power or impact on prices by interest rates.

Now you have to add currencies to the game because this is the largest of all markets into which this liquidity must go. So those currencies with positive fundamentals will go up beyond reason and those with negative fundamentals will go down beyond reason.

This is why I have been saying against all other advisors that the currency market is the most fundamental of all markets. Here the fundamentals will flatten the technicals, bottom callers, the Chairman of the Federal Reserve, soothsayers and anybody else that assumes any short covering rally is meaningful or long term.

Interest rates have NO ability whatsoever to blunt anything except the hope of a reduction in the US Federal Budget Deficit. They only serve as another tax on the consumer and business and thereafter on individual income and corporate profits. Therefore, there is no question in my mind about the US dollar plunging below .8000. That being said, gold is going to $480 and $529 and in time to $1650."

Gold and the US Dollar

The US Dollar has been moving up since about the middle of November.












Yet, gold does not want to go down.














What do you think gold will do when the US dollar starts heading back down?
This has got to have the boyz and the central banks sweating bullets.

What is going on in finance land right now is the stuff of great depressions.
If you do not know how serious it is, read Jim Willie's latest on the bond insurance companies:
US$ & MONOLINE BOND INSURERS
http://www.gold-eagle.com/editorials_05/willie122007.html

Many in government, treasuries, central banks and finance land have been playing the games little children play: "pretend" and "make believe" for too long. Their games are coming to a rude end. The US Dollar is going back down and gold is going up.

"The most important thing about money is to maintain its stability... You have to choose between trusting the natural stability of gold and the honesty and intelligence of members of the government. With due respect for these gentlemen, I advise you, as long as the capitalist system lasts, to vote for gold." -- George Bernard Shaw
Even a Fabian socialist understood gold vs. government:
http://en.wikipedia.org/wiki/George_Bernard_Shaw

Gold Hanging In

Gold is hanging in the triangular bullish flag pattern. It makes sense for gold to be taking a break at this level as it recently hit the nominal level that it hit back in 1980, a resistance level.
[Click on charts for larger views]





"What? Me worry?"
- Alfred E. Newman





Alfred E. Newman on those worrying about the price of gold: "Most people don't act stupid: it's the real thing!"





What's wrong with this picture?














Nothing!


What's wrong with this picture?














Nothing!

"...the U.S. government is, indeed, bankrupt, insofar as it will be unable to pay its creditors, who, in this context, are current and future generations to whom it has explicitly or implicitly promised future net payments of various kinds..." Professor L. Kotlikoff, for the U. S. Federal Reserve Bank of St. Louis. (July, 2006)

The Word Inflation

Most people use the word inflation in a way that helps perpetuate a con/ruse. They use it to mean rising prices of real economic goods and services. They do not even use the word to describe rising prices of financial assets or housing. This is an effect of inflation. It is not inflation. Inflation is as increase of the "money"[**] supply. If people do not know this, then they do not know who to blame for a deep recession/depression that hurts them because they can not figure out the cause of the deep recession/depression that hurts them.
Therefor those that hurt them do not get the blame of those that got hurt. Who hurt them? Those that control the supply of "money": governments treasuries and central banks. The supply of money and currencies should be a completely private business phenominum. A study of monetary history shows this. Read Laissez-Faire Banking by Kevin Dowd. It is a study of the beginning of banking in the western hemisphere. It started in Scotland and was going well till the British government got involved.

[**]
["money" is what most people refer to government fiat digital bits and paper. Today's "money" is not money. Gold, silver and other things are money. Another word, the meaning of which has been perverted to obfuscate/hide what governments and their central banks have been doing.]

Henry Ford, the inventor of the Model T Ford and the assembly production line, has said that if people really understood the banking system, there would be a revolution the next day.

The connection, thus the discipline on supply, between gold and "money" was completely broken in 1971. Inflation, historically, really took off after that point in time. For most of that time, excess fiat digital bits went into financial assets and more recently housing, in the western world. The Dow index rose from 776 in 1982 to over 14000 in 2007. Somehow that was not viewed as "inflation". That is all changing now. Fiat bits are going into real economic goods for protection from the decline of financial assets. This is going to be happening for a good number of years to come.

Banana Republics

Since 1971, when the US broke its promise to redeem US dollars for gold, a new group of banana republics has been developing. The increase of the supply of digital bits of fiat "money" needs the banking system to create more credit/debt because no increase of the supply can happen otherwise. The increase of debt, and thus "money" supply, has finally gotten out of hand. Using current account deficits over the past year(borrowing to maintain a certain standard of living that has not been earned by an equal production of economic goods and services), here is a list of the new top 7 banana republics in the world:

United States: $US 793 Billion
Spain: $US 126 Billion
Britain: $US 87 Billion
Australia: $US 50 Billion
Italy: $US 48 Billion
Greece: $US 42 Billion
Turkey: $US 34 Billion

There is a big general difference between the western world and the eastern world. It's basically that one does more unearned consumption than the other. The unearned consumer is borrowing from the earned excess producer. Guess which one's standard of living is going down. The net consumer or the net producer of real wealth?

Another measure of the top banana republic, debt to GDP ratio:
1929: 260%
2007: 343%
That is not the only aspect of the US economy that is worse than it was in 1929. It looks like the top banana is in for another Great Depression, worse than the one that started back in 1930 and lasted about 15 years. Can you imagine what is going to happen to the purchasing power of the US dollar?

Inflation is a world wide practice

The top 7 are not the only countries inflating their supplies of fiat digital bits on hard drives. The broad "money" quantity gauges in the US, UK, Eurozone, and the BRIC group (Brazil, Russia, India and China) have increased by $11.5 TRILLION, just over the past 2 years!!!!!!!!
Now, that is inflation!!!!!!!!!!







Vietnam
No wonder a weight of gold is what is required to buy a house in Vietnam. No wonder a mortgage is a borrowed weight of gold. No wonder a mortgage payment is a monthly payment of a weight of gold.








"Gold is absolute objectivity. It is blind, like justice. It has no politics and ideology, no likes or dislikes, no friends or enemies. All it recognizes is its possessor, whom it serves faithfully so long as he has it." -- British historian Paul Johnson quoting Charles de Gaulle

"When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it." - Frederic Bastiat, 'The Law'

"It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I've known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine - that is, they made no real money out of it. Men who can both be right and sit tight are uncommon." - Legendary speculator Jesse Livermore, "Reminiscences of a Stock Operator" by Edwin Lefevre, 1923

Outside Day

Gold made an outside reversal day. Intraday prices went lower than the previous day, then went higher than the previous day, and closed higher than the previous day. Bullish.

http://futures.tradingcharts.com/chart/GD/28

"Betting against gold is the same as betting on governments. He who bets on governments and government money bets against 6,000 years of recorded human history. -- Charles De Gaulle

Gold Flag

There are high odds that a small triangular flag is developing on the gold chart. Friday's intra-day low was probably a higher low that establishes the uptrending lower side of the triangular flag.

There are only weeks left, not months, to gold breaking out above the down sloping upper side of the triangle.

This makes sense considering the rate at which elements of the US dollar and the world's financial system are getting worse and worse.

Financial Definitions and Names

This is a good video for some financial definitions. Definitions make a difference.

There are even some examples of well named financial instruments. After all, how does one sell badly named financial instruments.

Or, call it a video that takes away the "mystery" of the financial world.



Now, that was not hard, was it?

US Debt and US Banks

Here are some ominous US debt and US bank numbers and time periods:

***

The US Treasury debt went above $9 trillion on November 7, 2007, 5 weeks after Congress raised the US Treasury debt ceiling. The new ceiling is $9.815 trillion.

This is the 5th increase since the current US president took office in January, 2001.

Back then, US debt was $5.6 trillion.

Do you wish you could take on debt at that rate *and* have the means to create out of thin air that which is required to pay the interest and principle? That is what is going on for the US as a whole, but it will not last. Sooner or later, sellers want real value for their goods and services. Look for goods on US suppliers and store shelves to start dissapearing. The US does not manufacture anywhere near what it used to.

Another reason for shelf inventories to decline is less internal US demand for goods and services due to US consumers being less able to take on more debt, just to maintain current living standards since the US is not creating enough value to pay for their current standard of living, level of spending. The US has to borrow, from the rest of the world, over $2 billion a day to maintain it.

Consumers are hitting their debt ceiling:

Total US debt (consumer) increases:
August + $15.41 Billion
September + $3.75 Billion

***

The latest on US banks:

Total US mortgage loans for 2006 was $10.9 trillion (American Mortgage Bankers Association of Washington).

Composition of that debt:

About $6 trillion of it is now CDOs

About $1.5 is subprime
About $1 is Alt-A
About $1.5 is adjustable rate

US bank debt got too big and too risky.
Just for starters, banks are going to take a $1 trillion hit to equity/assets?

***

How is business doing in the US?

Commercial mortgage debt for October was $8.6 billion.
The monthly average over the last 9 months was about $66 billion (Thomson Financial).
US business gets what is going on in the US. For all practical purposes, they have stopped taking on more debt (read no more new capital needed). The economic contraction is happening fast.

***




Be your own banker. Store value in stuff, or equity in stuff (paper share certificates in your own hands), or even paper government fiat tokens. Have you been keeping track of the price of lead since 6 years ago?










Yes, gold and silver is good stuff, too.

US Dollar Impression

Wile E. Coyote doing his impression of the US Dollar:


"Permit me to issue and control the money of a nation and I care not who makes its laws." -- Mayer Amschel Rothschild

`If you have dollars, I urge you to get out,'' Jim Rogers said in an interview in Singapore, ``That's not a currency to own.'', from a Bloomberg piece dated Nov. 15. Jim Rogers started the famous Quantum fund with George Soros and has been into natural resources since the beginning of their bull market, which started at the same time as the bull markets in gold and silver. This makes sense as they are made of atoms like gold and silver. Smart "money" started going into real stuff, tangible, at the beginning of this decade.

Not that people do not need some government fiat paper and digital bits to function in the world as it exists today. Even US dollar ones. Actually, the paper fiat might be more valuable than the digital fiat. If your bank goes bankrupt, you still have control over your paper fiat because it is in your hand. It's just that one should try not to store too much value this way. Just about all fiat paper and fiat digital bits are being devalued by around, at least, 10%. The US dollar by increasingly larger percentage amounts.

Over the coming years, Wile E. Coyote's impression of the US Dollar might not be too far off. We'll have to wait to see.

So far this year, the US dollar is down almost 10% versus other major fiat; and down far more than that versus gold and silver (actual money).

***************************************************************************

“Nations are not ruined by one act of violence, but quite often, gradually, and almost imperceptibly, by the depreciation of their currency, through excessive quantity”.
-- Nicolas Copernicus, 1525

"One of the saddest lessons of history is this: If we've been bamboozled long enough, we tend to reject any evidence of the bamboozle. We're no longer interested in finding out the truth. The bamboozle has captured us. It is simply too painful to acknowledge - even to ourselves - that we've been so credulous."
-- Carl Sagan

“Once public opinion is convinced that the increase in the quantity of money will continue and never come to an end, and that consequently the prices of all commodities will not cease to rise, everybody becomes eager to buy as much as possible and restrict his cash holdings to minimum size… If the credit expansion is not stopped in time, the boom turns to crack-up boom: the flight into real values begins, and the whole monetary system founders.”
-- Ludwig von Mises (1949)

“The truth is that liquidity, the only significant weapon remaining in the central bank’s arsenal as decision making moves to the markets, will not necessarily go where you want it to go when you need it to go there.”
-- Martin Meyer, from his book “The Fed”

M3

They created another 1 trillion bucks, adding to M3, just in the last few months. Now that is some pretty impressive inflation (increase in the "money" supply), increase of digital bits on hard drives. Try doing that with gold and silver supplies. That is some big time theft of purchasing power, stored value, from holders of US dollars and dollar denominated financial instruments, but not from holders of gold and silver.


Chart is thanks to http://nowandfutures.com/key_stats.html

Whose hands did all those dollars end up in?

There is a compound curve going on in that M3 chart! That should scare the bajeejus out of people. But hardly anybody knows it is happening, nor cares.

A communique sent from the Rothschild investment house in England to its associates in New York noted, "The few who understand the system. . . will either be so interested in its profits or so dependent on its favors that there will be no opposition from that class, while on the other hand, the great body of people, mentally incapable of comprehending . . will bear its burdens without complaint."



This correction in gold and silver is to be expected, does not amount to a hill of beans. This is still one powerful gold train.




The way to make huge percentage gains in a bull market is like Jesse Livermore said: "Be right. Sit tight.". Because of impatience, greed and fear, most will not make the huge gains possible. This correction is showing that. That goes for the "professionals" also.

Ron Paul Takes Ben Bernanke To The Wood Shed

...
"We are, indeed, between a rock and a hard place."
...
"There's a dollar crisis out there and people's money is being stolen; people who have saved, they're being robbed. I mean, if you have a devaluation of the dollar at 10 percent, people have been robbed at 10 percent. But how can you pursue this policy without addressing the subject that somebody's losing their wealth because of a weaker dollar? And it's going to lead to higher interest rates and a weaker economy."
...


"Weimar Bernanke", the man has no business experience, no banking experience, no financial market experience, yet is named to the most important central bank post on earth. - Jim Willie CB

"Who's zooming who, here?" - Aretha Franklin

Gold Bull Train

The gold bull train has definitely left the station, while many are still standing on the platform. The sentiment indicators are still awful, meaning this gold train has a long trip in front of it.

Using realistic measures of inflation, the gold train has to reach about $3,000 in today's dollars to equal the old high of $887.50. As the years of this ride pass, from this point in time, (there are still years left to this gold bull train ride) that price just keeps getting higher as the Fed increases the rate of devaluation of the dollar by increasing the US dollar supply. It has been over a year now since the Fed stopped publishing M3 dollar supply numbers. They knew it is going to get embarrassing.

This is one powerful gold bull train.



Consumer prices in the US are increasing about 10% per year now. Never mind the government's rigged statistics. They are virtually useless.

Shadow Government Statistics' M3 to be updated within days from now.

http://nowandfutures.com/ M3 has shot up to about an 18% annual rate of increase of the dollar supply, which is what inflation really is. Inflation causes/effects rising prices. No systemic inflation, no systemic rising prices, like during most of the 1800s in the US. Inflation did not start for real, in any systemic sense till the Fed was started in 1913. It has been up, up and away since.

Money (gold, silver, packs of cigarettes), Currencies (silver and gold certificates), and tokens (government fiat paper and digital bits) have 3 things in common:
1.) Medium of exchange
2.) Store of value
3.) Unit of measure/account

A. Money does not have any liability attached to it.
B. Currencies have liabilities attached to them. They are redeemable in something specific.
C. Government fiat paper and fiat digital bits while not redeemable in anything can not be created without debt/credit being created at the same time.

Inflation, depending on the degree of:
1. Causes people to shy away more and more from using it (US dollar loosing its reserve status amongst central banks).
2. Steals/robs stored value.
3. Shortens the yard stick (unit of measure) while people still use it as a full measure, screwing up their financial and economic calculations for the future (mal/bad investments).

So, what is the no-brainer protection from what is going on at central banks and their treasuries? Or is it treasuries and their central banks?

Gold and silver.

The more they create government fiat paper and fiat digital bits (most US dollars are just digital bits on a hard drive, and that hard drive sure as heck is not yours), the higher in price gold and silver go.

Here is something to think about. If you deposit dollars in a bank, where exactly are those dollars once you have deposited them in the bank?

Silver Chart

Below is a ten year monthly bar chart of silver. It is as of the end of October, so it does not show the highest current silver prices ($15.50-$16) that have broken up through the second major bullish triangular flag of this major bull market in silver.

True, silver broke down through it's original #2 uptrend line, unlike gold's that held. But, its new #2 trend line looks pretty solid. It connected with a high down in the base. Later in this bull market, silver could establish a more upwardly sloping major #3 upward trend line.

Look for silver prices to break up above the top of this current channel first.

When the world's excess inventories get used up, silver prices can get wild. Despite being actual money, it's also an industrial metal that some manufactures must have. They will pay and can pay a lot more for the silver that is not replacable by any other element on the earth because many just need the tiniest of amounts for their products. Remember, silver now a days, is a lot more scarce than gold.

On top of the industrial use, it seems that the demand for silver as money has not seriously kicked in, yet.

US Money Center Banks Bankrupt?

Legally maybe not, but for all practical purposes, probably yes. Legally, now a days, does not mean too much since there is so much fraud and rotteness in the financial system.

Heck, Ben said "The banking system is healthy" on October 15. Why is he even bothering to make a statement like this? Does he see that others see that the banking system is anything but? Why did he preside over 2 Fed Funds Rate and Discount Window rate cuts? Is he getting us ready for a banking crash? In any event, if the banking system was healthy, nobody would be making statements like that. Making a statement like that is like screaming that the banking system is not healthy.
Did Ben simply panick?

"The last duty of a central banker is to tell the public the truth." - Alan Blinder, Vice Chairman of the Federal Reserve … stated years ago on PBS's Nightly Business Report


Anyways, the US financial/banking sytem is the opposite of healthy:

*
Hundreds of lenders have borrowed a record $US 163 Billion from the 12 Federal Home Loan Banks in August and September. What comes after a liquidity crises is insolvency. Looks like more bank runs to come. Countrywide's was just the first in the US.

*
The CEO of Merrill Lynch is gone.
The CEO of Citi might be after this Sunday's "emergency meeting".

*
Central bank reservers:

EU - $trillions
China - $1.43 trillion
Japan - $923 billion
Russia - $400+ billion
Tiawan - $263 billion
South Korea - $257 billion
India - $249 billion

Ready for it? -> US - $44 billion

*
Bear Sterns attempted to auction off otc derivatives. It called the auction off when bids went to $.30 or so on the dollar. To have finished the auction would have established real world prices for some of these otc derivatives, toxic waste. The BIS (Bank for International Settlement), the central bank for nation central banks, has a world total of notional (contract) value for these things at well over $400 trillion dollars worth. What would a completed auction have done for the value of the other otc derivatives out there in the world?

*
These derivatives are zero sum games like futures and options. If someone looses a dollar, someone has to gain a dollar. They are interest rate sensitive. Interest rates are going up because of the world wide devaluation of government fiat tokens. At some point someone is going to attempt to exorcise their contract, along with a whole lot of others. There are not enough legitimate entities in the world with enough real wealth to pay up on 1/2 of well over $400 trillion dollars worth of these contracts it seems.

*
How are they valued if there is no real world active market with real bids and asks for them?
A computer geek working for the owner of one side of the contract has a "model" he developed which he uses to value his bosses contracts. A computer geek working for the owner of the other side of the contract has a "model" he developed which he uses to value his bosses contracts. It is possible because of this for both sides of the contract to be showing a profit on their books despite this being a zero sum game. Not much integrity left in the world's financial system anymore.

*
Recent estimates of toxic waste value on books from http://www.occ.treas.gov/ftp/deriv/dq107.pdf:
MARCH 31, 2007, $ MILLIONS
The first column is Assets. The second column is derivatives.
1 JPMORGAN CHASE BANK NA ------------ 1,224,104 ---- 70,817,340
2 CITIBANK NATIONAL ASSN ------------ 1,076,949 ---- 30,069,982
3 BANK OF AMERICA NA ---------------- 1,204,472 ---- 28,535,873
4 HSBC BANK USA NATIONAL ASSN --------- 169,010 ----- 5,649,176
5 WACHOVIA BANK NATIONAL ASSN --------- 518,753 ----- 5,454,856
6 BANK OF NEW YORK --------------------- 83,608 ------- 959,681
7 WELLS FARGO BANK NA ----------------- 396,847 ------- 879,779
8 STATE STREET BANK&TRUST CO ----------- 97,978 ------- 588,222
9 PNC BANK NATIONAL ASSN --------------- 90,405 ------- 244,870
10 SUNTRUST BANK ---------------------- 184,810 ------- 204,160

*
“The gap between future US receipts and future US government obligations now totals $65.9 trillion, a sum that is impossible for the US to reconcile, which means the US is now technically bankrupt.” - St Louis Federal Reserve Review July/August issue 2006

-----------------------------------------------------------------------------

"The coin is a delicate meter of civil, social, and moral changes...
It is the finest barometer of social storms, and announces revolutions."
- Ralph Waldo Emerson, 1860, "Essay on Wealth"

"The best measure of the dollar is that number of dollars it requires to purchase a measure of pure wealth -- an ounce of gold. Gold is both the unit and the messenger. The government and the central bank fear the messenger. The reason why they fear the messenger is obvious -- they are frightened of the message." Richard Russell … March 12, 2007

"...There is no nation on earth powerful enough to accomplish our overthrow. ... Our destruction, should it come at all, will be from another quarter. From the inattention of the people to the concerns of their government, from their carelessness and negligence, I must confess that I do apprehend some danger. I fear that they may place too implicit a confidence in their public servants, and fail properly to scrutinize their conduct; that in this way they may be made the dupes of designing men, and become the instruments of their own undoing."
--Daniel Webster, June 1, 1837

“Banking was conceived in iniquity and was born in sin. The bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of bankers and pay the cost of your own slavery, let them continue to create money .” - Sir Josiah Stamp, who became a director of the Bank of England in 1928

Keynes was speaking here about the ability to control money supply.

"By this means government may secretly and unobserved, confiscate the wealth of the people, and not one man in a million will detect the theft."
--British Lord John Maynard Keynes (the father of 'Keynesian Economics' which our nation now endures) in his book "THE ECONOMIC CONSEQUENCES OF THE PEACE" (1920).

"The other motive is to screw up the entire perception of inflation and its conceptual understanding, a project which fully deserves the claim "Mission Accomplished" to the masses. An entire generation of indoctrinated economists fills the ranks of colleges and universities." - Jim Willie

"This [Federal Reserve Act] establishes the most gigantic trust on earth. When the President [Wilson} signs this bill, the invisible government of the monetary power will be legalized....the worst legislative crime of the ages is perpetrated by this banking and currency bill."
-- Charles A. Lindbergh, Sr. , 1913

"Neither paper currency nor deposits have value as commodities, intrinsically, a 'dollar' bill is just a piece of paper. Deposits are merely book entries."
-- Modern Money Mechanics Workbook, Federal Reserve Bank of Chicago, 1975

"Every Congressman, every Senator knows precisely what causes inflation...but can't, [won't] support the drastic reforms to stop it because it could cost him his job."
-- Robert A. Heinlein, Expanded Universe

"During Greenspan's tenure, America was transformed from the world's largest creditor to its greatest debtor, from the world's mightiest industrial power to a second-rate service provider, and from a nation of responsible savers to one of reckless spenders,"
- Peter Schiff, President, Euro Pacific Capital

John Conolly, treasury secretary in the Nixon Administration,
put it bluntly in 1971 when the US decoupled the dollar from gold:
“The dollar is our currency but their problem.”

A communique sent from the Rothschild investment house in England to its associates in New York noted, "The few who understand the system. . . will either be so interested in its profits or so dependent on its favors that there will be no opposition from that class, while on the other hand, the great body of people, mentally incapable of comprehending . . will bear its burdens without complaint."

Bernanki is just a puppet. "Weimar Bernanke", the man has no business experience,
no banking experience, no financial market experience,
yet is named to the most important central bank post on earth. - Jim Willie CB

"Those who create and issue money and credit direct
the policies of government and hold in the hollow of their hands
the destiny of the people." - Reginald McKenna, Chancellor of Exchequer, England

"We have gold because we cannot trust governments…Paper money
is a great aid to politicians: it makes it possible for them to confiscate
the savings of the people by manipulation of inflation and deflation".
- President Herbert Hoover

Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation. - Ben Bernanke remarks before the National Economists Club, Washington, D.C. November 21,
2002

"Unconstitutional or not, the individual income tax (or any other tax, for that matter) will not by itself drive this country's economy to collapse tomorrow, next month, or next year. But the monetary and banking systems will--if not tomorrow, surely someday soon. And the resulting chaos will offer the occasion and excuse for the General Government to impose a police-state tyranny beside which the worst excesses of today's tax Gestapo will resemble Jeffersonian libertarianism." - April 9, 2005, Dr. Edwin Vieira, Jr., Ph.D., J.D., author of Pieces of Eight and coauthor of Cra$hmaker with Trader Vic
----------------------------------------------------------------------------

"Would you believe that I used to compute M3 myself, and that the Fed will be short handed after I retire?" - Jesse's Cross Roads Cafe http://www.geocities.com/arthurcutten/jesse.html


Sure enough! The Fed hasn't published M3 in over a year now.






Here is an interesting tidbit:
From BusinessWeek Online

Intelligence Czar Can Waive SEC Rules,

“President George W. Bush has bestowed on his intelligence czar, John Negroponte, broad authority, in the name of national security, to excuse publicly traded companies from their usual accounting and securities-disclosure obligations. Notice of the development came in a brief entry in the Federal Register, dated May 5, 2006, that was opaque to the untrained eye.”

There goes the transparency the US markets used to be known for.


Financially/economically, the US is a shell of it self. The opposite of what it used to be. No wonder the shares (US dollar) of USA, Inc. are making new historic all time lows. Gold is the protector of private wealth for those in the US. Too bad most in the US do not realize this. They will one day when it will be too late because they will be broke therefor unable to buy gold and silver.


The object of a bank run:

Gold Bull Perspective

This gold bull market is about six years old. Some other bull markets out of the past to relate this gold bull to: Still, it is just "jacks for starters".

S&P 500 July 82-Aug 00 - 1,366%
Nasdaq Oct 90-Feb 00 - 1,324%
Bonds Jan 81- Sept 98 - 1,241%
Homebuilder Index Feb 00-July 05 - 954%
WTI (oil) Jul 70-Dec 79 - 882%
Hang Seng Dec 87-July 97 - 665%
Dow Tranports Jun 49-Feb69 - 529%
Japan Land 1q75-3q90 - 467%
Nikkei Sep 82-Dec89 - 463%
Gold July99-current - 161%

(source: DataStream, Haver Analytics, Merrill Lynch)

----------------------------------------------------

Bloomberg news:

Commodities Head for Biggest Monthly Increase in 32 Years Sept. 28 (Bloomberg) -- Commodities headed for the biggest monthly gain in 32 years, led by wheat, crude oil and gold, as the dollar's slump enhanced the appeal of energy, grains and precious metals as a hedge against inflation.
...

----------------------------------------------------

The investing public is still comatose. Alexa's daily reach for Kitco's site:

Still, just "jacks for starters".

Warding Off Dark Fears

"It's not like the 1930s, is it? Their money isn't actually sitting there. They shouldn't panic. It's just the way it is today. The Bank of England don't lend money to just anybody." - a 63 year old woman who used to work as a teller at a Northern Rock branch.

"Their money isn't actually sitting there." - That part she got right.

Some realism:

"Yesterday something happened that I have not seen in my lifetime, a run on a major British bank."
Panic on the streets of Britain: Northern rocked, City shocked
Hamish McRae - The Independent (UK) - September 15, 2007





The Bank of England is trying to unfreeze a major bank's financial paper while the US Fed is trying to unfreeze much of the world's financial paper. Other central banks are trying to do the same. Simply creating more credit and debt is not going to solve the problem of too much credit and debt.

Tuesday, September 18, the Federal Open Market Committee meets. The Fed is universally expected to cut US official interest rates at this meeting.

A few days ago a US Senate panel very quietly approved an $US 850 Billion increase in the US Treasury's "debt limit", raising it to $US 9.82 TRILLION. This will be the fifth debt limit increase since Mr Bush first took office in January 2001.

"It'll work. It has to work. WE WANT IT TO WORK!" - a financial official in Atlas Shrugged.

"First, the deflation and liquidation progression is from stocks, to bank deposits, to currency, to gold; and, from bank deposits to currency to gold can happen with lightening speed."

Bank Runs

The other week people in California were lining up at Countrywide Bank branches trying to get cash out of their accounts.

Countrywide Financial Corp (NYSE) - Symbol: CFC

Here is its awful looking chart:
http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=cfc&sid=0&o_symb=cfc&x=0&y=0



This is not the only bank run going on out there in financial land. Some are happening kind of behind the scenes since the mass media is not picking up on it. Heck, the financial media is barely picking up on it.

"Those who do not read the news are uninformed. Those that do read the news are misinformed." - Mark Twain

"I don't make jokes. I just watch the government and report the facts."
- Will Rogers

Banks are stepping back from loaning each other funds and therefor their commercial customers. Many of these otc derivatives (assets) that banks own and thought had value, do not have value. So, there is a mad rush for cash by all kinds of entities. Credit Suisse warned on August 15 the global financial order could be on the cusp of "a system changing crash". They are simply too scared to lend like they did before. There is a freeze up in commercial paper going on. The total US decline in the past three weeks is about $US 244 Billion - or 11.0 percent - as reported by the Fed on Thursday, August 30. At this rate almost half the commerical paper, about two trillion dollars worth, will cease to exist three months from now. Business' other option is to borrow directly from banks at a higher rate, about 8.2%, up from about 6.5%, that they can not really afford, assuming cash short banks would make the loans to begin with.

In the Eurozone money market on September 2, the Euro Libor three-month rate widened to its highest since May 2001 at 4.74 percent, with the European Central Bank's base rate being at 4.0 percent. This is commercial banks finding it more risky to lend to their peers, or not trusting their peers. Heck, then why should the average Tom, Dick and Harry trust these banks. Tom and friends do not know what is going on in the banking system right now. That could change fast if just one commercial bank publically has to admit banckruptcy, or if the public suspects that the Treasury/Fed is covering a bank bankruptcy up, like what could possibly be happening with Countrywide now.

---------------------------------------------------------------------------
http://www.jsmineset.com/home.asp?
Jim Sinclair gets right to the point:
Wednesday, September 5, 2007

Day of reckoning for derivatives has arrived

It is not just coming -- it is already here.

I am convinced that all that has been anticipated since 1968 has now occurred. I see the mountain of over-the-counter derivatives that, including all types, exceeds $30 trillion. The mountain is shaking badly.

The situation now resembles the Weimar Republic (the German state from 1919-33) in the sense that the Weimar case study is predicated on planned currency destruction to avoid war reparations that got out of control.

The present situation is based on the ultimate sin of greed called over-the-counter derivatives. This mountain of unfunded special performance contracts is shaking and, as a product of declining US business activity and profits, will fall precipitously.

Before the fall of this unimaginably large mountain of garbage paper, all central banks in concert will prime the pump any way they can. Priming for this
purpose has no practical way of being drained. What is going to get out of control now is monetary inflation to offset the shaking mountain of over-the-counter derivatives. The beginning of this fall is in progress and will be history by 2012 or sooner.

Simply stated: This is it, today, now! Think the best but protect yourself under a worst-case scenario.

There is no more "if this happens, that will happen" scenario. It has already started to happen and the result will be a bull market for all commodities to a level that even the wildest (rational) bull cannot even imagine. The dollar is headed below the estimates of the biggest (rational) bear.

I take very seriously what I have said here. What I have just said I have never uttered before.

The over-the-counter shaking mountain of derivatives can't be fixed by trying to hide it. The problems cannot be fixed by any interest rate action. The problem will not even be fixed by a monetary inflation of unprecedented scope. The problem is coming home by 2012 or much sooner.

Keep in mind that the $20 trillion-plus over-the-counter credit and default derivatives generally have the following characteristics.

They are:

-- Without regulation.
-- Without listing on public exchanges.
-- Without standards.
-- Not in the least bit transparent.
-- Without an open market of the bid/ask type.
-- Dealt in by private treaty negotiations.
-- Without a clearing house.
-- Unfunded without financial guarantee of any kind.
-- Functioning as contracts of specific performance.
-- Of a character or ability to perform that is totally dependent on the balance sheet of the loser in the arrangement.
-- Evaluated by computer assumptions made by geeks, market-inexperienced mathematicians who assume religiously that all markets return to their normal relationships regardless of disruptions.
-- Now in the credit and default category and are considered by accepted authorities as totaling more than $20 trillion in notional value.
-- Notional value becomes real value when the agreement is forced to find a real market for ending the obligation, which is how one sells it.

-----------------------------------------------------------------------------



"You have to choose [as a voter] between trusting to the natural stability of gold and the natural stability of the honesty and intelligence of the members of the Government. And, with due respect for these gentlemen, I advise you, as long as the Capitalist system lasts, to vote for gold." - George Bernard Shaw
Even a famous Fabian socialist values gold over statist government types:
http://en.wikipedia.org/wiki/George_Bernard_Shaw

There is no counter party risk to gold. The "barbarous relic" is looking pretty sexy right now. There is no fever like a gold fever.

Gold and silver are 2 of the few ways to protect yourself from the rampant fraud in the world's financial system, particularly since 1971 when the US broke its promise to redeem dollars in gold to foreign central banks. Since then, the world's financial system is essentially a Ponzi scheme. Something (no gold or silver reserved currencies that can be fled to in times of financial repudiation) that the world has never experienced up to 1971. How long can this rampant fraud last?

Gold - On The Line

Oh God! Please tell me what to do.




Huh! Let's see if he can clean up the mess I left.



Of course I got out of there early. Whadya think I'm a dummy?






No matter what I do, I'm screwed!




Below is a monthly bar chart of the December (most active) COMEX contract. Last weeks intraday low was on the second more upwardly sloping trend line. That is pretty strong support.



Below is a weekly bar chart with equal spacing tool marks.



Between the horizontal support at about 650, gold being on a major uptrend line, the commercial paper market almost freezing up in the US, people running to US banks taking out cash, the Fed even taking boat loans from banks as collateral, the US Treasury at its debt ceiling, it looks like it is upwards from here for gold.

Gold Price Timing II

The equal spacing tool is indicating a high at some level about the 3rd week in July. After a pull back from this high, gold can turn around and make a significant run up to new highs in these gold and silver bull markets.



Gold has made an upside down head and shoulders pattern as well as breaking up through the pattern's neckline. Very bullish. The head was in the last week of June. This can be seen in this daily bar chart:
http://futures.tradingcharts.com/chart/GD/87

Also, it looks like the gold and silver share train is pulling out of the station.
Too bad that most do not know the train is leaving.

It looks like this about 14 month long gold basing action is over.

Gold Price Timing

There is interesting support at 640 to a little bit above. There seems to be a battle royal going on between big smart money and the central banks and their cohorts. Open interest is up big time as gold was going down. The first time in this bull market that that has happened.

Further support comes from the second more upwardly sloping major trend line. On top of this, the equal spacing tool says either a significant low or high is due at the beginning of July. It might be a high about equal to the 2006 April high above $700. That would be a natural resistance point for the gold price to hesitate at before taking off to new all time bull market highs.

The big bull market gold picture:




Timely fundamentals/technicals supportive of the gold price rising somewhere around this point in time:

1. 10 year notes and 30 year bonds have broken down through their 25+ year long price uptrend lines. Rising interest rates are a negative for government revenues, business revenues and for the consumer. Every which way, the US has more debt than it did before the last great depression that lasted between 1930 and 1945.

2. The Dow is acting toppy here recently. It should with the cost of debt going up. In February of this year, it put in a 4+ (5) down days in a row topping signal. More recently, in the first week of June, it put in a 2b topping signal (within 4 days after a high, it closed lower than the previous low's close).

3. The USD is getting up close to its important down trend line.

4. The Treasury/Fed are currently increasing M3 at around a 14% annualized rate, a 33 year high according to http://www.shadowstats.com/ . http://www.nowandfutures.com/ has a reconstructed M3, too, but needs updating (once every three weeks).

--------------

http://www.hyperinflation.net/about.html

"THE HYPERINFLATION SURVIVAL GUIDE: STRATEGIES FOR AMERICAN BUSINESSES" IS BACK IN PRINT

"There are 10^11 stars in the galaxy. That used to be a huge number.
But it's only a hundred billion. It's less than the national deficit!
We used to call them astronomical numbers. Now we should call them
economical numbers." - Richard Feynman (1918 - 1988)

A Long View of US Dollar Prices

(click chart to increase size)


(chart thanks to The American Institute for Economic Research )

For a hundred years or so, the US had relatively stable prices because it never had a central bank for long. "The sharp upturns in prices preceding the three peaks shown in the chart coincide with the War of 1812, the War of Separation, and World War I." Then, in 1913, (locate 1913 on the chart) a new central bank was established, "the Fed", which is still in existance, and prices took off with a vengence. It is quite the story, since it is illegal, which is what the book 'The Creature from Jekyll Island' by Edward Griffin is all about. Prices were even enough that there were no bond markets as we know them today. If the purchasing power of money (mostly gold and silver), or currencies (mostly that which is redeemable in gold and silver) do not fluctuate much, interest rates will not fluctuate much. If interest rates do not fluctuate much, the price of bonds will not fluctuate much. If the price of bonds do not flucutate much, there is no reason for traders to be interested in trading bonds, thus no huge active bond markets as we know them today.

People could actually rationally financially plan for their futures. Businesses did this, too. It actually paid to save. Back then you could actually get ahead by working.

And, there were no bull markets in the gold price like what is going on right now.

Oh, by the way. The gold prices and silver prices are still holding quite nicely above their newer, more upwardly sloping, primary trendlines.

The gold price bull market is now about 6 years old and the English speaking world is still comatose, do not pay any attention to it. Go figure that one. I guess they don't see the hyper-inflation freight train barreling down on them.

The Ugly Looking US Dollar Index

Jim Sinclair has marked up 4 charts of the US dollar here:
http://www.jsmineset.com/cwsimages/Miscfiles/4423_Charts050407-1.pdf
The 4 charts are 2 weeks, 6 months, 2 years and 14 years.

More and more, people are starting to realize that the US economy is rolling over hard. From the Financial Times:

"US braces for sharp profits slowdown
By Francesco Guerrera in New York and Eoin Callan in Washington
Published: April 9 2007 20:13 | Last updated: April 9 2007 20:13

US companies are bracing themselves for a sharp fall in profit growth this year, amid rising fears that corporate America’s woes will exacerbate the expected economic slowdown.

Wall Street analysts and economists are warning that the end to a record run of profit increases along with already anaemic business investment by US companies could have serious repercussions on the domestic economy.

Any slackening in the pace of earnings growth could also unsettle equity markets as corporate profits have been one of the key drivers behind the prolonged resilience of US stocks.

“The situation is fairly precarious,” said David Rosenberg, chief North American economist at Merrill Lynch. “The typical chief executive sees a slowing economy and acts accordingly.” "

More…
http://www.ft.com/cms/s/b6fdd054-e6cb-11db-9034-000b5df10621.html

Ayn Rand on money

Thanks to

https://gold.rayservers.com/blog

From ATLAS SHRUGGED, by Ayn Rand, page 387:

Rearden heard Bertram Scudder, outside the group, say to a girl who made some sound of indignation, "Don't let him disturb you. You know, money is the root of all evil—and he's the typical product of money."

Rearden did not think that Francisco could have heard it, but he saw Francisco turning to them with a gravely courteous smile.

"So you think that money is the root of all evil?" said Francisco d'Aconia. "Have you ever asked what is the root of money? Money is a tool of exchange, which can't exist unless there are goods produced and men able to produce them. Money is the material shape of the principle that men who wish to deal with one another must deal by trade and give value for value. Money is not the tool of the moochers, who claim your product by tears, or of the looters, who take it from you by force. Money is made possible only by the men who produce. Is this what you consider evil?

"When you accept money in payment for your effort, you do so only on the conviction that you will exchange it for the product of the effort of others. It is not the moochers or the looters who give value to money. Not an ocean of tears nor all the guns in the world can transform those pieces of paper in your wallet into the bread you will need to survive tomorrow. Those pieces of paper, which should have been gold, are a token of honor— your claim upon the energy of the men who produce. Your wallet is your statement of hope that somewhere in the world around you there are men who will not default on that moral principle which is the root of money. Is this what you consider evil?

"Have you ever looked for the root of production? Take a look at an electric generator and dare tell yourself that it was created by the muscular effort of unthinking brutes. Try to grow a seed of wheat without the knowledge left to you by men who had to discover it for the first time. Try to obtain your food by means of nothing but physical motions—and you'll learn that man's mind is the root of all the goods produced and of all the wealth that has ever existed on earth.

"But you say that money is made by the strong at the expense of the weak? What strength do you mean? It is not the strength of guns or muscles. Wealth is the product of man's capacity to think. Then is money made by the man who invents a motor at the expense of those who did not invent it? Is money made by the intelligent at the expense of the fools? By the able at the expense of the incompetent? By the ambitious at the expense of the lazy? Money is MADE—before it can be looted or mooched—made by the effort of every honest man, each to the extent of his ability. An honest man is one who knows that he can't consume more than he has produced.

"To trade by means of money is the code of the men of good will. Money rests on the axiom that every man is the owner of his mind and his effort. Money allows no power to prescribe the value of your effort except by the voluntary choice of the man who is willing to trade you his effort in return. Money permits you to obtain for your goods and your labor that which they are worth to the men who buy them, but no more. Money permits no deals except those to mutual benefit by the unforced judgment of the traders. Money demands of you the recognition that men must work for their own benefit, not for their own injury, for their gain, not their loss—the recognition that they are not beasts of burden, born to carry the weight of your misery—that you must offer them values, not wounds—that the common bond among men is not the exchange of suffering, but the exchange of GOODS. Money demands that you sell, not your weakness to men's stupidity, but your talent to their reason; it demands that you buy, not the shoddiest they offer, but the best your money can find. And when men live by trade—with reason, not force, as their final arbiter—it is the best product that wins, the best performance, then man of best judgment and highest ability—and the degree of a man's productiveness is the degree of his reward. This is the code of existence whose tool and symbol is money. Is this what you consider evil?

"But money is only a tool. It will take you wherever you wish, but it will not replace you as the driver. It will give you the means for the satisfaction of your desires, but it will not provide you with desires. Money is the scourge of the men who attempt to reverse the law of causality—the men who seek to replace the mind by seizing the products of the mind.

"Money will not purchase happiness for the man who has no concept of what he wants; money will not give him a code of values, if he's evaded the knowledge of what to value, and it will not provide him with a purpose, if he's evaded the choice of what to seek. Money will not buy intelligence for the fool, or admiration for the coward, or respect for the incompetent. The man who attempts to purchase the brains of his superiors to serve him, with his money replacing his judgment, ends up by becoming the victim of his inferiors. The men of intelligence desert him, but the cheats and the frauds come flocking to him, drawn by a law which he has not discovered: that no man may be smaller than his money. Is this the reason why you call it evil?

"Only the man who does not need it, is fit to inherit wealth—the man who would make his own fortune no matter where he started. If an heir is equal to his money, it serves him; if not, it destroys him. But you look on and you cry that money corrupted him. Did it? Or did he corrupt his money? Do not envy a worthless heir; his wealth is not yours and you would have done no better with it. Do not think that it should have been distributed among you; loading the world with fifty parasites instead of one, would not bring back the dead virtue which was the fortune. Money is a living power that dies without its root. Money will not serve that mind that cannot match it. Is this the reason why you call it evil?

"Money is your means of survival. The verdict which you pronounce upon the source of your livelihood is the verdict you pronounce upon your life. If the source is corrupt, you have damned your own existence. Did you get your money by fraud? By pandering to men's vices or men's stupidity? By catering to fools, in the hope of getting more than your ability deserves? By lowering your standards? By doing work you despise for purchasers you scorn? If so, then your money will not give you a moment's or a penny's worth of joy. Then all the things you buy will become, not a tribute to you, but a reproach; not an achievement, but a reminder of shame. Then you'll scream that money is evil. Evil, because it would not pinch-hit for your self-respect? Evil, because it would not let you enjoy your depravity? Is this the root of your hatred of money?

"Money will always remain an effect and refuse to replace you as the cause. Money is the product of virtue, but it will not give you virtue and it will not redeem your vices. Money will not give you the unearned, neither in matter nor in spirit. Is this the root of your hatred of money?

"Or did you say it's the LOVE of money that's the root of all evil? To love a thing is to know and love its nature. To love money is to know and love the fact that money is the creation of the best power within you, and your passkey to trade your effort for the effort of the best among men. It's the person who would sell his soul for a nickel, who is the loudest in proclaiming his hatred of money—and he has good reason to hate it. The lovers of money are willing to work for it. They know they are able to deserve it."

"Let me give you a tip on a clue to men's characters: the man who damns money has obtained it dishonorably; the man who respects it has earned it.

"Run for your life from any man who tells you that money is evil. That sentence is the leper's bell of an approaching looter. So long as men live together on earth and need means to deal with one another—their only substitute, if they abandon money, is the muzzle of a gun.

"But money demands of you the highest virtues, if you wish to make it or to keep it. Men who have no courage, pride, or self-esteem, men who have no moral sense of their right to their money and are not willing to defend it as they defend their life, men who apologize for being rich—will not remain rich for long. They are the natural bait for the swarms of looters that stay under rocks for centuries, but come crawling out at the first smell of a man who begs to be forgiven for the guilt of owning wealth. They will hasten to relieve him of the guilt—and of his life, as he deserves.

"Then you will see the rise of the double standard—the men who live by force, yet count on those who live by trade to create the value of their looted money—the men who are the hitchhikers of virtue. In a moral society, these are the criminals, and the statutes are written to protect you against them. But when a society establishes criminals-by-right and looters-by-law—men who use force to seize the wealth of DISARMED victims—then money becomes its creators' avenger. Such looters believe it safe to rob defenseless men, once they've passed a law to disarm them. But their loot becomes the magnet for other looters, who get it from them as they got it. Then the race goes, not to the ablest at production, but to those most ruthless at brutality. When force is the standard, the murderer wins over the pickpocket. And then that society vanishes, in a spread of ruins and slaughter.

"Do you wish to know whether that day is coming? Watch money. Money is the barometer of a society's virtue. When you see that trading is done, not by consent, but by compulsion—when you see that in order to produce, you need to obtain permission from men who produce nothing—when you see that money is flowing to those who deal, not in goods, but in favors—when you see that men get richer by graft and by pull than by work, and your laws don't protect you against them, but protect them against you—when you see corruption being rewarded and honesty becoming a self-sacrifice—you may know that your society is doomed. Money is so noble a medium that it does not compete with guns and it does not make terms with brutality. It will not permit a country to survive as half-property, half-loot.

"Whenever destroyers appear among men, they start by destroying money, for money is men's protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold was an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it becomes, marked: 'Account overdrawn.'

"When you have made evil the means of survival, do not expect men to remain good. Do not expect them to stay moral and lose their lives for the purpose of becoming the fodder of the immoral. Do not expect them to produce, when production is punished and looting rewarded. Do not ask, 'Who is destroying the world?' You are.

"You stand in the midst of the greatest achievements of the greatest productive civilization and you wonder why it's crumbling around you, while your damning its life-blood—money. You look upon money as the savages did before you, and you wonder why the jungle is creeping back to the edge of your cities. Throughout men's history, money was always seized by looters of one brand or another, but whose method remained the same: to seize wealth by force and to keep the producers bound, demeaned, defamed, deprived of honor. That phrase about the evil of money, which you mouth with such righteous recklessness, comes from a time when wealth was produced by the labor of slaves—slaves who repeated the motions once discovered by somebody's mind and left unimproved for centuries. So long as production was ruled by force, and wealth was obtained by conquest, there was little to conquer. Yet through all the centuries of stagnation and starvation, men exalted the looters, as aristocrats of the sword, as aristocrats of birth, as aristocrats of the bureau, and despised the producers, as slaves, as traders, as shopkeepers—as industrialists.

"To the glory of mankind, there was, for the first and only time in history, a COUNTRY OF MONEY—and I have no higher, more reverent tribute to pay to America, for this means: a country of reason, justice, freedom, production, achievement. For the first time, man's mind and money were set free, and there were no fortunes-by-conquest, but only fortunes-by-work, and instead of swordsmen and slaves, there appeared the real maker of wealth, the greatest worker, the highest type of human being—the self-made man—the American industrialist.

"If you ask me to name the proudest distinction of Americans, I would choose—because it contains all the others—the fact that they were the people who created the phrase 'to MAKE money.' No other language or nation had ever used these words before; men had always thought of wealth as a static quantity—to be seized, begged, inherited, shared, looted, or obtained as a favor. Americans were the first to understand that wealth has to be created. The words 'to make money' hold the essence of human morality.

"Yet these were the words for which Americans were denounced by the rotted cultures of the looters' continents. Now the looters' credo has brought you to regard your proudest achievements as a hallmark of shame, your prosperity as guilt, your greatest men, the industrialists, as blackguards, and your magnificent factories as the product and property of muscular labor, the labor of whip-driven slaves, like the pyramids of Egypt. The rotter who simpers that he sees no difference between the power of the dollar and the power of the whip, ought to learn the difference on his own hide-as, I think, he will.

"Until and unless you discover that money is the root of all good, you ask for your own destruction. When money ceases to be the tool by which men deal with one another, then men become the tools of men. Blood, whips and guns—or dollars. Take your choice—there is no other—and your time is running out."