The US Dollar and Gold - II

Below are some scary US Dollar charts. It looks like the panicky selling of US Dollar assets to meet cash demands has subsided for now, not that it can not happen again.

But first back to basics:

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. Prior to 1971, there used to be redeemable currencies, usually in gold, that people could flee to if a government or governments were devaluing, ruining their currency or token. For all practical purposes, no more.
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 (increase in supply, not increase in price), 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?

Now for the charts:

Reserve bank credit.












Currency in circulation.












Excess reserves of depository institutions.












Borrowings from the Fed.












Base money supply.











The US Dollar rally looks to be over:



This is all probably just for starters. Since most of the financial system is corrupt, what can safely store value for you? Not much. Gold and silver are 2 of the obvious.

The Ominous US Dollar

Scary:

HUI - AMEX Gold Bugs Index

The HUI (the AMEX's Gold Bugs Index) looks to be leading gold up.


















Notice how the HUI made a higher low in November and gold did not. In December it made another higher low and gold did, too.






It sure looks like the shares are leading gold.

The US Dollar and Gold

There have been a huge amount of US dollar denominated loans called in throughout the world, thus the rally in the USD.

It looks like the rally could be over since a head and shoulder topping pattern is developing in the USD.

M3 is about 14 trillion dollars. The US federal government and its central bank, The Fed, have already loaned, gauranteed, made promises of about 8 trillion dollars over just a matter of months with probably a lot more to come.

Do not be surprised if the US Treasury at some point can no longer borrow from the rest of the world, and The Fed breaks.

While this is excellent for the USD price of gold, it is ugly for the future of and life inside the US. Most Americans do not realize what is about to hit them.

While the boyz have a new puppet in the White House, not much has changed. They are still doing more of what caused the problem; creating more digital bit dollars and dollars worth of debt.

To see what life is like when governments and gangster banksters screw up the "money" supply royally, read about real life in Argentina after "1:1" (2001)

Argentina after 2001 - 1
Argentina after 2001 - 2
Argentina after 2001 - 3




For most inside the US, there will be no escape.









The wise already have major protection, gold and silver, from what is coming.

Elements In The World Point to Higher Gold and Silver Prices

It's just a matter of time before there are higher gold and silver prices in probably all government fiat tokens.


Jim Rogers in Seoul on the USD and more. He is still carrying around 2 gold pieces in his pockets.








The "Summit on Financial Markets and the World Economy" in Washington DC is not going to amount to a hill of beans. Politicians would have to voluntarily give up a lot of power to do anything that would actually make a significant difference, as in allowing real money to be used, or an honest currency redeemable in something by anybody, to be used.

*****

New!! Ron Paul has a run in with (grills) Ben Bernanke. To bad he only has about 5 minutes:



*****

Volcker issues dire warning on slump

"What this crisis reveals is a broken financial system like no other in my lifetime," he told a conference at Lombard Street Research in London.
...
"There has been leveraging in the economy beyond imagination, and nobody was saying we need to do something,"
...

*****

Judy Shelton writes:

Stable Money Is the Key to Recovery

...
One thing is guaranteed: Most attendees will take the view that Wall Street greed and inadequate regulatory oversight by U.S. authorities caused the global financial crisis -- never mind that their own regulatory agencies missed the boat and that their own governments eagerly bought up Fannie Mae and Freddie Mac securities for the higher yield over Treasurys.

But whatever they agree to pursue, whether new transnational regulatory authority or globally mandated limits on executive remuneration, would only stultify prospects for economic recovery -- and completely miss the point.
...
To speak of "overvalued" or "undervalued" currencies is to raise the question: Why can't we just have money that works -- a meaningful unit of account to provide accurate price signals to producers and consumers across the globe?
...

*****

"The sad fact of the matter is that the current financial system - the one which grew out of the final repudiation of Gold in 1971 and the "floating" of all currencies in 1973 - is much to the taste of the political and monetary powers that be. In fact, without it, the intrusions of governments everywhere could never have reached anything like their present all-encompassing size. "Running" a country is a very expensive proposition." - Bill Buckler

*****

The only type of "Running" an economy governments can do is into the ground.

*****


All this in full view of Congressional Market Oversight Committees and under the supervision of Government Regulatory Agencies. If governments can't organize a dozen of donuts at home, what are they doiing talking about organizing the world's financial system.

Savings In Real Stores of Value: Gold, Silver, Mines, Farms

Savings in real assets like gold and silver rather than most paper or digital financial assets is what is required to survive and/or get ahead in what is coming economically in the next decade or so.

Increased wealth creation requires increased savings from previous wealth creation. There has been little or negative growth to real wealth creation in the Anglo Saxon world, therefor the same can be said for savings.

Politicians and humans in general are pretty predictable. The US Treasury/Fed are going to try to create massive amounts of USD to save their buddies. There will be few safe stores of value left. The problem with gold and silver right now is that they are getting hard to buy. Either the supply is decreasing or they are getting bought up in a heart beat as they become available.

If you were not buying protection back in 1999, 2000, 20001; it is going to be really hard to do it now compared to back then. Gold and silver were cheap and readily available. No longer it seems.

What the combination of the US government and the US gangster banksters are doing is big time economic and financial history being made.

Jim Rogers on the big picture recently:


Jim Rogers again on the big picture recently:


Ron Paul on FOX Business w/ Cavuto on the big picture:


Who else in the mass media, particularly television, is telling it like it is?
Virtually nobody.


*****


Tough Sledding Ahead, Surviving A Coming USD Collapse
Christopher Laird

...
None of us in the US has ever dealt with the twin threats coming our way in the next few years. The first is a real economic depression. The second will be the demise of the US dollar, or at the very least, its severe devaluation like 70% or more (at first).

I would like to point out that in the last great depression in the US in the 1930’s, we did not have a combination of a currency crisis with the economic crisis. The USD, although it fell compared to gold, held up well. Deflation increased the value of anything called cash, including gold.

This time, the outcome will be different. This time, the US faces an economic depression AND a currency crisis soon after. How far off is this?
...


*****


M3 keeps chugging on up. The more there is of something, the less it is worth.

nowandfutures.com

There will probably be trillions more USD created before all the bailouts are done, particularly for government retirement and healthcare programs.







*****

Watch out when government's backs are financially against the wall. Many digital assets are a piece of cake to steal:

Argentina
BUENOS AIRES (Reuters) - Argentine President Cristina Fernandez on Tuesday sent a bill to Congress to nationalize the country's private pension system. ...

Dems Target Private Retirement Accounts
RALEIGH — Democrats in the U.S. House have been conducting hearings on proposals to confiscate workers’ personal retirement accounts — including 401(k)s and IRAs — and convert them to accounts managed by the Social Security Administration.


*****

Eric Sprott:
Cash or Gold




Probably, your savings are a lot safer in gold and silver.

Reopening of Gold Related Fund

Vanguard Group has reopened its Vanguard Precious Metals and Mining Fund (VGPMX) to new shareholder accounts.

The Vanguard Reopening Story

Gee, do you think they see an historic opportunity to make big bucks and do not want to look stupid? Why did they ever close it to begin with?

Another Screamingly Good Gold Buy Point

Gold is at another screaming buy point, almost right at the bottom of the downward sloping channel. Plus, Friday was an almost outside reversal day to the upside. Plus gold has broken up through its downward short term trend line (not drawn in on the bottom chart) in October.

Point and Figure chart:
Long-Term $US 5 x 3 Gold Chart - Since The 1982 Low

US credit market debt is $US 51 trillion while $US GDP is 14.3 trillion. That's 356% of GDP. It was 260% of GDP during the Great Depression that lasted from 1930 to about 1945.

This means a reduction in debt level of 14-15 trillion dollars to get it back to where is was during the 30s-40s relationship. And about that amount again to get debt down to more saner levels.

Politicians and the powers that be are trying to create US dollars out of thin air to "print" (fingers dancing on a key board re-arranging bits on hard drives, really) their way out of this predicament, devaluing the US dollar.

Yes, there is debt being paid off. Yes, there is or will be debt being defaulted on. Both of these things are deflationary, contract M3. The Treasury/Fed are increasing debt in order to increase the supply of "money", in order to counter affect the contracting debt (supply of dollars) going on out there in the private sector, not that government sectors are not involved.
Remember a dollar's worth of debt/credit has to be created and accepted before a dollar can be created.



Roughly speaking, a good chunk of the debt out there in the private sector is being transfered to the government sector, particularly the US government, thus to tax payers and dollar holders where ever. The dollar being backed by the full faith and credit of the US government is a bunch of subjective poppycock/gobbledeegook because its credit and any faith that people have in it is rapidly going down the tubes. This means holding any form of US government death is the opposite of a safe haven, even the shortest term. That goes for the Fed, too, looking at the increasing amounts of garbage that it has and calls assets/reserves. And that is just as of May.

Re-constructed M3 is about 14 trillion now. Creating another 30 trillion or so to get debt down to manageable levels could devalue the dollar around 70-75%; and that doesn't take into account velocity of "money".





The big question is: can the Treasury/Fed inflate enough debt away before being over taken by a credit crash? Maybe they won't be able to create debt fast enough and will stop trying if a big time economic crash sets in. Either way, what ever happens, it will get ugly inside the US.



Why is it illegal for people to counterfeit government fiat tokens, again? If the average Tom, Dick and Harry do it, it's a bad thing. If a treasury and a private bank do it, in outrageous quantities, it's ok. Huh???



"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." … Ayn Rand -- circa 1959


All this has nothing to do with the creation of wealth, but with the theft of wealth. Thus the importance of owning gold and silver. They are outside this wild and crazy, "pretend", "let's play make believe" government / gangster bankster, non-free market, non-capitalistic financial / economic system. The whole point of which is theft. Theft by the movement of digital bits. What is amazing is that many people don't like atoms (gold/silver) but love "their" digital bits and plastic cards. No wonder Henry Ford said "Thinking it the hardest work there is. This is probably why so few people do it."


Don't be fooled by the US dollar rally. It seems that most of this is margin calls and debt payment calls on USD denominated obligations because of the contraction going on in the world economy and USD denominated OTC derivatives obligations blowing up. The amount of OTC derivatives that exist being the really scary of the two.

Iceland: the Mini Me of the UK and the US. The bull market in gold, silver and other atoms (wheat, etc) is anything but over.

GEAB N°28 is available! Global systemic crisis Alert - Summer 2009: The US government defaults on its debt - Public announcement GEAB N°28 (October 16, 2008) -

This is a great buy point / level for US dollar priced gold and silver.

The Gold Price Can Double Fast

"Within the gold complex, there is a disparity between the paper market and the physical market, notes Jurg Kiener, CEO of Swiss Asia Capital. He tells CNBC's Maura Fogarty & Rebecca Meehan that if the paper market collapses, gold prices may double very quickly."



Jurg Kiener interview on CNBC

The Comex in NY has little gold in the vaults compared to the amount of futures contracts on the exchange. Same goes for silver. Look for defaults in the US. Physical prices are moving higher in some cases despite paper (futures) prices moving down or sideways. At some point someone long in the futures markets will see the sense of taking delivery of the metal itself instead of USD. It wouldn't take much of that to cause default on the Comex. Then the price of gold could blast off.

Goldman Sacks' Net Short Gold Position on Tocom

Goldman Sacks' net short gold position on Japan's Tocom futures exchange is now down to a tiny 627. Ready for lift off and a whole lot more?



The Fed has been disgraced with reserves around zero. There is only the US Treasury now. What happens when they hold a debt auction and nobody shows up to buy?

Gold And Silver Coin Minting

Casa de Moneda de Mexico, in business since 1535.








Jim Sinclair today: "There is no hope for the future as long as we have to listen to what we have experienced in the last two days. If the Fed pays �Hold to Maturity� prices in the bailout they are accepting onto their balance sheet all the lies that existed and still exists on and off the balance sheets of the banking and investment industry.

Fabrication has taken the US financial system over the cliff. The bailout of the near and dear fabricated to a spiritual level sets in cement the generational nature of this breakdown, the coming dollar collapse, and the reign of gold.

To categorize this bailout of OTC derivative manufacturers as an asset purchase is so wrong it strains the limits of criminality.

...

If the Fed pays "Hold to Maturity" prices for collapsed OTC derivatives that will never recover, that would represent an outrageous premium to their true value.

If the Fed pays what the collapsed OTC derivatives are presently worth, they could do the entire bailout for one Rupee.

You know what is about to happen. God help us all!"


****


Casa de Moneda de Mexico, still minting gold and silver coins with no nominal value numbers on them; just weight, date, and purity numbers.

Ready for the new gold and silver monetary world.

Gold's Reaction to US Government's Bail Out Plan

Gold, silver and other markets see the US government's bail out plan as a big over all negative.
The HUI (AMEX's gold & silver shares index) was up.





The Dow was down.






The USD dropped big time. The index was down ** 3 ** from Friday's high.








Bonds were down. The yield was too low. The market wants higher interest rates.









Silver and gold were up.






















The US's financial system almost froze up on Monday, thus the announcement of the bail out plan over the weekend. It still actually hasn't happened. The White House
is making announcements this morning that it will happen, trying to re-assure the rest of the world as well as "Wall Street", and the average Tom, Dick and Harry.











9:17AM Bush: Assured foreign leaders that mortgage plan will pass
9:03AM Paulson says his mortgage plan must hit the ground running
8:45AM Bernanke says Congress must pass Paulson debt plan

These guys are sweating bullets after Monday's market actions.

Are we in deep trouble? Come on, tell me the truth.







***


Putin calls for changing the architecture of the international financial system

20.09.2008, 17.56

SOCHI, September 20 (Itar-Tass) -- Prime Minister Vladimir Putin called for changing the architecture of the international financial system.
...

***


From the Los Angeles Times

GLOBAL ECONOMY

Europeans on left and right ridicule U.S. money meltdown

...

September 20, 2008

LONDON —

...

The finance minister of Italy's conservative and pro-U.S. government warned of nothing less than a systemic breakdown. Giulio Tremonti excoriated the "voracious selfishness" of speculators and "stupid sluggishness" of regulators. And he singled out Alan Greenspan, the former chairman of the U.S. Federal Reserve, with startling scorn.

"Greenspan was considered a master," Tremonti declared. "Now we must ask ourselves whether he is not, after [Osama] bin Laden, the man who hurt America the most. . . . It is clear that what is happening is a disease. It is not the failure of a bank, but the failure of a system. Until a few days ago, very few were willing to realize thei ntensity and the dramatic nature of the crisis."

In an interview Thursday in the Italian newspaper Corriere della Sera,Tremonti drew a comparison to corruption-ridden Albania in 1997, when a nationwide pyramid scheme cost hundreds of thousands of people their savings and ignited anarchic civil conflict.
...

Cavuto Ready For The Word "Gold"

If you watch closely, Neil Cavuto is waiting and ready for the word "gold" if Ron Paul mentions it in this interview on Fox TV. Not a good thing for the media to be turning citizen units onto a good thing **outside** the financial system.




Almost Armageddon: Markets Were 500 Trades From Meltdown

MICHAEL GRAY
NY Post
Sunday, Sept 21, 2008

The market was 500 trades away from Armageddon on Thursday, traders inside two large custodial banks tell The Post.
...

According to traders, who spoke on the condition of anonymity, money market funds were inundated with $500 billion in sell orders prior to the opening. The total money-market capitalization was roughly $4 trillion that morning.

The panicked selling was directly linked to the seizing up of the credit markets - including a $52 billion constriction in commercial paper - and the rumors of additional money market funds “breaking the buck,” or dropping below $1 net asset value.

The Fed’s dramatic $105 billion liquidity injection on Thursday (pre-market) was just enough to keep key institutional accounts from following through on the sell orders and starting a stampede of cash that could have brought large tracts of the US economy to a halt.
...

Full article here




Ron Paul on the Global Financial Crisis:



The primary problem is a central bank, the Fed.


Keiser: US dollar "backed by bananas"

...
"We have a treasury secretary in America - Hank Paulson. I'm afraid he's gone insane. He's become like the Colonel Kurtz of Treasury Secretaries. He's gone native. He's co-opted trillions of dollars of American taxpayers' money and he's playing hedge fund like a rogue trader. We have got a rogue trader in the Treasury Secretary's office. He's being aided and abetted by Ben Bernanke who's been discredited as the entire Federal Reserve Bank has been utterly discredited. We're looking at a possible inflationary depression in America and the worse is yet to come, much worse is yet to come."

...
"Unfortunately the fear at this point is that is that the laws have been changed. Hank Paulson has done a power grab. When George Bush came into office he did a power grab. When 9-11 happened they did another power grab. They have dictatorial powers now. So now you've got this lunatic, Hank Paulson with a multi-trillion dollar hedge fund who's basically running the economy like a rogue trader."
...


China paper urges new currency order after "financial tsunami"

BEIJING (Reuters) - Threatened by a "financial tsunami," the world must consider building a financial order no longer dependent on the United States, a leading Chinese state newspaper said on Wednesday.

The commentary in the overseas edition of the People's Daily said the collapse of Lehman Brothers Holdings Inc (LEH.P: Quote, Profile, Research, Stock Buzz) "may augur an even larger impending global 'financial tsunami'."
...


We're in deep dodo, right?








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When the rule of law and markets are breaking down, gold and silver (the metals themselves, outside the digital system) are major protection of stored value.

US Dollar

Since 1913 the dollar has not gone below the major support level of 80-81 on the index until 2007. Now that level is resistance. The dollar, being up against it recently, looks to be backing down from it.


























Since the US dollar has probably topped, gold has probably bottomed since it is down to it trend line and 20 month moving average, not to mention the horrendously awful financial news of major US financial houses, the pillars of the US financial system.
















>Wall Street Banks Fight for Life
>
>By Francesco Guerrera, Krishna Guha, and Greg Farrell
>Financial Times, London
>Monday, September 15, 2008
...
>The Federal Reserve announced a dramatic expansion of its lending
>operations, saying it would in future accept all assets including
>equities and whole loans as collateral for loans under the primary
>dealer credit facility.
>
>It widened the set of assets eligible as collateral for loans of
>Treasuries to include all investment grade paper, and raised the size of
>these Treasury loans to $200 billion.
>
>The Fed also suspended rules that prohibit banks from using deposits to
>fund their investment banking subsidiaries.
...

Quick! Virtually anything goes now. Train you dog to write I.O.U.s. Then tell your dog to ask the Treasury/Fed if they will take them as collateral for a loan of US Treasuries.

This is grand theft / organized crime of value stored in US dollars and US dollar denominated financial instruments by holders around the world, let alone US tax payers.

"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'

Gold and silver are ** outside ** of this system of plunder.

Lyrics and Poetry For The Gold Markets

...
Mirrors on the ceiling,
The pink champagne on ice
And she said 'We are all just prisoners here, of our own device'
And in the master's chambers,
They gathered for the feast
They stab it with their steely knives,
But they just can't kill the beast

Last thing I remember, I was
Running for the door
I had to find the passage back
To the place I was before
'Relax,' said the night man,
'We are programmed to receive.
You can check-out any time you like,
But you can never leave!'
...
- Hotel California, The Eagles


Ramble On
The leaves are falling all around, time I was on my way
Thanks to you I'm much obliged, such a pleasant stay
But now its time for me to go, the autumn moon lights my way
But now I smell the rage, and with it hate, and it's headed my way.
Ah, sometimes I grow so tired, but I know there's one thing I have to do.
Ramble on. And now's the time, the time is now.
- Led Zeppelin


“You got to know when to hold ‘em - know when to fold ‘em -
know when to walk away - and know when to run.
You never count your money - when you’re sittin’ at the table.
There’ll be time enough for countin’ -when the dealin’s done.”
- The Gambler, Kenny Rogers


The Gods of the Copybook Headings

...Then the Gods of the Market tumbled,
...... and their smooth-tongued wizards withdrew,
... And the hearts of the meanest were humbled
...... and began to believe it was true
... That All is not Gold that Glitters,
...... and Two and Two make Four --
... And the Gods of the Copybook Headings
...... limped up to explain it once more.

... As it will be in the future,
...... it was at the birth of Man --
... There are only four things certain
...... since Social Progress began: --
... That the Dog returns to his Vomit
...... and the Sow returns to her Mire,
... And the burnt Fool's bandaged finger
...... goes wabbling back to the Fire;
... And that after this is accomplished,
...... and the brave new world begins
... When all men are paid for existing
...... and no man must pay for his sins,
... As surely as Water will wet us,
...... as surely as Fire will burn,
... The Gods of the Copybook Headings
...... with terror and slaughter return!
- Rudyard Kipling


GOLD

I wonder if when all is done
Anyone heard my voice
But from the start we have no choice
Our journeys just begin

I'll never know if I was right
Did I fight hard enough?
When the battles grew too rough
Should I have given in?

But here I stand and swear to you
I did the best that I could do...

I know my voice was just a whisper
But someone may have heard
There were nights the moon above me stirred,
And let me grab ahold
My hands have touched the gold

My heart's been driven by extremes
Blind with dreams, tight with fear
But still God knows that I was here
And I was so alive

And now I lay the past to rest
For in the end I did my best

You have to live the life you're given
And never close your eyes
You hold on, and stare into the sky,
And burn against the cold
For any moment, you might find the gold!

And there was joy
Through it all
And I am standing tall

I know my voice was just a whisper
But someone must have heard
There were nights the moon above me stirred,
And let my light take hold
I'd rode across that sky
And once I touched the gold

Here in my own two hands
I once had the gold .....Music and Lyrics by Linda Eder


... and one joke:

Ben Bernanke, Alan Greenspan, and Jean-Claude Trichet are in the duck blind and a bird flies overhead. Bernanke looks at it and says, "Looks like a duck, flies like a duck... it's probably a duck," shoots at it but misses and the bird flies away.

The next bird flies overhead, and Monsieur Trichet looks at it, then looks through the pages of a bird manual, and says, "Hmmmm...green wings, yellow bill, quacking sound...might be a duck." He raises his gun to shoot it, but the bird is long gone.

A third bird flies over. Greenspan raises his gun and shoots suddenly, brings it down, and turns and says, "Can someone go see if that was a duck?"

Equities -> Dollar -> Gold and Silver

So much for a double bottom in gold. This whole gold, silver, US dollar scene is whackey considering fundamentals for the dollar are worse than ever and fundamentals are better than ever for gold and silver.

A possibility to watch for that could end the dollar's upward move and start gold and silver upward moves are US equities. The Dow and S&P are looking weak.

S & P:













Dow:













If foreigners start selling US stocks, they get paid in US dollars. They then sell US dollars to buy their home fiat tokens.