Saturday, January 31, 2009

Do Not Be Fooled By The US Dollar's Strength

The US dollar's strength is because many financial entities are doing the desperation samba, scrambling to sell US dollar denominated assets, get out of Us dollar denominated debt, deleverage, and repatriate "capital". US dollar strength is a sign of how bad things really are out there in the world.

Maybe it's double top will be a little wider.

From Bill Buckler:

" ... The US Dollar is still the world's RESERVE currency. The US is the only nation in the world which can buy valuable goods and services anywhere WITHOUT having first to buy the currency of the nation from which it is buying. The US Dollar is an INTERNATIONAL trading currency as well as being a RESERVE currency. Finally, there is the simple fact that the rest of the world holds predominantly US Dollars as the "reserves" which form the foundation of their own monetary system. Without these "reserves", they haven't got a system.

It is, of course, a fact that the US Dollar is rapidly losing its reserve currency status. The planned debt issuance of the US Treasury over this calendar year - estimates range from $US 2.5 to well over $US 3 TRILLION - are not supportable. The rest of the world doesn't have that kind of money to lend. If the Obama Administration carries forward its "stimulus" (and other) policies, the stark prospect of a simple "monetisation" of the debt - by means of literal US Federal Reserve purchases of it - is a certainty. The status of the US Dollar, as an international trading and reserve currency, will not survive that. The end result is that the US Dollar will plummet, if not against all other global currencies then certainly against the one form of MONEY which is no-one else's liability - Gold."

Now for a Privateer opinion:

"If you want a signal of the approaching demise of the entire global fiat debt-based money debacle, look for the point at which Gold sets new all time highs against the US Dollar and/or the Yen. At that point, the push will start in earnest for the return to a rational global monetary system. Gold will be resisted, but it cannot be overcome. It is the only rational global form of money which has ever been discovered."


A little bit from LeMetropoleCafe:

"The money

To all; while having dinner last night with my lovely wife, she mentioned us taking a trip or cruise to South America in October or November. I made the comment that "it is not likely tourism, or for that matter much of anything else will be running by then". [*****] is sharp and understands what is happening currently, but she missed the core when she said "why, the world didn't stop during the Great Depression?". The world is 180 degrees of what it was back then, this depression will be worse in many respects from the 1930's. Back then, at least money was trusted. The current debacle is all about confidence being lost in nearly everything, currencies standing front and center.

Today there is no money! Really there is not, every nation on earth uses an unbacked fiat currency that is supposedly "backed" by unbacked U.S. Dollars.

Back in the 30's, most every currency was backed by Gold, while banks went under and nations did eventually devalue their currency to Gold, Sovereign nations did not fail. Today the problem is systemic to every corner of the earth because the U.S. convinced the world that the Dollar was "as good as Gold", it clearly is not. Every central bank, every bank, business, all the way to every individual on earth is touched or affected by the "Dollar system" in some manner.

This is about a currency collapse, yes it is about too much debt, bubbles, etc., but it all boils down to the money. The money is bad and a new system must come forth because mathematically the old system cannot succeed. The current system cannot reflate without destroying the currency because the amount of "paper", ie bonds, mortgages, derivatives, etc., so dwarfs the amount of REAL goods on the planet. If enough credit was [or could be] generated into the system to reflate paper assets, then the cost of real products will explode in price. It will be interesting to watch this play out because the scale and size of the "Dollar hole" that has been dug is staggering to say the least.

So it is now different and we need a new currency system in my opinion, why does everything stop? Simple, when confidence in the Dollar is finally broken, what will the world trade with? Euro's...Yen... Swiss Francs...Roubles...Yuan? How? These all use Dollars as their primary reserves. THEY ARE ALL BROKE WHEN THE U.S. HITS THE WALL! Commerce, production, distribution, travel, etc., etc., all grind to a halt because the world runs on credit and no one wants to take on more credit when everything is deflating around them. As for investors, who wants to lend to a bankrupt entity? Hyper deflation/inflation, what a cocktail to serve at the end of this party! The system will eventually begin moving again, once and only once, the world starts to use a "money" that people can trust!

An off shoot of this topic is the current circus in Washington D.C.. How humorous, good bank bad bank, what a joke! The Federal Reserve has already taken well over $1 trillion onto their books on their way to a $ bazillion, and we are not supposed to call them a "bad bank"? Simulus package? Another $ trillion shot in the arm? Chicken feed for the size of this problem. The Fed and Treasury dept. have become the "dumping ground" of "impaired investments" for the entire world, and we are not supposed to come to the 2nd grade logic that they are broke? We can get this plan or that plan, whatever, the system is broke and nothing can change this. We must have a new global currency system to go forward, very simple. It's the transition that is not so simple! Regards, Bill H."


Because of the purposeful dumbing down of minds in at least the Anglo Saxon world (historically a new endarkenment coming possibly, it's that bad), plenty of people, 8 years into this bull market in gold and silver, still do not fundamentally get it. They lack critical basic knowledge.

Another little bit from the Cafe:

How clueless are most people today? On Monday a friend of my father's, who is quite successful in business, asked me where he could buy $100,000 of gold coins. I recommended either Tulving or APMEX to him. Last night my father reports that his friend bought Bank of America stock instead. I was speechless.
Best wishes,"


BUSINESS / WORLD BUSINESS | January 30, 2009
Global Worries Over U.S. Stimulus Spending
The long-term fallout from increased borrowing by the U.S. government seems to be getting more attention in Davos than in Washington.


The good ship USS dollar.

Thursday, January 29, 2009

Gold and Silver Gaps and Outside Days

Today, Thursday, January 29th, the gold price and the silver price made bulish outside reversal days.

The good 'ol ship USS dollar:

And what are other countries' fiat tokens backed by? "full faith and credit" and to a large extent US dollars and US dollar denominated debt as reserves, the US dollar being the world's reserve currency and all that "rag time" since the US dollar is not anywhere near what it used to be. So what happens to other countries' fiat tokens when the US dollar goes ***down***, breaks up?


Tidbit from LeMetropoleCafe

It's unreal how on the daily trading charts, lately, as soon as gold starts to make a strong move, the euro gets SMASHED. It's like they have run out of ammo and manipulating the fx market is the only way to try to keep gold under wraps. This daily struggle is wild. Gold just really seems to WANT to go up. There seem to be big buyers under the market. That's why these guys like Mark Hulbert etc with all their proprietary 'models' etc just don't get it. If gold is being sought as an alternative CURRENCY, then all bets are off as far as technicals, contrariness, overbought ratios and on and on. People around the world are ....TERRIFIED about their finances and the possibility of social disintegration. Thus a rush to gold. As much as western governments have tried to kill gold as an investment asset class, people still go to it when they are afraid.

We are in some mess here.

Buzz has it nailed here. Gold and silver have been really trading on their own of late, which is just what MIDAS has been saying would occur for as long as I can remember. The key to the gold/silver markets is physical market buying overpowering the cabal’s ability to feed available central bank supply to meet growing demand … not what the dollar does.

What we are seeing now is very exciting in that the biggest money in the world is coming our way. They now realize (finally) what kind of financial/economic market catastrophe is staring everyone in the face … and they know desperate governments, especially the US, are going to debase their currencies … so the GO TO investments are, and will be, gold and silver. We are close to spectacular fireworks price action-wise.


On top of the bullish outside reversal days, gold's two price gaps in the 2nd week of January may be break-a-way gaps, never to get closed, the start of a powerful move upwards. Same goes for silver's price gap in the same week.

Gold Offers Some Protection Against Fraud and 1984 "news speak"

Gold and silver offer some decent protection against the staggering amount of fraud and outright lying in the US and other financial systems.

Robert Rubin Says Mark-to-Market has Done ‘Damage’

"By Josh Fineman and Ian Katz

Jan. 28 (Bloomberg) — Robert Rubin, who quit his post as senior counselor at Citigroup Inc. this month, said an accounting rule forcing companies to mark down assets every quarter to reflect market value has “done a great deal of damage.”

“I spent my whole life at Goldman Sachs believing in mark- to-market accounting, and having said that, if you look at the experience from the last two years, I think mark-to-market accounting has led to terrible vicious cycles in asset prices,” "

Black is white, "war is peace, freedom is slavery, ignorance is strength", honest accounting causes problems, fraud is good. The government/financial scene in the US is getting to be like something out of 1984.

Gee! It couldn't have anything to do with taking on too much debt to begin with, could it? The US government installed a tax cheat as the new US Treasury head. Now a former US Treasury head says that accounting should not be of the honest kind, that account holders of all sorts should be kept in the dark. There goes the reputation of the US financial system down the drain right in front of the rest of the world. The US dollar can not be far behind.


Government Regulators Aided IndyMac Cover-Up

"Government Regulators Aided IndyMac Cover-Up, Maybe Others
Darrel Dochow May Not Be the Only Official Who Helped Banks Hide Financial Problems
Jan. 16, 2009—

A brewing fraud scandal at the Treasury Department may be worse than officials originally thought.

Investigators probing how Treasury regulators allowed a bank to falsify financial records hiding its ill health have found at least three other instances of similar apparent fraud, sources tell ABC News.

In at least one instance, investigators say, banking regulators actually approached the bank with the suggestion of falsifying deposit dates to satisfy banking rules — even if it disguised the bank’s health to the public."


Gold and silver are some of the few ways to protect your stored value, property, from people like above and from the increasing percentage of the population that support them. If a government robs Peter to pay Paul, the government can always depend on the support of Paul. The number or percentage of Pauls out there is increasing.


Trading Gold for US Dollars. Huh? Now?


"The sour economy has been sweet for the Florida gold-melting service, billed as an alternative to a pawn shop. Cash4Gold transactions more than doubled to about 500,000 in 2008 vs. 2007. How it works: Consumers send in gold items and get paid based on weight and quality within two weeks."


You should have gold and silver in your own hands, unlike most people's "wealth" (stocks, bonds, bank accounts) which is mostly digital bits on someone else's hard drive, ripe for the final rip off.

Sunday, January 25, 2009

Possible US Dollar Top

The US dollar may be putting in a double top to its secondary rally. The recent gold price and silver price actions have been unusually strong.

It is up against the neckline of its previous top. And, Friday's price action made an almost upside down hammer which could be the right hand top of a quick double top. We will see. If it turns out to be the case, the declining US dollar will be a wind at the back of the gold price and the silver price.

Saturday, January 24, 2009

Long Term Bond Trends Strongly Suggest Gold and Silver Ownership

When a government starts to big time trash its fiat tokens, the world wants a higher interest rate to make up for the bill's, note's or bond's decreasing purchasing power. If interest rates are really taking off because the world fears big time devaluation of the government fiat token that the debt is denominated in, so will the price of gold and silver denominated in the same fiat token that the debt being trashed is denominated in.

A 30 year bond chart

A 3 year bond chart

A 3+ month bond chart

The price of long term US Treasury bonds are up near the top of their long term channel. It does not look like there is anywhere for them to go but down. More wind at the back of the gold price and the silver price.



Opps! Looks like the world does not much like US debt. Great for the price of gold and silver.

Thursday, January 22, 2009

Another Possible US Dollar Top

The US dollar is up at the neckline of the previous top. The neckline offers resistance. If it is down from here for the US dollar, this downward movement would be a wind at the backs of the gold price and the silver price.

These nine charts show that it is not just the US dollar that is being devalued.

The gold and silver prices have moved up the last few days despite the US dollar moving up also. Bullish!

Wednesday, January 21, 2009

Bank "Holidays" and Bank Charts

If you are worried about the government shutting down the banks for a while, keep and eye on the charts of the big ones that are still left and in big trouble; and on the charts of government long term bonds. Do not worry about the price of gold. Keeping an eye on the charts for the price of gold will not do you much good. Getting, keeping, adding to gold and silver are what will. The gold price and the silver price will take care of themselves just fine.

Goldman Sachs Group, Inc

Wells Fargo & Company

State Street Corporation

JPMorgan Chase & Co

Citigroup, Inc

Barclays PLC

Bank Of America Corporation

Something is big time wrong with these pictures.

With gold and silver, you do not need a banking system to depend on to create value, determine value or store value for you. You do not need a central bank. You do not need Wall Street or any other Street. You do not need a government. That is because there is no liability attached to gold or silver or any of the other stuff that has been used as money in the past by humans. Money has no backing. There is no redemption of money because when you pay with or get paid with money, that action is actual final settlement. No backing with ("full faith and credit") required. No redemption for final settlement required.

You do not need a government controled and condoned financial system with rampant theft / fraud though out, what so ever. Which means you do not need government to use money, which is probably why governments now a days hate the private use of gold and silver so much. Which is why governments need the poor and lazy so much. The poor are usually cheap to buy and grateful. Those with gold and silver are usually the opposite, which usually means they do not need much government or none at all, which is not good for the power of government.


"In a separate lecture, Hayek noted that, "I am
more convinced than ever that if we ever again
are going to have a decent money, it will not
come from government: it will be issued by
private enterprise, because providing the public
with good money which it can trust and use
can not only be an extremely profitable
business; it imposes on the issuer a discipline
to which the government has never been and
cannot be subject." - F.A. Hayek

"If a nation values anything more than freedom, it will lose its freedom, and the irony of it is that if it is comfort or money that it values more, it will lose that, too." - Somerset Maugham

There are two methods, or means, and only two, whereby man's needs and desires can be satisfied. One is the production and exchange of wealth; this is the economic means. The other is the uncompensated appropriation of wealth produced by others; this is the political means. -- Albert Jay Nock

"They want their victims to believe that the victims' lives will be worse off without the tyrant than with them. That the tyrant's demands are minimal compared to the good that the tyrant does. That the victims owe the tyrant a "debt" for something. They want the victims to remain in fear of everything up to and including the victims' own shadows, such that the tyrant can offer protection. They want the victims to be lazy and immature, so that the tyrant can offer to take responsibility for them...." - hobbit

"By virtue of exchange, one man¹s prosperity is beneficial to all others."
-- Frederic Bastiat, "Economic Harmonies" p. 82

"The more restrictions and prohibitions in the world, the poorer people get." Lao Tzu, "Tao Te Ching"

"Elizabeth I Queen of England (reigned 1558 - 1603).
When she ascended to the throne, Elizabeth inherited numerous debts. Her genius was in the method she chose to raise revenue to pay those debts, which was unique in tax policy: she made taxation voluntary! Her words: "To tax and to be loved is not given to man. I will end as I began with my subjects, with love." Within 15 years she had a surplus, and was loved deeply."
- from Victor Sperandeo's dedication of his book
'Trader Vic II - Principles of Professional Speculation'

"It's not how much you know, but the truth and quality of what you know." - Trader Vic (Victor Sperandeo)


Even if you are prepared with gold and silver, life will not be easy. At least you can count on the gold price and the silver price to keep moving on up.

Friday, January 16, 2009

Possible HUI Head and Shoulders

It looks like the HUI index of gold and silver shares is putting in an upside down head and shoulders bottom.

The HUI today broke above its short January down trend line. This could be the right hand shoulder. That probably had something to do with the gold price and the silver price gapping up at the open in New York and continuing up for the rest of the day. Whether these are break away gaps that do not get filled remains to be seen.


Amazing, an establishment publication refers to Ayn Rand's Atlas Shrugged novel:

The Wall Street Journal

"The current economic strategy is right out of "Atlas Shrugged": The more incompetent you are in business, the more handouts the politicians will bestow on you. That's the justification for the $2 trillion of subsidies doled out already to keep afloat distressed insurance companies, banks, Wall Street investment houses, and auto companies -- while standing next in line for their share of the booty are real-estate developers, the steel industry, chemical companies, airlines, ethanol producers, construction firms and even catfish farmers. With each successive bailout to "calm the markets," another trillion of national wealth is subsequently lost. Yet, as "Atlas" grimly foretold, we now treat the incompetent who wreck their companies as victims, while those resourceful business owners who manage to make a profit are portrayed as recipients of illegitimate "windfalls." "

From fiction to fact in about 50 years as the US's living standard heads to third world levels.

Gold and silver will provide much protection from the growing legalized looting and theft of an increasing "money" supply, which is just mostly digital bits on computer hard drives now a days. Hardly any of the stuff is paper any more. What does it take to create bits on a hard drive versus getting gold and silver out of the ground and refining it. Heck, what central banks do is far easier than counterfeiting.


"The problem with socialism is that you eventually run out of other people’s money." – Margaret Thatcher

Friday, January 09, 2009

Gold and Government Fiat Token Turmoil

From The Privateer:

"Another Time - Same Place:

The place is, of course, the United States. The data is from the
Statistical History of the United States:

Real wages for the working man tripled in the years 1850-1913. US GDP
increased over 500 percent, averaging 4.3 percent annual growth from
1870-1913. This highly productive era was accompanied by steadily
FALLING consumer prices. From 1800 to 1913, there was an overall 30
percent reduction in the Consumer Price Index from 43 to 30.6.
"Modern" economists stand dumbfounded before these facts, but the
"Gilded Epoch" which lasted from about 1870 to 1910 has often been
called the second American industrial revolution. US wholesale
prices, for instance, increased by an annual average of only 0.1 per
cent from 1879 to 1913. The long-term stability of the late 19th
century was not, of course, due to US government measures. It was the
semi-automatic effect of the international Gold standard. There was
no Federal Reserve and the US income tax amendment to the
Constitution had not been enacted. Gold and Silver coinage was there
and Americans had the most productive period ever as living standards

Historical Statistics of the United States: Earliest Times to the Present
This 5 volume set provides a sweeping statistical history of the United States from colonial times to the present. Historical data series cover a wide range of subject areas including: population, work and welfare, economic structure and performance, economic sectors, governance and international relations.
- Available in print at Saint Mary's Library: SMREF HA 202 .H57 2006
The [email protected] Mary's
Statistical History of U S (Hardcover) at Amazon

(open chart in new tab to enlarge, or click on chart to enlarge)

Chart produced by AIER (American Institute for Economic Research)
Can you imagine what this chart is going to look like after 2015, particularly since there is a good chance that the US dollar, as we know it now, will not exist?


“By a continuing process of inflation [remember, it is the increase of the "money" supply, not an increase in prices], governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. ” - John Maynard Keynes

Central banks are key to the process of theft / robbery by the process of inflation, which is why The Fed is illegal in the US, not that most Americans care now a days. President Andrew Jackson ended the Second Bank of the United States in 1832 by vetoing its re-charter by Congress.

“Unless you become more watchful in your States and check this spirit of monopoly and thirst for exclusive privileges, you will in the end find that the most important powers of Government have been given or bartered away, and the control of your dearest interests have been passed into the hands of these corporations.” – Andrew Jackson, 1837


China's First Experience with Paper Money

Till 1927, China had a free banking system through the interaction of private banks operating in various regions of the country. Privately held banks operated like any other Chinese business and competed with one another to obtain customers. Most banks issued their own notes which were redeemable in silver, the traditional medium of exchange in China. The notes from each bank circulated freely with the notes from other banks.

These Chinese banks operated largely without state regulation. A free banking system has inherent checks against inflation - primarily because customers will flee from depreciating currencies - and instances of banks' inflating their currencies were rare.

Of course government put an end to it. Guess what ultimately came with that? Not one, but **2** famines.


Laissez-Faire Banking by Kevin Dowd
Fractional reserve banking in the western hemisphere started in Scotland. It was in a real free market environment, and was coming along nicely till government got into the act and screwed things up big time. Read it for the story, and the reasons why banking works best with absolutely no government rules and regulations required.


In Vietnam, if you want to buy a house, you need gold. If you take a mortgage on your house, you borrow gold. That means you make mortgage payments in gold. Important business deals are conducted in gold.

For the forseeable future, after the US dollar ceases to be the world's reserve "currency", which hemisphere is going to do better?

The one with the most gold and silver.

"I need someone to protect me from all the measures they take in order to protect me" … Banksy, street artist (b. 1974)

"The most potent weapon of the oppressor is the mind of the oppressed."
- Steven Biko

"The abandonment of the gold standard made it possible for the welfare statists (government bureaucrats) to use the banking system as an unlimited expansion of credit. In the absence of the gold standard, there is no way to protect savings from confiscation through inflation... Deficit spending is simply a scheme for the hidden confiscation of wealth. Gold stands in the way of this insidious process. ... There is no safe store of value. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves." - Alan Greenspan

"Much of the social history of the Western world over the past three decades has been a history of replacing what worked with what sounded good." - Thomas Sowell

"I actually think money is maybe the most fundamental idea that humanity has come up with. It's a 'universal bartering tool' that allows a person to concentrate on saving up for the future. -- Linus Torvalds, who wrote the Linux OS kernal

"People say money doesn't buy you happiness, but those people are usually people who don't have enough of it," -- Linus Torvalds, who wrote the Linux OS kernal

Wednesday, January 07, 2009

Dependable Gold

For those who understand government confiscation of stored value games, and were buying gold and silver at the bottom or before the start of the bull market in gold, they have been rewarded for their patience, particularly when their gold returns are compared with the returns people have been getting in their pensions, real estate, IRAs, 401Ks, and the rest of those complicated "money" traps mired in rules and regulations that the government can change at anytime, anyway it wants, including confiscation. Watch out when a government's back is hard pressed against the wall.

Numbers are based on spot future closing prices on the COMEX:

2009 should be an above average year for gold and silver.

Gold has broken above its most downwardly sloping trend line on The Privateer's long term point and figure chart.

Makes sense. The Continous Commodity Index chart shows its index having broken above its down trend line. Government fiat tokens are losing their value 'cause governments are making too many of them. If what governments and their central banks do is no problem, then they should let anybody make US dollars, Yen, etc., as much as anybody wants.
CCI chart thanks to

What to look forward to.

Tuesday, January 06, 2009

More US Dollars On Their Way

The world may be stopping the loaning of USD to the US in exchange for US debt. A great case for gold and silver.

Hugo Salinas Price:
The strange case of falling international reserves

Now, if the Reserves are no longer growing but diminishing, this might indicate that the exporting countries are no longer buying and accumulating more US, British and European debt. If they are not accumulating more foreign currency bonds and debt, then the fiscal deficits of the US, the Brits and the European Union countries are no longer being funded – especially important to the US, which is running an immense fiscal deficit, what with the US Treasury going into debt like a drunken sailor on account of the need to bail-out all and sundry debtors.

Now if the US deficit is not being funded, then that means that the fiscal deficit is simply being monetized by the Fed. Or what else can it mean?

Silver may outperform gold, Jim Rogers says

Silver, down 33% this year, will outperform gold as investors turn to the metal as a hedge against inflation, investor Jim Rogers said.

"Silver will do better than gold," Rogers, chairman of Singapore-based Rogers Holdings, said today in an interview in New York. "It's been beaten down horribly. If you put a gun to my head and said you have to buy one, I would buy silver rather than gold."

If you are wondering just what is going on with the US dollar, you might want to read a free book:
The Causes of the Economic Crisis
... a collection of five essays on economic fluctuations by Ludwig von Mises (1923, 1928, 1931, 1933, 1946) ...

Monday, January 05, 2009

Gold and Silver Advantages

Gold and silver have more advantages than just protecting stored value (purchasing power). At the height of a "Crack Up", they can buy you the means of production, real stuff with potentially huge value under the right circumstances, as in just as or just after the blood in the streets stops flowing.

The worst part of what Von Mises refers to as Crack Ups historically take about 1 & 1/2 - 2 years, the time period of the most upward or most near vertical part of a curve on a chart showing the loss in purchasing power of government fiat tokens.

A example of what Ludwig Von Mises called a Crack Up is happening right now in Zimbabwe.

(click to enlarge)

Numbers are from the "Zimbabwe dollar" at Wikipedia

Here is a link to "Banknotes of Zimbabwe" at Wikipedia

The above 2 pages are good ones to quickly get up to speed on the Zimbabwe Dollar (ZWD) scene.

The above chart is from Hyperinflation: Mugabe Versus Milosevic
Worth a look. It is probably as of about May of 2008. The ZWD has lost a lot more purchasing power since then and now, the beginning of January, 2009.

Here is a chart of the Crack Up of the ZWD but the sources are not given.

A check for over a quadrillion ZWDs from The Big Picture.


Final humiliation for Zimbabwe dollar as foreign currency legalised
Robert Mugabe's government has bowed to financial reality and legalised the use of foreign currency in Zimbabwe's shattered economy.

By Sebastien Berger, Southern Africa Correspondent
Last Updated: 1:28AM BST 11 Sep 2008

It is the final humiliation for Zimbabwe's battered currency, which was worth more than the US greenback at independence in 1980.

Even after two revaluations that have knocked a total of 13 zeros off it, it was trading on the black market on Wednesday at around 6,000 to the USD – or 60,000,000,000,000,000 to one in terms of the original Zimbabwe dollar.

Zimbabwe economy virtually foreign exchange-based: media
The Zimbabwe dollar continues to lose its worth as the country's chronic economic woes show no sign of abating. One US dollar is worth four million Zim dollars at the official exchange rate and three billion Zim dollars on the black market.
The Herald said the prevalent use of foreign exchange is threatening the once flourishing parallel foreign exchange market as traders get fewer people in need of the local currency.

Once a regional economic model, Zimbabwe is in the throes of economic crisis with inflation officially at 231 million percent and most families unable to afford a square meal.

By the way, the Zimbabwian central bank stopped publishing their ZWD supply numbers a while back just like the Fed did over a year ago.

The Fed/Treasury has the M3 growth rate down to about 8-10% at the moment. Gee, thanks guys. Dispite that, there is still a compound curve to the **supply** of M3, new highs. Roughly speaking, at the moment, you need to be making 8-10% on your bank accounts just to maintain purchasing power. Therefor most are loosing at an anuual rate of about 7-9% of purchasing power of their USD in their bank accounts. Such a deal!

During the last or radical part of a Crack Up, the purchasing power of gold and silver can increase a **lot** in real terms since the economy is so bad, the means to production have little value and can be bought dirt cheap. The story of the boy in Germany buying a hotel for a single ounce of gold could very well be true.

It is not easily done though. You probably should be a local who intimately knows the scene to get the best of the small deals before some of the big boyz swoop in to buy up stuff in large quantities, managed to survive, and somehow didn't need to spend gold or silver to do it, or at least has some left over to make the once in a life time buy(s).

It is safe to expect the gold price to go up into USD thousands.

Thursday, January 01, 2009

Bullish New Silver Numbers

Ted Butler has come up with some new supply numbers for silver.

Scroll down to "TIGHTENING PRODUCTION" at this link
Almost 70% of silver production derives as a byproduct from the mining of other metals.
In the past two months, the data concerning inventories and price seems to confirm that the storm is firmly in place. In spite of cutbacks in base metal mining, there has been a large increase in base metal inventories and a further fall in price. That should accelerate additional base metal mine closings. For example, London Metal Exchange (LME) inventories, measured from the low points of the past six months, have increased in copper by 165%, in zinc by 65%, nickel 70%, and aluminum by 100%. These are important economic indicators of industrial demand. In addition, COMEX copper inventories have also tripled in the past few months. LME lead inventories are still down for the year, but have grown in the past month by 10%.
How has silver fared in terms of inventory and price over the past few months compared to the base metals? That’s the point of this article - silver has moved in the opposite direction for both inventory and price.


If supply stays constant and demand stays constant, prices stay constant.
If supply stays constant and demand increases, prices increase.
If supply declines and demand stays constant, prices increase.
If supply declines and demand increases, prices increase even more.

And, if the unit of measure of value (the US Dollar and other government fiat tokens) declines in value because of increased supply, then the US Dollar price, and other government fiat token prices of stuff (in this case silver) will increase.


The Coming Hyperinflation?
So much potential new money is now impounded in the commercial banks’ holdings of excess reserves that it is difficult to see how the Fed will be able to stem the flood once the banks begin to transform those excess reserves into normal loans and investments. If the Fed attempts to sell enough government securities to soak up the growing money stock, it will drive down the prices of Treasury bonds and hence drive up their yield, increasing the government’s cost of borrowing to finance the huge budget deficits the government will be running because of its various bailout commitments and so-called stimulus programs. This scenario holds the potential for a complete monetary crackup.

Scroll down to the bottom of the Excess Reserves of Depository Institutions column of numbers


Ron Paul, probably the only person in Congress who understands Austrian economics, does not seem to hold out much hope for the US economy (therefor the US Dollar):

The course has been set for several decades, and in reality there is little the new administration could do to fix things without actually making them worse. But I expect them to try. The only real solutions involve allowing the market to liquidate the debt and malinvestment. The political reality is that this is not going to happen.

Through the coming months and years, our nation will find itself at many crossroads, as all manner of socialist, corporatist, protectionist and nationalist initiatives will be thrown at the economy to see if anything will reflate it. Some of these so-called fixes will be enacted amidst much outcry, as with the $700 billion TARP bailout, which the public was right to oppose. About half of that money is gone without a trace, with no accountability, and the economy is no better off for it. Others, such as the proposed new $800 billion plus economic stimulus the new administration is already clamoring for, might have limited public support, as many will find the prospect of receiving a government check a little too tempting to object to. After all, Wall Street got a bailout. What about the little guy? Everything will be attempted by government in the short run to remedy the worsening situation - everything, that is, but freedom. Therefore everything attempted will fail. Unfortunately, government will continue to consolidate and abuse power at an accelerated pace. Government will get bigger, in the short term, and as monetary policy goes from irresponsible to absurd, I have every expectation that we will soon shift from some prices falling to an inflationary nightmare.
It is regrettable that we keep forgetting what history has shown over and over to be true, because truly, it is a hard and destructive lesson to keep learning.


Silver is making a nice saucer type base and probably will develope a higher high next week:

Silver can do one heck of a job protecting stored value that you may have from being stolen by the world's current fractional reserve banking system.