Gold World News Flash |
- Hungary Circles the Drain.... Who's Next?
- Daily Dispatch: Weekend Edition - June 05, 2010
- Gold Wars : Military Conflicts, Gold and Currency Crises
- The Difference Between Gold and Miners
- Trading Week Outlook: June 7 - 11, 2010
- No Cheer For Housing Bulls From Goldman Which Goes Negative On House Prices
- The Latest EUR Smackdown Comes Courtesy Of BofA, Which Lowers It 2011 EURUSD Target To 1.10 From 1.20
- Hungary Tries to Calm Markets; Europe Headed Back in Recession, U.S. Will Not Decouple
- Societal Collapse Due to Peak Oil ‘Inevitable,’ According to Researcher
- Jim's Mailbox
- Is Your IRA or 401K a Target of Government Appropriation?
- Debt Default ‘Deferral’ of Greece a Dangerous Precedent – Got Gold?
- The BIS: the bankers’ money-launderer
- Gold: Global Supply Outlook
- Silver Falls in First June Week, Handing Back Gains
- Bullion Prices & Business Weekend Recap – June 5, 2010
- 2010 American Buffalo Gold Proof Coins on Sale
- Silver now almost completely bullish, Ted Butler tells King World News
- Jim Sinclair: This morning’s blatant gold market intervention
- Interview: Jim Rogers on Currencies and Inflation
- Gold Thoughts
- If 1 + 1 Still Equals 2 Then Gold Will Explode!
- On The Trail Of Europe's "Mysterious" $2.6 Trillion In Toxic Debt
- First Goldman Sachs Now..BP chief Tony Hayward Sold Shares Weeks Before Oil Spill And Paid Off His House
- Biggest Equity Outflow In Recent History Leads To Fifth Consecutive Outflow From High Yield Funds
- Thoughts On Upcoming Russell 1000 Rebalancing And Weekly Chartology
- UK Budget Butchers Put Public Finances on the Chopping Block
- This Is Worse Than A Depression
- Technical Market Report for June 5, 2010
- Guest Post: TIPS Vs Treasuries
- Gold's Fundamental Value
| Hungary Circles the Drain.... Who's Next? Posted: 05 Jun 2010 06:13 PM PDT Gold didn't do much in Far East and early London trading yesterday. But that changed shortly before 9:00 a.m. in London when gold got sold off about 10 bucks to it's low of the day around $1,195 spot. From there it came roaring back the same $10 that it had just lost... and by that time it was precisely 8:00 a.m. in New York. From that point it vacillated around $1,205... until it got sold off going into the London p.m. gold fix which occurred at precisely 10:00 a.m. Eastern time. Then gold price immediately returned to the $1,205 range... and shortly before lunchtime, gold really caught a bid... and was up $15 from the London gold fix in less than 15 minutes. Then a seller of some sort showed up, but gold still managed to close virtually at the high of the day, which was $1,221.40 spot. This turnaround was a big surprise, as I certainly wasn't expecting it. All my comments yesterday about gold being hit at the release of what were whispered to be fantastic j...
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| Daily Dispatch: Weekend Edition - June 05, 2010 Posted: 05 Jun 2010 06:13 PM PDT June 05, 2010 | www.CaseyResearch.com Weekend Edition The Sure Thing Dear Reader, Digging through the entrails of the fundamentals associated with the global economy and markets, it increasingly strikes me that there is really only one investment I’d now consider a “sure thing” – and that is buying gold on dips. In support of that contention, a quick review of the other primary asset classes is in order. The broader stock market. Now, I can’t speak for all the world’s stock markets, but will say that with the S&P 500 currently selling at a P/E of 18.29 and with a dividend yield of a miserly 2%, it’s hard to say that these stocks are selling on the cheap. Especially when you consider that during the depths of the deep recession lasting from 1980 to 1982, the P/Es hit below 7 (averaged 8.4) while dividend yields reached above 6% (averaged 5.4%)... levels we’ve been nowhere near ...
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| Gold Wars : Military Conflicts, Gold and Currency Crises Posted: 05 Jun 2010 05:30 PM PDT
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| The Difference Between Gold and Miners Posted: 05 Jun 2010 05:17 PM PDT Jeff Pierce submits: Something occurred to me on Friday about the non-strength in the miners that I really never considered until I looked at the long-long term charts of the following two ETF’s. Gold miners (GDX) are actually lagging the commodity gold so the real play that we should have all been focused on was either buying the bullion (which I’m not that interested in) or buying GLD. That is where the real momentum is. Complete Story »
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| Trading Week Outlook: June 7 - 11, 2010 Posted: 05 Jun 2010 05:05 PM PDT All Things Forex submits: With the U.S. Retail Sales and Consumer Sentiment data scheduled for release in the week ahead along with three interest rate announcements from the Reserve Bank of New Zealand, the Bank of England and the European Central Bank, traders will look for signs of future changes in the monetary policies of these three central banks, while also focusing on consumer spending patterns and economic outlook. Complete Story »
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| No Cheer For Housing Bulls From Goldman Which Goes Negative On House Prices Posted: 05 Jun 2010 04:11 PM PDT
Goldman recently confirmed it has lost the magic touch when it joined the momentum brigade in anticipating a blow out 600,000 NFP number, revising its prior estimate by +100,000 on Thursday, even as the real NFP came out as a miserable dud 24 hours later. Which is why we urge readers to take the following note from Goldman's Sven Jari Stehn, even though conceptually we are in full agreement with its message, with a big grain of salt: "Despite normalization of valuations, we expect excess supply, high delinquencies and the fading boost from housing policies to push down house prices somewhat further in 2010 and 2011." And just like earlier we pointed out the discrepancy between the opinions of two BofA strategists on the EURUSD, and the huge implications from this divergence, so here we observe the inconsistency between Sven's bearish view on the oh so critical to the US economy housing segment, and David Kostin's hope for an S&P at 1,250 by the end of the year (and 1,300 by June 30). From Goldman US Economics Analyst: 10/22 - House Prices Have Not Bottomed Yet June 4, 2010
House Prices Have Not Bottomed Yet
Modeling House Prices Our house price model is constructed as follows. First, we choose to model house prices at the metro area level. Most house price models have focused on forecasting aggregate prices at the national level, as more data with longer time series are available. However, we believe that the housing market is characterized by sufficient regional variation to warrant a more disaggregated approach. Exhibit 4, for example, shows very different house price developments in the three largest US metropolitan areas.
Given the excess supply in the housing market and rising delinquencies, our model suggests that the composite 20-city Case-Shiller index will fall by about 3% over the next year and another 1% over the following year. This projection is weaker than the current consensus forecast of a 0.4% drop in the national Case-Shiller index in 2010 followed by a 1.6% increase in 2011. The model projects the largest house price appreciation in Cleveland, Minneapolis, San Diego and San Francisco. None of these areas suffers from sharply rising delinquency rates or high vacancy rates (except Cleveland). In addition, house prices in Cleveland appear undervalued and San Diego/San Francisco benefit from positive price momentum.
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| Posted: 05 Jun 2010 03:06 PM PDT
First Goldman came out with a "favorite tactical short" of the EURUSD, targeting a 1.18 rate several days ago, now BofA is out with the latest hit job on the European currency: the bailed out bank's John Shin has said that he is lowering his "forecast for the euro, pushing down the year-end 2010 target to 1.15 from 1.28 and the year-end 2011 target to 1.10 from 1.20." He continues, "the evolution of the crisis has not only been a near-term negative for the euro, but signals poorly for its medium and longer-term future." Now this is very ironic, because as we pointed out two short days ago, the very same firm's European strategist, Hans Mikkelsen, espoused a much different optimistic point of view: "While we continue to view funding pressures as contained due to the ECB/Fed currency swap lines, the main risk to our tactical long credit positions remains any disorderly declines in the Euro as that would undermine the credibility of the ECB to contain the sovereign crisis." Presumably the take home here is that as long as the decline from 1.20 to 1.10 is orderly all shall be well? Because as has been repeatedly demonstrated, hedge funds always align calmly, in single file, when the Central Bank theater is burning, happy to see their sell EUR orders executed if and only if RBS, BofA, Barclays and GS so desire... We eagerly await Mikkelsen's positive spin to Shin's note, as otherwise those defending Europe's less than rosy liquidity situation may be down one more advocate. In the meantime, IMM COT reports that EUR shorts actually dropped to a 5 week low, down to -93,325 net spec total shorts, from -106,736 in the week before, and down from a record -113,890 in the week edned May 11. With the EUR down to 5 year lows, look for this number to once again reverse toward in a bearish direction. Full EUR beatdown from BofA:
And for JPY fans - bad news: BofA goes all friendo on the yen as well.
BofA doesn't stop there: the momentum chasers also have an "opinion" on the GBP, the CHF, the NOK, the SEK, the CAD, and of course the AUD and the NZD. Full report here.
This posting includes an audio/video/photo media file: Download Now | ||||
| Hungary Tries to Calm Markets; Europe Headed Back in Recession, U.S. Will Not Decouple Posted: 05 Jun 2010 02:26 PM PDT Michael Shedlock submits: Hungarian officials are attempting to distance themselves from Friday's economic statements regarding the "Very Grave Situation" in Hungary. Please consider Hungary Backtracks on Talk About Default.
Complete Story »
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| Societal Collapse Due to Peak Oil ‘Inevitable,’ According to Researcher Posted: 05 Jun 2010 01:39 PM PDT In a new article, an Oxford researcher has examined what will happen when peak oil hits. According to Jörg Friedrichs, the outlook is not good. In his article Friedrichs doesn't attempt to answer the question when peak oil will happen (or if it already has). Instead he imagines that it has happened and the world has to deal with it. His conclusions: the world will have a "slow and painful" adjustment to peak oil lasting a century or more with the inevitable collapse of industrial society and the disintegration of free trade. How cheerful. In his research, Friedrichs used three historical examples to guide his thought process of how the world's different governments will deal with being energy constrained: North Korea, Cuba and Japan. North Korea and Totalitarian RetrenchmentIn the 1990's North Korea entered a period of time that is akin to what the world might face when confronted with peak oil. As the Soviets stopped delivering subsidized oil to its comrades, North Korea was faced with a severe oil shortage. To deal with the catastrophe, the North Korean government "basically screwed its own population," said Friedrichs in an interview with Miller McCune. "Elite privileges were preserved, while hundreds of thousands of ordinary people starved." This type of governmental response to an oil chortage Friedrichs has labeled as "totalitarian retrenchment." Cuba and Mobilization of Local ResilienceDue to the same pullback that North Korea faced from the Soviets, Cuba also entered a period of severe oil shortages in the 1990's. But, instead of enacting more totalitarian control tactics, Cuba — with its history of grassroots communist organization and reliance on friends and family — fell back into what Friedrichs calls "mobilization of local resilience." In other words, people being a community. "People helped each other at the neighbourhood level, and the wastelands of Havana and other cities were utilized for urban gardening," said Friedrichs. "As a result, Cuba did not experience mass starvation despite considerable hardship in the 1990s." Japan and Predatory MilitarismFrom 1940-1945, Japan was on the brink of entering the war. For decades Japan had sought to expand its influence in China and secure energy resources — long considered its major growth restraint, having virtually none of its own. At the time, Japan was almost completely dependent on oil imports from California to fuel its growth. Given that Japan had its sights on a pre-emptory invasion of Pearl Harbor, they decided to invade the East Indies to secure their oil supply. This kind of response to an oil shortage Friedrichs calls "predatory militarism" — that is, using military might to steal resources from other areas. How will the Various Governments of the World React to Peak Oil?According to Friedrichs, all countries of the world that are wholly dependent on an oil economy will react to peak oil in one of the above 3 methods. "Countries prone to military solutions may follow a Japanese-style strategy of predatory militarism," he said. "Countries with a strong authoritarian tradition may follow a North Korean path of totalitarian retrenchment. Countries with a strong community ethos may embark on a Cuban-style mobilization of local resilience, relying on their people to mitigate the effects of peak oil." 
This posting includes an audio/video/photo media file: Download Now | ||||
| Posted: 05 Jun 2010 11:11 AM PDT Jim, Thought you would like to know. On this date in 1933 the USA went off the gold standard. Have a great weekend! CIGA Samuel
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| Is Your IRA or 401K a Target of Government Appropriation? Posted: 05 Jun 2010 11:08 AM PDT Is Your IRA or 401K a Target of Government Appropriation? By: Chris Blasi www.FinancialArticleSummariesToday.com
Will the laws and rules in place to protect individuals in their attempt to set something aside for retirement be safeguarded by the representatives elected to advocate for them in Washington? Will the principles and moral integrity of the political class keep them from appropriating the trillions of dollars held in 401k's and IRA's? I'm not so sure! While the answer is most likely yes, when one realizes the magnitude of the financial predicament the U.S. might well find itself in shortly, it is indeed, conceivable that such an appropriation of private retirement accounts might prove to be too compelling for most politicians to resist. With an economy and financial system on life support, trillions of dollars of new U.S. debt must be sold to keep up the daily operations of the welfare state. Unfortunately, the recent match-ups between desperate seller and willing buyer (transparent buyers) have been falling short. As a result, debt monetization appears to be expanding via the growing share of debt auction issuance being taken down by "Direct Bidders". Consequently, if this continues, a new source of massive funding must be found very soon. Several years back theorizing on the possibility of a government takeover of private retirement monies was bandied about only by those labelled "conspiracy nuts" by the main stream financial media. Consequently, a pliant public has been successfully conditioned to scoff at such speculations. Indeed, to even suggest that the US Congress would lay claim to the retirement savings of the common man were the ravings of the "un-American", as per the attitude projected by the media shills to such musings. Will We See an Introduction of Guaranteed Retirement Accounts? In the annual report of The White House Task Force on the Middle Class, Joe Biden discussed the possible creation of so-called "Guaranteed Retirement Accounts" (GRAs) which would provide protection from "inflation and market risk" and potentially "guarantee a specified real return above the rate of inflation." Why such a magnanimous gesture? Where would such a deeply indebted public find the extra funds to invest in such a sure fire offer? Forgive the cynicism, but as an aside, should such a creation come to be, what are the odds the officially declared rate of inflation used to index such a vehicle would fall short of real CPI? And risk….is there not risk in being stuffed with IOU's that nobody seriously believes would ever be paid off in a currency retaining any semblance of purchasing power? What is the Motive and Opportunity Behind GRAs? Connecting the dots in the speculation of this pending scheme, and utilizing basic detective methodology, we find motive and opportunity jumping out at us. The motive would be to keep a bankrupt political and economic system going a little while longer. The opportunity would be that the trillions of other people's dollars would be 'protected' in the hands of Congress. Indeed, unless there is some other massive pool of untapped wealth yet to be discovered, and appropriated, the rumours as to the confiscation of individual retirement monies may have legs! To successfully commit such a assault, it would serve the orchestrators best if a crisis ensued whereby the victims implored the perpetrators for their gracious protection. This point causes me to wonder if an event, or series of events, might transpire that drive disillusioned equity investors to the "safety" of government guaranteed paper. A good foundation toward such a transition has been laid. Ample disdain for Wall Street exists, and it is easy to ramp up courtesy of this crew's whorish behaviour. One could surmise that with stocks still selling below their peak of a decade ago that it would not be particularly difficult, with the assistance of a clueless and complicit media, to cause the public to sour on the "stocks for the long haul" mantra. Maybe just one major sell off, coupled with some additional high profile exposure of the creepy doings of investment bankers, would set the stage for a major short-term shot in the arm for a beleaguered Treasury and Federal Reserve. Is an Orchestrated Decline Coming in the Stock Market? What if the funding shortfalls of the Treasury become so acute that the magnitude of monetization required threatens to collapse the financial system or send interest rates skyward? Could such a possibility lead certain elite powers to decide, under the cover of darkness naturally, that national security calls for an orchestrated take down of the stock market? Accepting this as a possibility depends on one's beliefs pertaining to several key criteria, namely: 1. The degree of financial duress one believes the U.S. is under 2. The impact continued monetization will have on financial system stability 3. The participation levels for future debt auctions 4. The machinations the powers that be are capable of. Should one believe the deployment of GRAs are reasonably probable, then the remaining action item in this scenario would be to coax the public into personally assuming the debt the rest of the world was refusing to accept. If the beliefs of many regarding activities conducted by The President's Working Group on Financial Markets (Plunge Protection Team) were sound, could not this same entity be utilized for such theoretical events as those described? The possibility such an initiative might be needed to rescue the Treasury market does add an additional, and considerable, threat to the equity markets. Lastly, for those who believe very unsavoury things transpire when it comes to power and money, then a substantial sell-off in the equity markets would present a convenient buying opportunity for well-funded international interests at the expense of millions of ordinary investors. Would this not be a natural extension to the play book used throughout the economic crisis, with a slight variant? Instead of socializing the mortgage and derivative losses of bankers upon taxpayers, in this scenario, mountains of unwanted debt would be dumped on a politically powerless citizenry in exchange for their ownership interests in viable revenue generating entities. Where Should One Invest? It is times like this that the "no counterparty risk" element of gold and silver really shines. As such, I strongly believe every investor should allocate a portion of their assets into physical gold and silver. As to ETF's, I am not convinced they are a reasonable substitute for the time tested wealth protection provided by physical gold and silver. And while mining stock or warrants have provided leveraged returns in past precious metals bull markets, they would most likely suffer a decline, at least temporarily, in any stock market plunge. Chris Blasi is President of Neptune Global Holdings LLC (www.NeptuneGlobal.com) and a guest contributor to both www.FinancialArticleSummariesToday.com and www.munKNEE.com. CONFIDENTIALITY NOTICE AND DISCLAIMER: This message is intended to be viewed only by the listed recipient(s). It may contain information that is privileged, confidential and exempt from disclosure under applicable law. Any dissemination, distribution or copying of this message is strictly prohibited without our prior permission. If you are not the intended recipient, or if you have received this communication in error, please notify us immediately by return e-mail and delete the original message and any copies. Neptune Global Holdings LLC (NGH) is a precious metals dealer and as such does not deal with securities of any type. This communication, and the NGH website, are for informational purposes only and as such are not a solicitation to sell or promote any security or investment. NGH does not act as, nor offer the services of, an investment advisor. Therefore, this message, and the NGH website, in no way purport to recommend any security or investment.
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| Debt Default ‘Deferral’ of Greece a Dangerous Precedent – Got Gold? Posted: 05 Jun 2010 11:06 AM PDT Debt Default 'Deferral' of Greece a Dangerous Precedent – Got Gold? www.FinancialArticleSummariesToday.com
If the implications of the recent Greek tragedy were not so serious it would have been seen more as a Greek comedy (of fiscal errors). In fact, however, to deploy another metaphor, Greece's sovereign debt is seen as the proverbial canary in the coal mine – a microcosm of the relentlessly growing sovereign debt that has taken much of Europe by storm and is threatening to spread to the U.S. Short-Term Bail Out Fifteen other member nations comprising the Euro currency club have recently saved colleague Greece from defaulting on its debt … for now. On the surface this solution is just what any Keynesian economist would advocate because, as part of the bargain, Greece has agreed to implement a variety of painful spending constraints which will result in a much reduced standard of living for its people. In spite of such action, however, Greek debt will continue to grow to 150 percent of GDP by 2012. Long-Term Debt Tomb Unfortunately, however, this new bailout provokes and perpetuates a series of errors because Greece cannot, and will not, be extricated from its debt tomb. According to the UK Telegraph, Greece will now be doomed to transferring to foreign creditors an amount equal to 8 percent of its GDP in perpetuity … much more than German reparations to foreign creditors after WWI. It cannot, and will never, be repaid. Temporary Hiatus Further proof that these loans will provide only temporary relief is recent research by economists Carmen Reinhart and Kenneth Rogoff in their new book "This Time is Different: Eight Centuries of Financial Folly." They concluded that when sovereign debt exceeds a level of over 80 percent of its GDP, that debt grows ever more rapidly invariably pushing the country into financial default. Inevitable Default If we are to take the Reinhart/Rogoff research at face value then all that this recent bailout of Greece has done is buy it sometime before its inevitable financial default. It also allows Euro countries, the IMF and other agencies and persons with responsibilities for debt issues to work their magic. Moreover, it conveys hope to other countries on the brink of financial collapse. It defers the calamity and appeals to the overwhelming need of politicians everywhere to avoid and escape responsibility, if only to have the debt implosion occur on someone else's watch. Dangerous Precedent While the temporary hiatus given to Greece should be characterized as default deferral, it also, unfortunately, sets a highly dangerous precedent. Each of the next Euro default candidates – Portugal, Spain and Italy – comprise of much larger economies which will therefore require substantially greater levels of assistance. Of course, fairness will demand that they too receive an equivalent boost from their Euro partners and backstopping by the IMF. A closer look at bailout details brings to light something else which should raise serious concern. Who are the foreign creditors which Greece is having difficulty paying? While the current bailout originates among the taxpayers of the sixteen member nations of the Euro group, the existing debt which is in danger of default is held by foreign banks…not foreign nations. These foreign banks are headquartered in France, Germany, Switzerland, the UK and elsewhere. A short list includes Credit Agricole and Germany's Landesbanken. This begs a few unanswered questions: a) Is this a Greek government bailout or is it an indirect bailout of foreign banks by their own governments under the guise of loans to the government of Greece? b) Will this Greek script be played out on the stages of other Euro nations? c) Will it spread to the United Kingdom and the United States? Will the Debt Default Tragedy 'Tour' the U.S.? U.S. national debt now stands at $12.78 Trillion, more than twice as large as it was in the year 2000. Even the President Obama's budget director admits that the on-budget debt level will reach close to $20 Trillion by 2020, almost double over what it was just over one year ago. The non-partisan Congressional Budget Office says it will be even higher. As major as those debts are, however, the genuinely mind-boggling debt projections are the future commitments to citizens for such services as Social Security and Medicare, as well as a myriad of additional federal government obligations. These Unfunded Contingent Liabilities are now well beyond the $100 Trillion level. Some calculate the number is closer to $137 Trillion. Remember that these pending expenditures are the unfunded portions. No money has been set aside, just another promise. It has been calculated that the net present value of these future budget needs is in the neighbourhood of $35 Trillion. What that means is that $35 Trillion of 2010 dollars needs to be invested today in order to meet the $137 Trillion United States government responsibilities to its citizens in the years ahead. Combine the current budget debt of $12.78 Trillion with the $35 Trillion net present value for future obligations, then add in $1.5 Trillion of continuing annual deficits for as far as the eye can see and factor in future rising interest rates from their current multi-generational lows and it is clearly evident that: America's debt picture is truly astronomical and, like the situation with Greece, the debt cannot, and never will, be repaid. Indeed, any way you look at it, the consequences for the United States, let alone the many other haunted economies, are grim, dismal – even disastrous. As long as bond creditors retain a modicum of confidence the play – the 'Greek' tragedy - can continue for awhile longer, maybe even indefinitely. However, should interest rates spike northward or external events affect us it is highly likely we will witness a sudden unscripted end. We can only hope that creditor confidence, supplemented by modest economic gains and strengthened by politicians who exhibit vision and serve tough love to their respective electorates, might be sufficient to enable us to experience a 'muddle through' scenario. Time will tell. How Can You Protect Yourself From Sovereign Debt Defaults? Quite simply, individuals should invest in gold and silver in the form of bullion and select precious metals mining stocks. There is no better protection available. Arnold Bock is a frequent contributor to both www.FinancialArticleSummariesToday.com. and www.munKNEE.com. He can be reached at editor@munknee.com
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| The BIS: the bankers’ money-launderer Posted: 05 Jun 2010 10:37 AM PDT By Jeff Nielson, Bullion Bulls Canada If the Mafia were ever to find a genie-in-a-bottle, and thus obtain the mandatory "three wishes", there could be considerable debate over how it would choose to expend two of those wishes. However, it is an absolute certainty that one of the wishes would be used to invent a perfect "money-launderer" – an entity who could "launder" infinite amounts of their ill-gotten gains, with absolute secrecy and discretion.
The cabal of Western bankers has no need to rely upon the fortunes of chance to provide them with their own, perfect money-launderer, however. They already have the Bank for International Settlements (or "BIS"). In this respect, I am indebted to a regular reader who supplied me with a wonderful piece which thoroughly reviews the creation of, and the Charter for this most-odious of institutions.
Here I must confess to being derelict in my own education about the banksters. I was aware that the BIS was the "central bank of central banks", but had no idea what that really signified. Thanks to an illuminating article on a web-site called "The August Review", I now do understand the role of the BIS – and will pass along what I have learned to our own audience.
The BIS was created in 1930. Naturally, it was located in Switzerland, the nexus for all secret banking on the planet. Though it was officially created by "authorized agents" of the governments of France, Belgium, Germany, the UK, Italy and Japan (along with the acquiescence of the Swiss government); as the article clearly demonstrates, this was primarily an American creation – and institution. Along with the six governments above who helped form and finance the BIS, there were three other "Charter" members: all private bankers, and all American.
Indeed, the planning and scheming that gave birth to the BIS was the product of three individuals, two American bankers, and a German. Of interest, the two American bankers had been appointed (in 1924), to an international committee responsible for getting "reparations payments back on track." This referred to German war-reparations from World War I – which were mandated in the infamous Treaty of Versailles.
The punitive provisions of this "agreement" (which was essentially forced upon Germany) are widely credited with leading to the collapse of the German economy during the Weimar Republic, the hyperinflation which resulted from that collapse, along with the rise of the Nazi Party, and Adolph Hitler. Thus, by 1924, these banker-friendly governments were eager to get the money flowing again – in an atmosphere of extreme political tension, where the German government had already begun "cheating" on the terms of the Treaty.
It is necessary to understand the political/military/economic context of the times to fully appreciate the original purpose of the Bank for International Settlements, and the "needs" (of the bankers) which it was intended to satisfy. Essentially, the BIS was a vehicle designed to keep the money flowing between nations (and the banker-profits), irrespective of trivial details such as politics, wars, national allegiances, and the laws of nations. More articles from Bullion Bulls Canada….
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| Posted: 05 Jun 2010 10:36 AM PDT Bullion Vault Normally, when a commodity is in high demand, supply is accelerated and holders of that commodity often take profits, thereby increasing supply as well. Economic history tells us the same. Rising prices and high demand should result in rising supply. But when it comes to gold, all rules have to be re-written. That's because gold is only part commodity. It typically takes around five years from the raising of finance for a mine to the start of Gold Mining production. That's assuming there is a gold resource available to mine in a gold-mining supportive country of sufficient size to make the mine worthwhile. During the last 15 years of last century, support to such ventures from central banks through bullion banks was so strong that the mines would be loaned the gold they were going to produce. They then sold it forward to the time when the mine would produce and often even further out. This allowed the mine to earn a higher Gold Price (as the price was dropping) and earn interest on that gold until delivery. Then, from production, they repaid the bullion bank (and thus the central bank source) the amount of gold they had borrowed. While wise at the time, it did quickly exhaust the easily mined deposits of gold, leaving us with a situation today where good gold deposits are getting increasingly rare and difficult to mine. Add to this the propensity of governments to wait until the mines do really well then hit them with heavy taxation. This is deterring new investment in Gold Mining. The result is that from now on, gold mining companies will be hard pressed to replace the resources they have exhausted. Consequently, newly mined gold production is set to decline from 2010 onwards, irrespective of what the gold price is. As for central bank sales, from 1985 until 1999 the gold markets sat under the cloud of potential "official sector" sales. Central banks across the globe encouraged an atmosphere that expected unrestrained gold sales. Naturally the Gold Price fell, down from its $850 high of Jan. 1980 to $275 in mid-1999. Then the "Washington Agreement" was signed, capping European sales at 400 tonnes a year. The gold market breathed a sigh of relief and the Gold Price finally turned up. Sales under this agreement and the next (which ended and was then renewed on 26 Sept. 2009) did at first reach the ceilings levels that were set, right up until the last two years of the second agreement. Amid the global financial crisis, however, they then petered out, with hardly any sales in the last half of the last year of the Agreement. Since then, no significant European central bank sales have taken place. A total of 1 tonne of gold has been sold to date from the inception of the Third Agreement, nine months ago. It can then reasonably be concluded that European central banks sales have dried up. In their place have come Asian central-bank purchases of 400 tonnes a year. As we said at the beginning of this article, private Gold Investment demand is now very high. Both Western jewelry and Indian demand had been low until recently, but both of these markets have eventually accepted the current record price levels as being sustainable. Demand from these two sources has now begun to rise again, and it's clear that today's strong global gold demand comes without the usual froth that accompanies peak demand. This combination of peak demand and restricted supply leaves only one potential source of supply – and a capricious one at that – gold scrap supply. With no other source of supply, markets usually take prices to a level where holders of a commodity sell and take profits, in the belief that such prices are not sustainable and will soon fall. Since gold hit the high of $1215 for the first time, prices did fall, with many forecasting a low price of $850 an ounce. This didn't happen, however. Instead, a low of $1050 was seen, before the Gold Price began to climb again. During that time (and until recently), apparently 'weak holders' of gold in India did sell, and were the main suppliers of that market, in particular. Now they too have accepted current prices as a new 'floor'. Most Western consumers have now seen or heard of adverts for 'gold parties', rather like the Tupperware parties of the 1960s and '70s, where housewives now get together and sell old, unwanted gold jewelry that's lain in dressing-table drawers for years. The initial surge of scrap supply from this relatively new source has largely run its course, however, and such supplies are drying up. Once these sellers have sold out, that supply too will dry up too. This source of scrap is not important to the supply side of the gold market. The next potential source of scrap gold is from the current Gold Investment holders, those people who bought solely to make an eventual profit. Once they believe prices are as high as they will go, they will sell. These can be termed 'weak holders' in the gold market, for long-term investors from central banks, to institutions, to individuals hold gold to preserve wealth, in a world where it is threatened. Such investors hold gold simply to be prudent in the face of uncertainty and instability in the financial world. They may only hold a small proportion of their portfolios in gold. But be sure that they won't sell until certainty and stability are likely to return to the financial world. A look at what's going on now in that world tells us that we may see a squadron of pigs circling the White House at the same time. Looking to Buy Gold today…?
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| Silver Falls in First June Week, Handing Back Gains Posted: 05 Jun 2010 10:35 AM PDT Silver prices plummeted during the holiday shortened first week of June, giving back gains it made in a rallying final week of May.
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| Bullion Prices & Business Weekend Recap – June 5, 2010 Posted: 05 Jun 2010 10:35 AM PDT
Gold was the single precious metal to rise in New York on Friday and during the holiday shortened week. Silver and palladium fell the furthest as industrial assets were hit harder over fears of weakened global demand. Crude-oil tumbled more than 4 percent on the final trading day, handing back gains as prices fell under $72 a barrel after missing $74 a barrel by 3 cents last Friday. World stocks declined as well, with benchmark indexes posting weekly losses of 0.12 percent on the low end and 2.25 percent at the upper. (…) © CoinNews.net for Coin News, 2010. |
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| 2010 American Buffalo Gold Proof Coins on Sale Posted: 05 Jun 2010 10:35 AM PDT The United States Mint on Thursday, June 3, released the 2010 American Buffalo Gold Proof Coin for an opening price of $1,510.00.
The one ounce .9999 fine, 24-karat gold coin marks its fifth year of issue, but this year's version could experience demand unlike past offerings if recent history is any indication. The 2009 proof launched on October 29, 2009. Debuting four-day sales roared to 19,468. The US Mint stopped selling the coins on March 29, 2010 around the 50,000 level — the most recent unaudited Mint sales figures have them at 49,388. (…) © CoinNews.net for Coin News, 2010. |
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| Silver now almost completely bullish, Ted Butler tells King World News Posted: 05 Jun 2010 10:32 AM PDT 10:20a PT Saturday, June 5, 2010 Dear Friend of GATA and Gold (and Silver): In his weekly interview with Eric King of King World News, silver market analyst Ted Butler says last week's smash down in silver was the usual paper manipulation on the Comex, the commercial shorts are likely covering, and he finds silver's position now almost completely bullish. Meanwhile, Butler adds, the U.S. bank short position in gold is more concentrated and larger than ever. The interview is 11 minutes long and you can listen to it at the King World News Internet site here: http://www.kingworldnews.com/kingworldnews/Broadcast_Gold+/Entries/2010/… CHRIS POWELL, Secretary/Treasurer Join GATA here: World Resource Investment Conference * * * Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit:
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| Jim Sinclair: This morning’s blatant gold market intervention Posted: 05 Jun 2010 10:32 AM PDT 12:10p ET Friday, June 4, 2010 Dear Friend of GATA and Gold: Gold market analyst and gold mining executive Jim Sinclair says almost anybody could see today's market intervention against gold. His commentary is headlined "This Morning's Blatant Gold Market Intervention" and you can find it at JSMineSet.com here: http://jsmineset.com/2010/06/04/this-mornings-blatant-gold-intervention/ CHRIS POWELL, Secretary/Treasurer Join GATA here: World Resource Investment Conference * * * Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit:
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| Interview: Jim Rogers on Currencies and Inflation Posted: 05 Jun 2010 10:32 AM PDT
We are pleased to present the following exclusive interview with legendary international investor, best selling author, adventurer and family man Jim Rogers, Chairman of Rogers Holdings and founder of the Rogers International Commodity Index (RICI).
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| Posted: 05 Jun 2010 09:31 AM PDT Greece may not be enough. Further economic bodies may be needed for the funeral pyre of Keynesian economics. While one after another nation demonstrates the critical flaws inherent to this dogma, governments seem to simply ignore ...
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| If 1 + 1 Still Equals 2 Then Gold Will Explode! Posted: 05 Jun 2010 08:51 AM PDT If 1+1 still equals 2 then gold will explode. It's really that simple! Once you tune out the white noise of the main stream media, recognize Keynesian economics for the claptrap it is, and come to terms with the painful reality ...
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| On The Trail Of Europe's "Mysterious" $2.6 Trillion In Toxic Debt Posted: 05 Jun 2010 07:32 AM PDT
The NYT has a pretty good article about the "mystery" of Europe mega toxic loans, which amount to $2.6 trillion just to Greece, Spain and Portugal, in that all attempts to find out just who is on the hook for all this debt have apparently yielded no results. We disagree: this is a topic that has been beaten to death before on ZH, and it is all too well known that France and Germany will go bust overnight if PIIGS debt is allowed to be marked even halfway to market pro forma for governmental bailouts, on the banks' balance sheets. Throw in Austria and Italy if the Hungarian crisis (amusingly, the Hungarian government is now scrambling to undo the harm it caused with its fast and loose words of caution last week, but too late - it has now lost all credibility) spreads to Eastern Europe, and the mystery is solved. But at least the NYT has some pretty charts.
As for the NYT's message, here is the gist:
There is much more, but it is largely irrelevant. The IMF on Thursday said it can not possibly bail out all of Europe, absent another infusion of $300+ billion, and as the EU itself is insolvent, the debate of a European "game over" is not one of if but when. Unfortunately, the US is in far worse shape than all of Europe combined, but is much better equipped at dealing with a population so illiterate in financial matters that it can keep pulling the wool over the eyes of the sheeple years after the EMU is finished. Furthermore, the longer investors stay glued to their television watching the storming of the Athens parliament first, and soon many more, the longer the US debt catastrophe can stay out of sight and out of mind. Alas, once the European crisis is "dealth with" one way or another, the bored bond vigilantes will inevitably turn their eyes to the US, as Roubini recently predicted. It is all now just a matter of time, and how fast the kleptocracy can load up their vaults in various non-extradition countries with non-dilutable assets before it is all let loose.
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| Posted: 05 Jun 2010 06:25 AM PDT The chief executive of BP sold £1.4 million of his shares in the fuel giant weeks before the Gulf of Mexico oil spill caused its value to collapse. Tony Hayward ( An Active member of the Biderberg Group ) cashed in about a third of his holding in the company one month before a well on the Deepwater Horizon rig burst, causing an environmental disaster. Mr Hayward, whose pay package is £4 million a year, then paid off the mortgage on his family's mansion in Kent, which is estimated to be valued at more than £1.2 million. 
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| Biggest Equity Outflow In Recent History Leads To Fifth Consecutive Outflow From High Yield Funds Posted: 05 Jun 2010 05:30 AM PDT
Last week was the fifth consecutive week of HY mutual fund outflows, which while smaller than the prior week's $1.4 billion, was still a material $759 million. With that the five consecutive weeks of HY outflows now stand at $4.3 billion, which is the second largest 5 week sequential outflow from HY funds in history, only better compared to the $4.9 billion in August of 2003. With the disappointing end of week performance in stocks last week, we anticipate that next week Lipper/AMG will announce another huge outflow. With this week's HY outflow, YTD flows are now just barely positive at $898 million. Yet the HY action was nothing compared to the unprecedented, if not record, outflow in domestic equities: ICI reports that the week ended May 26 had $13.4 billion in domestic equity outflows: a number the likes of which we don't recall even in the post-Lehman days.
Curiously, even as flows out of all risky assets picked up, money market saw yet another outflow of $11.5 billion, bringing total YTD money market outflows to $414 billion, or -12.9% of total money market assets. Ironically, the only asset class (aside from gold) outperforming this year is the dollar. Instead of keeping capital invested in cash, Americans have shifted nearly half a trillion out of the best performing asset in 2010. Yet what is once again odd, is that the differential between YTD Money Market outflows and all other risky asset inflows, is now a 2010 high $120 billion. For all those who wonder where the money to buy 2 million iPads immediately after launch comes from, here is your answer. Americans are moving capital away from what they deem (incorrectly) is an unsafe asset class, and instead of putting it into riskier assets, they are spending it. One can only wonder what happens to already weakening retail sales, once the temptation to reallocate capital back to money markets rears its ugly head.
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| Thoughts On Upcoming Russell 1000 Rebalancing And Weekly Chartology Posted: 05 Jun 2010 04:14 AM PDT
While David Kostin's increase of his EPS outlook for 2010 last week may now seem a little "naive" at best, that doesn't mean that his crew of analysts doesn't have good insights into the market now and then. In the most recent weekly recap piece, Kostin suggests "portfolio managers should focus on expected changes to sector and constituent weightings in the Russell 1000 growth and value style benchmarks at the end of June." Hopefully this analysis performs a little better than Kostin's other 2010 recommendations: "Our recommended sector weightings have generated -23 bps of alpha YTD." Well, at least Goldman is good at generating beta. Here are Kostin's Russell rebalancing recommendations, focusing on the rotation of BRK into the index:
Full presentation of this week's pretty summary charts from Goldman. Little point commenting on any of the firm's projections as they will certainly all be wrong by the end of the year.
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| UK Budget Butchers Put Public Finances on the Chopping Block Posted: 05 Jun 2010 04:00 AM PDT Public finances are on the chopping block in England, but the butchers are using butter knifes and soup spoons. What's needed is a well sharpened cleaver…and the steely resolve to bring the blade down. Earlier this week, the UK's new coalition government announced the first round of what might fairly be considered rather mild "austerity" measures for one of the world's most indebted nations. Chancellor of the Exchequer George Osborne and the Chief Secretary to the Treasury David Law detailed their plan in the garden of Her Majesty's Treasury on Monday. According to The Wall Street Journal, the cuts "include £120 million from a civil-service recruitment freeze; about £1.15 billion in reductions from discretionary spending items such as consultancy fees and travel costs; and £1.7 billion from stopping projects and renegotiating large government contracts with suppliers. Local governments will be expected to find £1.17 billion in savings." All in, the measures aim at reducing Ol' Blighty's annual deficit by £6.25 billion. Impressive as that might sound, it is a drop in the pail when viewed next to the nations record-breaking £156 billion deficit for the most recent financial year. Expressed as a percentage of GDP (10.4%), the UK's budget deficit is only fractionally "healthier" than those of Greece and Spain (11.2% and 13.6% respectively), both of which recently saw their sovereign credit ratings decapitated by typically late-on-the-scene ratings agencies. To be fair, the early cuts are meant as a "down payment," as Mr. Laws explained, to show government departments that "the years of public-sector plenty" are over. "These are only the first steps we'll need to take in order to put our public finances back in shape," he said. Tough talk is a political prerequisite, of course, but it's tough actions that ultimately count. Alas, such decisive actions are unlikely. In what is seen as a concession to Liberal Democrats, some £500 million of the coalition's proposed savings will be siphoned right back into government welfare programs. Another £700 million in cuts to Scottish, Welsh and Northern Irish authorities aren't due to take effect until 2011, far beyond the use-by date of most political promises. The government also vowed to protect spending on health care, defense and overseas aid budgets, adding that it will not take the knife to public school outlays and various other education programs. It's not difficult to understand why a new government would opt for a "softly softly" approach. Budgetary savings must be weighed against a cost to political capital. A dollar saved is a vote lost, in other words. Or something like that. Of course, the state is never short of academics willing and eager to advise more and more spending, especially during recessionary or fragile economic landscapes. Keynesian interventionalists argue that withdrawing government support during downturns can hinder efforts to build a sustainable recovery. What they routinely forget, or misunderstand, is that state-sponsored "productivity" is not really productivity at all, but rather an opportunity cost to the private sector. A dollar spent hiring a post office clerk or, indeed, any molly-coddled rubber stamper is (at least) a dollar that real businesses can't then put to better, more efficient use elsewhere. Although government spending shows up in the GDP figure as a net positive, it really ought to be tallied as a minus. These agreements aside for the moment, the immediate impediment to slicing too deeply into public sector finances in countries like the UK is that so many citizens have their fingers on the cutting board. Over the past thirteen years – since the Labor government first came to power in 1997 – the number of public sector employees increased in the UK by almost 1 million, with government jobs now accounting for more than one-fifth of the total workforce. Public sector wages are also rising at almost three times the pace as in the private sector and, last year, average compensation for state workers actually eclipsed that of their private sector counterparts. And that's just the beginning. Public sector workers enjoy a bevy of additional financial and lifestyle advantages. On average, they retire 7 years earlier than those in the private sector, work fewer hours (35 per week), take three to four more paid days off annually and receive employer pension contributions worth 19.4% of their wages, more than three times the 6% average contributions afforded in the private workplace. And yet, despite these comparative advantages (or perhaps because of them) productivity in the UK's public sector actually fell by 3.4% in the 10 years from 1997 – compared with an increase of 28% in the private sector over the same period. Unfortunately for those seeking to push through spending cuts, it's virtually impossible to get rid of a public employee once you've got one on the books. In the two years following the collapse of Northern Rock (seen by some as Britain's "Lehman Bros. moment") in late 2007, the state increased its workforce by some 300,000 members. The private sector, by contrast, took the axe to almost a million jobs last year alone. Nevertheless, The Institute of Fiscal Studies, a British economic research institute, estimates government departments vulnerable to cutbacks will face reductions of 8.4% during the coming financial year. Our guess is that's not going to go over well. As we've seen in Greece and, more recently, in Spain, workers without fingers have a tendency to march in the streets, burn buildings and cause social unrest. Indeed, before the recent election, Bank of England governor Mervyn King is said to have warned that any party seeking to enact ambitious spending cuts would face a public outrage so severe it would see them ousted from power for an entire generation. Like their counterparts in neighboring, faltering Club Med economies, England's would-be budget butchers have some tough choices to make in the coming months. Today the cleaver…tomorrow the guillotine. Joel Bowman UK Budget Butchers Put Public Finances on the Chopping Block originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today's markets. Its been called "the most entertaining read of the day."
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| This Is Worse Than A Depression Posted: 05 Jun 2010 03:43 AM PDT (snippet) How We Get Inflation Our government is bankrupt many times over (see Spiraling to Bankruptcy) as are the democratic socialist states of Europe (see Welfare States – R. I. P.) are in the same condition. For political reasons, none of these countries is either willing to cut back on their spending or accept a recession. Mish provided a description of both the US and Europe (my emphasis):
We are witnessing the death of democratic socialism. No politician wants it to happen, but none can prevent it. We are at the point where the Ponzi concept of "extend and pretend" has been extended beyond social commitments and banking systems to entire economies. We are approaching what Ludwig von Mises described as "the crack-up boom":
Political cowards around the world have chosen Mises' second outcome – "a total catastrophe of the currency system involved."   None of the countries have the resources to continue to fund current programs. As their economies deteriorate, they will "print money" in order to continue meeting obligations and stimulating. At some point, the money supply will explode vis a vis the goods available.We have seen many "impossibles" in the last couple of years. Be prepared for the next — a hyperinflationary depression. It is not impossible, it is not an oxymoron and it should surprise no thinking economist. It is nearly upon us. Your lifestyle will depend on how prepared you are to meet this newest, biggest and most horrific Black Swan. This beast will destroy economies, overthrow some governments, and alter the nature of the world. Wake up people! Your politicians have no intention of heading this off.  This post originally appeared on American Thinker.
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| Technical Market Report for June 5, 2010 Posted: 05 Jun 2010 03:22 AM PDT The market has been following the average seasonal pattern for the 2nd year of the Presidential Cycle quite closely this year. The end of May - beginning of June rally was disappointing and now the seasonal pattern calls for an unpleasant 2-3 weeks.
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| Guest Post: TIPS Vs Treasuries Posted: 05 Jun 2010 03:17 AM PDT
Submitted by Jeff Borack of Kerrisdale Capital TIPS vs Treasuries Treasury Inflation Protected Securities are government issued securities adjusted bi-annually for inflation. When the urban consumer price index (CPI-U) increases, the face value and the yield on TIPS also increases. If investors are concerned about inflation, TIPS are one method of protection (you can buy them directly from the government here: http://www.treasurydirect.gov/indiv/products/prod_tips_glance.htm) given that they are directly tied to inflation. Unlike other investments which “should” appreciate in an inflationary environment, TIPS do appreciate. The spread between TIPS and Treasuries represents the market’s inflation expectation. It’s just as impossible for the government to default on TIPS as Treasuries, so default risk is the same. Investors will accept a lower yield on TIPS by the amount they expect to recoup from inflation adjustments. While investors who hold normal treasuries to maturity are guaranteeing their interest rate, TIPS holders are guaranteeing their purchasing power, making TIPS an attractive alternative for many savers. The chart from Bloomberg below shows the current yields available on TIPS in green, and treasuries in orange:
As we can see here, the 2-year spread between TIPS and Treasuries is a bit over one percent. The 5-year spread is at about 1.75%, and the 10-year spread is a little over 2%. It’s a bit surprising to see such low spreads given the inflation expectations investors claim to have. Everywhere we look, investors are fretting about inflation… why aren’t they buying TIPS? Even if we were not expecting an inflationary environment, TIPS might still be cheap relative to treasuries. The chart below plots the year-over-year percent change in CPI-U as of last month:
The average annual inflation over this time period has been 3.8%. The chart is volatile, and there have been lengthy multi-year periods where inflation has been less than 2%. But even if we assume a normal inflation rate will be only 3% per year, investors can reduce their risk of losing significant purchasing power and increase their expected return by about 1%, by moving from treasuries (and CDs and savings accounts) into TIPS. The combination of lower risk and higher return is a rare opportunity in finance. We’re at a loss to understand why investors (especially those with inflation fears) would hold treasuries, CDs, or excess cash when they could buy TIPS.
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| Posted: 05 Jun 2010 01:55 AM PDT The estimate of gold's fundamental value reported in this article won't be much different from earlier estimates of mine or others. What's new here is a tad more insight into the assumptions that go into this estimate.
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Attributions for pressuring commodities and stocks lower were disappointing U.S. employment numbers that raised recovery questions coupled with new concerns that Europe's debt crisis would create a double-dip recession.
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