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Buy Gold: It’s the Only Way to Combat Government Spending
Dollar Index Still Has a Lot of Room to Move
Competitive Dragon, Crouching Celtic Tiger
Dollar's Relief Rally Gains Steam as Stock Market Clings to Support
QE2 & The Great Misdiagnosis
NIA Video - Day the dollar died
Ted Says No Fear, Yet – Forum Rare Earth Kicker
Interview With Theodore Butler
Ireland bail-out: British banks hit as Irish rescue falters
Gold Sticker Shock and Silver Surge
Gold up in Euros and Pounds as Eurozone and North Korea Concerns Continue
Why gold will always be the best currency
Eleven unbelievable facts about North Korea
Generating Reasonable Yields in a Perverse Interest Rate Environment
SLV Adds Another 1,661,992 Troy Ounces of Silver
Buyer Beware
"€90 billion Irish bailout ends in turmoil – now Europe fears crisis will spread
Gold Separating From the Dollar
Market Update
2010-11-15 GFMS gold price forecast $1,500 in 2011
2010-11-08 Jeffrey Nichols gold price forecast $2000-$3000 within next few years
2010-11-05 Bretton Woods Research gold price forecast $1,500 in 2010
2010-11-01 Harmony Gold gold price forecast $1,500 in 2011
A concise history of Gold in China
Should You Buy SLV the Silver ETF?
A stunning silver forecast comes true, what next?
Gold Rises with Dollar as Korean Conflict Flares…
Dollar vs. Emerging Currencies is a Boon for Silver
CMIGS hours Thanksgiving Day weekend
When Housing Hijacks an Economy
QE236: Engineering Higher Inflation
Opportunities in Mining's Takeover Game
More Silver for SLV
Hedge Fund Closes Due To Bank Counterparty Risk
Gold Stocks in a Failing Fiat Currency
Buffet: Letter To Uncle Sam
Gold Rises in Euros, Pounds on Eurozone Concerns
Gold's Conflict Increase Bucks Dollar Surge
Now We're Talking Turkey
Another failed raid at the comex: gold rises
Economics Professor Ignores Fiat Money Failures
Gold Seeker Closing Report: Gold and Silver Gain With Dollar While Stocks Fall

Buy Gold: It’s the Only Way to Combat Government Spending

Posted: 24 Nov 2010 07:00 AM PST

I tried to tell my boss that my unexplained absence was because I was so Completely Freaked Out (CFO) that I didn't know what to do all weekend except hide like a little crybaby coward in the Big, Beautiful Mogambo Bunker (BBMB) waiting for the inevitable collapse of the entire world order because of the massive over-creation of money by the foul Federal Reserve, where I whimpered and cried in fear because We're Freaking Doomed (WFD) and there is nothing – repeat, nothing! – that can be done.

Naturally, I lost track of time, and so my absence is completely understandable and not my fault, but is, instead, the fault of the foul, filthy Federal Reserve creating so much money, for so long, that the US economy has been turned into a bloated, cancerous, twisted, bloated, government-centric grotesquerie that has almost destroyed us.

I didn't tell her that through the mist of my bitter tears, though, I still managed to get a good laugh from the quixotic earnestness of Erskine Bowles and Alan Simpson, chairmen of some idiotic National Commission on Fiscal Responsibility and Reform trying to craft a plan to reduce government spending in an effort to reduce the national debt.

Of course, before you can reduce the debt, you have to stop it from getting bigger, which is a Long, Long Way From Here (LLWFH) as even former Senator Alan Simpson says, "for every buck we spend we're borrowing 39 cents."

At first I laughed with my usual merriment at such foolishness, although somewhat childishly hopeful and enthusiastic about the new commission while managing to overlook the fact that it is just another outrage of central planning to redistribute incomes that is doomed to failure.

Suddenly, I also saw it as a ray of hope! Quickly, I proposed to my boss that instead of her just firing me like she wants to – and like I deserve – I organize a Company Commission on Responsibility and Reform to address my poor job performance, my incompetence and staggering net losses due to my apparent natural stupidity.

She rudely vetoed my terrific plan, just like she always vetoes my Terrific Mogambo Plans (TMP) ever since that time long ago, in one of our first power-struggles after she came waltzing into the job opening that should have been mine to fill, when I casually asked her if she was buying gold, silver and oil as a defense against the horrifying inflation in prices that will result from the Federal Reserve creating so much new money.

She acted surprised at the question, but admitted, smiling to be nice, "No." Boy, you should have seen that pleasant smile disappear from her stupid face as I was instantly on the attack, telling her that that meant she was stupid, as anybody with any brains at all knows that they should be buying gold, silver and oil with frantic abandon in response to the foul Federal Reserve acting so treacherously!

Ergo, I went on, I didn't think that it was appropriate that I take orders from somebody more stupid than I, and if she wanted me to listen to any of her "boss" crap, she had better get some gold, silver and oil soon so that she would demonstrate enough smarts that I would value her opinion enough to even listen to it.

I am not going to dwell on her reply or the brouhaha about how "cleaning the executive washroom" mysteriously appeared on my Job Description, but I will note for the record that her reaction is partly responsible for my now being totally AGAINST the National Commission on Fiscal Responsibility and Reform, as I always figured I would be.

So, I go back to mirthlessly laugh – Hahaha! – at their arrogance, their conceit and their up-to-now total ignorance of the decades-long growing problems, caused by the Federal Reserve creating the money that made the problems financially possible, that underscore their glaring incompetence.

As for the economy, a dollar not spent by the government is a dollar not received by somebody, which reduces national income dollar-for-dollar, which is Highly, Highly Significant (HHS) now that state, local and government spending constitutes slightly more than half – half! – of all spending in the Whole Freaking Country (WFC), meaning that government spending IS the freaking economy! Government spending is the economy!!

And this is Just The Beginning (JTB) of the misery, because this horrific fact is made worse by that whole ordinary Multiplier Effect of the velocity of money, compounding the economic misery of each of those missing dollars as it no longer bounces hand to hand through the economy with everyone making a little profit and governments taking a little bite at each exchange, nibbling, nibbling, nibbling at it until it disappears totally.

And let's not forget that every dollar is now the basis of a whole universe of derivatives, leveraging each of those dollars 10-to-1, 20-to-1, sometimes 40-to-1 – and more! – meaning that the total impact is some huge, unfathomable, terrifying multiple of this!!!

And now these weenies think that they are going to reduce the debt? Hahaha! If Simpson, Bowles and the rest of National Commission on Fiscal Responsibility and Reform weenies had a clue about economics, they would note the use of the rare triple exclamation point at the end of the previous paragraph and correctly deduce that the only intelligent thing to do is to buy gold, silver and oil, which is not only the only the smart thing to do, but the easy thing, too! Whee! This investing stuff is easy!

The Mogambo Guru
for The Daily Reckoning

Buy Gold: It's the Only Way to Combat Government Spending 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."

Dollar Index Still Has a Lot of Room to Move

Posted: 24 Nov 2010 06:18 AM PST

Emerging Money submits:

Although the euro has already faltered 4.4% against the dollar so far this month on Irish fears, there is plenty of space left on the dollar index chart for DXY to move even higher.

At roughly 79.70, the DXY has bounced a lot against other global currencies and is now trading securely above the 20-day and 50-day moving averages. This means the dollar has near-term support under it and is unlikely to fall more than 2.5% any time soon -- if, of course, we only look at the technical aspects.

Complete Story »

Competitive Dragon, Crouching Celtic Tiger

Posted: 24 Nov 2010 06:14 AM PST

Dirk Ehnts submits:

I have recently written about Germany and commented on the question whether it was innovation or policy that is driving the competitiveness of German firms. In my opinion, policy plays a strong role in putting a lot of costs on German workers, who had to face declining real wages for many years. China’s mechanism to increase the competitiveness of domestic firms is a different one. (The following paragraphs build on a joint paper with Finn Körner.)

China manipulates its currency by fixing it against the US dollar. Yes, fixing an exchange rate already is currency manipulation, since the motivation behind this is to control the external value of your currency (while the internal value of your currency might float and become a problem). The Financial Times recently summed up nicely how it works:

Complete Story »

Dollar's Relief Rally Gains Steam as Stock Market Clings to Support

Posted: 24 Nov 2010 05:45 AM PST

Dr. Duru submits:

Nothing like some geo-political drama to throw in some extra uncertainty into carefully laid out trading plans.

After North and South Korea exchanged pleasantries early Tuesday, the dollar’s relief rally continued in dramatic fashion with a 1.3% gain. I am now even more convinced that the dollar will, sooner than later, retest the resistance at the 200-day moving average (DMA).

Complete Story »

QE2 & The Great Misdiagnosis

Posted: 24 Nov 2010 05:30 AM PST

home: Golden Jackass website
subscribe: Hat Trick Letter
Jim Willie CB, editor of the "HAT TRICK LETTER"

Use the above link to subscribe to the paid research reports, which include coverage of critically important factors at work during the ongoing panicky attempt to sustain an unsustainable system burdened by numerous imbalances aggravated by global village forces. An historically unprecedented mess has been created by compromised central bankers and inept economic advisors, whose interference has irreversibly altered and damaged the world financial system, urgently pushed after the removed anchor of money to gold. Analysis features Gold, Crude Oil, USDollar, Treasury bonds, and inter-market dynamics with the US Economy and US Federal Reserve monetary policy.

The backdrop has turned dire on several front simultaneously. The great millstone around the USEconomy's neck continues to drag it down. CoreLogic reported 2.1 million units have created a swamp in Shadow inventory of the housing market. That equates to 23 months inventory, whereas normal is 7 months. They tallied the growing tumor of bank owned properties as a result of home foreclosures, also called the REOs (real estate owned). Look for no housing market recovery for at least another two years. Starting in summer 2007, the Jackass forecast each year has been for another two years of housing market declines, all correct. Ireland might be squarely in the news, but the big enchalada is Spain. The Irish banks have presented a grand headache for the European banks, with a $150 billion exposure. Ironically, Ireland has done more to reduce its budget spending effectively than any EU member nation, yet is left to twist in the soft rain. They cut their government budget by 20%. The USGovt budget grows every year without remedy or remorse. Few seem to remember that Irish fund managers lost the German civil service pension funds a couple years ago, a source of hidden tension and great resentment. Spain will rock Europe and the Euro currency in the springtime. The gold price consolidation will center on the Spain debt crisis hitting fever pitch, with the Euro hit. Then again, perhaps a mammoth new wave of European gold demand will neutralize any USDollar stability. On Tuesday this week, the Euro fell by 200 basis points, but the gold price was stable like a rock. That is notable strength. But the bigger story of strength is with silver. The round robin of destruction to major currencies that makes the Competing Currency War, the race to the bottom in rotated currency debasement, it will lift gold & silver in a round robin of strong demand.

MISDIAGNOSIS: INSOLVENCY NOT ILLIQUIDITY

The US bankers often go home to mommy and order a giant slosh of monetary inflation whenever in deep intractable trouble, like after the previous mistake in QE1 when ordering a giant slosh of monetary inflation. The USFed, led by the academic professor with no business experience, has ordered a fresh supply of gasoline from a lit fire hose, but he does so on a collapsing building. Bernanke has very erroneously diagnosed lack of liquidity within the system to be the underlying problem. He has prescribed a huge swath of 'free money' to be sent into the bond market as a solution. He has prescribed that cheap money continue to be delivered to the USEconomy. Bernanke has failed to notice the insolvency in banks, and has failed to notice that 0% has yet to prompt any revival in lending among banks. Bernanke is fighting INSOLVENCY with LIQUIDITY for a second time after learning nothing the first time.

The USTreasury 10-year yield has risen from a grand bond market dare, not at all from evidence of growth. Bond players dare the USFed to create another $1 trillion in new money. In no way does another lift in retail spending constitute a recovery. Household insolvency rises every month from worsening home loan balances. The USFed wants households to spend more on borrowed funds, yet they have depleted home equity and vanished income security. No, US bankers are confused with their wrecked financial engineering aftermath and the broad banking system insolvency that they refuse to acknowledge or discuss. Ever since the April 2009 decision by the USCongress to bless the falsified accounting practices by the Financial Accounting Standards Board, the big US banks have masked their ruined balance sheets, sold stock for their dead entities, and pretended to act as banks. Instead they are mere carry trade shells taking advantage of the USTreasury yield differentials, and storing the cash profits in the USFed, where it earns interest.

Finance minister Wolfgang Schauble from Germany was hostile in public remarks toward the desperate monetary decisions. At the recent G-20 Meeting, Schauble called USFed Chairman clueless openly (his word), describing his policies as reckless (his word). He ridiculed the USGovt approach to urge China and Germany to reduce their trade surpluses. Take surpluses as signs of success and competent industrial and policy management, where the US is void. He gives his nation credit for a strong competitive industry. He cites a direct contradiction. Schauble said, "The American growth model, on the other hand, is in a deep crisis. The United States lived on borrowed money for too long, inflating its financial sector unnecessarily, and neglecting its small and mid-sized industrial companies. There is no lack of liquidity in the USEconomy, which is why I do not recognize the economic argument behind this measure." Exactly on both counts!!! The USFed is fighting insolvency with liquidity rather than debt restructure for a second time, after learning nothing the first time. The US economists have lost their way so badly, that they no longer comprehend the concept of legitimate income. The US counselors push for putting more cash in consumer hands, regardless of where it comes from. Call it heresy, or call it incompetence, or call it blindness from the Keynesian bright lights that burn bright in the inflation laboratory.

New money does not cure an insolvent banking system or insolvent households. No sterilization of QE2 is in the plan, to serve as protection for the USEconomy. Not in QE2!! My forecast is for the hollowing out of the USEconomy from a massive cost drain with puny export benefit, compounded by continued income erosion. Price inflation will be labeled as growth, even income growth, the chronic sins. The borrowing costs have been near 0% for 18 months with no economic response, making Bernanke's points again vacant, myopic, and deficient. He is fighting an endemic insolvency problem with amplified monetary inflation. A voice with hint of wisdom came from former New York Fed President E Gerald Corrigan Corrigan. He said, "Even in the face of substantial margins of under-utilization of human and capital resources, efforts to achieve an upward nudge in today's very low inflation rate make me somewhat uncomfortable." His experience came under ex-USFed Chairman Volcker during the late 1970 decade, who raised interest rates to 20% to combat inflation, pushing the economy into the 1981-82 recession. That was the final chapter of anti-bubble USFed chieftain linneage. Since the Greenspan Era, it has been full speed ahead with inflation engineering, asset bubble creation, erudite apologists, permitted bond fraud, careful collusion, and reckless management. They have systemic failure to show for it.

The claim by Bernanke and a supporting chorus of economists that QE2 will bolster USEconomic competitiveness is fallacious, and patently backwards as usual. It will push the US further into a wasteland, a vestibule to the Third World. The higher cost structure uniformly imposed will render great damage in a profit squeeze for businesses and discretionary spending squeeze for households. New money does not cure an insolvent banking system or insolvent households. It presents a new problem of significiant price inflation. They want it, so they can call it growth!! Producing high value products efficiently and cost effectively makes the nation competitive. Imposing a fair tax structure that is stable, reasonable, and with proper incentives makes it competitive. Having an active legal prosecution staff to combat bond fraud and defense appropriation fraud makes it competitive. Having a strong education system makes it competitive. A weaker currency raises the cost structure, increases import costs, and assists the export trade if a nation has one. The United States has shipped a large segment of it away in the last 10 years to China, after having shipped a larger segment away in the 1980 decade to the Pacific Rim. Not only did the US promote its financial sector, but it denigrated the industrial sector as dirty. By removing a significant portion of the nation's capacity to generate legitimate added value income, the USEconomy was left vulnerable to debt overload and insolvency. The US Ship of State was hoisted on its own petard. For those ignorant of naval terminology, that means the US killed itself in a great display of cannon backfire in recoil. The QE2 initiative will be disastrous from many angles, certain to push the nation into an Inflationary Depression, from the current chronic Deep Recession.

MARGIN HIKE AS FINAL LIMP WEAPON

Increases to the silver margin requirement in futures contracts should be viewed as the final act of desperation. It is a device to control price within the paper silver arena. However, in a grand backfire, a higher margin produces a lower price for the physical buyers, who eagerly step up to place and fill orders. The margin maintenance hike on November 9th was six times greater for silver than for gold. The Big Four US banks are caught in an historically unprecedented short squeeze, bleeding $billions. Tuesday November 9th saw a powerful gold & silver price downdraft. The COMEX raised the silver margin requirement in a bland attempt to slow a raging bull market amidst a broken global monetary system. One week later they raised the margin again for both monetary metals. The price downdraft continued. But some calmer winds in Europe enabled precious metals prices to recover. Silver has snapped back much more than gold.

The Chicago Mercantile Exchange raised the margin requirements for silver on November 9th. It was highly motivated. They wanted to prevent a blowout upside move in silver past $30 before Christmas, and to relieve some of the pain to the Big Four US banks. Unlike gold & silver, no margin hikes were doled out for soybeans, corn, sugar, or cotton despite their concurrent price gains. The message is clear, that desperation has set in relative to precious metals, as conditions are breaking down badly. The CME sent out a memo raising the margin maintenance requirements for silver futures by up to 29%, from $5000 to $6500 per contract. Initial positions have a slightly higher margin. It is their right, being the market maker. Let not their fast disappearing silver inventory deter their path. Less than two weeks later, the CME raised the silver margin maintenance requirement another 11.5% to $7250 in a sign of desperation. They also raised the gold margin, but only by 6% from $4251 to $4500 in a symbolic gesture. The CME motive is less about risk mitigation concerns and more driven by the desire to restrain the bull market movement. The investment world will regroup long before Christmas, like in the next week or two. Just when the European woes focused on Ireland, and a rescue aid package seemed in the offing, the silver price jumped upward by $2.00 on a single day, November 18th, a strong telegraph across the paper-physical silver table. The Powerz cannot halt the silver juggernaut, which will see $30/oz by January. If a double hike in the silver margin is the best they have, then they are truly whistling in the grave yard.

The demand for gold is global, diverse, and motivated by the gradual disintegration of the monetary system. Sovereign bonds that support the major currencies are in deep trouble the world over. The consensus actions toward Quantitative Easing, also known as hyper monetary inflation, have boosted demand for gold & silver monumentally in a natural offset. Dozens of nations and billions of people around the world are slowly awakening to the grand deception of money itself and the crumbly foundation that make up fiat currencies. They are losing money in supposedly safe government bonds, a trend without precedent. Most of Southern European nations will declare debt default within two years. Foreign central banks are attempting to diversify their oversized US$-based reserves without causing a run on the USDollar. Gold is gradually being seen as part of the solution, at least in private wealth preservation. Gold is the new reserve safe haven asset, since it is true money.

Important changes have come to the precious metals market. Silver has taken a leadership role. It has broken out in Europe to new highs. Its snapback was impressive after the weak-kneed COMEX hike in margin requirements. Silver is no longer only seen as just an industrial metal, a commodity, but rather as a safe haven alternative, a monetary brother to gold. The European Union bond fracture has wrought great damage to the structural foundation of the global monetary system. It is exposed as having a debt backbone, a paper spine fashioned of weakness, vulnerable to central bank abuse. Money is fleeing the EU Govt bonds, and fleeing even to some extent the USTreasurys. Horrible publicity has befallen the Big Four US banks with class action lawsuits at a time when Asian buyers have targeted the silver market. The Asians of unidentified origin (probably China) have descended with waves of layered orders, exploiting the discount offered from the paper impact after the margin hikes by COMEX officials. Recall that the US & China are locked in a trade war. The louder the USGovt accuses China of currency manipulation, the more they bid up Gold & Silver on the quiet. The strongest months of the year for Gold & Silver are December and January. The margin hike seemed designed to interrupt momentum. It only delayed the next powerful upward thrusts in price.

TITANIC BATTLE OVER PHYSICAL METAL

The nature of the Gold & Silver markets is two-headed. The price discovery aspect is driven by the paper futures contracts. Intended as devices to aid in pricing, to protect from drawn out periods under which business is conducted with commitments made, the paper futures arena turned into a monster two decades ago. The paper tail has led the metal dog, a backwards condition. Some important developments have taken place in recent weeks and months. Secure allocated account holders at both the COMEX and LBMA have forced the situation, demanding physical delivery of futures contracts. They openly cite their distrust, as suspicion is aroused of improper lease of allocated accounts. Huge delivery demands have come from Chinese and Arab investors. The remarkable new wrinkle is that silver paper price ambushes have led to strong silver physical purchases. Stories abound of an Asian assault on the silver market underway. Interviews granted by those with direct information have appeared on reliable websites. The skirmishes result in backfires to the paper market mavens, as they offer repeated discounts to the Asian physical buyers, who grab at the discounts with layered orders, as reported. Therefore, the actions by the paper mavens works to accelerate their own destruction. Investors should hope for occasional ambushes, so that the physical side can reload and obtain more physical metal at lower prices. Also, with occasional bouts of consolidation, the price advances are more stable. A very bizarre pathogenesis of the silver paper market is evident, hidden from view.

The London contact source has shared details to the inner workings of the Asian silver market assault on New York and London with an update. The Asian buyers have been squeezing the shorts in the silver market, causing great pain as the silver price has risen 50% since late summer. After the drop in price from a brief touch of $29 down to the low $25′s, the physical market has responded with strong demand. Keep in mind that the paper silver market is the opposite, a key point. The bizarre anomalous paper market results in more selling when the price drops, the opposite to normal. The ambush catches the leveraged players off guard, forcing paper position sales in sudden liquidations. So a collision is in progress. The paper arena cannot produce enough silver after the raids push down the paper price in order to relieve their tenuous short condition. By pushing down the paper price, they must bring to the table the discounted silver at the lower price, in physical deliveries. The paper market is playing directly into the hands of the physical participants who want to drain the exchanges of their bullion metal. The credibility of the London source was enhanced by the quick jump above $26 as he predicted earlier in interviews. He described lines being crossed between the paper and physical orders, stops, covers, and delivery demands. Details are provided in the November Hat Trick Letter. Great intrepid work by King World News for developing the valuable source.

A staggering rise in physical demand is noted from Chinese & Indian buyers. Physical demand growth more than offsets the miner de-hedging, a process almost wound down fully. Investment demand globally is skyrocketing. According to the World Gold Council, global demand for gold bars climbed by over 30% between 2Q2009 and the second quarter this year. De-regulation in China might permit much broader gold ownership. That would unleash huge demand and pressure the Anglo bankers. Chinese demand has been strong for years, soon to reach a higher gear. With domestic mine output not expected to grow much next year, China will tap the global market, pushing up the gold price. New rules in China have already enabled tremendous increases in private gold demand, whose volume surpasses and overwhelms European central bank sales. The Chinese gold demand in 2010 will be a mammoth consensus estimated 500 tonnes. It will rise by as much as 20% in the year 2011, enough to surpass India as the top consumer in the next three years. Demand is forecasted to rise to around 600 tonnes in 2011, according to a Reuters survey of five analysts. Recent Chinese Govt restrictions imposed on property investment and speculation in other markets have resulted in more money going into gold and jewelry, which seems a calculated policy by the crafty government officials in Beijing. Gold will not burn their citizens in a bubble bust. Jewelry demand has risen by an average of 7% annually in steady fashion.

Investment demand for gold in China has surged by 60% in 2009 to 150 tonnes. On an annualized basis, China is on course to import 118 tonnes of gold through Hong Kong. Domestic gold mine output is expected to be flat inside China for 2011, the first time in years. Couple strong demand and flat output, and big net import of gold bullion will result. The Peoples Bank of China announced in August a relaxation of gold rules, a prelude to broader reform of financial markets pertaining to bonds and currencies. Banks would be permitted to export and import more gold in a program to drive the development of their market in the precious metal. Regard this as a direct assault on the COMEX in New York and LBMA in London, since huge physical gold demand will ramp up to a staggering high level. The PBOC wants to draw gold tonnage into their country without disrupting market equilibrium unduly, as it diversifies more of its burgeoning $2.6 trillion in FOREX reserves.

STATE VERSUS FEDERAL BATTLE

A great battle is being waged, but not presented in the light preferred by the Jackass. Witness the Tenth Amendment battle by the states versus the USGovt on the federal front. The battle has myriad microcosms in the mortgage court decisions made against the big Wall Street banks. So far the decisions favor the people, but the USCongress is busy preparing an unconstitutional bill to permit interstate contracts and possibly to whitewash any mortgage contract fraud. Bank lobby funds flow briskly to the craftsmen of the legislation. If challenged, such a bill might not withstand a constitutional battle. Sheeple justice versus mega-banks could reveal a quintessential states rights battle versus the federal govt controlled by the banking syndicate. Local judges are taking action against obvious criminal and predatory behavior by the big US banks. Some Florida homeowners were foreclosed by the big banks when no home loan was active in force. The Robo-Signers have captured much attention in document forgery. People who challenge are often winning their homes free & clear. Fraudulent attempts to foreclose and seize homes are being interrupted by those who challenge, and demand to prove property title. Legal precedents are set. Banks are worried. Regard the battle as an extension of the Tenth Amendment challenge, with proxy brigades doing battle. The big US banks represent the federal authority when a certain lens is applied.

The struggle in my view reveals a bigger macrocosm, where the states are pitted against the federal government. The proxy warriors for the states are local courts, where mortgage jurisdiction lies. The proxy warriors for the USGovt are the big Wall Street banks, whose syndicate has taken control of the national government bodies in their financial ministries. The states are fighting and winning the battle on home property challenges. Recall that in separate movements, 20 states have invoked the Tenth Amendment in a struggle to wrest back control from the New York and WashingtonDC syndicate. Their turf struggle has been over taxation, waged war, national security directives, border immigration, even threats of pandemic. Witness numerous local battles, erupting conflicts that serve as substitutes for state revolt against the encroaching federal apparataus. The legal structure favors the states. Watch the movements in reaction in counter-attack. What comes next might be Fascist Business Model corrupt extensions. The November Hat Trick Letter includes a review of some legal cases and their implications, which seem to be centered in metropolitan New York City. Some confusion might come from different decisions in different jurisdictions that lack consistency across the 50 states. That lack of uniformity might work to the advantage of upholding state rights, since the nation has always favored individuality of the states, a strength from diversity. Either way, a gigantic hairball is building within the system pipelines at a time when the majority of states are ruptured with huge budget shortfalls and pension shortfalls. They point a finger to the Wall Street corner where the housing & mortgage bust rendered damage. They point a finger to the USGovt colossus where the bloat exists, the deficits have expanded, and the control is centered.

By the way, notice how Bank of America quietly is approaching the funeral parlor. Word from my sources tell of Wall Street buying heavily the Credit Default Swap contracts for Irish and Portuguese Govt debt, in order to lift the bond yields enough to create a renewed cris

NIA Video - Day the dollar died

Posted: 24 Nov 2010 05:06 AM PST

http://inflation.us/videos.html

Only thing I disagree with is the leap they make where everyone rushes to the grocery store and cleans out all the shelves. I don't think that most Americans will understand whats going on, and it will be several days, or maybe weeks before they realize how this type of scenario actually impacts them.

Ted Says No Fear, Yet – Forum Rare Earth Kicker

Posted: 24 Nov 2010 04:59 AM PST

HOUSTON – We will get to the Forum Uranium story in a moment, but first: When the world has higher than normal anxiety toward the banking system, such as now with the bank exposure to sovereign credit risks in the Eurozone, one of the first indicators we want to see is the Ted Spread. The "Ted" is kind of a measure of bank-to-bank fear or mistrust. When it is rising there is generally growing mistrust of banks toward each other and vice versa. When we hear about bank trouble, but the trouble is not confirmed by a very sharply rising Ted Spread, we tend to gain comfort from that indication.

Interview With Theodore Butler

Posted: 24 Nov 2010 04:58 AM PST

Cook: For the past ten years you have been claiming that silver was the best thing people could own. How do you feel now with silver around $25 an ounce? Butler: I have a sense of relief that I could not possibly have hurt anyone who followed my advice. I also feel intellectually vindicated about the way things are turning out. Lastly, I feel amazed how good silver still looks for further gains.

Ireland bail-out: British banks hit as Irish rescue falters

Posted: 24 Nov 2010 04:32 AM PST

British banks lost billions of pounds in value on Monday after the Irish bail-out was thrown into jeopardy over concerns that the country's government might collapse before a rescue deal can be agreed...

Read

Gold Sticker Shock and Silver Surge

Posted: 24 Nov 2010 03:38 AM PST

To continue to attract shoppers, jewelers are lowering the karat weight of gold and increasing the amount of silver. A 22k gold band made of gold and silver is just as yellow, but nearly 10% less expensive than a 24k band. To a shopper, the difference between 22k and 24k is insignificant, but to silver investors, it's huge.

Gold up in Euros and Pounds as Eurozone and North Korea Concerns Continue

Posted: 24 Nov 2010 01:22 AM PST

gold.ie

Why gold will always be the best currency

Posted: 23 Nov 2010 11:53 PM PST

From Frank Holmes of U.S. Global Investors:

Our interactive timeline traces gold's history back to its earliest origins but one question it doesn't answer is: Why gold? Why did our earliest ancestors choose gold over copper, neptunium or any other of the earth's elements as a form of currency?

The hosts of NPR's "Planet Money" set out to answer that question by breaking down the periodic table of elements. They sought the expert opinion of scientist Sanat Kumar, chair of Columbia University's chemical engineering department.

Kumar reveals the secret to gold's value as a currency is simple science. Here's his process...

Read full article...

More on gold:

How to know if you own enough gold

The colossal force driving gold higher and higher

Why a runaway move in gold could be just around the corner

Eleven unbelievable facts about North Korea

Posted: 23 Nov 2010 11:52 PM PST

From The Economic Collapse:

Is the United States about to go to war with the most bizarre nation on earth?

A lot of Americans would actually welcome "the Korean War Part 2," but before people get too excited it is important to keep in mind that we have never been at war with a nation that actually possesses nuclear weapons.

... Let us hope that a new all-out Korean war does not erupt. North Korea is ruled by delusional leaders who are insane enough to actually use nuclear weapons. If you doubt this, just consider the following 11 facts....

Read full article...

More on North Korea:

Asia could be headed for "all-out" war

Korean peninsula could be headed for war

North Korea: War could begin "at any moment"

Generating Reasonable Yields in a Perverse Interest Rate Environment

Posted: 23 Nov 2010 11:25 PM PST

Guests on the radio program this week included a publisher of an investment tracker publication, two associates of Taylor Hard Money Associates that gave information on the gold, and commodities markets and two mining companies.

Roger S. Conrad provides hope for people living on fixed incomes at a time when government policy is robbing savers and rewarding bankers and others engaging in reckless behavior.

How can retired folks live on their savings when 0% is the going interest rate on "safe" government debt and when the purchasing power of social security continues to decline? Our guest this week, Roger S. Conrad, an analyst of all manner of utility stocks and Canadian income trusts, provided some excellent ideas about which utility stocks can provide you with life sustaining income and do so with relative safety. How do 3% to 10% yields sound at a time when the insanity of Quantitative Easing is driving Treasury yields to near zero? Is it possible to get reasonable yields without risking the chance that you could lose a major portion or all of your savings? If you are retired or nearing that time, you don't miss Roger Conrad's practical guide to financial survival.

In addition to guest Roger Conrad, associate Chen Lin joined Jay to open the show and talked about how China will help keep the price of gold moving higher along with most other commodities. We talked to representatives from Adventure Gold and Gold Bullion Development to give updates on their companies.

November 23 Episode

Roger S. Conrad is editor of Canadian Edge, an internet-based service directed at US investors that tracks more than 130 high yielding Canadian equities. He's also editor of Utility Forecaster, the leading US advisory on essential service stocks, bonds and preferred stocks, cited for editorial excellence six times by the Newsletter & Electronic Publishers Association. He's an associate editor for Personal Finance, chief strategist of Portfolio 2020 and coeditor of MLP Profits. He is the author of Power Hungry: Strategic Investing in Telecommunications, Utilities and Other Essential Services. To subscribe to his free weekly e-zines, go to mapleleafmemo.com, which focuses on Canadian trusts.

SLV Adds Another 1,661,992 Troy Ounces of Silver

Posted: 23 Nov 2010 08:47 PM PST

€90 billion Irish bailout ends in turmoil... and Pimco's El-Erian pours gasoline all over it! Fed has secret meeting to buy everything in sight. Gold separating from the dollar. Silver analyst Ted Butler has another column... and much more.

¤ Yesterday in Gold and Silver

Tuesday was an unusual day in the gold market to say the least. Gold slowly got sold off starting right at the beginning of trading in the Far East on Tuesday morning... with an interim low coming shortly after 1:00 p.m. Hong Kong time. Then, like Monday, the price ran up to its high point in Far East trading around 3:20 p.m. in Hong Kong... before getting chopped off at the knees.

From that high, gold got sold off to its low of the day, which was 1:00 p.m. in London [8:00 a.m. in New York], a little less than six hours later. A nice rally began at exactly that point that lasted until precisely 10:30 a.m. Eastern time. Gold basically traded sideways from there... although the high price tick of they day [$1,383.50 spot] came about twenty minutes before Comex trading ended and electronic trading began.

Silver's general price path was similar to gold's... but certainly not the same. Silver's high occurred at 3:20 p.m. Hong Kong time during their Tuesday, with silver's low [around $27.05 spot] coming at half past lunchtime in London [7:30 a.m. in New York]. From that low, silver made some serious rally attempts, but every attempt to get even close to positive territory on the day, got sold hard... and silver finished down 36 cents from its Monday close.

From the Far East open, until the New York close at 5:15 p.m. Eastern time on Tuesday, the dollar was up about 110 points... with about 85 points of these gains coming between 6:15 a.m. and 11:20 a.m. Eastern time yesterday morning. The moves in gold and silver yesterday were about 100% opposite to what one should have expected... as the dollar and gold moved upwards together yesterday. As a matter of fact, the gold chart looks almost identical to the dollar chart!

The dollar has been rising steadily since the Far East open on Monday morning... and gold has been rising with it.

Here's the 3-month dollar chart to put it all in some sort of perspective. I suppose that the dollar could make it back to its 200-day moving average... but this is counter-trend rally in a dollar bear market. So, if gold is rising [or at least holding its own] as the dollar rally continues, one can only image what will happen when the dollar turns down once again.

With the general equity markets in the toilet yesterday, I wasn't entirely surprised that the gold shares couldn't pull a win out of the fire, despite the fact that gold price was up nicely on the day. In the end, the precious metal stocks were mixed... with the HUI down 0.92% on the day.

There wasn't much activity in the CME's Delivery Report... but JPMorgan did issue 20 silver contracts for delivery on Friday... all of which were from its proprietary [house] account! So much for them turning over a new leaf... as they are back to their old tricks for the moment. If you want to check it out, the link is here.

The GLD ETF had no report... but that wasn't the case over at the SLV ETF. As my headline states, another 1,661,992 troy ounces of silver was added on Tuesday. The SLV ETF now sits with 350.2 million ounces of silver. I just hope it's all there as stated. As you know, dear reader, I don't own [and would never own] either of these ETFs. The only reason I see red flags flying is that the custodians of these two ETFs, JPM and HSBC, are the two biggest silver and gold shorts on the Comex... and both have 25 law suits filed against them for manipulating the silver price. I want nothing to do with them. There are lots of other ways to own the physical metal without having these two organizations involved.

The U.S. Mint had a report yesterday... another 10,500 ounces of gold eagles, along with another 100,000 silver eagles. Month-to-date... 83,000 ounces of gold eagles have been sold, along with 3,875,000 silver eagles.

There was also action over at the Comex-approved depositories... and when the smoke cleared, a rather chunky 891,793 ounces of silver was withdrawn on Monday. There was a lot of activity, both in and out...and the link to that action is here.

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¤ Critical Reads

U.S. banks will close 5,000 branches

I don't have a lot of stories, which I'm sure will suit you just fine. The first is a Bloomberg piece courtesy of reader Scott Pluschau. U.S. banks will close 5,000 branchesin the next 18 months as they face profit declines from decreased loan demand and lower fee revenue, said Meredith Whitney, the former Oppenheimer & Co. analyst who now runs her own firm. Whitney also said that she sees slower growth in investment banking. U.S. securities firms may cut as many as 80,000 jobs in the next 18 months as revenue growth slows. The link to this short story is here.

View full GSD edition

El-Erian: "What You Advise Your Sister In Ireland Now Is That You'd Say Take Your Money Out Of An Irish Bank

The next story came from reader 'David in California'. It appears that Mohamed El-Erian of PIMCO has poured gasoline all over the burning fire that is Ireland with his comment to his sister in Ireland that she should withdraw all her money from the Irish banks. When the world's leading bond-fund manager makes these sorts of statements, people tend to get a bit nervy. [No! Really! Who would have thought that? - Ed] This very short story, which is posted over at businessinsider.com, is a must read. The headline states "El-Erian: "What You Advise Your Sister In Ireland Now Is That You'd Say Take Your Money Out Of An Irish Bank"... and the link is here.

View full GSD edition

"€90 billion Irish bailout ends in turmoil – now Europe fears crisis will spread

Yesterday's King Report provided the next story. It's a piece out of the Monday edition of The Guardian. Financial markets were thrown into turmoil amid fears that an imminent collapse of Ireland's beleaguered government would have a knock-on effect across the eurozone. There were also concerns that Portugal, and even Spain, might also need their own rescue packages. This sent the euro and shares falling while the risk of holding the debt of potentially vulnerable countries rose alarmingly. The headline reads "€90 billion Irish bailout ends in turmoil – now Europe fears crisis will spread". The link to the story is here.

View full GSD edition

Merkel's Dilemma: Chancellor Faces Tough Sell on Irish Bailout

The next offering I have for you is one that was sent to me by reader Roy Stephens. It's a piece taken from the German website spiegel.de... which is headlined "Merkel's Dilemma: Chancellor Faces Tough Sell on Irish Bailout". For the second time in just a few months, Angela Merkel will have to explain to voters why Germany must bail out a fellow euro-zone member state. Skepticism is growing -- amongst voters, in the media and within her party. The link is here.

View full GSD edition

At secret meeting, Fed considered buying everything and holding press briefings

Here's a GATA release of a story that appeared in yesterday's edition of London's Financial Times. Chris Powell's headline reads "At secret meeting, Fed considered buying everything and holding press briefings". The FT headline reads "Fed Considered Long-Term Rate Target in Secret". The "Creature From Jekyll Island" is certainly living up to its reputation. If you have the time, the story is worth the read... and the link to the GATA release is here.

View full GSD edition

Gold Separating From the Dollar

I only have two precious metals-related stories for you today.

As per my rather long commentaries on the world's reserve currency, both in my column today and yesterday, James Turk wades into this issue with a short blog over at King World News entitled "Gold Separating From the Dollar". It's a very short read that's definitely worth your time... and the link is here.

View full GSD edition

Buyer Beware

Lastly today is a piece by silver analyst Ted Butler. It's something he wrote for his paid subscribers yesterday and bears the headline "The Final Warning?" Over the years, Ted has made no secret of the fact that he's diametrically opposed to pool accounts and unallocated accounts... and since he has taught me the dangers of these 'investment' vehicles... I wouldn't touch them with a 10-foot cattle prod either. Although I can't post the entire commentary, here are a couple of paragraphs... plus a link to his prior article on this issue.

"At the time of my prior article, the price of silver was a little more than $13... it has since more than doubled. So has the price of gold. If, as I contend, no real metal backing stands behind the pool or unallocated accounts issued by these and other companies and banks, then investors in these and similar accounts, now have tremendous open profits and these issuers have equal [but undisclosed] open liabilities. An individual issuer could easily be out tens and hundreds of millions of dollars... with the total liability of all such issuers running into the many billions of dollars. You must remember that there is no central regulator governing pool or unallocated accounts... and no mark-to-market or clearinghouse protections exist. If ever a problem existed, namely the metal didn't exist [or the issuing firm didn't have enough money to honour all claims. - Ed], there would be no way for an investor to find that out until it was too late. Such investors may suddenly find themselves at the end of a long line of unsecured creditors... and not as a true investor in silver, grateful for big gains."

"...my common sense tells me that there is a strong possibility that much, if not all, of the metal supposedly backing pool or unallocated accounts, simply does not exist... as I explained in the original article. If I am correct, a horrible day of [reckoning] lies ahead for participants in such accounts. and if you are questioning how something like this could go on for many years, the answer is that until pool account investors start to pull big money out of such programs, there is no actual cash drain to the issuers. Silver [and gold] investors holding for the long [haul] have little reason to cash out of such programs yet. The key word is 'yet'. If and when they do, it may be a very different story."

I have warned readers about pool accounts ever since I started writing for Casey Research... and even before that. I know some of you own them, so don't say you weren't warned if something goes sideways when you go to cash in your 'gains' when silver is some rather large 3-digit number. Ted's original commentary on this issue was posted back on January 30, 2007... and is headlined "Buyer Beware"... and the link to this absolutely must read commentary is here.

View full GSD edition

Buyer Beware

Posted: 23 Nov 2010 08:47 PM PST

Link:

Buyer Beware

Image:

"€90 billion Irish bailout ends in turmoil – now Europe fears crisis will spread

Posted: 23 Nov 2010 08:47 PM PST

Link:

"€90 billion Irish bailout ends in turmoil – now Europe fears crisis will spread

Image:

Gold Separating From the Dollar

Posted: 23 Nov 2010 08:47 PM PST

Link:

Gold Separating From the Dollar

Image:

I only have two precious metals-related stories for you today.

Market Update

Posted: 23 Nov 2010 08:13 PM PST

On Closing Thursday, November 18, 2010 "ISI's DeGraaf Says U.S. Stocks Poised to Resume Rally: Technical Analysis"

"This week's retreat in U.S. stocks is probably temporary and the Standard & Poor's 500 Index is unlikely to fall more than -8% from its 2010 high, said Jeffrey deGraaf of ISI Group Inc.

"The S&P 500 has lost -3.9% since closing at a two-year high of 1,225.85 on November 5, including a -1.6% retreat on November 16 that was the biggest in three months. The main benchmark for American equities is 5.7% higher for the year, and up 15% from its 2010 low on July 2. It rose +1.2% to 1,192.45 as of 9:34 a.m. today in New York."

"DeGraaf, the head of technical analysis at ISI, said in an interview that the market's trend turned to positive last month after gauges of momentum on September 3 registered their best readings since March, 2009. The historical tendency of stocks to rise between now and the end of January, and leadership from commodity, consumer discretionary and industrial companies during the retreat, support a bullish outlook, he said."

"You want those to be the leadership groups to be bullish on stocks," deGraaf said. "It's a very dangerous time to be fighting a strong tape seasonally. So we'll get a consolidation — I don't think it's anything worse than 1,130 — and then take another run at a new high." Elizabeth Stanton Bloomberg.net (Editor: End of January 2011, we predict a larger drop).

Dow Jones Industrial Average: Closed at 11181.23 +173.35 on 90% of normal volume and positive news on a new GM IPO. Price is above all moving averages. Momentum began to drop this week but the close was on the top of a wide trading range signaling more buying on the Friday weekend before next weeks' holiday week. We agree with Mr. Degraaf (above) and project this market can now touch 11250 then pause. This would be followed by mild relief selling and then a final thrust to form a double top at 11450. Most of December would be in channeled sideways trading with a new rally in the first half of January 2011. After that peak I would expect Dow selling from a 2010 11450 double top to a lower price of 9850 or lower next year.

S&P 500 Index: Closed at 1196.69 +18.10 after finding support at 1175-1165 base. The close is just three points above the 20-day moving average at 1193.30 for new support. The high close signals more buying tomorrow on Friday before the weekend. Based on the patterns we forecast 1225 could be the left leg of new double top. This would then be followed by either a triple top or start over in a new formation. With inflation beginning to rage, and fund managers eager to keep stocks up into the year end, the S&P could close out the year at 1250 before the mid-January 2011 selling retreat begins.

S&P 100 Index: Closed at 539.04 +8.23 after forming a very wide double top from last April and this month. The months'-apart pattern signals a larger selling event when it does arrive. Price resisted at 540 today and is supported by the 20-day average at 538.06. Volume was 10% over normal and momentum was falling but has based. Since this chart is composed of larger companies and moves slower, it's a good predictor of the longer view just as the Nasdaq signals the way in the shorter patterns. No one we know has predicted it but we might just get a very wide, long and slow selling event into later next year before a smashing selling event. Expect more buying tomorrow and a stall at either 540 or 550 in December.

Nasdaq 100 Index: Closed at 2134.77 +34.77 after price gapped higher today and closing undecided in the middle of the trading range bar. Momentum is down and volume was over 100% of average. Support is the 20-day average at 2127.76. Price could drop back to fill that gap and stay in the bull uptrend channel tomorrow, Friday and Monday. Resistance is 2150 and a double top would be 2200, which we forecast next.

30-Year Treasury Bonds: Closed at 126.53 -0.53 with bonds selling as stocks were rising. Bonds are strongly supported on the 200-day moving average of 125.48. Momentum has been falling since early September. The trading range was tight and small on the pre-holiday slow down. Watch for bonds to move sideways in a trading range for the rest of this month between 128.00 and 125.50. However as stocks begin new end of year rallies in December, the bonds should fall again slipping between 122.50 and 125.50. As credit markets get slapped around with QE2 in the first quarter of 2011, bonds will be challenged again as trader's force yields up and price down. We are in brand new territory where the Federal Reserve has never been before. We think it might be possible for them to get all the way into the fall 2011 before going out of control. The first big real hard test is May-June of 2011 for both stocks and bonds.

Gold: Closed at 1354 +17.80 after falling from a small tight double top. We see new heavy support at 1350 and resistance at 1365. Price fell below a lower support line but we expect it to recover and rally back up and through that price line. Our forecast is for gold to rally through the recent high at 1424 and touch 1448.50 for a new high and peak for 2010. Into December, gold should top out and sell on a normal cycle to a new low near Christmas. By end of June, 2011, we could easily see gold trading between 1550-1600.

Silver: Closed at 26.95 +1.33 and should rally again to $29-$30 by December 3-10. That could be our peak for 2010 followed by corrective selling back to $24.85-$25.85. Between January 2011 and May, silver should touch, close and surpass $30 in its new quest to visit $50. After the $30 is posted we can do new work forecasting the higher highs between $30 and $50. The old high near $50 from 1981 will be very hard resistance but it will eventually be broken. We have noticed a new shift in silver rallying faster than gold. The demands on physical silver are now higher than gold purely on high gold costs. We are only $3.00 away from $30 right now. Look for that number to arrive quickly as the daily trading ranges expand further. Trading margins were increased this month and will be increased again, especially above $30.

Gold & Silver Index XAU: Closed at 210.79 +3.50 finding support at 210. Resistance is 220. The metal to shares ratio peaked and retreated but has more room to rally into the first week of December before some profit taking. We have futures options expiration on the 23^rd next week. This will be the beginning of some last quarter selling extending into the end of January with one major rally in the middle; probably in the first week of January. Expect more buying through the end of this month right through the holiday as long as the broader markets continue to firm and rise per our forecast.

U.S. Dollar Index: Closed at 78.64 -.045 as the dollar peaked and resisted at 79.50. The next move should be selling back to 77.50-77.93 on the 20-day moving average. There is support at 76.50 and 75.50. If the credit pressures build with bonds and Europe can stay glued together for a few more weeks (we think so) then the dollar could sink to a 2010 double bottom at 74.50-74.00 on dilution and inflation by end of this year. Some are predicting a huge dollar rally to some price beyond 80.00 when the Euro cracks. It is possible and logical except a rising dollar would not last very long. Further, some are saying gold could take a whipping back to 650-850. We have always said in trading anything can happen but we do not think this is realistic. Our dollar forecast is a 50% haircut from 80-86 to 40-46 within 3-5 years on inflation and potential hyperinflation.

Crude Oil: Closed at 82.69 as oil continues to be supported at 80.00 in the middle of three moving averages and the 78.50-82.50 trading range. On normal cycles and seasons crude should sell back to $70-$75 by the middle of next month. However, with new inflation we think it cannot go that low and expect a low near 77.50. Look for a new rally in mid-December on cold weather and heating demands along with inflation. By spring of next year, crude should be well over $100. In January-March next year, prices will be trading between 88.50 and 92.50. I expect 108 by March and 116-118 by April. Weaker dollars will hurt us.

CRB: Closed at 302.29 +6.86 after peaking at 320 this month and selling to a new base at 295, which was our forecast. Prices gapped-up on higher oil prices today resisting at the 20-day average of 303.85. Support is the price of 300 and the 50-day average at 295.49. When oil sells back per our notes above, the CRB will probably sell down to 280 support before the next rallies. The last two weeks of this year and first week of next year should give this market a boost on higher inflation and energy prices. -Traderrog

This posting includes an audio/video/photo media file: Download Now

2010-11-15 GFMS gold price forecast $1,500 in 2011

Posted: 23 Nov 2010 05:10 PM PST

The precious metals consultancy Gold Fields Minerals Services (GFMS) expects gold to peak above $1,500 and silver to hit $30 in 2011.

Full articles:
http://

2010-11-08 Jeffrey Nichols gold price forecast $2000-$3000 within next few years

Posted: 23 Nov 2010 05:08 PM PST

Jeffrey Nichols: "Without a doubt, the new arithmetic on Capitol Hill — along with the Fed’s recent policy shift — reinforces the bullish case for gold and raises my confidence that gold prices will rise to $2000 an ounce, then $3000, and possibly higher peaks over the next fe

2010-11-05 Bretton Woods Research gold price forecast $1,500 in 2010

Posted: 23 Nov 2010 05:03 PM PST

Bretton Woods Research claims that $1,500 gold is possible by the end of 2010.

Full article: http://www.goldalert.com/2010/11/1500-gold-by-year-end/

2010-11-01 Harmony Gold gold price forecast $1,500 in 2011

Posted: 23 Nov 2010 04:58 PM PST

The South-African gold miner and the third largest producer of gold in Africa, Harmony Gold, expects that gold will reach $1,500 per ounce in 2011.

A concise history of Gold in China

Posted: 23 Nov 2010 04:30 PM PST

China Gold News

Should You Buy SLV the Silver ETF?

Posted: 23 Nov 2010 04:16 PM PST

A stunning silver forecast comes true, what next?

Posted: 23 Nov 2010 04:11 PM PST

Gold Rises with Dollar as Korean Conflict Flares…

Posted: 23 Nov 2010 04:08 PM PST

Dollar vs. Emerging Currencies is a Boon for Silver

Posted: 23 Nov 2010 03:00 PM PST

Any careful observer of the Federal Reserve should be slowly coming to the conclusion that Bernanke is off his game plan. In the past few weeks and months, Bernanke has repeated before Congress that his dual mandate is to provide for slow and gradual recovery, but low inflation and full employment. Recently though, Bernanke is on a new tangent, a semi-mercantilist endeavor to lower the value of the US dollar against emerging economies.

CMIGS hours Thanksgiving Day weekend

Posted: 23 Nov 2010 02:52 PM PST

CMI Gold & Silver Inc. will be closed Thursday, November 25, 2010 in celebration of Thanksgiving Day. Friday, November 26, 2010 we will be open only for taking orders from 8:00 a.m to 2:00 p.m. We will not be able to discuss the status of ou

When Housing Hijacks an Economy

Posted: 23 Nov 2010 01:52 PM PST

--There is absolutely nothing we can add today to your understanding of what is happening on the Korean Peninsula. But it sure has prompted a mini "flight to safety" rally. The gold price was up nearly 1.6% up in U.S. dollar terms. That in itself was an achievement because the greenback rallied against its arch-rival the Euro at the same time.

--Before we delve even further into the sub-basement of the world economy, a quick note about yesterday's reckoning. A reader wrote in asking us if we went to bed at night dreaming/fantasizing about the collapse of the banking system in the developed world, implying that there was something both perverted and off-putting about such a desire.

--But don't worry. That's not our desire. Our main point was that there is already a system for dealing with bad loans made by bank officers: it's called bankruptcy. The EU/IMF solution to Ireland's problem is to borrow from someone else to pay for the mistakes made by the Irish banks. The people who should really lose money, as Jim Rogers pointed out overnight, the shareholders and bondholders in the banks. This is not a risk free world we live in.

--Rogers pointed out that Ireland's banks borrowed up to 80% of Irish GDP to fund that country's property boom. A lot of the loans went to developers as well as individual borrowers. When the property market went bust after the banks soon turned to the European Central Bank for repeated helpings of credit to delay the inevitable. This week, the inevitable arrived.

--Could such a thing happen here? Well, according to the June issue of APRA's always-scintillating "Quarterly Bank Performance," Aussie banks have a combined $1.45 trillion in housing loans. The report says, "The banks showed a 4.0 per cent decrease in total assets over the year to 30 June 2010, driven predominantly by falls in other assets. Total housing loans increased by 12.3 per cent to $1,145.0 billion over the year."

--Hmm. So total housing loans (assets) for banks are about equal to total GDP. Now keep in mind Aussie banks have not borrowed all that money from abroad. Just some of it (quite a lot of it). This is one reason why Australia's net foreign debt is around $670 billion. The housing boom has been financed with foreign money.

--That's not a problem, unless foreign money gets expensive or is no longer as forthcoming. As long as you can sell bonds to foreign borrowers you're alright. But it's a bit of a worry for the major banks, based on the charts below from the RBA, that foreigners may not be as keen to buy bonds issued by Aussie banks, although keep in mind the banks might not be keen to sell debt right now either when they can raise money through equity financing.

--All three charts show that conventional and unconventional debt instruments have all declined as a source of funding since the GFC. The government has stepped in the Residential Mortgage Backed Securities (RMBS) market to support non-bank lenders and offer other sources of competition for bank lending. But for the most part, the unconventional sources of asset securitisation haven't recovered to their pre-crisis highs.

--Which brings us to covered bonds. No, it's not a new type of underwear. It's a source of funding for banks which uses deposits as collateral against default. In other words, the bank sells a security and the buyer of the security is first in line to be paid from bank deposits in the event that the bank is wound up.

--You might wonder why a lender would have first access to bank deposits ahead of, say the depositor himself (you). And that's a fair question. It's also why covered bonds are a bit controversial. Putting creditors ahead of depositors in line for the distribution of assets would be a public relations disaster.

--But it would only be a disaster if the bank is actually wound up and creditors (the buyers of covered bonds) get your money while you (the depositor) get nothing. And of course, if a bank sources just a small portion of its funding from covered bonds, it doesn't represent a mortal threat to depositors and their deposits (you and your money in the bank).

--Yet it's telling that the Gillard government and Treasurer Wayne Swan are considering the introduction of covered bonds in Australia. Joe Hockey likes this idea, which should scare you even more. It's a bi-partisan agreement on how to put housing even more at the epi-centre of Australia's economy. Anytime politicians from the major parties agree on something, it's bound to be bad for you.

--The Big Four would claim that covered bonds are an additional source of funding for the housing boom that allows banks to lower borrowing costs to Australians because it lowers their aggregate cost of funding. But remember, the collateral for the bonds is your money in the bank.

--What could possibly go wrong?

--Well, hypothetically, a fall in bank asset values (housing crash) would raise concerns about bank liquidity and lead to doubts about the likelihood of a bank paying out on its covered bonds. This is what has happened in Ireland.

--When Anglo-Irish Bank had ratings on its covered bonds cut by Moody's, it showed that the Irish banks increasingly at the mercy of the ECB for continuous funding and that alternate sources of funding were tapped out. It also meant that the collateral for the bonds was in doubt, and forced the Irish government to try to make it good.

--This last point is really the most important. Covered bonds were just the last in a long-line of ideas to keep Ireland's housing boom going beyond all bounds of normality. Once the money ran out to keep prices inflating, the housing market collapsed and took the entire banking sector with it. This is how housing hijacks an economy.

--So what does all this have to do with Australia? Well, in our view, Australia's market has been partially hijacked by housing. Covered bonds would only make the bubble bigger, which would make housing even more unaffordable and lead to bigger losses down the track.

--The recourse to covered bonds is being sought to keep the housing bubble from deflating. The banks, having exhausted the supply of first buyers, need to find new sources of funding to offer new mortgage products. And they might be worried that the traditional sources of funding are getting more expensive and more reluctant to feed Australia's bubble.

--The big risk with covered bonds is that they get abused as cheap of way of sourcing funding for reckless lending. It works as long as house prices go up and up. But if house prices fall, then not only are depositors imperilled, but the government will be asked to help the banks with more cash to pay off investors. And when the value of bank loans exceeds GDP, not even the government can make that good.

--Of course that could never happen here.

--By the way, covered bonds are legal now in New Zealand. In fact, kiwi banks are selling the bonds denominated in foreign currency, which you think would expose them to massive currency risk. Incidentally, Aussie banks have a heaping helping of assets. We'll get the figures for you tomorrow.

--- And finally, get a load of this from Dow Jones Newswires overnight: Standard & Poor's Monday shifted its outlook on New Zealand's foreign currency credit rating to negative from stable, warning on the country's dependence on offshore markets to fund its banking network and putting a spotlight on the its tepid economic recovery.

--Hmmn.