Gold World News Flash

Gold Seeker Weekly Wrap-Up: Gold and Silver Fall Almost 2% on the Week
The Timing of QE2 Was No Accident
Comex Continuous Gold
CLSA' Chris Wood On Why Chinese Inflation Is Not That Big Of A Deal, And Other Issues
Accounting for Public Pensions?
Gene Arensberg: Watch the next COT report carefully
GATA's Murphy interviewed by National Inflation Association
GATA's Murphy interviewed by National Inflation Association
This all boils down to dramatically higher Gold and Silver!
FRIDAY Market Excerpts
Exploration Techniques Hint at Possible Gold Company Successes
Protecting Your Portfolio From Inflation
Gold: A Plethora of Bearish Signs
One Word of Advice For Those Playing the Australian Boom
Official image,”Silver Keiser”
Are banks shorting silver even more than thought?
Gold Daily and Silver Weekly Charts
What’s Up With Gold?
Chart of the Month: TSX-V Speaks Volumes - Gold Mania Still Ahead -Andrey Dashkov
Amidst Uncertainty Over Tax Deal, All Aboard the Precious Metals Train
After Gold and Silver, How About White Cake for Dessert? Part 2
Chart of the Month: TSX-V Speaks Volumes - Gold Mania Still Ahead
COT Gold, Silver and US Dollar Index Report - December 10, 2010
Gold's Gleam Will Not Fade Away Because of the Current Decline
Technology is the Best “Inflation Trade”
David Rosenberg's 10 Themes For 2011
ROFLMAO
The following data set is taken from the June, 2010 Bank for International Settlements [BIS], Semiannual OTC Derivatives Report and it is compared to other data from the U.S. Office of the Comptroller of the Currency’s, June, 2010 Quarterly Report on Ba
High Long Bond Yield Good News for Gold Holders
What’s Up With Gold?
Sprott Thinks Silver Explosion Coming
November Budget Deficit $150.4 Billion, Worse Than $138 Billion Consensus, Biggest November Deficit On Record
Ron Paul: The Fed Spends “More Money Than the Congress Does”
What's the best way to play gold?
When the Government Demands More Debt
Somethingâ€™s Wrong in the Silver Pit, and Itâ€™s Much Bigger than J.P. Morgan
Two Great (Quick) Reads For Your Weekend Pleasure
Gold Stocks Are Still Cheap
Gold Stocks Still Cheap 2
Something’s Wrong in the Silver Pit: But It’s Much Bigger than J.P. Morgan
Bernanke Meddles as Bondholders Exit the Market
Is a Correction in Gold Coming?
The Energy Investment No One Is Talking About
This has, in turn, led former broker Max Keiser to start an Internet crusade asking people to buy silver coins in order to squeeze JPM out of its position.
CPM Group Looks For Historically High Silver Prices For Next Decade
Global Currencies Rally Against the US Dollar
4 DAY RULE
Gold Prices Update
Oil and U.S. Hyperinflation
Play central banker at the ECB

Gold Seeker Weekly Wrap-Up: Gold and Silver Fall Almost 2% on the Week

Posted: 10 Dec 2010 04:00 PM PST

Gold remained near unchanged in Asia and London before it fell almost $20 in early New York trade to as low as $1372.15 shortly after 10AM EST, but it then rallied back higher in the last few hours of trade and ended with a loss of just 0.55%. Silver fell to as low as $28.038 before it also rallied back higher and ended with a loss of just 0.52%.

The Timing of QE2 Was No Accident

Posted: 10 Dec 2010 03:41 PM PST

View the original post at jsmineset.com... December 10, 2010 01:56 PM Do you think the Fed’s decision to move ahead with QE2, despite the strengthening economy rhetoric, was coincidence with the rollover in "the Formula" and "Leading Formula" in November? Don’t think so. When the formula rolls over, it begins to feed on itself as described by Jim. Identification of the real secular trends shows the path to profit in this business. "The Formula" US Fiscal Balance vs US Dollar: Federal Government Budget As A % of GDP, 12 Month Moving Average: "Leading Formula" Federal Taxes Withheld (TW) Less Total Government Outlays (TO) As A % of GDP, 12 Month Moving Average: November federal budget deficit highest on record Treasury says deficit hit $150.4 billion last month, largest November imbalance on record Associated Press Martin Crutsinger, AP Economics Writer, On Friday December 10, 2010, 3:56 pm WASHINGTON (AP) — The federal budget deficit rose to $150...

Comex Continuous Gold

Posted: 10 Dec 2010 03:41 PM PST

View the original post at jsmineset.com... December 10, 2010 10:54 AM ...

CLSA' Chris Wood On Why Chinese Inflation Is Not That Big Of A Deal, And Other Issues

Posted: 10 Dec 2010 02:18 PM PST

When it comes to China, few people are as erudite (if somewhat biased) as CLSA's Chris Wood. Below we present his latest thoughts on the world's most populous country, which after tonight's inflation news is sure to be in the headline news for at least a few days, or at least until an iPad 2 prototype is shockingly stolen from Apple's offices. And according to Wood, tonight's Chinese news are, in the grand scheme of things, not all that material: "GREED & fear is not about to change the current view on China since the view here remains sanguine on the near-term perceived risk of higher CPI “inflation”. Still the issue of the fast developing non-banking financial sector needs to be watched closely; most particularly how the regulators respond to it since any aggressive crack down will have negative market implications. In the longer term, if the growing breed of financial entrepreneurs continue to find ways around the rules, that might ultimately make policymakers consider a more market orientated policy where interest rates are set by the market. But that would have major political implications as it would mark a fundamental departure from the command economy model. All this is just another way of saying that there are limits as to how long China can continue to run its weird hybrid of command economy and private sector economy. But for now at least GREED & fear is going to give Beijing the benefit of the doubt that the game can continue in 2011 since the empirical evidence continues to support it."

The much awaited Chinese CPI and PPI have been released: CPI came at 5.1%, on top of the whisper number, but higher than the official consensus of 4.7%, and the highest number by far in over two years. PPI beat by 100 bps, printing at 6.1%, compared to 5.1%. This "data" should be sufficient to negate the impact of last night's RRR hike and force the PBoC to raise its interest rate, as if the Chinese central bank does not act, one would wonder why the Politburo would allow the release of data which would only enflame the domestic inflation scare even more.

The view of the authorities is that headline CPI should peak at about 5% by the middle of next year at the latest, and decline back to below 4% in the second half of 2011 as the pressure from food prices goes out of the system. This is not far off from the view articulated by CLSA’s China macro strategist Andy Rothman, and would result in a cycle not so dissimilar from the food-driven inflation surge that occurred in 2007-08. It is true, however, that the pressure from food prices seems much more broadly based than in 2007-08 when it was primarily confined to pork prices.

True, the authorities could always be wrong about inflation; though in GREED & fear’s view it is a major assumption to believe that China is about to diverge wildly from its long established pattern of productivity-driven disinflationary growth. Far more likely is the pattern as described in the new proposed 12th Five-Year Plan where CPI inflation rises from a trend level of 3% to 4% on the back of a structural pick up in the share of wealth generation taken by labour in the form of higher wages. This is all part of the hoped for move to a more consumption driven economy, a trend which would surely be totally benign.

GREED & fear says “hoped for” since there is still no hard evidence that consumption’s share of GDP growth has stopped declining. Thus, final consumption expenditure accounted for 34.4% of real GDP growth in the first three quarters of this year, down from 76.8% in 1999 (see Figure 6). It is also the case that, with talk of yet more infrastructure projects in the continuing “Go West” programme, the escalating cranking up of social housing and the ongoing high speed development of a high-speed railway network, that China’s growth is still going to remain to a significant degree investment driven for many years to come. (On the railway story read a recent report by CLSA’s regional head of transport and infrastructure research Robert Bruce – China transport: Fast tracking, 29 November 2010). This macro-economic outcome is also a function of necessity. Net exports are likely to make only a minimal contribution to estimated real GDP growth of 10.5% this year (based on the latest official estimates). The contribution of net exports is also likely to be minimal at best in next year’s 9.5% real GDP growth rate as forecast by the authorities.

If the PRC is not worrying about inflationary pressures surging sharply to the upside as measured in the official CPI data, the authorities do want to appear to be “prudent” on monetary policy; to quote a statement made by the Politburo of the Chinese Communist Party’s Central Committee last Friday. This is why the loan growth quota in 2011 is likely to be in the Rmb6.5-7tn range, down from this year’s official Rmb7.5tn figure. Further moves in reserve requirements and interest rates can also not be ruled out.

There will also be a continuing desire to rein in residential property prices, while it is clear that the government’s determination to deal with the housing affordability issue has this year seen the beginning of what is likely to be at least a five-year programme accelerating development of social housing. The official plan is to construct 5.8m units within this year (though GREED & fear hears that only 60% of that figure will be completed by year end) and for another 10m units in 2011. It is unclear whether the 10m figure includes this 40% not completed this year. But the point about these ambitious targets is less the details than that the central government is dead serious about social housing and local governments will be judged on their record in meeting such targets. This is good news for producers of steel and cement. Thus, 15% more cement per square metre is consumed building social housing than in regular private sector housing. While developers who want to get access to desirable land will need to show they have done their bit constructing social housing.

If all of the above is clear and reasonably well understood, a far more opaque issue in China is the real level of credit growth. GREED & fear refers specifically to a report issued by the credit agency Fitch Ratings this week arguing that credit growth has not slowed this year from the frantic pace seen in 2009 when new credit totalled Rmb11tn despite the slowdown in official bank lending data (see Fitch Ratings report – Chinese Banks: No pause in credit growth, still on pace with 2009, 2 December 2010). Fitch notes two reasons for this; first the growing use of higher yielding securitised products sold by banks and trust companies and second the manipulation of discounted bills. Thus, by the end of November an estimated Rmb2.5tn in credit was sitting off bank balance sheets in credit-related wealth management products while credit-related trust products had risen to about Rmb485bn. Fitch also estimates that the balance of Chinese banks’ discounted bills was understated by as much as Rmb1.65tn at the end of 3Q10. Adjusted for both factors, Fitch estimates that the amount of new credit extended in the first three quarters of this year is on pace with the Rmb9.3tn extended during the same period last year.

The above is a relatively non-transparent issue about which GREED & fear has in no way done enough legwork to make a definitive judgment on. But that Fitch may be on to something is suggested by the macro data. Thus, a look at the People’s Bank of China’s depository corporations survey data shows that bank loans and claims on other depository corporations and financial institutions grew by Rmb10tn through to the end of September (see Figure 7), or at an annualised rate of Rmb12tn which is equivalent to the level of lending seen in 2009 when the Chinese government abolished the loan quota given the PRC’s desire to use the command economy banking system to combat the post-Lehman collapse in growth.

If this is the top-down macro evidence of the growth in the non-banking financial sector, it is also clear from a bottom up level that bank depositors with capital to invest are now aggressively sold “guaranteed” securitised trust products offering yields on corporate loans of 3-4% and higher. Interestingly, in some cases the bank is selling as an agent loans made by a so-called trust company where the guarantee is made by a third party, be it a private or state-owned guarantee company.

GREED & fear hears that there are two basic types of credit-related wealth-management trust products. For the first type, the bank makes the loans and then sells them to a trust company which repackages the loan assets and sells them as a trust product. The incentive for the banks is that this process allows them to move the loan off balance sheet thereby getting around the loan quota. This type of product offers annual yields of 3-4.5% with a maturity period of up to three years. The second type of product is where the bank only acts as a sales agent for the trust company which makes the loan themselves and sells the repackaged trust product to the bank’s clients. This tends to be higher yielding product with annual yields ranging from 5-15% depending on the credit risk and a maturity period of up to three years. Note that both types of credit-related wealth-management products are usually built around loans to a single borrower or “credit”. One sector which has taken particular advantage of the second type of product is the property development industry. This is because of regulatory controls on lending to that sector.

It should be noted that in July the CBRC issued regulations which targeted the first type of product by ordering banks to move any loans securitised on to trust companies back on to their balance sheets, though implementation apparently only really started in November. Banks will, therefore, no longer have the incentive to do the first type of trust product. GREED & fear hears that, in practice, going forward the first type of product will likely shrink in size and the second type will grow.

All of the above is, as noted, a reflection of the rapid development of an increasingly entrepreneurial non-banking financial sector, a sector which seems to have expanded as a consequence of the liquidity surge triggered by the post-Lehman expansion in lending; as well as increased private sector demand for credit combined with depositors’ appetite for yield. The appearance of China’s version of the West’s now no longer expanding shadow banking system raises the issue whether this phenomenon can be managed by the PBOC and the China Banking Regulatory Commission given the somewhat primitive command-economy loan quota system. For if the Fitch analysis is accurate, it would suggest that credit now leaks to other channels not managed by the authorities.

Still even if it is assumed that the authorities are not on top of the issue, and that is a very big if given the PRC’s impressively pre-emptive track record over the past ten years and more, the publicity generated by the Fitch report will presumably have the merit of alerting them to it. Still a failure to bring the non-banking financial sector under control could ultimately serve as the trigger for the over-investment bust that many have been predicting for so long in China given the economic model’s addiction to investment and given the fact that interest rates have always been unnaturally low raising longstanding concerns about the inefficient allocation of capital. This is because it would mean the authorities were losing control of the credit cycle, meaning the banking system was less “command economy-like” and therefore more vulnerable to a classic capitalist over-investment bust.

Still all of the above is for now only interesting conjecture. GREED & fear’s point is to make investors and indeed bank analysts aware of the above issue, and to highlight the need to be alert to any possible policy measures that might be announced to address it; though ironically the greater reliance on quotas by administrative fiat the greater the entrepreneurial incentive for the banking sector to find new ways to get around them.

Meanwhile, the medium-term threats to the Chinese macro story posed by the development of a non-banking financial sector, in China’s command economy context, are a very different issue to the issue of whether inflation is about to surge in China today. In GREED & fear’s view, as already noted, there is no compelling evidence that inflation outside food in China is about to take off in coming months. This makes it less likely that the authorities are going to crack down aggressively on the trend highlighted by Fitch.

What about the macroeconomic argument that a surge in liquidity since 2009 is leading to an inflation threat, an argument clearly linked to the expansion of the non-banking financial sector? GREED & fear’s prime view remains that the liquidity is more likely to be reflected in rising asset prices in China than in a generalised rising CPI trend. The other point which has already been highlighted by Rothman (see CLSA research Sinology – Inflation: Causes and consequences, 30 November 2010), is the sharp decline in velocity of money which has occurred since 4Q08 (see Figure 8). This is the opposite of inflationary. Still the surge in overall credit in the system beyond formal bank lending is exactly what would be expected as a prelude to an over-investment bust, most particularly if it is taking more and more credit to produce a certain level of economic growth as was the case in Asia ex-Japan in the lead up to the Asian Crisis. See the chart below on the historic trend in Thailand and China (see Figure 9).

Clearly, over-investment busts are normally preceded by high investment to GDP ratios and asset bubbles. In China’s case the investment to GDP ratio has been at seemingly stratospheric levels for a long period (see Figure 10). Hence those premature forecasts of a collapse. It is also the case that the continuing policy of holding down the currency via intervention also encourages higher asset prices raising asset bubble risks. On the specific point of the renminbi, GREED & fear heard this week there will only be a 3-5% appreciation next year against the US dollar which, if true, is not going to please Washington.

Meanwhile, Beijing remains obsessed with the asset bubble risk, as reflected in the continuing focus on residential property prices. On that point nobody is expecting any easing of policy towards that sector. Rather if the official data shows property prices rising by more than 1% a month, then there will be growing expectation of more policy action. But for now the official residential property price index of 70 mainland cities rose by only 0.3% MoM in October (see Figure 11).

The net of all of the above is that GREED & fear is not about to change the current view on China since the view here remains sanguine on the near-term perceived risk of higher CPI “inflation”. Still the issue of the fast developing non-banking financial sector needs to be watched closely; most particularly how the regulators respond to it since any aggressive crack down will have negative market implications.

In the longer term, if the growing breed of financial entrepreneurs continue to find ways around the rules, that might ultimately make policymakers consider a more market orientated policy where interest rates are set by the market. But that would have major political implications as it would mark a fundamental departure from the command economy model. All this is just another way of saying that there are limits as to how long China can continue to run its weird hybrid of command economy and private sector economy. But for now at least GREED & fear is going to give Beijing the benefit of the doubt that the game can continue in 2011 since the empirical evidence continues to support it.

If Chinese savers are pursuing yield, as reflected in the surge in so-called trust company wealth-management products, it is also interesting to note that the chairman of the Shanghai Gold Exchange, Shen Xiangrong, stated last week in a speech that gold imports into China rose 480% YoY to 209.7 tonnes in the first ten months of this year. While there is no way to verify independently the figure, there seems no reason to assume he has made it up. It is also interesting to note that this import number is equivalent to about two thirds of China’s estimated annual gold output of 340 tonnes.

For those who believe the US economy will not get real traction resulting in ever greater waves of monetary and fiscal stimulus, gold remains an essential hedge. On this point CLSA’s Australia office has this week published a research report covering seven Australian mid-cap gold mining companies (Australian goldminers - The elusive quest, 7 December 2010). Meanwhile, GREED & fear maintains the biggest Australian goldminer Newcrest Mining with an 8% weighting in the Asia ex-Japan long-only portfolio. The operating leverage of those mining companies who actually produce gold remains an interesting investment story for those equity investors who sympathise with GREED & fear’s longstanding gold price target of US$3,360/oz. Meanwhile, back in China, the China Securities Regulatory Commission (CSRC) in late November approved the first QDII gold fund where domestic Chinese investors can invest in a fund of offshore gold ETFs. It will be interesting to see how much money is raised in this product.

Accounting for Public Pensions?

Posted: 10 Dec 2010 01:07 PM PST

Via Pension Pulse.

Floyd Norris of the NYT reports, Accounting for Public Pensions:

A generation ago, when Ronald Reagan was president, the accounting rule makers forced American companies to come clean on the cost of the pension plans they were promising to employees. That decision, perhaps more than any other, heralded the eventual demise of defined-benefit pensions for employees of American companies.

Now something very similar may be in store for public sector employees, thanks in part to the Republican victories in last month’s Congressional elections.

Forcing companies to account in a reasonable manner for their pensions was a contentious issue at one time. Companies feared it would slash reported profits, and they preferred a system where the only expense they had to count was the money the company actually put into the pension plan. Roger Smith, then the chairman of General Motors, came to a hearing of the Financial Accounting Standards Board to denounce the idea. G.M. argued that such accounting would violate its agreement with the United Automobile Workers union, an argument that seemed to perplex the accountants.

The rule adopted was far from perfect, but it forced companies to estimate the cost of pension benefits being accrued each year. Companies were allowed to “smooth” the numbers by phasing in market changes in the values of pension fund assets, so there was reason to complain that the figures could be misleading. But the principle was established.

Today, not nearly as many companies offer defined-benefit plans to new employees. It is far more common to see a company that has stopped allowing workers to accumulate new benefits, even though companies are still liable for benefits earned before plans were changed or closed. The accountants forced companies to confront the risks they were taking — in effect guaranteeing that pension fund investments would grow — and the companies decided the risks were too great.

As a result, a part of the safety net that previous generations took for granted became far less secure. Workers now tend to have defined-contribution plans, like 401(k)’s, to which they and their employers contribute. The worker chooses the investments, and bears the consequences when they go up or down in value.

That fact almost certainly contributed to the severity of the 2007-9 recession and the slowness of the recovery that has followed. Far more Americans than ever before had a direct stake in the stock market, and the sharp fall in stocks meant that their retirement plans had to change. The number of people over 60 with jobs is up 10 percent over the last three years while the number of jobs held by people under 60 has fallen by 7 percent.

The stock market has regained most of the lost ground since then, but many 401(k) plans have not benefited. Many people reduced their stock market investments at precisely the wrong time. Mutual funds that invest primarily in American stocks have suffered net withdrawals of $90 billion since the stock market hit bottom.

As companies moved away from defined-benefit plans, most cities and states did not follow. One reason for that may have been that the Government Accounting Standards Board — the public sector equivalent of FASB — has done much less to force good disclosures, or comparable ones.

Having limited information available can obscure problems, but when concerns arise, a lack of good data can have the opposite effect; people assume the worst.

Estimates of unfunded pension liabilities can be breathtaking. Two economists, Robert Novy-Marx of the University of Rochester and Joshua Rauh of Northwestern, put the figures at $3 trillion for state governments and almost $600 billion for municipalities. Those figures are far greater than official government figures, and are highly dependent on interest rate levels, which can and do fluctuate. They may be too high, but there is no way to be sure of that.

Some people say the 1974 passage of the Employee Retirement Income Security Act, known as Erisa, led to the demise of private pension plans because companies for the first time really had to honor pension promises. But the trend did not pick up steam until the accountants forced disclosure of real numbers. Most state constitutions have long barred cutting public pension benefits that have been earned, but that fact alone did not force change.

This week, three Republican members of Congress, led by Representative Devin Nunes of California, a senior member of the Ways and Means Committee, proposed legislation to force states and cities to report pension fund liabilities on the same basis, and to force them to disclose market values of assets. The bill would not even allow smoothing, so the state of pension funding will seem volatile as markets rise and fall. Such volatility could be reduced by putting more pension money into bonds than stocks, but doing so would force governments to admit they were likely to earn less on investments, and thus need to put even more money into pension plans.

The congressmen would not like to have it said they are forcing anything. The bill gives local governments a choice: they can report the way the members want them to report, or they can give up the ability to issue tax-exempt bonds. That is, of course, no choice at all.

Introducing a bill is not the same as passing one, but this may be an idea whose time has come. There is rising concern over the state of local government finances, and governments may be forced to make better disclosures if they simply want to issue new bonds.

Disclosures are likely to lead to growing pressure to rein in pension costs, even though that will be resisted by public employee unions, which often have considerable political clout.

Even assuming legislatures want to act, doing so is not easy, in part because of state constitutional provisions. Governments could follow corporate precedents by treating new employees differently and by stopping existing employees from accumulating new benefits. But that may not be enough to stem the flood of red ink, particularly in cities and states where pension fund contributions have been deferred to avoid cuts in other spending.

Some abuses can be stopped, such as the practice of allowing retiring employees to work hundreds of hours of overtime in their final year, and then counting that pay in determining the pension payment, which is often based on a percentage of annual pay. It is not clear how many abuses there are, but the publicity given to some of those that do exist has damaged the image of, and public sympathy for, public employees.There is also a widespread suspicion that mayors and governors have agreed to excessive pension benefits, often as a substitute for pay increases, simply because the bill would be paid by some future administration.

Companies have the option of going bankrupt and getting the Pension Benefit Guaranty Corporation, a federal agency, to take over their obligations. The P.B.G.C. can then reduce payments on larger pensions. But it is not clear what will happen when cities go bankrupt, in part because there are not that many precedents, and states apparently cannot file for bankruptcy at all. Of course, the fact a state cannot file in bankruptcy court does not mean it cannot go broke.

There has been talk of shared sacrifice, in which employees accept lower benefits, taxpayers pay more and bondholders also take hits. You can argue that is what happened in New York City a quarter of a century ago, when some bondholders were forced to extend maturities. But widespread expectations that such a thing was possible could drive up borrowing costs for all localities, making their fiscal problems that much worse.

In the end, I suspect ways will be found to abrogate some pension promises. But even if that does not happen, the trend away from defined-benefit pensions is likely to affect most younger public employees, as it already has their counterparts in the private sector. The retirement safety net will thus become a little more frayed.

The retirement safety net is already full of holes, and it will most certainly affect younger public employees. If things get real ugly, it might even affect retired pensioners who are enjoying gold-plated public sector pensions. Of course, how bad things get is anyone's guess right now and there is no reason to sound the alarm prematurely. At least I hope not.

Gene Arensberg: Watch the next COT report carefully

Posted: 10 Dec 2010 10:44 AM PST

6:34p ET Friday, December 10, 2010

Dear Friend of GATA and Gold (and Silver):

Gene Arensberg's Got Gold Report tonight says that the next report on the commitment of traders in the gold and silver futures markets in New York will be especially important, providing data from just after the start of this week's smashing down of the precious metals. Arensberg's commentary is headlined "Important COT Report Today" and you can find it at the Got Gold Report's Internet site here:

http://www.gotgoldreport.com/2010/12/important-cot-report-today.html#tp

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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Opportunity in the gold coin market

Swiss America Trading Corp. alerts GATA supporters to an opportunistic area of the gold coin market. While the gold bullion market has been quite volatile lately and as of November 29 gold has risen only $7 per ounce over the last month, the MS64 $20 gold St. Gaudens coin has risen about 10 percent in the same time. The ratio between the price of these coins and the price of gold is rising. If you'd like to learn more about the ratio and $20 gold coins, Swiss America can e-mail you a three-year study of it as well as other information.

Swiss America also can provide a limited number of free copies of "Crashing the Dollar," a book written by Swiss America's president, Craig Smith.

For information about the ratio between the $20 gold pieces and the gold price and for a free copy of "Crashing The Dollar," please call Swiss America's Tim Murphy at 1-800-289-2646 X1041 or Fred Goldstein at X1033. Or e-mail them at trmurphy@swissamerica.com and figoldstein@swissamerica.com.

Join GATA here:

Yukon Mining Investment e-Conference
Wednesday-Thursday, January 19-20, 2011

http://theyukonroom.com/yukon-eblast-static.html

Vancouver Resource Investment Conference
Vancouver Convention Centre West
Vancouver, British Columbia, Canada
Sunday-Monday, January 23-24, 2011

http://cambridgehouse3.com/conference-details/vancouver-resource-investment-conference-2011/15

Cheviot Asset Management Sound Money Conference
Guildhall, London
Thursday, January 27, 2011

http://www.cheviot.co.uk/news/video/2010/12/the-cheviot-sound-money-conf...

Phoenix Investment Conference and Silver Summit
Renaissance Glendale Hotel and Spa
Glendale, Arizona
Friday-Saturday, February 18-19, 2011

http://cambridgehouse3.com/conference-details/phoenix-investment-confere...

Support GATA by purchasing a colorful GATA T-shirt:

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Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009:

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Prophecy Drills 71.17 Metres of 0.52 percent NiEq
(0.310 percent Nickel 0.466 g/t PGMs +Au and 0.223 percent copper)
from surface at Wellgreen Project in the Yukon

Prophecy Resource Corp. (TSX-V: PCY) reports that it has received additional assays results from its 100-percent-owned Wellgreen PGM Ni-Cu property in the Yukon, Canada. Diamond drill holes WS10-179 to WS10-182 were drilled during the summer of 2010 by Northern Platinum (which merged with Prophecy on September 23, 2010). WS10-183 was drilled by Prophecy in October 2010. Highlights from the newly received assays include 71.17 metres from surface of 0.52 percent NiEq (0.310 percent nickel, 0.466 g/t PGMs + Au, and 0.233 percent copper) and ended in mineralization. For more drill highlights, please visit:

http://prophecyresource.com/news_2010_nov29.php

GATA's Murphy interviewed by National Inflation Association

Posted: 10 Dec 2010 10:27 AM PST

6:24p ET Friday, December 10, 2010

Dear Friend of GATA and Gold (and Silver):

The National Inflation Association today posted at its Internet site an 11-minute audio interview with GATA Chairman Bill Murphy. You can listen to it here:

http://inflation.us/videos.html

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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Sona Drills 85.4g Gold/Ton Over 4 Metres at Elizabeth Gold Deposit, Extending the Mineralization of the Southwest Vein on the Property

Company Press Release, October 27, 2010

VANCOUVER, British Columbia -- Sona Resources Corp. reports on five drillling holes in the third round of assay results from the recently completed drill program at its 100 percent-owned Elizabeth Gold Deposit Property in the Lillooet Mining District of southern British Columbia. Highlights from the diamond drilling include:

-- Hole E10-66 intersected 17.4g gold/ton over 1.54 metres.

-- Hole E10-67 intersected 96.4g gold/ton over 2.5 metres, including one assay interval of 383g of gold/ton over 0.5 metres.

-- Hole E10-69 intersected 85.4g gold/ton over 4.03 metres, including one assay interval of 230g gold/ton over 1 metre.

Four drill holes, E10-66 to E10-69, targeted the southwestern end of the Southwest Vein, and three of the holes have expanded the mineralized zone in that direction. The Southwest Vein gold mineralization has now been intersected over a strike length of 325 metres, with the deepest hole drilled less than 200 metres from surface.

"The assay results from the Southwest Zone quartz vein continue to be extremely positive," says John P. Thompson, Sona's president and CEO. "We are expanding the Southwest Vein, and this high-grade gold mineralization remains wide open down dip and along strike to the southwest."

For the company's full press release, please visit:

http://sonaresources.com/_resources/news/SONA_NR19_2010.pdf

Join GATA here:

Yukon Mining Investment e-Conference
Wednesday-Thursday, January 19-20, 2011

http://theyukonroom.com/yukon-eblast-static.html

Vancouver Resource Investment Conference
Vancouver Convention Centre West
Vancouver, British Columbia, Canada
Sunday-Monday, January 23-24, 2011

http://cambridgehouse3.com/conference-details/vancouver-resource-investment-conference-2011/15

Cheviot Asset Management Sound Money Conference
Guildhall, London
Thursday, January 27, 2011

http://www.cheviot.co.uk/news/video/2010/12/the-cheviot-sound-money-conf...

Phoenix Investment Conference and Silver Summit
Renaissance Glendale Hotel and Spa
Friday-Saturday, February 18-19, 2011
Glendale, Arizona

http://cambridgehouse3.com/conference-details/phoenix-investment-confere...

Support GATA by purchasing a colorful GATA T-shirt:

http://www.gata.org/node/16

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Prophecy Drills 71.17 Metres of 0.52% NiEq
(0.310 % Nickel 0.466 g/t PGMs +Au and 0.223% Copper)
from surface at Wellgreen Project in the Yukon

Prophecy Resource Corp. (TSX-V: PCY) reports that it has received additional assays results from its 100-percent-owned Wellgreen PGM Ni-Cu property in the Yukon, Canada. Diamond drill holes WS10-179 to WS10-182 were drilled during the summer of 2010 by Northern Platinum (which merged with Prophecy on September 23, 2010). WS10-183 was drilled by Prophecy in October 2010. Highlights from the newly received assays include 71.17 metres from surface of 0.52 percent NiEq (0.310 percent nickel, 0.466 g/t PGMs + Au, and 0.233 percent copper) and ended in mineralization. For more drill highlights, please visit:

http://prophecyresource.com/news_2010_nov29.php

GATA's Murphy interviewed by National Inflation Association

Posted: 10 Dec 2010 10:27 AM PST

6:24p ET Friday, December 10, 2010

Dear Friend of GATA and Gold (and Silver):

The National Inflation Association today posted at its Internet site an 11-minute audio interview with GATA Chairman Bill Murphy. You can listen to it here:

http://inflation.us/videos.html

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

http://theyukonroom.com/yukon-eblast-static.html

Vancouver Resource Investment Conference
Vancouver Convention Centre West
Vancouver, British Columbia, Canada
Sunday-Monday, January 23-24, 2011

http://cambridgehouse3.com/conference-details/vancouver-resource-investment-conference-2011/15

Cheviot Asset Management Sound Money Conference
Guildhall, London
Thursday, January 27, 2011

http://www.cheviot.co.uk/news/video/2010/12/the-cheviot-sound-money-conf...

http://www.gata.org/node/16

This all boils down to dramatically higher Gold and Silver!

Posted: 10 Dec 2010 10:12 AM PST

Gold Technicals & ETF Inefficiencies Share this:

FRIDAY Market Excerpts

Posted: 10 Dec 2010 10:11 AM PST

China rate hike worries, upbeat U.S. data weigh on gold price

The COMEX February gold futures contract closed down $7.90 Friday at $1384.90, trading between $1372.70 and $1393.00

December 10, p.m. excerpts:
(from Dow Jones)
Comex gold futures eased as traders eyed a possible weekend interest rate hike in China and upbeat U.S. trade data. The U.S. trade deficit shrank by more than expected as exports soared to their highest levels in more than two years, a Commerce Department report said Friday, with the total U.S. deficit in international trade of goods and services falling around 13% to $38.71 billion in October. The report boosted confidence in the economy and prompted investors to shift away from safe-harbor assets like gold to riskier investments like equities…more
(from Xinhua)
China China's central bank on Friday raised the reserve requirement ratio by 50 basis points from Dec. 20, a move pointing to the urgency of curbing runaway lending amid accelerating inflation. Market traders noted that China's tightening efforts could cool down its economic growth and thus dampen demand for precious metals. The market also expected that China might further tighten its monetary policy by lifting the benchmark interest rate soon. China moved up the release of key macroeconomic data, including inflation numbers, to Saturday from Monday…more
(from TheStreet)
Gold prices were having a mixed reaction to moves from China to cool rising inflation ahead of its core Consumer Price Index reading for November. Reports indicate it could be as high as 5.1% vs. a year ago after October's reading of 4.4%. Investors had been expecting a more aggressive interest rate increase, so gold prices were seeing a bit of relief at the more tame measures, but gains were tempered on worries that a reserve ratio increase won't be enough to severely tame inflation and that a rate hike is still in the cards after the CPI reading…more
(from Reuters)
Suki Cooper, precious metals analyst at Barclays Capital, said profit-taking pressured gold but economic uncertainty kept longer-term investment demand stable across precious metals. "Gold has still found healthy physical demand upon price dips even after the seasonally strong period for demand, but perhaps more importantly, we haven't seen a surge in scrap supply," Cooper noted. HSBC and other bullion banks also said steep declines in prices triggered more gold buying in emerging markets, with high premiums in India and China as evidence of strong physical demand…more

see full news, 24-hr newswire…

Exploration Techniques Hint at Possible Gold Company Successes

Posted: 10 Dec 2010 09:26 AM PST

Marco G. submits:

Do you remember the Aurelian Resources discovery of the Fruta del Norte epithermal gold deposit in the Ecuadorian Andes in 2006? The hidden under overburden, gold discovery in the South American jungle, of 13 million ounces of gold was the most exciting gold discovery story for the last decade. The stock price of Aurelian Resources soared from 60 cents to over $40 over the course of half a year of spectacular drilling results. Aurelian was eventually merged together with Kinross Gold Corporation (KGC) in 2008 for value of $1.2 billion USD. The author has a particular interest in this type of epithermal precious metal deposits.

Secret to Finding

Complete Story »

Protecting Your Portfolio From Inflation

Posted: 10 Dec 2010 09:03 AM PST

Brad Case submits:

John Waggoner's personal investing column in today's USA Today focuses on building a portfolio to protect against the inflation that, it seems to me, is likely to build up dramatically over the next few years. He highlights four inflation hedges:

Dividend-paying stocks
Gold
TIPS
REITs

I've done my own research on those assets plus commodities as inflation hedges, so I can add a little color to Waggoner's recommendations.

Complete Story »

Gold: A Plethora of Bearish Signs

Posted: 10 Dec 2010 09:00 AM PST

courtesy of DailyFX.com December 10, 2010 07:24 AM Daily Candles Prepared by Jamie Saettele There are signs that this gold reversal is ‘for real’. For one, each successive peak since October sports divergence with RSI. The latest top was also accompanied by several bearish candle patterns (doji and bearish engulfing). Coming under 113050 would break the series of higher lows but in light of the bearish evidence, jumping the gun on short attempts is appropriate....

One Word of Advice For Those Playing the Australian Boom

Posted: 10 Dec 2010 09:00 AM PST

We should have more thoughts. But to tell you the truth, many of our thoughts went out of our head on our recent round-the-world trip. You need constant air pressure in order to maintain thoughts. And regular hours. Start getting up at midnight and going to bed at noon; thoughts have a way of disappearing by late afternoon. If they were ever there in the first place.

One thought that disappeared somewhere over the pacific was this:

The suntanned country must be close to getting burnt.

Australia is booming. Prices are high. It cost $38 for breakfast in the Crown Towers hotel. Even so, you could have only one cup of café latte. You'd have to pay extra for another one.

Our total bill for 3 nights was over $2,000. Impossible? Well, we thought so too. But when you throw in a bit of laundry…transfer from the airport…and breakfast for a friend, not to mention a consumption tax of $184, you end up over 2,000 bucks – without even a single dirty movie.

The boom has been going on Down Under for the last 19 years. Not even the Great Correction is stopping it. Each year, it sells more dirt to Asia… from 40% of its exports 10 years ago to 72% today. It should probably just sell all of Western Australia to the Asians and be done with it.

Meanwhile, the Ozzies enjoy their boom…raise their glasses…and throw raw meat on the barbie. Our colleague's house in Melbourne has risen 200% in price since we sent her there four years ago. And it's still going up. Converted shipping containers, transformed into mobile homes, sell for as much as $1 million. And truck drivers in the mining areas earn more than $100,000 a year.

How long can this go on? We don't know. But our advice to our colleague was simple enough:

"Sell!"

Bill Bonner
for The Daily Reckoning

One Word of Advice For Those Playing the Australian Boom 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."

Official image,”Silver Keiser”

Posted: 10 Dec 2010 08:55 AM PST

November federal budget deficit highest on record

LINK

Got gold? Silver? If not, good luck!

The following data set is taken from the June, 2010 Bank for International Settlements [BIS], Semiannual OTC Derivatives Report and it is compared to other data from the U.S. Office of the Comptroller of the Currency’s, June, 2010 Quarterly Report on Ba

Posted: 10 Dec 2010 06:42 AM PST

Something's Wrong in the Silver Pit: But It's Much Bigger than J.P. Morgan Share this:

High Long Bond Yield Good News for Gold Holders

Posted: 10 Dec 2010 06:40 AM PST

The Financial Times brought up the interesting point that because bond prices are so insanely high (making bond yields so preposterously low), a one-percent change in yields would negatively impact the prices of bonds much more than a one-percent ... Read More...

What’s Up With Gold?

Posted: 10 Dec 2010 06:36 AM PST

by Addison Wiggin - December 10, 2010

A bad week for gold… and why we’d like more of them
“Popular”… “Attractive”… Chinese load up on gold, Arabs urged to do the same
“The gold was not there”… Scary tales of the uber-wealthy trying to take delivery from Swiss banks
How the White House and Congress slaughtered municipal bonds this week
“Dump it!” Readers offer advice on all kinds of things: from our friends at Odyssey Marine to a wealthy food stamp recipient... and finally... some last words about WikiLeaks, Assange and Vancouver...

Hmmm… gold whacked again this morning. The moment the trade deficit figures came out (they’re now the lowest since January), the spot price fell below $1,380.

Gee, we barely know what to do with ourselves. A week in which gold touches its all-time high and then pulls back 3% to hand us another buying opportunity? We’ll take it!

More, please.

And so will much of the rest of the world, it seems. From China to the Middle East, the buying signs are all there.

Chinese gold imports are on a pace to quintuple this year, according to figures from the Shanghai Gold Exchange. Last year, the Middle Kingdom imported 45 metric tons of gold. Through October of this year, the figure was 209.7 metric tons.

Meanwhile, the volume of gold traded on the exchange is up 43% from a year ago.

“Uncertainties in domestic and global economies, and increasing anticipation of inflation, have made gold as a hedging tool very popular,” says exchange chairman Shen Xiangrong.

Coupled with the news we mentioned yesterday -- Chinese regulators approving the first mutual fund to invest in gold-backed ETFs -- we see Chinese gold demand is going to a whole new level.

Two leading economists in the Persian Gulf region are urging central banks to boost their gold reserves.

They just issued a report on behalf of the Dubai International Financial Centre Authority. Their advice to the nations of the Gulf Cooperation Council, including Saudi Arabia: Back up the truck.

"When you have a great deal of economic uncertainty, going into paper assets, whatever they may be -- stocks, bonds, other types of equity -- is not attractive," writes economist Nasser Saidi. "That makes gold more attractive."

Five of the six GCC members peg their currency to the dollar. And all six haul in a lot of revenue from selling oil priced in dollars. The dollar’s fall over the last six months is a big deal to them.

"The value of paper money is being debased by injections of quantitative easing in Europe, Japan and the U.S," adds Saidi’s co-author Fabio Scacciavillani. "Gold is a means of exchange not dependent on any political decisions and has a role as a hedge against inflation and economic risk."

Are Swiss banks getting tightfisted about handing over the gold they stash on behalf of their clients when those clients decide they want to stash it themselves? That’s what we’re hearing from the top echelon of the world’s wealthy.

First comes a story related by Jim Rickards of Omnis Inc., the man perhaps best known for negotiating the rescue of the hedge fund Long-Term Capital Management in 1998. He tells about a client of a major Swiss bank who was refused access to his $40 million of gold.

“It took lawyers, it took threats of publicity, it took a lot of pressure,” before the bank would relent, Rickards says. “This is something that should have taken two days, three days, a week at the most, although I would say even a week is a long time. But it took 30 days.

“My inference is that that gold was not there. The bank had to scramble, go out and find it somewhere before they could make good delivery.”

“I could tell you several stories of similar experiences,” says our friend James Turk from GoldMoney. He cites the example of an individual with $550,000 of silver stashed in a Swiss bank -- not exactly a super high roller like Rickards described.

This individual bought his silver more than a decade ago. And yet he’s been struggling for two months to collect his bullion. The bank is insisting he take cash. This one’s not yet resolved.

“People increasingly want to own the real thing,” says James, and not some paper substitute like an ETF, or even physical gold held in an “unallocated” account (where your gold is mingled with other peoples’ gold).

All of this underscores the final part of Energy & Scarcity Investor editor Byron King’s long-standing advice about precious metals. “Buy gold. Buy silver. Take delivery.”

While gold is down 3% from its highs this week, gold stocks have pulled back nearly 5.4%. The HUI index, which topped out Tuesday morning at 596, trades this morning below 565:

“I like gold,” Byron says. “I like gold miners. I'm generally bullish on gold and gold mining. I love technically competent, well-run gold mining firms.” So whatever’s going on this week is short-term noise, and a reminder that nothing moves straight up.

Of course, the HUI is made of big mining companies, solid buy-and-hold plays. But Byron also has a taste for the more speculative… like the potential 30-bagger (you read that right) that he recently identified.

Byron doesn’t throw out a figure like that lightly: He knows full well Mark Twain’s definition of a gold mine -- “a hole in the ground with a liar standing on top.” That’s why he likes to take his geology degree and take a look 2 miles deep…

Bottom line… The mine Byron saw could hold 10 times as much gold per ton of rock as the best mine in South Africa. And he sees two short-term catalysts that could rocket the stock price of the company sitting on this mine.

We won’t tease you any more. You can learn all about it right here.

Major U.S. stock indexes are going nowhere today, which is what they’ve done since Tuesday.

Traders yawned at the news that China is raising the reserve requirements on its banks for the third time in a month -- another toothless and symbolic move against the growing Chinese inflation menace.

A crisis in the municipal bond market that we warned about several days ago is gathering pace, thanks to the wrangling in Washington over whether to extend the 2001 and 2003 tax cuts.

Whatever the result of the congressional sausage making, it looks as if Build America Bonds are toast.

“BAB,” explains Lifetime Income Report’s Jim Nelson, “is a program that guarantees federal subsidies on certain taxable municipal bonds. So for each of these bonds sold to investors, the federal government pays 35% of the interest payments.”

“This eases the budget pains that states and local governments have been feeling since the economy hit the rocks in 2008. And it's only going to get worse.”

News that BAB was left out of the Grand Bargain between President Obama and top Republicans in Congress “crushed the muni market this week, continuing a trend that started in early November.”

Don’t look for BAB to magically rematerialize in the final bill. “So bond funds and munis look like they hit a wall,” says Jim. That’s on top of Treasuries’ miserable performance we told you about earlier this week. All this reinforces the need for alternative sources of income like the ones Jim seeks out.

We just looked over a spreadsheet of the open positions in Lifetime Income Report. They’re up an average 25%. And the positions he’s sold during 2010 rose an average 23%. If that’s the kind of consistency you’d like for the income part of your portfolio, look here.

From Pennsylvania comes just about the worst idea we’ve seen in… well, maybe a week.

It’s a vending machine that sells you wine. Well, it sells you wine as long as you take a breathalyzer test, swipe your driver’s license and confirm your purchase with a bureaucrat on the other side of a closed-circuit TV camera.

This is Pennsylvania’s idea of “liberalizing” its liquor laws. For decades, the only place you could buy booze was a state-run liquor store. More recently, you could actually buy wine at a grocery store (which is more than we can do here in Maryland, but that’s another story)… as long as you contend with one of these contraptions.

Now comes word that Pennsylvania’s Liquor Control Board has approved these machines for use at Wal-Mart. So you can jump through all the hoops of your state-approved purchase while you listen to a pre-recorded message from Janet Napolitano urging you to narc on your fellow citizens if you see something “suspicious.”

It’s enough to drive you to drink, no?

“I read with dismay,” writes a reader, “about the double-dealing that went on with the Black Swan treasure. Sounds very similar to what Mel Fisher went through with the Atocha.

“If I were Odyssey, I would dump every last doubloon to the bottom of Davy Jones before I gave any of it to any government. I personally hope that they are considering that option.

“Better to get nothing than to allow the parasites in government to get their greedy hooks on any of it. But that's me. Best of luck to them come what may, but don't give in without a fight.”

The 5: The intrigue has caught on with the mainstream press, too. Here and here. We haven't heard yet what Greg plans to do about it.

“Yes,” a reader writes, “go ahead and invite Julian Assange to speak in Vancouver, if he is still alive or hasn't gone insane from torture, and if the nameless ‘they’ have not yet told Agora, as they have told an increasing number of other businesses, to shut up or close down.”

“With regard to the uproar over WikiLeaks,” writes another, “it is perhaps worth noting that in this government ‘of the people, by the people, for the people,’ the people have essentially no power to limit what the government may demand to know about their personal affairs, nor do they have any right to know the ‘personal’ affairs of government officials.

“On the other hand, as private citizens, we have been told that we must reveal to government officers all details of our financial affairs, even those parts that are held and accessed totally outside the legal jurisdiction of the United States.

“It is now deemed a crime to lie to any officer of the government, even when not under oath, but said officers are permitted to pile whopper on whopper in an effort to induce us to speak an untruth, yet they incur no penalty, even if they testify in court that they did so.

“And finally, it now appears that the charges of rape were grossly overstated, that instead a woman involved believes that she suffered ‘sex by surprise.’ But now that Mr. Assange is in the hand of the authorities, it seems exceedingly unlikely that he will be allowed to go free, even as the original charges which brought about his arrest fade into the background.

”In the face of all this, it is hard to defend the idea that the citizens control the government. Rather, government officials appear to view us as something between subjects and property, and they exercise the power to make it so.”

“You, my friend, are more correct than you know,” writes a reader addressing the New Zealander who unloaded on American “cretins” demanding Assange’s head.

“Every time this country gets in trouble, whether it be in world affairs or economically, the so-called leaders begin to manipulate (dare I say brainwash) people into believing their rhetoric. But the more insidious and covert action here is to create a ‘push button’ Pavlov's dog response to anything they say.

“The government is carefully crafting a mechanism whereby they just have to spew key words to get these poor idiots to salivate; “patriot,” “freedom,” “terrorist,” “national security,” “our troops,” and the list just keep getting longer. Mind control is more powerful than anything to the people susceptible.

“We are becoming the 'Cult of The United States of America.' Too bad the Founding Fathers couldn't foresee this destruction of democracy.

“So Mr. Assange, I wish you well, and I'm grateful for your courage to expose the real danger to our ‘freedom and Democracy,’ secrecy and manipulation.”

The 5: Without being too presumptuous, we believe the Founders did foresee the problems with democracy. That's why they founded a republic. It's our bad for turning it into a democracy.

“To the classless scumbag that makes $600,000 a year," writes another, "and forced his wife to apply for food stamps: I say take the $600,000 and try and buy some integrity, you double-dipping f _ _ _er! It's people like you that makes me ashamed to be an American.”

“You smart... but ruthless [expletive],” adds yet another. “You’re pulling in over a half-mil annually and you’re going to have your (I'm-not-committed-enough-of-a-man common-law) wife get food stamps. You, sir, are part of the problem and should be ashamed!

"Written by an out-of-work welder that turned down extended unemployment benefits so that I would not be part of the problem.”

The 5: Yikes… we always figured welding is one of those jobs for which there’d always be demand. Your comment makes us even more suspicious of the bureau's unemployment numbers.

Regards,
Addison Wiggin
The 5 Min. Forecast

P.S.: Books are flying off the proverbial shelves at Laissez Faire.

And why not?

60% off is a good start for purchasing your holiday gifts, don't you think? Plus, you get the classics Economics in One Lesson and The Law absolutely free, gratis, no charge, on the house. Just for being you. Thanks! Check out the offer here.

Sprott Thinks Silver Explosion Coming

Posted: 10 Dec 2010 06:34 AM PST

Perhaps silver investors might want to rethink plans to take profit with $30 silver. We believe the two articles at the link below are worthy of consideration by Vultures. They are from Sprott Asset Management and they relate to silver. Eric Sprott and David Franklin lay out their very bullish view of the silver market now that they are free to do so following the successful launch of the new Sprott Physical Silver Trust PSLV. We are indebted to the Gold Anti-Trust Action Committee (GATA) and Chris Powell for bringing them to our attention. ...

November Budget Deficit $150.4 Billion, Worse Than $138 Billion Consensus, Biggest November Deficit On Record

Posted: 10 Dec 2010 06:25 AM PST

The Treasury has released the November deficit, which at $150.4 billion was about $12 billion worse than expected. Total receipts were $148 billion, of which individual income taxes were $64.3 billion, while the government actually refunded $3.1 billion for corporate taxes in the month. While cumulative receipts since the start of the new fiscal year are better than in the prior year period ($135.7 billion compared to $109.1 billion), it is the expense side that is far more important: in November the government spent $299.4 billion, the bulk of which going to the Department of Health and Human Services ($72 billion), social security ($64 billion), and Defense ($57 billion). The department of education saw a whopping $7.6 billion in funding in November. What is more troubling is that the interest expense is starting to rise: in the two months ended November 30, the US government paid $43.5 billion compared to $40.8 billion last year. Of course, this is to be expected, as total US debt is about $1 trillion higher now than it was last year. And, as always, what is most notable is that in November total debt increased by $192 billion to $13.861 trillion from $13.669 trillion. In other words, we are now at a point that every dollar in receipts is matched by 1.3 dollars in incremental debt.

Ron Paul: The Fed Spends “More Money Than the Congress Does”

Posted: 10 Dec 2010 06:16 AM PST

This morning, Dr. Ron Paul (R-TX) held his first interview since being appointed chair of the House Monetary Policy Subcommittee. From what he says in the video below, he's going "to think things through and not overdo things too soon," but ultimately plans to stick to his guns, and "emphasize the oversight of the Federal Reserve."

He also points out why he views his new role as important in these times…

"Obviously, it is very popular with the American people to audit the Fed and know what they're doing when they can spend trillions of dollars and we don't know where it goes. They have a bigger budget; they spend more money than the Congress does. Yet, we have no oversight. It was never intended that a secret body like this could create money out of thin air spend to take care of some banks and big business and foreign banks and the American people struggle? We have to look into it and we have to start to consider reforms."

You can see and hear more details in the clip below, which came to our attention via Bloomberg Television in its recent exclusive interview with Ron Paul.

Ron Paul: The Fed Spends "More Money Than the Congress Does" 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."

What's the best way to play gold?

Posted: 10 Dec 2010 06:07 AM PST

by Mark Hulbert
12.09.2010 (Barron's) — Is it better to buy gold bullion or shares of the companies that mine it?

That question—a perennial one in the gold-bug community—has taken on special urgency in the wake of gold's impressive bull market, which reached new all-time highs this week.

Urgent or not, however, it's not clear that the question has the significance that many investors are giving it. It's unlikely that, over the long term, shares of gold-mining companies will perform appreciably better than bullion itself—especially once risk is taken into account. Furthermore, the factors that cause gold-mining shares to outperform bullion over the short term, or vice versa, are often not those that investors have in mind when betting on one over the other.

Those at least are the conclusions I drew from an extensive analysis of the historical inter-relationships between gold bullion and the shares of gold-mining companies….

mining

Though the shares often outperform bullion over the short term, their greater risk doesn't necessarily translate into greater profits over the long term. This can be traced to the asymmetry of risk: Big losses require even bigger gains to be overcome…. You can reduce the risk otherwise associated with gold-mining company shares by investing in those companies that hedge their gold positions. But you will pay a price for that reduced risk: In the event gold rises, as a general rule, you will make less money in the shares of hedged mining companies than in the shares of unhedged firms.

While being highly correlated with bullion, shares of gold-mining companies are also moderately correlated with the stock market. This otherwise surprising pattern nevertheless makes sense, since those shares trade on the stock market and, therefore, are vulnerable to some of the same factors that cause the overall market to rise and fall. One such factor is liquidity. When liquidity dried up during the Great Recession of 2008, for example, the gold-stock index plunged by more than 60% in just a few months' time.

Because of these and no doubt other factors, gold bullion has more than held its own against gold shares over the long term.

The bottom line? If you are short-term trader and believe that gold is about to rise, you may want to favor shares of unhedged gold companies over bullion itself. Over the long term, however, the physical metal would appear to be a logical choice.

[source]

RS View: It would be useful to add to Hulbert's overview the very basic fact that the modi vivendi of mining companies is to extract their livelihood from a diminishing orebody. When the gold price rises significantly through time, rather than having fat profits to give to shareholders, a mining company will instead begin mining the marginal periphery of the ore (at higher costs for lower output) always with an eye to extend the life of the operation more or less at break-even cashflow. Again, the typical company will put its emphasis on maximizing its operational lifespan ahead of maximizing shareholder profits. Bottom line: if you want to make money from a mining company, the best way to do it is to pick up a shovel and hardhat or else take a chair with the CEO and board of directors to land yourself one way or the other on their payroll.

When the Government Demands More Debt

Posted: 10 Dec 2010 06:00 AM PST

I always like the name Minyanville because it sounds so soothing, and it makes me think of some peaceful, beautiful little town of my childhood dreams, where everything is always nice and everybody is happy, where wishes come true for good little boys, and there are no angry fathers literally throwing you out of his stupid house and yelling after you, "And stay away from my daughter, you worthless piece of teenaged hoodlum trash!"

Of course, life wasn't like that back then, and it is apparently not like that in Minyanville.com, either, as it is there that I ran across Dan Cofall of NorAm Capital Holdings, Inc, and also the host of the radio show "The Wall Street Shuffle", who is, perhaps without realizing it, summing up my horror of the gigantic increases in the money supply by the horrid Federal Reserve announcing a six month-long $600 billion creation of new money, and thus I fearlessly forecast them to create at least $1.2 trillion in the whole year!

The GDP, the total of all the goods and services produced in the Whole Freaking Country (WFC), is only $14 trillion, and yet here are these Federal Reserve weenies printing up a massive, monstrous $1.2 trillion in new money! This is an unbelievable 9% of GDP, for crying out loud!

And that's just the amount This Freaking Year (TFY)! This doesn't include even more money next year! And more the year after that! And more the year after that, on and on, more and more until, as Ludwig von Mises of the Austrian school of economics so famously said, the economy cracks up.

And now, thanks to Mr. Cofall, we know that it is worse than the astounding $1.2 trillion, as, "The Fed granted $9 trillion (that's right, trillion) dollars of loans to countries, central banks, companies, and banks in the fall of 2008," which leads to the terrifying fact that the money supply has taken a big boost, as he notes when he says, "This $9 trillion did not exist the day before the loans were made."

If you remember that changes in price always equilibrate supply and demand, this is $9 trillion of new demand, which becomes significant when followed up by the obvious fact that supply did not increase, as, as he says, "The world did not create $9 trillion of goods and services in one day."

Ergo, demand swamping supply means that prices must go up to clear the market!

Of course, Junior Mogambo Rangers (JMRs) look at the gigantic increase in the amount of money used to buy things, compared to the static sameness of the amount of things that can be bought, and come to the only possible conclusion, namely, "Forget that formation of Klingon battle-cruisers passing Saturn on their way here! We're freaking doomed to die of inflation in prices! Buy gold, silver and oil, and lots of arms and armaments against the coming horde of desperate, angry people who do not want to die of exposure and starvation because of high prices that keep going higher and higher, and they want to kill you and steal all your stuff! And if not them, then the government wants to kill you and steal your stuff! Or the Klingons!"

The problem boils down to, as he succinctly puts it, that we "have long since passed the point of the world's debts exceeding our assets," and that, even worse, "Our debts far exceed our ability to repay those debts or, often, even service the debts."

I figure that this "drowning in debt" scenario explains why people are not borrowing more money to buy more things to go farther in debt, and it is this lack of sales that explains why businesses are not going farther into debt to invest and expand to create more things for people to buy by going farther into debt, and why businesses are not hiring new workers, which explains why unemployment is so high, which explains why workers are being fired, and which explains why I will probably be "let go" in the next round of "restructuring" as people much less incompetent than I am have been fired already.

Unfortunately, the Excellent Mogambo Investment Plan (EMIP) dictates that I buy gold, silver and oil when the government is acting so bizarrely, and whether I have a job or not, which may make a mockery of the EMIP slogan, "Whee! This investing stuff is easy!"

The Mogambo Guru
for The Daily Reckoning

When the Government Demands More Debt 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."

Somethingâ€™s Wrong in the Silver Pit, and Itâ€™s Much Bigger than J.P. Morgan

Posted: 10 Dec 2010 05:52 AM PST

When researching the precious metals, often times things are seldom as they appear on the surface. GATA Secretary and Treasurer – Chris Powell – has said that the true picture of a nations’ gold holdings are, “more closely guarded than their nuclear secrets”. This has been more-or-less proven true based on the Federal Reserve’s reaction to GATA’s 2009 FOIA request for information concerning GOLD SWAPS. The Fed is ON RECORD admitting they’ve done gold swaps – which, by definition, necessarily utilize sovereign American gold stocks.

Two Great (Quick) Reads For Your Weekend Pleasure

Posted: 10 Dec 2010 05:38 AM PST

The first one is sourced from the King World News Blog. The author makes the argument that, on a relative basis, Europe will begin to appear "stable" relative to the U.S. What's interesting about this that I was meeting with prospective client who was relating a presentation he heard from some fancy economist who talked about a stronger dollar vs. all the problems in Europe. My response was, "huh?" California alone is a bigger problem for the U.S. than Greece, Ireland, Spain, Italy and Portugal combined. Then layer in Califorinia, New York, New Jersery, The Rust Belt..."

Anyway, this commentary alludes to all of that:

In no way do we see the Build America Bonds program as a panacea for what ills Municipals, rather we see it as the duct tape holding states together until growth in whatever guise comes its way. With no growth and no duct tape, we see the problems of state and local governments coming to the fore. Given California, New York, and Illinois comprise 25 percent of the US GDP, we believe headlines regarding their budget deficits will soon overtake those regarding Ireland, a country that makes up only 1.8 percent of Euro-Zone GDP.

More interestingly, he makes the argument that the best way for China to revalue its yuan vs. the U.S. dollar is to continue buying a lot more euros, which they are doing anyway in order to diversify out its increasingly worthless dollar position. It's the first time I had thought of this issue this way and I believe he's dead right. Here's the link and it's definitely worth reading: Buy Euros On Dips

The second article is about silver from Sprott. Like most of us who understand the how/what/why of the precious metals market, Sprott as an institution - and the principals of the firm individually - have overweighted silver in their investment portfolio. I know both Eric Sprott and John Embry have 90% of their net worth in the precious metals sector because they have stated that on several occassions. It made me feel a lot better about having 90% of my net worth in the sector as well. At any rate, if you want to read an excellent summary on why silver is poised to provide breathtaking investment returns just click HERE.

As an aside, I was out to dinner last night with a good friend going back to 1st grade. At one point in his career he was a Federal prosecutor at the Justice Dept who prosecuted RICO cases. I told him about the RICO lawsuit filed against JP Morgan for manipulating the silver market. His only response is that JPM is likely in a lot of trouble at this point...

Gold Stocks Are Still Cheap

Posted: 10 Dec 2010 05:29 AM PST

Earlier this week, the flagship HUI gold-stock index powered up to new all-time record highs. While fantastic for gold-stock investors and speculators, such lofty achievements inevitably cement more big bricks on top of the wall of worries. At their highest levels in history, are gold stocks wildly overbought and doomed to correct hard? Provocatively, a strong case can be made that they actually remain cheap!

Gold Stocks Still Cheap 2

Posted: 10 Dec 2010 05:25 AM PST

Something’s Wrong in the Silver Pit: But It’s Much Bigger than J.P. Morgan

Posted: 10 Dec 2010 05:14 AM PST

Any way you slice it – precious metals data reporting on the part of American regulators is atrocious. Simple MATHEMATICS tells us a gold / silver ratio at 48:1 is EXTREMELY contrived and REEKS of manipulation on the part of the Federal Reserve and the Banks they are charged with regulating.

Bernanke Meddles as Bondholders Exit the Market

Posted: 10 Dec 2010 05:00 AM PST

As were the days of Noah, so will be the coming of the Great Correction (38) For as in those days before the flood they were eating and drinking, marrying and giving in marriage, until the day when Noah entered the ark, (39) and they did not know until the flood came and swept them all away, so will be the coming of the Great Correction…

– Apologies to Matthew 37, (Sent to us by a Dear Reader)

Gold +$9.

Dow -2.

What more do you need to know?

Well, what you OUGHT to know is that the bond market may finally be cracking up.

"People are getting out…shell-shocked at the speed of the rise in yield," says a "strategist" quoted by The Financial Times.

Bond buyers are leaving the scene of Bernanke's crime. They are packing up and moving out.

The yield on the 10-year note hit 3.33% on Wednesday…a full percentage point over its October low.

Whoa. The bond market is the biggest, most important market in the world. What would cause a 25% move in so little time?

Bernanke pledged to lower bond yields (raise bond prices) back in August. He said he would buy $600 billion worth of US government bonds with money he was going to print especially for that purpose. And another $250 billion more with money he got from selling those mortgage backed monsters he acquired in the Panic of '08-'09.

You'd think that a guy with $850 billion in his pocket could pretty much name his own price. But central planners always seem to run into a ditch. Even with their eyes wide open and GPS on the dashboard.

Here we are almost at the end of the year and what have bonds done? They've gone down!

They defied Ben Bernanke and all his ilk. They thumbed their noses. They turned their backs and dropped their pants!

We're beginning to feel a little sorry for Ben. He's like a rich kid in school with a flashy car who still can't get a date.

Oh, the humiliation! Oh, the shame of it!

Wait a minute. We're not going to waste a minute of sympathy on the little creep. He got himself into this mess – against our advice. He should be grateful they don't castrate him. Or run him out of town on a rail.

Lucky for him they don't do that any more.

The Great Correction, mentioned above, is still on-going. Unemployment numbers actually got worse in the latest reading. So did home pricing. As for retail, holiday-inspired spending, the figures are mixed.

As near as we can tell, de-leveraging has a ways to go. A long ways. Say, 7 years?

Maybe longer. That's how long it OUGHT to take to squeeze the debt out of the system.

But Mr. Bernanke, the aforementioned little creep, is making it a lot harder. As the private sector squeezes debt out, Mr. Bernanke pumps it in. That's why we're seeing such crazy anomalies. It's a correction – yet commodities, emerging market stocks, collectibles, oil, gold…all are flying off the shelves and out of the wells.

Did you see what happened to Audubon's bird pictures? A book of them sold for $14 million at Christies. Okay… He could draw some cool fowl. But $14 million worth? Our guess is that the price tells us more about Mr. Bernanke's cuckoo money machine than it does about the bird man.

And the strangest anomaly has got to be the rise in interest rates. Whatever good Mr. Bernanke thinks he is doing is surely undone by rising rates. Now, he can print all he wants. He may make an even bigger mess of the economy, but he won't be able to get interest rates down that way. He prints…the feds spend…and rates rise, squeezing the real economy even harder.

Rates rise like Noah's floodwaters. Make sure you've got an ark.

Bill Bonner
for The Daily Reckoning

Bernanke Meddles as Bondholders Exit the Market 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."

Is a Correction in Gold Coming?

Posted: 10 Dec 2010 04:59 AM PST

In the past few weeks I have made the case that gold might be nearing a correction. I understand that people get defensive regarding gold (no pun intended), but I do not think vulgarities should be expressed towards someone who is pointing out the overbought nature of the daily and weekly charts. It seems any time that I discuss a possible pullback in gold I place a giant target on my back for people to make nasty public comments or send me hateful emails which in some cases I find particularly amusing. To each his own, but something tells me this article will be as well received as an oral reading of the history of the Illuminati at a Christian Christmas celebration.

The Energy Investment No One Is Talking About

Posted: 10 Dec 2010 04:44 AM PST

automakers Last week I discussed the country's dire need for energy infrastructure improvements and expansion, and how you can use the First Trust Clean Edge Smart Grid Infrastructure ETF (GRID:NASDAQ) to capitalize on that need. Our evolution into hybrid and eventually full electric cars is a major driver of this need for a better grid and is my topic today.

This new energy infrastructure will offer Americans more efficient energy distribution, storage and hopefully cost savings over the long term, not to mention more places for us to fill our cars up with their new fuel (electricity). What I didn't discuss is the need for super-efficient storage devices to power the cars themselves!

We Need Better Batteries!

A major hurdle for electric carmakers to overcome in addition to the lack of charging stations around the U.S., is the capacity, efficiency and charging time of the batteries used in the cars. Batteries for hybrid and electric cars are still evolving and although they have gotten much more efficient and recyclable (most are made with very toxic chemicals), they still have a ways to go.

Most of us are familiar with the lead-acid batteries common to traditional cars. Nickel-metal hydride is another form of battery used in many of the first-generation hybrid cars. Today's technology of choice is lithium-ion, which produces 400% more energy than its lead-acid cousin. Even though that sounds impressive, it still needs improvement, and here's why.

RESOURCE SHOCKER: More Valuable Than Gold, More Important Than Oil!

More than $4.5 trillion in commerce (7% of the global economy!) depends on a critical group of natural resources. And China has a choke hold on the supply!

The battle to secure these vital resources will drive the shares of several companies through the roof. This URGENT FREE VIDEO shows how you could make gains of 20-to-1 in this coming crisis.

Our Driving Habits

For most Americans, our cars are used predominantly to get us to and from work and to run errands. According to Edmunds, the average American drives about 12,000 miles per year and that number has been increasing year over year on average. If you assume that people drive the same distance each day, that's about 34 miles per day. Commuting figures are closer to 26 miles round trip per day on average. We all know that those figures vary quite a bit and if there is an accident on the way to work, expect longer drive times and distances if detours are involved, and of course we have to account for those trips to the market or shopping malls.

At 35 miles per day, that means that the "electric" power of the Chevy Volt for example will be depleted, leaving the driver to burn fossil fuel.

The Chevy Volt, which boasts a highly advanced lithium-ion battery system, takes 10-12 hours to charge fully, depending on climate, using the standard 120-volt line, or about four to five hours using a dedicated 240-volt line. Fully charged (four to 12 hours later), the Volt's battery can take you about 35 miles. That's much different than the three minutes it takes to stop at your local Exxon for a fill-up.

The good news is that once the battery is drained, there is an onboard gas-powered generator that turns on to make more electricity and allows you to drive another 300 miles or so. Which means you can keep driving while the generator runs and then recharge the battery when you stop using a regular electrical outlet or a charging station designed for any electric car.

I'm not knocking the Chevy Volt or its competitors, the Nissan Leaf or Mitsubishi's i-MiEV. Actually, I believe that necessity is the mother of invention and if Americans really catch on (which I think they eventually will), the technology will rise to meet that demand.

But the technology is simply not there yet (at a reasonable cost) for a car to be completely battery powered. In fact, batteries have been relatively slow to evolve when compared to the rest of technology. They still take way too long to recharge, are too heavy, and just are not powerful enough. Unlike computers, where we can estimate the evolution and advancement (thanks to Moore's law), batteries are a real conundrum!

What Do You Do Here?

In the meantime, the manufacturers of the batteries used in these cars will reap some profits from the sale of the cars and the batteries themselves. GM and Nissan both produce and engineer their own lithium-ion batteries, so there is some opportunity there, at least in GM for American investors.

A Must Read for You

Of all the books you can choose to read over the holidays, this is a must! Learn all the dirty tricks Wall Street financial institutions have used over the years to rob you blind.

And it's not just Wall Street fat cats in on the act. Think our government is here to help you? Heck no! They look after one another... not you and me.Learn the truth about the "old boys" network... and how you can defend yourself. It's all in the new book, Barbarians of Wealth.

Invest in Lithium

There are alternative ways to invest in the future of battery-powered cars and efficient grid storage. You might want to check out FMC Corporation (FMC:NYSE), which is based in my hometown of Philadelphia. They not only produce lithium, but also other agri-products like insecticides, herbicides and fungicides. If lithium-ion battery usage takes off, FMC could very well reap big rewards, as there are not many who produce the metal needed to manufacture Lithuim-ion batteries.

Invest in Companies That Make Energy Storage More Efficient

Another small company worth mentioning is Altair Nanotechnologies (ALTID:NASDAQ), which is in the business of designing, manufacturing and delivering energy storage systems, with a focus on green technology. They may benefit from a rise in battery usage (and smart-grid expansion) because of their research in improving the overall attributes of lithium-ion batteries by adjusting the battery's chemical properties ("nano-structured lithium titanate," if you want to Google it). While this is a stock you may want to own, use caution, as it is a penny stock.

Rest assured that I will keep you on top of developments in this exciting segment!

P.S. My co-editor, Sara Nunnally, has been researching lithium and other metals critical to new battery and clean energy technology. She's compiled her findings in a free webinar called, "Green Power Metals: How to Cash In on the Clean Energy Future." Follow this link to watch the free webinar.

Article brought to you by Taipan Publishing Group. Additional valuable content can be syndicated via our News RSS feed. Republish without charge. Required: Author attribution, links back to original content or www.taipanpublishinggroup.com.

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Other Related Sources:

G.M. to Hire 1,000 to Engineer More Electric Cars

Chevy Volt the 2011 Green Car of the Year

Green Power Metals

This has, in turn, led former broker Max Keiser to start an Internet crusade asking people to buy silver coins in order to squeeze JPM out of its position.

Posted: 10 Dec 2010 04:12 AM PST

Will the Internet Take Revenge on JPM? Share this:

CPM Group Looks For Historically High Silver Prices For Next Decade

Posted: 10 Dec 2010 03:21 AM PST

Silver prices are projected to remain at historically high levels over the next 10 years, concludes CPM Group in its 2010 edition of its "Silver Long-Term Outlook," released Thursday by the New York commodities research and advisory firm.
The 224-page study is a comprehensive analysis of the key market fundamentals of silver that are expected to influence prices over a decade. The report contains projections for global mine production through 2019 on a mine-by-mine basis and also contains a new China section with an analysis of the silver supply and demand in a previously opaque market. CPM Group said the use of silver in China during 2009 was perhaps twice as much as had been believed.
The report also reviews uses for silver, including new fabrication demand such as solar panels, as well as investment. The report includes 10-year projections of supply, demand, and prices under a base case and two alternative scenarios.
More Here..

Global Currencies Rally Against the US Dollar

Posted: 10 Dec 2010 03:15 AM PST

Well… I've spent a lot of time this week talking about the rise in Treasury yields… Apparently the rise in yields wasn't confined to Treasuries, as municipal bonds are getting whacked too… I saw that my friend and former colleague, David Galland, had this to say about the problems with the municipal bonds…

"The problem is state debt. New York, California and Illinois look more like Greece to their bondholders every day."

Hmmm, isn't that the stuff I was telling you a year ago? But it's taken a year for the municipal bondholders to realize it?

Well, any old way, the rise in Treasury yields took a pause for the cause yesterday, gaining back some ground with the 10-year yield falling to 3.20% from 3.23%… Maybe the FOMC was in doing their dirty work with quantitative easing… And then maybe, the rise in bond yields was too far, too fast…

So… With the selling in Treasuries taking a pause, gold was able to gain back some lost ground, rallying back to $1,390.00… And… The euro (EUR) was able to rally back to above the 1.32 handle, after falling through it briefly yesterday morning. The euro led the currencies higher throughout the day, but has given a little back this morning as France and Italy posted manufacturing numbers that were below expectations. I do believe that the Eurozone will continue to come under attack by the markets until the Eurozone members all agree and sing from the same song sheet on a rescue plan… I've said this before, and I'll probably say it a few more times, but for the Eurozone to work through times like this, they need a coordinated monetary policy… Yes, I know, it takes away each Eurozone country's central bank, but Shoot Rudy, who needs them? They have one currency; they should have one monetary and fiscal policy!

OK… Well… Recall a week or so ago, I told you about Brazil's soaring inflation, and said that the central bank was dragging its feet to raise interest rates because of the fear of investment flows into Brazil, to take advantage of the higher interest rates, would drive the real (BRL) higher, and that the Brazilian Central bank has an axe to grind with a stronger real… Well… I do believe that the Brazilian Central Bank (BCB) is going to have to raise rates soon… Last night, Brazil posted a stronger-than-expected third quarter GDP growing 0.5% from the second quarter, and 6.7% annualized.

I truly believe that Brazil's economy is smoking, and should be dealt a higher interest rate to cool its heels before things get out of hand, and the economy overheats…

Aussie (AUD) and Canadian dollars (CAD) are adding to their small rally yesterday, with both only about a cent away from parity with the US dollar once again… Even the New Zealand dollar/kiwi (NZD) saw a reversal of its recent downward move, as traders try to get past the dovish statement by Reserve Bank of New Zealand (RBNZ) Governor Bollard.

You know… I've said this before… But I just don't like RBNZ Governor Bollard, as a central banker… (I don't know him personally!) He's no Don Brash, that's for sure! Governor Bollard disses kiwi any chance he gets, and I just don't see that as being prudent… A strong currency should be the goal of any country's central bank… And that's all I'll say about that, otherwise I would begin to talk about how the US Fed/Cartel/Bernank has watched the value of the dollar slide down the slippery slope for almost 100 years now… OH! I went ahead and said it!

China saw their trade surplus numbers last night, and brother, were they cooking with gas! China's exports rose 34.4% versus November last year! I'm sure there were some gnashing of teeth in Washington DC when China's trade figures were released… And I'm sure the calls for more trade sanctions will begin to show up on the TV once the boys in DC wake up this morning… But if I were the Chinese, I would respond to those calls for trade sanctions with a comment like: Chinese exports face a gloomy outlook next year, with increased pressure from the appreciation of the renminbi (CNY) and trade frictions… So, leave us alone, and we'll take care of this ourselves…

Maybe the Chinese would want to hire me as a publicist? HAHAHAHAHAHAHA! Now that would be funny; I don't care who you are!

OH! And China raised their bank reserve requirements last night, showing once more that they are working at cooling their economy the right way…

While we're in Asia… Japan printed their November Business Sentiment Index for Large Manufacturers and saw it fall to a negative level for the first time since June 2009. The index fell from 13.3 to -8.0… Now, that certainly looks to me like Business Sentiment in Japan just fell off a cliff! But get this… The Japanese yen (JPY) rallied overnight… That's crazy, folks… And just goes to show you that Japanese traders are a different breed…

Well… The US will print their Trade Balance for October, and their November Monthly Budget Statement today. Both will be HUGE numbers that will be difficult to swallow for the Treasury and Cartel/Bernank… But, they'll get through it, by printing more dollars… The more the merrier, eh? NOT! At least not in this case!

The U. of Michigan Consumer Confidence for the first two weeks of December will also print this morning… Amazing enough, it is forecast to show confidence rising… I sure wish I knew what those being surveyed that feel so confident were drinking…

Then there was this… So… I've heard quite a few claims lately about what the extension of the tax cuts will do for our economy…

Now, I might not be the sharpest tool in the shed, but apparently, I'm sharper than those making claims that the tax cut extensions will cure all that ails us… You see, the key word here is "extension"…

Now… I learned many years ago, that an initial tax cut, or new tax cut, could increase the tax receipts of a country, and spur the economy. (Of course, government spending cuts also needed to happen to keep government deficits from growing!) But, what we're doing now isn't "new" or "initial"… It is simply extending what we already have.

When someone gets a new tax cut, they immediately experience "found money", and the propensity to spend goes up! What we're doing now isn't going to help… Yes, maybe a short blip from those that already stopped spending ahead of the previously planned end of the Bush tax cuts… But, that's it… That's all… Thank you for playing, there's a nice parting gift for you at the door!

And then there was this… So… If you think Big Ben Bernanke's lip was quivering on 60 Minutes the other night, imagine what it was doing when he heard yesterday that Ron Paul, the only Congressman who understands sound monetary policy, was named the Chairman of the House Financial Services Committee, which puts him directly in line to put significant pressure on the Fed/Cartel/Bernank… It was Ron Paul who pushed for a full audit of the Fed… And it was the same Ron Paul who authored a book called Fire the Fed… I'm sure that the "audit the Fed" bill will get some sharper teeth in the next go around… And I for one am glad to see this, because the Fed/Cartel/Bernank has gotten too big for their britches… They have more power over the US economy than any other institution, but it's not audited? Something has to change… And I believe that Ron Paul is the man to bring about that change…

To recap… The rise in Treasury yields took a pause for the cause yesterday, and that allowed the currencies and precious metals to rebound a bit. That rebound carried over to the Asian and European trading sessions, where the euro met up with some soft manufacturing data from France and Italy. That has put a cap on the euro's rise this morning. Brazil posted a better-than-expected third quarter GDP, proving once again that the BCB needs to get off their duffs and hike rates!

Chuck Butler
for The Daily Reckoning

Global Currencies Rally Against the US Dollar 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."

4 DAY RULE

Posted: 10 Dec 2010 03:15 AM PST

By Toby Connor, Gold Scents
If the market can end the day with a gain we will get a 4 day rule possible trend change signal.

The four day rule says; After a long intermediate rally look for the first down day to signal an intermediate trend change after the market rallies 4 or more days in a row.

The four day rule is a sign of extreme sentiment. I would caution that it only works after a long intermediate rally lasting multiple months. We have those conditions right now. We have also reached extreme bullish sentiment levels. The kind of levels where we are in jeopardy of running out of buyers.

Add to that the fact that the intermediate cycle is now going on it's 23rd week and we got a large selling on strength day a couple of weeks ago (a sign institutional smart money is exiting in front of a large correction.) and we can probably expect any further gains to be given back and then some when the market moves down into the intermediate degree correction.

Now is not the time to press the long side in either stocks or gold.

That doesn't mean one should short. Shorting bull markets is a tough trade. You have to time the exit perfectly and survive the violent fakeout rallies to make money. Not to mention you will invariably miss time the entry several times. All in all you will probably be better off just going on vacation for the next 5-6 weeks.

Toby Connor

GoldScents

A financial blog primarily focused on the analysis of the secular gold bull market.

If you would like to be added to the email list that receives notice of new posts to GoldScents, or have questions, email Toby.

Gold Prices Update

Posted: 10 Dec 2010 03:12 AM PST

Gold prices almost returned to take tea with the 50dma after 2 down days, but today she just wasn't in the mood and gained a few bucks just to keep us all guessing at where next for gold. The RSI is now mid range, standing at 53.10 today ... Read More...

Oil and U.S. Hyperinflation

Posted: 10 Dec 2010 03:10 AM PST

By Jeff Nielson, Bullion Bulls Canada

As precious metals investors, it can often seem to us that the U.S. government (and the banking cabal which pulls its strings) is exclusively focused on suppressing gold and silver prices – given the historic role of precious metals as a "barometer" of economic conditions, especially inflation. However, there is a different commodity that this group obsesses about to a far greater degree than precious metals: oil.

The United State's enormous dependency on imported oil translates directly to enormous economic vulnerability. Indeed, U.S. paranoia about "securing" oil supplies for itself has been the driving force behind most (if not all) of the wars it has instigated in the Middle East.

The U.S. dependence on petroleum goes well beyond simply the massive amounts that is spent each year by the U.S. to satisfy its oil-gluttony. Cheap oil is the essential input needed to operate the "levers" of U.S. military/economic imperialism, as well as the foundation upon which the entire U.S. domestic economy is built.

Let me summarize this dependence briefly. By itself, the U.S. military is one of the ten largest oil-consuming entities on the planet. In other words, operating the U.S. war machine by itself consumes more oil each year than all but a handful of nations. Thus, the death, destruction, and misery that the U.S. military has inflicted upon its victims over recent decades is accompanied by the horrendous waste of countless billions of barrels of our most precious natural resource.

In this respect, high oil prices are a "blessing" to much of the world, as the hopelessly insolvent U.S. government is totally incapable of financing any more "military adventures", now that the era of cheap oil is gone forever. Indeed, we can only assume that Iranian defiance to the U.S. regarding its nuclear program is based upon their firm conviction that any military harm which the U.S. could inflict upon Iran would pale in comparison to the economic harm it would inflict upon itself from such an attack. Thus, we know the #1 reason why the U.S. is vainly attempting to keep a lid on oil prices: having a "big stick" is of little use if you're never able to use it.

The U.S. military is but one facet of the U.S. empire totally dependent upon cheap oil. Of near-equal importance is the need for cheap oil in order to pursue its agricultural imperialism. Roughly two decades ago, the U.S. government made a conscious decision to abandon most manufacturing activity – with the exception of the industrial and hi-tech sectors which service the U.S. war-machine.

Replacing manufacturing as the foundation for the U.S. economy is agriculture. The "World's Only Superpower" has chosen to become a "banana republic". Indeed, on the last major, U.S. trade mission to India, the big "success" of that endeavour was being able to increase U.S. soya bean exports to India.

Around the world, the story is the same. Where U.S. consumer manufactured goods used to flood the markets of countries all over the Earth, agricultural products now take their place – heavily subsidized agricultural products.

U.S. agricultural imperialism is based upon first injecting massive subsidies (in excess of $100 billion per year) into its crop production. These heavily subsidized food items are then dumped into markets in every continent on the planet. For the other, wealthier economies, this extreme U.S. subsidization is met with competing subsidies. Indeed, for many years the U.S. and Europe have been locked in an endless exchange of dueling subsidies.

For the less-wealthy nations, however, matching U.S. subsidies for its agricultural products is economically impossible. These nations have been forced to watch helplessly as the massive quantities of subsidized U.S. agricultural products bankrupted millions of small farmers all over the world – and severely depressed agricultural production. Thus, at the same time that rising per capita incomes in developing economies is spurring an enormous increase in demand for agricultural products, we have the U.S. government engaged in a predatory campaign which has crippled numerous economies, in addition to creating crop-shortages through depressing global production.

More articles from Bullion Bulls Canada….

Play central banker at the ECB

Posted: 10 Dec 2010 03:09 AM PST

by Emma Saunders
December 10, 2010 (Financial Times) — A new game has been launched by the ECB – and apparently even the San Francisco Fed is tweeting about it. If you thought "monetary policy" and "game" couldn't be sensibly strung together in a sentence, think again…

[source]

RS View: Of all the possible variations of a suitable congratulatory message, ask yourself this question, "Why did the ECB choose to reward the game winners with a message that says, 'You've struck gold!'…?" (see the article graphic for an example)

This is a subtlety, to be sure, but so very often the language of the central banking realm is cut from the very fabric of nuance and subtlety.

Apparently, the ECB doesn't feel the need to encourage participants to 'win' per se, but rather they want your efforts to be toward 'striking gold'.

Save Your ASSets First

Saturday, December 11, 2010