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Sunday, December 19, 2010

Gold World News Flash

Gold World News Flash

Death and Taxes

Posted: 18 Dec 2010 05:41 PM PST


This article originally appeared in The Daily Capitalist.

I've been meaning to write a major piece on the inheritance/estate/death tax for quite a while, but until then I wish to share some brief thoughts on it since the topic is front and center in the current tax debate in Congress.

First some background. The inheritance/estate/death tax came into being in modern times by the Brits in order to break up the large landed estates held by the leftover royalty. They really hated these families who had gathered huge estates from as far back as feudal times. The socialist Labor Party made class warfare a foundation of their party. After the nobles were hit, then anyone with money was their target in their goal of socialist leveling.

That great regressive president, Theodore Roosevelt admired the Brit socialists and had such a tax passed in the US in 1916. Teddy was a "Progressive" and basically believed in social engineering. The concept behind the law had nothing to do with feudal estates, but more with class warfare, the enmity that demagogues stir up against the "rich" among needy voters.

The ostensible reason that Teddy had for the law was that "concentrated wealth" in his version of what capitalism should be was bad for America. There is no evidence, empirically or theoretically, that "concentrated wealth" is harmful to the economy. You hear this argument anew with people like Bill Gates, Sr. who has no clue what he is talking about. But he sure "feels" strongly about it.

In other words, they say, without the tax financial power is concentrated in the hands of the rich whose interests are obviously adverse to "society's" interests. Somehow they will use that financial power to gain economic and political advantage. What a crock. If that were the case then, every successful institution should be stripped of wealth in order to protect society from their harmful effects.

The other reason is, they wish to control the way you raise your children as part of a social experiment. Such inherited wealth is bad for your kids because they won't work hard. Instead, the State has a duty to step in and stop you from making decisions that they believe are socially harmful -- to your kids. And we can't have that.

The real reason for the tax is class enmity. It is an ancient view of wealth that equates entrepreneurial success with theft. Which it was in pre-capitalistic societies through feudal and royal privilege and government-created monopolies. Today in free market1 capitalist societies, wealth is created through the entrepreneurial process. Businesses don't steal your money, they earn it. But old ideas, like stubborn bacteria, are hard to kill.

Today there is another idea floating around and that "we can't afford" to "cut" the estate tax and give "the rich money." In other words they are saying it's OK to tax the "rich" because "we" (i.e., the government) need it. Which is another way of saying that "we have wasted the taxpayers' money because of our foolish and wasteful spending and don't care where we get the money as long as we get it. Screw the rich." As I heard on a news report the other night, politicians have been using the argument that we need this money to balance the budget for the past 50 years and they haven't been fiscally responsible yet.

One last thought. If you think about the theory of taxation, almost all major taxes are based on some economic event: earning money, selling something at a profit, paying dividends or interest. So when has death become an economic event? It isn't and that's why it doesn't make any economic sense (assuming any tax makes economic sense). You work a lifetime to build a business and you've become successful and wealthy. You have been paying taxes on earnings, profits, and gains over the years and now they want to take a big chunk of your wealth just because you died. It's just theft. How is that morally justifiable?

1I'm not talking about current forms of crony capitalism such as exist in our financial markets which has resulted from government interference and manipulation. Free market capitalism is something else entirely.

BoA is extremely vulnerable. Short sellers, naked short sellers, Silver buyers . . . all can help push this pig into bankruptcy.

Posted: 18 Dec 2010 11:24 AM PST

Opening the Bag of Mortgage Tricks Two States Sue Bank of America Over Mortgages Share this:


Gold/Bonds Ratio Chart From Trader Dan Norcini

Posted: 18 Dec 2010 11:08 AM PST

Dear Friends,

This is the chart I referenced in my radio interview of this week.

There are several things to note in this chart. First is the direction of the ratio – a strong, sharp, sustained thrust higher which has shattered a level not seen in 30+ years. That tells us that Gold has become the definitive safe haven and that bonds are rapidly falling out of favor compared to the security of the metal. For this ratio to reverse, it would take much higher rates of return to draw capital back into bonds and out of the metal. Where that rate might be is anyone's guess but suffice it to say, it would be considerably higher than today's levels. This event would first however wreak havoc on the real estate sector as it would shove interest rates to a level that would prevent many would-be buyers from obtaining loans.

It is good to remember that it took double digit interest rates back in 1980 to finally break the back of the inflation monster. Think about where rates are today and you can see that the Fed has no intention whatsoever of even remotely trying to rein in this wild horse. Even if they did, the current state of the "recovery" would prevent them from so doing.

The second thing to note about the ratio is the SPEED at which it has turned and moved higher. It is accelerating and that tells us that the shift from deflationary fears to inflationary fears is entering high gear among the general investing public. In short, inflation psychology is taking hold and taking hold quickly. You may be hearing all sorts of blather from talking heads and pundits on financial LA-LA Land TV about how tame inflation is but the fact is that this ratio is shouting loudly that all such drivel is BS. The charts do not lie and you can count on them giving you a much clearer picture of where investor psychology is moving long before the talking heads catch on.

Click chart to enlarge in PDF format with commentary from Trader Dan Norcini

clip_image002

Must Read: Oaktree's Take On Gold - Howard Marks Discusses All That Glitters

Posted: 18 Dec 2010 11:04 AM PST

The topic of Howard Marks' latest letter is gold. The Oaktree Chairman presents one the better comprehensive pieces on the precious metal, laying out both the pros and cons. Presenting the current broad schizophrenia when debating the value of of gold, Marks, in a comparative allegory to 1952 opinion of Noah "Soggy" Sweat on whiskey, Marks states: "I have no doubt: gold is the ideal investment"...yet..."Gold has no financial value other than that which people accord it, and thus it should have no role in a serious investment  program. Of this I’m certain." Arguably one of the better two-sided presentations on gold's true value, we are nonetheless surprised that Marks did not reference the opinion of Dylan Grice (and others before him), who analyzes the price of gold in terms of the global monterey supply, which can be read in its entirety here.  Nonetheless, as Marks is always one of the most thoughtful observes on markets, this piece if a must read for everyone.

All that glitters (pdf)

 

AttachmentSize
All That Glitters.pdf257.61 KB


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

Must Read: Oaktree's Take On Gold - Howard Marks Discusses All That Glitters

Posted: 18 Dec 2010 11:04 AM PST


The topic of Howard Marks' latest letter is gold. The Oaktree Chairman presents one the better comprehensive pieces on the precious metal, laying out both the pros and cons. Presenting the current broad schizophrenia when debating the value of of gold, Marks, in a comparative allegory to 1952 opinion of Noah "Soggy" Sweat on whiskey, Marks states: "I have no doubt: gold is the ideal investment"...yet..."Gold has no financial value other than that which people accord it, and thus it should have no role in a serious investment  program. Of this I’m certain." Arguably one of the better two-sided presentations on gold's true value, we are nonetheless surprised that Marks did not reference the opinion of Dylan Grice (and others before him), who analyzes the price of gold in terms of the global monterey supply, which can be read in its entirety here.  Nonetheless, as Marks is always one of the most thoughtful observes on markets, this piece if a must read for everyone.

All that glitters (pdf)

 

AttachmentSize
All That Glitters.pdf257.61 KB


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

I estimate the chance of Silver and Gold diverging – with Silver dropping and Gold rising – near zero.

Posted: 18 Dec 2010 09:55 AM PST

FOFOA On Gold’s “Focal Point”, Or Is Silver Money Too? This is the offending paragraph: “Something very interesting happened after Jan. 30, 1934 when Roosevelt devalued the dollar against gold. The price of gold went up 70%. What do you think happened to silver? Did it go up more than gold? Did it shoot the [...]


Gold, silver could go ballistic by year-end

Posted: 18 Dec 2010 08:24 AM PST

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US Empire Could Collapse At Any Time, Pulitzer Winner Tells Raw Story

Posted: 18 Dec 2010 07:48 AM PST

America's military and economic empire could collapse at any time, but predicting the precise day, week or month of its potential demise is unattainable, according to a former New York Times war correspondent who spoke with Raw Story.
"The when and how is very dangerous to predict because there's always some factor that blindsides you that you didn't expect," Pulitzer-winning journalist Chris Hedges said in an exclusive interview. "It doesn't look good. But exactly how it plays out and when it plays out, having covered disintegrating societies, it's impossible to tell."
He explained that he learned this lesson as events unfolded around him in the fall of 1989. Then, members of the opposition to the Soviet Empire told him that they predicted travel across the Berlin Wall separating East from West Germany would open within the year.
"Within a few hours, the wall didn't exist," he said.
Hedges was one of the 131 activists were arrested in an act of civil disobedience outside the White House yesterday, even as Obama was unveiling a new report citing progress in the Afghanistan war.
Speaking to Raw Story on Wednesday night, he said the signs of US collapse are plain to see and compared the country's course through Afghanistan to Soviet Russia's.

Goldman's Jim O'Neill On The Consequences Of The 10 Year Hitting 5%

Posted: 18 Dec 2010 06:20 AM PST

Here's a hint: it's all great. Just like the 10 Year hitting 0% was great for stocks, Jim explains why its round trip bacl to 5% is even gooder. In fact, it may be one of the goodest things to ever happen to the gnome underpants business that Goldman suddenly believes the US economy is: "I would guess that GDP growth could be above 3 pct, and it would not surprise me if some start forecasting close to 4 pct soon...checking my simple stats with Jan Hatzius this weekend, the US stock market would “only” need to rise by around 19 pct in order for the 168 bps rise in government bond yields to be entirely neutralized...Are 5 pct US 10-year yields and an S+P of 1475 possible in 2011? We shall see. In my opinion, a 19 pct rise in the US stock market seems quite likely. As for 5 pct bond yields, I think they are much less likely, but not impossible. If they did occur, it certainly wouldn’t have to be for negative reasons." That's all fine and great even if it is totally and utterly insane. The real win here, and it may be hidden at first, is that we now have not a phrase, but an entire essay to challenge that all time dumbest thing ever uttered: "If it weren't for my horse, I wouldn't have spent that year in college"...

From Goldman Sachs Asset Management:

WHAT WOULD BE THE CONSEQUENCES OF 10 YEAR US BOND YIELDS GOING TO 5 PERCENT?

In the past two weeks, we have witnessed a remarkable rise in US interest rates. Those people who are one step removed from the financial markets might not be really notice, however, since the level of interest rates is still remarkably low. But, in the past 2 weeks, the rise across the whole maturity spectrum of US rates has been quite noteworthy. The topic was discussed by John Authers in Saturday’s Financial Times. According to John, 10-year rates rose 14 pct on Tuesday. And, since their absolute bottom on October 7th, they have risen 37 pct. As I shall discuss below, this rise has led to numerous discussions, many of which suggest that the Fed’s so-called “QE2” has not worked. Others suggest that this rise is the work of bond market vigilantes punishing the US ala European style for fiscal excess, and a small number acknowledge, in fact, that it simply recognizes that the US economy is suddenly looking quite a bit perkier. The latter argument is my own preferred one. More on this later, but the fact that shorter term interest rates have risen sharply in my judgment supports this view.

US 2-year note yields have risen from around 0.38 basis points (bps) to around 0.64 on Friday – a near 70 pct increase! Presumably, this part of the yield curve is less vulnerable to pure market forces and more closely related to perceptions of central bank policy over the next 2 years. If this is correct, then I can’t understand why the more negative assessments of rising rates are appropriate.

WHY HAVE INTEREST RATES RISEN SO ABRUPTLY?

Of course, none of us really know or never will. There appears to be 4 possible explanations. First, the most abrupt rise happened last week, coinciding with signs of an agreement between President Obama and Congress for an additional fiscal stimulus. Given the underlying fiscal deficit and debt situation, which on a cyclically-adjusted basis appears to be on a par with Portugal, the bears are arguing that the vigilantes are suddenly out in force, expressing their distaste for the wanton disregard of any kind of budgetary discipline in the world’s largest economy and major reserve currency. While this is certainly possible, I am far from sure that it is the case. If it were true, how come the Dollar rose during this period, and US stock indices continue to make fresh highs?

Second, some bears also argue that, possibly related to the first point, it is the beginning of an inflationary surge in the US and the appropriate punishment for the lavish monetary and fiscal stimulus that has been applied to help exit from the severe recession induced by the housing collapse and credit crisis. This seems even easier to refute in my view, as much of the rise in yields can also be seen in “real yields” through the TIPS market, and most measures of inflationary expectations have been quite stable.

A third argument, also possibly linked to the others, is that it is simply recognition that, whatever the state of the economy, there will be no more quantitative easing given the hostility in which QE2 was greeted, both by many politicians domestically and by overseas policymakers. While it is probably the case that the Fed is somewhat surprised by the strength of opposition expressed to their move, my view is that the Fed will judge their future monetary policy needs and obligations by both the actual evidence and outlook for real economic growth, employment and inflation.

The final fourth and quite simple argument is that, “It’s the economy, stupid.” In the past few weeks, with the exception of the November payrolls, most important coincident and lead indicators for the US have improved notably. Of most importance, there has been a sharp improvement in weekly jobless claims, a good guide to underlying unemployment and a pretty good predictor of the stock market. The November manufacturing ISM survey kept hold to much of its previous monthly outsized gains and, towards the end of last week, the October trade report showed a further sharp improvement in exports. If you add the possible 0.5-1.0 pct stimulatory impact of the budget deal, it is looking more and more likely to me that 2011 is going to be an “above trend” year for US real GDP growth. I would guess that GDP growth could be above 3 pct, and it would not surprise me if some start forecasting close to 4 pct soon.

If the latter explanation is conceivable, then this would sit more easily with what has happened to all financial markets, including the stock and foreign exchange market.

I have thought since late September that it was quite possible, even likely, that once the mid-term elections were out of the way, the negative mood surrounding the US might lift. Indeed, I have joked on a number of occasions that everyone I met seemed to think that they had a below consensus view of the US economy. Well, this is no longer the case. And, for those that stick with a negative cyclical outlook, they have got to be hoping that rising US interest rates choke off the budding recovery.

HOW MUCH MORE CAN THIS MOVE PROGRESS?

I have 2 completely contrary opinions.

The first, and the one I am assuming, is that in the near term, US rates will not rise much further. I had thought back in September when I first smelled signs of stronger US growth than generally perceived, that if the data started to back me up, then it would be likely that the case for QE3, i.e., even more Fed easing would quickly fade and the US 2-year note sometime in Q1 2011 would get to 0.75. That is now only 11 basis points away, a mere 17 pct! I assumed that 10-year yields might manage 3.50 pct, a mere 18 bps and now just 5 pct away.

If the Fed is conducting policy on what might be referred to as an “output gap” basis, then it is going to take a lot more positive growth before the Fed gives up its recent concerns and those stated reasons which led it into its last monetary easing. While the view will vary depending on individual assumptions of the growth trend, some key Fed officials like Bill Dudley have used phrases like “many years” in describing how long the Fed might have to stick to its current policies.

For the 2-year note to move up to 1 pct and beyond, I think the Fed will need evidence of 5 pct real GDP growth for 2011 before that were warranted. Of course, this strength of GDP growth is not impossible and the next month’s ISM and payroll data are likely to be highly illuminating.

If 2-year notes don’t move much above 0.75 pct, it is tough to see 10-year yields rising much above 3.50 pct unless the darker interpretations from above were the main culprit, i.e., fiscal profligacy and sharply rising inflation expectations.

The second opinion is very different.

Within a couple of weeks of my move into this new exciting phase of my life, I started to spend quite a lot of time wondering about the “consequences” of 5 pct 10-year US bond yields. There are many reasons why this came into my head including that, at some stage in the future, if the US economy returned to normal health, 5 pct would be the likely 10-year yield. Such a future might be described by inflation returning to 2 pct and a more normal growth cycle, which would vary around the trend growth rate somewhere between 2.5-3 pct. Adding a small risk premium, such an environment would be broadly consistent with US bond yields at 5 pct.

I now find myself thinking that if these thoughts go through my mind, then the same is likely to be true for many others when they start to believe that the US economy might be returning to normality. It is conceivable that this could happen in 2011, especially if the US and other companies around the world starting spending their large cash holdings and banks return to lending.

WHAT HAPPENS IF US BOND YIELDS RISE TO 5 PCT?

Surprise surprise, none of us know that either. But let me take a stab.

For all the bears that think it could only occur because of the irresponsibility of US fiscal policy and rising inflation, and others that probably believe a rise to 5 pct bond yields would lead to another recession, the key way of thinking about the issue is in terms of US financial conditions.

In the GS Economics Department’s US Financial Conditions Index (FCI), a close proxy for10-year bond corporate bond yields have a weight of 55 bps. It is probably the case that a 168 bps rise in 10-year government bond yields would have a significant impact on the FCI, although it is possible that corporate–government bond spreads would narrow. The direct impact, if the FCI used only government bond yields, would be just over 90 bps.

What would happen to the overall US FCI would then depend on the other 45 pct, made up primarily of short-term interest rates, the trade-weighted Dollar, and an index related to the stock market.

If the bears were right, and such a rise is really because of the state of US fiscal affairs, then the Dollar might fall and corporate bond spreads tighten, which would offset some of the 90 plus bps tightening. A decline in the equity market would tighten conditions further. Such a move of the FCI would itself, in turn, dampen the longevity of any sharp US recovery.

If the optimists were right, and if any rise in US bond yields continued because of a return to normality, then in fact, the Dollar might rise, corporate bond spreads certainly tighten, and the stock market rally, possibly significantly. In fact, checking my simple stats with Jan Hatzius this weekend, the US stock market would “only” need to rise by around 19 pct in order for the 168 bps rise in government bond yields to be entirely neutralized.

Are 5 pct US 10-year yields and an S+P of 1475 possible in 2011? We shall see. In my opinion, a 19 pct rise in the US stock market seems quite likely. As for 5 pct bond yields, I think they are much less likely, but not impossible. If they did occur, it certainly wouldn’t have to be for negative reasons.

WHAT ARE THE CONSEQUENCES FOR EVERYTHING ELSE?

This is a topic for a separate piece. But, in my judgment, among reasons why it wouldn’t entirely be a bad thing are the two great debates surrounding the future of the monetary system, and separately the true strength of conviction about US$ based capital moving into so-called “emerging markets.” A few things seem clear to me:

1. The Dollar would strengthen somewhat, especially against the Yen. All comparisons with Japan’s lost two decades would rightly diminish.

2. The problems of European Monetary Union would appear relatively starker, although a stronger US economy combined with the strength of the BRIC countries would be good for European growth.

3. World GDP growth might exceed 5 pct for a while.

4. Money would leave emerging markets by those that treat them as old fashioned emerging markets, leaving the table more open for those that rightly regard a lot of those countries, especially the bigger ones, as “Growth Markets.”

5. More money might flow from debt to equity in the EM/Growth World, rather than back to the more developed markets.

Much to look forward to, not the least of which is the coming holidays and all that exciting football in the next fortnight!
Jim O’Neill

Chairman, Goldman Sachs Asset Management

in other words:

 

Goldman's Jim O'Neill On The Consequences Of The 10 Year Hitting 5%

Posted: 18 Dec 2010 06:20 AM PST


Here's a hint: it's all great. Just like the 10 Year hitting 0% was great for stocks, Jim explains why its round trip bacl to 5% is even gooder. In fact, it may be one of the goodest things to ever happen to the gnome underpants business that Goldman suddenly believes the US economy is: "I would guess that GDP growth could be above 3 pct, and it would not surprise me if some start forecasting close to 4 pct soon...checking my simple stats with Jan Hatzius this weekend, the US stock market would “only” need to rise by around 19 pct in order for the 168 bps rise in government bond yields to be entirely neutralized...Are 5 pct US 10-year yields and an S+P of 1475 possible in 2011? We shall see. In my opinion, a 19 pct rise in the US stock market seems quite likely. As for 5 pct bond yields, I think they are much less likely, but not impossible. If they did occur, it certainly wouldn’t have to be for negative reasons." That's all fine and great even if it is totally and utterly insane. The real win here, and it may be hidden at first, is that we now have not a phrase, but an entire essay to challenge that all time dumbest thing ever uttered: "If it weren't for my horse, I wouldn't have spent that year in college"...

From Goldman Sachs Asset Management:

WHAT WOULD BE THE CONSEQUENCES OF 10 YEAR US BOND YIELDS GOING TO 5 PERCENT?

In the past two weeks, we have witnessed a remarkable rise in US interest rates. Those people who are one step removed from the financial markets might not be really notice, however, since the level of interest rates is still remarkably low. But, in the past 2 weeks, the rise across the whole maturity spectrum of US rates has been quite noteworthy. The topic was discussed by John Authers in Saturday’s Financial Times. According to John, 10-year rates rose 14 pct on Tuesday. And, since their absolute bottom on October 7th, they have risen 37 pct. As I shall discuss below, this rise has led to numerous discussions, many of which suggest that the Fed’s so-called “QE2” has not worked. Others suggest that this rise is the work of bond market vigilantes punishing the US ala European style for fiscal excess, and a small number acknowledge, in fact, that it simply recognizes that the US economy is suddenly looking quite a bit perkier. The latter argument is my own preferred one. More on this later, but the fact that shorter term interest rates have risen sharply in my judgment supports this view.

US 2-year note yields have risen from around 0.38 basis points (bps) to around 0.64 on Friday – a near 70 pct increase! Presumably, this part of the yield curve is less vulnerable to pure market forces and more closely related to perceptions of central bank policy over the next 2 years. If this is correct, then I can’t understand why the more negative assessments of rising rates are appropriate.

WHY HAVE INTEREST RATES RISEN SO ABRUPTLY?

Of course, none of us really know or never will. There appears to be 4 possible explanations. First, the most abrupt rise happened last week, coinciding with signs of an agreement between President Obama and Congress for an additional fiscal stimulus. Given the underlying fiscal deficit and debt situation, which on a cyclically-adjusted basis appears to be on a par with Portugal, the bears are arguing that the vigilantes are suddenly out in force, expressing their distaste for the wanton disregard of any kind of budgetary discipline in the world’s largest economy and major reserve currency. While this is certainly possible, I am far from sure that it is the case. If it were true, how come the Dollar rose during this period, and US stock indices continue to make fresh highs?

Second, some bears also argue that, possibly related to the first point, it is the beginning of an inflationary surge in the US and the appropriate punishment for the lavish monetary and fiscal stimulus that has been applied to help exit from the severe recession induced by the housing collapse and credit crisis. This seems even easier to refute in my view, as much of the rise in yields can also be seen in “real yields” through the TIPS market, and most measures of inflationary expectations have been quite stable.

A third argument, also possibly linked to the others, is that it is simply recognition that, whatever the state of the economy, there will be no more quantitative easing given the hostility in which QE2 was greeted, both by many politicians domestically and by overseas policymakers. While it is probably the case that the Fed is somewhat surprised by the strength of opposition expressed to their move, my view is that the Fed will judge their future monetary policy needs and obligations by both the actual evidence and outlook for real economic growth, employment and inflation.

The final fourth and quite simple argument is that, “It’s the economy, stupid.” In the past few weeks, with the exception of the November payrolls, most important coincident and lead indicators for the US have improved notably. Of most importance, there has been a sharp improvement in weekly jobless claims, a good guide to underlying unemployment and a pretty good predictor of the stock market. The November manufacturing ISM survey kept hold to much of its previous monthly outsized gains and, towards the end of last week, the October trade report showed a further sharp improvement in exports. If you add the possible 0.5-1.0 pct stimulatory impact of the budget deal, it is looking more and more likely to me that 2011 is going to be an “above trend” year for US real GDP growth. I would guess that GDP growth could be above 3 pct, and it would not surprise me if some start forecasting close to 4 pct soon.

If the latter explanation is conceivable, then this would sit more easily with what has happened to all financial markets, including the stock and foreign exchange market.

I have thought since late September that it was quite possible, even likely, that once the mid-term elections were out of the way, the negative mood surrounding the US might lift. Indeed, I have joked on a number of occasions that everyone I met seemed to think that they had a below consensus view of the US economy. Well, this is no longer the case. And, for those that stick with a negative cyclical outlook, they have got to be hoping that rising US interest rates choke off the budding recovery.

HOW MUCH MORE CAN THIS MOVE PROGRESS?

I have 2 completely contrary opinions.

The first, and the one I am assuming, is that in the near term, US rates will not rise much further. I had thought back in September when I first smelled signs of stronger US growth than generally perceived, that if the data started to back me up, then it would be likely that the case for QE3, i.e., even more Fed easing would quickly fade and the US 2-year note sometime in Q1 2011 would get to 0.75. That is now only 11 basis points away, a mere 17 pct! I assumed that 10-year yields might manage 3.50 pct, a mere 18 bps and now just 5 pct away.

If the Fed is conducting policy on what might be referred to as an “output gap” basis, then it is going to take a lot more positive growth before the Fed gives up its recent concerns and those stated reasons which led it into its last monetary easing. While the view will vary depending on individual assumptions of the growth trend, some key Fed officials like Bill Dudley have used phrases like “many years” in describing how long the Fed might have to stick to its current policies.

For the 2-year note to move up to 1 pct and beyond, I think the Fed will need evidence of 5 pct real GDP growth for 2011 before that were warranted. Of course, this strength of GDP growth is not impossible and the next month’s ISM and payroll data are likely to be highly illuminating.

If 2-year notes don’t move much above 0.75 pct, it is tough to see 10-year yields rising much above 3.50 pct unless the darker interpretations from above were the main culprit, i.e., fiscal profligacy and sharply rising inflation expectations.

The second opinion is very different.

Within a couple of weeks of my move into this new exciting phase of my life, I started to spend quite a lot of time wondering about the “consequences” of 5 pct 10-year US bond yields. There are many reasons why this came into my head including that, at some stage in the future, if the US economy returned to normal health, 5 pct would be the likely 10-year yield. Such a future might be described by inflation returning to 2 pct and a more normal growth cycle, which would vary around the trend growth rate somewhere between 2.5-3 pct. Adding a small risk premium, such an environment would be broadly consistent with US bond yields at 5 pct.

I now find myself thinking that if these thoughts go through my mind, then the same is likely to be true for many others when they start to believe that the US economy might be returning to normality. It is conceivable that this could happen in 2011, especially if the US and other companies around the world starting spending their large cash holdings and banks return to lending.

WHAT HAPPENS IF US BOND YIELDS RISE TO 5 PCT?

Surprise surprise, none of us know that either. But let me take a stab.

For all the bears that think it could only occur because of the irresponsibility of US fiscal policy and rising inflation, and others that probably believe a rise to 5 pct bond yields would lead to another recession, the key way of thinking about the issue is in terms of US financial conditions.

In the GS Economics Department’s US Financial Conditions Index (FCI), a close proxy for10-year bond corporate bond yields have a weight of 55 bps. It is probably the case that a 168 bps rise in 10-year government bond yields would have a significant impact on the FCI, although it is possible that corporate–government bond spreads would narrow. The direct impact, if the FCI used only government bond yields, would be just over 90 bps.

What would happen to the overall US FCI would then depend on the other 45 pct, made up primarily of short-term interest rates, the trade-weighted Dollar, and an index related to the stock market.

If the bears were right, and such a rise is really because of the state of US fiscal affairs, then the Dollar might fall and corporate bond spreads tighten, which would offset some of the 90 plus bps tightening. A decline in the equity market would tighten conditions further. Such a move of the FCI would itself, in turn, dampen the longevity of any sharp US recovery.

If the optimists were right, and if any rise in US bond yields continued because of a return to normality, then in fact, the Dollar might rise, corporate bond spreads certainly tighten, and the stock market rally, possibly significantly. In fact, checking my simple stats with Jan Hatzius this weekend, the US stock market would “only” need to rise by around 19 pct in order for the 168 bps rise in government bond yields to be entirely neutralized.

Are 5 pct US 10-year yields and an S+P of 1475 possible in 2011? We shall see. In my opinion, a 19 pct rise in the US stock market seems quite likely. As for 5 pct bond yields, I think they are much less likely, but not impossible. If they did occur, it certainly wouldn’t have to be for negative reasons.

WHAT ARE THE CONSEQUENCES FOR EVERYTHING ELSE?

This is a topic for a separate piece. But, in my judgment, among reasons why it wouldn’t entirely be a bad thing are the two great debates surrounding the future of the monetary system, and separately the true strength of conviction about US$ based capital moving into so-called “emerging markets.” A few things seem clear to me:

1. The Dollar would strengthen somewhat, especially against the Yen. All comparisons with Japan’s lost two decades would rightly diminish.

2. The problems of European Monetary Union would appear relatively starker, although a stronger US economy combined with the strength of the BRIC countries would be good for European growth.

3. World GDP growth might exceed 5 pct for a while.

4. Money would leave emerging markets by those that treat them as old fashioned emerging markets, leaving the table more open for those that rightly regard a lot of those countries, especially the bigger ones, as “Growth Markets.”

5. More money might flow from debt to equity in the EM/Growth World, rather than back to the more developed markets.

Much to look forward to, not the least of which is the coming holidays and all that exciting football in the next fortnight!
Jim O’Neill

Chairman, Goldman Sachs Asset Management

in other words:

 

FOFOA On Gold's "Focal Point", Or Is Silver Money Too?

Posted: 18 Dec 2010 05:30 AM PST

All those who believe there is sentiment of complacency within the precious metals camp may be forgiven. After all if one likes gold, one should like silver, and/or vice versa. Today FOFOA presents a counterargument. "I don't write about silver very much. Just like I don't write about copper or pork bellies. But, in fact, I have addressed many of the standard arguments for silver over gold in various comments on this blog and others. I'm sure someone will dig them out again and post links as people pose these arguments once again in the comments. But here's a new one. One of the argument for silver that we hear often is that it is "the poor man's gold." So I guess gold is "the rich man's gold." Well, what is the main difference between rich men and poor men? Is it that the rich have an excess of wealth beyond their daily expenses? In fact, the really rich have "inter-generational wealth," that is, wealth that lies very still through generations. The poor do not have this. So what do you think is going to come of all that "poor man's gold" that the silverbugs have hoarded up? Is it going to lie very still for generations? Or will it circulate, to meet daily needs? Note that circulation velocity is the market's way of controlling the value of any currency. Faster circulation = lower value. Lying still for generations = very slow circulation." Thus, today's question - is silver money too?

Via FOFOA

Focal Point: Gold

In game theory, a focal point (also called Schelling point) is a solution that people will tend to use in the absence of communication, because it seems natural, special or relevant to them. The concept was introduced by the Nobel Prize winning American economist Thomas Schelling in his book The Strategy of Conflict (1960). In this book (at p. 57), Schelling describes "focal point[s] for each person’s expectation of what the other expects him to expect to be expected to do." This type of focal point later was named after Schelling.

Consider a simple example: two people unable to communicate with each other are each shown a panel of four squares and asked to select one; if and only if they both select the same one, they will each receive a prize. Three of the squares are blue and one is red. Assuming they each know nothing about the other player, but that they each do want to win the prize, then they will, reasonably, both choose the red square. Of course, the red square is not in a sense a better square; they could win by both choosing any square. And it is the "right" square to select only if a player can be sure that the other player has selected it; but by hypothesis neither can. It is the most salient, the most notable square, though, and lacking any other one most people will choose it, and this will in fact (often) work.

Schelling himself illustrated this concept with the following problem: Tomorrow you have to meet a stranger in NYC. Where and when do you meet them? This is a Coordination game, where any place in time in the city could be an equilibrium solution. Schelling asked a group of students this question, and found the most common answer was "noon at (the information booth at) Grand Central Station." There is nothing that makes "Grand Central Station" a location with a higher payoff (you could just as easily meet someone at a bar, or the public library reading room), but its tradition as a meeting place raises its salience, and therefore makes it a natural "focal point." [1]

Salience: the state or quality of an item that stands out relative to neighboring items.

There are two simple, but seemingly, apparently impossible-to-comprehend concepts. The first concept is why money not only can be split into separate units for separate roles, one as the store of value and the other to be used as a medium of exchange and unit of account, but why it absolutely must and WILL split at this point in the long evolution of the money concept. This means no fixed gold standard, or any system that attempts to combine these units/roles into one, making easy money "less easy" and hard money "less hard." And by "must" I do not mean that we must do this, I mean that it is happening today whether we recognize it or not.

And the second concept, once the first is understood, is how and why gold and only gold will fill the monetary store of value role. Not gold and silver. Not precious metals. Just gold. People often ask why I don't mention silver. They assume that when I say gold I really must mean gold and silver, or precious metals. So let me be clear. When I say gold, I mean gold and only gold.

Money's most vital function in our modern world is lubricating commerce, or more specifically, keeping the essential supply lines flowing – supply lines that bring goods and services to where they are needed. Without it we would be reduced to a barter economy, eternally facing the intractable "double coincidence of wants." This is the problem whereby you must coincidentally find someone that not only wants what you have to trade, but also, coincidentally, has what you want in return. And in the modern world of near-infinite division of labor, this would be a disaster. [2]

So we need money, and lots of it. In fact, we need money in unrestricted amounts! (I'll bet you are surprised to see me write this!) Yes, I said it, we need unrestricted money in order to fulfill this most vital function in our modern society – lubrication! But here's the catch: we need the right money in order to perform this seemingly impossible task. Let me try to explain.

Money is debt, by its very nature, whether it is gold, paper, sea shells, tally sticks or lines drawn in the sand. (Another shocking statement?) Yes, even gold used as money represents debt. More on this in a moment.

For this reason, the money used as a store of value must be something completely separate and different from the medium of exchange. It must be so, so that the store of value unit can expand in value while the medium of exchange unit expands in quantity and/or velocity. You may be starting to encounter my thrust. Expand… and expand. Unrestricted by artificial constraints.

Compare this concept to a gold standard in which you fix the value of gold to the dollar at, say, $5,000 per ounce. The assumption is that this is where the price of gold will stay for a long time, if you manage the system properly. So what is the result? You artificially constrain the expansion of the medium of exchange fiat currency while also restricting the value expansion of the store of value. You are locking the two together. Do you think this works and makes sense?

I said we need unrestricted money in order to ensure the lubrication of the vital supply lines in our modern world. This is it. This is what really matters. If we have a major monetary and financial breakdown, what do you think will be the worst consequence? Do you grow all of your own food? Do you make – or know someone who does – all of your own stuff? How long could you survive without any stores? Do you trust your government to be sufficiently prepared to take care of you with no supply lines flowing?

Have you ever stretched a rubber band until it breaks? You can feel the resistance grow gradually and observe the smooth thinning of the band until finally it loses its continuity and the two parts snap back stinging your fingers. A tiny observer of this exercise, perhaps a flea resting on your thumb (or an economist), one who doesn't really understand rubber bands, might swear that it could be stretched forever. The smooth change in the stretching rubber gives little warning of the abrupt (sometimes painful) deformation that is coming.

This is where we are today. The dollar standard is like a stretched rubber band. It has been stretched and stretched, but it cannot provide the unrestricted money that we need today. They think it can. And that's why they are spewing it out in quantitative easy money boatloads. But it's not the right money. As I said above, we need the right money in order to perform this seemingly impossible task.

That resistance you feel is the artificial restraint built into the dollar system. It appears to be infinitely expandable, but it is not. It is just like the rubber band. Oh sure, you can print all the dollars you can imagine, to infinity and beyond! But it won't work. It won't do the most vital job, beyond a certain point. And yes, we are beyond that point.

I want you to imagine a tiny micro economy. Just two guys stranded on a tiny island. Let's call the guys Ben and Chen. They have divided the island in half and each owns his half. They each have a tree which bears fruit and three tools for fishing, a spear, a net and a fishing pole. For a while they both fished often. Fish were the main trade item between Ben and Chen. Sometimes Ben would take a vacation from fishing and Chen would provide him with fish to eat. Other times Chen would take a break.

But after a while Ben got lazy, and Chen got tired of giving Ben free fish to eat. At first they used sea shells as money to keep track of how many fish Ben owed Chen. Then they switched to leaves from the tree. Finally they just broke a stick off the tree and drew little lines in the sand. If Chen gave Ben a fish, Ben drew (issued) a line in the sand on Chen's side of the island. There were only two of them, so it was easy to avoid cheating.

These lines sort of became Chen's bank account. Each one represented the debt of one fish that Ben owed to Chen. But after a while they started adding up, and Chen worried that he would never get that many fish back from Lazy Ben. So Chen cut a deal with Ben. Chen said he would keep accepting lines drawn in the sand for fish, but he wanted to be able to use them to purchase some of Ben's other stuff (since Ben didn't like to fish).

At first he used them to purchase fruit from Ben's tree. But after a while the pile of fruit just rotted on Chen's beach. Next he started purchasing Ben's tools. First the spear, then the net and lastly the fishing pole. But at this point Chen realized that Ben would NEVER be able to repay those fish without his fishing tools. So Chen rented them back to Lazy Ben.

Of course Ben was still lazy, and now he owed rent on top of the fish he already owed. The lines in the sand grew even more rapidly as lines were added to pay for rent even when Chen hadn't given Ben a fish. Then Ben had a great idea. Why even go through the charade of selling the fishing pole and then renting it? Ben could just sell Chen some "special lines" which had a "yield." For ten one-fish lines, Chen could buy a special "bond" that would mature into 11 lines in a year's time. They tried this for a while, but all that happened were more lines in the sand. So many lines! Nowhere to walk. Chen's "bank account" was taking up all of his real estate!

Finally Chen had had enough. He called Ben over and said, "Okay, since you refuse to fish for yourself, let alone to pay me back, I want to use these lines to buy some of your gold coins." Oh, did I mention that Ben had a treasure chest of gold coins that had washed ashore? Of course these gold coins were the last thing that Chen wanted, because what good are gold coins on a tiny island with only two inhabitants?

But actually, they turned out to be an excellent record of the debt Lazy Ben owed to Chen the fisherman. You see, at first, Chen bought half of Ben's gold with the lines he had already accumulated, transferring his "bank account" over to Ben's side of the island and consolidating his "wealth" into gold. It worked out to 100 lines for one gold coin, or 100 fish per ounce.

But after a while, Ben realized that he was running out of gold. He knew it would only be a short matter of time until he ran out, so he closed the gold window. And once again, Chen started accumulating lines and special yielding "bond" lines. Finally, they agreed that the value of the gold coins had to be raised higher than 100 fish per ounce. Ben suggested 500/oz., but Chen saw the short-sighted flaw in his thinking. So Chen said that the value of ounces should float against the number of lines issued by Ben. This way, Ben would never run out of gold, and his lines would always and forever be exchangeable for gold coins. Finally, a sustainable accounting system!

Now I do realize the glaring flaws in this analogy I cobbled together. So spare me the critique. It is far, FAR from perfect. But it does help with a few good observations.

First, the lines in the sand and the gold coins are both money on this island. One is the medium of exchange/unit of account and the other is the store of value. The store of value is quoted at any given time in units of lines, but its value floats, it is not fixed, so it never runs out. This method of accounting forces Lazy Ben to part with something more substantial than simply issuing more lines via line-yielding "special bond lines."

In this case it was the accounting of transactions between a consumer and a producer. But it works just as well between any two actors with unequal levels of production and consumption. Some people just produce more while others can't stop consuming. I'm sure you know a few of each type.

Also, notice that gold coins and lines in the sand both represent the debt owed from Ben to Chen. And with gold, Chen can wait forever to be paid back (which, on this island, is quite likely). The gold doesn't spoil, and Chen's possession of it doesn't interfere with Ben's ability to fish or eat fruit. But notice also that the more lines in the sand that Ben issues, the more the value of the gold (representing a debt of fish) rises. So the longer Ben runs his trade deficit, the more debt he owes for each ounce of gold that Chen holds.

This is not so dissimilar to the special bond lines, with a few notable differences. The bond values are not only quoted in lines, they are also denominated in lines. So the principle amount paid for the bonds drops in value as more lines are issued to lubricate the vital trade. To counteract this "inflation," interest is paid by drawing more lines without the reciprocal delivery of fresh fish. But these additional "free" lines also dilute the value of lines, which leads ultimately to infinity (or zero value) in a loop that feeds back on itself.

The more fish Chen supplies to Ben, the more lines he receives, the more bonds he buys, and the more lines he receives in service to interest. Eventually Chen will be receiving two lines for each fish, one for the fish and one for the interest. And then three, and then four. And so on. Wouldn't you rather just have one gold coin that floats in value? I know Chen would.

Another observation is that the medium of exchange on our island devolved into the most insignificant and easy to produce item. A simple notation in Chen's "account." Is that so different from what we have today? And Ben could issue them with ease as long as Chen let him. Once Chen had so many lines, he wasn't about to just abandon the system, was he? Wipe the (beach) slate clean? No, Chen wanted to get something for his lines. Something compact that didn't interfere with Ben's ability to work off his debt should he ever decide to do so. Something durable. Something physical from Ben's side of the island. Something… anything other than those damn-stupid lines!

I hope that this little analogy helps you visualize the separation of monetary roles, because those talking about a new gold standard are not talking about this. I understand that sometimes you have to speak in terms familiar to your audience in order to not be tuned out, but I also hope that my readers come to understand how and why a new gold standard with a fixed price of gold, no matter how high, will simply not work anymore.

The full explanation of why it will not work is quite involved, and I'm not going to do it here. But the short answer is that the very act of defending a fixed price of gold in your currency ensures the failure of your currency. And it won't take 30 or 40 years this time. It'll happen fast. It wouldn't matter if Ben decided to defend a price of $5,000 per ounce, $50,000 per ounce or $5 million per ounce. It is the act of defending your currency against gold that kills your currency.

You can defend your currency against other currencies… using gold! Yes! This is the very essence of Freegold. But you cannot defend it against gold. You will fail. Your currency will fail. Slowly in the past, quickly today. If you set the price too high you will first hyperinflate your currency buying gold, but you won't get much real gold in exchange for collapsing the global confidence in your currency, and then you will have to empty your gold vaults selling gold (to defend your price) as your currency heads to zero. And do you think the world trusts the US to ever empty its vaults? Nope. Fool me once…

If you set the price too low, like, say, $5,000/ounce, you will first expose your own currency folly with such an act and have little opportunity to buy any of the real stuff as the world quickly understands what has gone wrong and empties your gold vaults with all those easy dollars floating around. You will sell, sell, sell trying to defend your price, but in the end, the price will be higher and you'll be out of gold. Either that, or you'll close the gold window (once again), sigh, and finally admit that Freegold it is.

Yes, the gold price must… WILL go much higher. The world needs MONEY! And by that, I mean recapitalization. Unfortunately the dollar is not the right money. And printing boatloads of it will no longer recapitalize anything. Today we are getting a negative real return on every dollar printed. That means, the more you print, the more you DEcapitalize the very system you are trying to save. Less printing, decapitalized. More printing, decapitalized. Freegold… RECAPITALIZED. Yes, it's a Catch-22, until you understand Freegold.

There Can Only Be One

A "focal point" is the obvious, salient champion. But for many reasons, some things are not as obvious as we would think they should be. Mish ended his recent post, Still More Hype Regarding Silver; Just the Math Maam, with the following disclosure:

As a deflationist who believes Gold is Money (see Misconceptions about Gold for a discussion), I am long both silver and gold and have been for years.


Now is it just me, or did he say that because gold is money, he is long both silver and gold?

Here's another one from a recent article on Zero Hedge:

Part 3. People lie…..

“…I want to make it equally clear that this nation will maintain the dollar as good as gold, freely interchangeable with gold at $35 an ounce, the foundation-stone of the free world’s trade and payments system.”
-John F. Kennedy, July 18, 1963

“That we stand ready to use our gold to meet our international obligations–down to the last bar of gold, if that be necessary–should be crystal clear to all.”
-William McChesney Martin, Jr. (Federal Reserve Chairman) December 9, 1963

Lesson: When someone says you can exchange paper for precious metals – make the swap before they change the rules.


Whoa. Wait. Did he just take two quotes about monetary gold and extend the lesson to all precious metals? Is this right? Should we all be assuming that "gold" always means "precious metals?"

According to Wikipedia:

A precious metal is a rare, naturally occurring metallic chemical element of high economic value, which is not radioactive… Historically, precious metals were important as currency, but are now regarded mainly as investment and industrial commodities…

The best-known precious metals are the coinage metals gold and silver. While both have industrial uses, they are better known for their uses in art, jewellery and coinage. Other precious metals include the platinum group metals: ruthenium, rhodium, palladium, osmium, iridium, and platinum, of which platinum is the most widely traded.

The demand for precious metals is driven not only by their practical use, but also by their role as investments and a store of value. Historically, precious metals have commanded much higher prices than common industrial metals.

Here's how I read the above description. Precious metals have a high economic value. But because of investment demand, they also tend to have a price higher than it would be on its industrial merits alone. Gold and silver carry some additional sentimentality for their past coinage. In other words, precious metals are industrial commodities with an elevated price due to levitation from investment demand. Fair enough?

Now to understand Freegold, I think there are two issues that need to be addressed. The first is the difference between money, or a monetary store of value, and an industrial commodity levitated by investment demand. And the second, once the first is understood, is whether silver belongs in category with gold as money, or with platinum as an elevated commodity. You see, the very key to understanding Freegold may actually lie in understanding the difference between gold and silver with regard to their commodity versus monetary wealth reserve functions.

So from here, I will explore the valuation fundamentals of money versus levitated commodities. And then I will explore the history of silver as money and ask the question: Is silver money today?

First, money. Money is always an overvalued something. Usually a commodity of some sort. But it can be as simple as an overvalued line in the sand, or a digital entry in a computer database. But the key is, it is always overvalued relative to its industrial uses! That's what makes it money! If it was undervalued as money, it wo


FOFOA On Gold's "Focal Point", Or Is Silver Money Too?

Posted: 18 Dec 2010 05:30 AM PST


All those who believe there is sentiment of complacency within the precious metals camp may be forgiven. After all if one likes gold, one should like silver, and/or vice versa. Today FOFOA presents a counterargument. "I don't write about silver very much. Just like I don't write about copper or pork bellies. But, in fact, I have addressed many of the standard arguments for silver over gold in various comments on this blog and others. I'm sure someone will dig them out again and post links as people pose these arguments once again in the comments. But here's a new one. One of the argument for silver that we hear often is that it is "the poor man's gold." So I guess gold is "the rich man's gold." Well, what is the main difference between rich men and poor men? Is it that the rich have an excess of wealth beyond their daily expenses? In fact, the really rich have "inter-generational wealth," that is, wealth that lies very still through generations. The poor do not have this. So what do you think is going to come of all that "poor man's gold" that the silverbugs have hoarded up? Is it going to lie very still for generations? Or will it circulate, to meet daily needs? Note that circulation velocity is the market's way of controlling the value of any currency. Faster circulation = lower value. Lying still for generations = very slow circulation." Thus, today's question - is silver money too?

Via FOFOA

Focal Point: Gold

In game theory, a focal point (also called Schelling point) is a solution that people will tend to use in the absence of communication, because it seems natural, special or relevant to them. The concept was introduced by the Nobel Prize winning American economist Thomas Schelling in his book The Strategy of Conflict (1960). In this book (at p. 57), Schelling describes "focal point[s] for each person’s expectation of what the other expects him to expect to be expected to do." This type of focal point later was named after Schelling.

Consider a simple example: two people unable to communicate with each other are each shown a panel of four squares and asked to select one; if and only if they both select the same one, they will each receive a prize. Three of the squares are blue and one is red. Assuming they each know nothing about the other player, but that they each do want to win the prize, then they will, reasonably, both choose the red square. Of course, the red square is not in a sense a better square; they could win by both choosing any square. And it is the "right" square to select only if a player can be sure that the other player has selected it; but by hypothesis neither can. It is the most salient, the most notable square, though, and lacking any other one most people will choose it, and this will in fact (often) work.

Schelling himself illustrated this concept with the following problem: Tomorrow you have to meet a stranger in NYC. Where and when do you meet them? This is a Coordination game, where any place in time in the city could be an equilibrium solution. Schelling asked a group of students this question, and found the most common answer was "noon at (the information booth at) Grand Central Station." There is nothing that makes "Grand Central Station" a location with a higher payoff (you could just as easily meet someone at a bar, or the public library reading room), but its tradition as a meeting place raises its salience, and therefore makes it a natural "focal point." [1]

Salience: the state or quality of an item that stands out relative to neighboring items.

There are two simple, but seemingly, apparently impossible-to-comprehend concepts. The first concept is why money not only can be split into separate units for separate roles, one as the store of value and the other to be used as a medium of exchange and unit of account, but why it absolutely must and WILL split at this point in the long evolution of the money concept. This means no fixed gold standard, or any system that attempts to combine these units/roles into one, making easy money "less easy" and hard money "less hard." And by "must" I do not mean that we must do this, I mean that it is happening today whether we recognize it or not.

And the second concept, once the first is understood, is how and why gold and only gold will fill the monetary store of value role. Not gold and silver. Not precious metals. Just gold. People often ask why I don't mention silver. They assume that when I say gold I really must mean gold and silver, or precious metals. So let me be clear. When I say gold, I mean gold and only gold.

Money's most vital function in our modern world is lubricating commerce, or more specifically, keeping the essential supply lines flowing – supply lines that bring goods and services to where they are needed. Without it we would be reduced to a barter economy, eternally facing the intractable "double coincidence of wants." This is the problem whereby you must coincidentally find someone that not only wants what you have to trade, but also, coincidentally, has what you want in return. And in the modern world of near-infinite division of labor, this would be a disaster. [2]

So we need money, and lots of it. In fact, we need money in unrestricted amounts! (I'll bet you are surprised to see me write this!) Yes, I said it, we need unrestricted money in order to fulfill this most vital function in our modern society – lubrication! But here's the catch: we need the right money in order to perform this seemingly impossible task. Let me try to explain.

Money is debt, by its very nature, whether it is gold, paper, sea shells, tally sticks or lines drawn in the sand. (Another shocking statement?) Yes, even gold used as money represents debt. More on this in a moment.

For this reason, the money used as a store of value must be something completely separate and different from the medium of exchange. It must be so, so that the store of value unit can expand in value while the medium of exchange unit expands in quantity and/or velocity. You may be starting to encounter my thrust. Expand… and expand. Unrestricted by artificial constraints.

Compare this concept to a gold standard in which you fix the value of gold to the dollar at, say, $5,000 per ounce. The assumption is that this is where the price of gold will stay for a long time, if you manage the system properly. So what is the result? You artificially constrain the expansion of the medium of exchange fiat currency while also restricting the value expansion of the store of value. You are locking the two together. Do you think this works and makes sense?

I said we need unrestricted money in order to ensure the lubrication of the vital supply lines in our modern world. This is it. This is what really matters. If we have a major monetary and financial breakdown, what do you think will be the worst consequence? Do you grow all of your own food? Do you make – or know someone who does – all of your own stuff? How long could you survive without any stores? Do you trust your government to be sufficiently prepared to take care of you with no supply lines flowing?

Have you ever stretched a rubber band until it breaks? You can feel the resistance grow gradually and observe the smooth thinning of the band until finally it loses its continuity and the two parts snap back stinging your fingers. A tiny observer of this exercise, perhaps a flea resting on your thumb (or an economist), one who doesn't really understand rubber bands, might swear that it could be stretched forever. The smooth change in the stretching rubber gives little warning of the abrupt (sometimes painful) deformation that is coming.

This is where we are today. The dollar standard is like a stretched rubber band. It has been stretched and stretched, but it cannot provide the unrestricted money that we need today. They think it can. And that's why they are spewing it out in quantitative easy money boatloads. But it's not the right money. As I said above, we need the right money in order to perform this seemingly impossible task.

That resistance you feel is the artificial restraint built into the dollar system. It appears to be infinitely expandable, but it is not. It is just like the rubber band. Oh sure, you can print all the dollars you can imagine, to infinity and beyond! But it won't work. It won't do the most vital job, beyond a certain point. And yes, we are beyond that point.

I want you to imagine a tiny micro economy. Just two guys stranded on a tiny island. Let's call the guys Ben and Chen. They have divided the island in half and each owns his half. They each have a tree which bears fruit and three tools for fishing, a spear, a net and a fishing pole. For a while they both fished often. Fish were the main trade item between Ben and Chen. Sometimes Ben would take a vacation from fishing and Chen would provide him with fish to eat. Other times Chen would take a break.

But after a while Ben got lazy, and Chen got tired of giving Ben free fish to eat. At first they used sea shells as money to keep track of how many fish Ben owed Chen. Then they switched to leaves from the tree. Finally they just broke a stick off the tree and drew little lines in the sand. If Chen gave Ben a fish, Ben drew (issued) a line in the sand on Chen's side of the island. There were only two of them, so it was easy to avoid cheating.

These lines sort of became Chen's bank account. Each one represented the debt of one fish that Ben owed to Chen. But after a while they started adding up, and Chen worried that he would never get that many fish back from Lazy Ben. So Chen cut a deal with Ben. Chen said he would keep accepting lines drawn in the sand for fish, but he wanted to be able to use them to purchase some of Ben's other stuff (since Ben didn't like to fish).

At first he used them to purchase fruit from Ben's tree. But after a while the pile of fruit just rotted on Chen's beach. Next he started purchasing Ben's tools. First the spear, then the net and lastly the fishing pole. But at this point Chen realized that Ben would NEVER be able to repay those fish without his fishing tools. So Chen rented them back to Lazy Ben.

Of course Ben was still lazy, and now he owed rent on top of the fish he already owed. The lines in the sand grew even more rapidly as lines were added to pay for rent even when Chen hadn't given Ben a fish. Then Ben had a great idea. Why even go through the charade of selling the fishing pole and then renting it? Ben could just sell Chen some "special lines" which had a "yield." For ten one-fish lines, Chen could buy a special "bond" that would mature into 11 lines in a year's time. They tried this for a while, but all that happened were more lines in the sand. So many lines! Nowhere to walk. Chen's "bank account" was taking up all of his real estate!

Finally Chen had had enough. He called Ben over and said, "Okay, since you refuse to fish for yourself, let alone to pay me back, I want to use these lines to buy some of your gold coins." Oh, did I mention that Ben had a treasure chest of gold coins that had washed ashore? Of course these gold coins were the last thing that Chen wanted, because what good are gold coins on a tiny island with only two inhabitants?

But actually, they turned out to be an excellent record of the debt Lazy Ben owed to Chen the fisherman. You see, at first, Chen bought half of Ben's gold with the lines he had already accumulated, transferring his "bank account" over to Ben's side of the island and consolidating his "wealth" into gold. It worked out to 100 lines for one gold coin, or 100 fish per ounce.

But after a while, Ben realized that he was running out of gold. He knew it would only be a short matter of time until he ran out, so he closed the gold window. And once again, Chen started accumulating lines and special yielding "bond" lines. Finally, they agreed that the value of the gold coins had to be raised higher than 100 fish per ounce. Ben suggested 500/oz., but Chen saw the short-sighted flaw in his thinking. So Chen said that the value of ounces should float against the number of lines issued by Ben. This way, Ben would never run out of gold, and his lines would always and forever be exchangeable for gold coins. Finally, a sustainable accounting system!

Now I do realize the glaring flaws in this analogy I cobbled together. So spare me the critique. It is far, FAR from perfect. But it does help with a few good observations.

First, the lines in the sand and the gold coins are both money on this island. One is the medium of exchange/unit of account and the other is the store of value. The store of value is quoted at any given time in units of lines, but its value floats, it is not fixed, so it never runs out. This method of accounting forces Lazy Ben to part with something more substantial than simply issuing more lines via line-yielding "special bond lines."

In this case it was the accounting of transactions between a consumer and a producer. But it works just as well between any two actors with unequal levels of production and consumption. Some people just produce more while others can't stop consuming. I'm sure you know a few of each type.

Also, notice that gold coins and lines in the sand both represent the debt owed from Ben to Chen. And with gold, Chen can wait forever to be paid back (which, on this island, is quite likely). The gold doesn't spoil, and Chen's possession of it doesn't interfere with Ben's ability to fish or eat fruit. But notice also that the more lines in the sand that Ben issues, the more the value of the gold (representing a debt of fish) rises. So the longer Ben runs his trade deficit, the more debt he owes for each ounce of gold that Chen holds.

This is not so dissimilar to the special bond lines, with a few notable differences. The bond values are not only quoted in lines, they are also denominated in lines. So the principle amount paid for the bonds drops in value as more lines are issued to lubricate the vital trade. To counteract this "inflation," interest is paid by drawing more lines without the reciprocal delivery of fresh fish. But these additional "free" lines also dilute the value of lines, which leads ultimately to infinity (or zero value) in a loop that feeds back on itself.

The more fish Chen supplies to Ben, the more lines he receives, the more bonds he buys, and the more lines he receives in service to interest. Eventually Chen will be receiving two lines for each fish, one for the fish and one for the interest. And then three, and then four. And so on. Wouldn't you rather just have one gold coin that floats in value? I know Chen would.

Another observation is that the medium of exchange on our island devolved into the most insignificant and easy to produce item. A simple notation in Chen's "account." Is that so different from what we have today? And Ben could issue them with ease as long as Chen let him. Once Chen had so many lines, he wasn't about to just abandon the system, was he? Wipe the (beach) slate clean? No, Chen wanted to get something for his lines. Something compact that didn't interfere with Ben's ability to work off his debt should he ever decide to do so. Something durable. Something physical from Ben's side of the island. Something… anything other than those damn-stupid lines!

I hope that this little analogy helps you visualize the separation of monetary roles, because those talking about a new gold standard are not talking about this. I understand that sometimes you have to speak in terms familiar to your audience in order to not be tuned out, but I also hope that my readers come to understand how and why a new gold standard with a fixed price of gold, no matter how high, will simply not work anymore.

The full explanation of why it will not work is quite involved, and I'm not going to do it here. But the short answer is that the very act of defending a fixed price of gold in your currency ensures the failure of your currency. And it won't take 30 or 40 years this time. It'll happen fast. It wouldn't matter if Ben decided to defend a price of $5,000 per ounce, $50,000 per ounce or $5 million per ounce. It is the act of defending your currency against gold that kills your currency.

You can defend your currency against other currencies… using gold! Yes! This is the very essence of Freegold. But you cannot defend it against gold. You will fail. Your currency will fail. Slowly in the past, quickly today. If you set the price too high you will first hyperinflate your currency buying gold, but you won't get much real gold in exchange for collapsing the global confidence in your currency, and then you will have to empty your gold vaults selling gold (to defend your price) as your currency heads to zero. And do you think the world trusts the US to ever empty its vaults? Nope. Fool me once…

If you set the price too low, like, say, $5,000/ounce, you will first expose your own currency folly with such an act and have little opportunity to buy any of the real stuff as the world quickly understands what has gone wrong and empties your gold vaults with all those easy dollars floating around. You will sell, sell, sell trying to defend your price, but in the end, the price will be higher and you'll be out of gold. Either that, or you'll close the gold window (once again), sigh, and finally admit that Freegold it is.

Yes, the gold price must… WILL go much higher. The world needs MONEY! And by that, I mean recapitalization. Unfortunately the dollar is not the right money. And printing boatloads of it will no longer recapitalize anything. Today we are getting a negative real return on every dollar printed. That means, the more you print, the more you DEcapitalize the very system you are trying to save. Less printing, decapitalized. More printing, decapitalized. Freegold… RECAPITALIZED. Yes, it's a Catch-22, until you understand Freegold.

There Can Only Be One

A "focal point" is the obvious, salient champion. But for many reasons, some things are not as obvious as we would think they should be. Mish ended his recent post, Still More Hype Regarding Silver; Just the Math Maam, with the following disclosure:

As a deflationist who believes Gold is Money (see Misconceptions about Gold for a discussion), I am long both silver and gold and have been for years.


Now is it just me, or did he say that because gold is money, he is long both silver and gold?

Here's another one from a recent article on Zero Hedge:

Part 3. People lie…..

“…I want to make it equally clear that this nation will maintain the dollar as good as gold, freely interchangeable with gold at $35 an ounce, the foundation-stone of the free world’s trade and payments system.”
-John F. Kennedy, July 18, 1963

“That we stand ready to use our gold to meet our international obligations–down to the last bar of gold, if that be necessary–should be crystal clear to all.”
-William McChesney Martin, Jr. (Federal Reserve Chairman) December 9, 1963

Lesson: When someone says you can exchange paper for precious metals – make the swap before they change the rules.


Whoa. Wait. Did he just take two quotes about monetary gold and extend the lesson to all precious metals? Is this right? Should we all be assuming that "gold" always means "precious metals?"

According to Wikipedia:

A precious metal is a rare, naturally occurring metallic chemical element of high economic value, which is not radioactive… Historically, precious metals were important as currency, but are now regarded mainly as investment and industrial commodities…

The best-known precious metals are the coinage metals gold and silver. While both have industrial uses, they are better known for their uses in art, jewellery and coinage. Other precious metals include the platinum group metals: ruthenium, rhodium, palladium, osmium, iridium, and platinum, of which platinum is the most widely traded.

The demand for precious metals is driven not only by their practical use, but also by their role as investments and a store of value. Historically, precious metals have commanded much higher prices than common industrial metals.

Here's how I read the above description. Precious metals have a high economic value. But because of investment demand, they also tend to have a price higher than it would be on its industrial merits alone. Gold and silver carry some additional sentimentality for their past coinage. In other words, precious metals are industrial commodities with an elevated price due to levitation from investment demand. Fair enough?

Now to understand Freegold, I think there are two issues that need to be addressed. The first is the difference between money, or a monetary store of value, and an industrial commodity levitated by investment demand. And the second, once the first is understood, is whether silver belongs in category with gold as money, or with platinum as an elevated commodity. You see, the very key to understanding Freegold may actually lie in understanding the difference between gold and silver with regard to their commodity versus monetary wealth reserve functions.

So from here, I will explore the valuation fundamentals of money versus levitated commodities. And then I will explore the history of silver as money and ask the question: Is silver money today?

First, money. Money is always an overvalued something. Usually a commodity of some sort. But it can be as simple as an overvalued line in the sand, or a digital entry in a computer database. But the key is, it is always overvalued relative to its industrial uses! That's what makes it money! If it was un


Weekly precious metals review at King World News

Posted: 18 Dec 2010 04:32 AM PST

12:31p ET Saturday, December 19, 2010

Dear Friend of GATA and Gold (and Silver):

Bill Haynes of CMI Gold & Silver and Dan Norcini of JSMineSet.com are interviewed by Eric King for the weekly precious metals market review at King World News. The interview is about 24 minutes long and you can listen to it here:

http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/12/18_...

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://gata.org/tshirts

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

http://gata.org/node/wallstreetjournal

Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon:

http://www.goldrush21.com/

Help keep GATA going

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:

http://www.gata.org

To contribute to GATA, please visit:

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

Silver: “It is what it is.”

Posted: 18 Dec 2010 04:08 AM PST

Share this:


Once one PIIG flies, they all will, Ben Davies tells King World News

Posted: 18 Dec 2010 04:02 AM PST

12:01p ET Saturday, December 19, 2010

Dear Friend of GATA and Gold:

In an 18-minute inteview with Eric King at King World News, Hinde Capital CEO Ben Davies explains why he doesn't think the euro zone will stay together. Rather, Davies says, the withdrawal of one of the weaker members to avoid crushing austerity is likely to prompt the withdrawal of all the weaker members and in turn smash the banks and insurance companies in the stronger euro-member countries that are creditors to the departing members. You can listen to the interview at King World News here:

http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/12/18_...

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


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Prophecy Receives Permit To Mine at Ulaan Ovoo in Mongolia

VANCOUVER, British Columbia -- Prophecy Resource Corp. (TSX-V:PCY, OTCQX: PRPCF, Frankfurt: 1P2) announces that on November 9, 2010, it received the final permit to commence mining operations at its Ulaan Ovoo coal project in Mongolia. Prophecy is one of few international mining companies to achieve such a milestone. The mine is production-ready, with a mine opening ceremony scheduled for November 20.

Prophecy CEO John Lee said: "I thank the government of Mongolia for the expeditious way this permit was issued. The opening of Ulaan Ovoo is a testament to the industrious and skilled workforce in Mongolia. Prophecy directly and indirectly (through Leighton Asia) employs more than 65 competent Mongolian nationals and four expatriots. The company also reaffirms its commitment to deliver coal to the local Edernet and Darkhan power plants in Mongolia."

The Ulaan Ovoo open pit mine is 10 kilometers from the Russian border and within 120km of the Nauski TransSiberian railway station, enabling transportation of coal to Russia and its eastern seaports. Thermal coal prices are trading at two-year highs at Russian seaports due to strong demand from Asian economies.

For the complete press release, please visit:

http://prophecyresource.com/news_2010_nov11.php


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://gata.org/tshirts

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

http://gata.org/node/wallstreetjournal

Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon:

http://www.goldrush21.com/

Help keep GATA going:

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:

http://www.gata.org

To contribute to GATA, please visit:

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


ADVERTISEMENT

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

Dollar's Rally Still Concerning for Stocks and Commodities

Posted: 18 Dec 2010 03:57 AM PST

As we head into the final two trading weeks of the year, the U.S. Dollar Index has completed two of the three steps typically associated with a change in trend: (1) the black trendline was broken, and (2) a higher low has been made. Read More...



What’s more exploitive, the US dollar or Gold mining?

Posted: 18 Dec 2010 03:56 AM PST

MK: This HuffPo story lists the most destructive industries/products in terms of exploiting children. No. 1 is Gold mining. Nowhere on the list is the US dollar mentioned – even though the US dollar is the number 1 culprit primarily responsible for underwriting the entire list of 13. Gold mining is an environmentally nasty business [...]


3 Things to Watch As Silver Season Ends

Posted: 18 Dec 2010 01:43 AM PST

Silver season is coming quickly to a close after one of the best five month rallies in silver history.  From mid-August to early December, silver managed to rise more than 66% from top to bottom, a sign of silver's strength against what is normally a positive, but not nearly as pronounced, rise in silver prices.  In moving forward, there are three main events on which silver investors need to focus.


The Bell Tolls for the U.S. Treasury Bond Market Investors

Posted: 17 Dec 2010 10:30 PM PST

There is an old adage on Wall Street: no one rings a bell to signal a market top or bottom. Yet, I have found that bells do ring; it's just that few people know exactly what sound to listen for. Perhaps the biggest and most liquid of all markets is for US government bonds. That market has been rallying for almost thirty years. The bull can be traced back to 1981, when Treasury bond yields peaked at about 15%. At that time, high inflation and a weakening dollar had justifiably squelched demand for Treasuries. Even the ultra-high interest rates were not enough to attract buyers.


Rare Earth Metals Supply Hysteria

Posted: 17 Dec 2010 10:23 PM PST

China's domination of the rare earth industry has led to very real fears about the future supply of these strategic metals that are used in all things technological—from electric car batteries, laptops and cell phones all the way to smart bombs. As one of the foremost experts in rare earth elements (REEs), Bill understands the implications of future supply shortfalls. In this exclusive interview with The Gold Report, the head of Vancouver-based Medallion Resources Ltd., explains the supply bottleneck and how his company is working to solve it.


Long AND Short Important for Investor Profit & Protection in 2011

Posted: 17 Dec 2010 10:18 PM PST

“There is a dire collapse taking place below the radar screens of the public. The financial condition of the fellow states of a currency union is the most critical component of a common union currency's value today. It is the challenged financial integrity of member states and their constituents, the cities, towns and villages that make up the state where risk is most prevalent. The municipal bond market is today in a second freefall…


Hourly Action In Gold From Trader Dan

Posted: 17 Dec 2010 07:50 PM PST

View the original post at jsmineset.com... December 17, 2010 01:47 PM Dear CIGAs, Click chart to enlarge today's hourly action in Gold in PDF format with commentary from Trader Dan Norcini ...


PLeaSe TaKe YouR GoLD

Posted: 17 Dec 2010 06:56 PM PST


BANZAI7--Ever felt the late night urge to exchange paper for gold bullion? Well, now you can. Just head on down to Town Center Mall in Boca Raton, Florida, where America's first gold dispensing ATM opened for business on Friday.

 

Cook

 

.BZ

Dollar’s Rally Still Concerning for Stocks and Commodities

Posted: 17 Dec 2010 06:44 PM PST

As we head into the final two trading weeks of the year, the U.S. Dollar Index has completed two of the three steps typically associated with a change in trend.

Silver/Gold Ratio Reversion 4

Posted: 17 Dec 2010 06:24 PM PST

Zealllc


The Silver Shock

Posted: 17 Dec 2010 12:00 PM PST

2010 will go down in history as the beginning of a new era in silver investing. This article takes a brief look back at a momentous year for silver, and makes the point that from the perspective of anyone long of this metal, the best is yet to come.
at

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