saveyourassetsfirst3

Safety Deposit Box Talk
Gold, politics, and Venezuela
Gold and silver withstand raid, rising to $1794.10/Silver rises to $40.95/ Bernanke does nothing at Jackson Hole
Stocks at Rock Bottom, Gold at Top - Is a Bigger Correction Underway
Ditch the dollar for these two trading opportunities …
Ready...Set...Go?
Debt Collapse - $20,000 Gold - Mike Maloney
Expect spectacular short-covering rally in gold, Turk tells King World News
Real metal is beating paper in the gold market: Ned Naylor-Leyland
Hint of more Fed stimulus goosed gold today, Michael Pento tells King World News
Goldsmiths struggle in soaring market for precious metals
Physical market overpowers gold cartel, GATA's Bill Murphy tells Resource Clips
Russian central bank to offer gold-backed loans at 7 pct
Yamashitas Gold and the Looting of Asia
Action in Gold and Silver May Be Bearish For Stocks (Updated)
BMO Capital Rates Argonaut Outperform with $9 Target
CMC Metals to ship 1,575 t of Silver Hart Bulk Sample
Closing Tables for Week Ending August 26
When Atlas Shrugged… Part I : The lure and lore of risk-free profits
The Mysterious Habits of Central Banks
Maybe Crime Does Pay: How To Play Corrections Corporation of America
How Risky Are 'Safe-Haven' ETFs?
When Gold ETFs Sell Off, Do Other Precious Metals Follow?
Qualitative Easing from Jackson Hole
Gold and Silver - A Cure for Panic and Anxiety
Japanese investors are selling gold and buying this instead
Hurricane effect on gold ?
The key takeaways from Ben Bernanke's speech this morning
Gold Seeker Weekly Wrap-Up: Gold and Silver Fall About 3% on the Week but Miners Gain
COT Silver Report - August 26, 2011

Posted: 27 Aug 2011 04:39 AM PDT

I finally relented and got one. It was just getting to be too much for the house, wasn't liking the 'eggs in one basket' approach. I have supreme confidence in my hiding place. It was a place no burglar would ever find. The only hang up was a wife and fire. Not that my wife would steal it but she might talk. I am still going to keep some there but just spreading the risk a little. I saw the vault this morning and was pretty impressed. Underground, giant locking door, the works.

Here was something that got me thinking. The branch near my home was full, only could be put on a waiting list. When I went to this branch, which is a major one, they only had a few left, and only the smallest size, which was fine with me. The girl who registered it for me said they don't quite understand it but they've been getting a lot of requests lately. Hmmmm, with the advent of a paperless society you'd think sdb's would be becoming a thing of the past. I am thinking that these boxes probably have a lot of you know what in them. Or does anyone else have some other reasons for this?

Has anyone looked into insurance? Do you just add this to your homeowners? I am still leery of getting anyone else involved if they have to know the exact contents. I feel pretty good about this move. I think the idea of fire is pretty remote. What about theft (do banks REALLY only have one side of the dual key system??). Say I did insure it. I've had too many schister insurance episodes lately. Would they really pay for theft or would I have to 'prove' they were stolen. Don't trust those sinister b-tards anymore.

Gold, politics, and Venezuela

Posted: 27 Aug 2011 03:00 AM PDT

Markets were abuzz last week with Chavez's recall of Venezuela's gold reserves not currently held in Caracas. Bulls are excited by the thought that withdrawing some 150-200 tonnes from the ...

Gold and silver withstand raid, rising to $1794.10/Silver rises to $40.95/ Bernanke does nothing at Jackson Hole

Posted: 27 Aug 2011 01:25 AM PDT

Stocks at Rock Bottom, Gold at Top - Is a Bigger Correction Underway

Posted: 27 Aug 2011 01:00 AM PDT

SunshineProfits

Ditch the dollar for these two trading opportunities …

Posted: 27 Aug 2011 12:32 AM PDT

Money And Markets

Ready...Set...Go?

Posted: 26 Aug 2011 11:33 PM PDT

¤ Yesterday in Gold and Silver

Gold spent most of the Far East and London trading session within ten dollars of Thursday's closing price in New York. The tiny rally that had developed at the London open didn't last, as gold got sold off to unchanged by the time that the Comex opened in New York yesterday.

The first rally attempt that developed during early Comex trading ran into a determined seller...but the low that came after that rally...the London p.m. gold fix, which came minutes after 10:00 a.m. Eastern time...proved to be the New York low of the day. The gold price never looked back from there.

From the p.m. gold fix, until the close of electronic trading, gold rose about sixty-five dollars...and closed on its high tick of the day...up $57.80 from Thursday's close. Volume was huge once again.

Silver's price path was very similar to gold's...but the price swings were much more pronounced...and the rally from the London p.m. gold fix at 10:00 a.m...was much more subdued. The silver price only finished up thirty-eight cents from its Thursday close...and, like gold, closed on its high of the day. Net volume was very light.

The dollar was down about 55 basis points during the Friday trading session...with a wild price spike between 10:00 a.m. and 12:30 p.m. in New York. As per usual, the dollar's activity had no bearing on the activity in the precious metals again yesterday.

Here's the 5-day dollar chart for the week that was...and it closed virtually unchanged on the week.

The gold stocks got sold off at the open, with the low of the day coming at the London p.m. gold fix...which, coincidentally, also happened to be the low for the Dow as well. From there, it was onwards and ever upwards...and the HUI finished up 2.53% on the day...and up 4.9% from its absolute low.

The other amazing thing about yesterday's price action in the shares, was the complete lack of volatility in the HUI after 11:30 a.m. It was a very orderly market once the gold price really began to sail.

Here's the HUI for the week that was. As I mentioned in this column yesterday, from last Friday's close until the close of trading on Thursday, the HUI was basically unchanged...so the gain we had during Friday's trading day, was the net gain for the entire week. Not too shabby considering what the gold price did over the last four trading days.

Despite the fact that silver didn't do particularly well on Friday, Nick Laird's Silver Sentiment Index was a healthy 2.78%...which was even better than the HUI did.

(Click on image to enlarge)

The CME Daily Delivery Report showed that 424 gold contracts were posted for delivery on Tuesday. Barclays [293 contracts] was the big short/issuer, with Jefferies a distant second with 63 contracts delivered. The big receiver/stoppers were JPMorgan [275 contracts] in its client account...and MF Global with 87 contracts stopped. There were a lot of other smaller issuers and stoppers...and the report is worth skimming. The link is here.

The GLD ETF reported a very tiny withdrawal yesterday... only 48,682 ounces...and there were no reported changes over at SLV.

The U.S Mint reported selling another 30,000 silver eagles yesterday...and that was all.

Over at the Comex-approved depositories on Thursday, they reported receiving 623,386 troy ounces of silver...and shipped a smallish 62,872 troy ounces out the door.

I must admit that I was ready for anything when I checked the Commitment of Traders Report [for positions held at the close of trading on Tuesday, August 23rd] yesterday afternoon...and it was a surprise in both metals.

In silver, the Commercial traders increased their net short position by a very chunky 5,870 contracts...or 29.4 million ounces. Ted Butler said that half of that number came from the smaller commercial traders selling long positions and taking profits...and the balance of the shorts were most likely put on by JPMorgan in an attempt to prevent the price from running away to the upside during the reporting week.

Don't forget that the 'correction' didn't start until this past Tuesday...and before that, silver was really moving to the upside with some authority, so it's obvious that JPMorgan had to go short that rally to prevent it from getting away on them. That's obviously why silver performed so poorly relative to gold.

It would be a good bet that JPMorgan covered that entire short position [and maybe a bit more] during the 'correction' that began on Tuesday...but none of this data will show up until next Friday's COT report.

Armed with that knowledge, Ted thinks that silver is still all cleaned out to the downside...and that we saw the bottom on Thursday morning in London. I agree with that analysis.

But the real shocker was in gold, as the Commercial traders/bullion banks reduced their net short position by another 18,411 contracts...or 1.84 million ounces. Add into that all the short covering that took place during this week's 'correction'...and it appears that the gold bottom was in on Thursday morning in London as well...and the subsequent price action certainly appears to confirm that.

In a nutshell, most of the price appreciation in gold during the prior week's trading was again caused by Commercial traders covering their short positions...not new tech fund long buying...and that's precisely what yesterday's COT report indicated.

I'd give a day's pay to know what the COT report looked like at the close of trading yesterday. Was the rally off the lows this week more short covering? Probably, but that won't be known for sure until next Friday. As you know, 'da boyz' are very good at covering their tracks.

As Ted has said on several occasions over the years, the CME is there to protect the positions of their largest customers...and that would certainly include all the '8 or less' traders, the bullion banks, with JPMorgan at the top of the list.

Here's an interesting graph that shows all the margin hikes in silver going back to the beginning of 2009. But it's the margin increases that began when the silver rally started last August that really caught my eye. Note the margin increase in silver as the price 'fell' after the drive-by shooting on May 1st. The CME continued to increase margins even as the price declined...which was of huge benefit to the shorts, as it forced more margined longs to puke up their positions.

(Click on image to enlarge)

I have lots of stories, videos and interviews for you today...enough to keep you in front of your computer screen for the rest of the weekend if you've got nothing better to do.

There are only three ways out for a short seller. They either cover, deliver...or default, and it's obvious from yesterday's COT report that the bullion banks are covering in gold.

Physical market overpowers gold cartel, GATA's Bill Murphy tells Resource Clips. Expect spectacular short-covering rally in gold, Turk tells King World News. Russian central bank to offer gold-backed loans.

¤ Critical Reads

Obama Goes All Out For Dirty Banker Deal

Here's a Matt Taibbi blog that was posted over at Rolling Stone magazine on Wednesday.

A power play is underway in the foreclosure arena, according to the New York Times.

On the one side is Eric Schneiderman, the New York Attorney General, who is conducting his own investigation into the era of securitizations – the practice of chopping up assets like mortgages and converting them into saleable securities – that led up to the financial crisis of 2007-2008.

On the other side is the Obama administration, the banks, and all the other state attorneys general.

This is a must read from start to finish...and I thank reader Randall Reinwasser for sending it along. The link is here.

View full GSD edition

Taibbi on Olbermann: SEC Covering Up Wall Street Crimes

Last weekend I ran Matt's big essay on this subject...and here he is in a 4-minute video segment with Keith Olbermann. It's certainly worth four minutes of your time...and I thank Roy Stephens for sending it along. The link is here.

View full GSD edition

Germany fires cannon shot across Europe's bows

German President Christian Wulff has accused the European Central Bank of violating its treaty mandate with the mass purchase of southern European bonds.

He warned that Germany is reaching bailout exhaustion and cannot allow its own democracy to be undermined by EU mayhem.

"I regard the huge buy-up of bonds of individual states by the ECB as legally and politically questionable. Article 123 of the Treaty on the EU's workings prohibits the ECB from directly purchasing debt instruments, in order to safeguard the central bank's independence," he said.

This story was posted over at The Telegraph on Wednesday...and is a must read in my opinion. I thank reader John Bastian for sharing it with us...and the link is here.

View full GSD edition

Letter from Berlin: Blast from the Past Has Merkel on the Defensive

Criticism of Angela Merkel is nothing new. This week, though, it was ex-Chancellor Helmut Kohl who found sharp words for his erstwhile protégé. With her foreign minister also under fire, things are not looking good for Merkel in upcoming state elections.

Kohl, who originally plucked Merkel out of obscurity to make her a cabinet minister in 1991, was referring primarily to trans-Atlantic relations and to concerns that the US no longer sees Germany as a vital foreign partner. But his comments hit the headlines just as Libyan rebels entered Tripoli, an event which made Berlin's March refusal to support NATO's bombing campaign in Libya appear all the more misguided.

This is a Roy Stephens offering of a Friday posting over at spiegel.de...and the link is here.

View full GSD edition

Technology Keeping Internet Freedom Ahead of Censorship

Here's a story that I picked up from reader Julius Adams earlier this week.

Efforts by the Federal Communication Commission (FCC) to regulate the Internet may become irrelevant if the new technology being developed succeeds as expected. When the U.S. Court of Appeals for the District of Columbia ruled against the FCC last December, the FCC rewrote its rules to allow them to regulate the Internet anyway through the whitewash called "net neutrality." Verizon immediately filed suit to overrule the new attempt, and a House subcommittee in March voted to invalidate the actions of the FCC. But the new rules remain in place until the issue is decided.

This is a very interesting...and very worthwhile story. It was posted over at thenewamerican.com website on Wednesday...and the link is here.

View full GSD edition

Russia Green Lights $65 Billion Siberia-Alaska Rail and Tunnel to Bridge the Bering Strait

Here's another story that I found intriguing...this one from Washington state reader S.A.

In what could certainly be one of the boldest infrastructure developments ever announced, the Russian Government has given the go-ahead to build a transcontinental railway linking Siberia with North America. The massive undertaking would traverse the Bering Strait with the world's longest tunnel – a project twice the length of the Chunnel between England and France. The $65 billion project aims to feed North America with raw goods from the Siberian interior and beyond, linking a railway network across 3/4 of the Northern Hemisphere.

This very short essay runs a couple of pages, but has some interesting photos and maps to go with it. It's posted over inhabitat.com...and the link is here.

View full GSD edition

Debt Collapse - $20,000 Gold - Mike Maloney

Posted: 26 Aug 2011 11:33 PM PDT

Debt Collapse - $20,000 Gold - Mike Maloney

Mike Maloney is the author of the world's best selling book on precious metals investing. Since 2003 he has been advocating gold and silver as the ultimate means of protecting wealth from the games played by our governments and banking sector. In this 90 minute presentation he lays down his 'most likely' scenario for the global economy over the next decade...short term deflation, followed by big or even hyperinflation. Here you will learn the true definitions of inflation/deflation, the difference between currency and money, price vs. value, 'Wealth Cycles', gold and silver accounting for the expansion of fiat currency, gold and silver supply and demand, the differences between the today's bull market and that of the 1970s, The Debt Collapse, and more.

Expect spectacular short-covering rally in gold, Turk tells King World News

Posted: 26 Aug 2011 11:33 PM PDT

Expect spectacular short-covering rally in gold, Turk tells King World News

GoldMoney founder James Turk told King World News last night that short covering well may send gold back to $1,900 very quickly, that silver likely will follow to $44, and that he is very impressed by the strength of the mining shares. The link to the KWN blog is here.

Real metal is beating paper in the gold market: Ned Naylor-Leyland

Posted: 26 Aug 2011 11:33 PM PDT

Real metal is beating paper in the gold market: Ned Naylor-Leyland

Here's a GATA release from yesterday afternoon. I'll let Chris Powell do all the talking here, as his introduction is rather extensive. The link to that...and the brief essay by Ned Naylor-Leyland...is here.

Hint of more Fed stimulus goosed gold today, Michael Pento tells King World News

Posted: 26 Aug 2011 11:33 PM PDT

Hint of more Fed stimulus goosed gold today, Michael Pento tells King World News

Interviewed by King World News, Euro-Pacific Capital's senior economist, Michael Pento, argued that gold exploded this afternoon because Federal Reserve Chairman Ben Bernanke's remarks in Wyoming implied a lot more money printing and stimulus after the Federal Open Market Committee's meeting next month.

I stole the above preamble from a GATA release...and the link to the short blog is here.

Goldsmiths struggle in soaring market for precious metals

Posted: 26 Aug 2011 11:33 PM PDT

Goldsmiths struggle in soaring market for precious metals

Demand for jewellery dries up as people become sellers of gold rather than buyers.

With its genteel Georgian square and cobbled pavements, Birmingham's 250-year-old jewellery quarter is a world away from the high-octane trading desks of the Square Mile in London.

But investors in the City and elsewhere are playing God with the district's 400 manufacturers and goldsmiths, whose livelihoods are threatened by the unprecedented march of the gold price, which has surged nearly 500% in the last decade and touched a record high of $1,911 (£1,176) this month.

Physical market overpowers gold cartel, GATA's Bill Murphy tells Resource Clips

Posted: 26 Aug 2011 11:33 PM PDT

Physical market overpowers gold cartel, GATA's Bill Murphy tells Resource Clips

Also predicting a quick resumption of gold's rise this week [along with Peter Grandich] was GATA Chairman Bill Murphy when interviewed Wednesday by Kevin Michael Grace for Resource Clips. Asked about the smashing down of gold, Murphy said:

"My guess is that this will be very brief because the physical market will catch on fire again. This has been GATA's whole premise, and why we've been right since gold was at $250 to $300 and all the way up. We said that the key to the future is the physical market overpowering the gold cartel. Years ago you may recall that everyone said the key to gold was what the dollar did. GATA said no; that's not correct. It is the physical market's ability to overpower the gold cartel."

Russian central bank to offer gold-backed loans at 7 pct

Posted: 26 Aug 2011 11:33 PM PDT

Russian central bank to offer gold-backed loans at 7 pct

Russia's central bank will offer gold-backed loans for up to 90 days at an interest rate of 7 percent, it said in a statement on Friday, expanding its lending facilities for dealing with any future liquidity crunch in the banking system.

The gold-backed lending was approved by the board of directors at a meeting on Friday. The rate on the facility is in line with the central bank's Lombard rate on borrowing secured against high-quality bonds.

This short Reuters story was filed from Moscow yesterday...and I thank reader 'David in California' for sending it. The link is here.

Yamashitas Gold and the Looting of Asia

Posted: 26 Aug 2011 05:00 PM PDT

Lrb

Action in Gold and Silver May Be Bearish For Stocks (Updated)

Posted: 26 Aug 2011 04:51 PM PDT

BMO Capital Rates Argonaut Outperform with $9 Target

Posted: 26 Aug 2011 04:42 PM PDT

Andrew Kaip, BMO Capital Markets: "We are initiating coverage of Argonaut Gold Inc. with an Outperform rating and a CAD $9.00 target price:

1.) The company is an emerging intermediate gold producer that provides investors with exposure to an attractive combination of internally funded growth driven by a proven management team,

2.) Deposit and processing similarities between the company's El Castillo mine and the San Antonio and La Colorada projects mitigates capital and development risk,

3.) Management has a track record of making strategic acquisitions; we expect this strategy to support future production growth to 300–500 Koz. gold annually, raising Argonaut to intermediate producer status. Since acquiring the Castillo mine in Q309, the company has increased production threefold through low-cost expansion. . .unlike other emerging producers within our coverage universe, Argonaut provides an attractive combination of low required capital per ounce of new and total production. . .the company looks to have one of the highest production growth rates among junior and intermediate gold producers within our research universe."

CMC Metals to ship 1,575 t of Silver Hart Bulk Sample

Posted: 26 Aug 2011 04:35 PM PDT

StockWatch Reports:

CMC Metals Ltd. is providing an update on the progress on the Silver Hart bulk sample. An estimated 1,575 tonnes have been removed from the Silver Hart site for preparation to be shipped. The company is also finalizing contracts for the bulk sample and will provide a news release on signing of the contracts.

All one million common shares available for exercise at 20 cents per share pursuant to the exercise of warrants expiring Aug. 15, 2011, were exercised. The funds raised from the exercise of these warrants will be used for further exploration and development of the company's mineral properties in the Yukon Territory.

Furthermore, the company has granted options to buy 150,000 common shares pursuant to an incentive stock option under the company's rolling stock option plan, which plan received shareholder approval at its last annual general meeting held June 23, 2011. The options have been granted for a one-year period expiring Aug. 1, 2012, at the exercise price of 27 cents per share, subject to TSX Venture Exchange approval.

Closing Tables for Week Ending August 26

Posted: 26 Aug 2011 04:31 PM PDT

Just below is this week's closing table, followed by the CFTC disaggregated commitments of traders (DCOT) recap for the week ending August 26, 2001.

If the images are too small click on them for a larger version.

Table Comments: Mr. Arensberg is on vacation this week, however he intends to update the linked charts for Vultures, (Got Gold Report Subscribers) by the usual time (18:00 ET) on Sunday.

Continued…

Gold and Silver Disaggregated COT Report (DCOT)

In the DCOT table below a net short position shows as a negative figure in red. A net long position shows in black. In the Change column, a negative number indicates either an increase to an existing net short position or a reduction of a net long position. A black figure in the Change column indicates an increase to an existing long position or a reduction of an existing net short position. The way to think of it is that black figures in the Change column are traders getting "longer" and red figures are traders getting shorter.

All of the trader's positions are calculated net of spreading contracts as of the Tuesday disaggregated COT report.

Thank you for honoring us with your time.

When Atlas Shrugged… Part I : The lure and lore of risk-free profits

Posted: 26 Aug 2011 04:00 PM PDT

Gold University

The Mysterious Habits of Central Banks

Posted: 26 Aug 2011 11:46 AM PDT

To look at the gold-buying habits of the Western central banks, you'd almost think they were in it to lose money. In fact, they like many investors, are depending on gold as a backstop if the global currency system implodes.

Doug Hornig of Casey Research shakes his head over an investment history that has had Western central banks consistently selling low, buying high—the exact opposite of what any sensible investor would do. Hornig writes:

Description:

Western central banks are depending on gold, yet consistently sell low, and buy high—the exact opposite of what any sensible investor would do.

Maybe Crime Does Pay: How To Play Corrections Corporation of America

Posted: 26 Aug 2011 11:03 AM PDT

By Michael Polodna:

The last month has left many investors wondering where to put their money to safeguard against a possible double dip recession. Most stocks have been volatile among fears of a macroeconomic slowdown, yields on treasuries have shrunk to insignificance despite a downgrade of the U.S. credit rating, and even the traditional store of value, gold, appears bubbly amid the widespread fear. At the same time, with inflation threatening to run wild in the wake of multiple rounds of government stimulus, investors can't be entirely safe in cash either.

Many pundits recommend positions in defensive stocks, such as consumer staples Johnson & Johnson (JNJ), Procter & Gamble (PG), McDonald's (MCD) and Coca Cola (KO), arguing that these firms offer products that are less effected by the problems facing our economy. But what about firms that might actually benefit from hard economic times? I decided to take a look at one such

Complete Story »

How Risky Are 'Safe-Haven' ETFs?

Posted: 26 Aug 2011 10:44 AM PDT

By Tom Lydon:

Exchange traded funds that invest in perceived safe havens such as U.S. Treasuries, gold and the Swiss franc have pulled back somewhat after a big rally, although investors remain fearful over the economic recovery and Europe's debt crisis.

These pockets of safety may lose value if the economic picture brightens, and they could be overbought, reports Jeremy Gaunt for Reuters.

"A safe asset is something that is going to be safe across economic environments," remarked William De Vijlder, chief investment officer at BNP Paribas Investment Partners, in the report. "It means you'd better make sure your forecast is right."

ETFs following gold, U.S. Treasuries and the Swiss currency have been among the top performers amid the recent sell-off in risk assets. Gold has corrected after a foray above $1,900 an ounce but on Friday climbed back above $1,800 after Federal Reserve Chairman Ben Bernanke said the central bank will consider

Complete Story »

When Gold ETFs Sell Off, Do Other Precious Metals Follow?

Posted: 26 Aug 2011 10:06 AM PDT

By ETF Database:

One of the biggest stories in the ETF world over the past few trading sessions has been the Gold SPDR (GLD) taking the top spot among the most widely-held ETFs, finally surpassing SPY for the AUM crown. Yet, just as soon as this happened and gold hit $1,900/oz., investors saw a brutal sell-off in the precious metal, causing prices to fall to their current level around $1,770/oz. While the reasons for this decline are unclear - some blame profit-taking while others point to market manipulation - one has to wonder if a similar situation plagued the rest of the precious metal group and their respective ETFs, specifically, silver, platinum and palladium.

Thanks to some gains in Thursday's session, as well as strong buying to start the week, GLD is now down just 3.4% over the past five days. While the rest of the precious metal group is also experiencing losses,

Complete Story »

Qualitative Easing from Jackson Hole

Posted: 26 Aug 2011 10:00 AM PDT

Once again, everything is backwards. The worse news gets, the higher markets go. That's because it brings government meddlers with their wacky 'solutions' back into the fray. (The irony here is that the rallying markets, anticipating the wacky solutions, make those solutions seem less necessary to those that might choose to implement them. Hence the bipolar nature of markets these past two weeks.)

Mr Market is under siege from all the institutions and authorities created by men. They lob their legislation over the walls, set off money bombs under the walls and try to bribe the gatekeeper with something they call stimulus.

But Mr Market doesn't eat, drink or sleep - and he has one hell of a life expectancy. So you know he will be the last one standing. It's just a matter of time before the rest of us give up on telling him what to do. That doesn't make what goes on in the meantime less interesting. So let's take a look...

Credit default swaps on many bank bonds around the world, known to you and me as insurance against their default, are priced higher than they were in 2008. That implies the likelihood of their default is at its highest yet.

The Telegraph gives a big hint as to why things are worse this time around: 'The cost of insuring [Royal Bank of Scotland] bonds is now higher than before the taxpayer was forced to step in and rescue the bank in October 2008.' That's because, this time, there may be no money for bailouts.

Over in Germany, it's the politics that is causing the issues. One German minister called for Greece to put up gold as collateral for any more German bailout lending. She was promptly shushed up by her parliamentary colleagues. But Germany's renowned politicians of the past - and some who hold largely symbolic office only - are taking Chancellor Merkel's government to task. Their theme is 'don't spend it all at once,' or as a gambler would translate it, 'don't go all in.' The gamble they are referring to is saving the rest of the EU.

Then there is the German Constitutional Court, which is still deliberating on the legality of all this bailing out in the first place.

Remember, without an ironclad commitment from Germany, Europe is in trouble. Well, more trouble than it would be in with German backing.

One brief respite from the world's woes came when an earthquake hit Washington D.C. As staff from the Pentagon and the White House were evacuated, the Libyan campaign was victorious and the stock market rallied massively for the day. We'll leave you to draw your own conclusions.

Looking back to more serious economics, the list of maladies continues. Economic indicators, which have all sorts of strange names that make your eyes glaze over, like Empire State Index, are pointing down. Many quite firmly indicate a recession is in the US's near future. Remember, it took the US nine months to realise it was in recession from December 2007. So they may already be in a recession. One that is beginning with debt levels that make fiscal stimulus and bailouts questionable.

But as you read this, Federal Reserve chairman Ben Bernanke will be practising his Jackson Hole speech. Or washing the dishes, which he claims to do regularly.

The world will be awaiting his decision on whether or not to increase monetary stimulus efforts to the world economy. (The US dollar is the world's reserve currency and banks from around the world, including Australian ones, enjoy emergency lending facilities at the US Fed. So, any decision there affects us all.)

The irony in this is that the Fed and its fellow conspirators, including the European Central Bank, the Reserve Bank of Australia and the pioneering Reserve Bank of Zimbabwe, are supposed to promote stability. Price stability, output stability, employment stability and so on.

But when Bernanke gives his Jackson Hole speech, markets will either jump or tank depending on Bernanke's decision (or indecision). Call that stability?

Not that anyone knows what will happen if Bernanke decides to stimulate or not, or continues with ambiguity. The previous two Quantitative Easings ended up having the opposite effect to their intended purposes. QE1 was about suppressing interest rates, but they rose. QE2 was about the wealth effect, where rising stock prices encourage spending. The market is below the level it was at when QE2 was announced.

Of course, that didn't stop central bank apologists from justifying the sequence of events in their favour. Usually they come out with the old 'it would have been worse if we didn't do it' chestnut. The fact that the counterfactual is never known in economics is a perfectly good point. But it invalidates the mathematical models the intervention was justified upon.

When the free market reigned over the interest rate, at least to a greater extent than it does now, economic events were not determined by men who do the dishes. In fact, not by men at all. Instead, the market determined the price of money. Supply (the savers of money) met demand (the borrowers of money). There was no central bank to fiddle around with the supply and demand, so the interest rate simply balanced the two.

Of course, it wasn't only supply and demand. The weather was important too. Most borrowing, for much of Britain's most prosperous era, was done by merchants. And so when the flag outside the Bank of England was pointing downstream on the river Thames, people knew that a lot of borrowing and lending was about to take place, as money was needed to fill up departing ships with merchandise. Then, when the flag turned to point upriver, a lot of repayments would be flooding in to repay loans after ships returned from successful commercial ventures.

Everyone could tell, based on the direction of the flag, what the nature of the day's business would be. Today, nobody has a clue what Bernanke will come up with.

Our guess is that it will involve the banks. That's because they have been in trouble lately. (As discussed above.)

So how might the Federal Reserve help out the struggling banks without inciting more public rage? (Presidential candidate Rick Perry threatened Bernanke with physical violence if he prints more money a few weeks ago, which is an entirely new tactic.) The best way to snuggle up to its owners (yes, private banks own the Federal Reserve) would be to do what economist Philipp Bagus calls 'Qualitative Easing'. That's when the central bank swaps high quality assets for the banks' poor quality assets. That improves the position of the banks.

Not necessarily in the way you would expect. Here is how it works: Central banks can hand out cash to banks if banks lodge collateral with them. That collateral has to be of a certain quality, based on the ratings agencies' ratings. So what the central banks do is swap high quality assets on their own balance sheets for low quality assets on the private banks' balance sheets and then use those high quality assets as collateral in lending agreements. This leaves the central banks holding the low quality assets and the banks holding the cash, with the high quality assets posted with the central bank as collateral. All without violating the rules of how central banks are allowed to operate.

This is already taking place in Europe with Greek bonds, where the bailouts are not simply handing out money, but handing out assets that can be posted as collateral with the ECB, which then hands out the money.

If you're confused then you've discovered why they do it all so complexly.

Most likely, this sort of thing is going on in the US already.

But rather than berating the Fed for the terrible nature of all its intervention, we'll accentuate the positives.

Blogger Bruce Krasting explains how some Fed economists have made themselves useful:

The San Francisco Fed has come out with a research paper connecting the dots between the retiring baby boomers and stock prices. The thinking is that the boomers will divest themselves of stocks as they retire and eat into their savings.

[Their] conclusions are just horrendous! The suggestion is that there is a 15-year bear market in front of us. [Price to earnings] multiples will fall by 50%.'

Our guess is that much of the same will apply here in Australia. From memory, the US's demographics aren't as bad as our own. Nor were Americans forced into superannuation-type investing to the same extent.

Oops. We're not supposed to mention super.

Usually, licences allow you to do something. Driving licences allow you to drive. Gun licences allow you to shoot. But Australian Financial Services Licences do the opposite. They prevent you from doing things. If our publishing firm, Port Phillip Publishing, didn't have an AFSL, we'd be able to write about superannuation all we liked. But because we have one, we can't.

We can however, write about retirement savings. But that's toeing the line a little too close for a goody two shoes like us.

So here goes:

Isn't it rather telling that the most marketable benefit fund management companies can come up with regarding your government-mandated retirement savings is that they can find them?

Seriously, take a good look at your TV screens, advertising mail and tram stop billboards. Everywhere you look, the biggest Aussie funds management companies are advertising their ability to find your lost super, erm... retirement savings.

Our fingers are tied with red tape on this topic, so we will finish with a 'happy birthday' to Slipstream Trader Murray Dawes, whose subscribers are in several risk-free positions, awaiting Bernanke's speech. That means they have taken enough profit on their trades so far that the overall position cannot lose money, but is poised to make a packet if the markets moves as Murray expects.

To find out what Murray expects will happen next, check out his YouTube channel here.

Until next week,

Nickolai Hubble.
The Daily Reckoning Weekend Edition