Thursday, December 8, 2011

Gold World News Flash

Save Your ASSets First

Gold World News Flash


The Catfish, Your Savings and Japans Gold Coin Giveaway

Posted: 07 Dec 2011 06:00 PM PST

Bullion Vault


Hinde's Davies talks with MineWeb about intervention against gold

Posted: 07 Dec 2011 04:30 PM PST

12:30a ET Thursday, December 8, 2011

Dear Friend of GATA and Gold (and Silver):

Interviewed this week by MineWeb's Geoff Candy, Hinde Capital CEO Ben Davies talks about central bank intervention in the gold market and gold's re-establishment as money, preferably trading freely rather than as part of a gold standard. Audio as well as text of the interview are posted at MineWeb here:

http://www.mineweb.com/mineweb/view/mineweb/en/page96985?oid=141163&sn=2...

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



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Sona Discovers Potential High-Grade Gold Mineralization
at Blackdome in British Columbia -- 13.6g over 1.5 Meters

From a Company Press Release
November 22, 2011

VANCOUVER, British Columbia -- With its latest surface diamond drilling program at its 100-percent-owned, formerly producing Blackdome gold mine in southern British Columbia, Sona Resources Corp. has discovered a potentially high-grade gold-mineralized area, with one hole intersecting 13.6 grams of gold in 1.5 meters of core drilling.

"We intersected a promising new mineralized zone, and we feel optimistic about the assay results," says Sona's president and CEO, John P. Thompson. "We have undertaken an aggressive exploration program that has tested a number of target zones. Our discovery of this new gold-bearing structure is significant, and it represents a positive development for the company."

Sona aims to bring its permitted Blackdome mill back into production over the next year and a half, at a rate of 200 tonnes per day, with feed from the formerly producing Blackdome mine and the nearby Elizabeth gold deposit property. A positive preliminary economic assessment by Micon International Ltd., based on a gold price of $950 per ounce over eight years, has estimated a cash cost of $208 per tonne milled, or $686 per gold ounce recovered.

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

http://www.sonaresources.com/_resources/news/SONA_NR18_2011-opt.pdf



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Prophecy Granted Landmark Chandgana Power Plant License

Company Press Release
Monday, November 21, 2011

VANCOUVER, British Columbia -- Prophecy Coal Corp. (TSX: PCY)(OTCQX: PRPCF)(Frankfurt: 1P2) announces that its wholly-owned Mongolian subsidiary, East Energy Development LLC, has received the license certificate from the Mongolian Energy Regulatory Authority to construct the 600-megawatt Chandgana power plant.

This 600-mw thermal power plant license is the first of its size issued by the Mongolian government. To ensure strict compliance with Mongolian laws and regulations in obtaining this license, Prophecy retained Mongolian and international consultants over the past 18 months and spent much effort on community relations.

Coal for the Chandgana mine-mouth power plant will be supplied from Prophecy's Chandgana Tal deposit, for which the company has already obtained a full mining license. Tal contains 141 million tonnes of measured coal and is located just 9 kilometers north of Prophecy's Chandgana Khavtgai project, a deposit with more than 1 billion tonnes of measured and indicated coal.

Chandgana is 60 km from Underkhann city (East Energy System) and 150 km from Baganuur city (Central Energy System). Construction of transmission lines linking the two cities through Chandgana is seen as a top priority for a much-improved and more efficient national Mongolian energy system.

John Lee, chairman and CEO of Prophecy Coal, says: "Prophecy has distinguished itself as the premier candidate to build the next Mongolian thermal power plant. There is an understanding among all stakeholders that Mongolia, being one of the world's fastest-growing economies, needs additional power. With the International Monetary Fund projecting a deficit for Mongolia of more than 600 mw by 2016, this need has become urgent and can no longer be delayed."

For Prophecy Coal's full press release, complete with maps, please visit:

http://www.prophecycoal.com/news_2011_nov21_prophecy_granted_landmark_ch...



GoldSeek.com and SilverSeek.com Announces Re-Launch of Web Sites

Posted: 07 Dec 2011 04:30 PM PST

We are pleased to announce the re-launching of our entirely new GoldSeek.com and SilverSeek.com websites on December 15th. The sites have been re-designed and built from the ground up to create an exciting, new, clean look and feel, backed by a powerful new website engine that will support our record traffic demands. The new aesthetics will deliver greater balance with well-organized gold, silver and financial information along with many new features providing great usability.


Gold Tsunami: on the Cusp of $3,000+?

Posted: 07 Dec 2011 04:23 PM PST

[/CENTER] [/CENTER] Goldrunner goes on to say: The Gold Tsunami analogy continues, and it goes like this……..* "The Dollar Inflation psychology pulled back out into the sea, taking the price of Gold with it.* Those of a deflation bent ran amok on the naked sea bed for a bit, acting like the Dollar Inflation and Gold Price run was over.* Suddenly, the new wave of paper currency inflation popped up on the horizon last week, and many Dow Stock 'Crashers' were mowed down with the early start of the tidal wave of Dollar Inflation and rise in Gold.* Many ran back to the shore and looked back to watch as the waters approach the shore, but the tidal wave of paper currency inflation is just starting its acceleration that might wellpropel Gold much higher into the middle of 2012 than practically anyone thinks.* Everybody can see the symmetrical triangle forming on the Gold chart, but few really believe the size of the move in Gold that is possible on this door step of the 'Fractal Gold Cycl...


In The News Today

Posted: 07 Dec 2011 04:14 PM PST

Jim Sinclair's Commentary

Everyone trading securities or commodity futures, holding paper gold/silver or any OTC metals derivatives and ETFs in gold and/or silver is using a clearinghouse facility.

MF Global and the great Wall St re-hypothecation scandal By Christopher Elias (UK)

(Business Law Currents) A legal loophole in international brokerage regulations means that

Continue reading In The News Today


Gold Seeker Closing Report: Gold Rises While Silver Slips

Posted: 07 Dec 2011 04:00 PM PST

Gold fell $8.65 to $1720.25 by about 8AM EST, but it then rallied back higher throughout most of trade in New York and ended with a gain of 0.72%. Silver dropped down to $32.20 before it rebounded to $32.79 at about 9:30AM EST, but it then chopped back lower into the close and ended with a loss of 0.95%.


Why The UK Trail Of The MF Global Collapse May Have "Apocalyptic" Consequences For The Eurozone, Canadian Banks, Jefferies And Everyone Else

Posted: 07 Dec 2011 03:06 PM PST

In an oddly prescient turn of events, yesterday we penned a post titled "Has The Imploding European Shadow Banking System Forced The Bundesbank To Prepare For Plan B?" in which we explained how it was not only the repo market, but the far broader and massively unregulated shadow banking system in Europe that was becoming thoroughly unhinged, and was manifesting itself in a complete "lock up in interbank liquidity" and which, we speculated, is pressuring the Bundesbank, which is well aware of what is going on behind the scenes, to slowly back away from what will soon be an "apocalyptic" event (not our words... read on). Why was this prescient? Because today, Reuters' Christopher Elias has written the logical follow up analysis to our post, in which he explains in layman's terms not only how but why the lock up has occurred and will get far more acute, but also why the MF Global bankruptcy, much more than merely a one-off instance of "repo-to-maturity" of sovereign bonds gone horribly wrong is a symptom of two things: i) the lax London-based unregulated and unsupervised system which has allowed such unprecedented, leveraged monsters as AIG, Lehman and now as it turns out MF Global, to flourish until they end up imploding and threatening the world's entire financial system, and ii) an implicit construct embedded within the shadow banking model which permitted the heaping of leverage upon leverage upon leverage, probably more so than any structured finance product in the past (up to and including synthetic CDO cubeds), and certainly on par with the AIG cataclysm which saw $2.7 trillion of CDS notional sold with virtually zero margin. Simply said: when one truly digs in, MF Global exposes the 2011 equivalent of the 2008 AIG: virtually unlimited leverage via the shadow banking system, in which there are practically no hard assets backing the infinite layers of debt created above, and which when finally unwound, will create a cataclysmic collapse of all financial institutions, where every bank is daisy-chained to each other courtesy of multiple layers of "hypothecation, and re-hypothecation." In fact, it is a link so sinister it touches every corner of modern finance up to and including such supposedly "stable" institutions as Jefferies, which as it turns out has spent weeks defending itself, however against all the wrong things,  and Canadian banks, which as it also turns out, defended themselves against Zero Hedge allegations they may well be the next shoes to drop, as being strong and vibrant (and in fact just announced soaring profits and bonuses), yet which have all the same if not far greater risk factors as MF Global. Yet nobody has called them out on it. Until now.

But first, a detour to London...

As readers will recall, the actual office that blew up the world the first time around, was not even based in the US. It was a small office located on the top floor of 1 Curzon Street in London's Mayfair district, run by one Joe Cassano: the head of AIG Financial Products. The reason why this office of US-based AIG was in London, is so that Cassano could sell CDS as far away from the eye of Federal regulators as possible. Which he did. In fact he sold an unprecedented $2.7 trillion worth of CDS just before the firm collapsed due to one small glitch in the system - the assumption that home prices could go down as well as up. Yet the real question is why he sold so much CDS? The answer is simple - in a world of limited real assets, the only way to generate a practically limitless cash flow annuity would be to sell synthetic insurance on a virtually infinite amount of synthetic underlying. Which he did. Only when it came time to pay the claims, AIG blew up, forcing the government to bail it out, and set off the chain of events where we find ourselves now, where every day could be the developed world's last if not for the ongoing backstops, guarantees and bailouts of the central banking regime. 

What is greatly ironic is that in the aftermath of the AIG collapse, the UK was shamed into admitting that it was its own loose, lax and unregulated system that allowed such unsupervised insanity to continue for as long as it did. As the Telegraph reminds us, "Conservative Party Treasury spokesman Philip Hammond called for a public inquiry into the FSA's oversight of AIG Financial Products in Mayfair. "We must not allow London to become a bolthole for companies looking for a place to conduct questionable activities," he said. "This sounds like a monumental cock-up by the FSA," said Lib Dem shadow chancellor Vince Cable. "It is deeply ironic," he added, that Brown was in Brussels last week calling for tougher global financial regulation just as the scandal over the FSA's role in one of the key regulatory failures at the root of the global panic emerged as an international issue." It is ironic because the trail in the MF Global collapse, where it is yet another infinitely leveragable product that once again comes to the fore, once again goes straight to that hub for "questionable activities" - London.

But before we explain why London is once again to blame for what was not only the immediate reason of the MF Global collapse, but could well precipitate the next global collapse, a quick look at rehypothecation.

As Reuters points out, it was not so much the act of creating "repos-to-maturity" that imperiled MF Global, but what is a secret gold mine for those privy to it - the process of re-hypothecation of collateral.

[h]ypothecation is when a borrower pledges collateral to secure a debt. The borrower retains ownership of the collateral but is "hypothetically" controlled by the creditor, who has a right to seize possession if the borrower defaults.

 

In the U.S., this legal right takes the form of a lien and in the UK generally in the form of a legal charge. A simple example of a hypothecation is a mortgage, in which a borrower legally owns the home, but the bank holds a right to take possession of the property if the borrower should default.

 

In investment banking, assets deposited with a broker will be hypothecated such that a broker may sell securities if an investor fails to keep up credit payments or if the securities drop in value and the investor fails to respond to a margin call (a request for more capital).

 

Re-hypothecation occurs when a bank or broker re-uses collateral posted by clients, such as hedge funds, to back the broker's own trades and borrowings. The practice of re-hypothecation runs into the trillions of dollars and is perfectly legal. It is justified by brokers on the basis that it is a capital efficient way of financing their operations much to the chagrin of hedge funds.

So far so good, assuming there was regulation, and assuming if regulation failed, that the firms that blew up as a result of their greed would truly blow up, instead of being resurrected as TBTF zombies by a government in dire need of rent collection and lobby cash (because with or without regulation, if those who fail are not allowed to fail, then the whole point of capitalism is moot). But... there is always a snag.

Under the U.S. Federal Reserve Board's Regulation T and SEC Rule 15c3-3, a prime broker may re-hypothecate assets to the value of 140% of the client's liability to the prime broker. For example, assume a customer has deposited $500 in securities and has a debt deficit of $200, resulting in net equity of $300. The broker-dealer can re-hypothecate up to $280 (140 per cent. x $200) of these assets.

 

But in the UK, there is absolutely no statutory limit on the amount that can be re-hypothecated. In fact, brokers are free to re-hypothecate all and even more than the assets deposited by clients. Instead it is up to clients to negotiate a limit or prohibition on re-hypothecation. On the above example a UK broker could, and frequently would, re-hypothecate 100% of the pledged securities ($500).

 

This asymmetry of rules makes exploiting the more lax UK regime incredibly attractive to international brokerage firms such as MF Global or Lehman Brothers which can use European subsidiaries to create pools of funding for their U.S. operations, without the bother of complying with U.S. restrictions.

 

In fact, by 2007, re-hypothecation had grown so large that it accounted for half of the activity of the shadow banking system. Prior to Lehman Brothers collapse, the International Monetary Fund (IMF) calculated that U.S. banks were receiving $4 trillion worth of funding by re-hypothecation, much of which was sourced from the UK. With assets being re-hypothecated many times over (known as "churn"), the original collateral being used may have been as little as $1 trillion – a quarter of the financial footprint created through re-hypothecation.

So let's see: a Prime Broker taking posted collateral, then using the same collateral as an instrument for hypothecation with a net haircut, then repeating the process again, and again... Ring a bell? If you said "fractional reserve lending" - ding ding ding. In essence what re-hypothecation, and subsequent levels thereof, especially once in the shadow banking realm, allows Prime Brokers is to become de facto banks only completely unregulated and using synthetic assets as collateral. Curiously enough it was earlier today that we also penned "ECB Confirms Shadow Banking System In Europe In Tatters" in which we explained that since ECB has to expand the eligible collateral it will accept, there is no real collateral left, meaning the re-hypothecation process in Europe has experienced terminal failure.  Yet the kicker is that the "safety haircut" only occurs in the US. Not in the UK. And therein lies the rub. In the UK, the epic failure of supervision has allowed banks to become de facto monsters of infinite shadow banking fractional reserve leverage - every bank's wet dream! Naturally, Prime Brokers have known all about this which explains the quiet desire to conduct re-hypothecation out of London-based offices for every US-based (and Canadian) bank. Reuters explains:

Keen to get in on the action, U.S. prime brokers have been making judicious use of European subsidiaries. Because re-hypothecation is so profitable for prime brokers, many prime brokerage agreements provide for a U.S. client's assets to be transferred to the prime broker's UK subsidiary to circumvent U.S. rehypothecation rules.

 

Under subtle brokerage contractual provisions, U.S. investors can find that their assets vanish from the U.S. and appear instead in the UK, despite contact with an ostensibly American organisation.

 

Potentially as simple as having MF Global UK Limited, an English subsidiary, enter into a prime brokerage agreement with a customer, a U.S. based prime broker can immediately take advantage of the UK's unrestricted re-hypothecation rules.

While we already mentioned AIG as an example of the lax UK-based regulatory regime, it is another failed bank that is perhaps the best example of levered failure but in the specific re-hypothecation context: Lehman Brothers itself.

This is exactly what Lehman Brothers did through Lehman Brothers International (Europe) (LBIE), an English subsidiary to which most U.S. hedge fund assets were transferred. Once transferred to the UK based company, assets were re-hypothecated many times over, meaning that when the debt carousel stopped, and Lehman Brothers collapsed, many U.S. funds found that their assets had simply vanished.

 

A prime broker need not even require that an investor (eg hedge fund) sign all agreements with a European subsidiary to take advantage of the loophole. In fact, in Lehman's case many funds signed a prime brokerage agreement with Lehman Brothers Inc (a U.S. company) but margin-lending agreements and securities-lending agreements with LBIE in the UK (normally conducted under a Global Master Securities Lending Agreement).

 

These agreements permitted Lehman to transfer client assets between various affiliates without the fund's express consent, despite the fact that the main agreement had been under U.S. law. As a result of these peripheral agreements, all or most of its clients' assets found their way down to LBIE.

And now we get back to the topic at hand: MF Global, why and how it did precisely what Lehman did back then, why it did this in London, and why its failure is a symptom of something far more terrifying than merely investing money in collapsing PIIGS bonds.

MF Global's Customer Agreement for trading in cash commodities, commodity futures, security futures, options, and forward contracts, securities, foreign futures and options and currencies includes the following clause:

 

     "7. Consent To Loan Or Pledge  You hereby grant us the right, in accordance with Applicable Law, to borrow, pledge, repledge, transfer, hypothecate, rehypothecate, loan, or invest any of the Collateral, including, without limitation, utilizing the Collateral to purchase or sell securities pursuant to repurchase agreements [repos] or reverse repurchase agreements with any party, in each case without notice to you, and we shall have no obligation to retain a like amount of similar Collateral in our possession and control."

 

In its quarterly report, MF Global disclosed that by June 2011 it had repledged (re-hypothecated) $70 million, including securities received under resale agreements. With these transactions taking place off-balance sheet it is difficult to pin down the exact entity which was used to re-hypothecate such large sums of money but regulatory filings and letters from MF Global's administrators contain some clues.

 

According to a letter from KPMG to MF Global clients, when MF Global collapsed, its UK subsidiary MF Global UK Limited had over 10,000 accounts. MF Global disclosed in March 2011 that it had significant credit risk from its European subsidiary from "counterparties with whom we place both our own funds or securities and those of our clients".

It gets even worse when one considers that over the years the actual quality of good collateral declined, meaning worse and worse collateral was to be pledged in these potentially infinite recursive loops of shadow banking fractional reserve lending:

Despite the fact that there may only be a quarter of the collateral in the world to back these transactions, successive U.S. governments have softened the requirements for what can back a re-hypothecation transaction.

 

Beginning with Clinton-era liberalisation, rules were eased that had until 2000 limited the use of re-hypothecated funds to U.S. Treasury, state and municipal obligations. These rules were slowly cut away (from 2000-2005) so that customer money could be used to enter into repurchase agreements (repos), buy foreign bonds, money market funds and other assorted securities.

 

Hence, when MF Global conceived of its Eurozone repo ruse, client funds were waiting to be plundered for investment in AA rated European sovereign debt, despite the fact that many of its hedge fund clients may have been betting against the performance of those very same bonds.

At this point flashing red lights should be going though the head of anyone who lived through the AIG cataclysm: in effect the rehypothecation scenario affords the same amount of leverage, and potentially even less supervision that the CDS market. Said otherwise, the counteparty risk of daisy chaining defaults is on par with that in the case of AIG.

As well as collateral risk, re-hypothecation creates significant counterparty risk and its off-balance sheet treatment contains many hidden nasties. Even without circumventing U.S. limits on re-hypothecation, the off-balance sheet treatment means that the amount of leverage (gearing) and systemic risk created in the system by re-hypothecation is staggering.

 

Re-hypothecation transactions are off-balance sheet and are therefore unrestricted by balance sheet controls. Whereas on balance sheet transactions necessitate only appearing as an asset/liability on one bank's balance sheet and not another, off-balance sheet transactions can, and frequently do, appear on multiple banks' financial statements. What this creates is chains of counterparty risk, where multiple re-hypothecation borrowers use the same collateral over and over again. Essentially, it is a chain of debt obligations that is only as strong as its weakest link.

And the kicker:

With collateral being re-hypothecated to a factor of four (according to IMF estimates), the actual capital backing banks re-hypothecation transactions may be as little as 25%. This churning of collateral means that re-hypothecation transactions have been creating enormous amounts of liquidity, much of which has no real asset backing.

It turns out the next AIG was among us all along, only because it was hidden deep in the bowels of the unmentionable shadow banking system, out of sight (by definition) meant out of mind. Only it was not: and at last check there was $15 trillion in the shadow banking system in the US alone, where the daisy chaining of counteparty risk meant that any liquidity risk flare up would mean the AIG bankruptcy was not even a dress rehearsal for the grand finale.

But where does one look for the next AIG? Who would be stupid enough to disclose the fact that they have essentially the same risk on their off-balance sheet books as AIG had on its normal books? Once again, we turn to Reuters:

The lack of balance sheet recognition of re-hypothecation was noted in Jefferies' recent 10Q (emphasis added):

 

    "Note 7. Collateralized Transactions
    We pledge securities in connection with repurchase agreements, securities lending agreements and other secured arrangements, including clearing arrangements. The pledge of our securities is in connection with our mortgage?backed securities, corporate bond, government and agency securities and equities businesses. Counterparties generally have the right to sell or repledge the collateral.Pledged securities that can be sold or repledged by the counterparty are included within Financial instruments owned and noted as Securities pledged on our Consolidated Statements of Financial Condition. We receive securities as collateral in connection with resale agreements, securities borrowings and customer margin loans. In many instances, we are permitted by contract or custom to rehypothecate securities received as collateral. These securities maybe used to secure repurchase agreements, enter into security lending or derivative transactions or cover short positions. At August 31, 2011 and November 30, 2010, the approximate fair value of securities received as collateral by us that may be sold or repledged was approximately $25.9 billion and $22.3 billion, respectively. At August 31, 2011 and November 30, 2010, a substantial portion of the securities received by us had been sold or repledged.

    We engage in securities for securities transactions in which we are the borrower of securities and provide other securities as collateral rather than cash. As no cash is provided under these types of transactions, we, as borrower, treat these as noncash transactions and do not recognize assets or liabilities on the Consolidated Statements of Financial Condition. The se


Why The UK Trail Of The MF Global Collapse May Have "Apocalyptic" Consequences For The Eurozone, Canadian Banks, Jefferies And Everyone Else

Posted: 07 Dec 2011 03:06 PM PST


In an oddly prescient turn of events, yesterday we penned a post titled "Has The Imploding European Shadow Banking System Forced The Bundesbank To Prepare For Plan B?" in which we explained how it was not only the repo market, but the far broader and massively unregulated shadow banking system in Europe that was becoming thoroughly unhinged, and was manifesting itself in a complete "lock up in interbank liquidity" and which, we speculated, is pressuring the Bundesbank, which is well aware of what is going on behind the scenes, to slowly back away from what will soon be an "apocalyptic" event (not our words... read on). Why was this prescient? Because today, Reuters' Christopher Elias has written the logical follow up analysis to our post, in which he explains in layman's terms not only how but why the lock up has occurred and will get far more acute, but also why the MF Global bankruptcy, much more than merely a one-off instance of "repo-to-maturity" of sovereign bonds gone horribly wrong is a symptom of two things: i) the lax London-based unregulated and unsupervised system which has allowed such unprecedented, leveraged monsters as AIG, Lehman and now as it turns out MF Global, to flourish until they end up imploding and threatening the world's entire financial system, and ii) an implicit construct embedded within the shadow banking model which permitted the heaping of leverage upon leverage upon leverage, probably more so than any structured finance product in the past (up to and including synthetic CDO cubeds), and certainly on par with the AIG cataclysm which saw $2.7 trillion of CDS notional sold with virtually zero margin. Simply said: when one truly digs in, MF Global exposes the 2011 equivalent of the 2008 AIG: virtually unlimited leverage via the shadow banking system, in which there are practically no hard assets backing the infinite layers of debt created above, and which when finally unwound, will create a cataclysmic collapse of all financial institutions, where every bank is daisy chanied to each other courtesy of multiple layers of repo hypothecation, and re-hypothecation. In fact, it is a link so sinister it touches every corner of modern finance up to and including such supposedly "stable" institutions as Jefferies, which as it turns out has spent weeks defending itself, however against all the wrong things,  and Canadian banks, which as it also turns out, defended themselves against Zero Hedge allegations they may well be the next shoe to drop, as being strong and vibrant (and in fact just announced soaring profits and bonuses), yet which have all the same if not far greater risk factors as MF Global. Yet nobody has called them out on it. Until now.

But first, a detour to London...

As readers will recall, the actual office that blew up the world the first time around, was not even based in the US. It was a small office located on the top floor of 1 Curzon Street in London's Mayfair district, run by one Joe Cassano: the head of AIG Financial Products. The reason why this office of US-based AIG was in London, is so that Cassano could sell CDS as far away from the eye of Federal regulators as possible. Which he did. In fact he sold an unprecedented $2.7 trillion worth of CDS just before the firm collapsed due to one small glitch in the system - the assumption that home prices could go down as well as up. Yet the real question is why he sold so much CDS? The answer is simple - in a world of limited real assets, the only way to generate a practically limitless cash flow annuity would be to sell synthetic insurance on a virtually infinite amount of synthetic underlying. Which he did. Only when it came time to pay the claims, AIG blew up, forcing the government to bail it out, and set off the chain of events where we find ourselves now, where every day could be the developed world's last if not for the ongoing backstops, guarantees and bailouts of the central banking regime. 

What is greatly ironic is that in the aftermath of the AIG collapse, the UK was shamed into admitting that it was its own loose, lax and unregulated system that allowed such unsupervised insanity to continue for as long as it did. As the Telegraph reminds us, "Conservative Party Treasury spokesman Philip Hammond called for a public inquiry into the FSA's oversight of AIG Financial Products in Mayfair. "We must not allow London to become a bolthole for companies looking for a place to conduct questionable activities," he said. "This sounds like a monumental cock-up by the FSA," said Lib Dem shadow chancellor Vince Cable. "It is deeply ironic," he added, that Brown was in Brussels last week calling for tougher global financial regulation just as the scandal over the FSA's role in one of the key regulatory failures at the root of the global panic emerged as an international issue." It is ironic because the trail in the MF Global collapse, where it is yet another infinitely leveragable product that once again comes to the fore, once again goes straight to that hub for "questionable activities" - London.

But before we explain why London is once again to blame for what was not only the immediate reason of the MF Global collapse, but could well precipitate the next global collapse, a quick look at rehypothecation.

As Reuters points out, it was not so much the act of creating "repos-to-maturity" that imperiled MF Global, but what is a secret gold mine for those privy to it - the process of re-hypothecation of collateral.

[h]ypothecation is when a borrower pledges collateral to secure a debt. The borrower retains ownership of the collateral but is "hypothetically" controlled by the creditor, who has a right to seize possession if the borrower defaults.

 

In the U.S., this legal right takes the form of a lien and in the UK generally in the form of a legal charge. A simple example of a hypothecation is a mortgage, in which a borrower legally owns the home, but the bank holds a right to take possession of the property if the borrower should default.

 

In investment banking, assets deposited with a broker will be hypothecated such that a broker may sell securities if an investor fails to keep up credit payments or if the securities drop in value and the investor fails to respond to a margin call (a request for more capital).

 

Re-hypothecation occurs when a bank or broker re-uses collateral posted by clients, such as hedge funds, to back the broker's own trades and borrowings. The practice of re-hypothecation runs into the trillions of dollars and is perfectly legal. It is justified by brokers on the basis that it is a capital efficient way of financing their operations much to the chagrin of hedge funds.

So far so good, assuming there was regulation, and assuming if regulation failed, that the firms that blew up as a result of their greed would truly blow up, instead of being resurrected as TBTF zombies by a government in dire need of rent collection and lobby cash (because with or without regulation, if those who fail are not allowed to fail, then the whole point of capitalism is moot). But... there is always a snag.

Under the U.S. Federal Reserve Board's Regulation T and SEC Rule 15c3-3, a prime broker may re-hypothecate assets to the value of 140% of the client's liability to the prime broker. For example, assume a customer has deposited $500 in securities and has a debt deficit of $200, resulting in net equity of $300. The broker-dealer can re-hypothecate up to $280 (140 per cent. x $200) of these assets.

 

But in the UK, there is absolutely no statutory limit on the amount that can be re-hypothecated. In fact, brokers are free to re-hypothecate all and even more than the assets deposited by clients. Instead it is up to clients to negotiate a limit or prohibition on re-hypothecation. On the above example a UK broker could, and frequently would, re-hypothecate 100% of the pledged securities ($500).

 

This asymmetry of rules makes exploiting the more lax UK regime incredibly attractive to international brokerage firms such as MF Global or Lehman Brothers which can use European subsidiaries to create pools of funding for their U.S. operations, without the bother of complying with U.S. restrictions.

 

In fact, by 2007, re-hypothecation had grown so large that it accounted for half of the activity of the shadow banking system. Prior to Lehman Brothers collapse, the International Monetary Fund (IMF) calculated that U.S. banks were receiving $4 trillion worth of funding by re-hypothecation, much of which was sourced from the UK. With assets being re-hypothecated many times over (known as "churn"), the original collateral being used may have been as little as $1 trillion – a quarter of the financial footprint created through re-hypothecation.

So let's see: a Prime Broker taking posted collateral, then using the same collateral as an instrument for hypothecation with a net haircut, then repeating the process again, and again... Ring a bell? If you said "fractional reserve lending" - ding ding ding. In essence what re-hypothecation, and subsequent levels thereof, especially once in the shadow banking realm, allows Prime Brokers is to become de facto banks only completely unregulated and using synthetic assets as collateral. Curiously enough it was earlier today that we also penned "ECB Confirms Shadow Banking System In Europe In Tatters" in which we explained that since ECB has to expand the eligible collateral it will accept, there is no real collateral left, meaning the re-hypothecation process in Europe has experienced terminal failure.  Yet the kicker is that the "safety haircut" only occurs in the US. Not in the UK. And therein lies the rub. In the UK, the epic failure of supervision has allowed banks to become de facto monsters of infinite shadow banking fractional reserve leverage - every bank's wet dream! Naturally, Prime Brokers have known all about this which explains the quiet desire to conduct re-hypothecation out of London-based offices for every US-based (and Canadian) bank. Reuters explains:

Keen to get in on the action, U.S. prime brokers have been making judicious use of European subsidiaries. Because re-hypothecation is so profitable for prime brokers, many prime brokerage agreements provide for a U.S. client's assets to be transferred to the prime broker's UK subsidiary to circumvent U.S. rehypothecation rules.

 

Under subtle brokerage contractual provisions, U.S. investors can find that their assets vanish from the U.S. and appear instead in the UK, despite contact with an ostensibly American organisation.

 

Potentially as simple as having MF Global UK Limited, an English subsidiary, enter into a prime brokerage agreement with a customer, a U.S. based prime broker can immediately take advantage of the UK's unrestricted re-hypothecation rules.

While we already mentioned AIG as an example of the lax UK-based regulatory regime, it is another failed bank that is perhaps the best example of levered failure but in the specific re-hypothecation context: Lehman Brothers itself.

This is exactly what Lehman Brothers did through Lehman Brothers International (Europe) (LBIE), an English subsidiary to which most U.S. hedge fund assets were transferred. Once transferred to the UK based company, assets were re-hypothecated many times over, meaning that when the debt carousel stopped, and Lehman Brothers collapsed, many U.S. funds found that their assets had simply vanished.

 

A prime broker need not even require that an investor (eg hedge fund) sign all agreements with a European subsidiary to take advantage of the loophole. In fact, in Lehman's case many funds signed a prime brokerage agreement with Lehman Brothers Inc (a U.S. company) but margin-lending agreements and securities-lending agreements with LBIE in the UK (normally conducted under a Global Master Securities Lending Agreement).

 

These agreements permitted Lehman to transfer client assets between various affiliates without the fund's express consent, despite the fact that the main agreement had been under U.S. law. As a result of these peripheral agreements, all or most of its clients' assets found their way down to LBIE.

And now we get back to the topic at hand: MF Global, why and how it did precisely what Lehman did back then, why it did this in London, and why its failure is a symptom of something far more terrifying than merely investing money in collapsing PIIGS bonds.

MF Global's Customer Agreement for trading in cash commodities, commodity futures, security futures, options, and forward contracts, securities, foreign futures and options and currencies includes the following clause:

 

     "7. Consent To Loan Or Pledge  You hereby grant us the right, in accordance with Applicable Law, to borrow, pledge, repledge, transfer, hypothecate, rehypothecate, loan, or invest any of the Collateral, including, without limitation, utilizing the Collateral to purchase or sell securities pursuant to repurchase agreements [repos] or reverse repurchase agreements with any party, in each case without notice to you, and we shall have no obligation to retain a like amount of similar Collateral in our possession and control."

 

In its quarterly report, MF Global disclosed that by June 2011 it had repledged (re-hypothecated) $70 million, including securities received under resale agreements. With these transactions taking place off-balance sheet it is difficult to pin down the exact entity which was used to re-hypothecate such large sums of money but regulatory filings and letters from MF Global's administrators contain some clues.

 

According to a letter from KPMG to MF Global clients, when MF Global collapsed, its UK subsidiary MF Global UK Limited had over 10,000 accounts. MF Global disclosed in March 2011 that it had significant credit risk from its European subsidiary from "counterparties with whom we place both our own funds or securities and those of our clients".

It gets even worse when one considers that over the years the actual quality of good collateral declined, meaning worse and worse collateral was to be pledged in these potentially infinite recursive loops of shadow banking fractional reserve lending:

Despite the fact that there may only be a quarter of the collateral in the world to back these transactions, successive U.S. governments have softened the requirements for what can back a re-hypothecation transaction.

 

Beginning with Clinton-era liberalisation, rules were eased that had until 2000 limited the use of re-hypothecated funds to U.S. Treasury, state and municipal obligations. These rules were slowly cut away (from 2000-2005) so that customer money could be used to enter into repurchase agreements (repos), buy foreign bonds, money market funds and other assorted securities.

 

Hence, when MF Global conceived of its Eurozone repo ruse, client funds were waiting to be plundered for investment in AA rated European sovereign debt, despite the fact that many of its hedge fund clients may have been betting against the performance of those very same bonds.

At this point flashing red lights should be going though the head of anyone who lived through the AIG cataclysm: in effect the rehypothecation scenario affords the same amount of leverage, and potentially even less supervision that the CDS market. Said otherwise, the counteparty risk of daisy chaining defaults is on par with that in the case of AIG.

As well as collateral risk, re-hypothecation creates significant counterparty risk and its off-balance sheet treatment contains many hidden nasties. Even without circumventing U.S. limits on re-hypothecation, the off-balance sheet treatment means that the amount of leverage (gearing) and systemic risk created in the system by re-hypothecation is staggering.

 

Re-hypothecation transactions are off-balance sheet and are therefore unrestricted by balance sheet controls. Whereas on balance sheet transactions necessitate only appearing as an asset/liability on one bank's balance sheet and not another, off-balance sheet transactions can, and frequently do, appear on multiple banks' financial statements. What this creates is chains of counterparty risk, where multiple re-hypothecation borrowers use the same collateral over and over again. Essentially, it is a chain of debt obligations that is only as strong as its weakest link.

And the kicker:

With collateral being re-hypothecated to a factor of four (according to IMF estimates), the actual capital backing banks re-hypothecation transactions may be as little as 25%. This churning of collateral means that re-hypothecation transactions have been creating enormous amounts of liquidity, much of which has no real asset backing.

It turns out the next AIG was among us all along, only because it was hidden deep in the bowels of the unmentionable shadow banking system, out of sight (by definition) meant out of mind. Only it was not: and at last check there was $15 trillion in the shadow banking system in the US alone, where the daisy chaining of counteparty risk meant that any liquidity risk flare up would mean the AIG bankruptcy would be amateur hour at the Apollo!

But where does one look for the next AIG? Who would be stupid enough to disclose the fact that they have essentially the same risk on their off-balance sheet books as AIG had on its normal books? Once again, we turn to Reuters:

The lack of balance sheet recognition of re-hypothecation was noted in Jefferies' recent 10Q (emphasis added):

 

    "Note 7. Collateralized Transactions
    We pledge securities in connection with repurchase agreements, securities lending agreements and other secured arrangements, including clearing arrangements. The pledge of our securities is in connection with our mortgage?backed securities, corporate bond, government and agency securities and equities businesses. Counterparties generally have the right to sell or repledge the collateral.Pledged securities that can be sold or repledged by the counterparty are included within Financial instruments owned and noted as Securities pledged on our Consolidated Statements of Financial Condition. We receive securities as collateral in connection with resale agreements, securities borrowings and customer margin loans. In many instances, we are permitted by contract or custom to rehypothecate securities received as collateral. These securities maybe used to secure repurchase agreements, enter into security lending or derivative transactions or cover short positions. At August 31, 2011 and November 30, 2010, the approximate fair value of securities received as collateral by us that may be sold or repledged was approximately $25.9 billion and $22.3 billion, respectively. At August 31, 2011 and November 30, 2010, a substantial portion of the securities received by us had been sold or repledged.

    We engage in securities for securities transactions in which we are the borrower of securities and provide other securities as collateral rather than cash. As no cash is provided under these types of transactions, we, as borrower, treat these as noncash transactions and do not recognize assets or liabilities on the Consolidated Statements of Financial Condition. The securities pledged as collateral under these transactions


2012 -- The End of America -- trillion dollar deficits Collapse the

Posted: 07 Dec 2011 03:05 PM PST

A Tsunami of debt is growing and will drown the United States by 2020. Unfunded entitlement promises will be ruinous to keep and if cut will likely bring civil unrest. Sovereign insolvency is likely to spread across the Globe as higher interest rates are demanded for government borrowing. America faces a terminal decline as an economic Superpower as stagnation and high unemployment sap its strength.

The End of America as we know it to be is imminent. That is a bold statement and I do not make it lightly, but it is the truth. My reasons are varied and many and there is ample evidence that have led me to make that statement. I'll try to keep this blog post short, but include as much fact as I can to back that statement.

What the Government Has Up It's Sleeve
Ben Bernake says he has the magic pill to restore the dollar and it's been used a few times before in history. Notably the Romans and our own President used it in 1935 and it's simply devaluing the dollar and inflating precious metal prices, then backing the currency with that inflated metal. Read more....


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

Bix Weir: Join the holiday silver drive

Posted: 07 Dec 2011 02:28 PM PST

10:23p ET Wednesday, December 7, 2011

Dear Friend of GATA and Gold (and Silver):

Bix Weir of the Road to Roota Letter reminds everyone today that silver coins may be the holiday gifts that truly keep on giving -- not just appreciating in value over the years but helping to protect individual liberty by sustaining a currency potentially independent of overbearing and intrusive government. Weir's commentary is headlined "The Holiday Silver Eagle Drive" and you can find it at the Road to Roota Internet site here:

http://www.roadtoroota.com/public/758.cfm

If you're inclined to heed Weir's suggestion, the coin and bullion dealers recommended by GATA's supporters will be glad to assist you:

http://www.gata.org/node/173

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



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For Continuous Wealth Creation, the Hera Research Newsletter

The life cycles of companies that produce natural resources allow investors to allocate assets among companies at different stages of development and to profit from transitions between stages.

Based on natural resource company life cycles, the Hera Research Newsletter maximizes profits through deep, fundamental analysis at each stage of development and by moving gains back to earlier-stage companies in a continuous wealth-creation process.

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Discover the unique value of the Hera Research Newsletter by visiting:

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Or call Ron Hera at 360-339-8541x101.



Join GATA here:

Vancouver Resource Investment Conference
Sunday-Monday, January 22-23, 2012
Vancouver Convention Centre West
Vancouver, British Columbia, Canada

http://cambridgehouse.com/conference-details/vancouver-resource-investme...

California Investment Conference
Saturday-Sunday, February 11-12, 2012
Hyatt Grand Champions Resort
Indian Wells, California, USA

http://cambridgehouse.com/conference-details/california-investment-confe...

Support GATA by purchasing gold and silver commemorative coins:

https://www.amsterdamgold.eu/gata/index.asp?BiD=12

Or 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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Golden Phoenix Signs Definitive Agreement
to Acquire and Reopen Santa Rosa Gold Mine in Panama

Company Press Release
Monday, September 19, 2011

SPARKS, Nevada -- Golden Phoenix Minerals Inc. (OTC Bulletin Board: GPXM) has signed a definitive agreement to acquire a 60 percent interest, with an option to buy an additional 20 percent interest, in the Santa Rosa gold mine in Panama, now owned by Silver Global S.A., a Panamanian corporation.

Santa Rosa produced more than 100,000 ounces of gold from 1996 to 1998 before being closed in part to low gold prices, which are now more than five times higher.

Golden Phoenix intends to acquire its initial 60 percent interest in Santa Rosa by acquiring 60 percent of the share capital of a recently created company under the name Golden Phoenix Panama S.A., formed to hold and operate the mine.

Tom Klein, CEO of Golden Phoenix says: "The agreement establishes a solid framework from which we can advance Mina Santa Rosa to production-ready status."

For Golden Phoenix's complete statement, please visit:

http://goldenphoenix.us/press-release/golden-phoenix-signs-definitive-ac...



Ron Hera interviews Hugo Salinas Price about remonetizing silver

Posted: 07 Dec 2011 02:20 PM PST

10:16p ET Wednesday, December 7, 2011

Dear Friend of GATA and Gold (and Silver):

Financial letter writer Ron Hera today interviews Hugo Salinas Price, president of the Mexican Civic Association for Silver and a speaker at GATA's Gold Rush 2011 conference in London in August, about his plan for remonetizing the silver ounce Libertad coin in Mexico and the plan's prospects in Mexico's Congress. The interview is headlined "Hugo Salinas Price: What Every Politician Needs to Know about Silver" and it's posted at GoldSeek's companion site, SilverSeek, here:

http://news.silverseek.com/SilverSeek/1323272915.php

And at 24hGold here:

http://www.24hgold.com/english/news-gold-silver-hugo-salinas-price-what-...

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



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Golden Phoenix Completes Operating Agreement
for Santa Rosa Gold Mine in Panama

Golden Phoenix Minerals Inc. (GPXM) has entered a joint venture operating agreement with Silver Global S.A., a Panamanian corporation, governing the operational and management aspects of their new joint venture company, Golden Phoenix Panama S.A., a Panamanian corporation formed to hold and operate the Santa Rosa gold mine in Canazas, Panama, and explore the mine's adjacent property.

Golden Phoenix will be manager of the joint venture company. Silver Global will handle all social programs, political and community relations, and human resource matters for the joint venture company in Panama. Golden Phoenix and Silver Global also have agreed to work together on all future acquisitions within Panama and to bring such new opportunities to the joint venture company.

Golden Phoenix will be earning in to a 60 percent interest (and potentially an 80 percent interest) in the Santa Rosa mine. Upon signing the joint venture agreement and completing the corresponding acquisition payment, Golden Phoenix will earn an initial 15 percent interest in the joint venture company.

Tom Klein, CEO of Golden Phoenix, says the agreement "creates a solid foundation for the development and planned re-opening of Mina Santa Rosa."

For Golden Phoenix's full statement on the joint venture operating agreement, please visit:

http://goldenphoenix.us/press-release/golden-phoenix-completes-joint-ven...



Join GATA here:

Vancouver Resource Investment Conference
Sunday-Monday, January 22-23, 2012
Vancouver Convention Centre West
Vancouver, British Columbia, Canada

http://cambridgehouse.com/conference-details/vancouver-resource-investme...

California Investment Conference
Saturday-Sunday, February 11-12, 2012
Hyatt Grand Champions Resort
Indian Wells, California, USA

http://cambridgehouse.com/conference-details/california-investment-confe...

Support GATA by purchasing gold and silver commemorative coins:

https://www.amsterdamgold.eu/gata/index.asp?BiD=12

Or 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

For Continuous Wealth Creation, the Hera Research Newsletter

The life cycles of companies that produce natural resources allow investors to allocate assets among companies at different stages of development and to profit from transitions between stages.

Based on natural resource company life cycles, the Hera Research Newsletter maximizes profits through deep, fundamental analysis at each stage of development and by moving gains back to earlier-stage companies in a continuous wealth-creation process.

Hera Research covers a pipeline of high-quality natural resource companies at different stages of development. The companies span discovery and production of gold, silver, and platinum group metals, select base metals, oil and gas, green energy, agriculture, rare earth elements, uranium, and more.

Discover the unique value of the Hera Research Newsletter by visiting:

http://www.heraresearch.com/newsletter.html

Or call Ron Hera at 360-339-8541x101.



ECB's 'qualitative easing' is more 'quantitative easing,' Davies tells King World News

Posted: 07 Dec 2011 02:15 PM PST

10:12p ET Wednesday, December 7, 2011

Dear Friend of GATA and Gold:

Hinde Capital CEO Ben Davies tonight tells King World News that the European Central Bank's plan for "qualitative easing" will be a form of "quantitative easing," more money creation to prop up troublesome banks. An excerpt from the interview is posted at the King World News blog here:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/12/8_KW...

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



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The United States Once Again Can Establish
a Stable Dollar Worth Its Weight in Gold

Lewis E. Lehrman, chairman of the Lehrman Institute, sponsor of The Gold Standard Now project, has released a plan to restore economic growth through a stable dollar.

The plan, titled "The True Gold Standard: A Monetary Reform Plan Without Official Reserve Currencies," responds to the recurrent economic crises of the last century and outlines a detailed proposal for America's leadership on "how we get from here to there." That is, how we get from the present unstable paper dollar to a stable dollar as good as gold.

James Grant, author and editor of Grant's Interest Rate Observer, says of the Lehrman plan: "If you have ever wondered how the world can get from here to there -- from the chaos of depreciating paper to a convertible currency worthy of our children and our grandchildren -- wonder no more. The answer, brilliantly expounded, is between these covers. America has long needed a modern Alexander Hamilton. In Lewis E. Lehrman the country has finally found him."

To learn more and to sign up for The Gold Standard Now's free, noncommercial, weekly report, "Prosperity through Gold," please visit:

http://www.thegoldstandardnow.org/gata



Join GATA here:

Vancouver Resource Investment Conference
Sunday-Monday, January 22-23, 2012
Vancouver Convention Centre West
Vancouver, British Columbia, Canada

http://cambridgehouse.com/conference-details/vancouver-resource-investme...

California Investment Conference
Saturday-Sunday, February 11-12, 2012
Hyatt Grand Champions Resort
Indian Wells, California, USA

http://cambridgehouse.com/conference-details/california-investment-confe...

Support GATA by purchasing a silver commemorative coin:

https://www.amsterdamgold.eu/gata/index.asp?BiD=12

Or 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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The Catfish, Your Savings & Japan's Gold Coin Giveaway

Posted: 07 Dec 2011 02:06 PM PST

by Adrian Ash BullionVault Wednesday, 7 December 2011 Don't be greedy, or a giant catfish might force you to spew out your savings... UNLIKE us – who are so smart today – ancient folk in ancient times used to believe the oddest things about how the world worked. The Japanese, for instance, long thought that earthquakes were caused by a giant catfish, shuffling and shifting whenever the great god of Kashima forgot to keep his foot on a heavy stone which held the beast down, deep beneath the coast of Honshu. Honoring the Kashima shrine, some 80 miles north-east of what was then Edo (modern-day Tokyo) was therefore a good idea. Because tectonic upheaval, causing death and destruction, was a sign that the god was neglecting his duty. November 1855 saw Kashima skip town, or so legend soon had it, leaving the god of fishing in charge of the stone and the catfish. What a mistake! The Great Ansei Earthquake killed 7,000 people at a stroke, and many more in the days and...


SHARING the COLLAPSE Message

Posted: 07 Dec 2011 01:23 PM PST

from Fabian4Liberty:

My experience on sharing the message of collapse and how America is about fundamentally change.


4 Reasons to be Bearish

Posted: 07 Dec 2011 01:15 PM PST

Betting against equities – the market – is always difficult.  First, the market isn't designed to go down.  Companies provide those goods and services for one reason – to turn a profit, and hopefully, such activity can be recognized with a rising stock price.  Second, our economic stewards and political leaders (wisdom?) use the stock market as a vehicle that validates all that they do.  Fixing a crisis is one thing, but fixing a crisis and having the Dow confirm such actions with a 600 point move is even better.   Call this headline risk to any short position because market participants are likely to shoot first and ask questions later on any rumor.  When was the last time you heard some elected official say "run for the hills"?  There is always the hope that they can fix the problem.  For example, this week alone, we have US Treasury Secretary, Tim Geithner, in Europe for "important" meetings.  That's 3 days of headlines telling us Europe's problems will be fixed.

Nonetheless, here we find a market hoping for a Santa Claus rally just like they were hoping for the traditional Thanksgiving lift that showed up about a week late.  How did that work out for you?  Thanksgiving week was the worst Thanksgiving week since 1932.  Oh well.

So why I am a bearish?  I have 4 reasons.

The first is purely technical.  See figure 1 a weekly chart of the S&P Depository Receipts (symbol: SPY).  The red and black dots are key pivot points, which represent the best areas of support (buying) and resistance (selling).  The SPY is at a prior key pivot point (126.89) that was support but it is now resistance.  There is also resistance from the down sloping 40 week moving average.  The SPY is at the upper end of its price range.  How it got to this point –i.e., a rally built on poor volume and breadth — is another concern.  In essence, I would rather short the market at this point because if wrong I will be shown an exit rather quickly.  This would be a "meaningful" close above the aforementioned resistance levels.

Figure 1. SP500/ weekly

The second reason has to do with my belief that we are headed into a recession.  This can be seen by my real time recession indicator, which is shown in figure 2  a monthly chart of the SP500.  (See this article to read about the real time recession indicator.)  The red price bars are those times when there is a risk of the economy going into a recession.  As can be seen in this snapshot, the risk of recession seems to coincide with prices being below the simple 10 month moving average.  So with the SP500 bumping up against the simple 10 month moving average and with the economy on recession watch, I am willing to say, "prove me wrong".  A close above this level would have me re-thinking my thesis.  I like to think of the simple 10 month moving average as the line of hope, and in a recession, that hope keeps getting crushed.  We shall see if this time is different.

Figure 2. SP500/ monthly

The third reason has to do with trading models that characterize the current trends in the Dollar and Treasury as being bullish.  Last summer, when the Fed announced QE2, equities really didn't take off until the Dollar Index sank and Treasury yields started moving higher.  The current situation is completely opposite to the Summer of 2010, and every market watcher knows that there are only two trades in this market: the Dollar and Treasury bonds (risk off) or everything else (risk on).   Figure 3, a weekly chart of the SP500, shows this graphically.  In the middle panel is an analogue chart of the Dollar trend which is currently up.  The lower panel shows an analogue chart for the trend in Treasury bonds, and this is up to.  The vertical black line is August, 2010, and we note that equities took off when these two trends reversed.

Figure 3. SP500/ weekly

The final reason has to do with market sentiment.  Currently, market sentiment is neither bullish nor bearish, and this presents a problem for the bulls for several reasons.  If there were more bears, I could make the argument that this is bullish.  (This is the traditional interpretation.)  If and when the market turns higher, there will be plenty of short covering to fuel any rally, and there will be plenty of investors willing to chase prices higher as they are on the sidelines wanting in.  If too many bears is a good thing (and it usually is about 80% of the time), then too many bulls must be bad.  But that really isn't the case.  Why?  At important market junctures, like market bottoms in 2003 and 2009, too many bulls was a good thing.  In essence, it took bulls to make a bull market. But in the current market environment, we have neither bulls nor bears.  There are no bears to provide short covering fuel for a rally and the bulls don't seem to be particularly interested for anything but a trade.

So let's put it all together.  Prices are at resistance.  There is risk of recession.  There are intermarket headwinds.  And investors aren't committed either way.  I think this skews the dynamic to the downside even if there is headline risk.

How will I know if I am wrong?  As silly as it sounds, higher prices on bullish news.  And the appearance of bullish sentiment as investors truly embrace that news and get their speculative mojo back.  Until that happens, I am willing to say, "prove me wrong".

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The Militarization of American Police – and Shredding of Our Constitutional Rights – Started At Least 30 Years Ago

Posted: 07 Dec 2011 01:03 PM PST

POLICE BEING MILITARIZED NATIONWIDE

Journalists from across the spectrum have documented the militarization of police forces in the United States, including, CNN, Huffington Post, the Cato Institute, Forbes, the New York Times, Daily Kos, Esquire, The Atlantic, Salon and many others.

Many police departments laugh at and harass Americans who exercise their right to free speech (pro tip for ZH readers - listen to the officer call protesters "Scurrying Cockroaches" at 1:50):

 

 

 

 

Indeed - especially since police brutality against protesters has been so blatant in recent months, while no top bank executives have been prosecuted - many Americans believe that the police are protecting the bankers whose fraud brought down the economy instead of the American people:

 

 


iVjUA The 1%

 

 

Some are comparing police brutality towards the Occupy protesters to that used by Israeli forces against Palestinian protesters. Indeed, numerous heads of U.S. police departments have traveled to Israel for "anti-terrorism training", and received training from Israeli anti-terrorism experts visiting the U.S. See this, this, this, this, this

.

 

MILITARIZATION OF POLICE STARTED IN 1981

Most assume that the militarization of police started after 9/11. Certainly, Dick Cheney initiated Continuity of Government Plans on September 11th that ended America's constitutional form of government (at least for some undetermined period of time.) On that same day, a national state of emergency was declared … and that state of emergency has continuously been in effect up to today.

But the militarization of police actually started long before 9/11 … in the 1980s.

 

Radley Balko testified before the House Subcommittee on Crime in 2007:

Militarization [of police forces is] a troubling trend that's been on the rise in America's police departments over the last 25 years.

***

Since the late 1980s, Mr. Chairman, thanks to acts passed by the U.S. Congress, millions of pieces of surplus military equipment have been given to local police departments across the country.

We're not talking just about computers and office equipment. Military-grade semi-automatic weapons, armored personnel vehicles, tanks, helicopters, airplanes, and all manner of other equipment designed for use on the battlefield is now being used on American streets, against American citizens.

Academic criminologists credit these transfers with the dramatic rise in paramilitary SWAT teams over the last quarter century.

SWAT teams were originally designed to be used in violent, emergency situations like hostage takings, acts of terrorism, or bank robberies. From the late 1960s to the early 1980s, that's primarily how they were used, and they performed marvelously.

But beginning in the early 1980s, they've been increasingly used for routine warrant service in drug cases and other nonviolent crimes. And thanks to the Pentagon transfer programs, there are now a lot more of them.

(And see this.)

Huffington Post notes:

Former Seattle Police Chief Norm Stamper published an essay arguing that the current epidemic of police brutality is a reflection of the militarization (his word, not mine) of our urban police forces, the result of years of the "war on drugs" and the "war on terror. Stamper was chief of police during the World Trade Organization protests in Seattle in 1999, and is not a voice that can be easily dismissed.

And Jamie Douglas notes:

Ever since Ronald Reagan in 1981 helped draw up the Military Cooperation With Law Enforcement Act, quickly passed by a very cooperative congress, effectively circumventing the Posse Comitatus Act of 1878 by codifying military cooperation with law enforcement, the military has been encouraged to give any and all law enforcement agencies unfettered access to all military resources, training and hardware included. The military equipment was designed to be used by American fighting forces in combat with "the enemy," but since a law was passed in 1994, the Pentagon has been able to donate all surplus war materiel to America's police departments. The National Journal has compiled a number of statistics showing that in the first three years after the 1994 law came into effect, the "Department of Offense" stocked police departments with 3800 M-16 assault rifles, 2185 M-14's, 73 grenade launchers, and 112 armored personnel carriers, as well as untold number of bayonets, tanks, helicopters, and even some airplanes. Regardless who will be in power in the future, the militarization of the police will continue. After all, who wants to appear as being soft on crime? These days, a chief of police's office is like a doctor's office, but instead of getting swamped with drug salesmen, they have very congenial visits with the merchants of popular oppression, the salesmen of weapons, various chemical agents, Tasers, body armor, and all kinds of tracking software, surveillance gear, and anything else the department may need for crowd control and to infiltrate dissidents, which are no more than US citizens wanting to restore the republic to its rightful place.

NUMEROUS OTHER ASSAULTS ON LIBERTY STARTED PRIOR TO 9/11 AS WELL

Numerous other assaults on our liberty started before 9/11.

For example, the Patriot Act was planned before 9/11. Former Counter Terrorism Czar Richard Clarke told Stanford law professor Lawrence Lessig:

After 9/11 the government drew up the Patriot Act within 20 days and it was passed.

The Patriot Act is huge and I remember someone asking a Justice Department official how did they write such a large statute so quickly, and of course the answer was that it has been sitting in the drawers of the Justice Department for the last 20 years waiting for the event where they would pull it out.

(4:30 into this video).

The government's spying on Americans also began before 9/11 (confirmed here and here. And see this). Indeed, Dick Cheney, Donald Rumseld and other government officials who held high positions in the George W. Bush administration pushed for wiretaps without approval by a judge … in the 1970s.

(And because the "temporary" crackdown on civil liberties within America is being justified by the "War on Terror", the fact that that war was planned 20 years ago is arguably relevant. Especially since we are in a perpetual war - see this, this, this and this - and so our liberties will never be restored unless we demand it.)  

GOVERNMENT TARGETING GRANDMAS ... INSTEAD OF ACTUALLY WORKING TO REDUCE TERRORISM

The militarization of police forces throughout the United States cannot be taken in a vacuum, but is part of the ongoing drift towards a police state. The government has said for years that American citizens on U.S. soil may be targets in the war on terror, is using anti-terrorism laws to crush dissent.

Indeed, you can be labeled as or suspected of being a terrorist simply for questioning war, protesting anything, asking questions about pollution or about Wall Street shenanigans, supporting Ron Paul, being a libertarian, holding gold, or stocking up on more than 7 days of food. Government agencies such as FEMA are allegedly teaching that the Founding Fathers should be considered terrorists. So perhaps that means that any people who like American values are "terrorist sympathizers".

Instead of doing the things which could actually make us safer, the Bush and Obama administrations have been harassing innocent grandmothers and other patriotic Americans (and doing things which increase the risk of terrorism.).

Image by Anthony Freda: www.AnthonyFreda.com Background concerning the image: Here and here

This trend is not just limited to the U.S.


All Hail The United States Of Germany? The Rest Of Europe Is Facing Either German Domination Or Financial Collapse

Posted: 07 Dec 2011 12:21 PM PST

from End of The American Dream:

It has now become very clear who dominates Europe. As European officials prepare to gather for one of the most important summits in EU history, it has become apparent that either the German plan for a new EU treaty is going to be adopted or there is not going to be a deal at all. Germany wants to impose strict new fiscal restraints on all of the eurozone nations. This would include a new 3 percent budget deficit rule with automatic sanctions on any violators. The European Court of Justice would be given power to decide whether or not an individual nation was complying with the 3 percent rule or not. A highly controversial new tax on all financial transactions is also being proposed, along with a number of other repressive new regulations that are designed to more tightly integrate Europe. Germany says that if all 27 EU nations are not willing to go along with a new treaty then it is prepared to strike an agreement with just the 17 nations that make up the eurozone. But not everyone is thrilled with what Germany is trying to do. Critics are saying that the German proposals (which are also being backed by the French) would mean a massive loss of sovereignty for most of the nations that make up the eurozone, and they would essentially turn the eurozone into "the United States of Germany".

Read More @ EndOfTheAmericanDream.com


Will A Euro Short Squeeze Launch Gold And Silver Higher?

Posted: 07 Dec 2011 12:03 PM PST

The Euro:  The financial news media's "Bad Flavor Of The Month".

Is it just me, or do you get the sense that the financial news media goes out of it's way these days to beat up on the "poor 'ol defenseless" Euro?  I won't bore you dear readers with a recitation of the "Euro headlines" we have all been bombarded with.  Suffice it to say, there have been so many, one wonders if there is any other financial news out there.  It's almost as if they "cover up" the real news in the financial world...are there no financial issues here in the USA worth reporting?

And all of the Euro news is so "negative".  As if  all the country's of Europe and their citizens were a large leper colony.  "Touch the Euro and you too shall fail."  ...or so the news media would have you believe...

The news media has everybody that will listen believing that the Euro is gasping for air and on the verge of collapse.  Is it really?

Europe has its debt problems, absolutely.  But so does the U.K., Japan...even China.  And there is that little matter of the $15 TRILLION of debt that America possesses.

America, the WORLD'S LARGEST DEBTOR NATION, and we hear nary a word about it.  And when we do, miraculously the debt issues in Europe quickly take over the headlines.  Is the American financial press trying to hide something?  It's pretty difficult to hide an elephant in the bathtub, but maybe if nobody talks about it, nobody will notice it's there!

Look at the one year daily chart of the Euro below [click on chart to enlarge]:


Notice on the far left, the Euro closed December 30, 2010 at 1.3382.  Notice on the far right, the Euro at 8PM est this evening was trading at 1.3407.  As of 8PM est, the Euro was UP 0.0025 on the year!  That's right folks, after almost a full year of trading, and COUNTLESS negative headlines declaring the imminent collapse of the Euro, THE EURO IS UP!

Hey, a picture is worth 1000 words right?

Over the past three months, the financial press, particularly the American financial press, have been abnormally harsh in their representation of the Euro AND the Eurozone countries.  Look at the above chart again closely.  Following Labor Day in America, the price of the Euro appears to have been beaten with an Ugly Stick.  Does anybody recall what occurred in the financial press around the Labor Day weekend in America?

That's right folks, the US Congressional Debt Ceiling Farce...um, Debate...AND...the S&P downgrade of US Treasury Debt.

Now we can't have that in the headlines can we?  All this negative talk about US Debt and a weak US Dollar...THAT IS NOT GOOD FOR CONFIDENCE.  The debt woes in Europe "must be" way worse, Goldman Sachs says so!

And so the latest round of Greek Debt Default began...and the Euro tanked after rising the last half of the summer on the back of a floundering US Dollar as the debt woes of the USA were front and center in the "financial news headlines".

The "fears" of a Greek Debt Default were fanned by the "financial news headlines" for the entire month of September.  The Dollar rose, investors lined up to buy the downgraded debt of the USA, and the imminent collapse of the Euro was at hand.

Suddenly, it seemed from out of nowhere, a resolution to the Greek Debt Crisis is announced, the Euro rises and the Dollar falls, and the American debt woes AND banking insolvencies begin to creep back into the headlines.  That is until Halloween when MF Global blows up....

Back down goes the Euro on new and bigger debt fears that Italy and Spain "may" default...shocking, I know.  And since Halloween, with headlines about MF Global few and far between, the headlines have been stuffed with Eurozone debt defaults and the "now certain" collapse of the Euro.  Is this to keep MF Global out of the headlines?  You tell me...look at the chart of the Euro again.

Getting a bit winded here, ...I think that the debt woes of Europe are covering up the COLOSSAL debt AND banking woes here in the USA.  Not to belittle the debt and banking issues in Europe, but seriously, why are the debt and banking issues in the USA getting so little mention in the "financial news headlines"?

OK...  The moral of our presentation today is "market sentiment" and the contrarian view of a market.

Think of a market, any market, in this case the Euro, as if it were a boat on a lake.  One side of the boat is for the Bulls, and the other side is for the the Bears.  What happens if one side of a boat gets too full?

BINGO!  It tips over...

Right now market sentiment with regards to the Euro is hugely bearish.  There is little room left on the Bears side of the boat.  A few more Bears move onto that side of the boat, and they'll all fall in the water leaving just a few Bulls in the boat all alone.  These Bulls that are left are the Contrarians...

Contrarians are an odd lot in the markets.  They are always looking to take the other side of a trade when a trade gets too one sided.  It's a simple philosophy that the Contrarian follows:

When every body wants to buy a market, they want to sell...when everybody wants to sell a market, they want to buy.

The contrarian is buying the Euro right now in the belief that Bears side of the boat is about to empty in a hurry.  With regards to today's Euro, the contrarian is a Bull in a Bear market.  He senses the bottom.

And in the case of today's Euro...the chart technicals, as they stand right now, support the Contrarian philosophy to a T.

But what is most telling of all about the "inside" of today's Euro market is its "net non-commercial short interest".

This is best described below in an essay I pinched off of the Lemetropole Cafe website yesterday.  [The folks at Planet Gata have got it goin' on.  I urge all of you to become subscribers.]


Rocket Shots Around The Corner,..


Calling all 'Rocketeers of the Happy Silver Ship'


I would suggest anyone still looking to book his seat on this precious journey to utopia, should get down to his local ticket office right now.


For the last 2 months the market lemmings have held back from suitable inflation hedging because of the dark spectre of Euro default hanging over this whole debasement fiasco!


But this roadblock looks to have about run it's course, and given that the only solution to it's demise is even larger sums of manufactured paper notes, the consequences are likely to be one of accelerated debasement in the world's most over valued commodity, paper money!


Note the two charts below and the extra-ordinary correlation between the two:


The first shows the technical set up presently in the Euro currency (red line), where non - commercial speculators are as short as they have been since mid 2010. The second shows the price of the Euro over the same time frame and one can see clearly how one shadows the other.




I have numbered each chart to highlight this blinding correlation,


(1) Both put in lows around June 2010
(2) Both then rose steeply into early August 2010
(3) Both then corrected back down for about a month
(4) Both then rose steeply again into Early November 2010
(5) Both then collapsed back into the beginning of January 2011
(6) Both then rose again strongly peaking out at the end of April 2011


The point about these two charts is to show how horribly wrong the non commercial speculators almost always get it! In mid 2010 their short position was at a multi-year extreme, co-inciding with a 20% rise in the currency over the post-ceding next 9 months, By Mid to late April they'd all scrambled over to the long side of the boat, amassing the largest collective long position for at least 18 months. And no surprise then to find that almost their entire basket of positions has been slaughtered ever since!


With them now all herded back onto the short side of the boat again, it is only reasonable to expect a multi-month rise in the Euro directly round the corner.


This will of course have negative connotations for the US Dollar that is long overdue a further fall, and should prove to be fire fuel for our next upwards vault in our favourite metals.


With Silver building strength in the early 30's these last 2 months, it looks increasingly likely that it's setting itself up for another grand assault on the 1980's high of $50 some point into 2012.


This should prove to be another very suitable place to load up for the longer term investor, because when/if the mighty $50 dam is finally breached, the run up should be explosive!


In poker terms, I'm 'all in',
The Thrusters are burning,
Best,
Rich (Live from 'The Bridge of the Silver Rocket Ship')



Taking all of the above into account, and believing that the Euro CANNOT be allowed to collapse, a positive resolution [or the appearance of one ;-) ] will be shortly forthcoming from the European bankers and politicos.  This will be cause for a mad dash to "buy" the Euro, forcing the shorts to cover in what just could be the most massive short squeeze ever in the currency markets.

The future of the US Dollar will dim quickly, but in the end, BOTH the US Dollar and the Euro are destined for the fiat money graveyard.

Got Gold you can hold?

Got Silver you can "squeeze"?

It's not too late to accumulate!

BUY REAL GOLD AND SILVER TODAY!!!


Interview with Hugo Salinas-Price: What Every Politician Needs to Know About Silver

Posted: 07 Dec 2011 11:50 AM PST

By Ron Hera December 7, 2011 ©2011 Hera Research, LLC * The Hera Research Newsletter (HRN) is proud to present a vitally important interview with Hugo Salinas-Price, Founder, Director and Honorary President of Grupo Elektra, S.A.B. de C.V., which is now run by his son, Ricardo Salinas-Pliego. Grupo Elektra is a part of Grupo Salinas, which owns businesses in the television industry, the telecommunications sector, banking and financial services, and other industries. Grupo Salinas companies include TV Azteca, Azteca América, Grupo Elektra, Banco Azteca, Afore Azteca, Seguros Azteca, Iusacell, Azteca Internet, GS Motors and Italika y la Asociación del Empresario Azteca. Each of the Grupo Salinas companies operates independently, with its own management and board of directors. Born in 1932, Mr. Salinas-Price became a follower of Austrian economics at a young age and is the author of three books and of numerous articles, both in Spanish and in English, on the use of s...


Start Thinking in Terms of Gold Price

Posted: 07 Dec 2011 11:50 AM PST

http://www.caseyresearch.com/editorial.php?page=articles/start-thinking-terms-gold-price&ppref=TBP426ED1211A The answer is simple: save in gold. The dollars you keep in a money-market account will steadily lose value year after year. In fact, monies deposited into a simple savings account in 2000 have lost an incredible 25% of their purchasing power since then. Conversely, if those savings were denominated in gold, the wealth [...]


Gold and Silver Rise / Waiting for Resolution from Europe on Dec 9 / Tomorrow Testimony from MFGlobal's Jon Corzine

Posted: 07 Dec 2011 11:42 AM PST

by Harvey Organ:

Good evening Ladies and Gentlemen:

Gold and silver had a good day today waiting patiently for news from Europe on how they can going to tackle their huge sovereign debts. Thus we are just marking time waiting for news to emanate from the EU leaders. Gold finished the comex session at $1740.90 up 13 dollars on the day. Silver on the other hand was held back finishing the day down 11 cents to $32.56 Let us head over to the comex and see what happened to inventory movements of silver and gold and also delivery notices.

The total gold comex OI rose by 2565 contracts to 422,956 from 420,391. The front delivery month of December saw its OI fall from 1223 to 1095 for a loss of 128 contracts. We had 358 delivery notices yesterday so again we gained in gold ounces standing and lost nothing to cash settlements. It seems that the bigger boys want their physical stuff. The next big delivery month is February and here the OI rose a touch from 262,795 to 263,107. The estimated volume at the gold comex today was very weak at 96,782. The confirmed volume yesterday, the day of another mini-raid saw its volume swell a bit to 145,868.

Read More @ HarveyOrgan.Blogspot.com


Gold Price Rose $13 Today to $1,740.90 While Silver Fell 11.7c

Posted: 07 Dec 2011 11:14 AM PST

Gold Price Close Today : 1740.90
Change : 13.00 or 0.8%

Silver Price Close Today : 3255.5
Change : 11.7 cents or -0.4%

Gold Silver Ratio Today : 53.476
Change : 0.589 or 1.1%

Silver Gold Ratio Today : 0.01870
Change : -0.000208 or -1.1%

Platinum Price Close Today : 1523.00
Change : 3.30 or 0.2%

Palladium Price Close Today : 681.05
Change : 12.80 or 1.9%

S&P 500 : 1,261.01
Change : 2.54 or 0.2%

Dow In GOLD$ : $144.82
Change : $ (0.52) or -0.4%

Dow in GOLD oz : 7.006
Change : -0.025 or -0.4%

Dow in SILVER oz : 374.64
Change : 2.76 or 0.7%

Dow Industrial : 12,196.37
Change : 46.24 or 0.4%

US Dollar Index : 78.41
Change : 0.049 or 0.1%

Confusion abounds: yesterday the GOLD PRICE fell and SILVER was was up, today just the opposite. The GOLD PRICE rose $13 today to $1,740.90. Silver fell 11.7c to 3255.5c, right at the bottom of my range.

During the day the SILVER PRICE dipped as low at 3218 but came right. The bottomy looking formation left on the chart Friday - Tuesday remains intact. More, silver remains above that rising trend line (bottom of the even-sided triangle). Obviously silver is much more vulnerable to a downdraft than gold, but until it breaks that support the trend has not broken down. My job is to report, not to anticipate -- well, not too much, anyway.

Mayhap I have not made myself entirely, pellucidly clear. I will therefore, try again.

1. Get out of IRAs and 401(k)s, and put the proceeds into physical silver or gold you hold in your own hands. Do NOT put the proceeds in anything else.

2. I do not recommend, or invest in, gold and silver stocks. Why? Because although the rationale for buying these mining stocks is that they offer leverage to the gold price, history shows that the precious metals mining stock indices, at least, do not outperform plain bullion. If they offer me no more leverage, then why would I take the extra risk above the gold price risk, namely, the enterprise risk? Answer: I wouldn't, so I don't buy them.

Yes, it is possible that SOME precious metals mining stocks will outperform the indices. Can you pick those? If not, you'd better find some great broker to pick them for you.

'Twas a marginal day, mumbling out of both sides of its mouth. Gold, silver, and dollar index all sailing awfully close to the wind.

All the drunks are sobering up again as this latest dose of Crisis-Cure Bust-skull wears off. Whoops! Turns out it won't keep you drunk forever after all. Turns out the crisis isn't solved after all, no matter how much Sarcophagus and Ferkel snuggle up to each other. Propaganda machine is plumping full-bore for more centralization.

Stocks knew not which way to turn today. With a last 45 minutes surge, Dow looks to have been the beneficiary of the beneficent Nice Government Men. After all, the level of the Potemkin stock market must be kept up.

Dow was down 100 early in the day, flirted with barely up/unchanged part of the day, then rose into the close. It ended 46.24 higher (0.38%) at 12,196.37, right at the 12,200 barrier. S&P500 rose 2.54 points or 0.20% to 1,261.01.

Y'all listen now: the Dow is smashing up against overhead resistance in the form of the neckline of a head and shoulders top formed during most of 2011. Could breach that slightly, but drag will be terrible, and won't make it much higher than 12,400 if that.

Dollar flirted with the dowside, too, down 9.4 basis points to 78.405. Yet the cord is not yet broken.

I heard that the communists in the United States senate passed another bill to strip us mushrooms of 6th Amendment rights, 93 to 7. Makes it easier for them to define you as a "terrorist" administratively and so strip you of rights in advance before any trial or other "red tape." Y'all are not paying attention. They will keep on doing this to you until you say NO in some way that will get clear through their muddled brains from one ear to the other.

Empires just have no room for statesmen with outdated republican (small R) virtues. They grow, rather, traitors and assassins aplenty.

Argentum et aurum comparenda sunt -- -- Gold and silver must be bought.

- Franklin Sanders, The Moneychanger
The-MoneyChanger.com

© 2011, The Moneychanger. May not be republished in any form, including electronically, without our express permission.

To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold; US$ or US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down.

WARNING AND DISCLAIMER. Be advised and warned:

Do NOT use these commentaries to trade futures contracts. I don't intend them for that or write them with that short term trading outlook. I write them for long-term investors in physical metals. Take them as entertainment, but not as a timing service for futures.

NOR do I recommend investing in gold or silver Exchange Trade Funds (ETFs). Those are NOT physical metal and I fear one day one or another may go up in smoke. Unless you can breathe smoke, stay away. Call me paranoid, but the surviving rabbit is wary of traps.

NOR do I recommend trading futures options or other leveraged paper gold and silver products. These are not for the inexperienced.

NOR do I recommend buying gold and silver on margin or with debt.

What DO I recommend? Physical gold and silver coins and bars in your own hands.

One final warning: NEVER insert a 747 Jumbo Jet up your nose.


Snow Cones and SWAT Teams

Posted: 07 Dec 2011 11:07 AM PST

December 7, 2011 [LIST] [*]Outrage over $11,700 for “homeland security snow cones”... while nearly $500 million in military surplus for local cops goes unnoticed [*]Eurodrama on pause: Rumor drives market up, denial drives market down [*]The elephant in the room when it comes to the payroll tax cut debate in Washington [*]Highly anticipated tech toy arrives in stores Dec. 19... Ray Blanco on the game-changing investment implications [*]Gold steady while precious metals ETF inflows explode... a stock offering sure to be oversubscribed... reader sees the upside of a European downgrade... and more! [/LIST] It’s one of those stories guaranteed to generate outrage — government spending $11,700 on snow cone machines from a budget allocated for “homeland security.” Maybe you saw it: The West Michigan Shoreline Regional Development Commission bought 11 of the machines with state money to distribute to its member counties and cites...


George Soros: Global Financial System In ‘Self-Reinforcing Process Of Disintegration'

Posted: 07 Dec 2011 10:57 AM PST

Billionaire investor George Soros says that the global financial system is on the brink of collapse.

Developed countries are falling into a "deflationary debt trap," in which consumer spending falls, products become more expensive, tax revenues drop, and sovereign debt grows, Soros said last week, according to the Wall Street Journal. As a result, he said, the global financial system is in a "self-reinforcing process of disintegration."

"The consequences could be quite disastrous," Soros, who was born in Hungary, said at the tenth anniversary of the International Senior Lawyers Project.

Concern is mounting that the eurozone may break up because of market pressure on European sovereign debt, which could plunge Europe into a depression and the world into a recession. Observers are already worried that Europe could suffer a recession and subsequent slow growth for several years even if it averts a eurozone breakup, since products would remain expensive in the euro, making consumers more hesitant to buy them and forcing governments to curtail budgets even more as consumer spending falls.

The markets have forced pressure on the eurozone because of these fears. Borrowing costs for Italy and Spain recently hit record highs, which economists say are unsustainable over the long term. Either of these countries would be forced to default on their debt if not enough investors are willing to buy their new sovereign debt at bond auctions.

If Italy or Spain defaults on their sovereign debt and leaves the eurozone, it would probably break up. Depositors likely would pull their investments from banks, large European banks would fail, borrowing costs for other countries would become unsustainable, and other countries would leave the euro. Such an outcome would depress lending and consumer spending and plunge Europe into a deep recession.

European leaders will meet for a summit on Thursday and Friday to try to reach an agreement to stave off a breakup of the eurozone — a deal they haven't been able to come to for two years.

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Jim Rogers: I’m Being Forced to Buy More Real Assets

Posted: 07 Dec 2011 10:46 AM PST

Always looking for bargain prices in commodities markets, famed investor Jim Rogers has been patiently awaiting a significant pullback in precious metals prices before adding to his stockpile.

But that plan may change for Rogers.

The Fed's statement released on Wednesday, in which it announced a coordinated 50-basis point cut in dollar swap rates with five other central banks, jolted Rogers into rethinking his buying strategy for precious metals and commodities, according to a GoldSeek interview with the 69-year-old commodities trader.

When GoldSeek Radio host Chris Waltzek asked Rogers whether he's buying commodities right now, the 69-year-old commodities trader said, "Well, not at the moment, but I'm seriously considering it given what's happening in the world . . . They [central banks] are going to loosen up even more on money. That's not good for the world, not good at all, but that's all they know how to do. So, I'm contemplating, being forced to buy more real assets."

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You can find today's interview on Bloomberg here:

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Guest Post: Start Thinking in Terms of Gold Price

Posted: 07 Dec 2011 10:43 AM PST

Submitted by Jeff Clark of Casey Research

Start Thinking in Terms of Gold Price

A young woman – let's call her Andrea – inherited some money from her father in late 1997. She was only nineteen at the time. Not knowing the first thing about investing, she kept the money in stocks and bonds as her father had, wanting to hold on to it until she really needed it. She played it "safe."

She got married last year and so began to withdraw the money. She was pleased to see a chart from the broker that showed her portfolio was up about 20%. While admittedly not a great return over 12 years, her account had nevertheless survived both the 2000 tech crash and the 2008 market meltdown. She knew not all investors could not say the same thing.

Andrea began spending the money, thankful that she'd saved the money to start a family. But a cruel reality slowly began to set in: the money didn't seem to be going very far. She couldn't quite put her finger on why, but it all clicked when she saw the lofty price of a new SUV she wanted. She remembered her Dad's favorite vehicle back in the day – a Ford Ranger pickup – and recalled him boasting that he paid only $8,500 for it in 1992. A comparable vehicle today costs more than twice as much.

It hit her like a slap in the face. While the number of dollars in her portfolio was greater than what she inherited, they bought less stuff. It was such a revelation that she actually uttered the words out loud…

"My investments didn't keep up with inflation… I LOST money!"

Gold Is the Benchmark

Whether they realize it or not, the same thing is happening to most people's investments. Over time, real returns are diluted because of inflation. The only reliable way to measure the value of investments is in terms of a financial intermediary that cannot be inflated: gold. That way, investors can tell how they're doing in real terms.

This has practical ramifications for all of us. Someday, we (or our heirs) are going to spend some of the wealth we are accumulating. How much we can actually buy with our gains will directly depend on how hard inflation has hit whatever our investments are denominated in. A 15% gain in dollars is only 9% in real terms if USD inflation was 6% during that time frame. A money-market return of 1% is a losing investment if denominated in something inflating at 3%. In Andrea's case, by keeping all her funds in dollars, her 20% gain turned into a 16% loss in purchasing power.

In other words, since most people don't adjust for inflation, their investments are not doing as well as they think.

In contrast, if Andrea had kept part of her inheritance in gold, that portion would have grown 332% (from December 1998 to June 2010, when she got married). More importantly, she would have lost no purchasing power during that time. In fact, after inflation and taxes, Andrea could've bought 50% more in goods and services than in 1998, if purchased using liquidated gold. She could buy two small pickup trucks today with the same number of gold coins it took her father to purchase the Ford Ranger in 1992. (This all while gold went nowhere for those first three years and lost a third of its value in the fall of 2008.)

With gold as her savings vehicle, she could have completely sidestepped the erosion in the dollar.

How have you done?

Re-Indexing in Gold – "This Changes Everything"

To demonstrate the effect of currency dilution, we've developed a tool for re-indexing popular indices from dollars to gold. Doing so provides a more accurate picture of the dilution of investments made in dollars (and would work just as well in euros or other currencies). We use gold in grams so the indices won't be priced in decimals.

Here's how the DOW has fared since 2000 when measured in both dollars and gold:

(Click on image to enlarge)

While the Dow Jones Industrial Average is up 4.7% in dollar terms, it's lost 82.5% when measured in gold grams. An investment of $10,000 on January 1, 2000 would total just $10,470 today (excluding dividends) – but in gold it's worth only $1,750.

In other words, investments made in the DJIA Index have not only lost money in real terms, they're worth a pittance when measured in gold. This is a breathtaking loss.

How about a broader measure of stocks, like the S&P 500?

(Click on image to enlarge)

The S&P 500 is down 15.1% in dollars since 2000, but it's lost 85.8% against gold. If you've owned an S&P index fund, you not only have fewer dollars that what you started with (excluding dividends) but have fallen dramatically behind when compared to the monetary asset of gold.

How about the technology sector?

(Click on image to enlarge)

Tech stocks show a whopping decline of 38% in dollars over the same time period, but money invested in that sector has lost 89.7% when measured in gold grams.

We also decided to look at some foreign markets. Are they doing better than the US?

(Click on image to enlarge)

The stock market for Hong Kong, one of the largest exchanges in Asia, shows an increase of 6% in dollars. However, it's lost 82.3% when priced in gold.

(Click on image to enlarge)

The primary stock market for UK companies is down 22.4% since 2000 calculated in dollars, but has fallen 87.1% in gold grams.

Conclusions

Obviously, measuring portfolios in dollars exaggerates performance in real terms. This isn't to say that one shouldn't invest in stocks. It means that one must: a) be cognizant of how results compare to gold or other real assets that one might buy with whatever currency one is dealing with; b) adjust brokerage statements to allow for currency dilution; and c) not rely on stocks in general to outpace inflation.

In fact, it isn't just investments that are eroding. Our entire world is being devalued, even as one reads this article – from groceries and gas to cars and college. Someday we'll want to spend the gains we're making; how will we avoid the long-term erosion of the currencies we invest in?

The answer is simple: save in gold. The dollars you keep in a money-market account will steadily lose value year after year. In fact, monies deposited into a simple savings account in 2000 have lost an incredible 25% of their purchasing power since then. Conversely, if those savings were denominated in gold, the wealth would have not only been preserved but increased. We believe this trend will continue – and accelerate. It will become increasingly important to your financial future that you cash in earnings from time to time and save them in precious metals – not in dollars, euros, yen, yuan, or even Swiss francs.

Don't make the mistake Andrea did. Save in gold. That new car or retirement home or world travel you want to spend money on someday will be a lot easier to afford if your savings are denominated in the one asset that can't be debased, devalued or destroyed.


Marc Faber: "I Have A Very Special Stock Tip For You. The Symbol Is G-O-L-D"

Posted: 07 Dec 2011 09:24 AM PST

It has been a while since the Marc Faber graced Zero Hedge. It is time to remedy that. Providing his traditional dose of snark, tragedy and realism, the Gloom, Boom and Doom report author spoke to Bloomberg TV, and when asked what his outlook for the euro is, dispensed the following pearl: "I have a very special stock tip for you. The symbol is g-o-l-d. That is what I prefer to hold. Both the euro and the dollar are long-term undesirable currencies, especially given zero interest rates in the U.S. Equities to some extent become like cash because they become a store of value compared to cash at a zero interest-rates. Paintings become a store of value, stamps become a store of value." Needless to say, this is the kind of response that will get him banned from CNBC for life when Bartiromo breathlessly asks him, "ok, you think the world is ending, so what five stocks would you buy." As for his latest report, "It's actually quite gloomy but if you're very gloomy what do you invest in: Treasuries, Italian bonds or commodities or equities?  I happen to think U.S. equities are not terribly expensive, so relatively speaking to other assets, they may for a while actually do quite well." Considering the ridiculousness of the market over the past two weeks when it has gone up on nothing but lies, Faber just may have a point. 

Some other highlights from Faber:

On the market now:

"Right now, the market is in neutral territory. It was very oversold on October 4th when the S&P dropped to 1,074. Now around 1260, the upside in my opinion will be between 1,280 and 1,350 because there's a lot of supply around that area. But if there is some good news coming out of Europe, and good news would simply mean postponing the problems for another few years with some kind of money printing operation, either by that ECB or IMF or EFSF, [that] lift stock prices higher."

"[Postponing problems] is not good news, but it is better news than if the whole eurozone falls apart. It gives some time to maybe find better solutions. I doubt they will be found, but with money printing you can hide a lot of things and you can postpone problems as we have seen in the U.S."

On whether he'd rather own euros or dollars:

"I have a very special stock tip for you. The symbol is g-o-l-d. That is what I prefer to hold. Both the euro and the dollar are long-term undesirable currencies, especially given zero interest rates in the U.S. Equities to some extent become like cash because they become a store of value compared to cash at a zero interest-rates. Paintings become a store of value, stamps become a store of value."

On emerging markets:

"There is close correlation between all markets in the world. This year, the U.S. has grossly outperformed the emerging markets   In Asia, we're down between 15% and 25% in markets. In Eastern Europe, even more. The U.S. this year is a wonderful market relative to the rest of the world. "

"I think this outperformance may go on for a while. Some emerging markets could rebound more strongly than the U.S. because they are more oversold. Like India, the currency is down 18% since July and the market is down 22%.  Currency adjusted, the market has been extremely weak and is oversold. It could rebound somewhat here, but forget about new highs. It's not going to happen anytime soon."

On China:

"The reason I'm not very keen on China at the present time [is because] we had a credit bubble, we still have artificially low interest rates and a huge fiscal deficit in orders words artificial stimulus. That's coming to an end. Yes, the government can further stimulate and slash interest-rates again and reduce reserve requirements, but it will just postpone the problem and aggravate the problem in my opinion."

"When you have an economy like China that becomes so big so quickly, you can have a more meaningful setback. If the U.S. economy grows at 3% or contracts that 3%, it has no impact on the price of copper to speak of….In the case of China, whether the economy grows at 10% or 5% as a huge impact on the demand for iron ore and copper and aluminum, steel and coal. The Chinese economy today has a much larger impact on the rest of the world than is generally perceived economically speaking."


Marc Faber: "I Have A Very Special Stock Tip For You. The Symbol Is G-O-L-D"

Posted: 07 Dec 2011 09:24 AM PST


It has been a while since the Marc Faber graced Zero Hedge. It is time to remedy that. Providing his traditional dose of snark, tragedy and realism, the Gloom, Boom and Doom report author spoke to Bloomberg TV, and when asked what his outlook for the euro is, dispensed the following pearl: "I have a very special stock tip for you. The symbol is g-o-l-d. That is what I prefer to hold. Both the euro and the dollar are long-term undesirable currencies, especially given zero interest rates in the U.S. Equities to some extent become like cash because they become a store of value compared to cash at a zero interest-rates. Paintings become a store of value, stamps become a store of value." Needless to say, this is the kind of response that will get him banned from CNBC for life when Bartiromo breathlessly asks him, "ok, you think the world is ending, so what five stocks would you buy." As for his latest report, "It's actually quite gloomy but if you're very gloomy what do you invest in: Treasuries, Italian bonds or commodities or equities?  I happen to think U.S. equities are not terribly expensive, so relatively speaking to other assets, they may for a while actually do quite well." Considering the ridiculousness of the market over the past two weeks when it has gone up on nothing but lies, Faber just may have a point. 

Some other highlights from Faber:

On the market now:

"Right now, the market is in neutral territory. It was very oversold on October 4th when the S&P dropped to 1,074. Now around 1260, the upside in my opinion will be between 1,280 and 1,350 because there's a lot of supply around that area. But if there is some good news coming out of Europe, and good news would simply mean postponing the problems for another few years with some kind of money printing operation, either by that ECB or IMF or EFSF, [that] lift stock prices higher."

"[Postponing problems] is not good news, but it is better news than if the whole eurozone falls apart. It gives some time to maybe find better solutions. I doubt they will be found, but with money printing you can hide a lot of things and you can postpone problems as we have seen in the U.S."

On whether he'd rather own euros or dollars:

"I have a very special stock tip for you. The symbol is g-o-l-d. That is what I prefer to hold. Both the euro and the dollar are long-term undesirable currencies, especially given zero interest rates in the U.S. Equities to some extent become like cash because they become a store of value compared to cash at a zero interest-rates. Paintings become a store of value, stamps become a store of value."

On emerging markets:

"There is close correlation between all markets in the world. This year, the U.S. has grossly outperformed the emerging markets   In Asia, we're down between 15% and 25% in markets. In Eastern Europe, even more. The U.S. this year is a wonderful market relative to the rest of the world. "

"I think this outperformance may go on for a while. Some emerging markets could rebound more strongly than the U.S. because they are more oversold. Like India, the currency is down 18% since July and the market is down 22%.  Currency adjusted, the market has been extremely weak and is oversold. It could rebound somewhat here, but forget about new highs. It's not going to happen anytime soon."

On China:

"The reason I'm not very keen on China at the present time [is because] we had a credit bubble, we still have artificially low interest rates and a huge fiscal deficit in orders words artificial stimulus. That's coming to an end. Yes, the government can further stimulate and slash interest-rates again and reduce reserve requirements, but it will just postpone the problem and aggravate the problem in my opinion."

"When you have an economy like China that becomes so big so quickly, you can have a more meaningful setback. If the U.S. economy grows at 3% or contracts that 3%, it has no impact on the price of copper to speak of….In the case of China, whether the economy grows at 10% or 5% as a huge impact on the demand for iron ore and copper and aluminum, steel and coal. The Chinese economy today has a much larger impact on the rest of the world than is generally perceived economically speaking."


Journalists Jumping To Conclusions Can Get Contusions

Posted: 07 Dec 2011 09:06 AM PST


Journalists Jumping To Conclusions Can Get Contusions

Courtesy of Lee Adler of the Wall Street Examiner 

Pedro da Costa, maybe the smartest and best reporter covering the Fed, and who seems like a good guy, has a blog post out suggesting that the $50 billion ECB dollar lending operation today will cause the Fed's balance sheet to expand. He's piggy backing on Mike Derby's column in the Wall Street Journal, most of which is behind a paywall, so I don't have the full story on that. I think that the conclusions are unwarranted, or at least premature, until we see the Fed's H41 statement for this week or next, depending on when the funding settles. If not same day, the effect would not show up until next week's H41.

Da Costa's piece implies that one result of the loan will be a jump in the Fed's custody accounts of foreign central bank holdings of Treasuries and Agencies and that that would somehow imply an increase in the size of the Fed's balance sheet. First, even assuming all of the $50 billion came via swaps with the Fed, custody holdings are custody holdings. They are assets of foreign central banks (FCB). They are not part of the Fed's asset base. There is no direct connection between the swaps and the custody holdings. I have no clue why he thinks that the ECB lending dollars to its constituent banks would cause an increase in FCB holdings of Treasuries and Agencies. If the ECB is investing those dollars in loans to banks, then they can't be buying Treasuries with them. The point he makes there, makes no sense in that respect.

In fact, sale of those custody holdings would be one means by which the ECB could have raised the $50 billion in USD to fund these loans. That would have NO IMPACT on the Fed's balance sheet. It would not involve the Fed supplying one red cent.

Even if we assume that the Fed does fund the swaps, there are a number of ways that can be done and simultaneously sterilized. Even beyond sterilizing the impact, there are ways it may be accomplished which would actually shrink the balance sheet!  ("A sterilized intervention means an intervention that doesn't affect the monetary base — swapping dollar t-bills for euro T-bills, or T-bills for mortgage-backed securities." - Krugman.)

In fact, the Fed's balance sheet has been shrinking since June as MBS holdings have been paid down, and the replacement MBS purchases have apparently all been 60 day forwards. As a result, the Fed's assets have shrunk by about $50 billion since July, and, all other things being equal, would not begin to rebuild to the $2.654 trillion SOMA target until the purchase program is complete this coming June, and the settlements continue through August. The point here is that the Fed has shown no inclination to grow its balance sheet. There's been a lot of hot air about it, but they haven't pulled the trigger.

I reported to Professional Edition subscribers last month the big withdrawal from the bank reserves deposits at the Fed that went into Other Deposits. I tried, but failed, to interest any mainstream reporters, including your friend and mine, Mike Derby of the Wall Street Journal, and Greg Robb of Marketwatch, in this massive transfer. There have now been several massive deposits and withdrawals between bank reserves and Other deposits on the Fed's balance sheet in the past several months. The net amount remaining in Other was $52.8 billion last Wednesday. That's a sea change from the nominal amounts typically held in Other deposits.

"Other," as defined by the Fed, includes "foreign official organizations," along with GSE direct deposit accounts at the Fed, and the account of the US Exchange Stabilization Fund (ESF), aka the Plunge Protection Team, which operates out of the U.S. Treasury.

Since we are making assumptions, let's assume that the $52 billion are mostly funds of "foreign official organizations." If these are ECB funds and the ECB withdraws them to fund these dollar loans, this would force the Fed to either borrow the dollars itself, which would seem to be a non starter under current market circumstances, or sell SOMA Treasury holdings outright, thereby SHRINKING rather than expanding the Fed's balance sheet. The Fed could not on the one hand see its liabilities reduced and its assets increased. It cannot "reprint" a withdrawal of money that was already in existence and on deposit. The immutable law of double entry accounting would not allow it. The Fed would have to sell assets to fund the withdrawal, i.e. the reduction of the existing deposit liability under this scenario.

Now I have no clue what WILL happen, but neither does Mike Derby, unless he just got off the phone with the Fed's media leak line. Maybe he's right, maybe not. If they are right, then the commodity speculators will swing into action. But if they are wrong, and the loans are funded via means such as described above, the implications would be bearish for stocks and commodities. Because I like Pedro, I want to warn him that we should wait until the data is in before we jump to conclusions and maybe end up with reportorial contusions.

 

Note:

I was confused about the paying down of MBS and how that affects the Fed's balance sheet, and so asked Lee to explain further.  Here's what he wrote back. ~ Ilene

Lee: The Fed's MBS holdings are gradually paid down when mortgage borrowers pay off their mortgages, either because they sell their houses (or they go into foreclosure and the lender sells it and writes off a portion) or when they refinance their mortgages and a new lender takes out the original lender. 

In order to prevent its balance sheet from shrinking the Fed has undertaken various securities purchase programs. Since QE2 ended in June, the Fed's objective was to hold the balance sheet steady at $2.654 trillion. Each month it attempted to estimate in advance the rate at which its MBS holdings would be paid down and it scheduled purchases of Treasury securities to replace the MBS paydowns, making up any shortfall or adjusting for any overage the following month. 

When the Fed began Operation Twist in early October, it changed its MBS replacement program. Instead of purchasing Treasuries from the Primary Dealers, it opted to purchase MBS from them, in the hopes of more directly boosting the housing market. However, instead of immediate settlement of the purchases as was the case with the Treasury purchases, the MBS purchases were 60 day forward contracts. As a result from late September on, MBS were being paid down and disappearing from the Fed's balance sheet, but no new purchases had settled. No new MBS purchases were settled until the last week of November. The first settlement (approx $5 billion) will be reflected on the H41 to be released Thursday evening. But MBS will continue to be paid down as the Fed's purchases begin to settle each week. The MBS purchase program is due to end in June. The settlements will continue until August.  All other things being equal, the Fed's balance sheet would remain below its target of $2.654 trillion until next August. 

This is all a technicality, but the fact remains that the Fed is tight, and that even if they did actually print the $50 billion in swaps, it would only bring the balance sheet up to the target level.

 

Get regular updates on the US housing market, and stay up to date with the machinations of the Fed, Treasury, Primary Dealers and foreign central banks in the US market…stay ahead of the herd. Click this link to try WSE's Professional Edition risk free for 30 days! 


By the Numbers: A Closer Look at the Real Wealth of US Households

Posted: 07 Dec 2011 09:02 AM PST

Bill Bonner View the original article. December 07, 2011 10:59 AM Americans are poorer than they think… Dow up again yesterday. Gold still bouncing around… The press is still focused on Europe. A "deal over eurozone fiscal rules," was announced earlier in the week. Every day brings more speculation about what form the final deal will take…and whether the European Central Bank will lend a hand. Nobody really wants to sell stocks. Because a real deal might send stock prices shooting up in a giant Christmas rally. They don't want to buy either. Because a failed deal might send them collapsing. So investors watch…and wait. In America and Europe investors are playing it cool. Congress has to extend the payroll tax cut by December 16th or the economy is probably going to bite the dust. But no one seems particularly concerned about it. The automatic cuts probably aren't going to happen — at least, not the way they were supposed to happen. The pols are negotiatin...


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