saveyourassetsfirst3

attempted silver raid fails
Macro Uncertainty To Drive Value For Newmont, Gold Fields
Dexia bank/Deutsche Bank/Greece/Silver and Gold Standings at the Comex/ Iran
Sunken Coins Bound For Spain After Legal Battle
Ben Davies: Central-Bank Buying Has Gold Shorts Trapped
Collections: scottbgw's Metals Collection
Links 2/25/11
WATCH: Fifteen Million Dollar Conspiracy
WATCH: The Next Gold Upleg
Silver Update: “Silver Salvage”
Silver & Gold Looking at Gains on Week Despite “Dull Markets” and “Muted Demand” in India and China
Blueprint for a Gold Bank
By the Numbers for the Week Ending February 24
$15 Trillion Bond Fraud to Prop up the U.S. Dollar
First Trust Plans Dividend ETFs, State Street Files For Corporate Bond Funds
Noteworthy Insider Buys And Sells In Consumer And Retail Sectors Wednesday To Friday
Europe's Road to Nowhere (Part II)
An Infinite Source of Energy Resources
Gold and Silver Disaggregated COT Report (DCOT) for February 24
Barrick May Soar 64%, Besting Newmont
This little-owned commodity could be starting its first major bull market in 31 years
Casey Research explains the latest developments in rare earth metals
We could finally have a buy signal on the world's cheapest, most hated stocks
Top manager Burbank: Oil will not stop "until the economy breaks"

Posted: 25 Feb 2012 04:02 AM PST

interesting charts of raid at link

http://silverdoctors.com/

Silver has put in a monster rally this week, and much to the cartel's dismay, was preparing to close the week above $35.50 today, preparing a break-out next week that could potentially fill the gap from the September smash to $40, and see silver off to the races back to challenge the all-time nominal highs near $50.

Obviously, the cartel stepped in with a massive paper raid to prevent such a bullish weekly close.

That's where things got interesting and likely induced more than a few Myocardial Infarctions today among JPMorgan execs.

Check out the following price and volume chart screen shot on this 1-minute silver chart courtesy NetDania.

Notice the massive volume that began at approximately 14:47, with 4,000 paper contracts dumped on the market in a single minute, followed by 2,500, 1,800, 3,200, 3,000, 2,900, and 3,100 over the next 6 minutes.

After dumping 102.5 million ounces of paper shorts on silver in 7 minutes, silver fails to collapse into a waterfall decline, and STAGES AN OUTSIDE REVERSAL TO CLOSE THE GLOBEX SESSION BACK ABOVE $35.50!!!

Macro Uncertainty To Drive Value For Newmont, Gold Fields

Posted: 25 Feb 2012 03:17 AM PST

By Takeover Analyst:

Although gold offers an attractive hedge against macroeconomic uncertainty, analysts are reserved on a few producers. According to T1 Banker, Newmont (NEM) and Gold Fields (GFI) are both rated just around a "hold". However, based on my multiples analysis and review of the fundamentals, I find decent room for upside for both companies.

From a multiples perspective, both firms are fairly attractive. Newmont trades at a respective 13.5x and 11.7x past and forward earnings, while Gold Fields trades at a respective 21.8x and 7.2x past and forward earnings. To put this in greater context, consider that Newmont is only valued at nearly half of its 3 Digit MG Group PE multiple!

At its fourth-quarter earnings call, Gold Fields' management noted a strong year:

"Earnings went up 536% in 2011 compared to 2010. And we made just shy of $1 billion. $973 million of earnings was generated by Gold Fields for

Complete Story »

Dexia bank/Deutsche Bank/Greece/Silver and Gold Standings at the Comex/ Iran

Posted: 25 Feb 2012 02:09 AM PST

Sunken Coins Bound For Spain After Legal Battle

Posted: 25 Feb 2012 12:29 AM PST

Author:

Ed Steer

Yesterday in Gold and Silver

Jax_Drupal

February 25, 2012 2:29pm GMT

In gold, the high of the day came about 9:20 a.m. in London... and from there the price declined in fits and starts for the rest of the trading day both there... and in New York later in the day. The gold price basically traded in a ten-dollar price range all of Friday. Nothing to see here, folks... please move along.

Gold closed the day at $1,773.60 spot... down $6.50 on the day. Net volume was the lightest all week at 115,000 contracts... give or take.

It was pretty much the same story in silver, with the high of the day coming at the same 9:20 a.m. time in London. Silver traded within two bits of the $35.50 spot price during the entire Friday trading day.

The silver price closed on Friday at $35.41 spot...up a whole 4 cents. Gross volume was well over 90,000 contracts once again... but netted out to a pretty light 26,000 contracts once all the spread and roll-overs out of the March contract were removed.

The dollar index rose a bit once it opened in the Far East on their Friday morning. The high of the day came around 1:20 p.m. Hong Kong time... and then spent almost twelve hours declining about 55 basis points. The index hit its low at precisely 1:00 p.m. in New York... and then proceeded to gain back a bit of that loss. The dollar index closed down about 42 basis points.

This decline obviously didn't have much impact on gold and silver prices yesterday.

The gold stocks pretty much followed the gold price tick for tick yesterday... and the HUI finished down 1.34% on the day. The HUI finished up 4.06% on the week.

The silver stocks obviously suffered from a bout of profit-taking yesterday... and despite the fact that silver finished up a few pennies on the day, Nick Laird's Silver Sentiment Index also closed down 1.34%.

I was eagerly looking forward to yesterday's CME Daily Delivery Report... and I was not disappointed nor surprised by what I saw. In gold, there were 154 contracts posted for delivery on Tuesday... and in silver, it was 180 contracts.

Although there was no prize for getting it right, I was correct in assuming that Jefferies would be the big short/issuer and that the Bank of Nova Scotia and JPMorgan would be the big long/stoppers... but that's almost exactly what happened. Jefferies issued 177 contracts of the total... and the Bank of Nova Scotia received/stopped 176 of those contracts. The link to yesterday's Issuers and Stoppers Report, which is well worth checking out, is here.

The CME's preliminary volume report for Friday showed that another 10 silver contracts were added to the February delivery month, bringing the total up to 185... of which 180 were delivered yesterday. Is there more to come? Beats me, but Jefferies et al. only have two more business days left to get it done, if there is.

So far in February, there have been 946 silver contracts delivered... and we're now at almost 2,200 contracts delivered for January and February combined, which are huge numbers considering the fact that neither month is a delivery month for that particular precious metal. I'll have more to say on this issue in my February 29th column.

With all this silver being delivered in these off months, one has to wonder what kinds of delivery numbers will be posted on First Day Notice in March silver next Tuesday evening.

Gold and silver continued to pour into the two big ETFs yesterday. GLD received another 58,303 ounces from an authorized participant... and SLV took in another big chunk on Friday as well... 1,943,188 troy ounces... almost exactly the same amount as they added on Thursday.

And, for the second day in a row, there was no sales report from the US Mint.

It was another big day over at the Comex-approved depositories on Thursday. Between the Brink's and Delaware depositories, they received 1,125,475 troy ounces of silver... and Scotia Mocatta shipped out 1,250,725 ounces. The link to that action is here.

It was another frantic week at these five depositories once again... and I'm sure that Ted Butler will have something to say about it in his comments to subscribers later today.

I knew that I wouldn't be thrilled with yesterday's Commitment of Traders Report... and I wasn't. However, as Ted pointed out, the increase in the Commercial net short position could have been worse... but it was bad enough... and checked in with an increase of 1,878 contracts. Ted says that it was the '4 or less' traders in the Commercial category who were responsible for all of the increase. Which means that the lion's share of that amount was sold by JPMorgan in order to prevent the price from running away to the upside.

The total Commercial net short position now sits at 39,188 contracts, or 195.9 million ounces. Based on my back-of-the-envelope calculation... and once you remove all the market-neutral spread trades... JPMorgan (all by themselves) is short a bit more than 25% of the entire Comex silver market. The Commercial traders have sold 25,000 silver contracts short (125 million paper ounces) since the late-December lows. One can only imagine what three-digit silver price we would have if JPMorgan et al. hadn't been there.

But as bad as the COT was in silver, it was just plain ugly in gold, as the Commercial net short position rose an eye-watering 19,894 contracts... a hair under 2 million ounces. The Commercial net short position has now blown out to 22.9 million ounces. These are not extreme numbers (extreme is over 30 million ounces), but the danger flags are now flying.

Without doubt, the situation has deteriorated a lot further since the Tuesday cutoff... as both Wednesday and Thursday were big up days. And as Ted pointed out on the phone yesterday, it's been the '4 or less' traders stepping in front of this market on the short side to prevent both gold and silver prices from blasting to the outer edges of the known universe. They are the short sellers of last resort.

Here's Ted Butler's 'Days of World Production to Cover Short Positions' that Nick Laird produces every week. As you can see, the four precious metals are the most rigged markets on the Comex, with silver leading the pack by a goodly margin. You should also note that the largest and most concentrated short positions are held by the '4 or less' traders... and the tallest hog at the trough in all four metals is, without a doubt, JPMorgan.

(Click on image to enlarge)

Here's another chart that Nick Laird sent me last night that's worth looking at it. It's the "Total PMs Pool". As Nick mentioned in his covering email, "There are new highs in ounces... and soon-to-be new highs in value."

(Click on image to enlarge)

This next graph comes courtesy of South African reader Dave Toms. As he said in his email, "Note how we in South Arica are doing with the rand vs. gold. The graph is terrifying! " Yes, it is. But it's also a clarion call to own precious metals in the face of rapidly depreciating fiat currency. In the near future, a lot more countries will have currency charts that look like that.

(Click on image to enlarge)

I have the usual number of stories today, so I hope you'll find time over the weekend to at least skim the parts that I've cut and pasted on each one.

I certainly was not amused with yesterday's Commitment of Traders Report... and I'm not likely to be enthralled with next Friday's report, either.

Central Bank Buying Has Gold Shorts Trapped: Ben Davies. Now China is Venezuela's partner in developing Las Cristinas gold project. Ancient plants back to life after 30,000 frozen years.

Critical Reads

SEC Joins Running for Worst Rogue Agency

Jax_Drupal

February 25, 2012 2:29pm GMT

The alphabet-soup federal bureaucracies seem to be engaged in a contest to see who can do the most to steamroll the legitimate legislative process and compromise freedom and economic growth.

To date it has been a neck-and-neck race between the EPA, which is pursuing a head-spinningly aggressive anti-energy and anti-development agenda, and the NLRB, which is rewriting federal labor laws to allow union bosses to force workers into unions and infamously sued Boeing for locating in a right-to-work state. Of course, the FDA, HHS, IRS, FCC, and the rest also have been in on the act.

But the Securities and Exchange Commission (SEC) is now distinguishing itself as a new contender in the top tier of the worst rogue agencies.

This story was posted over at the Fox News website yesterday...and I thank Washington state reader S.A. for bringing it to my attention. The link is here.

Stockton, California, May Ask Bondholders to "Suffer," City Officials Say

Jax_Drupal

February 25, 2012 2:29pm GMT

Stockton, California, may take the first steps toward becoming the most populous US city to file for bankruptcy next week because of burdensome employee costs, excessive debt, and bookkeeping errors that misrepresented accounts, city officials said yesterday.

The Stockton City Council will meet February 28 to consider a type of mediation that allows creditors to participate, the first move toward a Chapter 9 bankruptcy filing under a new state law. The council will also weigh suspending some payments on long-term debt of about $702 million, according to a 2010 financial statement.

Stockton, a farming center about 80 miles (130 kilometers) east of San Francisco, has fought to avert bankruptcy by shrinking its payroll, including a quarter of the roughly 425-member police force. At 292,000, the city has more than twice as many residents as Vallejo, California, which became a national symbol for distressed municipal finance in 2008 when it sought protection from creditors.

This Bloomberg story, posted on its website late last night, was sent to me by West Virginia reader Elliot Simon...and the link is here.

"America's Per Capita Government Debt Worse than Greece": Senator Jeff Sessions

Jax_Drupal

February 25, 2012 2:29pm GMT

The office of Senator Jeff Sessions, ranking member on the Senate Budget Committee, sends along this chart, showing that America's per capita government debt is worse than Greece, as well as Ireland, Italy, France, Portugal, and Spain.

This chart was posted over at the weeklystandard.com website late yesterday morning...and I thank Phil Barlett for sending it along. The link is here.

Stop the Nonsense about the "Falling Dollar" Being the Cause of Rising Gasoline Prices

Jax_Drupal

February 25, 2012 2:29pm GMT

I ran the Forbes story about this in Friday's column and then received the following story from reader Ian Nunn with the comment..."You chose to reference the Forbes article. Here's the analysis that debunks it." Mish Shedlock was underwhelmed by that Forbes article...and had this to say about it...

Louis Woodhill, Forbes contributor says he applies "unconventional logic to economic issues". He proves it with this headline report Gasoline Prices Are Not Rising, the Dollar Is Falling

Forget the "logic" and skip straight to reality.

Mish's take on things was posted on his globaleconomicanalysis.blogspot.com website yesterday...and you can read all about it here.

David Rosenberg Presents the Six Pins that Can Pop the Complacency Bubble

Jax_Drupal

February 25, 2012 2:29pm GMT

The record volatility and 400-point up-and-down days in the DJIA of last summer seem like a lifetime ago, having been replaced by a smooth, unperturbed, 45-degree-inclined sea of stock market appreciation, rising purely on the $2 trillion or so in liquidity pumped into global markets by the central printers, ever since Italy threatened to blow up the Ponzi last fall. In short – we have once again hit peak complacency.

This item was posted over at the zerohedge.com website yesterday... and I thank Australian reader Wesley Legrand for sharing it with us. The link is here.

Art Cashin: Bank Run May Accelerate and Short Squeeze in Euro

Jax_Drupal

February 25, 2012 2:29pm GMT

Art Cashin told King World News yesterday that we are witnessing a slow-motion bank run in Greece. Cashin, who is director of floor operations for UBS (which has $612 billion under management), also said it needs watching because if it accelerates it would be the first sign Greece is going to default.

Here is what Art Cashin had to say: "What you are watching, and people always use the example of

Ben Davies: Central-Bank Buying Has Gold Shorts Trapped

Posted: 25 Feb 2012 12:29 AM PST

Ben Davies: Central-Bank Buying Has Gold Shorts Trapped

"A new player came into the market and that caught the market substantially offside. It started on Monday. The market was quiet but a lot of option activity was taking place in the market and then again on Tuesday in the physical (market)."

"A bigger player (and a new player) came into the market and it's a central bank. The fact is people don't get what's happening and that tells me the market is going higher."

This blog was posted over at the King World News website yesterday... and the link is here.

Collections: scottbgw's Metals Collection

Posted: 24 Feb 2012 11:37 PM PST

TVR salutes gold and silver bug Scott, second in the new "collections" series.

from scottbgwb:
I have over 2,000 ounces of gold and silver in various forms… in this clip you will see a large number of bars, silver rounds, medallions, scrap silver coin and silverware. I am of the view that physical silver will trade at US$100 per ounce by the end of 2011, making a joke of the spot PAPER price.

~TVR

Links 2/25/11

Posted: 24 Feb 2012 07:39 PM PST

Eagle owl at 1000 frames per Second towards a camera Dogwork (hat tip Lambert) I've featured this before but it is still cool.

ADVENTURES IN BEHAVIORAL NEUROLOGY—OR—WHAT NEUROLOGY CAN TELL US ABOUT HUMAN NATURE Edge (hat tip reader Aquifer)

Would We Have Drugged Up Einstein? How Anti-Authoritarianism Is Deemed a Mental Health Problem Alternet (hat tip reader Aquifer)

Smallest legal apartment in California is prefab, adorbs Grist (hat tip reader Aquifer)

There is no ethical smartphone Andrew Leonard, Salon

Eighth grade teacher 'caught in bed having sex with her student, 15, by his 12-year-old brother' Daily Mail (hat tip reader May S)

Finally, a smoking gun connecting livestock antibiotics and superbugs Grist (hat tip reader Aquifer)

German Economic Striving at the Expense of Workers and Neighbors Will Backfire Marshall Auerback, Alternet

Germany softens resistance on 'firewall' Financial Times

Family of three dies from apparent starvation in Japan Guardian (hat tip reader Emiliano Z). Really sad. Their cat died too.

Fresh questions overshadow launch of Sun on Sunday Guardian (hat tip Buzz Potamkin)

Why the super-rich love the UK Guardian (hat tip Buzz Potamkin)

Solidarity within the Eurozone: how much, what for, for how long? Notre Europe (hat tip Swedish Lex)

Rising prices of Iranian sheep's intestines triple costs for German bratwurst makers Der Spiegel (hat tip

Saudi Arabia backs arming Syrian opposition Guardian (hat tip reader May S). Warmongering on the other side of the pond.

U.S. does not believe Iran is trying to build nuclear bomb LA Times (hat tip reader May S). Please tell Elizabeth Warren.

Payroll tax cut undermines Social Security's security LA Times (hat tip reader Aquifer). They are finally figuring this one out.

Wall Street Shills Hype How Much Preet Bharara Could Make If He Stopped Shielding Wall Street Marcy Wheeler

The 10 Most Excellent Reasons to Attack Iran David Swanson (hat tip reader Aquifer). You have to read this.

Fisher: Qur'an blunder has made Afghan mission more dangerous Montreal Gazette (hat tip reader May S)

Students Physically Attacked for Interrupting Israel Talk in New Mexico Atlantic Wire (hat tip Lambert)

Donovan: The Foreclosure Fraud Settlement Is Strong Because of the OCC Settlement Dave Dayen, Firedoglake

THE OCCUPY SUPER PAC NON-STORY: HOW LAZY HACKS HELPED BREITBART SMEAR THE OCCUPY MOVEMENT Yasha Levine, eXiled

UK House of Lords Asked to Investigate Massive International Financial Fraud Nation of Change. This looks completely batshit, except you can click through and find the excerpted text on what looks to be the Parliament's website, and Lord James said RBS verified the transfers attributed to it.

Bonus cuts hide bigger problem for investment banks Financial Times. This is salutary. Investment bankers will have more power, and they care for their franchises more than traders do (not that bankers are princes, but traders are more ruthless). That will constrain some of the worst predatory behavior.

Have labour will travel MacroBusiness. There are some important observations in this piece, marred by a bit of gold standard thinking

Would We Have Drugged Up Einstein? How Anti-Authoritarianism Is Deemed a Mental Health Problem Alternet (hat tip Aquifer). Today's must read.

Antidote du jour. This is reader Scott's cat Allie. Her brother D'Art (for D'Artagnan), who has an Austrian survival of the fittest outlook, got a profile in NC after made his hostility to Marshall Auerback's free-spending monetary views quite apparent. Allie's been jealous ever since.

WATCH: Fifteen Million Dollar Conspiracy

Posted: 24 Feb 2012 06:57 PM PST

from Fabian4Liberty:
Another trillion dollar scam appears to be taking place. Is this a hoax as the Federal Reserve Bank of New York claimed back in 2007? Our the $6 Trillion in fake bonds a hoax? Or is it something more

~TVR

WATCH: The Next Gold Upleg

Posted: 24 Feb 2012 06:56 PM PST

Trace Mayer: The Next Dollar Downleg And Gold Upleg

from runtogold:

~TVR

Silver Update: “Silver Salvage”

Posted: 24 Feb 2012 06:22 PM PST

from BrotherJohnF:
BJF predict an upcoming "slingshot for silver in the 2.24.12 Silver Update.

Got Physical ?

~TVR

Silver & Gold Looking at Gains on Week Despite “Dull Markets” and “Muted Demand” in India and China

Posted: 24 Feb 2012 04:14 PM PST

BullionVault
Friday 24 February 2012, 08:30 EST

Silver & Gold Looking at Gains on Week Despite "Dull Markets" and "Muted Demand" in India and China

U.S. DOLLAR gold bullion prices held steady around $1780 an ounce Friday morning London time, having fallen slightly from yesterday's 3-month high.

Silver bullion meantime hit its highest level since September, rising to $35.74 per ounce just after London opened.

"Silver has finally broken out of its sideways range," says Russell Browne, technical analyst at bullion bank Scotia Mocatta.

"We have also cleared the previous resistance at $35.16…and this level should now start to act as support."

Stocks and commodities were relatively flat going into this weekend's G20 meeting, while government bond prices ticked higher.

Heading into the weekend, gold bullion at Friday lunchtime looked set for a weekly gain of over 3%, with silver looking at a gain of over 6% on last Friday's close.

However "the market is still dull" says gold dealer Pinakin Vyas, assistant vice president at IndusInd Bank in Mumbai, which imports gold bullion.

"Gold prices have moved up $40 [in two days], so people will take time to digest these prices."

"While one would not expect strong physical demand as prices push higher," adds a note from Swiss investment bank UBS, "the overall weakness in physical demand of late has caught our attention…in India, volumes have eased this week."

UBS also sees signs of slower activity on the Shanghai Gold Exchange.

"SGE premiums have been hovering at the lower end of the range, reflecting consistently muted demand out of China post-Lunar New Year."

The ongoing Eurozone crisis is expected to dominate discussions at this weekend's meeting of G20 finance ministers and central bank governors in Mexico. Eurozone leaders will be encouraged to increase the size of the so-called 'firewall', the European Stability Mechanism bailout fund, before asking for help from the International Monetary Fund, the Financial Times reports.

"IMF resources cannot be a substitute for further steps by the Eurozone to support its currency," UK chancellor George Osborne and Japanese finance minister Jun Azumi wrote in a jointly-authored FT article yesterday.

"The Eurozone must increase the resources of its firewall so the markets can be reassured that it can respond to any eventuality."

"Until Europe starts showing more signs that it's getting its act together," adds Mohamed El-Erian, chief executive of world's largest bond fund Pimco, in the same organ Friday, "the other G20 members must resist [pressure for the IMF to lend]."

Germany remains opposed to increasing the size of the €500 billion ESM, due to become operational in July, by adding to it funds that remain in the existing temporary bailout vehicle the European Financial Stability Facility.

The German Bundestag is due to vote Monday on whether to approve the second Greek bailout deal earlier this week, while Eurozone leaders are set to discuss the ESM's size at a summit next Thursday.

Germany appears to be the only Eurozone nation opposed to an increase after Dutch finance minister Jan Kees de Jager expressed his support for such a move on Wednesday.

"We're aware we're pretty isolated," one German source tells newswire Reuters.

"But this has to be a unanimous decision."

Another source told the newswire that domestic politics creates a disincentive for German politicians to support the idea:

"It doesn't help anyone to agree on something that isn't going to go through the Bundestag."

Elsewhere in Europe, the European Commission yesterday revised down its growth forecasts for the Eurozone. It now expects the single currency area as a whole to see its economy shrink 0.3% in 2012 – compared to its forecast last autumn for 0.5% growth.

Spain's government has asked the Commission to ease its budget deficit target following the revised forecasts.

Eurozone banks could seek to borrow around €470 billion at next week's 3-Year longer term refinancing operation by the European Central Bank, according to the median estimate of a survey by news agency Bloomberg. This would represent a small decline from the amount borrowed at December's LTRO, as well as a dig drop from earlier estimates that €1 trillion.

ECB president Mario Draghi has stressed that there is "no stigma" in borrowing at the LTRO, and that "the facilities are there to be used".

"It is really monetary expectations that are making the investment rationale for gold," reckons Bayram Dincer, analysts at LGT Capital Management.

"Conditional on those expectations, it makes sense, but the potential for disappointment, and price consolidation, is a given."

Across the Atlantic, US Mint sales of American Eagle gold bullion coins so far this month are down 87% on January's total by weight, according to US Mint data.

So far this year, 4.4tonnes of the gold coins – the most popular gold investment coin produced by the US Mint – have been sold.

By comparison, the US Mint sold over seven tonnes in the first two months of 2011.

Ben Traynor
BullionVault

Gold value calculator | Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK's longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.

(c) BullionVault 2011

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Blueprint for a Gold Bank

Posted: 24 Feb 2012 01:09 PM PST

Throughout history gold has been used in transactions and as a form of savings. Today, using gold to make payments is no longer practised in the Western world, many argue this is due to the impracticality of using the precious metal. However this no longer need be the case. Below, Ralph Hazell, explains how your gold investment could one day turn into a means for making payments in a number of ways.

Electronic gold: The combination of the internet, electronic payment systems, and gold are a game changer for the banking system

One of the reasons that paper money started was that it was more convenient than carrying around gold. You find this in Europe in the late 16th century in Venice. You might have deposited your gold coins with Banco della Piazza di Rialto, which was a state run bank set up to facilitate trade through paper transactions rather than actual coins. On depositing your gold, the bank would have given you notes, or a bill of exchange, which you could use to purchase goods with, on the basis that these notes could then be cashed in for gold coins, or the new owner of the notes would deposit the notes back with the issuing bank in the knowledge that the gold equivalent was in their "account" with the bank.
Fast forward to 2012, we have a similar system of carrying notes and coins around, we also have internet banking and card processing through companies such as Visa and Mastercard, but we also have online payment systems such as PayPal. But the big difference is that the paper or digital money is not convertible into gold, it is what is called "fiat money" which basically means it is backed by nothing and its prevailing purchasing power depends on the confidence in the issuing central bank to maintain a stable currency.
We can make payments through all these different mediums with all sorts of government sponsored currencies such as Pounds Sterling, US dollars and Japanese Yen. Surely it is a good for people to be able to make payments in gold or its digital, fully backed equivalent? Another currency could then compete for our savings and transactions. Who could possibly argue that this is not a good addition to the global monetary system?!

The two key roles of money are as a medium of exchange, and equally as a store of value for people's savings. This can work in exactly the same way as it has throughout history. Gold is stored somewhere, an approved vault with ViaMat, except payments are made digitally rather than with paper.

So how can this work in practise?

Online gold payments:

Digital payments with gold have been in operation since the early internet days. The technology for making a payment for something with digital gold is very similar to how PayPal operates with global currencies. The challenge is the credibility of the provider.

Card processing:

This is a bit more complicated, as we might be a few years off from Mastercard and Visa processing payments in gold, however you could easily have a debit card that is linked to a gold account, and whenever a payment is made, gold leaves the gold account and pounds (or a currency of your choice)are paid out through the card payment system.

Mobile phone:

This would be similar to online peer to peer (P2P) payments, where you don't have the added problem of having to go through the payments system, or Visa or Mastercard. The vendor and purchaser would simply need to be part of the same gold network. Whether the payment is a transfer instruction given on their phone or a contactless type payment that sends an instruction to make a payment, the transaction can be seamless.

A Gold bank account:

The most attractive part of using gold as an alternative to conventional currencies is that you can save in gold. This would be in a fully backed environment, not through the unstable fractional reserve system (that Mervyn King so publically criticised in 2010). If the customer owns 200 grams of gold, then all of that gold is set aside for him; he owns it completely free of any counterparties.

For instance, when you choose to buy gold with The Real Asset Co, at the point of the transaction, there is some gold in a vault that you own. You can manage and view this online like with your bank account. Because gold is a very efficient and liquid market, you can buy and sell your gold within a very efficient trading spread. By people owning gold this way, as they have for hundreds of years, it diversifies the risk away from government issued currencies, which means more liberty and choices for those people.

One institution providing all of these elements together could become a blue print for a gold banking system. It should function pretty much like a normal bank account, with a debit card that is accepted all over the world. The only difference is that your core holding is gold rather than dollars, pounds or euros.

Gold banking is as simple as that. What are we waiting for?
"But when you recall that one of the first moves by Lenin, Mussolini and Hitler was to outlaw individual ownership of gold, you begin to sense that there may be some connection between money, redeemable in gold, and the rare prize known as human liberty" The Hon Howard Buffet

By the Numbers for the Week Ending February 24

Posted: 24 Feb 2012 12:08 PM PST

HOUSTON -- Just below is this week's closing table.

If the image is too small click on it for a larger version.

That is all for now, but there is more to come.

$15 Trillion Bond Fraud to Prop up the U.S. Dollar

Posted: 24 Feb 2012 10:32 AM PST

I am not sure yet where this story will lead, but it is interesting nonetheless due to the scale of the potential fraud – $15 TRILLION! This is the total amount of the U.S. 'official' debt.

Lord James of Blackheath has done his research and claims that the money is the property of what [...]

First Trust Plans Dividend ETFs, State Street Files For Corporate Bond Funds

Posted: 24 Feb 2012 10:08 AM PST

By Stoyan Bojinov:

Investors on Wall Street have endured another tumultuous week as domestic indexes have been flirting with historically significant resistance levels while developments in the financially fragile eurozone appear to be progressing toward stability (see Is SPY Overbought?). Despite the back-and-forth price action in the stock market, issuers have continued to fill the product pipeline with exciting offerings. First Trust and State Street have both filed with the SEC for several intriguing products to come.

First Trust, the issuer behind the AlphaDEX product lineup, has filed with the SEC to bring to market several dividend-focused equity funds along with a commodity ETF.

First Trust Dividend AlphaDEX Fund: This ETF will seek to replicate the price and yield performance of the Defined U.S. Dividend Index. The underlying index is a modified equal-dollar weighted index designed by Standard & Poor's to objectively identify and select securities from the S&P U.S. BMI Index, using

Complete Story »

Noteworthy Insider Buys And Sells In Consumer And Retail Sectors Wednesday To Friday

Posted: 24 Feb 2012 09:08 AM PST

By Ganaxi Small Cap Movers:

We present here two noteworthy buys and six noteworthy sells from Wednesday, Thursday and Friday's SEC Form 4 (insider trading) filings in the consumer and retail sectors, as part of our daily and weekly coverage of insider trades (the basic materials and energy sectors, and the technology sector, were covered in separate articles, hyperlinked above). These were selected by a review of over 790 separate transactions in over 450 different companies filed by insiders on Wednesday and Thursday, and an additional 200 or so filings so far today. The filings are noteworthy based on the dollar amount sold, the number of insiders buying or selling, and based on whether the overall buying or selling represents a strong pick-up based on historical buying and selling in the stock (for more information on how to interpret insider trades, please refer to the end of this article):

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Europe's Road to Nowhere (Part II)

Posted: 24 Feb 2012 09:05 AM PST

[Ed Note: Satyajit Das is a keynote speaker at After America. You can read Part I of his essay here]

The proposed [European] plan is fundamentally flawed. It made no attempt to tackle the real issues - the level of debt, how to reduce it, how to meet funding requirements or how to restore growth. Most importantly there was no new funds committed to the exercise.

Over the next few months, the euro zone faces a number of challenges including: the implementation of the new arrangements, possible downgrading of a number of nations, refinancing maturing debt and meeting required economic targets. There will also be complex political and social pressures.

Implementation of the new fiscal compact may not be a fait accompli. The lack of agreement by Britain makes the change more complex. A number of treaties and protocols need to be amended. There are also doubts as to whether the "work around" will be legally effective.

At least four governments have indicated that agreement to the changes is contingent on the precise legal text. One key area of concern is the precise form and extent of powers granted to the EU to police national budgets.

Another relates to the structure of the ESM, where a qualified majority of 85% will have the power to make emergency decisions. Finland is currently opposed to the ESM act by super majority instead of unanimity. Others are also reluctant to pay in capital, which can be placed at risk without the right to a veto.

Given issues of national sovereignty, it is possible that there will delays in implementation. Changes cannot also be ruled out.

Wall of Debt...

A crucial issue is the ability of European sovereigns to meet maturing debt commitments and to keep borrowing costs at a sustainable level.

European sovereigns and banks need to find Euro 1.9 trillion to refinance maturing debt in 2012, equivalent to around euro 7.5 billion each business day.

Italy requires euro 113 billion in the first quarter and around euro 300 billion over the full year, equivalent to around euro 1.5 billion per business day. Italy, Spain, France, and Germany together will need to issue in excess of euro 4.5 billion every working day of 2012.

European banks, whose fates are intertwined with the sovereigns, need euro 500 billion in the first half of 2012 and euro 275 billion in the second half. They need to raise euro 230 billion per quarter in 2012 compared to euro 132 billion per quarter in 2011. Since June 2011, European banks have been only able to raise euro 17 billion compared to euro 120 billion for the same period in 2010.

Given that banks and investors have been steadily reducing their exposures to European countries and banks, the ability to finance this wall of debt is uncertain. The bailout fund and the IMF with around euro 200-250 billion each cannot absorb this issuance. Europe will be forced to resort to "Sarko-nomics" to finance itself.

The ECB has reduced euro interest rates and lengthened the term of emergency funding of banks to three years with easier collateral rules (a lottery ticket is now acceptable as surety for borrowing). The French President suggested that banks should buy government bonds, which could then be pledged as collateral to borrow unlimited funds from the ECB or national central banks.

Nicolas Sarkozy was unusually direct: "each state can turn to its banks, which will have liquidity at their disposal." He pointed out that earning 6% on Italian bonds that could then be financed at 1% from central banks was a "no brainer". At the same, ECB President Mario Draghi is urging banks to reduce holdings of government securities and to use the funding provided to meet debt maturities.

Sarko-nomics perpetuates the circular flow of funds with governments supporting banks that are in turn supposed to bail out the government. It does not address the unsustainable high cost of funds for countries like Italy. If its cost of debt stays around current market rates, then Italy's interest costs will rise by about euro 30 billion over the next two years, from 4.2% of GDP currently to 5.1% next year and 5.6% in 2013.

In many countries, Sarko-nomics will be supplemented by "financial oppression" as government increasing coerce their citizens and institutions to purchase sovereign bonds. Regulatory changes will require a proportion of individual retirement savings to be invested in government securities.

Banks and financial institutions will be required to hold increased amounts of government bonds to meet liquidity and other requirements. There may be restrictions on foreign investments and capital transfers out of the country.

Financial oppression will complement traditional public finance strategies such as direct reduction in government spending, indirect reductions in the form of changing eligibility such as delaying retirement age, and higher taxes, including re-introduction of wealth and property taxes as well as estate or gift duties.

Debt reduction through restructuring remains off the agenda. The adverse market reaction to the announcement of the 50% Greek write down forced the EU to assure investors that it was a one-off and did not constitute a precedent. Despite this, investors remain skeptical, limiting purchases of European sovereign debt.

Weaker euro zone countries may meet their debt requirements through these measures but it will merely prolong the adjustment period. It will also increase the size of the problem, locking Europe into a period of low growth and increasing debt levels.

Reality Check...

The prospects for the real economy in Europe are uncertain. European debt problems and slowing growth in emerging markets such as China, India and Brazil may lead to low or no growth.

For the nations that have received bailouts, the austerity measures imposed have not worked. Growth, budget deficit and debt level targets have been missed.

Even Ireland, the much lauded poster child of bailout austerity, has experienced problems. The country's third quarter GDP fell 1.9% and its Gross National Product fell 2.2% (the latter is a better measure of economic performance due to the country's large export/ transhipment activity).

Ireland must reduce its budget deficit from 32% of GDP in 2010 to 3% by 2015. Despite spending cuts and tax increases, Ireland is spending euro 57 billion, including euro 10 billion to support its five nationalised banks, against euro 34 billion in tax revenue.

Spain, which has voluntarily taken the austerity cure, is missing economic targets. Spain's budget deficit is above forecast (at 8% of GDP, it is a full 2% above the target agreed with the EU.)

The need to support the Spanish banking system may strain public finances further. Unemployment increased to over 21% (nearly 5 million people). Spain's economic outlook is poor and deteriorating.

Under Prime Minister Maria Monti, Italy has passed legislation and budget measures to stabilise debt. The actions focus on increasing taxes, especially the regressive value-added tax, rather than cutting expenditures.

Structural reforms to promote growth are still under consideration and the content and timing is unknown. It is also not clear whether the plans will be fully implemented or work.

If the pattern elsewhere in Europe continues, it is unlikely that Italy will be able to stabilise its public finances. The sharp drop in demand from cuts in government spending and higher taxes will result in an economic slowdown, which will result in continuing deficits and increased debt.

In the third quarter of 2011, Italy's economy contracted by 0.2%. The government forecast is for a further contraction of 0.4% in 2012. The government forecasts may be too optimistic. Confindustria, the Italian business federation forecasts the economy will contract by 1.6% in 2012.

Consumption is especially weak in many of the problem economies, with Greece experiencing falls of around 30% and Italy also experiencing large falls.

Stronger countries within the euro zone are also affected. Lack of demand for exports within Europe and from emerging markets combined with tighter credit conditions may slow growth.

German export orders are slowing, reflecting the fact that the EU remains its largest export market, larger than demand from emerging countries. Germany exports to Italy and Spain total around 9-10 per cent in 2010, higher than to either the US (6-7%) or China (4-5%).

What happens in Europe will not stay in Europe, being transmitted via trade and investment channels, negative feedback loops will complicate the economic outlook.

One complication will be the euro itself. Following his American counterparts, who insist that they favour a strong dollar inconsistent with the evidence, German Finance Minister Wolfgang Schaeuble stated that:

"The euro is a stable currency." In fact, the euro has fallen around 12 % against the dollar.

Should the European debt crisis cause currency volatility, as seems likely, the effects will be widespread. One unstated element of the calls for the ECB to engage in quantitative easing is to weaken the euro, increasing the export competitiveness of weaker European nations boosting growth.

Such action risks setting off currency wars as both developed nations (US, Japan, Britain, Switzerland) and emerging countries retaliate. The risk of capital controls, trade restrictions and currency intervention is high.

Voting Intentions...

The risks of political and social instability remain elevated.

Greece faces elections in April 2012. The polls indicate a fractious outcome, with the major parties unlikely to gain majorities with significant representation of minor parties. An unstable government combined with a broad coalition against austerity may result in attempts to renegotiate the bailout package. Failure could result in a disorderly default and Greece leaving the euro.

The French presidential elections, scheduled for May 2012, also create uncertain. The principal opponents to incumbent Nicolas Sarkozy either oppose the euro and the bailout (the National Front led by Marine Le Pen) or want to renegotiate the plan with the introduction of jointly guaranteed euro zone bonds (the Socialists led by Francios Holland).

The European debt crisis is also creating political problems in Germany, Netherlands and Finland, especially among governing coalitions. The risk of unexpected political instability is not insignificant.

In the weaker countries, austerity means high unemployment, reductions in social services, higher taxes and reduced living standards. Social benefits increasingly below subsistence are widening income inequality and creating a "new poor". Protest movements are gaining ground, with growing social unrest.

In the stronger nations, increasing resentment at the burden of supporting weaker euro zone members is evident. Despite the tabloid headline, Germans have been relatively sanguine about the commitment of funds to the bailout, aided by limited disclosure of the extent of the commitment and a relatively strong economy.

A downgrade of Germany's cherished AAA rating or any steps to undermine the sanctity of a hard currency (by printing money or other monetary techniques) will force increasing focus on the costs to Germans of the bailouts. Germany's commitment to date is euro 211 billion in guarantees, euro 45 billion in advances to the IMF and euro 500 billion owed to the Bundesbank by other national central banks - around 25% of GDP.

The increasing risk of losses may even divert attention away from the 2012 European Soccer Championship where Germany is drawn in the "Group of Death" with Netherlands, Portugal and Denmark.

Road to Nowhere...

In the short term, Europe needs to restructure the debt of number of countries, recapitalise its banks and re-finance maturing debt at acceptable financing costs. In the long term, it needs to bring public finances and debt under control. It also needs to work out a way to improve growth, probably by restructuring the euro to increase the competitiveness of weaker nations other through internal deflation.

Such a program is difficult and not assured of success, but would provide some confidence. At the moment, Europe does not have any credible policy or workable solution in place.

One persistent meme is that Europe has enough money to solve its problems. This is based on the euro zone members' aggregate debt to GDP ratio of around 75%. There are several problems with this analysis.

The debt is concentrated in countries where growth, productivity and cost competitiveness is low, which is what caused the problems in the first place. The relevant wealth is in the hands of a few countries like Germany that appear unwilling to bail out spendthrift and irresponsible neighbours. A substantial portion of the savings is also invested in European government debt directly or in vulnerable banks, which have invested in the same securities.

The total debt of the PIIGS (Portugal, Ireland, Italy, Greece and Spain) plus Belgium is more than euro 4 trillion. A writedown of around euro 1 trillion in this debt is required to bring the debt levels down to sustainable levels (say 90% of GDP).

In the absence of structural reforms and a return to growth, the writedowns required are significantly larger. This compares to the GDP of Germany and France respectively of euro 3 trillion and euro 2.2 trillion.

In addition, the stronger nations may have to bear the ongoing cost of financing the weaker countries budget and trade deficits. This does not appear economically or politically feasible.

Europe now resembles a chronically ill patient, receiving sufficient treatment to keep it alive. A full and complete recovery is unlikely on the present medical plan. Europe resembles a zombie economy, which functions in an impaired manner with periodic severe economic health crises. The risk of a sudden failure of vital organs is uncomfortably high.

In their song "Road to Nowhere", David Byrne and the Talking Heads sang about "a ride to nowhere". Byrne sang about "where time is on our side". Europe's time has just about run out. A failure to properly diagnose the problems and act decisively has put Europe firmly on the road to nowhere. It is journey that the global economy will be forced to share, at least in part.

Regards,

Satyajit Das

© 2012 Satyajit Das All Rights Reserved. Satyajit Das is author of Extreme Money: The Masters of the Universe and the Cult of Risk. He is a keynote speaker at After America: the Port Phillip Publishing Investment Symposium, March 14th-16th at Sydney's Intercontinental Hotel.

From the Archives...

Mixed Economic Blessings
2012-02-17 - Nick Hubble

Lost in Translation: An Important Note for Daily Reckoners
2012-02-16 - Joel Bowman

How Warren Buffett Looks at Stocks vs. Gold Investing
2012-02-15 - Bill Bonner

That Fair Dinkum Bloke Barack Obama
2012-02-14 - Dan Denning

Building With New BRICS
2012-02-13 - David Thomas

Why Energy Efficiency is the Environmentalist's Worst Enemy

Most people like the idea of energy efficiency. They believe if we could just make our coal power plants put out more power for every lump of coal, or if we could make solar panels convert the sun's energy at a better rate, we'd be able to reduce our carbon footprint. We'd live much more sustainable lives.

I'm not so sure...

Every time there has been an innovation in energy efficiency, the human race has ramped up its activities dramatically. Burning coal instead of wood may be more efficient. But it didn't exactly cause us to have a smaller impact on the environment. Instead we used the coal to transport more chopped-up wood than was ever used before.

The same goes for Boeing's new Dreamliner, its most fuel-efficient airliner yet. Do you think it will reduce fuel consumption? Our bet is that more people will fly. And they'll fly further than before. As each mile becomes cheaper, people will extend their reach. And we will pollute more than ever.

The reason for this counterintuitive reaction to energy efficiency is surprisingly intuitive if you think about it. As energy becomes more efficient, it also becomes cheaper. And cheaper energy makes more energy-using projects viable.

Think about it in terms of your Sunday drive, fishing trip or holiday. How far you go - and whether you go at all - is often determined by cost. If the cost falls, you might go more often or further than usual.

All this means that energy efficiency is a source of economic expansion and therefore increased energy use. Energy efficiency is an environmentalist's worst nightmare.

Why We Never Run Out of Energy Resources, We Just Move On

The best thing about the free market is that it adjusts itself at exactly the right rate. As we run out of oil, it will become more expensive. That in turn makes more difficult oil discoveries viable. And it makes oil's alternatives more viable too.

So just when people start to worry about running out of oil, we will move on to the alternatives. But only once those alternatives become viable relative to oil. Of course, it's not an immediate switch. Energy alternatives slowly develop as oil slowly depletes. It's a steady, calm changeover. Not like implementing carbon taxes or emissions trading schemes. Those are disruptive, unpredictable changes that endanger the efficient use of our existing resources. Unless, of course, they are implemented by a bunch of bungling bureaucrats. Then there's no way of predicting what will happen.

According to analysts at UBS, the European Emissions Trading Scheme 'is actually making coal more attractive than renewable energy.' Oops. But don't lose faith if you're a nature lover. The free market will overcome government's pro pollution policies.

Hoarding Energy Resources of the Past

What depleting energy resources can you invest in today, in the knowledge that they will become more expensive and therefore profitable for owners? The big one is obviously oil. Much has been written about peak oil - the idea that we are on the cusp of declining oil production. That's an unfair misrepresentation of a more complex idea, but the investment implications are quite clear. Buy companies with impressive oil reserves and companies that specialise in oil that is hard to get.

Diggers and Drillers editor, Dr Alex Cowie tipped an oil stock just last month. It's up 27% in only 31 days. (To find out more, click here.)

Some sources of energy are so plentiful, they fall by the wayside because of their lack of energy producing efficiency instead of their depletion. Coal is probably an example of this. We aren't likely to abandon coal because of a shortage causing a price hike. And it's not likely that coal will fuel spaceships in 50 years. But that doesn't mean coal companies are a bad bet in the meantime. Especially if they are raking in cash.

Picking the Energy Resources of the Future

Trying to figure out what will power us into the next age is far more exciting. That's usually a bad sign when it comes to investing, but the rewards will draw you in anyway. There are a couple of picks for the energy producing resources of the future. But first, a quick note on strategy.

Rather than thinking you know best, it's probably a good idea to diversify your bets on future energy developments. A nuclear power believer would've had a tough time keeping the faith when the tsunami hit Fukushima's nuclear power plant. Uranium stocks halved.

Source: australianuranium.com.au

This may be a brilliant buying opportunity. Dr Cowie thinks so. He wrote this in Money Morning on Wednesday:

So what I expect in 2012 is a steady recovery, with the uranium price around $60/lb by December. This would be a great result after last year's massive fall in uranium prices. It would help bring uranium back onto the menu for investors.

This is the kind of buying opportunity you should wait for in other energy industries like solar and wind power. Just when they are most unpopular, it's time to pounce.

Our favourite energy pick of the future is thorium. It's like uranium, without the problems. But finding a more or less pure thorium investment opportunity is a bit of a pain in the neck. And the profits could be many, many years away.

So let's focus on something a little more topical. The International Energy Agency asks 'Are We Entering A Golden Age of Gas?' Australian Wealth Gameplan subscribers certainly are. Dan Denning's three gas tips on Thursday were up 106%, 215% and 198%. These days, you can tell an AWG subscriber from their swagger.

Is it too late for you to profit from these tips? We're not so sure. The three tips are focused on a certain geographic area in Australia that's seen most of the drilling action. But there are plenty of other regions set to come into focus now that companies have proven the gas boom isn't just hot air. We wonder how many Australian Wealth Gameplan subscribers have taken matters into their own hands and are picking up similar stocks with claims in those other areas.

Then there's the opportunity to pick up the larger companies that end up generating the cash from these new energy resources. The companies that will be acquiring, producing and selling the power you like to consume.

We're thinking about adding one of them to feature in our speech at Port Phillip Publishing's first investment conference in Sydney on the 14th - 16th of March. We'll be talking about the world 'After America' and the investment opportunities it presents. It would be great to see you there. If you'd like to come along - and haven't got your ticket yet - please click here.

Until next week,

Nickolai Hubble.
The Daily Reckoning Weekend Edition

ALSO THIS WEEK in The Daily Reckoning Australia...

What the Greek Debt Crisis is Really About
By Dan Denning

Greece isn't about saving Greece. The only reason something so small and insignificant can matter so much is that it matters in a way no one is willing to say. It's about the subversion of sovereignty and democratic processes by removing decisions from people and giving them to trans-national financial elites. It's about preserving a global system that's based on the accumulation of debt and growing government power because there are two groups of people who benefit tremendously from that system, even if most people don't.

WTF, Warren Buffett?
By Tim Price

And yet, the rot set in (at least as far as this writer is concerned) when Buffett went from investing in private non-financial businesses to siding with the establishment, using his institutional heft to win sweetheart deals in dubious banking institutions way beyond the reach of regular Joes...And at the first sign of trouble, he simply wraps himself up in the American flag.

Greek Default Therapy
By Eric Fry

The newest austerity deal is not a rescue plan; it is a captivity plan. It provides the same kind of "rescue" that a circus provides an elephant: dance on a stool under the Big Top twice a day and we won't forget to toss some hay into your cage. To change metaphors, the newest austerity plan is an imprisonment pan: it straps leg-irons onto a nation that is already shackled to a monstrous debt load and a deeply depressed economy. The country's GDP is tumbling faster than Icarus into the Aegean Sea.

Borrowing Your Way Out of Debt and Other Normal Abnormalities
By Bill Bonner

The feds didn't invent their EZ money theories. John Maynard Keynes came up with the goofy program many years ago. He met with Franklin Roosevelt and explained the idea. Roosevelt later confessed that he had no idea what Keynes was talking about. But he liked Keynes' palaver. Because it gave him a theoretical justification for taking control of the economy.