Gold World News Flash |
- Open thread
- Robert Wenzel Addresses The New York Fed, Lots Of Head-Scratching Ensues
- Golds B-Wave Bottom
- Gold Stocks: Where Is The Bottom?
- Is Gold Still Cheap?
- Why You Should Look for 10-Baggers
- Gold Will Win Money War
- Gold Unchanged after Test of Support
- 5 New Lies That The Federal Reserve Is Telling The American People
- Yamarone - We Are Literally Witnessing a Collapse
- Gold Seeker Closing Report: Gold and Silver End Mixed
- India Demand for Gold ETFs Rises on Festival
- Oil Field Justice
- Will Silver and Platinum Outperform Gold In The Near Future?
- Golden Dreams & Global Nightmares
- So Long, US Dollar
- Well, THAT Was Interesting
- Led by Mexico and Russia, central banks from 11 countries and the Eurozone added a combined 57.9 tonnes of gold in March.
- Doug Casey On Taxes And Freedom
- Is the worst over for silver?
- Gold Price Must Stay Above $1,623 Has it Already Bottomed?
- This isn’t 2008!
- NASDAAPL Explodes Most In 4 Months As Volatility Implodes
- Ben Bernanke’s Paper Dollar Embodies Systemic Risk
- Gold Daily and Silver Weekly Charts - Jack of All Trades, And We'll Be All Right
- A Tale of Three Bubbles
- US Dollar VS Gold: Epic Money Battle
- Fed: Bernanke Saves QE3 Bullet As Labor Markets Improve
- Jim's Mailbox
- Mexico, Russia, Turkey, Kazakhstan Raised Gold Reserves in March
| Posted: 25 Apr 2012 07:27 PM PDT So did anyone short silver before Shalom spoke today? Easy money.
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| Robert Wenzel Addresses The New York Fed, Lots Of Head-Scratching Ensues Posted: 25 Apr 2012 06:39 PM PDT A month ago we had the pleasure of bringing you Jim Grant's must read address directly to employees of the Federal Reserve in one of the most epic rhetorical polemics ever release unmasking the hollow intellectual sophistry at the very core of modern monetary systems. Today, it is Robert Wenzel's turn. Just released in the Economic Policy Journal are his own prepared remarks from his address to the New York Fed. They are recreated below as, like Grant, Wenzel asks a series of burning questions. Not surprisingly, lots and lots of head scratching ensues... From EPJ: My Speech Delivered at the New York Federal Reserve Bank At the invitation of the New York Federal Reserve Bank, I spoke and had lunch in the bank's Liberty Room. Below are my prepared remarks. Thank you very much for inviting me to speak here at the New York Federal Reserve Bank. Intellectual discourse is, of course, extraordinarily valuable in reaching truth. In this sense, I welcome the opportunity to discuss my views on the economy and monetary policy and how they may differ with those of you here at the Fed. That said, I suspect my views are so different from those of you here today that my comments will be a complete failure in convincing you to do what I believe should be done, which is to close down the entire Federal Reserve System My views, I suspect, differ from beginning to end. From the proper methodology to be used in the science of economics, to the manner in which the macro-economy functions, to the role of the Federal Reserve, and to the accomplishments of the Federal Reserve, I stand here confused as to how you see the world so differently than I do. I simply do not understand most of the thinking that goes on here at the Fed and I do not understand how this thinking can go on when in my view it smacks up against reality. Please allow me to begin with methodology, I hold the view developed by such great economic thinkers as Ludwig von Mises, Friedrich Hayek and Murray Rothbard that there are no constants in the science of economics similar to those in the physical sciences. In the science of physics, we know that ice freezes at 32 degrees. We can predict with immense accuracy exactly how far a rocket ship will travel filled with 500 gallons of fuel. There is preciseness because there are constants, which do not change and upon which equations can be constructed.. There are no such constants in the field of economics since the science of economics deals with human action, which can change at any time. If potato prices remain the same for 10 weeks, it does not mean they will be the same the following day. I defy anyone in this room to provide me with a constant in the field of economics that has the same unchanging constancy that exists in the fields of physics or chemistry. And yet, in paper after paper here at the Federal Reserve, I see equations built as though constants do exist. It is as if one were to assume a constant relationship existed between interest rates here and in Russia and throughout the world, and create equations based on this belief and then attempt to trade based on these equations. That was tried and the result was the blow up of the fund Long Term Capital Management, a blow up that resulted in high level meetings in this very building. It is as if traders assumed a given default rate was constant for subprime mortgage paper and traded on that belief. Only to see it blow up in their faces, as it did, again, with intense meetings being held in this very building. Yet, the equations, assuming constants, continue to be published in papers throughout the Fed system. I scratch my head. I also find curious the general belief in the Keynesian model of the economy that somehow results in the belief that demand drives the economy, rather than production. I look out at the world and see iPhones, iPads, microwave ovens, flat screen televisions, which suggest to me that it is production that boosts an economy. Without production of these things and millions of other items, where would we be? Yet, the Keynesians in this room will reply, "But you need demand to buy these products." And I will reply, "Do you not believe in supply and demand? Do you not believe that products once made will adjust to a market clearing price?" Further, I will argue that the price of the factors of production will adjust to prices at the consumer level and that thus the markets at all levels will clear. Again do you believe in supply and demand or not? I scratch my head that somehow most of you on some academic level believe in the theory of supply and demand and how market setting prices result, but yet you deny them in your macro thinking about the economy. You will argue with me that prices are sticky on the downside, especially labor prices and therefore that you must pump money to get the economy going. And, I will look on in amazement as your fellow Keynesian brethren in the government create an environment of sticky non-downward bending wages. The economist Robert Murphy reports that President Herbert Hoover continually pressured businessmen to not lower wages.[1] He quoted Hoover in a speech delivered to a group of businessmen: In this country there has been a concerted and determined effort on the part of government and business... to prevent any reduction in wages. He then reports that FDR actually outdid Hoover by seeking to "raise wages rates rather than merely put a floor under them." I ask you, with presidents actively conducting policies that attempt to defy supply and demand and prop up wages, are you really surprised that wages were sticky downward during the Great Depression? In present day America, the government focus has changed a bit. In the new focus, the government attempts much more to prop up the unemployed by extended payments for not working. Is it really a surprise that unemployment is so high when you pay people not to work.? The 2010 Nobel Prize was awarded to economists for their studies which showed that, and I quote from the Noble press release announcing the award: One conclusion is that more generous unemployment benefits give rise to higher unemployment and longer search times.[2] Don't you think it would make more sense to stop these policies which are a direct factor in causing unemployment, than to add to the mess and devalue the currency by printing more money? I scratch my head that somehow your conclusions about unemployment are so different than mine and that you call for the printing of money to boost "demand". A call, I add, that since the founding of the Federal Reserve has resulted in an increase of the money supply by 12,230%. I also must scratch my head at the view that the Federal Reserve should maintain a stable price level. What is wrong with having falling prices across the economy, like we now have in the computer sector, the flat screen television sector and the cell phone sector? Why, I ask, do you want stable prices? And, oh by the way, how's that stable price thing going for you here at the Fed? Since the start of the Fed, prices have increased at the consumer level by 2,241% [3]. that's not me misspeaking, I will repeat, since the start of the Fed, prices have increased at the consumer level by 2,241%. So you then might tell me that stable prices are only a secondary goal of the Federal Reserve and that your real goal is to prevent serious declines in the economy but, since the start of the Fed, there have been 18 recessions including the Great Depression and the most recent Great Recession. These downturns have resulted in stock market crashes, tens of millions of unemployed and untold business bankruptcies. I scratch my head and wonder how you think the Fed is any type of success when all this has occurred. I am especially confused, since Austrian business cycle theory (ABCT), developed by Mises, Hayek and Rothbard, has warned about all these things. According to ABCT, it is central bank money printing that causes the business cycle and, again you here at the Fed have certainly done that by increasing the money supply. Can you imagine the distortions in the economy caused by the Fed by this massive money printing? According to ABCT, if you print money those sectors where the money goes will boom, stop printing and those sectors will crash. Fed printing tends to find its way to Wall Street and other capital goods sectors first, thus it is no surprise to Austrian school economists that the crashes are most dramatic in these sectors, such as the stock market and real estate sectors. The economist Murray Rothbard in his book America's Great Depression [4] went into painstaking detail outlining how the changes in money supply growth resulted in the Great Depression. On a more personal level, as the recent crisis was developing here, I warned throughout the summer of 2008 of the impending crisis. On July 11, 2008 at EconomicPolicyJournal.com, I wrote[5]: SUPER ALERT: Dramatic Slowdown In Money Supply Growth After growing at near double digit rates for months, money growth has slowed dramatically. Annualized money growth over the last 3 months is only 5.2%. Over the last two months, there has been zero growth in the M2NSA money measure. This is something that must be watched carefully. If such a dramatic slowdown continues, a severe recession is inevitable. We have never seen such a dramatic change in money supply growth from a double digit climb to 5% growth. Does Bernanke have any clue as to what the hell he is doing? On July 20, 2008, I wrote [6]: I have previously noted that over the last two months money supply has been collapsing. M2NSA has gone from double digit growth to nearly zero growth . A review of the credit situation appears worse. According to recent Fed data, for the 13 weeks ended June 25, bank credit (securities and loans) contracted at an annual rate of 7.9%. There has been a minor blip up since June 25 in both credit growth and M2NSA, but the growth rates remain extremely slow. If a dramatic turnaround in these numbers doesn't happen within the next few weeks, we are going to have to warn of a possible Great Depression style downturn. Yet, just weeks before these warnings from me, Chairman Bernanke, while the money supply growth was crashing, had a decidedly much more optimistic outlook, In a speech on June 9, 2008, At the Federal Reserve Bank of Boston's 53rd Annual Economic Conference [7], he said: I would like to provide a brief update on the outlook for the economy and policy, beginning with the prospects for growth. Despite the unwelcome rise in the unemployment rate that was reported last week, the recent incoming data, taken as a whole, have affected the outlook for economic activity and employment only modestly. Indeed, although activity during the current quarter is likely to be weak, the risk that the economy has entered a substantial downturn appears to have diminished over the past month or so. Over the remainder of 2008, the effects of monetary and fiscal stimulus, a gradual ebbing of the drag from residential construction, further progress in the repair of financial and credit markets, and still-solid demand from abroad should provide some offset to the headwinds that still face the economy. I believe the Great Recession that followed is still fresh enough in our minds so it is not necessary to recount in detail as to whose forecast, mine or the chairman's, was more accurate. I am also confused by many other policy making steps here at the Federal Reserve. There have been more changes in monetary policy direction during the Bernanke era then at any other time in the modern era of the Fed. Not under Arthur Burns, not under G. William Miller, not under Paul Volcker, not under Alan Greenspan have there been so many dramatically shifting Fed monetary policy moves. Under Chairman Bernanke there have been significant changes in direction of the money supply growth FIVE different times. Thus, for me, I am not at all surprised at the current stop and go economy. The current erratic monetary policy makes it exceedingly difficult for businessmen to make any long term plans. Indeed, in my own Daily Alert on the economy [8] I find it extremely difficult to give long term advice, when in short periods I have seen three month annualized M2 money growth go from near 20% to near zero, and then in another period see it go from 25% to 6% . [9] I am also confused by many of the monetary programs instituted by Chairman Bernanke. For example, Operation Twist. This is not the first time an Operation Twist was tried. an Operation Twist was tried in 1961, at the start of the Kennedy Administration [10] A paper [11] was written by three Federal Reserve economists in 2004 that, in part, examined the 1960's Operation Twist Their conclusion (My bold): A second well-known historical episode involving the attempted manipulation of the term structure was so-called Operation Twist. Launched in early 1961 by the incoming Kennedy Administration, Operation Twist was intended to raise short-term rates (thereby promoting capital inflows and supporting the dollar) while lowering, or at least not raising, long-term rates. (Modigliani and Sutch 1966).... The two main actions of Operation Twist were the use of Federal Reserve open market operations and Treasury debt management operations..Operation Twist is widely viewed today as having been a failure, largely due to classic work by Modigliani and Sutch.... However, Modigliani and Sutch also noted that Operation Twist was a relatively small operation, and, indeed, that over a slightly longer period the maturity of outstanding government debt rose significantly, rather than falling...Thus, Operation Twist does not seem to provide strong evidence in either direction as to the possible effects of changes in the composition of the central bank's balance sheet.... We believe that our findings go some way to refuting the strong hypothesis that nonstandard policy actions, including quantitative easing and targeted asset purchases, cannot be successful in a modern industrial economy. However, the effects of such policies remain quantitatively quite uncertain. One of the authors of this 2004 paper was Federal Reserve Chairman Bernanke. Thus, I have to ask, what the hell is Chairman Bernanke doing implementing such a program, since it is his paper that states it was a failure according to Modigliani, and his paper implies that a larger test would be required to determine true performance. I ask, is the Chairman using the United States economy as a lab with Americans as the lab rats to test his intellectual curiosity about such things as Operation Twist? Further, I am very confused by the response of Chairman Bernanke to questioning by Congressman Ron Paul. To a seemingly near off the cuff question by Congressman Paul on Federal Reserve money provided to the Watergate burglars, Chairman Bernanke contacted the Inspector General's Office of the Federal Reserve and requested an investigation [12]. Yet, the congressman has regularly asked about the gold certificates held by the Federal Reserve [13] and whether the gold at Fort Knox backing up the certificates will be audited. Yet there have been no requests by the Chairman to the Treasury for an audit of the gold.This I find very odd. The Chairman calls for a major investigation of what can only be an historical point of interest but fails to seek out any confirmation on a point that would be of vital interest to many present day Americans. In this very building, deep in the underground vaults, sits billions of dollars of gold, held by the Federal Reserve for foreign governments. The Federal Reserve gives regular tours of these vaults, even to school children. [14] Yet, America's gold is off limits to seemingly everyone and has never been properly audited. Doesn't that seem odd to you? If nothing else, does anyone at the Fed know the quality and fineness of the gold at Fort Knox? In conclusion, it is my belief that from start to finish the Fed is a failure. I believe faulty methodology is used, I believe that the justification for the Fed, to bring price and economic stability, has never been a success. I repeat, prices since the start of the Fed have climbed by 2,241% and there have been over the same period 18 recessions. No one seems to care at the Fed about the gold supposedly backing up the gold certificates on the Fed balance sheet. The emperor has no clothes. Austrian Business cycle theorists are regularly ignored by the Fed, yet they have the best records with regard to spotting overall downturns, and further they specifically recognized the developing housing bubble. Let it not be forgotten that in 2004, two economists here at the New York Fed wrote a paper [15] denying there was a housing bubble. I responded to the paper [16] and wrote: The faulty analysis by [these] Federal Reserve economists... may go down in financial history as the greatest forecasting error since Irving Fisher declared in 1929, just prior to the stock market crash, that stocks prices looked to be at a permanently high plateau. Data released just yesterday, now show housing prices have crashed to 2002 levels. [17] I will now give you more warnings about the economy. The noose is tightening on your organization, vast amounts of money printing are now required to keep your manipulated economy afloat. It will ultimately result in huge price inflation, or, if you stop printing, another massive economic crash will occur. There is no other way out. Again, thank you for inviting me. You have prepared food, so I will not be rude, I will stay and eat. Let's have one good meal here. Let's make it a feast. Then I ask you, I plead with you, I beg you all, walk out of here with me, never to come back. It's the moral and ethical thing to do. Nothing good goes on in this place. Let's lock the doors and leave the building to the spiders, moths and four-legged rats. Footnotes [1] http://www.amazon.com/Politically-Incorrect-Guide-Depression-Guides/dp/1... [2] http://www.nobelprize.org/nobel_prizes/economics/laureates/2010/press.ht... [3] ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt [4] http://www.amazon.com/Americas-Great-Depression-Murray-Rothbard/dp/14679... [5] http://www.economicpolicyjournal.com/2008/07/super-alert-dramatic-slowdo... [6] http://www.economicpolicyjournal.com/2008/07/alert-collapsing-credit.htm... [7] http://www.federalreserve.gov/newsevents/speech/bernanke20080609a.htm [8] http://www.economicpolicyjournal.com/2009/04/announcing-epj-quarterly-ec... [9]http://www.economicpolicyjournal.com/2008/07/super-alert-dramatic-slowdo... [10] http://www.frbsf.org/publications/economics/letter/2011/el2011-13.html [11] http://www.federalreserve.gov/pubs/feds/2004/200448/200448pap.pdf [12] http://www.huffingtonpost.com/2012/04/03/federal-reserve-watergate-iraqi... [13] http://www.federalreserve.gov/releases/h41/Current/ [14] http://www.newyorkfed.org/aboutthefed/visiting.html [15] http://fednewyork.org/research/epr/04v10n3/0412mcca.pdf [16] http://www.economicpolicyjournal.com/2012/02/checkmate-new-york-fed-as-t... [17] http://www.nytimes.com/2012/04/25/business/economy/survey-shows-us-home-... Special thanks to the following, who helped me research and collect data for this paper: Stephen Davis, Bob English, Jon Lyons, Ash Navabi, Joseph Nelson, Nick Nero, Antony Zegers
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| Posted: 25 Apr 2012 05:53 PM PDT Gold Scents
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| Gold Stocks: Where Is The Bottom? Posted: 25 Apr 2012 05:50 PM PDT Hera Research
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| Posted: 25 Apr 2012 05:15 PM PDT from Got Gold Report:
This isn't a "greater fool" game that we are playing, in that our belief that gold will become a lot more expensive over the years ahead isn't based on the expectation that people will be silly enough to pay a much higher valuation in the future for an asset that is already over-valued today. It is, instead, a position based on the observation that the world's most important central banks and governments remain committed to a course that ends in catastrophe for their economies and currencies. To put it another way, gold may well be expensive relative to the current economic backdrop, but it is cheap relative to what the economic backdrop will be 5 years from now if the current policy course is maintained.
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| Why You Should Look for 10-Baggers Posted: 25 Apr 2012 05:02 PM PDT  Hall of Fame investor Ralph Wanger once remarked that baseball fans remember how many home runs Babe Ruth hit in his best year, but they usually can't recall how many strikeouts he had. That keen insight will be central to our new real-money "10-Bagger Portfolio."Great investors like Peter Lynch and Fool co-founder David Gardner have understood this principle intuitively. Indeed, Lynch is responsible for coining the term "10-bagger," and he once remarked, "all you need for a lifetime of successful investing is a few big winners, and the pluses from those will overwhelm the minuses from the stocks that don't work out." We completely agree. That's why our 10-Bagger Portfolio will make prudent bets on the greatest investing opportunities of our generation. We're confident that a few big winners will reward all of the stakeholders in our portfolio tremendously. Our goals Building on the foundations of an earlier real-money portfolio, we (John Reeves and David Meier) will look for outstanding businesses that will deliver solid returns for investors over the long term. Some selections will be smaller companies that have the potential to become 10-baggers over time. Others will be larger, more-established companies that can go up two or three times in value over a five-year period. In each case, we prefer to take a patient, methodical approach toward meeting our goals. Read more..... 
This posting includes an audio/video/photo media file: Download Now |
| Posted: 25 Apr 2012 04:53 PM PDT by Greg Hunter, USAWatchdog:
WORLDWIDE OBJECTION The major players of the world have three major complaints on USDollar management: 1) unilateral decisions to conduct debt monetization by the USFed (debased) 2) bond fraud centered on mortgage securities, exported globally (cancer) 3) endless war with ulterior motives too numerous to specify (aggression).
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| Gold Unchanged after Test of Support Posted: 25 Apr 2012 04:44 PM PDT courtesy of DailyFX.com April 24, 2012 05:44 PM Daily Bars Prepared by Jamie Saettele, CMT “Price is testing a long term trendline that extends off of the 2008, 2010, and December 2011 lows. A break of such a well-defined trendline would signal a significant shift. The downside is favored below the April high of 1683.35.” Bottom Line (next 5 days) – topping?...
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| 5 New Lies That The Federal Reserve Is Telling The American People Posted: 25 Apr 2012 04:34 PM PDT from The Economic Collapse Blog:
Read More @ TheEconomicCollapseBlog.com
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| Yamarone - We Are Literally Witnessing a Collapse Posted: 25 Apr 2012 04:02 PM PDT  On the heels of the release of the Fed statement and the Bernanke press conference, today King World News interviewed Richard Yamarone, senior economist at Bloomberg Brief. He has consulted for monetary and fiscal policymakers and served as an adviser to major U.S. corporations. Yamarone also held senior positions for major international and domestic money center and investment banks. When asked what's really happening with the US economy, Yamarone responded, "I think people are just running out of money. We have contracting, real disposable incomes. Most of the job creation that we have is from minimum wage type jobs."
This posting includes an audio/video/photo media file: Download Now |
| Gold Seeker Closing Report: Gold and Silver End Mixed Posted: 25 Apr 2012 04:00 PM PDT Gold waffled near unchanged in Asia and London and edged up to $1644.30 at about 9:15AM EST before it dropped to as low as $1625.25 immediately after today's fed statement, but it then climbed to as high as $1646.20 in afternoon trade and ended with a gain of 0.16%. Silver slipped to as low as $29.98 before it also recovered, but it still ended with a loss of 0.29%.
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| India Demand for Gold ETFs Rises on Festival Posted: 25 Apr 2012 03:48 PM PDT from WSJ The Wall Street Journal:
The trade value of gold ETFs, or paper gold, on India's National Stock Exchange rose to 6.08 billion rupees ($115.8 million) from 4.23 billion rupees a year earlier, while the total number of units traded on the bourse grew 10% to 2.2 million. Though sales of gold in physical form, such as jewelry, coins or bullion bars, account for more than 90% of the business in the world's largest consumer, the jump in ETF trade marks a shift in buying patterns. Gold ETFs were first launched in India in early 2007. "The young generation now prefers to invest online rather than go to jewelers, which is increasing the demand for paper gold," said Harish Galipelli, head of research at commodity brokerage firm JRG Wealth Management.
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| Posted: 25 Apr 2012 03:32 PM PDT This Associated Press story about trouble in the oil fields was in the local paper the other day along with the somewhat related news that unemployment in Montana now stands at only 6.2 percent, two percent below the national average, but almost double what it is in neighboring North Dakota where most of the oil fields are.
We've heard a lot about the Sherry Arnold murder in recent months. In some ways, it's probably like the 1860's gold rush in this part of the country or when they built the railroad not long after with what they call "sprawling man camps" for all the workers who are being paid handsomely. Some small percentage of young men working hard and making lots of money always seem to get into trouble and, understandably, the locals don't like it much.
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| Will Silver and Platinum Outperform Gold In The Near Future? Posted: 25 Apr 2012 03:02 PM PDT from ETFDailyNews.com:
In this chart, we see a major support line in play and the suggestion is that a move to the upside here is very likely. The chart tells us that silver is likely to outperform gold in the months ahead, though not necessarily immediately.
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| Golden Dreams & Global Nightmares Posted: 25 Apr 2012 02:47 PM PDT by Alex Stanczyk, SilverBearCafe.com:
BRICS Sidestep U.S. Dollar Completely and Choose Chinese Currency for Trade Settlement In a historic move, Brazil, Russia, India, and China have conducted negotiations to utilize the RMB for settlement of international trade. South Africa has joined this group and is expected to endorse Chinese currency as the currency of trade for these emerging markets. World Bank President Robert Zoellick has been noted as supporting a "BRICS Bank." To put into perspective why this is important, developing nations now contribute almost 50% of new global economic growth and account for roughly 25% of global GDP. In the meantime, China continues to position its currency as a viable alternate to the USD for settlement of international trade. Read More @ SilverBearCafe.com
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| Posted: 25 Apr 2012 02:26 PM PDT by Marin Katusa, Casey Research:
Signs the Dollar Is Going the Way of the Dodo The biggest oil-trading partners in the world, China and Saudi Arabia, are still using the petrodollar in their transactions. How long this will persist is a very important question. China imported 1.4 million barrels of oil a day from Saudi Arabia in February, a 39% increase from a year earlier, and the two countries have teamed up to build a massive oil refinery in Saudi Arabia. As the nations continue to pursue increased bilateral trade, at some point they will decide that involving US dollars in every transaction is unnecessary and expensive, and they will ditch the dollar. When that happens, the tide will have truly turned against the dollar, as it was an agreement between President Nixon and King Faisal of Saudi Arabia in 1973 that originally created the petrodollar system. Nixon asked Faisal to accept only US dollars as payment for oil and to invest any excess profits in US Treasury bonds, notes, and bills. In exchange, Nixon pledged to protect Saudi oilfields from the Soviet Union and other potential aggressors, such as Iran and Iraq.
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| Posted: 25 Apr 2012 02:21 PM PDT from TF Metals Report:
I know that many folks come here only to read my blogs or to visit Pailin's Corner. In doing so, many miss out on the terrific information that is shared in the comments. Rather than re-type my thoughts from earlier, here are some C&Ps of my comments from the previous thread: Submitted by Turd Ferguson on April 25, 2012 – 10:46am. Read More @ TF Metals Report.com
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| Posted: 25 Apr 2012 02:17 PM PDT New IMF figures show at current rate central banks will buy almost 700 tonnes of gold this year
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| Doug Casey On Taxes And Freedom Posted: 25 Apr 2012 02:15 PM PDT via Doug Casey of Casey Research, The always-outspoken Doug Casey addresses a broader view of taxation and its costs to both individuals and society in general in this interview with Louis James. L: Doug, the Taxman cometh, at least for most US citizens who file their annual tax papers on April 15. We get a lot of letters from readers who know about your international lifestyle and wonder about the tax advantages they assume it confers. Is this something you care to talk about? Doug: Yes; something wicked this way comes, indeed. But first, I have to say that as much as I can understand the guy who flew his airplane into an IRS building, as we once discussed, I do not encourage anyone to break the law. That's not for ethical reasons – far from it – but strictly on practical grounds. The Taxman can and will come for you, no matter how great or small the amount of tax he expects to extract from you. The IRS can impound your assets, take your computers, freeze your accounts, and make life just about impossible for you, while you struggle to defend yourself against their claims and keep the rest of your life going. The number of IRS horror stories is beyond counting. As the state goes deeper into insolvency, its enforcement of tax laws will necessarily become more draconian. So you absolutely don't want to become a target. L: So… just bow down and lick the boots of our masters? Doug: Of course not. People can and should do everything they can to pay as little in taxes as possible. This is an ethical imperative; we must starve the beast. It could even be seen as a patriotic duty – if one believes in such things – to deny revenue to the state any way possible, short of endangering yourself. Starving the beast may be the only way to force it back into its cage – we certainly can't count on politicians to make the right choices – they're minions of the state. They inevitably act to make it bigger and more powerful. It's sad to see well-intentioned people supporting someone like Mitt Romney because they naïvely think he'll reduce the size of the state and its taxes. The man has absolutely no ethical center; he'll just try to change the government to suit his whims. L: Can you expand on the ethical imperative aspect? Doug: Yes. The first thing is to get a grip on who owns the moral high ground. The state, the media, teachers, pundits, corporations – the entire establishment, really – all emphasize the moral correctness of paying taxes. They call someone who doesn't do so a "tax cheat." As usual, they have things upside down. Let's start with a definition of "theft," something I hold is immoral and destructive. Theft is to take someone's property against his will, i.e., by force or fraud. There isn't a clause in the definition that says, "unless the king or the state takes the property; then it's no longer theft." You have a right to defend yourself from theft, regardless of who the thief is or why he is stealing. It's much as if a mugger grabs you on the street. You have no moral obligation to give him your money. On the contrary, you have a moral obligation to deny him that money. Does it matter if the thief says he's going to use it to feed himself? No. Does it matter if he says he's going to feed a starving person he knows? No. Does it matter if he's talked to other people in the neighborhood, and 51% of them think he should rob you to feed the starving guy? No. Does it matter if the thief sets himself up as the government? No. Now of course, this gets us into a discussion of the nature of government as an institution, which we've talked about before. But my point here is that you can't give the tax authorities the moral high ground. That's important because decent people want to do the morally right thing. This is why sociopaths try to convince people that the wrong thing is the right thing. If an armed mugger or a gang of muggers wanted my wallet on the street, would I give it to them? Yes, most likely, because I can't stop them from taking it, and I don't want them to kill me. But do they have a right to it? No. And every taxpayer should keep that analogy at the top of his mind. L: I also believe that the initiation of the use of force (or fraud, which is a sort of indirect, disguised, form of force) is unethical. It doesn't matter what the reason for it might be nor how many people might approve of the action. But some people claim that taxation is really voluntary – the price one pays for living in society… and if I'm not mistaken, the US government says the federal income tax is voluntary. Doug: [Snorts] That is a widely promoted lie. It's propaganda to help statists claim the moral high ground, confuse the argument, and intimidate people who aren't critical thinkers. Just try not volunteering to pay it and see what happens. Taxation is force alloyed with fraud – a nasty combination. It's theft, pure and simple. Most people basically admit this when they call taxation a "necessary evil," somehow mentally evading confrontation with the fact that they are giving sanction to evil. But I question whether there can be such a thing as a "necessary evil." Can anything evil really be necessary? Can anything necessary really be evil? Entirely apart from that, if people really wanted anything the state uses its taxes for, they would, should, and could pay for it in the marketplace. Services the state now provides would be offered by entrepreneurs making a profit. I understand, and am somewhat sympathetic, to the argument that a "night-watchman" state is acceptable; but since the state always has a monopoly of force, it inevitably grows like a cancer, to the extent that the parasite overwhelms and kills the host. That's where we are today. I think a spade should be called a spade, theft should be recognized for what it is, and evil should be opposed, regardless of the excuses and justifications given for it. Ends do not justify means – and evil means lead to evil ends, as we see in the bloated, corrupt, dangerous governments we have all over the world. L: That runs counter to the conventional wisdom, Doug. Evil or not, most people think taxation is part of the natural order of things, like rain or day and night. Death and taxes are seen as the two inevitable things in life, and you are a silly idealist – if not a dangerous madman – if you believe otherwise. Doug: That saying about death and taxes is both evil and stupid; it's a soul-destroying and mind-destroying perversion of reality. It's evil, because it makes people reflexively accept the worst things in the world as permanent and inevitable. As for death, technology is actively advancing to vanquish it. Who knows how far medicine, biotech, and nanotech can delay the onset of death? And taxes are, at best, an artifact of a primitive feudal world; they're actually no longer necessary in an advanced, free-market civilization. People also once thought the world was flat, that bathing was unhealthy, and that there was such a thing as the divine right of kings. Many things "everyone knows" just aren't so, and this is one of those. A government – for those "practical" people who think they need one – that stuck to the basic core functions of police and courts to defend people against force and fraud and a military to defend against invasion, would cost a tiny, tiny fraction of what today's government costs, and that could be funded in any number of ways that essentially boil down to charging for services. As it is now, the average US taxpayer probably works half of the year just to pay direct and indirect taxes. That doesn't even count the cost of businesses destroyed by regulation and lives lost to slow approval of new treatments by regulators, or a million other ways governments burden, obstruct, and harass people. L: I just looked, and Tax Freedom Day this year was April 17. Doug: That means that all the work the average guy does until April 17 goes to pay for the government that failed to protect him on September 11, 2001, failed to protect him from the crash of 2008, and continues failing him every day. We pay for an organization bent on doing not just the wrong things, but the exact opposite of the right things in economics, foreign policy, and everything else we've talked about in all our conversations. It's rather perverse that Emancipation Day – the day the first slaves in the US were freed in the District of Columbia in 1862 – is April 16. But what is a slave? He's someone who is deprived by force of the fruits of his labor. Sound familiar? I disapprove of slavery, in any form – including its current form. However, Tax Freedom Day is an incomplete way of looking at things. What's the cost to business forced to install equipment to meet government regulations? That's not paid as a tax, but it's a serious burden. There's something called Cost of Government Day that's a somewhat more inclusive estimate of the burden the state imposes on the average guy… L: I just looked for that too and don't see that a date for 2012 has been announced yet; but Cost of Government Day for 2011 was August 12. According to that estimate, the average US taxpayer slaved away for about two-thirds of the year to pay for the state and got to keep only a third of the fruit of his labor for his own benefit and improvement. Doug: That may be a more accurate way of looking at the burden of government the average guy has to bear, but it still doesn't even begin to address what economists call "opportunity cost." Basically, I don't just look at what the state we have costs us in cash, but in terms of the innovation and growth we don't have because of government policies, laws, and regulations. This covers everything from new medicines to all sorts of new technologies to different forms of social and business organizations to the cleaner intellectual atmosphere I think we'd have without government propaganda machines cluttering it up. I don't believe in utopia, but I do believe our world could be far freer, healthier, and happier than it is today – without any divine intervention, magic, or changes in the laws of physics. Just a different path, every bit as possible as the one we've taken to where we are today. L: As in the alternative reality L. Neil Smith wrote about in his book The Probability Broach? Doug: At least as far as the humans in that story go, yes, it's a good illustration of how much more advanced the world might be, based on a different turn of events. Back in this world, I think that without any major differences in technological development and without assuming that people would spontaneously become angels, the average standard of living worldwide would be much higher if… Well, there are lots of turning points, some of which we've discussed. Just in the 20th century, things would be very different if America had stayed out of WWI, or had not ratified the 16th Amendment to the Constitution, or had not elected FDR. L: Okay, but those things did happen, and we live in the world we have today – the one you call a prison planet. How should people try to do what's right in such a world without ending up in jail? Doug: First, it's important to think about what's actually possible, because people will not even try to reach for what they are sure is impossible. The world needs idealists to challenge us all to aim higher… including idealists willing to go to jail for what they believe in, like Thoreau. But even he said that while he encouraged all people to disobey unjust laws, he wouldn't ask those who support families to get themselves locked up and leave their families destitute. So my take is as we started out saying: It is both ethically and practically imperative to starve the beast. The less cooperation of any sort we give the state – but especially the less money we give it – the less mischief it can get into. We're unlikely to get politicians to vote for getting the state off our backs, out of our pocketbooks, out of our bedrooms, and out of other people's countries as a matter of principle, but we could see the state get out of places it doesn't belong simply for lack of funds. And if everybody treated minions of the state with the contempt they deserve, most of them would quit and be forced to find productive work. As Gandhi showed us, civil disobedience can not only be an ethical choice, but a very powerful force for change. L: Any specific advice? Doug: Get a good accountant, take every deduction you can, and look for ways to legally reduce your tax burden. For example, our readers should know that charitable contributions in the US get deducted after the alternative minimum tax wipes out your other deductions. That means that a substantial fraction of every dollar you give a registered 501(c)(3) nonprofit does not go to the federal government. Now, as you know, I don't believe in charity, at least not in the institutional sense, but wasting money on charities is far, far better than giving it to the government to use bombing innocents and creating enemies for generations to come. And if that charity happens to be something like the Institute for Justice, the Fully Informed Jury Association, or any of the other libertarian think tanks dedicated to reducing the size and scope of government, you get to help fight the beast and starve it at the same time. L: I do my economics and entrepreneurship camps in Eastern Europe under the auspices of the International Society for Individual Liberty – of which I should disclose that I am a director. I have to admit that it pleases me greatly to see funds that would have gone into making bombs to drop on foreigners and hiring more goons in uniform to oppress people at home redirected to something I consider constructive. But what about the international diversification question: can that help reduce your tax burden back home? Doug: It's different for different countries, and each individual should consult a tax specialist with the details of his or her own case, or proposed case. However, there is an exclusion for Americans who live abroad for a whole tax year – it was around $100,000 the last I looked. So there are very good tax reasons for Americans to live abroad. There are even better reasons for Canadians, Europeans, and almost everyone else to leave their native country – many can live 100% tax-free. I guess it's just a sad testimony to the medieval-serf mentality that most people suffer from that few people take advantage of this. They're born someplace, and they stay rooted there, like a plant. Oh well, everybody basically makes his own bed, reaps what he sows, and gets what he deserves… However, as appealing as the "permanent tourist" idea is, I recommend international living first and foremost as a way to protect your assets. As we've discussed before, real estate in foreign countries cannot be repatriated or confiscated by the government that thinks of you as its milk cow. There is nothing illegal or nefarious about buying real estate abroad, and it could come in very handy if things get really chaotic back home, wherever that happens to be. L: Okay… any investment implications to discuss? Doug: Sure, but nothing new to our readers. Starving the state-beast is the right thing to do, ethically and practically, but I believe the state's days are numbered anyway. The thing to be aware of is that the beast won't go quietly, and in its death throes it can do a lot of harm. Still, like Nietzsche said, "That which is about to fall deserves to be pushed." In the meantime, much higher taxes are on the way. More and more currency controls are coming. You may have heard that the US is contemplating a law denying issue or canceling the passport of anyone accused of owing more than $50,000 in taxes. I expect the transformation of what was once America into a police state to continue, and I expect other "developed" nations – especially Europe, Canada, and Australia – to follow suit. And this will happen whether or not the global economy exits the eye of the storm as I expect it to. So you want to rig for stormy weather and invest for continuing crisis. Own gold for prudence, speculate on related stocks and others that may benefit from government profligacy, and as we've just been saying, diversify your assets and personal living arrangements internationally. The day is coming when your local government may stop seeing you as a milk cow and start seeing you as a beef cow, and you want to have options before that day. L: The Casey mantra. Any chance you're wrong? Doug: Anything's possible. But we just asked ourselves that question in our conversation on the illusion of recovery, and I just don't see a way out for the old economic order. L: Okay, Doug. I hope our readers don't tune us out for sounding like a broken record – I believe it's vital that they do take action, preparing for more volatility in the markets ahead. And hedging one's bets against social chaos may sound a bit extreme, but as an option, it sure is something that can help one sleep better at night. Doug: I didn't formulate the rules for this crazy game; I'm just trying to play it competently. L: Right then. Until next week. Doug: Next time. [For more thought-provoking ideas from Doug Casey – as well as actionable investment ideas – be sure to preorder the entire audio collection of Casey Research's upcoming Recovery Reality Check Summit. You'll hear every minute of every presentation… get specific investment information from over 30 experts… and be better prepared for what the future holds. Plus, if you order now, you'll get the set at a generous discount.]
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| Posted: 25 Apr 2012 01:58 PM PDT May Silver's Precise Bounce Is Most Encouraging
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| Gold Price Must Stay Above $1,623 Has it Already Bottomed? Posted: 25 Apr 2012 10:17 AM PDT Gold Price Close Today : 1641.40 Change : (1.60) or -0.10% Silver Price Close Today : 3035.6 Change : 39.0 cents or -1.27% Gold Silver Ratio Today : 54.072 Change : 0.634 or 1.19% Silver Gold Ratio Today : 0.01849 Change : -0.000219 or -1.17% Platinum Price Close Today : 1544.40 Change : 1.50 or 0.10% Palladium Price Close Today : 658.25 Change : -6.75 or -1.02% S&P 500 : 1,390.69 Change : 18.72 or 1.36% Dow In GOLD$ : $164.86 Change : $ 1.30 or 0.79% Dow in GOLD oz : 7.975 Change : 0.063 or 0.79% Dow in SILVER oz : 431.24 Change : 8.37 or 1.98% Dow Industrial : 13,090.72 Change : 89.16 or 0.69% US Dollar Index : 79.03 Change : -0.168 or -0.21% Today the GOLD PRICE made a low ($1,623.40) equal to Monday's low. Market was flat above $1,635, then suddenly woke up at 12:30 (on the dot) to fall to $1,623. About 1:00 p.m., it shot up higher than the shelf it had fallen off of, to $1,646.60, then closed down $1.60 on the day at $1,641.40. Now that's not a key reversal, but it is strong action. The GOLD PRICE fell to its previous low and refused to break -- no more sellers waiting there to be spooked out of gold. Worse yet for the gold short universe (which encompasses pretty much every government and central bank on the globe), crowds of buyers were waiting there, enough to drive the price above $1,640. Okay, this isn't by any means a runaway bull rally, but it does suggest a bottom and a market running out of sellers. Here's a little more. With a double bottom, GOLD has now established support at $1,623, so we can say "as long as gold stays above $1,623, 'twill be out of danger of great declines." However, y'all ought also bear in mind that the falling wedge on gold's chart has a lower boundary that could stand a drop to $1,575 without violation. Mirroring gold's performance, the SILVER PRICE, too, dropped mid-day, but to a lower low at 2998.7 cents. Just as quickly it jumped up out of that hold, and closed Comex only 39c lower at 3035.6c. On a longer term chart, the one with that falling wedge, this took silver only to the bottom of that falling wedge, whence it bounced back. This is splendid behavior, but silver must keep it up by not falling through 3000c. Today, with its bad/good/indifferent news announcement from the FOMC that didn't break silver, constitutes positive news. Now SILVER needs a higher close above 3100c to prove that. Well, the Great Ones of The Frittering Open Market Committee met, and their announcement leads one to suspect they were scared of doing anything to disrupt markets. We're going to keep on doing what we have been doing, they said. How did the markets take that? Me, I want to know not what people say, but what the canny ones do with their money. No cannier exist than bond investors, and the yield on 10 year and 30 year bonds rose a little. That represents a discount on the bonds for more expected inflation, which would explain why stocks also rose, because markets insanely (or should I say "Keynesianly") think more inflation will help the economy, and idea on a par with the notion that putting a knife under a laboring woman's bed will cut the pain. The mighty US Dollar Index fell a little, 16.8 basis points (0.22%) to 79.034. In any other market this would be fatal, but you have to allow a lot of "slop" for currencies, manipulated as they are. Today's lower close marks a new low for the dollar for this move, and brings it much closer to The Line That Must Not Be Crossed, namely, 79 (bottom of the long even-sided triangle). Dollar could stumble badly here. After a drop lower today, the Yen recovered to close higher by a gnat's eyebrow -- 122.98c against yesterday's 122.96c. Remains above the 50 DMA and 20 DMA, so momentum is positive but until it can climb above the 200 DMA (127.74) yen remains in a downtrend. Euro rose to US$1.3225, up 0.23% but still scruffing along without any resolution. Meanwhile, not only Spain but not Holland also appears ready to unravel. Doesn't really make the euro attractive. Stocks rose today, proving that P.T. Barnum was right about the frequency of certain births. Dow rose 89.16 (0.69%) to 13,090.72 and S&P500 did better rising 18.72 (1.36%) to 1,390.69. Dow is trapped below 13,100 resistance, and above that more resistance at 13,300. This unrolleth against a backdrop of a head and shoulders top finishing out a right and last shoulder. Buying a market that looks like that is like drawing to an A-K-J-10 inside straight flush in 5 card draw. Argentum et aurum comparenda sunt -- -- Gold and silver must be bought. - Franklin Sanders, The Moneychanger The-MoneyChanger.com 888-218-9226 10:00am-5:00pm CST, Monday-Friday © 2012, 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. No, I don't. 
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| Posted: 25 Apr 2012 09:16 AM PDT STOCK MARKET REPORT April 24, 2012 America is the only country that went from barbarism to decadence without civilization in between. - Oscar Wilde There has been so much talk lately about the coming high inflation due to excessive printing of fiat currency, that I think it's necessary to explore the topic. There is no doubt that the US, Europe, Japan and now China are all creating fiat currency at a rate never before in modern history. We also have had the lessons of excessive printing during Germany's Weimar Republic# drilled into our heads since the crib. Therefore we naturally assume that excessive printing in today's world will produce the same result. When it comes to the US it is worth remembering that there are significant differences. In the first place the US dollar has been the world's reserve currency for seven decades, and in the second place the excessive printing is nothing new in the United States. As you can see in the previous chart, ...
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| NASDAAPL Explodes Most In 4 Months As Volatility Implodes Posted: 25 Apr 2012 08:57 AM PDT A 2.7% gain in the NASDAQ, obviously dramatically aided and abetted by the squeeze-fest in AAPL +9% from last night's close, was the best gain in over four months for the tech-heavy index but still leaves it lagging the Dow (by over 2%) and S&P 500 (by over 1.5%) from the 4/9 highs in Apple. At the other end of the spectrum in the real economy, CAT's less than rosy outlook, saw it suffer its largest drop in 7 months dragging an impressive 37pts out of the Dow's lagging but positive performance on the day (now positive from the 4/9 Apple Top day). Of course the Apple-exuberance which seemed enough for the entire world's risk-asset markets to decide that everything is fixed started the day off gap higher in the US and late-to-the-game retail pushed equities higher out of the date this morning as the rest of risk-assets were generally steady. Europe's close seemed to have only minimal impact as everyone was focused on the FOMC statement and Bernanke's presser. Between the FOMC and the Bernanke conference, Gold, stocks, and the USD knee-jerked and retraced but Treasuries remained worse (higher in yield by 3bps or so). Once Bernanke began his quaking tenor, Gold pushed higher, Treasuries lower, stocks higher and the USD lower as hints of QE back on the table were dribbled in between defensive tacks on biflationary concerns. This QE-specific action was accompanied by low volumes though (as usual) but volatility did compress (a la typical QE trades) with VIX closing below 17% - its lowest in over a month and near its largest divergence from European volatility (V2X). Commodities in general lagged early then recovered as USD sold off on QE chatter from Ben - Silver underperformed on the day but outperformed notably off its lows after testing below $30 for the first time in 3 months. Treasuries pulled back positively off their high yields of the day in the late afternoon ending the week with the short-end (out to 5Y) flat and 10s/30s 2.5bps higher in yield. HYG was a dramatic high-beta outperformer today - now green for the month - even as HY and IG credit lagged the ebullience in stocks (though did improve to two-week highs). ES (the S&P 500 e-mini future) closed above its 50DMA on average volume today with some heavy and larger average trade size into the close ending just above Friday's highs - even after the dismal US data (Durable Goods) and Europe's issues this morning. The NASDAQ still lags the S&P 500 and the Dow post Apple's Top but did a lot of catching up today...
The pre-FOMC exuberance was generally only in stocks (blue - red oval) but between the FOMC statement and the Bernanke press conference equities, gold, and the USD round-tripped off initial knee-jerk responses (but Treasuries did not - staying higher in yield). Then once Ben started quivering and let the QE cat out of the bag a little, it was QE-on (after AAPL-on earlier in the day)...
VIX also followed the QE-on path and compressed to its lowest in over a month below 17% and dramatically dislocated from Europe's VIX equivalent...
But it was gold and silver that were rejuvenated by the QE chatter - recovering dramatically off their earlier knee-jerk lows. Interesting that Silver dropped notably before FOMC and gold today?
But it was high-beta high-yield bonds that were bid/squeezed today as they pushed notably higher (green below) into a gain for the month and remain the easy outperformers. IG and HY re-converged after some HY-IG decompression but stocks (blue) outperformed IG/HY on the day..
Which leaves HYG significantly rich not only to its own intrinsic value (dark red below) but stocks broadly and HY credit spreads in general. After SPY and HYG came back together (red oval) from early month rotation - perhaps this jump today is the final squeeze cover of those who put the earkly month short HYG, Long SPY trade on? Either way, HYG premia is getting high after reconnecting just two days ago...
Charts: Bloomberg
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| Ben Bernanke’s Paper Dollar Embodies Systemic Risk Posted: 25 Apr 2012 08:33 AM PDT The paper dollar is now the single most important source of systemic risk to the financial system, the world economy, and the security of the American people. That is the lesson of the past 100 years that Federal Reserve Chairman Ben Bernanke did not teach during his four lectures at George Washington University's Graduate School of Business. Instead, he celebrated the importance of the extraordinary powers he and his fellow governors have to manipulate interest rates and the value of the dollar in the name of economic growth and stability. In so doing, he ignored completely that the ever growing need for heroic interventions by the Fed is itself being created by the paper dollar system he celebrates. This failure is all the more telling because Mr. Bernanke states up front that central banks perform two critical functions: The first is to "achieve macroeconomic stability." By that, he generally means "stable growth in the economy, avoiding big swings, recessions and the like, and keeping inflation low and stable." The second is to provide "financial stability" by either trying to prevent or mitigate financial panics or financial crises. On both counts, the paper dollar system in effect since the final link between the dollar and gold was broken in 1971 has failed and failed miserably when compared to the results produced under the gold standard. Let's begin by stipulating that we agree with Chairman Bernanke's point that the gold standard is not a perfect monetary system. What is? The more important question is which system, the gold standard or the paper dollar, provides more macroeconomic stability and fewer financial crises. To answer this question, let's examine the historic record beginning with the most difficult example, the Great Depression, which supporters of the paper dollar invoke to discredit the gold standard and thereby avoid defending the abysmal record of the paper dollar. As Professor Brian Domitrovic pointed out in his recent Forbes.com column, the officials running the Federal Reserve in the critical period between 1928 and 1933 chose to ignore the rules of the gold standard, which would have forced them to increase the money supply in response to inflows of gold. Instead, the Fed exercised discretion and tightened, thereby making the deflation of the early 1930s worse than it otherwise would have been. Explains Domitrovic: "Rather, as (Richard H.) Timberlake has shown, we know what guided Fed thinking in this period, and this was the doctrine that the Fed would refrain from issuing money unless it clearly would go to financing end-point economic transactions, as opposed to things like stock-market speculation and even investment. Whatever you want to say about this doctrine, it has zip to do with the gold standard. And it was at the root of the Fed's weird decision-making 1928-33 where it presided over a radical narrowing of the money supply." What about the claim that, while the gold standard maintains a stable price level over longer periods of time, in the words of Chairman Bernanke: "over shorter periods, maybe 5 or 10 years, you can actually have a lot of inflation, rising prices, or deflation, falling prices." After the largest gold discovery of modern times set off the 1849 California gold rush the price level in the US rose 12.4% over the next 8 years. Under the paper dollar, that 8 year cumulative increase was exceeded in 1974, 1979 and 1980 alone. Moreover, an 8 year increase of 12.4% is equivalent to an average increase of 1.5% a year. By contrast, current Fed policy calls for inflation to average 2% a year which equates to a 17% increase in the price level over the next 8 years. Since abandoning the last vestiges of the gold standard in 1971, inflation has averaged 4.4% a year. Nevertheless, various sectors of the economy have suffered Great Depression like deflations. For example, between 1980 and 1986, the price of oil fell 60%, and the price of agricultural commodities and farm land fell by double digits. Those deflations led to the major bank failures of the mid and late 1980s. And, of course, the most recent financial crisis was triggered by a 30% decline in home prices, a disaster for American families, banks and investors alike that ranks right up there with the hardships experienced during the Great Depression. The net result is that without the guidance of the gold standard, the Fed and the paper dollar have become the leading sources of economic and financial instability. Since 1971, when President Nixon freed the Federal Reserve from the strictures of the gold standard, recessions have become more frequent, longer and deeper. From 1971 through 2010 (under the paper standard) unemployment averaged 6.3%, much worse than the 1947-67 (gold standard) average of 4.7%. We have since experienced the three worst recessions since the end of World War II, with the unemployment rate averaging 8.5% in 1975, 9.7% in 1982, and now above 8% for three years and counting. Under the post-World War II gold standard, there were no financial crises that presented a systemic risk to the US economy. Since 1971, we have experienced the:
In addition, the massive increase in the Fed's and other major central bank balance sheets since the first quantitative easing in 2009 has coincided with the slowest recovery ever — even worse than the recoveries experienced during the 1930s — and the fear of yet another break out in inflation. Under Chairman Bernanke's leadership, the extraordinary steps taken to contain the financial panic in late 2008 and early 2009 by fulfilling its "lender of last resort" role to banks and, under emergency powers granted to it by the Federal Reserve Act, to non-bank institutions, may well have avoided a complete collapse of the world's financial system. But to use that success as justification for a discretionary monetary policy and a defense of the Fed's ability to manipulate interest rates and the value of the dollar is to miss the greater point. The growing instability of the macro economy and the financial system is itself a product of the paper dollar system. The most important thing the Fed could do now to fulfill its two fundamental roles of providing for a stable economy and preventing financial crises would be to begin an orderly transition back to a dollar whose value was once again defined by a unit weight of gold — that is to make the dollar once again as good as gold. To do otherwise is to leave in place the fundamental source of systemic risk that no amount of increased regulation or oversight can correct — the inherent instability of today's monetary system based on a paper dollar whose future value is unknown and unknowable. Regards, Charles Kadlec, Ben Bernanke's Paper Dollar Embodies Systemic Risk originally appeared in the Daily Reckoning. The Daily Reckoning, published by Agora Financial provides over 400,000 global readers economic news, market analysis, and contrarian investment ideas. Recently Agora Financial released a video titled "What Causes Gas Price to Increase?".
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| Gold Daily and Silver Weekly Charts - Jack of All Trades, And We'll Be All Right Posted: 25 Apr 2012 08:20 AM PDT |
| Posted: 25 Apr 2012 08:15 AM PDT Dave Gonigam – April 25, 2012
Mr. Johnston manages a fund that invests in Canadian farmland… but he's also an astute macroeconomic observer. And this morning he's hot on the trail of what our own Patrick Cox and Byron King have identified as "the higher education bubble."
By their estimate, the total amount of student loan debt is to surpass $1 trillion today. We're not sure how they come by that estimate; the Consumer Financial Protection Bureau, an arm of the Federal Reserve, figures we passed the $1 trillion mark "several months ago," which jibes with our own reckoning late last year. Even if you go by a more conservative estimate of student loan debt — ironically, from another tentacle of the Fed — it still outranks car loans and credit card balances… 
"In the same way that artificially low interest rates and risk subsidies from Fannie Mae and Freddie Mac drove homeownership rates and prices to unsustainable levels," he goes on, "subsidized loans to students have led to the rapid growth in what can only be described as the diploma mill business, while at the same time pushing the cost of such education to stratospheric levels."
"These serial bubbles each have the effect of 'extracting' wealth from the citizens — in the form of bigger mortgages, heftier credit card statements and stuffed stock portfolios. The 'extracted' money is, over time, passed from the wallets of citizens to the pockets of the well-connected." And the student loan bubble? "This bubble that has already taken flight," he writes, "now it's flying dangerously close to a few pins." Already lenders like J.P. Morgan Chase and U.S. Bank are bailing on new student loan issuance. But a dozen other companies remain "all in." And you might be surprised at some of the names. They might even be in your portfolio. We identify every one of them in the new Apogee issue. Access here.
"It is a widely held misconception that TARP will make a profit," writes TARP inspector general Christy Romero in her quarterly report to Congress this morning. She figures when all's said and done, TARP will lose $60 billion. At the moment, taxpayers are still owed $118.5 billion. With this, we're going to borrow a phrase from Vancouver favorite Barry Ritholtz (which we cleaned up for the audience at The Daily Reckoning): Could someone at CNN please tell Erin Burnett to pour herself a tall glass of "Keep Your Mouth Shut" and go sit quietly in the corner?  Ms. Romero, meanwhile, says whether TARP makes a profit or loss masks "the bigger picture of… whether lessons learned from the financial crisis have been adequately implemented so that Treasury, banking regulators and Congress do not find themselves in the position of rushing out another massive bailout of the financial industry in the form of TARP 2.0." The inspector general has already spoken heresy by declaring TARP a money loser. We'll say what she can't without jeopardizing her job security: It's too much to assume the "lessons" have even been "learned," much less implemented.
"Stocks Rally on Apple's Strong Beat," says a headline at The Street. After yesterday's episode of The 5, that "strong beat" elicited some…um… hostile email. "Nice call on AAPL!" said one, as we dive into a representative sample. "I'm sure you saw the blowout quarter. It's the greatest company on our planet and you had the outrageous nerve to advise shareholders to sell." "Would you just ['Keep Your Mouth Shut'] about Apple already?" says another (which we cleaned up). "Why make fools of yourselves over a stock you have never recommended? I feel bad for the fools who actually shorted it on your call." "Chris Mayer's 'Sell Apple' call may soon add to his enviable record," writes a less-hostile, but nonetheless impatient, reader. "The logic he laid out as he presented his case certainly makes sense and events may well play out along the lines he anticipates. But it has yet to put any profit in the pockets of those that sold Apple based on Chris' advice." Well, that depends on when they bought, right? Careful readers will note there was not a time frame attached to Chris' call; he merely laid out the "logic," as that last reader said. It may take a couple more quarters to play out. Along those lines, Marc Faber — who's coming back to Vancouver this year — sees China headed into recession. "If you go and slow down from a gross rate of, say, 10% [GDP] to a gross rate of 3%, there is a recession. And I don't believe in the gross figures China publishes." If China falls out of bed, what happens to iPhone sales? Maybe the same thing that's happened to iPod sales — down 15% year over year — as that product has reached saturation. Until that day, we're braced for more abuse and invective. Chris and Addison are used to it, having both sounded the lonely alarm about housing in 2004-05.
The firm stands accused of "material misrepresentations and omissions" about its staff levels and the background of that staff when it applied for SEC permission to rate sovereign debt, municipal debt and asset-backed securities. According to The Wall Street Journal, which appears to have a mole in the SEC feeding it stories about this case, the SEC warned Egan-Jones about some sort of enforcement action last October. That would be three months after the agency had the temerity to pre-empt the "respectable" S&P by downgrading U.S. sovereign debt from AAA. Because this isn't a civil case, it won't be tried before a federal judge; rather, it will go before an SEC administrative judge. Talk about a stacked deck…
The agency is proposing to apply child labor regulations to farm work — forbidding anyone under 18 from a long list of tasks on their own family's property. "The new regulations," according to The Daily Caller website, "would also revoke the government's approval of safety training and certification taught by independent groups like 4-H and FFA, replacing them instead with a 90-hour federal government training course." According to the American Farm Bureau Federation, the regulations could be made final as early as August — clearing the way for Labor Department inspectors to swarm family farms. Not noted in The Daily Caller account is the fact that last year, the Transportation Department attempted its own takedown of small farms. It proposed that anyone driving farm equipment on — or even across — a public highway obtain a commercial driver's license. After a hue and cry, the department backed off. We shall see if the same occurs this time…
Tests have found "a mysterious humming sound that has drawn hundreds of complaints in Windsor, Canada, for more than a year is emanating from Michigan," according to a UPI report. It's come to be known as the Windsor hum. The Ontario provincial government has logged 500 complaints. "I was in bed, it was about 2:30 a.m. and I could just hear this pulsing noise," one homeowner says. "I couldn't get back to sleep." The testing has traced the noise to an industrial area called Zug Island — in River Rouge. But in another example of how the "mother of all financial bubbles" makes itself felt on the local level first… city fathers "have said they don't have the money to find the precise source of the noise." Maybe the Canadians can take up a collection?
"Now after reading yesterday's 5 I learn you are trying to make a PROFIT!! Horreur!" "Oh, wait a sec. Isn't making a profit one of the basic motives of a free market system? I'm confused."
"Tell him I'll pay for his first two months if he promises to read the free books and comment on them to The 5. That way, I can see if I got anything for my money." The 5: "The best 'public service' we could provide," said Addison via instant message this morning, "is to build a successful business that serves our customers well."
The 5: Heck, that's the main attraction. You get one e-book a week for as long as you maintain your membership. Seriously, the benefits of membership are more than we can list here and stay within our allotted 5 Mins. Jeffrey Tucker, who's doing yeoman's work heading up this project, has a comprehensive list at this link. Cheers, Dave Gonigam P.S. The Federal Reserve's Open Market Committee is out with its every-six-weeks statement. It delivered no surprises, promising once again to keep interest rates near zero "until late 2014." Because this was a two-day FOMC meeting, we'll be treated later today to a Ben Bernanke news conference. We'll pick apart anything worth picking apart tomorrow. P.P.S. Our friends at First Federal have secured a supply of Mint-State 1/10th-ounce American Gold Eagles. And right now they're able to offer the best price in more than two years. If you missed the announcement earlier today from Nick Bruyer, check it out.  The idea behind the aforementioned relaunch of Laissez Faire Books evolved in fits and starts over the last three months. And the way it happened is a remarkable story in its own right. Here to tell it is Laissez Faire Books executive editor Jeffrey Tucker… The Secret History of the Club: Part 1by Jeffrey Tucker "Launch" has been the watchword this week in the world of Laissez Faire Books. It's been on everyone's mind since the brilliant idea of a club first emerged in the early weeks of 2012. When the launch finally happened, I experienced one of those moments: "Pinch me so that I know I'm not dreaming." I was, at that very moment, flying through the air on an airplane, logged into the Internet with my portable laptop, running about five different applications that allow real-time interactions with the mortals on earth. This was not even possible a few years ago. It's like a dream world, a miracle that is part of our daily lives, a gift to us from the entrepreneurial class working within a market framework. It has produced results no one could have expected only a few years ago. I was reflecting on this amazing reality when suddenly, there was a stillness that I detected from those doing the work at the home office. The texts and chatter had stopped. I texted Doug Hill, who has worked so hard on this project from his position at Agora Financial. "How's it going?" I asked. "Rockin'," he said. I pulled up the page to see what he meant. Rockin' indeed. The Laissez Faire Club was live. We existed. It finally happened. The thing that was a dream only a few weeks ago was suddenly a reality. Here is the proof of a notion that has consumed me for years, a theory I gleaned from my years of reading the works of Ludwig von Mises: The world we see is the realization of the ideas of the past; the world of the future will consist of the ideas we hold today. We need only to dream, create and act, and the course of history is changed. I don't doubt that there will be books written in the not too distant future about the early days of the Laissez Faire Club, this history-changing idea. The future of this venue, the combustible mixture of commerce and intellectual work, might determine the future of human liberty itself. It is a reinvention of the whole project of creating and distributing the best ideas. This short account is just the beginning. There are so many moving pieces, so many creative minds and talented people involved, so much extraordinary drama. Had this launch been made in a reality television show, it would be bigger than The Office. The genesis stretches back in time before I got involved. Agora Inc. has long had an interest in the acquisition, preservation and refurbishment of undervalued assets. Look at the properties it owns in Baltimore, Md., the historic buildings that it has made its own. Look at the land in Nicaragua now becoming a luxury resort. Look at the way this company has changed the lives of so many people around the world by giving them the tools to manage their own lives. Laissez Faire Books was one of those undervalued assets. It had a mighty history stretching back to 1973, but since the digital age, there was a wide perception that it had been in decline, changing hands every few years and never quite able to change with the times. Addison Wiggin and Bill Bonner decided to take it on with the goal of doing for this company what Agora had done for so many physical properties. I came into the mix in November 2011, and the first task was to migrate to a modern Web space. For those who have never attempted this, you would be amazed at the work here. We were talking about a large inventory that had to come to life in a new way. Building a commercial space from the ground up takes time, but it is doable; migrating a giant store from one space to another is not unlike moving a city from one state to another. But it finally happened, and in a relatively short time. The release came the first week of January. It was thrilling and wonderful, a perfectly beautiful website. Yet we all knew the truth: We had just begun. There had to be something else. There was something wonderful waiting to happen; we just had to discover what that thing was. The pieces came together gradually in late January. It began with Joe Schriefer from Agora, who said that we really need small set of great books that offer a total economics education in one small package. Brilliant! Addison Wiggin and I talked it through, and it was rather obvious what these had to be: Hazlitt, Hayek and Garrett. But is that really all? Surely not. Let's talk e-books. What if we gave them all away for free with the purchase of the physical books? Sounds great to me: I love nothing better than free books. And how many of these free books can we actually give away? Dozens, hundreds, thousands. How about one per week, forever? Perfect. It can be done. Each will have new editorial notes, new introductions, amazing art, the best possible functionality. Still thinking. What if we provide a way for people to discuss these books? There are public forums everywhere, but I knew from experience that their value is limited and unstable. What if we make them private, a members-only deal, so that everyone has a stake in keeping them as civil and intelligent as possible? We were all beginning to see how this works. Big ideas, a community of discussion, reckless generosity, practical effects. And what is the context in which this appears? The government is growing and wrecking the physical world in every possible way. Standards of living are slipping. Despair is growing. Politics provides a nice diversion of energy, but no real answer. Ah, but the digital world is different: It allows us to create our own civilization. Now the fullness of the possibilities is emerging. We need our own private city, not so that we can hide, but so that we can think and discover in peace. This new world should be a place where ideals rule, where friendships blossom, where we can all learn together. We can disagree without being nasty or argue, and expect to learn at the same time, checking our experiences and ideas against others. The time between the period in which we had only glimpsed this and when it all came together was no more than a few days. Then it was born: the Laissez Faire Club. Now we have it. Here, we combine the magic of the commercial marketplace with the thrilling uncertainty that comes with a free thinking society of ideas. Having the model is one thing. Building the software infrastructure is another. This where the fun began, and this is when I really got know the inside culture of this place called Agora. There have been so many times when I wished that everyone could see what I've seen in this place. It represents the very best of what modern commercial life has to offer, an institution that is a great servant of the market that drove its creation and growth. Every employee has something to contribute. The diversity of the cast of characters is real kick. Regardless of their official title, they are all interested in ideas. They might be technicians or accountants or customer service people or database managers, but they care about so much more than what they do. Any topic is fair game. As an example… On my way out of the office one day, the mastermind behind the database infrastructure of a Agora's Web family gave me an inspired painting that he had done. It is a treasure, a scene from a graveyard in France in which a 500-year-old statute is brought to life amid spring blooms. Another example… A book author was talking about how she anticipated with fear and joy an open performance she would attend the following night. The opera is Charles Gounod's Faust, and she is right: scarier than any modern movie. A cover designer was looking for inspiration. It was provided by a payment systems operator who knew the book in question very well. He pounded out a great paragraph explanation for the designer while I was still thinking about the question. The result was genius. I wish I could write a personal tribute to each one. They've all made contributions to making this dream come true. The place can be quiet and solemn one minute, and then, just as quickly, become a place of frenzied fun and wild laughter. Employees work to the point of exhaustion, all in the service of the customer, but somehow never seem exhausted. At the end of the day before launch, I was slumping over a desk, holding my head up with my hands, feeling as if the last ounce of energy had been drained from me. I picked myself up and went out into a large room on the second floor where the copywriters and editors work. They had all been through what I had been through. But there were no long faces. They were still brimming with energy and excitement about what was coming. They were smiling and joking. Instantly, I felt a change come over me. The inspiration came back, as did the energy. In any office like this, in which everyone cares so intensely about the results, there will be arguments, and even explosions and strong words. Everyone is used to differences of opinion, passionately expressed. They are allowed. No one holds back, even in a manner that disregards the company hierarchy. There is nothing phony about the culture here. If you are going to explode, bring it on. But what is truly wonderful is that even the most-tense moments, even following sharp exchanges and argument, normalcy and collegiality returns with ease. And quickly. There is no grudge. We all want the same thing. We are on the same team. Each day is new. Each hour is a chance to do something great. Reflecting on how this could be, and why this culture of honesty, innovation and collegiality is so sadly lacking in other sectors of life, it finally hit me. The gaze of this institution is always outward and upward, toward the North Star of the commercial marketplace: the consumer. At Agora Financial, he even has a name: Bob. Bob is the archetype of the person we serve. He is smart, searching, inquisitive and hoping for a better life through better ideas. Well, Bob has a new home. A happy home of ideas and friendship. We made it for him. We invite him in so that we can serve him generously and for as long as he finds benefit in what we do. Bob might be you. Join us and see.
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| US Dollar VS Gold: Epic Money Battle Posted: 25 Apr 2012 08:00 AM PDT The so-called Global Financial Crisis is a term so widely used that it has earned its own acronym of GFC. When first seen, it seemed like girl friend club or some such, since many friends use GF loosely to refer to sweethearts. The GFC is falsely named, since it is more accurately described as a global monetary war with the USGovt vigorously defending its franchise in the USDollar for crude oil and trade settlement, and for bank reserves management.
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| Fed: Bernanke Saves QE3 Bullet As Labor Markets Improve Posted: 25 Apr 2012 07:45 AM PDT 25-Apr (Forbes) — The Bernanke Fed decided to keep the monetary levers unchanged on Wednesday, as they acknowledged the slight improvement in labor markets and general economic activity. While QE3 appears to be off the table, the Fed's FOMC statement made it clear that downside risks abound, particularly in "global financial markets," signaling that the European sovereign debt crisis could still bring the U.S. economy down. Inflation, on the back of food and energy prices, has risen, but the Fed considers it temporary. [source] PG View: Gold sold-off initially in the wake of the FOMC statement, but has since recovered and is again trading higher on the day; nearly $20 off the intraday low.
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| Posted: 25 Apr 2012 07:19 AM PDT Dear CIGAs, This is a disgusting fabrication by MSM and MOPE. Gold roared up from $20 dollars lower. Do you think they have an agenda? I do. Gold drops sharply after Fed stands pat CIGA Eric Did you actually expect headlines to say Gold rose sharply after Fed stands pat? Breaking headline news and/or Continue reading Jim's Mailbox
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| Mexico, Russia, Turkey, Kazakhstan Raised Gold Reserves in March Posted: 25 Apr 2012 07:15 AM PDT "It will be interesting to hear what "Helicopter" Ben has to say for himself...and how the precious metal markets will react, or be allowed to react." ...
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We addressed the above question last year and arrived at the answer: no, gold left bargain territory long ago. We remain bullish on gold not because we think gold is still cheap, but because we expect it to get a lot more expensive.
The Federal Reserve says that everything is going to be okay. The Fed says that unemployment is going to go down, inflation is going to remain low and economic growth is going to steadily increase. Do you believe them this time? As you will see later in this article, Federal Reserve Chairman Ben Bernanke has been dead wrong about the economy over and over again. But the mainstream media and many Americans still seem to have a lot of faith in the Federal Reserve. It doesn't seem to matter that Bernanke and other Fed officials have been telling the American people lies for years. 
The region is emerging as one of the top oil-producing areas of North America. Officials say up to 30,000 more workers could descend on the Bakken oil fields of Montana, North Dakota and Saskatchewan in the next few years.
What a day, huh? First we saw some May silver call-sellers get squeezed. Then, the FOMC statement caused a sharp selloff. Unfortunately for The Cartel, no waterfall ensued as price quickly rebounded. We now look to be on the verge of a rally. Let's get started!
"See any similarities to the U.S. housing market?" read the email from our acquaintance Stephen Johnston.
Today is "1Tday" — as heralded by an organization that brands itself the "Occupy Student Debt Campaign."
"U.S. student loans," writes Mr. Johnston, "are a prime candidate to be the source of a future financial crisis with the predictable QE response, bank bailouts and all-around money supply shenanigans.
"To grow," writes Addison in the new issue of Apogee Advisory, "the American Empire is always looking to inflate the next bubble.
Meanwhile, here's a new signpost to tell us that we're not done dealing with the consequences of the last bubble: The $700 billion monstrosity known as the Troubled Asset Relief Program is still a money loser, 3½ years on.
Major U.S. stock indexes are all up today, pulled largely by the strength of one company's earnings.
Gold is treading water, as it has for most of the last week and a half. The spot price sits at $1,640. Silver's at $30.87.
The SEC has followed through on its threat to file an "administrative action" against the plucky rating agency Egan-Jones.
The U.S. Labor Department will try to kill off whatever remains of the family farm.
The town of River Rouge, Mich., is too broke to figure out what's driving their neighbors across the Canadian border nuts.
"Signed up last week," a reader writes of 
"You had me convinced that Laissez Faire Books was going to be a bastion of support for the free market system," writes another reader with tongue firmly in cheek.
"The reader who carped about 'Laissez Faire Books becoming another moneymaking proposition, rather than a public service' is in desperate need of the information he may learn from Laissez Faire."
"I like the idea of your current project," another reader writes in. "However, I would be more likely to buy the books if they were e-books that could be used on the Apple iPad and the Amazon Kindle."| You are subscribed to email updates from Save Your ASSets First To stop receiving these emails, you may unsubscribe now. | Email delivery powered by Google |
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