Gold World News Flash |
- 20 Years From Now: Gold @ $12,000 & Silver @ $1,000?
- Don’t Be Seduced, Why Summer Will Be Disastrous for Markets
- The Mythical Land of Us
- Max Keiser Brings Stand Up Rage! Tour to Los Angeles, 11 May 2012
- Money Slow Down
- “Akshaya Tritiya” – India's Gold Festival
- Guest Post: Alan Greenspan Asked For Advice, Do People Ever Learn?
- Why Going "Naked To The Strip" Means More Pain For Nat Gas Companies
- Double or Nothing: How Wall Street is Destroying Itself
- Germany Begins Quantifying The Cost Of A Greek Exit (And Discovers Contingent Liabilities Are All Too Real)
- Greece Exit, Euro-Zone Collapse, Spain and Portugal Will Follow Within 6 Months
- Alasdair Macleod: Gold bugs will be vindicated
- In Much-Anticipated Move, China Cuts Reserve Requirement Ratio, Joins Reflation Race
- Latest GoldMoney article
- Gold bugs will be vindicated
- Gold COT (CFTC - Commitment of Traders) for Period 4/26 - 5/8
- This Past Week in Gold
- How You Can Profit From the Natural Gas Market's Next Big Collapse
- Gold Down-leg Completed
| 20 Years From Now: Gold @ $12,000 & Silver @ $1,000? Posted: 12 May 2012 06:44 PM PDT Should both Gold & Silver Bulls & Bears take a long winter sleep? Maybe… When we look at Silver prices from 1985 to today (Green line in the chart below) and compare the evolution to the one from 1967 to 1974 (black line in the chart below), we can see a very similar pattern. If price would continue to track this pattern, it could mean that silver has just entered a 20 years lasting winter sleep. In the meantime, it would trade between $20 and $50, before taking off again in 2032… From then on, it could gain over 2,000% to reach nearly $1,000. A similar pattern can be observed in the price of Gold, although the time scale is slightly different. Gold would drop towards $1,000 in 2015, before taking off to about $12,000 by 2025. Why the hell would Gold drop towards $1,000 per ounce by 2015, while all the fundamentals are pointing to a “screaming buy”? Well, if Martin Armstrong is correct and we would get a Sovereign Debt “Big Bang̶...
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| Don’t Be Seduced, Why Summer Will Be Disastrous for Markets Posted: 12 May 2012 01:55 PM PDT from KingWorldNews:
Pento continues @ KingWorldNews.com
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| Posted: 12 May 2012 01:35 PM PDT by Jeff Nielson, Bullion Bulls Canada:
The U.S. economy has never been less-solvent in its entire history, meaning that U.S. Treasuries have never been less valuable. The new supply of U.S. Treasuries grossly exceeds any level of paper the U.S. has ever pumped into global markets before, meaning that Treasuries have never been less valuable. And yet we see (alleged) buyers being permanently willing to pay (by far) the highest prices in history for these mountainous stacks of paper. Read More @ BullionBullsCanada.com
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| Max Keiser Brings Stand Up Rage! Tour to Los Angeles, 11 May 2012 Posted: 12 May 2012 01:30 PM PDT from Silver Vigilante:
"So, did you know that in China they hang bankers?" Keiser began his set. Keiser spoke for approximately 45 minutes before turning the event over for Question and Answers which lasted approximately another hour. Read More @ SilverVigilante.com
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| Posted: 12 May 2012 01:15 PM PDT by Richard (Rick) Mills, Ahead of the Herd:
Many have called for very high levels of inflation possibly leading to hyperinflation. Their reasoning is that over printing of the US dollar will cause the dollar to weaken and inflation to set in – more money chasing the same amount, or less, of goods causes prices to rise. A rise in gold and silver (and commodities prices), would be the result. The called for massive inflation hasn't yet happened, yes there's been more than a modest rise in the real price of goods (much more then the government measured Consumer Price Index), but treasury yields and home prices are at record lows, jobs have languished and credit has stalled. These are not the conditions one would expect to see in a highly inflationary environment. This brings up two questions: Read More @ AheadOfTheHerd.com
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| “Akshaya Tritiya” – India's Gold Festival Posted: 12 May 2012 01:03 PM PDT from The Indian Express:
Watch the Video @ www.indianexpress.com
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| Guest Post: Alan Greenspan Asked For Advice, Do People Ever Learn? Posted: 12 May 2012 12:44 PM PDT Submitted by James Miller of the Ludwig von Mises Institute of Canada Alan Greenspan Asked For Advice, Do People Ever Learn?
That is the only way to express this author's utter bewilderment that former Federal Reserve chairman Alan Greenspan is still given an outlet to speak his mind. Actually, I am surprised Mr. Greenspan has the audacity to show his face, let alone speak, in public after the economic destruction he is responsible for. It was because of Greenspan, of course, that the world economy is still muddling its way along with painfully high unemployment. His decision to prop up the stock market with money printing under any and every threat of a downtick in growth, also known as the Greenspan Put, created an environment of easy credit, reckless spending, and along with the federal government's initiatives to encourage home ownership, the foundation from which a housing bubble could emerge. It was moral hazard bolstering on a massive scale. Wall Street quickly learned (and the lesson sadly continues today) that the Federal Reserve stands ready to inflate should the Dow begin to plummet by any significant amount. Following his departure from the chairmanship and bursting of the housing bubble, Greenspan quickly took to the press and denied any responsibility for financial crisis which was a result in due part to the crash in home prices. In his infamous 2009 Wall Street Journal editorial, he had the nerve to blame availability of credit which financed the run-up in home prices to a "savings glut" in Asia. He writes: [T]he presumptive cause of the world-wide decline in long-term rates was the tectonic shift in the early 1990s by much of the developing world from heavy emphasis on central planning to increasingly dynamic, export-led market competition. The result was a surge in growth in China and a large number of other emerging market economies that led to an excess of global intended savings relative to intended capital investment. That ex ante excess of savings propelled global long-term interest rates progressively lower between early 2000 and 2005. Sounds convincing right? Much of the aura of greatness attributed to Greenspan throughout his term as chairman was due in part to the purposefully overly-technical language he used when talking to reporters. Here he utilized the same technique, albeit in a simpler manner, to obscure the Fed's role in the housing bubble. His explanation falls on its face though when looking at key historical data and by asking the right questions. As University of Georgia economics professor George Selgin documents, Greenspan's lowering of the fed funds rate, that is the rate banks pay each other to borrow money on the overnight market, coincides with the lowering of mortgage interest rates when taking account for the variable lagging effects of monetary policy:
To put downward pressure on long term mortgage rates, an increased pool of dollars had to be available. If Asian economies experiencing an unprecedented increase in savings were to invest in the United States and provide the financing for reduced mortgage rates, there would have to be an increasing supply of dollars available for Asian savings to funnel into the U.S. And as economist George Reisman brilliantly shows, the "savings glut" argument doesn't stand when taking into account the following questions and observations: First, if saving had been responsible, rather than credit expansion and the increase in the quantity of money, there would have been a corresponding decline in consumer spending in the countries allegedly doing the saving. The fact is that there was no such decline. Second, saving implies a growing supply of capital goods, more production, and lower prices, including lower prices of capital goods and even of land. These are results that are incompatible with the widespread increases in prices typically found in a bubble. Third, if somehow saving had been responsible for the housing bubble, the spending it financed would not suddenly have stopped. Such stoppage is a consequence of the end of credit expansion and the revelation of a lack of capital. Fourth, if large-scale saving rather than credit expansion had been present, banks and other firms would have possessed more capital, not less. They would not be in their present predicament of having inadequate capital to carry on their normal operations. This situation of insufficient capital is the result of malinvestment and overconsumption, which are the consequences of credit expansion, not saving. Fifth, in the absence of increases in the quantity of money and overall volume of spending in the economic system, saving also implies an immediate tendency toward a fall in the economy wide average rate of profit. This is another result that is incompatible with what is observed in a bubble or boom of any kind, which is surging profits so long as "the good times" last. It should be perfectly clear at this point that Greenspan holds the majority of the blame for the housing bubble. And yet many financial media outlets still see the former central banker as a type of guru on global economic affairs. Sure enough, Greenspan headed the institution predominately culpable for the state of the global economy. The Federal Reserve's monopoly over the supply of the dollar, still the world's reserve currency, means its policies often have repercussions on a grand scale. Recently in the Financial Post, Greenspan was interviewed and offers some thoughts on the Eurozone crisis and what path should be followed to rectify the ongoing sideshow. Q. So what is the possible outcome? For a supposed free marketer, it's awfully strange that Greenspan would regard tax evasion as a bad thing. Money not forcefully plucked by the highway robbers occupying the public offices of the PIGS is better used in the private sector where consumer needs are satisfied; not political ones. It stands to be reckoned that tax evasion is actually playing a significant part in keeping the economies of these heavily indebted countries afloat. As I have noted before: Tax evasion is typically listed as a "problem" for Greece- economist Martin Sullivan calls it "disrespectful"- but evasion is only a problem if one considers the person who flees from a mugger a problem for the mugger himself. Greenspan really lets his statist side show by calling for political unionization as the only feasible solution. Though it is true that monetary unions have never survived unless united politically, Greenspan treats a break up as out of the question when the EU is indeed breaking up before the world's collective eyes. The debts are too high and no politician in either country seems willing to take the necessary steps to rollback the welfare state and spending. Crying foul over brutal austerity measures has become all the rage despite the fact that no real austerity is taking place. The economic truth that you can't spend what you don't have is being ignored by the ruling class as the citizens of the PIGS keep buying into the fantasy that their elected and appointed leaders are truly looking out for them. Greenspan's advocacy of a European political union is demonstrative of his bent toward overall centralization of power. No man principled enough to believe in liberty and free markets would ever utter such nonsense. Greenspan is then asked point blank over his alleged belief in the ability for the market to correct itself in lieu of government regulation. Q. You mentioned in 2008 at a Congressional hearing that you had placed too much faith into self-correction on the part of markets, so do you think the new regulations will protect the public? Again, Greenspan ignores how his actions affected the decisions of major banks to overleverage themselves. From the tech boom and bust to the housing bubble, Greenspan gave a clear signal to the banking system that he would be there to save the day with the printing press should it find itself much too leveraged to sustain a turn for the worse. This precedent dates back to bailout of Long Term Capital Management as popular financial blogger Barry Ritholtz explains in his great book Bailout Nation: Of course, that's not how Greenspan saw it. The failure of LTCM would have had a very negative impact on psychology. Woe to the Fed Chair who allows traders to become morose! That was how Mr. Atlas Shrugged rationalized the intervention. (Thank goodness Ayn Rand was already dead). Whether that would have turned out to be true is a matter of much dispute. The evidence leads me to surmise that not only would LTCM's demise not have caused the system to collapse, it would have done a world of good. Had LTCM been allowed to fail naturally, perhaps a lesson might have been learned: risk and reward are each sides of the same coin. Alas, it was a missed opportunity for the traders and risk managers at major banks and brokers to learn this simple truism. The parallels between what doomed LTCM in 1998 and forced Wall Street to run to Washington for a handout in 2008 are all there, and the significance of these missed opportunities are now readily apparent. Ritholtz unfortunately makes the same mistake the interviewer at the Financial Post did in attributing Greenspan's belief in the unfettered market to influencing his decision to bailout private companies that made bad bets. True capitalism is about profits and losses; no matter the contagion effects. Engaging in bailout after bailout demonstrated the exact opposite of what is often ascribed to Greenspan; that he was not a defender of free markets but someone who headed the greatest state-authorized regulatory body in the world. Much like he does on all of these matters, Murray Rothbard had Greenspan's number even before the tech bubble. Writing in the Free Market in 1987, Rothbard hits the nail on the head: Greenspan's real qualification is that he can be trusted never to rock the establishment's boat. He has long positioned himself in the very middle of the economic spectrum. He is, like most other long-time Republican economists, a conservative Keynesian, which in these days is almost indistinguishable from the liberal Keynesians in the Democratic camp. As an alleged "laissez-faire pragmatist," at no time in his prominent twenty-year career in politics has he ever advocated anything that even remotely smacks of laissez-faire, or even any approach toward it. For Greenspan, laissez-faire is not a lodestar, a standard, and a guide by which to set one's course; instead, it is simply a curiosity kept in the closet, totally divorced from his concrete policy conclusions. Thus, Greenspan is only in favor of the gold standard if all conditions are right: if the budget is balanced, trade is free, inflation is licked, everyone has the right philosophy, etc. In the same way, he might say he only favors free trade if all conditions are right: if the budget is balanced, unions are weak, we have a gold standard, the right philosophy, etc. In short, never are one's "high philosophical principles" applied to one's actions. It becomes almost piquant for the Establishment to have this man in its camp. Greenspan's advocacy of laissez-faire is nothing but a mythical trait evoked to tarnish those who believe in actual free markets. Because of Greenspan's inept leadership, Keynesians, politicians, and the like can paint the uninhibited market as unstable and subject to huge failures when actual capitalism hasn't been attempted in the U.S. in over a century. And even then the free market wasn't allowed to prevail due to regulation at the state level and legal tender laws. Greenspan was never a believer in the freedom of the market. His adoration of capitalism was a disguise for his real motive to be chief regulator. That's why, when asked what keeps him up at night, he answers "What could go very wrong if the euro busts up." The answer is nothing could go wrong when considering the long term. The breakup of the euro would go a long way in fixing the damage done by fiat currency and the central banks which provide it. In a just world, what would ensure Greenspan's sleeplessness at night should be the prospect of hordes of pitchfork-armed, disgruntled unemployed waiting to take out their frustration on his disastrous tenure as head of the Fed. Instead, he frets over the breakup of the Eurozone which is coming regardless of decisions the buffoon technocrats come up with to keep the party going just long enough to cash out on their respective government's dime. The fact that he is the keynote speaker at the upcoming International Economic Forum of the Americas/Conference of Montreal shows just how clueless the participants at such a forum are. Taking his advice will only lead the world into further monetary chaos. Rather than a valiant defender of the market, Greenspan championed money printing, otherwise known as counterfeiting in any other industry, as the perfect vaccine for economic ills. His greatest accomplishment was selling the world Keynesian snake oil wrapped in an articulate package. He got out of the house of cards before it tumbled beneath the feat of his successor who is following the Greenspan rulebook to a tee. Publications that seek Greenspan's advice show their true ignorance of the financial crisis and its foremost cause. Given his track record, it's a safe bet that anything the former Fed chairman recommends will benefit the establishment and banking sector over the general public.
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| Why Going "Naked To The Strip" Means More Pain For Nat Gas Companies Posted: 12 May 2012 09:09 AM PDT By Martin Katusa of Casey Research Which Stocks Will Lose the Most in the Coming Energy Bloodbath Yesterday, I made a prediction that should scare a lot of investors. I predicted a massive loss in market valuation for some of North America's largest energy producers. You might own some of these names yourself. I'll share some specific names with you in a moment... But before we cover them, it's important you know the dynamics that will drive them lower. I covered the first dynamic yesterday. It's called "reserve write-downs." As you probably know, the price of natural gas has collapsed more than 60% over the past 12 months. Energy firms that carry billions of dollars of reserves on their books based on the "old" prices (around $4 per MMBtu) will have to "write-down" the value of those reserves to reflect the new prices (below $2 per MMBtu). Natural gas reserves that were "economically recoverable" – and thus, extremely valuable – when natural gas traded for more than $4 per MMBtu back in 2010 are going to be worth much, much less... now that natural gas is below $2 per MMBtu. The second dynamic involves "hedging." Hedging is when one party agrees to sell a commodity to another party at a particular price in the future. This strategy helps commodity producers and consumers know in advance what their price of a given commodity will be. It gives both parties a greater ability to plan for the future. For example, a farmer might agree to sell his corn for $6 per bushel before he even harvests it. Or an oil producer might agree to sell his production for $100 per barrel. This gives the farmer and the oilman the certainty they need to run their budgets. Even if the prices of their given commodities fall, both the farmer and the oilman are protected from price declines. They've "hedged" their production. Hedged natural gas contracts have protected many producers from the full wrath of today's rock-bottom prices. They've been able to sell their production at relatively high prices... even while the spot price collapsed. But... for a lot of producers, these higher-priced hedges are about to expire. Encana, Canada's largest natural gas company, is a good example. The company had prudently hedged lots of the gas it sold over the last six months. This means it was still realizing $4 or $5 per MMBtu on its sales. Now, those hedges are expiring... and the new hedges are at much lower prices. Encana's cash flow and its economically recoverable reserves are going to plunge. Encana isn't the only natural gas company in this situation. In recent months, the second-largest natural gas producer in the U.S., Chesapeake Energy, removed most of its gas hedges for 2012 and 2013 based on the belief that prices are at or near a bottom. Such a move, known as going "naked to the strip," marks a major turnaround for a company that was one of the best and most active hedgers in the sector. Now, Chesapeake has no protection if gas prices continue to slide. It's a risky scenario seeing as prices are currently below production costs in most U.S. gas basins. For investors, the fact that many North American gas producers are seeing their high-priced hedges expire makes it more important than ever to understand a company's cash flow picture going forward. An investor must ask the following questions...
These are the questions you need to ask... But be warned: you won't find very many producers with pretty short- and medium-term cash flow pictures.I expect natural gas prices to remain between $1.50 and $2 per MMBtu for the next 12 months. Those prices will render a lot of production uneconomic. They will force companies to massively write down the value of their reserves. Cash flows will plummet. Shares in gas producers, while down a lot over the past year, will fall more than 25%. The bloodbath in natural gas stocks is about to get worse.
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| Double or Nothing: How Wall Street is Destroying Itself Posted: 12 May 2012 05:34 AM PDT Submitted by John Azis of Azizonomics Double or Nothing: How Wall Street is Destroying Itself
This was exemplified by the failure of LTCM which blew up unsuccessfully making huge interest rate bets for tiny profits, or "picking up nickels in front of a streamroller", and by Jon Corzine's MF Global doing practically the same thing with European debt (while at the same time stealing from clients). As Nassim Taleb described in The Black Swan these kinds of trades — betting large amounts for small frequent profits — is extremely fragile because eventually (and probably sooner in the real world than in a model) losses will happen (and of course if you are betting big, losses will be big). If you are running your business on the basis of leverage, this is especially dangerous, because facing a margin call or a downgrade you may be left in a fire sale to raise collateral. This fragile business model is in fact descended from the Martingale roulette betting system. Martingale is the perfect example of the failure of theory, because in theory, Martingale is a system of guaranteed profit, which I think is probably what makes these kinds of practices so attractive to the arbitrageurs of Wall Street (and of course Wall Street often selects for this by recruiting and promoting the most wild-eyed and risk-hungry). Martingale works by betting, and then doubling your bet until you win. This — in theory, and given enough capital — delivers a profit of your initial stake every time. Historically, the problem has been that bettors run out of capital eventually, simply because they don't have an infinite stock (of course, thanks to Ben Bernanke, that is no longer a problem). The key feature of this system— and the attribute which many institutions have copied — is that it delivers frequent small-to-moderate profits, and occasional huge losses (when the bettor runs out of money). The key difference between modern business models, and the traditional roulette betting system is that today the focus is on betting multiple times on a single outcome. By this method (and given enough capital) it is in theory possible to win whichever way an event goes. If things are going your way, it is possible to insure your position by betting against your initial bet, and so produce a position that profits no matter what the eventual outcome. If things are not going your way, it is possible to throw larger and larger chunks of capital into a position or counter-position again and again and again —mirroring the Martingale strategy — to try to compensate for earlier bets that have gone awry (this, of course, is so often the downfall of rogue traders like Nick Leeson and Kweku Adoboli). This brings up a key issue: there is a second problem with the Martingale strategy in the real world beyond the obvious problem of running out of capital. You can have all the capital in the world (and thanks to the Fed, the TBTF banks now have a printing-press backstop) but if you do not have a counter-party to take your bets (and as your bets and counter-bets get bigger and bigger it by definition becomes harder and harder to find suitable counter-parties) then you are Corzined, and you will be left sitting on top of a very large load of pain (sound familiar, Bruno Iksil?) The obvious real world example takes us back to the casino table — if you are trying to execute a Martingale strategy starting at $100, and have lost 10 times in a row, your 11th bet would have to be for $204,800 to win back your initial stake of $100. That might well exceed the casino table limits — in other words you have lost your counter-party, and are left facing a loss far huger than any expected gains. Similarly (as Jamie Dimon and Bruno Iksil have now learned to their discredit) if you have built up a whale-sized market-dominating gross position of bets and counter-bets on the CDX IG9 index (or any such market) which turns heavily negative, it is exceedingly difficult to find a counter-party to continue increasing your bets against, and your Martingale game will probably be over, and you will be forced to face up to the (now exceedingly huge) loss. (And this recklessness, is what Dimon refers to as "hedging portfolio risk"?) The really sickening thing is that I know that these kinds of activities are going on far more than is widely recognised; every time a Wall Street bank announces a perfect trading quarter it sets off an alarm bell ringing in my head, because it means that the arbitrageurs are chasing losses and picking up nickels in front of streamrollers again, and emboldened by confidence will eventually will get crushed under the wheel, and our hyper-connected hyper-leveraged system will be thrown into shock once again by downgrades, margin calls and fire sales. The obvious conclusion is that if the loss-chasing Martingale traders cannot resist blowing up even with the zero-interest rate policy and an unfettered fiat liquidity backstop, then perhaps this system is fundamentally weak. Alas, no. I think that the conclusion that the clueless schmucks at the Fed have reached is that poor Wall Street needs not only a lender-of-last-resort, but a counter-party-of-last-resort. If you broke your trading book doubling or quadrupling down on horseshit and are sitting on top of a colossal mark-to-market loss, why not have the Fed step in and take it off your hands at a price floor in exchange for newly "printed" digital currency? That's what the 2008 bailouts did. Only one problem: eventually, this approach will destroy the currency. Would you want your wealth stored in dollars that Bernanke can just duplicate and pony up to the latest TBTF Martingale catastrophe artist? I thought not: that's one reason why Eurasian creditor nations are all quickly and purposefully going about ditching the dollar for bilateral trade. The bottom line for Wall Street is that either the bailouts will stop and anyone practising this crazy behaviour will end up bust — ending the moral hazard of adrenaline junkie coke-and-hookers traders and 21-year-old PhD-wielding quants playing the Martingale game risk free thanks to the Fed — or the Fed will destroy the currency. I don't know how long that will take, but the fact that the dollar is effectively no longer the global reserve currency says everything I need to know about where we are going. The bigger point here is whatever happened to banking as banking, instead of banking as a game of roulette? You know, where investment banks make the majority of their profits and spend the majority of their efforts lending to people who need to the money to create products and make ideas reality?
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| Posted: 12 May 2012 04:28 AM PDT First came the rhetorical jawboning, where following announcements by Fitch, European politicians, and finally Germany's finance minister, the scene was set to prepare the general public that despite protests to the contrary, a Greek exit from the euro would not really be quite the apocalypse imagined. Now comes the actual quantification part, whereby in addition to adding numbers and determining what the further sunk costs to a Greek bailout will be (hint: much, much greater than anyone can conceive), Germany has finally understood what we have been warning for over a year: that contingent liabilities become very real liabilities when a threshold event forces the transition from "off balance sheet" to on, and the piper has to be paid. According to an analysis released hours ago in Wirtschafts Woche, Germany "would only absorb losses of 76.6 billion euros in Germany. This amount results from bilateral aid loans, the liability of Germany's share in credit rescue fund EFSF, Germany's share of losses of the European Central Bank (ECB) and the German share of liability to the credit support of the International Monetary Fund (IMF)." The quantification continues (google translated):
A far bigger issue, however, is that once Greece bails, the contagion effect would begin: first by Fitch downgrading all European countries as it warned yesterday, then more and more countries becoming ineligible for EFSF/ESM participation, as we warned last July when we predicted this entire chain of events in "The Fatal Flaw In Europe's Second "Bazooka" Bailout: 82 Million Soon To Be Very Angry Germans, Or How Euro Bailout #2 Could Cost Up To 56% Of German GDP" when we explained how in a daisy chain collapse of European countries which could only be sustained, paradoxically, by an exponential expansion in the EFSF, could result in Germany easily footing 32% of its GDP (and in reality up to 56%) in "contingent liabilities":
So while we appreciate Germany's first attempt at quantifying the cost of the Greek exit, the truth is that the number proposed is woefully inadequate. And the roughly 50% of German GDP already "sunk" will only get bigger and bigger, until finally there is no choice for Germany but to pull the plug. What, however is most important, is that after months and years of even denying this potential outcome as a possibility, Germany too has finally discovered that when it comes to numbers, no amount of rhetoric can change the final outcome. That the quantification of costs has finally started is critical. And yes, we are confident that the true final number, one that Zero Hedge predicted with precision last July, will soon be derived even by the most hardened pro-Euro German press.
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| Greece Exit, Euro-Zone Collapse, Spain and Portugal Will Follow Within 6 Months Posted: 12 May 2012 03:30 AM PDT This analysis continues on from my last article in light of the recent French and Greek elections where voters rejected economic austerity in favour of money printing Inflation stealth debt default as politically an smoke and mirrors Inflationary depression is being seen as far more palatable for populations than a deflationary depression slow motion economic collapse. However to be able to print money inline with the true state of the respective competitiveness of euro-zone economies, then these countries governments have no choice but to exit the euro-zone, or be forced out as they one by one fail to follow through on agreed austerity measures.
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| Alasdair Macleod: Gold bugs will be vindicated Posted: 12 May 2012 02:27 AM PDT 10:23a ET Saturday, May 12, 2012 Dear Friend of GATA and Gold: Writing at GoldMoney, the economist Alasdair Macleod argues that when the debt trap is sprung on profligate governments, not just their bonds but their currencies too will be wrecked, and "gold bugs will be vindicated." That's the headline on his commentary and it's posted at GoldMoney here: http://www.goldmoney.com/gold-research/alasdair-macleod/gold-bugs-will-b... CHRIS POWELL, Secretary/Treasurer ADVERTISEMENT Be Part of a Chance to Discover Northaven Resources Corp. (TSX-V:NTV) is advancing five gold and silver projects in highly prospective and politically stable British Columbia, Canada. Check out the exploration program on our Allco gold/silver project : -- A large (13,000 hectare) property, covering more than 15 square kilometers of a regional mineralized trend just 3km from a recently announced 1.2-million-ounce gold and 15-million-ounce silver deposit. -- The property hosts historic high-grade silver workings and many mineral showings as well as former mines at the property's northern and southern boundaries. -- A deep-penetrating airborne geophysics survey has just been completed on the entire property and neighboring deposits and its results are eagerly awaited. To learn more about the Allco property or Northaven's other gold and silver projects, please visit: http://www.northavenresources.com Or call Northaven CEO Allen Leschert at 604-696-3600. Join GATA here: Las Vegas Money Show Committee for Monetary Research and Education Vancouver World Resource Investment Conference Standard Chartered's Earth Resources Conference Hong Kong Gold Investment Forum Toronto Resource Investment Conference New Orleans Investment Conference * * * Support GATA by purchasing DVDs of our London conference in August 2011 or our Dawson City conference in August 2006: http://www.goldrush21.com/order.html Or by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit:
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| In Much-Anticipated Move, China Cuts Reserve Requirement Ratio, Joins Reflation Race Posted: 12 May 2012 02:25 AM PDT After sell-side analysts had been begging for it, pardon, predicting it for months, the PBOC finally succumbed and joined every other bank in an attempt to reflate, even as pockets of inflation are still prevalent across the country, although the recent disappointing economic data was just too much. Overnight, the Chinese central bank announced it was cutting the Reserve Requirement Ratio by 50 bps, from 20.5% to 20.0%, effective May 18. The move is expected to free up "an estimated 400 billion yuan ($63.5 billion) for lending to head-off the risk of a sudden slowdown in the world's second-largest economy" as estimated by Reuters. "The central bank should have cut RRR after Q1 data. It has missed the best timing," Dong Xian'an, chief economist at Peking First Advisory in Beijing, told Reuters. "A cut today will have a much discounted impact. So the Chinese economy will become more vulnerable to global weakness and the slowing Chinese economy will in turn have a bigger negative impact on global recovery. Uncertainties in the global and Chinese economy are rising," he said. The irony, of course, is that the cut, by being long overdue, will simply accentuate the perception that China is on one hand seeing a crash in its housing market and a rapid contraction int he economy, while still having to scramble with high food prices (recall the near record spike in Sooy prices two weeks ago). In the end, the PBOC had hoped that it would be the Fed that would cut first and China could enjoy the "benefits" of global "growth", and the adverse effects of second hand inflation. Instead, Bernanke has delayed far too long. When he does rejoin the race to ease, that is when China will realize just how short-sighted its easing decision was. In the meantime, the world's soon to be largest source of gold demand just got a rude reminder that even more inflation is coming. More from Reuters:
And that implies far more inflation is coming down the road to the country, which unlike the US, still sees food and energy as part of its inflation equation, and in turns leads people to consider alternatives to a devaluing currency. Such as silver and of course gold. And so a full repeat of 2011 is now fully in the cards.
The chart above also shows why between India and China, there will always be ever more demand for a real currency. And, finally, a chart from Nomura, which shows why in the grand scheme of things RRR-moves have virtually no impact on the market:
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| Posted: 12 May 2012 02:18 AM PDT This article has been posted at GoldMoney, here. Gold bugs will be vindicated2012-MAY-12
 We can understand why they think this. Though the Keynesian vs Austrian economic debate is attracting increasing attention, financial services companies recruit economists who have been trained in the traditions of Keynes and Friedman. They are thus immersed in economic disciplines that assume gold is old-fashioned and has no meaningful place in a modern economy. While they might accept that gold has an historical attraction for some investors, they see it as a “risk-on” investment. This is jargon for something you buy when you want to take risks, the opposite of gold’s traditional role. For further proof, you need look no further than the average level of portfolio exposure, which across the global investment management industry is said to average less than one per cent. This is certainly not compatible with the level of risk in today’s markets, with many nations on the edge of bankruptcy. The result is that flaky gold bulls are experiencing the discomfort of rising panic. Let us go back to fundamentals. The Keynesians and Friedmanites are oblivious to the debt trap faced by all major currencies. Central banks are printing money to fund government deficits at the lowest possible interest cost. The inevitable consequence of printing money is price inflation, and price inflation always leads to higher interest rates. Higher interest rates exacerbate budget deficits. You cannot put it more simply than that. The alternative is to stop printing the money and jack up interest rates, but in that event at the head of the insolvency queue is government itself, so this can be ruled out as a deliberate policy. That is what a debt trap is all about: whichever way you turn, there is only one outcome: bankruptcy. When a government goes bust, its paper is valueless: not just its bonds, but its fiat currency as well. On the surface it is different in Euroland, because the nation states do not issue their own currency. On this basis the demise of the euro is an event one step removed from the bankruptcy of individual nation states. The relationship with the other major fiat currencies is direct. The destruction of fiat currencies themselves is becoming more likely by the day. Meanwhile, the weakness of “risk-on” gold has led to a serious mispricing in the market. This has happened because the financial community, sucked into the bond market bubble, has not even begun to discount the debt threat to government paper from sovereign bankruptcies. When this mispricing is inevitably resolved, it is unlikely to be gradual. It will be so swift that those old-fashioned enough to own gold for insurance purposes will have the protection they sought. Those that fall for modern neo-classical economics will learn a very sudden lesson about what gold is actually for. Tags: debt crisis, Europe, fiat currency, gold price Alasdair Macleod 
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| Posted: 12 May 2012 02:00 AM PDT In recent weeks, while the eurozone has suffered escalating levels of systemic stress in government bond markets and its banking system, the gold price has fallen under $1,600. One would have thought ...
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| Gold COT (CFTC - Commitment of Traders) for Period 4/26 - 5/8 Posted: 12 May 2012 01:34 AM PDT The commercials are working their way out of their massive short positions they have accumulated, over the years, and those positions are not there for window dressing. They patently manipulate the silver and gold markets at the benevolence ... Read More...
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| Posted: 12 May 2012 01:27 AM PDT Summary: Long term - on major sell signal. Short term - on sell signals. Both long and short term on sell signals and cycle is down. Patience and cash are positions. Read More...
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| How You Can Profit From the Natural Gas Market's Next Big Collapse Posted: 11 May 2012 09:15 PM PDT Marin Katusa, Chief Energy Investment Strategist, Casey Research writes: If you think the bloodbath is over for natural gas stocks, think again... Despite falling 50% over the past year, many natural gas stocks are about to enter another major decline. And if you know what's going on here, you can use this coming decline to make huge capital gains over the next 12 months.
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| Posted: 11 May 2012 08:39 PM PDT Spot gold plunged to a new reaction low at $1573.01 in overnight trading, but has since rebounded to $1582/83. On further inspection, let's notice that the overnight new low hit and reversed off of the lower "support" line of the March-May down-slanted channel ... amidst a glaring 4-hour RSI momentum divergence. My pattern and momentum work indicate that the down-leg from the May 1 high at $1672.10 to today's low at $1573.01 has the right look of completion (notwithstanding the likelihood of a retest or even a press to a marginal lower low).
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Today Michael Pento told KWN why "this summer is going to be disastrous for equity prices." Pento, of Pento Portfolio Strategies, also stated he believes JP Morgan, the Fed and gold are headed for a major showdown. But first, when asked about the JP Morgan debacle, Pento responded, "I blame the Fed, like I do for much of the world's ailments. The Fed buys a bond from JP Morgan, yielding say 2% on the 10-Year, and then they expect the bank, JP Morgan, to accept 25 basis points from the Federal Reserve. Now, they have to beat earnings by a penny, so what do they do?"
If ever we needed proof of the saturation-level brainwashing to which the Western masses are now subjected (and to which they have succumbed), there is no clearer evidence than the U.S. Treasuries market.
Max Keiser spoke to approximately 100 people in an appearance that was scantily advertised. He covered topics such as prosecution of criminal bankers, a new global currency, gold and silver as security, and the internationalization of one's life.
As a general rule, the most successful man in life is the man who has the best information
Apart from being colorful and loud, Indians are also world famous for their love for gold. So much so that they have a special festival 'Akshaya Tritiya' dedicated to gold buying only. People in India's western states celebrated 'Akshaya Tritiya' with fervour and enthusiasm despite the steep rise in its price.
There's nothing controversial about the claim— reported on by 
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