Gold World News Flash 2

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Key Fundamentals for Profits & Protection
1% Investing: The 1% Don't Endure Recessions
Only buy from trustworthy bullion dealers
Gold Falls Following “Bernanke Curve Ball”, US “Lacks Credible Fiscal Plan”
James Dines: Debt Liquidating Depression & Systemic Failure
Do Investors Need Zero Gold In Their Portfolios?
Does Any Clear Picture Emerge From Gold And Crude Oil Charts?
Gold's perception problem
How the Beige Book Turned the Price Boards Red
Gold, silver miners to benefit from favorable prices over next 2 years-S&P
Gold Falls after ‘Bernanke Curve Ball’ on ‘Credible Fiscal Plan’
‘The End Is Not Near, It Is Here and Now’ – Sinclair
CFTC Charges South Carolina Company With Running $90 Million Silver Bullion Ponzi Sch
Will More Join China & Australia in Rate Cutting?
Commodities Fall on Fading QE3 Hope, Spain Downgrade
Ultimate Gold Bull Peter Grandich vs. Muted Bear Steve Palmer
Links 6/8/12
As India's Richest Ranks Swell, Many Head For Gold
Gold & Silver Market Morning, June 08 2012
Greg Hunter: Weekly Wrap Up 6.8.12
DTS: A Day in the Life of a Silver Day Trader
Silver Update: ZIRP – 6.7.12
Byron King: Companies Must Pay Dividends to Make Top-10 Gold List
The Avalanche and the Phase Transition of the Financial System
Wealth Inequality: Where Does All the Money Go?
Sell Everything Else and Buy Gold

Key Fundamentals for Profits & Protection

Posted: 08 Jun 2012 05:55 AM PDT

"As always, the Federal Reserve remains prepared to take action as needed to protect the U.S. financial system and economy in the event that financial stresses escalate…"

"Bernanke: Fed Could Act If Economy Weakens," 6/7/2012
Martin Crutsinger, AP Economics Writer, Associated Press

Fed Vice-Chairman Janet Yellen's "hint" of possible further QE on Wednesday, June 6, 2012 was followed by Ben Bernanke's much weaker mere openness to the possibility, expressed on Thursday.

It is thus no surprise that the Equities Markets Massively Rallied Wednesday. And also no surprise that the "Rally" petered out late Thursday.

This raises the question: how Durable are Rallies juiced by QE? Just consider the Quite Temporary Effect of QE1, then QE2, then Operation Twist, then (or in conjunction with) LTRO1 and LTRO2.

The answer is: increasingly Less Durable.

Like another dose to a Drug User, the effects of QE (however it is disguised) are increasingly fleeting, and less effective, and more damaging in the long run. And China's similar Stimulus has created a Property Bubble (now deflating) and a loan bubble, and considerable Civil Unrest.

More significantly, what does it say about the underlying strength of the Equities Markets that it takes QE or the prospect thereof, to Rally them. It says that the Fundamentals are very weak.

So it is very important to stay focused on the Fundamentals in order to Profit and Protect, and to screen out the Noise, and Disinformation.

Indeed, one Fundamental Reality is that QE in whatever form has considerable downsides. For example, U.S. QE has created considerable net Real Inflation in the U.S. (and notwithstanding real Deflation in certain Sectors and MSM Reports which indicate an overall Deflation, a False Indication) and elsewhere, especially in Food and Energy (9.93% Annualized per Shadowstats – Note 1). That is why our High Yield Portfolio is aimed at generating Total Return in Excess of this Real Inflation (Note 2).

Another Fundamental Reality is that Liquidity Injections do not solve Solvency Problems. Taking on more Debt does not solve the problems caused by Debt Saturation, but only worsens them. The Eurozone is an object lesson in how Bank and Sovereign Bailouts harm, not help, Economies.

Even so, yet another Fundamental Reality is that the Central Bankers will continue to implement repeated QE to Prop up the Financial System which is designed to Operate for their benefit.

"More than six months have passed since Frances Weaver and I published our pamphlet, Guilty Men, identifying those financiers, politicians and propagandists who advocated the creation of the European single currency 15 years ago, and exposing the dishonest or even brutal methods they used. …

"It must be acknowledged this week that the main reason for the depth and longevity of the economic and financial catastrophe striking Europe is that all the policy-makers who are dealing with the crisis were advocates of the euro right from the beginning. In other words, the very people who caused the conflagration in the first place are in charge of putting it out.

"This is a disaster. For them, the logical step of abandoning the failed policies of the past decade is unthinkable. …Far from being driven out of public life, which is what they deserve, the creators of the eurozone crisis remain very much in charge of events. …

"Such is the sensibility of the European political class as they confront one of the largest financial crises in our history. … as this week's call for eurobonds shows. … They would have to be underwritten in common by all European countries, … The introduction of eurobonds would therefore lead immediately to the full economic and political integration of Europe, which has been the objective of the European political class from the very start. …

"The only lasting solution to the crisis is a total reversal of the policies being pursued by the European elite. …

"Hence the importance of a paper published this week by Jonathan Compton of Bedlam Asset Management, a heretical investment company which (almost alone among City firms) predicted the banking crash of four years ago.

"Mr Compton expertly makes the case for the weaker eurozone countries to default on their debt and to pull out of the single currency. He argues that such a move, far from leading to the chaos and devastation predicted by an out-of-touch Euro elite, would very quickly cause the return of economic buoyancy.

"Inside the eurozone, a number of countries – among them Greece, Spain, Portugal, Ireland and Italy – are facing intolerable levels of distress. Bank depositors are withdrawing their money, the banks are in collapse, capital investment has stalled, while foreign investors are pulling out as fast as they can.

"Mr. Compton argues that the moment that these countries quit the eurozone and default on their debt this process will go speedily into reverse. The bank depositors, no longer having anything to fear, will return. New owners will buy the failed banks and foreign investors will flood back in, while a surge in inflation will stimulate a revival of economic activity. …

"Already in Greece, Spain and the Netherlands, the voters are rejecting austerity – and once they start to link that austerity to eurozone membership, monetary union will collapse quite quickly. This partly explains the warnings of economic Armageddon that would follow from euro collapse emanating from Brussels and Frankfurt. In fact, the opposite is the truth."

"The euro's 'guilty men' are now steering Europe to catastrophe"
Peter Osborne, www.telegraph.co.ul, 6/6/2012

Another Fundamental Reality is that The Fed-led Banker Cartel (Note 3) will continue to work very hard to Suppress Gold and Silver Prices, because increasing recognition of Gold and Silver as Real Money tends to delegitimize their Fiat Currencies and Treasury securities. (Thus the $50, as we write on June 7, Takedown of the Gold Price is no surprise either.) Of course, ongoing Price Suppression attempts do not change the fact that these Precious Metals have been the best performing Asset class in the past decade and will continue to be.

Another Fundamental Reality is that the Major over-indebted Sovereign Nations' Debts can not under any Reasonable Economic Scenario ever be paid.

But rather than facing the Default Issue Head-On, the Central Banks elect to buy back, as an "Extend and Pretend" stop-gap, as it were, the Toxic Debt, and put it on their Balance Sheets. But that chicanery too has its limits.

Indeed, the Combined Balance Sheet "Assets" of these seven Major Central Banks – U.S., U.K., China, ECB, Germany, Japan, Switzerland – rose from just over $5 Trillion in mid-2006 to about $15 Trillion at the end of 2011.

This is Debt Monetization (i.e., via Monetary Inflation) with a Vengeance and can lead only, and is leading already, to Price Hyperinflation (see Note 1).

This Price Hyperinflation is not widely recognized, yet, because the Official Statistics of Major Economies (the U.S. & China, to name two) are Bogus.

Fortunately, a Profit Opportunity arises from the foregoing provided one buys Inflation Assets at the Right Time. We have recommended Gold and Agricultural Plays recently and thus were subsequently able to recommend Subscribers Take 'Considerable Profits'.

The Bottom-line Reality, as it were, is that QE to Infinity can not continue, because, Major Sovereign Nations and Banks are Debt Saturated.

And there are other challenges, as former Assistant Secretary of the U.S. Treasury Dr. Paul Craig Roberts describes, and one action which could help achieving a solution:

"Ever since the beginning of the financial crisis and quantitative easing, the question has been before us: How can the Federal Reserve maintain zero interest rates for banks and negative real interest rates for savers and bond holders when the US government is adding $1.5 trillion to the national debt every year via its budget deficits? … Without the artificially low interest rates, the debt service on the national debt would be so large that it would raise questions about the US Treasury's credit rating and the viability of the dollar, and the trillions of dollars in Interest Rate Swaps and other derivatives would come unglued.

"In other words, financial deregulation leading to Wall Street's gambles, the US government's decision to bail out the banks and to keep them afloat, and the Federal Reserve's zero interest rate policy have put the economic future of the US and its currency in an untenable and dangerous position. It will not be possible to continue to flood the bond markets with $1.5 trillion in new issues each year when the interest rate on the bonds is less than the rate of inflation. … A rise in interest rates, which must come sooner or later, will collapse the price of the bonds and inflict capital losses on bond holders, both domestic and foreign.

"The question is: when is sooner or later?

"The presstitute financial media tells us that flight from European sovereign debt, from the doomed euro, and from the continuing real estate disaster into US Treasuries provides funding for Washington's $1.5 trillion annual deficits. …Another explanation for the stability of the Fed's untenable policy is collusion between Washington, the Fed, and Wall Street.

"Unlike the US financial press, the foreigners who hold dollar assets look at the annual US budget and trade deficits, look at the sinking US economy, look at Wall Street's uncovered gambling bets, look at the war plans of the delusional hegemon and conclude: "I've got to carefully get out of this."

"US banks also have a strong interest in preserving the status quo. …The banks can borrow dollars from the Fed for free and leverage them in derivative transactions.

"…even actors in the process who could terminate it have themselves a big stake in not rocking the boat and prefer to quietly and slowly sneak out of dollars before the crisis hits.

"The very process of slowly getting out can bring the American house down. The BRICS … are in the process of forming a new bank. The new bank will permit the five large economies to conduct their trade without use of the US dollar.

"In addition, Japan, an American puppet state since WWII, is on the verge of entering into an agreement with China in which the Japanese yen and the Chinese yuan will be directly exchanged.

"Now we have arrived at the nitty and gritty. The small percentage of Americans who are aware and informed are puzzled why the banksters have escaped with their financial crimes without prosecution. The answer might be that the banks "too big to fail" are adjuncts of Washington and the Federal Reserve in maintaining the stability of the dollar and Treasury bond markets in the face of an untenable Fed policy.

"Here are some of the catalysts waiting to ignite the conflagration that burns up the Treasury bond market and the US dollar:

"A war, demanded by the Israeli government, with Iran, beginning with Syria, that disrupts the oil flow and thereby the stability of the Western economies…

"An unfavorable economic statistic that wakes up investors as to the true state of the US economy…

"An affront to China, whose government decides that knocking the US down a few pegs into third world status is worth a trillion dollars.

"More derivate mistakes, such as JPMorgan Chase's recent one, that send the US financial system again reeling…

"Financial deregulation converted the financial system, which formerly served businesses and consumers, into a gambling casino where bets are not covered. These uncovered bets, together with the Fed's zero interest rate policy, have exposed Americans' living standard and wealth to large declines.

"As a result of jobs offshoring, the US has become an import-dependent country, dependent on foreign made manufactured goods, clothing, and shoes. When the dollar exchange rate falls, domestic US prices will rise, and US real consumption will take a big hit. Americans will consume less, and their standard of living will fall dramatically.

"However, the $230,000,000,000,000 in derivative bets by US banks might bring its own surprises. JPMorgan Chase has had to admit that its recently announced derivative loss of $2 billion is more than that.

"It is difficult to imagine a more reckless and unstable position for a bank to place itself in, but Goldman Sachs takes the cake. That bank's $44 trillion in derivative bets is covered by only $19 billion in risk-based capital, resulting in bets 2,295 times larger than the capital that covers them.

"Bets on interest rates comprise 81% of all derivatives. These are the derivatives that support high US Treasury bond prices despite massive increases in US debt and its monetization.

"US banks' derivative bets of $230 trillion, concentrated in five banks, are 15.3 times larger than the US GDP. A failed political system that allows unregulated banks to place uncovered bets 15 times larger than the US economy is a system that is headed for catastrophic failure.

"Everyone wants a solution, so I will provide one. The US government should simply cancel the $230 trillion in derivative bets, declaring them null and void. As no real assets are involved … the only major effect of closing out or netting all the swaps (mostly over-the-counter contracts between counter-parties) would be to take $230 trillion of leveraged risk out of the financial system. … And most certainly … purging the financial system of the gambling derivatives would vastly improve national security."

"Collapse At Hand," prisonplanet.com, 6/5/2012
Dr. Paul Craig Roberts, Former Asst Secretary of Treasury

However, while derivatives cancellation would help stabilize the financial situation, it would not by itself suffice to solve all the aforementioned problems. Considering all those problems, are there not eventually and ultimately only two choices?

The two "choices" are the Intensifying current monetary, and thus price, Inflation (itself eventually unsustainable) or Partial Debt Repudiation.

The Late Johan Joubert provides an example of a Successful Implantation of the latter by Iceland, whose Economy is now recovering nicely.

"In Iceland, the people have made the government resign, the primary banks have been nationalized and it was decided not to pay the debt that these created with Great Britain and Holland due to their bad financial politics, and a public assembly has been created to rewrite the constitution….

"In March (2010) the referendum and the denial of payment is voted in by 93%. Meanwhile the government has initiated an investigation to bring to justice those responsible for the crisis, and many high level executives and bankers are arrested….

"And all of this has been done in a peaceful way. A whole revolution against the powers that have created the current crisis.

"This is why there hasn't been any publicity during the last two years: What would happen if the rest of the EU citizens took this as an example? What would happen if the US citizens took this as an example?"

"We Must Learn from Iceland", Johan Joubert, 6/7/2012
The Johan Joubert Community, Truth & Justice Global Informer

Focusing on Fundamental Realities and tuning out the Noise and Disinformation, is the key to Profit and Protection in Turbulent Times.

Best regards,

Deepcaster
June 8, 2012

Note 1: Shadowstats.com calculates Key Statistics the way they were calculated in the 1980s and 1990s before Official Data Manipulation began in earnest. Consider

Bogus Official Numbers vs. Real Numbers (per Shadowstats.com)

Annual U.S. Consumer Price Inflation reported May 15, 2012
2.30% / 9.94%

U.S. Unemployment reported June 1, 2012
8.1% / 22.7%

U.S. GDP Annual Growth/Decline reported May 31, 2012
2.08% / -2.17%

U.S. M3 reported June 1, 2012 (Month of March, Y.O.Y.)
No Official Report / 2.50% (e)

And Official Source Disinformation continues, consider Shadowstats comments on the January 6, 2012 release of U.S. Employment data:

"The reported seasonally-adjusted 200,000 jobs surge in December 2011 payrolls included a false, seasonally-adjusted gain of roughly 42,000 in the "Couriers and Messengers" category. That gain was an artifact of the seasonal-adjustment process and will remove itself in the January 2012 numbers.

"The problem is that this 42,000 gain is part of a seasonal pattern that fully reverses itself each January…"

"December Payroll Seasonal-Adjustment Problem"
www.shadowstats.com, John Williams, 1/6/12

Note 2: There are Magnificent Opportunities in the Ongoing Crises of Debt Saturation, Rising Unemployment, negative Real GDP growth, nearly 10% Real U.S. Inflation (per Shadowstats.com) and prospective Sovereign and other Defaults.

One Sector full of Opportunities is the High-Yield Sector. Deepcaster's High Yield Portfolio is aimed at generating Total Return (Gain + Yield) well in excess of Real Consumer Price Inflation (9.94% per year in the U.S. per Shadowstats.com).

To consider our High-Yield Stocks Portfolio with Recent Yields of 18.5%, 8.6%, 10.6%, 26%, 6.7%, 8%, 10.6%, 14.9%, 10% and 15.6% when added to the portfolio; go to www.deepcaster.com and click on 'High Yield Portfolio'.

There is great Profit Potential and Income in our Precious Metal and High Yield Portfolio selections. For example, Deepcaster recently recommended taking profits on One Premium Gold Miner and on two tranches of a Blue Chip Agricultural Stock as follows:

56% Profit on Premium Gold Miner on June 1, 2012 after just 2 days (i.e., about 10,100% annualized!)

87% Profit on Agricultural Blue Chip (Tr. 2) on April 23, 2012 after just 208 days (i.e., about 152% profit annualized on the remaining half of the original position)

57% Profit on Agricultural Blue Chip (Tr. 1) on February 24, 2012 after just 149 days (i.e., about 140% annualized!)

Note 3: We encourage those who doubt the scope and power of Overt and Covert Interventions by a Fed-led Cartel of Key Central Bankers and Favored Financial Institutions to read Deepcaster's December, 2009, Special Alert containing a summary overview of Intervention entitled "Forecasts and December, 2009 Special Alert: Profiting From The Cartel's Dark Interventions - III" and Deepcaster's July, 2010 Letter entitled "Profit from a Weakening Cartel; Buy Reco; Forecasts: Gold, Silver, Equities, Crude Oil, U.S. Dollar & U.S. T-Notes & T-Bonds" in the 'Alerts Cache' and 'Latest Letter' Cache at www.deepcaster.com. Also consider the substantial evidence collected by the Gold AntiTrust Action Committee at www.gata.org, including testimony before the CFTC, for information on precious metals price manipulation. Virtually all of the evidence for Intervention has been gleaned from publicly available records. Deepcaster's profitable recommendations displayed at www.deepcaster.com have been facilitated by attention to these "Interventionals." Attention to The Interventionals facilitated Deepcaster's recommending five short positions prior to the Fall, 2008 Market Crash all of which were subsequently liquidated profitably.

1% Investing: The 1% Don't Endure Recessions

Posted: 08 Jun 2012 04:00 AM PDT

By Andrew Cherna:

I have an investment theory that I would like to float with people.

The basic premise is that the ultra-wealthy among us do not ever endure recessions. While people are busy making a fuss about the great recession, the "one-percenters" are busy living the same lives that they have always been living. Really, what is the difference between having $150 million and $100 million? One less multimillion-dollar vacation house a year?

CNBC has been doing a fascinating series of articles on high-net-worth individuals. I encourage anyone interested in this subject to check them out. They are very well written and equally enlightening. They have articles about all sorts of interesting topics relating to high net worth individuals. Some of the most interesting to me are an article about rich people changing citizenship, an article about the image of premium brands in China, and an article about the complexities of stashing

Complete Story »

Only buy from trustworthy bullion dealers

Posted: 08 Jun 2012 03:45 AM PDT

Another precious metals scam has been uncovered in America. Sterling Precious Metals of Boca Raton, Florida, is being investigated by the feds and stands accused of bilking clients out of ...

Gold Falls Following “Bernanke Curve Ball”, US “Lacks Credible Fiscal Plan”

Posted: 08 Jun 2012 03:33 AM PDT

Gold Falls Following "Bernanke Curve Ball", US "Lacks Credible Fiscal Plan"

WHOLESALE MARKET prices for gold bullion hit a low of $1561 an ounce during Friday's Asian session – 4.8% down on this week's high – while stocks and commodities also fell this morning and major government bond prices gained.

On the currency markets, the Euro dropped back below $1.25 as the Dollar rallied, after Federal Reserve chairman Ben Bernanke yesterday "disappointed" traders by not making a firm commitment to a third round of quantitative easing, known as QE3.

Gold prices managed to recover some ground by Friday lunchtime in London, rising back above $1580 an ounce, but gold bullion was still down 2.5% on the week, having unwound most of last Friday's jump.

Silver bullion meantime dipped below $28 an ounce in early London trading, before it too recovered some ground, adding about 50 cents ahead of the US session.

"Gold bulls were very disappointed by the Bernanke testimony yesterday," says Lynette Tan, investment analyst at Phillip Futures in Singapore.

"Bernanke gave few clues on QE3," adds the latest note from Swiss precious metals group MKS, "and attributed much of the recent job weakness to seasonal factors."

"This morning, we are seeing some support for [precious metals] despite a persistently strong Dollar," says Marc Ground, commodities strategist at Standard Bank.

"This support is most likely coming from the physical market as buyers find current price levels once again more attractive…however, we would not completely discount another leg down."

At his testimony to the Joint Economic Committee on Thursday, Bernanke warned Congress that current US fiscal policy is "clearly unsustainable". The Fed chairman added that the so-called fiscal cliff – the expiration of tax cuts and reduced government spending currently due to happen at the start of 2013 – poses "a significant threat to the recovery".

A day earlier, European Central Bank president Mario Draghi also drew attention to fiscal policy issues, saying on Wednesday that "some of [Europe's] problems have nothing to do with monetary policy…[which should not be used] to compensate for other institutions' lack of action."

Europe "poses significant risks to the US financial system", Bernanke said yesterday.

"The Federal Reserve remains prepared to take action as needed to protect the US financial system and economy in the event that financial stresses escalate," he added. Later in his testimony, Bernanke argued there is "no justification" for fears that QE poses a risk of high inflation.

"[Bernanke is] saying what he has said before," reckons Fabian Eliasson, New York-based vice president of currency sales at Mizuho Corporate Bank.

"[He is] reassuring people that they will act if things deteriorate further."

A day before Bernanke's testimony, Fed vice chair Janet Yellen told an event in Boston she was "convinced that scope remains for [the Fed] to provide further policy accommodation either through its forward guidance or through additional balance-sheet actions".

"Bernanke threw traders a curve ball," complained one Chicago analyst following the Fed chairman's testimony.

"After his vice chair made it seem like [QE] was a foregone conclusion, he really messed people up."

Despite its rhetoric, the Fed is actually tightening policy, argues Grant's Interest Rate Observer publisher Jim Grant. In an interview with CNBC this week, Grant pointed out that the Fed's balance sheet has contracted over the last three months.

"The Fed is withdrawing stimulus even as more and more [Fed policymakers] are talking about QE3," said Grant, who nevertheless says he expects there will be a third round of quantitative easing.

Here in Europe meantime, Spain is due to ask the European Union to inject funds into its banking sector, according to a Reuters report which cites EU and German officials.

"The government of Spain has realized the seriousness of their problem," the newswire quotes a senior German official.

Spanish banks hold €184 billion in real estate loans described as "problematic" by the Economy Ministry, news agency Bloomberg reports.

Ratings agency Fitch downgraded Spain's sovereign credit rating from A to BBB Thursday, putting it two notches above junk.

Fitch also warned Thursday that it will cut its rating for the US next year if it does sufficiently address its fiscal problems.

"The United States is the only [AAA-rated] country which does not have a credible fiscal consolidation plan," said Fitch sovereign ratings analyst Ed Parker.

China, the world's biggest buyer of gold bullion in the six months to March, is due to publish several pieces of key economic data this weekend, including the latest consumer price inflation, money supply and trade figures.

China's central bank cut interest rates yesterday for the first time since early 2009, a move that surprised many analysts.

"This rate cut is a clear indication the government sees further weakness in the May economic data," reckons Stephen Green, head of research, Greater China at Standard Chartered in Hong Kong.

Ben Traynor
BullionVault

Gold value calculator | Buy gold online at live prices

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

(c) BullionVault 2011

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

James Dines: Debt Liquidating Depression & Systemic Failure

Posted: 08 Jun 2012 03:25 AM PDT

from kingworldnews.com:

With central planners actively scrambling to address mounting problems facing the United States and Europe, and uncertainty continued uncertainty in global markets, today King World News interviewed legendary James Dines, author of The Dines Letter. Dines told KWN that "a collapse of Europe's banking system is inevitable" and "the United States is headed towards a Greek tragedy of its own." Here is what Dines had to say about what is taking place: "The Fed has lowered interest rates to record low levels, and Bernanke has printed unimaginable amounts of money, but it hasn't worked. Instead of acknowledging that Keynesian economic theories are bankrupt and at a dead end, Bernanke can only wonder if even more of the same medicine might somehow work."

James Dines continues:
"Blind repetition of what is not working has been described as insanity, and that is what the Fed is engaged in right now. For many years I've been predicting a coming currency upheaval, and we're in one now, only they don't see it that way. One of my other predictions has been the coming debt liquidating depression, and we're observing one right now in Europe.

Keep on reading @ kingworldnews.com

Do Investors Need Zero Gold In Their Portfolios?

Posted: 08 Jun 2012 02:52 AM PDT

By The Financial Lexicon:

Did you happen to read Jack Hough's recent Wall Street Journal article, "How Much Gold Do Investors Need? Zero Should Suffice"? Next to endless commentaries on the Treasury "bubble," articles trashing gold (GLD) seem to be a favorite pastime of the financial media. There is plenty to discuss from Hough's article, but I would like to comment on two quotes in particular.

Still others view gold as 'real money' -- the one thing that will hold its value if governments create so much new currency that those currencies lose their value. Taken to its logical conclusion, this means governments would eventually agree to once again use gold as the basis for their currencies, says James Swanson, chief investment strategist at MFS, a mutual-fund company.

That is a fantasy, he argues, because some powerful nations have relatively little gold and some gold-rich nations have little power.

The real fantasy is Swanson's

Complete Story »

Does Any Clear Picture Emerge From Gold And Crude Oil Charts?

Posted: 08 Jun 2012 01:00 AM PDT

SunshineProfits

Gold's perception problem

Posted: 08 Jun 2012 12:29 AM PDT

from mineweb.com:

There is no mistaking the disappointment markets felt yesterday at Ben Benanke's "failure" to reward expectations of dovish comment.

Despite the recent poor jobs numbers out of the US, the Fed Chairman's comments were non-committal, saying that the committee was continually reassessing the situation. Unfortunately for gold, the market was hoping to hear him say that a further bout of QE was imminent and this he didn't do.

As UBS analyst, Edel Tully points out, however, In reality, gold yesterday responded to the fact that Bernanke's testimony did not contain much more than general statements, failing to take into account that he was quite clear about leaving all options on the table."

Keep on reading @ mineweb.com

How the Beige Book Turned the Price Boards Red

Posted: 08 Jun 2012 12:28 AM PDT

A renewed slide in gold prices commenced shortly after the release of the Fed's Beige Book on Wednesday afternoon and it then intensified into Thursday with the parsing of the Bernanke Congressional testimony.

Gold, silver miners to benefit from favorable prices over next 2 years-S&P

Posted: 08 Jun 2012 12:23 AM PDT

from mineweb.com:

In an analysis published Thursday, Standard & Poor's said they expect gold and silver producers, including U.S.-based Allied Nevada Gold Corp. "to benefit from favorable pricing over the next two years, albeit at levels likely below recent cyclical highs."

S&P assigned its "B" corporate credit rating toAllied Nevada Gold with a stable outlook. The credit ratings agency also assigned a "B" issue-level rating to the company's C$400 million senior unsecured notes due 2019.

Keep on reading @ mineweb.com

Gold Falls after ‘Bernanke Curve Ball’ on ‘Credible Fiscal Plan’

Posted: 08 Jun 2012 12:17 AM PDT

Wholesale market prices for gold bullion hit a low of $1,561 an ounce during Friday's Asian session – 4.8% down on this week's high – while stocks and commodities also fell this morning and major government bond prices gained.

‘The End Is Not Near, It Is Here and Now’ – Sinclair

Posted: 07 Jun 2012 11:56 PM PDT

Gold fell $28 or 1.73% yesterday in New York and closed at $1,591.60/oz. Gold traded sideways prior to another 1% fall in Asia but has recovered somewhat in early European trading and has made gains in euros and Swiss francs particularly.

CFTC Charges South Carolina Company With Running $90 Million Silver Bullion Ponzi Sch

Posted: 07 Jun 2012 11:51 PM PDT

Great, but when is the CFTC gonna have a look at JPMC, Goldman, HSBC and the rest of the BIG scammers.

Never mind, silly me.

CFTC Charges South Carolina Company With Running $90 Million Silver Bullion Ponzi Scheme

07 June 2012, 9:44 a.m.
By Kitco News
http://www.kitco.com/

(Kitco News) - The Commodity Futures Trading Commission is charging a South Carolina-based firm with operating a $90 million Ponzi scheme, fraudulently offering contracts on silver sales, but never actually purchasing any metal, the agency said late Wednesday.

The CFTC charged Ronnie Gene Wilson and Atlantic Bullion & Coin, Inc, both of Easley, S.C., with violating the Commodity Exchange Act and CFTC regulations, saying they have operated a Ponzi scheme dating back as far as 2001 and continuing through Feb. 29, 2012. The complaint against Wilson and Atlantic Bullion & Coin was filed Thursday in the U.S. District Court for the Southern District of South Carolina, Anderson Division.

In the suit, the CFTC said Wilson and Atlantic Bullion & Coin fraudulently obtained at least $90.1 million from at least 945 investors. The CFTC said it has jurisdiction over the two from Aug. 11, 2011 to Feb. 29 under new provisions contained in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

During the August to February timeframe, Wilson and Atlantic Bullion & Co are alleged to have fraudulently obtained at least $11.53 million from at least 237 investors in 16 states under contracts of sale to buy silver but never actually bought the metal. Instead, the CFTC charges that they allegedly misappropriated all of the investors' funds and to conceal their fraud, issued phony account statements to investors.

The CFTC said it will seek restitution to defrauded investors, a return of ill-gotten gains, civil monetary penalties, trading and registration bans, and permanent injunctions against further violations of the federal commodities laws if successful in its suit.

By Debbie Carlson of Kitco News dcarlson@kitco.com

Will More Join China & Australia in Rate Cutting?

Posted: 07 Jun 2012 11:27 PM PDT

Gold futures had a big turnabout in the past 48 hours. From last Friday to this Wednesday, gold futures surged 4.6%. On Thursday, prices slumped 2.8% to $1,588, the biggest one-day drop since early April.

Commodities Fall on Fading QE3 Hope, Spain Downgrade

Posted: 07 Jun 2012 11:07 PM PDT

Commodity prices are trading lower in early European hours, with sentiment-linked crude oil and copper prices following stocks lower while gold and silver face de-facto downward pressure as haven demand buoys the US dollar.

Ultimate Gold Bull Peter Grandich vs. Muted Bear Steve Palmer

Posted: 07 Jun 2012 10:03 PM PDT

Is gold preparing for another shot up to $2,500/ounce heights or on the way down after being overbought? Two respected names in the investing world share their arguments for what could happen in the coming years and how to profit from it.

Links 6/8/12

Posted: 07 Jun 2012 09:55 PM PDT

Dear patient readers,

I'm surprisingly jet lagged and still behind the eight ball, but have the good fortune to have some particularly strong guest posts today, so I hope you'll bear with me as I get back on track.

Karl Lagerfeld's Cat Has Personal Maids, an iPad, and a More Glamorous Existence Than You Vanity Fair (Ed M). Well, she will still be (or has been) neutered, but Chinese men used to castrate themselves to be considered for the job of court eunuch, and these self administered medical procedures didn't always work out so well…so this cat is doing well even allowing for the indignities of being a housepet.

Foie-mageddon: California in one last foie gras binge before statewide ban Telegraph (Lambert)

Earth Facing Imminent Environmental 'Tipping Point': Report Common Dreams

European monsoon brings 70mph winds, torrential rain and 40ft waves Telegraph (Richard Smith)

Report: Hackers could access US weapons systems through vulnerable chip Christian Science Monitor

The 10 Most Sexually Healthy Colleges Huffington Post (Carol B)

Phishers 1, DeLong 0…. Be warned, they are getting better.

China cuts rates MacroBusiness

China faces stimulus dilemma Financial Times

No One Is Talking About The Chinese Move That Is Even More Important Than The Rate Cut Clusterstock

The Accidental Empire George Soros, Project Syndicate

The Eurozone as a Modern Day 'Merchant of Venice' Marshall Auerback, New Economic Perspectives

Getting Them Dead Francine Prose, New York Review of Books (barrisj)

Obama Increases Pakistan Drone Strikes As Relations Sour Bloomberg

Suicides are surging among US troops Associated Press (Lambert)

Romney beats Obama on fundraising Financial Times

Telegraphic thoughts on Netroots Nation Lambert. Per #4: now he knows how I feel all the time.

Reagan Was a Keynesian Paul Krugman, New York Times

How Could Law Enforcement Files on Bradley Manning Not Be Relevant to the Case? Kevin Gosztola, Firedoglake

NYPD's stop-and-frisk policy to be reviewed by US department of justice Guardian

Fake Shell Video Followed by Fake Shell Lawsuit Over Video Gawker

MBS and Foreclosures Expose Our Degraded Legal Profession Abigail Field

Household Net Worth In U.S. Increases By Most Since 2004 Bloomberg

Consumer Debt Growth Slows WSJ Real Time Economics. And downward historical revisions yet again.

Accounting Backfired at MF Global Floyd Norris, New York Times (Hecht)

Ex-Bear Stearns executives to pay $275m Financial Times

JOBS Act Fallout: More Fraud, Fewer IPOs Matt Taibbi (Chuck L)

* * *

Lambert here:

D – 92 and counting*

"Show me a good loser, and I'll show you a loser." — Vince Lombardi

Reader note: Because I'm on the road tonight, these links are light.

Montreal. "What seems like a movement sprung up overnight was actually a long time in the works. The tuition increase have been on the table since 2010, and student unions across Quebec spent two years working to build the movement." Grand Prix photos (some NSFW). Nadeau-Dubois (CLASSE) in Le Monde. Ooh!

FL. "In a sharply-worded letter, the Scott administration all but dares the Justice Department to sue FL for allegedly violating voting rights laws. Florida also accused another federal agency, the Department of Homeland Security, of violating the law by denying Florida access to a federal citizenship database."

MT. "New out-of-state publisher fires beloved independent columnist. George Ochenski's last column: "The peril for [AG] Bullock is what 30,000 former patients and nearly 27,000 signers on the [medical marijuana] initiative will do this fall. If they think he's fought against their interests" he could lose the governor's race." Detail here, here, and here.

NC. "International Christian relief and evangelism charity organization Samaritan's Purse run by Franklin Graham contributed $150,200 towards newspaper and TV advertising in support of the NC Marriage Amendment, according to an Independent Expenditure report filed with the NC State Board of Elections." Maybe Graham can give the invocation at Obama's second inaugural.

NV. "As Nevada Hispanics spends its $1 million of who-knows-whose money in this swing state—and as other dark money groups with other agendas arrive here—there will be opportunities for the Nevada press to do better."

OR. "Shorter [Columbia River Crossing bridge]: we've dumped 7 years and $140 million on this mess and it's going to have to be scrapped because the boats that sail under it will crash into it. And oh by the way, planners have known this since 2004."

PA. "You're just confused about Susquehanna pollution. That's what Department of Environmental Protection (DEP) secretary Krancer essentially told 22 retired DEP water quality experts who wrote to him asking for 90 miles of the Susquehanna River to be officially designated as polluted." Occupy Riverside: "But when Monday comes–or whatever day it is that either Aqua America turns the park back over to the residents or offers them something that doesn't require folks to liquify their retirement accounts in order to move–the meaning of the barricades changes. On that day, we decide to defend the Susquehanna."

WI. "Winona City Council allows barge transport of silica ['frac'] sand." (See also.) Athenae: "Yelling at people who agreed with me about how they sucked and I knew it isn't where my interests lie. [Education by contrast is about] the future, not about what should have been done in the past by people who were doing the only thing they thought they had in front of them, a path that only looks ill-advised now because it led here." True. Daily Page: "Here we had 100,000 people storming the square but there was no effort to include them in any meaningful — or even symbolic — decision-making process." True. "Gov. Walker said after Tuesday's balloting that he hoped an iron mining bill could move forward in the spirit if bi-partisanship. Given the new D majority in the State Senate, and R Senator Dale Schultz's previous opposition, anything resembling the measure that earned its rightful deposit in the bad-bill shredder will go nowhere this year." Nooners: "The vote was a blow to the power and prestige not only of the unions but of the blue-state budgetary model, which for two generations has been: Public-employee unions with their manpower, money and clout, get what they want. If you move against them, you will be crushed." So what are the red states going to do, when their blue state subsidies go away? (Map; map).

Inside Baseball. Halperin gives Drudge a reach-around. And not for the first time, I might add. CA's new top two system: "Out of the 214 endorsements, there are only three instances at which the endorsed candidate failed to receive the highest vote among that party's candidates." "[T]he website Environmental Health News (EHN) launched a special series, "Pollution, Poverty, People of Color," about environmental justice—the notion that no one should have to put up with a disproportionate amount of risk because of their socioeconomic status." Bipartisanship: "From designating funds for specific races to sharing opposition research, Rs and Ds are perfecting the art of communicating without coordinating. Sometimes operatives communicate privately, using in-house counsels as the conduit, while other information is shared through less-traveled regions of the Web. … [U]nlawful coordination can lead to jail time. But attorneys advising both parties have come to many of the same unspoken conclusions where the law isn't specific." Obamacare: "In what may be the most riveting livestream of the century, people who oppose Obamacare can not only sign an online petition to repeal the health care law, but also watch a live web camera shot of their petition printing." Actually, that's neat. "Nearly seven in 10 Americans hope the Supreme Court will decide against all or part of President Obama's healthcare reform law, according to a new poll." "The House Ds pushing for a steep hike in the minimum wage could face an unlikely [sic] foe: their own leadership." So how am I going to pay for ObamaCare's mandated junk insurance? Fast and Furious, Holder: "I've looked at these affidavits, I've looked at these summaries, there's nothing in those affidavits — as I've reviewed them — that indicates that 'gun-walking' was allowed." "As I've reviewed them."

Ron Paul. "TX congressman Ron Paul has claimed that he will have the support of some 500 delegates at the R national convention in Tampa this summer, and has vowed to make their presence felt."

Green Party. "Keiko Bonk, the Green Party's first partisan winner in the U.S., is Green Party nominee for Hawaii legislative seat."

Grand Bargain™-brand Catfood Watch. Bernanke: "The so-called fiscal cliff would, if allowed to occur, pose a significant threat to the recovery." I hope whoever invented the phrase 'the fiscal cliff' got a percentage of the gross from looting Social Security. After all, a shill's gotta eat. D Dick Durbin: "There's a genuine concern that a downturn in Europe or another place will force our hand [Shock Doctrine]… If we can present something immediately after the election that is a good solid starting point, I think it's going to restore confidence in the business community." Trying to restore "confidence" to the business community with cuts is like trying to kill locusts by feeding them more grain.

Romney. "This is not just a failure of policy; it is a moral failure of tragic proportion. Our government has a moral commitment to help every American help him[- or her]self. And that commitment has been broken." True, for some definition of "help." "When Mitt Romney was a college freshman, he told fellow residents of his Stanford University dormitory that he sometimes disguised himself as a police officer – a crime in many states, including Michigan and California, where he then lived. And he had the uniform on display as proof." So Romney's into cosplay. Interesting! "Presumptive GOP presidential nominee Mitt Romney said this afternoon that he is 'honored' to be endorsed by Sen. Rand Paul.

Obama. Nate Silver: "One of the confusing aspects of this presidential race so far is that national polls have often shown a race that is nearly tied — or Mr. Romney sometimes leading — while Mr. Obama has more often had the lead in polls of crucial battleground states." Visionary minimalism. "Campaign aides have told Yahoo News in the past that the dollar amount requested in fundraising emails is based on prior giving. Giving nothing, apparently, yields a request for three bucks." I'd wondered.

* 92 days 'til the Democratic National Convention feasts on rice and beans on the floor of the Bank of America Stadium, Charlotte, NC. Code 92 is the source for -030- which would be meta, had I stopped immediately before beginning to explain that it would have been meta, but now it is no longer meta. Reflexivity!

* * *
Antidote du jour:

As India's Richest Ranks Swell, Many Head For Gold

Posted: 07 Jun 2012 09:19 PM PDT

¤ Yesterday in Gold and Silver

It was an uneventful trading day in the precious metals in the Far East yesterday...and not much more exciting in London.

But that all changed at 9:30 a.m. in New York...and 125 minutes later, gold hit its low of the day at $1,577.40 spot. The gold price got sold off in two tranches...once at the London p.m. gold fix at 10:00 a.m. Eastern...and the second time exactly an hour later.

From its New York high to its New York low, gold's price move was a hair over $52. Gold closed at $1,588.50 spot...down $31.20 on the day. Net volume was a gargantuan 244,000 contracts.

Here's the New York Spot Gold [Bid] chart on its own, so you can see the shenanigans that went on in greater detail.

Silver's price path had a little more structure to it. It got sold down about two bits around 10:00 a.m. Hong Kong time...and stayed around the $29.25 price range right up until the noon silver fix in London. Then a rally began the took it up to its 9:30 a.m. New York high of the day...$29.79 spot...and at that point it met the same fate as the gold price.

From its high to its low, silver got smacked for $1.47...which works out to 4.93%. From it's $28.32 spot low, silver gained back 27 cents...and closed the electronic trading session in New York at $28.59 spot...down 84 cents on the day.

Platinum got hit pretty hard as well...down 1.58% from Wednesday. Palladium was actually up a buck on the day. You don't need a degree in rocket science to know that very little of what happened in the precious metals had to do with what "Helicopter Ben" had to say.

The dollar index did very little yesterday. It's high of the day, such as it was, came at the London open...and from there it declined about 45 basis points to its low which came a few minutes after 9:30 a.m. in New York. From there it rallied 30 odd basis points...and closed up a handful of basis points from Wednesday.

It's more than a stretch to pin yesterday's bloodbath in the precious metals on the dollar index.

The gold shares opened the trading day in the green for just a few minutes before heading for the nether reaches of the earth...with the low of the day coming around 11:30 a.m. Eastern time. The shares recovered a bit from there, but the HUI still finished down a chunky 3.26%. At the low, the HUI was down over five percent, so I guess we should be thankful for small mercies.

As can be imagined, the silver shares got it in the neck pretty good as well...and Nick Laird's Silver Sentiment Index was down 2.11%.

(Click on image to enlarge)

The CME's Daily Delivery Report was a yawner, as only 10 gold contracts were posted for delivery on Monday.

There were no reported changes in GLD...but as I mentioned in this space yesterday..."an authorized participant added 970,184 ounces of silver to SLV on Wednesday, which was within twelve ounces of the amount of silver added on Tuesday." Well, the Wednesday deposit was obviously an error, as they reversed the entire amount on Thursday.

Both Ted Butler and I were expecting/hoping for a decline in the short interest in SLV when the new report came out this week. Well, the new report is out, and it showed that the short position in SLV increased another 1,423,800 shares/ounces...or 11.15%. As of the cut-off for this report, which is posted over at shortsqueeze.com, there are currently 14,190,300 SLV shares that have no silver backing them. That's a bit over seven days of world silver production...or 441.3 metric tonnes.

After a monstrous increase in the last report, the GLD ETF showed a small decline in their short position in this report. It declined by 564,900 shares...or 3.16%...or 56,490 troy ounces. As of the report date, GLD now has a short position of 17.33 million shares, or 1.733 million ounces, which is a hair under 54 tonnes.

As I've said at every possible opportunity...I wouldn't touch either of these two ETFs with a 10-foot cattle prod. I'd own physical metal in hand instead. Then you really know you own it.

The U.S. Mint had a small sales report. They sold 500 ounces of gold eagles...500 one-ounce 24K gold buffaloes...and 100,000 silver eagles.

The Comex-approved depositories reported receiving 560,074 troy ounces of silver on Wednesday...and didn't ship out anything. The link to that action is here.

I have the usual number of stories once again and, as I always like to do, I'll leave the final edit up to you.

It was either all Ben Bernanke's fault...or 'da boyz' used his speech as fig leaf to beat the living snot out of the gold, silver and platinum prices.

Nigel Farage: "Europe is Collapsing, Buy Gold & Expect QE". The Golden Wealth of Turkey: Frank Holmes. CFTC Charges Company With Running $90 Million Silver Bullion Ponzi Scheme.

¤ Critical Reads

Fitch: US Risks 2013 Rating Downgrade Without 'Credible' Deficit Plan

Fitch Ratings reiterated on Thursday it would cut its sovereign credit rating for the United States next year if Washington cannot come to grips with its deficits and create a "credible" fiscal consolidation plan.

It also said it would immediately cut the credit ratings on Cyprus, Ireland, Italy, Spain and Portugal if Greece were to exit the eurozone. Additionally, all eurozone nations would have their ratings put on its negative ratings watch list, setting a six-month time frame for a potential downgrade.

Europe's ongoing sovereign credit crisis undermines already below-trend growth seen in the United States, the world's biggest economy.

This story was posted on the moneynews.com Internet site late yesterday morning...and I thank West Virginia reader Elliot Simon for bringing it to our attention. The link is here.

View full GSD edition

Fed's Janet Yellen Warns Against 'Downward Spiral'

The most impressive Federal Reserve speech this week wasn't Chairman Ben Bernanke's guarded remarks today before Congress's Joint Economic Committee. It was a speech on Wednesday in Boston by Vice Chair Janet Yellen, who warned that things could start to get really bad if the Fed doesn't stay ahead of the curve.

Here's what she said, as reported by Caroline Salas Gage of Bloomberg News: "It may well be appropriate to insure against adverse shocks that could push the economy into territory where a self-reinforcing downward spiral of economic weakness would be difficult to arrest."

That's been the philosophy of Bernanke's Fed ever since the financial crisis began in 2008: The risk of a downward spiral is so great that the Fed needs to lean over backward to make sure it doesn't get started—even to the point of erring on the side of keeping monetary policy too loose for too long.

This story was posted over at the businessweek.com Internet site yesterday...and I thank Washington state reader S.A. for sending it. The link is here.

View full GSD edition

Governor Scott Walker's historic re-election was a kick in the teeth for hysterical union bosses

You may have missed this week's big political news from the United States where conservative Republican Governor of Wisconsin, Scott Walker, was re-elected by a landslide in the teeth of hysterical and well-funded opposition from public sector unions who had sought his early removal from office through a recall ballot.

How do I know it was a landslide? Well, Walker won by a larger share of the vote than Obama did the White House in 2008 and his victory was proclaimed a landslide. What's good for the goose...

Had Walker lost, the BBC and their liberal allies would have made sure that President Obama's victory (as it would surely have been portrayed) led the bulletins. The GOP, we would have been told, was finished - the party's "extremism" and "intolerance" deservedly seeing Governor Walker turfed out of office.

This story was posted on the dailymail.co.uk website during the afternoon in London...and is Washington reader S.A.'s second offering in a row in today's column. The link is here.

View full GSD edition

Estonian president scolds Paul Krugman on Twitter

The President of Estonia slammed Nobel laureate and New York Times columnist Paul Krugman on Twitter today over Krugman's short blog post pooh-poohing the Eastern European country's economic recovery.

Krugman wrote that defenders of Europe's austerity measures often point to Estonia's economic recovery to defend their policies. He included a chart that showed the country's rising GDP and added: "Better than no recovery at all, obviously—but this is what passes for economic triumph?"

Estonia's president, Toomas Hendrik Ilves, struck back on Twitter. "Let's write about something we know nothing about & be smug, overbearing & patronizing: after all, they're just wogs," Ilves wrote, using the derogatory British slang term for dark-skinned people from Africa or the East.

"Guess a Nobel in trade means you can pontificate on fiscal matters & declare my country a 'wasteland'. Must be a Princeton vs. Columbia thing," he added, referencing the university where Krugman teaches and his own alma mater. (It's unclear when and if Krugman actually called Estonia a wasteland, even though Ilves puts the word in quotes.)

You just read the entire 4-paragraph story that was posted over at the news.yahoo.com website on Wednesday...and I thank reader Scott Pluschau for sending it. The link is here.

View full GSD edition

UK banks sitting on £40bn of undeclared losses

PIRC, the shareholder advisory group, has analysed the 2011 accounts of the UK's top five banks to calculate how much they expect to write off as bad debt in the coming years but have yet to take against profits.

Royal Bank of Scotland (RBS) was in the worst condition, PIRC found, with £18bn of undeclared losses that would wipe out more than a third of its capital buffer and potentially force the 82pc state-owned lender back to the taxpayer for another rescue.

HSBC had ($16bn) £10bn in undeclared losses, Barclays £6.7bn, Standard Chartered $3.6bn (£2.3bn) and Lloyds Banking Group £2.9bn. PIRC presented its numbers to all the banks and said none disputed them.

Profits at Britain's lenders have been flattered by controversial international accounting standards introduced in 2005 that prevent companies from provisioning against potential losses. The rules have been attacked by the House of Lords, among others, as deeply flawed.

PIRC said the rule was "masking the true position [of the accounts] by including fictional assets and fictional profits".

Really!!!...and it's probably much worse than stated here. As I [along with many others] have said for years, most of the Western banking system is totally insolvent...and this is just more proof. This short story was posted in The Telegraph on Tuesday...and I thank reader Brad Robertson for sharing it with us. It's worth skimming...and the link is here.

View full GSD edition

George Osborne hints at British referendum on Europe

The Chancellor spoke as eurozone leaders debate moves towards a deeper political union in response to the crisis affecting the single currency.

Conservative MPs believe that the crisis will mean changes in the way the European Union works, changes that should trigger a referendum in the UK.

The Coalition has promised that any move to transfer more power from Westminster to Brussels will be put to a referendum.

This story was posted in The Telegraph early yesterday morning New York time...and is the first of many stories from Roy Stephens. The link is here.

View full GSD edition

Spain Blinks: Ambrose Evans-Pritchard

It would be unkind to say that Spain has capitulated, but that is almost certainly what has happened.

There will be a sovereign bail-out for Spain from the EFSF rescue fund. This is disguised (very slightly) by paying the money into Spain's state restructuring fund for banks FROB rather than the treasury, but that changes little.

It is the Spanish state that will bear the costs of recapitalising the banks, not the EU. Spain's public debt will shoot higher.

The Spanish press understands this perfectly well, as made clear this morning by Bernardo de Miguel in Cinco Dias.

This AE-S blog was posted on telegraph.co.uk Internet site yesterday...and is Roy Stephens second offering of the day. The link is here.

View full GSD edition

Spain's Vicious Circle: Madrid Leans on Its Troubled Banks to Buy Its Bonds

While the Spanish government was able to sell all the bonds it wanted to on Thursday, it mostly sold to the usual buyers: Spain's increasingly fragile banks.

And so, as Madrid tries to come up with the money to bail out its banks, its main lenders are increasingly becoming many of those same institutions.

If it sounds like the most vicious of circles, it is.

Economists warn that over the long term, Spain will have trouble meeting its substantial financial requirements until foreign investors return to the market as regular buyers, injecting new money into the system. Until late last year, foreign investors were doing just that. But lately, much of the foreign money has been staying away.

This story, filed from London, was posted in The New York Times yesterday...and is the third and final offering from Washington state reader S.A...and the link is here.

Gold & Silver Market Morning, June 08 2012

Posted: 07 Jun 2012 09:00 PM PDT

Greg Hunter: Weekly Wrap Up 6.8.12

Posted: 07 Jun 2012 08:50 PM PDT

Fighting in Syria continued unabated, this week, with no end in sight. The UN says that civil war in Syria is "imminent." It looks to me it's been imminent for months. More than 9,000 people have been killed in the uprising which, at its core, is a fight between Shia and Sunni.

from usawatchdog:

That's the Hatfields and McCoys to you and me. There is mounting pressure from the U.S. calling for regime change, and Secretary of State Hillary Clinton echoed that call, again, this week. There is covert support of the rebels from the west, but no official military intervention–yet. The EU debt crisis is bad and getting worse. Spanish banks have openly asked for a bailout, but the entire Euro-zone appears to be in trouble. Still, the leaders of the Western world want to keep it together no matter what. Barack Obama and David Cameron (UK) have been involved with EU leaders to try to continue to bail it out and keep the monetary union together. Massive money printing will be necessary according to Member of the European Parliament (MEP) Nigel Farage, who says buy gold and expect very big inflation. Germany is being asked to carry the bailout weight, but it doesn't want to take on all the debt. If it does, it will be asking to be in control of most of Europe. It tried that before in WWII. Meanwhile, Fed Chief Ben Bernanke says he will provide more stimulus but isn't giving up any details. The Fed meets in a couple of weeks to decide the money printing course. Record lows are being recorded with mortgage interest rates and Treasury rates. Some say it is a flight to quality, but others say it is, at least in part, the Federal Reserve suppressing interest rates behind the scenes. Wisconsin Governor Scott Walker survived an attempt to kick him out of office over cutting the benefits of some public worker unions. This is a bad sign for the public unions everywhere. I think you can call this the beginning of a nationwide taxpayer revolt. The big story on Capitol Hill this week is Attorney General Eric Holder and the "Fast and Furious" debacle that ended with the death of a border patrol officer. He was shot with assault rifles given to Mexican drug cartels by the ATF. It was a sting operation that went very bad. Congress was grilling Holder about it yesterday but should have been asking him why there have been zero prosecutions of big bankers for trillions of dollars in fraud in the financial meltdown. Oh, both Republicans and Democrats got bought off; I mean, got campaign money from Wall Street. So, I guess we should forget that. Finally, the biggest distraction of the week for serious news is Mayor Michael Bloomberg's crack down on big sugary drinks in New York City. This story seemed to get way more coverage than all the stories I just mentioned. Greg Hunter of USAWatchdog.com gives his take on these stories and more in the Weekly News Wrap-Up.

~TVR

DTS: A Day in the Life of a Silver Day Trader

Posted: 07 Jun 2012 08:49 PM PDT

daytradeshow: A Day in the Life of a Silver Day Trader
The dizzying highs, etc.

from daytradeshow:

~TVR

Silver Update: ZIRP – 6.7.12

Posted: 07 Jun 2012 08:36 PM PDT

brotherjohnf: Silver Update 6/7/12 ZIRP

from brotherjohnf:

~TVR

Byron King: Companies Must Pay Dividends to Make Top-10 Gold List

Posted: 07 Jun 2012 07:00 PM PDT

The world still needs gold and other natural resources, but we may need a new investment model to sustain them, says Byron King, writer and editor for Agora Financial's Outstanding Investments and...

Visit the aureport.com for more information and for a free newsletter

The Avalanche and the Phase Transition of the Financial System

Posted: 07 Jun 2012 05:08 PM PDT

We've been running with the idea that the financial system is now so big and unwieldy that efforts to stimulate will prove increasingly fleeting. Past attempts to 'do something' have led to an increasingly complex and distorted economy. More of the same is just making things worse.

So we weren't surprised to see this headline in the Financial Times this morning...

'China faces stimulus dilemma'

Doubts already! The only dilemma with previous stimulus calls was how big it should be. Not anymore. Late yesterday, China announced a cut in interest rates, the first since 2008. The People's Bank of China cut the benchmark one-year lending rate 0.25% to 6.31%. The interest rate paid on deposits also fell 25 basis points, to 3.25%.

Instead of rejoicing in the typical fashion - a sharp and boisterous rally - the market did nothing. Even worse, some people questioned the validity of further stimulus. What is going on?

From the Financial Times article:

'...many economists and analysts from inside and outside the government are warning of the dangers involved in a fresh round of stimulus and easy credit that could reinflate a property bubble and exacerbate the stark structural imbalances already present in the Chinese economy.'

As we point out on a weekly basis, China has massive problems. Tinkering with interest rates won't help in the slightest. After experiencing their own credit bubbles, the US and Japan both lowered interest rates until they couldn't fall any further. Then they just printed money.

But the money didn't go where the Fed's wanted it to. You can never reinflate a burst bubble. That should be one of the laws of economics - we'll call it YCNRABB. The 'rescue money' always goes somewhere else. In the US and Japan, it went into government bonds.

And in Europe, the rescue funds for Greece, Spain, Italy, etc. have travelled through those markets and right back to the safety of the German bond market. Today, major government bond prices (US, UK, Germany, Japan) are at, or very close to, all-times highs. Think about that. The bond market is hundreds of years old. The bond market is saying that the risk of lending to governments is lower now than at any point in modern history.

Our response would be to tell the bond market it's lost the plot. That bonds are an accident waiting to happen is not hard to predict. It's the timing that kills you. The Japanese bond market has buried many investors over the years betting on its demise.

We don't think faith in Western government's fiat paper promises will prove as resilient. That's not telling you much. Japanese bonds have levitated for a decade now...

There's plenty of reason to think markets will remain in a state of fear for some time yet. Ben Bernanke, Chairman of the Fed Reserve, basically told the market not to expect more money printing anytime soon. Speculators are yet to work out that the market needs to fall considerably before the Fed will step in.

Over in Europe, faith in economic stimulus is also waning. It's dawning on people that Spain is too big to bail out. If Spain does get a handout it can't be a creditor to the EFSF, or the other acronym, the ESM. That means the rest of Europe needs to stump up more cash. You can bet the Germans won't be happy about that.

Ever greater attempts to stimulate create ever greater amounts of complexity. Financial markets are like a stricken boat. Global capital is a hapless passenger, lurching from one side to the other, looking for safety. Strangely enough, in this on-the-run analogy gold is our lifeboat...or more accurately it's our path to dry land. With no counter party risk, it lies outside the system...off the boat, away from the boiling seas.

With gold appearing volatile, it's worth remembering that gold is inert. It doesn't change. It's the value of paper currencies that change. Perhaps a picture will illustrate the point. This was sent to us a few weeks ago by DR reader and mate, Wesley LeGrand.

As complexity gets...more complex, expect volatility to rise. Jim Rickards alerted us to this theme of complexity in his recent book, Currency Wars. Rickards makes the observation that financial markets resemble a highly complex system. Nothing revolutionary there.

But his definition of a complex system is a little concerning:

'Our definition of complex systems includes spontaneous organisation, unpredictability, the need for exponentially greater inputs and the potential for catastrophic collapse.'

He then goes on to explain the characteristics of a complex system. Two crucial ones are 'emergent properties' and 'phase transitions'.

A simple way to define an emergent property is to say the whole is more than the sum of its parts. We're not sure Jamie Dimon would agree but that sounds like a reasonable description of global financial markets.

The phase transition is where things begin to get interesting. According to Rickards, the system must be in a critical state to experience a phase transition.

'This means that the agents in the system are assembled in such a way that the actions of one trigger the actions of another until the whole system changes radically. A good example of a phase transition in a critical state system is an avalanche.'

All it takes is just one more snowflake to land - and chaos ensues. Nassim Nicholas Taleb popularised the term 'Black Swan' to explain the randomness and severity of such events. Rickards takes it a step further, and says you can view such events not as 'Black Swans' but as an inevitable result of complexity theory.

He suggests that only by making the system less complex can you lower systemic risk. Breaking up the banks into small, less complex entities would be a good start. It's unlikely to happen though.

'Instead US banks are bigger and their derivatives books are larger today than in 2008. This makes a new collapse, larger than the one in 2008, not just a possibility but a certainty. Next time, however, it really will be different. Based on theoretical scaling metrics, the next collapse will not be stopped by governments, because it will be larger than governments. The five-meter seawall will face the ten-meter tsunami and the wall will fail.'

But don't worry, we'll leave you with this recent quote from Warren Buffett.

'We're not smarter than the people in 1930. We're not harder working than the people in 1930. We've just got a system that works.'

A system that works?

Look out...

Have a great long weekend!

Regards,

Greg Canavan
for The Daily Reckoning Australia

Save Your ASSets First

Friday, June 8, 2012