A unique and safe way to buy gold and silver 2013 Passport To Freedom Residency Kit
Buy Gold & Silver With Bitcoins!

Wednesday, July 25, 2012

Gold World News Flash

Gold World News Flash

GoldSeek.com Radio Gold Nugget: Arch Crawford & Chris Waltzek

Posted: 25 Jul 2012 08:00 AM PDT

GoldSeek.com Radio Gold Nugget: Arch Crawford & Chris Waltzek


Gold Bugs Index (HUI): Buy, Hold Or Sell? Update #14

Posted: 25 Jul 2012 07:12 AM PDT

Because of this dramatic price decline in these stocks, investors have the opportunity to purchase explorers, developers and producers, often referred to as juniors, at about half of the company's net asset value (NAV).


GATA files new gold records requests with State, Treasury, Fed, and FOMC

Posted: 25 Jul 2012 07:00 AM PDT

Through its lawyer, William J. Olson P.C. of Vienna, Virginia (http://www.lawandfreedom.com/), GATA today filed federal Freedom of Information Act requests with the U.S. State Department, Treasury Department, Federal Reserve Board, and Federal Open Market Committee, greatly expanding upon GATA's 2009 FOIA request to the Fed, which sought access to records involving gold swaps.


Fed “Independence” Is a Scam … And No Reason to Prevent a Full Audit

Posted: 24 Jul 2012 11:53 PM PDT

Congress will vote tomorrow on auditing the Federal Reserve.

The Federal Reserve says that an audit will interfere with it’s “independence”. For example, in Congressional testimony on 2009, the vice chair of the Fed used the “i” word 30 times.

Democratic whip Steny Hoyer is urging Dems to vote no on auditing the Fed in order to preserve the Fed’s “independence”:

This bill impedes the independence of this critical institution. In order for the Federal Reserve to do its job effectively, it should not be subject to short-term political pressures.

Hoyer doesn’t speak for the wishes of Democrats.  The overwhelming majority of Americans favor a full and complete audit, and disagree with the “independence” argument.  For example, Bloomberg noted in 2010:

A majority of Americans are dissatisfied with the nation’s independent central bank, saying the U.S. Federal Reserve should either be brought under tighter political control or abolished outright, a poll shows.

 

***

 

Americans across the political spectrum say the Fed shouldn’t retain its current structure of independence. Asked if the central bank should be more accountable to Congress, left independent or abolished entirely, 39 percent said it should be held more accountable and 16 percent that it should be abolished. Only 37 percent favor the status quo.

Are the Fed and Congressman Hoyer right and the people wrong? Do we need to protect the Fed against a short-sited Congress which cares only about political concerns?

What the Last Audit Showed

Let’s start by looking at what information was revealed in response to the previous, watered-down version of Ron Paul’s  Fed audit bill:

  • The Fed threw money at “several billionaires and tens of multi-millionaires”, including  Christy Mack, the wife of Morgan Stanley’s John Mack, billionaire businessman H. Wayne Huizenga, and Michael Dell, co-founder of Dell Computer, hedge fund manager John Paulson and private equity honcho J. Christopher Flowers

Moreover, there is strong evidence that the Fed’s decisions are often influenced by conflicts of interest.  The non-partisan Government Accountability Office calls the Fed corrupt and riddled with conflicts of interest.   Nobel prize winning economist Joseph Stiglitz agrees, saying that the World Bank would view any country which had a banking structure like the Fed as being corrupt and untrustworthy.

As Senator Sanders noted last October:

A new audit of the Federal Reserve released today detailed widespread conflicts of interest involving directors of its regional banks.

 

“The most powerful entity in the United States is riddled with conflicts of interest,” Sen. Bernie Sanders (I-Vt.) said after reviewing the Government Accountability Office report. The study required by a Sanders Amendment to last year’s Wall Street reform law examined Fed practices never before subjected to such independent, expert scrutiny.

 

The GAO detailed instance after instance of top executives of corporations and financial institutions using their influence as Federal Reserve directors to financially benefit their firms, and, in at least one instance, themselves. “Clearly it is unacceptable for so few people to wield so much unchecked power,” Sanders said. “Not only do they run the banks, they run the institutions that regulate the banks.”

 

***

 

The corporate affiliations of Fed directors from such banking and industry giants as General Electric, JP Morgan Chase, and Lehman Brothers pose “reputational risks” to the Federal Reserve System, the report said. Giving the banking industry the power to both elect and serve as Fed directors creates “an appearance of a conflict of interest,” the report added.

 

The 108-page report found that at least 18 specific current and former Fed board members were affiliated with banks and companies that received emergency loans from the Federal Reserve during the financial crisis.

 

[T]here are no restrictions in Fed rules on directors communicating concerns about their respective banks to the staff of the Federal Reserve. It also said many directors own stock or work directly for banks that are supervised and regulated by the Federal Reserve. The rules, which the Fed has kept secret, let directors tied to banks participate in decisions involving how much interest to charge financial institutions and how much credit to provide healthy banks and institutions in “hazardous” condition. Even when situations arise that run afoul of Fed’s conflict rules and waivers are granted, the GAO said the waivers are kept hidden from the public.

(Indeed, the Fed routinely allows favored bankers to make billions of dollars from inside information.)

The Fed also picks winners and losers.  in an interview this weekend with Der Spiegel, Paul Volcker – while trying to support the Fed’s argument for independence – actually undermines it:

SPIEGEL: Lawmakers on Capitol Hill are thinking about tougher controls over the Federal Reserve.

 

Volcker: I think the loss of independence and authority of the Federal Reserve would be a very serious matter for the United States. Not just in terms of monetary policy but in terms of our place in the world. People look to strong, credible institutions and I think the Federal Reserve has been such an institution. If that’s lost or too hamstrung by legislation I think we will regret it.

 

SPIEGEL: But is the Fed still the same kind of institution as during your tenure as chairman? Or is it now more of a governmental instrument? The Fed is managing the TARP program and is also buying government bonds.

 

Volcker: In some sense the Federal Reserve is always an instrument of the government. It is a government body but it is independent within government. But you are right in the sense that part of the concern is that they have involved themselves quantitatively in entering markets and in that process, you are supporting some markets and not others. That is an area in which the Federal Reserve has never wanted to get into and one that most central banks don’t want to get into. If you are going to maintain your independence you have to avoid that. To intervene in particular sectors of the market is not the proper role for the central bank over time. It could be justified only by extreme emergency.

Intervening and supporting some market players (Goldman, AIG, etc.) and not others (Lehman, etc.) is precisely what Bernanke has been doing. Whatever can be said for the Fed in the past, picking winners and losers is “not the proper role for the central bank”, in Volcker’s words. Without an audit, we will never know which “winners” were saved and which “losers” were left to die, or why. Nor do we really currently know which bailouts and other actions were truly performed under emergency conditions – to stave off catastrophe – and which were done to help out financial companies for other reasons.

Moreover, Bernanke gave many billions to private foreign banks and foreign central banks (and see this).    While Fed apologists say that the bank’s “independence” must be preserved, the fact that the Fed has sent trillions overseas shows the Fed is somewhat independent of American interests.

And the question has to be asked:  Has the Fed been picking winners and losers among countries? Among private banks?

Current Audits Are Inadequate

The Fed and its cheerleaders pretend current audits are sufficient.

For example, Steny Hoyer argues today:

Congress already conducts regular and robust oversight of the Federal Reserve and actually expanded GAO’s audit authority two years ago in the Dodd-Frank Wall Street Reform and Consumer Protection Act. It expanded the types of audits GAO may conduct of the Federal Reserve, as well as the data that must be disclosed to the public. The Federal Reserve’s financial accounts have long been subject to audit both by the GAO and an outside, independent audit firm.

But Robert D. Auerbach – an economist with the U.S. House of Representatives Financial Services Committee for eleven years, assisting with oversight of the Federal Reserve, and now Professor of Public Affairs at the Lyndon B. Johnson School of Public Affairs at the University of Texas at Austin – points out that current audits are wholly inadequate:

A 1997 Gonzalez investigation, assisted by the GAO, found extensive corrupt accounting at the cash section of the Los Angeles branch of the San Francisco Fed Bank with dire possibilities at other Fed vault facilities. Greenspan informed Gonzalez that nearly $500 thousand had been stolen from Fed vaults by Fed employees from 1987 to 1996. The Gonzalez/GAO investigation indicated this was an understatement.

 

The Fed Banks’ vaults contain uncirculated currency and coin transferred from the Bureau of Engraving and Printing and cash from banks throughout the country. The Fed district banks and branches need to be audited with GAO personnel who are trained and experienced in central bank operations and auditing. When will these audits be done and reported to the Congress or will Bernanke dismiss this national security problem as an urban legend?

Former Federal Reserve economist William Bergman writes:

The appearance of extensive auditing authority doesn’t mean audits are effective. Good auditing requires the willingness and ability of auditors to do their jobs. Some people view the Inspectors General, generally, and the Federal Reserve Board’s Office of Inspector General, specifically, as less than effective or independent in pursuing their mandates. In turn, some people question whether the Board’s oversight of the Reserve Banks, including the Federal Reserve Bank of New York, might be less than arms-length. More fundamentally, from the point of view of the supporters of the recently introduced legislation, there are a variety of restrictions on the ability of the GAO to audit the Fed. There are significant exceptions for monetary policy and transactions with foreign central banks and international organizations like the Bank for International Settlements and the IMF.

Would They Fight Against Transparency If they Had Nothing to Hide?

The former Vice President of Dallas Federal Reserve said that the failure of the government to provide more information about the bailout signals corruption.  ABC reports:

Gerald O’Driscoll, a former vice president at the Federal Reserve Bank of Dallas and a senior fellow at the Cato Institute, a libertarian think tank, said he worried that the failure of the government to provide more information about its rescue spending could signal corruption.

 

“Nontransparency in government programs is always associated with corruption in other countries, so I don’t see why it wouldn’t be here,” he said.

Thomas Woods said in 2009:

There is no good reason for Americans not to know the recipients of the Fed’s emergency lending facilities. There is no good reason for them to be kept in the dark about the Fed’s arrangements with foreign central banks. These things affect the quality of the money that our system obliges the American public to accept.

 

The Fed’s arguments against the bill are unlikely to persuade, and will undoubtedly strike the average American as little more than special pleading. Perhaps the most frequent of the claims is that a genuine audit would jeopardize the alleged independence of the Fed. Congress could come to influence or even dictate monetary policy.

 

This is a red herring. The bill is not designed to empower politicians to increase the money supply, choose interest-rate targets, or adopt any of the rest of the Fed’s central planning apparatus, all of which is better left to the free market than to the Fed or Congress. It seeks nothing more than to open the Fed’s books to public scrutiny. Congress has a moral and legal obligation to oversee institutions it brings into existence. The convoluted scenarios by which merely opening the books will lead to an inflationary catastrophe at the hands of Congress are difficult to take seriously.

 

At the same time, as we hear this objection repeated time and again, we might wonder just how independent the Fed really is, what with its chairman up for reappointment by the president every four years. Have these critics never heard of the political business cycle? Fed chairmen have been known to ingratiate themselves into the president’s favor close to election time by means of loose monetary policy and the false (and temporary) prosperity it brings about. Let us not insult Americans’ intelligence by pretending this phenomenon does not exist…

 

If there is any truth to the idea of Fed independence, it lay in precisely this: the Fed may reward favored friends and constituencies with trillions of dollars in various kinds of assistance, while keeping the public completely in the dark. If that is the independence we’re talking about, no self-respecting American would hesitate for a moment to challenge it.

 

A related argument warns that the legislation threatens to politicize lender-of-last-resort decisions. Again, this is untrue. But even if it were true, how would that represent a departure from current practice? I hope we are not asking Americans to believe that the decisions to bail out various financial institutions over the past two years, and in particular to allow them to become depository institutions overnight that they might qualify for assistance, were made on the basis of a pure devotion to the common good and were not political at all. Most Americans, not unreasonably, seem convinced of another thesis: that Goldman Sachs, for instance, might be just a little bit more politically well connected than the rest of us…

 

If our monetary system were really as strong, robust, and beyond criticism as its cheerleaders claim, why does it need to rely so heavily on public ignorance? How can it be a sound banking system that depends on keeping the public in the dark about the condition of its financial institutions?

 

Let me also make clear that supporters of this legislation are strongly opposed to a watered-down version of the bill – which, incidentally, would only increase public suspicion that someone is hiding something.

 

If the Federal Reserve Transparency Act passes and the audit takes place, the American people will have achieved a great victory. If the legislation fails, more and more Americans will begin to wonder what the Fed could be so anxious to keep hidden, and the pressure for transparency will simply intensify. A recent poll finds 75 percent of Americans already in favor of auditing the Fed. The writing is on the wall.

 

The Federal Reserve may as well get used to the idea that the audit is coming. That would be a far more sensible approach than the counterproductive and condescending one it has adopted thus far, in which the peons who populate the country are urged to quit pestering their betters with all these impertinent questions. The Fed should take to heart the words of consolation the American people are given whenever a new government surveillance program is uncovered: if you’re not doing anything wrong, you have nothing to worry about.

 

The superstitious reverence that Americans have been taught to have for the Federal Reserve is unworthy of the dignity of a free people. The Fed enjoys a government-granted monopoly on the creation of legal-tender money. It is not an unreasonable imposition for Americans to demand to know about the activities of such an institution. It is common sense.

“Independence” … a Scam

The senior S&L prosecutor (and professor of economics and law) Bill Black notes:

The sad fact is that very few Americans will be surprised that the Fed represented the interests of the SDIs [too big to fails, or "Systemically Dangerous Institutions"] even though they were directly contrary to the interests of the nation. The Fed’s constant demands for (and celebration of) “independence” from democratic government, combined with slavish dependence on and service to the CEOs of the SDIs has gone beyond scandal to the point of farce. I suggest organized “laugh ins” whenever Fed spokespersons prate about their “independence.”

(Indeed, the Fed has now agreed to backstop the derivatives exposure of American and foreign entities, which could result in multi-trillion dollar losses to the American people.)

Bill Bergman says:

How independent is the Fed, right now, to begin with? The Fed is not an apolitical beast. It has had politicians working there in formal leadership positions as well as staffing roles. The Fed’s regulatory performance matters for the conduct of monetary policy, and the Fed’s relationships with the banks it regulates and bails out deserve scrutiny. Recently, we’ve been through a financial calamity, and have endured the biggest spike in the unemployment rate since World War II. Investment returns crumbled in 2007 and 2008, and Federal Reserve monetary and other regulatory policy played a significant role in this calamity. Looking back a little further, how effective has the ‘independent’ Fed been as source of stable prices? Congress passed the law first mandating ‘stable prices’ as a goal for Fed monetary policy in 1977, and the CPI has tripled since then.

 

The FOMC [the Federal Open Market Committee] conducts monetary policy under authority delegated by the Congress. It seems reasonable to allow for some form of stronger inquiry in this area, especially after the worst financial and economic crisis since the Great Depression. One facet of a possible future investigation could deal with individual monetary policy ‘transactions.’ Under the quantitative easing posture adopted by the Fed in recent years, with a wider range of financial instruments bought to liquify the banking system and promote monetary and credit growth, the question arises – at what price were those instruments bought? Were they ‘market’ prices, or were they another way to apply public resources to overpay for bad assets and help large financial firms that got into trouble?

 

That may or may not be a valid avenue of inquiry, but it seems like we could benefit greatly from learning about the broader range of issues that could be tackled.

 

Audit the Fed? Sounds good to me.

We noted in 2010:

In March 2004, when Alan Greenspan was Fed chairman, he suppressed the opinions of those Fed officials who knew that there was a housing bubble.

 

Congressman Alan Grayson points out that – because the Fed unilaterally decided to hand out half a trillion to foreigners without any Congressional oversight, and that Bernanke testified that he didn’t know who got the loot – the Fed must be subject to an audit.

 

Yves Smith and Tom Adams – in analyzing the Fed’s lack of full disclosures regarding its extraordinary rescue operations – conclude:

Even a cursory inspection of the Fed’s disclosures of its extraordinary rescue operations shows them to have been made only under duress, and then to be incomplete and deliberately unhelpful.

 

The reason this matters, is that, contrary to the Fed’s claims of independence, it has been operating as an extra-legal off balance sheet entity of the Treasury, circumventing normal Cons


Europe is sleepwalking towards imminent disaster, warn top economists

Posted: 24 Jul 2012 11:25 PM PDT

July 24, 2012 02:13 PM - The euro has completely broken down as a workable system and faces collapse with "incalculable economic losses and human suffering" unless there is a drastic change of course, according to a group of leading economists. Read the full article at the Telegraph......


The One Personality Trait that All Gold & Silver Investors Need to be Profitable

Posted: 24 Jul 2012 11:15 PM PDT

by JS Kim, Gold Seek:

Before one every buys a single troy ounce of gold and silver, one should ensure first and foremost that one understands that gold and silver are volatile in price every single year. Many people commit the same mistake in buying gold and silver that they commit when buying into the stock market – they don't buy assets when asset prices are low, and only buy them after prices have soared and news of a steep short-term climb in price has been reported by the mainstream media news. However, an even bigger mistake gold and silver purchasers make is not having enough patience to benefit from the long-term trends higher. So to sum up the mistakes people make when buying gold and silver they are:

(1) Not understanding that volatility in gold and silver markets does not equal risk when one knows how to interpret the volatility in these specialized assets correctly; and
(2) Not having enough patience.

These two concepts go hand in hand for the following reasons.

As the fraud of the global fractional reserve banking system is now beginning to be understood by more and more people for the first time in a century, the volatility of gold and silver prices will increase due to the war that is going on between (1) the people that wish to protect themselves against the ongoing fraud of the global financial system and (2) the banking cartel, for the simple reason that these two segments reside on the opposite sides of the price spectrum for gold and silver. The people wish to purchase physical gold and silver as a means of protecting their purchasing power, while the banking cartel wishes to suppress gold and silver prices as rising gold and silver prices expose the fraud of their fractional reserve banking system.

Read More @ GoldSeek.com

Grandich Client Timmins Gold

Posted: 24 Jul 2012 11:14 PM PDT

The following is automatically syndicated from Grandich's blog. You can view the original post here. Stay up to date on his model portfolio! July 24, 2012 07:04 PM I spoke with CEO Bruce Bragagnolo and here’s his overview of where Timmins Gold stands: Peter, I’m leased to report that operations at the mine are proceeding as per our expectations. Production: Just reported our Q2 production statistics and it was our best quarter ever just having sold 23,300 ounces of gold as we ramp up to 100,000 ounces sold this year. We anticipate that Q3 and Q4 will show further incremental increases. We are currently in ongoing expansion mode as we are increasing our throughput. This expansion will initially take us from 18,000 tpd to 22,000 tonnes per day.* Further expansion planned for 2013 will result in 30,000 tpd and annual gold production of 130,000 ozs. We have also made numerous modifications at the mine which will result in a more efficient and lower cost mining operation....


Silver Update 7/24/12 London Calling

Posted: 24 Jul 2012 11:07 PM PDT

Gold Stocks Clash Of The Titans

Posted: 24 Jul 2012 10:58 PM PDT

Graceland Update


How Bad Can it Get?

Posted: 24 Jul 2012 10:57 PM PDT

The Gold Speculator


What To Expect Next For The US Dollar, Euro, Stocks & Bonds

Posted: 24 Jul 2012 10:07 PM PDT

With global stock markets continuing to struggle, top Citi analyst Tom Fitzpatrick puts KWN readers ahead of the curve on stocks, the US dollar, euro, bonds & more. Fitzpatrick, a 28 year veteran and top analyst at Citibank, which has $1.3 trillion in assets, sent KWN some extremely powerful charts and notes. Below were his comments with five key charts:


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

Ben Davies: Seeking value in a world of financial repression

Posted: 24 Jul 2012 08:55 PM PDT

10:58p ET Tuesday, July 24, 2012

Dear Friend of GATA and Gold:

Four years ago, at GATA's Washington conference, your secretary/treasurer remarked that there were no markets anymore, just interventions --

http://www.gata.org/node/6242

-- and, last year, elaborating at the Cheviot Asset Management Sound Money Conference in London --

http://www.gata.org/node/9545

-- remarked that "since central bank intervention in the currency, bond, equities, and commodity markets has exploded over the last few years, we don't really know what the market price of anything is anymore."

Now Ben Davies, CEO of Hinde Capital in London, has put intellect, data, and graphs to work in the same vein in a presentation made last month at the Value Intelligence Conference in Munich, a presentation titled "Seeking Value in a World of Financial Repression."

Davies concludes:

"Unfortunately the criticisms leveled at capitalism's supposed failings are not a function of failed free markets but of state intervention in the supply of money. The failing of the banking system is the product of meddling in the true or real rate of interest which has distorted all pricing mechanisms in the production of credit, resource availability, manufactured goods, and services. This has been a global phenomenon. ...

"The repressive nature of finance today deters us from observing true prices that signal to us the true time preference of individuals to make purchases or sales and hence their assignation of value for assets.

"I may sound more like a philosopher or even a political reformer than an investment manager, but I make no apology. For me to achieve my fiduciary duty of protecting my clients' money I must protect its value first and foremost. Until such time as the monetary system resets or a new monetary order appears that fosters price and hence stability in the value of our numeraire, then I will have to fight what I see as infringement in free markets to perform their basic and fiduciary responsibility, which is price discovery. A true price discovery will enable value to be representative of buyers and sellers, where one can chose of one's own volition to reject or not the value offered."

Thus Davies echoes the British economist Peter Warburton, whose 2001 essay, "The Debasement of World Currency -- It Is Inflation, But Not as We Know It" --

http://www.gata.org/node/8303

-- perceived that the primary purpose of Western central banking had become to deprive the world of what he called "a stable numeraire," a constant measure of things financial. Of course that's what the gold price manipulation scheme is all about.

Davies' presentation is posted in PDF format at the Hinde Capital Internet site here:

http://www.hindecapital.com/attachments/reports/full/132/original/HindeS...

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


ADVERTISEMENT

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

From a Company Press Release
November 22, 2011

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

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

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

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

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


Join GATA here:

Toronto Resource Investment Conference
Thursday-Friday, September 27-28, 2012
Toronto Sheraton Centre Hotel
Toronto, Ontario, Canada
http://www.cambridgehouse.com/event/toronto-resource-investment-conferen...

New Orleans Investment Conference
Wednesday-Saturday, October 24-27, 2012
Hilton New Orleans Riverside Hotel
New Orleans, Louisiana
http://www.neworleansconference.com/

* * *

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:

http://gata.org/tshirts

Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009:

http://gata.org/node/wallstreetjournal

Help keep GATA going

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:

http://www.gata.org

To contribute to GATA, please visit:

http://www.gata.org/node/16

ADVERTISEMENT

Prophecy Platinum Announces Wellgreen Preliminary Economic Assessment:
38% Pre-Tax IRR, $3.0 Billion NPV, and a 37-Year Mine Life

Company Press Release

VANCOUVER, British Columbia, Canada -- Prophecy Platinum Corp. (TSX-V: NKL, OTC-QX: PNIKF, Frankfurt: P94P) reports the results of an independent NI 43-101-compliant preliminary economic assessment for its fully owned Wellgreen nickel-copper-platinum group metals project in the Yukon Territory.

The independent assessment, prepared by Tetra Tech, evaluated a base case of an open-pit mine (with a mining rate of 111,500 tonnes per day), an on-site concentrator (with a milling rate of 32,000 tonnes per day), and an initial capital cost of $863 million. The project is expected to produce (in concentrate) 1.959 billion pounds of nickel, 2.058 billion pounds of copper, and 7.119 million ounces of platinum, palladium, and gold during a mine life of 37 years with an average strip ratio of 2.57.

The financial highlights of the preliminary economic assessment, shown in U.S. dollars, are as follows:

Payback period: 3.55 years
Initial capital investment: $863 million
IRR pre-tax (100% equity): 38 percent
NPV pre-tax (8% discount): $3 billion
Mine life: 37 years
Total mill feed: 405.3 million tonnes
Mill throughput: 32,000 tonnes per day

Prophecy Chairman John Lee says: "We are pleased with the preliminary economic assessment results. The numbers indicate that Wellgreen is one of most exciting mineral projects in the Yukon. The company is drilling to upgrade and expand the resource base. The infrastructure is excellent as the project is only 1,400 meters in altitude and 14 kilometers from the paved Alaska Highway, which leads to the Haines deep seaport. Discussions are under way with support from local stakeholders regarding permitting and logistics."

For the complete press release, please visit:

http://prophecyplat.com/news_2012_june18_prophecy_platinum_announces_res...

The Extortion Racket Shifts to Spain

Posted: 24 Jul 2012 08:38 PM PDT

Wolf Richter   www.testosteronepit.com

After 21 summits to save the euro, followed by dog-and-pony shows to calm the markets, followed by confidence-inspiring pronouncements about insurmountable firewalls and pandemic structural reforms, the euro is in greater danger than ever before. After the last summit at the end of June, Spanish Prime Minister Mariano Rajoy walked away with a victory smile, and Italian Prime Minister Mario Monti was so triumphant that it aggravated other heads of state. Now, Spain is on the brink. Its collapse would be so spectacular that people have stopped watching Italy for now.

Despite repeated assurances that Spain would not need a bailout, though it already accepted €100 billion to bail out its banks, rumors floated to the surface Monday that it would seek a bailout. The price: €300 billion. This would be the topic in Berlin on Tuesday where Spanish Economic Minister Luis de Guindos would meet German Finance Minister Wolfgang Schäuble, the lynchpin in any of this. True to Eurozone bailout form, de Guindos denied the rumors and emphasized again that Spain would not need a bailout.

Spain is desperate. Yields on 10-year bonds hit 7.5%, approaching the point where the high cost of borrowing would lock Spain out of the credit markets. But in October, €28 billion in government debt will come due. Hence de Guindos’ mission in Berlin.

But Tuesday morning, new rumors seeped out: de Guindos would push and shove Schäuble to allow the European Central Bank to buy Spanish debt in the secondary markets to force down yields and preserve Spain’s access to the markets. The government, with support from its triumvirate partners France and Italy, has been castigating the ECB that it wasn’t doing its job, which was to print money and buy sovereign bonds, something it had done before, but had inexplicably stopped in mid-March, and it fingered the behind-the-scenes culprit: Germany.

If de Guindos couldn’t persuade Schäuble to give in, “sources” of el Economista said, he would seek a temporary line of credit, not a bailout, to deal with Spain’s “temporary problems,” namely its maturing debt, funding its deficit, and bailing out its regions—Valencia, Murcia, and Catalonia already asked the central government for help. The line of credit would buy time—the mantra in all Eurozone bailouts. And if he couldn’t hoodwink Schäuble into agreeing to a line of credit, “sources” suggested that more “forceful measures” must be studied....

Default. Because Spain has no money to meet its upcoming obligations in October. Then there would be haircuts, the “sources” said. Dreadful words. It worked for Greece; it’s going to work for Spain. Given the amount of Spanish debt and related derivatives decomposing in closets of German banks, those words were a loaded gun to Schäuble’s head.

The extortion racket, perfected by successive Greek governments, has switched to Spain. But this alternative is so extreme, the sources said (thus putting the gun back into the holster for now), that it isn’t the most likely option. Nevertheless, Spanish Credit Default Swaps jumped 31 basis points to a record of 636.

Suddenly, plot twist. Meeting over, a new rumor bubbled up: the Germans wanted Spain to formally request a ... €300 billion bailout! It might fund Spain for a year and a half or so—to buy time. €100 billion would come from the current bailout fund, the EFSF—which would leave it with only €38 billion, after its commitments to Spain, Greece, Portugal, and Ireland, and possible commitments to Cyprus. €200 billion would come from the permanent but still non-existing bailout fund, the ESM; it’s still awaiting the rubber stamping by the German Constitutional Court. Apparently, de Guindos and Schäuble agreed that both funds could buy Spanish debt. Schäuble, however, didn’t yield on one item, despite the big gun to his head: the ECB would not buy Spanish bonds.

The conditions linked to the bailout package haven’t been determined yet. However “sources“ close to the government believed that no additional harsh conditions would be imposed due to the structural reforms announced two weeks ago and those already implemented—measures that have caused demonstrations and some violence across the country. And an utterly peaceful and tongue-in-cheek protest by naked Firefighters [I’m not kidding; check out the video.... Naked Firefighters Protest Salary Cuts].

Given how bailouts have gone so far, the combined €400 billion won’t be enough, and it will probably be clear that it won’t be enough before the ink on the deal is even dry. Just like Greece now needs a third bailout, which it is unlikely to get, Spain’s final bailout costs will be far larger than the €400 billion, and far larger than any of the prior bailouts. And then there’s Italy. Read.... But Who The Heck Is Going To Do All The Bailing Out?

The currency debasement fallacy

Posted: 24 Jul 2012 08:31 PM PDT

by Chris Marcus, Gold Money:

In Frédéric Bastiat's 1850 essay Ce qu'on voit et ce qu'on ne voit pas, the famous economist introduced the parable of the broken window. He illustrated the principle that intentionally breaking a window just so that someone can subsequently fix it did not actually represent an increase in the net wealth of an economy. Today we will examine a similarly misguided fallacy that has been the foundation of an equally disastrous pattern of economic policy. We will call this the fallacy of the debased currency.

It is accepted by the vast majority of economists and, more importantly, politicians that currency debasement is a desirable weapon to be used to combat recessions. In the last few years printing money for deficit financing has become normal in Europe and America. Moreover, many take the view that currency debasement can serve as a means of increasing exports. In the past year the Swiss and Japanese have intervened to weaken their currencies as they rose in response to US dollar and euro weakness. This was done in order to promote exports. And while the Federal Reserve and European Central Bank have been less explicit in linking money printing to boosting exports, they are just as eager to reap the same supposed gains. President Obama's 2010 State of the Union pledge to double exports in five-years, QE1, QE2, Operation Twist Part 1, Operation Twist Part 2, and a perpetual zero-interest rate policy are not unconnected.

Read More @ GoldMoney.com

It Is Absolutely Shocking How Much Gold China is Acquiring

Posted: 24 Jul 2012 08:00 PM PDT

from KingWorldNews:

Today Stephen Leeb told King World News, "… there is a controlled desperation in China when it comes to acquiring gold." Leeb, who is Chairman of Leeb Capital Management, also said, "They are acquiring as much as they possibly can without tilting the markets dramatically to the upside."

The acclaimed money manager also stated, "China mined a total of 355 tons, which was by far the largest amount of gold mined for any country. And yet they are still buying every single available ounce they can get in the open market." Leeb was also quick to point out the strength gold is displaying, "Today we have global stock markets under significant pressure, the US dollar breaking out on the upside, and yet gold is holding firm."

Here is what Leeb had to say about what is happening with Europe, the Chinese and gold: "Europe is a mess and sooner or later the Europeans are going to have to come to grips with the dire situation they face. Yesterday, Moody's put the three AAA countries on credit watch, Germany, Luxembourg, and the Netherlands."

Stephen Leeb continues @ KingWorldNews.com

Global Financial Fraud Is WIN-WIN For Gold And Silver

Posted: 24 Jul 2012 06:46 PM PDT


The Special Inspector General for Tarp Issues a Wakeup Call … Lambasts the Government and the Banks

By George Washington on 07/23/2012, via Zero Hedge

The government's special inspector general in charge of oversight of the Troubled Asset Relief Program (the "TARP" bank bailouts) – Neil M. Barofsky – wrote a stunning editorial for Bloomberg yesterday, concluding:
Americans should lose faith in their government. They should deplore the captured politicians and regulators who distributed tax dollars to the banks without insisting that they be accountable. The American people should be revolted by a financial system that rewards failure and protects those who drove it to the point of collapse and will undoubtedly do so again.

Only with this appropriate and justified rage can we hope for the type of reform that will one day break our system free from the corrupting grasp of the megabanks.
See this for background.
This is not the statement of a raving blogger (although some of the best reporters write blogs) or a conspiracy theorist living in his mom's basement (even though some conspiracies are real).
This is the former government official who oversaw the bailouts.
========================

And just where did all that TARP money go?
Interest Or No Interest On Excess Reserves, That Is The Question

by Dave in Denver, The Golden Truth



For what it's worth, there is an enormous amount of interference in the gold and silver share market. I think that will end as soon as gold and silver break their highs. When that happens, I think it's going to unleash a rally in these stocks that is absolutely going to stun people. People will be shocked that don't understand the full extent of the manipulation and how cheap these stocks have become as a result of it. - John Embry on King World News LINK
Before I delve into "excess reserves" held at the Fed by banks, I wanted to post two more indicators that confirm my thesis that our economy is pretty much in "plunge" mode. First, the Richmond Fed released its regional manufacturing index, considered a good proxy for the national economy. It plunged from -3 last month to a reading of -17 for July. The incompetent economists on Wall Street were expecting a reading of -1. Every sub-component of the index was horrific. You can read the details here: LINK


Second, Cisco released its Q2 guidance yesterday. It significantly lowered its expectations, said the outlook for the global economy looks grim and announced it will cut 1,300 jobs: LINK Cisco's stock price is down 6% as I write this. With regions in Italy and Spain now in insolvency and 3 large California cities in bankruptcy, with more to follow there and across the U.S., if Bernanke does not open up the liquidity floodgate again, he is going to be tagged as making the same mistake the Fed made in the early 1930's - a decision of which he claims to be an expert - in causing the Depression. Even more profound, he'll hand the Presidency to Romney. Note: Bernanke is a Democrat and, given his background, he likely despises hardcore Christian sects.


Now for the debate on cutting the interest rate on the excess reserves held by banks at the Fed. I will try to be concise as possible. First, bank excess reserves held at the Fed are bank funds - in excess of Fed capital ratio requirements - which banks keep on "reserve" at the Fed for lack of something better to do with them. Currently the Fed is paying banks .25% in interest on these reserves (IOER - interest on excess reserves). A big debate has erupted over this policy, as critics contend it's keeping banks from lending out that money into the financial/economic system. Defenders of the IOER policy say that because the Fed/bank money system is "a closed system," whether or not the Fed pays IOER is irrelevant other than as a monetary tool to regulate the Fed funds rate.


This article, if you are interested, does a good job of explaining why it is said that the Fed/banking system is "a closed system:" LINK, but you can ignore the part where Stella defends the current IOER policy. And my friend and colleague wrote an excellent piece yesterday that explains why the argument being served up in the media both for and against IOER is disingenuous and flawed: LINK In fact, I didn't really care about the whole issue until Jesse and I started emailing back and forth in depth about the topic.


Let's strip away the Orwellian gobbledygook being served up by lousy economists and retarded financial TV show hosts and commentators. As Jesse wrote in his piece linked above, the IOER is nothing but a direct means of pumping liquidity into the banks. And where did the ER come from? The excess reserves were created by the massive TARP and QE programs. TARP is directly from the Government and the assets purchased by the Fed under QE are guaranteed in value by the Treasury. In other words, the $1.46 trillion in bank excess reserves sitting at the Fed is YOUR money. So the banks are being given a nice liquidity injection from IOER using YOUR capital. Thank you Bernanke, Geithner and Obama (and Paulson and Bush).


Now to the issue of whether manipulating IOER will stimulate bank lending. The answer is yes, but not to the private sector economy. Think about it this way: given what we know about the economic prospects of this country, would you lend money to a new Mercedes Benz dealership, a new shopping mall development or to build a new Cisco manufacturing plant? No. So why would we expect the banks to do that? Taking the IOER to zero or negative will absolutely not stimulate lending to the private sector UNLESS there are loan opportunities that make sense from a risk/return standpoint. On this basis, the .25% IOER is irrelevant because a bank can make several percentage points more in interest if it could find risk/return worthy lending projects. Banks are still lending to homebuyers, but that's because ultimately that loan is being guaranteed by the Government/YOU. It's also not relevant as a tool to manage the Fed funds rate - the argument against cutting the IOER. As Jesse points out, IOER is irrelevant other than as a liquidity subsidy to the big banks. To that I add: using YOUR capital.


Now, if the Fed were to cut the IOER to zero or take it negative, it will increase bank lending to the Government via Treasury auctions. If the IOER goes to zero, the Fed will "force" a lot of that $1.46 trillion from the excess reserve account at the Fed and into the longer-maturity Treasury auctions. The Government will be funded through the election and beyond without the Fed having to increase the size of its balance sheet - that is, print money.


They say the devil's greatest trick is to make you think it doesn't exist. The second greatest trick - ironically by a surrogate devil, the Fed - is to finance the U.S. Government using your money and likely against your desires. Welcome to this country's transition to totalitarianism. Orwell smiles, Atlas shrugs.
=================

If this smells like a FRAUD to you, maybe that's because it is!  And of course we are to believe that this FRAUD is in our best interests as taxpayers and citizens of the USA...

Paul Craig Roberts: World financial system now can be sustained only by fraud

The Libor Scandal In Full Perspective

By Paul Craig Roberts
Institute for Political Economy
Thursday, July 19, 2012


The article about the Libor scandal, coauthored with Nomi Prins, received much attention, with Internet repostings, foreign translation, and video interviews. To further clarify the situation, this article brings to the forefront implications that might not be obvious to those without insider experience and knowledge.

The price of Treasury bonds is supported by the Federal Reserve's large purchases. The Federal Reserve's purchases are often misread as demand arising from a "flight to quality" due to concern about the EU sovereign debt problem and possible failure of the euro.
Another rationale used to explain the demand for Treasuries despite their negative yield is the "flight to safety." A 2% yield on a Treasury bond is less of a negative interest rate than the yield of a few basis points on a bank CD, and the US government, unlike banks, can use its central bank to print the money to pay off its debts.
It is possible that some investors purchase Treasuries for these reasons. However, the "safety" and "flight to quality" explanations could not exist if interest rates were rising or were expected to rise. The Federal Reserve prevents the rise in interest rates and decline in bond prices, which normally result from continually issuing new debt in enormous quantities at negative interest rates, by announcing that it has a low interest rate policy and will purchase bonds to keep bond prices high. Without this Fed policy, there could be no flight to safety or quality.
It is the prospect of ever lower interest rates that causes investors to purchase bonds that do not pay a real rate of interest. Bond purchasers make up for the negative interest rate by the rise in price in the bonds caused by the next round of low interest rates. As the Federal Reserve and the banks drive down the interest rate, the issued bonds rise in value, and their purchasers enjoy capital gains.
As the Federal Reserve and the Bank of England are themselves fixing interest rates at historic lows in order to mask the insolvency of their respective banking systems, they naturally do not object that the banks themselves contribute to the success of this policy by fixing the LIbor rate and by selling massive amounts of interest rate swaps, a way of shorting interest rates and driving them down or preventing them from rising.
The lower is Libor, the higher is the price or evaluations of floating-rate debt instruments, such as CDOs, and thus the stronger the banks' balance sheets appear.
Does this mean that the US and UK financial systems can only be kept afloat by fraud that harms purchasers of interest rate swaps, which include municipalities advised by sellers of interest rate swaps, and those with saving accounts?
The answer is yes, but the Libor scandal is only a small part of the interest rate rigging scandal. The Federal Reserve itself has been rigging interest rates. How else could debt issued in profusion be bearing negative interest rates?
As villainous as they might be, Barclays bank chief executive Bob Diamond, Jamie Dimon of JP Morgan, and Lloyd Blankfein of Goldman Sachs are not the main villains. The main villains are former Treasury Secretary and Goldman Sachs chairman Robert Rubin, who pushed Congress for the repeal of the Glass-Steagall Act, and the sponsors of the Gramm-Leach-Bliley bill, which repealed the Glass-Steagall Act. Glass-Steagall was put in place in 1933 in order to prevent the kind of financial excesses that produced the current ongoing financial crisis.
President Clinton's Treasury Secretary, Robert Rubin, presented the removal of all constraints on financial chicanery as "financial modernization." Taking restraints off of banks was part of the hubristic response to "the end of history." Capitalism had won the struggle with socialism and communism. Vindicated capitalism no longer needed its concessions to social welfare and regulation that capitalism used in order to compete with socialism.
The constraints on capitalism could now be thrown off, because markets were self-regulating as Federal Reserve chairman Alan Greenspan, among many, declared. It was financial deregulation–the repeal of Glass-Steagall, the removal of limits on debt leverage, the absence of regulation of OTC derivatives, the removal of limits on speculative positions in future markets–that caused the ongoing financial crisis. No doubt but that JP Morgan, Goldman Sachs and others were after maximum profits by hook or crook, but their opportunity came from the neoconservative triumphalism of "democratic capitalism's" historical victory over alternative socio-politico-economic systems.
The ongoing crisis cannot be addressed without restoring the laws and regulations that were repealed and discarded. But putting Humpty-Dumpty back together again is an enormous task full of its own perils.
The financial concentration that deregulation fostered has left us with broken financial institutions that are too big to fail. To understand the fullness of the problem, consider the law suits that are expected to be filed against the banks that fixed the Libor rate by those who were harmed by the fraud. Some are saying that as the fraud was known by the central banks and not reported, that the Federal Reserve and the Bank of England should be indicted for their participation in the fraud.
What follows is not an apology for fraud. It merely describes consequences of holding those responsible accountable.
Imagine the Federal reserve called before Congress or the Department of Justice to answer why it did not report on the fraud perpetrated by private banks, fraud that was supporting the Federal Reserve's own rigging of interest rates (and the same in the UK.)
The Federal reserve will reply: "So, you want us to let interest rates go up? Are you prepared to come up with the money to bail out the FDIC-insured depositors of JPMorganChase, Bank of America, Citibank, Wells Fargo, etc.? Are you prepared for US Treasury prices to collapse, wiping out bond funds and the remaining wealth in the US and driving up interest rates, making the interest rate on new federal debt necessary to finance the huge budget deficits impossible to pay, and finishing off what is left of the real estate market? Are you prepared to take responsibility, you who deregulated the financial system, for this economic armageddon?
Obviously, the politicians will say NO, continue with the fraud. The harm to people from collapse far exceeds the harm in lost interest from fixing the low interest rates in order to forestall collapse. The Federal Reserve will say that we are doing our best to create profits for the banks that will permit us eventually to unwind the fraud and return to normal. Congress will see no better alternative to this.
But the question remains: How long can the regime of negative interest rates continue while debt explodes upward? Currently, everyone in the US who counts and most who don't have an interest in holding off armageddon. No one wants to tip over the boat. If the banks are sued for damages and lack the money to pay, the Federal Reserve can create the money for the banks to pay.
If the collapse of the system does not result from scandals, it will come from outside. The dollar is the world reserve currency. This means that the dollar's exchange value is boosted, despite the dismal economic outlook in the US, by the fact that, as the currency for settling international accounts, there is international demand for the dollar. Country A settles its trade deficit with country B in dollars; country B settles its account with country C in dollars; and so on throughout the countries of the world.
For whatever the reason–perhaps to curtail their accumulation of suspect dollars or to bring Washington's power to an end–the BRICS countries, Brazil, Russia, India, China, and South Africa, are agreeing to settle their trade between themselves in their own currencies, thus abandoning the use of the dollar.

The New Economic Collapse Video: It makes uncomfortable but urgent viewing

Posted: 24 Jul 2012 06:24 PM PDT

When Casey Research Chief Technology Investment Analyst Alex Daley met former Reagan Budget Director David Stockman to talk about the economy and where he sees it leading taxpayers investors and savers in the near future, he got some very intriguing insights from a man who served right at the heart of the US federal government. [...]


The Silver and Gold Price are Sitting at the Bottom of Correction Ranges This is as Low Risk as it Gets

Posted: 24 Jul 2012 06:07 PM PDT

Gold Price Close Today : 1575.80
Change : -1.30 or -0.08%

Silver Price Close Today : 2679.0
Change : -22.9 or -0.85%

Gold Silver Ratio Today : 58.820
Change : 0.450 or 0.77%

Silver Gold Ratio Today : 0.01700
Change : -0.000131 or -0.77%

Platinum Price Close Today : 1382.30
Change : 3.50 or 0.25%

Palladium Price Close Today : 562.25
Change : 5.55 or 1.00%

S&P 500 : 1,338.31
Change : -12.21 or -0.90%

Dow In GOLD$ : $165.52
Change : $ (1.21) or -0.73%

Dow in GOLD oz : 8.007
Change : -0.059 or -0.73%

Dow in SILVER oz : 470.97
Change : 0.14 or 0.03%

Dow Industrial : 12,617.32
Change : -104.14 or -0.82%

US Dollar Index : 84.00
Change : 0.296 or 0.35%

Five day GOLD PRICE chart appears to have troughed yesterday about $1,563. Today gold lost a cosmetic $1.30 to close Comex at $1,575.80, but the aftermarket is gainsaying that at $1,581. Once again, this gives me no change to report. However, chart says that if the GOLD PRICE can break through its 20 DMA (1,583) it ought to race toward the top bound of that even-sided triangle ($1,610). 50 DMA, too, stands nearby at $1,586.51. Gold must hold the line at $1,560 or be o'errun by hordes of barbarian hedge funds and Nice Government Men.

The SILVER PRICE barely moved today, 2716 cents to 2662c. Closed Comex, that international paragon of exchange traded integrity, at 2679c, down 22.9c. For SILVER 2660c is the last ditch. Today kept silver above the rising triangle boundary.

Folks, I live with the possibility that the SILVER and GOLD PRICE might see another deeper break here, but I think not. Once they work their muddy path through August, a rally is coming, unless an all out international financial panic bites down. Even then, exactly how long (I wonder) will it take folks to grasp that the dollar and it's scrofulous fiat counterparts are no "safe haven" but gold (and silver) are.

There's always risk whenever you buy, but right now both metals are sitting near the bottom of their correction ranges. That's about as low risk as you get for anything in a continuing bull market.

Here's something y'all can mark down in that little book you carry with you. When day after day a market makes new highs or new lows, a whistle is blowing, warning that this won't persist much longer. Oh, it might continue a month or longer, but the message remains, "Reversal approacheth."

What makes me say these things? Yield on US treasuries hit another record low today (= bonds made a new high). As part of the same package, the euro made another new low today. Six months from now, these will be dim memories.

Trouble is, when the dollar breaks and confidence in US Treasuries as a (har-de-har-har) "safe haven," panic's liable to be coursing through the whole universe.

BWDIK, just a natural born fool from Tennessee, sitting up on a ridge suspecting everybody and everything.

Controlling my mentation about the US dollar is the presupposition that criminal central bankers conspire to manipulate exchange rates, and more than all else except a fat retirement check, they want stability. Don't let anything move too far or too fast.

So I was fiddling around with a pencil today, 'cause I have noticed that the dollar trades roughly around 80 eurocents and the yen around 80 to the dollar. Then my mind recurred to all those exchange rate bands central bankers love to play with, keeping one currency within some announced exchange rate range.

So my pencil wrote down 80 cents and added and subtracted a 2.5% band on either side: 82 cents at 78 cents. Hmmm. Yen is today at Y78.17=US$1.

Then my pencil wrote 80 cents and banded it by 5%: 84 at 76, or, for euros in terms of dollars, $1.1905 at $1.3158.

Upshot is that I suspect the central banking criminals will intervene strongly in behalf of the euro and against the US$ if the euro threatens to drop beneath $1.1905. Likewise, the miscreant banksters will intervene against the yen and for the dollar at any dollar value higher than Y82 (122c/Y100).

Leastways, that's what I'd do in their shoes, if I wore them shiny, pointy-toe Eyetalian shoes, but I go barefoot.

TODAY that US dollar index threatened to break the leash of 84 again, closing at 83.998, up 29.6 basis points or 0.38%. High came at 84.10. If the Nice Government Men and international central bank criminals cannot keep the dollar below 84, they will find themselves in boiling oil and habañeros. Panic could easily float the Samolean up to 90, and the consternation and commotion would become general to the whole world.

Euro made and closed at a new low, $1.2062, down 0.48% on the same old news we've been hearing two years, "euro is falling apart."

Meanwhile the yen closed higher for the 5th straight day, edging up 0.23% to 127.90c (Y78.17). This takes it through, but barely, the downtrending fan line. If the yen doesn't reverse, it will sprint for 128.75 and higher.

Moody's altered credit outlook for Germany, Holland, and Luxembourg (where's THAT?) to negative. This is all as ridiculous, as me trying to sing Grand Opera. Strong as Germany looks compared to the rest of Europe, it's broken-legged in real terms, burdened with government debt, social costs, and rotten banks. Comparing Germany to the rest of Europe is like comparing the US to California. It looks good till you look closer. The entire world economy has been hollowed out by the looney Keynesian dogma that countries and businesses can borrow and spend their way into prosperity.

Dow in Gold Dollars (DiG$) today punched through the lower boundary of its diamond formation and hit the 50 DMA (G$164.34 or 7.95 oz). Diamonds are notoriously slow to resolve, but this one has internal support around that 50 DMA, say, G$161.25 (7.80 oz). Close below that might be the straw that breaks Bernanke's back.

Stocks began the day underwater and kept sinking, floating slightly toward days end -- probably just the NGM tidying up loose ends before they race home for their preprandial martini.

Dow slipped 104.14 (0.82%) to 12,617.32. Today's low at 12,522 pretty much marks the point where stocks fall off the cliff. S&P500, too, abated 12.21 (0.9%), and it appears to me it is already hanging on the edge of that cliff. I'd be surprised if the S&P500 didn't roll on over that cliff tomorrow.

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

- Franklin Sanders, The Moneychanger
The-MoneyChanger.com
1-888-218-9226
10:00am-5:00pm CST, Monday-Friday

© 2012, The Moneychanger. May not be republished in any form, including electronically, without our express permission.

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

WARNING AND DISCLAIMER. Be advised and warned:

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

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

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

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

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

One final warning: NEVER insert a 747 Jumbo Jet up your nose. No, I don't.

David Stockman: "The Capital Markets Are Simply A Branch Casino Of The Central Bank"

Posted: 24 Jul 2012 05:48 PM PDT

A selected excerpt by David Stockman from his just released interview with Alex Daley of Casey Research:

This market isn't real. The two percent on the ten-year, the ninety basis points on the five-year, thirty basis points on a one-year – those are medicated, pegged rates created by the Fed and which fast-money traders trade against as long as they are confident the Fed can keep the whole market rigged. Nobody in their right mind wants to own the ten-year bond at a two percent interest rate. But they're doing it because they can borrow overnight money for free, ten basis points, put it on repo, collect 190 basis points a spread, and laugh all the way to the bank. And they will keep laughing all the way to the bank on Wall Street until they lose confidence in the Fed's ability to keep the yield curve pegged where it is today. If the bond ever starts falling in price, they unwind the carry trade. Then you get a message, "Do not pass go." Sell your bonds, unwind your overnight debt, your repo positions. And the system then begins to contract... The Fed has destroyed the money market. It has destroyed the capital markets. They have something that you can see on the screen called an "interest rate." That isn't a market price of money or a market price of five-year debt capital. That is an administered price that the Fed has set and that every trader watches by the minute to make sure that he's still in a positive spread. And you can't have capitalism if the capital markets are dead, if the capital markets are simply a branch office – branch casino – of the central bank. That's essentially what we have today.

From Casey Research

The New Economic Collapse Video: It makes uncomfortable but urgent viewing.

When Casey Research Chief Technology Investment Analyst Alex Daley met former Reagan Budget Director David Stockman to talk about the economy and where he sees it leading taxpayers investors and savers in the near future, he got some very intriguing insights from a man who served right at the heart of the US federal government.

True, some if it makes for uncomfortable watching, but the message is critical if you want to keep your assets safe in what David calls calls "the great unwind."

Watch the video and secure your money.

 

Full Transcript:

Interviewed by Alex Daley, Chief Technology Investment Strategist, Casey Research

Alex Daley: Hello. I'm Alex Daley. Welcome to another edition of Conversations with Casey. Today our guest is former Reagan Budget Director and Congressman David Stockman. Welcome to the show, David.

David Stockman: Glad to be here.

Alex: So we're here in Florida talking at the Recovery Reality Check Casey Summit. What do you think: is the United States economy on the road to recovery?

David: I don't think we are at the beginning of the recovery. I think we are at the end of a disastrous debt supercycle that has gone on for the last thirty or forty years, really. It started when Nixon defaulted on our obligations under Bretton Woods and closed the gold window. Incrementally, year after year since then, we have been going in a direction of extremely unsound money, of massive borrowing in both the private and the public sector. We now have an economy that is saturated with debt: $54 trillion or $53 trillion – 3.5 times the GDP – way off the charts from where it was for a hundred years prior to the beginning of this. The idea that somehow all of that debt is irrelevant, as the Keynesians would tell us, is fundamentally wrong – and the reason why the economy can't get up off the mat.

We're doing all the wrong things. We're adding to the problem, not subtracting. We are not allowing the debt to be worked down and liquidated. We're not asking people to save more and consume less, which is what we really need to do. And so therefore I think policy is just making it worse, and any day now we will have another recurrence of the kind of economic crisis we had a few years ago.

Alex: You paint a very stark picture, but if people just stop spending, start saving, won't companies like Apple see their earnings hurt? Won't the stock market then start to tumble, people's net worth fall? Isn't that a negative cycle that feeds on itself?

David: Sure it does, but you can't live beyond your means because it's pleasant. It's not sustainable. Clearly the level of debt that we have is not sustainable. We have a whole generation – the Baby Boom – that's about ready to retire, and they have no retirement savings. We have a federal government that is bankrupt, literally. Its [debt is] $16 trillion and growing by a trillion a year. Something's going to give. We can't pay for all these entitlements. There won't be the revenue generation in the economy to do it.

So as a result of that, we are deluding ourselves if we think we can just continue to spend. Look at the GDP that came out in the first quarter of this year. It was only 2.2%. Most of it was personal consumption expenditure, and half of that was due to a drawdown of the savings rate, not because the economy was earning more income or generating more real output. It was because of a drawdown of savings. That is exactly the wrong way to go – an indication of how severe the crisis is going to be.

I'm not saying the economy should stop spending entirely. I'm only saying you can't save 3% of GDP and spend 97% if you are going to get out of this fix. As the savings rate goes up both in the public sector (which means reduction of spending and the deficit) and the household sector (to seriously reduce debt burden, which has not really happened) we are going to, on the margin, spend less, save more. It will slow down the economy. It will undermine profits, I agree. But profits today are way overstated. They're based on a debt-bloated economy that isn't sustainable.

Alex: So we can only live beyond our means for so long, as any family knows.

David: Yes.

Alex: Now, the government can reduce its expenses at any time by simply reducing spending, and it can reduce debt if it brings in more tax revenue. That's austerity – I think that's how they refer to it. But won't austerity cause massive joblessness? Won't there be millions more people in this country not receiving a paycheck?

David: Yes, but the critique, the clamoring and clattering that you hear from the Keynesians (or even mainstream media, which is pretty clueless economically) that austerity is bad forgets the fact that austerity isn't an elective course. Austerity is something that happens to you when you're broke. And yes, it is painful and spending will go down and unemployment will go up and incomes will be impaired, but that is a consequence of the excess debt creation that we've had for the last thirty years. So austerity is what happens when you break the rules.

And somehow we have this debate going on. They're making a mistake. They chose the wrong strategy. Do you think Greece chose the wrong strategy with austerity? No. No one would lend them money. That's why they ended up in the place they were. Do you think that Spain today is teetering on the brink because they said, "Oh, wouldn't it be a good idea to have austerity?" No, they had a gun to their head. They were forced to do this because the markets would not continue to lend, and even now their interest rate is again rising. The markets are losing confidence, and unless the ECB prints some more money and bails them out some more, they are going to have austerity. So the austerity upon us is the backside of the debt supercycle we had for the past thirty years. It's not discretionary.

Alex: Austerity hasn't been forced upon us yet. The dollar is up, people are continuing to buy Treasuries – both nations and banks are buying Treasuries. To all extents and purposes, people are continuing to show massive confidence in the US government, lend it money at extremely cheap interest rates, and letting it build up its debt.

So you are advocating that, unlike Greece or Spain taking it to the edge and having austerity forced on them, we should volunteer for austerity today? Instead of just kicking the can down the road and living high a little bit longer, until the bill collectors finally come knocking? Why go today, why start austerity now instead of doing what Greece did and going as long as you possibly can?

David: Because Greece is a $300 billion economy. Tiny. A rounding error in the great scheme of things. It's Рlast time I checked Рabout eight and a half months' worth of Walmart sales. Okay? That's a little different than when you have the $15 trillion heartland of the world economy, and the $11 trillion Treasury market which is at the center of the whole global financial system buckle and falter. That's the risk you're taking if you say, "Ma̱ana. Kick the can; let's just wait for something good to happen."

This market isn't real. The two percent on the ten-year, the ninety basis points on the five-year, thirty basis points on a one-year – those are medicated, pegged rates created by the Fed and which fast-money traders trade against as long as they are confident the Fed can keep the whole market rigged. Nobody in their right mind wants to own the ten-year bond at a two percent interest rate. But they're doing it because they can borrow overnight money for free, ten basis points, put it on repo, collect 190 basis points a spread, and laugh all the way to the bank. And they will keep laughing all the way to the bank on Wall Street until they lose confidence in the Fed's ability to keep the yield curve pegged where it is today. If the bond ever starts falling in price, they unwind the carry trade. They unwind the repo, because then you can't collect 190 basis points.

Then you get a message, "Do not pass go." Sell your bonds, unwind your overnight debt, your repo positions. And the system then begins to contract – exactly what happened in September and October of 2008. Only, that time it was an unwind to the repo on mortgage-backed securities and CDOs and so forth. That was a minor trial run for the great unwind that is going to happen when the Treasury market is finally shattered with a lack of confidence because, on the margin, no one owns a Treasury bond: they just rent it on borrowed money. If the price starts falling, they'll get out of that trade as fast as they got out of toxic CDOs.

Alex: So when people run away from the US, they will run away all at once.

David: Well, if they run away from the Treasury, it sends compounding forces of contagion through the entire financial system. It hits next the MBS and the mortgage market. The mortgage market then scares the hell out of people about the housing recovery, which hasn't happened anyway. And if there isn't a housing recovery, middle-class Main-Street confidence isn't going to recover, because it is the only asset they have, and for 25 million households it's under water or close to under water.

Alex: We saw something much like that in 2008. All the markets correlated. Stocks went down. Bonds went down. Gold went down with them. It sounds like what you're saying is that the Fed is effectively paying bankers to stay confident in the Fed, and that the moment that stops – either because the Fed stops paying them or something else shakes their confidence – this all goes down in one big house of cards?

David: Yes, I think that's right. The Fed has destroyed the money market. It has destroyed the capital markets. They have something that you can see on the screen called an "interest rate." That isn't a market price of money or a market price of five-year debt capital. That is an administered price that the Fed has set and that every trader watches by the minute to make sure that he's still in a positive spread. And you can't have capitalism if the capital markets are dead, if the capital markets are simply a branch office – branch casino – of the central bank. That's essentially what we have today.

Alex: Last night you told our audience that if you were elected president, the first thing you would do is quit. Or at least demand a recount, I believe were your words, which I thought was telling. Are you saying there are no policy changes we could make today that would get us out of this? Or at least that wouldn't get you assassinated?

David: Yeah, there is a paper blueprint. People who believe in sound money and fiscal responsibility, that you create wealth the old-fashioned way through savings and work and effort and not simply by printing money and trading pieces of paper – there is a plan that they could put together. One would be to put the Fed out of business. You don't have to "end the Fed," although I like Ron Paul's phrase. You have to get them out of discretionary, active, day-to-day meddling in the money markets. Abolish the Open Market Committee.

The Fed has taken its balance sheet to $3 trillion. That's enough for the next 50 years. They don't have to do a damn thing except maybe have a discount window that floats above the market, and if things get tight, let the interest rate go up. People who have been speculating will be carried out on a stretcher. That's how they used to do it. It worked prior to 1914. That's the first step: abolish the Open Market Committee. Abolish discretionary monetary policy.

Let the Fed, if you're going to keep it – I don't even know that you need to do that, but if you are going to keep it – be only a standby source. As Badgett said (Walter Badgett, the great 19th-century British financial thinker): provide liquidity at a penalty rate to sound collateral.

Now, that's what J.P. Morgan did in 1907, in the great crisis of 1907, from his library. He didn't have a printing press. He didn't bail out everybody. He didn't do what Bernanke did and say: "Stop the presses, freeze everybody, and prop up Morgan Stanley and Goldman Sachs and all the rest of the speculators." The interest rate, the call-money interest rate, which was the open-market interest rate at the time, some days went to 30, 40, 70% – and they were carrying out the speculators left and right, liquidating margin debt, taking out the real estate speculators. Eight or ten railroads went bankrupt within a couple of months. The copper magnates got carried out on their shields.

This is the only way a capital market can work, but it needs an honest interest rate. And we have no interest rate, so therefore we solve nothing and we have the kind of impaired, incapacitated markets that we have today. They're very dangerous, because they're all dependent on twelve people. It is what I call "the monetary Politburo of the Western world," and they are just as dangerous as the Politburo in Beijing or the Politburo of memory in Moscow.

Alex: A twelve-person Open Market Committee determining the future of our economy by manipulating rates. Sounds like central planning to me.

David: It is. They are monetary central planners who are attempting to use the crude instrument of interest-rate pegging and yield-curve manipulation and essentially buying debt that no one else would buy, in order to keep this whole system afloat. It's Ponzi economics. Anybody who had financial training before 1970 would instantly recognize this as Ponzi economics. It is only because of the last twenty years we got so inured to prosperity out of the end of a printing press and massive incremental debt that people lost sight of the fundamental principles of sound money, which, there's nothing arcane about it. It's just common sense. It is not common sense to think that 50, 60, 70% of all the debt that's being created by the federal government can be bought by the Federal Reserve, stuffed in a vault, and everybody can live happily ever after.

Alex: So the government has certainly put us in a precarious position, but I don't think they alone have put America in this position, have they? You mentioned consumer debt becoming a major burden on the economy. How do we shed ourselves of that? I mean, the federal government can repudiate its debts if we walk away from it. We might see a few wars or something from that. It could inflate its way out of it. It can tax its way out of it. But how do households get out from under the debt burden that they have today?

David: Well, it's very tough, and they were lured into it by bad monetary policy when Greenspan panicked in December 2000. The interest rate was 6.5%; we had an economy that was threatened by competitors around the world. We needed high interest rates, not low. He panicked after the dot-com crash, and as you remember in two years they took the interest rate all the way down to 1%, and they catalyzed an explosion of mortgage borrowing, which was crazy.

When they cut the final rate down to 1% in May, June 2003, in that quarter – the second quarter of 2003 – the run rate of mortgage borrowing was $5 trillion at an annual rate. That was nuts! There had never been even a trillion-dollar annual rate of mortgage borrowing previously. In that quarter the run rate was $5 trillion, 40% of GDP. Why? Because the Fed took the rate down to 1%. Floating-rate product got invented everywhere. Anybody that had a pulse was being given mortgage loans by the brokers. The mortgage brokers didn't have any capital or funding. They went to Wall Street. They got warehouse lines, and the whole thing got out of control. Millions of households were lured into taking on debt that was insane, and now we have a generation of debt slaves.

There are 25 million households in America who couldn't move if they wanted to, because their mortgages are under water. They cannot generate a down payment and the 5% or 6% broker fee that you need to move. So we've got 25 million households immobilized, paralyzed, and worried every day about when they are going to lose property, because of what the Fed did. It's a terrible indictment.

Alex: Mobility itself is the American dream, isn't it? It's the ability to pick up and find work and then move and do all that. So now we have people who are slaves to their debt. How do we get ourselves out of this? Is this just a matter of personal financial discipline? Is there a policy move that can happen?

David: It's policy. If we don't do something about the Fed, if we don't drive the Bernankes and the Dudleys and the Yellens and the rest of these lunatic money-printers out of the Federal Reserve and get it under the control of people who have at least a modicum of sanity, we are just going to bury everybody deeper.

It's unfortunate. The American people are as much a victim of the Fed's massive errors as anything else. People were not prudent when they took on debt at 100% of the peak value of their property at some moment in 2004 and 2005. They were lured into it. But now we're stuck with something that didn't need to happen.

Alex: The Federal Reserve was founded in 1914, and it saw America through World War I, World War II. It saw America through Vietnam, saw America through the biggest boom in the economic history of the world. Yet now, today, you are calling for the abolishment of the Fed. Wasn't the Fed here the entire time that America was a prosperous, growing, wealthy, technology-driven nation? What's changed?

David: The greatest period of growth in American history was 1870-1914 – the Fed didn't exist. Right after 1870, when we recovered from the Civil War we went back on the gold standard. It worked pretty well. World War I was a catastrophe for the financial system. The Fed financed it, but I don't give them any credit for that, okay? We shouldn't have been in that war. It was a stupid thing to get involved in. But once we got involved in it, the Fed printed money like crazy, it facilitated borrowing, set the groundwork for the boom of the 1920s and the collapse of the 1930s.

Even then though, we had great minds who coped with reality in a pragmatic way in the Fed. Even Marriner Eccles wasn't all that bad. He stood up to Truman in 1951, when Truman wanted to force the Fed to continue to peg interest rates at 2% or 2.5% when inflation was 5%. Then we had William McChesney Martin: brilliant, pragmatic. He wasn't some kind of gold-standard guy in a pure sense, but a pragmatic guy who understood that prosperity had to come out of private productivity, out of investment, out of risk-taking, and the Fed had to be very careful not to allow speculation to start or inflation to get ignited. In 1958, he invented the phrase, "The job of the Fed is to take the punchbowl away." And we had a small recession. Six months after the recession was over he was actually raising the margin rate on the stock-market loans in order to quell speculation, and raising interest rates so that the economy didn't start to inflate again.

Now that was the regime we had until, unfortunately, Lyndon Johnson came along with his "guns and butter," took William McChesney Martin down to the ranch, and beat the hell out of him and forced him to capitulate. But here's the point I would make: In 1960, at the peak of what I call the golden era – the twilight of fiscal and financial discipline – we had $30 billion on the balance sheet of the Fed. It had taken 45 years to build that up. Then, as they began to rapidly expand the balance sheet of the Fed during the inflation of the '70s and the '80s, even then it took us until September 2008 – the Lehman collapse – to get to $900 billion. Had the balance sheet only grown at 3%, which is what the capacity of the economy to grow, I think, really is, it would have been $300 billion, so they were overshooting.

Alex: We're three times where we should be.

David: Where we should have been by the Lehman crisis event. In the next seven weeks, this crazy lunatic who's running the Fed increased the balance sheet of the Fed by $900 billion, in seven weeks. In other words, they expanded the balance sheet of the Fed as rapidly in seven weeks as it had occurred during the first 93 years of its existence. And that's not all, as they say on late night TV: in the next six weeks they added another $900 billion. So in thirteen weeks they tripled the balance sheet of the Fed.

Alex: Wow, that's an incredible…

David: So no wonder we are in totally uncharted waters, and it's being run by people who are clueless as to how to get out of the corner they've painted this country into. They really ought to be run out of town on a rail.

Alex: I think you'd find that a lot of our viewers would agree with you on that one. You know, the average American is suffering. It looks like the average American is going to have to suffer more to get us out of this, but it seems like the only thing the Fed is interested in these days is propping up the stock market. Why is that? Where does that come from?

David: The Fed has taken itself hostage with this whole misbegotten doctrine of wealth effects, which was created by Greenspan. In other words, if we get the stock market going up and we get the stock averages going up, people feel wealthier, they will spend more. If they spend more, there is more production and income and you get a virtuous circle. Well, that says you can create wealth through speculation. That can't be true, because if it is true, we should have had a totally different kind of system than we've had historically.

So they got into that game, and then the crisis came in September, 2008. They panicked and pulled out the stops everywhere. As I said, tripled the balance sheet in thirteen weeks, [compared to what] they had done in 93 years. They are now at a point where they don't dare begin to reduce the balance sheet, begin to contract, or they'll cause Wall Street to go into a hissy fit. They are afraid to death of Wall Street going into a hissy fit, so essentially, the robots and the boys and girls and the fast-money traders on Wall Street run the Fed indirectly.

Alex: So, in the 1960s, the Fed is taking away the punchbowl. Sounds like in 2010 the Fed is the one adding the alcohol. They are afraid to stop, lest everybody riot.

David: Yes, they got the party going, and they're afraid to stop it. As a result of that you have a doomsday machine.

Alex: At some point we are going to be forced to stop. Market forces will kick in and Europe and China and India will stop lending us money.

David: Yes. As I say, when the crisis comes in the Treasury market, it will be the great margin call in the sky. They'll start unwinding all of the carry trades, all of the repo. Asset prices generally will be affected, because this will ricochet and compound through the system.

Alex: When does this happen?

David: People looked at the housing market and the mortgage market way back in 2003 – there were some smart people looking at this. They looked at the run rate of gross mortgage issuance, the $5 trillion I was talking about, and said: "This is insane, this is off the charts, this is so far beyond anything that has ever happened before, something bad is going to come of this." It's obvious, if you pour debt into markets… I mean a lot of people leveraged 98%, or whatever they were doing at the time with so-called mortgage insurance, and just high loan to value ratios. They were driving up prices, and so there was a housing-price boom going on. It was sucking the whole middle class into speculation. So that's the nature of the system, and now they don't know how to unwind it.

Alex: That's a pretty stark picture. So as an individual investor, what are we to do? How do we protect ourselves in this type of situation? Should I be owning bonds and staying out of stocks? Should I be owning stocks?

David: No, I would stay out of any security markets. These are unsafe markets at any speed. It's all tied together. As I was saying when the great margin call comes and they start selling the Treasury bond, they'll take everything else with it. Real estate is priced off Treasuries. Mortgaged-backed securities are priced off Treasuries. Corporates are priced off Treasuries. Junk bonds are priced off Treasuries. Everything. The stock market will go into a panic. We don't know when the timing will come – we've never been in a world where there is $15 trillion worth of central-bank balance sheets, like we have tod


Economic Countdown To The Olympics 5: Ten Olympic Trends

Posted: 24 Jul 2012 05:31 PM PDT

With the 302 events across 32 sports of the Olympics about to start (with early round soccer starting tomorrow), we conclude our five part (Part 1, Part 2, Part 3, and Part 4) series of posts bringing markets, economics, and sports together by looking at 10 exhibits that Goldman sees as describing how various aspects of the Olympics have evolved from the first modern Games in 1896 (where Greece won 46 medals compared to USA's 20) all the way to London 2012. From the monetary value of the distributed gold medals to the globalization of medal wins, the trends are analogous to the world's change but the full report attached provides some incredible interviews with many of the greatest Olympians ever with Michael Johnson reminding us that: "People are generally very fed up with political processes and the bickering that comes with it. You have some politicians with one particular set of ideas as to how to fix the problems and one with another set of ideas, and this continues to create a divide between people. The Olympic Games is the epitome of non-politicised activity. It's about coming together... and having the opportunity to put differences aside and get behind their country and the athletes who are representing them."

Trend 1: The Olympic Radar is Now Becoming Truly Global, Reaching EMs in Recent Times

 

Trend 2: Share of Women Athletes Has Been Rising and Will Likely Continue to Rise

 

Trend 3: Olympic Games Cover a Broad Set of Nations with Different Income Levels

 

Trend 4: Emerging Markets Now Win Half of All Olympic Medals, Reflecting their Growing Influence

 

Trend 5: Emerging Markets Have Become Leaders or Stronger Competitors in Many Sports

 

Trend 6: Split of Medals around the Globe is Moving Towards Emerging Economic Groups

 

Trend 7: Set of Olympic Sports Has Expanded and Changed Composition Through Time

 

Trend 8: Number of Medal Events Has Increased Markedly in Both the Olympics and the Paralympics

 

Trend 9: Monetary Value of Distributed Gold Medals Has Declined as Composition Effects Offset More Competitions

 

Trend 10: 'Olympic Economies', Constructed by Linking Host Countries, Grow Faster on Average

 

and full presentation is below:

GS the Olympics

 

Source: Goldman Sachs

The War on Silver

Posted: 24 Jul 2012 05:17 PM PDT

It has taken more than 25 years for me to fully comprehend a conclusion that I never wanted to reach, namely, that there is an organized war against the price of silver that has come to include the US Government. I think the US Government involvement came into being almost accidently, but even if it was an accident of sorts, that does not diminish the serious nature of what must be described as illegal activity at the highest levels. I am conflicted between feelings of sadness and outrage. Starting around 1985, I became convinced that the price of silver was being manipulated by collusive and concentrated short selling by certain commercial entities on the world’s leading precious metals commodity exchange, the COMEX. Having a background in futures trading going back to 1972, it dawned on me that the concentrated and orchestrated short selling was dominating and, therefore, manipulating the price of silver. The very first thing I did after this discovery was to pet...


Tony Blair: Don’t Hang Bankers

Posted: 24 Jul 2012 04:36 PM PDT

Mainstream economist Nouriel Roubini said recently:

Nobody has gone to jail since the financial crisis. The banks, they do things that are illegal and at best they slap on them a fine.  If some people end up in jail, maybe that will teach a lesson to somebody.  Or somebody hanging in the streets.

Former British prime minister Tony Blair – currently employed as a senior adviser to JP Morgan – said today:

We must not start thinking that society will be better off “if we hang 20 bankers at the end of the street” ….

Where’s all of this coming from?

The American government’s top official in charge of the bank bailouts writes:

Americans should lose faith in their government. They should deplore the captured politicians and regulators who distributed tax dollars to the banks without insisting that they be accountable. The American people should be revolted by a financial system that rewards failure and protects those who drove it to the point of collapse and will undoubtedly do so again.

 

Only with this appropriate and justified rage can we hope for the type of reform that will one day break our system free from the corrupting grasp of the megabanks.

Economics professor Randall Wray writes today:

Thieves … took over the whole economy and the political system lock, stock, and barrel. They didn’t just blow up finance, they oversaw the swiftest transfer of wealth to the very top the world has ever seen. They screwed workers out of their jobs, they screwed homeowners out of their houses, they screwed retirees out of their pensions, and they screwed municipalities out of their revenues and assets.

 

Financiers are forcing schools, parks, pools, fire departments, senior citizen centers, and libraries to shut down. They are forcing national governments to auction off their cultural heritage to the highest bidder. Everything must go in firesales at prices rigged by twenty-something traders at the biggest and most corrupt institutions the world has ever known.

 

***

 

I see two scenarios playing out. In the first, we allow Wall Street to carry on its merry way, as the foreclosure crisis continues and Wall Street steals all homes, packaging them into bundles to be sold for pennies on the dollar to hedge funds. All wealth will be redistributed to the top 1% who will become modern day feudal lords with the other 99% living at their pleasure on huge feudal estates.

 

***

 

That is the default scenario—the outcome that will emerge in the absence of action.

 

In the second, the 99% occupy, shut down, and obliterate Wall Street.

Economics professor Michael Hudson agrees … saying that the banks are trying to make us all serfs.

Top economists say that fraud caused the Great Depression and the current financial crisis, and that the economy will never recover until fraud is prosecuted.

Leading experts say that fraud is not only widespread, it is actually the business model adopted by the giant banks. See this, this, this, this, this and this.

Indeed, the big banks – with the help of the government  – have basically become criminal enterprises.   And yet the Bush and Obama administrations have made it official policy  not to prosecute fraud.

Economics professor Steve Keen says:

“This is the biggest transfer of wealth in history”, as the giant banks have handed their toxic debts from fraudulent activities to the countries and their people.

Nobel economist Joseph Stiglitz said in 2009 that Geithner’s toxic asset plan “amounts to robbery of the American people”.

That’s why people are so mad at bankers.

I noted 7 years ago: 

 I am NOT calling for the overthrow of the government. In fact, I am calling for the reinstatement of our government. I am calling for an end to lawless dictatorship and a return to the rule of law. Rather than trying to subvert the constitution, I am calling for its enforcement.

 

***

 

The best way to avoid all types of revolution would be for the government to start following the rule of law. I passionately hope it will do so.

The fact that even Tony Blair and Nouriel Roubini are talking about hanging bankers shows that this is the last chance for the justice system – the only thing which stands between criminals on Wall Street and pitchforks – to work.

The Economics of Silver

Posted: 24 Jul 2012 04:21 PM PDT

From the guys at Endeavour Silver, an educational video with lots of images of SILVER!


Gold goes where The Money is

Posted: 24 Jul 2012 04:08 PM PDT

Gold Switzerland


Do Gold, Silver Prices Fall, in a Shrinking, Debt-distressed World?

Posted: 24 Jul 2012 04:01 PM PDT

Gold Forecaster


The Seeds For An Even Bigger Crisis Have Been Sown

Posted: 24 Jul 2012 03:19 PM PDT

Part 1 of what became a two-part interview begins: "On occasion of the publication of his new gold report, Ronald Stoeferle talked with financial journalist Lars Schall about fundamental gold topics such as: "financial repression"; market interventions; the oil-gold ratio; the renaissance of gold in finance;"Exeter's Pyramid"; and what the true "value" of gold could actually look like.

20120724-Ronald-Stoeferle
Ronald Stoeferle, who is a Chartered Market Technician (CMT) and a Certified Financial Technician (CFTe), was born October 27, 1980 in Vienna, Austria. During his studies in business administration and finance at the Vienna University of Economics and the University of Illinois at Urbana-Champaign in the USA, he worked for Raiffeisen Zentralbank (RZB) in the field of Fixed Income / Credit Investments. After graduating, Stoeferle joined Vienna based Erste Group Bank (http://www.erstegroup.com), covering International Equities, especially Asia.

(Photo: Ronald-Peter Stoeferle, credit Gold Switzerland) 

In 2006 he began writing reports on gold. His five benchmark reports on gold such as "A Shiny Outlook" and "In Gold We Trust" drew international coverage on CNBC, Bloomberg, the Wall Street Journal and the Financial Times. Since 2009 he also writes reports on crude oil. The latest gold report by Stoeferle was published (July 11). (Ed. Note: the full report is available for subscribers in the Other Reports section of the GGR subscriber pages.)

 
The Seeds For An Even Bigger Crisis Have Been Sown

 

Lars Schall: What is "financial repression" according to Ronald Stoeferle?

Ronald Stoeferle: Financial repression is a perfidious form of redistribution. It always means a combination of incentives and restrictions for banks and insurance companies, which cause the investment universe to be substantially reduced for investors. This means that capital is channeled away from the asset classes that it would flow into in a more liberal environment.

Continued...

I sincerely believe that financial repression will continue to crop up in many shapes and sizes over the coming years. However, the long-term costs of the lack in efforts made towards consolidating national finances are substantial. While low bond yields in the short run suggest that the saving measures are on course, one has to bear in mind that this has mainly been achieved by market interventions.

Therefore, we regard the gradual transfer of assets as a disastrous strategy in the long run.

What happens is that none of the previous problems of misallocation are resolved, but instead redistribution takes place (at the beginning mostly invisibly) and problems are dragged out, having to be addressed later. As the dependence on these measures rises, so does the collateral damage to be expected later, and the seeds for an even bigger crisis have been sown. … 

Part 1 of this interview continues at the link below. 


Part 1 of Lars Schall interview of Ronni Stoeferle 
http://goldswitzerland.com/the-seeds-for-an-even-bigger-crisis-have-been-sown/

Part 2 is a follow up interview entitled: Gold goes where The Money is

The setup reads:  "In a follow-up interview related to his new gold report, commodity analyst Ronald Stoeferle discusses with financial journalist Lars Schall for MATTERHORN ASSET MGMT some more crucial points for a better understanding of the action in the gold pits. This time around they talk about, inter alia: "Resource Nationalization"; Peak Gold; the "Asian love affair with gold; and the "aurophobia" of certain old men in finance." 

Part 2 begins: Lars Schall: A lot of goldbugs are accused that they cheer about high gold prices while the whole world is in a mess. How do you feel about this, Mr. Stoeferle?

Ronald Stoeferle: To be honest, I would love to be bearish on gold. For this would mean that we'd have sound money, low debt levels, a solid financial system. I do not wish for prices at 10,000 per ounce. This would imply major (social) disruptions and the end of the world as we know it.

I really love this quote by Ayn Rand: "You can avoid reality. But you cannot avoid the consequences of avoiding reality." Therefore, we have to be realistic and admit that the (tail) risks we're facing are getting bigger and bigger from day to day.

L.S.: What has to be said about the US debt in relation to gold?

R.S.: I think that excessive structural debt suggests further increase of the gold price. A wrong diagnosis of causes leads to wrong solutions. The systemic problem is not low tax revenue, but excessive spending. Additional tax hikes will never consolidate the public budgets in the long run. This can only be achieved by structural reforms in the spending department.

According to Schlesinger saving is tantamount to holding back on consumption in the present in order to be able to consume more in the future. The opposite is true for credit, where today's benefit is bought with tomorrow's shortcoming.

Let me give you a few facts on the situation in the US:

• In fiscal 2011 public spending in the US amounted to USD 3,700bn, whereas revenues were falling short, at USD 2,400bn. Tax revenues covered only 65% of expenditure. Reinhart and Rogoff call this the "bang point", at which the confidence of creditors often tends to collapse.

• When including the debt and guarantees given by states, authorities, pension funds, etc., we find that the picture of excessive debt looks even more dramatic. According to Prof. Laurence Kotlikoff the fiscal gap, i.e. the financing gap between the present value of all future expenditure and all future tax revenues, amounts to at least USD 200,000bn

• Within the past twenty years debt has increased by 350%, while the interest burden has only risen by 60%. If interest rates were on a similar level as in 1991, interest paid would have increased to USD 1,200bn. According to the CBO, government debt will rise to USD 20,000bn by 2015. At an interest rate of 5%, interest payments would then amount to USD 1,000bn, or 45% of current tax revenues.

• Today, the USA has three times as many Treasury bonds outstanding as ten years ago. In the meantime, the average interest rate has fallen from 6.1% to 2%. Is that a logical development? Hardly, seeing as last year 61% of all bond issues were bought by the Federal Reserve. In 2008, it had been an insignificant percentage. This results, on the one hand, in an erroneous impression of high demand, and on the other hand, it downplays the urgency of slashing debt and getting structural reforms underway.

• The budget of the current fiscal year will produce a deficit of USD 1,300bn – an amount that would have exceeded the entire budget in 1990. During Barack Obama's term in office, public debt has increased by more than USD 5,000bn – the same amount of debt that had been amassed over a period of 211 years from George Washington's inauguration in 1789 to Bill Clinton's second term. The average deficit between 2000 and 2007 amounted to USD 174bn, while the annual shortfall has come to an average of USD 1,160bn since 2008.

Although we are currently faced with the highest level of public debt in times of peace, a far-reaching consolidation of public budgets does not seem to be up for discussion. The required grave cutbacks are being postponed, and the policy of "muddling through" is cheerfully continued. The longer structural and far-reaching reforms are postponed, the more substantial will be the need for adjustment and thus greater the burden on future generations.

According to the Austrian School of Economics every act of consumption has to be preceded by production first. "Debt is nothing but consumption brought forward which will then not take place in the future." There does not seem to be a painless therapy for these problems. I believe that gold is an effective medicine. Thus I expect interest rates to be kept low for an extensive period of time, and this in turn is one of the strongest arguments in favour of a rising gold price. –

Part 2 of this fascinating and timely interview continues at the link below.

Source: Gold Switzerland and Matterhorn Asset Management
http://goldswitzerland.com/gold-goes-where-the-money-is/

Thanks to our friend Chris Powell at GATA for calling our attention to the story. 

The Shift to a New Global Currency Alters International Relations

Posted: 24 Jul 2012 03:12 PM PDT

Synopsis: 

A new global currency threatens to alter the world balance of power.


By Marin Katusa, Chief Energy Investment Strategist

Last week I wrote about how Israel's newfound natural gas wealth is catalyzing a shift in Middle-Eastern relations. It was a topic that generated much discussion in our office – we knew that the Mediterranean Sea resource is highly significant for the Jewish state, which has long struggled with energy insecurity, but the deeper we delved into the issue the more we realized that Israel's new resource is already having wide global implications. In particular, we were very intrigued to realize just how cozy Russia and Israel are becoming – this being the same Russia that usually supports Iran and Syria, Israel's sworn enemies.

The article generated a fair bit of feedback from our readers as well, including several good questions. In answering the questions and in continuing to discuss the issues among ourselves, we placed Russia's advances on Israel as but one part of a shifting global web, wherein old allegiances are being dropped in favor of new friends with benefits. Those benefits are energy resources, and the race to control them is changing the way the world turns.

Dozens of countries are slowly altering their international allegiances because of energy considerations. Here I will shine a light on a few of the more significant transitions and how they might impact US and EU energy security.

Russia's Strategic Steps Toward Israel

I discussed this at some length last week, so rather than repeat myself I will just summarize the situation in order to address some questions that arose following that Dispatch. The gist of it is this: The Middle East has long been informally divided into two camps, with US allies such as Saudi Arabia, Egypt, and Qatar making up the camp that can get along with Israel, while Iran and Syria lead the group that cannot befriend the Jewish state. In a holdover from the Cold War, Russia has long backed the anti-Israel group, providing arms to Syria and support to the increasingly isolated Islamic Republic.

Now Israel, long the oil- and gas-poor brother in the squabbling Middle-Eastern family, has delineated trillions of cubic feet of offshore natural gas. It is hard to overstate the significance of this discovery. Instead of having to rely on a strained peace with Egypt for its natural gas, Israel now has far more natural gas than it can use – the country will be self-sufficient in terms of gas to generate electricity and will be able to fill its coffers with export revenues.

Israel's transition from a nation constantly in need of resources to one that could well play a major role in the global gas trade is earning it new respect. Greece and Cyprus are discussing paths for potential pipelines to Europe. Turkish leaders are likely kicking themselves for having destroyed what was a close friendship with Israel in recent years; now Turkey will have to sit on the sidelines and watch as Israel, Greece, and Cyprus work together to develop these gas riches. Egypt's Islamists, finally in power after decades of having to abide their nation's peace accord with Israel, have been stripped of the opportunity to cut off Israel's gas supplies – the Jewish state doesn't need Egyptian gas anymore. Syria and Lebanon, among others, are considering how to stake their claims on the gas bounty, which sits in waters laced with international boundaries.

And then there's Russia. Vladimir Putin's third official international trip after retaking the Russian presidency in May was to Israel. The two nations now share $3 billion in annual trade and considerable immigration. Arching over all those ties is the fact that, in the wake of the Arab Spring, Russia and Israel share an interest in preventing the rising tide of radical Islam.

The Russia just described sure doesn't sound like a very good friend to Iran, does it? But why the shift – is Russia that concerned about radical Islam? No, Putin has never cared much about religion; his decisions are always far more strategic than that. The reason is simple: Israeli gas.

That brings us to the most common question we were asked following last week's energy Dispatch: Why does Russia, a natural gas giant in its own right, want Israeli gas? To our questioners, you are absolutely right: Russia does not need any more gas for itself. Russia is home to one-quarter of the world's known natural gas resources, roughly 1,600 trillion cubic feet (TCF) according to the EIA. And that doesn't count potential reserves of unconventional gas. We think that all told, Russia may control as much as one-third of the world's natural gas.

Russia has gas. What Putin desperately wants is to maintain his country's stranglehold over European natural gas supplies.

Putin loves using control over resources to enhance Russia's power, and natural gas is a key part of his scheme – we dedicated an entire issue of the Casey Energy Report to this topic recently. It was only a few years ago that Russia cut off gas supplies to Europe for a few days in the middle of winter in order to punish Ukraine for siphoning fuel from Russian lines. Europe relies on Russia for 34% of its natural gas; Putin wants to increase that reliance. To that end, he has spent years building new pipelines to Europe that avoid transiting troublesome countries (i.e., Ukraine). As if controlling Europe weren't enough, Putin is also developing Russia's ability to sell gas to Asia by jumping into the liquefied natural gas (LNG) scene with new facilities in the Far East. And he's several steps ahead of the United States in this LNG game.

How does Israel factor in? Israeli gas could join the world market in two ways: through a pipeline to Europe running under the Mediterranean Sea (with a stopover in Cyprus); and/or as LNG, which would be sold to Europe and beyond. Both would turn the Jewish state into an unexpected competitor in Putin's plan to continue controlling European natural gas supplies. Since he can't prevent Israeli gas from flowing, Putin is trying to control where it flows and siphon off some of the profits.

That control is so important, it seems that Putin is considering coming out as a full-fledged friend of Israel. Such a move would almost certainly sever those long-time ties between Russia and Iran, but when the currency in question is energy then alliances formed over decades can change overnight. If Russia does take that strategic step away from Iran and toward Israel, it will rock the ever-delicate Sunni-Shiite balance in the Middle East… to what end is anyone's guess. As for whether Israel will reciprocate Russia's advances: never forget that Israel is a pragmatist nation, its very survival dependent on making strategic decisions. We would not be surprised to see the Jewish state playing both sides of the ex-Cold War game, if that's what makes sense for them.

Africa's New Best Friend

Late last week the news broke that China will lend $20 billion to African governments over the next three years. The funds will be directed at infrastructure and agriculture projects, but to anyone who views the world with an eye out for strategic resource relationships, the growing friendship between China and Africa is all about energy and minerals.

Specifically, China is cultivating the relationship very carefully in order to cement its role as Africa's best friend and top ally. Caring for Africa's needs puts China in a perfect place to negotiate resource deals with countries across the African continent – after all, aren't sharing and caring the first rules of friendship?

This isn't a new tactic – Chinese involvement in Africa has increased dramatically over the past decade. Today annual trade between the African continent and the People's Republic is worth more than $166 billion, a threefold increase since 2006. What is new in the relationship is China's new breadth and depth of caring. Until recently, most Chinese aid to Africa went to projects that were clearly designed to primarily benefit China's extractive industries on the continent, not Africa's people. To boot, Chinese laborers were brought to work on the projects, reducing the number of jobs available for Africans. The result: China was accused – by Africans and by international observers alike – of being dastardly self-serving in its African endeavors.

This has become particularly problematic in Angola, which has received more Chinese money than any other African nation. Angola is rich in oil, diamonds, gold, and copper, but a devastating 27-year civil war destroyed most of the country's infrastructure. China has been helping Angola rebuild by providing infrastructure-related loans in exchange for oil; bilateral trade between the countries topped $25 billion in 2010. But the projects, such as rebuilding the 840-mile Benguela Railway, are all designed to make it faster and easier for China to access Angola's resource wealth, and Chinese laborers are now a common sight in Angola. With jobs and resources ending up in Chinese hands, Angolans in recent years have started questioning whether China has their interests in mind at all.

Lopsided relationships like this are nothing new for Africa. From colonialism to aid dependency, Africa has been in a lopsided relationship with Europe for decades. However, it seems the continent has learned from the past and now wants to try to craft a deeper relationship with China... one that would hopefully result in a more sustainable partnership.

"Africa's past economic experience with Europe dictates a need to be cautious when entering into partnerships with other economies," said South African President Jacob Zuma at the recent Forum on China-Africa Cooperation in Beijing. He continued to say that China has demonstrated its commitment to Africa with investment and development aid and that Africans are generally pleased that they are treated as "equals" in the relationship. However, he cautioned that the trade balance "… is unsustainable in the long term."

It was seemingly in response to that worry that Chinese President Hu Jintao promised $20 billion in loans aimed at projects specifically not related to mining or oil. Instead, the money is earmarked for agriculture, manufacturing, education, safe drinking water, protected lands, and the development of small businesses.

Has the Chinese leadership suddenly taken to caring for the health, welfare, and economic prospects for the people of Africa? It might be nice to think so, but the truth is much more strategic: China realized that it needs to improve its standing in the hearts and minds of Africans if it wants to continue securing access to African oil, gas, and minerals. And it did so with a bang – the $20 billion pledged for the next three years is twice what China pledged for the last three-year period.

With a show of renewed friendship and caring, China will now go about seeking new resource deals to add to the plethora of extractive deals it has signed with African countries in recent years. In Nigeria, China is spending $23 billion to build three oil refineries and a fuel complex; the two countries are also building one of Africa's largest free-trade zones near Lagos, a $5-billion, 16,000-hectare project. In Sudan, where Darfur-related sanctions bar American companies from investing, China has invested billions in oil ventures and buys 90% of the country's oil exports. A billion dollars in bilateral trade between China and Mauritania revolve around oil; the magnitude of China's investment in the country has carried Sino-Mauritanian relations through two military coups in the last decade. In Botswana the expansion of the Morupule coal-fired power station is being funded through an $825-million Chinese loan, but that is only one of 28 infrastructure projects that China is backing in the country.

China has money, Africa has resources, and both have tainted views of many other global powers. It's a match made in heaven.

Asia Stakes a Claim on Canada

They came only a month apart: two multibillion-dollar offers from Asian energy giants to buy up Canadian oil and gas companies. The first was in late June, when Malaysian state energy company Petronas offered $5.5 billion in cash for Canadian natural gas producer Progress Energy Resources. The offer represented a 77% premium over Progress' closing price the day before the deal was announced and is the biggest deal to date for Petronas. Why did the Malaysian firm play such a huge hand? Because Progress has 1.9 trillion cubic feet of proved and probable gas reserves in British Columbia's Montney shale region, a massive resource that Petronas hopes to export to Asia asLNG.

News of the second deal broke just yesterday; the dollar size of the deal sent it reeling across business headlines around the world. China National Offshore Oil Company (CNOOC) is buying Canadian oil and gas producer Nexen (T.NXY) for $15 billion in cash. It is the largest investment China has ever made into Canada – its previous Canadian investments total $23 billion – and the offer represents a 66% premium to Nexen's 20-day volume-weighted average share price.

CNOOC wants Nexen for its diverse project portfolio – the company has operations in Colombia, Yemen, the North Sea, and the United States – but it is the company's Canadian projects that hold the vast reserves that China seeks. Nexen is only a mid-sized player in the Canadian oil sands, but it has 900 million barrels in proven oil reserves plus another 5.6 billion barrels of less-certain contingent resources. In addition, Nexen is on the cusp of producing from its significant shale gas reserves in BC. Between those two forays – oil sands and shale gas – Nexen has major exposure to two of the world's most rapidly growing, major energy sources.

New, fast-growing supplies are exactly what Asian energy giants need. In the race to secure oil and gas resources for the future, importers have to look beyond historic suppliers to new frontiers. Big oil reserves in historic producing countries are generally either state-owned and therefore closed to investment – examples include Saudi Arabia, Iran, Mexico, and Venezuela – or have already been staked out and carved up among domestic and international partners who aren't likely to give up an inch of their claim.

That means nations looking to buy up international oil and gas reserves have to look at newer regions – the oil sands, the Arctic, the shale fields of North America, the sub-salt oil riches off Brazil's coast, and the like. The risks and costs may be higher, but at least these regions still offer the opportunity to stake a claim on a massive resource. When it comes to the oil sands and the shale fields of British Columbia and Alberta, the fact that these massive resources are in western Canada – pretty darn close to the Pacific Ocean – makes the opportunity almost picture-perfect.

That is precisely why Asian energy giants are moving on Canadian oil and gas companies... though to be fair, they were invited to do so. Led by Prime Minister Stephen Harper, the Canadian government has been actively courting Asian investment for its energy riches; these two multibillion-dollar deals are the first fruits of that labor.

The growing, energy-based relationship between Asia and Canada represents a seismic shift for Canada, which until now relied on the United States market to buy almost all of its oil and gas. Today, southbound oil pipelines are almost at capacity and political theater is slowing the approval process for new lines to a snail's pace, just as production in the oil sands is set to ramp up. Similarly, shale gas discoveries across western Canada have delineated vast new reserves that are begging for new buyers.

Canada needs to diversify its export list if it wants to capitalize on its unconventional energy resource wealth. Asian nations, led by China, are racing to put down payments on the oil and gas deposits that will fuel their futures. Sure, Canada and Asia are in the honeymoon stage of a new relationship, with multibillion-dollar deals keeping things new and exciting. When CNOOC, Petronas, PetroChina, Mitsubishi, Korea Gas, and the other Asian energy firms pressing Canada to permit oil and gas pipelines to the west coast come up against regulatory roadblocks and popular opposition, the new relationship will get a real test.

For now, however, it looks like the United States is losing a race that it has always led – the competition for Canadian energy resources (it's especially losing out to China, whose purchases of North-American energy resources include a stake in a Texas oil shale project). Interestingly, this is happening a few short years after the army of oil refineries along the Gulf Coast spent billions upgrading their facilities to process heavy oil in preparation for an onslaught of Canadian oil sands bitumen. If Asia beats out the US for access to Canadian oil, US refiners will be left paying a premium for heavy oil from other suppliers – not an ideal situation.

It's also interesting that this is happening just as the US seems to be at risk of finding itself distanced from two of its strongest Middle Eastern energy allies – Egypt under its new Islamist government and Israel, which might move gently away from the US in order to secure strategic ties to Russia. Is a hegemonic outlook still clouding US views on the security of its relationships and energy supplies, leaving the nation complacent while its competitors race to lock up new resources and secure new friends?

It's a very interesting thought, but the details of that discussion are best saved for another day. The point for today is that increasing desperation from resource-needy nations to secure oil and gas for their futures is putting the world's complex web of relations under incredible pressure. Longstanding allegiances are being tested, and any nation that assumes its historic friends and suppliers will simply stay by its side risks losing precious supply streams. Lubricated with money and the potential for future profits, new friendships are being forged that could alter the global balance of power.

Energy security underlies every country's abilities for today and prospects for tomorrow. Without secure access to the resources that power buildings, move vehicles, connect people, and enable growth, a country's economy will stagnate and its global influence dwindle. From that perspective it is easier to understand why Russia is considering a 180-degree shift in its Middle-Eastern relations, why China is willing to spend tens of billions of dollars on schools, wells, and hospitals in Africa, and why Asia is offering fat premiums to take over Canadian energy producers in a down market.

Energy is the new global currency, and its influence is starting to change the rules of the global diplomatic game. China is playing, Russia is working its hand, and countries with resources from the Black Sea to the Horn of Africa are placing their bets. As for the United States, it seems to be a couple of steps behind and had better figure out a game plan before new allegiances solidify and the US finds itself alone.


Additional Links and Reads

Nexen Deal Could Put Other Oil Sands Firms in Play (Globe and Mail)

Never before has a foreign firm paid so much for a Canadian asset, and never before has a Chinese firm paid so much for an overseas asset. The $15-billion takeover offer for Nexen from CNOOC is a clear sign of the tremendous opportunity that Asian buyers continue to see beneath the forests and muskeg of northeastern Alberta, especially because Nexen's flagship Long Lake project has struggled for years and has yet to come close to its design capacity. But CNOOC is looking more at the massive reserves that stretch out around Long Lake, and other Canadian companies with similar reserves are now clearly in play.

Oil Fluctuates Amid European Crisis, Mideast Tension (Bloomberg)

Opposing pressures are keeping oil prices range-bound. Concerns that Europe's debt crisis is deepening continue to generate downward pressure, but prices cannot fall far before upward pressure from the continuing standoff over Iran's nuclear ambitions prop them up. WTI crude oil for September delivery is trading near US$88 a barrel, while Brent crude for September settlement is priced around US$103 per barrel.

Premier Oil's Plan Leads UK and Argentina to New Dispute (Guardian)

Britain seems to have put itself on a collision course with Argentina over the Falkland Islands when it gave explicit support to a $1-billion deal to develop offshore oil reserves near the disputed south Atlantic islands. The government backed Premier Oil's move to buy a 60% stake in the Sea Lion license from Rockhopper Exploration, but soon after the deal was announced Argentina threatened criminal and civil charges against any companies operating in the area. The oil conflict comes on the 30th anniversary of the military conflict between Britain and Argentina over the Falklands.

Hedge Funds Increase Gas Bets as Surplus Shrinks (Financial Post)

Natural gas futures recently climbed to their highest levels in almost seven months as forecasts for hotter-than-usual weather heading into August indicate power plants will be burning through fuel. Natural gas has now climbed 63% from a ten-year low in April, and the US stockpile surplus has now fallen for 15 consecutive weeks. In response, hedge funds raised bullish bets on natural gas to the highest level in more than a year.

As Patriot Goes, So Goes Coal? (Resource Investing News)

Record low demand for thermal and coking coal is driving American coal producers to the edge of solvency. Patriot Coal was the first to file for Chapter 11 bankruptcy reorganization, but it is by no means the only US coal company struggling with declining revenues. Rising operational costs, stagnant demand, and poor prices are threatening coal producers across the US and the world, though many observers predict that coal will rebound in the medium term. The trick for producers is lasting until then.

China Offers $20 Billion in Loans to African Nations (Guardian)

China has offered $20 billion in loans to African countries over the next three years, cementing an alliance that appears increasingly hostile to the West. Chinese President Hu Jintao announced the credit line at the Forum on China-Africa Cooperation in Beijing, and the news immediately sparked renewed discussion about how China's support for Africa is based on exploitation of African resources, neglect of human rights, and support for non-democratic leaders. South African President Jacob Zuma responded by saying he and his peers remain "convinced that China's intention is different to that of Europe, which to date continue to attempt to influence African countries for their sole benefit."

Khartoum Rejects South Sudan's "Last" Offer on Oil (AllAfrica)

Sudanese negotiators have dismissed South Sudan's "last offer" to resolve the two countries' disputes over oil transit fees and the status of Abyei, a region claimed by both nations. South Sudan is home to most of the former country's oil production, but that oil has to pass through pipelines crossing Sudan to reach the ocean; the dispute centers on transit fees for use of those pipelines. In what they called their "last offer," South Sudanese negotiators offered to pay US$9.10 for every barrel of oil that passes through one set of pipelines and US$7.26 for every barrel that transits the other major set of pipelines; the South also offered an annual compensation package of US$3.2 billion to help Sudan cover the budget deficit it faces after losing three-quarters of its oil production. Sudan immediately dismissed the offer, indicating that the conflict will now head to the United Nations.

Jim's Mailbox

Posted: 24 Jul 2012 02:26 PM PDT

Jim Sinclair's Commentary

Not much changes. In 1974 I placed an advertisement in Barrons saying gold would go to $900. That made for good laughs amongst the establishment then at Domonicos Steak House in the financial district. When in early 2000 I suggested gold would go to $1650 there were great laughs amongst the

Continue reading Jim's Mailbox

Gold Seeker Closing Report: Gold Gains While Dow Drops

Posted: 24 Jul 2012 02:25 PM PDT

Gold edged up to $1584.09 at about 9:30AM EST before it dropped back to $1569.05 in the next few hours of trade, but it then bounced back higher into the close and ended with a gain of 0.32%. Silver slipped to as low as $26.60 before it also bounced back higher into the close and ended unchanged on the day.


Gold Outperforms But Hilsenrath-Rally Fails, As VIXophrenic Equities Converge To Bonds YTD

Posted: 24 Jul 2012 02:21 PM PDT

Pathetic. A late day surge to test yesterday's lows and VWAP (which makes some technical sense) was buoyed by positivity from yet another Hilsenrath 'hint'. The total lack of response in the afternoon as German and Spanish FinMins tried to jawbone us up was the reality. We do note though that all the 'Hint' managed to do was get us back to VWAP - which suggests that 'the force is weakening with this one'. The S&P 500 and the 30Y Treasury Bond almost converged in performance year-to-date today as the entire TSY complex saw new all-time record low yields (bullish?). Gold put in a decent surge to the highs of the day into the close (but remains fractionally lower on the week - which is decent considering the USD is up 0.55% on the week). Copper lost ground but Oil and Silver ended unch though well off their lows. VIX closed at one month highs, reversing yesterday's malarkey ending the day 20.4% up around 1.75vols and much more in line with equity/credit. The Hilsenrath-rally helped steer financials to the best performers on the day (though still -0.3%) but as soon as cash closed ES limped back down. SPY pushed well ahead of its ETF peers into the cash close but in general ES caught down to broad risk-asset dysphoria. Now everything hinges on CRAAPL.

YTD equities and bonds have converged...

 

The Hilsenrath-rally drove cash equities nicely into the close - upper left chart - but rates/vol/credit did not follow suit. VIX finally pushed up and met its equity/credit-implied reality (lower left chart) and stocks caught down from their late-day surge yesterday with broad risk assets (upper right chart) and cross-asset-class correlation (while noisy) has picked up more systemically...

 

Meanwhile, ES managed to test yesterday's lows and VWAP (thank you Hint-enrath) but then failed and turned lower...and just to be clear - once we hit VWAP, heavy and large block size selling volume hit the tape - surprise!! ES also managed to escape the dreaded close below 50DMA

 

with Gold the only winner on the day...

 

Charts: Bloomberg and Capital Context

Bonus Chart: GM hit $18.85 at its lows today, and as we noted earlier the market is seeing straight through all the channel-stuffing. What is most peculiar is that OLDGM fell off its cliff at $18.83 and never looked back until bankruptcy - what a happy coincidence...
at

No comments:

Post a Comment

Subscribe to: Post Comments (Atom)