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Friday, August 17, 2012

Gold World News Flash

Gold World News Flash

Startling Evidence That Central Banks And Wall Street Insiders Are Rapidly Preparing For Something BIG

Posted: 17 Aug 2012 12:00 AM PDT

from The Economic Collapse Blog:

If you want to figure out what is going to happen next in the financial markets, carefully watch what the insiders are doing. Those that are "connected" have access to far better sources of information than the rest of us have, and if they hear that something big is coming up they will often make very significant moves with their money in anticipation of what is about to happen. Right now, Wall Street insiders and central banks all around the globe are making some very unusual moves. In fact, they appear to be rapidly preparing for something really big. So exactly what are they up to? In a previous article entitled "Are The Government And The Big Banks Quietly Preparing For An Imminent Financial Collapse?", I speculated that they may be preparing for a financial meltdown of some sort. As I noted in that article, more than 600 banking executives have resigned from their positions over the past 12 months, and I have been personally told that a substantial number of Wall Street bankers have been shopping for "prepper properties" this summer. But now even more evidence has emerged that quiet preparations are being made for an imminent financial collapse. That doesn't guarantee that something will happen or won't happen. Like any good detective, we are gathering clues and trying to figure out what the evidence is telling us.

Read More @ TheEconomicCollpaseBlog.com

Questor share tip: Hold African Barrick Gold until bid situation becomes clear

Posted: 17 Aug 2012 12:00 AM PDT

African Barrick Gold's shares have jumped 8pc after its parent revealed a bid appraoch. Questor says hold.


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

Gold Continues to Coil

Posted: 16 Aug 2012 11:40 PM PDT

courtesy of DailyFX.com August 16, 2012 02:56 PM Daily Bars Prepared by Jamie Saettele, CMT No change: “A bearish triangle remains favored (headed lower from current level) but presentation of an alternate count is appropriate. The alternate would treat consolidation from 1640.80 as a B wave triangle. A break above 1640.80 would confirm that wave C is underway towards 1700 (Fibonacci extension is just below that level and the 2/10 low is just above 1700).” LEVELS: 1555 1563 1584 1629.50 1640.80 1700...


Silver Update 8/16/12 Zing Ya

Posted: 16 Aug 2012 10:53 PM PDT

Gold & Continued Loss Of Confidence In The Financial System

Posted: 16 Aug 2012 10:03 PM PDT

With the recent surge in gold, silver, and the mining shares, today King World News interviewed 25 year veteran Caesar Bryan over at Gabelli & Company, which has over $31 billion under management. Here is what Ceasar had to say regarding a continued loss of confidence in the financial system: "Yesterday marked the 41st anniversary of the US coming off the gold standard, thus severing the ties of the US dollar to gold. We get caught up in the day to day ebbs and flows of financial markets, but sometimes you need to take a step back and realize we are 41 years into a monetary experiment without precedent."


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

Gold Seeker Closing Report: Gold and Silver Gain About 1%

Posted: 16 Aug 2012 10:00 PM PDT

Gold saw slight losses in Asia and waffled near unchanged in London, but it then climbed to as high as $1617.76 in New York and ended with a gain of 0.62%. Silver surged to as high as $28.275 and ended with a gain of 1.37%.


How to Introduce a Gold Standard

Posted: 16 Aug 2012 09:00 PM PDT

by Rafał Rudowski, Financial Sense:

The idea of restoring gold to its former monetary status (or, as it is often described, "returning to the gold standard") seems to be increasingly popular all around the world. The main reason is the continuous debasement of all paper currencies that forces people to look for ways to protect their wealth. Additionally, it is commonly expected that the ongoing monetization of sovereign debts will lead to much higher inflation down the road. There is also a growing awareness that the government's, or central bank's, interference in the monetary sphere leads to various detrimental economic consequences such as distortions of price signals or inadequate levels of interest rates. Therefore, there is a need for a commodity money that would be hard to control and manipulate, and gold is the most obvious candidate to perform that role. Apart from that, it is becoming increasingly evident that the ability to create money by arbitrary decisions, which is a feature of fiat monetary systems, is a source of tremendous power and opens space for various forms of corruption. There are also many advocates of the idea of a global currency that would facilitate trade by removing costs, inconveniences, and risks connected with foreign exchange.

Read More @ Financial Sense.com

Chris Waltzek: Gold and silver have long way to go before reaching 'mania' stage

Posted: 16 Aug 2012 07:27 PM PDT

9:25p ET Thursday, August 16, 2012

Dear Friend of GATA and Gold:

GoldSeek Radio's Chris Waltzek today revisits the "Fear Index" concept of GoldMoney founder and GATA consultant James Turk and calculates that both gold and silver have a long way upward to go before entering the "mania" stage. Waltzek's commentary is headlined "Current Gold Fear Index" and it's posted at GoldSeek Radio here:

http://radio.goldseek.com/silverfearindex.php

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

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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...


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Thursday-Friday, September 27-28, 2012
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UPDATE-1 YOURI CARMA'S LINKS: SILVER & GOLD – ALWAYS GO PHYSICAL – FACEBOOK PUMP AND DUMP – FRAUD – QEIII – US IN DENIAL – MEANWHILE IN EUROPE

Posted: 16 Aug 2012 06:26 PM PDT

ALWAYS GO PHYSICAL Aaaand It's Gone: This Is Why You Always Demand Physical Bank of America drills open customer safe deposit box and removes contents SILVER & GOLD Barrick Gold in talks with China National over ABG The Hoarding Continues: … Continue reading →


What? Me Worry?

Posted: 16 Aug 2012 06:15 PM PDT

by Bill Holter, MilesFranklin.com:

Just a little bit of news in the last 24 hours: The Hoarding Continues: China Has Imported More Gold In Six Months Than Portugal's Entire Gold Reserve

No One Will Charged With a Crime for the MF Global Collapse

Social Security Administration To Purchase 174 Thousand Rounds Of Hollow Point Bullets

First, we learned that China has purchased 382 tonnes of Gold in the first 6 months of the year. This amounts to over 750 tonnes annualized and better than 25% of the worlds' global production. When you add in their own production of over 200 tonnes, they will have accumulated nearly as much as the WGC says are their official holdings. Do you think that they may have a tad more than the 1054 tonnes that we are told? Of course, if you were already asking yourself this question, the next logical question would be "why are they so hellbent on accumulating more"? Especially at these current prices that we are assured daily that represent bubble prices in the stratosphere.

We also got the (good) news (for Jon Corzine) that NO ONE will be prosecuted for the commingling and THEFT of over $1 Billion in client funds at MF Global. …uh, is anyone surprised? Yep, under the rug with this one too. It was a "mistake" and as the CFTC has promised us, new regulations have been put in place to prevent this from ever happening again…until last month with PFG Best's downfall. The fraud is so "in your face rampant" that even with the admission and paper trail that client funds were outright STOLEN (and looks to have ended up in JP Morgan's pocket), NO ONE will even pay a penny in penalty or even 30 minutes time to be "booked". No, it is now so bad that they don't even bother to arrest anyone even for "appearance" sake. Meanwhile, back at the grocery store, the guy who stole a loaf of bread worth $1 to feed his family, got caught and will do 5 years time and charged a $10,000 fine. Gee…with this as precedent, I wonder how what the CFTC will be saying about the Silver investigation…anything?

Read more @ MilesFranklin.com

Still propagandized after all these years

Posted: 16 Aug 2012 05:44 PM PDT

I got a call from a young friend the other day complaining of writer's block.  It wasn't that he couldn't think of anything to write, exactly; he couldn't think of anything to satirize. 

"You're crazy," I said.  "What's not to satirize?"

Brief silence.  "I can see you don't know a thing about satire."  He sighed.  "Satire requires an audience who would appreciate it.  Look, you don't tell jokes to yourself, right?  You tell them to others.  If no one gets them, they're not jokes."

"Well--"

"They're not jokes -- trust me.  Satire's a little more complicated.  You want them to laugh, but when they're done you want them to see what or who you're picking on and agree with you.  You want them to take action.  If it's political satire, you want them to overthrow the government.  Satire's serious business.  You need to know what's right, to laugh at what's wrong.  But that's the problem.  People don't know."

"Oh, yeah?  Tell that to the cast of Saturday Night Live.  Or Jon Stewart.  You're burned out, man.  Let the field lie fallow.  You'll get your touch back."

"It's not a case of lost touch.  Suppose you wanted to lampoon this stuff that passes for money, the fiat outpourings of the central banks.  Among the commentariat money is an issue, at least since the crisis of 2008.  At least on the internet.  But it's not an issue with the middle class.  They still don't get it.  They've been savaged by the bankers and politicians but they still don't understand how it happens.  They have no freaking idea of what role gold has traditionally played in keeping these guys off their backs and out of their wallets.  They hear bright people say it's barbarous, that to support it is like calling for the return of the biplane, and that serious discussion centers around whether Bernanke should impose another QE.   And if a few of them do get curious about gold as money, crowned experts like Bernanke slam the door in their faces.  He tells them that in the 1930s, the smart countries dumped gold before the others did.  Or that all those infamous panics of the 19th century were gold's fault, that it forced bankers to redeem their notes for something of value.  So what if they issued more notes than they had gold on deposit?  That was acceptable practice and always has been.  If only people would simply believe that paper issued under a monopoly arrangement with the government was something valuable, everything would be fine.  The fact that we've had perpetual inflation and war since paper was crowned king is a fact lacking visibility.  To the general population."

"No, you've lost your touch.  The material for a spoof of fiat money is there in abundance."

"You could spoof it only for a select few.  The rest would be bored.  Okay, let's try this: Suppose you wanted to satirize the War on Terror.  A ripe topic, right?"

"Over-ripe."

"So what do you do?  You might say we're winning the war and show the number of terrorists we have locked up in prison.  Yea for our side!  We're number one!  But wait -- these guys don't look like terrorists.  They're not al-Zawahiri or al-Umari or al-Salada or something -- they're al-Johnson or al-Jones or al-Richardson."

"Great!"

"No, it isn't.  No one on main street would laugh.  Half these prisoners are drug users.  They may not know it but they fund terrorism.  Their partners are the real 'als' planning the next attack."

"Nooo!"

"That's what people believe.  If you're in jail, you're a bad guy.  Bad guys support terrorists.  So you can't satirize the War on Terror."

"You just did!"

"Then why didn't you laugh?"

"Your readers will, once you polish it."

"They won't.  My readers are the 'als' in prison."

"Then dig deeper.  Hit the War on Drugs."

"How?  By writing about soccer moms signing out kiddie aspirin at their local pharmacy, all the while chattering about their latest trip to the shore?"

"That's a start."

"Or a hospital scene depicting a shriveled old guy strapped to his mattress, his face a rictus of pain, while a canned video plays on his overhead TV detailing the evils of marijuana?"

"That's good.  Dark, but good."

"Of course there's the old standby, cops armed with controlled substances to plant on troublemakers they want to send up."

"That's satire?"

"It might be if a cop's kid gets hold of the stuff and is collared by some dick in another city."

"You're on a roll, man.  You need to hang up and get this stuff down."

"You still don't understand.  You know that puzzle about a tree falling in a forest with no one there -- would it make a sound?  I would be like that tree.  It's not that there's no one around.  They're here but they're lobotomized.  Regular people no longer think critically about the government.  Today's normal is yesterday's outrage, with the outrage removed.  Satire would play on that outrage, but it's not there.  They've made peace with it in a psychotic sort of way.  They live in Huxley's world without knowing it.  They love their servitude and call it freedom.  They still have their ball games and fishing trips, their malls and sitcoms.  Water still runs downhill, the sun rises and sets.  They can even speak freely, because their words are powerless.  In this blissful metamorphosis Julian Assange is the problem, not the corrupt governments.  You satirize that, they won't laugh.  Satire's not just humor, it's an instrument of change.  Its fuel is outrage."

"You've overlooked the elephant in the living room, my friend.  People have been screaming about the banks and Wall Street for at least four years.  They may not understand gold, but anti-Fed sentiment is all over the place!"

"Someone's already tested the water on your elephant, buddy.  In this case a Brazilian elephant.  You say such animals don't exist?  I say they're invisible -- to the middle class.  They're invisible to the middle class because they believe in the rightness of central banking.  Which, as I said earlier, is why they're going broke.

"No satire I could ever write could top this.  It seems the staff of Brazil's central bank is on strike.  They're demanding a 23 percent pay increase.  Why?  Because of inflation.  They want the pay increase to cover the inflation they've created since 2008."

"You're making that up."

"The Brazilian bank violated the first law of institutional counterfeiting: It didn't take care of its own.  But who noticed?  No one.  Who cares?  No one.  Stand at the entrance to your local grocery store on a Saturday morning and ask the SUVs and mini-vans coming in if they've even heard of the strike . . or the central bank . . . or if they know what a central bank is.  Or if they have heard of a central bank, ask them if they think it's an inflation fighter.  They'll probably say yes.  'Thank God we have a central bank in the U.S., keeping a lid on inflation.  Unlike those boobs in Brazil.'  And if you stand there too long the store manager will order you off the premises, because he noticed you're not selling girl scout cookies."

"Look, you can't expect political satire to ignite a revolution among everyday grocery shoppers.  If you were to conduct a survey you'd scare half of them and leave the rest thinking you're a kook.  There's an audience for your satire.  Not everyone's been cleansed of outrage.  You need to find those people."

"Yeah.  I believe they're called 'the choir.'  By definition you can't change them."

"That's right -- and for the rest you need to be a teacher.  Satire isn't a good teaching tool.  You build outrage with sound arguments.  Satire coaxes that outrage to the surface in the form of humor.  But you have to build it first."

"But they're lobotomized."

"A better word would be 'propagandized.'  It's treatable."

Then quietly, "Yeah," followed by another silence so long I started to wonder if the connection broke.  Finally, to my surprise: "Yeah.  Yeah, that might work.  Talk to you later."

Expect Massive Short Covering In Gold Within Weeks

Posted: 16 Aug 2012 05:30 PM PDT

from KingWorldNews:

Today Egon von Greyerz told King World News, "… the paper shorts in gold and silver are going to have real problems." Greyerz, who is founder and managing partner at Matterhorn Asset Management out of Switzerland, also said, "The short covering during the next few weeks and during this autumn is going to be massive."

Here is what Greyerz had to say: "The real underlying figures (for the global economy) are still deteriorating. Just look at what's happening in Europe now. A few days ago the eurozone GDP came out and it was down .2% for the quarter, and for the last twelve months it was down .4%. So Europe is suffering. But that's just the beginning in my view.

I wouldn't be surprised over the next two or three years to see a fall of 10% in GDP in the eurozone, and in other countries also, the UK and US. Just take an example of commercial property in Italy. In the second quarter of this year there were (only) 2 commercial property transactions in Italy. This was against 56 in the previous quarter.

I mean a drop from 56 to 2, it's just come to a total standstill…."

Dan Norcini continues @ KingWorldNews.com

Billionaires Paulson & George Soros Hoarding Gold

Posted: 16 Aug 2012 05:18 PM PDT

We should be focused on backing away from bank...

[[ This is a content summary only. Visit my website http://goldbasics.blogspot.com for full Content ]]


Why are Gold, Silver Mining Share Prices Not Moving Higher?

Posted: 16 Aug 2012 05:16 PM PDT

Gold Forecaster


Portugal being drained of its gold

Posted: 16 Aug 2012 05:15 PM PDT

by Jeff Nielson, SilverGoldBull:

This post is about tragedy, but there is also an important life-lesson here. First the tragedy. One of the Corporate carrion-feeders (Bloomberg) describes it nicely:

Gold Runs Out In Lisbon As Price Drop Compounds Money Misery

Understand the dual aspects of the tragedy being presented here. On the one hand we have the bankers having caused/created all the economic devastation (and loss of employment/incomes) being experienced by ordinary Portuguese residents. I've explained this in considerable detail in past commentaries, most notably a prior four-part series.

On the other hand, because of the success the bankers have had in suppressing the price of bullion over the past 18 months; desperate Portuguese residents who have been forced to exchange their gold (simply to feed their families) have been getting much less "money" (i.e. paper) in return.

The combined effect is that the banksters' initial act of "economic rape" is forcing the Portuguese to use their gold (to survive), while their price suppression results in these people using up their gold much more rapidly. Think of clothing being "put through the wringer" of a washing-machine.

Read More @ SilverGoldBull

Proof Positive that Government's "Homeowner Relief" Programs Are Disguised Bank Bailouts ... Not Even AIMED at Helping Homeowner

Posted: 16 Aug 2012 05:02 PM PDT

 

We pointed out last year:

Huffington Post notes, in a story entitled “New Obama Foreclosure Plan Helps Banks At Taxpayers’ Expense “:

A key new condition in the plan would shift the financial liability for refinanced loans from Wall Street banks to the American taxpayer.

 

***

 

The newly expanded program would expunge legal liabilities associated with mortgages refinanced through the program for the original lenders of the mortgages. Each time a bank sent a loan to Fannie and Freddie, it certified that the loan met Fannie and Freddie’s safe lending criteria. But many loans sent to the mortgage giants did not, in fact, meet those criteria. Currently, when borrowers default on those ineligible loans, the mortgage giants can “put back” the resulting losses onto the banks that pushed the loans.

 

Under the modified plan, “put back” liability at banks will be erased for any underwater mortgage that is refinanced through HARP, eliminating Fannie and Freddie’s ability to sack lenders with losses in the event that the mortgage does not pan out.

 

If borrowers go through HARP, but decide after several months that the modest monthly savings do not outweigh owing tens of thousands of dollars more than their home is worth, taxpayer-owned Fannie and Freddie will have to take the full loss. Even if the original loan was sent to Fannie and Freddie with false or fraudulent guarantees from the bank — promises that may directly be tied to the borrower’s current financial problems — banks will be immune from liability. Fannie and Freddie plan to charge banks “a modest fee” to extinguish this liability, but the administration has yet to determine what that fee will be.

 

“In most cases people would probably be better off walking,” said economist Dean Baker, co-director of the Center for Economic Policy and Research.

While this is outrageous, it’s nothing new. PhD economists John Hussman and Dean Baker, fund manager and financial writer Barry Ritholtz and New York Times’ writer Gretchen Morgenson say that the only reason the government keeps giving billions to Fannie and Freddie is that it is really a huge, ongoing, back-door bailout of the big banks.

Many also accuse Obama’s foreclosure relief programs as being backdoor bailouts for the banks. (See this, this, this and this).

We noted in February:

The 50-state settlement with the banks ... over mortgage fraud is a stealth bank bailout, according to many top observers. See this, this, this, this, this, this, this and this.

 

This is par for the course … All of Obama’s previous “mortgage relief” programs have really been stealth bank bailouts which screwed the homeowner. And see this.

We reported in April that the current overseer of the Tarp bailout program – the special inspector general for TARP, Christy L. Romero - said that the Tarp funds haven't been paid to homeowners, but have gone to banks:

A fund to support homeowners in the communities hit hardest by the collapse of the housing bubble has disbursed just 3 percent of its budget and aided only 30,640 homeowners in the two years since its creation, according to a report released on Thursday by a federal watchdog office.The Hardest Hit Fund, which was created in the spring of 2010, grants money to state housing finance agencies for efforts to help families that are facing foreclosure. It has “experienced significant delay” because of “a lack of comprehensive planning” by the Treasury Department and limited participation by Fannie Mae, Freddie Mac and the large mortgage servicers, said the report by the special inspector general for the Troubled Asset Relief Program.

“Look at the TARP money that goes out to the banks,” said [Romero] “That goes out in a matter of days. This has been two years and only 3 percent of these funds have trickled out to homeowners.”

And last month, the former Tarp overseer - Neil Barofsky - noted last month:

The truth is that the administration – whether through principal reduction or otherwise – has never prioritized coming up with an effective approach to helping homeowners and reviving the housing market, even when it had a multi-hundred-billion-dollar TARP war chest at its disposal.

More dramatically, in his must-read book Bailout, Barofsky says the Obama Administration never cared if the HAMP mortgage modification program actually saved homeowners from foreclosure, and that Treasury Secretary Geithner said that the program was simply aimed at spreading out foreclosures over time to “foam the runway” for the giant banks so that a high number of simultaneous foreclosures would not jeopardize their balance sheets. See this 45-second video clip:

Remember that the entire Tarp bailout was initially sold as a solution to the housing meltdown, but was switched - before it was even approved - to a bailout for Wall Street.

This is in addition to all of the government's other stealth bailouts to the big banks.

By choosing the big banks over the little guy, the government is dooming both.

Will Bernanke Bail Out An Incompetent Congress Once More

Posted: 16 Aug 2012 04:48 PM PDT

The vital question of the moment is whether of not The Bernank will signal an intention of moving towards QE3 in his much-anticipated 'Jackson Hole' conference in two weeks. Citi's Tom Fitzpatrick believes "it would be irresponsible to do so and that we need a more 'responsible fiscal policy' which will not materialize as long as we have an 'irresponsible monetary policy' bailing policymakers out". However, what we think in this regard is totally irrelevant to this discussion for it is what we think the Fed thinks that is critical. Recent data seems to have been a little more supportive of the economy (on the face of it) and may lead the Fed to stay on hold in the near term (September meeting). This will almost certainly raise the bar extremely high for further easing as we head into the Presidential race proper. If this window closes then a move before December will be extremely unlikely barring a major financial/market/economic shock, since after the 9/13 meeting, there are no more meetings until 12/12. However this increases the danger of the Fed getting 'caught behind the curve' which must be balanced with the 'mistake' of one-monetary-step-too-far with very real inflationary consequences.

10 year yields today compared to the summer of 1993

 

and Gold resembles 2006 - after Gold corrected down from $730 to $542 - when the market consolidated but utlimatley rallied to new trend highs...

 

and Brent is breaking to new highs...

 

Tom Fitzpatrick, Citigroup: To QE Or Not QE:

from a Fed perspective

Recent data seems to have been a little more supportive of the economy (on the face of it) and may lead the Fed to stay on hold in the near term (September meeting). This will almost certainly raise the bar to moving extremely high as we head into the Presidential race proper. If this window closes then a move before December will be extremely unlikely barring a major financial/market/economic shock. There is no Fed meeting in November so after the 13 Sept meeting the window likely closes until Dec 12 without an "event risk" scenario materializing.

However this increases the danger of the Fed getting "caught behind the curve" in their objectives as:

  • Small business indicators (the backbone of the U.S. economy) are deteriorating again (Bad sign for employment)
  • Overall employment is not following a traditional recovery path and we are seeing
    • Poor household survey
    • Continued dropping participation rate
    • Flattening out for initial claims
    • 3 consecutive monthly rises in the underemployment rate
  • A housing market recovery that still dramatically lags other recoveries at this point in the cycle is keeping the consumer (70% of the economy) suppressed
  • Consumer confidence appears to be rolling over again. Historically this has had negative leading indications for the Equity markets in the months following.
  • Consumer credit is starting to soften again
  • Core inflation indicators (their mandate) are softening
  • Food and energy rising on supply concerns are creating a negative "fiscal drag" feedback loop
  • US yields starting to rise as people now start to believe that we will not get a move from the Fed in the near term adding a potential monetary drag to the "fiscal drag" (Double whammy as we get de facto fiscal and monetary tightening)
  • A Middle East "tinderbox" that is very susceptible to a food price shock and a likely cause of an Oil price shock (as we saw in 1973-1974 and again in 1978-1979)
  • ISM back below 50 again where Fed "normally" eases
  • Negative short-term yields in core Europe and elevated peripheral yields still in place suggesting that strains are still just below the surface. Despite this the ECB made no accommodative moves at the last meeting but just "kicked the can" again. More Eurozone stresses are therefore likely "around the corner." In addition the weaker EUR will exacerbate the Food and Energy price rises in Europe.
  • Slowing China economic data and rising food inflation is a bad mix.
  • A Presidential election that has now become a clearly defined "policy battle" with one side of the fence clearly not supportive of the present Fed approach if elected therefore becomes one of the only catalysts for an early move but would likely be perceived as way too political.

They are some of the reasons for moving. The reason for not moving is that it could be a mistake, one step too far. What is the consequence of being wrong to move - the likelihood of inflation in a debt laden economy.

While as in the 1970's this would be painful and likely create a "stagflationary" economic dynamic it is an acceptable outcome in a "debt laden economy" (the lesser of two evils argument)

From a Fed perspective this decision process looks to becoming less linear and more in favour of renewed balance sheet expansion.

Do we believe this is the right way to go? Probably not.

Do we think it will ultimately be inflationary? Yes.

However what we think does not matter.

What we think the Fed thinks is what matters and we are starting to think that a move is becoming more , not less likely, just as the market and possibly even the Fed seems to be thinking otherwise. A move in September now certainly looks less likely but ironically the lack of a move may see the Fed once again "behind their curve" and scrambling to catch up again in late 2012/early 2013.

 

Succinctly summarized thus:

1. What we have to pay for is rising in price (oil and food)
2. What we choose to pay for is falling in price reflecting stresses on the consumer and businesses alike.

 

This is not a positive dynamic in a very uncertain environment.

 

The most concerning chart is Oil which we fear will break higher and ultimately create a negative feedback loop that could at some stage become a negative backdrop for equities.

 

Europe will suffer most given their economic fragility and currency weakness.

The Gold Price Gained $12.40 Closing at $1,616.10 Time is Running Out to Buy at These Prices

Posted: 16 Aug 2012 04:47 PM PDT

Gold Price Close Today : 1616.10
Change : 12.40 or 0.77%

Silver Price Close Today : 28.205
Change : 0.400 or 1.44%

Gold Silver Ratio Today : 57.298
Change : -0.378 or -0.66%

Silver Gold Ratio Today : 0.01745
Change : 0.000114 or 0.66%

Platinum Price Close Today : 1433.90
Change : 39.00 or 2.80%

Palladium Price Close Today : 582.80
Change : 5.40 or 0.94%

S&P 500 : 1,416.65
Change : 11.12 or 0.79%

Dow In GOLD$ : $169.55
Change : $ (0.13) or -0.08%

Dow in GOLD oz : 8.202
Change : -0.006 or -0.08%

Dow in SILVER oz : 469.95
Change : -3.52 or -0.74%

Dow Industrial : 13,254.99
Change : 90.21 or 0.69%

US Dollar Index : 82.38
Change : -0.293 or -0.35%


###########

Editor Note: We appologise for the error in prices on the 14th of August when Franklin didn't post commentary, the prices posted on the 14th of August were incorrect. This was due to a fault of goldprice.org and not Franklin Sanders.

##########

The GOLD PRICE raked in another $12.40 to close Comex at $1,616.10, while silver scooped up 40 cents to 2820.5c.

Today the GOLD PRICE carved out the rest of a bottom, rising to the level where it broke off on Tuesday, about $1,615. This pattern resembles an upside down head and shoulders, and targets $1,640. But first, gold must pierce $1,625 - $1,630 resistance where it hath so oft been rebuffed. Close up around $1,625 tomorrow would be your first hint gold intends to slap back at the folks who have repeatedly slapped it around. Whether sooner or later, that will come.

The SILVER PRICE, on the other hand, rose a little higher than gold while tracing out the same pattern. Today's high at 2829c was slightly higher than Monday's 2820c. I know I sound like you're old 78 rpm record stuck in the same groove, but silver still needs to better 2850c to break away from gravity. Y'all know that can happen very quickly. Once silver crosses that line all those uppity shorts will panic and silver will blast away.

But first, it must breach the resistance between here and 2806c.

Time is running out to buy silver and gold at these prices. August draweth to a close.

Th'other end of the see-saw dropped today -- the US Dollar index -- while the metals and stocks end rose. All this remains in a range, changing nothing.

Scabrous US Dollar index dropped toward the 82.20 bottom of this week's range, skidding to a low at 83.32. Closed at 82.378, down 29.3 basis points (0.38%). Dollar remains in a rigidly controlled range from 82.90 to 82.20. I think I smell ripe mackerel in the air. Whoops! Sorry, Nice Government Men, but y'all aren't too subtle lately.

This did, however, benefit the dying euro, which yesterday was threatening to vomit all over investors by breaking through the 20 day moving average ($1.2275). Euro rose 0.55% to $1.2356. This is like shocking a fresh corpse with jumper cables: it jumps, but 'tain't alive. Euro didn't quite reach its 50 dma ($1.2386).

Yen followed through downside leaving behind, well, if not a waterfall then at least a cataract. 'Twas enough to take it below the 200 DMA (126.40), closing down 0.51% at 126.00 cents (Y79.37). Rollover earthward is now confirmed.

STOCKS solidly advanced throughout the day. Dow added 0.69% (90.21) to 13,254.99. S&P out did the Dow rising 11.12 (0.79%) to 1,416.65.

Stocks are now drawing nigh this year's highs that posted a double top April 1 and May 1 at 1,422.38 and 1,415.32. Analogous prices for the Dow came at 13,297.11 and 13,338.66. If the Dow travelled all the way to the trend line left by those two tops, it might reach 13,450. Stocks have same chance of breaking through these tops and entering a new bull market that I have of winning $305 million Power Ball lottery. Well, maybe not quite that likely.

On 16 August 1896 gold was discovered in the Klondike, at Bonanza Creek, Alaska.

"Plus ça change, plus c'est la même chose." The more things change, the more they stay the same. On 16 August 1777 France declared bankruptcy, which monetary troubles contributed to the later Revolution.

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.

Guest Post: Financialization's Self-Destruct Sequence

Posted: 16 Aug 2012 03:43 PM PDT

Submitted by Charles Hugh Smith from Of Two Minds

Financialization's Self-Destruct Sequence

We are in the latter stages of financialization's self-destruct sequence.

Like all systems that follow an S-curve of growth and decay, financialization cannot return to its growth phase. I addressed the impossibility of reflating asset and credit bubbles in Let's Pretend Financialization Hasn't Killed the Economy (March 8, 2012).

But there is another dynamic at play: a self-destruct sequence triggered by central bank and Central State efforts to reflate asset and credit/leverage bubbles. All central bank and State policies aimed at driving capital into risk assets boil down to reflating phantom assets purchased with debt by issuing more debt that is based on newly issued phantom assets.

Phantom assets purchased with debt cannot be reflated by issuing more debt that is based on newly issued phantom assets. Piling more debt/leverage on a sandpile of phantom assets (CDS, bonds that cannot possibly be paid back, empty condos in the middle of nowhere, etc.) only heightens the probability that the unstable pile will collapse.

The implicit Central Planning campaign to trigger "mild" inflation is part of the self-destruct sequence. Central planners metaphorically fight the last war, or at best the last two wars, and so they remain blind to any dynamics that did not exist in their case studies.

In the 1970s, central bank easing and Central State stimulus sparked a nasty bout of accelerating inflation. This reduced the weight of debt because wages inflated along with goods and services.

Now that labor is in surplus globally, wages are not keeping pace with inflation. This completely changes the dynamic of "mild" (3%) inflation: as the purchasing power of earned income declines, servicing debt becomes more burdensome. Inflation only renders debt less burdensome if wages rise at the same rate as the cost of goods and services.

In a decade of "mild" inflation and stagnant wages, households will experience a very real-world 30+% decline in their income. Meanwhile, their debt payments remain unchanged.

"Mild" inflation in an era of stagnant earned income will crush households, forcing liquidation or renunciation of debt. What happens as debt service costs rise as a percentage of real net income? There is less cash for consumption, and so the consumer-dependent economy spirals down. Credit is poured into the banking sector, but little trickles down to high-debt, stagnant-income households. This is deleveraging writ large.

What happens when central bank financial repression--lowering the yield on cash to near-zero--causes pension plans to fail and savings to earn negative real returns? Households must save more income to compensate for the destruction of yield by Central Planners.

These mutually reinforcing dynamics feed the self-destruct sequence's inevitability. Add up the self-destructive forces: declining purchasing power, negative real returns on savings, rising debt based on newly issued phantom assets, and promises unbacked by real assets or based on declining national surpluses.

As Central Planning reflation of phantom assets fails, the credibility of the Status Quo institutions that promised success will crumble. I have described the dynamics of Heightened Expectations and the Collapse of Credibility and discussed The Keys To Understanding the Collapse of the Status Quo: Credibility and Expectations.

In the euphoric blow-off top phase of financialization, expectations of security and wealth were raised by political Elites anxious to mask the systemic looting of national wealth by financial/political Elites. Promises were even easier to issue than paper money.

But issuing promises, credit and leverage did nothing to expand the national surplus or the resources that ultimately back the promises and credit.

We can characterize the sudden, explosive convergence of fantasy (phantom assets and promises) and reality as Snapback! (October 9, 2008). The entire project of Central Planning (central banks and States) is to "extend and pretend" the Status Quo in the hopes that the gargantuan divergence between fantasy and reality will magically close as the result of "aggregate demand" or a new business cycle, or some other version of renewed "animal spirits."

But "animal spirits" require trust in the transparency and fairness of markets and Status Quo institutions. As markets are rigged and manipulated to manage perceptions and enable vast skimming operations to continue, the credibility of the markets, politicos, State oversight agencies and the financial sector is eroded.

As central bank/State reflation of phantom assets fail, the credibility of the entire political/financial Elite and the institutions they control will be irrevocably lost.

Financialization's self-destruct sequence has been triggered, and there is nothing anyone can do to stop it. The workings of the machine are opaque, and the interactions complex. We cannot know when the sandpile will collapse, or what the proximate cause of the collapse will be, but we can know that the unstable pile will collapse under the weight of the system's illusory assets, fraud, collusion, embezzlement, corruption and corrosive dependence on artifice and lies.

We also know that self-serving vested interests will continue their pillaging until the destruct sequence's final implosion brings the entire rotten edifice down in heap of empty promises.

In a word: Snapback!


Gold Price Disillusionment

Posted: 16 Aug 2012 03:04 PM PDT

The markets are holding on for more quantitative easing (QE). This is what we keep hearing. Every day we hear reports of the gold price still maintaining its narrow ‘trading range’ of the last month. In fact, since May it hasn’t broken out of the $100 trading range. Things don’t seem to be getting any better, the markets are still demanding more action, banks are asking for more liquidity, bailouts still seem to be the only medicine for the PIIGS and the central banks are mulling about what to do next.


Silver Quietly Sneaking Higher

Posted: 16 Aug 2012 03:03 PM PDT

[url]http://www.traderdannorcini.blogspot.com/[/url] [url]http://www.fortwealth.com/[/url] Silver has managed to rally right to the top of its consolidation pattern without any fanfare and I should add, the participation of a great deal of managed money flows. In other words, without the benefit of the momentum crowd. CAll it a type of stealth rally. I find this very interesting as it is occuring against the backdrop of rising Treasury yields and a rising equity market. Clearly, for whatever the reason, something seems to be occurring on this inflation front that is moving below the radar screen of many investors. Could silver be sniffing out the first whiff of an inflation play? Take a look at the following chart and note that the shorter term moving averages, the 10 day and the 20 day, are now trading either ABOVE the longer term 50 day or near par with it. This is a big change that has not been seen on this chart since early March of this year! That is quite astonishing! Keep in ...


22 Stats That Show How The Emerging One World Economy Is Absolutely Killing American Workers

Posted: 16 Aug 2012 03:02 PM PDT

For a lighter side to the main article, The Onion made a valid point the other day: Nation's Lower Class At Least Grateful It Not Part Of Nation's Middle Class

"CHAPEL HILL, NC—A survey released Wednesday by researchers at the University of North Carolina found that despite the many challenges they face, the nation's lowest-income individuals are nonetheless thankful they don't have to endure the unique hardships of the nation's long-suffering middle class.

 

According to the report, the 46 million Americans who fall below the federal poverty line, though struggling mightily, are at least glad they don't have to live up to some rapidly vanishing American dream of advancing in their career, making more money, and improving their lifestyle, the way their middle-income counterparts do."  Keep reading >

22 Stats That Show How The Emerging One World Economy Is Absolutely Killing American Workers

For decades our politicians have promised us that the "free trade" agenda would bring us greater prosperity than ever before. They insisted that merging our economy into the emerging one world economy would cause millions upon millions of new jobs to be added to the U.S. economy.  Unfortunately, it was all a giant lie. 

Trading with other countries is not a bad thing as long as the level of trade is fairly equal on both sides. When trade becomes very unequal, the consequences can be absolutely catastrophic. Since 1975, the United States has bought more than 8 trillion dollars more stuff from the rest of the world than they have bought from us. We are the only economy on earth that could have had 8 trillion dollars drained out of it and still be standing.  Instead of leaving the country, those 8 trillion dollars could have gone to U.S. businesses and U.S. workers. If we could go back and have a "do over," how much more prosperous would we be today if we had kept that 8 trillion dollars inside the country?

But instead of pursuing a balanced trade philosophy, our politicians were so enamored with the emerging one world economy that they threw all caution to the wind.

So we have lost tens of thousands of businesses, millions of jobs and trillions of dollars of our national wealth.

And this emerging one world economy is absolutely killing American workers.  It lumps them into a global labor pool with workers in other countries where it is legal to pay slave labor wages.

Just think of it this way. Imagine that you are a giant corporation that makes "widgets".  You can make them in the United States, but you would have to pay your workers about $10 an hour, provide them with a whole bunch of benefits, pay very high taxes, and comply with a dizzying array of laws, rules and regulations.

Or, you could set up shop on the other side of the world where you could pay your workers a dollar an hour.  Those workers would receive no benefits and you would have to deal with very little red tape.

Which would you choose?

The "giant sucking sound" that Ross Perot once warned us about has become a reality.  Big employers are competing with one another to see who can outsource jobs the fastest, and American workers are the big losers in all of this.

As I wrote about the other day, right now there are some American workers that are actually personally training their replacements from overseas how to do their jobs.

If nothing is done about this, jobs are going to continue to pour out of high wage countries such as the United States and into low wage countries on the other side of the globe, and big corporations are going to keep laughing all the way to the bank as unemployment in America gets even worse.

The following are 22 stats that show how the emerging one world economy is absolutely killing American workers....

#1 One professor has estimated that cutting the U.S. trade deficit in half would create 5 million more jobs in the United States.

#2 The United States has a trade imbalance that is more than 7 times larger than any other nation on earth has.

#3 Overall, the United States has run a trade deficit of more than 8 trillion dollars with the rest of the globe since 1975.  That 8 trillion dollars could have gone to support U.S. businesses and pay the wages of U.S. workers.  Federal, state and local taxes would have been paid on that 8 trillion dollars if it had stayed in the United States.  This is one reason why our national debt is getting ready to cross the 16 trillion dollar mark.

#4 When NAFTA was passed in 1993, the United States had a trade surplus with Mexico of 1.6 billion dollars.  In 2010, we had a trade deficit with Mexico of 61.6 billion dollars.

#5 In 2001, American consumers spent 102 billion dollars on products made in China.  In 2011, American consumers spent 399 billion dollars on products made in China.

#6 The Chinese undervalue their currency by about 40 percent in order to gain a critical advantage over foreign competitors.  This means that many Chinese companies are able to absolutely thrive while their competition in the United States goes out of business.  The following is from a recent Fox News article....

To keep Chinese products artificially inexpensive on US store shelves, Beijing undervalues the yuan by 40 percent. It pirates US technology, subsidizes exports and imposes high tariffs on imports.

#7 According to the New York Times, a Jeep Grand Cherokee that costs $27,490 in the United States costs about $85,000 in China thanks to all the tariffs.

#8 The U.S. trade deficit with China during 2011 was 295.4 billion dollars.  That was the largest trade deficit that one nation has had with another nation in the history of the world.

#9 Back in 1985, our trade deficit with China was only about 6 million dollars (million with an "m") for theentire year.

#10 U.S. consumers spend about 4 dollars on goods and services from China for every one dollar that Chinese consumers spend on goods and services from the United States.

#11 The United States has actually lost an average of about 50,000 manufacturing jobs a month since China joined the World Trade Organization in 2001.

#12 According to the Economic Policy Institute, America is losing about half a million jobs to China every single year.

#13 The United States has lost more than 56,000 manufacturing facilities since 2001.

#14 During 2010 alone, an average of 23 manufacturing facilities closed their doors in America every single day.

#15 Since the auto industry bailout, approximately 70 percent of all GM vehicles have been built outside the United States.

#16 As I have written about previously, 95 percent of the jobs lost during the last recession were middle class jobs.

#17 According to Professor Alan Blinder of Princeton University, 40 million more U.S. jobs could be sent offshore over the next two decades if current trends continue.

#18 The percentage of working age Americans that are employed right now is actually smaller than it was at the end of the last recession.

#19 The average duration of unemployment in the United States is nearly three times as long as it was back in the year 2000.

#20 Due in part to the globalization of the labor pool, only about 24 percent of all jobs in the United States are "good jobs" at this point.

#21 Without enough good jobs, more Americans than ever before are falling into poverty.  Today, more than 100 million Americans are on welfare.

#22 In recent years the U.S. economy has embraced "free trade" and the emerging one world economy like never before. Instead of increasing the number of jobs in our economy, it has resulted in the worst stretch of job creation in the United States in modern history....

If any single number captures the state of the American economy over the last decade, it is zero. That was the net gain in jobs between 1999 and 2009—nada, nil, zip. By painful contrast, from the 1940s through the 1990s, recessions came and went, but no decade ended without at least a 20 percent increase in the number of jobs.

Sometimes a picture is worth a thousand words.

You can get a really good idea of how nightmarish the manufacturing job losses have been in the United States over the past 40 years by checking out this map right here.

And if everything posted above was not bad enough, some U.S. companies even find themselves competing with slave labor here in the United States.

Seriously.

Prison labor is absolutely destroying some businesses here in America.  The following comes from a recent CNN article....

Unicor is a government-run enterprise that employs over 13,000 inmates -- at wages as low as 23 cents an hour -- to make goods for the Pentagon and other federal agencies.

 

With some exceptions, Unicor gets first dibs on federal contracts over private companies as long as its bid is comparable in price, quantity and delivery. In other words: If Unicor wants a contract, it gets it.

One company that tries to compete with Unicor has been forced to lay off 150 people over the years because they lose so many contracts to them....

Wilson has been competing with Unicor for 20 years. He's an executive at American Apparel Inc., an Alabama company that makes military uniforms. (It is not affiliated with the international retailer of the same name.) He has gone head-to-head with Unicor on just about every product his company makes -- and said he has laid off 150 people over the years as a result.

 

"We pay employees $9 on average," Wilson said. "They get full medical insurance, 401(k) plans and paid vacation. Yet we're competing against a federal program that doesn't pay any of that."

But this is also the kind of thing that U.S. companies are dealing with when they try to compete with big corporations that are exploiting cheap labor abroad.

If you are spending ten times as much on labor as your competitor is, it is going to be really hard to survive.

That is why it has become so hard to find products that are made in America.

Most of our jobs these days are low paying "service jobs", cushy government jobs or jobs where people push papers around all day.

But those kinds of jobs do not create lasting wealth for a country.

Did you know that there are more tax preparers in the United States than there are police officers and firefighters combined?

Our economy is a giant mirage. We consume way more wealth than we produce, but we are able to keep the party going because we are riding the biggest debt spiral the world has ever seen.

But at some point the debt spiral is going to end and the crash is going to come.

Until then, however, those at the very top are still really enjoying themselves.

For example, one of the latest trends is for rich kids to show off pictures of themselves enjoying their enormous wealth on Instagram.

Something has gone very, very wrong with this country.

So what do you think about all this?  Please feel free to post a comment with your thoughts below....

Deleveraging Needed In Next 4 Years: $28 Trillion

Posted: 16 Aug 2012 02:55 PM PDT

Over the past several years, there has been much speculation and numerous reports that America is deleveraging. It isn't. In fact, consolidated across the 5 different kinds of American debt, which takes into account not only federal, but also financial, municipal, household and non-financial, total debt as a percentage of GDP has not budged over the past 4 years and is flat at 350% of GDP. Which simply means that all of the household debt that has supposedly vaporized (at least until the next major Flow of Funds revision), all of which has taken place purely from discharges on uncollectable mortgage and credit card debt, has been replaced by federal debt, while financial debt has merely soared to take the place of the collapsing shadow debt which is imploding as the confidence in a Fed-free financial system erodes to zero. Which of course, is the worst possible outcome: instead of funding private, individual entrepreneurs, who are the true basis for America's historic growth, prosperity and success (and who, unlike the government can and will fail if they dont allocated capital efficiently) the transferred debt (from household to federal) merely goes to fund the unproductive components of the US economy: the US government which by definition produces nothing, and the financial sector, whose only product is financial innovation which serves to make the TBTFs TBTFer, and pay record bonus after record bonus, and... that's it.

 

But wait, it gets better.

Recall, that as Reinhart and Rogoff, and numerous other analysts doing actual empirical analysis over the years have discovered, the threshold for sovereign instability in terms of debt/GDP is 60% (the number above which European countries will have to pledge their gold to Germany once the Redemption Fund kicks in in 6-9 months). So where are we now?

Sadly, nowhere. The chart below explains the problem: where in 2006 the global excess debt to hit the required threshold was only $7 trillion, most of it located in Japan, a decade later, or in 2016, this number has soared to $28 trillion!

Somehow, somewhere, the developed world will have to delever by just under $30 trillion over the next 4 years. Will this happen? No. Because as the chart above also reminds us, when we had the Lehman and Greek collapse, which combined accounted for precisely 0% in terms of debt/GDP reduction, the world almost ended. Think the world will somehow miraculously vaporize $28 trillion in debt any time soon?

In other news, today total US debt just hit a new all time record high of $15,944,869,685,894.92. The $16 trillion threshold will be breached in just about 2 weeks. When did America cross $15 trillion? November 16, or 9 months ago.


The Whiskey Rebellion, Part III: Ending the Rebellion

Posted: 16 Aug 2012 02:45 PM PDT

As Washington's expedition approached its destination from the mountains to the east, another group of western Pennsylvania militia formed with the intent of attacking Pittsburgh and burning the city in advance of Washington's arrival. The city fathers, who had made plans for a great civic celebration upon the arrival of Washington, heard of the threat. Thinking fast, they rode out to meet the militia at a place named Braddock Field, the site of a major engagement during the French & Indian War (and now the site of U.S. Steel's Edgar Thomson Works). In tow, the Pittsburgh men brought many wagons filled with beef, beer, and other victuals that were originally intended for Washington and his army. The Pittsburghers offered the feast to the militia, who enjoyed it thoroughly and thereafter determined that they would not burn the city to the ground. A few days later, Washington's army marched to the city line, but the militia had dispersed and, lo and behold…few people had any recollection of the identities of the offending rebels. Realizing that the nation was at a political crossroads, President Washington took a magnanimous route and granted a general amnesty to almost all of the insurrectionists.

Today, the Whiskey Rebellion is usually mentioned as a minor event in American history. It is considered by most people, if they have ever even heard of it, as a quaint occurrence long ago, just a footnote in the standard history texts. But the Whiskey Rebellion was actually a defining moment for the United States, and, by implication, for the world. In many respects, it is a period that still resonates today. The Whiskey rebellion raised issues of liberty, peoples' right of protest, taxation, treason, the use of the militia, and the scope of representative government. The events leading up to, and after, Washington's march across Pennsylvania in 1794 forced a national debate on the power of the new federal government, including the limitations on the use of that power. Out of it all came a general consensus on the principle of federal supremacy in many fields of national life, among the least of which was to clarify federal power to impose and collect a tax on whiskey.

Post-Whiskey Rebellion, the political life of the nation began to concern itself with the meaning of "perpetual union," and the implications of the concept. The national memory of the near-dissolution of the young constitutional republic lasted for several generations, until the matter flared again and ignited in 1861. The immediate threat to national expansion that was inherent in discussion of secession, by certain individuals in "Westsylvania" in 1794, prompted an aggressive federal policy favoring westward expansion, fueled by a relatively liberal immigration policy.The lands south of the Great Lakes began to fill up with American immigrants, not Canadians. Within a decade, President Jefferson would purchase the Louisiana Territory from France, and through the explorations of Lewis and Clark (whose boat was constructed on the banks of the Monongahela River, just south of Pittsburgh) America would move the western frontier of the nation to the Pacific Coast. The Whiskey Rebellion started the country on its path to becoming a continental power, and later a world power.

The westward movement of the United States also prompted federal efforts to expend resources on what were called "internal improvements," both to construct roads, canals and mail routes to the interior, and also to put gold and silver coins into the western frontier economy. Not coincidentally, on October 15, 1794, as Washington's army was encamped in western Pennsylvania, the U.S. Mint in Philadelphia struck 1,758 silver dollars. These coins were intended to compete with the foreign currencies then circulating freely in the U.S. These "1794 Silvers," of which only a few are known still to exist, are considered the nation's first true issue of real money and are all but priceless in today's numismatic market.

The Whiskey Rebellion framed the debate in early America over the limits to freedom of speech and when such speech would be considered seditious. National divisions over the propriety of the cause of the insurrectionists highlighted philosophical fault lines, along which the first American "political societies" (now called "parties") were formed. At the same time, the federal government confronted the reality of an armed citizenry and the grudging respect that a large group of like-minded people with guns and ammunition were entitled to be accorded by the sovereign. It is no coincidence that these two issues, speech and guns, had been the focus of the first two Amendments to the U.S. Constitution, in 1791, just a few years before the Whiskey Rebellion.

The need to call out the militia of one state to quell a disturbance in another highlighted the inadequacy of the federal army of that time. It illuminated sectarian fears, in that an army of Virginians was marching through Pennsylvania. (The next time that would occur would be on the march to Gettysburg.) After this episode in 1794, the central government began to build a national military capability based upon a standing army, with an industrial base of armories and associated vendors. The use of federalized militia to enforce police powers and execute the laws also led to a robust debate that has lasted through today. Almost a century after the Whiskey Rebellion, the principle was embodied in the national policy behind the Posse Comitatus Act of 1878.

The sense of unfairness caused by citizens having to travel great distances to confront their government in a federal courthouse led to the establishment of numerous federal District Court jurisdictions, in particular the Western District of Pennsylvania located at Pittsburgh. "Just in case," President Washington must have been thinking. Incidentally, this philosophy of locating courts near the citizens also led to a national political consensus that state courts should be located near to the people as well, resulting in the development of relatively compact county jurisdictions as the United States expanded to the west. This was a key element in the shaping of an "American" political character, and the development of American participatory democracy. People still say that "All politics is local."

In today's world, American taxpayers routinely part with 40-50% of their income in the form of federal, state, and local taxes. It might seem strange to the modern mind that the collection of a tax on whiskey would usher in a defining episode in the history of the United States. But this says more about the loss of national memory of people today than about the political values and motives of the whiskey insurrectionists. In many respects, the fault lines of the Whiskey Rebellion are still present in contemporary society, if you understand the issues and know where to look. And absent Mr. Hamilton's tax on whiskey and the rebellion that it sparked, the United States of America would be a very different nation. The world would be a very different place.

One last note…If you want to sample the rye whiskey of old, the closest brand you can find on the market today is Old Overholt. If you cannot locate a bottle of "O.O." (it is hard to find), then try a sip of Jim Beam Straight Rye Whiskey. Even if you do not drink hard liquor, take a taste. You will be reliving history.

Regards,

Byron King,
for The Daily Reckoning

The Whiskey Rebellion, Part III: Ending the Rebellion originally appeared in the Daily Reckoning. The Daily Reckoning, published by Agora Financial provides over 400,000 global readers economic news, market analysis, and contrarian investment ideas. Recently Agora Financial released a video titled "What Causes Gas Price to Increase?".

Afterburner with Bill Whittle: A Great Way to Win and Lose

Posted: 16 Aug 2012 02:42 PM PDT

The setup for the video below reads: "Rep. Paul Ryan (R-WI) has energized the 2012 race for the White House since Mitt Romney tapped him as his pick for vice president. Bill Whittle wants to know why Ryan is the only public servant in America to propose a serious plan to save the nation from certain fiscal ruin. He is also, win or lose, the best man on the ticket this year. Hear why."

 

Worthy of sharing. 

Source: Afterburner via YouTube in association with PJ Media
http://www.youtube.com/watch?v=3778luxnpI0&feature=player_detailpage

In The News Today

Posted: 16 Aug 2012 02:38 PM PDT

China Is Looking Into Taking Over One Of Africa's Biggest Gold Miners  by Matthew Boesler on Aug 16, 2012

Barrick Gold, the world's biggest gold producer, announced today that they are in talks to sell the 74 percent stake in its African mining business to China National Gold Group Corporation, a state-owned enterprise in

Continue reading In The News Today

Gold Daily and Silver Weekly Charts - Ben Bernanke, With A Printing Press, On the Comex

Posted: 16 Aug 2012 02:24 PM PDT


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The Gold Market May Stun Participants With A Move To $6,300

Posted: 16 Aug 2012 02:22 PM PDT

Today Tom Fitzpatrick told King World News, "We see no reason why this gold trend cannot perform as well as the last bull market in gold between 1970 and 1980." Fitzpatrick also stated that a replication of that move, "... will take gold to $6,300."


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Gold Investment Demand and India, China Demand Down; Central Bank Demand Doubles

Posted: 16 Aug 2012 02:18 PM PDT

Today's AM fix was USD 1,603.50, EUR 1,306.74, and GBP 1,021.34 per ounce. Yesterday’s AM fix was USD 1,594.75, EUR 1,293.60 and GBP 1,016.74 per ounce. Silver is trading at $27.91/oz, €22.81/oz and &ound;17.85/oz. Platinum is trading at $1,401.00/oz, palladium at $574.40/oz and rhodium at $1,075/oz.


Gold "Trapped" in Same Range for Over 2 Months

Posted: 16 Aug 2012 02:10 PM PDT

SPOT MARKET prices for Buying Gold hovered just above $1600 per ounce Thursday morning in London, well within their trading range of recent weeks, having risen back above that level amid ongoing speculation over quantitative easing. "Gold remains trapped in a range where it has been for two-and-a-half months," says a note from bullion bank Scotia Mocatta.


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