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Sunday, September 16, 2012

Gold World News Flash

Gold World News Flash

How High Will Silver Go? – Office Series 17

Posted: 15 Sep 2012 09:34 PM PDT

Vietnam central bank to inject more Gold into market

Posted: 15 Sep 2012 08:30 PM PDT

from Bullion Street:

Reiterating it's commitment to ensure enough gold supply in the market, Vietnam's central bank.

The State Bank of Vietnam said the Saigon Jewelry Company began to recast deformed gold bars on August 25 and plans to issue a total of 48,000 taels (1.8 tons) of gold onto the market by early next month.

Last week, the central bank officially made Saigon Jewelry Company (whose SJC-branded bullion already accounted for 90 percent of the local market) Vietnam's sole bullion producer.

The long-anticipated move came after the central bank said it would take over gold production to tighten control over the market. From now on, Saigon Jewelry will only produce bullion based on orders from the central bank, according to a statement from the government.

Read More @ BullionStreet.com

Top 14 Reasons To Buy Silver – Full Version

Posted: 15 Sep 2012 07:49 PM PDT

[Ed. Note: You absoultely must re-watch the clip from 13:05 - 18:15. As I have told Chris Duane, if people truly understood how absolutely incredibly difficult physical silver is to find, mine, refine & get to market, APMEX, Gainsville, LibertyCPM, Tulving & Provident would be sold out by morning.]

from TruthNeverTold :

The Fraud of Negative Gold/Silver Lease Rates

Posted: 15 Sep 2012 07:30 PM PDT

by Jeff Nielson, Bullion Bulls Canada:

Experienced precious metals investors are familiar with the topic of "negative lease rates" for gold and silver bullion. However, even novice investors can infer what is being discussed: paying someone to "borrow" gold/silver bullion.

In general, any time we contemplate a situation where lenders are paying borrowers to borrow, the word "dump" immediately comes to mind. This is because we begin the scenario with a lender choosing to enter into a transaction with the deliberate outcome of losing money. Because the world of commerce is entirely devoted to earning profits rather than creating losses, this automatically also implies market-manipulation – and thus fraud.

It is with this general context that we can now look at the particular subject of the gold and silver markets, where lease-rates are now usually negative (and are negative again currently). With negative lease rates creating a prima facie presumption of manipulation and fraud, the issue then becomes whether the particular fundamentals of the gold and silver markets either support or refute that presumption of fraud.

The easiest way to approach this issue is by asking ourselves a question: are there conditions where it might make some crude "business sense" to enter into a transaction with the deliberate intent of losing money? This is ultimately a fairly simple question to answer since when we examine any market, we quickly discover that it is very difficult to construct even hypothetical circumstances where it would make sense to lease that asset at negative prices (other than illegal/nefarious purposes).

Read More @ BullionBullsCanada.com

Silver To Surge 433% From Current Levels

Posted: 15 Sep 2012 06:30 PM PDT

from KingWorldNews:

Today Egon von Greyerz told King World News that silver is going to surge a remarkable 433% from current levels. Greyerz, who is founder and managing partner at Matterhorn Asset Management out of Switzerland, also said the move in silver could take place, "… in the next twelve months."

Here is what Greyerz had to say: "Gold is now up 13% this year after having been up 19% compound annual growth in the last ten years. Gold is going up every year, paper money has been going down, and that will continue because of the amount of money printed."

Greyerz continues @ KingWorldNews.com

9/11: The Mysterious Collapse of WTC Building 7 was Not An Inside Job

Posted: 15 Sep 2012 05:54 PM PDT

Clipboardwtc7 9/11: The Mysterious Collapse of WTC Building 7 was Not An Inside Job

Preface:  If you believe that the government always tells the truth, you have gotten lost in a bad neighborhood, and you should turn around and get back on the freeway as quickly as possible.

If you believe that politics, war and terrorism do not greatly affect your lifestyle, your investment portfolio and the economy, you are sadly mistaken.  See this, this, this, this and this.

If, on the other hand, you believe that 9/11 was an inside job, then please point out any inaccuracies, shortcoming or erroneous conclusions contained within the post.   Please don’t just label it as being a “limited hang-out” propaganda sell-out hit piece … instead, if you believe it is wrong, please link to actual evidence which disproves what I am saying, or which adds pieces of information which you think are missing.  Maybe I’ll agree with you, maybe I won’t.  But I will consider every comment.

People who state that 9/11 was an inside job are claiming that it is a false flag operation which killed people, was used to justify wars in Iraq and elsewhere and a power grab in the U.S.

But  World Trade Center building 7 – the third building to collapse on September 11th – has nothing to do with any inside job:

  • No one died as a result of the collapse
  • No airplane hit the building, and so it was not directly involved in the terrorist attack
  • No wars were launched to avenge WTC7
  • No power grabs or loss of civil liberties ensued because of the collapse of this building
  • Unlike the rest of 9/11, the government has been very quiet about its destruction

As such, the collapse of the building – also known as the “Solomon Brothers Building”  – was not an inside job.

Of course, the building might have been demolished to save lives.  For example, Paul K. Trousdale – a structural engineer with decades of experience – says:

I had always thought the 3rd building was destroyed to prevent unpredictable collapse.

(some point to the World Trade Center owner's statement about the decision to "pull" the building as confirming Trousdale's theory).

So why am I wasting your valuable time in discussing this?

Because the government – as part of its political cover-up of negligence before and on 9/11 – pretended that the building collapsed due to “natural causes”.  This should not be entirely surprising … we know that government personnel sometimes misspeak about things like the economy or Iraq and weapons of mass destruction, and they may also have made some minor errors peripherally related to 9/11:

Again, this post has nothing to do with “9/11 inside job”: no one died when building 7 collapsed.

What Do the Experts Say?

What does the evidence show about the Solomon Brothers Building in Manhattan?

Numerous structural engineers – the people who know the most about office building vulnerabilities and accidents – say that the official explanation of why building 7 at the World Trade Center collapsed on 9/11 is “impossible”, “defies common logic” and “violates the law of physics”:

The collapse of WTC7 looks like it may have been the result of a controlled demolition. This should have been looked into as part of the original investigation

  • Robert F. Marceau, with over 30 years of structural engineering experience:

    From videos of the collapse of building 7, the penthouse drops first prior to the collapse, and it can be noted that windows, in a vertical line, near the location of first interior column line are blown out, and reveal smoke from those explosions. This occurs in a vertical line in symmetrical fashion an equal distance in toward the center of the building from each end. When compared to controlled demolitions, one can see the similarities

  • Kamal S. Obeid, structural engineer, with a masters degree in Engineering from UC Berkeley and 30 years of engineering experience, says:

Photos of the steel, evidence about how the buildings collapsed, the unexplainable collapse of WTC 7, evidence of thermite in the debris as well as several other red flags, are quite troubling indications of well planned and controlled demolition

  • Steven L. Faseler, structural engineer with over 20 years of experience in the design and construction industry:

    World Trade Center 7 appears to be a controlled demolition. Buildings do not suddenly fall straight down by accident

  • Alfred Lee Lopez, with 48 years of experience in all types of buildings:

    I agree the fire did not cause the collapse of the three buildings [please ignore any reference in this essay to the Twin Towers.  This essay focuses solely on Building 7]. The most realistic cause of the collapse is that the buildings were imploded

  • Ronald H. Brookman, structural engineer, with a masters degree in Engineering from UC Davis, writes:

    Why would all 47 stories of WTC 7 fall straight down to the ground in about seven seconds the same day [i.e. on September 11th]? It was not struck by any aircraft or engulfed in any fire. An independent investigation is justified for all three collapses including the surviving steel samples and the composition of the dust

  • Graham John Inman points out:

    WTC 7 Building could not have collapsed as a result of internal fire and external debris. NO plane hit this building. This is the only case of a steel frame building collapsing through fire in the world. The fire on this building was small & localized therefore what is the cause?

In my view, the chances of the three buildings collapsing symmetrically into their own footprint, at freefall speed, by any other means than by controlled demolition, are so remote that there is no other plausible explanation

Near-freefall collapse violates laws of physics. Fire induced collapse is not consistent with observed collapse mode . . . .

How did the structures collapse in near symmetrical fashion when the apparent precipitating causes were asymmetrical loading? The collapses defies common logic from an elementary structural engineering perspective.

***

Heat transmission (diffusion) through the steel members would have been irregular owing to differing sizes of the individual members; and, the temperature in the members would have dropped off precipitously the further away the steel was from the flames—just as the handle on a frying pan doesn’t get hot at the same rate as the pan on the burner of the stove. These factors would have resulted in the structural framing furthest from the flames remaining intact and possessing its full structural integrity, i.e., strength and stiffness.

Structural steel is highly ductile, when subjected to compression and bending it buckles and bends long before reaching its tensile or shear capacity. Under the given assumptions, “if” the structure in the vicinity … started to weaken, the superstructure above would begin to lean in the direction of the burning side. The opposite, intact, side of the building would resist toppling until the ultimate capacity of the structure was reached, at which point, a weak-link failure would undoubtedly occur. Nevertheless, the ultimate failure mode would have been a toppling of the upper floors to one side—much like the topping of a tall redwood tree—not a concentric, vertical collapse.

For this reason alone, I rejected the official explanation for the collapse ….

We design and analyze buildings for the overturning stability to resist the lateral loads with the combination of the gravity loads. Any tall structure failure mode would be a fall over to its side. It is impossible that heavy steel columns could collapse at the fraction of the second within each story and subsequently at each floor below.We do not know the phenomenon of the high rise building to disintegrate internally faster than the free fall of the debris coming down from the top.

The engineering science and the law of physics simply doesn’t know such possibility. Only very sophisticated controlled demolition can achieve such result, eliminating the natural dampening effect of the structural framing huge mass that should normally stop the partial collapse. The pancake theory is a fallacy, telling us that more and more energy would be generated to accelerate the collapse. Where would such energy would be coming from?

Fire and impact were insignificant in all three buildings [Again, please ignore any reference to the Twin Towers ... this essay focuses solely on WTC7]. Impossible for the three to collapse at free-fall speed. Laws of physics were not suspended on 9/11, unless proven otherwise

The symmetrical “collapse” due to asymmetrical damage is at odds with the principles of structural mechanics

It is virtually impossible for WTC building 7 to collapse as it did with the influence of sporadic fires. This collapse HAD to be planned

  • James Milton Bruner, Major, U.S. Air Force, instructor and assistant professor in the Deptartment of Engineering Mechanics & Materials, USAF Academy, and a technical writer and editor, Lawrence Livermore National Laboratory

It is very suspicious that fire brought down Building 7 yet the Madrid hotel fire was still standing after 24 hours of fire. This is very suspicious to me because I design buildings for a living

  • David Anthony Dorau, practicing structural engineer with 18 years’ experience in the inspection and design of buildings under 5 stories tall, who worked as a policy analyst for the Office of Technology Assessment, an arm of the U.S. Congress providing independent research and reports on technological matters
  • Jonathan Smolens, 11 years experience, with a specialty in forensic engineering

The above is just a sample. Many other structural engineers have questioned the collapse of Building 7, as have numerous top experts in other relevant disciplines, including:

  • The top European expert on controlled building demolition, Danny Jowenko (part 1, part 2, part 3)
  • Harry G. Robinson, III – Professor and Dean Emeritus, School of Architecture and Design, Howard University. Past President of two major national architectural organizations – National Architectural Accrediting Board, 1996, and National Council of Architectural Registration Boards, 1992. In 2003 he was awarded the highest honor bestowed by the Washington Chapter of the American Institute of Architects, the Centennial Medal. In 2004 he was awarded the District of Columbia Council of Engineering and Architecture Societies Architect of the Year award. Principal, TRG Consulting Global / Architecture, Urban Design, Planning, Project Strategies. Veteran U.S. Army, awarded the Bronze Star for bravery and the Purple Heart for injuries sustained in Viet Nam – says:

The collapse was too symmetrical to have been eccentrically generated. The destruction was symmetrically initiated to cause the buildings to implode as they did

Watch this short video on Building 7 by Architects and Engineers (ignore any reference to the Twin Towers, deaths on 9/11, or any other topics other than WTC7):

 

Fish In a Barrel

Poking holes in the government’s spin on Building 7 is so easy that it is like shooting fish in a barrel.

As just one example, the spokesman for the government agency which says that the bui


Guest Post: Janet Tavakoli: Understanding Derivatives and Their Risks

Posted: 15 Sep 2012 05:31 PM PDT

Submitted by Adam Taggart of Peak Prosperity,

Global financial markets are awash in hundreds of trillions of dollars worth of derivatives. By some estimates, the total amount exceeds one quadrillion.

Derivatives played a central role in the 2008 credit crisis, as they had a brutal multiplying effect on the magnitude of the carnage. As a bad asset was written down, oftentimes there were derivative contracts written against it that resulted in total losses 10x greater than the initial write-down.

But what exactly are derivatives? How do they work?

And have we learned to treat these "weapons of mass financial destruction" (as Warren Buffet colorfully coined them) any more carefully in the aftermath of the global financial crisis?

Not really, claims Janet Tavakoli, derivatives expert and president of Tavakoli Structure Finance.

But the danger behind derivatives doesn't lie in their existence, she stresses. They play and important and constructive role in a healthy financial system when used responsibly.

But when abused, derivatives can create massive damages. So at the root of the "derivatives problem", Tavakoli stresses, is control fraud - the rampant unchecked criminal action by influential players on Wall Street. (This is the same method of fraud we've explored in past interviews with Bill Black [13] and Gretchen Morgenson [14]). Derivatives contracts are too often constructed in favor of these parties, who if they end up on the losing side of the trade, are able to socialize their losses. Until we address this root problem of corruption, says Tavakoli, derivatives (as well as other securities: stocks, bonds, etc) will continue to subject investors and our makets, overall, to unacceptable risk.

On The Nature of Derivatives

Derivative just means "derived from." It's just referencing another obligation, like a bond or an equity, or you can even reference an option. You can have options on futures, as an example. So a derivative is just like handing out fifty photocopies of a model; you know it's a derivative of something that actually exists.

 

Let's take an example. Goldman-Sachs used derivatives they used to help supply money to mortgage lenders by creating securitizations. And those securitizations were simply packaging up loans that were made by people like Countrywide. Countrywide of course was sued for fraud and settled for $8.3 billion with a number of different states for their predatory lending practices.

 

So you take these bad loans, you package them up in securities, and if you can combine them with leverage, it will always look like you are making a lot of money. That's classic control fraud, as William Black so eloquently keeps explaining to the market and as our financial media keeps ignoring. Now, how do you combine it with leverage? Well, derivatives are a very handy item if you want to lever something up. So as an example, the Wall Street Journal looked at a $38 million dollar sub-prime mortgage bond that Goldman created in June of 2006, and yet Goldman was able to leverage that up to cost around $280 million in losses to investors.

 

Now how did they do that? They did that with the magic of derivatives.

 

Because with a derivative, you can reference that toxic bond, that $38-million-dollar bond can be referenced, you can say If that bond goes up or down in value, the value of your securitization will change as that bond goes up or down in value. So you don't actually put that bond in a new securitization; instead you use a derivative – a credit derivative, in this case – to reference that bond. And so with the credit derivative, you can basically create as many of those referenced entities as you want. Now, they stopped at around thirty debt pools; they could have done a hundred and thirty.

 

Because with a credit derivative, all you're doing is saying you are going to look to the value of that bond and we're going to write a contract that your money is going to change when that bond goes up or down in value. That's a derivative. You're not actually putting the bond in; you're just referencing that bond. You are basically betting on the outcome of something. And you don't actually have to own its physical security. Now that's a derivative. And that's how derivatives were used to amplify losses and to magnify losses to make a bad situation much, much worse.                 

On Control Fraud

The root cause of it is control fraud - people in the financial system being able to do whatever they want and remain unchecked.. Where you have a group of individuals who are well rewarded for this kind of behavior and yet there is no punishment for this kind of behavior. As long as we keep that in place, you will just see more of the same. The way the Fed and regulators have chosen to deal with it is to pretend it's not happening and just continue to print money. And, as I say, it acts as a neurotoxin in the financial system, 

On Deriviative Risk in a Market Downturn

When you most need liquidity, it isn't there. And that's always true of leveraged products, by the way. You know, the thing that people overlook is – and this is why fraud is such a potent neurotoxin – when the market freezes, when you end in combination with that, when you have a liquidity event, then you see even good assets deteriorate in value quickly, as people need to sell them into a market that has no liquidity. So you get sucker punched a couple of different ways. So if you can't stand low liquidity, again, you shouldn't be playing with credit derivatives.

 

Now, if you custom tailor your contract, it will be more difficult to offload that contract because people will have to take the time to read the contract, if they bother to read it at all. But that said, that's not a reason not to re-write the language. With the ISDA standard documentation, the hype was, take our language, because if everyone accepts it, it will make it easier to trade these securities. And that was true, until credit events happen and then everyone pulls out their documents and says Oh my god, what did I sign?

On Gold and Countyparty Risk

Counterparty risk is the biggest risk.

And if you've been reading the Financial Times, you see a lot of people who are dismissive of gold. Well, here's an interesting thing: The Derivatives Exchanges accept gold in satisfaction of margin calls.

 

We had credit derivatives traders who wanted to have contracts on credit derivatives on the United States that would settle in gold. Because if obviously the United States is in credit trouble, what would you want? You would want gold.

 

You don't want euros, you don't want any other currency; you want gold.

 

The thing about gold is that you don't have counterparty risk. And if you look at the rebuttal for people who are saying that gold isn't money, well, I'm sorry, but gold is being used as money already on derivatives exchanges around the globe. Now that wasn't true five years ago. It's true today. J.P. Morgan itself, around eighteen months ago or two years ago, said it will accept gold as collateral in satisfaction of margin calls. So they've de facto said gold is a currency.

Click the play button below to listen to Chris Martenson's interview with Janet Tavakoli (54m:27s):

 

 

Click here to read the full transcript

Who says silver is second best? Price streaks ahead 572% in the past decade – beating even gold as the top-performing commodity

Posted: 15 Sep 2012 05:30 PM PDT

by Tanya Jeffries, Mail Online:

Silver has zoomed up in value by 572 per cent over the past decade – outstripping the performance of all other top commodities, including gold.

Gold, which saw a 428% price jump, was the second-best performer in a league table compiled by Lloyds TSB Private Banking. The top duo were followed by tin (414%), copper (406%) and lead (344%).

But there is a sting in the tail, because commodity prices have suffered an overall decline of 13 per cent in the past year due to fears of a global economic slump – and precious and base metals have fared worst with falls of 19 per cent in both sectors.

Some 15 of the 20 commodities tracked by Lloyds TSB have at least doubled in value since 2002, according to Lloyds TSB.

Silver proved the winner over 10 years because it is seen as a safe haven investment and is in high demand for industrial uses, it explained.

Read More @ dailymail.co.uk

How Investors Can Protect Themselves in a Politicized Economy

Posted: 15 Sep 2012 03:31 PM PDT

Right on the heels of the Republican and Democratic National Conventions, the recent Casey Research Summit in Carlsbad, California—cosponsored by SprottGlobal—focused on a timely theme: "Navigating the Politicized Economy." The somber revelations of the summit contrasted with the buzz of the party conventions. The Gold Report sat down with Louis James, Casey Research's chief metals and mining investment strategist, Rick Rule, founder of Global Resource Investments, and Marin Katusa, Casey Research's chief energy investment strategist, to discuss how investors can position themselves in a politically driven economy.


The Next Recession Will Be Triggered by Oil

Posted: 15 Sep 2012 01:27 PM PDT

I was confident that the Fed had already begun printing. That seemed quite evident by the overall action in the commodity markets, the dollar, and the fact that stocks were unable to correct in the normal timing band for a daily cycle low. Read More...



John Hathaway - $2,000 Gold Will Happen Very Quickly

Posted: 15 Sep 2012 12:41 PM PDT

Today John Hathaway told King World News that "$2,000 gold will happen quickly." The four decade veteran and prolific manager of the Tocqueville Gold Fund also believes gold will continue to surge, "I just don't think $2,000 is a convenient stopping point."

Hathaway went on to cover silver, but first, here is what he had to say about what is taking place in the gold market: "We've had a very strong move off the lows in gold. Bernanke has been saying all year long, 'No more QE.' What do we have? More QE, with no end in sight. I'm amazed that people are surprised by all of this. That's the way the shares and the metals have been acting."


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

Silver Liberation Army Readies Major Assault with New ‘Ethical Silver Keisers'

Posted: 15 Sep 2012 11:13 AM PDT

I just got some of these first-run 'Ethical Silver Keisers' this morning. The rounds are being minted at The Birmingham Mint here in the UK. These rounds will be produced using recycled silver and silver sourced from ESG compliant supplies … Continue reading →


This Past Week in Gold

Posted: 15 Sep 2012 10:08 AM PDT

$HUI confirmed a major sell signal early this year with a monthly close below 500, and will likely reverse back to a major buy if prices stay firm at current level in coming months. Long term signals are not actionable, they simply suggest ... Read More...



Dramatic pre-election action from an activist Fed

Posted: 15 Sep 2012 08:43 AM PDT

Steven Beckner with Futures writes:

The Federal Reserve is looking increasingly desperate as it layers one monetary stimulus program on top of another, but no one can fault Chairman Ben Bernanke and company for being timid.

Going into its Sept. 12-13 meeting, the Fed's policymaking Federal Open Market Committee (FOMC) already had renewed its Maturity Extension Program or "Operation Twist," and the New York Federal Reserve Bank was in the process of buying $267 billion in longer-term Treasury securities through year's end.

Now, the FOMC announced Thursday, the Fed also will buy $40 billion per month of agency mortgage-backed securities (MBS) in a third round of quantitative easing (QE3) — until further notice.

Unlike Operation Twist, whose bond purchases are financed by sales of shorter-term securities in the Fed's portfolio, this third round of large-scaled asset purchases will create new reserves and further expand the Fed's already bloated $2.8 trillion balance sheet. And that's not all. The two-fisted FOMC also is having another go at verbal easing.

The FOMC further delayed the expected date of initial short-term rate hikes until at least mid-2015. Since January it had been saying it expected the Federal Funds rate to stay near zero "at least through late-2014." Prior to that, dating back to August 2011, the FOMC was putting the funds rate "lift-off" date at "at least through mid-2013."

Just as important as the actions themselves are the FOMC's new strategy and new way of communicating. There were two important new approaches.

First l, the FOMC made QE3 open-ended. In contrast to QE1 and QE2, in which large amounts of total intended bond purchases were preannounced over a predetermined time period, QE3 has no fixed amount or end date.

The Fed will continue to buy $40 billion of MBS per month indefinitely. "If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability," the FOMC statement said.

This will give the Fed additional flexibility. As Bernanke said in his post-FOMC news conference, how much bond buying the Fed does will be "a function of how the economy evolves," he said. "If the economy is weaker, we'll do more. And in those cases probably rates would be pretty low in any case because the economy is looking weak."

He also made clear that the FOMC could adjust the composition, not just the size of its asset purchases from meeting to meeting.

The FOMC also augmented its "forward guidance" on the path of the funds rate in important ways, presumably to meet objections that its conditional pledge to hold rates low was not sufficiently credible. Beyond merely extending the anticipated zero rate period from "late-2014" to "mid-2015," the FOMC removed the conditionality it had been attaching to the calendar date.

Gone was the old caveat that "economic conditions — including low rates of resource utilization and a subdued outlook for inflation over the medium run — are likely to warrant exceptionally low levels for the federal funds rate...." Now the FOMC is stating bluntly that it expects to keep the funds rate near zero "at least through mid-2015."

What's more, the FOMC said it "expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens."

In case there were any doubts about the Fed's intentions, Bernanke told reporters the FOMC has an "obligation" to continue using its various policy tools until it sees "substantial" labor market improvement. "We will be looking for the sort of broad based growth in jobs and economic activity to signal sustained improvement in labor market conditions and sustaining employment," he said, maintaining that low inflation allows the Fed to do that.

Even if inflation rises above the 2% target, the FOMC will not necessarily desist, he implied. In that event, the FOMC will "take a balanced approach," he said. "We bring inflation back to the target over time, but we do it in the way that takes into account the deviations from both of their targets."

Why did the FOMC take these dramatic steps?

Well, the FOMC explained its action by saying it was "concerned that, without further policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions."

Many will point to the dismal August employment report, with its meager 96,000 non-farm payroll rise; 41,000 downward revision to prior months and 368,000 plunge in labor force participation, or to Bernanke's Aug. 31 speech in Jackson Hole, where he expressed "grave concern" about "the stagnation of the labor market" and vowed to "provide additional policy accommodation as needed."

But the Sept. 13 decision was not a result of one month's jobs data, ugly as they were. Nor did it happen because Bernanke had a sudden epiphany in the shadows of the Grand Tetons. It was the culmination of a series of disappointments going back months.

Remember that, as the year started, the labor market seemed to be on the mend. From December through February, payrolls rose an average 245,000 per month. But Bernanke was skeptical, warning in March that "further significant improvements ... will likely require a more-rapid expansion of production and demand..."

His Okun's Law-based fears that the economy wasn't growing fast enough to reduce unemployment soon were realized. In March, payroll gains dipped to 143,000 and then decelerated even more sharply — to 68,000 in April, 87,000 in May and 45,000 in June.

The July employment report, released a couple of days after the FOMC decided on Aug. 1 to stay on hold and take "more time" to assess the impact of the renewed "Operation Twist" bond-buying program, was seen as encouraging by officials who were uncertain about whether more easing was needed when it showed non-farm payrolls rebounding by 163,000. But less than a week before the FOMC convened in September, that number was revised down to 141,000, and the 96,000 August rise suggested a return to the dreary pre-July pattern.

And the FOMC was convinced that the outlook wouldn't be much better unless it did more to cushion the economy against downside risks from the fiscal cliff and Europe. As they performed their quarterly ritual of revising their three-year economic projections and federal funds rate forecasts, Federal Reserve Bank Presidents and Fed governors did not see much improvement on the horizon.

Still, why did  the FOMC  go ahead with new easing measures at this politically sensitive time?Why — when a vocal cadre of officials have been warning that the Fed has done all it can effectively do in the face of non-monetary impediments and that the cost of further easing would exceed the benefits? Why do QE3 when the Fed already had one stimulus program — Operation Twist — running? Why delay rate hikes when officials and academics alike have questioned the credibility and efficacy of such pledges?

There are two basic answers:

1. The FOMC majority believes that its statutory dual mandate commands the Fed to use the tools at its disposal even though internal and external factors may limit their impact. If there are forces such as mortgage lending constraints and business and household uncertainty about taxes, regulation and health care costs that are gumming up the "monetary transmission mechanism," well then, the Fed just needs to push all the harder on its policy levers.

An ancillary point is that the FOMC majority believes the economy's woes are primarily "cyclical," which is to say because of a shortfall of aggregate demand, and thus amenable to monetary policy.

2. If the normal interest rate channel through which lower rates are supposed to work is clogged, that doesn't render monetary policy impotent in the eyes of the FOMC majority. There are other channels through which unconventional easing measures can work that policymakers would rather not talk about publicly — namely the exchange rate channel. Lower rates and rate expectations should, in theory lower the value of the dollar, making U.S. goods more competitive in global markets and boost net exports.

The Fed also hopes that by holding rates very low, investors will put their money into riskier assets such as stocks, yielding a positive "wealth effect" on the economy.

Well, what's next?

The Fed, in its limited experience with QE has never done an "open-ended" asset purchase program. QE1 and QE2 involved pre-announced and well-defined large amounts of bond buying with a fixed end date. QE3, as designed, seems like a sensible departure and likely garnered support it might not otherwise have had because of its flexibility.

For one thing, it parallels more conventional monetary policymaking in which, in normal times, the FOMC decides meeting by meeting how much to adjust the federal funds rate. It will enable the FOMC to honestly say it is not wedded to a predetermined amount of easing and can terminate the bond buying, or extent and enlarge it, depending on the circumstances.

How much or how little the FOMC ultimately will decide to do is anyone's guess. It will depend, among other things, on the election's outcome, the steepness of the fiscal cliff, the success of the European Central Bank's latest bond-buying adventure and the magnitude of the Chinese slowdown.

One thing is for sure, until such time as the composition and/or leadership of the FOMC changes significantly and so long as it has tools left to use, the Fed will keep plugging away at stimulating the economy.

September 14, 2012 (Source: Futures)

http://m.futuresmag.com/2012/09/14/dramatic-pre-election-action-from-an-activist-fed?eNL=50536753150ba05e0d000239&utm_source=MarketWeekender&utm_medium=eNL&utm_campaign=FUT_eNL&_LID=120883451

All Signs Pointing to Gold

Posted: 15 Sep 2012 08:35 AM PDT

Frank Holmes, U. S. Global Investors writes:

With another syringe of quantitative easing being injected into the U.S. economy's bloodstream, Ben Bernanke is giving the markets their liquidity fix. The Federal Reserve's action reaffirmed my stance I've reiterated on several occasions that the governments across developed markets have no fiscal discipline, opting for ultra-easy monetary policies to stimulate growth instead.

The government's liquidity shot promptly boosted gold and gold stocks, as investors sought the protection of the precious metal as a real store of value. You can see below the strong correlation between the rising U.S. monetary base and growing gold value. Since the beginning of 1984, as money supply has risen, so has the price of gold.

Urban Incomes Exceeding Rural Income in China

The dollar declined due to the Fed's easing, which isn't surprising, given the fact that gold and the greenback are often inversely correlated, and increasing money supply generally causes the currency to fall in value.

What's interesting is that currency decline was what Richard Nixon sought to avoid when he ended the gold standard in 1971 and announced that the country would no longer redeem its currency in gold. During his televised speech to the American public, Nixon translated in simple terms the "bugaboo" of devaluation, saying, "if you are among the overwhelming majority of Americans who buy American-made products in America, your dollar will be worth just as much tomorrow as it is today."

As you can see below, more than 40 years later, a dollar is worth only 17 cents. This significant decline in purchasing power only strengthens the case of gold as a store of value, likely prompting Global Portfolio Strategist Don Coxe to propose making Nixon the "patron saint of gold investors," during this year's Denver Gold Forum.

Historical Employment Shifts Across Asia

As Milton Friedman once said, "Only government can take perfectly good paper, cover it with perfectly good ink and make the combination worthless."

In its long-term asset return research charting economic history in comparison to current markets, Deutsche Bank illustrates multiple ways how "the world dramatically changed post-1971 relative to prior history." While the research firm makes it clear that returning to the gold standard would be "disastrous," DB finds that the "lethal cocktail of unparalleled levels of global debt and unparalleled global money printing" are relatively new governmental developments.

Prior to the last four decades, deficits only occurred in extreme situations of war or severe economic setbacks, such as the Great Depression. Balanced budgets were a "routine peace time phenomena in sound economies." Since 1971, surpluses have been rare. The U.K. has had an annual budget deficit 51 out of the past 60 years and Spain has had 45 years of deficit spending over the past 49 years, according to DB.

 

Top 10 Net Oil Importers, 2011


Many developed countries are in a predicament, as fiscal austerity attempts have led to weaker-than-expected growth in Greece, Ireland, Portugal, Spain and Italy. DB asks, "Can we really be confident that the developed economies that we have created over the last 40 years have the ability to withstand the effects of austerity and cut backs? Do our modern day econometric models have the ability to understand the impacts of fiscal retrenchment after a financial crisis having been calibrated in a period of excessive leverage?"

Countless discussions over fiscal and monetary policies will carry on, but time will tell. Ian McAvity, editor of Deliberations on World Markets, says, "Excessive debt creates deflationary drag that they repeatedly fight by throwing fresh 'liquidity' or 'stimulus' at, to debauch the currency of that debt … For private investors, gold is the best medium for self-protection and preservation of purchasing power in my view." I agree. Rising money supply, declining purchasing power and annual deficits are giving the all-clear to include gold in your portfolio.

Many others appear to agree with us, as sentiment has shifted in favor of the metal in recent days: According to Morgan Stanley's survey of 140 institutional investors in the U.S., gold sentiment was at its highest bullish reading since July 2011 and the largest month-over-month increase during the survey's three-year history!

So, gold investors, if you haven't put in your orders, consider getting them in quickly, because the bulls are buying. Credit Suisse saw "massive inflows" into gold exchange-traded products in August after experiencing significant outflows compared to crude oil and the broader market in March, April, May and July. August shows a clear preference toward gold.

China's Crude Oil Imports by Sources, 2011

We generated lots of interest when we showed our standard deviation chart a few weeks ago, so I updated it through September 13. Although gold has been on a tear recently, breaking through the stumbling block of $1,600 and climbing to $1,770 by the end of the week, bullion still looks attractive, with a low sigma reading of -1.7

China's Crude Oil Imports by Sources, 2011

A look at a histogram shows how many times gold bullion historically fell in this sigma range. Today's sigma of -1.7 has occurred only about 2 percent of the time. Bernanke and Draghi only made the decision more obvious for gold and gold stock buyers.

China's Crude Oil Imports by Sources, 2011

The Fed and ECB also make my job presenting at the Hard Assets conference in Chicago very exciting. Don't miss my presentation on September 21. I invite you to be there in person if you live in close proximity to Chicago, or you can download a pdf at www.usfunds.com following the meeting.

You might also learn something you didn't know with our newest interactive slideshow, the 10 Surprising Uses of Commodities. Check it out and share with a friend.

September 14, 2012 (Source: U S Global Investors)

http://www.usfunds.com/investor-resources/investor-alert/

 

QE3 Removes Price Ceiling for Gold and Silver

Posted: 15 Sep 2012 07:18 AM PDT

Peter Schiff, chief executive officer of Euro Pacific Capital, recently gave an interview discussing the prospects of gold. When asked how high the price of gold may reach, he responded that there is no ceiling for the precious metal, because there is no limit on how much money will be printed. The Federal Reserve’s latest announcement confirms this theory, and paves the way for much higher gold and silver prices.


QE3 will drive up gold price but won't solve economic problems

Posted: 15 Sep 2012 06:34 AM PDT

Paul Brent writes: Gold's sharp price increase in response to yesterday's QE3 announcement compared to a smaller increase in equity prices indicates the futility of more fiat currency expansion, according to Bullion Management Group Inc.'s CEO Nick Barisheff. It confirms what he sees as gold priced at $10,000 an ounce.After yesterday's announcement of QE3, something dramatic occurred in the price of all precious metals. Gold futures shot 2.2% higher yesterday while the S&P was up 1.6%. Platinum, another precious metal, also rose more than 2% and silver jumped almost 4%.


Retirement Accounts: Problems Above And Beyond Sentinel Ruling and Custodian Integrity

Posted: 15 Sep 2012 05:10 AM PDT

Jim Sinclair's Mineset My Dear Extended Family, There is one more serious problem with all retirement accounts above and beyond the Sentinel Ruling and the integrity of the custodian. If a systemic failure and lower dollar causes an unwanted increase in interest rates in light of the Fed as the major consumer of treasury paper in the last 18 months, how would the US government fund itself? You can be certain that China and the Middle East are not coming to the rescue. One way would be to liquidate retirement accounts ($2 trillion USD) and put treasury paper into them to save the poor worker and coming retirees from loss as MSM and MOPE would say. Look around the world at governments either eyeing retirement programs or invading them. You will find it is already happening. Please, at a minimum, stop creating and funding them. Regards, Jim...


Transforming Collateral is the Newest Ponzi

Posted: 15 Sep 2012 02:00 AM PDT

Wall Street changes the rules any time it is threatened, rule changes claim to prevent a meltdown, collateral transformation, Congress demands to see more details in derivatives trades, limited amount of T-bills available to soak up demand, collateral that is rented. The risk is only going to be shuffled around.

Why Did Ben Bernanke Cross the Road?

Posted: 15 Sep 2012 01:10 AM PDT

Bullion Vault


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