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Sunday, November 18, 2012

Gold World News Flash

Gold World News Flash

This Metal Is Gearing Up For A Major Bull Run and It's Not Gold or Silver

Posted: 17 Nov 2012 10:00 PM PST

by Sean Brodrick, SilverBearCafe.com:

You may think of platinum as a jewelry metal. But nowadays, platinum is more often used as an autocatalyst — a catalytic converter — in diesel engines.

So far, scientists just haven't found a good substitute for the metal. And that makes this metal even-more-precious in value.

For my Global Resource Hunter members, I've written about the labor strikes going on in South Africa. What you may not know is that South Africa supplies around 80% of the world's platinum.

Read More @ SilverBearCafe.com

Real Estate Sales Collapse in Paris and Ile-de-France; New Home Starts Lowest Since 1998; VAT Hike to Make Matters Much Worse

Posted: 17 Nov 2012 07:40 PM PST

Hiking the VAT in face of falling demand is blazing stupidity. Apparently a VAT hike is an expectation rather than a done deal, but given other examples of stunning stupidity from France, including tax hikes and the Economically Insane ... Read More...



Delaware Coin Collector Taking State To Court Over Scrap Metal License Law

Posted: 17 Nov 2012 06:30 PM PST

from 10tv.com:

DELAWARE, Ohio – Mike Tomaso of Delaware has been in the business of buying and selling coins for more than three decades. Tomaso also used to purchase and sell scrap gold and silver, including jewelry, but he said he's been forced to stop.

"So, it was a minority of the business, but yet substantial, the difference between surviving or not," said Tomaso. State law requires those who buy and sell precious metals to purchase a state license.

With a license, he would be able to once again buy and sell scrap metal. But the license would require that he give the state and local law enforcement access to his store and his books anytime.

Read More @ 10tv.com

As Unemployment & Economic Hardship Soars, Americans Turn To… Beer

Posted: 17 Nov 2012 05:30 PM PST

Beer For Breakfast: 16% of the Calories Consumed by U.S. Public Are From Alcohol

from Silver Vigilante:

According to Food Product Designs, 16% of all calories consumed by those in the US are from alcoholic beverages. Nearly one-third of men, 32.7%, and almost one in five women, 18%, take in some amount of calories from alcohol on each day. The men intake three times the amount (150 vs 50) of women. While men drink typically beer, on average, women enjoy a more colored melange of beer, wine and spirits. The average child consumes 16% of its calories from added sugars, so perhaps there is a correlation or maybe its merely coincidental.

Millions of beers are consumed by the US, and it is likely that for many, many individuals, more than 16% of their calories are consumed on average by alcohol. It's almost as if, you're either a foodie or a drunk, amid the global depression: you've got to choose between either more and more expensive foods or more and more expensive alcohol.

Read More @ Silver Vigilante

Niall Ferguson On China's Gold And The "Tremendous Flux In International Order"

Posted: 17 Nov 2012 05:19 PM PST

"This is a time of tremendous flux in the international order" is how Harvard's Niall Ferguson describes the world in which we live as he opines expertly on the change in China, Europe's pending 'lost decade', and the Middle East's post-Arab Spring disestablishment of the 1970s 'order' with GoldMoney's Alasdair Macleod. From China's need to begin privatizing SOEs and globalizing the RMB (with an interesting focus on the introduction of reliable property rights to 'enable' the middle class) to concerns about its large dollar holdings (and the top-down and bottom-up diversification into gold that continues); Ferguson notes that the ongoing attempt to diversify its wealth and revenues (stock and flow) is relatively limited by the ability to secure hard assets but adds that as the world's 'trade' center of gravity shifts east at a very fast pace so gold will flow from "the West to the rest" as Western power declines and the Asia bloc rises. A fascinating macro-economic and geo-political discussion that concludes with a shift through Russia's energy quagmire, Japan's debt problems, and the faulty design of the European Union.

 

Guest Post: Shale Gas Will Be The Next Bubble To Pop

Posted: 17 Nov 2012 03:57 PM PST

Submitted by James Stafford of OilPrice.com,

The "shale revolution" has been grabbing a great deal of headlines for some time now. A favourite topic of investors, sector commentators and analysts – many of whom claim we are about to enter a new energy era with cheap and abundant shale gas leading the charge. But on closer examination the incredible claims and figures behind many of the plays just don't add up. To help us to look past the hype and take a critical look at whether shale really is the golden goose many believe it to be or just another over-hyped bubble that is about to pop, we were fortunate to speak with energy expert Arthur Berman.

Arthur is a geological consultant with thirty-four years of experience in petroleum exploration and production. He is currently consulting for several E&P companies and capital groups in the energy sector. He frequently gives keynote addresses for investment conferences and is interviewed about energy topics on television, radio, and national print and web publications including CNBC, CNN, Platt's Energy Week, BNN, Bloomberg, Platt's, Financial Times, and New York Times. You can find out more about Arthur by visiting his website: #0000ff;">http://petroleumtruthreport.blogspot.com

In the interview Arthur talks about:

•         Why shale gas will be the next bubble to pop
•         Why Japan can't afford to abandon nuclear power
•         Why the United States shouldn't turn its back on Canada's tar sands
•         Why renewables won't make a meaningful impact for many years
•         Why the shale boom will not have a big impact on foreign policy
•         Why Romney and Obama know next to nothing about fossil fuel energy

Interview conducted by James Stafford of Oilprice.com

Oilprice.com: How do you see the shale boom impacting U.S. foreign policy?

Arthur Berman: Well, not very much is my simple answer.

A lot of investors from other parts of the world, particularly the oil-rich parts have been making somewhat high-risk investments in the United States for many years and, for a long time, those investments were in real estate.

Now these people have shifted their focus and are putting cash into shale. There are two important things going on here, one is that the capital isn't going to last forever, especially since shale gas is a commercial failure. Shale gas has lost hundreds of billions of dollars and investors will not keep on pumping money into something that doesn't generate a return.

The second thing that nobody thinks very much about is the decline rates shale reservoirs experience. Well, I've looked at this. The decline rates are incredibly high. In the Eagleford shale, which is supposed to be the mother of all shale oil plays, the annual decline rate is higher than 42%.

They're going to have to drill hundreds, almost 1000 wells in the Eagleford shale, every year, to keep production flat. Just for one play, we're talking about $10 or $12 billion a year just to replace supply. I add all these things up and it starts to approach the amount of money needed to bail out the banking industry. Where is that money going to come from? Do you see what I'm saying?

Oilprice.com: You've been noted suggesting that shale gas will be the next bubble to collapse. How do you think this will occur and what will the effects be?

Arthur Berman: Well, it depends, as with all collapses, on how quickly the collapse occurs. I guess the worst-case scenario would be that several large companies find themselves in financial distress.

Chesapeake Energy recently had a very close call. They had to sell, I don't know how many, billions of dollars worth of assets just to maintain paying their obligations, and that's the kind of scenario I'm talking about. You may have a couple of big bankruptcies or takeovers and everybody pulls back, all the money evaporates, all the capital goes away. That's the worst-case scenario.

Oilprice.com: Energy became a big part of the election race, but what did you make of the energy policies and promises that were being made by both candidates?

Arthur Berman: Mitt Romney, particularly, talked about how the United States would be able to achieve energy independence in five years. Well, that's garbage.

Anybody who knows anything about oil, gas and coal, knows that that's absurd. We were producing a little over 6 million barrels a day thanks to an all-out effort in the shale oil play. We consume 15 million barrels of oil a day and that leaves the gap of 9 million barrels per day. At the peak of U.S. production, in 1970, the U.S. produced 10.6 million barrels per day. Like I said, either the guy doesn't know what he's talking about, or is making a big joke of it.

Obama didn't talk so much . . . He's a hugely green agenda kind of president and I'm not opposed to that, but he's certainly not for the oil and gas business. It wasn't until he got serious about thinking about his re-election that he decided to take credit for what really happened.

Oilprice.com: Japan recently announced that they are going to be phasing out nuclear power. What are your views on nuclear? Are we in a position to abandon this energy source?

Arthur Berman: No. Japan is a special case. The disaster at Fukushima, the nuclear reactor, was right on top of a major fault. So, that was a dumb place to put it.

To wholesale abandon nuclear power because one reactor was incredibly stupidly planned, to me seems like a bit of a . . . well, I can't tell people how they should react, but if I were a Japanese citizen, and the truth was that we have no oil, we have no coal, we have no natural gas, the next question is, "Well, if we get rid of nuclear, what are we going to do?"

It's a really good question to ask. If you don't have anything of your own, how are you going to get what you need? The answer is that they have to import LNG and that's very expensive.

Right now, natural gas is selling in Japan for $17 per million BTUs. You can buy the same BTUs in Europe for $9 today, or in the US for $3.25

Oilprice.com: What about Germany's decision to also phase out nuclear power?

Arthur Berman: For Germany to abandon nuclear… that decision is truly delusional because they haven't had any problems over there. Nor is Germany particularly earthquake prone or tsunami prone. They have forced themselves into a love relationship with Russia.

Oilprice.com: What are your views on Canada's tar sands? Are they a rich source of oil that the U.S. needs to exploit? Or do you think they're a carbon bomb, which could do irreparable damage to the climate?

Arthur Berman: Well, that's a very good question. I suppose they're both, as are virtually all things that burn. Right? They're a very rich source of oil. And they're dirty. It requires a lot of natural gas heating to convert them into some usable form, a lot of processing, but here's the thing, if the United States doesn't buy that oil from Canada, do you think Canada's just going to say, "Oh. Okay. Nevermind. We'll forget about all this."

No. They're going to sell it somewhere else. They'll probably sell it to Asia. So, the issue of the carbon bomb doesn't get resolved by the United States not taking the oil.

So, to me, that's off the table. Yes. I think it's an incredibly sensible play to get your oil from a neighbour, and a neighbour who you trust, and it doesn't require overseas transport and probably getting involved in periodic revolutions and civil uprisings.

Oilprice.com: Is there any technology, any development you see coming in the future that can help us get where we need to be? Is conservation really the only answer or do you have any hopes for some of the alternative energy technologies, such as solar or, even, some of these more advanced technologies such as Andrea Rossi's E-cat machine?

Arthur Berman: Oh. I have all the enthusiasm for technology that you could ask for. I'm a scientist and I love technology but I heard a very good presentation several years ago on your exact question and the man who gave a talk said, "I'm going to give you a rule to live by. If it's not on the shelf today, then a solution is no sooner than ten years in the future." So, when you talk about E-cat and you talk about algae and all this kind of stuff, it's not on the shelf today. So, that means it's in some sort of pilot stage of testing.

Work harder guys. Work harder and faster because you've got a lot of work to do. So, yes, I'm enthusiastic. I think there are some great ideas out there but I don't see any of them helping us in the coming five to ten-year period.

Oilprice.com: Environmentalists talk about the evil of fossil fuels, but have they really done their research to see how vital it is to pretty much everything that we base our modern lives upon?

Arthur Berman: Well, that's exactly right. My oldest son and his family until recently lived in California, and in California people think electricity comes from the wall. They don't have any idea that most of their electricity comes from horrible coal-fired power plants in New Mexico and Arizona. As long as they don't have to see it, they don't have a problem.

But, in this world, and in this life, we're all connected and if you see something you don't like, there's a good possibility that whatever they're doing there has something to do with something you're using. So, this is an issue.

Oilprice.com: Arthur, thank you for taking the time to speak with us. For those readers who may be interested in contacting Arthur please take a moment to visit his website: http://petroleumtruthreport.blogspot.com/

GATA consultants Kirby and Turk appear on 'Keiser Report'

Posted: 17 Nov 2012 02:22 PM PST

4:20p ET Saturday, November 17, 2012

Dear Friend of GATA and Gold:

GATA consultants Rob Kirby of Kirby Analytics in Toronto and GoldMoney founder James Turk appeared this week on Max Keiser's program on the Russia Today network, "The Keiser Report," to discuss manipulation of the gold and silver markets. GATA figures heavily in the discussion. The program is 26 minutes long and its video is posted at YouTube here:

http://www.youtube.com/watch?v=H4IBUTHyROs

Kirby appears at 2:29, Turk at 12:58.

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


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Prophecy Platinum Intercepts Best Pt+Pd+Au Grades Yet
at Wellgreen Project in Yukon Territory: 5.36 g/t

Company Press Release
Tuesday, September 11, 2012

VANCOUVER, British Columbia -- Prophecy Platinum Corp. (TSX-V: NKL, OTC-QX: PNIKF, Frankfurt: P94P) announces more results of its 2012 drill program on the company's fully-owned Wellgreen platinum group metals, nickel, and copper project in southwestern Yukon Territory, Canada. Four surface holes and four underground holes all intercepted significant mineralized widths, ranging from 28.5 meters (WS12-201) and up to 459.5 metres (WS12-193). Highlights include WU12-540, which returned 8.9 metres of 5.36 grams per tonne platinum, palladium, and gold; 1.73 percent copper; and 1.01 percent nickel within 304.5 meters of 0.66 g/t platinum-palladium-gold, 0.20 percent copper, and 0.27 percent nickel.

The surface drill program started in June and has completed 16 holes (assays pending for 12 holes) with two rigs now on site. The surface program continues to progress at a steady pace.

Prophecy Chairman John Lee commented: "Wellgreen is a very large nickel, copper, and platinum group metals project with near-surface high-grade zones. High-grade intercepts will be incorporated into resource modeling and mine planning in the pre-feasibility study. We expect further positive drill results from Wellgreen shortly."

Wellgreen features a low 2.59-to-1 strip ratio, is situated at an altitude of 1,300 meters, and is only 15 kilometers from the two-lane paved Alaska Highway. Those factors significantly minimize the project's indirect costs.

For the complete company statement with full tabulation of the drilling results, please visit:

http://prophecyplat.com/news_2012_sep11_prophecy_platinum_drill_results....

Risk Assets Are Ready To Get Red Hot & Soar

Posted: 17 Nov 2012 02:18 PM PST

On the heels of more volatile trading this week, today Michael Pento explains why risk assets are poised to soar. Michael Pento writes exclusively for King World News to let readers know what is happening globally that has gold set to explode to all-time highs. Here is Pento's piece: "Nearly every key factor behind a bullish gold price is now currently in place, save one. Once this single piece of uncertainty is removed, risk asset prices should soar."


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

Latest Buzz from PirateMyfilm.com

Posted: 17 Nov 2012 02:16 PM PST

thscapist Follow   Got silver?   Rebuzz Reply  


Guest Post: So How Many Ounces Of Gold (Or Silver) Should You Own?

Posted: 17 Nov 2012 01:29 PM PST

Submitted by Adam Taggart of Peak Prosperity,

This week, Chris talks with Jeff Clark, Senior Precious Metals Analyst at Casey Research, where he serves as editor of their Big Gold newsletter.

They tackle head-on many of the questions weary precious metals investors are wondering after enduing the volatile yet range-bound price action of gold and silver over the past year:

  • Have the fundamentals for owning gold & silver changed over the past year? No
  • What are they? currency devaluation/crisis, supply-chain risk, ore grade depletion
  • How should retail investors own gold? Mostly physical metal, some quality mining majors (avoid the indices), and ETFs only for trading
  • Is gold in a bubble? No
  • Could gold get re-monetized? Quite possibly
  • Where is gold flowing? From the West to the East. At some point, capital controls will be put in place

What the politicians are doing is the exact opposite of what they need to be doing. We continue adding to our debt, we continue raising the debt ceiling, we continue deficit spending, we continue borrowing money, and, of course, we continue printing money. We are doing the exact opposite of all the things that would lead us away from inflation. So yes, I think that is an important point.

 

I will add that inflation has occurred very quickly, very rapidly, very suddenly many times in the past, just in recent history. If you look back at the high inflationary times, just in the past 100 years here in the U.S., many of those that hit 12%, 14%, 15% -- two years prior to then, the CPI was completely benign. It was 1%, 2% – I think at one point it was 4% – and then all of a sudden within 24 months, it was 12%, 14%. So it can happen very suddenly, and my fear is that is what is going to happen this time. People are in a lull; no one is expecting it: the CPI is low; nothing is really happening with all this money printing; there has been no fallout. But I think that is the critical point. You cannot do these kinds of things we are doing forever and not experience any consequences. Sooner or later there are going to be consequences to what we are doing, and my fear is that it is going to be nasty, catch a lot of people off guard, and really hurt our society. The bottom line for me is, that is why I am buying gold and silver, still, to this day.

For these reasons and others, Jeff strongly believes everyone should have exposure to gold and silver as a defense for preserving the purchasing power of their weath. The key question is: how much exposure?

You want to focus on how many ounces you own, not necessarily looking at whether the price is $5 higher today than it was yesterday. How many ounces do you own? That is really the question you want to ask yourself, so you can focus on how much you are really going to need, and the amount really comes down to this.

 

For me, I am probably going to use some of this gold if we get high inflation. How are you going to protect your standard of living if we get some kind of runaway inflation? And let’s say it's not runaway hyperinflation; let’s just say it's high inflation, 10%, 15%. Remember it was 14% in 1980, so the odds of us getting high inflation are realistic. So if I am going to use that gold to cover my standard of living, you are going to need about two thirds of an ounce of gold for every thousand dollars of monthly expenses. If you want to protect your standard of living and not have your house be ravaged by inflation, so to speak, so that is a good guideline to follow.

 

So if inflation lasts a couple years, well, you are going to need 15 ounces of gold for every thousand dollars of monthly expenses. That is a good guideline to think about. And if your expenses are more per month, you are going to need more gold than that. If inflation lasts longer than two years, you are going to need more than that, but you can actually use the sales of gold and silver to protect your standard of living. You sell some gold and silver, you are going to get U.S. dollars or Canadian dollars with it and you can use the increase in the gold and silver price to offset the increase in the goods and services you are buying.

 

So I think that is the way to view it, to look at how you are going to use it. And so the focus again comes back to how many ounces do you own? So if you do not have any, you need to obviously start buying. 

Here are two tables -- one for gold and the other for silver -- Jeff offers in his newsletter to help investors calculate the requisite ounces needed to protect against rising inflation over time:

The point here is that you're probably going to need more ounces than you think. Look at your bank statement and assess how much you spend each month – and do it honestly.

 

The other part of the equation is how long we'll need to use gold and silver to cover those expenses. The potential duration of high inflation will dictate how much physical bullion we need stashed away. This is also probably longer than you think; in Weimar Germany, high inflation lasted two years – and then hyperinflation hit and lasted another two. Four years of high inflation. That's not kindling – that's a wildfire roaring through your back yard.

 

So here's how much gold you'll need, depending on your monthly expenses and how long high inflation lasts.

 

Ounces of Gold Needed to Meet Expenses During High Inflation
Monthly expenses in US dollars Monthly expenses in gold, oz* Inflation Duration
6 months  1 year  18 months 2 years 3 years 4 years 5 years 
$500
0.31
1.9
3.7
5.6
7.5
11.2
15.0
18.7
$1,000
0.63
3.8
7.5
11.3
15.0
22.5
30.0
37.5
$2,000
1.25
7.5
15.0
22.5
30.0
45.0
60.0
75.0
$3,000
1.88
11.3
22.5
33.8
45.0
67.5
90.0
112.5
$4,000
2.50
15.0
30.0
45.0
60.0
90.0
120.0
150.0
$5,000
3.13
18.8
37.5
56.3
75.0
112.5
150.0
187.5
$10,000
6.25
37.5
75.0
112.5
150.0
225.0
300.0
375.0
$20,000
12.50
75.0
150.0
225.0
300.0
450.0
600.0
750.0
*Based on $1,600 gold price

 

If my monthly expenses are about $3,000/month, I need 45 ounces to cover two years of high inflation, and 90 if it lasts four years. Those already well off should use the bottom rows of the table. How much will you need?

 

Of course many of us own silver, too. Here's how many ounces we'd need, if we saved in silver.

 

Ounces of Silver Needed to Meet Expenses During High Inflation
Monthly expenses in US dollars Monthly expenses in silver, oz* Inflation Duration
6 months  1 year  18 months 2 years 3 years 4 years 5 years 
$500
17.9
107.1
214.2
321.3
428.4
642.6
856.8
1,071.0
$1,000
35.7
214.3
428.5
642.8
857.0
1,285.6
1,714.1
2,142.6
$2,000
71.4
428.5
857.0
1,285.6
1,714.1
2,571.1
3,428.2
4,285.2
$3,000
107.1
642.8
1,285.7
1,928.5
2,571.4
3,857.0
5,142.7
6,428.4
$4,000
142.9
857.1
1,714.2
2,571.3
3,428.4
5,142.6
6,856.8
8,571.0
$5,000
178.6
1,071.4
2,142.8
3,214.3
4,285.7
6,428.5
8,571.4
10,714.2
$10,000
357.1
2,142.6
4,285.0
6,427.8
8,570.4
1,2855.6
17,140.8
21,426.0
$20,000
714.3
4,285.7
8,571.4
12,857.0
17,142.7
25,714.1
34,285.4
42,856.8
*Based on $28 silver price

 

A $3,000 monthly budget needs 1,285 ounces to get through one year, or 3,857 ounces for three years.

 

I know these amounts probably sound like a lot. But here's the thing: if you don't save now in gold and silver, you're going to spend a whole lot more later. What I've outlined here is exactly what gold and silver are for: to protect your purchasing power, your standard of living. 

Jeff discusses the Hard Assets Alliance as a solution worth considering when purchasing bullion. For more information on the HAA can be found here. 

Click the play button below to listen to Chris' interview with Jeff Clark (46m:01s):

 

This is big news… a very worried (and huge) Japanese pension industry is switching from buying JGB's to Gold

Posted: 17 Nov 2012 12:48 PM PST

Ben Davies – There Is A New Buyer Entering The Gold Market


How to Protect Your Portfolio from a Slumping U.S. Dollar in 2013

Posted: 17 Nov 2012 12:18 PM PST

John Paul Whitefoot writes: No one said austerity measures would be an easy pill to swallow. But, after decades of overspending, they’re become an unwanted necessity. And the fed-up workers of Europe are uniting! Protests broke out Wednesday across Europe in a coordinated day of action over ongoing austerity policies. While some of the largest and most violent protests took place in Spain, Portugal, Greece and Italy also took to the streets.


Kyle Bass: Fallacies Such As MMT Are "Leading The Sheep To Slaughter" And "We Believe War Is Inevitable"

Posted: 17 Nov 2012 11:58 AM PST

Below are some of the key highlights from Kyle Bass' latest, and as usual, must read letter:

On central banks and the final round of global monetary debasement:

Central bankers are feverishly attempting to create their own new world: a utopia in which debts are never restructured, and there are no consequences for fiscal profligacy, i.e. no atonement for prior sins. They have created Potemkin villages on a Jurassic scale. The sum total of the volatility they are attempting to suppress will be less than the eventual volatility encountered when their schemes stop working. Most refer to comments like this as heresy against the orthodoxy of economic thought. We have a hard time understanding how the current situation ends any way other than a massive loss of wealth and purchasing power through default, inflation or both.

 

In the Keynesian bible (The General Theory of Employment, Interest and Money), there is a very interesting tidbit of Keynes' conscience in the last chapter titled "Concluding Notes" from page 376:

 

[I]t would mean the euthanasia of the rentier, and, consequently, the euthanasia of the cumulative oppressive power of the capitalist to exploit the scarcity value of capital. Interest today rewards no genuine sacrifice, any more than does the rent of land. The owner of capital can obtain interest because capital is scarce, just as the owner of land can obtain rent because land is scarce. But whilst there may be intrinsic reasons for the scarcity of land, there are no intrinsic reasons for the scarcity of capital.

 

. . .

Thus we might aim in practice (there being nothing in this which is unattainable) at an increase in capital until it ceases to be scarce, so that the functionless investor will no longer receive a bonus[.] (emphasis added)

This is nothing more than a chilling prescription for the destruction of wealth through the dilution of capital by monetary authorities.

 

Central banks have become the great enablers of fiscal profligacy. They have removed the proverbial policemen from the bond market highway. If central banks purchase the entirety of incremental bond issuance used to finance fiscal deficits, the checks and balances of "normal" market interest rates are obscured or even eliminated altogether. This market phenomenon does nothing to encourage the body politic to take their foot off the spending accelerator. It is both our primary fear and unfortunately our prediction that this quixotic path of spending and printing will continue ad?infinitum until real cost?push inflation manifests itself. We won't get into the MV=PQ argument here as the reality of the situation is the fact that the V is the "solve?for" variable, which is at best a concurrent or lagging indicator. Given the enormity of the existing government debt stock, it will not be possible to control the very inflation that the market is currently hoping for. As each 100 basis points in cost of capital costs the US federal government over $150 billion, the US simply cannot afford for another Paul Volcker to raise rates and contain inflation once it begins.

Hayek was, of course, right:

The current modus operandi by central banks and sovereign governments threatens to take us down Friedrich von Hayek's "Road to Serfdom". Published in 1944, its message, that all forms of socialism and economic planning lead inescapably to tyranny, might prove to have been prescient. In the 1970s, when Keynesianism was brought to crisis, politicians were vociferously declaring that attempting to maintain employment through inflationary means would inevitably destroy the market economy and replace it with a communist or some other totalitarian system which is the "perilous road" to be avoided "at any price". The genius in the book was the argument that serfdom would not be brought about by evil men like Stalin or Hitler, but by the cumulative effect of the wishes and actions of good men and women, each of whose interventions could be easily justified by immediate needs. We advocate social liberalism, but we also need to get there through fiscal responsibility. Pushing for inflation at this moment in time will wreak havoc on those countries whose cumulative debt stocks represent multiples of central government tax revenue.

 

The non?linearity of expenses versus revenues is what will bring them down.

"Pavlov's Party" is ending, and when it does, it will happen so fast no reaction will be possible:

Through travel and meetings around the world, it has become clear to us that most investors possess a heavily anchored bias that has been engrained in their belief systems mostly through inductive reasoning. Using one of the Nobel Laureate Daniel Khaneman's theories, participants fall under an availability heuristic whereby they are able to process information using only variables that are products of recent data sets or events. Let's face it – the brevity of financial memory is shorter than the half?life of a Japanese finance minister.

 

Humans are optimistic by nature. People's lives are driven by hopes and dreams which are all second derivatives of their innate optimism. Humans also suffer from optimistic biases driven by the first inalienable right of human nature which is self?preservation. It is this reflex mechanism in our cognitive pathways that makes difficult situations hard to reflect and opine on. These biases are extended to economic choices and events. The fact that developed nation sovereign defaults don't advance anyone's self?interest makes the logical outcome so difficult to accept. The inherent negativity associated with sovereign defaults brings us to such difficult (but logical) conclusions that it is widely thought that the powers that be cannot and will not allow it to happen. The primary difficulty with this train of thought is the bias that most investors have for the baseline facts: they tend to believe that the central bankers, politicians, and other governmental agencies are omnipotent due to their success in averting a financial meltdown in 2009.

 

The overarching belief is that there will always be someone or something there to act as the safety net. The safety nets worked so well recently that investors now trust they will be underneath them adinfinitum. Markets and economists alike now believe that quantitative easing ("QE") will always "work" by flooding the market with relatively costless capital. When the only tool a central bank possesses is a hammer, everything looks like a nail. In our opinion, QE just doesn't stimulate private credit demand and consumption in an economy where total credit market debt to GDP already  exceeds 300%. The UK is the poster child for the abject failure of QE. The Bank of England has purchased over 27% of gross government debt (vs. 12% in the US). UK bond yields have all but gone negative and are now negative in real terms by at least ?1%. Unlimited QE and the zero lower bound ("ZLB") are likely to bankrupt pension funds whose expected returns happen to be a good 600 basis points (or more) higher than the 10?year "risk?free" rate. The ZLB has many unintended consequences that are impossible to ignore.

 

Despite reading through Keynes' works, we didn't find a single index referencing the ZLB or any similar concept. In his General Theory, there are 64 entries in the index under "Interest" but no entry for the ZLB, zero rates, or even "really low rates".

 

Our belief is that markets will eventually take these matters out of the hands of the central bankers. These events will happen with such rapidity that policy makers won't be able to react fast enough.

On the lunacy of such "modern" "economic" "theories" as MMT (which may or may not stand for "Magic Money Trees")

The fallacy of the belief that countries that print their own currency are immune to sovereign crisis will be disproven in the coming months and years. Those that treat this belief as axiomatic will most likely be the biggest losers. A handful of investors and asset managers have recently discussed an emerging school of thought, which postulates that countries, as the sole manufacturer of their currency, can never become insolvent, and in this sense, governments are not dependent on credit markets to remain fiscally operational. It is precisely this line of thinking which will ultimately lead the sheep to slaughter.

The inevitable end of that supremely flawed monetarist experiment - the Eurozone:

Each subsequent "save" of the European debt crisis has been devised by the Eurocrats coming up with some new amalgamation of an entity that is more complex than its predecessor that is designed to project size, strength, and confidence to investors that the problem has been solved. Raoul, a friend of mine who resides in Spain, put it best:

 

"Let's just clear this up again. The ECB is going to buy bonds of bankrupt banks just so the banks can buy more bonds from bankrupt governments. Meanwhile, just to prop this up the ESM will borrow money from bankrupt governments to buy the very bonds of those bankrupt governments."

 

The EFSF, the IMF, the ESM, and the OMT (and who knows what other vehicles they will dream up next) have all been developed to serve as an optical backstop for investors globally. The Eurocrats are sticking with the Merkelavellian playbook of hiding behind the complexity of these various schemes. All one has to do is review the required contributions to said vehicles from bankrupt nations to realize that the circular references are already beginning to show in broad daylight. Does anyone stop to consider that the two largest contributors to the IMF are the two largest debtor nations in the world? Are things beginning to make sense now?

 

...

 

In the end, the EMU won't look the same, if it exists at all.

And finally, a less than rosy outlook for the entire "developed" world.

Trillions of dollars of debts will be restructured and millions of financially prudent savers will lose large percentages of their real purchasing power at exactly the wrong time in their lives. Again, the world will not end, but the social fabric of the profligate nations will be stretched and in some cases torn. Sadly, looking back through economic history, all too often war is the manifestation of simple economic entropy played to its logical conclusion. We believe that war is an inevitable consequence of the current global economic situation.

All this and much more, including the usual detailed summary depicting the Japanese ultra slow-motion trainwreck (which is picking up speed as none other than Seiji Maehara, state minister for economic and fiscal policy, admitted yesterday when he said that "[The Japan economy] is in a dire state") in the full letter below:

 

China Persists In Refusing To Buy US Paper As Foreign LTM Purchases Of Treasurys Plunge To Three Year Lows

Posted: 17 Nov 2012 10:47 AM PST

Yesterday's TIC data held two important pieces of data. The first is that in September, the month that Bernanke launched QEternity, for the first time in 2012, foreigners were net sellers of US Treasurys, dumping a total of $17.3 billion in paper, with foreign official institutions selling $919 million and non-official "Other Foreigners" offloading a whopping $18.3 billion: a record amount for this data series! The combined outflow was a dramatic reversal from the August $42.9 billion in purchases, from the $341.8 billion in foreign purchases Year To Date, was the first outflow of 2012, the first since the $13.1 billion sold in December 2011, and finally was the biggest sale in US paper since May 2009, or the month Greece had its first (of many) bailouts. While the reason for this dramatic shift in sentiment toward US paper is not defined, perhaps a primary reason is that in September foreigners bought a whopping $23.8 billion in corporate US stocks, the most since July 2009, and certainly motivated by hope that the latest Bernanke easing would send stocks soaring. Oh how wrong they were to believe that, and to fall for the media's latest attempt to force a rotation out of bonds and into stocks.

Source: TIC

Another way to see the sudden drop off in foreign appetite for US Long-Term Treasurys is the following chart of LTM purchases by Foreigners. At $393 billion, this is the lowest total notional since November 2009.

The second, and even more troubling observation, is that in September China "added" another token $300 million in US paper, keeping its total holdings at $1155.5 billion, or a number that has remained unchanged since December 2011, when the Chinese selloff of US Treasurys concluded, which in turn took down its total from a high of $1315 billion in July 2011. So who has taken China's place as America's best oriental friend? Why that supreme basket case of all debt monetization, both foreign and domestic, Japan, which added another $8 billion in US Treasurys in September, bringing its total to $1131 billion, and just $25 billion shy of overtaking China as the biggest holder of US paper. Just because having Y1 quadrillion  in total debt of your own is not enough.

Source: TIC

For the terminal basket case that is Japan the move makes sense: since having, and monetizing a ridiculous amount of its own debt has done absolutely nothing to weaken the Yen, the Japanese financial authorities are now resorting to the last case option: monetizing others', in this case the US', debt. In doing so Japan gives a glimpse of what the next round of currency warfare, when every currency in the closed Keynesian loop has to hit bottom first or bust, will look like: central banks buying not only their own debt, but the debt of other nations, all in a desperate attempt to crush their own currencies first (except for Europe, of course, to the ECB, currency intervention means keeping the EUR high or else someone may get an idea there is redenomination risk, and proceed to do the ECB's rightful job - which is to sell the EUR - for them).

Finally, those wondering where China is reinvesting its current account surplus, the answer, at least to our readers, has been well-known for a long time.

IRA/401k Confiscation Coming?

Posted: 17 Nov 2012 09:47 AM PST

To start, I would like to report that my MBA alma mater, the University of Chicago (class of '91, Dean's list 1990), just received the #1 business school ranking by Businessweek:  LINK  Unfortunately, the professor I had for a high level "forensic" accounting course is not longer there. His course was the best course in any MBA program anywhere and made the 2 years there worthwhile.

An article about Obama starting the process of nationalizing the private retirement fund system went viral in the blog community yesterday.  The truth is that the these "genius" bloggers are about 4 years behind the curve on this.  Here's the report:  LINK

Let me make one thing crystal clear before the world erroneously blames this on Obama.  The IRA confiscation movement started at least during, if not before, the Bush administration.  Four years before the recent hearing sponsored by the Treasury/Labor Dept, there was a Congressional hearing On October 7, 2008 sponsored by the House Education and Labor Committee at which pension reform academic Teresa Ghilariducci presented a paper on her Guaranteed Retirement Account program.  Her idea is to replace IRA/401k accounts with a Government administered program which would provide retirees with a guaranteed annuity stream annuitized by good old U.S. Treasuries.

This symposium was held before Obama was elected.  In fact, I warned 10 years ago, that the elitists (note: real elitists, as in the handful of men who pull the strings) would print money and keep our system from collapsing until they had swept every last crumb of middle class wealth off the able the table and into their own pockets.  Note:  "middle class" = everyone who is not wealthy enough to buy their own Congressman;  in my view this would be anyone with a liquid net worth under $100 million.

This movement to de facto seize your private retirement plan was started years before Obama was even a local politician in Chicago.  Regardless, once these movements begin in the Government they happen slowly and then all at once (sound familiar?).  Anyone with two operational frontal lobes will do what I did 6 years ago and cash out their IRA, pay the 10% penalty plus any income tax for that year on the proceeds and put the money into physical gold and silver outside of the system.  Over the next 4-5 years you will more than make up for the 10% penalty/taxes with the appreciation of the bullion AND your wealth will be safe from the Government.  Capito?

[KR368] Keiser Report: ‘Crash JP Morgan' – 2nd Anniversary Special

Posted: 17 Nov 2012 09:12 AM PST

We present the two year anniversary special of their Crash JPM, Buy Silver campaign. They discuss JP Morgan doing everything to protect the Queen of their massive silver short position – a position that has DOUBLED in the past two … Continue reading →


James Turk & Max Keiser on the 2nd Anniversary of Crash JP Morgan buy Silver

Posted: 17 Nov 2012 09:03 AM PST

The historical Au:Ag ratio of 16:1 does not...

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


CFTC to challenge court ruling on position limits

Posted: 17 Nov 2012 08:24 AM PST

By Daniel P. Collins
Futures magazine, Chicago
Thursday, November 15, 2012

http://www.futuresmag.com/2012/11/15/cftc-to-challenge-court-ruling-on-p...

The Commodity Futures Trading Commission (CFTC) in a brief statement released Thursday afternoon confirmed that it would appeal a federal district court's decision vacating the commission's position limit rule.

The appeal was approved by a 3-2 vote, which was foreshadowed during the Futures Industry Association Expo conference in Chicago two weeks ago when Commissioner Mark Wetjen indicated that he would support an appeal and stated that commission attorneys felt it had a strong case. Chairman Gary Gensler and Commissioner Bart Chilton had already indicated support for an appeal.

Commissioner Scott O'Malia wrote a sharply worded and detailed dissent. In it O'Malia states, "When I voted against the commission's final position limit rule last November, I expressed dismay that the commission had failed to utilize its expertise to lay the necessary foundation for the establishment of position limits. A federal district court affirmed my reasoning in striking down the rule in September. Regrettably, instead of taking the opportunity to revise its flawed reading of the statute, the commission has decided to double down on its no-justification-needed stance by appealing the district court's ruling."

... Dispatch continues below ...


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In announcing the appeal Chairman Gensler stated, "As part of the Dodd-Frank Act, Congress directed the commission to limit promptly speculative positions in physical commodity futures and options contracts and economically equivalent swaps. ... It is critically important that these position limits be established as Congress required. I support the commission's continued efforts to put in place position limits on speculative positions by appealing the September ruling."

O'Malia took issue with the way the commission proponents ignored the court's decision. "The court explicitly stated that the statute unambiguously requires a finding of necessity before establishing position limits," he wrote. "It went on to argue that subsequent parts of the statute are ambiguous. I continue to believe that the statute is crystal clear in calling for a necessity finding -- and that this should be the end of the discussion."

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Vancouver Resource Investment Conference
Sunday-Monday, January 20 and 21, 2013
Vancouver Convention Centre West
Vancouver, British Columbia, Canada
http://www.cambridgehouse.com/event/vancouver-resource-investment-confer...

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Or by purchasing a colorful GATA T-shirt:

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

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Opinion Around the World Is Changing
in Favor of Gold -- Find Out Why

When Deutschebank calls gold "good money" and paper "bad money". ...

http://www.gata.org/node/11765

When the president of the German central bank, the Bundesbank, pays tribute to gold as "a timeless classic". ...

http://www.forbes.com/sites/ralphbenko/2012/09/24/signs-of-the-gold-stan...

When a leading member of the policy committee of the People's Bank of China calls the gold standard "an excellent monetary system". ...

http://www.forbes.com/sites/ralphbenko/2012/10/01/signs-of-the-gold-stan...

When a CNN reporter writes in The China Post that the "gold commission" plank in the 2012 Republican platform will "reverberate around the world". ...

http://www.thegoldstandardnow.org/key-blogs/1563-china-post-the-gop-gold...

When the Subcommittee on Domestic Monetary Policy of the U.S. House of Representatives twice called on economist, historian, and gold standard advocate Lewis E. Lehrman to testify. ...

World opinion is changing in favor of gold.

How can you learn why and what it will mean to you?

Read the newly updated and expanded edition of Lehrman's book, "The True Gold Standard."

Financial journalist James Grant says of "The True Gold Standard": "If you have ever wondered how the world can get from here to there -- from the chaos of depreciating paper to a convertible currency worthy of our children and our grandchildren -- wonder no more. The answer, brilliantly expounded, is between these covers. America has long needed a modern Alexander Hamilton. In Lewis E. Lehrman she has finally found him."

To buy a copy of "The True Gold Standard," please visit:

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This Past Week in Gold

Posted: 17 Nov 2012 05:55 AM PST

Summary: Long term - on major sell signal. Short term - on mixed signals. Gold sector cycle - down as of Oct 13. Buy signals during a down cycle could be short lived and often fail, caution is advised. Read More...



US Dollar – Devil's Currency, Obliterate It!

Posted: 17 Nov 2012 02:33 AM PST

Max's jacket is 'original terrorist clothing' from A Child of the Jago available at Tom Baker.


Marc Faber, Gold and a Special Picture of Ben Bernanke

Posted: 17 Nov 2012 02:30 AM PST

What Marc Faber said in Hong Kong this week… YOU ALWAYS get great presentations from the biggest players in gold and silver at the annual London Bullion Market Association conference. Being in Hong Kong this year, the world's premier event for the bullion industry also got lots of great insights from genuine Asian insiders – ICBC, Kotak Mahindra, the People's Bank of China no less. 


Countdown To Dollar, Stock Market Total Financial Collapse

Posted: 17 Nov 2012 02:16 AM PST

Aside from a clear unwillingness to admit the reality of epic failure and total defeat, the powers-that-be insist upon believing that they can still pull magic rabbits from their empty hat of totalitarian deceptions. In addition to monitoring the VIX, which is another means by which to track the efforts of a corrupt Fed and Treasury, we present the Dow Gold ratio-charts below, which add yet another real-time measure in monitoring REALITY vs. the Ponzi charade otherwise known as the global debt-based fiat currency system of political economics.


Marc Faber, Gold & a Special Picture of Ben Bernanke

Posted: 17 Nov 2012 12:40 AM PST

Bullion Vault


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