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Saturday, December 22, 2012

Gold World News Flash

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Gold World News Flash


We are on the cusp…

Posted: 21 Dec 2012 11:30 PM PST

by Bill Holter, MilesFranklin.com:

It had not occurred to me until last night that we truly are on the cusp… of 100 ounces of Gold becoming real money. Of course it always was "real" money but very soon as the cabal loses control, it will become REAL money. Money, as in enough to not only purchase a house for your family but a REAL house. I'm talking about a real house, a McMansion house, a house that will (already has) be "puked up" by an over leveraged owner.

Let's go back 10-12 years and see where we came from. Back in the year 2000, Gold was trading in a $250-$270 trading range. A nice house back then would have cost let's say $200,000. This would not have been a McMansion but it would have been a nice home of maybe 2,000 or 2,500 sq. ft.. Basically you would have needed about 800 ounces of Gold to purchase this house. Fast forward to today and let's say that the market value (yes I know, some places are ridiculously higher and others lower but stay with me) is $250,000-$300,000. For arguments sake let's say that it could be bought 175 ounces. …Do you see where I'm going with this?

Read more @ MilesFranklin.com

The insane parade: Obama, guns, psychiatric drugs, Adam Lanza, Asperger's

Posted: 21 Dec 2012 11:00 PM PST

by Jon Rappoport, Natural News:

American society is now a funnel that slides millions of people into toxic psychiatric treatment. Obama thinks we need a bigger funnel.

At the same time, of course, he's pushing for greater gun restrictions.

At his December 19 press conference, he said, "We are going to need to work on making access to mental-health care as easy as access to a gun."

"Mental health" is always the go-to institution whenever a mass murder occurs. It's like "we need more medical research on the problem." Generalities are spouted by people who don't have a clue what they're talking about.

Read More @ NaturalNews.com

The Reason Gold Has Been Declining Is Simply This?

Posted: 21 Dec 2012 11:00 PM PST

Edited for posting by:[B][B]munKNEE.com[/B][/B] There have been many motives offered for the recent and ongoing plunge in gold and silver prices since the start of October from sentiment to a supposed trade against the Euro, etc, etc. but the true reason is a lot more prosaic. It’s old fashioned liquidation. Let me explain. Words: 257 So says*Paulo Santos ([url]www.thinkfn.com[/url]) in edited excerpts from his post* on Seeking Alpha entitled*A Very Simple Explanation For Gold’s Weakness. [INDENT]*This article is presented compliments of [B][COLOR=#0000ff][COLOR=#ff0000]www.FinancialArticleSummariesToday.com[/COLOR] (A site for sore eyes and inquisitive minds) and [COLOR=#ff0000]www.munKNEE.com[/COLOR] (Your Key to Making Money!) andmay have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The author's views and conclusions are unaltered and no personal comm...

Fiscal Cliff Deadline Looms Large in Coming Week – YouTube

Posted: 21 Dec 2012 10:49 PM PST

Fiscal Cliff Deadline Looms Large in Coming Week via Fiscal Cliff Deadline Looms Large in Coming...

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

This Past Week in Gold

Posted: 21 Dec 2012 10:23 PM PST

Summary: Long term - on major sell signal. Short term - on sell signals. Gold sector cycle - down as of Oct 13. Read More...

Gold Seeker Weekly Wrap-Up: Gold and Silver Fall Over 2% and 6% on the Week

Posted: 21 Dec 2012 10:00 PM PST

Gold fell $13.10 to $1635.60 in early Asian trade, but it then rose to as high as $1659.50 in New York and ended with a gain of 0.38%. Silver climbed to as high as $30.255 and ended with a gain of 0.03%.

By the Numbers for the Week Ending December 21

Posted: 21 Dec 2012 09:36 PM PST

This week's closing table is just below. 

20121221-table

If the image is too small click on it for a larger version.

Vultures, (Got Gold Report Subscribers) please note that updates to our linked technical charts, including our comments about the COT reports and the week's technical changes, should be completed by the usual time on Sunday (by 18:00 ET).  

QE3 Silver Impact

Posted: 21 Dec 2012 09:30 PM PST

from Adam Hamilton, Zeal Speculation and Investment:

Silver has been selling off relentlessly since the Federal Reserve expanded its third quantitative-easing campaign last week. As that decision was highly inflationary, silver's subsequent weakness has really vexed traders. But its counter-intuitive selloff had nothing to do with fundamentals. As the Fed's past QE campaigns demonstrated abundantly, QE3 will eventually prove to be very bullish for silver's fortunes.

Quantitative easing is a pleasant-sounding euphemism for debt monetization. Historically this dangerous practice has been scorned because it ultimately unleashes serious inflation. Monetizing debt is exactly what it sounds like. A central bank chooses to buy bonds, and then conjures up the money to do so out of thin air. This new money is injected into the economy as the bond sellers spend it, igniting inflation.

The rapidly-expanding money supply grows much faster than the underlying economy. So relatively more money chases after relatively less goods and services, which bids up their prices. As more money is poured into the system, each unit has less purchasing power. Inflation is ultimately an oversupply of money, which quantitative easing greatly accelerates. Investors flock to precious metals in such times.

Read More @ zealllc.com

The Unadulterated Gold Standard Part III (Features)

Posted: 21 Dec 2012 08:44 PM PST

by Keith Weiner, Daily Capitalist:

In Part I, we looked at the period prior to and during the time of what we now call the Classical Gold Standard. It should be underscored that it worked pretty darned well. Under this standard, the United States produced more wealth at a faster pace than any other country before, or since. There were problems; such as laws to fix prices, and regulations to force banks to buy government bonds, but they were not an essential property of the gold standard.

In Part II , we went through the era of heavy-handed intrusion by governments all over the world, central planning by central banks, and some of the destructive consequences of their actions including the destabilized interest rate, foreign exchange rates, the Triffin dilemma with an irredeemable paper reserve currency, and the inevitable gold default by the US government which occurred in 1971.

Part III is longer and more technical, as we consider the key features of the unadulterated gold standard. It could be briefly stated as a free market in money, credit, interest, discount, and banking. Another way of saying it is that there would be no confusion of money (i.e. gold) and credit (i.e. paper). Both play their role, and neither is banished from the monetary system.

Read More @ DailyCapitalist.com

Precious Metals Decouple from Stock Market

Posted: 21 Dec 2012 08:30 PM PST

by Jordan Roy-Byrne, Gold Seek:

At the end of July we wrote an article examining the relationship between gold stocks and general equities. We sought to understand the huge variance in performance between the two markets. Sometimes they trended higher together. Sometimes the gold stocks surged while conventional equities fell into a bear market. Both markets have endured bad bears at the same time. Is there any rhyme or reason to why such variation?

Here was our conclusion: What can history tell us going forward? The key is the correlation. If gold stocks are trending higher with the equity market into a potential recession and bear market, then the gold stocks would remain positively correlated over the intermediate term. However, we can see that if the gold stocks are in a cyclical bear while the broad market is nearing a trend reversal or while the economy is nearing recession, then the gold stocks will remain negatively correlated. This is evident in three of the four previous examples.

Read More @ GoldSeek.com

Highly popular CombiBar gold wafers may be coming to the U.S.

Posted: 21 Dec 2012 07:40 PM PST

European investors have been buying CombiBar credit card sized gold wafers which can be broken into one gram pieces and used as emergency currency. Now there are plans to market them in the U.S.

Reuters via MineWeb.com

Private investors in Switzerland, Austria and Germany are lining up to buy gold bars the size of a credit card that can easily be broken into one gram pieces and used as payment in an emergency.

Now Swiss refinery Valcambi, a unit of U.S. mining giant Newmont, wants to bring its "CombiBar" to market in the United States and build up its sales presence India – the world's largest consumer of gold where the precious metal has long served as a parallel currency.

Read More @ MineWeb.com

Gold’s woes won’t last – we’re heading back to $1,800

Posted: 21 Dec 2012 07:30 PM PST

by Dominic Frisby, Money Week:

Ugh.

Monday was another one of 'those days'. Gold was hit for $40 – over 2%.

The bulk of the losses (as they always seem to) came during New York trading. The hard selling began quite gently – but punctually – shortly before 10am, with gold just below $1,700. It got aggressive after the mid-morning latte at about 11.20am and, in just over two hours, the price was taken from about $1,693 to $1,660.

Then it was time for a pastrami sandwich.

'Those days' are becoming a little too frequent for my liking. We've had about five of them since the beginning of November. Somebody doesn't like gold …

Read More @ MoneyWeek.com

Tiny gold bars latest rage for jittery investors

Posted: 21 Dec 2012 06:29 PM PST

By Oliver Hirt
Reuters
Friday, December 21, 2012

http://www.reuters.com/article/2012/12/21/swiss-gold-idUSL5E8NL4N8201212...

ZURICH, Switzerland -- Private investors in Switzerland, Austria, and Germany are lining up to buy gold bars the size of a credit card that can easily be broken into 1-gram pieces and used as payment in an emergency.

Now Swiss refinery Valcambi, a unit of U.S. mining giant Newmont, wants to bring its "CombiBar" to market in the United States and build up its sales presence India, the world's largest consumer of gold, where the precious metal has long served as a parallel currency.

Investors worried that inflation and financial market turmoil will wipe out the value of their cash have poured money into gold over the past decade. Prices have gained almost 500 percent since 2001 compared to a 12 percent increase in MSCI's world equity index.

... Dispatch continues below ...



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Sales of gold bars and coins were worth almost $77 billion in 2011, up from just $3.5 billion in 2002, according to data from the World Gold Council.

"The rich are buying standard bars or have deposits of phsyical gold. People who have less money are buying up to 100 grams," said Michael Mesaric, CEO of Valcambi. "But for many people a pure investment product is no longer enough. They want to be able to do something with the precious metal."

Mesaric said the advantage of the "CombiBar" -- which has been dubbed a "chocolate bar" because pieces can be easily broken off by hand into one gram squares -- is that it can be easily transported and costs less than buying 50 one gram bars.

"The produce can also be used as an alternative method of payment," he said.

Valcambi is building a sales network in India and plans to launch the CombiBar on the U.S. market next year. In Japan, it wants to focus on CombiBars made of platinum and palladium.

Elsewhere, demand is particularly strong among Germans, still scarred by post-World War I hyperinflation, when money became all but worthless and it took a wheelbarrow full of notes to buy a loaf of bread.

"Above all, it's people aged between 40 and 70 that are investing in gold bars and coins," said Mesaric. "They've heard tales from their parents about wars and crises devaluing money."

The CombiBar is particularly popular among grandparents who want to give their grandchildren a strip of gold rather than a coin, said Andreas Habluetzel head of the Swiss business of Degussa, a gold trading company.

Other customers buy gold for security reasons.

"Demand is rising every week," Habluetzel said. "Particularly in Germany, people buying gold fear that the euro will break apart or that banks will run into problems."

Some fund managers, however, remain sceptical.

Stephan Mueller, who manages bank Julius Baer's $6 billion gold fund, said one problem with using gold as a method of payment is that people have to take its value on blind trust.

"Gold is a useful store of value," Mueller said. "However, I doubt whether it will succeed as a method of payment."

Nonetheless, as developments in the euro zone lurch from one crisis to another, demand for gold that can be sold in vending machines is also growing.

"Sales rise according to the temperature of the crisis," said Thomas Geissler, whose firm Ex Oriente Lux operates 17 gold vending machines in Europe, the United States and the United Arab Emirates.

The machines saw record sales in 2010, one day after the then Deutsche Bank CEO Josef Ackermann raised doubts over whether Greece would be able to pay its debts.

Since the launch of the machines, which operate under the name "GOLD to go", 50,000 customers have withdrawn more than 21 million euros in gold. The average buyer is male, over 50 years old and well off.

"Customers are hoarding gold mostly at home as a precaution against a crisis, just as their fathers and grandfathers did before them," Geissler said.

* * *

Join GATA here:

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...

* * *

Support GATA by purchasing DVDs of our London conference in August 2011 or our Dawson City conference in August 2006:

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The Gold Price Closed Down for the Week but Gained a Meaty $14.20 Today Closing at $1,659.10

Posted: 21 Dec 2012 06:19 PM PST

Gold Price Close Today : 1,659.10
Gold Price Close 14-Dec : 1,695.80
Change : -36.70 or -2.2%

Silver Price Close Today : 30.142
Silver Price Close 14-Dec : 32.23
Change : -2.088 or -6.5%

Gold Silver Ratio Today : 55.043
Gold Silver Ratio 14-Dec : 52.616
Change : 2.43 or 4.6%

Silver Gold Ratio : 0.01817
Silver Gold Ratio 14-Dec : 0.01901
Change : -0.00084 or -4.4%

Dow in Gold Dollars : $ 164.35
Dow in Gold Dollars 14-Dec : $ 160.12
Change : $ 4.24 or 2.6%

Dow in Gold Ounces : 7.951
Dow in Gold Ounces 14-Dec : 7.746
Change : 0.20 or 2.6%

Dow in Silver Ounces : 437.62
Dow in Silver Ounces 14-Dec : 407.54
Change : 30.08 or 7.4%

Dow Industrial : 13,190.84
Dow Industrial 14-Dec : 13,135.01
Change : 55.83 or 0.4%

S&P 500 : 1,430.15
S&P 500 14-Dec : 1,413.58
Change : 16.57 or 1.2%

US Dollar Index : 79.569
US Dollar Index 14-Dec : 79.567
Change : 0.002 or 0.0%

Platinum Price Close Today : 1,536.90
Platinum Price Close 14-Dec : 1,613.60
Change : -76.70 or -4.8%

Palladium Price Close Today : 681.80
Palladium Price Close 14-Dec : 700.80
Change : -19.00 or -2.7%

Both the silver and GOLD PRICE formed descending right triangles with highs in April 2011 and September 2011. In August, they both broke through the falling hypotenuse of that triangle, the break-out marking the escape from that correction. It is common, yea, frequent for markets to break out (up or downside), then return to the resistance or support they broke through earlier for that Final Kiss Good-bye and last reversal.

I reckon that's what you're seeing right now in both the silver and GOLD PRICE, because both have nearly touched that downtrend line. If they fall through that support, then the carnage and bloodshed becometh general, sending silver back toward 2600c and gold toward $1,525.

I don't believe that will happen. I believe we are within pennies of a bottom, maybe $1,636 for gold and 2900c for silver.

Today the SILVER PRICE gained 53 cents to 3014.2 while gold gained a meaty $14.20 to $1,659.10. I wouldn't chortle too much about these gains, because short-covering at week's end easily explains them. Besides, gold didn't clear $1,675 nor silver 3150c, which they must do to reverse upward.

Few people make commitments in the days right before Christmas. Come the day after Boxing Day (26 December) we'll see their intentions.

Back away a minute. Even if silver and gold return to those support lines that were 12 and 18 months a-building, it matters not. They remain in a primary uptrend, a bull market. Calm yourself with that reminder, and don't fret corrections and short term moves. I've been on the winning and the losing sides of these moves -- you just have to keep your head and remember you have a LONG-TERM strategy and are not a day-trader.

I'm not sure anyone got away from this week without bleeding: stocks gained slightly, but looking closer failed to breach resistance. Metals were beaten with barbed wire whips and left for the buzzards. Oddly, yea, oddly, the US dollar index closed the week within two-thousandths (2/1000s) of last week's close. Good shooting, that!

Here before Christmas I'm going to try to sum up events of the past month. By the way, I will be celebrating the Incarnation of Jesus Christ the Son of God on Christmas Eve, Christmas Day, and St. Stephen's Day, so I won't return with a commentary until 27 December. I pray each of you has a Merry Christmas.

Since mid-November the US dollar index has dropped from 81.46 to 79.569 today, a 2.3% loss. This has carried the buck down to support at 79. From here it will likely rally up to the downtrend line, today about 80, but dropping fast. If the dollar index closes below 79, it will attract sellers like a pretty girl attracts male eyeballs at the beach.

Because the Management (the Fed and any Administration) has demonstrated since 1914 they will depreciate the dollar, it's almost silly to talk about the dollar's short term fate. Long term it will go the way of all paper. Meanwhile, the central banks want to keep out of a devaluation competition, so they manage their currencies in ranges. That for the dollar index is probably about 84 to 72. But remember no central bank is managing its exchange rate to preserve purchasing power, but only to keep it from depreciating or appreciating too rapidly against the other two of the Big Three Turkeys, yen, euro, and dollar. Against anything with value -- a package of gum, a share of stock, an ounce of silver or gold -- all those currencies will continue to depreciate, because governments must borrow or die, and central banks must inflate or die. Long term, not the tiniest fact appeareth on the horizon to gainsay this easy descent into hell.

Dollar index today closed 2/1000s higher than last week. 2/10 of a basis point. Passing odd.

Euro looked a bit carsick today. Lost 0.45% to $1.3189. If $1.3400 doesn't stop it, could rise clean to $1.3500. In the undercarriage, however, the euro is even more salt-and-rust rotten than the US dollar, and only terror that it might fall apart keeps it together. Despite what the well-trained and well-paid actors assure you, the European bank, currency, and economic problems are not cured, anymore than the Black Death promised to stop at Naples and not move up into Europe.

Euro since mid-November low at $1.2672 has gained 0.517 to 1.3189 today, up 4.1%.

In the same period the yen has dropped from 126.43 cents/Y100 to 118.73 today, down 6.1%. Since September it's lost 8.4%. Clearly, a deal was made amongst the central banks to cheapen the yen, the sickest of a plague-rotted lot. Bottom should be found here somewhere around 118 cents.

US$1=YU84.22=E0.7582=0.033 176 oz Ag=0.000 603 oz Au.

US$1=0.969 gram silver = 0.187 gram gold.

Stocks gained a little this week, but every time the Dow approaches that 13,300 resistance, a big hand reaches out and slaps it winded. Today the Dow lost a breath-catching 120.88 (0.91%) to 13,190.84 and the S&P500 tumbled 13.54 (0.94%) to 1,430.15.

Unless the Dow falls significantly below its 50 day moving average (now 13,091.51) 'twill yet score higher prices in this move. With the new year, sobriety will return. Settling the fiscal cliff will prove a greater disappointment than encouragement. Better sell that news.

The Dow priced in gold. Ahh, here you will note the last four days have drawn the Death Card with a clear Island Reversal. The Dow in gold gapped up through the downtrend line, made a new high for the move, then fell back. At the very least that gap will be filled, but it looks more like an Island Reversal that appears when a move exhausts itself, surges one last time, then falls away. The "falling away" is due very, very shortly.

Mathematically that can mean stocks rise while gold rises faster, or stocks fall while gold remains steady or rises. Either way, gold will begin to outpace stocks. (I don't make this stuff up. I just look at the chart. This plainly implies stocks' move up is ending, or gold's move down.) Same picture, with gaps leading to the island, appears in the Dow in Silver. More overvalued than a brand new automobile waiting on the lot for a sucker to buy.

Stocks since mid November have risen from 12,471.49 to 13,190.84 today, up 5.8%.

Over that same space the GOLD PRICE has dropped from $1,755 to $1,659, down $96 or 5.5%. Silver has lost 14.1%, dropping from 34.49 to 29.64, lower by $4.85.

Think about the Final Kiss Good-bye, the one that says, "I'm leaving, and I ain't coming back."

Y'all enjoy your weekend.

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

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

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

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

WARNING AND DISCLAIMER. Be advised and warned:

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

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

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

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

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

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

Markets & Macro - 2008 And Today

Posted: 21 Dec 2012 06:17 PM PST

It seems left, right, and center we hear that fundamentals are currently supportive of equities. However, dismal earnings outlooks (and historicals) aside, we have seen the current pattern of macro-economic data 'outperforming' economists' expectations while stocks don't appear to fully play along before - it was mid-2008. As is clear from the chart below, the rapidity of the collapse in macro data should be greatly concerning to any and all who think there is even a possibility we go over the cliff - as, for sure, economic expectations are not priced for that at all (and stocks for at worst a modest macro weakening only).

 

The last time we saw a divergence between macro (higher) and stocks (flat to lower) was Summer 2008...

 

Data: Bloomberg

Paper raid on metals causes 'unprecedented' silver premiums, Maguire tells King World News

Posted: 21 Dec 2012 06:00 PM PST

7:56p ET Friday, December 21, 2012

Dear Friend of GATA and Gold (and Silver):

London metals trader and silver market whistleblower Andrew Maguire reports via King World News tonight that premiums for delivery of physical silver in Shanghai today reached "unprecedented" and "ludicrous" levels, so distortive was the Western central bank intervention against the monetary metals in London and New York. Maguire says the bullion bank agents of the central banks "are fully aware of the physical drain" caused by their paper raid, "and I guarantee you that they are going long on this final stage of the selloff."

An excerpt from Maguire's interview is posted at the King World News blog here:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/12/21_M...

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



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Join GATA here:

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...

* * *

Support GATA by purchasing DVDs of our London conference in August 2011 or our Dawson City conference in August 2006:

http://www.goldrush21.com/order.html

Or by purchasing a colorful GATA T-shirt:

http://gata.org/tshirts

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

http://gata.org/node/wallstreetjournal

Help keep GATA going

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

http://www.gata.org

To contribute to GATA, please visit:

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



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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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Guest Post: The Unadulterated Gold Standard Part 3

Posted: 21 Dec 2012 05:43 PM PST

Authored by Keith Weiner,

In Part I , we looked at the period prior to and during the time of what we now call the Classical Gold Standard.  It should be underscored that it worked pretty darned well.  Under this standard, the United States produced more wealth at a faster pace than any other country before, or since.  There were problems; such as laws to fix prices, and regulations to force banks to buy government bonds, but they were not an essential property of the gold standard.

In Part II , we went through the era of heavy-handed intrusion by governments all over the world, central planning by central banks, and some of the destructive consequences of their actions including the destabilized interest rate, foreign exchange rates, the Triffin dilemma with an irredeemable paper reserve currency, and the inevitable gold default by the US government which occurred in 1971.

Part III is longer and more technical, as we consider the key features of the unadulterated gold standard.  It could be briefly stated as a free market in money, credit, interest, discount, and banking.  Another way of saying it is that there would be no confusion of money (i.e. gold) and credit (i.e. paper).  Both play their role, and neither is banished from the monetary system.

There would be no central bank with its "experts" to dictate the rate of interest and no "lender of last resort".  There would be no Securities Act, no deposit insurance, no armies of banking regulators, and definitely no bailouts or "too big to fail banks".  The government would have little role in the monetary system, save to catch criminals and enforce contracts.

As mentioned in Part I, people would enjoy the right to own gold coins, or deposit them in a bank if they wish.  We propose the radical idea that the government should have no more involvement in specifying the contents of the gold coin than it does specifying the contents of the software that runs a web server.  And this is for the same reason: the market is far better at determining what people need and far better at adapting to changing needs.

In 1792, metallurgy was primitive.  To accommodate 18th century gold refiners, the purity of the gold coin was set at around 90% pure gold (interestingly the Half Eagle had a slightly different purity than the Eagle though exactly half the pure gold content).  Today, much higher purities can easily be produced, along with much smaller coins (see http://keithweiner.posterous.com/pieces-of-50).  We also have plastic sleeves today, to eliminate wear and tear on pure gold coins, which are quite soft.

If the government had fixed a mandatory computer standard in the early 1980's (some governments considered it at the time), we would still be using floppy disks, we would not have folders, and most of us would not be using any kind of computer at all, as they were not user friendly.  When something is fixed in law, it is no longer possible to innovate.  Instead, companies lobby the government for changes in the law to benefit them at the expense of everyone else.  No good ever comes of this.

We propose the radical idea that one should not need permission to walk down the street, to open a bank, or to engage in any other activity.  Without banking permits, licenses, charters, and franchises, the door is not open to the game played by many states in the 19th century.

"To operate a bank in our state, you must use some of your depositors' funds to buy the bonds sold by our state.  In return, we will protect you from competition by not allowing out-of-state banks to operate here."

Most banks felt that was a good trade-off, at least until they collapsed due to risk concentration and defaults on state government bonds.

State and federal government bonds are an important issue.  We will leave the question of whether and when government borrowing is appropriate to a discussion of fiscal policy.  There is an important monetary policy that must be addressed.  Government bonds must not be treated as money.  They must not become the base of the monetary system (as they are today).  If a bank wants to buy a bond, including a government bond, that is a decision that should be made by the bank's management.

An important and related principle is that bonds (private or government) must not be "paid off" by the issuance of new bonds!  Legitimate credit is obtained to finance a productive project.  The financing should match the reasonable estimate of the useful life of the project, and the full cost must be amortized over this life.  If the project continues to generate returns after it is amortized, there is little downside in such a conservative estimate (though it obviously makes the investor case less attractive).

On the other hand, if the plant bought by the bond is all used up before the bond is paid off, then the entrepreneur made a grave error: he did not adequately deduct depreciation from his cash flows and now he is stuck with a remaining debt but no cash flow with which to pay it off.  Issuing another bond to pay off the first just extends the time of reckoning, and makes it worse.  Fully paying debt before incurring more debt enforces a kind of integrity that is almost impossible to imagine today.

With few very limited and special exceptions, a bank should never borrow short and lend long.  This is when a bank lends a demand deposit, or similarly lends a time deposit for longer than its duration.  A bank should scrupulously match its assets to its liabilities.  If a bank wants to buy stocks, real estate, or tulips, it should not be forcibly prevented, even though these are bad assets with which to back deposits.  The same applies to duration mismatch.

Banks must use their best judgment in making investment decisions.  However, the job of monetary scientists is to bellow from the rooftops that borrowing short to lend long will inevitably collapse, like all pyramid schemes.

There should be no price-fixing laws.  Just as the price of a bushel of wheat or a laptop computer needs to be set in the market, so should the price of silver and the price of credit.  If the market chooses to employ silver as money in addition to gold, then the price of silver must be free to move with the needs of the markets.  It was the attempt to fix the price, starting in 1792 that caused many of the early problems.  While "de jure" the US was on a bimetallic standard, we noted in Part I that "de facto" it was on a silver standard.  Undervalued gold was either hoarded or exported.  After 1834, silver was undervalued and the situation reversed.  Worse yet, each time the price-fixing regime was altered, there was an enormous transfer of wealth from one class of people to another.

Similarly, if the market chooses to adopt rough diamonds, copper, or "bitcoins" then there should be no law and no regulation to prevent it (though we do not expect any of these things to be monetized) and no law or regulation to fix their prices either.

If a bank takes deposits and issues paper notes, then those notes are subject to the constant due diligence and validation of everyone in the market to whom they are offered.  If a spread opens up between Bank A's one-ounce silver note and the one-ounce silver coin (i.e. the note trades at a discount to the coin) then the market is trying to say something.

What if an electrical circuit keeps blowing its fuse?  It is dangerous to replace the fuse with a copper penny.  It masks the problem temporarily, and encourages you to plug in more electrical appliances, until the circuit overheats and set the house on fire.  It is similar with a government-set price of paper credit.

A market price for notes and bills is the right idea.  Free participants in the markets can choose between keeping their gold coin at home (hoarding) vs. lending their gold coin to a bank (saving).  It is important to realize that credit begins with the saver, and it must be voluntary, like everything else in a free market.  People have a need to extend credit as explained below, but they will not do so if they do not trust the creditworthiness of the bank.

Before banking, the only way to plan for retirement was to directly convert 5% or 10% of one's weekly income into wealth by hoarding salt or silver.  Banking makes it much more efficient, because one can indirectly exchange income for wealth while one is working.  Later, one can exchange the wealth for income.  This way, the wealth works for the saver his whole life, and there is no danger of "outliving one's wealth", if one spends only the interest.  In contrast, if one is spending one's capital by dishoarding, one could run out.

No discussion on banking would be complete without addressing the issue of fractional reserves.  Many fundamental misunderstandings exist in this area, including the belief that banks "create money".  Savers extend credit to the banks who then extend credit to businesses.  The banks can no more be said to be creating money than an electrical wire can be said to be creating energy.

Another error is the idea that two or more people own the same gold coin at the same time.  When one puts gold on deposit, one gives up ownership of the gold.  The depositor does not own the gold any longer.  He owns a credit instrument, a piece of paper with a promise to pay in the future.  So long as the bank does not mismatch the duration of this deposit with the duration of the asset it buys, there is no conflict.

If people want to vault their gold only, perhaps with some payment transfer mechanism, there would be such a warehousing service offered in the market.  But this is not banking.  It's just vaulting, and most people prefer the convenience of fungibility.  Who wants the problems of a particular vault location and a delay to transfer it elsewhere?  And who wants a negative yield on money just sitting there?

A related error is the claim, often repeated on the Internet, is that a bank takes 1,000 ounces in deposit and then lends 10,000 out.  Poof!  Money has been created—and to add insult to injury, the banks charge interest!  The error here is that of confusing the result of a market process (of many actors) with a single bank action.  If Joe deposits 1,000 ounces of gold, the bank will lend not 10,000 ounces but 900 ounces (assuming a 10% reserve ratio).

Mary the borrower may spend the money to build a new factory.  Jim the contractor who builds it may deposit the 900 ounces in a bank.  The bank may then lend 810 ounces, and so on.  This process works if and only if each borrower spends 100% of the money and if the vendors who earned their money deposit 100% of it, in a time deposit.  Otherwise, the credit (this is credit, not money) simply does not multiply as Rothbard asserts.

This view of money multiplication does not consider time as a variable.  Gold  payable on demand is not the same as gold payable in 30 years.  It will not trade the same in the markets.  The 30-year time deposit or bond will pay interest, have a wide bid-ask spread, and therefore not be accepted in trade for goods or services.

This process involving the decisions of innumerable actors in the free market may have a result that is 10x credit expansion.  But one cannot make a shortcut, presume that it will happen, and then assert that the banks are "swindling."

If one confuses credit (paper) with money (gold), and one believes that inflation is an "increase in the money supply" then one is opposed to any credit expansion and hence any banking.  Without realizing it, one finds oneself advocating for the stagnation of the medieval village, with a blacksmith, cobbler, cooper, and group of subsistence farmers.  Anything larger than a family workshop requires credit.

Credit and credit expansion is a process that has a natural brake in the gold standard when people are free to deposit or withdraw their gold coin.  Each depositor must be satisfied with the return he is getting in exchange for the risk and lack of liquidity for the duration.  If the depositor is unhappy with the bank's (or bond market's) offer, he can withdraw his gold.

This trade-off between hoarding the gold coin and depositing it in the bank sets the floor under the rate of interest.  Every depositor has his threshold.  If the rate falls (or credit risk rises) sufficiently, and enough depositors at the margin withdraw their gold, then the banking system is deprived of deposits, which drives down the price of the bond which forces the rate of interest up.  This is one half of the mechanism that acts to keep the rate of interest stable.

The ceiling above the interest rate is set by the marginal business.  No business can borrow at a rate higher than its rate of profit.  If the rate ticks above this, the marginal business is the first to buy back its outstanding bonds and sell capital stock (or at least not sell a bond to expand).  Ultimately, the marginal businessman may liquidate and put his money into the bonds of a more productive enterprise.

A stable interest rate is vitally important.  If the rate of interest rises, it is like a wrecking ball swinging into defenseless buildings.  As noted above, each uptick forces marginal businesses to close their operations.  If the rise is protracted, it could really cause the affected country's industry to be hollowed out.  On the other hand, if the rate falls, the wrecking ball swings to the other side of the street.  The ruins on the first side are not rebuilt.  But now, capital is destroyed through a different and very pernicious process: the burden of each dollar of (existing) debt rises at the same time that the lower rate encourages more borrowing.  From 1947 to 1981, the US was afflicted with the rising interest rate disorder.  From 1981 until present, the second stage of the disease has plagued us.

Today, under the paper standard, the rate of interest is volatile.  The need to hedge interest rate risks (and foreign exchange rate risk, something else that does not exist under the gold standard) is the main reason for the massive derivatives market.  In this market for derivatives, which is estimated to be approaching 1 quadrillion dollars (one thousand trillion or one million billion), market participants including businesses and governments seek to buy financial instruments to protect them against adverse changes.  Those who sell such instruments need to hedge as well.  Derivatives are an endless circle of futures, options on futures, options on options, "swaptions", etc.

The risk cannot be hedged, but it does lead to a small group of large and highly co-dependant banks, who each sell one another exotic derivative products.  Each deems itself perfectly hedged, and yet the system becomes ever more fragile and susceptible to "black swans".

These big banks are deemed "too big to fail."  And the label is accurate.  The monetary system would not survive the collapse of JP Morgan, for example.  A default by JPM on tens or perhaps a few hundred trillion of dollars of liabilities would cause many other banks, insurers, pensions, annuities, and employers to become insolvent.  Consequently, second-worst problem is that the government and the central bank will always provide bailouts when necessary.  This, of course, is called "moral hazard" because it encourages JPM management to take ever more risk in pursuit of profits.  Gains belong to JPM, but losses go to the public.

There is something even worse.  Central planners must increasingly plan around the portfolios of these banks.  Any policy that would cause them big losses is non-viable because it would risk a cascade of failures through the financial system, as one "domino" topples another.  This is one reason why the rate of interest keeps falling.  The banks (and the central bank) are "all in" buying long-duration bonds, and if the interest rate started moving up they would all be insolvent.  Also, they are borrowing short to lend long so the central bank accommodates their endless need to "roll" their liabilities when due and give them the benefit of a lower interest payment.

The problems of the irredeemable dollar system are intractable.  Halfway measures, such as proposed by Robert Zoelick of the Bank for International Settlements that the central banks "watch" the gold price will not do.  Ill-considered notions such as turning the IMF into the issuer of a new irredeemable currency won't work.  Well-meaning gestures such as a gold "backed" currency (price fixing?) might have worked in another era, but with the secular decline in trust, why shouldn't people just redeem their paper for gold?  One cannot reverse cause and effect, trust and credit.  And that's what a paper note is based on: trust.

The world needs the unadulterated gold standard, as outlined in this paper, Part III of a series.

In Part IV, we will look at one other key characteristic of the Unadulterated Gold Standard: The Real Bill…

Diamonds From Shovel to Shop: Inside De Beers: Video – Bloomberg

Posted: 21 Dec 2012 04:33 PM PST

Rough diamond prices have slumped 16% over the past year, but De Beers expects a turnaround in the...

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America in Danger if California Goes Off Fiscal Cliff | Daily Ticker – Yahoo! Finance

Posted: 21 Dec 2012 04:26 PM PST

The biggest economy in the U.S. is turning around, which could mean good news for the overall...

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Guest Post: Santa Keynes and the Hayekian Grinch

Posted: 21 Dec 2012 04:14 PM PST

Authored by Peter Foster, originally posted at Financial Post,

Keynesianism has extended ­downturn, despite recent praise

We are now approaching the fourth Christmas of the great debate between the benign supporters of Santa Keynes and the walnut-hearted acolytes of the Hayekian Grinch. Or at least that's how Keynesians seem to see it.

Prominent statist fans of John Maynard Keynes such as Nobel laureates Paul Krugman and George Stiglitz, and Keynes' biographer Lord Robert Skidelsky, tend to be moralists who castigate their opponents as flinty-eyed masochists rather than level-headed students of immutable laws. Their indignant question is "Would you have us do nothing?" The response from supporters of Friedrich Hayek and his "Austrian" free-market economics is: "Yes, since what you are doing is making things worse. Moreover, it's your policies that cause crises in the first place."

Keynesians don't just fail to grasp Austrian economics — which emphasizes that diverting tax dollars or government borrowing to Santa's workshop to produce what people don't want (such as holes in the ground, pyramids or windmills) will have painful long-term consequences — they condemn it on the basis that Austrians rejoice in suffering.

Then again, who doesn't want to believe in Santa? (Naughty or nice doesn't come into it. Just get those elves working). And who could support the mean green character who wanted to drain all the fun from Whoville?

The latest champion of Keynes as both economically benign and more "moral" is Peter Berezin, the managing editor of the Bank Credit Analyst. In the December edition, Mr. Berezin produces a long piece, Hayek vs. Keynes: Weighing the Evidence, in which he suggests that Keynes is winning the battle hands down.

The claim is moot, to say the least.

Keynesianism is essentially a refutation of the Invisible Hand-driven natural order identified by Adam Smith. Smith would have spotted Keynes as a "man of system" who mistook the economy for a machine and economic actors for chess pieces. The Austrians are Smith's politically unpopular heirs.

Regurgitating murky history, Mr. Berezin writes "The apparent success of Roosevelt's New Deal policies, and the fact that massive government spending on the war effort did end the Depression, seemed to validate the views of Keynes."

Seemed indeed.

In fact, it was FDR's New Deal policies — which, like those of Obama, demonized "the rich," promoted Big Government, and created uncertainty — that helped make the Depression "Great." Meanwhile, how can war create real growth or "cure" unemployment except by forcing people into uniform?

Mr. Berezin acknowledges the collapse of Keynesianism amid the stagflation of the 1970s, but claims that its revival since the 2008 crisis has been successful — or at least hasn't (yet) produced the disasters suggested by the Austrians.

His argument for Keynesian triumph is that stimulus really did create jobs. Nobody denies, however, that government can create short-term employment. The question is sustainable jobs. Meanwhile claims of a significant impact from government spending clash sharply with studies by the likes of the Fraser Institute's Niels Veldhuis and Stanford University's John Taylor.

Mr. Berezin claims that "Friedrich Hayek's latter-day disciples" (whom he doesn't identify) made three predictions about the government response to 2008: "soaring" interest rates, "runaway" inflation, and that fiscal austerity would "boost growth."

These claims represent undeniable truths blown up into straw men. Other things being equal, increased government borrowing will raise interest rates and money printing will boost inflation. Fiscal austerity is obviously not a short-term growth booster so much as the inevitable consequence of overspending.

Mr. Berezin typically appears to imagine that austerity is merely an — undesirable — option. Thus, the fact that economies whose feckless governments have been forced to cut spending have "done worse" economically is cited as a flaw in the Austrian view rather than a natural consequence of the Keynesian pretensions of spending yourself rich.

Mr. Berezin exonerates President Obama for getting his employment projections wrong by suggesting that the "vicious downward spiral" of the economy in late 2008 had been underestimated. But this surely confirms that economists have no idea how to read cycles or project anything but straight lines, let alone calculate "multipliers."

His government job-creation calculations — in particular the notion that Obama's US$787-billion of fiscal stimulus produced three million jobs — are pure macromancy. More important, what are the longer-term adverse implications of that US$787-billion of borrowed and/or printed money, not to mention Ben Bernanke's ongoing efforts to find new ways to drop more cash from the proverbial helicopter? And where do the 1.7 million real jobs created by the quite unexpected U.S. shale gas and tight oil booms fit into those figures? Oh, that's right. They didn't come from government.

Keynesianism has two insuperable flaws. The first is the belief that government spending can be a viable substitute for the private variety. It promotes the view that spending is spending and jobs are jobs. The most obvious current refutation of this notion is provided in the almost universal trend to "stimulate" growth by subsidizing alternative energy and other "technologies of the future." One much-quoted Spanish study found that each green job "stimulated" by government expenditure cost two jobs elsewhere.

The second Keynesian flaw is that Keynes believed governments would run surpluses when times were good to compensate for those downturn-fighting deficits. Nobel economist James Buchanan pointed out that Keynes was naive not to see that his policies would promote a one-way pendulum of expenditure that inevitably led into fiscal crisis, with which the world continues to struggle.

Far from being a success, Keynesian policies have retarded recovery and extended the downturn, just as they did in the 1930s and the 1970s. They're the "moral" policy present that keeps on taking, supported by those who claim that their opponents have hearts "two sizes too small."

The Gold Bug, Will it Last?

Posted: 21 Dec 2012 04:13 PM PST

The Gold Bug, Will it Last? Thu 20 Dec 12 | 05:20 PM ET John Hummel, President &...

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How You Play the Cards Is More Important Than What You Are Dealt

Posted: 21 Dec 2012 03:49 PM PST

As many people know, I'm a frequent traveler. This means I spend a lot of time standing in lines at airports, taxi stands, train stations, and so forth. My habit has been to use this time reading books, playing with lines of poetry, or simply thinking about whatever needs thinking about. If I believed in sin, the cardinal sin in my book would be to waste time; every squandered minute is a piece of my life I will never get back.

But a couple months ago, I saw my wife playing a game on her phone and remembered that my phone has games on it too… and sometimes one is just too tired or jet-lagged to do good work. So I started playing solitaire.

Now, Doug has long said that he loves playing poker, a game with instructive lessons for speculators. He always stresses that speculative investment is – or should be – very different from gambling, but there are obvious parallels in how one assesses odds and the like. That's great, but I'm a terrible poker player; I can't seem to bluff. Solitaire is more my speed.

Solitaire is a silly use of time, really, but relaxing. After a few hands, my wife showed me the "Undo" function that lets you try different solutions to the challenge each hand of cards presents. And down there by the Undo icon was another for stats. The game had been keeping track the whole time, and I had won approximately 30% of all the games I'd played. Checking on my progress, I noticed that the stats don't include the games I don't play – if I didn't like a hand I was dealt and hit the "New Game" button, it didn't count as a loss, didn't show up in the stats at all. And then I saw an option to reset all statistics…

As my daughter likes to say: light bulb!

It was like Doug Casey's favorite Warren Buffett aphorism about investing being like a ball game with no called strikes. You don't have to swing at every – or any – pitches. You can wait for one you like and then swing for the bleachers. So, what would my stats look like if I simply refused to play any hand that didn't offer me the advantages that I've learned help me win?

Well, you can see in the photo below what happened: I reset the statistics, applied my new criteria, and doubled my success rate to 60%.

On the left is a hand of solitaire I was playing. On the right is the stats screen that shows I've won 60% of 205 games played since resetting the statistics and beginning my experiment. Note that the "Games Won" is greater than "Wins Without Undo" by one game – that was the time my wife showed me how she would play the hand.

Before You Make Your Move

After playing many hands, I'd found that the more moves I had at the outset the greater the odds of winning. If I am dealt a hand in which I can make three moves before turning over my first card from the deck, I can win 50% to 60% of the time. And if I have that plus an ace I can move up top, I can win 80% to 90% of the time.

So, my criteria were simple: I needed to see at least three moves at the start, or I wouldn't play.

This is, I submit, very similar to the due diligence on a mining stock. If the 8 Ps are not all there, we should not invest. If they are, it doesn't guarantee success, but it sure improves the odds.

I was even tempted by hands that did not quite meet my criteria but looked really interesting – like showing two aces at the start. When I tried such hands anyway, I lost more often than I won. I didn't track it, but I lost a lot more than I won, perhaps even the 70% loss rate I started with.

I found this to be very, very much like investing in resource stocks; the times I've been tempted by something with an exciting story but not quite up to snuff, I've regretted it far more often than not.

Solitaire is not stock picking, I know, but the principle of not acting unless the odds are in your favor is the same; if you don't like anything about the hand you're dealt, the ball you're thrown, or the investment opportunity you're pitched, don't buy the stock.

It's a simple twist on the Nike motto: Just don't do it.

The Deeper Lesson

Not playing unless dealt a favorable hand is an incisive instance of something far more important that's familiar to long-time readers: discipline.

Not being tempted by an exciting but flawed story is just the beginning. Believe it or not, even in something as simple as solitaire, discipline in how one plays matters a lot – perhaps as much as refusing to play unless dealt a great hand.

Patience throughout the game is key.

On my phone, I can turn over the cards in the deck as many times as I like. So, unless I'm going for speed, there's actually no need to use any of the cards in the deck the first time I turn them over. I can go through them as many times as I like, learn what's there, and think about how to play the cards before making a single move.

Boring?

Maybe. But remember, my objective is not just to solve the puzzle but to win without undoing any moves. I don't get to call my broker and ask him to undo trades that don't work out. Once I play a card in the deck, or uncover a card in the hand, it stays played. There's more I can do, but there's no going back.

For example, if I have a space for a king, I don't just fill it with the first king I find in the deck; I go through the deck looking for the color of king that will help me the most.

So, yes, patience is a virtue – as is due diligence. Going through the deck is like reading financial statements and examining drill core. I don't want to get too excited by what I find early on, because I can't undo a blunder.

I also discovered that I make more mistakes when tired. I found that – this shouldn't have surprised me, but it did – if I get stuck in a game and put it away long enough to clear my mind, and come back to it, I can often see moves not seen before.

The same thing happens when I research investment opportunities; sometimes the most important thing I can do is take a break and come back to it after a rest, then think it through again. Makes sense – picking winners is very complicated and requires assessing market conditions, global trends, and the individual psychology of the players involved, as well as the technical merits of the mineral prospect itself.

I could go on, but I'm sure you get the idea. What excited me about this analogy was not just how well it fits my experience as a speculator, but the statistical result. I don't just think it works; I know it does. And I have numbers that show it – as you can see in the photo above.

Our Market Today

Moving from theory to practice, the article we ran in the October 29 Daily Dispatch sums up the Casey metals team's view of the market today. In short, as we have long said, our stocks move with greater volatility than the underlying metals. For most good companies, the extreme bargains of last summer are gone. I sincerely hope that those who bought at higher prices heeded my calls to average down. Yet, gold's retreat in October has created a new buying opportunity, as you can see in the chart below.

Could our market head lower again? Of course it could – but our experience throughout this bull market (since the bottom in 2001) tells us that the odds favor rising prices this fall and winter, and that makes buying the current dip the right move. It's like being dealt an advantageous hand; it doesn't guarantee success, but it's the way to play.

It's also highly advantageous to have expert advice guiding your stock selections in the potentially lucrative but all too often heartbreaking junior resource sector. If you want to increase your chances of seeing portfolio gains like 46% in one day, or 522% in just over two years – plus get a special bonus if you act now – click here to learn how.

75 Economic Numbers From 2012 That Are Almost Too Crazy To Believe

Posted: 21 Dec 2012 03:44 PM PST

Compiled by Michael of Investment Watch blog,

What a year 2012 has been!  The mainstream media continues to tell us what a "great job" the Obama administration and the Federal Reserve are doing of managing the economy, but meanwhile things just continue to get even worse for the poor and the middle class.  It is imperative that we educate the American people about the true condition of our economy and about why all of this is happening.  If nothing is done, our debt problems will continue to get worse, millions of jobs will continue to leave the country, small businesses will continue to be suffocated, the middle class will continue to collapse, and poverty in the United States will continue to explode.  Just "tweaking" things slightly is not going to fix our economy.  We need a fundamental change in direction.  Right now we are living in a bubble of debt-fueled false prosperity that allows us to continue to consume far more wealth than we produce, but when that bubble bursts we are going to experience the most painful economic "adjustment" that America has ever gone through.  We need to be able to explain to our fellow Americans what is coming, why it is coming and what needs to be done.  Hopefully the crazy economic numbers that I have included in this article will be shocking enough to wake some people up.

The end of the year is a time when people tend to gather with family and friends more than they do during the rest of the year.  Hopefully many of you will use the list below as a tool to help start some conversations about the coming economic collapse with your loved ones.  Sadly, most Americans still tend to doubt that we are heading into economic oblivion.  So if you have someone among your family and friends that believes that everything is going to be "just fine", just show them these numbers.  They are a good summary of the problems that the U.S. economy is currently facing.

The following are 75 economic numbers from 2012 that are almost too crazy to believe...

#1 In December 2008, 31.6 million Americans were on food stamps.  Today, a new all-time record of 47.7 million Americans are on food stamps.  That number has increased by more than 50 percent over the past four years, and yet the mainstream media still has the gall to insist that "things are getting better".

#2 Back in the 1970s, about one out of every 50 Americans was on food stamps.  Today, about one out of every 6.5 Americans is on food stamps.

#3 According to one calculation, the number of Americans on food stamps now exceeds the combined populations of "Alaska, Arkansas, Connecticut, Delaware, District of Columbia, Hawaii, Idaho, Iowa, Kansas, Maine, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Dakota, Oklahoma, Oregon, Rhode Island, South Dakota, Utah, Vermont, West Virginia, and Wyoming."

#4 According to one recent survey, 55 percent of all Americans have received money from a safety net program run by the federal government at some point in their lives.

#5 For the first time ever, more than a million public school students in the United States are homeless.  That number has risen by 57 percent since the 2006-2007 school year.

#6 Median household income in the U.S. has fallen for four consecutive years.  Overall, it has declined by over $4000 during that time span.

#7 Families that have a head of household under the age of 30 have a poverty rate of 37 percent.

#8 The percentage of working age Americans with a job has been under 59 percent for 39 months in a row.

#9 In September 2009, during the depths of the last economic crisis, 58.7 percent of all working age Americans were employed.  In November 2012, 58.7 percent of all working age Americans were employed.  It is more then 3 years later, and we are in the exact same place.

#10 When you total up all working age Americans that do not have a job in America today, it comes to more than 100 million.

#11 According to one recent survey, 55 percent of all small business owners in America "say they would not start a business today given what they know now and in the current environment."

#12 The number of jobs at new small businesses continues to decline.  According to economist Tim Kane, the following is how the decline in the number of startup jobs per 1000 Americans breaks down by presidential administration

Bush Sr.: 11.3

Clinton: 11.2

Bush Jr.: 10.8

Obama: 7.8

#13 The U.S. share of global GDP has fallen from 31.8 percent in 2001 to 21.6 percent in 2011.

#14 The United States has fallen in the global economic competitiveness rankings compiled by the World Economic Forum for four years in a row.

#15 There are four major U.S. banks that each have more than 40 trillion dollars of exposure to derivatives.

#16 In 2000, there were more than 17 million Americans working in manufacturing, but now there are less than 12 million.

#17 According to the Pew Research Center, 61 percent of all Americans were "middle income" back in 1971.  Today, only 51 percent of all Americans are.

#18 The Pew Research Center has also found that 85 percent of all middle class Americans say that it is harder to maintain a middle class standard of living today than it was 10 years ago.

#19 62 percent of all middle class Americans say that they have had to reduce household spending over the past year.

#20 Right now, approximately 48 percent of all Americans are either considered to be "low income" or are living in poverty.

#21 Approximately 57 percent of all children in the United States are living in homes that are either considered to be either "low income" or impoverished.

#22 According to one survey, 77 percent of all Americans are now living paycheck to paycheck at least part of the time.

#23 Back in 1950, more than 80 percent of all men in the United States had jobs.  Today, less than 65 percentof all men in the United States have jobs.

#24 The average amount of time that an unemployed worker stays out of work in the United States is 40 weeks.

#25 If you can believe it, approximately one out of every four American workers makes 10 dollars an hour or less.

#26 According to the U.S. Census Bureau, an all-time record 49 percent of all Americans live in a home where at least one person receives financial assistance from the federal government.  Back in 1983, that number was less than 30 percent.

#27 Right now, more than 100 million Americans are enrolled in at least one welfare program run by the federal government.  And that does not even count Social Security or Medicare.  Overall, there are almost 80 different "means-tested welfare programs" that the federal government is currently running.

#28 When you account for all government transfer payments and all forms of government employment, more than half of all Americans are now at least partially financially dependent on the government.

#29 Barack Obama has been president for less than four years, and during that time the number of Americans "not in the labor force" has increased by nearly 8.5 million.  Something seems really "off" about that number, because during the entire decade of the 1980s the number of Americans "not in the labor force" only rose by about 2.5 million.

#30 Electricity bills in the United States have risen faster than the overall rate of inflation for five years in a row.

#31 According to USA Today, many Americans have actually seen their water bills triple over the past 12 years.

#32 There are now 20.2 million Americans that spend more than half of their incomes on housing.  That represents a 46 percent increase from 2001.

#33 Right now, approximately 25 million American adults are living with their parents.

#34 As the economy has slowed down, so has the number of marriages.  According to a Pew Research Center analysis, only 51 percent of all Americans that are at least 18 years old are currently married.  Back in 1960, 72 percent of all U.S. adults were married.

#35 At this point, only 24.6 percent of all jobs in the United States are good jobs.

#36 In 1999, 64.1 percent of all Americans were covered by employment-based health insurance.  Today, only 55.1 percent are covered by employment-based health insurance.

#37 Recently it was announced that total student loan debt in the United States has passed the one trillion dollar mark.

#38 If you can believe it, one out of every seven Americans has at least 10 credit cards.

#39 One survey of business executives has ranked California as the worst state in America to do business for 8 years in a row.

#40 In the city of Detroit today, more than 50 percent of all children are living in poverty, and close to 50 percent of all adults are functionally illiterate.

#41 It is being projected that half of all American children will be on food stamps at least once before they turn 18 years of age.

#42 More than three times as many new homes were sold in the United States in 2005 as will be sold in 2012.

#43 If you can believe it, 53 percent of all Americans with a bachelor's degree under the age of 25 were either unemployed or underemployed last year.

#44 The U.S. economy continues to trade good paying jobs for low paying jobs.  60 percent of the jobs lost during the last recession were mid-wage jobs, but 58 percent of the jobs created since then have been low wage jobs.

#45 Our trade deficit with China in 2011 was $295.5 billion.  That was the largest trade deficit that one country has had with another country in the history of the planet.

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

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

#48 The U.S. tax code is now more than 3.8 million words long.  If you took all of William Shakespeare's works and collected them together, the entire collection would only be about 900,000 words long.

#49 According to the IMF, the global elite are holding a total of 

12 Gold Bugs Bring Christmas Cheer

Posted: 21 Dec 2012 03:30 PM PST

While gold's recent action has been a little mystifying, gold bugs view it as an opportunity... maybe one that's soon to vanish. Read More...

Stock Market Breather and Gold Yearly Cycle Low

Posted: 21 Dec 2012 02:49 PM PST

The stock market has known all along that the fiscal cliff issue was going to be pushed out to the last minute. This is just how Washington works. Nothing is ever settled until everybody gets all of the pork needed to buy their vote. Read More...

Gold and Silver Disaggregated COT Report (DCOT) for December 21

Posted: 21 Dec 2012 02:48 PM PST

This week's Commodity Futures Trading Commission (CFTC) disaggregated commitments of traders (DCOT) report was released at 15:30 ET Friday. Our recap of the changes in weekly positioning by the disaggregated trader classes, as compiled by the CFTC, is just below.

20121221-DCOT

(DCOT Table for December 21, 2012, for data as of the close on Tuesday, December 18.   Source CFTC for COT data, Cash Market for gold and silver.) 

More...

In the DCOT table above a net short position shows as a negative figure in red. A net long position shows in black. In the Change column, a negative number indicates either an increase to an existing net short position or a reduction of a net long position. A black figure in the Change column indicates an increase to an existing long position or a reduction of an existing net short position. The way to think of it is that black figures in the Change column are traders getting "longer" and red figures are traders getting less long or shorter.

All of the trader's positions are calculated net of spreading contracts as of the Tuesday disaggregated COT report.

Gold in Doesn't-Beat-Stocks Shocker!

Posted: 21 Dec 2012 02:33 PM PST

So the world didn't end on the shortest day of 2012, as forecast by no-one beyond lazy journalists and internet frauds. But the long bull market gold has choked its last. Or so some soothsayers claim. Read More...

VWAPalooza Keeps Risk Anchored (For Now)

Posted: 21 Dec 2012 02:22 PM PST

After last night's craziness, equity markets anchored off the synthetics and the synthetics anchored to VWAP. We clung there at VWAP all day long in S&P 500 futures with some rumor-driven angst into the close to try and get some levitation. Much was made of VIX's decline from its opening highs, however, a look back at the week and it is obvious that this was hedgers unwinding their positions (leaving VIX still notably more worried than stocks). Equities in general collapsed down to where yesterday's risk-assets had languished and cross-asset-class correlations were very high today (which makes sense as every algo in the market was working over time to hold us together after the flash crash overnight). The USD ends the week unchanged (with AUD 1.5% weaker and SEK 1.9% stronger) and early winners and losers in commodities reverted (oil down and silver/gold up today) leaving Silver -7% on the week still! Treasury yields ended only 7bps higher on the week (well off the 15bps on Tuesday) as Financials remain the week's winners (+2.5%) and Staples the losers (-2.25%).

VIX is still telling a different story... despite the compression today... lots of theta now until 12/27 when congress is back so makes some sense...

 

Stocks slumped to broad risk-assets' view of the world (from yesterday) and clung there all day (upper right). ETFs were a little more noisy with SPY under- and over-performing after Europe's close (upper left). Correlations (lower right) were almost 1 as algos were in charge...

 

which is even more obvious from the VWAP-hugger in S&P 500 futures today...(+/- 2 sigma around VWAP all day bid and offered)...

 

The USD ended the week unchanged...

 

and today saw commodities revert a little though Silver remains slammed...

 

Treasurioes and stocks stayed well corelated most of the week - though it seems that it is always stocks that get overexcited and revert...

 

Charts: Bloomberg and Capital Context

Maguire - Shocking $2.89 Premium For Physical Silver In China

Posted: 21 Dec 2012 02:16 PM PST

After boldly calling for a bottom in the gold and silver markets yesterday, today whistleblower Andrew Maguire told King World News that the premium for physical silver expanded to shocking and "unprecedented" levels in China. Maguire also spoke with King World News about the challenges the shorts are now facing in both the gold and silver markets.

This is the fourth in a series of interviews with Maguire lifting the curtain on what is going on behind the scenes in the gold and silver war.

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

Gold Daily and Silver Weekly Charts - Bounce

Posted: 21 Dec 2012 02:06 PM PST

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

Brazil doubles gold reserves as central banks buy bullion

Posted: 21 Dec 2012 02:02 PM PST

By Glenys Sim | Bloomberg Brazil boosted gold reserves for a third month in November to double the country's holdings since August as central banks from Russia to Belarus and South Korea add the metal to diversify their assets. Brazilian holdings expanded 14.7 metric tons in November to 67.2 tons, the most since November 2000, according to data on the [...]

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

What a Coincidence!

Posted: 21 Dec 2012 02:00 PM PST

By Catherine Austin Fitts

Now let's get this straight. On December 11th, the Department of Justice announces that HSBC is paying a $1.92 billion settlement for money laundering. However, no officers of HSBC are being indicted or penalized. Everyone skates.

Now, HSBC is the custodian for the largest gold ETF in the world. Numerous questions [...]

Confiscation of Gold – Then What? Part 3

Posted: 21 Dec 2012 02:00 PM PST

In this part of the series on the subject of Confiscation, we look at the realities that you face in trying to avoid your gold being confiscated should a Confiscation Order be issued in your country. But first we ask the question, is there really a danger of gold being confiscated? We believe that there is.

COT Gold, Silver and US Dollar Index Report - December 21, 2012

Posted: 21 Dec 2012 01:32 PM PST

COT Gold, Silver and US Dollar Index Report - December 21, 2012

Stocks Beat Gold for 1st Time Since 2004

Posted: 21 Dec 2012 12:42 PM PST

- SO the WORLD DIDN'T END on the shortest day of 2012, writes Adrian Ash at BullionVault, as forecast by no-one beyond lazy journalists and internet frauds. But the long bull market gold has choked its last. Or so some soothsayers claim. Bloomberg: "Gold, [enjoying] its longest winning streak in at least nine decades, is poised to enter a bear [...]

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

2012 Gold Price Performance Really Disappoints Readers and Experts Alike

Posted: 21 Dec 2012 12:32 PM PST

"These guys sure are in a hurry. They might as well have hired a brass band and marched it down Wall Street" ...

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