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|Last on gold is $822.00
The following is lengthly but important in supplementing our knowledge in understanding how the world is run and why we must own physical gold and silver to protect ourselves.
Don't Cry for Me Argentina
Save Your Tears For Yourself
Darryl Robert Schoon
Aug 25, 2008
While bankers do control the issuance of credit, they cannot control themselves. Bankers are the fatal flaw in their deviously opaque system that has substituted credit for money and debt for savings. The bankers have spread their credit-based system across the world by catering to basic human needs and ambition and greed; and while human needs can be satisfied, ambition and greed cannot - and the bankers' least of all.
I have a bad feeling about what's about to happen. The Great Depression is the closest that comes to mind. I, like most, was not alive during the 1930s when it happened. Nonetheless, what once was feared in private is now being discussed in public. It's going to be bad. It's going to make high school seem like fun.
THE UNITED STATES OF AMERICA
THE NEXT ARGENTINA
This Time is Different: A Panoramic View of Eight Centuries of Financial Crises by University of Maryland's Carmen Reinhart and Harvard's Kenneth Rogoff makes for perfect reading when flying between the US and Argentina.
There is perhaps no better analysis than Reinhart and Rogoff's on the history of sovereign defaults; and, as such, Reinhart and Rogoff's paper was ideal reading material when traveling between the US and Argentina, for the sovereign defaults that happened in the past to Argentina will soon be happening to the US.
But a US default will make Argentina's debt defaults pale both by comparison and consequence. The US, unlike Argentina, is the world's largest economy, the issuer of the world's reserve currency and the world's largest debtor - and a default by the US on its debt will shake the very foundations of our increasingly fragile global economy.
The power of ambition is extraordinary. The power of ambition transformed the US from the world's only creditor after WWII into the world's largest debtor in less than fifty years. Wanting to emulate England's 19th century empire in the 20th, the US instead has mirrored England decline in the 20th century here in the 21st.
Credit and borrowing fueled America's ambitions in the 20th century as it had England's in the 18th and 19th. During the 1980s, to pay for President Reagan expansion of the military, the US quadrupled its national debt in less than a decade by borrowing three trillion dollars during a presidency pledged to balance the budget.
When Reagan took office, US debt totaled one trillion dollars. When Reagan left office, US debt totaled four trillion dollars. Reagan's vaunted slogan of fiscal conservatism was just that - a slogan; and while talk is cheap, the debts now have to be repaid.
Just as the costs of WWI forced England to abandon the gold standard in the early 1900s, post WWII military spending forced the US to suspend the convertibility of the US dollar to gold in 1971; and the consequences, e.g. burgeoning trade deficits and global currency instability, are now putting unsustainable strains on a financial system already in extremis.
Ambition has its price and the bill is now due and owing. The question is: how will the US pay what it owes? In Hyman Minsky's Financial Instability Model, the US is close to "Ponzi status" if not already there since the US is having to roll its debt forward and borrow from others to pay the interest as it can no longer pay down the principle.
In 2006, in an article published by the St Louis Federal Reserve Bank, Professor Laurence Kotlikoff stated the US was "technically bankrupt" as there was no way the US could pay the $65.9 trillion it owed.
Evidently, Professor Kotlikoff was conservative in his estimate or we're going downhill faster than he knew. Just three months ago, on May 28, 2008 Richard W. Fisher, President and CEO of the Dallas Federal Reserve Bank estimated the obligations of the US to be actually $99.2 trillion, 50 % higher than Kotlikoff's figures.
"In the distance, I see a frightful storm brewing in the form of untethered government debt. I choose the words - "frightful storm" - deliberately to avoid hyperbole. Unless we take steps to deal with it, the long-term fiscal situation of the federal government will be unimaginably more devastating to our economic prosperity than the subprime debacle and the recent debauching of credit markets that we are now working so hard to correct."
Fisher should know what the US owes and the danger that sum represents. As President and CEO of the Dallas Federal Reserve Bank, Fisher is a part of the Federal Reserve System - the very system that has indebted America into perpetuity when its credit-based money forced out gold and silver based money in 1913.
But in his speech Fisher said nothing about the role the Federal Reserve has played in America's fatal dance with debt, warning instead about the increasing costs of entitlements such as Social Security and Medicare.
Fisher is part of a larger effort to now blame America's entitlements as the primary cause of our problems, assiduously avoiding the role his own Federal Reserve Bank has played in sinking our once wealthy nation into perpetual indebtedness.
In truth, the entitlement program that poses the greatest threat to America is - and always has been - the Federal Reserve System. Without the Federal Reserve's credit-based money whose compounding interest (paid to the bankers) is obliged to be paid for by a possibly unconstitutional US income tax [note: the Federal Reserve Act and Federal Income Tax were both instituted the same year in 1913], the US would not be indebted and bankrupt as it is now.
If Ben Bernanke and Richard Fisher et. al. at the privately owned Federal Reserve Bank resigned and stopped plundering the US for their own benefit at the expense of the public in order to line the pockets of their banker friends with public funds, the US might have a chance of successfully getting out of this mess.
But, of course, they won't and the now privately controlled US government will continue to indebt the American public so insiders can continue to profit immensely at the public trough. But the question still remains, how will the US pay its unpayable debt? The answer is as clear as it is obvious. It won't because it can't.
DEBT & DESTRUCTION SOUTH OF THE BORDER
In their well-researched paper, Serial Defaults and Its Remedies, Reinhart and Rogoff write "Cycles in capital flows to emerging markets have now been with us for two hundred years". If we are to understand the dynamics of serial default, it would do us well to look at these cycles and their relevance to what is happening today.
Serial Defaults and Its Remedies, Section 2. Capital Flow Cycles and the Syndrome of "This Time Is Different":
...a pattern of borrowing followed by crisis is evident in the string of defaults during 1826-28 in Latin America that come on the heels of the first wave of massive capital flows from Britain into Latin America in 1822-25A second wave of capital flows from Britain came during the 1850s and 1860s. The cycle ended with the crisis of 1873. The next wave of capital flows into emerging markets coincided with the shift of the financial epicenter of the world from London to New York. Among Latin American countries, the borrowing binge of 1925-28 was [financed] with "cheap" money from New York. Capital flows peaked in 1928, the year before the U.S. Stock market crash ushered in financial and currency crises around the world and eventually an international debt crisis during 1929-33.
Argentina is at the very epicenter of Latin America borrowings and defaults and a cursory judgment may well lay the blame for such on Argentina. But understanding the past is akin to sedimentary sampling and a deeper reading of events reveals far more than the too familiar story of a spendthrift deadbeat nation borrowing more than prudence would otherwise dictate.
The capital flows from England and the US in the last two hundred years to Latin America were flows of credit, not money. The distinction is critical in understanding what has happened during the last two centuries. It explains the basis of the British Empire and current American power. It also explains the exploitation of Argentina.
The British Empire was founded on the central bank invention of credit-based money and the subsequent ability to substitute this new "money" for costly gold and silver; and the issuance of paper money allegedly backed by gold and silver is a critical component in the confidence game of central bankers to pass off their printed coupons as the real thing.
What the private bankers accomplished with the creation of the Bank of England was the government's "legitimization" of the bankers' new credit based coupons, sic paper money - coupons upon which the private bankers could now charge interest just as they had when loaning actual gold (what a wonderful scam). The new coupons were a lot easier to come by, especially when the king gave them a monopoly over its issuance.
The advantage to the king was that the king now had an unlimited supply of "money" that could be used to finance his wars - wars which led to the establishment of the British Empire; the cost of which was transferred directly as a burden to the people as the new counterfeit debt-based money was now an obligation of the state, not of the king.
This was the genesis (genius to the bankers and government) of the modern income tax where the people are forced to pay interest on the credit-based money issued by their own government. This was also the beginning of credit-based markets, deceptively called capitalism in order to closely identify the newly counterfeit credit based economy with the real money it had replaced.
THE SPREAD OF DEBT IN DISGUISE
The flow of credit from England and then from its surrogate successor, the US, to developing nations such as Argentina was but the flow of printed coupons designed to harness and indebt the wealth and productivity of new lands.
The "capital" was really only credit, thinly disguised debt in the form of paper money originally issued by central banks, the Bank of England in Britain and the Federal Reserve Bank in the US, the twin towers of monetary Mordor.
The wonderfully sounding idea of unfettered capitalism is but a smokescreen for bankers to leverage their coupons in the form of credit and thereby indebt and control the productivity and wealth of others. As such, it has accomplished its goal admirably but its success will now cost the bankers dearly.
Three centuries of indebting nations, businesses, and the citizenry with constantly compounding debt is no longer sustainable. This is why central bankers in London, New York, Paris, and Tokyo are in such distress. Debtors can no longer pay their debts, defaults are on the rise and bankers may actually have to find real jobs if their confidence game continues to disintegrate.
Lawrence Summers' credentials as a banker are impeccable. Educated at MIT and Harvard in economics, Summers has served as Chief Economist for the World Bank, US Secretary of the Treasury and President of Harvard University.
Recently, in March 2008, Summers stated:
...we are facing the most serious combination of macroeconomic and financial stresses that the U.S. has faced in a generation--and possibly, much longer than thatIt's a grave mistake to believe in the self-equilibrating properties of economies in the face of large shocks. Markets balance fear and greed. And when fear takes over, the capacity for self-stabilization is not one that can be relied upon.
On June 29, 2008 the Financial Times quoted Summers:
...we are in an economic environment where we have more to fear than fear itself
Lawrence Summer's fears are not to be taken lightly. They are the banker's equivalent of Jim Cramer's televised fit of fear when interviewed on CNBC last year, see youtube.
While Summers is rightfully fearful of the current economic environment, the rest of us have far more to fear from bankers like Lawrence Summers and others like him. Summer's role in the manipulation of the price of gold is found in his 1988 paper Gibson's Paradox and the Gold Standard co-authored with Robert Barsky, published in the Journal of Political Economy (vol. 96, June 1988, pp. 528-550).
The hubris of bankers such as Summers is stunning. Fixing the price of gold hoping to control interest rates and prices is like fixing the temperature of thermometers hoping to control global warming. Such is the short reach of Summers' considerable intellect.
FACT OR FICTION?
But the real danger of bankers like Lawrence Summers lies not in their untethered intellect but in their cold ambition and selfish greed that sees nations and people as but living fodder to be milked, used and discarded as they and others profit.
In 1991, Summers issued the following memo while serving as Chief Economist at the World Bank:
...developed countries ought to export more pollution to developing countries because these countries would incur the lowest cost from the pollution in terms of lost wages of people made ill or killed by the pollution due to the fact that wages are so low in developing countries... the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that.
As the World Bank's Chief Economist, Summer's memo is a chilling reflection of the heartlessness that lies at the core of bankers and banking establishments. The World Bank itself seems to be a favorite watering hole for those of questionable intent.
Robert McNamara, the architect of the Vietnam War was President of the World Bank as was Paul Wolfowitz, the architect of the Iraq War. The current President of the World Bank, Robert Zoellick, is also an ardent supporter of the Iraq War (also on Zoellick's considerable list of "credits" is his service as advisor to Enron, his membership on the Council on Foreign Relations and Trilateral Commission and his attendance at the secretive Bilderberg meetings from 1991 to the present and his role as Senior International Advisor to investment bank Goldman Sachs).
It is no coincidence that those heading the World Bank are closely associated with America's vast war machine. Bankers have profited from fueling the military ambitions of both England and the US for the past two centuries and continue to do so today.
But perhaps the most damning indictment yet of the World Bank and today's bankers is John Perkins's Confessions of an Economic Hitman (Barrett Koehler, 2004) in which Perkins reveals the hidden intent of the World Bank and US bankers to cold-bloodedly indebt third world countries such as Argentina and profit by their misery.
In their review of Confessions of an Economic Hitman, Russell Mokhiber and Robert Weissman write:
Remember Smedley Butler?
He was perhaps the most decorated Major General in Marine Corps history. In the early part of this century, he fought and killed for the United States around the world. Butler was awarded two Congressional Medals of Honor.
Then, when he returned to the United States he wrote a book titled "War Is A Racket" which opens with the memorable lines: "War is a racket. It always has been."
"I was a high class muscleman for Big Business, for Wall Street and for the Bankers," Butler said. "In short, I was a racketeer, a gangster for capitalism."
In a speech in 1933, Butler said the following:
"I helped make Mexico, especially Tampico, safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. I helped in the raping of half a dozen Central American republics for the benefit of Wall Street. The record of racketeering is long. I helped purify Nicaragua for the international banking house of Brown Brothers in 1909-1912. I brought light to the Dominican Republic for American sugar interests in 1916. In China I helped to see to it that Standard Oil went its way unmolested."
Smedley Butler, meet John Perkins.
Perkins has just written a book, "Confessions of an Economic Hit Man" (Barrett Koehler, 2004). It is the War is A Racket for our times. Some of it is hard to believe. You be the judge.
In 1968, after graduating from Boston University, Perkins joined the Peace Corps and was sent to Ecuador. There, he was recruited by the National Security Agency (NSA) and hired by an international consulting firm, Chas. T. Main in Boston.
Soon after beginning his job in Boston, "I was contacted by a woman named Claudine who became my trainer as an economic hit man." Perkins assumed the woman worked for the NSA.
"She said she was sent to help me and to train me," Perkins said. "She is extremely beautiful, sensual, seductive, intelligent. Her job was to convince me to become an economic hit man, holding out these three drugs -- sex, drugs and money. And then she wanted to let me know that I was getting into a dirty business. And I shouldn't go off on my first assignment, which was going to be Indonesia, and start doing this unless I knew that I was going to continue doing it, and once I was in I was in for life."
Perkins worked for Main from 1970 to 1980. His job was to convince the governments of the third world countries and the banks to make deals where huge loans were given to these countries to develop infrastructure projects. And a condition of the loan was that a large share of the money went back to the big construction companies in the USA - the Bechtels and Halliburtons.
The loans would plunge the countries into debts that would be impossible to pay off.
"The system is set up such that the countries are so deep in debt that they can't repay their debt," Perkins said. "When the U.S. government wants favors from them, like votes in the United Nations or troops in Iraq, or in many, many cases, their resources - their oil, their canal, in the case of Panama, we go to them and say - look, you can't pay off your debts, therefore sell your oil at a very low price to our oil companies. Today, tremendous pressure is being put on Ecuador, for example, to sell off its Amazonian rainforest -- very precious, very fragile places, inhabited by indigenous people whose cultures are being destroyed by the oil companies."
When a leader of a country refuses to cooperate with economic hit men like Perkins, the jackals from the CIA are called in. Perkins said that both Omar Torrijos of Panama and Jaime Boldos of Ecuador -- both men he worked with - refused to play the game with the U.S. and both were cut down by the CIA -- Torrijos when his airplane blew up, and Roldos when his helicopter exploded, within three months of each other in 1981.
If the CIA jackals don't do the job, then the U.S. Marines are sent in -- Butler's "racketeers for capitalism."
Perkins also gives lurid details of how he pimped for a Saudi prince in the 1970s, in an effort to get the Saudi royal family to enter an elaborate deal in which the U.S. would protect the House of Saud. In exchange, the Saudis agreed to stabilize oil prices and use their oil money to purchase Treasury bonds, the interest on which would be used to pay U.S. construction firms like Bechtel to build Saudi cities.
For years, Perkins wanted to stop being an economic hit man and write a tell-all book. He quit Main in 1980, only to be lured back with megabucks as a consultant. He testified in favor of the Seabrook Nuclear power plant ("my most infamous assignment") in the 1980s, but the experience pushed him out of the business, and he started an alternative energy firm.
When word got out in the 1990s that he was starting to write a tell-all book, he was approached by the president of Stone & Webster, a big engineering firm.
Over seven years, Stone & Webster paid Perkins $500,000 to do nothing.
"At that first meeting, the president of the company mentioned some of the books that I had written about indigenous people and said -- that's nice, that's fine, keep doing your non-profit work," Perkins told us. "We approve of that, but you certainly would never write about this industry, would you? And I assured him that I wouldn't."
Perkins assumes the money was a bribe to get him not to write the book.
But he has written the book.
You be the judge.
Evil bankers? Fact or Fiction? You be the judge.
DEFAULT OR JUST DEADBEATS
While Reinhart's and Rogoff's work on sovereign default is worthwhile and important, their glaring avoidance of the geopolitical aspect of credit flows from England and the US to Latin America and other developing regions is indicative of the blind eye scholars turn to the activities of those who pay them.
Lawrence Summers was President of Harvard University where Kenneth Rogoff is now employed. It is not likely those who hired the likes of Summers would look kindly upon Rogoff should he begin asking questions whose answers would lead to truths Harvard's trustees would rather not see the light of day.
So instead of dealing with the critical issues raised by John Perkins, Reinhart and Rogoff consider the phenomena of sovereign defaults as an innocent rite of passage much like high school through which developing economies must pass. Perhaps it is so, perhaps not.
But their "trained" eye wanders a bit, even to an untrained eye such as mine. According to Reinhart and Rogoff, the US is a "default virgin", sic the US has never missed a debt repayment or rescheduled on at least one occasion. While this is strictly so, the US is nonetheless at the center of the largest default in monetary history.
In the 1970s, the US defaulted on its gold obligations under the Bretton-Woods Agreement. After overspending the greatest hoard of gold in history, 21,775 tons, between 1949 and 1971, the US had 7,000-8,000 tons of gold left and still owed perhaps over 31,000 tons to others.
In 1973, when the US officially refused to convert US dollars held by other countries to gold, it was the biggest monetary default ever. In that one act, as a consequence the entire global monetary system shifted from a gold-based system to a fiat-paper system.
Of the US default on its gold obligations, Professor Antal Fekete wrote in June 2008:
Thirty-five years ago gold, symbol of permanence, was chased out from the Monetary Garden of Eden, replaced by the floating irredeemable dollar as the pillar of the international monetary system. That's right: a floating pillar. The gold demonetization exercise was a farce. It was designed as a fig leaf to cover up the ugly default of the U.S. government on its gold-redeemable sight obligations to foreigners. The word 'default' itself was put under taboo even though it punctured big holes in the balance sheet of every central bank of the world, as its dollar-denominated assets sank in value in terms of anything but the dollar itself. These banks were not even allowed to say 'ouch' as they were looking at the damage to their balance sheets caused by the default. They just had to swallow the loss, obediently and dutifully join the singing of the Hallelujah Chorus of sycophants in Washington praising the irredeemable dollar and the Nirvana of synthetic credit.
Debt virgin? Hardly, and whether the US defaulted or not is not just a question of semantics, it is a matter of truth - which, like credit, is now surprisingly hard to come by.
THIS TIME IT'S DIFFERENT
Carmen Reinhart and Kenneth Rogoff's paper, This Time It's Different, refers to the idea that sovereign defaults are a thing of the past. That we have somehow fixed what was wrong and it won't happen again. Reinhart and Rogoff think otherwise.
But this time, in a different way it really is different. This time default will come to both banker and debtor alike. The bankers' system itself is now collapsing under the weight of debt that the bankers' debt-based money has produced.
Banks are finding themselves increasingly bankrupt as are the governments the bankers used to debase the world's currencies. This time, not only will Argentina possibly suffer another sovereign default, so too will its creditor, the US, as will many of the US banks that issued that debt.
The default of the US will remain, however, outside the limited definition of default used by Reinhart and Rogoff. The US will not miss a payment or reschedule its debt. Unlike Argentina, the US prints the currency in which the Argentine and US debt is denominated. The US will print its way out of its debts. Argentina cannot.
Because of the enormity of the US debt, the amount of dollars necessary to print to pay down the debt will lead to the hyperinflation in the US and the destruction of the US dollar. Those who live by the sword sometimes die by the sword - though not often.
In that same article where Professor Kotlikoff estimated US liabilities to be $65.9 trillion, Kotlikoff also wrote:
The United States...appears to be running the same type of fiscal policies that engendered hyperinflations in 20 countries over the past century.
Maybe this time it isn't different.
DON'T CRY FOR ME ARGENTINA
SAVE YOUR TEARS FOR YOURSELF
In 1976, the Argentine military overthrew the democratically elected Argentine government. The first to recognize the dictatorship was the US. The second was the International Monetary Fund, and within 24 hours of recognizing the soon-to-be most brutal regime in recent history, the IMF arranged a loan to the military junta.
At the time, Argentina's external debt totaled $7 billion. When the bloody dictatorship ended with the return of democracy six years later, Argentina's debt totaled $43 billion, a debt owed mainly to US banks.
The common law concept of caveat emptor has particular relevance here, caveat emptor - Latin, "let the buyer beware", is a legal precept that buyers must take responsibility for the conditions under which the sale was made.
If you loan to a dictatorship, don't expect to be repaid if a democracy emerges.
Richard Perle, former US Assistant Secretary of Defense and neoconservative lobbyist
Richard Perle who supported the Iraq War said those words shortly after the US invaded Iraq. While it is doubtful Perle believes the same applies for debts incurred by the US supported dictatorship in Argentina, the truth of Perle's words extend beyond Perle's situational principles or a lack thereof. In a court of law, an illegal contract cannot be enforced - unless, of course, the court has been bought off.
A critical distinction between the debt "owed" by Argentina and the debts owed by the US is that Argentina's debt was illegally imposed upon Argentina by the IMF, the US and international bankers without the consent of the Argentine citizenry, The US debt, however, was incurred with the consent of the American people - or was it?
That, my fellow Americans, is a $99.2 trillion question.
BANKRUPT BE THE BONDS THAT BIND
Americans with their outstanding obligations now measured in trillions of dollars of outstanding US bonds have much in common with the Argentine people. We have both been enslaved and bankrupted by the same financial system.
While it is impossible for the debt burdened Argentines to do something about US banks, it is not impossible for Americans to do so. The US Federal Reserve Bank - the largest emitter of debt-based money in the world - while not an official US government agency is nonetheless still subject to the rules and laws of our land.
STIRRINGS IN THE ELECTORATE
Dissatisfaction, the beginning of change, is now occurring. The two political polarities are finally awakening to the fact that both have been callously used by those in power. The US has lurched right then left then right again, but it continues to go in the same disturbing direction, a direction now equally distasteful to those on the left and on the right.
In modern democracies, successful politicians must possess two qualities: They must say what the people want to hear and they must do what those in power want done.
It has been easy to manipulate those on the right as well as those on the left. The Republicans and Democrats have done so for years. But where's the beef? The nation's finances have been even more badly managed by the Republicans than the Democrats - and Iraq? Sure, vote for the Democrats and stay mired in a conflict they promised they would end.
Both parties are controlled by the same money, the same money that now controls global governments and institutions such as the World Bank and the IMF, the same money that buys politicians, scholars, the military, lawyers, TV anchors, radio talk show hosts and anyone else whose influence they can use for their own ends.
There is a reason why we are indebted as we are and there is a reason why we are mired in a war that one wants except the few that do, the few that now control our nation and many others. In the midst of this most unreasonable world, there are reasons - whether you want to know them or not.
Humanity now finds itself at the beginning of a profound shift, a shift that will force us - if we are to survive, if we are to triumph - to put aside our differences to accomplish together what we obviously cannot accomplish apart.
The two political polarities must find common ground or they will soon find there is no ground at all. What is happening is bigger than money and power although it involves both. It involves humanity, it involves all of us and unless we find each other we will soon find there will be nothing left to find at all.
We are closer to the end than to the beginning. Keep your own counsel. Buy gold and silver. Keep the faith.
In Argentina, I read in a recent issue of Scientific American that physicists now believe that in the beginning of time the Universe was only one centimeter across. That knowledge heartened me. We have come a long way.
Note: I will be speaking at Professor Fekete's last session of Gold Standard University Live to be held in Canberra, Australia from November 11th to the 14th. The focus of the session will be trading the gold and silver basis for profit. For further details, contact email@example.com.
Darryl Robert Schoon
|Last on gold is $820.60
It was reported that the U.S. Mint was no longer selling platinum coins, this was erroneous.
The Mint continues to still offer these coins in all denominations: tenth of an ounce, quarter of an ounce, half ounce and the full ounce.
The Mint stated today that they are beginning to take orders again for gold coins(the one ounce Eagles) on a limited basis.
|Last on gold is $822.40
Bankers Caused Collapse In Gold And Silver Markets
It all has to do with pulling maturing CD's out of the banking system for the safety of gold and silver.
The banker's answer: Destroy the creditability of gold and silver. It's all there in Ted Butler's report that follows.
Will America ever wake up to all this manipulation? Will the Mint produce Gold Eagles again? They have already completely stopped minting platinum bullion coins.
The following post was made at Agoracom.com by a brilliant contributor who presented some thoughts along with Ted Butler's commentary today:
It is rare indeed for Ted Butler to issue a statement at the end of a week so it must be something extraordinary...
Nothing but manipulation today - VHF
The Smoking Gun
By: Theodore Butler
Posted 22 August, 2008
For years, the data contained in the weekly Commitment of Traders Report (COT), issued by the CFTC, have indicated that several large COMEX traders have manipulated the price of silver and gold. For an equal number of years, the CFTC has reluctantly responded to public pressure over this issue with blanket denials of any wrongdoing. Many analysts have agreed with the CFTC’s position, conjuring up various ways to explain why a massive short position held by a handful of traders is not manipulative.
The recent widespread shortage of silver for retail purchase coupled with a price collapse appears to have shaken these analysts’ confidence that the COMEX silver market is operating ‘fair and square.’ Well it should, since there is no rational explanation for a significant price decline going hand in hand with product shortages other than collusive manipulation.
For any remaining doubters that COMEX silver and gold pricing is manipulated, the following CFTC data should be considered. This data is taken from a monthly report issued by the CFTC, called the Bank Participation Report. Here’s the link for the report -
http://www.cftc.gov/marketreports/ba... The relevant data is found in the July and August futures sections. I will condense it.
These facts speak for themselves. Here are the facts. As of July 1, 2008, two U.S. banks were short 6,199 contracts of COMEX silver (30,995,000 ounces). As of August 5, 2008, two U.S. banks were short 33,805 contracts of COMEX silver (169,025,000 ounces), an increase of more than five-fold. This is the largest such position by U.S. banks I can find in the data, ever. Between July 14 and August 15th, the price of COMEX silver declined from a peak high of $19.55 (basis September) to a low of $12.22 for a decline of 38%.
For gold, 3 U.S. banks held a short position of 7,787 contracts (778,700 ounces) in July, and 3 U.S. banks held a short position of 86,398 contracts (8,639,800 ounces) in August, an eleven-fold increase and coinciding with a gold price decline of more than $150 per ounce. As was the case with silver, this is the largest short position ever by US banks in the data listed on the CFTC’s site. This was put on as one massive position just before the market collapsed in price.
This data suggests other questions should be answered by banking regulators, the CFTC, or by those analysts who still doubt this market is rigged. Is there a connection between 2 U.S. banks selling an additional 27,606 silver futures contracts (138 million ounces) in a month, followed shortly thereafter by a severe decline in the price of silver? That’s equal to 20% of annual world mine production or the entire COMEX warehouse stockpile, the second largest inventory in the world. How could the concentrated sale of such quantities in such a short time not influence the price?
Is there a connection between 3 U.S. banks selling an additional 78,611 gold futures contracts (7,861,100 ounces) in a month, followed shortly by a severe price decline in gold? That’s equal to 10% of annual world production and amounts to more than $7 billion worth of gold futures being sold by 3 U.S. banks in a month. How can this extraordinary concentrated trading size not be manipulative?
Because prices fell so sharply after the short sales were taken (with the appropriate dirty tricks as I have previously explained) holders of known physical silver in the world suffered a decline in value of more than $2.5 billion and long COMEX silver futures holders suffered a similar $2.5 billion decline in the value of their contracts. In gold, because the dollar value held is much greater than silver, investor losses were much greater, on the order of hundreds of billions of dollars on their physical holdings. Declines in the value of mining shares adds many billions more. Was this loss of value caused by the concentrated short selling of 2 or 3 U.S. banks?
What real legitimate business do 2 or 3 U.S. banks suddenly have for selling short such quantities of speculative instruments over a brief time period? Do we want banks to be engaging in this type of activity? If the manipulation was not successful, would U.S. taxpayers be called on to bail out yet another bank speculation gone bad?
Do the traders who lost money in the recent price collapse of silver have a reason to believe that their money is now in the pockets of these two or three U.S. banks? If so, do they have recourse?
The data in the Bank Participation report is clear and compelling. that it is hard to conclude anything but manipulation. It is beyond credulity to conclude other than two or three banks caused one of the most severe price collapses in precious metals history. The CFTC has a lot to answer for as the regulatory agency responsible for preventing this type of blatant manipulation.
|Last sale on gold is $829.60.
More on gold coin shortage from the mint as was reported August 21, 2008:
Blanchard and Co., one of the largest U.S. retail dealers of rare coins and precious metals, said the American Eagle and American Buffalo one-ounce gold coins are sold out.
"Nobody has the Eagles or the Buffaloes right now. We bought 2,000 ounces late last week, and those were the last 2,000 ounces that we can find in the marketplace," said David Beahm, vice president of New Orleans-based Blanchard.
"If we don't have them, nobody has them," Beahm said. He added that he has been recommending customers to buy the one-ounce Canadian Gold Maple Leaf gold coin instead.
|Gold $823.00 off $12.60
Silver $13.39 off $ 0.44
Gold/XAU Ratio 5.48
Gold/Silver Ratio 61.46
In the previous article by Mr. Richard Smith it appears on the surface that the writer exhibits lack of respect for Mr. Powell who in the past has been very supportive of the gold community and who has assisted with Mr. Jim Puplava at financialsense.com in drawing attention to the illegal naked short selling of gold and silver related companies resulting in sizable investor losses.
Although Mr. Smith has supplied with his commentary some good data on mint production levels and informative production procedures he comes across as being naive.
Do we believe him that markets aren't manipulated? Do we believe him that there is only a temporary shortage from ther mint? Mr. Jim Sinclair reports that he is hearing from all parts of the world that there is a physical shortage of bullion coins. Do we really believe free markets exist anymore with all the government interference? Well, Mr. Smith does.
The following is Mr. Powell's polite response in regards to Mr. Smith's attacks:
Home » Daily Dispatches
Is gold demand soaring or plunging?
Submitted by cpowell on Tue, 2008-08-19 19:39. Section: Daily Dispatches
3:30p ET Tuesday, August 19, 2008
Dear Friend of GATA and Gold:
Richard Smith, proprietor of Coin and Stamp Gallery Inc. in Phoenix and its Internet site, Only Gold, has written an essay purporting to dispute GATA's interpretation of the U.S. Mint's suspension of sales of gold eagle coins. GATA construed this as more evidence that the futures price of gold on the commodities exchanges does not represent the price of the real metal. (See http://www.gata.org/node/6489.) Smith's response is headlined "Remember GATA? Another Gold Conspiracy Unveiled," and you can find it here:
But even Smith observes that the Mint cannot keep up with demand for gold eagles, even as the futures price of gold has been plunging, which ordinarily would indicate a collapse in demand. In any case, GATA's complaint, to which Smith objects, was aimed not at the Mint but at the futures markets and the financial institutions and governments that manipulate them.
While Smith writes that an official statement from the Mint about its suspension of gold eagle sales is expected shortly, your secretary/treasurer telephoned the Mint's public information office on Friday and again on Monday in search of such a statement and was promised calls back, but no calls back have been made. Your secretary/treasurer now has his congressman's office trying to get an official explanation from the Mint.
Any government agency operating on the level should be able to do far better than this. What the Mint announces to coin dealers privately it should be able to announce to the public simultaneously. After all, the Mint has a very nice Internet site with a section for press releases:
But as of this hour the Mint has posted nothing about the suspension of gold eagle sales and refuses to return telephone calls from the public seeking information on the subject.
Once again, where gold is concerned, government does not seem to be operating on the level, and nobody on gold's side should be making excuses for it.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
|Last on gold is $823.70
The following is an article written by Mr. Richard Smith a Phoenix gold dealer in addressing the bullion coin shortage and certain remarks made by Mr. Chris Powell, secretay/treasurer Gold Anti-Trust Action Committee(GATA):
A dig at GATA from a U.S. gold coin dealer over assumptions it has made, and publicised, regarding the U.S. Mint’s recent suspension of 1 ounce Gold Eagle sales. All credit to GATA though in that it has linked to this article on its own website too(Mineweb).
Author: Richard Smith*
Posted: Wednesday , 20 Aug 2008
Last Thursday, the US Mint notified its bullion distributors that the 1-ounce size gold Eagles were out of stock and temporarily not on offer for a while, with more details to follow early this week. Then the fun began...
From time to time, the bullion division of the US Mint suspends sales of one product or another, usually due to some production glitch or shortage of blanks. This week word came out that one-ounce gold Eagles would temporarily be unavailable. (As gold coin dealers, at this time, we have plenty of Eagles in stock, with more coming to us through distribution channels.)
Somehow, the coin publication "Numismatic News" picked up this story and sent it out to their email subscribers. No US Mint sources were cited for the story, but instead they quoted an ‘explanation' provided by Chris Powell, still holding forth under the banner of the Gold Anti-Trust Action Committee. Remember GATA?
Under the headline, "U.S. Mint suspends gold coin sales: futures price is a fiction," Chris Powell of GATA wrote Friday:
"The U.S. Mint has suspended sales of American eagle gold coins and is refusing orders from dealers, two coin and bullion dealers confirmed Thursday."
Mr. Powell goes on to say that:
"The suspension is overwhelming evidence that the futures contract price of gold on the commodities exchanges is substantially below the physical market price and that, indeed, the commodities exchanges are being used as GATA long has maintained -- as part of a massive scheme of manipulation of the precious metals, currency, and bond markets."
In order to separate fiction from truth, let's start with the fact that the US Mint did not suspend all gold coin sales, or even all bullion gold coin sales, but is only temporarily suspending sales of one size (1-ounce) of one product (the gold Eagle).
Word is that the Mint is temporarily out of planchets (round gold blanks of proper coinage weight and .917 fineness), and that more information will be provided as to when sales of the 1-ounce gold Eagle will re-start.
In the meantime, gold bullion is available in many forms of coins and bars from all over the world, at prices based on, yes, commodities futures trading. Even the US Mint is offering some, including the .9999 pure gold 1-ounce "Buffalo" bullion coin (a product the Mint first launched in 2006), and the .917 fine gold Eagles in half-, quarter-, and tenth-ounce sizes.
So what really happened? How does an institution such as the US Mint run out of the gold raw materials from which it strikes the most popular size of its most successful bullion coin product?
In this instance, the Mint is the victim of its own success. Demand for gold Eagles has skyrocketed lately, and some 287,500 1-ounce gold Eagles have been sold by the US Mint since January. This year the Mint's average monthly sales of 1-ounce gold Eagles is some 36,000, compared with a little over 12,000 coins a month in 2007. When the Mint temporarily suspended sales of gold Eagles on 8/14/08, some 60,000 coins had already been delivered in the first two weeks of August alone.
This latest glitch by the US Mint is hardly evidence that "the commodities exchanges are being used as... part of a massive scheme of manipulation of the precious metals, currency, and bond markets." In fact, the US Mint is turning out Eagles at a pace not seen since 1999. See U.S. Mint Sales
It's no wonder that the Mint would run out at that rate. Gold blank production is outsourced by the Mint, and the Mint orders them ahead of time according to expected demand. But when sales triple in a few weeks time, some delays can be expected.
When the Mint places an order, gold strips are prepared, blanks are punched out, then weighed, finished, packaged, and shipped via secure carrier to the Mint's facility at West Point, New York, where they are struck into gold Eagles, then inspected, tubed, counted, and boxed.
This process can take a few days. It's not like running out of chocolate chip cookies at lunchtime, and going to the store for more chocolate, butter, and flour, so you can have another batch ready in time for dinner.
It cannot be unknown to Chris Powell and GATA that billions of dollars worth of physical gold are bought, sold, and exchanged every week, all over the world, in the form of finished bullion, coins, jewelry, mine bars, and recycled gold scrap, based on the very futures prices which Mr. Powell calls a "fiction."
Not to be too hard on GATA - they stood up for gold in the days when no one cared much about the shiny yellow metal one way or the other. Around the turn of the last century, when gold was $255 per ounce and The Powers That Be were putting on that gold was just an obsolete metal, an anachronism from days gone by, GATA uncovered and published a lot of factual evidence that gold prices were being held down intentionally by the US Treasury and the Fed, in cahoots with central bankers the world over
Back then, no organization was more loved and respected by the then-tiny US gold- bug community than the Gold Anti-Trust Action Committee. The organization's self-aware ‘tilting at windmills' image had a sort of charm to it, and their noble protests of gold price manipulation had a certain resonance and underdog appeal.
Today, Mr. Powell's pique is understandable, coming during one of the worst weeks for precious metals in modern memory. During the week just past, gold lost 8.39%, silver tumbled 22.9%, platinum was down 10.8%, and palladium shed some 16.7%, all in five days time. These sorts of number suggest a washout in the current downdraft in precious metals prices.
Why? There is fairly universal agreement that the credit crunch that celebrated its first birthday this month is a slow-moving train wreck that will take at least a couple of years to come to its ugly end. This has helped tip the US into a recession, Europe is heading there fast, and oil and most commodities are down sharply over the past few months. All these factors have helped to relieve inflationary pressures on prices. In a nutshell, the prospect of potential deflation is the current ‘story' behind the past few months' swoon in the precious metals.
The loss in value this week of All the Gold in the World (AGIW) came to some US$300 billion. Total losses to AGIW since March 17th's London fix of $1011.25 now exceed US$1.049 trillion dollars ($1,049,000,000,000.00). That's probably nowhere near the aggregate world-wide loss in real estate value over that same time period, but a big chunk of change nonetheless.
This is how free markets work, and no one, including Mr. Powell, is obligated to sell his gold when prices don't suit him. In fact, the beauty part of these ‘manipulative' commodities exchanges is that they make it possible for he, or anyone else in a free country, to buy gold for some 28% less than it would have cost on March 17th. To label that reality a ‘fiction' is either disingenuous nonsense or a sign of deep denial about how the world works.
|Last on gold is $836.50.
The following was submitted to Agoracom.com by a member.
August 20, 2008 article written by Richard J. Green of Clearwater, Florida
The Truth About the Recent PM SMashdown.
Two paragraphs of excerpts from that article:
It’s no wonder precious metals investors are unloading despite swearing they would not be fooled into panicking when the financial system began to come apart at the seams. Make no mistake; what we are seeing in the gold and silver markets is an all out attack by the financial powers that increased in intensity on July 15th when it became apparent that Fannie Mae and Freddie Mac are, for all intents and purposes, insolvent. Gold investors have been let down in a big way by supposed experts that comment on the gold and silver markets but can not see the most obvious of price suppressions in the history of the financial markets. Just this morning I read another comment on how the creation of the gold and silver ETFs has been a huge boon to gold and silver. While it increased demand due to the ease of acquisition; it has done nothing for the price of gold and silver since supply can now be said to be unlimited by the paper promises as well as centrally located physical stockpiles that can be further leased out. Just try redeeming your promise of silver and gold for actual silver and gold. Not only that, but most commentators completely miss relaying the point to gold and silver investors that at times like now, where systemic risk levels are higher than ever, you want real physical gold and silver in your possession and not the undeliverable promises of a counterparty such as Bear Stearns, for example. Money is now growing on the order of 20% and that is not only in the US but also worldwide. The recent bounce in the dollar has been explained to be a big reason for the decline in gold. You are being sold a story by a dishonest used car salesman. Where the dollar trades versus other paper currencies no longer has any lasting affect whatsoever on any hard assets. They are all declining at an increasing pace toward worthlessness. About the only difference of substance is that they have different colors of ink. Without the option of the ETFs gold would long ago have climbed past $2000 per ounce. I would wager that if only 10% of gold ETF holders sold their position and turned around and bought physical gold that gold would be back over $1000 an ounce in a heartbeat. The spreads that have opened up between the spot and futures market and the physical markets should be setting off alarm bells but you hear very few commentators mentioning it. Two notable exceptions are bullion dealer Franklin Sanders and bullion accumulator and commentator Jason Hommel. Please see Hommel’s silver wisdom.
You do not get a $200 move down in gold and $7 move down in silver in a month’s time, (because they were supposedly in a bubble), and then after everyone and his mother is selling you find it almost impossible to find any actual gold or silver to buy at major dealers across the country. 100 oz. bars on eBay are changing hands at $17 per ounce, over $4 above the spot price. That is a heck of a lot closer to the market price than $12.68 spot which is what the screen says right now but where you can not buy a single ounce of physical silver. After this display anyone that uses the paper markets to invest in gold and silver is just an out and out dummy, plain and simple, and they deserve what they will eventually get… nothing. How speculators can continually line up leveraged positions against bullion banks with unlimited cash backing who in turn repeatedly smack down the markets is a mystery. Unfortunately, the cumulative action of these players is making it tough for the rest of us but at the end of the day it will not matter because we will have our gold and silver or our stocks of the companies that are producing gold and silver and making a lot of money. Even the US mint has suspended production of gold coins. Silver coins are being severely rationed because they can not divert any more silver from the industrial users that must have the physical silver to consume, taking it off the market forever. If you can not see by now, with all this data in hand, that the crash in gold and silver has nothing to do with market-related prices you would have to be a complete imbecile.
|Last on gold is $812.60
More on bullion coin shortages.
The following exchange was carried on the jsmineset.com website earlier today.
Dear Mr. Sinclair,
Wonder if other CIGA's have encountered delays in delivery of their gold bullion orders? The dealer I use has posted a message on their website and when called, affirmed that various products are unavailable for delivery for an undetermined length of time. They hope to resume deliveries "within a few weeks".
Though I am delighted to hear folks are putting money in hard assets and are taking advantage of the current sale, I am wondering what is going on and whether this is something to worry about.
Puzzled in New Jersey,
I would have simply shrugged this off based on the fact that most local coin dealers as well as majors are in the business to make money without taking risk. As markets fall they do not buy in any significant way. Therefore as gold settles out they have little or no inventory.
They are merchants only at times when it pleases them, yet so many people all over the world are telling me the same story. The only answer is the reaction we just witnessed in paper, not real gold. That would suggest but not prove the bullion market is tight.
|Last on gold is $812.50
Gold continues to rally off a low point from a few days ago in the $775 area where it was learned that the Chinese were big cash buyers.
The following story came out today concerning the vulnerability of the US banking industry:
August 19, 2008
> Credit crunch may take out large US bank warns former IMF
> Gary Duncan, Economics Editor and Leo Lewis, Asia Business
> The deepening toll from the global financial crisis could
> trigger the
> failure of a large US bank within months, a respected
> former chief
> economist of the International Monetary Fund claimed today,
> another battering for banking shares.
> Professor Kenneth Rogoff, a leading academic economist,
> said there was
> yet worse news to come from the worldwide credit crunch and
> turmoil, particularly in the United States, and that a
> casualty among American banks was highly likely.
> "The US is not out of the woods. I think the financial
> crisis is at the
> halfway point, perhaps. I would even go further to say the
> worst is to
> come," Prof Rogoff said at a conference in Singapore.
> In an ominous warning, he added: "We're not just
> going to see mid-sized
> banks go under in the next few months, we're going to
> see a whopper,
> we're going to see a big one - one of the big
> investment banks or big
> banks," he said.
I sleep well at night with gold and silver. I wonder sometimes how people can sleep with their money in the banks.
|I saw the same disclaimer this morning when I checked spot. A while ago I related the experience of a shareholder who wanted to take delivery on a 100-ounce commodity contract. He wanted the gold. He never got it and his contract was rolled over or he could take his profit. What is the situation with physical gold? I wish someone would buy a contract (especially now) and take delivery. If anyone out there has done this, please tell us.
I come in contact with gold people over the phone or Internet. After all, the Sixteen to One produced over 1 million ounces of gold. The best part is that knowledgeable geologists are confident at least another million will be accessed with our mine plan. I am actively looking for some working capital and therefore meet people interested in gold. I have heard that physical gold is not easy to come by, which surprises me. Maybe the big mines have liens on their production. I don’t see why there is this difficulty. Again, if someone can shed some light on this specific subject, please do so. Thanks.
|Gold $797.80 up $11.80
Silver $13.11 up $ 0.41
Gold/XAU Ratio 5.68
Gold/Silver Ratio 60.85
In past submissions to the Forum I have stressed that weakness in gold and silver coming from the New York markets is a paper market. The CFTC says that there are adequate supplies of the metals on deposit in vaults but is that really true?
The following is a advisory posted at kitco.com:
IMPORTANT NEW NOTICE: Due to market volatility and higher demand in the entire industry, we are anticipating delays in supply of all bullion products. Please note that you can continue to place orders and prices will be guaranteed; however, cancellation fees will still be applicable regardless of the length of the delay. Consequently once inventory is received there may also be delays in processing and shipping by our vaults.
Where is all the silver?
A report posted to the ECU forum page at Agoracom.com by a member living in Ottawa states that there are no bullion silver coins, silver bars or junk silver available from local coins dealers.
The same member states that coin dealers say that there is an eight week waiting period for these silver products.
It appears that there are two silver markets: a paper commodities market that determines world prices and a physical market where prices are unsure.
While there seems to be great pressure on the price of silver recently at the commodity exchanges with buyers at the retail level finding delivery delays, what is one to think?
One end result here is obvious, the market on physical silver bullion coins will be carrying a far greater premium than what used to be the norm.
|Gold $786.00 off $19.70
Silver $13.04 off $ 1.10
Gold/XAU Ratio 5.66
Gold/Silver Ratio 60.28
Visions of 1976 come to mind today as gold is trading below the $800 level. In August of 1976 I was hearing nothing but negatives concerning gold as it dropped below the $100 mark and was being verbally whipped by every media outlet in town.
Following the oil crisis and Israeli/Egyptian conflict in late 1973, gold topped out at just over $200 an ounce early the following year.
It was in August of 1976 at near $95 that gold made an important low. Not too far in price from where the US abandoned paying gold out for dollars when President Nixon, basically, closed the gold window and effectively took the country off the gold standard on August 15, 1971.
August is seasonally a quiet month in gold for the commercials and one might wonder, why it wouldn't make sense for the anti-gold miscreants to do their dirty deeds against believers in gold during this time of the year? The element of surprise is an old trick used in making and continuing wars since the beginning of time with degrees of success.
The important point to remember is that the anti-gold legions have successfully won some battles but they continue to lose the major war on gold.
Could it be any coincidence that gold's unexpected sell-off is going full force this August and could it be the month of another major low for gold like it was back in August of 1976?
In 2006 gold made an important intermediate low in September of 2006 at $555 very near in time of the year to the other mentioned intermediate lows. It would appear reasonable to make the assumption that this year's sudden weakness will either end today(low so far is $774.90), or in going forward in just a matter of days.
Way far in the distance hidden by media attacks, Jim Sinclair is calling for gold to surpass $1400 an ounce in February of 2009 or possibly a few months later. His superior batting average is in a stand alone category.
Based on the media's track record they will be wrong again and will have delivered another great dis-service to those who allow their minds to be ravaged with all their continuing arrogant propaganda concerning the doom of gold.
|Gold $806.90 off $3.90
Silver $14.47 Unch
Gold/XAU Ratio 5.73
Gold/Silver Ratio 55.76
Today, 8-12-08, Lawrence Williams from Mineweb made some preposterously suspect comments to their readership:
On the way up to its(gold's) high point of $1,030.80 an ounce, which now seems almost a distant memory(????), gold was moving up along with the oil price as the dollar sank to unprecedented recent depths. Gold then stuttered as oil continued to rise and the dollar to sink, never regaining its peak, while oil went on to a heady $147 a barrel as the dollar continued its weakness.
It's now only taken a month for all to change. The dollar is strengthening by the day as the oil bubble has burst(????) and the black gold has lost over 20 percent of its peak value against the dollar - and whether it has dragged gold down with it, or vice versa, gold has also tumbled by over 20%, putting both effectively into defined bear market territory(????).
Most of the above is no more than cheap propaganda.
Mr. Williams makes the case for a poor relative strength performance of gold compared to oil and the dollar but fails to tell the truth why it acted that way: by the help of the cental bankers of the world that are scared to death that a continuing higher gold price will focus suspicion upon their weakening paper currencies.
Mr Williams says that the gold price above $1,000 is a distant memory. The days of gold being fixed at $35 an ounce is a distant memory.
Mr. Williams says that the oil bubble has burst. Please, give your readers some credit for intelligence. The dot.com and housing market were burst bubbles. Oil is in a very strong bull market that just got ahead of itself, nothing more.
The last questioned statement by Mr. Williams has to be the joke of the day: "Putting both(oil and gold) into defined bear market territory." OK Mr. Williams, why don't you define your defined bear market territory phraseology? Gold is in a major bull market and has been in it since it traded above $350 some years back. In my opinion, gold would have to close below $400 to be in bear territory again.
If central bankers hadn't messed with gold's price since 2001 the royal metal would be selling for well in the excess of $2,000 an ounce.
The central bankers have a license to steal from simple folks like the shareholders of the Sixteen to One Mine: they suppress gold's price while making our company carry the burden of increasing prices for labor and materials in THEIR inflation that THEY created with THEIR printing presses.
Gold's last sale is $811.30.
|Last on Gold is $817.10.
The following was posted to the jsminset.com website earlier today.
Jim Sinclair's Commentary:
Those OTC derivatives continue to humble the once high and mighty. It is far far from over.
UBS swings to loss as customers withdraw cash
Troubled bank plans restructure; new finance chief appointed
By Simon Kennedy, MarketWatch
Last update: 10:13 a.m. EDT Aug. 12, 2008LONDON (MarketWatch) -- Beleaguered Swiss bank UBS on Tuesday reported a second-quarter loss of 358 million francs ($331 million) and said it would restructure by separating its investment banking and wealth management arms after nervous clients withdrew more cash in the quarter.
The bank's fourth consecutive quarterly loss compared to a profit of 5.55 billion francs a year earlier and came after it warned in July that its bottom line would be at or slightly below break-even for the quarter.
The latest loss included around $5.1 billion of further write-downs and provisions of $900 million linked to its recent settlement of a U.S. probe into the sale of auction-rate securities.
The bottom line would also have been far worse if it wasn't for a tax credit of 3.83 billion francs, which was significantly more than the 3 billion franc credit expected.
Shares in the group wavered between gains and losses and were down 0.8% in afternoon trading as investors balanced the weak results against welcome restructuring plans and a further reduction of its remaining exposure to risky debt.
"We would characterize the results themselves as largely disappointing, with weak inflows and underlying investment bank division revenues," said Matthew Clark, an analyst at Keefe, Bruyette & Woods.
"However, risk asset reductions, governance improvements and proposed separation of the units may be better received," he added.
|Last on Gold is $805.10. The following few sentences are an excerpt taken from a Jim Sinclair commentary on Georgia tonight:
It may well be that the friends of the dollar and enemies of gold are gearing up for the final battle as the dollar bulls fail to see the forces being marshalled against them right outside their windows.
|Gold $823.00 off $32.50
Silver $14.64 off $0.63
Gold/XAU Ratio 6.02
Gold/Silver Ratio 56.22
Gold took a severe beating today closing off $32.50 at $823.00. This is the start of the fourth straight week of declining prices. The weakness has surprised followers of the metal and has freightened many.
Jim Sinclair of jsmineset.com has repeatedly stated that nothing has changed. So, what's up? He has stated that the OTC derivative problems can't be fixed.
The problem is that the banking system is in BIG trouble and the Fed is beside themselves in the continuing cashing out of maturing CD's looking for safe heaven.
Where is this money to go? One place that the Fed doesn't want it to go is into gold, other precious metals and the producing companies. To their mind, these acts would undermine their power and be counter stabizing to the ailing banking system.
There is nothing more unsettling to the Fed than witnessing long lines of people at banks wanting their money. If you don't think this is a serious problem just ask the people that lost millions in the IndyMac Bank failure in California that was the second largest bank failure in U.S. history.
The Fed is a member of the powerful Plunge Protection Team which also includes the Treasury, SEC and the CFTC. These people rig markets. The days of free markets in this country are over and maybe others, they just don't exist anymore.
The proof of this is, why are hedge funds allowed by the SEC to depress prices of precious metal companies with "out of control" naked short selling. This means for the people that don't understand it that the hedge funds can sell shares that they don't own or are unable to borrow. To me, this is a crime.
During the past 16 days someone or some entity has been forcing gold lower and they are doing almost all of this selling without physical gold.
In an article in the Wallace Street Journal by David Bond on June 28, 2008 he quoted, in his words, a well placed China guy. The source said:
1- China has a problem. What it would like to do is convert its huge holdings of U.S. dollars and U.S. Treasuries into gold.
In response, Mr. Bond asked the following question:
Then why not start buying gold?
2- We can't. The minute the word gets out that China is unloading all, or any part, of its $1 trillion in U.S. paper to buy gold, the game is up. Two things happen: the price of gold goes to $10,000 and the current value of the U.S. dollar falls to about 10 cents.
I have attempted to offer guidance based upon interpretation of charts and quoting smart people and presenting articles over the years.
I can not control the suspected negative exploits of the anti-gold element that is currently represented by the PPT to cast mud all over the shinny metal in hopes of dissuading bank withdrawals from being directed into it.
The really sad concern is that as Americans we are witnessing an ugly fact: while our government employees are depressing gold and the producing company's shares the Chinese are gladly scooping them up in a slow and methodical manner.
The Chinese will not buy in excess of 4.99% of any listed company which negates their obligation to report their new ownership to the SEC as the process continues to divest themselves slowly of the diseased dollar.
I feel like a parrot saying this but you should be buying more gold on this deepening reaction to protect your wealth factor from inflation and to insure your financial future.
Does anyone know what's really going to happen next to our financial sector as the OTC derivatives continue to meltdown? Will we be told everything in a timely manner? I wouldn't expect it.
Protect youselves and take advantage of gold's current weakness.
Last sale on gold is $813.50.
What we are witnessing is a well planned and executed attack on gold. The Chinese are loving it!
|Forum readers may also be interested in an interpretation of Wizard of Oz.
Google: Wizard of Oz allegory
|Gold $853.10 off $19.20
Silver $15,43 off $0.75
Gold/XAU Ratio 5.85
Gold/Silver Ratio 55.29
As the paper factory proponents pull out all the stops to discredit our gold insurance policy its seems timely to interject some perspective while the miscreants from the paper factory continue to make the royal metal swoon for the third straight week.
The Four Tires of the Apocalypse
By Darryl Robert Schoon
Aug 5 2008 8:48AM
The engine used to run on premium, e.g. gold and silver; now it’s being run on credit which over time will destroy the engine and everything else.
The euro, the yuan, the yen, and the dollar are The Four Tires Of The Apocalypse, an event that recently appears to have come out of nowhere. It didn’t. Its apparently sudden appearance is new only to those who wished to see otherwise.
The destructive juggernaut now bearing down on the financial house of cards constructed by central bankers contained within it the seeds of its own destruction from its very beginning. Over time, those seeds would turn into Cerberus, the hound of hell, on whose mercy Bernanke et. al. now depends.
Epochs, like movies, need time to reveal protagonists and antagonists, as well as victims, villains and victors. We are now at the end of an epoch and as the final scene opens, the program notes are becoming disturbingly clear.
We find ourselves participants in the last and final act of capitalism and its credit based capital markets—or more correctly, credit and/or debt markets masquerading as free markets.
THE BIRTH OF CERBERUS THE GENESIS OF THE JUGGERNAUT
Capitalism did not appear until the Bank of England began issuing its debt-based paper money in 1694. The issuance of credit as money gave rise to capital markets where debt-based money replaced savings-based money
The Bank of England’s debt-based money drove out gold and silver coinage as Gresham’s Law clearly illustrates—bad money drives out good. No one would willingly pay gold or silver for what paper coupons would just as easily buy.
Capital markets are debt-markets made possible by the fiat issuance of central bank debt-based money. After central bankers’ faux money replaced gold and silver coins, commerce appeared to change forever; but that too is now about to change.
The rise of central banks parallels the substitution of paper debt-based money for gold and silver. When a disease spreads, so, too, do its symptoms. Replacing gold and silver with debt-based money was to eventually cripple commerce itself, albeit after a three hundred year run at the table.
Previous to central banking, commerce was founded on currencies composed of gold and silver. But with the advent of central banks, credit was substituted for gold and silver and after three centuries, credit-based economies are now on the verge of collapse, the juggernaut is in the shop and the long awaited apocalypse has arrived.
SOMEBODY BETTER CHECK THE TIRES
The euro, the yuan, the yen, and the dollar—the four major fiat currencies—are The Four Tires Of The Apocalypse; and although the economy’s engine, the credit markets, have seized up and are receiving most of the attention, somebody should take a look at the tires.
The mechanics, the central bankers, are instead focused only on the engine. Their solution again proves that good mechanics are hard to find. Like hacks at the corner garage, they’re pouring more credit into an already flooded engine, a sure sign they don’t know what they’re doing.
They’re not even looking at the tires. They should because the tires are fiat made of paper. The front tires are the Japanese yen and the Chinese yuan. The rear two are the euro and the US dollar; and it’s the two rear tires that now pose the greatest threat, the driver’s side rear, the US dollar, in particular—and the spare in the trunk, the British pound has a leak.
Of the four, the Chinese yuan is the newest, which in credit-driven economies is a plus, as usage in such economies equals more debt. Nonetheless, the Chinese yuan is not capable of carrying more than its present load although it is presently holding its own.
The other front tire, the Japanese yen, unlike the Chinese yuan, is well-worn and its tread is almost gone. Its debt load is enormous (the highest ratio of debt to GDP of all major economies) while its pressure, sic interest rate, is the lowest of all, incapable of handling more.
Currently at only 0.5 % because of an almost fatal blowout in 1989, the Japanese yen still hasn’t yet recovered—that the tire is still in service after its severe blowout is in itself something of a miracle.
But the two rear tires, the euro and the US dollar, are the source of our future trouble as they are particularly vulnerable to the continuing collapse of credit markets. The euro and dollar, like all fiat currencies, are dependent on the strength of their underlying economies, economies addicted to credit from increasingly insolvent banks, banks which are in far more trouble than presently believed.
Like someone who has HIV and has only confessed to having the clap, the money-center banks in Europe and the US are holding assets both on and off their balance sheets that are virtually worthless, with actual losses totaling $1.6 trillion, four times what the banks have yet admitted; and because the value of fiat currencies are a function of their economies, the collapse of the US dollar and euro may be ahead.
PUBLIC MONEY PRIVATE BANKS
It is now clear that central banks are using national treasuries to indemnify losses incurred by private banks. This should come as no surprise. Once private bankers and public government colluded to debase the currencies of their nations in order to enrich themselves, the joining of the two was inevitable and it is happening as we watch.
The last and final act of capitalism will be characterized by the looting of what little remains in our national treasuries as central bankers bail out the banks that caused our present problems. The only thing new is our surprise that it is happening.
The consequences, however, will not end there. The consequence of the public bailout of private banks will be the collapse of fiat currencies, currencies which have been the very basis of government and bankers’ power—power which will be swept away when fiat currencies collapse.
THE END GAME
Capitalism and credit markets—the bastard offspring of fiat money and central banking—are now in their final stage; and the default of fiat money will herald the end of the reign of central bankers in our affairs. No fiat system has ever survived. The present fiat system will be no exception to that rule
For those worried about private property, have no fear. Capitalism has nothing to do with the private ownership of property as maintained by private bankers and their corporate sponsors. The private ownership of property existed long before capitalism and will exist long after.
Capitalism has everything to do with central bankers’ issuance of debt-based money and the increasing power of government in our lives and the increasing profits of bankers at our expense.
Thomas Jefferson, the author of America’s Declaration of Independence understood well the threat posed by central banks:
The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution…Bankers are more dangerous than standing armies… [and] If the American People allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will wake up homeless on the continent their Fathers conquered.
With the establishment of the Federal Reserve Bank in 1913, the American people allowed private bankers to destroy the economic freedom the founding fathers had fought to achieve.
That first by inflation and then by deflation, the banks and corporations as Jefferson warned are now in the process of depriving Americans and others of their homes and property by the issuance of credit and by default on those debts
The founding father fought a war in 1776; and 137 years later in 1913, Americans ceded back what they had won when they allowed private bankers to establish the Federal Reserve Bank in the US, a central bank which would do exactly as Jefferson said
Since the establishment of the Federal Reserve System, the US has been a slave to bankers and those in government who do their bidding, Today, Americans are bankrupt and indebted to those they allowed to issue their currency.
Today, America’s once free markets are rigged and government officials lie openly and with impunity whenever it serves their purpose to do so, their words no more trustworthy than the statistics they produce in order to pacify a nation regarding the dangers they have put it in.
Soon, however, that will change. For the collapse of the fiat US dollar will also bring about the collapse of those who benefit from its false issuance—private bankers, corporations and those who govern for their benefit in our name.
Although we do not possess the requisite power to successfully oppose those who oppress us, we can however wait for their inevitable demise, a demise that will unfortunately be as devastating to us as it will be to them.
The collapse of the US dollar will be horrific as will be its aftermath. But the price of liberty is always high. It was high in 1776. It will be high again.
THE UNLEASHING OF CERBERUS
These days at Apocalypse Auto, the lights are on at midnight as the mechanics wonder what to do. This is not the first time the once apparently unstoppable US economic juggernaut has been in the shop.
Just a few years ago, when the dot.com bubble burst, the US economy was obviously badly in need of emergency repair. To Al Greenspan, the head mechanic at Apocalypse Auto, it was a dangerous situation.
In 1989, the Japanese stock market bubble had collapsed sending Japan into a deflationary spiral in which it was still mired and if the US suffered likewise, the US, Japan and world economies would be in deep trouble.
So, Al and the others at Apocalypse Auto did what they did. The story is best told by Professor Antal E. Fekete in The Bubble That Broke The World, June 2003
… Aladdin Greenspan let the genie out of the bottle. The genie is now at large, entirely on its own, roaming around the world, visiting disaster upon the economies wherever it may go: a depression possibly worse than that in the 1930s. Aladdin hasn’t got a clue how to put it back in the bottle because if he tried, the genie would threaten to plunge the world into another bottomless pit, that of hyperinflation.
Greenspan [explained] the strategy the Fed has developed to combat deflation. He would climb the yield curve, that is, go out to buy government bonds of all maturities, if need be up to and including the30-year Treasury bonds, in an effort to push interest rates down thereby enlarging the monetary base that would, according to him, contain the weakness in prices.
It is a long shot from open market purchases of bonds to a buoyant price level. After all, once in circulation, the new money created by the Fed is no longer under its control. It is under the control of the speculators. They will not necessarily deploy it in the commodity or stock markets, as the Fed is hoping. They may see a better opportunity for profitable speculation elsewhere, say, in the real estate or the bond markets [bold, mine].
Just as Professor Fekete predicted, central bank credit, sic “new money”, went out of central bankers’ control and created an even larger bubble, the US real estate bubble whose collapse is now threatening economies everywhere.
Central bankers are again trying to contain the forces they themselves set in motion. But, irreparable harm has already been done because the genie that Greenspan let out of the bottle was no ordinary genie, it was Cerberus, the hound from hell.
Cerberus, Hades’ three-headed hound, is now on the loose. It is a sign of the times that many still hope central bankers can save them from what is about to happen. But hope is as blind as the information upon which it feeds—for although the bankers let Cerberus out, they are powerless to put him back in.
GOLD & SILVER THE BANE OF CENTRAL BANKERS THE FOUNDATION OF OUR PAST AND FUTURE FREEDOMS
Darryl Robert Schoon
|Slower growth of M3 still at record heights
The recent slow-down in M3-Growth from 20% p.a. to 16% p.a. is actually telling us that M3-Growth is still sky high.
Accordingly the monetary exchange equation is telling us, that inflation will be the inevitable result of this rapid expansion of the money-supply.
US-$ denominated gold-prices will continue to mirror the real inflation of the US-Dollar paper currency as long as M3-Growth is higher than the actual gowth of all goods and services sold during a given period of time.
This principle has been proven to work against all paper-currencies in the world. It will also work in case of the US-Dollar.
Until M3-Supply is finally reigned in at some time in the future the average price of gold expressed in US-Dollar paper-currency will climb higher and higher.
|Gold $871.70 off $7.30
Silver $16.23 off $0.31
Gold/Xau Ratio 5.76
Gold/Silver Ratio 53.71
The shakedown in gold continues. Alf Field has revised his Elliott Wave Analysis by stating that a retest of gold's lows at $845 could develop during this current fishing line drop. Alf Field's batting average, calling major moves in gold correctly over past years has been well in excess of .900. So, I think we should listen to him.
The following is how Alf summed up his recent analysis:
The gold market is in the process of completing Large wave II of Major wave THREE. Once Large II is finished, Large III of Major wave THREE will commence. As detailed in Update 20, this should be a strong upward impulsive wave that could reach to above $1,500 before it is completed.
These forecasts are based on the rhythms detected in the gold market during its early stages. The magnitude of the various corrective waves helps to identify the type of wave sequence underway and assists in pinpointing errors when they occur.
Let's see, the expected trading range on gold from a $845 low to the exceess of $1,500 during the upcoming new phase doesn't give a person too much room for being right if they are a fearful seller, does it?
The three P's - Perspective, Perspective and Perspective will always rule.
6 August 2008.
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