November 21, 2017 
 Tuesday 
 
 

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Topic:
Gold Enters Major Bull Market

       

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 By bluejay

09/23/2008  7:36PM

Last on gold is $881.50.

The following is an excellent article written by a Canadian from Calgary that was presented today on the Agoracom.com website under the stock ECU in the Forum Discussion section.


Mob will be growing with startling awareness
Posted by: sinbob on September 23, 2008 03:52PM

Shattering the myths.


As Senator Shelby kicked off this morning’s “hearings” with Paulson and Bernanke, one could not help but note his tone of justifiable repudiation towards the Treasury, Fed., SEC and Wall St. Shelby made pointed references to his opposition since 1979 to the bailing out of any private institutions/corporations with taxpayer’s dollars, going back to Chrysler. He also made it graphically clear that Congress has been assured on many occasions over the years, starting with Greenspan and ending Cox, Paulson and Bernanke, as recently as February, that there was no cause for concern and that the economy was sound. So, now Paulson wants undisputed power to move quickly forward, “clean and decisively” to legislate action that would favor even more private control over the US markets. He is holding the ultimate “bazooka” to the head of the people of the US making it clear that urgency is of the utmost importance. This is the man who many are on to, now despised by many (all you had to do was watch the demeanors of the many panned shots of several of the committee members). This is the man who, as President of Goldman, sold out his options for $700 million and became the Secretary of the US Treasury. This is the man who has linkage to all the ex Goldman executives now sprinkled strategically throughout the financial and political power bases in the US, Canada ( Mark Carney, Gov. Of the Bank of Canada, former GS ) and Europe.


As the bankers proceeded to raid the life time savings and personal accounts of Americans last week in order to cover their collective bottoms, overriding the rule of contract law, and bail out the crooks (hidden inside the AIG bail out) Paulson and team were hurridly crafting their grand plan for financial crisis legislation, legislation allowing the use of unlimited public funds well over the $700 billion teaser price (say $Trillions) mentioned. Here are just a few proposals of the Act that should strike fear into all Americans:


LEGISLATIVE PROPOSAL FOR TREASURY AUTHORITY
TO PURCHASE MORTGAGE-RELATED ASSETS


Sec. 2. Purchases of Mortgage-Related Assets.

(a) Authority to Purchase.—The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States.


Sec. 8. Review.
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.




Today, Diane Francis in her column in the Financial Post titled “In the U.S. the monkeys guard the bananas” makes some interesting observations. The real attacks on the New York towers “have been coming from inside by the Capitalist Cowboys”. Making GS and Morgan holding companies completes the demise of all five Wall St. Banks. Paulson, the former Czar of Wall St. has a major conflict of social interest in taking any tough measures against the culprits that have been responsible for the financial Tsunami looming over the U.S. and global markets. He is one of them, beginning is career with Nixon’s sidekick John Erhlichson (Watergate) and culminating as the CEO and Chairman of Goldman form 1999 to 2005. He, along with the rest of the Bush Admin. are now bailing out the problems they created and they won’t attack their base as they leave Washington for Palm Beach and Palm Springs “with the gangs that got away”. I would like to point out here that there are those from the Clinton Admin. That should also be on the hook, such as gold basher, “strong dollar Rubin” and others. Did someone mention Greenspan?


There are many who should have their feet held to the fire as they profited greedily from allowing the capital derivatives monster to grow into Buffet’s “financial weapons of mass financial destruction”. Ms Francis believes that “lawsuits and handcuffs and… RICO prosecutions are in order”, that there should be mass arrests. She also thinks that “taxpayers should be able to seize all the assets of the managers, of all the managers, directors and executives who oversaw this conspiracy of recklessness for years” and that there should be “induced foreclosures in Palm Beach and Palm Springs of Wall Streeter’s mansions, stock portfolios, Porches and private jets.”


I briefly observed part of the statement of the Senator from Ohio this morning commenting on the more than palpable anger emanating from so many of his constituents, that one man had driven over seven hours to meet with him to express his anguish and concerns. Observing the somber expressions of worry so apparent on the faces of so many of those Senators today truly struck almost a chord of fear. One could see that there was every effort being made to disguise negative emotion towards those being interviewed. It seemed to have very little effect on Paulson. That’s when I turned off the TV.


In an aside to all Canadians, we should not delude ourselves into thinking that all of the above does not and will not have serious fallout here. It is only delayed. As the above hearings are being played out, Canadian regulators, politicians, bankers, brokers and others are, and have been erring through omission, ignorance and illegality. Many investors have been and are complaining about apparent “inconsistencies” in our markets, notably the JPMs and specifically naked shorting. There are no satisfactory or accountable replies to such complaints at this time, at least those forwarded by me. We have no idea of what role Mr. M. Carney or the Bank of Canada (at arm’s length to our Government.) has played, or is playing in the above globally infected derivatives markets, now estimated by the Bank of International Settlements to be well over seven hundred and fifty TRILLION dollars. Canadian banks are exposed by $800 billion through credit default swaps. They rely on their guarantors, such as AIG, to back them during a crisis. “Canadian banks and financial institutions are exposed to AIG in several ways, with one of the greatest sources of risk being their reliance on opaque credit markets that link lenders in complex was through an elaborate system for sharing risk in which AIG plays a central role.” (Financial Post, FP1, Se. 17/08) The Royal Bank alone has $300 billion notional exposure, many times its own value. As Jim Sinclair points out, when there is no counter party, it’s real dollars. TD has $197 billion exposure. I openly wonder at their seeming lengthy shenanigans in the trading of one junior’s shares, ECU on the TSE. They aren’t alone.


Suffice it to say, we investors in Canada are still in the dark and there are many factors that we should be urgently cognizant of. I have personally written many times to many authorities and have basically been ignored. That arrogance and off-handedness alone are red flags, and tells me there are some serious speed bumps ahead that will grow proportionately bigger with time and continued obfuscation. Ignorance, recklessness, and/or illegality on behalf of our bureaucrats , regulators, politicians, banks and brokerages is presently greasing the wheels of greed, arrogance, power and malfeasance as we “unaffected” Canadians plunge headlong into the wake of the U.S. juggernaut without a very small jacket.
 By bluejay

09/23/2008  12:13PM

Gold $892.40
Silver $13.17
Gold/XAU Ratio 6.11
Gold/Silver Ratio 67.69

It appears that the dark forces are reigning in the gold price following its recent quick advance in the general area of $900. It's apparent the governement's grip on gold prices isn't as well placed as it used to be with the latest enlistment of US banks in the continuing effort. From gold loans, to gold swaps, to bullion banks, to hedge funds, the government has tried everything to extinguish gold's demand.

Over the past 18 months the naked short selling tool has worked like a charm for the government in having all their cronies sell everything gold related to break public confidence in gold. Unfortunately as greed goes, the public played the leverage game with the metal and the shares and got severly burned when the dark side turned up the heat as three US banks started shelling the metal prices that ended with gold hitting $740 and Silver just north of the $10 level.

All is not lost, just time. The sad fact is the government will do whatever is necessary to keep the gold price checked. It will be quite interesting when inflation hits the hyperinflation stage where they will get the gold from or participants to aid in their efforts. The long term direction of a higher gold price CAN NOT BE STOPPED.

The only possibility that will never be attempted according to Mr. John Williams of shadowstatistics.com is:

1- Increase the individual tax to 44%, now.

2- Cut governement spending by 20%, now.

If we delay the costs go up to:

1- Increase the individual tax to 88%

2- Cut government spending by 40%.

Who has the stomach for that???

So, hyperinflation here we come.

The current figure being used to fix the financial dislocation in the US is $700 billion. How will this ever work with the world's outstanding derivative contracts far in excess of a quadtrillion, that's a thousand trillion dollar's worth. Now, size that up with the $700 billion bailout in this country to fix the problem and you quickly understand the magnitude of these potential failures greatly overshadows this tiny, if you can call it that, $700 billion figure.

$700,000,000,000

versus

$1,400,000,000,000,000

The $700 billion rescue plan only deals with 1/2000ths of the entire problem.

If you were a bookie what odds would you give to the proposed $700 billion figure fixing the potention exposure to the greater amount?

If you know of a better way to survive and keep your wealth undamaged without gold please share it.
 By bluejay

09/21/2008  8:47PM

Last on gold is $868.00

The following are observations and opinions from one of the best information sites on the web at agoracom.com under the stock ECU Discussion Forum.

Govt allows financial firms to raid individual accounts
Posted by: ESL on September 21, 2008 10:53AM

Precedent has been set that allows bankers to raid your personal accounts & use your lifetime savings to keep the ship afloat for a few more weeks. This is another example of authorities out of control that are overriding the rule of contract law, tearing up your investment account legal agreements with the banks and replacing it with laws that cater to bailing out the crooks who created this fine mess. This is the most utterly disgusting measure yet that shows how very broken the system is. The politicians and other scumbags at the helm don't give a hoot for your welfare and it's every man for himself when tshtf. On the other hand you can bet your last bar of Gold that members of tptb are busy squirelling away their savings outside of the US before Capital Controls are inevitably instituted in the not too distant future. Best of luck to all.


===============================

RAIDS OF INDIVIDUAL ACCOUNTS

This is so important a topic, that it deserves top billing!!! Hidden inside the AIG bailout funding package, surely hastily cobbled together, but carefully enough to include a totally corrupt clause, was a handy dandy clause that permits raids. The conglomerate financial firms are permitted at this point to use private individual brokerage account funds to relieve their own liquidity pressures. This represents unauthorized loans of your stock account assets. So next, if the conglomerate fails, your stock account is part of the bankruptcy process. Finally the corrupt USGovt and corrupt Wall Street houses are desperate enough to put into policy, stated by the US Federal Reserve, outlining the authorized raid of your money.
-------------------------------


Jim Sinclair warned us months ago to take physical possession of our stock certificates.

It's becoming clearer everyday that everyone must have a secure safe in their home.

Another point Mr. Sinclair has been repeating is that YOU MUST ELIMINATE ALL MIDDLEMEN BETWEEN YOU AND YOUR ASSETS.
 By bluejay

09/21/2008  5:15PM

Last on gold is $871.80

September 19, 2008

The Bi-Partisan Origins of the Financial Crisis
Shattering the Glass-Steagall Act
By WILLIAM KAUFMAN

If you're looking for a major cause of the current banking meltdown, you need seek no farther than the 1999 repeal of the Glass-Steagall Act.

The Glass-Steagall Act, passed in 1933, mandated the separation of commercial and investment banking in order to protect depositors from the hazards of risky investment and speculation. It worked fine for fifty years until the banking industry began lobbying for its repeal during the 1980s, the go-go years of Reaganesque market fundamentalism, an outlook embraced wholeheartedly by mainstream Democrats under the rubric "neoliberalism."

The main cheerleader for the repeal was Phil Gramm, the fulsome reactionary who, until he recently shoved his foot even farther into his mouth than usual, was McCain's chief economic advisor.

But wait . . . as usual, the Democrats were eager to pile on to this reversal of New Deal regulatory progressivism -- fully 38 of 45 Senate Democrats voted for the repeal (which passed 90-8), including some famous names commonly associated with "progressive" politics by the easily gulled: Dodd, Kennedy, Kerry, Reid, and Schumer. And, of course, there was the inevitable shout of "yea" from the ever-servile corporate factotum Joseph Biden, Barack Obama's idea of a tribune of "change"--if by change one means erasing any lingering obstacle to corporate domination of the polity.

This disgraceful bow to the banking industry, eagerly signed into law by Bill Clinton in 1999, bears a major share of responsibility for the current banking crisis. Here's the complete roll call of shame:

REPUBLICANS FOR (52): Abraham, Allard, Ashcroft, Bennett, Brownback, Bond, Bunning, Burns, Campbell, Chafee, Cochran, Collins, Coverdell, Craig, Crapo, DeWine, Domenici, Enzi, Frist, Gorton, Gramm (Tex.), Grams (Minn.), Grassley, Gregg, Hegel, Hatch, Helms, Hutchinson (Ark.), Hutchison (Tex.), Inhofe, Jeffords, Kyl, Lott, Lugar, Mack, McConnell, Murkowski, Nickles, Roberts, Roth, Santorum, Sessions, Smith (N.H.), Smith (Ore.), Snowe, Specter, Stevens, Thomas, Thompson, Thurmond, Voinovich and Warner. DEMOCRATS FOR (38): Akaka, Baucus, Bayh, Biden, Bingaman, Breaux, Byrd, Cleland, Conrad, Daschle, Dodd, Durbin, Edwards, Feinstein, Graham (Fla.), Hollings, Inouye, Johnson, Kennedy, Kerrey (Neb.), Kerry (Mass.), Kohl, Landrieu, Lautenberg, Leahy, Levin, Lieberman, Lincoln, Moynihan, Murray, Reed (R.L), Reid (Nev.), Robb, Rockefeller, Sarbanes, Schumer, Torricelli and Wyden.

REPUBLICANS AGAINST(1): Shelby.

DEMOCRATS AGAINST(7): Boxer, Bryan, Dorgan, Feingold, Harkin, Mikulski and Wellstone.

NOT VOTING: 2 REPUBLICANS (2): Fitzgerald (voted present) and McCain.

The House Democrats were no less enthusiastic in their endorsement of this invitation to plunder--the repeal passed there by a margin of 343-86, with the Donkey Party favoring the measure by a two-to-one margin, 138-69. Current House speaker Nancy Pelosi managed not to register a vote on this one, so great was her fear of offending her party's corporate paymasters even though she knew passage was a sure thing.

According to Wikipedia, many economists "have criticized the repeal of the Glass-Steagall Act as contributing to the 2007 subprime mortgage financial crisis. The repeal enabled commercial lenders such as Citigroup, the largest U.S. bank by assets, to underwrite and trade instruments such as mortgage-backed securities and collateralized debt obligations and establish so-called structured investment vehicles, or SIVs, that bought those securities. Citigroup played a major part in the repeal. Then called Citicorp, the company merged with Travelers Insurance company the year before using loopholes in Glass-Steagall that allowed for temporary exemptions. With lobbying led by Roger Levy, the 'finance, insurance and real estate industries together are regularly the largest campaign contributors and biggest spenders on lobbying of all business sectors [in 1999]. They laid out more than $200 million for lobbying in 1998, ' according to the Center for Responsive Politics. ' These industries succeeded in their two decades long effort to repeal the act. ' "

This lust for banking largesse is as wanton among Democrats as Republicans--right up to the current presidential campaign. According to the Phoenix Business Journal,

Obama and McCain . . . have accepted a substantial amount of campaign money from Wall Street bankers, investment and securities firms and their executives during this election cycle.

Investment firms have donated $9.9 million to Obama and $6.9 million to McCain this campaign thus far, according to the Center for Responsive Politics. Commercial banks have given Obama $2.1 million and McCain $1.9 million. Private equity firms and hedge funds have given Obama $2 million and McCain $1.4 million, according to CFRP.

Lehman Brothers, Goldman Sachs, JP Morgan Chase & Co., UBS and heavyweight law firm DLA Piper are among Obama's top contributors. JP Morgan acquired Bear Stearns with the federal government taking on as much as $30 billion Bear assets as part of the deal. McCain's top donor sources include Merrill Lynch, Goldman Sachs, Citigroup and Blank Rome and Greenberg Traurig LLP law firms.

So . . . the next time a mass-media-lulled Democrat ridicules Ralph Nader for arguing that there are few significant differences between the two major parties on the truly important issues, you might refer them to this atrocity, along with all the other ones.

William Kaufman can be reached at kman484@earthlink.net
 By bluejay

09/21/2008  3:24PM

Last on gold is $876.60.

India continues to take 30% of world gold production. That percentage should increase as it is looking more and more like gold production has already peaked out.


India's love affair with gold keeps going despite volatile prices
Module body

Sun Sep 21, 1:20 AM

NEW DELHI (AFP) - Pushpa Bhatia is in a dilemma as she scans the glittering gold offerings laid out on a showcase at a fancy jewellery store in the Indian capital.

ADVERTISEMENT

With the precious metal's price on a roller-coaster ride, she's wondering whether she should buy now or wait.


"Will the price go up or down -- you tell me," the sari-clad Bhatia says to the salesman, who responds with a shrug.


Last week, gold posted its biggest weekly gain in a decade, climbing by 13 percent to 864.70 dollars an ounce, as mounting credit turmoil pushed investors into safe haven assets.


But Bhatia can't wait too long -- India's marriage and festival seasons are approaching and she needs gold for both.


She has a 23-year-old daughter getting married in November and she likes to give small "auspicious" golden gifts for the Hindu calendar's biggest holiday of Diwali, or the Festival of Lights, in October.


India is the world's biggest gold consumer, importing 700 tonnes to 800 tonnes a year on average -- around 30 percent of global demand.


And higher prices won't stop Indians buying, said Suresh Hundia, head of the Bombay Bullion Association.


"Those who have marriage commitments will buy -- no matter what the rates," said Hundia.


Indian brides are traditionally bedecked in heavy gold jewellery -- seen as a family heirloom and also security.


With around 10 million marriages a year in the country of 1.1 billion people, wedding-related demand is huge, especially during the nuptial season between October and January and April and May.


"The idea of giving gold to the bride is it will bail her and her family out in times of crisis," said Ajay Mitra, managing director of the World Gold Council in India.


The gold given to a bride is known as "streedhan," or "woman's wealth."


In fact, said jewellery store salesman Devender Kumar, "most of the time the customers don't even look at the design -- they just look at the weight."


However, lifestyles are changing in urban areas.


Bhatia's daughter, Supriya, a newly minted accountant in tight trousers and an applique T-shirt, says she's bored with the metal.


"It's too heavy to put on," she says, screwing her face in disgust at an elaborate gold chain the salesman is looping around her mother's neck.


The vast array of consumer goods and trendy accessory jewellery to be found in India's cities have made gold a less sought-after item for many.

"For thousands of years women had very little personal wealth other than their jewellery -- they didn't have bank accounts," said Arvind Singhal, head of retail consulting firm Technopak.

"But now with the empowerment of women in urban areas, they want to spend their disposable income on cars, TVs, holidays, a new handbag," said Singhal.

Still, bride-to-be Supriya Bhatia knows she won't win the battle over her gold wedding jewellery as her mother orders her to sit and pay attention.

"It's a necessity to own gold if you're a woman," said her mother firmly.

And even though urban tastes are changing, India's overall gold consumption is unlikely to alter much in the foreseeable future, analysts say.

There is "a growing trend toward luxury goods rather than wanting to buy gold in urban areas," noted Suki Cooper, analyst at London's Barclays Capital.

But she said "the majority of gold consumption is in rural areas," where "that level of consumerism doesn't exist so India is likely to stay a very important gold consuming nation."

In the countryside, where the banking system is still poorly developed, gold rules as a medium of financial exchange and secure savings vehicle.

"Beyond the big cities, gold is something which has intrinsic value for consumers," said the Gold Council's Mitra.

"They know they will never get cheated. It's an insurance."
 By bluejay

09/21/2008  3:23PM

India continues to take 30% of world gold production. That percentage should increase as it is looking more and more like gold production has already peaked out.


India's love affair with gold keeps going despite volatile prices
Module body

Sun Sep 21, 1:20 AM

NEW DELHI (AFP) - Pushpa Bhatia is in a dilemma as she scans the glittering gold offerings laid out on a showcase at a fancy jewellery store in the Indian capital.

ADVERTISEMENT

With the precious metal's price on a roller-coaster ride, she's wondering whether she should buy now or wait.


"Will the price go up or down -- you tell me," the sari-clad Bhatia says to the salesman, who responds with a shrug.


Last week, gold posted its biggest weekly gain in a decade, climbing by 13 percent to 864.70 dollars an ounce, as mounting credit turmoil pushed investors into safe haven assets.


But Bhatia can't wait too long -- India's marriage and festival seasons are approaching and she needs gold for both.


She has a 23-year-old daughter getting married in November and she likes to give small "auspicious" golden gifts for the Hindu calendar's biggest holiday of Diwali, or the Festival of Lights, in October.


India is the world's biggest gold consumer, importing 700 tonnes to 800 tonnes a year on average -- around 30 percent of global demand.


And higher prices won't stop Indians buying, said Suresh Hundia, head of the Bombay Bullion Association.


"Those who have marriage commitments will buy -- no matter what the rates," said Hundia.


Indian brides are traditionally bedecked in heavy gold jewellery -- seen as a family heirloom and also security.


With around 10 million marriages a year in the country of 1.1 billion people, wedding-related demand is huge, especially during the nuptial season between October and January and April and May.


"The idea of giving gold to the bride is it will bail her and her family out in times of crisis," said Ajay Mitra, managing director of the World Gold Council in India.


The gold given to a bride is known as "streedhan," or "woman's wealth."


In fact, said jewellery store salesman Devender Kumar, "most of the time the customers don't even look at the design -- they just look at the weight."


However, lifestyles are changing in urban areas.


Bhatia's daughter, Supriya, a newly minted accountant in tight trousers and an applique T-shirt, says she's bored with the metal.


"It's too heavy to put on," she says, screwing her face in disgust at an elaborate gold chain the salesman is looping around her mother's neck.


The vast array of consumer goods and trendy accessory jewellery to be found in India's cities have made gold a less sought-after item for many.

"For thousands of years women had very little personal wealth other than their jewellery -- they didn't have bank accounts," said Arvind Singhal, head of retail consulting firm Technopak.

"But now with the empowerment of women in urban areas, they want to spend their disposable income on cars, TVs, holidays, a new handbag," said Singhal.

Still, bride-to-be Supriya Bhatia knows she won't win the battle over her gold wedding jewellery as her mother orders her to sit and pay attention.

"It's a necessity to own gold if you're a woman," said her mother firmly.

And even though urban tastes are changing, India's overall gold consumption is unlikely to alter much in the foreseeable future, analysts say.

There is "a growing trend toward luxury goods rather than wanting to buy gold in urban areas," noted Suki Cooper, analyst at London's Barclays Capital.

But she said "the majority of gold consumption is in rural areas," where "that level of consumerism doesn't exist so India is likely to stay a very important gold consuming nation."

In the countryside, where the banking system is still poorly developed, gold rules as a medium of financial exchange and secure savings vehicle.

"Beyond the big cities, gold is something which has intrinsic value for consumers," said the Gold Council's Mitra.

"They know they will never get cheated. It's an insurance."
 By Hans Kummerow

09/20/2008  5:21AM

Bailout plain will not be in place before Summer of 2009

Just sit down for a minute and try to write down the basic rules for a nation-wide bail-out-plan for financial institutions - it is a terrible job. And Mc Cain's refusal of the plan actually means, the present administration will not be able to resolve the issue before election day.
If Mc Cain wins, he will kill the issue. If Obama wins he will have to consider the justice-issue he stressed today. Not an easy job either.
Chances are: This bail-out-plan will never become effective at all.
 By gfxgold

09/19/2008  1:24PM

"In Defense of Gold." An article written by Christopher Barker. Read it and then make a comment about it if you want It is located at: http://www.fool.com/investing/small-cap/2008/09/12/in-defense-of-gold.aspx
 By bluejay

09/19/2008  8:24AM

Last on Gold is $861.90

Listening to a calm, collected and experienced mind is preferred to bureaucrats who who are croud pleasers until their house starts to burn down.

The appropriate question is, if these people are so smart why did they not heed warnings years ago from Warren Buffett when he was widely quoted in the media as saying, "OTC derivatives are weapons of mass destruction?"

And these are the same people that are going to fix the problem????

Posted On: Friday, September 19, 2008, 9:49:00 AM EST

Potential Infinite Bailouts To Explode Money Supply

Author: Jim Sinclair

Dear Friends,

Today's reported potential infinite bailout of all and any portends, if adopted, is the largest increase in dollars outstanding since the Jurassic Age.

It closely models actions undertaken regarding the production of currency liquidity seen in the "Weimar Republic."

It is reported now that more than 1000 hedge funds are on the rocks. This has the potential for a significant financial impact.
The only way to hide the numbers from the statistics produced by the suspected actions of the Fed is to value the indebtedness purchased at 100%, claiming a wash transaction.

The only conclusion is that when the smoke clears and the advertised actions have been adopted, nothing more dollar negative than this has ever occurred due to the potential expansion of T bills and therefore dollar supply explosion.

Gold is the only currency with no liability attached to it which, as you have seen recently, will be selected as the currency of the people.

Respectfully yours,
Jim Sinclair
 By bluejay

09/18/2008  11:13PM

Last of gold is $851.90.

Thanks Mike for your kind words. I can't take all the credit as I am just a student of Mr. James Sinclair's at http://www.jsmineset.com.

The following article caught my attention and is well worth reading.

Investing in Chaos
The Storm is Here
Darryl Robert Schoon
Posted Sep 17, 2008

All Swans Are Black

Saturdays and Sundays
Used to be fun
Weekends were holidays
Perhaps time in the sun

But now it's all changing
Changing for worse
As bankers are draining
The public's thin purse

Northern Rock Fannie Mae
Freddie Mac and Bear
What's next we all wonder
Who will it be where?

Lehman's a lemming
As was Bear Stearns
WaMu AIG
They're all gonna burn

Only one thing is for certain
And that will be when
The next bank that fails
It'll be on a weekend.

Last weekend started early for Timothy Geithner, President and CEO of the New York Federal Reserve. At 6pm, Friday, Geithner called an emergency meeting to discuss the possible collapse of Wall Street investment bank, Lehman Bros.

The troubles of Lehman Bros had worsened during the previous week and the current Fed playbook dictated a solution be found on the weekend to calm financial markets opening Monday; but, this weekend, the Fed playbook came up empty, Lehman Bros. declared bankruptcy.

It's official. The storm is here. In How To Survive The Crisis And Prosper In The Process, I predicted a global financial crisis would happen where real estate prices would fall 40-70%, stock markets would crash and a Great Depression would result.

Eighteen months later, the median price of housing in California is down 40 %, global stock markets are in disarray and although another depression has yet to begin, this weekend's failure of Lehman Bros combined with the pressured sale of Merrill Lynch and the prospect of an AIG collapse are clear signs that we are now that much closer to the predicted end.

This is the end of a system. It is not a cyclical correction. It is not a market pullback and it is not a repricing of risk in an otherwise resilient marketplace. We are witness to the end of an economic system based on credit-based paper money that began 300 years ago in England. All beginnings have endings - and that we didn't expect it to end doesn't mean that it wouldn't.

THE BANKERS' BEGGING BOWL

Because Lehman Bros.' CEO Richard Fuld received a $22 million bonus for his "work" in 2007 or perhaps because Fed officials had been openly criticized at their annual Jackson Hole soirée for their continuing bailouts of US investment banks, last weekend US officials unexpectedly informed Wall Street bankers that a government bailout of Lehman Bros. was not possible.

There is no political will for a Federal bailout...
Timothy Geithner, September 12, 2008

Geithner's statement really means that Wall Street no longer possesses the requisite political muscle to extract more US dollars from a bankrupt electorate. Last weekend, Wall Street bankers finally understood that their privileged position in the welfare line of US government largesse had come to an end. This time, the banker's begging bowl would remain empty.

With their co-conspirators in the US government no longer able or willing to provide additional US guarantees, the position of investment banks has now become increasingly fragile; and their newly hatched liquidity plan concocted by the bankers over the weekend is another indication of just how fragile their system is.

THE BANKERS' NEW PLAN

Last Saturday when the bankers realized they could no longer depend on government money to bail them out, they came up with a plan. Granted, they did so with only one night's sleep but nonetheless there appears to be a significant flaw in their thinking.

This is the plan:

Sept. 14 (Bloomberg) -- A group of banks including Bank of America, CitiGroup and JPMorgan Chase & Co. are putting up $70 billion for a borrowing fund aimed at providing liquidity... Each participating financial firm will provide $7 billion to establish the fund and have the ability to borrow up to a third of the total. Other banks include Barclays Plc, Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs Group Inc., Morgan Stanley, Merrill Lynch & Co. and UBS AG. The pool could expand as other companies join.

Now, let's get this straight. Ten banks put up $7 billion for a total of $70 billion. Because any bank can withdraw up to $23.3 billion, if three banks take $23.3 billion each, there will be nothing left for the others. Am I missing something?

There is nothing wrong with the plan, per se. The flaw lies in the flawed character of the participants. These are investment banks and if investment banks can exploit a situation, they will do so. That's what investment banks do for a living, they exploit situations for their own advantage in order to maximize profits.

Last year when two Bear Stearns highly leveraged funds were in danger of failing, Bear Stearns came to the "rescue" of one of its funds and lent it more capital, albeit with the caveat that Bear now had first claim on the fund's assets. Then, when the fund collapsed shortly thereafter Bear Stearns exercised its now first-in-line rights to all the assets.

Since self-serving behavior is common among investment bankers, it will be interesting to see how the bankers' $70 billion fund will fare. After the first withdrawal, there may be a "bank run" on the remaining assets by the remaining banks - a real life version of what will be "the Banker's Dilemma".

A FRACTIONAL RESERVE SAFETY NET

The investment banks' $70 billion liquidity fund is predicated on much the same premise that fractional reserve banking is based. While it is understood there may not be enough in the fund to cover all needs, it is assumed that not everyone one will need their funds at the same time.

This thinking/sic assumption is the basis of today's fractional reserve banking system; because, as in the banker's "liquidity plan", there is not enough money in US banks in the event of significant withdrawals by savers.

There is $6.84 trillion on deposit in US banks; but US banks have only $273.7 billion cash on hand. The banks cannot possibly pay back depositors all their money as only 4 % of depositors' funds are actually available. The rest has been loaned out, i.e. to real estate developers, etc.

The safety net of both bankers and depositors may prove inadequate in the days ahead. Be forewarned.

INVESTING IN CHAOS

Investing in these times is investing in a time of chaos; and gold and silver, traditional havens, appear to have failed in that role, both having sustained significant losses of late. But don't dismiss gold and silver so quickly. Their day is coming.

The recent correction of gold and silver was not unexpected. In my book, I noted that in 2006 UBS had predicted a commodities sell-off - an avalanche sale of all commodities - could occur and take down gold in the process.

Page 48, from How To Survive The Crisis And Prosper In The Process:
In the June 5, 2006 article, UBS also warned that while the long term outlook for gold was decidedly positive, there was an intermediate risk of a global economic downturn that would drag "gold down in an avalanche sale of all commodities"; an avalanche that gold would ultimately survive before embarking again on a strong upward path.

The global turndown predicted by UBS in 2006 is underway; and the current sell-off of commodities, an avalanche sale of all commodities, may well be the event predicted by UBS. That such is occurring means we are now entering what I call the third and final stage of economic-collapse.

No one knows how long this stage will be. It is clear, however, from the recent takeovers of Fannie Mae and Freddie Mac, and the collapse of Bear Stearns and Lehman Bros. that there has been a seismic shift recently in the global financial landscape.

This stage is the last period in which investments can be profitably re-allocated to take advantage of what will soon happen, a financial tsunami the likes of which have never before been seen. A deflationary collapse with hyperinflation is only one possibility. There are more.

Professor Fekete's final session of Gold Standard University Live will take place in Canberra, Australia, November 11-14. I will be joining Professor Fekete and Tom Szabo in discussing the gold and silver basis as a trading strategy in this critical period, see feketeaustralia@yahoo.com.

There are proven ways to prepare for what is to come. In matters of money trust in gold and silver; in matters of the world trust in the perfidy of man; and in everything, trust in God.

Until humanity changes, history will not.

blog:
http://www.posdev.net/pdn/index.php?option=com_myblog&blogger=drs&Itemid=81

Darryl Robert Schoon
email: info@drschoon.com
website: www.drschoon.com
website: www.survivethecrisis.com
Schoon Archive
 By Michael Miller

09/18/2008  12:18PM

Sometimes a long memory can be useful when thinking about Bluejay's credibility or my credibility or writers who offer up their thought on gold, investments and the future. I just took a moment break from my executive chores, read the last entry and clicked on page 17 of this topic. Curiosity. Up came 2/06/2003 and I quote, "I believe from reading many related articles that all this debt will eventually lead us into something much larger than the "soft patch" Alan Greenspan says the country is currently in. I believe we may have a credit crisis in this country and people will want safety and that safety will come from something that carries no debt and that is gold." Nice call, Bluejay. Nice call five years ago.
 By bluejay

09/18/2008  8:16AM

Last on gold is $873.40

The Chuckle Of The Day

Then for the laugh of the day...the CEO of Goldman Sachs was complaining to the CFTC that illegal short selling was the reason his stock was collapsing. What goes around, comes around!!!
 By bluejay

09/17/2008  7:35PM

Gold $884.60 up $106.90
Silver $12.37up $ 1.92
Gold/XAU Ratio 6.73
Gold/Silver Ratio 71.24

Big Buyers in Bankruptcy Proof Items Today

Wall Street is burning with some people starting to care. The Feds saved AIG from going belly up today with a near to $90 billion cash infusion.

The bailout this time is being called a bridge loan. Yesterday, the Feds were using consevatorship and before that they were naming the bailouts only 28 day loans.

You can paint this current dire financial condition in the US any color you want, just let's not disturb the natives.

Well, some people are starting to figure it out contrary to all the spin that's being delivered to us, that everything is not under control and it is getting worse.

The 90 day government bond market has been overwhelmed with buyers like the market has never seen before. Current yields for the 90 day paper are at an astonishing 0.3%. It wasn't too long ago that the paper was yielding 5%.

Today, people want bankruptcy proof items. Gold and the 90 day paper has seen unprecedented demand. Gold at this writing is up over $100. This event by itself will get world attention.

The engineered forced sell-off recently of gold and silver was an desperate frightened attempt by amateurs running the government. Mr. Greenspeak will have cost this country trillions of dollars by allowing OTC derivatives not to be regulated. What a jerk.

Treasury Secretary Paulson is probably ordering extra printing presses right now to print us out of this historic financial mess. Weimar Republic, here we come.

Fasten your seat belts! The currency supply is going to the moon and with it rapid price inflation for consumers.

Within this increasing meltdown of OTC derivative related company's, hard assets without attachment to debt will be the winners. Even with some debt, if it's gold related you will have a chance.

How long do you figure it will take the public to discover junior and exploration gold related companies? The days ahead could get dicey for investors and folks with their money on deposit at banks.

One thing you should always remember in times like these: gold and the other precious metals are your best friends and have served that purpose for 5,000 years while all attempted monetary experiments absent of gold convertibility have failed from government to the next over this time span.
 By Michael Miller

09/17/2008  10:55AM

As always, Your entries are interesting. Two entries ago you said that 5% of production of gold goes to industrial use. Gold use continues to increase beyond jewelry: electronics, medical and research. Perhaps someone has the time and ability to dig into the industrial use quantities. I am confident that it is greater than 5%.

Oops, I forgot how gold is helping the global environmental movement in reducing energy consumption. Go miners!
 By bluejay

09/16/2008  7:08PM

Last of gold is $781.20

A financial cataclysm on the way?

Posted On: Tuesday, September 16, 2008, 3:33:00 PM EST

In The News Today

Author: Jim Sinclair

Dear CIGAs,

The quoted amount of OTC derivatives on Lehman's books are not notional value, but some silly mark to no market. The real number is trillions. When either party to an OTC derivative fails the value of that derivative instantaneously become the size of what was previously called notional value. With one quadrillion, one thousand one hundred and forty four trillion (BIS) in notional value, there is NO means to stop this financial cataclysm.

The s*** has hit the fan because trillions of dollars of OTC derivatives failed Monday.

The entity to fail is not the winner on those fraudulent pieces of paper but the loser. Otherwise it would not have failed.

Many other counter parties to those derivatives have fallen into potential bankruptcy.

The long spoken about "domino effect" is active and I now believe the Fed did not consider how a derivative becomes full value (formerly called notional value) when one side goes into bankruptcy.

Yes, Pandora's Box opened Monday morning.

For years I was laughed out when this present condition was clearly described.

Gold is going to $1200 and $1650. Laugh at me again if you must.

Those that demand a date already have one - on or before January 14th, 2011.

This is it and it is now.

The greatest damage done to gold shares and gold came directly from those that were over-margined. Yes shorts got it down but those on margin got them here. Shame on you who demanded margin!

Continue to ignore all the means of protecting yourself and you do not deserve to be protected.

If you fail to retain proper parties such as an attorney to read your custodian agreement you do not deserve to be protected. Cheap out NOW and you crap out later, and that won’t be much later…
 By bluejay

09/15/2008  2:38PM

Gold $783.50 Up $19.80
Silver $11.00 Up $ 0.16
Gold/XAU Ratio 6.60
Gold/Silver Ratio 71.23

I guess now we understand why the government wanted gold down in a hurry, the pending financial mess that Wall Street is now in with both feet.

For months you have been informed of how dangerous OTC derivatives are and now we are finding out first hand what Warren Buffett said years back which is now true, "they are weapons of mass destruction."

The old-line brokerage firm of Lehman Brothers is now bankrupt. Merrill Lynch, which should be considered worthless, is being taken over by the second largest OTC derivatives holding bank in the US, the Bank of America(BAC). The takeover price makes no sense as Merril is technically bankrupt if they were ever to value their OTC derivatives holdings correctly.

Someone knows something is wrong. The takeover price for stock only, more paper floating around without an anchor to gold, is $29 a share. No cash is involved, just an entry for a different colored certificate.

Funny thing, the last on MER on the NYSE is $18.81 not anywhere near to $29 takeover price. It sounds like the BAC shareholders are not expected to approve the deal. Would you?

Already, Bank of America's shares are down $6.72 at $27.02. It's a bad deal for BAC shareholders. The Fed, the Treasury and some kingpin bankers seem to have forgotten they are not the majority of BAC's shareholders. This is just a proposed deal and nothing more.

It looks like Merrill will follow in the footsteps of Lehman. The price activity on Merrill and Bank America says one thing, people want out.

The gold price looks to have put in a major intermediate low at $740 only days ago. The price of silver went down from over $21 to somewhere near $10.50.

The current ratio on gold to silver is 71.23 which is the highest for sometime. All this weakness is being brough to you by three large US banks and a handfull of questionable big short sellers with the blessings from the CFTC who refuse to say, "anything is wrong." Oh I forgot to mention, the CFTC is a member of the Plunge Protection Team also know as the MMM(Mighty Market Manipulators).

The PPT has a good reason to hold down the silver prices as there is five times more gold above the ground than there is silver. What?? Yes, this is true according to Jim Butler the expert on silver. So, silver is the wildcard with the potential to explode in price at a far greater percentage than gold. This is what fiat producing currency central banks fear the most, for the public to take charge of the silver market and bring back silver as a monetary metal. This would greatly undermine any fiat currency.

Look what happened to Bunker Hunt when he tried to take charge of the small silver market in the early 80's. The governement stepped in with the CFTC banning on the US futures exchanges all purchases. This creamed Bunker and sent the price spiralling south.

If ever there were a manipulated market it is the silver market. Having a cash market set up for the public is wishful thinking. Already, suspected intervention is taking place behind the government's curtain of secrecy to withhold the supply of newly minted silver bullion coins, mainly because it's in short supply. Call it anything you like, it's happening. The mint says there is a shortage of blanks to account for the dry-up in supplies. If you believe them they your mind is being manipulated according to their plan.

You see, silver is 100% consumed by industry, mainly for jewelry, industrial uses and some left over for silver bars and bullion coins, if possible. In the case of gold, only 5% is used up by industry and the rest just accumulates above ground.

Currently, not much silver is left over for bars and coins and the public is feeling the pinch at their local coin stores by having to go on a waiting list. No more cash and carry. It's now, cash and wait. Never put a middleman between you and yous assets. You can still do cash and carry on e-Bay but with a premium to silver's last sale as a result of the silver shortage.

Here's something that doesn't find its way in the media: the above the ground gold holdings are at a 250 year high while the above the ground holdings of silver are at a 250 year low. Now we know why the silver market is manipulated, so the public doesn't find out and want it more.

One thing is painfully clear, the government uses all of its resources and more just to hold back the true value of silver.

Just like the gold price was held down to buffer it from the continuing meltdown to hit Wall Street today to make fiat currencies appear to look better. So too will the price of silver be temporally held back to restrain the public from making it a competing monetary metal and a confidence breaker to any fiat currency during these continuing financial crises.

Recently, a banking analyst stated there there will be from 125 to 150 more bank failures in this country before the whole thing is over.

With a last sale on silver at $11, one doesn't have to possess that much of an imagination to grasp that silver's potential to trade significantly higher is just a matter of time.

Jim Sinclair has stated that $1,650 on gold is coming in 2011. Premiums are starting to build up in the bullion coins now for people not wanting to wait for new supplies, if that ever does happen.

You see, that is the trick that they are trying to use on you to prevent your purchase today. Face it, the silver bullion supply channels have been bent to slow down or cut off silver bullion flow. The days of buying silver with a slight premium are over, especially at these levels.

The gold and silver markets should be much higher today but instead the government just goes on killing the messengers left and right.

In the Patriot Act it states that all gold valued at two times more the last sale and less is considered bullion. Will they come for our gold? If they do, everything above the value of twice gold's last price will immediately jump in premium, including ownership in all gold realted companies.

Large numbers of the public have been chased from their gold stocks recently. Who has been buying? Remember, follow the money? Who has been allowing all these naked short sellers to bring the gold related companies down on their knees? Who has been influencing regulators to look the other way?

Who has been buying silver and the silver related companies during this criminal price suppression scheme? If you continue holding on to the horn of this precious metal's bucking bronco you, too, will be a survivor.

Good luck!
 By martin newkom

09/13/2008  2:05PM

I'm told and I've read that one
country, India has stepped its
purchases of gold for jewelry
and other uses.
 By bluejay

09/11/2008  12:11PM

Gold $742.90 off $9.10
Silver $10.50 off $ 0.12

The real reason commodities are tumbling
Article Comments JOHN HEINZL

Globe and Mail Update

E-mail John Heinzl | Read Bio | Latest Columns
September 10, 2008 at 6:00 AM EDT

To hear Donald Coxe tell it, the commodity selloff ripping through Canada's stock market is no accident. It is the result of a deliberate, brilliantly executed plan hatched at the highest levels of the U.S. Federal Reserve and Treasury.

Mr. Coxe is no paranoid conspiracy theorist. As the chairman and chief strategist of Harris Investment Management in Chicago, he is one of the most respected investment authorities in North America. He also happens to have lost about 10 per cent of his personal wealth in the commodity rout, which came at the worst possible time for his Coxe Commodity Strategy Fund that started trading in June.

“This has done more damage to my personal wealth than anything in the last 20 years,” he said in an interview yesterday. But he has too much respect for how the U.S. authorities engineered the collapse in commodities – a move he said was necessary to shore up the global financial system – to be bitter.

“My attitude is, goddamn it, they're good … it was brilliant.”

To understand why commodities are plunging now – the S&P/TSX plummeted another 488 points yesterday – you have to go back to mid-July, when the U.S. Federal Reserve and Treasury first announced steps to support mortgage giants Fannie Mae and Freddie Mac.

The move, which ultimately led to the Treasury taking control of Fannie and Freddie this week, touched off a chain-reaction of market events that culminated with the wrenching decline in commodities.

According to Mr. Coxe, the Fed's ultimate goal was to trigger a rally in financial stocks, which would, in theory, help banks hammered by the credit crisis raise fresh capital and repair their balance sheets. To accomplish this, the decision to support Fannie and Freddie was deliberately announced on a Sunday, which had the effect of maximizing the reaction from thinly traded financial stocks on overseas markets.

Because many hedge funds were using massive leverage to short financials and go long on commodities, when North American markets opened and banks initially rallied, the funds were forced to cover their short positions.

At the same time, the U.S. dollar was rallying because the risk of holding Fannie and Freddie paper had diminished. The rising dollar, in turn, made commodities less attractive, giving funds that were already scrambling to cover their financial shorts another reason to dump oil, grains and other commodities.

The losses were swift and dramatic. On the Friday before the July 11 announcement, crude oil closed at $145.18 a barrel. Over the following five days, it plunged 11 per cent. “Leverage was being unwound dramatically,” Mr. Coxe said on a conference call last week. “We had a true panic.”

As oil and other commodities were tumbling, fears about the slowing global economy were mounting, giving resources another push downhill. This was also in keeping with the Fed's wishes, because lower commodity prices would help quell fears about inflation.

Mr. Coxe has no proof that the Fed and Treasury acted in concert to boost financials and sink commodities. He is basing his assertions on conversations with hedge fund managers and on years of watching financial markets. “There's no doubt whatever in my mind” about what happened, he says.

The future is less certain, however. Now that Freddie and Fannie have been nationalized, the credit crisis is still very much alive and financial stocks are looking as shaky as ever. As for commodities, once the current storm passes, Mr. Coxe is confident they will recover.
---------------------------

Coins dealers are continuing to report that their bullion silver coin supplies continue to be exhausted due to unprecedented demand.

The price of silver is down 50% over the period of a few short months. I suspect that officials are clogging supply channels to stymie CD withdrawals. Isn't it interesting that with an annual production level of newly mined silver at 600,000,000 ounces that there is a physical shortage?

The current ratio of 80,000,000 ounces of world gold production to silver's is 7.5. Also, there is less available supplies of silver compared to gold supplies as silver is mostly consumed by industry and gold is mostly retained in jewelry production and bars and collector bullion coins. In the market today, supposedly, you can buy silver at the rate of 70.80 ounces compared to each ounce of gold. Does this make any sense?

No wonder there is an apparent silver shortage just with this high spread between the two, aside from the other consideration. Believe it or not, there are spread traders currently buying silver futures contracts and shorting gold contracts at the moment.

When the spread closes gold futures are bought back and silver contracts sold out for a profit.

Gold Continues to be stressed lower today by hedge funds and the local miscreants. We are witnessing just another historic shakeout.

Jim Sinclair has stated that no one could have foreseen this rapid collapse in the gold price as it, basically, was an engineered event by the government. Jim also said that something very big is coming but can't pinpoint yet.
 By bluejay

09/10/2008  10:17AM

Gold $760.50 off $15.50
Silver $10.92 off $ 0.32

Gold is like a retreating army being chased by the Plunge Protection Team, the hedge funds and the participating banks. Great efforts are being made to take gold lower as fast as possible to break confidence in it and keep funds in the banking system.

Millions and millions of dollars have been permanently lost in the banks by deposits who thought their money was safe. The financial institutions that lost a portion of their depositors wealth are now getting bailed out with our money. Does that make any sense?

And with some folks who had bought gold and silver for protection, they now see the same people that have and continue bailing out their buddies beating down those metals with a heavy club. Does that make any sense?

The brave ones are hanging on to their metals and the related companies not being intimidated by this historical farce. The really brave ones are buying gold and silver.

When do we reach peak gold and silver production? What will happen to the metal prices then? In the future, the wealthiest people in the world will be the citizens of India.

We are already in a transitional shift in the world's wealth where U.S. citizens are destined to slide lower in their comparable per capita standings. India's populace continues to buy more and more gold as prices sink lower and lower. Who do you think will be the ultimate winner: The people of India or the people of the U.S.? India will have piles and piles of gold while all we'll have is piles and piles of fiat paper bills.

The great orchestrators of this shame in creating mountains and mountains of newly issued money(more and more inflation) in bailouts for the rich and in the process attempting to destroy gold's value are dealing from the bottom of the deck.

Some recent comments from Mr. Jim Rogers:

US Is "More Communist than China": Jim Rogers

08 Sep 2008 | 05:28 AM ET

The nationalization of Fannie Mae and Freddie Mac shows that the U.S. is "more communist than China right now" but its brand of socialism is meant only for the rich, investor Jim Rogers, CEO of Rogers Holdings, told CNBC Europe on Monday.

"America is more communist than China is right now. You can see that this is welfare of the rich, it is socialism for the rich… it's just bailing out financial institutions," Rogers said.

"This is madness, this is insanity, they have more than doubled the American national debt in one weekend for a bunch of crooks and incompetents. I'm not quite sure why I or anybody else should be paying for this," Rogers told "Squawk Box Europe."

"You certainly gonna see a huge jump in any financial institutions which owned a lot of Fannie [FNM 1.04 0.05 (+5.05%) ] or Freddie [FRE 0.87 -0.01 (-1.14%) ] … because they don't have to worry about going bankrupt all of a sudden," Rogers said.

"Bank stocks around the world are going through the roof, that's 'cause they've all been bailed out. You don't see the homeowners in Kansas going through the roof 'cause they're not being bailed out," he added.

"A Huge Mess"

However, despite the rally in Asian and European markets, the decision to take over Fannie and Freddie is likely to cause more volatility and needs careful consideration by investors, according to Rogers.

It's rarely good to jump in a moving bus and right now you got a lot of buses moving. I might short some more investment banks in the US, depending on how they rally over the next week, but other than that, I'll just sit and watch," he said.

Rogers, who is short on U.S. bonds, said these are likely to fall while commodities may rally. The two government-sponsored enterprises don't have good loans on their books, because "everybody else took the good stuff and dumped the bad stuff onto Fannie and Freddie," he said.

From 2010, Fannie and Freddie will have to shrink their portfolios by 10 percent a year until they reach $250 billion, to reduce the risk to the taxpayer, according to the Treasury plan. But this may put additional pressure on the housing market, Rogers said.

"That's going to also ensure that house prices continue to go down. It's going to be harder and harder to get a mortgage."

Investors should not pin their hopes on this year's presidential election for a solution to the problems, as none of the candidates is likely to find one, Rogers said.

"This is a big huge mess and neither one of them has a clue what to do next year. It's going to be a mess."

© 2008 CNBC.com
 By bluejay

09/09/2008  11:04AM

Gold $783.90 off $17.60
Silver $11.68 off $ 0.38
Gold/XAU Ratio 6.67
Gold/Silver Ratio 67.11

Kill The Messenger

The continuing OTC derivatives disaster is dragging down more and more financials as the Plunge Protection Team(PPT) sweats it out day and night creating unprecedented amounts of fiat money for the bailouts along with daily calls to their bullion banks to sell, sell and sell more gold.

Selling gold to cloak failures of a central bank has never been successful over the long term. Our Fed's failure was Alan Greenspan's position while he was chairman that, the derivatives market didn't need regulation. James Dines some time ago referred to Alan Greenspan as a twit. Alan Greenspan, you are a twit for your stupidity.

Remember England's Gordon Brown? He was instrumental in selling a great portion of his country's gold under $300 an ounce even as the populace there protested. Brown stated that investing in currencies was better than holding gold. Yea, sure, great move Gordon.

Remember all the gold that our country gave away or indirectly sold when the Fed in this country was being questioneds by foreign holders of their dollar holdings up until the time Nixon closed the gold/dollar exchange window in 1971?

Throughout history central banks have mostly sold and attacked gold, that's what they do when their currency expansion experiments start to fail. Or, when something starts sapping the system which leads to failures like the out-of-control OTC derivatives.

This is what we can expect over the short term from the PPT concerning gold:

When a major institution or institutions(Fannie Mae & Freddie Mac) fail gold will be weak preceding the event and following for an undetermined short time period.

When a medium to large sized bank fails on Friday, most likely, gold will be weak for over a shorter time frame.

In between failure notices gold will bounce back until the next failure or failures when prices are expected to be manipulated lower.

Somewhere along in time the PPT will run out of ammunition to control gold prices and we will have liftoff. Jim Sinclair is still looking for a minimum of $1,650 on gold.

There could be a problem along the way for holders of the gold bullion. If the financial meltdown continues to greatly expand, the Treasury may make it illegal for Americans to hold gold, call it all in, just to stop the dollar from collapsing. This is a possibility, although some say it won't happen.

Following the 20% plus drop in gold over the last two months, if the Treasury gets desperate enough, who knows what's coming?

Jim Sinclair stated yesterday that very large amounts of reserves (and other assets or more IOU's) were committed in contolling markets to make it appear that the problem was solved with the government's takeover of Fannie Mae and Freddie Mac.

The 21st century belongs to China and maybe, India. Their treasuries will be built up with significant increases in gold reserves. As mentioned a while back, China will soon be the number one world producer of gold and don't expect them to export much as they build up their reserves. Where will the gold come from to meet world demand as South Africa and Australia's output continues to decline?

I just hope that the gold in my safety deposit box doesn't end up in the coffers of the Chinese as payment to cancel out some of our international debt. Don't forget, in England some months back private and secure safety deposit boxes were opened by government representatives. Could it happen here?

Following the Fannie Mae and Freddie Mac bailouts each U.S. citizen will ultimately be responsible for $360,000 of federal debt.

I wonder how much of that went into the pockets of bankers and OTC derivative sales people that have since left the game taking with them their big bonuses and leaving us holding the bag?

Write or e-mail your representatives in government, I did.

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