goldmap

Stellar Wind - 3/18/12

 

  

"I have to go back...I...I...uh...I...I'm not certain whether that was addressed or not," - FBI Director Robert Muller at a congressional hearing 3/7/12, responding to the question of whether the Administration has the authority to assassinate Americans on U.S. soil.

  

 

Dear All,

 

Gregg Smith's New York Times piece reciting his reasoning for resigning from Goldman Sachs was unsurprising insofar as his description of the culture and activities of his former employer. Two things stand out however:

 

The first is the disparaging use of the term"Muppet's" which Smith reveals was used derogatorily within Goldman to refer to clients who were seen as easy prey. As regular readers are aware, this blog has been at the forefront of calling attention to puppetploitation and the under-aged muppet slave trade, a dirty secret of the politically correct left (which includes inevitably -- certain clergymen who have an uncanny habit of involvement in such cases, as seen in this goldmap expose). While Mr. Smith has not accused any Goldman employee of inappropriate hand-puppetry, such activity is often associated initially with verbal degradation of the victim(s).

 

The other rather grotesque element that emerged was JP Morgan Chase CEO James Dimon's ostensible (and clearly intended for public consumption) "internal memo" released the day following the Times publication. “I want to be clear that I don't want anyone here to seek advantage from a competitor's alleged issues or hearsay -- ever. It's not the way we do business," Dimon wrote, transparently seeking to do just that through sanctimonious grandstanding crafted so as to appear to take the high road. The concurrent element underlying Dimon's memo is that but for the grace of regulatory ineptitude is he not running his criminal enterprise from the inside of a prison cell: RollingStone: J.P. Morgan Chase's Ugly Family Secrets Revealed

 

The putrid culture that Gregg Smith describes is not company specific. Certainly there are good people within in its ranks serving their clients professionally and with integrity, but as a general rule the financial services industry has become a cesspool. In your dealings with Wall Street, you would be well advised to ask yourself who the muppet is. If you don't know, its probably you.

 

The more interesting whistle-blower story this week came not from a bank but from the Congressional Budget Office, which is so often cited for its non-partisan objectivity: Terminated CBO Whistleblower Shares Her Full Story With Zero Hedge, Exposes Deep Conflicts At "Impartial" Budget Office  

"I was repeatedly pressured by the CBO Assistant Director, Deborah Lucas… to not write nor discuss issues in the banking sector and mortgage markets that might suggest weakness in these sectors and their consequences on the economy and households."

  

This poor fraudster simply didn't travel in the proper New York banking circles; otherwise he would be as free as Jon Corzine.

 

 

Well over 1 million Greeks are now unemployed, officially a 21% unemployment rate -- 40% higher than a year ago.  More than half of Greece's youth are out of work and 30% of Greek businesses have closed their doors. Its socialistic model has now fully imploded and yet much of the financial world seems to accept the possibility that the non-ending "rescue" packages are viable. Never underestimate the propensity of politicians to willfully squander the money of the constituents they claim to serve. Greece is hopeless and the bailouts are nothing more than a desperate attempt to rescue banks and the monetary union itself. In the interim we have default by a thousand cuts in order to obfuscate the untenable losses in the credit default swaps held by the largest U.S. banks. The audacity with which the ISDA is perverting contract sanctity by re-defining the term default is having an effect on the debt market. This will reduce debt market liquidity, reduce private market participation in sovereigns and drive up borrowing costs: IFR: Greek CDS uncertainty fuels dumping

 

 

FBI director Muller's uncertainty quoted at the top of this post as to whether the FBI has the authority to kill within its borders citizens it deems a "threat," followed a speech two days earlier at Northwestern University in which Attorney General Eric Holder pledged to use care when going about the business of assassinating Americans, something I think we all appreciate. Mr. Holder also made the incredible assertion that the mere consideration by a U.S. president of whether an assassination is appropriate constitutes due process. Shoot and ask questions later, in other words, is the new due process. Actually, I'm unclear about the asking question component.

 

In its April issue Wired Magazine has done a cover story on the NSA's massive new spy center under construction in Bluffdale, Utah. As Wired bluntly puts it: "There is no doubt that it has transformed itself into the largest, most covert, and potentially most intrusive intelligence agency ever created."  Codenamed "Stellar Wind," the top-secret project has little interest in conforming to the legal safeguards most Americans assume prevent the unwarranted data gathering of law-abiding citizens' personal activities. The depth of intrusiveness is mind-boggling. Wired: Inside the Matrix

"When they started violating the Constitution, I couldn’t stay.” Binney says Stellar Wind was far larger than has been publicly disclosed and included not just eavesdropping on domestic phone calls but the inspection of domestic email. At the outset the program recorded 320 million calls a day...The former NSA official held his thumb and forefinger close together: 'We are that far from a turnkey totalitarian state.'"

 

A pithy photograph in which the rise of Asia and decline of the west are encapsulated in a single image is presented here.

 

 

Why are we not surprised?...MailOnline: How to get ANYTHING through TSA body scanners. Blogger exposes loophole in $1billion fleet  While the former Wendy's tray collectors now employed by the TSA are watching you disrobe and confiscating toothpaste, aircraft remain sitting ducks. These Keystone Cops are effective at nothing other than inconveniencing and harassing travelers. Watch this video:

"It can't possibly be that easy to beat the TSA's billion dollar fleet of nude body-scanners, right? The TSA can't be that stupid, can they? Unfortunately, the can and they are."

 

Republicrats love passing new laws and regulations to 'protect' us. If you find the following disturbing you have only yourself to blame. This is what habitually voting for the "lesser of evils" leads to. Unless you've been consistently supporting libertarian candidates both locally and nationally, you are contributing to the problem: Illegal Everything

 

 

Foreign aid is the process by which the working people in rich countries transfer their money to the rich people in poor ones: NYTimes: Intractable Afghan Graft Hampering U.S. Strategy

  

  

The trend...

 

Bloomberg: Currency wars - Brazil says 'it's on'

Bloomberg: China Expands Yuan Export Settlement to All Qualified Companies

ChinaDaily: China reduces holdings of US govt bonds

Reuters: Japan to purchase 65 billion yuan in Chinese government debt to diversify away from dollar

WSJ: Beijing Diversifies Away From U.S. Dollar

 

  

Gold and silver...

 

Gold weakness in the face of what has occurred in Greece is confusing and entirely counter-intuitive. As GATA's Bill Murphy says so often -- in the gold world , black is white and white is black. Bill understands that central bank manipulation of the gold price -- the financial world's stress barometer, is critical to influencing perception of the viability of the banking system. These short term interventions always prove meaningless and the central banks will continue to lose their ability to control the gold price. The shenanigans have been going on since gold $260. Wait them out while buying the dips.

 

In the past two and one half years the world's central banks have increased their balance sheets by 2/3 of the dollar value of all the gold on earth. That's just the increase.  The re-pricing of gold (and silver) that is coming will rattle your socks.

 

 

Jeff

 

 

Discarded Denominators -- 12/4/11

  

 

"You know how screwed up Europe is when you have a German pope and an Italian central banker." -- Kyle Bass, 11/15/11 in a BBC interview

 

 

Dear All,

  

The New York Times yesterday began its reporting on the paranormal drop in the unemployment rate contained in Friday's BLS release by suggesting, possibly without intention that sleight-of-hand may be at play. "Somehow the American economy appears to be getting better, even as the rest of the world is looking worse" (Emphasis mine).  The BLS reported 120,000 jobs added in November and a huge drop in the unemployment rate from 9.0% to 8.6%. 

  

Let's begin by pointing out that the country needs to add 150,000 new jobs each month just to keep up with population growth. So without a reduction in the number of people seeking jobs, anything less than 150,000 new jobs added each month raises the unemployment rate.  So what is to be made of an employment report that fell short of the requisite number of new jobs created for the unemployment rate to have remain unchanged, yet miraculously shows a sharply higher rate of employment? If you're among the alchemists at the Ministry of Propaganda Bureau of Labor Statistics you're familiar with a game known as Shrink the Denominator, in which a certain category of Americans barely able to make their Zoloft co-pays under their soon-to-be-expiring COBRA benefits are simply removed from the ranks of the unemployed and crane-lifted onto a growing heap of flesh the BLS calls "discouraged workers," which according to the way the BLS figures things, makes them non-unemployed.  From this constantly swelling aggregation these non-working individuals shall -- statistically at least -- never return; forever unproductive and permanently disheartened. If in fact the size of the designated demoralized grows sufficiently, the rate of unemployment can be manipulated downward -- managed according to the speed of the crane operator (coupled of course with the 'birth-death' models concocted in the BLS' animation department).

  

Let us not be as presumptive as the BLS in assigning an emotional state to the former workers that are dropped on to this pile each month. We'll label them without the patronizing sentiment the Bureau of Labor Statistics ascribes. By the manner and motivation of the Bureau's assessmentt of these foks we'll call them, correctly and objectively --'discarded denominators.'  Some would consider the progression of a human being from employed, to unemployed, to former devisor as cold-hearted indignity. To the government statisticians charged with creating happy numbers though, it is a blessing.  Discarded denominators are among the fastest growing segments of Americans lacking W-2's.

   

 

                                       

 

 

 

 

 

  

 

  

  

European banking and market risks are now fully absorbed into the United States banking system through derivative agreements backstopping the Continent. These guarantees dwarf the financial capabilities of the largest U.S. banks that are on the hook for them and so it is that the Fed has effectively come to underwrite Europe. The dollar swap line announcement Wednesday was yet again, a thinly disguised bailout of European banks (at least one of which was about to fail) as capital flight in the European banking system had reached a critical juncture. The European and U.S. banking systems are systemically now one-in-the-same. The banks will continue to be propped up with rolling liquidity injections although it resolves nothing. Solvency issues cannot be cured with liquidity and once the fix wears off central banks will be back with more of the same, continuing to throw gasoline on a fire they cannot allow to burn out. Quantitative Easing will rule the world.

There is also the back-story. The role of the ISDA in the Greek 'non-default default was discussed here in the 10/29 post. Take note that the maneuvering continues in order to prevent a cascade of Greek credit default swaps from blowing up. This initial desperate short term gimmick to avoid an avalanche of default triggers on Greek swap contracts had immediate consequence. In the aftermath of the ISDA's refusal to permit default insurance on Greek debt to perform as required, yield spreads on all European debt promptly soared: NYTimes: Scare Tactics in Greece .

  

On December 19th one billion euros of Greek debt comes due, the first tranche of 8.8 billion maturing between then and Dec. 30th.  It is hard to imagine:

  

a) Holdouts from the "voluntary" 50% haircut being paid par,

b) Holdouts from the voluntary haircut not being paid under their credit default insurance, and

c) Credit default insurance performing at all. 

 

Anything is up for grabs. We live in interesting times.

  

 

In for a penny, in for a pound...The OTC derivatives debacle has no practical resolution and keeps growing. The latest Bank for International Settlements report indicates that there are now $700 trillion in notional private derivative contracts outstanding -- an increase of 18% or $107 trillion in 6 months. We are talking gargantuan numbers here so perspective is in order. The notional value of OTC derivatives written in just the last 6 months is 7 times greater than annual U.S. GDP.  It is utter madness and can only be explained by an exponentially deteriorating financial system and the impunity with which contracts are written. The six TBTF banks that account for virtually all (96%) of the total derivatives outstanding can never be called to perform, for they are insuring nothing less than the entirety of life as presently constituted on the planet. Their collective lack of capital is problematic however only for the Federal Reserve, which will allow neither the global financial system nor these banks to collapse.

 

The Fed takes care of its bank wards nicely -- facilitating the banks' need to appear profitable by permitting their retention of the entirety of derivative fee (insurance premium) income, while the Fed wholly absorbs the corresponding risk. Were it not for the missing step of premium transfer to the party actually incurring the risk, it might otherwise qualify as the largest reinsurance operation in history. All the regulatory chatter about transparency and moving OTC derivatives to clearinghouses is well and good but existing OTC derivative contracts are bespoke and therefore cannot be clearing-housed.

 

As is the case in the U.S., European banks are overstating the value of assets to such a degree that selling them for what they're actually worth would force massive write-downs and the acknowledgement that they have negative capital. Take note of their attempted solution -- a European version of TARP -- sell the garbage to taxpayers at inflated prices in order to mask the real value: Business Insider: European Banks Frantically Trying To Dump $7 Trillion Of Crap Assets -- But No One Will Buy Them.

 

  

 

Gerald Celente's account at MF Global was among the tens of thousands of accounts looted by former U.S. senator and Goldman Sachs head, Jon Corzine: "I got a call on Monday, and they said I needed to have a margin call. And I said, what are you talking about, I’ve got a ton of money in my account. They responded, oh no you don’t, that money’s with a trustee now.” Gerald Celente: 'They took my money out of my account' MF Global's collapse should have you scrambling to assess the safety of the entities at which you maintain securities accounts. Better yet, have the transfer agent of the companies in which you own securities directly register them in your name, particularly if you're not an active trader. MF Global illustrates that when a firm has financial problems customer assets are up for grabs. The SEC and CFTC have demonstrated that they are thoroughly useless in protecting the public. They only protect the industry: WSJ: Purgatory for MF Global Customers

 

"Certainly going with a Morgan Stanley, Merrill Lynch or a Goldman Sachs is a far better alternative than going with a firm you've never heard of."  Under the theory that the firms cited are too big to fail, perhaps so. However the securities attorney dispensing this advice should note that all these firms have their own trading operations, as did MF Global and Lehman Brothers. More prudent advice might be to avoid any firm that has a proprietary trading or mortgage banking unit unless you're convinced it enjoys TBTF status. Be reminded though that quite a few clients presumed Lehman Brothers to be TBTF: NYTimes: In Commodities World, Safe and Secure Sometimes Isn’t

 

You will recognize Mr. Gensler as the same Goldman Sachs alumnus who is protecting fellow bankers in a 4 year CFTC investigation of silver price manipulation that he refuses to end: WSJ: Mr. Corzine and His Regulators  

"Gary Gensler, chairman of the Commodity Futures Trading Commission (CFTC), has a lot of explaining to do...if they do nothing else CFTC regulators have to make sure that nobody is digging into the customer cookie jar...In previous beltway shifts [Messrs. Corzine and Gensler] had helped to write the 2002 Sarbanes-Oxley law that was also supposed to help protect investors....Mr. Gensler for his part, has a response to the cronyism charge. Since the firm went bankrupt he has announced that he will recuse himself from issues affecting MF Global., Now?"

 

A single accusation of rape made by a hotel maid against Dominique Strauss-Kahn resulted in a flamboyant arrest on an airliner, a handcuffed perp-walk and outright media frenzy. Jon Corzine, a former Goldman Sachs head, politician and thief (redundant) raped the accounts of tens of thousands of his customers to the tune of -- at last estimate -- $1.2 billion.  Why was Bernard Madoff's theft any more egregious? Why isn't the media hounding this guy?  They never seem to miss a Lindsay Lohan court appearance. Bloomberg: MF’s Missing Money Makes You Wonder About Goldman: Jonathan Weil

 

 

Old habits die hard...Goldman Sachs is the largest insider trading operation in the history of financial markets. His tenure as U.S. Treasury Secretary upon retiring from that firm did not however preclude Henry Paulson's continued participation in the sport: Bloomberg: How Paulson Gave Hedge Funds Advance Word

 

 

 

The powerful are no longer being sent to prison for their crimes -- the rule of law has broken down. We have become a nation of men, not laws. Former bank regulator William Black: Banking System Rotten to the Core

"In the Savings and Loans crisis, which was 1/70^th the size of this crisis, our agency made over 10,000 criminal referrals and that resulted in the conviction on felony grounds of over 1,000 elites in what were designated as major cases...In this crisis, the same agency that I worked with that made over 10,000 criminal referrals in a tinier crisis made zero criminal referrals."

 

 

His is a voice in the wilderness but libertarian Nigel Farage is a rare example of courage in a politician. He pulls no punches and speaks the blunt truth to his constituents, never pandering or playing to the lowest common denominator: Nigel Farage: "We are now living in a German dominated Europe."

  

  

  

Return free risk...This is rich. Here we have two competing ETF promoters debating which of their products is less crappy. Wall Street markets these fractional reserve frauds as 'convenient' vehicles through which to invest in a particular asset or sector, the only manifestation of which is the ease with which fees and stock-lending profits are conveniently extracted from the pockets of investors, who bear unnecessary risks. In the tradition of other such innovative Wall Street schemes ostensibly intended to make investing more convenient (think collateralized mortgage obligations) ETF's are vehicles for Wall Street abuse. Why any investor would own one is beyond me: Bloomberg: BlackRock’s Fink Attacks Societe Generale in Row Over ETF Risks

If you buy a Lyxor product, you’re an unsecured creditor of SocGen,” Fink, who heads the world’s largest asset manager, said at a conference held in New York by Bank of America Corp.’s Merrill Lynch unit. Providers of synthetic ETFs should “tell the investor what they actually are. You’re getting a swap. You’re counterparty to the issuer.”

  

Physical ETFs “expose their holders to undisclosed levels of counterparty risk to typically undisclosed counterparties,” Nizam Hamid, deputy head of Lyxor ETFs, said in an e-mailed response to Fink’s comments. “The unregulated use of securities lending has resulted in meaningful losses in the past.”

 

  

Lexapro Alert... The following is quite instructive. There are 736 members of the European Parliament (MEP's) from 27 European Union countries. Each MEP receives the equivalent of roughly $230,000 in annual compensation, some of it tax exempt. This expose' comes not from the BBC or a mainstream media outlet (the media sources least likely to confront those in power) but from an alternative Czech media site. Here MEP's are shown running like rats when cameras catch them showing up to collect their daily "allowances" and then leaving without doing any work. If you think that there is something particularly unusual about the ethics or character of this group, think again. There are after all 27 different countries represented in this legislative body. This is government in action. The circumstances of their corruption may vary, but politicians are the same everywhere including in the United States, particularly the ones that come from investment banks. MEP's caught on camera lining their pockets

 

 

  

About that Arab Spring (be careful what you wish for)...A secular dictatorship (supported by the U.S.) was overthrown by revolutionaries (supported by the U.S.) and is being replaced by a democratically elected religious orthodoxy in which reactionary Islamic puritans will wield large influence.  Lashings and stoning will now be officially condoned and women will be treated as per the will of the majority.  The people have spoken...Long live democracy!...Ladies, cover yourselves:

"But a big surprise was the strong showing of ultraconservative Islamists, called Salafis, many of whom see most popular entertainment as sinful and reject women’s participation in voting or public life." 

 

NYTimes: Islamists Claim Egypt’s Mandate in Early Voting

 

 

The trend...

  

* Russia Officially Adds 19.5 Tonnes of Gold Reserves in October Alone

  

* Reuters: S.Korea buys more gold in Nov in cbank gold spree  The central bank bought 15 metric tons in November alone.

 

* This is quite something. Zimbabwe had the worst hyper-inflation in recent world history. In 2009, in order to end the country's monetary anarchy it abandoned its own currency in favor of the U.S. dollar.  The head of the country's central bank who was a principal player in the utter destruction of the Zimbabwe dollar is today expressing reservations about his country's link to the U.S. dollar, suggesting that the Chinese yuan may be a better choice. A reforming banana republic is pontificating about the future of the U.S. dollar:  "At the moment the US dollar is going down the tube owing to the Euro-zone debt crisis and as a country, we are also going down the tube because we do not have control of that currency." Zimbabwe may move off dollar to yuan

  

* Bloomberg: Gold shipment arrives in Venezuela as Chavez begins to remove reserves from European, US banks  Nelson Merentes, the president of Venezuela's central bank describes gold's attributes and function quite differently than does the Chairman of the U.S. Federal Reserve, Ben Bernanke, who insisted in congressional testimony that gold is not money....11/26 UPI -- "Our gold is being stored in the vaults...It has historic value. It has symbolic value [a]nd it has financial value...It's a guarantee...If there's some problem in the international markets, here it's going to be safe... The country's finances will be backed by autonomous wealth, so we are not subject to pressure from anyone."  Such is the state of affairs that a Marxist government is more forthright than the United States in articulating the truth about the oldest and purest international currency.

 

 

I have three excellent interviews to recommend, the first being this BBC interview with Kyle Bass, wherein an old chestnut is revived; 'Capitalism without bankruptcy is like Christianity without hell.'

 

Chris Martenson's made this presentation at the Madrid gold and silver conference, He discussed the human tendency to extrapolate data in a myopic manner, resulting in the failure to recognize major changes to historical patterns. Martenson primarily discusses the sea change that is about to hit the world from the shift in the dynamics of oil discovery, although as you will learn later in the broadcast, he has 75 percent of his personal assets invested in gold and silver.

 

Steve Keen is an independent thinking economics professor very much worth paying attention to. His innovative thinking may strike some as radical. He was interviewed by the BBC  "[The protesters] should be occupying the economics departments of universities...You don't get into as disastrous as situation as we are in now without extremely bad thinking."

 

Gold and silver... 

Does this look remotely like a bubble to you?

  

 

 

Uh-oh... "We expect gold prices to continue to climb in 2011 given the current low level of US real interest rates."

Goldman Sachs/CommodityWatch 11/14/11

 

 

As you endure the air pockets, refer to this chart for a perspective of what previous turbulence over a decade has meant to gold's long term trend ...

 

  

.

John Embry offers his analysis of the price action the last few months. As you would expect, spot on: Collapse of gold and silver points to skullduggery

  

I have little to add to John's piece.  Predicting how things will play out is as much about human nature and examining history as it is about analyzing current affairs. As complicated as the problems may be, the end-game is really not so obscure. Politicians and central bankers are motivated by self interest. Figure out what they believe is best for them, and rely less on media analysis and daily market price action to guide you -- you'll be thrown off course, particularly in the face of manipulated markets and banal financial pundit commentary.  Your nasal instincts are far more valuable.   

  

We are being led by political and banking sociopaths who have no interest in ending a system that continues to benefit them.  The dizzying parade of collapses, government insolvencies, bailouts, and scandals can easily numb you, but pay attention.  These scandals never occur in isolation.  There is too much complacency over the MF Global collapse. $billions in customer funds were looted from a major clearing firm that has collapsed (an unprecedented event in itself) and exchanges are refusing to cover the victims. The firm was run by a man who is a former U.S. senator, former state governor, former head of the most powerful U.S. bank and the largest Wall Street fundraiser for the President of the United States. If there was ever a moment to recognize that there is a rot far deeper than you might have imagined then this was it.  

 

Be careful where you keep your assets. Take no comfort from legal restrictions and prospectuses which recite investor safeguards. As the MF Global collapse establishes, law serves no purpose if there is no enforcement.   A run on Europe will continue despite the Fed led rescue this week, which merely bought a few days.  Now what?  The banks and markets require much more. There will be massive printing of currency throughout the world.  There is stealth but unmistakable anxiety as well about U.S. financial institutions. Geopolitical risk continues to be a wild-card. Extricate yourself from the banking system as much as possible by converting paper assets to physical gold and silver and taking possession of the metal. 

 

All the best,

 

Jeff

Phony deals and 'the tradition' - 8/4/11

 

"...[T]he whole world to me is on the verge of a final scramble to lock up hard assets as part of a flight out of paper money...Mark my words, if you don’t own gold you will rue the day you decided not to buy it.” -  James Dines 7/8/11

 

Dear All,

If after this most recent display of U.S. political/fiscal stewardship, S&P and Moody's fail to downgrade U.S. debt then Dagong will become the only credible international credit rating agency: Xinhuanet: Chinese agency downgrades US credit rating

The debt-ceiling budget plan is merely a back-ended placebo scheme of phased-in pretend spending reductions against considerably larger spending increases.  While the debt ceiling is being raised by $2.4 trillion, less than $19 billion in spending cuts (under 0.8% of the debt ceiling increase) will take effect prior to the November 2012 presidential election. That's really all you need to know as the remainder of the plan is entirely bullshit. There are no net spending cuts or debt reductions under the plan. $2.4 trillion will be spent today while $917 billion in spending "reductions" will be phased in over a decade against an additional $10 trillion of new spending (and by which point such "cuts" will further prove utterly meaningless relative to future debt levels and multiple ceiling increases that will surely come) while the other $1.5 trillion of reductions are only "perhaps/maybe."   Notwithstanding the gyrations of the past few months, under this plan net spending will continue upward at an accelerating rate.  The manner in which this country has thus-far accumulated $14.3 trillion in debt (exclusive of entitlements) can be gleaned from precisely the perverse process by which this latest "debt deal" -- under which the U.S. has raised the ceiling by another $2.4 trillion -- was hammered out.  And so the story goes. 

Debasement is the covert manner by which modern nations default on their debt.  What has been most striking in observing the Republicrat debt ceiling/default posturing is the plethora of observers who have mistaken its relevance. The process of U.S. debt default has actually been well underway for some time and is accelerating.  The arm-wrestling has been a charade diverting the country's attention away from its thoroughly irresolvable structural financial position, as debasement of its currency persists. Here is an updated chart of the U.S. adjusted monetary base. Note that QE2, despite having officially ended in June, did not stop the base's expansion. Following a brief respite at that time it has set another record: 

It has been curious to read commentary that the U.S. has never defaulted on its debt and that such an event --  had it occurred -- would have been unprecedented.  The following are prior overt occurrences of default by the U.S. on its debt obligations.  Ron Paul is the only public official to have recently taken note of this:

January 30, 1934:    Through passage of The Gold Reserve Act, the U.S. reneges on its promise to pay holders of U.S. gold certificates the gold they are entitled to pursuant to the certificate legend: "This certifies that there have been deposited in the Treasury of the United States of America (number) Dollar(s) in gold coin payable to the bearer on demand"   The Act requires that all gold certificates be surrendered.  Additionally, The Gold Reserve Act outlaws the private possession of gold, forcing individuals to sell their gold to the Treasury at the "official price" of $20.67 per ounce.  The Treasury subsequently "revalues" gold to $35 per ounce.

June 24, 1968: The U.S. reneges on its promise to pay holders of U.S. silver certificates the silver they are entitled to pursuant to the certificate legend:  "This certifies that there is on deposit in the Treasury of the United States of America (number) dollar(s) in silver payable to the bearer on demand."

August 15, 1971:   President Nixon closes the "gold window" by which foreign governments are permitted to exchange their dollars for gold.  Nixon blames "international speculators" for the necessity to do so.   

 

While the quantitative unemployment statistic is widely reported there is far less attention paid to the qualitative story behind the nation's chronic unemployment misery:

 

Charts: Courtesy Zerohedge

 

 

ISDA ("The International Swaps and Derivatives Association") is owned by the major international banks and writers of OTC derivatives.  Here you see the OTC derivative fraud at work. ISDA refuses to declare the Greek bond default a "default."  To do so would trigger massive credit default swap payment obligations by U.S banks and systemic threat.  Never mind that under the arrangement, holders of Greek debt are as a practical matter given no choice but to "voluntarily" accept  an exchange for new securities worth far less than the original debt -- a default is only a default when the ISDA says so.  Kafka would blush. MSNBC: Bank plan for Greece won't cause CDS payout: ISDA

 

The folks who conjure up the entirely fictional Consumer Price Index at The Bureau of Labor Statistics are a creative bunch.  As Grant's Interest Rate Observer points out in its July 15th issue, The Wall Street Journal, citing data from Reis Inc. reported last month that residential rents increased 2.4% in the second quarter.  The BLS meanwhile reported that the "Owner's Equivalent Rent" component of CPI (the price an owner's house would fetch in the rental market) rose by only 0.9%. 

 

Noteworthy coming from a Treasury Secretary but nontheless, an understatement: "[I]t's a very tough economy....it's going to feel very hard, harder than anything they've experienced in their lifetime now, for a long time to come."

 

Traveling in China last month, the national celebration commemorating the 90th anniversary of the Chinese Communist Party's founding was observable in the major cities, particularly in Beijing where a celebratory film entitled 'The Founding of a Party', plays continually in Tiananmen Square.  I found this piece of reporting on the commemoration by Der Spiegel quite interesting:  'The high point of the Communist Party's culture festival is an elaborately produced movie called "The Founding of a Party," which was financed in large part by General Motors.'

 

This is what the United States has to show for its support for the replacement of a secular dictatorship by means of "the democratic process."  This is not to suggest that its prior alliance with the ousted Mubarak regime was necessarily wholesome -- only that U.S. foreign policy is so dopey that one has to wonder if it is goal oriented or simply impromptu and reactionary whenever a crisis develops.  The U.S. abandoned an ally in which it had invested hundreds of $billions over successive decades and which, notwithstanding the always attendant regime corruption, ran a reasonably functioning secular dictatorship providing relatively decent infrastructure and a balance to the radicalized Islamic regimes in that part of the world. The winner in its removal is Islamic fundamentalism.   NYTimes: Islamists Flood Square in Cairo in Show of Strength

One therefore has to wonder what precisely the 'War on Terror" is.  While TSA employees screen barefoot air travelers -- confiscating shampoo and toothpaste, the White House and State Department support the overthrow of regimes which result in the release of imprisoned Islamic extremists. One also must wonder what our goals are in Iraq, Afghanistan, and Libya when under the best of circumstances, the type of regimes that might one day appear in these countries are precisely the type whose fall the U.S. supported in Egypt.  American style democracy is not in the cards in that part of the world (Arguably, It is barely functioning in the U.S.).  Kids are losing lives in wars that make no sense and many are there only because they can't find jobs at home.

 

The trend...

FT: China and Iran plan oil barter system  The new Iranian Oil Bourse will circumvent the U.S. dollar as a medium of exchange.

hindustanTimes: Inflation to remain elevated  This only adds to India's already robust gold appetite.

Turkey Bank Cancels Dollar Buying

Korean central bank makes first gold purchase in 13 years

Bloomberg: Yu Yongding Says China Needs to Hold Less Treasuries  “U.S. bonds are not safe, but people think they are safe. That is a mirage"

 

Misc....Forbes: New NASA Data Blow Gaping Hole In Global Warming Alarm-ism

 

Gold and silver...

When a central banker, no less the Chairman of the U.S. Federal Reserve pronounces that gold is not money, it is attention worthy. NYSun: Bernanke - "Gold Isn't Money"   Not that demonetization of the barbarous relic is ever surprising from these quarters -- gold is after all the natural enemy of a central bank. This particular banker however chose to express his disdain for the single monetary instrument to which he is ultimately accountable and which cannot be maneuvered (other than in short-term operations) in the most desperate manner -- by denying that it is money in the first place. Gold is of course the only real money in that it is not simultaneously someone's liability, and it has been so for at least 5,000 years.  The Chairman though, testifying before the House, was pained to state under questioning that he prefers to think of gold not as money but as 'a tradition.'  OK, Mr. Chairman, we'll allow your semantic indulgance and simply point out that whereas no paper currency in history has survived more than 200 years, the very same fistful of gold that was used to trade for goods and services three millennium before Jesus' time on earth still serves in that tradition today.

Reporting that it holds  €83,939 million of “Gold and Gold Receivables," the Bundesbank lumps together paper and gold into one line item -- typical of western central bank obfuscation of their gold holdings. James Turk: Germany’s gold: It’s time for an accurate accounting

The goldmap index and the GOI are at 20.2 and 3.37 respectively. The stocks remain anemic relative to the metals. This relationship will revert to the mean.  The timing will prove of little consequence -- the returns will be that large.  The relationship is so out of whack that the Index could theoretically double without any upward move in the price of either silver or gold -- yet the GOI would be mid-range of the historic norm.

Look for volatility and ever larger daily dollar moves in gold and silver as they make their way higher.  The world is increasingly losing confidence in currencies and debt. With the focus on the U.S. debt ceiling, few have noticed that Europe is deteriorating and depositors there are itchy. 

The financial world's a mess. Fail to own hard assets at your own risk.

 

My best,

 

Jeff

 

 

 

Farewell America - 9/11/09

Dear All,

One of the most often repeated and incorrect statements by the "experts" on financial television and those whose comments appear in print is that current dollar weakness is the result of the unwinding of the "safety trade" whereby investors are now willing to take on greater risk and sell the safe haven that the dollar represents. How utterly ridiculous. Financial market participants are fleeing the dollar precisely because it is being increasingly seen as unsafe. These "experts" often hold titles such as "Chief Investment Strategist"  or "Equity Strategist" of this firm or that. The sand is shifting beneath their feet but they are oblivious and regurgitate the same drivel.  Wall Street is full of lightweights from top schools with nice suits.

Cheng Siwei, a former vice chairman of the Communist Party's Standing Committee was in Italy this past weekend and as reported by Ambrose Evans-Pritchard, had this to say about China, gold and U.S. monetary policy. For those who care to understand, the interpretation is this. There is a floor underneath the gold price:

"...Gold is definitely an alternative, but when we buy, the price goes up. We have to do it carefully so as not stimulate the market...If [the Fed] keep[s] printing money to buy bonds it will lead to inflation, and after a year or two the dollar will fall hard. Most of our foreign reserves are in US bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen, and other currencies."

Wegelin & Co is Switzerland's oldest private bank. Barely reported is this significant event. The bank has announced in an erudite commentary entitled "Farewell America" that it is advising clients to pull entirely out of United States assets. You may wish to read this first rate analysis of the disturbing trends that drove it's decision.  Click here: http://www.wegelin.ch/download/medien/presse/kom_265en.pdf

The point here is not whether or not it actually happens, but that it is even being discussed at all.

Click here: UN wants new global currency to replace dollar - Telegraph 

The U.S. continues to follow the Japanese "Denial Model" of financial crisis management. This model will work as successfully here as it has in Japan for the past 20 years. United States banks continue to absurdly overstate their assets which, with the blessing of the cowards comprising the Financial Accounting Standards Board, they refuse to write down. Accounting standards in America have become trivialized and would be outright comical were it not so terribly a serious matter. As an illustration of the degree of lying that has become ubiquitous, on August 15th, when BB&T acquired  failed US bank Colonial Bank, it immediately wrote down Colonial Bank’s real estate loans and real estate construction loans 37% by 67% respectively. Had these loan valuations actually changed to this degree from one day to the next?  Obviously not. The writedowns were taken simply as a result of their having been deferred (i.e. lied about) by Colonial all the way until it's collapse at which point a new owner ultimately wiped the slate clean. I again point out that Colonial's lies were entirely in conformance with FASB guidelines.  Click here: Bankers Want G-20 to Rein in FASB, IASB

Far from being over, the financial crisis is worsening with the consequences merely being shifted into currency debasement. The dollar will be the ultimate reservoir of all the bailouts, waste, free lunches, profligacy and printing. It is going to be seriously devalued. Superficial observation may focus on improvement in "nominal" statistics, but unless you apply accurate adjustments to the effects of debasement, you will be led astray. Make no mistake, the Federal Reserve and Treasury want to lead you astray.  Because the effects are subtle and so misunderstood, it is easy for them to do. If most of Wall Street is clueless how hard is it to pull the wool over the eyes of the average American? Only when inflation runs rampant will some begin to understand.

What three generations of Americans have taken for granted -- the sanctity and pre-eminence of the U.S. dollar, is ending.  As much as possible, you need to opt out of the financial system for the next several years.  Physical gold (and silver) is the way to do it. It's popularity ebbs and flows but in times of waning confidence in paper assets gold has always been the go-to investment. When most catch on there will be a panic into gold. The right silver and gold stocks will produce extraordinary profits. 

Gold has not worked its way higher since 2000 in a straight line. There have been corrections and much volatility along the way. But as of today it has since quadrupled in price and many precious metal stocks have done considerably better than that. For those who saw the big picture, refused to trade and remained calm and in position it has paid off handsomely. The same will hold true for the next few years.

The "coiled spring" that I made reference to a few weeks ago is uncoiling. Risking being caught out of position by trying to catch bottoms and tops in this generational precious metals bull market is foolish. Doing nothing and sitting tight for extended periods of time is often the most profitable, albeit difficult endeavors in investing. If you haven't yet done so stake your position and then, for the next several years...do nothing.

My best,

Jeff