Tuesday, May 31, 2011

U.S. Has Binged. Soon It’ll Be Time to Pay the Tab.

It is indeed strange that experts from academia (and economic think tanks) are now crying wolf about exploding sovereign debt crises--years after the blogosphere has been declaring the same "unsustainable" scenarios.  Thanks to Kitty for finding this article from the conservative, right-wing New York Times .


Wednesday, May 25, 2011

Presenting The Fed's Slogan: "Making It Harder To Feed Your Family For 98 Years And Counting"


SocGen On Why Japan's Plunging Pension Reserves May "Cause Havoc" To The Japanese Bond Market

I've always said the Japanese bond market--and hence, economy, was in deep feces due to their aging demographics and huge indebtedness.  And I've always said the US could learn from Japan's demise, as we encounter the same head winds.  The earthquakes, tsunamis, and nuclear fallouts--as tragic as they were--are mere sideshows and will only accelerate the economic downdrafts, as Japan incurs more debt in the reconstruction effort.  The implications are far and wide, as they become net sellers, instead of buyers, of US Treasuries.

Just as the Japanese government has force fed their citizens into Japanese government bonds, nearly nil in returns, it would not surprise me to see the US government mandate retirement funds into US Treasuries--again earning negative returns relative to a higher cost of living.  And they'll declare it our patriotic duty to do so.  If you're a 401K, IRA, or pension fund holder, I'd be nervous (I am).


OECD cuts Japan GDP forecast again, urges easy monetary policy


Ummm, the Japanese don't need urging on easy monetary policy.  They've been doing it for 21 years--and counting.  Until they stop kicking the monetary can down the road (which won't happen until they encounter a financial cul-de-sac), tangible assets will continue to be bullish.

The European Gold Confiscation Scheme Unfolds: European Parliament Approves Use Of Gold As Collateral


Not only does this further legitimize gold as an investment asset, but it also clears the path for sovereign gold reserves from Greece, Ireland, Portugal, Spain, and Italy to be ultimately plundered.

Things Are Spinning Out of Control


The Reason Why The CFTC is Doing Nothing

This is an old topic on this blog, but the price manipulation of the precious metals at the COMEX is starting to gain exposure.


Tuesday, May 24, 2011

Gold is Not an Investment By CARL RICHARDS

In order to maintain a semblance of balance, I have to include comments from idiots also.  Carl Richards fits into that catalog, a bitter one wrong-way Corrigan who has completely missed the train--and will continue to miss it.  Thanks to Kitty for pointing out that the comments from readers are more enlightening than from the author himself. 


Secret Service interrogates 13-year-old over Facebook post

Thanks to Kitty for finding this news item.  The take-away message?  Be careful what you post on Facebook--and what you blog about.  Your message may be "mistaken" for something threatening--even if you're still in middle school.  Your tax dollars hard at work... 


Inquiry Into Monopolistic Trading Practices By JPMorgan On LME Launched, Sending PMs Higher


Who’s afraid of Comex gold delivery?


The 'Baseball' Economy: The Fed Strikes Out


Fed's Duke: "America's Poor Have To Make A Choice Between Paying Their Gas And Their Mortgage"


US Worse Off Financially Than Euro Nations


Belarus Devalues Ruble by 56%!


Victor Sperandeo talks about precious metals and the world economy with James Turk


Monday, May 23, 2011

U.S. Prosecutors Faulted on Failing to Catch Credit-Crunch ‘Bandits’


Paul Craig Roberts, "There Is Probably More Democracy In China Than There Is In The West"

"The west prides itself that it is the standard for the world, that it is a democracy. But nowehere do you see democratic outcomes: not in Greece, not in Ireland, not in the UK, not here, the outcomes are always to punish the innocent and reward the guilty. And that's what the Greeks are in the streets, protesting. We see this all over the west. There is no democracy, there are oligarchies, some of these smaller European countries are not even run by their own governments, they are run by Wall Street... There is probably more democracy in China than there is in the west. Revolution is the only answer... We are confronted with a curious situation. Throughout the west we think we have democracy, we hold ourselves up high, we demonize China, we talk about the mafia state of Russia, we talk about the Arabs and so on, but where is the democracy here?"

Bloomberg TV's Matt Miller talks to David Stockman

"That kind of crisis would be a vicious sell-off in the global bond market. That could come sooner than people think, because the Fed is getting out of the market with QE2 ending.”

"For the last six months, the Fed has bought nearly 100% of this $6 billion a day that's been issued. Once they are out of the market, where is the new bid, where is the new demand going to come from? The Chinese are getting out of the market because finally they are having to deal with the rip-roaring inflation they have had. The people's printing press of China will not be buying as much U.S. debt because of its own internal problems.”

"When we get to real investors, what are some of the real investors saying today? PIMCO is short the bond, they're selling, they're not buying.

"When we get into a two-way market when real investors began to look at real risk, begin to look at the gong show in Washington and the magnitude of the gap that we are borrowing, I think we're going to get a re-rating of sovereign risk. We're going to get a huge dislocation in the global bond market, and then maybe the wake-up call will finally come."
"The real problem is the de facto policy of both parties is default. When the Republicans say no tax increases, they're saying we want the U.S. government to default. Because there isn't enough political will in this country to solve the problem even halfway on spending cuts. When the Democrats say you can't touch Social Security, when you have Obama sponsoring a war budget for defense that is even bigger than Bush, then I say the policy of the White House is default as well...That is the question that really needs to be understood better and appraised by the bond market. Both parties are advocating default even as they point the finger at each other."

Sunday, May 22, 2011

Friday, May 20, 2011


With many speculative longs liquidated out of their positions, look for silver to build a base here, and consolidate within a trading range, before building up energy for another rally by late summer.  Seasonally, with Diwali in September, Ramadan, and the Holiday seasons peaking in Q4, look for mid-summer doldrums in the precious metals complex. 


See disclaimers in the side bar.

Disclosure:  long precious metals equities.

Spain's Icelandic Revolt; Protests Spread to Italy

As I said, protests would reach the shores of Spain and Italy.  France, you are next.  What do all these western countries have in common?  Uncontrollable debt.  The UK, Japan and the US are waiting in the wings.


Gold: inflation and deflation.

The Euro crashes due to intensified fears of a Greek default, and rising Spanish bond yields.  The USDollar rises as a result.  Which means gold should plummet, right?  Wrong, gold surged in a flight to safety today.

Many investors correctly buy gold as an inflation hedge.  What they don't realize is that gold performs even better in a deflationary environment, as debt default risk rises.  When the credibility of sovereign debt and paper currencies erode, precious metals remain a safe haven.

Investors Pick Physical Gold Over ETFs In Q1; Comex Registered Silver Just Hit A Fresh All Time Low


China Becomes World’s Larest Gold Buyer - Buys 93.5 Tonnes Of Gold Coins / Bars in Q1 - Gold Ownership Rising From Miniscule Levels


Goldman Warns That Spanish Bonds, EUR Poised For Technical Breakdown

I've said for a while Spain was on deck, despite having rotten tomatoes lobbed my way.  The shockers will be when France and Italy are on the EU chopping block.  There, I said it.


Norway Stops Aid Payments To Greece

Norway says "no mas" to another Greek bailout. 


Zimbabwe To Trade Diamonds For Gold As It Prepares To Launch Gold-Backed Currency

For those who need to be reminded, Zimbabwe is the most recent poster child for a currency collapse and hyperinflation.  In a world gone upside down, they desire to have a gold-backed currency now.  Sound monetary policy--what a concept.


Thursday, May 19, 2011



Preparing for Economic Collapse


Executive Order 11110


Executive Order 11110 was signed into law June 4, 1963 by President John F. Kennedy.  This executive order re-monetized silver, with the issuance of fully redeemable silver certificates.  In essence, President Kennedy's action would make our privately-owned Federal Reserve Bank obsolete.

President Kennedy was assassinated on November 22, 1963.

Ironically, this little-known Executive Order 11110 has never been repealed, amended, or superceded by any subsequent Executive Order--which means it is still valid.

Are You a Sheeple? Take the Sheeple Quiz and Find Out


Step Aside US: Pakistan's New "Best Friend" China, To Provide Karachi With 50 New JF-17 Fighter Jets On Expedited Basis

So wait a minute.  The US provides Pakistan billions of USDollars in foreign aid, and Pakistan turns around and buys 50 jet fighters from China?  That's sound foreign policy, I tell ya...


First Egypt...now Spain?


WGC: China's Annual Gold Demand Tops 700 Metric Tons, Still Growing


Bring Out QE3: Philly Fed Plummets: Prints At 3.9 On Expectations Of

When Margaret Brennan, Bloomberg's anchor, first announced the Philly diffusion index for May, she mistakenly read it as 39, a surprisingly sharp increase from April's 18.5 number.  The actual number was 3.9, so shockingly low that she missed the decimal point.


Famous Last Words

“Gold is no longer a profitable investment,” said then economic minister Pedro Solbes in 2007 to justify the Bank of Spain's selling off more than 32 per cent of its gold reserves. At the time, gold was selling for $669 an ounce – at the close of last week, it was selling for $1,508, and rising.

The Betting Begins


State finances threaten recovery: Whitney

Default doyenne Meredith Whitney reiterates her bashing, er...downgrading of municipal bonds, and adds insolvent states to her crosshairs. 


LinkedIn share price almost doubles in market debut

LinkedIn's IPO reminds me of the go-go NASDAQ days of the late 1990's.  I should probably update my LinkedIn profile. 


Wednesday, May 18, 2011

Dominique Strauss-Kahn: IMF head 'hired prostitutes from Manhattan madam'


Munich Re Says Prostitutes Attended Reward Party

Warren Buffett's Berkshire Hathaway own 10% of Munich Re.  Just sayin'...


Titans of business, Warren Buffett and George Soros, avoid each other at HBO party


Former OMB Director David Stockman talks U.S. debt crisis

"The essential distinction is that we had a clean balance sheet then - $1 trillion of national debt. Today we have $14 trillion in national debt.  We have used up all the runway, so to speak. We have piled our national balance sheet with so much debt that the government is at the very edge of a huge solvency crisis that isn't going to be addressed unless both parties dramatically change their position, and I see no sign of it.  So we're going to have a gong show."

"We have not had a two-way bond market.  We have had a rigged market that has been dominated by not just the Fed, but all the central banks.  Today over half of the $9 trillion in publicly-held debt is in central bank vaults. I call it the 'Monetary Roach Hotel.'"

"Gang of Six" budget talks founder in Senate


Republican Tom Coburn, one of the Senate's leading fiscal conservatives, told reporters he was dropping out of the bipartisan "Gang of Six" after months of meetings.

"We can't bridge the gap between what actually needs to happen and what people will allow to happen," Coburn said.

A source familiar with the talks said Coburn had pushed for deep and immediate cuts to Medicare, the healthcare program for the elderly, which were rejected by other members of the group. Coburn's proposal was described as more dramatic than a plan that passed the Republican-controlled House of Representatives last month.

USPS warns of default on retiree benefits


This Too Shall Pass. So Will This, This, This, This, And This Too


World Bank Sees Dollar Reserve Status Ending Over Next Decade

This is not surprising: after all it is none other than World Bank president Robert Zoellick who recently predicted a return to the gold standard and an end to USD hegemony. Our advice to Bob: stay away from penthouse suites at the Sofitel.

Ireland's future depends on breaking free from bailout

Ireland’s Last Stand began less shambolically than you might expect. The IMF, which believes that lenders should pay for their stupidity before it has to reach into its pocket, presented the Irish with a plan to haircut €30 billion of unguaranteed bonds by two-thirds on average. Lenihan was overjoyed, according to a source who was there, telling the IMF team: “You are Ireland’s salvation.”
The deal was torpedoed from an unexpected direction. At a conference call with the G7 finance ministers, the haircut was vetoed by US treasury secretary Timothy Geithner who, as his payment of $13 billion from government-owned AIG to Goldman Sachs showed, believes that bankers take priority over taxpayers. The only one to speak up for the Irish was UK chancellor George Osborne, but Geithner, as always, got his way. An instructive, if painful, lesson in the extent of US soft power, and in who our friends really are.
If one connects the dots, alleged rapist IMF chief Dominique Strauss-Kahn made some major enemies due to his anti-USDollar and anti-US monetary policy stance.

DSK had Dollar, Banksers and the FED in his Crosshairs


Tuesday, May 17, 2011

Silver Price: The Least You Should Worry About


Debate of QE Termination a Head Fake; Expect Market Rallies Upon Completion of QE2


The US Debt Limit Breach Is Now A Cartoon

English subtitles:  translation not needed.


Computers Will Soon Take Orders at European McDonald’s

Here comes the inverse effect of the recent 62,000 minimum-wage hiring spree in the US by McDonald's.  Workers in Europe are about to be "outsourced", this time by a credit card swiper.


Peter Grandich on gold and silver (manipulation)

Part 1:


Part II: 


US Government Seizes Pension Funds, Invades Pakistan


Monday, May 16, 2011

Revisiting registered silver in COMEX depositories

There are approximately 32 million ounces of registered silver in COMEX warehouses.  Each futures contract controls 5,000 ounces of silver.  Which means there is enough deliverable silver for 6,400 COMEX contracts.

The open interest was 123,000 contracts as of today.  126,000 contracts traded last Friday.

Normally, most COMEX contracts are settled via cash (rumor is that cash settlement premiums are up to 80% due to the shortage of physical silver).  However, if enough longs stand for physical delivery, the shorts don't have the inventory and the COMEX would have to default.  That can't be good for an exchange.

The supply/demand dynamic is already strained, and the price of physical silver is starting to bifurcate from the manipulated spot price.  A default would send physical prices soaring above the paper prices.

A default on silver or gold has never occurred at a major exchange.  There was a default on nickel at the LME in London in 2006, at which point nickel prices spiked.  The same thing will happen to silver if there is a delivery default at the COMEX.

PIMCO is long gold

I previously blogged about how PIM(P)CO was ramping up their equities team.  I snooped around on their website for recent hires, and it looks like they have recently beefed up their equities team <click here>.

I sent this email to a group (the infamous BORG group of activist investors) last week (May 9):
When the biggest bond fund manager in the world is SHORT bonds (including Treasuries and mortgage-backed securities), he's expecting a bond collapse.  And because Bill Gross is building up his equities team (including emerging markets), he thinks the Asian growth story in stocks is alive and well.  One of their hires is a foreign exchange (forex) and derivatives trader, so he's also hedging.
It looks like PIMCO, the world's largest bond fund, is long gold after all, via their equities fund exposure:

The largest position in the fund is gold, which we think is a very good form of protection against what can go wrong. We were encouraged by the fact that a lot of the central banks, especially in Asia, are big buyers. We think that's an underlying trend that's very favorable for gold.
I also follow Rob Arnott, who runs the PIMCO's All Asset Fund.  He's a proponent of sound money as well, and typically bullish on precious metals, the ultimate hedge against debased currencies.

Hugo Salinas Price - QE in US Will Lead to Utter Destruction

With the Mexican central bank purchasing 100 tons of gold, today King World News interviewed multi-billionaire Hugo Salinas Price to get his thoughts.  When asked about the purchase Mr. Price stated, “Well I think the central bank (of Mexico) is watching what the Federal Reserve has been doing with utter amazement because we have been down that path before and it led to our ruin.  So maybe they are saying, ‘We better have a little bit of gold because what is going on with quantitive easing is really hair-raising.’  I must imagine that is the motive because they don’t think that what is being done is going to lead anywhere but where it lead us in the past, and that was to utter destruction."


The economic peril that we find ourselves confronted with, has been ninety-eight years in the making. The confluence of debt, demographics, delusion, and denial has left the country at the precipice of annihilation. There are two kinds of people in the world, those who control the money and those that are controlled by those who control the money. The last century has been marked by a methodical looting of the good (working middle class) by the bad (Federal Reserve & bankers) and supported by the ugly (Washington D.C. politicians). When historians pinpoint the year in which the Great American Empire began its downward spiral they will conclude that year to be 1913. In this dark year for the Republic, slimy politicians, at the behest of the biggest bankers in the country, created a private central bank that has since controlled the currency of the United States. This same Congress staked their claim as the most damaging group of politicians in US history by passing the personal income tax in the same year. These two acts unleashed the two headed monster of inflation and taxation on the American people.

Commodities and a stalling economy

This article aligns with my hypothesis that the price suppression of paper silver and gold (COMEX futures, LBMA, GLD and SLV ETF's) enables buyers of physical metals lower entry points.  Among the buyers of physical bullion are investors (especially in Asia), hedge funds, and central banks.  It's also conceivable that some of those buyers of physical metals are the same ones who are manipulating the prices of paper silver and gold down.


Our Peculiar State of Suspended Animation


London Trader - Massive Asian Buying of Physical Gold & Silver

“What we are seeing this morning is long gold/short silver by hedge funds who are moving on this play once again.  Many of these hedge funds are run by kids who are only out of university for three years now and don’t know what they are doing, they are literally just chasing a dot up and down a screen.  They don’t look at what is happening with inventory levels at the Comex or what’s happening with SLV where real metal is being pulled out of that ETF.

Some are beginning to believe this is a sign of weakness on the part of the bears at this point.  At these prices we are seeing serious buying out of Asia and the buying is consistent.  Whether or not we have seen the bottom as of yet, large physical buyers are now buying the dips aggressively.

The US side on the paper market at the Comex it appears that all of the specs are washed out, and the last time we had open interest at these levels was when silver was $28 or so on its way to $50.  The smart money as I said earlier appears to be dealing with this setback in prices by buying huge amounts of physical metal, continually accumulating it at this point. 

Any time we get into silver into the $33’s we get very, very big, high volume buying.  This buying we are seeing out of Asia is thought to be continued diversification out of dollars, so the physical gold and silver which is being taken out of the market in that case is not expected to return. 

This physical buying is part of an increase in hard asset reserves for China and other Asian countries who are underweight precious metals and it is expected to continue for quite some time, most likely for many years.  Right now, each time we see gold under $1,500 the demand out of Asia is massive, they are huge physical buyers.

Some would say the paper market is diverging from the physical market and that is probably accurate at this time.

Cartoon Recreation Of The DSK Fiasco

Can anybody translate?  Argh...no need, I think we get it.


Too Big to Jail

Thanks to an unnamed good friend (for his/her own protection) who found this snippet on CNN.

At least Goldman Sachs shill Megan McArdle admits she didn't read the report, ergo she is eminently qualified to comment on it.  Not.  "These cases are incredibly difficult to bring and win..." is a legitimate reason to not prosecute them?  What a friggen' joke of a print journalist.  So Megan, how much did you get paid for your incredibly ignorant, er...insightful comments?  Obviously, none of it was used for a make-over.

As for Matt Taibbi's landmark exposes on The Vampire Squid, I would be increasing his life insurance coverage if I were him.  Let's hope he doesn't end up in some mysterious "accident".  He's one of the truly courageous investigative journalists left.

Treasury Confirms Debt Ceiling To Be Breached Today; Will Tap Pension Funds

It's official: the US credit card has officially been maxed out, just as we predicted on Wednesday, and througout Q1 and Q2. The United States is expected to reach the legal limit on its debt later on Monday and will start dipping into federal retirement funds to give the country more room to borrow, a Treasury official said.

Sunday, May 15, 2011

RBZ urges gold-backed Zim dollar

The world has truly gone bizarro when Zimbabwe, the most recent country to have its domestic currency collapse, resulting in catastrophic hyperinflation, suggests a gold-backed currency since the USDollar is about to experience its own currency collapse.


THE central bank says the country must consider adopting a gold-backed Zimbabwean dollar warning that the US greenback’s days as the world’s reserve currency are numbered.
Government ditched the Zimbabwe dollar in 2009 after it had been rendered worthless by record inflation levels and adopted multiple foreign currencies with the US dollar, the South African Rand and the Botswana being the most widely used.
Gono said the inflationary effects of United States’ deficit financing of its budget was likely to impact other countries to leading to a resistance of the green back as a base currency.

“The events of the 2008 Global Financial Crisis demand a new approach to self reliance and a stable mineral-backed currency and to me, Gold has proven over the years that it is a stable and most desired precious metal,” Gono said.
And for proof of Zimbabwe's recent hyperinflation, here is an image of its currency:  a 100 trillion dollar bill <click here>.

A Renewed Crackdown on Redlining

Housing Bust 2.0 here we come.  Thanks to Dick again for finding this gem. 


Saturday, May 14, 2011

Update: DSK Now In Police Custody; IMF Head Dragged Off A Plane, Arrested Following Hotel Maid Allegations Of Forced Head


05.14.11 Geithner Letter To Bennet

It looks like the US needs a credit card limit hike.  This is the same Treasury Secretary who said the US government would never default.  Now he says a US government default would be catastrophic. 


Silver Action a Reminder of the Risks of the Paper Market


Silver’s New Trading Range


What If the U.S. Treasury Defaults?


'A financial crisis is surely going to happen as big or bigger than the one we had in 2008 if we continue to behave the way we're behaving," says Stanley Druckenmiller, the legendary investor and onetime fund manager for George Soros. Is this another warning from Wall Street that Congress must immediately raise the federal debt limit to prevent the end of civilization?
No—Mr. Druckenmiller has heard enough of such "clamor and hyperbole." The grave danger he sees is that politicians might give the government authority to borrow beyond the current limit of $14.3 trillion without any conditions to control spending.
One of the world's most successful money managers, the lanky, sandy-haired Mr. Druckenmiller is so concerned about the government's ability to pay for its future obligations that he's willing to accept a temporary delay in the interest payments he's owed on his U.S. Treasury bonds—if the result is a Washington deal to restrain runaway entitlement costs.
"I think technical default would be horrible," he says from the 24th floor of his midtown Manhattan office, "but I don't think it's going to be the end of the world. It's not going to be catastrophic. What's going to be catastrophic is if we don't solve the real problem," meaning Washington's spending addiction.
Widely credited with orchestrating Mr. Soros's successful shorting of the British pound in 1992, Mr. Druckenmiller also built his own fund, Duquesne Capital, into a $12 billion titan. He announced plans last year to close the fund and now reports, "I have no clients." He is still managing his own money, which Forbes magazine recently estimated at $2.5 billion.
Whatever the correct figure is, it would be significantly larger if Mr. Druckenmiller hadn't given away so much of his wealth. The online magazine Slate reported last year that Mr. Druckenmiller and his wife gave away more money in 2009—over $700 million—than anyone else in the country. Over the last two decades, he has been the largest benefactor of the Harlem Children's Zone, a community service organization featured in the movie, "Waiting for 'Superman.'"
Mary Kissel of the editorial board previews congressional action on the debt limit.
It's hard to think of someone with more expertise in the currency and government-debt markets, but Mr. Druckenmiller's view on the debt limit bumps up against virtually the entire Wall Street-Washington financial establishment. A recent note on behalf of giant banks on the Treasury Borrowing Advisory Committee warned of a "severe and long-lasting impact" if the debt limit is not raised immediately. The letter compared the resulting chaos to the failure of Fannie Mae and Freddie Mac and warned of a run on money-market funds. This week more than 60 trade associations, representing virtually all of American big business, forecast "a massive spike in borrowing costs."
On Thursday Federal Reserve Chairman Ben Bernanke raised the specter of a market crisis similar to the one that followed the 2008 bankruptcy of Lehman Brothers. As usual, the most aggressive predictor of doom in the absence of increased government spending has been Treasury Secretary Timothy Geithner. In a May 2 letter to House Speaker John Boehner, Mr. Geithner warned of "a catastrophic economic impact" and said, "Default would cause a financial crisis potentially more severe than the crisis from which we are only now starting to recover."
In a Monday speech at the New York Economic Club, Mr. Boehner fired back, saying that "It's true that allowing America to default would be irresponsible. But it would be more irresponsible to raise the debt ceiling without simultaneously taking dramatic steps to reduce spending and reform the budget process."
So the moment couldn't be better to consult Mr. Druckenmiller, who almost never gives interviews but is willing to speak up now because he thinks that fears about using the debt-limit as a bargaining chip for spending cuts are overblown—and misunderstand the bond market. "The Treasury borrowing committee letter speaks about catastrophic financial crises, comparing it to Fannie and Freddie. That's not what we're talking about here," he says.
He contemplates the possibilities for bond investors if a drawn-out negotiation in Washington creates a short-term problem in servicing the debt but ultimately reduces spending:
"Here are your two options: piece of paper number one—let's just call it a 10-year Treasury. So I own this piece of paper. I get an income stream obviously over 10 years . . . and one of my interest payments is going to be delayed, I don't know, six days, eight days, 15 days, but I know I'm going to get it. There's not a doubt in my mind that it's not going to pay, but it's going to be delayed. But in exchange for that, let's suppose I know I'm going to get massive cuts in entitlements and the government is going to get their house in order so my payments seven, eight, nine, 10 years out are much more assured," he says.
Then there's "piece of paper number two," he says, under a scenario in which the debt limit is quickly raised to avoid any possible disruption in payments. "I don't have to wait six, eight, or 10 days for one of my many payments over 10 years. I get it on time. But we're going to continue to pile up trillions of dollars of debt and I may have a Greek situation on my hands in six or seven years. Now as an owner, which piece of paper do I want to own? To me it's a no-brainer. It's piece of paper number one."
Mr. Druckenmiller says that markets know the difference between a default in which a country will not repay its debts and a technical default, in which investors may have to wait a short period for a particular interest payment. Under the second scenario, he doubts that investors such as the Chinese government would sell their Treasury debt and take losses on the way out—"because I'll guarantee you people like me will buy it immediately."
Now suppose, Mr. Druckenmiller adds, that he's wrong. If the market implodes on day two of the technical default, Mr. Obama and Congress would be motivated to finally come to agreement. But he doesn't expect such market chaos. "My guess is that the bond market would rally as long as it believed the ultimate outcome was going to be genuine entitlement reform—that we wouldn't even have to find out about a meltdown because it wouldn't happen. And I have some history on my side here."
And the scars to prove it. In 1995, Bill Clinton was threatening to veto budget cuts advanced by the Republican House. In return, congressional leaders threatened not to increase the federal debt ceiling. Back then, before Americans knew what a real government spending crisis was, the debt stood at less than $5 trillion. (It has nearly tripled since then and is poised to race some $10 trillion higher in the next decade.)
Mr. Druckenmiller had already recognized that the government had embarked on a long-term march to financial ruin. So he publicly opposed the hysterical warnings from financial eminences, similar to those we hear today. He recalls that then-Secretary of the Treasury Robert Rubin warned that if the political stand-off forced the government to delay a debt payment, the Treasury bond market would be impaired for 20 years.
"Excuse me? Russia had a real default and two or three years later they had all-time low interest rates," says Mr. Druckenmiller. In the future, he says, "People aren't going to wonder whether 20 years ago we delayed an interest payment for six days. They're going to wonder whether we got our house in order."
Mr. Druckenmiller notes that from the time he started saying that markets would welcome a technical default in exchange for fundamental reform, in September 1995, "the bond market rallied throughout the period of the so-called train wreck . . . and, by the way, continued to rally. Interest rates went down the whole time, past the government-shutdown deadline, and really interest rates never went back up again until the Republicans caved and . . . supposedly the catastrophic problem was solved."
He adds, "I owned [Treasury] bonds and Rubin accused me and Soros of being short them, and that this was some sort of conspiracy. We made a fortune being long bonds during the whole fight. We were advocating a default and we were long bonds. That's kind of putting your money where your mouth is. By the way, I'm long them today."
Mr. Druckenmiller is puzzled that so many financial commentators see the possible failure to raise the debt ceiling as more serious than the possibility that the government will accumulate too much debt. "I'm just flabbergasted that we're getting all this commentary about catastrophic consequences, including from the chairman of the Federal Reserve, about this situation but none of these guys bothered to write letters or whatever about the real situation which is we're piling up trillions of dollars of debt."
He's particularly puzzled that Mr. Geithner and others keep arguing that spending shouldn't be cut, and yet the White House has ruled out reform of future entitlement liabilities—the one spending category Mr. Druckenmiller says you can cut without any near-term impact on the economy.
One reason Mr. Druckenmiller says he spoke up in 1995 was his recognition that the first baby boomers would turn 65 in 2010, so taxpayers would soon have to start supporting a much larger population of retirees. "Well," he says today, "the last time I checked, it's 2011. We don't have another 16 years this time. We're there. I don't know whether the markets give us three years or four years or five years, but we're there. We're not going to be having this conversation in 16 years. We're either going to solve it or we're going to find ourselves being Greece somewhere down the road."
Some have argued that since investors are still willing to lend to the Treasury at very low rates, the government's financial future can't really be that bad. "Complete nonsense," Mr. Druckenmiller responds. "It's not a free market. It's not a clean market." The Federal Reserve is doing much of the buying of Treasury bonds lately through its "quantitative easing" (QE) program, he points out. "The market isn't saying anything about the future. It's saying there's a phony buyer of $19 billion of Treasurys a week."
Warming to the topic, he asks, "When do you generally get action from governments? When their bond market blows up." But that isn't happening now, he says, because the Fed is "aiding and abetting" the politicians' "reckless behavior."
And they could get even more reckless. Mr. Druckenmiller acknowledged by 1996 that the Republican budget shutdown strategy had failed, and he agrees today that the worst outcome would be a technical default that still doesn't muster enough pressure to force the Beltway to change its spending habits. This possibility "scares the hell out of me because I don't know whether Obama would cave. I tell you one thing, if [Obama officials] believe what they're saying, they'll cave. If they believe this is Armageddon and this is worse than Lehman and this is the greatest catastrophe ever, they'll cave."
But what if Mr. Obama hangs tough, Republicans cave, and there is no spending reform between now and the 2012 elections? Would Mr. Druckenmiller sell his Treasurys? "Everything else being equal, that would be a big sell factor, not a buy factor. One of the reasons I bought the Treasurys a ways back was I thought [House Budget Chairman Paul] Ryan was serious. I mean I heard some serious things that I hadn't heard in a long time." When President Obama responded to Mr. Ryan with a harsh partisan attack instead of a serious policy proposal, "that made me feel not as good about my Treasurys as the day before. But I'm still long them," he says.
Mr. Druckenmiller says he's "a registered independent" but says he admires New Jersey Gov. Chris Christie for the way he has explained that the state has to reform its benefit plans if it is going to be able to take care of retired government workers. He argues that the same case needs to be made nationally. "We don't have a choice between Paul Ryan's plan and the current plan, because the current plan is a mirage. . . . That money is not going to be there."
Given Mr. Druckenmiller's track record, officials at the Fed and Treasury may not have a choice, either. They may finally have to try to explain why technical default is a crisis, but runaway spending is not.
Mr. Freeman is assistant editor of The Journal's editorial page.

Friday, May 13, 2011

J.P. Morgan's hunt for Afghan gold



Gaddafi gold-for-oil, dollar-doom plans behind Libya 'mission'?


Louise Yamada - $5,200 Gold is Long-Term Channel Target


Gold and silver snapped up by bullish Indians



As I suspected, JPMorgan needed to load up on physical silver to meet future delivery obligations.  How to do it?  Drive down the paper price of silver and force physical liquidation out of SLV vaults.  Oh, and by the way, JPMorgan is the the custodian for SLV! 


Court: No right to resist illegal cop entry into home


Wednesday, May 11, 2011

Gold Mania in the Yukon

This is an interesting story about a Yukon prospector, Shawn Ryan and his wife Cathy Wood.  I had read about them last month and decided to invest in their company.


See disclaimers in the side bar.  Investing in junior mining companies are extremely risky.  Perform your own due diligence.

Disclosure:  long shares of Ryan Gold (symbol "RYGZF" in the US) since April 18, 2011, at $2.0755, which was a higher price than today's closing price.  Buying early isn't always buying better.

Decline in silver content of Roman coin

Click on image to enlarge.

"The People Vs. Goldman Sachs" - Taibbi's Magnum Opus


What do you think about gold and silver coins being proposed as SC tender?

Another hat tip (and hat trick) to Dick for this contribution.

South Carolina lawmakers are proposing a bill that would give the state another form of legal tender.

Sen. David Thomas, a Republican from Greenville, wants to make gold and silver coins another option in the Palmetto State.  Lawmakers are calling it the Sound Money Legislation.

"I'm no financial expert but am I smart enough to know that you can't keep printing money when it has no backing," says SC Republican Representative Mac Toole.

The Lying Liars of Luxembourg

Thanks to Dick for finding this ticking time bomb of an article on the Euro debt crisis.

In saying "When it becomes serious, you have to lie," Mr. Juncker was apparently talking about the serious conditions in the eurozone. The necessary lies -- this time at least -- were in regards to the euro.

"Just before 6 p.m. [on Friday]," the WSJ reports, "German news magazine Spiegel Online distributed a report saying that eurozone finance ministers were convening a secret, emergency meeting in Luxembourg that evening to discuss a Greek demand to quit the eurozone."

Reporters frantically phoned Mr. Juncker's spokesman, Guy Schuller, to verify the "secret meeting" assertion Spiegel Online had made. The official word: No meeting. Even though there actually was one.
"I was told to say there was no meeting," Mr. Schuller told the WSJ. "We had certain necessities to consider... there was a very good reason to deny that the meeting was taking place."

It was "self-preservation," Schuller added, speaking for his finance minister boss.

CBS 60 Minutes: The Next Housing Shock

This is a good expose on the mortgage robo-signing scam, but I find it disgusting that the CBS reporter let FDIC Chairwoman Sheila Bair off the hook by declaring the mortgage process "sloppy."  It's forgery and intentional fraud, plain and simple.  Yet, guilty banks will probably get a slap on the wrist:  a fine and no admission of guilt.  No bank executives will go to prison.  It's just another egregious example of how the whole banking industry is polluted.

And people wonder why Bair is leaving this sinking ship.  Perhaps she'll land a job in JPMorgan's mortgage lending division.  Amerika, wake up.


Osama Bin Laden Raid: Pakistan Hints China Wants a Peek at Secret Helicopter


Rajaratnam verdict may mean more Wall St. crackdowns

In an era of heightened public cynicism about ethics on Wall Street, the government’s insider trading conviction of hedge fund manager Raj Rajaratnam is a small step toward restoring investors’ confidence in the financial markets.
This comment just shows how out of touch MSNBC is with public sentiment.  Wall Street doesn't deserve investors' confidence.  It's a rigged game run by sociopaths who have plundered the country into poverty.

Pictures From A Violent (And Media Blacked Out) Greek Exhibition


Forbes Predicts U.S. Gold Standard Within 5 Years

Depending on whom you ask, and depending on the metric used, if the US returned the USDollar to the gold standard, gold would be worth between $5000/oz. and $64,000/oz.  Thanks to Dick for finding this article.


The False Myths of Gold & Silver Bulls Promulgated by Gold & Silver Bears


Tuesday, May 10, 2011

FDIC warns on moral hazard for money market funds

The operative word is "outgoing" FDIC Chairwoman.  The truth always comes out when they are about to leave office.


Irish Bombshell: Government Raids PRIVATE Pensions To Pay For Spending

Thanks to Dick for finding this article.  It's something we've been predicting and warning readers about for a few years, and it's coming to the US before you can say "confiscation." 


Global Industrial Growth Downturn


On the Elimination of Osama bin Laden

Our failed foreign policy is reflected in our bizarre relationship with Pakistan. We bomb them with drones, causing hundreds of civilian casualties, we give them billions of dollars in foreign aid for the privilege to do so, all while they protect America's enemy number one for a decade.

It is time to consider a sensible non-interventionist foreign policy as advised by our Founders and authorized by our Constitution. We would all be better off for it.

Jim Rogers: 'US the largest debtor nation in history'


Treasury Math: #Winning


$6.5 Trillion Lost, One House At A Time


Monday, May 9, 2011

Premiums on physical silver over spot

Premiums on Physical Silver Over Spot Prices, Click on image to enlarge.

Indian Demand "Overwhelming" on "Golden Day to Buy Gold"


A salute to Sheila Bair, outgoing FDIC Chairwoman



All FDIC insured deposits are backed by “the full faith and credit” of the United States government.    Therefore,  according to the FDIC Chairman Bair, “In short, we cannot run out of money“. - Sheila Bair, FDIC Chairwoman, Fall, 2009


"Without substantial amounts of additional assessment revenue in the near future, current projections indicate that the fund balance will approach zero or even become negative."- Sheila Bair, FDIC Chairwoman, March, 2009

Looks like she covered all her bases.

Bair Steps Down At A Crucial Time For FDIC

One more lifeboat taken in this Titanic.


Grave Warnings to Precious Metal Investors - Buyer Beware!


Bank Of America To Start Charging 30% On Credit Cards


Sunday, May 8, 2011

Silver and the USDollar

Confucious 222 quote in the comments section:
The Fed/Crimex/JPMorgue cartel has only one answer for a 60 year old price suppression scheme that has resulted in silver shortages and backwardation: suppress it some more.
The Fed has only one answer for the destruction of currency value resulting from too much currency printed: print some more.

The US Govt. has only one answer to the economic destruction resulting from too much deficit spending: spend some more.

The MSM has only one plan to explain the disconnects from observable fact and the lies: lie some more.

Hong Kong Mercantile Exchange's 1 Kilo Gold Contract To End Comex Gold Futures Trading (And "Bang The Close") Monopoly

Long-term, this Hong Kong Mercantile Exchange will be just another vehicle for bullion banks to manipulate the paper prices of precious metals, but short-term, it provides competition for the LME in London and the COMEX in New York.  This is rather bullish for precious metals as the emerging countries in Asia are now the biggest buyers of gold and silver. 


Volcker warns of danger from U.S. deficits


Biggest market rigger is government itself


Saturday, May 7, 2011

Silver corrects


For what it's worth, I've been buying as silver tanks, and longs are panic selling.  If I liked silver at $50, I really like it at $35.  And if it drops even more, I'll like it even more, and nibble down, with an eye for my cash position.  Always have dry powder so you aren't forced to liquidate should the market go against you.  There will be a bottom, but it is impossible to know exactly where and when.

See disclaimers in the side bar.

Disclosure:  long silver equities.

Soros and Paulson move in opposite directions as gold declines


CFTC to Probe Speculator Role in Commodity Prices


Friday, May 6, 2011

With the Dollar in Turmoil, Two Debates on Gold Captivate Manhattan


Silver crash: The COMEX margin trick and Soros "rumors" worked well

If the price of silver has plummeted, there should be a flood of supply out there, eh?  Well, look at Scotia Mocatta's website for silver products.  ScotiaMocatta is Canada's biggest precious metals dealer. 


As of today, they are sold out of every silver product--except for the 5 oz. bar.  This is more evidence that there is a shortage of physical silver, and that the paper prices at the COMEX do not reflect the reality of this shortage.

Deutsche Bank Put Volume Surges On Greek News

While German citizens may welcome the exit of Greece from the Euro, i.e. they won't have to continue bailing out a reckless Greek government, a certain German bank won't like it because it means all their Greek debt goes to zero.  Greek citizens should also be careful in what they wish for, because much of that Greek debt is owned by its own citizens.


China Buying Silver Overnight

I'm glad I bought some silver equities last night and at the open this morning.  The paper futures prices have been plummeting, allowing the Chinese to buy physical bullion at discounted prices.  This will exacerbate the physical shortage, and will backfire on the shorts who are manipulating futures prices down.


Thursday, May 5, 2011

Silver Lease Rates

Negative lease rates for silver still indicate tightness in the physical markets.  Yet, COMEX silver prices keep plummeting.  Hmmm... 


Time to Go Back In Gold $1,481 Silver $35.75


Rumsfeld: $2.3 Trillion missing from Pentagon 1 DAY before 911


What the Crowd Is Missing About Silver


Silver’s Paper Driven Sell Off To Be Confronted By Continued Significant Physical Demand


Central Banks Expand Gold Reserves With $6 Billion in Purchases


Debt Ceiling Has Some Give, Until Roof Falls In

Thanks to Kitty for finding this article.


Initial Claims: 474K - Bring Out QE3


Wednesday, May 4, 2011

Mexico ramps up gold reserves at dollar's expense


Paper vs. Physical Silver Prices

With silver prices plummeting at the COMEX, the price of physical silver hasn't dropped as much, creating a huge premium for physical bullion over spot price.  This is what silver bugs have predicting, as physical shortages don't follow the price manipulation of the paper markets.

Having said that, silver's stratospheric prices have encouraged scrap supply to come on-line.  Hence, prices for physical bullion (and coins) should drop relative to the COMEX futures prices over the next several weeks, shrinking the current premium over spot.  A period of consolidation to digest the incoming scrap supply is in order, with silver trading within a range, setting up for its next move above huge resistance at $50.  If it holds above the nominal all-time high, it's onward and upward with no meaningful resistance above $50.  Silver would then merely catch up to gold's record-breaking bull market.

See disclaimers in the side bar.

Disclosure:  long silver mining shares.

Dan Norcini - Silver Plummets, What to Look For Now?


China "Aims To Have More Gold Than America"


The War on Gold (and Silver)


Dear Liberals: It’s Your Fed’s Paper Money That’s Thwarting Full Employment


Ben Bernanke’s Lone Positive Legacy: A Return To The Gold Standard


US Treasury Tells Lawmakers It Needs $2 Trillion In Debt Capacity


As silver plunges, the coverage from the financial media intensifies

During the rise of gold and silver to record highs, the coverage was more limited.  I'm nibbling silver-related assets on the way down, as levered longs are liquidating.  When investing in volatile assets, never use leverage, as the commercial shorts will stop you out of your positions.  See entry points here.

Dick Morris Reports: How The Government Lies About Inflation


For accurate data on such metrics as unemployment and inflation, please visit John Williams' www.shadowstats.com.

Tuesday, May 3, 2011

Eric Sprott - “Sprott Has More Physical Silver Now Than Ever!”


WSJ Reports Soros, Burbank Selling Gold, Silver, While Paulson Sees Gold Hitting $4,000 In Three Years


Part 6- The Paper Silver Manipulation Game at all time Highs


John Williams: Weak Dollar Behind Inflationary Oil Prices


Osama Bin Laden Death Photo?

Click on  image to enlarge.

A.M. Kitco Metals Roundup: Comex Gold Lower, Silver Sharply Lower as U.S. Dollar Index Firmer, Crude Oil Weaker


Against a wave of liquidation of silver longs (mostly due to another CME hike in margin requirements, <click here>), I am going against the grain and accumulating mining shares (buying the dip).  I'm glad I took partial profits last week, allowing me to raise cash to buy back in today.  Silver could drop more, and while trying to "catch a falling knife" is considered dangerous, I've been eying AGQ for a bit, and I'd rather nibble at $258 than at $382.  If silver continues to drop, I will nibble some more, but never depleting my cash reserves.  Good luck everyone.

See disclaimers in the side bar.

Disclosure:  added AGQ at $289.33, $258.1899, $258.06 and SLW at $36.785, $36.35 today (5/3/11).
Edit 1:  filled at $235.37 with AGQ, and $36.145 with SLW on 5/4/11.
Edit 2:  filled at $215.9999, $214.465, and $201.90 with AGQ, and $35.84 with SLW on 5/5/11.
Edit 3:  filled at $181.02, $189.1799 with AGQ, and $35.844, $36.17 with SLW on 5/6/11.
Edit 4:  sold a tranche of AGQ at $206.80.

Monday, May 2, 2011

James Turk - Silver Forming Another Bullish Flag Formation


US kills 911 mastermind bin Laden


CME Group Hiking Silver-Futures Margins By Another 11.6%


I view each margin hike as short-term negative for any commodity, as weak longs liquidate, but long-term it remains bullish for silver because buyers of physical bullion buy at discounted prices and provide a floor for the silver market.

See disclaimers in the side bar.

Disclosure:  long silver.

U.S. Treasury: China Has Decreased Its Holdings of U.S. Debt




More On The Silver Dive: "Massive Sell Orders" Coupled With Bolivian Nationalization Halt Combine For Perfect Weak Hand Shakeout Storm

Looks like the old sell into low volume trick to flush the stops and kill the weak hands has worked again. Throw in last week's two CME margin hikes and Friday night's margin bonanza by MF Global, and one had a perfect storm set up for another wipe out in silver to start the week.
In the meantime, silver promptly managed to retrace over 50% of the move shortly after the dump. At this point whatever holders remain following last week's margin action and this evening's fine example of shock and awe will likely need far more energy and capital to be shaken out by the same entities whose primary goal is to prevent the surge in silver and ongoing capital-sapping collateral calls. Since none of the actual fundamentals before the long-term trajectory in silver (and gold) have changed, this appears like a rather attractive entry point.
Lastly, one should recall that silver had a mini 10% correction last week and not only promptly recovered but nearly passed the $50 level shortly thereafter. This time will not be any different.

So Much For The Sprott Silver Scare: "Every Dollar From PSLV Sales Was Reinvested In Silver Equities"


When to take profits in silver

Thanks to Kitty for submitting this article.  It looks like my partial exit last week was early--and not wrong after all.  Long-term holders should take comfort that the secular bull market in precious metals is still intact, as the support levels of the 50- and 200-moving day averages have not been violated.


Looking for a re-entry point.

The Age Of Silver

Thanks to Dick for finding this gem of a blog.