30 Apr 2011

Just When You Think You've Seen It All

You get days like today...

Never mind that I told you this morning that silver would be capped all day.
Never mind that I warned you last night that The Wicked Witch would be stalking the pit like a mythical beast.
Never mind that I told you yesterday that gold was going to be leading silver for a while.
Today was truly breathtaking it it's peculiarity.

I've been around a long time and maybe my memory is starting to fail. (Wouldn't surprise me. It's always been said that alcohol abuse damages brain cells.) I cannot recall ever seeing such a disconnect between silver and gold on a day session. Ever. Oh, sure, maybe silver might be up or down 3% while gold only moves 1% but at least they'd be moving in tandem. To have the two totally and completely trade independent of each other is absolutely extraordinary. Here are your two charts to consider. They are both 5-minute pictures of today's action.

So, what does this mean? Is it just an aberration? A coincidence? No freaking way, my friends. Everything...and I mean everything...is being done to temporarily restrain silver. The Cartel is effectively expending their entire "conventional" arsenal in their attempt to survive May settlement in silver and live to play another day. Think about it, this week we've seen:

1) Two CME margin increases in 48 hours.
2) Every available Disinformation Agent has been put forth to convince the sheep that silver has topped.
3) Sell side analysts stubbornly refusing to raise or even maintain year end price estimates. Remember, year end estimates are critical to the calculation of miner share price forecasts.
4) Today's historic price divergence.
5) And now, on the Globex, on a Friday no less, The EE is putting the hammer down in an attempt to gin up ever more top-calling over the weekend. Since closing on the Comex at about 48.60, silver is now down 80 cents, the majority of which has come in three minutes.

Anyway, the good news is that The Cartel has been successful. Weak-handed longs have been frightened. They've run from silver and charged into gold, instead. This is great news! I'm long a bunch of June 1550 gold calls so I made a lot of money today. Thanks, Blythe!! Its also great news because we needed The Comex to survive May. The fundos haven't changed. In fact, they've only gotten worse. Remember the Scotia story? June will be another crazy, wild month in the silver pit and we will have a remarkable opportunity to make a boatload of money. In the words of The Wicked Witch herself, "shit, Ruprecht, IF Turd Ferguson is correct, we'll make enough money to fucking BUY Venezuela"!

And, regarding this "topcalling nonsense". Since when has any market topped while everyone was telling you to sell. I'll tell you when...NEVER! Markets "top" when the last buyer has bought...when there is no fear and no perception of risk. Is that today's silver market? Hardly! The fact that so many douchebags are trying to convince you to sell your silver is simply a sign that silver will trade even higher. "Climbing the wall of worry", as they say.

So, relax and be happy. Go into the weekend KNOWING that you areWINNING. Gold is at $1562/ounce, for the love of pete!  Rejoice!  TF out

ps Before today, I hadn't urged anyone to make a trade at any time. Against my better judgement, I did just that earlier. For any short-term angst I have caused you, I sincerely apologize. I won't do it again. I make general observations here for you to interpret and evaluate. It is not, nor will it ever be, my place to give you specific advice or trade ideas.

Gold and Silver Versus the U.S Dollar

One sure upshot of the quantitative easing money flooding the stock market will be further distortions, chaos and unpredictability that make the value-investing proposition difficult, if not impossible, according to Casey Research Chairman Doug Casey. On the eve of a sold-out Casey Research Summit in Boca Raton, Florida, Doug returns toThe Gold Report. In this exclusive interview, he warns, "Like it or not, you're going to be forced to be a speculator."

The Gold Report: When the average investor turns on the news, even on financial channels, they hear that the U.S. economy is in the best shape it's been in for three or four years. While the experts say the recovery is slower than anticipated, they expect its slow recovery will equate to a long, slow growth cycle similar to that after World War II. You have a contrary view.
Doug Casey: The only things that are doing well are the stock and bond markets. But the markets and the economy are totally different things – except, over a very long period of time, there's no necessary correlation between the economy doing well and the market doing well. My view is that the market is as high as it is right now – with the Dow over 12,000 – solely and entirely because the Federal Reserve has created trillions of dollars, as other central banks around the world have created trillions of their currency units. Those currency units have to go somewhere, and a lot of them have gone into the stock market. As a general rule, I don't believe in conspiracy theories, and I don't believe anything's big enough to manipulate the market successfully over a long period. At the same time, the government recognizes that most people conflate the Dow with the economy, so it is directing money toward the market to keep it up. Of course, the government wants to keep it up for other reasons – not just because it thinks the economy rests on the psychology of the people, which is complete nonsense. Psychology is just about the most ephemeral thing on which you could possibly base an economy. It can blow away like a pile of feathers in a hurricane. 

TGR: So, you're saying we're confusing the market's performance with the economy's performance? 

DC: Yes. The fact is that the economy itself is doing very badly. The numbers are phonied up. I spend a lot of time in Argentina. Anybody with any sense knows you can't believe the numbers coming out of the Argentinean Government Statistical Bureau, nor can you (any longer) believe the numbers that come out of Washington D.C. The inflation numbers consider only the things the government wants to look at and are artificially low. It's the same with the unemployment numbers. None of these things is believable. 

TGR: Isn't the unemployment figure a lagging indicator of a rebounding economy? 

DC: If you look at the way unemployment was computed until the early 1980s – something that John Williams from ShadowStats does – the numbers would indicate about 20% unemployment today. Besides, even while the population keeps rising, the number of people reported as actually working is level or even lower. Most indicators of the economic establishment, in my view, don't really make any sense. GDP, for instance, includes government spending – much of which amounts to paying some people to dig ditches during the day and other people to fill them in at night. So-called "defense" spending is almost totally wasted capital. The practice of economics today is pathetic and laughable. 

TGR: So, the economy is not rebounding? 

DC: No. My take on this is that we entered what I call the "Greater Depression" in 2007. And now, because the government has printed up trillions of dollars in the last couple of years, we're in the eye of the hurricane. We've only gone through the leading edge of the storm. People think this will just be another cyclical recovery like all the others since WWII. But it's not. It's going to wind up with the currency being destroyed. It's going to be a disaster… a worldwide catastrophe. 

TGR: You indicated that the government is using these mass infusions of made-up money to prop up the stock market due to the psychological factor – that people will think the economy's doing well because the market is doing well. However, we hear that a lot of that money has been caught up in the banks. Would you comment on that? 

DC: As I said, that money has to go somewhere. The banks have been borrowing from the Fed at something like 0.5% and investing it in government securities at 2%, 3% or 4%, depending on the maturity. So, much of that money has been a direct gift to the banks; and they're basically making an arbitrage spread of 2%–4%. So, yes, that's happening with some of the money. Still, it doesn't all just sit in these Treasury securities. A great deal of it, inevitably, goes into the stock market. 

TGR: You also said that psychology isn't the only reason the government wants to see the stock market go higher. 

DC: Right. Pension funds have a great deal of their assets in stocks. Certainly, many funds run by government entities, such as the state and city employee pension funds, are approaching bankruptcy despite the fact that the Fed has driven interest rates to historic lows, artificially pumping up both stocks and bonds. And, I might add, keeping property prices higher than they would be otherwise. When interest rates rise eventually – and they will go up a lot – it'll be something to behold in the markets. 

TGR: You mentioned John Williams who's in your speaker lineup for the Casey Research Summit, The Next Few Years. Another of your speakers is Stansberry Associates Founder Porter Stansberry, who's been making two points about the devaluation of the U.S. dollar. One point he makes in hisThe End of America video concerns the quantitative easing (QE) you mentioned –those trillions of dollars. But Porter also anticipates the U.S. government announcing a devaluation of the currency similar to what England did in 1970. Do you see that type of scenario occurring, as well? 

DC: When the U.S. government last officially devalued the dollar in August 1971, it had been fixed to $35 per ounce to gold. In other words, before that, any foreign government could take the dollars it owned and trade them in at the Treasury for gold. Nixon devalued the dollar by raising it to $38/oz., and then to $42/oz. It was completely academic, anyway, because he wouldn't redeem gold from the Treasury at any price. But because the dollar isn't fixed against anything now, the government can't officially devalue it. It's a floating market. The government's going to devalue the dollar by printing more of the damn things and letting them lose value gradually – actually the loss will no longer be gradual, but quite fast from here on out. But it's not going to do so formally by re-fixing the dollar against some other currency or against gold. I'm not sure Porter's phrasing it in the best way, but he's quite correct in his conclusion and his prescriptions as to how to profit from it. At this point, the dollar is nothing more than a floating abstraction, an IOU nothing on the part of a manifestly bankrupt government. 

TGR: Another abstraction is the fact that the Treasury says the money it is printing has a multiplier effect when it gets into the U.S. economy, so it can pull those dollars back when the time comes. Is that a viable alternative to offset the devaluation caused by printing more money? 

DC: You have to look first at the immediate and direct effects of what the government's doing, and then at the delayed and indirect effects. And sure, just as it's injecting all this money into the economy – mainly by the Fed buying U.S. government bonds – theoretically, it can take it out of the economy by doing the opposite. But I just don't see that happening. 

TGR: Why not? 

DC: One of the reasons is that the U.S. government, itself, is running annual trillion-dollar deficits as far as the eye can see. I think those deficits will go higher – not lower. So, where's that money going to come from? Where will it get trillions of dollars to fund the U.S. government every year? China isn't going to buy this paper, and Japan will be selling its U.S. government paper because, if nothing else, it'll need to buy things to redo the northeast part of the country. Nobody else is going to buy that trillion-dollar deficit either, so it'll have to be the Federal Reserve. In fact, the Fed will have to buy much more and, therefore, create more money. That's what happens. 

TGR: This currency crisis isn't unique to the U.S. You just brought up Japan. And aren't all the European countries doing the same thing? 

DC: The U.S., unfortunately, is not unique. This is going to be a worldwide catastrophe. It's been a disaster for every country that's done this in the past – Zimbabwe, Germany, Hungary, Yugoslavia and countries in South America – but those were within only those particular countries. In most of those cases, people never trusted their governments; so, they had significant assets outside the country in a form other than the local currency. The problem now is that the U.S. dollar is the world's reserve currency and all of these central banks own USDs as the backing for their own currencies. All these other countries will wind up finding that they don't have any assets after all. That's going to happen all over the world. 

TGR: With countries around the globe facing the same issue, should anyone hold currencies? 

DC: No. Sure, you need local currency to go to the store and buy a loaf of bread. But for liquid assets you're trying to save, it's insane to own currencies at this point because they're all going to reach their intrinsic value. I've been recommending for many years that people buy gold and own gold for their savings – serious capital they want to put aside in liquid form. With gold now over $1,500/oz. and silver at $48, people who followed that advice have made a lot of money. That's the good news. The bad news is that very few people have done so. Newbies to the game are paying $1,500/oz. for gold. It's going higher, but it's no longer the bargain that it was. The important thing to remember, though, is that gold is the only financial asset that's not simultaneously someone else's liability. That's why it's always been used as money and why it's likely to be reinstituted as money. 

TGR: From your viewpoint, how does a person with any wealth preserve it during this tumultuous period other than by investing in gold? 

DC: Frankly, I don't know. I own beef and dairy cattle, which are a good place to be; but that's a business, and it's not practical for most people. I think it boils down to gold. 

TGR: But what investments should they be looking at these days? 

DC: There really aren't investments anymore. With trillions of newly created currency units floating around the world, things will become very chaotic and unpredictable shortly. It's very hard to invest using any kind of Graham-and-Dodd methodology when things are that chaotic. Whether you like it or not, you're going to be forced to be a speculator in the years to come. A speculator is somebody who tries to capitalize on politically caused distortions in the marketplace. There wouldn't be many speculators, or many of those distortions in the marketplace, if we lived in a free-market society. But we don't. 

TGR: So, speculation will supplant value investing? 

DC: Well, investing is best defined as allocating capital in a way that it reliably produces more capital. The government is going to make that quite hard in the years to come with much higher taxes, much higher inflation and draconian regulations. You will actually be forced to speculate. That's a pity, from the point of view of the economy as a whole. But I kind of like it, in a way. Few people know how to be speculators, so I should be able to make a huge amount of money in the next few years. Unfortunately, it'll be at a time when most people are losing their shirts. But I don't make the rules. I just play the game. 

TGR: As you look over the next year or two with your speculator hat on, what sectors do you expect to experience the most distortion and, therefore, offer the most opportunity for the speculator? 

DC: One sure bet is the collapse of the U.S. dollar. Always bet against the USD and you'll be on the winning side of the trade. A very direct way to make that bet is by shorting long-term U.S. government bonds because, eventually, interest rates will go to the moon, which means bond prices will collapse. You can also look at the precious metals because, at some point, when people panic into them, their price curves will go parabolic. Mining stocks are likely to draw a lot of money, so they could go wild as they have many times over the last 40 years. 

TGR: Your summit has presentations scheduled on silver, gold, currencies, Asia, real estate, agriculture and even more. What do you expect to be the major takeaway this time? 

DC: What we're facing now is something of absolutely historic importance – the biggest thing that's gone on in the world since the Industrial Revolution. Many things will be completely overturned in the years to come. What's happening now in the Arab world, with all of these corrupt kleptocracies being challenged and overthrown, is just the beginning. We haven't seen the end of this in any of these countries – Tunisia, Egypt, Syria, Algeria. Of course, Saudi Arabia will be the big one. Everything's going to be overturned. And all these stooges that the U.S. government has been supporting for years could very well lose their heads. It's going to be the most tumultuous decade for hundreds of years, bigger than what happened in the 1930s and 1940s. 

TGR: Any last things you'd like to tell our readers? 

DC: Yeah. Hold on to your hats. You're in for a wild ride. At the Casey Research Summit in Boca Raton, 35 of the most renowned economists, investment and natural-resource pros convene to talk about the U.S. and global economy, the fate of the dollar, the threat of rampant inflation… and the best ways to make it through that “wild ride” in the next few years. Among them are big names like ShadowStats’ John Williams, investment legend James Rickards, financial author Chris Whalen, and “Rich Dad” advisor Mike Maloney.

Secret Silver Buying by Russian Billionaire, Chinese Traders, and People's Bank of China to Lead to Comex Silver Default?

Gold rose to new record nominal highs at $1,540.85/oz in early Asian trading last night. Silver and gold remain very close to nominal highs today as the beleaguered US dollar remains under pressure due to ultra loose US monetary policies, deepening inflationary price pressures and concerns about the feeble economic recovery.
Cross Currency Table GoldCore
Cross Currency Table

Gold has risen 8% this month and silver 28% due to the very poor US monetary and fiscal position, the Eurozone debt crisis and in the background the Japanese nuclear crisis, and geopolitical instability in the Africa and the Middle East. This is continuing to lead to diversification into the precious metals.

COMEX Silver Default?
A number of readers contacted us yesterday to comment critically on our advice to “as ever” ... “ignore the daily noise and focus on the long term and the fundamentals driving these markets.”
Comex Silver Inventory Data  GoldCore
Comex Silver Inventory Data 

They felt that it was linked to the paragraph above regarding a possible COMEX default and was suggesting that rumours of a run on COMEX depositories was “noise”.

We were not suggesting that and with hindsight the juxtaposition of this sentence in the immediate aftermath of the paragraph regarding the COMEX was unfortunate and ripe for misinterpretation.

Let us reiterate a COMEX default on delivery of precious metals and specifically of silver bullion bars is far from “noise”. It is of significant importance and that is why we have covered its possibility for some months. A COMEX default would have massive ramifications for precious metals markets, for the wider commodity markets, for the dollar, fiat currencies and our modern financial system.

Silver surged 3.4% yesterday to settle at a 31-year nominal high, and rose by $1.55 on the day. Silver is up some 28% in April alone. The last time this happened was when Warren Buffett took a large stake in silver in 1987 and there were rumours of Buffett “cornering the market”.

Silver remains in backwardation and the possibility of a COMEX default cannot be ruled out – especially as silver bullion inventories are very small vis-a-vis possible capital allocations to silver in the coming weeks and months.

The possibility of an attempted cornering of the silver market through buying and taking delivery of physical bullion remains real and would likely lead to a massive short squeeze which could see silver surge to well over its inflation adjusted high of $140/oz.

Indeed, a recent article in the Financial Times suggested that private or state interests with very deep pockets are attempting to corner the silver market. Bizarrely, this massive story which mooted the possibility of Russian billionaires, Chinese traders and even the People’s Bank of China and other central banks secretly buying silver, has subsequently been barely reported or commented on.

There are now two “conspiracy theories”. One is the long side conspiracy theory which claims, a la the FT, that there are foreign private and state actors attempting to corner the silver market through secret buying.

The other is the more long-standing short side conspiracy theory which has gained credence in recent months due to the CFTC’s investigation into silver manipulation by Wall Street banks, such as JP Morgan, who have massive concentrated positions. This theory has been backed up by some circumstantial evidence by GATA and has recently gone “viral” through the campaign of financial journalist Max Keiser.

The theories are not mutually exclusive and may be true. Indeed, Chinese, Russian and other private interests may be cornering the physical market in an effort to end manipulation of the silver market by Wall Street banks in order to ensure the silver price rises very sharply and creates significant profits on their silver bullion holdings.

Indeed, if the People’s Bank of China is involved – profit may not be the end game, rather the positioning of the Chinese yuan as the new reserve currency through use of gold and silver bullion reserves.

Bloomberg Link Precious Metals Conference
The Bloomberg Link Precious Metals Conference heard a wide range of opinions from precious metal experts and mining executives. The vast majority believed that gold and silver’s strong fundamentals (especially due to anaemic supply and strong demand) should result in prices continuing to rise in the coming years.

The knowledge amongst the participants regarding the fundamentals is in stark contrast to many so-called financial or market experts in the press who continue to be misinformed regarding the gold and silver markets (see news).

The knowledge amongst the participants is also in stark contrast to much of the western public (particularly in European countries), many of whom continue to believe that “cash is king” and remain unaware that they are very exposed to sovereign debt default risk, currency debasement and inflation.

The one participant who was bearish on silver was William Hamelin, the president of Ames Goldsmith Corp., who forecast a drop to $35.85/oz by year-end. Hamelin’s company processes silver for use in a number of consumer products, such as electronic components, batteries and photography.

Gold in Euros to Play Catch up?
Gold’s recent rise has not been solely US dollar related as gold has risen to new record nominal highs in British pounds and yen. Gold has underperformed in euros recently and yet remains only 3.7% below the record nominal high of €1,072/oz seen four months ago in December 2010.

The euro’s strength is not due to German economic strength or due to positive fundamentals rather it is purely due to the fundamentals of the dollar, the pound, the yen and other fiat currencies being very poor. It also may be due to short covering as those short the euro are forced to buy back positions.
Gold in EUR – January 2010 to April 2011  GoldCore
Gold in EUR – January 2010 to April 2011

Gold’s continuing strength in euros suggests that the recent bout of euro strength versus the dollar and other fiat currencies will be short lived and the euro will come under pressure again in the coming months.

Gold in euros has risen 2% in April. It will be interesting to see if euro gold replicates the performance of April and May last year when Eurozone sovereign debt concerns saw gold rise to €825/oz to over €1,000/oz prior to a correction. Previous resistance at €1,000/oz gold looks to be strong support for gold.


Food and Energy Inflation is Not Transitory

Federal Reserve Chairman Ben Bernanke on Wednesday held his first press conference in history. The press conference took place shortly after the Fed announced its decision to leave the Fed Funds Rate at a record low of 0% to 0.25%, where it has been for an unprecedented 28 months. The U.S. economy is flooded with U.S. dollars and is close to overdosing on excess liquidity. The fact that our financial markets are not falling on the possibility of the Fed not unleashing QE3 immediately at the end of QE2, shows that we could be on the verge of hyperinflation with or without QE3.

The Federal Reserve currently has a mandate of both maintaining price stability and facilitating job creation. However, central banks don't have the ability to create real employment. If any jobs happen to be created as a result of a central bank's policies, they are only temporary jobs created due to the errors and distortions of phony asset bubbles. All phony asset bubbles that are fueled by monetary inflation eventually burst, sending unemployment through the roof.

Almost every major central bank besides the Federal Reserve, understands the truth about job creation, and has a mandate that focuses solely on keeping price inflation low. The Bank of Japan, Swiss National Bank, Bank of Canada, and Bank of New Zealand, all have mandates that are entirely about low inflation and don't even mention the creation of jobs or the rate of employment. Bernanke said on Wednesday that, "while it is very, very important for us to try to help the economy create jobs and to support the recovery, I think every central banker understands that keeping inflation low and stable is absolutely essential to a successful economy."

Bernanke has decided to go down a route that no central banker has ever gone before. Bernanke has literally invented countless ways to create inflation that nobody else has ever thought of. If keeping inflation low was ever Bernanke's slightest concern, the Fed Funds Rate would currently be north of 5% and the U.S. economy would be in a steep recession. Bernanke has never once thought about keeping inflation low. He has literally implemented every measure he could possibly think of to create as much inflation as possible, while outright lying to the American public and saying that he isn't printing money and that inflation is under control.

Bernanke would like the public to believe that his policies of expanding the money supply through cheap and easy money will cause the U.S. economy to recover and unemployment to decline back to pre-crisis levels, and that right before price inflation spirals out of control, he can raise interest rates and prevent massive price inflation without disrupting the recovery. Unfortunately, this is impossible because the recovery isn't real and massive price inflation is already here. Bernanke's policies may have created 1 million artificial jobs since December of 2009, after 8.75 million jobs were lost in the previous two years, but he did this at the expense of 310 million Americans already seeing double-digit percentage increases in food and energy prices.

Since after the Real Estate bubble burst in late-2008, the primary economic concern of Americans has been finding a stable job in order to make mortgage payments and put food on the table. Under the pressure of Congress, the Fed printed enough money to prevent a much needed recession that would be healthy for the long-term U.S. economy. In its attempt to reinflate the Real Estate bubble, the Fed has been destroying the free market and creating new economic distortions, which caused an artificial bounce in the rate of employment. Unfortunately, when you add together the money the Fed has either printed or committed for bailouts and stimulus programs, over $4 million has been spent for each job created. The Fed would have been better off just crediting the bank accounts of unemployed Americans with the average U.S. income.

When asked about rising gas prices, NIA is very happy that Chairman Bernanke acknowledged that gas prices "have risen quite significantly" and are "creating a great deal of financial hardship for a lot of people". Bernanke admitted that gas is a "necessity" as "people need to drive to work" for the artificial jobs Bernanke created at a cost of $4 million per job. However, Bernanke seemed to be confused when he said "higher gas prices add to inflation". The truth is, Bernanke's zero percent interest rates and quantitative easing are the inflation, and inflation leads to higher gas prices.

Bernanke is directly responsible for gas prices rising back to $3.87 per gallon, yet refuses to admit it. Bernanke placed the blame on the growing global and emerging market economies, and their strong demand for oil. He said that America's demand for oil is going down, which NIA believes is actually due to the U.S. dollar losing its purchasing power and Americans seeing their standard of living decline. Bernanke said there is nothing that he can do about rising oil and gas prices "without derailing growth entirely". The truth is, Bernanke already derailed growth entirely when he derailed the free market. It is impossible to see real economic growth when a government and central bank is interfering in every aspect of the economy and impeding the free market in every possible way. All nominal GDP growth in the U.S., along with growth in retail sales, is solely due to inflation. Even when the government adjusts GDP and retail sales growth to the rate of inflation, it is based off of the consumer price index, which NIA believes is currently understating price inflation by approximately 4%.

Although Bernanke denies he has the ability to reduce gas prices, he claims he can prevent "gas prices from passing into other prices and wages throughout the economy and creating a broader inflation which will be much more difficult to extinguish." Bernanke obviously doesn't want Americans to see higher wages because he believes it could lead to broader inflation, but NIA believes rising wages would be a good thing. Inflation hurts Americans most when the rate of inflation is far outpacing wage increases. The fact is, the U.S. is already experiencing broad inflation even without wage increases.

Bernanke's brand new favorite word as of late seems to be "transitory", which he used about a dozen times during his press conference. Despite what Bernanke says, NIA strongly believes that rising food and gas prices are not transitory. Bernanke likes the word "transitory" because he can use it to try and pretend that rising food and gas prices are only just a temporary phenomenon and that their current high levels aren't here to stay. Many Americans can remember the day 40 years ago when a can of Coca-Cola cost a dime and a Hershey chocolate bar cost a nickel, with a gallon of gas back then costing only thirty-five cents. Have rising food and gas prices over the past four decades been transitory?

NIA first predicted two years ago in its documentary 'Hyperinflation Nation', that rising food and gas prices would soon become the primary concern of all American citizens as a result of the Fed's dangerous and destructive monetary policies. Bernanke back then claimed that inflation would not be a problem and said that the U.S. risked deflation. If Bernanke has been so wrong about the inflation that Americans are faced with today, NIA doesn't see how anybody can possibly believe that Bernanke will be right and that current high food and gas prices aren't here to stay. In our opinion, the food and gas price inflation that Americans have experienced over the past 40 years, is likely to occur all over again during the next 4 years. NIA believes that 4 years from now, Americans will look back at the good old days of having cheap $4 a gallon gas.

The last thing the U.S. government wants is for the American public to realize that Bernanke is responsible for rising food and gas prices. If the public demanded to end the Federal Reserve, the government will no longer be able to spend recklessly knowing that the Fed will be there to monetize their deficit spending. In an attempt to make up excuses for rising gas prices and deflect attention away from the Fed, Congress has been pressuring the U.S. Attorney General to investigate the matter. Attorney General Eric Holder just announced the formation of the Oil & Gas Price Fraud Working Group. The stated purpose of this working group is to monitor the oil and gas markets for potential violations of criminal or civil laws to safeguard against unlawful consumer harm.

NIA considers this to be complete insanity. Any government interference in the oil markets will only drive oil prices up even higher. Oil prices are rising solely do to supply and demand. Demand is going through the roof because the Federal Reserve is creating a lot of inflation, and inflation always gravitates to the goods that Americans need the most to live and survive. Oil supplies are falling because President Obama has ordered U.S. troops to occupy Libya. In the past we at least made up excuses to invade countries like Iraq over oil by claiming they had weapons of mass destruction. Today, the U.S. government doesn't even bother. Obama campaigned as an anti-war President, saying he would bring our troops home from the middle-east. Instead, he has increased our middle-east troop levels, and the sheep who voted for him are showing absolutely no signs of outrage.


Topple Dictator Ben Bernanke Or Face Complete Collapse Into Neo-Feudalism

The fact that millions of Americans aren’t demanding Ben Bernanke’s immediate resignation proves how horrifically propagandized and unaware the American public is.
As someone who spends 60 hours a week analyzing the news, chronicling every step down in America’s decline, it has become incredibly depressing to see Bernanke maintain his position of power and continue his reign of terror.
Colleagues say that they try not to let it get to them too much by telling themselves that there is only so much you can do, and ultimately people get what they deserve. I have always refused to buy into that line of thinking. I know how effective the mainstream media is in propagandizing people, and unless you have significant time to research these issues, there is no way for the average working American to truly grasp the information that they need to.
All that being said, I’m quickly losing faith in the people who do know what is going on. There are millions of people who read independent news reporting daily and know exactly what is happening. There are millions of people who understand that we now live in a banana republic that is systematically looting the country to enrich one-tenth of one percent of the population. There are also millions of people who understand that Ben Bernanke and the Federal Reserve banking system is the central planning force behind this looting.
Almost every day there is more evidence of the outright corrupt actions of the Federal Reserve and their primary dealers on Wall Street. Their campaign of economic shock and awe is so overwhelming, there have been so many corrupt actions that it is hard to list them all, or even pick out which ones to highlight as the most egregious. Here are just a few off the top of my head; the audacity of it all, and knowing the obvious consequences that these actions entail, is enough to make your head explode from complete frustration:

  • Trillions of American taxpayer dollars were given, in secrecy, to the banks/people who were most responsible for causing the crisis in the first place.

  • After causing the crisis, they took our tax dollars and gave themselves all-time record-breaking bonuses.

  • They gave American taxpayer money to foreign banks and corporations, with billions going to places like Libya.

  • They funneled hundreds of millions of taxpayer dollars into to the Cayman Islands, robbing us some more by directly subsidizing tax evasion.

  • They also added to the deficit by lending American tax dollars to their primary dealer banks, so the banks could then lend that same money back to the government at higher interest rates, leading to significant profits for the banks, at the further expense of the American public.

  • Through bailout programs they gave sweetheart deals to their friends, which socialized any loses and privatized all the profits.

  • They aid and abet trillions of dollars in accounting fraud.

  • They routinely manipulate the stock market.

  • And now, to top it all off, they are deliberately causing inflation in food, gas and basic necessities, while devaluing the dollar.

  • As I said, the list goes on, and you are probably grinding your teeth thinking of other egregious examples that I haven’t mentioned.
    All of this can be summed up by the fact that we now have the most severe inequality of wealth in American history. The Fed’s policies have strategically and deliberately impoverished tens of millions of people to enrich what amounts to a small group of global bankers. They have aided and abetted trillions of dollars in fraudulent activity. This is not a conspiracy theory! This is the unfortunate reality of our crisis.
    It is not hyperbole to call Ben Bernanke a financial terrorist who is committing crimes against humanity. This is a bold and blatant fact. At this point, no one can seriously debate against this anymore.
    Watching Bernanke stride to the podium, smiling for his scripted press conference on Wednesday, was yet another depressing moment in our downfall. People keep debating why it was that Bernanke gave the press conference. Some say that it was a defensive tactic, an acknowledgement of the need to increase the propaganda campaign and cast the “illusion of transparency.” Perhaps, but I feel he also gave the press conference for the same reason that terrorists release video statements. He wants to show the world that he is still a free man who can terrorize tens of millions of people in broad daylight and get away with it. He wants to show us that he can shove our face into the dirt while smiling for the cameras. The main message of the press conference wasn’t anything that Bernanke had to say, it was to show the people of America that he can rob us, set our future on fire and still be walking the red carpet with fawning reporters and cameras flashing in his imperial presence – a way of demonstrating that the financial terrorists are still in charge, running the show.
    We’ve been trying to bring people together to call for Bernanke’s removal and to break up the Federal Reserve banking system. With all the evidence that is now a matter of public record, you would think it would be easy to get people down to Wall Street on June 14th to demand this. Yet, sadly, it is still incredibly difficult to unite people on even this common sense common ground.
    What does that tell you about our future prospects?
    If we can’t even unite to topple Bernanke, our complete collapse into neo-feudalism is assured.


    29 Apr 2011

    Peter Schiff Interview

    Asian Economies Rejecting US Dollar Deposits For Chinese Renminbi

    A milestone of sorts was reached this month when the dollar hit a multiyear low on a trade-weighted basis and set record lows against Asian currencies, led by the Singapore dollar.
    The drop in the dollar was especially remarkable because it took place against a backdrop of geopolitical uncertainty, which usually triggers a flight to haven currencies – which in the past would have meant a rush to the dollar. Meanwhile, the currency of the special administrative region of Hong Kong moved not at all. But that is because the Hong Kong dollar is pegged to the US dollar, not because the people of Hong Kong are enamoured with it. Indeed, Hong Kong citizens are increasingly turning their backs on the US dollar and momentum to reject the dollar peg is developing.
    The basic law says that Hong Kong needs to peg to a freely convertible currency. Since the Chinese renminbi still has capital controls and does not trade freely, the renminbi cannot replace the dollar, despite the fact that many people in Hong Kong wish it would.
    But there is increasing support to peg the dollar to a basket of currencies, as Singapore does, rather than to tie Hong Kong to the US dollar and easy American monetary policy. That policy is meant to help a weak US economy recover – but is clearly inappropriate in vibrant Hong Kong.
    By including the renminbi in that basket, Hong Kong would not be violating the basic law. And as Hong Kong’s economic fate becomes ever more closely tied to that of China, and far less tied to that of the US, a flexible basket that can be altered in the course of time to include the renminbi makes sense.
    Strains on the current dollar peg are intensifying by the day. Because few residents of this pragmatic city have faith in the dollar, they prefer to hold renminbi. Renminbi deposits in Hong Kong now total some Rmb400bn and are expected to increase fivefold to Rmb2,000bn by the end of 2012. That growth has taken place even though savers are paid virtually nothing on those deposits and there are only about Rmb100bn of assets in which to invest.
    Nor does that number capture the renminbi bank accounts Hong Kong residents keep in China where the rates they can earn are marginally better.
    Property purchases swell by the day, in large part because exposure to property is seen as a way of being long the Chinese currency over time. Even with mortgage interest rates under 2 per cent, monthly mortgage payments can be 2-2.5 times monthly rent for flats as a result.
    The strains will only intensify still further. In the past, Hong Kong imported deflationary pressures from China. Today, inflationary pressures in Hong Kong will become more intense both because of imported inflation from China and because of the appreciation of the renminbi against both the Hong Kong dollar and the greenback.
    The rejection of US dollar deposits has become so widespread that smaller local banks in Hong Kong are being forced to go into the wholesale market to procure dollars, wreaking havoc with their finances.
    Of course, any transition will be difficult to manage. The biggest challenge is that if the market were to anticipate a switch, Hong Kong asset values such as property would inflate even more rapidly as the market front-runs the monetary authorities who are already unhappy at the level of real estate prices. And there are technical issues that would need to be resolved if the renminbi were to be included in any basket.
    The debate over the Hong Kong dollar is taking place against a backdrop of increasing internationalisation of the Chinese currency. Given the expectation that the renminbi will appreciate over time, few borrowers are interested in renminbi loans.
    But the number of companies that use the renminbi to settle trade is increasing. Singapore will soon offer renminbi clearing, another step in the steady march toward internationalisation of the Chinese currency.
    Many observers have been calling for the end of a dollar-based world for many years – and have been proved wrong. All reserve currencies are ultimately faith-based, as Jim Grant, the editor of Grant’s Interest Rate Observer, loves to point out.
    But the residents of Hong Kong, at least, are losing their faith by the day.


    The Waterfall Decline in the US Dollar Has Begun

    With gold and silver taking off after the Fed statement, today King World News interviewed James Turk out of Spain. 

    When asked about the action Turk stated, I've just finished reading the Federal Reserve's announcement of its meeting concluded earlier today.  I've also scanned some of the excerpts from Bernanke's press conference and Eric, I am struck by the inconsistencies.  The precious metals markets must be seeing it the same way I am given the strength in gold and silver after the announcement's release.On the one hand, the Fed acknowledges higher commodity prices and rising inflation.  Yet they go on to say that inflation trends are "subdued" and inflation expectations are "stable" - and those are the exact words they use.  I mean, what can they possibly be looking at to reach those conclusions?
    Then they say that they will keep interest rates low, but the reality is they need to be raising interest rates to fight the growing inflationary pressures, just like Volcker did when he was Fed chairman thirty years ago.
    But here's the biggest inconsistency, the Fed plans to end its $600 billion quantitative easing program on schedule at the end of June.  But the federal government continues to run horrendous deficits, forcing it to borrow record amounts of money.  Consider this, since the Fed began QE2 last August, the federal government's debt has increased about $900 billion.  Over $500 billion of that debt has in effect been borrowed from the Fed, courtesy of the Fed's printing press.  Now I ask you, with the federal deficits running at or near record levels, who is going to buy all of the debt the federal government will be issuing after June 30th to fund its never-ending deficits?

    Clearly, something has to give.  There are only two choices to stop the dollar from the waterfall decline you and I have been talking about and expecting.  Either the Fed raises interest rates, or politicians stop spending and it doesn't look like either one of those is about to happen.  In fact, looking at the Dollar Index and precious metals markets as we speak, the waterfall decline in the dollar has begun.  The Dollar Index has broken below all of its previous lows except for the last one at roughly 71 on the index.  When that gives way you could see incredible panic selling ensue.

    The bottom line is the market is calling the Fed's bluff.  Investors don't believe the Fed will stop its purchases of US government debt on June 30th and for what it is worth, I don't either.”

    When asked about gold Turk replied, Gold is at a new record high, what's there to say?  I am a firm believer in the message of the market.  In other words, I don't look at cycles, momentum indicators or anything else, instead I look at prices, their trends and underlying fundamentals.  The only conclusion to make about gold is that it is heading to my $1800 target and looks like it will get there soon, maybe sooner than the June 30th date I had been anticipating.”

    When asked about silver Turk remarked, Silver got close to its all-time $50 record high when it reached $49.78 on Monday morning in Asia.  It is currently still below that price.  Therefore, silver has not yet confirmed the new high gold made today.  That may mean silver has to build a base here in the high $40s before plowing higher, and let gold lead for awhile.  That would not be surprising given that silver has been leading since last summer, as is clear from the drop in the gold/silver ratio.  We'll see how long it will take silver to hurdle above $50, but regardless, let's step back from the trees and look at the forest.

    The dollar is in trouble and the Federal Reserve has its head buried in the sand.  Washington's politicians are spending money they don't have and the federal government's credit rating is being called into question, I could go on, but you get the point.  We're at an historic moment.  Years from now we will look back and point to 2011 as the moment in time when the flight out of the US dollar accelerated leading to its eventual collapse.  A simple and safe way KWN readers can prepare for this catastrophe is to own physical gold and physical silver.”

    It is important to understand that your physical gold and silver holdings are insurance against a collapse of the US dollar if you live in the United States.  If you live outside of the US it is your insurance against a collapse of your country or regional currency.  This is an extremely important time in history because people are slowly losing faith in all fiat money globally.  For now simply continue on your monthly accumulation programs and do not try to time these markets.

    US Dollar Dumped As Fed Keeps Lid On Interest Rates

    Top of the pile . . . the Aussie dollar is set to break through US1.10 cents as the greenback is sold off. Top of the pile . . . the Aussie dollar is set to break through US110 cents as the greenback is sold off. Photo: AFP/Torsten Blackwood

    THE United States' radical policy of printing money while keeping interest rates near zero is taking a growing toll on the world's reserve currency, prompting financial markets to abandon the greenback.
    A broad sell-off in the US dollar yesterday drove the Australian dollar to a fresh post-float record of US109.48¢, continuing its recent stellar performance.
    The move came after the US Federal Reserve cut its domestic growth forecast and said it would keep interest rates between zero and 0.25 per cent for an ''extended period''.

    The Fed's chairman, Ben Bernanke, also confirmed the central bank would end its $US600 billion ($550 million) program of buying government bonds, known as quantitative easing, at the end of June.
    The chief currency strategist at Westpac, Robert Rennie, said that by the time quantitative easing had ended the Fed would have increased its balance sheet by $US2 trillion.
    This extra supply of US dollars, alongside the prospect of ultra-low interest rates, was likely to fuel further rises in the Australian dollar, Mr Rennie said.
    ''One of the stated aims of quantitative easing was never to debase the value of the US dollar, but if it's a byproduct, then so be it,'' Mr Rennie said.
    ''I see little to stop the Australian dollar pushing through the $US1.10 level and little to stop the euro from cracking through $US1.50.''

    The chief economist at JP Morgan, Stephen Walters, said news that the Fed would cease buying bonds at the end of June had also fanned market fears that there would be a shortage of buyers after this date.
    Some investors thought the lack of buyers could push up interest rates from their low levels, which could threaten the US economic recovery, Mr Walters said.
    However, he dismissed these fears as unwarranted, saying there were clearly enough buyers for Treasury bonds aside from the US government.
    ''It's just a knee-jerk reaction. It's not a long-term argument, but that's the way the market is interpreting it,'' Mr Walters said.
    Despite the US dollar sell-off, Nomura's chief economist, Stephen Roberts, said the US economy's prospects were looking up thanks to its unconventional policies.
    Ultra-low interest rates were likely to help growth in the US to accelerate towards 3 per cent this year, he said, and inflation remained tame.

    Analysts think the Aussie dollar will continue to hold the upper hand over the greenback until there is a narrowing in the interest rates charged in the two countries.
    While US rates were likely to stay at their depressed levels for now, Mr Roberts predicted the Reserve Bank would soon opt to raise the cash rate from 4.75 per cent in response inflationary pressures.
    ''We are clearly getting closer to the point where the next rate move is up, and that marks us out as different from the US,'' Mr Roberts said.


    28 Apr 2011

    Fed Halting Bond Purchases Equals Big Problems

    With the Fed signalling that it will keep interest rates low causing gold and silver to take off to the upside, today King World News interviewed the man Jim Rickards calls the best bank analyst in America, Chris Whalen of Insititutional Risk Analytics to get his comments on the Fed’s policies. 

    When asked about Fed policy Whalen stated, “The bottom line is that they seem to be I think lost in a policy sense.  They are going to continue to muddle along and keep rates where they are, so there doesn’t look to be any change in price guidance coming from the Fed.  But I don’t know how they can ignore what’s going on with the financials.  If we don’t let the rates start to rise we are going to have a very serious problem with the banks because the are not making any money. Well what should they be doing?  There is no easy answer here, you know they achieved a certain stability in financial assets by keeping rates low and also through quantitative easing.  But that’s not helping households and it’s certainly not helping the housing sector because we haven’t seen the kind of trickle down in terms of liquidity in this cycle that we have seen in the past.  

    The problem is that there aren’t many ways for the Fed to help the economy if they can’t re-liquify households with cheaper credit.  So if you don’t have households getting a little bit of a lift in terms of disposable income we are not going to see a rebound in the economy.  

    You had that piece in the Times today criticizing the Fed, talking about how they are not doing enough to create jobs.  Well the Fed doesn’t create jobs.  They just provide the lubrication if you will for the real economy.  But if there is a block, and if the Fed’s low rates aren’t getting down to the household level the way they have with the banks, then you are not going to have the kind of rebound that everybody hopes for and I think in a sense expects. So when those expectations are dashed...then people are going to react negatively.”

    When asked about how Fed’s policies will influence the dollar Whalen remarked, “Well it’s baked into the pie.  Ask yourself a question Eric, where would the dollar be if the US currency wasn’t the global default as a means of exchange?  It would be much lower.  So in a sense, the adjustment of the dollar is long overdue.  I don’t like it, it doesn’t make me happy to see the dollar going down, but given the debt load we have and the absolute refusal of Americans to face reality...I think the real problem we face is not so much Fed policy, but the fact that there is no fiscal policy.”

    When asked about the Fed signalling that the bond buying would end in June Whalen replied, “Well we’ve got some deep, deep problems then Eric.  See if the you think about what they’ve been doing they have been monetizing all of the Treasury’s debt issuance.  And what that means is that they are taking the paper and the duration that paper represents which is the time value of money out of the market.  So the dealer market hasn’t had to support those inventories. 

    They took it very briefly when the Treasury issues the bonds and then the Fed buys the bonds from them and puts them on their books and they pay cash for them.  So their is no leverage, the street doesn’t have to support any of that paper with leverage.  And so the Fed has been saying to them go and put your money in other things...and the Fed is hoping that eventually this cash is going to go into something productive.” 

    The KWN interview with Chris Whalen will be released shortly and you can listen to it by CLICKING HERE.


    Barack Obama Provides Birth Certificate- Is It Fake?

    Our investigation of the purported Obama birth certificate released by Hawaiian authorities today reveals the document is a shoddily contrived hoax. Infowars.com computer specialists dismissed the document as a fraud soon after examining it.
    Check out the document released by WhiteHouse.gov for yourself.
    Upon first inspection, the document appears to be a photocopy taken from state records and printed on official green paper. However, when the government released PDF is taken into the image editing program Adobe Illustrator, we discover a number of separate elements that reveal the document is not a single scan on paper, as one might surmise. Elements are place in layers or editing boxes over the scan and green textured paper, which is to say the least unusual.
    When sections of the document are enlarged significantly, we discover glaring inconsistencies. For instance, it appears the date stamped on the document has been altered. Moreover, the document contains text, numbers, and lines with suspicious white borders indicating these items were pasted from the original scan and dropped over a background image of green paper.

    VIDEO: Alex Jones gives proof that Obama’s purported birth certificate is fraud.

    Let’s assume the state of Hawaii scanned the original document and placed it on the green textured background. This does not explain the broken out or separate elements. There is no logical reason for this to be done unless the government planned to modify the document and make it appear to be something other than it is.
    There are two elements of interest, as shown in the image to the above – both entries for the date accepted by the local registry. This appears to have been modified in an image editing program.
    The media was quick to dispel the fact the document was modified. “Our analysis of the latest controversy: The original birth certificate was probably in a ‘negative’ form, and someone at the White House took it upon themselves to doctor it up so the form can be readable,” writesJoe Brooks for Wireupdate.
    Nathan Goulding, writing for the National Review, tells us anybody can open the White House released PDF in Illustrator and it will break out into layers. “I’ve confirmed that scanning an image, converting it to a PDF, optimizing that PDF, and then opening it up in Illustrator, does in fact create layers similar to what is seen in the birth certificate PDF. You can try it yourself at home,” he writes.
    Indeed, but this does not answer the question why in the Obama birth certificate PDF the layers or elements contain dates – which appear to be modified – and the signature of the state registrar. If the document was acquired from state records in whole, why was in necessary to add elements? Goulding and Brooks do not address this issue.
    As Market-Ticker.org points out, it may prove to be significant that two of the boxes appear over both of the “date accepted” boxes, as well as the “Mother’s occupation box.” Was there a need to tamper with the dates on the document or other areas? The recent stamp date and issuing signature of the state registrar also contain an edited layer.
    Questions have also been raised about the number at the top of the document issued by the Department of Health, number 61 10641, as one part of the number is in a separate layer when viewed in Illustrator, as demonstrated in the video above. This may prove to be significant. A long form birth certificate obtained by the Honolulu Star in 2009 from a female born one day after Obama and whose form was accepted three days after Obama’s document contains a Dept. of Health number that is lower, 61 10637. There are others subtle differences, such as the use of “Aug.” for the date rather than “August,” and the use of “Honolulu, Oahu” rather than “Honolulu, Hawaii” (seen also in the 1962 certificate below) which may or may not be significant.
    More to the point, this certificate and others, like the one posted below it, have visible seals. No issuing seal can be seen on the document released today by Obama.
    Negative of long form birth certificate for Aug. 5, 1961 birth in Honolulu, released in 1966 with seal and dated signatures.Published by Honolulu Star and World Net Daily in 2009.
    Long form certificate for Aug. 5, 1961 birth in Honolulu.
    Photo of physical copy of long form birth certificate for June 15, 1962 birth in Honolulu, also with visible seal.
    Photo of physical copy of long form certificate for June 15, 1962.
    Infowars will continue to analyze this issue as more information comes in. It is significant that the Obama Administration was pressured into responding to this controversy, whatever the final analysis of this document. However, the administration still needs to release his other records which have been sealed at great expense. Is there an issue with his being naturalized in Indonesia? Why are his college records at Columbia and Occidental sealed, and what do they contain? Did Obama travel to Pakistan on a foreign passport? These questions and many others have not been properly answered.
    What do you think? Leave comments below.