How Money Works

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May 27, 2010 04:01 PM

Dear CIGAs,

What makes something a standard is because there is a restricted supply of it.


We have all seen those movies with rooms full of gold. Well this is far from reality. In fact there is very little gold around.

Below is a metric tonne of gold. It is only 15 cubic inches. Only slightly larger than a milk crate!

If you collected all the gold ever extracted from the earth and stacked it up in a column with the same base size as the Washington Monument you would get this. ALL THE GOLD IN THE WORLD!!!

How big is a tonne of gold?
Gold is traditionally weighed in Troy Ounces (31.1035 grammes). With the density of gold at 19.32 g/cm3, a troy ounce of gold would have a volume of 1.61 cm3. A metric tonne (equals 1,000kg = 32,150.72 troy ounces) of gold would therefore have a volume of 51,762 cm3 (i.e. 1.61 x 32,150.72), which would be equivalent to a cube of side 37.27cm (Approx. 1′ 3”).

Gold is measured in Troy ounces and 1 Troy ounce equals 1.0971428571 ounces.

1 metric tonne = 32,150.746 Troy ounces
1 long ton of 2240 lb (UK) = 32,666.667 Troy ounces
1 short ton of 2000lb (US) = 29,166.667 Troy ounces

A cubic centimetre of gold will weighs 19.3 grams.
A cubic meter of gold will weighs 19.3 tonnes.
A cubic inch of gold will weighs 315.2 grams = 10.13 troy ounces = 11.06 avoirdupois (ordinary) ounces.
A cubic foot of gold will weighs 545.225 kilos = 1188.6 pounds (avoirdupois).

approx. 18″ square for the ton

At the end of 2001, it is estimated that all the gold ever mined amounts to about 145,000 tonnes.

If you took all of the gold in the world and put it in one place how much would there be?

It is amazing, but the total amount of gold in the world is a surprisingly small q uantity. Here’s how you can calculate the total amount that is available.

If you look at a page like this one, or if you look it up in an encyclopedia, you will find that the annual worldwide production of gold is something like 50 million troy ounces per year. Gold has a specific gravity of 19.3, meaning that it is 19.3 times heavier than water. So gold weighs 19.3 kilograms per liter. A liter is a cube that measures 10 centimeters (about 4 inches) on a side. There are 32.15 troy ounces in a kilogram. Therefore, the world produces a cube of gold that is about 4.3 meters (about 14 feet) on each side every year. In other words, all of the gold produced worldwide in one year could just about fit in the average person’s living room!

This cube weighs 1,555,210 kilograms (3,110,420 pounds). A recent spot price for gold was $256.10 U.S. — using that number, all of the gold produced in a year is worth $12,805,000,000. That’s a lot of money, but not an unimaginable amount. For example, that’s about how much the Pentagon spent launching the GPS satellite system. NASA’s budget in 1998 was $13.6 billion.

Figuring out the total amount of gold that has been produced by man is a little harder. To get at some kind of estimate, let’s figure that the world has been producing gold at 50 million ounces a year for 200 years. That number is probably a little high, but when you figure that the Aztecs and the Egyptians produced a fair amount of gold for a long time, it’s probably not too far off. Fifty million ounces * 200 years = 10 billion ounces. Ten billion ounces of gold would fit into a cube roughly 25 meters (about 82 feet) on a side. Consider that the Washington Monument measures 55 feet by 55 feet at its base and is 555 feet tall (17 x 17 x 170 m). That means that if you could somehow gather every scrap of gold that man has ever mined into one place, you could only build about one-third of the Washington Monument.


Traditional American Values Are Dead and Buried?.. UN Swaps One Fear for Another

Traditional American Values Are Dead and Buried?

Monday, May 24, 2010 by Staff Report

Who owns America today? … Perhaps the greatest threat to … the tea party is that they appear to be arguing a case that, for all practical purposes, has already been settled for the majority of Americans. The America of the Founding Fathers roots a modest, decentralized, and agrarian nation is gone, or is at least being pushed to the demographic margins, inhabiting the great red swath of the country’s middle. Politically, the America of today is as much a product of Lyndon Johnson and Franklin Delano Roosevelt as James Madison and Thomas Jefferson of the sprawling government programs of Medicaid and Social Security as much as the Second Amendment and its provision for nongovernment militias. Though he was speaking of … the Civil Rights Act specifically, Republican National Committee Chairman Michael Steele’s comment Sunday morning on “Fox News Sunday” appears to be broadly relevant to the tea party as a viable political movement: “The philosophy was misplaced in these times,” he said. “The philosophy got in the way of reality.” Christian Science Monitor

Dominant Social Theme: It’s ovah! The blue states have won. Federal government activism is gloriously ascendant.

Free-Market Analysis: Working closely together, we Bell staffers have developed a most un-libertarian, hive-like mentality. These days, buzzing in our brains are recollections, often, of the compelling Claudius books by Robert Graves. What comes to mind, however, is not so much the pomp and decrepitude that Graves brought to life as the books’ over-riding, semi-tragic perspective that the Republic was gone and could not be brought back.

Indeed, the theme of Roman republicanism-now-lost hangs over these books and in our humble opinion lifts them into the realm of great art. Not only does Graves have an apparently thorough grasp of ancient times, but he is able to bring these times to life and to inhabit them with living, breathing creatures who are often among the most maleficent and fascinating since Edward de Vere, 17th Earl of Oxford, wrote his great character-driven plays (Hamlet, Othello, Macbeth, etc.).

Graves’ insight was to utilize the Roman emperor Claudius as the narrator for these two books (I, Claudius, and Claudius the God). Who was this historical personage? Wikipedia tells us that “Tiberius Claudius Caesar Augustus Germanicus (1 August 10 BC 13 October AD 54; Tiberius Claudius Drusus from birth to AD 4, then Tiberius Claudius Nero Germanicus until his accession) was the fourth Roman Emperor and a member of the Julio-Claudian dynasty, ruling from 24 January AD 41 to his death in AD 54. Born in Lugdunum in Gaul (modern-day Lyon, France) to Drusus and Antonia Minor, he was the first Roman emperor to be born outside Italia.”

And further …

He was reportedly afflicted with some type of disability, and his family had virtually excluded him from public office until his consulship with his nephew Caligula in AD 37. Claudius’ infirmity may have saved him from the fate of many other Roman nobles during the purges of Tiberius’ and Caligula’s reigns; potential enemies did not see him as a serious threat to them. His very survival led to his being declared emperor (reportedly at the insistence of the Praetorian Guard) after Caligula’s assassination, at which point he was the last adult male of his family. (- Wikipedia)

It was Graves’ great fictional conceit (which in fact has some historical justification) that Claudius was among the most literate, thoughtful and generally best emperors of the generally horrid Roman imperium. Here’s a good Amazon book review by “Mary Whipple” that sums up the matter:

Arguably the greatest fictional biography ever written. December 5, 2006 … In I, Claudius, Robert Graves creates the first person narrative of Claudius Drusus Nero Germanicus, known in Roman history as Claudius, and widely regarded as an idiot. Telling the story of his family’s rule from the beginning of the Christian era until his death fifty years later, Claudius relates stories of his grandmother Livia, one of the most treacherous women in history, a woman who manipulated the imperial succession through poisonings, assassinations, marriages, and secret alliances. The reign of her son Tiberius is bloody, murderous, and corrupt. Tiberius’s succession by Caligula, his insane grandson and the protege of Livia, takes Rome into even more terrifying debauchery. Claudius’s ultimate succession to the throne is widely regarded as a joke.
In Claudius, the God, Graves continues the story of Claudius, who is hugely popular when he first becomes Emperor, refusing many of the numerous titles claimed by his predecessors because he believes he has not yet earned them. Gradually, we observe the truism that “power corrupts and absolute power corrupts absolutely.” His invasion of Britain, his relationship with his wife Messalina, and his attempts to control the succession to the throne show his attempts to manipulate Roman history and his own legacy. The reader develops enormous sympathy for this man who began his reign with pure motives but who was ultimately powerless to control his own destiny and that of Rome.

Characters are complex, fully developed humans, instead of cardboard, costumed ancients, and their machinations, though extremely bloody, show the conflicts that occur when absolute rule and republican sentiments contend for dominance, a conflict in which Graves says he saw parallels to World War I and its aftermath. Taken together, these two novels of Claudius constitute what is arguably the greatest fictional biography ever written. Precise historical detail creates a rich tapestry of life in the period, while, at the same time, Graves’s keen awareness of psychology leads to vibrant and believable characters behaving badly. The values (and lack of them) in the period are presented in dramatic scenes of violence and excess, and the fickleness of the masses (whom Claudius calls “the frog pool”) is both realistic and sadly universal.

Graves apparently had the ramifications of World War One and the decline and fall of the British Empire in mind when he wrote these books. In looking at the startling unwinding of what is left of American exceptionalism, especially, we find ourselves reminded over and over of Claudius’ dilemma as related by Graves the yearning for a bygone republic (the Roman republic) that Claudius shared (as Graves’ relates it) with other academics and romantics of his day.

While many items, anecdotal and otherwise, remind us of Graves’ great work, this CS Monitor article, excerpted above, is among the most startling. At least Graves didn’t CELEBRATE the demise of the Roman republic. No, for him and his protagonist, the expansion of empire can be perhaps justified or at least comprehended but never truly endorsed. Both books, but especially the first, show in great detail just what the establishment of an empire entails, with all its murder, moral, spiritual and economic degradation and degeneration.

In fact, we had to read the article in question twice to fully absorb what we consider to be its wrongheadedness. Are we supposed to be relieved, or at least satisfied that, “The America of the Founding Fathers roots a modest, decentralized, and agrarian nation is gone, or is at least being pushed to the demographic margins, inhabiting the great red swath of the country’s middle?”
Here’s some more from the article, which is actually built around Kentucky conservative/libertarian senatorial candidate Rand Paul’s recent “controversial” remarks regarding the constitutionality and appropriateness of the nation’s far-reaching Civil Rights Act of the early 1960s. (The general gist of his remarks was that from a philosophical standpoint, anyway, the federal government might have been seen as over-reaching.)

What the tea party wants … While Paul’s comments are political gaffes, they do not appear to be too far afield from tea party doctrine to the degree that such a thing exists. The battle flag of the tea parties has been the Revolutionary War “Don’t Tread on Me” banner. But the enemy to liberty, in this instance, is not the British, but the overbearing American government itself. The tea parties’ 10-point Contract From America includes “restore fiscal responsibility and constitutionally limited government in Washington.” As if to underscore the point, it also includes: “demand a balanced budget” and “end runaway government spending.”

Paul has been anointed to carry this gospel to Washington, and in each instance, Paul’s comments last week spoke to the desire to lessen the grip of the American government on its people in this case, business. In theory, almost all Republicans have this aim. The difference between Paul and more mainstream Republicans, however, has been his apparent willingness (or inability not to) speak the pure doctrine of Barry Goldwater libertarianism regardless of the political costs.

Paul is burrowing deep into political theory. The fundamental question he is raising is: Who should be in charge of changing the United States the government or the American people themselves? Tea party principle, as interpreted by Paul, suggests that the American people must be free to evolve on their own. In other words, business-owners should have the right to discriminate even though Paul says he “abhors” racism because the alternative is a slippery slope of government interference, leading to tyranny.

For people like Paul, the hope is problems such as racism will be increasingly exposed as abhorrent, and society will gradually change on its own without government interference. Yet on race in particular, one prominent conservative abandoned this philosophy. The late William F. Buckley Jr., founder of the National Review, originally opposed the Civil rights Act. “I once believed we could evolve our way up from Jim Crow,” Mr. Buckley said in 2004, according to The New York Times. “I was wrong: federal intervention was necessary.”

There is a “gotcha” aspect to all this that we have noted before in other American mainstream-media references to the apparent demise of Thomas Jefferson’s vision of an agrarian republican nation-state. The article’s implications are obvious: In the modern world, freedom is not free and the US federal behemoth soon to redistribute up to 40 percent of this bleeding nation’s wealth is both inevitable and apparently necessary.

At least Robert Graves had the decency not to celebrate the demise of the republic. In fact the Claudius books are nothing if not a cautionary tale as to what happens to a society that degenerates as Rome did. As for William F. Buckley, the libertarian movement in America reflects (and correctly in our opinion) an increasing Rothbardian repugnance toward this legendary intellectual. In fact, Buckley, a walking, talking mechanism of cognitive dissonance, spent his adult life celebrating free-markets while seemingly endorsing (or at least ignoring) the gamut of military-industrial activities undertaken by the Pentagon and America’s spying agencies.

We’ve stayed away from commenting on Rand Paul’s remarks directly, for the issue has blown up into a national controversy and plenty of publications have covered it. What we are fascinated with is the approach that the CS Monitor has taken to the subject by implying (regardless of the appropriateness of Rand Paul’s remarks) that he is likely standing futilely athwart the path of history and shouting “stop!”

Now we can recognize a dominant social theme when we see one (the Bell is supposed to sniff them out, after all). We are sufficiently cynical to suggest that one reason for Graves’ continued success and celebration by the powers-that-be (other than the greatness of the work itself) is that it delivers the message that empire is implacable and irreversible. And that is what this article is implying heck, stating!

We have a meme of our own to suggest. We regularly offer up the idea that the Internet is the second, modern communications’ revolution of the past 500 years, and is putting “the hurt” on power-elite fear-based promotions. The first one (initiated by the Gutenberg press) eventually resulted, one way or another, in the Renaissance, the Reformation, “these united States” and a host of other far-reaching changes. These happened despite ongoing wars and an apparent determination by the powers-that-be to roll back the transformative aspects of Gutenberg’s book-printing invention.

There are similarities between then and now in terms of the elite’s increasing dysfunction. The elite is fairly obviously applying 20th century damage-control techniques to a 21st century problem. In the 20th century, when a fear-based promotion was in danger of unraveling, the elite could bring to bear all the academic, media and governance forces at its disposal to make sure that the problem was snuffed out and credibility restored. In the 21st century, the elite has seemingly lost control of various portions of its command-and-control apparatus. The Internet is an evolving emergency, not amenable to one-time fixes.

Most damagingly, the elite’s mainstream media is not fully in control of fear-based messaging any more and thus problems that might have been quickly alleviated, linger and drastically erode the believability of what has been painstakingly created with tremendous cost and clout. Not only that, but each erosion subtly effects the rest. The ongoing degeneration of the global warming theme has eroded the ability of the elite to justify other power grabs and even to create additional promotional spin-offs as planned.

A most successful dominant social theme for the power elite in the 20th century was the whole promotion of regulatory democracy as the only logical and inevitable methodology of governance. Today, we would argue, this meme is increasingly under siege along with central banking, so-called international trade agreements and, in fact, the entire superstructure of global government.
Rand Paul’s Kentucky nomination in the US, the Tea-Party movement itself, along with the destabilization of the euro and the EU itself are signs from our perspective that the inevitability of regulatory democracy is finally being questioned by the West’s long-suffering citizens at a fundamental level. We reject the meme as enunciated (smugly) by the CS Monitor (and even by Graves himself, regretfully) that empire is irreversible and that what is once done, no matter how bad, cannot be undone, or at least rectified.

Conclusion: Since we are in a naming mood, we will call this dominant social theme (the inevitability of regulatory democracy and the expansion of the Anglo-American empire) the “I Claudius meme.” If we are correct, the insanity of current Western governance with its endless warring, destructive taxation and phony money printing will eventually go the way of Rome itself falling silent as something else evolves.

UN Swaps One Fear for Another

Monday, May 24, 2010 by Staff Report

Goods and services from the natural world should be factored into the global economic system, says UN biodiversity report … The economic case for global action to stop the destruction of the natural world is even more powerful than the argument for tackling climate change, a major report for the United Nations will declare this summer. The Stern report on climate change, which was prepared for the UK Treasury and published in 2007, famously claimed that the cost of limiting climate change would be around 1%-2% of annual global wealth, but the longer-term economic benefits would be 5-20 times that figure. The UN’s report dubbed the Stern for Nature is expected to say that the value of saving “natural goods and services”, such as pollination, medicines, fertile soils, clean air and water, will be even higher between 10 and 100 times the cost of saving the habitats and species which provide them. To mark the UN’s International Day for Biological Diversity, hundreds of British companies, charities and other organisations have backed an open letter from the Natural History Museum’s director Michael Dixon warning that “the diversity of life, so crucial to our security, health, wealth and wellbeing is being eroded”. UK Guardian

Dominant Social Theme: OK, OK, global warming didn’t work out, but now we’ve got one that will really run shivers up and down your spine the “destruction of the natural world.”

Free-Market Analysis: There are many that would maintain the larger Daily Bell approach to news and analysis is fatally flawed by its analysis of a non-existent power elite. For those who adopt this argument, the world runs on serendipity and there is no rhyme, nor reason to current events, human triumphs, disasters, etc. This is a perfectly logical “conditioned” way of looking at the world and one that, especially in the 20th century, was most understandable. But today there is the Internet, and here at the Bell we think the Internet has given serious students of the world-as-it-is an opportunity to “connect the dots” when it comes to the socio-political manipulation of Western nation-states and the world in general.

In this article we want to use the above news report from the UK Guardian, also featured yesterday on the Drudge report, to illustrate why we believe the Bell’s way of looking at the world may have something to it. (We want to “promote” our point of view in other words!) We think we have a case to make.

The Internet, in our opinion, has revealed a great deal of connectivity between some of the wealthiest funds, families and non-profits and various manipulations of industries, politics and even military initiatives. These connections are abetted by the power elite’s lack of anticipation as regards the Internet, and the maintaining and expanding of a fairly sizable paper trail throughout the 20th century one that in large part has found its way on-line. It is thus fairly easy to find out who funded what initiative and who was in favor of this promotion or that one. (We have noticed in our several decades of trolling the web that this paper trail has diminished rather markedly of late at least as it concerns Google. But the information is still “out there.”)

Another reason the elite left a paper trail is because those involved (not very many) were fairly paranoid about being accused of doing anything in secret. If one is worth literally trillions, then it makes sense to support an ever-expanding regulatory democracy because regulations can always be traduced by smart lawyers, accountants, etc. given access to enough funds.

This is the reason, in our opinion, that the power-elite feeder system focuses on symbol manipulators from the best Western universities. Thus it is, that the smartest symbol manipulators (often those with unusual mathematical aptitude) are hired by the biggest corporations and financial firms because these entities need to work around the rules and regulations hemming in the “little guy.”

The elite may take its decisions in private, but it has constructed a vast matrix of academic, political and non-profit entities that “paper” the decisions that likely have already been made. This is the reason that those in elite positions are often seen as giving speeches or disseminating policy statements that provide valuable clues to as to what is going to happen next from economic, industrial and sociopolitical policy perspectives.

The above report in the Guardian is a good example of how this elite programmatic element actually works. The UN, from our perspective anyway, is a perfect example of a power elite vehicle, one established primarily as a receptacle for the elite’s fear-based dominant social themes. These themes propose a problem anything from global-warming, to over-population, to economic catastrophe. But it is just as important to have an authoritarian receptacle providing a solution (the UN) that can further consolidate the wealth and power that fear-based promotions are supposed to generate.

In the case of the upcoming announcement about biodiversity and humans “destruction of the natural world,” we would argue that the powers-that-be are returning to the hoary global-warming promotion from a different angle. UN-o-crats are still arguing that the environment is “at risk” only now humans are creating problems through industrial EXPLOITATION rather than outright “carbon pollution.”

Being somewhat cynical (it’s true), we don’t buy either of these memes. We didn’t believe in carbon pollution causing global warming even when it was fashionable to do so. We believe even less, if that’s possible, that individual human beings are “degrading” the environment its flora and fauna in catastrophic ways, or that the UN can actually do anything about it even if it were occurring. (It is the nature of evolution to shape and reshape all living things via extinction, which is a natural process not some sort of manmade disaster.) That this latest warning comes from the same outfit that documented the “damages” from carbon pollution, is not exactly a confidence builder. Here’s some more from the article:

The UN report’s authors go further with their warning on biodiversity, by saying if the goods and services provided by the natural world are not valued and factored into the global economic system, the environment will become more fragile and less resilient to shocks, risking human lives, livelihoods and the global economy. …

The report will advocate massive changes to the way the global economy is run so that it factors in the value of the natural world. In future, it says, communities should be paid for conserving nature rather than using it; companies given stricter limits on what they can take from the environment and fined or taxed more to limit over-exploitation; subsidies worth more than US$1tn (£696.5bn) a year for industries like agriculture, fisheries, energy and transport reformed; and businesses and national governments asked to publish accounts for their use of natural and human capital alongside their financial results.

And the potential economic benefits are huge. Setting up and running a comprehensive network of protected areas would cost $45bn a year globally, according to one estimate, but the benefits of preserving the species richness within these zones would be worth $4-5tn a year. The report follows a series of recent studies showing that the world is in the grip of a mass extinction event as pollution, climate change, development and hunting destroys habitats of all types, from rainforests and wetlands to coastal mangroves and open heathland. However, only two of the world’s 100 biggest companies believe reducing biodiversity is a strategic threat to their business, according to another report released tomorrow by PricewaterhouseCoopers, which is advising the team compiling the UN report.

[This] report shows that on average one third of Earth’s habitats have been damaged by humans but the problem ranges from zero percent of ice, rock and polar lands to 85% of seas and oceans and more than 70% of Mediterranean shrubland. It also warns that in spite of growing awareness of the dangers, destruction of nature will “still continue on a large scale”. The International Union for the Conservation of Nature has previously estimated that species are becoming extinct at a rate 1,000 and 10,000 times higher than it would naturally be without humans.

We remember when hysteria was at its manufactured height prior to the miserable failure of the Copenhagen conference on global warming. At the time, top officials at the UN were literally claiming that the “world” was at risk and that the next few months were going to be critical in terms of humankind’s survival and life on the planet as we know it. Well, Copenhagen fizzled and life has gone on. In fact, as we have long-maintained, the effective dissemination of these fear-based promotions is foundering thanks in large part to the Internet (and also the anger and enlightenment caused by the ongoing financial crisis). People actually understand the mechanisms and are catching on to the manipulation.

Admittedly, this is non-scientific opinion, but we read feedbacks at mainstream media news sites and inevitably they are filled with comments that make our Bell articles look, well … tame by comparison. The amount of non-believers roaming the blogosphere is large, astonishingly well informed and not at all inclined to take the authorities at face value anymore. And those circulating in leadership roles at major, elite groups seem increasingly aware. Alternative news reporter Paul Joseph Watson recently pointed out the following in an article entitled Brzezinski Decries “Global Political Awakening” During CFR Speech, as follows:

At a recent Council on Foreign Relations speech in Montreal, co-founder with David Rockefeller of the Trilateral Commission and regular Bilderberg attendee Zbigniew Brzezinski warned that a “global political awakening,” in combination with infighting amongst the elite, was threatening to derail the move towards a one world government. … Brzezinski then explained another significant factor in that, “For the first time in all of human history mankind is politically awakened that’s a total new reality it has not been so for most of human history.”

Brzezinski continued, “The whole world has become politically awakened,” adding that all over the world people were aware of what was happening politically and were “consciously aware of global inequities, inequalities, lack of respect, exploitation. … Mankind is now politically awakened and stirring,” said Brzezinski, adding that this in combination with a fractured elite “makes it a much more difficult context for any major power, including currently the leading world power, the United States.”

We will stick with our paradigm until we see evidence that it doesn’t explain what’s going on in the world today. But the UN’s transparent (almost pathetic at this point) attempt to swap one global, environmental fear-based meme for another and Brzezinski’s startling admission in Montreal provide us additional confidence we’re on the right track. In fact we’ll go even further out on a limb by writing as we have before that the power elite has not yet shown it has any answers to the truth-telling of the Internet. What was secret in the 20th century is common knowledge in the 21st.

Of course, we hope we are not foolish optimists. We try to stay level headed. But so many elite memes are under attack or foundering these days that we are having trouble keeping track of them. We are also fully aware that when powerful people are being pushed the usual solution is to push back with some sort of military activity. A war in, say, Iran might fit the bill, given other economic and socio-political difficulties faced by the elite. We don’t necessarily anticipate it, but we are certainly more concerned about that possibility than humankind’s gross, planetary depredations. Here is some war news from the Western intel-analysis webiste DEBKAfile:

Obama starts massive US Air-Sea-Marine build-up opposite Iran … DEBKAfile’s military sources report a decision by the Obama administration to boost US military strength in the Mediterranean and Persian Gulf regions in the short term with extra air and naval strike forces and 6,000 Marine and sea combatants. Carrier Strike Group 10, headed by the USS Harry S. Truman aircraft carrier, sails out of the US Navy base at Norfolk, Virginia Friday, May 21. On arrival, it will raise the number of US carriers off Iranian shores to two. Up until now, President Barack Obama kept just one aircraft carrier stationed off the coast of Iran, the USS Dwight D. Eisenhower in the Arabian Sea, in pursuit of his policy of diplomatic engagement with Tehran.

For the first time, too, the US force opposite Iran will be joined by a German warship, the frigate FGS Hessen, operating under American command. It is also the first time that Obama, since taking office 14 months ago, is sending military reinforcements to the Persian Gulf. Our military sources have learned that the USS Truman is just the first element of the new buildup of US resources around Iran. It will take place over the next three months, reaching peak level in late July and early August. By then, the Pentagon plans to have at least 4 or 5 US aircraft carriers visible from Iranian shores.

Conclusion: The difficulty with attempting to decipher elite memes and actions in the era of the Internet is that as the workability of fear-based memes has decreased, the level of uncertainty regarding elite actions and their effectiveness has actually increased. There are many ways of looking at them. Military analysts, for instance, point out that additional naval strike forces could actually be aimed at dissuading Israel from a nuclear attack on Iran. Yet, just as possibly, America may be positioning itself for a quick and overwhelming attack on Iran, one that could conceivably utilize “tactical nuclear” weapons to ensure victory. If military activities do commence in this part of the Mideast, one could conceivably see huge price hikes in precious metals, oil and other important or valuable commodities. On a more basic level, a nuclear war, even a limited one, would constitute a REAL degradation of the environment. There’s something for the UN to work on.

U.S. Mint Sales Are Over the Moon

Gold recovered from its little pounding in early Far East trading on Friday morning… and then rallied right into the Hong Kong close. But once the Far East was done trading for the weekend, the selling pressure resumed into gold’s New York low of $1,169.60 spot, which occurred a few minutes after 9:30 a.m. Eastern time. From that low, gold rallied into the London p.m. fix at 10:00 a.m. New York time, before getting sold off… but then rallied to its high of the day [$1,188.90 spot] about 11:45 a.m. Eastern. Then it got sold off into the Comex close… and flat-lined for the rest of the trading day. All in all, it wasn’t a very exciting trading day… but a new low was set for this move down… and, without doubt, there was more tech fund long liquidation.

Silver traded in a twenty cent range for virtually the entire day on Friday… but the bullion banks did set a new low price for the move. That low came at the same time as gold’s… minutes after 9:30 a.m. in New York. That low price was $17.40 spot… followed by silver’s high at 11:45 a.m. Eastern time at $17.88 spot. From there, silver drifted lower into the close and finished up a whole penny from Thursday. With that new low for this move down, there was certainly more tech fund long liquidation.

The dollar was all over the map during Friday’s trading… but ended up closing down a little over 50 basis from its Far East open at 6:00 p.m. on Thursday evening. Needless to say, the dollar’s movements had no effect on precious metals prices yesterday. Here’s the 3-day dollar graph. In those three days, the dollar has lost about 175 basis points… and the precious metals got creamed. But as you know, dear reader, the precious metals price action was in the hands of the bullion banks… and when that’s going on, it matters not what the dollar is doing.

The HUI chart pretty much followed the gold and silver price action… with the low of the day coming at the lows for these two metals…which was minutes after 9:30 a.m. Eastern time… and moments after the equity markets opened. It’s all there… the London p.m. gold fix, the little sell-off afterwards, the rise to the highs of the day around 11:45 a.m… then the slow decline until 3:15 p.m. Eastern time when the Plunge Protection Team showed up [for the second time] to goose the equity markets and reverse a serious decline in the Dow. It worked like a charm… and also lifted the HUI to a positive close of 0.32% on the day. We owe “Helicopter Ben” et al a big thank you for that.

The CME’s Daily Delivery report showed that 172 gold and 35 silver contracts were posted for delivery on Tuesday. The list of issuers and stoppers may be of interest to some… and the link is here. There were no changes reported by either the GLD or SLV ETFs yesterday… and considering how badly the prices of both gold and silver have been crushed during the past week, this is quite amazing.

The U.S. Mint had another report yesterday. One-ounce gold eagle sales were up another 15,000 to 142,500 for the month so far. Another 3,500 24k-gold eagles were also sold… for a total of 61,000 for the month. And 381,000 silver eagles were sold as well… bringing April’s silver eagle sales up to a whopping 3,040,500 for the month. These are huge numbers, dear reader… and as I’ve been saying all week, it’s a good bet that a lot of these bullion coins are headed for Europe. I hope you’re getting your share as well.

The Comex-approved depositories showed another decline on Thursday. This time they reported silver stocks down 582,801 troy ounces. The 2.4 million ounces that the Comex brought in a week ago Friday, was obviously meant for the deliveries that have been ongoing all this past week… and they’ve gone through most of it in the last four days. You may ask [and rightly so] why the Comex just doesn’t deliver from the stocks they have on hand. Well, there’s a very good reason for that, and it goes like this… every single ounce of that silver sitting in those four Comex warehouses is owned by someone; a financial institution, a user, a private investor… and the list goes on. Of that group, nobody wants to sell at the current price, so if the Comex wants to fulfill their delivery requirements, they have to bring in silver from outside the Comex for that purpose… or they would be in default… and that’s what they’ve been doing. On the other hand, if they couldn’t get it from outside sources, then they’d have to bid up the price high enough that some of the holders of Comex silver would be willing to part with it. And that, dear reader, would drive the silver price up substantially in a very short period of time… and we mustn’t have that, now must we?

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The Commitment of Traders report was a disappointment… at least for me… although Ted Butler had an explanation which, quite frankly, would be over the heads of most people… so I will not get into here. Ted explains some of it in his weekly interview with Eric King over at King World News further down.

Anyway, the COT report [for positions held at the end of trading on Tuesday] showed that the bullion banks increased their net short position in silver by an absolutely monstrous 6,700 contracts… which translates into 33.5 million ounces of paper silver. That’s 18 days of world silver production that the bullion banks went short in one five day period! There are currently 89,453 contracts held short in the Commercial [bullion bank] category. Of that amount, the ‘4 or less’ traders are short 49,500 contracts of that… which is 55.3% of the entire gross short position. The ‘8 or less’ traders are short 73.6% of that 89,453 contracts. This concentration is grotesque and obscene. A lot of people should be in jail for this.

There was a small improvement in the Commercial net short position in gold this past week… but it was a miniscule 2,900 contracts. The net paper short position in gold [as of Tuesday’s cut-off] stood at 28.0 million ounces. The ‘4 or less’ bullion banks hold 21.5 million ounces of that… and the ‘8 or less’ traders hold 27.1 million ounces short.

Lot of people think that this situation is perfectly OK… but we know better. The link to this week’s COT report is here.

Of course, since the Tuesday cut-off, the bullion banks have been covering shorts [or going long] like crazy every since… and next Friday’s COT will show a vast improvement. How vast still remains to be seen.

Here’s Ted Butler’s interview with Eric King over at King World News… and I urge you to stop reading and listen carefully to what he has to say. The link is here.

Well, it’s now official, German lawmakers bit the bullet and bailed out Greece… and the associated EU bankers. I thank Washington state reader S.A. for sending me this Bloomberg story headlined “German Lawmakers Approve Share of $1 Trillion Bailout”… and the link is here.

Along a similar line, comes this story posted at the English language website of It’s courtesy of reader Roy Stephens… and the headline reads “EU agrees on coordinated action, financial sanctions”. In my opinion, all this does is delay the inevitable… and the link is here.

Here’s another Bloomberg story courtesy of reader S.A. The headline reads “CFTC Set to Limit Oil Speculation With Senate Backing”. It remains to be seen if CFTC chairman Gary Gensler et al, get around to setting position limits in silver. He know what has to be done… but will he do it? The link to the story is here.

This next item is a very short read… and has an interesting set of numbers to go with it. The title is on the longish side… but explains all… “32 States Have Borrowed from the Federal Government to Make Unemployment Payments; California Has Borrowed $7 Billion” It’s a very short read… and the list of states [and amounts] is shocking. I thank reader Scott Pluschau for bringing it to my attention. It’s posted over at… and the link is here. It’s worth your time.

Here’s another story provided by reader Roy Stephens. This one is about silver. The article was written by Mark O’Byrne, director of GoldCore… and it’s posted over at and bears the headline “Why silver could soon take off”. There are a lot of good graphs… and it’s certainly worth the read… and the link is here.

The next story is definitely gold related… and is headlined “10 Gold Charts Commercial Investment Firms Never Want Clients to See”. There are very good reasons why they don’t want to, either. The charts show that, priced in gold, most Western stock indexes have declined over the last decade. This is an excellent piece… and is a must read. It’s posted over at… and the link is here.

The next gold-related story is also very much worth your time. It’s a piece from today’s edition of The Wall Street Journal. Since you would normally need a subscription to view the whole thing… GATA was kind enough to post it in the clear. The headline reads “A Billionaire Goes All-In On Gold”… and the link to this must read story is here.

Here’s a story courtesy of reader Scott Pluschau that arrived in my in-box at 5:32 a.m. Eastern time this morning… just before I hit the ‘send’ button on this column… so I inserted it here. It’s from today’s edition of The Borneo Post of all places. The ‘Golden Dinar’ has been out of the news for many years… but it’s back again. The headline reads “Support gold dinar as alternate trade instrument, World Islamic Economic Forum members told”. The story is definitely worth your time… and the link is here.

Lastly today is another interview from the King World News web site. This one is with the always-popular Jim Rickards. As you are aware, dear reader, he’s only one of a small handful of people that I have all the time in the world for. Gold is one of the topics de jour in this interview… as is financial warfare… which F. William Engdahl spoke of yesterday. This is a must listen interview from one end to the other… and the link is here.

My ‘blast from the past’ today is a video I posted at least two years ago… and since I have many orders of magnitude more readers now… I will take the liberty of posting it again. It’s one of my favourite songs from the 1970s… and this one hails from 1976. Everyone knows it… and you can sing along if you wish. So turn up your speakers and click


Without a doubt, if the President’s Working Group on Financial Markets [the PPT] hadn’t shown up at the beginning of trading… and also again in the late afternoon on Friday… the markets would have melted down again… as that was where they were going in a hurry. Gold was headed north… and the stock markets were headed south. If that had been allowed to happened on a Friday in North America, the bloodbath in the Far East and Europe on Monday would have been catastrophic. That wasn’t allowed to happen… but it was oh so obvious… both in the stock market and the gold price.

As I keep saying… the world’s current economic, financial and monetary system is on the verge of total collapse. The only thing that concerns me is how soon it will come… and how bad it will be. That’s why I’m “all in”… like that billionaire in that story earlier in this column. I have a feeling that when gold and silver are allowed to melt up… there will be little or no entry points for anyone sitting on the sidelines. After 10 years of this… I’m not going to risk being out of position when the precious metals markets blow up, or the equity markets melt down… either accidently or deliberately.

It’s impossible to tell how far along in the liquidation cycle we are. Only JPMorgan et al know that… as do the powers that be at the Fed and the U.S. Treasury Department. I think that we’ll have to wait until June before we see any major improvement in precious metals prices. At the moment, both gold and silver are badly beaten up, but they don’t hold a candle to what happened to platinum and palladium. We should be thankful the these kinds of loses have not been visited on either gold or silver… at least not yet.

Here’s the 3-year palladium chart.

And the 3-year platinum chart.

Enjoy the rest of your weekend… and I’ll see you right here on Tuesday morning.

Tedbits: The Policies of Insolvency, Part II

Death, er… Debt Spirals; Blow Out and BLOW UP

As the currency and financial systems of the developed world’s social-welfare-states head towards their doom, the battles between King Kong (Mother Nature and Darwin) versus Godzilla (public servants and banksters) continue. After generations of defying the reality that you must produce more than you consume, the social welfare states are being presented with the bill for their unpayable social obligations.

Modern day kings and their courts in developed world capitals are learning what King Canute once did: you CANNOT stop the tides from rolling over you; man is not god; he cannot command nature or defy its laws (i.e., survival of the fittest and producing more than you consume or perish/submit to those who do) and to believe he can is FALSE. POLITICS and MAN WILL NOT PREVAIL OVER NATURE or MARKETS (which are nature).

Morally and fiscally-bankrupt public servants, ratings agencies and finance ministers can try to DECLARE that bankrupt sovereigns and financial systems are AAA, but it does not change the fact that they are BANKRUPT. They only produce PAPER illusions and, like governments and kingdoms in history tried to turn lead into gold, this form of sovereign alchemy will FAIL as well. We only wait for history to roll over them like the tides. The farther they climb out on the limb, the bigger the coming economic and financial system CRASH.

Black swans are taking flight in a number of areas; the “when hope turns to fear moment” continues to advance towards the social welfare states.

Broken promises loom. First, the entitlement promises to the something-for-nothings which have driven us to this point, and then, ultimately, to the holders of Bonds through the IOU’s in which they are denominated, known as G7 currencies (US dollars, British Pounds, Euros, Swiss Francs, Aussie and Canadian dollars.)

The greatest transfer of wealth from those who store it in paper to those who don’t has commenced: A Crack-up Boom is on the horizon.

Remember what the December 2009 Tedbits stated about the something-for-nothing societies? They will borrow until they can borrow no more, then they will print the money until it is no longer accepted. This is in full motion throughout the G7, the idea that 11 million people in Greece who have already borrowed 300 billion Euros ($396 billion) are going to be rescued by the Euro Zone by lending them another 110-120 billion Euros is FALSE, as the NEW patsies, er….. lenders shall soon learn.

“Extend and pretend” only works when income and growth can be expected to resume robustly. Obviously whoever is engineering this package FORGOT to bring the calculators to the table to see how the money might be REPAID.

For prepared investors this is the greatest opportunity in history; for those looking in the rearview mirror it is the seeds of their demise. You must learn to restore the functions of money to your fiat currencies to stop the debasement of your money. Then apply various absolute-return alternative investing techniques and the indirect exchange as outlined by Ludvig Von Mises to turn the unfolding crisis into your opportunity. Volatility is opportunity and it is about to explode.

The Greek drama is fascinating to watch and from which to learn, but it is just a small glimpse of what is to come; like a snowball rolling downhill gathers size and momentum, this crisis will also until it engulfs the base and BLOWS it apart. The belief that the EU, ECB and IMF will stop contagion is false; the cat is already OUT OF THE BAG.

PAPER is TOXIC, as are any promises of morally and fiscally bankrupt governments, central banksters and their BIG bank partners, crony capitalists and their state-run capitalist systems.

Insanity in individuals is something rare – but in groups, parties, nations and epochs it is the rule….
— Friederich Nietzsche

The insanity began with the creation of the Federal Reserve and central banks in general, but really accelerated with Bretton Woods II in 1971, when semi-reserved-backed currencies (dollars were redeemable in gold by central banks) were converted into government-sponsored FRAUD (dollars and all currencies redeemable in NOTHING) and became IOU’s.

“Prosperity was to be created out of government debt, not effective policies. That notion was so appealing to the politicians.
Greece simply carried Keynesianism to an extreme. Government workers and pensioners were to receive excessive salaries and annuities, financed by government debt, in exchange for votes. Keynesianism evolved into quite simply the substitution of government provided incomes for earnings from private activities. As we will observe in Greece, and likely in Spain, Portugal, and England, the terminal stage for a debt-financed lifestyle is a lower standard of living.
Keynesian economics, through government intervention in the real economy, creates distortions. Rather than investors placing their money at risk in sound business ventures, they are seeking to extricate it from those unsound economies. Rather than investing in those enterprises that would provide tomorrow’s economic growth, wealth is hiding in U.S. government debt. With $13 trillion of debt, the U.S. government has provided plenty of hiding space”.
Ned Schmidt

Malinvestments are at the heart of the insolvencies, as misallocated capital vaporizes the money and credit placed in them, and while other sectors which DID not receive the proper funds (due to financial system distortions) become DARLINGS sooner than later. I hope you all understand BOTH concepts outlined by Austrian economist Ludwig Von Mises:

Malinvestments (buy them when they become UNDERVALUED) and the Indirect Exchange (exchange your money for them to store your wealth and create CASH flow) are the KEYS to SUCCESSFUL investing for the foreseeable future. This will unfold over and over again until the global financial crisis ends. I am working on these subjects for readers and investors.

We are just waiting for purchasing power to collapse under the debasement which is currently unfolding both in PLAIN sight, and by stealth by morally and fiscally-BANKRUPT central bankers and public servants. All FIAT currency and financial systems (they are just credit, aka IOU’s) throughout history have fallen to their doom in insolvency, and this episode will be no different. Never in the history of the world have the outcomes been different. Let’s take a look at a recent comment from the granddaddy of newsletter writers Richard Russell:

“I want to make one thesis clear. Up until recently, gold moved inversely to the dollar. If the dollar was weak, gold rallied, and vice versa. But I believe that has changed. With the mess in Greece and other European nations (Portugal, Spain, Italy, Ireland), suspicion is rising about ALL fiat money. Increasingly, gold is considered the ONLY safe money (probably along with diamonds and famous works of art). The most stable intrinsic wealth is gold because it is priced around the world every hour of the day, and it can be sold immediately in any quantity, making it completely liquid.

As I see it, a great drama is unfolding. What we are seeing is the slow, steady decline of the greatest fraud ever perpetrated on the people of the world. The fraud I am referring to is fiat money. This is the so-called “money” created by the central banks. Fiat (non-intrinsic) money can be created at will by a central bank via a computer.

You work all your life to make a total of $900,000. The Fed, with no work or sweat on its part, can create a billion or 10 billion fiat dollars at will. Is that logical or moral? It allows politicians to spend whatever they want, and the bills are paid for in fiat money. The result is that many nations have spent far more than they ever should have, and oceans of fiat money have swept across the planet.

If you continue to produce an over-supply of an item, ultimately that item will become progressively less valuable. This is what’s happening to fiat money. As fiat money, all of it, loses value, it takes an increasing amount of a given fiat currency to buy an ounce of gold.

As economies sink, governments create an increasing amount of fiat money in an effort to jump-start their sinking economies. Thus, what we are seeing is the perfect formula for the death of fiat money. But before death, the value (purchasing power) of a given fiat money must head down.

Therefore, I view rising gold as the death knell for all fiat money. But first, investors will exit the weakest and most speculative of the various fiat monies. Right now we are seeing investors fleeing Greek money in favor of the US dollar. In the end, I believe this is a fool’s trade. Ultimately, we’ll see the final flight to safety. This will be the flight out of dollars into gold.” -Richard Russell

Thank you Richard (I urge you to subscribe – The sage Richard Russell understands it all. Look at the Greeks in the streets, their way of life having been taken for granted, built on wage, entitlement and pension promises to pay which will never be met. Now that illusion to reality is SHATTERED. Just think of all the pensions, government entrepreneurs (private sector vendors to government), Medicare, Medicaid, government-sponsored healthcare recipients, social security, public sector pensions, etc. ANYBODY dependent on government support in one way or another is about to be issued a WAKE UP call. In the G7 welfare-state economies this is OVER 50% of the economies.

This way of life planning is woven into the fabric of the developed world social welfare states, built on government promises to pay which will also NEVER be met. If you count the hundreds of trillions of dollars of entitlement and pension obligations held off balance sheet by bankrupt G7 governments, then the streets of Greece will spread to every G7 Capital. Let’s take a look at the amount of understatement of debt-to-GDP ratios, which do not include BIG “politically connected or controlled” bank debts, which are also out of control and unpayable:

Looking behind the curtain, the understated OBLIGATIONS are bigger than outlined. An example of this is Fannie and Freddie debt and guarantees which are not included in the above calculations, and amount to almost another $10 trillion. These liabilities are only � of the total, because every Dollar, Euro, Pound, Swiss Franc or whatever is also an IOU of a bankrupt G7 government, so we can double the amounts their constituents hold. Here is a chart from a recent outlining the enormous amount of money which is owed between countries, a “Web of Debt”:

Greece is but a footnote, the main event is about to unfold. When you consider this picture you now understand this was not a rescue of Greece; it was an attempt to rescue these behemoths and their CREDITORS from the meat grinder. The meat grinder is also known as Mother Nature and Darwin; politics WILL NOT prevail over fundamental insolvency which spells the demise of the unfit, morally and fiscally BANKRUPT elites, central banksters and their BIG bank cronies. But the fight is certainly interesting to watch.

These obligations are unpayable, inextinguishable and represent government fraud upon their constituents and employees. Pitting the “something-for-nothings” (welfare recipients of one sort or another), public servants and under-worked and overpaid public employees against over-worked and income-starved private sectors (destroyed by misstated inflation, over taxation, mandates, and rules and regulations that benefit crony capitalists and destroy their UN, politically-connected PRIVATE SECTOR competitors). As German Chancellor, Angela Merkel, quipped today “we have reached the fork in the road,” spelling doom for something-for-nothing societies as they grasp for lenders and cash from their private sectors, and thereby destroying the seed corn required for growth. The parasite is killing the host private sectors and is a sociopath in search for something for nothing.

These conflicts are set to EXPLODE as MANY governments REFUSE to reform themselves or reduce spending; instead, they are selling fairy tales to the something-for-nothings and vote buying. The printing press and its incipient inflation are in the PIPELINE to destroy these illusions and expectations for the future.

Under the gold standard, deficit spending, entitlement promises and the size of bailouts available to public servants, banksters and crony capitalists was LIMITED. In a fiat system there is no limit to them until the purchasing power of the money COLLAPSES.

We are in the stretch run for these MAINSTREAM currencies and their financial systems, as hundreds of billions of Dollars, Euros, and Francs etc. will be required for the bailouts and unpayable promises, and sooner or later the lenders will FIGURE out the game in which they are the patsies. This is why DEFAULT in Greece is to be avoided at ALL COSTS, as to do so would FREEZE the lenders into inaction, creating an immediate sovereign BOND market collapse.

The only source of the funds is the PRINTING press, as these economies NO LONGER produce more than they consume, if properly measured. In fact, wealth creation has gone in reverse; these economies are shrinking at a rate of 5 to 10%, or more if you SUBTRACT government spending which is miscounted as GDP, paid for by socialist, corporatist monsters who are BORROWING from SAVERS and sending the bill to FUTURE generations and their children.

Just before the collapse of the financial systems and markets in August 2008, I wrote an article entitled Blow Out and Blow Up — and that is where we find ourselves NOW. Greek Bond interest rates have exploded higher and inverted, the Two-Year Note trades at approximately 19%, and the Ten-Year Notes are just north of 10%.

The markets have shut down for Greek banks, money is FLEEING the country and the big Greek banks are about to collapse as the REPO market is CLOSED to them. But the bigger story is the downgrading of Greek debt to Junk, forcing institutions to SELL and prohibiting holders of the debt from borrowing against them from the European Central Bank. Take a look at the size of the GREEK debt currently held by banks in the Euro Zone:

The money on their balance sheets just took a 30% haircut at the minimum, and NO ONE will lend against them, except the European Central Bank (which changed the rules to keep them eligible to use as collateral). It is only a MATTER of TIME before this spreads to the other social welfare states. As this crisis spreads to Italy, Portugal and Spain the interbank lending market will become increasingly dysfunctional and FREEZE up, as the COUNTER PARTY solvency issues which emerged with Lehman Brothers resurfaces.

This is actually a bailout of the European banks as they are STUFFED to the gills with sovereign debt, running the carry trade with 1% money from the European Central Bank (this is how Trichet got around QE in 2008, now it is BACKFIRING) and buying longer term maturities from the respective bankrupt sovereigns. Until now a win/win as quantitative easing, now practiced by the Bank of England, US Federal Reserve (the fed is STILL monetizing, only through different channels to hide it) and the Bank of Japan. Look for Libor (London interbank spreads) to start blowing out soon as counterparty risk considerations come to the fore.

Euro Zone public servants are outraged at the credit ratings agencies which FINALLY acknowledged the unfolding insolvency, calling for investigations of their refusal to provide politically-correct but practically-incorrect sovereign bond ratings. It is being postulated that the Greek downgrade was a diversion from the raising of the debt ceiling by the US of $1.9 trillion in February. Global financial crisis part II has begun or will do so SOON.Take a look at 2-year yields – they are a canary in the coal mine:

As you can see, Portugal is at the doorstep with Spain and Italy about to join the BANKRUPTCY party. BLOW OUT and BLOW UP is happening right before your eyes, financial calamity DEAD AHEAD. The contagion cannot be contained at this point as all the other Euro Zone countries try to finance their own budget deficits of 5 to13% and become lenders of last resort to Italy, Portugal and Spain, who will, at some point SOON, arrive at the point Greeks are now. Ten-year Spreads are blowing out over German

Bunds as this chart illustrates:

Look at deficits currently unfolding this year, and the debt as a percentage of GDP from a recent :

These countries are NOT growing, but their debt and borrowing is exploding HIGHER. These governments are doing NOTHING to increase incomes and generate higher levels of wealth creation (remember this does not include off balance sheet OBLIGATIONS). In fact, they are raising taxes and burying their private sectors in new regulatory mandates (increased costs such as health care, cap and tax and new entitlements of one sort or another). Do you see ANYTHING in government policy which creates jobs, rising incomes or economic activity? NO, it is INSANITY. A RECIPE for ECONOMIC collapse…

Since the beginning of the global financial crisis, the private sectors of these economies have and continue to shed millions and millions of jobs, while the public sectors are the same size, or growing, and have wages that are considerably higher than the private sector, and they produce NOTHING.

Wealth, job and Income generation are public sector and main stream media HOT AIR with absolutely nothing being proposed or implemented. ON PURPOSE. This is the final assault on CAPITALISM and the private sector just before the UNFOLDING ECONOMIC collapse lowers the BOOM on what little freedoms are left. Why start a new business or work hard to make money when the Government and president think:

“We don’t begrudge success fairly earned. I do think at a certain point you’ve earned enough money”
… Bar@ck Ob@ma

This is an obscene attitude from the president of the United States. VOTE EVERY DEMOCRAT OUT; it is the only way to stop this man from destroying more than he already has. Congressional oversight and support of wealth creation must be restored.

Of course, this number is in continuous FREEFALL throughout the developed world welfare state (while rich is continually defined LOWER), in France that number is about 50,000 Euros, after which rates become confiscatory. France is not growing in any meaningful way except through misstated inflation.

Next year when the Bush tax cuts expire, taxes on DIVIDENDS and investment income are slated to climb to 39.6%, then the health care bill adds a 3.8% SURCHARGE taking the rate to 43.4%. Can you say gangster government? In effect, this is a tripling of the current 15% rate. Do these GOVERNMENT terrorists actually believe this will not affect human and investor behavior? They are destroying all incentives to PRODUCE wealth, invest and create jobs. This is CHANGE WE CAN BELIEVE IN… the bastards. This is UNREPORTED by the media, and is already in law for the 2011 budget. They seek nothing less than the FINAL death of capitalism.

The companies are taxed at 40% on income and what little they share with their shareholders will be taxed at that level as well. A double dip for the terrorists in Washington DC. An increase of 164%; do you think this is going to spur investors? Or entrepreneurs? Or create economic activity? Of course not. It is absurd policy from the progressives (BIG GOVERNMENT supporters). To them you are UNDERTAXED; you are their sheep to be fleeced.

Politicians and Keynesian economists DO NOT consider human behavior or the incentives to produce when formulating government policy. They believe they can keep taxing and that people who actually produce will keep working just as hard ever, but take bug pay cuts as their incomes are confiscated and redistributed to others; they somehow missed the history of these beliefs.

Recent polls show 4 out of 5 people DO NOT trust Washington, and they trust Wall Street over Washington by the same amount. I am quite certain that our European brothers and sisters are harboring the same beliefs.

This is INCREDIBLE, yet they ignore this and proceed to bury you and me. As I have said before, dictatorship is upon us as elected representatives DEFY the will of the people they represent and work against the public interest in growing the economy. The progressive, congressional, democrats in charge are now at ramming speed to implement everything they want, as they realize that, come the 2010 elections, they are LAME ducks.

Let the economic destruction begin as socialist, progressive, ideologues RAM through every hoped-for policy from the last 50 years, just as they have been doing since the chosen one was elected. Congressional progressives and the Executive Branch have been braying they INHERITED the deficits: B**L S**T, congress passes the budget and the president signs it. They are the CULPRITS, take a look at this chart of budget deficits illustrating the reckless expansion of government embarked upon AFTER the last presidential election:

Of course, they did this to SAVE YOU. If you properly add in losses at Fannie Mae and Freddie Mac, the budget deficits are another $250-300 billion HIGHER. The GAAP budget deficit (generally accepted accounting principles) is defined by the US TREASURY at almost $5 trillion rather than the main stream media advertised $1.6 trillion. I have no love lost for Pinocchio but this makes Bush look like an ANGEL. This is the embodiment of the chosen one’s campaign slogan: “Change we can believe in.” The chosen one is now the new Pinocchio.

Just as the Euro Zones markets must PRICE in this profligacy, so must American markets. Think of the reckless entitlement EXPANSION contained in HEALTHCARE reform. As Ob@ma muttered after it passed, “this is what change is,” unpayable benefits for those who are unwilling to work with the bills sent to those who do. Government dependence for money.

Anyone who has looked CLOSELY at the financial reform bill KNOWS it is nothing of the sort; it is just another expansion of government power over another sector of the economy. Reform of Fannie and Freddie are ABSENT, as well as a resolution process for TOO BIG TO FAIL. This bill is a favor factory for incumbent politicians. IT IS MORAL HAZARD WRIT LARGE, removing the fear of failure for politically-connected campaign contributors and the holdings of the financial ILLUMINATI. Let’s take a look at the money trails while the GANG of 535 DEBATES the future of banks and financial companies:

And the top recipients are:

Dozens of FUNDRAISERS are being held while these gangsters are DEBATING the legislation. And who made the BIG contributions to protect their futures from these congressional PREDATORS?

This is PROTECTION money just like that collected by the mafia; it’s just like Congresswoman Bachman has said: GANGSTER government. It’s the Chicago way. The republicans and democrats doing imitations of the Gambino’s and Gotti’s as I have said many times in the past. Tea Party buyers beware.

Another question that beggars belief is the fact that this legislation is being put forth BEFORE the financial commission created by Ob@ma presents their report. How do you fix the problems if they haven’t been properly identified and defined? This is another political fix to practical problems. It HAS NO REDEEMING value except to entrenched politicians, giving them more POLITICAL control of the banking system. It NEEDS to be RUSHED through before they LOSE the next elections. You can expect the VAT tax to be rushed into law before the deficit commission presents their conclusions which have already been decided upon as well. MORALLY and FISCALLY bankrupt public servants.

In Conclusion: These are the policies of INSOLVENCY! Nowhere are policies of economic, job or income growth being discussed or implemented, so a return to economic growth as a method to pay the unpayable is OFF THE TABLE. There is no way that extend and pretend will PAY OFF. They will have to print the money, and since we are off the gold standard there is nothing preventing the illuminati and their minions from doing so. Keynesian economics are falling on their own petard.

A hyperinflationary depression continues to unfold. Trillions of dollars have yet to be created to STEM the collapse. The elites will FAIL and take their financial and currency systems with them. IT’S ALL AUSTRIAN economics. The something-for-nothing social welfare states of the developed world will ALL descend into the hell hole Greece is becoming. No politician, central bankster or crony capitalist can stem the tide of their self-generated insolvency from washing over them. When interest rate spreads blow out in your area, you know the crisis has ARRIVED where you live and the blow up will not be far behind.

Make no mistake, this is an unfolding currency extinction event and it is not limited to the Euro. Spain, Italy and Portugal are at the EU doorstep soon to seek Greek aid. The destruction of the Euro is dead ahead as they will soon try a rescue of BIG MONEY. A $2 trillion Euro Zone rescue fund is being proposed. YOU can COUNT on it. As I have said in this letter for years: They will print the money. Germany MAY leave the monetary union because the rescue is toxic to the public. One thing is certain; they will not pay for it. The Euro is in freefall and, as Dennis Gartman correctly notes, the situation has now become a liquidation of euro-denominated reserves by central banks.

Something-for-nothing societies will borrow until they cannot do so, and print until the purchasing power of the currency collapses, up to and including the US Dollar. It will be the last to fall as all fiat currencies are derivatives of the dollar. Don’t lose everything when they crank up the printing presses over and over again. The fiat currency PONZI schemes are collapsing. Learn how to turn it into your opportunity.

For investors, it’s the greatest opportunity in the world as these REALITIES are priced into all markets (stocks, bonds, commodities, metals, etc.) they will zoom up and down. BUY and HOLD is DEAD, except for GOLD and SILVER (buy pullbacks). EVERY asset class in the world is MISPRICED as it is impossible to know what a Dollar, Franc, Pound, or Euro is worth.

As a unit of account for trade they are WORTHLESS as they represent no intrinsic value except the corruption of our leaders. They will all ultimately go to their intrinsic value as they have done throughout history, without exception. In order to thrive, you must learn to restore the functions of money and consider investments that can thrive in up and down market conditions. This is what I do click here to find out

I also have a special treat from my friend and Technical Analyst Garret Jones. He has written a special alert on the major stock indexes and the big and little pictures, it is good work and you can access it here

There are only two reliable units of account and settlement and they have not changed value in thousands of years: Gold and silver. The only thing that changes value is the currencies in which they are denominated, pushing them up and down as a reflection of the RELATIVE strength or weakness of the underlying FIAT currency. Remember: Currencies don’t float they just SINK at different rates.

The European central bank will have to figure out quantitative easing or its curtains sooner rather than later. They will do so in one form or another. Banks soon will rebel at taking down more bad sovereign offerings. It will probably be camouflaged, as the fed is probably doing it now: DIRECT BIDDERS.

Why do we know this will happen? If someone points a gun at your head will you duck or take the bullet? These predators (public servants, elites, crony capitalists and banksters) are no different than you. They will duck and let the public take the bullets as they have done since time began. You must learn to dodge the bullet as well. It’s all contained in the works of Von Mises, Hayek and Schumpeter. Applied Austrian economics. You should learn it.

Ty Andros / TraderView – Managed Futures & Alternative Investment Specialists

233 West Jackson Blvd. Ste. 725, Chicago, IL 60606,
PH:. 800.253.7689 // +1.312.338.7800

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Tedbits may include information obtained from sources believed to be reliable and accurate as of the date of this publication, but no independent verification has been made to ensure its accuracy or completeness.Opinions expressed are subject to change without notice.This reportis not a request to engage in any transaction involving the purchase or sale of futures contracts or options on futures.There is a substantial risk of loss associated with trading futures, foreign exchange, and options on futures.This letter is not intended as investment advice, and its use in any respect is entirely the responsibility of the user.Past performance is never a guarantee of future results

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Bear Market Race Week 135: Bull & Bear Markets Review

The 1929 & 2007 Bear Market Race to The Bottom Week 135 of 149
Bull & Bear Markets Review
The Guild of Mad Science
COMEX Gold Charts
Mark J. Lundeen
14 May 2010
Color Key to text below
Boiler Plate in Blue Grey
New Weekly Commentary in Black
Below is my BEV chart for the Bear Race.

The DJIA was up 239 Points in Wk 135, and my only recommendation is that people should run away as fast as their legs can carry them! The Stock Market’s internals are crumbling. Rising Volatility, NYSE 70% A-D Days coming one after another, Mr Bear is taking a Monkey Wrench to the Stock Market.

Who knows what tomorrow will bring. I sure don’t. But there is such a thing as situational awareness. In the past two weeks, there have been many changes not seen since Autumn of 2008. That is not good. So just because you’re an investor, it doesn’t mean you have to be in the Stock Market all of the time. There are times when it’s best to step back and let the bus go down Wall Street without you. This is one of those times.

Let me tell you something about you & Mr Bear. Most people don’t know who they are dealing with, but Mr Bear knows exactly who you are! You’re the people, Long or Short, whose wealth he is going to take home in his lunch bucket. Last week he ate the Longs’ Lunch, this week he ate the Shorts’ Lunch.

Simple Gold and Silver Coins look very good at times like these. The fundamental problems in the Financial Markets are from all of the distortions in Market Valuation caused by Doctors Greenspan and Bernankes’ past “Liquidity Injections.” For this reason, Precious Metals are off Mr Bear’s menu. They may take a hit now and then, but that’s from the “Policy Makers” trying to shake you down. But they are weak, while Mr Bear is strong. So a year from now, Gold and Silver will be much higher, the Stock Market much lower, and there is nothing the “Policy Makers” can do to stop this from happening.

Below are the DJIA Volatility’s 5-Day M/A & BEV Chart

Seeing the Up Spike in the Blue Volatility Plot above is not good! Don’t take my word for it; look at the DJIA’s Red Plot. We saw these Volatility Up-Spikes in August of 2007, just months before the DJIA’s Octobers Terminal Zero. Look at what followed a year later. In Wk 135, we don’t know if we are about to see is a replay of 2008-09. But why is Volatility spiking up like it did in August of 2007? And why from nowhere are we seeing such a large spike? Something beneath the surface of the Stock Market is changing!

This Volatility Up Spike isn’t from anything we’ve been reading in the news papers for the past month. Someone, or some people of wealth and power knows something we haven’t been told about, and they are repositioning their assets. Let’s see if a huge, but currently unknown to the public, news story hits the media in a month or so.

It’s been a long time since I published this next chart. It’s a Volatility Comparison of the Great Depression and the 2007-10 Bear Markets. All Percentage changes in Volatility are positive. Up or Down days are all converted into positive values on my Excel File. But to provide for the best comparison, I inverted all the 2007-10 data points to negative values. This allows me to show the two Bears in two different windows. So when our Bear’s Volatility starts heading down in the chart (2007-10), it’s actually going up.

For the first time since 26 January 2009, the DJIA Volatility’s 40 Day M/A is above its 200 Day M/A. That’s significant. But what is worse is that in Wk 132, the 40 Day M/A turned up. Now in Wk 135, the 200 Day M/A has also turned up.

This development needs to be watched very closely. When the 40 Day M/A hit 3.5% in 1929, people were jumping from windows over Wall Street. It was worse in 2008; Congress demanded the Federal Reserve and US Treasury do something to “Stabilize” the Stock Market. Only God knows what will happen when the 40 Day M/A goes over the 3% line again.

Daily Volatility Statistics for Wk 135
70% A-DMonday10785.14+3.90%3+88.23%* Tuesday10748.26-0.34%3-Wednesday10896.91+1.38%3*Thursday10782.95-1.05%3-Friday10620.16-1.51%2-73.87%* Wednesday saw a NYSE A-D Ratio of just a fraction from 70%: +69.83%. This is the Second Week in a Row where the NYSE A-D Ratio just missed hitting the 70% line. Seeing the DJIA rising * only * 1.38% on Huge Breadth is not a sign of Market Strength!

Historical Daily Volatility is < 1.0% Source Dow Jones Last week, I said the most Bearish Thing that could happen in the Stock Market was for us to see a Positive NYSE 70% A-D Day. Well we got one on Monday, and missed another in Wk 135, Wednesday, one by only 0.17%. What does this mean? Well it's sort of like a herd of cattle in one of those old Cowboy movies. But in this movie, Mr Bear is in the saddle. First he makes his cattle stampede one way (Advancing), and then he stampedes them the other way (Declining). All this stampeding tires them out and makes them docile, as he drives them to the railhead, and then on to slaughter. Bull & Bear Markets Review Human Psychology Drives Markets Bull and Bear Markets have one thing in common with each other; the People who come into the markets to buy and sell. Markets are human things. There is no market analogue in the Animal World, as only Humans generate surpluses for the purpose of trading. That's true with the Stock Market too. When People generate more income than they need to pay the bills, they may decide to take their surplus income to the Financial Markets, hoping to improve their situation in life. But Bull and Bear Market, as we all know, have great differences too. To most people, its enough to know that in Bull Markets, prices rise, while in Bear Markets prices fall. However, as Serious Students of the Markets, we should know there is much more to Bull and Bear Markets other than rising or declining asset valuations. Human psychology plays an important part in how a market values what is being traded. There's only one market cycle that is dependable. It's based upon Human psychology, and is completely independent of the “Valuations”, of whatever is being traded. For half of the Cycle, Markets are driven from despair to euphoria in a Bull Market. In the other half, the Market is driven from euphoria to despair in a Bear Market. There is no set schedule of how long it takes these Bull and Bear Markets to drive their investors from the Penthouse to the Outhouse, and then back again. It may take years, or even generations for a particular market to go from where everybody is * out * to where everyone is back in. For example: the Stock Market from 1932-2000. The same is true for when everybody is * in * the Market to where everyone promises never again to play the fool for Wall Street: the Stock Market from 1929-32. Note I did not use the 2000-10 Stock Market era as an example for a mass market exodus. Today's Retail Investors, even after two major bottoms in the DJIA, have not abandoned the Stock Market, en-mass, as they had in 1932. They may no longer be lining up around the block to buy Wall Street's latest IPO, as they were in 1999, but the Baby Boomers are still holding on to a forlorn hope that the Stock Market will still provide for them in their retirement. It will not! Before Mr Bear is finished with his work, the Stock Market will become an object of public scorn and contempt. That will be the bottom, and should produce one of those generational buying opportunities, as stout hearted Gold and Silver Investors saw in 2001. From 1971 to 1980, as Gold rose from $35 to $840 an ounce, the Precious Metals Markets went from zero public interest to a mass mania. But things change all the time, as from 1980 to 2001, Precious Metals went from being a respectable asset class, to an object of public ridicule. But notice how the Precious Metals Market turned, just as its Market Psychology bottomed in 2001. After a 21 Year Bear Market, Gold declined to $255 an ounce and respectable investors and money managers wanted none of it! Nine years later, Gold and Silver are no longer only for the “Tin-Foil Hat Crowd”; Central Banks are buying too, but you now have to pay $1240 for an ounce of Gold in an increasingly crowded market. As always, the Bull Market in Precious Metals will not terminate until it once again we see panic buying by the public, who will pay any price for their heart's desire. But due to the success of the American “Policy Makers” in integrating the US Dollar into World Commerce, demand for Gold and Silver will go Global when the US Dollar fails. Demand for Precious Metals is still in its early stages. How far Valuations are driven up or down in these cycles are not determined by the Bullishness or Bearishness of the Market's participants, but is dependent upon the extent of the expansion of Credit that banks have provided the Market. As we live in a time that worshiped Megalomaniac Central Bankers, and the massive “Liquidity” they “Injected” into the Financial Markets, my expectations are that we will see a massive Bear Market in Financial Assets that will rival or even exceed that of the Great Depression's 89% decline in the DJIA, before we see our ultimate bottom. Currently, Monetary Inflation has become so grotesque, that “Policy Makers” now have to create Trillions of Dollars of Monetary Inflation to finance their “Policies.” But one day, this process will go into full reverse. The World will upchuck Doctor Bernanke's Dollars. Precious Metals will then be on the receiving side of this flow of “Liquidity”; driving Gold and Silver prices up to levels that are simply not believable today, as Financial Assets are ground into dust. You may disagree, but this is my logic for expecting the March 2009's lows in the DJIA, not to hold when Mr Bear comes back in earnest, and that Gold may soar far north of $30,000 an ounce. Time will prove or disprove my Bearish Thesis. Trading Volume & Market Volatility In my studies of Stock Market mechanics, I've found two indispensable variables in tracking Bull or Bear Markets: Trading Volume (number of shares traded daily) Market Volatility (daily % moves in valuation from the previous day's Closing Price) DJIA Bull & Bear MarketsMarketDJIA 2% DaysVolume BullFewIncreasing BearManyDecreasing Bull & Bear Markets are Mirror Images of Each Other. Source Barron's Graphic by Mark J Lundeen Trading Volume Bull Markets see rising Trading Volume as the Bull progresses from a Bear Market Low, towards the Bull Market's BEV Terminal Zero (the last all-time high of a Bull Market Cycle). This is a very logical relationship. As Valuations rise, additional investors are drawn into the Market, increasing Trading Volume as their bidding competes for available shares. Bear Markets see declining Trading Volume as the Bear progresses towards it ultimate Bear Market Lows. This is because during Bear Markets, investors become discouraged with their losses, and leave the market as asset valuations decline. In Wk 75, I covered this topic from 1900 to 2009. I noted this relationship held true from 1900 to 2000: 100 years. But after 2000, Volume began increasing in down markets and decreasing in up markets. This is the exact opposite of what happened with Volume in the previous 100 years. Its no secret what is going on; Congress is on record telling the Federal Reserve and US Treasury to “Stabilize” the Markets. The only way the Government can “Stabilize” a Market in a selling panic, is to buy stocks in the open market at prices no one else is willing to pay. So it's reasonable assuming the increase in Trading Volume during the big market declines of 2000-09, were the result of the US Government “Stabilizing” the Stock Market. We should not be surprised if one day we learn that the largest shareholder in most American Companies is the Federal Government. Until an audit of the Federal Reserve is performed, we really don't know what the Government has been buying with its Inflationary Dollars. All we can say with certainty is that after 2000, the public record shows that Washington has been very busy in the Financial Markets. Investing, and following the Markets isn't studying science. While much of what Markets do can be calculated with Mathematics, what actually drives Markets are the changing Emotions of Fickled Mankind. I include the “Policy Makers” in this. So my Rules of Thumb for Volume and Volatility are not iron clad laws of nature, like Ohms Law in Electricity. But over time, in aggregate, they should hold up. When they don't, there is something wrong. Since early February, it has been real quiet in the Stock Market, but starting in late April, we're seeing 1% & 2% DJIA days again. It's interesting comparing these days of increased Volatility in the DJIA, with the DJIA trading volume in my table below. Something is out of whack in the Stock Market. DJIA & DJIA Trading Volume (Mils)DateDJIADJIA Vol% DJIA% Vol19-Apr-1011,092.05214.660 20-Apr-1011,117.06175.1080.23%-18.43%21-Apr-1011,124.92188.8450.07%7.85%22-Apr-1011,134.29210.7570.08%11.60%23-Apr-1011,204.28207.1600.63%-1.71%26-Apr-1011,205.03191.8780.01%-7.38%27-Apr-1010,991.99263.333-1.90%37.24%28-Apr-1011,045.27236.2990.48%-10.27%29-Apr-1011,167.32194.2991.10%-17.77%30-Apr-1011,008.61255.091-1.42%31.29%3-May-1011,151.83178.0661.30%-30.20%4-May-1010,926.77241.886-2.02%35.84%5-May-1010,868.12215.727-0.54%-10.81%6-May-1010,520.32459.859-3.20%113.17%7-May-1010,380.43428.338-1.33%-6.85%10-May-1010,785.14313.3543.90%-26.84%11-May-1010,748.26223.949-0.34%-28.53%12-May-1010,896.91196.6261.38%-12.20%13-May-1010,782.95201.475-1.05%2.47%14-May-1010,620.16256.496-1.51%27.31%Typically, Big Up Days for the DJIA should Match the Big Volume Days, and Big Down DJIA Days should Match with the Low Volume Days. But since 2000, this has not been so.Source Barron's Graphic by Mark J Lundeen Let's deal with facts: President Obama is a Socialist. His political roots spring from the Students for a Democratic Society (SDS) of the 1960s. He's introduction into Chicago Politics was by the Political Terrorist William Ayres, founder of the Weather Underground. I can't believe Our President is a big supporter of personal property. The Bond Holders of GM and Chrysler discovered this last year. If he could get away with it, I believe he'd support the idea of Washington purchasing America's “Means of Production” with Monetary Inflation, leaving scant little for the Floor Traders on the NYSE to buy and sell. When Mr Bear comes back, and the DJIA breaks its BEV -60% line, it would be a perfect crisis for such a “Big Government Solution.” They may not be thinking of this now, but what options will they be considering when the DJIA descend to levels not seen since the Great Depression? Would a DJIA BEV -90% Market be acceptable to our President and Congress, Republicans included? I think not! I'm not saying this is going to happen. But with our current President and Congress, I don't see why they wouldn't favor eliminating an institution, the Stock Market, Socialism has never approved of, when it becomes a major thorn in their side. The Political Aspects of the Market is just something I think warrants watching. Market Volatility as Seen in DJIA 2% Days Bear Markets are Volatile Markets, and the bigger the Bear, the higher the Volatility. Surprisingly, the largest up days for the DJIA in the past 110 years are found in the Big Bear Markets. It's a fact, during the Great Depression Bear, and our 2007-10 Bear, the largest moves from the previous day's close were positive days. In the Chart below, I stripped out every day where the DJIA's close was less than 2% from its previous day's Closing Price. Those periods with few or no DJIA 2% Days, tend to be good markets to be in. But it's hard making money on the long, or the short side when Volatility rises. Note how Mr Bear makes life miserable for Short Sellers with plenty of strong up days, just before he takes the market down again. You know, Mr Bear doesn't care if the DJIA moves up or down by over 2%, or greater; he likes rocking everyone's' boat. I don't know why I should treat big down days different than big up days. So in the Chart below, I treat all 2% days (+ or -) as being positive events. I then take a 200 Day Running Sample, to see how many DJIA 2% days are in each Sample. This is really an amazing chart. With the exception of the 1942 DJIA BEV -50% Bear, it catches every major DJIA Bear Market from 1900 to 2010. Here is my list of DJIA Bear Markets. Dow Jones Bear Markets 1885 to 2010 -40% Declines * Daily Closing Prices Date of DJIA Bull Bear Time in Bear Bottom HighLow% Decline Weeks 108 Jul 1932381.1741.22-89.19%149209 Mar 200914,164.536547.05-53.78%1353* 28 Apr 1942 194.4092.92-52.20%2364* 31 Mar 1938 194.4098.95-49.10%56515 Nov 1907103.0053.00-48.54%96608 Aug 1896 78.3841.82-46.64%325724 Aug 1921119.6263.90-46.58%94809 Nov 190378.2642.15-46.14%124906 Dec 19741,051.70577.60-45.08%100The Current Bear Market is only 135 Weeks Long. But Bear Markets can last a very Long Time. Don't be Surprised if the 2007-10 Bear still has Years to go. The US Federal Government is doing Everything Necessary to drag this Bear Market out for a Long Time to Come. * Based Upon 10 March 1937 Bull Market TopSource Dow Jones Averages 1885-1990 Business One Irwin & Barron's Graphic by Mark J Lundeen As the #1 & #2 Bear Markets are the Great Depression Bear, and our own, a side by side comparison of the DJIA's 2% Days in a 200 Day Sample is interesting. At the Bottom of the 1929-32 Bear, every other day was a DJIA 2% day; Wow! In October of 2008, we came close, with 40% of the days in the 200 Day Sample being a 2% Day. This was a big deal. Big enough to make Congress go on Live TV and order the Fed and US Treasury on CNBC to do what they had to do to stop the pain, and “Stabilize” the Stock Market. I don't want to be repetitious, but too little is made of the fact that our “Free Markets” in 2010 are mostly political props. Anyways, you may want to take a second look at my first 2% Chart (the chart above the table) to really appreciate how massive these two Bear Bottoms were. Currently the 200 Day Sample is a 12, with 6 of those 2% Days from the first of August 2009 to New Year's. If Mr Bear leaves us alone, we should see this plot shortly dropping to 6, and staying there, or go lower, for months, and years to come. But I notice that in the past two weeks, we've seen 3 DJIA 2% days. I think this is an omen of bad things to come. If I'm correct that Mr Bear is back, we will see Market Volatility, and DJIA 2% days increasing as he goes about his work destroying those Asset Values the “Policy Makers” treasure most: American Voters' Retirement Accounts Pension Fund Assets It's what Mr Bear does for a living, and he does it very well. In the process, we'll see the 2007-10's Red Plot once again rising up, and I suspect exceeding the highs of the Great Depression Bear. It's a mess made in Washington. I hope I'm wrong, but my fears are that I'm not. When I put it this way, the idea of Washington buying out the Stock Market doesn't sound so outrageous, does it? Considering that at the 2009 bottom, they bought GM & Chrysler with Monetary Inflation. Why not the entire S&P 500 in the next? The Lundeen Bear Box and Step Sum is below. The DJIA's Step Sum is heading down. And guess what; so is the DJIA. Not much else to say about this in Wk 135. But I suspect I'll have something to say about it in Wk 136. The Step Sum is an indicator of market sentiment. When the underlying sentiment is bullish, the Step Sum rises. When bearish, it falls. Think of the “Step Sum” as the sum total of all the up and down price “steps” in a data series over time; an Advance Decline Line for a data series derived from the data series itself. Logically, bull markets will have more net up days, while bear markets will have more net down days. Understanding the Step Sum is no harder than that. The Guild of Mad Science These are interesting times in the Gold Market! Zero Hedge reports a Gold & Silver Run in Europe. I'd expect seeing that happening in Europe first. Unlike Americans, Europeans during the 20th Century have frequently seen their money turn to dust before their eyes. A life time of saving just vanished, because there comes a point when an ever increasing supply of paper, or its “electronic equivalent” can no longer function as a means of trade, or as a store of wealth. That's when Paper stops being Money, and being a Billionaire becomes nothing special very quickly. "Such were the sources of that flood of paper money which, ever since, has alternatively accelerated and threatened the economic life of the world." -William Durant: Our Oriental Heritage, (1935) pg 780 I doubt our Doctor Bernanke, during his days at Princeton, spent much time in his lectures on the when's where's and why's of past failed paper money schemes. Those academics who DO never become Chairmen at the Fed. So it wasn't a coincidence after Bernanke's November 2002 speech at the NY Economics Club, where he promised he would drop bails of $100 Bills from Helicopters to stop asset price deflation, that he became Alan Greenspan's Heir Apparent in the media. In Science Fiction Movies, the "Mad Scientists" who attempt to destroy the World are either Medical Doctors or Ph.Ds in Physics'. But this is only in the movies. In Real Life, the actual Mad Scientists who really are destroying the World are the “Social Scientists.” Our current Fed Chairman is a Keynesian Economist, and a member in good standing in the Guild of Mad Science. This Chart above shows his considerable contribution in the coming Global Chaos. The Guild needed someone to destroy the American Dollar, and in Doctor Bernanke they found the man willing to do a “Proper Job” on the Dollar. No currency can survive this level of over issuance, and the Doctor knows it. That's why he does it, and why they love him in Washington and Academia. COMEX Gold Charts Now that I've shown you the current lay of the Monetary Landscape, let's take a look at what is happening over at the COMEX. Here is a Chart giving how many Ounces of Paper Gold have been traded daily, as well as how many Physical Gold are Stored at COMEX approved vaults since 1974. The Blue Plot (Left Scale) is for Physical Gold Stored at COMEX approved facilities. Only a fraction of this Gold is available for delivery in settlement of a Paper Gold Futures Contract. The Red Plot (Right Scale) is how many Ounces of Paper Gold are being traded at the COMEX. Currently, there are 5.6 Ounces of Paper Gold being Traded for every 1.0 Ounces of Gold stored at the COMEX. There actually is nothing wrong with this, as everyone who currently trades Gold Futures knows this is the situation. Anyways, most traders of Gold do so to either hedge Dollar production costs, or are seeking profits in Dollars. The problem I see coming, is if a day comes when the Gold Longs (buyers), as a group, decide they would rather take actual Gold, instead of Dollars, from the Gold Shorts (sellers) in contract settlements. It's their right to do, but currently, the Gold Shorts don't have the Gold to Deliver. I said “if a day comes”, because I don't want to say anything “irresponsible.” But in May 2010, there are too many Infernal “Policy Makers” in Washington talking in terms of Trillions of dollars, to fund their expanding, but bankrupted Government for this not to happen! The price of Gold and Silver Coins could double, or more on the news of a COMEX default. After a COMEX Default, Mining shares are likely to become the replacement of choice of those people seeking a rational Gold and Silver derivatives to hold in their portfolios. I say beat the crowd and buy the Miners now. But as we can see below, in Wk 135 of our Bear Market, the crowd is still hanging out at the COMEX. The COMEX's Open Interest for its Gold Contract reached a new All-Time High (BEV Zero) on Friday 14 May 2010. This is the first BEV Zero since January 2008, and the largest Open Interest in the history of the COMEX. I just get the feeling that there are going to be many disappointed people trading at the COMEX, sometime in the not to distance future. Right now Gold and Silver Mining shares are cheap, so why waste your time and money on Paper Gold at the COMEX? A few weeks back, I recommended that my readers may want to consider as a * speculation *, a few Exploration Companies, and one Junior Producer. One of them, International PBX Ventures has drilled some excellent cores from their Copper-Molybdenum property. This news came out just days after I made my recommendation, so I thought an update would be appropriate. This project has a lot going for it, and has the potential to make some excellent profits for PBX's shareholders. I need to note that I'm a large shareholder in PBX, but I receive no reimbursement, in any way from PBX in making this, or past recommendations. Mark J. Lundeen 14 May 2010 Dow Jones -40% Declines From 1885 to 2008 is the article inspiring this race of 1929 & 2007 Bear Markets. You may want to read that article to understand my “BEV Chart.” Dow Jones Industrials Average Market Volatility is the source for my volatility studies. The Lundeen Bear Box and Step Sum is the source for my Lundeen Bear Box and Step Sum Chart Note For the Record: Mark Lundeen does not want a devastating bear market in the next two years. However, in full view of Congressional Market Oversight Committees and under the supervision of Government Regulatory Agencies, things were done that I believe will make a historic bear market inevitable. If you have a problem with this bear market, contact Washington, not Mark Lundeen.

Daily Dispatch: The End of the Gold Bull Market

May 13, 2010 | The End of the Gold Bull Market

Dear Reader,

In communicating with a financial advisor friend of mine this morning, the topic of cash and gold stocks came up. Which got me thinking about a few things I’d like to share with you.

To change things up a bit, I’ll interview… myself.

Q. With gold and gold stocks on a tear, does Casey Research still recommend holding 1/3rd of a portfolio in cash?

A. The answer depends, of course, on what country you are currently sitting in. Were I sitting in the eurozone, I would have already moved much of my safe harbor cash into the “resource” currencies such as Canada and Norway… i.e. countries that are rich in the natural resources that the world needs and will always need.

If my derrière was resting in a seat planted on U.S. soil, as it is, and I didn’t plan on doing any significant overseas spending, then I would feel relatively comfortable for the time being, with a larger than usual allocation to the dollar. But I would have been diversifying into the resource currencies as well.

(One convenient way to do so is with the FDIC-insured EverBank® World currency accounts and CDs details here.)

Q. Hold the fort, dude how can you write frequently about the demise of the dollar and yet be “relatively comfortable” holding the stuff?

A. In a nutshell, the monetary inflation, quantitative easing, and insane spending of the U.S. government, emulated by countries around the globe, have set the table for a large serving of currency depreciation down the road.

Once that depreciation begins to appear in the form of price appreciation, we’ll look to trade our greenbacks for more in the way of tangibles probably more gold… maybe real estate in a good location, location, location… maybe more silver… maybe deep value energy stocks… maybe antiques… maybe some of all of the above.
For the time being because price inflation is not out of control and yields are so low there is little real carrying cost to holding a larger allocation to cash and the flexibility and security of having cash is a big plus.

Q. What about gold and gold stocks today?

A. Gold is sound money. Always has been, probably always will be. In the sort of crisis now underway a crisis that to no small extent is now focused on sovereign fiscal and monetary excesses gold has a particularly important role in protecting wealth.

If you don’t own it, start accumulating it, preferably on the inevitable dips. If you do own it, hold it and consider accumulating it up to somewhere between 20% and 30% of your portfolio, though the exact amount will depend on factors such as your cash flow needs, personal debt obligations, your age and work status, etc. that we can have no way of knowing.

One of the nuances in answering this question has to do with deciding what form of gold to own. While we like physical gold held in a safe place, you don’t want to go overboard because things can happen. For instance, robbery, or even a house fire that melts your wealth back into the dirt. In addition, at some point the gold bull market will end and when it does, the scramble to sell will likely overwhelm the coin dealers to the point where they literally take their phones off the hook. That creates the potential for big gaps down in the price between the time you decide to sell, and are actually able to sell. Mind you, I don’t see that being a concern any time soon but it’s always worth keeping in the back of your mind.

There are a number of other bullion alternatives a big positive being that many are easy to buy, hold, and sell including allocated and unallocated gold accounts, electronic gold, gold ETFs, and so forth. Some are better than others and all are worth understanding before making investments. Our Casey’s Gold & Resource Report is a good source for this sort of info. At just $39 a year, it’s also a real bargain details here.

Generally our recommendation is to hold your gold in a variety of investment vehicles as that will mitigate the risks of having too many eggs in one basket.

Turning to gold stocks, subscribers of some duration will already be well positioned in the best of the best. And will own many positions risk-free, having already recaptured their original investment. If that is the situation you are in, and you really understand the companies you are invested in, then at this point either hanging in for the big upside, or trading the surges and dips, makes sense. If you are new to the sector, I wouldn’t chase the stocks just now but rather put in stink bids i.e. 10% to 20% below the current market, and look to get filled on a correction.

If you are new to the gold stocks, or risk-averse, then look to build a portfolio of large cap gold stocks such as we cover in our Casey’s Gold & Resource Report (more). Those will attract a lot of attention from the public at large, and from institutions, as the bull market gathers steam.

If you have experience with gold stocks, and a higher tolerance for risk, then a subscription to our International Speculator, which focuses on the small-cap Canadian explorers and developers, is right for you. Those juniors have amazing volatility and, when the news is good, the upside can be breathtaking. (more here.)

Regardless of the approach you take, don’t chase stocks as they move higher but look to build your portfolio on dips over the next few months.

The idea is to get positioned before the underlying price of gold reaches a level where the public starts to come into the sector in a big way at which point, if history is any guide, the early investors will make stunning returns.

Q. At what price do the gold stocks catch fire?

A. Some years ago, we had someone spend the better part of a week in a musty storeroom full of old Canadian newspapers, paging through past issues and recording the price and volumes of the gold stocks during the last big run-up, in the 1970s. We then compared that data to the gold price in inflation-adjusted dollars in order to determine the price that the broader investment public began piling into the gold. The number worked out to about $1,250 per ounce in today’s dollars. In other words, when gold decisively takes out $1,250 an ounce and holds above that level, if history is a guide, we may start seeing the average guy on the street and the institutions start to pile into the stocks.

Of course, while interesting from an historical perspective, that analysis has no scientific basis. The key point, therefore, is that during the last big gold bull market the public wasn’t involved in the gold stocks when they should have been in the run-up phase but rather only piled in after the price of gold bullion soared, relatively late in the bull market. So far, the average Joe and Jill are just not in this market. But, they will be.

Q. How high do you think gold will rise?

A. At our recent Crisis & Opportunities Summit (more on CDs), an attendee asked how high we thought the dollar price of gold would reach in this bull market.

My response was that there really is no way of actually forecasting that number, for the simple reason that, in a fiat currency regime, the underlying unit of valuation is so intangible. Let’s say you lived in Zimbabwe some years ago, and owned an ounce of gold. One day your ounce might be worth 1,000 of the local currency units. A year later, it might be 1,000,000. Or, even 10,000,000,000.

While the U.S. is no Zimbabwe at least not yet its currency is just as intangible, for the simple reason that the government can print the stuff pretty much at will. To say that gold will go to $5,000 in the current crisis is really just another way of saying that the dollar currency unit will fall by some significant degree. But, given the uncertainty in the economy, and unknown of what actions the government and the Fed might take next, we really can’t know how much purchasing power the currency unit will lose in the months and years just ahead.

To date, the government has been extraordinarily breathtakingly willing to abuse the dollar. They have largely gotten away with it so far, but that certainly doesn’t mean they have gotten away with it. When the time comes for the piper to be paid, we suspect he’ll be paid pennies on the dollar… which could easily result in gold trading for $3,000, $5,000, $10,000 per ounce but, who knows, maybe even $10,000,000,000.

The point is, given the choice between dollars and gold, you are far more likely to preserve your wealth over the duration of this crisis better with gold.

Q. Is the gold bull market getting old? How much longer can it last?

A. Having been around and actively involved in hard assets as the editor of “Gold Newsletter” and the conference director of the New Orleans Conference during the last big gold bull, I hope I can provide some useful perspective.

For instance, I can well recall in late 1979 when all of the many gurus of the day were predicting gold would keep going higher and higher still. Well, as we all know, it didn’t.
What’s interesting about this time around is that there is almost no scenario we can envisage that is going to kick the legs out from under the gold market at least any time soon. In contrast, in the late 1970s, the gold bulls coulda/shoulda seen that the Fed had a lot of room to act i.e. by pushing up interest rates in order to tackle the price inflation that was the key driving force in the soaring gold prices of the time.

Today, the situation is profoundly different. Starting with the fact that this is, at the core, a debt crisis. And the one thing you can’t do in a debt crisis is to encourage interest rates to rise. Look no further than Greece for that lesson.

So, we have an unprecedented monetary inflation, truly out-of-control sovereign spending and debt, unprecedented levels of private debt, unprecedented trade deficits, a massively overbuilt and overpriced post-bubble real estate market and, importantly, near historically low interest rates.

So, we have to ask ourselves other than continuing to exercise its powers of fiat money creation what ammunition does the government have at its disposal to address the structural problems of today’s economy? And, of course, actually creating more money and more debt isn’t addressing the structural problems, it is compounding them.

Of course, the government can default on their sovereign obligations an option I think we’ll see Greece and others of the PIIGS take, and probably fairly soon.

They can also continue to inflate, which we expect them all to do.
And they can… no, actually, I think that about sums it up: default or inflate. In either scenario, gold is going to be seen as the ultimate safe harbor.

Q. Won’t the government see gold as a threat to its fiat currency and try to do something about it?

A. Of course, governments might try any number of stunts that could affect gold. For example, raising margin requirements to curb playing the markets with leverage, or even attempting outright confiscation.

All we can do is to monitor the situation closely and try to anticipate their next moves in order to get out of the way. A number of people I know have opened safety-deposit accounts in other countries as one way to hedge their bets against confiscation. Others have bought numismatics but be careful on that front, because that can increase illiquidity.

It is not out of the question, in my view, that before this is over we could see a revaluation of gold in order to relink the U.S. dollar to it because sooner or later, as the crisis reaches its climax, something is going to replace the fiat currencies but at this stage it’s impossible to guess what that will look like. If we did see a return to a gold standard, then the government could actually be responsible for sending gold up by many multiples.

Back to the present, at this point I can’t see anything that is going to derail this bull market but I do see a whole lot of things with the potential to send it into the stratosphere.

Q. Thank you for your time.

A. My pleasure. Always happy to be of help.

Q. You’re kind of strange, talking to yourself and everything. You know that, right?

A. Sometimes I wonder.

Speaking of Gold

While we don’t use technical indicators in our analysis, a lot of active traders do. As such, the tripping of key technical supports can serve as something of a self-fulfilling prophecy. Which is why we do like to keep at least one eye on it.

The chart here shows one of the technical views of gold’s breakout, and an analysis that expects gold stocks to move strongly higher from here. As the chart is too small for most to read, you can hit the link here to view a larger version.

A Hung Parliament
By General Watson from the Algarve

While a long-term expat from his native Britain, friend and correspondent General Watson makes it a point to keep up with the happenings in the land of his birth. In this installment, he sheds some light on the turnabout in British politics thanks to the recent election.

There are 650 constituency seats in the British Parliament. This means that to form a new government, one party has to win a majority of 326 seats. Last week’s general election result was that the Tory (conservative) party won 306, Labour (socialist) won 258, the Liberal/Democrats (centrist) party won 57 seats, and Others won 28. This means that no one scored an overall majority. This is referred to as a ‘hung parliament.’

The British system is ‘first past the post’ in each constituency. As a result, the names of the leaders standing for election do not even appear on the ballot paper, except in their own constituency. For the first time ever there were three live, 90-minute TV debates featuring the three party leaders: David Cameron of the Conservatives, Gordon Brown from Labour, and Nick Clegg from the Liberal/Democrats. The big surprise was that Nick Clegg, who was not well known to voters, performed very well.

The election result was that someone had to put together a coalition of two parties. This gave Clegg an opportunity to horse-trade his seats between the Conservative and Labour parties. They also must agree on their potential common policies. This took five days of negotiations. Even though Brown had obviously lost, tradition has it that Brown should remain as prime minister until a new one is appointed by the Queen. So Führer Brown hunched down in his 10 Downing Street bunker, until the war was over.

The end result was that, eventually, the Conservatives did a deal with the Lib/Dems to form a coalition government with David Cameron as prime minister and Nick Clegg as deputy prime minister. This meant that Gordon Brown had to go down to Buckingham Palace to see the ‘Head Mistress’ and resign his premiership. The ‘Boss’ then appointed David Cameron as the new prime minister.

This is the first coalition government in the UK since World War Two. And Cameron, at 43, is the youngest prime minister in 200 years. As the price for coalition, the Lib/Dems also get five members of their team appointed to cabinet posts. The key Conservative appointments are that 38-year old George Osborne will become chancellor of the exchequer (treasury secretary) and William Hague will be the new foreign secretary. In the meantime, Gordon Brown has also resigned as the leader of the Labour party and the deputy leader Harriet Harman will take over on a temporary basis, until Labour has a new leadership election in the next few weeks. The most likely winner of that is David Miliband, the previous foreign secretary, who is reported as being a great favorite of Hillary Clinton’s.

The new government is facing an annual deficit of 163 billion pounds, which represents about 12% of GDP and is nearly as bad as Greece. They have promised that they will tackle the deficit with a new emergency budget within 50 days, which will cut government expenditures and no doubt increase some taxes. Sounds familiar, but seeing is believing.
David, again. The initial word out of the new government is that they will soon propose a cut in spending of 8 billion pounds. Not much of a dent, though it wouldn’t surprise if the public reacted negatively to even that amount. Speaking of the public acting badly, click here for a just-released video of protestors trying to storm a bank in Greece… I mean, Ireland.

Plain Insane

Since we’re in video watching mode, check out this video from the state of Pennsylvania in which they overtly use the latest in Big Brother technology along with the added threat one would associate with drone warfare to threaten delinquent taxpayers.
When I first watched it, I thought it was a joke… a spoof. It’s not. And the worst part is they don’t even know how wrong this is.

Watch it here


(Thanks Jeff, for sending that along.)
MiscellanyBye Bye BP? In NYC, I had a beer with an old college chum who is now a partner in a law firm that has been retained by one of the litigants in the Deeper Horizon rig accident. He figures that the case will provide a good ten-year annuity for his firm. And he also thought, as have others I’ve spoken to, that this could ultimately take BP down.

This whole litigation thing is just getting started. The trend for looking to harvest cash with more and bigger litigation in the U.S. won’t stop with a deep-pocketed, oil-spilling, foreign conglomerate (translation: BIG target), but will expand to Wall Street banks and the rating agencies whose primary function during the mortgage crisis was to put lipsticks on the portfolios of pigs.
The lawsuits will come from governments, from the pension plans that thought they were buying safe bonds, from folks in the fishing industry… hell, from everyone, about everything. In the end, the biggest winner will be the U.S. government that will have its hand out at every turn, and the biggest loser the American public, who will find itself scratching its collective head in the dark and wondering why no foreigners want to do business over here.

Report from the Sacramento Phyle. If you want to know what other readers are thinking, check out this recap of the recent Casey Phyle meeting in Sacramento. For those of you new to Casey Research, these “phyles” a term from sci-fi writer Neal Stephenson meaning a group of individuals who affiliate with each other based on shared views are informal meet-up groups of Casey readers. To find out if there is a Phyle near you, drop us a note at

Coming Monday a Return of the Deutsche Mark? Okay, this is way out there but one of our researchers came across an online posting from a person who purports to work at Deutsche Bank who claims to have been working for months on a surprise reintroduction of the Deutsche Mark… this coming Monday. While I have to take this information with a large bag of salt it sure would shake things up in the eurozone if it were true.
And that, dear reader, is that for the day. Until tomorrow, thanks for reading, and for subscribing to a Casey Research service.

For those of you new to our services, don’t miss this opportunity to “dip your toe” into gold and gold stocks with our Casey’s Gold & Resource Report. At just $39 a year with a 3-month unconditional money-back guarantee, you literally can’t go wrong. Here’s the link.

David Galland
Managing Director
Casey Research