Remobilize Gold To Save The World Economy! Open Letter To Paul Volcker

An open letter to Paul Volcker, Chairman of the Board of Governors of the Federal Reserve, 1979-1987; Chairman of President Obama’s Economic Recovery Advisory Board, presented to him, in person, last year

Antal E. Fekete
Dear Paul:

In 35 years our paths have crossed for the second time. In 1974/75 you and I were Visiting Fellows at Princeton University. Now, in 2009, both you and I are attending the Santa Colomba Conference on the present debt crisis at the invitation of Bob Mundell.

In 1975 you conducted a seminar on the international monetary system and invited me to contribute a paper on gold which I did. Those were halcyon days by comparison. The United States, after the turbulence of 1971, successfully consolidated the international position of the dollar and could confidently lift the 42-year old ban on the ownership and trading in gold. On December 31, 1974, trading of gold futures contracts started in New York and Chicago. It showed a robust contango at full carrying charge, that is to say, the gold basis (the spread between the futures and the cash price) was at its peak. It indicated that monetary gold was available in great abundance to meet any demand for any reason. It showed that the gold futures markets could serve as the fulcrum in seeking out the equilibrium between the supply of and demand for gold. They could act as a safety valve, releasing occasional pressures that, in the absence of paper gold, may be a threat to the monetary system. It looked as if the gold problem has been solved for once and all.

But as I feared, and as the intervening 35 years have proved, rather than moving towards equilibrium we have been constantly moving ever farther away from it, as measured by the gold basis. The secular vanishing of the gold basis is a most ominous danger signal. It indicates that monetary gold is increasingly unavailable, and in case of a crisis it can no longer be relied upon to come to the rescue. Basis started out at 100 percent of the prevailing interest rate, but has been steadily eroding all the way to zero percent today. Permanent gold backwardation (negative gold basis) is staring us in the face. The gold basis is trying to tell us something. It heralds the greatest monetary crisis of all times. It warns about the possible collapse of the international monetary and payments system.

Let me explain. Gold is the only ultimate extinguisher of debt. Other extinguishers do, of course, exist but they are not ultimate in that they have a counterpart in the liability column of the balance sheet of someone else. Gold has no such liability attached. Gold is where the buck stops. It is this property that makes gold unique as a financial asset. Historically, gold discharged its function as the ultimate extinguisher of debt through the gold clauses written into the bonds of the U.S. government before 1933. Gold could also discharge this function, albeit rather imperfectly, under the gold exchange standard of 1934 with gold redeemability limited to foreign holders. It could still work under the system of fluctuating gold price introduced in 1971, thanks to the availability of paper gold. Imperfect as though these stratagems were, they served as a pacifier to the bond market. But as the threat of permanent backwardation indicates, all offers to put monetary gold at the disposal of the international monetary system could be abruptly withdrawn. In that event there would be no ultimate extinguisher of debt. The world is totally unprepared for such a momentuous development. I ask: are there contingency plans in the U.S. Treasury and in the Federal Reserve what to do if backwardation makes monetary gold unavailable for the indirect retirement of debt?

The message to debt holders would be: suave qui peut. There would be a rush to the exit doors and people would trample one another to death in trying to get out. The debt crisis of 2008 was a dress rehearsal. It gave the world a foretaste. This crisis is a gold crisis. It is a crisis indicating the threat of a shortage of the ultimate extinguisher of debt, without which our runaway debt tower is doomed. When it topples, it will bury the world economy under the rubble, as the Twin Towers buried the people working inside in 2001.

All kinds of ad hoc explanations have been offered for the debt crisis. But the real explanation is that under the threat of gold backwardation creditors are scrambling for liquidity. There will be no recovery unless provision is made for the orderly retirement of debt through a mechanism using gold as the ultimate extinguisher. The alternative is a Great Depression worse than that of the 1930’s. To understand this we have only to contemplate the shock to the world if it was all of a sudden revealed that the debt of the U.S. government was in fact irredeemable. The Emperor is naked. As long as bonds carry a gold clause, or the bond market is supported by the trading of paper gold, bonds are deemed redeemable. But once permanent backwardation makes monetary gold unavailable, debt becomes irredeemable in the eyes of the bondholders. Paying U.S. bonds at maturity in F.R. notes does not establish redeemability. The latter is just evidence of debt secured by the former as collateral. This reveals that bonds are not really redeemable at all. At maturity, an interest-bearing bond is replaced by non-interest-bearing debt, that is, by an inferior instrument. All you do is shuffle various forms of irredeemable debt. When the world wakes up to this prestidigitation, the international monetary system will not be able to survive the shock-waves. The chaos that will engulf the world is appalling.

The solution is evident. The world’s monetary gold should be remobilized. This can be accomplished by opening the U.S. Mint to the free and unlimited coinage of gold. There should be no attempt to fix, cap, or otherwise control the dollar price of gold. The gold coins of the United States ought to be made available to bondholders in order to provide for an orderly retirement of debt, if that is what the bondholders want. When they become convinced that this avenue is open to them through the unlimited availability of gold coins of the realm, the scrambling for liquidity will peter out and stability return. If other great nations wanted to join, and open their Mints to the free and unlimited coinage of gold, so much the better. It should not be beyond the power and the wit of the U.S. government to rein in this crisis and make a decisive move in the direction of full recovery through opening the U.S. Mint to gold, as demanded by the Constitution.

Gold is a great world resource. It would be foolish if, for parochial or ideological reasons we failed to enlist it in the cause of economic development and stabilization — even in the absence of a great crisis. But given the present unprecedented crisis, remobilization of gold is imperative.

Yours very sincerely,
Antal E. Fekete
Santa Colomba, July 10, 2009.

Volcker: “The financial system is broken.” In a bleak assessment delivered on September 23, 2010, he also said, among other things, that the financial system is as broken today as it was in 2008. The real economy was in disequilibrium, and that’s why it is so difficult to get out of this recession. He was chastising banks and CEO’s, he trashed regulators and inept business schools. He had a broadside on the Fed; he bombed money market funds.

In fact, Volcker spared no one in his broad critique — except himself. He was present at the Camp David meeting, as the Undersecretary of the U.S. Treasury for Monetary Affairs that, where the decision was made to default on the international gold obligations of the United States, as announced by president Nixon on August 15, 1971, almost forty years ago.

Volcker still does not see the connection between that fateful decision and the present crisis. Once you remove gold from the international monetary system and prevent its rehabilitation, as the U.S. has been doing it through chicanery, duplicity, and arm-twisting, you have in fact removed confidence, and prevented its return, to international relations. It started as a slow process as it was turning the granite at the foundations into putty. It took forty years, but it has happened. Volcker still does not see that, and he still could not bring himself to uttering a word about gold in his assessment of the crisis at the 13th annual International Banking Conference.

Volcker: “The financial system is still at risk!” Yes, indeed, and only bringing gold back as the ultimate extinguisher of debt into the international financial system will change that.

If the United States government hasn’t got the moral fiber to admit its past mistakes, and make the necessary changes to correct them, then other countries will bypass it, as will history. Then the United States can join the Club of Disgraced Empires, and the U.S. dollar can join the garbage heap of worthless fiat currencies of history, right next to the Zimbabwe dollar.

September 24, 2010.

Daily Dispatch: The Cure for High Prices

September 24, 2010 | The Cure for High Prices

Dear Reader,

With gold poking its fair-haired head over the top of $1,300 today, a new record, many dear readers are wondering if this rally is sustainable. Reader and correspondent Mike B. sent along the following chart, which offers a useful road map to any secular bull market.
Of course, those of you who have been subscribers to our services for any period of time will happily note yourselves as belonging to the “smart money” crowd.

As to where we are on this map today, it’s our contention that the public is still almost completely uninvolved in gold at this point. Increasingly, however, the institutions are. David Rosenberg, who has a large following among the institutions, wrote today that he thinks the Mania stage is still well off, and that gold won’t really gain steam until it hits $3,000. This, despite his being a staunch deflationist.

Of course, we can’t know what the purchasing power of a debased U.S. dollar will be a few years down the road and it could be worth nothing which means the price of gold could be literally anything, maybe even one million dollars per ounce.

But Rosenberg is directionally correct that the Mania phase is still ahead of us. Sure we are starting to see increasing media attention to gold, a benchmark on the chart above, but it’s still nowhere the level of coverage the yellow metal used to receive during the latter stage of the 1970s bull market. Back then, the CBS Evening News in fact, all the major news broadcasts would, as a matter of policy, display the price of gold right next to that of the stock indices.

At this point, using any corrections to build positions ahead of the Mania phase still makes a world of sense to us.

Quick Comment on the Stock Market

As I write, a modest (and passing) pick-up in consumer durables has sent the S&P 500 to 1,147, blasting through the 1,130 top of the range we discussed last week. Given that such a high percentage of trades are now computer driven, this could be the move needed to trigger short covering, in which case the market could move higher still.

I have no doubt that this is a bear market trap, but timing when the trap will close is a near impossibility. One bit of useful input came today in the form of a chart in David Rosenberg’s letter showing the tight correlation (75%) between the two-year Treasury note and the S&P 500. His take is that either yields have to rise or the S&P has to fall.
In my view, the two-year rate will rise, causing the S&P to fall. It’s just a question of time.

While we risk being stripped of our speculator credentials, we hold to our contention that in the face of such uncertainty you shouldn’t be afraid to take a profit when a profit is to be taken, and to favor larger allocations to cash and to gold during this transitory period. In other words, be careful.

Still on the bigger picture, I ran an interview yesterday featuring the co-founder of Home Depot speaking with great eloquence on just how challenged American businesses are in this environment. Continuing that theme, the good folks at ZeroHedge tipped us to a Bloomberg story in which William Simon, the CEO of Walmart, is quoted as saying the company is trying “to figure out how to deal with what is an ever-increasing amount of transactions being paid for with government assistance.”

He then goes on to say…
You need not go farther than one of our stores on midnight at the end of the month. And it’s real interesting to watch, about 11 p.m. customers start to come in and shop, fill their grocery basket with basic items baby formula, milk, bread, eggs and continue to shop and mill about the store until midnight when government electronic benefits cards get activated, and then the checkout starts and occurs.
Full story here.

Congressional Hearings on Gold

Congressional hearings have begun on matters related to gold. Reading MineWeb’s story on the hearings, it’s hard not to conclude that the government is looking for an excuse to drop a heavy new layer of regulation onto the gold sellers, a prerequisite to ultimately limiting public access to the soundest form of money.

I have no illusions about the shady nature of many coin dealers, but remain firm in my opinion that more regulation fixes nothing. In fact, it makes things worse because it lulls buyers into a false sense of security. Thanks to the Internet, there are a near endless number of resources now readily available to potential buyers trying to understand the dos and don’ts of coin buying, and to sort the honest dealers from the bad.

In any event, because it’s important to keep an eye on Congress, much in the same way you might watch a drunk boxer sitting next to you at the bar, here are a few relevant quotes and a link to the full story.
Charles Bell, programs director for the Consumers Union, the publisher of Consumer Reports, told the subcommittee, “Many of the problems that have come to public light are related to high-pressure sales tactics that entice consumers to purchase coins that have high mark-ups, that turn out to have much less resale value than the customer initially expected.”
Bell said consumers are also at risk because sellers of gold coins and bullion may not be licensed or regulated either by the SEC or the Commodities Futures Trading Commission. “And sales representatives may not be licensed as investment advisors, even though they present their products as an ‘investment.'”
“Coin and bullion sellers are subject to relatively limited public oversight, and state consumer protection authorities may only be able to offer limited help for consumers who feel they have been defrauded,” Bell explained.
… ” Lois Greisman, associate director in the Bureau of Consumer Protection at the FTC, said, “Scam artists also are putting a new twist on an old scamfalsely touting coins and precious metals as low-risk, high-yield investments to hedge against the economic downturn and fears of a declining U.S. dollar.”
“Often these marketers also fail to disclose hidden fees, mark-ups, and premiums added onto the purchase place of the coin or precious metal investment,” she explained. “By failing to disclose this key information to consumers, the marketers divert consumers from purchasing investment opportunities from legitimate dealers, and leave the consumers drowning in underwater investment.”
…The FTC supports the Coin and Precious Metals Disclose Act, which would require coin and precious metals dealers to fully disclose not only the purchase price, but also all other fees associated with the sale of coins and precious metals, and the melt value and reasonable resale value for coin and precious metals. The legislation would require dealers to make disclosures clearly and conspicuously prior to completing the sale.
That last part sounds reasonable, doesn’t it? Based on the history of these things, though, it’s likely a Trojan Horse. Once they get through the gates, amending and expanding the regulations becomes a snap.

The good news is that there is no overt discussion, yet, of confiscating gold, but retaining the freedom to buy and own gold will require constant vigilance.

The Cure for High Prices

Commodity traders have a saying that goes, “The cure for high prices is high prices… and the cure for low prices is low prices.”

The wisdom of that homily can be best understood by considering the impact of price movements on a commodity such as wheat.

Should the price of wheat rise well above the norm, the natural response of farmers will be to plant more. At a high enough price, farmers who traditionally plant other crops will also shift to wheat to take advantage of the profit opportunity. And, in the absence of trade restrictions, producers in other parts of the world will increase their wheat shipments to markets where they can get a better rate for their crops. In almost no time at all, a glut of wheat will assure that the price of wheat will fall. Ergo, “The cure for high prices is high prices.”

Of course, the situation works in reverse as well. Should prices fall to the point where there’s no money to be made in wheat, producers will plant something else or go out of business. Either way, in a relatively short period of time, wheat supplies will come under pressure, and the price will rise.
Despite the obvious truth of the scenarios just described, it’s remarkable how often governments feel compelled to meddle in the market mechanism. Which is why it was so refreshing to recently read the following out of Russia…
Russia Won’t Intervene To Curb Soaring Food Prices Minister
MOSCOW (AFP)–The Russian government won’t intervene to curb prices for basic food stuffs as inflation soars after the country’s worst ever drought, Economic Development Minister Elvira Nabiullina said Tuesday.
“I think it does not make sense to impose [price] limits,” Nabiullina was quoted by Russian news agencies as saying.
“We are of course monitoring what is happening to prices. In August, the average weekly rate of inflation sped up. This is primarily due to the drought.”
Under Russian law, the government can impose caps on the prices of flour, millet, buckwheat and salt if they jump by more than 30% over a 30-day period.
Forty-five Russian regions saw prices for certain foods grow by more than 30% in the 30-day period up to Aug. 23, Vedomosti business daily reported Tuesday, citing a report by the economic development ministry.
While Russia still has many imperfections, it is refreshing to see that after its long communist experiment, Russians have developed an understanding of the importance of letting markets sort themselves out. We can only hope the trend continues to gain momentum.

Since we’re on this general topic, I might as well quickly comment on some other commodities and how high or low prices affect them. Oil and gas, for instance.
Periods of higher prices for oil and gas will typically cause an escalation in exploration, and in the development and production of known reservoirs that have been left undeveloped due to the poor economics. Going after a deepwater target, or investing in a new heavy oil deposit, won’t happen at $40/bbl oil, but if the producers think oil is going to stay over $70, it may. And in relatively short order, escalating production will begin to weigh on the price.

But as the price begins to go down, the production may not fall off nearly so rapidly as might be the case for wheat or other crops. That’s because shutting in a well and eventually restarting production is costly. Further, as long as you are making money, the temptation will be to produce. Thus, if, taking into account all lifting costs, you are producing oil at, say, $25 per bbl and oil is selling for $70 per barrel, you will produce all you can. But what happens if oil drops to $40 a barrel? As long as you are making money, you’ll keep right on producing.

Thus, the time lag between overproduction and lower prices and a reduction in the supply to the point where prices start moving upwards can be protracted. Case in point, at $3.90 natural gas is now selling at close to the cost of production, yet the price has remained stubbornly low.

As per above, lower prices will curtail further exploration and development, and so in time supply and demand will swing in the opposite direction, and you can make a lot of money by positioning yourself ahead of those swings.

Another commodity for which the general rule of thumb doesn’t hold up is gold. As you can see in the chart just below, which we have published previously, despite a stunning rise in price over the past decade, mine production has fallen from previous highs, though the amount of scrap coming to market has certainly increased. This is a clear picture of a commodity with structural limitations to new supply.

Should demand continue to escalate as we believe it must then the mostly static supply profile has to result in higher prices. It would be the equivalent of the world’s dirt becoming so depleted that only so much wheat could be grown and no more. At that point, if you wanted a nice loaf of bread, you’d pay a lot more for it just as you will for an ounce of gold.

Viewed in this context, by the time Jill Q. Public decides to jump on the gold bandwagon, she’ll almost certainly find available supplies limited or at least not available at anything close to today’s prices.

On that point, a straw in the wind flew by yesterday when the following announcement arrived out of the blue on the fax machines of coin dealers across the nation.

Gold get it while you can.

Friday Funnies

I’m running late, and I haven’t come across anything really worthy, so I’m light on the Friday Funnies this week. If you come across a great joke or have any comments on this service, please send them my way at


Hello, and thank you for calling the State Psychiatric Hospital. Please select from the following options menu:

If you are obsessive-compulsive, press 1 repeatedly.

If you are co-dependent, please ask someone to press 2 for you.

If you have multiple personalities, press 3, 4, 5 and 6.

If you are paranoid, we know who you are and what you want; stay on the line so we can trace your call.

If you are delusional, press 7 and your call will be forwarded to the Mother Ship.

If you are schizophrenic, listen carefully and a little voice will tell you which number to press.

If you are manic-depressive, it doesn’t matter which number you press, nothing will make you happy anyway.

If you are dyslexic, press 9696969696969696.

If you are bipolar, please leave a message after the beep or before the beep or after the beep. Please wait for the beep.

If you have short-term memory loss, press 9. If you have short-term memory loss, press 9. If you have short-term memory loss, press 9.

If you have low self-esteem, please hang up; our operators are too busy to talk with you.

If you are menopausal, put the gun down, hang up, turn on the fan, lie down, and cry.
You won’t be crazy forever.

For the Record

As President Obama paves the way for the newest round of peace talks between the Israelis and Palestinians, he has been speaking optimistically about the outlook for the talks. A smattering of quotes…
“The Israelis and Palestinians have waited a long time for this vision to be realized, and I call upon all those gathering to redouble their efforts to turn dreams of peace into reality.”
“I remain personally committed to implementing my vision of two democratic states, Israel and Palestine, living side by side in peace and security.” (1)
*** “The hardest issues now at last are on the table.” He added: “I hope the parties will seize this opportunity and not retreat from the clear moment to capture the momentum of peace.” (2)
*** “We want to be an honest broker, and I think the parties see us in that role, and that’s the role we will continue to play at this point.” (3)
*** “We’ve made significant progress toward peace. We have initiated a dialogue from which we should not consider turning back.”
“Much work remains to be done and the road ahead is tough, but it’s the right road and I remain optimistic that direct negotiations for a just resolution of the Palestinian problem in the context of a real and enduring peace is within our reach.” (4)
*** “We are going to settle things on the West Bank. We are friends. There will be peace in the Middle East.”
“I think there will be peace in the Middle East thanks to these brave men who have had the courage to face difficult problems.” (5)
No, wait it wasn’t Obama who said all that!
It was, in order… (1) George W. Bush; (2) Bill Clinton; (3) George H. W. Bush; (4) Ronald Reagan; (5) Jimmy Carter.
What Obama said was
“We have to summon the will to break the deadlock that has trapped generations of Israelis and Palestinians in an endless cycle of conflict and suffering.”
“This moment of opportunity may not soon come again,” Obama said in the Rose Garden Wednesday afternoon. “The [two sides] cannot afford to let it slip away.”
As regular correspondent Dennis Miller recently wrote, the only way for there ever to be peace in this sort of conflict is if one side or the other loses the will to fight. As they’ve now been at it for half a century and neither side shows signs of throwing in the towel, maybe it’s time that the U.S. stop wasting its time and resources trying to get the two parties together and instead encourage them to drop the gloves and engage in a winner-takes-all Battle Royale?
Or we could let some other country take over the charade of brokering peace. Maybe the leaders of Denmark have some spare time on their hands?


Scottsdale, Arizona, Phyle Meeting. If you live in the Scottsdale area and would like to connect with other Casey readers, the next Casey Phyle meeting is being held at 6pm on Monday, September 27, at the Paradise Bakery on Raintree. The agenda for discussion now includes:
The apparent aversion of a stock market crash, at least for now
The strange dichotomy of a falling dollar with rising bonds
Are agricultural commodities for real?
Why does oil languish while most commodities, including Dr. Copper, are doing well?

If you’re interested in attending, drop us a note at, or just show up.

Errata Right Bubble, Wrong Year. In yesterday’s missive, I noted in passing the top of the Japanese real estate bubble as having occurred in 1981. That, of course, was a typo as the actual top occurred in 1989.

New Orleans Investment Conference. As usual, the annual New Orleans Conference is pulling out all the stops to present a star-studded cast of speakers, with headliners that should appeal to those of you dear readers who skew toward the more conservative side of the political spectrum, specifically Newt Gingrich and Con. Dick Armey. While Doug Casey won’t be able to make it this year to balance things out with his more libertarian perspective, our own Marin Katusa will be there to talk about some of his favorite resource plays. More on the event here.

And with that, dear reader, I wish you a nice weekend thank you for reading and for being a Casey Research subscriber!

David Galland
Managing Director
Casey Research

Bill Gross’ $8.1 Billion Bet

By Dr. Steve Sjuggerud Wednesday, September 22, 2010
“Bill Gross’s PIMCO made an $8.1 billion wager,” Bloomberg news reported last week.

Bill’s bet is simple: He’s betting inflation will return to the U.S. in the next 10 years. And he’s willing to risk billions on the idea.

Bill Gross is known as the Bond King. He’s probably the most famous and successful bond-fund manager in history. He manages the PIMCO Total Return Fund the world’s biggest bond fund, with a quarter-trillion dollars in assets. It makes sense to pay attention to Bill’s bets…

Bill is betting on inflation. Actually, more specifically, Bill is betting that DEFLATION won’t happen.

Today, I’ll show you why Bill’s bet is a smart one. And I’ll show how to make your own bet on this idea. But first, let me explain what exactly Bill is up to…

The mechanics of Bill’s bet are a bit complicated. In short, he took the other side of a bet on deflation.

Bill received $70.5 million now… If deflation occurs over the next 10 years (if the consumer price index is lower in 2020 than it is today), Bill is on the hook for up to $8.1 billion. If deflation does NOT occur, he simply gets to keep the upfront $70.5 million.

“We think the possibility that the U.S. goes 10 years with stagnant or falling prices is remote,” a PIMCO portfolio manager told Bloomberg news.

Fears of deflation have increased dramatically this year. We’ve seen a huge shift in the mindset of the U.S. consumer. We’ve gone from a “conspicuous consumption nation” to a nation of savers. Deflation is simply defined as “falling prices” and the U.S. consumer has surely seen that… Exhibit “A” is the price of their home.

But Bill has an ace in the hole for PIMCO’s anti-deflation bet… Ben Bernanke.

Bernanke is the chairman of the U.S. Federal Reserve. He is a student of the Great Depression. And he is determined to prevent the destructive deflation we saw in the 1930s from happening again today.

In a now-infamous 2002 speech, he said:

…The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost… Under a paper-money system, a determined government can always generate higher spending and hence positive inflation…

…Prevention of deflation remains preferable to having to cure it. If we do fall into deflation, however, we can take comfort that the logic of the printing press example must assert itself, and sufficient injections of money will ultimately always reverse a deflation.

Bill Gross has made a career out of taking calculated risks. A bet on inflation, when Ben Bernanke is at the helm of the Fed, seems like a smart one. While the fears of deflation are high, the chances of sustained deflation are slim in a paper-money society.

If the Fed does “crank up the printing press,” the simple investment you want to hold is gold. The Fed can print dollars, but it can’t print gold.

Gold is particularly attractive today… Since the Fed has cut interest rates essentially to zero, gold is more attractive than money in the bank… You earn zero percent on your cash in the bank, and earn zero percent on your gold. You don’t give up any “opportunity cost” you don’t give up any interest on your cash by holding gold today.

If you believe Bernanke is telling the truth and the U.S. government will print money as needed to prevent deflation you should hold at least some of your savings in gold instead of paper money. You’ll be on the same side of the bet as the Bond King.

Good investing,



More on the “China confounds the skeptics” story…

As I mentioned in yesterday’s column, plenty of investors believe China’s economy and real estate market is a bubble ready to burst. They think the Chinese government has directed huge amounts of money into wasteful real estate and infrastructure projects.

But as we highlighted yesterday, the market is warming back up to high-profile China stocks like New Oriental Education… and sending them to new 52-week highs. Add Home Inns and Hotels (HMIN) to this list…

HMIN is one of the largest hotel operators in China. Its market cap is nearly $4 billion. HMIN is a play on China’s growing wealth and propensity to travel… so it booms and busts according to investor sentiment toward the country.

As you can see from today’s chart, you can mark HMIN in “boom mode.” After briefly struggling early this year, the stock has gained 40% and sits near its all-time high. The “China story” is still intact.

Russia’s Central Bank Buys 300,000 Ounces of Gold in August

Gold bull market has a long way to go: Jim Rogers. The Battle for $21 Silver Begins. Russia’s Central Bank Buys 300,000 Ounces of Gold in August. The IMF itself has become the problem: Ambrose Evans-Pritchard… and much, much more.


Gold gained about six bucks from the time the markets opened in the Far East on Monday morning… until shortly after London opened at 9:30 a.m. local time. From that point, the gold price rolled over a bit, declining into the London p.m. gold fix at 10:00 a.m. in New York, before rising to a new record high of $1,284.80 spot… and then getting sold off and trading sideways for the rest of the New York session.

Silver’s price followed a similar path, except its high of the day [around $21.00 spot] was in London… shortly after 9:00 a.m. local time. From there it got sold off a bit, rose after the London p.m. gold fix… and then got sold off for a small loss on the day. Silver did not break through to a new record high price on Monday… and this is the second day in a row that silver has closed with a small loss.

The world’s reserve currency traded in a 50 basis point price range on Monday… and closed basically unchanged from Friday’s close.

The precious metals stocks pretty much traded in tune with the gold price action, with the top coming shortly before lunch in New York, which was gold’s [record] high price of the day. From that intraday high, the HUI gave up about a percent of its gains, but still managed to finish up 1.37% on the day… and back above the 500 level once again.

All in all, not much happened during Monday’s trading… and it’s impossible to read anything into one day’s worth of trading, especially considering the fact that volume in both gold and silver was on the light side. I’d love to see gold [and especially silver] blast off to the moon from these big overbought positions… but that sort of thing has never happened before… and if it does this time, it will be [as Ted Butler says] the very first time. It will mean that the bullion banks have been over run with a full short position on… and I see no sign of that from yesterday’s price action in either metal. But I rub my hands together with glee in anticipation of such an event!

Monday’s CME Delivery Report showed that 7 gold and 24 Comex silver contracts were posted for delivery on Wednesday. JPMorgan is still trading in its proprietary account. The link to what little action there was, is here.
The GLD ETF showed an increase on Monday of 117,260 ounces of gold… and there was no reported change over at SLV.

The U.S. Mint had a sales report yesterday. They sold 5,500 ounces worth of gold eagles… 2,000 one-ounce 24-K gold buffaloes… and 655,000 silver eagles. Month-to-date, the U.S. Mint has sold 43,000 ounces of gold eagles… 7,000 one-ounce 24-K gold buffaloes… and 1,045,000 silver eagles. Over at the Zürcher Kantonalbank in Switzerland, they reported adding 23,860 ounces of gold and 809,074 ounces of silver to their respective gold and silver ETFs last week.

Over at the Comex-approved depositories, they reported receiving a net 165,440 troy ounces of silver on Friday. The link to that report is here.
The big gold news yesterday came from the monthly update over at The Central Bank of the Russian Federation. They reported purchasing 300,000 ounces of gold bullion for their reserves in August. Year-to-date they’ve purchased 3.1 million ounces… a hair over 96 tonnes. I’m sure China is socking away gold as well, except they aren’t advertising the fact. Russia is broadcasting it to the world. Here’s the graph courtesy of Richard Nachbar and his most excellent assistant, Susan McCarthy.


I have a lot of stories… too many, in fact… but I’m going to post them all anyway. You can decide what’s worth your time. I’ve already hacked and slashed down to what I thought was the bare minimum, so you can complete the editing job for me. I also apologize for the fact that a lot of them fall into the must read category as well.

I mentioned late last week that Sprott Asset Management in Toronto had just purchased another six tonnes of gold for their bullion fund. Well, there was a story about that in the Saturday edition of Canada’s Financial Post… and it covered more than the Sprott purchase. The headline reads “Gold Glitters For Sprott”… and it’s worth the three minutes it will take to run through it. The link is here.

The next item is a 16-minute long video from the Friday edition of CNBC’s Squawk Box. It’s a story about small business in America… and gives insight into the struggles of making it as an American small business owner, with Home Depot co-founder, Bernie Marcus. Bernie started off life as a [very] small businessman… and he’s still tuned into what’s going on with the small business owner. I was very impressed by his honesty and integrity. People like him are what America is really all about. Even if you don’t own a small business, this is a must listen. I thank my good friend Rick Friesen for sending it along… and the link is here.

According to the following Bloomberg story [courtesy of reader Scott Pluschau], another six U.S. banks were closed by the FDIC on Friday… costing them about $350 million. The FDIC’s list of “problem” banks climbed to 829 lenders with $403 billion in assets at the end of the second quarter, a 7% increase from the 775 on the list in the first quarter, the FDIC said last month. It’s not an overly long story… and the headline reads “Six Banks Fail, Community & Southern Acquires Three”… and the link is here.

Late last week I ran story that the IMF might be coming to bail out Ireland. Well, Ireland’s finance minister Brian Lenihan moved to calm markets with a rebuttal of this story that Ireland is ‘perilously close’ to a debt crisis. The headline from the Saturday edition of The Telegraph reads “Ireland’s finance minister quashes IMF bail-out story”. Where there’s smoke… there’s fire, dear reader… and I thank reader Roy Stephens for sending this story along. The link is here.

Following that article in Saturday’s edition of The Telegraph, comes this Ambrose Evans-Pritchard offering from the Sunday edition of The Telegraph that’s headlined “The IMF itself has become the problem as Europe’s woes return”. Ambrose gets up on his high horse and cuts a swath through the IMF with this piece. It’s very much worth the read… and I thank Washington state reader S.A. for sending it along… and the link is here.

Also on Sunday came this piece on Ireland that was posted over at the Business Insider website. The headline reads “Ireland To Face Crucial €1 Billion Bond Test This Tuesday”. That’s today! The story is only three paragraphs long and will take less than a minute of your time… and is definitely worth the trip. I thank reader ‘David from California’ for sending it along… and the link is here.

As you know, Europe isn’t the only area of the world that has big economic, financial and monetary problems. In many ways the United States is in even worse condition. Here’s the latest GlobalEurope Anticipation Bulletin with the longish headline that reads “The Global systemic crisis Spring 2011: Welcome to the United States of Austerity / Towards a very serious breakdown of the world economic and financial system”. This essay came out last week and lays out in stark terms what’s coming down the pipe for the U.S.A. It’s a long and very ugly read, with excellent graphs. It’s also a must read… and I thank reader Ken Metcalfe [along with others] for sending me this story… and the link is here.

Before I begin all my gold-related stories for today, here’s a graph that Nick Laird over at Gold .:. ShareLynx Gold .:. Gold Charts .:. Gold Markets .:. Gold Articles .:. Precious Metals .:. Alternative Self-Sufficiency .:. Eclectic Scategories slipped into my in-box in the wee hours of this morning. It’s his “PM Funds Index” graph… and it shows that we’re almost back to our 2008 highs in the world’s precious metals equity markets. I’m sure that ‘da boyz’ are looking at this graph as well.

Click here to enlarge.

The first story is the latest offering from GoldMoney founder James Turk over at his FGMR – Free Gold Money Report website. The headline reads “They are printing too much money”. The article [long, by Turk’s standards] is a must read from start to finish… and the graph is excellent… and the link is here.
The next gold-related story is one that I ‘borrowed’ from Kitco. It’s an interview with Jim Rogers that was posted over at their website last Friday. The headline reads “Gold bull market has a long way to go”… and the link to the text and video interview… is here.

Next is Monday gold market commentary from Peter Brimelow over at MarketWatch – Stock Market Quotes, Business News, Financial News. The headline reads “Some gold bugs worried by Friday’s flop”. The gold bug he refers to is your humble scribe… as I was underwhelmed by the price action on Friday… and I get quoted in his column. Just ignore what I had to say… and read the rest. The link is here. I’ll have more to say about this in my closing comments.

Also in Peter Brimelow’s column, he quotes from James Turk’s essay over the weekend that is headlined “The Battle for $21 Silver Begins”. This is a must read commentary as well… and it’s accompanied by the usual excellent graph… and the link is here.

Lastly today, comes this lengthy item that was posted over at zero hedge | on a long enough timeline, the survival rate for everyone drops to zero on Sunday afternoon. The longish headline reads “Bill Buckler Discusses The Last Price Standing Of “True Money”, Answers The Only Question Relevant To Gold Bugs”. “Bill Buckler, publisher of The Privateer, has released one of the most scathing critiques of paper money we have read to date…” Zerohedge has published a huge portion of Bill Buckler’s latest edition of The Privateer… and it’s a privilege for me to present it in this column. I cannot overemphasize how important it is for you to read this. I thank reader ‘David in California’ for bringing it to my attention… and now to yours. The link is here.

Since zero hedge | on a long enough timeline, the survival rate for everyone drops to zero stole a chunk from Bill Buckler’s latest… I might as well ‘borrow’ something from his latest report as well. Last week I mentioned the fact that Alan Greenspan had given a speech saying that “Fiat money has no place to go but gold”. That was the headline from my Thursday column. Well, Bill Buckler… one of the sharpest knives in the drawer in my humble opinion… had this must read commentary about Greenspan’s speech…

“By definition, a political and financial establishment are the rulers of the nation they inhabit. In a “democratic” nation like the US, the people get to “vote”. But who writes the party platforms and picks the candidates for the major political parties, the only parties which stand any chance of forming a government? And who sets up the campaigning and voting rules to make sure that they ARE the only parties which stand any chance of forming a government?”

“The more established an establishment becomes, the fewer the REAL differences between the parties vying for the vote. There was a time when there was a marked difference between the Democrats and the Republicans in the US (or the Coalition and Labor in Australia). That time has long since passed. For many decades now, the only choice available in elections has been which party to put in charge of the borrowing and spending. This policy is carved in granite and has been for almost a century.”

“The first pre-requisite to political power is the ability to control what is used as money. Without that, an establishment cannot be formed because the means for its sustenance cannot be taxed to the extent necessary and cannot be created out of thin air at all. Everybody in the US establishment and in every other establishment in the world knows this and has always known it.”

“Long before Alan Greenspan developed the urge to join the establishment, he understood this and warned against it. Once he DID decide to join the establishment, he turned his undoubted talents to sustaining the economic and financial ignorance of the governed. He was uniquely successful in this task, but he knew it couldn’t last. That is what he was telling the members of the CFR on September 15th. But he was preaching to the converted. They know it too. And that is their overriding problem. The jig is up. The “sting” is no longer working.”

“All over the world, financial markets are clinging to the only things they “know” because they dread to discover that there is no real substance to their “knowledge”. In the US, the establishment knows that their free ride is coming to an end. They have waxed fat on their ability to create the world’s reserve currency out of thin air for many decades. From the “excess”, they have kept their nation in line by the usual means of “bread and circuses”. Now, the system they created has broken down and they know it.” – Bill Buckler, The Privateer… 19 September 2010

Please read those five paragraphs over and over again, until you ‘get it’. I consider those five paragraphs to be the most important ones I’ve read in almost ten years.

Buckler says the following at the beginning of every weekly “Gold This Week” commentary that he writes…”

“In any discussion of the future of Gold, or of the price of Gold, the first thing that must be realized is that Gold is a political metal. In the true meaning of the word, its price is “governed”.

“This is so for the very simple reason that Gold, in its historical role as a currency, is fundamentally incompatible with the modern worldwide financial system.

“Up until August 15, 1971, there has never in history been an era when no paper currency was linked to Gold. The history of money is replete with instances of coin clipping, printing, debt defaults, and the other attendant ills of currency debasement. In all other eras of history, people could always escape to other currencies, whose Gold backing remained intact. But since 1971, there is no escape because no paper currency has any link to Gold.
“All of the economic, monetary, and financial upheaval of the past 30 years is a direct result of this fact.

“The global paper currency system is very young. It depends for its continued functioning on the belief that the debt upon which it is based will, someday, be repaid. The one thing, above all others, that could shake that faith, and therefore the foundations of the modern financial system itself, is a rise (especially a sharp rise) in the U.S. Dollar price of Gold.

And, dear reader, I suggest you read that over a few times as well.



As I said earlier in this column, based on the volume, I wouldn’t read a lot into yesterday’s price action. I note that there we are now down to 798 silver contracts that are still open for September. These have to be closed out, or delivered into, by September 29th.

I also note that there has been some interesting price action that started around 2:00 p.m. Hong Kong time… and it got even more interesting once London opened for trading. Volume [as of 4:55 a.m. Eastern time] is pretty light, which I’m glad to see considering the price action.

Today is Tuesday, the cut-off day for this Friday’s Commitment of Traders report. The last three weeks have seen very unusual price activity [all to the upside, fortunately] on this day… and I’m wondering if Tuesday’s action in New York will follow that same pattern. We’ll find out soon enough.

If we do get a correction of some kind, I do not expect it to be very deep or last very long. Once that low has past, I expect to see some real fireworks in both metals… especially silver. I sleep well at night knowing that when that happens, I won’t be found asleep at the switch.

I hope you are in a similar position, dear reader… but there’s still time to get on board. As I said in this column on Saturday, with the precious metals shares poised to blast off to new highs in the very near future, I would deem it prudent to be as fully invested as you wish to be… starting right now. I’m still urging you to put your investment dollars to work. The first place I’d start would be with a subscription to either Casey’s Gold and Resource Report… or Casey Research’s flagship publication… the International Speculator. Please click on the links, as it costs nothing to check them out… and the subscriptions come complete with CR’s usual money-back guarantee.

It could be an interesting day when trading begins in New York.

Thanks for putting up with this very long column today… and I expect that tomorrow’s commentary will be much shorter. Not only for your sake, but also for mine.
See you on Wednesday.

Is Thailand’s Central Bank Buying Gold?

Is Thailand’s Central Bank buying gold? Gold Dinar Sells Out in Malaysia. Silver soars in early Tuesday trading in London. John Hathaway says that the bull market in gold has barely started… and the truth about gold and silver ETFs.


I wouldn’t read a whole heck of a lot into yesterday’s gold price activity on any market yesterday… even New York. Even though the dollar swooned, it didn’t make one bit of difference to the gold traders on Monday. Both the high and low in Monday’s trading action came during the New York session… with the low [$1,240.10] spot coming at 8:35 a.m. shortly after the Comex open… and the high [$1,429.90 spot] was minutes before 10:30 a.m. Eastern time. I wasn’t entirely surprised to see the U.S. bullion banks turn the gold price back at the $1,250 spot level once again. This has been a line in the sand for the last week or so.

Here’s the New York spot gold chart. It shows Monday’s high spike very clearly. The above chart does not.

Silver was more ‘volatile’ yesterday. Like gold, its price didn’t do much of anything in Far East and London trading. But at 8:45 a.m. in New York.. silver’s price also took off to the upside… only to be stopped dead in its tracks at $20.25 spot… which, like gold, also occurred minutes before 10:30 a.m. Eastern time. An attempt was made to get silver back below the $20 spot price before the end of New York trading… and that attempt failed. Silver has not closed above that number since the middle of March 2008. One has to wonder if the highs from 18 months ago will fall as well. Time will tell.

As I mentioned in my discussion on gold, the world’s reserve currency did a face plant during the Monday trading session. It gapped down at the beginning of Far East trading on Sunday evening New York time… stabilized a bit between 2 and 8:15 a.m. Eastern time… and then declined to its low of the day at 12 noon in New York… and almost closed on its low. The dollar lost around 108 basis points… or 1.3%. Gold should have been up about $15 on the day… but not-for-profit selling made sure that gold closed with a small loss on the day. I wonder who would be selling gold into a falling dollar scenario?

The HUI’s high of the day came around the 10:30 a.m. price spike in gold… and then, along with the gold price, retreated into slightly negative territory… and finished with a small loss of 0.38% on the day.

Well, the CME Delivery Report on Monday showed that nothing of consequence was posted for delivery tomorrow… zero gold and seven silver contracts. Nothing to see here, folks.

The U.S. Mint filed a sales report today. They indicated that they’d sold another 12,500 ounces in their gold eagle program… and another 70,000 silver eagles… and nothing in the one-ounce 24-K gold buffaloes. Month-to-date, there have been 30,500 ounces of gold sold in the gold eagle program, 3,500 one-ounce 24-K gold buffaloes… and 390,000 silver eagles. These are pretty pathetic numbers, dear reader. And, to go along with these low number of silver eagles, comes this story courtesy of the good folks over at They report that the United States Mint has ended rationing of silver eagle coins… at least until the next shortage… and the link to that story is here. It’s worth the read.

The Comex-approved depositories reported that they added a net 349,747 troy ounces of silver into their warehouses on Friday. The link to that action is here.


Along with that story on silver eagle sales a few paragraph back, I have a lot of other stories for you today. The first is courtesy of Florida reader Donna Badach. It’s a posting from last Friday over at… and the headline reads “EXCLUSIVE: Outlook Gloomy at Secret Billionaire Meeting”. For 25 years, legendary Wall Street strategist Byron Wien, now with The Blackstone Group, has held summer meetings with high net worth individuals to get their outlook on the global economy and investing. This year’s group, totaling fifty individuals and including more than 10 billionaires, was decidedly pessimistic on the U.S. economy, investment opportunities and the Obama administration. The link to the story is here.

On Sunday afternoon in Basel, Switzerland… the world’s top bank regulators agreed on far-reaching new rules intended to make the global banking industry safer and protect international economies from future financial disasters. Where have we heard that sort of promise before? Reader Roy Stephens was the first through the door with a story from The New York Times linked here… but ‘David from California’ sent me the story on this… and Tyler Durden [bless his heart] rips ‘da Boyz from Basel’ a new one. The link to this must read article is headlined “Basel III Summary, and the Fed’s Endorsement of 20x+ Leverage” is here.

The next item is an Ambrose Evans-Pritchard story from The Telegraph that was sent to me courtesy of reader Roy Stephens. The neo-colonial rush for global farmland has gone exponential since the food scare of 2007-2008. The headline reads “The backlash begins against the world land grab”. This is a very worthwhile piece… and I suggest you run through it… and the link is here.
As you are aware, I’ve posted many stories regarding real estate… and lately it’s mostly about commercial real estate. Here’s a Bloomberg posting sent to me by Australian reader, Wesley Legrand. Monthly losses on commercial property debt bundled into bonds have doubled since April as loan specialists gave up trying to restructure smaller mortgages, Deutsche Bank AG data show. It’s ugly… as all real estate stories have been for the last three years. The headline reads “Commercial Property Losses Mount Amid Debt Triage”… and the link is here.

The next item today is a GATA release headlined “Zero Hedge covers pervasive market manipulation every day” Imbedded in the release is a story headlined “First HFT Casualty As Finra Fines Trillium $1 Million For Quote Stuffing And General Market Manipulation (Again)”. The story [and Chris Powell’s preamble] are a bit of a read, but worth it in my opinion… and the link is here.

While we’re on the subject of… here’s another eye-opener from that website. The headline reads “Market Liquidity Update: 112 Stocks Now Account For Half The Day’s Trading Volume”. The top 20 stocks account for 26% of all domestic volumes, and the first 1,029 stocks are responsible for 90% of all volume, meaning the remaining 17,349 account for just 10% of all dollar traded. It’s not a long read… and the chart [click to enlarge] is a stunner. It’s a must read… and I thank reader U.D. for sending it along… and the link is here.

The rest of my offerings today are all precious metals related. The first is a story posted over a week ago in the Malaysian newspaper The Star. It was sent to me by Netherlands reader Victor de Waal… and the headline reads “Dinar sold out in Kelantan”… Kelantan Gold Trade (KGT) Sdn Bhd that issues the gold dinar and the silver dirham, said about RM1.5mil worth of dinar and RM1mil worth of dirham had been sold since it was introduced on Aug 12th. The link is here.

Here’s a Financial Times blog from yesterday headlined “Thailand: Who’s Buying Gold?”. It’s contained in a GATA release headlined “Is the Bank of Thailand buying gold on the sly?”. I’m linking the GATA release, as the FT story requires a [free] subscription… and the link to this must read article is here.

My next offering is your long read of the day. It was sent to me by reader Randall Reinwasser… and the headline reads “The Truth About Gold and Silver ETFs”. I found this 7-page essay to be very excellent… and confirms [at least to me] why I won’t own either the GLD or SLV ETFs. This is a must read commentary from one end to the other… and the link is here.

Here’s a silver story that’s posted over at the that was sent to me in the wee hours of this morning by California reader Ray Wiberg. It was filed yesterday from Mumbai and bears the headline “In India, silver tops the charts”. Though the price of silver has scaled to dizzying heights, investment demand in India is at the helm of the price fever. As the country celebrates the Ganesh festival, silver ornaments and coins fly off the rack. It’s an interesting view on silver from a part of the world we don’t hear much from, so I urge you to read it… and the link is here.

The next piece is a posting over at It’s a short synopsis of what Frank Holmes had to say at Kitco Metals eConference yesterday. I know Frank quite well and he’s one of the brightest guys I know… and he’s also a very good friend of GATA. It will take you about two minutes to run through this very worthwhile read that’s headlined “Holmes does Not See A ‘Bubble’ In Gold”… and the link is here.

Lastly today is another piece posted over at… and, it too, is a synopsis of a speech given at their eConference yesterday. This one is by John Hathaway over at Tocqueville Asset Management… and when he’s talking… I’m listening. This is a must read as well… and the headline states “Hathaway Says Gold Bull Run At Midway Point”. The link is here.

Well, I thought that was the last story until Eric King over at King World News slipped the following James Turk commentary into my in-box around 5:45 a.m. Eastern time. Turk stated in an interview earlier this morning that “We are very close to the upside explosion.” From your lips, to God’s ears, James! It’s headlined “Gold and Silver Will Lead the Way”… and the link to this short must read piece is here.



Well, if you look at the New York Spot gold chart at the top, you’ll see that gold did try to break out above $1,250… but was turned back. Silver also ran into the same not-for-profit seller. One would suspect, on the face of it, that it was probably JPMorgan.

Trading volume in gold on Monday was on the lighter side… and moderate in silver.

Needless to say, I’ve been watching Tuesday’s price moves in the Far East and early London trading with great interest since 6:00 p.m. Eastern time last night. Both metals were on a bit of a tear… and showed signs of going parabolic starting at 8:00 a.m. London time… but both got capped shortly after London opened for business. And, without doubt, it was the major U.S. bullion banks [who have offices in London as well as New York] who stepped into the market and put an end to the fun.

It will be interesting to see if we break out to new all-time highs today in both silver and gold… or are these early morning price spikes in London the high ticks for the day? Obviously, as I write this at 5:57 a.m. Eastern time, it’s too soon to say.

After watching every twitch in the gold and silver price for the last ten years, I’m still skeptical… and still camped out in Missouri. But, with all these supposed changes in the works, I am very hopeful… but when you’re up against white collar criminals such as these… a healthy dose of skepticism doesn’t hurt. I’d love to be wildly bullish… but nothing is worse, or more embarrassing, than being wrong at the top of your voice… and there’s this little matter of credibility as well. The fact that I’m ‘all in’ should tell you a lot. Besides which, I’m just as happy to let James Turk [and others] stick their necks out.

I’m sure hopeful we’ll break out to much higher prices in both metals… but I’m also wary of the fact that ‘da boyz’ are still out there and have some pretty monstrous short positions in both metals. I’d love to see these bastards get over run with these full short positions on… but, like I’ve said before… if it does happen, it will be for the very first time.

As I put this report to bed for another day, I see that gold is up $8.50 the ounce, with silver up 29 cents. These are big moves for this time of day… especially for silver. I’d love to read something into it, but I won’t. But I am looking forward to New York trading today… and what I will find when I turn my computer on later this morning.

So pour yourself a big mug of coffee and watch to see what kind of show JPMorgan et al put on for us when trading begins in New York.
See you on Wednesday.

JPMorgan Adds to Their Silver Short Position

The gold price gained about five bucks in Far East trading on Friday… and then basically flat-lined for four and a half hours between the London open and the New York open. The moment that trading began on the Comex, a big not-for-profit seller showed up… and gold was sold down to its low of the day of $1,235.70 within the next thirty minutes.

Then the selling stopped… the gold price turned on a dime… and around 11:15 a.m. gold hit its high of the day at $1,252.30 spot. From there it got sold off once again and closed the Friday session up $2.70 from Thursday’s spot close.

The silver price, as they say, was more ‘volatile’ yesterday. Starting around lunchtime in Hong Kong, silver rallied to its London high around 11:30 a.m. their time. From that point, silver got sold off into the New York open where the not-for-profit seller took it even lower, with silver’s low price [$19.71 spot] coming at precisely the same instant as gold’s low price… around 8:45 a.m. Eastern.

An hour after silver hit its low price, it broke through $20 to the upside… and hung in there… setting its high price of the day [$20.06 spot] shortly before 11:30 a.m. Eastern time. Needless to say, silver was not allowed to close anywhere near the $20 mark… but still managed to close up fourteen cents from Thursday’s spot close.

The world’s reserve currency was all over the place in a very tight trading range yesterday… and obviously had no bearing on what happened with the gold and silver prices yesterday. Here’s the US$ chart for information purposes only.

The HUI pretty much followed the gold price around yesterday… and managed to finish the Friday trading day up 0.50%. Here’s the HUI for the week that was… and, in case you’re interested, the HUI is up 12% year-to-date.

The CME Delivery Report on Friday showed that zero gold and 274 silver contracts were posted for delivery on Tuesday. For the second day in a row, R.J. O’Brien was the big issuer with 267 contracts, with JPMorgan being the biggest stopper. They received 153 contracts in their proprietary trading account, plus an additional 37 contracts in their client account. There was a lot of other activity in yesterday’s delivery report… and it’s worth a look. The link is here.

There was no activity reported in either GLD or SLV yesterday… but the U.S. Mint had a smallish sales report. They showed that 4,500 ounces of gold were sold in their gold eagle program… along with an additional 1,000 24K gold one-ounce buffaloes. They also reported selling another 175,000 silver eagles. Month-to-date, the U.S. Mint has sold 18,000 ounces of gold in their gold eagle program… 3,500 24K gold one-ounce buffaloes… and 320,000 silver eagles. These are hardly earth-shaking numbers, dear reader.

Thursday was a fairly busy day over at the Comex-approved depositories. There were silver withdrawals from all four warehouses… and the total came to 294,289 troy ounces. The link to that action is here.

Well, one of the first things I looked at after my computer was up and running yesterday morning was the September Bank Participation Report for positions held at the end of trading on Tuesday, September 7th. Even without looking back to the August numbers, I could tell that there was big deterioration in both silver and gold.

In a nutshell… here it is for silver. ‘3 or less’ U.S. bullion banks increased their net short position in Comex silver by 5,637 contracts from the August report to the September report. Without doubt, JPMorgan was the culprit. The ‘8 or more’ Non U.S. banks that hold Comex silver contracts were exactly market neutral… holding the same number of longs as shorts. However, this is a deterioration from the August report… as that report showed that foreign banks were net long 1,015 Comex contracts.

In gold, four U.S. banks were net short 109,826 Comex contracts in the September report. This is an increase in net short position of around 11,400 Comex contracts since the August report. The thirteen Non U.S. banks were net short 20,586 Comex contracts. This is also a big deterioration since the August report… as the August report showed that these same 13 Non U.S. banks were only net short 9,317 Comex contracts.

From the August report to the September report, these bullion banks [U.S. and foreign] have increased their total net Comex short positions by 6,652 contracts in silver and 29,903 contracts in gold.

And, without a doubt, a lot of the short position increase by the U.S. bullion banks was put on by JPMorgan. This especially applies to silver where, without doubt, they put on the lion’s share of the 5,637 Comex short position increase that was reported by the ‘3 or less’ U.S. bullion banks.

In a report to private clients yesterday, Ted Butler had this to say… “Here’s why I think JPMorgan shorted more, putting its head back into the lion’s mouth, after closing out a bunch of silver short positions. I don’t think they thought they had any other choice. On August 24th, the price of silver was around $18 the ounce. Over the next couple of days it jumped sharply to $19… and then continued to move up from there. The technical funds were buying aggressively and the Commercials [as a group] sold to them. Without JPMorgan’s additional 5,000 or 6,000 or more short contracts, the Commercials stood a good chance of being over run to the upside. I’m sure JPMorgan was afraid of this and helped out their collusive commercial brother crooks. I’m also sure that without JPMorgan’s pile-on, the price of silver would have exploded upward.” If you wish to read more about this, you can check out Ted’s subscription service here.

The Commitment of Traders wasn’t happy reading either. It showed that the bullion banks went net short another 2,421 contracts in silver. The Commercial net short position [where the bullion banks play] now sits at 61,798 contracts, or 309.0 million ounces of silver. The ‘4 or less’ traders are short 256.0 million ounces… and the ‘8 or less’ traders are short 337.6 million ounces. The link to the full colour COT silver graph is here… and the further deterioration is very obvious.

In gold, the bullion banks increased their net short position by a smallish 3,119 contracts, or 311,900 ounces. The Commercial net short position in gold is now 28.8 million ounces… of which the ‘4 or less’ traders hold 21.0 million ounces short… and the ‘8 or less’ bullion banks are short 28.3 million ounces. The full colour COT graph for gold is linked here. The page was very slow to load earlier this morning.

These increases in net short position in the Commitment of Traders report are part of the numbers reported in the September Bank Participation Report… not an addition to them…. as the cut-off date for both reports was this past Tuesday at the close of trading.

Here’s Ted’s graph of “Days of World Production” for all Comex-traded commodities… courtesy of Nick Laird over at Needless to say, the bullion banks increased their ‘days to cover’ in both silver and gold. In silver, the ‘4 or less’ traders would take 132 days of world silver production to cover their short positions… and the ‘8 or less’ traders are now up to 174 days.

Click here to enlarge.
I have very few stories today, which suits me just fine. The first one is courtesy of reader Roy Stephens. China’s top-ranking UN diplomat embarked on a drunken rant against the UN Secretary General Ban Ki-moon, telling his boss he’d “never liked” him, and adding for good measure that he didn’t like Americans either. It’s a story from Thursday’s edition of The Telegraph… and the headline reads “China’s UN diplomat in drunken rant against Americans”. It’s not a long read… but definitely worth your time… and the link is here.

My second offering today is courtesy of reader U.D. A survey performed by the polling firm StrategyOne came up with some pretty ugly data. The public is fearful about prospects for economic recovery… and almost half see America’s ‘best days’ behind them… and 7 in 10 concerned that the country is ‘fundamentally broken and not working’. The headline reads “Two-Thirds of Americans Expect Double-Dip Recession, Brace for Second Hit Worse Than the First”. It’s posted over at the website… and the link is here.

Here’s a graph that Nick Laird sent me yesterday evening. It’s not one of his, but it certainly is worth looking at. No explanation is needed, as the graph says it all.

Here’s a story that just arrived in my in-box from Thomas John Mullen. For the last couple of days I’ve posted stories about the Anglo Irish Bank that were in The Telegraph out of London. Here’s one that’s posted in Thursday’s edition of The Irish Times. While all the focus has been on losses at Anglo Irish, the other Irish banks are in denial about the scale of State support needed. It is time to face the facts: the three viable banks need over €17 billion. The headline reads “Stark reality of losses at AIB and BoI must be faced”… and the link to this must read articles is here.

My only precious metals-related story today comes from the September 8th edition of The Miami Herald. It falls into the “you can’t make this stuff up” category. A rare 18th century coin worth $9,000 was stolen in Vero Beach – but not for long! The headline reads “Florida man steals $9,000 coin, sells it for $167”. The story [courtesy of Florida reader Donna Badach] is only four paragraphs long… and it’s well worth the read. The link is here.

My last story… and big read of the day… is courtesy of Washington state reader S.A. It’s from the October edition of Vanity Fair magazine. The headline reads “Beware of Greeks Bearing Bonds”. Like every major essay that appears in Vanity Fair… it’s very well written and very well researched. It’s also a must read from one end to the other… and the link is here.

Today’s ‘blast from the past’ doesn’t need any introduction either… as the artist and the song are know world-wide. So turn up your speakers and click


Well, neither Ted Butler nor myself were exactly overjoyed to see JPMorgan show up again on the short side of the silver market. Ted had suspected that that was the case about ten days ago… and I mentioned it in passing at least once in this column… but now its been confirmed by yesterday’s Bank Participation Report.

Unless JPMorgan and the other bullion banks get over run with this full short position on, I must admit that the chances for either silver or gold to blast off to new highs from this point are pretty remote. If I had to bet a dollar, I’d say that unless world events [financial, monetary… or otherwise] dictate it, the bullion banks will engineer another sell-off to blow the brain-dead tech funds out of their current leveraged long positions… which will allow them to ring the cash register one more time.

As Ted mentioned in his closing comments in his letter to clients yesterday… “The most concentrated and manipulative short position in history just got a lot more concentrated. Where is the CFTC? JPMorgan reveals it is exiting proprietary trading and then increases its giant silver short position? The new Financial Regulatory Reform law intends that big banks stop manipulating markets and thereby creating a danger to us all, and JPMorgan drastically ups the danger meter? And all this is taking place as the two-year mark has come in what is supposed to be a silver investigation into this very matter?” Once again, Ted Butler’s website is linked here.

Volumes in both gold and silver on Friday were reasonably robust… and I won’t know until Monday how the open interest numbers fared, as the preliminary numbers don’t give much of a clue. One thing that I did note, however… was that despite the reasonably large deliveries reported on Thursday and Friday, there are still 1,497 silver contracts open for delivery in September. It will be interesting to see how this resolves itself as the month wears on.

Enjoy what’s left of your weekend… and I’ll see you here on Tuesday morning.

Tedbits: The Financial and Economic NO SPIN Zone, Part II

Tedbits: The Financial and
Economic NO SPIN Zone

By Theodore (Ty) Andros

Depression Written into
Law, Part II

Death of the Middle Class

Economies TAXED to Death

Economic Suicide

As our socialist progressive leaders in the
developed world murder wealth creation, the middle class and our economies
under the guise of saving them.
Capitalism is now dead in the lands of its birth because there are NO
REWARDS for saving, investing, starting a business, hiring an employee, taking
a risk or working your ass off to get ahead.

The rewards for doing so now go to GOVERNMENT,
public serpents and their supporters to redistribute to themselves and to the
desperate, useful idiots who support them (because they do not have the
education required to know not to). As
the something-for-nothings in society turn to government to save them more
torture lays ahead.

policy responses to the unfolding depression are exactly the OPPOSITE of what
is required to restore economic and income growth. Ob@ma’s policies are not new; they are an
AGGRESSIVE expansion of those under George Bush. More government, more entitlements, more
regulation, more deficit spending — compassionate conservatism was nothing
less than progressive socialism in disguise.

The middle
class is being destroyed as socialist progressives, elites and crony
capitalists destroy the means for rising standards of living/incomes, rewarding
savers and investors and short circuit capitalism – ever driving the middle
class into dependence through monetary debasement, unsound money and economic
sabotage, purposefully.

Marxist socialism is the economic policy of “misery
spread widely”, collapsing economies and destruction of the middle class, and it
is now practiced throughout the developed world. In the developed world, capitalism is dying
as socialist predators are allowed to prey upon their young entrepreneurs and
small businesses to protect the big crony capitalists who support them. It robs
the middle class of the opportunities to thrive and rise through being superior
competitors who dethrone the corporatists by providing more for less to
consumers and being rewarded for doing so.

Capitalism is the economic policy of wealth
spread widely, expanding middle classes and is defined as providing more goods
and services for less money to consumers, thus destroying entrenched crony
capitalists who rely on regulatory assassinations of rugged young competitors… And
it is alive and well in the emerging world as their governments PROTECT them
from the predators in the developed world, thus allowing them to collect the
rewards from global consumers for providing more goods and services for less

policies are creating huge OPPORTUNITIES for prepared investors as volatility
expands in ALL MARKETS (stocks, bonds, commodities, currencies, natural
resources, etc) to price in the unfolding demise of the western world’s
economies, currency and financial systems.
As incomes and economies collapse in the developed world (G7), the
printing press will be substituted to FILL IN the shortfall. Buy and Hold is dead until REAL growth is
restored. Stocks and bonds have 10% upside and 40%
downside potential: risking 4 dollars to make one is the definition of
INVESTING insanity.

Absolute-Return Investments with the potential to thrive in UP, down and sideways
market conditions are part of the solution.
The indirect exchange and restoring the functions of money to your fiat
currencies offer many of the solutions. This is
what I do ( )….

In America, TAXES are about to rise viscously to
support those who produce nothing in government. The bill for FREE healthcare is about to
arrive and it is a 20 to 30% rise in premiums for employers who provide
it. Let take a look:

What can you say about this?

Christina Romer, currently Chairman of the
Council of Economic Advisers in the White House, and her husband David when
they were at Stanford conducted exhaustive research which concludes that tax
increases are highly contractionary, Their estimates imply that the tax
increases will shrink economic output by more than three dollars for every
dollar in new taxes.

The sun setting of the bush tax cuts and new
healthcare taxes beginning in 2011 will generate a projected 300 billion
dollars a year in new taxes. Using the
Romer Multiplier implies a 900 billion dollar decline in economic activity next

The other taxes contained in the healthcare bill
will be phased in over a 4-year period and no one knows what they will be. The healthcare legislation was a tax bill in
disguise, unreported by the press but plainly seen in the final draft. What employer would hire an employee when
they do not know the costs to do so? The
biggest expense in any enterprise is labor, and no one will know the cost — if
costs are unknown you cannot expect hiring to take place.

Only 3 percent of taxpayers pay over 80 percent
of all individual taxes in the United States.
These are small business owners, over their lifetimes they have taken
risks and entered the field of capitalism and competition. If they fail they are broke.

The ones that survive employ the vast majority
of Americans and have been rewarded by consumers because they supply more goods
and services for less money than their competitors.

This is
virtuous behavior for provider and buyer.
The seller makes a profit and the consumer gets more goods and services
for his family for less money. The
reward to this is savings and profits; they earned it with their sweat, risk
taking and investment

And at
the same time they provide jobs for many.
So profits and lower prices go hand in hand.

If they are not allowed to keep the fruits from
their investment in time, sweat and money they will quit doing so. three percent is a small group for the
something-for-nothings to rest and prey upon.
These are the people that the administration is demonizing as the RICH
and for whom they are refusing to allow tax rate extensions. If twenty percent decide to close their doors
and retire because it no longer pays to run their small businesses unemployment
will double.

Ask California how well this formula works?

I believe
a far higher portion is heading for
the hill; they have made their money and don’t need the hassle and, as rugged
individuals, they will not be slaves to the president and government — they
are not stupid.

Embedded in
Ob@ma’s budget are tax revenue projections and they are Orwellian in size, and they
show the intentions of the morally and fiscally corrupt administration that it

This chart illustrates the 80% rise of taxation
in the United States that the administration and congressional democrats have
in their plans to finance their redistributive schemes, also known as MARXIST
progressive socialism. It’s called
OB@MAGEDDON and it is the implementation of a social welfare state, continuing
middle class destruction and increasing government dependence. It will IMPLODE wealth creation and private
sector income. Look no further
than this short essay from Porter Stansberry (thank you Dennis Gartman for
bringing this to us The Gartman Letter )
describing the current state of affairs and unfolding catastrophe:


By Porter Stanberry

Saturday, August 21, 2010

I’d like to make you a business offer. Seriously.
This is a real offer. In fact,
you really can’t turn me down, as you’ll come to understand in a moment…

Here’s the deal.
You’re going to start a business or expand the one you’ve got now. It doesn’t really matter what you do or what
you’re going to do. I’ll partner with
you no matter what business you’re in – as long as it’s legal.

But I can’t give you any capital – you have to come up
with that on your own. I won’t give you
any labor – that’s definitely up to you.
What I will do, however, is demand you follow all sorts of rules about
what products and services you can offer, how much (and how often) you pay your
employees, and where and when you’re allowed to operate your business. That’s half of your profits.

Now in return for my rules, I’m going to take roughly
half of whatever you make in the business each year. Half seems fair, doesn’t it? I think so.
Of course, that’s half of your profits.

You’re also going to have to pay me about 12% of whatever
you decide to pay your employees because you’ve got to cover my expenses for
promulgating all of the rules about who you can employ, when, where, and how. Come on, you’re my partner. It’s only “fair”.

Now…after you’ve put your hard-earned savings at risk to
start this business, and after you’ve worked hard at it for a few decades
(paying me my 50% or a bit more along the way each year), you might decide
you’d like to cash out – to finally live the good life.

Whether or not this is “fair” – some people never can
afford to retire – is a different argument.
As you partner, I’m happy for you to sell whenever you’d like…because
our agreement says, if you sell, you have to pay me an additional 20% of
whatever the capitalized value of the business is at that time.

I know…I know… you put up all the original capital. You took all the risks. You put in all of the labor. That’s all true. But I’ve done my part, too. I’ve collected 50% of the profits each
year. And I’ve always come up with more
rules for you to follow each year.
Therefore, I deserve another, final 20% slice of the business. Oh…and
one more thing…

Even after you’ve sold the business and paid all of my
fees…I’d recommend buying lots of life insurance. You see, even after you’ve been retired for
years, when you die, you’ll have to pay be 50% of whatever you estate is worth.

After all, I’ve got lots of partners and not all of them
are as successful as you and your family.
We don’t think its “fair” for your kids to have such a big
advantage. But if you buy enough life
insurance, you can finance this expense for your children.

All in all, if you’re a very successful entrepreneur…if
you’re one of the rare, lucky, and hard-working people who can create a new
company, employ lots of people, and satisfy the public…you’ll end up paying me
more than 75% of your income over your life.

Thanks so much.

I’m sure you’ll think my offer is reasonable and happily
partner with me…but it doesn’t really matter how you feel about it because if
you ever try to stiff me – or cheat me on any of my fees or rules- I’ll break
down your door in the middle of the night, threaten you and your family with
heavy, automatic weapons, and throw you in jail.

That’s how civil society is supposed to work right? This is America, isn’t it? That’s the offer America gives its
entrepreneurs. And the idiots in
Washington wonder why there are no new jobs…

Regards, Porter

Thank you, Porter. That, folks, is a description
of the United States today; it’s a country where the private sector only EXISTS
to feed the leeches in the public sector, banksters, elites and crony
capitalists. They have BETRAYED America
and usurped the constitution and become our masters. They run America to serve no one but
themselves and their special-interest supporters; to them the public are
sheeple to be fleeced. As you can see,
you do not need to take over a business to confiscate the fruits of its labors;
the private sector is independent in name only!!

This is
what “CHANGE we can believe in” really is.
Remember last fall when the president held a jobs and economic summit in
Washington and DID NOT invite the Chamber of Commerce or the National Federation
of independent businesses? These
organizations represent MILLIONS of small businesses and they have NO VOICE in
Washington. They are the dastardly RICH,
in the president’s rhetoric. They
weren’t invited because the socialist progressives despise those who are not
dependant on them. Attendees were
limited to large crony capitalists such as GE, the too-big-to-fail banks,
government motors, and the pharmaceutical and healthcare industries.

Wealth and income generation CANNOT be expected
to RESUME until the public sector is REFORMED and brought back to the FACT that
they are our servants not our MASTERS.
The public are not the SLAVES of the PUBLIC sector.

parasites have now KILLED the host private sector and continue to FEED on the
middle class CARCASS with policies which WILL NOT allow them to advance —
personally, professionally or financially.
This is the recipe Europe has had for decades and is why it is a
hopeless case to expect wealth generation to resume. The debt spirals in America and Europe are
terminal as incomes will NEVER service the exploding debt. Take a look at Europe’s tax BURDENS on its
slaves….er, I mean public, and keep in mind they sold this as “compassion and
social responsibility”:

Pied Piper of Poverty

In reality, this is obscene and absurd, the private
sectors and public at large are nothing more than slaves. No wonder the industrial sectors have LEFT the
continent and US. The public serpents,
elites, banksters and crony capitalists have now also EATEN the private
sector. They march HAND in HAND to
oppress the public with higher prices for less goods and services
for those they claim to serve. This is
where socialist progressives on BOTH SIDES of the POLITICAL aisle are taking
Amerika. This is why the G7 WILL NOT escape the greatest depression EVER!

Do you know how a VAT (value added tax) tax
works? Let me explain it. It is a tax at the levels you see above at
EVERY STAGE of production. Let’s look at
a cotton T-shirt. In the United Kingdom
it means 20% tax when the cotton is sold to the mill to produce the thread,
then a 20% tax when the thread is sold to another mill to weave into fabric,
then a 20% tax when it is sold to the manufacturer to sew the fabric into the
garment, then a 20% tax when the finished garment is sold to the retailer, then
a 20% tax when the retailer sells it to you.
This is how a $1 pair of underwear at Target or Walmart costs $10 in
Europe. This is government ROBBERY of
the public. Now Ob@ma and the socialist
progressive democrats have its sights set on bringing it to YOU.

They call it VALUE ADDED to FOOL the dumbest
among us or useful idiots; it is thus with all socialist-progressive legislation:
actually subtracts value from the consumer at every stage of production. Every time wealth is created at every stage
of the production cycle it is immediately CONFISCATED and transferred to the
PUBLIC sector. Basically, you are
PUNISHED for producing more than you consume and for creating wealth. Talk about a disincentive to produce wealth
— this is it! Wealth that is
immediately transferred to people who misallocate and destroy it through
redistribution through the incompetent bureaucrats and a corrupt state!

This is another reason why Europe no longer
makes its own everyday items. To pay this is ECONOMIC suicide for the
manufacturing industry and every other industry it touches. It is why WEALTH creation, the middle class
and incomes can never rise. It is why EUROPE cannot grow its economies or
middle classes. The public are rats on
spinning wheels to NOWHERE, fleeced to exhaustion and poverty. This is misery spread widely by public

Your federal government officials in Washington
think this is a good idea for Amerika — vote
against every democrat you can. When
Ob@ma and the democrats talk about helping small businesses but then tax people
who make over $250,000, please understand: they are one and the same. They talk cooing sounds for sound bites and
main stream press headlines while STABBING these people in the back through
their actual policies.

This VAT tax combined with FIAT currency
masquerading as sound money, deficit spending and runaway welfare state
entitlements is why Europe’s economies cannot EVER expect recovery. The structural reforms necessary to restore
wealth and income growth will destroy the special interests which control the
public sectors. So you can expect the collapse in
the economies to resume.
Recovery relies on increased DEMAND from consumers, but without rising
economies, WAGES cannot rise.

conclusion: You can expect the US
economy to resume its collapse NOW. In
fact, it has resumed its freefall, a 27% drop in home and auto sales are
canaries in the coal mine. Job creation
in this environment is a fairy tale. You
can expect up to 1 million small businesses to CLOSE their doors in the next
year and take 5 to 10 MILLION jobs with them.
And reversal or repeal of finreg and OB@MACARE WILL NOT bring them

Unemployment is turning up and it will
relentlessly RISE and smash the previous peak as the expiration of current TAX
RATES and the obscenities called FINREG and OB@MACARE, implemented in the last
two years by Washington DC, come home to roost:

Turning up as small businesses CLOSE their doors in
surrender to: The vultures in the

Take a look at what the banksters and the terrorists
in the beltway have brought you in this interactive video of spreading

As Porter Stansberry correctly points out, there
are no incentives left to create wealth in Amerika. Socialism is in full bloom and misery spread
widely can be expected to blossom as well.
The policies which needed to be implemented during the global-financial
crisis and deep recession to foster growth were ignored. As White House Chief of Staff, Rahm Emanuel,
said: “A crisis is a terrible thing to
waste”… they didn’t and…

Instead, more taxes, more regulations and more
government were implemented, deepening the crisis and crippling future ECONOMIC
and employment prospects. Trillions have
been and are being printed to hold up the economy, support crony capitalists and
expand government at the expense of the wealth-creating PRIVATE sector. The economy in real terms is in free fall; in
nominal terms (by misstating inflation) it is BARELY growing.

Gold-backed, absolute return alternative
investments with the potential to thrive in up, down and sideways markets are
part of the solution. Volatility has
been and is set to SOAR. As the unfolding depression is priced into
markets, stocks, bonds, currencies and commodities will ZOOM up and down to
REFLECT the insanity of our socialist progressive leader’s policies. Buy-and-hold is dead; an actively managed
investment by professionals is essential to meet the challenges of today’s
markets. This is
what I do. ( )

I will be doing a webinar on gold-backed,
absolute return investments in the next several weeks, watch for links to
register to attend in upcoming editions.
Tedbits is also about to
release a video book entitled: “When HOPE turns to FEAR” which will ONLY be for
available to registered subscribers of Tedbits. Subscriptions are free at TRADERVIEW.COM/ . Don’t miss the next edition of Tedbits: Depression written into law series…