Federal Reserve

Did I not say the Fed would be the buyer of all these new Treasury Issuances??

If you are in the bond markets, why?

Get safe while you can. This can end only one way. Dollar Deadpool.

Fed Extends Bond Purchases Until October But Not Amount

(Reuters) – The US Federal Reserve said Wednesday the economy was showing signs of leveling out after 20 months of recession and it will extend the duration but not the size of a program to buy long-term government securities to minimize any disruptions from completing it.

The U.S. central bank also kept its benchmark short-term interest rate steady near zero and said it would likely stay there for an extended period.

“To promote a smooth transition in markets as these purchases of Treasury securities are completed, the committee has decided to gradually slow the pace of these transactions and anticipates that the full amount will be purchased by the end of October,” the Fed said in a statement at the conclusion of its policy-setting meeting.

(more…)

This is theft. You still trust these people?

Unjust weights and Measures are an abomination unto the Lord.

The Lord delights in just weights, all the weights in the bag are his.

It took me a long time to figure out that last part. Do you realize that out of the thousands of various types of paper currencies to paper derivatives of every imaginable stripe and color, that only gold and silver were here before man?

Traders Profit With Computers Set at High Speed

July 24, 2009, 4:10 am

It is the hot new thing on Wall Street, a way for a handful of traders to master the stock market, peek at investors’ orders and, critics say, even subtly manipulate share prices. It is called high-frequency trading — and it is suddenly one of the most talked-about and mysterious forces in the markets, writes Charles Duhigg in The New York Times.

Powerful computers, some housed right next to the machines that drive marketplaces like the New York Stock Exchange, enable high-frequency traders to transmit millions of orders at lightning speed and, their detractors contend, reap billions at everyone else’s expense.

(more…)

Alex’s Notes: This keeps getting better and better. The Federal Reserve act was passed in 1913. In direct conflict with the US Constitution which states only gold and silver are legal as money, it allowed a private bank to control the issuance of currency, to basically create money at will.

I can already hear the argument versus gold and silver as money starting up..the barbarous relic theme…instead of addressing this argument which has gone on for as long as man has wanted to control issuance of currency, let me just point out one simple fact: you cannot build a stable house with a measurement of value that changes all of the time. If the inches on a slide rule a carpenter used changed its size constantly, the house would be a catastrophe waiting to happen. That is precisely what the US Dollar is, a measure that changes value constantly. It would take you almost $100 to buy in raw goods what $1 would buy you 100 years ago. These are simple, indisputable facts, and have nothing to do with the idea that people do not want gold coins clinking around in their pocket. The point is money must have a stable measure or it cannot be the foundation a financial house is built upon.

Evidence of this is pretty obvious and widespread in today’s economy.

The US government literally borrows money from the Fed then taxes US citizens to pay the interest, then the Fed, which is a private bank, then uses your tax dollars to buy garbage out of the market and off the books of financial firms, cleaning their books and padding everyone’s pockets in the process, once again at the cost of the american taxpayer.

Lets be clear here: I am not trying to get you mad at the government, I am trying to point out that you can either trust the paper system with your money, or you can put your money in gold. History proves that parabolic debasement of the money supply that is occurring now, has led to the demonitization of that particular form of money, every time.

Get safe. Gold is the Money of Kings.

***

Wall Street profits from trades with Fed

By Henny Sender in New York

Published: August 2 2009 23:04 | Last updated: August 2 2009 23:04

Wall Street banks are reaping outsized profits by trading with the Federal Reserve, raising questions about whether the central bank is driving hard enough bargains in its dealings with private sector counterparties, officials and industry executives say.

The Fed has emerged as one of Wall Street’s biggest customers during the financial crisis, buying massive amounts of securities to help stabilise the markets. In some cases, such as the market for mortgage-backed securities, the Fed buys more bonds than any other party.

However, the Fed is not a typical market player. In the interests of transparency, it often announces its intention to buy particular securities in advance. A former Fed official said this strategy enables banks to sell these securities to the Fed at an inflated price.

The resulting profits represent a relatively hidden form of support for banks, and Wall Street has geared up to take advantage. Barclays, for example, e-mails clients with news on the Fed’s balance sheet, detailing the share of the market in particular securities held by the Fed.

“You can make big money trading with the government,” said an executive at one leading investment management firm. “The government is a huge buyer and seller and Wall Street has all the pricing power.”

(more…)

Chinese have a memory of fiat currency failure as it has happened a handful of times. The chinese cultural memory goes back a long ways. Metal is flowing like a river from west to east.

There is an ancient saying of ‘He who has the gold, makes the rules’. This isnt just a cliche, but rather proven out by historical evidence. Wherever the largest stocks of gold were, the nations who have held it were usually the most influential nations of their time period.

Egypt, Rome, Byzantium, Western Europe and England, then the USA.

The US gold stocks have not been audited since the 50’s, and many analysts believe that what is claimed to be there is alot more than what is actually there.

China is still making strong strides to make the Yuan a fully convertible currency. When the veil spun by the mass media comes off, people will run to whats ultimately safe, which is gold and silver.

China May Overtake India in Gold Demand, Council Says

By Sophie Leung

July 24 (Bloomberg) — China may overtake India to become the world’s top gold consumer this year, the World Gold Council said, as the nation became the first of the major economies to rebound from the global recession.

Jewelry demand in China expanded in the first quarter while dropping in India, Marcus Grubb, a managing director at the London-based council, said today at a conference in Hong Kong. Chinese gold demand will keep rising, he said.

China’s economy grew 7.9 percent in the second quarter after a 4 trillion yuan ($586 billion) stimulus package spurred record lending and consumption. India’s gold purchases slumped 54 percent in the six months ended June after a decline in the rupee pushed up the cost of owning bullion, cooling demand from housewives and jewelers, the Bombay Bullion Association said.

“There is a possibility that China might overtake India as the world’s largest gold consumer this year,” Hou Huimin, deputy head of the China Gold Association, said by phone from Beijing today. “India’s gold consumption is reportedly dropping this year due to the financial crisis.”

(more…)

Consumer level investors do not stand a  chance trading these markets. If you arent a big trading firm with access to Dark Pools, you are at a serious disadvantage.

Talk to and inteview the guys who built the technology behind the Dark Pools. Its an eye opener.

Solution: Protect wealth using gold and silver

By Jonathan Spicer

NEW YORK, July 24 (Reuters) – U.S. Senator Charles Schumer warned a top regulator on Friday that if she does not ban so-called “flashes” — orders that stock exchanges send to a select group of traders before revealing them to the wider market — he will introduce legislation that does.

In a letter dated Friday to Mary Schapiro, chairman of the U.S. Securities and Exchange Commission, Schumer said this type of order “seriously compromises the integrity of our markets and creates a two-tiered system where a privileged group of insiders receives preferential treatment.

“If allowed to continue, these practices will undermine the confidence of ordinary investors and drive them away from our capital markets,” Schumer, a senior Democrat on the Senate Banking panel, said in the letter obtained by Reuters and verified by an aide.

(more…)

Do you trust the Federal Reserve?

Do you trust Wall Street?

Congressman Alan Gray discusses the Federal Reserve lending to foreign countries in the last year with Chairman Bernanke.

The reason people are running to gold is because it isnt paper…it doesnt depend on a bank or a government for it to have value.

There is a reason gold and silver have been money for almost 6000 years of recorded human history. Is it really possible that mankind has become so enlightened in the last 200 years that the accumulated wisdom and experience from the prior 5800 years has become obsolete?

Or maybe is this just hubris?

Honolulu, Hawaii
July 13th, 2009AD

Here is a little global economy roundup:

Many still think the economy is on the verge of recovery. While the rest of the developing world continues to steam ahead plowing through obstacles, the western world continues to spiral downward. This still does not take into consideration ALT-A and ARM loan resets through 2011.

July 9 (Bloomberg) — The $3.5 trillion commercial real estate market is a ticking “time bomb” that may lead to a second wave of losses at large U.S. banks, congressional Joint Economic Committee Chairwoman Carolyn Maloney said.

About $700 billion in commercial mortgages will need to be refinanced before the end of 2010 and “doing nothing is not an option,” Maloney, a New York Democrat, said at a committee hearing today. This “looming crisis” may lead to significant losses for banks, force shopping center and hotel owners into bankruptcy, and impede economic recovery, she said.

Meanwhile, the rest of the world forges onward.

The IMF  claims Asia cannot decouple from the western world economies and will not continue to grow until the west recovers…this article doesn’t agree. Also….has the head economist of the IMF forgotten that China has almost $2 Trillion in savings that it can spend?

SAN FRANCISCO (MarketWatch) – China wrestled the new-car sales crown from the U.S. through the first half of the year, topping 6 million cars and trucks at a time when the long-time global sales leader grapples with historic declines.

Do you really think the worlds leaders believe all this BS about green shoots? If they did, would they be plowing money into commodities like this? Or maybe is it, that they know that if you print $13.5 Trillion (and growing) you will see massive inflation of real prices, so they are buying while its cheap and using lip service to keep the dollar value from dropping to preserve as much buying power as possible?

BEIJING, July 10 (Reuters) – China’s imports of unwrought copper and semi-finished copper products in June hit an all-time record for a fifth straight month of 475,999 tonnes, from May’s record 422,666 tonnes, data from the General Administration of Customs showed on Friday.

Rats from a sinking ship

More Diversification out of Dollar…Japan has always been one of the biggest supporters of the USD…and now there is public discussion of diversifying out of it…this is very bearish for the USD (and very bullish for gold)…this may be a prelude to a new ‘basket of currencies’ as an index to a new global exchange currency

July 13 (Bloomberg) — Japan’s opposition party, leading in polls ahead of next month’s election, said the nation should consider shifting its $1 trillion of foreign reserves away from the dollar and buying International Monetary Fund bonds.

The next world reserve currency

President Medvedev has called for a gold backed currency over and over. This time, he isnt just calling for it, he is producing examples of it. He handed coins to the leaders of G8 delegations, a proto-type of a potential new global currency…and these coins were pure gold. Any move in this direction would be extremely bullish for gold. Read an article I wrote regarding shifting to a gold back currency to understand why.

July 10 (Bloomberg) — Russian President Dmitry Medvedev illustrated his call for a supranational currency to replace the dollar by pulling from his pocket a sample coin of a “united future world currency.”

My colleagues have been right so far, having called the current economic crisis over a decade ago. This video proves it: Millennium Money as it was produced in the mid 90’s.

Our portfolios also reflect the fact that those who listened to us over the last few years are doing quite well right now. Those who did not…maybe not so much.

I will be sending out a ‘Rapid Trends Insider’ email later today with an exclusive chance to listen in on a recent round-table discussion with my colleagues regarding the global supply / demand situation, as well as an interview we did with David Morgan, one of the worlds top recognized silver analysts.

You can join our newsletter here: Rapid Trends Insider

Just posted an excellent article by J.S. Kim in regards to golds role as a monetary balancer.

In this article, Mr. Kim goes back through Greenspans famous essay and shows clearly why gold is the only means of counterbalancing what governmental and banking oligarchies do with fiat currency systems.

An excerpt:

Today, due to the proliferation of fragile and confusing financial instruments called derivatives and the fraudulent nature of our fractional reserve banking system, hundreds of billions, and more likely, trillions of more dollars exist than claims on real assets and goods.

The comparable analogy would be if, as an Apple (AAPL) store owner, I sold the same 100 Apple desktop computers to 10,000 clients. As long as no more than 10 of my customers required delivery in any given year, then my business could operate for many years without this fraudulent scheme ever being exposed. However, the instant my clients collectively decided they wanted to take delivery of all 10,000 computers in the same month, my ruse would be exposed and my business sentenced to a fate of bankruptcy.

Almost all of us would agree that this would be an insane way to run a business, yet we readily accept the fact that all major banks in every modern, developed nation run their businesses in this very manner. However, the development of such a situation would be next to impossible with the institution of a true gold standard and this is why Alan Greenspan once made the timeless statement that economic freedom and gold are inseparable.

The full article is here: Gold is the balance to fiat currency

Alex’s notes: This is a horrible idea.

The proper oversight of systems lies with the people themselves not a private banking institution, let alone a private banking institution owned by private interests who benefit from the debasement of a currency supply.

This is exactly the kind of thing that got us into this mess in the first place.

“Some [most] people think the Federal Reserve Banks are U.S. government institutions. They are not … they are private credit monopolies which prey upon the people of the U.S. for the benefit of themselves and their foreign and domestic swindlers, and rich and predatory money lenders. The sack of the United States by the Fed is the greatest crime in history. Every effort has been made by the Fed to conceal its powers, but the truth is the Fed has usurped the government. ”

—Congressional Record 12595-12603 — Louis T. McFadden, Chairman of the Committee on Banking and Currency (12 years) June 10, 1932

Can anyone who has studied this subject say that the SEC and the Fed have actually done a good job at regulating fraud and crime? Ever?

Do you realize that the books of the Federal Reserve have never been audited? The Federal Reserve is essentially above the law as it does not answer to the United States Congress, nor have to report its activities or allow its books to be audited.

Did you know that when asked for information by various members of Congress, duly authorized by the people to do so, that representatives of the Federal Reserve to include Ben Bernanke have simply said “no”, and its perfectly legal for them to do so?

The Feds very existence defies the US Constitution, but the legislation it is written under allows it to operate with total secrecy, even from the people of the United States. Can you imagine what would happen to our banking system if these people were allowed full authority over the core of the banking system, completely above the law, in total secrecy?

“The few who understand the system will either be so interested in its profits or be so dependent upon its favours that there will be no opposition from that class, while on the other hand, the great body of people, mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests.”

—The Rothschild brothers of London writing to associates in New York, 1863, laying the groundwork for the eventual passage of their catastrophic Federal Reserve Act on December 23, 1913

This proposal is like searching the prison for the most despicable serial rapist one can find, and then making that person in charge of protecting people from being raped.

The “Federal Reserve” is neither Federal nor does it have reserves. It is not a government institution, and it simply creates money when it needs it. Its very name is a fraud.

If you want proof of this, there are numerous works available publicly by credible sources that shed further light on this. Check out Creature from Jekyll Island by G. Edward Griffin, or google Edwin Vieira. Anyone who has studied this subject in detail already knows this, but if you are just starting your journey into the subject of “how the world REALLY works” then understanding the Fed is a critical piece of the puzzle.

In times of fear people let the government do all sorts of stupid things. People are scared, and I dont imagine we will see anyone trying to stop this, except maybe Ron Paul.

If people fear failure of systems, they will let them get away with this. If you are one who allows it to occur without at least trying to understand it, speaking about it and educating your fellow man, then remember that ultimately people do not get the government they want, they get the government they deserve.

“It is well that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”

—Henry Ford inventor and founder of the Ford Motor Company.

You have heard me harp on this before, if you dont own gold and silver as this unfolds, you may be very sorry before this is all over.

The article is below. Oh by the way, this news release was put out via Associated Press.

You may find it interesting to know, as I did,  that The House of Rothschild bought Reuters news service in the 1800’s. Within the last 20 years, Reuters bought the Associated Press.

No conflict of interest there, and you can expect completely unbiased reporting with absolutely no agenda. I also have a bridge to sell you, cheap.

***

By ANNE FLAHERTY, Associated Press Writer Anne Flaherty, Associated Press Writer   – 2 hrs 11 mins ago

WASHINGTON – The Federal Reserve could become the supercop for “too big to fail” companies capable of causing another financial meltdown under a proposal being seriously considered by the White House.

The Obama administration told industry officials on Friday that it was leaning toward making such a recommendation, according to officials who attended a private one-hour meeting between President Barack Obama’s economic advisers and representatives from about a dozen banks, hedge funds and other financial groups.

Treasury Secretary Timothy Geithner and other officials made it clear they were not inclined to divide the job among various regulators as has been suggested by industry and some federal regulators. Geithner told the group that one organization needs to be held responsible for monitoring systemwide risk.

“Committees don’t make decisions,” said Geithner, according to one participant.

Officials from the Treasury Department and National Economic Council, which hosted the meeting, told participants that the Fed was considered the most likely candidate for the job, according to several officials who attended or were briefed on the discussions.

The administration officials said a legislative proposal would likely be sent to Capitol Hill in June with the expectation the House Financial Services Committee, led by Rep. Barney Frank, D-Mass., would consider the measure before the Independence Day recess.

The officials requested anonymity because the meeting had not been publicly announced and they were not authorized to discuss it.

A Treasury Department statement provided to The Associated Press on Friday confirmed Geithner’s position that he wants a “single independent regulator with responsibility for systemically important firms and critical payment and settlement systems.”

A spokesman said Geithner also is open to creating a council to “coordinate among the various regulators, including the systemic risk regulator.”

The Fed itself hasn’t taken a position on whether it should have the job, although Chairman Ben Bernanke has said the Fed would have to be involved in any effort to identify and resolve systemwide risk.

Original Article

I just posted the most recent RT Insiders Update.

In this report I cover the current push for a new currency to settle global trade in.

An excerpt:

The worlds governments are scared, confused, and are reluctant to give up their control of your wealth

It is a normal human reaction, when faced with the decline in purchasing power of a fiat currency, to seek a way to stop that buying power from dis-appearing.

There is nothing wrong with this, and it is a completely reasonable reaction. The challenge occurs when someone who is in a decision making role either doesn’t truly understand why the currency is devaluing in the first place, or if they have a motive to continue to devalue it.

Russia and China have proposed to create a global currency linked to a basket of currencies, or the Special Drawing Rights of the IMF.

Hugo Chavez has just floated a proposal to create an international reserve currency linked to the price of oil.

Venezuelan President Hugo Chavez tried Tuesday to court Arab support for another swipe at America as its economy stumbles: a proposal for a new, oil-backed currency to challenge the global prominence of the dollar.
– Associated Press – Tue Mar 31, 2:59 pm ET

World leaders are floundering around in desperate attempts to salvage a global trade system based on fiat currency, and so far they are all terribly wrong.

Out of the Frying Pan and into the Fire

The US Dollar, as the reserve currency of the world, is facing massive devaluation. This isn’t a guess, it’s not a theory, it’s a mathematical equation that any 10 year old can calculate.

This is available exclusively to Rapid Trends Members.

You can register to receive these updates at no charge here: http://www.rapidtrends.com/

All the best for your health, wealth, and future prosperity,
Alex

This week has seen the US Government bail out a growing number of Wall Street firms, the largest insurance company in the world, and finally end at printing money without subjecting the backing instruments to international market scrutiny.

(Treasury is now selling T-Bills DIRECTLY to the Fed, no pretense of going through an investment bank anymore)

This is pretty shady stuff, and thats being kind.

To understand why this is BAD, we have to understand why inflation is bad.

Yes of course, inflation is bad because prices go up, but that is not what inflation really is, prices going up is just what happens AFTER inflation occurs.

Put simply, inflation is when you add more currency to the currency supply.

Price increases happen, because when you add more currency then each unit of currency already in existence becomes worth less.

So prices rising arent so much because what you are buying is worth MORE than it was a year ago, but simply because your dollar is worth LESS.

So, the reason I explained that to you, is so you can understand what happens when the Government “bails out” all these failing financial institutions.

Really, two things happen:

1. The government creates Treasury Bills, which it then sells to someone, usually an investment bank and now, the Federal Reserve. In exchange, Congress gets currency from the investment bank, or the Federal Reserve, to spend on Bridges to no-where, military toys, and bailouts of corrupt, overpaid, Wall Street Slicksters who are their buddies.

Guess who gets to pay for that? Thats right, US Taxpayers! Arent you excited?!

2. The second thing that happens is, “liquidity”, which is a fancy term for more money, gets injected into the currency supply because this currency was essentially just “created” in order to bail out these silly greedy Wall Street slicksters and the firms who happen to be buddy buddy with our Congressman and Senators.

Ok, so, what happens when we inject all this currency into the system? Thats right, you guessed it, the value of your dollar goes down, prices go up!!!

So essentially, each time one of these Wall Street firms gets bailed out, the value of your dollar to buy groceries and gas, GOES DOWN, so groceries and gas become more expensive.

Now obviously, if you are a Wall Street Slickster,  you are happy with this deal, because you get to do all kinds of stupid things, then get some silly taxpayer shmuck to pay for your severance package of hundreds of millions of dollars anyway.

If you are a Congressman or Senator of course, this is all good, because lots of cash flows into your tax haven bank accounts from your Wall Street buddies, you get to ride around in fancy cars and go to fancy fundraiser dinners, and you get a HUGE pension for life, even if you dont do crap your entire time in office.

AWESOME! Its good to be the King. Or in this case, a Congressman or Senator.

Now now, Mr. taxpayer, dont complain, you should just shutup and eat your gruel, and be happy to get it! Peasants! Your lucky we dont raise taxes to 85% and then make you WALK to work!

But whats really got me miffed right now, even beyond the fact that our “leaders” have no problem raping the wealth of US Citizens to bail out a bunch of greedy, stupid, people who are already rich anyways, all the while destroying the buying power of the common man AND taxing the common man on top of it to pay for all this shenanigans…

Is that just when we think its IMPOSSIBLE for our leaders to get any more stupid, this happens:

President Bush approved the use of existing authorities by Treasury secretary Hank Paulson to make available as necessary the assets of the Exchange Stabilisation Fund for up to $50 billion to buy more illiquid mortgage assets.

When the Government bailed out the the Government Sponsored Enterprises it promised to buy illiquid mortgage backed securities, but this announcement extends that pledge.

The ESF was created after the Great Depression and uses the US gold reserve as collateral for financial stability.

So what does all that mean?

Basically, it could very well be the dumbest thing any group of government officials has ever done, in history.

This is a quote from the website of the US Treasury describing what the “Exchange Stabilization Fund” is:

The Exchange Stabilization Fund (ESF) of the United States Treasury was created and originally financed by the Gold Reserve Act of 1934 to contribute to exchange rate stability and counter disorderly conditions in the foreign exchange market. The Act authorized the Secretary of the Treasury, to deal in gold, foreign exchange, securities, and instruments of credit, under the exclusive control of the Secretary of the Treasury subject to the approval of the President.

This is my translation:

This thing gives Mr. Paulson, who already has WAY to much authority, the ability to sell off the gold stocks of the United States, manipulating the gold price down, to prop up the US Dollar and make all the sheeple think that gold is falling and the markets and USD are rallying, so all the stupid people can pour more money into the markets, bail out the corrupt Wall Street Slicksters, impoverish and steal the wealth of US Citizens, and perpetuate the scam that the USD which happens to be backed by nothing is actually worth something insteading doing whats smart and backing our currency in gold.

They are going to sell off gold into the international market, which is going to depress the gold price, and use the money to prop up the US Dollar, the stock market, and to try and ‘neutralize’ all this garbage derivative crap that Wall Street has been creating over the last ten years or so.

This isnt just any gold mind you, its the reserves of the United States, belonging to citizens of the United States.

So not only are these guys willing to tax you to pay for bailouts, which then adds currency to the currency supply, which then reduces your buying power, but now, they are selling off the bedrock of the nations financial health, the gold stocks that belong to YOU as a US Citizen, to again save a bunch of fools who probably should have been hung from the gallows a long time ago.

If that does not infuriate you, well….

A brief prediction.

I dont like to make predictions, because predictions usually make a guy look stupid later, but here it is:

The gold price will drop, they will use this as another means to manage the gold price, stocks and the USD will rise or remain level, they HOPE through the elections in November.

This of course is only short term. A band-aid on a gushing severed limb, if you will.

They are willing to sacrifice the nations financial future, and the well being of our children and grandchildren, just to get one more US President in office and perpetuate the non-sense.

But at what cost?

Ultimately, Gold ALWAYS revalues to match the amount of currency that gets pumped into a currency system.

This is not a theory, its not conjecture, history proves it happens over and over, every single time, as predictable as the seasons.

Over the long term we will see the US Dollar devalued, the gold stocks of the United States depleted just when they are needed the most, the common citizen robbed of everything he has through inflation and taxation to bail out those who do not deserve to be saved, and worse case scenario, it could cost citizens of America our freedom and form of government in the end.

We will see the government start to directly monetize debt as a matter of habit, and once that occurs the United States is on the road to hyperinflation.

Solution?

Anchor your finances in gold and silver now while you still can.

“Unjust weights and measures are an abomination unto the Lord” – What is an unjust weight and measure? How about a piece of currency that changes in value constantly? If something is a “measure” it has to remain constant, not change in value.

If you were a carpenter trying to build a house, and the tape measure you used to measure your cuts changed all the time, how solid would your house be?

I am of the opinion that if this thing goes down the tubes, and there is no indication that Congress, the Senate, The President, The Secretary of the Treasury, or the Federal Reserve Chairman have any inkling as to how to prevent it based on recent decisions, then the ONLY safe place in this coming storm is gold and silver.

Those who have gold and silver, will see a huge transfer of wealth to them. Those who dont….well….sorry. Get used to gruel and string vests.

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With this announcement, the US has stepped into a realm formerly reserved for such lofty icons of global financial dominance as the Wiemar Republic, Argentina, and Zimbabwe.

We are now officially directly monetizing debt, and creating money out of thin air.

God forgive us for what we are about to do to our children.

September 17, 2008
HP-1144

Treasury Announces Supplementary Financing Program

Washington- The Federal Reserve has announced a series of lending and liquidity initiatives during the past several quarters intended to address heightened liquidity pressures in the financial market, including enhancing its liquidity facilities this week.  To manage the balance sheet impact of these efforts, the Federal Reserve has taken a number of actions, including redeeming and selling securities from the System Open Market Account portfolio.

The Treasury Department announced today the initiation of a temporary Supplementary Financing Program at the request of the Federal Reserve.  The program will consist of a series of Treasury bills, apart from Treasury’s current borrowing program, which will provide cash for use in the Federal Reserve initiatives.

Announcements of and participation in auctions conducted under the Supplementary Financing Program will be governed by existing Treasury auction rules.  Treasury will provide as much advance notification as possible regarding the timing, size, and maturity of any bills auctioned for Supplementary Financing Program purposes.

http://www.ustreas.gov/press/releases/hp1144.htm

***

Bernanke: ‘We have lost control’

Economist recounts talk with Fed chairman

By Joshua Boak | Chicago Tribune reporter
September 17, 2008

NAPLES, Fla. — Several months ago, economist David Hale had a private meeting with Federal Reserve Chairman Ben Bernanke, who was trying to ward off a recession by lowering interest rates and increasing the money supply in the economy.

“Ben, you are playing a very unique role in world economic history,” Hale recalled telling Bernanke, an expert in the Great Depression. “You are the first central bank governor of the United States to preside over a recession with no decline in commodity prices.”

“We have lost control,” said Hale, quoting Bernanke. “We cannot stabilize the dollar. We cannot control commodity prices.”

http://www.chicagotribune.com/business/chi-wed_oilsep17,0,4833605.story

***

Government steps in again, bails out AIG with $85B

By JEANNINE AVERSA, IEVA M. AUGSTUMS and STEPHEN BERNARD, AP Business Writers 1 hour, 30 minutes ago

In the most far-reaching intervention into the private sector ever for the Federal Reserve, the government stepped in Tuesday to rescue American International Group Inc. with an $85 billion injection of taxpayer money. Under the deal, the government will get a 79.9 percent stake in one of the world’s largest insurers and the right to remove senior management.

http://news.yahoo.com/s/ap/20080917/ap_on_bi_ge/aig;_ylt=AonHCCQ2_HZ__h1XWo5HDf2s0NUE

***

Global credit system suffers cardiac arrest on US crash

By Ambrose Evans-Pritchard
Last Updated: 11:59pm BST 17/09/2008

The global credit system almost grinds to a halt as yields on US Treasury bills reach zero for the first time since the Great Depression, writes Ambrose Evans-Pritchard

The global credit system came close to total seizure yesterday. Key parts of the derivatives market shut down and a panic flight to safety depressed the yield on three-month US Treasury bills to almost zero for the first since the Great Depression in 1934.

The closely-watched TED-spread measuring stress in the interbanking lending market rocketed to 238 as the share prices of Morgan Stanley, Goldman Sachs, Citigroup, Wachovia, and Bank of America all went into a tailspin yesterday.
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The collapse in investor confidence is a harsh verdict on the judgment of the US Federal Reserve, which chose to ignore market pleas for a rate cut to halt what amounts to a modern-era run on the banking system. Almost none of the current Fed governors have market experience. Most are academic theorists.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/09/18/ccambrose118.xml

***

Bright Side of a Total Financial Market Collapse: Michael Lewis 

We’ve just witnessed the largest bankruptcy in U.S. history and we know neither the inciting incident (though there is speculation that sovereign wealth funds decided to stop lending to Lehman Brothers Holdings Inc.), nor the deep cause. But there’s now a pile of assets and liabilities smoldering in New York awaiting inspection.

The assets include subprime mortgage-backed bonds and no doubt many other things that aren’t worth as much as Lehman hoped they might be worth. But it’s the liabilities that are most intriguing, as they include more than $700 billion in notional derivatives contracts. Some of that is insurance sold by Lehman, against the risk of other companies defaulting.

http://www.bloomberg.com/apps/news?pid=20601039&sid=a9xtBHJoZTOw&refer=home

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Panic Is the Word of the Hour

Traders abandoned the NYSE temple visually defeated and immune to the TV crews waiting. The disastrous closing prices were flickering on the ticker above the NYSE entrance: American Express -8.4 percent; Citigroup -10.9 percent; JPMorgan Chase -12.2 percent. American icons, abused like stray dogs. Even Apple took a hit.

“I don’t know what else to say,” stammered one broker, who was consoling himself with white wine and beer along with some colleagues at an outdoor bar called Beckett’s. Ties and jackets were off, but despite the evening breeze, you could still make out the thin film of sweat on his forehead. His words captured the speechlessness of an industry.

http://www.spiegel.de/international/business/0,1518,578944,00.html

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New World Order: Likely Morgan Merger Leaves Goldman Last Man Standing

Posted Sep 18, 2008 10:48am EDT by Aaron Task in Investing, Recession, Banking

As of this writing, the fate of Morgan Stanley remains uncertain although continued independence seems unlikely. The investment bank is having merger talks with a variety of players, including Wachovia and HSBC, while China’s sovereign wealth fund is looking to raise its stake in the firm, according to various reports. (After rallying early Thursday on such reports, Morgan shares recently turned negative, about $2 below its early high of $22.32.

The bigger story is a Morgan merger would leave Goldman Sachs as the last remaining major independent brokerage firm, when four existed a week ago and five were operating at the beginning of 2008.

“A new world order is upon us. A seismic shift that is redefining the brokerage intermediary,” writes Todd Harrison, CEO of Minyanville.com.

http://finance.yahoo.com/tech-ticker/article/62699/New-World-Order-Likely-Morgan-Merger-Leaves-Goldman-Last-Man-Standing?tickers=MS,GS,WB,BAC,XLF,AIG

***

In the Military, we called this “going to sleep on watch”, which during wartime was an offense punishable by death.

If we are not currently at war in the most desperate fight for our financial system and form of government, and if Congress is not falling asleep at the watch, then they need to reach down, grab a hold of their manhood, and put a stop to this before its too late.

Our Congress and Senate are the only powers within our laws that have full legal authority over the issuance of currency, and have only temporarily delegated it to the Federal Reserve. It is their DUTY and their RESPONSIBILITY to this generation and every generation of Americans to follow, to ACT and not GO HOME.

This is EXACTLY the reason our country is so incredibly screwed up right now.

Our “Leaders” are basically spineless, ignorant, “politicians” who have no clue as to how we got in this mess, let alone how to fix it.

But most important of all, it appears they do not have the courage to fix it, and that is what saddens me the most.

Democratic Congress May Adjourn, Leave Crisis to Fed, Treasury

By Kristin Jensen
More Photos/Details

Sept. 18 (Bloomberg) — The Democratic-controlled Congress, acknowledging that it isn’t equipped to lead the way to a solution for the financial crisis and can’t agree on a path to follow, is likely to just get out of the way.

Lawmakers say they are unlikely to take action before, or to delay, their planned adjournments — Sept. 26 for the House of Representatives, a week later for the Senate. While they haven’t ruled out returning after the Nov. 4 elections, they would rather wait until next year unless Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke, who are leading efforts to contain the crisis, call for help.

One reason, Senate Majority Leader Harry Reid said yesterday, is that “no one knows what to do” at the moment.

“When you rush to judgment, you usually make mistakes,” said Sherwood Boehlert, a former Republican congressman from New York. “This is something you can’t go on forever without addressing, but Congress in a short span of time is best served by going home.”

http://www.bloomberg.com/apps/news?pid=washingtonstory&sid=aVPBaUbYV_qQ

***

The result?

Gold soars as safe haven from Wall Street

By Alden Bentley

NEW YORK (Reuters) – Gold logged its biggest price advance ever on Wednesday and oil snapped a two-day rout as fears that the bailout of U.S. insurer AIG would not end the turmoil on Wall Street restored the luster of an established safe haven.

Gold’s 8.97 percent futures rally was the largest daily percentage gain in since February 2000. In absolute terms, bullion had a record day, leading a recovery across the commodities asset class after several days of liquidation sales to raise cash.

http://www.reuters.com/article/newsOne/idUSN1724013520080917?sp=true

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Summary: If this thing goes to hell in a handbasket it will happen very quickly.

If that occurs, you will not have time to fix it afterwards.

Anchor your finances in gold and silver now, while you still have time.

Smart Rapid Trenders are already doing this. We may end up taking care of everyone else.

May God watch over us all.

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Dont Look, and Dont Tell..Paper Gold Prices have decoupled from Physical Gold Demand and Supply

I was having a chat with several colleagues of mine in the precious metals industry over the last few days, and a few things have become readily apparent.

1. The massive sell off in paper gold contracts has forced the paper price down substantially

2. The majority of this sell off appears to be coming from large financial entities in liquidity crisis, and desperate for some relief and cash flow that are divesting themselves of metals

3. This does not reflect what the common man investor of gold and silver is looking for, as demand at the retail level is many fold higher than it has been in some time, with some of my colleagues completely inundated with buy orders that they cannot keep up with, nor find physical stocks to provide from

4. Physical supply at the retail level has seriously dried up, especially in silver, but now in gold as well, as it seems the US Mint has ceased taking orders for new American Eagle Gold 1oz coins. In addition, throughout the US on a retail level reports of physical shortage are common.

So what gives here? How is it possible that the prices of metals have plummeted, yet there is no metal to be found anywhere at retail?

A few possibilities come to mind:

If hedge funds are divesting themselves of metal, yet individual investors are buying like never before at the retail level, it may not impact the paper gold or silver price at all, except for the downside, because its doubtful that the few options traders are going to be able to meet what hedge funds can dump. A hedge fund that is on emergency life support and demanding liquidity may exit its metal positions at any cost, and not be met by buyers, as most retail investors are buying at coin shops and not the COMEX or NYMEX.

I have a colleague who has informed me that he has personal knowledge of a default of a delivery of metal on COMEX, the contract holder being forced to take Fiat currency instead of the metal because he got “bumped” at the warehouse because an Industrial user took precedence. What does something like this say about our markets if true?

Is it possible we are looking at trading defaults on a larger scale? Will such trades move to other exchanges in London and Asia? Will such defaults cause a London Gold Pool type escalation in valuation as history records of similar events?

Will actual physical prices decouple from the paper spot price? I suspect this is likely, and in fact we are already seeing such premiums at the retail level. It is my opinion this will only continue, and accelerate as we move farther into this bull market.

While the paper markets will continue to see sharp volatility over the next few years as financial institutions require liquidity infusions to offset the massive write-offs that have still not been reported from the credit crisis, mom and pop investors are buying all they can get their hands on, and not reselling back into the market as has been normal for many years.

No, this marks a definate turning point, and while some will only watch the price action and continue to declare gold no more than a commodity and barbarous relic, some will understand the deep fundamental factors in the economy that will force gold to revalue higher over time.

Yes, some of us will be doing quite well as this unfolds. The question now is, will you? Time is running out. You will either be a fool or a prophet.

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The Case for Gold Today

by: Charlie Bottle posted on: July 28, 2008

“With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people.” – Friedrich Von Hayek

I’m not advocating a return to the gold standard but when governments lose on printing money, as is the case today, investors should buy gold.

The analysis set forth in this article is focused on gold but the same conclusions are largely applicable to the other precious metals with monetary characteristics: silver and platinum.

Gold has been trading in a $900-$1,000 which all time high, slightly above the 1980 brief peak above the $800 range, however, on an inflation adjusted basis (please see chart below) it is still way below the peak and average range during the stagflation period of the seventies; a period that greatly resembles of current macro-economic setting.

I expect gold to continue to appreciate substantially in the medium and long term, with strong chances of moving in a sustained fashion above $2,000 within the next two to three years.

There are perhaps about 130,000 tons of gold above the ground, with about half in jewelry, 40% in bars and coins (of which 30% with central banks and 10% with individuals) and the remaining 10% are in dental and industrial applications.

The total annual demand of gold is currently just under 4,000 tons and breaks down roughly as follows:

• Industrial and Dental: 400 tons (10%)
• Consumer: 3,600 tons (90%)
  o Fashion jewelry: 800 (20%)
  o Investment jewelry: 2,600 tons (60%)
  o Investment (bars and coins) 400 tons (10%)

This demand far outpaces mining production of 2,600 tons, and is met by the following supply:

• Mining: 2,600 tons (65%)
• Net central bank net sales: 800 tons (20%)
• Scrap: 600 tons (15%)

Demand growth should accelerate fueled by the need for a hedge against increased inflation, and against ongoing political and financial uncertainty, as well as growth in emerging markets middle class income.

Gold as an inflation hedge and insurance against political and financial distress

The point on inflation is self-evident as many emerging markets have double digit inflation rates (e.g. Russia 15%, Vietnam 20%, Turkey 11%, Chile 10%, Argentina 10%), or close to that (China 7%, Brazil 6%, India 8%).

In the United States, headline inflation is at about 5% and the public is becoming increasingly aware of the lack of accuracy of the reported inflation figures.

There is much controversy about the effectiveness of gold as an inflation hedge, with substantial research pointing to real estate and stocks as being better hedges. Even if this is the case, considering the ongoing bursting of the real estate bubble and negative trend in equity prices, it seems quite likely that gold will be the preferred hedge. In any case, there is consensus that there is a negative correlation between the value of the dollar and gold prices (see chart below) and that gold substantially maintains its buying power over long periods of time.

The risks of insolvency of the domestic financial system, with a growing number of financial institution bankruptcies, and the resulting risk of ballooning US government debt (from propping up GSEs and possibly in the near future FDIC and Federal Home Loan Bank systems), provide politically expedient incentives for the US government to keep interest rates low and print money to inflate its way out of this crisis.

With growing unemployment and the social costs of high inflation, protectionism and international political instability will be on the rise.

In times of uncertainty, investors turn to gold as a hedge against unforeseen disasters since gold is one of the few investments that is not simultaneously an asset and someone else’s liability.

Emerging Asian middle class income growth

Growth of middle class incomes in emerging economies in Asia with a traditional strong appetite for gold will favor demand growth, independently of the above cited factors.

Indian middle classes have strong appetite for precious metals jewelry. India is already the largest worldwide consumer with annual demand of 650 tons. India, China and Turkey, for example, spend a much higher % of their GDP in gold than the US or Western Europe) and witness the reaction of the Vietnamese public to inflation, at least until a government ban became the largest worldwide importer of gold bullion.

Gold ETFs

The emergence of gold and precious metals ETFs such as GLD, CEF, and several others, and their growing availability to investors around the world is also likely to fuel demand. The first gold exchange-traded fund to trade in the United States, the StreetTracks Gold Shares (GLD), was launched in November 2004 and has been a success since. By the end of 2007 GLD reported holdings of 600 tonnes of physical gold bullion held in trust for its investors. If GLD was a central bank, it would nearly make the top 10 in the world for gold holdings. Gold ETFs provide the same economic benefits, although not entirely, of holding physical gold for ultimate insurance against extreme scenarios when the four horsemen of the apocalypse are unleashed and physical ownership is irreplaceable.

Gold supply

Supply is growth is likely to lag demand as central banks, which have been heavy until recently, are likely to curtail their sales of gold and will likely become net buyers (more on this below). Increased mining production and scrap recovery is unlikely to make up entirely for this.

Gold production has been rather flat for the last ten years (please see chart below) in spite of healthy price growth which indicated there is limited spare capacity. Brand new mine locations, especially the larger ones, can take 8-12 years for production to commence. Smaller mines can begin more quickly but if in the newly discovered category, they require eight years as a probable minimum. Open pit operation start-ups are faster, but not that much faster, and re-opening former operating mines requires the permitting process to start all over again, adding several new layers of paperwork not formerly encountered.

Chart courtesy of GFMS, Ltd.

Also, to some extent, the same problems as the oil industry arise with the gold industry. Gold mines are located in many regions where the political climate (see chart below) makes it difficult for private sector investment, particularly foreign investment, as the risks of nationalization are high. On the other hand, government owned companies often lack the skills and incentives to invest in exploration and adding capacity.

Central banks: from net sellers to net buyers.

We are presently witnessing a change of financial paradigm with the diminution of the dollar’s role as the single dominant global transaction and reserve currency, and the emergence of a multi-currency system, where gold as a percent of global reserves will increase.

Gold as a percent of monetary mass may also increase, but this does not necessarily mean a return to the gold standard. However, it may be the natural reaction to the excesses that are currently being committed by monetary authorities in the United States.

Central banks held relatively little foreign exchange [FX] reserves sixty years ago – the bulk of their reserves were in gold. FX reserves totaled $10.96 billion in 1949, gold reserves were just shy of 28,879 tons, and the gold reserve ratio was over 70%. Today it has declined to under 10%. This is decline is likely to reverse as emerging market economies diversify their reserves and increase their gold holdings. The IMF is a big seller as it uses up its reserves to make up for its operational deficit, reflecting the reduced need for its lending.

Below is a raking of central bank gold reserves:

Emerging markets have remarkably low ratios of gold reserves, particularly China. China’s foreign exchange reserves, the world’s largest, hit 1.53 trillion dollars at the end of 2007, around 70 percent of which is believed to be in U.S. currency-denominated assets, particularly U.S. Treasuries. Thirty years ago China held 95% of its foreign reserves in gold.

For example, the Qatar Central Bank quadrupled its gold holdings in the first quarter of 2007. It didn’t have much to begin with but now it has more – but not nearly as much as it had back in the 1980s according to World Gold Council statistics.

Russia announced a couple of years ago a long term goal of increasing its gold holdings to 10% of total reserves. India, Turkey and the Middle-East have also been important buyers.

Investors choosing to ignore these trends do so at grave peril to their wealth. As Churchill once said: “The time for procrastination and delays and excuses is over, we are into a period of consequences”.

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Alex’s Notes: One of the biggest problems our nation faces today is that the common American has a very low level of financial literacy.

Generations of spin and information control have led us to a current generation of Americans and even “Financial Experts” who do not truly understand how our economy works.

Beginning at US college level teaching economics studies, you can find misinformation teaching our future generations of financial leaders that you can simply create wealth through debt, unchecked printing of money, and federal spending.

A quick look at the facts show that healthy growing economies are based on savings and capital investment, not expansion funded by debt. China for example has a national savings rate approaching 52%. China has a growing middle class and will be able to make the transition from an export economy to a more balanced economy dependant more on domestic revenues.

Yet, when we see a massive devaluation of the dollar, you find hordes of talking head analysts who want to blame it on everything from foreign investment in bonds, money market funds, and other instruments denominated in usd, and completely ignore the root cause of the matter.

The problem we face to day in skyrocketing commodities, debt, a crashing dollar, sky high gas prices, food prices going up, electric bills going up, and on and on can be attributed to one thing: Inflation of the Money Supply.

The problem is is several fold:

1. Your government thinks you are stupid. The government creates all kinds of useless reports such a CPI to measure inflation, that have removed from them key indicators such as the cost of gas and food to reach its conclusions. I dont know about you, but food and gas for my family have gone parabolic in price, so the folks in Washington who come up with this garbage must be buying their gas and groceries on a different planet. The fact that you have to even come up with a way of measuring inflation outside of how much currency created is preposterous, and in itself an insult. But here is the real slap in the face, they publish that garbage assuming you are too stupid to see through it.

2. The Main Stream Media thinks you are stupid. By parroting the same garbage over and over, if said enough times maybe you will believe it. If you have ever seen the media blaming inflation on oil prices increasing, or oil companies who should be audited and punished for making lots of money in a boom in their industry, or the boogie man under the bed or the green alien from mars with the ray gun in your closet, you have had the pleasure of experiencing this. Once again, no one ever wants to talk about the fact that we have added over $14 Trillion to the money supply approaching a rate of almost 20% year over year. Since 1913 when a handful of criminals (oops I mean congressmen) passed the Federal Reserve Act, our nation has printed so much money that we have devalued the buying power of the dollar by over 96%.

3. Wall Street thinks you are stupid. By creating all kinds of red herrings as to what inflation truly means, and making sure to invent thousands of financial terms to confuse people, Wall Street figures they can continue to convince you to give them all of your money to manage, because even though they make money whether you lose or gain, you are too dumb to manage your own money so you should give it to some wet behind the ears kid who just graduated from business school because of his vast financial wisdom. Add to that the fact that when people BUY markets rise, and when people SELL markets fall. When those 85 million baby boomers start to suck their money out of the market to fund retirement expenses, its going to come down like the Hindenberg. Todays tactic is to assume of course that you are too dumb to realize this, and will keep right on letting them suck you dry of every retirement dime you have spent your lifetime accumulating.

I dont know about you but I am about fed up with these people treating the American Public like idiots. I know you are not stupid. You know you are not stupid. Isnt it time we started proving it?

I have bolded the article below where yet another Financial Analyst is 100% off target in terms of why the dollar is crashing.

If you want a spot on interview in terms of the primary reason for the rise in the oil price, see this video interview of Paul Van Eeden of Cranberry Capital 

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Bush’s Weak Dollar
By Scott Lilly
May 27, 2008

America’s working families have been squeezed for most of this decade by stagnant wages and diminishing health and retirement benefits. Now they face new economic pressures from rising gasoline, food, heating, and electricity prices. A portion of those higher costs are directly attributable to the weakening of the dollar and the economic policies that have produced a weak dollar.

Since January 2000, the dollar has fallen by 37 percent against the euro, with nearly two-thirds of that decline occurring since January 2006. The dollar has fallen 31 percent against the Canadian dollar, and 17 percent against the British pound.

The fall of the dollar has affected oil prices in two specific ways. First, as the dollar falls against the euro and other major currencies, oil-exporting states have been demanding more dollars per barrel of oil to protect their ability to meet expenses paid in euros and other currencies.

This can be most clearly seen in the price of oil (the spot price for Saudi light crude) as measured in U.S. dollars and euros during the first four years of the current Bush administration. As the dollar weakened, the dollar price of oil increased proportionately.

Measured in dollars, oil cost about 28 percent more on average in 2004 than it had cost in 2000, but the price remained relatively constant if measured in euros. In fact, Europeans were actually paying about 8 percent less for oil in 2004 than they had paid in 2000.

More recently, the declining dollar has pushed the price of oil and other commodities higher for a second reason. Retirement funds, hedge funds, speculators, and other institutional investors around the world have tried to protect themselves against further declines in the dollar by moving money into commodity futures that are denominated in dollars—financial instruments that will remain stable or even rise against other currencies even as the dollar falls.

Stewart Bailey reported for Bloomberg last month that “global investments in commodities rose by more than a fifth in the first quarter to $400 billion, helping boost prices as investors sought a buffer against inflation and a weaker dollar.”

Because so many money managers are attempting to use commodities to hedge against the declining value of the greenback, their investment strategies create at least temporarily additional demand for those commodities, driving the price upward.

This effect is demonstrated by the fact that although the increase in the price of oil has been substantial, it is not out of line with what has happened with other commodities, and in particular agricultural commodities.

Over the past 25 months, the dollar price of oil has increased by 79 percent. That is more than the increase in precious metals such as gold and silver. But it is significantly less than the increase in commodities such as soybeans, which have gone up 137 percent, or corn, which has gone up 167 percent.

There are of course additional factors that influence the price of oil and other commodities. These include growing global demand, particularly from China and other emerging economies, and the so-called “security premium” or “tension premium” that results from the market estimation of the potential for hostilities that could interrupt the production or distribution of a commodity.

With respect to oil, recent U.S. saber-rattling toward Iran and the possibility of hostilities in or near the narrow Straits of Hormuz has clearly played a significant role in a number of recent spikes in oil prices, and perhaps in the ongoing higher price of oil.

Yet the fact that oil prices have risen nearly fivefold when measured in dollars, but slightly less than threefold when measured in euros, would indicate that nearly 40 percent of the increased price American consumers are paying for oil is attributable to the weak dollar.

If only 10 percent of the price increase is attributable to the flow of dollars and other currencies into commodities to hedge against further weakening, then at least half of the explanation for high gas prices is the weak dollar.

Is a Weak Dollar Necessary?

Just as the increases in oil prices are not attributable to a single cause, the same is true of the devaluation of the U.S. dollar. Chronic trade imbalances play an important role. But the recent policies of the U.S. Federal Reserve have had an extraordinary effect on the value of the dollar.

When the Federal Reserve began cutting rates last September the dollar traded against the euro at 0.73 euros to the dollar. The 14 percent decline in the dollar over the succeeding eight months can be clearly tracked against each of the seven cuts in the Federal Funds Rate over that period (see chart below).

The explanation is relatively simple—the lower the interest paid on a currency, the less likely foreign investors will want to invest in bonds, money market funds, and other instruments denominated in that currency, and the more likely U.S. investors will want to search for better returns overseas.

Certain industries do very well with low interest rates and a weak dollar. The banks and Wall Street investment firms are greatly benefited by low interest rates, which is why the Federal Reserve has made the dramatic cuts that have occurred since last September.

Energy companies are directly benefited by a weak dollar since the value of their domestic reserves increase in proportion to the dollars decline. While the value of most businesses rise and fall in rough proportion to the value of their local currency, oil companies can gain significant value in comparison to other businesses as a result of a devalued currency.

The nation’s largest oil company, Exxon-Mobil, is only one of many examples of how powerful appreciating commodity prices are in determining stock valuations of companies owning substantial reserves of those commodities.

At the beginning of 2001, ExxonMobil shares traded at less than $36 apiece. By early 2008, the share price had jumped to nearly $85. For most of that period (as the chart below demonstrates), the increase in ExxonMobil’s share price matched almost precisely the appreciation in the price of a barrel of crude oil.

The 138 percent appreciation in valuation of ExxonMobil during these seven years was reasonably typical of energy companies in general, but at stark variance with the increase in share prices of other large companies. Case in point: Between January 2001 and January 2008 the Standard & Poor’s 500 Index moved from 1,366 points to 1,378 points—an increase of less than 1 percent—but had energy companies been removed from the S&P index the remainder would have doubtlessly shown a significant decline.

The government’s monetary policy and the weak dollar not only create winners and losers in terms of consumers and businesses, but also benefit some businesses far more than others.

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Gold is Money. Its been said before, notably by the late JP Morgan. Yet today we find ourselves forgetting that gold is money.

Jim Sinclair has made some very accurate calls in his time, and is one of the most recognized experts in gold today. A recent message from Mr. Sinclair, I have bolded where he says gold is money:

As far as I am concerned:

1. I do not anticipate a one month or more drop in gold. Neither does Monty Guild, so be careful not to read his general commodity comment ass-backwards.
2. The worst case scenario is a chop after the low of April 28th set in, and the rally high in the low $950s. Following this the chop gives way to a break above $1034 on its way to $1200 in 2008. Write that down for the dark night of your gold soul.
3. Gold is a currency, not a commodity.
4. Gold while remaining as a currency is now more tied to the euro than the USDX.
5. Weakness in crude, if you can call any price above $100 a barrel weak, helped gold be prone to lower prices.
6. Gold?s real help moving lower was a push by COT that triggered the mindless black boxes which are as nuts on the upside as they are on the downside.
7. If tonight you curse gold, keep this in mind when it crosses$1034, and please leave never to return.
8. Hold my hand when you feel low as gold takes a beating, and when you feel high as a kite when higher highs happen. I will moderate both for you.
9. The greatest technical analysis trick is simple to learn. Whatever your emotions say to you is totally wrong. Whenever you want to margin to the rafters it is time to eliminate debt.

Regards,
Jim

Modern economic alchemy has labeled gold nothing more than a commodity, a bygone relic, with no industrial or commercial use in todays world of paper and electronic markets.

But what happens when those who are in charge of those paper and electronic systems abuse it? What happens when people lose confidence in it? What happens when the paper becomes ever more worthless in the eyes of the world?

Quite simply, a return to gold is money. It has been money for over 5000 years. Human beings have this interesting tendancy to forget history, and what we have learned from societies past.

Economies, and nations, both regional and global have gone back and forth from ‘easy money’ to ‘disciplined money’ in a recurring pattern that so far has shown no reason of stopping.

Governments of course favor easy money, because they can print as much as they like, and spend as much as they like, with no sensible restraints on wars, emergency relief, subsidies on foolish programs, and social welfare that dwarfs the entire global gdp combined.

The bad part of course, is this propensity to print and create tens of trillions of dollars out of thin air is called inflation, and it is spreading around the globe like a cancer. Food riots, oil heading to $200 a barrel, $5.00 a gallon gas, and the sad part is, this is just the beginning.

There are, however, solutions. Investigate gold and silver. Learn why gold is money. Most importantly, learn why the cycle is again shifting back to gold is money, and what it means in terms of how high gold will truly go.

Do your research, because for the ones who bury their heads in the sand and fail to see it coming, there will be terrible losses as stock markets come down from baby boomers sucking their money out as they retire in hordes.

Some however, will be gathering wealth because they were smart enough to learn from history.

To Learn more about gold and silver and how it can impact your wealth, or for information on how to open an Anglo Far East Gold or Silver Bullion Account, Click here.

Alex’s Notes: Unexpected inflation?? You have got to be kidding me.

It does not cease to amaze me how often main stream media financial analysts are either completely ignorant of how the economy works, or are deliberately creating spin to keep consumers fat dumb and happy.

The bottom line is we have added over 14 TRILLION dollars to the money supply and currently the rate of adding money is only increasing. We are about to hit 19% in terms added change to money supply.

How anyone can expect that we will not see price increases under such conditions and call themself a financial analyst is beyond my comprehension.

————————————

India’s Inflation Unexpectedly Accelerates on Food
By Cherian Thomas

May 16 (Bloomberg) — India’s inflation rate unexpectedly rose to the highest in 3 1/2 years, adding pressure on the central bank to raise borrowing costs further to tame prices.

Wholesale prices rose 7.83 percent in the week ended May 3 from a year earlier, after gaining 7.61 percent in the previous week, the government said in a statement in New Delhi. Economists surveyed had expected a 7.55 percent increase.

Increasing borrowing costs will check the flow of money to speculators in the commodities market and rein in food prices, former central bank Governor Bimal Jalan said in parliament last month. The government, to augment monetary policy action, has persuaded steel and cement makers in the past week to cut prices and help slow inflation.

“More monetary tightening cannot be ruled out,” said Rajeev Malik, senior economist at JPMorgan Chase & Co. in Singapore. “More measures are likely as inflation is expected to remain above the central bank’s target of 5.5 percent.”

The index for fruits, vegetables and other food items rose 0.5 percent, while that for manufactured products gained 0.3 percent, today’s statement showed.

The rupee declined to 42.73 against the dollar from 42.65 before the data was announced. The yield on the benchmark 10- year bond was little changed at 7.88 percent, holding near this week’s high.

China Inflation

India and China, the world’s fastest growing major economies, are battling rising prices stoked by consumer demand and high food costs. Wholesale prices in China rose 10.3 percent in April from a year earlier, the fastest since at least 1999.

India’s central bank twice asked lenders to set aside more funds last month, raising the so-called cash reserve ratio to 8.25 percent, the highest since March 2001, from 7.5 percent. The Reserve Bank of India may raise the ratio for a third time this year to control inflation, according to six of nine economists surveyed by Bloomberg News on April 30.

India’s cement makers joined steel producers on May 14 in pledging to cut prices after Finance Minister Palaniappan Chidambaram said the government will take “administrative action” against them for behaving like cartels.

Chidambaram yesterday said there is significant scope for further reduction in cement prices. Steel Authority of India Ltd. and other Indian steelmakers on May 7 agreed to lower prices for a second time since April.

Indian Elections

The Associated Chambers of Commerce and Industry, an Indian trade organization, says it expects the combination of steps taken by the government, central bank and companies to slow inflation to 6 percent in the next four to six weeks.

Prime Minister Manmohan Singh’s government has been stepping up measures to cool prices in Asia’s third-largest economy to improve his re-election chances in a vote that must be held before May 2009.

The government wants to bring inflation down to 4 percent, to protect consumers in a nation where the World Bank estimates half the 1.1 billion population live on less than $2 a day.

Over the past two months, the government scrapped import duties on edible oils, steel products and banned the export of cement, pulses, rice, wheat and edible oil to contain prices.

Last week, under pressure from its communist allies, the government also banned futures trading in soybean oil, rubber, chick peas and potatoes to reduce speculation. It halted wheat and rice contracts last year and lentils in 2006.

Today’s inflation rate may be revised in two months when India’s government reviews the figures after receiving additional price data. The Commerce Ministry today increased the inflation rate for the week ended March 8 to 7.78 percent from 5.92 percent.

                       Week Ended    Week Ended     Percentage
                         May 3         April 26        Change

Primary articles         239.3         238.6           0.3
Fuel, power              345.4         342.5           0.8
Manufactured products    198.9         198.3           0.3
Food products            204.3         202.8           0.7
Edible oils              186.6         187.9          -0.7
Cement                   220.8         221.6          -0.4
Iron & steel             354.6         360.6          -1.7
Pulses                   241.8         243.9          -0.9
Fruits & vegetables      253.2         247.1           2.5
Total                    228.6         227.7           0.4

http://www.bloomberg.com/apps/news?pid=20601068&sid=aN4UwM8U3oQA&refer=economy

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Alex’s Notes: This quick note was fired to me from Simon Heapes, Director and Treasury Officer of The Anglo Far East Bullion Company. This was his comment and response to my post on the possibility of China holding the next world reserve currency:

2,000 yrs ago As Rome debased its currency and expanded via inflationary methods, the question must be asked who was buying the tangible productive assets?

It was the Byzantine Empire! When the Byzantines finally did over run Rome, they did not collapse it, they merely replaced Rome’s leadership with their own leadership, and effectively ran Rome as a defacto Empire keeping all the same systems in place for another 200yrs.

Finally, the Byzantium leadership broke apart from a Moral decay into the nations we call Europe today!

So the Question now, is China & the East going to do the same thing and keep the current system running further expanding globally and running inflation even further sending the cost of tangibles higher for many yrs to come? It certainly looks that way!

- Simon Heapes, The Anglo Far East Bullion Company

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Alex’s Notes: I happen to concur with the authors thought in this article. Much of the worlds international settlement systems have grown up for half a century around the dollar as the reserve currency, so it is unlikely this will change overnight.

There are, however, a few things that could accelerate the process. A run on the dollar by any country or group of nations that is a major holder of dollars as a part of their reserve base, Sovereign Wealth funds becoming even more aggressive than they are now in securing hard assets versus paper cash holdings, or OPEC/China deciding to divest its dollar holdings into something else, such as Euro or gold.

Another scenario that could rapidly accelerate the dollars demise includes the continued bail-outs of financial institutions by the Fed. If we are so simple as to believe the Wall Street talking heads that we are in the clear, we are being as silly as they are. The fact is less than half of the asset losses from the sub-prime fiasco of 2007 have been reported, and through 2011 we are going to see another mortgage related scenario unfold in the form of Alt-A and ARM resets that will make the sub-prime mess look like romper room in comparison. This would have a domino effect, in that as the Fed bails more failing institutions out, it will multiply not only US, but Global inflation.

Such a series of events would continue to devalue the dollar, and give ever more impetus to nations sitting on vast dollar reserves to get rid of their dollars while those dollars are still worth something. This means that those dollars will start coming home. The effect of that would be increased prices in the US for everything from food to gas to electricity (if you think it is bad now, you aint seen nothing yet!). The other effect of that would be accelerating the value the dollar, further spurring dollar holding nations to dump them.

Finally, any country that chooses to stand on its own and link its currency to a hard asset such as gold or silver would be a currency that is in high demand virtually overnight. Why stack billions in paper that is redeemable for nothing, when you can instead stack billions in paper that you can exchange for gold and silver? Our world’s governments are not stupid, and that’s exactly the way it would go.

The net effect of that would be of course changing gold and silver from commodity status back to monetary status. This isn’t a new idea, humans have used gold and silver linked to currency or as currency for thousands of years, because it is un-inflatable (if it remains pure), and forces governments to remain disciplined in their fiscal policies. It is only in the last 40 years that we have strayed from this wisdom, and we are witnessing its effects as I write this.

Societies throughout history have oscillated back and forth between currencies redeemable in things of intrinsic value, and paper that is redeemable for nothing for hundreds and thousands of years. As inflation continues to grow, inciting food riots and civil unrest around the world, the idea of having currencies that prevent the governments of the world from inflating the world’s currencies becomes ever more enticing.

This is not as far fetched as it might sound. I certainly consider it curious that China has invested so heavily into mining, mineral rights, and acquisition of operating gold and silver companies over the last ten plus years. They have made attempts at buying mega-mining companies such as Rio Tinto through proxies, they have been running all over Africa for years buying up mineral rights, they have become the worlds largest producer of gold, and China is among the top silver producers in the world. Metals are of course important to an emerging nations economy like China’s, yet gold can barely be considered an industrial metal, so why are they investing so heavily in it?

One of the primary reasons that the US Dollar became the world’s reserve currency in the first place is because it was redeemable in gold.

The Chinese are not stupid people, so as with all things we must apply ‘Cui Bono’, or ‘Who Benefits’, and ask ourselves, why are they doing this? The United States has enjoyed a unique ability to run massive trade deficits for half a century and borrow money from the entire world at low interest due to its currency status. The Chinese are hungry to move into a western style standard of living, so is it so far fetched that they would like to enjoy the same benefits?

Could the Yuan become the next reserve currency of the world? More importantly to those who understand how small the gold and silver markets are, is what effect would that have on the prices of gold and silver?

The results could be explosive to say the least.

—————————————————-

Dollar Reserve Status Is Tale of Fading Glory: Michael R. Sesit
Commentary by Michael R. Sesit
May 2 (Bloomberg) — Reserve currency status is like your health: Abuse it, and you risk losing it.

With the dollar’s 45 percent decline against the euro during the past six years and its 37 percent drop on a trade-weighted basis, there is a growing concern that the greenback’s six-decade reign as the world’s most important currency may be ending.

It’s not. The dollar is the world’s reserve currency, and absent some unexpected exogenous shock, will probably remain so for some time.

Nonetheless, the dollar’s premier status is under threat, especially as a store of wealth, by both foreign governments and private investors. Also, companies are using it less as a currency in which to invoice and settle international trade transactions.

Why care? Reserve currency status allows the U.S. government to borrow in its own currency, lets the U.S. run large trade deficits, and helps the government and American companies to fund themselves at low interest rates. It makes it easier for U.S. companies to do business and increases the international demand for U.S. assets.

Moreover, as the specie of choice, the dollar is blessed with seigniorage, the interest-free loan America receives from the hundreds of billions of dollars held overseas and hoarded as misfortune insurance.

Although the composition of official central-bank foreign- exchange holdings receives the lion’s share of attention when people talk about reserves, it is the private sector’s trade in goods and services that plays a dominant role in determining a currency’s international status.

Cash Reserves

Official reserves equal 33 percent of global imports, according to UBS AG. If a company in country A trades with a company in country B and the transaction is invoiced and settled in the currency of country C, that third currency will have reserve status. That’s because both companies are likely to keep cash balances in that currency.

“The dollar is the most important reserve currency in the world, but it is no longer the only reserve currency, nor even the overwhelmingly dominant choice as a reserve currency,” says Paul Donovan, a London-based economist at UBS.

When the Bretton Woods system collapsed in 1971, almost all Japanese exports were priced in dollars. Now less than half are. About 40 percent of Japan’s total exports are invoiced in yen, up from 34 percent in 2001.

Raw Materials

Seventy percent of Australia’s exports are denominated in U.S. dollars, reflecting the dominance of raw materials in their makeup. Apart from commodities, the dollar plays a smaller role. For instance, 59 percent of beverage shipments to other countries are denominated in Australian dollars, 19 percent in pounds and 16 percent in U.S. currency.

Data on country invoicing patterns are hard to come by. Still, the decline in dollars held outside the U.S. from 1.83 percent of world trade in 2002 to 1.22 percent in 2006 reflects the U.S. currency’s shrinking role as a medium of exchange.

Anecdotal evidence also suggests a trend. In November, India’s Taj Mahal said it would no longer accept dollars and take only rupees. International drug dealers are said to prefer euros to dollars.

Ditto, Copenhagen-based A.P. Moeller-Maersk A/S, whose container-shipping line, the world’s biggest, on April 1 began invoicing in euros for transporting containers from Europe and North Africa to Australia, New Zealand and the South Pacific. The shipping industry historically billed in dollars.

$4.9 Trillion

On the official side, developing countries have been steadily inching away from the dollar. Their foreign-exchange reserves surged to $4.9 trillion in 2007 from $1.2 trillion in 2000. Emerging-market countries accounted for 76 percent of total global reserves in 2007, up from 56 percent in 1997, according to the International Monetary Fund. Yet during that period, their dollar holdings shrank to 61 percent from 73 percent.

The euro has been the beneficiary, rising to 28 percent of developing-country reserves in the fourth quarter from 19 percent when the decade began.

Behind this dollar downgrade lies the U.S.’s rising debtor profile, an unpopular war in Iraq, the growing threat of trade protectionism, apprehension over the greenback’s decline and the subprime crisis.

“These factors have all conspired to weaken investor confidence in the buck and undermine the dollar’s position as the world’s top currency,” says Joseph Quinlan, New York-based chief market strategist at Bank of America Capital Management.

Asian and oil-exporting central banks also hold more dollars than they prudently need and are seeking to diversify their portfolios away from their traditional preference for highly liquid, relatively low-yielding Treasuries.

No Allegiance Owed

Many countries — including China, Russia, Kuwait, Singapore and Norway — are transferring tens of billions of dollars to sovereign wealth funds. Long-term investors with mandates to maximize returns, these entities owe no allegiance to the U.S. currency and over time their investments will probably result in their governments’ holding fewer dollars.

The durability of the dollar’s reserve-currency status owes more to the absence of a challenger than sound U.S. policies. The euro is hobbled by the lack of a single, pan-European capital market and its being a hybrid currency used by a mix of countries yet owned by none.

China’s yuan is a potential contender, but not until that currency becomes fully convertible, the nation’s financial markets more developed and internationally recognized laws more established — which is years away. Japan, meanwhile, has always resisted the yen being a reserve currency.

It isn’t ordained that the dollar surrender its position as the world’s go-to currency. Yet if Americans insist on living beyond their means, eschew sound fiscal policies, ignore the greenback’s weakness and remain tempted by protectionism, the dollar will in small bites begin to mimic the British pound — the currency of a once proud but spent imperial power.

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I have uploaded the PDF version of Dr. Edwin Vieira’s speech at the recent GATA conference.

Dr. Vieira is likely the foremost expert on Constitutional Money in the entire United States. He holds four degrees from Harvard University, and has taken several cases to the Supreme Court and prevailed.

You can view Dr. Viera’s address at the GATA conference here: http://www.rapidtrends.com/downloads/edwinvieira-gata2008.pdf