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Thursday, November 29, 2007

Financial Definitions and Names

This is a good video for some financial definitions. Definitions make a difference.

There are even some examples of well named financial instruments. After all, how does one sell badly named financial instruments.

Or, call it a video that takes away the "mystery" of the financial world.

Now, that was not hard, was it?

Sunday, November 18, 2007

US Debt and US Banks

Here are some ominous US debt and US bank numbers and time periods:


The US Treasury debt went above $9 trillion on November 7, 2007, 5 weeks after Congress raised the US Treasury debt ceiling. The new ceiling is $9.815 trillion.

This is the 5th increase since the current US president took office in January, 2001.

Back then, US debt was $5.6 trillion.

Do you wish you could take on debt at that rate *and* have the means to create out of thin air that which is required to pay the interest and principle? That is what is going on for the US as a whole, but it will not last. Sooner or later, sellers want real value for their goods and services. Look for goods on US suppliers and store shelves to start dissapearing. The US does not manufacture anywhere near what it used to.

Another reason for shelf inventories to decline is less internal US demand for goods and services due to US consumers being less able to take on more debt, just to maintain current living standards since the US is not creating enough value to pay for their current standard of living, level of spending. The US has to borrow, from the rest of the world, over $2 billion a day to maintain it.

Consumers are hitting their debt ceiling:

Total US debt (consumer) increases:
August + $15.41 Billion
September + $3.75 Billion


The latest on US banks:

Total US mortgage loans for 2006 was $10.9 trillion (American Mortgage Bankers Association of Washington).

Composition of that debt:

About $6 trillion of it is now CDOs

About $1.5 is subprime
About $1 is Alt-A
About $1.5 is adjustable rate

US bank debt got too big and too risky.
Just for starters, banks are going to take a $1 trillion hit to equity/assets?


How is business doing in the US?

Commercial mortgage debt for October was $8.6 billion.
The monthly average over the last 9 months was about $66 billion (Thomson Financial).
US business gets what is going on in the US. For all practical purposes, they have stopped taking on more debt (read no more new capital needed). The economic contraction is happening fast.


Be your own banker. Store value in stuff, or equity in stuff (paper share certificates in your own hands), or even paper government fiat tokens. Have you been keeping track of the price of lead since 6 years ago?

Yes, gold and silver is good stuff, too.

Friday, November 16, 2007

US Dollar Impression

Wile E. Coyote doing his impression of the US Dollar:

"Permit me to issue and control the money of a nation and I care not who makes its laws." -- Mayer Amschel Rothschild

`If you have dollars, I urge you to get out,'' Jim Rogers said in an interview in Singapore, ``That's not a currency to own.'', from a Bloomberg piece dated Nov. 15. Jim Rogers started the famous Quantum fund with George Soros and has been into natural resources since the beginning of their bull market, which started at the same time as the bull markets in gold and silver. This makes sense as they are made of atoms like gold and silver. Smart "money" started going into real stuff, tangible, at the beginning of this decade.

Not that people do not need some government fiat paper and digital bits to function in the world as it exists today. Even US dollar ones. Actually, the paper fiat might be more valuable than the digital fiat. If your bank goes bankrupt, you still have control over your paper fiat because it is in your hand. It's just that one should try not to store too much value this way. Just about all fiat paper and fiat digital bits are being devalued by around, at least, 10%. The US dollar by increasingly larger percentage amounts.

Over the coming years, Wile E. Coyote's impression of the US Dollar might not be too far off. We'll have to wait to see.

So far this year, the US dollar is down almost 10% versus other major fiat; and down far more than that versus gold and silver (actual money).


“Nations are not ruined by one act of violence, but quite often, gradually, and almost imperceptibly, by the depreciation of their currency, through excessive quantity”.
-- Nicolas Copernicus, 1525

"One of the saddest lessons of history is this: If we've been bamboozled long enough, we tend to reject any evidence of the bamboozle. We're no longer interested in finding out the truth. The bamboozle has captured us. It is simply too painful to acknowledge - even to ourselves - that we've been so credulous."
-- Carl Sagan

“Once public opinion is convinced that the increase in the quantity of money will continue and never come to an end, and that consequently the prices of all commodities will not cease to rise, everybody becomes eager to buy as much as possible and restrict his cash holdings to minimum size… If the credit expansion is not stopped in time, the boom turns to crack-up boom: the flight into real values begins, and the whole monetary system founders.”
-- Ludwig von Mises (1949)

“The truth is that liquidity, the only significant weapon remaining in the central bank’s arsenal as decision making moves to the markets, will not necessarily go where you want it to go when you need it to go there.”
-- Martin Meyer, from his book “The Fed”

Wednesday, November 14, 2007


They created another 1 trillion bucks, adding to M3, just in the last few months. Now that is some pretty impressive inflation (increase in the "money" supply), increase of digital bits on hard drives. Try doing that with gold and silver supplies. That is some big time theft of purchasing power, stored value, from holders of US dollars and dollar denominated financial instruments, but not from holders of gold and silver.

Chart is thanks to

Whose hands did all those dollars end up in?

There is a compound curve going on in that M3 chart! That should scare the bajeejus out of people. But hardly anybody knows it is happening, nor cares.

A communique sent from the Rothschild investment house in England to its associates in New York noted, "The few who understand the system. . . will either be so interested in its profits or so dependent on its favors that there will be no opposition from that class, while on the other hand, the great body of people, mentally incapable of comprehending . . will bear its burdens without complaint."

This correction in gold and silver is to be expected, does not amount to a hill of beans. This is still one powerful gold train.

The way to make huge percentage gains in a bull market is like Jesse Livermore said: "Be right. Sit tight.". Because of impatience, greed and fear, most will not make the huge gains possible. This correction is showing that. That goes for the "professionals" also.

Monday, November 12, 2007

Ron Paul Takes Ben Bernanke To The Wood Shed

"We are, indeed, between a rock and a hard place."
"There's a dollar crisis out there and people's money is being stolen; people who have saved, they're being robbed. I mean, if you have a devaluation of the dollar at 10 percent, people have been robbed at 10 percent. But how can you pursue this policy without addressing the subject that somebody's losing their wealth because of a weaker dollar? And it's going to lead to higher interest rates and a weaker economy."

"Weimar Bernanke", the man has no business experience, no banking experience, no financial market experience, yet is named to the most important central bank post on earth. - Jim Willie CB

"Who's zooming who, here?" - Aretha Franklin

Saturday, November 10, 2007

Gold Bull Train

The gold bull train has definitely left the station, while many are still standing on the platform. The sentiment indicators are still awful, meaning this gold train has a long trip in front of it.

Using realistic measures of inflation, the gold train has to reach about $3,000 in today's dollars to equal the old high of $887.50. As the years of this ride pass, from this point in time, (there are still years left to this gold bull train ride) that price just keeps getting higher as the Fed increases the rate of devaluation of the dollar by increasing the US dollar supply. It has been over a year now since the Fed stopped publishing M3 dollar supply numbers. They knew it is going to get embarrassing.

This is one powerful gold bull train.

Consumer prices in the US are increasing about 10% per year now. Never mind the government's rigged statistics. They are virtually useless.

Shadow Government Statistics' M3 to be updated within days from now. M3 has shot up to about an 18% annual rate of increase of the dollar supply, which is what inflation really is. Inflation causes/effects rising prices. No systemic inflation, no systemic rising prices, like during most of the 1800s in the US. Inflation did not start for real, in any systemic sense till the Fed was started in 1913. It has been up, up and away since.

Money (gold, silver, packs of cigarettes), Currencies (silver and gold certificates), and tokens (government fiat paper and digital bits) have 3 things in common:
1.) Medium of exchange
2.) Store of value
3.) Unit of measure/account

A. Money does not have any liability attached to it.
B. Currencies have liabilities attached to them. They are redeemable in something specific.
C. Government fiat paper and fiat digital bits while not redeemable in anything can not be created without debt/credit being created at the same time.

Inflation, depending on the degree of:
1. Causes people to shy away more and more from using it (US dollar loosing its reserve status amongst central banks).
2. Steals/robs stored value.
3. Shortens the yard stick (unit of measure) while people still use it as a full measure, screwing up their financial and economic calculations for the future (mal/bad investments).

So, what is the no-brainer protection from what is going on at central banks and their treasuries? Or is it treasuries and their central banks?

Gold and silver.

The more they create government fiat paper and fiat digital bits (most US dollars are just digital bits on a hard drive, and that hard drive sure as heck is not yours), the higher in price gold and silver go.

Here is something to think about. If you deposit dollars in a bank, where exactly are those dollars once you have deposited them in the bank?

Tuesday, November 06, 2007

Silver Chart

Below is a ten year monthly bar chart of silver. It is as of the end of October, so it does not show the highest current silver prices ($15.50-$16) that have broken up through the second major bullish triangular flag of this major bull market in silver.

True, silver broke down through it's original #2 uptrend line, unlike gold's that held. But, its new #2 trend line looks pretty solid. It connected with a high down in the base. Later in this bull market, silver could establish a more upwardly sloping major #3 upward trend line.

Look for silver prices to break up above the top of this current channel first.

When the world's excess inventories get used up, silver prices can get wild. Despite being actual money, it's also an industrial metal that some manufactures must have. They will pay and can pay a lot more for the silver that is not replacable by any other element on the earth because many just need the tiniest of amounts for their products. Remember, silver now a days, is a lot more scarce than gold.

On top of the industrial use, it seems that the demand for silver as money has not seriously kicked in, yet.

Sunday, November 04, 2007

US Money Center Banks Bankrupt?

Legally maybe not, but for all practical purposes, probably yes. Legally, now a days, does not mean too much since there is so much fraud and rotteness in the financial system.

Heck, Ben said "The banking system is healthy" on October 15. Why is he even bothering to make a statement like this? Does he see that others see that the banking system is anything but? Why did he preside over 2 Fed Funds Rate and Discount Window rate cuts? Is he getting us ready for a banking crash? In any event, if the banking system was healthy, nobody would be making statements like that. Making a statement like that is like screaming that the banking system is not healthy.
Did Ben simply panick?

"The last duty of a central banker is to tell the public the truth." - Alan Blinder, Vice Chairman of the Federal Reserve … stated years ago on PBS's Nightly Business Report

Anyways, the US financial/banking sytem is the opposite of healthy:

Hundreds of lenders have borrowed a record $US 163 Billion from the 12 Federal Home Loan Banks in August and September. What comes after a liquidity crises is insolvency. Looks like more bank runs to come. Countrywide's was just the first in the US.

The CEO of Merrill Lynch is gone.
The CEO of Citi might be after this Sunday's "emergency meeting".

Central bank reservers:

EU - $trillions
China - $1.43 trillion
Japan - $923 billion
Russia - $400+ billion
Tiawan - $263 billion
South Korea - $257 billion
India - $249 billion

Ready for it? -> US - $44 billion

Bear Sterns attempted to auction off otc derivatives. It called the auction off when bids went to $.30 or so on the dollar. To have finished the auction would have established real world prices for some of these otc derivatives, toxic waste. The BIS (Bank for International Settlement), the central bank for nation central banks, has a world total of notional (contract) value for these things at well over $400 trillion dollars worth. What would a completed auction have done for the value of the other otc derivatives out there in the world?

These derivatives are zero sum games like futures and options. If someone looses a dollar, someone has to gain a dollar. They are interest rate sensitive. Interest rates are going up because of the world wide devaluation of government fiat tokens. At some point someone is going to attempt to exorcise their contract, along with a whole lot of others. There are not enough legitimate entities in the world with enough real wealth to pay up on 1/2 of well over $400 trillion dollars worth of these contracts it seems.

How are they valued if there is no real world active market with real bids and asks for them?
A computer geek working for the owner of one side of the contract has a "model" he developed which he uses to value his bosses contracts. A computer geek working for the owner of the other side of the contract has a "model" he developed which he uses to value his bosses contracts. It is possible because of this for both sides of the contract to be showing a profit on their books despite this being a zero sum game. Not much integrity left in the world's financial system anymore.

Recent estimates of toxic waste value on books from
MARCH 31, 2007, $ MILLIONS
The first column is Assets. The second column is derivatives.
1 JPMORGAN CHASE BANK NA ------------ 1,224,104 ---- 70,817,340
2 CITIBANK NATIONAL ASSN ------------ 1,076,949 ---- 30,069,982
3 BANK OF AMERICA NA ---------------- 1,204,472 ---- 28,535,873
4 HSBC BANK USA NATIONAL ASSN --------- 169,010 ----- 5,649,176
5 WACHOVIA BANK NATIONAL ASSN --------- 518,753 ----- 5,454,856
6 BANK OF NEW YORK --------------------- 83,608 ------- 959,681
7 WELLS FARGO BANK NA ----------------- 396,847 ------- 879,779
8 STATE STREET BANK&TRUST CO ----------- 97,978 ------- 588,222
9 PNC BANK NATIONAL ASSN --------------- 90,405 ------- 244,870
10 SUNTRUST BANK ---------------------- 184,810 ------- 204,160

“The gap between future US receipts and future US government obligations now totals $65.9 trillion, a sum that is impossible for the US to reconcile, which means the US is now technically bankrupt.” - St Louis Federal Reserve Review July/August issue 2006


"The coin is a delicate meter of civil, social, and moral changes...
It is the finest barometer of social storms, and announces revolutions."
- Ralph Waldo Emerson, 1860, "Essay on Wealth"

"The best measure of the dollar is that number of dollars it requires to purchase a measure of pure wealth -- an ounce of gold. Gold is both the unit and the messenger. The government and the central bank fear the messenger. The reason why they fear the messenger is obvious -- they are frightened of the message." Richard Russell … March 12, 2007

"...There is no nation on earth powerful enough to accomplish our overthrow. ... Our destruction, should it come at all, will be from another quarter. From the inattention of the people to the concerns of their government, from their carelessness and negligence, I must confess that I do apprehend some danger. I fear that they may place too implicit a confidence in their public servants, and fail properly to scrutinize their conduct; that in this way they may be made the dupes of designing men, and become the instruments of their own undoing."
--Daniel Webster, June 1, 1837

“Banking was conceived in iniquity and was born in sin. The bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of bankers and pay the cost of your own slavery, let them continue to create money .” - Sir Josiah Stamp, who became a director of the Bank of England in 1928

Keynes was speaking here about the ability to control money supply.

"By this means government may secretly and unobserved, confiscate the wealth of the people, and not one man in a million will detect the theft."
--British Lord John Maynard Keynes (the father of 'Keynesian Economics' which our nation now endures) in his book "THE ECONOMIC CONSEQUENCES OF THE PEACE" (1920).

"The other motive is to screw up the entire perception of inflation and its conceptual understanding, a project which fully deserves the claim "Mission Accomplished" to the masses. An entire generation of indoctrinated economists fills the ranks of colleges and universities." - Jim Willie

"This [Federal Reserve Act] establishes the most gigantic trust on earth. When the President [Wilson} signs this bill, the invisible government of the monetary power will be legalized....the worst legislative crime of the ages is perpetrated by this banking and currency bill."
-- Charles A. Lindbergh, Sr. , 1913

"Neither paper currency nor deposits have value as commodities, intrinsically, a 'dollar' bill is just a piece of paper. Deposits are merely book entries."
-- Modern Money Mechanics Workbook, Federal Reserve Bank of Chicago, 1975

"Every Congressman, every Senator knows precisely what causes inflation...but can't, [won't] support the drastic reforms to stop it because it could cost him his job."
-- Robert A. Heinlein, Expanded Universe

"During Greenspan's tenure, America was transformed from the world's largest creditor to its greatest debtor, from the world's mightiest industrial power to a second-rate service provider, and from a nation of responsible savers to one of reckless spenders,"
- Peter Schiff, President, Euro Pacific Capital

John Conolly, treasury secretary in the Nixon Administration,
put it bluntly in 1971 when the US decoupled the dollar from gold:
“The dollar is our currency but their problem.”

A communique sent from the Rothschild investment house in England to its associates in New York noted, "The few who understand the system. . . will either be so interested in its profits or so dependent on its favors that there will be no opposition from that class, while on the other hand, the great body of people, mentally incapable of comprehending . . will bear its burdens without complaint."

Bernanki is just a puppet. "Weimar Bernanke", the man has no business experience,
no banking experience, no financial market experience,
yet is named to the most important central bank post on earth. - Jim Willie CB

"Those who create and issue money and credit direct
the policies of government and hold in the hollow of their hands
the destiny of the people." - Reginald McKenna, Chancellor of Exchequer, England

"We have gold because we cannot trust governments…Paper money
is a great aid to politicians: it makes it possible for them to confiscate
the savings of the people by manipulation of inflation and deflation".
- President Herbert Hoover

Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But 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. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation. - Ben Bernanke remarks before the National Economists Club, Washington, D.C. November 21,

"Unconstitutional or not, the individual income tax (or any other tax, for that matter) will not by itself drive this country's economy to collapse tomorrow, next month, or next year. But the monetary and banking systems will--if not tomorrow, surely someday soon. And the resulting chaos will offer the occasion and excuse for the General Government to impose a police-state tyranny beside which the worst excesses of today's tax Gestapo will resemble Jeffersonian libertarianism." - April 9, 2005, Dr. Edwin Vieira, Jr., Ph.D., J.D., author of Pieces of Eight and coauthor of Cra$hmaker with Trader Vic

"Would you believe that I used to compute M3 myself, and that the Fed will be short handed after I retire?" - Jesse's Cross Roads Cafe

Sure enough! The Fed hasn't published M3 in over a year now.

Here is an interesting tidbit:
From BusinessWeek Online

Intelligence Czar Can Waive SEC Rules,

“President George W. Bush has bestowed on his intelligence czar, John Negroponte, broad authority, in the name of national security, to excuse publicly traded companies from their usual accounting and securities-disclosure obligations. Notice of the development came in a brief entry in the Federal Register, dated May 5, 2006, that was opaque to the untrained eye.”

There goes the transparency the US markets used to be known for.

Financially/economically, the US is a shell of it self. The opposite of what it used to be. No wonder the shares (US dollar) of USA, Inc. are making new historic all time lows. Gold is the protector of private wealth for those in the US. Too bad most in the US do not realize this. They will one day when it will be too late because they will be broke therefor unable to buy gold and silver.

The object of a bank run: