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Tuesday, January 29, 2008

Gold Price Versus Silver Price

How is the gold price doing versus the silver price. That depends on what point in time is being considered and what time period is being considered.

A period in time to look at:
At the start (about 2000-2001) of this bull market it took about 70-80 ounces of silver to buy 1 ounce of gold. Now it is taking about 50 ounces of silver to buy 1 ounce of gold.

A point in time to look at:
At the beginning of 1980 it took about 15 ounces of silver to buy 1 ounce of gold.

So, since 1980, gold has outperformed (increased its purchasing power more than) silver.
Since 2001, silver has outperformed (increased its purchasing power more than) gold.

********

Basic point:
Silver is found in the ground about 16 times more often than gold. In a free market, an ounce of silver would be worth about 1/16 an ounce of gold. Historically this is the value/price ratio between the two metals.

********

The US dollar price of gold is trying to play catch up to inflation, the increase in the supply of US dollars. Same goes for silver.

US dollar supplies:
1980: M3 was about $1.8 trillion
2007: M3 is about $13+ trillion

The supply of US dollars has grown about 7.2 times (13 divided by 1.8).

1980 USD price of gold: $850
2007 USD price of gold, all other things being equal except the supply of USD, should be about $850 times 7.2 = $6120.

1980 USD price of silver: $50
2007 USD price of silver, all other things being equal except the supply of USD, should be about $50 times 7.2 = $360.

Or silver should be about the historic ratio of 16:1, or 1/16 the price that gold should be at, or $6120 divided by 16 = $383.

$6120 divided by $850 = 7.2
$370 (lets call it) divided by $15.5 = 23.9

The gold price versus silver price picture looks like silver has more outperformance of gold to do. It probably will, and more.

(Click chart to enlarge. It's not quite up to date,
but still does the job.)







At $15.5-16, silver is going up nicely in its channel:








Ted Butler's (silver expert/analyst) latest on demand for silver:
The Coming Investment Boom in Silver
http://news.silverseek.com/TedButler/1201020133.php






Silver is still the Rodney "I don't get no respect" Dangerfield of metals. Or, in other words, its price is still "Just this side of stealing"; still a screaming buy.

Friday, January 25, 2008

Gold Price Drivers

The nature of otc derivatives (see jsmineset.com) are the main drivers to a much higher gold price. For the detailed nature of otc derivatives, see . The BIS (Bank for International Settlement) has the world's total over $500 trillion bucks worth of notional (contract) value.

Recent news tidbits from Davos, Switzerland

*****
Fed Risks Fueling More Bubbles, Davos Economists Say

Jan. 23 (Bloomberg) -- The Federal Reserve, which yesterday announced
its first emergency rate cut since 2001, is ignoring history's lessons
and risks re-igniting more asset bubbles, economists at the World
Economic Forum annual meeting said.

The Fed is saying ``we are there to clean up after bubbles first rather
than to prevent the danger,' Stephen Roach, Morgan Stanley's Asia
chairman, said in a panel discussion in Davos, Switzerland. ``It's a
dangerous, reckless and irresponsible way to run the world's largest
economy.'..

*****
Soros Sees End of Dollar as World's Reserve Currency

Jan. 23 (Bloomberg) -- Billionaire investor George Soros said the
fallout from the U.S. subprime crisis will bring about the end of the
dollar's status as the world's reserve currency.

``The current crisis is not only the bust that follows the housing boom,
it's basically the end of a 60-year period of continuing credit
expansion based on the dollar as the reserve currency,' Soros said in a
debate today at the World Economic Forum in Davos, Switzerland. ``Now
the rest of the world is increasingly unwilling to accumulate dollars.' ..

*****

From The King Report
M. Ramsey King Securities, Inc.
Thursday January 24, 2008 – Issue 3796 "Independent View of the News"

Solons are so wretchedly desperate to save a terminally damaged and egregiously corrupted US financial system that they sheepishly floated a risible Daisy Chain Bailout to euchre the markets.

Because so many investors and traders are equally desperate, they swallowed the implausible scheme.

Does anyone realize that all the scheme does is shift the system-busting losses that bond insurers face to a different troubled pocket of the system’s pants?

Let us get this right. Stocks soared because entities with crappy paper, and some needed bailouts, will now bailout bond insurers that insure the crappy paper that the bailouters hold? Only in Cramerica!!!

*****

What the heck is reality?

Oh, ya. We don't really "do" much of that anymore, at least in the financial system. No wonder gold and silver, reality, is such a small part of today's financial system.




Federal Reserve Board Chairman Ben Bernanke during testimony before the House Budget Committee on Capitol Hill in Washington in this Thursday, Jan. 17, 2008





Jim Sinclair, January 23, 2008 at jsmineset.com :

"Today's situation is infinitely more dangerous than that of 1929. A financial Armageddon is possible due to the size (BIS Quarterly) of the OTC derivative mess. It is for just this reason that there is no limit to the monetary and fiscal stimulus that will be applied to prevent it. It is that attempt to prevent a total meltdown that will take the price of gold to and above $1650. I wish the Fed and PPT good luck because no one could possibly want to see what is coming in 2011."

True, all the dollars that have been created thus far can justify or are the drivers of a $5,000 gold price. The amount of otc derivatives out there now can be the drivers of an even higher gold price.


It is too late for that stuff, Ben.

"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



"Reality must take precedence over public relations, for nature cannot be fooled." -- Richard P. Feynman, http://en.wikipedia.org/wiki/Richard_feynman

Thursday, January 24, 2008

HUI Gold and Silver Stock Index











The AMEX exchange's HUI index; the Gold Bug's Index of gold and silver stocks:
http://amex.com/othProd/prodInf/OpPiIndComp.jsp?Product_Symbol=HUI

The components (stocks) that make up the index:
http://amex.com/othProd/prodInf/OpPiIndComp.jsp?Product_Symbol=HUI

About 800% in 7 years. Not bad. It's strange how the financial media will not talk about the HUI gold and silver stock index. Of course, one of these days they will be talking about it.

"NEWS is what someone wants to suppress. Everything else is advertising."
Reuven Frank - Former head of NBC News

A No Brainer:
Buy equal dollar/yen/yuan/peso/etc amounts of each of the 25 components of the HUI, and you will beat about 85% of "money" managers, "professionals", that attempt to do better than the index. This is because most "money" managers are not professionals. Professionals are those that are heavy into the work that they do, thus are really good at what they do. The over whelming majority in any line of work are not professionals, are into taking the path of least resistance. Their performance when measured against an index(s) shows this. Only about 5-10% of people are really good/excell at what they do.

* * * * *

http://miningpedia.com/

Miningpedia is an encyclopedia of mining stocks. It is a free comprehensive database of mining stocks. Anyone can update or enter data, it's like wikipedia.com. Currently there are about 758 companies in the database.

Big Job For Gold - II

(Click chart for larger view)



It does not matter how big gold's job is. It is up for it. Not to worry. How big is the job for gold? According to how Shadow Stats calculates its alternative (more realistic than the US government's rigged to the down side) CPI (Consumer Price Index), in today's US dollars, Gold needs to be priced at about US$ 5,000 for it to have the same purchasing power that it had in 1980.

That is right now, but, the top of this current bull market in gold is a few years away. More USD will be created between now and the top of this bull market. So, US dollar priced gold should be more than US$ 5,000 at the top.

http://mwhodges.home.att.net/inflation.htm




















This cannot happen without government central banks. It is their job, to steal stored value for governments.












This one should be self-explanatory.







FINANCIAL TERRORISM AGAINST SENIORS
Crushed Incomes and International Buying Power
by Michael W. Hodges, Author
Grandfather Economic Report
November 20, 2004
http://financialsense.com/editorials/hodges/2004/1120.html

Gold and silver, actual real spendable money made out of atoms with no liabilities attached, are financial protection for seniors from their governments.

Gold and silver have been doing their jobs for people for about 5,000 years. There is no reason for them to stop now.

Tuesday, January 22, 2008

Gold Outside Reversal




Today, Tuesday, on the futures charts, gold made an outside reversal to the upside. Bullish, particularly with the others being made.









"It's a wonderfull day in the neighborhood."

GATA Gold Ad






Watch for this GATA gold ad in the Wall Street Journel. http://www.gata.org

Dollar and HUI Outside Reversal




Today the US dollar made an outside reversal day to the downside which is bullish for gold and silver:




(Click charts for larger views)


At the same time, the HUI (AMEX's Gold Bugs Index of gold and silver stocks) made an outside reversal day to the upside which is bullish for gold and silver.



Plus, the HUI stayed above its short term uptrend line that started back in the middle of August. These outside reversal days in the US dollar and HUI combined with Friday's outside reversal for silver are definately bullish for gold and silver.

Gold and Silver Are Protection From Dangerous People

The most dangerous people in the world are cornered politicians and their high level bureaucrats. Gold and silver are your major protection from them. They do not plan way out into the future in order to create wealth. They only plan short term to increase power or to hang onto power which requires the consumption of wealth, usually other people's wealth.


WASHINGTON, Jan 18 (Reuters) -
... it [the economy] was not in danger of stalling."

"This is not an emergency. There is an urgent need," Paulson said on NBC television about rapidly-moving plans to develop a rescue plan for an economy hit by a housing crisis, a credit crunch and soaring oil prices. President George W. Bush is to outline his plans for a stimulus package later on Friday.

"The long-term fundamentals of our economy are strong," Paulson said. "We believe the economy is going to continue to grow slowly here, but it has slowed down and the risks are to the downside and the President is very focused on taking actions quickly that will give a boost to our economy as soon as possible this year."
...

They have to be in a panick to be contradicting themselves in the same paragraph several times in a row. Watch out.

In other words there is a danger of stalling [reality is a crash is coming], there is an emergency, the long term fundamentals are as weak as any worse time in the past. There will be no real boost to the economy. There will be tons of smoke and mirrors.

Their fix is what caused the problem in the first place, more US dollars and the equivilent in debt. Their fix will accelerate the problem. At the moment the plan in the US is to give back some paid taxes to tax payers hoping they will spend it to prop up the economy. The problem is that the governments in the US have already spent their tax receipts and more from their borrowings. They will now have to borrow even more (more dollars get created out of thin air) to give these rebates back to the tax payer, thus increasing the problem of stagflation: rising prices with a declining economy.

The US Treasury/Fed will create trillions of dollars if necessary to keep financial institutions functioning, and to try to keep US equities from crashing despite that the Dow will probably end up down around 3,000. Initially these dollars go to the financial institutions but end up getting out into the world's economy, thus increasing the pressure of entities around the world to get rid of them.

Other governments are increasing their token supplies also. Reserve assets of other central banks climbed $1.30 trillion (27%) in 2007. Or, about 50% in 2 years. Most central banks around the world, for all practical purposes, are out of control. World wide, this has never happened before. To a large extent, this is due to the final disconnect at Bretton Woods in 1971 of all government fiat paper and digital bits from the discipline of gold.

Look for a major change/rebuild of the world's financial system in the near future, 2010-2020. There is big time history being made right here and now. Your major protection from the larger moves that are coming is real spendable money, gold and silver. Not something (digital bits) that are trapped on someone else's hard drive.

In the mean time, foreigners are buying up US assets with unwanted US dollars. The US dollars are returning home, ultimately jacking up prices for daily essentials of life, thus threatening life itself in the US.

********

“Our modern shadow banking system craftily dodges the reserve requirements of traditional institutions and promotes a chain letter, pyramid scheme of leverage, based in many cases on no reserve cushion whatsoever. Financial derivatives of all descriptions are involved but credit default swaps (CDS) are perhaps the most egregious offenders. While margin does flow periodically to balance both party’s accounts, the conduits that hold CDW contracts are in effect non-regulated banks, much like their hedge fund brethren, with no requirements to hold reserves against a significant “black swan” run that might break them.” -

Bill Gross, PIMCO
Investment Outlook
Jan. 20, 2008

"...
Mr. Gross isn’t some poor schmuck down in Peru whistling into the wind. He just happens to manage one of the largest, if not the largest, bond funds in the world and it’s stuffed full of other people’s money. I often read his work because he’s honest and that is a rare quality in today’s world. Note that he is calling derivatives a pyramid scheme, strong language to say the least, and quantifies it at US $500 trillion

dollars, almost ten times the entire asset base of the global banking system. In defense of the system, some would say these bets between risk seeking and risk avoiding parties were entered into by consenting adults who knew what they were getting into. I couldn’t disagree more. For those of you who don’t know how a lot of big deals are done, I’m going to enlighten you. The president of Goldman Sachs calls up the president of Credit Suisse and tells him that he’s got a “can’t miss” deal for him. The president of Credit Suisse tells him to fax it on over, looks at the cover, sees its issued by Goldman and bears a AAA rating from Standard & Poor’s, then picks up the phone and orders some subordinate to get it done. The whole process takes ten minutes and is based on faith. The president of Credit Suisse isn’t going to read the entire one hundred page prospectus because it’s written by lawyers and he isn’t going to understand it. In fact, it is expressly written not to be understood and thereby considerably increasing the chances that Goldman can escape blame should something go wrong.

Recently Credit Suisse came out and said that they can’t quantity their losses. By making such a bold statement, Credit Suisse is confirming the pyramid scheme label applied by Mr. Gross as are Merrill Lynch and Citibank when they write off a combined US $30 billion and can’t deny that more write-offs won’t happen next quarter. In reality you’ll see that US $30 billion is just a very small tip of a very large iceberg. That iceberg has now collided with the economy and has done irreparable damage. In an effort to calms investors, Mr. Bernanke gave two poorly received speeches this week and indirectly begged for help from President Bush in the form of stimulus package. The markets had high hopes Friday morning as the futures shot up almost 160 points before the President’s speech. As soon as the details of the highly touted plan were released to the public, the air began to leak out of the balloon, and everyone went home disappointed. Now all that is left is the Fed rate decision at the end of the month. It is a given that they’ll cut 50 bases points and there are people calling for as much as a 100 bases point cut. What no one is telling you though is that they can cut all they want and it just won’t matter. Some months back, there was a very small window of opportunity to postpone the inevitable one more time. As so often happens when opportunity comes knocking, no one answered and the window is now firmly shut.

The problems are now floating to the surface and they are being felt all over the world. Northern Rock (UK) and Credit Suisse are not isolated events; they are just the beginning. A significant portion of the US $500 trillion in derivatives is held by foreigners, and they are just now beginning to wonder what they got themselves into. Usually when we have a scandal the SEC and the Department of justice can’t wait to beat the door down and assign blame. The same holds true with the Congress. This time around they are all conspicuous by their silence. Why? Simply put, people who live in glass houses cannot be seen throwing stones. By that I mean that the Congress and the SEC, and by implication the DOJ, are all to blame. In fact, I’ll go so far as to say that they are the problem. In the end, they’ll find some poor middle management fellow and pin the whole mess on him but somehow I don’t think that will fly this time around." -

DTAnalysis SAC
Lima, Peru
www.dowtheoryanalysis.com

Since the US is in worse shape than it was before the Great Depression of 1930-1945, this Great Depression should be worse than the last one.

One of the major ways for people to protect themselves from dangerous people is to have plenty of gold and silver, actual real spendable money that has no liability attached to it.

Sunday, January 20, 2008

Ron Paul - The End of Dollar Hegemony

On February 15, 2006, Ron Paul made a speech before the U.S. House of Representatives called The End of Dollar Hegemony. It has to do with the end of the US dollar as the world's reserve currency, being used as reserves for central banks around the world.

The text can be read here:
http://www.house.gov/paul/congrec/congrec2006/cr021506.htm

Or his speech can be viewed on YouTube in 2 parts. He does not start in Part I till about at the beginning of the 2nd quarter. He is very knowledgable of history and Austrian economics, thus a good education as to a part of how the world really works can be had.

Excerpts and part I:
...
Though money developed naturally in the marketplace, as governments grew in power they assumed monopoly control over money.
...
Since printing paper money is nothing short of counterfeiting, the issuer of the international currency must always be the country with the military might to guarantee control over the system. This magnificent scheme seems the perfect system for obtaining perpetual wealth for the country that issues the de facto world currency. The one problem, however, is that such a system destroys the character of the counterfeiting nation’s people-- just as was the case when gold was the currency and it was obtained by conquering other nations. And this destroys the incentive to save and produce, while encouraging debt and runaway welfare.
...



Excerpts and part II:
...
The 1944 Bretton Woods agreement

[There were 2 Bretton Woods Agreements. One in 1944 and one in 1971.]

solidified the dollar as the preeminent world reserve currency, replacing the British pound. Due to our political and military muscle, and because we had a huge amount of physical gold, the world readily accepted our dollar (defined as 1/35th of an ounce of gold) as the world’s reserve currency. The dollar was said to be “as good as gold,” and convertible to all foreign central banks at that rate. For American citizens, however, it remained illegal to own. This was a gold-exchange standard that from inception was doomed to fail.

The U.S. did exactly what many predicted she would do. She printed more dollars for which there was no gold backing. But the world was content to accept those dollars for more than 25 years with little question-- until the French and others in the late 1960s demanded we fulfill our promise to pay one ounce of gold for each $35 they delivered to the U.S. Treasury. This resulted in a huge gold drain that brought an end to a very poorly devised pseudo-gold standard.
...
That is until the fraud is discovered, and the foreign producers decide not to take dollars nor hold them very long in payment for their goods. Everything possible is done to prevent the fraud of the monetary system from being exposed to the masses who suffer from it.
...
It is an unbelievable benefit to us to import valuable goods and export depreciating dollars.
...
Our whole economic system depends on continuing the current monetary arrangement, which means recycling the dollar is crucial.
...

Friday, January 18, 2008

Silver Outside Reversal


This Friday, in New York, silver made an outside reversal day.

It traded lower than Thursday's intraday low, higher than Thursday's intraday high, and closed up from Thursday's close.

Very bullish.




Maybe it has something to do with the negative silver lease rates. Who in their right mind would lease silver at a loss, and why?





"It is my idea," said Galt, "that the financial institutions of the
country, - I mean the insurance companies and the banks, - instead of
lending them selves out of funds in times of high prosperity ought then
to build up great reserves of capital to be loaned out in hard times.
That would keep people from going crazy with prosperity at one time and
committing suicide at another time. But they won't do it by themselves.
Somebody has to see to it, - some body who knows not only how not to
spend money when everybody is wild to buy, but how to spend it
courageously when there is a surplus of things that nobody else wants.
Every financial institution that I have anything to do with will be
governed by that idea, and the Great Midwestern properties, while I run
them, will decrease their capital expenditures as prices rise and
increase them as prices fall. When we show them the whole trick and how
it pays everybody will do it. We won't have any more unemployment. In a
country like this unemployment is economic lunacy." - The Driver, Garet
Garrett
http://www.mises.org/books/driver.pdf

Tuesday, January 15, 2008

Big Job For Gold

Gold has a really big job ahead of itself to play catch up with the M3 supply.

Notice M3's compound curve heading up:















Compared to M3, gold is just starting to play catch up:













The problem is the awful aspects of the economic and financial scene that go along with a particularly high gold price. The steepness of the rise in the gold price should be disturbing.

"An impending sense of doom takes all the fun out of decadent living". - ?, and the fun out of making the big percentage gains in the gold and silver scenes.

"In many ways, as will appear, the folly of the lender has exceeded the extravagance of the borrower." - A BUBBLE THAT BROKE THE WORLD, Garet Garrett http://www.mises.org/books/bubbleworld.pdf

Gold has now made it over:




USD $5,000 gold? Higher?

Thursday, January 10, 2008

Gold is the new global currency

"Gold is the new global currency" is the title of an article in the Financial Times. Serious!!!! That's right. The main stream media said this!
http://www.ft.com/cms/s/0/b8107770-bd8b-11dc-b7e6-0000779fd2ac.html

...
There was a time when gold was money. In today's uncertain world, the yellow metal is back in fashion.
...
A better way to think of gold may be as central bankers used to before America dropped the gold standard: not as a commodity, but as another currency.
...
Prices have a long way to go ... It could top $1,000 and still be at the lower end of ...
...
The world's major economies have experienced rapid money supply growth of 10 per cent plus per annum in recent years.
...
Gold's rise shows investors are nervous.
...

[The last sentence makes no sense, but what do you expect from main stream media.]
...
But it is in the interests of business and consumers that its most bullish fans are proved wrong.

"The dollar may be our currency but it is your problem." -- John Connally, former U.S. Treasury Secretary

Coming to a theater near you:

Gonzo Gono

Zimbabwe has a too much "money" problem despite people thinking that it has a not enough "money" problem, which is the same thinking people had in the past during other hyperinflation eras.

http://allafrica.com/stories/200801040601.html
Zimbabwe: No Solution Yet to Cash Crisis
...
> Analysts said the cash shortage ...
...
> Cash-hungry Zimbabweans are asking why the country continues
> to face acute cash shortages
...

Soooooooooo, about $57 trillion of cash in circulation is not enough.

No central bank, single human, treasury department or government can take in and properly process the huge amounts of information necessary for smooth makets that the invisable hand of a market can. That is why money and currencies should only be the business of private enterprise.

Naturally when a central bank, single human, treasury department or government is in control of "money" supply, the theft of stored value operation can get out of hand, like in Zimbabwe now.

The official spin by Zimbabwe Reserve Bank governor Gideon Gono:

> He promised the situation would improve at the start of the year,
> accusing what he termed big "money movers" and cash barons for
> the current crisis.

> Gono also accused transport operators, wholesalers and bank
> employees for fueling the crisis.

Zimbabweans and the western world should read F.A. Hayek's classic The Road to Serfdom, at least for starters. It's not as though this whole scene was not basically figured out and understood almost 200 years ago.

Animals (mostly) and plants (totally) are preprogrammed for survival. Humans are the opposite. A dog is preprogramed to smell for too much heat so that it does not touch something that is too hot. A human has to learn, somehow, not to touch something that is too hot, let alone how money, currencies and fiat tokens work (in order for the human to defend itself against central banks, single humans in high places, treasury departments or governments). Strange, how many humans do not learn from the past, costly repeating the mistakes of the past.

"For two hundred years the governments have interfered with the markets choice of the money medium. Even the most bigoted statists do not venture to assert that this interference has proved beneficial." - Ludwig von Mises

More Mises quotes here

For more on the Zimbabwe hyperinflation scene, type "Gono" into the site "Google Search" field at the top of the home page: http://allafrica.com/

Close:

Wednesday, January 09, 2008

Inflation cause and effect

It's a good thing people do not know what causes rising prices (which they think is inflation) and crashing economies, or they would be really ticked off, or having a revolution in the streets the next day. The cause is too much creation of what they call "money". Artificial demand for real goods and services is caused be artificially creating to much credit, which when accepted, is debt.

Instead of the demand for real economic goods and services coming from the creation, and then spending, of real wealth, it comes from the creation of credit and debt that was not earned because it will not be paid back because there is not enough creation of real wealth to support the future payment of the debt. Debt default causes economic contractions.

Keep an eye out for the amount of debt relative to the amount of wealth. Ratios count, a lot! Also whether the ratio is changing, and if so, which side(s) of the ratio is changing and by how much. There are constants in life, but not many; so are there trends. There are plenty of trends that make huge differences that need watching.

If debt keeps increasing while real wealth creation does not keep pace, or stops, or declines, some kind of economic and financial adjustment has to take place. After all, how long will a debtor be allowed to keep taking on debt when it becomes obvious that the debtor is not doing enough, nor will the debtor be able to in the future, to make the future payments on the debt.

It works the same for individuals, towns, companies, cities and national governments.





The "money" monster is stalking the world.





From the Fed's third quarter "Flow of Funds" report:

Total US credit growth expanded at an annualized $4.99 trillion.

To give that number some perspective, the US has an annualized GDP of about $14 trillion. That means that about 36% of GDP was borrowed. It was not necessarily due to the creation of real wealth, real goods and services.

Imagine what all those dollars are ultimately going to do to the prices of real goods and services; real goods and services becoming scarcer relative to the number of dollars chasing real goods and services.

If someone borrows "money" from a bank, the bank takes that person's I.O.U. and puts it on its books as an asset because, to the bank, it is. If that person takes that "money" and buys debt in the debt market, no real wealth was created. Yet all other things being equal, GDP increases because of those exchanges of "money". A GDP number means a lot less than most people think.

An increasing GDP number can mean that a nation is increasing it total real wealth. It can also mean that it is actully consuming/spending its real wealth, becoming less wealthy. One has to look under the hood, dig into the details, other fundamentals, to know.

By the way, when the bank puts that I.O.U. on its books as an asset, that action increases its reserves. Therefor, since its reserves increased, it is allowed to create more dollars, out of thin air, necessary to make that loan.

If central banks and the banking system as a whole are allowed to create fiat tokens out of thin air, how come "counterfeiters" are not allowed to?

Where was the use of human hands and mind, manipulating nature, being used to create real economic goods and services in these exchanges? Virtually none. Yet GDP increases. GDP can be increasing while the rate of the production of real wealth is actually decreasing. At some point in future time, real wealth is needed to pay off these loans. Let's see now, real debt increasing with real wealth decreasing. ... trouble ahead.

The rate of debt and "money" creation has got way out of line with the rate of real wealth creation. At this point, there is going to be quite the reaction/adjustment/correction. And, it will not be felt just in the US.

Now a days, since 1971 (Brenton Woods Agreement), these huge increases of "money" supply (mostly digital bits on a hard drive) and the huge reaction/adjustment/correction that is inevitable are due to those that control the hard drives that contain the supply of digital bits. Huge increases in supply and the next Great Depression, sure are not due to the invisible hand of a free market. They are due to visable hands that have no business messing about in markets because that makes the markets non-free, which makes the markets not work well, and sometimes to crash.

Suggested reading: Markets Don't Fail - Brian Simpson

Close:

Tuesday, January 08, 2008

Dollars and Debt

Because of the nature of today's banking system, a dollar can not be created without a dollar's worth of debt being created, and vise versa.

The U.S. Federal debt:

December 28 - $9,120,549,682,475.62
December 31 - $9,229,172,659,218.31

That is a one day gain of $108,622,976,742.69.

Over 100 freaking billion dollars in a day.

Canada’s 2007-08 Federal budget - $233.4 billion
Mexico’s probable 2007 Federal budget should be about $200 billion.

That is borrowing in a day about what these governments spend in a half a year!

The supply of US dollars out there is getting to be about the size of the supply of dirt out there. Or, the US dollar is getting to be "dirt cheap".






Will 2008 be a year for bank runs?










In the US, what is the market saying?















http://money.cnn.com/2007/11/30/news/economy/florida_investments.ap/index.htm?cnn=yes
Florida halts run on investment pool
Local governments shaken over mortgage-related securities are suspended
from making withdrawals.

November 30 2007: 6:22 AM EST

TALLAHASSEE, Fla. (AP) -- Florida officials suspended withdrawals from a
state-operated investment pool Thursday, abruptly halting a run by local
governments spooked over the downgrade of its mortgage-related holdings.
...

Sunday, January 06, 2008

US Dollar Spin

Most people have no idea how the world really works, thus politicians and bureaucrats talk to most people like children, usually get away with it, at least for a while, and do it as they steal these people's stored value without these people detecting the theft. Here are some examples of that talk (spin / ballderdash) on the US dollar and economy:

Tricky Dick back in 1971


Gee, it sounds so...... so........... benign.

[Google "Brenton Woods Agreement"]

"The dollar has been the world's reserve currency since World War II and it's been that for a reason. We are the biggest economy in the world, we are as open as any economy to investment, to trade and we've had stable economic policies. I have no doubt that looking out over any reasonable period of time, you're going to see our strong economic fundamentals in this country shine through." - November 9, 2007, Treasury Secretary Paulson

The major reason it became the world's reserve currency was because it was redeemable in gold for foreigners, till Tricky Dick broke that promise in 1971. And, it was down hill from there. Now, about 3 decades later, it's time to pay the Piper.

[Sure, Dick. Sure, Pauly. Sure.]

Remember these with what will be said when the US government has to impose drastic actions on people in the near future. Things are getting bad fast, at an acelerating rate.

From jsmineset.com

> Posted On: Monday, January 07, 2008, 6:04:00 PM EST
>
> The Dangerous World We Live In
>
> Author: Jim Sinclair
>
> My Dear Friends,
>
> Operation White Noise failed so we are now moving into Operation Blitz to revive the first
> flop. Today you had the President, the Secretary of the US Treasury and a host of Federal
> Reserve and talking head big wigs making their sugared remarks about the 2008 US dollar’s
> supposed positive future and success in handling the economic problems.

Friday, January 04, 2008

New All Time Gold High



Gold has made a new all time * closing * US dollar high. The closing high from the last bull market was right around $850. Intra day, it got almost to $890.





How has gold been doing versus the Dow?





(Click on graphs for larger views)






"You've come a long way, baby." - old Tarrington cigarette commercial

"The most salient buzzword in 2008 is going to be inflation. The Fed is lowering interest rates and vastly increasing the money supply. They're further fueling inflationary expectations." - Michael Pento, senior market strategist, Delta Global Advisors Inc., Huntington Beach, California, which manages about $1.4 billion.

“a government can get away with the illusion that paper is wealth, but in the end, too much paper is always created, and with that action the illusion falls apart.” - the venerable Richard Russell.