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Thursday, May 22, 2008

Gold Doing Its Job

Gold doing one of its jobs; as a safe store of value.

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Good thing because the USD is falling down on the job particularly as a reliable measuring stick, let alone as a store of value. Since the USD is failing at a faster and faster rate, at some point they're going to tell it to "go sit in the truck". It gets told that when it can not do its medium of exchange job anymore.









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“... sound money protected the citizenry against the predatory inroads of Government.” - Von Mises

"When nothing happens for a long time, people begin to assume that nothing ever happens. But, sooner or later, something always happens." … Steven Lagavulin

http://www.mises.org/books/bubbleworld.pdf
"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


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Some recent tidbits:

About bags of junk silver ... 10,000 dimes in each bag of $1,000 face value:

" ... If things get really dicey, and we have to live through a currency
crisis or a bank holiday, you can always barter a silver dime for a
gallon of gas. In 1980, when silver hit $50, there were gas stations in
every major city in America offering to swap a gallon of gas for a
silver dime. That will happen again."

"The story that appeared on Monday referring to the Oregon gas station
accepting silver quarters as payment reminds me of the time I took a
trip to visit my parents in Florida during the last energy crisis in the
late 70's. All along the route (Montreal to Miami) we had to wait in
long line-ups on the American side of the border for gas, but as luck
would have it, I was always able to get some. While in Miami I found it
strange that many stations were not open for business, but I never gave
it a second thought. A few days into my visit, radio announcements were
talking of emergency rationings and that car plates with odd last
numbers could line up at the pumps on odd numbered days, while even
numbered on even days. Waiting in a long line-up for my rations, I saw
the gas attendant approaching all the cars ahead of me and talking to
the drivers. I remember thinking that he probably was telling everyone
that there may not be enough gas to go around. When he got to my window
he asked if I had a silver dime. I asked him why and he said that if I
had one, he would pull me out of the line-up and fill me up. I asked if
this was a joke, but no, he was serious,a dime for a total fill-up.
Several minutes later I saw through my rear view mirror a car pulling
out. The attendant led it to the next available pump and filled it up.
There were a few clients cursing, but the attendant ignored them.
Needless to say, I was not able to get gas that day.With just four more
cars to go, the tanks ran dry. That was my first exposure to the
barbaric metals. It's amazing just how precious, precious metals really
were in a crisis. Even the gas jockey understood."

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"Without some attachment to harder values, the half-life of paper money is Hobbesian -- "nasty, brutish and short"."

"It is well enough 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

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Gold, "... taking care of business.", on the job, doing its job, on time, doing it right.

Monday, May 19, 2008

Inflation Adjusted Silver Price Charts


Jason Hommel's programmer, Shelby Moore, has produced two USD ** price ** (not supply, which would be M3) inflation adjusted silver price charts. One using the US goverment's rigged bogus estimates of price increases since 1975, and the other using realistic Shadowstats.com's use of government statistics http://www.shadowstats.com/alternate_data
estimates of price increases since 1975.

For those new to silver and not up to speed on silver basics, here is a silver review from December of 2007.

Here is a review of silver versus gold.


Most people in the world are not aware of the fundamental silver story. When just a tiny percentage of people catch on, the silver price will be a sight to behold. You can bet on it because of all the USD that has been created since 1975. There were about maybe $1.1-1.2 trillion of them then. Look at how many there are now. Most are still outside the US and in financial instruments. Wait till they start heading back to the US and start coming out of financial instruments looking for a home in real stuff, or atoms related financial instruments, like silver stocks.

http://nowandfutures.com/key_stats.html

Silver is still the Rodney (I can't get no respect) Dangerfield of metals.
















Buy! Buy!













ShadowStats.com founder John Williams on M3 Money Supply:

"....
It's going to be the .. probably the worst business cycle seen since the great depression
...
I believe that it will evolve into a depression.
...

What Mr. Bernanke is assuring us ... a hyperinflationary great depression ..."





A fun graphic:
http://www.phile.com.au/SecTreasAdvice.jpg

However you want to adjust today's USD silver price for reality, it's a screaming steal. "Just this side of stealing.". Money, currencies and tokens are:

1.) Mediums of exchange
2.) Stores of value
3.) Units of account/measure

Radically increasing the supply of USD has radically distorted the USD's unit of account (measure of value) ability, thus silver's really low USD price. And it's not just silver's price that has been distorted. People need a unit of measure that stays constant over time. If it does not, future financial, business, economic calculations get distorted. Well, distorted, big time, they have become, thus big time re-adjustments still to be made, as in another Great Depression in the US.

Sunday, May 18, 2008

You Need Gold and Silver Because of the System Break Down That Paul Volcker Sees As Happened

Paul Volcker says a system break down has happend while providing testimony to Congress. This breakdown is not over and gold and silver are you major protectors. The situation is going to get a lot more ugly than it is now.

He uses the words "broken down" "break down".

What are the amounts of otc derivatives potentially involved? Try well over 500 trillion USD worth. If central banks around the world try to create out of thin air not even half that much to try and save the butts of the boyz, all hell breaks loose.

"We are in the most difficult and complicated circumstances...

...

I would emphasize the point that we often lose sight of.
This country has spent some years spending a lot more than it has been producing. It's been carrying out a higher level of consumption relative to GDP than we can sustain.

...

In the forground is the new financial system that a number of you have commented on, less relying on banks, more relying on the open market, a more fluid system, certainly heavily engineered. You and others have said, Mr. Chairman, that you look to more tranparency. It's hard to argue against tranparency but I have to tell you this new financial system with all its enormous complexity gives rise to a certain opaqueness. It is almost impossible to penetrate. So I don't think we're gonna find all the answers in transparency.

There's kind of a symbiotic relationship between this new financial system and the unbalanced economy that the new financial system was so fluid and so effective in some ways that it enabled us to finance the excess in spending. We didn't have to save when people thought that they had other ways of finding money. The sub-prime mortgage phenomina is the prime example of financial engineering leading to a way to finance consumption. Well, that's broken down. And to over simplify I think we've seen a system in which the mathematicians have basically have taken over, the financial engineers.

And you combine that complexity and opaqueness with a super charged compensation system and you had great incentives for risk taking. And at the same time you had a basic break down I think in the discipline of creditor houses. That the system developes in a way that it is trading dominated. People didn't worry so much in the quality of the paper so long as you could pass it off on someone else in a hurry. And there was a lessor sense of vulnerability. And I .. a general sweeping conclusion I would have to say that under stress, this new system has failed the test of the market place. We are here because the new system has in effect broken down. That put the Federal Reserver front and center in dealing with a crisis. It obviously has reacted in unprecidented ways.

...


When things are going well, no one wants to be regulated.
When things go bad everone asked the regulator where were you.

But there have been breakdowns in supervision and regulation. I don't think there is any doubt about this.

...




Of course being one of the boyz himself, he fails to mention the most fundamental problem of the new (since Bretton Woods in 1971) system, everyone in the system never gets paid, no settlement. They just get to use a medium of exchange based on debt. This new system that the world has never experienced will fail in a really big way because it tries to deny the fundamental facts of life.


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http://www.frbsf.org/news/speeches/2008/charts.pdf
Page 18 of the .pdf file.

The Fed's balance sheet has be deteriorating since taking on all kinds of junk collateral for loans to various financial entities. Get your dog to sign a million dollar I.O.U and see if the Fed will take it as collateral for a loan to your dog.

When the Fed runs out of US Treasuries for assets, what they want to do is to be able to tell / order the Treasury to issue more debt, send it over to the Fed, and the Fed will use it to issue more US dollars since that debt is an asset on the balance sheet of the Fed. 'course the Treasury will have to pay interest to the Fed ... or ultimately the US tax payer will have to pay the interest and other dollar holders through the process of loss of stored value in USD due to USD devaluation due to the increase in supply of USD. Virtually no people in the US are aware of this at the moment, that they will be bailing out the boyz, the gangster banksters. Wait till they find out, it won't be pretty.

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Ron Paul tells Paul Volcker what really is needed:



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"Last call to board gold train at under US$1,000"
http://www.sprott.com/pdf/investorsdigest/digest.pdf
Article by John Embry, chief investment strategist at Sprott Asset Management

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Currency War (a best seller in China)

"6th printing in two months, sales breakthrough 100,000 copies, still in short supply, -- the book "Currency war" in the financial services sector has brought spotlight.

Song is not denying his view - all Chinese families should produce 3% -5% of revenue to purchase gold in kind, to add their wealth with insurance, because when real turbulence come, we can guarantee wealth, rather than any government-issued letter with notes. In fact, when the government trusted, issued currency is valuable, and when the government was not strong sense of trust, it will devalue the currency, or even worthless."

http://www.thechinaweekly.co.uk/chinaweeklyspecial/peopleoftheweek.html

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Gold and silver are major protection from what's coming. Even if Paul Volcker does not say all this, he knows it. Watch for panic at some point as people try to get their hands on gold and silver. Because the new system is so flawed, it looks like it will have an historically very short life.

Thursday, May 08, 2008

Trader Jones on Gold and Silver

Veteran gold and silver trader Jones comments on the need to own gold and silver coins in lieu of paper money:







...
"The average American doesn't know what money is, the average Brit, average Aussie, anybody in the west."
...
"... the thing about this money is that it holds its value."
...
"... only about 5% is paper money. The rest are computer entries."
...
"... most Americans have never held a gold coin. Don't even know what it is. ... gold. Solid honest money."
...




" ... The Chinese ... in asia are buying gold with both hands. They're accumulating dollars and buying gold."

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Don't expect to later on buy gold and silver when ever you want and in what ever quantities that you want.

Wednesday, May 07, 2008

Good Silver Price Signals

Silver is generating some good price signals:

Besides making what is probably a double bottom to this reaction, the right hand bottom is lower than the left hand bottom. Good, a stronger last shake out of the weak longs hopefully. On top of this, the right hand bottom made a 2b end of downward trend signal. This would apply to the short about 3 week down trend that just happened. The silver price moved above the previous low of the first week of April within 1- 4 days of making a new low.

On top of the double bottom and the 2b, the equal spacing tool indicated an important time period at the beginning of May. It looks like a significant bottom has happened.







2, 3, 4 years from now, 20 dollar silver is going to look ridiculously cheap.


Silver will never go out of style. Go ahead. Click on the Mercedes!