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Wednesday, February 03, 2010

Misc. Dollar and Gold News From The Past That Should Be A Wakeup Call

Saudis drop WTI oil contract

By Javier Blas in London
Published: October 28 2009
Saudi Arabia on Wednesday decided to drop the widely used West Texas Intermediate oil contract as the benchmark for pricing its oil, dealing a serious blow to the New York Mercantile Exchange.

The decision by the world’s biggest oil exporter could encourage other producers to abandon the benchmark and threatens the dominance of the world’s most heavily traded oil futures contract. It is the main contract traded on Nymex.


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Turkey to use national currencies in trade with Iran, China

.ANKARA, October 28 (RIA Novosti) - Turkey is switching to national currencies in trade with Iran and China, ending dependence on the U.S. dollar and the euro for about 20% of its commodity turnover, local media reported on Wednesday.

Turkey has already switched to settlements in national currencies with Russia amid weakening confidence in the greenback as the world's major reserve currency. The move was initiated by Turkish President Abdullah Gul during his visit to Moscow in February…


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U.S. Inflation to Appear Next in Food and Agriculture

October 30, 2009

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The average American consumer today spends approximately 30% of their income on housing and only 10% of their income on food. We expect these numbers to reverse in the years ahead as the U.S. dollar loses its purchasing power. In Germany during hyperinflation, rents fell from 30% to less than 1% of the average households' expenditures while food rose from 30% to a high of over 91%.
...


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Former Wall Street Player Reveals the Inside World Behind Shady Bailouts to Bankers
By Joshua Holland and Nomi Prins, AlterNet. Posted October 30, 2009.


An interview with Prins, former managing director at Goldman Sachs, now a razor-sharp financial muckraker and author of the new book, "It Takes a Pillage."
...

[What's going on right now is the greatest heist of value stored in the USD in the history of the US. After all, that's the main function (theft of stored value) of a central bank's monopoly on issuing what ever it is that people are forced to use for a medium of exchange, store of value and unit of measure of value. It's just that now, it's gotten totally out of hand. Nothing new in history though. It's just that the masses never learn, which is why central banks can get away with the theft. And, at the moment, the masses do not know what is happening. Even when it all falls down, many still will never understand the causes of what happen.]


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Paul Tudor Jones: Why Gold Will Soar

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“precious metals exposure has been increasing and is currently the largest commodity exposure. As a result we have included, for this quarter, a separate discussion on gold as an appendix. I have never been a gold bug. It is just an asset that, like everything else in life, has its time and place. And now is that time.”
...

[ There are very few in the commodity trading world who are true legends. Paul Tudor Jones, who began his career as a cotton trader for Refco, is not only a legend, but among the best of them. His comment that gold’s time has come will reverberate in the commodity world and be taken VERY SERIOUSLY. ]


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Inflation by Stealth

John Browne
Oct 29, 2009
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The TARP money, financed by an increase in the monetary base, has been provided to the banks at zero cost. And for the first time ever, the Fed is paying interest on bank reserves. Therefore, the banks can loan money to the Fed and to the government, via Treasury securities, at an interest rate spread of some 3 to 4 percent without risk. Given these incentives, it makes no sense to loan to anybody else. So, despite a massive increase in the monetary base, credit remains tight and price levels flat.

However, if the Fed stops paying interest on bank reserves or otherwise 'persuades' the banks to lend, the $1 trillion will be leveraged up by the banks and spewed out into the economy. Fractional reserve banking will transform a $1 trillion monetary base injection into a $9 trillion increase in money supply. When that happens, prices for everything will go through the roof.

So for now, inflation is like a ninja stalking our economy. It's lurking in the shadows but can't easily be seen. But once its strikes, it will be fast and deadly.


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A 5 page .pdf file:
Surreality Check Part Two..
Dead government walking


By: Eric Sprott & David Franklin
October 2009

In November 2007 we wrote an article entitled “Surreality Check... Dead Men Walking”, in which we
discussed the early warning signs of the impending credit crisis and highlighted companies that were looking particularly troubled to us at the time.
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As respected market commentator David Rosenberg recently wrote, “the stock market is divorced from economic reality”.1 It’s time for another surreality check, but this time it isn’t the publicly traded companies that deserve attention, it’s the governments that have saved them. Make no mistake – the dead men are still walking – they’re just a lot bigger now than they were two years ago, and they don’t generate earnings – they print money and tax their citizens.
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we thought we’d state it outright for our readers this month: the United States Government is on a trajectory to default on their obligations.
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There simply isn’t enough taxing power, value creation or outside capital willing to support its egregious spending.
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Three years later, the financial condition of the US government is completely untenable. The projected US deficit from 2009 to 2019 is now slated to be almost $9 trillion dollars.
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[That's using cash accrual method of accounting (illegal for the rest of us). 10s of trillions using GAAP (Generally Accepted Accounting Principles)]

On a GAAP basis, US government unfunded obligations increased by more than $9 trillion from last year alone!
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The real shocker that we discovered some time ago is that the FDIC ‘funds’ were never even held in a segregated bank account – the fees collected from the banks are accounted for as a part of the government’s general revenues that go towards military spending, bailouts, interest costs and other government programs.
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[Don't you wish you could write yourself an I.O.U. and put it down on a loan application as an asset, or to just kid yourself about what your net worth is?] [The FDIC "insures" (fraud) about 5 trillion of deposits, yet is broke.]


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Central banks are going from selling gold to buying gold; Germany has stopped selling it while India bought 200 ton. Here is just another country, the latest, that is getting it:

Sri Lanka c.bank buying gold to diversify reserves

Nov 5 (Reuters)NEW DELHI, India -- Sri Lanka's central bank has been buying gold for the past five or six months as it diversifies its reserves amid volatile markets, the bank's governor said in an interview on Thursday.

"We have been fairly strong accumulators of gold reserves over the past few months," Sri Lanka Central Bank Governor Ajith Nivard Cabraal told Reuters in a telephone interview from the southern Indian city of Chennai.

"We haven't stopped yet," he added, declining to quantify how much gold the central bank had bought or how much of the more than $4.8 billion of the country's reserves were in gold.

"Many countries are today diversifying. They are also looking at intrinsic value of their reserves, so gold would be a natural candidate for that kind of reserve accumulation," he said.


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In the New York Times no less:

November 8, 2009
Inside the Global Gold Frenzy
By NELSON D. SCHWARTZ

MENDRISIO, Switzerland

HERE, in a corner of Switzerland where Italian is spoken and roughly one-third of the world’s gold is refined into bars and ingots, business is booming. Every day, bangles, bracelets and necklaces arrive in plastic bags — from souks in the Middle East, from pawn shops in Asia and from corner jewelers in Europe and North America.
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“It’s not that gold has changed, but gold buyers have changed,” said Suki Cooper, a precious-metals strategist for Barclays Capital. “It’s a structural shift we’re seeing on the investing side, from Asian central banks right down to individual investors buying ingots and coins.”
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At the airport in Zurich, where there are special vaults to hold gold, shipments of jewelry arrive daily on early morning flights before making their way here via a twisty, three-hour journey through the mountains on tightly guarded trucks. After the jewelry is unloaded, gold ingots, bars and other forms of bullion — already stacked like cordwood along the sooty corridors of Argor-Heraeus — are sent back to Zurich in the same trucks.

“The truck never drives back empty,” said Mr. Oberli. “Time is so important because the value of the material is so high.”
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Gold has been around as an investment for 6,000 years,” Mr. Oberli said. “When there is no alternative, it’s there.”

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