Not much changed

During my absence in December the dollar index hovered near 80, the Stock Market rallied further and gold languished.

One thing did change though. Weiss research has done away with its model portfolio and promises to build a better one this coming year. At bargain prices to us too. We also get a new rationale for why gold is going to 5,000: wars. What happened to the idea that the Euro will self-destruct? Forgotten.

The latest IMF scheme.

In its October Fiscal Monitor Report, the International Monetary Fund (IMF) has quietly set the stage for what could eventually be a European, or perhaps even worldwide, "Supertax."

Think I'm kidding?

Here's what they had to say:

"The sharp deterioration of the public finances in many countries has revived interest in a 'capital levy' - a one-off tax on private wealth - as an exceptional measure to restore debt sustainability [emphasis added]. The appeal is that such a tax, if it is implemented before avoidance is possible and there is a belief that it will never be repeated, does not distort behavior (and may be seen by some as fair)."

The report goes on:

"The conditions for success are strong, but also need to be weighed against the risks of the alternatives, which include repudiating public debt or inflating it away."

Translation: We think we could pull this off, but we need to consider the alternatives: debt default, or inflation/hyperinflation.

Clearly, they're not going to go for debt default, as it would lead to a depression. No central banker in power today would ever get the leeway to try that. Besides, the 1930s were not much fun. Come to think of it, neither were the early 1940s.
Nor are they convinced that the current attempt - inflation through mega-printing as the path of least resistance - is going to work. But that certainly hasn't stopped them from trying harder and harder, especially Japan.

So like any good central planner, they've been hatching a backup plan - one that involves taking a serious chunk of your hard-earned assets.
Will this happen here? I honestly don't know

Austerity is coming and soon.

Curtailing government spending may become a necessity in the US as government tax receipts slow, yet government expenditures rise.

 

This tendency is also apparent in Europe:

 

 

 

 

 

Clearly, the income and spending ratios can no longer to sustained.

The cost of Obama's green power push.

Dina Cappiello and Matt AQpuzzo wrote a story entitled "The secret, dirty cost of Obama's green power push." It is a story carried by AP, but I saw it on BARCHART. It is another disaster story of the Obama regime's making.

The addition of ethanol to gasoline was supposed to reduce carbon dioxide emissions, supposedly to combat the phantom "global warming." As is common with most programs pushed by Progressives, it made matters worse. Experts who warned about the harmful effects of increasing ethanol production from corn were silenced. The Progressives plowed ahead. Five million acres of conservation land were plowed, resulting in increased soil erosion, loss of wild life habitat and increased run off into the Gulf of Mexico, where organic effluents kill the fish. Just as wind mills kill eagles in the West, the cost of "green" power must be measured in all its disasters. As with ObamaCare, Obama and his cohorts knew of the coming disasters but they lied about it.

Meanwhile, a golden opportunity to produce safe, cheap and clean power was once again scuttled. Thorium cycle power plants can not be used to produce fissionable material, recycle their waste and shut down automatically and safely if coolant power is interrupted. It is not important to combat carbon dioxide, but should we ever have to, thorium-cycle atomic power plants produce very little carbon dioxide.

The damage caused by this regime grows higher every day.

If Iran goes nuclear.

Iran is chugging toward building nuclear weapons. And the Ayatollahs leave little room to doubt that their intentions are: to destroy 1. Israel and 2. the United States, using those weapons.

It is interesting to note how various governments react to this. The Russians (for some unfathomable reason that is not apparent to anyone) sort of support the idea. The Obama regime does what you would expect the regime to do: lie to the American people and root for Iran to succeed (to placate the anti-Semitic Left) and try to persuade Iran via sanctions (to placate the Jewish Left).

Israel blusters that it won't permit Iran to obtain nukes and will act unilaterally, but so far it is just talk.

What is more interesting in a macabre way is the position of Saudi Arabia. It is reported that the Saudis have an agreement with Pakistan to obtain missiles and nukes if Iran gets the bomb:

http://www.bbc.co.uk/news/world-middle-east-24823846

For the Saudis, the drive for the bomb is but an extension of the Shia-Sunni rivalry and animosity. While for Westerners it is difficult to understand the depth of animosity based on differences in religion that to us appear minor, the religious wars between Catholics and Protestants in the Middle ages were just as unfathomable to outsiders.

 The Obama regime appears as incompetent fixing the situation in the Middle East, as it is incompetent in fixing ObamaCare.

Why the FED can not taper.

Some people believe that the "taper talk" from the FED is designed to add to the downward pressure on gold prices. That in reality, we are in a recession and that reducing the stimulus by the FED would put us into a Depression. Here is a short explanation of why this is so:

"

Uncooking The Books – 3Q GDP DECREASED $58.4 Billion

November 7, 2013 by Karl Demminger           
   

                                                 
That’s the real headline, by the way.
But what you have from the BEA is this:

Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 2.8 percent in the third quarter of 2013 (that is, from the second quarter to the third quarter), according to the “advance” estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 2.5 percent.

Nope.
And here’s why not.

The Fed is “creating” $85 billion a month in “QE”, injecting it into the economy.  These funds are immediately spent and thus “count” in GDP (all goods and services sold, remember?)

So the actual amount of economic activity for which trade occurs must have the QE amount subtracted back out.
The BEA’s GDP tables tell us that the gross change in GDP from 2Q -> 3Q was $196.6 billion.  But the Fed’s QE program injected $255 billion, so in fact the economy shrank during the 3rd quarter.
When people tell you that they believe the economy is in a recession, as a recent survey said was commonly believed – they’re right.
- See more at: http://www.libertynews.com/2013/11/uncooking-the-books-3q-gdp-decreased-58-4-billion/#sthash.huSEoh0o.dpuf

Richard Russell: financial system destroyed.

1. Really? What does he mean?

a. Russell cites the lack of effect of QE. He believes that the FED under Janet Yellen will increase QE to stop deflation. The biggest effect of this will be on stock prices which will take off in a third and speculative wave.

b. Larry Edelson forecasts the same thing but he puts a number to his forecast: DOW 32,000.

c. Russel also notes that gold and silver are acting as if they were forming the bottom. (Lower lows. Any drop below 1,300 is greeted with massive buy orders of physical gold).

2. What are the expected consequences?

a. Russell believes that China is accumulating gold to have the Yuan become the world's reserve currency. He even reminds us that he who has the gold makes the rules.

b. I believe this will happen, because the rest of the world will not accept the idea that America live off of cheapening the value of their earnings. This will bring on financial collapse of the US. We will not be able to service our debt if the world cuts up our credit card.

c. The Obama regime counts the days until the collapse comes and it can establish a Marxist dictatorship. Ever wonder why Homeland Security has bought a billion bullets and now wants a quarter million pepper sprays?

Puerto Rico; the next domino.

From Bob Adelman
It is tempting to compare Puerto Rico to Detroit, but the headwinds facing Puerto Rico makes Detroit’s problems seem almost not worth mentioning. Detroit’s bankruptcy filing in July was for $18 billion. Puerto Rico’s debt is nearly four times larger.
A partial listing of those headwinds include:
• Moody’s downgrade of PR debt on October 3 to just above junk, with its outlook changed from stable to negative;
• The recent settlement by UBS bank’s Puerto Rican branch with the Securities and Exchange Commission over hiding the country’s faltering financial condition and artificially supporting bond prices;
• The necessity by Puerto Rico treasury officials to borrow in the private market because the bond market is essentially closed to them;
• The U.S.-enforced minimum wage in Puerto Rico, which makes it too expensive for business owners to hire workers, impacting the island’s already high unemployment rate — a rate that is nearly twice that in the United States;
• National debt that is greater than any American state, except California (population of 38 million) and New York (population of 20 million) — Puerto Rico has a population of just 3.6 million;
• A ratio of debt to personal income (which in the United States averages 3.4 percent) is an eye-popping 89 percent;
• A labor force participation rate of just 41 percent, compared to 63 percent in the United States;
• The sharp increase in income taxes by President Alejandro Padilla in his attempt to balance the government’s budget by 2016;
• Overly generous welfare and disability income programs, which discourage employment and encourage dependency;
• Bloated government, where one in five workers are employed by the government;
• The country’s pension plan, which is only 7 percent funded;
• The government’s cash flow, which has been negative for the past 13 years, and
• Its 2012 Comprehensive Annual Financial Statement, due months ago, has yet to be filed.
As a territory of the United States (more accurately, the relationship between the United States and Puerto Rico is that of a suzerainty), Puerto Rico therefore suffers from the welfare state mentality of its northern neighbor. The country has subsisted on handouts, special incentives (such as a tax code that, until 2006, allowed U.S. corporations with offices in Puerto Rico to send their earnings to their parent without paying corporate income tax), and triple tax exemptions that allowed the government to continue to borrow at artificially attractive rates from American investors who assumed that their investments were safe. For those investors it was the best of all worlds: In a low interest-rate environment, they were able to generate excellent real rates of return without risk to their capital.
Until now.
Most of Puerto Rico’s borrowings have been absorbed by municipal bond funds run by big names such as Franklin, Fidelity, and Oppenheimer. According to MorningStar, the mutual fund tracking service, 180 mutual funds in the United States hold at least five percent of their portfolios in PR municipal bonds. Some of them, such as the Franklin Double Tax-Free Income fund, has a 60 percent exposure to Puerto Rico and has seen its value drop a harrowing 15.7 percent in just the last five months. In other words, investors in that fund have seen their capital shrink by three percent per month just since May, losing one-sixth of their initial investment.
One mutual fund manager, affiliated with UBS bank, has seen its two primary Puerto Rico funds — the UBS Puerto Rico Tax-Free Target Maturity Fund and the UBS Puerto Rico Tax-Free Target Maturity Fund II — lose an astounding 88.9 percent and 83.5 percent of their value, respectively.
The impact on borrowing costs ripple out far beyond that of a small island in the Caribbean. It is estimated that the entire municipal bond market in the United States exceeds $4 trillion. If the situation in Puerto Rico continues to unravel, interest rates are likely to rise significantly across the board, raising borrowing costs for every municipality from Dubuque to Portland.
This is the end game of government interference, subsidies, wage laws, special incentives — the end game, in other words, of the welfare state itself. In a microcosm, Puerto Rico is not Detroit, or Greece, or Spain. It is the United States itself.

Puerto Rico, Detroit and California share some traits that do matter: 1. a large minority population prone to  elect Leftists (i.e. Democrats) and 2. State interference in economics.

The coming default of the LBMA.

1. How gold price is suppressed.

In several posts, I have discussed HOW the bouillon market was being manipulated and why. Basically, an avalanche of SALE orders submitted in quiet trading hours, that's how.

2. I have also posted various people's conjectures as to WHY. Basically, to keep gold going down and thus camouflage the real (price) inflation that is occurring because of the monetary inflation.

3. The cost of manipulating the gold price.

Have you heard about the GOLDEN RULE? The rule says HE WHO HAS THE GOLD, MAKES THE RULES. And the reason why nations hold gold is to guarantee to their trading partners that their currency is backed by something solid - something that has been regarded as of universal value for ages.

So where is our gold?

a) There is the anecdotal evidence of the soldier who asked for live ammo while guarding Fort Knox. His Sergeant told him to forget it, THERE WAS NOTHING TO GUARD.

b) Then there is the strange refusal of the FED to audit the amount of gold in its vaults. Would you trust a bank that refused to audit its holdings?

c) Germany is supposed to have 2,400 tons of gold, of which 2/3 is in the US. Germany has asked for its gold. The fed is willing to return 300 tons in 10 years. Let's remember that after WWII the US had 24,000 tons of gold. By the time of Pres Nixon, this had decreased to 12,000 tons. The last figure we had was 8,000 tons. It should be easy to return 2/3 of 2,400 (1,600 tons) right away. But it is not being done.

d) There is other evidence that the suppression of the gold price required the use of Western gold:

1) Sweden has 120 tons of gold. On paper at least. The Swedes admit that 88% of that gold is not at home and much of it has been 'traded.'

2) Finland has 96% of its gold out of the country and admits that 1/2 has been traded.

3) France and Austria admit that their gold has been traded.

What does this all add up to? What this means that a lot of the gold the West claims it has been sold and is no longer in the possession of the LBMA (London Bouillon Bank Association). As the actual value of the US Dollar decreases, these countries will demand their gold back. But, some people calculate that there are 100 claims for every ounce of gold in the possession of Western banks. And if the LBMA is required to turn over gold, it won't be able to do so. And that is the definition of default.

Here is the latest on the US Dollar. A timely intervention drove it up - for now. The drop in value of the USD continued. Will it go lower?

The 80 year cycle in the US.

If you followed Larry Edelson's writings, you are aware of his cycles. The claim is that the price of commodities and stocks follow a cycle (which look like sine waves) and thus become somewhat predictable. Thus, Larry has predicted that unless the price of gold hit around 1,050 and AT THE RIGHT TIME, gold would not rally. This is sheer nonsense, of course, because the FED controls the gold price (via banks) so gold will go up when the FED loses control.

There is another cycle, however, which is about 80 years long. Here is a representation of it by Nick Hodge:

The cycles began in the 1780s. The next one was in 1860 then the 1940 and the current cycle is ending in the 2010's.

So, we are going through a crisis now. Hodge's prediction is that once we are over the crisis, America will come back and establish incredible well-being and progress. I hope he is right. But, before a national awakening can take place, the Country has to overcome the effects of currency failure, a National Debt that is beyond repairment, a Professoriate that is insane (Liberal-Socialist) intent on destroying the foundations of the Country and the many social programs that render progress through capital investment possible.

U. S. Banks: here we go again.

Beside the slowing in manufacturing, the US faces a serious deterioration in the health of its biggest banks. Wells Fargo's mortgage initiation dropped from 112B to 80B in the latest quarter. Bank of America has suffered a $1B drop in its consumer (mortgage) credits and had to lay off 9,000 workers.

Net Interest Margins (the difference between what the bank is charged and what the bank charges for lending) has gone from 4.1% to 3.3%. I know this does not sound all that much, but even the 4.1% margin was near cost of overhead.

Worst of all, the six biggest banks have litigation costs of $100B and growing. Expect bailout talks to begin.

Hyperinflation in upper and middle regions.

We have to give credit to the FED for how it is preventing inflation at the general population level. If you are a wage earner at the mid to lower end of the scale, your wages are stagnant, your taxes are increasing and you do not have a lot of leeway in making ends meet. As long as you refrain from eating meat, you can survive.

For now the FED is buying up Treasuries, keeping gold prices low and having the banks maintain a large reserve. In addition, stock prices are skyrocketing (soaking up a lot of extra currency). Has the FED figured out how to live off printing money?

Not really. Other nations are getting restless as the FED is inflating its holdings. What the FED is doing is trading in the future for propping up the present. If printing money would be a good way to increase a nation's wealth, Zimbabwe would be a rich country.

In fact, the country has entered hyperinflation. So far, this hyperinflation is showing in stock prices and the art works. Prices for the latter have increased over 100% in a year. So, the wealthy are scrambling to protect themselves against a depreciating currency.

There is an ominous undertone to Homeland Security buying ammunition by the ton. They are preparing for the population taking to the street.

Chaos now ready to explode?

Asks one of the posters on KWN.

On the other hand, Larry declares that since gold did not hit on his magic line, it will now be at least till January (after telling us that he did not see how the correction could go into the New Year) till it can drop enough to hit a new low on his squiggles.

Larry also predicted that the US Dollar would rally (and had his subscribers buy UUP, the UP $). Why? Because as the Euro imploded, European  capital would flow into the Dollar and gold.

None of these things have happened. Why? I tell you. I don't know. I suspect that the colossal amount of money printed has overwhelmed normal market forces. WE KNOW that the FED is buying Treasuries, so interest rates stay low - for now. As long as the phony money is accepted as real, the FED will get away with it.

I guess that the big question concerns what the Chinese and the Japanese will do with their hoard of T bills. Will the Chinese carry out the "de-Americanization" they talked about in Xinhua? If they do, the Dollar might be toast and collapse is just around the corner.We have seen the US Dollar tank lately and so the question is; More to come?

End game in progress.

Yahoo News finally published the news we knew for months: China is pushing to make its currency the world's reserve currency.

What does that mean for the US? Well, for one, the international community will no longer accept US Dollars to clear trade accounts. The US Dollar will rapidly lose its value as the FED has to print more and more to pay for the deficit. Prices will skyrocket along with interest rates. The Day of Reckoning is now very near.

The effect of automation.

The Technology Investor has studied the effect of automation and productivity.

First, China's demographic points to a shrinking pool of labor."The effects of demographics on the supply and therefore the cost of labor, the Chinese government has set a target of 13% for annual increases in the minimum wage through 2015. All this suggests that year-over-year increases in China's hourly manufacturing labor costs will continue to be at least as high as the roughly 15% average experienced over the 10-year period of 2003-2012.

Already, export customers are beginning to take notice of the detrimental effects of wage inflation on the cost of Chinese products. What to do? Well, if history is any guide, Chinese manufacturers will automate.

Using robot density (industrial robots in use per 10,000 manufacturing employees) as a proxy for overall industrial automation, we can see in the table below that once Japan, Korea, and Taiwan achieved baseline densities of 5 to 10 (similar to China's current density of 7), compounded annual growth was a torrid 26% to 45% for the next 5 years, and 20% to 33% for the next 10 years.

Productivity then will increase. It is a matter of creating new occupations.

Gold and the end game.

William Kay tells us that there is no question but that we are in the 'end game.'

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/10/15_There_Is_No_Question_That_We_Are_Now_In_The_End_Game.html

What is precisely the end game?

The nearest definition  I can give is this: the economic end game is a sum of events (processes) that occurs as market forces reassert themselves and the US Dollar is de-throned as a reserve currency.

The events that are included are: 1. the rise in interest rates on T-bills and in general; 2. the rise in price inflation; 3. the end of the US Dollar as a reserve currency and 4. the rise in gold and silver prices.

While, it is relatively easy to see what will comprise the end game, the resultant consequences are more difficult to see. First, because there are quite a few players and forces involved and second, because the relationship between the various factors is complicated and not necessarily subject to simple equations (though some are). Thus, forecasting the consequences of the 'end game' is more like focusing light on the hills that protrude from the forests below.

Key to understanding the end game is that it is about financials and money. Another important point is that it is a loser game. No nation has ever pulled itself out of a slump by printing more money. Thus, some of the consequences are as clear as they are unavoidable. It is the timing that is an issue. In fact, we need to view the FED's latest action as something that happens in the end game. The FED is telling the banks to cease and desist from buying commodities, which is not aimed at stopping the banks from buying oil or aluminum, but to stop buying gold and silver.  I have discussed why the FED wants to keep gold and silver prices low (it allows the illusion of low inflation and low interest rates) and how the rising interest rates will increase the deficit. An increase in the gold price will weaken the Dollar, increase interest rates and the deficit will skyrocket, which in turn will necessitate more printing, which will increase inflation and ...Once we get into the self-reinforcing and vicious circle, there is no way out until the currency is destroyed..

The graphic shows how the Roman Empire destroyed its currency vs the destruction of the US Dollar:

 The trend is reinforced by the drop in foreigners buying Treasuries;

How does the govt explain this?

Will manufacturing disappear?

That is the question that one asks after reading Mr Cho's article:

http://seekingalpha.com/article/1738042-my-80-year-prediction-on-3d-printing-and-robotics?source=email_the_daily_dispatch&ifp=0

Cho's prediction can be summarized as such: Parts will be manufactured increasingly by 3D printers and put together by robots. Thus, there will be less and less need for low-skilled workers. Cho's prescription? To get better education.

Apart from the fact that education delivers less for more cost, not everyone is capable of absorbing higher education, let alone gain a skill for employment. Inasmuch as our universities specialize in Sex, Drugs and Subversion, it is highly questionable that universities impart useful skills.

It is much more likely that we will see a strong resurgence of the Luddite movement. We already have examples: the anti genetic modification of plants, the "organic food" movement (which is inferior product at higher prices) and the 'lower your standards' (hippy) movement championed by the followers of Gov Jerry(Moonbeam) Brown.

I am not unsympathetic to the Luddites. To find out that not only your skills, but you, yourself are no longer employable is a horrific thing. No doubt that our Marxist Party (the Democrats) will insist that people be put to work on building infrastructure. Unfortunately, there is no longer money to provide for govt subsidies for people. That fatted calf had been killed and eaten already.

What is the solution then?

Historically, when the cost of manufacturing drops, living standards improve and all sorts of new jobs spring up, along with new occupations. It will not be smooth, but if the govt will provide the "fix," it will be bloody difficult.

In the meantime, 3D printer stocks are expensive, with a P/E of over 100.

Gold and its role in the end game.

We have a number of financial developments going on.

1. First and foremost is the drive by China to become a superpower financially and militarily. They are aided in this quest by the West that is selling them the gold at low prices.

2. The whole world is printing money and the West is the worst culprit. This should have driven up inflation. But it didn't. Why not?

3. The FED discovered that the endgame can be postponed (though not avoided eventually) by artificially keeping the Dollar up. And the Dollar's value is kept up by periodically crashing the Gold Market. There have been at least five TAKEDOWNS when a large amount of sell orders come in within just a few minutes. The SELL orders are referred to as paper gold. It is highly leveraged and is basically paper money.

4. The PAPER GOLD MARKET is ten times the size of the METAL GOLD MARKET. Accounts are squared by paying off paper trades, though not all trades can be squared. Some gold must be fed in to keep the scam going and that gold goes to the East. The latest report is that 250 tons of gold passed through Shanghai in a month which is many times what these numbers used to be.

5. Then there is the question of "where is the gold?" At the end of WWII the US had 24,000 tons of gold. Now we are said to have 8,000 tons left. Where did it go? There is no AUDIT, no accounting. Is the gold at Fort Knox real, or merely tungsten covered with gold? Germany is waiting to have its gold returned to her. It might be a long wait.

6. What will the end game be like? It will start in earnest when the FED loses control of the Gold Market, the Dollar will plunge and inflation will take off.

7. We have seen this play out in the Weimar Republic.

No default looms.

Jack Lew and all the Liberals are telling Republicans that if they do not raise the debt ceiling the Country will default on its payments.

The Liberals are peddling a lie.

The taxes rolling into the Treasury far exceed the amount of money that must be paid to retire some Treasuries coming due and the interest on the debt. Just as with the shutdown, default will only happen if Obama and the Democrats engineer it.

GM subprime loans: here we go again.

The Washington Free Beacon reports that GM is in desperate straights again. First, it tries to maintain its market share by issuing subprime loans then bundling them and selling them as Asset Secured Securities. Ninety six percent of GM  loans are subpar, i.e. made to customers with credit rating of 660 or below.

Will the US Dollar be destroyed?

It is difficult to be a Stock Market Pundit nowadays. I do not consider myself such, but I am talking about Larry. The poor sap thinks that commodities and stocks are traded freely and that there is no manipulation of the Markets. That's why he keeps missing with his predictions. Like the one about the US Dollar.

According to Larry, the US Dollar will skyrocket as the Euro craters. Except that the Euro is not cratering, thanks to the efforts of the ECB to prop it up. And neither is the US Dollar skyrocketing. So, do I think that the FED is doing a good job holding the Dollar steady? Definitely NOT. What the FED is doing is manipulating the price of gold and the value of the Dollar. It is objectionable because the very act of manipulation puts the Dollar at risk.

And here comes the story of the Chinese warning us about our finances. They hold $1.3T in Treasuries and if they dump them...But, the Market does not worry. After all the POTUS has told us that if the Republicans fund ObamaCare and raise the debt limit then he will negotiate. It isn't clear just what they will negotiate.

Poker End Game, JP Morgan, FED, US Treasury, China and Gold.

This is the title of a post by Robert Fitzwilson on KWN. Fitzwilson strings together a lot of facts and considers a theory. He sounds surprisingly like me.

Fitzwilson starts with the fact that JP Morgan is heavily engaged in trading precious metal and its derivatives. JP Morgan maintains that it does not trade for itself, but for clients. What clients?

Fitzwilson proposes that the clients of JP Morgan are the FED and China. Here are their deduced motivations:

1. China wants the Yuan to become the world's reserve currency and acquire the privileges that go along with that status.

2.  In order to have the Yuan become the reserve currency, China needs 10,000 tons of gold as backing.

3. China owns $1.4T worth of US Treasuries and also US Dollars.

4. China is allowed to trade paper gold sales, while buying physical gold and methodically emptying COMEX vaults of gold. At the same time, China is compensated for the drop in the Dollar. The US Census Bureau's Foreign Trade Division has acknowledged a shipment of $1B worth of gold bouillon to China this year.

5. Why do the Chinese agreed to this deal? For sure it is in their advantage to buy gold cheap and pocket the proceeds of the naked shorts. Chinese law allows the repudiation of contracts that were based on fraudulent premises.

6. Why does the FED go along with this? The Chinese apparently agreed to keep and not dump their Treasury notes and US Dollars. This allows the FED to maintain the value of the Dollar and keep interest rates low. The FED bought time to resurrect the US economy.

7. How long will this go on? As long as the Chinese can expect to syphon away more gold. The report is that it won't be long before China concludes that it is not in their interest to continue.

The Stock Market signals a disaster brewing. It is shown by the "megaphone formation" shown below:

 

The formation forecasts the DOW to reach 16,500 then plunge to 6,000. This goes along with the political situation. We are led by a President who was raised in Indonesia and who considered himself a foreign student (his transcripts are sealed and hidden). His chief advisor is Valerie Jarret whose origin is Iran.

In Spain: Still raining trouble.

Spain is still hemorrhaging from its deficit. Govt forecasts this year's deficit to be 243B Euros, falling slightly to 215-239B next year. If all goes well and there is a recovery. So, the national debt of Spain is expected to rise to 99.8% of GDP. Following the intervention of the ECB, Spanish interest paid on 10 yr bonds has fallen all the way to 4.36%.

Italian govt falls, economy sputters.

Italy's coalition government has unraveled with the resignation of 5 Ministers from Berlusconi's Party. The immediate cause was the attempt to expel Berlusconi, because of his tax conviction.

The country's economic problems flared again: July's economic numbers came in as  a drop of 1.1% instead of the expected increase of 0.3%. The government planned "reforms" (read tax increases and increased spending) and the Center Right rebelled. What reforms? Sales tax was about to go from 20% to 21%.

Italy's borrowing costs are rising again as 10 year notes increased yield from 2.4% to 2.7%, in spite of ECB guarantees. Ironically, Spanish conditions improved, even if only marginally.

Europe's economy is not improving much as shown by a drop in inflation, which is reported as 1.1%.

Yes Virginia, the PM Markets ARE being manipulated.

There is an interesting article on KWN about the US Government admission that the PM Markets are being manipulated. The reference is contained in an article entitled: "The Shocking Truth About Secret Documents and the CFTC.

In 2001 Reg Howe had sued the BIS, the FED, the US Treasury and JP Morgan for manipulating the Gold Market. The Author states:

 

 

"I bumped into the Exchange Stabilization Fund and JP Morgan back in 2001, when we were underwriting Reg Howe’s lawsuit against the Bank for International Settlements, the Fed, the US Treasury, JP Morgan, and other bullion banks.  Reg was charging them with gold market manipulation.

In one hearing I attended in US District Court in Boston, an assistant US attorney got up, speaking on behalf of the US government, and he said that the US government under the Exchange Stabilization Fund Statute, the Gold Reserve Act of 1934, had precisely the power to interfere with the pricing of gold that the lawsuit complained of -- that is, a US government lawyer declared in open court, in 2001, that rigging the gold market as government policy is totally authorized by law.

You will find the US Treasury Department quoting the Gold Reserve Act as saying the Exchange Stabilization Fund can intervene, as I said previously, not only in the gold market, but in any financial market.  This intervention power is essentially an economic declaration of war against every other nation in the world."

 

I have stopped doing TA on gold prices because it is manipulated by the US Government. Larry Edelson's insistence that the prices are not manipulated is the source of the many errors he recently committed in giving bad forecasts.

 

What is wrong with the manipulations? Plenty. The FED essentially risks the financial stability of the world to keep PM prices down. And in the effort, it is transferring gold to China and other countries.

 

 

 

The clueless GOP leadership.

The kerfuffle over the CR from the House defunding ObamaCare is a one of the best examples of what is wrong with the GOP Leadership:

1.  they listen o the Media;
2. they listen to the Democrats;
3. they do not have the intellectual smarts to analyze the arguments.

GOP Senators were told by the Media and Democrats that elections have consequences and the GOP lost the last election.

Really? It is not more complicated than that? Do not the Republicans have the right to filibuster Reid's attempt to strip the defunding from the CR? Yes they do. They missed their opportunity to do so, even though they ran on the platform to defeat ObamaCare.

True that the GOP does not control the Senate, but they control the House. Does not the same argument hold for the House that whoever controls the Legislature gets to write the Bills? There were elections for House seats as well and the Republicans had won that! Of course, the Media and the Dems argue that the House should give in and allow ObamaCare to go forward.

Republican Senators excuse themselves that they will put up a fight when it comes to the debt ceiling. How? The debt ceiling can also involve the threat of govt shutdown and as soon as O'Bungle threatens a govt shutdown, the Republicans will fold like a cheap suit and agree to phantom cuts like they did the last time.

O'Bungle argues that the Repubs want to stop his socialized medicine scheme because they are afraid that people will come to like it. But that is not what is planned. What O'Bungle plans is to destroy our health care system and replace it with the socialized medicine. That way people have two choices: 1. accept the inferior system or 2. have no medical care at all. This is not rhetoric, O'Bungle admitted that his goal is to set up a "Single Payer" system - socialized medicine run by the government. And kill off opponents by the "death panels" that are most assuredly part of ObamaCare.

Is Fort Knox empty?

asks one of my advisory newsletters. The question arises because:

1. There has been no audit of Fort Knox since 1974;
2. Attempts to secure an audit are rebuffed or answered by a list of what is supposed to be there;
3. The US shipped $1B worth of gold this year to somewhere in S Africa; Coal to White Castle?
4. The rumor is that US gold is shipped to China as collateral for Treasuries and the weak Dollar.

Hundreds of tons of gold were used in the schemes to suppress the gold price. Where from?

Why the manipulation of PM prices is objectionable.

Some of us object to the manipulation of gold and silver prices, because they are illegal and pose a great danger to the financial wellbeing of the US and the West.

1. First of all, the manipulation is illegal. It is fraud and theft. The COMEX is rife with the sale of PM options where the options do not represent actual gold or silver. This is naked shorting which is prohibited. Regulatory agencies have ample evidence provided by whistleblowers, but sit and do nothing. The perps (both the naked short sellers and the regulators that ignore their crimes) should be brought to justice.

2. The suppression of PM prices result in gold and silver being transferred to China at below production costs. When a new global financial order will be restored, America will suffer.

Nancy Pelosi uncorks another one.

Someday someone is going to collect the [idiotic] sayings of Nancy Pelosi. Like the one about 'having to pass the ObamaCare bill to find out what was in it.' Or the one about how 'unemployment checks grow the economy.' Not to fret folks. Just because she is no longer Speaker, it does not mean that she will no longer make idiotic statements. Like the one about Obama being NONPARTISAN and APOLITICAL. You have to wonder, even for a Democrat from California...

Is the Pope Catholic?

That used to be the saying when someone questioned the validity of something overwhelmingly obvious. The current Pope (Francis) may make that saying join the one about "sound as the Dollar." By urging us that we should make homosexuality and abortion acceptable, Pope Francis had knocked two of the fundamental Catholic teachings out of the way. The third one (about Socialism) has already been abandoned by the Catholic Church. On his way to Jerusalem to be crucified, Jesus sanctified the legitimacy of the profit motive and the principle of investing in His parables about the Talents (the Talent was worth 60K denarius -one day's wages) and the Minas (one Mina = 20 Denarius). He established the moral legitimacy of Capitalism.

California: Blue-footed Boobie sighted.

The Boobie has a reputation of being stupid. It is unafraid of people and has some pretty bizarre behavior on land. But, it is a great flier and is not handicapped by its blue feet.

I propose to make the Boobie our national bird - short of that, make it the State bird of California. Gov Jerry (Moonbeam) Brown, like Obama, excels while doing high-flying rhetoric, but on land they have trouble. Californians are excited about the visit of some Blue-footed Boobies, but ignore the one in their State house.

Is it appropriate to compare the Liar in Chief to a Boobie bird? Certainly. Mr Obama declared that "Raising the Debt Ceiling Does Not Increase Our Debt."

Larry: Trapped in hubris.

Larry's latest prognostication came out a couple of days ago. These are his proclamations:

1. The gold price is yet to hit bottom. Why? Because according to his calculations, it should have hit 1150 and instead it hit only 1178.

2. According to his cycle diagrams, the minimum will occur either on Oct 2,3 (if it goes below 1150), or Jan first days.

3. He now tells us the "I'm convinced" number is 1605.50 , instead of the previously ballyhooed 1422 -
this is the number where he is convinced that
gold is back in the Bull Market.

Let's look at the flaws in his arguments.

1. It is stupid hubris to think that one can determine precisely the number of the low in the Market.

2. The gold price exceeded the previous "I'm convinced" number set by Larry at 1422. He now acts as if that did not happen.

3. Note that Larry's cycle prediction numbers are out of phase with the actual gold price:

Let us now look at the actual gold price:

What the graph shows us is a reverse head and shoulders formation. This graph predicts a rapid rise to 1600 just around the corner.

Now, I have no faith in TA vs gold because of the wide-spread manipulation. (See articles on the subject at KWN). But, if the patterns indicate something, it is the coming increase in gold prices.

Lots of news!!

1. Draghi says EU recovery is in its infancy. Yeah, like it is a zygote.

2. Janet Yellen becomes leading candidate for FED job, because Summers bows out. She is a former University of California (Berkeley) Professor, which means she is a Leftist. You think Summers bowed out because he did not want a confrontation in the Senate? Who would confront him? The Republicans led by McCain? Or, Senator McMumbles? Summers bowed out because he was told to. Yellen is the choice of Obama, because she wants to enlarge the money printing.

3. Two competing forces are acting on the Stock Market now: a) the expected tapering and b) the anticipation of higher inflation under Yellen.

4. Two JP Morgan Traders admit that their bank is manipulating the precious metal markets. Like are we surprised?

5. Bouillon banks head for default. It is getting close to impossible to deliver the gold that is "sold" on the COMEX. So, two things are in the offing as the financial elites contemplate the mess they created: a) gold deliveries will stop and b) those who own paper gold will get cash. It will not even be called a default.

6. Holland is joining the economically troubled countries of Europe. Its deficit will go up next year.

Gold and econ: Here we go again.

Europe.

Do you recall reports a month ago that Europe's economic troubles were solved and that the EU was on the mend? The reports were not true. That talk was heard after reports that the EU's GDP was up 0.3% in QII. Probably another lie. The July figure was DOWN 1.5%. There was a significant drop in Germany, but Italy and France as well.

How about the recovery of the automobile industry of Europe? The recovery did not happen. The actual figures show that car manufacturing dropped 6.6% this year.

Greece! Remember? Unemployment in Greece is 27.9% and in the group below 25 years it is 58%.

The US.

We have a similar situation in the US. An anemic rise in the GDP of 1.7% was made into a 2.5% because of the drop in imports (due to less oil needed because of the increased oil production due to new technologies). Here, too, we get a report of a robust automotive industry. No doubt, that report will be revised.

Then we have a drop in initial unemployment applications. We know how this was achieved: two States did not report!

Talk of the FED phasing out bond buying is just that: talk. The US economy would be boosted if ObamaCare was defunded, but a lot of Republicans have no stomach for a fight.

GOLD.

That takes us back to gold. Central planners are pulling out all stops trying to reduce gold price once again. And it all goes to China How far can they drop gold prices this time? Hard to tell.  Gold is in backwardation again and  GLD is telling their customers that they can't have their gold. JP Morgan is "forecasting" once again that gold will go below $1,000/oz. So, they expect gold mines to operate at a loss or shut down. These are dangerous folks.                                                            

Is the economy really getting better?

GDP figures for QII have been revised from 1.7% to 2.5%. Vow! The Obama cheerleader squad of "Reporters" squeals in delight that O'Bungle's policies are beginning to bear fruit. Is that true?

If you look at the numbers, we find that wages have actually decreased and real personal consumption, nondurable goods and spending on services are virtually flat. So, how did thw Labor Department can conclude that GDP increased from 1.7% to 2.5%?

The increase in the GDP is due entirely to the decrease in imports. SPECIFICALLY, to the decrease in the imports of oil. Yes, the much-maligned oil industry. The use of hydraulic fracturing techniques (FRACKING) has reduced oil imports from 10.2 million barrels to 6.8 million barrels. That is why the GDP figures were revised.

O'Bungle lost little time in trying to take credit for the increased oil production - something that he strenuously opposed. He claims that oil production has increased because of federal research and increased permitting. Hogwash.

Here are the actions O'Bungle took to DECREASE the use of oil production:
1. Initiated a federal investigation into fracking, trying to intimidate the oil industry;
2. Sought to limit drilling via the EPA;
3. Sought to use the SEC to force oil companies to admit to liabilities due to 'global warming.'
4. Slowed the permitting process for the Gulf of Mexico;
5. Blocked permits for drilling on ALL federally owned lands;
6. And called for a special tax of $44B on oil companies.

Increased oil and natural gas production is taking place not because of but in spite of O'Bungle.

Gold: Capping operation in place.

The story I hear is that the powers that be (BIS, BOE and the FED and the Bouillon Banks) have given up on trying to bankrupt the precious metal miners, because it created a firestorm of demand. So, they now went back to the older strategy of capping the price of gold between 1,380 and 1,420.

How long will this hold?

Hard to tell, but the strategy has a weak Achilles heel: silver. While, the banks have stockpiled gold in their vaults, they have not stockpiled silver. So, expect the gold/silver ratio to narrow down from 62.

India's gold: the bankers' last hurrah.

We have been warned it is coming. There were negotiations between the Indian govt and ?(the BIS?) to rent India's 200 tons of gold to make one more stab at breaking the gold mining industry. As long as paper gold is regarded as real, gold prices can be dropped by selling options with the pretense that the gold will be actually delivered.

Parallel with the possible loaning of its gold, the Indian govt  has also raised taxes on gold purchases to 10% to discourage buying gold by Indians.

So, here we go again.

Syrian policy: A symphony of failure.

The "coalition of the willing" is shrinking by the hour. The British Parliament voted against participating and France has pulled in its horns and now wants "diplomacy;" meaning just talk. None of the Arab countries is willing. That leaves O'Bungle. And even he might bug out.

American intelligence sources are not sure that Assad's regime used chemical weapons Logic would tell us that it was the Al Qaeda-led rebels that may have pulled the stunt. Why? Because they are losing the "civil war." In reality, this is a war between the Shiite minority of Syria and the Sunni population, plus the Iranian "volunteers" and the Sunni contingents from outside of Syria.

The American President can order our military into action without the approval of Congress if our Country is attacked or our vital interests are threatened. If the Assad regime had indeed used chemical weapons it is reprehensible, but no justification to use our military force. The UN is unwilling to go on record to authorize an attack of Assad forces, neither does NATO or the Arab League.

The Market agrees with my last post that any action ordered by O'Bungle will be limited and meaningless.

Gold, silver, Syria and Miley

As gold is aiming at 1,450 and silver at 25, Larry Edelson has grown quiet and absent from my emails from Uncommon Wisdom. No doubt that the crying you hear is his subscribers who bought the leveraged ETF on silver going down. But, Larry is a good technician and once he digests the lesson, he will be back, pretending that all that did not happen and that he called the turns of the PM Market perfectly.

Gold and Silver are heading higher. Why? Because Central Banks are now long, they are buying gold and silver and whatever is left is hovered up by China. The miners have not done that well, because they were influenced by the Stock Markets getting clobbered. Why is that happening? It is attributed to jitters over war with Syria. I should write a satire about how the Obama regime changes its mind about Syria: starting with tough talk of bombing for weeks, then days until the final day when five cruise missiles are launched.

The Syrian fiasco epitomizes the price of incompetence. The Syrian "civil war" is really a struggle between  Iran-backed Shiites and Al Qaeda- backed "rebels." Kucinich, the Ohio Leftist refers to the Obama effort as "being Al Qaeda's air force." The Obama regime simply wants to take people's minds off its failures and appeal to Americans' patriotism to support the President during a war. IT IS NOT GOING TO WORK!

We see a resumption of the commodities super cycle as China resumes its march toward a consumer society and needs commodities besides gold and silver.

Another important factor that weighs in on PM prices is the looming selection of FED Chairman. Bernanke will make a wonderful scapegoat for why the economy is not recovering fast enough) and Geithner is rumored to be dark horse. His allure? He will promote inflation to reduce the importance of the National Debt. Bernanke engineered the takedown of gold, but that simply stimulated demand for gold and silver. awhen the damage done by this regime is done, experts expect gold to end at $10,000/oz and silver at $500/oz. We will see.

What about Miley Cyrus? She is not the first young entertainer who is fed into the maw of decadent entertainment. The Harry Potter main character performed in the nude once he finished with his role. The progressive mindset is getting weirder and more debased as time goes on.  Miley Cyrus is Michael Jackson two steps down the road to Hell.

What now Larry?

Larry has been rather schizophrenic lately. He admits that the mining stocks have risen (and even recommends some), but insists that gold will hit 1050 and silver about 15 before the bull market resumes. He gave himself an out though: he said he will change his mind if gold closes above 1445 and silver above 23.73.

Today was an up-day on the PM prices. Gold is almost at 1,400 and silver had closed above Larry's magic number and on a Weekly basis:

 

 

What say you now Larry?

The pulse of the world.

EUROPE is coming out of a nasty and protracted recession. QII growth in Europe was 0.3%, which is nothing spectacular, but better than shrinkage. True, Europe's banks are in bad shape, but it is not European money that is responsible for the rally in gold. Europe needs to write off $3T and if not done soon, the sum will increase. Liabilities of European banks are estimated as $30T, 6x GDP.

WAR fears are mounting world wide.

1. Egypt is heading for a civil war.

2. Israel must be close to unloading on Iran as Iranians are getting ready to start up 7000 more centrifuges, among them some new ones that are faster. Right now the centrifuges are concentrated in two areas, but if Iran acquires enough uranium for a half dozen bombs, that capability will be dispersed.

3. Syria continues with its civil war.

4. Japan, Taiwan and the Philippines have decided to build aircraft carriers to counter China's aggressive stand.

US economy uncertain. The Market anticipates a tapering to begin in September, where the FED will reduce its stimulus by $10-20B monthly. The Market responded and 10 year Treasuries had an interest rate hike from 1.4% to 2.8%. And gold took off.

PMs rally.

Silver miners lead the rally.

Larry still says that gold will hit between 1050 and 1110 before the rally is ON. He is correct to say that a bear market reversal requires a low to be tested. But, this is where ha makes his mistake. Gold had a double bottom in July and HE IGNORES THIS. Otherwise he was correct that the PM market would turn around in QII.

Let's sum up where Larry was wrong:

1. The gold market WAS being manipulated.

2. Gold and silver have broken out of their bear markets.

3. Stocks he selected for avoiding are doing fine.

Larry says he will change his mind if Silver closes above 23.73 on Friday and gold above 1445. Silver closed at 23.32 last Friday so its close. I expect a short pullback in silver, but it should resume its rally later this week.

But, why does the FED want digital money?

The FED wanting digital money is in line with the practices of the Federal Government, which is the establishment of an all-powerful Federal Government. To wit:

1. The govt NOW reads all our phone calls and claims that they do not need warrants to do so;

2. The govt also reads/stores our e-mails and claims it needs no warrants;

3. The IRS will be in charge of determining who gets what medical care;

4. The IRS is in charge of denying the regime's opponents the ability to raise money.

5. When the FED forces us into using digital money, the govt will know where and how we spend.


These are all steps in establishing a dictatorship.

WHY? Because the FED wants digital money.

There is a tremendous article that pierces the curtain around the manipulation of the LIBOR and the gold and silver markets:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/8/8_Default_Feared_-_Gold_%26_Silver_Paper_Claims_Hit_All-Time_Highs.html

The manipulators are literally risking the financial world, especially the gold stock of the Western world.

I have already posted on how the Bank of England has lost 20% of its gold hoard between February and June. This constant loss continues. How about COMEX? COMEX is also losing gold and may default on delivery. As we see in the Kings World News article, the number of claims on each ounce of gold has now reached 24 and for silver it is 26. Here is the amount of gold stored by the COMEX:

 

 

There are two kinds of gold accounts stored by COMEX: 1. Eligible stocks. These comprise 1000 oz silver bars and 100 oz gold bars. These are PM bars that meat the requirement of purity and authentication and are thus "eligible" to be stored at the warehouse. These bars belong to banks and other institutions and are not available to satisfy obligations such as paper options. Registered stocks have the same purity, but are available for delivery on paper accounts. Note that COMEX stocks of both kinds are dwindling.

Some people should pay a price...

1. The Treasury Bill Bubble.

QE III involves the purchase of $40B/month worth of Treasuries by the FED. Is this helping the economy? Not so much, but it has created a bubble in Treasuries and the bubble is being deflated as we watch. It is estimated that the FED has lost $195B on he 10y Treasuries it "owns" and this threatens its ability to defend the Dollar, since it has only a $60B to its credit. Of course it can print more money, but it sets up a vicious circle of inflation, increasing.

The Media is trying to keep this a secret, but word will get out. And those responsible will be held to account.

2. The squandering of Western gold.

The various schemes to suppress the gold price are not without cost. One became known recently due to the efforts of Alasdair McLeod. He noticed that the Bank of England reported a total of 500,000 gold bars on deposit (the BOE acts as a bank that deposits other people's gold) in February, whilst this decreased to 400,000 by the beginning of June. The difference (100K 400 oz gold bars) represents 1,300 tons of gold. Since, England owns only 300 tons, this means that 1,000 tons of gold is missing. Either that, or it has been loaned out not to the real owners. Since, the BOE reports these gold bars as 'not there' they may have been delivered to a second claimant. Just like the German gold. Germany owns 1,436 tons of gold, but the FED is unable to deliver.

These are crimes, folks! Somebody will have to pay dearly as the consequence.

How far can you trust Larry's calls?

Larry is at it again. This time he is setting the new low for gold at 1050 to 1070 but claims that the rally in gold can not resume until gold hits that low. He admits that the miners are now in rally mode, but has ten stocks to avoid, including FSM and GPL.

Let's review his recs.

1. He predicted that the Stock Market  would fall to 9,000. It did not and his followers incurred heavy losses from buying the bearish ETF.

2. He now says that he got his clients out of the gold stocks at the top. That is not how it happened. He told us that he became bearish on gold in the short term, but not in long term and mid term. He told his followers to stay with their positions, but buy the bearish gold ETFs as a hedge, which did not do so well and hit the sell point. Yes, he did tell us to sell all gold stocks, but by then those stocks were plummeting.

3. He has called for gold to hit a low at 1050, then at 1210 then at 1050 now. He says he is getting hate mail, but I think it is only criticism of him making calls that turn out to be wrong.

4. How about his admonition to avoid GPL and FSM?

Here is the course of the GDX. Larry admits that the miners started rallying.

We see the double bottom beginning about June 26 or so.

Here is GPL and FSM:

We can see that GPL is doing somewhat better than the miners. FSM had a double bottom in April with a retest of the low in May and is on a tear now.

 

 

The problem I have with Larry is that he is erratic and denies his mis calls, acting as if they never happened.

 

A Tale of two Cities

is the title of Dickens' novel of the French Revolution, as well as the title of FitzWilson's interview for KWN. Dickens was a critic of "conspicuous consumption," as contrasted to the plight of the French peasantry before the Revolution. FitzWilson's contrast has to do with the plight of Detroit as compared to Palo Alto and Facebook.

In fact, California itself offers a contrast of the haves and have nots: the conspicuous consumption of Hollywood and Silicon Valley  and the poverty of the inner regions of California, away from the Coast.

Drudge quotes an AP story that 4 out of 5 US adults face near poverty and no work. Even the surface wealth of the California Coast is shaky: 1) box office revenues for Hollywood are down by 19% and 2), Silicon Valley is propped up by the Stock Market bubble created by the FED.

The contrast between Detroit (Obamaville) and Palo Alto grows deeper, as ever larger parts of the Country fall victim to the chickens of Obama's economic policies coming home to roost.

1. Why do we have a "jobless recovery?" Because ObamaCare is forcing business to get rid of as many workers as possible and convert full timers to part timers.

2. Thus, the desire to look good in the profit column drives an unusual number of workers into unemployment.

3. Insurance premiums are driven sky high because of the mandates of ObamaCare.

4. The cost of an ever enlarging government shrinks the ability of private business to expand and hire more workers.

The French Revolution exacted a heavy price from the French aristocracy. Let us hope that our revolution takes place at the ballot box and exacts a heavy price from the ruling class.

Weiss sees war coming.

Here is how it is put:

"The good news: Iran won't nuke Israel.
The bad news: The war to stop it will be ugly.

Here is how [they] think events will unfold ...

• An Israeli strike on Iran nuclear facilities and missile development infrastructure will lead to ...

• Vicious air war over Syrian, Lebanese and Iraqi airspace, followed by ...

• An Israeli land invasion of Lebanon to neutralize Hezbollah’s rocket capacity, while  ...

• Iran tries to choke off oil exports through the Strait of Hormuz!

Then it will get even worse ...

• Egypt’s paramilitary Muslim Brotherhood will obstruct the flow of oil through the Suez Canal.

• The final blow: an Iranian missile strike on Saudi oil fields.

When all this happens — and it will — world markets will suffer the worst one-day loss since 9/11. Crude oil could skyrocket to as high as $200. I expect to see gold make daily jumps of $100 or more.

If U.S. carrier groups in the Arabian Sea come under fire, we could see $300 oil and $2,000 gold — or even more!"

Larry's contradictory calls.

Larry's newsletter for July reiterated his old call of 1050 to 1100 as the bottom of the gold price.  Furthermore, he predicts this to occur in September. Both of these calls contradict his recent calls for nibbling at the SPDR gold fund and some gold miners. Tomorrow Larry is to present a session on gold miners. Why do that unless he recommends a buy?

What is going on? I think he wrote the newsletter earlier and failed to make the proper corrections. An alternative explanation, that he plans to punish the $49/yr subscribers for not having upgraded to the $2,600/yr subscription is too sinister to contemplate.

What about the gold and silver miners? The GWS (an ETF that tracks the miners) has now had three up waves. Check out also THM, NAK, ISVLF (or IPT.V), GPL and FSM and they all show 20-50% gains.

Big banks rig electricity prices.

Banks Caught Manipulating Electricity Trading Now Face Billions in Fines
By Shah Gilani, Capital Wave Strategist

What haven't the Big Banks manipulated for trading profits, with taxpayers picking up any losses? First it was toxic derivatives, CDOs, CLOs and all that junk that led to government bailouts.

Now it's electricity trading. Shah Gilani shows that it's become the new Enron. The Big Banks manipulated the bids in the market, just like Enron. They got caught, paid big fines, but their profits still soared in the second quarter, with trading gains making up a big part of that.

Big Banks sure do know how to make big trading profits by rigging the game...

WHY? Greed of the Bankers.

http://pro.moneymappress.com/EDIGOLD1199MML/EEDIP736/?email=bszepesi%40peoplescom.net&a=8&o=3713&s=4377&u=2043775&l=104696&r=MC&g=0

Mike Ward of Money Morning has analyzed the takedown of the gold price in Money Morning. The reference to his article appears above.

This is NOT a CONSPIRACY theory. It is a description of criminal activity, just like the fixing of the LIBOR was. The financial media and regulators have failed to notice it yet, but $1.2T was pocketed by the criminals and an industry was damaged. When the litigation begins, there will be all sorts of them.

Is this the new BUY SIGNAL?

Larry Edelson in fact did give a buy signal. He recommended cautious buying of three gold miners. Which ones? Well, only those who pay the 2,600/yr to be part of the Traders group get to be told which ones.

Lt's see though what we can deduce from the data.

Gold has executed a double bottom, with the second bottom being higher than the first one. Couple this with the reported shortage of gold and silver metal and a case can be made that the bottom og the gold correction is IN.

The gold miner index (GDX) confirms: we had three up moves, each ending highere than the previous. Down moves in the upmoves are 1/3 or 2/3 of the upmove as you expect for the classical Fibonacci pattern.

The correction seems to be over.

How about the long term. Here we have to consult the amount of metal allegedly in US possession, vs the debt.

We see that reported gold in US vaults is down to 8,000 tons, while debt continues to accumulate.

WHY - the first answer.

A few posts ago, I have asked the question as to why a couple of big banks (FED, BIS(?)) with very deep pockets are trying to knock down the price of gold. This is my first answer to the question.

First off, let me rebut Larry Edelson's take on the Gold Market. Larry claims that the takedowns in the Gold Market were not orchestrated, but normal reactions to market mechanisms. I do want to approach this statement and rebut it, not because I do not respect Larry, but because I DO RESPECT him, his expertise and his opinions. There have been several takedowns in the Gold Market and a couple of the last three or four were clearly INTENTIONAL TAKEDOWNS. No self respecting trader will phone in a SALE  order to the Asian Markets of 500 tons of gold during the lightest trading, unless he WANTED THE PRICE OF GOLD TO DROP. And obviously, he would have very deep pockets. No one but the FED (and possibly the BIS) would have the motive and the deep pockets to conduct such suicidal trade.

So, what is the motive?

The FED is struggling to keep an arrogant and increasingly desperate Empire (run by a bunch of Socialists) afloat. This Empire is unable to pay its bills, or even keep its manufacturing base. To maintain themselves in power, the Leaders of the Empire buy off the electorate by federal handouts. These programs are escalating and are the source of deficits. In order to pay for the handouts, the FED (the Empire's banker) prints money to the tune of a trillion Dollars a year.

What is the consequence of the money printing?

The consequence of money printing is always the loss of value in the currency and eventually, the repudiation of that currency. So, the FED is acting to preserve the value of the US Dollar. If gold were allowed to rise in response to the money printing, the Dollar would be repudiated. The FED, therefore is acting to maintain the value of the Dollar by knocking down the price of gold and selling Dollars to keep it from increasing in value beyond a certain point. This seems contradictory, but the Empire's partner (the EU) is in even worse shape than the US and people are fleeing its currency: the Euro.

Some of the details of this is presented by Dr Paul Craig Roberts (a former Treasury official) on KWN:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/7/12_Former_US_Treasury_Official_-_The_Fed_Is_Facing_Collapse.html

Ben Bernanke's about face.

Last month FMOC meeting was reported by Ben Bernanke as raising the issue of "tapering." By which Bernanke told us to expect QE to be reduced and eventually phased out next year - the economy permitting. Other members of the FOMC began to backpedal immediately. The Market responded very negatively: bonds lost value, interest rates began to move up and the Stock Market went into a swoon.

We heard a very different report from Bernanke following the July meeting. Ben said that the 7.6% reported unemployment overstates the ability of the economy to add jobs (otherwise it is a contrived and unreliable number -surprise, surprise) and that “highly accommodative monetary policy” will probably be needed “for the foreseeable future.”

In other words, forget what he said in June, he was not really serious. Stocks went up and interest rates moderated. The economy did not really recover.

What is happeningin the PM Markets.

KWN reports that the Gold Market is reporting a backwardation. This is an almost unheard-of phenomenon. What does it mean? It means that the supply of deliverable gold is getting short. The COT report (Commitment of Trade) discloses a tremendous change in the PM Market. The "Commercials" (banks that trade PMs) have decreased their silver shorts from 259M ounces in February to 20M ounces at the end of June. Gold shorts are down to 35,200, which is the lowest in 10 years. Big traders are expecting the Market to turn.

There is another indication (nay, proof) that gold is flowing fro West to East. Look at the graph:

China's deliveries are almost as large as the world production. Demand for gold is increasing. Perhaps that is the reason for the big bump today in gold prices.

Banking changes in the EU.
The EU has inaugurated a new Agency today to deal with failing banks. So, they finally did it, right? Well, no. The Agency won't have any money to spend and some safety regs have been discontinued at the insistence of Germany.

Greece and Portugal have gotten what is supposedly their last bailout. What next? These countries are economic basket cases and their default is not far off.