Back at the energy ranch.

I have posted on the discoveries of gas and oil in the Eastern Mediterranean. As encouraging as this news is (if you are an Israeli), there are caveats. The oil lies below a kilometer and half of water. That means using special techniques (like robotic equipment) to get to the oil. Then there is the possibility of disasters (remember BP?). I am sure that Israel has its own environmentalist wacoes, who are always protesting progress; especially carbon-based fuels. And, lets not forget, Israel is surrounded by Arab nations who want the country destroyed. It is easier to get gas from the depths, because if there is a leak it will dissipate. Getting oil up from that deep is something else.

That is why my ears perked up when I read about a fusion breakthrough. A lawrenceville Plasma Physics Inc announced that it was able to produce a temperature of 1.8B degrees centigrade, topping the previous record of 1.1B degrees C. Such a temperature allows aneutronic fusion of protons to helium and giving up energy in the process. How close does that bring fusion? Not very. The density of plasma being used must be increased to get a machine  that produces more energy than the process requires.It's a long way till there.

A Day of Infamy: the Cyprus Bank Robbery.

The Great Cyprus bank robbery happened on the 30th of this March. Bank deposits larger than 100,000 Euros were officially seized. Former owners received class A shares for a bankrupt bank, 22.5% of the money is frozen for future purposes and 30% is just frozen. This represents a 60% loss of capital and maybe the loss of another 30% ultimately.

Remember when holders of Greek bonds were asked to take a hair cut? This was it.Needless to say, this is very deflationary.

The new face of the Mediterranean.

If you are an European country, you need to pay $15/natural gas unit vs in America, where the corresponding price is $4. This is due to the price gauging of the Russians.

There is a new dawn in the energy field in Europe. It has to do with the oil and gas fields of the Eastern Mediterranean. The Levantine field (consisting of the Leviathan and Tamar fields) comes under the control of Israel and next to the Leviathan field is the Cypriot field, estimated to contain $400B worth of gas.

Exploration and infrastructure buildup is done for the Cypriot field and drilling may commence this year. Israel has a working gas well in the Tamar field. Unknown amounts of huge oil field lie below the gas field in the Leviathan and probably the Tamar. Houston-based Nobel Energy is doing the work in the Levantine basin.

Italy has new government.

Two months after the election, Italy has managed to cobble together a new government. It is an uneasy coalition between the left wing Democrat Party and Berlusconi's party. Beppe Grillo and his fellow crazies are left out:


http://online.wsj.com/article/SB10001424127887323528404578450350631741768.html

It is too early to comment on the possible success or failure of this govt. Italy's indebtedness now stands at 127% of GDP, so by the Rogoff hypothesis it has gone past the point of being able to rehabilitate itself without sinking into hyperinflation. While, the WSJ editorial is full of hopeful phrases, we will have to see how the Left and Right can work together. Past experience tells us that it will be a very uneasy coalition. How long will it last? I would not bet on it.

Cyprus and Gold: the Elite are losing it.

1. Investors had learned from the Cyprus fiasco that banks and deposits are not safe. It was a big loss of confidence for the ruling elites.

2. The gold takedown was another blow to the credibility of the financial elites. I have promised a few months ago that I will find out how the gold price is manipulated and here is the latest find:

http://seekingalpha.com/article/1365351-physical-gold-vs-paper-gold-the-ultimate-disconnect?source=email_the_daily_dispatch&ifp=0

Just as the Cyprus mistake cast doubt on the financial elite, the takedown of the gold price led to loss of credibility. Some of the consequences were not seen by the perps. The dropping of the gold price has opened the floodgates of demand for the physical metal. people had cleaned out coin dealers and sellers of gold and silver bars. The COMEX has no gold available, neither does the LBMA or the Swiss banks. JP Morgan's gold stock has been reduced from 64M ounces to 160,000 ounces.

The gold shills are as active as ever, but we know that the COMEX is a phoney criminal syndicate designed to fleece 90% of the traders. Anyone who buys futures contracts is a fool.

EU vs US; Debt comparisons.

Larry will tell you that the Dollar Index is rising because panicking people from Europe and Japan are buying US Dollars. In fact, some wags have quipped that our most profitable export is $100 bills.

Larry will tell you that the Euro is finished, because the inability of Europe to grow and balance its budgets in the various countries. I looked up current figures and in the 2013 US budget the deficit is 24.5%.

http://en.wikipedia.org/wiki/2013_United_States_federal_budget#Total_revenues_and_spending

Compare this to the budgets of European countries:

Pls note that even the countries in most trouble (Greece, Italy, Spain and Ireland), none of them have budget deficits like ours. And our ration of indebtedness is now pretty close to 100% of GDP. So, why are the Europeans jumping from the frying pan into the fire?

Gold thieves: Caught on Tape.

The gold smash, as it is called, of last Friday and this Monday, was far bigger then we envisioned. It involved COMEX trades amounting to 12% greater than the entire gold production for a year. Obviously, such an amount of gold can not be delivered, so it is a naked short trade, an illegal trade to fix gold prices.

But, I promised you a picture of the gold thieves on the tape. The whole anatomy, rationale and aftermath is detailed in this article:

http://seekingalpha.com/article/1343211-this-gold-slam-is-a-massive-wealth-transfer-from-our-pockets-to-the-banks?source=email_the_daily_dispatch&ifp=0

The first graph is the normal functioning of the COMEX. Orders vary in size and timing.

The second graph is the artifical trading during the gold smash:

The third picture is the volumes:

This is one of the takedowns including a practice run before 8:25.

We can speculate as to who the culprits are. Certainly, a takedown such as this can not happen with without the knowledge of the COMEX, the bouillon banks and even the FED, because the amount of the money involved.

Why did they do it? Maybe to conceal the inflation and justify further QE? Or, to recapitalize a few banks? To protect the US Dollar? The more the distortion the worse the consequences will be.

PM buyers outnumbersellers 50 to 1

says Bill Haynes on KWN. Shortages will soon materialize:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/4/13_Haynes_-_Were_On_The_Verge_Of_Major_Gold_%26_Silver_Shortages.html

The desparation of the FED.

Imagine yourself to be Bernanke. You have inflated the monetary base like if there were tomorrow. You have kept the money sequestered as reserves, thus avoiding rampant inflation. So far. But, things don't look so good. While, the US Dollar looks good against the Euro, the Yuan hit its highest against the Dollar. Time to start unwinding the printing while it's possible. Or so you think.

Number one on the to do list is to establish in people's mind that the place for funds is in the US Dollar or the Stock Market. What stands in the way of this? Well, the gold price that is inching higher. So, in order to preserve the value of the Dollar, the gold price must be knocked down. And that's what happened.

For weeks, the Media has spread the drivel that hedge funds were dumping gold and that the Bull Market in gold was over. Short positions in gold and silver reached historical highs. Then yesterday an avalanche of paper shorts hit the COMEX knocking gold down $75 an ounce at one time. Gold finished the week $63/oz down. I calculated the sum needed for doing this and it turns out to be $10B. Is gold selling for 1,501/oz on the London Bouillon Market? No. There are no supplies as the lower price was achieved entirely with paper (naked) shorts.

Bernanke knows that if gold is allowed to rise, inflation will take off and the FED will have to raise interest rates. Higher interest rates will crash the Stock Market and the economy.

What about Larry's predictions? Correct so far. Does he have the magic formula that predicts gold prices? IMO, NO! What Larry must have is a pipeline to the FED so he knew the FED would crash the gold price.

Does this takedown herald the drop to 1,200 as Larry forecasts? I do not think so. The East is eager to buy gold, but supplies have dried up. At some point, the actual metal will win.

The Euro crisis: dropping shoes by a centipede.

One of the problems the West faces is a Press that tries to save Socialism by under reporting the crisis of Europe and the US.

In the spotlight today is Portugal - a country that is sinking deeper into recession. To make matters worse, the Portuguese Constitutional Court ruled some of the austerity measures unconstitutional. This essentially blows up the Portuguese budget and sets off the next crisis. The Slovenians just have to wait for the spotlight. Even Greece is back into the news with talks between creditors and the government. Cyprus is seething after the theft of part of the bank deposits (and we still do not know how much was stolen). The Dutch Finance Minister said that Cypress will now be a model and he had to backtrack for fear of bank runs. Greece, Italy and Spain are quiet, which means that the crisis is now in slow burn mode.

Back in the States, the latest unemployment figures were greeted with the usual surprise by the Media that claims that recovery is getting robust.

In Egypt, the Muslim Brotherhood continues the murder of Christians and N Korea threatens atomic war.

Welcome to Obamaville.

Central Banks.: shock and awe.

Fresh on the heels of the announcement by the head of the Bank of Japan( Haruhiko Kuroda) to double the Japanese Yen monetary basr, the head of the ECB announced that the ECB is planning to ease if economic conditions do not improve in the EU. The English demurred, chiding Japan for not trying "structural reforms." Of course, the English have already done their easing.

One wonders, however, just what the central banks can do more of. We know they can continue to attack the gold price, so they can have cheap money. But, one of these days a demand to deliver gold will not be met and the gig will be up.

Why there is less than expected inflation.

The FED has increased the money supply like crazy. Here is a graph showing that:

Inasmuch as the inflation that is reported is the result of the Money Supply M2 and its Velocity multiplied together, the reported Inflation depends both on M2 and its Velocity. Here is the Velocity of M2:

We then have our answer.

As  long as VM2 keeps falling, fast inflation is held off. But, as long as VM2 is falling, the economy will stagnate in spite of the rise in M2.

VM2 has been held down by requiring the banks to keep a very large reserve. And money has gone into the Stock Market.

The FED started talking about unwinding the mess it created. Easier said than done. Inflation is now running at almost 10% year and an increase in VM2 would really kick us into hyperinflation. Trying to restrain VM2 by increasing the interest rate would crash the Stock Market. For the time being, there is no unwinding.

Interesting, is it not, that people readily see that the FED is controlling interest rates, while they believe the propaganda that the precious metal prices are not being held down. Has the FED discovered how to evade the laws of economics? I do not think so. What they had discovered is how to kick the can down the road and hope that when  the deluge hits, they will no longer be in their positions and the blame can be shifted to someone else.

The double talk about silver.

Money Morning asks the question as to why in the face of red hot sales of silver coins and bouillons, silver spot prices are languishing. Here is an answer from an expert:

"(Q): We've covered a lot of ground here today. Can I ask you to offer a summary - you know, to reiterate the key points you've made here?
Rich Checkan (A): Absolutely. To sum up ... the current situation in silver is nothing new. It is a temporary shortage of physical product - but not a shortage of silver itself. That's an important distinction. And even though the most popular forms of silver are experiencing higher premiums and extended delivery times, there are still a number of viable options available to the prospective silver buyer.
Obviously, there are no guarantees here. But it's our belief that there will be another leg up in this 13-year (and counting) precious-metals bull market."

So, there is no shortage of silver, even though there is a shortage of silver.

What is really going on? What is happening is that certain banks are shorting silver and gold to keep the price down. What is being shorted is the paper market and you can not get the physical without paying a premium. A lot of people are kept out of the market, because of the stagnating prices. And that creates the mirage that the FED's policies are working.

Cyprus: the aftermath.

Why do people worry about Cypress?

Cypress decided to make finances and financial products their basic industry so that the E90B deposit in Cypress banks was 5x their GDP. Forty five percent of the Cypriot economy depended on financials. How much of this will survive is a question on everyone's mind.

Current estimates put the drop in Cypriot economy at 10%, but I think that is an optimistic estimate. Moody's Senior Credit Officer Sarah Carlson wrote in a note. "The potentially irreparable damage to the country's current drivers of economic growth leaves its ability to sustain its current debt highly in doubt."

It is like planes staked up to land: Slovenija is waiting for its bailout, then Ireland. Italy is in limbo and so is Spain.

Earlier report of Spanish theft INCORRECT.