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Fannie Debt Merger Monetization

December 31, 2009 by · Leave a Comment 

By Jim Willie CB, Golden Jackass

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The background noise has been considerable. The USCongress, the august body that often passes legislation without reading it, evaluates a new initiative to reinstitute the Glass Steagall Act. Pass it, don’t read it! Great idea! In the wisdom from post-Depression seven decades ago, the same Congress imposed firewall separation among the commercial banks, the brokerage houses, and the insurance firms in order to prevent systemic financial sector failure. That is precisely what happened in the last two years, without proper recognition or diagnosis, except by this and some analysts. Insolvent systems do not spring back to life with grandiose infusions of phony money and complete covers for fraud. They remain insolvent. The bank woes will suffer massive relapse this year, from fresh commercial mortgage losses, from prime Option ARMortgage foreclosures, and from continuing overload of toxic losses from gargantuan residential property held on their books that they stubbornly refuse to put up for sale. If the US housing market shows any remote signs of price stability, it is due to a few hundred thousand foreclosed homes held by banks, floating on their ruined balance sheets, held back from dispatch to real estate brokers in auction. Keep price stable by erecting a banker dam on properties. It must release, but it might head straight into the Fannie Mae toxic pit.

Another popular bizarre balance sheet item is the bank reserves held for interest yield within the safe confines of the US Federal Reserve. The USFed itself might desperately need such funds to ward off its own deep insolvency in the hundreds of billion$. They did after all, ramp up toward 50% their ratio of USAgency Mortgage Bonds, most of which are worth far less than the stated value on their cratered books. The ugly truth on this matter is that US big banks face additional huge losses, so the reserves held at the USFed should be regarded as Loan Loss Reserves, hardly robust assets. They are still insolvent. These big banks are so dead, that the only partners they attract are other vampires. Non-performing loans have soared to a record 5%, shown below. Now factor in that US banks carry over $7000 billion in commercial loans. The resultant $350 billion of non-performing loans on the books of banks is disclosed, but what is not disclosed is their additional toxic assets off balance sheet and other various credit derivatives like Interest Rate Swaps. These huge supposed bank reserves are not going anywhere, surely not the USEconomy. The big banks are still wrecked.

$NPTLTL

Quietly the USCongress has been working on new legislation to reform the financial system regulatory structure. It reads like a TARP to the sixth power. The House of Representatives has passed its version, the House Resolution 4173. The US Senate must next tackle the issue.The House version calls for up to $4 trillion in big bank aid if and when another banking system breakdown occurs. Despite all calls to reverse rescue for financial firms too big to fail, this bill does exactly the opposite. My pattern of analysis, successful for five years, has been to hear the words, to expect precisely the opposite in the action taken, and to regard the words as pure deception to calm the opposition and lull it into a moribund state. The people are easily fooled, and rarely comprehend new legislation once forged into law. Hear the words, anticipate the opposite. That tactical approach was honed in my work by observing Greenspan. Without any hint of doubt, the USCongress is a trained lackey for Wall Street and the bankers. The nation has lost control to bankers long ago. The end game is a shattering reality.

BLANK CHECK TO FANNIE & FREDDIE

Turn to the Eye-Popper this past week, an event that should have caused incredibly deep alarm, disgust, dismay, disconcertment, and consternation. Instead, the US financial markets have been so anaesthetized by nationalizations, big bank welfare, major fraud cases, outsized executive bonuses for failed bankers, prattle about recovery by political and bank leaders, and mindless federal programs that cost multiples more than benefits. So the news of an unlimited line of funds, not at all a credit line, comes to the viewing audience. This is a BLACK HOLE of unlimited diameter. One should be immediately suspicious, before reading any details. Fannie Mae & Freddie Mac (F&F) have been the source of at least $2000 billion (yes, $2 trillion) in missing funds from the Papa Bush and Clinton Administrations. Politicians love the Fat Fannie Freddie Duo, since it has served as a slush fund source for two decades. These missing, stolen, counterfeited, absconded funds are documented by the auditors to the USDept Housing & Urban Development. The follow-up stopped in its tracks, as officials in the USDept Treasury halted investigations, informing auditors that the funds are designed to fund black bag projects, including the Working Group for Financial Markets. This is all well documented, and not in dispute any longer. My theory from September 2008 onward has been that Fannie & Freddie were put under conservatorship within the USGovt in order to prevent investigations of fraud, to prevent discovery of Wall Street bond counterfeit, to prevent lawsuits on improper securitization of mortgage income streams (usage of single income with multiple bonds), and to prevent mortgage rates from rising as foreign creditors dumped mortgage bonds. The joke on Wall Street these days has been that Fannie Mae is a great firm to leave, since despite allegations of criminal activity, nothing happens on the legal side, and besides, the exit bonuses are in the multi-million$. Ex-CEO Franklin Raines, friend to all politicians, earned $62 million upon exit amidst controversy and shades of fraud.

So next, the blank check is written for Fannie & Freddie, and one should suspect that the funds will flow freely. Any expectation of major home loan balance reduction for the benefit of the people might be misplaced. We shall see! Maybe it will come! The USDept Treasury announced last Thursday the removal of the $400 billion financial cap on the money line provided to keep the companies afloat. To date, US taxpayers have parted with $110 billion to the fat duo. All estimates submitted by the USGovt about loss magnitude have been laughable. My forecast over a year ago was for at least $2 trillion and possibly $3 trillion in losses ultimately, over 10 times what officials stated. My figure is looking better every passing week. Denials persist that the original $400 billion limit was nowhere approached. So why extend the line of funding to unlimited? The reasons are two-fold in my view. First, grandiose grotesque gargantuan losses are coming, since liquidation of bad home loans has been halted. A huge dam of toxic loans is on the Fannie & Freddie books. As Rich Santelli of CNBC said on Tuesday, “This move permits Fannie Mae to load on all kinds of additional pigslop onto their balance sheet, and to do so without end.” He followed with some denigrating remarks about the wisdom of fiscal leadership. Second, the blank check will permit continued coverup of the mortgage bond fraud, along with rafts of broken credit derivative contracts. The coverup requires much additional papering over. The size of the Interest Rate Swap book on the F&F books must be greater than the global economy, maybe by a multiple.

Next is large scale mortgage portfolio liquidations, mortgage portfolio writedowns, and possibly some actual loan balance reductions finally. Massive losses will be revealed by Fannie & Freddie, but the public and financial sector will applaud the cleansing process. An astonishing volume of backlog home loan constipation might be relieved by means of this official enema in the planning stage. Housing prices are certain to drop if F&F refuse to permit their managed home portfolio to grow without limit. If F&F dump homes on the housing market, the prices will drop another 15% to 20% easily. The alternative is more what my forecast has in store, a truly staggering shocking alarming home rental business by the USGovt as landlord. The Fat F&F Duo can mitigate the negative political reaction by reducing home loans in a substantial way and to a meaningful degree, which would help to stop the foreclosure parade and the reversal of the Ownership Society nightmare.

MOTIVE FOR THE USGOVT HOME OWNERSHIP

Fannie Mae and Freddie Mac provide vital liquidity to the mortgage industry by purchasing home loans from lenders and selling them to investors. Most investors lose heavily, but the bond brokers make out very well indeed. Together, F&F own or guarantee almost 31 million home loans worth about $5.5 trillion, almost half of all mortgages. Without USGovt aid, the firms would have gone bust long ago, leaving millions of people unable to obtain a mortgage. The biggest headwind facing the housing recovery has been the rise in foreclosures as unemployment remains high and the hidden bank inventory of foreclosed properties swells each month. The Obama Admin dare not disclose its long-term plans for the two agencies under conservatorship.

Pardon me during outbursts of laughter at the mere word ‘conservatorship’ since nationalization was under that thin veil all along, as in all along. The formal steps were missing, but no longer. The Toxic F&F Duo will never return to their former power and influence, not to mention integrity, if they have had any for 20 years. The Obama Admin might do best to conceal its plans of federal residential property ownership, since it might read like a Communist Manifesto. In summer 2005, my forecast for Fannie Home Rentals has come true, with nary a peep of objection. Rentals are seen as a great solution. The F&F shareholders should face total ruin with share price at zero. Instead, Fannie Home Rentals should provide a massive revenue stream useful in justifying a stock share price. At the same time, the financial sector will likely applaud all initiatives that result in removing home supply from selling inventories. The federal landlord plan actually will permit some home price stability. Let’s not even touch on executive bonuses and compensation packages for the current managers of these financial sewage treatment plants.

My personal conjecture is that Fannie Mae is burning through money 5 times faster than the topline figures show. The USGovt will next be funding the Great Black Hole in a more visible fashion, if that is a positive development. One might even conclude that the blank check is not price inflationary, since it goes right into the toilet. This is Weimar Defecation. It will affect the USDollar and USTreasury global integrity. Worse, we are at the forefront of a blossoming of the USGovt emerging as a significant national landlord. What we have is the onset of precisely the opposite of the Ownership Society put forth by ex-President Bush II. What irony! Or was it the plan? Just like the Greenspan Project to undermine the US financial grid? One should harbor great suspicion that the USGovt has been collecting mortgages on a grand basis, as has been the USFed. My full expectation is that the USFed will dump their entire mortgage bond assets on the USGovt at the appropriate timely moment, despite any lack of value, and receive nearly full book value. The taxpayers inherit the sewage. Furthermore, gigantic tranches of home loans from the residential sector are likely to come from the commercial banks, heading directly to the Fannie & Freddie balance sheets. This flood will accelerate the disenfranchisement of the proletariat, as home foreclosures continue unabated, and the USGovt entrenches its property ownership. Those who fail to see the trend toward a communist state with military dictatorial powers are at best sleep and at worst blind.

Numerous theories have been floating in the media and in internet journals, where the most responsible journalism exists, by far, bar none. Former HUD auditor Catherine A Fitts shared her opinion that the banks are going to take huge writedowns on the commercial side. To make room on their balance sheets to handle the commercial mess, the residential portfolios are going to be shifted to Fannie & Freddie in a manner that will protect the major banks. The F&F balance sheets are where residential mortgages will go to die, she expects. The market cannot handle the home sale flow from liquidations. And besides, the Federal Housing Admin and Ginnie Mae are too small and too logistically strained to move such volume so quickly. The sewage treatment plant is well equipped. All roads lead to F&F Processing Plant. The USGovt auditors will proclaim profits from Fannie Home Rentals, but hide the enormous losses.

Dan Amoss of the Strategic Short Report shares his opinion on a trend. He said, “The market will eventually adopt the view that Fannie Mae and Freddie Mac have been nationalized. Last week’s elimination of limits on Treasury’s capital infusion into Fannie and Freddie is a defacto nationalization. In other words, there is no longer much chance of a re-privatization, but instead we will see a gradual transformation of these Frankensteins into new branches of government. They will implement the official government agenda for housing, without much regard for prudent lending. This will have huge consequences for the Treasury market. While the federal government will stick to its Enron-style accounting, and not officially consolidate Fannie/Freddie assets and liabilities onto the government balance sheet, the smarter foreign creditors will. These creditors will start viewing Fannie/Freddie liabilities as equal to Treasuries in terms of default risk.But this does not mean that spreads on Fannie/Freddie liabilities will tighten down to Treasuries. Rather, it will substantially increase the long-term default risk of Treasuries, and Treasury buyers will demand higher rates to compensate for this risk.” Amoss anticipates the principal mortgage provider in the future is indirectly going to be the USGovt. Amoss also states that the USTreasury debt is to be mixed with the USAgency Mortgage debt in perception, no longer distinguishable since the former funds the latter. THE RISK OF USTREASURY DEFAULT HAS LEAPED HIGHER!! Since Fannie & Freddie are deeply insolvent, the new USGovt debt ratio also leaped higher.

On the entire motive theme, ponder the following. The USTreasury Bonds are at risk of higher bond yields. They will likely not shoot up rapidly, since the JPMorgan machinery is still in operation, namely the Interest Rate Swaps. Check the Office of Comptroller to the Currency for basic evidence. A reversion to the mean, a reversal of the lopsided positions, a return to normalcy would clearly involve over a $1 trillion loss to the JPMorgan monster. The IRSwap contracts are firmly in place, ramped up, heavily fortified by Printing Pre$$ activity without scrutiny or bounds, never properly audited since done by venerable JPMorgan. While we all decry the rise of credit derivatives, few complain about low interest rates in today’s age of speculation. Artificially low cost of money has fueled two decades of asset bubbles and the ruin of the US industrial base. My view is that the USFed is desperate to end their 0% rate, since they realize it caused the housing & mortgage bubbles in 2003-2007. But the USFed has returned to the scene of the crime with entrenched 0% rates, stuck for over a year. The USFed definitely does NOT want long rates to rise. They are scared witless of rising mortgage rates, since they would kill the housing market altogether, or at least put it under a massive wet blanket for an indefinite time. The IRSwap detonation could happen at either end, on the short rate or long rate, much like a stick of dynamite with a fuse at each end. Risk is acute if the USFed were to hike the FedFunds rate, since they would directly set off IRSwap explosions. The USGovt borrowing costs would triple also.

RISK RISK RISK, MONETIZATION & INTEGRITY

Harken back just a few weeks, when the USDept Treasury and USFed announced on a repeated basis the end of Quantitative Easing. Their words were laughable, intended to deceive, and were whole portions of propaganda. INSTEAD, THEY DID THE EXACT OPPOSITE, AND MADE THE FORMAL ANNOUNCEMENT BETWEEN THE CHRISTMAS AND NEW YEAR HOLDIDAYS. The move to permit unlimited Fannie & Freddie funding is an end-around maneuver to prevent long-term interest rates from rising, or at least to insulate the mortgage finance arena from higher long-term interest rates. IT COMES AT A COST, OF SYSTEMIC RISK, OF PERCEIVED DEFAULT RISK, OF USGOVT DEBT FOUNDATION RISK. The year 2010 might be characterized by a rise in the entire USTreasury bond yield spectrum, from short-term to mid-term to long-term. It is not just a bad thing, a risk filled development. It is a risk of game over! The monetization threat and deep monetary inflation to fund USTreasurys (indirectly Fannie & Freddie debt) are important parts of the vicious cycle displayed in the December 16th article entitled “Full Circle of Govt Debt Default” (CLICK HERE). The full circle (see the chart) starts and ends with the USDollar and the USTreasurys, from debts, monetization, and monetary inflation gone haywire. The toxic chickens come home to roost!!

The credit markets must prepare for one of two undesirable outcomes. Either interest rates rise markedly in order to fund the USGovt federal deficits or else Printing Pre$$ output of phony money must escalate without bounds. Next comes debt explosion or Weimarinflation. The federal deficits must be securitized, in other words, converted into bonds and funded. The process so far has involved an incredible amount of hidden monetization. It is slowly being discovered, but not reported by the sleepy lapdog intrepid press & media. My articles have detailed some of the primary bond dealer monetization in Permanent Open Market actions, and some of the foreign central bank monetization of mortgage bonds to fund USTreasury bids. The year 2010 will feature monetization of USGovt debt and of mortgage losses out in the open to a much greater degree. The effect will be to place the USGovt debt viability at grave risk. It will be interesting to watch the debt ratings agencies (Standard & Poors, Moodys, Fitch) squirm. They are under tremendous pressure not to repeat their lackadaisical behavior in the past. They are downgrading European nation sovereign debt. They are denying openly the justification to downgrade both United Kingdom Govt and United States Govt debt. Their denials are damning in themselves, since why mention the lack of justification for such downgrade unless they should be downgraded by any reasonable measure. The USGovt short-term funding requirements are almost as great as their active monetization, the clear expedient. The USEconomy tolerates huge Ponzi Schemes from the inside, like Madoff, like Fannie & Freddie, like AIG, like Wall Street itself. Rather the USEconomy has become one huge Ponzi. Its expansion on the margin is uncontrollable, just like its appetite for new funds is uncontrollable. The blank check to Fannie & Freddie is testimony to the need to fund the Ponzi Scheme, but it is phony money entering a vast and widening Black Hole.

USDOLLAR BOUNCE

Last autumn 2008, one year ago, the USDollar embarked on what my analysis called a Dollar Death Dance. The bounce from the November depths last month at 74.5 to the hardly rarified air near 79 has been sudden. The rise in rebound has been built upon several factors. The Dubaidebt mess has exposed European and London banks for further losses, leading to an exit from both the Euro and British Pound currencies. The US banks are more adept at hiding their losses, extended their toxic loans, pretending they will find eventual value. The Dubai shock has made vividly clear the heightened risk of a European Union fracture, a threat to the Euro currency, and a need for Germany to cut off the Southern Europe impaired limbs, debt and all. One must wonder with sinister thoughts if the Dubai debt was permitted to default, or orchestrated to default, precisely at the most promising season for gold, into the year end strength. It short-circuited the strong gold season. But one thing is for sure about seasonality issues. They have been widely destroyed in recent years in numerous asset classes. The late winter and spring for gold should be strong again, as the USDollar will expose its toxic fundamentals. The only thing making the ugly pig with lipstick look good is the unfavorable comparison to broken European national debt structures, which do not have the benefit of the Printing Pre$$ Privilege or the vast criminal sydicates supported by it.

The Competing Currency Wars have heated up again from comparisons rather than open hostility to protect exports. Money departs the Euro harbors and enters the toxic USDollar pits, where the stench of Printing Pre$$ overdrive operation fills the air, where the shame of unlimited Fannie & Freddie black hole directed funds tarnishes the USDollar image, and where the unprosecuted Wall Street bond fraud festers like an open sore. This sudden US$ rebound has left the G-20 Meeting declarations a recent bad memory. The emerging nations had shown steady disrespect for the so-called developed nations, the deep debtors who long ago lost their industrial base. They transformed industry to debt, a miracle of modern central banking!! There is nothing like some debt liquidation to show how the USDollar still has remnants of a safe haven. Its security has only remnants, torn shreds adorned by stars and stripes once given respect. Let’s not even touch the endless wars, the clandestine military business in narcotics, the private contractor fraud in the war effort, the missing $50 billion in Iraqi Reconstruction Funds that nobody is looking for. These activities smear and harm the US image in powerful ways, often without US awareness from inside the US Dome of Perception.

Just what is the force to sustain the USDollar rebound? More European member nation debt woes. More credit derivative liquidation and payouts. The US$ rebound runs on noxious fumes. This is the Dollar Death Dance, part II. The long-term trend will remain down. The immediate activity could feature more of the same. The short covering of the Dollar Carry Trade has been clear. It will have to muster enough funds, courage, and wisdom to put that carry trade into second gear. It is inevitable. It is justified. It will be profitable. It certainly will be dangerous, since the USDollar is still the global reserve currency. That status is threatened though. Clearly, the USDollar rebound, a move of a mere 6% in the last few weeks, is the only factor pushing down the gold price. One can see that the gold price decline has run its course. The overbought condition has worked itself off. The risk of a move to 1060-1080 is apparent. However, the moving averages are rising. The stochastix are ready to cross over in a positive way. Last but not least, the fundamentals for the USGovt finances and the USDollar in particular could not be more acutely horrible, miserable, outrageously negative, and represent a palpable threat of a sovereign debt default down the road. At least we will see a monetary crisis centered upon the USDollar. That would pressure the eventual default.

$Gold-Bull

The USDollar rebound and the reflexive gold correction have been rapid and thus are unstable. They are both nurtured by European and London weakness, rather than US strength. The long-term trend is solid and up for gold. With all the hubbub and gnashing of teeth, the gold price is still above its October highest level. My favorite question of US$ Bulls is “What has been fixed?”The answer is nothing. Much money has been spent, and huge deficits have been racked up, but to what end? No remedy, no reform, no structural imbalances corrected, no deficit reduction, no military expense curtailment, no end to banker welfare, no successful modification to home loans, no end to home foreclosures, no end to job cuts, no end to supply chain disruption, no end to the USGovt and USFed acting as primary lenders, not just lenders of last resort. The USDollar is running on fumes, and the end to its bounce is near. The gold bull will run again. Three to four steps up, one step back.

THE HAT TRICK LETTER PROFITS IN THE CURRENT CRISIS.

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Jim Willie CB is a statistical analyst in marketing research and retail forecasting.   He holds a PhD in Statistics. His career has stretched over 25 years. He aspires to thrive in the financial editor world, unencumbered by the limitations of economic credentials. Visit his free website to find articles from topflight authors at   . For personal questions about subscriptions, contact him at  JimWillieCB@aol.com

A Happy New Year for Metals

December 31, 2009 by · Leave a Comment 

By Jeffrey Lewis, GoldSeek

In welcoming 2010, the stars could not be better aligned for precious metal investors. Stimulus spending, coupled with a low federal funds rate and a new jobs program, should put plenty of money in the hands of precious metals holders.

Stimulus and Silver

2009 was just the beginning for federal stimulus programs.  Although the American Reinvestment Act was pushed through Congress in a matter of days, the money has moved much slower.  Currently, only 58% of the allocated $158 billion has been awarded to start work on “shovel ready projects.”  However, of all the money awarded, only about $37 billion has actually been spent thus far.  Many more projects are slated to start early 2010, and nearly all of the money will have been spent by 2011.

This creates an excellent environment for precious metals investors who will be well served riding the tides of $260 billion in fresh cash for the economy.  With so much money being spent in such a short time frame, inflation is nearly guaranteed.

One beneficial part of the stimulus is that much of the contracting is given to small, local firms that exist in each Congressman’s district.   By allocating funds to smaller companies, it is likely that the funds will be spent quicker and in the locality that the project was requested, allowing for quick infusion of cash into local economies.

Read more….

The Goldsmiths—Part CXXII

December 31, 2009 by · Leave a Comment 

By R. D. Bradshaw, GoldSeek

In the vein of looking at what might happen in the year 2010 in the financial markets, and particularly with gold, silver and precious metals, much depends on the work of the Rothschild Cabal and its owned/controlled central banks as found in most of the world. Of all of the Rothschild owned/controlled central banks, perhaps the most important one of all is the US Federal Reserve Bank.  As a part of its alleged rescue of the United States and the world’s financial system in 2008, the Fed commenced a vast program of increasing its balance sheet (to over $2 trillion) and reserves to allegedly provide liquidity to the financial markets.

Supposedly, this increase in Fed money (which is correctly US taxpayers’ money made essentially by the Fed out of the thin air) would counteract deflationary pressures and restore the US and world economies.  While this supposition sounds good, the truth was that the work of the Fed was not to increase liquidity to the US or the world, but rather to contract credit/money and further the Rothschild plan to intensify the current recession/depression started by the Cabal (this process was reportedly described by Mayer Amschel Rothschild some 250 years ago in his master plan to rule the world—on this, see Understanding Money and War XIV at www.analysis-news.com).

True, the Fed’s Balance Sheet did climb astronomically high–starting in 2008 and thru 2009.  But what few people grasped is that the secret work of the Fed was not to provide liquidity to the people of the United States or any other nation, per se.  What happened was that the Fed provided financial support and liquidity to the Rothschild Cabal owned and controlled big banks and financial institutions.  Here, quite a paradox developed because while the Fed was busy pumping up liquidity to the Rothschild Cabal banks the same banks were simultaneously contracting the credit markets to dry up liquidity by the American people.

Read more….

2010′s Perils and Potential

December 31, 2009 by · Leave a Comment 

By Deepcaster, GoldSeek

To see 2010’s Potential we must first consider the Main Perils.

Hyperinflation Nears

The intensifying economic and solvency crises, and the responses to both by the U.S. government and the Federal Reserve in the last two years, have exacerbated the government’s solvency issues and moved forward my timing estimation for the hyperinflation to the next five years, from the 2010 to 2018 timing range estimated in the prior report. The U.S. government and Federal Reserve already have committed the system to this course through the easy politics of a bottomless pocketbook, the servicing of big-moneyed special interests, gross mismanagement, and a deliberate and ongoing effort to debase the U.S. currency. Accordingly, risks are particularly high of the hyperinflation crisis breaking within the next year…

Numerous foreign governments have offered unusually blunt criticism of U.S. fiscal and Federal Reserve policies in the last year. Both private and official demand for U.S. Treasuries increasingly is unenthusiastic. Looming with uncertain timing is a panicked dollar dumping and dumping of dollar-denominated paper assets. Such is the most likely event to trigger the onset of hyperinflation in the year ahead…

The U.S. has no way of avoiding a financial Armageddon…With the creation of massive amounts of new fiat dollars (not backed by gold or silver) will come the eventual destruction of the value of the U.S. dollar and related dollar-denominated paper assets…”

“HYPERINFLATION SPECIAL REPORT (UPDATE 2010)”

John Williams, Shadow Government Statistics, December 2, 2009

These Expectations of Hyperinflation (and a contracting Economy) are unfortunately supported by the Realities of Total U.S. Federal Obligations (National Debt plus downstream Unfunded Liabilities).

2009 Total Federal Obligations (TFO per GAAP) are $74.6 Trillion (according to Shadowstats.com), up from $65.5 Trillion in 2008.

The 2009 National Debt Component (of TFO) is $11.9 billion, up from $10 billion in 2008.

Over the long term, these obligations cannot possibly be repaid without a substantial further devaluing of the U.S. Dollar. Unfortunately, when the devaluing picks up steam the denouement could look quite like the Weimar Republic, or Zimbabwe.

Read more….

GATA Sues Fed, Demands Disclosure Of Gold Market Intervention Records

December 31, 2009 by · Leave a Comment 

Tyler Durden, zerohedge.com

Our friends at GATA have had enough of the Fed’s, and other Central Banks’ alleged (and with so much circumstantial evidence presented both at Zero Hedge and elsewhere, that in this case “alleged” is just a term only a lawyer could love) manipulation of gold prices, and have taken Bernanke’s monetization, manipulation and money making unlimited liability company to task (“M4 ULLC”). We are overjoyed that yet another entity has followed in the footsteps of our dear late friend Mark Pittman in taking on the one organization that represents all that is irreconcilably broken with the current economic and financial system. We wish GATA much success, and hope that ever more wronged counterparties will seek remedies from the Fed’s consistent and blatant wealth transfer from America’s Middle Class to the uber-wealthy, Wall Street-originating oligarchy.

GATA notes:

GATA today brought suit against the U.S. Federal Reserve Board, seeking a court order for disclosure of the central bank’s records of its surreptitious market intervention to suppress the monetary metal’s price.

The suit was filed in U.S. District Court for the District of Columbia and targets Fed records involving gold swaps, exchanges of gold with foreign financial institutions. In a letter dated September 17 this year to GATA’s law firm, William J. Olson P.C. of Vienna, Virginia, (http://www.lawandfreedom.com) Fed Board of Governors member Kevin M. Warsh acknowledged that the Fed has gold swap agreements with foreign banks but insisted that such documents remain secret:

http://www.gata.org/files/GATAFedResponse-09-17-2009.pdf

The lawsuit follows two years of GATA’s efforts to obtain from the Federal Reserve and the U.S. Treasury Department a candid accounting of the U.S. government’s involvement in the gold market. These efforts parallel those of U.S. Rep. Ron Paul, R-Texas, who long has been proposing legislation to audit the Fed. The Fed has wrapped in secrecy much of its massive intervention in the markets over the last year, and Paul’s legislation recently was approved by the U.S. House of Representatives.

Read more….

GATA sues Fed to disclose gold market intervention records

December 31, 2009 by · Leave a Comment 

By Chris Powell, GoldSeek

Dear Friend of GATA and Gold:

GATA today brought suit against the U.S. Federal Reserve Board, seeking a court order for disclosure of the central bank’s records of its surreptitious market intervention to suppress the monetary metal’s price.

The suit was filed in U.S. District Court for the District of Columbia and targets Fed records involving gold swaps, exchanges of gold with foreign financial institutions. In a letter dated September 17 this year to GATA’s law firm, William J. Olson P.C. of Vienna, Virginia, (http://www.lawandfreedom.com) Fed Board of Governors member Kevin M. Warsh acknowledged that the Fed has gold swap agreements with foreign banks but insisted that such documents remain secret:

http://www.gata.org/files/GATAFedResponse-09-17-2009.pdf

The lawsuit follows two years of GATA’s efforts to obtain from the Federal Reserve and the U.S. Treasury Department a candid accounting of the U.S. government’s involvement in the gold market. These efforts parallel those of U.S. Rep. Ron Paul, R-Texas, who long has been proposing legislation to audit the Fed. The Fed has wrapped in secrecy much of its massive intervention in the markets over the last year, and Paul’s legislation recently was approved by the U.S. House of Representatives.

The Fed claims that its gold swap records involve “trade secrets” exempt from disclosure under the U.S. Freedom of Information Act.

While GATA has produced many U.S. government records showing both open and surreptitious intervention in the gold market in recent decades (see http://www.gata.org/node/8052), Fed Governor Warsh’s letter is confirmation that the government is surreptitiously operating in the gold market in the present as well. That intervention constitutes a huge deception of financial markets as well as expropriation of precious metals miners and investors particularly. This deception and expropriation are what GATA was established in 1999 to expose and oppose.

Of course GATA’s lawsuit against the Fed will take months if not years to resolve. We think we have a good chance of winning it in court. But we can win it outside court, and much sooner, if the suit can gain enough publicity from the financial news media and market analysts and prompt enough inquiry from them and from the public, the mining industry, and members of Congress.

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The $ rally, will it end the Bull Market for Gold & Silver?

December 31, 2009 by · Leave a Comment 

By Julian Phillips, GoldSeek

It has become clear to us that the media and so many institutional analysts are going to keep talking the $ up despite the lack of fundamental reasons.  We feel that you will benefit most from a look at what lies ahead for the $ and its fundamentals and what could take it higher, if it does rise.

A Rally is due?

The main reason a rally in the $ is being promoted is because it is due for a rally.   The same is being touted for the Pound Sterling.   It is certainly true that a price never moves in a straight line.   It is also true that investors, buyers and sellers must see trade around all levels to ensure they are balanced and accept price levels as convincing.   When the market sees a price ‘spike’ you can be sure that sellers will turn up to bring it down.   The only time it stays there is when buyers and sellers feel that, that price is justified by them both.

However, please note that the price of the $ is the main fulcrum of the currency world, a currency, unlike a share that is traded by an exchange.  So its price doesn’t move by buyers dominating one day and sellers the next.   It stays in balance most of the time.   That is why its fall from $1.23 to $1.51: €1 has been gradual.   If it rises it is because of a distinct reason similar to a change of tide.   So the concept of ‘just a rally” will not end the bull market for gold.

Is the € is worth more than the $?

When the $ rises, gold traders on COMEX sell gold in such a related manner as to try to establish a direct link between the € and gold.   Silver follows.  Of late we have seen that relationship broken then followed again.   As the gold price has risen if has also risen in the €, thus de-coupling from the $.  But the actions of short-term traders keep returning to the day to day moves of the $ against the €, perpetuating the belief that when the $ rises against the €, the gold price falls.

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China’s 2010 Gold Rush

December 31, 2009 by · Leave a Comment 

Bullion Vault

Owning gold is more often the aim of accumulation, not the means, in China today…

THE COLLAPSE
of Indian gold demand since the global financial crisis broke in 2007 might seem good reason to question the fundamental strength of gold buying worldwide today.

After all, if the world’s No.1 gold buyers can’t keep up with record-high Gold Prices, who can…?

But the plain fact, as BullionVault first forecast in spring 2009, is that China has overtaken India as the number one private gold buyer this year. The typical Chinese New Year gold rush has already begun (thanks in part to 3% discounts at major retailers), and robust demand looks likely to continue through 2010 if not beyond.

Full-year 2009 private demand in mainland China could outstrip India, the former No.1 buyer, by one quarter if not one third. Short of a (very unlikely) collapse in Q4 demand, full-year private gold buying – including jewelry and retail investment – is set to have grown 10% from 2008′s record in volume terms, rising 26% by value to equal $13.5 billion or more.

On recent trends, that would equate to more than 2.0% of China’s famously massive household savings (up from 1.0% ten years ago) and account for almost one ounce in every eight sold worldwide.

Basis the GFMS consultancy’s data (published by the World Gold Council), physical gold purchases by mainland Chinese households in 2009 was already running 19% ahead of India’s private demand for Q1-Q3.

Given China’s continued economic growth (certain to hit Beijing’s 8% target according to the Chinese Academy of Social Sciences) – let alone the surge in money-supply and credit growth over and above GDP (put at 23 and 27 percentage points respectively by Deutsche Bank) – private gold consumption in Q4 most likely remained very robust. Whereas India’s private gold off-take during Oct-Dec. continued to shrink in the face of record-high prices. Indian bank and wholesale dealers have reported below-market bids from their clients throughout the autumn. Comments from the Bombay Bullion Association put Q4 imports 54% lower from 2008′s already disastrous finish.

Fourth-quarter Chinese consumption should be in the range of 116 tonnes (if it adds 37% to Q1-Q3 volume, as per the 5-year average) to 128 tonnes or more (if Q4 tops Q3 by volume, as it has each year since 2004). Running total to end-Sept. was 315 tonnes. Likely to finish full-year at 431-443 tonnes.

India’s private demand, in contrast, ran 45% below 2008 levels during the first 9 months of the year, most notably depressed during Q1 (down 83% from Q1 08, with Indian investors becoming physical dis-hoarders on GFMS’s data; overall, India was a net exporter of gold for the first time since the Depression according to market historian Timothy Green). Applying the 5-year average ratio of Q4 demand to Q1-Q3 figures (27% added to 264 tonnes), full-year private off-take would come in at 336 tonnes, the lowest total since at least 1991 on GFMS’s data.

India’s full-year imports (it has virtually no domestic mining output) are forecast at 370-380 tonnes says the Bombay Bullion Association. They have not been below 400 tonnes per year since at least 1997 according to the Indian Bullion Market Association.

It is impossible to predict the outlook for gold-buying in mainland China next year, but this decade’s drivers for Western gold investment – credit excess and miserable returns to cash – also apply in China, with bells on.

The People’s Bank cut its benchmark rate from 7.5% to 5.3% in Dec. 2008, and has left it there since. Inflation in the cost of living was officially reported at minus 1.1% across the first 3 quarters, but real rates were negative in H2 2004 and again in at the turn of 2007-8. Some analysts are forecasting 4.0% inflation for 2010, and either way, commercial rates have been so attractive this year that new credit growth was CNY295 billion in Nov., equal to $43 billion. That was down from 2009′s monthly average of $130bn, but took full-year credit growth to the equivalent of $1.35 trillion, equal to 27% of GDP.

Pitched against this rampant credit excess, gold’s quasi-religious and auspicious appeal in Chinese culture – as a solid, tangible, intrinsically valuable store of wealth – will only have grown. Most significantly, and in sharp contrast to Indian demand, private Chinese buying has grown as the price has risen (gold has than tripled against the Yuan since retail price controls were lifted in 2001).

That might suggest gold is just another bull-market asset for China’s increasingly wealthy and capital-rich middle classes. But owning the metal is most often viewed more as an end-in-itself than as an investment vehicle; it’s the aim of accumulation, not the means.

Given this last decade’s average 15% annual gains for US-Dollar investors – plus the outlook for sub-zero real interest rates, struggling equity dividends, and the danger of sharply higher bond yields (i.e. falling bond prices) as the Treasury attempts to finance a new record deficit – might the Chinese approach to Gold Investment start to take hold in the West…?

Please Note: A version of this article first appeared in the Financial TimesChina Confidential

Make Buying Gold simple, secure and cost-effective at BullionVault today…

US Mint Sales: 2009 Silver Eagles Peak, Collector Coins Weak

December 31, 2009 by · Leave a Comment 

US Mint silver coin sales statsThe latest United States Mint sales report shows robust 2009 Silver Eagle bullion figures, but weakening numismatic silver coin demand.

 

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The Cocoa Beach Collection Highlights Heritage FUN Currency Event

December 31, 2009 by · Leave a Comment 

Dallas, TX Heritage Auctions, the world’s leading numismatic auctioneer and the official auctioneer of the Florida United Numismatists (FUN) Show, will present fractional currency from The Cocoa Beach Collection at the 2010 FUN Show.

Fr. 1383 Fractional Currency Shield
A very rare and very high grade pink shield, Fr. 1383 Fractional Currency Shield, With Pink Background. Click image to visit Heritage Auction page for additional information.

The Cocoa Beach Collection is part of the 4800+ lot Signature® Currency Auction being offered Jan. 7-11, 2010 at the Orange County Convention Center, 9400 Universal Blvd., Orlando, FL. The Convention Center is also the site of the FUN show, as well as the location for lot viewing for the CAA auction and the other Heritage auctions at the event.

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