By Rick Ackerman, Rick’s Picks

[Alan Geik, whose razor-edged essays on our sordid political culture have gained him a loyal following at Seeking Alpha and other popular web sites, has been a lifelong student of frauds and scams, and so writing about this Era of Bailouts comes naturally to him.  In the essay below (which contains some great links that we would encourage you to follow, including a video punch line at the end), he explains not only why the global financial crisis is not going away any time soon, but why it is likely to get much worse before it gets better.  To bolster his conclusions, Alan draws a bead on some of the bigger-than-life buffoons and greedy political hacks who have helped to amuse and entertain us even as they have unwittingly contributed to the collapse of the global economy. An egregious example of the breed is Fed. Governor Mishkin, who in 2006, with amazingly bad timing and lack of prescience, presented a paper entitled “Iceland’s Financial Stability.”  There are also some piquant notes on the recent misdoings of a world-class buffoon who needs no introduction, Sen. Christopher Dodd. Enjoy!RA]

Beginning with this somewhat worn animated video, Worst Slide Story, will hopefully lend a light, amused tone to my few observations about the iCorrosion of the Empire. Also, a bit of light comedy might lessen the appearance that this is just another frustrated Financial Collapse to Come rant. I have written several articles outlining the two major Wall Street conceived scams of the 1980s; the Latin American Debt Crisis and the S&L bailout. Back then lobbyists gave Congress hooks on which to support massive Wall Street loans to Latin American dictators (“we need to help third world economic development”) and also, to their own S&L campaign contributors (“we need to support small business.”)

Of course all of the loans disappeared, and the banks claimed they had inadequate cash reserves, and, furthermore, if they didn’t get immediate government assistance (it’s always needed immediately!) they would fail and of course, “the economy would crash.” (The lobbyists didn’t invent this deceit just for the current money grab; they had worked it both times in the 80s.) Ironically, Fidel Castro and the conservative National Review were The Odd Couple among the few observers who consistently exposed the charade underlying those financial “crisis.”

In September 2008, Congressional leaders emerged from a meeting with then Secretary of the Treasury Paulson. “We need to do something now. We didn’t know“, they claimed, “that the economy was this bad.” Researching my last article, I was surprised to discover that about one-third of ALL members of Congress who voted in great haste for that Sept. 2008 $700 billion bank giveaway had also voted for the bank bailouts of the 80s and into the 90s (including the RTC funding, which when it finally ended its “mission,” couldn’t account for billions of dollars).

Running for Perks

Presumably, Congress learned nothing in twenty years except how to extract more perks with each successful election campaign. So here, as in my last article, are still more reasons why we are in a Death Spiral — reasons other than the mathematical impossibility of ever paying off the national debt, which will lead ultimately to default, or crushing inflation. They instead suggest a pervasive decay of oversight by every elected official, few of whom can now withstand the demands of reelection without corporate support.

“….150 economists support the Federal Reserve’s recent (you name it) action…” You’ve seen these banners many times streaming under the CNBC on-camera blatherers. Of course, the question is always asked in the post mortem; how did so many economists get it so wrong…so many times? The answer is simple: The Federal Reserve Bank thoroughly controls the field of monetary economics. They have raised the academic imperative of “publish or perish” to “disagree at your own risk.”

Fed Is the Only Filter

Large corporations do compete amongst themselves to have their fingerprints all over the content in the academic and trade journals of their industry. However, in the world of monetary economics there is only one filter through which submitting writers have to pass:  the Federal Reserve bureaucracy, who long ago salted the boards of every journal with their loyal followers. But the Fed stranglehold is far more pervasive than just controlling journals. They have created a sprawling company town of economists by allocating  $$ millions for meetings, consultancy fees, hiring hundreds of on-and-off staff PhDs, all with the overt or unintended consequence of widespread academic assent for the political decisions made at the top of the Fed pyramid.

Must reading is an article from the Huffington Post: Priceless: How the Federal Reserve Bought the Economics Profession. A reasonable conclusion is that once inside the company town commissary so to speak, the benefits of supporting the widely reported positions of those higher up the chain are clearly visible. And no doubt many have watched their more savvy colleagues rise toward the top of the pyramid, and witnessed the greater rewards waiting at each succeeding level. Sure, this speaks to the mindset of the modern corporation, not just of the Fed. However, I don’t see any great impact on my grandson’s future lifestyle from corporate infighting at Microsoft over the launching of still another unnecessary upgrade, or at Mattel, over Barbie’s new image.

A Complicit, Pliant Media

But we are talking about the Fed whose actions will have a profound affect over our lives in the next few years. It is dispiriting that, despite whatever positions papers are generated and conferences attended, the Fed direction will ultimately be set by the most short-term of political considerations. So the question, one of many, arises: Why don’t the CNBC compliance people require these economists to fess up to how much into the Federal Reserve dole they are, along with their consulting companies, and universities? Why should it be assumed that their acknowledgements that “Chairman Bernanke has done a masterful job at……..” do not carry a price tag with them?

The poster boy for this fetid culture must be Frederick Mishkin, who parlayed his rise to Fed governor into a job as a well-paid spokesperson for private industry. The most recent revelation, which was mentioned by several bloggers, including Michael Shedlock’s popular Mish’s Global Economic Trend Analysis, is that Governor (I supposed that is what they call themselves) Mishkin received an at-the-time, unreported $140,000 to stamp his name onto a 2006 paper “Iceland’s Financial Stability.”

Mishkin’s ‘Study’

For those that who didn’t follow the trajectory of Iceland’s economy, less than two years after Mishkin’s “study,” the economy crashed when it was publicized that the three leading banks could not refinance their short-term debt, quickly leading to a run on their deposits in Europe. The consequences were devastating for every Icelandic citizen. Ultimately the banks campaigned to have the taxpayers make good for them (sound familiar?) The voters in a referendum overwhelmingly rejected the banks’ suggestion for resolution of the matter. However, as is often the case, the people of Iceland are paying dearly.

Needless to say, Mishkin’s under-the-table payment came from the banks: money sanitized by the appearance that the Icelandic Chamber of Commerce commissioned the study. Mishkin’s report went a long way to counter significant international concern that cracks as massive as those in their globally warmed glaciers were growing in the Icelandic banking system, and posed a serious threat to the stability of the economy.

Mishkin, while Fed Governor, also wrote lengthy views favorable to the largest U.S. banks and argued against the existence of a housing crisis, well into its unfolding. One can conclude — I certainly do — that the disastrous Iceland “study” was not his only unreported fee from the many special interests circling the Fed.

Senator Dolt

And how can we discuss these matters without checking in on my favorite waste of space in Congress, Sen. Christopher Dodd? (Granted, there are so many, but his particular buffoonery provides me with great amusement.) It was he who warned that a decision to nominate Harvard law professor Elizabeth Warren to head a new consumer agency could produce a protracted confirmation fight.  Sen. Dodd is my favorite congressional dolt, totally befuddled by the enormity of the systemic meltdown while still loyally supporting anyone who has given him a few point edge on a home mortgage. In my last article I pointed out that he claimed that he “wanted to revamp the credit card industry,” but “they didn’t want to.”  So he didn’t!!! My kind of field general.

It appears that some Republicans and “industry representatives” were against the Warren nomination, so Sen. Dolt folded his hands, shrugged his shoulders and advised another choice. The bankers couldn’t have invented a more perk-laden stooge than this guy. Even worse, of course, is that there is nobody to succeed him who will not be lining up for their own turn at the trough while Main Street burns.

Let’s end, as we began, on a lighter note:  Click here for an amusing take on some white-collar gringos desperate for work.

(If you’d like to have Rick’s Picks commentary delivered free each day to your e-mail box, click here.)

Rick’s Picks is a trading newsletter for stock, gold, silver and mini-indexes. All trades are based on the proprietaryHidden Pivot technical analysis method.
© Rick Ackerman and www.rickackerman.com, 2010.

By Toby Connor, Gold Scents
I have been expecting the daily cycle to bottom on last Friday’s revision to GDP or possibly with Friday’s jobs report. Yesterdays big rally more than likely confirmed the daily cycle low did come last Friday.

Now we have a test coming. If the market can break above the August highs it will complete a 1-2-3 reversal. That will confirm the trend change from down to up and the odds will be good that we will test the April highs.

 
Actually I expect we will probably test and at least marginally break to new highs even if we have entered another leg down in the secular bear market. I’ll explain why.
 
Back in July I posted an article showing how big money runs technical levels in order to trick technical traders into puking up their shares. That allows big money to accumulate large positions without moving the market against themselves. Well the same thing happens at market tops and bottoms.
 
Both the `02 bottom and the `07 top occurred with a slight break of a significant technical level that immediately reversed.

 

 
My expectation is that if the market can complete the 1-2-3 reversal by rallying above the August highs we will probably see the April highs marginally broken. Now if that break is immediately sold there is pretty good odds that big money used the technical break to unload positions onto technical traders in preparation of the next leg down in the secular bear market.

Toby Connor

GoldScents

A financial blog primarily focused on the analysis of the secular gold bull market.

If you would like to be added to the email list that receives notice of new posts to GoldScents, or have questions, email Toby.

By Chris Vermeulen, TheGoldAndOilGuy

Thursday Sept 2nd, 2010
Wednesday was a big session with better than expected manufacturing surging the market 3%. In this article I will do a quick technical take on the current situation for the SP500 and gold as they are both trading at a key resistance level. also its important to know what type of price action we will get in the next 1-2 days so you can have your profit targets or protective stops in place depending on which side of the market you are currently playing.

SPY – SP500 Exchange Traded Fund – 60 Minute Chart

The market is currently in a down trend which means bounces get sold. But if you take a look at the buying volume ratio at the bottom of the chart you will notice that in an uptrend buying surges are the beginning of a rally, and during a downtrend buying surges are the end of a rally. I also want to mention that a lot of volume traded at this current level which you can see on the volume by price bars on the chart. This means there will be a lot of sellers to overcome before breaking to the upside.

The situation the market is at now makes things difficult to tell if this bounce will get sold, or if its just the starting of a rally. There are several arguments for each side but the one which I think has the most influence is the buying volume. It was very strong on this current bounce. It feels more like a rally but we will not know for sure for a couple days…

That being said, if the SP500 moves up Thursday then I would consider the market to be in an uptrend and exiting any short positions is a smart play. But if this bounce is sold and the market drops, then the 3% rally on Wednesday could all be given back and then some.

GLD Gold Exchange Traded Fund – 60 Minute Chart

Gold has continued to grind its way up to the previous top. Problem is the volume has been very light and that tells me there is not much demand for gold at these elevated prices. While we are still long gold it is crucial to have your protective stop in place so we lock in as much profit as possible for when the sharp selling spike happens.

Mid-Week Technical Take:

In short, the market feels like its trying to reverse back up but at this time its still in a down trend and trading under a key resistance level. This means trading with the trend and selling the bounces is still the play. That being said today’s strong volume makes this bounce suspect. Keeping positions small and setting a protective stop should be done as a safety precaution. The next couple days will shed some light for sure…

As for gold, I am still bullish but expecting our protective stops to be triggered any day now, which means we get paid and can mark another successful trade down on the scoreboard.

I’d like you to have my ETF Trade Alerts for Low Risk Setups! Get them here: http://www.thegoldandoilguy.com/specialoffer/signup.html

Chris Vermeulen

The Daily Reckoning

Since I am known as something of a gold bug, a lot of people write to me about gold, but since I am a paranoid lunatic, I don’t read their letters, mostly because I now call myself Marvelous Macho Grande (MMG), figuring that an established alias could potentially come in handy when the prices of gold, silver and oil shoot higher and higher as inflation in consumer prices starts going parabolic as a result of the despicable Federal Reserve creating so, so, so much money, especially so that the despicable federal government can borrow and spend that selfsame so, so, so much money.

So, you can see how a dramatic, romantic new name like Marvelous Macho Grande (MMG) would perfectly suit a guy like me, which is a guy with a theoretical massive coming increase in wealth from investing according to The Mogambo Perfect Portfolio (TMPP), which uses the Austrian school of economics (see Mises.org) and the last few thousands of years of history as Absolutely Compelling Reasons (ACR) to invest in gold, silver and oil when the government is acting so insanely bizarre, as does ours now, blithely deficit-spending a monstrous 11% of GDP, now with a national debt nearing a heart-stopping 100% of GDP, and allowing the Federal Reserve to continue to create So Freaking Much (SFM) money that, like creating too much money always does, it creates booms and bubbles that predictably, inevitably, unstoppably, disastrously go bust, leaving you, sadly, worse off than before.

So, you can see how I am not in the mood to answer emails from people who, deep down in their hearts, are pleading, “Oh, please help me, Masterful Mogambo Guru, or Marvelous Macho Grande (MMG), or whatever in the hell your name is this week: Sadly, I have not been following your terrific advice to buy gold, silver and oil as the One True Way (OTW) to end up with a lot of money without working for it, and now I need one of your famous Secret Investment Plans (SIP) to make up for lost time, else I am reduced to being the widow of a rich Nigerian banker who needs to sneak $100 million out of Nigeria and into your country. In that case, I will give you $50 million after you give me your bank account number and $5,000 in cash to pay various fees, expenses and bribes.”

Alas, I don’t have $5,000 to invest in this terrific opportunity to make a quick $50 million, as likewise there are no Secret Investment Plans (SIP), although I have spent a lifetime looking for one.

Fortunately, constantly buying gold, silver and oil is always the smart thing to do when your stupid, desperate, half-witted, corrupt, clutching-at-straws government is acting like all the other stupid, desperate, half-witted, corrupt, clutching-at-straws governments that created too much money and destroyed themselves over the last 4,500 years.

And if you don’t believe me, then maybe you will listen to the famous Richard Russell of the Dow Theory Letters, who writes, “Investors sometimes get caught up in the day to day and week to week movements in gold and silver. Don’t waste your time or energy on that, just accumulate. Standing in front of us is the greatest transfer of wealth in history. When the dust settles, those holding the gold will make the rules.”

And “just accumulate” sounds so easy because it is so easy, which is why I say, as I always say until you are tired of hearing me say it, “Whee! This investing stuff is easy!”

The Mogambo Guru
for The Daily Reckoning

No Secret to Gold Investing. Just Accumulate. originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

More articles from The Daily Reckoning….

By Jeff Nielson, Bullion Bulls Canada

Given the decades of rampant manipulation of the precious metals markets on the “short” side of trading, it is more than ironic that as the U.S. CFTC (“Commodity Futures Trading Commission”) ponders restrictions on commodities markets, it has expressed the most public concern about “speculators” on the “long” side of investing.

This comes with HSBC sitting with the largest concentrated-position in the gold market in history (“short”), while JP Morgan sits with the largest concentrated-position in the history of the silver market (also “short”). Furthermore, these concentrations (in proportionate terms) are far larger than anything seen in the history of all commodities markets.

Nonetheless, we continue to hear endless rhetoric about “speculators” disrupting markets (especially the crude oil market) – through “competing” with the buyers who actually consume these commodities through their own operations. Such “disruptive speculation” is often referred to (disparagingly) as “hoarding”.

Before I get into a direct analysis of this economic phenomenon, it would be helpful to review some basic economic fundamentals, and then first apply those fundamentals to the “short” side of commodities trading. Regular readers will be familiar with one of my economic mantras on commodities markets: anything which is under-priced will be over-consumed.

In fact, this isn’t really “economics”, but merely an expression of common sense. If chocolate bars were suddenly re-priced at a dime apiece, store shelves would be cleaned-out in days. Manufacturers’ inventories would then quickly be drained. This would soon be followed by acute shortages in the global cocoa market, and very possibly the sugar market as well.

At some point, not too far down the road, such warped pricing (totally against economic fundamentals) would create utter havoc in these markets – as acute shortages occurred – leading (inevitably) to a massive price-shock, not only to the chocolate bar market, but also with the cocoa market, and likely the sugar market, too. These price-shocks, in turn, would cause serious disruptions in other markets which rely upon these commodities.

In short, excessively low prices are at least as damaging and disruptive to markets as excessively high prices – and arguably much more so, since they lead to two massive distortions to markets: first over-consumption (which depletes inventories and stockpiles), followed by a massive price-shock (the only way to curb demand to a sustainable level).

If we replace the words “chocolate bar” (in our example) with the word “silver”, we see what utter havoc has been created in this market, through JP Morgan being allowed to accumulate and hold the largest, concentrated (short) position in the history of commodities market.

Noted silver authority Ted Butler has estimated that 90% of global stockpiles of silver have been used-up, thanks to decades of this market-manipulation by JP Morgan – along with smaller, but equally nefarious allies in this market. With decades of manipulation behind us, and global inventories and stockpiles already decimated, we have gone through the period of “over-consumption” and are rapidly approaching the massive price-shock – which became inevitable the day that JP Morgan (and fellow banksters) embarked upon this permanent-manipulation scheme. It is the years of ceaseless manipulation, combined with JP Morgan misrepresenting their activities in this market which makes this more than merely “illegitimate”, but also illegal.

Not surprisingly, growing numbers of investors are gravitating toward this market. They are investing in a commodity which has become genuinely “scarce”, due to the nefarious (and illegal) manipulation of this market by JP Morgan and allies. How is the brain-dead media reacting to these market events?

Far from condemning the indefensible conduct of the bankers (on the short side), it is silver investors who are depicted as “speculators” – which as I explained earlier, is a “four-letter word” in the eyes of the U.S. regulator.  And rather than describing the activity of these “speculators” as the very sensible decision to stock-up on a commodity in short supply, the media depicts this activity as “hoarding” – yet another term with negative connotations.

More articles from Bullion Bulls Canada….

Bullion Vault
Yikes! The WSM nearly shakes the WEM from his TOADP…

FROM BLOOMBERG we get the bad news that “Bank of England Governor Mervyn King said inflation is likely to exceed the UK government’s upper 3% limit in coming months as higher sales taxes drive gains in consumer prices,” reports the Mogambo Guru in Tampa, Florida for The Daily Reckoning.

UK prices “rose 3.1% in July from a year earlier after climbing 3.2% in June.”

Apparently, Dr.King has to write a letter about it, probably something along the lines of:

“Dear British taxpayer,

“Our stupidity and incompetence have caused prices to rise more than 3% in a year, which means you are all doomed unless we government lowlife halfwits stop being incompetent, especially as regards monetary policy in general and creating far too much new money in particular, which we won’t. Terribly sorry, old chap.

“Respectfully yours,

“Mervyn.”

Of course, this cruel punishment of having to write a letter is harsher than the justice meted out in the USA, as New Jersey, and everybody connected with their pension disgrace, lied, hid relevant information and data, and is, according to the SEC, being charged with the fraud and corruptions of “withholding and misrepresenting pertinent information about its financial situation” so that municipal bond sales could continue.

Actually, in the UK, their consumer price index (CPI) rose at an annual rate of a scary 3.1% in July, which was only down from a slightly-scarier 3.2% rise in prices in June.

And inflation in something called the retail price index (RPI) came in at a terrifying 4.8% annual rate of increase! Yikes!

Here in the USA, according to The New York Post reporting a “recent JPMorgan Chase study” of prices at Wal-Mart showed that “the world’s largest retailer has raised prices by nearly 6% on average over the past six weeks,” and, “Prices on certain items increased by more than half,” which is an instant inflation rate of 50%, which all thinking people agree is a lot of inflation! Wow!

Now, if you are like me, then you are already calling for rough vigilante justice and/or some mindless, merciless mob rule, an obviously hysterical over-reaction when compared to saner heads saying to simply let the justice system take care of these government and Federal Reserve creeps, and they will all be found guilty and locked away in a dark and dank dungeon for the rest of their lives, and you can go to the prison on visiting day and laugh at them and make fun of them right to their snotty faces, and tell them how much you enjoy seeing them slowly rotting in prison as punishment for having caused so much suffering and misery with their greedy, self-serving arrogant treachery.

So, we all finally agreed that they would let me up from being pinned rudely to the ground if I agreed not to advocate open revolution, rebellion of any kind, mob rule, vigilante justice, or have anything to do with any extra-legal “rounding up” of any, or all, of these malfeasant monsters for any punishment, well-deserved or not.

They, in turn, were required to stipulate that this Whole Stinking Mess (WSM) was proof of how justified I was in having so little faith in a lying, moronic, rat’s nest of incestuous government thievery and lying.

So, what happened to these lying, thieving Jersey scumbags who ripped us off? According to Ian Mathias, in his essay “Another Warning Shot for Bond Investors” here at The Daily Reckoning, “the penalty for this outright fraud” is “Nothing.”

In fact:

“The State of New Jersey will pay the SEC precisely zero dollars. Not one state employee will pay a fine either, or go to jail…not even lose his job. In fact, the State didn’t even have to admit wrongdoing. ‘New Jersey agreed to settle the case without admitting or denying the SEC’s findings,’ calmly explains the SEC press release.”

About this time my fists clenched into Mogambo Fists Of Rage And Outrage (MFORAO), and I am screaming obscenities at them, and curses upon them, and exhorting the excitable gathering crowd to do the same and then converge on Washington, DC to take over the US government in some spontaneous revolutionary rebellion, whereupon everybody agrees to place me, The Fabulous Mogambo (TFM), on the Throne Of Absolute Dictatorial Power (TOADP), and thus begin the wonderful reign of the Fabulous Emperor Mogambo (FEM)!

This is where I bring back gold and Silver Bullion as the currency of the United States to fix the dollar’s value to the only tangible things that have survived 4,500 continuous years of history, explaining their required use as money as written in the Constitution of the United States, and I will be a true American hero, and everyone will love me and proudly name their children Mogambo, a proud name meaning, “The wise and handsome one, and hung like a horse” instead of meaning, you know, other stuff not as complimentary.

After doing that, I would probably have lunch, and maybe a nice nap. Then, when I got up, I would eliminate, at a stroke, all barriers to real entrepreneurial free-market capitalism that don’t address actual criminal frauds and corruptions, setting us on the road, at last, to Utopia.

The closest I can come to providing a parallel is in the movie It’s a Wonderful Life when Jimmy Stewart returns to Bedford Falls after Clarence the Angel gives him his wish to have “never been born.” Jimmy discovers that the town has turned into Pottersville, where the previously sedate downtown area is now a hoppin’ and boppin’, be-boppin’ thriving community, where one finds blaring marquees advertising “Girls Girls! Girls!”, all in a fun-loving, laughing, whirling, jazz-crazed, alcohol-fueled boomtown extravaganza of “party down, dudes and dudettes!”

I will not get into criticizing Jimmy Stewart when he finds out he is not married anymore, since he had never been born, and he gets weird about it (“Mary! Mary!”), instead of saying “Yippee!” and happily heading back to the party, hopefully to run into Violet, and I will stick, instead, strictly to economics.

From a research standpoint, I had been hoping that there was something in the official records of Pottersville that would indicate the conditions of the local economy under the wise stewardship of Mr. Potter lending money for capital equipment to satisfy real demand, instead of the previously lackluster economy of crumbling Bedford Falls, where the Savings and Loan was apparently so broke that they had all Sam’s money in Joe’s house, and Sam said to Joe, “What are you doing with my money in your house, you moron?” and Joe said, “Who you calling a moron, you ugly little snot?” and there was a big fight, all of which was later completely edited out of the movie, which explains why not many people know about this ugly part of the story.

The point is that the people affected by my wholesale slicing of the government payrolls and paring of the list of Pottersville government parasites would be employed as new-hires by new private businesses, new industries springing up as solid, demand-led growth, and hired as part of a brave new economic tomorrow of zero inflation, higher quality goods and services with lower prices, thus raising the standard of living for everyone, which is the gift of the free market. Whee!

Well, it turns out that official records of Pottersville are, mysteriously, missing, and there is constant denial at all levels of government, where most of their “official government policy” is summarized as, “It was only a movie, you nitwit! They made it all up! There is no Pottersville, and there never was! What in the hell is wrong with you that you keep calling us up and asking this stupid question all the time?”

So, it looks like the truth will never be known, so my advice is to keep buying gold, silver and oil until it all gets sorted out, one way or the other. By that I mean, of course, that one way is to end badly, and the other way is to end very badly.

Except if you are buying gold, silver and oil today, because then it will all end happily for you, and you will say to your son Mogambo Junior, “Whee! That investing stuff was easy.

Buy Gold and silver at BullionVault today…

The Gold Audit

From The New York Sun

Tuesday, August 31, 2010

http://www.nysun.com/editorials/the-gold-audit/87065/

Congressman Ron Paul is in the news again, this time for calling for an audit of America’s gold reserves. He issued the call in an interview with a news service run by a gold dealer, Kitco News, which reported that the congressman intends to introduce legislation calling for such an audit of what we hold at Fort Knox and other sites, such as the New York Federal Reserve Bank in lower Manhattan. It’s the kind of thing people tend to laugh at, the way they once did when Doctor Paul launched his legislative campaign to audit the U.S. Federal Reserve. Yet after years of persistence by the Texas Republican, Congress finally passed a law requiring an audit of the Fed. It passed the mandate by a wide margin and a bi-partisan vote. So whatever snickering there will be over Paul’s proposal for an audit of the gold holdings, it will be more muted.

We are not in the camp that believes a vast conspiracy has stolen America’s gold. But neither are we in the camp that sees any harm to an audit. As Paul put it to Kitco News: “If there was no question about the gold being there, you think they would be anxious to prove gold is there.” He has been pressing the point, on and off, since the early 1980s, when he was a member of the United States Gold Commission. He reminded the interviewer from Kitco that his recommendation back then that Congress audit the gold reserve was rejected by 15 of the Gold Commission’s 17 members. It strikes us that it would not be a bad thing were an audit to keep our national mind focused on our gold holdings — particularly at a time when the value of the dollar has collapsed to less than a 1,200th of an ounce of gold.

If that weren’t enough of a warning, the Bloomberg wire reports that “gold’s most-accurate forecasters” are predicting that the value of the dollar may fall to but a 1,500th of an ounce of gold. It reports that what it calls the most widely held option on gold futures in New York is for the dollar to fall to but a 1,500th of an ounce of gold by December. The lowest value to which the dollar has plummeted so far is a 1,266.50th of an ounce of gold, which was the value of the dollar recorded on June 21. Bloomberg reports that holdings through what it calls “bullion-backed exchange-traded products” are within a 10th of a percent of the all-time high of 2,075 metric tons. It quotes one Deutsch Bank analyst, Dan Brebner — whom it calls “the most accurate forecaster so far this year” — as predicting the value of the dollar may drop to a 1,550th of an ounce of gold.

Suddenly the question to ask is not why in the world is Paul asking for this audit but why is he the only member of Congress making our gold holdings an issue. It was only a decade ago, at the start of the presidency of George W. Bush, that a dollar was worth nearly a 250th of an ounce of gold. As it started dropping, these columns warned repeatedly that it was a signal to be heeded, starting with “The Bush Dollar,” which was issued in December, 2005, and carrying on up through “The Pelosi,” “The Greenspan,” “The Bernanke,” “Ron Paul’s Prescience,” “$1,000 Gold,” “The Obama Dollar,” “Golden Opportunity,” and “Paul Ryan’s Question,” just to name but a few of the editorials of the Sun that have touched on this topic.

By our lights a weak dollar policy is a strategic mistake for America. We felt that way when President Carter and his treasury secretary at the time, W. Michael Blumenthal, were running a weak dollar. We’ve never credited the idea that one cannot have a strengthening dollar and a growing economy, an idea that should have been thoroughly discredited during the Reagan years and the Clinton years. One could say that a strong dollar is a good idea that is bi-partisan in pedigree. But what good can come of a weak dollar policy, such as the one being pursued by Messrs. Obama, Geithner, Bernanke, Mrs. Pelosi, and the others who have various levels of constitutional — or, in the case of Mr. Bernanke, non-constitutional — authority over policy in respect of America’s money? As the value of the dollar evaporates, why in the world wouldn’t ordinary Americans want to have the gold holdings they’ve been told about for so many years given a full and independent audit?

* * *

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9:40p ET Wednesday, September 1, 2010

Dear Friend of GATA and Gold:

Congratulations to Kitco News and its reporter Daniela Cambone for having broken last week what this week Fox News made into a national story, the call by U.S. Rep. Ron Paul, R-Texas, for a serious audit of U.S. gold reserves. The Fox News story, broadcast and posted today and appended here, is notable for two reasons apart from calling attention to the audit issue.

First, the Fox News story quotes Paul as remarking that the audit should determine not only the simple presence of gold in the U.S. government’s vaults at Fort Knox, Kentucky, and elsewhere but also “whether any of it has been obligated.”

That is, Paul is fully aware of the Federal Reserve’s involvement in gold swaps with foreign banks, an admission made by Fed Governor Kevin M. Warsh a year ago in the course of GATA’s litigation against the Fed under the Freedom of Information Act, even as Warsh insisted that the Fed’s gold swap arrangements must remain secret:

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

And second, the Fox News story is notable for the refusal of the Treasury Department to comment about the gold audit issue: “Representatives from the Treasury Department and U.S. Mint did not respond to requests for comment on Paul’s proposal.”

Imagine what would happen if mainstream financial news organizations began to put detailed, coherent questions to the Fed and Treasury Department about the disposition of the U.S. gold reserve, the gold swap arrangements, and the overwhelming if obscure public record of Fed, Treasury, and other U.S. government agency interest in suppressing the gold price:

http://www.gata.org/taxonomy/term/21

Already the Treasury Department is clamming up just as the Bank for International Settlements clammed up in July when the Reuters news agency was shamed into pressing the BIS with questions about the unprecedented gold swaps the BIS recently had undertaken surreptitiously:

http://www.gata.org/node/8834

Practically everyone seriously involved in the financial markets now acknowledges that they’re all manipulated all the time by central banks — except the gold market, which can’t quite be talked about candidly yet. But thanks to Kitco News and Fox News, the gold market is another step closer to real journalism.

An introduction and link to the Kitco News story about Paul’s proposal can be found here:

http://www.gata.org/node/8954

Audio of the Kitco News interview with Paul can be found here:

http://www.kitco.com/KitcoNewsVideo/kitco_news.htm

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

Rep. Paul Calls for Gold Audit, Questions Whether Fort Knox Is Empty

From Fox News, New York
Wednesday, September 1, 2010

http://www.foxnews.com/politics/2010/08/31/rep-paul-calls-fort-knox-audi…

There’s gold in them thar hills. Or is there?

Texas Rep. Ron Paul, suggesting America’s reserves may not be as robust as officials claim, is calling for an independent audit of the U.S. gold held at Fort Knox and other facilities.

The Republican congressman known for his fierce opposition to virtually everything the Federal Reserve does says the public deserves to know what’s behind the fortified walls of America’s gold vaults — particularly in case gold is ever reintroduced as a basis for U.S. currency.

“It’d be nice for the American people to know whether or not the gold is there,” Paul told Fox Business Network. And if it is all there, he said, the public should know whether any of it has been obligated.

A spokeswoman told FoxNews.com the congressman wants to introduce the bill in September when Congress returns from recess.

Fort Knox claims billions of dollars worth of gold are stored away in its secret vault. The Fort Knox facility, a hyper-secure fortress in Kentucky that is part of quintessential American lore, is encased in 750 tons of reinforced steel, as well as thousands of cubic feet of concrete and granite. No visitors are allowed.

Though Paul no doubt wants a more thorough inspection, the U.S. Mint is subjected to regular audits, including at Fort Knox. The Mint claims gold is removed in “very small quantities” for this purpose alone, and that no other gold has been transferred in or out of the facility for a long time.

The latest audit, conducted by KPMG, did not appear to detail U.S. gold holdings — dealing more with gold and silver sales, coin circulation, workplace environment, and other issues — but did state that gold and silver continue to be held at Fort Knox.

Scrutinizing U.S. monetary policy, though, is nothing new for Paul. Last year he pushed on Capitol Hill a bill to audit the Federal Reserve, an effort that ended with a Fed audit provision tucked inside the financial regulation package.

Paul, in an interview last week with industry publication Kitco News, first outlined his next campaign.

He said there is “reason to be suspicious” about U.S. gold holdings and suggested officials were manipulating the price of gold to prop up the perceived value of paper money. Paul said “it is a possibility” that neither Fort Knox nor the New York Federal Reserve vaults have any gold. He also said he will call for the U.S. government to legalize the use of gold and silver as “legal tender” alongside the U.S. dollar. Let them compete, he says.

“If people get tired of using the paper standard, they can deal in gold or silver,” he told Kitco News.

Representatives from the Treasury Department and U.S. Mint did not respond to requests for comment on Paul’s proposal.

Gold and silver investment has drawn renewed attention amid concerns about the stability of the U.S. dollar. The United States moved away from the gold standard in the early 1970s, but Paul said it’s good to know what the United States holds just in case. He warned the U.S. government is setting the stage for a depression by trying to print, spend and regulate its way out of the last recession.

“Who knows? Someday we might want to have a gold standard again and quit all this printing-press money, so it would be nice to know how much we have,” Paul said in the interview with Fox Business Network.

* * *

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Robert Kientz submits:

This is Part 4 of a 5-part series on gold and silver price analysis. Please read Parts 1, 2, and 3 before proceeding to read this article as each article in the series builds upon the last.

Those who have been following precious metals manipulation in the market have been waiting a long time for the explosion in prices. Since gold is hovering around $1200 now and silver broke $19 very recently, it seems as though the breakout has occurred.

Read more »

Jeff Nielson submits:

Given the decades of rampant manipulation of the precious metals markets on the “short” side of trading, it is more than ironic that as the U.S. CFTC (“Commodity Futures Trading Commission”) ponders restrictions on commodities markets, it has expressed the most public concern about “speculators” on the “long” side of investing.

This comes with HSBC (HBC) sitting with the largest concentrated-position in the gold market in history (“short”), while JP Morgan (JPM) sits with the largest concentrated-position in the history of the silver market (also “short”). Furthermore, these concentrations (in proportionate terms) are far larger than anything seen in the history of all commodities markets.

Read more »