By R. D. Bradshaw, GoldSeek

The gold-plated, tungsten-filled bars story hasn’t gone away.  Not only has it continued to pop up in various gold and hard-money, investment-advisory letters; but even the populous press publishers, like the American Free Press and Rense.com, have found it expedient to publish material on it as well.

Recently, rense.com had it in an article on “More Tungsten Fake Gold Bars Found” (from Coin Update News of Mar 2, 2010, by Patrick Heller).  This one said that W. C. Heraeus (a metals refinery in Hanau, Germany) found a tungsten, gold-plated, 500-gram bar it received from a bank.  A Heraeus employee was suspicious of the bar.  To check out his suspicions, he cut it in two.  It was found to be tungsten with a gold plate.  I would just add here that the find involved a 500-gram bar (reportedly 16.0755 troy ounces?) and not a 400-ounce bar.  There is a considerable difference between the two.

The Coin news report repeated the rumor of fake, gold-plated, tungsten bars allegedly found in the Chinese central bank.  The Coin story concluded that “there has been almost a total blackout on news coverage of this story.”  Well, this charge can’t be laid to gold investor news sources and letters as numerous attempts continue to be made with regularity to try to validate and legitimize the original story that cropped up last fall in the vein of an alleged 1.3 to 1.5 million 400-ounce bars produced in the US to flood/fool various nations in the world.

The Take at Analysis-News.com

Www.analysis-news.com eventually weighed in on the question with some material on it on Dec 3, 2010 in the Goldsmiths 116, as published bywww.goldseek.com, and in an article on Gold Plated Tungsten Bars, Yes or No?, as published by www.safehaven.com and www.marketoracle.co.uk.  Once more, I feel compelled to weigh-in on the question because I fear the real issues are not being addressed and people are still being grossly misled.

The original story that first came to me was a sensational story that if true it would have rocked the whole political and economic structure of not only theUnited States but many other countries in the world.  It was a fantastic story on the surface which would whet the appetite of gold and hard money publishers as well as the populist press.  Frankly, I took it at once as a questionable rumor following another questionable rumor from the same source that some big gold buyer on COMEX had tried to take delivery on a futures contract and COMEX/short sellers could not deliver.  I took both of these stories as being unsubstantiated, far-out rumors which I believed could lead to misinformation among honest people.

Read more….

GoldSeek

(Conversations with Casey: Interviewed by Louis James, Editor, International Speculator)

L: Doug, last time we spoke, you said quite a bit about debt, in the context of your expectation that the euro is on its way out. At the end of that conversation, you mentioned, of course, that the problem is not limited toGreece, nor the eurozone. America as a country has become a world-class debtor, and many Americans seem to think a maxed-out credit card is a reason to get a higher credit limit, not to economize. It’s like a global epidemic. Let’s talk about debt.

Doug: Sure. This is a story that’s going to end very badly for a lot of people. I’ve said this before, in many different ways, but I think it’s worth saying again, because most people just don’t grok it…

L: Grok. From the Martian word for “drink” and “understand.” In Heinlein’s novels, water was a critical element of Martian culture – makes sense, for a desert planet. When you grok knowledge, as when you drink water, you don’t just hold it in your mouth and spit it out. You take it into yourself, it goes into your blood, and eventually into every cell in your body; it becomes part of you. This is heavy-duty understanding… Sorry for jumping in with the spontaneous lecture. I just suspect many readers will not know the term.

Doug: Or put another way, in the negative case, most people just don’t get what money really is – and what it isn’t. They take it as a given, as part of the cosmic firmament. But it’s not. A prime example of this is the mistaking of debt for money, a phenomenon David Galland pointed out in a Casey’s Daily Dispatch a few weeks ago. This is why the entire world’s monetary system today is headed for a disastrous failure. And this is absolutely inevitable. There’s no way around it.

Read more….

By Trace Mayer, GoldSeek

The IMF gold has serious geo-political ramifications in the background because of the nature of foreign exchange reserves, credit default swaps and gold. Wikipedia:

South Korea and Japan are both home to large numbers of United States troops and neither are going to invite a nuclear attack.  The Kuomintang, which the US backed, retreated to Taiwan when they lost power and China still asserts their ownership over the tiny island and the US continues to honor their agreement to defend Taiwan.  Russia has been discharging dollars and acquiring gold while Brazil is bucking the buck.  Neither China nor India have significant reported physical gold holdings; they need a hedge to the major currency illusions.  In my book The Great Credit Contraction the liquidity pyramid represents the FRN$ will be the last major currency to evaporate.

Read more….

By Brady Willett, GoldSeek

On March 20, 2007 China’s Central Bank governor, Zhou Zianochuan, had this to say about China’s burgeoning reserves:

“Many people say that foreign exchange reserves in China are (already) large enough…We do not intend to go further and accumulate reserves” Zhou Xiaochuan

The above comments were made when China had a $1.2 trillion stockpile in foreign exchange reserves. Over the last 32-months this figure has almostdoubled to $2.399 trillion (as of December 2009). The lesson, if otherwise unclear, is that China’s policy ‘intentions’ are not necessary synonymous with policy actions.

China Says Buy Gold (on weakness)

Those that thought China was going to dump U.S. Treasuries and buy all the gold on the planet were disappointed by recent comments from Yi Gang, head of the State Administration of Foreign Exchange (SAFE).  But for those in the know Yi’s words simply meant more of the same:

Read more….

By Deepcaster, GoldSeek

“Greece is only the latest in a series of countries that have faced this type of crisis in recent memory. Not too long ago the same types of fears were mounting about Dubai, and before that, Iceland. Several other countries (Spain, Portugal, Ireland, Latvia) are approaching crisis levels with public debt as well. Many have strong ties to Goldman Sachs, and the case could easily be made that default could have serious implications for big USbanking cartels. Considering the ties between the Fed and these big banks,it is not outlandish to wonder if the US taxpayer is secretly bailing out the entire world, country by country, even as our real unemployment tops 20 percent. Unless laws are changed to allow a complete and meaningful audit of the Federal Reserve, including its agreements with foreign central banks, we might never know if this is occurring or not.” (emphasis added)

“Another Reason to Audit the Fed”

Rep. Ron Paul quoted in Casey Research Report, 2/18/10

“Harvard professor and former IMF chief economist Ken Rogoff says the United States has been in ‘default’ before, when it went off the gold standard, and there is no reason why it won’t do so again…

As an example, he points out that the United States defaulted on its debts during The Great Depression.

‘We went off the gold standard,’ he observes, and the price of gold, which used to be $20 an ounce, suddenly jumped to $35 an ounce.

‘That was a default on domestic debt, Rogoff observes. ‘You would be amazed at how many countries have amnesia with respect to their default(s).’”

“Rogoff: U.S. Has Defaulted Before, May Do So Again”

Julie Crawshaw, Moneynews, 3/5/10

Investors were understandably dismayed at the Savaging their Portfolios took in the Equities Market Crash lasting from the late Summer, 2008 and through March, 2009.

Unfortunately, given present and prospective Economic and Market Realities, Investors are likely looking at another Massive Loss in Paper Portfolio “Wealth” soon, unless they act to prevent it.

Dismay at past Portfolio Losses and prospective future ones is understandable but perplexity should not be.

Fortunately, there are Opportunities to insulate oneself from the risks of holding one’s “wealth” in Paper (and to profit as well), Paper which the aforementioned Takedowns (and those which we anticipate) have revealed to be less valuable than earlier thought.  Indeed much of the Paper (and electronic equivalents) which suffered dramatic Takedowns in 2008-2009 has thus been de-legitimized as a SECURE Repository of Wealth.

Fortunately also, employing Strategies which provide insulation from such Takedowns also provide opportunities to profit, as we indicate below.

Read more….

By Julian D. W. Phillips, GoldSeek

We are hearing from some sources that the gold price will tackle previous highs then fall to $850.   We did hear this before gold rose to $1,100, with many believing that then there would be a correction to $850, but it didn’t happen then either.   What happened was that gold held its ground then broke upwards through resistance to set itself on track for higher prices.

If previous highs are hit and if a double top is formed, then a major correction could come about.   But there are two ‘ifs’ there, which is not solid ground on which to stand.

It is at these times when we bring in the fundamentals.   Many will say that the Technical picture can stand alone.   Well in a situation that has to read a Technical picture still to come, that would be dangerous.

In the last few years the gold market has changed considerably from essentially a market where there was little investment interest to one where investment interest dominates the market.   That investment interest is now at Sovereign wealth fund and central bank level, areas well beyond past market shapes.   Past shapes defined the Technical patterns we now see.   Technical patterns that are now being set are based on a far bigger, different natured market too.  The Technical picture is still very valid, but must be tempered by the new fundamentals.   So let’s not ignore these changes when assessing future price moves.

One only has to watch the media, written and watched to see that it is so easy to fall victim to persuasive, if unbalanced presentation.   TV journalists in particular have to present a story, one with drama and presence, simply to keep the audience watching.   This can easily detract from realities.   For example, Mr George Soros was accurately quoted as saying that gold was the “ultimate bubble”.   The press interpreted that as him discrediting gold.  However, to the contrary he was pointing forward to the future of gold, when it would become the “ultimate bubble”.   How do we know, simply because he has been buying the shares of gold Exchange Traded Funds and shares in Nova gold, a gold exploration company.   So it is more likely that he is buying into gold with a tremendous gold price rise in view.   This is now obvious, but to date we have not seen a change in the views on his position.   He’s read them, better than they read him.

Read more….

By Toby Connor, Gold Scents

I can virtually guarantee that what I’m about to suggest isn’t on anybody’s radar screen.  But before I share my prediction, a little background analysis is in order.

There have been seven previous bull markets that were born in the depths of vicious bear markets similar to what we just went through.  Each one of those bulls racked up impressive gains during the initial thrust out of the final low.  Throwing out the `32 to `37 bull as an anomaly not likely to be repeated, the average gain for the first two legs of bulls with similar DNA as our own has been between 41% and 73%.  After the second leg each one of these bulls underwent a mild corrective pullback of 8% to 14%.

I’ve been looking for that pullback since December and we obviously got it from mid January into early February.

Next I’m going to put up a long term chart of the S&P from the `02 bottom to present so we can make some comparisons for what should and should not happen in a “normal” bull market…if there is such a thing.  Both bulls were born on the back of massive liquidity injections by the Fed.  So it’s not surprising they have followed a similar path…well at least up to now.

Generally we will see the most aggressive moves at the beginning and the end of a bull market.  At the beginning smart money piles into perceived

value.  At this stage of the game retail traders are still too shell shocked from the bear to trust the rally.

Finally towards the end of the bull, retail investors will panic into the market on fears of getting left behind sending the market surging higher.  This is of course when smart money is unloading their shares.

You can see that the `02 -`07 cyclical bull followed this script almost to a T. The sharpest rallies occurred from March `03 to early `04 and then again as the market surged out of the `06 bottom into the final top in October of `07.

The cyclical bull we are in right now is about to morph into a completely different animal than just about any other bull market in history.  And most certainly this bull will not fit in the same category as the `02-`07 bull.  I think we are about to bypass the second phase of a normal bull market and jump straight to phase three, the ending stage.

This is a bull spawned by the printing of literally trillions and trillions of dollars by central banks around the world.  You can see by examination of the chart above that this bull has been much more aggressive than the last one, rallying over 70% in its first 10 months.

The recent move to new highs by the Russell, Mid Caps, and Nasdaq suggests that the third leg of the bull is now underway.  As most intermediate term rallies last 20-25 weeks trough to trough and this rally is on week 4, we probably have at least 10 to 15 weeks left before we can expect a top.

Now keep in mind that this has transpired while the dollar has been rising. As a matter of fact, the dollar is the key element in what I’m about to suggest.

So next, let’s take a look the dollar.

I’ve marked the last two major 3 year cycle lows with a blue arrow.  Now to understand where I’m going with this you need to understand the concept of left and right translated cycles.

A left translated cycle is a cycle that tops left of center.  For instance, if the rally out of a 3 year cycle low were to top out in less than 18 months we would consider it left translated.  Generally speaking the majority of cycles that top in a left translated manner move below the prior cycle low.

You can see in the chart (above) that the 3 year cycle that began in December of 04 did in fact top in less than 18 months.  As expected it broke to new lows at the next 3 year cycle low in `08.

We are currently in the same position in this 3 year cycle as it has obviously topped in a left translated manner.  As such, we should expect to see the dollar break to new lows by the next major 3 year cycle low due sometime in 2011.

Now if we zoom in a bit I’ll tie this together with how it relates to what I think is brewing in all asset markets.

There’s no doubt the rally in the dollar over the last three months has been violent (the most violent rallies occur in bear markets).  However, as you can see from the chart below, so far the dollar has not been able to move above the peak of the last intermediate cycle.

We now have a failed intermediate cycle in the making. If the dollar fails to break the June `09 highs and continues to roll over it is in jeopardy of succumbing to the secular bear trend again.

Next I’m going to note that last week was the 14^th week of the dollar rally. The intermediate cycle in the dollar rarely lasts more than 20-25 weeks so not only is the dollar getting deep into an intermediate cycle and in jeopardy of topping at any time but it’s also contending with the multi-decade resistance level at 80.

Not only that, but sentiment has now turned to extreme bullishness for the dollar and extreme bearishness on the Euro.  That is a recipe for running out

of buyers of dollars and a prescription for a violent short covering rally in the Euro.

Now remember, the stock market has been rallying despite the dollar. Oil is over $80 despite a strong dollar. Copper is only about 15% from all time highs despite a strong dollar. Gold, the strongest commodity of all, is holding well above the prior bull market high of $1025 in defiance of a strong dollar.

All asset classes are now wound up as tight as a drum. If, or should I say when, the dollar begins the trip down into the next intermediate cycle low all assets are set to explode higher.

As hard as it is to believe I think there’s a very good possibility that the third leg of this cyclical bull could match the first leg and tack on 200-300 points in the next few months.

I think virtually everyone underestimates the effect that the multi-trillions of dollars the Fed has pumped into the system is going to have on all markets.

Unfortunately that’s probably the single worst thing that could happen for two reasons.

First, I’m afraid that not only will the stock market surge higher but so will the commodity markets in an inflationary explosion.  It was $147 oil and $4.00+ gasoline that eventually broke the back of the global economy in `08 when it was already reeling from a bursting credit and real estate bubble.

Second, I’m afraid the average investor is going to fall for the hype that the Fed has “fixed” all of our problems.  If the S&P is trading north of 1400 it’s going to appear that the coast is clear.

Nothing could be further from the truth, so when the market tops and rolls over into the next bear phase virtually no one will recognize what’s happening and everyone will again get sucked down into the depths of the bear.

Only this bear will be much worse than the last one.

This bear won’t be caused by problems in the credit markets. No, this bear is going to be driven by structural problems in the currency markets and soaring inflation. Unfortunately we aren’t going to fix a currency crisis by printing money.  Money printing is going to be the cause of the crisis in the first place.

The only asset class that is going to offer any protection in this environment is commodities. And the one sector that will thrive in a currency crisis is the precious metals.

Not only will gold and silver outperform in the pending inflationary surge, but they will protect investors during the inevitable crisis that the Fed’s insane monetary policy is going to unleash next year.

Toby Connor

Gold Scents

A financial blog with emphasis on the gold bull market.

The Daily Reckoning

It was a great day in the currency markets for investors who own currencies or metals, as the dollar slid versus every asset over the past 24 hours.

The big news driving the dollar lower was the ‘leaking’ of Obama’s pick for Vice-Chairmanship of the Federal Reserve. He apparently has chosen Janet Yellen, the Fed Bank of San Francisco President. Yellen has recently been sounding rather dovish on interest rates, and therefore her nomination has all of those who were expecting an early rise in US interest rates heading for the exits. At EverBank, we have never bought into this ‘US interest rates are going higher in early 2010’ camp. Yellen has pretty strong credentials, as she served as President Bill Clinton’s chief economist in the 1990s; and will certainly be approved by the Senate.

So what will her appointment to the Vice Chairmanship mean for the Fed policy? The Vice Chairman doesn’t get an extra vote, and their vote is still just one of several. The big difference is that the Vice Chairman gets a permanent vote on monetary policy, while the other Fed heads only get a vote one year out of every three as a regional Fed chief. Therefore, the Vice Chairman has three times more influence on Fed policy and the direction of interest rates.

And Yellen wants to keep interest rates low in order to continue stimulating our economy. Last month she said the US economy “still needs the support of extraordinarily low” interest rates. She is a strong supporter of Bernanke, and has been a key advocate of the massive expansion of the central bank’s balance sheet, even as some other regional Fed officials have been calling for a pull back of the monetary stimulus. Yellen spent much of her career at the University of California at Berkeley, and is considered a leading expert in the causes and implications of unemployment. This background has shaped her opinions on monetary policy, which she believes should be used to promote ‘full employment’ rather than ‘price stability’.

Obama will also get to appoint two other governors, giving him the ability to reshape the Fed’s seven member Board of Governors. I am a bit biased, but it worries me a bit when those directing our monetary policy are mainly from NY and California. The data shows that these are the exact areas of the country that are in some of the worst financial shape! Doesn’t it scare anyone else that these individuals were in leadership positions and directed policy in states that are now basically bankrupt? How about choosing some individuals who are from states that aren’t in dire financial straights? I know it is becoming increasingly more difficult to find any US state in good shape, but why do we continually pick folks from the places where the economic downturn has been the worst?

Speaking of financial leaders who were asleep at the switch and still got kicked ‘upstairs’ to try it again; Treasury Secretary Geithner is taking some heat in Europe. The EU has proposed regulating hedge funds and private equity funds that operate in Europe in an attempt to make financial disclosures more transparent. Geithner is vehemently opposed to the EU proposals, and has enlisted the backing of the UK. Geithner is afraid the tighter regulations will lead to discrimination against US firms operating in Europe. The Europeans continue to be upset about the role Goldman and other US banks played in attempting to bring down the euro (EUR). It will be interesting to see how all of this plays out.

The euro moved nearly a full cent higher in overnight trading on optimism that Greece’s budget crisis has been contained. The successful bond offering in Portugal seems to have emboldened traders who are moving back into the euro, believing the worst is now over. German Finance Minister Wolfgang Schaeuble helped strengthen the euro with some tough words for EU members who continue to flout debt rules. Shaeuble has endorsed Chuck’s idea of a European monetary fund to help deficit plagued states, but wants the lending to be tied to strict conditions. “Should a euro-zone member ultimately find itself unable to consolidate its budgets or restore its competitiveness, this country should, as a last resort, exit the monetary union.” Shaeuble wrote in today’s FT. Tough talk like this had led many to believe that even if Greek can’t fix their problem, they won’t destroy the euro, as in a worst case scenario, they would simply be thrown out of the EU.

The Swiss franc (CHF) was up versus the US dollar, but weakened a bit versus the euro after the SNB kept rates unchanged. While the interest rate non-move was widely predicted, the statement accompanying the rate announcement hurt the franc. The central bank said it “will act decisively to prevent an excessive appreciation of the Swiss franc against the euro.” This language has refueled the intervention fears and pushed the franc lower versus the euro.

The British pound (GBP) climbed higher versus the US dollar for a second day after a report showed UK housing prices rose in February. The increase was the fastest pace in more than seven years, with prices jumping 1.9% compared to January. But this report is in direct contradiction to other data which shows values have been falling recently. Apparently there are much fewer transactions, making the numbers volatile and causing many to believe this big positive number will be revised down. I say take advantage of any pound strength to exit, as this currency will continue to move lower in the long term.

Moving to this side of the pond, the weekly unemployment numbers came in a bit worse than predicted. 462 thousand applied for unemployment benefits last week, 2Khigher than estimates, but slightly less than last week’s number. Other data showed the trade balance narrowed slightly, but we still have a $37.3 billion deficit.

Today we are scheduled to get the US retail sales numbers, which are expected to have contracted a bit in February. The snowstorms are being blamed for what is expected to be a 0.2% decrease in retail sales after they rose 0.5% in January. A later report will probably show that business inventories and consumer sentiment rose.

Gold is up for a second day, as the dollar slide helped spur demand for precious metals. Gold has had a very close negative correlation to the dollar, moving higher as the US currency drops, and falling as the currency rises. So the drop in the US dollar versus the euro propelled the metals higher. The price of gold was also helped by a report that showed production in South Africa fell 18% in January from a year earlier. As with all commodities, a drop in production causes an increase in price.

Speaking of South Africa, RBC Capital released a report yesterday which predicted that the rand (ZAR) will rally 10% in the next three months. The report credits improving economic growth and the upcoming Fifa World Cup tournament with pushing the South African rand higher. The report predicts the rand will reach a high of 6.75 per dollar by the time the World Cup ends on July 11th. “Investors are going to push the rand stronger as we approach the world cup, which will attract quite a lot of money into the country”. We have seen a pattern of major events pushing the host country’s currency higher, as the Olympic host country typically gets a boost in the months prior to the event.

The other commodity currencies also had a good day, with the Canadian dollar (CAD) hitting a five-month high and the Aussie dollar (AUD) approaching its highest level this year. These commodity currencies were under selling pressure early yesterday on fears of a Chinese slowdown, but rallied in the afternoon and overnight. Traders seemed to have figured out that the reason the Chinese are looking to slow their economy is that their economy is growing at a good clip!!! This is a good thing for commodity prices, as a growing Chinese economy will continue to put upward pressure on commodity prices.

The New Zealand dollar (NZD) also benefited from a report which showed that retail sales increased for a fifth time in six months in January. Reserve Bank Governor Alan Bollard said yesterday that he might start raising borrowing costs around the middle of 2010 as the economy recovers. Interest rate differentials should continue to support the New Zealand dollar. With US rates remaining at their current low levels, investors will be moving toward countries that have stable economies and where interest rates will be rising.

To recap: With Yellen having a bigger say, US monetary policy will remain dovish for some time; the euro moved up over 1 cent as the Greek crisis passes; Gold finally starts to move higher as the dollar slips; commodity currencies will continue to take advantage of interest rate differentials.

Chris Gaffney
for The Daily Reckoning

Yellen Brings the Dollar Down 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….

The Daily Reckoning

I was laid out on the couch, which I remember distinctly because my wife was yelling, “If you’re going lay down on the couch instead of doing something around the house to help me out, at least take your damned shoes off!” and I was using the remote to idly flip through the channels on TV, hoping to catch something in the vein of happy mindlessness, maybe something in the Gilligan’s Island-Bewitched genre, so that I did not have to keep track of a complicated plot and/or a bewildering cast of multi-faceted characters.

I needed this kind of mental break to take my mind off of, for one thing, the sheer horror of today’s economic situation and how we are So Freaking Doomed (SFD).

Finally, I happened to catch a moment on CNBC just where Larry Kudlow was correctly making fun of Greece for saying that it will raise taxes and cut spending in an effort to get its ludicrous deficits and preposterous budget under control, and he had a deliciously snotty, supercilious, sarcastic attitude (the True Mogambo Way!) towards the idea of raising taxes and reducing spending as an economic stimulus of some kind! Hahaha!

I was with him all the way, too! And I had a few choice things that I wanted to say to Greece, too! Most of my complaints about Greece are about how Greek salads always seem to come with a damned oil and vinegar dressing that is terrible until you add some sugar, then it’s pretty good, so why in the hell don’t they add sugar to start with, the lazy bastards? God knows they had the money!

And then to add sour ripe olives to the mix – which is more of the same, only worse! – makes me want to jump to my feet and shout, “What is the matter with Greeks that they would they would do such a terrible thing to an otherwise delicious salad?”

So with Mr. Kudlow on the case to make sure that Greece gets its act together, I am sure that their deficit problem will soon be resolved, and this salad dressing thing will soon be a thing of the past, too, which may be part of the reason why I thought he was really good for about, oh, three seconds, which is about as long as the average period of time that I usually agree with Mr. Kudlow, or my wife, or my kids, or my boss, about anything.

The aforementioned three seconds during which I agreed with Mr. Kudlow is because he said something scornful in a rapier-like rebuttal, something like “Raising taxes and cutting spending is not the answer!” which is true.

But it is only true because there IS no answer! To even ridiculously assume that someone can come up with a plan to dissolve consumers’ debt and simultaneously pay off their creditors – the fabled “win-win” situation! – is ludicrous! Hahaha! Beyond ludicrous! Hahaha!

Mr. Kudlow and his little panel of “experts”, however, ignore my scornful laughter and the way that Icky Mogambo Spittle (IMS) shot from my lips, and implied that there really is a solution to this problem out there, somewhere, anywhere, maybe over here, maybe over here, which would marvelously, and magically, enable debtors to get rid of their debts without paying anybody anything, and creditors to get all their money back without being paid anything by anybody! Hahahaha!

But I understand that it’s Mr. Kudlow’s job to take positions on monetary, fiscal and economic policy that are the opposite of mine, because my job is to stay away from the majority, and his job is to get people to join the majority.

My position is so antagonistic because in these three cases, “the majority is always wrong.”

The majority is wrong in encouraging monetary insanity by always yammering for more and more monstrous Federal Reserve money-creation to buy the fiscal insanity of Congress’s avalanche of new government debt to fund Obama’s spendthrift imbecilities, which will cause inflation in prices, which is The One Big Freaking Thing (TOBFT) that you don’t ever, ever, ever want to have, which means that you can never, never, never allow excessive amounts of money to be created in the first place.

The majority is wrong on economics because they still, laughably, believe in the proverbial “free lunch”, a childish fiction where somebody gets something and nobody has to pay for it, and the majority are willing to bankrupt themselves, and destroy their own country, by letting Congress try to provide a free lunch to anyone and everyone who walks up with a hand out or a sad story.

And the biggest reason to go against the majority is in investing, because it’s less than a zero-sum game, and thus the majority must lose money and be bled dry by a ghoulish financial services industry (that is so large that it makes up 70% of all profits made in the country, and thus pays most of the taxes, which are actually paid by the “investors”) so that a minority of people (hopefully, me!) can make money despite being bled dry by the financial services industry and despite paying taxes on the gains. “Investing for the long term!” Hahahaha! I snort with derision! Snort!

So you can see why my natural anti-establishment makes me pound the table for gold and silver simply because the majority ignores them!

Okay, the real reason is that today’s dire economic condition, due to a staggeringly incompetent government and incompetent citizenry, has been played out thousands of times in the last 4,500 years, and in each case, the only thing that saved anyone’s butt was gold and silver.

There are those, of course, who say, “That explains why you are buying gold and silver, but it does not explain why you are always screaming at people to invest in oil, as well as in gold and silver.”

Well, since you asked, I say invest in oil because it has the most energy per cubic centimeter, and now that it is used in practically everything everywhere, nobody in the industrialized world can live without lots and lots of it, with guaranteed continual rising demand, but it is being rapidly depleted. Rising demand and falling supply? Who could ask for more in an investment?

As for those who go on to say, “Well, that is pretty convincing, alright, but it doesn’t explain why you are such a hateful, disrespectful, little creep”, I admit that, no, it doesn’t.

The Mogambo Guru
for The Daily Reckoning

Bet Against the Majority. Buy Gold. 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….

The Daily Reckoning

Here we go again. Markets have caught a chill after signs of inflation fever in China. And that’s not even the half of it. Let’s dive in…

Consumer price inflation in China hit a 16-month high in February – a 2.7% year-over-year increase. China’s National Bureau of Statistics was quick to put out a statement reassuring everyone that “price rises this year will be moderate and controllable,” but that’s not enough to calm traders looking for excuses to feel jittery.

And any news that might, possibly, at some point in the future, signal monetary tightening in China…well, that’s enough to put the fear of God in them. Hence, the major US indexes opened down about 0.2% in the first hour of trading. The news is also an excuse for traders to bail out of gold, which clings to $1,105 as we write.

So much for the short-term noise from China. But the Middle Kingdom is also making real news this week. We’ll get to that in a bit, but first, we bring you this item to help put it in context.

Right in line with analysts’ forecasts, Uncle Sam’s budget deficit for the month of February was $220.9 billion – the largest monthly total in history. For the first five months of fiscal 2010, the total is $651.6 billion, 10% ahead of last year’s blistering $589.9 billion pace.

The details are even fuglier. Total revenues: $107 billion. Total expenditures: $328 billion. Yes, that’s only one dollar of revenue for every three dollars spent.

We have just two words for this: Banana. Republic.

So what does China make of numbers like this? As it happens, the National People’s Congress is holding its annual session this week. During the festivities, Yi Gang, the head of the Chinese State Administration of Foreign Exchange assured the world that US Treasuries would remain a major component of China’s reserves.

We noticed he said little about whether China would actually add to its positions and soak up some of that additional debt racked up last month.

Yi also pooh-poohed any role for gold in China’s wealth management strategy: “It is, in fact, impossible for gold to become a major investment channel for China’s foreign exchange reserves,” he said. “I have 1,000 tonnes now, and even if I doubled that holding, according to current prices, that would be about $30 billion…” barely a drop in the big bucket that contains $2.4 trillion of China’s forex reserves.

Of course, that’s what face the Chinese government puts on for the public.

Yet “the volume of China’s gold reserve in terms of its forex reserves only ranks fifth in the world, and is well below the global average,” says Russell Hsiao of the Jamestown Foundation.

Hsiao rounded up some interesting stories from Chinese media that shed additional light…

• The Guangzhou Daily reported in 2008 that China’s central bank was considering raising its gold reserve by 4,000 metric tons. (It’s currently 1,054 metric tons.)
• Ji Xiaonan, the chair of the supervisory board for major state-owned companies under the Chinese State Council’s state assets commission, set an even higher bar last year – 6,000 tons by 2014, and 10,000 tons by 2019
• According to the English-language website ChinaStakes, a senior official from the People’s Bank of China (PBoC) suggested last year that China should “secretly increase its gold holdings” as part of a long-term plan – with the central bank buying up as much domestic production as possible.

However it turns out, “the long-term implications of Chinese debates to increase its gold reserves,” Hsiao concludes, “will have far-reaching impact on the stability of China’s forex reserves and the yuan’s ability to become the next reserve currency of the world. The question for Chinese leaders now appears no longer if, but how, that will come about.”

Addison Wiggin
for The Daily Reckoning

The Ins and Outs of Chinese Gold Reserves 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.”

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