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Competing Currency War in View

By Jim Willie CB, Golden Jackass

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Some prefatory stories are highly revealing. Bank of America is badly on the ropes. On the same weekend at the end of July, when the Bank For Intl Settlements executed a 340 ton gold swap contract, two other events happened. The London metals exchange apparently suffered coordinated delivery raids, all legal, but painful nonetheless, stripping the embattled exchange of much gold bullion. My source from the German banking fortress shared that the BIS might have rescued the London Bullion Market Assn, and thereby prevented a near default at the exchange. Spurious stories about aiding commercial banks, even the Portuguese central bank, were floated to distract the masses. The second event was that on the same weekend, Bank of America suffered a failure. But the USFed pulled it out of the fire by Monday morning with fresh huge infusions of funny money. This week, another $13 billion infusion came to BOA by way of much darker corners of USGovt agencies, from nether recesses. It is getting that bad! So BOA had been propped by the USFed and the USCongress in the past, but by the syndicate now. In time, they will remove the valued assets and exit the burning building. Unexpected consequences are sure to come, a fact of nature. The BOA story came after a prompted inquiry as to which banks might next succumb to the rising gold & silver prices. BOA was at the top of the list of banks mentioned, but others were mentioned too. They appear in the September Hat Trick Letter, the usual suspects.

QE2:  A JUSTIFIED CANCER

My best description of QE2, the Quantitative Round #2 Launch, is simply stated a monetary cancer, an admission of failure, and the trigger for the next breakdown in the global monetary system. The QE2 Launch is a US flag flying upside down at the central bank command center. Imagine trying to justify printing money to cover debts, and retaining credibility. The belief stated by USFed Chairman Bernanke, that zero cost comes from printing money, is pure heresy with dire consequences. The cost is lost confidence in the monetary system, in the currencies, and in the central bank franchise system. The QE initiatives kill the requisite confidence. Thus the rise in the Gold price in response. The financial news anchors struggle to hide their growing awareness that gold is the safe harbor from a destroyed monetary system, wrecked currencies, discredited central banks, and insolvent banks. They are awakening, as are those in the investment community.

Three additional sides are revealed on the Quantitative Easing desperation. The Bank of England has a US plant residing within. Adam Posen is an American who sits on the Monetary Policy Committee at the bank. He inflamed concerns about monetary instability with a speech to the Chamber of Commerce in Hull on Tuesday. He urged the major central banks to pursue more aggressive bond buying in order to rescue the world economy from stagnation that persists. He spoke of the fear of looking ineffective from inaction, mitigated by usage of extreme tools. He actually said, “Thus, policymakers should not settle for weak growth out of misplaced fear of inflation.” So there you have it, inflation full speed ahead. A clarion call to inflate. The risk is hyper-inflation. Their policies in the last cycle produced unforeseen problems. In fact, the central banks, in particular the USFed, fight the last war only to create the most monster, on a consistent basis, in a pattern of serial events. Their colossal monetary inflation is breaking all historical records. It is given political cover by virtue of doctored price inflation statistics to hide its chronic 5% to 7% range. Posen pushed for further monetary easing undertaken in the United Kingdom, even to the extent of corporate debt purchases. Of course, to keep the order, they should begin with simple UKGilt (bond) purchases. He acknowledged that a QE program will not be able to create sustained recovery on its own. He fears a 1990s Japan style scenario, when a collapse of the Western monetary system is the more possible ugly outcome. He advises more effective coordination of large scale asset purchases by the central banks working together. This is a trumpet call to the Competing Currency War, where peace is declared at first, but which will vanish in the din of a threatening crisis.

A second warning came from Bill Gross of PIMCO, the newest target of informal inside trader accusations. His bond funds seem to have been benefiting handsomely from advanced notice of many special USGovt programs to purchase bonds. The PIMCO funds might front-run the USGovt policy, certainly doing very well for their investors. They could be the newest invited player in the fascist business model privileged group. Gross is on record this week as warning that the Quantitative Easing programs, those that involve vast bond purchases with newly printed USDollars, backed by nothing, fully diluting the national currency and undermining the central bank integrity, will lead to a worsening strain on the USDollar and a decline in the American standard of living. That is a slick backdoor way of saying significant price inflation. Nobody on stage wishes to warn of price inflation as a consequence to the current policy. Nobody on stage wishes to contradict the low price inflation environment portrayed falsely by bank officials, which justifies the magnificent monetary inflation being ordered.

The third warning came from Yu Yongding, a former adviser to the Chinese central bank. He called the USDollar as being one step nearer to a crisis while debt levels in the US rise to frightening levels. Yu also called a devaluation of the USDollar inevitable while the USGovt debt rises. He stressed that USTreasurys fail to provide safety or liquidity. Yu openly expressed concern over the safety of its FOREX reserves, including those invested in USTreasurys. China is the largest foreign investor in this sanctioned asset bubble, falsely deemed a safe haven. Its pursuit globally has transformed it to an asset bubble. China is trying to shed USGovt bonds, as they have cut holdings by 10% to $847 billion in the twelve months ended July, according to the USDept Treasury data. The invitation given to Fannie Mae to reside under the same USGovt roof as the USTreasurys has greatly increased the risk to the USDollar. The guarantee has been declared as explicit.

EUROPE‘S HAND BID TO DANCE

Any new QE2 chapter will probably have minimal positive effect, but much negative effect. The beneficiary will be gold & silver, but no specific currency, since tied to the same papyrus raft. No cure will come from a prescribed Quantitative Easing Round #2. The first round accomplished nothing. Curiously, the central bankers exhibit a strange sense of caution, as though they realize the great risk of much deeper capital destruction, and heightened risk of triggering price inflation. A selloff of the USDollar might soon motivate a similar QE2 by Europe. Except this time around, the Europeans must admit their Bank Stress Tests were a total fraud and sham staged event. The QE2 will ultimately serve as the catalyst that speeds up the processes riddled in crisis that are already underway. Tremendous destruction of wealth comes next, from the USGovt creditors and US citizens alike.

In order to mitigate the severe damage to the USEconomy and US financial structure, theUS will induce Europe to join in the destruction. The cause celebre will be to avoid a fast rising Euro currency. My forecast is that the high risk of a significant USDollar decline will induce European leaders to join in the currency debasement. They will announce a nearly simultaneous rescue soon, a similar EU bank bond redemption initiative, but without much time delay like last time. It will coincide nicely with the USFed QE2 Launch in order to minimize the currency impact and isolated USDollar swoon effect.European leaders will push for a matching QE Launch, since their export trade lies in the line of fire with a higher Euro currency. In joining the deadly tango on the currency dance floor, Europe and the United States will define the primary forces in the Competing Currency War, best described as a race to the bottom. In my view, the hesitation to execute a renewed QE2 program is foreknowledge of its extreme risks and admission of central bank failure at a certain level. It will deplete the central banks of weapons in their toolbag. They will be failure standing naked on the monetary stage in full view.

The advent of the QE2 Launch might have served as the final straw for former USFed Chairman Volcker. The man of extreme stature, perhaps the last effective central banker of US vintage, delivered a scathing tirade to a gathering of bankers and economists, harshly criticizing them in impromptu fashion. He left no financial stone without a stain or dent, in the most ringing, acerbic, rattling harangue qualifying as internal indictment in US history!! That is not an exaggeration, not in the least. Such a shrill speech has never been witnessed in US history. Volcker particularly expressed disappointment that the Financial Regulation Bill actually granted the USFed even more powers, when the original intention was to limit it. That was my stated forecast in the summer Hat Trick Letter reports, since bankers control the USCongress and the reform process. My personal belief is that the QE2 Launch is understood by Volcker as a green light toward a full speed careening downhill ride down into the chasm for the US Economic Ship of State. He must in his mind’s eye realize that the Third Worldawaits. Isn’t it interesting how the concept of Third World has gained traction in the USalternative press, after the Jackass forecasted it in October 2008? It is mentioned with greater frequency lately.

THE CURRENCY WAR HEATS UP

The competing currency war is ramping up, with gross interventions, open disputes, notable desperation, friction among trade partners, and urgent need to take action. Nations are taking positions against each other increasingly. In defending their economies, they are pitting themselves against allies and foes alike. The number of bilateral squabbles has never been greater. The winner will be Gold, as all paper currencys will circle the toilet and lose. The Gold price acts as a meter; it will rise in spectacular fashion. It rises due to the profound debasement in a death process of the currency system. The undermine is being sanctioned by the major nations. This process follows inevitably after the grotesque insolvency of the US banking system, the UKbanking system, and much of the European banking system. Their economies are dying on the vine as a result of the dysfunctional credit systems.

The Competing Currency War has numerous sides in flourishing development, many stories, involving many nations, much conflict, collectively of huge importance. The longstanding battle between China and the United States is at a flashpoint every couple months. Japan is angry that the Chinese central bank has pushed up the value of the Yen. A return to investor flight away from the Euro might resume on renewed concerns over the sovereign risk. The Australian Dollar has been pushed higher by the strength of Australian resource wealth and further official interest rate hikes. Numerous international meetings over the next six weeks will elevate concerns from the broken financial arenas into the fractious political domain. The US and China are headed for a serious clash, with little sign of compromise. Each Quantitative Easing initiative acts like a stick poked in the Chinese eye, since claims of currency manipulation ring hollow when the USGovt is doing precisely that, undercutting the USDollar loudly.

The upcoming midterm elections in the United States could easily flip control to the other inept party, as perceptions grow of systemic failure while political inaction persists. Anticipated gridlock would ensure inaction and accelerate the slide. President Obama hastily sent the lead economic adviser Larry Summers to Beijing to haggle with Chinese leaders over their currency policy. Summers promptly resigned afterwards. Team Obama is losing its members, never perceived as any all-star cast, but rather retreads. The political insects in the USCongress harp on China, an easy target. They buzz but make no honey. Further details on events related to other nations in the widening Competing Currency War are provided in the September Hat Trick Letter. Refer to Chinaversus Japan, but also unilateral actions taken by Australia and Switzerland. Some juicy updates are provided regarding the New Nordic Euro currency scheduled for June 2011. A reversion to the D-Mark currency might be the more likely route. Great disruption comes, but with a de-centralization theme. Several months ago the Jackass forecasted a broad movement toward domestic currencies in Europe. The Globalists appear to be blocked from their conceived plans, good news for people who care about the people.

THE GOLD REACTION

The next chapter will not unfold like the last chapter. Past efforts to remedy in response to crisis were extraordinarily shallow and ineffective. The next round will feature a zooming gold & silver price, already hitting record high levels. GOLD & SILVER will be the beneficiary to currency strife, the global tremor in the monetary system. The paper currencies and their attached sovereign shackles of debt have ruined the approved legal tender format. Money is actually denominated debt!! In the forecasting arena, applying yesterday’s effect to a different world makes for gross errors. What comes will not be a repeat of the USDollar rise after the September and October 2008 events. In fact, what comes next will be the opposite. My forecast is for all currencies, including the USDollar, to suffer great damage in their purchase power and the all important confidence aspect, but to rotate in focused stories. The Competing Currency War has heated up in a huge way. The broken sovereign debt arena has done untold damage to the monetary system, a story not fully told. Gold & Silver will rise, but the currencies (USDollar, Euro, Pound Sterling, Yen) will experience eerie calm !!! Sure, the USDollar will fall, but only until the Euro is intentionally undermined and damaged by its own custodians on the continent. The falling USDollar is your tipoff that every major currency will be under assault. Gold will react favorably.

Numerous factors have conspired to lift the Gold price, which has broken the $1300 target level. It has much more to run, since nothing is fixed, much money has been squandered, and great volumes of additional debt will be monetized in a cancer stroke. Silver has also breached the important $21.5 level of resistance. Rather than show a chart of the Gold price or Silver price, check the Gold-Silver Ratio. Great strides are soon to come in the Silver price, breath taking moves toward $30. The Powerz are losing control of silver, as the shortage is acute. Endemic Big Bank behavior has changed radically in the silver price suppression. They are losing control. Lack of physical metal does that!! One should always remember that central banks own no silver, thus silver wins on the supply side. Also, industry makes almost no demands of gold, thus silver wins on the demand side. Its volatile price should not deter the investor in times of crisis and grotesque shortage, but rather give courage.

THE USDOLLAR SHUN & SHAME

The USDollar is being increasingly avoided in global commerce. China & Russia have set up currency trading facilities. While a positive move, neither nation has a convertible currency. Behold the Chinese Yuan convertibility to Malaysian Ringgit, just the start of global Yuan usage, a small but important step. Usage in Brazil is in the works. Chinese Yuan trading against the Russian Ruble is expected to begin within weeks inShanghai. Bank Rossii in Russia has targeted the Ruble currency against a Dollar-Euro basket, which the bank claims is a fully convertible currency. China overtook Germany asRussia’s second largest trading partner in the first six months of 2010. Trade betweenChina and Russia rose 50%  to $30.7 billion in the first seven months of 2010, compared with the same period in 2009, according to the Chinese Ministry of Commerce. More details are provided in the widening maturing developing relationship between Russia andChina in the proprietary reports. Both nations have called vigorously for the USDollar role in the financial system to be reduced. Neither nation has anything remotely to call a major financial center, but they are evolving slowly in steps. Both Putin and Medvedeve has expressed aspirations. The USDollar is in deep trouble internationally, obviously in financial centers, but also in global commerce. The USDollar is even discounted by 20% in some cases in West Africa, like with older vintage bills, the ultimate insult. The issue is heavy counterfeiting. Thanks to Jim Sinclair for that story.

The great bond fraud on Wall Street, the great USGovt deficits, the great USTreasury Bond bubble, the great risk faced by foreign creditors in possession of bloated reserves, these factors are causing lost integrity for the USDollar. In countless transactions conducted at high levels of commerce, the two sides of deals increasingly avoid the USDollar. Dariusz Kowalczyk is a senior economist at Credit Agricole CIB in Hong Kong. He said, “Gradually the dollar is being eliminated from the foreign trade settlement flows. People are beginning to trade Asian currencies without intermediation via the dollar.”

THE RUINED VEGETABLE GARDEN

Lastly, an illustrative example is given about a vegetable garden that continues to suffer damage, wherein no remedy is sought, which produces lousy inadequate output for survival. The garden is the USEconomy and the water comes from the US financial system. The key to the garden’s success is plowing under the soil and proper water management. To see how the USEconomy does not and cannot respond to the current policy, consider a vegetable garden. It fails to produce much crop output, a fine analogy of the current landscape. The reasons why it cannot be revived must be closely examined. They are not even remotely understood in the United States by either the economists, leaders, or population. The analogy is not perfect, but it sure hits a realistic and sensitive chord. It makes sense.

The view is better elaborated by means of a vegetable garden analogy, such as one acre of land, or 4/10-th hectare. Imagine this derelict garden is the de-industrialized USEconomy racked by asset bubbles. The analogy is in no way complete, but some aspects are one-to-one almost perfectly. To begin with, this acre suffered from two gardener custodians mainly having money to devote to the garden from the housing mortgage bubble. It broke and thus starved the garden of money for most upkeep, as the water flow has been systematically constricted. The garden must be plowed under and turned over, but it is not. See the banks which are not liquidated, nor their toxic assets liquidated, as the process would bring them ruin and thus loss of all power.So the soil is not conducive to growth of much. The garden must have its weeds removed, but they are not. See the regulatory burden which is the norm, the constant. The USFed applied a big hose to irrigate the garden, but since the soil is not prepared, it cannot absorb water. Businesses cannot grow, since credit is scarce, and capital is wasting away. The vast irrigation programs resulted in vast pools of collected water, with some runoff that actually stripped the land of its nutrients and seeds. See the huge bank reserves, and the interrupted capital formation step. The landlord did step in and force the planting of a queer beast of a crop, which actually caused more problems. See the Clunker Car program, the GM Volt electric car, and the home buying tax credit. The primary problem is the soil. It is not turned over properly to release new nitrogen juices. The soil is not soft and conducive to new growth, free of weedy roots like dandelions. The soil cannot absorb the hose of water effectively.Thus the crop is poor.

The landlords need to be eliminated, even permitted a dangled fate from the nearby oak tree. They are too well entrenched in the farm county political structure though. The landlords are untouchable and can never be given justice, despite their horrible theft of water, despite their frequent purchase of crops with phony lord coupons. See the confiscation of savings from baseless printed money. The landlords are invisible and know no nation as home, as they operate a monopoly on the lake water source. They control from the shadows and have gardeners eliminated who cause a ruckus. The misery and hunger caused has been horrific, and the theft of water has been staggering. New landlords should take over. Their advisors, the arrogant lot who watch from their luxurious porches, who never have accomplished anything in their lives on a farm, should be eliminated also, their high priests even shown the same tree. See the Goldman Sachs syndicate officers, Wall Street included, the cast of economic advisors, the regulatory scarecrows that rotate in field roles, even the US Federal Reserve.

The secondary problem is the irrigation, as the hose goes through the landlord’s property, and he steals much of it before creating the damaging floods in the garden. The gardeners must pay for the landlord’s stolen water, part of the deal from this imperfect arrangement. The irrigation system must be redesigned so that a network of channels is created to more evenly distribute the water in smaller volumes, with much less skimming, and with less likelihood of large pools collected without theft. The channels must bypass the landlord’s property altogether. Let him build his own well, and work for a change. Let him experience calloused hands and dirt under his fingernails, even an aching back from labor under the sun. This garden is a wreck, and cannot grow vegetables in any conceivable volume that would sustain life, not with the current landlords serving in their current roles, as the people endure heavy work with sweaty brows, only to find meager crop output for their family dinner tables.

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  www.GoldenJackass.com. For personal questions about subscriptions, contact him at  [email protected]

International Forecaster September 2010 (#9) – Gold, Silver, Economy + More

By Bob Chapman, The International Forecaster

US MARKETS

It is interesting to watch Wall Street defy reality. This is a scene we’ve observed since the early 1960s, the effect of debt on the economy and the nation and in turn on its currency. The result of the profligacy over all those years is the biggest bull market in history in gold and silver. As we write gold is toying with $1,300 and silver with $21.50. Each day a new high is reached in spite of a pending options expiration and the perpetual market rigging and manipulation by the US government.

One of the things that astound us is that few professionals have seen this coming over the past 10-1/2 years, and even those that do believe do not think this is an earth-shaking event. What we are about to experience is an event that only occurs every 300 to 500 years. All we can imagine is that they have a very limited perspective of history and particularly economic and financial history.

Unbeknownst to most gold and silver shares, coins and bullion have been under accumulation since 2000, by the smart money. Gold alone on a compound basis has been up just under 20% annually. It should also be noted that gold demand rose 36% in the second quarter.

Several events of recent vintage have changed the atmosphere in which gold and silver reside. Six or eight months ago the major NYC banks arranged for a major rally in the dollar, which ran from 74 to 89. It is now back to 79. The problems in Greece were the catalyst, as well as other EU-euro zone member problems. This caused the euro to fall from $1.50 to $1.19. It is now at $1.35. This temporarily boosted the dollar. About 11 weeks ago we predicted a new quantitative easing program in the US and it was put into operation about a month ago. This is the way the Federal Reserve again intends to keep the USeconomy from collapsing. The result of this move is that again foreign central banks are moving to cheapen their currencies, because the dollar is again falling in value. That is reflected in the increasing foreign exchange dollar reserves of many countries. What they do to cheapen their currencies in US dollar terms is to print their own national currency and purchase dollars. With those dollars they buy US Treasuries or spend them. That process cheapens their currency in dollar terms. This is called intervention.

The prevailing attitude is that if a nation doesn’t cheapen its currency others will and that would leave a nation at a disadvantage in terms of trade and pricing exports. This has been going on for years and US administrations have overlooked the practice. That is because it cheapens exports into the US, holds down inflation and creates buyers for Treasury and Agency bonds and USstocks and investments. Unfortunately for the US other nations have decidedUS debt is so onerous that they are diversifying into other currencies, purchasing items such as commodities and in some cases buying gold. The argument against gold has been that there is no interest on the investment. They perpetually do not understand that gold has been appreciating in value for the last ten years just shy of 20% annually. Thus their argument for not owning gold is incorrect. It has cost nations dearly and will continue to do so. The real reason that they do not purchase gold is because of pressure from the USgovernment.

The most visible intervention in the currency markets was that of Japanin a desperate attempt to cheapen the value of the yen in violation of agreements with other major nations. Their manipulation into the $4 trillion Forex market was totally unsuccessful. Japan and others are faced with increases in money and credit by the Fed in its efforts to again liquefy the USeconomy. Any attempt to fight another $2.5 trillion by foreign nations is going to be futile. The currencies of almost every nation will rise and there is little they can do about it. The US dollar has been abandoned in an effort to save an American economy that is in serious trouble. The currency devaluations will come, but will be unsuccessful. Russia is an exception and has thus far failed to use stimulus to weaken its rouble. Every time the IMF tries to suppress gold prices with its gold sales, Russia is right there buying it up, which must infuriate the elitists in Europe and the US. Almost 2/3s of their economy’s growth loss has been due to drought and fires, but with close to $500 billion in foreign exchange, they have no trouble buying gold, which puts those reserves at close to 24 million ounces. It is an easy way to dump dollars.

Over and over again we hear central banks worldwide announcing how they are going to defend their currencies in order to keep their exports inexpensive. We wonder when someone in Washington is going to catch on to what has been perpetually done to injure the US economy? Free trade, globalization, offshoring and outsourcing doesn’t work. It has cost 8 million American jobs over the past 12 years and lowered wages from $30.00 an hour to $14.00 an hour, and caused a depression. British mercantilism has never worked except for those demeaning their currencies. The only answer forAmerica is to impose stiff tariffs on foreign goods and services and junk NAFTA, CAFTA and the WTO. Just look at what China has done as an example. The yuan is undervalued by 40% and they could care less. They keep right on devaluing their currency and then complain about the loss in the value of the dollar and US Treasuries they buy as a result of currency manipulation. If theUS is ever to survive economically they have to put an end to criminal devaluations.

The euro zone has had a 6-month reprieve due to the fall of the euro from $1.50 to $1.19, but that advantage may be history, as the euro has again risen to $1.35. The euphoria in Europe, particularly in Germany, will be short lived. Their 15% currency advantage is fading away, although we see relapses ahead, as problems in Greece and the other four nations in trouble reveal just how terrible their financial situations are.

As a result of currency machinations more and more investors are seeking out gold, which over the past 17 months has made the transition away from being a quasi-commodity to being a monetary metal that is free of liability, unlike the state of the US dollar – the world’s reserve currency.

The Fed isn’t contemplating a new round of quantitative easing; they secretly started in June and failed to tell you about it. They are being followed by England and soon Europe will relent as the euro works itself higher prior to its next debacle. Japan is an example of what you can’t accomplish by throwing money at the problem. No one is willing to do what is right and that is to purge the system of its excesses. Until that is done nothing will be solved and the problems will worsen. Even the Swiss National Bank doesn’t get it. They go right along with the program of cheapening their currency, but as we have seen that has proved futile as the franc trades at close to $.9800. Brazil is booming, but that isn’t good enough for them and they as well are manipulating the value of their currency lower. The European Central Bank is a joke. They take their marching orders from London and NYC. As you can see no one wants a strong currency and the only way to change that is via US tariffs on all foreign goods and services. This is truly a beggar thy neighbor policy. That is another reason why gold is hitting new highs along with silver. The increase in the prices in these metals is not speculative at all. The buyers are long-term investors. As we predicted long ago that the buying would come in waves. This is only the second wave, or phase. Put speculation right out of your head. This is real long-term investment. What could be more obvious as day after day gold hits new highs in every currency? You are not going to see mania and a bubble for a long time and prices will be four times higher then they are today. What we do have today is a bubble in the treasury market, arranged by those behind government, and a stock market that defies rationality, due to governmental manipulation. Once they both collapse the only investment avenue open to you will be gold, silver and commodities. When that happens their upsides will be cyclonic. The trend is your friend, and that is the case for gold and silver.

As we have postulated over and over again the best and the only alternative the US and most other debtor nations have are multilateral devaluation, revaluation and default. Presently this is being accomplished by stealth, via inflation, which government perpetually lies about, in order not to wake up the US and world consumers. The latter method in the end proves far more costly to the citizen consumer. Inflation in the end not only wipes out the imprudent, but the prudent as well. The only exceptions are those who have the foresight to purchase gold and silver related assets. That is why we still publish and do 25 to 30 hours of radio programming each week. That is to let the public know what is being done to them, by those criminals in Wall Street and in banking wearing those $4,000 suits. You are about to witness increasing inflation in spite of the lies your government might tell you. We cannot be content to just blame government. They are to blame, but it is the powers behind government that is the cause of what you see. It is their policies that are steeped in greed, control and their ultimate goal of world government. This is how they intend to force America and citizens worldwide to accept control of all of humanity. This is a deliberate attempt to enslave humanity make no mistake about that. Citing government is correct, but that is not the whole story. You have to look behind the curtain for the true and total answer. Almost all writers are unwilling to do that, either because they don’t understand history or they are afraid too. Just ten years ago when we talked about the causes out of the CFR, Trilateral Commission and the Bilderburg Group, we were considered insane. Today we are mainstream. The plans of the elitists are being exposed. If you read economic and financial history you find it is impossible to inflate yourself out of trouble perpetually. In the end your system collapses. What is worse is that those who plan these policies know that. They are not dumb, incompetent or foolish. They know exactly what they are doing.

Government goes on its merry way because they have a Federal Reserve. There will be no cutback in deficit spending.

All the government has to do is request that the Fed purchase their debt and they do so by creating money and credit out of thin air. This is monetization and it’s inflationary. This is how government pays for mandated services. The taxes for such were already extracted from the public, but unbeknownst to most of the public these funds have already been spent. This is how Social Security, Medicare and all those other bailout services are being funded. Foreigners are buying only 25% of US government debt. The slack is and has been assumed by the Fed, which the people eventually get to pay for. Today we are in a lull, a sort of magical time, when the very superstructure of the system is being destroyed, but it is not particularly noticeable. The economy, we might add, is going sideways, with the assistance of $2.5 trillion a year. That can last for several years but in the end inflation goes rampant and sometimes becomes hyperinflation as we have seen in the Weimar Republic and most recently in Zimbabwe. Inflation, as consumers can attest to, is already climbing and the roar of higher inflation is not far off. One of the events that will kick that off will be bank lending of the funds they hold, some $1.5 trillion, which presently are sterilized, but become monetized once they are lent or spent. We can assure you that day is just over the horizon. This, once raging, will cause political, social and perhaps military conflict. If you look back in history when such problems existed those in power create another war or they subject their own people. Historically this hasn’t been difficult, but today is different, because talk radio and the Internet have allowed people to know and understand what has been and will be forced upon them and by whom.

– This was a section from the most recent issue of the International Forecaster. You can read the full 34 page issue by using the information below to subscribe.

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Stocks Blithely Ignore Traditional Warning Signs

By Rick Ackerman, Rick’s Picks

(I wrote here recently that the stock market is almost completely driven these days by algorithmic trading and prop-desk automotons who couldn’t care less about whether the ups and all-too-infrequent downs of the broad averages accurately reflect “reality.” Following is a post from the Rick’s Picks forum by “3 Lions” that nicely frames the insanity of it all. The theme is especially timely given the mini flash-crash perpetrated in bullion Monday night. This brazen, quasi-criminal shakedown not only allowed DaScumballs –aka the Night Shift – to steal gold and silver futures for far less than they were to fetch later that morning in more liquid markets, but to pick off widows and pensioners in some key stocks that trade round-the-clock, such as Apple, IBM and Google. RA)

Unequivocally, we have reached a watershed in the history of the U.S. stock market and therefore global stock markets. Never mind whether traders or investors are making money or not; the stock market has now become nothing more than a casino where the “table” almost always wins.  Business-news channels in the USA are nothing more than offshoots of Hollywood sitcom studios which 20 years ago would have been rejected for children’s TV as being too dumbed down.  The U.S. stock market has become so far detached from reality that justifiably it cannot be called a stock “market.” 

Those of us who believe that one of the best ways to keep proper tabs on the financial charade is by perusing the consistently accurate touts in Rick’s Picks should spare a thought for those still bogged down in ancient trading methodology, such as Elliott Wave analysis, that began life when the stock market was indeed a “market.”  A trading/investing friend of mine had 24 years in a row of profits until 2009/2010, when his proprietary trading method failed dismally.  During the last 18 months, Bob Prechter has had more wrong calls than the Shanghai telephone exchange, and Dr. McHugh likewise. (I must point out that I have great respect for both of these men — they are still as clever as they always have been, it is just that the rules have changed).

What Hindenburg?

It even looks like the otherwise invincible Charlie Nenner has got the top wrong (some say he is a secret agent of Goldman Sachs, but he does get it right 90% of the time).  There are so many charting indicators (i.e., no fewer than six Hindenburg omens) that say this market should be collapsing  – but it isn’t…so far.  To cap it all, the infallible and rare VIX Bollinger signal almost two weeks ago signaled “down, down, down,” but in fact we have gone up, up, up!  Meanwhile, the latest figures reveal that U.S. corporate insiders are selling 1411 shares (!) for every share they’re buying.

Undoubtedly, this market will not go down until “Da Boyz” are totally overwhelmed by some kind of trigger event that sets off a chain of events that will see the legs of their “table” collapse.  It will be a “flash crash” of immense proportions rather than a “stair-step” decline. The only thing that is still favorable to Main Street is low interest rates, so when they start to rise, that will most likely be the trigger.

Good trading.

(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.

World According to Gold: Here comes Tokyo Rose

By James West, MidasLetter.com

Now that gold is muscling its way towards $2,000 an ounce, the forces of ignorance embodied by post-secondary-accredited yet nonetheless clueless commentators are being given voice by government sponsored media outlets such as CNN. Tokyo Rose was the generic handle accorded to any of a dozen women who, during World War 2 broadcast programming designed to undermine the morale of American troops over the radio.

Coverage such as stories like today’s “The Case Against Gold” on CNN Money are designed to undermine the determination of gold accumulators who are genuinely frightened about the purchasing power of their dollars as their government ‘quantitatively eases’ the economy back onto its feet. By continuously counterfeiting fiat currencies and flooding the markets with such ersatz lucre, the final rush towards economic collapse is momentarily cushioned.

But make no mistake. The acceleration of the rate at which gold increases – the average has been $87 per year since 2000, and in the last 365 days from today, that number is $317 – is an analogous signal that the rate of deterioration of the global economic system as a whole is itself accelerating proportionately. Contrary to the misguided tone in the CNN article suggesting now is not the time to get into gold, the correct sentiment should be that now is the time to put ALL of your liquid, dollar –denominated wealth into gold. All of it.

Here’s what is going to happen next:

1. We’ve reached the brink where the next phase is hyper-inflation. This is where money can’t be printed fast enough to keep up with its devaluation. Governments will stop accepting, first and foremost, U.S. dollars for the settlement of international trade, and will look to its own currencies. This will have the effect of paralyzing the global flow of commodities and commodity derived industry, which will further paralyze national economies, which will respond by printing yet more money, which will cause another devaluation in purchasing power, in this end-game spiral to the bottom of this hole we’ve dug.

2. The first casualty of the collapse of the economic system will be civil order. Crimes against property will skyrocket roughly proportionate to the rate of currency devaluation as families find themselves cornered by lack of goods on the shelves in markets, and there is no choice but to steal from whomsoever is weaker.

3. Finally governments desperate to restore order and re-establish a new global economy to facilitate the flow of goods again will sit down and negotiate the establishment of a new form of global currency that will essentially tie the amount of money one can print to the value of a country’s GDP, which at the end of the day, is the only realistic way to mark a currency’s value accurately. Gold at this point, will be re-embraced as the defacto standard by which currencies are valued, and should be able to hang onto that role as long as history is accurately recorded and taught.

4. This will bring about an end to the meteoric rise of gold, and should see its price flatten out, if this scenario unfolds.

As to the exact dates of this scenario, it is impossible to predict, because the variables that will force the final capitulation economically are unknown, such as how much money will be issued before the diminishment in purchasing power surpasses the rate at which money is created, and when exactly any given food producing country will stop accepting currency from its trading partners.

In this scenario, less developed and less populated countries that are agriculturally self-sufficient will fare much better than over-populated, over-industrialized agriculturally import-dependent nations.

Countries like Peru, Argentina, Vietnam will continue to eat. Europe, China and most fittingly, the United States, will suffer most.

The current war of words between China and the United States over currency, and Japan’s present requirement to sell its own currency to push down the yen’s value, are also indicators of a broadening monetary crisis. Here’s Tiny Tim Geithner and Barack Obama, neither of whom have a native macro-economic brain cell that functions properly, issuing threats to China about unfairly propping up the value of its currency while apparently ignorant about Japan’s violation of the free trade mantra supporting free-floating currency exchange rates.

Its truly astonishing that the hypocrisy of such policy remains under-reported in the mainstream financially media – clear evidence of the Tokyo Rose type of role that top tier financial programming has been roped into.

China holds all the cards here. If they decide the United States needs to be taught a lesson, it will just sell of some of its vast holding of treasuries and force the United States into hyperinflation. The final days of the U.S. hegemonic empire are at last coming to a close, and the world, including clear-minded Americans, should sigh in relief when that day finally comes. Then we can get to work, as a unified world, to build a more realistic and equitable global economy.

Want to subscribe to Jame’s West’s Midas Letter Premium Edition? Learn about the emerging resource sector stocks he’s buying and selling each month for only US$39.00 per month. Click here to learn more….

Don’t Get Shaken Off the Gold Bull

By Jordan Roy-Byrne, CMT, The Daily Gold

The question now is not whether Gold will go higher or not. Most of us know the primary trend is higher and will continue in the years ahead. The real question is three-fold. Are you invested? How much are you invested? Will you hold on? Going forward, as the bull strengthens and as more come on board the last question becomes most pertinent. Let me present you with some quotes that will elucidate my point.

Jesse Livermore once said: “It was never my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! Men who can both be right and sit tight are uncommon.”

I believe Richard Russell said that the job of a bull market is to throw off as many people as possible along the way. After all, if everyone jumped on board all at once, the bull market wouldn’t be sustainable.

Finally, consider this wisdom from Dr. Marc Faber. “An investor could have done very well over the last 30 years with just a handful of investment decisions. In 1970, a long-term investor should have bought gold, silver, and oil (commodities); in 1980, he should have sold his gold and oil and bought Japanese stocks; then, in 1989, he should have switched out of Japanese stocks into the S&P 500 or, ideally, into the Nasdaq, which he should have sold at the beginning of 2000.”

It is really not all that difficult to make big money in the capital markets. The big money is made in finding major trends in their infancy and riding them out for many years. The major trends are not difficult to find. The difficult part is having an open mind to find the trends and then having the conviction to stay with the trend for many years.

Let me present you with two data points/charts, which confirm that this bull market is still in its infancy insofar as its price appreciation.

First is this chart from Nick Laird (sharelynx.com), which compares current price appreciation with price appreciation in various bull markets.

Currently, both precious metals are up about 400%. I don’t know how anyone can look at that figure and proclaim this to be a bubble top. Moreover, that is after 10 years! This tells us that we’ve yet to see an acceleration and so one is likely in the next few years.

Secondly, we can’t forget the anemic money flows into this market. Even after a 10-year bull market, less than 1% of global managed assets are in this sector. Barrick Gold came up with 0.7%. As of the end of 2009, $400 Billion (of $55 Trillion in global managed assets) was invested in Gold equities and ETF’s. According to Goldstocksdaily.com, the total market cap of all public Gold & Silver companies is roughly $300 Billion. What happens if only 3% of global assets ($1.65 Trillion) try to get a foothold in a sector currently worth $300 Billion? And keep in mind; most of those involved in the sector are diehard loyalists. They won’t sell easily.

Furthermore, it is increasingly difficult to argue with the market. Please see the chart below.

Look how high Gold went after breaking the 1974-1978 highs. In percentage terms, the 1979 breakout ended up rising 325% greater than the depth of the consolidation. This would project a target of roughly $4,555 for today’s bull. We should also note the obvious. The first consolidation spanned only four years while this consolidation spanned 26 years, thus providing a much larger and stronger base that can support a breakout for far more than a year or two.

The question of a major bull market is not in doubt. The answer is obvious. If you are reading this you have made it this far. You are in the bull market before the crowd. If you aren’t yet in, you still have time.

Going forward, you need to prepare yourself mentally by developing a plan and following it. First, you need to decide how much of your portfolio should be in the sector. Realize, that this sector can make you fabulously wealthy but that navigating the final stages will be difficult. Hence, you need to formulate a plan beforehand that revolves around trading tactics, which can help reduce risk and volatility.

The primary trend is higher but there will be increasing volatility and major interruptions along the way. That is why we are here. We endeavor to help you find the best stocks and assist you in riding out the bumps along the way. If you’d be interested in professional guidance, we invite you to try a free 14-day trial to our premium service, which provides access to a month’s worth of updates!

Good Investing and Good Luck!

Jordan Roy-Byrne, CMT
[email protected]
http://www.thedailygold.com

Technically Precious with Merv

By Merv Burak, CMT, Precious Metals Central

For week ending 24 September 2010

Other than Tuesday it was a pretty good week.  There was all that excitement about the $1300 mark for gold but let’s get real, it’s only a number.  We have higher numbers on our mind.

GOLD

This is a busy week-end so the commentary will be pretty short and only the facts.

LONG TERM

As noted above, that $1300 level is just a number.  I know many attached some magical meaning to it as I mentioned last week, let’s concentrate on $1395 followed by $1600.

Regardless of what one might think is going to happen or should happen in the market a technician’s credo is that a trend in motion remains in motion until verified otherwise.  So, what is the trend in motion?  That’s easy.  I use simple indicators for the three basic concepts of following the market, i.e. trend, momentum and volume.  Putting them together I come up with my assessment of where we are at the present point in time for the three basic investment time periods.

On the long term gold price remains above its positive sloping moving average line so the trend is positive.  The long term momentum indicator remains in its positive zone and above its positive sloping trigger line for a positive momentum reading.  The volume indicator is moving nicely into all time high territory above its positive sloping trigger line.  Putting those together one can easily see that the long term rating, i.e. trend of the gold price, is BULLISH.

INTERMEDIATE TERM

The intermediate term trend in motion is also easy to assess.  The price of gold continues to move above its positive sloping intermediate term moving average line.  The intermediate term momentum indicator remains in its positive zone above its positive sloping trigger line.  The volume indicator continues to move higher and remains above its intermediate term positive sloping trigger line.  Here too, putting those together we get a rating or intermediate term trend for gold as being BULLISH.  For the intermediate term I also look at where the short term moving average line is relative to the intermediate term line.  The short term moving average remains above the intermediate term line for confirmation of the bull rating.

SHORT TERM

We have a similar situation as far as the short term trend in motion is concerned as we had for the other time periods.  The Gold price continues to move above its positive sloping moving average line.  The short term momentum indicator continues inside its positive zone and above its positive sloping trigger line.  Here, we go to the daily volume activity to assess the volume action for the short term.  That volume action has been pretty weak versus previous periods.

In fact the daily volume continues below its 15 day average volume most of the time.  Despite the weaker volume indication the trend in motion, as represented by the rating, remains BULLISH.  Here the very short term moving average is looked at versus its position relative to the short term moving average.  The very short term average remains above the short term average, where it has been now for two months, for confirmation of the short term bull.

We have additional indicators that assist in making the final determination of trend.  We have here an up trending channel with its support and resistance trend lines and we have a momentum indicator that is now traveling inside its overbought zone.  These are additional warning indicators and may at times cause us to be careful in any purchase or sell activities.  For now both are suggesting not to be surprised if we get some short term activity on the down side.

As for the immediate direction of least resistance, here I use the Stochastic Oscillator (SO) along with very short term indicators.  All are positive but the SO had already crossed back below its overbought line and shot back above the line on Friday.  How long it will stay there is anyone’s guess.  There does not look like much upside left unless gold is going to break above its channel resistance line.  For now I’ll go with the lateral direction as the most probable for the next day or two.

SILVER

Due to time constraints silver is getting the short shift today.  It continues to out perform gold so as can be expected silver remains BULLISH in all three time periods.  The latest P&F projection for silver was mentioned last week as being towards the low $30 area so that is where we are heading.

PRECIOUS METAL STOCKS

I have mentioned this Index several times in the past.  The Index reflects the average weekly performance of the 30 component penny stocks and is an indication of the speculators interest in the more aggressive gambling variety of stocks.  When speculators are very comfortable with the bullish direction of stocks they gravitate towards the more speculative variety.  As long as their interest continues in these stocks one can assume that the primary sentiment is still bullish on stocks.  These speculators seem to have a better feel for the market and when they start to get uneasy they dump their more speculative (or gambling) stocks first.  This they do some time before the general market reflects any direction change in stocks.  The last time this Index turned bearish was a year BEFORE the universe of gold and silver stocks turned bearish so we might still look for several months of good times ahead as this Index is still very much bullish.  The two other very speculative Indices one can view in the weekly Table at the end of these commentaries are the Merv’s Gamb-Gold Index and the Merv’s Spec-Silver Index.  Both are also in the very top of the short, intermediate and long term performance categories so all are giving the same message for a continued precious metals market advance..

Merv’s Precious Metals Indices Table

Well, that’s it for this week.

Merv Burak, CMT

Hudson Aero/Systems Inc.

Technical Information Group

for

Merv’s Precious Metals Central

25 September 2010

For DAILY Uranium stock commentary and WEEKLY Uranium market update check out my new Technically Uranium with Merv blog at http://techuranium.blogspot.com.

During the day Merv practices his engineering profession as a Consulting Aerospace Engineer.  Once the sun goes down and night descends upon the earth Merv dons his other hat as a Chartered Market Technician (CMT) and tries to decipher what’s going on in the securities markets.  As an underground surveyor in the gold mines of Canada’s Northwest Territories in his youth, Merv has a soft spot for the gold industry and has developed several Gold Indices reflecting different aspects of the industry.  As a basically lazy individual Merv’s driving focus is to KEEP IT SIMPLE.

To find out more about Merv’s various Gold Indices and component stocks, please visit http://preciousmetalscentral.com.  There you will find samples of the Indices and their component stocks plus other publications of interest to gold investors.

Before you invest, Always check
your market timing with a
Qualified Professional
Market Technician

Mukuba is in the Zambian Copperbelt

By Richard (Rick) Mills, Ahead of the Herd

As a general rule, the most successful man in life is the man who has the best information

The Republic of Zambia (plus 12 million people) is a landlocked country in Southern Africa covering 752, 600 square km of the central African plateau from the River Zambezi in the south-west to the tip of Lake Tanganyika in the north-east. The neighboring countries are the Democratic Republic of the Congo to the north, Tanzania to the north-east, Malawi to the east, Mozambique, Zimbabwe, Botswana, and Namibia to the south, and Angola to the west. The capital city is Lusaka, located in the south-central part of the country.

Zambia was occupied by the British as a protectorate of Northern Rhodesia towards the end of the nineteenth century.

On 24 October 1964 the protectorate gained independence with the new name of Zambia (named after the Zambezi river which flows through the country). Zambia was governed by the socialist United National Independence Party from 1964 until 1991.

Zambia’s industrial base, the Copperbelt (the Zambian Copperbelt accounts for approximately 46 percent of the production and reserves of the Central African Copperbelt, the largest and highest grade sediment-hosted stratiform copper province known on Earth), is centered around the towns of Ndola, Kitwe, Chingola, Luanshya and Mufulira – a string of towns on Zambia’s northern border with Congo.

Map from geographicguide.com

During the socialists rule the copper mines fell under the control of the mostly state owned Zambia Consolidated Copper Mines (ZCCM). Profitable mines subsidized those that ran at a loss. The idea was to keep everyone working – the perfect socialist nirvana built on natural resource extraction. And it worked… for a while, until copper prices fell.

Pressure from the World Bank and International Monetary Fund forced the Zambian government to privatize the copper mines. All the mines were snapped up (Anglo American grabbed the Konkola copper mines, Glencore and First Quantum joint ventured to buy the Mopani copper mines, the Copperbelt’s second largest producer) by international investors – the profitable mines were kept and the uneconomic ones closed.

Today the Copperbelt is one of the richest sources of copper in the world and the area’s production of copper and cobalt are of global importance. The Zambian Copperbelt is unusual among sediment-hosted stratiform copper districts in having abundant Cobalt (Co) and low Silver (Ag), Zinc (Zn) and Lead (Pb).

Copper accounts for 80 per percent of Zambia’s foreign exchange earnings and has, since 2003, been the main driver of an annual economic growth rate of five percent. Most developing countries depend heavily on exporting just a few products as their means of earning foreign exchange but  Zambia is an extreme case – the country depends on the production and export of a single product, copper.

Copper

Global copper production has been plagued year after year by supply shortages due to falling ore grades, lower volumes, higher costs and scarce new resources. Copper exploration/development companies looking for or trying to develop deposits already found and copper miners looking to expand their production capacity are all facing some serious challenges:

• Falling ore grades
• Country risk
• Water supply
• Labor problems, strikes
• Shortage of skilled labor
• Cost of capital for project finance
• Capital cost overruns
• Tax and sharing initiatives
• Energy costs
• Inadequate exploration funding – The Metals Economics Group estimates that exploration spending plummeted 42 percent to $7.7 billion in 2009.
• A lack of new discoveries
• Currency fluctuations

Credit Suisse Group AG said in a recent report that mining companies are missing analysts’ output forecasts because of lower-quality ore – Xstrata posted a 3 percent fall in first half copper output. The miner said copper output fell due to reduced volumes and lower grades at their Mount Isa and Ernest Henry mines.

“Spectacular” was used by UBS to describe western world copper demand growth in the first half of this year. Global copper inventory levels have been on a steady decline. Bloomberg recently reported stockpiles on the London Metal Exchange (LME) have fallen 20% since mid-February. According to the International Copper Study Group world refined copper consumption exceeded production by 67,000 tonnes between January and April this year, against a surplus of 74,000 tonnes in the same period one year ago.

Consider:

The declining rate of production at the world’s largest copper mine, Escondida. BHP Billiton forecasts a 5 to 10 percent production cut at the mine this year due to lower ore grades.

Bart Melek, Global Commodity Strategist with BMO Nesbitt Burns in Toronto, said this could take as much as 80,000 to 100,000 tonnes of copper out of the market.

• U.S. copper mine production had been expected to increase by more than 200,000 tons last year, instead production declined by 120,000 tons
• Rio Tinto and Freeport McMoRan both saw their output drop in the first six months of this year
• A lack of investment in new mining capability because of recent low prices
• The growth in demand from China, India and other emerging markets
• Consistent declines in warehouse inventories are underpinning the price of copper
• A low interest rate environment bodes well for the whole resource sector
• The overall weakness in the U.S. dollar translates into support for dollar denominated metal prices
• The potential for a drop in production from Australia – the world’s fifth largest copper producer – as a result of a resource tax the government might implement
• China has set a goal of 65 percent of urbanization rate in 2050. Over the coming 40 years that means 20 percentage points of urban growth per year, that translates into 300 million rural residents becoming urban residents over this time period
• Over the next two decades China will build 20,000 to 50,000 new skyscrapers
• By 2025, 40 billion square meters of floor space will have been built
• 221 Chinese cities will, by 2025, have one million people
• More than 170 cities will need mass transit systems by 2025
• India’s power production needs to rise by 15 to 20 percent annually which means, according to the International Energy Agency (IEA), India needs to invest $1.25 trillion by 2030 into its energy infrastructure. Because of this investment into new infrastructure India’s annual copper demand is expected to more than double to nearly 1.5 million tonnes by 2012 – up from a current 600,000 tonnes. India usually exports between 100 and 150,000 tonnes a year, Indian copper exports are likely to cease and indeed Indians might become large copper buyers

“The vision of a lower carbon transportation system, delivered by affordable, hybrid and electric vehicles, connected to smart grids, along with high-speed rail networks, requires copper. A hybrid passenger car contains 50 kg of copper for the electric motor, energy storage and transfer system. Each high-speed train requires 10 tonnes of copper components, plus 10 tonnes in the power and communication cables per kilometer of track. Low carbon electricity sources, such as renewables, and the distributed electricity systems required to incorporate and manage them, need four to ten times the copper content of electricity produced via centralised, fossil fuel generation.” Manifesto for a Competitive European Copper Industry European Copper Institute

“Our preferred commodities over the short to medium term are thermal coal, copper, zinc and gold. We still like copper and met-coal longer term.” UBS Investment Research Analysts Julien Garran, Tom Price and Edel Tully

Zambia sees bright future for copper mining

“The outlook for copper mining is very bright. Copper will continue to be sought because it is ideal for construction and is a very good conductor of electricity which cannot easily be substituted. We need to invest in exploration activities and that will require a lot of investment.” Mines minister Maxwell Mwale

Last year Zambian copper output reached 697,860 tonnes of finished copper cathodes from 17 privately-owned mines. With copper production rising by 16 percent in the first half of 2010 – first-half output equals 393,089 tonnes -  the country is on course to hit its forecast 2010 target of 750,000 tonnes (a level last seen in 1973). Zambia continues to attract new mining investments (Zambia’s Chamber of Mines of Zambia said investments in the mining sector have peaked at $5 billion in the last eight years) and the country should achieve the targeted 1 million tonnes output forecast for 2012.

“The extractive industries are the key drivers of African economies in general. Here in Zambia, mining has become the mainstay of Zambia’s economy and therefore it is in the interest of government to see that investment in the mining sector is increased. This will reverse the negative effects of the global economic crisis on the nation.” Mines minister Maxwell Mwale,

Zambia’s government said that it expects a strong performance by the mines over the long-term due to rising metals prices and has urged mineworkers’ unions to support new investors.

Zambia’s mineral royalty is three percent which compares very favorably to other jurisdictions of around five percent. Corporate tax is charged at 25 percent with a proposed profit variable tax at 15 percent – if after paying their 25 percent corporate tax companies still have a profit greater than eight percent of their overall income than these profits will be taxed at 15 percent – this tax is designed to transfer a fair share of the windfall value of copper to the Zambian government.

Do not confuse Zambia with the Democratic Republic of the Congo. Although both countries have immeasurable resource riches there is a vast difference between them, namely political risk.

Mukuba Resources Ltd. TSX.V – MKU

Issued and Outstanding: 55,384,054
Warrants: 16,825,979
Options: 2,812,083
Fully Diluted: 75,022,116
Cash: $4 million
Debt: 0

Mukuba is a Canadian mining company focused on the exploration and development of the Northcore Project, which is located in the highly prospective Central African Copperbelt region of Central Zambia. This geological phenomenon is one of the most important metallogenic provinces in
the world, containing massive reserves of copper-cobalt, as well as gold,
uranium, nickel, lead-zinc, iron and manganese.

Northcore Project – licensed for copper and cobalt – encompasses approximately 2,274 square kilometres of geologically prospective ground in the Domes Region of the Zambian Copperbelt – over 95% of the known Zambian copper reserves occur in rocks of the Lower Roan Group, or in the adjacent basement complex. The Northcore Project area contains roughly 2,000 km2 of the Lower Roan Group.

Geological mapping, soil sampling and investigation of the historical showings as well as ground-truthing of the geophysical survey results have confirmed historical geological anomalies and identified new anomalies – Approximately half of the Northcore Project area has been surveyed using aeromag/VTEM in the 2008 exploration program, with the remainder of the property completed by the end of the 2009 season using radiometrics and aeromag. The Company’s 2009 exploration program included drilling several of these anomalies and confirmed the presence of copper mineralization.

In June MKU started its 2010 drill program – on the Northcore Project, located southwest of Ndola, Zambia – of up to 10,000 metres in approximately 55 boreholes and it’s anticipated to be completed by November 2010. A test Induced-Polarization (IP) geophysical survey completed across selected lines at Target 18 outlined several chargeable anomalies. A selected number of these targets will be tested by the drilling program.

“This drilling program will test the numerous prospective targets identified in the 2008 and 2009 exploration seasons and we look forward to reporting drill and exploration results over the next 6 months.” Trevor Richardson, Mukuba’s President and CEO

Mukuba has recently mobilized a second diamond drill rig to test various high priority targets within the Target 17 area (Northcore Project) where coincident soil geochemical and VTEM, electromagnetic conductors will be tested.

Regional soil sampling across various new target areas is ongoing. It is anticipated that additional drill targets will be identified and selected based on the level of coincidence between the new soil geochemical survey and airborne geophysical results.

Recently published drill results are encouraging:

“The results are very promising since they correlate well with our previous work and represent the first eight holes of a larger planned program. In addition to confirming the presence of copper mineralization they provide the data to better understand the geological structure at Northcore and further support our belief in the highly prospective nature of the overall project area. Our technical team will continue to interpret the geological structure and mineralization style to refine drill locations for the remainder of the 2010 drilling program.” Trevor Richardson, President and CEO

Mukuba recently obtained the right to acquire an 85% interest in the exploration license rights to the Nyimba Project near the town of Nyimba, approximately 300 km east of Lusaka, Zambia. Historic exploration records indicate there are five defined areas of mineralization within the 500 square kilometre license area. The most prospective area appears to be Chipirinyuma, where soil sampling by Minex and Rio Tinto defined a surface anomaly measuring 3.5 km by 1.2 km.

These polymetallic deposits host zinc, with copper, lead, molybdenum, silver, and gold, and were systematically explored and partially drilled by Minex (Mindeco) – a Zambian government department – in the late 1970s and early 1980s. The Nyimba Project rights were acquired by Rio Tinto-Zinc Corporation in 1994. RZC carried out EM, magnetic and radiometric surveys as well as initial RC drilling. Exploration work on the property ceased in 1997 when Rio Tinto, along with most other mining companies, withdrew from Zambia.

Mukuba expects to mobilize a diamond drilling rig in October of this year.

“The addition of the Nyimba Project is an exciting opportunity for Mukuba and fits well into our African exploration strategy. We remain committed to the exploration and development of the Northcore Copper Project, which is our primary focus. The Company’s current cash position will allow us the flexibility to explore and develop both properties and to increase shareholder value. The Nyimba Project is well advanced and substantial exploration work has been completed to date.” Trevor Richardson, President and CEO Mukuba

Could a junior take part in a possible Zambian Copperbelt Boom? Could a fully cashed up, early stage greenfields exploration company with good solid management, having two large projects with excellent addresses find the “goods” and participate in a Copperbelt revival?  Only time will tell.

The Zambian Copperbelt and Mukuba Resources TSX.V – MKU should be on every copper/cobalt and zinc/polymetallic resource investors radar screen.

Are they on yours?

Richard (Rick) Mills
[email protected]
www.aheadoftheherd.com

If you are interested in the junior resource / bio-tech markets and would like to learn more please come and visit us at aheadoftheherd.com

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Richard is host of aheadoftheherd.com and invests in the junior resource sector. His articles have been published on over 200 websites, including: Wall Street Journal, SafeHaven, Market Oracle, USAToday, National Post, Stockhouse, Lewrockwell.com, Casey Research, 24hgold, Vancouver Sun, SilverBearCafe, Infomine, Huffington Post, Mineweb, 321Gold, Kitco, Gold-Eagle, The Gold/Energy Reports, Resource Investor, Calgary Herald and Financial Sense.

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