DEVILS ADVOCATE

By Toby Connor, Gold Scents
The persistent and mindless bullishness on gold lately has got me nervous. When I get nervous the first thing I do is pull up a multi-year chart and look at the big picture.

A couple of things are apparent when one looks at the chart below. First as I’ve noted many times in the past gold has a tendency to move above a big round number before topping. It did it at $1025, $1225, $1432, and gold  recently tagged $1630.

Another glaring discrepancy in that chart is the utter failure of the miners to participate in the last 200 point rally in gold. As a matter of fact the miners could possibly be forming a head and shoulders top.

We can also add to this the fact that sentiment has reached levels that in the past have triggered intermediate declines. Plus gold is now stretched above the 200 day moving average.

Now I don’t want anybody to think that I have all of a sudden become bearish on gold, I haven’t. Gold is quite obviously in a secular bull market. I am however beginning to question whether or not the low we saw three weeks ago was an intermediate bottom. I have been riding this bull market long enough to know that when everyone is rabidly bullish (especially me) it’s about time for gold to throw a curveball.

Until the dollar breaks below the May bottom I think we need to be very careful in assuming that gold is going straight up.

Toby Connor

GoldScents

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

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

Economic Rape of Europe Nearly Complete, Part III

By Jeff Nielson, Bullion Bulls Canada

In Part I of this series, I reviewed the campaign of U.S. “economic terrorism” which has ravaged many of the economies of Europe – and set the stage for their economic destruction. In Part II, I identified three of the most important strategies which will be used to “finish the job”, and discussed one of them: either to steal the national gold reserves of these nations, or to hide the fact that those national hoards of gold were already squandered.

In this installment I will focus on the second strategy for completing the looting of Europe. It is a mere two-word phrase, and arguably the most-odious two-word combination in the realm of 21^st century economics: “loss guarantees”. It is the ultimate form of “welfare” for both the banker Oligarchs and the bond parasites, and the principles behind it are extremely simple:

1) Direct hand-outs are the visible part of any/all welfare for the “elites”. Indeed, that component of welfare-for-the-rich is essentially the only part of these schemes which is understood and thus noted by the general public – and so they must be kept to a minimum (the proverbial “tip of the iceberg”).

2) In order to steal the $10’s of trillions which these Vampires are currently in the process of plundering from us, it is necessary to lie about (and thus hide) most of what is being stolen.

It is in this respect that our political leaders are “earning” the campaign-bribes which these Oligarchs used to buy our governments. In fact “lying about things” and “hiding things” are arguably the only two “talents” possessed by the current crop of Western political “leaders”.

We got our first real exposure to “loss guarantees” after the Crash of ’08, and the multi-trillion dollar extortion campaign which Wall Street based upon that deliberately created “crash”. Naturally when the (banker-friendly) propaganda machine writes about the “costs” of all of the Wall Street welfare they only ever point to “the tip of the iceberg”: the direct hand-outs – totaling somewhere around a paltry $1 trillion. However, once the “0% interest loans” and “loss guarantees” are added in, suddenly the Wall Street hand-outs swell to roughly $15 trillion (and counting).

It is a testimony to the monumental stupidity and apathy of the average Western citizen (in this case Americans) when we see how easy it was to dupe the American people. Understand first of all that both the banksters and the politicians (at least those at the very top) have known all along that the Wall Street fraud-factories are all hopelessly insolvent – and hiding countless $trillions in losses.

It is common knowledge that Wall Street was leveraged by an (insane) average of more than 30:1 at the time that their Ponzi-schemes imploded. The arithmetic is simple: a loss of roughly 3% on the underlying assets which were leveraged would take the entire paper-empire of Wall Street to zero. Most of the Wall Street scam-products were based upon the U.S. housing sector. Prices for U.S. homes have now plummeted in excess of 30% – ten times what would be necessary to make all of Wall Street insolvent. Even worse, many of the “exotic” products (i.e. bets) devised by the Wall Street Vampires were so unstable and/or heavily leveraged that losses well in excess of 100% are possible.

In this respect, the example I like to use is when one bankster sued another – in this case, Citigroup suing Morgan Stanley to force Morgan Stanley to honour its losses on just one “credit default swap”. Even after liquidating the so-called collateral which “backed” this contract, Morgan Stanley was faced with not a mere “100% loss”, but rather a 300:1 loss (or 30,000%).

Upon examining these facts, we discover the cruel, horrifying truth about these “loss guarantees”: what they are really are guaranteed losses. Thus in typical deadbeat fashion, the U.S. government immediately committed itself to more than $10 trillion in Wall Street losses – while not actually “paying for” thoses losses…at least not right away.

More articles from Bullion Bulls Canada….

Registrations closed as GATA’s Gold Rush 2011 conference is fully booked

GATA

10:52p ET Thursday, July 28, 2011

Dear Friend of GATA and Gold:

Registrations for GATA’s Gold Rush 2011 conference at the Savoy Hotel in London, to be held Thursday-Saturday, August 4-6, today reached the hotel’s conference capacity, nearly 400 people, and so registrations have been closed.

This overwhelming response is to the credit of the extraordinary caliber of the conference’s speakers — you can review them here:

http://www.GATAgoldrush.com

– and, we hope, to the growing recognition of GATA’s work as well as the growing desire around the world for an impartial standard of value in currencies and the de-facto remonetization of gold as the reserve currency of free people and free markets everywhere.

Reflecting that worldwide desire, registrants at Gold Rush 2011 have come from 31 countries: Australia, Austria, Belgium, Canada, China’s special administration region Hong Kong, Cyprus, the Czech Republic, Denmark, the Dominican Republic, Finland, France, Germany, Guyana, Ireland, Italy, Mexico, Monaco, the Netherlands, New Zealand, Norway, Panama, Poland, Russia, Singapore, South Africa, Spain, Sweden, Switzerland, the United States, the United Arab Emirates, and the United Kingdom.

Because of an extravagant contribution from the GoldMoney Foundation, GATA plans to videotape the conference and put it on DVDs for sale via our Internet site. So even if you couldn’t attend the conference, you’ll be able to share the insights, excitement, and fun.

Thanks so much to our conference’s speakers, registrants, and individual and corporate sponsors, and to all our friends around the world for their continuing support. Now it’s on to London to knock the market riggers on their ear.

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

Help keep GATA going

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:

http://www.gata.org

To contribute to GATA, please visit:

http://www.gata.org/node/16

 

Gold is the alternative to dollar, euro, Hathaway tells King World News

GATA

1:37p ET Thursday, July 28, 2011

Dear Friend of GATA and Gold (and Silver):

Gold is the obvious alternative to the dollar and euro, Tocqueville Gold Fund manager John Hathaway tells King World News today, and big institutions, sovereign wealth funds, and central banks haven’t even gotten into gold seriously yet. An excerpt from the interview is headlined “Institutional and Sovereign Buys to Cause Gold Spike” and you can find it at the King World News blog here:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/7/28_Ha…

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

Help keep GATA going

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:

http://www.gata.org

To contribute to GATA, please visit:

http://www.gata.org/node/16

Brazil starts taxing U.S. dollar shorts

GATA

Market rigging and currency controls are already under way.

* * *

Brazil Real Weakens for 2nd Day on Government Derivatives Tax

By Paulo Winterstein
Dow Jones Newswires
via The Wall Street Journal
Thursday, July 28, 2011

http://online.wsj.com/article/BT-CO-20110728-714708.html

SAO PAULO, Brazil — The Brazilian real opened somewhat weaker on Thursday, still recoiling from new taxes on currency traders as the government sought to slow the Latin American currency’s climb after reaching 12-year highs against the dollar.

The real opened at 1.5632, slightly weaker than its previous close at 1.5624, according to Tullet Prebon via Factset.

The government on Wednesday imposed a 1% tax on short dollar positions and said that new regulations could lead that tax to as high as 25%. While few expect the government to follow through on the threat of raising the tax to 25%, the measure increases the cost of speculative positions that favor the appreciation of the real.

“Although this is a new weapon in the government’s toolkit to combat BRL strength, we don’t believe it’s a silver bullet that will ultimately be able reverse the currency’s ongoing strengthening trend,” Banco Santander’s Alejandro Estevez-Breton wrote in a note.

Continued inflows, in the form of foreign direct investment attracted by the economy’s growth as well as speculative inflows thanks to one of the world’s highest interest rates, will continue to pressure the real, according to Santander. The central bank raised the benchmark Selic interest rate to 12.5% last week.

The sky-high interest rates, however, may not go much higher so soon, the central bank signaled Thursday. After removing language last week of a “sufficiently prolonged” rate adjustment cycle, the bank also signaled that it is more confident that global growth will slow and commodity prices moderate.

Brazil’s central bank said in minutes of its latest meeting that commodity prices have “shown a certain accommodation,” a change from previous talk of “great uncertainty” in the international commodity market. The spike in commodity prices at the beginning of the year had pressured Brazilian inflation, but now pressure appears to be easing, the bank said in minutes of its July 20 meeting.

The bank also said that growth of the world’s largest economies has shown additional signs of moderation.

* * *

Help keep GATA going

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:

http://www.gata.org

To contribute to GATA, please visit:

http://www.gata.org/node/16

 

2010-P Mount Hood 5 Ounce Silver Uncirculated Coin Available

The 2010-P Mount Hood National Forest 5 Ounce Silver Uncirculated Coin went on sale from the United States Mint today, July 28, 2011, at Noon (Eastern Time). The Mint is offering each of the Mount Hood uncirculated coins for $279.95 with an initial order limit of one coin per household. These strikes are each composed of five [...]

Peter Schiff Says Gold Will Reach $10,000 Per Ounce

In this video Peter Schiff of Euro Pacific Capital is asked about a previous quote in which he suggests that gold could reach a price as high as $10,000 per ounce. At the time this video was recorded, the Dow`s value lied at around 10,000. Schiff clarifies in the video that the value of the Dow could move up or down, but that he predicts a one to one ratio of the gold price to the down. That means thathttp://www.blogger.com/img/blank.gif it would cost 1 ounce of gold to buy one share of the Dow. So if the Dow stays at 10,000, then the price of gold will also end up somewhere around $10,000.

The one to one ratio also occurred in 1929 and 1980, at the peak of gold`s bull markets. Today the Dow is at approximately 12,500, so if the gold to dow ratio was one to one today, then it gold would cost $12,500 per ounce.

According to Mike Maloney of goldsilver.com, the gold price could reach as high as $15,000 per ounce. In light of this prediction, Schiff`s prediction seems thoroughly credible.

Read more….

A Gold Standard That Makes Sense In Utah

Yahoo! News
By David L. Garrett
July 28, 2011

Discussions about the U.S. going back to the “gold standard” are floating in the media and with politicians. Gold is trading at historically high levels fueled in part by inflation fears and recent actions of the Federal Reserve.

Precious metal ETFs like the SPDR Gold Trust (GLD) or the iShares Silver Trust (SLV) have seen dramatic annualized gains, as have mining ETFs, such as the Market Vectors Gold Miner ETF (GDX) and the Global X Silver Miners (SIL).

Aside from the stunning investment gains, what substance is there behind gold standard chatter?

First, if we seriously believe we need to return to a gold standard, which one are we supposed to go back to? And, will this really help? Economists agree that of all the gold standard adaptations, the pre-1914 classical gold standard worked best: when the price of an ounce of gold was tied to a specific amount in a nation’s currency.
This was the case in Britain, where the Pound Sterling was tied to gold as early as the eighteenth century. Since Britain was the world’s center of finance at the time, it was in the best interest of other nations to tie their currencies to a specific weight of gold as well, if they wanted to do business with Britain.

Trade flourished with this free market international monetary standard. When it came time to settle accounts, nations settled in gold. It was the international currency. If one country started to inflate its currency, the natural effect would be that other countries would be drawing down the inflating country’s gold reserve. It would compel the offending country to turn off the printing press or face the loss of its gold reserve or go off the gold standard altogether and lose business with Britian.

No doubt the pre-1914 classical gold standard is the gold standard to invoke, if we can, but even if the U.S. were to tie the dollar to a specific weight of gold, how would we get the rest of the world to follow? And even if they do, would we blow up the dollar in the process? The classical gold standard seems to have worked because virtually all nations adopted it and settlements between nations seemed to have been one of the big factors in keeping them from debasing their own currencies. The pre-1914 gold standard would require a lot of international cooperation to get going again.

The new Utah currency law sidesteps this international problem while providing State residents with a choice that could avert a disaster in local trade for products and services, and it accomplishes this swiftly and safely. The Utah currency law does not fix the dollar to any weight of gold or silver. Each would stand as a separate currency. If the dollar starts to inflate it won’t affect the precious metals since there is no direct tie. This also means that inflation of the dollar now has a check in the form of State monetary competition. Instead of a foreign currency tied to gold as a check, we have a check against federal monetary abuse by the States.

Utah’s currency law won’t require additional nations to get involved to make it work since the new currency is a competitor to the dollar on the dollar’s own ground. If the Federal Reserve and the Treasury inflate the paper dollar beyond usability, citizens will simply shift to the precious metal legal tender alternative. Life goes on. Moreover, trade goes on. Having an alternative to our paper dollar when risks seem to be growing almost daily is reassuring.

Also, either the dollar or the precious metal can be redeemed at any time for one another at the market price anywhere in the state. This puts them in competition with one another without either replacing the other, except as freely used by the public. There will be no massive currency changeover or mind boggling convoluted monetary issues.

You want to spend paper dollars? Fine. You want to spend precious metals? Fine. Transactions in gold or silver can occur using a credit card. Just hand your card to the store clerk like you do now. Technology would allow for as smooth and efficient transaction handling as we have right now with dollars.

If this concept is adopted by the other States — and at least twelve are considering it right now – over time it would make precious metal coins more stable in relation to anything we buy. Gold and silver prices would begin to stabilize in relation to goods and services. Merchants could begin pricing in both dollars and the precious metals. Americans would become arbitrators between the dollar and the metals by just living their lives and buying and selling on a day-to-day basis.

Moreover, the Utah currency is a 100% backed. Redeemability is 100% at any time because there is nothing to redeem to. Unlike the gold standards prior to 1971, when the public was actually prohibited from redeeming paper dollars for precious metal, this currency is the precious metal. There is no issuance of paper currency tied, or as it were, untied to gold or silver somewhere in a vault.

Finally, the new Utah currency law comports with the U.S. Constitution, whose framers authorized the states to make gold and silver coins legal tender, as well as authorized the federal government to do the same plus issue paper money. The door was left open for paper currency in the event of a national crisis, such as the War for Independence.

Authorizing gold or silver and paper currency as legal tender within states creates balance between state and federal monetary authority, note Larry Hilton, a consulting attorney to Utah gold currency proponents, with Rich Danker, economics director for the Washington-based American Principles in Action. Having states authorize gold and silver coins in addition to the national government actually fits more closely the intent of the founders than money solely being issued by the Federal Reserve.

It’s hard finding any significant fault with the direction Utah is taking with the passage of this law, which is why other States are considering following Utah. Congress is now considering complementary legislation supporting Utah’s move with the DeMint/Lee bill to remove federal taxes on gold and silver legal tender.

Sometimes big things start with little beginnings. This might be one of them.

Read more….

Kiss The AAA Rating Of The U.S. Goodbye

Commentary: Our broken political culture assures a downgrade

MarketWatch.com
By Howard Gold
July 27, 2011

NEW YORK (MarketWatch) — It’s been a hot summer, and it’s been even hotter in Washington, where Democrats and Republicans have been burning down the House with a pitched battle over the debt ceiling, the cap that Congress puts on the national debt.

Usually it’s a mundane bit of legislative business barely worthy of C-Span. Congress hikes spending and then authorizes an increase in the debt ceiling to pay for it. It’s happened 78 times since 1960.

But this year it will likely cause the U.S.’s prized AAA credit rating to go up in smoke.

Newly elected tea-party Republicans have held fast to their campaign promises to cut spending. So they have demanded spending cuts at least equal to the roughly $2 trillion the debt ceiling will have to be increased from its current $14.3 trillion to cover rising expenditures.

If that doesn’t happen by Aug. 2, President Obama and many others have warned the government won’t be able to meet all its obligations, including interest payments on the debt, military pay, Social Security checks, what have you. If we can’t, it could mean a default by the U.S. government, just like Argentina and Mexico did in days of yore.

Speaker of the House John Boehner and other Republican leaders also have said that default is not an option. But as a polarized Washington seems incapable of reaching a compromise, the ratings agencies have stepped in with more and more dire warnings.

Standard & Poor’s, Moody’s Investors Service and Fitch Ratings all have warned that failure to raise the debt ceiling would trigger a downgrade of U.S. government debt.

S&P in particular has also raised the stakes, and quite publicly. The kind of short-term fix so popular in Washington — like the ones that are being bandied about as I write this — that raises the debt ceiling for six months or so, with maybe $1 trillion or so in spending cuts, may forestall a technical default but still may result in a downgrade, S&P officials have said.

I’ll save who I think is primarily responsible for this mess for my political blog, but I will say this: You can kiss the AAA rating of U.S. Treasury debt goodbye.

Needing a miracle

If a miracle happens, we may be able to forestall it for a while. But without a huge turnaround in Washington’s broken political culture, I don’t think this Congress and president will enact the dramatic changes S&P has strongly suggested are necessary for us to stay in the elite club of AAA-rated sovereigns. They include Australia, Austria, Canada, Denmark, Finland, France, Germany, the Netherlands, Norway, Singapore, Sweden, Switzerland and the United Kingdom.

The philosophical and political differences between Democrats and Republicans are so sharp that no long-term agreement on spending and revenues seems possible. They live in two parallel universes, with two completely different visions of what the problems facing the country are.

And if they can’t strike a compromise with the Sword of Damocles of default hanging over their heads, when are they going to do it? In 2012, when they may face primary challenges and well-financed general election opponents?

This may sound like a digression, but it’s actually at the heart of S&P’s warnings.

“There is at least a one-in-two likelihood that we could lower the long-term rating on the U.S. within the next 90 days,” S&P wrote on July 14 when it put U.S. debt on credit watch with negative implications.

“Despite months of negotiations, the two sides remain at odds on fundamental fiscal policy issues. Consequently, we believe there is an increasing risk of a substantial policy stalemate enduring beyond any near-term agreement to raise the debt ceiling,” it continued.

Who are we, Bermuda?

In fact, it warned that it “may lower the long-term rating on the U.S. by one or more notches into the ‘AA’ category in the next three months, if we conclude that Congress and the administration have not achieved a credible solution to the rising U.S. government debt burden and are not likely to achieve one in the foreseeable future.”

“An inability to reach an agreement now could indicate that an agreement will not be reached for several more years,” S&P wrote. “We view an inability to timely agree and credibly implement medium-term fiscal consolidation policy as inconsistent with a ‘AAA’ sovereign rating.”

S&P even spelled out what it thought would be necessary to maintain the AAA. “If Congress and the Administration reach an agreement of about $4 trillion, and if we conclude that such an agreement would be enacted and maintained throughout the decade, we could, other things unchanged, affirm the ‘AAA’ long-term rating on the U.S.”

In this remarkable report, the agency laid out several possible scenarios for losing and regaining the AAA rating, which I won’t go into and which you can read at www.standardandpoors.com .

Neither Moody’s nor S&P would provide officials for me to interview for this column, and S&P issued a statement that said: “Standard & Poor’s has chosen not to comment on the many and varying proposals that have arisen in the current debate. Any statement to the contrary is inaccurate.”

Maybe so, but it you draw a road map, do you really need to fill in the name of every one-horse town along the way?

In fact, a top S&P official appeared to be easing the pain of a downgrade in advance. In a video interview on S&P’s website, executive managing director Paul Coughlin said: “That’s not the end of the world. Lots of countries would give their right arm for a AA+ rating.” That would put us right up there with Belgium and New Zealand. With AA we’d be in the class of Bermuda and Qatar.

Losing the AAA would probably hurt the economy through higher borrowing costs for the government, corporations and consumers, especially those who have adjustable-rate debt, and we’d likely see a stock market decline.

But most of all it would be a terrible blow to our national pride and prestige, capping a decade of decline from the commanding heights we bestrode at the start of the millennium.

It gives me no joy but considerable sadness to reluctantly agree with Barry Knapp, head of U.S. equity strategy at Barclays Capital, that a downgrading of the U.S.’s credit rating is inevitable.

As the great Bob Dylan wrote, you don’t need a weatherman to know which way the wind blows. So long, AAA, it’s been good to know you.

Read more….

Gold Seeker Closing Report: Gold and Silver Fall Again

Gold climbed $5.13 to $1619.93 by a little after 8AM EST before it fell back to $1602.55 by late morning in New York, but it then rallied back higher in the last couple of hours of trade and ended with a loss of just 0.12%. Silver fell to as low as $39.342 before it also rallied back higher, but it still ended with a loss of 1.97%.

Read more….

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