Tuesday, December 14, 2010

Silver price up as JP Morgan cuts short position and backwardisation rules

From ArabianMoney.net:

Silver market experts have long pointed to the massive short position held by several major banks as the prime reason for the metal being underpriced and the only commodity still trading below its all-time high of thirty years ago.

But the headlines in the Financial Times today announced that JP Morgan has ‘materially reduced’ its position in silver to counter these allegations which it denies. It is perhaps no coincidence that silver is up 70 per cent since August.......read on

Ron Paul - Making money out of thin air

From Bloomberg:

U.S. Representative Ron Paul, a Republican from Texas, talks about the Federal Reserve's response to the financial crisis and the bank's that borrowed from the Fed's Term Auction Facility. Paul speaks with Pimm Fox on Bloomberg Television's "Taking Stock.".........watch here

15 year old Tells Establishment to Stick-it

Weekend chill out

As the ABC Bullion blogger is on Thai time, ie late, so it seems is last weekend's chill out, and being in Thailand I thought it only right to have a Thai pop song as the chill out.

Mai Chai Ghon Hin
(I'm Not A Stone)


Speech by Commissioner Bart Chilton before the High Frequency Trading World USA 2010 Conference, New York

December 8, 2010


Good morning and thanks to Terrapinn, and especially Matt Bednarsky, for the kind invitation to speak with you today.

Today, I’m going to spend a few minutes talking about speed. That is, speed not only with regard to computers in trading but also to regulation. Together, we’re all going boldly where no man has gone before. I’ll also share with you a few of my thoughts about the happenings and changes that are occurring in Washington that will impact Wall Street and LaSalle Street and a bunch of people on streets that not many folks have even heard about.

Streets With No Name

In fact, forget about Wall Street or LaSalle, it really doesn’t matter the name of your street at all. Many High Frequency Trading (HFT) and other financial trading firms don’t even have offices in New York or Chicago, let alone London, Hong Kong or Singapore. If you have a connection, you can trade, and trade they do. A recent report says HFT firms account for about 50 percent of European markets. Our CFTC economists say high frequency traders (HFTs) account for roughly a third of all trading volume on regulated U.S. futures exchanges.......read on

End of Empire: Max Keiser interviews Dr. Paul Craig Roberts

Words vs. Actions

Sins of the Father

One has to wonder if Bernie's son was given some help for fear of him naming the banks that helped Daddy.

Brittan protests against the imposition of the New World Order

Mass demonstrations by thousands of students and trade unionists in central London against an increase in tuition fees, are growing more violent. It's the latest and the largest in a string of rallies against sweeping austerity measures and budget cuts across Europe. What started as a relatively peaceful march later turned into violent clashes with the police, which were largely outnumbered by the demonstrators.

Jim Rogers: Britain is Bankrupt

China Tells Bernanke To Take A Hike

Graham Summers
9 December 2010
Over the last few months, I've noted that the most important monetary relationship in the world is that between China and the US, the world's largest creditor and debtor countries respectively.

Both countries' central banks engaged in a money-printing orgy to counter the Financial Crisis in 2008. Now they're butting heads on the consequences of their actions: the US Federal Reserve wants to create inflation, while China wants to aggressively halt it.

This is IT, the #1 dynamic for the financial markets going forward. How this plays out will impact everything from the US Dollar's reserve currency status to where the stock markets will head.

With that in mind, we need to consider the power dynamics between these two countries from a monetary perspective.

China has made it clear that it is NOT pleased with the US's current monetary policy (China has blamed the Fed for its inflation woes with some officials going so far as to label the Dollar's status as a reserve currency, "absurd").

The US has in turn responded by labeling China a currency manipulator and blaming it for the US's economic woes. Indeed, it seems almost every other week that some US Government official comes out with a "it's ALL China's fault" statement.........read on

A Gentleman's Agreement

Richard Zimmerman
December 9, 2010
Following the 1980 price peak in gold, there was a sell-off that probably left more than one investor wondering if precious metals had completely lost their luster. The Hunt Brothers' manipulation of the silver markets also added its own tarnish to the world of bullion. As these two markets march to fresh highs this year, it is time to think about what pulled both markets down and why support may come at a higher level than you think.

As mentioned in previous reports, catalysts for rising prices include geopolitical tensions, inflation, and a host of other fear-inducing fundamentals. The jittery reaction to uncertain world and economic conditions doesn't always cause the pendulum to swing towards higher ranges. There is one thing in particular that can make gold buyers into gold sellers. That is an increase in gold sales from large banks or investors.

This fear was one of the biggest culprits for the most recent low price in gold.

In the late 1990s, there were a number of gold sales that were thought to be impacting the broader market. Sales were coming from central banks including Bank of England auctions and other European nations. The result of rumors over more central bank sales, especially considering the lower prices for gold, was a threat of destabilizing the market. Since central banks held so much of the physical gold at the time, some of them came together to take action to prevent a rapid decline in prices. The result of their meeting was a gentleman's agreement on gold sales......read on

Oil And U.S. Hyperinflation

Jeff Nielson
December 9, 2010
As precious metals investors, it can often seem to us that the U.S. government (and the banking cabal which pulls its strings) is exclusively focused on suppressing gold and silver prices - given the historic role of precious metals as a "barometer" of economic conditions, especially inflation. However, there is a different commodity that this group obsesses about to a far greater degree than precious metals: oil.

The United State's enormous dependency on imported oil translates directly to enormous economic vulnerability. Indeed, U.S. paranoia about "securing" oil supplies for itself has been the driving force behind most (if not all) of the wars it has instigated in the Middle East.

The U.S. dependence on petroleum goes well beyond simply the massive amounts that is spent each year by the U.S. to satisfy its oil-gluttony. Cheap oil is the essential input needed to operate the "levers" of U.S. military/economic imperialism, as well as the foundation upon which the entire U.S. domestic economy is built.

Let me summarize this dependence briefly. By itself, the U.S. military is one of the ten largest oil-consuming entities on the planet. In other words, operating the U.S. war machine by itself consumes more oil each year than all but a handful of nations. Thus, the death, destruction, and misery that the U.S. military has inflicted upon its victims over recent decades is accompanied by the horrendous waste of countless billions of barrels of our most precious natural resource.

In this respect, high oil prices are a "blessing" to much of the world, as the hopelessly insolvent U.S. government is totally incapable of financing any more "military adventures", now that the era of cheap oil is gone forever. Indeed, we can only assume that Iranian defiance to the U.S. regarding its nuclear program is based upon their firm conviction that any military harm which the U.S. could inflict upon Iran would pale in comparison to the economic harm it would inflict upon itself from such an attack. Thus, we know the #1 reason why the U.S. is vainly attempting to keep a lid on oil prices: having a "big stick" is of little use if you're never able to use it.

The U.S. military is but one facet of the U.S. empire totally dependent upon cheap oil. Of near-equal importance is the need for cheap oil in order to pursue its agricultural imperialism. Roughly two decades ago, the U.S. government made a conscious decision to abandon most manufacturing activity - with the exception of the industrial and hi-tech sectors which service the U.S. war-machine.

Replacing manufacturing as the foundation for the U.S. economy is agriculture. The "World's Only Superpower" has chosen to become a "banana republic". Indeed, on the last major, U.S. trade mission to India, the big "success" of that endeavour was being able to increase U.S. soya bean exports to India.

Around the world, the story is the same. Where U.S. consumer manufactured goods used to flood the markets of countries all over the Earth, agricultural products now take their place - heavily subsidized agricultural products.

U.S. agricultural imperialism is based upon first injecting massive subsidies (in excess of $100 billion per year) into its crop production. These heavily subsidized food items are then dumped into markets in every continent on the planet. For the other, wealthier economies, this extreme U.S. subsidization is met with competing subsidies. Indeed, for many years the U.S. and Europe have been locked in an endless exchange of dueling subsidies.

For the less-wealthy nations, however, matching U.S. subsidies for its agricultural products is economically impossible. These nations have been forced to watch helplessly as the massive quantities of subsidized U.S. agricultural products bankrupted millions of small farmers all over the world - and severely depressed agricultural production. Thus, at the same time that rising per capita incomes in developing economies is spurring an enormous increase in demand for agricultural products, we have the U.S. government engaged in a predatory campaign which has crippled numerous economies, in addition to creating crop-shortages through depressing global production.

Even here, however, the U.S.'s Achilles heel asserts itself. Apart from the fact that U.S. agriculture is highly dependent on massive water subsidies, what few people realize is that agriculture is an oil-intensive industry. Oil-powered machines plant the crops. Oil-powered machines distribute the petroleum-based fertilizer products used by most forms of agriculture.

Oil-powered machines then harvest most of these crops, so that oil-powered trucks can take this food to processing centers, before ultimately being shipped to consumers - primarily in more oil-powered trucks. Compounding U.S. oil-gluttony, the U.S. has embarked on a huge program to produce the world's least efficient bio-fuel: corn-based ethanol.

In other words, after consuming vast quantities of oil to produce its crops, the U.S. then takes a large chunk of that agricultural production and converts it to fuel - in a process which uses nearly as much fuel as is produced, resulting in no economic benefit to anyone (and no increase in energy supply), except for a windfall for corn-farmers.

While the U.S. selfishly wastes vast quantities of oil with its war-mongering, and foolishly squanders vast, additional amounts through short-sighted agricultural policies which can only be characterized as "idiotic", this endless waste of precious petroleum is 100% certain to destroy its domestic economy.

As U.S. "inner cities" became increasingly uninhabitable due to endemic poverty - and the crime which inevitably accompanies that - U.S. "urban sprawl" turned into a gigantic population-shift, where urban Americans became "suburban Americans", forced to commute long-distances (in oil-powered vehicles) just to make it to work each day.

Meanwhile the rest of the world chose to reduce their own oil-consumption through adding high taxes to oil, which also made various forms of mass, public transit economically viable - further reducing their oil-dependence. In its typically short-sighted fashion, the U.S. did the exact opposite. It continued to heavily subsidize oil consumption amongst its population.

Decades of this totally suicidal policy has left the U.S. with the following problems. Americans possess tens of millions of obsolete gas-guzzlers - for which they are still making $billions in payments. They live in massive homes they can no longer afford to heat, located so far from employment centers that they can't afford to drive to work. Meanwhile, equally short-sighted city planners never bothered to embark upon any significant investments in mass-transit.

Even if the U.S. had the money to begin to create 21st century mass transit for its cities (which it doesn't), these long-term infrastructure projects would take at least a decade before making a significant dent in U.S. oil consumption. The U.S. has no money, no oil, and no options.

While Wall Street caused the "Crash of '08" to attempt to hide its own insolvency as being merely part of a "global crisis", the U.S. government had an entirely different motive for engineering a global economic crash, and a total meltdown in all commodity markets: $140/barrel oil. In this respect, Rob Kirby wrote a very interesting article about U.S. "machinations" in the oil market, beginning in May/June of 2008.

Through a combination of sleuthing and deduction, Kirby connected a dramatic change in U.S. oil policy to the Crash of '08, and otherwise inexplicable price-behavior regarding the different grades of global crude - which coincided with the change in U.S. energy policy. He also noted that these "machinations" bore an uncanny resemblance to "activities" of the U.S. government in precious metals markets.

Media talking-heads continue to perpetuate the myth that a "cheaper dollar" will improve the U.S. trade balance - and ultimately help the U.S. dig its way out of insolvency. Empirical data has revealed this to be nothing but wishful thinking. In fact, each time the U.S. dollar takes another nose-dive, the U.S. trade deficit usually widens, as the modest up-tick in U.S. exports is overwhelmed by the soaring bill for U.S. imported oil.

The bottom-line for these parameters is that the only way in which the U.S. can delay economic collapse is to continue to push-down oil prices (versus the U.S. dollar). Where precious metals factors into this equation is that oil-producing nations (most notably the Arab, OPEC nations) watch gold and silver prices - to tell them when/if they need to push crude prices higher, as compensation for the ever more rapid dilution/depreciation of the U.S. dollar.

Therefore, while the U.S. government desperately wants to keep gold and silver prices down, it absolutely needs relatively cheap oil prices. What this means is that when oil surges above $100/barrel (likely by January or February) we should all expect another made-in-the-USA "economic crisis".

If (or when) the U.S. finally loses any ability to control oil prices, the consequence is inevitable: hyperinflation. Soaring oil prices increase the U.S. trade deficit, cripple the domestic economy, negate any/all benefit of its massive agricultural subsidies, and leave its war-machine "out of gas".

Simply, there is not a single facet of the U.S. economy which can remain solvent with high oil prices. When cities, states, and most average Americans begin a downward spiral toward bankruptcy due to high oil prices, the last and only option for the U.S. is more money-printing - much, much more.

With current U.S. money-printing already a threat to set-off U.S. hyperinflation, any further escalation of Bernanke's monetary madness must result in hyperinflation. Much like decades of suppression of the silver market has resulted in the near-total depletion of silver stockpiles, so too has the U.S. policy of depressing global oil prices resulted in the depletion of global oil reserves - decades sooner than would have occurred with any kind of sensible, long-range planning.

While the silly, suicidal bullion-banks only increase silver demand each time they launch another "attack" on prices (advancing the date of their own funerals), so too has the U.S. government's permanent policy of oil price-suppression merely served to dig its own economic grave.

At the exact same time that U.S. vulnerability to high oil prices has reached a new, all-time high, the ability of the U.S. to suppress oil prices through any form of moderate/subtle manipulation of global markets has been exhausted. With the U.S. economy already on the verge of collapse, creating another "crisis" (its last and only "tool") will require nothing more than simply being honest about the severity of its economic problems.

Jeff Nielson


None dare call it Conspiracy: A Secretive Banking Elite Rules Trading in Derivatives

By LOUISE STORY, The New York Times:

On the third Wednesday of every month, the nine members of an elite Wall Street society gather in Midtown Manhattan.

The men share a common goal: to protect the interests of big banks in the vast market for derivatives, one of the most profitable — and controversial — fields in finance. They also share a common secret: The details of their meetings, even their identities, have been strictly confidential.

Drawn from giants like JPMorgan Chase, Goldman Sachs and Morgan Stanley, the bankers form a powerful committee that helps oversee trading in derivatives, instruments which, like insurance, are used to hedge risk.......read on