Monday, February 28, 2011
An international buying spree, or flight to safety by global investors, saw silver prices breach 30-year highs on Sunday at $33.30 an ounce.
Emerging economies of China and India are both heavy consumers of the metal, which is used in jewellery but also has its use as a raw material for industrial use.
Silver is now up 22.28 per cent in the past 30 days and according to traders, has more than doubled in the last one year, trading as it was at $16.24/oz on February 27, 2010.
Compared with this, gold prices have gone up by just a little over 6 per cent in the past 30 days and according to data sourced from goldprice.org, the yellow metal is up by just 27.75 per cent in the last one year.
This is now leading to precious metal analysts to argue that silver will see much more appreciation in the months to come, especially since the extent of global silver reserves are debatable.“Robust international demand, financial and political instability across the world, and concerns over remaining reserves all harbour well for the price of silver,” said a Mumbai-based wholesale trader of silver. “Silver is the new gold,” he said.
The Thailand Futures Exchange Plc (TFEX), part of The Stock Exchange of Thailand, will begin trading silver futures and extend trading hours for gold and silver futures until 22:30 hours, both starting in June 2011.
Silver has been gaining popularity among investors due to its upward price tendency and its relationship with gold prices, TFEX Managing Director Kesara Manchusree reported. Investors in gold can employ similar trading strategies for both precious metals. Moreover, they see more opportunities in silver because of its comparatively low price and high volatility.TFEX’ specification for trading silver futures are similar to those for 10-baht weight gold futures. This means the silver futures’ contract size is set at 100 troy ounces (approx. 3.1 kgs.), which are worth around THB90,000 (approx. USD3,000). Silver will be quoted in Thai baht (THB) per troy ounce, and its underlying price will be based on 99.9% pure silver. Final settlement will be in cash when the contract expires, instead of physical delivery. Final settlement prices for silver will use information from the same source as when gold futures are settled, i.e., London Bullion Market Association ( LBMA)......read on
(Reuters) - Ireland's victorious opposition party Fine Gael set the stage for coalition talks with its traditional partner Labour next week, after a historic election that crushed long-time rival Fianna Fail.
The parties are under intense pressure to clinch a quick deal so they can present a united front to European partners as they bid to renegotiate the terms of a bailout that some fear could bankrupt the former "Celtic Tiger" economy.
"We don't have any time to lose," Fine Gael's leader and prime minister-in-waiting Enda Kenny said after claiming victory. "The country can't borrow money, the banks can't borrow money, we are up to our necks here."
The center-right Fine Gael, swept into power on a wave of voter anger over the country's financial meltdown, is on course for a record 75-plus seats, but the pro-business, low-tax party will fall short of a majority in the 166-seat lower chamber......read on
Sunday, February 27, 2011
BEIJING: Bank of India has become the first Indian bank to offer trade settlement facility between the rupee and the Chinese RMB from Hong Kong. This follows intense persuasion by the China Banking Regulatory Commission, which is trying to gain acceptance of the RMB as an international currency.
"We are the first Indian bank to offer real-time settlement facility in RMB to Indian exporters and importers. It will be save a lot of time because settlement in US dollars usually takes three working days," Arun Kumar Arora, BoI's chief executive in Hong Kong, said during a recent visit to meeting regulators in Beijing.
Indian buyers are at present making payments in US dollars, and they often have to convert rupee into the US currency for the purpose. The US dollars will no more be the intermediary currency as the BOI is offering direct settlement between the rupee and the Chinese money.
Chinese exporters want their money in the local currency, which is regarded as more stable compared to the US dollar. They are also in a position to have their way because Indian buyers do not have an alternative source of low-cost goods, sources said.......read on
By Greg McCoach
Friday, February 25th, 2011
Gold will continue dominate the precious metal headlines in 2011. But it's silver that will ultimately be the year's top performing precious metal.
Don’t get me wrong; gold will do very well for investors this year.
But on a dollar-for-dollar basis, silver is going to blow the doors off gold’s performance in 2011.
Silver could easily eclipse the metal's 1980 nominal high of $50 an ounce this year.
And when you learn just how little silver is available on the market right now, I think you'll agree...
The ten largest precious metal traders on COMEX currently hold net short silver positions that represent more than 330 million ounces — nearly half of total global silver production.
Compare that to gold, in which the net short position in of the same ten traders represents 25 million ounces (or a mere 1%) of the 2 billion ounces of world gold inventory.
That means the net short position in silver is 27 times greater than that of gold.
This is setting up what I believe could be an explosive situation for wise investors.
The world's largest holders of silver bullion account for roughly half (500 million ounces) of the available 1 billion ounces of worldwide silver.
This is spread over the seven largest investment funds, which include iShares Silver Trust (NYSE: SLV), the Central Fund of Canada (AMEX: CEF), and others.
This means only 500 million ounces remain for the rest of the world to invest in.....read on
25 February 2011
Is 0.4% really that big of a deal?
This morning, the Commerce Department revised its GDP estimate for the fourth quarter of 2010 by 0.4% to the downside. That in and of itself is certainly not newsworthy, but the reasons given for the downward revision most certainly are. For the first time in quite a while, the government and the media are actually allowing the light of truth to shine into government reporting. One of the biggest reasons (which has been included in many headlines) is that cuts in state government spending are largely responsible for the cut in GDP. So what, that is common sense isn't it? It will be, but let's analyze. I've talked many times about how GDP numbers have been overstated because they included government spending that comes from borrowed money. While those discussions generally focused on the federal government, this includes the states too. The states issue debt in the form of general obligation and specific bonds to do much of their spending since they, like the federal government, are largely insolvent. This spent borrowed money counts in GDP the same as a dollar spent that had been kept in savings. The thesis proposed months ago was a simple one; the states are going into extremis and when they do, down goes GDP. Double that for the federal government.
This is one of the biggest reasons that no one in Washington really wants to cut government spending, putting the rhetoric aside. They all know that if they were to cut a trillion dollars from the federal budget that GDP would fall by around 1/14th and we'd have an instant depression. Yet at the same time, a trillion dollar cut in spending is exactly what needs to happen along with a bevy of program reforms; and that is just for starters. Hopefully this gives you a better appreciation of the predicament we're in as a nation. This is one of the reasons I think politicians are taking up the stance that they agree cuts need to be made, but can't agree on which ones. This will give them all political cover to maintain the status quo thereby cutting essentially nothing, while making much in the way of fanfare over insignificant token cuts. The idea of shutting down the government and its massive entitlement system has already been floated to scare people into pressuring their leaders into maintaining the status quo. Stay tuned; it gets better.
Consumers also did not escape blame for the lack of more vigorous 'growth'. Spending had originally been thought to have increased at a 4.4% annualized rate. It turns out spending likely only increased at 4.1%. Bad consumers! From our good friend Jeannine at AP:
"Consumers spent a little less than first thought. Their spending rose at a rate of 4.1 percent, slightly smaller than the initial estimate of 4.4 percent. Still, it was the best showing since 2006. And it suggests Americans will play a larger role this year in helping the economy grow, especially with more money from a Social Security tax cut."
Talk about opinion shaping. This should be another indicator that nobody is really intent on fixing anything. While I am all in favor of a tax cut, one without reform seems rather obtuse, especially given the fact that Social Security is already in the red and busted out beyond description in terms of its unfunded promises. The program needs a massive overhaul, not insipid palliatives.
What cannot be left alone in the above press line is the suggestion that consumers are going to lift the economy in such a Herculean manner. First of all, let's get it straight that much of the 'gain' in consumer spending (as measured by retail sales) came from the fact that consumers are paying more for food and gasoline and, sadly, have increased their debt burdens slightly to do so. More unsustainability.
To demonstrate this, I'll show a couple of charts; the first is the slight, but significant increase in consumer credit followed by the steady increases in both food and energy prices throughout all of 2010:
Now let's get a better idea of where at least a portion of those borrowed dollars went - first food and beverage prices:
Now, for energy…
Consumers paying more for staple goods doesn't constitute economic growth, yet this is exactly what the Keynesian deficit-lovers would have you believe. And we know the CPI is in most cases grossly understating the real increases, but at least you now have a visualization of the issue. It may very well be that this next boom in consumer indebtedness comes more from necessity rather than greed and avarice. With the labor market still incredibly soft, and thousands of discouraged workers falling out of the BLS counts each month, the credit card is the only place many people will be able to fill the gap.
Further anecdotal evidence that supports the notion that this 'recovery' was nearly entirely a contrived event (thanks to borrowed government money and increasing prices of finished goods) is the housing market. Home prices have continued to drop despite the frantic calls of 'bottom' from market analysts, hopeful professional associations like NAR, and the mainstream press. Foreclosures continue to mount and even CNBC got on the bandwagon a few weeks back reporting that around 11% of all homes in the US are now sitting empty. A genuine bottom up fix would have corrected many of these problems. Spending a trillion dollars to rebuild our manufacturing base would have created jobs beyond those necessary to do the building. It would have employed people on an ongoing basis, miraculously converting bad debts into good ones. Instead we chose to do a top-down fix, lavishing trillions of dollars on banks, brokerages, and lobbyists in the hope that a few bucks might find their way to Joe Q. Public. It reeks of too much textbook and too little practicality.
The recovery that never was is over. Continuation of the current state of affairs will result in further debt accumulation by a system that is ready to disintegrate on its own weight. Assuming the consumer can step in and spend up where even state governments leave off is an absurd idea. Assuming they can fill the black hole left by a gutted and fiscally impotent federal government is laughable.
Andrew W. Sutton, MBA received graduate honors in the field of Economics and is the Chief Market Strategist for Sutton & Associates, LLC, a Registered Investment Adviser in the Commonwealth of Pennsylvania. For more information about the company, its products and services, or contact information, please visit our website. Please feel free to distribute, copy or otherwise disseminate this information.
24 February 2011
Gold's history as a currency extends back thousands of years. The western world's first known standardised minting of gold currency took place in 564 BCE by King Croesus of western Asia Minor. However, it is also believed that China in the fifth and sixth century BCE, minted the Ying yuan gold coin as well. In the great Gupta Empire of India, from 320 to 550 CE, gold coins were used throughout its domain. And in the early Islamic world around the time of the Prophet Muhammad, the gold dinar coin led as its currency. In Europe, gold coins became an important or central monetary unit for the Greeks, Romans, Venetians, Dutch, Spanish and British.
During approximately 1870 to 1910 all major countries linked their currencies to gold, thereby adopting the gold standard. However, China was the exception preferring a silver-based standard. The first silver coins are reported as being minted by King Pheidon of Argos around 700 BCE.
Gold and silver have historically asserted themselves as monetary mediums due to their intrinsic value. They are consistent, divisible, durable and convenient, and they are nobody's liability.
Unlike paper money, gold, particularly, has proven itself in maintaining its value over many centuries. The World Gold Council (WGC) says that, "since the 14th Century, gold's purchasing power has maintained a broadly constant level… an ounce of gold has repeatedly bought a mid-range outfit of clothing… in the fourteenth century… in the late 18th century and… at the beginning of this century (2000 to 2008)… On the other hand, the US dollar that bought 14.5 loaves of bread in 1900 buys only 3/4 of a loaf today. While inflation and other forces have ravaged the value of the world's currencies, gold has emerged with its capacity for wealth preservation firmly intact… [whether] in the face of financial turmoil… [as] a crisis hedge… [or] as an inflation hedge."
Since their origins, central banks have realised the importance of gold, and sometimes silver, as a strategic part of their reserves. Commenting on the rapidly rising price of gold, Alan Greenspan, former chairman of the US Federal Reserve, said in a Bloomberg report on September 9, 2009, that, "[the rising gold price is] an indication of a very early stage of an endeavor to move away from paper currencies… What is fascinating is the extent to which gold still holds reign over the financial system as the ultimate source of payment."
And this is also because, "[the central banks] no longer trust each other… [and] there's this perception that different countries are trying to weaken their currency in order to get a competitive advantage," said Francisco Blanch, head of global commodity research at Bank of America Merrill Lynch at a New York City November 2010 conference, reports Fastmarkets. Among the countries whose central banks are increasing their gold reserves are China, India, and Russia-all countries with mammoth trade surpluses and foreign exchange reserves.
However, as throughout history, he who owns gold and how much he owns is often shrouded in secrecy. For a central bank, covertly selling and buying of gold and its currency can be used to secretly manipulate the value of its currency. Some indirect proof of this comes again from Mr Greenspan during testimony to a US Congressional committee in 1998. He remarked that, "central banks stand ready to lease gold in increasing quantities should the price rise." Therefore, declaring the precise gold holdings of a central bank might be akin to giving away 'trade secrets.'
Central banks worldwide supposedly hold around 30,000 tonnes of gold, perhaps 20 to 25 per cent of all the gold ever mined. But true independent verification of their holdings is not available. The US based Gold Anti Trust Committee (Gata) has compiled extensive and critical information concerning western central bank gold holdings. Their information and that from other sources suggests the actual physical gold holdings of some western central banks could be 30 to 50 per cent lower than publicly reported.
As an example, the US boasts official gold holdings of 8,133.5 tonnes. However, it is known that some, perhaps a significant portion of these holdings, have been leased out to various financial entities and might not be returned without huge financial losses. Ron Paul, the chairman of the influential US Congress's Domestic Monetary Policy Subcommittee of the House Financial Services Committee, is so concerned about such activities that he is calling for a full public audit of US gold holdings.
Additionally, gold is possibly set to play a reinvigorated role in the international monetary system. The International Monetary Fund (IMF) as well as most members of the G20 are seeking alternatives to the US dollar as the world's principal reserve asset. And in this regard, gold-perhaps silver too-could be included in a basket of currencies and commodities that create the basis for a new international unit of exchange (currency).
Moreover, an RBC survey of global financial executives and business leaders reported on Yahoo! Finance on February 3 that "just 52 per cent of respondents expect the dollar to be the world's currency in five years," and that "gold is coming back as a reserve currency 'of sorts,'" says Marc Harris, head of global research at RBC Capital Markets.
Probably since the beginning of civilisation, gold especially, but silver as well, have served as monetary vehicles. Gold has demonstrated itself to hold its value over centuries and in many diverse cultures. And despite today's sophistication with paper money, gold is still seen by central banks as the ultimate source of payment. Concerns are growing that the real physical gold holdings of some major central banks might be substantially lower than they have reported, and as they unabashedly devalue their paper money, gold and silver rise once again as history's chosen currencies.
Founder & Analyst
Investing for the Soul
E-mail the writer: firstname.lastname@example.org
Saturday, February 26, 2011
Michael Pento, of Euro Pacific Capital, discusses Gold and Gold shares, the decay of the US$ and QE3 with Eric King, of King World News........listen here
Art Cashin of UBS, discusses with Eric King, of King World News, the action in gold, silver markets, the lack of strength in the US$ and the potential for the uprising in Bahrain to spread to Saudi Arabia.......listen here
On this edition of Peter Lavelle's CrossTalk: Will the US have a say in the Middle East scenario? Will it co-author it or play a silent spectator role? Is there any way the West can benefit from the current chaos? And will it gain any points if it continues to ring the alarm over rising fundamentalism? CrossTalking with Harold Rhode and Johan Galtung.
The Kremlin has unveiled the biggest rearmament programme since the fall of the Soviet Union, saying it intends to buy 600 new planes, 100 new ships and 1,000 new helicopters within the next decade.
The ambitious overhaul will cost the equivalent of £406 billion and comes at a time when other countries around the world such as Britain are cutting their defence spending to try to balance their national budgets.
But with oil prices rising, Russia, the world's biggest energy exporter, feels confident it can afford to upgrade its dilapidated Soviet-era military and believes it urgently needs to do so in order to confirm its self-proclaimed status as a major world power.
Vladimir Popovkin, Russia's deputy defence minister, said the rearmament programme would be sweeping.
"The main task is the modernisation of the armed forces," he said. "Nineteen trillion roubles (£406 billion) will be allocated for this. We are not interested in purchasing any foreign weapons or military equipment."
Vladimir Putin, the prime minister, has joked he is frightened to even imagine how much the Kremlin is about to spend on arms, while Alexei Kudrin, the finance minister, has said that defence spending will account for 1.5 per cent of gross domestic product in future, up from 0.5 per cent now........read on
Friday, February 25, 2011
22 February 2011
Gold prices held steady as the People's Bank of China did what it can do combat inflationary pressures at home. The price of gold was almost unchanged after reports confirmed that the PBOC raised its reserve ratios to 50 points which will become effective on Feb. 24, 2011.
It should be noted that the gold prices were firm despite the fact that policymakers in China implemented a series of tactics, even interest rate hikes, to contain inflation and cool its overheating economy. Food prices in China are of particular concern because an average working class Chinese allocates a high proportion of their income to buy food.
While Chinese policymakers are ramping up their fight against inflation, Fed Chairman Ben Bernanke doesn't seem to think that deviating from his current policy of quantitative easing and zero interest rate would be a good move at this time. Aside from buoying gold prices, it also helped maintain the price of almost all asset classes.
In the United States, precious metals are doing well because the Fed is keeping its commitment to keep monetary policies loose in spite of skyrocketing commodity prices. Silver performed better than gold this month, appreciating by 13%. Meanwhile, gold price only increased by 4% in February. At its current rate, silver is trading at its peak level since 1980 when the Hunt Brothers tried to dominate the market, pushing the price of silver to $50.
High inflation brings one of George Washington's statements to mind, "paper money has had the effect in your state that it will ever have, to ruin commerce, oppress the honest, and open the door to every species of fraud and injustice." Around a century afterwards, the effects of inflation are distinctly apparent. Today, a dollar is worth less than 2 cents in purchasing power than in 1913.......read on
What an incredible few weeks with global uprisings! It is not all too surprising that social eruptions over food prices come from the Arab world, since they spend up to 75% to 80% of income on food for basic needs. What proof that the global economy is not a closed system! The QE and QE2 initiatives have spread like a powerful virus, leading to global commodity prices heading upward and quickly. Even cotton is up 170% in price. The USFed has suffered even more credibility blows, calling the global food price inflation unrelated to its QE2 policy. It is obviously connected. What we have is the Western Big Banks protected from fraud prosecution, redeemed for their broken toxic balance sheets at government expense, leading to a global price tag in the form of foodstuffs and commodities. Worse, the USGovt and USFed continue to be run by fraud kings, who continue to maintain a tight strangehold on the purse of the state and the Printing Pre$$ itself that produce deficit spending and fresh phony money. Ironically, the punishment for the US banking system is chronic unending insolvency. Despite the largesse to prop them up, fund their channels, redeem their toxic debt, enrich their executive packages, they remain the same Zombie banks from late 2008. Tragically, the USGovt will continue to fund their black holes instead of restructuring like Iceland, which is back on its feet. The battle cry of Too Big To Fail for the Big US Banks is a call to sustain the corruption and to ensure no recovery ever!!
In the meantime, fast rising gasoline prices and higher crude oil price, along with a host of industrial metals like copper, have lifted the entire cost structure of the USEconomy, and the global economy since all are priced in US$ terms. The banking officials act like keeping US wages down it a noble objective with a national purpose. It is indeed a noble purpose, as the nobility remain with money, but the masses will not be capable of effectively dealing with the cost squeeze. Businesses not well placed within the Fascist Business Model will also fare poorly. The list of US companies is long that have complained of an important cost squeeze. Expect many businesses to suffer a vanished profit margin in the next few months. The process has already begun, in fact well along. Across the oceans, the untold story on the geopolitical front is not the billboard message given by the obedient US press. The Arab world does not simply demonstrate on the city streets as a result of higher cost for hummus, bread, and cooking oil. The Arab people sense the demise of the Anglo Empire. They sense the end of the US & UK support for their tyrants and royals, who have enriched themselves and their families. The Arab people sense a weakening of their leaders and their system of government, often harsh and repressive. The food prices only serve as a lightning rod to gather the people together. What is happening is the defacto Petro-Dollar Standard is crumbing ever so slowly. Many eyes are fixed on Saudi Arabia, where the royals are increasingly fearful. All hell breaks loose if the Saudis lose their grip of the Petro-Dollar device, by which the OPEC crude oil is sold in USDollar terms. THE PETRO-DOLLAR IS THE LACE ON THE CORSET THAT SUPPORTS THE THE ANGLO-AMERICAN FRONTISPIECE. Remove the Petro-Dollar practice in global crude oil sales, and the United States becomes isolated, its currency rejected, since it cannot stand on its own. Observe the US trade gap and escalating federal deficit.
Put aside the fundamentals of Silver. It continues to see huge industrial demand, no replacement opportunities, and totally depleted stockpiles. It continues to see skyrocketing investment demand growth, massive shortages for national coin mints, and reports of extreme machinations to relieve the inventory shortages at exchanges. Focus instead on the silver market. The everpresent Big US Banks continue to ply their trade, selling silver contracts without benefit of posting collateral, otherwise known as naked shorting. However, since the autumn months, their game, their modus operandi, has backfired badly in their faces. By means of lowering the paper contract silver price, they enable a cheaper physical silver price. Imagine being a big buyer of silver bullion metal. If the strongarm syndicate forces choose to offer a discount from the corrupted price discovery system, then the outcome is hardly favorable. The physical buyers ramp up their purchases, enjoy the price discount, and thank the absurd connection between the paper silver and physical silver markets. In fact, evidence is growing fast that the two markets are gradually diverging. The Jackass forecast from months ago was for the eventual divergence between the paper silver market, where increasingly contract settlement takes place in cash (with a 25% bribe to keep quiet and walk away) and the physical market, where acute shortages have not stopped the aggressive purchases of those seeking to diversify out of the USDollar.
Aw heck!! Don't put the shortage aside. Observe it instead and take personal action with the remaining wealth not destroyed. Understand the incredible shortage. Thanks to Nick Laird of Sharelynx for the fine chart. By the way, shortages result in massive price increases to achieve balance between Supply & Demand, a concept totally missed by the clueless cast of economists that litter the USGovt and Wall Street landscape. They believe price is something achieved by JPMorgan market intervention, for the national good. They wrecked the system and markets, yet remain in control of the USGovt and its finance ministry. They should be in prison. They should watch over their shoulders.
In the last week, two significant factors must be mentioned, each important in its own right. Last week, both factors were overrun by the silver market as new highs were established in the silver price. Options expiration for silver futures contracts usually brings about a huge ambush by the usual suspects, the Big US Banks, who sell vast additional futures contracts without posting any collateral. Mere mortals are prohibited from such naked shorts! Usually the imminent options expiration date results in a significant sudden swoon in the silver price, at least in the futures market, the so-called but increasingly absurd price discovery arena. This past week, the silver price zoomed toward $34/oz despite the threat of ambush, in total defiance to the options expiration deadline. Also, the COMEX in their height of wisdom and market rig efforts decided to raise the margin requirements for silver, for the umpteenth time since last summer. Usually such a margin hike results in a significant price drop like a wind sheer to an commercial jet aircraft. This past week, the silver price zoomed toward $34/oz despite the threat of margin ambush, in total defiance to the greater hardship to maintain margin. It is unusual to see a silver price advance in the face of one such factor. But it rose with gusto in the face of two important obstacles. My forecast in the last few months has been steady, that silver would lead the precious metals. That has been confirmed. While silver raced past $30 and $31 with ease, Gold has yet to confirm the breakout beyond the January highs. All in time.
A final comment on price estimates for goals and targets. As preface, consider that despite a powerful USEconomic recession in progress, and despite earnings declines for the major US companies, and despite the profit margin compression to lower levels from rising costs, the S&P500 companies have a collective Price/Earnings Ratio that stands as ridiculously high. The absurdity lies in forward P/E Ratios, since the supposed expert equity analysts do not factor in the rising costs and falling profit margins. Estimates on future earnings are ridiculously low and totally fallacious. The P/E Ratios might be subject to division by zero soon, as profit margins vanish from fast rising costs. Numerous companies from Whirlpool to Kraft have tipped the market off, but the market has so far ignored the warning call about costs. These costs are obvious consequences to the Quantitative Easing initiatives done by the US Federal Reserve. Next consider the estimated price target for Gold if the monetary aggregate is based in gold held by the USGovt in reserves. My argument, and the argument of many informed analysts, is that the USGovt has no possession of gold whatsoever, having leased and sold the entirety of Fort Knox, then sold European gold, then sold Chinese gold. So the recent estimates of $7000/oz gold or $8000/oz gold make little sense if the monetary aggregate is divided by a gold reserves quantity likely to be ZERO, bound by lies at worst and myth at best. Therefore, the potential Gold price is infinite, since division by zero cannot be done. This utterly basic point escapes many conventional analysts, who have yet to benefit from any independent audit of the gold reserves. The claim of national security is given, but the reality is more like national insecurity!
It should always be noted that silver has gained much greater acceptance as a monetary asset. The Chinese Govt in February announced a new objective to put into action, for diversifying their reserve assets to include silver and platinum. This is huge news. Never before has the silver metal been included in national sovereign reserves management, an unprecedented event. Gold awaits confirmation of the silver breakout. The momentum swing move was so quick, so sudden, so breaktaking, so powerful, that it could not be sustained. Just like in the last four months of year 2010, expect the corrections to be brief and not too painful. After three or four such mini-corrections, only later can the silver market expect another consolidation that endures like what was seen in January. Maybe by June the timing will produce a month of consolidation.
THREAT OF USDOLLAR CRISIS
The Bernanke USFed is on the road to triggering a USDollar panic, a run on the buck. The USEconomy can become more competitive if the USDollar declines hard and worker pay scales fall hard. In the view of many, QE2 then QE3 will present two alternatives, rabid price inflation or USTreasury debt default. A QE3 program is guaranteed by the chronic federal deficit in excess of $1.5 trillion. Even the usually compliant Wall Street Journal has been opposing USFed policy, with dire warnings of deep USDollar devaluation, debt downgrade, and hefty labor wage cuts. Higher USTreasury Bond yields are the currently ignored flashing signal, hardly what Bernanke promised over a year ago when QE1 was launched, and hardly what he promised when QE2 was launched. But then again, he has been wrong about the housing market, the mortgage market, the economic recovery, nascent price inflation, bank stability, a housing recovery, and just about everything. Serving as Secretary of Inflation, he manages the money creation diligently and liquidity facilities with such aplomb and dexterity. Thus he is revered. Unlike the Great Depression, for which he is a revisionist history expert, massive price inflation has begun to accompany the hyper-inflation on the monetary side. Bernanke was selected as the dumb professor in residence, the bag holder, the obedient lackey, and idiot savant. My forecast is for both rabid price inflation and USTreasury debt default, the former in spades at this moment and the latter in due time.
If the USDollar declines significantly more than what it did in the 2000 decade, and worker wages fall to more competitive levels, then to be sure the US labor market would find itself more in line with foreign worker wage levels. A stimulus would be felt, but at a great cost. The price inflation effects would be powerful, while the lower income purchase power would aggravate the price effects in a profound double whammy. US households would feel an introduction to the Third World of poverty. USTreasury Bond yields have risen markedly in the last several months since the USFed announced the reckless QE2 bond purchase program born of cancer. Focus on the opposite ends of the USTreasury yield curve. The 30-year USTBond yield has shot up noticeably, the opposite of what the oafish clownish Bernanke expected. During that time, the 2-year USTBill yield has been stuck under 0.5% for over a year. The Treasury Yield Curve has grown steeper, which normally happens at the beginning of a recovery, due to investors moving out of risk free bonds into riskier assets like stocks. This time around, the steeper yield curve signals the advent of unwanted price inflation without any trace of recovery prospects. In a typical credit cycle, the yield on the long-term bond would start to fall due to investor expections that the USFed intention to raise short-term rates to curb potential inflation. The yield curve is signaling one of two things: inflation or default. My forecast is for BOTH. In fact, NO signal can be seen of a robust recovery. Fast rising costs are spreading like a powerful virus across the USEconomy. The latest crude oil threat out of Libya highlights the viral aspect. Businesses will suffer vanishing profit margins. Household will suffer vanishing extra income, the discretionary spending source.
The USFed credibility will experience yet another huge blow when prices rise across the entire spectrum but they take no action. They will instead deny the price inflation and point to absurd meaningless measures, their habit. The preppy lieutenant in charge, Geithner actually claimed that the banking officials had ample experience dealing with the crude oil threat. Mularky! They are experts at producing inflation and asset bubbles, following by fraud coverups and regulatory body silence. Even worse, US bank leaders will explain the urgent need for QE3, especially when the new USGovt fiscal budget is approved, complete with its inherent deficit estimated to be at least $1.6 trillion. USGovt debt buying has dried up. Recall the baseless chatter two years ago about reducing the deficit from $1.3 trillion to $500 billion in two to three years. The Jackass rebuttal stated in early 2009 was to expect $1.5 trillion federal deficits for as far as the eye can see. We have exactly that! The Bernanke Fed is totally committed to keeping interest rates low for an extended period, like forever. Chronic high deficits and a crippled housing market guarantee 0% rate policy continuation forever, or at least until a USTreasury Bond default. Few mention even in the gold community that the high negative real rate of inflation is the most powerful elixir and fuel propellant for the Gold price rocket. With the true CPI at 8% and rising (see the Shadow Govt Statistics), and near 0% official FedFunds rate, the real rate is falling more dangerously negative. Such is constant fuel for the rising Gold price. The flood of extra liquidity has lifted commodities prices in a grotesque display of unintended consequences.
A climax comes for an end of the USDollar. The extravaganza of monetary expansion ushers in the advent of hyper-inflation. The response will be an urgent global demand for monetary discipline. The Gold Standard is a device for that discipline. The demand for USDollar as well as other currencies comes from the failure of the bond world, including sovereign bonds. The supply for USDollars as well as other currencies comes largely from the Printing Pre$$, gargantuan government deficits, and coverage of black holes like the credit derivatives and Fannie Mae mortgages. Witness an historic bust of a fiat currency system resting upon numerous economies built atop bubbles. A revolution in currencies is in progress. Hyper-inflation in prices is well on its way, the aftermath from monetary hyper-inflation by reckless bankers insistent on bailing out bank failures, enabling bank frauds, and providing banker bonuses. Even Black Swan author Nassim Taleb urges avoidance of the USTreasury Bond and the USDollar. Taleb trumpets a theme, advising every single human being to bet Treasurys will decline because of the policies of USFed Chairman Bernanke and the Obama Admin. Taleb believes the United States is just like Greece, only without the Intl Monetary Fund to enforce discipline. Worse, the Euro Central Bank is often a voice of restraint, whereas the USFed is the grand centrifuge of inflation and perpetrator of monetary fraud. Bill Gross of PIMCO also believes the a bond riot would be a positive event to enforce debt discipline by the USGovt. The USTreasury Bond is the final asset bubble, but a very harmful one. Its bust will ensure an economic depression, and an explosion in the price of Gold & Silver, even crude oil. Gold is guaranteed to rise by double, and silver certainly much more. If a USTreasury Bond bust occurs, the Gold & Silver prices will rise to breathtaking levels. Those who believe Silver will be harmed by economic ruin are just plain morons. Their deflation arguments are the dumbest chapters written in our day, since they ignore the monetary inflation response and how Silver has been included as a monetary asset, even a reserve asset.
THE GOLD STANDARD, RELUCTANTLY
A powerful Reactive Law of Nature dictates that in the absence of a Gold Standard, the world will seek an alternative, a quasi-Standard, a stand-in substitute, whatever functions reasonably well or effectively. Crude oil and homes served well. Nowadays the entire commodity basket serves the purpose, except that means a destructive rising cost structure. Recall the fraudulent underpinning of the QE2 movement itself, to produce jobs and stimulate the USEconomy. One must be a total blockhead idiot to believe that further Quantitative Easing, aka monetary hyper-inflation, would stimulate any economy. Instead it will act like a huge wet blanket, one that even eliminates a return on investments in savings certificates of deposit, keeps down the earnings that fund pensions, and much more. The hidden message behind the QE2 chapter, the second of many, is that the USFed is planning to give every working man and woman in the US a big pay cut, so the USEconomy can more capably compete with foreign labor. The US is heading to a dangerous place where poverty abounds, the population is rendered unable to contend with the rising costs, shortages crop up, and labor turns cheap. The many claims that the USTreasury Bonds cannot default come from simple minds and empty craniums, fed by propaganda and arrogance. They have never seen a run on the USDollar, which has begun.
China might be considering a gold-backed Yuan currency. But they must not go alone. Any launch of a currency with strong basis foundation will threaten to de-throne the USDollar. China must NOT form the lone currency with a gold component in operation. If China did it alone, embarked on the path without other monetary allies like Russia or Germany, then the Yuan currency would rise by 50% to 100% quickly. That would kill their export industry and turn the economy of the Middle Kingdom into a burned crisp. Such a radical move must be done in concert with most of the world monetary leaders, excluding the most egregious nations in violation. Point the finger at two nations most responsible for bond fraud, market interventions, bank insolvency, and constant monetary inflation. Read the United States and United Kingdom. Basically, those nations not participating with the Chinese lead would plunge into the Third World. A Gold-backed Yuan could happen alongside a Gold-backed Nordic Euro, a planned coordinated direction. Try to imagine the US & UK, along with PIGS nations, bidding up the Yuan and Nordic Euro, killing the USDollar and other native currencies. That process would force a shocking price inflation episode on American and British soil, as well as Southern Europe, that would invite a systemic failure. No global financial dominance is possible without control of global monetary system from a catbird seat, a control position. The fallen nations, if debt burdened, risk falling into the Third World in the flip flop. The rise of China can only come if the United States falls perilously. Such is the powerful motive for world war.
Dominique Strauss-Kahn from the Intl Monetary Fund has called for a new world currency. All such attempts to replace the USDollar by a basket of paper currencies are absolutely futile. Observe desperate maneuvers to switch discredited executives on a Board of Directors with other unqualified executives. The currency basket concept is a subtle attempt at currency exchange rate fixing, since a basket of currencies inherently would contain fixed ratios within the basket. So if the Powerz cannot prevent a USDollar decline that releases a wave of global price inflation, they might attempt to hitch the US$ to the other damaged currencies in a clever gesture. It will not work. The Axiom of Sound Money dictates that only a hard asset currency can replace a broken fiat paper currency as global reserve for usage widely in banks and commerce. Dominique is totally clueless, preaching in front of a burning bonfire of paper currencies without recognition that the underlying problem is paper money and QE is the lighter fluid. The world needs a reasonable US monetary policy first and foremost!! He advocates inclusion of the Chinese Yuan from the emerging market nations to a basket of currencies that the IMF administers, a move be believes could add stability to the global system and reduce exchange rate volatility. The IMF device called Special Drawing Rights (SDR) is an official fixed basket currently composed of the USDollar, Pound Sterling, Euro, and Yen. The SDR is not a new class, but a repackaged old class. At the Paris G-20 Meeting of finance ministers, absolutely nothing was either agreed upon or solved. The SDR basket vehicle might gain widespread acceptance in order to halt the global price inflation. But its basket will break apart since the USDollar is the generator of monetary hyper-inflation. The fixed inherent ratios would have to change on a weekly basis, not every several years. The reduction by numerous nations in their US$-based reserves in a diversification to a different basket would result in a powerful decline in the USDollar exchange rates. The basket is not a static concept. How idiotic!
A new alternative as supposed solution to the monetary crisis is a foursome basket of global reserve currencies. The world saw a desperate gambit revealed at Davos to retain the fiat paper currencies with multiple reserve currencies. The move would be an exchange rate price fix attempt, nothing more. The concept is akin to the IMF basket, and equally unworkable in a futile attempt to avert imposition of the Gold Standard. Lack of action assures chaos, the Jackass forecast. Action is far too difficult to agree upon and implement. A movement is afoot to create four global reserve currencies, as other major currencies would join the crippled USDollar. The vehicle instrument would be the Special Drawing Rights (SDR) from the IMF. This is a crackpot concept born of total desperation and steadfast refusal to work toward realistic reform, simply a patchwork of the broken currency regime. Multiple reserve currencies would mean immediate diversification out of the USDollar, and thus a significant US$ devaluation within the process of its actual installation, since the US$ would go from 65% to 30% of reserves held officially. The four-part reserve basket could work for a short time, like a month or two, provided the USDollar is devaluated by 20% suddenly within the basket inception. How totally unworkable, as though a sudden change could avoid a transition. These bankers are idiots as much as witch doctors.
Alan Greenspan supports the Gold Standard. After almost two decades of making great contributions to destroying the global monetary system, encouraging a sequence of asset bubbles, blessing them as good, and reinforcing the calamitous bank derivative foundation, Greenspan repeated his devotion to the inert precious metal of historical importance. A Gold Standard would enforce laws against abuse, fraud, and basic counterfeit. The Gold price in the sanctified regime would require a reset to at least $6000 per ounce. One must truly wonder if Greenspan, along with countless other monetary criminals of our era, have invested personal fortunes in Gold while destroying the global monetary system in thorough fashion. My suspicion is that for over 15 years, Greenspan, Rubin, Paulson, Dimon, Blankfein, Mack, and a dozen major Wall Street executives took the opposite long gold position in their personal accounts while their wrecked corporations took the short gold position. Former USFed Chairman Greenspan again reiterated his support for the Gold Standard, following World Bank president Robert Zoellick, credit analyst Jim Grant, and Kansas City Fed president Thomas Hoenig. They have no political capital to lose in doing so, since none is elected. They are all elite members of different pedigree.
Greenspan stands out as the person most responsible for the American addiction to cheap toxic credit, the nearly complete destruction of the middle class, displaced industry, a ruined economy, and insolvent banking system. Greenspan said, "We have at this particular stage a fiat money which is essentially money printed by a government. It is usually a central bank which is authorized to do so. Some mechanism has got to be in place that restricts the amount of money which is produced, either a Gold Standard or a currency board, because unless you do that, all of history suggest that inflation will take hold with very deleterious effects on economic activity. There are numbers of us, myself included, who strongly believe that we did very well in the 1870 to 1914 period with an international gold standard." The deleterious price inflation has arrived. The USEconomic risks depression. Greenspan actually questioned openly whether the United States really needs a central bank.
Some quick napkin calculations. According to Dylan Grice of Societe General, a great adjustment would be required if a Gold Standard is imposed. The monetary base would have to go through a re-index stage, setting the currencies to a real time equivalent price of Gold. He estimates the proper value of Gold to be $6300 per ounce. His reasoning is derived from simple arithmetic. He said, "The US owns nearly 263 million troy ounces of gold, the world's biggest holder. While the Fed's monetary base is $1.7 trillion. So the price of gold at which the US dollars would be fully gold backed is currently around $6300." Next bring into the calculus that the USGovt has almost zero gold except admittedly in Deep Storage reserves, namely mountain ore bodies of yet unmined gold bullion final product, like deep beneath the Rocky Mountains. Primary school arithmetic teaches us that when zero enters the denominator, the resulting quotient bears an infinite result. Hence, the gold price in USDollar terms, given the total lack of gold reserves, has an infinite potential price. The Jackass believes that no upper barrier exists in the Gold price. The march upward in price will be halted only when a global replacement to the USDollar is launched, with great effort, courage, and gold initiative. The Gold Standard is not only the obvious solution to enforce discipline, it is a reluctant solution since the banker elite prefer their fraud.
The next QE3 initiative will be born from desperate need. Numerous causes will be put forward as beneficiary to the next Quantitative Easing chapter. It will form like a bandwagon. Its approval will invite a global shrill outcry, and demand for a Gold Standard. The USFed must overcome the price inflation (especially food) objections in order to win political approval. That would involve a vigorous debate to be sure, but one that USFed and USCongress can overtime with other false promises and twisted logic, their specialties. The QE programs will be endless until the United States is cut off globally. Many are the causes and suppliers of bonds for entry toward USFed support in QE3, via the monetization engines. Of course, the USTreasury Bonds will need buyers, given the chronic continuing yawning federal deficits. The Fannie Mae mortgage bonds will need buyers, given the desired movement to phase out the toxic firm (key word desire). It will never be phased out, any more than a garbage dump is removed from city outskirts. Big US Banks will stand in line looking for buyers for the flood of Mortgage Putbacks, given the court decisions that come and the MERS court dismissal of legal standing. The Municipal Bonds are overdue for needed buyers, given the plight of the states and cities, provided they all abandon their employee pension obligations. The hidden need is for the derivatives that hold together the US banking system structurally, in particular the Interest Rate Swaps, given the difficulty in keeping interest rates down. So the advent of QE3 is a lock, my forecast. The Bernanke Fed must sell QE3 from urgency and national survival!! His credibility has never been lower, still falling rapidly with each passing month and each fresh chaotic outbreak like Egypt and Libya. Each QE chapter makes the next far easier to sell, since desperation and ruin are nearer to the system and its participants. Prepare for QE to infinity!!
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 JimWillieCB@aol.com
Thursday, February 24, 2011
Oil past the $100 mark in New York yesterday for the first time since the global financial crisis of 2008, and King Abdullah of Saudi Arabia returned from medical treatment abroad with $11 billion in housing and social security handouts for the poor.
But the eyes of the world are focused on the horrific violence in Libya with Muammar Qaddafi saying he will never surrender and digging in for a final battle with his mercenary forces. Paying foreign soldiers to shoot his own citizens has led to widespread desertions from his military and the eastern city of Benghazi has fallen.
Exodus of expats
Western countries are now engaged in a massive effort to get their nationals out of a fast deteriorating situation. Oil and gas exports are being shut down, and this impacts immediately on global energy prices. Libya produces 1.6 million barrels per day or 1.8 per cent of the global oil supply....read on
London, Feb 20(ANI): Double murder-accused US official Raymond Davis has been found in possession of top-secret CIA documents, which point to him or the feared American Task Force 373 (TF373) operating in the region, providing Al-Qaeda terrorists with "nuclear fissile material" and "biological agents," according to a report.
Russia's Foreign Intelligence Service (SVR) is warning that the situation on the sub-continent has turned "grave" as it appears that open warfare is about to break out between Pakistan and the United States, The European Union Times reports.
The SVR warned in its report that the apprehension of 36-year-old Davis, who shot dead two Pakistani men in Lahore last month, had fuelled this crisis.
According to the report, the combat skills exhibited by Davis, along with documentation taken from him after his arrest, prove that he is a member of US' TF373 black operations unit currently operating in the Afghan War Theatre and Pakistan's tribal areas, the paper said.
While the US insists that Davis is one of their diplomats, and the two men he killed were robbers, Pakistan says that the duo were ISI agents sent to follow him after it was discovered that he had been making contact with al Qaeda, after his cell phone was tracked to the Waziristan tribal area bordering Afghanistan, the paper said.
The most ominous point in this SVR report is "Pakistan's ISI stating that top-secret CIA documents found in Davis's possession point to his, and/or TF373, providing to al Qaeda terrorists "nuclear fissile material" and "biological agents", which they claim are to be used against the United States itself in order to ignite an all-out war in order to re-establish the West's hegemony over a Global economy that is warned is just months away from collapse," the paper added. (ANI)
Even despotic leaders, it turns out, can make sound investment decisions.
Libyan leader Moamar Gadhafi turned down a chance to invest with Bernie Madoff and accused ponzi schemer Allen Stanford, according to a new diplomatic cable released by WikiLeaks. (The U.K.'s Telegraph has the full cable, dated January 28, 2010.)
In the cable, the head of the Libyan sovereign wealth fund, Mohamed Layas, claimed to control $32 billion in liquid assets, most of which was deposited at U.S. banks. Layas, according to the cable, was miffed at Libyan funds that were "mismanaged" by Lehman Brothers, the failed investment bank......read on
Wednesday, February 23, 2011
Violent clashes in Libya have resulted in at last three oil companies halting output in Africa's third-largest producer, which pumps 1.6 million barrels per day (bpd), or nearly 2 percent of global supply.
The disruptions mark the first reduction in oil supply stemming from a wave of protests that have swept through the oil-producing Middle East and North Africa. Investors fear for the potential impact on the flow of oil from top exporter Saudi Arabia if it suffers similar unrest.
U.S. crude rose as high as $96.08 a barrel, the highest level since October 2008. By 11:59 a.m. ET, the April contract had trimmed gains to trade at $95.48, up 6 cents on the day.
Brent crude rose 58 cents to $106.36 a barrel, after rising as high as $106.58 earlier. On Monday, Brent hit a 2-1/2-year high of $108.70.
"Even if Libya completely shuts down, there isn't a supply issue. But the (U.S. crude) could go to $100, given the potential for this contagion to spread to Saudi Arabia," said Jonathan Barratt, managing director of Commodity Broking Services in Sydney.......read on
Gold prices broke above $1400 an ounce, as the unrest in the Middle East continues to escalate.
Dozens of people were reported killed in Libya as anti-government protests reached the capital for the first time and several cities in the east appeared to be in the hands of the opposition. Anti-government protesters rallied in Tripoli's streets, tribal leaders spoke out against Libyan leader, Muammar Gaddafi, and army units defected to the opposition in a revolt that has cost the lives of more than 200 people. Protesters said they had taken control of Benghazi in and one other city.
With autocratic governments already toppled by popular uprisings in Tunisia and Egypt, there was a sense that Gaddafi's iron grip was being severely tested. And, the wave of unrest continues to spread to other countries. There have been rallies in Morroco, Algeria, Jordan, Yemen and, in Bahrain, tensions are still high after riot police opened fire on protesters trying to reclaim landmark Pearl Square last week. At least eight people have been killed and hundreds injured in the clashes since the unrest spilling across the Arab world reached the Gulf last week.
Who would have thought that such unrest would have occurred in this region? It just goes to show how unpredictable life can be, and how sudden, unexpected events can change the course of our lives - for the good and for the bad. In times such as these, rather than placing it with politicians, I'll continue to keep my faith in precious metals.
While these pockets of resistance proliferate around the Middle- East, we must not lose focus on the main driving force behind the higher prices in gold. Many investors are looking at gold as a way to protect their wealth as a major currency meltdown looks more imminent. Last week gold prices advanced on the back of numerous factors. The increase in prices began following news of the US President's $3.7 trillion budget for next year and mounting fears of inflation, prompting many investors to strengthen their positions in precious metals as a safe haven for their wealth. The U.S. budget deficit has been growing steadily since 2000 and took a sharp increase in 2007 according to the U.S. Congressional Budget Office. Many economists feel that this level of debt on either a governmental or public level is not sustainable in the long-term. However, the U.S. government continues to borrow money in order to fund numerous programs, prompting concerns regarding President Obama's recent $3.7 trillion budget. Inflation fears are growing as a result of this news......read on
David Levenstein began trading silver through the LME in 1980, over the years he has dealt with gold, silver, platinum and palladium. He has traded and invested in bullion, bullion coins, mining shares, exchange traded funds, as well as futures for his personal account as well as for clients.www.lakeshoretrading.co.za
Two Iranian naval warships entered the Suez Canal this Tuesday, en route to the Mediterranean. Israel, which views Iran as a threat, has already called the move a 'provocation'. Iranian officials say the frigate and supply vessel are headed to Syria for a year-long training mission. It's the first time Iran's military ships have sailed those waters since the country's Islamic revolution of 1979. Egypt's Defence ministry says Iran's request stated the vessels would have no military equipment or nuclear materials onboard.
21 February 2011
To briefly summarize the facts, an unknown "trader" was able to leverage a $10 million "fund" (i.e. bet) into an $850 million dollar spread-trade, representing nearly 15% of the entire COMEX futures market, while leveraged at an absurd 85:1. It was a "trade" created to fail. Of more relevance (to this piece), I observed that such tactics would likely become commonplace with the banksters, since a mere $850 million was "nothing" to them - in a world where they can get their friend (and fellow, private banker) Ben Bernanke to simply print-up $850 million more in Bernanke-bills, and "lend" it to them at 0% interest.
A reader of my previous piece attempted to criticize that commentary by noting that the actual losses on the trade(s) would have been nowhere near $850 - totally missing the point. With the Wall Street bankers able to obtain (and Ben Bernanke willing to print) infinite amounts of Bernanke-bills, "loaned" at 0% interest, this paper has become nothing more than "confetti" to the banksters.
Several observations need to be made about the United States' "zero interest rate policy" (ZIRP), observations which (strangely) no one in the mainstream media has been willing/able to make.
- Calling the $trillions in Bernanke-bills funneled into Wall Street banks "loans" is absurd. Anything "borrowed" with ZIRP never needs to be repaid - since there is literally "zero" penalty for failing to do so. Thus every penny of these "0% loans" is simply another back-door hand-out to the greatest corporate deadbeats in the history of humanity.
- As a matter of elementary economic fundamentals, a ZIRP economy must drive the value of its currency to zero over time. It is merely simple arithmetic that the long-term value of any/every good which can be obtained at zero cost is zero. Otherwise those with access to this 0% good could literally use the "arbitrage" on this scam to buy-up (i.e. steal) all of the world's assets.
- The U.S. economy is already so insolvent that (in reality) U.S. interest rates are permanently frozen at 0%. Carrying $60 trillion in total public/private debt, raising interest rates by a mere 1% would drain an additional $600 billion per year out of the U.S. economy - equal (by itself) to nearly a 5% drop in GDP, before factoring-in the severe "multiplier effect" of draining that massive amount of capital from the economy. This means that in practical terms, the U.S. dollar is already worthless.
- The Federal Reserve has placed absolutely no limits on the amount of 0% funny-money it's willing to funnel to Wall Street. In other words, it is available to these banksters in literally infinite amounts. For reasons previously given, the present value of any/every good which can be obtained in infinite amounts, at zero cost is zero. This means on the basis of simple arithmetic, the U.S. dollar is already worthless.
The latter point should be extremely self-evident. If I could "borrow" infinite amounts of money at 0%, I would "borrow" $1,000,000 quadrillion, and "buy" every asset on the planet. I would need at least that much money to buy-up everything, since the moment all that funny-money began circulating in the global economy, it would rapidly drive-up the price of everything (kind of like what is currently taking place in the global economy after "QE2").
Of course, on a practical basis I could never buy-up everything, not even if I had a million times that previous fantasy-number. The reason? People would quickly realize that this funny-money which I obtained in infinite amounts, at zero cost was worthless - and they would no longer accept it.
Thus we have our practical reason as to why the thieves of Wall Street have not asked Ben Bernanke to print-up $1,000,000 quadrillion, and "loan" it to them at 0% - because they know the moment they engage in such a blatant scam (to steal the world's assets) that all of their money (and their entire, paper "empires") immediately becomes worthless, as the chumps figure out the scam.
This is merely one of the reasons that no nation in history has ever moved its official, national interest rate to 0%, and simply left it there over the long term (with inevitable hyperinflation being another reason). While all of our banker-dominated governments are addicted to the theft-through-money-dilution which is inherent in our "credit-based" (i.e. inflation-based) economies, none of them want totally worthless currencies - for obvious reasons.
If the U.S. government (and the bankers who operate all the levers of power) wish to demonstrate that the value of the U.S. dollar today is greater than zero, there is a very simple way to do so: raise interest rates significantly. As I have demonstrated, the failure to do so is a direct (but implicit) admission that the real "value" of the U.S. dollar is zero.
The Duplicitous Duo of Bernanke & Geithner continue to spout the ridiculous lie that the U.S. economy is "too weak" to justify raising interest rates. Again, the mainstream media cowardly refuses to acknowledge the blatant hypocrisy here. For over two years (out of the other side of their mouths), this tag-team has told us there is a "U.S. economic recovery" underway. In historical terms, the GDP "growth" being reported quarter-after-quarter constitutes a "robust recovery" (if taken seriously).
This means that in a world of responsible journalism, the Duplicitous Duo would be forced to face their blatant contradiction: that after two years of a robust "economic recovery", the U.S. economy still "needs" to have its interest rates set at the most reckless level in the history of humanity - despite the obvious and catastrophic impact this policy has on the national currency and the overall economy.
The analogy here is of a professional athlete who is critically injured, and admitted to the "intensive care" ward of a hospital. Weeks later, the doctor in charge of the athlete pronounces the athlete "recovered" - and ready to continue playing his sport - but refuses to discharge the athlete from the intensive-care unit (not even two years after the athlete's "recovery"). It is an absolute contradiction of fact, and the failure of the mainstream media to assert this contradiction (on a daily basis, if necessary) is an absolute failure of journalism.
Simply, either the "U.S. economic recovery" is 100% myth, or the "need" to keep U.S. interest rates is a complete and total lie. There are no other possibilities. It has been my position all along that it is the former position which is the "fiction", while I wholeheartedly assert again and again that 0% interest rates are the only factor temporarily warding-off the bankruptcy of both the Wall Street banks and the entire U.S. economy.
The "trap" here, and the reason that this desperation-policy must result in self-annihilation is because of what I also alluded to: the inevitability of hyperinflation. As competent economic commentators point out, hyperinflation is a "confidence" event (as is the case with the failure of any/every scam): the chumps finally figure out that the money-printers plan to print up their funny-money in infinite quantities - and they refuse to accept it.
Essentially, every episode of hyperinflation in human history is nothing more than a real-life portrayal of "The Emperor's New Clothes". Just as the masses can/could blind themselves to the fact that the Emperor is naked, so too have the masses (in real life) deluded themselves into believing that worthless, U.S. dollars still have value. And just as with the naked Emperor, the masses could very easily wake up tomorrow and decide the dollar is also "naked" (i.e. worthless).
This is why over the last decade sophisticated investors all over the world have been converting their banker-paper to gold and silver. The U.S. dollar is already worthless. Most of the other fiat-currencies are merely lagging the dollar's plunge to zero.
"ZIRP" is not the sober policy of responsible bankers, in charge of (at the moment) the world's largest economy. It is the loudest "warning siren" in the history of humanity that the scraps of paper we carry in our wallets are soon to be worthless, and a "last call" to convert that banker confetti into "good money" (i.e silver and gold).