Explained Time and Time Again: Currency Induced Cost Push Hyperinflation

By Jim Sinclair: "Nothing will unnerve the paper gold shorts more quickly and do more to undercut their confidence than to strip them of the real metal and force them to come up with more hard gold bullion to make good on deliveries. "Stand and Deliver or Go Home" should be the rallying cry of the gold longs to the paper gold shorts." --Trader Dan Norcini

If gold market participants were all tank drivers their machine would have but one gear - reverse. The smallest book in the world is the book of confirmed gold price visionaries.

Someone says deflation and the long gold positions hit the fan. Gold banks make their short covers even though the fuel in Bernanke's Helicopter Money Drop is founded in the dreaded use of the "D" word.

People are so fixed in present time that they cannot picture a euro back towards its high and the dollar back towards its low because the financial condition of the USA dwarfs the problems of the USA.

Hyperinflation is always the product of a loss of confidence in currency resulting in a "Currency Produced Cost-Push Hyperinflation."

No one with a synapse talking to another synapse expects a "Demand-Pull Inflation."

All hyperinflation in modern history has occurred for one reason, and one reason only. That is loss of confidence in currency.

Loss of confidence in a currency can be brought about by many reasons, but there is one constant factor. When hyperinflation has occurred in modern history EVERY economy involved was decimated as and when it occurred.

It has never been caused by "Demand-Pull," but always and without exception caused by "Currency Induced Cost Push Hyperinflation."

The nonsense being spread by the F-TV taking heads is that the Fed is out of ammunition to fight deflation. That is raving BS. The Fed can and will do QE to infinity which is restricted as a tool by nothing whatsoever. The ECB will not be far behind the Fed.

Argue all you want, but this is exactly what is going to happen starting now. Stop being glib. Study hyperinflation in modern times listed below before you ask me to explain it one more time.

What is out there today QE wise is enough to result in hyperinflation as confidence falls in currencies due to two characteristics, QE and volatility.

Try meditating on the concept of "Currency Induced Cost Push Hyperinflation," rather than loading your pants over gold banks manipulation full of sound and fury, but meaningless in the great scheme of things.

Examples of hyperinflation in modern times:

Angola, Argentina, Belarus, Bolivia, Bosnia-Herzegovina, Brazil, Bulgaria, Chile, China, Congo, Free City of Danzig, Georgia, Germany, Greece, Hungary, Israel, Japan, Madagascar, Mozambique, Nicaragua, Peru, Philippines, Poland, Russia, Taiwan, Turkey, Ukraine, United States, Yugoslavia

Silver - The Secret is Out!

As an investment metal, silver is gaining rapidly in popularity. Silver unlike gold has significant industrial uses, in fact more patents are issued each year for inventions using silver than all other metals combined.

Silver is the best conductor of electricity & heat and is the most reflective of all metals. Also modern medicine has recently rediscovered silver's anti-bacterial qualities, actually before antibiotics were invented silver was the treatment of choice for infections. This germ fighting property has recently lead to an explosion in products containing silver, from silver impregnated sports wear (to kill the germs which cause body odor), fabrics for public transport and airline seats to prevent the spread of infections, coatings for fridges & washing machines and even in antiperspirant sprays and band-aids!

As the best conductor of electricity silver is used in solar panels to increase efficiency and in wiring, switches and soldiering contacts Another growing use of silver is in batteries, silver oxide batteries (like the one in your watch) are increasing being used to power larger devices as they store the most power to size of any battery.

As you can see silver is used everywhere, almost every modern device you name will contain a minute amount of silver. This low use per unit means that almost all of this silver will never be recycled.

The life cycle of gold often described as being dug up, refined, poured into a bar and then reburied in a bank vault. For silver after being refined it will most likely be used in a disposable application, a mobile phone or a battery all of which tend to end up buried in a land fill. It is unfortunate fact of our disposable society, gold is horded but silver is destroyed!

The fact that silver is not often recycled, whilst a huge waste of the energy required to mine and refine it, is a huge bonus to silver investors. Whilst the world's inventory of gold tends to increase slightly over time, the inventory of silver has plunged over the last 60 years. Whilst most governments hold gold as part of their reserves, some like the US, Germany and China holding over a 1,000 tons each, no central government holds a significant amount of silver.

Psst, Do you want to know a secret that only 0.001% of the world's population knows?

Whilst silver is 18 times more plentiful in the earth's crust than gold (1), silver being lighter and more reactive makes it easier to find as it occurs closer to the surface of the ground and can be mined as byproduct of other metals.

Why is this a good feature for investors? Because anything easy to find is used to excess and silver being used by humans for money and utensils for over 6,000 years means all the “easy” silver has been found, as can be shown by the fact that only 9 times as much silver is mined each year compared to gold (2). This has in part lead to over 60 years of inventory depletion of silver.

We now have reached a situation that has never occurred in human history, there is now less silver in bullion form (coins and bars) available for investors to purchase than there is gold! – read that last sentence again. Silver for the investor is rarer than gold! This has NEVER happened before. It is estimated that there are 5 billion ounces of gold in bullion form in the world and possibly only 500 million ounces of silver in bullion form. A factor of 10 to 1 in favour of silver. Yet silver currently sells for approx. 65 times less than gold.

Note: All silver sold by ABC is the highest investment grade silver, refined to 99.9% purity (three nines) and attracts no GST in Australia.

References:
(1) CRC Handbook of Chemistry and Physics
(2) USGS: 2008 Minerals Handbooks:
http://minerals.usgs.gov/minerals/pubs/commodity/silver/myb1-2008-silve.pdf
http://minerals.usgs.gov/minerals/pubs/commodity/gold/myb1-2008-gold.pdf

Adrian Douglas examines the ratio between the supply of gold and the U.S. dollar

GATA board member Adrian Douglas examines the ratio between the supply of gold and the U.S. dollar and concludes that the dollar's gold backing has fallen to a mere 2.3 percent and that the real dollar value of gold now approaches $53,000 per ounce.....read on

The Keiser Report

Latest Keiser Report discusses Paul the Octopus, faith based currencies and gold.....watch here

Eric Sprott interviewed

Billionaire hedge fund mgr, Eric Sprott discusses gold, silver, market conditions and possible QE2.....listen here

Fed to push rates lower? Some traders are betting on it

CHICAGO (Reuters) - The big question ahead of U.S. Federal Reserve Chairman Ben Bernanke's Congressional testimony on Wednesday is whether a weaker economy could prompt the Fed to push already rock-bottom borrowing costs even lower.

Some traders are already betting on it.

Since July 2, when a U.S. government report showed overall employment fell for the first time this year, interest has risen in options on CME Group Inc's Fed funds futures that are profitable only if short-term rates fall.

The bets pay off if the rate at which banks borrow from each other overnight -- the so-called Fed funds rate -- drops below 0.12 percent.

The Fed has kept its target for this benchmark rate at between zero and 0.25 percent since December 2008, to spark and then nurture recovery from the worst U.S. economic downturn since the Great Depression.

So far this year the actual, or effective, rate has hovered at around 0.16 percent.

But signs of a soft economy are intensifying, with consumer sentiment at a one-year low, housing starts down, and unemployment at a lofty 9.5 percent.

And at the Fed's policy-setting panel's most recent meeting, officials discussed the possible need for further steps to boost the economy if it takes a turn for the worse.

At $10.42 apiece, the Fed funds options are an inexpensive way to buy rate protection for $5 million against such a step, said Todd Colvin, a vice president at MF Global in Chicago.

"It's the kind of insurance you don't want to buy, but you need to," he said. "You need to have some defense for something that you never thought could happen."

All told, traders have insured more than $380 billion against rates dropping sometime between November and February, data from CME shows. That's up from $273 billion on July 1, the day before the June unemployment report.

Open interest -- the technical term for the number of contracts in existence -- jumped fastest in options that expire at the end of February, with traders insuring $71.9 million against lower rates by then, up from $28.8 million on July 1.

Most of those bets were placed after the Fed released minutes of its June 22-23 policy meeting that showed the committee discussed the possibility of easing.

Many traders reacted to that news, and other signs of a weakening economy, by deferring expectations for the Fed's next rate hike. Fed fund futures are now pricing a first rate increase for June 2011, compared to expectations of an April rate hike before the minutes were released.

The Fed is seen as having limited tools for easing monetary policy further than it already has. A small but growing number of traders are seeking protection in case it tries.

"We're really talking about the mood in the market shifting its perception," said Kevin Cooke, a market analyst for Peak6 in Chicago. "We're seeing it show up in the markets, where some traders are willing to place a hedge, or a bet, on the possibility of interest rates going lower."

Ron Paul cuts through the Govt. lies and Statistics

Gold, Silver & Copper being accepted as Money

By Dan Armstrong: New types of money are popping up across Mid-Michigan and supporters say, it's not counterfeit, but rather a competing currency.

Right now, you can buy a meal or visit a chiropractor without using actual U.S. legal tender.

They sound like real money and look like real money. But you can't take them to the bank because they're not made at a government mint. They're made at private mints.

"I sell three or four every single day and then I get one or two back a week," said Dave Gillie, owner of Gillies Coney Island Restaurant in Genesee Township.

Gillie also accepts silver, gold, copper and other precious metals to pay for food.

He says, if he wanted to, he could accept marbles.

"Do people have to accept dollars or money? No, they don'," Gillie said. "They can accept anything they want or they can refuse to accept anything."

He's absolutely right.

The U.S. Treasury Department says the Coinage Act of 1965 says "private businesses are free to develop their own policies on whether or not to accept cash, unless there is a state law which says otherwise."

That allows gas stations to say they don't accept 50- or $100 bills after a certain time of day in hopes of not getting robbed.

A chiropractic office in Lapeer County's Deerfield Township allows creativity when it comes to payment.

"This establishment accepts any form of silver, gold, chicken, apple pie, if someone works it out with me," said Jeff Kotchounian of Deerfield Chiropractic. "I've taken many things."

Chinese Economists Call For Government To Ditch U.S. Treasuries And Buy Gold

By Vincent Fernando: A former advisor to the Chinese central bank, and influential economist, has called for his nation to diversify away from U.S. treasury holdings.

This comes after China cut its U.S. treasury holdings by $32.5 billion in May:

Reuters:

"Although assets in other currencies and forms are not an ideal replacement for U.S. Treasury bonds, diversification should be a basic principle," Yu wrote in the China Securities Journal.

"When demand for U.S. Treasury securities is strong, it's a rare opportunity for us to gradually pull back. That way, it will not have a big impact on prices and China will not suffer too much," he said.

Zhang Monan, a researcher with the State Information Center, a think tank under the powerful National Development and Reform Commission, told the paper that China should invest more of its $2.5 trillion of foreign exchange reserves, the world's largest stockpile, in hard assets such as gold.

Moody's Downgrades Ireland's Credit Rating

From CNN: Moody's downgraded Ireland for the second time in a year Monday. In a familiar refrain, the rating agency pointed to deteriorating government finances and weak growth prospects as the country cleans up after a massive real estate bust.

Ireland's economy contracted 7% last year, and the nation's debt load as a share of economic output could quadruple by the time the crisis peaks, Moody's said.....read on