Sunday, February 20, 2011

Blythe Masters from July 2010

If you ever wondered who she was......Blythe Sally Jess Masters (born 22 March 1969) is an economist and current head of global commodities at J.P. Morgan Chase, and led the development of so-called Credit Default Swaps (CDSs) widely used by financial institutions.

Korean Bank Runs

From The Korean Times:
By Kim Jae-won

The government suspended the operations of Busan Savings Bank, the largest savings bank in Korea by assets, and its affiliate Daejeon Mutual Savings Bank, Thursday, citing capital inadequacy caused by mounting insolvent project financing (PF) loans.

Announcing the move, Financial Services Commission (FSC) Chairman Kim Seok-dong said no more savings banks will face suspension in the first half of the year, unless a run occurs on them. Three other affiliates are facing scrutiny by regulators over their financial status

“A great deal of money is required to restructure the savings banks,” Kim said, adding that the National Assembly should act promptly to enable the creation of 10 trillion won in funding. “It will be pivotal in stabilizing the market.”

Once the announcement was made, branches of three Busan Savings Bank affiliates that were not suspended faced thousands of customers who were trying to withdraw their deposits.

About 1,400 tried to make their way into the Haeundae branch of Busan II Savings Bank, an affiliate of Busan Savings Bank.

The FSC decided to expand its emergency fund by five times to 3 trillion won.

“This expanded provision is aimed at calming customers,” an FSC official said. Four banks — Woori, Kookmin, Shinhan and Hana — also opened a credit line worth 2 trillion won with the state-run Korea Finance Corp.

The two savings banks ceased operations for six months immediately after the announcement was made. Customers are provided with government payment guarantees on their deposits up to 50 million.

Complete withdrawals of deposits will be banned with each customer allowed a uniform 15 million won payment.

The suspension of the two leading savings bank came a month after the FSC suspended the smaller Samhwa Mutual Savings Bank in order to weed out unviable players. Samhwa is set to be taken over by a commercial bank.

The trouble facing savings banks is closely linked to the property market slump that started during the 2008 global financial crisis, sharply driving up defaults on loans backed by construction projects.

Daejeon Mutual’s liabilities exceeded its assets by 32.3 billion won as of the end of 2010, the FSC said in a statement.

Its capital adequacy ratio, the key measure of capital strength, was found to be minus 3.18 percent as of the end of last year, far lower than the minimum regulatory level of 1 percent, the financial regulator added.

Busan Savings’ liabilities exceeded its assets by 21.6 billion won at the end of last year, with its adequacy ratio standing at 5.13 percent.

“Daejeon Mutual is in a situation where it cannot respond to depositors’ withdrawal demands due to a liquidity shortage triggered by a recent run on deposits,” an FSC official on

Truth about Markets

Max & Stacey's latest radio show from London.......listen here

Update on Libyan & Bahraini protests

On The Edge with Michael Krieger

In this edition of Press TV's On the Edge with Max Keiser, Max, as usual, highlights the bad conditions the US economy is in. He says the fall of the dollar is imminent and ties the latest events in the Middle East to the US economic policies. His guest, Michael Krieger, believes that the unrest will spill over to the US as the world economy is "co-centric." He further elaborates on the competition between the US and the giant China which is taking over the rest of the world and is expected to turn the next superpower. Enjoy the show.

Silver's Palladium Moment

By Ryan Jordan:

The hype, confusion, and debate regarding reports of silver shortages are unfortunate, as they distract from discussion of the fundamentals behind the rising silver price. Fundamentals such as: peak silver, the near depletion of government stockpiles, the future increases in industrial silver demand, manipulation in the paper silver markets likely worse than any other asset class, and the misunderstanding of silver's monetary history among gold-only investors. Admittedly, fundamentals do not always drive prices. The irrational human herd can be completely unconcerned with fundamentals at times. Still, fundamentals can be used to inspire and make others think about the relative value of overlooked financial assets. And silver, at probably less than .5% of global assets, would certainly count as overlooked.

The Silver price can fire on more than one engine

Compared to the first industrial revolution for silver between 1900 and 1970- where demand for the white metal exploded from under 100 million ounces to over 400 million ounces- over the last 35 years industrial demand for silver (including photography) has not increased much. Industrial demand has been volatile, but it has consistently been between roughly 350 to 550 million ounces give or take, since the mid 1970s, even if there has been a slow move to the high end of the range in the last 15 years. This may come as a surprise to some, but silver has yet to have another "industrial revolution" of the same size and magnitude as the one for silver between roughly 1900 and 1970. Maybe industrial silver demand will never increase by 4 times the way it did in the early and mid-20th century, but remember that silver mine supply also increased several hundred percent over that same time period. And no one believes that the type of increase once seen in mine supply is possible if silver's industrial demand begins to increase.

It also bears repeating that the entire time of the Hunt Brother's Silver Corner, from 1973 to 1980, industrial demand for silver was declining (if only slightly), meaning that silver was rocketing higher by several hundred percent solely from investment demand (see Handy and Harman "Annual Reviews" to get a sense of the historical supply and demand of silver.) The investment demand story has propelled the price of silver higher over the course of the last decade as well: investment and coin demand has exploded by more than 300%. This category has been the only reason I can see that silver prices have moved higher in the recent past, but there are other future reasons for silver's increase as we move into the 2010s.

Silver's Next Industrial Revolution

A number of silver experts, foremost among them David Morgan, but also Stephen Leeb, Ted Butler and Izzy Friedman, have all been discussing the possibility of industrial demand finally breaking out of the 400-600 million range, and begin to move up closer to the 600 to 900 million range in the future, and some would extrapolate an even higher number for industrial demand in the years ahead. Of course this is all a guess, but silver is a highly versatile and in-demand metal for computers, cell phones, and many forms of alternative energy for green living.

Yes, much of the silver in PCs and other electronics is recycled, so an increase in demand may also be accompanied with an increase in the ability of silver to be recovered. But as David Morgan has pointed out, the likely dramatic increase in solar energy (some put it at 20 fold over the next decade), plus the need for water purification systems, sanitized hospital or medical devices, and RFID tags all represent an increase in consumable, non-recycled silver- possibly 200 million ounces a year or more. Given the estimates of the USGS that there are only 17 or 18 billion ounces of silver in the ground, even if mine production stayed the same, there is less than 20 years of extractable silver left. So where will all of this silver come from to meet surging industrial demand? Well, the CPM Group estimates above ground stockpiles of jewelry and silverware at over 20 billion- so maybe more of this type of silver will be scraped, even though it is held in many, many small hands around the globe. On an annual basis, perhaps jewelry and silver consumption will decline by another 100 million ounces, thus freeing up more silver for industrial use? Perhaps recycling will increase from roughly 170 million ounces a year to something higher (but could it realistically double or triple??)

But perhaps more likely, those who want to invest in silver coins and bullion- the same people who have driven investment/coin demand from less than 50 million ounces to over 220 million in a decade- will find that there are limits to the possible when it comes to getting access to the "other" monetary metal. New investors will be told to buy their silver from people who already have it, and not expect any more new silver supply to be "wasted" on coins, ingots, or bars.

When the silver rocket takes off, good luck picking pullbacks

Which brings me to the title of this piece: "Silver's Palladium Moment." Part of the reason for the allure of half-truths about 100 ounce bars being unavailable, or other gossip about shortages being taken seriously, is because many people in the precious metals industry understand just how tiny the silver market is for investment, as well as the other possible factors that can drive the silver price higher which have yet to materialize. Remember the dollar amount of available silver for sale is in the single billions of dollars & 30 billion dollars is the likely value of all the silver coins and bars on planet Earth. Contrast this to the TRILLIONS of dollars in stocks, bonds, and real estate and you get a sense for silver's rarity. These industry insiders also remember what happened to palladium between 1997 and 2000. In late 2000, Ford Motor Company panicked and bought large amounts of palladium in response to shortages and disruptions coming out of Russia, one of the world's largest Palladium producers. The price of palladium skyrocketed to near $1100 an ounce, nearly a 10 fold increase in less than 10 years. I think the PGMs are also a great investment. But unlike the platinum group metals, silver possesses a much larger concentrated short position on the COMEX, there are many more investors who only own silver as a derivative or a futures contract or on a fractional reserve basis, and - at least according to the USGS- the platinum group metals are only about 6 times more rare than silver in the earth's crust, and not over 40 times as expressed in the price. Additionally, silver has yet to experience the industrial revolution described above. I do realize that platinum and palladium are nearly a hundred times rarer above ground and that the PGM's in the ground can be very uneconomical to extract, but silver is the cheapest precious metal, and therefore the easiest one to acquire for poorer investors looking for a way into monetary assets separate from the banking system.

Yes, all assets are manipulated to varying degrees, and all assets have their own set of possibly bullish fundamentals to go with them, but I am at a loss to think of another asset with a longer laundry list of reasons to go higher than silver.

University of San Diego Lecturer
University of San Diego, KIPJ 262, 5998 Alcala Park, San Diego, 92110
Primary Tel 619.260.4756
Industry Education/Academia

G-10 minutes from 1997 show central bankers conspiring about gold

From GATA:

Western government and central bank officials discussed coordinating their gold market policies at a private meeting of the G-10 Gold and Foreign Exchange Committee in April 1997, according to minutes of the meeting released to GATA today by the Federal Reserve Board upon the order of a federal court. The minutes also quote a U.S. delegate as warning that a rising gold price would increase the U.S. government's debt burden.

The document was only one of many whose release was sought by GATA in its freedom-of-information lawsuit against the Fed in U.S. District Court for the District of Columbia. The judge, Ellen Segal Huvelle, ruled two weeks ago that other documents containing the Fed's gold-related secrets were exempt from disclosure under the on

Gold: the ultimate inflation hedge

UK Telegraph:

Is gold the ultimate hedge against inflation? Many investors clearly think so and with inflation now running at twice the Government's target it is not surprising that gold hasn't lost its lustre.

Recent research from the World Gold Council shows how gold has held its value over the long term when compared with other commodities. The relative price of gold and oil has remained almost constant over the past 50 years. So although the price of both (in either pounds or dollars) has risen during this period, if you were buying a barrel of oil with bullion you would hand over roughly the same weight of gold as you would have done in 1950.

More startling is that gold has retained this purchasing power over even longer periods. It is thought that an ounce of gold bought 350 loaves in the time of Nebuchadnezzar, the king of Babylon who died in 562BC. An ounce of gold still buys roughly 350 ordinary sliced loaves today, showing that over 2,500 years gold has proved a very effective hedge against inflation, at least when it comes to everyday essentials.

Given our current economic situation, it's not hard to see why there is increasing demand for an asset that appears to offer inflation-proofed on

Robert Fisk in Bahrain: 'They didn't run away. They faced the bullets head-on'

By Robert Fisk
The Independent:

"Massacre – it's a massacre," the doctors were shouting. Three dead. Four dead. One man was carried past me on a stretcher in the emergency room, blood spurting on to the floor from a massive bullet wound in his thigh.

A few feet away, six nurses were fighting for the life of a pale-faced, bearded man with blood oozing out of his chest. "I have to take him to theatre now," a doctor screamed. "There is no time – he's dying!"

Others were closer to death. One poor youth – 18, 19 years old, perhaps – had a terrible head wound, a bullet hole in the leg and a bloody mess on his chest. The doctor beside him turned to me weeping, tears splashing on to his blood-stained gown. "He has a fragmented bullet in his brain and I can't get the bits out, and the bones on the left side of his head are completely smashed. His arteries are all broken. I just can't help him." Blood was cascading on to the floor. It was pitiful, outrageous, shameful. These were not armed men but mourners returning from a funeral, Shia Muslims of course, shot down by their own Bahraini army yesterday on