Wednesday, February 23, 2011

U.S. crude oil futures climb to a 2-1/2-year peak

(Reuters) - U.S. crude futures climbed to a 2-1/2-year peak on Wednesday on concern that unrest in Libya could spread to other top oil producers in the region and cut more output.

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 on

Pierre Lassonde on the Gold Market & Euro

Pierre Lassonde of Chairman of Franco-Nevada talks to Eric King of King World News about Gold, silver, issues in the Euro zone and Chinese bullion demand.......listen here

Gold's safe haven appeal surges

With tensions in the Middle East and North Africa rising and concerns about loose money in the west continuing, investors are looking once more to gold as a means to protect their wealth Author: David Levenstein

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 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

Iran's naval warships enter Suez Canal first time in 3 decades

From: RussiaToday | February 22, 2011

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.

Libya tops shoe throwing index

Latest on the Libyan uprising

Keiser Report - Fed's Reign of Terror

Lucky Money

Interview between GATA's Chris Powell and James Turk

0% Interest Rate = Worthless Dollar

Jeff Nielson
21 February 2011
In a recent piece I wrote (Suicide Bombers' in the Gold Market?) I strongly asserted that the highly-leveraged spread-trade which 'blew up' - and caused the most recent sell-off in the gold market - was deliberately orchestrated by the anti-gold banking cabal.

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.

  1. 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.

  2. 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.

  3. 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.

  4. 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).

Jeff Nielson

The Future Of Silver Mining

Jeff Nielson
19 February 2011
In my previous piece to this, I focused upon the definition of a "silver mine", in order to expose the biggest myth about silver: that having most of the world's silver produced as a "byproduct" of other mining is a normal state of affairs. What I demonstrated conclusively (through simple arithmetic) is that the only reason that most of the world's silver production doesn't come mostly from "primary" silver mines is purely a function of the price of silver (i.e the extremely low price).

More specifically, I pointed out how it was the relentless manipulation of the price of silver - which was kept far below its "fair market value" - that resulted in the "silver mine" becoming an "endangered species". In this commentary, I intend to build upon that analysis, by explaining the implications of that analysis with respect to the creation of new silver mines.

To start this process, it is first helpful to examine the gold mining industry, given the many and obvious parallels between the two metals. With respect to the gold market, knowledgeable investors are well aware that this metal has also been subjected to decades of price manipulation. While the manipulation of the gold price can be seen as "extreme" relative to the pricing of other metals, the manipulation of silver was "extreme" in relation to the price of gold.

To understand this market-manipulation better, it's instructive to look at the history surrounding the "bottom" of the gold market. In this respect, there is no better place to start than with the observations made at that time by our good friends at GATA - the Gold Anti-Trust Action committee. On May 25, 1999; Bill Murphy had this to say, in a piece titled "Bottom in, bull market begins":

Gold continues to make 20-year lows led by the unending barrage of selling in the physical market by Goldman Sachs…Goldman Sachs has been relentless in its selling since right before the Bank of England's announcement and has not let up since…We told you two weeks ago that the word was out in London that Goldman Sachs has a 1,000-tonne short position on its books…

The "spot" price of gold on that date was $270/ounce, while the price of silver was just over $5/oz. The "announcement" which Bill Murphy alludes to is the infamous decision by future Prime Minister Gordon Brown to dump more than half of the UK's gold reserves onto the market at the absolute bottom (to bail-out Goldman Sachs?), costing his country billions of pounds.

At this price, the world's gold-mining industry was decimated. Well over 90% of the world's gold mines were forced to shut-down, as only the world's absolute "richest" deposits could even be mined on a break-even basis at that price. Indeed, this reality alone is conclusive proof of that manipulation. What is important to note, however, is that at no time has the world's gold production ever been produced primarily as a "byproduct". In other words, that industry was never destroyed to the same degree as silver mining.

In fact, Bill Murphy was slightly premature. The price of gold would actually decline to as low as $253/oz (approximately 6% below his call of a "bottom"), before rocketing upward more than 500% in the nearly 12 years since. My guess is that those investors who bought at $270/oz have forgiven Bill for being a little "early".

The absolute "bottom" of the silver market occurred much sooner, back in 1992, with the price briefly going as low as $3.65/oz, and it averaged an amazing $3.95 throughout that year. Why is this "amazing"? Because that price represented a 600-year "low" for the silver market.

Here it is important for us to focus on the gold/silver ratio. Regular readers know that in the nearly 5,000 years over which our species has mined and collected gold and silver that the average price ratio is 15:1. At silver's 600-year low, that ratio had been stretched to more than 80:1, while when gold was hitting its own lows the ratio was at a still-ridiculous level of roughly 60:1.

Put another way, when gold was at its absolute bottom (and 90% of the world's gold mines had been shut-down from this under-pricing), silver was priced at only ¼ of its predicted value - based on 5,000 years of human history. It is only upon absorbing all of this context that we can understand how ruthlessly the silver market (and silver miners) were wiped-out by this banker-manipulation.

The consequence of that manipulation is that in the 20 years since silver hit its bottom, anywhere from 2/3 to 4/5 of the world's silver has come as a "byproduct" of other mining, since only a handful of mines (out of 1,000's) were actually able to break-even with silver priced at that level. With the price of silver now nearly ten-fold higher than that absolute bottom, clearly the "pendulum" is swinging back. However, even at this price-level, the gold/silver price ratio remains in an extremely lop-sided range of more than 40:1.

With any/every reputable gold analyst still adamant that gold is "cheap" (i.e. under-priced) at this level, the question is: at what price-level will silver have to reach before that industry returns to a "healthy" state - i.e. where the vast majority of our silver is produced via primary silver mining, as was the case throughout the remainder of this 5,000-year period, and as is the case with gold?

This is more than just an "academic" question. Few investors understand the significance of silver being produced as a "byproduct" in relation to the fundamentals of supply and demand. In any/every mine where silver is produced as a byproduct, by definition this means that the majority of the revenues of any/every such mine are expected to come from the other metals being mined with silver. This means that the decision to build new mines (which produce silver as a byproduct) would be based upon not the price of silver, but the price(s) of the other metal(s).

This, in turn, means that throughout most (if not all) the years since silver hit its absolute bottom, the rising price of silver has done virtually nothing to "stimulate" higher silver production. This is something unheard of in the history of markets. A "commodity" rockets upward nearly 1000% in price, while producing virtually zero stimulative effect on supply.

This explains another extreme anomaly in the silver market: the price has rocketed upward by nearly 1000% while inventories continue to plummet. From 1990 to 2005, silver inventories plummeted by 90% while the price roughly tripled. At that point there was less available silver in the world than at any time in centuries (i.e. when humanity first acquired the technical savvy to mine it in large quantities).

Since 2005, we no longer have accurate numbers with which we can refer. As I have documented in several previous commentaries, the quasi-official "record-keepers" for the gold and silver mining industry (and very close chums of the banking community) have blatantly falsified and obfuscated the numbers to the point where they are totally meaningless. However, all empirical and anecdotal evidence is that silver inventories have never been as "tight" as they are today. An enlightening interview with the eminent fund-manager Eric Sprott establishes this clearly.

This suggests that despite the nearly ten-fold increase in the price of silver that as of yet there has not been the expected "response" in terms of supply - i.e. ramping-up production to service a market suddenly prepared to pay much higher prices for silver. Indeed, despite the near-1000% rise in the price of silver, mine production has been anemic, at best.

For the nine years from 2000 through 2009, The Silver Institute reports that mine supply rose from 591 million ounces to 709.6 million ounces, a mere 20% (or an average of about 2%/year). The CPM Group reports that mine production rose to 741.5 million ounces in 2010 (an increase of just over 4%), and predicts that 2011 mine production will total 769.8 million ounces (an increase of less than 4%).

In other words, as of yet this 1000% rise in the price of silver has not produced any significant response from the silver mining industry - precisely what we would expect, since silver is still produced primarily as a byproduct. As long as most of the world's silver continues to be produced as a byproduct, exploding prices and collapsing inventories will continue to produce only a very muted response on the supply-side.

As I alluded to in a previous commentary, this provides investors with the rarest of investment opportunities: the "one-way trade" - where (over the long-term) the only possible direction for prices is higher. Inventories are gone at the same time demand is spiking. Indeed, just over the last five years, China has gone from being a net-exporter of roughly 100 million ounces of silver per year to a net-importer of 100 million ounces - a 200 million ounce per year surge in Chinese demand. This amounts to more than the total increase in mine-supply from 2000 right through the predicted increase in supply for this year.

Thus, looking at just this one nation, we see there is less silver available (in relative terms) today than there was in 2000 - and that is before we add-in any of the surge in industrial demand, and the even greater explosion in investor demand (excluding China). And with most silver produced as a byproduct, there is still no sign at all of this trend ending.

We are still several years away from reaching a stage where (like nearly all other commodities) the price of silver directly drives the production of silver. Until that happens, the only possible way to reduce demand to the point where severely-stressed inventories can merely remain in balance is much higher silver prices.

For those investing in silver miners, we are clearly in a Golden Age ("Silver Age"?). Any and every new silver miner to emerge (as this industry slowly rises from the dead) represents purely an investment opportunity, with no possibility over the foreseeable future that these "new producers" could over-supply this banker-starved market.

The typical "mine cycle" is close to ten years: the time it takes from beginning to explore (and drill-out) a deposit until mine-production actually begins. Thus a full response from the silver mining industry will not occur until as much as ten years after the silver market is finally being driven by "primary" mine production - which has still not occurred.

However, as mentioned before, there are literally thousands of old, closed silver mines - many of which still have sufficient ore remaining to re-commence production (once those mines are rehabilitated and modernized). The companies engaged in these reclamation projects represent not only a "short-cut" toward higher silver production, but wonderful investment opportunities.

Instead of the 10-year cycle to go from first exploration to production, some of these new miners can be in production only one to two years after first being listed on our exchanges. This means there is the potential for a more rapid response to demand than the expected near-decade. However, in even the most bearish assessment of these parameters, investors are assured of several more years of unparallelled growth for those investing in these companies. As always, we remind investors that the vast majority of "opportunities" (and the vast majority of gains) will occur with the "junior miners": small producers, who are generally producing less than 3 million ounces of silver per year.

Where could this market go? John Williams of is on record as saying that if real numbers were used for U.S. inflation since gold hit its previous, nominal high in 1980 that the price of gold would have to reach roughly $7,500/ounce - simply to equal that price in inflation-adjusted terms. With gold at that price, if silver merely equaled its long-term price ratio with gold that implies a silver price of $500/oz.

Because when the "pendulum" swings in markets it tends to swing too far, the vast majority of knowledgeable silver commentators are expecting the silver price to exceed that long-term price ratio. Because "fundamentals" for gold are much, much, much more bullish than in 1980, none of these numbers should be seen as an absolute "ceiling" for either gold or silver.

In fact, as the out-of-control money-printing of Western bankers continues to accelerate (with no end in sight) our economies become more and more irrevocably doomed to "hyperinflation" - where the prices of gold, silver, and many other hard assets will literally surge to infinite price levels, as expressed in the bankers' worthless paper.

Sadly (for all of us), the future of silver looks much too bright.

Jeff Nielson