Tuesday, March 29, 2011
Dominic Frisby of Money Morning newsletter quotes Nick Laird of Sharelynx as saying that the situation in silver is such that “since 1950, almost 925,000 tonnes have gone into demand with 570,000 tonnes of this having come from production. This leaves a shortfall of 350,000 tonnes, which has come from central bank sales, stockpiles and scrap. This deficit equals approximately 16 years of production.”
Even more surprisingly, as statistics go, the deficit in silver “is equal to the entire global production of silver in 1982!” which you’ll notice is already punctuated with an exclamation point, as everybody can see the exceptional, startling, scary nature of the statistic!
Jeff Clark, in his essay “How Much More Demand Can Silver Handle?” here at The Daily Reckoning, notes that “The numbers for silver demand are starting to make some market-watchers nervous. The US Mint sold over 6.4 million silver Eagles in January, more than any other month since the coin’s introduction in 1986.”
Well, playing the devil’s advocate, I say that “Maybe it’s because economic things are worse than at anytime since 1986, and there are so many more vampire-related things in the popular media than there were in 1986, so it is only natural to expect more people to be buying silver!”
Mr. Clark, obviously having been instructed to ignore me, ignores me, and goes on to trump my stupid theory with the awesome fact that “China’s net imports of silver quadrupled in 2010, to 122.6 million ounces, roughly 13.7% of global production.”
Already “mine production can’t meet worldwide demand,” and since I never hear of central banks dis-hoarding silver, nor of any stockpiles of silver being drawn down, maybe that is why he says, “the only way demand gets fulfilled is from scrap supply.”
As to what this means in precise dollars and cents, I don’t know, but he may be giving us a hint when he reminds us to “Remember that silver rose over 3,646% from trough to peak in the last precious metals bull market; it’s up about 630% in our current run. A return matching the 1970s advance would push the price to $152.”
From $33 an ounce to $152 an ounce? Wow! That seems like investing at its best, while the truth is that the gains in silver just get better from there, because the evil Federal Reserve is going to keep creating more and more money from there, which explains why I was spending more and more time alone in the Mogambo Big, Bad Bunker (MBBB) a few weeks ago, nervously watching the Federal Reserve creating another $28 billion in credit, which means that the Fed is creating more inflation in prices, which means that the time when people get desperate is not far away.
And this $28 billion in bank credit turned, seemingly magically but actually just a coincidental accounting thing, into $26 billion in cash with which to buy $26 billion in government debt! All in One Freaking Week (OFW)! Astounding!
The reason I bring this up is because it means, We’re Freaking Doomed (WFD) to die a horrible, horrible economic death because of inflation in prices that must necessarily result from all this creation of new money, which is obvious once you strip away all the confusing jargon, acres of spreadsheets and idiot editors rejecting your work with caustic comments like, “Utter trash” and, “Thank you for your recent submission. However, we have no present need for worthless ramblings of a paranoid lunatic.”
Paranoid lunatic, eh? Ha! Sharp Junior Mogambo Rangers (JMRs) are instantly on alert at a “dog that didn’t bark” – as in this case the sentence fragment “to die a horrible, horrible economic death because of inflation in prices that must necessarily result from all this creation of new money” did not end with an exclamation point, or two, or three, as would seem to be indicated.
The reason is that the long-forecasted inflation, which the use of an exclamation point would indicate as an impending calamity, is not only impending, but it is here, which does merit an exclamation point thusly!
I involuntarily looked around the bunker in a kind of scared paranoia when I read The 5-Minute Forecast boiling it down to, “Wholesale prices jumped 0.8% in January, according to the Bureau of Labor Statistics. The Producer Price Index has now jumped 3% over the last four months. And no, that’s not an annualized figure.”
Suddenly feeling nervous and paranoid again, The 5 continues, “Note that the PPI headline number is for ‘finished goods’ – stuff that’s ready to be sold direct to consumers. In the category of ‘crude goods,’ the figures are far worse – up 3.3% in January, and up a staggering 15.8% over the last four months.”
This is the ugly start of the price inflation horror that results from the horror of the Federal Reserve creating so excessively much money, and if ever there were a clearer signal to buy gold and silver with the last of your Federal Reserve Note money, I never heard of it.
And I am a guy who has heard many, many things over his lifetime that will curl your hair, or, if already curled, straighten, and I am not even talking about any of that REALLY scary stuff about genetic mutants being manufactured for the Pentagon (which is under control of UFOs from outer space) that are computer-controlled and can shoot laser beams (“zzzzt!”) out of their eyes.
And if that last stuff turns out to be true, too, then it will be just one more reason, on top of the other thousands of reasons, to buy gold, silver and oil, and which would perhaps add just that little bit extra jollity to your jaunty step as you realize, as you walk along, “Whee! This investing stuff is easy!”
$105 per barrel oil. Cotton prices at record levels. Food prices at 2008 highs. Typically, such commodity price increases would send central banks running to the U.S. Dollar to secure the value of their savings. After all, the dollar has been the reserve currency since World War I.
But not this time.
Central banks are shedding dollars, reducing their holdings by about $9 billion in previous quarter, according to Nomura Securities’ Jens Nordvig, global head of G10 FX Strategy.
What are they buying instead? Gold
The yellow metal hit a fresh record high this morning, while the dollar index dropped to a 15-month low. The news had Fast Money’s Brian Kelly looking to add more gold and silver longs to his portfolio Thursday morning.
“What is working is gold, silver and oil” said Kanundrum Capital’s Kelly. “I wish I had more.”
- From Rense.com:
By Bob Nichols 3-28-11
- (San Francisco) -- The Japanese military has deployed two Type 74 Main Battle Tanks to the destroyed Fukushima Daiichi GE nuclear reactors. The 80,000 lb, or 36,363 kg, Type 74 Tanks are equipped with bull dozer blades and can be equipped with Nuclear, Biological and Chemical Warfare Protective kits.
- The 720 HP tanks are expected to clear away rubble from the destroyed reactors; including thousands of tons of burning, highly radioactive old reactor cores stored on site. Internationally known Physicist Dr Paolo Scampa has calculated that 70 Billion Lethal Doses of radioactive particles have been released from the Fukushima Daiichi six reactor site. That is enough lethal radiation to kill everyone on Planet Earth 10 times over.
- Dr Michio Kaku, a world famous physicist has recommended that the Japanese military implement the "Chernobyl Option" to entomb the four out of control reactors in Boron and Concrete. The Boron kills the Neutron life blood of the reactor cores.
Type 74 Tanks To Be Used For N-Plant Cleanup BY KYLE MIZOKAMI NEWPACIFICINSTITUTE.ORG 3-22-11
Type 74 Main Battle Tank with dozer attachment. Photo via Military-Today.com.
- According to the Daily Yomiuri, the GSDF is sending two Type 74 main battle tanks to the Fukushima Daiichi reactor to help clean up rubble and debris from the earthquake, tsunami, and explosions at the reactor site. The rubble and debris are hampering emergency efforts to repair the reactors. The GSDF is using tanks instead of bulldozers because the thick steel hull of the Type 74 is effective at blocking some radiation from the crew. The tanks also have NBC air filtration systems.
- The article says that the tanks will be sent from Camp Komakado, which according to Wikipedia is the headquarters of the 1st Tank Battalion, as well as the 1st Armored Training Unit. Other sources on the Internet indicate that one Type 74 per tank company is equipped with a dozer blade, in which case the 1st Tank Battalion probably has three such tanks on hand.
- Kyodo News Agency has a picture of one of the tanks chained to a tank transporter.
Type 74 with dozer attachment. Kyodo News Agency. http://newpacificinstitute.org/jsw/?p=5568
The Federal Reserve will disclose details of emergency loans it made to banks in 2008, after the U.S. Supreme Court rejected an industry appeal that aimed to shield the records from public view.
The justices today left intact a court order that gives the Fed five days to release the records, sought by Bloomberg News’s parent company, Bloomberg LP. The Clearing House Association LLC, a group of the nation’s largest commercial banks, had asked the Supreme Court to intervene.
“The board will fully comply with the court’s decision and is preparing to make the information available,” said David Skidmore, a spokesman for the Fed.
The order marks the first time a court has forced the Fed to reveal the names of banks that borrowed from its oldest lending program, the 98-year-old discount window. The disclosures, together with details of six bailout programs released by the central bank in December under a congressional mandate, would give taxpayers insight into the Fed’s unprecedented $3.5 trillion effort to stem the 2008 financial panic.
“I can’t recall that the Fed was ever sued and forced to release information” in its 98-year history, said Allan H. Meltzer, the author of three books on the U.S central bank and a professor at Carnegie Mellon University in Pittsburgh.....read on
Congressman Ron Paul [R-TX] is seeking to end all taxes charged by federal, state and local governments on coins and bullion.
Rep. Paul introduced the Free Competition in Currency Act of 2011, H.R. 1098, in the United States House of Representatives on March 15, 2011.
The move to end the taxation is one of three parts to the bill and marks a continuation of an effort by Paul that can be traced back to previous Congressional sessions. Those attempts stalled, leaving Ron Paul little choice but to re-introduce the measures in the latest session of Congress.
If passed, the Free Competition in Currency Act would eliminate capital gains taxes on gold and silver coins which are levied at rates of up to 35% for short term and 28% for long-term. Also eliminated would be sales taxes charged by state and local governments on coin and bullion transactions......read on
This paper is written as a response to market observers who opine, “how can the price of precious metals be suppressed when their prices have empirically gone up 4 fold and more over the past 10 years?”
The following graph depicts the price performance of silver over the course of 2010, paying special attention to the change in silver derivatives positions at both J.P. Morgue and HSBC:
The U.S. Office of the Comptroller of the Currency [OCC] publishes quarterly data showing the change in aggregate derivatives data of reporting Commercial Banks:
When we juxtapose Q3/2010 precious metals aggregates against Q4/2010 – we can see that J.P. Morgue and HSBC cumulatively added roughly 4 billion in silver derivatives. We know these institutions are “short” because the Commitment of Traders Report [COTS] published weekly by the CFTC have perpetually shown the “Commercials” category to be short. J.P. Morgue and HSBC are “Commercials”.
What Could Have, Should Have But Wasn’t Allowed to Happen [thank you CFTC]:
While the price of silver did rise in Q4/2010 – in the absence of J.P. Morgue and HSBC piling on suppressive, paper, future short sales – the price rise would have undoubtedly been much steeper.
Conclusions: The price rise of silver in Q4/2010 would have been much steeper had J.P. Morgue and HSBC not “shellacked” the market with an additional, cumulative 4 billion in price-suppressive, paper short sales. Had these agents of the U.S. Federal Reserve not undertaken this market manipulation – the price of silver would have soared much higher, making the already weak U.S. Dollar look even more unattractive as a prudent vehicle for countries seeking diversification/safety of their reserve positions.
The CFTC is “owned” by the banks they are supposed to regulate. Instead of ensuring the sanctity of our capital markets, enforcing meaningful position limits, they aid-and-abet the banks in their price rigging [undoubtedly in the name of fiat preservation / National Security].
What is really occurring in precious metals-ville is that DEMAND for physical metal is now increasingly trumping the fraudulent, unlimited supply of paper metal [futures]. This is why “BEAT-DOWNS” in price – like the buck and half swoon depicted below [circled] on March 11, 2011 – no longer cause MASSIVE, LASTING breakdowns. A couple of years ago an engineered sell-off like the one depicted below would have decimated the silver market for months:
The real reason for the growing resilience in the metals markets is this: despite shills claiming that physical supply is no problem – institutional investors and national mints are having increasing difficulty sourcing physical metal.
In the past – smack downs in the price made investors wary and blunted demand. Today, investors are better informed and realize that smack downs in price when physical supplies are tight - are not only counter-intuitive, they’re a sign of desperation – and this brings buyers of physical metal “out of the woodwork”.
The game has fundamentally changed – but don’t tell the chartists – they’re still married to their Fibonacci retracements and buggy-whip, Bollinger bands.
With Central Banks continuing to increase the rate at which they create money out of thin air – we can logically expect this increased demand for physical precious metal to keep the price vectoring upward, to the right.
Got physical yet?
Most Americans have no idea just how bad the financial problems over in Europe are right now. The truth is that the entire European financial system is teetering on the brink of disaster. Ireland and Greece have already received bailouts and Portugal, Spain, Italy, France and Belgium are all drowning in an ocean of unsustainable debt. Sovereign credit ratings all over Europe have being slashed in recent months. For example, a while back Moodys Investors Service cut Ireland's bond rating by five levels. Up until now Europe has weathered all of this financial instability fairly well, but now huge new financial problems in Portugal threaten to send the European debt crisis spinning out of control.
The Prime Minister of Portugal, Jose Socrates, resigned on Wednesday after the major opposition parties banded together to vote down the austerity measures that he was requesting. The package of budget cuts and tax increases was intended to get Portugal's horrible debt crisis under control. Prior to the vote, the prime minister warned that he would no longer be able to run the country if the austerity package was not passed.
Now there are all kinds of questions about what is going to happen to Portugal. At this point most financial authorities in Europe seem to be assuming that Portugal is going to need a bailout.
Today, Standard & Poor's reduced the credit rating of long-term Portuguese government debt from "A-" to "BBB". Standard & Poor's is also warning that the credit rating may be cut further if negotiations for a bailout do not go well.
Without a bailout, it seems almost certain that Portugal will default.
Interest rates on Portuguese government debt have risen to unsustainable levels. The yield on 10-year Portuguese bonds hit 7.78% on Friday. That was the highest it has been since Portugal joined the euro.
Authorities in Portugal are publicly saying that they simply cannot afford to pay that kind of interest. Unfortunately for them, it appears that Portugal is going to be forced to issue more bonds by June at the very latest.
So how much would a bailout of Portugal cost?
Well, according to one estimate, it would probably be in the neighborhood of 70 billion euros.
That isn't going to sink Europe.
However, the concern is that the crisis in Portugal could have a domino effect.
There is increasing worry in Europe that Portugal's neighbor, Spain, could also need a bailout. But a bailout of Spain would potentially be so large that it would cause a financial nightmare for Europe.
The following is how a recent article in the Wall Street Journal sized up the problem....
Portugal's admission that it will probably need a financial bailout raises a question that will shape the outcome of the euro zone's debt crisis: Is Spain next?
The cost of saving Spain, a 1.1 trillion ($1.56 trillion) economy, would dwarf previous bailouts and could test the financial strength of Europe as a whole.
The truth is that the rest of Europe simply does not have the kind of financial muscle necessary to continue putting together huge bailouts indefinitely. If Spain does go down, it is going to put a massive amount of strain on the rest of the continent.
There are other financial problems simmering in Europe right now as well.
According to a recent Business Insider article, the financial problems in Ireland are also creating a lot of concern at the moment....
Ireland's banks are likely to need another $39 billion in support, which would use up 80% of its current bailout funds.
Ireland is a financial basket case right about now. Confidence in Irish debt is rapidly evaporating. In fact, the yield on 10-year Irish bonds recently hit 10.12%.
But that is nothing compared to what Greece is being forced to pay.
The yield on 10-year Greek bonds recently reached an astounding 12.58%.
There are persistent rumors that Greece is going to need yet another bailout. The truth is that Germany and the other European nations that are coming up with the cash for these bailouts are just pouring their money into financial black holes.
Nations like Greece and Ireland are just money pits at this point.
As I have written about previously, the financial collapse of Europe has basically become inevitable. The EU can keep coming up with bailout plan after bailout plan, but they are only putting off the crash for a while.
Eventually a point will come when all of the balls simply cannot be kept up in the air anymore.
So what is going to happen once that point is reached?
Well, many believe that we could actually see the end of the euro and potentially even the break up of the European Union.
Of course top politicians in Europe will fight tooth and nail to keep that from happening, but the truth is that at some point we are going to see some incredibly challenging financial problems in Europe. How the EU responds to the crisis is going to be extremely interesting to watch.
So many people talk about the death of the U.S. dollar, but the truth is that we could very easily see a financial collapse and a major currency crisis in Europe prior to the collapse of the dollar. Europe is in really, really bad shape right now.
Of course it doesn't help that the entire world is so incredibly unstable right now. The disaster in Japan, the war in Libya, the revolutions across the Middle East and the surging price of oil all threaten to throw the global economy into turmoil.
As I discussed in a previous article, people need to start preparing for economic disaster. The entire global financial system is coming apart. The U.S. economy is crumbling, Europe is dealing with an unprecedented debt crisis and Japan has just been struck with the worst economic disaster that it has seen since World War 2.
Most Americans don't pay much attention to what is going on in Portugal (or in the rest of Europe for that matter), but they should. The world is more interconnected than ever, and if Europe experiences a financial meltdown it will have dramatic consequences for the United States as well.
The financial crash of 2008 swept the entire globe and virtually every nation on earth was deeply affected. The next wave of the financial crisis is also going to be felt globally.
We live in one of the most interesting times in the history of the world.
Are you prepared for what is about to happen?