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Archive for October 2009

US government report recommends blocking popular websites during pandemic flu outbreak

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by Mike Adams, NaturalNews Editor
Originally posted Friday, October 30, 2009

THE US GOVERNMENT HAS ISSUED a new report that recommends blocking access to popular websites during a pandemic outbreak in order to preserve internet bandwidth for investors, day traders and securities clearing house operations. The concern is that a pandemic would cause too many people to stay at home and download YouTube videos and porn, hogging all the internet bandwidth and blocking throughput for investment activities, thereby causing a stock market meltdown.

This isn’t an April Fool’s joke. It’s all based on a public report issued by the Government Accounting Office (GAO), available from their website at http://www.gao.gov/new.items/d108.pdf

In this article, I’m going to explain how a pandemic outbreak could theoretically bring down Wall Street. But to get to that, you’ll first need to find out what the GAO said in its curious report (see below). Parts of this article are presented as satire, but the underlying facts quoted here are all true and verifiable (links are provided to all sources).

This report in question is entitled, “GAO Report to Congressional Requesters, INFLUENZA PANDEMIC” and includes this subtitle: Key Securities Market Participants Are Making Progress, but Agencies Could Do More to Address Potential Internet Congestion and Encourage Readiness.

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The Extinction of Ethics in Finance – The Fallout

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by Greg Simmons
Originally posted October 13, 2009

I AM WRITING THIS ARTICLE for those of you who suffered losses due to the market meltdown of 2008. So I guess I’m writing this for pretty much – nearly everyone. It’s my sincere hope that you’ve been able to recoup some of your losses considering we’ve just had the greatest bear market rally in history. My aim is to get anyone who will listen to take advantage of the breathing-room this rally has bought us and ask yourself a series of questions.

The two most important questions anyone with any money at risk in the US financial markets should ask themselves at this critical point in economic history are exceedingly simple. One, are you prepared for another market meltdown? And two, what is your new exit strategy when things do go wrong?

Another perplexing question you might ask yourself is this. How did my financial advisor not have a clue that history’s most catastrophic economic storm was brewing in the credit markets? It was blatantly obvious. The canary in the coal mine fell off its perch, dead as a doornail, in February of 2008 when the ‘auction rate preferred’ paper froze (an instrument of 7 to 28 day maturity that the wealthy have historically kept their liquid cash in at 100 basis points higher than money market funds) – a sign that anyone with any knowledge of the financial markets should have known was ominous and would precipitate other catastrophic events.

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Will Obama’s Economic Policies Destroy the US Dollar?

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by Gerard Jackson
Originally posted 26 October 2009

ONE DOESN’T NEED TO BE AN ECONOMIC genius to see that the US dollar is in trouble. That Americans are hopelessly confused about what is happening to their currency is no surprise. However, before we get to the point of whether Obama’s economics will do the dollar in I think it is important to provide a brief outline of the history behind the economic thinking that is sometimes used to explain exchange rate movements in the hope that this will give readers a better understanding of the current situation.

Economics is not as easy as some people think, particularly those political activists who are passing themselves off as honest journalists. Unfortunately, most of the economic commentariat are not much better informed. Regardless of what some commentators assert a weak currency does not necessarily reflect a weak economy.

More than 80 years ago Mises pointed that those who argue that a strong economy must always mean a strong currency “…do not understand that the valuation of a monetary unit depends not on the wealth of a country, but rather on the relationship between the quantity of, and the demand for, money. Thus, even the richest country can have a bad currency and the poorest country a good one.” (On the Manipulation of Money and Credit, 1978. The article was first published in 1923).

End of US$ Global Reserve Currency

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by Jim Willie CB
Originally posted October 15th, 2009

THE HERALDED END TO THE Petro-Dollar defacto standard completes the loop, the vicious cycle that will work to destroy the USDollar. In a sense, the US$ had to face an end, its sunset guaranteed when Nixon defaulted on its redemption value. The United States served as custodian for the global reserve currency. Naturally, the most damage will be to the US as a consequence of its twilight, especially after the recent era of fraud & counterfeit. Few look back to that date in 1971 as prophetic for declaring the USDollar’s days as limited and finite.

The world will continue to trade the US$ in future years, but it must stand on its own value, based upon its own merit, the result of balancing its supply & demand, from the integrity of its fundamentals. Some climax events have come, or at least are previewed on an unfortunate path.

Never in my memory has USGovt leadership been so disrespected. Never has Wall Street been so culpable for financial ruin, yet still in power running the USGovt finance ministries. The global revolt against the United States has many sides, but the financial aspect is most profound. It is hardly even covered in the US press. The US citizens have little comprehension of the enormity of a lost global reserve currency, with all its privileges, abused for constructing financial engineering towers and funding foreign wars. The direct effects will be felt in higher costs and assured supply, including credit.

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America has lost its soul and collapse is inevitable

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Death of ‘Soul of Capitalism’: Bogle, Faber, Moore
20 reasons America has lost its soul and collapse is inevitable
By Paul B. Farrell, MarketWatch
Oct. 20, 2009
Jack Bogle published “The Battle for the Soul of Capitalism” four years ago. The battle’s over. The sequel should be titled: “Capitalism Died a Lost Soul.” Worse, we’ve lost “America’s Soul.” And, worldwide, the consequences will be catastrophic.
That’s why a man like Hong Kong contrarian economist Marc Faber warns in his Doom, Boom & Gloom Report: “The future will be a total disaster, with a collapse of our capitalistic system as we know it today.”
No, not just another meltdown, another bear-market recession like the one recently triggered by Wall Street’s too-greedy-to-fail banks. Faber is warning that the entire system of capitalism will collapse. Get it? The engine driving the great “American Economic Empire” for 233 years will collapse, a total disaster, a destiny we created.
OK, deny it. But I’ll bet you have a nagging feeling that maybe he’s right, that the end may be near. I have for a long time: I wrote a column back in 1997: “Battling for the Soul of Wall Street.” My interest in “The Soul” – what Jung called the “collective unconscious” – dates back to my Ph.D. dissertation, “Modern Man in Search of His Soul,” a title borrowed from Jung’s 1933 book, “Modern Man in Search of a Soul.” This battle has been on my mind since my days at Morgan Stanley 30 years ago, witnessing the decline.
Has capitalism lost its soul? Guys like Bogle and Faber sense it. Read more about the soul in physicist Gary Zukav’s “The Seat of the Soul,” Thomas Moore’s “Care of the Soul” and sacred texts.
But for Wall Street and American capitalism, use your gut. You know something’s very wrong: A year ago, too-greedy-to-fail banks were insolvent, in a near-death experience. Now, magically, they’re back to business as usual, arrogant, pocketing outrageous bonuses while Main Street sacrifices, and unemployment and foreclosures continue rising as tight credit, inflation and skyrocketing federal debt are killing taxpayers.
Yes, Wall Street has lost its moral compass. It created the mess, but now, like vultures, Wall Streeters are capitalizing on the carcass. They have lost all sense of fiduciary duty, ethical responsibility and public obligation.
Here are the Top 20 reasons American capitalism has lost its soul:
1. Collapse is now inevitable
Capitalism has been the engine driving America and the global economies for over two centuries. Faber predicts its collapse will trigger global “wars, massive government-debt defaults, and the impoverishment of large segments of Western society.” Faber knows that capitalism is not working, capitalism has peaked, and the collapse of capitalism is “inevitable.”
When? He hesitates: “But what I don’t know is whether this final collapse, which is inevitable, will occur tomorrow, or in five or 10 years, and whether it will occur with the Dow at 100,000 and gold at $50,000 per ounce or even confiscated, or with the Dow at 3,000 and gold at $1,000.” But the end is inevitable, a historical imperative.
2. Nobody’s planning for a ‘Black Swan’
While the timing may be uncertain, the trigger is certain. Societies collapse because they fail to plan ahead, cannot act fast enough when a catastrophic crisis hits. Think “Black Swan” and read evolutionary biologist Jared Diamond’s “Collapse: How Societies Choose to Fail or Succeed.”
A crisis hits. We act surprised. Shouldn’t. But it’s too late: “Civilizations share a sharp curve of decline. Indeed, a society’s demise may begin only a decade or two after it reaches its peak population, wealth and power.”
Warnings are everywhere. Why not prepare? Why sabotage our power, our future? Why set up an entire nation to fail? Diamond says: Unfortunately “one of the choices has depended on the courage to practice long-term thinking, and to make bold, courageous, anticipatory decisions at a time when problems have become perceptible but before they reach crisis proportions.”
Sound familiar? “This type of decision-making is the opposite of the short-term reactive decision-making that too often characterizes our elected politicians,” thus setting up the “inevitable” collapse. Remember, Greenspan, Bernanke, Bush, Paulson all missed the 2007-8 meltdown: It will happen again, in a bigger crisis.
3. Wall Street sacked Washington
Bogle warned of a growing three-part threat — a “happy conspiracy” — in “The Battle for the Soul of Capitalism:” “The business and ethical standards of corporate America, of investment America, and of mutual fund America have been gravely compromised.”
But since his book, “Wall Street America” went over to the dark side, got mega-greedy and took control of “Washington America.” Their spoils of war included bailouts, bankruptcies, stimulus, nationalizations and $23.7 trillion new debt off-loaded to the Treasury, Fed and American people.
Who’s in power? Irrelevant. The “happy conspiracy” controls both parties, writes the laws to suit its needs, with absolute control of America’s fiscal and monetary policies. Sorry Jack, but the “Battle for the Soul of Capitalism” really was lost.
4. When greed was legalized
Go see Michael Moore’s documentary, “Capitalism: A Love Story.” “Disaster Capitalism” author Naomi Klein recently interviewed Moore in The Nation magazine: “Capitalism is the legalization of this greed. Greed has been with human beings forever. We have a number of things in our species that you would call the dark side, and greed is one of them. If you don’t put certain structures in place or restrictions on those parts of our being that come from that dark place, then it gets out of control.”
Greed’s OK, within limits, like the 10 Commandments. Yes, the soul can thrive around greed, if there are structures and restrictions to keep it from going out of control. But Moore warns: “Capitalism does the opposite of that. It not only doesn’t really put any structure or restrictions on it. It encourages it, it rewards” greed, creating bigger, more frequent bubble/bust cycles.
It happens because capitalism is now in “the hands of people whose only concern is their fiduciary responsibility to their shareholders or to their own pockets.” Yes, greed was legalized in America, with Wall Street running Washington.
5. Triggering the end of our ‘life cycle’
Like Diamond, Faber also sees the historical imperative: “Every successful society” grows “out of some kind of challenge.” Today, the “life cycle” of capitalism is on the decline.
He asks himself: “How are you so sure about this final collapse?” The answer: “Of all the questions I have about the future, this is the easiest one to answer. Once a society becomes successful it becomes arrogant, righteous, overconfident, corrupt, and decadent … overspends … costly wars … wealth inequity and social tensions increase; and society enters a secular decline.” Success makes us our own worst enemy.
Quoting 18th century Scottish historian Alexander Fraser Tytler: “The average life span of the world’s greatest civilizations has been 200 years” progressing from “bondage to spiritual faith … to great courage … to liberty … to abundance … to selfishness … to complacency … to apathy … to dependence and … back into bondage!”
Where is America in the cycle? “It is most unlikely that Western societies, and especially the U.S., will be an exception to this typical ‘society cycle.’ … The U.S. is somewhere between the phase where it moves ‘from complacency to apathy’ and ‘from apathy to dependence.'”
In short, America is a grumpy old man with hardening of the arteries. Our capitalism is near the tipping point, unprepared for a catastrophe, set up for collapse and rapid decline.
15 more clues capitalism lost its soul … is a disaster waiting to happen
Much more evidence litters the battlefield:
1. Wall Street wealth now calls the shots in Congress, the White House
2. America’s top 1% own more than 90% of America’s wealth
3. The average worker’s income has declined in three decades while CEO compensation exploded over ten times
4. The Fed is now the ‘fourth branch of government’ operating autonomously, secretly printing money at will
5. Since Goldman and Morgan became bank holding companies, all banks are back gambling with taxpayer bailout money plus retail customer deposits
6. Bill Gross warns of a “new normal” with slow growth, low earnings and stock prices
7. While the White House’s chief economist retorts with hype of a recovery unimpeded by the “new normal”
8. Wall Street’s high-frequency junkies make billions trading zombie stocks like AIG, FNMA, FMAC that have no fundamental value beyond a Treasury guarantee
9. 401(k)s have lost 26.7% of their value in the past decade
10. Oil and energy costs will skyrocket
11. Foreign nations and sovereign funds have started dumping dollars, signaling the end of the dollar as the world’s reserve currency
12. In two years federal debt exploded from $11.2 to $23.7 trillion
13. New financial reforms will do little to prevent the next meltdown
14. The “forever war” between Western and Islamic fundamentalists will widen
15. As will environmental threats and unfunded entitlements
“America Capitalism” is a “Lost Soul” … we’ve lost our moral compass … the coming collapse is the end of an “inevitable” historical cycle stalking all great empires to their graves. Downsize your lifestyle expectations, trust no one, not even media.
Faber is uncertain about timing, we are not. There is a high probability of a crisis and collapse by 2012. The “Great Depression 2” is dead ahead. Unfortunately, there’s absolutely nothing you can do to hide from this unfolding reality or prevent the rush of the historical imperative.

by Paul B. Farrell, MarketWatch
Originally posted Oct. 20, 2009

JACK BOGLE PUBLISHED “The Battle for the Soul of Capitalism” four years ago. The battle’s over. The sequel should be titled: “Capitalism Died a Lost Soul”. Worse, we’ve lost “America’s Soul”. And, worldwide, the consequences will be catastrophic.

That’s why a man like Hong Kong contrarian economist Marc Faber warns in his Doom, Boom & Gloom Report: “The future will be a total disaster, with a collapse of our capitalistic system as we know it today.”

No, not just another meltdown, another bear-market recession like the one recently triggered by Wall Street’s too-greedy-to-fail banks. Faber is warning that the entire system of capitalism will collapse. Get it? The engine driving the great “American Economic Empire” for 233 years will collapse, a total disaster, a destiny we created.

OK, deny it. But I’ll bet you have a nagging feeling that maybe he’s right, that the end may be near. I have for a long time: I wrote a column back in 1997: “Battling for the Soul of Wall Street.” My interest in “the soul” – what Jung called the “collective unconscious” – dates back to my Ph.D. dissertation, “Modern Man in Search of His Soul”, a title borrowed from Jung’s 1933 book, “Modern Man in Search of a Soul.” This battle has been on my mind since my days at Morgan Stanley 30 years ago, witnessing the decline.

Has capitalism lost its soul? Guys like Bogle and Faber sense it. Read more about the soul in physicist Gary Zukav’s “The Seat of the Soul,” Thomas Moore’s “Care of the Soul” and sacred texts.

Read the rest of this entry »

Marching Toward Zombieland

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Marching Toward Zombieland
When sober-minded individuals begin to regard an enterprise within a nation as “an enemy of the people” you can bet that some serious blood is going to flow.  This is now essentially the situation for the Goldman Sachs company, which last week announced third-quarter earnings of over $3 billion largely derived from converting zero percent loans from taxpayers into zero risk profits off of anything paying more than zero percent in interest, revenue, or dividends.
The “people” across this big country may not have a clue how any of this is done, and there may be much to fault them on from the care-and-feeding of their own bodies to the content of their dreams, but you can’t argue with the fact that they are heavily armed to an extreme. And although it may be hard to measure with precision, one might venture to state that they are increasingly pissed off. How else explain popular entertainments like “Zombieland?”
The political part of what has to date appeared to be an economic problem is resolving into a crisis of authority and legitimacy.  When those in charge of a nation’s livelihood prove to be comprehensively false and dishonest, the economic automatically turns political. Nobody believes the bankers anymore, of course, and nobody believes the interlocutors of the bankers – the Federal Reserve chairman, the Secretary of the Treasury, the heads of the SEC and a dozen other regulatory bodies – and increasingly the charming figure in the White House cannot be believed on these issues of the nation’s livelihood.
The questions lately revolve around whether the nation is destroying itself by inflation or deflation – by the willful destruction of the value of our currency to evade the repayment of debt, or by the hapless destruction of households, companies, and governments by default and bankruptcy.  It’s a fire-or-ice debate. Either way the nation is going down as a viable enterprise. The fiction that we can return to a Crate-and-Barrel credit card orgy has sustained the false of heart and mind for some months now, but even that pleasant reverie will come to an end as the foreclosures mount.  Only remember, men living in their cars who have lost nearly everything else will still have guns.
All these tensions beat a path into the holiday season when emotions run high, when blessings are counted and sorrows taste most bitter. So the big question now floating above the sheer data of Goldman Sachs profit announcement is: what kind of year-end bonuses will they dare to pay their executives and minions, and how will the “people” react? It seems to me that conditions are ripening for a bloodbath. The kind of heinous acts that we have feared emanating from foreign “evildoers” since the awful stunt of 9/11/01 are now most likely to come from among our own “people” – a few pounds of Semtex in the lobby of Goldman Sachs’s New York headquarters… a few men with market-grade small arms converted to full-automatic outside on the Wall Street sidewalk one evening at holiday time when the suits are leaving work for the day…. It won’t take much.
President Obama had better strike first. He’s about the only figure left in the whole termite mound who has a shred of even potential credibility left because he still has the power to act.  He can instruct the people who work for the executive branch to “claw back” any and all ill-gotten bank bonuses; he can direct the Justice Department to investigate everything from the uses of federal bailouts to grand-scale accounting fraud; he can fire people in high places who have failed to act and lost legitimacy. If he doesn’t do these things soon then he’s finished, too. In the wake of such a failure things will get fractal fast.
The sense that Wall Street has pulled off a coup d’etat and taken over the machinery of the United States is the most powerful meme out there now, and its power is growing in magnitude every day among all classes of Americans.  I can’t say how much it reflects reality.  Even if it is a result of sheer happenstance – the tragic evolution of an industrial economy into a financial finagling economy – the citizens will still experience it as a stealing of their future.  Whatever else one might say about American culture, it is keenly attuned to a sense of heroes and villains.  We take great pride in our ability to blow away the bad guys. And life imitates art, as Oscar Wilde observed.  If a zombie virus is on the loose in America, the first infections showed up in the zombie banks, among the zombie bankers. Watch out, Lloyd Blankfein!  Woody is on his way….
James Howard Kunstler

by James Howard Kunstler
http://www.kunstler.com

WHEN SOBER-MINDED INDIVIDUALS begin to regard an enterprise within a nation as “an enemy of the people” you can bet that some serious blood is going to flow. This is now essentially the situation for the Goldman Sachs company, which last week announced third-quarter earnings of over $3 billion largely derived from converting zero percent loans from taxpayers into zero risk profits off of anything paying more than zero percent in interest, revenue, or dividends.

The “people” across this big country may not have a clue how any of this is done, and there may be much to fault them on from the care-and-feeding of their own bodies to the content of their dreams, but you can’t argue with the fact that they are heavily armed to an extreme. And although it may be hard to measure with precision, one might venture to state that they are increasingly pissed off. How else explain popular entertainments like “Zombieland”?

Read the rest of this entry »

Predicting Worse Ahead from America’s Economic Crisis

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Predicting Worse Ahead from America’s Economic Crisis
September 4th, 2009 7:46 AM
by Stephen Lendman
Austrian economist Ludwig von Mises (1881 – 1973) said: “There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”
Under Alan Greenspan, Ben Bernanke and successive US Treasury Secretaries, America chose the latter path and now faces the consequences of their reckless, criminal behavior.
In early 2009, economist Michael Hudson said:
The (US) economy has reached its debt limit and is entering its insolvency phase. We are not in a cycle but (at) the end of an era. The old world of debt pyramiding to a fraudulent degree cannot be restored,” only delayed to postpone a painful day of reckoning.
Economist Hyman Minsky (1919 – 1996) described a “Ponzi finance” system during prolonged expansions and economic booms. Speculative excesses create bubbles, triggering structural instability, then asset valuation collapse that turns euphoria to revulsion and market crashes.
On December 29, 2008, the Wall Street Journal online headlined: “As if Things Weren’t Bad Enough, Russian Professor Predicts End of US,” then continued:
“For a decade, Russian academic (and former KGB analyst) Igor Panarin has been predicting the US will fall apart in 2010” to include an “economic and moral collapse, a civil war, and the eventual breakup of the country.” For years, no one took him seriously, but no longer. He’s invited to Kremlin receptions, gets interviewed twice a day, publishes books, is a frequent lecturer, and appears regularly in the media as an expert on US – Russia relations as well as the great interest in his predictions and new book titled, “The Crash of America.”
On March 25, 2009, RussiaToday.com headlined: “Is there anything Obama can do about the US Collapse?” No, according to Panarin, for these reasons:
— “the moral and psychological factor and the stress of the American population;”
— America’s deepening financial and economic crisis; and
— “the increase of anti-Americanism in the world,” the result of continued US belligerency.
Panarin sees America collapsing into six areas of foreign influence and perhaps disintegrating as a nation:
— depressed northern states close to Canada “in their mentality and economic development;”
— the Southwest “fuel and energy complex, the oil sector” close to Mexico;
— California and the Pacific Northwest falling under Chinese influence;
— the Northeast and Middle Atlantic regions under the EU;
— Alaska may be returned to Russia; and
— Hawaii may become a Japanese or Chinese protectorate.
Panarin sees 2010 as America’s tipping point and says no miracle rescues can save it. In addition, he cites French political scientist Emmanuel Todd’s 1976 prediction of the Soviet Union’s dissolution that got him laughed at and scorned at the time but proved right.
Todd now predicts a similar fate for the US in his 2002 book, “After the Empire: The Breakdown of the American Order.” He cites:
— unilateral militarism shows weakness, not strength;
— America is parasitic, relying on voluntary or extracted “tributes” from vassal states;
— global terrorism is a myth;
— many nations, including EU states, China and Russia, are beginning to resist US adventurism;
— terminal corruption and decay;
— economic weakness and decline;
— producing little, America’s “specialty is consumption (so) relies on foreign imports” to satisfy it;
— a declining middle class and growing poverty will curtail spending sharply;
— if capital inflows cease, the dollar will crash:
— a coming collapse of the stock market, financial institutions and the dollar;
— a ballooning trade deficit and shrinking manufacturing base;
— a predatory ruling class plundering the world with impunity, yet out of touch with its own people growing poorer, more desperate and angrier;
— America’s abandonment of universalism and egalitarianism;
— excess consumption trapping people in an ocean of debt and lowering their living standards;
— “the rest of the world….is on the verge of discovering that it can get along without America; America is realizing that it cannot get along without the rest of the world;”
— an emerging Eurasia will end US supremacy, then isolate and curtail its dominance; and
— “If America continues to endeavor to show its power, it will simply reveal (to) the world its impotence.”
For his part, Panarin compares America to the Titanic after hitting an iceberg when it was unclear whether the crew would try to save the ship or more importantly its passengers. Unfortunately, under Bush and Obama, they’re trying to save themselves at the expense of the ship and passengers.
After disintegration, Panarin sees three dominant influence areas emerging – the EU, Russia and China. After 11 years of monitoring US policies, he believes his prediction is largely confirmed and states the following:
America’s FY 2009 “budget deficit is 4.5 times the 2008 deficit, while firearms sales are up 40%. On October 1, the coupons that were given state workers are to be cashed out. When (they) realize that they are getting nothing for (them), they will take out their firearms and chaos will unfold.”
Further, on September 30, 2009, results will be published that are “destined to shock investors worldwide. After that, and (Japan and China’s) snubbing of the dollar….which will transfer 50% of (their) international operations to Yuan starting in 2010, the currency will then flow like a landslide out of style.” Already nations like China, Russia, Brazil, Argentina and others are trading in their own currencies or will do so shortly.
In Panarin’s view, “the probability of the US ceasing to exist (in its present form) by June 2010 exceeds 50%. At this point, the mission of all major international powers is to prevent chaos” because what hurts America also harms them.
A Multiple-Dip Depression
Economist John Williams publishes the shadowstats.com electronic newsletter with updated sample data on his site. He calls government figures corrupted and unreliable because manipulative changes rigged them for political and market purposes. To correct them, he reverse-engineers GDP, employment, inflation, and other key data for greater reliability to subscribers.
On August 1, Williams called the “Current Economic Downturn (the) Worst Since (the) Great Depression.” It began a year earlier than reported, triggered a systemic solvency crisis, and the effects of “a multiple-dip depression (are) far from over.”
The July 31, 2009 national income accounts “confirmed that the US economy is in its worst economic contraction since the first downleg of the Great Depression, which was a double-dip” one like today’s.
Intermittent upturns are common, like from spiked auto sales from the cash-for-clunkers program that borrowed future purchases for today’s. “Yet, this downturn will continue to deteriorate, proving to be extremely protracted, extremely deep and particularly nonresponsive to traditional stimuli.”
The economy suffers from deep structural problems related to household income. Consumers are over-indebted, can’t borrow, and Washington’s policies aren’t helping them. Continued economic decline will follow. “The current depression is the second dip in a multiple-dip downturn that started in 1999 (and triggered) the systemic solvency crisis” that was visible by August 2007 but started in late 2006.
The worst lies ahead, the result of the “government’s long-range insolvency and (dollar debasing that risks) hyperinflation during the next five years,” and perhaps sooner in 2010. It will cause “a great depression of a magnitude never before seen in” America, disrupting all business and commerce and reverberating globally.
Williams defines deflation as a decrease in goods and services prices, generally from a money supply contraction. Inflation is the reverse. Hyperinflation debases the currency to near worthlessness. Officially, two or more consecutive declining quarters means recession, but better measures are protracted weakened production, employment, retail sales, construction, capital investment, and demand for durable goods among other factors.
A depression occurs when inflation-adjusted peak-to-trough contraction exceeds 10%, and a great depression when it’s 25% or worse.
Today’s economic downturn preceded the systemic solvency crisis after key data “hit cycle highs and began to weaken in late-2005 for housing and durable goods orders….early-2006 for nonfarm payrolls, (and) late-2006 for retail sales and industrial production, patterns more consistent with a late-2006” real recession onset. Gross Domestic Income (GDI) data confirms this analysis.
Its real growth peaked in Q 1 2006, and revised GDI data contracted in seven of the last nine quarters. “Revised GDP shows the sharpest annual decline in the history of the quarterly GDP series,” suggesting a much deeper and protracted downturn than previously reported.
July 2009 marked the 19th consecutive month of contraction, “the longest downturn since the first downleg of the Great Depression.” More recent GDP declines of 3.3% and 3.9% in Q 1 and Q 2 2009, “are the worst showings in the history of the quarterly GDP series” dating back to 1947-48. In 1946, a greater contraction occurred because of post-war production cutbacks, but it was short-term.
Today’s most reliable economic indicators show the downturn is deepening, not abating as deceptive media accounts report. “The SGS (Shadow Government Statistics) alternative measure of GDP suggests (a) 5.9% contraction….versus the official year-to-year” 3.9% figure.
The official estimated annualized Q 2 2009 decline was 1% compared to SGS’s figure “in excess of five-percent.” Its alternative data show “deeper and more protracted recessions” than officially reported, suggesting a deepening crisis ahead.
The CBO’s Grim Forecast
Even the conservative Congressional Budget Office sees a weaker economy ahead, contrary to most consensus views of a sustainable upturn. Its latest projections are as follows:
— 2010 U-3 unemployment at 10.2%, edging down to 8% by 2011 and 4.8% by 2014;
— in 2010, 12 million will be underemployed;
— for the next five years, economic weakness and lower demand will pressure workers with unemployment or underemployment;
— part-time work only will be available for millions wanting full-time jobs;
— low consumption will persist through 2014;
— unemployment benefits will be exhausted;
— households will be pressured to make mortgage payments, pay for health care, meet other obligations, and provide for their families at a time state and city budget crises force deep cuts in vital social services, not made up for by the federal government;
— tax revenues are down 17%, the sharpest decline since 1932;
— $600 billion in investment losses will result plus another $5.9 trillion in lost output through 2014; and
— the federal deficit will nearly double over the next 10 years to about $20 trillion.
In sum, CBO projects a more severe protracted downturn than it earlier forecast in January.
Troubled Times Ahead
On July 14, Egon von Greyerz, Founder and Managing Partner of Zurich-based Matterhorn Asset Management AG, specializing in precious metals and other investments, said “The Dark Years Are Here” and explained why.
Because of “the devastating effects of credit bubbles, government money printing (and) disastrous actions that governments are taking, (upcoming) tumultuous events will be life changing for most people in the world.” They’ll begin by year end, last for two to three years, then be followed by extended economic, political, and social upheaval, perhaps continuing for two decades.
Greyerz cites three main concerns:
— exploding unemployment and government deficits;
— trillions of unreported bank losses and worthless derivatives; and
— rising inflation, high interest rates, collapsed Treasury bond (and UK gilt) valuations resulting in more money creation, worthless paper, and a “perfect vicious circle (leading to) a hyperinflationary depression followed by the collapse of the dollar and British pound.
America is hemorrhaging financially and economically. Other countries now realize they hold “worthless” US dollars. Reckless money creation achieved short-term hope, benefitted Wall Street alone short-term, elevated world stock markets, and led some to believe the crisis was over when, in fact, it’s worsening.
Aside from expected short-lived upturns, “every single sector of the real economy is deteriorating whether it is production, unemployment, corporate profits, real estate, credit defaults, construction, federal deficits, local government and state deficits etc.”
In response, the Fed keeps printing money and destroying its value. “This is total lunacy! How can any intelligent person believe that printed pieces of paper can solve an economic catastrophe?”
We’re in “the first phase of this tragic saga.” Likely by year end, a second more serious one will start. Real unemployment now tops 20%. It hit 25% in the Great Depression with 35% of the nonfarm population out of work and desperate.
“It is our firm opinion that (US) non-farm unemployment levels will reach 35% at least….in the next few years” with all uncounted categories included.
Growing millions with no jobs, incomes, savings, or safety net protections will create “a disaster of unimaginable consequences that will affect the whole fabric of American society” to a degree far greater than in the Great Depression.
Growing unemployment now plagues Western and Eastern Europe as well, and by 2010 will more greatly affect most parts of the world, “including China, Asia and Africa. Never before has there been a global unemployment crisis affecting the world simultaneously.” Ahead expect sharp drops in consumption and global trade leading to depression, poverty, “famine and social unrest.”
Already, conditions are worse than in the 1930s, but the worst is yet to come. Expect:
— an extremely severe global depression in most countries with grave economic, political, and social consequences;
— social safety net protections will end;
— private and state pensions will likely collapse; and
— unemployment, poverty, homelessness, hunger, and famine will cause a protracted period of economic, political, social, and institutional upheaval.
If von Greyerz, Panarin, Todd, and others with similar views are right, a deepening, protracted, unprecedented global catastrophe approaches that “will be life changing for most people in the world.”
-###-
Stephen Lendman is a research associate of the Centre for Research on Globalization. He lives in Chicago and can be reached at lendmanstephen@sbcglobal.net.
Also visit his blog site at sjlendman.blogspot.com and listen to The Global Research News Hour on RepublicBroadcasting.org Monday – Friday at 10AM US Central time for cutting-edge discussions with distinguished guests on world and national issues. All programs are archived for easy listening.

by Stephen Lendman
Posted originally September 4th, 2009

AUSTRIAN ECONOMIST LUDWIG VON MISES (1881 – 1973) said: “There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”

Under Alan Greenspan, Ben Bernanke and successive US Treasury Secretaries, America chose the latter path and now faces the consequences of their reckless, criminal behavior. In early 2009, economist Michael Hudson said: “The (US) economy has reached its debt limit and is entering its insolvency phase. We are not in a cycle but (at) the end of an era. The old world of debt pyramiding to a fraudulent degree cannot be restored, but only delayed to postpone a painful day of reckoning.”

Economist Hyman Minsky (1919 – 1996) described a “Ponzi finance” system during prolonged expansions and economic booms. Speculative excesses create bubbles, triggering structural instability, then asset valuation collapse that turns euphoria to revulsion and market crashes.

On December 29, 2008, the Wall Street Journal online headlined: “As if Things Weren’t Bad Enough, Russian Professor Predicts End of US” and then continued:

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The Reality of Unreality

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Sep 22 2009 11:42AM
The Reality of Unreality
Hallucinatory, fanciful make-believe government policies and supporting media hype will fool the Sheeple for only so long. New York Banksters and their Washington, D.C. partners in crime are losing a grip. In our weirdest imagination we could not fathom the socialist-commie-bent Obama Gang gaining control let alone being elected. Now the incomprehensible is a fact. The non-existent vision has become real. This outrageous, preposterous, unjustifiable nonsense has become our daily rule. We cannot imagine what comes next.
The American presidency has been reduced to one of being cartoonishly rough, crude, unpolished, and coarse. Our reliable foreign partners are skittish. There is no plan and no direction. As economic danger mounts and fiscal discipline is tossed out a closing window, this ad-libbed presidency, flying by the seat of its torn bankrupt pants is on a Weimar monetary collision of revolution and destruction.
Their alleged reasoning is poisoning trade relations, making new enemies of old friends and encouraging global criminals and dictators of all stripes. Our meandering leadership with fanciful blurred visions of Utopia will soon learn harsh lessons in an attempt to repudiate massive debts through inflation. We had a terrifying near miss in 1987 with a markets’ biblical moment. That one horrified briefly. The next one will be a years’ long nightmare of legendary, unimaginable proportions. This isn’t just FDR revisited. This is FDR to the 10th power with a toxic mix of our worst economic disasters in a re-run. Pick the top ten economic mistakes of the last 50 years and we are repeating them all-right now. Coupled with an empty leadership vacuum, anything can happen; and probably will.
I wondered aloud numerous times over past months that all this noxious action was part of some diabolical plan to destroy the  United States from within by Judas political  enemies of the state. In some ways it’s even worse than that-it’s a naked grab for power.
A new theory, of which I have recently learned, is this: These people are not concerned with any outcome either positive or negative. They are not concerned with the rich or, the poor. Destruction of America and its international neighbors and friends is just collateral damage on a magnificently stupid path to grab power.
Big corporations and banks have been the closet directors behind Obama’s Throne just as with other presidents. America’s Sheeple, tax money, retirement funds, freedom, liberty, way of life, and the very future of this beautiful nation are mere impediments to gaining complete and final control of America. Hence the hip-attached, world-wide political and economic system so dependent on the U.S goes down, too.  Globalists’ have one dream; to make us all live under the same umbrella of one ruler. To achieve this goal, they must first get past 10-20 million angry US men with guns. We say they might give it a go but would vanish into the mist of revolution if they try it.
With Obama puppets at their beck and call, advancement of the One-Worlders’ agenda has moved forward ten years in only six months. Our nation and our world will suffer the consequences. The instigators after a very brief spate of glory shall suffer something far worse. This is history. This is the way of the world. The rude aftermath takes down these enemies of the state by those vastly underestimated. This will be their ultimate demise. Meanwhile, a majority of the innocents are economically and perhaps personally run-over for just existing and being in the way. Sadly, this group contains single mothers, children, the poor and the elderly.
What’s Ahead
The US Government owns controlling interest in the banks, auto companies, credit, and American real estate. They are the only employer offering jobs in any volume as the rest of our nation sinks into retraction, cutbacks, saves pennies, spends nothing and fends for scraps. Unemployment is skyrocketing and will not be stopped for years. Roughly 50% or less of the real damage in phony statistics is acknowledged. If the truth were known, we suspect insurrection would be immediate. Read this:
Cash-for-clunkers was a clunker that ripped-off the auto dealers, and smothered the poor by taking away paid-for but still running old cars and trucks. Now buyer’s remorse has settled in and these folks are stuck with years of new vehicle payments they cannot afford. Further, instead of $1 Billion, Cash-For-Clunkers cost $3 billion and still counting.
The next wave of real estate foreclosures hits in the second quarter of 2010. Coupled with that one we see massive commercial loan foreclosures and failures on paper held by large insurance companies. If you think AIG was fun, watch what comes next spring for those unfortunate insurers thinking they had real estate income for years. Fannie and Freddie, the mortgage buyers of last resort are BK but still purchasing (on paper) billions of new mortgages handing out $8,000 buyer credits to build the next bubble. We’re not over the last one yet and they’re busy creating even more new havoc. These jokers finance 2/3rd’s of USA mortgages and they are broke.
Retail in 2010-2012 is a holocaust. Only a handful of the national chains can survive. The moms and pops are destroyed as Big Box and intermediate-sized retailers drop like flies. General Growth owned over 100 big malls and went BK to the tune of $27 Billion. Competitor Simon Properties is bottom-feeding through their BK mall wreckage for viable gems. We say they are too early and Simon had better have lots of cash or they are toast, too. With the internet, brick and mortar retail for the most part is passe’. Retail got whacked first with competing internet sales then the depression. Now, we go back to small towns and small neighborhood stores who shuffle for nickels and dimes. While this can be a life-style game-changer, for many in small towns life goes on as usual-not all too bad.
The Big Banks are not healed. They just buried 90% of their toxic debt and pretend it’s gone away. It has not gone away and will rear its ugly head again when these Banksters need-demand TARP II, and they can’t get it. More and more people are dropping out of the system providing for themselves; rejecting old paradigms. Small banks cannot compete and big banks are only out of the woods temporarily. Banking is not the place to be for a future. Now the government wants to set wage scales for bankers.
Foreign investors are running from US investments to shed dollars, bonds and notes. For the shorter term they appear to be back “in the game.” This too, is only temporary as investors frantically scavenge for other places to hide or, invest cash where it’s safe from loss. Long term bonds and paper are converting to short term. What if Uncle Sam in all his infinite wisdom over a quiet weekend announced with no recourse that all short term paper is now 30 years long? Talk about mayhem! Anything they do would not surprise me.
With instigation of the old Smoot-Hawley Tariff plan against Chinese tires, this signals the world you had better run, hide and protect your own stuff with your newly imposed tariffs, too. This paralyzes whatever remaining trade and international credit there is, smothering it to a standstill. Old tragic mistakes are made over and over. Beggar they neighbor rides again. These dumbos just never learn.
Japan, for 50 years, one of America’s best allies, is now re-thinking their position. They understand they cannot count on Obama to protect the motherland against external threats any more than Israel can. Their new leaders are proponents of looser credit (inflationary), moving US troops out of Okinawa and eliminating open free entry to in-country Japanese refueling ship stations. This is the early glimmering of a major game changer. Our administration could care less. Soon they will care a lot. Japan will partner more with Australia and China.
Stock markets came back after the Lehman related collapse one year ago. With all the US government aid dumped into our immediate world it had to happen. This is a temporary fix placing band aids on mortal economic wounds. This fall we get either a mild -10% haircut or something worse, which we did forecast. However, even if the fall selling is harsh, in November through May, 2010, we forecast a resurgence of the markets buoyed again by the $8.5 trillion in side-lined cash waiting to re-enter long positions. Gold and silver shares should really rock in this atmosphere. Goodbye deflation. Hello inflation.
Enter they will and we think Mr. Dow and his S&P brother can enjoy a nice  rally run in these forthcoming months before it ends in the spring of 2010.
A belated “Sell In May And Go Away” could turn into a volcano of destruction in June-July, 2010 as several nasty economic elements converge onto that time cycle. That one could be the worst of the worst in this Greater Depression II or perhaps, fall of 2010 might be the ultimate wreckage. One of our very smart and level-headed analyst friends is not only predicting a giant 2010 smash but potential for a 100% complete markets wipeout. As in Dow at ZERO ! We read this one and went immediately pale.
The Chinese are encouraging their citizens to buy gold and silver. Further, they are mining the stuff with both hands and NOT SELLING ANY OF IT. China has an estimated M2 money growth of 28% and the 2009 first half stimulus plan (ALL SPENT) exceeded the entire amount of the US’s TARP approvals. All this wild and crazy spending was dumped into an economy 25% the size of the US’s. Yikes! This is Bubblemania to the extreme.
Most all the primary nations, those leading the world with former top economies and in trading are into “Quantitative Easing.” This is a disguised euphemism for printing the hell out of the money supply with nothing behind it but thin air, hopes and lies. The USA is a terrible abuser but others are even worse. The most incredible case of course is Zimbabwe. This lowers currency values and incites inflation. American inflation is now running at 6% in our view and in the view of our analyst friends-advisors. This winter it goes ever faster. Food and fuel will be outrageously apparent first; then it spreads out with a vengeance.
US GDP annual growth is supposedly running at a negative -4% but our friend and smart statistics guy, John Williams at Shadow Stats says its -6%. This kind of action discourages any new business investment as small business entrepreneurs see no future in an economy with higher taxes, destroyed markets and disincentives from Obama-Land as far as the eye can see. Who will buy? Who has credit? Those with cash refuse to spend.
On the energy front, the US has plenty of domestic property to be drilled. However, the EPA and tree-huggers hold the upper hand wrecking any hopes of drilling new fields in top seeded locations. Next, the Greenies are trying to shut-down existing coal fired power plants to kill-off the source of half of America’s electric power. All energy rates and costs will rise on basic shortages, fundamentals and rabid inflation. Cap ‘N’ Trade would hit each family with costs of $1700+ per year if approved. We think it fails this time. What about later?
Municipalities, cities, towns, counties and states are beginning to fiscally fail in numbers. Those with foresight and rainy day funds can last a little longer but eventually tax income deteriorates and down they go. California is always first; the leader in all things new. Now they are showing us the darker side of these problems being first in line on a massive scale of self-destruction.
Meanwhile, the Obama Health Care Saga goes on like a months’ long migraine headache. Tea parties composing a cross section of the American heartland have had enough. Anger began with the health care plan but lingering disregard for TARP thefts, Cap “N” Trade proposals and a White House full of Commies and socialists throws gas on these fires of discontent. Folks are out for political blood lining-up to disenfranchise their alleged congress people in the 2010 elections. We think that election promises to be super ugly in preliminaries and then succumbs to voter fraud, name-calling; the usual and newly unusual Wild West election happenings. This event should be better than the movies. Florida Chad-Hangers were great fun. What new voting horrors await us next year?
Those in the Sheeple public with little or no education and those solidly among welfare supporters will be crying ever louder for more handouts, give-outs and pay-outs. Millions of them are jobless and many more millions join unemployment and food stamp lines. Rhetoric escalates with cries of “do something” as village idiot politicians scream, finger point and eventually do something. Problem is; it’s always the wrong thing they do.
Inflation breeds ever more inflation. It feeds on itself unless government raises interest rates (no chance Lucy) careening down a path of self-destruction. Own hard assets; not dollars. Buy silver and gold coins.
We say a lot of this stuff is inevitable and some of it may never happen. However, just as in the FDR’s 1930’s, governments make the same mistakes over-and-over again. We think Greater Depression II lasts from 2009 until the next world war. That is sadly the ultimate economic weapon to find depression exit relief. This, we would not wish on any one. Read American and world history from 1776 to the present. This is what we get; all over again.
Financials crashed in fall 2008 with Lehman. Recovery began with TARP May, 2009: During this month of September, 2009 we’re having more of a dead cat bounce with a big smash later this month. While precious metals and their shares are higher this September 22, 2009, for the intermediate term (beginning October 31) most all trends reverse and moves to rallies.
Keep in mind, if you own paid for stuff it will most likely remain in your hands; not in somebody else’s. That includes gold and silver. Do not get tangled-up in daily noise. Keep studying the larger view and buy precious metals after each profit-taking correction. Headwinds are building into an economic hurricane. Take care of business right now. My dire fall prediction might surprise us and arrive a little later. Time is short.
Personally, I can see unbelievable opportunities to trade that we would never see again for many years. Turn these problems into opportunities. Those on the right side of the trade might get rich. Those on the other side are just victims. Stay Alert. –Traderrog
Roger Wiegand
Editor Trader Tracks

by Roger Wiegand, Editor Trader Tracks
Originally posted Sep 22, 2009

HALLUCINATORY, FANCIFUL, MAKE-BELIEVE government policies and supporting media hype will fool the Sheeple for only so long. New York Banksters and their Washington, D.C. partners in crime are losing a grip. In our weirdest imagination we could not fathom the socialist-commie-bent Obama Gang gaining control let alone being elected. Now the incomprehensible is a fact. The non-existent vision has become real. This outrageous, preposterous, unjustifiable nonsense has become our daily rule. We cannot imagine what comes next.

The American presidency has been reduced to one of being cartoonishly rough, crude, unpolished, and coarse. Our reliable foreign partners are skittish. There is no plan and no direction. As economic danger mounts and fiscal discipline is tossed out a closing window, this ad-libbed presidency, flying by the seat of its torn bankrupt pants is on a Weimar monetary collision of revolution and destruction.

Their alleged reasoning is poisoning trade relations, making new enemies of old friends and encouraging global criminals and dictators of all stripes. Our meandering leadership with fanciful blurred visions of Utopia will soon learn harsh lessons in an attempt to repudiate massive debts through inflation. We had a terrifying near miss in 1987 with a market’s biblical moment. That one horrified briefly. The next one will be a year’s long nightmare of legendary, unimaginable proportions.

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Of Green Shoots and Broken Windows

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Of Green Shoots and Broken Windows
BY RICK ACKERMAN ON SEPTEMBER 23, 2009 4:12 AM GMT · 0 COMMENTS
Our memory stumbles whenever we try to recall any recent sightings of “green shoots” that would support the officially promoted illusion of a U.S. economy in recovery.  Actually, this vision is more of a hallucination than an illusion, since one’s mind needs to venture beyond the pale of rationality, light years beyond the fringe of statistical evidence, to conjure up supposed signs of sustainable growth. Does “recovery” square with the reality that you, personally, see all around you?  Indeed, whatever picture the government and the news media want us to see will be unconvincing at best, since a hundred million Americans are each day living the anecdotal evidence that flatly contradicts what we are being told.  How many of the 50 million homeowners who are underwater on their mortgages, for instance,  jumped for joy when it was reported yesterday that home prices in the U.S. rose 0.3% in August?  Optimists would say it’s the trend that matters, but realists would point out that at that rate, it will take a decade for prices merely to return to where they were before the housing market collapsed.
Someone in the Rick’s Picks forum said the news media were in cahoots with the government to sell us on the idea that America’s worst downturn since the 1930s has ended. Speaking as a former newspaper reporter and editor myself, I have a more boring theory — that journalists are simply too lazy intellectually to pursue a story line that doesn’t perfectly fit the Administration’s script. With some cursory background reading in Econ 101, they could nail Greenspan and Bernanke to the wall for their lies and sometimes startling economic ignorance. But that would be a far more difficult story to write than the ones that flow so easily from the government’s press releases and speeches. Journalists’ other big problem is that 95% of them are hard-core liberals for whom Big Government, warts and all, will always be the answer.
Bastiat’s Parable
Many of the reporters I’ve known have been very intelligent, but where economics is concerned, they seem incapable of understanding Frederic Bastiat’s so-called broken window fallacy. Bastiat’s parable, written in 1850, describes (from Wikipedia) “a shopkeeper whose window is broken by a little boy. Everyone sympathizes with the man whose window was broken, but pretty soon they start to suggest that the broken window makes work for the glazier, who will then buy bread, benefiting the baker, who will then buy shoes, benefiting the cobbler, etc. Finally, the onlookers conclude that the little boy was not guilty of vandalism; instead he was a public benefactor, creating economic benefits for everyone in town.”
And so it is for all those who continue to see Government as America’s economic benefactor, nay savior. Would someone please explain to such as the New York Times, the Wall Street Journal, and other zealous purveyors of green shoots where, exactly, the fallacy lies.

by Rick Ackerman
Posted originally September 23, 2009

OUR MEMORY STUMBLES WHENEVER we try to recall any recent sightings of “green shoots” that would support the officially promoted illusion of a U.S. economy in recovery. Actually, this vision is more of a hallucination than an illusion, since one’s mind needs to venture beyond the pale of rationality, light years beyond the fringe of statistical evidence, to conjure up supposed signs of sustainable growth.

Does “recovery” square with the reality that you, personally, see all around you? Indeed, whatever picture the government and the news media want us to see will be unconvincing at best, since a hundred million Americans are each day living the anecdotal evidence that flatly contradicts what we are being told.

How many of the 50 million homeowners who are underwater on their mortgages, for instance, jumped for joy when it was reported yesterday that home prices in the U.S. rose 0.3% in August? Optimists would say it’s the trend that matters, but realists would point out that at that rate, it will take a decade for prices merely to return to where they were before the housing market collapsed.

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Written by aurick

23/10/2009 at 3:22 pm

Gold Manipulation: “They are about to hit the wall”

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Gold Manipulation: “They are about to hit the wall”
Von Lars Schall
Montag, 31. August 2009
The Gold Anti-Trust Action Committee (GATA) celebrates its 10th anniversary this year. GATA’s founder and director Bill Murphy about price suppressing schemes, the “real numbers” and a possible COMEX default on gold.
Mr. Murphy, GATA has its 10th anniversary this year. What are the most important discoveries
of this ten year journey?
The Gold Anti-Trust Action Committee (GATA) was organized in January 1999 to expose the manipulation of the gold price by a Gold Cartel consisting of the US Government and various bullion banks, such as Goldman Sachs and JP Morgan Chase, for more than a decade. Initially, GATA thought it was just the bullion banks. As time went by, we realized the US Government was behind the rigging.
Let’s get back into the year 1998. In September 1998 you started a website dedicated to observe the gold market called LeMetropoleCafe.com. A few days later a giant hedge fund named Long Term Capital Management (LTCM) crashed. Could you tell us a bit about this event and how it lead to the launch of the Gold Anti-Trust Action Committee in January of 1999?
Prior to opening my website, http://www.LeMetropoleCafe.com in September of 1998, I had been told from very good sources that LTCM was short 400 tonnes of gold as part of a gold carry trade. When they blew up, I expected the price of gold (below $300 at the time) to explode. Each time it went above $300, bullion banks such as Goldman Sachs, Morgan, Deutsche Bank, and Chase Bank would sell in unison and stop the upward movement in its tracks. Right then and there I knew something was fishy. Everywhere I turned, I received more feedback on the gold market which suggested it was managed. As a limit position futures traders some time ago, I knew something about how markets trade and it made no sense the way gold was trading at the time.
One more question with regard to LTCM. In order to handle that crisis there was an organization called the “Counterparty Risk Management Policy Group” (CRMPG). What was the purpose of that organization and what did it in 2002 when JPMorgan Chase was in trouble?
May I quote from an article I wrote in September 2006?
Sure.
Not only does it answer your question, as I think, but it reveals also the nature of the beast which caused so many problems years later. I have done back then a good bit of research trying to obtain some insight into the inter-relationship between the Federal Reserve, the government, and the large money center NYSE member banks. In my reading I kept coming upon the phrase ‘moral hazard’- as in “we want to avoid a moral hazard”. I tried to find the definition as they defined within the context of what I was reading – no luck.
Then I started reading Robert Rubin’s book, “In an Uncertain World’” As Secretary of the Treasury during the Clinton Administration, I thought I would try to get in the mind of one of the principals of the group we call the Plunge Protection Team (PPT). In the book he writes about his service at the White House. The book starts off with the Mexican Bailout and discusses that bailout and those that followed from the perspective of Mr. Rubin. After the first few pages he uses the term and defines ‘moral hazard’.
MORAL HAZARD – A problem whereas investors, after being insulated from the consequences of risk by intervention, might pay insufficient attention to similar risk the next time, or operate on the expectation of official intervention.
We traders know this government intervention more as the ”Greenspan Put”.
‘Private Counterparty Surveillance’ is another phrase that I read several times. This is basically the large NYSE member banks, a couple of well connected hedge funds, and that form the ‘Counterparty Risk Management Policy Group’. The one financial member of this group that is not a bank or a hedge fund is General Motors Asset Management. I guess with $300 billion in outstanding paper they want to be sure GM has a seat at the table.
What we also know is that we had a series of bailouts in the mid to late 90’s that started out with the Mexican bailout. Robert Rubin of Goldman Sachs was sworn in as Secretary of the Treasury on the evening of January 10th, 1995. That same evening an emergency meeting was held to finalize a plan to bail out Mexico.
I guess this could not be done until the well connected Rubin was in office. The administration waited until Rubin was confirmed and sworn in to move ahead. Greenspan’s “irrational exuberance” speech, Long Term Capital Management (LTCM) bailout, the “Asian Flu” economic crisis and Y2K followed. All contributed to what we all now know as a ‘moral hazard’. In 1999 the ‘Counterparty Risk Management Policy Group’ (CRMPG) was formed to address the issues with LTCM and to develop policy that would protect the financial world from another threat to the financial markets such as the LTCM incident.
Now fast forward to 2002. In May of 2002 the SEC appears to have fears that a major bank – one of two that clear government paper – may become insolvent due to derivative issues. The possible problem bank is JP Morgan. By the end of the year CRMPG recommends the foundation of a new bank be put in place just in case. The new bank would be a coordinated effort of the members of the CRMPG. The Federal Reserve and the SEC approve. 
Also in 2002 it just so happens that we see a big jump in the use of program trades. The major players are also members of the CRMPG. Those without large proprietary trading units such as Citigroup, start them. Citigroup is quoted as saying something along the lines that due to “new” innovations they see less risk in trading.
Remember JPM’s “problems”. Suddenly they went away. A “stealth bailout” is put in place. About year later the Wall Street Journal reported concerns that JPM was making a lot of money in the “risky” business of trading their own capital. They said, “Profits have been increasing recently due to a small and low profile group of traders making big bets with the firm’s money. Apparently, an eight man New York team has pulled in more than $100M of trading profit with the company suggesting it is a result of better market conditions and not greater risk.” Program trading was running at about 25% of all shares traded on the NYSE in early 2002. In 2006 program trading is running near 60%.
If you look at the members of the CRMPG you will find some foreign banks included. We are not looking at a group that deals solely with the US markets. Any market that could be contagious to the greater good is subject to control by the CRMPG.
In 2004 Greenspan acknowledged concerns about derivative growth. All markets had seen strong growth in the previous five years. In the OTC market, the notional outstanding of equity-linked derivatives was $4.5 trillion in June 2004, having tripled in size over the previously five years (source: BIS). The listed options market has also shown strong growth. For example, in 2004 the combined open interest of equity index options contracts on was around $3 trillion notional, double that of 1999. Turnover, at $200 billion notional per day in 2004, was triple that of 1999 (source: BIS). Data for the retail structured product markets is less comprehensive. Estimated issuance in Europe was around €100 billion in 2004. Around half of the issuance was in Italy, Spain and the UK (the other major European markets are France, Germany and Switzerland). On this basis, the market has doubled in size from 2000 to 2004.
However, free markets do not work this way. Their collusion at their highest ranks to secure the financial stability of the largest financial institutions could be at odds with the investments of smaller institutions and may be at odds with the small investor’s long term investments and goals. When LTCM failed many of us could have not cared less if you were not a shareholder of one on the banks that bailed them out. The bailout was simply put in place to save their own skins and the investors they serve.
In short, “Moral hazard” has led to moral decay at the highest ranks of our financial institutions.
Another organization which is not in the public spotlight is the “Exchange Stabilization Fund” (ESF), that was authorized by Congress. What is the aim of this specific group?
Well, here it is in their own words:
The Exchange Stabilization Fund (ESF) consists of three types of assets: U.S. dollars, foreign currencies, and Special Drawing Rights (SDRs). The ESF can be used to purchase or sell foreign currencies, to hold U.S. foreign exchange and Special Drawing Rights (SDR) assets, and to provide financing to foreign governments. All operations of the ESF require the explicit authorization of the Secretary of the Treasury (“the Secretary”).
The Secretary is responsible for the formulation and implementation of U.S. international monetary and financial policy, including exchange market intervention policy. The ESF helps the Secretary to carry out these responsibilities. By law, the Secretary has considerable discretion in the use of ESF resources.
The legal basis of the ESF is the Gold Reserve Act of 1934. As amended in the late 1970s, the Act provides in part that “the Department of the Treasury has a stabilization fund ….Consistent with the obligations of the Government in the International Monetary Fund (IMF) on orderly exchange arrangements and an orderly system of exchange rates, the  Secretary, with the approval of the President, may deal in gold, foreign exchange, and other instruments of credit and securities.”
GATA calls the force that is behind the price suppressing scheme of the gold market “The Gold Cartel”. Who are the main partners in this “Cartel” and how are they orchestrating their operations without the broader public taking notice of it?
I think I answered this one already. Nevertheless, as far as GATA is concerned, we are used to being shunned, no matter how right we have been for a decade now, as gold has rallied  NINE years in a row.  It all began ten years ago when somehow I got on CNBC and was interviewed by Ron Insana. Once they heard what GATA had to say, we have not only been blackballed by CNBC, but by most all of the US financial market press. We have hardly ever been mentioned no matter how much we contact the press, or send  blockbuster information to them. It is like there is a black hole out there when it comes to what GATA has to say.
The bottom line is that there is NO free financial market press in the US. They are a fraud in that regard and have contributed greatly to the financial chaos of the day with their refusal to cover one of the most significant financial market stories in recent years … that being the suppression of the gold price. The rich and powerful don’t like being challenged and the US financial press is petrified of offending them.
One person that you “like” is former US-Treasury Secretary Robert Rubin. You stated in the past that the whole rigged game was developed by him when he was working in London for Goldman Sachs a decade before. What was the basic innovation that Rubin came up with and how do you know about that exactly?
Before he was CEO of Goldman Sachs and then US Treasury Secretary, Robert Rubin worked in London for Goldman Sachs. One of his duties was to oversee their gold trading operations. We know this because the CEO of GATA supporter Kirkland Lake Gold, Brian Hinchcliffe, worked in London back then for Goldman Sachs and reported directly to Robert Rubin.
This was many years ago and interest rates in the US were very high, say from 8 to 12%. Rubin had Goldman Sachs borrow gold from the central banks, sell it in the physical market and use the proceeds to fund their basic operations They could do so at about a 1 % interest rate. This was like FREE money, as long as the price of gold did not rise to any sustained degree for any length of time.
Soon other major financial institutions realized what GS was doing and copied them. Rubin continued these operations as the Goldman Sachs CEO and then took it to a new level as US Secretary Treasurer. The gold price suppression scheme became the lynchpin of his widely acclaimed “Strong Dollar Policy.”
In the late 1980’s another future Treasury Secretary, Lawrence Summers, was dedicating his time as Professor at Harvard also on the inter-relation between gold and interest rates, wasn’t he?
GATA’s Reg Howe caught on to this notion in a paper titled, “Gibson’s Paradox and The Gold Standard,” co-authored by Lawrence Summers in 1988. Summers, a professor at Harvard at the time, succeeded Rubin as US Treasury Secretary. The bottom line of Summer’s analysis is that “gold prices in a free market should move inversely to real interest rates.” Control gold and it will help to control interest rates. How disturbing to have Summers, a man very responsible for America’s current market nightmares, back on the scene as Obama’s most significant economic advisor.
What is the motivation to keep interest rates low in the first place? Aren’t the long term risks higher than the short term advantages? And do you see a direct connection between artificially low interest rates and the current financial crisis with respect to derivatives and the housing market?
The motives of “the cabal” are to give support to the dollar, keep US interest rates lower than they should be, and to tone down the widely watched US barometer of US financial market health, that being the gold price. After all, whenever the price of gold soars, it congers up talk of what? Too much inflation, a sinking dollar, or a crisis of some sort … all negative for Wall Street and the incumbent administration. Therefore, “Shoot the Messenger” has been The Gold Cartel’s key mission for many years now.
The gold price suppression scheme has led directly to the financial market/economic crises that we face today. As a result of what we knew, GATA warned what was coming in a full-page color ad which we placed in the Wall Street Journal on January 31, 2008. The ad, titled “Anybody Seen Our Gold?” cost GATA $264,400.
The DOW was a little under 12,500 at the time and very few in the investment world were prepared for the coming financial market/economic chaos in the US.
GATA was. I am going to read some copy from this very telling ad, one that I believe will become a CLASSIC in the years ahead … AFTER the gold market blows up.
It opens with…
“The gold reserves of the United States have not been fully and independently audited for half a century. Now there is proof that those gold reserves and those of other Western nations are being used for the surreptitious manipulation of the international currency, commodity, equity, and bond markets.”
Now, anybody who has watched the DOW rally back in the last half hour to hour via The Plunge Protection Team’s Hail Mary play knows how true that is. When the market is in serious trouble, the PPT (The Working Group on Financial Markets) continues to prop it up late in the day, often floating rumours which mysteriously disappear the following morning.  By the way, how many of you have heard of the Counterparty Risk Management Group?  Do a Google and you will find another Goldman Sachs market rigging domain.  It is so telling about how the INSIDERS operate.
Later in the ad copy…
“The objective of this manipulation is to conceal the mismanagement of the US dollar so that it might retain its function as the world’s reserve currency. But to suppress the price of gold is to disable the barometer of the international financial system so that all markets may be more easily manipulated. This manipulation has been a primary cause of the catastrophic excesses in the markets that now threaten the whole world.”
… and then…
“Surreptitious market manipulation by government is leading the world to disaster.”
And this just what happened later last year!!!
Had gold been allowed to trade freely, the price would be sharply higher than it is now. If the price had been allowed to trade freely  to keep up with true US inflation, the price would be over $2,000 per ounce, according to most analyses. Interest rates would have also been sharply higher years ago, thereby curbing many of the excesses which have led us close to a second Great Depression.
How do banks like Goldman Sachs, JPMorgan Chase and the Deutsche Bank AG profit from those activities in the gold market? Why do they take part in all of this?
Borrowed central bank gold is virtually free money. That was a big deal years ago when interest rates were much higher. Then, as agents of the US, they are able to fleece spec longs whenever they are ready to attack from the short side, aided by physical gold being dumped on the market. Time and time again technical spec longs are sent running for the hills and the Gold Cartel covers when they sell. $20 here, $100 there. It adds up over the years.
In addition, gold is a small market compared to other major financial markets. Getting the inside scoop on what is going to occur is invaluable to their overall trading operations. Goldman Sachs has become commonly known as “Government Sachs” for a reason. The number of GS people who have gone on to the US Treasury is astounding. And most everyone knows JP Morgan is the Fed’s bank.
Can you describe in detail how the leasing and swap operations are put in place in order to pressure the price of gold? How many players does it take to carry this day-to-day process out? And furthermore how are those activities integrated between what happens in New York at the Commodities Exchange (COMEX) and the London PM Fix?
No, I don’t know exactly who gets what order and when, but it is not necessary. We have witnessed the price action for more than a decade and it is clear what is transpiring. Recently, ahead of US Treasury auction, gold traded EXACTLY the same way on the three days of the auctions. Going down into and through the COMEX openings after trading higher overseas.
Three other noticeable trading patterns include…
*Plan A – to pressure the market as soon as The Gold Cartel traders report to work, which is 3 AM NY time.
*Plan B – to pressure the market as soon as the PM Fix is concluded in London, or after the physical market pricing is over for the day.
*Plan C – to pressure the price in the lightly traded Access Market, which opens after the COMEX closes for the day.
One point: my guess is there are VERY few people in any one particular organisation who are part of the manipulation scheme … that know what is really transpiring.
One main protagonist of the past, former Federal Reserve chairman Alan Greenspan, stated in July 1998 before the US House Banking Committee:
“Central banks stand ready to lease gold in increasing quantities should the price rise.” 1
You believe this is exactly what the central banks have done?
They sure have. That simple. Although a number of them are getting cold feet. Central bankers are sheeples. They don’t want to be seen squandering what gold they have left in this precarious financial environment, which is why the European central banks have sold zilch the past month … when they could be selling hundreds of tonnes and still be in line with the Washington Agreements, first put into existence a decade ago.
What was the role of the German Bundesbank at that time? For example there are continuing rumours related to Germany’s gold reserves. Max Keiser published recently a documentary entitled “Brown’s Bottom” in which he stated that the total amount of Germany’s gold reserves are stored in the United States:
“The most fascinating thing I’ve heard is that all the gold in Germany is in New York.” 2
He also said that he received this information in March 2008 from officials at the German Bundesbank. Which information does GATA have about the question where Germany’s gold is located?
It appears there is a great deal of commotion behind the scenes in Germany about your gold reserves … one very opposed to mobilizing Germany’s gold and one that has been for it. Somebody in Germany wanted to stir up this issue nearly ten years ago when out of nowhere, there were back to back, unpenned articles in the Frankfurter Allgemeine Zeitung, like the one from August 25, 2000. Your readers can find this article at GATA’s web site under this link: http://www.gata.org/node/4226.
There is a great deal of controversy in our camp about where the 3400 tonnes of German gold is. GATA Secretary/Treasurer Chris Powell recently issued a missive which included the following:
Germany’s gold is in U.S. custody, Bundesbank confirms
International journalist Max Keiser has just posted a nine-minute documentary he has done about the British government’s gold sales that were begun in 1999 and now are disparaged as “Brown’s Bottom,” after then-Chancellor, now-Prime Minister Gordon Brown, who decided upon the sales and remains unashamed that they marked the bottom of the gold market. Keiser’s documentary is based largely on an interview with Conservative Party opposition Member of Parliament Phillip Hammond, who is shadow chief secretary of the treasury and who remarks that the British gold sales seem to have been structured precisely to knock the price of gold down rather than to maximize the return to the British government. Hammond also wonders aloud whether “something other than achieving the best price” might have been the objective of the gold sales scheme.
But Keiser’s documentary may be sensational for getting an acknowledgement from the German central bank, the Bundesbank, that Germany’s gold reserves are actually in the custody of the United States. This is a detail the Bundesbank long has denied to others who have inquired and is potentially a matter of great controversy in Germany. It raises the question of whether the German gold reserves are actually intact at all or whether they have been used by the U.S. government as part of its long-time gold price suppression scheme or have been comingled and diminished with the gold reserves of other countries held in the United States.
While Keiser’s documentary does not identify the Bundesbank spokesman who confirmed the transfer of the German gold reserves to New York, it does provide the date and location of the confirmation: March 17, 2008, at Bundesbank headquarters in Frankfurt. The documentary shows that Keiser was there and got the interview.
After his interview at the Bundesbank, Keiser remarks: “The most fascinating thing I’ve heard is that all the gold in Germany is in New York.” Indeed.
How long is this rigged game that you were talking about going on by now according to the research done by GATA? And has it changed since Barack Obama is US-President? Or is it more than just coincidence that Lawrence Summers is his top economical advisor?
The Gold Cartel has most likely been managing the gold price since Robert Rubin become Treasury Secretary in the Clinton Administration. Now that Summers is the man behind the scenes, nothing has changed. Worse, the Treasury Secretary now is Timothy Geithner, who heads the NY Fed, a bastion of the gold price rigging operation.
If all of this is true then the central banks wouldn’t have 30.000 tons of gold in their vaults as it is reported. What is GATA’s estimation of the real numbers and how do you reached those conclusions? Can you explain also your concerns related to the swap policies of the International Monetary Fund (IMF) in this context?
Years ago GATA consultants Frank Veneroso, James Turk, and Reg Howe, all using different methodologies, came to the same conclusion: that the central banks had far less gold in their vaults than they said they did. Even though some central bank gold has been restored as gold producer hedgers covered their forward short positions (2700 tonnes), the central banks still have less than half of the 30,000 tonnes they say they have in their vaults.
The good news is The Gold Cartel is gradually running out of enough available central bank gold to keep up with demand. We have a price explosion coming soon. Why….
*The European Banks have been withdrawing as sellers. They have sold next to nothing the past many weeks.
*The Russians revealed recently they are buyers.
*The Chinese are buying QUIETLY … and are likely to accumulate gold reserves at a rate of 300 tonnes per annum over the coming years.
*The supply/demand deficit is over 1,000 tonnes per year. The Gold Cartel needed other central bank gold to meet that deficit and they are dwindling away to nothing.
The last official audit of the US gold reserves took place during the years of the Eisenhower administration in 1955. What has GATA done in order to find out what is left in the United States Bullion Depository and what has been the outcome?
We have made that fact public many times. In addition we have filed two Freedom of Information inquiries to the Fed and Treasury about their activities in the gold market. They refuse to give us anything of substance, so we are filing an appeal. The Fed is withholding 137 pages of documents and we want to know what they contain. Perhaps we will have to go to the US Supreme Court to find out the truth.
I would also like to talk a bit with you about two independent reports that seem to support GATA’s findings that the gold price is kept artificially low. The first was published in August 2004 by the “Sprott Asset Management”, a firm based in Toronto.3 What did they say in their report entitled: “Not Free, Not Fair: The Long-Term Manipulation of the Gold Price”?
Their report was extensive and supports what GATA has to say throughout. Eric Sprott is one of GATA’s staunchest supporters and came to our Gold Rush 21 conference in the Yukon’s Dawson City in August 2005. Sprott Strategist John Embry (who presented at GR 21) is one of the most highly regarded men in the Canadian gold industry and was instrumental in the findings of that report.
The other report that comes outside of GATA is “The Role of Gold in the Unified Gulf Cooperation Council Currency” written by Eckard Wörtz for the Gulf Research Center.4 Can you tell us about the conclusions of this report, too?
GATA released the following in March of 2005:
DALLAS–(BUSINESS WIRE)–March 3, 2005–A study published by a research foundation in Dubai has endorsed the Gold Anti-Trust Action Committee’s findings that Western central and commercial banks have rigged the gold market but have much less gold than they claim to have and so are vulnerable to rising demand for gold. The study recommends that the oil-producing countries of the Middle East diversify their ever-depreciating U.S. dollar holdings into gold.
The study, “The Role of Gold in the Unified Gulf Cooperation Council Currency,” was written by Eckart Woertz, vice president of CFC Securities in Dubai, for the Gulf Research Center. It quotes the work of GATA’s consultants, including Frank Veneroso, and predicts that the gold price suppression scheme of the Western banks will fail just as their similar scheme of the 1960s, the so-called London Gold Pool, failed when the drain on Western gold reserves became too great. Once the scheme fails, the study says, “it will be highly difficult and expensive to accumulate a gold reserve. This is especially true for central banks that have low gold reserves like those in the Gulf Cooperation Council countries.”
The study concludes: “The paper dollar standard is a dead man walking. Its debt, accumulated over the recent decades, is too high to be effectively repaid. It will either default or be inflated to such an extent that it will not ‘hurt’ to pay it back. Therefore, the accrued imbalances in global finance and the inherent weakness of worldwide growth models that rely on a continuance of U.S. deficit spending are likely to usher in a serious crisis of currency systems in coming years…
The status of the US-Dollar as reserve currency of the world is the only thing that remains from the US economical power of the past. This status is secured since the 1970’s only because crude oil is paid in US-Dollars. If taken into context with the mentioned report by Eckard Wörtz, even this status linked to oil is in jeopardy, isn’t it?
All I can say is there has been a great deal of effort and talk lately to reduce the status of the dollar as the reserve currency … emanating from France to Brazil. If the dollar tanks in the coming year, as I suspect, certainly the link to oil will be in great jeopardy.
Could you also say something about China’s gold reserve policy during the last years? Didn’t China become increasingly active to accumulate physical gold exactly because the US-Dollar is a “paper asset” that loses its value? The Chinese use the low price of gold as long as they can whereas the West is getting extremely vulnerable?
Over the past 18 months I have been a part of three conference calls with the Chinese Investment Corporation, one of their Sovereign Wealth Funds. They wanted to know what GATA knew about the gold market and our opinion what was coming price-wise and why. We still don’t know what they are doing, or will do.
This year China announced they had quietly increased their gold reserves by 454 tonnes. In 2005 one of our GATA supporters reported the Chinese stealthily bought 510 tonnes of gold. We were pretty close to nailing the real deal years in advance … when it was occurring.
I mentioned the following in my commentary this past April…
GATA’s credibility took another leap forward this morning when China announced it has increased its gold reserves to 1,054 tonnes from 600 tonnes. For years and years and years GATA has claimed that the gold world establishment has failed to account for surreptitious gold lending operations by The Gold Cartel to suppress the price. For there to be greater gold supply hitting the market, there had to be greater demand to satisfy this undisclosed supply. As a result of Frank Veneroso’s brilliant supply/demand work in years past, we mentioned that one of the demand areas, that the likes of a GFMS was not accounting for, was China, and that someday their stealth buying would be reported. Voila…
China gold reserves apparently doubled
HONG KONG (MarketWatch) — China has added to its gold reserves and now holds 1,054 metric tons of the yellow metal, according to a Friday report by the Xinhua News Agency, which cited comment by Hu Xiaolian, head of the State Administration of Foreign Exchange.
Hu said that China’s gold reserves had risen by 454 metric tons since 2003 and that the total was being reported to the International Monetary Fund as per the organization’s rules…
According to my sources, China will be in the market for years to come and will be buying in size and as quietly as possible.
This trend shown by China and countries in the Middle East will gain even more momentum when it becomes clear to everyone that hyperinflation will come to the U.S.A., am I right?
YES!
Compared to eight years ago the price of gold has gone up three times against the dollar. If one would use a multi-year long perspective on things, one would come up with the conclusion that gold is the best store of wealth. Nevertheless, you say that the price of gold would be much higher without the market rigging techniques that we talked about?
True on all counts. It is critical to know what GATA knows to appreciate what is coming down the pike. Gold has now gone up 9 years in a row. The Gold Cartel has been MANAGING a retreat and keeping excitement to a minimum in the process … which is why the bullish sentiment with gold above $950 is so low today.
But, they are soon about to hit the wall, as mentioned above. We are at the Tipping Point in which physical demand buying overpowers supply. Once gold takes out $1,000 and stays above that level for a week or so, it is likely to explode. We are getting so close to that day.
There were two statements recently that I found quite interesting for the future developments at the gold market. Puru Saxena, the publisher of the “Money Matters“-report, said for example this:
“It is interesting to note that only 160,000 tons of gold has ever been mined from the face of this planet and at US$950 per ounce, it is worth US$4.9 trillion.  Now, consider that the total amount of paper money in circulation (currencies, savings, deposits, money-markets and CDs) is worth US$60 trillion or approximately twelve times the value of the gold in existence.  Now, there is no doubt in my mind that as world governments debase their currencies, many people will begin to question the viability of paper money as a store of value and they will turn to gold, silver and platinum.  Even if a small fraction of paper money rushes towards the small gold and silver markets, what do you think will happen to their prices?  No question, precious metals’ prices will explode!”5
Can you comment on this and put it maybe into the context that mining supply is decreasing?
He is correct. Mine supply has been contracting for many years and continues to head south … and there have been very few major discoveries to replace depleting mine supply. Most people don’t realise gold is way too cheap. They think gold is too expensive at $1,000 and is going to collapse. Not so. It will take a gold price of about $1500 for the industry to be really profitable as a whole. If a producer is going to start from scratch, building new infrastructure, etc., it will take a $2,000 gold price.
The other statement was coming from Frank Holmes of “U.S. Global Investors Inc.“ who said under the headline “Why now could be the right time for gold stocks“:
“Another bullish indicator for gold and gold stocks is that, for the first time in my 20 years at U.S. Global Investors, pension fund consultants and other gatekeepers for large institutional investors are advocating an exposure to gold.
These gatekeepers have influence over managers of many hundreds of billions of dollars in retirement funds, and they are advising a 5 percent to 8 percent allocation to gold, which is similar to the long-term exposure suggested by U.S. Global.”6
Can you comment on this, too?
Frank is one smart cookie and a quiet GATA supporter. I see gold becoming the GO TO investment in the months and year to come, even among the Wall Street crowd. The market cap of our sector is very tiny compared to others. Thus, just a shift in thinking among a number of major money managers could send the shares flying. When the public jumps on board, all boats will be lifted. Ten baggers among the VERY suppressed shares of the junior and exploration companies will be common.
Mr. Murphy, you have been a successful commodities trader before launching  LeMetropleCafe.com. Therefore I think you know a good deal about COMEX. I mention this because Trace Meyer and Avery Goodman see the danger on the horizon that COMEX might fail to deliver gold with respect to the rapidly grown size of future contracts.7 The Deutsche Bank AG seemed to have shown some difficulties to deliver gold on COMEX already.8 What are your expectations?
It is possible but a COMEX default would be a disaster for our financial markets. There never has been one and the credibility of our exchanges would come into question … especially after GATA’s claims all these years that the gold and silver markets have been rigged.
What is your experience with the Commodity Futures Trading Commission (CFTC) when it comes to the gold market?
They seem to be everywhere these days except in the most important issue of all: the rigging of the gold and silver markets aided by the extremely concentrated positions of a few shorts, like JP Morgan Chase. Instead they are jumping up and down about grains and oil.
At the G20 Summit that was held in April of this year in London there was a plan announced that the IMF should sell 403,3 tons of its gold to support Third World countries in these times of crisis via concessional loans. What is your point of view on this? Is this just marketing blather of some kind, and if so: what is the real deal?
Nobody knows how this is going to play out. The Gold Cartel is desperate for gold so there will be intense pressure to get the US Congress to approve the sale, which must happen. However, if my info is correct, there is a strong likelihood the Chinese will take it all for themselves.
Mr. Murphy, one last question. The biggest opponent that GATA has chosen to fight against is the Federal Reserve. Could it be that a lot of problems that you were talking about in the gold market take place because the Fed isn’t really a federal agency? In case it is true that the Federal Reserve System is “a consortium of very large multinational banks,”109  is it then any wonder that they seek to satisfy their interests instead those of the broader population? Isn’t this the main problem behind the problem that GATA is up against?
It certainly is a main one. Of extreme interest to us is Ron Paul’s HR 1207 bill to audit the Fed. More than 280 members of the House have signed up as co-sponsors. Barney Frank, who chairs the House Financial Services Committee, has been holding up its progress as a committee chairman. But, he now says the House will pass this bill.
IF the Fed is really audited, there will most likely be some stunning revelations regarding their activity in the gold market and might reflect on the status of US gold reserves. ANY activity, or lessening of official gold reserves, will be a bombshell of epic financial proportions.
To conclude, the price of gold is going to $3,000 to $5,000 per ounce. You can take that one to the bank.
Thank you very much for taking your time, Mr. Murphy.
SOURCES:

by Von Lars Schall
Posted originally  31 August 2009

The Gold Anti-Trust Action Committee (GATA) celebrates its 10th anniversary this year. GATA’s founder and director Bill Murphy talks about price suppression schemes, the “real numbers” and a possible COMEX default on gold.

Mr. Murphy, GATA has its 10th anniversary this year. What are the most important discoveries of this ten year journey?

The Gold Anti-Trust Action Committee (GATA) was organized in January 1999 to expose the manipulation of the gold price by a Gold Cartel consisting of the US Government and various bullion banks, such as Goldman Sachs and JP Morgan Chase, for more than a decade. Initially, GATA thought it was just the bullion banks. As time went by, we realized the US Government was behind the rigging.

Let’s get back into the year 1998. In September 1998 you started a website dedicated to observe the gold market called LeMetropoleCafe.com. A few days later a giant hedge fund named Long Term Capital Management (LTCM) crashed. Could you tell us a bit about this event and how it lead to the launch of the Gold Anti-Trust Action Committee in January of 1999?

Prior to opening my website, http://www.LeMetropoleCafe.com in September of 1998, I had been told from very good sources that LTCM was short 400 tonnes of gold as part of a gold carry trade. When they blew up, I expected the price of gold (below $300 at the time) to explode. Each time it went above $300, bullion banks such as Goldman Sachs, Morgan, Deutsche Bank, and Chase Bank would sell in unison and stop the upward movement in its tracks. Right then and there I knew something was fishy. Everywhere I turned, I received more feedback on the gold market which suggested it was managed. As a limit position futures traders some time ago, I knew something about how markets trade and it made no sense the way gold was trading at the time.

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