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Wednesday, November 26, 2008

Gold Price set to Explode on Hyper-Inflation


By: Jim_Willie_CB

he OMEN for a powerful shift in the gold market in my playful mind was the very real earthquake on November 18 here in Costa Rica, a clear signal from the financial gods, no minor tremor, measured at 6.0 on the Richter scale. The tremor confirmed the tectonic shifts to come to the gold market without question. This was the biggest earthquake in my life, no damage at all though, roof and toys intact. Numerous stories testify in aggregate to a severe tightening of the physical market, certain to put pressure on the corrupt paper market managed by the COMEX and its parent NYMEX.


Be sure not to miss the spectacular conjunction of planets and the moon in the southwest sky, over the next few days. The opportunity is for those in the Northern Hemisphere, sorry Australians and New Zealanders. Venus will converge with Jupiter, seen in nearly equal magnitude of brightness. When they are close in a few more days, the moon will enter the picture as a crescent in a spectacular display. For the description of the highly unusual event, check the NASA website (CLICK HERE ). One could regard this event as another omen for a COMEX gold default, a stretch, but a legitimate one.

THE GLOBAL SHAME OF CENTRAL BANKS

On October 29, the US Federal Reserve cut by 50 basis points the official Fed Funds rate down to 1.0% flat. Do not expect the US Fed to be done cutting rates. One week later, the entire globe of beleaguered central banks also cut their official interest rates in a parade of ignominy. They coordinated rate cuts on October 8, and again followed the US Fed in early November. The important Euro CB cut by 50 basis points to the 3.25% level, surely in reluctant fashion given their firm defiant stance. The most desperate CBs are clearly England and Switzerland among the majors, and Australia and New Zealand in the second tier. The Bank of England (BOE) cut by 150 basis points unexpectedly, now at a 3.0% low level.

The Swiss National Bank cut by 50 bpts with the pack, but on November 20 surprised all by cutting another full 100 bpts down to the ultra-low 0.5% level. The Reserve Bank of Australia cut by 100 bpts in October and plans to cut again this month. The Reserve Bank of New Zealand cut by 100 bpts in October and also plans further cuts. The Bank of Canada cut by 25 bpts in October and plans another 25 bpt cut in December. The Riksbank of Sweden cut by 50 bpts to 3.75% in October and plans another 25 bpt cut in December or soon afterwards. With global monetary inflation raging, and official interest rates converging to zero, the global central bankers must hang their heads in shame. THIS IS THE MOST VISIBLE, OBVIOUS, PREVALENT SIGNAL OF THEIR FAILURE.

The contained messages are four-fold:

• ABSOLUTE CONTAGION: the global economy is suffering from broadly felt toxic shock due to US bonds, a process that has a few more quarters of severe crisis pathogenesis

• POLICY EXTORTION: the major and secondary CB heads want to cut so that the US$ does not fall, coerced with a monetary gun at their heads

• INFLATION EXPLOSION: global monetary growth has gone ballistic, no longer a priority to control, with all talk about limiting price inflation relegated to mumbling in the corner

• ENDLESS RESCUES & BAILOUTS: the government sponsored bailouts are nowhere near finished, sure to be an endless parade of patchwork and stimulus with eventual climax of mortgage aid.

Just think of it. The USGovt, after a coup d'etat pulled off by Wall Street and fraudulent climax diversion of TARP funds, has yet to address the mortgage problem at all. Mortgage aid in meaningful and necessary terms is actively avoided, since it must come with a price tag up to $2000 billion in the United States alone. The nationalization of the US banking, if not financial system, is highly likely to be followed by an eventual virtual nationalization of the entire mortgage system . Such a decision and desperate socialist action will be the death knell for the US Dollar, if it survives to the point when such a program is enacted.

The unbridled monetary inflation is a powerful bull market signal for gold, once asset prices stabilize. Monetary explosion always pushes gold upward in price, but this time much money is directed into a multi-channeled black hole . Today, yet another program was announced, finally to enable more lending capital to banks. They have been starved to date, drained in order to supply the corrupt Wall Street conmen in charge. The coordinated interest rate cuts reveal the strong impact of Competing Currency Devaluation. Foreigners wish to avoid further aggravation to their economies from even lower domestic currency exchange rates. They inflict higher prices upon their economies. Later, foreign governments will order their reserves and sovereign wealth funds to dump USTBonds in order to bolster their domestic currencies, the great counter-attack.

The US Economy has a worse problem to fix by an order of magnitude. My view is that the powerful US ailments are not fixable, since the financial engineering is too deeply rooted and the manufacturing industrial base has been removed in several stages over a 25-year period. Besides, the credit derivatives loom like a series of hidden bombs whose fuses intersect in the dark.

THE FRANCHISE OF CENTRAL BANKING HAS FAILED, AND GRAND RATE CUTS CONFIRM THIS NOTION EMPHATICALLY!!! THE COLLECTION OF CONCLUSIONS ADDS UP TO ONE POWERFUL FORECAST: GOLD & SILVER PRICES WILL RISE 10-FOLD IN THE NEXT FEW YEARS. SOON THE CLUTCH WILL BE RELEASED AND THE 10000 RPMS ENGAGE THE ECONOMIC TRANSMISSION TO PRODUCE PRICE SKIDMARKS. Ignore for now the paper price heavy-handed influence, which in my view will suddenly disappear in a volcano of controversy and tumult! The US paper system has falsified the entire global pricing structure. Instead of price discovery, we have been subjected to price controls and tyranny. Next comes the counter-attack.

Lost faith in US Fed has finally come. Chairman Bernanke has learned the hard way that usage of the printing press is not the boasted solution. He is sending good money after bad, redeeming criminal fraud, endorsing checks for a broken system, and creating numerous delivery channels into a vast black hole. The US Federal Reserve has accomplished a bizarre feat. They have made short-term lending virtually free, but offer a yield over 3% on long-term bonds. So US banks are deeply engaged in a queer carry trade. US banks borrow short and lend to the USGovt long, and thus exploit the steep USTreasury yield curve. The US banks are trying to liquefy from this perverse mechanism, using incredibly large volumes of money. In the process, the US Fed balance sheet is testing whether it can grow a tree to the sky. The USGovt has contributed to the ugly mountain of rancid paper with bad precedent after bad precedent, from poorly written deals. No private investor in right mind would step forward to help an ailing industrial or financial firm on the absurd blockheaded terms established by the USGovt. A record setting 25% of high-powered money, as in bank assets, that the US Fed has provided, actually sit idle as excess reserves. Hence, money velocity has sharply dropped , typical of a recession. Failure has many symptoms. The US Economy aggregates are falling off a cliff in unison.

Europe has entered a recession, but the US has entered disintegration, while England is close behind with a galloping leap off the Dover Cliffs. Kenneth Clark is a highly respected former conservative Chancellor of the Exchequer (finance minister) from 1993 to 1997 in England. He delivered an urgent warning for a “catastrophic crisis [that will be] far worse than anything that has occurred in my lifetime” for Great Britain. Clarke even slammed Gordon Brown as having received undue credit for his role in attempting to shore up the global economy. He warned policymakers should beware of a “full-blown depression will have on public finances” for its effect.

A major error has been committed by both the US & UK. Neither nation has succeeded in passing on lower interest rates to home loans, and repayment plans are not happening in volume. The elite in both the US & UK are protecting their bankers, but killing the system in the process. Housing prices are careening downward, while job losses mount in large numbers, in both nations. The death of the Anglo Sphere is nigh, as status of debtor nations comes soon with all its penalties. A simple move to cut rates does nothing to address insolvency of both banks and households. This basic truism is totally lost on clownish inept US & UK economists and bankers. They both built an economy atop a housing bubble, blessed it, and encouraged the debt orgy process, only to see the entire system melt down. This was fully forecasted during the last two years by the Hat Trick Letter.

A VERY QUEER ANOMALY

We are working toward a nasty climax of historic proportions. Notice that the USTreasury Bill has an artificially high price, with staggering huge volume, which is backwards . This condition defies Mother Economic Nature. Notice that gold has an artificially low price on the paper contracts, with staggering huge demand for physical metal, which is also backwards. This condition defies Mother Economic Nature.

The USTreasurys, given the staggering high volume, should be valued lower. The gold bullion, with its staggering high demand, should be valued higher. Something must break, and break soon. Regard these two anomalies as temporary distress symptoms of ass-backward price mechanisms. The natural tendencies of man, full of human emotions like vengeance and retribution, will soon be unleashed to correct the PHONY HIGH USTBILL PRICE AND PHONY LOW GOLD PRICE. All kinds of key evidence points to a COMEX default in December, discussed in the November Gold & Currency Report. The keys are in the Open Interest, which for gold is collapsing. But the December OI is holding up at relatively high levels. The interpretation from Mr Market, who is a distant cousin of Mother Economic Nature, is “The paper gold market is flawed, and people want no part of it. What physical gold becomes available is being grabbed immediately.”

Further hints are offered by the Chinese, who announced a stimulus plan worth over $500 billion. They will use their USTBonds before they are trashed. The next phase is feeding off the USTreasury much like a dead elephant. However, the signature event must come first. THE COMEX GOLD MUST BE VANQUISHED. This is the Achilles Heel to the US Dollar
ATTACK OF COMEX GOLD & SILVER

Powerful foreign entities are preparing a massive major assault on the US financial corruption, at key spots. All signs seem to point to the gold futures contracts traded at the COMEX and NYMEX, whose prices are routinely suppressed by a high volume of uneconomic short contracts by two to four banks. The COMEX is a division of the New York Mercantile Exchange. A highly leveraged sequence is soon to be unleashed, one that should bring back thoughts of asymmetric attack. Think small cost of a weapon, heavy damage to costly equipment. Something big comes to the gold market, with big angry players! If successful, severe damage will be done to the US Dollar Their goal is to kill the COMEX gold market, the key location for gold price suppression. Major Russian, Chinese, Arab, and European bankers and billionaires are angry beyond words. The giant portion of gold vaulted resides in Central Europe. A plan is in place. The key here and now is COMEX gold futures contracts, where many big players are demanding delivery for their December contracts. North American investment houses have also targeting them for delivery demands. With newly energized Russia & China building their gold treasures, with Arabs turning from distrusted Western paper and more toward gold & silver, look for the new players to offer support to the primary thrust attacks. If successful, it will be a defining moment in US financial history. The first delivery notice for the December gold contract is given on November 28.

Recall that Russians and Arabs each have severe damage done to the crude oil price and petro revenues. The futures contract games conducted by US price systems and Wall Street tactics used against hedge funds are largely responsible. Russians and Arabs are angry. Their financial markets are in turmoil, their economies are disrupted, their property markets are in disarray. Furthermore, Russians and Arabs own a large amount of acquired gold, whose value is also pushed down by corrupt US paper mechanisms.

The Persian Gulf lusts to put in place a gold trading center of world repute. A brutal powerful trap has been set, to be executed upon the paper engineers without mercy. If you have noticed the facial expression on some Wall Street heads, like Paulson, change in the last few weeks, this is one reason why. They have no shame in confiscation of Congressional funds. But they dread presiding over a failed pricing system for gold, and dread the prospect of being unmasked, not to mention bankrupted. Keep the focus on the JPMorgan garbage can, where the illegal futures contracts are stored, the very same contracts that are never marked to market on their balance sheet. A COMEX blowup reveals their grotesque distortion of market forces, underpinned by gold and USTreasurys. More details are provided in the November Hat Trick Letter report, like the movement by the Chinese and Iranians to vastly increase their gold reserves.

Veteran warhorse Max Keiser, has a video worth watching. See his video (CLICK HERE ). He discusses the upcoming COMEX default for the December gold futures contract. He believes that in its wake, the gold price will rise suddenly to $2000 per ounce, perhaps in a single day. The main impetus in his view for the breakdown is pressure exerted by Russia, in his view. He describes their motive. Russia is very angry over the oil price, down 60% from its peak, driven largely by liquidations from Wall Street targeting of hedge funds. Russia regards the paper game to be out of control. Russia has suffered from both reduced energy revenues from export sales, and notable currency decline in their ruble exchange rate. Financial markets, banks, and corporations have suffered in Russia as a result, prompting a severe reaction by Putin and Medvedev. These are not guys known to take ambushes and sucker punches well without a response.

AWAKENED GOLD PRICE

The US Dollar DX index has topped. Conversely, the gold price has bottomed. Each has experienced a clear vivid pronounced reversal off the extreme. Signs point to December as being a battleground month. The moving averages have begun to reverse, a more stable signal. A MACD crossover is near, which would give a billboard notice to technical traders. Beware that this is the phony paper gold price. Actual large physical gold transactions are conducted at prices in excess of $1000 per ounce. The undue influence of paper price discovery is soon to end. As the Gladiator said in the 1999 movie by the same name, to the phony emperor who usurped power, “The time will soon come to an end for you to honor yourself.” Expect severe discontinuity in the gold price in the next few months, maybe sooner. If Keiser and others are correct, and the assault on the COMEX gold succeeds to liberate its price, a gap up is assured, a big gap up, like a few hundred dollars per ounce. Now is the time to hold firm your gold and silver metal. Sell the children, but do not sell the precious metal.

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Monex is the low-cost gold and Silver retailer. Paul Bea @ monex 800-949-4653 x2172
To support Goldmoney use Kevin from Goldmoneybill.org as referral.

Friday, November 21, 2008

The End of Gold and Silver Manipulation?

could the suppression of precious metals finally be over? although yours truly is a avid fan of bob chapman's theinternationalforcaster.com i have heard this scenario before. granted the short interest in gold is the lowest it has been in while however this doesn't mean a guaranteed run up in the price of gold. lets not forget we are dealing with a fiat system, a funny money system with temporary unlimited printing capabilities. We are very close to a total financial collapse where the suppression in gold and silver will end. until we hit this point the shorts will come in again. remember a low short interest means more buying power to manufacture another false ceiling or resistance level. -st0ckman

-just a snip of larger article:

Since the end of October, when open interest for the December gold contract started a new series of decreases as the rollovers got off to any early start, the December open interest has fallen from 190,140 to this past Friday's 122,902, yet total open interest has fallen from 305,451 to 285,219 during that same period.

Thus, of the 67,238 December contracts that have been terminated in the rollover thus far, total open interest has plummeted by 20,232 contracts, meaning that many of the contracts are not being rolled over, and are being cashed out instead. If this 30% ratio persists, we could see gold open interest fall to under 250,000, a multi-year low, an astonishing drop of 58% from the peak of 593,953 contracts set on January 15, 2008.

This is an absolute disgrace for the CRIMEX owners and regulators, and we wish them well in the ensuing bankruptcies and criminal investigations that will occur after the exchange collapses. No one wants to play in a game where the owners and sponsors are in cahoots with certain privileged players to make sure they come out on top. In addition, we note that no commodities market can survive without speculators who provide balance to the markets by taking the other side of contracts and by keeping the pendulum of market momentum alternating between bulls and bears. Otherwise the markets lean to far to one side or the other, and then bubble and/or collapse due to the lopsided positions. Once the precious metals markets of the exchange collapse, all the other markets will soon follow, as everyone realizes that the whole system is rigged against them. The CRIMEX will soon be ostracized from participation by honest market players. The criminal manipulators will soon find themselves traipsing in and out of court in endless investigations, and they will be forced to sit in their bedrooms, lonesome, because their is no one left who wants to play with them.


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Monex is the low-cost gold and Silver retailer. Paul Bea @ monex 800-949-4653 x2172
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The Crash is Still Coming Lessons from the First Depression



1927-1933 Chart of Pompous Prognosticators

Chart locations are an approximate indication only

1. "We will not have any more crashes in our time."
- John Maynard Keynes in 1927

2. "I cannot help but raise a dissenting voice to statements that we are living in a fool's paradise, and that prosperity in this country must necessarily diminish and recede in the near future."
- E. H. H. Simmons, President, New York Stock Exchange, January 12, 1928

"There will be no interruption of our permanent prosperity."
- Myron E. Forbes, President, Pierce Arrow Motor Car Co., January 12, 1928

3. "No Congress of the United States ever assembled, on surveying the state of the Union, has met with a more pleasing prospect than that which appears at the present time. In the domestic field there is tranquility and contentment...and the highest record of years of prosperity. In the foreign field there is peace, the goodwill which comes from mutual understanding."
- Calvin Coolidge December 4, 1928

4. "There may be a recession in stock prices, but not anything in the nature of a crash."
- Irving Fisher, leading U.S. economist , New York Times, Sept. 5, 1929

5. "Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months."
- Irving Fisher, Ph.D. in economics, Oct. 17, 1929

"This crash is not going to have much effect on business."
- Arthur Reynolds, Chairman of Continental Illinois Bank of Chicago, October 24, 1929

"There will be no repetition of the break of yesterday... I have no fear of another comparable decline."
- Arthur W. Loasby (President of the Equitable Trust Company), quoted in NYT, Friday, October 25, 1929

"We feel that fundamentally Wall Street is sound, and that for people who can afford to pay for them outright, good stocks are cheap at these prices."
- Goodbody and Company market-letter quoted in The New York Times, Friday, October 25, 1929

6. "This is the time to buy stocks. This is the time to recall the words of the late J. P. Morgan... that any man who is bearish on America will go broke. Within a few days there is likely to be a bear panic rather than a bull panic. Many of the low prices as a result of this hysterical selling are not likely to be reached again in many years."
- R. W. McNeel, market analyst, as quoted in the New York Herald Tribune, October 30, 1929

"Buying of sound, seasoned issues now will not be regretted"
- E. A. Pearce market letter quoted in the New York Herald Tribune, October 30, 1929

"Some pretty intelligent people are now buying stocks... Unless we are to have a panic -- which no one seriously believes, stocks have hit bottom."
- R. W. McNeal, financial analyst in October 1929

7. "The decline is in paper values, not in tangible goods and services...America is now in the eighth year of prosperity as commercially defined. The former great periods of prosperity in America averaged eleven years. On this basis we now have three more years to go before the tailspin."
- Stuart Chase (American economist and author), NY Herald Tribune, November 1, 1929

"Hysteria has now disappeared from Wall Street."
- The Times of London, November 2, 1929

"The Wall Street crash doesn't mean that there will be any general or serious business depression... For six years American business has been diverting a substantial part of its attention, its energies and its resources on the speculative game... Now that irrelevant, alien and hazardous adventure is over. Business has come home again, back to its job, providentially unscathed, sound in wind and limb, financially stronger than ever before."
- Business Week, November 2, 1929

"...despite its severity, we believe that the slump in stock prices will prove an intermediate movement and not the precursor of a business depression such as would entail prolonged further liquidation..."
- Harvard Economic Society (HES), November 2, 1929

8. "... a serious depression seems improbable; [we expect] recovery of business next spring, with further improvement in the fall."
- HES, November 10, 1929

"The end of the decline of the Stock Market will probably not be long, only a few more days at most."
- Irving Fisher, Professor of Economics at Yale University, November 14, 1929

"In most of the cities and towns of this country, this Wall Street panic will have no effect."
- Paul Block (President of the Block newspaper chain), editorial, November 15, 1929

"Financial storm definitely passed."
- Bernard Baruch, cablegram to Winston Churchill, November 15, 1929

9. "I see nothing in the present situation that is either menacing or warrants pessimism... I have every confidence that there will be a revival of activity in the spring, and that during this coming year the country will make steady progress."
- Andrew W. Mellon, U.S. Secretary of the Treasury December 31, 1929

"I am convinced that through these measures we have reestablished confidence."
- Herbert Hoover, December 1929

"[1930 will be] a splendid employment year."
- U.S. Dept. of Labor, New Year's Forecast, December 1929

10. "For the immediate future, at least, the outlook (stocks) is bright."
- Irving Fisher, Ph.D. in Economics, in early 1930

11. "...there are indications that the severest phase of the recession is over..."
- Harvard Economic Society (HES) Jan 18, 1930

12. "There is nothing in the situation to be disturbed about."
- Secretary of the Treasury Andrew Mellon, Feb 1930

13. "The spring of 1930 marks the end of a period of grave concern...American business is steadily coming back to a normal level of prosperity."
- Julius Barnes, head of Hoover's National Business Survey Conference, Mar 16, 1930

"... the outlook continues favorable..."
- HES Mar 29, 1930

14. "... the outlook is favorable..."
- HES Apr 19, 1930

15. "While the crash only took place six months ago, I am convinced we have now passed through the worst -- and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us."
- Herbert Hoover, President of the United States, May 1, 1930

"...by May or June the spring recovery forecast in our letters of last December and November should clearly be apparent..."
- HES May 17, 1930

"Gentleman, you have come sixty days too late. The depression is over."
- Herbert Hoover, responding to a delegation requesting a public works program to help speed the recovery, June 1930

16. "... irregular and conflicting movements of business should soon give way to a sustained recovery..."
- HES June 28, 1930

17. "... the present depression has about spent its force..."
- HES, Aug 30, 1930

18. "We are now near the end of the declining phase of the depression."
- HES Nov 15, 1930

19. "Stabilization at [present] levels is clearly possible."
- HES Oct 31, 1931

20. "All safe deposit boxes in banks or financial institutions have been sealed... and may only be opened in the presence of an agent of the I.R.S."
- President F.D. Roosevelt, 1933
Source

Monex is the low-cost gold and Silver retailer. Paul Bea @ monex 800-949-4653 x2172
To support Goldmoney use Kevin from Goldmoneybill.org as referral.

Thursday, November 20, 2008

Chinese May Buy GM and Chrysler. No Invasion Necessary


by Bertel Schmitt
Chinese Automakers may buy GM and Chrysler


Chinese carmakers SAIC and Dongfeng have plans to acquire GM and Chrysler, China’s 21st Century Business Herald reports. LINK A National Enquirer the paper is not. It is one of China's leading business newspapers, with a daily readership over three million]. This newspaper cites a senior official of China’s Ministry of Industry and Information Technology– the state regulator of China’s auto industry– who dropped the hint that “the auto manufacturing giants in China, such as Shanghai Automotive Industry Corporation (SAIC) and Dongfeng Motor Corporation, have the capability and intention to buy some assets of the two crisis-plagued American automakers.” These hints are very often followed with quick action in the Middle Kingdom. The hints were dropped just a few days after the same Chinese government gave its auto makers the go-ahead to invest abroad. And why would they do that?

A take-over of a large overseas auto maker would fit perfectly into China’s plans. As reported before, China has realized that its export chances are slim without unfettered access to foreign technology. The brand cachet of Chinese cars abroad is, shall we say, challenged. The Chinese could easily export Made-in-China VWs, Toyotas, Buicks. If their joint venture partner would let them. The solution: Buy the joint venture partner. Especially, when he’s in deep trouble.

At current market valuations (GM is worth less than Mattel) the Chinese government can afford to buy GM with petty cash. Even a hundred billion $ would barely dent China’s more than $2t in currency reserves. For nobody in the world would buying GM and (while they are at it) Chrysler make more sense than for the Chinese. Overlap? What overlap? They would gain instant access to the world’s markets with accepted brands, and proven technology.

The editors of 21st Century Business Herald, obviously with input from higher-up, writes that Chinese industry must change and upgrade. China wants their factories to change from low-value-added manufacturing to technically innovative and financially-sound high-value-add industries. Says the paper: “It would be much easier now for strong Chinese automakers to go global by acquiring some assets of their U.S. counterparts in times of crisis.”
Interactive Eforum


Deloitte & Touche sees a trend: “Chinese automakers can start with buying out the OEM projects and Chinese ventures of some global carmakers such as GM and Chrysler.”

The Chinese appear to have bigger plans than an accounting firm can imagine. 21st Century Business Herald acts and writes as if its already a done deal, and the beginning of more to come. “In the coming two years China is likely to see a few of its large Chinese automakers and other manufacturing enterprises set a precedent for achieving globalization by acquiring global companies, just like SAIC or Dongfeng’s possible acquisition of troubled GM or Chrysler.”
Rebel Life: Online Dating


Just in case you missed it, the Shanghai Automotive Industry Corporation (SAIC) is China’s largest auto manufacturer. In 1984, the company entered a joint venture with Volkswagen. A decade later, SAIC entered a joint venture with General Motors. In 2007, SAIC bought the Nanjing Automobile Corporation, which had acquired British MG Rover in 2005.

Dongfeng Motor Corporation is a public company, although 70 percent of their shares are reported to be in government hands. They also are one of China’s Big Three. The company has numerous joint venture partners, such as Nissan, Peugeot-Citroen, Honda, and Kia. Dongfeng (which means “East Wind”) was founded at the behest of Mao Zedong himself in 1968.
Source

Wednesday, November 19, 2008

The Myth of Gold as a Bad Investment

The Six Biggest Myths About Gold
By Nick Barisheff Nov 18, 2008

Gold. People either love it or hate it. There aren’t many who feel ambivalent toward it. Unfortunately, gold is deeply misun­derstood by investors, and that misunderstanding is hurting their portfolio returns. Many in the in­vestment community trot out the old myths about gold: that it is a bad investment; that it is very risky; that it is not a good inflation hedge. But is there anything behind these assertions? If investors take the time to examine the facts, these commonly held beliefs simply do not stand up to scrutiny. It is precisely because these myths have become so prevalent that gold is still undervalued. Once the general public realizes these beliefs are not valid, the price of gold will be much higher.

Myth 1:

Gold Is A Bad Investment

A frequently cited argument is that since it peaked at $850 per ounce (all amounts in U.S. dollars unless otherwise noted) in 1980, gold’s return has been poor compared to the major stock indices. However, that peak price was a short-lived, single-day aberration. Investors who avoided the mania phase and purchased gold one year earlier in 1979 at its average price of $306 per ounce also avoided any significant losses during the subsequent bear market. The performance of different asset classes varies from cycle to cycle. The previous cycle from 1968 to 1980 saw the Dow Jones Industrial Average remain flat with significant volatility, while gold increased by 2,300 percent. In the current cycle, which began in 2002, gold has posted a compounded return of 14 percent, while 15 of the 30 Dow components are negative.

Many studies compare gold to equities over peri­ods as far back as the 1700s. But these studies ignore the fact that gold’s price was fixed until 1971. Prior to that time, gold was money and not an investment. Interestingly, virtually none of the stocks listed in the 1700s still exist today. Instead, the returns of major indices such as the Dow are boosted by the removal of bankrupt companies and poor performers, which are replaced by high performers. Three of the 30 companies that made up the Dow in 2000 have since been replaced.

From a strategic portfolio allocation viewpoint it is easy to see why Ibbotson Associates, one of the world’s most highly regarded asset allocation specialists, determined that holding between 7.1 percent and 15.7 percent in precious metals bullion reduces portfolio volatility and improves returns.

Myth 2:

Gold Is Not A Good Inflation Hedge

The arguments against gold as an inflation hedge are usually based on calculations arising from the intra-day price spike in 1980. While gold did not keep up to inflation using daily prices from 1980 to 2002, the annual average gold price has kept up extremely well since 1971, when the price was no longer fixed, Figure 1. During the same timeframe, the U.S. dollar lost about 80 percent of its purchasing power. In fact, all the world’s major currencies have depreciated by significant amounts due to continuous excessive increases in the money supply. The impact of this devaluation on real returns is significant.

Figure 1 - Annual average gold price vs. annual inflation rate since 1980

Gold had increased in purchasing power since 1971.

Conversely, gold has not only maintained its purchasing power but increased it against all major currencies. It will continue to do so as long as the world’s central banks keep increasing the money supply by a greater percentage than their country’s GDP growth.

More importantly, gold maintains its purchasing power not only during inflationary periods, but also during deflationary periods. An extensive study, published by Roy Jastram, analyzed the purchasing power of gold in England and the U.S. from 1560 to 1976. Jastram concluded that gold held its value remarkably well over time. The purchasing power of gold and precious metals actually increases during deflationary periods because other assets decline in price by a much greater amount than precious metals do.

As central banks continue to accelerate the pace at which money is printed, inflation will increase, and the purchasing power of paper currencies will decline. This will result in more and more astute investors fleeing to the safety of gold. As a con­sequence, gold’s price should rise far in excess of the Consumer Price Index and the true inflation rate. In order to protect portfolios from rising inflation, Wainwright Economics concluded that an all-bond portfolio would need an 18 percent all­ocation to gold, silver and platinum, while an all-equity portfolio would need 40 percent just to stay ahead of inflation.

Myth 3:

Gold Is A Risky Investment

Risk means different things to different investors. A pension fund may perceive risk as a failure to meet its liabilities, whereas an asset manager may view risk as a failure to meet its benchmark. Most investors, however, associate risk with a loss of their capital or underperformance of their invest­ments in comparison to their expectations. “Risk comes from not knowing what you are doing,” according to Warren Buffett.

There are many kinds of risk: currency risk, default risk, market risk, inflation risk, systemic risk, political risk, interest rate risk and liquidity risk. While all of these apply to financial assets, many do not apply to gold bullion. Physical bullion is not subject to default risk, liquidity risk, political risk, inflation risk or interest rate risk. In the rare cir­cumstance of strong currencies, gold may be sub­ject to short-term currency risk and, at times, to market risk. Unlike financial assets, however, gold bullion cannot decline to zero. Gold is the only asset that can protect wealth from non-diversifiable systemic risk.

Precious metals provide high returns at low risk

Volatility or standard deviation are often used as measures of risk, and gold is considered to be quite volatile. However, when annual compounded returns are plotted against standard deviation, the individual Dow stocks are all more volatile than gold, and all but two of the Dow stocks had poorer performance than gold, silver, and platinum over the past eight years. Figure 2.

Returns are important, but even more important is to compare risk-adjusted returns. Clearly, an investment that has higher volatility may still be attractive if the returns are appropriately higher. Nobel prize-winning economist William Sharpe devised the most commonly used measure of risk-adjusted performance: the Sharpe Ratio. This ratio measures the amount of excess return per unit of volatility. The interpretation of the Sharpe Ratio is straightforward: the higher the ratio the better.

Bullion is unlikely to suffer underperformance risk in the near future. Demand for gold, silver and platinum is increasing for both commodity and monetary attributes, while annual mine production is declining. As the price of oil continues to rise due to production declines and increased demand, inflation will accelerate. As central banks increase money supply at accelerating rates, the purchasing power of currencies will continue to decline. As these two major trends interact with each other, the price of gold will continue to rise.

Myth 4:

Gold Does Not Pay Dividends or Interest

The Bank of England used this argument to justify selling half the country’s gold holdings at the bot­tom of the market in 1998. It wanted a “safe” investment, one that would generate interest, and it chose U.S. treasury bills. The gold was sold for under $300 per ounce. In the months following that sale, the price of gold tripled, and the value of the U.S. dollar lost 30 percent against the British pound. The currency exchange losses plus the opportunity cost resulted in billions of pounds in losses, significantly offsetting any interest income the Bank might have received.

The same is true for bond investors. In an infla­tionary environment, the “real” or inflation-ad­justed interest rate they receive is often negative. Gold, like any other asset that sits in a vault, will not earn interest or dividends, but neither is it at risk. No asset class generates income unless you give up possession and take the risk of not getting it back. However, gold’s capital appreciation is many times greater than the prevailing interest yields, while not being subject to any of the risks that interest-bearing investments are subject to. For a comparative analysis of holding bonds versus a systematic withdrawal program for BMG BullionFund units.

Myth 5:

Gold Is An Archaic Relic

A comparison of bullion to the larger producers shows gold has outperformed mining stocks since March 2007

Gold is often referred to as an archaic relic with no monetary role in today’s modern digital society. Several facts contradict this view. The world’s central banks still hold 29,000 tonnes of gold in their reserves. Gold, silver and platinum trade on the currency desks – not the commodity desks – of the banks and brokerage houses. The turnover rate of physical gold bullion, between the nine members of the London Bullion Marketing Association, currently averages $24 billion per day. Trading volume is estimated at seven to ten times that amount. Clearly, gold is still trading in its tra­ditional role as an alternative currency.

Myth 6:

Mining Stocks Are Better Investments Than Bullion

While mining stocks can generate impressive returns during an uptrend in precious metals prices, they do not always outperform bullion. It is unfair to compare junior mining companies to bullion because of the huge disparity in risk. While successful junior miners can generate impressive returns, over 90 percent of precious metals discov­eries never become productive mines. A better comparison would be the larger producers. While mining stocks have outperformed bullion during the early stages of this bull market, gold bullion has outperformed the major mining indexes since March 2007. Figure 3.

Mining stocks tend to be significantly more volatile and risky than bullion, and during sharp market declines they tend to follow the broad equity markets downwards – even if the price of the metal is rising. During the late stages of the bull market of the 1970’s, mining stocks underperformed bullion. In order to adequately compensate inves­tors for the higher risk, mining stocks would have to outperform bullion.

Conclusion

Investors who take the time to carefully evaluate the benefits of bullion will realize that these com­monly held myths do not hold up to scrutiny. Those investors stand to reap significant rewards. Investors who believe these myths are missing out on the opportunity to add an asset class that diver­sifies portfolios, protects against inflation, and may provide better returns than traditional assets, such as stocks and bonds.

Under a worst-case scenario of systemic risk, bullion may be the only asset that holds its value. As these myths are dispelled and the price of bullion rises, as many mainstream analysts predict, informed investors will benefit from purchasing bullion at today’s undervalued prices.

When the public at large becomes fully educated with respect to precious metals, it will bid up the price. Considering that global financial assets are estimated at over $180 trillion, while total global above-ground gold is only $4 trillion (and above-ground bullion is less than $1.5 trillion), a massive wealth transfer event is likely to occur. It is inter­esting to note that even a 10 percent switch from financial assets to gold would result in a 450 percent to 1,200 percent increase in the gold price.

The first and second editions of this article are published in Canadian MoneySaver September 2008 and Wealth Management Review 2008 Volume 2

The BMG Special Report: "The Six Biggest Myths About Gold" is required reading for sophisticated investors and advisors. This report provides a more detailed and technical evaluation of the six myths. Please visit www.goldmyths.com to download the report.
Source


Monex is the low-cost gold and Silver retailer. Paul Bea @ monex 800-949-4653 x2172
To support Goldmoney use Kevin from Goldmoneybill.org as referral.

Sunday, November 16, 2008

G20 Economic Summit Is Gold on the Horizon?

The G-20’s Secret Debt Solution

by Larry Edelson 11-13-08
Larry Edelson

If you think this weekend’s G-20 meetings in Washington are only about designing short-term fixes to the financial system and regulatory reforms for banks, hedge funds, brokers, mortgage companies and investment banks … think again.

Behind the scenes, a far more fundamental fix is being discussed — the possible revaluation of gold and the birth of an entirely new monetary system.

I’ve been studying this issue in great depth, all my life. And given the speed at which the financial crisis is unfolding, I would be very surprised if what I’m about to tell you now is not on the G-20 table this weekend.

Furthermore, I believe the end result will make my $2,270 price target for gold look conservative, to say the least. You’ll see why in a minute.

First, the G-20’s motive for a new monetary system: It’s driven by and based upon this very simple proposition …

“If we can’t print money fast enough to fend off another deflationary Great Depression, then let’s change the value of the money.”

I call it …
The G-20 may propose devaluing all currencies, including the U.S. dollar and the euro.
The G-20 may propose devaluing all currencies, including the U.S. dollar and the euro.

“The G-20’s Secret Debt Solution”

It would be a strategy designed to ease the burden of ALL debts — by simultaneously devaluing ALL currencies … and re-inflating ALL asset prices.

That’s what central banks and governments around the world are going to start talking about this weekend — a new financial order that includes new monetary units that helps to wipe clean the world’s debt ledgers.

It won’t be an easy deal to broker, since the U.S. is the world’s largest debtor. But remember: Debts are now going bad all over the world. So everyone would benefit.

Fed Chairman Ben Bernanke … Treasury Secretary Paulson … President Bush … President-elect Obama … former Fed Chairman Paul Volcker … Warren Buffett … and central bankers and politicians all over the world agree a new monetary system is needed.
The G-20 may propose devaluing all currencies, including the U.S. dollar and the euro.

So they’ll start hashing out the details to get the new financial architecture deployed as quickly as possible.

If you think I’m crazy or propagating some kind of conspiracy theory, then consider the historical precedent …

To end the Great Depression in 1933 Franklin Roosevelt devalued the dollar via Executive Order #6102, confiscating gold and raising its price 69.3%, effectively kick starting asset reflation.

Only this time, it won’t be just the U.S. that devalues its currency. The world is too interconnected. Instead, the world’s leading countries will propose a simultaneous and universal currency devaluation.

This time, they will NOT confiscate gold. There would be riots all over the globe if they even mentioned the “C” word.

But they don’t have to confiscate gold. Here’s one scenario …

They cease all gold sales and instead, raise the current official central bank price of gold from its booked value of $42.22 an ounce — to a price that monetizes a large enough portion of the world’s outstanding debts.
That way, just like in 1933, the debts become a fraction of re-inflated asset prices (led higher by the gold price).

And this time, instead of staying with the dollar as a reserve currency, the G-20 issues three new monetary units of exchange, each with equal reserve status.

The three currencies will essentially be a new dollar, new euro, and a new pan-Asian currency. (The Chinese yuan may survive as a fourth currency, but it will be linked to a basket of the three new currencies.)

The new fiat monetary units would be worth less than the old ones. For instance, it could take 10 new units of money to buy 1 old dollar or euro.

New names would be given to the new currencies to help rid the world of the ghost of a system that failed. Additional regulations and programs would be designed and implemented to ease the transition to a new monetary system.
The IMF would be at the center of the new monetary system.
The IMF would be at the center of the new monetary system.

The International Monetary Fund (IMF) would implement the new financial system in conjunction with central banks and governments around the world.

Keep in mind that the IMF is already set up to handle the transition, and has had contingency plans allowing for it since the institution was formed in 1944.

Included in the design and transition to a new monetary system …

A. A new fixed-rate currency regime. Immediately upon upping the price of gold and introducing the new currencies, a new fixed exchange rate system would be re-introduced. The floating exchange rate system would be tossed into the dust bin along with the old currencies.

This would kill any speculation about further devaluations in the currency markets, and drastically reduce market volatility.

B. To sell the program to savers and protect them from the currency devaluation, compensatory measures would be enacted. For instance, a one-time windfall tax-free deposit could be issued by governments directly to citizens’ accounts, or, to employer-sponsored pensions, to IRAs, or Social Security accounts.

Income taxes may subsequently be raised to pay for the give-away, or a nominal global type of sales tax could be enacted to help pay for the new system and the compensatory measures.

C. Additional programs would be designed to protect lenders and creditors. Lenders stand a much higher chance of getting paid off under the new monetary system — but with a currency whose purchasing power would now be a fraction of what it was when the loans were originated.

So programs would have to be designed to help lenders offset the inflationary costs of their devalued loans, probably via the tax code.

Naturally, all this is a bit more complicated than I’ve spelled out above. But that gives you a big-picture outline of what the plan could look like. And I think major changes like these are going to be set in motion at this weekend’s G-20 meetings in Washington.

Would they work?

Yes. They would help avoid a repeat of the deflationary Great Depression. But don’t expect even a new monetary system to put the U.S. or the global economy back on track toward the high rates of real growth that we’ve seen over the last several years. That’s simply not going to happen. Not for a while.
Instead, I’m talking about a massive asset price reflation, negative real economic growth in the U.S. and Europe — but continued real GDP gains in Asia.

The Big Question: What gold price would be legislated to reflate the U.S. and global economy?

I can’t tell you what gold price the G-20 would ultimately agree to. But here’s what they will be looking at …

* To monetize 100% of the outstanding public and private sector debt in the U.S., the official government price of gold would have to be raised to about $53,000 per ounce.

* To monetize 50%, the price of gold would have to be raised to around $26,500 an ounce.

* To monetize 20% would require a gold price a hair over $10,600 an ounce.

* To monetize just 10%, gold would have to be priced just over $5,300 an ounce.

Those figures are just based on the U.S. debt structure and do not factor in global debts gone bad. But since the U.S. is the world’s largest debtor and the epicenter of the crisis, the G-20 will likely base their final decision mostly on the U.S. debt structure.

So how much debt do I think would be monetized via an executive order that raises the official price of gold? What kind of currency devaluation would I expect as a result?

I would not be surprised to see the G-20 monetize at least 20% of the U.S. debt markets. THAT MEANS …

* Gold would be priced at over $10,000 an ounce.

* Currencies would be devalued by a factor of at least 12 to 1, meaning it would take 12 new dollars or euros to equal 1 old dollar or euro.

The return of the Gold Standard?

“But Larry,” you ask, “how could this be accomplished when we no longer have a gold standard? Further, are you advocating a gold standard?”
If the G-20 monetizes at least 20% of the U.S. debt markets, gold could easily hit $10,000 an ounce.
If the G-20 monetizes at least 20% of the U.S. debt markets, gold could easily hit $10,000 an ounce.

My answers:

First, you don’t need a gold standard to accomplish a devaluation of currencies and revaluation of the monetary system.

By offering to pay over $10,000 an ounce for gold, central banks can effectively accomplish the same end goal — monetizing and reducing the burden of debts, via inflating asset prices in fiat money terms.

Naturally, hoards of gold investors will cash in their gold. The central banks will pile it up. At the same time, other hoards of investors will not sell their gold, even at $10,000 an ounce. But the actual movement of the gold will not matter. It is the psychological impact and the devaluation of paper currencies that matters.

Second, I do NOT advocate a fully convertible gold standard. Never have. There isn’t enough gold in the world to make currencies convertible into gold. It would end up backfiring, restricting the supply of money and credit.

What should you do to prepare for these possibilities?

It’s obvious: Make sure you own some core gold, as much as 25% of your investable funds.

Also, as I’ve noted in past Money and Markets issues, you will want to own key natural resource stocks, and even select blue-chip stocks that will participate in the reflation scheme.
Source

China Building Up Gold Reserves, May Return to a Gold Standard?

Gold rush

Benjamin Scent

Friday, November 14, 2008

ADVERTISEMENT

The mainland is seriously considering a plan to diversify more of its massive foreign-exchange reserves into gold, a person familiar with the situation told The Standard.

Beijing is considering changing its asset allocations during the financial tsunami in order to build up gold reserves "in a big way," the source said.

China's fears about the long-term viability of parking most of its reserves in US government bonds were triggered by Treasury Secretary Henry Paulson's US$700 billion (HK$5.46 trillion) bailout plan, which may make the US budget deficit balloon to well over US$1 trillion this fiscal year.

The US government will fund the bailout by printing new money or issuing huge amounts of new debt, either of which will put severe pressure on the value of the greenback and on government bond yields.

The United States holds 8,133.5 tonnes of gold reserves valued at US$188.23 billion. China holds gold reserves of just 600 tonnes, worth only US$13.89 billion.

Beijing's reserves could easily go up to 3,000 to 4,000 tonnes, Tanrich Futures senior vice president Colleen Chow Yin-shan said.

Until now, the United States has had little choice but to issue massive amounts of debt to fund its deficits, and China has had little choice but to purchase it, as there are not many markets deep enough to absorb the mainland's US$30 billion to US$40 billion in monthly capital inflows.

Government officials involved in the management of China's reserves are beginning to see gold as an attractive place to park some of these funds. They see it as a real, tangible asset that will not lose its value over time - in stark contrast to the greenback, which is becoming more disconnected from economic realities as more bills are printed.

"It's the right time to increase the gold reserves, as the price is about US$710 to US$720 per ounce," said Wan Guoli, vice secretary general of the China Gold Association.

The International Monetary Fund has made reducing global payment imbalances one of its priorities in the aftermath of the financial tsunami.

"I think China probably will expand its strategic reserves into commodities during this downturn," said a Hong Kong-based strategist.

"China will continue to buy treasuries ... otherwise the system would get distorted," he said.

"But I think China will diversify its reserves."
Source


Monex is the low-cost gold and Silver retailer. Paul Bea @ monex 800-949-4653 x2172
To support Goldmoney use Kevin from Goldmoneybill.org as referral.

Nationwide State Silver Coin Proposal

This is a nationwide Silver Coin proposal to re-introduce the idea of Silver as money. Kentucky and Michigan are interested in the idea currently. A Silver dollar is traditionally worth a day's wage. With a days wage at about $150 Silver is undervalued 1/300th with the current price at about $10 per oz.

Silver Coin Proposal
by Jason Hommel, SilverStockReport.com
Goals:
# To protect against the theft of inflation and devaluations of paper money
# To promote an alternate choice to paper money
# To provide true wealth for people
# To secure economic strength through honest weights and measures

At GATA's Gold Rush 21 Conference, held in the fall of 2005, precious metal advocates discussed strategies to promote gold and silver. (See goldrush21.com.) Among the best silver money ideas are Hugo Salinas Price's silver coin movement in Mexico, the Liberty Dollar, and New Hampshire's Silver Coin ballot measure, but none of these, I feel are ideal. From what I have learned about the importance of using honest weights and measures as taught in the Bible, (unjust weights and measures being described as abominations) I have developed this Silver Coin Proposal.

In July of 2005, I sent this Silver Coin Proposal to all 50 governors of the U.S. states. To date, about 15 have responded. Two state officials from Kentucky and Michigan have called me to state that when they are ready, they would like discuss this proposal further.

On December 2, 2005, five hundred and sixty six supporters of my silver coin proposal emailed California Governor Arnold Schwarzenegger to ask him to consider it. You can read a few of these endorsements here: silverstockreport.com/silver-coin-proposal-endorsements.html

I am now seeking endorsements from leaders in the precious metals industry, investment newsletter writers, libertarian leaders, business executives, celebrities, union leaders, and prominent politicians. You can find the celebrity endorsements here: silverstockreport.com/Silver_Coin_Proposal_Celebrity_Endorsements.html
Email your endorsement to: j@silverstockreport.com

This Silver Coin Proposal was originally written for State Governments (and National Governments), but it is also appropriate for city & county governments and for any business--especially large employers such as Wal-Mart or McDonald's. Gold and silver mining companies are among those who would benefit the most from paying willing employees in silver. Issuing silver as money is the best way to promote the use of silver as money!

For my readers: A Job Opportunity: It is too overwhelming for me, to persuade every mining company, employer and government in the world. Only through you, the collective market-place, can we effectively promote the use of silver as money. Presentations need to be made, and people need to take charge. For example, if Wal-Mart uses this program, Wal-Mart will need to hire someone to coordinate it. Why not you, the one who presented it to them?
The Presentation:
Desirable Features of Money

To best function as money, a monetary item should possess a number of features:

To be a medium of exchange:

* It must be liquid, easily tradable, and with a low spread between the prices to buy and sell. A low spread typically occurs when an item is fungible.
* It must be easily transportable; precious metals have a high value to weight ratio. This is why oil, steel, copper, water, or bricks are not suitable as money.

To be a unit of account:

* It must be divisible into small units without destroying its value; precious metals can be coined from bars, or melted down into bars again. This is why leather or animals are not most suitable as money.
* It must be fungible: that is, one unit or piece must be equivalent to another, which is why diamonds or real estate are not suitable as money.
* It must be a certain weight, or measure, to be verifiably countable. This is why paper is not most suitable as money.

To be a store of value:

* It must be long lasting and durable; it must not be subject to decay. This is why food items, expensive spices, or even fine silks, are not most suitable as money.
* It must have a stable value and an intrinsic value, as with a luxury item; a scarce or rare commodity.
* It must be difficult to counterfeit, and the genuineness must be easily recognizable. These reasons are why paper, or electronic credits, often fail as money.

For these reasons, gold and silver have been chosen repeatedly throughout history as the choice for currency for more societies and cultures and over longer time periods than any other items. Those societies embracing gold and silver invariably have prospered under what is often called a golden age.

One key benefit of money is that it facilitates and encourages trade, savings, and wealth creation.

Perhaps the most desirable feature of money is that you have a lot of it as compared to other people, and that others want what you have. Money would be rather useless if everyone had a million dollars. Keep this in mind when considering the silver shortage.
Why Silver? Why Now?
1. Low value of silver today

We live in a unique historical era. No nation on earth currently uses gold or silver as money. This has created the greatest investment opportunity in the history of mankind, because lack of monetary demand for gold and silver has lowered their value.

Silver once had a much higher value. For over 2000 years, the amount of silver in a dime or dollar was worth a day's wage--be it 100 years ago in the U.S. or Canada, or in Roman times with a silver denarius. At $7/oz., those same dimes are worth about 50 cents each, and you can buy about 300 silver dimes with a day's wage of $150. Thus, silver today is valued about 1/300th of the historic value it possessed when it was plentiful√Ďand this is the opportunity.
2. The silver shortage.

Silver is scarcer now than ever before due to the fact that on average, modern industrial nations have consumed about 6/10ths of an ounce of silver per person a year since 1945. That usage has consumed about 90% of the silver mined in the history of the world. The scarcity of silver is now being recognized by its users. See "Silver Users Fear Silver Shortage" at http://silverstockreport.com/silvershortage

It is "first come, first served"! And those who buy silver first will benefit the most.

Over the last five years, I have invested millions of dollars in silver. About 10% of my net worth is in silver bullion bars and coins, and about 85% is invested in stocks of silver exploration and mining companies. I am a world expert on the opportunities available in silver stocks, as I keep track of about 80 silver stocks at silverstockreport.com. I have given speeches at mining conventions in Vancouver, Toronto, Calgary, Chicago, and Idaho. I am a successful trader and investor. In 2002, my picks and portfolio were up about 150%. In 2003, they were up about 300%. In 2004, up about 40%. In 2005, up about 100%. Of course, gains of this magnitude are much easier to do with my small, multi-million dollar portfolio.

Speaking of successful investors, one of the world's best is Warren Buffett, who averages about 20% gains each year. That is made more significant because Warren invests billions, and the larger your holdings, the more difficult it is to grow rapidly. The point is that Warren Buffett purchased 130 million ounces of silver in 1997, which was 2% of Berkshire Hathaway's holdings. Today, this equals nearly half of all known stockpiles of above-ground refined silver. When Warren bought his silver, he made the understatement of the year by saying, "Equilibrium between supply and demand was only likely to be established by a somewhat higher price." This can be confirmed here: http://www.berkshirehathaway.com/news/feb03981.html
3. Others are leading the way.

Various states and nations are beginning to re-consider a gradual reuse of using gold and silver coins as money. New Hampshire, Nevada, Idaho, and others have been considering legislation to make this happen. See http://www.goldmoneybill.org

Hugo Salinas Price, a billionaire in Mexico, leads a coalition of all 31 Mexican governors that is asking the Mexican government to begin minting and using the Libertad, a one-ounce silver coin, for general commerce.

Additionally, a resurgence in using the dinar and dirham, the gold and silver coins of the Muslim world, is beginning in Muslim nations. See http://www.islamicmint.com

In sum, it's about truth. Will you stand up for the truth of honest money, honest weights and measures? The alternative is to support the fraudulent "broken promises" of un-backed paper money.
Silver Coin Proposal

The State or Corporation, the "issuer of the coins" (hereafter referred to as the Issuer) should buy silver on the open market, mint the silver into one-ounce coins (or hire a company for this purpose such as NorthWest Territorial Mint http://www.nwtmint.com), and pay silver to employees of the Issuer who voluntarily choose to be paid in silver.

Employees may select, on a questionnaire, a certain percentage of their paychecks to be paid in silver (rounded to the nearest price of an ounce of silver).

The coin should be "sold", "bought", "traded", "priced", or "valued" at 10% above the spot price (which is the bullion price of silver traded worldwide) which would allow for a nice profit to the Issuer. (Private mints today can mint silver coins at 4-7% above the spot price.) The Issuer's coins could be "bought", "repurchased", or exchanged for cash by the Issuer, (or accepted as payment for State taxes), at the same value of 10% above the spot price.

The Issuer would also gain extra profit as the price of silver rises between the time of its purchase in the spot market until the time of coin distribution, as surely the price of silver would rise due to increased monetary usage and demand. I anticipate that this extra profit could reach, or even exceed a gain of 100%-200%. This is due to the fact that the silver market is so small, and prices are extremely volatile in response to even tiny increases in investment demand. In other words, the Issuer could purchase raw silver between $7-$15/oz., and by the time the Issuer distributes coins, the price of silver could have risen to $21 to $45/oz. in anticipation of the increased demand for silver.
Important Details

1. The coin should have no "spread," that is, cost to buy and sell. The quoted price should be 10% above the price of silver whether buying or selling. Reducing transaction costs will help promote the use of the coin as money. Currently, silver has about a 7% spread, meaning that the cost to buy the silver is about 7% higher than when selling the same silver.

2. A coin with a value denominated in terms of weight (not dollars) would keep the coin in circulation, regardless of continued dollar inflation. The coin will be valued by weight and based on the price of silver. The coin cannot have a fixed dollar value, because the dollar's value is always changing. For example, if a one-ounce silver coin was stamped as a $20 piece, the coins would not be valued closely enough to the free market value of silver. Few would choose to accept a grossly overvalued silver piece. On the other hand, if the silver price exceeded $20/oz., a $20 dollar-denominated coin would cease to circulate and be hoarded.

3. Many potential Issuers (States and Corporations) have pension funds. The Issuer's pension fund could invest in silver before the introduction of the coin. Thus, the investment in silver would increase in value as monetary demand for silver increases. Increased liquidity for silver would also follow, making it easier for the pension fund to liquidate and sell any investment of silver. This is because there would always be a large and ready market for silver after the establishment of the coin program.

4. The Issuer's purchase of silver should initially be done discreetly, perhaps for the first six months to a year. The Issuer should buy through a hired broker that conceals the Issuer's identity so as to obtain the most silver at the best price without moving excessively increasing the market price. Doing this could add 100% or more to the Issuer's initial profits from the coin program.

5. Private hoards of silver could be coined for a 5% fee. This would encourage others to buy silver and bring it to the Issuer's mint to coin it, in order to gain the profit of being able to "market" the coins at 10% higher than the silver price. This would thus enable the Issuer's coins to be placed into the hands of non-Issuer employees, and thus circulate more widely, and gain greater acceptance.

6. Since the coin would not be federally issued, the coin would not be accepted by any banks. This must be made clear to the people, but it should be emphasized that it would not be a problem.

7. The coins would be accepted by:
# The Issuer, at 10% above the spot price
# Coin dealers, at whatever discount they offer (typically 5% off)
# Regular merchants, at whatever they decide they are worth (typically 5% to 10% over spot)

8. One advantage to a non-federally-issued coin is that it can contain the image of a living person, such as a State Governor, or a Corporate Logo. Thus it can serve as an advertising medium. (Only Federal notes and coins must restrict the images to dead people.)

9. The coin is constitutional for States to issue. The U.S. Constitution, in Article 1, Section 10, states: "No State shall ... make any Thing but gold and silver Coin a Tender in Payment of Debts; ..."

There is also no law preventing any Corporation or entity from minting their own coins.

10. To advertise the benefits of silver, a one-page fact sheet on its historical and present-day value (Excerpts from the sections above titled "Desirable Features of Money", and "Why Silver, Why Now?") could be inserted into the paychecks of the Issuer's employees. This could greatly increase voluntary demand for the coins.

11. Free market dynamics: A silver coin accepted on a voluntary basis is an important free market principle. Other free market principles are choice and competition. A silver coin would be a viable & meaningful alternative to Federal Reserve Notes (U.S. paper dollars.) A silver coin must remain a choice.

12. Coins can be sent out through U.S. Post Registered Insured Mail very safely and cheaply. Coin dealers in the U.S. routinely send silver via U.S. Post Registered Insured Mail. All registered mail is transferred under lock and key, and signed for at every step of the way up to the final recipient. The cost varies from about $5 for a small package to $60 for about 50 pounds. This may add costs of up to 1-10%, depending on the amount of silver to be shipped. To further reduce shipping costs, an alternative might be to ship silver payments in bulk. For example, silver could be shipped to a school's administration to be distributed to the teachers, or to a store manager for all employees.

13. Other denominations, such as 1/2 oz., 1/4 oz., and 1/10 oz., could be minted as demand increases, or as silver's value increases. Gold coins could also be introduced in the same manner, after a successful review of the silver coin program.
Reasons why this will succeed:

The proposed silver coin program has advantages that will make it vastly more successful than the Federal Silver Eagle coin program for the following reasons:

a) These coins will be more reasonably priced. The Federal Silver Eagle sells for up to $2.50/oz. more than the silver price, or up to 50% more. The State coin will be only 10% above the silver price, and have no spread between the buying and selling prices.

b) These coins will be issued to employees (who choose it), and thus, will be more widely distributed.

c) These coins will be accepted for State fees and taxes unlike the Silver Eagle, which is not accepted by the Federal Government for any fees or taxes. Thus, the State's acceptance of the coin will legitimize it, and actually create demand.

d) These coins will be "created" by people who will bring in their own silver to the State mint so as to "spend" their silver at a small profit, which will thus boost circulation of the coin among merchants.

e) These coins will soon circulate widely outside the state, as people worldwide will appreciate the alternative of a "State-backed" silver coin that is cheaper than the overvalued, non-repurchasable Federal coin.

f) These coins should be advertised by the Issuer. And, the coins will be a circulating advertisement for the Issuer.
Suggested design for a one-ounce State/Corporate/Private-Issued silver coin:

On the "heads" side, there can be an engraving or logo of some sort.
Arched across the top: "SILVER IS MONEY"
Arched across the bottom: "ONE OUNCE SILVER"
Year minted (2005)

On the flip side (tails), the inscription:
"ECONOMIC STRENGTH THROUGH HONEST WEIGHTS AND MEASURES"
Arched across the top, the Issuer's name such as: "State of California" or "Wal-Mart"
Arched across the bottom: "99.9% PURE SILVER"
Source

Monex is the low-cost gold and Silver retailer. Paul Bea @ monex 800-949-4653 x2172
To support Goldmoney use Kevin from Goldmoneybill.org as referral.

Thursday, November 13, 2008

Hyperinflation on the Horizon- Gold $2000 oz Oil $300 Barrel


Investors warn liquidation of assets and deflation is temporary calm before the storm.
Economic experts have predicted that rampant inflation caused by government stimulus packages will soon take hold of the economy and force precious commodity prices to all time highs.

Johann Santer, MD at Superfund Financial Hong Kong told CNBC that he expects to see gold climb from its current position at $710 to a whopping $1500-$2000 an ounce within the next three months.

"Should money should be going into cash, paper?" asked CNBC anchor Martin Soong, to which Santer replied in the negative:

"Not necessarily, we see that for the time being this remains the right strategy to be in, of course people are quite nervous, but once we start to understand again that it will not really protect us from inflation, which most likely will come in the long run, because of all the stimulus packages, I would assume that we should also start looking at the gold price at the moment and find opportunities there."

Santer explained that deflation is not going to protect us from what he sees as inevitable heavy inflation in the long run caused by the huge amounts of money being pumped into the market in the name of saving the economy.

Santer predicted that we may even see double digit inflation.

"We better get prepared right away and start to look at real assets, for example gold could be really attractive at the moment, trading at $710." Santer added.

"At the moment there is a major sell off in everything, people are really looking at cash and treasury bills but in the long run, we will not escape from inflation so we have a medium to long term target of $1500 within the next three months."

Watch the video here.

Johann Santer's prediction mirrors that of numerous other fund managers and top investors such as Jim Rogers, Robin Griffiths and Jurg Kiener who are now predicting that global central banks' insistence on printing their way out of economic turmoil is setting the stage for a hyperinflationary holocaust, a knock-on effect of which will be gold's acceleration towards $2,000, as demand for precious metals outstrips supply.


Meanwhile another investor, Puru Saxena, CEO of Puru Saxena Wealth Management, has told CNBC that within the next four to five years he sees oil prices skyrocketing to up to $300 a barrel.

"Over the last few months we have seen widespread liquidation of all assets, nothing has been spared, commodities, corporate bonds, real estate, equities in the emerging markets, the Dow Jones the FTSE, everything has been sold because of distressed liquidation. However, if you look at the supply and demand dynamics of most of the natural resources, whether it's energy or food or mining companies, they are still very very bullish." Saxena stated.

He explained that he feels people are only looking at one side of the equation at the moment with regards to the decline in the value of oil, which is currently hovering around the $55 per barrel mark.

Saxena predicts that we are going to see a huge rebound in resources in the next couple of years due to increased demand and reduced supply.

"Obviously no one has a clue where the market will be in two or three years from now, or indeed the price of oil, but over the next four or five years I suspect it will go to over two or three hundred dollars a barrel." Saxena added.


With OPEC continually cutting oil output it is not surprising to hear such predictions emerging from investors. We have been continually warned that the sharp decline in oil prices is a temporary respite only.

We have previously reported on the corporate elite's efforts to hike oil prices up to the $200 mark. Earlier this year, a report by Goldman Sachs Group Inc. forecasted that oil prices will reach $150 to $200 dollars a barrel within 2 years. JPMorgan Chase & Co have also predicted that prices could rise to $200 a barrel. Such levels would set the stage for a possibly catastrophic post industrial revolution.
Source


Monex is the low-cost gold and Silver retailer. Paul Bea @ monex 800-949-4653 x2172
To support Goldmoney use Kevin from Goldmoneybill.org as referral.

Friday, November 7, 2008

Democrats Want to Confiscate 401K Plan

Here comes full-blown Communism, America you wanted change? Now you got it? How bout them apples, and this is only the beginning; all in the guise of protecting your interests.
Dems Target Private Retirement Accounts
Democratic leaders in the U.S. House discuss confiscating 401(k)s, IRAs

By Karen McMahan

November 04, 2008

RALEIGH — Democrats in the U.S. House have been conducting hearings on proposals to confiscate workers’ personal retirement accounts — including 401(k)s and IRAs — and convert them to accounts managed by the Social Security Administration.

Triggered by the financial crisis the past two months, the hearings reportedly were meant to stem losses incurred by many workers and retirees whose 401(k) and IRA balances have been shrinking rapidly.

The testimony of Teresa Ghilarducci, professor of economic policy analysis at the New School for Social Research in New York, in hearings Oct. 7 drew the most attention and criticism. Testifying for the House Committee on Education and Labor, Ghilarducci proposed that the government eliminate tax breaks for 401(k) and similar retirement accounts, such as IRAs, and confiscate workers’ retirement plan accounts and convert them to universal Guaranteed Retirement Accounts (GRAs) managed by the Social Security Administration.

Rep. George Miller, D-Calif., chairman of the House Committee on Education and Labor, in prepared remarks for the hearing on “The Impact of the Financial Crisis on Workers’ Retirement Security,” blamed Wall Street for the financial crisis and said his committee will “strengthen and protect Americans’ 401(k)s, pensions, and other retirement plans” and the “Democratic Congress will continue to conduct this much-needed oversight on behalf of the American people.”

Currently, 401(k) plans allow Americans to invest pretax money and their employers match up to a defined percentage, which not only increases workers’ retirement savings but also reduces their annual income tax. The balances are fully inheritable, subject to income tax, meaning workers pass on their wealth to their heirs, unlike Social Security. Even when they leave an employer and go to one that doesn’t offer a 401(k) or pension, workers can transfer their balances to a qualified IRA.

Mandating Equality

Ghilarducci’s plan first appeared in a paper for the Economic Policy Institute: Agenda for Shared Prosperity on Nov. 20, 2007, in which she said GRAs will rescue the flawed American retirement income system (www.sharedprosperity.org/bp204/bp204.pdf).

The current retirement system, Ghilarducci said, “exacerbates income and wealth inequalities” because tax breaks for voluntary retirement accounts are “skewed to the wealthy because it is easier for them to save, and because they receive bigger tax breaks when they do.”

Lauding GRAs as a way to effectively increase retirement savings, Ghilarducci wrote that savings incentives are unequal for rich and poor families because tax deferrals “provide a much larger ‘carrot’ to wealthy families than to middle-class families — and none whatsoever for families too poor to owe taxes.”

GRAs would guarantee a fixed 3 percent annual rate of return, although later in her article Ghilarducci explained that participants would not “earn a 3% real return in perpetuity.” In place of tax breaks workers now receive for contributions and thus a lower tax rate, workers would receive $600 annually from the government, inflation-adjusted. For low-income workers whose annual contributions are less than $600, the government would deposit whatever amount it would take to equal the minimum $600 for all participants.

In a radio interview with Kirby Wilbur in Seattle on Oct. 27, 2008, Ghilarducci explained that her proposal doesn’t eliminate the tax breaks, rather, “I’m just rearranging the tax breaks that are available now for 401(k)s and spreading — spreading the wealth.”

All workers would have 5 percent of their annual pay deducted from their paychecks and deposited to the GRA. They would still be paying Social Security and Medicare taxes, as would the employers. The GRA contribution would be shared equally by the worker and the employee. Employers no longer would be able to write off their contributions. Any capital gains would be taxable year-on-year.

Analysts point to another disturbing part of the plan. With a GRA, workers could bequeath only half of their account balances to their heirs, unlike full balances from existing 401(k) and IRA accounts. For workers who die after retiring, they could bequeath just their own contributions plus the interest but minus any benefits received and minus the employer contributions.

Another justification for Ghilarducci’s plan is to eliminate investment risk. In her testimony, Ghilarducci said, “humans often lack the foresight, discipline, and investing skills required to sustain a savings plan.” She cited the 2004 HSBC global survey on the Future of Retirement, in which she claimed that “a third of Americans wanted the government to force them to save more for retirement.”

What the survey actually reported was that 33 percent of Americans wanted the government to “enforce additional private savings,” a vastly different meaning than mandatory government-run savings. Of the four potential sources of retirement support, which were government, employer, family, and self, the majority of Americans said “self” was the most important contributor, followed by “government.” When broken out by family income, low-income U.S. households said the “government” was the most important retirement support, whereas high-income families ranked “government” last and “self” first (www.hsbc.com/retirement).

On Oct. 22, The Wall Street Journal reported that the Argentinean government had seized all private pension and retirement accounts to fund government programs and to address a ballooning deficit. Fearing an economic collapse, foreign investors quickly pulled out, forcing the Argentinean stock market to shut down several times. More than 10 years ago, nationalization of private savings sent Argentina’s economy into a long-term downward spiral.

Income and Wealth Redistribution

The majority of witness testimony during recent hearings before the House Committee on Education and Labor showed that congressional Democrats intend to address income and wealth inequality through redistribution.

On July 31, 2008, Robert Greenstein, executive director of the Center on Budget and Policy Priorities, testified before the subcommittee on workforce protections that “from the standpoint of equal treatment of people with different incomes, there is a fundamental flaw” in tax code incentives because they are “provided in the form of deductions, exemptions, and exclusions rather than in the form of refundable tax credits.”

Even people who don’t pay taxes should get money from the government, paid for by higher-income Americans, he said. “There is no obvious reason why lower-income taxpayers or people who do not file income taxes should get smaller incentives (or no tax incentives at all),” Greenstein said.

“Moving to refundable tax credits for promoting socially worthwhile activities would be an important step toward enhancing progressivity in the tax code in a way that would improve economic efficiency and performance at the same time,” Greenstein said, and “reducing barriers to labor organizing, preserving the real value of the minimum wage, and the other workforce security concerns . . . would contribute to an economy with less glaring and sharply widening inequality.”

When asked whether committee members seriously were considering Ghilarducci’s proposal for GSAs, Aaron Albright, press secretary for the Committee on Education and Labor, said Miller and other members were listening to all ideas.

Miller’s biggest priority has been on legislation aimed at greater transparency in 401(k)s and other retirement plan administration, specifically regarding fees, Albright said, and he sent a link to a Fox News interview of Miller on Oct. 24, 2008, to show that the congressman had not made a decision.

After repeated questions asked by Neil Cavuto of Fox News, Miller said he would not be in favor of “killing the 401(k)” or of “killing the tax advantages for 401(k)s.”

Arguing against liberal prescriptions, William Beach, director of the Center for Data Analysis at the Heritage Foundation, testified on Oct. 24 that the “roots of the current crisis are firmly planted in public policy mistakes” by the Federal Reserve and Congress. He cautioned Congress against raising taxes, increasing burdensome regulations, or withdrawing from international product or capital markets. “Congress can ill afford to repeat the awesome errors of its predecessor in the early days of the Great Depression,” Beach said.

Instead, Beach said, Congress could best address the financial crisis by making the tax reductions of 2001 and 2003 permanent, stopping dependence on demand-side stimulus, lowering the corporate profits tax, and reducing or eliminating taxes on capital gains and dividends.

Testifying before the same committee in early October, Jerry Bramlett, president and CEO of BenefitStreet, Inc., an independent 401(k) plan administrator, said one of the best ways to ensure retirement security would be to have the U.S. Department of Labor develop educational materials for workers so they could make better investment decisions, not exchange equity investments in retirement accounts for Treasury bills, as proposed in the GSAs.

Should Sen. Barack Obama win the presidency, congressional Democrats might have stronger support for their “spreading the wealth” agenda. On Oct. 27, the American Thinker posted a video of an interview with Obama on public radio station WBEZ-FM from 2001.

In the interview, Obama said, “The Supreme Court never ventured into the issues of redistribution of wealth, and of more basic issues such as political and economic justice in society.” The Constitution says only what “the states can’t do to you. Says what the Federal government can’t do to you,” and Obama added that the Warren Court wasn’t that radical.

Although in 2001 Obama said he was not “optimistic about bringing major redistributive change through the courts,” as president, he would likely have the opportunity to appoint one or more Supreme Court justices.

“The real tragedy of the civil rights movement was, um, because the civil rights movement became so court focused that I think there was a tendency to lose track of the political and community organizing and activities on the ground that are able to put together the actual coalition of powers through which you bring about redistributive change,” Obama said.
Source

What can you do? Buy Silver and Gold and hide it!
Monex is the low-cost gold and Silver retailer. Paul Bea @ monex 800-949-4653 x2172
To support Goldmoney use Kevin from Goldmoneybill.org as referral.