Saturday, August 23, 2008

august 22.08 commentary.....extremely important

   James Joyce table

Ted Butler Commentary…attached.


Good morning Ladies and Gentlemen:


I am not going to bore you with details on yesterdays trading.  As I promised you on Thursday, we knew that Bernanke was speaking and gold and silver had to be taken down.

Rumours of a pending deal to safe Lehman Brothers brought the Dow up by 192 points.  If any of you believe this story, I have a great piece of land to sell you in the Sahara desert.  The chance of this happening is zero.


I have attached  Ted Butler`s commentary which was released on Friday instead of Monday due to its importance.  The title speaks for itself:   `the smoking gun``.


For years, the weekly COT report issued by the CFTC  has indicated large comex traders have manipulated the price of silver and gold.  And for years, CFTC has resisted public pressure over the issue of manipulation with blanket denials of any wrongdoing.  Brokers have agreed with the CFTC officials explaining the massive short position in both metals in a manner that defies all known economic laws.


During the months of July and August, we have seen a widespread shortage of silver for retail purchase corresponding with a complete collapse of that metal.  All silver dealers are out of metal as the mint cannot find enough to mint the coins.  The physical market is London is totally devoid of both silver and gold  as various sovereign entities have drained and stored these precious metals on their soil.

The Wall  Street Journal reported yesterday that the usa Mint has closed its minting of gold because of a lack of metal.


Yesterday, Ted Butler released a paper that will shake the boots of the investment community.  The data is taken from a monthly report issued by the CFTC called the Bank Participation Report.

The link is in the bottom of the paper:  re


I will try and explain its significance:


The report is only for a change in action on a commodity for the month.  It is not a total quantum, only a change  or a delta in a commodity.  The total short position on both silver and gold rose exponentially.

However, the report only lists the change in the months of July and August for silver and gold.  The data speaks for themselves;


On July l.08, the opening inventory short, two usa banks who for now are nameless were short  6199 contracts of silver  or  30,995000 oz.  Please note that there are other banks that are short but they did not add to their short position during this participation report.


On August 5.08 , these two banks who are still nameless were short  33,805 contracts  or 169 million oz of silver.  The increase is 131 million oz of silver or 5 fold increase.  This is the largest data change in the history of the CFTC.  Corresponding to this of course, the price of silver dropped from 19.55 an oz to 12.22 an oz. at its nadir and now trading at 13.40.


For gold:   3 usa banks who are nameless, held a short position of 7787 contracts of gold or 778700 oz of gold short.  On August 5.08 when this report surfaced, these same  3 banks increased their short position to 86,398 contracts or 8,700,000 oz of gold an 11 fold increase in their short position.  Please note that there are other banks who are massively short gold.  However they did not participate in their dealings with the commodity gold for the July-august period so these guys are not in the report.  As you all are aware, the price of gold fell by 150 oz per oz.  Also this is the largest delta change reported in the history of the comex.  This was put on as one massive short position just hours before the market collapsed in price in gold and for that matter silver.


The banks need cover in order to carry out their fraud.  They probably  (we will need police or special authorities to determine this) leased the silver metal from the SLV in England and the GLD.  This is why the lease rates went negative 3.5%  Bullion banks paid these 2to 3 banks payment to lease.  This is totally unprecedented and defies all logic.  It is difficult to explain why a bullion bank would pay someone to lease something.   The two  banks re silver and the 3 banks re gold, showed the regulators that they have metal even though it wasn`t their ownership.  The cover allowed the massive short to proceed.


There is going to be many questions regulators must answer.  Is there a connection between the 2 usa banks selling an additional 138 million oz of non existent silver into the market and the instant fall in the price of silver.  Is there a connection between the 3 usa banks selling an addition 7.8 million oz of non existent gold causing an instant fall in the price of that metal at the exchanges.


The silver short is equivalent to 20% of world production.  It is greater in quantum than the entire comex silver stockpile.  It is almost equivalent to the supposed stockpile at the SLV in London who lists their silver inventory at 200 million oz.


The gold short is equivalent to 10% of annual world production. In dollars, the amount of gold sold short is 7 billion dollars.  To give you an idea of the short, the usa produces 20 tonnes of gold per month and sells it to refiners.  The total dollars sold by the usa is 1 billion dollars per month.  So this equates to 7 months of total usa gold production sold short.


The losses to the world to silver holders is estimated to be more than 2.5 billion dollars.  Long holders of silver futures also suffered a similar 2.5 billion decline in the value of their contracts.   If they cashed their losses they would record a loss of approximately 2.5 billion dollars.


The losses to the world in gold is much greater due to the higher dollar amount of gold..probably in the order of hundreds of billions of dollars.  To this we must include losses in holdings of gold and silver shares.


We can only conclude that the losses in both of these metals was caused by the two banks for silver and the 3 banks for gold.


Butler asks the right questions:


What real legitimate business do the 2 or 3 usa banks suddenly have for selling short such quantities of speculative instruments over a brief time period. Do we want banks to be engaging in this type of activity.  If the manipulation was not successful, would usa taxpayers be called on to bail out yet another bank speculation gone bad.


Do the traders who lost money in the recent price collapse of silver and gold have a reason to believe that their money is now in the pockets of these two or 3 banks. 


The data on the CFTC report is clear and compelling. 


The short positions initiated by these banks remain today.  I can assure you that  Russia  smells blood.  They see shortages of metal and a huge short position by the banks that cannot be closed.

They already own comex positions and they will not roll but take delivery in December.


Years ago, when Russia defaulted on its bonds, it got immediate funds from the IMF.  However it had to deposit its gold in London which was rumoured to be around 300 tonnes.  As commodity prices increased, so did the fortunes of Russia.  They accumulated vast quantities of paper dollars.  They then asked for their gold back only to find that England leased out the metal.  They offered a cheque in cash but Russia  refused.  They are still owed the gold today.


Russia is a very unforgiving nation.  They have now accumulated gold on its soil slowly as well as accumulating a good position in gold at comex and LBMA.  At a moments notice they can take delivery and bankrupt the West in the identical manner which President Reagen destroyed Russia in 1998.  Putin was the head of the KGB then.  This cagey individual is taking his time seeking revenge.

In the meantime Russia controls the natural gas distribution through  Europe.  They wish to control the pipelines.  They wish to control oil and they wish to control gold.


China has vast amount of usa dollars and only about 600-1000 tonnes of gold.  They have stated publicly that they wished to accumulate 2500-3000 tonnes of gold.  There will be a race for the last remaining oz on the planet.

Hang onto your hats…this is going to be very stormy.


Have a great weekend



August 22, 2008

The Smoking Gun

(This essay was written by silver analyst Theodore Butler, an independent consultant. Investment Rarities does not necessarily endorse these views, which may or may not prove to be correct.)

For years, the data contained in the weekly Commitment of Traders Report (COT), issued by the CFTC, have indicated that several large COMEX traders have manipulated the price of silver and gold. For an equal number of years, the CFTC has reluctantly responded to public pressure over this issue with blanket denials of any wrongdoing. Many analysts have agreed with the CFTC’s position, conjuring up various ways to explain why a massive short position held by a handful of traders is not manipulative.

The recent widespread shortage of silver for retail purchase coupled with a price collapse appears to have shaken these analysts’ confidence that the COMEX silver market is operating ‘fair and square.’ Well it should, since there is no rational explanation for a significant price decline going hand in hand with product shortages other than collusive manipulation.

For any remaining doubters that COMEX silver and gold pricing is manipulated, the following CFTC data should be considered. This data is taken from a monthly report issued by the CFTC, called the Bank Participation Report. Here’s the link for the report - The relevant data is found in the July and August futures sections. I will condense it.

These facts speak for themselves. Here are the facts. As of July 1, 2008, two U.S. banks were short 6,199 contracts of COMEX silver (30,995,000 ounces). As of August 5, 2008, two U.S. banks were short 33,805 contracts of COMEX silver (169,025,000 ounces), an increase of more than five-fold. This is the largest such position by U.S. banks I can find in the data, ever. Between July 14 and August 15th, the price of COMEX silver declined from a peak high of $19.55 (basis September) to a low of $12.22 for a decline of 38%.

For gold, 3 U.S. banks held a short position of 7,787 contracts (778,700 ounces) in July, and 3 U.S. banks held a short position of 86,398 contracts (8,639,800 ounces) in August, an eleven-fold increase and coinciding with a gold price decline of more than $150 per ounce. As was the case with silver, this is the largest short position ever by US banks in the data listed on the CFTC’s site. This was put on as one massive position just before the market collapsed in price.

This data suggests other questions should be answered by banking regulators, the CFTC, or by those analysts who still doubt this market is rigged. Is there a connection between 2 U.S. banks selling an additional 27,606 silver futures contracts (138 million ounces) in a month, followed shortly thereafter by a severe decline in the price of silver? That’s equal to 20% of annual world mine production or the entire COMEX warehouse stockpile, the second largest inventory in the world. How could the concentrated sale of such quantities in such a short time not influence the price?

Is there a connection between 3 U.S. banks selling an additional 78,611 gold futures contracts (7,861,100 ounces) in a month, followed shortly by a severe price decline in gold? That’s equal to 10% of annual world production and amounts to more than $7 billion worth of gold futures being sold by 3 U.S. banks in a month. How can this extraordinary concentrated trading size not be manipulative?

Because prices fell so sharply after the short sales were taken (with the appropriate dirty tricks as I have previously explained) holders of known physical silver in the world suffered a decline in value of more than $2.5 billion and long COMEX silver futures holders suffered a similar $2.5 billion decline in the value of their contracts. In gold, because the dollar value held is much greater than silver, investor losses were much greater, on the order of hundreds of billions of dollars on their physical holdings. Declines in the value of mining shares adds many billions more. Was this loss of value caused by the concentrated short selling of 2 or 3 U.S. banks?

What real legitimate business do 2 or 3 U.S. banks suddenly have for selling short such quantities of speculative instruments over a brief time period? Do we want banks to be engaging in this type of activity? If the manipulation was not successful, would U.S. taxpayers be called on to bail out yet another bank speculation gone bad?

Do the traders who lost money in the recent price collapse of silver have a reason to believe that their money is now in the pockets of these two or three U.S. banks? If so, do they have recourse?

The data in the Bank Participation report is so clear and compelling that it is hard to conclude anything but manipulation. It is beyond credulity to conclude other than two or three banks caused one of the most severe price collapses in precious metals history. The CFTC has a lot to answer for as the regulatory agency responsible for preventing this type of blatant manipulation.



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Thursday, August 21, 2008

Wall Street Journal reports gold coin shortage, cites GATA

Le Metropole Members,

Wall Street Journal reports gold coin shortage, cites GATA

Submitted by cpowell on 09:21AM ET Thursday, August 21, 2008. Section: Daily
12:15p ET Thursday, August 21, 2008

Dear Friend of GATA and Gold:

The Wall Street Journal today published a long story on the cover of its
Money & Investing section about the U.S. Mint's suspension of sales of
1-ounce gold eagle coins. Like GATA, even the Journal apparently could not
get an official statement out of the Mint, but the newspaper did quote from
a memorandum purportedly sent by the Mint to coin dealers. The Journal's
story, appended here, quotes GATA at the end.

GATA was contacted today by an international news organization that is also
interested in the story and also has been unable to get comment from the
Mint. The Mint's unaccountability is, to say the least, disrespectful and
incompetent. But then the truth about government dealings in gold is seldom
easily obtained.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

The Eagle Has Been Grounded

Mint Halts Gold-Coin Sales After Supply Depleted Amid Price Drop

By Ianthe Jeanne Dugan
The Wall Street Journal
Thursday, August 21, 2008

As gold prices tumbled from their highest level ever, investors and
collectors loaded up on one-ounce "American eagle" gold-bullion coins. The
buying spree came to an abrupt halt this week after the U.S. Mint stopped
selling the coins for the first time since production began 20 years ago.

"Due to the unprecedented demand ... our inventories have been depleted,"
the Mint -- part of the U.S. Treasury Department -- told its dealers Friday.
"We are therefore temporarily suspending all sales of these coins."

The move shocked sellers and collectors of the coins, which are the most
widely traded in the U.S. Suppliers became angry as they turned away
customers. Theories about the decision's underlying cause ran rampant --
from investors in gold futures to Russia's invasion of Georgia.

"This whole thing started about the time the Ruskies made their move," a
collector noted in an Internet chat room called "It may
very well be that the USGovt is preparing for the real financial meltdown by
hoarding all remaining gold flows."

The Mint says it simply was wiped out. It has sold 311,000 ounces of the
coins this year -- about 50% more than in all of 2007. In the first few
weeks of August alone, buyers snapped up 63,500 ounces.

"We are working diligently to build up our inventory and hope to resume
sales shortly," the Mint wrote in a memo to dealers.

The American-eagle bullion program was launched in 1986 with the sale of
gold and silver bullion coins. One-ounce coins have a face value of $50 and
$1, respectively, although the coins trade close to the market value of the
underlying metal. After the 2008 silver coins, known as silver eagles,
surged in popularity earlier this year as silver prices rose, the Mint began
rationing them.

Dealers were upset by the latest blow. "If I don't have something to sell, I
lose business," says Rand LeShay of A-Mark Precious Metals, a Los Angeles

The Mint announced the suspension Friday, the day prices of gold-futures
contracts -- bets on what gold will cost later -- finished below $800 an
ounce for the first time this year. The drop accelerated a buying spree
among investors. Gold began bouncing back and late Wednesday traded at
$810.30. In March, gold futures hit a high of $1,003.20 an ounce.

American-eagle gold-bullion coins are made from 22-karat gold mined in the
U.S. The front side's design was inspired by August Saint-Gaudens' $20 gold
piece, minted from 1907 to 1933. On the reverse side is a nest of American

The coins are sold by the Mint to 10 dealers world-wide for a premium above
the price of gold. These dealers resell the coins, which now fetch about

The American Precious Metals Exchange, an online gold dealer, posted an
alert about the Mint's move, generating confused and angry responses. Many
customers said they were mystified because the silver-coin rationing
followed a price surge, while the gold suspension followed a drop.

"The situation is strange and doesn't fit the 'normal' supply & demand
economic model," the firm wrote to customers.

The Gold Anti-Trust Action Committee, an advocacy group, said the Mint's
move proved financial institutions are colluding to set prices.

"The suspension is overwhelming evidence ... that the commodities exchanges
are being used ... as part of a massive scheme of manipulation of the
precious metals, currency, and bond markets," the group wrote on its Web

* * *

august 21.08 commentary.

James joyce table


Good evening Ladies and Gentlemen:


Gold closed up by 23.00 to 833.30.  Silver skyrocketed up by  73 cents to 13.76. Strangely the OI’s for both metals diverged.  Gold saw its Oi rise by 3000 whereas silver’s OI declined by 2000.

Gold’s OI is still relatively low as the specs have been annihilated.   With respect to silver, many silver details still maintain their longs on the comex as they cannot get physical from the mint or from the public.


We are witnessing many reports that physical is not existent. There is no question that the stories about the mint closing its doors on silver and gold is having a dramatic effect on comex trading.


The story with Freddie and Fannie is certainly weighing on the market.   As I pointed out to you yesterday, the USA government has to do something fast.  If they no nothing then Fannie and Freddie will default and many angry Chinese, Japanese Koreans, Russians etc.  will be visabily upset.


The USA realizes that if they pony up dollars to guarantee 5 trillion of debt, this will put huge pressure on the treasury and will drive up long term rates.  The dollar will fall badly.

The usa is in a pickle and this is why the stock markets have been on a downward tear lately.


Strangely the market was up by 12 points today even though it was down for most of the day.   The stock of Fannie was up but Freddie was down to 3.10.


The big news came from John Williams and its Government Shadow  Statistics.  There was an article last week,  from Europe, which stated that M3 contracted.  This is what fuelled commodity prices to fall.

It seems that Willliams has basically stated that the European data is flawed.  The M3 rose in July by a huge 81 billion dollars despite the  housing crash and the deflation in that arena.


In essence we are experiencing staglation where the economy is not growing but we are inflating at 12%.  This is real bad for the economy and good for gold.


I would like to present to you how this situation will play out in the coming few weeks.


If the usa decides the default on its debt, then we would experience deflation whereby the money supply contracts and the economy becomes moribund.  Prices fall in spiral fashion as people hoard cash.

Wages fall in proportion.  It is as if we are back in the 1960’s.  Governments had no control over deflation and you can spend decades here spinning out of control.

Japan is still in a deflationary mode and they are desperately trying to escape.  The Japanese government has spent trillions of yen in public works to stimulate the economy to no avail.


In all probability, the usa will select to hyperinflate their way out of this mess.   The banks, will probably have losses of 3.0 trillion dollars when the smoke clears from the mortgage mess.

They have only .6 trillion of retained earnings, so the only way to escape this is to raise assets and thus print money.


They have certainly chosen this route re Fannie and Freddie.


The FDIC is already negotiating with first mortgagees  trying to entice them to stay in the homes.  This is the fallout  from the Indy Mac bankruptcy.   The home equity second mortgages are now wiped out.

This spells trouble for Wells Fargo, Washington Mutual and Wachovia, huge home equity providers.


Expect extreme volatility in the stock market and in the precious metals markets.  Tomorrow, Bernanke is speaking .  They generally hit gold and silver.  Also the clowns do not like gold and silver rising for two consecutive days.


It looks like December 1 will be the showdown month for silver and gold.  It is the last month for delivery of both metals before the new President takes office.

Do not be surprised to see sovereign nations  like Russia and/or China take some metal from Comex.  There is no other place that they can get the stuff as London is out, the Mint is out. And all dealers are out.  We may have a comex default.


Russia is not very enthusiastic with the deal that the USA and Poland cooked up where Poland is going to deploy defensive missile shields pointing towards Russia.

Russia is not pulling out of Georgia and BP just announced a force majeure on oil shipments from the Georgian pipeline. Russia has an alliance with Iran.


Russia wishes to control the natural gas and oil throughout Europe.  It has the worlds most important commodity asset. It needs the world;s most important financial asset: gold.


This is what the Russian minister stated:  we will deal with Poland in a non diplomatic way.  In plain English:  they will take delivery of the comex contracts they already own.  They will not roll them over but take delivery.  Lets see if this develops.







Wednesday, August 20, 2008

commentary august 20.08


James Joyce table


Good evening Ladies and Gentlemen:


Gold closed down by 50 cents today.  Silver fell by 10 cents.  The Gold closing price at comex was 810.30 and silver was 13.03


However, the raid was on.  At 10 seconds past the London closing fix, cartel members went to work and trashed gold down by 12.00 dollars.  Silver went all the way down to 12.88.


Oil remained stable despite increase reserves.  Then came the announcement from  Russia that they will handle the Poland defence shield in “non diplomatic” ways.


Gold rose in the access market where it is now trading at 815.50.


Putin is an extremely cagey fellow.  He is a chess master  (and a black belt in karate).  He does not need  a military threat to the usa.  He can simply buy huge contracts on silver and gold at the comex and then take delivery.  The financial meltdown of the west will be in full bloom.


In financial news, Fannie and Freddie fell big time today.  Freddie is trading in the low 3’s and Fannie in the low 4’s. Even though the market was goosed at 3:30 these two characters did not join in the party.

They market expects that the shareholders are going to lose everything.


Fannie and Freddie have over 300 billion dollars worth of bonds maturing on Sept 30 that need to be rolled over.  I can safely say that unless the government backs them, these guys will cash their bonds rather than roll.  This is why the government must come and take Fannie and Freddie over.  They will use the preferred share route and dilute the common shareholders into oblivion.


After the market closed, Goldman Sachs wrote a piece saying that Lehman will report a 3-3.5 billion dollar loss in the 3rd quarter.  Their quarter ends August 32.08.  Their stock fell into the 12’s column for the first time in a long time.  I have highlighted the passage for you;

Goldman cuts projections for Lehman and others
Tuesday August 19, 5:56 pm ET

NEW YORK (AP) -- Lehman Brothers Holdings Inc. received more bad news on Tuesday after another analyst projected that the investment bank will unveil a big third-quarter loss.

William Tanona, an analyst at Goldman Sachs, said after the market closed he believes Lehman will post a $2.5 billion-to-$3.5 billion loss during the quarter. He also believes that any recovery for the troubled industry is still a few quarters away, and that many Wall Street banks will focus on purging their books of risky mortgage securities.

He also lowered third quarter and full-year estimates for Merrill Lynch & Co., JPMorgan Chase & Co., and Morgan Stanley. Major investment banks have written down more than $300 billion since the credit crisis began last year, with several posting the first losses in their company's history.


Expect huge volatility from now on as the banks desperately try and repair their balance sheets

The losses however will be too great.  We expect losses to exceed 3.0 trillion and this will spark derivative losses.


I have no idea how this thing will end


Speak to you later




Tuesday, August 19, 2008

commentary August 19.08

  James Joyce table


Good evening Ladies and Gentlemen:


Today, the raid was on as gold fell by 15 dollars to 785.00 early London England time.  The price recovered a bit during the night but again by NY time, gold and silver were hit again.


Gold was again 785 and silver  was 12.80.  However news of worsening financial news sent gold and silver  on an upward trajectory and the Dow plummeting.


By the close gold rose by 10.00 to 810.50 and silver rose  by 8 cents to 13.11.


The open interest on gold comex fell slightly to 366000 and silver OI also marginally declined to 136000.  Silver’s OI is relatively much higher than gold .  There is no question that dealers in the silver metal own they contracts and will not part with them until they get physical metal.  The retail physical market for silver is completely out.  The only physical left are the 1000 0z bars for industrial use.

However they are going fast as well.


In India, all gold bullion shelves are empty as we are approaching Diwali season.  As I pointed out to you yesterday, there is a total disconnect between the paper gold and silver market to the real  physical market.


In financial news, the Dow tanked by 130 points on the following news:


The PPI:


08:30 Jul PPI reported 1.2% vs. consensus 0.6%; ex-Food & Energy 0.7% vs. consensus 0.2%
Jun PPI unrevised from 1.8%; ex-Food & Energy unrevised from 0.2% 




The PPI is rising the fastest in decades



Then this:



U.S. July housing starts down 11 percent

WASHINGTON, Aug 19 (Reuters) - U.S. home building projects started in July fell 11 percent to the lowest annual rate in more than 17 years, while building permits tumbled 17.7 percent, the Commerce Department reported on Tuesday.

The annual pace of housing starts at 965,000 slimly beat Wall Street's expectations of 960,000, but it was the lowest since a 921,000 unit rate in March 1991. In June, housing starts rose 10.4 percent, revised up from the previously reported 9.1 percent.

Building permits, an indicator of future construction, dropped to an annual rate of 937,000, well below the 970,000 analysts polled by Reuters had forecast. It was the lowest level since March, when they were 932,000, the Commerce Department said.



The economy is weakening fast.  Take a look at Saks’ earnings as well as Target and Home Depot:


Saks Posts Loss; Target, Home Depot Earn Less on Weak Economy

Aug. 19 (Bloomberg) -- The slumping U.S. economy is taking its toll on retailers from luxury chain Saks Inc. to discounter Target Corp., and everything in between.

Saks reported its largest quarterly loss in two years after cutting prices on women's designer clothing, while profit dropped for a fourth straight quarter at Target. Office supplies retailer Staples Inc. said second-quarter net income probably dropped, and Home Depot Inc., the biggest home improvement chain, posted its seventh sales decline in eight quarters.

Falling retailer earnings may signal that the U.S. economy will deteriorate further as consumers rein in spending to cope with rising unemployment and inflation. Home Depot Chief Executive Officer Frank Blake told analysts today he was ``cautious' about spending through mid-2009.

``The question is, when will it end,' said David Abella, a portfolio manager at Rochdale Investment Management with $2.5 billion in assets, including Target shares. ``It's hard to say, because the underlying macroeconomics story still looks pretty bleak.'

All but one of the companies in the Standard & Poor's 500 Retailing Index fell in New York trading. The index declined 1.9 percent to 386.07 at 10:29 a.m…


However the two big news events that caused the markets to tank were the following two headlines, one concerning Lehman Brothers and the other by an economist with the IMF.  Here are the two  news events;

Lehman May Report $4 Billion Writedown, JPMorgan Says

Aug. 19 (Bloomberg) -- Lehman Brothers Holdings Inc. may write down about $4 billion in credit-related investments and other assets when it reports fiscal third-quarter earnings, JPMorgan Chase & Co. analysts said.

``The credit environment continues to be difficult,' New York-based analysts led by Kenneth Worthington wrote in a report yesterday. ``It will be another difficult quarter for Lehman.'

Lehman may mark down some of its $61 billion of mortgage and other asset-backed securities after benchmark residential and commercial mortgage-related indexes declined by as much as 20 percent, the analysts wrote. The company may have already been selling some commercial mortgage assets, they added…


Here is the IMF story:

Large US bank collapse ahead, says ex-IMF economist

SINGAPORE, Aug 19 (Reuters) - The worst of the global financial crisis is yet to come and a large U.S. bank will fail in the next few months as the world's biggest economy hits further troubles, former IMF chief economist Kenneth Rogoff said on Tuesday.

"The U.S. is not out of the woods. I think the financial crisis is at the halfway point, perhaps. I would even go further to say 'the worst is to come'," he told a financial conference.

"We're not just going to see mid-sized banks go under in the next few months, we're going to see a whopper, we're going to see a big one, one of the big investment banks or big banks," said Rogoff, who is an economics professor at Harvard University and was the International Monetary Fund's chief economist from 2001 to 2004.

"We have to see more consolidation in the financial sector before this is over," he said, when asked for early signs of an end to the crisis.

"Probably Fannie Mae and Freddie Mac -- despite what U.S. Treasury Secretary Hank Paulson said -- these giant mortgage guarantee agencies are not going to exist in their present form in a few years."

Rogoff's comments come as investors dumped shares of the largest U.S. home funding companies Fannie Mae and Freddie Mac on Monday after a newspaper report said government officials may have no choice but to effectively nationalise the U.S. housing finance titans.

A government move to recapitalise the two companies by injecting funds could wipe out existing common stock holders, the weekend Barron's story said. Preferred shareholders and even holders of the two government-sponsored entities' $19 billion of subordinated debt would also suffer losses.

Rogoff said multi-billion dollar investments by sovereign wealth funds from Asia and the Middle East in western financial firms may not necessarily result in large profits because they had not taken into account the broader market conditions that the industry faces.

"There was this view early on in the crisis that sovereign wealth funds could save everybody. Investment banks did something stupid, they lost money in the sub-prime, they're great buys, sovereign wealth funds come in and make a lot of money by buying them.

"That view neglects the point that the financial system has become very bloated in size and needed to shrink," Rogoff told the conference in Singapore, whose wealth funds GIC and Temasek [TEM.UL] have invested billions in Merrill Lynch and Citigroup .

In response to the sharp U.S. housing retrenchment and turmoil in credit markets, the U.S. Federal Reserve has reduced interest rates by a cumulative 3.25 percentage points to 2 percent since mid-September.

Rogoff said the U.S. Federal Reserve was wrong to cut interest rates as "dramatically" as it did.

"Cutting interest rates is going to lead to a lot of inflation in the next few years in the United States."



Libor rates continue to rise and shows stress in the banking system:

Libor on the rise amid banking stress

Published: August 18 2008 19:21 | Last updated: August 18 2008 19:21

The key rate at which banks lend to each other in dollars hit its highest level in two months on Monday, suggesting there could be more turbulence ahead for the financial system.

The three-month dollar London interbank offered rate reached 2.81 per cent, a level not seen since mid-June. Libor remains particularly elevated when compared with the official overnight rate – the Federal funds rate – of 2 per cent. The difference of 81 basis points between Libor and the Fed funds rate compares with an average spread of about 12bp that prevailed before the onset of the credit squeeze last year.

"There is still stress in the system," said George Goncalves, strategist at Morgan Stanley. "Libor is creeping up, and banks are still restructuring their balance sheets."



We are starting to see big increases in foreclosures due to the Alt a’s and now the ARMS are starting.


And the banks have run out of available silver and gold as we witnessed the closing of the mint.

Speak to you tomorrow.











Monday, August 18, 2008

august 18.08 commentary   james joyce table


Dear Ladies and Gentlemen:


Tomorrow we will have another raid and expect gold to be hit by 20 dollars and silver by 20 cents or so.


The end game is being played out as bank losses will be astronomical which will blow up credit derivatives and gold derivatives


I am going to highlight a passage that I wish everyone would read:  it explains it all.


Here goes:


James Conrad of wrote as fine a piece as you will find on what the gold and silver markets are about these days … one of the most comprehensive and insightful pieces on the precious metals that I have read in the past decade. I urge every Café member to take the time go over it. Some excerpts…

The Disconnect Between Supply and Demand in Gold & Silver Markets

August 18, 2008

There is a huge demand for both gold and silver right now in India and North America. North American shops are completely bare of silver. Indian shops are empty of both silver and gold. Even the Indian banks don't have any gold or silver. The big western bullion banks, based in New York and London, control both the gold and silver trade. Reports from India are that they are refusing to extend Indian bank lines of credit, forcing the small banks to deliver to clients, collect money, and pay down lines of credit, before being allowed to take delivery of another gold or silver shipment. This is very abnormal….

Contrary to the pundits at CNBC, Bloomberg, etc., the price of gold really has nothing to do with the value of the dollar or the value of oil. It doesn’t matter what the dollar is worth, in relation to euros, pounds sterling or Zimbabwee money. It only matters what supply and demand factors exist for gold….

But we don’t live in a world of free markets. Instead, we are living in an Orwellian 1984 double-speak world. Welcome to the world of Fed/PPT, where 2+2=5, blue is yellow, and black is white. All things are as they say they are, rather than as they really must be...

We have a disconnect between reality markets and fantasy markets. The COMEX and London Metals Exchange are fantasy markets controlled by the big bullion banks. They must be engaged in market manipulation, because nothing can explain a big price collapse, in the midst of widespread shortages and robust demand…


Press on the above blue:   for the article.


As you can see, we are in a massive fraud.










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