Saturday, January 30, 2010

Jan 30.10 commentary..very important

Good Morning Ladies and Gentlemen:
First of all, lets report on the bank failures.  There were 4 busts last night and they were quite large.
The total cost to the FDIC will be around 1 billion dollars.  Here is the headline story:


FDIC announces bank failures in Florida, Georgia


LOS ANGELES (Reuters) - Four more U.S. banks were seized on Friday as regulators continue to close the doors of banks struggling to cope with fallout from the financial crisis.


The Federal Deposit Insurance Corp (FDIC) said First Regional Bank in Los Angeles, Florida Community Bank in Immokalee, First National Bank of Georgia in Carrollton and Community Bank and Trust of Cornelia, Georgia had failed -- pushing the tally to 14 of bank's that have failed this year.

The FDIC expects 2010 to be a peak for bank failures as a result of the financial crisis. Last year, 140 banks failed, compared to 25 in 2008 and three in 2007.

First-Citizens Bank & Trust Company will purchase $2.17 billion in total assets and $1.87 billion in total deposits from First Regional Bank, the FDIC said.

The eight branches of First Regional Bank, the first California bank to fail this year, will reopen on Monday as branches of First-Citizens.

SCBT, N.A. will assume $1.1 billion in total deposits and about $1.21 billion in total assets from Community Bank and Trust, FDIC said.

Community Bank's 36 branches will reopen during normal business hours as branches of SCBT but will continue to conduct business under its own name, FDIC said.

Florida Community Bank will be taken over by Premier American Bank, N.A., but will continue doing business under its old name. The bank's branches are due to open on Saturday.

As of September 30, 2009, Florida Community Bank had $875.5 million in total assets and $795.5 million in total deposits.

Premier, which was acquired on January 22 by Naples, Florida-based Bond Street LLC, will pay the FDIC a premium of 0.4 percent to assume all deposits of Florida Community Bank and will buy $499 million of the failed bank's assets.

The 11 branches of First National Bank of Georgia will reopen on Saturday as Community & Southern Bank branches. As of September 30, 2009, First National had $832.6 million in total assets and $757.9 million in total deposits.

Community & Southern Bank will pay FDIC a premium of 1.25 percent to assume all of the deposits of First National and will purchase essentially all of its assets.

U.S. regulators have said the banking industry's recovery will lag the overall economy.

The FDIC has said it expects the total bill for bank failures to reach $100 billion for the period of 2009 through 2013.

(Reporting by Gina Keating; Editing by Richard Chang and Bernard Orr)

Gold closed down 60 cents at closing comex time to the tune of 1083.00  Silver closed down 2 cents to 16.20.
There are major developments on 4 fronts today:
1. release of GDP figures
2. release of COT report
3. release of the OI and delivery notices for comex gold
4. the continuation on the story of the currency swaps between the USA and the ECB and other nations.
Other stories on premiums on Indian and Chinese demand for gold, on consumer sentiment
and debt levels in Europe will be discussed.
The first story is the release of figures on the strength of the economy, the GDP.  Last quarter saw GDP growth rise by 5.7%
which was quite a surprise.  The three areas of strength were:
1. increase in the inventory levels which accounted for 75% of the growth
2. huge increase in government spending which is not a surprise
3. increase in consumption from the importing side of the equation.
First the official story:

U.S. economic news:

08:30 Q4 GDP 5.7% vs. consensus 4.7%; Personal Consumption 2.0% vs. consensus 1.8%
•GDP Price Index 0.6% vs. consensus 1.3%
•Core PCE 1.4% vs. consensus 1.3%
The 5.7% increase is the largest since 2003. 
* * * * *

US economy up 5.7 pct in Q4, fastest in 6 years

WASHINGTON, Jan 29 (Reuters) - The U.S. economy grew at a faster-than-expected 5.7 percent pace in the fourth quarter, the quickest pace in more than six years, as businesses reduced inventories less aggressively, the Commerce Department said on Friday.

The first estimate put fourth-quarter gross domestic product growth at its fastest pace since the third quarter of 2003. The economy expanded at a 2.2 percent annual rate in the third quarter.

Analysts polled by Reuters had forecast GDP, which measures total goods and services output within U.S. borders, growing at a 4.6 percent rate in October-December period.

Growth was boosted a sharp slowdown in the pace of inventory liquidation, a factor that could mask the strength of the economic recovery from the longest and deepest downturn since the Great Depression.

But even stripping out inventories, the economy expanded at an annual rate of 2.2 percent, accelerating from the 1.5 percent increase in the third quarter, reflecting relatively strong performance from other segments of the economy.

Business inventories fell only $33.5 billion in fourth quarter after dropping $139.2 billion in the July-September period. The change in inventories alone added 3.39 percentage points to GDP in the last quarter. This was the biggest percentage contribution since the fourth quarter of 1987.

For the whole of 2009, the economy contracted 2.4 percent, the biggest decline since 1946, the first year after the end of World War II, the department said.

In the last three months of 2009, consumer spending increased at a 2 percent annual rate, below the 2.8 percent annual pace in the prior quarter when consumption got a boost from the government's "cash for clunkers" program.

In the forth quarter, consumer spending contributed 1.44 percentage points to GDP. Consumer spending, which normally accounts for about 70 percent of U.S. economic activity, has been held back by the worst labor market in a quarter century.

Business investment in the fourth quarter grew for the first time since the second quarter of 2008 as the drag from the troubled commercial real estate was offset by robust spending on equipment and software. Business investment rose at a 2.9 percent rate after falling 5.9 percent over the previous three-month period.

The growth of spending on new home construction braked sharply in the fourth quarter to an annual rate of 5.7 percent from an 18.9 percent pace in the third quarter. Home building has received a lift from a popular tax credit for first-time buyers, but recent data have hinted at some weakness starting to creep in.

Export growth outpaced imports, leaving a trade gap that contributed half a percentage point to GDP growth in the last quarter.


Here are some comments from individuals on the GDP release:
From John Williams of  He states that GDP growth is negative not 5.7% growth:

4th-Quarter GDP "Boom" Sets Stage for Double-Dip 
- 2009 Downturn Worst Since Great Depression 
- Watch-Out for 2010 Federal Deficit! 
- Durable Goods Orders Keep Bottom-Bouncing

Mr. Williams from discusses his views of the upcoming economic conditions today after the release of the fortuitous and miraculous report of a booming GDP. His service is by subscription and highly recommended by me to you as another source for getting the real facts. The following is from his website:


The State of the Real World: No Economic Boom in the United States; No Happy Deficit Outlook.

As discussed in recent writings, the U.S. economy is headed into an intensified downturn/double-dip depression (see Commentary No. 268), with significant risk this year for a massive sell-off in the U.S. dollar and the onset/early stages of a hyperinflation (see Hyperinflation, Commentary No. 263).

The news of the strength of the GDP initially sent the Dow rising.  However it succumbed at the end of the day falling by 54 points.
In other strange developments, the long bond rose in price and down in yield.  Generally if the economy is booming, yields rise.
The usa dollar also rose which again is contrary to normal market reactions.  Normally if the economy is strong, there is movement out of dollars and
into Euros as Euroland is exporting huge amts of goods into the usa.  If the economy is weak, then there is a movement to supposedly 'strong haven' status of the usa dollar.
The release of the strong GDP number saw a rise in the dollar and a rise in bond prices.
I guess the real world saw what John Williams saw.
The next release was the COT report basis Tuesday last:
The gold COT report makes no sense again...

*The large specs reduced longs by 15,053 and decreased shorts by 5,508 contracts.

*The commercials reduced longs by 2295 contracts and decreased shorts by 22,734. Those changes make sense, as gold had fallen some $140 off its highs, but was before the liquidation of the last two days. Here's the run:

*The small specs supposedly reduced longs by 1859 contracts, BUT INCREASED SHORTS BY 13,625, which is ridiculously high. Either someone is playing games somehow, or gold is going to soar very soon. The small specs just don't that newly short so quickly and win.

We saw a massive covering by the commercials of 22,734 contracts.  I find the increase of 13,625 shorts by small speculators as astonishing.
In other words, the small specs for the first time decided to join the criminal bankers which accentuated the fall.  The bankers realizing they had company,
decided, it was in their interests to cover as much as they could and then let the small specs carry the short position while the bankers covered!.
Please remember this is basis Tuesday and we got considerable more damage on Wednesday through Friday.
The open interest on the gold comex was released at 1:30 and it showed a massive loss of 19000 contracts and silver also lost considerable  OI contracts to the tune of 2438 contracts to 122144.  From Bill Murphy:

We have made mention over the past month about the lack of liquidation in the gold market, which has been unlike what we have seen in the past. No more. The liquidation is finally kicking in. Yesterday the gold open interest dropped a STEEP 19,109 contracts to 478,361. For gold to come back like it did, with that kind of selling, is a real plus for us in the weeks ahead.

Silver bounced off $15.99 for the second day in a row, but still can’t get out of its own way … not with JP Morgan all over it. The silver open interest is liquidating too. It fell 2438 contracts to 122,144.

Please remember that the OI contraction is basis Thursday.  I can assure you that Friday probably saw a little more liquidation.
The total OI of 478361 was last seen with gold at 950.00 usa.  So gold has risen by $150.00 on the same level of OI.  It was at this juncture point that gold rose to $1222.00 dollars per oz. and it looks like it is about to start its ascent to levels either equal to greater than its all time high, starting Monday.
As promised, I told you that the smoke would clear on Friday and we could see developments as to how much gold will be taken up by investors.
I will include the gold comex data at the end of my commentary.
First, the volume yesterday officially announced late in the day was 204254 contracts with zero switches.  Absolutely huge fire power on the part
of JPMorgan and their cartel buddies.  I guess, if you have unlimited paper to supply without any supervision on the part of  authorities, it is a no -brainer that these  paper suppliers of gold can defeat paper buyers of gold  as paper dollars are in finite supply to investors.  Paper gold supplies are infinite to our bankers.  The game ends only when the paper gold holders turn their obligations into real gold!
On that front, the total OI for February, comex gold,  standing is 10,489 or 1,049,000 oz of gold.  We must add the January options of  290,000 oz as no deliveries occur in the non delivery month of January.
The total gold standing is 1.339 million oz of gold.  I had predicted that between 1.4 and 1.8 million oz would stand.  However the volume on Thursday
right at the Feb 2010 contract was an immense 100,000 contracts on Thursday,  so I knew that anything could happen.
As it turned out, the quantum of physical gold oz standing is quite large at this 1.339 million oz level.  The total registered (or dealer inventory)
is 1.8 million oz.
we do not know if any of the 1.8 million oz of dealer gold is encumbered or on loan from another jurisdiction like the GLD.
There are other strange developments on the first day notice  (from Adrian Douglas)

There were 1,040 delivery notices issued in the FEB gold contract. The FEB gold contract total for the month is 1,040 notices or 104,000 ozs. When things change in the gold market one has to pay attention; there were plenty of changes today. First of all, there are usually only 6-10 traders issuing or stopping delivery notices. Today there were 23 entities doing the stopping and 5 doing the issuing. However, 940 of the notices issued were issued by HSBC. If you look back at my daily COMEX Warehouse reports I haven’t mentioned HSBC at all at being prominent in the delivery process. So HSBC suddenly shows up and issues 90% of the delivery notices today. HSBC and JPM are likely the biggest gold shorts on the COMEX as evidenced by the fact that these two banks together own 90% of all the OTC gold derivatives held by US banks. So clearly the big shorts are having to deliver because there are a large amount of contracts standing for delivery in the FEB contract (see below). It should be noted that HSBC is the custodian of the gold that GLD supposedly holds for investors in its ETF. I have not seen anywhere in the GLD prospectus that the custodian of GLD gold is one of the biggest short sellers of gold futures and gold derivatives in the world. This is a material omission which is in contravention of SEC Rule 10b-5:

"Rule 10b-5: Employment of Manipulative and Deceptive Practices":

It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,

(a) To employ any device, scheme, or artifice to defraud,

(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or

(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security."

I would say that anyone who sells gold that they don’t own (short selling) on a massive scale must be obliged to declare this material fact when they are in charge of storing other people’s gold!

JPM issued 17 notices and stopped 323 while BNS issued none and stopped 154. Another Cartel honcho also appeared on the radar today…Deutche Bank issued no notices and stopped 144.

There were 119 delivery notice issued in the FEB silver contract. The total delivery notices for the month in silver stand at 119 or 0.6 Mozs. Bank of Nova Scotia issued 118 notices and stopped none.

There is 0.7 cent of contango in silver FEB/MAR contracts and 2.8 cents contango FEB/MAY contracts. The contango in gold fell dramatically which for FEB/MAR is $0.3 and $0.8 for FEB/APR. This shrinking of contango is signaling stress in the physical market.

The Open Interest in FEB gold reduced from 47,946 contracts to 10,489. What happened to the 37, 457 contract difference? On first notice day those contracts should have been fully paid for i.e. “standing for delivery”. Were there some cash settlements offered? The delivery notices issued together with the Open Interest represents a potential delivery obligation of 1.15 Million ounces. The dealers have only 1.8 Million ounces. There are more and more rumors circulating about difficulties meeting deliveries of gold at the LBMA in London. George Soros who is not known for gold trading expertise suddenly is of the opinion that gold is in a bubble. George Soros has seen enough charts in his life to know that is not true. Soros has the same ethics as an alley cat. Soros is like all the other so called investing gurus who seem to have not noticed the only asset that has appreciated every year for the last 9 years and outperformed every other asset in the process. Are we to believe that having not mentioned it for 9 years that he secretly owned gold and is now selling his proclaimed “bubble top”? Yes, and pigs might fly. I think he has heard rumors about shortages and he would like investors to dump some so he can accumulate before it’s too late. I am sure he would prefer to suffer the minor consequences of admitting he was wrong later than suffer the financial consequences of not being along for the ride in gold. 

 First a little terminology:  issuers of paper gold are the bankers hitting or "serving" those that are standing for delivery.  A stopper is a funny term
but they are the bankers who are taking the gold metal on behalf of the long holders.  The issuer may be representing himself as the server of metal or
being asked by all the bankers to "do the honours".  They balance inventory between themselves.  The stopper  can act for themselves in receiving contracts or act for a multiple of investors.
OK lets see what is different on this delivery day from other first day notices:
Generally speaking, we see no more than 5 or six issuers or stoppers in an given delivery period.  Usually, the stopper and issuer is JPMorgan and HSBC.
In silver, it is generally Scotia Macotta taking the honours.
Yesterday,we saw 23 different banking entities being the stoppers or on the receiving end of the gold metal.  Five issuers were on the spotlight.
Only  104,000 oz on the 1.049 million oz or 10% of the notices of delivery were acted on.  This is a very low percentage and indicative of scarcity.
HSBC for the first time in quite a while did the issuing. It is this bank along with JPMorgan that all the biggest shorters in gold and silver.
Adrian Douglas also  thinks that HSBC, a custodian for gold at the GLD should declare such in their filings.  (see above).
So in summary, only 10% of the notices were sent out.   The total notices for Feb totalled 1.049 million oz of gold.  The Jan options totalled 290,000
so the total standing for delivery of gold equals 1.339 million oz of gold.  Of the delivery notices sent out so far, 90% were by HSBC.
As for the stoppers everybody demanded whatever was available as evidenced by the huge 25 different entities standing.
The last big story is of course the currency swaps.  There has been a lot of noise on this issue.
I sent this email to Bill Murphy trying to explain the inner workings of a dollar-Euro swap, dollar-yen swap etc:
Bill:  My understanding of the swaps is as follows:
In late 2008 the usa introduced swaps with the ECB and with Japan, New Zealand and other European nations.
With massive losses throughout the world by hedge funds and other financial entities, the world was short of dollars to unwind hedges. Dollars had to be created to pay for the losses and pay for the deleveraging
that was besetting the world at that time. Europe did not have enough dollars on hand to pay off this.
This is why the first swap was announced with the usa and the ECB.  To my understanding 500 billion usa dollars flowed into Europe and they sent approximately
350 billion euros to balance the swap.  The terms were simple:  at a fixed time, the trade would unwind  ie. the usa would get their dollars back and the ECB would get their euros
repatriated and then retired.  The euros and the dollars never enter the money supply to either nation as these funds are temporary.
The deleveraging occuring throughout the world was greater than anticipated and the losses were immense.  They orchestrated a second swap with all nations and included Canada in the second tranch.
The swap was to be for six months but it lasted longer and from the second tranch there have been zero announcements from either Europe or USA.
In the summer when I believe Congressman Grayson questioned Bernanke, the quantum of swaps mentioned was 2 trillion dollars.
As the economy soured, the usa deficit rose big time.  In fiscal 2009, the deficit came in at 1.8 trillion dollars. 
To finance this debt, the usa continued to issue paper.  However this time Asian nations lacked the necessary surplus of usa dollars to funnel back into the usa in the form of bonds.
The usa had to do something extraordinary and that is to purchase all of their own bonds.  They decided to buy the bonds with the dollars overseas.  They ordered the Europeans to buy the bonds
with the swap usa money available, once the deleveraging process was basically over.
This is why at every bond issue, the indirect bid is always 40-55% which indicate foreign purchase.  However the TIC does not show an increase in foreigners buying usa debt.
Thus the entire purchase of the debt is with their own dollars held overseas,and /or with printed dollars on usa soil.
Now comes the announcement from Europe and surprisingly it is unilateral:  all swaps are going to be unwound. No word from the usa.  They do not know how to handle the dollar-bonds coming back
So now the usa will get their dollars back but it will be in the form of the treasurys. The problem here is that the world thought that China or some foreign entity had purchased them but
much to the surprise of financial analysts, they will be shocked to find that nothing was bought.
No comes another problem.  The bond itself increased the federal debt.  However the dollars that were used to purchase the bonds never raised the federal debt as this was temporary and
since the swap was going to be unwound, the dollars printed never added to the federal debt.
Once these dollars (in the form of bonds) are brought back, the usa federal debt was artificially kept much lower than it ought to have been and thus quite fraudulent.
This is my simple explanation of a complex situation.  I hope you understand this.  I think I am correct on this.
all the best
Harvey Organ.
Further to this discussion, a few asked what happens to the Euros on the American side?
Great question:   the world was massively short of dollars and not Euros.  In my mind, the USA would just
sit on the Euros and put them on deposit against the ECB.
However, one cafe member surmised (commentary below) that it is possible that the usa converted the 350 millions of Euros  (which equal 500 million dollars)
into dollars and bought the treasuries with these dollars.  The swaps occurred on two different times and were never unwound.
Is it possible?  yes! 
When the swaps occurred the dollar was in a free-fall.  In or around late 2008 the dollar rebounded smartly from a low of 78. to a high of 89.00 by May 2009 and the Euro faltered.
The usa by this time were suffering huge deficits.  I think the official fiscal deficit for 2009 was 1.45 trillion dollars even though the calender deficit was 1.8 trillion dollars.  The deficit for fiscal 2010 as forcasted by the independent CBO is slated at 1.35 trillion dollars.
Where were the dollars to purchase the bonds coming from?....
Remember, the usa announced two swaps of 500 billion usa dollars each.
The newly minted dollars flows over to the Euro central bank and plus other nations. 
There has never been any announcements of these swaps being unwound.  (The total length of time for the swaps to unwind is 6 the swaps must have  continued from the initial announcement until now, Jan 30.2010)
Now suppose the usa converted all the Euros, arriving on its shores, into dollars and had these dollars on this side of the pond, join the purchase of  usa bonds on the Euroland side with the swapped usa dollars.  It makes sense.  In other words, both sides of the world were engaging in the purchase of the usa's treassury bonds or what we refer to as quantitave easing (QE)
The indirect portion of all the treasury purchases  represent the "foreign" purchase... i.e. the Europeans helping the Americans with massive purchases of bonds over there.
The 17 dealer -bankers who participated in the bond-treasury purchases on this side of the pond,  immediately offloaded all of their purchases to the Fed.
Many of the trades are done officially (around 300 billion ).  The rest off balance sheet.
The Chinese, who had I believe over 200 billion dollars worth of GSE's sold all of this paper in late 2008 and got treasuries.  The dollars to purchase these treasuries may have come from this source.  The TIC data supports the fact that foreign entities have not bought usa treasuries at all!
So what is the problem?
These swaps never enter the money supply or debt figures of either group because they are to be unwound.  Can you imagine the headache the usa
will be in, if they:
1. have to return the equivalent of 1 trilllion dollars of Euros to Euroland having bought all of the treasuries in a clandestine manner?
2. have to return the 1 trillion dollars of bonds-dollars held by the ECB and others? The dollar will be in for some rough ride!!
The federal debt limit is way off side and the balance sheet would have been totally misrepresented.  However that is totally to be expected
by usa authorities.  I will leave it up to you to decide what is going on.  I have no doubt that the unwinding of the swaps will be huge.
In the words of Dave Kranzler:  "it will be messy"!!
It will also explain, why the announcement to unwind only came from the ECB, Japan and other nations.  The usa did not make a similar announcement detailing the end of the swap which is to occur on Jan 31.10.  I wonder why?
Lets see how this develops.
As promised, here is how a cafe member discusses the above issue with Bill Murphy:

When the Central Banks announced these swap arrangements, they claimed that there was tremendous demand for the dollar. Since when has a central bank ever told the truth? Does anybody believe that the agreement was concluded/agreed to on the date on which they made this information public? These bankers never tell the truth and have never told the truth.

More likely than not, the agreement was made back when the dollar was falling apart. It was not made because foreigners has such great demand for our worthless dollars. It was made because the value of the dollar was plumenting and the Europeans did not like the Euro skyrocketing against the dollar thereby destroying their exports.

The FED gave the foreign central banks dollars, which they themselves could use to invest in US treasury securites or they could give to other entities/hedge funds/banks/central bank controled corporations to invest in treasuries. At the same time the FED received massive quantities of Euros which it could sell and receive dollars for. This accomplished two goals, there was a big seller of Euros and a big buyer of dollars. This caused the dollar to spike upwards in value and caused greater demand for treasury securities. As the dollar spiked up, it caused a short squeeze in the dollar as all the hedge funds and major corporations that were short dollars had to cover their positions.

If this trade now has to be unwound then Harvey is right. This is potentially catastrophic for the demand for dollars and US Treasury bonds. Perhaps that is why Congress voted to expand the debt limit by 1.9 trillion dollars. today.

If they simply are going to stop doing this and maintain the existing positions, then there will still be a lack of demand for dollars and treasuries on a on-going basis as our government spews out more bonds and prints more dollars.

If this is the case, then the cartel needs to panic people out of their international stock and bond investments and their domestic stock investments creating demand for dollars and treasury bonds. Additionally, despite all the rhetoric on CNBC about the FED draining liquidity and protecting the value of the dollar now that Bernanke has been reappointed today, you can rest assured that they will be in the markets printing more dollars to buy all types of bonds to prevent interest rates from skyrocketing. 



Last night, I forgot to mention to you that congress passed the increase in the debt ceiling to 14.3 trillion dollars. Strange events indeed.


To all of us who like a mental economic challenge, I bring you Adrian Douglas' piece on the increase in the debt ceiling and on the total usa money supply:


The debt level in the US is not yet unsustainable??

Here is some food for thought for everyone: The USD Money Supply M3 is 14.2 T$. When the US Government spends up to its new debt ceiling (I don’t suppose that will take more than 10 months) the US government debt will be 14.3 T$. So the US government will then owe every single dollar in existence to someone! The interest payment is currently about 600 B$ per year. So with interest obligations thrown in the US government owes more money than is in existence. The US government has declared its annual deficit for 2010 will be 1.35 T$ , a number carefully chosen because last year’s deficit was 1.4 T$ so there is an illusion of the deficit going down but don’t fall for that cheap trick! The current rate of deficit increase is more than 10% per annum. By the end of 2010 if this rate of increase is maintained the Federal debt will outstrip the available money to pay it off also at a 10% annual clip. This doesn’t take into account State, municipal or private debt. I don’t know what economists define as "unsustainable" but owing more money than exists would be good enough for me!

Here is something to ponder. To resolve this problem will the US Government

a) Become fiscally responsible and slash spending such that it is less than tax receipts?

b) Pass a bill demanding all money in existence be handed over to the government?

c) Print a mountain more dollars?

If you are not sure of the answer take a look at what Hank Paulson says was the solution when they didn’t have any money for an AIG bailout:

Have a good weekend,







what is Adrian stating?  Simply at the end of Dec 2010, the new debt ceiling will be reached.  The total money supply of M3 has calculated by J Williams of and others is around 14.3 trillion

dollars. Yes, it does mean that the usa government owes every usa dollar in existence to someone. And on top of that the future interest payments on the government at 600 billion dollars creates a situation

where the total federal debt outstrips all available money created into existence whether it is paper dollar bills  or electronic digits.  This is what is unsustainable!!!


And yes..this does not include private debt, state debt, municipality debts etc.



This is your food for thought for today.


In international circles, the Davos forum concentrated on the huge debt problems of Greece.  Noriel Roubini piped in that it is Spain that is in deep trouble, far worse than Greece.


Both of these countries, I have detailed to you their troubles in previous commentaries.  Here is the story from Europe (Davos)


Debt crisis fears overblown, economists say

The chatter from economists at Davos is that "deficits don’t matter"…didn’t we hear that from Dick Cheney BEFORE the debt crisis?


In Dubai and Greece, mounting debt levels were indeed likely out of line and unsustainable, said Gerard Lyons, chief economist at Standard Chartered Bank, in a brief interview Friday.

But such situations should be viewed on more of a case-by-case basis, he said. Markets look at mounting debt problems and see the possibility of default, Lyons said. He argues that the more likely consequence is a squeeze on public spending and investment.

The potential for fiscal crises has been identified as a top fear by participants in this year's annual meeting of the World Economic Forum. An ongoing rout of Greek government bond prices as Athens struggles to put its financial house in order remains in the spotlight, highlighting fears that troubles could spread to other nations on the periphery of the euro zone as well as in some struggling emerging economies in Eastern Europe.

Meanwhile, debt levels in the United Kingdom and the United States, while on the rise, aren't yet unsustainable, Lyons argued. While the United Kingdom, which moved back into growth in final quarter of last year, likely won't need a further fiscal boost, the jury is out in the United States, he said.




Here are some figures which show expansion of the economy.  There is no doubt that the stimulus money is showing up in various places:


US consumer sentiment at 2-year high-report

NEW YORK, Jan 29 (Reuters) - U.S. consumer confidence rose to a two-year high this month as the economic outlook improved, though most had a grim view of their own personal financial and employment prospects, a private report showed on Friday.

The Reuters/University of Michigan Surveys of Consumers said its final index of sentiment for January was 74.4, up from December's 72.5 and higher than analysts' expectations for 73.0.

That was the highest since January 2008 -- a month after the recent recession started -- and it also beat the preliminary reading for this month of 72.8.

The report follows government data showing the U.S. economy grew 5.7 percent in the fourth quarter, which was the fastest in six years but still failed to dispel concerns about sustainability of recovery amid a 10 percent jobless rate.

"Consumers are overwhelmingly convinced that the worst is over but nonetheless expect stagnating income and job prospects rather than solid growth during the year ahead," the University of Michigan report said.

The report's gauge of current economic conditions rose to 81.1 in January from 78.0 in December, hitting its highest since March 2008…


10:00 Jan NAPM-Milwaukee 56.0 vs. Dec 52.0 

and this:


US Midwest business expands more than expected in Dec

CHICAGO, Jan 29 (Reuters) - Business activity in the U.S. Midwest expanded much more than expected in December, a report showed on Friday.

The Institute for Supply Management-Chicago business barometer rose to 61.5 from 58.7 in November.

Economists forecast the index at 57.4. A reading above 50 indicates expansion in the regional economy.

The employment component of the index rose to 59.8 from 47.6 in November. New orders rose to 66.4 from 63.5.






Here are stories showing huge demand for gold coming from India and China:


Premiums for gold bars hit 13-mth high on China

*Premiums at 13-month high in Singapore, Hong Kong 
* Cash gold 11 pct below all-time high

SINGAPORE/TOKYO, Jan 29 (Reuters) - Premiums for gold bars jumped to their strongest since December 2008 as weaker bullion prices ignited buying from investors and Chinese consumers ahead of the Lunar New Year holidays, dealers said on Friday.

Gold bars were offered at premiums of $1.10 an ounce to the spot London prices in Singapore, up from 70 cents two weeks ago. Cash gold slipped to $1,082.30 an ounce, down 11 percent from an all-time high of $1,226.10 struck in early December last year.

"Concerns about waning risk appetite and the euro's slide are playing against gold," said Koichiro Kamei, managing director at research firm Market Strategy Institute in Tokyo.

"But at the same time lower prices are attracting physical buyers widely from Asia, particularly China," he added. Jewellery makers in China, the world's second-largest gold consumer after India, stepped up purchases ahead of the Lunar New Year in February, while a drop in bullion prices attracted buying from investors across Asia, said dealers.

Gold bars were also offered at premiums around $1 in Hong Kong from 80 cents two weeks ago. output jumped 11.34 percent to a record of 313.98 tonnes in 2009, the China Gold Association said on Thursday, securing the country's position as the world's largest producer of the yellow metal.

Metals consultancy GFMS said last month that China, the world's most populous nation, would overtake India, the second most populous nation, as the world's largest gold consumer in 2009, with total demand forecast at 432 tonnes.


India gold buying continues as rupee rebounds

  • Spot gold down at $1,084.95 an ounce 
    * London Brent crude up at $72.45 a barrel 
    * Rupee strong at 46.4200 per dollar 

MUMBAI, Jan 29 (Reuters) - India gold traders continued their purchases on Friday afternoon to replenish stocks for wedding demand, which will start in April, as rupee recovered from its early losses, making the dollar-quoted asset cheaper.

"The rupee is the main driver (for gold sales)... anything below 46.30 is good enough for them to buy, a lot of orders were triggered in late trade yesterday at $1,075 (an ounce)," said a dealer with a state-run bullion dealing bank in Mumbai.

At 2:36 p.m., the partially convertible rupee was at 46.2625 per dollar, recovering in line with the domestic equity market.

It had fallen to 46.44 after the central bank raised the CRR by a more-than-expected 75 bps at its monetary policy review on Friday. It had closed at 46.35/36 on Thursday.

International spot gold was trading $1,082.55/1,083.35 an ounce as against the previous close of $1,086.75/1,087.55 an ounce.

"There are a lot of orders below $1,075," said another dealer with a private bank said.

"There is wholesale demand at $1,080, infact most of the investors are active rather than jewellery buyers," said Lokesh kumar Agarwal, chairman of Lucknow-based Brijwasi Bullions and jewellers Pvt. Ltd.



As promised, here is the closing figures on the gold comex.


I hope that everyone has a great weekend and I will speak to you on Monday.


Expect violent activity on markets from now on.  Do not pay much attention to CNBC as they are paid shills.

I will try and give a balanced picture as to what is happening in the financial world. 





the gold comex:


Trade Date
Daily Settlements for Gold Futures (FINAL)Trade Date: 01/29/2010
Month Open High Low Last Change Settle Estimated
Prior Day
Open Interest
FEB 10 1085.0 1090.8 1074.5 1081.8 -.6 1083.0 11,456 10,489
MAR 10 1085.2 1090.9 1074.9 1081.4 -1.0 1083.3 1,469 1,672
APR 10 1087.0 1091.4 1075.0 1083.2 -1.0 1083.8 181,874 298,010
JUN 10 1086.0 1091.0 1076.8 1082.6 -1.0 1084.8 1,524 53,703
AUG 10 1086.2 1088.4 1077.7 1084.0 -1.0 1085.6 173 22,262
OCT 10 1093.2 1093.2 1079.4 1079.4 -1.0 1086.4 1,365 7,930
DEC 10 1086.4 1092.0B 1079.0 1085.5 -1.0 1087.4 3,440 32,745
FEB 11 1089.0 1089.0 1084.6 1084.6 -1.1 1088.9 1,236 7,570
APR 11 - - - - -1.2 1090.8 232 3,793
JUN 11 1086.4 1093.0 1086.4 1088.8 -1.4 1093.3 711 6,347
AUG 11 - - - - -1.4 1096.3 4 1,486
OCT 11 - - - - -1.3 1099.7 - 1,360
DEC 11 1097.0 1097.8 1097.0 1097.8 -1.3 1103.4 233 11,259
JUN 12 - - - - -1.3 1116.7 200 6,212
DEC 12 - - - - -1.3 1133.4 334 8,364
JUN 13 - - - - -1.3 1152.7 - 927
DEC 13 1183.0 1183.0 1183.0 1183.0 -1.3 1174.0 3 3,005
JUN 14 - - - - -1.3 1198.1 - 1,175
DEC 14 - - - - -1.3 1225.5 - 52
Total 204,254 478,361

Last Updated 01/29/2010 06:00 PM

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end of commentary  Jan 30.2010
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