Good morning and Merry Christmas to all:
Gold closed up by $4.90 in Europe yesterday whereas silver finished the day at 29.22 down 6 cents.
We only received one piece of data and that was a delivery notice of 114 silver contracts for a total of 570,000 oz. Isn't it strange that the missing 580,000 oz of silver finally reappears in the form of a delivery notice. Boy are the comex folk scrambling for metal. The total number of notices sent down so far this month total 1722 or 8.610 million oz. However they did not publish the number of open interest or notices to be served because the comex was closed. The 114 notices were sent down late Thursday night. So I cannot tell you the total number standing except that the minimum standing is the 8.6 million oz. There were zero notices sent down for gold.
I will redo everything for you on Monday, when the complete data is sent down. However I felt it is important that you got this immediately.
I have decided to send to you important stories that will play a major role in the economy for the balance of this year and next.
The following is a huge story. Last week I reported on the failure of the 7 day repo auction on Chinese treasuries. Now this:(courtesy of Zero Hedge)
Shanghai Stocks Drop Following Failed 3 Month Bill Auction
Submitted by Tyler Durden on 12/23/2010 23:31 -0500
As the rest of the world celebrates Christmas, blissfully pretending all is good, and the Fed can manipulate markets to infinity without at least one of the numerous violated laws of physics being reasserted in the process, things in China are once again reminding those who care that just as liquidity giveth, so does liquidity taketh away. We pointed out a week ago that the 7 day Repo rate in China recently hit a post-Lehman high, as banks are increasingly concerned that following 3 RRR hikes, the PBOC has no choice but to resort to some tightening measure that actually works. As a result excess liquidity has suddenly become rares than hen's teeth. Today we get a first hand lesson of why this was material: Dow Jones reports that the Chinese MoF has failed to attract sufficient interest in its 3 Month 20 billion CNY auction. The result: SHCOMP is now down 1.2%. Bottom line: as the world is sleeping, China just had a failed bond auction. If news mattered, this would be a very disturbing event. Luckily for Ben, it doesn't. For the time being. It will soon. Then Montier's mean reversion meme may just strike with great deferred vengeance and furious accrued anger.
From Dow Jones:
China shares extend their falls following news the Ministry of Finance fails to attract enough bids to sell all of its planned CNY20 billion 3-month bills in an auction. The Shanghai Composite Index is now down 1.2% at 2819.72 and analysts peg support at 2800. The MOF's unsuccessful bill auction is fresh evidence of tight liquidity conditions in the market, due to China's three RRR hikes since November and rising cash demand near the year-end. "Institutions are inclined to expedite pocketing in some profit," says China Post Securities, adding "the situation will increase the likelihood of a bearish market in the short term." Banks continue to fall on various news reports that China is likely to use new measures, such as special RRR hikes, to rein in credit expansion next year.
Incidentally, the last time China had a failed bond auctionwas in mid April, just as the stock market hit its then 2010 highs, only to be followed by a drop to the year's lows.
I would like everyone to read this Christopher Laird commentary on the plight of China and what the new world economy will look like in the coming years. This fellow is very good and has a good grasp of things:
Have We Entered A Period Of Chaos
In Financial & Commodity Markets?
December 22, 2010
I want to start out with some reassurance that there will not be any extensive math in this piece. Rather, I will attempt to use general macro economics to describe how I believe that the world has definitely reached a point of massive change from an industrial economy to a technology and post industrial economy.
This will have tremendous implications for commodities and industry, and technology.
The change is chaotic, in that the governments of the world know what is happening but they cannot stop the change. They also are having trouble controlling any aspect of it.
If the world is changing from an industrial economy to a post industrial economy, you can expect massive population shifts and job losses as machines take on more production. The entire economy changes from the inside out.
For example. The US entered the 20th century (1900s) to become the dominant world manufacturing empire. It reigned there until roughly 1970/80 when the US started losing manufacturing jobs. The entire world economy mimicked the industrial economy in one way or another.
China is not the US and this is not 1900
Now I bring up China. China is a hybrid economy combining socialism/communism with capitalism. I view China as out of control. China's experiment with capitalism, the way they handled it, is either going to work or its going to lead to a world war over resources.
I submit that the Chinese economy is growing out of control and in a huge bubble. I submit that the nature of the Chinese economy, with intergovernmental corruption and the massive amounts of money at moral hazard and already wasted on Ghost Cities (look at google) is out of control and is a chaotic economic and sociopolitical disaster waiting to happen. China is too big not to fail. Too chaotic. Too unregulated. Too un modernized still with 800 million Chinese living on $100=200 a month.
I also submit that the world economy, and the world monetary system is in a chaotic phase and is going to collapse when some final last straw crisis appears. It could be Europe, it could be another war that goes badly. In any case, merely shaking this creaky world economy is enough to cause chaotic collapse.
China has two key problems with their implementation of capitalism.
One is that they have a huge population. They graduate 3 million engineers a year! Tell me, who can use 3 million new engineers a year?? I saw a story about tens of thousands of college graduates in slums around Beijing who cannot find work. Yet this year, and next year, another 3 million engineers will be graduated in China, many to have their hopes of working in engineering dashed…
What is wrong with this picture??? There is not enough demand in China nor the world for another 3 million engineers from China alone, let alone in the US, Japan and so on…
Let me explain. Because of automation, and the use of machines, China will NEVER be able to raise the standard of living of the majority of Chinese to the level of a Western standard of living. There will simply be millions of bottom feeders who make $200 a month. Those people won't be buying anything other than ramen noodles. Good paying manufacturing jobs are a thing of the past century. That is not good news for the world's middle class.
Now, taking this China college degree situation a little further, I find other stories in the US about millions of US college graduates of recent vintage living with their parents after graduating because there are no jobs. I don't only mean no engineering jobs, but no 'fill in the blank ' jobs of any type. Um, I heard its 40%!
Now, follow along, (its either this approach or lots of pages of equations!) since the world is having to face austerity, and China WILL face a period of austerity from their massive overbuilding, and so, there is no way all these engineers in this case will find work even remotely related to their degree.
Throw away engineers. Huh?
This is a world phenomenon. These are the modern throw away college graduates, and there are tens of millions of them in every country of any size. Today, having a college degree does not by any means guarantee a decent job.
Anywhere in the world. This point proves the world cannot provide a Western standard of living to billions more people. Maybe in 50 years…
Now, as China attempts to modernize and bring the rest of their 1.2 billion people up to economic par, they find out that things like their college graduates have no jobs. Or, rather, too many of them don't.
What about India? Same problem. What about Europe? Well, Spain has something like 40% unemployment for age 18 to 30. That includes college graduates…
Same problems everywhere. Lots of willing workers and engineers, and fewer jobs each year. Something has to give…
Chaos in geopolitics and economics
As the world enters a period of evolution from an industrial society to a post industrial information/technology society, the following will happen and in fact is already well underway:
- Labor arbitrage : Internet and fast communications enable outsourcing of all kinds of back office work like phone banks, accounting, law practice, doctors even. Not to mention the obvious factories leaving the US for China for example. Net effect is millions of permanently lost jobs to cheap foreign labor. Yes, the factory workers make only $1 to $2 an hour. Try a European or a US citizen living on that.
- Instability : As nations lose jobs, they become unstable economically and politically.
- Automation : increases efficiency inside factories and causes permanent job losses.
- Wealth disparity : vastly increases with two distinct groups emerging: the 'plugged in' who have work in the new efficient economy, and this includes the super rich who probably deserve their own category, and the masses of unemployed and slave employed and under employed.
The wealth disparity problem is one of China's major concerns. In the US, a nation of roughly 120 million around 1900 took over manufacturing around the world by the time of 1950. IE even with old technology, one major advanced nation was capable of supplying goods to the entire world.
Supposedly China intends to do this with their economy. But if they cannot physically get their own wealth disparity problem under control, all they will get is a revolution.
Now, with a world in very painful transition from industrial to post industrial/technical civilization, enter the chaotic trip wires.
These might be called shocks. The Lehman situation was a chaotic shock in that, even though it was expected months before, when it unraveled the Fed and other banks lost control of the situation and were hours away from a world bank shutdown. Most people are not aware of how serious that week was in Fall 2008.
But, the Lehman shock shook an already stressed out financial system, and the world entered a horrendous period of economic decline. We are only now limping. We have not exited that situation. But, the weakened state of the world economy allowed a chaotic shock to implode the financial system.
Transition state is a weak period
As the world evolves from an industrial to post industrial model, the winners and losers start to emerge. The winners will have a huge head start entering the new post industrial information economy. The losers will suffer terrible economic hardship and be at the mercy of foreigners. One of the first things the winners will do, and the first war of this transition will be to grab all the world's resources they can get their hands on.
The world is right now in the early stage of transition.
Vast financial opportunities coming
Now, I am professionally trained in Oracle Databases, which are used by the internet and just about any application you can pick. I also have a math degree.
The internet and the vast implications it has for the economy and the social fabric of the world has rapidly escalated the changes in everything. There will be huge opportunities in future internet startups, as well as existing companies. We have only seen the beginning of what is possible here with Facebook for example, or the incomparable Google.
PCs are now a couple of hundred dollars. Internet bandwidth is still exploding, meaning more and more people can view online videos or you name it.
But, in the meantime, the changes are scary. What the world is going to do with perhaps 20 pct of the world working population being either unemployed or underemployed is a scary question. Insurrections and wars usually result.
Nevertheless, we at Prudent Squirrel are still looking for opportunities, such as the tech field for investors. We are still cautions right now due to risk of a major stock correction. But we have plans for investors in the future that have real possibilities!
The Prudent Squirrel newsletter is our financial and gold commentary. Subscribers get 44 newsletters a year on Sundays, and also mid week email alerts as needed. The alerts include quick notification of important financial news developments by email. Subscribers tell us that the alerts alone are worth subscribing for.
We have also made a number of good calls on big currency swings, such as with the USD, the Euro and the Yen, and we called the USD rally that started in November.
We invite you to stop by and have a look.
Editor in Chief
Disclaimer: Chris Laird is not an investment advisor/professional. This article, and the PrudentSquirrel newsletter and alerts, are general market commentary only. They are not intended as specific advice. You should talk to your own investment professionals for specific advice. Information here is deemed reliable but should be verified by you if you think it's important.
This morning we got this from China that they are raising interest rates by 25 basis points in their attempt to contain inflation. Seems that inflation is rampant throughout the world:
courtesy of Gold-eagle.com and the writer Wu Loh from China.
China Raises Interest Rates by 25 Basis Points in Bid to Curb Inflation
David Rosenberg through the National post has given a great commentary on threats to the economy. (courtesy National Post)
David Rosenberg on the huge threats facing the economy
Read more: http://www.nationalpost.com/related/topics/David+Rosenberg+huge+threats+facing+economy/4019151/story.html#ixzz198jzF9Pn
The best articulator of the bear case, David Rosenberg of Gluskin-Sheff, summarizes all of the risks facing the market in one paragraph:
Market sentiment is as overly optimistic now as it was pessimistic at the July- August lows. Eurozone fiscal deflationary shock. Anti-inflation policy restraint in emerging Asia. Widespread cutbacks at the state and local government level. Debt ceiling issue triggers major rounds of market volatility. Tax breaks that are temporary tend to have marginal economic impact with few multiplier impacts, hence GDP revisions will likely be to the downside post-Q1. Another downleg in home prices undercuts confidence and spending (with around two years’ supply of total vacant inventory backlog).
please click on Rosenberg's expanded list of market risks. You will see for the first time Canadian problems. (
Canadians are not immune to the global mess)
This video on our famous cartoon characters continue exposing the fraud at the "JPMorgue" and the "Ben Bernake"
The details provided are terrific and accurate. (thanks to silvergoldsilver.com and all the gang for their production of this)
www.silvergoldsilver.com has left a new comment on your post "Open interest in silver continues to rise/troubles...":
Merry Christmas. I will be releasing Part 2 of Silver Manipulation Explained tomorrow afternoon right before Santa sets sail. Enjoy.
Posted by www.silvergoldsilver.com to Harvey Organ's - The Daily Gold & Silver Report
My goodness, look what is going on in Denmark. I guess liberties are being thrown away to protect our banker fraudsters: (courtesy of zero Hedge)
Guest Post: Legislation Proposed To Criminalize Calls For A "Run On The Bank"
Submitted by Tyler Durden on 12/24/2010 14:34 -0500
Legislation proposed to criminalise calls for a "run on the bank"
There's something going on in the Netherlands:http://nos.nl/artikel/207170-oproep-...strafbaar.html
Calling for a "bank run" in public will possibly become a criminal offense. Ministers Opstelten of Security and De Jager of Finance are preparing a proposal for a new law.
They want to be able to penalize people who are openly calling for a "bank run" a maximum of 4 years or a fine of 19.000 euro. According to the ministers a bank run can seriously endanger a bank.
The ministers say that the collapse of a bank in case of a "bank run" is a question of hours instead of days, since a call for this can be spread fast, using prestent methods of communication. Banks cannot defend themselves from this, and thus must acquire protection under the criminal law, is their thought.
DSB: Reason for the tightened methods is the demise of the DSB Bank. Account holders took out 600 million euro from their accounts in this bank, after the call of Pieter Lakeman, of the Foundation "Hypotheekleed" (Motgage suffering).
The bank run was the initiation of the bankruptcy of the bank of Dirk Scheringa.
What happened to the DSB Bank then?
The behaviour of the president of De Nederlandse Bank (our State bank, our "FED"), Noud Wellink, was part of the reason for the bankruptcy in 2008 of the DSB bank. Politicians called for his (voluntary) resignation, since it became widely known that he acted wrongly, by putting the DSB bank under suspicion in public, in name of the Nederlandsche Bank, and by allowing a banking license in the first place. (at least, that is the official message, it was very clear that the reputation of the DSB was tarnished by the Central Bank) The president of the DSB, Dirk Scheringa fell for the bait and took out his own money. Later he put it back, but by then, it was too late; by then, the warning was issued, and the run had begun.
This criminalisation of the "run on the bank" existed as plan (Scheltema Commission who investigated this) already after the DSB demise. (concluding in june 2010)http://www.rnw.nl/english/article/du...ent-under-fire
As of late, there's been several campaigns to mobilise the "silent majority" into a more active stance against taking on private debt and risk, of private banks.
Notably, the "run on the bank" as proposed by french football player Eric Cantona, as well as the "Buy silver, crash JP Morgan Bank" initiated by agent provocateur Max Keiser, are examples of "financial activism". The purpose of these actions is to break the stranglehold of banks that speculated and lost (and are basically insolvent) over society itself, which is, at least in the Netherlands, very sound. There's political resistance (of aforementioned Minister De Jager) to "pay for debt of other countries". At least those are his words.
Making such acts of "financial activism" illegal is unconstitutional in the Netherlands.
(art. 1.7 freedom of speech, art. 1.9 freedom of protest)
Of course the overleveraged position of banks, and their key role in the present Fiat currency system is the cause of this vulnerabillity. This should have been adressed, not the wish of the savers to take out their own money, and warning others. That is the elephant in the room; that banks here aren't necesserally in a worse shape than anywhere else, but are extending their risk to society at large, because they're engaged in both speculation, and in handling the day-to-day financial affairs of corporations and individuals.
Drs. Jasper Blom of the UvA (University of Amsterdam) stated in a publication that the Basel Accord, to stipulate rules for banks to restrict risk, have been "watered down", and that essentially nothing has changed since 2008. Politicians are, according to him, uninterested, and unconcerned, while it is their responsibillity.
Is this important?
Yes, the positition of the Netherlands in the international banking cartel is very important. Moreover the position of the Netherlands is very important to the american government, as can be seen by the latest Wikileaks cables.
The controller of the dutch stockmarket, the Euronext is owned (since 2006) by the NYSE !
And: "In 2009, the Netherlands was the largest destination for United States direct foreign investment, with 13.4% of the total. This made the United States the largest direct foreign investor in the Netherlands. Vice versa, the Netherlands was the ninth-largest direct foreign investor in the United States in 2009. In 2008, however, the Netherlands was the largest direct foreign investor in the United States."
So, with this move, the dutch government wants to protect it's banking system, at the cost of the liberty of individuals. A dangerous course of action.
I sent this story on the declining Baltic Dry Index to you on Wednesday. The Baltic Dry Index is an index which relates to costs to ship dry goods (not oil)
throughout the world through the shipping lanes. The rate is what is charged by ships to move commodities from A to B. When activity is slow, the rate drops, and when activity is strong, it is difficult to a get a ship and thus costs rise. I will repeat this story to you the huge drop in the Baltic Dry Index and its significance will be borne out in the reply to this story:
Harvey this is a reply I received from a friend in Europe to forwarding this on ...
“The Baltic indicators are real. It WILL get much worse. Hundreds of tankers and ship are sitting rotting off Gibraltar without charters. Next year will get much worse. Only LNG tankers are strong. Freight is a disaster. Ships are running at a loss now. The world is full of distressed Ship Sellers.
It will all get worse as economies cut back. Watch the dips then. I recently stood on the Gibraltar rock and looked down at disaster. Its like Pearl Harbour. A real mess. “
On 10-12-22 10:19 PM, "Harvey Organ" <firstname.lastname@example.org> wrote:
Baltic Dry Free Fall Accelerates
Submitted by Tyler Durden <http://www.zerohedge.com/users/tyler-durden> on 12/22/2010 09:35 -0500
· Baltic Dry <http://www.zerohedge.com/taxonomy_vtn/term/309>
Last week, we pointed out when the BDIY dipped below 2000 for the first time since August. In the next three days, the index slide has accelerated and after dropping 3% just overnight, is back to 1830, just 130 points away from the 2010 lows printed in July. And while the index topped in early September following a brief and uninspired climb, it has since been a one way downward pointing slope. Whether the BDIY is a leading indicator to anything is debatable: some believe it is a completely irrelevant indicator. Others disagree. A very strong case for the former camp was made last week by Nordea which demonstrated, in its chart of the week <http://www.zerohedge.com/article/nordeas-chart-week-collapsing-us-import-demand> , the average speed of its vessel fleet. One thing is certain: for whatever reason, demand for trans-Pacific cargo shipments is once again plunging.
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For those of you who are coin collectors, the usa has now been authorized to mint Palladium coins
like the Russians: here is this story: (courtesy of Gold-eagle.com)
PALLALIUM DEMAND INCREASES: American Palladium Eagle Coins
Well that about does it for today. I will give my comprehensive review on the comex gold and silver on Monday,
when we get the COT report and the inventory movements plus delivery notices.
I wish you a very Merry Christmas...and a very safe and enjoyable holiday weekend.
I will see you on Monday