Saturday, February 12, 2011

Important commentary...Mubarak resigns/silver open interest and deliveries explode/whole story on the disappearing gold and silver

Good morning Ladies and Gentlemen:


Today's commentary will be long but very important for you to read everything carefully.


Before starting as is my custom, let me introduce to you 4 new entrants to our banking morgue.  The story is courtesy of Reuters:


 18 banks closed so far in 2011

* Banks closed on Friday have total of 19 branches (Adds two more bank failures)

Feb 11 (Reuters) - U.S. banking authorities closed small banks in California, Florida, Michigan and Wisconsin on Friday, bringing the total number of bank failures in 2011 to 18.

The Federal Deposit Insurance Corporation (FDIC) announced the following closures on Friday:

* Peoples State Bank, based in Hamtramck, Michigan, with 10 branches, was closed. Its deposits were assumed by First Michigan Bank. As of Dec. 31, Peoples State Bank had some $390.5 million in assets and $389.9 million in deposits.

* Canyon National Bank in Palm Springs, California, was closed. Canyon National Bank's three branches will reopen as part of Pacific Premier Bank. As of Dec. 31, Canyon National Bank had about $210.9 million in assets and $205.3 million in deposits.

* Sunshine State Community Bank of Port Orange, Florida, which has five branches, will reopen as Premier American Bank. As of Dec. 31, Sunshine State Community Bank had some $125.5 million in assets and $116.7 million in deposits.

* Badger State Bank of Cassville, Wisconsin, was closed. Its sole branch will re-open at part of the Royal Bank. As of Dec. 31, Badger State Bank had approximately $83.8 million in assets and $78.5 million in deposits.

In 2010, 157 banks failed while 140 failed in 2009. The bulk of the failures have increasingly been smaller institutions, those with less than $1 billion in assets, as large banks have recovered more quickly from the 2007-2009 financial crisis.

(Editing by Bernard Orr)



Gold closed yesterday at comex closing time of 1:30 at  $1360.00 down $1.90 from Thursday.  Silver the subject of interest for our banking cartel survived another ambush falling only by 9 cents after being down by over 40 cents.  Our banking ninjas used all their weaponry in their attempt to slice up silver but failed.  Let us now head over to the comex and see the results of trading yesterday.


First gold:


The total gold comex open interest rose by 572 contracts with Friday's reading of 462,968.  Looks like nobody left the party here.  (please remember that the reporting of open interest is always one day back and thus I refer to the reading of OI on Friday.  as basis: Thursday).  The front delivery month of February saw its open interest rise by 3 contracts to 943 from 940.  Since we had 50 deliveries on Thursday, somebody needed gold in a hurry and of course the amount of gold standing would have to increase.

The next front delivery month of April saw its OI marginally fall from 303,273 to 302329 for a drop of 944 contracts.  No big deal here.  The estimated volume on the gold comex continues to be relatively weak coming in at 126,515.  The confirmed volume yesterday was also very anemic coming in at 127,581.  It seems that the major players have moved to the physical markets of London to get their gold metal.  There will be more discussion on this later in the commentary.


And now silver:


The total silver comex open interest exploded by almost 5000 contracts rising to a level not seen for a couple of years.  The final reading for the silver comex came in at 140,275 from Thursday's level of 135,440.  As I pointed out to you on many occasions, any total open interest at figures greater than 135,000 necessitates our banking ninjas into action.  Their mission:  to remove as many of the silver leaves from the tree.  They are frightened to death of the many that may stand for delivery. 


The front options expiry delivery month of February saw its open interest fall from 182 to 148 for a drop of 34 contracts.  However on Thursday we had 87 deliveries so all of the fall was due to deliveries and we got more standing for delivery.

All eyes are on the front month of March as this trading off goes off the board, I believe, a week from Wednesday.  First day notice will be on Feb 28.2011as we are getting close to D-Day.  The front delivery month shocked our bankers to no end as the open interest actually rose by 111 contracts instead of seeing roll-overs to the next delivery month of May.  The volume on the silver comex was quite different than its older cousin gold.  The estimated volume on Friday was a very good 62,058 and the confirmed volume on Thursday was also respectable, coming in at 68,308.

Here is a chart for Feb 10.2011 on deliveries and inventory changes at the comex:



Withdrawals from Dealers Inventory 

180,873 oz

Withdrawals from customer Inventory 

244,357 oz

Deposits to the dealer Inventory


Deposits to the customer Inventory

2154 oz

No of oz served  (contracts )  63

315,000 oz

No of notices to be served 85

425,000 oz


Withdrawals from Dealers Inventory 

39,516 oz

Withdrawals from customer Inventory 

 1175 oz

Deposits to the dealer Inventory

  2,000 oz

Deposits to the customer Inventory

103 oz

No of oz served (contracts 87

8700 oz

No of oz to be served  856

85,600 oz

 Let us start with gold which is generally the less volatile of the two metals.

We are starting to see some action in the gold vaults.  We saw a tiny 2000 oz enter the dealer and one brick of 103 oz enter the customer. However the withdrawals were huge.  The dealer withdrew 39,516 oz from all vaults as this inventory is needed in London;

Two customers removed a collective total of 1175 oz  (one customer: 982 oz and the other 193).  There was a tiny adjustment of 289 oz whereby a customer came to the aid of the dealer by loaning him 289 ounces with a hope and prayer that he gets it back along with a handsome profit.

The comex folk notified us that a total of 87 notices were sent down for servicing for a total of 8700 oz of gold.  The total number of notices sent down so far this month total 10,435 for a grand total of 1,043,500 oz of gold.  To obtain what is left to be served upon, I take the Friday deliveries of 87 and subtract that total from the February open interest of 943 which gives me a total of 856 notices left to be served upon or 85,600 oz.

Thus the total number of gold oz standing in this delivery month of February is  1,043,500 oz (already served) +  85,600 oz (to be served)  =  1,129,100 oz.  Thursday's total was 1,125,800 so we gained a very large 3,200 oz of additional gold standing.

For those keeping score, in metric tonnage the gold standing equates to 36.305 tonnes of gold which is extremely high.


And now for silver:

The dealer did not receive any silver.  There was a tiny deposit of 2154 oz to the customer.  There was however massive withdrawals of silver from both the customer and the dealer:

The customer withdrew from two warehouses a total of 180,873  (one lot of 175,574 oz and other other 5,299 oz).  The dealer also got into the act removing massive silver totalling 244,357 oz and this silver no doubt was on a plane to England as this physical bourse is on fire with many taking their physical and moving onto their sovereign shores.  There were no adjustments.

The comex folk notified us that 63 notices were sent down for servicing for a total of 315,000 oz.  The total number of notices sent down so far in this non delivery month of February is represented by 354 notices or 1,755,000 oz of silver.

Even though February is not an official delivery month, an investor can exercise an option to purchase silver  and stand for delivery.  There are 12 options expiry months for silver and gold, one for each calendar month.

To obtain what is left to be serviced, I take the deliveries of Friday (63) and subtract that total from the February OI  (148) which gives me 85 notices or 425,000 oz of silver are left to be served upon.

Thus the total number of silver oz standing in this non delivery month of February is 1,755,000 + 425,000 oz =  2,180,000 versus 1,930,000 oz recorded on Thursday.  We may get our back to back 4 million oz of silver standing which will be a first ever for comex trading in only options exercised deliveries.

Friday night we got the release of the COT report and here it is:

First the gold COT report:

COT Gold, Silver and US Dollar Index Report - February 11, 2011


-- Posted Friday, 11 February 2011 | Share this article | Source:  

Gold COT Report - Futures

Large Speculators

















Change from Prior Reporting Period


















Small Speculators







Open Interest
















non reportable positions

Change from the previous reporting period


COT Gold Report - Positions as of

Tuesday, February 08, 2011


Those large speculators that are long in gold like our hedge funds continued to press on by adding 14,534 contracts to their long positions.

Those large speculators that have been short gold, did not like what they saw so they reduced their short interest by 1365 contracts.

Ignore the spreaders.

The large commercials that have been long gold lessened their longs by a large 5042 contracts.

The large commercials who are always short, continued on the criminal ways by supplying a massive 11,072 contracts.

Forget about the small specs in gold as they have been eliminated from the score by these criminal bankers.


And now for silver:

COT Gold Report - Positions as of

Tuesday, February 08, 2011


Silver COT Report - Futures

Large Speculators

































Small Speculators







Open Interest
















non reportable positions

Change from the previous reporting period


COT Silver Report - Positions as of

Tuesday, February 08, 2011


Those large speculators that have been long silver added massively to their long positions heeding to the message sent by Max Keiser and all:  7,032 contracts.

Those large speculators that have been short added marginally to their short position to the tune of 649 contracts.

Those large commercials that have been long silver lightened up by a tiny 816 contracts. No big deal here.

And now for our famous bankers, JPM and HSBC: these guys continued on their criminal way by supplying another 5500 contracts totally un-backed by silver.

The small specs that were long silver added largely to their longs to the tune of 2191.  Those that were short followed the bankers by adding 2258 to their short position.

In a nutshell;  the bankers are trying to suppress the price by supplying massive paper in both silver and gold.  The regulators who gave 60 days grace took over for an extended holiday except for Bart  Chilton who is doing his best trying to expose this fraud.



Let us now head over to our ETF's

First the GLD inventory: no change from Thursday:

Total Gold in Trust

Tonnes: 1,225.53


Value US$:



Now for our SLV and again no change in inventory from  Thursday:



Ounces of Silver in Trust


Tonnes of Silver in Trust Tonnes of Silver in Trust




And now for our real physical ETF''s and their positive performance to their NAV:

The Sprott silver fund showed a positive to NAV of 12.8%

The Sprott gold fund is continually adding to its positive  NAV.  Last night the gold fund registered a 6.04% premium to NAV

The central fund of canada recorded a 7.4% premium to NAV.



And now for the big stories of the day.  No doubt you all heard that Mubarak of Egypt left office.

Here is Jim Sinclair's commentary on this subject:

Dear CIGAs,

There has not been one word on financial TV about what has occurred in Egypt being a military coup by definition and without any doubt. This was probably planned in the beginning by the military using the people to pull it off.

The new man (for now) has the same background as Putin has.

Bahrain, Algeria and 8 other countries best not allow assembly.

This may be the best military/industrial coup since Kennedy & Johnson.

The two strongest elements in Egypt now are the military and the Brotherhood. The Brotherhood has said they will not field a candidate in any upcoming election. The Brotherhood would favor the clergy steeping into the power vacuum.

The media is now comparing the event in Egypt to Mahatma Ghandi and Martin Luther King.

We will see.


Here is the official story last night from the New York Times:

Mubarak Steps Down, Ceding Power to Military 
Published: February 11, 2011

CAIRO — Egypt erupted in a joyous celebration of the power of a long repressed people on Friday as President Hosni Mubarak of Egypt resigned his post and ceded control to the military, ending his nearly 30 years of autocratic rule.

Shouts of “God is Great” competed with fireworks and car horns around Cairo after Mr. Mubarak’s vice president and longtime intelligence chief, Omar Suleiman, announced during evening prayers that Mr. Mubarak had passed all authority to a council of military leaders, bowing to a historic popular uprising that has transformed politics in Egypt and around the Arab world.

Protesters hugged and cheered and shouted, “Egypt is free!” and “You’re an Egyptian, lift your head.”

“He’s finally off our throats,” said one protester, Muhammad Insheemy. “Soon, we will bring someone good.”

The departure of the 82-year-old Mr. Mubarak, at least initially to his coastal resort home in Sharm el-Sheik, was a pivotal turn in a nearly three-week revolt that has upended one of the Arab’s world’s most enduring dictatorships. The popular protests — peaceful and resilient despite numerous efforts by Mr. Mubarak’s legendary security apparatus to suppress them — ultimately deposed an ally of the United States who has been instrumental in implementing American policy in the region for decades.


If you think, the contagion stops with Egypt you are wrong.  Here is Zero Hedge talking that the next nation to be hit is Algeria:

Algeria Next?

Tyler Durden's picture





For all those on revolution withdrawal, fear not: there are at least 20 more countries to go (many of which hilariously fall in Jim O'Neill's N-11 list - does the N stand for Next to revolt Jim?). Tomorrow, we may get the next one. Thousands of police are reportedly being drafted into the Algerian capital ahead of planned pro-democracy marches, opposition groups have said. Said Sadi, the head of the Rally for Culture and Democracy (RCD), said authorities were moving to prevent Saturday's protests in Algiers from taking place."

From Al Jazeera:"Trains have been stopped and other public transport will be as well," he told the AFP news agency.

According to Sadi, around 10,000 police officers were coming into reinforce the 20,000 that blocked the last protest staged on January 22, when five people were killed and more than 800 hurt in clashes.

The latest rally is being organised by the National Co-ordination for Change and Democracy (CNCD), a three-week-old umbrella group of opposition parties, civil society movements and unofficial unions inspired by the mass protests in Tunisia and Egypt.

Demonstrators in the oil-rich nation have been protesting over the last few months against unemployment, high food costs, poor housing and corruption - similar issues that fuelled the uprisings in other north African nations.

At least 12 people have set themselves alight in protest against the government since January, four of those dying.

Earlier this month, Abdelaziz Bouteflika, the president, said he would lift emergency powers, address unemployment and allow democratic marches to take place in the country, in a bid to stave off unrest.

However, protests in Algiers remain banned.

Don't think for a minute that the Bernank is the only person to conceive of social appeasement by dangling shiny trinkets and unemployment checks before the great unwashed. Oh yes, once Algeria goes, Bahrain is next:

Bouteflika's attempt to appease protesters is just one of many undertaken by Arab governments concerned about spreading unrest in the region.

In Bahrain, the king offered each family $2,650 on Friday.

The small oil producer is considered the most vulnerable of the Gulf Arab countries to unrest, although seen as unlikely to fall in the same way as Tunisia and Egypt.

The Bahraini government has made several concessions in recent weeks, such as higher social spending and offering to release some minors arrested during a security crackdown against Shia groups last August.

The official Bahrain news agency released a report saying: "To praise the tenth anniversary of the National Action Charter and in recognition of the people of Bahrain.... His Majesty King Hamad bin Isa Al Khalifa ... will provide the amount of one thousand dinars for each family of Bahrain after adopting necessary legal procedures."

Activists have called for protests on February 14, the tenth anniversary of Bahrain's constitution, but it is not yet clear how widespread they will be.

And unlike Egypt, Algeria actually has more resources than just one strategically located canal.

Algeria is an important exporter of oil and natural gas and is a member of the Organization of the Petroleum Exporting Countries (OPEC). In 2008, Algeria produced 1.42 million bbl/d of crude oil. Algeria was the fourth largest crude oil producer in Africa after Nigeria (1.94), Angola (1.89), and Libya (1.71) and the largest total oil liquids producer on the continent.  As a member of OPEC, Algeria's crude oil production can be constrained by the group's crude production allocations, but Algeria also produced 450,000 bbl/d of condensate and 357,000 bbl/d of natural gas liquids, which are exempt from OPEC quotas, bringing total oil liquids production for the year up to a total of 2.23 million bbl/d. Domestic oil consumption accounted for about 13 percent of total production.

Algeria was the sixth largest natural gas producer in the world in 2007 after Russia, the United States, Canada, Iran, and Norway. Algeria produced 3.03 trillion cubic feet of natural gas in 2007, of which 70 percent was exported and 30 percent was consumed domestically.

Don't worry though. This, and every next revolution, up to and including that of the US at the very end, are all priced in as the market goes to all time highs by the end of June 2011.

h/t Scrataliano



Congress is now worried about individual states blowing up:  (courtesy of Jim is Stephen Foley of the Independent Business)

Congress warned over states’ bankruptcies 
By Stephen Foley in New York 
Thursday, 10 February 2011

US lawmakers were warned yesterday that allowing states to declare bankruptcy would upend the $2.8 trillion (£1.7 trillion) municipal bond market, making it much harder and more expensive to fund local government, and potentially destablising the economic recovery.

A House of Representatives committee was examining the extent of the financial distress in state and local governments, which has become a major topic of concern on Wall Street and among individual investors, and examining ways to prevent the need for a federal bailout of any of the lower rungs of government.

"The perfect storm is brewing; already state and municipal governments are coming to Washington, hat-in-hand, expecting a federal bailout like everybody else," Republican Congressman Patrick McHenry said. "But the era of the bailout is over."

The White House has floated a plan to allow federal aid to states to help to fund unemployment benefits, so that the states do not have to raise taxes on business. However, the plan ran into immediate opposition on Capitol Hill.

The House Oversight and Government Reform Committee yesterday included testimony from the Manhattan Institute for Policy Research and the Centre on Budget and Policy Priorities – two lobby groups from opposite sides of the political spectrum but with the same view on the question of allowing states to go bankrupt.



Max Keiser on a radio interview told the world that the whistle blower has some explosive news to release in the next few weeks.

On the 18th of February we get the explosive documents on gold swapping with the Fed and some nation. (probably Germany)

I will comment on this when we get it.

The NY courts have also amalgamated 7 of the class action suits against JPMorgan et al into one with the key witness, Andrew Macquire the whistle blower.



Commodity prices are on a tear with cotton going limit up on several days trading over at the nymex:  (story: courtesy Reuters)

US cotton hits 150-year high, $2 targeted for next week

* Virtual absence of supplies stokes cotton rally 

* Players say $2 a lb cotton to be hit next week

NEW YORK, Feb 11 (Reuters) - U.S. cotton futures rallied Friday to a 150-year peak on trade and speculative buying as very tight supplies were expected to push the market to the unheard of level of $2 a lb by next week, analysts said.

The key March cotton contract on ICE Futures U.S. rose 6.42 cents to $1.94 which marked the highest price since the Civil War. The early low was $1.8796.

"There are no supplies available," said Lou Barbera, cotton analyst at brokerage VIP Commodities.

He said buyers, faced with a virtual dearth of physical cotton, were being forced to pay up to get some material.

Since the benchmark March cotton contract can only rise the 7-cent limit to $1.9458, attempts to hit the $2 a mark level will have to wait for next week.

"We should be well over $2 next week," said Barbera.

The cotton market, basis the spot month, traded over $1 per lb in September 2010, only the second time it had done so in the last 50 years. Now, it is seemingly poised to hurdle $2 and some in the market are even talking of $3 or $5 cotton.

Analysts said the culprit is scarce supplies because most of the Northern Hemisphere cotton crop has already been harvested. Exportable supplies from No. 2 producer India are not reaching the market because of agricultural inflation fears in the subcontinent.

The shortage is being exacerbated by the fact that supplies of cotton from the United States, the world's top exporter, are practically gone. The trade estimates that more than 95 percent of the crop of 18.32 million (480-lb) bales has been sold.

Analysts said talk of a dry spell in China, the top producer and No. 1 consumer of cotton, fueled the rally.

The September cotton contract on the Zhengzhou Commodity Exchange hit a record 34,390 yuan per tonne on Friday and was last done at 33,795 yuan, up 145 yuan.

The announcement by ICE Futures U.S. of a 25 percent increase in cotton margins has failed to dampen the market's rally for now, dealers said.

Analysts said the rally's longer-term impact will be seen during the spring planting season for row crops in the United States.

The market will be looking toward the U.S. Agriculture Department's potential plantings report on March 31 to see if the rally lures more American farmers to plant cotton in 2011.

Industry group National Cotton Council of America said U.S. 2011 cotton plantings could reach 12.5 million acres. Most analysts believe the number will be much higher because the NCC survey was conducted before the rally.


Many of you have sent this down to me of which I thank you.

First the story whereby the Dutch Central bank has forced a Dutch pension fund to remove his gold bars as investment which comprised only 13% of its portfolio:


The authorities only ordered them to remove their gold holdings.  They will switch to silver.


The trade balance came in a negative 40 billion and the street were delighted that imports were up as the consumer is spending.

First the official news:

U.S. economic news:

08:30 Dec US Trade Balance ($40.58B) vs.consensus ($41.1B) 
* Nov revised to ($38.32B) from ($38.3B) 
* * * * *


and now Dave Kranzler on this important number

Friday, February 11, 2011

Is The Consumer "Recovering?"

Let's breakdown the December trade deficit numbers released today. For all of December, the trade deficit was $40.6 billion, roughly in-line with expectations and up $2.7 billion from November. The media is already pointing to the fact that imports increased by $5.1 billon from December to November as the signal that the U.S. consumer has returned and the economy is improving. 

But let's look at the golden truth. The total value of goods imported in December was $116.6 billion, up $2.9 billion from November. Of that, $22.5 billion was oil, up $2.7 billion from November. THUS, of the total amount of the increase in goods imported from November to December, $2.7 billion - almost 100% - of that was oil. Does that look like the consumer is spending more money on "consumables and durables?" Rest assured, the full amount of the value of oil imported was from higher prices. The consumer in this country is now spending an even bigger percentage of his monthly paycheck on oil. THAT is bad for the health of the economy.

What is more interesting, in terms of the inflation picture, is the fact that China appears to be taking measures to "repatriate" inflation back to the U.S. by raising interest rates and slowly strengthening the value of the yuan. This will cause the price of Chinese imports (i.e. Walmart, Best Buy, Target, etc) to rise in value, further exacerbating the accelerating price inflation in this country.

This will be GREAT for gold/silver. Make no mistake about that. And another little tidbit of news that you won't find reported on most U.S. media sources is that Viet Nam, the 5th largest importer of gold in the world, just devalued its currency by 7% - a huge amount in terms of currency devals. Here's theLINK This will further fuel inflation in Viet Nam AND further fuel the demand for gold by the population in that country.

It's so simple to weed thru the garbage reported in this country to get at the truth. It's stunning how few people are interested in doing this. I just heard about someone I know, who I thought had a lot of money socked away. It turns out he's scrambling now to make ends meet. This is someone who used to be a big corporate executive and I tried to convince him to unload his real estate and move into gold over 8 years ago...oh well, it is what it is...Have a great weekend everyone (Avete una grande fine settimane, ognuno)


That is why I never watch CNBC as we get distorted figures and nobody tells the truth.



Please read this next release very carefully.  The Chinese always puts out their strategy is little pieces and released by prominent Chinese economists:

Prominent Chinese Economist Advises Country To Sell Its $500 Billion In GSE Holdings Before QE2 Ends

Submitted by Tyler Durden on 02/10/2011 13:33 -0500

Add one more pill to the daily Oxycodone consumption by the Chair Central Planner. In what is about to become the latest headache for Bernanke, popular Chinese economist Lu Zhengwei, a senior economist at China's Industrial Bank Co., has advised that China should promptly sell its GSE holdings on concerns that continued "blank check" writing by Congress to the GSEs will be "almost impossible" as well as fears that as soon as QE2 ends, the entire US bond complex will see a major sell off. In other words welcome to the world of game theory defection: he who sells first, loses the least.

From Dow Jones:

A popular Chinese economist on Thursday said China should be aware of risks in its holdings of debt issued by U.S. government-controlled mortgage giants Fannie Mae (FNMA) and Freddie Mac (FMCC), and suggested that China sell the securities soon.

The report by Lu Zhengwei, a senior economist at China's Industrial Bank Co., doesn't represent the views of China's leadership, but it does highlight persistent concerns about the security of Fannie Mae and Freddie Mac securities among Chinese civilians and some influential thinkers.

Lu's warning comes just ahead of a report from the Obama administration, which could come as soon as Friday, that will outline options to gradually phase-out the two companies, reducing the government's footprint in the U.S. mortgage industry. 

Although an outright default is unlikely, Lu said that the end of the Federal Reserve's program of quantitative easing could cause the price of the securities to fall. He suggested China sell its Fannie and Freddie holdings before the U.S.'s quantitative easing ends in June.

If China were to sell its GSE debt how big would be the damage? Pretty big: $500 billion worth of big.

Lu estimated in the report that "Chinese organizations" hold around $500 billion of debt backed by the two companies. In a telephone interview with Dow Jones Newswires, Lu said "Chinese organizations" was a reference to holdings by the Chinese government in their foreign exchange reserves. Lu said he based this estimate on Chinese media reports, as the Chinese government has never confirmed the size of its holdings in the two agencies.

According to the U.S Treasury's report on foreign holdings of U.S. securities, China held $454 billion of long-term U.S. agency debt as of June 30, 2009. That includes $358 billion of "asset backed securities???backed primarily by home mortgages," and $96 billion of other long-term agency debt.

The bulk of those holdings are likely in Fannie and Freddie bonds and securities, though it also includes debt from other U.S. government agencies such as the Government National Mortgage Association.

And as all those who follow the shady dealing of the "Direct Bidders" and the UK-based buyers, the number is likely far, far greater:

The U.S. Treasury data may understate the true extent of China's holdings, as they don't include purchases made through special units based in Hong Kong and in other locations outside China.

As Zero Hedge has been reporting with every single TIC report, China has continued to sell its agency debt, as well as lowering its US Treasury holdings.

According to separate figures from the U.S. Treasury, China has been steadily selling its holdings of agency securities since mid-2008. It sold a net $24.67 billion worth of agency securities it 2009, and $27.35 billion in the first 11 months of 2010, according to the data.

So if China decides to not only not buy any incremental debt issued by the US, but to fully commit to selling, this virtually guarantees QE3, as the only way to find a buyer for the debt will be to prime the Fed's printer. Which in turn will activate the timer fuse on the 21st century's first Wiemar Republic recreation. And to think of just how much of a coward Tim Geithner was forced to appear last weekwhen he announced that China is not a currency manipulator: it will be so very fitting for the country to add insult to injury and literally take a bond dump on Geithner's front lawn.


On Thursday, I promised you that I will try and piece together the huge difference between the West Texas Intermediate Crude Oil and the Brent sea OIL.  The difference is still over 14 dollars.  it seems that there is a backlog at Cushing OK where Canadian Tar Sands OIl is piling up and cannot get refined.

Pipelines to the west and east coast have not been built yet to take the overhang from here.  It now seems that the WTI is losing its title as benchmark for crude as the world is turning to Brent.

Here are a few major stories on this subject :

Ignore That CNBC West Texas Intermediate (WTI) Price Ticker On Your Television Screen – It No Longer Is The Benchmark For Oil

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Buzz up!

Feb. 06, 2011





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I’ve been watching the enormous spread between WTI and Brent oil prices over the past couple of weeks. One of them has been flirting with that concerning $100 mark. Should we be concerned ? 

The explanation for the spread is actually fairly easily explained, as it is by Canadian economist Jeff Rubin and Platt’s below. The reality is that the WTI price is basically no longer a reliable indicator of oil prices 

Jeff Rubin: 

Just which price is the world benchmark for oil these days? 

If you ask the folks over at the New York Mercantile Exchange (NYMEX), the answer is West Texas Intermediate (WTI), which is priced at the storage tanks in Cushing Oklahoma, where all expiring NYMEX oil contracts must be settled either through the purchase or sale of physical crude. 

But West Texas Intermediate is trading at an all-time discount to other grades of oil. Last week, it was trading at a record $12 per barrel discount to competing European Brent Crude. Until the Egyptian uprising captured the market’s attention, the two prices were actually heading in opposite directions with WTI sinking to a two-month low of $85 per barrel, while Brent was within a dollar of triple digits. 

The divergence is no mystery. Unlike Brent crude from the North Sea, which can be shipped to refineries pretty much anywhere in the world, oil in storage at Cushing can only be absorbed by refineries in the U.S. Midwest. With nowhere else to go, WTI is not even an accurate barometer for oil prices in the U.S. market, let alone the global market. For example, the price spread between it and Light Louisiana Sweet on the Gulf coast is as big as its spread with Brent. And by all accounts, the spread between WTI and Brent is going to become even bigger, rendering the former increasingly irrelevant as a global pricing benchmark. 

It is largely new crude from the Alberta oil sands piling up at Cushing these days, often coming in much faster than local refineries can process it. And within a couple of months, there is going to be another 150,000 barrels a day of Alberta crude coming down Transcanada Corp.’s newly completed arm of itsKeystone Pipeline that will connect Cushing with the flow of oil sand crude from Hardisty, Alberta. 

Until TransCanada can connect the ever-increasing flow of crude from the oil sands to refineries on the Gulf of Mexico (not likely before 2013), there is going to be a bigger and bigger disconnect between WTI and global crude demand as more oil piles up at Cushing. 

As that happens, the oil industry and the investment community will look to Brent as the new benchmark for global oil prices. Soaring purchases of Brent crude contracts have already driven the European oil benchmark to the highest level in five months against NYMEX oil futures contracts as more investors bet it is a better indicator of global demand. 

So don’t be fooled by bloated inventories of Canadian crude held in storage in the middle of nowhere. Check out the Brent March futures contract if you want to know where world oil prices are trading. 

And when you do, you may just find you are already in a world of triple digit oil. 


If the NYMEX light sweet crude oil contract is dying, and is irrelevant because its Cushing delivery point is drowning in oil that can't move to the US Gulf refining centers, it has a strange way of showing it. Open interest at this point is slightly more than it was at the beginning of 2010. 

But that doesn't cover up the bewilderment that the oil industry is expressing at the Brent/WTI spread, which on Wednesday climbed above $11 before falling back slightly. Still, Brent was a little more than $2 over WTI in early December, and now it's double digits. This is a relationship that for years, when Brent exceeded WTI, it was newsworthy. Now the only thing newsworthy about it is the double-digit size of Brent's premium to the Cushing-based barrel. 

We've been covering the spread heavily this week, and here are a few takeaways: 

· When the Brent/WTI spread goes wacky, there's always a debate: is it that WTI is too weak, or Brent too strong? In this round, there's little doubt that WTI's weakness is creating much of this movement. Refining margins in the Midwest relative to WTI have been extremely strong, a sign that the crude is not keeping up with the strength of the products. WTI is also lagging behind the benchmark product contracts on NYMEX: the RBOB gasoline blendstock contract and the No. 2 heating oil contract. But those contracts have moved largely in line with Brent, which makes sense. Atlantic Coast products are made from crudes usually priced relative to Brent, not WTI. So as Brent blows out against WTI, the NYMEX product contracts are going along for the ride. 

· So with that out of the way, why is WTI so weak? It's actually a positive story for the North American oil market, because WTI is weak in part because of...more North American oil. Crude from Canada's oil sands and the North Dakota-Saskatchewan-Montana Bakken Shale are filling pipelines and taking lots of oil into the Cushing delivery point. When it gets there, it is greeted by an ever-expanding amount of crude storage. So why don't producers send the oil into other markets, where prices are higher? Because they can't. Outside of some capacity to take Canadian crude to the Pacific Coast and export it to Asia or the US West Coast, there simply aren't any options except to move it through various pipelines--Enbridge, Express -- into the US Midcontinent. 

· But the end of that may have gotten a boost this week. TransCanada said it has enough shipper interest to proceed with a 150,000 b/d pipeline spur from Cushing to its proposed Keystone XL pipeline. ButKeystone XL still awaits the decision of the US State Department. 

· It's been said that WTI is disconnected from the rest of the world market, and to a degree it is. But you don't get those sorts of spreads without something happening. And one place it's happening is on the Capline, the 1.2 million b/d pipeline that runs from the Gulf Coast up to the refineries in Chicago. As Platts Matt Cook and Lucretia Cardenas reported recently, it's running at no more than 40% of capacity. It previously carried crude from all over the world into Chicago; now, it carries none, as Chicago and the Wood River-Patoka area near St. Louis is well-fed by Bakken and Canadian crude. (Hmmm...could Enbridge be extended to link up with a reversed Capline, and start sending Canadian crude due south to Louisiana area refineries?) 

· It's not easy to move off a benchmark. So Gulf Coast crudes still trade as a differential to WTI, despite all the moaning about WTI's value. The market simply adjusts. The differential of Mars crude, the most important Gulf Coast sour grade, has moved about $7.65/b since early December, going from about 90 cts less than WTI to $6.75/b over. LLS, the chief sweet grade on the Gulf Coast, has moved the most, from a $4.40 premium to WTI to a $12.55 premium, a jump of about $8.15/b. Meanwhile, after Thursday's craziness, the Brent/WTI spread is wider by about $8.30/b. So other US grades tied to WTI are trying to adjust to the Brent/WTI movement. 



However, I would like to bring to you Rob Kirby's version:

Fed Manipulating Market Prices, Gold, Oil and Bonds

Stock-Markets / Market RegulationJan 20, 2009 - 02:28 PM

By: Rob_Kirby

Stock-MarketsDiamond Rated - Best Financial Markets Analysis ArticleQuestions Begging Answers - To say that markets have been behaving “strangely” recently is an understatement. In recent weeks and months we've been witness to historic lows in sovereign interest rates in-the-face-of record amounts of debt being issued by governments? We've seen the price of gold behave counter intuitively by “not rising” in-the-face-of unprecedented systemic global economic malaise? Last, but not least, we've witnessed a “complete flip-flop” in the traditional pricing of Brent Crude Oil [IPE-London] versus West Texas Intermediate [NYMEX-N.Y.]? 


So we have the price of gold, the price of crude oil and interest rates – three items vital to the integrity of the U.S. Dollar -ALL trading in total disregard for their underlying fundamentals?

The following is a thought provoking analysis with commentary:

The Situation In Gold

First and foremost it is imperative that everyone realize and understand that Gold “is” Money . We know that gold is money because every Central Bank in the world carries gold on their balance sheets as ‘an official reserve asset'.

With that in mind, folks would do well to read one of James Turk's latest articles titled, The Fed's blueprint for market intervention . In this article, Turk offers commentary on a recently unearthed 1961 document from the archives of the late, long-time former Chairman of the Federal Reserve, William McChesney Martin Jr. which details in the Fed's own pen; their plans to intervene surreptitiously in the currency and gold markets to support the dollar and to conceal, obscure, and falsify U.S. government records so that the intervention would not be discovered. In Turk's words,

“In short, [the newly unearthed document] lays out what the Treasury and Federal Reserve needed to do in order to begin intervening in the foreign exchange markets, but there is even more. This document plainly shows what happens when government operates behind closed doors. It also makes clear the motivations of the operators of dollar policy long described by the Gold Anti-Trust Action Committee and its supporters -- namely, that the government would pursue intervention rather than a policy of free markets unfettered by government activity. The run to redeem dollars for gold had put the government at a crossroads, forcing it to make a decision about the future course of dollar policy. This paper describes what the government would need to do by choosing the interventionist alternative.

This document provides primary, original source supporting evidence that GATA has been right all along.”

In Feb. 2007 here's what the Royal Bank of Canada 's Chairman, Tony Fell had to say , confirming unequivocally that gold is money,

"At Royal Bank of Canada, we trade gold bullion off our foreign exchange desks rather than our commodity desks," says Anthony S. Fell, chairman of RBC Capital Markets, "because that's what it is – a global currency, the only one that is freely tradable and unencumbered by vast quantities of sovereign debt and prior obligations. 

"It is also the one investment and long-term store of value that cannot be adversely impacted by corrupt corporate management or incompetent politicians," he adds – "each of which is in ample supply on a global basis." 

In short, says Fell, "don't measure the Dollar against the Euro, or the Euro against the Yen, but measure all paper currencies against gold, because that's the ultimate test."

Fell's admission coupled with the recently unearthed account of the Fed's game plan shows that gold “is” and always has been feared as competition for the U.S. Dollar and a game plan has long been in place to thwart it. This explains why economic data has been falsified and the price of gold has been surrepticiously managed and interfered with by the United States Treasury and the Federal Reserve.

The mounting evidence is this regard is so compelling that from this point forward any ‘economist' attempting to explain our current situation without prefacing their explanation with an EXPLICIT ACKNOWLEDGEMENT that our capital markets are not free and are in fact RIGGED by officialdom – their analysis is not worth the time to read it. In this regard, perhaps never have more prescient words been uttered than GATA's Chris Powell in Washington in April, 2008 – when he opined,There are no markets anymore, just interventions .

The recent decoupling in price of gold as measured by the spread between the futures price and the cost to obtain physical ounces is a stark reminder that smart money is beginning to repudiate fiat money by seeking tangible ownership of goods perceived to posses value instead of derivative ‘promises' to deliver the same.

The Oil Picture

Back in June, 2007, Market Watch reported ,

Normally, Brent crude costs $1-$2 less than WTI crude, according to James Williams, an economist at WTRG Economics. At its peak, the price spread between the two topped $5, according to his data.

The article went on to explain,

WTI usually trades at a premium to Brent " because of the slightly higher quality , and the extra journey" oil tankers have to take to get the oil to the U.S. , according to Amanda Lee, a strategist at Deutsche Bank. So "WTI minus dated Brent should be roughly equal to the freight rate," she said. Indeed, "crude-oil prices usually depend on two things: quality and location," said Williams. "The greater the distance from the major exporters, the greater the price."

But here's what's happened recently in the global crude oil market:

Brent Crude trading at a 7 Dollar premium to West Texas Intermediate is like the SUN rising in the west and setting in the east – and no-one asking any questions why?

Thanks to the unearthing of the Fed's Playbook Document, referenced above, along with cumulative knowledge of the existence of the President's Working Group On Financial Markets [aka the Plunge Protection Team]; we know that interference in strategic markets with national security implications is now practiced commonly by the Government and the Fed working together. No other explanation for this distortion is plausible other than NYMEX regulators like the Commodities Futures Trading Corp. [CFTC - Plunge Protection Team members] are more brazen and actively complicit in market rigging of strategic commodities than their London counterparts. This manipulation is all being done in desperation; to preserve U.S. Dollar hegemony by perpetuating the illusion that inflation is being held at bay. Ample anecdotal evidence exists in a host of articles – particularly relating to derelict CFTC oversight of COMEX gold and silver futures - archived at to support this position.

Spiking VLCC Rates Reflect “The Movement to Tangibles”

The “unusual” premium for Brent Crude is even more perplexing given that crude oil shipping rates [unlike their dry goods shipping counterparts, as depicted by the Baltic Dry Index] for VLCCs [very large crude carriers] have, as recently as Dec. 2008, been enjoying robust and improving charter rates,

Last week the spot rate for Suezmax tankers was in the low $40k per day range. Yesterday, I check the rates and they have popped to over $90k this week! VLCC (very large crude carriers, i.e. supertankers) rates have not jumped as much but appear to be following the trend. So what is the deal here? Oil prices are falling and so is the apparent global demand for oil. Are not oil tankers just sitting around idle like the dry bulk carriers? 

The answer is somewhat counter intuitive. The spike in spot tanker rates is actually the result of the low oil prices. Many tankers are being leased on the spot market as storage tanks. Oil producers, for whatever reason, do not want to significantly slow their oil production, but at the same time do not want to sell it for $45 a barrel. So they are leasing tankers to store oil in the hope or belief that oil prices will recover shortly. Two names in news articles that I have read doing this are Royal Dutch Shell and Iran . The majority of the planet's oil production is owned by national oil companies that have policy and employment as well as financial reasons to keep the oil flowing. So at least in the short term, the current low oil prices are a boon for tanker owners. 

Oil tanker companies, like their dry cargo brethren, can sign their ships to either long term, multi-year leases or charter them on the spot market where they are leased for a single voyage at the current spot rate.

The fact that “smart money” is now paying elevated prices to lease very large crude carriers [to store physical crude for later sale] is further evidence that faith in fiat money is waning simply because – you can do the same “trade” on paper – utilizing futures - without the bother and nuisance of leasing ships and handling the physical. Ask yourself why smart money has recently become engaged in buying ‘relatively illiquid' physical crude oil, in a world allegedly awash in the stuff, for resale at a later date – instead of playing futures, accepting promises and holding cash?

Smart money is in the process of losing confidence in cash.

Interest Rates

It is vital that everyone understand that the function of interest rates in a system of usury is to solemnly act as the efficient arbiter of capital – rising to restrict money / credit growth when the economy overheats and falling to create the opposite when the economy cools.

Interest rates no longer serve this function.

As deceitfully disastrous as the surreptitious interventions in the crude oil and gold markets has been – they pale in comparison to the travesty which has been perpetrated through the premeditated hobbling of usury.

The roots of this most wicked experiment are traceable to the appointment of Alan Greenspan as Chairman of the Federal Reserve and then to academia – Harvard – where Robert Barsky and Lawrence Summers co-authored an academic research paper in the 1980s titled, Gibson's Paradox and the Gold Standard . The “elevator speech” of what the paper examined was the co-relation between bond prices, inflation and the price of gold and, by extension, theorized that interest rates could be driven down [or kept low] – without sacrificing the currency - in the face of and despite profligate monetary policy so long as gold prices declined or did not rise.

After a stint as Chief Economist at the World Bank, Mr. Summers brought this “theory” to Washington mid-way through the first Clinton Administration [late1993] as Under Secretary of Treasury to Robert Rubin where he began laying the groundwork – with co-conspirators Greenspan, Rubin and Clinton - for the implementation of his “theoretical research”:

Gold price suppression began in earnest concurrently with changes in how the Office of the Comptroller of the Currency [OCC] begins records the mushrooming growth of derivatives [mostly interest rate swaps which – absent end user demand – only create artificial demand for government bonds]:

The Federal Reserve acting in cahoots with the U.S. Treasury utilizing the futures pits in N.Y. [COMEX] and the obscenity that has become J.P. Morgan's Derivatives Book – the Fed / Treasury combo seized control of both the gold price and interest rates. The mechanics of how interest rate swaps were utilized to suppress interest rates is chronicled and explained in detail at in a paper titled, The Elephant in the Room .

Subscribers are reading about the logical implications, and what comes next, as a result of the market manipulations outlined above as well as actionable suggestions to help insulate your investment portfolio from the inevitable fallout.

By Rob Kirby

Rob Kirby is the editor of the Kirby Analytics Bi-weekly Online Newsletter, which provides proprietry Macroeconomic Research. Subscribers to are benefiting from paid in-depth research reports, analysis and commentary on rapidly unfolding economic developments as well as recommendations on courses of action to profit from chaos. Subscribe here .



I would also like to point out that wheat is also experiencing huge differences in prices over in England and Europe vs  the USA:

Wheat Disparities,.. from the Sarrborough Bullion Trading Desk


Expanding on this theme further I have examined a number of the wheat standards and the results have been similarily brow raising,

Here in the UK front end month wheat contract has broken out to new record highs in the last quarter,

Likewise in Europe the Paris Milling Wheat front end month contract, whilst not quite in new record territory, is close to it’s highs of 2007/2008,

However if you look at the chart equivalent for the US CBOT wheat contract, one can see that although the price has risen significantly in the last 8 months it is still some staggering 50% from it’s 2008 highs!

There will be those that would argue that this disconnect between the European and US exchanges can be put down to exchange rates, as the London Feed Wheat contract is priced in UK Sterling and the Paris Milling wheat is priced in Euro’s,

Yet, while there has been some change across the exchange rates, it is nothing close to the disparity in the performance of the CBOT exchange and it’s European peers,

Below is the graph of the Euro, As can be clearly seen, while it’s exchange rate was stronger against the US dollar during the 07/08 wheat spike, it was only ever at it’s height some 10-15% higher than today, Therefore for the CBOT exchange to have correlated with it’s Euro counterpart, should be presently showing a wheat price some 20-30% higher than it’s present price of circa $880/bushel,

Likewise against the UK Feed Wheat Contract,

Below is a graph of the UK Pound,

Whilst Sterling was some 20-30% stronger against the US Dollar during the 07/08 wheat spike, it’s contract price today is some 4-5% higher than it’s previous peak, Therefore for the CBOT exchange to have correlated with it’s UK counterpart, it should be presently showing a wheat price some 10-25% higher than it’s present price of circa $880/bushel,

The above shows clearly that since the collapse of the credit system, there has been a growing disconnect between the US CBOT exchange pricing mechanism for wheat and it’s global counterparts,

Rob Kirby, within his excellent analysis of the oil and gas exchanges, shows a similar trait,

We are all aware of the shennagins within the the Comex for true price discovery of physical gold and silver, but what looks increasingly likely is that this disconnect between the Paper Futures Markets of the US Exchanges and the realities of actual global commodities prices is endemic across a larger portion of the commodity spectrum,

Whether it’s a bushel of wheat, a barrel of oil, an ounce of gold or a kilo of silver, it seems there has never been a more suitable time to be in the real asset, Like the fiat system itself, the paper equivalent to these tangible assets is clearly becoming more questionable by the day,
Rich (Live from ‘The Scarborough Bullion Desk’)




And finally I would like to discuss with you what is happening with the huge  removal of gold and silver from the GDL and SLV.

Jim Willie through his impeccable sources has found that the Chinese has found a faster way of obtaining massive gold and silver.  They are buying gobs of GLD and SLV stock and tendering it for metal.  This will explain how the comex gold has been trading lower in volumes.

The Chinese know that there is little physical left at the comex.  The Chinese are delighted to take the gold from the GLD.  The problem here is of course, the gold does not belong to the GLD folk but it belongs to the Bank of England.  The custodians of the GLD received their gold through a swap with the Bank of England as the GLD got gold and the Bank of England got paper dollars.  However this swap can be undone at any time the Bank of England deems it.  Thus the gold must be re-swapped and the dollars returned.  The shareholders of GLD  get paper money and not the rise in price of gold in paper money.

The swap will be done at prices of the original swap.  However our friends at the Bank of England will be suffering migraine headaches as the gold is gone to China and cannot be returned.  This gold is not even the Bank's gold but belongs to depositors like the Arabs.

You see, all depositors of gold in England put gold as a deposit like you would put money on deposit at a bank.  It is the Bank's liability and they surely have a massive headache if this gold does not come back.


Willie also discusses the silver problem at the comex.  He notes that silver is in full or complete backwardation and this spells trouble for our bankers.  He also through his sources state that China received special favourite nation status by loaning its 300 million hoard of silver

in the suppression scheme of the USA.  China wants its silver back and cannot get it.  China is the major short and refuses to supply the metal.  It also through conduits, is taking all of the silver in can back to home base.

I will now leave you with the Willie article: ( )

Jim Willie CB                        10 February 2011
home: Golden Jackass website
subscribe: Hat Trick Letter
Jim Willie CB is the editor of the "HAT TRICK LETTER"

Use the above link to subscribe to the paid research reports, which include coverage of critically important factors at work during the ongoing panicky attempt to sustain an unsustainable system burdened by numerous imbalances aggravated by global village forces. An historically unprecedented mess has been created by compromised central bankers and inept economic advisors, whose interference has irreversibly altered and damaged the world financial system, urgently pushed after the removed anchor of money to gold. Analysis features Gold, Crude Oil, USDollar, Treasury bonds, and inter-market dynamics with the US Economy and US Federal Reserve monetary policy.

With the advent, then the continuation of the Quantitative Easing exercise in hyper-inflation and capital destruction, the US Federal Reserve has perhaps taken its deeply damaged reputation as a central banker and decimated it into shreds. They have lost the respect of the world, more so outside the nation's borders than inside. The financial sector and politicians seem unable to stop showing deep reverence for the post, even licking the Chairman's boots whenever he appears before the USCongress. Recent hints of contempt in WashingtonDC are encouraging. He has not made a single correct forecast on major items. The USFed in short has lost control. See the rising bond yields, which torpedo the housing ship, badly listing as a derelict vessel. The USFed seems thoroughly content to rescue the big US banks, whose wretched condition cannot possibly be rectified, even if such a rescue results in global price inflation and revolts. The decision made after recognition that a recent QE chapter has failed is clearly to repeat it. When QE2 is exhausted or deemed a failure, expect QE3 at the doorstep. This behavior exhibits insanity. The February package of Hat Trick Letter reports includes a special report entitled "USFed as Agent of Destruction"that elaborates on the deep damage.

The USFed balance sheet reads like a Fannie Mae lookalike, with perhaps $1 trillion in negative value, if priced to market. No wonder they altered their rules for a major dump on the USDept Treasury. The next chapter should see a default in USGovt debt, as it spirals out of control, supported mainly by the monetization engines, the stuff of hyper-inflation. Meanwhile, back at the inflation farm, a widening array of economic mythology has sprung up, replete with nonsense and deep deceptions like shallow walls to defend the monetary press. The new myths extend from the standard Second Half Recovery dupe, the Jobless Recovery insult, the Green Shoots absurdity, and the Exit Strategy refrain that ushered in QE2. The inflation engineers must defend their craft, which has destroyed the USEconomy and rendered its banking system insolvent, as well as households. By the way, Ben aint no Atlas, holding up the world. He aint no Poseidon, controlling the oceans and all their liquidity. He sure aint pretty like Aprhodite neither, even though his bust might serve as a fine pin cushion. Hey! Don't mention pins when standing near the USTreasury Bond bubble!

The Hat Trick Letter has warned fully and repeatedly. The price inflation that has begun to show itself in clear terms will be passed off with pure economic deception, and extreme statistical fraud. 
The effect of higher prices will be called economic growth. The price inflation within the adjustment process with full motive will grossly under-estimate the actual rising price rate. Therefore, the adjustment off the nominal economic activity will be grossly inadequate. The 10% to 12% price inflation will be called 3% to 4%, and thus a 6% to 9% error in the Gross Domestic Product will be made. The consequence will be that a powerful recessionary surge downward will be called a positive 4% to 5% GDP growth. Credit goes to the stat rats who betray my field of expertise. The deception will calm public fears on the highly destructive effects of Quantitative Easing #2 and its price inflation side effects. Actually it is more like direct effects. No longer are the QE1 effects isolated to excess bank reserves held by the USFed. They were not excess anyway, since US banks simply held their loan loss reserves at the USFed. The main point is that price inflation will rise sharply, called economic growth, a process already begun. The USGovt and Wall Street handlers will ignore it, under-state it, and herald the return of growth as success of policy. The reality will be less growth, in a deeper decline into recession. It has been my contention for the entire seven years of the Hat Trick Letter that the topic of inflation has been the most egregiously misunderstood and most common used deception device used against the American people, as the USEconomy has deteriorated in grotesque fashion for 20 to 30 years. They have been told to hedge against that inflation by home ownership, which has backfired in a national catastrophe. The underlying cause of the deterioration is massive monetary inflation and price inflation, manifested structurally as an over-priced US labor market that has sent jobs to Asia since the first migration phase to the Pacific Rim in the 1980 decade. The semanal event was the Vietnam War, which urged the broken Bretton Woods accord.

The justifications, explanations, and clever deceptions have been and will continue to be widespread. They are many, like singers in a chorus, each with voices like Sirens leading men and their ships to the rocks and a watery grave. Destruction awaits those attracted by their serene tones. My ear is tuned to detect them and to record their many deceptions. Let's touch on the 
wrong messages made on the US Public Address systems one at a time and dismiss them. They are trumpeted by the USGovt, by the Wall Street bank staffers, by the USFed Chairman and most Board members, by the US Financial press, by the market mavens, and by numerous others, all of whom did not foresee the wreckage and charred ruins like the burning of Troy. To be sure, the principal player was Alan Greenspan, whose charisma and eloquence made him the Helen of Troy for our modern day. Both his visage and utterances more resembled Mr Magoo.

A) Rising prices are proof that the USEconomy can handle the higher costs. Not true! They are an indirect effect of massive monetary inflation, as surplus loose money sloshes until it makes higher priced items. A direct effect comes from a falling USDollar in whose terms commodities are priced.

B) Rising commodity and material costs mean more profits all around. Not true! The exact opposite is the case, since profit margins are being squeezed. Businesses are making this statement openly.

C) Rising prices mean the USGovt and USFed stimulus applied is finally working, as the system is coming alive. Not true! It signals the arrival of the nightmare, in the form of price inflation that the banking leaders said would not arrive. They boasted a year ago that the monetary inflation would not have a spillover effect. That spillover effect is precisely broadly rising prices, most evident in food & energy. Witness the spillover.

D) Rising prices mean final demand has arrived, which is pushing up the prices. Not true! Final demand remains weak. Businesses do not anticipate a big rush of new demand, as their business investment is modest to non-existent. Consumers are strapped with weak income and no more home equity to raid.

E) The USEconomy is least vulnerable to price inflation effects, since strongest and most resilient. Not true! The chief export in recent years from the United States had been mortgage bond fraud, along with the usual fare of USTreasury Bond empty paper. The chief export in the current period is commodity price inflation. The USEconomy remains a major importer, and thus will import the price inflation, a process already begun with both commodities and finished products. The US is the originator of massive monetary inflation. Since its economy is deteriorating and stifled, the resilience is born of weakness. Its back door will usher in that price inflation.

F) The housing decline has kept prices in check from powerful deflation effects. Not true! The housing decline has guaranteed that the rising cost structure cannot be handled by the entire system. With the resumption in housing price decline, the insolvent banks will grow deeper in insolvency, while the households will fall more broadly into insolvency. Demand will not meet the higher prices required by corporations to even remain in business. Watch more job cuts and business shutdowns, since they must but cannot pass along the higher costs to customers.

G) Higher prices in the stock market is prologue and harbinger for the growth of the USEconomy and corporate profits. Not true! The massive monetary inflation has spewed new phony money into the system. It leaks through an array of sieves. It finds paths of least resistance. Almost no resistance exists toward the stock market, especially with the Working Group for Financial Markets openly pushing up stocks, no longer in hidden fashion. The USDept Treasury finally admitted as much.

H) Being a food producer, the USEconomy does not see rising food prices. Not true! For five years, the USEconomy has turned into a net importer of food products, although only slightly. The farm sector has seen their costs from diesel and other energy sources rise uniformly. The farm end product prices (like corn, wheat, soybean, cotton) are controlled on the commodity exchanges, not by farmers. So higher product and costs mean much higher prices at the US dinner tables.

I) Rising producer costs is obvious. The miracle of not ending up in final product prices results in success of the system. Not true! If final products cannot have higher costs passed on, that means the businesses suffer important profit margin squeeze. In parallel, the lack of job or income growth means that households suffer important squeeze also on discretionary spending. The squeeze is systemic, not a success, resulting in lower demand and business layout cutbacks.

J) Jobs will come eventually. Not true! This propaganda mantra is losing its mojo totally. Be prepared for a brief rejoice followed by the horrors of recognition that the USEconomy is suffering from broadbased price inflation and continued powerful deterioration. Monetary inflation destroys capital, a concept our clueless cast of economists cannot seem to conceive. In response to failure from monetary inflation, they order more in higher volumes. Prepare for QE3.

Homes turned out to be leveraged financial assets after all. Notice that the housing sector is not rising in price, as almost every commodity in the universe is rising rapidly, from rice crude oil to gold to cotton. Actually gold is not a commodity, but rather MONEY, being pursued as the global monetary system fractures and crumbles.Some Jackass warnings went back to 2006, calling the home nothing but a leveraged futures contract that had no callable feature for banks, but offered renewable reloads known as refinances. Along with a drawdown in account balance (home equity) came a foreclosure notice to millions of unwary investors. So much for the American Ownership Society! It was more like a siren call to the marginal buyers and minorities to lose all their life savings. The great majority of victims never read the great warning by Thomas Jeffersona about banks.

The clueless cast of US economists have lost their way so badly that they no longer comprehend legitimate income. They insist on USGovt programs to put more cash in people's hands, from tax credits, jobless benefit extensions, home equity loan interest deductions, anything to put green in grubby hands. Talk of helicopter cash drops never materialized. The economist and bank leaders never seem concerned about the origin of money put in hands. They seem ignorant that credit extension and monetary inflation are almost always the source. They US economists ARE totally ignorant of the founding principles of capitalism, led by a mindless stream of expectation indexes. They fund elite bankers, redeem fraud-ridden bonds, create liquidity facilities to grease the debt system, erect channels for corporate paper, bail out dead corporations, feed the Working Group for Financial Markets in their stock market support, reload JPMorgan after the Lehman killjob for more commodity market price suppression, and much more. All these devious endeavors are funded by funny money or tainted money. Nowhere is open debate about a grand revival of US industry, a return of factories to US shores, a reversal of the PacRim outsourcing that reached a climax with the Chinese low-cost solution, followed by the current national insolvency. The nation has lost its way on basic capitalism, whose mantle China has picked up from the ground. Their many factories produce not only shiny useful products, but legitimate income. The clueless cast of US economists would do well to read basic textbooks on capitalism, capital formation, and the other cycle. It starts with business investment, then hiring, then value added, then worker income, then consumer spending. The United States must shed its devotion to asset bubbles and the Virtuous Cycle espoused by the USFed, which ends in systemic ruin, a ruin they cannot even recognize.

The recent history of enforcement against insider trading and excess speculation is criminal. Its pursuit of insider trading reads like a cheap spy novel. Right after the Lehman failure came attacks by Wall Street firms against their own hedge fund clients. Their trading investment positions were open to see. Wall Street banks cut the credit lines on hedge funds with prominent long positions in assorted commodities, including crude oil, gold, and silver. The attack was complete and vicious, leading to widespread liquidations. Many commodity prices fell hard. Obviously, Wall Street firms gobbled up the positions forced into liquidation on margin calls. The attack was followed by a ban on shorting the big US bank stocks. An exception was granted for Goldman Sachs, since they were busy doing God's work. My guess is their god is money, and their lord breathes fire not love. The last few months have seen a sequence of arrests and prosecutions against insider trading, except that no Wall Street firm is implicated. Those conducting the investigations are of Wall Street pedigree, to be sure. In my view, moves against insider trading are disguised attacks against Wall Street competitors and opponents to the heavy handed naked shorting of important commodities led by the titans in South Manhattan.

Not a single effective prosecution took place after the May 2010 flash trading controversy, despite ample evidence that the malfeasance went far beyond insider trading. The illicit practice involved raids of the trading exchanges, deep looks at the order stacks, and front running of placed positions. The SEC and CFTC investigators should take a closer look at JPMorgan and Goldman Sachs orders placed in front of the actions taken by the Working Group for Financial Markets, aka the Plunge Protection Team. Furthermore, investigators should take a closer look at the common Wall Street practice of naked shorting of USTreasury Bonds. The evidence lies in the nearly $1 trillion in Failures to Deliver in the bonds. The inventive Wall Street firms found a way to produce instant liquidity from which they fund a large portion of their business operations, like meeting payroll and covering overhead costs.

A high paradox is kept a dirty secret by the USGovt and USFed. Low interest rates hurt savers, to be sure. However, the low prevailing interest rates actually slow down the USEconomy, not stimulate it. The total typical income from savers through bank CDs and bond fund income is in the neighborhood of $850 billion annually, in usual times with normalized bond yields. Compare that figure to the estimated $620 billion paid in interest for consumer loans, student loans, and revolving credit also in usual times. Higher bond yields put more legitimate income in the hands of savers, which more than compensate for the higher interest payments made. This grand deception must be kept quiet. The Wall Street fraud kings want that 0% rate, since it fuels their USTreasury carry trade. Free money can redeem their disastrous errors that tarnish balance sheets. It produces income without work, the great advantage of the elite.

Numerous are the important events taking place behind the curtains, behind the closed doors, the stratospheric ploys, under the cover of intrigue. They are reviewed in the Hat Trick Letter issues with analysis. China is gobbling up COMEX gold & silver, draining the London supply chain. The widely done but hardly publicized practice of settling COMEX precious metals contracts in cash with a 20% bonus has caught the eye of many. So gold & silver contracts contain little metal anymore, mainly paper. The recent tactic of building Dollar Swap Windows to gobble up Southern Europe sovereign debt at discount by the Chinese was outlined in the last article. They will likely convert much of those ruined bonds to gold bullion, with the aid of the IMF harlot. A global shortage of silver has grown acute. Several nations have announced skyrocketing silver coin demand, and outright shortages at the official mints. The latest tactic reported by intrepid analysts is that China has been gobbling up SPDR shares from the GLD gold exchange traded fund. They intend to convert GLD shares directly to gold, according to the London Deep Throat broker. Massive deliveries of gold bullion from this SPDR, managed by HSBC, have been reported in recent weeks. Gold bullion is exiting the fund inventory vaults in high volume, an order of magnitude greater than only two to four months ago. Apparently, the Chinese have noticed a faster method to acquire vaulted gold than the COMEX. Central banks in the Eastern world are loading up with gold bullion, not reporting all their accumulation, as they prepare and executive the Paradigm Shift. Power will move eastward. An excellent source informs me that China is accumulating gold at least 5x faster than the official figures indicate, maybe up to 10x faster. Russia posts some official numbers, more as chicken bones tossed before the feet of conmen. These topics are analyzed in the private newsletter Hat Trick Letter reports.

While the silver price leaps toward its high at $31/oz with reflex ease, the gold price struggles. My long held belief has been that on the Supply side argument, silver beats gold, and on the Demand side argument, silver beats gold. My forecast has been and will continue to be that the gains in Silver price will be around triple to the gains in the Gold price, due to tremendous shortages and colossal demand. So far, so good since last summer. It is my firm contention that China has been very busy buying silver. They probably are motivated by yet another USGovt betrayal. The Most Favored Nation status granted to China in 1999 apparently had at least two possible important components. In return for diverse industrial buildup, direct foreign investment, and shared technology, China appeared to have promised years of deep USTreasury Bond support. The side deal demanded by Wall Street appears to have been a large lease of Gold & Silver bullion left over from the Mso Tse Tung era. Recent demand for its return by the USGovt to China, as part of the lease contract, appears to contain a betrayal. Wall Street sold the leased hoard into the precious metal market, so it appears. To those who dispute the allegations, take note of the track record of profound fraud by the Wall Street banksters. Sale of the Chinese gold & silver came during and after sale of Fort Knox, and sale of the European swaps as well.

The Silver price has advanced handsomely since July 2010. Its gains have outdistanced those fo Gold. In the last two weeks, the rebound for Silver has embarrassed that of Gold. Thanks to Adrian Douglas for the fine chart, not showing the dimension of time but instead the paired prices of Gold & Silver. The chart exhibits clearly the falling Gold/Silver ratio. He wrote, "This update of my previous work adds more fuel to the fire that the dynamics of the silver market have dramatically changed. Because silver has been suppressed for so long we do not know what its free market price should be, but we are going to find out soon. I strongly suspect it will be many multiples of the current price."Here, here!! Bring it on!!




I will now leave you today so you can now read this stuff very carefully. 

I hope you all have a grand weekend, and I will see you all on Monday.









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