Saturday, April 9, 2011

Silver blasts off rising to $40.60. Continues in access market to $40.93

Good morning Ladies and Gentlemen:

Before beginning my commentary, let me introduce to you the latest entrants into our banking morgue:

2 new entrants:  (courtesy of the street)

Two Banks Fail; 2011 Tally at 28

Stock quotes in this article:CYN 
WASHINGTON (TheStreet) - Two banks failed on Friday, bringing this year's total number of bank failures to 28.
Both failed banks had previously been included inTheStreet's Bank Watch List of undercapitalizedinstitutions, based on fourth-quarter regulatory data provided by SNL Financial.

Western Springs National Bank and Trust

The Office of the Comptroller of the Currencyclosed Western Springs National Bank and Trustof Western Springs, Ill. The regulator said Western Springs National Bank and Trust had roughly $186.8 million in total assets and $181.9 million in total deposits when it failed.
The Federal Deposit Insurance Corp. was appointed receiver and sold the failed bank toHeartland Bank and Trust Co. of Bloomington, Ill.
The failed bank's two offices were set to reopen during normal business hours beginning Saturday, as branches of Heartland Bank and Trust.
The FDIC entered into a loss-sharing agreement with Heartland Bank and Trust, agreeing to cover 80% of losses on $100.8 million of the acquired assets. The agency estimated the failure of Western Springs National Bank and Trust would cost the deposit insurance fund $31 million.
Western Springs National Bank and Trust has been undercapitalized since March 31, 2010 after a $6 million net loss in the first quarter of 2010 left the institution's total risk-based capital below the 8% required for most institutions to be considered adequately capitalized by regulators. At that time, nonperforming assets -- including loans past due 90 days or more, nonaccrual loans and repossessed real estate -- made up nearly 17% of total assets.
The institution was operating under a November 2009 consent order from the OCC, agreeing to raise capital, improve credit administration and make various other improvements. A prompt corrective action order from the OCC followed in November 2010, requiring the bank's board of directors to submit plans to restore its capital and return to profitability, or if these plans weren't accepted by the regulator, to make plans to sell the bank.

Nevada Commerce Bank

The Nevada Financial Institutions Division closed Nevada Commerce Bank of Las Vegas. The FDIC was appointed receiver and sold the failed bank's $144.9 million in total assets and $136.4 million in total deposits to City National Bank of Los Angeles.
The acquiring bank is the main subsidiary of City National Corp.(CYN_).


Gold closed yesterday at comex closing time at $1473.40 up a full $14.90.  Silver however was the star again finally breaking the 40 dollar barrier rising to $40.60 by closing time and then continuing its assault in the access market rising to $40.93.  Rumours were abound that there were huge purchases of May in the money calls and this forced the seller of these calls to delta hedge because they were deeply in the glue.  The writers of those calls were rumoured to be JPMorgan.  Gold closed at record levels and silver is now at a 31 yr high.

First the rumour mill on those massive May calls  (courtesy of zero hedge):

Let us see how trading fared on Friday.  First the gold comex:

The total gold comex OI rose by 3232 contracts to 513,786 from Thursday's level of 510,574.  With gold's advance on Thursday, the rise in OI is to be expected.  The front delivery month of April surprisingly saw its OI rise from 2390 to 2460 for a gain of 70 contracts despite 37 deliveries on Thursday.  We thus had no cash settlements today in gold.  The next front month of June saw its OI rise from 358,923 to 362,266.  This may be the ultimate battleground as the longs take on JPMorgan and Blythe Masters. The estimated volume yesterday was a mediocre 119,396 contracts for such a bold advance by gold.  The confirmed volume on Thursday was also light at 115,861.  As I mentioned to you on Thursday, the volume only rises on a grand scale on days of a raid.

Let us proceed to silver.  First of all, I would like to report that we have a slight contango for half of the months and then we have a backwardation for the other half of the months.   The total open interest for the silver comex rose again Friday advancing by 426 contracts to 144,647 from 144,221.  With silver's huge advance we must have lost a few more bankers as post mortems will commence shortly on them.  The front options expiry month of April surprisingly saw its OI rise by one contract from 12 to 13 despite 14 deliveries being sent down. Obviously someone was in great need of silver. We again lost no ounces to cash settlements today in silver.  The next delivery month of May saw its OI contract a bit from 71,707 to 69,555.  This is to be expected as we get closer to first day notice.  The estimated volume at the silver comex was respectable at 61,256.  The confirmed volume on Thursday was very good at 75,745.

Here is the chart for 4/8/2011 regarding deliveries and inventory changes at the comex
Withdrawals from Dealers Inventory
A big zero
Withdrawals from Customer Inventory
A big zero
Deposits to the Dealer Inventory
Deposits to the Customer Inventory
No of oz served (contracts) today
10,000  (2)
No of oz to be served (notices)
55,000 (11)
Total oz silver served (contracts) so far this month
475,000 (95)
Total accumulative withdrawal of silver from the Dealers inventory this month
Total accumulative withdrawal of silver from the Customer inventory this month

Withdrawals from Dealers Inventory
Withdrawals from Customer Inventory
Deposits to the Dealer Inventory
Deposits to the Customer Inventory
No of oz served (contracts) today
7200 (72)
No of oz to be served (notices)
238,800 (2388)
Total oz gold served (contracts) so far this month
242,400 (2424)
Total accumulative withdrawal of gold from the Dealers inventory this month
Total accumulative withdrawal of gold from the Customer inventory this month

Let us start with gold. On Friday we saw no activity again and this is very strange in a delivery month. We witnessed no gold deposits nor any gold withdrawals from the dealer.
We only had a tiny 129 oz withdrawal from a customer.  There was a tiny 300 oz adjustment of gold whereby this gold left the customer to enter the dealer.
It could be a lease (probably) or the customer wished to change status and sell his inventory. In order to sell inventory it thus must become registered or "dealer" inventory.

The comex folk notified us that 72 gold contracts were served on our longs today. For a delivery month this is very tiny and this suggests that the gold metal is also scarce.  The cost to store, and insurance, is high so there is no reason to keep the metal until the end of the month unless you do not have it.  The total number of notices sent down so far this month total 2496 or 249,600 oz of gold. To obtain what is left to be served, I take the OI of 2460 and subtract from it the deliveries (72) leaving me with 2388 notices to be serviced or 238,800 oz of gold.
Thus the total number of gold oz standing in this delivery month is as follows:
249,600 oz (served)  + 238,800 oz (to be served)  =  488,400 oz
Yesterday we had: 477,300 oz for we gained back 11,100 oz.
We lost zero oz to cash settlements.  The amount standing is still quite large and it is  possible that no amount of cash will satisfy the remaining resolute longs.  We will have to wait and see. (I have included the accumulated totals for withdrawals on gold for the dealer and the customer vs deliveries.  Please note accumulative zero ounces of gold withdrawals have left the dealer so far this month)

And now for silver: In a nutshell, we had no activity. We did have a small adjustment of 10,490 oz of silver leaving the customer and enter the dealer inventory.  This is probably a lease or it could be a customer changing his status to registered in order to sell his metal.
The total number of notices sent down today totaled 2, for a total of 10,000 oz.
The total number of notices sent down so far this month total 95 for 475,000 oz. To obtain what is left, to be serviced, I take the OI of April  (13) and subtract out today's deliveries  (2) which leaves me with 11 notices to be served or 55,000 oz.
Thus the total number of silver oz standing in this non delivery month is as follows:
475,000 (served)  + 55,000 oz (to be served)  =  530,000
On Thursday we had:525,000 oz so we gained 5000 oz and lost nobody to cash settlements.
The total silver withdrawn almost matches the deliveries in silver.

Let us head to our ETF's and see how they behaved on Friday.

First, let's see what happened to our "non-physical" inventories.

First the GLD: April 8.2011:

Total Gold in Trust

Tonnes: 1,217.21
Value US$:

Total Gold in Trust:

April 7.2011
Tonnes: 1,217.21
Value US$:

We lost zero oz of gold "inventory" in GLD.

How about SLV?  April 8.2011

Ounces of Silver in Trust361,467,177.800
Tonnes of Silver in Trust Tonnes of Silver in Trust11,242.89

 April 7.2011:

Ounces of Silver in Trust359,856,899.900
Tonnes of Silver in Trust Tonnes of Silver in Trust11,192.80
April 6.2011
Ounces of Silver in Trust
Tonnes of Silver in Trust Tonnes of Silver in Trust

Friday we witnessed another gain in inventory of 1.61 million oz of paper silver. How on earth did these guys find 1.6 million oz silver so quickly????

And now for our physical ETF's:

The Sprott silver fund: PSLV:

the premium to NAV continued on its assault rising back again to 18.24% .
The Sprott gold fund PHYS:
the premium to NAV remains steady at 1.85%

The Central Fund of Canada which is almost equal parts gold and silver:

saw its premium rose smartly back to 3.3% in USA funds and 3.4% in Canadian funds. It has been calculated that this fund will receive 4.1 million oz of silver and approx 170,714 oz of gold. This gold and silver will thus never reach the comex much to the chagrin of the bankers. Both the Sprott funds and the Central fund of Canada make their deals with major miners which thus bypasses the normal route for these metals. Henceforth the mints do not get their metal desired nor does the comex. This is the reason for the low premiums to NAV. This will last for another week and then it will revert back to normal high premiums to NAV.


Let us now head over to the COT report released on Friday night.  First the gold COT:

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, April 05, 2011

Here, those large speculators that have been long, piled on to their good fortune by adding a huge 17,449 contracts to their already burgeoning position. They seem to be gloating this weekend.
Those large specs that have been short, got it wrong by adding a large 5864 contracts to their short positions. They are seeing a shrink!
And now for our commercials;
Those commercials that are close to the physical scene and generally long gold decided to lighten up on their longs to the tune of 1102 contracts.
Those commercials like JPMorgan who have been short from the beginning of time,
decided that it was best to continue to supply the unbacked paper.  This week: they added a humongous 16,794 short positions. I guess these bankers just do not give up.
The small speculators finally got into the game.  Those small specs that have been long added a large 7197 contracts to their longs.  Those small specs that have been short added a tiny 886 positions to their shorts.

Thus in a nutshell:  the small specs and the large specs piled into gold in a big way and were obliged willingly by JPMorgan and friends with unbacked paper.

Let us now head over to the silver COT and note any differences.  Remember that silver has been on a tear these past several weeks.

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, April 05, 2011

Those large speculators that have been long only added a smallish 1126 contracts to their long positions.
Those large speculators that have been short silver added more shorts to the tune of 1480 contracts .
And now for our commercials:
Those commercials that are close to the physical scene added 826 contracts to their long position.

And now for our famous bankers JPMorgan and HSBC. These guys added again to their short position to the tune of 1945 contracts.  JPMorgan and friends are  still providing the paper despite the hearing on Tuesday.
And now for our small specs who seem to not want to play with the crooks.
The small specs that have been long cashed out 58 contracts to profits.  
Those small specs that have been short got it wrong and added 1531 contracts to their shorts.

The banking participation report was released after the market closed today for the March month.  Special thanks to Bix Weir for providing us with the report.

In a nutshell: JPMorgan and friends have their net short position remain at the comex at 125 million oz of silver. 
Here is Bix Weir's commentary on the Banking Participation Report and its effect on silver:

Here's the report:

and Bix Weir's commentary:

For those of you who contribute the rising price of silver to short covering by JP Morgan... the data doesn't support this conclusion. What does support the price rise is the growing knowledge of the silver story by the investing community and the ENDING of the official silver price suppression mechanisms!

So what lies ahead?


If the price of silver looks exciting to you now...JUST WAIT FOR THE REAL FIREWORKS!!! 

Have a nice weekend.

Bix Weir


They had a congressional hearing on Friday on the sub par performance of the Mint with respect to the minting of gold and silver coins. You will find this MINEWEB article very interesting:

Subpar U.S. Mint practices encourage speculation, Congress told

Precious metals blanks used to manufacture U.S. Mint silver bullion coins often come from an Australian mint, a fact which upset several members of a House Financial Services subcommittee.
Author: Dorothy Kosich
Posted:  Friday , 08 Apr 2011 

The U.S. Mint was taken to task Thursday before a House subcommittee for outsourcing precious metal coin and bullion blanks outside of the United States, and for its "surly and arrogant attitude" toward the public and industry.
While the U.S. Mint's bullion products are considered actually quite profitable, witnesses told the House Committee on Financial Services Subcommittee on Domestic Monetary Policy and Technology that the government agency loses at least one third of their bullion coin sales because they cannot meet demand.
This year marks the 25thanniversary of the American Eagle Bullion Coins, considered the world's most successful bullion coin program. The coins minted by the U.S. Mint have become the dominant bullion coins in the global market for physical bullion investment, said Terence Hanlon, president of Gage Metals, a Dallas-based precious metals dealer.
"Overwhelmingly, investors chose the American Eagle bullion coins and they do so for three key reasons," Hanlon noted. The coins' weight, content and purity are guaranteed by the U.S. Government. Secondly there is a liquid market for these products because of an established network of authorized dealers that ensure a two way market, he observed.
Finally, the exceptional beauty and quality of the coin make it desirable, Hanlon said.
However, the four witnesses testifying before the subcommittee agreed that the U.S. has been unable to keep pace with demand due to an insufficient supply of blanks. "The Mint has taken steps to address its supply difficulties by adding additional capacity, but it still struggles to meet demand, particularly for the silver eagle bullion coins," Hanlon told the lawmakers.
Ross Hansen, found and CEO of the Northwest Territorial Mint said he was able to acquire the Medallic Art Company, a former primary producer of silver blanks for the Mint, because government officials decided to take their business somewhere else. Currently, the primary supplier of silver bullion blanks is the Coeur d'Alene Mint in Idaho with the First Mint of Australia as back-up.
The fact U.S. precious metal coin blanks were being purchased from Australia incensed several members of the subcommittee. Hansen suggested, "It should be made in the United States, not overseas. We're providing American jobs."
"We could supply all the blanks the U.S. Mint would ever need," he declared.
Beth Deisher, editor of Coin World, told the subcommittee, "The quality of silver, gold and platinum bullion coins produced by the U.S. Mint is exceptional. However, the marketing of these coins is sub-par and is often disruptive to the marketplace."
"Most of the Mint's problems in marketing bullion coins are rooted in an ongoing failure to understand who its customers are and why they purchase bullion coins," she observed.
"Marketing multi-year bullion coin programs appears to be an arena in which the Mint continues on a self-destruct path," Deisher said, "in which mistakes made in the first year of offering dramatically reduce sales potential for the remainder of the program."
"The most current example is the Mint's decision to produce only 33,000 of each design of the 5-ounce .999 fine silver versions of the 2010 America the Beautiful quarter dollars," she noted, adding the program is supposed to be an 11-year investment program honoring five national parks and historical sites annually.
Although the program was approved in December 2008 production did not actually begin until Sept. 21, 2010. "Despite the Mint's earlier announcements suggesting 100,000 of each of the five designs would be available to the market, five days before sales to the public were to begin, the Mint disclosed it would instead produce only 33,000 for each of the five bullion designs beating the 2010 date for distribution through its established network of authorized purchasers," Deisher said.
"But again, we have low mintages that smack of contrived rarity, without thought or concern about the long-term consequences of these extremely low mintages," she asserted,.
Deisher also told the representatives that "every time there is a new collector product offered and you go to the [U.S. Mint] website, people sit there for hours trying to get in and you can't." The situation is so bad "people will pay people who will sit for hours and hours trying to get into the site."
"Some people are able to sit by their computer during business work hours and purchase in quantities, thereby shutting out others," she asserted. "Those who successfully obtain the coins race to eBay to sell them at exorbitant prices and high profits."
The veteran coin editor suggested the U.S. Mint encouraged the speculation by limiting some coins to one person per household. She quipped that dogs, cats and other beings have acquired their own addresses and households in order to get around the Mint's limits.
While her publication covers major mints all over the globe, Deisher said she finds the problem only occurs at the U.S. Mint.
Meanwhile, Hanlon suggested, "Congress could give a further competitive edge to the American Eagle bullion products by adjusting the capital gains tax treatment of these investments [from 28% to 15%] to make them on a par with securities."
"By lowering the rate, Congress could substantially boost the market potential for the America Eagles," he advised. Hanlon believes bullion sales could easily increase by 30% to 50% to meet investor and collector needs.
"I believe investors would welcome the Mint's resumption of the production of the platinum Eagles this year, which the Mint halted at the end of 2008," Hanlon suggested.
He feels the anticipated introduce of a palladium American Eagle coin this year will bring a new dimension to the Mint's offering. "It will offer investors an attractive price point in relation to gold and platinum, with different supply/demand factors for the metal."
Ranking subcommittee member William Clay, Jr., D-Missouri, noted that no staff members of the U.S. Mint were present at Thursday's hearing.
Subcommittee Chairman Ron Paul, R-Texas, said the situation at the Mint is a "reflection of what we are doing to our money," in particular what he termed a "huge debasement of our currency."

Here are some of the big stories of yesterday:

 Greg Hunter of USAWatchdog has provided this great commentary on the showdown between the Democrats and Republicans with respect to the budget of 2011 and what it will mean to the economy:

Greg Hunter’s
Dear CIGAs,
It is looking more and more like the budget showdown between the Democrats and Republicans will turn into a government shutdown 2011 by this weekend. The Obama administration has already started to inform federal workers who will be required to still come to work and those who will be told to stay home.
The Washington Post reported yesterday, “About 800,000 of the 2.1 million federal workers nationwide were expected to be furloughed, with exceptions for national security and other essential employees . . . . “If there is a shutdown, it would have very real effects on the services the American people rely on, as well as on the economy as a whole,” Jeffrey Zients, deputy director for management at the Office of Management and Budget, told reporters at the White House.” (Click here to read the complete Washington Post story.)
During the last several, there have been a series of short-term spending bills to keep the government running.  The latest includes $12 billion in cuts offered up by the Republican controlled Congress that will buy another week to negotiate.  This time, the President is digging in his heels according to a Washington Times story yesterday, “Without a short-term extension, lawmakers face two options: either reach a deal on a broad bill to fund the government for the rest of this year, or else have the government shut down as of midnight Friday.  “If presented with this bill, the president will veto it,” the White House said in an official statement of policy objecting to the House’s offer. The White House said it was “a distraction from the real work” on reaching a broader agreement.” (Click here to read the complete Washington Times story.)
If the government does shut down, it will not be the first time. There have been several government shutdowns since the early 1980’s.  The last one happened in the mid 1990’s.  Back then, the deficit was just under $36 billion.  By late 1997, the deficit shrank to just $17.3 billion.  In the mid 90’s, unemployment was low, the stock market was on fire without any help from Fed money printing, and the U.S was pretty much at peace.  The government shutdown was a political blunder for the Republicans, but the over-all economy didn’t miss a beat.

Late last night, there was a stopgap measure to fund the government through to Sept 30.2011, the last day of the 2011 budget.  They will need a new 2012 budget passed.
Here is this news event from Bloomberg:

Lawmakers Reach Deal to Cut $38.5 Billion, Avert Shutdown

Government Shutdown 4
Democrats and Republicans agreed to a budget deal late Friday night. Photographer: Andrew Harrer/Bloomberg
House Speaker John Boehner
House Speaker John Boehner, a Republican from Ohio, left, and Senate Majority Leader Harry Reid, a Democrat from Nevada, speak outside the White House following a meeting with U.S. President Barack Obama in Washington, D.C. on April 7, 2011. Photographer: Andrew Harrer/Bloomberg
Senate Majority Leader Harry Reid
Senate Majority Leader Harry Reid, a Democrat from Nevada, speaks at a news conference with other Democratic lawmakers inside the Capitol building in Washington, D.C., U.S., on Friday, April 8, 2011. Photographer: Andrew Harrer/Bloomberg
Senate Majority Leader Harry Reid
Senate Majority Leader Harry Reid, a Democrat from Nevada, pauses during a news conference with other Democratic lawmakers inside the Capitol building in Washington, D.C. on April 8, 2011. Photographer: Andrew Harrer/Bloomberg
U.S. Congress leaders reached an accord last night to cut about $38 billion from federal spending this year while jettisoning Republican proposals to defund Planned Parenthood and block environmental rules, pulling the government back from the brink of a shutdown.
The agreement was announced less than two hours before the government’s funding authority was due to expire, which would have started a partial shutdown of services and offices.
“It’s been a grueling process. We didn’t do it at this late hour for drama; we did it because it’s been very hard to arrive at this point,” Senate Majority Leader Harry Reid, a Nevada Democrat, said on the Senate floor with less than an hour to go before the midnight deadline for a shutdown. “Both sides have had to make tough choices.”
The Senate and the House of Representatives quickly passed a stopgap measure that makes $2 billion of the agreed-upon cuts and keeps the government open through April 14 while lawmakers draft legislation implementing a longer-term agreement to fund the government through the Sept. 30 close of the current fiscal year. Both chambers will vote on that measure next week.
House Speaker John Boehner, an Ohio Republican, said he was “pleased” with the outcome of what he called a “long fight” over the 2011 budget.
“We fought to keep government spending down, because it really will affect and help create a better environment for job creators in our country,” he told reporters.

‘Different Beliefs’

At the White House, President Barack Obama, who after weeks on the sidelines stepped in this week to prod an agreement, said the deal was possible because “Americans of different beliefs came together.”
“Like any worthwhile compromise, both sides had to make tough decisions,” Obama said. “Some of the cuts we agreed to will be painful.”
The Washington Monument, honoring America’s first president, loomed through a window behind Obama in his televised comments. He began his remarks with a reference to the landmark, saying, “I’m pleased to announce that the Washington Monument, as well as the entire federal government, will be open for business.”

Policy Riders

The deal came together after days of negotiations at the Capitol and the White House among Boehner, Reid, Obama and their aides over how much spending to cut and from which programs, as well as over so-called policy riders Republicans proposed to direct how federal money could be used.
The final compromise slashes about $38 billion in spending -- about $23 billion less than Republicans had initially sought, yet tens of billions more than Democrats originally said they could accept. It stripped most of the dozens of policy limits Republicans were seeking to impose on the Obama administration, while narrowing a handful of others Democrats said they could tolerate.
A provision barring federal funding for Planned Parenthood, the women’s health provider that offers abortion services in some locations, was dropped in exchange for a commitment that the Senate would vote on defunding the organization.
Republicans dropped their bid to use the measure to cancel funding for the health-care overhaul enacted last year, and Democrats in turn agreed to hold a separate Senate vote on repealing the law, according to a summary of the deal released by Boehner’s office.
Several provisions that would have barred the Environmental Protection Agency from regulating greenhouse gas emissions or other pollutants were abandoned.

Abortion Funding

Among the riders that survived were a ban on taxpayer funding for abortions in the District of Columbia and $2 million for a voucher program that is a personal cause of Boehner’s and provides low-income students in the District with federal money to attend private schools.
As part of the deal, studies will be conducted of the financial regulation measure enacted last year. Critics have said some of the law’s requirements place onerous requirements on business.
The agreement would include funding for National Public Radio, which Republicans had attempted to end. It also would strip Republican riders that sought to block the Federal Communications Commission’s “net neutrality” Internet rules as well as the Education Department’s efforts to clamp down on for- profit colleges.
In a closed-door meeting last night at which he described the agreement to colleagues, Boehner said it was best Republicans could get out of Democrats, according to an aide who spoke on condition of anonymity.

Months-Long Dispute

The months-long dispute over the 2011 budget stemmed from the failure of last year’s Democratic-controlled Congress to enact a spending plan before the fiscal year started Oct. 1. Since then, the government has been funded by a series of stopgap measures.
Republican took control of the House following November’s elections vowing to make deficit reduction one of their prime missions. The spending cuts agreed to yesterday exceed what House Republican leaders had proposed earlier this year before their rank-and-file forced them to push for $61 billion in reductions in the budget bill the chamber passed in February.

Other Battles

The accord clears the way for potentially even tougher battles over the government’s finances. A spending plan for the 2012 fiscal year prepared by House Budget Committee Chairman Paul Ryan, a Wisconsin Republican, and scheduled for a vote in the chamber next week would phase out the traditional Medicare program -- a proposal Democrats have denounced. It also would cut spending by $6 trillion over a decade and reduce the top tax rate to 25 percent.
Also looming is a fight over raising the government’s $14.3 trillion debt limit, expected to be breached by May 16. Many Republicans are demanding that the Obama administration commit to deep spending cuts as the price for their votes to raise the limit.
“In order to raise the debt ceiling, we need to do something significant about the debt,” Senate Minority Leader Mitch McConnell, a Kentucky Republican, said yesterday. “My definition of ‘significant’ is that the markets view it as significant, the American people view it as significant and foreign countries view it as significant.”
To contact the reporters on this story: Julie Hirschfeld Davis in Washington; Brian Faler in Washington at
To contact the editor responsible for this story: Mark Silva at

I have pointed out to you the dangers to the world of a falling usa dollar index.
Today the usa index broke the 75 dollar level: (courtesy zero hedge)

This Is What Currency Failure Looks Like

Tyler Durden's picture

Somewhere, someone is furiously drafting the impeachment proceedings for Chairsatan Bernankebub and TurboTaxTinyTim.
Time for another market crash.


Let us have a look at the long bond:  not good today a drop of 1/8 point.
coupled with a fall in the dollar is doubly troubling!!

118.53125 -0.12500 (-0.11%)
2011-04-08 16:57:24, 10 MIN DELAY
T-BONDS Jun 2011 (E) (CBOT:ZB.M11.E)

Let us head over into Japan.  This is a great commentary and an up to date 
assessment on the perils of the nuclear disaster in that country.
courtesy of zero hedge and the author is "George Washington":

Japan's Nuclear Meltdown, the Economic Meltdown, and the Gulf Oil Meltdown All Happened for the SAME REASON

George Washington's picture

Apologists for the nuclear power industry pretend there are no better alternatives, so we just have to suck it up and suffer through the Japanese nuclear crisis.
But this is wholly illogical. The truth is that we can store spent fuel rods in dry cask storage, which is much safer than the spent fuel rod pools used in Fukushima and many American reactors.
As the Nation pointed out:
Short of closing plants, there is a fairly reliable solution to the problem of spent fuel rods. It is called “dry cask storage.” Germany adopted it twenty-five years ago. Instead of storing huge amounts of spent fuel in pools with only roofs over them, small amounts of spent fuel rods are surrounded with inert gas inside large steel casks. These casks are quite stable and secure. At Vermont Yankee one of them was mistakenly dropped a yard or more when a crane malfunctioned—and the cask was fine.

But there is a problem with dry cask storage: it costs money. The track record of the atomic energy industry in the United States—less so in Japan—is to spend as little money as possible and extend the life of old plants for as long as possible, no matter the risks.
We could build a new, safer generation of nuclear power plants which have inherently safer designs, such as low-temperature reactors and thorium reactors.
But the owners of the nuclear plants can make more money with the ridiculous designs and cost-cutting measures used at Fukushima and elsewhere.
As the Christian Science Monitor notes:
Just as the BP oil spill one year ago heaped scrutiny on the United State's Minerals Management Service, harshly criticized for lax drilling oversight and cozy ties with the oil industry, the nuclear crisis in Japan is shining a light on that nation's safety practices.


Russian nuclear accident specialist Iouli Andreev, who as director of the Soviet Spetsatom clean-up agency helped in the efforts 25 years ago to clean up Chernobyl ... said the sequence of events at Japan's Fukushima I suggested that the plant's owner, Tokyo Electric Power Company (TEPCO), may have put profit before safety. The fire that broke out Tuesday in reactor No. 4's fuel storage pond may have been caused by a desire to conserve space and money, he suggested.

"The Japanese were very greedy and they used every square inch of the space. But when you have a dense placing of spent fuel in the basin you have a high possibility of fire if the water is removed from the basin," Andreev told Reuters.

TEPCO has come under fire in the past for falsifying safety records at the Fukushima Daiichi plant. In 2002, according to The Wall Street Journal, TEPCO admitted to the Nuclear and Industrial Safety Agency that it had falsified the results of safety tests on the No. 1 reactor.

This was only one in a string of scandals and coverups to mar the Asia's biggest utility company. In 2007, the company initially said there was no release of radiation after an earthquake damaged its Kashiwazaki-Kariwa plant, but later admitted that radioactive water spilled into the Sea of Japan.
And less than a year ago, on June 17, a reactor at Fukushima I lost electricity and saw a dangerous drop in cooling water, Bloomberg reported. TEPCO's president failed to adequately investigate to prevent the current crisis, said Iwaki City council member Kazuyoshi Sato ...
Indeed, Tepco has covered up cracked reactor core containment vessel and other serious problems for decades.
And this is not limited to Tepco. As one commentator writes:
Back in the late 80’s, when I was working for an environmental firm in New Jersey, one of the temps who came through said he’d just come from working at a nuclear plant. He said that his design, as delivered, had sufficient margin and backups to take care of whatever could possibly happen.

The owners thanked him for his work, then sent it to other engineers who cheapened down the whole design. Thinner walls in the pipes, fewer fasteners in the connections, less mass in the building walls, the whole bit. Saving money on the build to pay for higher profits, higher interest to the backers, and generally harvesting the value that should have been spread over the plant’s lifetime. He just shook his head.
The nuclear accident was largely caused because of Tepco's penny-pinching, just as the Gulf oil spill was caused by the fact that BP cut every corner in the book ( see thisthisthisthis, and this).
And just like BP captured the agencies which were supposed to regulate it, nuclear agencies have been wholly captured by the nuclear power companies. For example, as the above-quoted Christian Science Monitor article notes:
Andreev, the Russian scientist, has also accused the IAEA of being too close with corporations. "This is only a fake organization because every organization which depends on the nuclear industry – and the IAEA depends on the nuclear industry – cannot perform properly."
And the same is true of the economic crisis. As I've extensively documented, the crisis was caused by big banks and other financial players taking irresponsible and speculative gambles, committing fraud and fudging the numbers, using too much leverage, and other dangerous behavior. See this and this. And - just as with the nuclear and oil industries - the government "regulators" have all be captured by the big companies they are supposed to police, helped the bank robbers pull off the heist, and then helped cover it up afterwards.
Stiglitz Speaks Truth to Power
Nobel prize winning economist Jospeph Stiglitz has been speaking out on this same theme this week.
As Linda Keenan and Janine R. Wedel note:
Stiglitz describes well the intertwining of state and private power [quoting Stiglitz]:
The personal and the political are today in perfect alignment. Virtually all U.S. senators, and most...[House] representatives...are members of the top 1 percent....are kept in office by money from the top 1 percent, and know that if they serve the top 1 percent well they will be rewarded by the top 1 percent when they leave office. By and large, the key executive-branch policymakers on trade and economic policy also come from the top 1 percent. When pharmaceutical companies receive a trillion-dollar gift--through legislation prohibiting the government...from bargaining over price--it should not come as cause for wonder....Given the power of the top 1 percent, this is the way you would expect the system to work.
Stiglitz points out that a system gamed to benefit only that 1 percent is destined to sink us all, eventually, because it means America is squandering its productivity, efficiency, and much-needed infrastructure dollars. We would go a step further and say that this system, of, by, and for the 1 percent, is what paved the way for some of the greatest disasters of the new century. The BP-Transocean Oil Spill and the Wall Street collapse might never have happened without the promotion by shadow lobbyists of loose regulation and/or weak enforcement that benefited themselves and their elite brethen. Japan might not be facing a nuclear crisis, were it not for the fact that the very old reactors at the Fukushima Daiichi plant got an extension to keep operating despite safety concerns. That decision was a byproduct, critics say, of Japan's own gamed system known as amakudari, or "descent from heaven", a longstanding, widespread practice in which Japanese senior bureaucrats retire to high-profile positions in the private and public sectors.

A string of smaller, but still terrible disasters can be traced to weak regulation and/or spotty enforcement: the half-billion eggs that had to be recalled last year; a 2009 plane crash that killed 50 people, which Frontline traced back to the "cozy" relationship between the FAA and carriers, allowing some of them to operate flights despite safety violations; and several mine disasters that have killed dozens in recent years. A Washington Postanalysis found that more than 200 former congressional staffers, regulators and retired lawmakers work for the mining industry as lobbyists, senior executives, or consultants. Those last two roles make it possible for top power brokers to shadow lobby - they go unregistered simply by evading formal registration and refusing the accept the title of lobbyist, even if lobbying is essentially what they are doing.


A signature feature of the shadow lobbyist era is not just a manipulation of public policy, but also an embrace of "failing upward". No matter the track record, the elite 1 percent seek more of the same. Transocean executives thought they deserved rich bonuses, as did their unabashed, deeply entitled peers on Wall Street, despite their staggering failures.

The CEO of mine operator Massey, who retired a few months back, is due to get a reported 12 million dollars, a year after Massey's Upper Big Branch mine exploded, killing dozens. And then there's egg producer Jack DeCoster, who's been called "Teflon Chicken Don." For years DeCoster has fought various workplace safety and environmental violations. Yet here's what one lawyer who sued DeCoster's company said about him, to Tribune reporter Andrew Zajac: "He gets fined and things happen to him, but he comes back. He always bounces back."

The insulation from failure is galling, to be sure, but it's much more than that. It is both an outrageand a clear and present danger. If executives and stealth power brokers face no repercussions for making risky bets or pushing the limits on safety to save a buck or working the system to their advantage no matter the consequences, what incentive do they have to act more responsibly in the future?

As Stiglitz wrote Wednesday:

The entire financial sector was rife with agency problems and externalities. Ratings agencies had incentives to give good ratings to the high-risk securities produced by the investment banks that were paying them. Mortgage originators bore no consequences for their irresponsibility, and even those who engaged in predatory lending or created and marketed securities that were designed to lose did so in ways that insulated them from civil and criminal prosecution.

This brings us to the next question: are there other "black swan" events waiting to happen? Unfortunately, some of the really big risks that we face today are most likely not even rare events. The good news is that such risks can be controlled at little or no cost. The bad news is that doing so faces strong political opposition - for there are people whoprofit from the status quo.

We have seen two of the big risks in recent years, but have done little to bring them under control. By some accounts, how the last crisis was managed may have increased the risk of a future financial meltdown.

Too-big-to fail banks, and the markets in which they participate, now know that they can expect to be bailed out if they get into trouble. As a result of this "moral hazard", these banks can borrow on favourable terms, giving them a competitive advantage based not on superior performance but on political strength. While some of the excesses in risk-taking have been curbed, predatory lending and unregulated trading in obscure over-the-counter derivatives continue. Incentive structures that encourage excess risk-taking remain virtually unchanged.

So, too, while Germany has shut down its older nuclear reactors, in the US and elsewhere, even plants that have the same flawed design as Fukushima continue to operate. The nuclear industry’s very existence is dependent on hidden public subsidies - costs borne by society in the event of nuclear disaster, as well as the costs of the still-unmanaged disposal of nuclear waste. So much for unfettered capitalism!


In the end, those gambling in Las Vegas lose more than they gain. As a society, we are gambling – with our big banks, with our nuclear power facilities, with our planet. As in Las Vegas, the lucky few - the bankers that put our economy at risk and theowners of energy companies that put our planet at risk - may walk off with a mint. But on average and almost certainly, we as a society, like all gamblers, will lose.

That, unfortunately, is a lesson of Japan’s disaster that we continue to ignore at our peril.
The bottom line is that if we continue to let the top 1% - who are never satisfied, but always want more, more, more - run the show without challenge from the other 99% of people in the world, we will have more Fukushimas, more Gulf oil spills and more financial meltdowns.
As one commentator passionately put it:
Make no mistake. Nuclear power can be safe... if designed by honest and prudent people. Make no mistake. The economies of nations and planets can function well, and life can continuously improve... if only real, physical goods (including gold and silver) are exchanged in transactions.

Make no mistake. Life can be good. Life can be efficient. Life can be benevolent. Life can continuously improve as years go by, and as humans learn more about the nature of reality. The reason everything is getting worse can all be traced back to the predators-that-be, the predator-class, and their endless dishonesty.

Honesty => life, health, happiness, success.
Dishonesty => death, disease, misery, failure.
The dishonest [...] the predators must go.
Note:   This is not a question of left-versus-right. The war between liberals and conservatives is a false divide-and-conquer dog-and-pony show created by the powers that be to keep the American people divided and distracted. See thisthisthisthis,thisthisthisthis and this.

Instead, it is a question of 
the powers-that-be waging war on the freedom and wealth of the American people. ... and the people of the entire world.
Your rating: None Average: 4.6 (28 votes)

Over in Portugal we got this early Friday morning:

Hidden state debts may push Portugal bailout to €90bn

Officials in Brussels and Germany expected to demand big reforms in return for rescue package bigger than Ireland's
Bank market room, Lisbon 7/4/11
A trader at a bank market room in Lisbon. Hidden debts could mean Portugal's economy needs a bigger bailout than previously thought. Photograph: Rafael Marchante/Reuters
Portugal's bailout requirement is 20% higher than previously thought, with hidden debt in state companies and private-public partnerships possibly to blame, according to sources in Lisbon.
Officials plan to ask for a €90bn (£79bn) bailout, making it an even larger aid package than the €85bn granted to Ireland, according to respected business daily Diario Económico. Previous reports had suggested Portugal required around €75bn.
The extra cash is needed, it is said, to cover government debt, state companies that are having trouble paying employees and the possible recapitalisation of Portuguese banks after future stress tests.
The request would signal deeper debt problems buried inside the Portuguese administration, with economist Nuno Garoupa pointing to both troubled public companies and a lack of reporting on the state of public-private partnerships covering hospitals and roads which will not be revealed until 2013.
Many economists believe that these hidden elements drive the country's real debt up towards 120% of GDP, rather than the 85% figure given by the government. "This is an open secret," said economist João César das Neves of Lisbon's Catholic University. "Europe knows it already."
It is also unclear how a rudderless country with a caretaker government led by the outgoing Socialist prime minister José Socrates would set about negotiating a bailout. A formal request for aid was to be delivered to Brussels tonight, cabinet minister Pedro Silva Pereira told reporters.
With fresh elections due on 5 June, the Socialists and the centre-right opposition Social Democrats are both anxious to pass responsibility for the bailout on to their opponents.
Socrates is said to favour taking up to a third of the total money in the coming weeks to tide the country over until a new government is installed. That government, which opinion polls show would probably be led by the Social Democrats, could then negotiate the rest.
But the Social Democrats are said to be pressing for the caretaker government to take the full bailout, so that blame for the strict conditions that will accompany it can fall on Socrates' party.
Either way, an opinion poll run this week by the Diario de Noticias newspaper showed that a minority government is the most likely outcome – meaning that the two parties will have to come to some agreement.
The Portuguese president Aníbal Cavaco Silva would play a crucial role in bringing the two biggest parties together.
Officials in Brussels and Germany's chancellor, Angela Merkel, are also expected to intervene to demand major reforms of the Portuguese economy, which has grown by an average of just 0.7% a year over the past decade.
The senior German lawmaker Volker Wissing, chairman of his parliament's finance committee, noted that Portuguese MPs had rejected Socrates' latest austerity measures. "Now they'll be determined from outside," he said.
The parties are already blaming one another for the spiralling cost of Portuguese debt, which forced Socrates to turn to the European Unionfor a bailout on Wednesday night.
The Social Democrats had refused to back a Socrates austerity package which was presented to parliament on 23 March, bringing his government down.
Questions also remained over whether either party was capable of pushing through structural reforms that would allow the country to grow.
Prof Garoupa, who teaches at Illinois University, said that Portugal was in a worse state than Ireland and Spain because it had spent its EU funds on consumption rather than investment and so had little potential for growth.
"We face another decade without growth," he said. Other economists said growth could come much earlier if the bailout is accompanied by meaningful spending cuts and reforms.
Portugal's economy is already expected to fall back into recession this year, shrinking by around 1%.
The country's hard left is already getting ready to battle further cuts in a country that has passed three austerity packages since the debt crisis first began. "We will present a plan in response to the debt situation," said Francisco Louçã of the Left Block.
Business leaders and Portuguese bankers welcomed the bailout, agreeing that it had become inevitable.
• This article was amended on 8 April 2011. The original gave a Left Block politician's name as Francisco Louá. This has been corrected.

I will leave you with this great commentary from Jim Sinclair himself at  It is self explanatory.
Posted: Apr 07 2011     By: Jim Sinclair      Post Edited: April 7, 2011 at 11:22 pm
Filed under: General Editorial
Dear CIGAs,
The system has failed. It failed the day that Lehman Brothers was flushed.
There is a financial condition of an ocean of liquidity making the broken remains of a failed financial system in the Western world opaque.
There is no future failure coming. What is coming is a mass realization that exposes the fact there is no functioning system under all this liquidity. It is a sharp contraction in confidence that lies down the road. Realize this and know that there is one more step you need to make.
Having the largest pile of gold and silver without considering one more step might make you a modern Midas.
There is more to insurance than simply financial. Shortages of goods and services will occur because of currency induced cost push inflation resulting in dislocations of the organization and compensation in the distribution functions. That means there could be ample food in the system but little available on the shelf of your local market.
Because of the ill-understood world shaping changes in the Middle East, the impact of “Peak Oil” on price has been sharply accelerated. Public utilities considered now as a human right will prove themselves to be privileges. Expectation of power on a constant basis will become a hollow expectation.
If you do not have the experience of living in India and Africa in the 80s, you have no idea of how to live in a Western World experiencing long term currency induced cost push inflation. Self reliance will become as important as your holdings in gold. To have a huge pile of gold but remain totally dependent on the infrastructure of the Western World system is a serious mistake. You would have substantial capital but lack goods and services to buy. You will be able to afford much, but much will be either in short supply or illegal.
You know more about what is occurring than 99% of investors.
You are the 1% that knows the SYSTEM HAS FAILED.
You are the 1% that knows the system failed the minute Lehman Brothers was flushed.
You are the 1% not looking for some failure in the future but know there is no system below the flood of liquidity.
You are the 1% that has been exposed to the concept of currency induced cost push.
You are the 1% that can understand the future.
Please be that 1% that is not seduced by your profits and fails to take the last step to the best degree they can.


The picture above is another aspect of Sunnyfield’s Farm. It is one of two 20KW generators powered by a marine diesel engine. There is a special fuel filter system custom designed that allows this engine to run on low grade heating oil. There is at all times 14,000 gallons of fuel buried. This fuel is diesel, heating oil and gasoline. This is at best a short-term answer to the predictable failure of fossil fuel electric generation. The longer term solution is wind power banking batteries and a converter.
I will walk you through everything that I have done in hopes that you might use it as a model to improve on.

Have a great weekend everyone

Search This Blog