Before commencing, let me introduce you to the latest financial entities who have entered our banking morgue having taken their last breath last night:
1. Integra Bank Evansville Ind.
2. Bank Meridian, Columbia SC
3. Virginia Business Bank of Richmond Virginia
4. Landmark Bank of Florida, Sarasota Florida
5. Bank of Choice, Greeley Colorado.
May they rest in piece.
There were many developments occurring yesterday including the House voting for a revised Boehner bill
but defeated by the Senate. This weekend Washington will be busy trying to get a deal. While this was going on all attention was diverted from the comex which saw a massive amount of gold and silver standing for delivery. Without further ado let us head over to the comex and see the wild events of yesterday.
The price of gold finished the day at $1628.30 having risen most of the day. The bankers tried to quell its advance but to no avail. The price of silver finally made it above the 40 dollar mark, rising to $40.09 for a gain of 31 cents. These prices are comex closing prices at 1:30.
In the access market, here are the final prices for gold and silver:
The total gold comex open interest fell marginally by 200 contracts to 517,831 as the bankers supplied the paper and speculators piled into the metal. A few bankers covered their shorts fearing the debt ceiling debacle. Now comes the exciting part. The front delivery month of August saw a massive 12,124 contracts of open interest and this is the amount of gold standing for August representing 1.212 million oz of gold.
The next front month of October which is generally the weakest delivery month of the year for gold saw an open interest of only 24,705 contracts. The very big December month saw its OI climb big time from 347,752 to 370,297 contracts. If the comex gets by August, there is no doubt that December will be the battle royale in gold especially as we judge the huge number of gold standing in August. The estimated volume at the gold comex was quite good at 151,054 as all the rollovers have occurred already. The confirmed volume on Thursday was very good at 254,429 but it contained the many rollovers.
The total silver comex open interest continues to hover around the 119,000 mark. On Friday, the OI rests at 119,654 down about 300 contracts from Thursday. The front August options exercised month saw an OI fall slightly from 319 to 312. This represents the number of silver ounces standing (1.56 million oz) which is very large for a non delivery month. It is almost 30% of the total of July's silver oz standing. The next delivery month of September saw its OI fall slightly from 59,833 to 58905. The estimated volume at the silver comex on Friday was quite subdued at 42,264. The confirmed volume on Thursday was better at 59,060.
Let us begin with the gold inventory movements.
We basically had no movements whatsoever. No gold entered the dealer and no gold was withdrawn
We only had a tiny 707 oz of gold removed from a customer at HSBC and Manfra.
We had an adjustment whereby 4693 oz of gold was removed from the dealer to the customer.
Thus to start the August month we officially have only 2.027 million oz of registered gold but I will bet that most of it is encumbered. (registered = dealer gold)
The comex notified us that a massive 12,124 contracts stood in line for metal Friday, the first day notice.
This of course represents 1.2124 million oz of gold. I am sure that Blythe Masters has her work cut out for her this weekend as does Washington. To obtain what is left to be served, I take the OI standing (12,124 contracts) and subtract out Friday notices for delivery (3325) which leaves me with 8799 notices or 879,900 oz left to be served upon for the entire month.
Thus for this delivery month of August it seems that the following is standing for delivery:
332500 (oz already served) + 879900 (oz left to be served upon) = 1,212,400 oz.
Expect massive cash settlements as the comex does not have anywhere close to this in unencumbered gold.
Thus the total registered silver fall to an all time low of 26.729 million oz of silver inventory. However the total silver inventory rises to 104.17 million oz.
The comex folk notified us that a total of 275 notices were filed for delivery as these were options exercised by investors and standing for the metal. This represents a total of 1,375,000 million oz. To obtain what is left to be served, I will take the OI standing (312) and subtract out the notices (275) which will leave me with 35 notices or 175,000 oz left to be served upon. No doubt that this will rise as the month nears its end.
Thus the total number of silver oz standing in this non delivery month is as follows:
1,375,000 oz (served already) + 175,000 oz (to be served) = 1,550,000
which is very high for a non delivery month.
Blythe will be busy in the silver arena as well.
Total Gold in Trust
|Ounces of Silver in Trust||318,802,192.100|
|Tonnes of Silver in Trust||9,915.86|
we neither gained nor lost any silver.
Gold COT Report - Futures
Change from Prior Reporting Period
non reportable positions
Change from the previous reporting period
COT Gold Report - Positions as of
Tuesday, July 26, 2011
Silver COT Report - Futures
non reportable positions
Change from the previous reporting period
COT Silver Report - Positions as of
Tuesday, July 26, 2011
Those large speculators that have been short silver covered a minuscule 54 contracts.
And now for our commercials.
Those commercials that are close to the physical scene and are always long silver covered a small 1,019 contracts.
Those commercials that have been short silver from the year 4 BCE and onward added another 2241 contracts to their shorts courtesy of the largess of the Fed (supplying the needed capital)
and the regulators (who continue to allow this nonsense to continue)
Forgot about the small specs as they have been blown out since May.
Conclusion: again not a bullish report as the bankers increase their shorts. No wonder we had a raid on Wednesday and Thursday. We will probably have others this week.
Let us now see the big news stories relevant to gold and silver.
Late last night we got this story from Bloomberg where we learned that the Boehner plan was defeated by the Senate. Both sides were work throughout the weekend trying to get a plan passed. Remember that it is far worse to have a debt downgrade than a temporary default as this adds huge amounts of interest to the debt bill: (courtesy: Bloomberg)
I found this report from Econophile over at zero hedge super as he discusses both plans
by the Republicans and Democrats and the fraud that it represents. (courtesy zero hedge)
The Budget Debate Fraud
Submitted by Econophile on 07/29/2011 14:42 -0400
This article originally appeared in the Daily Capitalist.
The chaos that is our federal government never ceases to please. If you ask me what will happen, I will admit to not having a clue. I wrote a piece two weeks ago on this and my views haven’t changed (U.S. Default? Why Are We Surprised?“). The entire thing is a charade and thus my heart is with the Tea Party Caucus who are holding out for greater cuts and a balanced budget amendment. I have got to hand it to Boehner though for using the crisis to get Obama defeated in 2012 by causing the debt limit issue to come up again just before the elections. But let us not be fooled that the Republicans are actually cutting the deficit.
I listened to O’Reilly anchor Laura Ingram while I was doing my workout this afternoon, and she kept throwing back the argument to Tea Party Congressmen that, hey you’ve gotten what you can get, don’t risk another financial collapse. That is hyperbole. We, the U.S.A., have de facto already met the requirements for a credit downgrade, so it’s going to happen anyway because there are no real cuts proposed. Getting knocked down a minus tick on our rating another $43 billion per year of Treasury interest payments if rates shoot up 500 bps. That is not going to take us down. Yes, I know, it will impact other rates, etc., etc. It reminds me of the Panic of ’08 when Hank Paulson cried wolf and Ben Bernanke was kind enough to remind us that we had a Great Depression once. Those guys still don’t have a clue.
Ask yourself what will happen if they don’t truly cut spending? It will either be inflation or taxes that will result, probably both in my opinion. Either way it will cause long-term stagnation and permanent high unemployment. My vote: shut it down.
Before you think that the solution is for those nice people in D.C. to “just get along” read this from Cato which reveals that the cuts are just a mirage:
by Michael D. Tanner | Michael Tanner is a senior fellow at the Cato Institute
“It is clear we must enter an age of austerity,” House minority leader Nancy Pelosi mourned as she endorsed Harry Reid’s proposal for raising the debt ceiling. Austerity? Really?
The Reid plan would theoretically cut spending by $2.7 trillion over ten years. Even if that were true, it would still allow our national debt to increase by some $10 trillion over the next decade. But, of course, the $2.7 trillion figure is mostly fiction. About $1 trillion of the savings would come from the eventual end of the wars in Iraq and Afghanistan, savings that were going to occur anyway. Senator Reid might just as well have added another $1 trillion in savings by not invading Pakistan.
Another $400 billion comes not from cuts but from assuming reduced interest payments. And, of course, there are $40 billion in unspecified “program-integrity savings,” meaning the “waste, fraud, and abuse” that is the last refuge of every phony budget cutter. The plan rejects any changes to Medicare and Social Security, despite the fact that the unfunded liabilities from those two programs could run as high as $110 trillion. But those liabilities generally fall outside the ten-year budget window, so Reid — unlike our children and grandchildren — doesn’t have to worry about them.
That leaves about $1.2 trillion in discretionary and defense spending reductions over the next ten years. Let’s put that in perspective. This year the federal government will spend $3.8 trillion. Our deficit is roughly $1.6 trillion. Our national debt exceeds $14.3 trillion, not counting unfunded entitlement liabilities. We are talking about raising the debt ceiling to $16.9 trillion. This month alone the federal government will borrow $134 billion. Reid’s cuts would average roughly $120 billion per year.
This is austerity?
Of course, the House Republican plan as announced by Speaker John Boehner is only marginally more austere.
Boehner proposes a two-stage increase in the debt ceiling, with each stage accompanied by spending cuts. The first $1 trillion debt increase would be accompanied by $1.2 trillion in spending cuts over ten years, pretty much the same as Senator Reid’s plan. The big difference is that instead of Sen. Reid’s phony Iraq and Afghanistan savings, the speaker’s plan would appoint a commission — now there’s an exciting new idea — to propose $1.8 trillion in savings from entitlement programs. To be fair, Senator Reid would also appoint a commission — because that’s what Washington does — to recommend additional deficit reductions, presumably including entitlement changes. The difference is that the Boehner commission has teeth. If Congress rejects its recommendations, the president doesn’t get a second $1.6 trillion hike in the debt ceiling.But $1.8 trillion in entitlement savings over ten years is still too small to encompass real structural reforms of the type envisioned by Rep. Paul Ryan and others. It is much more likely to simply be more tweaking around the edges, perhaps raising the eligibility age or changing the way the cost-of-living formula is calculated. True, changes such as these will have a real impact out beyond the ten-year budget window, but they fall far short of what is necessary to deal with the shortfalls to come.
Making matters worse, both Reid and Boehner are using the time-honored Washington dodge of “baseline budgeting,” meaning that the proposed cuts are not actual reductions in spending from year to year, but cuts from projected future increases. Thus, under both the Reid and Boehner plans, actual federal spending will continue to rise.
With the clock running out, we are now down to fifth- or sixth-best options. But let’s not pretend that this is austerity.
Yesterday news came that the GDP was faltering badly in the second quarter as the new GDP came in at an annual 1.3% rise instead of 1.8%. Even more shocking was the first quarter was revised down to .4% from 1.9%. This sent the Dow southbound and gold/silver rising:
(Reuters) - The economy grew less than expected in the second quarter as consumer spending barely rose amid higher gasoline prices, and growth braked sharply in the prior quarter, a government report showed on Friday.Growth in gross domestic product -- a measure of all goods and services produced within U.S. borders - rose at a 1.3 percent annual rate, the Commerce Department said. First-quarter output was sharply revised down to a 0.4 percent pace from 1.9 percent.
Economists had expected the economy to expand at a 1.8 percent rate in the second quarter.
In addition, fourth-quarter growth was revised down to a 2.3 percent pace from 3.1 percent, indicating that the economy had already started slowing before the high gasoline prices and supply chain disruptions from Japan hit.
Economists had expected the economy would show signs of perking up by now with Japan supply constraints easing and gasoline prices off their high, but data has disappointed. This and the sharp downward revisions to the prior quarters suggest a more troubling and fundamental slowdown might be underway.
There is also heightened uncertainty over the outlook because of the impasse in talks to raise the nation's borrowing limit and avoid a damaging government debt default.
The Treasury says the government will soon run out of money to pay all its bills.
Economists have warned that a debt default could push the fragile economy over the edge.
"The implications of more rancorous foot dragging would be bad for an economy already in a precarious state," said Julia Coronado, chief North America economist at BNP Paribas in New York. "Uncertainty continues to tax an already fragile recovery."
Data released on Friday showed the 2007-2009 recession was much more severe than prior measures had found, with economic output declining a cumulative of 5.1 percent instead of 4.1 percent.
The annual revisions of U.S. GDP data from the Commerce Department showed the economy contracted at an annual average rate of 0.3 percent between 2007 and 2010. Output over that stretch had previously been estimated to have been flat.
The economy needs to grow at a rate of 2.5 percent or better on a sustained basis to chip away at the nation's 9.2 percent unemployment rate.
CONSUMER SPENDING BRAKE SHARPLY
The March earthquake in Japan severely disrupted U.S. auto production. The resulting shortage of motor vehicles weighed on retail sales as consumers were unable to find the models they wanted. That combined with high gasoline costs to curb spending.
Consumer spending, which accounts for about 70 percent of U.S. economic activity, decelerated sharply to a 0.1 percent rate -- the weakest since the recession ended two years ago.
Spending grew at a 2.1 percent pace in the first quarter.
Motor vehicle production subtracted 0.12 percentage point from gross domestic product growth in the second quarter, after adding 1.08 percentage points to first-quarter GDP growth.
The composition of growth in the April-June quarter was weak and could prompt economists to dial down their expectations for a quick and solid rebound in the third quarter.
A smaller trade deficit , as imports slowed, was one of the main contributors to the rise in second-quarter growth, with businesses spending and inventory investment also adding to output.
Government spending declined again in the second quarter as state and local authorities continued to pare their budgets, even though defense expenditures rebounded at 7.3 percent rate after contracting at a 12.6 percent rate in the first three months of the year.
Home building rose at a 3.8 percent pace, while investment in nonresidential structures increased at an 8.1 percent rate.
The easing of the auto parts disruptions and a drop in gasoline prices could be a tail wind to third-quarter growth, but economists are concerned that June data was rather weak.
"All the data we got for June thus far suggest that as we entered the third quarter, we did not gain any momentum setting up for a good third quarter," said Christopher Probyn, chief economist at State Street Global Advisors in Boston. "We are not starting the third quarter on a positive note," said Probyn, speaking before the GDP report was released.
The report also showed a moderation in inflation pressures, with the personal consumption expenditure price index rising at a 3.1 percent rate after rising 3.9 percent in the first quarter. Excluding food and energy, the core PCE index rose 2.1 percent, the fastest since the fourth quarter of 2009, after rising 1.6 percent in the first quarter. It overshot the Federal Reserve's preferred 2.0 percent level.
Joe Lavorgna of Deutsche bank threw in the towel and suggests that the USA is ready for lowering of their debt ratings. He discusses the new GDP releases: (courtesy zero hedge)
Lights Out For The US Economy As Its Biggest Cheerleader Hangs Up The Towel
Submitted by Tyler Durden on 07/29/2011 14:48 -0400
When Deutsche Bank's Joey perma-LaWronga finally gives up on his call that has been wrong for about 3 years now, it may be time to i) panic or ii) buy everything with three hands (thank you Fukushima). We are leaning to the former, especially after the upcoming downgrade forces the Fed to launch QE3 in about a month.
From Joseph LaVorgna, Deutsche Bank
Growth recession confirmed; H2 dims; waiting to see jobs
Commentary for Monday: Previously, we highlighted the possibility that the economy was on the brink of a growth recession—a sustained period of below trend growth typically accompanied by rising unemployment. The disappointing Q2 GDP results and downward revisions to the prior three quarters lead us to believe that this indeed is the case. Real GDP in Q2 rose just 1.3%, as personal consumption virtually stalled (+0.1% vs. +2.1% previously). The prior quarters were revised as follows: Q3 2010 (2.5% vs. 2.6% as previously reported), Q4 2010 (2.3% vs. 3.1%) and Q1 2011 (0.4% vs. 1.9%). In light of the softer first half performance of just +0.8% AR, we are making adjustments to our outlook for the second half. We are lowering our estimate of Q3 GDP by a full percentage point to 2.5%; and we are reducing Q4 from 4.3% to 3.0%. These estimates will be subject to further revision pending a couple of near term developments, namely the resolution of the debt ceiling impasse and the outcome of the July employment report. (Although the coming week’s data on ISM manufacturing, construction spending and motor vehicle sales will also be important gauges of activity.) Hence, we are likely to make additional adjustments—potentially sizeable ones—in the relatively near term. For example, if financial conditions tighten significantly in response to a sovereign ratings downgrade or there is a Federal government shutdown, we would make more drastic cuts to growth. We estimate that a 2-3 week shutdown could subtract 1.5% from Q3 GDP growth. A lengthier shutdown could have a significantly more deleterious effect, although we continue to believe that this will not be the case.
Following our discussion from late last week, we estimate the most likely path forward for the debt ceiling at this point in time is a “sweetened” version of the Reid plan, which would presumably entice a sufficient number of moderate Republicans (and most Democrats) to support it—possibly through enhanced spending cuts. In the event that a resolution is not reached, there are a few policy options remaining. It is possible that President Obama could authorize the Treasury to exceed the $14.3 Trillion debt ceiling without congressional approval, potentially citing the 14th Amendment. The President has expressed a strong preference to not use this option, but he has not ruled out the possibility in a crisis scenario. Conversely, if the borrowing limit is not raised, then the Treasury would have to prioritize its payment obligations based on the available funds. Following recent public comments, we expect debt service payments to be at the top of the list—so as to avoid an actual default, which could roil financial markets. Following debt service, there would be some combination of military funding, social security, Medicare/Medicaid, defense contractors, etc. The remaining components would be subject to furlough in a partial shutdown scenario.
The July jobs report takes on heightened significance given the reduced economic momentum now apparent in the GDP data, particularly in light of the soft profile of consumer spending last quarter. We project a +50k increase in nonfarm payrolls (+75k private) and no change to the unemployment rate (currently 9.2%).
We then got this report and that sealed the Dow's fate as costs to firms rise:
WASHINGTON, July 29 (Reuters) - U.S. civilian employment costs surged a steeper-than-expected 0.7 percent in the second quarter, the biggest gain since September 2008, on a jump in benefits costs, Labor Department data showed on Friday.
Analysts polled by Reuters had expected the Employment Cost Index to increase 0.5 percent in the three months ending in June, after a 0.6 percent rise in the prior quarter.
Benefits costs, which make up about 30 percent of compensation, grew 1.3 percent in the quarter, the biggest gain since June 2007. Wages and salaries expanded by 0.4 percent in the second quarter after increasing by the same amount in the first quarter.
Over 12 months, compensation costs rose 2.2 percent, the sharpest annual increase since December 2008.
Dave from Denver weighs in on the lousy GDP numbers (The GoldenTruth)
FRIDAY, JULY 29, 2011
The Consumer confidence report provided more evidence that the economy is sinking rapidly:
(courtesy Jillian Berman Bloomberg)
By Jillian Berman - Jul 29, 2011 10:01 AM ET Fri Jul 29 14:01:18 GMT 2011Confidence among U.S. consumers dropped more than forecast in July to the lowest level in two years, which may hold back the biggest part of the economy.
The Thomson Reuters/University of Michigan final index of consumer sentiment fell to 63.7, the weakest since March 2009, from 71.5 in June. The gauge was projected to decline to 64, according to the median forecast of economists surveyed by Bloomberg News. The preliminary June reading was 63.8.
Limited payroll gains, reduced home values and higher gas prices may dissuade Americans from stepping up spending, which expanded in the second quarter at the slowest pace since 2009 when the economy was in recession. Partisan wrangling over cutting the nation’s budget deficit in time to raise the debt ceiling could also be souring moods."We have to see a pickup in job growth at the very least before the consumer shows a little more enthusiasm to spend," Sal Guatieri, a senior economist at BMO Capital Markets in Toronto, said before the report. "It doesn’t inspire much confidence in a consumer-led economic recovery, at best the consumer will lag the recovery."
Estimates of the 63 economists surveyed for the confidence measure ranged from 61.5 to 68, according to the Bloomberg survey. The index averaged 89 in the five years leading up to the recession that began in December 2007.
The economy grew at a 1.3 percent annual pace in the second quarter, less than forecast, Commerce Department figures showed today. Household purchases, about 70 percent of the economy, rose 0.1 percent.
I thought that this paper on what happens when paper fails is a great piece for you.
It discusses in detail what happened in Yugoslavia in the 1990's when this communist nation went into hyperinflation. Please pay attention to all details as this will come to all nations as each nation tries to hyper inflate their way out of their mess: (courtesy the trader, Zero Hedge)
What Happens When A Paper Currency Fails?
Submitted by thetrader on 07/30/2011 04:05 -0400end.
Once upon a time there was a really nice country, Yugoslavia,but due to huge Economic and Religious problems, the country eventually was divided into smaller countries. Tito used to run the country successfully, balancing between the West and the East. It all worked well for Tito, who financed debt with printing money. Eventually, reality caught up, and Yugoslavia experienced one of the biggest Hyperinflation periods the World has ever seen. Sounds familiar?
Full Fiat Currency Map, click here.
From Thayer Watkins,
Under Tito, Yugoslavia ran a budget deficit that was financed by printing money. This led to a rate of inflation of 15 to 25 percent per year. After Tito, the Communist Party pursued progressively more irrational economic policies. These policies and the breakup of Yugoslavia (Yugoslavia now consists of only Serbia and Montenegro) led to heavier reliance upon printing or otherwise creating money to finance the operation of the government and the socialist economy. This created the hyperinflation.
By the early 1990s the government used up all of its own hard currency reserves and proceded to loot the hard currency savings of private citizens. It did this by imposing more and more difficult restrictions on private citizens’ access to their hard currency savings in government banks.
The government operated a network of stores at which goods were supposed to be available at artificially low prices. In practice these store seldom had anything to sell and goods were only available at free markets where the prices were far above the official prices that goods were supposed to sell at in government stores. All of the government gasoline stations eventually were closed and gasoline was available only from roadside dealers whose operation consisted of a car parked with a plastic can of gasoline sitting on the hood. The market price was the equivalent of $8 per gallon. Most car owners gave up driving and relied upon public transportation. But the Belgrade transit authority (GSP) did not have the funds necessary for keeping its fleet of 1200 buses operating. Instead it ran fewer than 500 buses. These buses were overcrowded and the ticket collectors could not get aboard to collect fares. Thus GSP could not collect fares even though it was desperately short of funds.
Delivery trucks, ambulances, fire trucks and garbage trucks were also short of fuel. The government announced that gasoline would not be sold to farmers for fall harvests and planting.
Despite the government’s desperate printing of money it still did not have the funds to keep the infrastructure in operation. Pot holes developed in the streets, elevators stopped functioning, and construction projects were closed down. The unemployment rate exceeded 30 percent.
The government tried to counter the inflation by imposing price controls. But when inflation continued, the government price controls made the price producers were getting so ridiculous low that they simply stopped producing. In October of 1993 the bakers stopped making bread and Belgrade was without bread for a week. The slaughter houses refused to sell meat to the state stores and this meant meat became unvailable for many sectors of the population. Other stores closed down for inventory rather than sell their goods at the government mandated prices. When farmers refused to sell to the government at the artificially low prices the government dictated, government irrationally used hard currency to buy food from foreign sources rather than remove the price controls. The Ministry of Agriculture also risked creating a famine by selling farmers only 30 percent of the fuel they needed for planting and harvesting.
Later the government tried to curb inflation by requiring stores to file paperwork every time they raised a price. This meant that many store employees had to devote their time to filling out these government forms. Instead of curbing inflation this policy actually increased inflation because the stores tended to increase prices by larger increments so they would not have file forms for another price increase so soon.
In October of 1993 they created a new currency unit. One new dinar was worth one million of the “old” dinars. In effect, the government simply removed six zeroes from the paper money. This, of course, did not stop the inflation.
In November of 1993 the government postponed turning on the heat in the state apartment buildings in which most of the population lived. The residents reacted to this by using electrical space heaters which were inefficient and overloaded the electrical system. The government power company then had to order blackouts to conserve electricity.
In a large psychiatric hospital 87 patients died in November of 1994. The hospital had no heat, there was no food or medicine and the patients were wandering around naked.
Between October 1, 1993 and January 24, 1995 prices increased by 5 quadrillion percent. This number is a 5 with 15 zeroes after it. The social structure began to collapse. Thieves robbed hospitals and clinics of scarce pharmaceuticals and then sold them in front of the same places they robbed. The railway workers went on strike and closed down Yugoslavia’s rail system.
The government set the level of pensions. The pensions were to be paid at the post office but the government did not give the post offices enough funds to pay these pensions. The pensioners lined up in long lines outside the post office. When the post office ran out of state funds to pay the pensions the employees would pay the next pensioner in line whatever money they received when someone came in to mail a letter or package. With inflation being what it was, the value of the pension would decrease drastically if the pensioners went home and came back the next day. So they waited in line knowing that the value of their pension payment was decreasing with each minute they had to wait.
Many Yugoslavian businesses refused to take the Yugoslavian currency, and the German Deutsche Mark effectively became the currency of Yugoslavia. But government organizations, government employees and pensioners still got paid in Yugoslavian dinars so there was still an active exchange in dinars. On November 12, 1993 the exchange rate was 1 DM = 1 million new dinars. Thirteen days later the exchange rate was 1 DM = 6.5 million new dinars and by the end of November it was 1 DM = 37 million new dinars.
At the beginning of December the bus workers went on strike because their pay for two weeks was equivalent to only 4 DM when it cost a family of four 230 DM per month to live. By December 11th the exchange rate was 1 DM = 800 million and on December 15th it was 1 DM = 3.7 billion new dinars. The average daily rate of inflation was nearly 100 percent. When farmers selling in the free markets refused to sell food for Yugoslavian dinars the government closed down the free markets. On December 29 the exchange rate was 1 DM = 950 billion new dinars.
About this time there occurred a tragic incident. As usual, pensioners were waiting in line. Someone passed by the line carrying bags of groceries from the free market. Two pensioners got so upset at their situation and the sight of someone else with groceries that they had heart attacks and died right there.
At the end of December the exchange rate was 1 DM = 3 trillion dinars and on January 4, 1994 it was 1 DM = 6 trillion dinars. On January 6th the government declared that the German Deutsche was an official currency of Yugoslavia. About this time the government announced a NEW “new” Dinar which was equal to 1 billion of the old “new” dinars. This meant that the exchange rate was 1 DM = 6,000 new new Dinars. By January 11 the exchange rate had reached a level of 1 DM = 80,000 new new Dinars. On January 13th the rate was 1 DM = 700,000 new new Dinars and six days later it was 1 DM = 10 million new new Dinars.
The telephone bills for the government operated phone system were collected by the postmen. People postponed paying these bills as much as possible and inflation reduced their real value to next to nothing. One postman found that after trying to collect on 780 phone bills he got nothing so the next day he stayed home and paid all of the phone bills himself for the equivalent of a few American pennies.
Here is another illustration of the irrationality of the government’s policies: James Lyon, a journalist, made twenty hours of international telephone calls from Belgrade in December of 1993. The bill for these calls was 1000 new new dinars and it arrived on January 11th. At the exchange rate for January 11th of 1 DM = 150,000 dinars it would have cost less than one German pfennig to pay the bill. But the bill was not due until January 17th and by that time the exchange rate reached 1 DM = 30 million dinars. Yet the free market value of those twenty hours of international telephone calls was about $5,000. So despite being strapped for hard currency, the government gave James Lyon $5,000 worth of phone calls essentially for nothing.
It was against the law to refuse to accept personal checks. Some people wrote personal checks knowing that in the few days it took for the checks to clear, inflation would wipe out as much as 90 percent of the cost of covering those checks.
On January 24, 1994 the government introduced the “super” Dinar equal to 10 million of the new new Dinars. The Yugoslav government’s official position was that the hyperinflation occurred “because of the unjustly implemented sanctions against the Serbian people and state.” (Watkins)
Further mega Inflation periods, click here.
I will finally leave you with this Christopher Donville Bloomberg report which suggests that gold demand is growing like gangbusters in both India and China. With the onset on the new futures arena in gold and silver in Hong Kong, the writing is on the wall with respect to the antics of the bankers.
You will enjoy this release courtesy of Bloomberg and Mr Donville. The article references Goldcorp as to their belief in gold demand.
By Christopher Donville - Jul 29, 2011 12:09 AM ET Fri Jul 29 04:09:37 GMT 2011
Demand for physical gold in China may exceed consumption in India by the end of this year, said Chuck Jeannes, chief executive officer of Goldcorp Inc. (G), the world’s No. 2 producer of the metal by market value.
"Three or four years ago there was no one who would have expected Chinese physical demand for gold to surpass India," Jeannes said yesterday in a telephone interview from New York. "Now it looks like that could happen as early as the end of this year. And that’s while Indian demand is increasing."
While global demand for gold is advancing on concerns about financial turmoil in the U.S. and some European countries, consumers in China are buying larger amounts of the metal as an inflation hedge, Jeannes said.Investment demand in China more than doubled in the first quarter to 90.9 metric tons as the nation overtook India to become the largest market for coins and bars, the World Gold Council said in May. India was the largest consumer of gold jewelry last year, according to data compiled by Bloomberg.
Gold reached a record $1,631.20 an ounce on July 27 in New York on concern about a potential U.S. default and is heading for an 11th straight annual increase.Consumer prices in China advanced 6.4 percent in June from a year earlier, the biggest gain since June 2008 and exceeding the government’s target of 4 percent. The central bank has raised interest rates five times and the reserve-requirement ratio 12 times since the start of 2010 to stem inflation.
Deliveries JumpDeliveries on the Shanghai Gold Exchange jumped 20 percent in the first six months to 483.7 tons, according to Song Yuqin, deputy chairman of the exchange.
Demand for gold in both China and India may help lift the price of the precious metal, said Jeannes, who said he expects gold to advance to $1,700 an ounce by the end of the year.
"I predicted a $1,600 gold price at the beginning of the year, and am happy to see it there now," Jeannes said. "I wouldn’t be surprised to see it move significantly higher by the end of the year."
Gold may be $1,510 an ounce in the December quarter, according to the median of 19 analyst estimates compiled by Bloomberg.Goldcorp, based in Vancouver, is second by market value after Toronto-based Barrick Gold Corp. (ABX), the world’s largest gold producer.
I hope you all have a wonderful weekend and I will see you on Monday.