Saturday, October 1, 2011

Stunning OI numbers/Huge Number of Gold ounces Standing in Oct/Markets tumble globally

Good morning Ladies and Gentlemen: ( amended commentary)

Gold on Friday rebounded nicely to the tune of $4.90 to rest at comex closing time at $1620.40.  Silver was a little under the weather falling by 43 cents to $30.04.  However in the access market with the Dow plummeting by 240  points, here are the final access closing prices for our two metals:

Gold;  $1624.80
Silver:  $29.97

You can visualize that gold is trying to decouple from the Dow as the bankers are losing control over this ancient metal of Kings.  The bankers still have some control over silver but that too will fade.  Let us have a complete look at trading, inventory movements, the COT report, and the amount of gold and silver standing for October.

The total gold comex open interest fell by 7903 contracts on Friday as we are seeing a combination of bankers cover their shorts and weaker longs pitch as margin requirements are just too large. The comex is becoming a physical market as many see the crooked games played by the bankers and just shy away.  The final resting OI is now down to 445,479 from Thursday's level of 453,292.  The open interest recorded for first day notice in gold came in at a remarkably high 6533 contracts.  This is generally what will stand.  However we have Blythe and her team providing paper fiat to settle so we will have to wait until the end of the month to see how many physical ounces have settled.  The next battleground is the December contract and here the OI fell by 4000 contracts to 283,105.  The estimated volume on Friday was a very tepid 134,438 compared to the confirmed volume on Thursday at 204,636.

The total silver comex OI did not follow gold. Its OI rose slightly by 818 contracts as investors around the world are reacting to bullion dealers showing  "out of silver" signs.  The USA mint recorded over 4 million oz of silver eagles sales.  The USA only produces 40 million oz so silver must be imported to satisfy the mint production.  Thus for the comex to get silver it must import silver from the rest of world.  The final OI resting spot for silver on Friday registered 101,396 and Thursday's level was 100,578.  The options expiry month of October saw 464 contracts standing on Friday night, a small drop from Thursday's level of 468.  Nobody pitched their Oct futures contract on the Thursday raid.  The next big delivery month for silver is December where the OI actually rose by 1346 contracts rising from 60,847 to 62,193.  The estimated volume was the weakest in quite some time:  37,993.  The confirmed volume on Thursday was better at 57,312.  As I reiterated to you on many occasions, the high margin requirements has caused the volume and drop off as this market is strictly a physical market.  The leverage in the future silver market is 6:1.  To many it is just not worth playing.  You might as well buy the physical, put it away and not play with the crooks.

Inventory Movements and Delivery Notices for Gold: Oct 1.2011:
Initial Chart for Oct. 

Withdrawals from Dealers Inventory in oz
Withdrawals fromCustomer Inventory in oz
48,722 (Manfra, scotia)
Deposits to the Dealer Inventory in oz:   nil
Deposits to the Customer Inventory, in oz
5816 (scotia,MANFRA)
No of oz served (contracts) today
278,100 (2781)
No of oz to be served (notices)
375,200  (3752)
Total monthly oz gold served (contracts) so far this month
278,100 (2781)
Total accumulative withdrawal of gold from the Dealers inventory this month
Total accumulative withdrawal of gold from the Customer inventory this month

Now we know the reason  why large amounts of gold oz are leaving the vaults.
The number of gold ounces standing is extremely high for a weak delivery month as most play December.  It seems that some players just could not wait for December and rushed into October.  Let us see inventory movements and then the amount of gold standing:

Again no dealer gold deposit and for that matter no dealer withdrawal.
The customer had the following deposits:

1. A surprisingly high 3215 oz of gold into Manfra  (usually reserved for the tiny stuff)
2.  Into Scotia:  2601 oz.

total deposit  5816 oz.

The withdrawals were huge:

1.  Out of Manfra:   482 oz
2.  Out of Scotia:  a monstrous 48,240 oz

for the past few days we have seen large withdrawals.
We did have an adjustment of 552 oz out of Brinks as an accounting error.
Total registered gold:  2.033 million oz.

The CME notified us that we had 2781 notices filed for first day notice for 278,100 oz of gold. In order to obtain what will stand, I take the OI standing for October
(6533) and subtract out the deliveries (2781) which leaves us with 3752 notices or 375200 oz left to be served upon.

Thus the total number of gold ounces standing for October is as follows:

278,100 oz (served)  +  375,200 (oz to be served)  =  653,300 oz or  20.3 tonnes which is absolutely huge for this month.

What is also alarming is that last night the CME sent notice that another 2602 contracts will be served on Monday for Tuesday delivery.  It appears that Blythe is not making much headway in the fiat dollars for gold.  They are all standing for the real metal.

Let us go to silver.

First the chart:

Withdrawals from Dealers Inventorynil
Withdrawals fromCustomer Inventory482,239 (Brinks,Delaware,HSBC)
Deposits to theDealer Inventorynil
Deposits to the Customer Inventorynil
No of oz served (contracts)  2,250,000 (450)
No of oz to be served (notices)70,000  (14)
Total monthly oz silver served (contracts)2,250,000 (450)
Total accumulative withdrawal of silver from the Dealersinventory this monthnil
Total accumulative withdrawal of silver from the Customerinventory this month

Again no silver was deposited by the dealer and again no withdrawal by the dealer.

The customer had no deposits on Friday as the only transactions were withdrawals:

1.  From Brinks:   23,241 oz
2.  From Delaware:  14,643 oz
3. From HSBC  444,455 oz

total withdrawal   482,239 oz
There was no adjustments.
The registered silver remains at 31.09 million oz
The total of all silver lowers to 106.7 million oz.

The CME notified us that we had 450 notices filed for 2,250,000 oz of silver
which is quite high for a first day non delivery month.  To obtain what is left to be served, I take the OI standing for October  (464) and subtract out Friday notices (450) which will leave us with 14 notices or 70,000 oz left to be served upon.

Thus the total number of silver oz standing in this non delivery month of October is as follows:

2,250,000 oz (served)  +  70,000 (oz to be served)  =  2,320,000 oz

Late last night the CME announced the second day of delivery notices in silver totaling 4 contracts.
I will make a gentleman's bet that the number of silver oz standing for the month will rise appreciably as bankers scramble for ever depleting silver.

Let us now proceed to our ETF's SLV and GLD and then our physical gold and silver funds:

Sprott and Central Fund of Canada.

The two ETF's that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.
There is now evidence that the GLD and SLV are paper settling on the comex.
Thus a default at either of the LBMA, or Comex will trigger a catastrophic event.

Total Gold in Trust:  Oct 1 2011

Tonnes: 1,231.93
Value US$:

Total Gold in Trust: sept 29.2011

Tonnes: 1,231.93
Value US$:
Surprisingly we neither gained nor lost any gold in the GLD vaults.

Now let us see inventory movements in the SLV: Oct 1.2011:

Ounces of Silver in Trust321,368,422.900
Tonnes of Silver in Trust Tonnes of Silver in Trust9,995.68
Sept 29.2011

Ounces of Silver in Trust323,753,501.100
Tonnes of Silver in Trust Tonnes of Silver in Trust10,069.86

sept  28.2011:

Ounces of Silver in Trust323,753,501.100
Tonnes of Silver in Trust Tonnes of Silver in Trust10,069.86

we lost 2.385 million oz of silver from the SLV.  This silver no doubt left the Bank of England's vaults to put out fires elsewhere.

1. Central Fund of Canada: traded to a positive 2.0 percent to NAV in usa funds and a positive 2.8 % to NAV for Cdn funds. ( Oct 1.2011).
2. Sprott silver fund (PSLV): Premium to NAV fell to a   positive 19.11%to NAV Oct 1.2011
3. Sprott gold fund (PHYS): premium to NAV fell  to a 2.25% to NAV Oct 1.2011).


Friday night saw the release of the COT report and it was rather stunning.  All COT reports are from a Tuesday to a Tuesday. (Sept 20 through to Sept 27)

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, September 27, 2011

Wow! you can see for yourself the modus operandi of the bankers.  They supply contracts at the right time (plus announcements of margin hikes) and cause an avalanche of selling tripping stop losses etc.  The huge increase in margin requirements plus this selling did the damage.

You can see that the large speculators that have been long in gold, were blown out to the tune of 31,086 contracts.
Those large speculators that have been short gold covered a huge 8,358 contracts.

And now for our commercials:
Those commercials who have been long in gold and are close to the physical scene added 5,200 contracts to their long side.
And our commercials who are always short gold, they covered a monstrous 25,7 45 contracts.

Even our small specs were blown up:
Those small specs that have been long in gold pitched a huge 5909 contracts.
Those small specs that have been short in gold surprisingly added 2308 contracts to their short side.
The small specs generally get it wrong.
This is without a doubt the most bullish COT released since 2008.  Time to load the boat in gold.

Now for silver COT:

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, September 27, 2011

Almost the same story for silver as gold.
Those large speculators that have been long in silver pitched a huge 8794 contracts.  I guess the 6th margin increase was just too much for them and they left the silver arena.
Those large speculators that have been short in silver covered 1,681 contracts.
Let us now see the other side of things...  the commercials:
Those commercials that have been long in silver and are close to the physical scene added a rather large 5,652 contracts.
And now for our crooked bankers who are always short in silver:  they covered a monstrous 10,794 contracts.
Evan our remaining small specs were blown up.
Those small specs that have been long in silver and stayed despite the margin hikes, pitched a huge 7,862 contracts.
Those small specs that have been short in silver added another 1,471 contracts.
Again this is the most bullish COT report in silver for many years. 


Let us now see some of the big news which effected gold and silver prices and the economy.
The first story is a dandy as German Banks have now entered the scene with lawsuits against Bank of America and JPMorgan.  The mortgage putbacks  globally are huge and this will cause the default at Bank of America.  Please remember that on Wednesday's commentary we highlighted to you the huge derivatives underwritten by these two behemoth banking entities.  You will enjoy this commentary courtesy of zero hedge:

Will Start Of Landesbank Mortgage Litigation Against Bank Of America Push Stock To New 52 Week Lows?

Tyler Durden's picture

When all is said and done, Bank of America will have no choice but to charge its 6 to 8 remaining clients about one million dollars each time an ATM transaction is executed because the bank will be so deep in mortgage putback litigation it will have a negative market cap. The latest news for the bank is about the worst possible kind: the wave of lawsuits filed against the Countrywide toxic mortgage receptacle has just jumped across the Atlantic, and after the Norwegian sovereign wealth fund recently started proceedings, the real threat, German banks, have just realized that Bank of America is nothing but a legal liability piggy bank and have sued Moynihan's house that taxpayers built. Furthermore, since it is precisely purchases of toxic MBS and RMBS from BAC and other banks that caused the collapse of the Landesbanken system, with Germany going on the offensive and now trying to recoup as much money as they can, look for gray market putback estimates to soar by another $20-40 billion, which will result in BAC selling the other half of its stake in the Chinese Construction Bank any minute, especially with Chinese banks starting to tumble like dominoes on Chinese slow down concerns.
From Reuters:
JPMorgan Chase & Co and Bank of America Corp were hit with new lawsuits by investors seeking to recover losses on $4.5 billion of soured mortgage debt, expanding the litigation targeting the two largest U.S. banks.

Sealink Funding Ltd said between 2005 and 2007 it bought nearly $2.4 billion of residential mortgage-backed securities (RMBS) from JPMorgan and $1.6 billion from Bank of America in reliance on offering materials that were misleading about the quality of the underwriting and underlying loans. 

According to court papers, Sealink is an Irish entity that oversees RMBS purchased by special purchase vehicles once sponsored by SachsenLB.

Another plaintiff, Landesbank Baden-Wurttemberg, raised similar claims in a separate lawsuit against JPMorgan over $500 million of RMBS that it said it bought.

The plaintiffs seek compensatory and punitive damages.
Look for BAC to drop to under $6 once the market realizes the implications of this putback tsunami which has just hit the inverse mother lode: a lot of very pissed off German banks.
h/t Manal Mehta


The much watched Gerald Celente tells GoldSeek Radio news that the 300 dollar drop in gold was due to central bank  engineering:

Gold's plunge was 'engineered' by central banks, Gerald Celente tells GoldSeek Radio
Submitted by cpowell on 11:54AM ET Friday, September 30, 2011. Section: Daily Dispatches
2:53p ET Friday, September 30, 2011
Dear Friend of GATA and Gold:
Market analyst Gerald Celente today tells GoldSeek Radio's Chris Waltzek that the recent plunge in gold was "engineered" by central banks to scare people out of investing in precious metals. You can read and listen to the interview at GoldSeek here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


HSBC talking about the big fall in gold prices and it details in a quantitative manner what the central banks orchestrated:  (courtesy HSBC

"Based on almost 40 years of data, the drop in gold prices last week represented a 3 standard deviation move, down 8.54%. According to the data, this has occurred only seven times since gold became freely convertible in 1972. This made the week ended 23 September the seventh-worst week in terms of percentage price performance in almost 40 years of trading, or more than 2,000 weeks.


The European stock markets around the world plummeted with this news out of Bloomberg that inflation jumped 3% on the annual basis this month from 2.5% last month.
The German Dax was down  137 points or 2.44%.
London's FTSE was down 24 points or .85%
The Paris stock index the CAC was down 1.51%

Here is the story that caused European stock markets to tank:
ECB Effort to Contain Crisis Is Complicated by Surprise Surge in InflationSep 30, 2011 6:53 AM ET
European inflation unexpectedly accelerated to the fastest in almost three years in September, complicating the European Central Bank’s task as it fights the region’s worsening sovereign-debt crisis.
The euro-area inflation rate jumped to 3 percent this month from 2.5 percent in August, the European Union’s statistics office in Luxembourg said today in an initial estimate. That’s the biggest annual increase in consumer prices since October 2008. Economists had projected inflation to hold at 2.5 percent, according to the median of 38 estimates in a Bloomberg survey.
Faster inflation increases pressure on an economy already hurt by tougher austerity measures and waning investor confidence as governments struggle to contain the fiscal crisis. European economic confidence slumped more than economists forecast this month and German retail sales fell the most in more than four years in August. Commerzbank AG said today that the region "looks set to slip into a recession."
"It’s more of a technical thing than a fundamental change," said Laurent Bilke, global head of inflation strategy at Nomura International Plc in London, which was the only bank to forecast the right inflation rate in the Bloomberg survey. "The ECB is not going to cut in October and obviously strong inflation doesn’t give them much room for maneuver on that side. They will probably need a few more months of negative economic news to get there, maybe in November or December."
The euro extended declines after the report, trading at $1.3493 at 12:49 p.m. in Brussels, down 0.7 percent on the day. The Euro Stoxx 50 Index dropped as much as 2.3 percent.
Greek Default
Investor concern that European governments may be unable to contain the debt crisis and prevent a Greek default has weighed on equity markets and pushed the euro lower. Germany’s benchmark DAX Index (DAX) has shed 21 percent over the pasts two months, with the Stoxx Europe 600 Index down 14 percent.
The ECB, which aims to keep annual gains in consumer prices just below 2 percent, said earlier this month that inflation may average 2.6 percent this year and 1.7 percent in 2012. Economic growth may weaken to 1.3 percent next year from 1.6 percent in 2011, it said.
Italy’s harmonized inflation quickened to 3.5 percent in September from 2.3 percent in August. In Germany, Europe’s largest economy, inflation also accelerated more than economists forecast this month, with consumer prices rising 2.8 percent from a year earlier, up from an annual 2.5 percent. Spain’s harmonized inflation rate jumped to 3 percent from 2.7 percent. There’s no September data available for France.
ECB Measures
With companies reluctant to boost hiring and increasing price pressures eroding their purchasing power, consumers may keep spending plans on hold. European economic confidence dropped to the lowest in almost two years this month and services output contracted.
Still, ECB officials have indicated the central bank is more likely to take non-standard measures first before resorting to rate cuts. Council members Ewald Nowotny and Luc Coene signaled the ECB may offer banks unlimited liquidity for as long as a year, while a euro-area central banking official speaking on condition of anonymity said policy makers will also debate restarting their covered-bond purchases.
"We suspect the ECB may be reluctant to cut interest rates in the near term," said Martin van Vliet, an economist at ING Groep NV (INGA) in Amsterdam, calling today’s report a "bombshell." The central bank "may instead opt to take steps to improve market functioning."
Rate Cut
ECB President Jean-Claude Trichet, who will retire at the end of October, said on Sept. 8 that inflation rates are "likely to stay clearly above" 2 percent in the coming months before falling below the central bank’s ceiling in 2012. This assessment is based on "moderate economic growth," he said. Trichet will be succeeded by Italy’s Mario Draghi.
Howard Archer, chief European economist at IHS Global Insight in London, said Draghi "may be reluctant to see interest-rate cuts straight away" when taking over.
"Despite the jump in inflation in September, there is evidence that underlying euro-zone price pressures are abating in the face of weakened economic activity and high unemployment," he said. "An ECB move as soon as next Thursday is unlikely."
The statistics office will release a breakdown of September consumer prices next month. Euro-region core inflation, which excludes volatile costs such as energy, held at 1.2 percent in August from the previous month.
To contact the reporter on this story: Simone Meier in Zurich at

This caught my attention, a huge buying spree in gold by Thailand and Bolivia!!!!
No wonder gold is leaving comex, GLD and the B. of E as poorer nations realize that the printing press is running full tilt and will bring to the world a hyperinflationary depression:

IMF data published yesterday indicates Thailand bought 9.3 tonnes of gold in August and Bolivia 7 tonnes.  Russia has well added  5.6 tonnes.


From the USA we had consumer spending and the report was dismal.
Remember that the consumer spending is 70% of GDP:  (courtesy reuters)

Weak income curbs consumer spending in AugustWASHINGTON | Fri Sep 30, 2011 8:36am EDT
WASHINGTON (Reuters) - Consumer spending adjusted for inflation was flat in August as income fell for the first time in nearly two years amid a weak labor market, according to a government report on Friday.
The Commerce Department said real consumer spending was unchanged after rising 0.4 percent in July. Nominal spending was up 0.2 percent after increasing 0.7 percent in July. The increase last month was in line with economists' expectations.
Consumer spending accounts for about 70 percent of U.S. economic activity.
Weak incomes as employment growth ground to a halt and earnings fell hurt spending in August. Income slipped 0.1 percent, the first decline since October 2009, with private wages and salaries dropping $12.2 billion.
Economists had expected income to edge up 0.1 percent.
Consumer spending growth slowed sharply to a 0.7 percent annual pace in the second quarter after advancing 2.1 percent in the first three months of the year.
Last month real spending on goods fell 0.2 percent, while services ticked up 0.1 percent. Disposable income was unchanged for the first time since September, but when adjusted for inflation fell 0.3 percent, the largest drop since October 2009.
With real disposable income weak, savings fell to an annual rate of $519.3 billion, the smallest since December 2009, from $550.5 billion in July. The savings rate dropped to 4.5 percent, also the lowest since December 2009.


Consumer sentiment slightly improved but the numbers are still worrisome. The Michigan consumer sentiment rose slightly from 57.8 to 59.4
(courtesy reuters)

Consumer mood improves but worries persist

NEW YORK | Fri Sep 30, 2011 9:59am EDT
NEW YORK (Reuters) - Consumer sentiment improved in late September but worries persisted about jobs and finances which could curb household spending in the coming months, a private survey released on Friday showed.
The Thomson Reuters/University of Michigan's final September reading of the overall index on consumer sentiment stood at 59.4, up from 57.8 earlier this month. Economists had expected no change from the initial September reading.
The index finished at 55.7 in August.

"The data indicate that consumers have shifted from anticipating deeper declines to the growing belief that the economy will stagnate at its currently depressed level," survey director Richard Curtin said in a statement.
The survey's barometer of current economic conditions rose to 74.9 from 74.5 in early September and 68.7 in August. Analysts had expected no change from the early September figure.
The survey's gauge of consumer expectations edged up to 49.4 from 47.0 in early September and 47.4 in August. Analysts had expected no change from the earlier reading.
The survey's one-year inflation expectation fell to 3.3 percent from 3.7 percent earlier this month and 3.5 percent in August, while the survey's five-to-10-year inflation outlook dipped to 2.9 percent from 3.0 percent in early September and was unchanged from 2.9 percent in August.

The Dallas Fed President, Fisher continues to harp on the rapidly deteriorating conditions within the USA:

(courtesy Dow Jones)

Fed's Fisher: Current Monetary Policy Ineffective In Climate Of UncertaintyNEW YORK (Dow Jones)--The current course of Federal Reserve monetary policy is "pushing on a string" and ineffective in the current climate of uncertainty, a top central banker argued Friday.
Speaking on Fox Business Network, Federal Reserve Bank of Dallas President Richard Fisher said the biggest factor holding back the economy is "uncertainty" created by government. As long as that climate of doubt continues stimulus provided by the Fed will be ineffective, he said.
That said, the central banker is worried about the economy. Growth is "anemic" and while "I am not concerned about a double dip [recession]...we are on an edge here," Fisher said. He said the nation's fiscal authorities "have done a horrible job" and things like the battle over the debt ceiling during the summer were "a horrible setback" for the nation's economy.
Fisher's comments came from an interview with the television news channel. The official is one of three central bankers who dissented at last week's Federal Open Market Committee meeting. Fisher, along with the leaders of the Philadelphia and Minneapolis Fed banks, believes the current challenges of the economy cannot be solved with additional policy support from the central bank.
Last week, the Fed decided that it would sell $400 billion of its short-dated holdings, and use the proceeds to buy longer-dated securities. Officials hope this action, called Operation Twist by market participants, will help make credit costs cheaper and give the economy more of a chance to grow.
(END) Dow Jones Newswires


Out of Germany we hear that the Germans have no appetite for a leveraged salvage of the PIIGS:
Germany has no appetite for EFSF leverage: Reuters cited comments from German Economy Minister Philipp Roesler, who said that after approving the expanded mandate for the EFSF, Germany's parliament would not be willing to leverage the bailout fund for additional firepower. Roesler told broadcaster ARD that "The German Bundestag (lower house of parliament) always has the last word," adding that "I do not see any willingness there to change the upper limits or increase the liabilities through other ways such as leveraging."


Many have written to me whether we will experience a Japanese type of deflation.
Here is a great article written by Wolf Richter which dispels the premise that the end game for us is deflation:

(courtesy Wolf Richter)  site:

Deflation In Japan And Its Chances In The U.S.

testosteronepit's picture

By Wolf Richter
Deflation phobia has broken out again. James Bullard, president of the Federal Reserve Bank of St. Louis, grumbled in San Diego about inflation expectations being too low and threatened to print more money, while pro-QEx commentators are once again pointing at the Japanese "deflation spiral" as a horrid event that we have to avoid at all cost.
In 1996, seven years after the Japanese bubble burst, I arrived in Tokyo for the first time and saw a shockingly expensive country (though the exchange rate was good, $1 = ¥110). It wasn't just me. One day, I was looking at Italian wines at a department store. The bottle of Chianti Classico in my hand was a global brand that sold for $8 in the U.S. In Tokyo, it was $53. I sucked in air and put it back down. As I drifted away, another gaijin wandered along and picked up the same bottle. He grunted in Italian. We started talking. Turns out, that Chianti cost less than $4 in Rome.
Item after item. Plain white T-shirts made in Japan, $30. Rent for a dingy 200 sq. ft. apartment in a lousy area, $1,500 a month (plus 3 months key money, plus 2 months deposit, plus 1 month rent up front, for a total upfront payment of $9,000). Public transportation, food, fuel, hotels (except love hotels), coffee, you name it. Everything was shockingly expensive.
There were reasons. During the bubble, pricing didn't matter. The more expensive an item was, the better it sold. The insular Japanese market was protected by insurmountable administrative barriers. When a company was actually able to import something, it wasn't to offer a better deal, but to offer a prestige product at a premium. A jungle of regulations, restrictions, knotty transportation issues, inefficiencies, and other hurdles made doing business expensive. But during the bubble, it didn't matter because everyone was making money, and everything kept going up.
In 1989, the hot air began to hiss out of real estate and equities. A lot of money went up in smoke. Buyers lost their exuberance. Attitudes changed. People began to look for cheaper alternatives. Some businesses figured out that they could gain market share by lowering prices. Price competition started. Import restrictions were softened. Certain aspects of the economy were deregulated in tiny and still incomplete micro steps. Year after year, the Japanese market became more competitive. Pressure to lower prices filtered into supply chains and made them efficient and cost conscious.
Now the $53 bottle of Chianti costs $8, and a Chinese-made T-shirt cost $5. Rents have come down, and new apartments are bigger and nicer. Food is cheaper, and so are meals at restaurants. Unemployment is under 5%. Wages have come down too, but not much. Infrastructure has improved. Subway and train lines have been added, extended, or four-tracked, and rush-hour trains are less crowded. Trees have been planted. Tokyo is cleaner and greener. Savers and bond investors haven't gotten ripped off by inflation. Reason has returned to Japanese prices.
In the U.S., too, the bubbles in equities, real estate, and credit blew up. But none of the other conditions that contributed to deflation in Japan exists in the US.
The massive U.S. trade deficit is proof that protectionism à la Japanese hasn't occurred in the U.S. (well, there are bizarre exceptions, like sugar). Price pressures from overseas have become even stronger during the process of globalization. Supply chains are highly efficient and integrated worldwide. In the US, that bottle of Chianti cannot drop from $53 to $8 because it already costs $8. Plus, China and other developing nations have begun to ship their red-hot inflation to the U.S.
Alas, in one category, the deflationistas have been right all along: real wages. Down nearly 9% since their peak in 1999. It is one of the reasons for the current economic malaise. Worse, without increases in real wages, servicing the growing mountain of debt will become ever more difficult.
Yet in its twisted way, the Fed favors deflation in real wages, inflation in goods and services, and negative real yields. Financial repression at its best. And while we may occasionally get a highly welcome quarter or two of deflation in goods and services, the conditions in the U.S. are unlike the conditions in Japan, and long-term deflation in goods and services is not in the cards.
But not everything is hunky-dory in Japan: How Long Can Japan Play The Endgame?

This is scary as Denmark one of the strongest  European nations has now announced an emergency bank liquidity programs:   Europe is now a very scary place and many citizens realize this and are sending their currencies to Switzerland and then converting it to gold.

(courtesy Jim Sinclair)

Denmark Announces Emergency Bank Liquidity Program
Posted: 30 Sep 2011 01:25 PM PDT
The Danmarks Nationalbank announced it will provide as much as 400 billion kroner in an emergency liquidity provision program to assist the nation’s banks.  The measures include expanding the existing collateral basis, and introducing 6-month loans in addition to the existing 7-day loan facility.  Danmarks Nationalbank Governor, Nils Bernstein, said: ”The expansion of credit facilities is intended to supplement the banks’ access to raise loans, thereby easing the transition to a situation without government guarantees when these guarantees expire in 2012 and 2013,”
Denmark’s central bank last raised the lending rate by 25 basis points to 1.55% in July this year, after increasing the rate by 25 basis points in April this year, mirroring the interest rate increases by the European Central Bank (ECB).  The Danish Central Bank typically follows the moves of the ECB in order to keep its currency, the Krone, stable.  Denmark reported an annual inflation rate of 2.6% in August and 2.9% in July, compared to 3.1% in May, and 2.9% in April this year.  The Danish economy grew at a year on year rate of 2% in Q2, compared to 1.7% in Q1 2011 (2.9% in Q4 2010).  The Danish krone (DKK) has strengthened about 3% against the US dollar this year, and last traded around 5.37.


For those that think that the major protesting by civilians is in Greece, look what is happening in the USA:

courtesy zero hedge)

Wall Street Protest Starting to Look Like Egypt

George Washington's picture

Wall Street Protest Starting to Look Like Tahrir Square, Egypt
Alexander Higgins reports:
NYPD police scanners are estimating a crowd up to 5,000
are occupying liberty square in a scene that is now starting to look
more like Egypt’s Tahrir square.

The protests have become so large that Fox News has set up a live stream covering the protests. Here are some screen shots from their camera.

Thousands Turn Out To Occupy Wall Street Protests Sept 30 Wall Street Protest Starting to Look Like Egypt

Thousands Turn Out To Occupy Wall Street Protests Sept 30
Thousands Turn Out To Occupy Wall Street Protests Sept 30 2 Wall Street Protest Starting to Look Like Egypt
Thousands Turn Out To Occupy Wall Street Protests Sept 30 -2
Thousands Turn Out To Occupy Wall Street Protests Sept 30 3 Wall Street Protest Starting to Look Like Egypt
Thousands Turn Out To Occupy Wall Street Protests Sept 30 -3

Here are some additional photographs from a helicopter.

Who Are the Protesters?

Wall Street is trying to write all of these people off as being
“hippies” who “need to get a job” (to which the protesters would
respond: That’s the point – There are no jobs, because Wall Street has destroyed the economy.)
 Wall Street Protest Starting to Look Like Egypt.
The poor and the desperate, formerly-middle class people participating in the protests are not taking well to Wall Street’s “Let them eat cake” response.
But all types are marching, including grannies and pilots:
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610x Wall Street Protest Starting to Look Like Egypt

Marines and other military men and women.
Wealthy folks such as Russel Simmons and Alec Baldwin.
On the other side of the protest line, Mayor Bloomberg is whining that the protesters are targeting bankers who “are struggling to make ends meet”.
He has a point: if Wall Street is reined in so that the rest of the
country has a chance, the bankers might have to cut back on their mistressesprostitutes and solid gold toilets.
blank Wall Street Protest Starting to Look Like Egypts o03 57968784 Wall Street Protest Starting to Look Like Egypt

Class Warfare?

Yes, this is class warfare. But it is class warfare by the 1% against the other 99% (and see this). Specifically, it is thelooting of the country by the top .1% through fraud.
As Warren Buffet – one of America’s most successful capitalists and defenders of capitalism – points out:
There’s class warfare, all right, but it’s my class, the rich class, that’s making war ….
Indeed, given that inequality in America is worse than Egypt (or Tunisia, or Yemen or most Latin American banana republics), and that social mobility is lower in America than in most European countries (and see this), we have been predicting these types of protests for years.
If Wall Street is starting to look like Tahir Square, it is because
America is starting to look more and more like Egypt – with a handful of
super-rich, and crumbs for everyone else.



I find that the following article by Ambrose Evans Pritchard on the German situation with funding for the EFSF:

He is correct, this will result in the death of the EU fiscal union.

(courtesy of Ambrose Evans Pritchard of the UK Telegraph)

NEIN, NEIN, NEIN, and the death of EU Fiscal Union

Angela Merkel with Eastern European leaders today (Photo: AP)
Judging by the commentary, there has been a colossal misunderstanding around the world of what has just has happened in Germany. The significance of yesterday’s vote by the Bundestag to make the EU’s €440bn rescue fund (EFSF) more flexible is not that the outcome was a "Yes".
This assent was a foregone conclusion, given the backing of the opposition Social Democrats and Greens. In any case, the vote merely ratifies the EU deal reached more than two months ago – itself too little, too late, rendered largely worthless by very fast-moving events.
The significance is entirely the opposite. The furious debate over the erosion of German fiscal sovereignty and democracy – as well as the escalating costs of the EU rescue machinery – has made it absolutely clear that the Bundestag will not prop up the ruins of monetary union for much longer.
Horst Seehofer, the leader of Bavaria’s Social Christians, said his party would go "this far, and no further".
There can be no question of beefing up the EFSF to €2 trillion or any other sum, whether by leverage or other forms of structured trickery. "The financial markets are beginning to ask whether Germans can afford all this help. We must not risk the creditworthiness of the German state," he said.
The best-read story in today’s Handelsblatt is the mounting rebellion against the EFSF in the Bundesrat, the German senate representing the interests of the regions. While this chamber does not have the power to block budget deals, it has begun to express deep alarm about the drift of events.
Marcel Huber, Bavaria’s Staatskanzleichef, gave an explicit warning that the Free State of Bavaria will not take one step further towards an EMU fiscal union or debt pool.
“A collectivisation of debts will under no circumstances be accepted. We oppose credit lines for the EFSF or leveraging through the ECB. Our message is simple and clear.”
Since the existing EFSF is too small to make any material difference to the EMU debt crisis, this means that nothing has in fact been resolved. We are where we started, almost entirely reliant on the ECB to play the role of lender-of-last resort.
Can it realistically play this role after the double resignation of Axel Weber at the Bundesbank and Jurgen Stark at the ECB itself over bond purchases? Can it defy Europe’s paymaster state for long? You decide.
This great eruption of feeling in Germany has been the transforming political and strategic fact of Europe over the summer. Finance Minister Wolfgang Schäuble is no doubt scrambling around trying to find some formula to breach his pledge that there is no secret plan to leverage the EFSF into the stratosphere.
He will try to pretend that this is not a flagrant double-cross. But his scheming with the French is largely irrelevant at this point. Bigger events are rolling over him. If he really thinks he can dupe the Bundestag yet again, he is out of his mind. And will soon be out of office.
As Bundestag president Norbert Lammert said yesterday, lawmakers had a nasty feeling that they had been "bounced" into backing far-reaching demands. This can never be allowed to happen again. He warned too that Germany's legislature would not give up its fiscal sovereignty to any EU body.
In a sense, the Bundestag vote was much like the ruling by the Constitutional Court earlier this month. It too said "Yes" to the bail-out machinery, but that was not relevant fact. What mattered was the Court’s implicit warning that Germany had reached the outer boundaries of EU integration, that German democracy is under threat, and its explicit warning that the Bundestag’s fiscal powers could not be alienated to Brussels.
Something profound has changed. Germans have begun to sense that the preservation of their own democracy and rule of law is in conflict with demands from Europe. They must choose one or the other.
Yet Europe and the world are so used to German self-abnegation for the EU Project – so used to the teleological destiny of ever-closer Union – that they cannot seem to grasp the fact. It reminds me of 1989 and the establishment failure to understand the Soviet game was up.
Our own Chancellor George Osborne has fallen into this trap. I can entirely understand why he is calling for quick moves towards EMU fiscal union, but such an outcome is not on the table.
Repeat after me:
Get used to it. This is the political reality of Europe, since nothing of importance can be done without Germany. All else is wishful thinking, clutching at straws, and evasion. If this means the euro will shed some members or blow apart – as it almost certainly does – then the rest of the world must prepare for the day.
It has certainly been an electrifying few weeks.
I happened to be in the room with a group of Nobel economists in Lindau last month when German President Christian Wulff lashed out at Europe, accusing the ECB of violating its mandate and subverting the Lisbon Treaty.
“I regard the huge buy-up of bonds of individual states by the ECB as legally and politically questionable. Article 123 of the Treaty on the EU’s workings prohibits the ECB from directly purchasing debt instruments, in order to safeguard the central bank’s independence,” he said.
“This prohibition only makes sense if those responsible do not get around it by making substantial purchases on the secondary market,” he said.
Mr Wulff said Germany itself risks being engulfed by escalating debts. Who will “rescue the rescuers?” as the dominoes keep falling, he asked.
"Solidarity is the core of the European Idea, but it is a misunderstanding to measure solidarity in terms of willingness to act as guarantor or to incur shared debts.
"With whom would you be willing to take out a joint loan, or stand as guarantor? For your own children? Hopefully yes. For more distant relations it gets a bit more difficult."
More distant relations?
“All I heard was Germany, Germany, Germany. There was nothing about Europe. It was astonishing,” said Myron Scholes, the winner of the 1997 Nobel Prize.
Indeed it was. Fellow laureate Joe Stiglitz said that if President Wulff’s views reflected the outlook of the German government, monetary union would have collapsed already.
Well yes. Quite.

And for your humour of the day, the situation in Greece:

Greek Banana Republic Status Upgraded To AAA After Sit-Ins At Eight Ministries Prevent Troika Inspections

Tyler Durden's picture

A day after we learned that the Greece tragicomedy just gets better and better after it had run out of ink to print tax forms, and hence is unable to collect taxes, and were forced to got over a minute long bout of hysterical laughter having learned that Greece plans on refinancing its rolling debt (which trades at over 100%) with Century Bonds, no seriously and this under the sage advice of BNP Paribas, Deutsche Bank, HSBC and Lazard, we now get the latest update in this progression of relentless Banana Republic upgrades after learning that the Troika is unable to conduct its much needed inspections of Greek deficit cut progress due to sit ins by protesting government workers at 8 ministries. From Kathimerini: "The troika has been in Athens since Wednesday but its monitoring of Greek finances is running into a variety of problems, as besides the disagreement with the government on a number of issues, the representatives of the country’s international creditors had to deal with sit-ins at the building they were about to visit on Thursday. Public sector employees blocked the entrance to the Finance Ministry and the Hellenic Statistical Authority (ELSTAT) in protest at the planned measure of putting thousands of them on labor standby status." Seriously what else? News that government workers start shredding debt indentures for fun? In the meantime the Troika is having official meetings with what's left of the government at the local Starbucks...
The inspectors met with Finance Minister Evangelos Venizelos at the deputy prime minister’s office on Zalocosta Street instead, a meeting that went relatively well according to reports, making amends for a rather disastrous meeting in late August that had led to the troika’s hasty departure.

The new snags concern the labor standby system, closed-shop professions and the privatizations.

By Monday, the troika will need to have completed its assessment, while the government must have approved the labor standby system, as well as the new public sector salary system, the 2012 budget draft and the new midterm fiscal plan. Venizelos therefore had an extraordinary meeting with Administrative Reform Minister Dimitris Reppas on Thursday evening, and there will be an extraordinary cabinet meeting on Sunday.

Public sector workers also staged sit-ins at seven other ministries on Thursday, but decided to leave during the day. Protesters intend to stay at the Finance Ministry until tonight while the sit-in at the ELSTAT building is not seen ending before Sunday.
Meanwhile the government has resorted to withholding the salaries of state employees who have outstanding tax debts, provided their monthly salary exceeds 1,000 euros. Already 20 civil aviation authority employees have had their salaries withheld.
Well at least the meeting went well...

I will leave you with this great commentary courtesy of Ron Hera of Hera Research

(special thanks to Jim Sinclair and, David Duvall for providing the article to us)

U.S. States Seek to Break Financial Connection with Federal Government

From: Hera Research, LLC
Dear David,
I hope you don’t mind receiving this note.  Let me say that I am not given to hyperbole.  This is the most important message I have ever sent.  I urge you to read it and to share it with others.
Earlier this week I attended the Utah Monetary Summit in Salt Lake City, Utah.  As you may know, the state of Utah passed a Legal Tender Act earlier this year authorizing the use of federally minted gold and silver coins as money in the state of Utah.  Now, legislators in other states, many of whom attended the Monetary Summit, are evaluating similar legislation.
Among other things, this means the United States is approaching a Constitutional crisis because states are beginning to financially break away from the federal government.  This is no less serious than the American War of Independence or the War Between the States.  The Utah Monetary Declaration (below) is a financial declaration of independence whereby states are beginning to opt out of the Federal Reserve System.  A major confrontation seems inevitable.
The issues underlying this historic development include:
1.  The unsound condition of large U.S. banks, which have inaccurate and crumbling balance sheets along with $250 trillion in high-risk OTC derivatives contracts;
2.  The unstable nature of the U.S. and world financial systems, characterized by unworkable levels of sovereign debt and private debt and by over $600 trillion in OTC derivatives liabilities;
3.  The excessive levels of federal government debt and unfunded liabilities combined with falling federal tax revenues prior to the start of the double-dip recession that began in the second half of 2011;
4.  The radically inflationary monetary policies of the federal government and of the Federal Reserve, which promise high inflation or hyperinflation in the future;
5.  The worsening condition of the real U.S. economy outside of large banks, multinational corporations, and Wall Street firms, where federal government bailouts and Federal Reserve monetary easing (money printing) transfer wealth from proverbial Main Street to literal Wall Street;
6.  The rapidly escalating polarization of the distribution of wealth, which threatens not only the economic stability of the United States but also its social and political stability; and
7.  The current, highly inflationary monetary system is plainly unfair and fundamentally immoral.
As a consequence of these grave, ongoing and growing problems, which are being largely ignored by the mainstream news media, state governments must take immediate action to ensure the functioning of local economies and of state governments, should the federal government / Federal Reserve System break down.  Specifically, there is an urgent requirement for an alternative currency to the privately issued Federal Reserve Note, which is erroneously referred to as the “U.S. dollar.”
Replacing a stable form of money with ever expanding debt and inflation undermines capitalism and destroys jobs.  The monopolistic monetary system of the United States today is inherently inflationary because it must continually expand in order to prevent a deflationary collapse.  The underlying structure and root cause of the monetary system’s inherent and inescapable inflationary bias is the legal construction of money as debt with no direct link to real economic activity.  Debt levels in the economy and bank profits are simply out of line with reality.
In addition to the unsustainable and unstable nature of such a system, an inherently inflationary monetary system destroys savings by devaluing the currency.  Savings, which are the result of excess production, precisely define the term “capital.”  Replacing capital with debt, while highly beneficial for banks that create money out of thin air (through lending), is a deeply flawed concept responsible for the systematic and ongoing breakdown of capitalism in America.  This deep, structural problem is the absolute root cause of chronic, irremediable unemployment.  As a consequence, there will be no genuine economic recovery in the U.S. and jobs will not return unless and until the monetary system is fundamentally reformed.
An ultimately more important issue is also garnering attention among state legislators, prominent (non Keynesian) economists, religious leaders, political activists and voters.  Inflation, particularly if it is systematically understated by the federal government or Federal Reserve, robs savers of the proceeds of past labor and robs workers of the spending power of their wages, living standards and financial futures.  Inflation robs the elderly of their retirement and robs investors of their capital by facilitating taxes on alleged gains created solely by currency debasement.  Legal tender, created as debt, results in ever larger debt burdens thrust upon innocent future generations that will experience progressively lower living standards and reduced economic opportunity.  Generations to come will be born into debt bondage, thus the monetary system is at the center of a profound moral crisis.
The morally and literally bankrupt nature of the current U.S. financial system is transforming America into a dog-eat-dog society where every person seeks to live at the expense of someone else rather than by producing wealth, because production is systematically stolen by the federal government and by banks through the clever device of an inflationary monetary system.  The monetary system operates by exchanging fictitious “wealth” (debt based money created out of thin air by private banks) for the real wealth of borrowers, i.e., the proceeds of their labor.  In effect, the monetary system is a massive scam purported to be legal but lacking any demonstrable legal authority.  Specifically, there is no Constitutional or other legal basis upon which the federal government can force a private monetary monopoly on the states.  In fact, the Constitution of the United States explicitly establishes the exact opposite.
The oversized banking system and federal government have grown in an unholy alliance in lock-step and now consume so much of the U.S. economy that, together, they not only pillage the real economy but threaten to kill, once and for all, what is left of the free country founded by the Declaration of Independence.  The moral precedent and example set at the highest levels of the federal government and of the banking cartel is that profit, fame, success and wealth are (either directly or indirectly) rewards for immoral acts rather than for honesty in business.  Moral corruption at the top–embedded in the very structure of the monetary system–has slowly spread its gangrenous effect, undermining totally the founding principles of the United States of America, enshrined in the Constitution of the United States and in the Bill of Rights.  Rather than liberty, America’s legacy is fast becoming one of moral turpitude enshrined in financial injustice and oppression.
The challenge before our nation today–our moment in history–is not merely a financial or economic or political or legal / Constitutional crisis.  It is also, and primarily, a moral crisis that could literally destroy the United States of America and all that it has stood for in more than two centuries.  A stable society requires sound principles.   A moral society requires sound money.  Today, the United States of America has neither.
This message is a call to action.  In the words of poet Dylan Thomas, let us say for America “Do not go gentle into that good night / Rage, rage against the dying of the light.”
I am personally asking you to read the Utah Monetary Declaration (below), which I, among many others, signed on Monday evening, September 26, 2011, in the Post Chapel on the University of Utah campus at Salt Lake City, and to forward it to all, especially to your state officials.  Time is of the essence.  Although its duration and pace are as yet unclear, the crisis is already upon us.  Please act now and do not delay.
Ron Hera
Utah Monetary Declaration
WHEREAS, money, as a medium of exchange, a store of value, and a unit of measure promotes economic activity, growth and productivity by facilitating specialization and trade, the accumulation of wealth and its long-term investment, as well as accountability in setting prices, tracking progress, and settling accounts;
WHEREAS, natural money – precious metal coin – by virtue of its inherent qualities of recognizability, measurability, uniformity, divisibility, durability, portability and scarcity has reliably retained its purchasing power, notwithstanding periodic fluctuations, over the centuries and millennia of human history, serving as an effective medium of exchange and store of value often without any governmental declaration to require, legitimize or perpetuate its adoption and operation as such;
WHEREAS, sound money, by retaining stable purchasing power over time, best serves societal needs by substantially reducing the uncertainty of inflation risk for creditors and deflation risk for debtors as well as encouraging saving and investment among the general populace and benefiting the economic zone in which it circulates by stimulating the economy and by attracting foreign capital and commerce to the region;
WHEREAS, history attests that monopolistic monetary systems frequently engender currency debasement, resulting in serious consequences such as lost purchasing power, inequitable wealth redistributions, misallocation of productive resources, and chronic unemployment, and that, as the cornerstone of a free market and society, the right to choose, whether between suppliers of goods and services, political parties and candidates, or between alternative media of exchange, effectively promotes the general welfare;
WHEREAS, for the equal protection of all people, rich and poor, the open circulation of complementary and competing currencies should be fostered and promoted by every sovereign state, including those of The United States of America pursuant to their monetary powers (expressly reserved in article 1, § 10 and in the 10th amendment of the United States Constitution) to monetize gold and silver coin as an alternative, voluntary medium of exchange, and as an effective check and balance against debasement of the national currency by the national government which is constitutionally precluded from demonetizing state legal tender, through disparate tax treatment, discriminatory regulation, the threat of suppression and seizure, or otherwise;
NOW THEREFORE, we the undersigned hereby declare and affirm that:
1.     As an essential element of true liberty and of the pursuit of happiness in a free society, all people enjoy the inherent and unalienable right to lawfully acquire, hold and use as a medium of exchange whatever form or forms of money they may prefer, including especially gold and silver coin.
2.     All free and sovereign states bear the moral, political and legal obligation not only to refrain from debasing their own currencies (except under the most exigent circumstances) and from erecting barriers to the unfettered circulation of monies issued under the authority of their sovereign trading partners, but also to affirmatively defend and protect against fraud, counterfeiting, uttering, passing off, embezzlement, theft or neglect by requiring full transparency and accountability of all state chartered financial institutions.
3.     No tax liability nor any regulatory scheme promoting one form of money over another should apply to: (a) the holding of any form of money, in a financial institution or otherwise; (b) the exchange of one form of money for any other; or (c) the actual or imputed increase in the purchasing power of one form of money as compared to another.
4.     Except in the case of governmentally assessed taxes, fees, duties, imposts, excises, dues, fines or penalties, the authority of government should never be used to compel payment of any obligation, contract or private debt in any specific form of money inconsistent with the parties’ written, verbal or implied agreement, or to frustrate the intent of contracting parties or impair contractual obligations by invalidating the application of a discount or surcharge agreed to be dependent upon the particular medium of exchange or method of payment employed.
5.     The extent and composition of a person’s monetary holdings, including those on deposit with any financial institution, should not be subject to disclosure, search or seizure except upon adherence to due process safeguards such as requiring an adequate showing of probable cause to support the issuance by a court of competent jurisdiction of a lawful warrant or writ executed by legally authorized law enforcement officers.
We hereby urge business leaders, educators, members of the media, legislators, government officials as well as judicial and law enforcement officers to use their best combined efforts to reinstate and promote the legal and commercial framework necessary to establishing and maintaining well-functioning, sound monetary systems based on choice in currency.
The signatories hereto concur in the general principles expressed in the foregoing declaration notwithstanding specific reservations some may have as to how such principles should be interpreted and applied in practice.


I think it is time to say goodbye for this week.

I strongly believe that you are safe to buy your silver and gold as you will not see lower prices

see you on Monday


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