Gold and Silver advance/Euro breaks to the upside/No Greek deal

Good evening Ladies and Gentlemen:

Today's commentary is will short as I have arrived home late today.

The price of gold rose by $14.30 to $1678.  Silver also rose by 59 cents to $32.24.
I would like to caution you that we have the FOMC meeting results on Wednesday and Thursday is the dreaded options expiry.  So be careful as our bankers surely raid around these events.

Let us head over to the comex and assess trading, inventory movements and of course amounts of gold and silver standing.

The total gold comex OI fell by 2833 contracts from 441,320 to 438,487. Because gold had a good day on Friday we must have seen some liquidations probably by our banker friends.  The front options expiry month of January saw its OI fall from 53 to 42 for a loss of 11 contracts.  We had 11 delivery notices on Friday so we neither gained nor lost any gold and thus no cash settlements.  The next big delivery month for gold is next week as first day notice is next Tuesday the 31st of January.  Here the OI fell from 156,621 to 148,308 and this movement to a futures month is on schedule. Nothing earth shattering here.  The estimated volume at the gold comex came in at 147,018 which is very mild.  The confirmed volume on Friday with a big rise in gold came in at 153,683 which is also tame.  Due to the confiscation with respect to the MF GLobal fiasco fewer players are playing the comex casino.

The total silver comex OI rose in contrast to gold.  The new Oi rests tonight at 104,406.  In gold we had liquidation but in silver we had accumulation of the metal by stronger hands.  The front options expiry month of January saw its OI fall from 152 to 108 for a loss of only 44 contracts despite 114 delivery notices on Friday.  We thus gained 70 contracts of additional silver standing (350,000 oz) and lost nothing to cash settlements.  The next big delivery month is March and here the OI rose from 51,351 to 53,024.  We are still quite away from first day notice which is Feb 28.2012 for March delivery.  The estimated volume at the silver comex was very light at 42,910.  The confirmed volume on Friday was also light at 46,146.

Inventory Movements and Delivery Notices for Gold: Jan 23 2012:

Gold	Ounces
Withdrawals from Dealers Inventory in oz	nil
Withdrawals from Customer Inventory in oz	nil
Deposits to the Dealer Inventory in oz	2899 Brinks
Deposits to the Customer Inventory, in oz	nil
No of oz served (contracts) today	29 (2900)
No of oz to be served (notices)	13 (1300)
Total monthly oz gold served (contracts) so far this month	1121  (112,100)
Total accumulative withdrawal of gold from the Dealers inventory this month	4598
Total accumulative withdrawal of gold from the Customer inventory this month	227,568

Again we witness no activity in the gold vaults save a tiny 2899 oz deposit into Brinks via
the dealer.  We had no customer activity and no withdrawal by the dealer. We had no adjustments.
Thus the registered gold inventory rests tonight at 2,4639 million oz or 76.63 tonnes.

The CME notified us that we had 29 delivery notices for 2900 oz of gold.  The total
number of gold notices filed this month total 1121 for 112,100 oz of gold. To obtain what is left
to be served, I take the OI standing for January (42) and subtract out today's deliveries (29) which leaves us with 13 notices or 1300 oz left to be served upon.

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

112,100 oz (served) +  1300 (oz to be served upon)  =  113,400 oz or 3.527 tonnes.

If we add the delivery month of December to the two non delivery months we have a total of 74.207 tonnes of gold delivery notices against a dealer inventory of 76.63 tonnes of gold or 96.83% of registered gold is spoken for.



And now for silver 

 the chart: January 23 2012:

Month of January now commences:

Silver	Ounces
Withdrawals from Dealers Inventory	nil
Withdrawals fromCustomer Inventory	499,529( Scotia Brinks,)
Deposits to theDealer Inventory	nil
Deposits to the Customer Inventory	311,849 (Brinks)
No of oz served (contracts)	49 (245,000)
No of oz to be served (notices)	59 (295,000)
Total monthly oz silver served (contracts)	987  (4,935,000)
Total accumulative withdrawal of silver from the Dealersinventory this month	298,683
Total accumulative withdrawal of silver from the Customer inventory this month	3,807,439

We had a little less activity in the silver vaults today.
However the dealer had no activity whatsoever i.e. no deposit to the dealer and no withdrawal by the dealer.

We had the following deposit by the customer:

1.  311,849 oz was deposited into the customer at Brinks.

we had the following withdrawal by the customer:

1.   Out of Brinks:  99,378 oz
2. Out of Scotia:  400,151 oz.

total withdrawal:  499,429 oz.

we had no adjustment whereby a dealer repaid a customer 536,525 from a prior liability.
The registered silver inventory rests tonight at 36.863 million oz.
The total of all silver inventory rests at 126.957 million oz.

The CME notified us that we had a another big delivery notice day to the tune of 49 contracts for 245,000 oz of silver.  The total number of notices filed so far this month total 987 for 4,9035,000 oz.
To obtain what is left to be served, I take the OI standing (108) and subtract out today's delivery notices (49) which leaves us with 59 notices or 295,000 oz left to be served upon.

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

4,935,000 oz (served)   +  295,000 oz (to be served) =   5,230,000 oz.

we gained 350,000 oz standing and for the first time ever if my memory serves me well, we
have more silver standing in this non delivery month than the big delivery month of December.  If you recall the December silver oz standing at the end of the month was approximately 5.1 million oz.
This will explain the violent behaviour at the silver vaults this month.

end

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.

Jan 23. 2012:

Total Gold in Trust

Tonnes:1,250.53

Ounces:40,205,808.06

Value US$:67,344,983,810.84

JAN 21.2012:

TOTAL GOLD IN TRUST

Tonnes:1,255.67

Ounces:40,371,055.31

Value US$:66,715,704,123.97

WE LOST A MASSIVE 5.14 TONNES OF GOLD OR 165,251 OUNCES OF GOLD.  

It looks like the boys had to put out some nasty fires over in England as sovereigns are lining up for their metal. 

And now for silver Jan 23 2012: 

Ounces of Silver in Trust	305,970,641.100
Tonnes of Silver in Trust	9,516.75

Jan 21.2012:

Ounces of Silver in Trust	305,970,641.100
Tonnes of Silver in Trust	9,516.75

Jan 19.2012

Ounces of Silver in Trust	305,970,641.100
Tonnes of Silver in Trust	9,516.75

we neither gained nor lost any silver today in the SLV.

Again very strange with the huge activity in the price of silver last week and today.  No additions whatsoever.

end.

And now for our premiums to NAV for the funds I follow:

1. Central Fund of Canada: traded to a positive 2.8 percent to NAV in usa funds and a positive 2.8% to NAV for Cdn funds. ( Jan 23 2012.).

2. Sprott silver fund (PSLV): Premium to NAV fell  to  8.00.% to NAV  Jan 23 2012:
3. Sprott gold fund (PHYS): premium to NAV rose  to a 5.56% positive to NAV Jan 23. 2012). 


the fall in the Sprott fund is due to the dilution of existing inventory with new silver inventory. The premium will resume in a month if Sprott gets his silver. Notice the strength in the premium of the Sprott gold fund.

end

Let us now head over to the paper side of things and see how economics will play into the hands of gold and silver.

This morning we were greeted with this news of a possible Greek settlement which of course all of you readers knew was a phony.  The Euro/USA passed the 1.30 mark and we had euphoria over in Europe:

(courtesy zero hedge)

EURUSD Passes 1.30 On Early Rumor Greece, IIF Reach Agreement

Submitted by Tyler Durden on 01/23/2012 07:00 -0500

• CDS
 
• European Central Bank
 
• Greece
 
• Gross Domestic Product
• International Monetary Fund

When we predicted on Thursday that the most recent record number of EUR shorts would take the EURUSD over 1.30 on Friday following a spurious rumor that the IIF and Greece had reached a deal, it turns out we were one work day off. As it happens, the EURUSD has just taken out 1.3000 following an FT Deutschland report that Greece and the IIF have reached a broad agreement. It would be funny if only it wasn't so predictable. The source- unidentified government officials. Either way, it appears this will be the on again, off again rumor that drives risk today, since there are no fundamental economic news. Per Bloomberg, banks and EU, IMF, ECB still trying to agree on coupons, so it actually is not a deal but hey, who cares. Coupon for the new, long-term debt after the voluntary haircut should be somewhere above 4%. Troika still pushing for a 4% ceiling. Deal may be concluded in next few hours. Top level talks were interrupted Saturday, continued Sunday by “experts”. Troika experts want to calculate today if Greece can still meet the goal of cutting total debt to 120% of GDP by 2020. And so on. Of course, since just one hold out hoping for "legal arbitrage" and par recoveries, will force the retroactive implementation of CACs, which in turn will trigger CDS, which in turn will force a subordination of debt claims, all of this is moot.

end.

Then at 8 am this morning we were told the rumour is now off:

(courtesy zero hedge)

Greek Deal - "Rumor Off"

Submitted by Tyler Durden on 01/23/2012 07:55 -0500

The "risk on" phases lasted a whole 3 hours (thank you FT Deutschland for forcing the latest EURUSD short squeeze round). And now, for the other side:

• CYPRUS FINANCE MINISTER NOT SURE GREEK RESTRUCTURING WILL BE CONCLUDED THIS WEEK
• EVERYTHING IS OPEN ON GREEK DEBT TALKS - CYRPUS FINANCE MINISTER

As expected. As further expected, look this rumor to be refuted, confirmed, refuted, and finally confirmed at least 10 more times before the end of the day, even as hedge funds are preparing to file papers.

end

Then throughout the day credit default swaps were still trading in the mid 60's.  Since the bankers are doing everything in their power to make sure credit default swaps are not triggered, who is bidding up these derivatives?

(courtesy Peter Tchir TFMarket Advisors )

Why Are Greek Credit Event Swaps Still In The Mid 60s?

Submitted by Tyler Durden on 01/23/2012 10:26 -0500

• Bond
 
• CDS
 
• Covenants
 
• Credit Default Swaps
 
• Creditors
 
• default
• European Central Bank
 
• fixed
 
• Greece
 
• Gross Domestic Product
 
• Net Notional
 
• Reality
 
• United Kingdom

Via Peter Tchir of TF Market Advisors,

As we wait for more IIF announcements about the Greek Private Sector Involvement (PSI), Greek CDS remains bid above 60 points up front.  For a contract that is about to be "worthless", this seems to have a lot of value.

Why would Greek CDS still be so well bid?

One answer is stubbornness and stupidity.  Maybe the CDS buyers are so convinced that Greece is a mess, that they will bid up CDS in spite of all the efforts by the "authorities" to circumvent a Credit Event.

Maybe some buyers really think they are buying Credit DEFAULT Swaps, rather than the Credit EVENT swaps that they are actually buying?  In spite of the name, it is not a Credit Default Swap, it is a Credit Event Swap. It is the Credit Event definitions that trigger the contract, and in spite of popular opinion, the word "voluntary" does not appear anywhere in the ISDA definitions.

Neither of those explanations seems satisfactory, although I do think the misunderstanding about what triggers a CDS may play a role.  What other explanations are there?

What notional of bonds is really represented by the IIF negotiating team? Of the 200 billion or so of bonds outstanding, how many are truly represented by the IIF?  When later today, or tomorrow, Dallara announces an agreement in principal, how many bonds are committed to that deal?  I think there is a real risk that the amount of bonds that are actually part of this negotiation is fairly small.  We may be disappointed to find out that only a fraction of potential bonds are being obligated to follow the IIF's deal.  You would think after all the failing in PSI, they would have ensured that the vast majority of bonds are committed to whatever this IIF led group decides to do, but so little has been done like a "proper deal" that it wouldn't be a shock to find that the IIF and EU have overestimated how many bonds will agree to the deal they agree to.

Even if the IIF deal represents close to 100% of bonds, the CDS could still have value.  In many ways, that is truly scary, but here is why the CDS could still have value.

There will be some holdouts.  The deal will not receive 100% agreement (of that, I'm 100% certain).  These holdouts are most likely to be "evil speculators".  That will create a big issue for Greece.  Will they pay these holdouts out at par?  What a horrible message to send, pay holdouts at par after reducing notionals by 50% for participants.  But if they don't want to pay them and reward them for holding out, it is hard to see how they can "screw" them without a default - either failure to pay or some retroactive Collective Action Clause (both of which would be a Credit Event).  The Net Notional of Hellenic Republic CDS outstanding is only around 3 billion (less than 1% of the debt outstanding).  After the PSI deal is done, the amount of debt would be reduced, but a default on a relatively small amount of holdout debt ($10 million I believe), would cause a Credit Event for the entire amount of CDS outstanding.

Away from the "holdout" scenario is the problem that the deal doesn't ensure Greece doesn't need to renegotiate again in the future.  Remember the goal of this is to get debt to GDP to 120% by 2020!!!  120% debt to GDP ratio isn't exactly pristine, and how much can go wrong between now and 2020?  The new debt would be under UK law, so it would be much harder to force another "voluntary" restructuring without triggering a Credit Event.  The documentation of the new bonds will make it harder for Greece and EU to force through a similar deal in an attempt to once again circumvent triggering a Credit Event.  60 points up front seems like a lot to pay if they really are going to reduce debt dramatically, but the fact that debt will remain high and the new bond covenants will give creditors more power going forward does mean CDS isn't worthless.

There is one last thing that makes Greek CDS retain value.  All of the conversations have focused on actual Greek debt.  What about debt guaranteed by Greece?  How much debt of weak Greek banks has Greece guaranteed?  These aren't going away or being reduced and the banks they have guaranteed aren't improving anytime soon.  It is hard to account for these guarantees, but they remain outstanding and if are called on and not met, would also be a Credit Event.  This is a second order effect, but shouldn't be ignored since the Greek banks have been using Greek Government guarantees as a means of accessing the ECB or Greek Central Bank.

Finally, what else could be going on?  One of the original 4 PSI proposals was a commitment to roll into new bonds when old bonds mature.

This is very different than an immediate exchange.  If someone holds 100 million of bonds due in a year and agrees to the exchange (restructuring, haircut, default) then Greece will have reduced their debt by 50 million.  If all they do is agree to exchange when their bonds become due, there is no immediate reduction in Greek debt.  I fully expect they are doing an immediate exchange, but watch the fine print as nothing about these negotiations has been straightforward or made sense from a normal deal.

The NPV reduction is another element that needs to be watched closely. The NPV hit will likely be 60% to 75%, but that is irrelevant to Greece.

The Notional reduction is primarily what impacts Greece.  If the debt notional is reduced from 200 billion to 100 billion, then Greece has reduced debt by 100 billion.  It doesn't matter if the new bonds only have a market value of 50 billion, that is the bondholders problem and doesn't directly benefit Greece.  Greek bonds already trade at 25% of par, so the secondary market discount doesn't provide a direct benefit to Greece.

So for Greece, the key is immediate exchange (rather than an exchange as bonds mature), and what the actual notional reduction is.

The interest rate is of secondary performance.  In the grand scheme of things, a 3% or a 5% coupon on the new bonds doesn't make or break Greece.  The coupons seem like a great savings, but the reality is that it isn't much different than the coupons Greece is currently paying. How "low" the coupon is and how helpful it is for Greece, needs to be compared to the average coupon Greece is currently paying and not to where bonds are trading in the secondary market.

What would be impressive?  Immediate exchange of all Greek debt with at least a 50% notional reduction, 30 year maturity, and low coupon.  Maybe we get that, but I doubt it, and it seems pretty well priced in.

Anything less is likely to disappoint the market as the realization that nothing is fixed sinks in, and that this may not even take near term "hard default" off the table (this PSI is a default no matter how it is spun even if it isn't a Credit Event).

end


And finally at the end of the day when everyone goes home to eat their dinner, we get this:
(courtesy zero hedge)

Greek Debt Deal Rejected As S&P Begins European Bank Downgrades

Submitted by Tyler Durden on 01/23/2012 16:58 -0500

• Fresh Start
 
• Greece

At least they were kind enough to wait until the close:

• EURO ZONE FINANCE MINISTERS REJECT OFFER OF GREEK PSI REACHED WITH PRIVATE BONDHOLDERS, ASK NEGOTIATORS TO CONSIDER COUPON ON NEW GREEK BONDS BELOW 4 PCT-EURO ZONE SOURCES - RTRS
• EURO FALLS VERSUS DOLLAR AFTER EURO ZONE FINANCE MINISTERS REJECT GREEEK PSI OFFER

Translation: Greece demands that the coupon on its fresh start 30 Year bonds to be below 4%, or roughly in line with US 30 year paper. Good luck guys!

But, but, Marathon promised... And making things even worse, here come the long overdue European S&P bank downgrades

• CREDIT LYONNAIS CUT TO A FROM A+ BY S&P
• BNP PARIBAS OUTLOOK NEGATIVE BY S&P; OFF WATCH NEGATIVE :BNP FP

Sarc-o-bot (that's Sarcasm, not Sarakozy) screaming: "This is all priced in. Buy buy buy."

end

Now the analysis on why the private will fail: The new bonds will trade at 20 cents on the dollar the moment it is released for trading.  This is on top of the 50 per cent haircut from the beginning.  The private boys get:  .20  x  .5  =  10 cents on the dollar from their original investments.  They might as well take their chances and going after the bankers in court:

(courtesy zero hedge)

80%+ Immediate Downside To Par For New Greek "Fresh Start" Bonds

Submitted by Tyler Durden on 01/23/2012 17:52 -0500

• Bond
 
• Fresh Start
 
• Greece
 
• Gross Domestic Product

One of the funny things about the proposed Greek debt exchange offer is that, at least according to most recent fluid rumor, the cash coupon ceiling on the "post reorg" bonds, as dictated by the European finance ministers, will be 4% (hedge funds want more). So let's assume 3.5% for argument's sake. Perhaps the fact that the cash coupon of the US 30 Year note is roughly the same is somewhat concerning, because call us skeptical but Greek credit quality may be just a little worse than that of America - something which should be obvious to most. Except for European leaders of course. But that's fine - one can define cash coupons to be anything. After all the only thing that matters for bonds is yield, which Greece appears to have forgotten is determined by coupon and price. So since the Greek Debt/GDP will still be over 120% according to another set of rumors (after all, only a small portion of the country's debt is really getting impaired), it is 100% safe to say that in 30 years Greece will still go bankrupt. So let's say it deserves a comparable yield to its current 30 year bonds, which are priced to yield about 23%. We are being a little generous and estimate the fresh start bonds will yield 20% post break. Which means that according to a generic bond yield calc, the price on the fresh start bonds post reorg will be... 17.9 cents of par, or immediate losses of over 80% the second these bonds break for trading from par.

One can probably see why the hedge funds would be a little leery of converting existing claims into new paper which will immediately implode, especially since by doing so they relinquish all rights to sue Greece. If anyone thinks hedge funds wouldn't rather take their chance in court where they could potentially recoup up to par of the pre-petition bonds, we have a bridge from Athens to Santorini to sell you. And more importantly, if anyone is aware of a way to short these fresh-start bonds in advance of break, synthetically or otherwise, please let us know.

Source: BBG YASC

The following story is huge.  The powers to be have decided that Iran is to banned from trading in gold and silver.  Isn't it amazing that gold (silver) a barbaric relic is used as a weapon here:



(courtesy zero hedge)

Currency Wars - Iran Banned From Trading Gold and Silver

Submitted by Tyler Durden on 01/23/2012 08:00 -0500

• Bank of England
 
• British Pound
 
• Eurozone
 
• Evans-Pritchard
 
• France
• Greece
 
• India
 
• International Monetary Fund
 
• Iran
 
• Japan
 
• Precious Metals
 
• Quantitative Easing
 
• Reuters
 
• Twitter
 
• Wall Street Journal
 
• Yen

From GoldCore

Currency Wars - Iran Banned From Trading Gold and Silver

Gold’s London AM fix this morning was USD 1,675.00, GBP 1,076.55, and EUR 1,294.94 per ounce.

Friday's AM fix was USD 1,646.00, GBP 1,064.68, and EUR 1,274.29 per ounce.

Cross Currency Table - Bloomberg

Gold has risen in all currencies today and bullion up nearly 1 % to $1,675/oz. Gold rose 1.7% last week has risen more than 6% so far this year.

Gold jumped to its highest in more than a month as result of the uncertainty over of the Greek debt outcome and the growing geopolitical tensions with Iran and the US and Nato countries. 

The Iranian geopolitical tension is supporting gold as Britain, America and France have delivered a clear message to Iran, sending six warships led by a 100,000 ton aircraft carrier through the highly sensitive Strait of Hormuz.

Reuters report that the EU has agreed to freeze the assets of the Iranian central bank and ban all trade in gold and other precious metals with the Iranian Central Bank and other public bodies in Iran.

According to IMF data, at the last official count (in 1996), Iran had reserves of just over 168 tonnes of gold. The FT reported in March 2011 that Iran has bought large amounts of bullion on the international market to diversify away from the dollar, citing a senior Bank of England official.

Currency wars continue and are deepening.

Many Asian markets are closed for the Lunar New Year holiday which has led to lower volumes. 

Of note was there was an unusual burst of gold futures buying on the TOCOM in Japan, which has helped the cash market to breach resistance at $1,666 an ounce. 

Investors are also waiting for euro zone finance ministers to decide the terms of a Greek debt restructuring later today.  This would be the second bailout package for Greece.

The risk of contagion in Eurozone debt and wider markets is leading to continued safe haven demand for gold.

Reuters Global Gold Forum

Silver surged 8% last week and is up nearly 20% so far in 2012 – thereby outperforming the other precious metals and nearly all assets. 

Silver cut through resistance at $31 like knife through butter on Friday. Next resistance is $33 then and $35 and then the big $50.

Increasing speculation that the Fed will soon embark on another round of quantitative easing or QE3 is also supporting the precious metals and confirmation of QE3 could see gold reach $1,700/oz in short order.

For breaking news and commentary on financial markets and gold, follow us on Twitter.

NEWS
(Reuters) 
Gold hits 6-week high on TOCOM, eyes on Greece‎

(MarketWatch) 
Gold, silver futures add to gains

(Wall Street Journal) 
EU to Adopt New Iran Sanctions

(Bloomberg) 
Iran Said to Seek Yen Oil Payments From India Amid Sanctions

(Reuters) 
Video: Gold price hike devastates gold market in protest-hit Syria

COMMENTARY
(MarketWatch) 
Gold's Happy New Year‎

(MaxKeiser) 
Keiser Report: Sinking Ship In Credit Sea

(GoldSeek) 
Mauldin: Eurozone - Staring into the Abyss

(24HGold) 
Willie: Inflation - The Only Tool Left

(FutureMoneyTrends) 
Rickards: Intervention in Libya was Largely About Gold

(GoldSeek) 
North: Auditing the FED's Gold

(Telegraph) 
Evans-Pritchard: Greek Debt Talks Stall Over Interest Rate On Bonds

end.



       And now India joins Asian dollar exclusion.  The USA cannot havenations stop using the dollar as the reserve currency in the world. This is the reason that they went to war in Iraq and they will do the same in Iran.

On January 10th, I wrote an update on the continuing fallout from the unresolved Tropos Affair that was a major underlying current that influenced the agreement to directly trade currencies between China and Japan bypassing the United States Dollar ("USD").

Today, the fallout from the Tropos Affair continues. You will recall that Tropos wrote various Global Leaders separately apart from distribution of letters to the G-20 in letters that have been posted.

Back in March 2011, Tropos wrote directly and separately to India and said " this matter goes to the heart of the integrity of the international banking system. If the Federal Reserve can intercept and unlawfully misappropriate the funds from an international transfer under a validly issued ACATS authority, then the Federal Reserve or any other central bank can misappropriate any valid transfer, be it from a company, a person, or a government. Under these circumstances, the international banking system loses the confidence of its constituency and becomes unable to operate, effectively losing the public trust in the "private scrip" issued by a central bank." Tropos further said " we know that the assurance of the fidelity and credibility of the international banking system is  one of the primary interests of your nation".  And the written response from India? The letter has been " forwarded herewith for action as appropriate". We now know they meant exactly, what they said. 

http://www.zerohedge.com/news/india-joins-asian-dollar-exclusion-zone-will-transact-iran-rupees

What makes this more damaging is the move to gold in trade settlements as the world retracts from the use of the USD for trade and rejects the use of the current international banking system as a settlement mechanism. This will continue to reduce the velocity of the USD in circulation as the demand for dollars is dampened. This in turn will lower not just lower the value of the USD but make the the current use of the  banking system irrelevant. Folks, this is far more serious than just the strength of the USD. The fallout from this is spreading to the far corners as people come to realize that a structural change is occurring before their eyes. No wonder that mining interest in all metals is on rise. As I wrote, the fallout from the Tropos Affair is hugely beneficial to gold and silver and a boon to all metals.

end.



The following is why the ESM and EFSF build up of a euro war chest is nothing but verbal diarrhea



(courtesy zero hedge)

The ESM/EFSF Bluff

Submitted by Tyler Durden on 01/23/2012 12:05 -0500

• European Central Bank
 
• Finland
 
• International Monetary Fund

Via Peter Tchir of TF Market Advisors,

Holding 10, Queen, not suited, small stack, is it time go all in?

Both EFSF and ESM rely primarily on guarantees which we know Most European politician think is as valuable as toilet paper, so why not provide more?  The ESM does have some paid in capital, but the plan is for minimal paid in capital and maximum usage of guarantees.

With the momentum from LTRO why not throw all in? 10, queen not suited isn't the worst hand and if the blinds are going to kill you in the end, why not try?  You might win.

This talk is mostly just that. It is all guarantees. It is the hope that it takes all pressure off the market.  There is no shot of raising all the capital. It is a distraction from their failure to leverage EFSF or to get new (non European bank) funding from the IMF.  It's not a solution, barely even feasible. Maybe they will catch some economic growth on the flop but without some luck this may be just one more step towards the endgame. I would expect some of the players - Finland and Holland in particular, to pick up their remaining chips and walk away from this ploy.

In the end there are only a couple of guarantors that matter and the rest is circular and even the viable grantors might not be able to produce the money if it's needed (at least not until the ECB gives it to them).

Average:

end


I hate to bring this to you but I must.  Here is the latest on Japan's Fukushima:
(courtesy George Washington/zero hedge)

Update on Fukushima

Submitted by George Washington on 01/23/2012 14:23 -0500

• Australia
 
• Finland
 
• Japan
 
• New York Times
 
• None
 
• Nuclear Power
 
• The Economist
 
• Twitter
 
• University of California

Update:  TEPCO ADMITS THAT RADIATION LEVELS FROM FUKUSHIMA ARE RISING

Ooops...

FUKUSHIMA RADIATION SPREADS WORLDWIDE

The University of California at Berkeley detected cesium levels in San Francisco area milk above over EPA limits … and even higher than they were 6 months ago.

Finnish public television says that cesium from Fukushima has been detected in lichens, fungi and elk and reindeer meat in Finland.

The Australian Radiation Protection and Nuclear Safety Agencyconfirmed a radiation cloud over the East Coast of Australia.

The West Coast of Canada is getting hit by debris from Japan … and at least some of it is likely radioactive.

The authors of the controversial study claiming 14,000 deaths in the U.S. so far from Fukushima are now upping their figure to 20,000. I spoke with nuclear health expert Chris Busby about their study, and he said that mortality figures fluctuate pretty substantially in the normal course, and so it is hard to know at this point one way or the other whether their figures are accurate.

And while there is no evidence linking them to Fukushima, Bed Bath and Beyond has recalled radioactive tissue holders after they set off police radiation monitors aboard a delivery truck This may just be an example of the incredibly lax handling of radioactive materials.

And thyroid cancers are – mysteriously – on the rise in the U.S.

RADIATION DOSE NORTHEAST OF TOKYO (IBARAKI) SPIKES TO HIGHEST LEVEL SINCE APRIL AFTER LAST NIGHT’S 5 INTENSITY QUAKE

Nothing to see here, folks, move along ...

TEPCO DRILLS A HOLE IN FUKUSHIMA REACTOR … FINDS THAT NUCLEAR FUEL HAS GONE MISSING

I noted last month in connection with Tepco’s announcement of “cold shutdown” of the Fukushima reactors:

If the reactors are “cold”, it may be because most of the hot radioactive fuel has leaked out.

***

The New York Times pointed out last month:

A former nuclear engineer with three decades of experience at a major engineering firm … who has worked at all three nuclear power complexes operated by Tokyo Electric [said] “If the fuel is still inside the reactor core, that’s one thing” …. But if the fuel has been dispersed more widely, then we are far from any stable shutdown.”

Indeed, if the center of the reactors are in fact relatively “cold”, it may be because most of the hot radioactive fuel has leaked out of the containment vessels and escaped into areas where it can do damage to the environment.

After drilling a hole in the containment vessel of Fukushima reactor 2, Tepco cannot find the fuel. As AP notes:

The steam-blurred photos taken by remote control Thursday found none of the reactor’s melted fuel ….

The photos also showed inner wall of the container heavily deteriorated after 10 months of exposure to high temperature and humidity, Matsumoto said.

TEPCO workers inserted the endoscope — an industrial version of the kind of endoscope doctors use — through a hole in the beaker-shaped container at the Fukushima Dai-ichi plant’s No. 2 reactor ….

The probe failed to find the water surface, which indicate the water sits at lower-than-expected levels inside the primary containment vessel and questions the accuracy of the current water monitors, Matsumoto said.

And while cold shutdown means that the water inside the reactors is below the boiling point, CNN reports:

Massive steam and water drops made it difficult to get a clear vision….

Given that steam forms when water boils, this is an indication that the reactor is not in cold shutdown.

Asahi Shimbun reports:

Tadahiro Katsuta, associate professor of nuclear engineering at Meiji University, said: "While an inside look was provided much sooner than I expected, it is still too early to rest assured. The water level is lower than estimated, so there is the possibility that the melted fuel that fell to the bottom of the vessel is not being adequately covered by water."

The Daily Yomiuri notes that Tepco has gone from 100% confident that water was covering the fuel to saying it is "quite unlikely" that there is any problem:

Drops of water fall like rain in the video, which was shot using an industrial endoscope. The drops were apparently the result of vapor--created by the heat from melted nuclear fuel--that cooled inside the upper part of the reactor containment vessel.

***

"It's quite unlikely nuclear fuel was exposed, as liquid from condensation is dripping down," a TEPCO official said.

Mainchi points out that reactors 1 and 3 are probably in no better shape:

The fuel inside the Nos. 1 to 3 reactors is believed to have melted through the pressure vessels and been accumulating in the outer primary containers after the Fukushima plant lost its key functions to cool the reactors in the wake of the earthquake and tsunami on March 11 last year.

FUKUSHIMA COVER UP UNRAVELS: “THE GOVERNMENT CAN NO LONGER PULL THE WOOL OVER THE PUBLIC’S EYES”

As I’ve pointed out since day one, the Japanese government and Tepco have covered up the extent of the radiation released by Fukushima and its health effects on the Japanese and others. See this and this.

The New York Times notes:

The government inspectors declared Onami’s rice safe for consumption after testing just two of its 154 rice farms.

Then … more than a dozen [farmers] found unsafe levels of cesium. An ensuing panic forced the Japanese government to intervene, with promises to test more than 25,000 rice farms in eastern Fukushima Prefecture, where the plant is located.

***

The repeated failures have done more than raise concerns that some Japanese may have been exposed to unsafe levels of radiation in their food, as regrettable as that is. They have also had a corrosive effect on public confidence in the food-monitoring efforts, with a growing segment of the public and even many experts coming to believe that officials have understated or even covered up the true extent of the public health risk in order to limit both the economic damage and the size of potential compensation payments.

Critics say … the government can no longer pull the wool over the public’s eyes, as they contend it has done routinely in the past.

“Since the accident, the government has tried to continue its business-as-usual approach of understating the severity of the accident and insisting that it knows best,” said Mitsuhiro Fukao, an economics professor at Keio University in Tokyo who has written about the loss of trust in government. “But the people are learning from the blogs, Twitter and Facebook that the government’s food-monitoring system is simply not credible.”

***

“No one trusts the national government’s safety standards,” said Ichio Muto, 59, who farms organic mushrooms in Nihonmatsu, 25 miles northwest of the Fukushima Daiichi plant.

The Japan Times reports:

The government buried a worst-case scenario for the Fukushima nuclear crisis that was drafted last March and kept it under wraps until the end of last year, sources in the administration said Saturday.

After the document was shown to a small, select group of senior government officials at the prime minister’s office in late March, the administration of then Prime Minister Naoto Kan decided to quietly bury it, the sources said.

“When the document was presented (in March), a discussion ensued about keeping its existence secret,” a government source said.

In order to deny its existence, the government treated it as a personal document of Japan Atomic Energy Commission Chairman Shunsuke Kondo, who authored it, until the end of December, the sources said.

It was only then that it was actually recognized as an official government document, they said.

“The content was so shocking that we decided to treat it as if it didn’t exist,” a senior government official said.

Major Japanese broadcaster NHK purportedly stopped a reporter in mid-sentence on March 12th as he was discussing the exposure of the nuclear fuel rods above the cooling pool, telling him:

They say you mustn’t read this draft.

Finally, the Economist and Boing Boing note that a Canadian journalist was grilled about who he spoke with at Fukushima, and:

Held, threatened, and shaken down for bribes before being detained without counsel or a phone call. He says he was eventually deported, though not before being ordered to sign a falsified confession and being threatened by an official at gunpoint.

(Many journalists and nuclear experts are alleged to have beenmonitored, harassed or blocked by the Japanese government.)

end



The last article I want you to read is from Jim Willie and it is a dandy.He is stating everything that I have told you re:
1. the comex2. the SLV and GLD3. the entire banking mess throughout the globe.4. the complete breakdown of sovereign bonds e.g. Greece, Italyetc.
Hope you enjoy it:

INFLATION: THE ONLY TOOL LEFT
Jim Willie CB                        20 January 2012

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

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

Any perusal around the world these days features Southern Europe crippled, preparing for the inevitable Greek Govt Bond default. It features a crippled US housing market, a mockery of statistical accounting in the US Gross Domestic Product, the plight of the COMEX with established veterans clearing out desks (not trading), the extreme physical demand reported by the London Trader, and the indictment of the SLV iTrust Silver Fund tool used by the cartel. The survey does not look favorable toward stability. The banking, economic, and political leaders have not pursued reform and remedy in any remote sense. Their only tool left is hyper inflation. The central banks of the Western nations have coordinated Global Quantitative Easing, as the USFed concealed its own QE3. Operation Twist was an enormous ruse, to cover the grand disposal sale (dump) by USGovt creditors and maintain a semblance of stability in the USTreasury market. The global financial crisis continues for a simple reason. No financial reform or remedy has been attempted, only bank-owned bond redemption and colossal aid to the financial sector that controls government ministries and law enforcement. Therefore, the crisis hurtles toward a series of climax events. The Chinese are accumulating physical Gold still in a big way. US finance minister, the diminutive Geithner admitted to the Chinese officials that the USGovt has no more tools left with which to stimulate or lift the USEconomy and its fumbling financial sector. An honest admission, except that hyper monetary inflation remains the all-in-one tool.

The Greek default could trigger some grand unintended consequences. Despite all the planning in the controlled event, likening it to the demolition of a 50-story hotel in an urban center, the better image might be to attempt to hold within a corral 500 cats released from a large truck. In no way can the technocrats, central banks, and bank officials contain the animal spirits coming. The only solution in the end will be the most massive hyper inflation project in history. They must recapitalize the broken banks of Europe, where fallout will surely extend in non-trivial manner to London and New York. Two major pressures will work to lift the Gold & Silver prices. The Commitment of Traders report on commercials points to a significant sequence where they covered their Gold shorts and Silver shorts since the summer months. The road is prepared for a big rise in price after some closing notes are played on the Dollar Death Dance. Details are seen in the January Hat Trick Letter. Also, the acute financial crisis in Europe and the West in general demands some important decisions to manage the Greek default. Look for talk of a monetary solution but action perhaps in a vast recapitalization program for the big banks. A footnote, the Citigroup earnings included a $1.5 billion release from their Loan Loss Reserves. The funds will be needed to cover bond impairment and mortgage related lawsuits. They also had a nice bump in the Credit Value Adjustment, a blatant accounting fraud that exploits gradual impairment to their own corporate bond value. Accounting for banks is a farce.

SOUTHERN EUROPE PERMANENTLY CRIPPLED
Although the entire southern rim is deeply affected, a look at Italy is telling as a microcosm of continental illness. Italy has imposed capital controls on the banks. Movement of funds is being closely monitored. Money cannot be withdrawn in volume at the bank windows. Borders have cameras and registries at the customs checkpoints. Italy has gone fascist with blazing speed, the most blatant indication is the installation of Monti as prime minister. Its banks are ready to capsize, like the cruise liner. The effects of the Fascist Business Model are being acutely felt in Italy. Nothing goes without monitor. The credit card companies must report to the fiscal authorities all transactions carried out by Italians, in the country and abroad. Limits have been imposed on bank withdrawals of 10,000 Euros, equal to US$13,000. Cameras have been installed by finance police at the border checkpoints with Switzerland to register all license plates. In addition, currency sniffing dogs have been deployed at the border. The Monti regime can be seen imposing Fascism, plain and simple. Their opening salvo was to attack private capital by raising the capital gains tax. The situation is degrading rapidly. The wealthy of Italy have a new game in removing money from Italy and to escape themselves.

The irony is thick, the tragedy stirring. The Italian cruise liner Costa Concordia went aground, a fitting symbol of the nation of Italy succumbing, a toppled elected regime in a sea of liquidity. Individual decks named after nations went underwater, liquidity of a different type. Parallels between the financial structure and ship structure, along with perceptions and reactions, are interesting. People believing such an accident as incredible in the 21st century need to awaken to reality on the mainland. Italians will make the same comments when their banking system collapses, in the wake of their elected political leadership being dismissed from the helm. The cruise liner was badly off course, as the captain changed paths to salute friends on the nearby island (mistress?). So is the Italian banking sector, hardly alone as the Spanish fleet of banks is also off course, taking on water, the banks derelicts at sea.

The ship crew was not trained for such accident, having advised passengers to return to their cabins incredibly. Neither is the Italian system prepared to handle rough waters, given the most egregious nepotism in all of Europe. Half of million gallons of fuel are being retrieved before salvage operations begin, in an effort to avoid an environmental disaster of contaminated beaches. Contrast to the toxic paper running through the Italian banking system. The ship's insurers may be liable for total costs of about EUR 405 million (=US$500 mn) as a resuilt of standing policies. Unlike the ship liability, the Credit Default Swap contracts, the debt insurance flagships, are forbidden to kick in for awards at docks. The ship's problem might be more low hull draft and high center of gravity ship design, much like the inefficient stream in Italian business practices and the high bank leverage.

THE BIG EVENT IN GREEK DEFAULT
Any bank or credit analyst worth his or her salt expects a Greek Govt Bond default. The event is inevitable, unavoidable, and a certainty. All solutions to date have been patchwork applications of tourniquets and needlepoint stitching, with full acquiescence to the banker class. The concept of a new Euro Bond to supplant the toxic bond is ludicrous, which exhibits the ignorance of the central bankers on conceptual constructs pertaining to monetary matters. The concept of a leaning upon the Intl Monetary Fund for a grand issuance of Special Drawing Rights is again ludicrous. A basket of water-logged debt-soaked currencies does not make for a viable raft to float any bodies in any seas. The contagion from a forced accord on Greek bonds will have a notable fallout value effect to Italian bonds, even to Spanish bonds. If the accord ignores the effect traveling with light speed to Italy, the plan is doomed from the outset. The default in Greece should trigger a Credit Default Swap event and award payments. But decisions might follow the trend seen to date, where contract law is trampled upon. The supposed redefinitions of debt securities were a travesty, not yet sufficiently challenged by the legal warriors and the court system. Then consider that the biggest creditor to Italy lies within the major French banks. A likely collapse of French banks in the wake seems the path that nature will take.

The contagion would spread to the London and New York bank centers, where insolvent hollow banks have stood for three years. They have long lost their credit engine role, thus the economic stalls in reverse gear. Lastly, any solution, apart from a new monetary system, must address the dire need for recapitalization of the Western banking system. The accord must begin with Europe. The accord must begin with $2 trillion or more to rebuild banks. A figure of $5 trillion is floated. The accord must dispose of the entire sovereign debt and its toxic paper from Southern Europe. Expect the greatest event in modern financial history before too many more weeks or months, the sovereign bond default and bank recapitalization. The impact on the USDollar could be profound and life altering for the planet. Expect unfortunately for half measures that sidestep any new monetary system and proper role for Gold. The half measures in the accord will bring great new attention on Gold, which should be at the core of the solution, both in the currency and banking system.

U.S. HOUSING PERMANENTLY CRIPPLED
The US-based shadow home inventory is vastly larger than estimated. The bank owned inventory is enormous, but so is the variation in those estimates. What is certain is the vast overhang of home inventory held by banks, and the steady flow to replenish the hidden inventory tumor, prevent any bottoming process to prepare for any recovery. Accurate housing data is hard to come by. The housing crisis is arguably a national emergency, which crushed both the banking system and the USEconomy.The USGovt-owned Fannie Mae still prevents the public from gaining access to loan data in detail, probably because multi-$trillion fraud is buried. It is far too difficult to obtain data from Freddie Mac also, and the MERS title database remains a black hole. My Jackass loose estimate has been tossed around frequently of one million bank owned homes in inventory, unsold, hanging over the market, rendering clearance and stability an absolute impossibility, with more home seizures always in the pipeline. The market cannot digest such an overhang, and cannot stop the price decline, especially since new foreclosures keep the flow into REO bank inventory. Banks refuse to clear their inventory, and are encouraged to hold that inventory since 0% financing is offered by the USGovt. If the shadow inventory is much larger than one million homes, then housing prices have much farther to go before they hit bottom, which has dire consequences for communities, homeowners, and the broader economy. It also means the US banking system is deader than dead.

On December 21st, less than one month ago, HousingWire reported that CoreLogic projected shadow inventory to be 1.6 million homes throughout the entire United States. Definition of a shadow inventory property varies widely. For example, the Wall Street Journal published an article last November, in which inventory size varied from the CoreLogic higher estimate to about 3 million by Barclays Capital. Other estimates are approximately 4 million by LPS Applied Analytic, roughly 4.3 million by Capital Economics. But the highest calculation comes from the source of most impressive methodology. Laurie Goodman of Amherst Securities offers the estimate of between 8.2 million and 10.3 million homes. Hers is regarded by many experts as having the most carefully crafted model, despite being the most dire of estimates. Michael Olenick of Naked Capitalism has his own large reliable database. He has been on the job in analyzing liability to taxpayers, investors, and banks. He submits his assumptions in calculations, an honorable practice based in integrity. The Olenick analysis arrives at a total close to the Goodman range. Using a more narrow definition of what constitutes shadow inventory, he estimates 9.8 million homes are in bank inventory, or suspended animation within the system, waiting for liquidation, suppressing price further. Long past critical mass, only radical out-of-the-box solutions will work. Massive loan forgiveness is the only solution, but it will never be done. USGovt ownership of one quarter of American homes is more likely. Conclude as inevitable that the nation will soon face widespread bank failures and even more staggering loss in home values, since the overhang of home inventory will force home prices down another 20%, my ongoing estimate that has been repeated and repeated ad nauseum. The problem is so great that the mortgage bond market can no longer be described as having viable parties and counter-parties. Too much bond counterfeit. Too much duplicate income streams used in mortgage bond securitization. Therefore, the principal parties do not want liquidations or scrutiny. See the Naked Capitalism articles (HERE & HERE).

U.S. GDP CALCULATION A TRAVESTY
Grossly Distorted Procedures on GDP calculations must be explained. Both hedonics and imputations contribute to one third of the entire reported Gross Domestic Product. The Chinese have long complained that half of the US GDP is mythical, due to interchange of debt paper across desks. The USEconomy is a fraction of its stated size, and it is stuck in chronic recession. A big hat tip to Michael Shedlock, whose analysis is excellent in focused economic sector topics. He provides an excellent overview on Hedonics and Imputations, to reveal their corruption of thought, whose concoctions he labels Grossly Distorted Procedures. Shedlock wrote, "Hedonics is a way of accounting for the changing quality of products when calculating price movements. For example, today's computers are 2 to 3 times faster and have more memory than models produced just a few years ago. If someone can buy a better computer today than last year for the same price, have not prices really fallen? Here is another example. Is it realistic to compare the price of a 1955 Chevy with the price of a 2005 Toyota with air conditioning, DVD player, anti-lock brakes, seat belts, air bags, side air bags, power steering, power brakes, etc? To say that cars have gone from 1955 prices to 2005 prices and calling the ENTIRE rise inflation is obviously wrong although many inflation alarmists do just that. Sorry folks, but that is not a straight up valid comparison. Would you be willing to drive to work a Model T ford today? If not, then comparisons of car prices today versus 1920 or 1950 or whenever are pretty absurd."

The USGovt makes unilateral decisions on value, in order to offset the rise in production costs from energy and materials, even labor. They justify their methods by pointing to manufacturing efficiency and economies of scale in production. They use the falling technology prices as justification for other abusive methods to reduce prices from inherent value on features which actually are subjected to strong price pressures. Shedlock rightfully points out how the potential greater hedonic abuse has entered into methods applied to the Gross Domestic Product, a mainstay not to be cut out. The accounted size of the USEconomy is subjected to vast distortions in the calculations. As the measured price inflation is kept low by force, the estimated GDP result is lifted higher by the same force. The lie in the CPI has been 6% to 8% for the last few years. That means the GDP has been running consistently negative in the most profound and harmful economic recession in American history. My analysis relies upon the indefatigable work of the Shadow Govt Statistics group. They measure the GDP as one quarter versus the same quarter a year ago to demonstrate a clear downward trend, a chronic recession. Conclude that the US GDP has been in decline by 4% to 6% for consecutive years. Shedlock has reported by means of Bureau of Economic Analysis data, that the US GDP is artificially lifted by a whopping $2.257 trillion in hedonic adjustments, equal to 22% of the entire GDP. That portion of the US GDP is pure myth. The United States is the only major country that hedonically adjusts its GDP, or needs to. The USEconomy is among the weakest in the entire industrialized world from industrial gutting and chronic consumption and pursuit of asset inflation.

The other major abuse is Imputations, a part of GDP calculation that the USGovt fabricates in estimated value where no cash changes hands. The imputation derives from homeowner self-paid rent and checking account services. These are pure fairy tale absurdities. For example, homeowners are assigned an imputed rent, that they pay to themselves as though renters. The BEA treats homeowners as businesses, which pay rent to themselves for the service of shelter. Be sure to know that mortgage payments and property taxes are also accounted for, a double counting process steeped in corrupt accounting. Self-paid homeowner rent tallies a ripe $153.8 billion in imputed rent as part of the GDP calculations. There is more. Free checking account services from banks are not to go without abuse. Self-paid check account services tallies a ripe $335.2 billion in imputed bank services. The beneficiary is in Personal Income data reported by the clownish USGovt stat labs.

Shedlock has reported by means of Bureau of Economic Analysis data, that the GDP is artificially lifted by a whopping $1.635 trillion in hedonic adjustments, equal to 13% of the entire GDP. Shedlock cites the total fabrication folly was a staggering 35% of the reported US GDP in 2003!! See the Global Economic Analysis article (CLICK HERE).

SIMPLE EVIDENCE OF RECESSION
US-based railway traffic is down hard, contradicting the vacant claims of an economic recovery in the United States. The slowdown is across North America, the worst brunt felt in Mexico. The Assn of American Railroads reported intermodal volume for the second week of January totaled 193,812 trailers and containers, down 9.3% versus the same week last year. The Eastern half of the nation was notably slower. The slowdown is across all North America. Canadian railroads reported cumulative volume of 40,281 trailers and containers for 2012, down 9.8% from last year. Cumulative volume on Mexican railroads for 2012 into only January is 10,857 carloads, down 15.2% compared to last year. Conclude that North American is in a severe deep recession, with the worst brunt felt in Mexico. Talk of recovery is Orwellian in its deception. My favorite data series to demonstrate recession is the USGovt payroll tax withholdings. They continue in decline. It is a pure series without adjustment. The USEconomic recession is the New Normal, Mr El-Erian.

CORROSIVE COMEX DRYING UP
Ann Barnhardt confirmed the COMEX is going into obscurity and irrelevance. Players are exiting. Risk of theft is perceived. Trust has gone. Metal inventory will vanish next from honest players in retreat, seeking more legitimate arenas. The normal methods of risk hedging are going away, turning to private means, or quitting altogether. Ann Barnhardt made a huge splash last month in her decision to shut down BCM Capital brokerage firm, for fear that client funds were at great risk of theft. She outlines many carefully laid points. Here are some of her main points with fortified evidence. Notice the point about high frequency trading, which indirectly indicts the GLD & SLV (gold and silver) funds, whose inventory is likely connected to futures arbitrage schemes, as their bullion metal is drained. Notice the perceived spread of futures hedge exposure at the market peripheries. Barnhardt compared events of MFGlobal and JPMorgan to economic treason and betrayal of the American system. Here are some of her main points.

• The futures markets are withering and dying on the vine, as business is totally evaporating. Many explicitly state that they are done trading and hedging with futures, both speculators and hedgers.
• The volume increases in recent months were due to the veritable fungal infection of the market that is the high frequency algorithm trading systems.
• Nobody in the trading pits believes the statistics that come out of the USGovt or the Federal Reserve. Anyone who believes them must be mentally disabled (her words).
• Exposure to futures is itself contagious. If producers enter into a private treaty forward delivery contract with a grain elevator or a feedlot, they would still be exposed to the futures market, and to the risk of a futures market collapse, or even just another wealth confiscation. If any contract participant utilizes futures contracts in risk hedge, all parties are exposed. Even private treaty forward contracting is exposed, since someone along the line laid risk off on the futures market.

LONDON TRADER
The London Trader is back with more splendid bountiful information, sharing volumes behind the veil of anonymity. The paper thin COMEX must react to gigantic physical demand, he reports in a recent interview. The staggering Gold demand is creating great shortages in the physical market. Here is the shocker, although it should not come as such a surprise. Compliance departments have widely banned participation in the COMEX anymore. It is drying up as a market. The Chinese have exploited the lower Gold price that resulted from the European distress and the American accommodation. They have grabbed huge physical supply. The anonymous London Trader pitched in a full month after the MFGlobal crime scene cordon tape has been overrun. He opened by describing a compressed coiled spring in both the Gold & Silver markets, from huge physical demand. He actually described the COMEX as no longer a credible marketplace. Gold represents power and the Eastern Hemisphere is gathering in that power. The displacement of Western Gold to Eastern vaults is a major symbol of the Western decline. Here are some of his extreme comments that portray a system entering a collapse phase.

• The Big Banks are trying to defend their massive short positions, like with 25 million SLV shorted shares. To meet the silver delivery demands, the cartel is borrowing heavily from the SLV, which will be gradually drained of metal in inventory.
• The panic in Europe with a broken system is creating huge Gold demand. The demand for Euro Gold in London is so intense that it brings shock to some veterans. It is creating grand shortages for metal in London. The physical Gold market is being exhausted by European Gold buyers.
• The COMEX paper discovery price system has become a joke. No serious players interested in taking physical delivery use the COMEX anymore.
• Since the CME did not backstop the MFGlobal clients, entire Compliance Departments prohibit usage of the COMEX. International funds and hedge funds starting in January will go elsewhere, and thus avoid the COMEX.
• Expect a powerful move once Gold rises above the $1650 level, as shorts cover in open fear. Above that point look for a very large tranche of unfilled wholesale orders to push the price a lot higher with their bids. The Chinese are Gold buyers at all these prices, $1600, $1700, or $1800. They are buyers, never sellers, and public stories pure nonsense about their retreat.
• The Chinese have recently taken another roughly 150 tons away from the Western central banks. The Western central banks essentially donated that Gold in an attempt to prop up their paper currencies. They have exploited the recent pushdown in the Gold price. The Chinese are using Gold accumulation as an indirect maneuver to introduce the Yuan (remninbi) to center stage.

INDICTMENT OF SLV i-TRUST SILVER FUND
The SLV exchange traded fund is drained of silver bars from the back door. Numerous blemishes can be identified. The fund cannot stand scrutiny. It is one of the most effective criminal fraud vehicles ever designed. Thousands of investors have been duped, buying what they believed was physical gold & silver, when they have aided the cartel in suppressing their prices. Their inventory is routinely raided from custodial shorting practices that have become glaringly clear in recent months from simple tracking of inventory and short interest. The SLV fund, formally called the iShares Silver Trust, contains much slippery language in its prospectus. The SLV provides funds for itself and custodian costs (managed by JPMorgan) by selling bullion, from the same fund. They actually achieve a benchmark price target for silver based upon their own sales. Their prospectus carefully states that the SLV share price reflects the value of the trust's silver holdings, NOT the spot silver price. It is a circular practice of self-fulfilling price achievement in suppression efforts.

BrotherJohn gives the excellent analysis in clear understandable terms, with focus on SLV fund shenanigans. A big hat tip goes to him. The SLV fund does not hold sufficient silver bars to correspond to all shares outstanding, but that fraud is carefully permitted under its prospectus and current legal structure. Track the shenanigans in a fine classroom style forensic analysis in YouTube video form by BrotherJohn (CLICK HERE). He covers a wide range of topics. Here are some of his main points. Adam Hamilton, are you paying attention?

• The SLV fund has 300 million shares, each worth one ounce of silver, valued at almost $9.0 billion. But it has over 25 million shorted shares, or 8% of the float.
• The practice of shorting SLV shares keeps the Silver price suppressed, enabling inventory raids from the fund. Around 25 million shares are short on SLV. Any suspicion that JPMorgan is the predominant party holding short shares would probably be correct, the shares provided by Bank of America, which owns a surprising 22 million shares, always a willing player to help push down the silver price.
• The SLV fund rigs their own market, pushing silver to a desired lower price. In fact, the number of silver ounces per share is falling consistently, just over 0.97 oz in recent weeks. Check out September 30th, when the silver price fell hard from 40 to 30 per oz. The SLV fund had numerous big sellers that day in their listing.
• A smoking gun is revealed on May 5th, when the silver price was busy falling from 48 to 34 per oz. The SLV fund had a single day volume of 300 million shares on that day in May, equal to its entire float. Conclude that naked shorting was taking place in coordinated fashion with a leveraged arbitrage between the fund and the COMEX using futures contracts. Leverage must be involved. Many fingers point to such arbitrage since the volumes are so great.

The lessons and signals are vividly clear. Purchase and invest in Gold & Silver bars and coins, the mainstay for financial survival and avoidance of debt serfdom. The crisis is working toward a series of climax events stretched over the next year. The outcome will be shocking. The events will awaken the masses finally, who are all too often perplexed and dismayed while many place their heads in the sand. The Gold & Silver prices are heading multiples higher. Efforts to confiscate by government will in all likelihood backfire, raising attention, pointing out value.

end

I have to go now.  I am so sorry for being late as I had a late shift tonight and I do not feel well tonight.
I will see you tomorrowHarvey