Alfred Woody's Kewl Blog [ 椼森 ]: Apr 7, 2011

Thursday, April 7, 2011

Sean Fieler and Jeffrey Bell: Our unaccountable Fed

Not having a real budget means the Federal Reserve doesn't have to compete with anyone for scarce resources. What the central bank needs is a little money competition.

By Sean Fieler and Jeffrey Bell
The Wall Street Journal
Wednesday, April 6, 2011

http://online.wsj.com/article/SB1000142405274870380630457623501167101364...

"I will maintain to my deathbed that we made every effort to save Lehman, but we were just unable to do so because of a lack of legal authority."

So said Federal Reserve Chairman Ben Bernanke in 2009. The statement was striking—not because it was false, but because the Fed lacked explicit legal authority to do so much of what it did during the financial crisis. Drawing the line at Lehman seemed arbitrary, and it proved that the Fed has become an unaccountable power within American government.

Mr. Bernanke's insistence that the Fed is restrained by some obscure statute is central to his argument that the Fed is a body subject to the check of external forces. But it's not. The principal check on its power is the self-restraint of its chairman, a point proven by the Lehman example: Had Mr. Bernanke saved Lehman, who would have enforced the statute that he had violated? No one. That's because the Fed, as currently configured, has no opposing force to rein it in.

In the beginning, it was not so. When the Fed was created in 1913, the gold standard limited its power as did the balance between the 12 reserve banks across the country and the Federal Reserve Board in Washington. Lawmakers thought that the reserve banks would represent regional economic interests in tension with the national political agenda of the board in Washington. Moreover, the Federal Reserve Act imposed a hard constraint on the Fed's balance sheet: 40% of the Fed's notes had to be backed by gold. Finally, the Fed's charter was temporary, lasting only 20 years before requiring congressional reauthorization.

These constraining forces began unraveling almost right away. During World War I, the Wilson administration suspended and then restricted the dollar's convertibility into gold. In 1927, the Fed's charter was extended indefinitely. In 1932, the Glass-Steagall Act effectively unmoored the Fed's balance sheet from gold by allowing government bonds to serve as collateral against the issuance of Federal Reserve notes. And with the passage of the Banking Act of 1935, the Fed's newly expanded powers were concentrated in the Federal Reserve Board, at the expense of the reserve banks. Thus by the mid-1930s, the only remaining check on the Fed's power was statutory.

Statutory supervision of government bureaucracies is usually workable because Congress maintains the power of the purse. But the Fed, which can print money, has no budget constraint. Its profit and loss statement doesn't matter because, unlike every other legal entity, its liabilities are irredeemable. Not having a real budget means that the Fed doesn't have to compete with anyone for scarce resources.

Accordingly, Congress, banks and businesses—institutions that would typically be skeptical of a government bureaucracy's uncontrolled expansion—are instead interested in capturing the Fed for their own purposes. From the Long-Term Capital Management bailout in 1998 to the cleanup of 2008, Congress has come to rely on the Fed's ability to act—and thereby excuse Congress from having to vote on unpopular bailouts. What's more, the government remains dependent on the Fed to help finance its debt going forward. Similarly, banks and big corporations are potential beneficiaries of low-cost leverage and (in the wake of popped bubbles) expedient bailouts.

Thanks to the tea party, there are increased numbers of reform-minded leaders in Congress willing to take on big issues such as the Fed. But even those lawmakers who recognize the Fed's threat to liberty are advocating narrow fixes, such as imposing the "single mandate" of price stability (and removing the Fed's statutory responsibility for full employment). That alone wouldn't impose any meaningful check or balance on the Fed's power.

If the history of the Fed proves anything, it is that no mere rule will take the fiat out of fiat money. And there is no reason to believe that a single mandate would have stopped "quantitative easing." More importantly, what would happen to the single mandate of price stability if and when the Fed violated it? At worst, Congress would hold hearings and be very, very upset. Or it wouldn't do even that, because the most likely reason the Fed would allow inflation to get out of control is to finance Congress's ever-growing budget deficits.

Members of Congress seeking to restrict the Fed's power need to consider what oppositional force is truly capable of hemming it in. One answer is a revived gold standard, which would once again obligate the Fed to redeem dollars for gold at a fixed rate.

Equally effective would be to leave the Fed and the dollar system untouched, but to allow gold a level playing field on which to compete with the dollar. Utah has already taken the first step in this direction by passing a law formally recognizing gold as legal tender. But for the playing field to be truly leveled, all taxes on gold transactions need to be removed and individuals and businesses need to be permitted to report their financial accounts in gold.

While it might not seem obvious to pit the dollar against gold, which has not been used as final money in over 100 years, it would provide a significant restraint on the Fed. Simply allowing gold to be used as currency again would concentrate the minds of the Federal Reserve Board on keeping inflation under control. Competition, after all, would mean that if the Fed doesn't preserve price stability, it will lose its monopoly franchise—not just get a tough talking-to from Congress.

-----

Mr. Fieler and Mr. Bell are chairman and policy director, respectively, of the American Principles Project (http://americanprinciplesproject.org/).

* * *

Bullion Bank Trading – A Closely Guarded Secret!

I have written extensively in the past about how the bullion banking members of the London Bullion Market Association (LBMA) trade unbelievable amounts of unallocated gold and silver on a daily basis. See for example “LBMA OTC Market – Alchemists Turn Paper into Gold”. I also managed to introduce spoken testimony on the subject at the CFTC March 25th, 2010 hearing on the Metals Markets “LBMA OTC gold market cited as a Ponzi Scheme in CFTC hearing.”

The latest LBMA clearing statistics (Feb 2011) reveal that the LBMA bullion bank members traded a total average net daily gold volume of 18.1 million ounces with a value of $24.8 billion. Some analysts have in the past estimated that the gross volume is likely to be 3-4 times the net volume giving potentially over 70 million ounces of gross gold trading worth 100 billion dollars. This would be equivalent to trading all the gold that is mined in world each year each and every day! Clearly the majority of this trading is unbacked by physical gold. The bullion banks only make a ledger entry for gold sold or bought and as long as the client never asks for delivery the bank never has to have the gold. I have through my studies indicated that probably 45 ounces of gold have been sold for each one that exists.

The bullion banking business is very opaque but it struck me that if the members of the LBMA are collectively trading a net value of $6.2 trillion annually this should be laid out and explained in the bullion banks annual reports. There are over 60 bullion banks who are members of the LBMA. Based on an 80/20 rule we can estimate that 20% of the banks conduct 80% of the business; that is to say that about 12 banks should collectively trade an annual amount of $5 trillion or $400 billion annually each. If gross volumes were to be reported (which they should be by accounting practices) then each bank would be reporting revenue based on $1.2 trillion of gross annual trading.

I turned to analyzing the bullion banks annual reports. I limited the review to the four of the five hundred pound gorillas on the block namely JPMorgan Chase, HSBC, Deutsch Bank, and Scotia Mocatta. The latter three banks are all the only members of the London Silver Fix and three of the five members of the London Gold Fix.

In analyzing the Annual reports of the major bullion banks I made some astonishing discoveries. For most of these banks their bullion banking business is entirely hidden from the accounting. In the text there is almost no mention of gold, silver, bullion, or precious metals. In fact it is impossible to know that these banks are even in the bullion banking business let alone know anything about their trades, assets and liabilities. The only exception is Scotia Mocatta (see below). The bullion banking business is completely obscured from view in the annual reports. We know from our discussion that there should be revenues of $1.2 trillion annually be reported which would make the activity the largest activity in any of the banks, yet instead it is entirely missing! How could such trading and references to it be almost entirely absent from these reports?

I analyzed JPM 2008 annual report. It is 240 pages long.
http://files.shareholder.com/downloads/ONE/974362468x0x283416/66cc70ba-5410-43c4-b20b-181974bc6be6/2008_AR_Complete_AR.pdf

I searched it for the word “silver”. There are only two mentions of the word “silver”

QUOTE
There is no silver bullet: We believe that all of these actions, if implemented properly and executed – in a timely way and in conjunction with the U.S. fiscal stimulus program – could have an enormous positive impact.
END

Clearly nothing to do with bullion and

QUOTE
Scott A. Silverstein President and COO The Topps Company, Inc.
END

You would not believe that this is a bullion bank when there is no reference to silver bullion! There is also no reference whatsoever to its custodial activities of the i-shares ETF SLV!

For the word “gold” most of the references are for “Goldman Sachs” the only reference to the commodity is

QUOTE
The Firm uses forward contracts to manage the overall price risk associated with the gold inventory in its commodities portfolio. As a result of gold price fluctuations, the fair value of the gold inventory changes. Gains or losses on the derivative instruments that are linked to gold inventory are expected to substantially offset this unrealized appreciation or depreciation. Forward contracts used for the Firm’s gold inventory risk management activities are arrangements to deliver gold in the future.
END

So they talk very briefly about “gold inventory” and hedging it but they don’t mention any silver inventory at all. This is very suspicious because we know from the Treasury department OCC derivatives report that they had over $9 billion in silver derivatives in that year. Why aren’t these mentioned? Does this mean they have a very small silver inventory if only a gold inventory is mentioned? If they don’t have any silver worth mentioning then what are they hedging with $9 billion of silver derivatives? How can they be a member of the LBMA and peddling unallocated accounts a member of the London Fix and not mention any silver bullion? Also the gold that is mentioned is part of a “commodity portfolio” and not anything to do with bullion banking. Is their entire bullion banking business “off balance sheet”? If so, why? The term “Precious Metals” appears nowhere in the report. The word “bullion” does not appear anywhere in the report. Very strange for a “Bullion Bank”! This is highly irregular for the Annual Report of the biggest bullion bank!

HSBC 2008 ANNUAL REPORT
http://www.hsbc.com/1/content/assets/investor_relations/hsbc2008ara0.pdf

The word “silver only appears twice
QUOTE
Awarded the Silver Bauhinia Star by the Hong Kong Government in 2008
END

which is unrelated to silver as a metal.

The term “precious metals” only occurs twice. One occurrence is in a list of the broad products offered by the bank and the other in the following

QUOTE
Revenues from emerging markets trading and precious metals trading also rose as a result of ongoing market volatility and increased transaction volumes as prices of gold and platinum rose during 2008.
END

The word “gold” occurs in references to “Goldman Sachs” but only once referring to the metal which is the same quote as above.

The word “bullion” occurs only once where it is under the assets of the bank as
QUOTE
Bullion .............................................................................................................................................. 6,095M$ (2008) 9,244 M$ (2007)
END

The liabilities of the bank are not broken down into the same level of detail, so it is impossible to know what the net liabilities for bullion are. It is interesting to note that if they are trading approximately $400 billion of net trades annually with 6 $billion of assets then the ratio of net traded gold to actually in vault gold is 50:1.

Reading the HSBC report it would not be possible to determine that they are a major bullion market player. The keywords of gold, silver, bullion and precious metals are hardly mentioned in 472 pages! You would also not know that they are members of both the London Gold Fix and the London Silver Fix. There is also no way to know they are custodians of the i-shares GLD ETF, the biggest gold ETF in the world!

DEUTSCHE BANK 2009
http://annualreport.deutsche-bank.com/2009/ar/servicepages/downloads/files/dbfy2009_entire.pdf

The 2008 DB report is no longer on line so I analyzed 2009.
The report is 436 pages. The word “Bullion” does not occur anywhere, again very strange for a bullion bank and a member of the “London Fixes”. The word “silver” does not occur anywhere. The word “gold” occurs twice in references to “Goldman Sachs” yet it does not occur in reference to the metal. “Precious metal” occurs in a glossary description of “futures” and under OTC derivative contracts held. It shows 101.376 Billion euros of precious metal derivatives which would be equivalent in value to twice the annual global production of gold!
Nowhere in the report could one discern that Deutsche Bank is a bullion banker. Nowhere does it mention any business related to the buying and selling of actual physical metal yet it reports holding a massive precious metals derivatives position.

SCOTIA BANK 2008
http://scotiabank.com/images/en/filesaboutscotia/19578.pdf

In the Scotia Bank 2008 Annual report there is an asset table which is shown in Figure 1 and a Liabilities shown in Figure2. In 2008 the report shows Scotia Mocatta had liabilities for gold and silver certificates of $5.619 billion and Precious Metal assets of $2.436 billion...in other words Scotia Mocatta was naked short $3.18 billion of precious metals by their own accounting! The price of precious metals would be very different if this $3.2 billion of customer money paid to them for buying precious metals had actually gone to making real purchases of physical metal. Note they were $1.94 billion net short precious metals in 2007 also. Imagine what the losses could have been if the precious metals had not been suppressed and hammered down by JPMorgan and HSBC in 2008 as alleged by at least twenty five class action lawsuits and supported by statements by Bart Chilton, a CFTC Commisioner.

fig.1

fig.2

SCOTIA BANK 2009
http://scotiabank.com/images/en/filesaboutscotia/22068.pdf

By the end of 2009 Scotia Mocatta was net long $1.7 billion in precious metals. Now that is interesting. How convenient that prices had been heavily suppressed in 2008 when they were net short and they managed to cover their short position and accumulate a net long position. Note, however, that the “assets” do not use the same language as in the liabilities. The liabilities line item is “gold and silver certificates and bullion” while the asset line item is “precious metals”. We don’t know what those assets are because it does not specify “bullion” as is the case for the liabilities. These could be forward contracts or call options or OTC derivatives or some other paper promise for future delivery which is being booked as a precious metal asset. So although they could be net long based on valuation of paper assets there is still the possibility Scotia Bank is net short in terms of bullion. But they were definitely net short of bullion in 2007 and 2008.

There have been many people who have challenged or dismissed out of hand the existence of an organized scheme to suppress precious metals as long and expounded and documented for over a decade by the Gold Anti-Trust Action Committee (GATA). There is without a question of doubt something highly irregular and criminal occurring when a multi-trillion dollar business is not reported in Annual reports of the major bullion banks conducting the business. Further more there is not even any disclosure that these banks are even in the bullion trading banking business, let alone the principle operators of it by being members of the London Fix and being custodians of the world’s largest bullion funds!

If investors think they own large amounts of bullion in “unallocated” accounts they should take a very close look at what has been presented here and try to work out where exactly the underlying assets that back their investment might be hidden. The inescapable conclusion is that the unallocated accounts are unbacked or backed with no more than 2% of the bullion required. The gigantic revenues that the precious metals market generates for the banks seems to be been omitted from the Annual reports entirely.

Anyone with an unallocated bullion position would be well advised to take delivery, or you can hope that there is a very reasonable explanation for all of this.

Adrian Douglas
Editor of Market Force Analysis
Board Member of GATA

April 6, 2011

www.marketforceanalysis.com
Market Force Analysis is a unique analysis method which provides reliable indications of market turning points and when is a good time to enter, take some profits or exit a market. Subscribers receive bi-weekly bulletins on gold and silver and the HUI. We also run a Hotlist of Junior Mining Stocks which we consider will yield outstanding returns.

Collapse of the US Dollar System? Looming Financial Collapse

As each day passes the US dollar loses prestige and its status as a world reserve currency. Washington and Wall Street pay little attention to its slide and the changes a lower dollar and loss of reserve status will bring. Once the dollar is dethroned Americans will have to learn to live on the edges of the economic and financial world.

Those of you who have not read G. Edward Griffins’ “Creature from Jekyll Island” should. It tells you why the Federal Reserve was created and why the Federal Reserve was created and what its function is. It also shows you why except for Wall Street, banking and selected elitist corporations why the system was designed to self-destruct. If you read economic and financial history you will discover why such economic and financial destruction takes place repeatedly and that more often than not does not happen due to incompetence, war or error, but it is planned that way.

What has happened to the dollar since Bretton Woods and the planned removal of gold backing from the dollar is an example of deliberate destruction and in that process the destruction of the greatest nation in history. In that process of 97 years the wealthy and connected have become wealthier and powerful and have become even more so. They truly expect to exit this maelstrom and war as the leaders of the future. We have news for them. The power of talk radio and the Internet stretches worldwide and the world now understands what they are up too, and they are not going to be successful in their efforts to bring about world government. The collapse of the dollar is but one aspect in the change planned in the shift in world power.

Rocky Mountain Herbals, Including Bladderwrack Seaweed(Ad)

The US budget deficit is a manifestation of the decline of America, its Executive, House and Senate 95% controlled by interests from behind the scenes. The agenda is not for the American people, the constituents, who put these people in power, but for the moneyed few who totally control them via campaign contributions, lobbying and other various nefarious means. We presently are being offered up a budget cut in a $1.7 billion budget deficit. What can the people behind the scenes be thinking of unless they want the government debt structure to implode?

Virtually no change in out of control spending. The deficit is accelerating not decelerating. It is obvious that these intelligent elitists and politicians know exactly what they are doing and that is destroying the financial system and the American economy. By the end of the year and perhaps sooner the deficit will be more than 100% of GDP, a role reserved for Banana Republics and there is no end in sight. No reality check, no control, no attempt to stop the deficit hemorrhage. War spending rages out of control, as we engage in another war. This is deliberate and very probable for the military and industrial complex, which could care less what the budget deficit climbs too. The nation is being ripped apart internally and there is no respite in sight.

The government, municipalities, states, banking, Wall Street, the US Chamber of Commerce and transnationals all advocate more aid and spending, as the public demands more handouts. Nobody seems to understand that things cannot go on this way; austerity is going to be thrust upon us and there is going to be economic chaos. In the meantime nothing the Fed and the Treasury have done has done anything to solve the problems. Everything temporarily has been papered over with debt. The Executive Office for 11 years has never told the truth about fiscal debt or future fiscal debt. They tell the public what they want them to hear. Over and over again just more lies and propaganda.

The Federal Reserve group of 12 banks are about evenly split on QE3. Whether the front is just making things interesting will remain to be seen. We do know Mr. Bernanke could care less. He takes his orders from the elitists and does exactly as he is told, just like Mr. Greenspan did. He and others are in the process of destroying the US economy so that the US economy will be so bad that Americans will be forced to accept world government. That is really what this is all about.

The Fed is destroying the monetary system, the President and Congress are burying the economy in debt and our transnational conglomerates along with this gang of criminals has made America uncompetitive and destroyed its industrial base. It is not any simpler than that. The dollar is not a financial or monetary refuge anymore. Its place as a world reserve currency has been destroyed and that mantel has again been assumed by gold. This is the result of deliberate insane monetary and fiscal policy that is destroying America.

The monetization in process is not just manifest in America. England, Europe, China and Japan and many others have done the same thing. The debt that has to be serviced, rolled and created is more than $5 trillion. In Europe alone the bailout of the sick 6 PIIGS will cost $4 trillion. If the solvent euro zone and European countries funded this debt they’d all end up bankrupt. Will the Fed be allowed to again bail out foreign central banks as they did three years ago? Probably not because the Fed now has to bail out the US government with more money and credit created out of thin air. The Fed, foreign central banks and other commercial banks cannot raise the trillions of dollars needed to keep the western world afloat.

We ask how can anyone accept QE3 when QE1 and QE2 have been such failures? Part of the result of such folly has been a weakening of the dollar and strengthening of gold and silver. We believe you will see QE3, because there is no way to stop. Inflation will roar this year and next and if we have QE3 and stimulus there is a good chance we’ll see hyperinflation. Close to zero interest rates and an endless supply of Treasury paper has driven away foreign buyers. Who wants to buy US 10-year T-notes yielding 3.5%, when inflation is 8% and climbing, especially when the dollar is moving lower? Two and a half years ago 66% of foreign central bank assets were in US dollar investments. Before that it was 70% and today it is 61.3%.

The Fed should have let the economy go into depression 3-1/2 years ago and purged the system. For whatever reasons that was not to be. Classical economics tells us malinvestment has to be removed from the system and the longer it takes to do that the worse the correction will be. Once a nation embarques on continued use of money and credit, inflation has to ensue and often that leads to hyperinflation. Not having solved the problems at hand a never-ending funding mechanism is put in motion in an attempt to buy time to fix the problem. As you can see thus far it has not worked. We are sure the Fed has added much more liquidity to the system already that they won’t admit too. This is why an outside independent forensic audit is needed to find out just what they have been up too.

Yields and currency risk are driving foreign investors out of US dollar investments and it is accelerating. Americans still do not realize you cannot survive as a first-world nation without a strong industrial base. It has been official US policy and that of Wall Street and banking to denude America of that capacity. Eighty percent of the destruction has already taken place and the only way to reverse that is by implementing tariffs on goods and services.

That brings us to the insolvency of the banking system. Does anyone really believe that putting another 1.7 million foreclosures on your books is good? That is where the lenders are headed. If they are to survive they’ll have to be quantitative easing for years to come. The deception continues, but it gets weaker with each passing day.

This past week we were exposed to the vicissitudes of what the Fed spent two years trying to hide. Who were the 271 banks and others who received bailout funds to gamble, speculate with and to try to create more assets then liabilities. The funds monetized by QE1 and 2 and stimulus 1 and 2 are turning into a giant wave of inflation that will stretch over 2011 and 2012 and beyond. If QE3 and stimulus 3 become reality add another year or more to inflation to reach hyperinflation in excess of 50%.

On top of what the Fed and Treasury are engaged in you have the states, individuals and corporations to consider. Despite assurances there are going to be many insolvencies in these areas. After viewing these problems you have to say to yourself, where does this all end? As inflation grows the cost of everything increases making the situation even more difficult. Wall Street and banking tell us a recovery is underway.

Unfortunately employment and housing sales and prices haven’t been informed as yet. Of course, the same gang lies about the economy and everything else. Then again, white-collar crime today is socially acceptable. Just look at the movie, “Insider Job.” Nobody cares and the SEC, CFTC and government are all working in tandem to enrich Wall Street at the expense of the public and later to enrich themselves.

There is no question the US government will have ongoing deficits of $1.3 to $2.2 trillion annually for some time to come. If this is the case there is no chance of the debt of government ever being paid. That means official devaluation and default, although we believe it will be done jointly by many countries.

Would You Turn Your House Into A Billboard If The Advertiser Paid Your Mortgage?

Having trouble making your mortgage payment? Think the paint job on your house could use some splash, color and branding? Then there's an ad agency you might want to talk to.

Ad firm Adzookie claims that, for people willing to turn their homes into billboards, it will make their monthly mortgage payments.

According to the Adzookie CEO, the company has already received over 1,000 applications from people willing to have their houses billboard-ified.

"It really blew my mind," he tells CNN. "I knew the economy was tough, but it's sad to see how many homeowners are really struggling."

From the company's site:

“
Here are a few things we're looking for. You must own your home. It cannot be rented or leased. We'll paint the entire outside of the house, minus the roof, the windows and any awnings. Painting will take approximately 3 - 5 days. Your house must remain painted for at least three months and may be extended up to a year. If, for any reason, you decide to cancel after three months or if we cancel the agreement with you, we'll repaint your house back to the original colors.
”

Adzookie has yet to paint anyone's house with an ad (the picture above is a Photoshop job) but the CEO says he expects to start redecorating the world in a few weeks.

This is just the latest guerrilla advertising stunt that blurs the line between public and private. Last month, Ecko began offering lifetime 20% discounts to people willing to get the company's logo tattooed on their skin.

Turn your house into a billboard, get free mortgage [CNN]

More About:

curb appeal,
advertising,
badvertising,
adzookie,
recession watch

From ConsumerReports.org:

Indymac Boys Get Sweetheart Deal

Silver Is Getting Too Popular… Right?

It’s no secret that the silver market is red hot. As I write, silver American Eagles and Canadian Maple Leafs are sold out at their respective mints. Buying in India has gone through the roof, especially noteworthy among a people with a strong historical preference for gold. Demand in China continues unabated. Silver stocks have screamed upward.

So, as an investor looking to maximize my profit, I have a natural question: is the silver trade getting too crowded, meaning we’re near the top? Have the masses finally joined the party such that we should consider exiting? After all, it’s not a profit until you take it, and you definitely want to sell near the top.

There are several ways to measure how crowded the silver market might be. I prefer to look strictly at the big picture and not get caught up in the weeds. This means I’m looking for signs of market exhaustion or the masses rushing in. Nothing says “peak” more than an investment everyone is buying.

So how crowded are silver investments right now? Let’s first look at the ETFs.

This is even more interesting when you consider that it’s the ETFs where most of the public – especially those that are new to the market – first invest in silver. So while the metal has doubled in the past seven months, total investment in the funds is still far beneath many popular blue-chip stocks.

Okay, maybe all this money is instead going into silver mining stocks. How does the market cap of the silver industry compare to other industries?

To be fair, there are a number of sectors that are smaller than silver. Radio broadcasters ($43.2B), video stores ($10.9B), and sporting goods stores ($2.5B) have puny market caps, too. But then again, who’s buying DVDs or baseball mitts to protect their wealth from a coming inflation?

Silver hardly resembles the picture of an investment that is too crowded.

I’m not saying one should rush to buy silver right now. After all, it has doubled in seven months. Unless this is the beginning of the mania, prudence would certainly be called for at this juncture. The price will always ebb and flow in a bull market, and an ebb is overdue.

The question, of course, is from what price level it occurs. What if a correction doesn’t ensue until, say, a month from now, and the price falls back to… where it is now? I remember some articles in January that insisted silver would fall to as low as $22, and, well, they’re still waiting and have in the meantime missed out on some huge gains. For silver to fall back to $22 now would require a 40% drop; not impossible, but I wouldn’t hold my breath.

Fixating on market timing takes your focus off the ultimate goal. In my opinion, instead of worrying about what will happen next week or even next month, focus on how many ounces you have, and then buy at regular intervals until you reach your desired allocation. This has the added benefit of smoothing out your cost basis. And don’t forget to buy more as your assets and income increase.

This is a market where you’ll want to be well ahead of the pack. Someday in the not-too-distant future, average investors will be tripping over themselves to join in. That will make the market caps of our silver investments look more like some of the others in the charts above. And that will do wonderful things to our portfolio.

[You won’t find better, more in-depth information on silver than in BIG GOLD’s just-published 2011 Silver Buying Guide. Including: The behind-the-scenes forces pushing up the silver price… Is now a good time to buy, or should you wait for a correction?... A candid interview with a bullion insider and what worries him right now… a new silver stock pick… and much more. Get one year of BIG GOLD, including the 2011 Silver Buying Guide, for only $79 – with 3-month money-back guarantee. Learn more here, or go directly to the BIG GOLD Order Form]

Gold Price Hits All Time High, Silver at 31 Year High AGAIN!!

Feeling Depressed? 27 Depressing Statistics About The U.S. Economy That Will Make You Feel Even Wor

If you know someone that believes that the U.S. economy is in great shape, just show that person the following statistics. But please don't show these statistics to anyone that is feeling depressed or that has just lost a job - it might push such a person over the edge. The sad truth is that the U.S. economy is in the midst of a long-term decline and it is coming apart at the seams. Right now the Obama administration and the Federal Reserve are attempting to "paper over" our economic problems with massive amounts of government debt and paper currency, but in the end it is not going to work. When you analyze the numbers objectively, it leads to the inescapable conclusion that we are headed for another Great Depression. That is a very depressing thought, but there is no denying that decades of debt and incredibly bad decisions are starting to catch up with us. The economic pain that is coming is going to be absolutely mind blowing.

It would be nice if our politicians and our business leaders suddenly started making incredibly wise decisions so that we could bring the U.S. economy in for a "soft landing", but the chance of that happening is so small that it is not even worth mentioning.

It is time for all of us to face up to the truth. In this day and age it is really easy to get caught up in the trap of feeling depressed, but once we understand exactly how bad our problems are it can be empowering because then we can start focusing on solutions.

The following are 27 depressing statistics about the U.S. economy that are almost too crazy to believe....

READ THEM HERE http://theeconomiccollapseblog.com/archives/feeling-depressed-27-de...

Investment Opportunity At Your Local Bank, Buy Nickels!! (Original Blog)

Investment Opportunity At Your Local Bank, Buy Nickels!! Yes those little round 5 cent coins called nickels.

1946-2011 Nickel

$0.05

$0.0685696

137.13%

http://www.coinflation.com/

There are bills right now in the works that will change the metals that make up our nickels. Currently they are 75% copper and 25% nickel, when this bill passes the new coins will as worthless as paper bills.

Right now you can walk into almost any bank and hand them a dollar bill and get 20, 0.0685cent coins..... your making 37cents PER DOLLAR you change into nickels! YES NO JOKE!

I in no way am telling you to melt these down, that would be dumb as well as illegal. Really just store them as is for barter later on when the dollar crashes. This is almost like being given a chance to go back in time and buy silver dimes, quarters and half dollars!! I'll bet you 10 years from now the copper and nickel will be worth many times the face value depending on how bad the dollar crashes. These are hedges against inflation just like silver or gold. Whats great is your getting the copper / nickel coins below spot!

Every time you go to the bank put a part of your check into nickels, TRUST ME you will thank me later. These coins will always be worth something.

-TheLasersShadow.com

Silver Is Getting Too Popular…Right?

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Jeff Clark
Casey Research

It’s no secret that the silver market is red hot. As I write, silver American Eagles and Canadian Maple Leafs are sold out at their respective mints. Buying in India has gone through the roof, especially noteworthy among a people with a strong historical preference for gold. Demand in China continues unabated. Silver stocks have screamed upward.

So, as an investor looking to maximize my profit, I have a natural question: is the silver trade getting too crowded, meaning we’re near the top? Have the masses finally joined the party such that we should consider exiting? After all, it’s not a profit until you take it, and you definitely want to sell near the top.

There are several ways to measure how crowded the silver market might be. I prefer to look strictly at the big picture and not get caught up in the weeds. This means I’m looking for signs of market exhaustion or the masses rushing in. Nothing says “peak” more than an investment everyone is buying.

So how crowded are silver investments right now? Let’s first look at the ETFs.

At $35 silver, all exchange-traded funds backed by the metal amount to $20.7 billion. You can see how this compares to some popular stocks. All silver ETFs combined are less than a quarter of the market cap of McDonald’s. They’re about 10% of GE, a company that still hasn’t recovered from the ’08 meltdown. Exxon Mobil is more than 20 times bigger. And this isn’t even apples-to-apples, as I’m comparing the entire silver ETF market to a few individual stocks.

This is even more interesting when you consider that it’s the ETFs where most of the public – especially those that are new to the market – first invest in silver. So while the metal has doubled in the past seven months, total investment in the funds is still far beneath many popular blue-chip stocks.

Okay, maybe all this money is instead going into silver mining stocks. How does the market cap of the silver industry compare to other industries?

While you fetch your magnifying glass, I’ll tell you thatthe market cap of the silver industry is $73.1 billion. It barely registers when compared to a number of other industries I picked mostly at random. The dying newspaper industry is over 26 times bigger. Drug manufacturers are 213 times larger. Heck, even the gold market is 19 times greater. And here’s the fun one: the market cap of the entire silver market, with all its record-setting prices and stock-screaming highs, represents just one-third of one percent of the oil and gas industry.

To be fair, there are a number of sectors that are smaller than silver. Radio broadcasters ($43.2B), video stores ($10.9B), and sporting goods stores ($2.5B) have puny market caps, too. But then again, who's buying DVDs or baseball mitts to protect their wealth from a coming inflation?

Silver hardly resembles the picture of an investment that is too crowded.

I’m not saying one should rush to buy silver right now. After all, it has doubled in seven months. Unless this is the beginning of the mania, prudence would certainly be called for at this juncture. The price will always ebb and flow in a bull market, and an ebb is overdue.

The question, of course, is from what price level it occurs. What if a correction doesn’t ensue until, say, a month from now, and the price falls back to… where it is now? I remember some articles in January that insisted silver would fall to as low as $22, and, well, they’re still waiting and have in the meantime missed out on some huge gains. For silver to fall back to $22 now would require a 40% drop; not impossible, but I wouldn’t hold my breath.

Fixating on market timing takes your focus off the ultimate goal. In my opinion, instead of worrying about what will happen next week or even next month, focus on how many ounces you have, and then buy at regular intervals until you reach your desired allocation. This has the added benefit of smoothing out your cost basis. And don’t forget to buy more as your assets and income increase.

This is a market where you'll want to be well ahead of the pack. Someday in the not-too-distant future, average investors will be tripping over themselves to join in. That will make the market caps of our silver investments look more like some of the others in the charts above. And that will do wonderful things to our portfolio.

[You won’t find better, more in-depth information on silver than in BIG GOLD’s just-published 2011 Silver Buying Guide. Including: The behind-the-scenes forces pushing up the silver price… Is now a good time to buy, or should you wait for a correction?... A candid interview with a bullion insider and what worries him right now… a new silver stock pick… and much more. Get one year of BIG GOLD, including the 2011 Silver Buying Guide, for only $79 – with 3-month money-back guarantee. Learn more here, or go directly to the BIG GOLD Order Form]

Use the Dollar or Else

Only use our monopoly money.
Terrorists use silver and gold
Dees Illustration

Llewellyn H. Rockwell Jr.
Lew Rockwell

Look up the phrase "a unique form of domestic terrorism" on a search engine and you will turn up a story about a man whom the US government is trying to cage from now until the time of his death.

And his crime? His unique form of terrorism? He minted silver and copper coins and sold them. In other words, he did what innumerable entrepreneurs from the beginning of time have done. He attempted to provide consumers with a store of value. No one was forced to buy. He met a market demand, and that’s it.

Whom did he hurt? No one. Unlike illegal drugs, which the government bans on grounds that it doesn’t want us to hurt ourselves, these silver coins did not endanger their users. They only gave people an option on what to do with their money. Did the proprietor attempt to claim that these were legal tender for monetary exchange? No, he sold them for what they are.

Could people use them for money? Yes, but people can use anything for money: shoes, shells, flash drives, or books. Whether something is money or not depends on the intentions behind the exchange. Do you acquire something to consume it? It is not money. Do you acquire something in order to trade it for something else? In that case, it takes on money-like properties.

It is wholly understandable that people have doubts about the future of the paper dollar. Many people are seeking alternatives, in their own financial interest. What this proprietor did was provide something that turned out to be a possible alternative to the dollar. And for that, and that alone, he is being hounded and destroyed.

His name is Bernard von NotHaus and he is 67 years old. In the course of the proceedings, he was called every name imaginable. He was called a crook, a terrorist, a crank, and a crazy man. What he actually did, however, should be fully legal and encouraged in any nation, in all times and all places.

A nation that is confident about its money’s future would not fear currency competition. A nation with a dying money uses every possible means to crush the competition. That is precisely what is happening in the case of the so-called Liberty Dollar.

What’s striking here is that no one believes there is any reason to argue the point. It is obvious to his persecutors that he is a criminal. "He's playing on a core idea of the radical right, that evil bankers in the Federal Reserve are ripping you off by controlling the money supply," said Mark Potok of the Southern Poverty Law Center. "He very much exists in the world of the anti-government patriot movement, whatever he may say. That's who his customers are."

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Where the Bailout Went Wrong: Parting Shot From TARP Inspector General Neil Barofsky (NYT Op-Ed, Video)

Barofsky's last day on the job was last week, and he closed it out with an editorial in the New York Times and a final appearance before Congress. He is leaving to become a senior fellow at the NYU School of Law.

New York Times

Where The Bailout Went Wrong

By SIGTARP Neil Barofsky

TWO and a half years ago, Congress passed the legislation that bailed out the country’s banks. The government has declared its mission accomplished, calling the program remarkably effective “by any objective measure.” On my last day as the special inspector general of the bailout program, I regret to say that I strongly disagree. The bank bailout, more formally called the Troubled Asset Relief Program, failed to meet some of its most important goals.

From the perspective of the largest financial institutions, the glowing assessment is warranted: billions of dollars in taxpayer money allowed institutions that were on the brink of collapse not only to survive but even to flourish. These banks now enjoy record profits and the seemingly permanent competitive advantage that accompanies being deemed “too big to fail.”

Though there is no question that the country benefited by avoiding a meltdown of the financial system, this cannot be the only yardstick by which TARP’s legacy is measured. The legislation that created TARP, the Emergency Economic Stabilization Act, had far broader goals, including protecting home values and preserving homeownership.

These Main Street-oriented goals were not, as the Treasury Department is now suggesting, mere window dressing that needed only to be taken “into account.” Rather, they were a central part of the compromise with reluctant members of Congress to cast a vote that in many cases proved to be political suicide.

The act’s emphasis on preserving homeownership was particularly vital to passage. Congress was told that TARP would be used to purchase up to $700 billion of mortgages, and, to obtain the necessary votes, Treasury promised that it would modify those mortgages to assist struggling homeowners. Indeed, the act expressly directs the department to do just that.

---

Bloomberg with SIGTARP yesterday...

Some Banks Should Face Criminal Charges Over Foreclosuregate

It may be time to ready those orange jumpsuits after all. Although a settlement is already being worked out between banks and state attorneys general over the institutions' failures to follow proper procedures in processing foreclosures, money and concessions might not be enough. A recent segment on 60 Minutes certainly makes the case that some bank officers should serve some jail time.

The show's segment revealed some pretty amazing stuff. One of the most incredible parts includes reports from former "robo-signers." One was paid $10 per hour to pretend to be a bank executive with a made up name to sign off on foreclosures. Here's an excerpt of an interview by Scott Pelley's from 60 Minutes. He talks to Chris Pendley, whose job it was with to sign the name "Linda Green" around 350 times per hour.

Pelley: Your first day, what did they tell you your job would be?
Pendley: That I was going to be signing documents using someone else's name.
Did you think there was something strange about that in the beginning?
Yeah, it seemed a little strange. But they told us, and they repeatedly told us, that everything was above board and it was legal.
And your previous experience in banking?
None
In legal documents?
None.
There really were no requirements for the job.
Correct.
You had to be able to hold a pen.
Hold a pen.
But you were signing these documents as if you were an officer of the bank?
Correct.
How many banks were you vice president of in a given day?
I would guess somewhere around 5 to 6.

And remember, Linda Green was not a bank executive -- it was a made up name used because it was simple. 60 Minutes also interviewed someone who notarized these documents, while knowing that those signing were misrepresenting their names.

This segment raises a few questions. First, should these robo-signers face criminal charges? At the very least, this would appear to be identity theft. Individuals knowingly signed someone else's name on a legal document, or knowingly verified fraudulent legal documents. It shouldn't really matter what the company told them: ignorance of the law does not shield you from prosecution. Of course, their cooperation with authorities to prosecute bank executives could help to limit any penalties they might face.

Second, of course, how is it that the bank officers who knew this was going on -- and some must have -- this aren't facing serious criminal charges? If this isn't fraud, then what is? This goes way beyond cutting corners or accidentally losing documents.

Here's the full video of the segment:

http://tinyurl.com/3mkv6d3

Shadow Housing and ForeclosureGate: Banks Are Stuck Between a Rock and a Hard Place

The inventory of homes held by financial institutions in Florida and across the country was labeled by writer Carla Fried for CBSMoneyWatch last week as one of the main reasons for the housing market to be in a much more serious condition than many realize. In her article entitled, "Why the Housing Market is Three Times Worse Than You Think," Ms. Fried discusses the Shadow Housing Inventory currently held by banks but not officially up for sale. It's bad news.

Held in Limbo: the Shadow Housing Inventory

According to the CBSMoneyWatch article, which relies in part on information from CoreLogic, almost 2,000,000 homes (1.8 million is the estimate) are sitting on bank books in some kind of limbo. These are properties that have been foreclosed upon already, as well as those that are somewhere in the legal process of being foreclosed upon, or home loans where the mortgage has gone at least three months without a mortgage payment, but the bank hasn't started the foreclosure paperwork yet. None of them are up for sale. They're just sitting there, on the bank's balance sheets in various categories.

Fear of Litigation Balancing Against Financial Burden of Unprecedented Real Estate Inventory

Meanwhile, in courthouses across the country, judges are mad and getting madder about the documentation that they are being asked to approve by bank lawyers. Consider this article in the SunSentinel yesterday, "Fed-up judges crack down on foreclosure disorder in courts,"where reporters Christine Stapleton and Kimberly Miller of the Palm Beach Post summarize the exasperation of judges in dealing with ForeclosureFraud issues.

Here in Florida, judges are actually penalizing banks for flawed foreclosure documentation by issuing court orders cancelling the mortgages and essentially giving the defaulting homeowners their real estate free and clear. It's winning the lottery for folks who have been sitting in homes and not making mortgage payments for months and months.

Banks Trying to Handle Massive Amounts of Reneged Mortgages Getting Labelled the Bad Guys

Read these media reports and others, and you get the idea that for many, these banks are wrongdoers because they have failed to file formally correct foreclosure lawsuits, or they are blocking a future economic recovery because they are holding these 2,000,000 homes from the seller's marketplace.

You can't win for losing in the mortgage arena. And this isn't good for anyone.

Banks relied on lawyers to get foreclosures completed in record numbers not because they saw this as their optimal choice. Mortgages were not being paid. People stopped paying the banks on their notes, and this ultimately left banks with little alternative but to try and get the collateral to lessen the losses they were accumulating. That collateral was a home.

In this unprecedented wave of unpaid notes -- breached contracts -- the banks were doing their legal duty to minimize their vulnerability by foreclosing on the homes that backed the notes. This is what the contracting, breaching homeowner agreed would happen if they failed to pay their mortgage. No surprise, draconian tactics here.

Now, because of reliance on legal foreclosure farms like David Stern, the idea that banks are hesitant to sell that Shadow Inventory shouldn't surprise anyone. This is the risk-averse thing to do, and until banks get some relief here, it's what we should expect financial institutions to do.

Answer? Recognize that this problem started with loanholders breaching their deal, not with banks donning black hats and capes. Work to help these vital financial institutions out of this Catch 22.

Top 25 Hedge Fund Managers Make Almost $1 Billion Each - And Pay Less Taxes Than You Do

For many of us, we've been lucky if we've held on to jobs, or even got a cost of living salary increase during the recession that has been plaguing the country for the last decade. But for one highly specific job in the banking industry, the hedge fund manager, not only have paydays been increasing, it's now five times as big as it was just ten years ago.

Via the New York Times:

Ten years ago, when the hedge fund industry was much smaller than it is today, it took 25 hedge fund managers to earn a combined annual payday of $5 billion.

Last year, it took only one.

...

Last year was very lucrative for some of the biggest and best-performing hedge funds' chiefs. Wealth was so concentrated that a mere 25 people pocketed a total of $22.07 billion, according to this year's annual ranking by AR Magazine, which tracks the hedge fund industry. At $50,000 a year, it would take the salaries of 441,400 Americans to match that sum.

But just because these executive are cashing big checks doesn't mean that they have big tax bills. Sure, they are likely giving Uncle Sam more money than you are, but as a percentage of their income they pay nowhere near close to what you pay. Wonkroom writes:

[H]edge fund managers benefit from preferential tax treatment that middle-income Americans don't. Due to what's known as the carried-interest loophole, the income that hedge fund managers receive if their funds make money is treated as capital gains -- rather than ordinary income -- and gets taxed at the capital gains rate of 15 percent. Even though the pay is performance-based compensation (just like any other performance-based bonus made by any other worker), hedge fund managers receive a tax break on that income. This results in hedge fund managers paying less in taxes on this income than middle-class workers, who are subject to a 25 percent top marginal tax rate.

So a hedge fund manager that is making $1 billion a year is probably only bringing home $850,000,000. That makes you feel better, right?

When the Republicans say that rich people need to have their money because they pay most of the taxes, remember that this is what they are talking about -- someone who makes one billion dollars only gets to keep $850,000,000 of it, and the GOP thinks that they should be able to keep many millions more. Whereas someone who makes $50,000 should be forced to lose collective bargaining rights to ask for a 2 percent raise for the following year.

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