BullionBuzz eNewsletter November 6, 2012

“All currencies, not only the American dollar but all currencies, always go down, mainly because of democracy. The voters will vote for a person who is going to spend too much. And so you have to expect all currencies to go down. And just recently, America has started to spend too much and the currency has already gone down a lot. But other nations now realize that and they don't want to lose out to America. So they make their
money go down, too...”

-- Sir John Templeton

CHART OF THE WEEK

To download chart

http://www.gold-eagle.com/editorials_12/degraaf103112.html

“This chart, courtesy Mises.org, shows the U.S. money supply is rising exponentially. The grey bars indicate a recession is underway. The Obama recession is now the longest recession since the Great Depression. As long as the recession continues, the money supply can be expected to rise since politicians cannot seem to stop spending.”

-- Peter Degraff

VIDEO OF THE WEEK

Gold's Face-Off Against Unfettered Currency Expansion

Nick Barisheff writes in the November issue of Resource World magazine, The US Federal  Reserve’s Quantitative Easing 3 policy brings to mind Wayne Gretzky’s famous quote: “A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be.” When applied to what is now officially sanctioned, open-ended, currency expansion, Gretzky’s quote speaks to the future price of gold. Quite simply, it’s going much higher.

To read article: http://www.bmgfunds.com/document/1212

GOLD

The Road to Bullion Default

Jeff Nielson

The long-term manipulation of gold and silver prices is resulting in collapsing inventories; the only possible long-term outcome is the collapse of the bankers' fraudulent paper bullion markets. This means that prices for physical bullion will soar.

The final rupturing of the paper markets doesn’t have to be the result of a formal default event. Indeed, it seems unlikely that a formal default would be allowed. It’s more likely that, as bullion inventories reach zero, regulators will simply declare an indefinite suspension of trading in the paper markets. A rupture could also be caused by a decoupling of the price of physical bullion from the price of paper bullion.

Such a decoupling could be caused by a multitude of factors. For example, as the 2008 crash intensified and AIG teetered on bankruptcy, the bullion funds for which it was guarantor briefly plunged in value. AIG received a bailout and survived, but if it had gone bankrupt, those bullion funds could have collapsed.

Nielson is particularly critical of the two largest bullion funds in the world: GLD and SLV. Any close scrutiny of these, he writes, reveals a business model fraught with massive counterparty risk. GLD, he says, is nothing but a leveraged scam, operating a classic shell game, and “In an eerie/disturbing symmetry; the scenario is identical in the silver market…”.

In conclusion, a decoupling event where paper bullion prices fall while physical bullion prices soar could result from multiple causes, or a hybrid event. Fears of the solvency/legitimacy of one or more bullion funds could result in an exodus of unitholders out of the paper bullion market and into the physical bullion market. What began as a decoupling could end up as a default event. All investors need to know is that, sooner or later, holders of paper bullion products will be threatened with catastrophic losses.

http://www.gold-eagle.com/editorials_12/nielson102712.html

All That Glitters May Be Ponzi USGSI Gold

Bill Singer

Lawrence (“Larry”) H. Heim, 72, of Tigard, Oregon was the president and owner of Portland-based U.S. Gold & Silver Investments, Inc. (“USGSI”). In marketing USGSI, Heim operated a website and hosted a radio program, where he advertised the sale of gold and silver coins. The website offered a calculation of the future value of gold.

For those who were dazzled by the glint of Heim’s precious metal coins, he was there to sell them what they wanted—all you needed was to send him a check or wire transfer.

Unfortunately, many of Heim’s clients were elderly individuals who purchased coins with funds from their retirement savings. As the price of precious metals began to skyrocket, Heim fell behind in his coin purchases. At this point, what may have started out as a legitimate venture devolved into nothing more than a Ponzi scheme, with Heim using new victims’ funds to make purchases of gold and silver coins for earlier customers.

By early 2011, amid growing customer complaints of non-delivery, Heim shut down USGSI’s website. By that summer, the sham was uncovered and the fraud was estimated at $1.7 million.

On August 25, 2011, Heim was indicted on 13 counts of mail fraud and wire fraud. If convicted, charges that carried a maximum penalty of 20 years in prison, and a fine of $250,000 on each count.

On May 30, 2012, Heim pleaded guilty to wire fraud. By that time, the estimated amount of the fraud had climbed from $1.7 million to more than $4 million from 48 victims.

On October 31, 2012, Heim was sentenced to 51 months in federal prison and ordered to pay $4,057,003.87 in restitution.

http://www.forbes.com/sites/billsinger/2012/11/01/all-that-glitters-may-be-ponzi-usgsi-gold/?partner=yahootix

CURRENCY

Turning from Green to Red

The Economist

Policymakers in emerging markets complain that Fed easing destabilizes their economies, contributing to higher inflation and asset prices. Fed Chairman Ben Bernanke says emerging economies can insulate themselves from his decisions by decoupling their currencies from the dollar.

Policymakers may heed Bernanke’s advice sooner than he thinks. A deputy governor of China’s central bank pointed out that China no longer buys up dollar reserves with abandon. And according to a new study from the Peterson Institute for International Economics in Washington, the dollar’s influence is waning in the emerging world. Currencies that used to shadow the greenback are no longer following it so closely. Some are floating more freely. But in other cases they are steadily falling under the spell of a different currency: The yuan.

The dollar still exerts a significant pull over 31 of the 52 emerging market currencies in the study. But a number of countries, including India, Malaysia, the Philippines and Russia, appear to have slipped anchor since the financial crisis. Comparing the past two years with the pre-2008 years shows that the dollar’s influence has declined in 38 cases.

The greenback has in the past played a dominant role in East Asia. But if anything, the region is now on a yuan standard. Seven currencies in the region now follow the yuan, or redback, more closely than the greenback. When the dollar moves by 1%, East Asia’s currencies shift by 0.38% on average. When the yuan moves, they shift by 0.53%.

Outside East Asia, the redback’s influence is still limited. When the dollar moves by 1%, emerging market currencies move by 0.45% on average. In response to the yuan, they move by only 0.19%. But China’s currency will continue to grow in stature as its economy and trading activity grow in size. Based on these two forces alone, China’s currency will eventually surpass the US dollar as a key currency.

http://www.economist.com/news/finance-and-economics/21564880-yuan-displacing-dollar-key-currency?fsrc=scn/tw/te/pe/trending/yuan

Nation of Denial

Greg Hunter

There is no bigger clue about the state of the US economy than the Fed’s announcement of ‘open-ended’ QE, which made all talk of a ‘recovery’ a giant lie. If the economy was in a recovery, the Fed would be raising interest rates, and there would be no need to create $85 billion every month to ‘stimulate’ the economy.

Money printing is like a drug: The more you take, the more you need. Going cold turkey on money creation would unleash the economic wrath of hell in the Western world. How much trouble is the US economy in that its central bank has to create unprecedented amounts of currency to keep it from imploding? This is why several analysts are predicting gold at $3,000 per ounce in the near future, and $12,000 per ounce in a longer time frame.

Countries around the world are shunning the dollar in trade. As the greenback loses world reserve currency status, it will decline in value. How far will it fall? Will gas be $8 per gallon or $18? In 2011, the Fed bought 61% of US debt. At a rate of $85 billion a month, it will be buying more than $1 trillion a year.

Hunter discusses rigged employment statistics, a daisy chain of defaults in the housing market, the ‘bottom bouncing’ US economy, and fraud and criminal activity on Wall Street.

Currently before the court in New York is a lawsuit that alleges bankers and government officials stole the American dream and much of its wealth. Spire Law Group, LLP’s national home owners’ suit claims that $43 trillion has been laundered by the banks, their partners and joint venturers, and pinpoints the identities of the key racketeering partners of the banks, some of whom are in the highest offices of government and acting for their own self-interests.

This lawsuit underscores the enormity of America’s problems. There is no recovery. No economy can truly grow under a backdrop of crime. The mainstream media lies by omission. No wonder so many US citizens are oblivious and unprepared for the coming calamity.

http://usawatchdog.com/nation-of-denial/

ECONOMY

Will a Prophet Assume Command?

The Burning Platform

In The Fourth Turning (1997), authors Strauss and Howe predicted the arrival of a crisis in our current time frame. This wasn’t guesswork on their part. They understood the dynamics of how generations interact and how the mood of the country shifts every 20 years or so, based on the generational alignment that occurs as predictably as the changing of the seasons. The generation that lived through the previous crisis (1929 to 1946) has virtually died off. This always signals the onset of the next Fourth Turning.

The housing bubble and its ultimate implosion created the spark for the current crisis that began in September 2008 with the near meltdown of the worldwide financial system. Just as the stock market crash of 1929, the election of Lincoln in 1860 and the Boston Tea Party in 1773 catalyzed a dramatic mood change in the country, the Wall Street-created financial collapse in 2008 has ushered in a 20-year period of agony, suffering, war and ultimately the annihilation of the existing social order.

For those who doubt generational theory and believe history is a linear path of human progress, consider the week of chaos suffered by those who didn’t prepare for Superstorm Sandy as a prelude to the coming crisis. The lack of preparation by citizens and government officials is a perfect analogy to preparing for the Fourth Turning. Building mansions yards from a dangerous, unpredictable sea is akin to allowing Wall Street bankers to create interconnected financial derivatives that will ultimately result in a worldwide flood obliterating billions in wealth. Going decades without upgrading power grids, transportation systems or storm protection is akin to allowing unfunded entitlement liabilities to accumulate to such an extreme level that they will be impossible to honour, and the coming storm will swamp those depending on those promises. The lack of foresight in not having food, water and backup sources of power and heat in case of an emergency is akin to the millions of people who have lived the good life in debt up to their eyeballs while never saving for a rainy day or their retirement.

Winter has arrived. The gathering storm is about to strike. Are you prepared?

http://www.theburningplatform.com/?p=43039

Eurozone Debt Crisis Deepening as Greece Runs Out of Money on November 16th

Global Research

The Eurozone financial crisis is set to worsen following the release of debt projections for the Greek economy. Estimates show that instead of peaking at 167% of GDP as previously predicted, the debt ratio will hit 189% this year, rising to 192% in 2014. Greece will be effectively out of money by November 16.

Germany has insisted that Greece and other highly indebted members of the Eurozone must continue with austerity programs. It says the G-20 should not focus solely on the Eurozone, but should direct attention to the US “fiscal cliff.”

Latest figures show that the austerity program of the “troika”—the EU, the ECB and the IMF—has created an economic catastrophe the likes of which has not been seen since the Great Depression.

The Greek catastrophe is the worst expression of a crisis that is spreading through the Eurozone; Italy, Spain and Portugal are also badly affected.

The ECB has made it a condition of its monetary stimulus that governments implement austerity measures. Stimulus money is not aimed at trying to boost the real economy; it is so banks can make profits even as the real economy continues to decline. Moreover, these measures are creating the conditions for a new crisis as the central banks become more dependent on global financial markets.

Another widespread fiction is the claim that the euro crisis could be resolved if Germany became more responsive to the needs of the debt-ridden European economies. Unfortunately, Chancellor Angela Merkel is driven by the fear that the German banking system is at risk as well.

http://www.marketoracle.co.uk/Article37331.html