As the integrity of the US banking system is compromised, private citizens should consider becoming their own central banks. The days of irredeemable paper fiat currencies may be approaching its end, and there is a reason why the central banks hold gold - it is their default insurance.

Do not be fooled, the gold reserves of central banks are their actual Money. Debt-based paper dollars, yen, pounds are all just ridiculous currencies, sad shadowy mirrors of their former selves, which is gold and silver coin. Gold's manipulated volatility cannot mask its >16% annualized returns versus the USD over the past 8 years. Remember - in actuality, it is the depreciation of the world's fiat currencies we are seeing, not the appreciation of gold itself which is itself both money and a currency.

Human Freedom Rests on Gold Redeemable Money

by Hon. Howard Buffett U.S. Congressman from Nebraska and father of Warren Buffet.

Reprinted from The Commercial and Financial Chronicle 5/6/1948

"Congressman Buffett stresses relation between money and freedom and contends without a redeemable currency, individual's freedom to sustain himself or move his property is dependent on goodwill of politicians. Says paper money systems generally collapse and result in economic chaos. Points out gold standard would restrict government spending and give people greater power over public purse. Holds present is propitious time to restore gold standard.""Is there a connection between Human Freedom and A Gold Redeemable Money? At first glance it would seem that money belongs to the world of economics and human freedom to the political sphere."But when you recall that one of the first moves by Lenin, Mussolini and Hitler was to outlaw individual ownership of gold, you begin to sense that there may be some connection between money, redeemable in gold, and the rare prize known as human liberty. You see, gold is mobility, gold is a passport to move across borders."Also, when you find that Lenin declared and demonstrated that a sure way to overturn the existing social order and bring about communism was by printing press paper money, then again you are impressed with the possibility of a relationship between a gold-backed money and human freedom."In that case then certainly you and I as Americans should know the connection. We must find it even if money is a difficult and tricky subject. I suppose that if most people were asked for their views on money the almost universal answer would be that they didn't have enough of it."In a free country the monetary unit rests upon a fixed foundation of gold or gold and silver independent of the ruling politicians. Our dollar was that kind of money before 1933. Under that system paper currency is redeemable for a certain weight of gold, at the free option and choice of the holder of paper money."

by Theodore Butler

We live in perilous financial times. If you are not alarmed with the flow of financial events, then you are just not paying attention. The problems are serious and growing, the solutions limited. It’s as if everything that could go wrong, has gone wrong. I’d much prefer to write of a growing domestic and world economy, with increased demand for silver. But financial and economic headwinds have converged to interrupt world growth.
What does this portend for silver? As I have written recently, the current bad news is good news for silver. That’s due to silver’s unique dual role as a vital industrial commodity, as well as an age-old investment asset that the world has always turned to when times get tough. When times are good, silver can be compared with natural resources, like copper and oil. When times are bad, silver should be compared to gold as a financial lifesaver. Sad to say, times are bad. To highlight just how bad, I’d like to reference some recent events and what I think they portend for silver.
There is a worldwide flight into assets of quality. This is no minor event, it is a tsunami. In the past week, demand for four-week U.S. Treasury Bills, considered by many to be the ultimate flight to quality asset, was so great that investors bought them at auction for the lowest yield in history - zero percent. In other words, investors in these securities were willing to forgo any return on the $30 billion purchased, for the promise of the return of the principal amount. The demand for the return of principal for these securities was so great that investors bid for four times the amount actually sold. None of us has ever witnessed this kind of demand for such low-yielding securities. Safety is the name of the game.
It is easy to see why the safety of one’s financial assets is suddenly all-important. The news is truly rotten and wealth is disappearing before our eyes. It is estimated that already more than $10 trillion ($10,000 billion) of value has been lost in the world market decline so far. Governments around the world, including the U.S., have responded with trillions of dollars of bailouts, stimulus and massive deficit spending programs. The scale and scope of the destruction of asset values and the offsetting financial injections are almost beyond our ability to grasp. Mind-boggling is not an overstatement.
Unlike government securities and unlike gold, the value of silver is sharply lower this year. That decline is not the result of the selling of physical silver, but of the paper variety on the COMEX. In fact, compared to gold, the physical shortage and premiums on various forms of retail silver are higher and delays in some cases are longer. This may prove that physical silver is tighter than gold. The price decline in silver, relative to gold, indicates silver is dramatically undervalued to gold.
This is not a knock on gold. All the conditions appear in place for a big gold price rise. The market structure on the COMEX, the growing physical demand, the palpable fear in the air, all point to gold as an important go-to asset. Gold holds no counterparty risk and that’s especially relevant in the current climate. All the positives about gold apply to silver, in spades. Silver is rarer and scarcer than gold and it sells for less than 1.5% of the price of gold. So, if you like gold, you should love silver.
Gold is finite and there are physical limitations on creating more. Compare this to the infinite amounts of paper and electronic money being created out of thin air. Recently, I have read sober analysis that suggests gold will be priced at multiples of its current price due to the rapid expansion of monetary reserves. Take those same calculations and apply them to a comparison of gold versus silver. This is an oversight that creates a special opportunity for those that investigate the facts. Dollar for dollar, there is 400 times more gold than silver in the world. Let that one fact sink in and everything else will fall into place.
The next time you read of hundreds of billions, or trillions of dollars of bailouts and government simulative spending, remember there is only $10 billion of silver bullion in the entire world. And very little of that is available for sale, as it is strongly held by true silver believers. The inevitable rush to safety into such a small pool of metal will send the price soaring.
Warning Signs
By now, the world is aware of the largest Ponzi scheme in history, the alleged $50 billion fraud by Bernard Madoff, a fixture on Wall Street for almost 50 years, and of special significance for silver. Madoff was widely respected and trusted by his clients. The pain of betrayal compounds the financial devastation. Knowing you have been cheated makes it much worse. Victims include well-known individuals, charitable organizations, hedge funds and banks. It is said to be the largest investment fraud in history. This will only accentuate the flight to safety. The more people reflect on this episode, the more they will be motivated to buy gold and silver. For thousands of years, gold and silver have been trusted assets in times of distrust. Silver (and gold) may go up or down, but they can’t defraud you.
There are some remarkable similarities between the Madoff fraud and the manipulation that I have alleged in silver for the past 20 years. Both have occurred over long periods of times. Both involved sophisticated investors, including individuals and institutions. Both occurred under the nose of government regulators expressly created to prevent such frauds - the SEC in the Madoff fraud and the CFTC in the silver manipulation. Both regulators were given numerous public warnings of wrongdoing for many years. Both agencies neglected to look into the allegations or investigated and found nothing wrong.
Of course, there are differences. All are now aware of the Madoff fraud while only a few thousand are aware of the COMEX fraud. It is not a mainstream media event. The SEC is under intense and well-deserved criticism for its failure to regulate and terminate the fraud. Criticism of the CFTC will come in the future.
Another difference between the Madoff and COMEX silver frauds is that evidence of fraud was largely concealed by Madoff, while the evidence of fraud in COMEX silver is contained in government data. There was no readily available public data that would have made it easy to see that Madoff was running a fraud. Some sophisticated investors did investigate and steered clear after performing their due diligence. In silver, the data contained in the CFTC’s Bank Participation and Commitment of Traders Reports are all that a reasonable person needs to see. These freely accessible reports clearly indicate a concentrated short position in COMEX silver far beyond anything held in any other commodity. Rather than offer a plausible explanation for how one or two U.S. banks holding 25% of the annual world production of any commodity could not be manipulating, the CFTC instead stalled and began a drawn out investigation during which silver investors were devastated.
Sadly, for Madoff investors, it is too late. For silver investors, it is starkly different. The manipulation has caused prices to nosedive, but this same fraud promises phenomenal future returns. When the Madoff fraud was revealed, it was all over, the money was gone. In silver, when the fraud is universally recognized, the payday for silver investors will have just begun. We will then have embarked on the long-term journey of sharply higher prices that rewards all silver investors properly positioned. With Madoff, not being in was the key. With silver, being in is all that matters. Make sure you are in.
The only real risk facing silver investors is how you hold your metal. This Madoff affair should wake up metals investors holding pool or certificate accounts with no serial numbers. Hold your silver in your personal possession or in bona fide storage. The storage facility should be separate and distinct from the sales agent. The big problem with Madoff is that he held everyone’s funds. When he went under, everyone’s money went under with him. As certain as I am of silver’s coming price advance, I am equally certain that many silver investors will lose their money by holding bogus accounts. You have one of the great opportunities of a lifetime with silver. Don’t expose your profit potential to unnecessary risk.

Bullionmark comment

I agree with Teds assessment that bullion is best held in personal posession. However this is not really a practical solution for many especially in silver. Segregated and allocated metal in private storage vaults are an ideal solution as is the Perth Mint Depository program. Much rumour has been spread about the Perth Mint but after detailed meetings with the Mint management in Perth last week, I am of the strong view that the Mint is fully hedged and a safe place to store metal. It is backed by the Western Australian government. Bullionmark holds much of its metal on an allocated basis at the Perth Mint but also uses private vaults in Sydney and Melbourne. Diversification is important. I have published several articles on the issue of storage and encourage you to re read before making a final decision on storage of your metal.

http://www.bullionmark.com/2008/10/bank-vault-safety.html

http://www.bullionmark.com/2008/10/paper-v-physical.html

http://www.bullionmark.com/2008/10/storing-at-home.html

The following article hightlights a worrying global trend - resource nationalisation. In a world of resource scarcity and tax revenue shortfalls expect to see more countries impose rules and taxes that essentially nationalise assets or profits from mines. Whilst I am very bullish on gold and silver mining stocks you should carefully consider the risks. The great thing about physical bullion in your possession is that it is no one elses liability.

article from AAP

Indonesian politicians have passed a new mining law that will give the mineral-rich nation greater control over its resources.
Analysts warn it could deter investment by multinational corporations.
Indonesia has some of the world's most abundant reserves of coal, copper, gold, tin and nickel.
It has lured mining giants like Denver-based Newmont Mining Corporation, Freeport-McMoran Copper & Gold and the Rio Tinto Group - most of whom arrived before the 1998 ouster of longtime dictator Suharto.
Critics say deals signed under the notoriously corrupt regime offered contracts to large foreign miners that lasted far too long, some running until 2041.
The new law, approved on Tuesday after three years of squabbling in parliament, will in some cases limit areas of exploration, a move intended to benefit small and medium-sized firms.
It also requires companies to seek separate permits for each phase of mining activity, from seismic surveying and exploration to feasibility studies and construction - reversing the previous system of one-stop contracts.
The law has yet to be signed by the president, a formality that normally takes 30 days.
Newmont executives wanted to study the new law in detail before commenting, spokesman Omar Jabara said.
Legislator Sonny Keraf said the law "will serve the nation's best interests" by creating certainty and boosting mining revenues.
But industry experts said it could end up chasing away large-scale investors, putting the future of the industry at stake.
Among other things, it requires investors to process all mining products into metal locally, whether by setting up their own smelters or by using others, something that would sharply increase operating costs.
"How are we going to attract big investors with regulations like this?" asked Priyo Pribadi Soemarno of the Indonesia Mining Association.
"It's a very unfriendly law."
Newmont has no refinery for Indonesian operations, and Jabara said that issue must be resolved, possibly by contracting a refinery in Indonesia to process its ore.
Jeffrey Mulyono, a chairman of Indonesia's coal producers' association, said he expected a sharp decline in investment, which hit $US1.5 billion ($A2.16 billion) last year, up from $US900 million ($A1.29 billion) in 2006.
"This could force some companies to pull out," he said, adding that dragged-out deliberations over the new law had already created uncertainty among miners, including British-Australia mining giant BHP Billiton Ltd, which abandoned a $US4 billion ($A5.75 billion) investment plan earlier this year.
Under the new law, existing companies operating with a contract of work have one year to comply with the new system.
They have five years to begin processing their mining products into metal domestically.

While some investors view precious metals as a short-term cyclical speculation, there are actually three important reasons for including precious metals in every investment portfolio. These are: strategic asset allocation, hedging and tactical asset allocation.

Strategic Asset Allocation
Strategic asset allocation is a method used to fully diversify investment portfolios by properly balancing asset classes of different correlations in order to maximize returns and minimize risk. While many investors believe their portfolios are diversified, they typically contain only four asset classes – Real estate, stocks, bonds and cash. Commodities, precious metals and collectibles rarely form part of most investors’ portfolios. With only four asset classes out of a total of seven, such portfolios are clearly not adequately diversified.

A recent study carried out by Ibbotson Associates, Portfolio Diversification with Gold, Silver and Platinum, noted that, since 1969, stock and bond correlations have increased and, contrary to popular belief, a mix of these will not result in a diversified portfolio. Today, most portfolios lack the negatively correlated asset classes – real estate, commodities and precious metals – necessary to achieve full diversification, and as a result are exposed to risk and volatility.

Ibbotson researchers constructed a composite index that held equal dollar amounts of gold, silver and platinum, and examined the correlations of that index to the other asset classes typically held in investment portfolios. The study, which examined the years 1972 to 2004, showed precious metals are the most negatively correlated asset to all other asset classes. As a result, it takes the least amount of precious metals in a portfolio to achieve maximum negative correlation and the appropriate level of diversification.

The overall performance of precious metals during the 32-year period was close to fixed income investments. Even through the long bear market of 1980 to 2002, precious metals outperformed both cash and inflation during the entire period.

From 1973 to 1984, a high inflation period, precious metals were the top-performing asset class, and the study concluded that precious metals provide an effective hedge against inflation. Precious metals were the only asset class with a negative average correlation to the other asset classes, the basis for diversification.

The Ibbotson study concluded that, by allocating from 10 to 25 percent of a portfolio to precious metals, returns would increase while risk decreased. These conclusions were not based on assumptions of a bull market in precious metals or a bear market in financial assets; they were simply based on a continuation of the returns and levels of inflation that have been prevalent recently.

Hedging
Hedging is a strategy used to offset investment risk; the perfect hedge eliminates the possibility of future losses. The old Wall Street saying, “Put 10% of your money in gold and hope it doesn’t work”, succinctly summarizes the hedging attributes of precious metals. And in today’s economic climate, there are plenty of risks to hedge against: currency exchange declines, loss of purchasing power and “Fat Tail” events.

Currency Exchange Risk
Currency crises have been occurring on a regular basis since 1971 when US President Nixon “closed the gold window”, and, globally, currencies were no longer backed by gold. When confidence in a currency wanes, people tend flee to the safe haven of precious metals. Perhaps most famously, the gold price exploded from 75 marks per ounce to 23 trillion marks per ounce in the 1920s Weimar Republic of Germany. Mexico experienced a currency crisis in 1995, and the peso declined by about 50% against gold in approximately three months. During Indonesia’s currency crisis of 1997, the rupee lost 82 % over a one-year period. In Russia’s 1998 currency crisis, the ruble declined by 60% in just one month. In Argentina’s 2002 currency crisis, the peso devalued to 22 % of its previous level.

A currency crisis is typically triggered by excessive growth in the money supply or unsustainable government debt. Is the world’s reserve currency, the US dollar, vulnerable? Total US money supply in 1971, when President Nixon ceased dollars-to-gold convertibility, was approximately $800 billion. Last year, the annual increase in M3 was more than $800 billion, bringing the total US money supply to $10.2 trillion. In other words, the US now has annual increases in the money supply equal to the entire money supply of 34 years ago. Adding in the current money printing for bail out after bail out money supply is out of control. If this continues, the result will be hyperinflation and, eventually, a currency collapse. Meanwhile, the rising price of gold is acting as a leading indicator for troubled times ahead, signaling a growing non-confidence vote in a government’s monetary policy.

Loss of Purchasing Power
An increasing money supply leads to the steady erosion of purchasing power. Based on published CPI figures, both the Australian and the US dollar have lost about 83% of their purchasing power since 1970.

To appreciate how precious metals preserve purchasing power against inflation, consider that in 1971 a compact car cost about $2,300; today, the price is $20,000. A starter home was $24,000; today, it is $350,000. The Dow Jones stood at 890, vs about 10,000 today. As for gold, it was $35 per ounce, compared to $750 as at October 2008.

If you convert these dollar prices to ounces of gold, you see that they have actually declined. For instance, the car that used to cost 66 ounces of gold in 1971 now costs only 30 ounces. The house that cost 703 ounces of gold now costs 466. In fact, you can buy almost twice as many cars or houses with your gold. Even investing in equities costs less today in gold terms. In 1971 the Dow Jones was 25 ounces of gold, while today it is 13.

Fat Tail Events
The third hedging benefit provided by precious metals is protection against a sudden, unexpected financial crisis – a fat tail event. Examples of fat tail events are war, terrorism, natural disasters, health pandemics and systemic financial risks such as a derivatives accident, bankruptcy of a major bank or a major corporation, defaults on bonds, derivatives contracts, insurance contracts and disruption of oil supply. When any of these occur, traditional financial assets often suffer while the price of precious metals tends to rise dramatically. While most investors regard insuring their homes an absolute necessity, their investment portfolios are often completely exposed and “uninsured” – lacking any precious metals allocation.

Tactical Asset Allocation
Although using strategic allocation or a hedging strategy is enough to justify a 7 to 15 percent allocation to bullion, tactical strategy justifies much higher allocations. Broadly speaking, tactical asset allocation means actively seeking out strategies that will enhance portfolio performance by shifting the asset mix in a portfolio in response to the changing patterns of return and risk. With rising oil prices and increasing inflation, precious metals are likely to outperform traditional financial assets in the years ahead. Here are some of the reasons why precious metals are a good tactical asset strategy today.

Precious Metals Bull Market
The bull market in precious metals began in 2002, and despite recent declines vs the US dollar it has reached new all time highs vs most currencies, including Australian dollars, euros, Swiss francs and British pounds. From a tactical point of view, portfolios should now be rebalanced so they are overweight precious metals in order to take advantage of the current market trends.

The main indicator confirming this trend is the Dow:Gold ratio, a factor that indicates when to be overweight precious metals and hard assets, and when to be overweight financial assets. In 1999 the Dow:Gold ratio peaked at over 40, before declining to its current level of about 13. When the ratio is rising, as it did from 1945 to 1960 and again from 1980 to 1999, it is prudent to be more heavily allocated to financial assets with lower allocations to precious metals and hard assets. When the ratio is declining, as it is today, the opposite investment strategy applies. In our current economic climate allocations to financial assets should be reduced, while allocations to precious metals and hard assets should be increased in order to maximize returns.

Some investors think the precious metals bull market is well advanced, and they have missed the boat. However, when we compare the current market to the bull market of the 1970s, it becomes apparent that we are still in the early stages of what could be a 20-year bull market.

Determining whether the trend will continue is as simple as looking at the key drivers for precious metals price increases. While commodity-based supply/demand fundamentals are certainly a factor, there are more: increasing concerns about the weakening US dollar, burgeoning US debt and rising oil prices. Since the US dollar acts as the world’s reserve currency, its decline will ultimately have a global effect.

US Economic Vulnerabilities
As the world’s reserve currency, the health of the US dollar impacts all economies, currencies and investments. The US economy is currently propped up by a mountain of debt. In 2008, the federal debt increased by over $1 trillion, to over $10.5 trillion. If you add the 5-10 trillion bailouts of banks and Insurance companies plus present value of unfunded Social Security and Medicare obligations is taken into account, it now stands at over $50 trillion.

The ballooning trade deficit has increased annually since 1975. Today it is approximately $1 trillion, meaning the US must borrow over $3 billion each day to fund its consumption of imported goods and commodities. The US now absorbs over 80% of the entire world’s savings in order to maintain its consumption. Since the US has outsourced much of its manufacturing and imports the majority of its oil, even a major decline in the value of the dollar will not reverse this growing trend. The US trade deficit has become systemic.

The US current account deficit is now approaching 7% of GDP. Economists believe that 5% is the critical number because, historically speaking, a current account deficit in excess of 5% has resulted in a currency crisis. During a currency crisis, demand for alternative currencies, including gold, silver and platinum, increase dramatically.

Total US debt as a ratio of GDP has surpassed the previous high set in 1933, when it stood at approximately 255% of GDP. Today, the number is well over 300% of GDP. The fact that foreigners hold a growing percentage of this makes matters worse; almost 50% of US government Treasury bills and bonds are held by foreign entities. If foreign investors, tired of funding US budget and trade deficits, lose confidence in the dollar, a massive exodus from both it and from US financial assets will ensue. The result would be a US financial disaster. Since the US dollar is widely viewed as the last stable currency, much of the money fleeing out of it will have nowhere to go but precious metals. A number of central banks have already announced they intend to diversify out of US dollars. Since aboveground global supplies of precious metals are currently valued at less than $2 trillion, and global financial assets exceed $70 trillion, the prices of gold, silver and platinum will increase dramatically if there is a shift in sentiment and demand explodes. Considering that precious metals are already rising against all currencies, this trend may have already started.

Gold/Oil Relationship

We are at a juncture where oil production is about to decline just as demand, particularly from China and India, is about to explode. Numerous studies suggest, and many experts agree, that the world is close to reaching peak oil production. The result of increasing demand coupled with dwindling supply will be an upward-spiraling oil price that drives precious metals price higher while negatively impacting financial assets and global economies.

Throughout history there has been a positive correlation between the prices of precious metals and oil. As the price of oil increases, so does that of gold. As gold rises, silver and platinum follow. Traditionally, oil trades at about 15 barrels per ounce of gold. Today, oil trades at about 8 barrels per ounce. Either gold is undervalued, or oil must decrease in price to about $50 per barrel, an unlikely event. At the normal 15-to-1 ratio, gold today should be priced at over $1200 per ounce.

Bullion vs. Mining Stocks

Hedging and tactical allocation to precious metals can only be achieved through investment in bullion itself, and not from mining company stocks. While stocks can be good trading opportunities during bull markets, they have a completely different risk/reward relationship than bullion. During the stock market crash of 1987, for example, mining stocks declined by a greater amount than equities in general, while the price of gold increased. Mining companies are exposed to many operational risks and can decline to zero; bullion cannot. During a currency crisis, bullion outperforms mining stocks because global investors as a whole will seek to hold bullion rather than invest in paper. While mining stocks are popular in North America, people in South-East Asia, South America, Europe and other parts of the world that have already experienced a currency crisis would rather have gold, silver and platinum bullion than anything else.

Bullion Investments

One of the most important things to consider when investing in bullion is whether you are investing in paper promises for bullion or the real thing. As we have seen in the current credit crisis counterparty risk is major concern. Owning bullion in your own right has no counterparty risk. Physical gold and silver are no one elses liability in your possession. A futures contract, option, certificate or fund cannot make this claim, someone owes you bllion that in a major melt down may never be repaid. Many precious metals investments are nothing more than promises to deliver bullion at some future date. Bullion investments must precisely track the price of bullion, and not be influenced by the equity markets. If the form of investment is dependent on a counter-party and the counter-party defaults, all the benefits of holding precious metals could be lost at precisely the time when they are needed the most.

In summary, a portfolio allocation of 10 to 25 percent in precious metals is justified simply from the strategic and hedging points of view. If you take into account current vulnerabilities in the global financial system and the implications of peak oil, a much higher allocation is appropriate. The Dow:Gold ratio is an accurate indicator of the trend toward precious metals, and clearly confirms the need to be overweight in that sector at this time.

by John Browne, Senior Market Strategist, Euro Pacific Capital

Despite the fact that the governments of the G-7 nations have injected some $3.5 trillion into their financial systems to prevent a meltdown of the world's financial system, stock markets are still reeling. With some stocks down by over 60 percent, many investors already have been through a disastrous erosion of wealth. The declines have not occurred in just a few days as they did in 1929. Rather, Government interventions, regulatory changes and bailouts have drawn out the fall in prices over a long enough time period to make it feel like a slow water torture.

Nonetheless, the reality is that there has been a dramatic fall in the price of stocks, precipitated by a massive sub-prime induced deleveraging and the opening salvos of a credit crunch that will likely be with us for some time. After years of misplaced optimism, market participants are now coming to grips with some rather unpleasant recessionary prospects. So, despite government rescue measures around the world, markets continue to sputter.

Worse still, as America is perceived as the engine of the fading economic order, the looming recession appears increasingly to be both worldwide and potentially severe. Indeed, it looks likely that, if badly handled, the recession could easily slip into a depression, based on a far more highly leveraged base than in the 1930's.

Therefore, the sad conclusion of the current stock market crash is that it appears to be anticipating an economic crash, just as bad as that of the 1930's.

For a moment at least, attention is focused increasingly on economic recession and diverted from the risk of financial panic. Temporarily, this is reducing the upward pressure on the price of gold. At the same time, recessionary influences are pressing the gold price down, like other more conventional commodities. Therefore, gold continues to trend downwards, possibly even towards $600 a fine once.

In addition, as the risk of recession appears to gaining international perspective, the strength of certain non-U.S. dollar currencies, including the Euro are eroding and driving the U.S. dollar upwards. This, in turn, is bringing yet further downward pressure on the U.S. dollar price of gold.

Regardless of which candidate the United States selects, the next President will face the prospect of severe recession and be forced to "spend, spend, spend" in an effort to avoid an international depression. In the meantime, a second tsunami of credit card, auto, personal and business loan defaults is heading for the banking industry.

Investors are sensing the approaching storm. On January 12, 2009, General Motors Automobile Credit Corporation (GMAC) is due to redeem $1 billion worth of bond issues. Just three months from redemption, these GMAC bonds are trading at a massive discount from par. In today's climate, three months can feel like an eternity. It is a finite measure of only a small part of the financial storm ahead.

In the third weekend of November, leaders of the G-20 nations will assemble in Washington for urgent economic talks. There may even be calls for a new Breton Woods to discuss a revised world monetary order. Key will be China's role. It is likely that a major debasement of all currencies will be undertaken to rescue the global economy and with it, the world's politicians. As this proposal gathers momentum, gold is likely to explode in price.

However, with the possible exception of countries like Switzerland, politicians the world over are likely to create international rules designed to preclude the holders of gold from making "windfall profits."

Therefore, holders of gold should renew their efforts to ensure their holdings of gold are as isolated as possible from the long, greedy arm of the law.

By F. William Engdahl.

He is author of the book, A Century of War: Anglo-American Oil Politics and the New World Order

What’s clear from the behavior of European financial markets over the past two weeks is that the dramatic stories of financial meltdown and panic are deliberately being used by certain influential factions in and outside the EU to shape the future face of global banking in the wake of the US sub-prime and Asset-Backed Security (ABS) debacle. The most interesting development in recent days has been the unified and strong position of the German Chancellor, Finance Minister, Bundesbank and coalition Government, all opposing an American-style EU Superfund bank bailout. Meanwhile Treasury Secretary Henry Paulson pursues his Crony Capitalism to the detriment of the nation and benefit of his cronies in the financial world. It’s an explosive cocktail that need not have been.

Stock market falls of 7 to 10% a day make for dramatic news headlines and serve to foster a broad sense of unease bordering on panic among ordinary citizens. The events of the last two weeks among EU banks since the dramatic state rescues of Hypo Real Estate, Dexia and Fortis banks, and the announcement by UK Chancellor of the Exchequer, Alistair Darling of a radical shift in policy in dealing with troubled UK banks, have begun to reveal the outline of a distinctly different European response to what in effect is a crisis ‘Made in USA.’

There is serious ground to believe that US Goldman Sachs ex CEO Henry Paulson, as Treasury Secretary, is not stupid. There is also serious ground to believe that he is actually moving according to a well-thought-out long-term strategy. Events as they are now unfolding in the EU tend to confirm that. As one senior European banker put it to me in private discussion, ‘There is an all-out war going on between the United States and the EU to define the future face of European banking.’

In this banker’s view, the ongoing attempt of Italian Prime Minister Silvio Berlusconi and France’s Nicholas Sarkosy to get an EU common ‘fund’, with perhaps upwards of $300 billion to rescue troubled banks, would de facto play directly into Paulson and the US establishment’s long-term strategy, by in effect weakening the banks and repaying US-originated Asset Backed Securities held by EU banks.

Using panic to centralize power

As I document in my forthcoming book, Power of Money: The Rise and Decline of the American Century, in every major US financial panic since at least the Panic of 1835, the titans of Wall Street—most especially until 1929, the House of JP Morgan—have deliberately triggered bank panics behind the scenes in order to consolidate their grip on US banking. The private banks used the panics to control Washington policy including the exact definition of the private ownership of the new Federal Reserve in 1913, and to consolidate their control over industry such as US Steel, Caterpillar, Westinghouse and the like. They are, in short, old hands at such financial warfare to increase their power.

Now they must do something similar on a global scale to be able to continue to dominate global finance, the heart of the power of the American Century.

That process of using panics to centralize their private power created an extremely powerful, concentration of financial and economic power in a few private hands, the same hands which created the influential US foreign policy think-tank, the New York Council on Foreign Relations in 1919 to guide the ascent of the American Century, as Time founder Henry Luce called it in a pivotal 1941 essay.

It’s becoming increasingly obvious that people like Henry Paulson, who by the way was one of the most aggressive practitioners of the ABS revolution on Wall Street before becoming Treasury Secretary, are operating on motives beyond their over-proportional sense of greed. Paulson’s own background is interesting in that context. Back in the early 1970’s Paulson started his career working for a rather notorious man named John Erlichman, Nixon’s ruthless adviser who created the Plumbers’ Unit during the Watergate era to silence opponents of the President, and was left by Nixon to ‘twist in the wind’ for it in prison.

Paulson seems to have learned from his White House mentor. As co-chairman of Goldman Sachs according to a New York Times account, in 1998 he forced out his co-chairman, Jon Corzine ‘in what amounted to a coup’ according to the Times.

Paulson, and his friends at Citigroup and JP Morgan Chase, had a strategy it is becoming clear, as did the Godfather of Asset Backed Securitization and deregulated banking, former Fed Chairman Alan Greenspan, as I have detailed in my earlier series here, Financial Tsunami, Parts I-V.

Knowing that at a certain juncture the pyramid of trillions of dollars of dubious sub-prime and other high risk home mortgage-based securities would come falling down, they apparently determined to spread the so-called ‘toxic waste’ ABS securities as globally as possible, in order to seduce the big global banks of the world, most especially of the EU, into their honey trap.

They had help. In recent testimony under oath by Eric Dinallo, the Superintendent of the New York Insurance Department at the AIG Bailout Oversight Hearing, into the AIG rescue by Paulson, Dinallo testified that funding cutbacks in recent years directed by the Bush-Cheney Administration had reduced the responsible department that should regulate or watch over the $80 trillions in Asset Backed Securities (ABS), which included the toxic sub-prime and Alt-A mortgage securities and much more. The Bush Administration took the staff from more than one hundred people down to one---yes that was not a typo. One as in ‘uno.’

Was that just ideological budget cutting fervor, or was it deliberate? Was former Goldman Sachs man, the man who convinced the President to hire Paulson, Bush’s former Director of the Office of Management and Budget (OMB), Joshua Bolten, now the President’s Chief of Staff, responsible for insuring there was no effective government oversight on the exploding securitization of mortgage assets?

These are perhaps some questions which the good Congressmen ought to be asking people like Henry Paulson and Josh Bolten, and not such red herring questions as how large Richard Fuld’s bonus pay at Lehman was. Are Mr Bolten’s fingerprints on the corpse here? And why is no one questioning the role of Paulson as CEO of Goldman Sachs, then the most aggressive promoter of exotic and other Asset Backed Securitization products on Wall Street?

It now would appear that the Paulson strategy was to use a crisis—a crisis that was pre-programmed and predictable as far back as 2003 when Josh Bolten became head of OMB—when it exploded, to panic the more conservative European Union governments into rushing to the rescue of US toxic waste assets.

Were that to have happened, it would in the process destroy what was left of sound EU banking and financial institutions, bringing the world one step closer to a global money market controlled by Paulson’s cronies—US-style Crony Capitalism. Crony Capitalism is certainly appropriate here. Paulson’s predecessor at both Goldman Sachs and at Treasury, Robert Rubin, liked to accuse the Asian bankers of Thailand, Indonesia and other lands hit with the speculative attacks of US-financed hedge funds in 1997 of ‘crony capitalism,’ leaving the impression the crisis was home grown in Asia and not the result of a deliberate executed attack by US-financed financial institutions to eliminate the Asia Tiger model among other goals, and turn Asia into the funder of US debt.

Interesting to note is that Rubin is now a Director of Citigroup, obviously one of Paulson’s crony bank ‘survivors,’ and the bank which to date has had to write off the largest sum in toxic waste securitized assets.

If the allegation of pre-planned panic, a la the Panic of 1907 is accurate, and it is a big if, then the plan worked…up to a point. That point came over the weekend of October 3, coincidentally the national unification holiday of Germany.

Germany breaks with US model

In closed door talks well into the evening of Sunday October 5, Alex Weber the hard-nosed head of the Bundesbank, BaFin head Jochen Sanio and representatives of the Berlin coalition Government of Chancellor Merkel came up with a rescue package for Hypo Real Estate of a nominal €50 billion. However, behind the dramatic headline number, as Weber pointed out in a September 29 letter to Finance Minister Peer Steinbrück that has been made public, not only did the private German banks have to come up with 60% of that figure, the state with 40%. But also, given the careful manner in which the Government in cooperation with the Bundesbank and BaFin, structured the rescue credit agreement, the maximum possible loss, in a worst case scenario, to the state would be limited to €5.7 billion, not €30 billion as many believed. It’s still real money but not the blank check for $700 billion that a US Congress under duress and a few days of falling stock market prices agreed to give Paulson.

The swift action by Finance Minister Steinbrück to fire the head of HRE, in stark contrast to Wall Street where the same criminal fraudsters remain at their desks reaping huge bonuses, indicates as well a different approach. But that does not cut to the heart of the issue. The situation of HRE arose as noted previously, from excesses in a wholly-owned daughter bank of HRE subsidiary DEPFA in Ireland, an EU country known for its liberal loose regulation and low tax regime.

A British policy shift

In the UK, after the costly and foolish bailout of Northern Rock earlier in the year, the Government of Prime Minister Gordon Brown has just announced a dramatic change in policy in the direction of Germany’s position. Britain's banks will get an unprecedented 50 billion-pound (€64 billion) government lifeline and emergency loans from the Bank of England.

The government will buy preference shares from Royal Bank of Scotland Group Plc, Barclays Plc and at least six other banks, and provide about 250 billion pounds of loan guarantees to refinance debt, the Treasury said. The Bank of England will make at least 200 billion pounds available. The plan doesn't specify how much each bank will get.

That means the UK Government will at least partially nationalize its most important international banks, rather than buy their bad loans as under the unworkable Paulson plan. Under such an approach, costs to UK taxpayers once the crisis abates and business returns to more normal conditions, the Government can sell the state shares back to a healthy bank at perhaps a nice profit to the Treasury. The Brown Government has apparently realized that the blanket guarantees it gave to Northern Rock and Bradford & Bingley merely opened the floodgates of government costs without changing the problem.

The new nationalization policy is a dramatic contrast to the Paulson ideological ‘free market’ approach of buying the worthless bonds held by the select banks Paulson chooses to save, rather than recapitalize those banks to allow them to continue to function.

The battle lines drawn

What has emerged are the outlines of two opposite approaches to the unfolding crisis. The Paulson plan is now clearly part of a project to create three colossal global financial giants—Citigroup, JP MorganChase and, of course, Paulson’s own Goldman Sachs, now conveniently enough a bank. Having successfully used fear and panic to wrestle a $700 billion bailout from the US taxpayers, now the big three will try to use their unprecedented muscle to ravage European banks in the years ahead. So long as the world’s largest financial credit rating agencies—Moody’s and Standard & Poors—are untouched by the scandals and Congressional hearings, the reorganized US financial power of Goldman Sachs, Citigroup and JP Morgan Chase could potentially regroup and advance their global agenda over the coming several years, walking over the ashes of a bankrupt American economy made bankrupt by their follies.

By agreeing on a strategy of nationalizing what EU finance ministers deem are ‘EU banks too systemically strategic to fail,’ while guaranteeing bank deposits, the largest EU governments, Germany and the UK, in contrast to the US, have opted for what will in the longer run allow European banking giants to withstand the anticipated financial attacks from the likes of Goldman or Citigroup.

The dramatic selloff of stocks across European bourses and across Asia is in reality a secondary and far less critical issue. According to market reports, the selloff is being driven mainly by US hedge funds desperate to raise cash as they realize the US economy is going into economic depression, that they are exposed and that the Paulson Plan does nothing to address that.

A functioning solvent banking and interbank system is far the more strategic issue. The ABS debacle was ‘Made in New York.’ Nonetheless, its effects have to be isolated and viable EU banks defended in the public interest, not just the interest of Paulson’s banking cronies as in the US. Unregulated offshore vehicles such as hedge funds, unregulated banking, unregulated insurance all went into building the $80 trillion ABS Tsunami as I have called it. Certain more conservative EU hands are not about to buy the remedy being offered by Washington.

The coordinated interest rate cut by the ECB and other European central banks while grabbing headlines, in effect do little to address the real problem: banks fear to lend to each other until their solvency is assured.

By initiating state partial nationalizations across the EU, and rejecting the Berlusconi/Sarkozy bailout scheme, the governments of the EU, interestingly enough this time led by the German, are laying a more sound foundation to emerge from the crisis.

Stay tuned, it’s far from over. This is a fight for the survival of the American Century which has been bvuilt since 1939 on the twin pillars of American financial dominance and American military dominance—Full Spectrum, Dominance.

Asian banks, badly burned by Wall Street’s manipulated 1997-98 Asia Crisis, are apparently very little exposed to the US problem. European banks are exposed in different ways, but none so serious as in the US banking world.

I have tried to inform you in a calm manner for several months now that the end game is near but you still had time to prepare. Hopefully you have done this by now. Unfortunately, the happenings of the last week indicate that we are heading toward a collapse of the financial system at a much faster rate than I anticipated. A real possibility of a banking holiday now exists, this means no open branches, no credit cards, no internet banking for a period of time determined by the government. Whilst I am confident our big 4 banks are strong you cannot under estimate the scale of the crisis that has this week spread to Europe and already bankrupted one country, Iceland. Whilst none of us can really know what this will mean in the near term it is not a time to bury your head in the sand and hope all will be OK. Take action now. Stock up on basic food items and withdraw enough cash to cover living expenses for 1-2 months. This takes little effort and the money can be re deposited once things settle down. If we get a meaningful relief rally in stocks over the next couple of days or weeks, offload any toxic financial stocks you may still own. Also now is not a time to bargain hunt stocks of any kind. This opportunity will arise but from much lower levels than today.

Whilst a little dramatic I think the article from Bill Holter of GATA summarises what is the most likely near term outcome:

"We are witnessing panic on the part of governments worldwide, they are fiddling while Rome burns. They might as well fiddle as there is no solution, the banking system missed the ditch and is going off the cliff. The news cycle is jamming up because more and more "solutions" are announced on a daily basis as the world turns and markets open [or try to]. The banking system worldwide is in a spiral stage that even if panic is stemmed, it will rear it's ugly head again a day, 3, or 7 later. Panic is the absolute outcome here, this has gone too far, too wide, and the infection is too deep to be reversed. Nothing goes straight down, and this is no different, so expect some rallies in stocks and currencies but make no mistake we are are witnessing the end of the banking system.

I don't think there are any band aids left that can last more than 3-5 days at a time. Gold and Silver [and the shares] will catch a bid that has never been seen before. Couple this bid with virtually no supply and the results will be a move to the upside in an asset class as has never been seen nor imagined before. I spoke over the weekend with a liaison to several European banks and he advised me that a waiting period of at least 3-4 weeks for Gold delivery is now the norm. He has never seen anything like this in his thirty years. As the banking system unravels, whatever little physical supply that is left will disappear. The jig is up, either you are out of the paper system or you go down with it. There will be NO paper survivors, either you are a charter member of the next banking system or you will be leapfrogged and left behind.

The Price of Gold will be beyond the reach of the common man. This has got to be the plan, the only way to recapitalize the banks is to revalue Gold up 10 fold, 100 or even 1000 fold. This is no joke, currencies will devalue and approach zero in many many cases. This is not 1929, it is WORSE for several reasons. The biggest being our currencies are bad. Back then the world had a hard and real currency, Gold. The level of debt back then looks highly conservative when compared with today's circus. The world went to sleep and woke up with more debt and more risk than all the previous asset bubbles combined. This IS the biggest financial BUST of all time, by multiples. This is it, it is over"

Maybe/maybe not..... but prepare yourself anyway!

Despite being incredibly bullish on gold & silver in the medium to long term, I believe significant short term price risk exists due to central bank manipulation of the US dollar. With the US bailout plan likely to pass congress this week, market manipulating central banks will be in full force making it appear as though all is well. That means rising stock markets and a strong US dollar. I caution anyone from making big investment bets on gold in the near term and suspect better entry prices after US elections. If gold prices do continue to rise into November be very worried, it spells big troubles and soon.

The long term case for gold (& even more so silver) just continues to build with every rescue plan, bailout, shotgun merger, liquidity injection, rule change and rate cut.

I wonder who is keeping score of the muppets at the US Treasury and federal reserve?

Aug07 – Northern Rock isolated incident - subprime crisis is contained time to buy financials
Mar08 – Bear Stearns was the problem, now all is fine Fannie/Freddie well capitalised – buy financials
Jul08 – Fannie Mae /Freddie signal end to crisis – buy financials
Aug08 – Indymac bank nothing to worry about banks are safe
Sep08 – Lehman Brothers failure needed to cleanse market
Sep08 – Merryl Lynch goes bust – shotgun marriage to Bank of America financial system safe
Sep08 – Next day AIG bailed by Govt but all is fine
Sep08 – Next day run on money market funds in US & Asia syndicated global liquidity all will be fine now
Sep08 – Next day run on Morgan Stanley / Goldman Sachs – Buffet steps in with $5bill. Evidently Buffets $5b will save system!!
Sep08 – Next day Washington Mutual goes under
Sep08 – Fed & US Treasury force Bush to make speech about the dire position of the financial system
Sep08 – Fed & US Treasury put gun to congress and ask for min $700b (but really open ended check) to fix all our problems.

Believe its fixed? No way. This is a $90 trillion, yes thats trillion dollar problem. They are pissing in the ocean. We are only at the end of the beginning
Next problems credit default swaps (ie insurance on company debt), credit cards, auto loans etc. All the muppets have achieved to date is short term stabilisation in ever diminishing time periods. The market wants to unwind all this excessive debt but the central bankers must keep the credit flowing to survive.

Remember central banks mission is to protect the banks and the system not people.

Governments and central banks have only two choices here:

1. Let the system implode on itself causing an immediate depression magnitudes greater than the 1930's
   
2. Print money to debase currencies, hyperinflating away debt Zimbabwe style.
   

Unfortunately both end in social and economic collapse but at least the latter gives a bit more time and can be blamed on other factors. Hyperinflation has been the preferred path of governments for hundreds of years this time will be no different. Except this time its global.

The coming weeks will provide an opportunity to unload any toxic financial stocks you may own. Speak to your financial advisor about reweighting your portfolio mix more into hard assets. Spread your cash around in top tier banks (not second tier). Try not to exceed govt guaranteed $20K in one account. Bring forward any necessary large purchases as prices are going to dramatically increase on everything you need (except houses)
We are living in extraordinary times, please make an effort to improve your understanding of issues beyond the propaganda supported by mainstream media.

Remember in the middle of difficulty lies opportunity, but only for those who are well prepared.

You still have plenty of time so start preparing now.

by Johnny Silver Bear Silver Bear Cafe


As the editor of the Silver Bear Cafe , I try to focus on the ramifications of world events. I try to understand how what's going on now will affect your pocketbook next week, next month, next year. It is my sole intent to help you consider the possibilities which will, in turn, help you prepare for your financial future.
One of the most important aspects of your financial survival concerns your understanding of the nature of money. If you believe that precious metals do not constitute "money", you may have been misled. If you have been misled, who misled you? Why? And "What's wrong with this picture"?
What is money? The whole point of money is suppose to be the provision of a convenient and liquid medium that can be exchanged for less liquid value. It is a go between. One strives to accumulate money so it can be exchanged for something else.
In our illustrious history, we humans have tried everything from salt to sardines as a medium of exchange, but nothing has seemed to work as well as gold and silver. A person bringing a relatively illiquid item to market could swap it for gold or silver, secure in the knowledge that the metal would retain its value for as long as he chose to hold it and would be accepted as payment for anything he wanted when he chose to spend it.
The condition that your gold and silver will retain its value for as long as you chose to hold it is the most valuable characteristic of the "barbarous relics", and provides the fodder for me to champion the cause of precious metals ownership, and for my ensuing attack on the debasement of the American dollar.
Man has an innate desire to obtain and own gold and silver. That we seek to possess precious metals seems as naturally entrenched in our collective psychic as any other instinct. The possession of wealth, in the form of gold and silver, has always represented power and control. There is nothing wrong or unnatural to desire power and control. The power to control one's destiny through the accumulation of wealth is not only natural, it is healthy. This natural desire is the basis of our capitalistic system. The gold standard, as prescribed by our Constitution, is "the Law" that insures that the "power and control" that is provided by wealth, cannot be abused. Those who would seek to abuse the power of wealth would consequently have to break "the Law." "The Law" has been broken.
In 1792 the U. S. Coinage Act was passed by Congress. It invoked the death penalty for anyone debasing money and provided for a U.S. Mint where silver dollars were coined along with gold coins beginning in 1794. The text of Coinage Act of 1792 states: “The Dollar or Unit shall be of the value of a Spanish milled dollar as the same is now current,” that is, running in the market, “to wit, three hundred and seventy-one and one-quarter grains of silver.”
To repeat, A“dollar” is a silver coin containing three hundred and seventy-one and one-quarter grains of silver — and it cannot be changed by constitutional amendment, definitionally, any more than the term “year” can.
Even at the current suppressed value of silver, ($17.06/troy ounce), a "dollar is worth $14.00. The fact that a currently circulated Federal Reserve Note of a "One Dollar" denomination is not worth $14.00 is evidence that a radical debasing of money has occurred sometime in the past and begs the questions: Who was responsible for the debasement, why did "we the people" allow the debasement to occur, and why weren't those responsible prosecuted?
Fiat money, (money not backed by anything), was something so abhorrent to our Founding Fathers that they didn't even discuss it as an option. The Constitutional gold standard provided that the Country's citizens could not be robbed by means of inflation. An interesting original draft by the Founders would have allowed for "bills of credit", or paper money but that was struck out. It seems that during the Revolutionary War, when paper money had been issued, a promise to back the notes for gold or silver was a "no confidence" disaster, causing counterfeiting by the British and other forms of fraud.
The end result were notes of no value, plummeting to less than a penny per dollar. Sound familiar? This is why the Founding Fathers decided to mint only gold and silver coins as "money." They provided for a U.S. Mint where silver dollars were coined along with gold coins beginning in 1794. The mint was intended to provide a service for "We the People", a facility where we could bring our precious metals, aquired by panning or mining or barter, have the metals assayed, minted and returned to us.
" The people of the states empower the Congress to coin money and regulate the value thereof and also of foreign coins." From Article I.8.5
This provision in the U.S. Constitution gave Congress the Right to produce a national coin, set the weight, fineness, and value. Also, Congress could specify the value of a foreign coin in terms of the national coin of the United States.
" No state shall ...coin money; emit bills of credit; or make anything but gold and silver coin a tender in payment of debts." From Article I.10.1
It is clear from this provision that the State's could not create their own coin nor could they make anything but the gold and silver coins issued by Congress as legal tender for the payments of debt. This is a Constitutionally mandated gold standard.
No further paper money was issued by the U. S. Government for over eighty years. The Founders did allow, however, private banks to act as depositories for the United States and to collect taxes. People were issued redeemable bank notes which circulated as currency. Alexander Hamilton was initially responsible for the "National Banking System". Unfortunately, he realized his error in promoting this type of banking too late, and by the end of the Civil War there were thousands of banks issuing thousands of different kinds of bank notes.
In 1862, during the "War for Southern Independence", Lincoln radically debased the currency by having millions of "greenbacks" printed so he could pay for the "trappings of combat" needed for his "sacking of the South". (see death penalty above)
In 1872, Supreme Court Justice Stephen Field, aware of the rages of inflation, attempted to block an unconstitutional overextension of powers by the Bank of the United States. He wrote:
“The arguments in favor of the constitutionality of legal tender paper currency tend directly to break down the barriers which separate a government of limited powers from a government resting in the unrestrained will of Congress. Those limitations must be preserved, or our government will inevitably drift from the system established by our Fathers into a vast, centralized, and consolidated government.”
Drift, it did, and is now moored on the precipice of the economic abyss.
In 1878, in a rare state of clarity, Congress began to redeem "greenbacks" into gold which put the United States back on the gold standard until 1933.
It was well known amongst intelligent politicians, (who have, apparently, remained in the minority), that the gold standard protected citizens against the controlling tendencies of the government by offering an absolute hedge against the depreciation or devaluation of the currency. Gold provided an agent of maintenance and liquidity within and beyond national borders. Above all, it raised a mighty barrier against authoritarian interferences through the manipulation of the economic markets. Within the constraints imposed by the gold standard, America's economy remained relatively healthy until 1913.
On December 23, 1913, the U.S. Congress passed the Federal Reserve Act, placing control of this nation's money into the hands of a private corporation. This corporation was made up entirely of bankers. Calling itself the Federal Reserve, so as to seem official, it replaced the national bank system. Treasury notes were recalled and Federal Reserve notes were issued with a promise to redeem them in gold on demand. The forces behind the Federal Reserve, (American and Western European banking interests), remained tethered by the limits imposed by the gold standard, but this would soon change.
In 1920, the 66th Congress passed the Independent Treasury Act.
In 1921, the United States Congress abolished the U.S. Treasury, and, as a result, all of our country's bullion and all other instruments of value, ( i.e...moneys in trust funds and other special funds that had been kept in U.S. Treasury offices and vaults), were systematically transferred to the coffers of a private corporation!
From 1913, until 1933, under the authority of the U.S. Congress, the Federal Reserve held control of all of our country's gold. They then proceeded to loan us back our gold, at interest. We paid interest for the use of our own gold! What's wrong with this picture? What could have incited our Senators and Representatives to allow that to happen? In order to keep up with the ever rising debt service, we borrowed more of our own gold. We kept borrowing more and more of our own gold to pay more and more interest, until all the gold was gone. At that point, the country went bankrupt. Guess what happened next.
The bankers foreclosed on America. I know what you're thinking. Me too.
On March 9, 1933, the U.S. declared bankruptcy, as expressed in President Franklin Delano Roosevelt's Executive Orders 6073, 6102, 6111, and 6260.
On April 5th, 1933, one month after his inauguration, President Roosevelt declared a National Emergency that made it unlawful for any citizen of the United States to own gold, (see death penalty above), and "unconstitutionally" ordered all gold coins, gold bullion, and gold certificates to be turned into the Federal Reserve banks by May 1st under the threat of imprisonment and fines. This was technically, a national confiscation of gold and silver. This unlawful precedent set by Roosevelt would eventually lead us to the catastrophic situation we find ourselves in today.
Our bankrupt nation went into receivership and was reorganized in favor of it's creditor and new owners, a private corporation of international bankers. (Since 1933, what is called the "United States Government" has been a privately owned corporation, and the property of the Federal Reserve / International Monetary Fund.)
Without a word of truth to the American people, all our good faith and credit was pledged as the surety for the debt by the same slime ball Congressmen who created the mechanism that allowed it to occur.
Those Congressmen, knew such "De Facto Transitions" were unlawful and unauthorized, but were mysteriously coerced into sanctioning, implementing, and enforcing the complete debauchment of our monetary system, and the resulting changes in all aspects of government, society, and industry in the United States of America.
From the onset of the Federal Reserve, fractional reserve bankers set out to win the war of misinformation. They did this, in part, by attempting to advance the pseudo tenets of Keynesianism, monetarism, and supply-side economics.
John Maynard Keynes, although a great friend of the bankers, was probably the most heinous influence on freedom, liberty, and the free market in the 20th century. He was a Fabian socialist and a Globalist, (is that redundant?), who provided an intellectual cover for inflationism. He is best known for authoring bogus economic theories, undermining Western values and philosophy, and providing a floor plan whereby the banksters could more easily deceive the people. It was Keynes who coined the phrase, “barbarous relic” in reference to gold. It was Keynes who desecrated the U.S. Constitution with almost every breath.
"Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose."
During the first half of the 20th century, each of four world leaders did the exact same thing within ninety days of their ascension to power. Each made it illegal for the citizens of their respective countries to own gold. Those leaders were: Mao, Stalin, Hitler, and Franklin D. Roosevelt. All four were acutely aware of the restrictions that a gold standard imposed on their abilities to wage war.
The bankers hate gold as money for the same reason. Gold as money acts as a barrier to the expansion of credit money. By pandering the lure of unlimited credit, the banksters went about recruiting politicians through out the world. The opportunity to wage war on borrowed money turned out to be irresistible to Empire. Wars have always been very important to the banking cartels. They are very expensive. Time and time again, through loans to governments, the cartels have provided the funding for great conflicts. Imagine, being able to go to war with unlimited funds. Better yet, imagine the inability to go to war because of the lack of unlimited funds. The temptation extended to the power mongers was too great. The credit was made available with a single catch. The gist of the pitch went something like this:
"Sure we'll loan you all the money you want, on the condition that you enact laws making all the citizens of your individual countries responsible for the interest payments, through taxation"
One by one the leaders of every government on earth sold out, and agreed to demonetize gold, thereby allowing the continued power grab of the banking cartels through the issuance debt based currency. The result has been the methodical fleecing of the general population through the debasing of the dollar by 97%. (see death penalty above)
On May 22nd, 1933, Congress enacted a law, against Constitutional mandate, declaring all coin and currencies then in circulation to be legal tender, dollar for dollar, as if they were gold. The President was unconstitutionally empowered to reduce the gold content to the dollar up to 50 percent. (see death penalty above)
On June 5th, 1933, Congress stabbed the gold standard out of existence by enacting a joint resolution (48 Stat. 112), that all gold clauses in contracts were outlawed and no one could legally demand gold in payment for any obligation due to him. (see death penalty above)
On January 30th, 1934, the Gold Reserve Act was passed, giving the Federal Reserve title to all the gold which had been collected. This act also changed the value/price of gold from $20.67 per ounce to $35 per ounce, which meant that all of the silver certificates the people had recently received for their gold now were worth 40 percent less. (see death penalty above)
On January 31st, 1934, after President Roosevelt fixed the dollar at 15 and 5/21 grains standard to gold. Russia and the central banks of Europe were very excited and began buying up gold in huge quantities. This planned redistribution of our country's wealth was one of the most important objectives of the Globalist's agenda. Thus a dual monetary system began which offered the gold standard for foreigners and Federal Reserve notes for Americans. (see death penalty above)
Between 1934 to 1963 all Federal Reserve notes issued had a promised to pay, or to be redeemed in "lawful money." Over a short period of time the wording on the Federal Reserve notes began to change until there was no redemption in silver promised. This was done slowly enough that the people didn't see it coming. (see death penalty above)
On November 2nd, 1963, new Federal Reserve notes with no promise to pay in "lawful money" was released. No guarantees, no value. (see death penalty above)
In 1965 silver in coins were reduced to 40 percent by President Lyndon Johnson's authorization. (see death penalty above)
President Lyndon Johnson issued a proclamation on June 24, 1968, that all Federal Reserve Silver Certificates were merely fiat legal tender and could not be redeemed in silver. (see death penalty above)
On December 31, 1970, President Richard Nixon signed into law an amendment to the Bank Holding Company Act, which, among other things, authorized the treasury to totally debase coins to a worthless value in non precious metal. (see death penalty above)
"Single acts of tyranny may be ascribed to the accidental opinion of a day. But a series of oppressions, begun at a distinguished period, and pursued unalterably through every change of ministers, too plainly proves a deliberate systematic plan of reducing us to slavery." - Thomas Jefferson
Since the seventies, the unfettered issuance of debt money has continued to debase our currency more rapidly than ever before. In the last three years, the debasement has accelerated exponentially.
"The abandonment of the gold standard made it possible for the welfare statists (government bureaucrats) to use the banking system as an unlimited expansion of credit. In the absence of the gold standard, there is no way to protect savings from confiscation through inflation... Deficit spending is simply a scheme for the "hidden" confiscation of wealth. Gold stands in the way of this insidious process." - Alan Greenspan
The world governments continue to babble that tired Keynesian rhetoric insisting that gold and silver have become obsolete, relics of the past. Yet in the 4th Quarter of 2006 global gold and silver demand was the highest on record, and, some of the world's largest investors are presently taking major positions in precious metals.
The cartel wants economic growth, lots of borrowers, and lots of opportunities to lend newly created funny money at interest. You can't blame them for wanting that. If I could print up all the funny money I wanted and could then lend it out at interest, I'd be happy too. That is, I would be happy to lend it if I didn't have a soul. The ravages of inflation have heretofore been thoroughly exposed and the results are blatantly apparent in our inability to successfully engineer our lives without debt. Fractional reserve banking has provided for the theft of the life blood of our nation.
Compounding the problem is the fact that the world is no longer capable of sustaining economic expansion. We are beginning to witness emerging nations, like China and India sucking up natural resources at a rate that is way past rechargeable. We are entering a period of civilization where the keyword is sustainability, not growth.
The debasement of our currency continues with abandon.The purchasing power of the dollar is quickly eroding. It is down 30% in the last three years. Conversely, the value of gold is up 30% in the last three years. Because the dollar is the reserve currency of world, every commodity, from rice to timber, from oil to precious metals, will continue to rise, priced in dollars.
The U.S.A. is currently breaking all records for the longest period of time that a nation's economy has endured after abandoning the gold standard. Our country has been foreclosed on in the past, and its just about to be foreclosed on again. It's just a matter of time. The "endgame" is near.
" I believe that banking institutions are more dangerous to our liberties than standing armies . . . If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] . . . will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered . . . The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." -- Thomas Jefferson -- The Debate Over The Re Charter Of The Bank Bill, (1809)
The last thing that the powers that are engineering the devaluation of the dollar want to happen is for the world to wake up to the fact that precious metals represent un-inflatable money. Both gold and silver are rising in price. This rise is currently fueled mostly by the dollar's demise. When the resulting "demand panic" kicks in, and it will very soon, the value of precious metals will "go ballistic." Oil is already being affected by "demand panic." It's price is rising in all currencies, not just the dollar.
It is my view, (and one that is shared by a great many others), that the failure of our current monetary system is eminent. The purpose of this examination has been to "wake you up", and make you aware of the facts that support my take on things. Hopefully it has increased your respect for the intrinsic value of precious metals. From an economic standpoint, gold and silver will lend heartily to our salvation. Gold and silver will soon regain their positions as the anchors of an honest monetary system. The market will demand it, and the "powers that be" will have no choice but to let the market have its way.
The presence of gold and silver in your portfolio will insure that you will emerge from the abyss with your capital intact. There is still time for you to reallocate a portion of your equity into the commodity sector, including gold and silver bullion, and gold and silver mining stocks. This move could well provide you with an unequaled measure of security. The gold standard is part of our Constitutional legacy. The subjugation of the Constitution is the root of all economic evils. If enough of us get together on this, we might be able to "Right the Republic". Very soon, as early as next year, a lot of people will be glad they held gold and silver.
Its not what you don't know that will screw you up, it's what you know that is wrong. The spin you hear from the mainstream media is intended to mislead you. Open your eyes and face the future. If you leave your head in the sand and ignore it, you are only leaving your butt exposed for the world to kick. This all may sound like gloom and doom, but when you get a handle on what is going to happen, you will have a future filled with opportunity. Fortune favors the Informed.

Many people often say to me bullion pays no interest so I prefer cash. The Keynesians have spent almost 40 years of well oiled propaganda positioning gold as a non interest bearing investment relic.

Lets examine the facts:

• Interest is a payment or "rent" on money lent or borrowed to compensate for loss of purchasing power or opportunity cost.
  
• The loss of purchasing power is measured by inflation.
  
• We all know government estimates of inflation at around 4% are lies (probably closer to 8%) but lets use them anyway.
  
• Today you can get about 7% in a Commbank term deposit.
  
• The interest is taxable so using a rate of 40%, your real return at 4% inflation is almost zero.
  
• If we apply the real world inflation rate of 8% you are losing about 4% after tax
  

The loss of purchasing power of paper currency is best demonstrated by some simple and observable facts:

Prior to 1971 a family financial structure was dramatically different:

Dad could work a blue collar 40hr per week job and mum could stay home and raise the kids but they could still afford a Sydney house with a small 10 year mortgage. They owned one car outright and paid cash for the annual beach holiday. Kids schooling, pensions and healthcare were government funded. Life was simple.

Fast forward to 2008:

Dad and mum are working 60 hr weeks. A 30 year mortgage buys a suburban box 1hr 20 mins from CBD. Both cars are fully financed, the annual holiday is paid on credit card, self funded childcare and education, personal super contributions and private healthcare. Life is crazy.

This is inflation........the loss of your purchasing power.

Why has this happened?

1971 is the year that the US dollar replaced gold as the worlds reserve currency. The spending discipline enforced by the gold standard no longer remained. The US dollar was now backed by nothing other than faith, a promise to pay. All currencies would now be measured in US dollars, meaning gold was effectively replaced by the US dollar as the global monetary check and balance.

The printing presses have been running 24 x 7 for 37 years now. The supply of money with nothing backing it is acting as a hidden tax for every citizen. It has turned entire countries of net savers into net debtors with no hope of repayment. This is why Joe sixpack, the factory worker in 1970, enjoyed a better standard of living than most people today – inflation through paper currency debasement.

This concept is nothing new. In Roman times Emperors struggling to fund the expanding war effort debased gold and silver coins by slicing edges or mixing cheaper alloys into production. History is littered with examples of how governments swindle money from its people.

Looking at recent events with the massive financial global bailouts (they are not just in US) the printing press spigots have been ratcheted to a level never seen before. In fact today the use of digital dollars means they don't even need to waste paper to increase the money supply. Governments call it liquidity injections, emergency funding, temporary loans, asset swaps etc etc but it all means something very simple: your money is being debased at record pace and inflation is going to accelerate to unimaginable levels as a result.

We are headed for a global currency crisis, hyperinflation ala Germany & Zimbabwe. Unfortunately the masses will learn the concept "what is money" the hard way. Their digital and paper dollars will become worth less and the kings of currency, gold and silver, will resume their rightful place as the only real money.

Still care about gold not paying interest relative to cash?????

This podcast is a must listen for any bullion investor. It highlights extraordinary demand and puzzling discrepancy between physical and paper bullion.

Feel fee to post comments after you have listened to the podcast.

Click here to download the podcast

I am more concerned about the return of my money than the return on my money. --Mark Twain

NEW YORK/WASHINGTON (Reuters) - The ruptured U.S. financial system was facing an unprecedented shakeup on Sunday that could lead to the failure of Lehman Brothers, the takeover of Merrill Lynch & Co Inc and big asset sales by big insurer American International Group.
The developments may indicate Wall Street and Washington are accepting that massive triage is necessary in the face of the 13-month old credit crisis and destructive U.S. housing bust.
"The U.S. financial system is finding the tectonic plates underneath its foundation are shifting like they have never shifted before," said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey. "It's a new financial world on the verge of a complete reorganization."
The focus on Sunday had initially been on whether talks between regulators and Wall Street's top bankers could lead to the sale of Lehman, which until recently was the fourth-largest U.S. investment bank.
However, those talks faltered when Britain's Barclays Plc, which had appeared to be front-runner to take over Lehman -- excluding its toxic mortgage-related assets -- said it had pulled out of the bidding.
That triggered expectations the investment bank is heading into bankruptcy and prompted a rare emergency trading session on Sunday to allow Wall Street dealers in the $455 trillion derivatives market to reduce their exposure to the firm.
The Lehman news pushed U.S. stock index futures sharply lower on Sunday, with the S&P500 futures down 36.40 points at 1222.10, and the U.S. dollar tumbled in early trade in New Zealand, with the euro jumping to 1.4306/10 at 2214 GMT compared with $1.4225 in late U.S. trade on Friday.
Within hours of Barclays withdrawal, the New York Times was reporting that Bank of America was in advanced talks to acquire Merrill for at least $38.25 billion in stock, citing people briefed on the negotiations.
And then, the Wall Street Journal said that AIG, which was until recently the world's largest insurer by market value, is expected to sell off assets, including a profitable aircraft leasing arm.
REAL ESTATE WOES
Merrill, AIG and Washington Mutual, which was the subject of conflicting reports on Friday about whether it was in advanced talks for a sale to JPMorgan Chase & Co all face similar problems because of their ownership of real-estate related assets that have fallen sharply in value.
A perception among investors that the losses they have disclosed are far from enough, and that they will have difficulty in raising new capital, has driven their share prices sharply lower.
One of the catalysts for this weekend's events was the stance of U.S. Treasury Secretary Henry Paulson.
He was strongly opposed to using government money in any deal aimed at resolving the Lehman crisis, a source familiar with his thinking reiterated on Sunday.
The lack of such government guarantees was the main reason Barclays decided to exit the negotiations to buy Lehman, according to a person familiar with the matter.
An emergency trading session was set between dealers with Lehman Brothers counterparty risk involved credit, equity, rates, foreign exchange and commodity derivatives, the International Swaps and Derivatives Association said.
"This is an extremely, and I stress extremely, rare event. It also speaks to the more general notion that, in today's highly disrupted financial markets, the unthinkable is thinkable," said Mohamed El-Erian, the chief executive of Pimco, the world's biggest bond fund.
Market sources said the special session was initiated by the Federal Reserve.
The aim was to reduce risk associated with a potential bankruptcy filing by Lehman Brothers.
"Trades are contingent on a bankruptcy filing at or before 11:59 p.m. New York time Sunday (0359 GMT)," said the statement. "If there is no filing, the trades cease to exist."
The special session "is a way to offset the risk between the remaining large banks and insurance companies and fund managers prior to the markets opening in Asia," said Mark Grant, managing director of structured finance at Southwest Securities, based in Dallas.
Grant is expecting a turbulent session when the U.S. markets reopen for business on Monday.
"No one has any idea about the credit quality of the assets in Lehman's portfolio and no one has a handle about the size of the CDS (credit default swap) contracts," he said.
"The market is going to be spooked. People will be fearful and no one outside a very small group of people knows what Lehman going into liquidation will mean."
If there is a forced sale or liquidation, "this could set off another round of writedowns globally."
BALANCING ACT
Lehman has been collapsing under the weight of toxic assets, mainly related to real-estate, that are now worth only a fraction of their original prices.
The crisis at Lehman presented a delicate balancing act for Paulson and the Federal Reserve, who have urged Wall Street chiefs to come up with their own solution.
So far this year, the government has sponsored rescues of Lehman rival Bear Stearns and mortgage lenders Freddie Mac and Fannie Mae.
The authorities don't want to be accused of encouraging excessive risk-taking by bailing out another yet another investment bank.
But they also cannot afford to let a blow-up of Lehman paralyze the financial system and deepen the credit crisis.
"Anyone else who has these toxic assets, if they haven't made a full confession, they better do it now," said Matt McCormick, portfolio manager at Bahl & Gaynor Investment Counsel in Cincinnati, Ohio, which has $2.9 billion of assets under management.
"These assets may be hard to unwind, but they can unwind your firm. Lehman tried to deny reality until the bitter end."
BAD BANK
Bankruptcy would mark an ignominious end to a once-proud firm, founded by cotton-trading German immigrants 158 years ago. It would also badly tarnish the reputation of CEO Dick Fuld, who has insisted that his firm could work through its problems to survive as an independent entity.
One solution that has been considered is a hiving-off of Lehman's bad assets into a "bad bank", in which rivals would take stakes, people briefed on the matter said.
It wasn't immediately clear whether such a plan could be part of a bankruptcy filing.
Former Federal Reserve Chairman Alan Greenspan said on Sunday he suspected "we will see other major financial firms fail," but added that this did not need to be a problem.
"It depends on how it is handled and how the liquidations take place," Greenspan told the ABC program "This Week."
"And indeed we shouldn't try to protect every single institution. The ordinary course of financial change has winners and losers."
At Lehman's headquarters in midtown Manhattan, employees were coming and going throughout the day.
Few agreed to be interviewed.
"For some people it's business as usual, but other people are worried about liquidation and that they won't have jobs," commented a man who said he worked in the investment banking division.
"Some people are upstairs and working on their projects. Others are worried that they'll be out of work and are packing up," said the man, who declined to give his name.
Security outside the Fed building where talks between banks and regulators over the crisis were continuing was even tighter on Sunday than on Saturday, with nine dark-blue federal government vans blocking the area around the entrance and security guards preventing reporters from getting close. By early evening, some of the executives had left the building but others remained.
DIFFERENT THIS TIME
The meetings with the CEOs of Wall Street's top banks were reminiscent of the 1998 bailout of hedge fund Long-Term Capital Management, two sources familiar with the situation said.
With LTCM, major banks each contributed to a $3.65 billion bailout of the hedge fund, allowing it to be wound down in an orderly way.
This time may be different. The capital of many top banks is already strained by the credit crisis, making them reluctant to fork over funds to help Lehman, whose problems are largely a result of bad bets on the U.S. mortgage market.
Also, while LTCM was a client of most Wall Street firms, Lehman is a competitor.
Lehman has hired law firm Weil Gotshal & Manges to prepare a potential bankruptcy filing, the Wall Street Journal reported on Saturday, citing a person familiar with the matter.

by Jason Hommel

When it comes time to talk about silver, most people first ask, "What's the price?" I can no longer say. My programmer summarizes the situation:
"I just got off the phone with Jason.
1. Industrial users are seeing longer lead times, and higher prepayments
2. Retail bullion is tightening and always 1 week of inventory away from default
3. Huge paper silver defaults imminent (Kitco, Perth, Barclays, etc all reporting major problems)4. If prices go up, investment demand will skyrocket
5. If prices stay low, defaults are imminent
6. If prices shoot up and down, businesses will break from volatility
7. The system has no where to run, it is at it's final cliff (after 37 years, from 1971.)."

The Mints are swamped, and operating at maximum capacity, or not at all, so the shortages will not end anytime soon.

A: Sunshine mint, who make blanks for U.S. Mint's Silver Eagles, says all new orders have an estimated lead time of 5 months, out to February.

B: NWT Mint, has lead times of 4-6 months.

C: Johnson Matthey refinery stopped taking orders for 100 oz. bars, as we know.

D: Perth Mint remains a joke, claiming to have $880 million in gold and silver in "working inventory"; but more than half is leased out to their 40% owned AGR Matthey, which is closing offices during a time of record demand from the public. I mentioned that to the mint master of the Sunshine, and he laughed, and was flabbergasted, knowing what he could do with that.

Even if the mints are at maximum capacity, the market is demanding far more than they can produce. So, product shortages will continue for months, even if there is no 1000 oz. bar shortage (but I think there is a shortage of 1000 oz. bars.) Further, they are not raising prices, nor will they allocate product to higher bidders. The Paper silver price is going down faster than the physical silver price.
So, people who own paper silver are losing more money than people who own real silver.
Premiums for physical are growing, and will likely continue to go up for the next 6 months, or perhaps indefinitely.
Dealers who have hedged in paper, are falling behind, and do not want to bid higher for real metal. They are hoping that premiums, the price paid over spot for physical silver, will come down. It probably will not.
That's the biggest reason why many dealers "can't find silver"; because they are unwilling to pay the growing premiums.
If they don't pay it, they won't have any silver for their business, and they will be out of business. So, at some point, they will "get it" and pay for it.
If you don't pay it, you won't have any silver to preserve your capital, and you will be out of capital.
Most people don't want to watch their paper go all the way to zero, so at some point, most people who own paper money or paper silver will "get it" and pay for it.

Examples of real silver selling for more than paper silver:

Example 1

My programmer, Shelby Moore, notes:
I bought Maples from apmex for $14.40 ($1.49 over spot) on that first big drop from $15 to below $13.
Today in same quantities (500+) Maples at apmex are $14.31 ($2.79 over spot).
Yet paper silver owners have lost -11% of their value since then. My net worth in Maples has not declined at all in the same time.
Example 2
I've repeatedly warned my readers about the Perth Mint, because they have had far too many complaints about not being able to deliver allocated silver in a timely manner over the years. This means they are either scraping the bottom of the barrel, or are technically bankrupt, but insolvency to silver investors is rarely something that causes a foreclosure or bankruptcy. It just causes physical prices to rise more than paper.
One of my readers reports that premiums for physical silver from the Perth Mint are out of control. It can cost 30-40% more for physical, and that's the "penalty" or "premium" for exchanging a Perth Mint silver certificate for real silver. It was reported this week to me by one of my readers that Perth was charging over $200 Australian for a 10 oz. silver bar, which is $20/oz.Has anyone been able to cash in their Perth Mint certificates for cash? Or are you trapped?

Example 3

As late as 1964, a US silver certificate paper dollar and a silver dollar were the same price.
Today, as everyone knows, a silver dollar is worth about ten times more than a paper dollar.
So, in the past bull market for silver, real silver became more valuable than paper silver.
The same thing is happening today, and just like then, most holders of paper silver are in denial and don't understand.
What is paper silver? Anything where the metal is not in your hot little hands. If the metal is held by someone else's cold clammy hands, held for you, then it's paper silver, because it's their liability to you.

Example 4

Ebay.com Silver Eagles in rolls of 20 have sold for over $400, which is $20/oz.

Example 5

My auction where 25 bars were bid for $4.01 over spot.
Some people just do not understand markets. Some of my readers have suggested that I was price gouging. But I did not set the price, it was set by the highest bidder in the auction market.
Some of my readers suggest that I simply "tell" people to not sell silver below $50/oz, so that will become the price. But I do tell. I can't command, obviously, I can only suggest that people not sell. And for the most part, people are not selling, or if they do, many more are buying. Also, remember, much silver is still coming to market by the miners, far more than ever came from investors selling. Most silver coming to market now is from the miners.

Example 6

90% junk is now $0.50 to $.70 over spot and 40% is sold out.
Junk was below spot before the paper price drop. So this is another example ofpaper silver holders falling behind physical holders.

Example 7

What if "THEY" told you that your silver was worth $2 per ounce? Would you believe them? No? Then why believe them today?

The purpose of manipulation has several goals:

1. To make the dollar look good by comparison.
2. To discourage silver investment. This time, the lower price is failing to do that.
3. To encourage silver investors to sell. This time, the lower price is failing to do that.

So, the manipulations are obviously failing, except it is making the dollar look good. They had to hammer silver by over 40%, and only got about a 10% increase in the dollar in overseas markets. Not bad for "wasting" $2 billion on the silver market, so at least they got some bang for their bucks. In fact, they probably made far more than $2 billion, just on the Forex markets, even though they have not, and cannot cover their silver trade.And the manipulations are now a blatant joke.People wonder, "how long can this go on?" Be patient, it will probably be over rather quickly now. The futures contracts that are not backed by any silver may come due in perhaps in 3-6 months, or maybe within 2 years the COMEX will be gone. That will be bigger than the FNM and FRE "conservatorship/bankruptcies".

What will happen next? It's anyone's guess. I have one. Maybe the paper sellers will never cover. Maybe they plan to default, while maintaining a low price. After all, if you have to give out a "cash settlement" because there is no silver, then it's far better to default at $10 than at $100, right?
Some people assume there will be short covering. Not necessarily. Debts that cannot be paid will not be paid. That's what bankruptcy is all about. You cannot squeeze blood from a stone, and you cannot conjure up silver from a short seller of silver who has no silver and who cannot find any silver and who is bankrupt.
The silver debt might take down the entire Exchange. No, scratch that, there is the 'paper payment' clause. They will continue to sell paper silver in all forms (including the dollar) until there are no more buyers.It's a very profitable business selling paper. My dad sold "Da Vinci" paper airplane packages for $1.50 that cost 80 cents to print up. He used very high quality paper. He stopped when people stopped buying.
Something to think about: In Zimbabwe last year, when there was runaway inflation, there was an official price of gold. The officials needed gold, because their currency could not be used to buy anything outside of the country. So, the price of gold rose, officially, by 10 times in one day. Something like that could happen here.
What if tomorrow, or next week, the price of silver was $50 or $100/oz. That would not let any new speculators "get on board" a new price rise. I expect something like that to happen one day. Recent history shows that's how it can go.
If it does go that way, very few holders of "paper silver" will benefit; most, if not all, will lose.
If paper silver bag holders start selling to save their skins, their sunburn will start to sizzle, as their selling of paper will cause paper prices to go down further, and premiums for physical silver to rise even more.

Something to think about:

If the silver investment market is $1 billion at around $13, then it's about $7 billion at $100.
Question: How much is $7 billion in the grand scheme of things financial? Peanuts, right?
People sometimes ask me, "Jason why not try to convince a billionaire to buy silver?" Oh, but I am. It's you. 80,000 readers. Average net worth is about $100,000. That's an asset base of $8 billion. Yes, I know many of you are broke. But if there is one guy with $10 million for every 100 broke people reading, that's how it averages out.
It is already far too late for someone with $8 billion net worth, you (collectively), to protect yourself with physical silver; especially if that silver cannot be found.
Therefore, I stand by my call to buy silver at $21/oz. The shortages started then, and have only gotten worse. Clearly, many of you did listen, and it was good that you did! But the majority reading me have still not acted.
Fortunately, for those who can really listen and accept it, you (individually), it might not be too late. Most of the people on my list, over half, have been reading me for less than a year. It takes the average person about a year of reading me before they start to act. I know. I get the emails from appreciative readers. Some take even longer, like 3 years, and then "buy their first silver". You might want to decide to act sooner, especially since they are giving away silver nearly for free right now, if you can find it.Many are still reporting to me their shock that the coin shops are totally sold out, and cannot find any silver. Even though I've been reporting this for 5 months now. What? Do you think I'm lying? No, for most people, it just sounds preposterous and against everything they think they know. But it's completely fitting with everything I've ever studied about silver.

You might want to speed up your "conversion" or understanding by browsing my archive:http://silverstockreport.com/ssrarchive.htm

My favorite dealer right now is www.apmex.com. They recently sold out of over 800 bars of 100 oz. of silver in less than a week. Amazing volume. Just in bars, that's 4 million oz./year, or nearly 10% of the net investment market in silver, just in bars alone. Minimum order? $50.
My second favorite dealer (and sometimes favorite) now is www.tulving.com. He has nearly 200,000 oz. of silver; mostly in Silver Eagles and Olympic Maples. Premiums keep rising to $3-4 over spot. Minimum order is 500 rounds. He could sell out again in about 2 weeks or less.
Both of their premiums for real silver keep rising. Maybe that's why they still have some to sell. Maybe they know something.

Something to think about:

It's reported, or theorized by at least two sources now, that JP Morgan is one of the major banks who sold about 130 million ounces of silver in a month, about $2 billion. JP Morgan is also the custodian for the Silver ETF, SLV.
The SLV is "paper silver" of the worst kind, as it puts the rat in charge of the cheese. Also, holders of the SLV are losing out, as premiums for real silver rise. Investors in the SLV who bought an equivalent of 100 ounces of silver cannot buy 100 ounces of real silver for the same price anymore. Paper silver holders are falling behind because they did not buy the real thing.
So, what's the price of silver? Is it $11? $14? $15? $20? Or more like "heading to $100?"
By the way, we used to "quote the price" at the main page of silverstockreport.com in a neat little application that quoted a 5 minute delayed average of 5 other precious metal price quotes. That always bothered me, because I knew we were not selling, so it's just a "re-quote". I finally took it down. What's the point? It was wrong and misleading. So, it had to go.
It was just numbers on a computer screen. Meaningless. Think about it.

Example 8

It could be worse. What if you owned Lehman Brothers stock? Stock went from $16-18 to $7.79 in two days. Or, you could have owned FRE and FNM stocks and lost even more. Funny thing. LEH lost over $7 billion in market cap in two days. There's not even $7 billion in silver in the world to buy! Not below $100/oz.!

Sincerely,
Jason Hommel