SilverDoctors: Cartel Defends $1750 Gold & $34 Silver With Waterf...

SilverDoctors: Cartel Defends $1750 Gold & $34 Silver With Waterf...: Absolutely classic cartel raid in gold and silver today as they attempt to defend $1750 gold and $34 silver.  Just prior to 10am EST, silve...

Fleckenstein - Get Ready, Public to Enter Gold & Silver Markets

Super Powers Can Handle Super Debt?

World renowned Harvard economist Niall Ferguson says the USA is now unlikely to default on its debt (actually only partially) and that the reason they won’t “run out” of money has nothing to do with their status as a currency issuer, but has everything to do with being a super power which gives them the ability to handle “super debts” (via Business Insider):

“I think we are going to get some defaults one way or the other. The U.S. is a different story. First of all I think the debt to GDP ratio can go quite a lot higher before there’s any upward pressure on interest rates. I think the more I’ve thought about it the more I’ve realized that there are good analogies for super powers having super debts. You’re in a special position as a super power. You get, especially, you know, as the issuer of the international reserve currency, you get a lot of leeway. The U.S. could conceivably grow its way out of the debt. It could do a mixture of growth and inflation. It’s not going to default. It may default on liabilities in Social Security and Medicare, in fact it almost certainly will. But I think holders of Treasuries can feel a lot more comfortable than anyone who’s holding European bonds right now.”

MF Global Was Doing Great Until It Wasn’t

By Matt Levine

“Every banker knows that if he has to prove that he is worthy of credit, however good may be his arguments, in fact his credit is gone,” but every banker also seems to forget the modern corollary, which is that, if you have to prove you are worthy of credit, however good may be your arguments, don’t do it over email. Here’s someone who forgot that and does it surprise you to find his name in the same sentence as “House Financial Services Subcommittee on Oversight and Investigations”?:

A week before MF Global Holdings Ltd. collapsed, its chief financial officer told Standard & Poor’s in an e-mail that the futures broker had “never been stronger.”
S&P provided the House Financial Services Subcommittee on Oversight and Investigations with an excerpt of the e-mail from MF Global CFO Henri Steenkamp. S&P also informed the panel that Jon Corzine, then MF Global’s chief executive officer, met with its analysts on Oct. 20 to reassure them that his $6.3 billion bet on European sovereign debt was no threat to the firm, according to a Jan. 17 letter obtained by Bloomberg News.
U.S. lawmakers will turn their attention to the role of the ratings companies in the failure of MF Global at a Feb. 2 hearing after summoning Corzine, the former governor of New Jersey and Goldman Sachs Group Inc. co-chairman, to two hearings in December. S&P ranked MF Global as investment grade until its failure, while Moody’s downgraded it to junk status four days earlier.
“MF Global is in its strongest position ever,” Steenkamp told S&P on Oct. 24, according to the letter to Representative Randy Neugebauer, a Texas Republican, from Craig Parmelee, a managing director at S&P in New York.

Iran sanctions: India exploring Russia payment route

With the U.S. and the EU imposing fresh sanctions against Iran, India is exploring all possibilities to keep the Iranian oil flowing as it is critical to its energy security. One of the options being discussed is firming up an arrangement with Russia’s Gazprombank for paying to Iranian oil.

In the wake of the U.S. and the European Union approving fresh sanctions and an oil embargo against Iran, India has no choice but to step up its efforts to find new ways to pay for Iranian hydrocarbons.
Unlike Turkey, the current mediator between Indian and Iranian oil companies, one of the most convenient options seems to be using the Russian banking system, which is not facing a lot of pressure. To keep Iranian oil flowing as it contributes around 12 percent of New Delhi’s oil imports, India had started preparing in advance for the introduction of the EU oil embargo against Iran. An Indian multi-ministerial delegation visited Tehran from January 16 to 21 to discuss with Iranian colleagues the possibility of changing the current payment methods for Iranian oil.

According to Indian media reports, India is exploring the possibility of opening a bank account in another country, perhaps with Russia’s Gazprombank. The desire for such an arrangement was expressed by Indian Oil Corporation and Bharat Petroleum Corporation, India’s two largest oil refiners. Indian Prime Minister Manmohan Singh discussed the question of opening accounts with Russian politicians during his visit to Moscow in December. Gazprom has not yet released information about a possible deal. Another proposed way to change the payment scheme for Iranian oil would be to transition to a barter system. India would invest in other sectors of Iran’s economy and in return receive an equivalent amount of Iranian oil.

The other alternatives that are being explored include paying for Iranian oil in Indian currency or Japanese yen. There is also a possibility of paying through gold. Tehran receives around $12 billion annually from New Delhi for oil (12% of India’s total oil consumption), and both countries wish to maintain trade volumes. However, with the progressively worsening economic sanctions against Iran, imposed unilaterally by the U.S. and the European Union, there are fewer opportunities for India-Iran cooperation. For India’s oil companies, this situation could lead to serious economic losses.

Iran well prepared for the worst

By David Isenberg

Most discussions of possible United States military operations in the Persian Gulf, should Iran try to prevent maritime traffic from going through the Strait of Hormuz, generally say that while it would not be a cakewalk, it would not be an enormously difficult task either.

But that conventional wisdom is wrong, according to a recent report issued by an independent, non-profit public policy research institute in Washington DC. The report found that the traditional post-Cold War US military ability to project power overseas with few serious challenges to its freedom of action may be rapidly drawing to a close.

While such conclusions have been voiced before, most notably in



regard to capabilities being developed by the People's Republic of China - which is developing an anti-access/area-denial (A2/AD) battle network that could constrain the US military's ability to maneuver in the air, sea, undersea, space and cyber-space operating domains - China is hardly the only country that has developed such options.

According to the report published by the Center for Strategic and Budgetary Assessments (CSBA), "Iran, in particular, has been investing in new capabilities that could be used to deter, delay or prevent effective US military operations in the Persian Gulf. Iran's acquisitions of weapons that it could use to deny access to the Gulf, control the flow of oil and gas from the region, and conduct acts of aggression or coercion, are of grave concern to the United States and its security partners."

The report, "Outside-In: Operating from Range to Defeat Iran's Anti-Access and Area-Denial Threats" [1] notes that Iran has been preparing for a possible military confrontation with the United States for decades. Instead of engaging in a direct military competition, which would be pitting its weaknesses against US strengths, Iran has developed an asymmetric "hybrid" A2/AD strategy that mixes advanced technology with guerilla tactics to deny US forces basing access and maritime freedom of maneuver.

Even if Iran did not disrupt Gulf maritime traffic for long, it could still have a devastating impact. A recent report by the International Monetary Fund (IMF) found that Iran's closure of the Strait of Hormuz would "neutralize a large part of current OPEC [Organization of Petroleum Exporting Countries] spare capacity," saying "alternative routes exist, but only for a tiny fraction of the amounts shipped through the strait, and they may take some time to operationalize while transportation costs would rise significantly."

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Venezuela Receives Last Shipment of Repatriated Gold Bars

 By Nathan Crooks - Jan 31, 2012 1:08 AM GMT+0100
Venezuela today received the last shipment of gold bars in an operation that repatriated 160 tons of the South American country’s reserves of the metal held abroad, said Nelson Merentes, president of the country’s central bank.
Fourteen tons of gold arrived at the Caracas airport today on a flight from Europe, Merentes said. The gold bars were transported in a caravan, broadcast on state television, to vaults at the central bank where street banners proclaimed “Mission Complete.”
“In two months, we’ve brought 160 tons of gold valued at around $9 billion back to Venezuela,” Merentes said on state television from the Caracas airport. “Today marks the last day of the mission.”

MFGlobal and our vaporizing 1.2 billion dollars/Greece and Portugal/Gold and silver raid prior to first day notice

Good evening Ladies and Gentlemen:

I guess our boys decided that a raid on silver and gold was necessary prior to first day notice.  The object of the exercise was to dampen the spirits of the long holders into taking cash and depositing it into the brokerage account in order to take delivery of gold and silver.  Gold closed down by 3.00 dollars to $1729.80 whereas silver fell by 25 cents to $33.50.  I would have to say that the raid was a total wipe out for our bankers.

Let us head over to the comex and assess trading.  First day notice is tomorrow.  However I still do not have delivery notices going into tomorrow.  This will be important so I will post it tonight in my comments sections.
The total comex gold OI today fell by 3551 contracts from 433,710 to 430,159.  On Friday we had a very good day for gold so again a few bankers bit the dust. The front options expiry month of January is now complete.  The big delivery month of February saw its OI rest tonight at a monstrously high 29,103 contracts.  I will still need tomorrow's OI data to see how many rolled into April.  The next front month of April saw its OI rise from 175,305 to 213,997 for a rollover of 38,692 contracts.  This snapshot would be as of Friday as all OI numbers are 24 hours back.  The estimated volume at the gold comex today was very very light at 184,065.  I would have thought that more rolled to the April month today.  The confirmed volume on the gold comex on Friday was very high at 343,879 but many were rollovers.

The total silver comex OI fell marginally by 121 contracts from 102,006 to 101,885.  Since silver had a great day on Friday we again lost some bankers who could not stand the heat.  The front options expiry month of January is now off the board.  The new front options expiry is now February and here the OI rose from 124 to 159 as these guys will be given a futures contract for February and thus automatically stand for metal.  The next big delivery month for silver is March and here the OI stayed quite constant rising by 500 contracts to 49,053.  The estimated volume at the silver comex today was anemic at 31,583 contracts.  The confirmed volume on Friday was also anemic at 34,752.

Keiser Report

In this episode, Max Keiser and co-host, Stacy Herbert, discuss banking zombies and clowns and their magical thinking on zero rates while starving the economy of interest income. In the second half of the show, Max talks to Ned Naylor-Leyland about the silver, gold, backwardation, manipulation and more.

Michael Hudson, "In America and Europe, Crime has been Decriminalized"

No Pushing In The Default Line, Please

By: Michael Ashton | Mon, Jan 30, 2012

Europe continues to smolder, but it is about to burst into outright flame. The 'private sector initiative' (PSI) discussions, which were supposed to be completed the Friday before last, continue. The leaks of an imminent deal continue, and eventually I am certain that a deal will be announced because eventually we will be down to just one bondholder still represented by the IIF. It is pretty clear by now - or it should be - that the PSI is no panacea. The only ray of hope to that process is that the approval of a 'haircut' (in the same way that Hannibal Lecter gave haircuts) would give the EU a fig leaf to approve a deal to send good money after bad, if it could overlook the failure to implement austerity measures that currently has German Finance Minister Schaeuble in a tizzy.
It would be a colossal mistake to agree to another €130bln bailout, even if the chances of it actually being disbursed would be slim (after all, remember the PSI process is necessary for the disbursement of the past-due tranche of the current bailout). And, honestly, I think the only reason they are continuing the charade is to give themselves more time to ready the Plan B default and/or Euro exit.
However, the market may not give them the time. Today Portugal's 10-year rate rose nearly 200bps (see Chart, source Bloomberg), likely triggered in part by a headline saying "ECB cuts off bond buying as pressure mounts."

It didn't actually cut off bond buying, but it bought very little last week. It seems fairly clear that the limits of the ECB's ability to sterilize the transaction are nearby, if they have not already been reached, and no doubt some cooler heads have pointed out that failing to have enough buyers for a 7-day ECB tender would be much worse than allowing bond yields to reach free-market levels. After all, what's the difference to Portugal of 15% or 17% on 10-year notes? Neither level makes Portugal's situation even vaguely sustainable.

China buying Gold like cheap cabbage, COMEX Gold speculator positions surge

By Ben Traynor
The spot market price of buying Gold climbed to $1728 an ounce Monday morning London time – a slight drop from last week's close – while stock markets, commodities and the Euro all fell and government bond prices rose as European leaders met for their latest summit in Brussels.

The cost of buying Silver fell to $33.08 at one point – a 2.6% drop from where it ended last week.

Gold fell as low as $1718 per ounce Monday morning, dropping steadily during Asian trading, though this represented a loss of only 1% on Friday's closing price.

CHINA

"Everybody seemed to be expecting profit taking out of Shanghai after the two Chinese bourses came back online," said one Hong Kong dealer.

"As far as we can see, there wasn't much of that."

During last week's Lunar New Year holiday, China saw a "gold rush", with consumers spending more on buying gold than during the 2011 festival, according to a China Daily report.

"People seem crazy about gold, snatching it up more like a cheap cabbage than such a precious metal," it quotes Beijing resident Miao Miao.

The value of sales at two of Beijing's top gold retailers, Caibai and Guohua, reportedly hit 600 million Yuan ($95.28 million) – a 49.7% rise on last year's sales, almost 50% increase in purchases!The gold price in Dollars meantime rose around 25% over the same period.

Is Gold the hottest currency in the world?

By Robert Lenzner
The price of Gold is roaring back from its latest temporary correction, sending the bears into full withdrawal. If you sold your gold in December as it fell to $1525 an ounce, you’re probably feeling foolish at the incredible $210 rise to $1735– a 15% move in no time at all.

Gold, you see, is not a commodity like oil and Copper and wheat. It is rather an alternative currency– one that finds buyers when paper currencies like the Euro are being hugely increased in supply by the ECB to forestall a sovereign cum bank crisis in Europe. There’s $650 billion in European bank and sovereign debt coming die before March 31, 2012 which can be sopped up by the $650 billion gift from ECB to the banks at the bargain rate of 1%. And more available from the European central bank– Europe’s very own Quantitative Easing program.

As the supply of gold cannot keep up with paper money(supply increases very little despite exploration), and it can be bought without loss of any real interest income, it seems clear t hat the gold bull market is alive and well. Central banks obviously are of the mind that gold’s rise will make up for t he decline in paper money and the lack of income on central bank liquid investments.

Portugal's Debt Will Be Restructured; 3-Year Government Bond Yield Tops 25%; CDS at Record High, Implies 72% Chance of Default

MISH'S
Global Economic
Trend Analysis

Inquiring minds are watching Portuguese government bonds soar into the stratosphere, with record-high bond yields across the entire yield curve.

In all the images below, the numbers are accurate but the charts reflect yesterday. I have mentioned this to Bloomberg a number of times to no avail.

Portugal 2-year Government Bonds



Portugal 3-year Government Bonds

You Ain't Seen Nothin' Yet; Another Trillion (or Two) Euro LTRO Coming Next Month

MISH'S
Global Economic
Trend Analysis

Last month, European banks tapped the ECB for €489bn in a long-term refinance operation dubbed LTRO. On February 29, another round of LTRO is coming up and expect banks to go for the gusto. Banks like cheap money to speculate and that is exactly what they will do.

The Financial Times reports Banks set to double crisis loans from ECB

European banks are preparing to tap the European Central Bank’s emergency funding scheme for up to twice as much as the ECB supplied in its debut €489bn auction last month, providing further evidence of the sector’s liquidity squeeze.

Several of the eurozone’s biggest banks have told the Financial Times that they could well double or triple their request for funds in the ECB’s three-year money auction on February 29.

“Banks are not going to be as shy second time round,” said the head of one eurozone bank at last week’s World Economic Forum in Davos. “We should have done more first time.”

Three bank chief executives, all of whom asked to remain anonymous, said they were planning to increase their participation twofold or threefold.

Making Money On Poverty: JP Morgan Makes Bigger Profits When The Number Of Americans On Food Stamps Goes Up

How would you feel if someone told you that one of the largest banks on Wall Street makes more money whenever the number of Americans on food stamps goes up?  Unfortunately, this is something that is actually true.  In the United States today, one out of every seven Americans is on food stamps.  In fact, the number of Americans on food stamps has increased by a whopping 14 million since Barack Obama entered the White House.  All of this makes JP Morgan very happy, because JP Morgan has been making money by the boatload on food stamps.  Right now, JP Morgan Chase issues food stamp debit cards in 26 U.S. states and the District of Columbia.  The division of JP Morgan Chase that issues these debit cards made an eye-popping 5.47 billion dollars in net revenue during 2010.  JP Morgan is paid per customer, so when the number of Americans on food stamps goes up, they make more money.  But doesn't this give JP Morgan an incentive to try to keep the number of Americans on food stamps as high as possible?  Of course it does.  JP Morgan is interested in making money as rapidly as possible. If JP Morgan can get more Americans enrolled in the food stamp program and keep them enrolled in it for as long as possible, that is good for business.
And the Obama administration is certainly doing what it can to help out.  Even though a whopping 46 million Americans are now on food stamps, the Obama administration plans to give out large amounts of money to organizations that are able figure out ways to get even more people enrolled in the program....

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China Doubles Gold Holdings: No Other Asset is Safe

Posted by Brittany Stepniak - Monday, January 30th, 2012

Due to the latest phenomena in China, some experts are calling this the “Gold Era”.

The Chinese are buying gold in record numbers and the trend has been increasing exponentially within the past year as the race for wealth-guarding picks up pace.

It has been estimated that China purchased approximately 490 tons of gold in the 2011 year – double the estimated 245 tons purchased just one year earlier in 2010.

With stories of China's gold hoarding blowing up headlines around the world, people are beginning to ask: “Who's buying all the gold?”...and “Why are they buying in such massive quantities?”

Usual Suspect #1: The People's Bank of China (PBOC).

According to Zhang Jianhua from the PBOC. “No asset is safe now...The only choice to hedge risks is to hold hard currency—gold.” Jianhua also commented on it being a wise move to purchase the expensive yellow-metal on price dips.

After Mr. Jianhua made these statements, global analysts immediately assumed they meant that the fifth-largest holder of gold would be on the prowl for even more of the glistening precious metal. Hence, an easy explanation as to "who's buying all the gold."

However, others argue that there is little proof to support that theory. Perhaps most the most important thing to remember before jumping to conclusions is the simple fact that it'd be an extremely rare scenario that China's government would want to purposefully disclose their short-term investment strategies, at the risk of hurting itself.

Second, the central bank has less purchasing power these days. China’s foreign reserves declined in Q4 2011, falling $20.6 billion from Q3. The first quarterly outflow since 1998 was not large, but the trend was troubling. The reserves declined a stunning $92.7 billion in November and December.

What Made Gold Break Out?

 By: Julian D. W. Phillips, Gold/Silver Forecaster - Global Watch -

Last week, gold broke through heavy overhead resistance, as did silver, to look very positive for the days ahead. Many technical analysts didn’t feel that gold had that kind of momentum but then came the break. It wasn’t a struggling break; it was robust sweeping resistance aside as though it wasn’t even there.

Fed’s Announcement Last Week

You’re probably saying now that it was the announcement from the Fed that interest rates would be held at current levels for another year more, through to the end of 2014. The superficial assumption is that this means that the dollar will earn nothing, so risk assets should outperform dollar deposits. That’s true, but a great deal more was implied in their statement (as we detailed in the latest issues of the Gold Forecaster & Silver Forecaster). The Fed pointed to long rates rising to above 4% over time, while inflation remained at 2% –and could fall further. Why?

If long-term rates are going to rise while inflation is dropping and short-term rates are flat, it’s more than likely that there will be a robust recovery. In those conditions it is more than likely that it is the dollar that will become suspect with dollar investors moving out of Treasuries. This could cause long-term rates to rise as they sell. The dollar would suffer in the process. What’s of considerable importance is that a rise in long-term rates means that the Treasury markets will fall to reflect interest rate rises. Currently, long-term bonds are at very high prices, so a fall could prove particularly harmful to those markets as well as the broad economy –including housing at a time when that will hurt that struggling market even more.

It is difficult not to see a sad picture for both the dollar and other facets of the developed world economies going forward, despite the noble efforts of the Fed.

What Made Gold, Silver Rise Beyond the Announcement

Investors who are aware that the U.S. gold market is not the hub of the gold market, must be asking why did the price jump in U.S. time? The sophisticated nature of the developed world market allows the U.S. trading markets to act like the waves on the sea shore and move prices quickly and dramatically. It takes the 24-hour market to smooth out the moves to reflect the true demand and supply picture. That’s why London pulled back the gold price on Monday this week. But the jump of $65 after the announcement reflected short covering and new long positions being established in those markets. The jump through $1,700 has been held in position and looks like staying there now.

Jim Rogers - CNBC 30 January 2012

Spring Festival sparks a 'gold rush' in China

Customers swarm to buy gold products at Caishikou Department Store in Beijing, capital of China, Jan 25, 2012.[Photo/CFP]

BEIJING - A "gold rush" swept through China during the week-long Lunar New Year holiday this year, with demand for precious metals and jewelry surging since the Year of the Dragon began.
Sales of gold, silver and jewelry rose 57.6 percent during the week-long holiday at Caibai, one of Beijing's best-known gold retailers, according to data released by the Ministry of Commerce (MOC) on Saturday.
Other jewelry stores across the country also saw sales boom during the period, with customers favoring New Year-themed gold bars, gold ingots and other types of Dragon-themed jewelries.
"Long treasured by Chinese, gold is no longer owned only by a privileged few, but has become a new investment channel open to all," said Guan Qiang, assistant manager at Caibai.
The Spring Festival gives people a chance to preserve and present gold as gifts, offering hopes that it will increase in value and not be impacted by inflation, Guan said.
During the week-long holiday, which lasted from January 22 to 28, the sales volume in Caibai and Guohua, another of Beijing's top gold retailers, reached about 600 million yuan ($95.28 million).
The figure showed a 49.7-percent increase over that of last year's Spring Festival, said a report released by the Beijing Municipal Commission of Commerce.
Caibai began selling gold bars as investment items during the 2008 Beijing Olympic Games, but the trend of buying gold or silver bars during the Spring Festival has really taken off in the past two years, Guan said.
For Guan and his colleagues, the Spring Festival rush was an exciting but exhausting experience, as customers flooded the store and surprised clerks with their purchasing enthusiasm.
"With customers crowding and rushing in, we did not even have time to eat and drink," said a sales clerk at the gold bar counter surnamed Li.
She said each shop assistant had received hundreds of customers per day and wrote several times more orders than on ordinary days.
"You can hardly even see the gold bars, necklaces and pendants in the display case. People seem crazy about gold, snatching it up more like a 'cheap cabbage' than such a precious metal," said Beijing resident Miao Miao.

THE CARTEL IS BOXED IN: Ranting Andy

THE CARTEL IS BOXED IN: Ranting Andy [Part 1 of 2]

IT'S TWO PARTIES VS. THE PEOPLE: Ranting Andy [Part 2 of 2]

Gold up 10% on India, China, Iran rumours

By: Vicky Kapur

Published Monday, January 30, 2012

May pay in bullion for Iran oil; Dollar under attack

An employee counts some gold bars before he sells them to a customer at a gold shop in Hanoi August 23, 2011. (REUTERS)

Gold prices are currently trending around the $1,730 per ounce mark, within touching distance of their 60-day high of $1,747/oz, and up 10 per cent in the first 30 days of 2012.
Fuelling the bullion’s newfound drive are rumours that India and China, one of the world’s largest oil consumers, are secretly mulling paying in gold for Iranian oil, and bypassing a European Union (EU) oil embargo on Iran, effective from July 1, 2012.
The EU voted last Monday to ban oil imports from Iran. The move came after a defiant Iran announced earlier in January that it had launched a nuclear enrichment programme at a well-protected underground facility near the city of Qom.
Western nations suspect Iran, which is already under numerous international sanctions, of pursuing a secret nuclear weapons programme but Tehran insists it needs nuclear power solely for civilian purposes.
Nevertheless, the new EU sanctions are being seen as a way for the Western world to bring Iran to the negotiations table, but any move by China and India, which together purchase more than one-third of Iran’s oil, to bypass the sanctions will significantly reduce the EU’s negotiating prowess.
India, which has had traditionally friendly relations with Iran and has found a relatively new ally in the US, is in a precarious situation and has reportedly been working at finding a middle ground and strongly urging for a diplomatic solution.

***2012 The Class Warfare Election***

This is sad, Americans have been so brain washed and so conditioned by the government that people are in an absolute tizzy about Mitt Romney paying an effective tax rate of 13.9%. Now everyone knows we are not supporters of any of the big government politicians, so this is NOT a political email in the sense of endorsing a candidate or party. This is about the mindset of most people, something we honestly find disgusting. The masses and the politicians from both sides of the aisle are using this 'tax return" story to beat the drums of class warfare.

 

Has anyone in the main stream media, colleges, or anyone brought up the fact that instead of everyone demanding Mitt pay more, why don't we demand that everyone else pay less. In fact, since it is the fruits of your labor, why don't we demand to keep all of our earned income? To us, this is a property rights issue, not a "pay your fair share" issue, that would be stupid to even say something like that. Seriously, Mitt paying more in income taxes than probably 150 million people combined, is he really paying his fair share? No, he is paying a lot more than his fair share.

 

The fact is taxing our income is oppression by the government, especially since the IRS is pointing a gun at our heads. If you don't pay your income tax, you might end up in jail. Don't believe us, ask Irwin Schiff, an anti-income tax advocate who the feds threw in jail for failure to report income.

 

 

 

Think about the tyranny in this tax, you exchange your time, energy, and body to produce income, and then instead of You using your earnings for yourself and family, the government forcefully takes some of it away in order to give it to others. Perhaps a Saudi prince, a life long smoker who needs medical care, or maybe to pay for a warrentless wire tap.

The Coming Paradigm Shift in Silver

By Steve St. Angelo

The biggest problem for investors today in trying to forecast the future price of silver is the enormous amount of contradictory analysis on the Internet.  There are bulls, bears, paper traders, physical buyers, technical analysts, hedge funds, commercial banks and silver manufacturers all trying to play a part in this highly volatile silver market.  Trying to sift through the huge volumes of silver analysis on the internet can be extremely frustrating.  In addition, some of this information is not meant to inform, but rather to confuse or mislead the investor.

There is a great deal of misinformation on the internet when it comes to silver.  I find it ironic that one of the so-called “bullion specialists” seems to give bearish commentary whenever the price of gold or silver rises to new highs.  This is akin to a CEO of a corporation telling the media and shareholders that the company’s stock price is too high and needs to drop down to more sustainable levels.  What CEO on Earth would say something as stupid as this with the best interest of the company and shareholders in mind?  Furthermore, how many CEOs would keep their job if they repeated this over and over for the past several years, and got it wrong time and time again?  

Unless you have been in the precious metals markets for quite some time, it is easy to be misled by this type of information.  This is the very reason behind the motivation that I had to write this article.  In it, I will attempt to give the reader-investor a more detailed and fundamental comparative analysis of the future price of silver, rather than the typical fly-by-night technical charting or bull-bear rant.  This should give a more commonsense methodology in forecasting the future path of silver and its eventual paradigm shift.

Paradigm Shift: —n, a radical change in underlying beliefs or theory

The coming paradigm shift in silver will not happen due to technical analysis, fundamentals, or supply & demand forces, but rather due to a change in mass psychology of investors.  Even though fundamentals and supply-demand forces will play a part in this shift, they will not be the ultimate cause.   I believe technical analysis as it is used today, only charts the amount of manipulation and mass psychology in the silver market.  

Throughout history, a paradigm shift occurs in rigged markets when the manipulation of the financial system and economy is no longer sustainable.  This occurred in the banking and housing markets in 2007-2008 when we had what I call a “Negative Paradigm Price Shift”— a trend where prices or values are declining.

Negative Paradigm Price Shift in Housing and Banking

Prior to 2007, the real estate market was kept alive by the work of clowns and magicians in the mortgage industry and banking system.  For several years everyone was having a great time.  As housing prices and sales continued towards the heavens, bank profits hit all-time records.  Everything was going along just fine until the market realized one day that there was nothing left after “Liars Loans” were levied to keep the Ponzi going.  Once the housing market collapsed, so too did the banking system.  Like two twins attached at birth, one could not live without the other.

In true waterfall fashion, investment banks, commercial banks, government-sponsored entities and insurance companies went bankrupt, were either taken over or became a mere shadow of their former selves.

Here we can see several examples of a Negative Paradigm Shift:

As you can see from these 10-year charts, the prices of these stocks were range bound prior to 2007.  All of a sudden, in the middle of 2007, the bottom fell out and the prices of these stocks suffered exponential losses.  Other examples of companies that have experienced similar Negative Paradigm Shifts include Lehman Brothers, Bear Stearns, Merrill Lynch, Washington Mutual and Freddie Mac.

How could all of these institutions collapse in this fashion?  It was due to policy deregulation as well as the manipulation of financial products, assets and information.  Thus, the banking system and these institutions were functioning and supposedly solvent a great deal longer than a free market would have allowed.  The act of misleading the market gave false values and elevated stock prices.

This is a perfect example of the mass psychology of the public investing in highly inflated assets based on superficial and bogus technical analysis.  As the housing and financial markets were reaching their peak in the 2007, fundamentals played no part in their real market values— it was based entirely on mass psychology instead; the false belief projected by investors and the corporations themselves that these companies were actually of high value.

This disintegration of the housing market and banking system was not an isolated episode; rather it was part of the events that take place in STAGE 1 of what Dmitry Orlov calls the Five Stages of Collapse.  

• Stage 1: Financial Collapse
• Stage 2: Commercial Collapse
• Stage 3: Political Collapse
• Stage 4: Social Collapse
• Stage 5: Cultural Collapse

According to Orlov:

STAGE 1:  Financial collapse.  Faith in "business as usual" is lost. The future is no longer assumed resemble the past in any way that allows risk to be assessed and financial assets to be guaranteed. Financial institutions become insolvent; savings are wiped out, and access to capital is lost.

Here we can see that the majority of these conditions in the Financial Collapse have already taken place.  The only reason why the U.S. banking system is still functioning today is due to the ability of banks to mark to model their assets giving the impression that they are still solvent.  Furthermore, the increased guarantee of FDIC deposit accounts to $250,000 as well as a temporary unlimited coverage for noninterest-bearing transaction accounts until Dec 31, 2012 have kept a major bank run on the banking system.  These changes of policy have postponed the United States from entering into STAGE 2 or the Commercial Collapse.  This will be discussed at the latter part of the article.

If this wasn’t bad enough, the current U.S. banking system is based on a fractional reserve requirement of 10% in fiat money; basically paper backing paper.  This wasn’t always the case.  To get a better idea of how disastrous the present banking system has become, we need to take a look at fractional reserve requirements of the past.

From an Historic Gold-Backed Fractional Reserve System to a Paper Farce Today

Eric Sprott made a recent comment posted in an article on Zerohedge.com, stating that “The financial system is a farce” .  He couldn’t be more correct in his assumption.  Not only is the present U.S. banking system based on a financial debt instrument called a Federal Reserve Note, but its fractional reserve ratio is virtually nonexistent.

In 1932, the United States had a fractional reserve banking system backed by gold.  The member banks had different reserve requirements: central reserve city banks (13 percent), reserve banks (10 percent) and country banks (7 percent).  All member banks had a 3 percent reserve requirement on time deposits.  Even with these official reserve ratios, the total paper dollar claims to gold were much higher.  For this analysis, we are going to compare the M2 money supply to the amount of U.S. Treasury-held gold.

Central-bank gold holdings reach 6 year high: joining the dots

Central banks are holding more gold but they're holding very much more wood-pulp and although there may ultimately be a change in structure of a global reserve currency this may still be some time away.

Author: Adrian Ash
Posted:  Monday , 30 Jan 2012

LONDON (BullionVault) - 

The gold price on Wednesday broke up through the downtrend starting at last summer's record high. Or so a technical analyst studying the price chart would tell you.
But just as in late 2007 - from where gold began a 55% run inside 6 months - this week the price of gold bullion jumped on news that is fundamental: the price of money, specifically Dollars, the world's #1 currency for trade and central-bank reserves.

Back in 2007, the catalyst came as a baby-step rate cut of 0.25%, signalling the Fed's switch from raising to destroying the returns paid on cash savings. Now the Fed's new zero-rate promise "took gold comfortably clear of the 50, 100 and 200-day moving averages, and opened up some big targets to the upside," says one London technician. The previous ceiling of $1700 has become a support level according to bullion bank Scotia Mocatta, "with further key support at the 200-day moving average at $1645."

Whatever you make of such numbers, it's worth stepping back to see the wood for the trees. Because the trend in who's buying gold, and why, is so plain to spot that you hardly need join the dots.

Gold bullion holdings amongst the world's central banks, for instance, have risen to a 6-year high, according to data compiled by the International Monetary Fund. Emerging and developing nations have swollen their gold reserves 25% by weight since 2008. The debt-heavy West is a net seller, but only just.

James Turk from the GoldMoney Foundation interviews Eric Sprott on precious metals and the global banking system.

Eric Sprott - James Turk - GoldMoney Foundation 1/3

Eric Sprott - James Turk - GoldMoney Foundation 2/3

Eric Sprott - James Turk - GoldMoney Foundation 3/3

3 Months After The MF Global Bankruptcy, We Find That $1.2 Billion (Or More) In Client Money Has "Vaporized"

Submitted by Tyler Durden on 01/29/2012 23:58 -0500

On the three month bankruptcy anniversary of the company whose rehypothecation gimmicks will one day be seen as a harbinger of everything that is  broken with the multi-trillion ponzi system, but not just yet despite loud warnings otherwise, we are getting close to a final verdict of where the $1.2 billion (and possibly more as originally predicted by Zero Hedge - see below) in commingled client money may have gone. Note the use of the passive voice because using the active, as in money that MF Global executives stole from clients, is prohibited in a legal system in which nobody goes to jail for something as modest as $1.2 billion in theft. That verdict? "Vaporized." No really (and yes, in the passive voice of course). From the WSJ: "As the sprawling probe that includes regulators, criminal and congressional investigators, and court-appointed trustees grinds on, the findings so far suggest that a "significant amount" of the money could have "vaporized" as a result of chaotic trading at MF Global during the week before the company's Oct. 31 bankruptcy filing, said a person close to the investigation." Uh huh... Because money simply vaporizes. Which means one of two things: i) the "vaporization" is merely the phrase that so called investigators use to avoid the far more troubling sounding "stolen" as it would imply guilt, something which the former NJ governor and Goldman CEO (and not to mention JP Morgan which most likely was on the receiving end of the $1.2 billion + transaction) will, under guidance from counsel, sternly disagree with, or ii) the capital markets are such an unprecedented and manipulated fraud, that nobody has any clue at any moment, where any client money is, and that any residual capital still "invested" in mythical representations of "assets", which are likely rehypothecated so many times, that not even Bank of America's robosigning division would have a clue where to start unraveling, will promptly be converted into tangible manifestations of capital. So when someone asks what happened to stock market volume, and to investor confidence in the "stock market" feel free to use just that phrase: "it vaporized."

Technically Perfect

What a week it was.  My head is still spinning.  With gold and silver breaking out and following through and now coming into some resistance to the US markets holding up great then looking like they wanted a little consolidation then seeing many leading stocks rush higher later Friday afternoon.

          We had some stellar earnings reports this week, and some not so stellar.  I try and steer clear of trying to trade over those earnings report days as the fast, very fast, leading stocks I trade in my swing trading portfolio simply move too much on earnings.

          If it works out for you than its great, but if not, then it can be disastrous when we are talking 18% gains or even gains as much as 6% or 8% can be devastating as a gap will form and often in leading stocks the gap simply will never be filled.  And of course the inverse can be true if the street dislikes a company’s numbers

          With leaders breaking out Friday afternoon and really the markets not doing much it gives me great encouragement for our near-term swing trading future.

          Leading stocks lead the market in term of timing, and especially in terms of gains.

          Last week I had taken gains in all our swing trading positions for great gains.  Unfortunately it appears I took them too early as we would have had a nice run this week.  I did not hold any new positions into this weekend as the ones I tried quickly didn’t work and it looked like a market correction was due also.

          You can’t win ‘em all but I’ll be here ready for the next buy point.

          Please sign up to receive my free weekly letter along with any relevant info or articles I write, and if you like what I have to say and think I can help you make some money, and I know I can, then consider subscribing to our daily updates and trading alerts.

          On that note, let’s move into our precious metals charts who did exceptionally well this past week.

Metals review

 

SilverDoctors: Silver Breaking Out of Massive Flag Formation- Tar...

SilverDoctors: Silver Breaking Out of Massive Flag Formation- Tar...: In early January, Clive Maund said a head and shoulders top in silver was as obvious as the nose on your face .  The Doc disagreed with Maun...

Silver Update 1/28/12 Junk Silver 2

Pento - Gold Shines as West Continues to Destabilize the World

16 Statistics Which Show That The Number Of Americans Dependent On The Government Is At An All-Time High

A higher percentage of the American population is receiving government benefits than ever before.  Yes, there have always been poor people that have needed our assistance, but what does it say about our economy that the number of Americans dependent on the government is at an all-time high?  Every night on the evening news we are told that the economy is improving, and Barack Obama is endlessly giving speeches about the "economic recovery" that is supposedly underway.  But that is not the reality on the ground for those on the bottom rungs of the income ladder in America.  People are really hurting out there, and the number of Americans that are turning to the government for financial assistance just continues to increase.  Yes, we should always have a "safety net", but right now our "safety net" is becoming massively overloaded as millions more Americans jump on to it every single year.  What all of these impoverished Americans really need are jobs, but the U.S. Congress and the past several administrations have been systematically killing job growth in America.  So unfortunately the number of poor Americans is going to continue to rise, and that is really bad news for a nation that is already drowning in debt.
Some people out there want to blame the poor for the statistics that you are about to read, but that is a mistake.  Yes, there are a lot of people out there that are abusing the system, and that needs to be stopped.
But many Americans that are dependent on the government are in that situation because there simply are not enough jobs in this country.

Gold and silver rise again/Greece/Italy/Portugal/Spain all in turmoil as Fitch downgrades

Saturday, January 28, 2012

Good morning Ladies and Gentlemen:
Before commencing my report, here our Friday's entrants to the banking morgue:
1. Bank East, Knoxville Tennessee
2. Patriot Bank of Minnesota, Forest Lake MN
3. First Guaranty Bank and Trust of Jacksonville Fla, Jacksonsville FL
3. Tennessee Commerce Bank of Franklin, TN
The price of gold rose on Friday finishing the comex session at $1731.80 up $5.80 on the session. The price of silver rose by only 5 cents to close at $33.75. However in the access market both metals shot up considerably. Here is how they finished the evening:
Gold: 41737.30
Silver: $33.99
If gold and silver hold up on Monday, this will be the first time in a decade that these metals were not smashed prior to or right after options expiry. For many years the bankers modus operandi was to raid these precious metals prior to options expiry as they wanted to preserve as much physical as possible. They would knock the paper price of metal below the level where many options were written whether puts or calls. For the past several months, the bankers new ploy was to attack right after options expiry but before first day notice to inflict pain on those who exercised. The plan was to prevent the longs from putting up the entire contract price. If Monday holds up this will be a massive defeat to our bankers as many options were suddenly "in the money" and many will stand for metal. I will report on the progress of these longs for you once the delivery month of February commences for gold, and the non delivery options expiry month of February for silver.
Let us head over to the comex and assess trading, inventory levels, a final amount of silver and gold standing for January and then position levels by our major players with our COT report.
The total gold comex open interest fell by 1287 contracts from 434,997 to 433,710.
This occurred with gold sharply rising on Thursday which generally means that we lost some
of our banker friends. The front options expiry month of January saw its OI fall from 62 to 6
for a loss of 56 contracts. We had 61 delivery notices on Thursday so we gained 5 contracts
or 500 oz of additional gold standing. First day notice for the gold contract is this Tuesday.
Here the OI contracted from 110,572 to 75,705 which is a considerable drop. Monday night
we will receive delivery notices and on Tuesday we should be a good glimpse on how many gold oz will be standing. As always I will report this to you. The estimated volume on the gold comex on Friday was a very large 310,459 as we had considerable rollovers. The confirmed volume on Thursday was very high at 358,282. Now we await to see if we have many determined longs standing for February.
The total silver comex OI continues to trade in a narrow channel. On Friday, the resting OI for the silver comex rested at 102,006 down 510 contracts from Thursday's level of 102,514. The front options expiry month of January saw its OI drop from 84 to 52 for a loss of 32 contracts. We had 43 delivery notices on Thursday, so we gained another 11 contracts of additional silver or 55,000 oz. The next big delivery month is March and here the OI dropped from 51,142 to 49,576. Since silver had a great advance on Thursday, this must indicate some banking liquidation as they are probably scared out of their minds with the rapid rise silver. The estimated volume on the silver comex was an extremely anemic 31,194. The confirmed volume on Thursday came in at 43,149. If Butler is right, that the comex volume is approaching 100% for the HFT traders, this does not look good for our bankers as our longs are resolute and there is no activity whatsoever that will force the silver leaves to leave the silver tree. However I caution you that volatility in the silver comex will be like a yo-yo.

US anticipates May as tentative date for clash with Iran. Floating SEALs base for Gulf

DEBKAfile Special Report January 29, 2012, 12:53 PM (GMT+02:00)

USS Ponce - future SEALs Persian Gulf platform

A hurried decision not to de-commission the USS Ponce helicopter marine carrier after duty in Libya - but to refit it for deployment by May in the Persian Gulf as a floating base for commando teams - was confirmed by the US Pentagon and Navy Sunday, Dec. 29. This transportable floating base will expand the commandos' range in coastal areas and support counter-measure against mines which Iran has threatened to plant in the Strait of Hormuz in reprisal for the US-EU oil embargo. The SEALs will also take on Iran's menacing fleet of military speedboats.
debkafile reports Tehran operates four different kinds of these craft in the Persian Gulf:
1. Small, fast vessels, each armed with a small missile for striking tankers and coastal oil targets around the Gulf region, such as export terminals. Earlier this month, Tehran claimed to have developed stealth cruise missiles capable of disabling aircraft carriers with a single shot.
2. Small, extra-fast boats armed with torpedoes. Iranian publications claim several such boats are capable of stealing up on US aircraft carriers and large warships from several directions without being detected and cause serious damage.
3. Floating bombs for kamikaze missions. These fast boats cannot be deflected after locking in on target, whether on sea or shore, and explode on contact.

$140 Silver, Figures Don’t Lie

Posted by Dominique de Kevelioc de Bailleul on Jan 27, 2012

Calls for $60, $75, $100 and $140 per ounce of silver by the close of 2012 may be very reasonable ones. Several well-known analysts have placed their bets already on each of these numbers. Sign-up for my 100% FREE Alerts

Sure, $140, a quadruple from today’s $33 price seems way out there.

However, after considering the ramifications of a global financial system moving more rapidly away from the U.S. dollar (witness Iran), coupled with the no. 2 reserve currency, the euro, looking vulnerable, too, half the world’s purchasing power may be forced into gold and, by proxy, silver, whether they like it, or not.

U.S. and European financial institutions have not participated in the silver bull market. But they will—though, at much higher prices than their Asia brethren.

2012 could be the year of some shocking revelations to the mom-and-pop retail investor. The soundness (or the lack thereof) of the U.S. dollar will redirect their attention away from NDAA and other Washington nonsense as they receive a hard study on why politicians have gone mad lately. It’s about the U.S. dollar, not Iran’s nuclear capabilities or terrorism or anything other lie that may fit.

At any time, the lines outside the coin/bullion dealer could form, as a carefully orchestrated attack of the dollar by significant entities of the East could result as a weapon against U.S. military aggression in the Middle East or elsewhere. That scenario, a dollar Armageddon, comes from Jim Willie.

Sounds outlandish? Welcome to the freshman class of the Jim Willie School of analysis. When you reach your senior year of Willie’s tutelage, however, you won’t be calling him “Crazy Jim” anymore, as past graduates will gladly attest to his previously unwarranted monicker. He’s been correct on so many issues, dismissing his analysis is most likely a bad idea.

And all it would take for a Jim Willie scenario is for the U.S.DX to break below 72, with vigor. Then, all hell would break loose. The short squeeze on silver could be epic, according to James Turk, Jim Sinclair, Bill Murphy and Eric Sprott.

Read more: http://www.beaconequity.com/140-silver-figures-dont-lie-2012-01-27/#ixzz1krnCAJ3n

The Fed’s Inflation Target; QE3, QE4, QE5, etc. are in the Queue

By David Knox Barker

The U.S. Federal Reserve policy announcement on Tuesday, January 25, 2012 marks an important moment in monetary history. The forecast by a majority of the members of the FOMC for interest rates to hug zero until late 2014 was of interest and points to the FOMC conviction extended global economic stagnation at best, reflecting the long wave forces at work in the global economy. However, more importantly, it was the first time that the U.S. Federal Reserve has clarified its interpretation of its mandate for price stability, i.e. the target for inflation.

This announcement is preparing global markets for the primetime monetary super bowl of inflation vs. deflation, aka U.S. Federal Reserve quantitative easing (QE) driven inflation efforts vs. a Kondratieff long wave debt deflation depression. Since bad debt is the problem in a long wave debt deflation, the Fed plans to buy all the bad debt required to hit their inflation target and put it in on their balance sheet until it matures and repaid or is written off. The Fed only has two mandates; maximum employment and stable prices. These objectives are a bit sketchy and have not been specific targets historically, so an actual inflation target sends a clear message.

The Fed officially informed market participants that its target for inflation is two percent. The Fed is signaling to global markets the message that below this level of inflation, they are within their mandate to keep the monetary spigots open by buying any debt, and therefore we can anticipate additional rounds of QE released from the queue on a regular basis over the next few years if inflation falls below this target.

The CPI, like interest rates, is following its natural long wave trend. It is on schedule to reverse higher in a new long wave spring in 2013 and beyond. Unfortunately and ironically, the Fed’s attempt to produce inflation could prolong the deflation by socializing bad debts and weighing down the U.S. and global economy. The CPI annual rate of change below demonstrates the long wave forces at work.

'Silver may outperform gold in near term'

By Debbie Carlson
Gold could build on its rally into next week and possibly close out the month of January with a gain, market participants said.

Countries that celebrate the Lunar New Year, such as China, will return to work next week, and others said that momentum that started following the dovish statement by the Federal Open Market Committee on its long-term interest rate outlook will likely continue.

Still, some market watchers said given the nearly one-way move in commodity prices in general, Gold and other markets could be due for a corrective pullback, which would mean lower values.

Prices rose on Friday and on the week. The most-active April gold contract on the Comex division of the New York Mercantile Exchange settled at $1,735.40 an ounce, up 4.12% on the week. March Silver settled at $33.790 an ounce, up 6.68% on the week.

Gold Stocks To Rally Like During The Great Depression And Early 70s

By: Hubert Moolman


Below, is an extract of my Gold Mining Fractal Analysis Report.

“He answered and said unto them, When it is evening, ye say, It will be fair weather: for the sky is red. And in the morning, It will be foul weather to day: for the sky is red and lowering.”- Jesus Christ

During the Great Depression, at a certain point, gold stocks started a massive rally. While most things were going down in price, gold stocks made significant gains, becoming one of the best performing sectors during that time.

It was no coincidence that gold stocks performed as well as they did. Like all goods, gold stocks will thrive under the ideal conditions. During the Great Depression, those ideal conditions were present.

The purpose of this editorial is to look at what those conditions were, and identify a pattern that was present before and during those rallies. If we are able to identify those circumstances and pattern, we could look to see if they are present today, or in the future, in order to know when to expect a massive gold stocks rally. – end of extract.

I then go on to identify those ideal circumstances and patterns that were present before and during the great gold stocks rally. The conditions today are very similar to then, and is an ideal set-up for a most spectacular gold stocks rally over the coming months. Here, I would like to illustrate, by way of a chart, how the conditions were similar.

The gold stock rally of the 1930s coincided with major economic decline, as well as a significant increase in the real price of gold. Below, is a chart (from planbeconomics.com) of the long-term Gold/Oil ratio:

International Forecaster January 2012 (#8) - Gold, Silver, Economy + More

By: Bob Chapman, The International Forecaster

The following are some snippets from the most recent issue of the International Forecaster. For the full 25 page issue, please see subscription information below.

US MARKETS

We are trying to figure out the best way to describe the banking and oil sanctions against Iran, which are blatant acts of war. Just look back in history at similar situations and you will see what we are referring too. It is simple incompetence or is the allied plan a false flag feint in order to distract attention away from debt problems?

A month ago when the US was trying to terrorize Syria and Iran with oil and banking sanctions we said they did not have a chance of winning. Iran’s nations that are friendlies, such as China, India and Russia are major nations that will assist in the circumvention of some 70% of those sanctions. As we predicted all the excitement in the Straight of Hormuz was just that, another distraction. This week the USS Abraham Lincoln, an aircraft Carrier, went through the Straight, which tells us as we said earlier, it was all just a game. That relieved pressure of financial markets in Europe, the UK and US.

Most people forget an agreement has been in place for more than a year between Russia and China, so the precedent has been set and it works. To simplify things India wants to use gold in exchange for oil, a very simple and novel idea.

What does all this add up too? The basic common denominator is a growing existence of the US dollar and of the world financial system. What Washington has done has expedited the end of the US dollar as the world’s reserve currency. Worse yet for the dollar deals like this are in the works all over Asia. Alliances are forming as we speak and it is only a matter of time before it happens. We believe this will take place over the next two years, accompanied by higher interest rates. These countries are proceeding at their own pace and will soon have major agreements in place.

Registered Silver Ounces At the Comex

Jesse's Café Américain

"Give light, and the darkness will disappear of itself." Desiderius Erasmus

There are 49,436 contracts currently open for the next delivery month which is March 2012. Each contract represents 5,000 ounces. That is 247.18 million ounces of silver being traded for March delivery against a registered 36.56 million ounces. This is a subset of all the contracts going out over the year.

The is leverage of about 6.8 to 1. It 'works' because most contracts are speculative and settled for cash. Comex is not where one goes for the delivery of a large amount of silver.

I think that over time the US markets will become increasingly less relevant as a price-setting mechanism for a number of commodity prices including the metals.

The failure of MF Global and the blatant cheating of the customers, both before and after the fact, will accelerate the process of failure.

It really is shocking, all the more so because so few people see it and understand its significance in the coming crisis of confidence in the US markets.

The Silver Singularity Is Near

Price, as they say, is determined on the margins. This is especially true for inelastic goods. If 100 Tickle Me Elmo dolls exist in Walmart on Christmas eve, and 100 people absolutely need to have them, you don't have a problem. The price will be some reasonable markup on the cost of production. However, if one more person walks in fearing the wrath of his child if there's no Elmo under the tree, Walmart (WMT) can quickly turn into a war zone. In Walmart, this supply shortage might be settled by shoving and hair pulling. In a civilized market, this supply, demand inequity is settled with price. In the case of Elmo in 1996, some dolls were reportedly sold in aftermarkets for $1500.
This is an important concept to keep in mind when evaluating the silver market. Silver is interesting because it is actually two different markets. On one hand, silver is a physical commodity that is used in industry or warehoused as physical savings. This market is rather inelastic on the supply and demand side as I will discuss in a bit. On the other hand is the silver derivatives market, paper contracts for silver, that set the spot price on the margins. The paper market is elastic and depends more on investor psychology than underlying fundamentals.
First the physical market. Each year, new silver is dug out of the ground and added to supply. A higher silver price causes an increase in silver production, but that increase is constrained due to the time it takes to bring new production on line and the fact that 70% of silver production comes as a relatively small byproduct of mining other metals. Government sales and recycling added about 25% to the physical supply in 2010, but those factors are only loosely correlated with price.
On the demand side, industrial applications make up nearly half of the demand. For many of these applications, such as electronics, coatings, anti-microbial uses, etc., the amount of silver in the final product is a tiny fraction of the product cost, thus a rise in the silver price does not affect its usage. For demand components such as jewelry, coins, and physical bar investment, a rising price can actually add to the desirability of these goods. As such, the supply and demand of physical silver is very insensitive to price as I explain further in my article, "The Top 10 Reasons Silver Will Soar".
Now for the paper market. Like all commodity futures markets, the silver futures market has its roots in providing a legitimate market function. A silver miner, for instance, may sell futures to lock in prices and pay for capital equipment. On the other side of the trade, an electronics manufacturer may buy futures to lock in their costs for silver they intend to use in the future. And like other commodities, the silver futures market provides speculators a convenient way to bet on the future price of silver without having to ship the stuff around. This speculation through commodities derivatives is not always a bad thing as it can add liquidity to markets and can help with price discovery.
But in the case of silver, the derivatives market has gotten way out of hand to the point of distorting true price discovery. Some market watchers believe there has been manipulation by banks with huge short positions, such as J.P. Morgan. Some, like Eric Sprott, suggest that the CME Group's odd behavior, such as raising margins two days after the silver price had just dropped by 22%, is holding down the price to help the commercial shorts. Regardless of whether you believe these "conspiracy" theories, in the long run, it does not matter. The important thing to realize is that the silver derivatives market, like all derivatives markets, is based on leverage, confidence and promises.
The main way the futures market keeps down the spot price of silver is by greatly adding to the supply of silver for investment. Take the example of the COMEX which currently has 102,516 open interest contracts (512 million ounces) promised for future delivery. This compares to roughly 117 million ounces of physical silver available for investment in 2010 (Mine supplies 736 + recycling 215 + gov't. sales 45 - fabrication 879 = 117Moz.) Shorts have promised to deliver over four times the amount of physical silver available per year. In other words, demand for silver investment at today's price is much higher than physical supply. This works fine as long as futures investors don't take physical delivery. Shorts can simply settle the contract for the cash value and everybody's happy. If a small amount of investors stand for delivery, the shorts can transfer silver from their accounts at the COMEX or buy silver on the open market. However, as more investors stand for physical delivery, things can get dicey.
Kyle Bass of Hayman Capital was clearly concerned about this leverage risk in the COMEX when he said the following:

DEBT LIMIT - A GUIDE TO AMERICAN FEDERAL DEBT MADE EASY.

Russell - Gold Threatening Dollar’s Reserve Currency Status

Tail Events, Isolation, the New Normal

By: Jim Willie
 
The year 2012 has started out in strange ways. While celestial forces augur for rare tail events, the assurance of man-made events that stretch far into the extreme tail of probability are not only very likely but will be of a type to reflect the change in the global balance of financial power. The Paradigm Shift mentioned over the course of the last two to three years is at work, having moved into a higher gear. The gold is moving from the West to the East, along with the power. We will not see the process reverse in our lifetime. The sanctions set against Iran have been devised by a former global leader nation that is beset by insolvency, fraud, and lost integrity. The backfire has consolidated forces into a more fortified position against the USDollar. Trade increasingly is not being settled in US$ terms. The icons of the day are mere apologist public address systems attempting to rationalize and justify the deep insolvency and wrecked systems. The new normal is of a caravan file of broken cars and trucks sputtering down the road, using the false fuel of hyper monetary inflation and the offensive paint of phony financial accounting, the tell-tale sign being the ugly rancid smoke out of their tailpipes. The last insult is of the US Presidential election process, which is badly marred by obvious inconsistencies and anomalies. The vote count for the candidate that attracts the biggest crowds, attracts the biggest donations from corporations, and defies the financially teetering system does not match the final official tallies.
Prepare for the Rare Damage of Tail Events
In the probability world, a tail event is described as an occurrence far out in the small numbers of probability, extended on the tail of the curve of likelihood. In the quality control domain, the battle cry used to be Six Sigma, meaning the tolerated defect rate goal would be six standard errors, a rate in no way achievable. A quick check of the probability tables unmasks the lofty goal as one defect part off the assembly line in every 1.013 billion items. That is Six Sigma on the normal bell-shaped curve. However, in the world of phony finagled finance, such rare events are indeed occurring. The modern world has never seen such grotesque charred ramparts posing as financial structures, badly beset by the insolvency caused by the natural sequence of broken asset bubbles, aggravated by absent industry. In fact, the entire fiat currency system, where money is nothing but redefined debt, is an abomination destined for the ruin we see on such a tragic widespread level. The modern world has never seen such grotesque housing disasters, the dream of home ownership turned upside down, one quarter of American households owing more than the value of their homes. In fact, the entire housing dependence devised by Greenspan, where the USEconomy would lean not on industry but on rising home equity, serves as the calling card of central bank heresy. The heresy continues with the high priest ZIRP and bishop QE. Of course it ended in tears. The modern world has never seen such grotesque quicksand in sovereign debt for so many major nations. This goes far beyond Greece, Ireland, and Portugal, the symbols of small fry nations that few nations will make deep sacrifice for. In fact, as the sovereign debt spreads, it has become clear that Italy, Spain, France, and many other nations suffer from the sinking pressures that national securitized debt brings. As the sovereign debt loses value, the banking system sheds reserves valuation and goes insolvent, the credit engines stall, the economy falls into recession, the labor force loses jobs, the spending patterns falter, and the nation goes into a failure mode. See the Cauchy distribution in the graphic, which when the degrees of freedom grow unbounded, approaches the Gaussian normal.

Some important tail events of rare type are coming. Any attempts to control a Greek Govt Bond default will be fraught with high risk and deep peril. The equal necessity to control a default for Ireland and Portugal will be made obvious. The extension to Italian and Spanish Govt Bond losses in collateral damage will be obvious. The implications to Credit Default Swaps must also be handled, not possible in the same fraudulent manner as before with redefinitions and denied insurance awards. The contagion of vanished equity in the banking system will spread to London, New York, and Germany, in whose nations numerous banks will fail. It will be extremely difficult for the USDollar to ward off such powerful storm damage, and remain as the global reserve currency. Some distant maritime voices might regard my claims as premature and far-fetched, but their preoccupation with gold basis has left their voices mere reverberant richochets in the hinterland. The academic voices seem out of touch with trends, the loud laps on the rocks from waves of inflation hardly recognized for their damage from the remote seacoast. They seem unable to foresee the new found land that is forming in the East, divorced from the USDollar.
Iran Sanctions Backfire into Isolation
In the last two weekly articles, the backfire was described regarding Iran sanctions, the response from the emerging economies, and the harmful effects of foreign nations grappling with defense from the uncontrollable unbridled unending printing of phony money. The USGovt actions have galvanized a response, led not by Iran but by China. The raft of bilateral accords juiced by currency swap agreements has provided a significant buoyancy in the global trade framework, a highly complex system. It dictates the flow of USDollars in obvious ways, but it also dictates the formation of reserve banking systems in more subtle ways. In 2007, when Brazil and China announced a swap facility to bypass the USDollar in trade settlement, the Jackass took notice like a prairie dog raising his head with erect spine. In 2010, when Russia and China announced a swap facility to bypass the USDollar in trade settlement, the Jackass took notice again. The big trade winds were changing direction. The extreme importance of trade and banking interwoven should not be overlooked, as often done by the clueless cast of US economists. So when in the last month, Japan and China announced a swap facility to bypass the USDollar in trade settlement, the Jackass concluded that the end was near for the waterlogged American financial fortress. These are two primary Asian powerhouses, who with South Korea form the core strength of the entire East.
The USDollar might not be attacked on several fronts with harsh assaults so much as it will be relegated into irrelevance, as the USDollar will be ignored and left to defend itself in the open fields where wolves and dragons roam wild. Note the parallel to the COMEX, which as a market will also be relegated into irrelevance, as the precious metals will be traded elsewhere, in markets where private accounts are not stolen. Entire Compliance Departments have forbidden usage of the COMEX as of January, due to outlaws overrunning the floors. As the USEconomy is isolated, it will be compelled to bid up whatever foreign currency is required to purchase commodities and finished products. In reaction, the USDollar will fall in value.