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Andy Hoffman writes: This likely explains not only the colossal decline in gold and silver open interest during an historic “safe haven period”, but also the massive increases seen in the physical holdings of physical ETFs (such as GLD and SLV), as well as the enormous growth in physical closed-end funds such as CEF. Yep, it is quite amazing that despite 30% and 60% declines this summer in the prices of gold and silver, respectively, both GLD and SLV are now holding all-time record holdings of actual physical metal. To find this info, use…[this link] and scroll down to the charts titled “SPDR Gold Shares – Gold held in Trust” and “SLV Silver Holdings”.

Not only are such losses enormously apparent in the COMEX futures market, but in the real world where essentially ALL gold and silver miners are operating at losses, with several of the larger players moving toward bankruptcy as we speak. And don’t forget about South Africa, once the largest gold miner in the world by far, where its entire gold industry is now underwater and on the brink of economic catastrophe due to the artificially low price. Unless gold trades well above $1,000/oz for an extended period of time, not only will much of the gold industry shut down, but the risk of civil unrest will increase exponentially. More

Gold is poised for a dramatic surge and could blast through $2,000 an ounce by the end of next year as central banks flood the world’s monetary system with liquidity, according to an internal client note from the US bank Citigroup. The bank said the damage caused by the financial excesses of the last quarter century was forcing the world’s authorities to take steps that had never been tried before. This gamble was likely to end in one of two extreme ways: with either a resurgence of inflation; or a downward spiral into depression, civil disorder, and possibly wars. Both outcomes will cause a rush for gold. “This will lead to political instability. We are already seeing countries on the periphery of Europe under severe stress. Some leaders are now at record levels of unpopularity. There is a risk of domestic unrest, starting with strikes because people are feeling disenfranchised.” More

Gold World Editor Greg McCoach discusses Gold and ETFs, coins and Central Fund of Canada. Beware of gold ETF’s. “They are not back by physical metal. There’s some metal behind it but underlining the whole thing it’s a derivative. It’s basically a tool by the big boys to manage the price of gold and silver. When the garbage hit’s the fan, you’re going to what physical possession of your metal.

Marc Faber: Expect a 30 percent asset rally with the dollar going down. “The investor has to be very careful to be in assets that will actually appreciate in both foreign currency terms and in dollar terms. And if I look around the world in my opinion, the most precious asset going forward will still be gold. I only buy physical gold because I don’t trust derivatives products; I don’t trust ETF’s, and I advise every American to hold his Gold outside the United States.”

Max Keiser: “You have to look at a country like Iceland that were sold a bunch of bogus bonds by Wall Street and the city of London. The Kroner collapsed, the people are revolting in Iceland, the people are starving in Iceland — this is what’s going to happen in Korea, in China and even to America. Effectively the speculators, the borrowers have taken the system hostage…the banks in America have taken the US economy hostage and they have a gun to the head of the American economy.

Euro Pacific Capital’s Peter Schiff on Fast Money, November 20, 2008. “Capitulation is probably the most over utilized word on CNBC. I hear it every day for months. I think capitulation, if we get it, is years away. Our markets are going lower. This isn’t just a financial crises, this is an economic collapse.”

Congressman Paul gives his thoughts on the testimony of Paulson and Bernanke, the New International Reserve Currency; the failure of the dollar standard, gold and where the global economy could go from here.

Steve Watson
Infowars.net
Commodities experts are in agreement that the price of gold and silver is being manipulated by bankers and government officials in order to halt a mass abandonment of paper currencies and the debt based economy. The New York Post today carries a column by John Crudele declaring that there is a global run on gold coins and that demand is not being met by government mints. “The price that the government charges coin dealers has recently been increased by as much as 10 percent for a 10-ounce coin.” Crudele comments, also pointing out that gold purchases that were easily filled immediately six months ago are now subject to two week waiting periods.

“There’s another more puzzling aspect to the recent gold rush.” Crudele writes, referring to the fact that the market price of gold is declining, despite the increase in demand. Crudele quotes Bill Murphy, chairman of the Gold Anti-Trust Action Committee who states: “Gold should be moving up… How could there be such a dichotomy between the historic high premium for coins all over the world and the low Comex price?” Figures released by the Labor Department today show that prices of gold and silver tumbled in October by the most on record, with the gold price heading for its first annual decline in eight years. Gold futures for December delivery declined $7.20, or 1 percent, to $734.80 an ounce at 9:33 a.m. on the Comex division of the New York Mercantile Exchange. Silver futures for December delivery dropped 4.5 cents, or 0.5 percent, to $9.285 an ounce.

Reports are attributing this to a dampening of inflation concerns, however Bill Murphy maintains that “the US government and the banks that hold bullion are intentionally keeping the price down.” Murphy and the GATA has been attempting to expose the blatant manipulation for a number of years now. “The gold market is managed by certain central banks and their agents, the bullion banks” he wrote in 2005. “It is a price-fixing case involving some very powerful people and institutions … in fact it is a Gold Cartel.”

Murphy and others have revealed how the IMF and the central banks have sought to suppress the gold price over the last 10 years in order to maintain their monopoly over an economy based on debt and fiat paper currencies. We have previously reported on how the official COMEX gold future numbers are completely divorced from reality and banker manipulation is rife. Recently, influential private investment advisor Martin Hennecke echoed these sentiments declaring that the anomalous price trends were partly a result of temporary deleveraging as well as, “manipulation as the central bankers and the politicians don’t want you to panic out of their debt and go into gold.”

Hennecke and other investors such as Jim Rogers have predicted that gold prices will explode towards $2,000 an ounce with future hyperinflation resulting from the global central banks’ insistence on printing their way out of economic turmoil. Last week more evidence of the manipulation of precious metals emerged with Silver market analyst Ted Butler obtaining a letter from the U.S. Commodity Futures Trading Commission to U.S. Rep. Gary G. Miller, Republican of California. The letter virtually confirmed Butler’s speculation in September that the smashing of the silver price this year involved JPMorganChase’s takeover of Bear Stearns in March.

Butler writes:

“Bear Stearns held the largest concentrated short position in COMEX silver (and gold) futures at the time of its forced merger with JP Morgan in March. That position was not discovered until the publishing of the August Bank Participation Report followed by the October 8 letter from the CFTC to Congressman Miller. Furthermore, Bear Stearns had no legitimate backing to the short silver position, either in actual metal or cash. Otherwise it could have been delivered against or bought back, just as would have happened were it a long position.

“The price of silver at the time of Bear Stearns implosion was $20 to $21 an ounce. A free-market covering of a concentrated short position of this size would have driven silver prices to the $50 or $100 level and would have exposed the long-term manipulation. Rather than let the free market deal with the required short covering of such an uneconomic and unbacked short position, government authorities arranged to have the short position transferred to JP Morgan. This was undertaken by the U.S. Treasury Department, along with taxpayer guarantees against loss to Morgan worth billions of dollars. This was done, no doubt, to save the financial system from imploding. This was also patently illegal, as it aided and abetted the silver manipulation.”

Thom Calandra says,
U.S. is on a path of quantitative easing that the world has never seen. All economies will super ease. But the U.S. will be the worst. It is amazing to me that this is not issue No. 1 in financial markets. The hedge funds and investment banks have all gone super bullish on the dollar. This is just another hedge fund investment bank craze with a lot of herding and manipulation. They keep talking about a shortage of dollars when the U.S. is the world’s mega debtor and the world’s mega current account deficit economy. They keep talking about the dollar as a safe haven when the locus of economic weakness and financial crisis is here and the Federal Reserve is clearly on a path to debase the dollar because of the debt deflation here.

And finally: “It’s as crazy as the case they made for commodities in the first half, when the world economy was weakening, supply and demand responses were well under way and prices had gone higher in real terms than in any prior cycle in history. This is the last desperate bubble for this failing crowd. And when they are exhausted the dollar will fall very hard and gold will be released to the upside. That is all I know,” Mr. Veneroso says.

This is all we know and all we need to know. More

As deleveraging occurs and debt is destroyed, prices of commodities and other assets will fall in terms of real money, which is gold and other precious metals. The price of oil, for example, will continue to fall in terms of gold. (Investors need to start thinking of values in terms of ounces of gold instead of dollars, because that is where we are headed) What this means is that, while it is possible that the price of oil could still increase in terms of dollars, the price of gold will increase to an even greater degree. There will be no deflation in terms of dollars Right now, everyone is buying dollars and US treasuries based on the idea of price deflation in terms of dollars. More

In the past couple of weeks the Saudis have bought $3.5 billion in gold. Iran’s President Mahmoud Ahmadinejad reported converting Iran’s financial reserves to gold and Chinese investors’ demand for gold hit 38.4 tonnes in the first nine months of this year against 24 tonnes for the whole of 2007. Putin suggests Russia, China ditch the dollar in trade deals and before the G-20 conference French President Nicolas Sarkozy called for an end to the dollar as the world reserve currency. Additionally, in late October, a Chinese state newspaper urged replacing the dollar as the world reserve currency.

Last month from the Toronto Resource Investment Conference, Dr. Jim Willie told Al Korelin, “I got word in the last 24 hours that the Europeans, Russians, Chinese and Arabs, have agreed to a new world currency. It’s going to be based on a basket and the dollar and British Pound are not included. Those currencies are going to be largely tethered to gold. There’s going to be a new Russian gold-backed Rubel and a new Arab-Gulf Dinar. You cannot have a global finance system with a world reserve currency based on a debt system or an indebted economy…you have to ask yourself who is calling the shots, who is forcing decisions? The answer is the Bank for International Settlements which has had enough of the United States.”

I think an immense shift in world economic power is about to take place that will effect the price of gold. If the Arabs anticipate a fall in the dollar, a gold-backed basket currency would in effect make the US, and the world for that matter, pay for oil in gold. I think intuitive investors are catching on as Superfund’s analyst Johann Santer suggests now is the right time to buy gold.

Superfund Analyst Johann Santer: “Inflation will rise due to the flooding of liquidity in the market. People are looking at cash and treasury bills at the moment, but in the long run we will not escape from inflation. We see a medium to long term target [for gold] of $1500-$2000 within the next three months and $1000 is not impossible at the moment. Current price is a…good entry point.”

Iran has converted financial reserves into gold to avoid future problems, an adviser to President Mahmoud Ahmadinejad said in comments published on Saturday, after the price of oil fell more than 60 percent from a peak in July. Gold futures ended more than 5 percent higher on Friday and bullion ended the week about $10 higher compared with its last Friday’s close of $735.95 as investors covered short positions. More

Whether you know it or not, the global financial system as we know it will collapse and before local economic restructuring begins, massive civil unrest will spread across the U.S. Martial Law will be declared and food supplies will be disrupted. Well-known survivalists advise having enough food and supplies on hand for at least three to six months. Banks and ATM’s may be closed for several weeks and as a result, no one will accept checks. Many people recommend buying gold and silver coins but in the beginning, supermarket store clerks will have no idea what these coins are worth. Food, water, guns, ammunition, medical supplies, and whiskey will be worth their weight in gold.

Consider this content in a Hyperinflation Special Report written by John Williams:

The United States in a hyperinflation would experience the quick disappearance of cash as we know it. Shy of the rapid introduction of a new currency and/or the highly problematic adaptation of the current electronic commerce system to new pricing realities, a barter system is the most likely circumstance to evolve for regular commerce. Such would make much of the current electronic commerce system useless and add to what would become an ongoing economic implosion.

Gold and silver both are likely to retain real value and would be exchangeable for goods and services. Silver would help provide smaller change for less costly transactions.

Other items that would be highly barterable would include bottles of a good scotch or wine, or canned goods, for example. Similar items that have a long shelf life can be stocked in advance of the problem, and otherwise would be consumable if the terrible inflation never came. Separately, individuals, such as doctors and carpenters, who provide broadly useable services, would have a service to barter.

To many all this will come as a complete shock. We cannot count on our government or mainstream news pundits for truth and Americans are in total denial. As MSNBC reports, some American homeowners still think their property values are rising. “Despite dismal housing headlines and reports showing falling prices nationwide, owners in some once-hot areas still believe their home is gaining value or at least holding its own.”

An underground economic bartering system has already taken firm roots in anticipation of what’s to come. Some economists claim bartering always goes up in a recession. This is different. Even those in the mainstream are beginning to worry about a US default and foreign leaders are calling to replace the USdollar as world reserve currency. Former Deputy Secretary of State, John Whitehead claims the US is on a road to disaster worse than Great Depression.

Don’t take false refuge in the what government officials and the media tell you. State, county and city governments across the nation are collapsing. Philadelphia, Atlanta and Phoenix have asked the U.S. Treasury Department for part of the $700 billion financial rescue package. When the collapse takes place, unless police volunteer their services (and some will), they will be protecting their own families.

Los Angeles Times
Boom times for barter
In this tough economy, Valerie Whitlock uses two forms of currency: money and barter. The 37-year-old actress and writer from Studio City holds down sporadic film and television gigs to cover her rent, utilities, car payments and insurance. For everything else — head shots and haircuts, clothing and cut reels — she trades her handcrafted jewelry. She started swapping for goods while at work on the set. But now the classifieds website Craigslist and her MySpace page for Fancy Pants Jewelry have become great places to find even more trading partners. Her best scores include microdermabrasion treatments, a used Apple G4 iBook computer and Marc Jacobs jeans. “Jewelry-making has become a creative outlet for me as well as an extra income and barter tool,” Whitlock said. “It has made a huge difference in my life.” As the financial crisis makes cash and credit increasingly scarce, the ancient custom of bartering is booming. More

Infowars.net
Economic experts have predicted that rampant inflation caused by government stimulus packages will soon take hold of the economy and force precious commodity prices to all time highs. Johann Santer, MD at Superfund Financial Hong Kong told CNBC [watch video] that he expects to see gold climb from its current position at $710 to a whopping $1500-$2000 an ounce within the next three months. “Should money should be going into cash, paper?” asked CNBC anchor Martin Soong, to which Santer replied in the negative: “Not necessarily, we see that for the time being this remains the right strategy to be in, of course people are quite nervous, but once we start to understand again that it will not really protect us from inflation, which most likely will come in the long run, because of all the stimulus packages, I would assume that we should also start looking at the gold price at the moment and find opportunities there.”

Santer explained that deflation is not going to protect us from what he sees as inevitable heavy inflation in the long run caused by the huge amounts of money being pumped into the market in the name of saving the economy. Santer predicted that we may even see double digit inflation. “We better get prepared right away and start to look at real assets, for example gold could be really attractive at the moment, trading at $710.” Santer added. “At the moment there is a major sell off in everything, people are really looking at cash and treasury bills but in the long run, we will not escape from inflation so we have a medium to long term target of $1500 within the next three months.”

Johann Santer’s prediction mirrors that of numerous other fund managers and top investors such as Jim Rogers, Robin Griffiths and Jurg Kiener who are now predicting that global central banks’ insistence on printing their way out of economic turmoil is setting the stage for a hyperinflationary holocaust, a knock-on effect of which will be gold’s acceleration towards $2,000, as demand for precious metals outstrips supply. More

Peter J. Cooper’s Weblog
There has been an unprecedented surge in Saudi gold purchases in the past two weeks with over $3.5 billion being spent on the yellow metal, reported Gulf News citing local industry sources. Gold market expert Sami Al Mohna told the leading regional newspaper that this buying had substantially increased the gold reserves of the country: ‘Many Saudi investors see this as the right time for making investments in gold as the price is the most reasonable one at present’. He said gold was seen as a traditional safe haven at a time of global financial turmoil. Gulf regional stock markets have fallen very sharply since early October, leading to an exodus of cash which needs to find a safe haven.

Gold is currently trading at prices similar to a year ago, and 30 per cent off its March peak. Saudi investors clearly think this is the right time to buy and are piling into gold. News about the Saudi gold rush is bound to fuel speculation about the alleged large physical gold transactions that have been taking place at prices will above the spot price set in the futures market. It is very unlikely that such a large hoard of physical gold could have been bought for the depressed current price. Market analysts such as the legendary gold bug Jim Sinclair have pointed out that if less than two thousand millionaires insisted on delivery of physical gold at the end of their futures contracts, as is their legal right, then the spot gold market would jump to new highs. Saudi Arabian investors have spotted a bargain, and it may be a much better one than they think.

Also See: Kuwaiti Stock Exchange suspends trading

Business Intelligence — Legendary global investor Jim Rogers believes the recent dollar gains are temporary and are not based on fundamentals. “The fact that the dollar is gaining rapidly is only temporary,” Rogers recently told a group of private bank clients. “Within a year you’ll have to get rid of the dollar,” he said. Rogers has spent a career being one step ahead of mainstream investment thinking. Amongst his many accomplishments, Rogers was co-founder with George Soros of Quantum Fund. During his ten years with the fund, the portfolio gained more than 4,000%, while the S&P rose less than 50%. All hedge funds were short on the dollar, Rogers said, but because there has been a rapid increase in the dollar’s value against other currencies, fund managers want to buy them now.

“This is temporary, Rogers says. “Fundamentally it is a drama.” Rogers also said US government bonds are extremely overvalued. “They are “the world’s last bubble.” The current rescue plans, which will force governments to issue more debt, print money and flood the markets with liquidity, will flare up inflation after the crisis is over and will create worse problems. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke should resign for keeping alive “zombie banks” that should be allowed to fail, he said The Japanese government refused to let financial institutions fail in the 1990s. “It’s 18 years later and their stock market is 75% or 80% below what it was 18 years ago,” he added. “I know we are going to get aggressive rate cuts everywhere, that’s why I’m long short-term government bonds in the US, but shorting long-term government bonds because it’s not going to help, it’s going to add to inflation.”

Rogers admits that silver has been particularly battered down, 35% this year, and perhaps that is why he thinks this precious metal will outperform gold as investors turn to the metal as a hedge against inflation. “Silver will do better than gold,” Rogers recently said. “It’s been beaten down horribly. If you put a gun to my head and said you have to buy one, I would buy silver rather than gold.” Gold may drop as central banks and the International Monetary Fund (IMF) sell the metal to raise cash, said Rogers, who correctly predicted in April 2006 that gold would reach US$1,000 an ounce. The IMF in May ratified a plan that included proposals to sell 403.3 metric tons of gold to reduce a budget deficit. “The IMF has gigantic amounts of gold. Maybe gold is going to go down for a while. If gold does go down, I’m going to buy more,” Rogers said.

Weimar Republic Inflation 1923–24: a woman feeds her tiled stove with money. At the time, burning money was less expensive than buying firewood.

Summary of Hyperinflation Special Report by John Williams, dated April 8th, 2008.

1. With the creation of massive amounts of new fiat (not backed by gold) dollars will come the eventual complete collapse of the value of the U.S. dollar and related dollar-denominated paper assets.

2. …a law professor at Harvard and The University of California, Berkeley, who experienced the Weimar Republic hyperinflation, said, ‘It was horrible. Horrible! Like lightning it struck. No one was prepared. You cannot imagine the rapidity with which the whole thing happened. The shelves in the grocery stores were empty. You could buy nothing with your paper money.

3. …the still-unfolding banking solvency crisis has confirmed the Fed’s and the U.S. government’s willingness to spend whatever money they have to create in order to keep the financial system from imploding.

4. The circumstance envisioned ahead is not one of double- or triple- digit annual inflation, but more along the lines of seven to 10-digit inflation seen in other circumstances during the last century.

5. The historical culprit generally has been the use of fiat currencies — currencies with no asset backing such as gold — and the resulting massive printing of currency that the issuing authority needed to support its system, when it did not have the ability, otherwise, to raise enough money for its perceived needs, through taxes or other means.

6. The United States is no exception, already having obligated itself to liabilities well beyond its ability ever to pay off.

7. Hyperinflation: Extreme inflation, minimally in excess of four-digit annual percent change, where the involved currency becomes worthless. A fairly crude definition of hyperinflation is a circumstance, where, due to extremely rapid price increases, the largest pre-hyperinflation bank note ($100) becomes worth more as functional toilet paper than as currency.

8. The current economic contraction is about halfway towards being classified as a ‘depression.’

9. Official CPI could be running in double-digits by year-end 2008.

10. The U.S. economy has been in a recession since late-2006, entering the second down-leg of a multiple-dip economic contraction, where the first down-leg was the recession of 2001 that really began back in late-1999. Annual CPI inflation currently is running around 11.6%, again, facing further upside pressures.

11. The evolving depression quickly will move to great-depression status, when the hyperinflation hits. It will be extremely disruptive to the conduct of normal commerce.
Ongoing M3 currently shows a record annual growth rate of 17.3%.

12. In the near future, dollar selling should build towards an extreme, with heavy foreign investment in the dollar fleeing the U.S. currency for safety elsewhere. With the domestic financial markets and U.S. Treasuries so heavily dependent on foreign capital for liquidity, the Federal Reserve — now touted as the formal financial market stabilizer — will be forced increasingly to monetize federal debt. That process will build over time, given the federal government’s effective bankruptcy.

13. Again, the current circumstance will evolve into a hyperinflationary depression, then a great depression. Although such is not likely much before 2010, or after 2018, the financial end game for the current markets will tend to come sooner rather than later and will break with surprising speed when it hits.

14. 2008 will favor an incumbent party loss, i.e. a victory for the Democrats.

15. What promises hyperinflation this time is the lack of monetary discipline formerly imposed on the system by the gold standard, and a Fed dedicated to preventing a collapse in the money supply and the implosion of the still, extremely over-leveraged domestic financial system.

16. The limits to the unlimited abuse of the debt standard are particularly evident in the GAAP-based financial statements of the U.S. government, which show the actual federal deficit at $4.0-plus trillion for 2007 alone, with total federal obligations standing at $62.6 trillion. With no ability to honor these obligations, the government effectively is bankrupt.

17. Although the U.S, government faces ultimate insolvency, it has the same way out taken by most countries faced with bankruptcy. It can print whatever money it needs to create, in order to meet its obligations. The effect of such action is a runaway inflation — a hyperinflation — with a resulting, full debasement of the U.S. dollar, the world’s reserve currency.

18. Oil prices are near historic highs, the dollar is near historic lows, and money growth is at an all-time high. The near-term outlook for all three is for new record levels and for extremely strong upside pressure on U.S. inflation.… gold prices should continue setting new historic highs.

19. The difference is in accounting … for unfunded Social Security and Medicare liabilities.

20. Put into perspective, if the government were to raise taxes so as to seize 100% of all wages, salaries and corporate profits, it still would be showing an annual deficit using GAAP accounting on a consistent basis. In like manner, given current revenues, if it stopped spending every penny (including defense and homeland security) other than Social Security and Medicare obligations, the government still would show an annual deficit.

21. U.S. federal obligations are so huge versus the national GDP that the country’s finances look more like those of a banana republic than the world’s premiere financial power and home to the world’s primary reserve currency, the U.S. dollar.

22. The effect of this structural change has been that most consumers have been unable to sustain adequate income growth beyond the rate of inflation, unable to maintain their standard of living. The only way personal consumption can grow in such a circumstance is for the consumer to take on new debt or liquidate savings. Both those factors are short-lived and have reached untenable extremes.

23. From the Fed’s standpoint, it can neither stimulate the economy nor contain inflation. Lowering rates has done little to stimulate the structurally-impaired economy, and raising rates may become necessary in defense of the dollar.

24. By the time hyperinflation kicks in, the economy already should be in depression, and the hyperinflation quickly should pull the economy into a great depression. Uncontained inflation is likely to bring normal commercial activity to a halt.

Hyperinflationary Great Depression

25. In the United States, the printing presses have not been revved up heavily yet, but the commitments are in place, as seen in the annual GAAP-based deficit running on average more than $4.0 trillion per year. That amount is far beyond the ability of the government to tax or the political willingness of the government to cut entitlement spending. While the inevitable inflationary collapse, based solely on these funding needs, could be pushed well into the next decade, actions already taken likely have set the stage for a much earlier crisis.”

26. It is this environment that leaves the U.S. dollar open to potentially such a rapid and massive decline, and dumping of U.S. Treasuries, that the Federal Reserve would be forced to monetize significant sums of Treasury debt, triggering the early phases of a monetary inflation. In this environment annual multi-trillion-dollar deficits rapidly would feed into a vicious, self-feeding cycle of currency debasement and hyperinflation.

27. Given the extremely rapid debasement of the larger denomination notes, with limited physical cash in the system, existing currency would disappear quickly as a hyperinflation broke. From a practical standpoint, however, currency would disappear, at least for a period of time in the early period of a hyperinflation.

28. Barter System. With standard currency and electronic payment systems non-functional, commerce quickly would devolve into black markets for goods and services and a barter system.

29. “Gold and silver both are likely to retain real value and would be exchangeable for goods and services. Silver would help provide smaller change for less costly transactions.”

30. In such a circumstance, gold and silver would be primary hedging tools that would retain real value and also be portable in the event of possible civil turmoil. Also, at some point, the failure of the world’s primary reserve currency will lead to the structuring of a new global currency system. I would not be surprised to find gold as part of the new system, in an effort to sell the system to the public.

Theodore Butler
The Real Story
There is compelling new proof of a silver (and gold) price manipulation. The evidence connects the investment bank JP Morgan Chase, the dominant force in world commodity trading, the U.S. Commodity Futures Trading Commission (CFTC), the primary commodity regulator, and the U.S. Treasury Department, the arranger of every conceivable bailout.

This week, I received a copy of a letter, dated October 8, sent from the CFTC to a California Congressman, Gary G. Miller. It discussed allegations of a silver market manipulation because of the data in the monthly Bank Participation Report. The data in that report for August showed that one or two U.S. banks held a massive short position in COMEX silver futures of 33,805 contracts, or more than 169 million ounces. This is equal to 25% of annual world mine production, and was up more than five-fold from the prior month’s report. After this position was established, silver prices fell more than 50%, in spite of a widespread shortage in retail forms of investment silver. Never before had there been a such a large concentrated position in any market, including every manipulation case in the CFTC’s history. Concentration and manipulation go hand in hand. You can’t have one without the other.

The letter was sent to me by a reader who had the foresight to write to his Congressman. Of course, the CFTC denied that a silver manipulation existed, as they always have. This proves that the Commission responds much quicker to a member of Congress than it does to hundreds of ordinary citizens and investors. In the future, should you decide to write to the CFTC, be sure to do so through your elected representatives.

What was remarkable (and disturbing) about the letter was that it strongly confirms an analysis I presented in an article dated September 2, titled, “Fact Versus Speculation”. In that article, I speculated that the shocking increase in the silver short position by one or two U.S. banks was related to the takeover of Bear Stearns by JP Morgan in March. More

envast.blogspot.com
In a recent Business News Network interview, Amanda Lang talks with John Embry, Chief Investment Strategist at Sprott Asset Management, about his position on precious metals (bullish) and base metals (bearish). While hesitating to make a definitive prediction in the midst of such widespread asset destruction, Embry nonetheless looks beyond the carnage to what he suggests could be the seminal event for gold—the possibility of default on physical delivery for the December futures contract. He also explains why gold has failed to rise to the occasion of the worst-case financial scenario in history. Below are some excerpts from the interview, edited for length and clarity.

Amanda Long: People say gold really should be doing better than it is now and that actually becomes a justification for not buying it. It’s not doing what it should be doing in a crisis and, therefore, I don’t want to own it.

John Embry: That is a wonderful analysis because that is exactly the mindset the guys who are driving the price down are trying to create. Gold doesn’t work so keep away from it. They’re able to control the price quite easily in the paper markets because the paper markets are so huge in comparison. “The guys” – the central banks and their bullion bank accomplices—have a lot of power and a lot of money, so they can overwhelm the other side. But what’s happening is that the physical supply is diminishing dramatically. It’s getting harder and harder to purchase gold and silver through traditional avenues. You can’t get it in coin shops to any extent. You can’t get it through your banks. The physical side is really constricted by supply. That, to me, is the reality. The paper stuff is just the illusion.

AL: Now the problem, of course, for investors is that the paper market is the one you’ve got to play and, for the most part, it affects the price. How will that be resolved?

JE: What will have to happen is the people that are on the long side of the paper market in, say, on Comex, are going to have to call for delivery. When they call for delivery and there isn’t enough gold available to meet that call, the game changes. That is probably going to be the event that changes the perception. There’s a suggestion that something may happen around the time of the maturity of the December contract.

AL: Would you expect them to do that out of fear? In other words, they’d literally want to take delivery so that they have gold in their vaults?

JE: I would think that would be the best reason to do it for the simple reason that I want physical gold today. I mean that is the one thing you can trust. Paper gold, who knows? You may have a force majeure in the sense that people in the end will settle for paper and you won’t have the gold protection you think you have. You’ll get your money’s worth, but you’ll have paper. So that to me is the reason why I think somebody’s going to say, wait a minute, I want the gold. [Ed. Note: Force Majeure is a common clause in contracts that essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties, such as war, strike, riot, crime, act of nature (e.g., flooding, earthquake, volcano), prevents one or both parties from fulfilling their obligations under the contract.]

AL: In that transaction people ask for delivery. Will that trade crush a lot of people? Are there a lot of people who are short this market?

JE: Yes, without question. For the people who are short this market, there will be a force majeure and they will have to settle in paper because they can’t meet the requirements of gold. That is going to be the seminal event that defines this whole situation. More

Minyanville.com
As of today, COMEX has open interest on about 18 million ounces of December gold. I’m assuming some proportion comes from hedging by producers, and producers can deliver if a futures buyer takes delivery. But some percentage involves naked shorts, and as I understand it, at some point COMEX is on the hook if a counterparty fails to deliver. Comex has about 5 million ounces in the warehouse and a couple of million more they can lay their hands on (backstopping not just December, but all gold futures). Anecdotally, I’m hearing that a number of players are deciding to take delivery, and we’re also seeing December open interest drop smartly as (I assume) shorts buy in contracts. I’m not a gold expert, by any means, but it looks like the mother of all short squeezes is brewing, a la the Hunt Brothers and silver 2 decades ago, and that it could put huge upward pressure on gold and also threaten to blow up COMEX. More

Towards the end of the video (7:14) Erin Burnett says, “Gold has no inherent value like oil which does. Gold only has value is so far as I want to believe it has value.”
Peter Schiff: “No, you’ve got it backwards, that’s fiat money. The dollar has no value except perception. Gold has real Value.”
Erin Burnett: “In this [world or role] all that has value is food and oil.”
Peter Schiff: “No, gold has value.”
Erin Burnett: “This is a fun conversation.”
Mark Haines: “He’s [Peter Schiff] provocative if nothing else.”

Peter Schiff; President & Chief Global Strategist of Euro Pacific Capital discusses the economy under a Barack Obama Administration. “When he [Obama] comes into office it’s going to be as if capitalism is repudiated. The new mandate is we need more government….He’s going to try and revive the bubble economy. He’s going to try to get Americans to spend money and borrow again, and that’s the disease not the cure….We’re setting up a collapse in our currency…There’s a major crises coming. This is only the beginning.”

Towards the end of the video (7:16), pay particular attention to the sheer idiocy of the comments made by Mark Haines and Erin Burnett. Erin Burnett makes the astounding claim that “gold has no inherent value like oil which does. ROLMAO!

She goes on: “Gold only has value is so far as I want to believe it has value.”
Peter Schiff: “No, you’ve got it backwards, that’s fiat money. The dollar has no value except perception. Gold has real Value.”
Erin Burnett: “In this…all that has value is food and oil.”
Peter Schiff: “No, gold has value.”
Erin Burnett: “This is a fun conversation.”
Mark Haines: “He’s [Peter Schiff] provocative if nothing else.”

I had previously believed mainstream news pundits were collusive in spreading government propaganda. Now I understand many of them actually believe the propaganda. (They must be the Aliens, those “We are from France” people everybody’s been talking about.) Think of how profoundly disturbing the implications are: These talking heads are so believable to the uninformed public because they themselves believe the lies and propaganda.

“The Dow is a dead banana republic dictator in full military uniform propped up in the castle window with a mechanical lever moving the cadaver’s arm, waving to the Wall Street crowd.”

– Michael Bolser, Le Metropole Cafe1

Ellen Brown
Opednews.com
It was another surreal week on Wall Street, with the Dow Jones Industrial Average rising a thousand points while the economy continued to sink into its worst financial crisis since the Great Depression. Most of this stellar climb occurred on Tuesday, October 28, when the Dow rose some 900 points, making it the largest one-day stock market rise since the Great Depression. The climb was especially remarkable in that it occurred in just the last two hours of trading, on no particularly good news. Commentators attributed it to an expectation of a half point interest rate cut by the Fed the following day, but the likelihood of a rate cut was not new news two hours before closing, and previous rate cuts have not evoked that sort of dramatic response. When the cut was actually announced, the market yawned and proceeded to drop.

Meanwhile, gold — the “go to” investment that at one time could be counted on to go up when the economy was tanking — had its worst month in 25 years. Gold rounded out the month by dropping $60 in a little over a day. Gas prices also ended 31% lower than a mere six weeks ago, all just in time to assure voters on November 4 that their fears of rampant inflation and stock market collapse were unfounded.

Nothing to See Here: Concealing a $700 Billion Boondoggle

The Stepfordville-like stability of the market may have been engineered for another reason: to divert Congress from reconsidering its $700 billion bailout bill, which is proving to be as disastrous for the taxpayers as it is lucrative for the banks. The bankers are manning the lifeboats as the taxpayers go down with the Titanic. In an October 29 article in The Nation titled “Bailout = Bush’s Final Pillage,” Naomi Klein wrote:

“When the Bush administration announced it would be injecting $250 billion into America’s banks in exchange for equity, the plan was widely referred to as ‘partial nationalization’– a radical measure required to get the banks lending again. In fact, there has been no nationalization, partial or otherwise. Taxpayers have gained no meaningful control, which is why the banks can spend their windfall as they wish (on bonuses, mergers, savings . . .) and the government is reduced to pleading that they use a portion of it for loans. . . .

“By purchasing stakes in these institutions, Treasury is sending a signal to the market that they are a safe bet . . . [b]ecause the government won’t be able to afford to let them fail. . . . That tethering of the public interest to private companies is the real purpose of the bailout plan: Treasury Secretary Henry Paulson is handing all the companies that are admitted to the program – a number potentially in the thousands – an implicit Treasury Department guarantee. . . . [F]or the banks, the best part is that the government is paying them – in some cases billions of dollars – to accept its seal of approval. . . .

“[T]he market is being told loud and clear that Washington will not allow the country’s financial institutions to bear the consequences of their behavior. This may well be Bush’s most creative innovation: no-risk capitalism. . . . Meanwhile, every day it becomes clearer that the bailout was sold on false pretenses. It was never about getting loans flowing. It was always about turning the state into a giant insurance agency for Wall Street – a safety net for the people who need it least, subsidized by the people who need it most.”

William Greider, writing in The Nation on the same day, discussed a stinging letter sent to Henry Paulson by Leo Gerard, president of the United Steelworkers, comparing the sale of very similar bank stock to the American public and to billionaire Warren Buffett, who got a much better deal. Greider wrote:

“The swindle of American taxpayers is proceeding more or less in broad daylight, as the unwitting voters are preoccupied with the national election. Treasury Secretary Hank Paulson agreed to invest $125 billion in the nine largest banks, including $10 billion for Goldman Sachs, his old firm. But, if you look more closely at Paulson’s transaction, the taxpayers were taken for a ride – a very expensive ride. They paid $125 billion for bank stock that a private investor could purchase for $62.5 billion. That means half of the public’s money was a straight-out gift to Wall Street, for which taxpayers got nothing in return. . . .

“If the same rule of thumb is applied to Paulson’s grand $700 billion bailout fund, Gerard said this will constitute a gift of $350 billion from the American taxpayers ‘to reward the institutions that have driven our nation and it now appears the whole world into its most serious economic crisis in 75 years.’ “Is anyone angry? Will anyone look into these very serious accusations? Congress is off campaigning. The financiers at Treasury probably assume any public outrage will be lost in the election returns.”2

And just to make sure that public outrage is buried, the Plunge Protection Team (PPT) has been busily painting the arid landscape of the U.S. economy with roses and dewdrops.

The PPT Rides Again

For anyone who still doubts the PPT’s existence and ability to control markets, this article will expand on one I posted a week ago on the group and its behind-the-scenes activities. As noted in my earlier article, the PPT is formally called the Working Group on Financial Markets (WGFM) and was created by President Reagan’s Executive Order 12631 in 1988 in response to the October 1987 stock market crash. The WGFM includes the President, the Secretary of the Treasury, the Chairman of the Federal Reserve, the Chairman of the Securities and Exchange Commission, and the Chairman of the Commodity Futures Trading Commission. Its stated purpose is to enhance “the integrity, efficiency, orderliness, and competitiveness of our Nation’s financial markets and [maintain] investor confidence.” According to the Order:

“To the extent permitted by law and subject to the availability of funds therefore, the Department of the Treasury shall provide the Working Group with such administrative and support services as may be necessary for the performance of its functions.”3

In short, taxpayer money is being made available to manipulate markets. The shady history of the PPT was tracked by journalist John Crudele in a June 2006 New York Post series, in which he wrote:

“Back during a stock market crisis in 1989, a guy named Robert Heller – who had just left the Federal Reserve Board – suggested that the government rig the stock market in times of dire emergency. . . . He didn’t use the word ‘rig’ but that’s what he meant. Proposed as an op-ed in the Wall Street Journal, it’s a seminal argument that says when a crisis occurs on Wall Street ‘instead of flooding the entire economy with liquidity, and thereby increasing the danger of inflation, the Fed could support the stock market directly by buying market averages in the futures market, thus stabilizing the market as a whole.’”4

The PPT was to be the Roman circus of the twenty-first century, distracting the masses with pretensions of prosperity. Instead of fixing the problem in the economy, the PPT could just “fix” the investment casino. More

Ellen Brown
Posted October 25th, 2008
October 24 marks the 79th anniversary of the October 1929 stock market crash. Heavy selling started on Thursday, October 24, 1929, and accelerated the following week on Black Monday and Black Tuesday, October 28 and 29. Many feared a repeat of this disaster on Friday, October 24, 2008, after Japan’s Nikkei stock average fell nearly 10% during the night, Hong Kong’s Hang Seng fell 8%, and Germany’s and Britain’s fell 5%.

“In a stunning turn of events,” reported Yahoo! Finance, “the futures for the major indices were ‘lock limit’ down before the start of trading Friday, meaning they had hit a 5% threshold that prevented them from trading any lower until the stock market opened Friday.” Traders prepared for the worst, but remarkably, disaster was averted. The U.S. market fell only 3.5%, just another “ordinary” bearish day.

Why the more modest drop in the U.S., where the financial debacle originated and should have hit hardest? Suspicious observers saw the covert hand of the Plunge Protection Team (PPT), the group set up under President Reagan to maintain market “stability” by manipulating markets behind the scenes. Bill Murphy commented in LeMetropoleCafe.com:

“Today the Muppets on CNBC were remarking how well our market acted, not falling apart as expected. All day long they spoke of how our market was acting differently today than every other stock market in the world. Well hello, the other countries don’t have a PPT, which is WHY our market is so different.

“There are those who might think what the PPT is doing is right. What they don’t realize is their making ‘Everything is fine’ for so long, and not allowing the market to trade freely . . . like allowing the stock market to fall the way it should, has kept the individual in the market . . . when they might have been SCARED out some time ago.”

In response to Bill Saporito’s comment in Time it might be countered that Henry Paulson’s Plunge Protection Team is quite adept at rigging an economy. The difference between an acknowledged socialist state and the stealth socialism we have in the U.S. today is that in a socialist state, everyone expects the market to be rigged and operates accordingly. In a rigged pseudo-capitalist economy, investors are easily separated from their money because they expect the market to follow “free market principles” based on “supply and demand.” They are seduced into “pump and dump” schemes – artificial manipulations that allow insiders to unload stock at a high price or buy it at a low price – because they trust in Adam Smith’s “invisible hand,” which is supposed to automatically set things right in a market left to its own devices. The market today is indeed controlled by an invisible hand, but it is not necessarily serving the interests of small investors.

Plunge Protection for Some, Plunge Creation for Others

The most egregious examples of market manipulation have been in gold, silver and oil. The official “spot” (or cash) prices of gold and silver were taken down sharply in the last ten days, despite the fact that physical demand has been inexorable. Gold is available in the “real” market only at huge markups, and popular types of silver are not available at all.1 We were taught in school that communism does not work because when industry is in the hands of a single owner (the government), competition is eliminated and chronic shortages and black markets develop, since the government does not let prices respond to “supply and demand” but dictates them from the top. Today this is happening with gold and silver, with the true physical price varying radically from the reported paper price.

Gold is known as the “contra-investment,” the “go to” investment which historically has gone up when other stocks were failing. Investors see it as something tangible that will hold its value when everything else is falling apart. For that reason, rigging the market to “maintain stability” means suppressing the price of gold.

The current round of gold manipulations started on Thursday, October 16, at 10 am, when the price of gold suddenly suffered a freefall plunge of $45 within minutes. It continued to drop until it was down by nearly $60 in a little over an hour. Nothing happened on Thursday between 10 and 11 am to warrant this vertical drop. If anything, gold should have been shooting up in the same exponential fashion that it was falling. On Wednesday, the stock market had dropped over 700 points, and Dow futures (bets on which way the market would go) were down by 150 points Wednesday night. During the night, the Japanese stock market fell more than 10%, and all European markets were down.2 Thursday morning, among other very bad economic news, U.S. industrial output was reported to have posted its biggest fall in 34 years, and mid-Atlantic factory activity had crashed unexpectedly from September to October. Yet Dow futures were suddenly 130 points higher; and gold was slammed down right at 10 am, although physical gold was available only by paying huge premiums, and gold prices around the world were shooting up. The day continued in the same counterintuitive way, just one more egregious example of an ongoing pattern of manipulation that has become so blatant that either the manipulators have become supremely confident of their invulnerability or they are so terrified of impending doom that all pretense of plausible denial has been abandoned.

“The Most Massive Intervention Since Roosevelt”

Market manipulation is not generally discussed by the commentators on CNBC, but sense can hardly be made of today’s wildly unpredictable trading patterns unless the plays of powerful men behind the curtain are factored in. One commentator who does talk about this manipulation is Don Coxe, strategist for the Bank of Montreal. In a weekly conference call on September 5, 2008, he described what has been going on in the markets since July as “the most massive intervention of government into the capital markets or the financial system since Roosevelt closed the banks back in 1933.”3

According to the Toronto Globe and Mail, Coxe is “no paranoid conspiracy theorist. As the chairman and chief strategist of Harris Investment Management in Chicago, he is one of the most respected investment authorities in North America.”4 The unprecedented intervention he described went back to when the financial establishment was facing a very banker-unfriendly market in July. Gold was about to break through the psychologically important $1,000 mark, oil was above $140 dollars a barrel, the dollar was breaking down, the bank stock index had dropped in six months from 90 to 50, and the Federal Reserve had a balance sheet to match, after making huge loans to banks on shaky collateral. Fannie Mae and Freddie Mac were on the verge of collapse, and hundreds of billions of their securities were held abroad. As if by magic, these trends all suddenly reversed, beginning with a dramatic reversal in the swooning dollar.

How was it done? The cat was let out of the bag by the Nikkei English News, which reported in late August that finance officials from the U.S., Japan and Europe had drawn up plans to strengthen the dollar following the collapse of investment bank Bear Stearns. The intervention called for the central banks to purchase dollars and sell euros and yen if the dollar’s value dropped significantly, with Japan providing the yen for the currency swap.5

As the dollar strengthened, gold, silver and oil plunged. The pundits read the drop in gold and silver as a reaction to the rise in the dollar, since precious metals rise historically when the dollar falls. But what they failed to explain was why the dollar was rising. As Bill Murphy observed, “the dollar rallies sharply whenever the US stock market comes under pressure. It is almost simultaneous.” He quoted one of his newsletter contributors:

“Since the [stock market] low on 22 SEP we have lost 8.3 trillion bucks worth of asset value within the equities markets and what happens? The US dollar goes up, and up, and up, and up, and up. From what? 72 to 84 now (up 1.14 just today??!!??)? A non-stop rally that is NEVER adversely affected by news or market events. It’s almost been a 45-degree ascent. THAT is pure unmitigated intervention of a huge degree.”6

How to explain this stunning about-face? In Coxe’s September 5 conference call, he candidly laid out how the Federal Reserve and the Treasury, in conjunction with the CFTC (Commodity Futures Trading Commission) and the SEC (Securities and Exchange Commission), colluded to manipulate this “necessary” bounce in the dollar, along with a corresponding boost to financial stocks and sudden collapse in the commodities markets. Coxe called it “brilliant,” but the play was at a cost of millions of dollars to commodities investors and short sellers who were betting on what a “free” market “should” do. Oil plunged more than 50%, from a high of $145 a barrel in July to a low of about $64 on October 24. The same pattern was seen in silver and gold, with gold falling from a high of over $1,000 an ounce to a low of $700 on October 23. It all added up to a massive “pump and dump” scheme, with insiders pocketing the fortunes lost by unsuspecting investors. It’s a messy business, but somebody has to rake in these obscene profits for the “greater good” of market stability.

“The Most Sordid Scheme in the History of Finance”

Theodore Butler, writing on SilverSeek.com on September 2, reported that there was more than just central bank collusion going on behind the scenes. He tracked an unprecedented wall of short selling of gold and silver – massive “borrowing” of stock, selling it into the market and forcing down the price, then “covering” by buying the stock back at the lower price. Butler wrote:

“In gold, no more than 3 U.S. banks sold short in one month more than 10% of world annual mine production. This was the largest short position in gold and silver ever recorded by U.S. banks. After the massive and concentrated silver and gold short position was established by these U.S. banks, the [gold and silver] markets experienced a historic decline in price. It all took