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From Financial Sense - Upcoming Gold Default
by Jim Willie, CB. Editor, Hat Trick Letter | October 30, 2008
by Jim Willie, CB. Editor, Hat Trick Letter | October 30, 2008
The COMEX gold & silver markets are each hurtling down a dangerous path toward default. The artificial paper price has created enormous physical demand, and hampered supply production, if not delivery. The gap between the JPMorgan-led corrupted phony paper price and the legitimate physical price in actual trading markets has grown sharply, enough to force a breakdown like in any distorted market. When December contracts in gold & silver are demanded to be satisfied via delivery of the metal, it will be clear that the COMEX is running a scam. A default is highly likely. Of course, they can continue to deny contract holders the right to benefit from delivery, as they have been doing for months to ‘Non-Economic Customers’ but soon the ‘Commercial Customers’ will be defrauded. Arrests are warranted. We will see how this corruption unfolds.
The USFed cut the official interest rate again by 50 basis points, now to 1.0% on the Fed Funds target, in utter desperation. Other central banks did not join in rate cut exercises. The Euro Central Bank is expected to cut next week, reluctantly. So is the beleaguered Bank of England. The pressure is building on gold demand. Now with the official US price inflation at CPI = 5% or so, the real rate of money cost is minus 4%. The actual price inflation runs more like 10% to 12%, making the real cost of money more like minus 9% to minus 11%. GOLD RESPONDS TO NEGATIVE REAL RATES VERY FAVORABLY.
GALLOPING RECESSION TO FORCE MORE INFLATION
If you think the bank crisis is bad now, wait until the USEconomic recession achieves galloping speed downhill. The stagflation will eclipse that seen in the late 1970 decade. Today the economic growth in the GDP was posted for 3Q2008 at minus 0.25%, even with a hefty 5.4% PCE (personal consumption expenditures). This is another fairy tale told. The US consumer activity cut the GDP back by 2.25%, while the government activity added to the GDP by 1.15% in retrograde style. So the USDollar has rallied amidst economic decay, doing its death dance. Bear in mind that the stated admitted price inflation for Q2 was only 1.5% in that GDP corrupt calculation, which avoided a negative GDP for 2Q2008. They called inflation growth, the usual corrupted modus operandi. The second quarter was when prices skyrocketed for everything under the sun, if memory serves properly. Clearly, the wizards in the USGovt stat-rat offices, employing advanced techniques, moved some price inflation from Q2 into Q3, so that a recession would not be admitted all summer long. With the USFed rate cut to 1.0% again, they are admitting the recession.
The Shadow Govt Statistics folks pitch in a comment to provide light upon corrupted data. “Narrower Than Expected GDP Contraction Is Nonsense. The difference between the reported 0.3% annualized Gross Domestic Product (GDP) and the consensus expectation of a 0.5% contraction is no more than statistical noise, yet the reported result most certainly was manufactured so as to allow the hypesters on Wall Street and in Washington to spin their fairy tales of a ‘less-severe recession’ in order to help draw the gullible back into stocks, at least for a day or two before next week’s election. This follows earlier economic scare tactics aimed at the public to help sell the ‘Bailout’ package… With a 95% confidence interval of +/- 3% around this morning’s estimate of an annualized 0.25% contraction in real (inflation adjusted), annualized quarterly third-quarter GDP growth, the number was not even statistically indistinguishable from growth or contraction in the 3% range. A quarterly contraction in excess of 2% would have been more realistic… U.S. Economy is in a severe recession. With real retail sales, housing, non-farm payrolls, new orders for durable goods, and industrial production all showing quarterly and annual growth patterns never seen outside of a recession still in deterioration, GDP reporting eventually should show a string of quarterly contractions, with the recession dating back to fourth-quarter 2006, long before the exacerbation of the current systemic solvency crisis.”
A simple statement is required to close the preface. The financial market crises, in numerous arenas, have come in large part because the banking authorities have intentionally provided rescues only for New York investment banks and other big financial firms. Up to a month ago, the USFed had sterilized most injections into the Wall Street centers of the banking system by denying the mainstream bank system via liquidity drains. Drain the national system where households work and live, and provide subsidies for the financial crime syndicate. This is a betrayal of government to the people. Elite gain came at mainstream expense. Attention has gained on the misuse, false promises, and other misdirection of USGovt funds even in the bailout packages. The big banks are ordered not to lend, but to acquire smaller banks.
Until the global interest rate cut was announced, the USFed had not created much new money, despite the numerous rate cuts on the US side. The policy was unconventional and deliberate, with a two-fold purpose to aid Wall Street and to keep a lid on the gold price. Their bad policy, emphasis upon rescue and redemption for criminal fraud, neglect of the private sector, have left the USEconomy vulnerable to an extreme breakdown. A GRAND REFLATION WILL SOON BE ATTEMPTED, TIMED OBVIOUSLY AFTER THE ELECTION. The effect will be much like blowing up a dam holding back a lake, where downstream the price inflation will be broad, deep, and powerful. That day comes soon, and if not, then the entire US financial system will go dark. That cannot be permitted, since the aristocrats need the serfs in the public fields to work, so as to be exploited for gain.
The USFed cut the official interest rate again by 50 basis points, now to 1.0% on the Fed Funds target, in utter desperation. Other central banks did not join in rate cut exercises. The Euro Central Bank is expected to cut next week, reluctantly. So is the beleaguered Bank of England. The pressure is building on gold demand. Now with the official US price inflation at CPI = 5% or so, the real rate of money cost is minus 4%. The actual price inflation runs more like 10% to 12%, making the real cost of money more like minus 9% to minus 11%. GOLD RESPONDS TO NEGATIVE REAL RATES VERY FAVORABLY.
GALLOPING RECESSION TO FORCE MORE INFLATION
If you think the bank crisis is bad now, wait until the USEconomic recession achieves galloping speed downhill. The stagflation will eclipse that seen in the late 1970 decade. Today the economic growth in the GDP was posted for 3Q2008 at minus 0.25%, even with a hefty 5.4% PCE (personal consumption expenditures). This is another fairy tale told. The US consumer activity cut the GDP back by 2.25%, while the government activity added to the GDP by 1.15% in retrograde style. So the USDollar has rallied amidst economic decay, doing its death dance. Bear in mind that the stated admitted price inflation for Q2 was only 1.5% in that GDP corrupt calculation, which avoided a negative GDP for 2Q2008. They called inflation growth, the usual corrupted modus operandi. The second quarter was when prices skyrocketed for everything under the sun, if memory serves properly. Clearly, the wizards in the USGovt stat-rat offices, employing advanced techniques, moved some price inflation from Q2 into Q3, so that a recession would not be admitted all summer long. With the USFed rate cut to 1.0% again, they are admitting the recession.
The Shadow Govt Statistics folks pitch in a comment to provide light upon corrupted data. “Narrower Than Expected GDP Contraction Is Nonsense. The difference between the reported 0.3% annualized Gross Domestic Product (GDP) and the consensus expectation of a 0.5% contraction is no more than statistical noise, yet the reported result most certainly was manufactured so as to allow the hypesters on Wall Street and in Washington to spin their fairy tales of a ‘less-severe recession’ in order to help draw the gullible back into stocks, at least for a day or two before next week’s election. This follows earlier economic scare tactics aimed at the public to help sell the ‘Bailout’ package… With a 95% confidence interval of +/- 3% around this morning’s estimate of an annualized 0.25% contraction in real (inflation adjusted), annualized quarterly third-quarter GDP growth, the number was not even statistically indistinguishable from growth or contraction in the 3% range. A quarterly contraction in excess of 2% would have been more realistic… U.S. Economy is in a severe recession. With real retail sales, housing, non-farm payrolls, new orders for durable goods, and industrial production all showing quarterly and annual growth patterns never seen outside of a recession still in deterioration, GDP reporting eventually should show a string of quarterly contractions, with the recession dating back to fourth-quarter 2006, long before the exacerbation of the current systemic solvency crisis.”
A simple statement is required to close the preface. The financial market crises, in numerous arenas, have come in large part because the banking authorities have intentionally provided rescues only for New York investment banks and other big financial firms. Up to a month ago, the USFed had sterilized most injections into the Wall Street centers of the banking system by denying the mainstream bank system via liquidity drains. Drain the national system where households work and live, and provide subsidies for the financial crime syndicate. This is a betrayal of government to the people. Elite gain came at mainstream expense. Attention has gained on the misuse, false promises, and other misdirection of USGovt funds even in the bailout packages. The big banks are ordered not to lend, but to acquire smaller banks.
Until the global interest rate cut was announced, the USFed had not created much new money, despite the numerous rate cuts on the US side. The policy was unconventional and deliberate, with a two-fold purpose to aid Wall Street and to keep a lid on the gold price. Their bad policy, emphasis upon rescue and redemption for criminal fraud, neglect of the private sector, have left the USEconomy vulnerable to an extreme breakdown. A GRAND REFLATION WILL SOON BE ATTEMPTED, TIMED OBVIOUSLY AFTER THE ELECTION. The effect will be much like blowing up a dam holding back a lake, where downstream the price inflation will be broad, deep, and powerful. That day comes soon, and if not, then the entire US financial system will go dark. That cannot be permitted, since the aristocrats need the serfs in the public fields to work, so as to be exploited for gain.
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