There is a divergence of mining stocks and gold/slv today- so far. Gold and silver down but the minning shares looking stronger this a.m. I dont believe i've seen this happen since this down leg started in July. Could be wrong, but looks promising.
NumbersUsa, FairUs, Alipac, CapsWeb, and TeamAmericaPac
<< <i>There is a divergence of mining stocks and gold/slv today- so far. Gold and silver down but the minning shares looking stronger this a.m. I dont believe i've seen this happen since this down leg started in July. Could be wrong, but looks promising. >>
i saw that, still wondering myelf
i have no savvy or huevos to do anything short or margin
Is it a great call when you call it both ways, as he did?
"So for gold I’m bullish for another strong leg up to start very soon, and we are poised and ready to re-enter if we get our specific trigger. Gold could easily rebound as high as $965 on this next leg up.
But we also want to be aware of the potential for a serious breakdown in gold, similar to what happened in platinum and copper under similar circumstances. If this is the case, it will throw the gold market into turmoil, and the only way to survive such a period will be with hedges and short positions."
If the bank is not Lehman, they will soon follow. Just a matter of who gets bailed out and who is allowed to fail. That's just semantics. There are no shortages of large banks bordering on failure to choose from. Part of it is dependent on how much dough and for how long the FED tosses at each one of them.
RE could fall another 50%, who knows. That would basically take us all the way back to 1996 starting levels. That is not impossible considering the real estate bubble began in the 1970's. Most of the hot air was added post-1996 and deflating all of that would is within reason. But I'm figuring at least another drop of 15-20% here in the northeast. That can be done in 5-10% steps over the next 3 years.
Just a note to say Thank You to all of you who helped with getting our thread put back on, and thanks to those who started and posted to the new thread while ours was down.
"<< There is a divergence of mining stocks and gold/slv today- so far. Gold and silver down but the minning shares looking stronger this a.m. I dont believe i've seen this happen since this down leg started in July. Could be wrong, but looks promising. >>"
Do you expect residential RE prices to drop another 50%? >>
i know you don't cohodk....but RR even "I" would want FED bailout...lol
15% maybe, i don't know what the prime RE mtg market is doing right now...but many prime borrowers use their equity as an ATM each year or refi....those are the ones who will probably NOT foreclose, but will cut all spending to the bone. this year Cal-Poly had a bazillion freshman applicants...why? the State U tuition is about 1/2 the UC system and "Poly" is at least as good as any UC. In my neck of the woods a big jump in "kids" in the public HS, vs those in the 20k+ private elite HS.
a good number are selling their 2nd homes here, too at a loss.
there is much more to "endure" if one is mortgaged to the eyeballs in first and equity....maybe not 2011 but at least through all of next year, is my best guess
Median new home sales price is about $231,000. Median existing home sales price is about $212,000. A 50% drop from here would be utterly ridiculous. If this were to happen though, gold and silver would be $50 and $1 respectively.
It is easy to see from the attached link that existing home sales have stabilized in the USA with the exception of the West. In fact most areas are above Sept 07 levels. Prices in my county are about 4% higher than last year. Existing home sale prices and sales.
A drop of 5-10% would only put prices back to the lows hit last winter. Also 30 yr mortgages have dropped about 50 basis points (1/2 percent) in the last 2 weeks. Sure there are areas where homes were grossly overvalued and further correction maybe needed, but that in no way contradicts my contention that we are near a bottom. Dont expect prices to go up anytime soon, but I believe we are 90% through this down cycle. Maybe it will be 2011 when they start to go up, but they will have bottomed years before.
Median new home sales price is about $231,000. Median existing home sales price is about $212,000. A 50% drop from here would be utterly ridiculous. If this were to happen though, gold and silver would be $50 and $1 respectively
A 50% further reduction in home prices would take us into a scenario similar to the 1930's. Considering that almost any potential downside in our current banking system is now possible, then so is the downside in home prices. Note that I didn't say probable or likely....but possible. A return to 1980's pricing would wash out all the speculation. One's home should never be considered an investment or even an income generator as has been the case since the early 1980's....after all you can't eat it unless insulation and sheet rock is your cup of tea. Note that in the 1930's gold stocks did not fall with everything else, with some increasing 500%. A 50% drop in home prices would not send gold to $50 or anything near that level. Now that is utterly ridiculous considering that when gold was last $50, average home prices were probably $25K-35K.
Sept. 11 (Bloomberg) -- Lehman Brothers Holdings Inc., UBS AG and Merrill Lynch & Co. are among Wall Street firms that concocted derivatives and stock-loan deals to help offshore hedge funds dodge hundreds of millions of dollars in U.S. taxes, according to a U.S. Senate committee investigation.
Levin, a Michigan Democrat, said he wants the IRS to pursue back taxes or penalties against Wall Street firms and their hedge-fund clients that got around a 30 percent dividend tax.
``We are going to press the IRS to go after what is obviously a scheme,'' Levin said, while briefing reporters yesterday about the committee's yearlong probe. ``The IRS should be going after this. They are not. They have been fooling around this.''
Lehman Brothers, in an internal document described in the Senate report, estimated that it helped clients avoid $115 million in taxes in 2004. Lehman spokeswoman Monique Wise declined to comment on the report.
Dividend-enhancement transactions earned about $5 million of profit for UBS in 2005, and $4 million for Deutsche Bank in 2007, the report said.
Levin said he plans to introduce legislation making it harder to structure swaps and stock loans for the sole purpose of avoiding taxes.
The swaps changed the definition of the income under IRS rules, letting offshore funds claim they didn't earn dividends subject to the 30 percent withholding tax.
With respect to home prices, aside from the fact that markets are local and not national while the pricing data is national, there is a general expecation that we will be past the current situation of oversupply and returning to a more normal housing market somewhere during the summer of 2009.
Rust belt states such as Michigan and Ohio will certainly lag as there are income related issues that will surpress the housing pricing and the meltdown in Florida and some other resort areas will still suffer. But the larger part of the country will level out IMHO.
What will not happen is an significant appreciation in the next 5 years and that is good for those entering the market as well as those who were on the sidelines through this entire situation.
Aside from distressed areas, it apprears to me the bottom is maybe another 10 percent down from current levels. As usual, time will tell. I intend to revisit this thread in 9 months to see how accurate I was.
Retired United States Mint guy, now working on an Everyman Type Set.
U.S. Trade Deficit of $62.2 Billion Exceeds Forecast (Update2)
By Timothy R. Homan
Sept. 11 (Bloomberg) -- The U.S. trade deficit widened more than forecast in July as oil imports soared to a record, overshadowing gains in exports.
The gap grew 5.7 percent to $62.2 billion, the largest in 16 months, from a revised $58.8 billion in June that was bigger than previously estimated, the Commerce Department said today in Washington. Total imports and exports were the highest ever.
The trade gap with China widened to $24.9 billion from $21.4 billion in the prior month. The deficit with the OPEC jumped 34 percent to a record $24.2 billion.
The 2008 Mint Silver Proof SET is priced at $44.95 a set, now that is the ripoff of the year. Only 7 of the 14 coins are silver now that is a strong dollar.
With respect to home prices, aside from the fact that markets are local and not national while the pricing data is national, there is a general expecation that we will be past the current situation of oversupply and returning to a more normal housing market somewhere during the summer of 2009.
Rust belt states such as Michigan and Ohio will certainly lag as there are income related issues that will surpress the housing pricing and the meltdown in Florida and some other resort areas will still suffer. But the larger part of the country will level out IMHO.
What will not happen is an significant appreciation in the next 5 years and that is good for those entering the market as well as those who were on the sidelines through this entire situation.
Aside from distressed areas, it apprears to me the bottom is maybe another 10 percent down from current levels. As usual, time will tell. I intend to revisit this thread in 9 months to see how accurate I was.
I could see that some areas of the country who have been in perpetual recessions for a while, or did not participate in the craziness of the housing run-up will fare better and possibly stabilize out in 2009. But areas like the Northeast (where I live), California, Florida and others, may slow the descent, but not entirely stop it until 2011 or later. Housing is not going to "recover" as CDS's and derivatives in general implode over the next few years. And if the FED loses the handle on the derivatives deleveraging, which seems very realistic to me, then all bets are off on just how low housing can go.
If you're hearing lots of talk of $500 gold, $6 silver, and $70 oil........it probably won't happen.
If you're hearing lots of talk of $500 gold, $6 silver, and $70 oil........it probably won't happen
Ah ha!!! You are now beginning to understand the mentality of markets.
Oil touched $100 this afternoon which I posted as big support a week or more ago. Lots of stars aligned for a tremendous amount of money to be made, albeit, alot was made today.
Another phenomenon to consider is that there is certainly a mass mentality right now. With the WWW, information sharing is global and instant, for anyone, right now. People hear of something, see it on the web, buy into it and snap at it up like a turtle on a sleeping minnow. The constant drone of global rumors, global herd mentality, global sized movements in markets, crazy what's happening. This is a good time to trust yourself and your intuition and your experience. There are killings to be made but for every killing made, hundreds are slaughtered.
Looking at $10 silver today and realizing it could be 8 again...man, have I seen that movie "$8 Silver"; go look at a chart. Last time it was at 8, it stayed that way for years and years. Maybe it will stick at $10 but I sure would wait till it started settling and moving up before I start running after it but that's just me. Temper that with "It's always a good time to accumulate." But don't think $8 is impossible. If we see 8 again, the silver bugs are going to really have to consider rethinking their strategy.
With that snap it up mentality, we are seeing runs on physical silver with people chasing it where ever it might be hiding. Dont ignore the fact that there are still big shorts out there that have a bunch of paper riding on lower prices and they can move the market, we can't. People won't sell it that low they say so they're stashing it...well, all God's children have to be liquid from time to time; they'll sell it, you just gotta wait. Were in an age of information where the internet swirls blogs, newsletters, free and paid for advice, just a tornado of information blown right at us.
Just a little extra caution is warranted in the predatory financial environment we find ourselves in right now. There is a lot of bait in the water so beware..."Don't Snap!"
P.S. Hey, how 'bout that hurricane?
edited because I forgot you couldn't post Kitco chart links.
You are right there are a lot of stars aligned; shine as bright monday?
Did notice however that brent crude broke the 100 3rd day now, do you think that may fortell a brief dip below 100 for the crude on the nymex? also looks like the 10 yr cbot maybe slowing...
All ralates to gld/slv.
NumbersUsa, FairUs, Alipac, CapsWeb, and TeamAmericaPac
September 12, 2008 Ticking Time Bomb Explodes, Public Shocked Posted by Lew Rockwell at September 12, 2008 05:36 PM Writes Bob Higgs: The failure of Fannie Mae and Freddie Mac, setting in motion the biggest government bailout/takeover in U.S. history, brings a grim sense of fulfillment to competent economists. After all, what did people expect, that water would flow uphill forever?
This financial mega-mess is the same sort of event as the collapse of the USSR’s centrally planned economy, another economically unworkable Rube Goldberg apparatus that was kept going, more or less badly, for decades before it fell apart completely. Along the way, of course, famous (yet actually unsound) economists assured the world that everything was working out splendidly. As late as 1989, when the pillars were crumbling on all sides of the temple, Nobel Prize winner Paul A. Samuelson informed readers of his widely used textbook, “The Soviet economy is proof that...a socialist command economy can function and even thrive.” In the future, we will see a similar breakdown of the U.S. government’s Social Security system, with its ill-fated pension system and its even more inauspicious Medicare system of financing health care for the elderly. These government schemes are fighting a losing battle against demographic realities, the laws of economics, and the rules of arithmetic. The question is not whether they will fail, but when—and then how the government that can no longer sustain them in their previous Ponzi-scheme form will alter them to salvage what little can be salvaged with minimal damage to the government itself. Our political economy is rife with such catastrophes in waiting, yet the public always seems startled, and outraged, when the day of reckoning can no longer be deferred, and another apartment collapses in the state’s Hotel of Impossible Promises, loading onto the taxpayers more visibly the burden of sheltering the previous occupants. Each of these time bombs has at least one element in common: it promises current benefits, often seemingly without cost; but if it must acknowledge a substantial cost, it places that burden somewhere in the distant future, where it will be borne by somebody else. From the standpoint of society in general, every such scheme is a species of eating the seed corn. It satisfies the public’s appetite to consume something for nothing right now, with no thought for the morrow. It represents the height of irresponsibility by permitting people to live higher today than they can truly afford, financing this profligacy by borrowing recklessly and by taxing politically weak and ill-organized people in order to shower benefits on politically strong and well-organized special interests. Call it democracy in action or utterly corrupt governance; they are the same thing. The architecture of the Hotel of Impossible Promises is not arcane. All competent economists understand these things. Ludwig von Mises explained as early as 1920 why a centrally planned economy could not work as a rational system of allocating resources. The reasons why Social Security, especially its Medicare component, and many other such government programs contain the seeds of their own destruction have been explained time and again. Are the politicians who construct these structures really such idiots that they cannot understand the logic of what they are doing? Not at all. But they are not striving to create economically viable institutions that serve the general public interest; they are feathering their own electoral nests in the only way they can in the context of our political institutions. As H. L. Mencken explained back in 1940, the politicians “will all promise every man, woman and child in the country whatever he, she or it wants. They’ll all be roving the land looking for chances to make the rich poor, to remedy the irremediable, to succor the unsuccorable, to unscramble the unscrambleable, to dephlogisticate the undephlogisticable,” because they understand that “votes are collared under democracy, not by talking sense but by talking nonsense.” And are members of the public so dense that they will fall for such promises? Yes. Moreover, they are greedy, impatient, and immoral, because the present benefits they hope to gain via politics, however unsustainable in the long run, come entirely at the expense of the taxpayers from whom the government extorts its revenues. “Politics, under democracy,” Mencken wrote more than 80 years ago, “resolves itself into impossible alternatives. Whatever the label on the parties, or the war cries issuing from the demagogues who lead them, the practical choice is between the plutocracy on the one side and a rabble of preposterous impossibilists on the other.” And in a declaration even apter now than it was at the time, he concluded that what democracy “needs beyond everything is a party of liberty.” The trouble is, however, that now, even more than then, the American people have little interest in liberty. Instead, they want the impossible: home ownership for those who cannot afford homes, credit for those who are not creditworthy, old-age pensions for those who have not saved, health care for those who make no attempt to keep themselves healthy, and college educations for those who lack the wit to finish high school. Moreover, they want it now, and they want somebody else to pay for it. If you think that Fannie and Freddie’s bust is a big deal, just wait until Medicare comes crashing down. Then, the wailing and gnashing of teeth will be truly unbearable. As that day rapidly approaches, however, you’ll notice that the politicians are doing utterly nothing to forestall it.
The trouble is, however, that now, even more than then, the American people have little interest in liberty. Instead, they want the impossible: home ownership for those who cannot afford homes, credit for those who are not creditworthy, old-age pensions for those who have not saved, health care for those who make no attempt to keep themselves healthy, and college educations for those who lack the wit to finish high school. Moreover, they want it now, and they want somebody else to pay for it. If you think that Fannie and Freddie’s bust is a big deal, just wait until Medicare comes crashing down. Then, the wailing and gnashing of teeth will be truly unbearable. As that day rapidly approaches, however, you’ll notice that the politicians are doing utterly nothing to forestall it.
Wow, this gem from Kitco anal-ist John Nadsless who actually thought this article posed some "interesting" ideas. The number of errors and misunderstandings is quite impressive. It's incredible that a congressman actually thinks this like this. At least he's not from Connecticut. Poe suggests that Congress has done nothing since 2001. But I disagree. They have in fact silently approved of the FED's increasing of M3 from 10-18% per year since 1996 and given them carte blanche on the economy over the past few years even if it meant breaking the law. It took great conviction on their part to stand by and allow that to happen. Repealing of Glass-Steagel was also a pro-active feather in their cap. Done nothing Mr. Poe? Congress has done plenty enough already.
Congress Must Stabilize the Dollar
Rep. Ted Poe
On July 31, I introduced H.R. 6690, the “Sound Dollar and Economic Stimulus Act of 2008”. It is vital that this bill become law.
The U.S. dollar affects every American citizen and every American business. Our economy is totally dependent upon the dollar. To have a stable economy, we must have a stable dollar. Unfortunately, for many years we have not had a stable dollar. Today, people are angry and afraid. The crumbling, gyrating dollar has created an economic crisis.
I was a judge for 25 years. I believe in law and order. The U.S. Constitution is the supreme law of the land. Article I, Section 8 of the Constitution provides that: “The Congress shall have Power…To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures…”
So, what has Congress been doing about the dollar? Nothing. Since 2001, Congress has stood idly by while the dollar has lost almost 70% of its value, whether measured against gold or retail gasoline. When a currency begins to lose value, the effects show up first in the price of gold, followed quickly by other commodities, such as oil. However, eventually the inflation works its way through the entire economy, raising prices across the board. In the process, the hard-earned savings of Americans are devalued—or, the way I look at it, stolen.
Inflation creates turbulence in financial markets and provokes conflict between economic groups. People become angry because they feel that they are being robbed. They become afraid because they know that unchecked inflation can lead to economic collapse. In 1913, Congress delegated its power over money to the Federal Reserve. Unfortunately, the Fed has been preoccupied with manipulating interest rates. Since 2001, the Fed has lowered its Fed Funds rate from 5.00% to 1.00%, raised it to 5.25% and then lowered it to 2.00%. Meanwhile, the value of the dollar has declined by nearly 70%.
Trying to regulate the value of the dollar by manipulating the Fed Funds rate makes no sense. The Fed Funds rate is the price of one type of capital. Because the Fed cannot supply capital (real resources) to the economy, it is not clear why it should be in the business of setting interest rates. Logically, interest rates should be set by the market—by the supply and demand for capital.
Unlike capital, the amount of money in the economy should not be limited by anything physical. It should be determined by the demand for money, which depends upon the transactions people want to do and how much money they want to hold. What matters about money is not its quantity but its value. In this, dollars are no different than foot rulers. No one cares how many foot rulers there are in the world. What matters is that each one is the length prescribed by the U.S. Bureau of Standards.
My bill directs the Federal Reserve to bring the price of gold down to $500/oz and then to keep it there. The Fed would do this by announcing that its Open Market Desk was prepared to sell government bonds and contract the monetary base until the price of gold falls to $500/oz.
At last measure, the monetary base was about $872 billion. In December, 2005, which is the last time the price of gold was at $500, it was $827 billion. So, it is possible that the Fed might have to sell as much as $45 billion worth of bonds to implement the new policy. Because this is only about 0.8% of the total amount of bonds currently outstanding, this should not be a problem. However, I believe that the demand for the newly-stable dollar will be so great that the Fed will actually have to expand the monetary base to keep the gold price from falling below $500/oz.
Once the Fed implements its new directive from Congress, every dollar in the world will have the same market value as one five-hundredth of an ounce of gold. From then on, the monetary base will expand and contract automatically in response to market demand. Why gold? My bill defines the value of the dollar in terms of gold because the financial markets want, and the American people deserve, a dollar that is “as good as gold”.
Why $500/oz? At $804/oz, the current market price of gold reflects the expectation (and fear) of future inflation. I believe that fixing the value of the dollar now in terms of gold at $500/oz will stop the current inflation without causing deflation. However, my bill also provides a powerful supply-side stimulus, in the form of first-year expensing of all capital investment, to ensure that economic growth accelerates at the same time that inflation is being stopped. Bringing the dollar price of gold down to $500 will bring the price of gasoline down from its current $3.50/gallon to less than $2.50/gallon. It will strengthen the dollar against foreign currencies. Most important, it will prevent Americans’ incomes and savings from being stolen by inflation.
My bill will not put America on the gold standard, like we had in the early part of the 20th Century. Under the old gold standard, gold was money. Limiting the supply of money to the supply of gold was a huge mistake. It was the basic error that caused the Great Depression. Under my bill, our money will be the same “legal tender” currency that we have now. There will be no limit on the number of dollars except market demand. The big difference will be that every dollar will always be worth the same as one five-hundredth of an ounce of gold.
When I became a Congressman, I took an oath to uphold the Constitution. The Constitution commands Congress to regulate the value of our money. My bill will do this. This is why it is essential that it become law."
First of all the USDollar index has only dropped 33% from it's 2001-2002 levels. I don't know where Mr. Poe dreamed up 70%...maybe from it's all-time highs many years prior to 2001.
The idea that $872 Billion in circulating currency "controls" our economic health and gold price is quite a leap of faith. Does this guy really think that merely cutting back on circulating currency to $827 Billion will restore gold to 2005 levels ($500/oz) and allow a stable dollar for years to come regardless of the actions of the FED begging bowl? Doesn't the fact that M2 is at $7.7 TRILL and M3 at $14 TRILL play any role in dollar strength? Ignoring the FED credit begging bowl window and also the hundreds of TRILLIONS in credit that banks created on their own leads to a wrong conclusion. Yes Virginia, the FED and its banks have created ways to invent monetary liquidity without going through congressional channels. It would be an incredible feat if a mere $45 BILLION reduction in circulating money would solve all our problems going forward. Linking the govt's stash of gold to the $827 BILL of circ currency yields about $310 gold/oz. Linking that to M3 yields over $50,000/oz. Tossing in the world's currencies might yield $5,000 gold. Guess the truth is somewhere inbetween.
The govt just tossed out $150 BILL in checks to Joe consumer (ie 3X Poe's recommended reduction but in the wrong direction)....and the price of gold actually fell in the meantime (lol). Maybe one more $150 BILLION cash give-away will get gold down to Rep. Poe's $500/oz.
Poe appears to want things both ways. I was a little confused with his thought process concerning the need to keep changing the money supply, while at the same time pegging the dollar to gold.
I'll have to re-read it when my head clears up.
Argh, he wants a stable currency but he wants to tinker and tinker with it for his own agenda. Nothing is changed.
Q: Are You Printing Money? Bernanke: Not Literally
Sept. 15 (Bloomberg) -- Lehman Brothers Holdings Inc., the fourth-largest U.S. investment bank, succumbed to the subprime mortgage crisis it helped create in the biggest bankruptcy filing in history.
Lehman bondholders may get about 60 cents on the dollar if the investment bank is forced into liquidation, analysts at CreditSights Inc. said. The filing is by Lehman's holding company and won't include any of its subsidiaries. Lehman owes its 10 largest unsecured creditors more than $157 billion, including debts to bondholders totaling $155 billion.
The largest single creditor listed in today's filing is Tokyo-based Aozora Bank Ltd., owed $463 million for a bank loan. Other top creditors include Mizuho Corporate Bank Ltd., owed $382 million, and a Citigroup Inc. unit based in Hong Kong owed an estimated $275 million. Lehman listed $639 billion of assets. Citigroup and The Bank of New York Mellon Corp. are among trustees for bondholders who Lehman owed about $155 billion.
Ah, back from the hurricane...20 miles outside of the western eyewall; two words: Red Butt! And just to test our will, we got a respectable flood from a separate storm the next night...come on...what else ya' got. Reminds of Lieutenant's speech to God from atop the mast of Forrests' shrimp boat in the hurricane...what else ya' got.
Yepper, Judge Ted Poe is a certified wack job that does quite well with press. Not to worry, even if that bill gets heard, it still has to pass. If it passes, a quick trip across the border fixes everything but then you just have a handful of stinking FRN's. See, that's one of the basic parts of the financial system here is they want everybody on FRN's. That's why foreign accounts, dual citizenships, all the dodging tactics are frowned upon and will become more and more illegal ala IR S. There are to be no off the books assets, everything must be accounted for in FRN's; house, car, notes, ir s, savings/checking, stocks, all assets.
NWO will be a phrase that should become more conspicuous. At some point, the authorities should be able to punch in your ssan and know exactly how much of what you have and where it is and probably where you are at the same time; they can almost do it now except for off the books metal, outside banking, shadow owners, and tricks like that and it's not so seamless, they still can't find everything out with just one click but it shouldn't be too much longer till they can pinpoint your location (cell phone, toll tag, IP add, etc.) and your assets. There is still no way to track PM...hee hee. Remember the referees final instruction to the boxers before they start the fight..."Protect yourself".
So, what has Congress been doing about the dollar? Nothing. Since 2001, Congress has stood idly by while the dollar has lost almost 70% of its value, whether measured against gold or retail gasoline. When a currency begins to lose value, the effects show up first in the price of gold, followed quickly by other commodities, such as oil. However, eventually the inflation works its way through the entire economy, raising prices across the board. In the process, the hard-earned savings of Americans are devalued—or, the way I look at it, stolen.
Translation: I think that the dollar loses its value out of the blue, and my constituents are starting to complain to Me. Imagine that! To Me!
Inflation creates turbulence in financial markets and provokes conflict between economic groups. People become angry because they feel that they are being robbed.
Ya think?
In 1913, Congress delegated its power over money to the Federal Reserve.
I'm beginning to think there might be a connection here!
Unfortunately, the Fed has been preoccupied with manipulating interest rates. Since 2001, the Fed has lowered its Fed Funds rate from 5.00% to 1.00%, raised it to 5.25% and then lowered it to 2.00%. Meanwhile, the value of the dollar has declined by nearly 70%.
Trying to regulate the value of the dollar by manipulating the Fed Funds rate makes no sense. The Fed Funds rate is the price of one type of capital. Because the Fed cannot supply capital (real resources) to the economy, it is not clear why it should be in the business of setting interest rates.
Hey, if you're in the business of creating money, you're gonna be in the business of manipulating interest rates, moron.
Logically, interest rates should be set by the market—by the supply and demand for capital.
Unlike capital, the amount of money in the economy should not be limited by anything physical. It should be determined by the demand for money, which depends upon the transactions people want to do and how much money they want to hold. What matters about money is not its quantity but its value. In this, dollars are no different than foot rulers. No one cares how many foot rulers there are in the world. What matters is that each one is the length prescribed by the U.S. Bureau of Standards.
This guy is smoking something. If the amount of money shouldn't be limited by anything physical, please let him explain how a "Bureau of Standards" would prescribe it. What a joke this guy is.
My bill directs the Federal Reserve to bring the price of gold down to $500/oz and then to keep it there. The Fed would do this by announcing that its Open Market Desk was prepared to sell government bonds and contract the monetary base until the price of gold falls to $500/oz.
Creating more government debt = lowering the price of gold? Is he confusing M1 with M3? This guy's a riot.
At last measure, the monetary base was about $872 billion. In December, 2005, which is the last time the price of gold was at $500, it was $827 billion. So, it is possible that the Fed might have to sell as much as $45 billion worth of bonds to implement the new policy. Because this is only about 0.8% of the total amount of bonds currently outstanding, this should not be a problem. However, I believe that the demand for the newly-stable dollar will be so great that the Fed will actually have to expand the monetary base to keep the gold price from falling below $500/oz.
This guy needs to take Accounting. And Economics. And an Ethics course. $45 Billion, yeah - it's nothing.
Someone else take over with this.........he's got a busy little brain, but I have to do some actual work this morning.......later.......
Q: Are You Printing Money? Bernanke: Not Literally
AIG is part of the DOW bad news or they just drop it and put another company in it's place as they've done to make sure the performace of it looks great? In another note GM looks like a bad bet too.
<< <i>AIG is part of the DOW bad news or they just drop it and put another company in it's place as they've done to make sure the performace of it looks great? In another note GM looks like a bad bet too.
Not to worry, I am sure that Dow Jones is already looking at replacements.
We discussed this several years ago. The stock market guys replace the bad companies with good companies to manipulate how the Dow and S&P averages look to the average “DUMB”, I mean uninformed American.
“Gee Martha how come my 401K went down when the market seems to be doing so well?”
How many of the smaller U.S. banks that are going down are being reported. Who has time to report small banks when huge investment firms are going belly up?
I got an email from a friend today that said this, “Very scary. I was reading that the FDIC has about $50 billion to protect $10 trillion in investments…. My broker called to let me know that a bank that I have a CD with, was closed down by the FDIC, but that it would take FDIC about 10 days to put the money back in my account. It’s only the beginning.”
Again here is the link to the site where you can check to see how safe your bank is.
Glad I dumped my 1500 shares of Boeing stock in September last year and started purchasing gold. I have no other stocks, gold hard to find at decent prices any more and I wonder if holding $7.000 in cash is a good idea? Any thoughts pro-con on the cash held? Thanks Jon
This time we're playing musical chairs with the remainder of the "investment" banks, except there are only 2 or 3 chairs left. Choose wisely. Not for the faint of heart.
Gold was about the only decent performing asset in the 1930's. Check your history. It functions well in strong inflationary times as well as deflationary times to maintain value. Cash is king until the reflation window is open wide. The FED gave out a "Poe-like" $50-70 BILL today. Easy come....easy go.
08:35 ET Market is Closed [BRIEFING.COM] S&P futures vs fair value: -15.90. Nasdaq futures vs fair value: -4.80. A lower open is expected, with a barrage of reports not doing much to help sentiment. The New York Fed accepted a $50 billion overnight repo in an effort to improve liquidity following the doubling of the overnight Libor rate and an increase in the fed funds rate above the target rate. Overseas central banks also injected liquidity into the system, according to CNBC. Fed funds futures for today's meeting now indicate a 96% chance of a 25 basis points cut to 1.75% and a 4% chance of a 50 basis point cut. There was no chance of rate cut just one week ago. Best Buy (BBY) reported second quarter earnings of $0.48 per share, which is $0.09 worse than the average analyst estimate of $0.57. Goldman Sachs (GS) earned $1.81 per share, which topped the average estimate of $1.71, but marked year-over-year decrease of 72%. GS fell 8% to a fresh 52-week low in premarket trading. In economic news, CPI fell 0.1% in August, matching expectations due to a drop in fuel costs. CPI excluding food and energy rose 0.2%, also in line with expectations. In commodity trading, oil prices are plunging once again, down 4.1% to $91.79 per barrel.
OPA, physical gold price in the 1930's was fixed by the govt for all intensive purposes, plus FDR made it illegal to own any significant quantity. The only way to effectively own gold in the 30's was to be a bank or buy gold stocks. Homestake Mining for example went up 6X. They eventually became Newmont. Owners of physical gold did make 60% over the US dollar in 1933 when FDR readjusted the price of gold. That was a real slap to cash owners.
Surveying the landscape, here’s an overview of what I’m seeing:
Decoupling Fact from Fictional Futures
In Bill Murphy’s daily commentary at LeMetropolecafe.com, Friday September 12, Murphy reported this account from one of his subscribers who happens to be in the metals recovery business:
“I have to admit Bill I have seen a lot in my time but if this information I am about to provide you doesn't prove once and for all that these markets are being totally manipulated and distorted. Then there will be nothing left to prove anymore about anything. I have been recycling for over 10 years now and I have been focused in developing a service in the silver recovery business. So far it's been very successful and I had been preparing an order for recovery just before they hit the silver market. I was sitting on 29 skids @ 28,000 lbs of fiche which equates to aprox. 385 lbs of pure silver considering my assay on this grade of fiche was very high. 1.4 grams per 1000 grams of micro fiche. It's around 4 dollars per lb or 6000 ounces of silver. Now, I won't mention names but I was unable to setup a bullion account with this company because they don't setup accounts anymore so I can't hedge the market. The day you deliver. You get paid spot on the Comex. So I simply parked my product and waited. Now talk about a squeeze play. Would you believe that this company called me today [Friday] @ 10.50 silver and quoted me 16.00 per ounce with room to negotiate??? “
This account perfectly illustrates what we are witnessing, first hand; as physical stocks become more and more scarce – the Cartel is “beating the COMEX price with a stick” – making would-be-buyers think twice before putting their money down [or order in] for the real thing.
This cripples all resource companies since they ALL contract to have their off-take benchmarked against fraudulently derived paper futures prices. This is why we currently give preference to ownership of physical metal versus mining shares.
This also provides a great backdrop for talking heads to say “commodities are toast” – lessening demand for physical or forcing liquidation through [cough] the etfs – GLD and SLV. I distrust the etfs on the basis that their alleged stocks of physical are all under the custody and direct control of institutions [the Cartel] long suspected / accused of price management of the same.
In the end, however, smart money the world over – has now cotton on to this charade. I speak quite regularly with folks around the world – there simply is NO PHYSICAL SILVER to be had – virtually anywhere.
To those suppliers that say they have piles of 1000 oz bars, go ahead and produce them. And I'm not sure I'd want to send any of them good money right and wait for the merchandise.
Cash is KING. Gold, if your cost is above $700, probably not.
Cash is printable. Gold is not. Bernake's biggest problem is how to get the dollar to retain value while replacing all of the value that is being destroyed by the derivatives implosion. He might over-shoot and lend out too much, or not. Nobody knows at this point, but one thing is certain - the U.S. is in debt and can't meet its committments. So, it will renege on a bunch of them, and it will change the rules for the rest. What that means in terms of the dollar and gold is still a crapshoot.
Q: Are You Printing Money? Bernanke: Not Literally
Comments
but the minning shares looking stronger this a.m. I dont believe i've seen this happen since
this down leg started in July. Could be wrong, but looks promising.
<< <i>There is a divergence of mining stocks and gold/slv today- so far. Gold and silver down
but the minning shares looking stronger this a.m. I dont believe i've seen this happen since
this down leg started in July. Could be wrong, but looks promising. >>
i saw that, still wondering myelf
i have no savvy or huevos to do anything short or margin
<< <i>Nicholas made a great call back in early August:
Platinum's Warning for Gold >>
Is it a great call when you call it both ways, as he did?
"So for gold I’m bullish for another strong leg up to start very soon, and we are poised and ready to re-enter if we get our specific trigger. Gold could easily rebound as high as $965 on this next leg up.
But we also want to be aware of the potential for a serious breakdown in gold, similar to what happened in platinum and copper under similar circumstances. If this is the case, it will throw the gold market into turmoil, and the only way to survive such a period will be with hedges and short positions."
Nope.
There is no chance the RE market will bottom next year, or even before 2011 when things really start to hit the fan
Do you expect residential RE prices to drop another 50%?
Knowledge is the enemy of fear
RE could fall another 50%, who knows. That would basically take us all the way back to 1996 starting levels. That is not impossible considering the real estate bubble began in the 1970's. Most of the hot air was added post-1996 and deflating all of that would is within reason. But I'm figuring at least another drop of 15-20% here in the northeast. That can be done in 5-10% steps over the next 3 years.
roadrunner
Just a note to say Thank You to all of you who helped with getting our thread put back on, and thanks to those who started and posted to the new thread while ours was down.
Terry
but the minning shares looking stronger this a.m. I dont believe i've seen this happen since
this down leg started in July. Could be wrong, but looks promising. >>"
//////////////////////////////////////////////////////
As the miners begin to report, we will likely learn that many have hedge-books containing sales that are WAY above today's prices.
<< <i>
Do you expect residential RE prices to drop another 50%? >>
i know you don't cohodk....but RR even "I" would want FED bailout...lol
15% maybe, i don't know what the prime RE mtg market is doing right now...but many prime borrowers use their equity as an ATM each year or refi....those are the ones who will probably NOT foreclose, but will cut all spending to the bone. this year Cal-Poly had a bazillion freshman applicants...why? the State U tuition is about 1/2 the UC system and "Poly" is at least as good as any UC. In my neck of the woods a big jump in "kids" in the public HS, vs those in the 20k+ private elite HS.
a good number are selling their 2nd homes here, too at a loss.
there is much more to "endure" if one is mortgaged to the eyeballs in first and equity....maybe not 2011 but at least through all of next year, is my best guess
It is easy to see from the attached link that existing home sales have stabilized in the USA with the exception of the West. In fact most areas are above Sept 07 levels. Prices in my county are about 4% higher than last year. Existing home sale prices and sales.
A drop of 5-10% would only put prices back to the lows hit last winter. Also 30 yr mortgages have dropped about 50 basis points (1/2 percent) in the last 2 weeks. Sure there are areas where homes were grossly overvalued and further correction maybe needed, but that in no way contradicts my contention that we are near a bottom. Dont expect prices to go up anytime soon, but I believe we are 90% through this down cycle. Maybe it will be 2011 when they start to go up, but they will have bottomed years before.
Knowledge is the enemy of fear
Brazil doesnt get it. Falling oil and commodities will cool their economy in due time. Higher rates will just speed and deepen their coming recession. Brazil Raises Rate to 13.75%, Highest in Two Years
Knowledge is the enemy of fear
A 50% further reduction in home prices would take us into a scenario similar to the 1930's. Considering that almost any potential downside in our current banking system is now possible, then so is the downside in home prices. Note that I didn't say probable or likely....but possible. A return to 1980's pricing would wash out all the speculation. One's home should never be considered an investment or even an income generator as has been the case since the early 1980's....after all you can't eat it unless insulation and sheet rock is your cup of tea. Note that in the 1930's gold stocks did not fall with everything else, with some increasing 500%. A 50% drop in home prices would not send gold to $50 or anything near that level. Now that is utterly ridiculous considering that when gold was last $50, average home prices were probably $25K-35K.
roadrunner
Oh come on this can’t be true?
Sept. 11 (Bloomberg) --
Lehman Brothers Holdings Inc., UBS AG and Merrill Lynch & Co. are among Wall Street firms that concocted derivatives and stock-loan deals to help offshore hedge funds dodge hundreds of millions of dollars in U.S. taxes, according to a U.S. Senate committee investigation.
Levin, a Michigan Democrat, said he wants the IRS to pursue back taxes or penalties against Wall Street firms and their hedge-fund clients that got around a 30 percent dividend tax.
``We are going to press the IRS to go after what is obviously a scheme,'' Levin said, while briefing reporters yesterday about the committee's yearlong probe. ``The IRS should be going after this. They are not. They have been fooling around this.''
Lehman Brothers, in an internal document described in the Senate report, estimated that it helped clients avoid $115 million in taxes in 2004. Lehman spokeswoman Monique Wise declined to comment on the report.
Dividend-enhancement transactions earned about $5 million of profit for UBS in 2005, and $4 million for Deutsche Bank in 2007, the report said.
Levin said he plans to introduce legislation making it harder to structure swaps and stock loans for the sole purpose of avoiding taxes.
The swaps changed the definition of the income under IRS rules, letting offshore funds claim they didn't earn dividends subject to the 30 percent withholding tax.
With respect to home prices, aside from the fact that markets are local and not national while the pricing data is national, there is a general expecation that we will be past the current situation of oversupply and returning to a more normal housing market somewhere during the summer of 2009.
Rust belt states such as Michigan and Ohio will certainly lag as there are income related issues that will surpress the housing pricing and the meltdown in Florida and some other resort areas will still suffer. But the larger part of the country will level out IMHO.
What will not happen is an significant appreciation in the next 5 years and that is good for those entering the market as well as those who were on the sidelines through this entire situation.
Aside from distressed areas, it apprears to me the bottom is maybe another 10 percent down from current levels. As usual, time will tell. I intend to revisit this thread in 9 months to see how accurate I was.
U.S. Trade Deficit of $62.2 Billion Exceeds Forecast (Update2)
By Timothy R. Homan
Sept. 11 (Bloomberg) -- The U.S. trade deficit widened more than forecast in July as oil imports soared to a record, overshadowing gains in exports.
The gap grew 5.7 percent to $62.2 billion, the largest in 16 months, from a revised $58.8 billion in June that was bigger than previously estimated, the Commerce Department said today in Washington. Total imports and exports were the highest ever.
The trade gap with China widened to $24.9 billion from $21.4 billion in the prior month. The deficit with the OPEC jumped 34 percent to a record $24.2 billion.
Knowledge is the enemy of fear
<< <i>Hearing lots of talk of $70 oil, $6 silver and $500 gold. HMMMMMM!!!
I'm with Cohodk, nibbling. Put my big toe into GLD on Thursday, into a low risk, low reward trade.
Rust belt states such as Michigan and Ohio will certainly lag as there are income related issues that will surpress the housing pricing and the meltdown in Florida and some other resort areas will still suffer. But the larger part of the country will level out IMHO.
What will not happen is an significant appreciation in the next 5 years and that is good for those entering the market as well as those who were on the sidelines through this entire situation.
Aside from distressed areas, it apprears to me the bottom is maybe another 10 percent down from current levels. As usual, time will tell. I intend to revisit this thread in 9 months to see how accurate I was.
I could see that some areas of the country who have been in perpetual recessions for a while, or did not participate in the craziness of the housing run-up will fare better and possibly stabilize out in 2009. But areas like the Northeast (where I live), California, Florida and others, may slow the descent, but not entirely stop it until 2011 or later. Housing is not going to "recover" as CDS's and derivatives in general implode over the next few years. And if the FED loses the handle on the derivatives deleveraging, which seems very realistic to me, then all bets are off on just how low housing can go.
If you're hearing lots of talk of $500 gold, $6 silver, and $70 oil........it probably won't happen.
roadrunner
<< <i>Hearing lots of talk of $70 oil, $6 silver and $500 gold. HMMMMMM!!!
Sign me up for all of that!
I would love to see all those levels return, just hope if they do - we all still have jobs!
...
Ah ha!!! You are now beginning to understand the mentality of markets.
Oil touched $100 this afternoon which I posted as big support a week or more ago. Lots of stars aligned for a tremendous amount of money to be made, albeit, alot was made today.
Knowledge is the enemy of fear
Another phenomenon to consider is that there is certainly a mass mentality right now. With the WWW, information sharing is global and instant, for anyone, right now. People hear of something, see it on the web, buy into it and snap at it up like a turtle on a sleeping minnow. The constant drone of global rumors, global herd mentality, global sized movements in markets, crazy what's happening. This is a good time to trust yourself and your intuition and your experience. There are killings to be made but for every killing made, hundreds are slaughtered.
Looking at $10 silver today and realizing it could be 8 again...man, have I seen that movie "$8 Silver"; go look at a chart. Last time it was at 8, it stayed that way for years and years. Maybe it will stick at $10 but I sure would wait till it started settling and moving up before I start running after it but that's just me. Temper that with "It's always a good time to accumulate." But don't think $8 is impossible. If we see 8 again, the silver bugs are going to really have to consider rethinking their strategy.
With that snap it up mentality, we are seeing runs on physical silver with people chasing it where ever it might be hiding. Dont ignore the fact that there are still big shorts out there that have a bunch of paper riding on lower prices and they can move the market, we can't. People won't sell it that low they say so they're stashing it...well, all God's children have to be liquid from time to time; they'll sell it, you just gotta wait. Were in an age of information where the internet swirls blogs, newsletters, free and paid for advice, just a tornado of information blown right at us.
Just a little extra caution is warranted in the predatory financial environment we find ourselves in right now. There is a lot of bait in the water so beware..."Don't Snap!"
P.S. Hey, how 'bout that hurricane?
edited because I forgot you couldn't post Kitco chart links.
shine as bright monday?
Did notice however that brent crude broke the 100 3rd day now,
do you think that may fortell a brief dip below 100 for the crude on the
nymex? also looks like the 10 yr cbot maybe slowing...
All ralates to gld/slv.
Ticking Time Bomb Explodes, Public Shocked
Posted by Lew Rockwell at September 12, 2008 05:36 PM
Writes Bob Higgs:
The failure of Fannie Mae and Freddie Mac, setting in motion the biggest government bailout/takeover in U.S. history, brings a grim sense of fulfillment to competent economists. After all, what did people expect, that water would flow uphill forever?
This financial mega-mess is the same sort of event as the collapse of the USSR’s centrally planned economy, another economically unworkable Rube Goldberg apparatus that was kept going, more or less badly, for decades before it fell apart completely. Along the way, of course, famous (yet actually unsound) economists assured the world that everything was working out splendidly. As late as 1989, when the pillars were crumbling on all sides of the temple, Nobel Prize winner Paul A. Samuelson informed readers of his widely used textbook, “The Soviet economy is proof that...a socialist command economy can function and even thrive.”
In the future, we will see a similar breakdown of the U.S. government’s Social Security system, with its ill-fated pension system and its even more inauspicious Medicare system of financing health care for the elderly. These government schemes are fighting a losing battle against demographic realities, the laws of economics, and the rules of arithmetic. The question is not whether they will fail, but when—and then how the government that can no longer sustain them in their previous Ponzi-scheme form will alter them to salvage what little can be salvaged with minimal damage to the government itself.
Our political economy is rife with such catastrophes in waiting, yet the public always seems startled, and outraged, when the day of reckoning can no longer be deferred, and another apartment collapses in the state’s Hotel of Impossible Promises, loading onto the taxpayers more visibly the burden of sheltering the previous occupants.
Each of these time bombs has at least one element in common: it promises current benefits, often seemingly without cost; but if it must acknowledge a substantial cost, it places that burden somewhere in the distant future, where it will be borne by somebody else. From the standpoint of society in general, every such scheme is a species of eating the seed corn. It satisfies the public’s appetite to consume something for nothing right now, with no thought for the morrow. It represents the height of irresponsibility by permitting people to live higher today than they can truly afford, financing this profligacy by borrowing recklessly and by taxing politically weak and ill-organized people in order to shower benefits on politically strong and well-organized special interests.
Call it democracy in action or utterly corrupt governance; they are the same thing.
The architecture of the Hotel of Impossible Promises is not arcane. All competent economists understand these things. Ludwig von Mises explained as early as 1920 why a centrally planned economy could not work as a rational system of allocating resources. The reasons why Social Security, especially its Medicare component, and many other such government programs contain the seeds of their own destruction have been explained time and again. Are the politicians who construct these structures really such idiots that they cannot understand the logic of what they are doing?
Not at all. But they are not striving to create economically viable institutions that serve the general public interest; they are feathering their own electoral nests in the only way they can in the context of our political institutions. As H. L. Mencken explained back in 1940, the politicians “will all promise every man, woman and child in the country whatever he, she or it wants. They’ll all be roving the land looking for chances to make the rich poor, to remedy the irremediable, to succor the unsuccorable, to unscramble the unscrambleable, to dephlogisticate the undephlogisticable,” because they understand that “votes are collared under democracy, not by talking sense but by talking nonsense.”
And are members of the public so dense that they will fall for such promises? Yes. Moreover, they are greedy, impatient, and immoral, because the present benefits they hope to gain via politics, however unsustainable in the long run, come entirely at the expense of the taxpayers from whom the government extorts its revenues.
“Politics, under democracy,” Mencken wrote more than 80 years ago, “resolves itself into impossible alternatives. Whatever the label on the parties, or the war cries issuing from the demagogues who lead them, the practical choice is between the plutocracy on the one side and a rabble of preposterous impossibilists on the other.” And in a declaration even apter now than it was at the time, he concluded that what democracy “needs beyond everything is a party of liberty.”
The trouble is, however, that now, even more than then, the American people have little interest in liberty. Instead, they want the impossible: home ownership for those who cannot afford homes, credit for those who are not creditworthy, old-age pensions for those who have not saved, health care for those who make no attempt to keep themselves healthy, and college educations for those who lack the wit to finish high school. Moreover, they want it now, and they want somebody else to pay for it.
If you think that Fannie and Freddie’s bust is a big deal, just wait until Medicare comes crashing down. Then, the wailing and gnashing of teeth will be truly unbearable. As that day rapidly approaches, however, you’ll notice that the politicians are doing utterly nothing to forestall it.
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
who ever it may be, it will be the coming of the
financial end. All the deficit spending and bailing out,
can only restrain the economic flood for so long.
Camelot
The trouble is, however, that now, even more than then, the American people have little interest in liberty. Instead, they want the impossible: home ownership for those who cannot afford homes, credit for those who are not creditworthy, old-age pensions for those who have not saved, health care for those who make no attempt to keep themselves healthy, and college educations for those who lack the wit to finish high school. Moreover, they want it now, and they want somebody else to pay for it.
If you think that Fannie and Freddie’s bust is a big deal, just wait until Medicare comes crashing down. Then, the wailing and gnashing of teeth will be truly unbearable. As that day rapidly approaches, however, you’ll notice that the politicians are doing utterly nothing to forestall it.
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
Congress Must Stabilize the Dollar
Rep. Ted Poe
On July 31, I introduced H.R. 6690, the “Sound Dollar and Economic Stimulus Act of 2008”. It is vital that this bill become law.
The U.S. dollar affects every American citizen and every American business. Our economy is totally dependent upon the dollar. To have a stable economy, we must have a stable dollar. Unfortunately, for many years we have not had a stable dollar. Today, people are angry and afraid. The crumbling, gyrating dollar has created an economic crisis.
I was a judge for 25 years. I believe in law and order. The U.S. Constitution is the supreme law of the land. Article I, Section 8 of the Constitution provides that: “The Congress shall have Power…To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures…”
So, what has Congress been doing about the dollar? Nothing. Since 2001, Congress has stood idly by while the dollar has lost almost 70% of its value, whether measured against gold or retail gasoline. When a currency begins to lose value, the effects show up first in the price of gold, followed quickly by other commodities, such as oil. However, eventually the inflation works its way through the entire economy, raising prices across the board. In the process, the hard-earned savings of Americans are devalued—or, the way I look at it, stolen.
Inflation creates turbulence in financial markets and provokes conflict between economic groups. People become angry because they feel that they are being robbed. They become afraid because they know that unchecked inflation can lead to economic collapse. In 1913, Congress delegated its power over money to the Federal Reserve. Unfortunately, the Fed has been preoccupied with manipulating interest rates. Since 2001, the Fed has lowered its Fed Funds rate from 5.00% to 1.00%, raised it to 5.25% and then lowered it to 2.00%. Meanwhile, the value of the dollar has declined by nearly 70%.
Trying to regulate the value of the dollar by manipulating the Fed Funds rate makes no sense. The Fed Funds rate is the price of one type of capital. Because the Fed cannot supply capital (real resources) to the economy, it is not clear why it should be in the business of setting interest rates. Logically, interest rates should be set by the market—by the supply and demand for capital.
Unlike capital, the amount of money in the economy should not be limited by anything physical. It should be determined by the demand for money, which depends upon the transactions people want to do and how much money they want to hold. What matters about money is not its quantity but its value. In this, dollars are no different than foot rulers. No one cares how many foot rulers there are in the world. What matters is that each one is the length prescribed by the U.S. Bureau of Standards.
My bill directs the Federal Reserve to bring the price of gold down to $500/oz and then to keep it there. The Fed would do this by announcing that its Open Market Desk was prepared to sell government bonds and contract the monetary base until the price of gold falls to $500/oz.
At last measure, the monetary base was about $872 billion. In December, 2005, which is the last time the price of gold was at $500, it was $827 billion. So, it is possible that the Fed might have to sell as much as $45 billion worth of bonds to implement the new policy. Because this is only about 0.8% of the total amount of bonds currently outstanding, this should not be a problem. However, I believe that the demand for the newly-stable dollar will be so great that the Fed will actually have to expand the monetary base to keep the gold price from falling below $500/oz.
Once the Fed implements its new directive from Congress, every dollar in the world will have the same market value as one five-hundredth of an ounce of gold. From then on, the monetary base will expand and contract automatically in response to market demand. Why gold? My bill defines the value of the dollar in terms of gold because the financial markets want, and the American people deserve, a dollar that is “as good as gold”.
Why $500/oz? At $804/oz, the current market price of gold reflects the expectation (and fear) of future inflation. I believe that fixing the value of the dollar now in terms of gold at $500/oz will stop the current inflation without causing deflation. However, my bill also provides a powerful supply-side stimulus, in the form of first-year expensing of all capital investment, to ensure that economic growth accelerates at the same time that inflation is being stopped. Bringing the dollar price of gold down to $500 will bring the price of gasoline down from its current $3.50/gallon to less than $2.50/gallon. It will strengthen the dollar against foreign currencies. Most important, it will prevent Americans’ incomes and savings from being stolen by inflation.
My bill will not put America on the gold standard, like we had in the early part of the 20th Century. Under the old gold standard, gold was money. Limiting the supply of money to the supply of gold was a huge mistake. It was the basic error that caused the Great Depression. Under my bill, our money will be the same “legal tender” currency that we have now. There will be no limit on the number of dollars except market demand. The big difference will be that every dollar will always be worth the same as one five-hundredth of an ounce of gold.
When I became a Congressman, I took an oath to uphold the Constitution. The Constitution commands Congress to regulate the value of our money. My bill will do this. This is why it is essential that it become law."
First of all the USDollar index has only dropped 33% from it's 2001-2002 levels. I don't know where Mr. Poe dreamed up 70%...maybe from it's all-time highs many years prior to 2001.
The idea that $872 Billion in circulating currency "controls" our economic health and gold price is quite a leap of faith. Does this guy really think that merely cutting back on circulating currency to $827 Billion will restore gold to 2005 levels ($500/oz) and allow a stable dollar for years to come regardless of the actions of the FED begging bowl? Doesn't the fact that M2 is at $7.7 TRILL and M3 at $14 TRILL play any role in dollar strength? Ignoring the FED credit begging bowl window and also the hundreds of TRILLIONS in credit that banks created on their own leads to a wrong conclusion. Yes Virginia, the FED and its banks have created ways to invent monetary liquidity without going through congressional channels. It would be an incredible feat if a mere $45 BILLION reduction in circulating money would solve all our problems going forward. Linking the govt's stash of gold to the $827 BILL of circ currency yields about $310 gold/oz. Linking that to M3 yields over $50,000/oz. Tossing in the world's currencies might yield $5,000 gold. Guess the truth is somewhere inbetween.
The govt just tossed out $150 BILL in checks to Joe consumer (ie 3X Poe's recommended reduction but in the wrong direction)....and the price of gold actually fell in the meantime (lol). Maybe one more $150 BILLION cash give-away will get gold down to Rep. Poe's $500/oz.
roadrunner
I'll have to re-read it when my head clears up.
Argh, he wants a stable currency but he wants to tinker and tinker with it for his own agenda. Nothing is changed.
I knew it would happen.
six packs of beer wont temporarily absolve.
Camelot
Sept. 15 (Bloomberg) -- Lehman Brothers Holdings Inc., the fourth-largest U.S. investment bank, succumbed to the subprime mortgage crisis it helped create in the biggest bankruptcy filing in history.
Lehman bondholders may get about 60 cents on the dollar if the investment bank is forced into liquidation, analysts at CreditSights Inc. said. The filing is by Lehman's holding company and won't include any of its subsidiaries. Lehman owes its 10 largest unsecured creditors more than $157 billion, including debts to bondholders totaling $155 billion.
The largest single creditor listed in today's filing is Tokyo-based Aozora Bank Ltd., owed $463 million for a bank loan. Other top creditors include Mizuho Corporate Bank Ltd., owed $382 million, and a Citigroup Inc. unit based in Hong Kong owed an estimated $275 million. Lehman listed $639 billion of assets. Citigroup and The Bank of New York Mellon Corp. are among trustees for bondholders who Lehman owed about $155 billion.
Yepper, Judge Ted Poe is a certified wack job that does quite well with press. Not to worry, even if that bill gets heard, it still has to pass. If it passes, a quick trip across the border fixes everything but then you just have a handful of stinking FRN's. See, that's one of the basic parts of the financial system here is they want everybody on FRN's. That's why foreign accounts, dual citizenships, all the dodging tactics are frowned upon and will become more and more illegal ala IR S. There are to be no off the books assets, everything must be accounted for in FRN's; house, car, notes, ir s, savings/checking, stocks, all assets.
NWO will be a phrase that should become more conspicuous. At some point, the authorities should be able to punch in your ssan and know exactly how much of what you have and where it is and probably where you are at the same time; they can almost do it now except for off the books metal, outside banking, shadow owners, and tricks like that and it's not so seamless, they still can't find everything out with just one click but it shouldn't be too much longer till they can pinpoint your location (cell phone, toll tag, IP add, etc.) and your assets. There is still no way to track PM...hee hee. Remember the referees final instruction to the boxers before they start the fight..."Protect yourself".
Translation: I think that the dollar loses its value out of the blue, and my constituents are starting to complain to Me. Imagine that! To Me!
Inflation creates turbulence in financial markets and provokes conflict between economic groups. People become angry because they feel that they are being robbed.
Ya think?
In 1913, Congress delegated its power over money to the Federal Reserve.
I'm beginning to think there might be a connection here!
Unfortunately, the Fed has been preoccupied with manipulating interest rates. Since 2001, the Fed has lowered its Fed Funds rate from 5.00% to 1.00%, raised it to 5.25% and then lowered it to 2.00%. Meanwhile, the value of the dollar has declined by nearly 70%.
Trying to regulate the value of the dollar by manipulating the Fed Funds rate makes no sense. The Fed Funds rate is the price of one type of capital. Because the Fed cannot supply capital (real resources) to the economy, it is not clear why it should be in the business of setting interest rates.
Hey, if you're in the business of creating money, you're gonna be in the business of manipulating interest rates, moron.
Logically, interest rates should be set by the market—by the supply and demand for capital.
Unlike capital, the amount of money in the economy should not be limited by anything physical. It should be determined by the demand for money, which depends upon the transactions people want to do and how much money they want to hold. What matters about money is not its quantity but its value. In this, dollars are no different than foot rulers. No one cares how many foot rulers there are in the world. What matters is that each one is the length prescribed by the U.S. Bureau of Standards.
This guy is smoking something. If the amount of money shouldn't be limited by anything physical, please let him explain how a "Bureau of Standards" would prescribe it. What a joke this guy is.
My bill directs the Federal Reserve to bring the price of gold down to $500/oz and then to keep it there. The Fed would do this by announcing that its Open Market Desk was prepared to sell government bonds and contract the monetary base until the price of gold falls to $500/oz.
Creating more government debt = lowering the price of gold? Is he confusing M1 with M3? This guy's a riot.
At last measure, the monetary base was about $872 billion. In December, 2005, which is the last time the price of gold was at $500, it was $827 billion. So, it is possible that the Fed might have to sell as much as $45 billion worth of bonds to implement the new policy. Because this is only about 0.8% of the total amount of bonds currently outstanding, this should not be a problem. However, I believe that the demand for the newly-stable dollar will be so great that the Fed will actually have to expand the monetary base to keep the gold price from falling below $500/oz.
This guy needs to take Accounting. And Economics. And an Ethics course. $45 Billion, yeah - it's nothing.
Someone else take over with this.........he's got a busy little brain, but I have to do some actual work this morning.......later.......
I knew it would happen.
Toss AIG from the Dow!
<< <i>AIG is part of the DOW bad news or they just drop it and put another company in it's place as they've done to make sure the performace of it looks great? In another note GM looks like a bad bet too.
Toss AIG from the Dow! >>
a question for the know-more-than-i-crowd here (many)
how often has the dow 30 been changed, who makes the change, what validates a change
or the USD index for that matter?
sorry ttown if it's in your article...i'll read it now....
edit thanks ttown most of them answered
Several years ago I heard a quote (prayer) from someone that goes: "Heaven protect me from those that profess to have my best interests at heart."
Not to worry, I am sure that Dow Jones is already looking at replacements.
We discussed this several years ago. The stock market guys replace the bad companies with good companies to manipulate how the Dow and S&P averages look to the average “DUMB”, I mean uninformed American.
“Gee Martha how come my 401K went down when the market seems to be doing so well?”
changes in DOW from inception
Who has time to report small banks when huge investment firms are going belly up?
I got an email from a friend today that said this, “Very scary. I was reading that the FDIC has about $50 billion to protect $10 trillion in investments…. My broker called to let me know that a bank that I have a CD with, was closed down by the FDIC, but that it would take FDIC about 10 days to put the money back in my account. It’s only the beginning.”
Again here is the link to the site where you can check to see how safe your bank is.
http://www.bankrate.com/brm/safesound/select.asp?insttype=0
I have no other stocks, gold hard to find at decent prices any more and I wonder if holding $7.000 in cash is a good idea?
Any thoughts pro-con on the cash held?
Thanks
Jon
Any thoughts pro-con on the cash held?
Actually, I think that it's not a bad idea, in combination with gold.
I knew it would happen.
This time we're playing musical chairs with the remainder of the "investment" banks, except there are only 2 or 3 chairs left. Choose wisely. Not for the faint of heart.
roadrunner
<< <i>gold hard to find at decent prices any more and I wonder if holding $7.000 in cash is a good idea?
Any thoughts pro-con on the cash held?
Actually, I think that it's not a bad idea, in combination with gold. >>
Cash is KING. Gold, if your cost is above $700, probably not.
roadrunner
<< <i>Gold was about the only decent performing asset in the 1930's. Check your history >>
Decent performing asset? Looks to me it stayed at around $35 for years
Market is Closed
[BRIEFING.COM] S&P futures vs fair value: -15.90. Nasdaq futures vs fair value: -4.80. A lower open is expected, with a barrage of reports not doing much to help sentiment. The New York Fed accepted a $50 billion overnight repo in an effort to improve liquidity following the doubling of the overnight Libor rate and an increase in the fed funds rate above the target rate. Overseas central banks also injected liquidity into the system, according to CNBC. Fed funds futures for today's meeting now indicate a 96% chance of a 25 basis points cut to 1.75% and a 4% chance of a 50 basis point cut. There was no chance of rate cut just one week ago. Best Buy (BBY) reported second quarter earnings of $0.48 per share, which is $0.09 worse than the average analyst estimate of $0.57. Goldman Sachs (GS) earned $1.81 per share, which topped the average estimate of $1.71, but marked year-over-year decrease of 72%. GS fell 8% to a fresh 52-week low in premarket trading. In economic news, CPI fell 0.1% in August, matching expectations due to a drop in fuel costs. CPI excluding food and energy rose 0.2%, also in line with expectations. In commodity trading, oil prices are plunging once again, down 4.1% to $91.79 per barrel.
An interesting story from analyst Rob Kirby.
By: Rob Kirby
http://news.goldseek.com/GoldSeek/1221548580.php
Surveying the landscape, here’s an overview of what I’m seeing:
Decoupling Fact from Fictional Futures
In Bill Murphy’s daily commentary at LeMetropolecafe.com, Friday September 12, Murphy reported this account from one of his subscribers who happens to be in the metals recovery business:
“I have to admit Bill I have seen a lot in my time but if this information I am about to provide you doesn't prove once and for all that these markets are being totally manipulated and distorted. Then there will be nothing left to prove anymore about anything.
I have been recycling for over 10 years now and I have been focused in developing a service in the silver recovery business.
So far it's been very successful and I had been preparing an order for recovery just before they hit the silver market.
I was sitting on 29 skids @ 28,000 lbs
of fiche which equates to aprox. 385 lbs
of pure silver considering my assay on
this grade of fiche was very high.
1.4 grams per 1000 grams of micro fiche.
It's around 4 dollars per lb or 6000 ounces
of silver.
Now, I won't mention names but I was unable to setup a bullion account with this company because they don't setup accounts anymore so I can't hedge the market.
The day you deliver. You get paid spot on the Comex.
So I simply parked my product and waited. Now talk about a squeeze play. Would you believe that this company called me today [Friday] @ 10.50 silver and quoted me 16.00 per ounce with room to negotiate??? “
This account perfectly illustrates what we are witnessing, first hand; as physical stocks become more and more scarce – the Cartel is “beating the COMEX price with a stick” – making would-be-buyers think twice before putting their money down [or order in] for the real thing.
This cripples all resource companies since they ALL contract to have their off-take benchmarked against fraudulently derived paper futures prices. This is why we currently give preference to ownership of physical metal versus mining shares.
This also provides a great backdrop for talking heads to say “commodities are toast” – lessening demand for physical or forcing liquidation through [cough] the etfs – GLD and SLV. I distrust the etfs on the basis that their alleged stocks of physical are all under the custody and direct control of institutions [the Cartel] long suspected / accused of price management of the same.
In the end, however, smart money the world over – has now cotton on to this charade. I speak quite regularly with folks around the world – there simply is NO PHYSICAL SILVER to be had – virtually anywhere.
To those suppliers that say they have piles of 1000 oz bars, go ahead and produce them. And I'm not sure I'd want to send any of them good money right and wait for the merchandise.
roadrunner
Cash is printable. Gold is not. Bernake's biggest problem is how to get the dollar to retain value while replacing all of the value that is being destroyed by the derivatives implosion. He might over-shoot and lend out too much, or not. Nobody knows at this point, but one thing is certain - the U.S. is in debt and can't meet its committments. So, it will renege on a bunch of them, and it will change the rules for the rest. What that means in terms of the dollar and gold is still a crapshoot.
I knew it would happen.