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Bill O'Reilly calls it: Economic Disaster on the Horizon.

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China to Fight Price Manipulation With Heavy Fines (Hoarding of goods will also be subject to fines of 2 million yuan.)

"The world is on a journey to an unstable destination, through unfamiliar territory, on an uneven road and, critically, having already used its spare tire."

--Mohamed El-Erian

CHART OF THE WEEK

“Above is a graphical representation of the fall in value of the U.S. dollar since the Federal Reserve took control of the monetary system. In the first seven years of providing the nation with a "more stable monetary system", the U.S. dollar lost one-half of its value. Today, the U.S. dollar is worth less than a nickel was in 1913!” --Mike Hewitt

Niall Fergerson on America’s Debt Spiral

John Rubino

In this recent CNN interview, Harvard Professor Niall Ferguson predicts that, barring a radical change in policy, "nasty fiscal arithmetic" will send the US into a "death spiral."
Part 1 - Length: 9:10
Part 2 - Length: 6:14

http://dollarcollapse.com/articles/classic-videos-niall-ferguson-on-americas-death-spiral/

Gold is Back as Money

Julian Phillips

In its 2010 annual report, the Bank for International Settlements (BIS) said that “gold, which the bank held in connection with gold swap operations, under which the bank exchanges currencies for physical gold, stands at 8,160.1 million in special drawing rights, equivalent to 346 tonnes this year, up from nil in 2009.” Apparently the amount has climbed to 382 tonnes since the report was issued. This is the best news gold has had in 30 years, writes Phillips. He discusses what swaps are and who does them; the significance of the transactions; and why this means that gold is back and alive in the monetary system. In short, it seems that a country (or countries) needed foreign exchange to counter some shortfall in its accounts and raised these funds as a short-term liquidity measure, believing it would be able to return the currency and receive its gold back. The gold would then be returned at the conclusion of the swap period in return for the currencies swapped. If it failed to return these funds to the BIS, then the BIS could discreetly place the gold with another central bank, should it not want to keep the gold. If it did so, the BIS would simply report its disposal of the gold, the originating central bank would report the drop in its gold reserves and the gold buying bank would report its increase in the reserves. This puts the transaction into an entirely different category. It seems that the credit of one or more of the world’s central banks is not good enough for other governmental institutions. If word got out as to which this country is, then the financial markets would go into a tailspin, shaking the global financial system to its core. No wonder the BIS is keeping a low profile.

http://financialsense.com/contributors/julian-phillips/gold-is-back-as-money

So You Think You Own Gold?

Erik Townsend

The principal contention of this article is that most investors who think they own gold or silver bullion really don’t. Most precious metals investments – including many touted as physical – are nothing more than paper promises. Townsend discusses the details of counterparty risk in precious metals investing, and evaluates ‘paper’ vs. ‘physical’ bullion investments, as well as allocated vs. unallocated bullion accounts. The executive summary: 1) The rationale most commonly cited for investing in precious metals is wealth preservation: precious metals provide a durable store of value that eliminates counterparty risk inherent to other investments; 2) Counterparty risk is only eliminated if the investor actually owns the precious metals he invests in free and clear of any encumbrances; 3) Most precious metals investments, including many touted as ‘physical gold’ do not actually convey legal ownership of precious metals to the investor. As a result, the elimination of counterparty risk rationale for the investment is defeated! 4) You do not own gold unless you have taken delivery of coins or bars personally or have received legally binding documentation showing you to be the legal owner of specific coins or bars (identified by bar serial numbers) stored with a bullion bank in an allocated account that is allocated in your name; 5) The physical gold vs. paper gold debate is revisited with an emphasis on counterparty risk. It turns out there are many layers of both ‘physical’ gold and ‘paper’ gold and these are explored; 6) Critics of ‘paper gold’ ETFs are sometimes guilty of scaring investors away from the ‘paper’ aspect of the ETFs, only to go on to sell the investor a competing ‘physical gold’ investment that is really nothing more than another form of paper promise; 7) The LBMA chain of custody system (and other similar systems worldwide) provides a way to own physical bullion stored in a commercial vault without the need to re-assay the bars each time the bullion changes hands.

http://financialsense.com/contributors/erik-townsend/so-you-think-you-own-gold

Jim Sinclair’s Commentary

The gold swap is bullish for gold. Those that say otherwise haven’t a clue what gold is all about.

This speaks to the nonsense used by the gold banks via the media in an attempt to cover more of their short positions.

You have a question about gold? Read us regularly.

BIS swap operation signals wider use of gold-GFMS
Tue Jul 13, 2010 3:30pm GMT
By Jan Harvey and Jane Grieve

LONDON, July 13 (Reuters) – The 346 tonnes of gold swap operations conducted by the Bank of International Settlements (BIS) in recent months highlight gold’s central role in the financial system and are unlikely to lead to dumping of the metal on the market, GFMS chairman Philip Klapwijk said.

The operations, detailed in the bank’s latest annual report, show the bank was holding 346 tonnes of gold as part of swap operations in exchange for currencies.

"Here we have gold being used quite creatively," Klapwijk told Reuters Insider television. "That is in a sense a validation again of gold’s centrality to the financial system."

More…

Jim Sinclair’s Commentary

What OTC derivatives do not do to the international banking community, litigation will.

Dozens of banks sued over subprime.
Dozens of brokerages and banks, including Morgan Stanley (MS), Goldman Sachs (GS) and Citigroup (C), are being sued by a Boston area-based fund over losses related to subprime loans. Cambridge Place Investment Management Inc. claims it lost more than $1.2B because of the banks’ untrue statements, and says the banks used faulty appraisals, accepted misleading information in loan applications, and violated their own standards for underwriting.

Jim Sinclair’s Commentary

The machine is not focused on the EU, but now on the problems of the pound.

UK debt is ‘twice as much as we thought’
12 July 2010, 7:37am

The true scale of the national debt is £2 trillion – more than twice the official figure, an alarming study shows.

The black hole in the public accounts equates to £78,000 for every household in the country.

The ‘real’ state of the national finances is exposed in a study published today by the Centre for Economics and Business Research, which warns of a series of mammoth debts that aren’t revealed by the official figures.

The national debt – forecast to reach £932m by next spring – does not include a number of expensive liabilities, such as the cost of civil service and town hall pensions and projects funded under the Public Finance Initiative.

Putting these liabilities into the official figure would add £1.13 trillion to Britain’s whopping overdraft, according to CEBR.

Under the worrying scenario, the debt would jump from 62% to 138% of Britain’s income.

More…