Greenspan’s Warning on Gold
Editorial of The New York Sun | September 15, 2010
Alan Greenspan spoke at the Council on Foreign Relations earlier today, and what was his advice? That central bankers should be doing what these columns, among others, have been rattling on about, namely that they should be paying attention to gold. “Fiat money has no place to go but gold,” the former Fed chairman said at the Council, according to economist David Malpass, who quotes Mr. Greenspan in one of Mr. Malpass’ emails on the political economy. Mr. Malpass writes that the former chairman of the Federal Reserve’s board of governors was responding to a question in respect of why gold was hitting new highs.
Mr. Greenspan replied that he’d thought a lot about gold prices over the years and decided the supply and demand explanations treating gold like other commodities “simply don’t pan out,” as Mr. Malpass characterized Mr. Greenspan. “He’d concluded that gold is simply different,” Mr. Malpass wrote. At one point Mr. Greenspan spoke of how, during World War II, the Allies going into North Africa found gold was insisted on in the payment of bribes.* Said the former Fed chairman: “If all currencies are moving up or down together, the question is: relative to what? Gold is the canary in the coal mine. It signals problems with respect to currency markets. Central banks should pay attention to it.”
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Exit Harry Schultz, pursued by a bear?
Veteran gold bug is now calling sudden hyperinflation
Sept. 16, 2010, 8:04 a.m. EDT
By Peter Brimelow
New York (MarketWatch) — A famous veteran gold bug, who called the Crash of 2008, is now calling for sudden hyperinflation. But he warns he may not be around to comment on it.
My headline paraphrases Shakespeare’s most famous stage direction (from The Winter’s Tale). But I’ve added a query, because Harry Schultz says that, after closing his International Harry Schultz Letter [IHSL] at the end of the year, he will write regular “Big Picture Editorials” to be included with the Aden Forecast, which will take over his subscription obligations, “for as long as my health allows.” He’s 87.
Schultz’s long and colorful career certainly appears to be ending on a high (albeit superbearish) note. Over the year to date through August, IHSL is up 11.7% by Hulbert Financial Digest count vs. just 0.7% for the dividend-reinvested Wilshire 5000 Total Stock Market Index. Over the past 12 months, IHSL is up 39% vs. 14.86% for the total return Wilshire 5000. Remarkably, the letter is up 6.63% annualized over the past ten years, vs. a miserable negative 1.07% annualized for the Wilshire.
Schultz was hard hit by the Crash of 2008. Nevertheless, I named IHSL Letter of the Year in 2008 because it had repeatedly and loudly warned of the crash. It just didn’t benefit for technical reasons. See Dec. 28, 2008 column. <http://www.marketwatch.com/story/newsletter-of-the-year-harry-schultz-really>
Schultz specializes in big ideas. Currently, he is fascinated by the possibility that hyperinflation might be triggered quickly, by a sort of global financial traffic accident. See June 10 column. <http://www.marketwatch.com/story/hyperinflation-could-happen-suddenly-2010-06-10>  
Schultz devotes a lot of his current letter to summarizing an account of how hyperinflation could happen by Gonzalo Liro on Zerohedge.com See article here. <http://www.zerohedge.com/article/guest-post-how-hyperinflation-will-happen>
Schultz describes this scenario as “a genuine risk” and comments:
“Hyperinflation can be triggered in several other ways. Trustfailure (my new word) is the controlling element, which triggers Fearflation (another new word). E.g., a Comex gold delivery default or a major Too-Big-To-Fail bank failure or a self-propelling domino bank-run are all possible triggers. A bond market implosion will result from any of the above, even if it isn’t itself the trigger.”
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Axel Merk: Bonds are a Bubble

 

Household Net Worth Plunges By Most Since Q4 2008, As Government Borrowing Surges 

 

Next On The IMF Bailout Wagon: Portugal, As DN Reports Country "May Be Required To Seek IMF Assistance"

 

Mike Pento And Keith Boykin: "We Are All Greedy And Selfish"

 

Here's a short item I picked up from yesterday's King Report.  It's a one-paragraph posting from Wednesday over at zerohedge.com headlined "Wonder Why Market Just Surged? One Word - POMO".  POMO is an acronym for 'Permanent Open-Mark Operation'... which basically means that the Fed is giving free money to the primary dealers so they can prop up the stock market for the rest of September.  This will prevent hedge funds from receiving "a tsunami of redemptions requests" at the end of the third quarter.  As you know, money is flowing out of the stock market by the billions every week... and huge redemptions out of hedge funds would only multiply the losses and force these very same hedge funds to liquidate even more stock.  I guess they don't want a market crash for this November's elections.  The link to this short read is here.

In The News Today

Posted: Sep 17 2010     By: Jim Sinclair      Post Edited: September 17, 2010 at 3:37 am
Filed under: In The News
Jim Sinclair’s Commentary
This is the ultimate national disgrace brought about by OTC derivatives and OTC derivatives only.
A four year normal mild recession with a corrective mechanism of free markets would have been the extreme of this experience.
The greed of sociopath Wall Streeters has destroyed the system. They do not give a damn, but damned they must be.

Number of Americans living in poverty ‘increases by 4m’ 16 September 2010 Last updated at 14:46 ET
One in seven Americans was living in poverty in 2009 with the level of working-age poor the highest since the 1960s, the US Census Bureau says.
The number of people in poverty increased by nearly 4m – to 43.6m – between 2008 and 2009, officials said.
The bureau defines poverty as any family of four living on less than $21,954 a year.
Meanwhile, new figures showed home foreclosures in August hit the highest level since the mortgage crisis began.
Banks repossessed 95,364 properties in August, up 3% from July and an increase of 25% from August 2009, said RealtyTrac, a company which charts the national picture.
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Jim Sinclair’s Commentary
The overvaluation of assets thanks to FASB’s capitulation is over 50% of the capital.
It is not money, it is accounting. No wonder these banks cannot perform.

More banks missing TARP dividend payments By Brady Dennis
Washington Post Staff Writer
Monday, September 13, 2010; 9:17 PM
Big Wall Street firms have the most bruised public reputations, but it’s a collection of smaller banks that continues to plague the Treasury Department’s bank bailout program.
The latest report from the agency shows that more than 120 institutions – nearly all of them small banks – have missed their scheduled quarterly dividend payments, which is more than a sixth of the banks that received federal aid during the financial crisis.
In addition, five banks that received capital injections from the controversial $700 billion Troubled Assets Relief Program have failed altogether, making it highly unlikely that taxpayers will recover the nearly $3 billion poured into those institutions.
The Treasury report showed that at the end of August, a record six banks each missed six dividend payments. Saigon National Bank in Southern California has missed seven.
The rising number of "deadbeat" banks, as they are known, has prompted calls for Treasury officials to take action to protect taxpayers’ investment.
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Hourly Action In Gold From Trader Dan

Posted: Sep 17 2010     By: Dan Norcini      Post Edited: September 17, 2010 at 2:10 pm
Filed under: Trader Dan Norcini
Dear CIGAs,
Both gold and silver reached their initial targets in overnight trade with gold missing $1,285 by just $0.60 and silver actually exceeding $21 by $0.025. The Dollar had been dropping rather sharply in overnight trade and late Asian trade and early European trade saw buyers surface in both metals especially as the S&P was also flying higher at the time.
The result was that huge flows of more hot money invaded the commodity sector. That has continued this morning especially in the grains that is going to have devastating effects outside of the ag sector, which is basking in new found wealth at the moment. Expect quite vociferous and rightly justifiable anger to soon arise from the livestock and poultry sectors aimed squarely at the idiotic ethanol boondoggle which has helped drive the price of a bushel of corn to a 2 year high with soybeans and wheat riding right alongside of the price spike. Some of this is demand based on increasing world populations plus reduced yields from this year’s crop but way too large a portion of the corn crop is being devoted to government subsidized ethanol production. We are fools burning our food in our damn gas tanks to salvage some guilt-ridden souls’ need to save the planet.
The result is going to be felt by every single consumer of food across the entire planet – this is not hyperbole; it is a tragic fact. Wait until you hit the grocery store in a couple of months to buy a box of morning breakfast corn flakes. Then try washing that down with a high priced cup of coffee with high priced sugar. If you decide to skip the corn flakes and go with a bagel – forget it; you will still deal with sticker shock. When you do realize what the hell is actually going on, send a thank you note to the idiots who have birthed this process with their QE and with the 30 to 1 leveraged trades now swamping our markets.
None of this is being lost on gold which is now moving relentlessly higher on the back of rising inflationary pressures that will seep into the economy and which cannot now be stopped.
See the chart for the technical picture which is very strong especially with the weekly close into a new all time high. Ditto for silver which will not stay down for any length of time.
Gold now needs to best today’s high to make a run towards $1300 with silver needing a close above $21 to enable it to push on towards major resistance near $21.50. Should it breach that level, it is going to $23.
The fly in the ointment once again is the HUI and the XAU which just cannot seem to really get rockin’ to the upside, yet.
Click chart to enlarge today’s hourly action in Gold in PDF format with commentary from Trader Dan Norcini


Consumer sentiment weakest since August 2009 CIGA Eric
Consumer sentiment unexpectedly worsened in early September to its weakest level in more than a year, as distress over jobs and finances intensified among upper-income families, a survey released on Friday showed.
Consumer expectations have breached August 2009 swing low. This brings the February 2009 low into play by 2012. Consumer Expectation and the price of gold are highly inversely correlated. That is, as consumer expectations declines, the price gold rises.
University of Michigan Consumer Expectations (CE) and Gold: A Correlation Study
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