The UK Now Officially Sees The US As A Banana Republic

Submitted by Tyler Durden on 10/08/2010 15:18 -0500

The following headline from the Telegraph explains it all.

There Goes Wells Fargo: California AG Calls On Banks To Halt All Foreclosures In California

Subprime Pipeline (a simple visual aid)

Janet Tavakoli On The "Biggest Fraud In The History Of Capital Markets"

 

Fed officials mull inflation as a fix

 

Ralph Benko: Time for a 21st-century gold standard

 

Jim Sinclair’s Commentary
If jobs grew at 50,000 per month it would only take 13 years to regain the jobs lost.
Where is the recovery on Main Street?

Jim Sinclair’s Commentary
The important figure is not the rise in spending, but what the revenue is. The Formula of 2006 grinds on.
The downward spiral, not having had intervention at the point of cause (OTC derivatives), guarantees the double dip will be a single flop.

Government spending rises 9%
2010 deficit lower than projected
Basic government spending rose by 9 percent in fiscal 2010, driving the country to a $1.291 trillion deficit down $125 billion from 2009, but still the second-largest hole on record, the Congressional Budget Office said Thursday.
CBO said the 9 percent rise in spending for defense, social programs, entitlements and interest on the debt was "somewhat faster than in recent years" a stark evaluation at a time when President Obama and Congress are working to convince voters they are pursuing a fiscally frugal course in Washington.
Still, the nearly $1.3 trillion deficit for fiscal 2010, which ended Sept. 30, is lower than prior projections, thanks in large part to expiring tax breaks, higher corporate tax receipts and the winding-down of the Troubled Asset Relief Program and payments to Fannie Mae and Freddie Mac.
"While the CBO deficit number is lower than expected, the fact that we are still in a very serious fiscal situation remains unchanged and the president is committed to getting us back on a sustainable fiscal path," said Meg Reilly, a spokeswoman for the Office of Management and Budget.
She said the rise in non-bailout spending is largely a result of last year’s $814 billion Recovery Act, whose outlays peaked in the middle of this year and which was supporting between 1.4 million and 3.3 million jobs.
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Jim Sinclair’s Commentary
I might add ounces in the ground, how deep down the ounces are, and what is the cost of extracting those ounces.
That all factors into price when, and only when, you proceed to extract those ounces.

John Kaiser: Best Leverage in Ounces-in-the-Ground Plays Source: Brian Sylvester of The Gold Report  10/08/2010
Kaiser Bottom-Fish Report Writer John Kaiser sees the gold price reaching well into thousands—one of a series of events that, ultimately, could result in the kind of area-play fever not witnessed on the junior board since the mid-1990s. John believes all it would take is a "holy mackerel"-type gold discovery in the right area. In this exclusive interview with The Gold Report, John reveals a Carlin-type gold discovery in the Yukon and a few others you’ll want to know about.
The Gold Report: John, you were recently at a mining conference in Toronto where you told the audience you could see gold spiraling well into the thousands/oz. without worldwide financial Armageddon. Other gold pundits think such prices can be attained only with global financial ruin. Tell us how gold investors can have their cake and eat it too.
John Kaiser: I regard gold as a special asset class, whose specialness is derived from the fact that gold is very rare, hard to bring above ground and generally useless due to its high cost, unlike silver, which is more abundant than cheap and gets fabricated into all sorts of industrial applications. Gold would be a wonderful conductor for electronics, too, but it’s just too expensive. We have just over 5 billion oz. (Boz.) scattered around the world in safes, vaults and jewelry boxes not doing much at all.
Because gold has limited utility, its price is irrelevant to ongoing economic activity. As a comparison, if oil shoots to $500/barrel that means that your paycheck would allow you to drive just one-fifth the distance it allows you to drive now. Such a move in oil would have drastic implications for the global economy. But if gold shoots to $5,000, what happens? Well, the gold stays in my teeth. Jewelry demand goes down even more, but nobody makes any decisions to substitute out of gold because it really isn’t being used for much. In other words, it really should not affect the economy.
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Jim Sinclair’s Commentary
Gold will re-enter the monetary system in a way few anticipate.
It will be as I have been communicating to you for years. This time it will be attached to a virtual currency basket and a measure of international liquidity.

It’s Time for a 21st Century Gold Standard By Ralph Benko
Published October 05, 2010 | FoxNews.com
Columnist Michael Kinsley is looking exceptionally prescient. Last May, in an article titled, "My Inflation Nightmare" in The Atlantic Monthly, he asked "Am I crazy or is the commentariat ignoring our biggest economic threat?" Kinsley’s piece in The Atlantic Monthly anticipated a flood of articles in the world press exemplified by this UK Telegraph July 20 headline: “Gold reclaims its currency status as the global system unravels.” The evidence of the shift in the elite opinion stream is clear: the gold standard is returning to respectability.
Just 5 months later, the dollar is in a relentless decline, falling below $1,300/oz of gold, sinking against the Euro, hitting a record low against the Swiss franc. For those of us who lived through the Nixon/Ford/Carter inflation of the 70s, this sure looks like a precursor, a dramatic one. Kinsley may be playing Cassandra here. It wouldn’t be the first time for him. Kinsley pondering gold:
Kinsley: The only reason to buy gold is fear that the currency may collapse. Paper currency used to represent claims on a share of the gold in Fort Knox. Now it is just “fiat money,” backed only by the “full faith and credit” of the United States government.
Thirty years ago, we peered into this abyss and pulled back just in time. A stable currency is firm ground on which you can build a life. These days everyone is disenchanted with civic institutions and government. They hate the press, they loathe Congress, and so on. Studies by foundations puzzle over why. Was it the ’60s? No, it was the late ’70s and early ’80s, when government failed to deliver on its obligation to provide a stable currency.
Kinsley’s voice changes the public conversation. Until recently, there were three main critiques of gold, all relying more upon ridicule than reason:
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Jim Sinclair’s Commentary
It chills some much larger.

Bank of America’s Big Freeze Chills Housing Recovery On Friday October 8, 2010, 1:53 pm
By: Diana Olick
It was bound to happen, and it did.
Bank of America extended its foreclosure freeze to all 50 states as it continues internal "assessments" of its foreclosure practices. "Our ongoing assessment shows the basis for our past foreclosure decisions is accurate," reads their statement.
Bank of America (NYSE: bac) is one of the highest volume loan liquidators. This means we’re going to see a huge slowdown in sales of bank owned properties in the coming months, which have been running at roughly one third of all home sales. It also says something about what happens next.
"It’s really only a matter of time before there is effectively a national foreclosure moratorium," notes Guy Cecala of Inside Mortgage Finance. "We already have moved way beyond having foreclosure concerns in just certain circumstances in certain states. There are concerns/challenges being raised about all foreclosures."
I put in the call to JP Morgan Chase (NYSE: jpm) to see if they will follow. "No comment at this point," answered spokesman Thomas Kelly.
While some see today’s announcement as something of an admission:
"The national moratorium is what would be expected if they are truly concerned about the legality of their internal policy, procedures and processes. This is because in non-judicial states it is even easier to commit fraud, or act irresponsibly with respect to the quality of legal documents, than in the 23 judicial states in question because there is no judge involved," says mortgage consultant Mark Hanson.
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Hourly Action In Gold From Trader Dan

Posted: Oct 08 2010     By: Dan Norcini      Post Edited: October 8, 2010 at 2:04 pm
Filed under: Trader Dan Norcini
Dear CIGAs,
So much for the anxiously anticipated payrolls report – it turned out to be an absolute dud with the economy shedding yet more jobs (try to think of this in human terms). Another 95,000 jobs disappeared. While private sector hiring did show a mild increase, government jobs (state, local and federal – census workers) showed another drop.
Further distressing news was that July and August numbers were revised DOWNWARD. If that were not depressing enough, preliminary estimates for the yearly benchmark revisions reveal that the government underestimated the overall number of job losses for the year and may erase another 366,000 off its books. Keep in mind that these are all “official” government numbers. The reality is even worse. By the way, the underemployment number is closer to 17.1%.  Nearly 1 out of 5 are either out of work or working part time being unable to secure full time employment.
Obviously this is not what the stock market was hoping for (it is also the last report before the upcoming November election) but it is what bond traders were hoping for as this sets the stage for another round of Fed Quantitative Easing. Bonds moved higher in anticipation of more purchases next month or certainly in December.
The rest of the markets were somewhat torn by the news. Commodities in general were moving higher on the reflation play (QE2) but some of the individual markets such as crude oil were caught in a tug of war between the rotten jobs number, the subsequent continued slow growth and slow demand, and the notion that more funny money will punish the Dollar. Crude was higher but its gains were subdued as it is thus far unable to stay above $83. Should it be able to better than market as of today’s close, it will be poised for a run towards $87.
It was not so in the grains where a stunningly bullish corn number from USDA caught that market by surprise. That market has been on a real roller coaster of late. It was just a week ago when a USDA report caught everyone by surprise but on the opposite side. Then the numbers show corn stocks larger than most were expecting and the market went limit down. At the time there was a great deal of suspicion regarding USDA’s numbers. Those fears were confirmed today and the doubters vindicated as the release showed a substantial drop in the overall corn yield with the result – the market went limit up and will probably do so again when it reopens Sunday evening. Can anyone say, “whiplash?” Wheat and soybeans were both pulled higher by corn with both markets locking limit up on the open of pit session trading; however, wheat has faded a bit but still remains sharply higher moving back occasionally hitting the limit again.
The Dollar moved lower but weakness in the Euro keep it from falling sharply. I am not certain why the Euro was relatively weak considering the payrolls number. A European official was attempting to jawbone the Euro lower saying that it was overvalued based in current fundamentals but his words do not really carry all that much weight. Still, some looked at it as revealing that the Europeans are very uncomfortable with the Euro near 1.40. There are also increased grumblings from various quarters of the world about what is being viewed as a deliberate devaluation of the Dollar by the US. The BRIC nations are becoming rather vocal and who can blame them? One wonders if perhaps there are some smoothing operations taking place to slow the Dollar’s descent and quiet some of the critics. Whatever the reason it kept the greenback from falling below the 77 level.
The hesitancy of the Dollar to break 77 is probably what kept gold from taking out its record high from yesterday’s overnight session. Looking at the charts however a close above $1,350 would be strongly bullish heading into next week. This goes back to what we have been repeatedly saying – as long as the market remains convinced that the Fed is going to engage in yet another round of Quantitative Easing, gold is going to move higher. You cannot create trillions in paper confetti Dollars and not have the ultimate currency respond accordingly. Even the most obtuse has to realize at some point that this will break the “back” of the greenback.
Historians will point to three factors when they analyze the events leading to the downfall of the Dollar from its global reserve status. First – an out of control Federal government spending binge which plunged the nation into an unsustainable debt abyss. Second – a binge of massive Quantitative Easing which resulted in an excess supply of the currency in a period of weakening demand. Third – the modernization and industrialization of the economies of Asian and Latin America.
But enough of that for now…
After seeing a bit of chart weakness surface in yesterday’s price action, gold bulls failed to run en masse forcing fresh short positions that were established yesterday to be covered. That took price higher before new selling originated near $1,350. For gold to continue moving higher it will need to take out $1365 to set up a push towards the next target level near $1,380. The key to $1365 appears to be the 77 level on the USDX. If it goes, so too goes $1,365. Initial chart support on the downside has been established near $1,325 with better support down near $1,315 – $1,312. The weekly close in Gold is yet another all time best.
Silver’s ability to recapture 23 is most impressive and should it manage to maintain its footing above this level early next week, it looks set for a run to $25.
The HUI managed to clear that 520 level once again. It is early in the day as I write this but IF the HUI can put in a weekly close above 520, it will be its best close ever and portends higher prices ahead. This 520 level is being fiercely contested with mining share short sellers pressing hard to avoid the level being violated. Why these boneheads continue to fight the trend escapes me but it is obvious that they are attempting to impose their will on the sector. It would be so much more profitable to just buy the mining shares and short the broader equity markets but combine huge paper losses and big egos and you get a combination that generally ends poorly. Regardless, 520 is the key that technicians are watching. If the HUI closes below 520 for the week but above 500, it will still look quite strong on the charts but will more than likely set the market up for some range trading for a period of time.
The Yen has now gone nearly straight up vertically for the last three weeks after dropping sharply on that round of BOJ intervention.  Amazing stuff. They either intervene on Sunday evening or Monday after this weekend’s big meeting or the Yen is going to accelerate higher. Everyone is sitting around wondering if they are going to be able to convince their counterparts that they are only wanting to engage in smoothing operations to prevent a “disorderly” rise in the Yen and thus get broad acceptance for an intervention or are instead attempting to engage in a currency devaluation at the expense of others. This continued rise in the Yen is killing Japanese GDP but apparently there is nothing that they can do any more to prevent it.  The stronger the Yen, the more downward pressure on the Dollar and the more upward pressure on commodities priced in Dollar terms. One has to wonder if the BOJ might make that argument to their counterparts to justify another round of intervention. “We are just trying to avoid a bubble in commodity prices so please let us bomb the speculative long yen crowd”.
The dollar is hanging by a thread above 77 on the USDX. Should it fail early next week, it will immediately head down towards 76.20 or so. A lot depends on what the BOJ might do coming out of the weekend. If they do nothing it will break the 77 level.
Platinum is over $1700 and palladium continues knocking on the door of $600. Copper totally negated yesterday’s bearish chart pattern and went on to make a 26 month high. It is within striking distance of psychologically important $4.00. As said several times here within the past two weeks, all that is lacking in seeing commodity prices managing to reach the former 2008 peaks based on the CCI (Continuous Commodity Index) is for the energy sector to spring to life. With today’s abysmal jobs number reminding us how many Americans are in terrible financial straits, any price rises in energy costs, particularly as we head into the winter months, is the WORST possible development at the WORST possible time for many of these families who are barely hanging on.
Click chart to enlarge today’s hourly action in Gold in PDF format with commentary from Trader Dan Norcini

Continuous Commodity Index Chart From Trader Dan

Posted: Oct 08 2010     By: Dan Norcini      Post Edited: October 8, 2010 at 6:29 pm
Filed under: Trader Dan Norcini
Dear CIGAs,
Click chart to enlarge today’s Continuous Commodity Index chart in PDF format with commentary from Trader Dan Norcini