We The Sheeplez- The Coming Economic Collapse.."A Nation Of Sheep Ruled By Wolves" Thomas Jefferson

Gold’s Role During Periods Of Monetary Stress (A Review)

February 9, 2012, at 2:09 pm
by Jim Sinclair

Dear CIGAs,

Here is a review of the why of the gold price when push comes to shove.
Gold always attempts to balance the international balance sheet of the USA as a function of price multiplied by the gold supposedly held.
The subjective mind of the market is the means to the end from the beginning of written history and before gold functioned as a money based standard of value and measure.
Gold’s Role During Periods Of Monetary Stress
March 4, 2009, at 5:18 pm
by Jim Sinclair

Dear CIGAs,

Gold’s job is, and will always attempt to during periods of monetary stress, balance the INTERNATIONAL Balance Sheet of the USA.

Putting the Numbers Into The Equation:
$3,125,000,000,000 / 260,272,000 ounces of gold = $12,006.67 per ounce of gold.
In the early 70s I put an advertisement in Barrons predicting gold would rise to $900. When it got near that level, I left for 21 years.
I reappeared officially when Forbes published an article on my career December 10th of 2001. Click here to view the Forbes article…
The mathematics behind the $900 number came from the following equation plus reasonable trend estimates on the number going into the future.
You will note the number today fits in nicely with Alf’s high levels.

Major ONE up from $256 to $1,015 (actually 4 times the $255 low);
Major TWO down from $1015 to $699, say $700 (a decline of 31%);
Major THREE up from $700 to $3,500 (a Fibonacci 5 times the $500 low);
Major FOUR down from $3,500 to $2,500 (a 29% decline);
Major FIVE up from $2,500 to $10,000 (also a 4 fold increase, same as ONE)

I would not have revealed this unless a recognized expert who has a 100% track record such as Alf Fields predicted it first.
I did not wish to yell "fire in the theatre."
It certainly make the Comex manipulators, who could easily be stopped, look long-term silly today.

Jim
See the following two links as support:
http://research.stlouisfed.org/fred2/data/FDHBFIN.txt
http://en.wikipedia.org/wiki/Official_gold_reserves
In the past, I believe you have said that the price of gold could reach a level whereby in dollar terms this equation will hold:
Oz’s of Gold Held by US x $ Price of Gold = External Debt

From the above links we find:

Federal Debt held by Foreign Investors = $3,125,000,000,000 (as of 12/31/08)
Official US Gold holdings = 8,133.5 tonnes (or 260,272,000 oz’s)
Putting the #’s into the equation:
$3,125,000,000,000 / 260,272,000 = $12,006.67 per ounce of gold

My question is – what is the mechanism or thought process that makes the equation true?
(I guess that I am looking for the why?)

Thank you for your time.
CIGA Rich Gold

In The News Today

February 9, 2012, at 2:05 pm
by Jim Sinclair

Jim Sinclair’s Commentary

QE to infinity as there simply is no other mechanism on earth to produce that kind of liquidity instantly.

The European Central Bank’s second injection of long-term liquidity into markets could reach as much as 1 trillion euros ($1.33 trillion), analysts predict.

How Big Will the ECB’s Next Liquidity Injection Be? Published: Thursday, 9 Feb 2012 | 3:40 AM ET
By: Catherine Boyle
The European Central Bank’s second injection of long-term liquidity into markets could reach as much as 1 trillion euros ($1.33 trillion), analysts predict.
Initial estimates for the February 29 operation of three-year, long-term refinancing operations (LTROs) suggested that there would be only about a 100 billion euros take-up by Europe’s banks, but those estimates have shot up in recent weeks after the success of December’s operation became clear.
December’s action by the ECB has spurred a stock market rally after increasing the supply of cheap money, and ECB Director-General Francesco Papadia even suggested that the bank could say “mission accomplished” after the operation.
Yet the effects on the real economy are still to be seen. Banks have shored up their balance sheets, but lending figures to consumers and businesses remain low.
“The hope is that it will trickle down,” said Christel Aranda-Hassel, director of European economics for Credit Suisse, who believes there will be a take-up of around 500 billion euros at the second auction.
More…

Jim’s Mailbox

February 9, 2012, at 2:04 pm
by Jim Sinclair

Eric,

Nothing we need to live is going to get cheaper in dollars.

Jim

Era of Falling Food Prices Comes to End as World Population Adds 2 Billion CIGA Eric
The era of falling food prices ended a long time ago. We’ll likely test the upper blue and green trading bands fast than the world expects once the current correction runs its course.Chart: CRBFoodstuffs And Year-over-Year (YOY) Change

Headline: Era of Falling Food Prices Comes to End as World Population Adds 2 Billion
The era of falling food prices has come to an end with the world population set to add another 2 billion people, according to Cargill Inc., the U.S. farm commodities trader.
The United Nations’ Food and Agriculture Organization has said global food output must rise 70 percent by 2050 to feed a world population expected to grow to 9 billion from 7 billion now and as increasingly wealthy consumers in developing economies eat more meat. Food prices tracked by the FAO climbed to the highest ever a year ago on surging grain prices.
“You don’t have to be a reviving bull on commodities to believe that the era, which went from the 50’s, 60’s to 70’s and early 80s, of ever decreasing food prices in real terms has probably come to an end,” Paul Conway, vice chairman of Cargill, said at the Kingsman sugar conference in Dubai yesterday. The conference is continuing through tomorrow when Jacob Robbins, managing director of global sweeteners at The Coca-Cola Co., are among the scheduled speakers.
The FAO food-price index averaged 228 points last year, 23 percent more than in 2010 and above the 200 points recorded in 2008, when food riots erupted from Haiti to Egypt. Prices since then have declined 11 percent by December.
Source: bloomberg.com
More…

Pimco Borrows A Record $88 Billion To Bet On Fed's Upcoming MBS Monetization

Regular readers of Zero Hedge know that in recent months tracking the portfolio and thoughts of one Bill Gross via the holdings of his flagship Total Return Fund (which just jumped by $6 billion in the past month and is just shy of its all time record north of $250 billion) has meant one thing and one thing only: betting on the Fed monetizing Mortgage Backed Securities or bust. Well, in January he just took it to a whole new level. The fund has now borrowed a record $88 billion, or -35% of its AUM, in cash (shows how much he things of the dollar) and used the proceeds (together with dumping European sovereign bonds from 18% to 11% of AUM) to bet on MBS which now stood at a whopping 50% of the entire portfolio - the highest since July 2009 when QE1 was in full force. However, in absolute dollar terms, due to the growth of the fund's AUM, the actual bet on MBS has never been bigger, and at $125 billion, represents the biggest notional bet ever made by PIMCO. Treasury holdings of just over $100 billion with an effective duration of 6.33 complete the epic bet that the fund has now put on QE3.

Greece/Iran and Indian Rice/Banks get big break with a $26 billion foreclosure settlement

Harvey Organ at Harvey Organ's - The Daily Gold and Silver Report - 1 hour ago

Good evening Ladies and Gentlemen: Gold closed higher by $9.70 to $1739.00. Silver also rebounded nicely rising by 21 cents to $33.88. Gold jumped immediately at comex opening and remained positive until London was put to bed and that is when the crooked bankers sold their paper metals to drive the price down. Let us head over to the comex and assess trading today. The total gold comex OI fell

A Very Different Take On The "Iran Barters Gold For Food" Story

Much has been made of today's Reuters story how "Iran turns to barter for food as sanctions cripple imports" in which we learn that "Iran is turning to barter - offering gold bullion in overseas vaults or tankerloads of oil - in return for food", and whose purpose no doubt is to demonstrate just how crippled the Iranian economy is as a result of the ongoing US embargo. Incidentally this story is 100% the opposite of the Debka-spun groundless disinformation from a few weeks ago that India was preparing to pay for Iran's oil in gold (they got the asset right, but the flow of funds direction hopelessly wrong). While there is certainly truth to the fact that the US is actively seeking to destabilize the local government, we wonder why? After all as the opportunity cost for the existing regime to do something drastic gets ever lower as the popular resentment rises, leaving the local administration with few options but to engage either the US or Israel. Unless of course, this is the ultimate goal. Yet going back to the Reuters story, it would be quite dramatic, if only it was not the case that Iran has been laying the groundwork for a barter economy for many months now, something which various other analysts perceive as the basis for the destruction of the petrodollar system. Perhaps regular readers will recall that back in July, we wrote an article titled "China And Iran To Bypass Dollar, Plan Oil Barter System." Specifically, we wrote that "according to the FT, China has decided to commence a barter system in which Iranian oil is exchanged directly for Chinese exports. The net result: not only a slap for the US Dollar, but implicitly for all fiat intermediaries, as Iran and China are about to prove that when it comes to exchanging hard resources for critical Chinese goods and services, the world's so called reserve currency is completely irrelevant." Seen in this light the fact that Iran is actually proceeding with a barter system, something that had been in the works for quite a while, actually puts the Reuters story in a totally different light: instead of one predicting the imminent demise of the Iranian economy, the conclusion is inverted, and underscores the culmination of what may have been an extended barter preparation period, has finally gone from beta to (pardon the pun) gold, and Iran is now successfully engaging in global trade without the use of the historical reserve currency.

Stop The (Printing) Press!.... If Only We Could

Hands up anyone who is surprised that the Bank of England has added another £50 billion to the quantitative easing pot? The same hands will also believe that the Greeks have agreed terms for the next bail out tranche with the Troika (the European Union, the IMF and the European Central Bank). This ongoing epic odyssey of the voyage to nowhere has grabbed the headlines, but the BoE’s quiet announcement is equally significant to us Brits. Central banks never utter the words quantitative easing, so the Bank calls it an addition to its “asset purchase programme”, which was only hiked to £275 billion back in October. The accompanying rhetoric states that inflation is on the way back down and may fall below their target of 2%, mainly as a result of the VAT increase last January falling out of the equation and lower energy prices, (despite Brent crude being over 10% higher Y-o-Y in sterling terms..); a convenient excuse perhaps.

Stephen Leeb: US Government Desperate & Scared Regarding Gold

from King World News:

Today Stephen Leeb told King World News the US government is now showing signs of desperation and fear regarding the gold market. Leeb is concerned the US is destroying its own currency and was not at all impressed by government efforts to label goldugs as terrorists. Leeb is the acclaimed money manager who is Chairman & Chief Investment Officer of Leeb Capital Management. When asked how he responds to the government labeling him and others as potential terrorists for owning gold and suggesting people buy gold because the US is going broke after going off the gold standard, Leeb stated, “The nature of a comment like that strikes me as desperation. When you are turning up the printing presses, common sense tells you that you are destroying your own currency.”
Stephen Leeb continues: Read More @ KingWorldNews.com

Rick Santelli Grills CFTC Commissioner, Bart Chilton

CNBC’s Rick Santelli asks Bart Chilton, Commodities Futures Trading Commission (CFTC) commissioner, how many taxpayer dollars have been lost in the futures industry and why the CFTC disappeared and let the SEC dictate policy.

Ben Davies: Fair Value on Gold Today is Over $4,000

from King World News:

In an exclusive interview with King World News, Ben Davies told KWN the fair value of gold today is over $4,000. Ben Davies, CEO of Hinde Capital, also said the public is now starting to enter the gold market. Here is what Davies had to say: “The theme I had last time we were talking, ‘This was to be the year of defaults.’ I spoke specifically about a (coming) risk asset rally. One thing that was very evident to me, at the end of last quarter, from my trip to Asia and in conversations I had with fund managers here in Europe and the UK, it was very evident a lot of people had moved to cash.”
Ben Davies continues: Read More @ KingWorldNews.com

Elite Media Downplays Austrian Economics by Building Up MMT

from The Daily Bell:

Heterodox economics … Marginal revolutionaries … The crisis and the blogosphere have opened mainstream economics up to new attack … The market monetarists do not fret about the side effects of the activism they seek, which can misdirect capital, inflate bubbles and seduce people into over-borrowing … Meanwhile mainstream economists continue to look at all the options askance, though not equally so. Some, particularly on the left, are getting quite enthusiastic about the market monetarists’ NGDP targeting. Few are as keen on neo-chartalism. The late Bill Vickrey, a Nobel prize-winner, had sympathy for its take on debt, but it remains largely confined to academic redoubts in Kansas City, Missouri and Newcastle, New South Wales. As for the Austrians, Brad DeLong, a Keynesian Berkeley professor who also blogs, has called an acquaintance with their ideas a useful part of a diversified intellectual portfolio. But his frequent comrade in arms, Mr Krugman, does not seem to have revised his view that their business-cycle theory is “as worthy of serious study as the phlogiston theory of fire”. – The Economist

Dominant Social Theme: The Internet and blogosphere have given rise to numerous new financial-economic theories. Oh, Austrian economics is one of them. But it’s only one of many. Not more important, man. Just another one. So many of them. At least one other.

Free-Market Analysis: Another day, another attempt by the mainstream media to marginalize Austrian economics. We’re using the Economist article (excerpted above) as an example but in our view this is a powerful elite dominant social theme.
Read More @ TheDailyBell.com

Anarchists Unite Behind Gold and Silver – Jeff Berwick and Gary Gibson – 02-09-2012

from The Financial Survival Network:

Gary Gibson of www.WhiskeyandGunPowder.com and Jeff Berwick of www.DollarVigilante.com join your humble host for a no holds barred discussion of why they believe that anarchy is the best course for humanity. While one can question the practicality of a world without government, Gary and Jeff have really thought things through and believe that we are all grown-up enough to live without the guiding hand of all knowing government. And while that may or may not be the case, governments today are teetering on the edge and we may have no choice but to prepare for life without them.
Certainly government as it is now constituted, represents a threat to every individual’s liberty around the planet. Whether it’s getting into unnecessary wars, bailing out criminal financial miscreants, or spending their way into the poorhouse, there is something inherently wrong with government as it is now practiced. So if we can devise a transition to anarchy that will not result in humanity’s descending into chaos, perhaps it’s worth considering. In any event, discussion of anarchy inevitably leads to a discussion of the proper role and scope of government, and this is a debate that has been much too long in coming.