June 2008


…but curiously not (quite yet) for Gold and Silver!

Spectre of Inflation Over Global Economy

By Francesco Guerrera, Krishna Guha, and Javier Blas
Financial Times, London
Tuesday, June 24, 2008

The spectre of inflation returned to haunt the global economy on Tuesday as companies ranging from Dow Chemical of the United States to South Korea’s Posco unveiled sharp price rises to combat the soaring cost of energy and raw materials.

The moves by Dow, the biggest chemical group in the US, and Posco, the world’s fourth largest steelmaker, came as Charles Holliday, chief executive of the chemical giant DuPont, warned of rising inflationary pressures in the corporate sector.

“Inflation is here big-time,” Mr Holliday told the Financial Times, adding that companies such as DuPont faced “tremendous cost pressures” and had the “obligation” to raise their prices to offset higher costs.

The general price pressure was exacerbated when BHP Billiton, the mining company, said the 96.5 per cent record increase in iron ore cost announced by Rio Tinto on Monday was not enough, signalling it could ask for a rise above 100 per cent with its steelmaker customers.

The sustained rise in the price of oil and commodities has hammered industries such as airlines and carmakers and deepened fears of a global inflationary spiral — which has already provoked riots across Asia — as producers pass on higher costs to manufacturers and consumers.

Figures on Tuesday showed US consumer confidence fell to a 16-year low in June while inflation expectations held at their recent record high. A closely watched housing index showed house prices in 20 of the biggest US cities posting a record 15.3 per cent year-on-year decline in April.

Inflation pressures will be high on the agenda at the two-day interest rate-setting meeting of the Federal Reserve, which concludes on Wednesday. The Fed statement is likely to indicate increased concern about inflation, despite a slowdown in the US economy, while avoiding any signal that rate increases are imminent.

Rising inflation would compound the crisis of the US consumer, whose confidence has been decimated by the bursting of the housing bubble and the ensuing financial turmoil.

But US macroeconomic data have so far shown little evidence that higher commodity prices have been passed to consumers.

Above-normal price increases have tended to be confined to industries for which commodity prices make up a large part of total costs, such as chemicals and airlines. The Fed is hoping that companies in most sectors will end up absorbing cost increases in their profit margins, which are above historic norms.

Andrew Liveris, Dow’s chief executive, said the decision to raise prices on the company’s products by up to 25 per cent — the biggest hike in company history — were aimed at offsetting a “staggering” increase in costs.

Dow is expected to spend $32 billion on energy and oil-based raw materials this year, more than four times the amount it spent in 2002, the company said.

Posco said it was increasing prices by up to 21 per cent, taking the cumulative price inflation to about 60 per cent. German steelmaker Salzgitter also said it would raise prices by 20 per cent.

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Dear CIGAs,

I respectfully request that each member of the JSMineset community send this missive to the management of their precious and base metals junior investment company. Please follow up on it to be sure it has been reviewed.

Strength In Numbers

The junior producer and exploration and development companies need to consider the formation of a Chamber of Mines for this section of the industry.

This Chamber should be free of any individual company agenda, free of fees and other interferences with the singular intention of protecting our shareholders from being attacked by those in the shadowy part of finance.

There are close to 2000 companies in this part of the industry, many of which are experiencing the same extreme nuisances.

The naked gold short seller is an entity engaged in a criminal act with a goal of doing serious injury for the purpose of profit and is therefore a major target in terms of civil liability. The short and naked short pool operations are exactly the same but more apt to be a conspiracy to injure slightly then become subject to RICO statutes.

The job of this working Chamber of Mines as a singular unit is to pull these criminals out of the shadows into the light of day.

No matter how well they feel they are hidden there is always a paper trail going back to the perpetrator in this financial world.

Certain financial areas of secrecy in many cases do not protect the spoils of criminal activities. This may be proven soon at UBS where an officer is under arrest in the USA and is due to go to court shortly.

It does not mean anything that neither regulators nor exchanges care about the naked short or short selling pools, regardless of whether they are naked or not. If the stockholders and the company who’s values have been injured initiate civil proceedings, discovery will be full of legal opportunity. You cannot erase the paper trail that exists to every transaction.

My request is simple:

Contact the management of every junior precious metals producer, exploration and developer, asking them to contact Editor Dan at information@jsmineset.com so that the Chamber can take form.

There is no hidden agenda, no money to be collected, and no desire to stroke egos and no desire for private corporate information. I do not wish to be anything but a member. Let the organization elect its officers so we can act as one. We can speak as one. We can win as one, but we are weak when scattered as the industry is now. Organize and we are a legion. Expose the perpetrators and then it is all over. The data is there. It can be organized and it can be dissected, yielding the evidence trail of those who wish to hurt, sometime simply because they are mean, sometimes for illicit profits.

Add to that that sociopaths mistreat their associates and employees by nature. No looking may be required. It might just happen to come over the transom, even though we do not invite that.

You stockholders must push your management hard. Personally there is nothing that I will NOT do in order to protect both my and my investors’ interests.

I herewith dedicate my life, my fortune and all that I am to the identification of the perpetrators and their conduits used. Those sociopaths that take joy by inflicting severe injury for profit by conspiracy and the use of dirty tricks must be the hunted of nearly 2000 company’s determined managements and their more than 500,000 very angry stockholders.

There is only one way to defend stockholders, which is through the organization and strategy of a major offensive. Forget attorneys at this point. Regulators are of no help. A Chamber of Mines acting together can prevail.

I will even if I must go it alone.

Together we are legion. Alone and looking the other way you are a victim. I have never been a victim. No one depending on me will be a victim.

There is NOTHING I will not do to protect those that depend on me. I am livid. Enough is enough.

We will add risk to the bad guys. That proposition you and they can depend on.

Your friend,
Jim Sinclair

The following is an excerpt from Alex Wallenwein‘s witty missive, fittingly titled “Fed-Ache”.

Will Deflation Crash the Gold Price?
There is probably enough that could be written on this topic to warrant an entire article, maybe even a book, but the question also has a very quick and easy answer. The answer is “no” because gold is primarily money, not a commodity. It is good for almost nothing except for making jewelry and for using it as money. That’s why it’s so valuable. Even jewelry is a latent form of money, if you think about it.

As the money stock decreases during a credit deflation, it becomes more valuable relative to goods and services, and so its buying power increases. Non-western people know this. Westerners will have to re-learn this lesson the hard way. They will keep their money in interest-paying loser-investments because they believe that cash and gold are “non-performing” assets that earn no interest.

In other words, in a deflation, “cash is king” – and gold is cash. In fact, gold is better than paper cash. That should tell you where to focus your investment dollars.

Got gold?

Alex Wallenwein
Editor, Publisher

By Joseph Goldstein
New York Sun
Friday, June 20, 2008

The federal government’s attempt to stop a group of gold-standard activists from minting an alternative to the greenback is about to face its first legal test.

A dozen people around the country filed suit in U.S. District Court in Idaho this week demanding the return of all the copper, silver, gold, and platinum coins — more than seven tons of metal in all — that the FBI and Secret Service seized in November during raids of a mint in Idaho and a strip mall storefront in Indiana.

The Justice Department had decided that the coins, many of which bear the familiar symbol of Lady Liberty and the phrase “Trust in Gold,” were being illegally marketed as government-sanctioned currency, according to the sworn affidavit of an FBI agent.

The creator of the coins, Bernard von NotHaus, who lives in Miami, claims that the federal government is trying to shut down production of his liberty dollars, as the coins are called, because of the competition they pose to the greenback. In recent years his precious metal coins have outperformed the dollar, whose value has plunged in relation to gold.

The raids in November were the result of a two-year undercover investigation of Mr. Von NotHaus and how he sold liberty dollars. The Justice Department has not followed up with any criminal charges against Mr. Von NotHaus or the regional distributors of his coins.

In the suit filed in Idaho, the various plaintiffs say the federal government has no right to continue holding onto their coins any longer.

While it is common for agents to warehouse property seized during criminal investigations, such as firearms or surveillance equipment, the plaintiffs say coins of precious metal should be off-limits.

The coins “do not constitute contraband or other property subject to seizure,” the legal papers state, adding that the seizures violated the Fourth Amendment rights of the plaintiffs.

For the most part, the plaintiffs had possessed bearer certificates for the silver liberty dollars that were being warehoused in Couer d’Alene, Idaho, at a mint. The mint, Sunshine Minting, is one of the sites that federal agents raided.

In an unusual request, the plaintiffs ask for an order, at the very least, forbidding federal agents from touching or moving the coins so that they are not dirtied in any way.

“Mishandling numismatic material can negatively impact value,” the legal papers say.

A spokesman for the Justice Department, Charles Miller, said that the agency had not yet seen the legal papers and could not comment.

E-mail messages circulating among Liberty Dollar enthusiasts have expressed fears that the federal government intends to publicly auction off the coins. There has been no public announcement indicating that to be the case. The U.S. attorney’s office in Asheville, N.C., which led the investigation that prompted the raids last November, did not return several calls for comment over the last few weeks.

Mr. Von NotHaus markets his coins via the Internet as an inflation-proof currency and claims that between 100,000 and 250,000 Americans own them. They have attracted the interest of coin enthusiasts, as well as critics of the Federal Reserve.

A 1999 report by the Southern Poverty Law Center said that many of the stores that accepted liberty dollars “are run by men and women connected to the radical right.” The coins have caught on particularly well in Asheville, N.C., and Austin, Texas, and are accepted by some merchants there.

More than 50,000 of the coins seized last year bear the likeness of Rep. Ron Paul, whose monetary policies Mr. Von NotHaus supports.

“About a quarter of a million people holding liberty dollars are almost up-in arms — not up in arms yet, but almost — about having their property seized, and rightly so,” Mr. Von NotHaus told The New York Sun yesterday.

* * *

Economist and monetary historian Antal E. Fekete contends that there is not a big concentrated naked short position in silver, as silver market analyst Ted Butler long has concluded from commodities exchange data.
No, Fekete believes that the silver behind the enormous short positions is out there, somewhere, just not in commodities exchange warehouses, and that the major listed short sellers are actually agents of all sorts of silver holders who are profitably putting their metal to work in the trading pits.

At least Fekete seems to agree with Butler that the silver market might benefit from greater transparency, since, apparently, Fekete’s innocent scenario and Butler’s sinister one would look the same on the books of the exchanges.

Fekete’s new essay is headlined “Putting Loincloth on the Naked Bogeyman” and you can find it at GoldSeek’s companion site, SilverSeek, HERE…

There are more than U.S.$1,700,000,000,000 (read 1.7 trillion) sloshing about in China’s FX reserves looking for a quiet and decent way out before their true value returns to mean, which is the value of some coloured ink over fancy paper, i.e. ZERO! Having said that we can now read the following China Daily’s newsitem without the distracting “static” noises and in correct perpective…

HSBC debuts in gold

China Daily
2008-06-06 03:22:06 GMT 2008-06-06 11:22:06 (Beijing Time)

In what is being widely seen as a major step toward globalizing China’s gold market, HSBC yesterday became the first overseas bank to start trading gold on Shanghai Gold Exchange (SGE) after gaining approval from China’s banking regulator.

Tong Gang, the press officer of Shanghai Gold Exchange, told China Daily: “The transaction volume traded by HSBC today (Thursday) on SGE amounted to 17 kilogram of gold in purity Au9995.”

“It is an exciting policy to allow overseas banks access to China’s gold market,” said Tong. “A closer tie between China’s gold market and the global market is expected to be established.”

Along with HSBC, Standard Chartered Bank and Canada’s Scotiabank were also given SGE memberships earlier this year.

Industry experts said the opening of Shanghai’s gold market to overseas banks is widely considered a major effort to help increase the liquidity of the domestic gold market and bring in the foreign expertise that can promote the development of the market in the longer term.

Richard Yorke, group general manager, president and CEO of HSBC China, said: “The opening of the gold market to overseas banks is another exciting development for China’s financial market.”

“HSBC China is pleased to remain at the forefront of the new market developments. Our trading at the exchange will enable us to share our international experience and expand our participation in China’s financial markets as well as our service scope,” Yorke added.

According to Financial Journalist Peter J. Cooper writing from Dubai, this coming summer may be just hot enough to ignite an aquisitions rush for promising and undervalued junior miners.

You can read P.J. Cooper’s post called “Stalking the best gold and silver juniors a profitable summer sport” at his blog HERE