October 2008

By James West
Monday, October 27, 2008

The campaign of disinformation and perception management continuously undermining gold’s natural role in the financial universe inflicts damage on the economy, the scope of which we are now finally understanding.

If gold had not been so thoroughly abused over the last two decades, and were it in fact able to exert its normal moderating influence on monetary policy, the disaster we’re in would have been much diminished, if it would have happened at all.

It is incumbent upon those visionaries who perceive clearly the truth of this situation to exert as much influence as possible to counteract the effects of market manipulation and disinformation, as it is only through these efforts that there can be any hope of returning to (or establishing) a transparent and equitable monetary system.

To that end, MidasLetter.com is hereby initiating production of a feature length documentary film intended for theatrical release initially, and then distribution by DVD, broadcast, and ultimately YouTube. The intent is for this film’s success to facilitate the establishment of a follow-on television series that continuously scrutinizes fiscal and political policy as they evolve in the light of the theories of classical economists.

It is our objective to establish an opposing voice to the mainstream media’s continuous delivery of information that is biased and/or just simply wrong, and syndicate this information in video format for broadcast throughout the world.

We are seeking expressions of interest from interested parties who are accredited or professional investors only. Contact me by telephone toll-free at 1-888-485-8029 or by e-mail at JWest@MidasLetter.com for a copy of the Film Production Plan and Script Synopsis.

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‘Think the futures price of metals is too low? The Got Gold Report reports on how to buy and actually take delivery of gold and silver metal from the futures markets that have savaged the price of them so much. If the COMEX is determined to under price its physical metal, then they ought not to mind seeing it leave their warehouse for the popular physical market’.

In his new “Got Gold Report” at Resource Investor, Gene Arensberg goes to war against the big gold and silver shorts on the commodities exchanges. He writes:

If the two or three big U.S. banks that have savaged the gold and silver markets on the Comex with an avalanche of short sales since July have so little respect for gold and silver that they are willing to sell them down into oblivion — when there is a raging shortage of metal in the real bullion marketplace — then shouldn’t some of us take them up on it?

“In other words, if the Comex doesn’t respect the real physical market for gold and silver, shouldn’t we remove the metal from them and send it into the physical market that does respect it? This report says yes, certainly we should. They are figuratively begging us to.

And then Arensberg explains how it can be done, with the help of Tony Klancic, senior account executive at commodities trading house Lind-Waldock in Chicago.

Arensberg’s “Got Gold Report” is headlined “How to Buy Physical Gold and Silver on the Comex” and you can find it at Resource Investor HERE

A juicy excerpt from today’s “The Market Ticker” excellent post:


..There are only two options remaining for America, and we as Americans, and our politicians, must choose one of these two paths.

Neither path is easy.

Neither path is pain-free.

The path that will lead us to where we can prosper involves a great deal of short-term pain. It involves forcing all of the bad debt – perhaps your mortgage, the bad corporate debt, the “Ponzi-Scheme” style debt that has been layered up one on top of another – out into the open and forcing it to default.

On purpose.

This means that if you are underwater on your home, you will lose it and your credit will be destroyed for a few years. It means you may have to file for bankruptcy. It means a great deal of short term pain if you are in this position. It means that companies that have taken on too much debt will be forced to either pay down what they can, or go bankrupt if they cannot.

This path will result in higher unemployment for a time, it will result in lower standards of living. You will not be able to spend money you do not have, and neither will our government. Both the government and we the people will be forced to live within our means.

The second path is for Ben Bernanke, Henry Paulson our government and you to attempt to do what we have been doing.

That is, to borrow more money to pay the interest on money we have already borrowed. To refuse to accept that those who borrowed too much, and who can’t pay, must declare that fact and face the potential bankruptcy that comes from being too far in debt and unable to make good on obligations.

This is now a critical matter for our nation, because our nation’s political leaders have chosen to take the private debt of companies and individuals and attempt to guarantee it with the credit of the United States.

However, The United States is just as broke as we are individually – in fact, more so.

Treasury will have to issue three trillion dollars of new debt over the next 12 months in an attempt to make this work. But Treasury has been using very short-term debt – mostly four week and 13 week “bills”, to fund the existing debt, because they are cheaper. As such the total amount of these auctions could easily reach five trillion dollars over the next 12 months.

Already, Treasury is issuing more than $100 billion dollars in this debt a week, on average, including new issues and rollovers. This is about double the total amount of debt that foreigners (or US interests) hold in total, and we have barely begun to actually issue the debt necessary to make the “TARP” operate.

We are, in effect, borrowing to pay interest. If you have ever tried to do this personally, you know that doing so almost always leads to bankruptcy.

It will for us as a nation if we don’t stop it now.

Please click HERE to access the complete article.

In the midst of highly unpopular bailouts of Wall Street, many justifications have been given about why Washington feels the need to act. Some claim that capitalism and the free market are to blame, but we have not had capitalism. If you compare our financial capital to our aggregate debt, this would be obvious. In the same way, we have not had a truly free market. The monetary manipulations of the Federal Reserve, a complex tax code, the many “oversight” agencies and their mountains of regulations show that we are far removed from a free market economy.

Another unsatisfying argument is that certain entities have to be bailed out because of their economic importance. Supposedly, some entities can be so big, so important, that no matter what they do, citizens must perpetually sustain them.

Even limited government has a basic duty to defend against force and fraud. Some argue that force is somehow permissible just because the entity engaging in it is “economically significant.” But one could use this reasoning to prop up slavery. It could be deemed unfortunate but economically beneficial, and indeed these arguments have been used historically to deprive people of their liberty. But slavery should never be tolerated regardless of any economic benefit, just as systemic fraud should not be tolerated. Some banks on Wall Street should fail. Fannie and Freddie should fail. They are perpetrating fraud against the people. Yet, government insists on rewarding behavior which should instead be investigated, prosecuted, and punished.

There has been much evidence of fraud at Fannie and Freddie, but when one man, Franklin Raines, defrauded the organization out of millions of dollars through illegal accounting tricks, and ends up agreeing to pay back just a fraction, one could argue that it was well worth it to him. Fannie went on to only get more deeply involved in subprime mortgages after this investigation. Several organizations are suffering right now precisely because the free market is trying to work and punish mismanagement, if only the government would get out of the way and let it. Perhaps banks are not lending to each other because they know that complicated accounting standards, created in part to defend against confiscatory tax policy, enables false fiscal pictures to be presented, which erodes trust. But this is not a time for the government to step in with more burdensome and complicated regulations, or more foolish liquidity injections. This is a time for some banks to fail, and remaining banks to deal honestly and transparently once again. More regulations will only result in more lies.

Just as economies that turned away from slave labor had a transition period, our economy would transition as well, but in the end, if we turned to honest, sound money and a truly free market, we would end up with a more just society, founded on truthfulness and decency, not subject to the violence of force or the whims of fraudulent institutions. Unfortunately, it seems we are headed into a new era of slavery, however, where all taxpayers will be forced to render to the Fed and big banking interests the bulk of the fruits of their labor, possibly through higher taxes but definitely through the eroding force of inflation.

It is axiomatic that the most leveraged gold market most often (95 percent of the time) sets the price of any cash market. First derivatives (listed futures) command price.

This remains true as long as the COMEX warehouse of gold is NOT meaningfully depleted by long gold contracts by taking delivery from the exchange warehouse.

As long as an exchange maintains a warehouse that historically overwhelms historical demand for delivery, then the first derivative, the COMEX listed gold future, will be the primary cause of price.

Taking delivery from the COMEX warehouse is not an easy process, as the system is designed not to violate your contract but to be a world-class pain in the ass. The COMEX requires re-assays, assuming that you wish to re-deliver. This then places another raving pain in the ass in your way.

The COMEX market is effectively an international 24-hour market as there is no location where you cannot buy or sell a COMEX clone.

Cash bullion gold, as opposed to the semi-cash markets that non-USA banks trade, is the only totally private means of buying and selling gold.

As currency problems increase, first the knowledgeable public such as you clean out the coin market.

This is the first time that the international coin markets have been cleaned out everywhere. This did not happen globally in the 1970s.

Large gold bars are still available in major markets but the backup inventory is getting low.

As long as the COMEX warehouse remains adequate and large bars still are available, the paper market, the leveraged COMEX market, will rule the price.

Only with a decline in COMEX warehouse inventories and a rundown in large bar supplies of the cash market will the cash bullion market command the price of the COMEX futures market.

It was not the buying by the Hunt Brothers that caused silver to move above $30 into the $50 area but rather the universal belief that the Hunts would take delivery, which would deplete or exceed the COMEX warehouse supply.

The war between paper gold and bullion gold is a war to determine which will take command of the price of gold, nothing more, nothing less. There will be no two markets trading at different prices. All this battle is about is if the bullion gold market is going to take the lead in making the singular price away from the traditional axiom that the most leveraged market makes the price.

I believe that bullion, in these most unique conditions, will command the one gold price, making it hard to impossible to manipulate the gold price via the paper gold market, as is the practice every day.

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The small print:This offer depends on the willingness of the Chinese government to continue buying U.S. government debt. Terms and conditions depend on the whim of Congress and may be changed without notice. U.S. taxpayers may not apply
Heavy secret gold leasing may explain disparity in gold prices

MineWeb’s Lawrence Williams interviews Jeff Nichols of American Precious Metals advisers about gold’s decline on the commodities exchanges even as demand for the metal explodes, and they come up with a likely explanation — heavy surreptitious gold leasing by central banks.

Williams writes: “Nichols reckons it has been central bank gold loans — even more so than official gold sales — that have really pulled the rug out from under gold. Gold loans by central banks are an alternative — and invisible — means of injecting liquidity into the banking system. These gold loans to banks and bullion dealers by the leading central banks are probably a significant multiple of outright official sales.

“In simple terms, a central bank may lend or deposit gold with a banker or bullion dealer who simultaneously sells forward. Even with the recent substantial increase in gold-lending rates, at the end of the day the dealer receives cash in the transaction at a cost that may be advantageous to short-term money-market borrowing costs. Central banks have great freedom to lend gold outside their government-mandated rescue programs and these lending activities are typically hidden by their accounting practices.”

That is, more market manipulation by central banks, kept secret from the public and most investors, concealed on the central banks’ own books, but executed through a few favored financial houses that can trade on their knowledge of the secret government policy and make huge profits for providing the central banks with cover.

Williams’ interview with Nichols is headlined “Why the Fall in the Gold Price When Physical Gold Remains in Huge Demand?” and you can find it at MineWeb HERE

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