Jim Rogers on Commodities & Alternative Energy for This Decade

Jim Rogers on CNBC Squawk Box 2_27_11

U.S. Warns Extreme Food Prices Will Stay

The world faces a protracted bout of extremely high food prices, the US government has warned, overwhelming farmers' ability to cool commodity markets by planting millions of additional hectares with crops.

The US Department of Agriculture on Thursday forecast nominal record farm-gate prices for corn, wheat and soyabeans in the crop year that begins with the 2011 harvests. It added that food inflation would surge in the second half of this year as wholesale prices filtered through the supply chain, affecting consumers.

The warning at the USDA Outlook Forum in Washington, the biggest annual gathering of the agribusiness sector, is likely to fuel global concerns about rising inflation and the potential for destabilising food riots in developing countries.

Joseph Glauber, USDA chief economist, told the conference that in spite of higher planting for corn and soyabeans this spring, grain and oilseed markets were "still forecast to be tight" in 2011-12 due to strong export and biofuel demand.

"While it is often said that the cure for high prices is high prices, even with additional supplies expected this year, it is likely that the tight stocks-to-use situation will not be entirely mitigated over the course of one or even two growing seasons," he said.

Mr Glauber forecast that the heavily subsidised US ethanol industry's demand for corn would continue to grow in spite of higher input costs, consuming about 36 per cent of the domestic crop.

The ethanol industry has been criticised for driving food prices higher. But Tom Vilsack, US secretary of agriculture, ruled out any change in US ethanol policy. "There is no reason for us to take the foot off the gas," said Mr Vilsack, the former governor of Iowa, a state in the US corn belt.

Farm-gate prices received by growers for corn, soyabeans and wheat will hit average nominal records in 2011-12 of $5.60 a bushel, $13 a bushel and $7.50 a bushel respectively, the forecast said. Farm-gate prices are an indicator of wholesale prices.

Analysts said the USDA forecasts for production, demand and stocks for the 2011-12 season and Mr Vilsack's affirmative comments about ethanol meant agricultural commodities prices could surge even higher this year. "No pullback for agricultural commodities," said Richard Feltes, a respected grain analyst with RJ O'Brien brokers in Chicago. "The speech [of Mr Vilsack] should be alarming to any corn consumer."

The USDA said that the country's farmers would sow 92m acres with corn in the spring, the second-highest yet, and 78m with soyabeans, another record.

As the US exports half of the world's corn and a third of the world's soyabeans, changes in US acreage and hence the potential supply has a global impact, affecting international buyers such as China.

Source

Jim Rogers on Gold, Silver and Oil

On the Edge with Max Keiser & Gerald Celente: Global insurrection

Gerald Celente, the man behind the famous Trends Journal, is Max Keiser's guest for this edition of Press TV's On the Edge. The main focus of today's show is on the relationship between Middle East uprisings and financial changes as a result of such political transformations. Enjoy.

Turk: Dollar Ready to Collapse,Silver Squeeze to Continue

With gold higher and silver up almost $1.30, King World News today interviewed James Turk out of Spain.  Turk had this rather frightening warning about the dollar, “The dollar right now is hanging on the precipice.  If we break below 77 on the dollar index, look out below.  I don’t think people really appreciate how scary the dollar chart is here, or how ominous the implications really are.  There’s no predicting how far the dollar could plunge if confidence breaks.”

Turk continues:

“You’ve got civil breaking out in North Africa and you have rebellions happening in the Middle-East.  In this kind of geopolitical situation in the past the US dollar would always rally, but this time it can’t even bounce.  You know Eric the other side of this coin is that if the dollar falls off the edge of a cliff, precious metals are going to skyrocket.” 

When asked about silver Turk stated, “During the most illiquid time of the trading day, somebody decided to take out all of the stops in silver.  If you were not following during business hours in the Pacific Ocean you missed it.  I woke up this morning and looked at the chart and couldn’t believe what happened while I was sleeping.

The important point Eric is that no technical damage was done and in fact the situation has become even more bullish because that little smack down overnight took out all of the weak hands.

With this month’s important options expiry now behind us, I’m looking for higher prices next week.  Even though the March/May spread has flattened a little, the backwardation continues to grow to 2015 and has ballooned further to $1.16.  The short squeeze is continuing to develop.  The shorts are trapped and whether the trap springs this week or in a month or two I don’t know, but we are getting very close.”

When asked about gold specifically Turk remarked, “While silver did get hit in overnight trading, gold hardly moved and then snapped right back.  Remember I said last time that the gold chart is beginning to look really strong, that is what the event last night displayed. 

Gold is incredibly resilient and looks coiled for an explosive move higher.  We started our initial probe of the all-time high this week closing in on $1,430 before backing off.  Look for another probe of that $1,430 level very soon.  It won’t be long Eric before we take out that all-time high, particularly if the dollar falls off the edge of a cliff.”

Source

Why Gold and Silver are Breaking Out

We have yet to complete two months of 2011 and so far we have already seen several attempted revolutions in Middle Eastern countries, with, so far, two of them successful. All of them have been unexpected and have caught the world by surprise. 

We are on the brink of the next successful revolution [Libya] disrupting the oil market and taking prices so high that we are likely to see them negatively impact growth in the developed world.

The prospect of the dreaded, "double-dip" recession is now back on our screens. Should food inflation continue to hurt the entire global economy, then words like 'stagflation' and 'depression' will reappear in much of the financial world. 

With developed world recoveries still tenuous at best and weakened from nearly four years of financial crises, there is little capacity to absorb this new threat. If it does come about, then the strength to resist yet another one of the many potential crises maturing in the last few years will not be there. Our previous articles on the 'validity of technical analysis in gold and silver markets' have already proved correct and are hopefully prompting investors to reassess their viewpoints on gold and particularly silver.

REFLECTIONS ON WHAT COULD HAPPEN

We are living in a world of consequences, all of them unforeseen, yet caused by the faulty structure of the financial world laid down decades ago. The 'credit crunch' that rippled into the banking crisis, then the sovereign debt crisis was a reflection of greed and the 'live now, pay later' way of life in the developed world. Each of the consequences of every stage of these crises was unforeseen. Yet each was a consequence of the sanctioning of debt leverage in all walks of financial life.

Energy prices are much higher than pre-credit crunch levels and expected to move higher. At the time, much was written about ensuring that oil supplies needed to accommodate both the developed world and the rapidly emerging Asian world, which accounted for half the world's population.

Have oil supplies been expanded to accommodate such Asian growth? No they haven't! So there is an oil crisis in the pipeline. 

The governments of the oil producing Middle East have long been secured by the main developed world powers to protect the vital interest of oil supplies. The fact that they were corrupt and kept their own people in poverty was ignored. It was a matter of time before that crisis erupted. Food and energy inflation provided the trigger. 

Will the new governments in these countries continue to support the dollar pricing policies on oil or will they accept all currencies and review their priorities concerning which customers to favor. Will we see prices like $145 if Libya falls [they supply 2% of global oil supplies]? If Bahrain falls, will it bring down the eastern area of Saudi Arabia? If so, the shape of the oil world will have to be re-sculptured.

In turn, the economic future of the developed and emerging world will change and cause pressures between the different trading blocs that have not even been contemplated. 2011 is already the most dramatic year of this century and it still has ten months to go.

CHANGES ARE A' COMING.....

It is in our nature to want our national, political, financial and economic environments not to change, leaving us to get on with our lives in a somewhat myopic way. Change, when it does come, is surprising every time. It shouldn't be, but we tend to be so focused it always is. As with the credit and subsequent crunches, we tend to feel everything will right itself eventually, it's just a case of waiting. Well it hasn't and here we are suffering the next set of structural crisis consequences.

So what should we do?

• We have always followed a policy of extrapolation, taking the events and structures of today and playing them forward to the future. Hope is not part of this exercise, only realities that are present and real now.
• We do not wait until statistics from the past confirm our viewpoint. We need to be able to take the factors unwinding now, knowing that statistics will confirm our conclusions later. This takes us to the front from the back of the queue. For instance, we were confirming central banks had turned sellers of gold nearly two years ago. It is now being confirmed by economic statistics provided now.
• We need the correct perspective in order to weigh the different market influencing factors in a balanced way. For instance, we don't see gold in a 'bull' market, but paper currencies in a 'bear' market after their 'bull' market last century from 1971.
• We need to accept that the gold and silver markets are now global markets. Asian markets are the most robust in this regard so they are now in the center of the market. These encompass investors who do not buy for profit. In the developed world, investors buy for profit, but are having a diminishing effect on the gold price itself. Yet western investors continue to believe they are the main influence on the gold price. They will sincerely believe that the level of U.S. interest rates will dictate the future of gold prices. The average Asian buyer doesn't even know what these are. Yet, it is the Asian buyer that is having and will have the greatest impact on the gold price.
• Our last two articles on technical analysis highlighted the dwindling influence of technical factors on the gold price too. The fundamentals are the main influence with technical factors clarifying short-term moves.
• We must accept that the world financial climate has darkened and that the storms of consequences are fundamentally destructive. Like adjusting to winter from summer our expectation have to be tempered by this reality. This allows us to protect ourselves from the coming storms. Where we are optimistic, we have weighed the pertinent realities before reaching that conclusion. We then act on that. We may well find that the realities of crises have given us tremendous opportunities both for profit and to protect those profits.

HOW WILL ALL THIS AFFECT THE GOLD AND SILVER MARKETS?

The fulcrum of the gold and silver markets at the moment remains rapidly growing Asian demand. Following this is the inability of the supplies of gold and silver to accommodate this growing demand. A factor that will grow in the days to come will be the change in the developed world to holding gold rather than selling it when prices indicate a correction. The corrections we have seen in the last few years have shortened and become shallower than the previous one. 

Just as central banks in the developed world have stopped selling, [but not yet turned to buying] so private investors are holding far longer than has been the case in the past.

Asian demand is totally different in that investors there buy to hold as financial security, just as we used to buy houses.

We expect to see this trend start to grow in the west as the developed world declines economically and the East rises.

By:Julian Phillips

Wednesday, February 23, 2011

BENONI (GOLDFORECASTER.COM)

Julian Phillips is a long term analyst of the global gold and silver markets and is the founder and principal contributor for Global Watch - Gold Forecaster - www.goldforecaster.com and Silver Forecaster - www.silverforecaster.com

Richard Russell: Gold is the Safest Currency

Richard Russell, the man behind Dow Theory Letters talks about the depreciation of the dollar and why he feels safe holding gold at the Casey Research Gold and Resource Summit

Keiser Report: Fox News Boo Fail

This time Max Keiser and co-host, Stacy Herbert, talk about China regulating reincarnation and the US Air Force seeking virtual people. In the second half of the show, Max talks to Salon.com blogger, Glenn Greenwald, about the Wikileaks smear campaign and about propaganda from corporate America.

Why I'm Buying Silver at $30

The silver price has bounced 27% since January 28, a huge advance for a measly 16 trading days. It's already soared past its 2010 high and was selling for less than $16 this time last year, a double in 12 months. So, is it pricy? Or should we ignore the run-up and keep buying?
 

I've read a few articles that say we should expect silver to drop to the $25 level, and one pinpointed $22. Others, of course, see bullish tea leaves for the near term and believe it's headed higher. Of those that assert silver will decline, most believe it will be temporary, though one writer claims the bull market in precious metals is over (I think he's a holdout from the gold-is-a-bubble camp).
 

These authors could be right about a near-term decline, but I'm less concerned with what the price does this month or even the next few months, and more focused on where it's likely headed over the next few years. Caution: the chart ahead may cause excitement.
 

While there are lots of reasons to be bullish on silver, what everyone really wants to know is how high the price can go. Here's one hint, based strictly on historical price performance.
 

 Silver rose an incredible 3,646% from the November 1971 low of $1.32 to its January 21, 1980 high of $49.45 (London PM fix prices). Our current advance, through February 4, is 596%. At $30, silver would have to climb over five times to match the last great bull market. If it did, the price would hit $160.89 per ounce (from its bottom of $4.295 on March 30, 2001).
 

You'll also notice silver has a record of outperforming gold in these two bull markets. In spite of the price dropping 26.9% in 2008 (while gold gained 5%), the metal has outrun its yellow cousin by 38.6% since their respective lows in 2001.
 

Gold advanced 2,333% in the 1970s; it's currently up 430%. If it matched the last run, the price would hit $6,227.26 per ounce, a return of four-and-a-half times the gold you buy today.
 

From solely a historical price perspective, the chart certainly suggests we've got a long way to go with both metals. The question is if the fundamentals support such price advances (show me a healthy dollar and no threat of inflation, and we'll talk), but my point for the moment is that there is an established precedence for the price of these metals to climb much higher. And just as important, to keep one's eye on the big picture.
 

So, yes, I'm buying silver at $30, in part because I think the potential for enormous gains is high.
 

However, I'll add that I'm not draining my cash account to do so. I think it's important for the precious metals investor to always be in the game, but given silver's volatility and the precarious nature of most markets right now, prudence suggests we keep some powder dry as well.
 

Let's say one of the soothsayers noted above is correct and silver temporarily falls to $25. If you snag it at that level, your endgame return would be 543%, vs. the 436% gain from $30 (excluding premiums and storage costs). That's more than another 100% gain on your original investment.
 

But how does one buy silver not knowing if the price will plummet or soar? For example, silver could take off from these levels, never to see $30 again, leaving those of you waiting for a sell-off out of the market. Or it could sink to $25, making investors who went all in now regret they didn't wait for a better price. Or it could trade sideways until, say, next fall, leaving both parties uncertain and on the sidelines.
 

In my opinion, there's a one-word answer to the question. It solves all dilemmas – it keeps you in the market, while simultaneously letting you buy at lower prices if that occurs. It lets you build your position bigger and bigger without the worry of whether you're getting a good price.
 

That one-word verb is, accumulate. Or in the vernacular made popular in the '80s by the financial planning community, dollar cost average. In other words, buy a little now, buy a little next month, etc., until you have a position sufficient in size to fight off inflation and any other economic woe we're likely to encounter over the next few years.
 

So my advice is, buy, hold, repeat. Because if our silver market ends up looking anything like that left bar in the chart, you may regret not having bought at $30, too.

 

By:Jeff Clark
Source

Eric Sprott: The Government Lied,There is No More Silver!

Speaking at the Casey Research Gold and Resource Summit, Eric Sprott told investors that there is no more silver left to go around, "There's $22 billion of silver available in the world, of which the ETFs already own half, and between you guys and us we probably own the other half... Which means there's nothing left."

G.Celente:The Greates Bank Robbery in World History is Collapsing

Gerald Celente on Rob McNealy Show 18 Feb 2011

Marc Faber:The Total Financial Collapse of America is Here!

Alex talks with investment analyst and entrepreneur Marc Faber. He writes the monthly investment newsletter The Gloom Boom & Doom Report and is the author several books, including Tomorrow's Gold: Asia's Age of Discovery and Riding the Millennial Storm: Marc Faber's Path to Profit in the Financial Markets. Faber has been a regular contributor to several leading publications around the world in the past, among them Forbes, the Financial Times, Financial Intelligence, Asian Bond Portal, Die Welt and others.

Keiser Report: Fed's Reign of Terror & the US Revolt

This time Max Keiser and co-host, Stacy Herbert, talk about the Fed's reign of terror and an economist's warning of revolution in America as Obama's budget robs from the poor to give to the rich. In the second half of the show, Max talks to William D. Hartung, author of Prophets of War, about the cost of corporate welfare to the U.S. military industrial complex and the role of this welfare in the current Middle East unrest.

Max Keiser: Americans Joining Middle East Uprising Trend

Dozens of people have been reported killed in the Libyan capital Tripoli overnight as violence continues to spread across the country. Key administrative buildings have been set on fire, with thousands of anti-government activists still on the streets calling for an end to the 41-year rule of Colonel Gaddafi. To find out more about how the Middle East upheaval is impacting global economic patterns, we're joined live now by RT's financial guru Max Keiser...

John Hathaway: Silver Breaks Out, Paper Market is Nonsense

With silver trading at a new multi-decade high trading above $34 and gold up almost $20 breaking above $1,400, King World News today interviewed John Hathaway, Senior Managing Director of the Tocqueville Gold Fund.  Hathaway stated, “What I strongly believe is that the amount of paper we are seeing traded in both gold and silver on the Comex and in the derivatives market is nonsense.  It has to be something in the order of 100 to 1.  The fact that the market is moving today when the Comex is closed tells me it is not New York that is doing this, it is physical demand.”    

Hathaway continues:

“I think it is just a tight market.  There have been reports of some difficulty regarding physical availability of silver.  Retail interest is being driven even further by the price action in silver.

Silver has broken out to the upside and because of that you have technical buying and short covering.  This could in fact be a short squeeze. 

When you look at the COT, the spec gold longs are below their norm for the last year.  Their net long in gold is only 126,000 contracts which is in the 30th percentile of the last 52 weeks. 

Circling back around to the paper markets, I cannot stress enough that the paper to gold ratio is out of whack.  The huge disparity between the amount of paper contracts traded versus actual physical gives a complete misread on the market reality.”

When asked about gold stocks specifically Hathaway stated, “The shares are way behind, and that is a reflection of the skepticism that still exists in this market.”

John Hathaway is one of the few fund managers willing to tell it like it is regarding the paper market in both gold and silver.  On a side note, those who have been claiming there is no shortage in silver have been completely discredited by the price action.  As far as the gold market is concerned, I agree with Hathaway that there is a long way to go on the upside.

Source

G.Celente:This Is the Beginning of the First Great War of 21 Century

Book of the Week: Empire of Debt

Empire of Debt

by Bill Bonner & Addison Wiggin

Engaging, quick to read, and well worth it. I would read it, if I were you, just for the historical parallels and history lessons. Fascinating stuff. The basic premise is that the US is an empire, but the first empire in world history that has funded its operations by exporting its debt rather than taxing the outposts. Quite an odd strategy, when you think of it this way. Also raises enormous questions about the sustainability of the model.

Food Price Inflation Entering Dangerous Levels

Could US Banks Get Away With Anything?

JP Morgan has an incentive to keep the number of Americans enrolled in the food stamp program as high as possible because it's the largest processor of food stamp benefits. Michael T. Snyder, the founder of The Economic Collapse Blog says JP Morgan and other big banks appear to get away with anything; there does not appear a desire by the government to do something.

Keiser Report: Welcome to Fakeville

This time Max Keiser and co-host, Stacy Herbert, talk about Guanxi schemes selling fictional forests for real money, while real farmland cant find even a virtual penny. In the second half of the show, Max talks to author and documentary filmmaker, Greg Palast, about whether it is peak oil or oil dictatorships that is the bigger threat to the global economy.

Why Isn't Wall Street in Jail?

Financial crooks brought down the world's economy — but the feds are doing more to protect them than to prosecute them

Over drinks at a bar on a dreary, snowy night in Washington this past month, a former Senate investigator laughed as he polished off his beer.

"Everything's fucked up, and nobody goes to jail," he said. "That's your whole story right there. Hell, you don't even have to write the rest of it. Just write that."

I put down my notebook. "Just that?"

"That's right," he said, signaling to the waitress for the check. "Everything's fucked up, and nobody goes to jail. You can end the piece right there."

Nobody goes to jail. This is the mantra of the financial-crisis era, one that saw virtually every major bank and financial company on Wall Street embroiled in obscene criminal scandals that impoverished millions and collectively destroyed hundreds of billions, in fact, trillions of dollars of the world's wealth — and nobody went to jail. Nobody, that is, except Bernie Madoff, a flamboyant and pathological celebrity con artist, whose victims happened to be other rich and famous people.

The rest of them, all of them, got off. Not a single executive who ran the companies that cooked up and cashed in on the phony financial boom — an industrywide scam that involved the mass sale of mismarked, fraudulent mortgage-backed securities — has ever been convicted. Their names by now are familiar to even the most casual Middle American news consumer: companies like AIG, Goldman Sachs, Lehman Brothers, JP Morgan Chase, Bank of America and Morgan Stanley. Most of these firms were directly involved in elaborate fraud and theft. Lehman Brothers hid billions in loans from its investors. Bank of America lied about billions in bonuses. Goldman Sachs failed to tell clients how it put together the born-to-lose toxic mortgage deals it was selling. What's more, many of these companies had corporate chieftains whose actions cost investors billions — from AIG derivatives chief Joe Cassano, who assured investors they would not lose even "one dollar" just months before his unit imploded, to the $263 million in compensation that former Lehman chief Dick "The Gorilla" Fuld conveniently failed to disclose. Yet not one of them has faced time behind bars.

Invasion of the Home Snatchers

Instead, federal regulators and prosecutors have let the banks and finance companies that tried to burn the world economy to the ground get off with carefully orchestrated settlements — whitewash jobs that involve the firms paying pathetically small fines without even being required to admit wrongdoing. To add insult to injury, the people who actually committed the crimes almost never pay the fines themselves; banks caught defrauding their shareholders often use shareholder money to foot the tab of justice. "If the allegations in these settlements are true," says Jed Rakoff, a federal judge in the Southern District of New York, "it's management buying its way off cheap, from the pockets of their victims."

Taibblog: Commentary on politics and the economy by Matt Taibbi

To understand the significance of this, one has to think carefully about the efficacy of fines as a punishment for a defendant pool that includes the richest people on earth — people who simply get their companies to pay their fines for them. Conversely, one has to consider the powerful deterrent to further wrongdoing that the state is missing by not introducing this particular class of people to the experience of incarceration. "You put Lloyd Blankfein in pound-me-in-the-ass prison for one six-month term, and all this bullshit would stop, all over Wall Street," says a former congressional aide. "That's all it would take. Just once."

But that hasn't happened. Because the entire system set up to monitor and regulate Wall Street is fucked up.

Just ask the people who tried to do the right thing.

By Matt Taibbi

February 16, 2011

Read the full article HERE

A Tipping Point Is Nearing

We are facing a tipping point.  There will soon be a crisis affecting US citizens beyond any experienced since the Great Depression.  And it may happen within the year.  This past week three awful developments put a dagger into the hope for a growth-led recovery, which held promise of possibly averting a debt and currency implosion crushing the American economy.

The first was a little-noticed, but tragic, series of events in the newly elected House of Representatives.  The speaker, Mr. Boehner, had given the task of fashioning the majority's spending cut agenda to Representative Paul Ryan (R-Wisconsin), a rising conservative star representing the vocal wing of fiscal conservatives in the House. Promising to cut $100 billion of government spending, Mr. Boehner spoke before the elections of the urgency to produce immediately when Republicans took control.

Out of a $3.8 trillion government spending agenda, the wonkish Mr. Ryan, considered by many to be the best hope for fiscal conservatives, revealed proposed cuts of a whopping $74 billion.  After some tense meetings, (referred to as a "revolt" by some media) newly elected conservative congressmen convinced the leadership to commit to unspecified cuts of an additional $26 billion. The actual "cuts" from any such legislation will, of course, be less once the appropriate political log rolling and deal-making are done- let's call it $50 billion (while the deficit grows by $26 billion during the week it takes to discuss it). So go the hopes for serious spending restraint from our newly elected wave of rabid, anti-big government Republicans. They may deliver cuts 1.3% of total spending that is itself approximately 90% greater than collected taxes.  Let's mark this spending reduction effort as an epic fail, at a time when epic success is almost required for survival.

The second awful development to occur last week was the employment report from the Labor Department, describing employment conditions in the U.S. economy in January, 2011.  The report was packed with statistics, all pointing to anemic growth with a modest pickup in manufacturing employment.  The little-noticed (not by the bond market) aspect of the report was the "benchmark" revisions, an attempt to get the total picture more accurate each year than simply adding up all the monthly change numbers.  This year's benchmark revisions showed two alarming things: a decline from previously reported employment in December 2010 of nearly 500,000 jobs, and a reduction in the workforce of a similar amount. 

Coupled with insistence from the Federal Reserve Chairman Ben Bernanke that the Fed intended to continue "quantitative easing" (a euphemism for monetizing the bonded debt of the federal government), the employment data caused bond holders to assume there will be no end to the red ink.  Ten-year U.S. bonds lost a full percent of their value, declining a total of 18% since Bernanke announced the acceleration of Fed policy in August 2010. The yield on these bonds has increased from an ultra-low 2.4% in August to 3.65% today, as the Fed repeatedly describes inflation in the U.S. as too low.

In context, a 3.7% yield does not appear high by historical standards. In our current predicament, however, it is heading toward Armageddon.  If interest rates on our debt rise by 1% it means our interest payments rise by more than $100 billion dollars annually (not including the interest payments owed to the Social Security Trust Fund--see below).  As global liquidity and deficit spending have accelerated, food and commodity prices have skyrocketed, sending many prices up 25-50% worldwide since August.  In some countries (Tunisia and Egypt among them) rice prices and cooking oil have doubled.  Copper is up 40% in that time.  If global inflation expectations take hold with tenacity, as they have many times in past periods of "easy money" by our Fed and Congress, interest rates may easily rise to 5-6%, an event which will blow an additional $300-500 billion hole in a budget already beyond sanity.  Can our creditors give the U.S. a nod on $2 trillion of new debt each year without any plan to fix it? Remember, there is plenty of past experience with U.S. debt yielding 7-8%, a potential expenditure on our current debt of nearly 100% of tax receipts to pay interest alone should yields go there.

The third development of the last week which received much less press than the Egyptian crisis is the "new normal" in Social Security.  The CBO released a report disclosing that the net cash flow for the Social Security trust fund -- excluding interest received from the book entry bonds it holds in U.S. debt -- will be negative $56 billion in 2011, and for every year hence even more so.  This is the train wreck that was supposed to happen in 2020. It is upon us now.  Any limp action by conservatives to bring this program into solvency can be expected only to slow the raging river of red ink this behemoth program (along with its twin Godzilla, Medicare) spills on U.S. citizens. With no political will to fix them, these "entitlements" will obligate Americans to borrow more and more money from China--to honor promises we simply refuse to admit we can't keep.

So why do these developments argue for a crisis of Great Depression proportions? Because they speak unequivocally of our pathway to insolvency, and the potential of currency failure via hyperinflation, despite the hopes of conservatives and market participants to see a halt of such direction.  Housing prices, the foundation of so much of private citizen debt loads, are destined for stagnation -- not inflation -- as the supply of homes is far greater than the demand -- 11% of the nation's homes stand empty today.  When the world begins to recognize that there is no fix for America's borrowings, a fast and brutal exodus from our currency and bonds can send us a shock in mere weeks or months.

Unlike the Great Depression, however, we will enter such a shock in a weakened state, with few producers among us and record mountains of debt.  More cataclysmic is the specter of inadequate food, as less than 4% of us farm, and those that do may cease to be as productive or may not accept devalued currency as payment, should the tipping point be crossed. Corn and wheat prices in the U.S. have nearly doubled in less than 12 months, using our rapidly evaporating currency as the medium of exchange.

The time for action has passed, which may only become apparent as the "aid" of easy money becomes seen as the harm that it is. May we all be spared the worst, but I offer no such prayers for those responsible.  The harm that comes will be swifter, and more severe, than most of them thought possible.

Source

Silver is Approaching Stage Two of its Bull Market

Back in April 2007, I wrote about the three stages that appear in every bull market, and more to the point, that gold was approaching the end of stage one.  Gold back then was still trading around $690, and therefore well below its then record high of $850 reached in January 1980.  My view was that “gold looks ready to make a new all-time high. When that happens, stage two begins. There will not yet be widespread excitement about gold in the next stage, because that won't occur until stage three. But when gold makes a new record high, and particularly after it breaks into a 4-digit price, people will begin paying attention.” 

I wrote a follow-up article in November 2009 entitled Welcome to Stage Two of Gold's Bull Market, just two months after gold broke above $1,000.  Focusing on the change in prevailing sentiment, I noted how differently gold was being treated.  "During the first stage of a bull market, the media and most investors alike focus on past issues, rather than future potential.  Over the past decade one consequently heard all the reasons not to own the gold…But there is a notable difference in this stage compared to stage one.  Look how many people are writing and talking about gold.  Gold has moved from apathy and neglect – stage one characteristics – to growing attention.  But importantly, instead of embracing gold and analyzing it to determine relative value, today’s attention is one of widespread disbelief and skepticism that gold can climb higher.  These are exactly the responses one should expect to emanate from stage two."  I concluded by noting that at some unpredictable point in the future, gold will enter stage three "when gold no longer is relatively good value."

I did not make any mention of silver in the above two articles.  It too has three stages, but silver is still mired in stage one, which began in February 1991 after silver had collapsed to $3.50.  It was an astounding 93% decline from its January 1980 peak of $50.  But as we can see on the following chart, $3.50 was silver’s low, and its price has been rising ever since.

This chart shows a massive accumulation pattern, marked by the green lines.  This pattern is a story of strong hands and weak hands, specifically, of silver moving to the former from the latter.

From its $50 high in January 1980 to its $3.50 low in February 1991, the weak hands were shaken out.  At that point, the accumulation by strong hands – who were buying because the recognized that silver was an exceptional bargain – became the dominant force.  Their buying power was stronger than the selling pressure of the weak hands, and the price of silver responded by starting to climb.  It was classic stage one action, but here’s the important point.

Silver is still in stage one.  It won’t advance into stage two until $50 is exceeded, just like gold did not enter stage two until its previous high of $850 was hurdled.

I expect that silver will exceed $50 this year, which is a point of view I first mentioned in my outlook for 2010.

Admittedly, I was a little early with my forecast about when gold would enter stage two.  So perhaps I will again be early by forecasting that silver will enter stage two of its bull market this year.  Regardless of the accuracy of my timing, one thing is clear.  Because it is still in stage one, silver remains good value.

Free Gold Money Report

David Morgan's Thought on Silver

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Gerald Celente on Obama's budget: "They're bankrupting the country!"

The new US budget was revealed by President Obama calling for America to rebalance the global economy, stressing that the US cannot rely on foreign governments to finance domestic consumption. However, many point to Obama's inability to rein in spending, including Gerald Celente. He says the future will be more of the same; it's going to be more debt and placing the burden on the American people.

Eric Sprott on The Financial Sense News Hour

interviewed on 12 Feb 2011

$8,000 Gold by 2013-2015 May be Too Cheap

CAPE TOWN, South Africa -- Speaking at the Mining Indaba conference here, James Turk forecast that gold could reach $8,000 per ounce by 2013-2015. He added that that may be too conservative.

 

Turk, the founder of digital gold currency GoldMoney, said individuals should own bullion not as an investment, but as a wealth preserver.

“Gold is not a commodity. It is not volatile. It is not an investment. Gold is money,” Turk told an audience of nearly 1,000 delegates.

He illustrated gold’s ability to retain its purchasing power by comparing the price of oil in British pounds, US dollars, German marks, euros and gold. Only gold had maintained its purchasing power since 1950, with massive losses for the currencies, especially the pound.

“Gold is a form of money that holds its value over time,” said Turk, adding, “capital is a precious resource that is best preserved with gold.

He explained gold’s fundamentally different character as a tangible asset that was accumulated, or saved, rather than consumed. It’s value derives from its utility as a medium of exchange for things like food, shelter and communication.

 

“Gold as money is a mental tool that enables economic calculation unchanged through human history,” Turk told the audience of mining and investment professionals.

Turk bases his forecast on a long-range view of boom-bust cycles. He believes we are currently moving through a bust of epic proportions as individuals, companies and governments are forced to restore balance to their balance sheets.

“The bust has not yet peaked and you should own gold to preserve wealth until it has.”

He projected the cycle via a ratio of the Dow Jones Industrial Average to gold. He asserts that the ratio will again revert to one, and that’s where his $8,000/oz prediction lands.

Turk said that a collapse of the dollar was inevitable because the United States, among other countries, was in a structural crisis that could not be avoided via interest rate increases.

“The US is not suffering from a cyclical deficit, but a structural one. It is a path to hyper-inflation.

“Japan’s credit rating has just been cut. It is probably the first slow fuse to be lit.”

Turk laid his thesis against the strong correlation of the Federal Reserve’s monetization of US debt with the S&P 500. Since the launch of quantitative easing, the correlation has been almost perfect.

Meanwhile, he pointed out that the US appears to have entered a “debt compounding” phase. As a result, the country is now extremely vulnerable to even moderate increases in interest rates which have begun to move up.

“We cannot replicate the previous [1980s] high interest rate cure for mismanagement of the economy,” Turk concluded. He believes the US currency will inevitably collapse as a consequence.

Max Kaiser - Revolutions & Economy 02-11-2011

This episode of Press TV's On the Edge with Max Kaiser again deals with American economic meltdown. Max raises the possibility that the revolutions in other parts of the world would come to the US. He says the economic systems favored by some corrupt Arab regime are similar to that of the US, that a mass movement against it in the US is inevitable. He also says the genie index is very high, which reveals the concentration of wealth among the top strata of the society.

David Hale: China to Drive Gold Toward $2,000 by 2015

While inflation risks remain benign in most of the developed world, what happens in the developing world and, in particular China is going to be crucial for commodities prices and gold in particular

But what happens in China is critical. The rise of consumers in that country, as well as costs like wages will be trans-formative, Hale says. This poses tests for commodity markets. But in the long there is a demand for gold and other commodities that is, for now, unstoppable.

Global economist David Hale discusses ‘the state of the world' and theorizes on how global economic conditions will impact inflation and monetary policies and how these will impact the price of commodities, in particular gold.

He is predicting a rise in the price of gold - to as much as $2,000 per ounce by 2015. The factors driving this rise are economic and Geo-political. The biggest driver of gold prices, he says, is China, and to a lesser extent, Africa.

Much depends though on the risk of inflation and its impact on growth in the developed and developing world. In the developed world, he says, inflation risks are benign and most countries are following an expansionary monetary policy to stimulate growth. But, in the faster growing developing world, inflation risks are rising. Monetary policy is tight, with many developing countries, including China, raising interest rates as they try to stave off inflation - how they manage this will impact commodity prices.

In the US the corporate profits are up thanks to unprecedented cost cutting and productivity improvements. US businesses are now hyper competitive and very profitable. But economic growth is likely to remain at a subdued 3,5% for this year. So interest rates, he says, are unlikely to rise in the medium term and the monetary policy is likely to remain expansionary for the next 12 to 18 months.

Similarly, the inflation outlook in Europe is also benign. "People are concerned about food inflation, but that is a transient problem". Instead economists are watching events like the current round of wage negotiations in Germany for signs of an inflation push. So far there are no ominous signs. "The first big agreement, at Volkswagen, was settled at 2,5%."

The European Central bank remains constrained by Greece, Ireland and Portugal and other, as yet unseen, problems. "I don't think Jean-Claude Trichet [the president of the European Central Bank] will want to raise interest rates this year. It is too uncertain." 

Japan's export led economy showed initial signs of recovery, but slowed again last year. Interest rates are unlikely to change and the government will support an expansionary fiscal policy. "So the Bank of Japan cannot raise interest rates."

Around the world the possibility of monetary tightening is very slim.

But the picture is quite different in emerging markets - which now account for 50% of global output. "There we may have tightening." China could raise interest rates by another 75 basis points this year. Inflation concerns are growing. A bubble in the property market remains a risk. Wage pressure is another concern. In eastern China there is a labor shortage of 20m workers. "We are talking wage gains of 20% to 30%," Hale says.

China is shifting its strategy of export-led and investment-driven growth to a more balanced pattern of economic development, one more dependent on Chinese consumption. As a result, China's growth rate may be lower - around 6% - but more sustainable.

At the same time the Chinese government is pushing to internationalize the Chinese currency and reduce its reliance on a weakening US dollar. "It is not yet a fully convertible currency, so it's not yet a rival to US dollar." says Hale. But it could be in the near future.

The upshot of this, as well as of the depreciation of the US dollar, is that China will want to increase its gold reserves. The Chinese central bank has been quietly buying gold for the two to three years, but last year it upped its purchases, buying 450 tons. (So too did Russia, India and Mauritius, but in smaller quantities). China now has more than $2400bn of foreign exchange reserves, but a fraction of this is invested in gold. The IMF projects that China will run a current account surplus of $2600bn during the next five years. If it does, Hale says, its forex reserves could rise to the $5000bn-$6000bn range. And even if it keeps the gold share of its reserves constant, it will have to buy another 1000-1500 tons. In fact, some in the Chinese government have suggested that the central bank should increase its gold reserves to 10 000 tons. "This would give China larger gold reserves than Fort Knox."

The massive expansion of China's foreign exchange reserves has resulted in faster monetary growth and helped drive China's inflation rate up. This triggered a rise in the private demand for gold. Private holdings have rocketed from nothing three years ago, to 300 tons now. "This could easily increase to several hundred tons, with China rivaling India as the largest private buyer of gold in the world."

The Egypt Crisis Will Engulf The Arab World, & Then Spread To Europe

Read the full article here

Max Keiser:Competition in The Markets is Dead

Alex talks with film-maker, broadcaster and former broker and options trader Max Keiser. Keiser formerly hosted The Oracle with Max Keiser on BBC World News. Previously he produced and appeared regularly in the TV series People & Power on the Al-Jazeera English network. He also presents a weekly show about finance and markets on London's Resonance FM, as well as writing for The Huffington Post.

Jim Rogers: How to Profit During Monetary Crises

In this video clip, investor Jim Rogers sits down with Judge Andrew Napolitano to discuss profit strategies during monetary crises.

Rogers said: “… what you have to do is you have to find things that will protect your assets real assets silver rice natural gas something that will hold its value in an inflationary time … I do it two ways: I own gold and silver coins in my hand in my house in my box; I also own gold and silver futures that’s another way to do it.”

He also commented Fed as follows: “Bernanke, he does not understand finance, economics and currencies; all he understands is printing money and now we have giving him the printing presses he has run those printing presses as fast as he can …”

J.Turk: Silver Backwardation for Years, Possible Hyperinflation

King World News has received word from James Turk that silver is in extreme backwardation.  Turk stated, “There is a huge story that is brewing.  Silver is in backwardation to 2015, which is 13-cents cheaper than spot.  This is unbelievable.  Money does not go into backwardation except ‘in extremis’!”

Turk continues:

“If this situation continues, and there is no reason to suspect that it is about to end quietly because the demand for physical silver is not abating, there are only two alternatives:

One, as we discussed on Friday, the silver price has to rise in order to dislodge physical metal from the strong hands that now own it. But why would anyone accept some national currency in exchange for physical silver unless the price is much, much higher?

Two, the shorts declare force majeure and use government force to let them escape from their untenable position. The fall-out from this outcome is very complex because there are so many factors to consider. But I would expect that any default would only strengthen the resolve of the strong hands now owning physical metal.  Meaning that the market for physical silver would become even more tight than it is now, even if the price shoots higher as I expect.”

Turk also went on to make the following points:

“Look for a short squeeze in silver already underway as evidenced by the backwardation to intensify as we move toward silver option expiry at the end of this month, and silver delivery on March futures contracts in early March.  In a short squeeze, what matters is ownership, not price. When you own physical metal, you are protected from government sanctioned force majeure that bails out the shorts.

As I mentioned Friday, the paper market for silver is losing its significance in the process of price discovery. Everyone who owns physical silver should make their decisions based on what is happening in the physical market, not the paper market. 

A basic premise of precious metals is that silver leads gold, which is a point we have discussed before. It will be interesting to see whether the backwardation in silver will lead to a backwardation of gold. If it does, the end game for the US dollar is near. It would mean hyperinflation of the dollar is upon us.”

original Source

Interview Between Alasdair Macleod & James Turk

In this video, James Turk interviews Alasdair Macleod, Founder and Proprietor of http://financeandeconomics.org. Alasdair explains why he started his blog almost 2 years ago. 

His aim is to inform educated people about finance and economics, with an angle towards sound money. During the interview he looks back on his active career in the UK and how he acquired the knowledge he has. They also discuss the collapse of the Slater Walker bank in 1975 in the UK and the preceding boom-bust period. There are clear comparisons to today's dangerous situation, where governments try to control the situation with more money and credit. According to Alasdair governments got themselves in a cycle of money and credit production where they can't get off from. 

Central bankers and politicians make the wrong decisions. Statistics like GDP and inflation numbers are being misrepresented. Alasdair refers to gold and silver as the only sound money out there. He is very bearish on paper currencies. He elaborates on the COMEX as well as on the huge short positions taken by central banks and bullion banks. The video was recorded in London in advance of the Cheviot Sound Money conference held the day after.

The Social Security Disaster

The average retirement age is measured in spans of five years for accuracy.

Of the people that are retiring, how many are completely or semi-dependent on the government? Social Security is a very sore subject for many. People have been working for decades, only to see FICA taxes taken away from their paychecks with the promise of a plan that would take care of their retirement needs.

U.S. Social Security is the largest government program in the history of the world—and it has enormous liabilities to those taxpayers who have paid into it.  According to the Social Security Administration, over the next 75 years, Social Security is underfunded by $5.4 trillion—meaning that Social Security has made promises that exceed its assets by the size of Japan’s entire economy.

The year 2010 was the date set as the tipping point for Social Security; the point when Social Security would take in less than it spent, making it cash flow-negative and forcing Social Security to borrow from Congress, which has already spent the original trust fund that Social Security had build up. If this doesn’t make sense don’t worry—it is the equivalent of you writing yourself a check and hoping that it increases your overall assets. It makes no sense whatsoever, but the government will try it anyway.

Social security payouts have grown faster than FICA tax revenues and are now  burdening our economy. How much longer can this flawed system last?

There are two possibilities for saving the Social Security system and that is either to increase taxes or to reduce benefits. Is increasing taxes really an option for an economy struggling with immense amounts of debt and such high unemployment?

Reducing benefits is as big a political issue as there, with entrenched political agendas battling over incremental changes instead of the dramatic changes necessary to remake Social Security.

As life expectancy increases people will live longer, demanding benefits over a longer and longer period.  

As the graph shows the U.S. retirement age has fallen over the years in the United States. But because of our recent Financial Crisis and the monetary issues around the corner, huge numbers of people are going to have to work through their golden years.

While Social Security is underfunded by $5.4 trillion over the next 75 years, it is underfunded by $16 trillion (larger than the size of the U.S. economy) over the long term. Can the flawed system be revitalized or will Social Security be the thing that brings this once great nation down?

Original Source

Gerald Celente on the Financial Sense News Hour 08 Feb 2011

Gold to the Moon

How can an investor take an educated guess about how high the price of gold could go?  Here is one thing to keep a close eye on.

As reflected in the graph, the green line is the monetary base, which floated slightly over the value of gold reserves until the Bretton Woods system ended in 1971.

The graph shows that just prior to 1971 the monetary base started to pull away from the price of gold as more currency was borrowed into existence with no more gold to back it up.
In 1971 Richard Nixon deceived the world by stating that the U.S. would no longer redeem gold for currency but would instead back the dollar with the full faith of the United States and its economy. This point marks where every economy across the world allowed a huge monetary mistake to happen.

Then look at what happened, with the price of gold unleashed, the will of the public and the free markets drove the price of gold to where the value of the United States gold reserves accounted for the value of the monetary base and revolving credit in 1980.  This was a very similar re-enactment of a similar event in 1934 and it had just happened again.



We believe this same mechanism is in process again... but look at the scale this time!
So, what value does this graph portray in 2011?

The graph demonstrates that the current value of the United States gold reserves, the monetary base and revolving credit are nowhere near each other once again.

In order this to correct itself like it has in the past, the current value of the United States' gold reserves has to meet the monetary base and revolving outstanding credit like it did in 1980.  We are a long way away from that today with gold dirt cheap at approximately $1360 an ounce.

This could mean three possible outcomes: the monetary base and revolving credit are going to drop, or the price of gold is going to increase substantially, or they will meet somewhere in the middle. However, as the Federal Reserve is continuously printing money with quantitative easing programs, or what we like to call QE to infinity, it makes it highly likely that the price of gold will only continue to rise over the long haul, but either way if history repeats (as it sure appears to be doing) the purchasing power of the precious metals should continue to explode over the long term.

How should the WORLD react in this time of horrible monetary inflation?
You have 2 options:

Option (A): Sit back and do nothing and watch your savings vanish away.
Option (B): Invest knowing more inflation is on its way and actually benefit from the inevitable outcome of monetary debasement.

As investors here at GoldSilver.com, we are presented with the Greatest Wealth Transfer of all times thanks to the Federal Reserve and its actions. We may not be able to change the system and its devious ways, but we can prepare for its inevitable end with physical silver and gold bullion helping us to transfer our wealth into a new brighter day.
Original Source

Keiser Report: Fiat Food

This time Max Keiser and co-host, Stacy Herbert, talk about fake rice and real inequality and about a 'new model' that looks a whole lot like an old model called capitalism. In the second half of the show, Max talks to Pierre Jovanovic, author "Blythe Masters," about credit default swaps, the Queen of commodities and Marie Antoinette.

Eric Sprott: Silver to Outperform Gold in 2011

Silver promises to become the next big buzzword among investors in 2011 and beyond, according to one of the investment industry's most prescient and successful experts on precious metals.

Eric Sprott is the founder of the Toronto-based investment firm, Sprott Asset Management LP. His renowned hedge fund, Sprott Hedge Fund LP, is heavily weighted in precious metals and has generated an estimated 23% annualized return over the past decade. Other similarly oriented funds under his stewardship have also been stellar performers in recent years.

He's now so bullish on silver that he launched the $575 million Sprott Physical Silver Trust in November of last year as he believes that: "Silver will be the investment of the decade."

"I think that silver could easily get to $50 this year," he tells BNWnews.ca.

This all bodes especially well for publicly traded companies that are already mining silver, he says. Likewise for ones that are developing primary silver deposits or gold deposits with plenty of silver as a byproduct.

"If the price of silver continues to go up, silver stocks are going to perform even better," Sprott adds.

Meanwhile, Sprott says the big catalyst for surging silver prices in the coming years will be exponentially increasing investment demand, which is already beginning to overwhelm existing silver supplies. The mining industry only produces around 800 tonnes of silver per annum. This is a relatively inelastic supply, regardless of silver prices, he adds.

As household investors are becoming increasingly jittery about the debasement of the U.S. dollar and other major currencies, they are loading up in record numbers on silver bars, coins and silver-denominated exchange traded funds, Sprott says.

However, there's also a quantum shift in investment demand taking place among big players in the precious metals market, including India (which is aiming to increase its imports by about 77 million ounces per annum), and of course China.

"China's net imports of silver were 112 million ounces last year. In 2005, they were net exporters of 100 million ounces," he says.

"That's a 200 million ounce shift in an 800 million ounce annual market that seldom ever grows because production hardly ever goes up. So where's it all going to come from? We don't know."

In fact, silver promises to outshine gold over the coming years, Sprott says. "Silver is the poor man's gold. Gold has had a great run for the past 11 years. But I absolutely believe that silver will outperform gold this year. Currently, there's more investment dollars going into silver than into gold."

Such a game-changing scenario should recalibrate the gold to silver pricing ratio in silver's favor, thereby eventually restoring it to its traditional level of about 16 to 1, he says. "It's the easiest call of all time." 

"Silver as a currency always traded in a ratio of around 16 to 1 compared to gold, when it was a currency in the U.S. and the U.K. The current ratio is 48 to 1. If we go back to a 16 to 1 ratio, the implied price for silver would be $85.62 (per ounce)." he adds.

"On that basis, if gold goes to $1,600, then that would value silver at $100. And we certainly think that gold is going to $1,600. In fact, I'm willing to bet that this ratio will overshoot on the downside. It might even get to 10 to one."

The only reason why silver is still trading at a 48 to 1 ratio to bullion's spot price is that its price is being "manipulated" by big banks, Sprott says. That's because they don't want precious metals to become a popular alternative currency to Fiat money (currencies that are not backed by hard assets).

"Then there's also a huge short position out there on silver," he adds.

But time is on silver's side, he says, as the sovereignty debt crisis deepens in Europe and a continued policy of quantitative easing in the U.S. continues to undermine the value of the greenback.

Marc Davis
February 8, 2011
VANCOUVER B.C. (WWW.BNWNEWS.CA )