JBP

Why Gold Enthusiasm Is 'Cool' Again

I mostly agree with your comments which go hand in hand with the thoughts of Jim Rogers. Jim thinks gold could fall back down to the 700's if the IMF starts selling some of their gold.

Rising Long-Term Interest Rates Go Hand in Hand with the Expanding Economy

On April 16, U.S. President Obama wrote a letter to congressional leadership seeking support for the U.S. government to loan the International Monetary Fund $100 billion. This is part of a plan for the IMF to expand its New Arrangements to Borrow (NAB) program from $50 billion to $500 billion.

President Obama is portraying this loan as an investment rather than an expenditure when he stated in the letter, "Such participation effectively represents an exchange of assets rather than a budgetary expenditure, and it will not result in budgetary outlays or any increase in the deficit. That is because when the United States transfers dollars to the IMF under the NAB, the United States receives in exchange another monetary asset in the form of a liquid, interest-bearing claim on the IMF, which is backed by the IMF's strong financial position, including its significant holdings of gold."

The supposed purpose of the increase in the NAB is to help combat worldwide financial crises. The United States would provide 20 percent of the assets for this purpose. China has already committed to lend $40 billion.

There is a small chance that the difficult-to-understand language in President Obama's letter could be taken at face value.

But, I don't really think so. There are a lot of implications to this proposed loan beyond what appears on the surface.

There is growing pressure on the IMF to actually sell some or all of its supposed gold holdings. If this pressure becomes strong enough that action is taken, there are a number of potential problems that could be exposed:



" The IMF does not physically hold the gold. It has been pledged by member nations who, in theory, have delivered the gold to one of four countries designated as depositories. The United States and United Kingdom are two of the designated depositories. It is entirely possible that one or more nations might, if called to turn over their gold, default on delivering their gold commitment.

" Although the IMF tries to pretend that it audits the gold holdings, it then immediately contradicts itself by reporting that holdings in depositories are not audited by the IMF.

" There is significant suspicion that some of the gold pledged to the IMF has been leased. If the IMF were to try to sell it, that could force the recall of some gold leases.

" It is also possible that some of the gold pledged to the IMF has conflicting ownership claims.

" The IMF only theoretically has 3,217 tons of gold, which at $920 gold spot is worth only $95 billion. Where would be the collateral for the other $400 billion of planned borrowings?



I'm not saying that there is any outright proof of the existence of any of these above problems. However, when the Gold Anti-Trust Action Committee made multiple attempts to clarify the nature of IMF gold holdings. The IMF's answers simply did not respond to the questions asked by GATA. If there were no problems with any of these issues, I would have expected the IMF to make straight statements to that effect.

Another implication is that the U.S. government is holding the gold it has pledged to the IMF as part of the collateral for the "loan." At the most extreme, this may be a sneaky way for the U.S. government to accomplish two goals - increasing its gold position by reducing its gold liability to the IMF and increasing its physical reserves, and to latch on to IMF gold rather than let China purchase all of it. Under these scenarios, the "loan" would never be repaid in U.S. dollars.

If the U.S. government is really trying to find a way to acquire more gold, and trying to do so in a way that the public does not know about, the implication is that, at today's levels, the U.S. dollar is significantly overvalued. Also implied is that gold is underpriced today.

The known fact is that President Obama has asked congressional leaders to pass legislation to enable this $100 billion loan. The rest is speculation as to what is really occurring, when placed in the context of all the other global financial calamities.

Don't Kick Yourself Later for Not Buying Gold and Silver Now

Anyone heard from CLH? I'm wondering how is DZZ trade is going?

How to Save the U.S. Economy

SWC down 30% today, ouch....

Cramer's Lightning Round - I Like Nike (10/30/08)

Cramer makes horrible calls and why people follow him is a mystery to me...

Don't Be Fooled - Inflation is Coming

Flow5-

What investment is good for stagflation as you predict?

Ignore the Hype - Gold as Currency is Dead

This author should not ever post again. I've just become dumber 4 reeding dis poast...

Don't Be Fooled - Inflation is Coming

Bofah,

One word on commodities, Asia. They were basically non-existent in the 70's and we hadn't reached peak oil at that time. World population keeps growing while commodities are being squeezed whether it's from limited sources or the high production costs to run mines. Food, cotton, etc. included. Yet, I'm glad people believe the way yo do because you have to have losers to have winners. I just think my case along with others is much more compelling than yours. This world is not coming to an end... Good luck.

Don't Be Fooled - Inflation is Coming

One independent analyst who does an excellent job tracking the growth of the money supply is John Williams. Many decades ago, money supply measures such as M2 and M3 were regularly reported. For some reason, the government stopped reporting M3, the broadest measure of the money supply, some years ago. Fortunately, the statistics and formulae needed to calculate M3 are easily available. Williams has taken up the slack and continues to calculate and publish M3.

The most fundamental monetary aggregate also calculated by Williams is called the adjusted monetary base, which measures very liquid forms of money such as bank notes and bank reserves. In his latest missive, Williams points out that the monetary base has recently exploded at a rate unprecedented in history -- up 38% year-over-year. Not even in the 1930s was so much money created so quickly. In fact, the only other time the monetary base grew anywhere near this quickly was during the build-up for World War II, when we needed a lot of cash to convert factories into making armaments.

Williams point is that all this cash is eventually going to work its way into the economy. The good news is that banks will have unprecedented amounts of money to lend, which will make them willing to lend more money at much lower rates. The Fed Funds rate will likely drop to 1% this week. Considering that banks can borrow money at the Fed Funds rate, deposit it at the Fed, and earn interest on those deposits, they will have access to virtually free money. So once the psychological impact of the current financial crisis wears off, we will be faced with an unprecedented rise in credit and monetary largess.

The next act in our economic drama could go one of two ways. One possibility is that all this new money will never find its way into the economy, because it will be overwhelmed by psychological factors, such as fear, which will make people stop borrowing and spending and plunge the world into a horrific depression accompanied by deflation.

However, I doubt that will happen. It's just not as likely as the alternative.
Instead, the most likely scenario is one of horrific inflation...

I expect a turnaround will occur in the near future in which the price of oil soars $2 for every $1 that it fell since last spring. Inflation may not hit record levels right away, but it will in time.

Prices of all commodities will soar. Gold especially...

80 Years' History of Brutal Gold Stock Corrections: How Does Today Compare?

Jolly,

M3 has been recently independently calculated at 38%. Good for gold/commodities. People will not be tired of the gold trade once it starts going higher and nothing else is because of the printing presses.

Approaching Zero

m3 is at 38%....

The Favorable Outlook for Gold

CLH is an idiot Amberger. Most people ignore his posts as he never says anything relevant and obviously, per his response above, doesn't read the posts...

Survival of the Fittest: Save Haven Investments

Mark,

Do you not see the Norilsk mine opening back up once the price increases bringing on more supply? Also, what is the play on physical palladium? Any ETF like SLV of GLD?

Some True Safe Havens Are Still (Surprisingly) Undervalued

meant to say "can't trust other people to store it for you".

Some True Safe Havens Are Still (Surprisingly) Undervalued

I guess I was confused on the trust interpretation since the author owns paper silver and puts his trust in corporations for the other plays. I thought he was going to lead into storing physical metals in his back yard since you can trust other people to store it for you. Yet, then you'd have to trust that anyone knowing where the metal is(someone needs to know incase you die) stored not to take it. You'd also put your trust in them not to tell anyone...