Jim and Dan,

Here’s today’s update:

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CIGA Stefaan

Home prices fell in August, near lows: S&P
CIGA Eric

Sluggish to falling home prices are not keeping pace with the rate of currency devaluation. This underperformance is illustrated by a declining median home price to gold ratio. The chart reveals that the bounce within the steps is not only weakening but also shortening as the price of gold accelerates.

U.S. Median Home Price (MHP) to Gold:
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Falling constant currency or “real” home prices means homebuilders struggle to remain profitable.

S&P Homebuilders (HB) to Gold Ratio:
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Prices of single-family homes fell in August, hovering around recent lows after the expiration of popular homebuyer tax credits, according a Standard & Poor’s/Case-Shiller home price report on Tuesday.

The S&P/Case Shiller composite index of 20 metropolitan areas declined 0.3 percent in August from July on a seasonally adjusted basis, as expected in a Reuters poll. The dip followed a 0.6 percent July gain.

Source: finance.yahoo.com ^[4]

More… ^[5]

TIPS Yield Goes Negative for First Time
CIGA Eric

The threat has never been deflation. Yet, that’s what they’ll continue to spin, thus, many will believe. Those that suggest that 2000-present represents a comparison to 1929-1954 ignore the key difference in the U.S. dollar between the two periods. Roosevelt, desiring inflation through currency devaluation, had to confiscate gold as it was directly tied to the dollar. Once gold was confiscated (at $20/oz), it was promptly revalued at $35/oz by executive order.

Check you pockets once. Do you find any $20 gold pieces? Any Federal Reserve notes convertible to gold?

The U.S. dollar has no anchor and can be devalued at will. On going default through inflation is the real threat.

The up turn in the TIPS to nominal long bonds reflects another reacceleration of inflation. It’s not the magnitude of the ratio but rather than direction and acceleration that matters to capital.

TIPS to Nominal Bond Ratio:
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In its bid to fight deflation, the Federal Reserve seems to be gaining some traction.

On Monday, investors snapped up government securities designed to protect against inflation, generating so much demand that the Treasury was able to sell them with a negative yield, the first time that has happened.

Source: online.wsj.com ^[7]

More… ^[8]

The Fiscal Disaster Set to Explode in December
CIGA Eric

Expect the moratorium on interest payments to be extended beyond December. The budgetary strains of the States have been and continue to be transferred to the Federal level. This transfer is increasingly supported by currency devaluation – better known as quantitative easing.

US Federal Budget (Surplus or Deficit As A % of GDP, 12 Month Moving Average) and Gold London P.M. Fixed:
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As businesses lay off workers, fewer payroll tax dollars go into each state’s unemployment insurance

Since March of 2009, 31 states have borrowed billions from the federal government to continue paying out unemployment benefits while keeping their UI trust funds from insolvency. The federal stimulus provided for a moratorium on interest payments until December, 2010. And, as you likely know, that’s a month from now.

Source: minyanville.com ^[10]

More… ^[11]