Posted at 6:30 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

This article puts focus on the shocking exposure of a NASDAQ trading house’s Boss running a massive Ponzi scheme.

I firmly believe the scams in gold, once disclosed, are going to set your hair on fire.

These will take the form of no gold gold certificates, paper gold rather than bullion confirmed as bullion to simply taking your money, sending you a confirmation without anything whatsoever behind it.

Dr. Fekete’s warning of gold scams don’t even scratch the surface of what I assure you will surface.

Just because someone says or writes what you want to believe, don’t for a second assume the author has ethics when there is a request for your money or an offering of a gold/silver deal.

Bernie Madoff’s alleged $50bn fraud may be just a foretaste of what’s to come
First come the losses and the stupidities committed by bankers working for their own self-interest.
By Rob Cox, breakingviews.com
Last Updated: 5:47PM GMT 12 Dec 2008

Then come the rogue traders, who are unable to ‘fess up on market bets gone wrong. The last to arrive is the "bezzle".

That was economist JK Galbraith’s word for the outright frauds built up when markets are good. These can be kept hidden for as long as the lies hold up. But the truth will out.

The first big outing in the current financial crisis is an alleged scam that may cost investors as much as $50bn. It was committed, according to a US criminal indictment, by a highly respected member of the financial community, a one-time Nasdaq executive and a legendary trader in New York.

Bernard Madoff is accused of orchestrating a multi-year fraud in which generous returns were manufactured for sophisticated investors. The technique was the usual Ponzi scheme. Old investors were paid off by the new funds lured into to Madoff’s art-laden New York headquarters.

Losses of $50bn would probably make Madoff the biggest single fraudster in history. But in fairness, such an accomplishment shouldn’t come as a great surprise. In Galbraith’s model of a speculative cycle, good times spawn the excess and corruption which eventually bring them to end. The last good times were especially profitable, fertilising the ground for especially large frauds.

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Jim Sinclair’s Commentary

Scotty beam me up please.

This world is coated with abhorrent stinking slime, and is terminally disintegrating.

Fed Refuses to Disclose Recipients of $2 Trillion in Lending
By Mark Pittman

Dec. 12 (Bloomberg) — The Federal Reserve refused a request by Bloomberg News to disclose the recipients of more than $2 trillion of emergency loans from U.S. taxpayers and the assets the central bank is accepting as collateral.

Bloomberg filed suit Nov. 7 under the U.S. Freedom of Information Act requesting details about the terms of 11 Fed lending programs, most created during the deepest financial crisis since the Great Depression.

The Fed responded Dec. 8, saying it’s allowed to withhold internal memos as well as information about trade secrets and commercial information. The institution confirmed that a records search found 231 pages of documents pertaining to some of the requests.

“If they told us what they held, we would know the potential losses that the government may take and that’s what they don’t want us to know,” said Carlos Mendez, who oversees about $14 billion at New York-based ICP Capital LLC.

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Jim Sinclair’s Commentary

I always suspected this guy was hiding something. Actually this is a serious article that nails the foundational problem now being thoroughly assaulted by instant karma.

Blame the Bailouts on Mister Rogers?
By Elizabeth MacDonald

mr_rogers1-150x150 - 20081212_175403 Mister Fred Rogers, the children’s TV star, who, beginning in 1968, started every show telling us that we were “special” just the way we were.

Blame all of those preening child-rearing experts who encouraged an excruciatingly costly culture of entitlement, a culture of narcissism, of excessive self-righteous self-indulgence, where generations grew up believing they were entitled to follow their own codes of conduct, a chronic “me first, I get what’s mine first” attitude–to the point where one survey shows one in three teenagers expect to be famous.

Better yet, blame the bailouts on everyone who forgot the most important part of the Mister Rogers’ Neighborhood show, a willful ignorance that has led to a mass dereliction of civic duty, of civic vision–Rogers’ emphasis on “neighborhood.”

Blame it on a post World War II culture of “me-ism,” of individuality over community, of “I’m special, you owe me,” a culture of anything goes in this Age of Aquarius.

A mindset which has resulted in more than half of the country’s annual $14 tn in GDP, $7.8 tn, a quantum leap in fiscal debt, now being committed to bail out the economy.

Concrete proof that equal opportunity means everyone will have a fair chance at being incompetent, to quote Laurence J. Peter, author of the “Peter Principle.”

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Jim Sinclair’s Commentary

25 down, 2075+ to go.

Georgia, Texas Banks Seized as Foreclosures Push Failures to 25
By Margaret Chadbourn and Alison Vekshin

Dec. 12 (Bloomberg) — Georgia and Texas banks with $544 million in deposits were closed by state regulators today, pushing the toll of failures to 25 as mortgage delinquencies and home foreclosures surge to records during a deepening recession.

Haven Trust Bank of Duluth, Georgia, was seized and sold by the Federal Deposit Insurance Corp. to BB&T Corp. of Winston- Salem, North Carolina, which will reopen four offices northeast of Atlanta on Dec. 15 as branches, the FDIC said. Sanderson State Bank was shut by Texas regulators and its assets were sold to Pecos County State Bank of Fort Stockton, which will open Sanderson’s southwest Texas office as a branch on Dec. 15.

Acquisitions by BB&T, the fifth-best performing stock in the KBW Bank Index this year, and Pecos County were “the ‘least costly’ resolution for the FDIC’s deposit insurance fund,” the Washington-based FDIC said in a statement.

Regulators have closed the most banks in 15 years, and the annual total now exceeds the combined toll for the previous six years, with the collapses of Washington Mutual Inc. and IndyMac Bancorp Inc. among the biggest in history. The U.S. entered a recession a year ago and President-elect Barack Obama on Dec. 7 said the slump will worsen before a recovery begins.

BB&T will buy about $55 million of Haven’s $572 million in assets and pay $112,000 for the failed bank’s $515 million in deposits, the FDIC said. The agency will retain the remaining assets “for later disposition.” The deposit insurance fund, supported by fees on insured banks, will pay an estimated $200 million, the agency said.

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Jim Sinclair’s Commentary

This might make India feel good but it is a terrible implications for the world and serious risks for Israel.

You can be sure if there is an Armageddon it lives in Pakistan.

Israeli experts help India prepare commando raids into Pakistan
DEBKAfile Exclusive Report
December 6, 2008, 11:45 AM (GMT+02:00)

New Delhi has asked Jerusalem to assist in the operational and intelligence planning of Indian commando cross-border strikes against Islamist terrorist havens in Pakistan – including al Qaeda, Indian counter-terror sources report.

The Indian government’s decision to embark on these in-and-out incursions in reprisal for the Mumbai outrage of Nov. 26-29 was first revealed in DEBKA-Net-Weekly 375 published Dec. 4 (Indian Retaliatory Raids inside Pakistan Impending).

DEBKAfile adds: Israel is willing to help the Indians carry out punitive forays into Pakistan because it has its own scores to settle for the brutal murder of six Israelis in Mumbai’s Chabad Center by the Islamist terrorists and for the Pakistani Inter-Services Intelligence (ISI) agency’s hand in the atrocity.

Security sources in New Delhi disclosed Saturday, Dec. 6, that ISI officers actively trained the terrorists on military lines and selected their targets, including two big hotels and the Jewish-Israeli center.

Indian sources told DEBKAfile that Israel was asked for assistance because its special undercover forces were long seasoned in plotting and executing reprisals for terrorist attacks; above all, they were expert in getting away after covert operations without leaving a trail. New Delhi wants its commando operations in Pakistan to be stealthy and focused, and does not propose to admit responsibility.

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Jim Sinclair’s Commentary

Most? I would say all. This is because of the interdependency of every regional bank and regional area on the spider web of financial products spun by the money center and investment banks, all without limit or any concern of the consequences to others.

Jim Rogers calls most big U.S. banks "bankrupt"
Thu Dec 11, 2008 1:53pm EST
By Jonathan Stempel

NEW YORK (Reuters) – Jim Rogers, one of the world’s most prominent international investors, on Thursday called most of the largest U.S. banks "totally bankrupt," and said government efforts to fix the sector are wrongheaded.

Speaking by teleconference at the Reuters Investment Outlook 2009 Summit, the co-founder with George Soros of the Quantum Fund, said the government’s $700 billion rescue package for the sector doesn’t address how banks manage their balance sheets, and instead rewards weaker lenders with new capital.

Dozens of banks have won infusions from the Troubled Asset Relief Program created in early October, just after the Sept 15 bankruptcy filing by Lehman Brothers Holdings Inc (LEHMQ.PK: Quote, Profile, Research, Stock Buzz). Some of the funds are being used for acquisitions.

"Without giving specific names, most of the significant American banks, the larger banks, are bankrupt, totally bankrupt," said Rogers, who is now a private investor.

"What is outrageous economically and is outrageous morally is that normally in times like this, people who are competent and who saw it coming and who kept their powder dry go and take over the assets from the incompetent," he said. "What’s happening this time is that the government is taking the assets from the competent people and giving them to the incompetent people and saying, now you can compete with the competent people. It is horrible economics."

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Posted at 3:54 PM (CST) by & filed under Guild Investment, Jim's Mailbox.

Dear Jim,

The president of Guild Investment Management, Inc. Tony Danaher, forwarded this to me today.

David Rosenberg is Merrill Lynch’s chief US economist.

David Rosenberg had some interesting comments: "Port activity in the United States is imploding — inbound cargo at the Port of L.A. slipped 9.7% YoY and was down 13.6% at Long Beach; outbound shipments were even weaker in a sign of ever-weakening domestic demand abroad with traffic down 12.8% Year on Year at the Port of LA and -23.6% at Long Beach. And get this — the only activity is in empty vessels — up 0.2% Year on Year in November. Global recessions beget global trade protectionism, which in turn begets global geopolitical strains, which finally begets investor buying of "safe havens" like gold (which looks on the precipice of breaking out to the upside again).

Respectfully yours,
Monty Guild
www.GuildInvestment.com

Posted at 3:53 PM (CST) by & filed under General Editorial, Guild Investment.

"Nothing will unnerve the paper gold shorts more quickly and do more to undercut their confidence than to strip them of the real metal and force them to come up with more hard gold bullion to make good on deliveries. "Stand and Deliver or Go Home" should be the rallying cry of the gold longs to the paper gold shorts." –Trader Dan Norcini

Dear CIGAs,

Hey all of you Americans. This movie is coming soon to a country near you. Except the headline will read "People Hoard Gold, Jewelry and Other Assets as US Dollar Plunges." In my opinion, it is just a matter of time.

Respectfully yours,
Monty Guild

Russians Buy Jewelry, Hoard Dollars as Ruble Plunges
By Emma O’Brien and William Mauldin

Dec. 11 (Bloomberg) — Moscow resident Tima Kulikov banked on the full faith and credit of the U.S. government, not the Kremlin, when he sold his biggest asset for cash.

The 31-year-old director of a social networking Web site initially agreed to sell his apartment for rubles, then cringed at the thought of the currency weakening as it sat in a lockbox pending settlement of the contract. It wasn’t until the buyer showed up with $250,000 stacked in old mobile-phone boxes and stuffed in his pockets that Kulikov closed the deal.

“The exchange rate we agreed on wasn’t great, but I did it because the money’s going to lie there for a month,” Kulikov said. “Put it this way, the ruble’s more likely to have problems than the dollar.”

Russians are shifting their cash into foreign currencies and buying things they don’t need as the economy stalls and the central bank weakens its defense of the ruble, signaling a larger devaluation may be on the way. The currency has fallen 16 percent against the dollar since August, when Russia’s invasion of neighboring Georgia helped spur investors to pull almost $200 billion out of the country, according to BNP Paribas SA.

The central bank today expanded the ruble’s trading band against a basket of dollars and euros, allowing it to drop 0.8 percent, said a spokesman who declined to be identified on bank policy.

With the specter of the 1998 debt default and devaluation in mind, Russians withdrew 355 billion rubles ($13 billion), or 6 percent of all savings, from their accounts in October, the most since the central bank started posting the data two years ago. Foreign-currency deposits rose 11 percent.

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Posted at 11:03 PM (CST) by & filed under Trader Dan Norcini.

Dear Friends,

Once again another week passes and once again foreign Central Banks unload US Agency debt. This week they dropped another $17 billion worth, bringing the total of agency debt that they have unloaded since the credit crisis began in July of this year to an almost unfathomable $138 billion.

Were it not for the fact that they were buying US Treasuries in its place apparently, the bottom would have fallen out of the Dollar even sooner, repatriation from abroad notwithstanding. Look at the chart of the Treasury holdings and ask yourself if it the least bit difficult to see why we have a bubble forming in the Treasury market.

Click here to view this week’s Custodial Holdings charts with commentary from Trader Dan Norcini

Posted at 7:20 PM (CST) by & filed under Jim's Mailbox.

Dear Monty and Dan,

I think this is very important. An ex-Fed bigwig sees the solution as revaluing the gold on the books. I have not seen this commented on and thought it would be of interest.

The Gold comment is about 8 minutes into the video.

Click here to view the video…

He says not to worry about the Fed’s balance sheet because they can just revalue their "gold certificates." This comment is at min. 11:20

This is very interesting coming from an ex-Fed big wig. Gold revaluation is beginning to be discussed…

Thanks,
CIGA Andrew S.

Dear Dan and Monty,

This video has good things in it and not only on gold. It should be reviewed by serious students and investors in gold and the US dollar from the moment it starts until the very end.

Think "Federal Reserve Gold Certificate Ratio, Revitalized and Modernized," and not tied to interest rates but rather to a measure of international liquidity. This would require gold be re-valued to market prices.

It seems to me we will draw closer and closer to a US dollar FRGCR backstop being called on as we near the .62 to .52 range on the USDX.

Respectfully yours,
Jim

Jim,

For your information..

Global interest cuts:
Korea cuts rates 100bps to 3%, 50bps was expected;
Taiwan cuts rates 75bps to 2%, 50bps was expected;
South Africa cuts rates 50bps to 11.50%, expected;
Switzerland cut rates 50bps to 0.50%, expected;

Anthony R. Danaher
www.guildinvestment.com

Jim,

I own several warehouse receipts for numbered allocated silver bars but am concerned after reading Dr. Fekete’s recent warning:

"Item 6: Even allocated and segregated metal account gold is not safe. The temptation on the account providers to default will be irresistible. They are not going to release the gold until expressly ordered by the courts, and will make sure that no gold will be left by then."

Do you believe that this is correct and also true for silver? If so, what safe storage options are there for relatively bulky silver in the United States?

Your insights on storage options for precious metals and degrees of safety would be greatly appreciated.

CIGA Ron M.

Dear Ron,

This week on www.jsmineset.com I gave you a total review of how to take delivery, how to transport precious metals, how to store precious metals safely and even provided a person to help you do it.

My reasons are different from Dr. Fekete’s take, but the remedy is the same.

All the best,
Jim

Click here to read the original article…

Posted at 3:37 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

Are you tired of those Gold banks that specialize in stealing your gold price lollypop on a daily basis, as they did once again today? I am.

There is only one way that we can permanently corral these costly nuisances.

If you can afford to buy 100 ounces of gold, buy it as the near trading month future on the Comex and then take delivery. Please move your gold bar or bars out of the Comex warehouse. You will have no problem reselling a bar like a Johnson Matthey or some other major refiner registered serial numbered bar.

The Comex requirement of re-assay before sale is simply a means to dissuade you from removing your gold from their warehouse. It only applies to sales on the Comex.

The entire process can be handled at every point with you by CIGA JB Slear. He has promised not to solicit you but only to serve you.

CIGA JB Slear can be reached at the following:

Fort Wealth Trading Co. LLC
www.FortWealth.com
866-443-0868 ext 104
Please for all of us, and certainly for your best interest, do the necessary.

There is no other means of defense against these grinches. It is the only way to stop our pockets being picked daily as the Comex sees itself being moved toward a cash exchange by the longs.

If you have the financial capacity to do this and do not then do not moan when these knuckle dragging apes knock a few hundred dollars off gold from time to time while the physical market is devoid of gold due to massive demand (like now).

Comex Gold Surges As Dollar Falls, Oil Soars
Thu, Dec 11 2008, 19:38 GMT
By Allen Sykora

Gold futures hit a seven-week high Thursday as the dollar tumbled, crude oil rallied sharply and investors turned to the metal as an alternative to low or non-existent yields in the Treasury markets, analysts said.

Nevertheless, gold stalled around chart resistance and some profit-taking set in after a sharp run-up in recent days.

February gold rose $17.80 to $826.60 an ounce on the Comex division of the New York Mercantile Exchange.

"We broke some major technical levels on the dollar index, which is going to be supportive for gold going forward," said Rob Kurzatkowski, futures analyst with optionsXpress.

The dollar index fell as far as 83.282, its weakest level since Oct. 30. And the euro hit a high of $1.3403 that was its strongest level against the greenback since Oct. 20. Traders often turn to gold as a hedge against dollar weakness.

"The dollar looks like it has broken out of its trading range and we may have seen a top in the dollar for a while," said Bill O’Neill, one of the principals with LOGIC Advisors.

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Jim Sinclair’s Commentary

The Comex gold bear manipulation must be stopped. Demand today in the physical market was immense yet the Comex knocked $20 off the gain.

Fear triggers gold shortage, drives US treasury yields below zero
By Ambrose Evans-Pritchard
Last Updated: 9:26AM GMT 11 Dec 2008

The investor search for a safe places to store wealth as the financial crisis shakes faith in the system has caused extraordinary moves in global markets over recent days, driving the yield on 3-month US Treasuries below zero and causing a rush for physical holdings of gold.

"It is sheer unmitigated fear: even institutions are looking for mattresses to put their money until the end of the year," said Marc Ostwald, a bond expert at Insinger de Beaufort.

The rush for the safety of US Treasury debt is playing havoc with America’s $7 trillion "repo" market used to manage liquidity. Fund managers are hoovering up any safe asset they can find because they do not know what the world will look like in January when normal business picks up again. Three-month bills fell to minus 0.01pc on Tuesday, implying that funds are paying the US government for protection.

"You know the US Treasury will give you your money back, but your bank might not be there," said Paul Ashworth, US economist for Capital Economics.

The gold markets have also been in turmoil. Traders say it has become extremely hard to buy the physical metal in the form of bars or coins. The market has moved into "backwardation" for the first time, meaning that futures contracts are now priced more cheaply than actual bullion prices.

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Jim Sinclair’s Commentary

This is a global event caused by a singular scam. That scam is OTC derivatives. OTC derivatives have turned a normal economic correction into a global disaster.

Financial life has met its global killer and will not survive.

Until the focus of fixing looks at OTC derivatives as the only culprit, no solution can be anticipated ever.

The longer it takes for derivates to take the problem limelight, the less chance there is for anyone to do anything but sit back and watch the world implode.

Globally at the instant this started, all OTC derivative of all kinds should have been drafted into a Resurrection Trust, taking the profits from the profit makers and loses from the loss makers.

All the derivative makers should have been arrested and their assets seized. Those entire assets would be credited to the Resurrection Trust.

All tax havens and bank secrecy states would have to cooperate only where the OTC derivative culprits are concerned or their banks would get no part of the pie. Actually if you had done that the math would have worked.

The only problem with this plan is then there would not be jails big enough. The District of Columbia would be a wasteland and country clubs would have been decimated. The Columbus Club would be empty and there would be no more bridge games at Jimmy’s condominium mansion.

BOJ’s Nishimura Sees No End to Financial Turmoil (Update1)
By Mayumi Otsuma

Dec. 10 (Bloomberg) — Bank of Japan Deputy Governor Kiyohiko Nishimura said there’s no end in sight to the global financial crisis that began with the collapse of the U.S. home mortgage industry last year.

“The turmoil in financial markets and the financial system, which was triggered by the U.S. subprime loan problems, continues to spread worldwide,” Nishimura said in a speech in Tokyo today. He said Japanese banks are becoming more wary of lending to small businesses as the economy stagnates.

The credit crunch in the U.S. and Europe has spread to Japan, as investors grow reluctant to lend cash on concern companies won’t be able to repay debt. Japan’s first recession since 2001 is deepening as companies including Sony Corp. and Toyota Motor Corp. cut production, jobs and spending.

“With the global economic slowdown prolonging, it’s becoming increasingly clear that Japan is slipping into a severe recession,” said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. “The Bank of Japan will be forced to take more policy action eventually.”

Nishimura said that while being more prudent about lending may seem reasonable to individual banks, if they all hoard cash at the same time that would worsen the economic slowdown.

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Jim Sinclair’s Commentary

This is a global event caused by a singular scam. That scam is OTC derivatives. OTC derivatives have turned a normal economic correction into an irreversible global disaster.

Heavy withdrawals hit Gaisano bank as more banks close

CEBU CITY — Alarmed by the bank holidays declared by rural banks under the Legacy Group, depositors have flocked to a Gaisano-owned bank since Wednesday in a bid to withdraw their money.

Three of the seven branches of the Rural Bank of Subangdaku (RBS) in Metro Cebu and one in Dumaguete City in Negros Oriental suffered from heavy withdrawals since Wednesday, said spokesperson and administrative manager Maritess Obenza.

Despite this, she assured that they had no plan to declare a bank holiday in any of the affected branches.

"The board (of directors) is still meeting on how to address the withdrawals although we have contained these because we were able to explain to our depositors and convince them that there’s no need to panic," Ms. Obenza said.

RBS depositors panicked after rural banks under the Legacy Group declared bank holidays. The affected RBS branches are located near the Legacy banks.

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Jim Sinclair’s Commentary

Here it comes on a global basis. That is Quantitative Easing plus Fiscal Stimulation at the same time. QE means saturation bombing the world with newly minted money.

U.K. May Expand Toolkit to Halt Recession Slide (Update3)
By Gonzalo Vina

Dec. 10 (Bloomberg) — The U.K. government and central bank are considering plans to pump billions of pounds into the economy as the bank rescue package and the lowest interest rates since 1951 fail to halt a slide into recession.

The Bank of England and the Treasury are weighing a strategy known as “quantitative easing” where authorities increase money supply to boost bank reserves. The initiative was last used by Japan at the start of the decade.

Prime Minister Gordon Brown’s government is frustrated that banks are rationing credit after tapping the Treasury for cash and guarantees to prop up their own balance sheets. Policy makers both in the U.K. and the U.S. Federal Reserve are looking beyond traditional interest-rate tools to revive the economy.

“The Bank of England has to step up to the plate,” said Neil Mackinnon, chief economist at ECU Group Plc in London. “They are thinking hard about quantitative easing. But they probably won’t announce anything until the next quarter, and they’ll follow the Fed.”

A U.K. Treasury spokesman said it is prudent for the government and the central bank to consider all options as the Bank of England’s benchmark lending rate approaches zero. He denied that a decision has been made and declined to be identified in line with government policy.

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The unthinkable has happened
Posted by Tracy Alloway on Nov 10 15:49.

Just two weeks after Deutsche Bank issued a note discussing the possibility of Japan-style quantitative easing in the US, it’s happening.

DB’s previous note was titled “The unthinkable.” This one is “Losing control of monetary policy.” From the note:

We are already close to a zero interest rate policy and quantitative easing, given the recent behavior of the effective fed funds rate and reserve balances.

Monetary policy has become more stimulative than indicated by the fed funds target, implying increasing loss of control of monetary policy.

FT Alphaville discussed most of the ins and outs of this last week. Deutsche Bank adds more meat to the argument today:

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Jim Sinclair’s Commentary

I am much too conservative at $1650. I believe Alf Fields has nailed it. Kudos to Alf.

RETURN TO $11-$13 SILVER?
Trend of gold as store of wealth ‘may start to snowball’–ScotiaMocatta
Deep-rooted global financial problems will escalate the demand for gold as a safe haven.
Author: Dorothy Kosich
Posted:  Wednesday , 10 Dec 2008

RENO, NV – In its December Metals Matters report, ScotiaMocatta suggests that global financial problems "seem so deep rooted that demand for gold as a safe haven is expected to escalate."

On silver ScotiaMocatta advised, "Investors remain key to silver’s fate, but its monetary attributes should keep investment demand strong."

Their analysis also noted that low PGM prices, especially for palladium, are "likely to rebalance the PGM markets before too long-thus providing long term investment opportunities.

Gold

Although ScotiaMocatta remains bullish for gold "we are concerned that gold prices are not considerably higher given the current bullish climate. "

"We see two possible reasons for this. Firstly, funds and investors have been in liquidation mode and industrial commodities have been hard hit. As gold is a component in commodity baskets, which were popular investment vehicles in the commodity boom, gold has been sold as investors have sold their commodities. "

"Secondly, gold has traditionally been bought for a ‘rainy day’ and many hedge funds and other institutional investors have indeed been having a ‘rainy day,’ according to ScotiaMocatta. However, as central banks’ measures to tackle the financial rout start to work, the level of redemptions is likely to slow and that should provide less selling pressure in gold."

ScotiaMocatta’s analysis revealed that gold lease rates have been soaring and "likely to put an end to the gold carry trade, at least for a while. With interest rates falling, the profit margin on gold carry trades has diminished significantly. This means that as former carry traders come to the end of their term, gold will be withdrawn from the system and returned to central banks."

"As carry trades are closed the pressure on the spot market will switch from selling pressure to buying pressure," they advised.

If people lose faith in the financial system and their currencies, ScotiaMocatta forecasts "the growing trend in wanting some gold as (a) store of wealth may start to snowball."

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Posted at 3:36 PM (CST) by & filed under Jim's Mailbox.

Dear Jim,

People have been incredibly slow to look ahead but the announcement today of a budget deficit of over $180 billion for the month of November 2008 (one month), seems to have spurred them to action. They have been selling the dollar and buying gold and iron ore (which benefits the infrastructure spending in China and the US). By the way, 12 times $180 billion is $ 2.16 trillion. That amount sounds to me like a good guess for the next 12 month’s budget deficit.

Respectfully yours,
Monty Guild

Fed Weighs Debt Sales of Its Own
Move Presents Challenges: ‘Very Close Cousins to Existing Treasury Bills’
By JON HILSENRATH and DAMIAN PALETTA

The Federal Reserve is considering issuing its own debt for the first time, a move that would give the central bank additional flexibility as it tries to stabilize rocky financial markets.

Government debt issuance is largely the province of the Treasury Department, and the Fed already can print as much money as it wants. But as the credit crisis drags on and the economy suffers from recession, Fed officials are looking broadly for new financial tools.

Fed officials have approached Congress about the concept, which could include issuing bills or some other form of debt, according to people familiar with the matter.

It isn’t known whether these preliminary discussions will result in a formal proposal or Fed action. One hurdle: The Federal Reserve Act doesn’t explicitly permit the Fed to issue notes beyond currency.

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