Tuesday, October 14, 2008

Some Points I noted on Falling Prices of Gold

Notes on the Falling Prices of Gold (13/10/2008)

1. According to the news on bullion, it is derived that there are shortages in the market on gold bullion.

2. The public in the US, UK, Europe and other countries are experiencing shortages of gold bullion supplies.

3. It has been clear that even banks in Germany are holding up gold, as a hedge against inflation and the devaluing of the currency.

4. Silver also suffers the same condition as gold, silver investors are required to wait for 8-10 weeks for their gold shipments to arrive.

5. Despite, the conditions mentioned in the above, we are seeing gold value slumping. According to theory of supply and demand, due to scarcity factors, the value of gold should be rising higher at the moment; however, the direct opposite is happening.

6. according to some market analyst, there is some sort of disconnect on the price of bullions.

7. Some analyst had the notion that it had to do with the COMEX. How does one buy or sell an object which is not even existed? How does someone buy something without throwing any money and has the capability to sell it and reap the profits? Yes it does sounds preposterous. Well, welcome to the futures market.

8. How the hell that physical gold which is getting scarcer to obtain and high in demand is losing value as stated by COMEX?

9. The price of paper gold as in COMEX does not reflect the true value of gold. If the prices quoted by COMEX are not the true value, what is the true value of gold compared to fiat currencies?

10. Is the true value of gold is being manipulated in order to strengthen the fiat currencies? When the fiat currencies are strengthening, it will make the fiat currencies more favorable compared to bullion.

11. Is Naked Short Selling is what has caused the decline of the value of gold? If Naked Short Selling is causing for the value of gold to decline, how does the quote by COMEX on the value of gold could be deemed as the right current value? By now, the credibility of COMEX should be questioned, and the practice of naked short selling should be banned. If short selling is a tool to prevent the price of commodities from soaring too high. There need to be some sort of regulation to prevent the activities in COMEX from distorting the true value of certain commodities.

12. I'm not deeming my notes to be correct, if there's any misunderstandings or misconception please inform me so i could understand better

Wednesday, October 8, 2008

Gold, Banks and Toilet Papers......

1. It's look like the stock market is crashing down. Is it time to panic ? I don't know either, I haven't been in the stock market. There's a crash in NYSE, LSE, DAX , and stock market around the world. The only few things that I saw that was rising again was GOLD and the strengthening of the US Dollar.

2. Why is the US dollar rising despite the bailout ? It is known that the US treasury and the Fed is flooding the market with USD 7 trillion with funny money ? It should trigger and inflation since the US government is debasing its currency. What is happening here ?

3. Although we've seen by now that gold has strengthen its position in the market, there is still cries mentioning that the it is still undervalued. Few are the reasons why they claimed that the price of gold should be much higher :
  • People still cant acquire physical gold in the market such as gold coins due to shortage of gold coins minted.
  • The cost of producing gold has increased, from mining till minting, thus the cost of gold should be on the rise.
  • Since investors are seeing a slump in the stock market, many are turning to gold instead of cash as a hedge from inflation. Some say cash is king, but gold is the emperor ...
The reasons given in the above might not be enough to justify why the price of gold should be higher. Maybe someone can enlighten me.

4. Some conspiracy theorist are saying that there is a "cartel" which is trying to keep the prices of gold from surging to its actual value. Why ? Its because they want the market to see that fiat currencies are still viable as savings and investments.

5. One might think why. The only reason I can think is, it is because, when people keep their wealth in currencies, they'll put it in banks. Why ? because commercial banks needs this deposit in order to create liquidity and to create funny debt generated money through the fractional reserve system.

6. In other perspective, when people still keep their wealth in fiat currencies. It means that the banks are still in business. But, when the public starts going panic. They will start withdrawing the money from banks, and it might create a run on banks. It means that the banks will not have the capacity to provide all the cash if the public is demanding cash all at the same time.

7. If run on banks occur, the banks will simply collapse. Thus, we see that the US government is raising its guarantee on savings in banks up to USD 250,000. The same situation is happening also in Europe. We could see the measures taken to guarantee all this savings is just to prevent a run on banks. They are trying to calm the public to prevent a run on banks. Some government is pledging guarantees on savings without limit. Why is the government trying to help banks eventhough the mess is created by the banks themselves ?

8. Some might feel relieved that the government is pledging a guarantee on their deposits. What will happen if the public starts to withdraw their savings and deposits and the banks cannot honor the publics withdrawals ? It means that the government will have to pump in more money . If the government has the resources to honor the withdrawals then, its good for them. What if there's no enough resources to meet the withdrawals ? Will the government print more funny toilet papers ? and devalue their currency ?

9. If the government is inflating the currency, the currency will lose its value. When the currency loses its value, it will create price inflation. It is not because that things costs more. But it is because the currency is losing its value.

10. So, have we seen the lowest point in this financial mess ? I dont think so. It is expected things will go worse from now on. It is said that the next quarter will be even worse which makes the current are still " acceptable".

11. Buckle up .... we dont know what will happen soon.

Monday, October 6, 2008

The Great Bailout and Malaysia

After a week of holiday, its time to get to work again. During the festive season I see gold prices fluctuating, from an average of USD 870 - USD 890 an ounce to USD 820 - USD 830 an ounce. The volatility of gold prices might reflect the economic conditions we are facing at the moment. I'm not sure whether the USD 700B bailout plan was passed by the congress although it was given a passing by the US Senate Comittee. However it makes me think, how will the greatest bailout of all times will affect our lives.

1. Before the bailout was in uncertainty we see the stock market rally up a bit and the gold prices were crashing down. At the moment, it seems like the bailout is mandatory to keep their banking system alive ( as like in life support machine ).

2. After the bailout passes, the stock market crashes again and gold prices rally up as in today. The KLCI fell again below 1000 points and so all other bourses in the region.

3. We see another bailout for Fortis Bank which has been bought by BNP of France. It looks like its another casualty of the Credit Crunch.

4. Commodity prices has been falling, on signs that the biggest economy on earth which is the US is in recession. Consumer spending has been declining. Thus, brining down prices from crude oil, crude palm oil and bla bla bla bla ...

5. If the price of crude oil is declining, crude palm oil is declining, rubber is declining, will the demand for electronic product decline? and the strengthening value of USD means that our export value is decreasing because we are paid less.

6. Its look like our 2nd biggest trade partner which is Singapore is also in economic pressure and the US which as we all know are already in deep shit. It is likely the demand of our products and produce will decline soon and who knows how will it affect us.

7. For the past decade, it looks like the economic boom was fueled by cheap credits. Banks offering cheap credit to public without regarding their credit worthiness, suddenly people were flooded with money. It looks like the party is over now.

8. Some economic expert are revealing that all these US financial institution is keeping toxic financial derivative products in their books and the value are reaching as high as USD 500 trillion. So, my question is, how will USD 700B will help to cover USD 500 trillion in losses ? It looks like that USD 700B is not a bailout, it is just an attempt to delay the impending doom of financial armageddon. USD 700B is such a small number compared to USD 500 Trillion, its just the tip of an iceberg.

9. If we apply the "fractional reserve" rule. It means that the US has just flooded the market with USD 7 trillion of debts for all to enjoy. Maybe buy some shelter before the financial armageddon becomes imminent and guess what ... the American Public gets to pay the bill.

10. Economist say that the influx of those " debt " created money will create inflation. But it seems like with the declining value of commodities such as crude oil from its all time high seems like deflation to me. Or ... is it some sort of market manipulation by the " cartel " ? Whatever it is, in my opinion, if you have the capital power and political will, manipulation is a simple game to play.

11. Well, its doesnt look like our banks are going to fail unless they themselves has been fooled by those toxic derivative products. I dont see we're going to get the credit crunch treatment. But I see slower growth in the coming month. I might be wrong, but time will tell.

Sunday, October 5, 2008

Global Red Alert: US Will Not Be Able to Service Its Debts By H2-2009 - Market Shut Down After Declaration of Force Majeure - By Matthias Chang (LATES

Something Important to think about and ponder

Global Red Alert: US Will Not Be Able to Service Its Debts By H2-2009 - Market Shut Down After Declaration of Force Majeure - By Matthias Chang (LATEST UPDATE)
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Matthias Chang
Saturday, 04 October 2008 06:30

This is the most important Red Alert to be issued by me. Do not take my word for it. Verify my facts and analysis, word for word, paragraph by paragraph, as your fortune (if any) and more importantly your family’s livelihood depends on you taking all the necessary steps now to avoid the inevitable pain that will follow.

All the signs are there that the Bush regime may impose stringent measures before the year is out, and if not, his successor will definitely do so when he assumes power in 2009. This will take place, at the earliest, by year end 2008 and latest by H2 – 2009. This is a given.

You have the means to verify it. Do it now! Google it before you read the next sentence. Once you have verified the same, you will be scared, very scared as I am now. We have an urgent duty and responsibility – that is to warn every American citizen as the first priority, and then fellow citizens in your country. This is because the impact and consequences will be global.

US Has Not Been Servicing Its Debts For Years

Sometime ago, before the Beijing Olympics, I had warned that the financial crisis would unravel rapidly after the Olympics, as China could not afford a calamity before and during their version of the greatest show on earth.

We are now witnessing the U.S. economy’s slippery slide to the financial hell hole.

Not many Americans are aware that the US has to service annually, debt-interest to the tune of US$400-500 billion! Being in perpetual deficit (both trade and budget), the only way that the US can continue borrowing and paying its ever increasing interest burden is by borrowing in larger and larger amounts from the central banks in Asia, Middle East and Europe.

Additionally, the US banks have been insolvent for years but they were able to cover up their bankruptcy because Alan Greenspan and his masters in Wall Street and Thread-needle Street were able to come up with an incredible Ponzi scheme – the selling of financial toxic wastes (CDOs, MBS, CDS etc.) which enabled these bankrupt banks to fleece both central banks and private investors, and create digital profits by fraudulent creative accounting and corruption of politicians in Congress!

Everyone was borrowing to pay off the previous debts and interests.

In 2000 / 2001, the US economy almost collapsed and the false flag operation of September 11, provided the pretext and the opportunity for the Military-Industrial-Financial Complex to wage a global war (the “War On Terror”) to avert the financial crisis – the massive US debt default. The Bush regime was able to delay the crisis for seven odd years.

China, Japan and other major central banks, given the then prevailing circumstances, accepted the status quo and grudgingly allowed the US to be in default and to part-pay the interests due on past debts and the monthly new debts to pay for the war in Iraq and other misadventures.

China realized that unless she accommodated the US predator, her economy would suffer a major blow and even a war with the US. Bush’s challenge that you are either with us or with the terrorists, was and is directed at creditor countries and served as a warning not to ditch the dollar and derail the US controlled global fiat money / fractional reserve banking system. To the Bush war cabal, any attempt to call a default would be considered a “terrorist threat” on America.

It was a brute’s message: Any threat of economic war would be countered by a hot war and all military options would be on the table, including nuclear war.

The Japanese Yen Carry Trade

For more than two decades the Yen Carry Trade was the main pillar that shored up the shaky foundations of the US controlled global banking system. The Japanese was feeding the hungry US banking system, knowing full well that it would be a matter of time, before the hungry US financial beast would choke on its debts.

Of late, there have been several articles in the American mass media singling out China as the main threat to the security and financial interests of the US. I beg to differ. The principal threat to the US is Japan. She has been, and will be in the future, the greatest threat to the US. This is because Japan’s war party never forgave the US for its disastrous defeat suffered in World War II and the humiliation of the nuclear destruction of Hiroshima and Nagasaki!

But for China’s agreement to finance the US’s ever growing appetite for debt, the financial crisis would have erupted much earlier. The Japanese grand plan has therefore been delayed. But no longer! Why?

The End of The Road

Given the present state of financial health of the US, China can no longer sustain the massive handouts to the US without damaging its economy. This is also the situation faced by other central banks.

This is a matter of simple arithmetic and common sense as every honest banker (if ever there was one) will tell you. Interest is revenue. If interest is not paid, there is no revenue to the lender. It is the interest payments that will enable the lender to lend more monies to borrower as well as other borrowers eager for loans. Once a borrower fails to service the interest payments or service it adequately, the lender will have a cash-flow problem. In the result, the lender will not be able to lend or unwilling to lend further unless and until the delinquent interest payments are remedied.

In the present scenario, we are not even addressing the payment of the principal loan. If interest payments are in default, the lender can forget the repayment of the principal sum.

For all intent and purposes, the US cannot in the next 50 years at the earliest, pay off the principal outstanding to global central banks! And this is conditional on the US not waging any more wars.

Declaration of Default, Only Way Out

For the past 16 months, we have witnessed borrowers defaulting on their loan installments and walking away from their mortgaged homes, because it does not make any sense for them to continue making payments when the mortgaged homes’ values have collapsed to two-thirds of its original value or even worse.

The same situation applies to the US. America knows that it cannot pay the principal which is now in the trillions. It cannot continue to pay the ever increasing interests due on past debts and new debts to finance the deficits and the wars in Iraq and Afghanistan. So, why continue with the pretense that it is still credit worthy?

The Bush regime, and for that matter any other future regimes, will not be able to cut back on defence spending. The Military-Industrial-Financial Complex will not allow it. If any President attempts to do so, he would be removed from office by a bullet to the head or an induced heart attack.

Neither would it be possible to raise taxes to pay off the over-due interests as it has been estimated by several economists as well as Paul O’Neill that the taxes would have to be increased from the present 28% to 65%. No President can impose such a hefty tax and remain in office.

David Walker, US Comptroller-General and Head of GAO have warned repeatedly that the US could no longer service its debts beyond 2009! And he is being optimistic. I would say that by year end, the US would hit the dead end.

The recent US$700 billion “bailout” approved by Congress is an attempt to prolong the inevitable. Bush hopes that he can pass the buck to the next president. But I doubt it.

And if I am right, and the shit hits the ceiling fan, Bush will have no choice but to declare a force majeure, tell the world that US is in default and impose martial law to prevent social unrest.

To the skeptics, I would like to remind them that when President Nixon was faced with the demand by France that their dollar holdings be redeemed in gold, he announced to the stunned world that the US dollar would no longer be convertible to gold, as there were insufficient gold in Fort Knox to meet the demand.

And because the Western world was facing the threat of war with Russia (an engineered threat at that), countries outside the communist bloc all fell in line and kow-towed to the “mighty US paper tiger”!

Today, the US and the Western world are reaping what they have sowed in the 1970s! The chickens have all come home to roost.

Government protocols for economic collapse are all in place. All the relevant institutions have the necessary legal powers to enforce government decrees and edicts to ensure that when banks are closed and markets shut down, there will be minimum resistance or else blood will flow on the streets!

This is the scenario that we will be facing in the coming months.