• GAAP-Based Federal Budget Deficit Hit Record $6.6 Trillion in 2012
• Five-Year Average Annual Shortfall at $5.2 Trillion
• With U.S. Facing Mortal, Long-Range Solvency Issues, Hyperinflation Remains a Virtual Certainty

- John Williams, Shadowstats.com, February 5 2013

The following Market Signals communicate the same message:

• The DJ Utility average is topping out... stalled around its 200 day Moving Average.
• The Equities Markets are hitting record highs on a surge of Central Bank provided liquidity, certainly not on fundamentals.
• The $US weakens on higher rates, not strengthens as is typical, a telling warning.
• Certain indices are going parabolic, a probable precursor to collapse in One Major Sector.

The Biggest One is coming, and it will dramatically affect all markets.

- Deepcaster.com

I agree totally with what Lawrie says here...and we'll only move substantially higher in price if JPMorgan et al allow it. With grotesque short positions in all four precious metals, nothing else matters. It's hard to believe how so many people can be blind to the obvious fact, which is posted weekly in the Commitment of Traders Report...and confirmed monthly in the Bank Participation Report.

- Ed Steer, With No One Selling, European Central Banks Seen Letting Gold Sales Limits Expire, February 5 2013

With this extremely concentrated silver short position, we still must remain vigilant for further engineered price drops...but the short position is also so extreme as to represent a real danger to JPMorgan and other big shorts. I think it instructive to recall that JPMorgan got into big trouble on the London Whale derivatives position because they kept adding to a bloated position going the wrong way. Added to the growing pressures from the physical market and the attention that the silver short position has garnered (is there any commentator not talking about the silver short position?), I get the feeling something will break soon. More than ever, I am mindful of Izzy Friedman's "full pants down" circumstance.

I think we are at the point where nothing should surprise us, except perhaps that calm price patterns will break out. It looks like it could get very interesting, especially considering the recent changes in the COT market structure. Regardless of short-term price changes, the big move in silver must inevitably be to the upside. I still think that may come sooner than most expect.

- Silver analyst Ted Butler, Butler Research, February 2 2013

Most people don't keep much cash on hand. In a crisis, they can't get to a cash machine. In a serious crisis, the cash machines don't work. Or maybe they are empty. What do you do? Gold and silver might be the only truly marketable commodities.

- Jeffrey Tucker, The Gas Price Story of Hurricane Sandy, February 5 2013

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Letter 1522

February 6, 2013

Parabolic surges in the averages, floods of liquidity, zero interest rates - those are the story of today - plus, of course, Fed manipulation. A less noticed story is that of silver. About a month ago, I showed charts of silver mining stocks that had exploded. This suggested to me that something bullish was coming up in silver. Since 2003 silver has gained 1012%, and in doing so it has outpaced gold.

***

At present the above ground supply of silver is dangerously low. Whereas ten years ago there were three billion ounces of silver above ground and there for the buying, today there are less than one billion ounces of silver available. Unlike gold, silver is actually consumed. This sets us up, say silver experts, for a huge squeeze on the silver shorts. On the Comex there is currently a giant silver position, a position that almost dwarfs the available supply of free silver.

I find the chart of silver to be interesting (below, left). For the first time in many months silver has closed above its 50-day MA. MACD could be in the process of turning up. Silver has now closed above its declining trend line. Below right I show SLV, the silver trust, and a good way to get on the silver bandwagon. SLV has been wrestling with its 50-day MA. At 31.5 SLV will have accomplished a clear upside breakout.

***

As I write, March silver is up. A rise in silver will almost surely rub off on gold, since there is a ratio that consistently connects them. Therefore, I will keep a sharp eye on silver in coming days and weeks. By the way, the outfit that holds an enormous short position in silver on the Comex is JP Morgan. And I wonder is JPM working secretly for the Fed?

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David's Comment: This is the second time I have inserted this information. It is very important and I want to be sure you don't over-look it.

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Interest Rates And The Government Bond Market Are One And The Same

February 4, 2013, at 4:56 pm
by Jim Sinclair

My Dear Friends,

This little email may be the singular most important market relationship you need to understand as we make our way through market being manipulated everywhere by special interests both government and private in unison either by plan or planned accident.

Interest rates and the government bond market are one and the same.

You cannot predict higher interest rates if you also predict QE to infinity. QE is the non-economic purchase of government and other debt securities. Therefore as long as QE expands to meet the size of bond offering, the bond market will stay bullish and interest rates will not rise significantly.

If you adhere to the prediction of higher interest rates then you are saying QE will cease or contract significantly. As long as QE is increased, as it just has been, bond bears will continue to get crushed.

You cannot separate predictions on interest rates from predictions on the conditions of the US Treasury market. Interest rates and the government bond market are one and the same.

Sincerely,

Jim

Jim,

Probably pushing my luck, but when the bond market breaks, what do you think will happen to general equities?

CIGA Russell

Russell,

I believe that every effort known to man to keep the bond market a raging bull will be undertaken. As long as QE is practiced, which is non-economic bond buying, the bond market cannot break. The mechanism of preventing a bond market break is positive to equities.

Jim

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Get ready for Washington's "Automatic IRAs"

Nilus Mattive | Tuesday, February 5, 2013 at 8:36 am

Washington's hubris never ceases to amaze me. For whatever reason, lawmakers always think they're better decision makers than the typical citizen - despite so much evidence to the contrary.

Take the subject of retirement planning.

As I point out in my just-updated video - The Death of Social Security - politicians have already run our nation's current retirement system into the ground.

Yet rather than worrying about the mess they've made, they are talking about creating MORE government-mandated retirement systems! 

One of those is the "Automatic IRA."

The idea comes from David John of the Heritage Foundation. He unveiled it back in 2006, and it has since been proposed to Congress a number of times:

• In the Senate, the latest iteration was introduced by Democratic Senators John Kerry and Jeff Bingaman in September 2011 ...

• In the House, Democratic Representative Richard Neal (Mass.) most recently proposed it in February 2012 ...

• And most notably, President Obama endorsed the idea in his budget for fiscal 2013.

The basic gist is that businesses with 10 or more employees would be required to start funding a new form of individual retirement account. While businesses that already have retirement plans would be exempt, it's estimated the legislation would affect about 40 percent of the U.S. workforce.

Employees would be automatically enrolled, though they could then choose to opt out.

What kind of investment choices would be offered?

That's not clear yet, though Mr. John - the initial creator - has said:

"There could be an R-Bond account at Treasury for first-time savers, but that money would be rolled into private sector accounts once the individual accounts reached a certain size."

Translation: The Default Option Might Be U.S. Treasuries!

Just think about it: This idea could amount to automatically taking money from 40 percent of the American workforce and putting it into U.S. debt ... at a time when Washington's deficits are ballooning out of control and other investors are growing less interested in buying our bonds.

Is that a mere coincidence? I don't think so.

Because, sure, you could opt out. And you might easily change the type of investment in your new Automatic IRA, too.

Yet the very reason lawmakers are pushing for these accounts in the first place is because they say most people don't take intentional actions. So by that same logic, a whole lot of people would just be herded into investing more of their earnings in spendthrift politicians!

Even if this plan really does start with the best of intentions - encouraging more Americans to start saving more for their retirements - I believe additional tax breaks or other incentives would be a far better way to accomplish the goal.

After all, look what's happened every other time lawmakers have tried to "help" Americans manage their retirements:

We've seen just how quickly politicians have drained our existing national retirement program ...

We've watched elected officials walk away with six-figure pensions while their constituents suffer ...

And even with systems that are truly segregated for the good of beneficiaries - like state pensions - there have been plenty of examples of mismanagement and broken promises.

So are Automatic IRAs the worst idea Washington can come up with? Not by a long shot.

But it sure would be better if they worried about the messes they've already created rather than new ways to protect everyday citizens from themselves.

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Ranting Andy Hoffman

Monday Afternoon Wrap-Up 2/4/2013

However, the forest is the REAL issue; of exploding DEBT...

Treasury Forecasts $16.763 Trillion in Debt on March 31 Translating To 105% Debt/GDP 

...and MONEY PRINTING...

By Printing Money Central Banks Have Already Begun the Next Stage of Warfare 

...forcing TPTB to suppress rating agencies...

Civil Charges to Be Filed Against S&P for its Exuberant Pre-Crisis Mortgage Ratings 

...and Precious Metals (can you say "CARTEL HERALD?)...

...and support the MOST IMPORTANT MARKET ON EARTH - the 10-year U.S. Treasury rate; which is why I wrote the below comments on Wednesday...

All the Fed's QE - and QE announcements - couldn't push the 10-year interest rate down; as ultimately, it rose from 1.99% to 2.01%. Prepare for MASSIVE attempts to push it back down in the coming days; and by the way, such MASSIVE attempts just might include a "worse than expected" NFP report Friday.

...and Thursday...

The 10-year Treasury rate dropped two basis points, but remains in a major DANGER ZONE; prompting my belief TPTB will shortly initiate a "market event" to help push rates back to "acceptable" levels.

Sure enough, we got the "modern version" of a U.S. market event - immediately after the PROPAGANDA about Friday's pathetic NFP report was concluded. And what was this event? Yep, a standard "limit down" for the "DOW JONES PROPAGANDA AVERAGE" - EXACTLY 1.0% lower than Friday's close...

...providing "cover" to push the 10-year rate safely below 2%...

Of course, the U.S. is not the only place diabolical, ominous events are unfolding; and thus, the pressure for GLOBAL Central banks to continue PRINTING MONEY will only intensify...

Continue reading the Monday Afternoon Wrap-Up for 2/4/2013 

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David's comment: This means QE for as far as the eye can see. QE is the tool used by the Fed to keep interest rates down. As Jim Sinclair says, "Interest rates and the bond market are one and the same." Roubini could just as well have titled this article "The Reason to Keep Buying Gold As Far as Eye Can See."

Roubini: Low Rates for 'As Far as Eye Can See'

Tuesday, 05 Feb 2013 09:40 AM

By Dan Weil

The Federal Reserve will keep interest rates near record lows for "as far as the eye can see," says Nouriel Roubini, chairman of Roubini Global Economics and a business school professor at New York University.

He also says that while private sector deleveraging has worked, public sector deleveraging will be a drag on the economy and keep gross domestic product growth at about 1.5 percent. And that will force the Fed to refrain from raising rates.

The U.S. economy contracted 0.1 percent in the fourth quarter, and economists' consensus is that growth will total about 2 percent in 2013.

"Once the deleveraging of the public sector occurs, consumption growth is going to be slower," Roubini tells CNBC. "So the economy for the time being is only growing 1.5 percent. Some positives would pick up the growth toward 2.3 percent, 3 percent."

Raising taxes and reducing government benefits will crimp income growth and force faster deleveraging, he notes. "Job creation is picking up, creating income. The tax increases, including the payroll tax elimination reduces it. So you have forces going in different directions."

That tension is going to drag down economic growth, Roubini explains. "Part of the growth over the last two years was due to the fact that we postponed the deleveraging of the public sector, and the consumer spent more income than otherwise."

Now that we no longer have this boost, "there will be a cost of deleveraging the public sector," he notes, thereby slowing economic growth.

As a result, "I don't think [a reversal of the Fed's easing] is going to happen any time soon."

The Fed is buying $85 billion of Treasuries and mortgage-backed securities a month and plans to keep short-term interest rates near zero until unemployment drops to 6.5 percent. The unemployment rate was 7.9 percent in January.

Last week, the Fed said it will stick with its massive easing program for the near future, despite the criticism of many economic experts.

Stanford University economist John Taylor writes in The Wall Street Journal that the central bank's policy "creates incentives for otherwise risk-averse investors to take on questionable investments as they search for higher yields."

Even some Fed officials have called for easing to be scaled back.

Richard Fisher, president of the Dallas Fed, favors reducing the pace of asset purchases as the U.S. economy gains momentum this year, Bloomberg reports.

"As you approach your goals and things get better, you reduce purchases," Fisher says. "I wouldn't go from Wild Turkey to cold turkey" in monetary policy.

"I wouldn't have favored spiking the punch bowl to the degree we have," but it would be too abrupt to stop purchases all at once.

Fisher, who doesn't vote on monetary policy this year, opposes the Federal Open Market Committee decision last week to continue purchasing securities at the rate of $85 billion a month.

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The following articles were borrowed from Ed Steer's Critical Reads section of his February 5^th daily newsletter.

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Bill Moyers and Matt Taibbi: Everyone Pays If the Banksters Don't Go to Jail

"The rule of law isn't really the rule of law if it doesn't apply equally to everybody," Taibbi tells Moyers.

Journalist Matt Taibbi assesses the Obama Administration's approach to holding banks accountable for their behavior, and early indications are not promising. Taibbi tells Bill that fearing another economic calamity is no excuse for turning a blind eye to shockingly unethical decisions and management.

This 15:19 minute video is well worth watching, so I hope you have the time.  There's also a printed transcript below the video link.  It was posted on the alternet.org Internet site on Friday...and my thanks go out to Roy Stephens for his first offering in today's column.  The link is here.

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Nearly Half of American Families Live on the Edge of Financial Ruin

A sobering new report by the  Corporation for Enterprise Development shows nearly half of U.S. households (132.1 million people) don't have enough savings to weather emergencies, or finance long-term needs like college tuition, health care and housing. 

According to the Assets & Opportunity Scorecard, these people wouldn't last three months if their income was suddenly depleted. More than 30 percent don't even have a savings account, and another 8 percent don't bank at all. 

We're not just talking about people who living people the poverty line, either. Plenty of the middle class have joined the ranks of the "working poor," struggling right alongside families scraping by on food stamps and other forms of public assistance.

Also linked in this report is a headline that reads "10 Most Financially Unstable States".  Both stories are worth skimming if you can fit them in...and both are courtesy of Roy Stephens.  The link to the entire story, which was posted businessinsider.com Internet site early yesterday afternoon Eastern time, is here.

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Argentina Freezes Prices to Break Inflation Spiral

Argentina announced a two-month price freeze on supermarket products Monday in an effort to stop spiraling inflation.

The price freeze applies to every product in all of the nation's largest supermarkets - a group including Wal-Mart, Carrefour, Coto, Jumbo, Disco and other large chains. The companies' trade group, representing 70 percent of the Argentine supermarket sector, reached the accord with Commerce Secretary Guillermo Moreno, the government's news agency Telam reported.

The commerce ministry wants consumers to keep receipts and complain to a hotline about any price hikes they see before April 1.

Polls show Argentines worry most about inflation, which private economists estimate could reach 30 percent this year. The government says it's trying to hold the next union wage hikes to 20 percent, a figure that suggests how little anyone believes the official index that pegs annual inflation at just 10 percent.

This AP story showed up on The New York Times Internet site just after the markets closed yesterday afternoon...and I thank Marshall Angeles for sending it our way.  The link is here.

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The Telegraph: Falling yen set to spark renewed currency wars

History shows that currency disputes can escalate from rhetorical spats into disastrously counterproductive economic conflict.

In September 2010 the Brazilian Finance Minister, Guido Mantega, pointed a rhetorical finger at the United States and accused the worlds largest economy of conducting a "currency war." Suggesting that emerging markets were being unfairly squeezed by a falling dollar, which makes US exports more competitive, Mantega lit the touch paper on a controversy that wont go away.

For now "currency wars" are a relatively arcane debate limited to foreign exchange specialists and diplomats. But this issue has already adversely affected hundreds of millions of people who consider themselves largely immune to the vicissitudes of international markets, not least in the UK. History shows, also, such currency disputes can escalate from rhetorical spats into disastrously counter-productive economic conflict.

"Currency wars" have hit the headlines anew in recent weeks, given Japan's attempts to force down the yen. Freshly installed prime minister Shinzo Abe, determined to stimulate a moribund economy, has ordered Japan's ultra-conservative central bank to be more expansionary.

I'm sure that Jim Rickards is smiling all the way to the bank.  This story was posted on The Telegraph's website early on Saturday evening GMT...and the link is here.

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Seven King World News Blogs/Audio Interview

1. Michael Pento: "The Greatest Bubble in History Will Lead to a Gold Explosion".  2. Robert Fitzwilson: "The Approaching End Game and How to Benefit From It".  3. John Embry: "Silver Market is Nearing a Commercial Signal Failure".  4. Stephen Leeb: "Gold Flow East and Silver Squeeze to Create Surge in Metals".  5. Richard Russell: "World's Supply of Silver Dangerously Low".  6. Audio Interview with James Dines.  7. Audio interview with Michael Belkin.

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Gold Reaches 155,180 Yen/oz. - New Record In Japanese Yen

Gold bullion for delivery in December climbed as high as 1.2% to 5,000 yen per gram on the TOCOM. In ounce terms, the yen fell to 155,180/oz against gold, its lowest level since 1980. 

According to the data on Bloomberg, the all-time record high for gold priced in yen was 204,850 yen on January 21, 1980.

Thus, yen gold remains 33% below the record intraday nominal high from 1980. Given the Japanese determination to devalue the yen to escape deflation, the record nominal high will almost certainly be reached in the coming months.

This story showed up on the goldcore.com Internet site yesterday...and I thank Ulrike Marx for sending it.  The link is here.

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With no one selling, European central banks seen letting gold sales limits expire

European central banks are unlikely to renew an agreement to limit gold sales when their current pact expires next year, a leading gold market consultant said, after selling evaporated over the agreement's previous term.

The amount of gold the region's central banks can sell in any given period has been capped by a series of Central Bank Gold Agreements (CBGAs) since 1999, after a spate of disposals by the official sector, including a 395-tonne sale by the Bank of England, shook up the bullion market.

But George Milling-Stanley, an independent consultant and former managing director of government affairs with the World Gold Council, said he saw little chance of signatories opting to extend a ceiling on bullion sales for a fourth time.

I've been writing on the Internet for the entire 12-year period that the Central Bank Gold Agreement has been around.  Now that a lot of central banks are buyers, it's obvious that this price management scheme should have died a quiet death years ago.

This absolute must read Reuters story was posted on their website last Friday...and it bears the headline "European central Banks Seen Shunning Fresh Gold Sales Limits".  I found it in a GATA release on Saturday...and the link is here.

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Alasdair Macleod: Why price inflation will take off

In commentary on Sunday, GoldMoney research director Alasdair Macleod makes the case for inflation. "Five years ago," Macleod writes, "there was a large one-off shift in favor of money, which suggests that the next large shift will be away from money -- not because suddenly we are all going to like spending again, but because we will like money even less."

I found all of the above posted in a GATA release...and I thank Chris Powell for wordsmithing it.  Macleod's commentary is headlined "Why Price Inflation Will Take Off" and it's posted at GoldMoney's Internet site here.

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Iranians shun own currency for Gold

Iranians continued to purchase gold from every available centers on fears about it's economy, particularly the risk of soaring inflation and a wobbly currency.

Analysts said ever dipping rial, Iran's currency, forced even those people who already have coins in large numbers to buy again rather than cashing in for a profit.

Worries about the declining buying power of the rial and doubts over the currency's stability are the main drivers behind the flight to gold.

They added that due to sanctions, Iranians have no choice but to invest in gold coins as they can't move their capital and invest in other countries.

This article showed up on the bullionstreet.com Internet site early yesterday morning...and I thank Marshall Angeles for sending it our way.  It's worth reading...and the link is here.

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Silver Institute Releases New Video on Silver

The Silver Institute today released a new video entitled, "Silver: The Element of Change." The video covers numerous facets of one of the most widely-used and indispensable precious metals: silver. The video explores silver's role in history and how it changed the course of countless lives in times of the Greek and Roman Empires, when it was used to prevent infection.

Focusing on its remarkable properties as an element of change, the video looks at silver's role in industry, highlighting its ability to make today's mobile interconnected life possible as well as its use in medicine and water purification, which relies primarily on its natural antibacterial qualities. The video also notes silver's importance to fashion through exquisite silver jewelry, and finally it speaks to silver's intrinsic worth as well as its role as a store of value, given its historical and modern use as a popular investment.

The video was posted on the silverinstitute.org Internet site yesterday...and I thank David Morgan over at silver-investor.com for bringing it to my attention...and now to yours.  The link is here.

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Gold reclaiming historic role as official financial asset - Murenbeeld

In a recent article, Dundee Wealth economist Martin Murenbeeld suggests, "The geopolitical factor may be about to 'heat up' for gold, observing "we'd like a small exposure to gold on this account alone."

In his February 1st edition of the "Gold Monitor", Murenbeeld observed "there is a gentle rise in monthly sales - albeit obscured by month-to-month volatility." He advised that "physical demand (except in India on account of the hike in import duties) will continue to be quit robust in 2013."

Meanwhile, Murenbeeld is increasingly bullish on central bank gold purchases. "It is our view that central bank gold purchases will continue for many years to come. Indeed, it is our view that gold is reclaiming its historic role as an official financial asset."

This article appeared on the mineweb.com Internet site yesterday...and I thank Ulrike Marx for her last contribution to today's column.  The link is here.

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Upside fundamentals for gold still intact: Blanchard

Major U.S. gold and gold coin dealer, Blanchard & Co. reckons that investors are yet again finding themselves entering a new year amid uncertainty, with the debt ceiling, taxes and government spending all playing a role in shaping the 2013 economy. Legislators walked the fiscal cliff tightrope until the 11th hour at the end of 2012, and something few expected happened in the financial market - gold declined in price.

Blanchard analysts - while surprised - say the counterintuitive downturn in gold's price when it should have moved upward is the result of investors and consumerskeeping their money in their pockets - just like most major banks.

This may well be a more cautious view on what has happened to gold - to this observer the timings of the actual downward movements in the gold price, just when it seems like it is about to break out of the current trading rang , and almost on a daily basis, does suggest an organised market attack on the yellow metal designed to keep the price firmly within limits.  The tendency of the markets seems to be to move upwards again following these manufactured dips and one wonders how what looks to be some kind of suppression scheme can go on before it falters and collapses - It could be days, weeks, or even months, but recent price movement patterns do suggest there is a likely breakout ahead.

Blanchard analysts thus add that these current price dips present a good buying opportunity for people looking to enter the market or for adding to existing long positions as the upside potential for strong gains is fundamentally intact.

Yes, I agree totally with what Lawrie says here...and we'll only move substantially higher in price if JPMorgan et al allow it.  With grotesque short positions in all four precious metals, nothing else matters.  It's hard to believe how so many people can be blind to the obvious fact which is posted weekly in the Commitment of Traders Report...and confirmed monthly in the Bank Participation Report.

I found this Lawrence Williams offering on the mineweb.com Internet site in the wee hours of this morning...and the link is here.

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Gold edging closer to upside breakout - Nichols

As regular readers may have gathered, I consider Nichols' views as perhaps the most similar to my own of all the gold pundits out there, although he is perhaps marginally more bullish than I.

Nichols feels that gold is edging closer to an upside breakout having built a good base of support in the $1650-$1690 range and he's convinced that sooner, rather than later, the price will push back through $1700 and create a new floor at that level.

He also feels that one of the bullish indicators is what he sees as "the spate of downward revisions to the price forecasts proffered by many of the major banking firms, dealers, trading houses, and other institutional participants in the gold scene."

One has to admit that there does seem to be a bit of a herd instinct among these forecasters - they seem to look at short term trends and base their medium and long term forecasts on them and them alone.

This story is also from the mineweb.com...and was posted on their Internet site on Saturday.  It's also authored by Lawrie Williams...and the link is here.

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