Market Recap forMonday January 21, 2013
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GOLD
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$1690.10
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$5.40
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GOLD - 1 year ago
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$1667.00
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$23.10
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SILVER
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$32.02
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$0.13
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SILVER - 1 year ago
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$32.20
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-$0.18
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PLATINUM
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$1674.00
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$9.00
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PALLADIUM
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$716.00
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-$3.00
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RHODIUM
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$1200.00
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$0.00
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HUI
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429.85
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0.76
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XAU
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161.34
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-0.18
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USD
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80.02
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-0.02
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EURO/USD
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1.3317
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-0.001
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DOW
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13649.70
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53.68
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GOLD to SILVER RATIO
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52.78 to 1
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-0.05
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 Table of Contents
Click on the Links Below to Scroll to the Articles
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Quotes of the Day
Only one of six young people in America is working full time, and 3 out of 5 live with relatives, including parents. They're not developing proper job skills, the education system is dysfunctional and the government cannot even find enough money to rebuild its deteriorating physical infrastructure - problems that will fester for a long time.
- Jim Dines, The Dines Letter
Public debt as a percentage of Gross Domestic Product was around 38% in 1965. It is around 74% now. Debt could approach a ruinous 90% of GDP in a decade and a cataclysmic 247% of GDP 30 years from now. By 2025, entitlement spending and debt payments are projected to suck up all federal revenue. Obligations to the elderly are already squeezing programs for the young and the needy. Those obligations will lead to gigantic living-standard declines for future generations. Meeting America's long-term obligations will require an immediate and permanent 35% increase in all taxes and a 35% cut in all benefits. So except for a few rabid debt-deniers, almost everybody agrees we have to do something fundamental to preserve these programs. The problem is that politicians have never found a politically possible way to begin. The "fiscal cliff" does raise $600 billion in revenue over 10 years from a tiny sliver of the population (compared with the $8 trillion in new debt likely to be accrued over that time). It does nothing to control spending. It abandons all of the entitlement reform ideas. It locks in low taxes on families making less than $450,000; it is simply impossible to avert catastrophe unless tax increases go below that line. We should blame the American voters. Many voters have decided they like spending a lot on themselves and pushing costs onto their children and grandchildren. They have decided they like borrowing up to $1 trillion a year for tax credits, disability payments, defense contracts and the rest. They have found that the original Keynesian rationale for these deficits provides a perfect cover for permanent deficit-living. They have made it clear that they will destroy any politician who tries to stop them from cost-shifting in this way.
- David Brooks, New York Times, 1 Jan 13
The nation's biggest challenge: breaking out of a decade of income stagnation that has afflicted the middle class and the poor and exacerbated inequality. Many of the bedrock assumptions of American culture - about work, progress, fairness and optimism - are being shaken as successive generations worry about the prospect of declining living standards. The causes of income stagnation are varied: At the top of the list are the digital revolution, which has allowed machines to replace many forms of human labor, and the modern wave of globalization, which has allowed millions of low-wage workers around the world to begin competing with Americans. The United States has lost its once-large global lead in educational attainment. For the first time since the Great Depression, median family income has fallen substantially over an entire decade. Health care costs have grown sharply over the last decade, leaving employers with less cash to use on salaries. Labor unions have shrunk. The American manufacturing sector produces much more than it did in 1979, despite employing almost 40% fewer workers.
- David Leonhardt, Front Page, New York Times, 24 Oct 12
On a per-capita basis, Gross Domestic Product still hasn't rebounded to its 2007 high, and by most other measures the economy has remained mired in its post-recession doldrums. For more than three years after the recession ended in June 2009, unemployment remained high, the housing market was depressed, and every economic speed bump brought renewed fears of another recession. That is poised to change in 2013. Home prices are finally rising again. The combined net worth of US households remains 12% below its pre-recession peak, after adjusting for inflation. Incomes, too, have yet to fully recover. And most significantly, US businesses still employ 3.3-million fewer workers than before the financial crisis.
- Ben Casselman & Phil Izzo, Wall Street Journal, 17 Dec 12
Some 15% of Americans (around 46.2m people) live below the poverty line. You have to go back to the early 1960s - before Lyndon Johnson's Great Society programs - to find a significantly higher rate. Many have incomes above the poverty line but nevertheless cannot meet their families' basic monthly needs, and there are signs that their number is growing. America's poor face systemic challenges beyond the aid of any single administration or program. Once diligent high-school dropouts could get a job on a factory line and work their way into the middle class: no longer. The low skill, high-wage jobs that many used to climb out of poverty in the 20th century are largely gone. The 15% poverty rate is calculated using the official federal poverty threshold of $11,702 in annual income for an individual or $23,201 for a family of four. The overall rate of poverty is highest in large cities. The rates of poverty are higher among minorities. The number of poor people living in the suburbs grew 53% between 2000 and 2010 as decades of suburban flight reversed and America's cities once again became desirable places to work, attracting back better-off suburbanites and damaging marginal suburban economies. As of 2008 more than a third of America's poor live in suburbs. Low skilled jobs, particularly in manufacturing, have gone overseas, or fallen victim to automation. Almost a third of the working poor are in the service sector. Wages borrowing up to $1 trillion a year for tax credits, disability payments, defense contracts and the rest. They have found that the original Keynesian rationale for these deficits provides a perfect cover for permanent deficit-living. They have made it clear that they will destroy any politician who tries to stop them from cost-shifting in this way.
- David Brooks, New York Times, 1 Jan 13
Most people will pay attention if Congress decides to start taxing employer-sponsored health insurance. About half of Americans benefit from the tax-free status of employer health insurance. Workers pay no income or payroll taxes on what their employer contributes for health insurance, and in most cases on their own share of premiums as well. If taxed like regular income it would raise almost $150 billion in 2013. The biggest tax increase from the health care law and the legislation calls it a "Medicare contribution," but none of the revenue will go to the Medicare trust fund. Instead, it's funneled into the government's general fund.
-Associated Press, 25 Dec 12
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From David's Desk
 | | David Schectman |
An Important Video You Should Watch
Here is a link to the Money News' latest report on the collapse of the dollar:
This 'Third War' Will Be the Most Destructive in History, Warns Pentagon Adviser
James Dale Davidson, Jim Dines, The Weiss group and others have written about this event. In fact, I published an article by Davidson on this topic last fall. I think you should watch the above video, all of it, and think it through.
Look, everyone is involved in this to make a living and Money News is selling "advice," but that doesn't make their message any less valid. Silver (and gold) are the number one and two performing assets over the last 10 years, so owning, or buying gold stands on its own merit. But, you also get the best form of financial insurance possible, in addition to an investment that holds its own against all comers. Here is a chart published by Jim Dines that proves the point.
So, my suggestion for today is to watch the video - Jim Rickards is the real deal. He is one of Gerald Celente's key contributors on the economy. Take him seriously. I do. You will be in good company - Jim Rickards, James Dale Davidson, James Dines, Martin Weiss, Jim Willie and Miles Franklin are all in agreement on this scenario. Truth be told, so is Jim Sinclair - or else, his "gold way above $3500" would never come to pass. You cannot afford to be wrong about this. You really need to be aware of the already-in-process attack on your dollar holdings!
One of our most in tune readers, and a long-time friend of Miles Franklin sent the following to us. His comments were, "About as direct and succinct a description of our economic folly as can be. BUY GOLD." I am not trying to be "political" here, but the FACTS speak for themselves. Like Bill Holter often says, "It's a mathematical impossibility!" It's tragic our President, with the help of this Liberal Congress, can't add one plus one and come up with two. We will ALL pay the price for this naivet�.
Sincerely,
David Schectman
Miles Franklin
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The Wages of Obama's Sins - StansberryResearch.com
By Porter Stansberry
We begin 2013 in awe of what's happened to our country...
Since 2008, when President Obama was elected, the official, net public debt of the U.S. federal government has increased by $5.5 trillion.
That's more than double the size of the total net public debt of the U.S. in 2007, the year before Obama was elected ($5.03 trillion). These additional new debts have swollen the total net debt of the federal government to more than $11 trillion, or roughly 80% of GDP.
These overwhelming public financial obligations are completely unprecedented in the history of our country, outside of the two major global wars we fought in the 20th century.
But even these incredible figures don't tell the real story. Or even half of it.
You see, these are merely the debts that we, federal taxpayers, are actively paying interest on right now. These don't include any of the additional $4.8 trillion in debts held by various government agencies (but which still cost us interest every year). Nor do they include any of Fannie Mae's or Freddie Mac's obligations, two private companies that were taken over by the federal government during 2008 and whose total obligations stand at a little more than $5 trillion.
We've paid nearly $200 billion in interest for these obligations, though they remain completely off the federal balance sheet. Nor do these numbers include any of the trillions of dollars in additional Federal Reserve assets that have been created out of thin air to manipulate the market rate of interest lower during this period of rapidly growing demand for federal debt.
When you add these other, genuine, federal obligations that exist right now, today, you come up with a total debt figure that's much more than $20 trillion. Far more than half of these debts were assumed under President Obama.
We don't know what the full burden of these new and existing debts will be in total, over time. That's because the Fed's power to manipulate interest rates is unlimited. We don't know how much of Fannie's and Freddie's bad debts will eventually be covered by the U.S. Treasury. (We do know they have an unlimited line of credit... so it's a safe bet that we haven't seen the last of these charges.) Finally, we have no idea what the eventual costs of the Federal Reserve's ongoing expansion of the monetary base will be over the long term.
There is one thing that's certain, however: These debts will not be free. They will carry a burden.
I call that burden the "wages of sin" because the effort to cover our country's current expenses with debts that will be borne by generations of Americans is simply evil. There's no other word for the people who have done this to our country. By refusing to take responsibility for their own policies and by refusing to make their constituents responsible for their own poor choices, they've doomed our country to a future that will certainly include a government that's far larger and more expensive.
That means a lower standard of living for all of us.
To give you some idea of the real, underlying costs we face, we can simply apply a real-world interest rate to the total debts we enumerated above. Let's pretend there's a lender large enough to finance our federal burden, someone who is able and willing to extend us credit larger than our entire economy. And let's pretend he's willing to do so for 30 years to make the payments affordable to us.
You can imagine this as a huge mortgage our leaders have put on top of our economy. How much would we have to eventually spend in interest to cover these debts in a legitimate way? When you buy a home, you're given the same information from your lender. It's part of the housing law that governs the mortgage industry - the Fair Lending Act. So using exactly the same guidelines, how much should we expect to spend on interest and principal, for these debts?
If the average real interest rate ends up being 4% annually, we'll spend $34.3 trillion to simply repay what we owe right now. If the rate ends up being 5%, we'll spend $38.6 trillion. If the rate ends up being 6%, we'll spend $43.1 trillion.
Now, of course, our politicians believe that through policy and currency manipulation, they can simply avoid paying any of these costs. They can order the Federal Reserve to prevent interest rates from ever rising to a level that would cost the American people anything. They believe they can manage the economy, so the debts of Fannie and Freddie won't go bad. They believe (without any proof whatsoever) that they can stimulate the economy by even more deficit spending, so that it grows faster, allowing tax revenues to produce a surplus. Repaying these debts, they say, will be easy and painless.
But you know better, my friend. You must know better. The wages of sin must be paid. And they will be paid. Just consider the plans of those who argue otherwise...
Paul Krugman, the publicity-hungry M.I.T. economist, pens a column for the New York Times that's ironically titled The Conscience of a Liberal. He recently suggested a simple and completely pain-free way around the debt ceiling, that flimsy piece of legislation that was supposed to slow the growth of the federal debt.The problem of our debt is easy to solve, according to Krugman: Just mint a $1 trillion coin (or coins) and deposit it with the Treasury:
There's a legal loophole allowing the Treasury to mint platinum coins in any denomination the secretary chooses. Yes, it was intended to allow commemorative collector's items - but that's not what the letter of the law says. And by minting a $1 trillion coin, then depositing it at the Fed, the Treasury could acquire enough cash to sidestep the debt ceiling - while doing no economic harm at all.
Very few people, even our most influential economists, seem to remember that the utility of money and credit are based upon their soundness.
Money allows people to exchange goods and services widely, greatly increasing the specialization of labor and facilitating the economic magic of competitive advantage. Money also plays the critical function of facilitating communications between and among many disparate actors. Price changes guide producers and consumers.
But... when the money can't be trusted... this entire system breaks down. The price signals can't be relied upon. And it becomes harder and harder for people to exchange labor and capital.
Likewise, credit enables an economy to grow by facilitating the growth of savings and capital investment through real interest rates. But very few people are willing to delay consumption and trust their savings in an economy that refuses to pay savers any return above inflation for their savings.
Actions that undermine the legitimacy of our currency or that threaten the stability of our credit will cause enormous problems - real costs - to our economy. Pretending otherwise won't change these facts in the slightest. Minting coins with a real intrinsic value of maybe $3,000 and claiming they're worth $1 trillion is Mugabe finance. Just reading about the possibility of this plan in the pages of the New York Times will damage the stability of our money and credit.
But regardless of whether our creditors read the New York Times, they will soon realize there's no way we can finance, in real dollars, our existing federal debt of $20 trillion. Assuming the real rate of inflation (today) is 4%, we should expect to pay at least 6% annually to finance these debts. That would mean interest payments of more than $500 billion annually.
This is impossible. Ignoring payroll taxes (which finance Social Security and Medicare... at a loss), the federal government takes in roughly $2.4 trillion in income and corporate taxes. Social Security, Medicare, and federal pension spending currently total more than $1.8 trillion, leaving roughly $600 billion for all other forms of government spending (including the military). Even all of the remainder isn't likely to cover the real costs of our debt for long, given the inevitable (and huge) increases to Medicare and Social Security spending.
And so that leaves us, at the start of 2013, wondering how we will pay for the wages of Obama's sins... and the inevitable consequences of refusing to acknowledge these debts or the politics that led to them.
Regards,
Porter Stansberry
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The Holter Report
 | Bill Holter
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2013, The Year of "Stuff"
Published: January 21st, 2013 I didn't plan to do any writing on "predictions" for 2013 as there were more opinions than one could possibly read but I see one trade as the most important and timely of all. Short the currency markets, ALL currency markets! This is really an easy call now as central bankers are collectively going "all in." Draghi from Europe used the term "as much as necessary," the Fed's QE is now "open ended" and in Japan the people clamored in the last election for Mr. Abe. Premier Abe vowed to put the accelerator to the floor both fiscally and monetarily. Normally I would tell you to fade anything that central bankers say and rather watch what they do. But now because the global economies are so stuck in the mud, they are all boxed into the same room. Every central bank has the same problem caused by the same conditions. Namely over-leveraged economies (and sovereign balance sheets) that each fight for "market share" of a global trade "pie" that is not expanding. The solution? Torpedo your own currency to allow your export sector a bigger slice of the pie. A global currency war will be the result. In my opinion 2013 will go down as the year that "money died." A global currency war has all of the necessary conditions of breaking out and the central bankers have already publicly and collectively told us that this is coming. It does make total sense because no matter where you look, balance sheets are about to blow. The "debt ceiling" is not just a U.S. problem, Europe, Britain and Japan have the same problem but not from a "statutory" standpoint. No, from the Mother Nature standpoint they know that they must either grow their economies rapidly or devalue their currencies greatly. Let me explain this, the West as you know full well simply has too much debt than can be serviced by the revenues being generated currently and they also know that the situation is now critical. This is why the decision to go all in. From their viewpoint this will either work (it won't) ...or it won't and "oh well" we get the collapse that would have happened it they hadn't gone "all in." The problem is not that there is not enough money, the problem is that the money has all gone to the banks to protect them and their derivative structures. The "money" is not on the streets so to speak which is why the economies are stagnant. Had TARP and the other programs put money in the hands of the populace the final result would not be any better but at least it would "feel better." 2013 in my opinion will be remembered as "the year of stuff". This will be the year (because of the decision to go all in) that "stuff" becomes more valuable. It will become more valuable because the central banks will finally get their wish for inflation. This will be the year where their steady debasement which is now a full court press takes hold. The only question is whether or not we get any "bump" out of the economy or whether an immediate panic out of paper takes place. "Stuff" can be anything. It can be collections of stamps, coins or art, it can be vintage cars, guns or whatever. "Stuff" would include silos filled with grain, the farmland to grow it or even the machines to work the field. Once the "money" that has been and is promised to be created starts to "bleed" from the system the movement (just as a dam breaking) will start moving faster and faster as investors figure out what's happening. The flip side to "stuff" are what once upon a time were conservative investments. Anything that is fixed income (bonds of all sorts, fixed pensions and annuities) will suffer. When we go into the panic phase (I believe it will be this year) they will ultimately suffer 90% losses at a minimum when all is said and done. Rice will still be rice, land and tractors will still be land and tractors but it will take many more Dollars, Yen, Pounds and Euros to buy them. You don't even have to believe me, just listen to what the bankers are telling you. By hook or by crook, one way or the other we will get "inflation." The only problem is that as much money and credit that has already (and now promised "all in") been created, it is already enough to make a cup of coffee $20 or more. All it will take is the banksters getting their wishes of a "little" inflation. Remember, there can be no "exit plan" and there never was one!
Regards,
Bill Holter
Associate Writer for Miles Franklin
Read more Bill Holter Articles on the Miles Franklin Blog
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Gold Highlights
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BFI Wealth, Zurich - Swiss Annuities and Managed Accounts
Miles Franklin and BFI Consulting of Zurich, Switzerland, have partnered for the past two decades in offering access to offshore annuities and managed accounts. Born at roughly the same time in the early 1990s, both firms have successfully PROTECTED clients via quality, secure, private accounts holding PHYSICAL Precious Metals, annuities, and other managed products. BFI is a global leader in the sale and maintenance of Swiss annuities and privately managed accounts - particularly to U.S.-based clients; and through its Global Gold subsidiary - utilizing worldwide storage leader Via Mat - offers international Precious Metal storage services in Switzerland, Hong Kong, and Singapore. As with Miles Franklin's Canadian offshore storage program, Global Gold offers allocated storage OUTSIDE the banking system.
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Gold is Setting Up for a Massive Breakout in 2H 2013
Jordan Roy-Byrne, CMT | Jan 18, 2013
This piece expounds upon what we covered last week. In that piece, regarding Gold, we concluded:
If Gold is able to firm up here and now then it has a good shot to rally back to $1750-$1800 over the next few months. If we get the bullish scenario and a fundamental catalyst shift then expect Gold to break past $1800 in Q3. That would mean that Gold consolidated for two years, which would be its longest consolidation on record. The longer the consolidation, the more explosive the breakout.
Following that editorial, we noted for premium subscribers that various sentiment indicators continued to look favorable even as the market began to make some progress. For example, the daily sentiment index for Gold touched 6% yet Gold didn't make a new low. At the same time we saw a continued reduction in speculative long positions. Bloomberg reported that hedge fund long positions in Gold were reduced to the lowest level since August. Technically, take a look at the weekly chart. Gold seemed at risk below $1630 yet it closed above $1650 in each of the past four weeks. Now that Gold is starting to turn bullish all time frames (daily, weekly, monthly) it has a great chance to rally back to $1750-$1800 over the next few months and position itself one step closer to a breakout.
With that said, we want to show why Gold is setting itself up for an excellent breakout later this year. In the chart below we are focusing on two things: the price action and the volatility as measured by Bollinger band width (bottom rows). Have a look.
Thus far Gold has experienced three major breakouts and four major consolidations. The type of breakout depends on the preceding consolidation pattern. The strongest breakouts are born out of consolidations, which are tight in terms of price but long in terms of time. The 2004-2005 consolidation, which lasted 20 months, fits that profile. It had the strongest breakout of the three. Meanwhile, the other breakouts weren't too shabby.
The current consolidation is most similar to the 2004-2005 consolidation. It is 17 months old and will last two years unless it can blast through $1800 on the next try. Also, its tight range of $1550 to $1800 has remained in place. Furthermore, note the volatility on the various time frames (as measured by Bollinger band width). Two of the three readings are at eight-year lows while one is at a five-year low. The last time all readings were at multi-year lows was in 2005.
Gold does have potential measured targets of $2,050 and $2,250 but in our view those are only initial targets. A target of $2,250 is only a 25% advance. Even a 40% move (less than the first two breakouts) equates to $2,500. This sounds wildly bullish but the technical arguments are there and we are counting on another six to eight months of consolidation before the initial breakout. That consolidation will serve to eliminate any marginally weak hands and replace them with ardent bulls. After a two-year consolidation, those on board would be looking for far more than $2,000 or $2,200.
Continue reading on TheDailyGold.com
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Reliable Financial Advisors
In a world of heightened speculative and counterparty risks, finding someone you can trust may be the most important research you do. Miles Franklin does not sell stocks, but is frequently asked if we know of reputable, full-service brokers. WE DO NOT CONDEMN OR CONDONE EQUITY INVESTMENTS, but want investors with such interest to be honestly and competently handled.
In resource stocks, the folks at Sprott Global Resource Investments - managed by Eric Sprott and Rick Rule - are the best in the business. In various capacities, we have worked with Eric Angeli, Jeff Howard, Kenton Toews, Mishka vom Dorp, Jason Stevens, Anthony Marsh, and Andrew Jackson - all of whom are diligent, ethical, and knowledgeable. That style of business is indicative of the reputation Global has built over the past 25 years. You can feel comfortable with any of their brokers, reachable at 800-477-7853.
For all other stocks - including large cap gold, silver and other resource equities - Nick Shermeta, from Northland Securities here in Minneapolis, is as trustworthy and knowledgeable as they come. Nick is a Senior Vice President with more than 20 years experience, but will treat you as if you were his only client. You can reach Nick at 612-851-5908, or by email at nshermeta@northlandsecurities.com.
The common denominator is decades of Wall Street experience, which should give you comfort that well-seasoned and weathered hands are helping manage your portfolio. Notably, we do not receive compensation for these recommendations. We just want you to know that if they are good enough for us, they should be good enough for you too.
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GOLD RAMPED UP IN 2011 DURING THE DEBT LIMIT DEBATE AND CONFLICT. THE CONDITIONS ARE MORE EXTREME THIS YEAR, WITH MUCH ELABORATE DEFENSE IN PROGRESS. More amplified derivative applications (Interest Rate Swaps) and more global bond monetization by every major central bank, these factors differ from past episodes. While the effect might not be as sharp in 2013, the demand for gold might hit a high note as the ruin of money takes a quantum jump in a raised debt limit. While past events are useful prologue for future activity, something more sinister seems at work. The Boyz are doubling and tripling their naked shorts, amplifying their interest rate derivatives, running overtime in Exchange Stabilization Fund activity in the FOREX market, enlisting matched bond monetization initiatives by major central banks, seizing Arab gold, denying repatriation efforts of official gold, and far more that remains obscure behind the curtains. The situation is far beyond unmanageable at this point, the risks rising fast. The entire system is at risk of collapse, to be clear, with the risk ten times greater than it was in 2009, and far higher than it was in 2011. The point is valid on a Gold price response though, worth watching. Thanks to Darrell-D of Colorado for the contribution of annotated chart and reminder of the effect on the gold price. PAUL CRAIG ROBERTS BELIEVES THE FISCAL CLIFF IS A DIVERSION FROM THE BIGGER PROBLEM AREAS. THE FISCAL CLIFF DRAWS ATTENTION AWAY FROM THE DERIVATIVES TSUNAMI AND THE DOLLAR BUBBLE. THE GREAT RISK IS FOR A RAPID ABANDONMENT OF US$-BASED ASSETS BY FOREIGN ENTITIES. THE RESULT WOULD BE A RUN ON THE USDOLLAR ITSELF, AND A SYSTEMIC CATASTROPHE. Roberts has credentials from previous administrations. He actually believes the fiscal cliff challenge is a hoax designed to shift the attention of policymakers, the media, and the attentive public, away from huge problems to smaller focused versions. The automatic spending cuts and tax increases present a temporary solution that would reduce the deficit by an insignificant amount over ten years if Congress takes no action itself. It is nothing more than a double-barreled dose of austerity imposed upon what he identifies as a faltering and recessionary economy. The fiscal cliff pertains to small numbers when compared to the Derivatives Tsunami or to the USTreasury Bond market in a major bubble. The requisite $110 billion annual spending cuts could be accomplished very simply, by taking a three-month vacation each year from the USMilitary wars. Turn to the real problem. The Derivatives Tsunami and the USTBond bubbles are of a different order of magnitude. According to the Office of the Comptroller of the Currency, their 4Q2011 report stated that 95% of the $230 trillion in US derivative exposure was held by four US financial institutions: JPMorgan Chase Bank, Bank of America, Citibank, and Goldman Sachs. Prior to the totally insane repeal of the Glass-Steagall Act, aided by the lack of derivative regulation, JPMorgan Chase, Bank of America, and Citibank had been commercial banks, which took deposits and made loans to businesses and consumers, then purchased USTBonds with any extra reserves. The repeal of Glass-Steagall converted these honest commercial banks into hot shot gambling casinos. The result was a mountain of uncovered bets on interest rates, currency exchange rates, mortgages, prices of commodities, and stock indexes. The inherent volume went out of control. Just the derivative volume (gambling bets) of JPMorgan Chase Bank are equal to world Gross Domestic Product. The current state of financial affairs would have been considered beyond science fiction back when Roberts served as a USDept Treasury official in the Reagan Admin. The skein of bond monetization programs by the USFed is designed to cover the USTBond issuance and the toxic assets held by the big banks. The entire financial structure is hopelessly wrecked. The deception is enormous and significant. The Federal Reserve claims that the purpose of its massive monetization of debt is to help the economy with low interest rates and increased home sales. Such objectives are rubbish, so claims Roberts, agreed by the Jackass. The true purpose of the QE programs has been to support the prices of debt securities, in order to support the gigantic bank bets in the form of derivatives. This purpose is never openly stated. However, the USFed monetary policy renders regular and continued harm to the USEconomy by depriving savers of interest income, especially the retired and pension funds. Interest paid is actually lower than the rate of inflation. Roberts does not notice or direct attention to the other hidden effect to kill capital by raising the cost structure, a huge economic depressant that few economists or analysts are aware of. But Hat Trick Letter readers are fully aware, a constantly stated theme. The nasty effect overseas is to make USTBond holders nervous, in fact enough to bail out, or at least to halt new purchases. The grand risk is for a run on the USDollar by foreign sales of US$-based assets, primarily the USTBond. The only resort left to the USFed would be to support the USDollar by raising interest rates. The catastrophe would follow, as bondholders would be wiped out, carry trade players would be wrecked, and the borrowing costs on the USGovt debt would explode. The grand climax would be the implosion of the derivatives market, often called the financial nuclear event. The real interest rate has been stuck deeply negative for over four years. It powers the Gold bull market. Roberts concludes, "The hyped threat of the fiscal cliff is immaterial compared to the threat of the derivatives overhang and the threat to the USDollar and bond market from the Federal Reserve's commitment to save four US banks. Once again, the media and its master, the US government, hide the real issues behind a fake one. In human history, such a policy [to dismantle the social safety net] usually produces revolt and revolution, which is what the United States so desperately needs. Perhaps our stupid and corrupt policymakers are doing us a favor after all." See the UK Guardian article (CLICK HERE). Also refer to the Zero Hedge article (CLICK HERE) for background on the derivative market, its extreme leverage, and the teetering platforms. JPMORGAN FACES A COURT SANCTION FOR WITHHOLDING MADOFF DOCUMENTS. JPMORGAN WAS DEEPLY INVOLVED WITH THE MADOFF FUND FRAUD, HIDING THE EMPTY SHELLS. THEY EARNED FEES FROM FUND PROCESSING, AND EVEN WITHDREW INVESTMENT FUNDS IMMEDIATELY BEFORE THE MADOFF ARREST. EVIDENCE IS BEING KEPT FROM PROSECUTORS. THE BIG US-BANK IS SLOWLY REVEALED AS A CRIME SYNDICATE CENTER. THEY ARE THEREFORE QUALIFIED TO RUN THE FINANCIAL FUNCTION OF THE USGOVT. The inspector general to the USDept Treasury has threatened to discipline and sanction JPMorgan Chase for failing to turn over documents to regulators related to the Madoff Fund fraud. The Office of the Comptroller of the Currency is conducting the probe. The syndicate bank actually claims the information is protected by attorney & client privilege. The internal watchdog dismissed the JPMorgan arguments on privilege, stating the OCC could not do its function if banks were legally permitted to withhold information on that basis. Failure to produce the records would be regarded as a continuing purposeful impediment to the authority of the OCC, a sort of obstruction of justice. The Madoff fraud was cited as a $50 billion theft, later changed to $65 billion. My source indicates the fraud totaled $150 to $160 billion, a figure the US public would not tolerate. So it was edited downward in revision. The pressure on the Madoff case only adds to the pressure already felt by JPMorgan from the London Whale losses of $6.2 billion on interest rate derivatives, which also contain a giant lie (not sovereign European Bonds). The trustee liquidating the Madoff firm sued JPMorgan in December 2010, accusing the bank of actively aiding the fraud. The lawsuit is led by Irving Picard and demands damages of $19 billion. The case is under appeal. Team Picard claims JPMorgan had financial reports in its possession that clearly evidenced fraud. The criminal giant JPMorgan was the firm's primary banker for more than two decades. The bank benefited from Madoff accounts while it helped perpetuate Madoff's fraud by ignoring the red flags, and continuing to structure products and collect fees for their own enrichment, according to the lawsuit. JPMorgan probably is responsible for vast concealment of empty shells and flow of funds to the Swiss banks where the stolen funds still reside. The JPMorgan bankers earned an estimated $398 million in pretax profit from Madoff deposits from 1986 to 2008, according to a 2011 study by Linus Wilson of the University of Louisiana at Lafayette. The trustee's lawsuit also claims in direct accusation that JPMorgan withdrew $276 million in its own investments in feeder funds to the Madoff financial pyramid about three weeks before the highly publicized arrest of Madoff in December 2008. The criminal bank justified the withdrawal as a routine review of its hedge fund exposure. See the Bloomberg article (CLICK HERE). Recall that JPMorgan was deeply involved in the MFGlobal account thefts as well as the Peregrine account thefts of a rhyming nature. JPMorgan is a large crime syndicate organization that routinely skates after its large thefts. Subscribe to the Hat Trick Letter to read the full article.
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USA Going to Get Downgraded-Karl Denninger
January 21, 2013, at 1:28 pm
by Greg Hunter
By Greg Hunter's USAWatchdog.com
Dear CIGAs,
Financial analyst Karl Denninger says, "If you keep raising the debt ceiling willy nilly, you're going to get downgraded." Denninger thinks the latest talks in Washington will only kick the fiscal can down the road. He says, "The truth of what we have to do is still politically impossible." Denninger contends, "All you are seeing now is the tap dance around the fact we have to accept a 7, 8 maybe 10 to 15% fiscal contraction in GDP in order to come back into balance." Denninger says the sooner you take the hit, the better it will be because "the damage you take today is always less than the damage you will take if you kick the can and wait until tomorrow." Don't expect politicians to do the right thing-yet. Denninger says, "There is no stomach to put their jobs on the line . . . We need statesmen who will say I will get fired over this. . . . That's the price the country has to pay." Join Greg Hunter as he goes One-on-One with Karl Denninger of Market-Ticker.org.
 | | US Downgrade: No Stomach to Do the Right Thing - Karl Denninger |
More...
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Defending the Tenth Amendment
Ron Paul Was Right!
By Jeff Siegel
Sunday, January 20th, 2013
The Tenth Amendment doesn't matter.
At least, that's how the thugs in Washington see it...
Back in November, I warned that despite a new Colorado law that allows for the legalization of marijuana for use by adults, residents of the Centennial State can still face prosecution, fines, and jail time if the mood strikes anyone in the Obama administration.
Don't believe it?
Well, tell that to Aaron Sandusky, a law-abiding California resident who was just sentenced to ten years in prison for operating three medical marijuana dispensaries in a state that allows such operations to exist.
Guns Drawn
In 1996, California legalized medicinal marijuana and authorized nonprofit cooperatives as dispensaries in 2004. And for years, Washington stayed out of it, just as it should.
But in 2011, the Feds decided to swoop in with guns drawn and shut down perfectly legal operations per California state law - a law that Washington decided was not relevant and just didn't work with its continued and horribly failed $1 trillion War on Drugs.
Folks, that's what it all boils down to.
In an effort to continue one of the deadliest and costliest wars in U.S. history, Washington huffed and puffed and reminded California that there really is no such thing as states' rights - regardless of what is guaranteed in the Tenth Amendment of the U.S. Constitution.
Ignore the Tenth Amendment
Speaking to the jury in Sandusky's case, the judge made the following statement:
Congress has defined marijuana as a schedule 1 controlled substance, making it illegal under federal law. You must disregard any state or local law to the contrary.
Translation: Ignore the Tenth Amendment!
According to a report from AllGov, the defense was discouraged from arguing that Sandusky was obeying California law, using public statements made by Attorney General Eric Holder and President Obama, or citing FBI agents who, they said, had assured Sandusky his actions were legal.
Of course, this isn't the first time the Feds have disregarded state marijuana laws and trampled the rights of hard-working entrepreneurs...
It wasn't long ago when 34-year-old father of two Matthew Davies found his legal marijuana growing operations raided by federal agents. Although Davies had complied with all of California's laws, Washington didn't care.
And now, the Obama-appointed U.S. attorney for California's Eastern District is trying to get him to agree to a plea that would include a minimum of five years in prison.
There was an interesting analysis of this case in the Atlantic last week, where writer Conor Friedersdorf wrote:
Let's set the legal questions aside and think through the cost of this course:
- The opportunity cost of focusing on other crimes
- $235,000 in incarceration costs
- Two young girls with an absent father
- Substantial lost tax revenue from his operation
- Other marijuana sellers go underground
- Less savory drug dealers, including violent cartels, get more business
- More of a hassle for sick medical marijuana patients to get their prescriptions filled.
Doesn't that seem awfully 'expensive' when the only real benefit is sending the message that you can't get away with openly flouting federal drug laws?"
I agree one thousand percent.
And although I personally have no use for marijuana myself, such a cost associated with these types of harassment cases is infuriating, given the overwhelming economic problems our nation faces today.
The Government Doesn't Have the Authority
Back in 2007, at a town hall meeting in Durham, New Hampshire, Congressman Ron Paul made a statement about this issue that I believe everyone in Washington should not only memorize, but use it to guide their decision-making process when it comes to state's rights and the issue of marijuana legalization:
I would absolutely never use the federal government to enforce the law against anybody using medical marijuana. There are a couple of reasons for that. We talk about medical marijuana and, as a physician, it's controversial in conventional medicine. I happen to believe that it is probably very, very helpful, and I bet you there are a few testimonials for that. But even in the legislative sense - in the political sense - the federal government doesn't have this authority.
I mean, if a state especially comes in and says you can use it, like some of these states have, then for the federal government to come in and say that we are going to override the state law, even if it's just a modest legalization, and override this law, that's an offense just on the issue of states' rights. But how can people do this? How can an individual talk to you like that, and still say, 'Well, I'm a compassionate conservative - I want you to suffer'?
That's what they're saying. You know, it's outrageous.
Just something to think about as a handful of law-abiding citizens gear up to defend themselves against the heavy hand of a few power-hungry bureaucrats, many of whom are the real criminals here.
Live honorably, live free...
Jeff Siegel
for Freedom Watch
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Legislatures Attacking Your Gold and Silver Rights!
By Brittany Stepniak
Sunday, January 20th, 2013
The holidays are over, winter storms are setting in, and cabin fever has many of us suffering from winter blues.
To break out of the seasonal slump, I decided to plan a weekend snowboarding trip. When I checked my online bank account to pay mid-month bills and put some cash aside for the trip, I saw it: my first paycheck of the year - with a 2% pay cut, courtesy of the federal government.
Happy New Year to you jerks, too!
No wonder everyone's feeling a little dismal these days.
The root of the winter blues...
On January 2, 2013, Obama signed the American Taxpayer Relief Act of 2012 into law.
This essentially translates to tax rates increasing for almost everyone - whether it's income tax rates for the wealthy, or employee and Social Security tax rate hikes for working individuals.
Bottom line: Taxpayers are giving back a lot more than their "fair share" to the government leech this year.
So the least productive Congressional unit since the 1940s is being rewarded for underperformance, while the rest of us are receiving hundreds of dollars less each month - and, worse yet, risking termination at companies forced to downgrade due to economic turmoil.
National polls show Congress has a historical disapproval rating of 85%, yet Obama is still rewarding them with raises. The average lawmaker received a pay increase of just $900.
The Public Policy Polling just released a shocking report outlining just how unpopular Congress has become - outranking cockroaches, traffic jams, and even the notoriously-detested band Nickelback in popularity.
And our elected officials aren't winning any approval ratings with the latest news from the Midwest...
New bill threatens your rights to precious metals.
Legislatures in Illinois have introduced the "Precious Metal Purchasing Act."
Critics argue the act violates certain liberties by enforcing new rules, regulations, and even fees for precious metal purchasers.
According to Gary North with the Tea Party Economist, the new bill means precious metal purchasers would be required to obtain proof of ownership, create a record of the sale, and verify the identity of the seller - or face civil penalties.
Additionally, buyers would not be allowed to pay for the precious metals in cash, but would be required to properly document the alternative method of payment.
Essentially, all gold and silver purchases amounting to $500 or more would be tracked for up to five years and monitored with rules subjecting buyers to fines if they don't adhere to the new strict legislation.
At this time, the fate of the bill remains in the hands of the House.
This is sad news for private gold and silver owners - and sadder yet for American freedom fighters - because this proposal has taken the government one step closer to the legal ability to confiscate your precious meals, as well as your home and farmland.
Exercise your right to private ownership now while you still can.
Money may be king, but it's still a serf to inflation.
Stay ahead of the curve by hedging your portfolio with safe haven assets. Just be sure to secure and maintain private possession of precious metals, while you still can.
Now, I want to end this piece on a positive note by saying this isn't the end...
On the contrary, this is the dawn of a new way of thinking to support a better way of investing and of protecting our wealth and our families.
We must be comfortable with self-reliance and confident and ready to do our own due diligence. And investors must educate and inform themselves on the "system" if they're going to try to beat it and truly grow and protect personal wealth.
One way to do this effectively is by picking up on macro trends before Wall Street does - and hedging inflation in innovative ways.
It's also time to take back some of the faith we've instilled in our government bodies over the last several decades.
We've been holding on to the hope that Congress and our country's leaders have our best interest at hearts - that they are working tirelessly to find a solution to ease the pain the threats to our livelihoods and our rights as citizens have been facing... but this couldn't be further from the truth.
And we are dedicated to bring you the news and investment ideas to help you be your own master, personally and financially.
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David's Mail Box
David,
Since you don't take my advice on the economy and America's greatness, here is some wise advice you may follow..
Here are the Five Rules for Men to Follow for a Happy Life that Russell J. Larsen had inscribed on his headstone in Logan, Utah.
He died not knowing that he would someday win the "Coolest Headstone" contest.
FIVE RULES FOR MEN TO FOLLOW FOR A HAPPY LIFE:
1. It's important to have a woman who helps at home, cooks from time to time, cleans up, and has a job.
2. It's important to have a woman who can make you laugh.
3. It's important to have a woman who you can trust, and doesn't lie to you.
4. It's important to have a woman who likes to be with you.
5. It's very, very important that these four women do not know each other or you could end up dead like me.
Take that!
Backwoods Jack
Jack,
Thanks! That's the most sensible thing you've said in years.
Regards,
David
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David -- I was born in 1943, and can relate to your rant.
Ronald B. US Army Vietnam 1965-67
Ron,
Thanks for your comments. Most of us early 40s guys do understand the difference.
David
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Dear Mr. Schectman,
I enjoyed your "rant" about the lack of energy we are now experiencing. The difference now, however, is that we have the "all volunteer" military force, commonly known throughout history as a mercenary army. As I see it, that is the major disconnect with the discontent of our generation and the lack of it being focused now. We have our beloved Nixon to thank for the concept of "all volunteer". The consequences of this decision can be seen in the bloated costs of our "defense" mechanism, as well as seeming indifference to the ill fated military adventures going on around us. The net result of all of this is more and more loss of our freedoms and less and less will to resist the dire effects of this concept, all in the name of "security". The timely warnings you have issued about economic disaster can easily be coupled with the "all volunteer" military theory. History shows again and again that this idea always ends in chaos and ruin. Gibbon's "Decline and Fall of the Roman Empire" illustrates this vividly. Once again, thank you so much for your wisdom. Nick Gold
Nick,
You're preachin' to the choir!
Best,
David
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About Miles Franklin
Miles Franklin was founded in January, 1990 by David MILES Schectman. David's son, Andy Schectman, our CEO, joined Miles Franklin in 1991. Miles Franklin's primary focus from 1990 through 1998 was the Swiss Annuity and we were one of the two top firms in the industry. In November, 2000, we decided to de-emphasize our focus on off-shore investing and moved primarily into gold and silver, which we felt were about to enter into a long-term bull market cycle. Our timing and our new direction proved to be the right thing to do.
We are approaching $200 million a year in precious metals sales. We are rated A+ by the BBB. We are recommended by many prominent newsletter writers including Doug Casey, David Morgan, Ron Hera and LeMetropole Caf�. Our reputation for service, education, quality product and pricing is outstanding. 
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Readers are advised that the material contained herein is solely for informational purposes. The author and publisher of this letter are not qualified financial advisors and are not acting as such in this publication. The Miles Franklin Report is not a registered financial advisory and Miles Franklin, Ltd., a Minnesota corporation, is not a registered financial advisor. Readers should not view this publication as offering personalized legal, tax, accounting, or investment-related advice. All forecasts and recommendations are based on opinion. Markets change direction with consensus beliefs, which may change at any time and without notice. The information and data contained herein were obtained from sources believed to be reliable, but no representation, warranty or guarantee is made that it is complete, accurate, valid or suitable. Further, the author, publisher and Miles Franklin, Ltd. disclaims all warranties, express, implied or statutory, including, but not limited to, implied warranties of merchantability, fitness for a particular purpose, accuracy and non-infringement, and warranties implied from a course of performance or course of dealing. The reader accepts information on the condition that errors or omissions shall not be made the basis for any claim, demand or cause for action. Past results are not necessarily indicative of future results. Any statements non-factual in nature constitute only current opinions, which are subject to change. The author, publisher, Miles Franklin, Ltd, and their respective officers, directors, owners, employees and agents are not responsible for errors or omissions or any damages arising from the display or use of such information. The author, publisher, Miles Franklin, Ltd, and their respective officers, directors, owners, employees and agents may or may not have a position in the commodities, securities and/or options relating thereto, and may make purchases and/or sales of these commodities and securities relating thereto from time to time in the open market or otherwise. Authors of articles or special reports contained herein may have been compensated for their services in preparing such articles. Miles Franklin, Ltd. and/or its officers, directors, owners, employees and agents do not receive compensation for information presented on mining shares or any other commodity, security or product described herein. Nothing contained herein constitutes a representation, nor a solicitation for the purchase or sale of commodities or securities and therefore no information, nor opinions expressed, shall be construed as a solicitation to buy or sell any commodities or securities mentioned herein. Investors are advised to obtain the advice of a qualified financial, legal and investment advisor before entering any financial transaction.
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