Sometimes I wonder how we are going to pay back the Chinese all the money we’ve borrowed.  They must be having second thoughts about all those T-bills they have.  We bought Alaska from the Russians when the Czar ran into financial difficulties.   I wonder….

Even the NY Times ‘gets it’: The Federal Reserve and the Treasury announced $800 billion in new lending programs on Tuesday, sending a message that they would print as much money as needed to revive the nation’s crippled banking system.

www.nytimes.com/2008/11/26/business/economy/26fed.html?_r=1&th&emc=th

Bloomberg: Fed Risks ‘Spitting in the Wind’ With New $800 Billion Pledge

The Federal Reserve’s new $800 billion effort to combat the financial crisis is designed to make credit more accessible to shaken consumers who aren’t sure they want more debt. Households and lenders may not respond much because of the wealth destruction from plunging property and stock values, and the deepening economic slump, economists say. That means banks may end up returning the Fed’s new liquidity through deposits at the central bank.

“We are sort of spitting in the wind,” said Michael Darda, chief economist at MKM Partners LP in Greenwich, Connecticut. “Banks won’t be throwing a lot of loans out there when they fear — rationally– those loans may not be paid back.”…

The Fed responded yesterday, invoking authority first granted in 1966 to buy $500 billion of

mortgage-backed securities issued by Fannie Mae, Freddie Mac and Ginnie Mae.

www.bloomberg.com/apps/news?pid=20601068
&sid=ag3TJyGD73qk&refer=home

We have noted numerous times that despite Wall Street and monetarist lore, the Fed did NOT tighten credit after the 1929 Crash and in fact pumped furiously until Q3 1931. At that time global gold runs and US statutes prevented the Fed from creating more credit – until Q2 1932. Interest rates only increased modestly over those two quarters…Additionally, the NY Fed, which at the time acted independently of the Fed, also pumped furiously.

When you confront those that try to blame the Fed for causing the Great Depression by contracting the money supply with the truth, the academicians’ retort is: “They could’ve monetized long bonds.”

Back then the US government had little long-term debt, so that excuse is lame. Now however, Great Depression ‘expert’, Ben Bernanke, is monetizing long bonds via his GSE and mortgage bond buying.

If recent measures, schemes and nationalizations fail, the Fed will have destroyed itself. But it is bigger than that. US solons have bet the ranch – the Treasury, the dollar, US bond market, the political system and economy - on hyper-credit and nationalization.

The FT: Merkel criticizes US over crisis Angela Merkel, the German chancellor, turned the tables on her international critics on Wednesday by accusing the US and other governments of making “cheap money” a central tool of their economic management, thus planting the seeds of a similar crisis in five years. “Excessively cheap money in the US was a driver of today’s crisis,” she told the German parliament. “I am deeply concerned about whether we are now reinforcing this trend through measures being adopted in the US and elsewhere and whether we could find ourselves in five yearsmfacing the exact same crisis.”

www.ft.com/cms/s/0/e361d344-bc0c-11dd-80e9-0000779fd18c.html

Merkel is right and wrong. The US’ reckless monetary policy and widespread nationalizations will create a bigger problem later but it probably won’t take five years to appear and the crises will be different.

2

Recent history validates Merkle’s prophesy. After the bursting of the Great US Stock Bubble and 9/11, Easy Al and US solons feared a depression. So Easy Al drafted Great Depression academician, Ben Bernanke, and the Fed embarked on the reckless monetary policy and lax regulation that produced the housing bubble and the ensuing destruction of the US financial system.

Now, Easy Al’s mind-addling credit creation looks like a temperance movement compared to Ben. PS –

We’ve heard numerous reports that Easy Al is telling anyone that will listen to him that the mess isn’t his fault – he was just listening to Ben. So you might see this published by an Easy Al-friendly reporter soon. Ambrose Evans-Pritchard: Citigroup says gold could rise above $2,000 next year as world unravels Gold is poised for a dramatic surge and could blast through $2,000 an ounce by the end of next year as central banks flood the world’s monetary system with liquidity, according to an internal client note from the US bank Citigroup.

The bank said the damage caused by the financial excesses of the last quarter century was forcing the world’s authorities to take steps that had never been tried before. This gamble was likely to end in one of two extreme ways: with either a resurgence of inflation; or a downward spiral into depression, civil disorder, and possibly wars. Both outcomes will cause a rush for gold. “They are throwing the kitchen sink at this,” said Tom Fitzpatrick, the bank’s chief technical strategist…

“The world is not going back to normal after the magnitude of what they have done. When the

dust settles this will either work, and the money they have pushed into the system will feed though into an inflation shock. “Or it will not work because too much damage has already been done, and we will see continued financial deterioration, causing further economic deterioration, with the risk of a feedback loop.

www.telegraph.co.uk/finance/comment/ambroseevans
_pritchard/3526645/Citigroup-says-goldcould-rise-above-
2000-next-year-as-world-unravels.html

Tain’t no joke. Some years ago, motorcycling at 65 mph on the Long Island Expressway, out East towards the Hamptons…felt like a bullit hit my chest. Darn Bumble Bee hit me head on in the upper chest…then fell down, stunned into my lower chest. So, I am driving one handed and swatting, crushing with the other hand where I think it is. about a mile later I hear this buzzing noice and say OH NO!~  Sucker got me big time and it was tough to keep control. Heavy Traffic and all.

In the recent past personal financial success was more dependent upon “who you know” … in the near future, personal financial success will depend more on “what you know”.

Those who understand international economics and politics, and also understand the financial markets will be the few survivors over the course of the next few years - this will likely be less than 5 percent of the total world population.  Most who visit this site will be part of that 5 percent group.

Looks like the dollar bulls are trying to pull themselves out of  downward pressure in hopes to make another move up as gold pushes higher, seen this before a few yrs ago when they both went up. I’m guessing they will try to out persist the gold bulls in hope they give up. But dollar chart ‘as far’  still doesn’t look good, and the Dow and S&P stocks trying to recop from  last dollar move, so wonder what their up to.

“There is only a relatively small group of investors who very seriously believe that there is a high level of risk that the (financial) system could break down. You only need a relatively small group to believe this to move the price of gold.” In other words, the metal’s price behavior reflects the trivial obsessions of a discredited fraction of investment opinion.
-Alan Greenspan

….Alan…if you are out there lurking….the least you can do is take possesion of a gold and silver december contract !…………….

……..anybody think he has gold somewhere ?

It is absolutely inconceivable that the bonds are rallying (disappearing yields) due to a “safe haven flow of funds” when their risk of default is being assessed as being at an all time high!!! What is wrong with this picture? It seems to me that the FED is secretly buying the Govt Debt to make way for the trillions of new debt issues coming. They apparently will now stop at nothing to prop up the system. It is a complete and utter farce.

The dollar is the last line of defense. One little detail they have omitted to pay attention to is that a Reserve Currency is meant to be “stable” and the bonds issued in that currency are meant to be “stable”. These instruments are not meant to move in the space of a few hours in trading ranges usually exhibited by dot.com stocks….but then again they have the fundamentals of many erstwhile dot.com stocks so perhaps it is appropriate! The CDS insurance cost is a reflection of the highly suspicious market moves which are uncharacteristic of instruments that are supposedly safe! Despite the rallying bonds the US Treasury market is a pyramid standing on its tip. It is stable while nobody moves….but who will try to jump off it first?

There is no credit default swap insurance on physical metals!
Cheers
Adrian

Dave from Denver…

This is remarkable

The risk premium that market is assigning to U.S. Government bonds is now wider than the risk premium the market was using price the highest rated Corporate bonds as recently as November 2007:

The spread or risk premium on U.S. Treasury credit default swaps hit record highs on Wednesday as markets digested the scale of U.S. government programs to buy various consumer loans and related securities.

Ten-year U.S. Treasury CDS widened to 54.7 basis points from Tuesday’s close of 50.0 basis points, according to credit data company CMA DataVision.

Five-year Treasury CDS jumped to a record 52.0 basis points from Tuesday’s close of 47.50 basis points, it said.

What this is saying is that the market is assessing the probability of a U.S. Govt default at a higher rate than was being assigned to the highest quality corporate debt just 12 months ago. Incredible.

***

02:08 Foreign banks want Treasury to give them same tax breaks American ones are getting - NYT
The banks — including UBS (UBSN.VX), Deutsche Bank (DBK.GR), Credit Suisse (CSGN.VX), Royal Bank of Canada (RY.CN), and HSBC (HSBA.LN) — argue that their US operations involve the same mortgage-related issues that caused Treasury to give hundreds of billions of dollars of breaks to their American counterparts in the $700B rescue package. They also argue US commercial law and tradition prevent their being discriminated against. The Institute of International Bankers is pressing the case on the banks’ behalf.
Reference Link (registration required)
* * * * *

…………….Looks like China has finally decided to trade its fast depreciating Paper for good old salt of the earth metals….which actually have some use…and require some effort to extract and refine….Maybe the World will come to its senses and value metals over Paper in a whole new ratio…

…….as we know they also like Gold !……………..looking for 4′000 Tons of it ……..plus that much again in ewlery I bet !

…………..I think we will all have to learn Mandarin !

……….what ever happened to Taiwangold ?…………..wish we had a GT correspondent in China !

…..calling all Chinese Lurkers…..we need Mandarin Lessons………(is that the official language …………….I bet there are a Lot of Dialects though with many hundeds millions of speakers…….

Like the moose hunter, it’s a preoccupation with size. Maybe thats it, their mentally challenged.

“big yellow grasshopper…”   LOL!

One hot summer day I was cruizin’ with my shirt open at only 50 mph.   Caught a June Bug (size of a 12ga. slug, for those who don’t know) in the gut that knocked the wind outta me.  Had to pull over until I could breathe again… and button up the shirt.

ref: DeCoding_Ferrera - 8..
2_p .. { Price = [ ( Aspected ) Time ] Squared .. } ..

China looks at buying ‘cheap’ base metals as strategic reserve

Reports suggest China is considering buying perhaps $3-$4 bn worth of base metals on the open market as state and commercial reserves to help boost economy.

Author: Polly Yam
Posted:  Friday , 28 Nov 2008
HONG KONG (Reuters) - 

China is looking at buying base metals as state or commercial reserves to take advantage of the lowest prices for years and bolster weak demand, industry sources said on Friday.

They said Beijing may be considering at least two proposals — one for all base metals and another just for copper and aluminium. The metals could be purchased by the State Reserve Bureau (SRB) or commercial entities controlled by the government.

http://tinyurl.com/56ud5c

Thanks my friend, that helps alot. 

that motorcycle is set up to prevent vertically challenged folks from “borrowing” it. also, it may well be that the rider can do a handstand during a collision and avoid contact until he has traveled a significant distance through the air. perhaps he has a bag to hang between the risers. he could carry a large cooler of beer and be within easy reach.

in all probability, the rider is mentally challenged and thinks “cool” is far superior to reasonable safety. i want to see him ride through oklahoma in the summer and see his reaction to a big yellow grasshopper in his armpit at 70 mph.{G}

rno

Been meaning to post and so how much I appreciate your photos, especially your mountain bike expeditions, as I do that myself, you really have it right…its the journey…we all lose sight of that from time to time…Regards Silvertri