Ron Paul on Fox Business Today: We Are Getting Close To A Serious Crisis

I bet at this point in time, everyone reading this wishes they had supported Ron Paul's candidacy for President in 2008.  Be that as it may, Congressman Paul was on Fox Business today to chat about the coming currency crisis that will hit this country.  Congressman Paul states that we'll be lucky if we can go 2 or 3 more years without a currency crisis, which means we're going to have a lot of inflation.  He says he's been buying gold since 1971 (Nixon closed the gold window) at $35/oz and he's still buying gold.  And he explains that gold is a good insurance policy to protect your family.  Here's the video:



Got gold?

Is Russia Vying to Buy the IMF Gold For Sale?

The First Deputy Chairman of Russia's Central Bank stated in an interview with Izvestia, one of Russia's most circulated newspapers, that the Central Bank wants to increase its gold holdings.  Here's the quote from Bloomberg News, which was confirmed by an official at the Central Bank (Bank Rossii): 

Russia’s central bank wants to increase the share of gold in its international reserves, First Deputy Chairman Alexei Ulyukayev said in an interview published in Izvestia today. His comments were confirmed by a Bank Rossii official. Here's the Bloomberg link:   Link

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In January, the latest month for which data is available, the Russian Central bank increased its gold holdings by 800,000 ozs (approx. 22 tonnes), or 4.1%, to 20.5 million ounces (approx. 582 tons).  This represents roughly 5% of Russia's foreign reserves.  Typical Central Bank gold holdings globally are around 10% of reserves.  When the world was on the gold standard, Central Banks held 40% of their reserves in gold.

Russia's gold holdings have increased 57% since Jan 2007 and 22% from a year ago.  There is no doubt that Russia is seeking to rapidy accumulate gold.  Seems to be an Eastern Hemisphere trend.  Here's is graphic portrayal of the growth in Russia's gold reserves thru November 2009.  This is from Richard Nachbar's http://www.coinexpert.com/:

On another note, the ECB showed no change in its gold holdings for the 4th week in a row.  The ECB has been a steady seller of gold for over a decade and this is the first time in the 11-year history of the Washington Agreement, which regulates ECB gold selling, that the ECB has remained dormant with respect to selling gold. 

More Precious Metals Pornography...

Rumors are starting to swirl around that Germany is getting ready to lead a bailout of Greece.  Apparently Germany is working behind the scenes to head off speculators from profiting on any bailout.  As per a Reuters article yesterday:  "Germany has moved to identify speculators in Greek debt to try to prevent them from profiting from any bailout of the euro zone country's ailing economy, a source with direct knowledge of the matter told Reuters...While publicly Chancellor Angela Merkel has insisted that Athens solve its own problems and there has been anger over Greek comments about war claims dating back to the Nazi occupation, privately German officials say they have an emergency plan. 'There is a moral responsibility on Germany (to help Greece) given European history and they know it,' said Olle Schmidt, a European liberal parliamentarian. 'Together with others, they will be obliged to help.'"

Today Reuters was carrying this story:  "Ever-cautious Chancellor Angela Merkel has made comments which could be seen as preparing the ground for some sort of aid and in a clear shift, some influential newspapers have started running editorials arguing Germany may have to act."  Here's the link:  German bailout imminent?

IF Greece is bailed out, and it is my view that if Germany does not lead one, then the U.S., via the IMF, will spearhead a bailout because of AIG's known CDS exposure, expect that the markets will party hard to the upside, especially gold, silver and mining stocks.  I believe part of today's ebullience in the precious metals market (HUI +2.57%, gold +1.45%, silver +2.79%) was related to these news reports.  The reason this development would be positive for the precious metals is that any kind of bailout like this means there is a de facto devaluation of the fiat currency involved.  In this case primarily euros, but to the extent the UK and the U.S. are involved, secondarily sterling and greenbacks. 

With this as a backdrop, please enjoy the chart below, provided by DC of New Jersey and created by Carl Swenlin of Decisionpoint.com (green commentary is mine):

(click on chart to enlarge)

AIG Is Raising the Salaries of Top Executives...

Make no mistake about it, this pay raise is coming from your pocket and being put into the pockets of the crooks at AIG, with the approval of the crooked Obama Administration.  Obama's integrity is now in question.  Recall, it was just last week that AIG reported an $8 billion dollar loss (remember, the real loss was likely a lot higher if you adjust assets to market instead of to fantasy)  AND had to beg the Government for more money.  This is your money...from Clusterstock.com: 

Fresh off of another round on eye-popping losses and hints that it may need more taxpayer funds, AIG is preparing to boost the salaries of some of its highest paid executives...Bloomberg's Margaret Brennan broke the news that Ken Feinberg, the Obama adminsitration's Pay Czar, may allow AIG to raise the compensation levels for some of its executives.  LINK

I don't know about anyone else, but this makes me want to throw up...

United States: See Your Future...

Through the colorful writing of SocGen's erudite and perceptive Albert Edwards:

Either governments pursue the path of fiscal rectitude (although it is a bit late for that) and we subside back into recession or we debauch the currency through deficits, the printing press and devaluation.

The FT Alphaville blog offers a fantastic American, de-Anglicized translation of Edward's wisdom: 

SocGen’s Albert Edwards says everyone should just relax and stop worrying about GBK because in an Ice Age a weak currency is the escape route of choice from the deflationary quicksand.

What's ironic is that the American public and policymakers seem to completely lack the understanding that, since 2002, the U.S. dollar has experienced substantial devaluation, with the dollar index plummeting from 120 to a low of 71 and a current reading of 80.66.  That's drop of 41% from high to low and 33% from high to current.  Remember, this drop is measured against a basket of global currencies, predominantly euros, yen and sterling.

Anyone want to take the position that a drop in the U.S. dollar of that magnitude is NOT debasement?  Our "future" is here and now.  Prepare yourself for serious price inflation ahead.

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Is The Inevitable Going to Start This Year?

I was going to post a blog this weekend which stepped through of the economic/political evidence showing why I believe the "cake eaters" might start to get testy soon (i.e. civil unrest may foment).  As I'm sure everyone is well aware, the State budget cuts in education in California prompted some protesting in Berkely which required riot police, from Clusterstock.com:  Let Them Eat Cake!

Here is why I believe the momentum has started to unfold in the direction of these public unrestful protests spreading nationwide:  There is now an organization that has established a nationwide call to protest the deep cuts in public education in every State:   No, We Won't Eat Cake

I'm sure almost no one reading this was aware, given the sorry state of U.S. mass media, that the Chicago Public School System is facing a $1 billion defiicit and there will be deep cuts in education:  Chicago Tribune.

I would like to add that, for those old enough to remember the MLK assassination/Viet Nam protests in Chicago in 1968 which ultimately helped undermine Humphrey's Presidential campaign against Nixon, recall that student civil unrest started in Berkely and then spread to Chicago. 

Something to ponder as Obama/Pelosi/Reid try to jam a healthcare bill up our ass that more than 60% of the country opposes...

Are Gold/Silver Getting Ready to Rock n Roll?

Let me preface this with the fact that every time I get "in my bones bullish," the cartel manages to pull out a big surprise attack on the metals - so maybe this is a good contrarian indicator. Having said that:


I think we're on the cusp of a big move up in the metals here - I can feel it in my bones. Gold has tested the inverse HnS breakout area (1030 area - not exactly but it did hit a 1044 intra-day low which is close enough for Government work and IED bombs), it weathered the Fed/IMF smash attack and it is really weathering the euro/pound cliff-dive well. When Greece is resolved, it will create an explosion higher in the euro and gold will do a moonshot. I think this is partially why we're seeing the commercial long side grow. Gold could well be on its way to hitting its technical objective from breaking the inverse HnS of $1350 area. From there, who knows...we're also going into what is a stronger seasonal period.