Bearish News

“The last duty of a central banker is to tell the public the truth.”

Alan Blinder

“When a man has so far corrupted and prostituted the chastity of his mind as to subscribe his professional belief to things he does not believe, he has prepared himself for the commission of every other crime.”

Thomas Paine

As the US Federal Reserve System approaches its 100th Anniversary in a few years, and as central banks and their political allies around the world promote the bailout and enrichment of the biggest banks and wealthiest individuals, to be paid for by the impoverishment and sacrifice of the people, it might be well to remember the lessons of history with regard to a fiat currency controlled by private corporations under the guise of an ‘independent monetary authority.’

The paper system being founded on public confidence and having of itself no intrinsic value, it is liable to great and sudden fluctuations, thereby rendering property insecure and the wages of labor unsteady and uncertain.

The corporations which create the paper money can not be relied upon to keep the circulating medium uniform in amount. In times of prosperity, when confidence is high, they are tempted by the prospect of gain or by the influence of those who hope to profit by it to extend their issues of paper beyond the bounds of discretion and the reasonable demands of business; and when these issues have been pushed on from day to day, until public confidence is at length shaken, then a reaction takes place, and they immediately withdraw the credits they have given, suddenly curtail their issues, and produce an unexpected and ruinous contraction of the circulating medium, which is felt by the whole community.

The banks by this means save themselves, and the mischievous consequences of their imprudence or cupidity are visited upon the public. Nor does the evil stop here. These ebbs and flows in the currency and these indiscreet extensions of credit naturally engender a spirit of speculation injurious to the habits and character of the people. We have already seen its effects in the wild spirit of speculation in the public lands and various kinds of stock which within the last year or two seized upon such a multitude of our citizens and threatened to pervade all classes of society and to withdraw their attention from the sober pursuits of honest industry.

It is not by encouraging this spirit that we shall best preserve public virtue and promote the true interests of our country; but if your currency continues as exclusively paper as it now is, it will foster this eager desire to amass wealth without labor; it will multiply the number of dependents on bank accommodations and bank favors; the temptation to obtain money at any sacrifice will become stronger and stronger, and inevitably lead to corruption, which will find its way into your public councils and destroy at no distant day the purity of your Government.

Andrew Jackson, Farewell Address, 1837

Guest post by Jesse of Jesse’s Cafe. Re-published with permission.

Analysis of the financial/debt side of Greek Debt situation.Who made the loans, and why they won’t take losses.

Via RT — Wish AP coverage was so blunt.

In the clip below, Mr. Faber says gold and silver may fall over the next 3 months, as the end of QE2 slows the flood of Fed liquidity. He “wouldn’t short” the metals, and is “accumulating gold”.

Offers fascinating perspective on Chinese reverse-merger stocks, and how the situation is similar to early industrial America where, “the foreigners got fleeced, constantly”.

He reiterates that QE3 will come, but not as early as some would like. The Fed needs markets to fall a bit first. Oil (consumers feel most), gold/silver (unofficial inflation gauges), stocks (EEK – My 401k is dropping, print!). Worth watching (shot last week):

I do wonder how low silver could go this year, before QE3 comes to the rescue fall/winter (best guess). In 2008 silver surpassed the $20 mark, only to be knocked back down to ~$9 by the credit crunch. Could silver retrace as much this time? I don’t think it’s all that likely, or I would’ve sold some physical.

Inflation is higher now, meaning the Fed will have a tougher time selling QE3. Will markets need to drop further, to compensate? Oil markets are buying the new deflation theme, thanks in part to that perfectly-timed strategic reserve release.

Then again, silver inventories are pitifully low at COMEX. Is a mass squeeze on naked shorts really possible? I don’t know. So many factors to consider.

Gold Daily and Silver Weekly Charts – La Douleur du Monde – Most Likely to Go Super Nova

By Jesse of Jesse’s Cafe Americain

“It appears that there is an undeliverable force heading towards an unmanageable object.”

At some point the shysters will lose control of the monetary papier-mâché which they have created. And the subsequent reaction could be epic, with the almost inevitable force of nature, like a tsunami rolling in.

Only a few people understand this. So it could be quite the surprise to many.

In the meantime the bankers and politicians are scrambling for the goodies pouring out of the financial piñata which they cracked open in the financial crisis.

The banks have plenty of gold to lease into the bullion banks, and then on into the markets and as collateral for leveraged paper obligations. But they are running out of silver, which causes me to believe that the silver cartel will break first, and will lead the way higher, as it has been doing.  A handful of Too Big To Fail Banks seem to be short more silver than can possibly be delivered without incurring terrific losses, even by today’s distorted standards.  From the looks of it, it appears that there is an undeliverable force heading towards an unmanageable object. Further complicating matters is the possibility of a magnitude 9.6 sovereign debt earthquake in the markets.

Unless there is some forced settlement, some draconian government intervention, silver appears to be a leading candidate for the manipulated market most likely to go super nova.

If the equity market does not fall apart over Greece et al., I would imagine that the trading desks will try to stand on the metals until a little closer to quarter end, then its elevator going up. But watch out for a Greek related problem. I am not sure how the markets might react to this if it really is another Lehman like event. So as you might expect I am running a paired trade, and net short into the close.

The dollar chart is a big problematic. I can make a scenario for a break either higher or lower from the chart. I think we will know the move when it comes, but predicting it in advance is a dicey thing, except for the broken clocks.

If the sovereign default situation goes badly there *could* be a liquidation selloff that would impact silver, and to some extent gold. This is why I am holding paired trades that are short stocks and long bullion. I further adjusted the risk downward today, and lengthened the shorts.

Re-published with author permission.