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July 3, 2011
Issue 154  -  Debt, a Yoke of Lead
Without debt, the American monetary system would not exist. Not slow down.  Not go into a recession.  Not enter a rough patch.  No, the system would cease to exist.  ALL money is borrowed into existence in our system.  Without a borrower, there would be zero money in circulation.  Now when I say money here, I'm talking about the fake, paper federal reserve notes that serve as money currently, not real money which is gold and silver.  Let's watch a short commercial that makes my point from Scotia Bank:
What a bunch of bull!  Borrow to get ahead?  Borrow to get out of debt faster?  Does this make sense in the least?  This is all part of scheme to KEEP you in debt.  That is the goal.  Make you a debt slave.  To condition the young that high debt levels are normal.  More propaganda:
By Rick Nauert PhD Senior News Editor
Reviewed by John M. Grohol, Psy.D. on June 7, 2011

Given the high rate of unemployment and the collapse of the housing market, a new research study finds a counterintuitive, even strange conclusion: young people feel empowered by their credit card and education debts.

Instead of feeling stressed by the money they owe, many young adults actually feel positive about their situation.

Researchers found that the more credit card and college loan debt held by young adults aged 18 to 27, the higher their self-esteem and the more they felt like they were in control of their lives. The effect was strongest among those in the lowest economic class.

Only the oldest of those studied – those aged 28 to 34 – began showing signs of stress about the money they owed.

“Debt can be a good thing for young people – it can help them achieve goals that they couldn’t otherwise, like a college education,” said sociologist Dr. Rachel Dwyer of Ohio State University.

But the results offer some worrying signs about how many young people view debt, she added.

“Debt can be a positive resource for young adults, but it comes with some significant dangers,” Dwyer said. “Young people seem to view debt mostly in just positive terms rather than as a potential burden.”

The findings appear in a recent issue of the journal Social Science Research.

Researchers studied 3,079 young adults who participated in the National Longitudinal Survey of Youth 1979 – Young Adults sample. The NLSY interviews the same nationally representative group of Americans every two years.

For this study, the investigators examined data on two types of debt: loans taken out to pay for college, and total credit-card debt.

They looked at how both forms of debt were related to people’s self-esteem and sense of mastery – their belief that they were in control of their life, and that they had the ability to achieve their goals.

“Debt can be a good thing for young people – it can help them achieve goals that they couldn’t otherwise, like a college education,” said Dwyer. But the results offer some worrying signs about how many young people view debt, she added.

Researchers have had two competing views of how debt might affect people’s self-concept, Dwyer said.

Some have said debt should have positive effects because it helps people invest in their future. Others have said credit should have negative effects because it allows people to spend more money than they make, thereby risking their future.

“We thought educational debt might be seen as a positive because it is an investment in their future, while credit card debt could be viewed more negatively,” Dwyer said.

“Surprisingly, though, we found that both kinds of debt had positive effects for young people. It didn’t matter the type of debt, it increased their self-esteem and sense of mastery.”

Some young people may be using credit card debt to help finance their college education – for items like textbooks — which is why they may see it as a positive, she said. But there is no way to know that from the data.

“Obviously, they are probably using credit cards for multiple purposes. Along with education spending, they could be using credit cards to pay for non-essential items. They may feel good about their debt only because it allows them to buy the things they want without having to delay gratification.”

But how debt affected young people depended on what other financial resources they had available, the study found.

Results showed that those in the bottom 25 percent in total family income got the largest boost from holding debt – the more debt they held, both education and credit card, the bigger the positive impact on their self-esteem and mastery.

Those in the middle class didn’t see any impact on their self-esteem and mastery by holding educational debt, perhaps because it is so common among their peers that it is seen as normal. But they did see boosts from holding credit-card debt – the more debt, the more positive effects.

On the other hand, the study found that young adults who came from the most affluent families received no boost at all from holding debt.

“The wealthiest young people have the most resources and options available to them, so debt is not an issue for them,” Dwyer said.

“The groups that most need the debt – the middle and lower classes – get the most benefits to their self-concept, but may also face the greatest difficulties in paying off what they owe.”

The oldest people in the study, those over age 28, were just starting to feel the stress of their debt, according to Dwyer.

For these young adults, having education debt is still associated with higher self-esteem and mastery, compared to those who don’t have any such debt. That suggests they still see some benefits to investing in a college degree.

But the amount of education debt mattered – having higher levels of debt actually reduced their sense of self-esteem and mastery.

“By age 28, they may be realizing that they overestimated how much money they were going to earn in their jobs. When they took out the loans, they may have thought they would pay off their debts easily, and it is turning out that it is not as easy as they had hoped,” she said.

Overall, Dwyer said the results suggest that debt can be an important resource for young adults that allow them to make investments that improve their self-concept. But the results may also have troubling implications for the future of young people.

“Debt may make young people feel better about themselves in the short-term, but that doesn’t mean it won’t have negative consequences in the long term,” she said.

“We found that the positive effects may wear off over time, but they still have to pay the bills. The question is whether they will be able to. There needs to be additional research to answer this question.”

Oh yeah, a 22 year coming out of college with 100 thousand in debt has a great self image.  This scheme has been so successful that people now think they are doing BETTER with the debt.  Unbelievable!  All the while, the government plays along as they REQUIRE this to continue.  They also "massage" things to make things seem better: 

Change To Inflation Measurement On Table As Part Of Budget Talks -Aides

By Corey Boles and Janet Hook

WASHINGTON -(Dow Jones)- Lawmakers are considering changing how the Consumer Price Index is calculated, a move that could save perhaps $220 billion and represent significant progress in the ongoing federal debt ceiling and deficit reduction talks.

According to congressional aides familiar with the discussions, the proposal would shift how the Consumer Price Index is calculated to reflect how people tend to change spending patterns when prices increase. For example, consumers tend to drive less when gas prices increase dramatically.

Such a move is widely seen by economists as resulting in a slower rise in inflation. That would impact an array of federal programs that are linked to CPI including the Social Security program and income tax brackets set by the federal government.

The proposal could lower federal spending by around $220 billion over the next decade, based on calculations by last year's White House deficit commission, which recommended the change as part of its final report.

This is one of the ways to keep the masses calm and unaware  (of course "reality" shows do their part) while the man behind the curtain pulls the levers.  This is with a backdrop of deteriorating conditions:
This shows one statistic that is nearly impossible to fudge, income tax withholdings.  This is the money withheld by employers and sent to the government.  This is a hard number with no wiggle room.  This is falling.  That's not a good sign as that indicates less employment, lower wages and a worsening economy.  Getting back to the main thrust of this post, the government debt payments are really the elephant in the room as far as the U.S. budget.  If interest rates go up.....

Post-Lehman Deja Vu As T-Bill Yields Turn Negative

Submitted by Tyler Durden on 11/19/2009 16:22 -0400

The last time Bill yields turned negative (in essence investors paying the Government to hold their money for them) was in the days after the Lehman bankruptcy, when the entire world was about to blow up. So why did Bill yield for January maturity just turn negative once again? In other words, why are investors suddenly running for the hills? As Dow Jones reports, January and February bills hit a yield of -0.03% earlier. Some explanations have to do with Bill scarcity, as nobody wants to be exposed to anything beyond 3 months down the curve, let alone 1 year. However, the fact that bond investors may not be buying into the whole recovery BS (or just realize that there is nobody willing to roll near-dated treasurys into longer-tenor pieces of paper) and are once again running scared and willing to pay Ben Bernanke to hold their money for them should be very, very troubling. Additionally, could there be something more pressing and/or catalytic? We have not heard peep from any of the big banks in a while...

There are many large investors that are willing to actually pay to put their money into treasury bills.  This is due to very tenuous nature of the economy and how large these entities have become.  There is really only so many places to put billions of dollars quickly.  If this interest rate starts to rise too much, the United States will be in big trouble.  The confidence of the investment community is the only thing keeping this sinking ship afloat.  Unfortunately, this isn't the only problem:
Study: $1400 Tax Hike Needed to Fund US Pensions

Published: Wednesday, 22 Jun 2011 | 2:47 PM ET

By: Reuters

U.S. state and local governments will need to raise taxes by $1,398 per household every year for the next 30 years if they are to fully fund their pension systems, a study released on Wednesday said.

The study, co-authored by Joshua Rauh of Northwestern University and Robert Novy-Marx of the University of Rochester, both of whom are finance professors, argues that states will have to cut services or raise taxes to make up funding gaps if promises made to municipal employees are to be honored.

Pension funding in U.S. cities and states has deteriorated in the wake of the 2007-2009 economic recession as investment earnings dropped, and some states, such as New Jersey and Illinois, skipped or reduced required payments.

The issue has sparked heated debates, from the streets of Wisconsin's capital, Madison, where thousands demonstrated over public employees' rights to bargain, to New Jersey, where lawmakers are expected to give final approval this week to a plan that will scale back benefits for public sector workers.

Wall Street rating agencies and investors in the $2.9 trillion U.S. municipal bond market are increasingly focusing on unfunded pension liabilities as they weigh the credit-worthiness of state and local government debt.

Rauh and Novy-Marx have previously stirred up the debate over state pension obligations, including the dire prediction that existing pension liabilities total around $3 trillion, if expected returns on investments are not counted

Other studies have estimated the shortfall as far less. The Pew Center on the States, for example, found the pension shortfall for states could be $1.8 trillion, or as much as $2.4 trillion based on a 30-year Treasury bond.

The study issued on Wednesday said contributions will far outstrip gains in revenue.

"To achieve fully funded pension systems within 30 years, contributions would have to rise today to the levels we calculate and then continue to grow along with the economy," Rauh said.

New Jersey will need to increase its revenue by the largest margin, requiring $2,475 more from each household per year, according to the study.

The contribution requirements may be higher for states that already have a significant amount of debt on their books and "cannot tap municipal bond markets as easily for large contributions," the report said.

Illinois, for example, which has the lowest funded ratio of any state pension system, sold billions of dollars of pension bonds over the last two years to make its pension payments.

There is just no way these pension promises can be kept.  They are too large.  Eventually the day of reckoning will come in this venue too.  Raising taxes is a nonstarter as you can see below.  The U.S. consumer is tapped out: (
This chart shows the year over year growth in debt.  As you can see it has been contracting over the last several years.  If our system depends on debt to survive, what is keeping things afloat?  That's easy, Federal government.  They are easily making up the difference.  That's why I'm laughing at the show going on in Washington with all of the posturing about "getting the deficit under control."  If this were to happen, the system will implode.  That's why it won't happen.  There's a very simple rule of the world:  if it can't happen it won't.  Inflation dead ahead. 
To try and camouflage this obvious outcome, the metals are relentlessly attacked and manipulated.  This is an effort to hide the true state of affairs.  Remember a couple weeks ago when the silver margins were raised even thought the price was falling to "ensure market stability?"  Well just recently the margins on several other markets were lowered.  These entities?  Treasuries and stock futures:

And Scene: CME LOWERS ES, SP, YM Margins, Despite An INCREASE In Realized Vol

Submitted by Tyler Durden on 05/31/2011 16:05 -0400

Speechless. Just.... speechless.

This is just hard to fathom in a fair and honest market.  The authorities are desperate to keep these two markets up.  They just can't afford to have them going lower, so what's the answer?  Lower margin requirements.  This allows speculators to purchase more contracts which provides additional buyers to keep the prices up.  What's very telling about this is not just that they lowered the margin.  It's that the volatility (how fast the market is moving up and down) is also rising.  If the intent of raising silver's margin was based on volatility then why is the exact opposite happening in treasuries and stock futures?  Because they are the "preferred" investments of the government.  It's that old "all animals are equal, but some animals are more equal than others," saying in full glory.  Treasuries rising means interest rates are lower and stocks rising are "good."  The government isn't impartial.  They have preferred outcomes and they will change the rules to help achieve these outcomes.  In that same vein, where is that gold?


Good Afternoon Bill, (from LAGOS on Sunday)

I have just viewed all 71.04 minutes of the Committee on Financial Services ‘hearing on the need to audit the USA gold reserves. This was a very trying task because none of the speakers were practiced at speaking into the microphone, so the audio quality was generally poor.

I spent several months of my leisure time a few years ago researching the topic of whether the IMF’s quota allocations of gold reserves were co mingled (ie. double counted ) with the reserves of the signatories to the founding charter of the IMF and came to the conclusion that that (ie. double counting) was probably the prevailing practice. This conclusion was then affirmed by the Sept 15th 1947 Weekly Bulletin of the American Institute for Economic Research. I find it absolutely disgraceful-shocking beyond belief-that Treasury Gold Auditor Thorson was ABSOLUTELY clueless about the issue. After all, auditing the Treasury’s gold is what he does for a living. The members of the Committee came back to this question several times and auditor Thorson was left just mumbling that he couldn’t be expected to know the answer because he didn’t audit the IMF. Just a simple and vital question that concerns a major encumbrance or otherwise of up to 2,800 tons of gold and the auditor didn’t even know that the issue existed at all.

Neither auditor Thorson or Engel had a clue as to the cost of auditing the Treasury’s full gold holdings although they claim that the gold reserves are audited every year by themselves. Apparently most of the gold reserves are entombed behind seals that have been unbroken for decades, and therefore the audit presumption is that if the seals are unbroken, then there is no need to conduct any further auditing procedures. As the auditors stated, there is no movement of product, so there is no need ever to break the seals. Therefore it is axiomatic that the only audit procedure that is performed on the ground is to verify that the seals to the storage chambers remain unbroken. AuditorThorson also asserted to Senator PAUL that transparency is WHAT HIS DEPARTMENT DOES, since all the Treasury gold audit reports are available on line. The auditors also believed that assaying gold reserves by drilling would result in the loss of some gold (or indeed tungsten-my aside)...

The auditors also asserted that the MINT buys its working stock for gold coin fabrication on the OPEN MARKET. That is indeed very interesting. Is that because there is one inviolable rule-the seals must never ever be broken or because of the additional corollary that, if the seals were ever broken, the lack of gold hoardings would be thereby revealed. The overall message from auditors Thorson and Engel was ‘trust us because we are government and we are transparent’.

Congress woman Maloney (D-NY) seemed to treat the Committee with the upmost disrespect by arriving very late and merely stating that the costs of any additional audit would be wasted duplication. Since nobody knows what the costs would be or even the full extent or otherwise of the existing (lack of) auditing procedures, this assertion of the congresswoman was not well based, but it was her solitary input.. To complete her abysmal display of arrogance, the Congresswoman made the point of leaving the proceedings just before Senator Paul formally adjourned the hearing. All in all, my take away impression of the 71 minute recording was that of NOT VERY CREDIBLE WITNESSES desperately trying to assert that all is well because we say so and the ancient seals are unbroken.

Our gold is most likely not there.  The idea that an auditor would decide that a seal being unbroken would exempt those bars from EVER being looked at or examined is ridiculous.  An audit entails counting and examining all the product.  A seal would never be considered the be all end all for a proper audit.  Like a seal couldn't be broken and replaced?  Also the complaint that drilling a few bars would entail losing some gold is not compelling either.  So what if a little gold is lost?  Verification is verification.  Without 100% certainty of what's inside the bars, then an audit is suspect.  Lastly, the idea that we should just trust them because they are in charge, doesn't even pass the laugh test.  "Trust us, we're from the government, and we're here to help."
GORO  (closed $24.10, down  $.73, average price paid $6)
GORO was the target of a "hit piece" this week in Barron's Magazine.  The financial press is run by Wall Street and will often do the bidding of those you will profit from certain outcomes.  One of the most common types of articles is the hit piece.  One way to identify these is the complete lack of balance.  There will be very few positives mentioned and the negatives will be exaggerated and even falsified.  This particular article focuses on the purchase of a new corporate headquarters for $1.7 million dollars.  This is hardly out of bounds for a billion dollar company and the location is closer to the managers.  They can now deduct the depreciation of the property and this is a common practice for growing companies and shouldn't raise any eyebrows.  The articles even admits that it isn't that big of deal.  (so why bring it up?)  Maybe so they can incorrectly mention that it is zoned for residential instead of commercial to cast doubts on the legality of being there.
They also mention paying dividends but only as a negative!  That's a new take on dividends.  Wouldn't it be easier to pull off a scam by not paying money to investors?  Crazy criticism.  As far as positives, they don't mention many.  Left out of the article are the incredible drill results, the tight share structure (which is completely foreign to scams as they typically issue hundreds of millions).  They gloss over the outside ownership as if that is unimportant and not actually a positive.  They also mention how a couple companies passed on the property and instead of praising them for seeing what others didn't, act like it's a negative!  Buying mining properties is hardly an easy task and without x-ray vision there is no way to tell what's under the ground without drilling.  Drilling just a couple feet in the wrong direction can result in a company "passing" on a property that in fact, is wildly rich in metal.
The release of the article, even though there is nothing time sensitive contained within, after being asked by GORO management to delay release until after 2nd quarter results, also is question raising.  GORO issued a press release that addresses the article and shines light on the fact that the article's author was in contact with the shorts which is the most troubling and damning of the revelations in this rebuttal.  Why would a unbiased writer who was supposedly doing a neutral article on a company consult with large short interests?  Any information that he received from them would be highly suspect as they have NO legal requirements about what they can say or imply which is the exact opposite of the company's board.
So what will happen the coming week?  I expect the stock to sell off on Tuesday but not very much as the shorts will be covering.  That is probably the purpose of this article.  Volume should be high.  If there is a sell-off, it would be a great time to pick up cheap shares.  
Mexus Gold  (closed $.20, down $.005, average price paid, $.22) 
Alexco Resource Corporation -  AXU  (closed $7.19, up .32, recommended at $7.90)
Stocks    (Current status, out, sold on March 18)
Still in a holding pattern as the market bounces up and down.
Physical Gold  (Closed $1,486,  down $14,  average price paid $395)
Physical Silver  (Closed $33.85,  down $.47,  average price paid $5.31)
Lastly, a video for the 4th.  The world's largest fireworks show launched off the tallest building in the world.  Hope you had a great holiday!