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October 30, 2010
Issue 120  -  Why Is the Dollar Worthless?
 
 
Gotta love this one:
 
 
A chart from contraryinvestor.com:
 
 
This chart shows why congress (even the new one) won't stop spending.  They can't.  This spending is supporting the economy.  Were they to pull it, things would get pretty nasty, pretty quick.  This will only quicken the demise of the dollar as it descends to it's ultimate true value (hint: rhymes with hero). 
 
Want more evidence?  How about this:

$8 billion spent, no records kept

Inspector general's report raises alarms about funds inside Defense Department

By Bob Unruh, WorldNetDaily


Posted: October 27, 2010
8:52 pm Eastern

The U.S. Department of Defense got more than $9 billion from the sale of Iraqi oil and other revenue streams to be used for reconstruction inside the war-damaged nation and spent it but now cannot document where $8.7 billion of those funds went, according to an inspector general's report published online.

The military's response in the report noted that the records probably exist, it's just that they're probably archived, and it might take a long time to track them down

 

This is just a small example of what happens in our government.  All this money floating around is keeping us afloat.  Apparently it's not enough: (From Zerohedge.com)
 

Goldman: The Fed Needs To Print $4 Trillion In New Money

Submitted by

Tyler Durden on 10/24/2010 11:58 -0500

With just over a week left to the QE2 announcement, discussion over the amount, implications and effectiveness of QE2 are almost as prevalent (and moot) as those over the imminent collapse of the MBS system. Although whereas the latter is exclusively the provenance of legal interpretation of various contractual terms, and as such most who opine either way will soon be proven wrong to quite wrong, as in America contracts no longer are enforced (did

nobody learn anything from the GM/Chrysler fiasco for pete's sake), when it comes to printing money the ultimate outcome will certainly have an impact. And the more the printing, the better. One of the amusing debates on the topic has been how much debt will the Fed print. Those who continue to refuse to acknowledge that the economy is in a near-comatose state, of course, hold on to the hope that the amount will be negligible: something like $500 billion (there was a time when half a trillion was a lot of money). A month ago we stated that the full amount will be much larger, and that the Fed will be a marginal buyer of up to $3 trillion. Turns out, even we were optimistic. A brand new analysis by Jan Hatzius, which performs a top down look at how much monetary stimulus is needed to fill the estimated 300 bps hole between the -7% Taylor Implied Funds Rate (of which, Hatzius believes, various other Federal interventions have already filled roughly 400 bps of differential) and the existing 0.2% FF rate. Using some back of the envelope math, the Goldman strategist concludes that every $1 trillion in new LSAP (large scale asset purchases) is the equivalent of a 75 bps rate cut (much less than comparable estimates by Dudley, 100-150bps, and Rudebusch, 130bps). In other words: the Fed will need to print $4 trillion in new money to close the Taylor gap. And here we were thinking the economy is in shambles. Incidentally, $4 trillion in crisp new dollar bills (stored in bank excess reserve vaults) will create just a tad of buying interest in commodities such as gold and oil...

 
So, we "only" need 4 more trillion?  I'm sure we can just grab that from under Ben Bernanke's bed.  These numbers are truly mindboggling.  This will only lead to more inflation.  But then again, that's the intent:
 
Federal Reserve Officials: Americans Are Saving Too Much Money So We Need To Purposely Generate More Inflation To Get Them Spending Again
By Michael Snyder
The Economic Collapse
October 07, 2010 21:49 PM
 

Some top Federal Reserve officials have come up with a really bizarre proposal for stimulating the U.S. economy.  As unbelievable as it sounds, what they actually propose to do is to purposely raise the rate of inflation so that Americans will stop saving so much money and will start spending wildly again.  The idea behind it is that if inflation rises a couple of percentage points, but consumers are only earning half a percent (or less) on their savings accounts, then there will be an incentive for consumers to spend that money as the value of it deteriorates sitting in the bank.  Yes, that is how bizarre things have gotten.  It is not as if U.S. consumers are even saving that much money.  Several decades ago, Americans typically saved between 8 and 12 percent of their incomes, but over this past decade the personal saving rate got down near zero a number of times as Americans were living far beyond their means.  Once the recession hit, Americans very wisely started saving more money, and so now the personal saving rate has been hovering around the 5 to 7 percent range.  This is well below historical levels, but the folks at the Fed apparently are eager for Americans to pull that money out and start spending it again.

The intentional lowering of interest rates to "make" people do what they want, is despicable.  We have retirees who had planned on living off their life's savings being unable to do so because the powers that be have different plans.  Can you imagine saving your whole life and doing the right thing to only be told that the government has to screw you over to "save" the economy.  Disgusting and immoral. 
 
This isn't "change" and is why the congress is up for grabs.  Of course a new congress won't change the inherent power structure, but that's a story for another day.  Another example of the status quo:
 
 Treasury Shields Citigroup as Deletions Undercut Disclosure
By Bob Ivry - Oct 25, 2010

The late Bloomberg News reporter Mark Pittman asked the U.S. Treasury in January 2009 to identify $301 billion of securities owned by Citigroup Inc. that the government had agreed to guarantee. He made the request on the grounds that taxpayers ought to know how their money was being used.

More than 20 months later, after saying at least five times that a response was imminent, Treasury officials responded with 560 pages of printed-out e-mails -- none of which Pittman requested. They were so heavily redacted that most of what’s left are everyday messages such as "Did you just try to call me?" and "Monday will be a busy day!"

None of the documents answers Pittman’s request for "records sufficient to show the names of the relevant securities" or the dates and terms of the guarantees. Even so, the U.S. government considers the collection of e-mails a partial response to an official request under the federal Freedom of Information Act  or FOIA. The Justice Department in July cited an increase in such responses as evidence that "more information is being released" under the law.

President Barack Obama vowed to usher in a new era of open government. On Jan. 21, 2009, the day after his inauguration and a week before Pittman submitted his FOIA request, Obama directed agencies to "adopt a presumption in favor of disclosure, in order to renew their commitment to the principles embodied in FOIA."

 
To tell the people what is actually happening would only speed up the collapse.  So secrecy it is.  On one bright note, it looks like the silver market manipulation may be closer than ever to ending.  Here is a statement issued this past week by CFTC commissioner, Bart Chilton:
 
Bart Chilton's Shot Over the Bow
 

I take this opportunity to comment on the precious metals markets and in particular the silver markets.  More than two years ago, the agency began an investigation into silver markets.  I have been urging the agency to say something on the matter for months.  The public deserves some answers to their concerns that silver markets are being, and have been, manipulated.

The legal definition of manipulation under the law is a high bar to prove.  It is a much different test than what the average person might consider as manipulation.  Under existing law, to prove manipulation, the government is required to demonstrate not only specific intent, we also need to prove that as a result of the intent and market control, that activity caused an artificial price�a point which can certainly be debated by economists.  Attempted manipulation is less difficult to prove�requiring an intent to manipulate and some overt act in furtherance of that intent.  There are also other violations of law that could contort markets and distort prices.

I believe that there have been repeated attempts to influence prices in the silver markets.  There have been fraudulent efforts to persuade and deviously control that price.  Based on what I have been told by members of the public, and reviewed in publicly available documents, I believe violations to the Commodity Exchange Act (CEA) have taken place in silver markets and that any such violation of the law in this regard should be prosecuted.

In saying this, I am fully aware of the prohibition from divulging trader names or information about their positions.  I am extremely careful not to violate the law in this, or any, regard.  I also cannot pre-judge anything the agency may do with regard to our silver investigation, or any other matter.

The Wall Street Reform and Consumer Protection Act, which I strongly supported, contains new manipulation provisions as well as antidisruptive trading rules.  These new authorities, along with the implementation of thoughtful position limits in metals will go a long way toward ensuring more efficient and effective metals markets devoid of fraud, abuse, and manipulation.

Thoughtful investigations take time.  The CFTC staff has worked extremely hard on the silver investigation.  That said, there is a point at which it is our responsibility to say something. Within the law, I have done so.  I am hopeful that the agency will speak publicly about the investigation in the very near future and when they do so that it will be in a more granular fashion than I am permitted from doing at this time.

 
Bart is trying to bring to light the total corruption of the system and is being stymied.  He clearly thinks that manipulation is happening and he is frustrated that the CFTC board hasn't acted yet.  Gee, I wonder why....  Maybe they are afraid of what would happen if the top blows off silver and what the inevitable congressional investigations might uncover.  No.....that's just crazy talk.
 
I saved a really good story which explains why dollars are worthless for the end.  Please read this one as it makes things really easy to understand and needs no explanation from me:  (from GATA)
 
 
 
To explain the dollar and its relationship to gold I have written a parody which is as follows: In 1913 a company is established called the Federal Valet Parking Board (FVPB). FVPB establishes branches all over the country. You take your car to FVPB and you are given a valet parking ticket (VPT). At anytime you can redeem your ticket and get your car back. FVPB brokers a special deal with the Government that allows people to use their VPT as currency. A law obliges everyone to accept these VPT as payment. No one objects because they can be redeemed for a car at anytime.
 
People find it convenient to spend their VPTs. Unfortunately, the FVPB is corrupt and they print more Valet Parking Tickets without parking any more cars in the parking lot. People start to suspect a scam. They rush to redeem their VPTs and take back their cars. The first ones to redeem think they are lucky because they get their cars back, but latecomers are told there are no cars in the parking lot! “How could this be?” the people demand, “I have a Valet Parking Ticket so I want my car back”. The FVPB is in trouble. The government steps in and makes it illegal to own a car. This promptly prevents anyone from asking for his car to be returned. Even the people who were lucky enough to get their cars back are told that they must return their cars to the FVPB or risk a fine or imprisonment. These hapless individuals dutifully cave in and return their cars and they are given VPTs in return. The people are still forced by law to accept VPTs as currency but the corrupt FVPB continues to print and issue more of them. As no one can retrieve a single car from the parking lot with a VPT there is no restraint on how many VPTs the FVPB can issue.

In 2010 an economist who is also a car expert remarks that the FVPB has millions of cars gathering dust which are of no use. He proposes that the FVPB should sell them all. The Government and the FVPB think this is a terrific idea. One fine day the parking lots are opened up and the people flock in to buy the cars. And what does the FVPB accept as payment for the cars? Why, VPTs of course! But due to the massive printing of VPT’s that has gone on over the years that has increased the supply of VPT’s while the stock of cars has remained constant the FVPB insists that the people have to give 100 Valet Parking Tickets to be given a car instead of the one ticket that was originally issued for each car. At the end of the operation the people have the cars and the FVPB has all the tickets. If the FVPB has only tickets and no cars what do you think the street value of these VPT’s is? Absolutely worthless!

 
Positions:
 
Goro  (closed at $21.10, up $0.90, average price paid, $6.10)  Nice bounce on Friday as the 4th dividend of .03 was announced.  This makes 12 cents in four months and works out to a 36 cent per year dividend.  I will be attending the stock holders meeting next Thursday in Denver, so I hope to have more scoop.
  
Mexus Gold  (closed .325, up 5.5 cents, average price paid, $0.20)  I added to my position this week for a couple reasons.  First, the release of this video:
 
 
This shows the cable pulling machine being attached to the barge.  This is excellent news.  I was also able to confirm the position of their tub, the Caleb, using free web sites.  (thanks to Jim, Tim, and Hugh).  marinetraffic.com had the ship moving straight up the coast of British Columbia to Alaska.  Unfortunately, the system used to track ships is unavailable to the general public in the Alaska area.  To see exactly when it dropped off the free tracking site, click here, and then zoom out using the zoom dial on the left hand column.  It shows the tug's position as it moves north.  This is very exciting and probably means they will be pulling cable next week, as the ship itinerary had the boat arriving Friday in Ketchikan, Alaska.  No way to know if that's the final destination but in any event, they are on the move.
 
GORO June 11, call options, strike $20 (closed at $4.70, up $0.40, average price paid, $5.60)
 
Silver Standard Call options, 3 strikes, all jan 2011,
      $22.50 closed at $3.10, up $.0.90, paid $2.60
      $25.00 closed $1.90, up $0.50, paid $1.65
      $30.00 closed at $0.65, up $0.15, paid $0.65
 
This week's video is of a Halloween costume that took a LOT of time.  Happy Halloween and have a great week!