Peter Schiff: Silver Price going to $50, “So Buy it Now”

For those waiting to seize another drop in the price of silver, Euro Pacific Capital CEO Peter Schiff believes today’s bargain basement price won’t get any cheaper and that full-pricing of $50 in the white metal is coming—maybe within 60 days.

Speaking with King World News’ Eric King, Friday, Schiff warned procrastinating silver bugs, “We are going to eventually go through $50 [silver], so buy it now.”

The gold price, he expects, will reach $2,000.

Schiff’s latest advice comes on the heals of last week’s bold call, of which, he said a renewed drop in the U.S. dollar was imminent and a rally in the precious metals would ensue for the remainder of the year.  And if Schiff turns out to be right in the face of a teetering EU and the backdrop of FX Concept’s Founder John Taylor’s mid-summer call for a big dollar rally for the second half of 2011, clearly many traders will be knocked off guard.

Moreover, and for what it’s worth, especially during a period of overactive central bank intervention in the currency market, Schiff’s outlook for a declining dollar for the remainder of this year is consistent with the dollar’s 40-year seasonal pattern of weakness against major competing currencies during the months of November and December—a period, too, when precious metals have historically been inversely strong.

“Our short-term target for the euro, maybe by year end, will be up near 1.48,” Schiff told listeners of the KWN Oct. 25 broadcast.  “I think that’s going to catch a lot of people off guard who were writing the obituaries for the euro, to see the euro approaching the 1.50 level.  The dollar index should be headed back down to the 72 level.”

Friday’s big move in the euro and nearly equal move down in the USDX did, indeed, take euro shorts by surprise and aided further the move higher with an onslaught of short covering in the Forex throughout the trading day Friday.

One currencies trader, Jim Rogers of Rogers Holdings, was taken aback by the surprise deal struck in Europe, the impetus of the euro move.

“Never in a million years did I expect them to impose a haircut of 50% [on Greek bondholders], this shows at least somebody is starting to accept reality,” Rogers said in an interview with UK-based Investment Week.

“There has been a major overhang, so we will see the easing of some pressure, but the problem will come back because the Western world still has not dealt with its debt,” he said, apparently agreeing with Schiff insofar as the flight back out of the dollar may still have some legs left in it.

Mostly buried beneath the news out of Europe, however, was the story of the yen cracking a post-WWII high against the dollar as well as the dollar falling significantly below strong support at 76 on the USDX.

“Today the dollar is at an all-time record low against the Japanese Yen,” Schiff said, Friday.  “So you have a weak dollar, you have bond prices now headed lower, commodities up, stocks up, kind of across the board.  The message is get out of paper, get into stuff and the worst paper is dollars.”

But the BOJ didn’t miss the move and took violent exception to a strong yen.  At the open of Monday’s trading in Tokyo, massive BOJ intervention dropped the yen 382 points to the dollar within 30 minutes—severely punishing the longs to a six-standard-deviation bloodbath, further making it clear that attempts at refuge from the dollar to the Japanese currency won’t be tolerated.  As precious metals price dropped against the dollar, gold and silver rose against the yen.

The move by the BOJ comes atop China’s central bank re-pegging of the renminbi to the dollar, Swiss intervention in early September to weaken the franc, and the BOE move to weaken pound sterling.  Now, it may be the dollar’s turn, according to Schiff. Get my next ALERT 100% FREE

He expects the decline of the USDX will logically come from further strengthening in the euro, sterling and CAD, with another assault (3rd time) on the all-time support low of 72 USDX expected this year, or at the latest sometime in 2012.

USDX composition (weighting)

Euro (57.6%)

Japanese Yen (13.6%)

Pound Sterling (11.9%)

Canadian Dollar (9.1%)

Swedish Krona (4.2%)

Swiss Franc (3.6%)

“I think we will come pretty close to hitting $2,000 on gold this year,” Schiff reckoned.  “It would be hard for gold not to be above $2,000 in 2012.  I really think it would be unlikely that we wouldn’t see prices north of $2,000 next year.”

He continued, “The dollar is headed right back to the lows and I think it will take out the lows.  If it does break to new lows, that’s when we might see another crisis because then we might start to see the world questioning the viability of the U.S. economy….”

Jim Sinclair: $2,000+ Gold “Coming Soon”

In Thursday’s post on JSMineset.com, Jim Sinclair reminded investors of his long-standing slogan for the global financial crisis: QE to Infinity Sign-up for my 100% FREE Alerts!

“QE to infinity – there is no other choice,” the life-long gold market consultant stated.  “There is no other functional tool in anyone’s toolbox to stop camouflaged runs on the bank.”

Therefore, he wrote, “QE to infinity in the Western financial world is assured. As a result, gold in the $2,000s is coming soon.”

How can Sinclair assure this outcome?  Well, no one sees into the future with anything resembling crystal clarity, but Sinclair is studied on matters of central banking, money printing and the psychology of politicians and the most likely social consequences of their actions during financial crises.

For the most part, Americans believe that as the sole superpower of the world, the U.S. is not subject to the same rules as foreigners must abide by.  During the first half of the 20th century, the German people, too, believed that they were special.

In his book, When Money Dies: The Nightmare of the Weimar Collapse (1975), its author Adam Fergusson describes the events, attitudes of politicians and public as well as the consequences of Weimar Germany’s monetary policies following WWI which led to the collapse of the Reichsmark.

There are some parallels to today’s crisis with the financial catastrophe of 1919-23 in Germany (and Austria) to support Sinclair’s thinking up to this point.

“The Chancellor [Karl Wirth, 1921-22] would accept no connection between printing money and its depreciation. Indeed, it remained largely unrecognised in Cabinet, bank, parliament or press. The Vossische Zeitung [German newspaper] of August 16 declared that the opinion that the flood of paper is the real origin of the depreciation is not only wrong but dangerously wrong.”

—When Money Dies

“S&P has shown really terrible judgment and they’ve handled themselves very poorly. And they’ve shown a stunning lack of knowledge about basic U.S. fiscal budget math. And I think they drew exactly the wrong conclusion from this budget agreement.”

—Treasury Sec. Timothy Geithner on S&P downgrade of U.S. debt

 “In Berlin the Majority Socialists and the Independent Socialists joined forces in a demonstration to protest ‘against the enemies of the Republic’”

“July 24 produced demonstrations against profiteering, capitalism and Fascism in Frankfort, where inoffensive citizens were molested, windows were broken, and one man kicked to death.”

—When Money Dies

“The ‘Occupy Wall Street’ movement has resonated around the world . . . Unlike some of the ‘anti-capitalist’ and ‘anti-globalisation’ movements that have sprung up and died down over the past couple of decades, this is directly linked to a sense of failure of capitalism itself. It is also intimately linked to working class discontent and rage at the conspicuous enrichment of the super-rich continuing through an enormous decline in working class living standards, unprecedented since the 1920s.”

—Red Scribblings – A blog for socialists politics, critical analysis and debate

 “In spite of his robust common sense, the man in the [German] street is beginning to believe what some interested industrialists are telling him, so that he seems almost readily to subscribe to the false doctrine that it is good for trade that a government, by inflationary finance, should habitually spend more than its income.”

—When Money Dies

 “O’Neill [Treasury Sec. Under President Bush] said he tried to warn Vice President Dick Cheney that growing budget deficits-expected to top $500 billion this fiscal year alone-posed a threat to the economy. Cheney cut him off. ‘You know, Paul, Reagan proved deficits don’t matter,’ he said, according to excerpts. Cheney continued: ‘We won the midterms (congressional elections). This is our due.’ A month later, Cheney told the Treasury secretary he was fired.”

—Issues2000.org

“I will not support any plan that puts all the burden of closing our deficit on ordinary Americans.  We are not going to have a one-sided deal that hurts the folks who are most vulnerable.”

—President Barrack Obama

Clearly, the US is not at the stage of 1922 Germany, but the stage for a replay to some extent has been set in that U.S. budget deficits of 10% of GDP (not including unfunded liabilities, which exceed a projected $1.6 trillion cash-basis shortfall) is the first step toward a Weimar scenario.  A first step!

No one knows how the endgame will play out in resolving unsupportable debt levels, but it’s sure not going to include the Chinese continuing the game of mopping up debt issuance from Treasury.

Morgan Stanley’s Global Head of Economics Stephen Roach dismisses the notion that China’s $1 trillion-plus holding of Treasuries provides the needed disincentive to the Chinese to sell the bonds.

“After all, where else would they place their asset bets? Why would they risk losses in their massive portfolio of dollar-based assets?” Roach asked rhetorically. “China’s answers to those questions are clear: it is no longer willing to risk financial and economic stability on the basis of Washington’s hollow promises and tarnished economic stewardship. The Chinese are finally saying no. Read their lips.”

Recent data from the Fed’s H.4.1 shows a meaningful decline in Treasuries held by foreigners at the Fed.  The trend line of increased holding throughout the crises has finally been broken; holding are now beginning to decline at a time when holdings must increase at the same rate as the Treasuries are issued and rolled over.

For those interested in following Treasury holding by foreigners (not broken down by country), zerohedge.com provides a link and commentary on the Fed’s H.4.1 reported, issued weekly.

Jim Sinclair says gold’s going to $2,000 and beyond, with a final target price well above $10,000 as the crisis in Europe eventually makes its way to the U.S., ground zero.

Silver price: Launch Underway!

With the global shift back to the dollar-flight trade, let’s look at the silver price’s technicals to see where we are in the trade, with the emphasis on one-way bets on silver—long!  With physical buying pouring into the market, taking a short position is suicide.

During the massive plunge (normal for the silver market) in the silver price, noticed where the heavy buying came in—right below Richard Russell’s 20-month moving average.  Russell looks for where to 20-month MA is relative to the 40-month for long-term buy and sell decision points.

“I’m looking right now at a chart of 20-month and 40-month moving averages of gold [said can be said of silver],” Russell said in a roundtable discussion with FinancialSense Newhour’s, “and May of 2002 . . . the 20-month moving average finally moved above the 40-month moving average.”  Coincidentally, the buy signal in the precious metals followed UK’s Chancellor of the Exchequer Gordon Brown’s dump of 60% of British of England gold reserves.

With no foreknowledge of the schemes of the gold and silver cartel, it appears the sell-off in silver is complete.  Notice the similarities between the sell-off during the de-leveraging event brought on by the collapse of Lehman Brothers in 2008 and the sell-off in the silver price during the coordinated raid by the cartel in May, made easy for the cartel from all the shallow-pocket speculators jumping on a moving train.  A simple margin raise was in order and watch the speculative longs fall like dominoes.

Volume statistics, as shown in the above graph, suggest a confirmation of COT reports which show speculative longs flushed out of the market during the May sell-off.  But note the volume; it’s reached levels not seen since the summer of 2010 when silver traded below $20.

More importantly, the difference between the two sell-offs cannot be gleaned from the charts.  The action is in the physical market is decidedly different this time, as a slew of reports coming from bullion dealers across the globe tell of physical buyers jumping into the market with both feet at these lower prices—in stark contrast to the 2008 sell-off.  Goldmoney’s James Turk and Eric Sprott of Sprott Asset Management (read article here) have both reported experiencing equal dollar amounts of purchases between gold and silver.  Significant order of silver run weeks to delivery—again!

Considering the price ratio of gold and silver is 50:1, already-long delays in securing a supply of silver provides a critical disincentive for the cartel to act anytime soon—if at all, in the future.

Tocqueville Gold Fund manager John Hathaway told KWN, “To the extent that this is a rigged game, the game is now over.”

He notes that commercial physical buyers may panic to secure silver at any price to keep production of its products moving.  Due the small amounts used by commercials in the production of most consumer electronics, to them, silver is an inelastic commodity.  JP Morgan is very well aware of this dilemma and most likely won’t push this manipulation scheme to a de facto force majeure (may never officially acknowledge one) at the COMEX intentionally.

Chief Investment Strategist of Sprott Asset Management John Embry agrees. “Right now we are in the throes of something similar to the old ‘London Gold Pool’ getting overrun,” Embry told KWN.  “I remember the London Gold Pool situation quite well, you have to be old to remember it but I do.  I see absolutely no difference this time except conditions are infinitely worse this time around and there is less central bank gold [silver supplies worse] available for the manipulation.”

Embry added, “So to me if the seventies were fantastic as a result of the London Gold Pool being broken, this one is going to be way better.”

Gold Price “Close to a Breakout,” John Hathaway

As the gold price smashed past through technical resistance at $1,680 on Tuesday, King World News’ usual suspects came out this week feeling confident that another big rally in gold is underway.  The gold cartel shorts are covered and sentiment in the gold market is terrible, a set up, he said, is “really what you want” before taking a position in the metal.

Speaking with KWN, Tocqueville Gold Fund manager John Hathaway told Eric King the gold manipulation cartel may be losing grip on the powerful forces of the golden bull.  He likens the situation to the problems faced by the infamous London Gold Pool of the 1960s.

“The central banks are losing to the extent that they are failing to keep the gold price down,” said Hathaway.  “You know whoever is fighting this battle is fighting a losing battle.  So I just don’t think there is going to be much courage left on the central bank side.  If this latest ‘London Gold Pool’ style manipulation fails and at the same time you see more of this disgust with paper currencies, that’s where you will get nothing but air to the upside.”

Hathaway’s point brings back memories of James Turk’s famous ‘Gold’s Infallible Indicator’ article of 2007, a clever qualitative indicator which came about as a result of his observation that each time the UK business publication The Economist published a ‘negative’ outlook for the gold price, the complete opposite happened.

Turk’s notations from his original article, posted on Kitco.com:

Date Article is Published

Gold Price
On Date of Publication

Low Gold Price After Date of Publication

Number of Days Low Is Reached After Publication

Subsequent High in the Gold Price

Date of Subsequent High in the Gold Price

% Gain from Publication Price to High Price

23 Jan 1993

$328.60

$326.30

32

$407.00

30 Jul 1993

23.9%

11 Sep 2003

$379.70

$369.20

20

$426.40

9 Jan 2004

12.3%

1 Dec 2005

$502.50

$493.00

14

$719.80

11 May 2007

43.2%

8 Apr 2007

$674.20

$651.90*

34*

$1,032.00*

03/19/08*

53.10%*

ñ     Updated chart from original publication

Not included in the Turk’s chart is a May 13, 2010, article published by the The Economist, entitled, Gold to Fall Below $1,000 By End of Year: Economist.

The article’s publication, proving once again that Turk’s ‘Infallible Gold Indicator’ is, indeed, infallible, the gold price of the date of the article’s release was $1,229.20.  Subsequently, the yellow metal rallied, dropped, then drifted to as low as $1,158.00 on Jul. 27.  But by the close of the year, instead of trading at $1,000 as predicted by The Economist, the gold price achieved a print of $1,421.40—a gain of 15.6% from $1,229.20.

It should be noted that the May 13 article was published in a nick of time for the start of gold’s seasonal soft period range of mid-May and the last trading day before Labor Day (first week of September).

“How can The Economist get it so wrong?  Or in other words, why is this indicator so reliable?” Turk asked in his May 7, 2007, article.

He added, “While The Economist pretends to offer serious analysis of gold, in reality it doesn’t.  It has another objective – anti-gold propaganda.  It is an apologist for the Bank of England and the other central banks that want to keep the gold price low.”

But tell that to CPM Group’s Jeffrey Christian, the apologist for the Fed.  GATA right again.  In fact, any time someone accuses you of being a ‘tin-foil hat’ guy for suggesting the gold market is manipulated, just tell ‘em to Google ‘GATA right again‘.  The raft of links to article of GATA’s fine detective work on the subject of gold cartel manipulation scheme is so overwhelming that even a judge, if presented with so much circumstantial evidence surrounding a murder of a Catholic Calcutta lad, would send Mother Teresa to the gas chamber.

Then, appeal to the naysayer’s greed by sending the ‘useful idiot’ to Turk’s May 7 article.

Even the Financial Times of London has found the time between initiating rumors of the European debacle (see here . . . here . . . and here) to report that, maybe, just maybe, further investigative work by FT might lead to subsequent article, entitled, ‘GATA right again’.

Back to the KWN Hathaway interview:

“To the extent that this is a rigged game, the game is now over,” he said of the gold cartel’s diminished capacity to stem the avalanche of physical gold buying.  “We are not quite at stampede levels yet, but we will be.  Who wants to hold euros? And if the U.S. starts to intervene through some form of central bank asset purchases, lines of credit, whatever it is they use, nobody is going to want to hold the dollar either.”

He continued, “We potentially have nothing but air to the upside in gold.  We could see a big number on gold before the end of the year.  Nobody is going to want these paper currencies going forward.  That’s kind of where we are now, we’re close to a big breakout.”

Peter Schiff Takes-on FX’s John Taylor; Commodities, PMs, Stocks “Go Higher”

Everyone’s favorite Wall Street irritant is out with his latest call for the gold and silver price—as well as calls for every other anti-dollar trade, for that matter.  Euro Pacific Capital’s Peter Schiff recommends loading up on your favorite precious metal because the launch in stocks, oil, and even, the euro!, is about to begin.

“You’ve got the euro now at about 1.39, and I think you’ve got a head and shoulders bottom in the euro,” Schiff told King World News yesterday.  “Our short-term target for the euro, maybe, by year end, will be up near 1.48.”  The implications, suggested from Schiff’s bullish call for the euro, at this critical time are enormous.

For the watchful of those very best in the forecast of currency moves, you should recognize Schiff’s ‘in your face’ dual with famed FX’s currency guru John Taylor, whose forecast for a move down to euro 1.20 on its way to parity with the dollar is nothing more than heresy to the Schiff thesis.

Schiff continued, “I think that’s [euro bullish move] going to catch a lot of people off guard who were writing the obituaries for the euro, to see the euro approaching the 1.50 level.  The dollar index should be headed back down to the 72 level.”

He added, “Certainly I think there is too much pessimism on the euro and what was going to happen to the euro visa vis the dollar.  The euro is also rallying now as the stock markets are rallying and in fact the dollar is selling off against all of the currencies in the world, not just the euro.”

Reminiscent of the-fight-to-be-right in July between heavyweights Goldmoney’s James Turk of Spain and Thailand’s bon vivant Marc Faber on the outlook for precious metals for the historically-weak summer season, Turk had slammed Faber to the mat as gold soared 30% leading into Labor Day—though Faber did recover nicely after that, as September ushered in the hair-raising decline in gold to the $1,500 and $1,600 range—a range that Faber was looking for before considering buying more metal for himself.

Back to today’s match up: As Schiff looks for renewed dollar weakness against the euro, the venerable Taylor sees nothing but disaster for the euro going into 2012.  Schiff expects $2,000 gold ahead, while Taylor anticipates $1,000 gold, first, before a 1976-like comeback in the yellow metal takes it to record highs in the longer term.  Read more about John Taylor’s summer interview.  His call for a top in gold at $1,900 on its way to a fall, back to $1,000 in Apr.-May 2012, is an eery one, to say the least.

“I would be surprised to see the euro hold above $1 through this crisis,” Taylor told Bloomberg Television’s Michael McKee on Oct. 11 (reported by BusinessWeek). “It’s not over. The banks are going to be in trouble when Europe goes into a recession next year.”

Schiff, the energetic 48-year-old makes up for his noticeably diminished appearances on widely-watched CNBC and Bloomberg TV by popping his head everywhere else, it seems, from broadcasting his own YouTube radio show to appearances on Russia Today, then over to The Keiser Report and King World News, and back again, littering articles and interview segments on GoldSeek.com, 321Gold.com and every financial news outlet hungry for some good copy on the way.  Get my next ALERT 100% FREE

So, for now, Schiff sees the reflation trade going into the Fed’s FOMC meeting, scheduled for Nov. 1 & 2, and beyond the meeting.  A full-blown QE3, he said, is a done deal; it’s only a matter of when, not if.

“ . . .  China is going to print more money, the U.S. is definitely going to print more money,” Schiff surmised.  “We have QE3 coming up.  Part of the reason for the sell off in August was because the markets were disappointed that we weren’t getting QE3.”

“Then we had ‘Operation Twist’.  People were disappointed that there wasn’t more but I think more is coming,” Schiff added.  “That’s not good for the economy, it’s not good for the average American who is going to see his cost of living go up, but it’s going to be good for nominal stock prices and that’s what I think we are seeing in this rally.”

It’s difficult to know whether Taylor would expect a squiggle up in the euro to test the high of 1.50, as Schiff suggests, before it crashes to parity with the dollar some time in 2012.  It’s unlikely Taylor would be comfortable at that point with his call, maybe.

But, what Schiff is really saying is: the U.S. dollar is about to test the level of the abyss at USDX 72 at a time when the U.S. recession deepens (if the Economic Cycle Research Institute and John Williams of ShadowStats.com are to be entrusted with such calls).  A sustained drop below 72 for the U.S. dollar could unravel into another Lehman-like chaotic mess and to who knows what in the deleveraging of the banking system on both sides of the Atlantic.

It should be noted, too, that all through the Keystone Cops antics in Europe, the lies, rumor milling by FT and CNBC’s Steve Liesman, the failed EFSF, as well as the Berlusconi sideshow, the dollar really hasn’t made a meaningful bounce of the USDX 72 lows as one expects it would.  Schiff may be onto something.

Silver Price much too Low, Eric Sprott

Nervous about the silver price during the worsening global economic slowdown?  Don’t be, according to Eric Sprott, CEO of Canada’s largest independently-owned securities firm Sprott Asset Management.  Silver (and gold) have become de facto reserve currencies, according to him.

In the silver market, “we’re going hand to mouth these days,” Sprott told listeners of Financial Sense Newshour.  And Sprott, of all people, should know; the last significant order placed in the open market by his firm in late 2010 took three months to arrive, he said, “and some of the silver that was delivered to us was manufactured after we purchased it.”

Following the massive ambushed on the silver market by Fed proxy JP Morgan during the month of May, Sprott, has noticed a radical change in the dynamics between the paper market for silver and the physical market for the white metal.

“The physical market is what I analyze more than anything else, and all I see is buyers,” Sprott said, at which point FSN host James Puplava chimed in, “That’s what the dealers are telling me.”

In the past, a Fed ‘take down’ caused demand for physical to cool significantly.  Today, however, typical supply/demand norms have been righted—that is, lower prices increase demand and visa versa.  In other words, the silver market has become functional through its physical market participants.

“It was very convenient for central bankers and governments, the price of gold fell off exactly as Europe hit its sort of peak in risk of the financial arena in the sovereign thing,” Sprott mused.  But, this time, the Fed-led take down of silver and gold prices revealed a large crack this time in its scheme to suppress precious metals demand in the physical market.

Sprott suggested that the evidence gathered from buyer demand in physical bullion at his firm, and others he deals with, has led him to conclude that gold has finally taken on the role as the preferred reserve currency, a conclusion also drawn by Grant’s Interest Rate Observer author and publisher James Grant, World Bank President Robert Zoellick, Euro Pacific Capital’s Peter Schiff, as well as bullion experts James Sinclair and Goldmoney’s James Turk.

“The markets have made gold the reserve currency.  That’s what I believe, that’s gone up 100 percent against every currency in the world,” Sprott explained.  “So, it is the world’s reserve currency, as far as the markets go.”   “And as an offset to that, gold is not going to be a reserve currency without silver playing a hand here.” Get my next ALERT 100% FREE

If an investor takes a three to five-year horizon of the silver market, according to Sprott, the historical ratio between gold and silver of approximately 15:1 (a geological observation of relative scarcity of earth deposits) will, again, be achieved as investors realize that a decision to buy precious metals to offset ongoing devaluation of fiat currencies across the globe will more likely favor the relative cheaper of the two metals to the other.

Moreover, as Sprott points out, mining production statistics throughout recent years reveal a decline in the historical ratio of availability between silver and gold ores.  Today, it appears that the ratio has been stuck at approximately 10:1 for some time now, suggesting to some analysts that maybe ‘peak silver’ is upon us.

“So why should it trade to a 50:1 multiple?” posits Sprott. “Give it three to five years; we’re going to get back to ratios which are way more appropriate to the underlying fundamentals of gold and silver.”

At today’s gold price, a reversion to the historical norm calculates to a silver price of $110, or a whopping 70% discount to today’s $32 price tag, under the Sprott thesis.

As approximately 57% of the world’s GDP, that percentage, which is the combined GDP of the U.S., EU and China, appears to be collapsing—again (see IMF), a well-founded sense of gloom for a coming worse economic time has gripped global markets rather quickly, creating fear of another Lehman-like unwind of money flows out of dollar and euro-denominated assets, back into those currencies, which could, then, take down the precious metals complex.

Sprott believes that argument will ultimately prove to be a specious one, a throwback to another time when the U.S. dollar (and euro) was readily accepted as a reliable medium of exchange.  Today, investors should, instead, focus upon horrendous supply constraints and mushrooming investor demand, driven by eroding faith in the both the dollar and euro.  Violent short-term swings shouldn’t dissuade investors from holding silver for a three to five-year outlook, according to Sprott.

“God forbid that we actually end up with a seriously declining economy,” he said facetiously.  “Because if you think it’s bad for banks, today, wait until you have to deal with a couple years of negative GDP growth and what happens to value of those paper assets that they own.”

Sprott added, “The ultimate destiny for gold and silver is that people will prefer to own those investments rather than have money in the bank.  And there’s a lot of money in banks.  People don’t yet perceive that gold and silver are the superior investment, but in my mind they are.  Because when you have money in the bank, there is tremendous counter-party risk.”

Counter-party risk?  That’s a Goldmoney’s James Turk’s theme—a theme, Turk believes will seep into investor consciousness over time, catapulting silver to phenomenal heights in the coming years.  Ditto for Eric Sprott, who said in a MineWeb interview of April 5—“Silver is the investment of this decade as gold was the investment of the last decade.  So we’re sitting back waiting for things to evolve here.”

Here we go again! Another Silver Shortage

In the midst of a Wall Street Journal article that suggests the groundwork for an addendum to the Fed’s ‘Operation Twist’ program is being laid right now, bullion dealer reports of lengthy delays securing silver are surfacing—again.

Of interest to traders seeking to catch the next big move in silver, both previous instances of shortages in the silver market led to an average price appreciation of 156% during an average of 10.5 months time span, with the second instance of a shortage catapulting the silver price higher in percentage terms and within a shorter time period.

“There is extraordinarily tight supply right now in Asia.  When you order silver there is so little available at these prices, that’s the trouble,” King World New’s frequent guest, ‘Anonymous London Trader’, told Eric King.  “You can order it all day long, but you are going to have to wait for it.”

Silver Price Manipulation Scheme Coming to a Close

The symptoms of Big Government seeking to defy nature’s law as it relates to the utmost important of all human behavior, that, of self-preservation, in response to a threat to said preservation, has become increasingly more self-evident in the silver (and gold) markets.  In the end, nature always wins.(1)

In that vein, KWN’s Anonymous sheds some light on the subject of the manipulated market price of silver and what he sees happening behind the scenes as the grip of government weakens on the price of gold’s kissing cousin.

“The price of silver has no reality to the paper market at all, absolutely zero reality there anymore,” Anonymous said.

“All of the sudden the game has changed because you have actual investment demand increasing exponentially vs. industrial demand, competing against industrial demand to buy,” (s)he continued.  “All of these sovereign entities buying silver know it’s manipulated.”

As the Fed successfully brought down the COMEX paper price (with a lot of help from speculative froth created by momentum traders who pushed the silver price up 171% within eight months) in April, the table is set once again for another Fed QE and another relaxation of the shortage of silver—which could result in an even higher percentage rally from the previous monstrous move in the paper price as we embark on the third go-around.

“To the extent that there has been intervention (in the gold market), you kind of have to wonder if the government in Europe or the European central bank didn’t want gold to be on the defensive because of all of these announcements about a lending facility,” another frequent guest to KWN, John Hathaway of Tocqueville, told Eric King listeners on Thursday.

The weekly Commitment of Traders reports illustrate an excellent source of validation of Hathaway’s suspicion in addition to his 40-year experience working the bullion markets.  According to the most recently published COT report, commercials scrambled aggressively to cover their shorts, suggesting, maybe, the a big rally could be coming as traders await word from the Fed of the possibility of an additional QE.

“I believe we should move back up toward the top of the list of options the large-scale purchase of additional mortgage-backed securities,” Fed governor Dan Tarullo stated in a speech at Columbia University on Thursday.

Add Tarullo’s statement to Fed Chairman Ben Bernanke’s recent language on the issue of more stimulus to the U.S. economy, as well as Thursday’s announcement that the biggest thorn to Bernanke’s behind, Kansas City Fed President Thomas Hoenig, has been appointed by Obama to vice chairman of the FDIC.  That should keep Hoenig quiet and serve as warning to other Fed governors who wish to remain at the Fed that transfers to other agencies of less distinction could be coming their way, too.

Aside form the political developments, the pattern of Fed intervention in the silver market prior to QE announcements may not be evident to the typical momentum trader who only watches price movements of anything that happens to be trading well, but for those focused on the Fed’s dilemma as it attempts to cushion a worldwide collapse of debt at ever level of the world economy, the Fed’s modus operandi makes much sense, but more importantly, the Fed’s timing model may provide clues to future movements and price levels along the way.

Back to Anonymous.  (S)he believes time is on the side of the silver bull.  As investors take on an ever increasingly greater role in the ‘pricing at the margin’ in the silver market, industrial demand will always play a critical factor as well, as a goof-ups by the Fed on the downside of price could ironically bust the COMEX.

If shortages become too acute through the Fed’s proxy JP Morgan and its criminal activities, the panic to buy the metal will most likely come from the commercial users, who will pay several times the manipulated COMEX price in order to secure the metal for their business applications.  After all, most industrial applications whereby, silver, specifically, is used, require too small of amounts to affect final product costs in any meaningful way.  For commercials, it’s not a matter of price, it’s a matter of availability.  Therein, lies the Achilles Heal.

But in the end, nature always takes its course, anyway.  The hogtied Fed will eventually strangle itself attempting to free itself from the virtuous Mr. Market.

“Yeah, any sort of attempt to hold back the market sooner or later falls apart,” Hathaway said.  “I mean we saw that with the London Gold Pool in the late 1960’s.  So you can keep the market off balance for a while, but you can’t do it forever and the longer the move is put off, the bigger the explosion on the upside.”

(1) Storing previously endured labor for future consumption as the intended lifespan of a human machine’s usefulness is reached is a serious matter.  But in the end, nature always wins; the human desire to survive outlasts the government’s ability to overcome that spirit.

Therefore, it’s truly time to move off the question of whether the silver price is manipulated.  The question, now, should not be whether Gold Anti-Trust Action Committee (GATA) is correct, or not, with its contention that the precious metals markets have been (and still are) manipulated; the question should be: Why do so few people know of a basic, undisputed sixteenth-century concept of economics, Copernicus-Gresham Law?  Why should GATA have ever existed?

New OWS Slogan: Eat Sh*t Warren Buffet

We implore Occupy Wall Street (OWS) to remain focused on the message suggested by those who have spent careers delving deeply into the tactics of the criminal mind who attempt to achieve the ‘Perfect Crime.’  But when, slowly, over time, one criminal multiplies into a criminal syndicate of other like-minded brethren to control a nation’s treasury, one prosecutor is not enough to kill the cancer, a political revolution remains the only cure.

Willie Sutton was asked by a reporter why he robbed banks.  Sutton replied, “Because that’s where the money is.”

Among Al Capone’s Chicago-like crime spree, having gone “white shoe,” as social trends forecaster Gerald Celente likes to refer to them, for so many years, Bank of America’s case of rampant fraud is as good as a case as any to break this Washington-Federal Reserve cartel into pieces.

For a background and primer on the latest ‘in your face’ fraud at Bank of America, famed former bank regulator William (Bill) Black, the man who broke wide open the S&L scandal of the 1980s, involving five U.S. Senators, is a must read for OWS patriots.

The essence of the trillion-dollar crime in progress stems from Bank of America’s attempt to dump multiple-trillions of dollars of hopelessly worthless financial derivatives from its Merrill Lynch subsidiary to its taxpayer-insured Bank of America holding company.  OWS patriots should know that Brian “Mumbles” Moynihan and his bandits on the board of directors exhibit no guilt as they attempt to offload to the taxpayer the losses incurred by former Bank of America CEO Ken Lewis’ reckless and vain purchase of Merrill Lynch on the eve of the Lehman Brother meltdown.

For any high-profile institution to attempt a scam of this magnitude must be in cahoots with the Fed and Washington, Black intimates.  After all, for those studied in the sorted details leading up to the creation of the Federal Reserve in 1913, may come to understand the con of the Federal Reserve and to why Aaron Burr (the real-deal OWS patriot) and Alexander Hamilton were so at odds with each other during the early years of the American experiment of the late 18th to early 19th century.  Burr shot dead Hamilton in a dual in 1804.

Moreover, the all-important real motive behind the Federal Reserve Act’s passage into law (OWS recommended reading: G. Edward Griffin’s book, The Creature of Jekyll Island) was to protect the banks.  The duplicitous and alleged reason for the Creature rings true of many time-endured parasitic institutions throughout history:  it’s all about you and your needs.  When in reality, the compelling reason for bankers to create another ‘religion’ was to greatly mitigate future losses—of bankers!—such as those suffered during the Banking Crisis of 1906-7.  During that crisis, it was the 1% who took the lion share of the losses.  There was no need of an OWS patriot movement.  As Nassim Taleb explained on Bloomberg Television this week, America operated on the principles of the Hummurabi Code back then.

With the denouement of the debt crisis in full swing now, there should be no surprise, then, of how this endgame of the financial crisis will be attempted to be played out.

So, now, the crime has been exposed, thanks to bill Black and others.  It appears that the Fed and Washington are, again, not surprisingly, coconspirators of the crime(s), with preliminary evidence pointing to a cast of characters that make The Keating Five look more like a teenage gang of lunch money extortionists.  And Bill Black is on the case to keep everyone informed of the “white-shoe boys” crimes.

The fight against the cartel now will be waged in the media—yeah, the media that’s been covering up for this enterprise ever since investigative reporter Jack Anderson and those of his stripe left the scene decades ago.  And, now, these ‘useful idiots’ have been belittling the OWS movement, those American patriots who dare to be heard!

“The smarter the journalists are, the better off society is. For to a degree, people read the press to inform themselves-and the better the teacher, the better the student body.”  — ?

Who, at one time, said that?  Warren Buffett!, the man who took a $5 billion stake in a bank it appears he knew was about to pull a heist—and he wanted a piece of that action with a sweetheart deal of preferred shares (as recommended by his bathroom friend, Mr. Rubber Ducky) while at the same time killing the other bird with his $5 billion stone by playing the role of JP Morgan of the Great Depression, the sequel.

The other mob bosses were happy with Warren, while the media, then, running with the story with “if Camel cigarettes are good enough for doctors, they’re good enough for you” advertising pitch for this up-and-coming pump-and-dump scheme—not too dissimilar to the GM pump-and-dump scam replete with other accounting gimmicks of channel-stuffing inventory figures touted as actual sales.

“Let blockheads read what blockheads wrote,” Buffett has been quoted as saying.  As Buffett masquerades as a creatively contrived noblesse oblige kinda common man, and not an evil “Let ‘em eat cake” gazillionaire kinda guy.  Well, the American people have a quote for you, too—you phony coward, AIG bailout recipient, who now sits in an unique position of history to prevent these neo-feudal barbarians from pissing on the U.S. Constitution.

“Eat sh*t, Warren  Buffett.” — OWS, the second revolution

Black Swan’s Nassim Taleb on OWS

In a display of cogent and rational thinking to what many have ascribed as ‘complex issues’ surrounding banker bailouts, Nassim Taleb, famed author of The Black Swan, told Bloomberg Television on Tuesday that, for him, the cause of the breakdown in the financial system is a simple one: reckless Wall Street practices are systemically protected by way of rewarding bankers for taking on ‘risk’ while government insures them against losses through the use of taxpayer money—thereby, de facto, creating a risk-free environment for bankers to gamble with bank deposits.

And when the bankers lose the bet, government’s threat of force collects for the next round of banker bets.

That, Taleb said, is an “untenable” model, especially within a social construct of a promised one-man-one-vote political system.   By rewarding bankers like successful hedge fund mangers irrespective of performance, Wall Street cronies have been legally enfranchised into “a compensation scheme, and nothing more.”

“The bank bailout is a masquerade of economics,” he continued.  “The banks have made . . . $2.2 trillion in the past five years.  It’s a business that doesn’t make money . . .  and projected another $5 trillion in the next 10 years.”

Bankers salaries and bonuses have been served up by society, not the other way around, according to Taleb.  “They [banks] aren’t hedge funds,” but are compensated like hedge fund managers who enjoy no risk; that, in the end, essentially, imposes an accumulated and system-breaking deferred tax to an economy when the house of cards finally falls.  And all the mal-investment along the way to the inevitable bad ending sucks from the economy and ends up in the pockets of bankers in the form of salaries, fees and bonuses.

In a Business Week 2010 interview, Taleb said, “The problem is getting runaway. It’s becoming a pure Ponzi scheme. It’s very nonlinear: You need more and more debt just to stay where you are. And what broke Madoff is going to break governments. They need to find new suckers all the time. And unfortunately the world has run out of suckers.”

Having morphed and devolved over time, Taleb characterizes the U.S. today as a “weird combination” of capitalism, which Maynard Keynes stated “can probably be made more efficient for attaining economic ends than any alternative system,” combined with Marxian Socialism, which Keynes believed is “a doctrine so illogical and as dull.”

The economic model first laid out at Brenton Woods in 1944 has changed; it’s developed into a “weird combination” that many describe as crony capitalism for the top 1%.  Therefore, the banking cartel stands in the way of the OWS’s 99%, and the righteous grievances of the protesters must be addressed immediately before the possibility of the movement turning into a “second generation” Marxist uprising, Taleb added.

“It [support of the banking cartel] is like a tax on citizens; it’s a transfer of money to compensation of the banks.  This is compensation, salary plus bonuses, of bankers,” Taleb continued.  “This is a huge amount of money, and people are worried about how much we spend on the military.”

Taleb squarely assesses blame on elected political leaders for the breakdown.  These folks are elected to manage a system so complex that “they [politicians] themselves don’t know what risks they have.”  Taleb, then, must disagree with those who claim the greed of the America people was a strong as Wall Street’s.  Would a buyer of sub-prime mortgages pay the equivalent amount per $1,000 as he would pay for a U.S. sovereign debt obligation if the rating on the sub-prime mortgages were rated to reflect a reasonable assessment of its true risk?

So what’s Taleb’s solution? He said, institute the spirit of the Hummurabi’s Code.

Hummurabi, the Babylonian King, said in 1750 B.C., “If a builder builds a house and the house collapses and causes the death of the owner of the house, the builder shall be put to death.”

Taleb said the most effective way to ferret out purposefully hidden risk is to do as the Romans once did, enforce Hummurabi’s Code.  “If you build a bridge, and you’re the engineer, you have to spend a few nights under the bridge,” he said.

With the use of similar rules for bankers, today, Taleb is convinced that Wall Street would no longer hide or miss-price risk and that it would no longer need to seek out suckers to buy that risk.

James Turk on Gold: Getting Close to the Endgame

James Turk increasingly sees the tell-tale signs of the endgame for the U.S. dollar rapidly emerging right before his eyes.  Ergo, a move in gold that will “light people’s hair on fire,” as the Nostradamus of the gold market, Jim Sinclair, has predicted, moves ever closer to reality.

“What we are seeing today is just like we saw in the 1970s when hot money was flying around the world from place to place,” Turk told King World News on Monday.  “Despite the fact that the Federal Reserve is buying long-term paper, interest rates are still rising.”

And rising rates on the long end of the curve, not only have demonstrated the dangers of levering up the Fed’s balance sheet but extending its average maturity (one of the many problems with Greek sovereign debt), it’s extraordinarily costly to the Fed and those who’ve made a living front-running the Fed, a la PIMCO’s Bill Gross, who, by the way, just released his crocodile tears mea culpa address to investors on Friday.  It appears the insiders at Gross and Co. have had a bad year.

“So the high in government [Treasuries] prices is probably behind us,” Turk speculated.  “This will eventually [lead] to questions about the Federal Reserve’s solvency.  The Fed has a lot of low-yielding paper and as interest rates rise, the price of that paper will fall.”

It appears that while Turk’s legion of tin-foil hat wearers have so far weathered this year the most vicious turmoil in currencies, sovereign debt and stocks since the 2008-2009 meltdown, Bill Gross has been busy taking a bullet for the Fed (Buffett, too, from his purchase of BofA ahead of the most dreadful earnings releases for the banks in recent memory) at the expense of his shareholders.

What?  Bill Gross?  Sounds like another tin-foil conspiracy theory.

Consider the real threat of a military invasion of any OPEC nation that threatens to bypass the U.S. dollar in oil transactions.  Collectively, OPEC holds approximately 30 percent less Treasuries than the potential holdings of PIMCO’s $1 trillion.  It’s a far-reaching conclusion to support a case that Gross has not been touched by someone at the NY Fed—and at a most critical time when ‘Operation Twist’ needed a little help beyond the initial reaction to the news of its deployment.

That’s a sign of desperation, or fear, at the Fed.  As the founder of bullion storage company Goldmoney reviews his proprietary model, called the ‘Fear Index,’ Turk has not backed off from his earlier prediction of $2,000 by November 1.  But from the looks of things, gold may not reach Turk’s $2,000 target with only 10 trading days left for October, but given his widely-followed track record, reaching as far back to the year 2000, Turk can only be faulted for his intermittent flubs in the precise timing of his calls.

That precision, of course, only proves that Turk is not included in the loop of cc’ed memos following ad hoc conference call pow-wows held by Bernanke, Geithner, JP Morgan and CFTC cabal.

Besides, a review of Turk’s record for timing major moves reveals miscalculations of only mere weeks, for the most part, but more importantly and typical of Turk, it shows his willingness to stick his neck out for investors time and time again—unlike the endless lame calls made by big Wall Street firms that issue target prices 5% from present levels and on a time horizon that nearly assures a correct call.

Turk continued, “It won’t take a big jump in interest rates to cause people to question the Federal Reserve solvency, especially given the poor quality of the assets on the Fed’s books from the bailouts it has engineered.  This is all part of the the overall trend of increasing fear as part of my ‘Fear Index.’”

And that’s where the dollar dominoes are mostly likely to fall first.  In line with Turk’s belief that a dollar collapse will show up first in the U.S. Treasury market, Donald Coxe, former Global Portfolio Strategist for BMO Capital Markets (the firm of the iconic CEO Jeremy Grantham) told listeners of Financial Sense Newshour that the dollar’s Achilles heal can be gleaned from the stresses on the Fed’s balance sheet and from the participation (or lack, thereof) at Treasury market auctions.

Keeping a careful eye on the amount of direct bid take-downs by the Fed’s primary dealers in relation to the indirects (mostly central banks and the likes of PIMCO) may provide investors a heads up to the stress the Bernanke Fed feels.  Zerohedge.com does a good job keeping investors apprised of the capital flows at the Fed’s custodial accounts.

As the Fed stresses, gold moves higher.

“What we are seeing in the metals right now is the quiet before the storm, Eric,” said Turk. “These are excellent times to be accumulating gold and silver on the dips because longer-term you are going to see price levels for the metals that today would be considered unimaginable.  This is how secular bull markets work and this one won’t be any different.  It will end in a mania that will, ‘Light people’s hair on fire,’ as Jim Sinclair is fond of saying.”