Imminent Silver Price Explosion!

By Dominique de Kevelioc de Bailleul

Silver has perked its head up and sniffed the next round to hyperinflation is on the way.  Load up the truck; it’s expected to be the best ride, yet.  Here’s why:

No less than three articles penned by well-placed journalists at the ‘establishment’ rags of the Wall Street Journal, Financial Times and the Economist were launched within days of each other, with all three ‘suggesting’ that Bernanke better start stirring-up the animal spirits—on the pronto!

Jon Hilsenrath of the Wall Street Journal, the man who the straight-shooting Stephen Roach of Morgan Stanley calls the real chairman of the Fed, wrote Wednesday, following the dismal U.S. GDP report:

A few quick thoughts on GDP report out this morning:

Key price indexes are uniformly running below the Federal Reserve’s 2% objective. The personal consumption expenditures price index was up 1.6% from a year ago, thanks in part to falling gasoline prices. This is the price index that the Fed watches most closely, more so than the consumer price index produced by the Labor Department, which is running a touch higher. Excluding food and energy, the PCE price index was up 1.8% from a year ago. The Fed watches this ex-food-and-energy index to get a read on underlying inflation trends. For the quarter at an annual rate, the PCE price index ran at 0.7% and excluding food and energy it ran at 1.8%. An alternate measure, the “market-based” price index, is also running below 2%. This is ammunition for Fed officials who want to act right away to spur growth. Not only is growth subpar, and the job market stuck in the mud, inflation is also running below the Fed’s long-run goals.

Final sales of domestic product — a measure of how the economy is doing when you take out inventory swings – up at a 1.2% rate in Q2 and averaging a 1.7% rate since 2011. That’s really substandard for a recovery.

That’s the first polite salvo at Bernanke.

Now from Greg Ip of the Economist.  Ip is Europe’s version of Wall Street Journal’s Hilsenrath, but it’s all the same as far as the American-European central bank alliance is concerned, with the Depression of 1873-79, the banking crisis of 1907, the brief but deep Depression of 1921, and the Depression of 1930-1945 to serve as stark reminders that the two economies are inexorably tied at the hip.

Ip piece for the Economist was written with the point of view of an article he would write in 2021, looking back at monetary policy of 2012.  A blog entry about Ip’s piece can be found at Zerohedge.com.

In the fall of 2012, Greece abrogated its bail-out agreement with the IMF, European Union and ECB, declared a moratorium on all external debt payments, and began paying domestic bills with IOUs that it then declared legal tender. The ECB cut off Greece’s banks, Greece responded with capital controls, and relabeled its IOUs “new drachmas” which quickly plunged to 35 euro cents. Bank runs immediately commenced throughout the periphery; bond yields in Spain shot over 7%; global stock markets cratered.

The ECB was finally forced to act to save the euro: it announced it would buy as many bonds as necessary to cap all sovereign yields at 6%, with the exception of Greece. The ECB never had to buy any bonds: investors no longer had any reason to sell since the ECB had taken insolvency off the table.

Days later, the ECB president destroyed the euro shorts during a press conference.

“Within our mandate, the ECB is ready to do whatever it takes to preserve the euro,” ECB President Mario Draghi told reports last week.  “And believe me, it will be enough.”

UBS’s Art Cashin commented on Draghi’s surprise market-moving jawbone antic:

“Mario Draghi’s comments stunned the markets,” stated Cashin.  “What prompted the timing of his move?”

Referring back to Ip’s article, Cashin continued, “Wait a minute! That [article] sounds rather close to what Mr. Draghi was discussing. Coincidence? Probably, but the timing is stunning. Somewhat like the simultaneous but separate development of calculus by Isaac Newton and Gottfried Leibniz in the early 1600′s.”

Unlike Morgan Stanley Roach’s direct style, Cashin’s more-diplomatic observation nonetheless delivers the point.

And to complete the shock-and-awe three-man series of salvos from the mouthpieces of the ‘establishment’, Council on Foreign Relations commissar Sebastian Mallaby of Financial Times wrote Tuesday:

 . . . the Fed could couple more quantitative easing with a formal announcement of a higher inflation target.  Some Fed leaders are open to this. Charles Evans, the Chicago Fed president, has floated the idea of a 3 per cent target, effective until unemployment falls below 7 per cent. A higher inflation target would lead markets to understand the Fed is committed to quantitative easing of game-changing magnitude, inducing the behavioural shifts needed to make the policy succeed.

The Bernanke Fed has been pilloried for pursuing wild quantitative easing at the risk of inflation. The truth is that it has pursued cautious quantitative easing without risking inflation. The time has come for some fresh thinking. A Fed that can escape the myth of its audacity might be able to do more.

Inflation isn’t a problem, according to Mallaby, though ShadowStat’s John Williams’ reconstruction of M2 reveals a 15 percent growth rate doesn’t quite jibe with Mallaby’s neoclassical assertion.

And according to Williams, further money printing is, not only expected by the Fed, it will lead to hyperinflation by the end of 2014.

Not too surprisingly, no one really expected central banks to repeat a Wiemar scenario so quickly, including Williams, who, after witnessing central bankers unleash the printing presses following the aftermath of the collapse of Lehman, pushed up his forecast for toilet paper money to 2014, from 2019-20.

And the conclusion that can be drawn from all of that jibber-jabber from the ‘establishment’s’ prestitutes?

FX Concepts’ currency expert extraordinaire John Taylor told Bloomberg News Monday, “I think something’s going to happen on Tuesday, Wednesday, obviously reported Wednesday,” referring to the FOMC meeting this week.  “And mostly likely it’s going to be Bernanke teasing us a little bit, you know, that QE is coming.”

“September it’s [a formal announcement of more QE] coming,” Taylor said.

Greece “Officially Defaults” March 23, Banks Close

Wonder why European leaders appear more like a rotating cast of bumbling 3 Stooges than a team of coordinated fraternal bureaucrats throughout the debt crisis in Greece?  British investigative reporter John Ward of The Slog may have shed some light on to the matter of Greece and the strategically planned hard default of the beleaguered nation’s financial obligations at the close of business March 23. Sign-up for my 100% FREE Alerts

According to Ward, that following Monday, the 25th, Greek banks will close, then presumably usher in the drachma in addition to the shock, confusion and panic expected in markets to the surprise outcome of the two-year long display of alleged unity between France, Germany and other monied parties to solving Greece is revealed to be just a ruse, a delay tactic for a preparation of the event.

“A written document giving firm dates and detailed actions for a planned Greek default has been in the possession of two top Wall Street bank currency trading bosses since the second week in January,” Ward begins his blog post of the morning of Feb. 16.  “The Slog has separate but corroborative sources affirming the existence of the document, and a conviction among senior bank staff that – at least at the time – the plan represented ‘a timetable, not a contingency’. The plan gives a firm date of March 23rd for default to be announced after the close of business.”

Ward makes a compelling case for a backdoor arrangement made between Germany, IMF and the U.S. to take matters into their own hands for saving the global banking system has been the plan all along.

One of Ward’s ‘protected’ sources was quoted as saying, “I have strongly suggested to Greek business friends and clients that they sell up fast, do a sale and leaseback on property, empty bank accounts, and change to a hard currency.”

If Ward’s information is indeed accurate, others closer to the decision makers than Ward surely must have known far earlier.

One premier currency heavyweight, John Taylor of FX Concepts, smelled blood (or had knowledge) back in July of last year of the eventual amputation of Greece from the euro.  His seemingly radical call for gold to reach $1,900 during that unusual summer rally of 2011 in the precious metals, coupled with his brazen prediction of gold $1,000 in April-May of 2012 as well as the euro trading below parity against the dollar, turned many heads.

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

Moreover, Taylor has once again reminded investors of his sentiments regarding the Eurozone and the implications of an imminent Lehman 2.0—but this time, a Lehman-like meltdown of industrial strength.

Thursday, zerohedge.com posted Taylor’s latest missive, which reads, in part:

The market has not opened its eyes to the impact this Greek unraveling will have. The Eurozone will be mortally wounded and the world will suffer a significant recession – maybe as deep as 2008. European banks will lose much of their capital base and many should be bankrupt, but just as in the Lehman aftermath, the governments will try to save the banks and the banks’ bondholders, solvent or not. As the bank appetite for Eurozone sovereign paper will be decimated, austerity will probably follow shortly, followed by deflation and uncontrollable money creation. The European recession should be one for the record books.

Supposedly, evidences by market action to every news flash of a Greek ‘deal’ has calmed markets, putting the risk-on trade into full swing.  But, according to Taylor—who makes no mention of the specifics to the politics—a disaster is in the offing, not a smooth juiced up trade in equities, bond spreads and gold as a result of a job-well-done in ameliorating bank stresses.

In the meantime, evidence of ever-increasing violence in Greece has been the response.  The latest clash with police got noticeably worse this week.

“Before the vote took place there were 80,000 people on the streets, outside the Greek Parliament, basically attempting to storm the Parliament,” UK Independence Party Leader Nigel Farage told King World News.  “There were 5,000 Greek police there using tear gas and there were 10 major buildings that were set on fire.  It really was a very dramatic scene that took place in Athens on Sunday.

Further insistence by Brussels and Germany to subjugate Greeks appears more likely to threaten the lives of those hired to represent the nation of 11.5 million Greeks.  Letting the country exit the euro appears to be the most rational political move before a full-blown Arab Spring sparks in Europe.  Therefore, dropping Greece and ‘ring fencing’ European and American banks could be the most logical solution to Greece—but the plan for a trap must be sprung into action overnight to prevent a run on the banks of a more unpredictable nature.

Capital controls are easy to institute, but where to get the cash?

That solution can only come from the only central bank that can and has been largely getting away with money printing (also, for the most part, legally unencumbered) without much tears for more than 40 years—the Fed.

In late November, the Fed announced a rate deduction of 50 basis points to its currency swap lines with the BOJ, BOE, ECB, SNB and BOC, in a coordinated effort to grease the global banking system (or preparation for the big day on March 23).  The operation is headed by the NY Fed and its mostly unmentionable Exchange Stabilization Fund (ESF).

When asked in December by a House Oversight and Government Reform Subcommittee about the Fed’s move to open the money spigots to five of the world’s most influential central banks, NY Fed president William Dudley said, he “can’t imagine” the Fed ever undertaking unprecedented and politically charged action such as bailing out the Western world triggered by a European meltdown.

“The bar to doing that would be extraordinarily high,” Dudley, the successor to Timothy Geithner.  “We have never gone out and bought large portions of sovereign debt in the history of the Fed that I’m aware of.”

“This is about ensuring the flow of credit to U.S. households and businesses,” Dudley added. “It is in the U.S. national interest to make sure that non-U.S. banks that are judged to be sound by their central bank are able to access the U.S. dollar funding they need in order to be able to continue to finance their U.S. dollar assets.”

Of course, bailing out, or more euphemistically speaking—ring fencing, Europe is in the national interest of the U.S. because, if Europe melts down the U.S. melts down, and it truly will be financial Armageddon.  And that scenario will not be left in the hands of a bunch of bumbling European bureaucrats, who have for a millennium never gotten along when push comes to shove, and most likely never will.

Wasn’t it Gerald Celente of Trends Research Institute who predicted a financial meltdown and bank holidays by the end of the first quarter?  The world will soon find out. Sign-up for my 100% FREE Alerts

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.

Expect $85 Silver, says Legendary Market Technician

As Asia continues to report soaring CPI statistics, with Vietnam’s 22% inflation rate as the most recent evidence of the Fed’s QE2 “liquidity” rippling through the world’s economies, legendary technician Louis Yamada told King World News (KWN) the precious metals are set to takeoff again as a result of Bernanke’s monetary actions.

Yamada’s fame as the market technician with a track record of “getting it right,” began as director and head of technical research at Smith Barney (now of Citigroup (NYSE: C)).  After being voted as the leading market technician in 2001-2004, she went off to found her own research group, Louis Yamada Technical Research Advisors, in 2005.

“Gold continues to be in an uptrend in our work,” Yamada told KWN.  “You had a little bit of a consolidation, seasonality would suggest a rise into the fall. The primary support level remains at $1,475 … Our next target is $2,000, and we did a gold special in our last piece that suggested from a very long-term perspective … we could see $5,200 on gold.”

Yamada is the latest of a raft of highly credible analysts, money managers and bullion dealers coming out during the past two weeks to tell KWN and other news organizations of the imminent explosion in the price of precious metals.  James Turk, Jim Sinclair, John Taylor, Ben Davies, John Embry, Peter Schiff, and Jim Rogers (who announced he is adding insult to injury to the U.S. dollar fiasco by shorting U.S. Treasuries) have all advised to go long the anti-dollar trade.

The lone hold-out of considerable import to the precious metals market is Marc Faber, the favorite go-to guy for the most steamy of quotes and anti-establishment rhetoric of all hard money advocates.  His forecast for this summer is for the monetary metals to succumb to the 30-year track record of weakness and relatively thin volume.

As gold makes new highs above $1,600 and silver makes its way past $40 amid a fierce “250 million ounces of silver in 1 minute” smack down attempt by the cartel last week, according to Precious Metal Stock Review’s Warren Bevan, the majority of our favorite talking heads, so far, have it right, and Marc Faber has it wrong.  But the summer isn’t over yet, and Faber hasn’t budged from his forecast for the metals.

Yamada, who, incidentally, didn’t offer a time frame for her targets for the gold and silver price, said her next target for silver is for a double “over time” from the $40 print.

“We hit part of our silver targets at $50, (expect) $65, even $80, $85 over time,” speculated Yamada in the KWN interview.  “We had an 88% rally in a very short period of time from January and a one third retracement, 34% down, so that was pretty normal. We saw some support at $33 and would loved to have seen it go sideways a little bit longer to be honest with you,” noting considerable dollar weakness in light of the  sovereign debt crisis with the PIIGS of Europe has revealed the dollar’s diminished status as the world’s safe haven currency.

“I think that one of the observations that one has to take into consideration is that with each of the Euro financial crises and our own financial crisis in 2008 to 2009, the dollar has rallied less!” she said.

“In other words you had a rally in 2009 that carried 25%,” Yamada explained.  “Then, in early 2010, the rally was only 19%.  And the second one in 2010 was only 7%.  And this time, you haven’t even seen 7% with the crisis that has evolved.  So that suggests to us that it (the dollar) is becoming less and less considered a really safe haven.”

While the systemic problems with the euro and dollar come fully into focus, we should be mindful of U.S. Treasury Secretary Tim Geithner’s recent comment on Meet the Press of July 10, when he said, for a lot of people, “it’s going to feel very hard, harder than anything they’ve experienced in their lifetimes now, for a long time to come.”  Bloomberg reported that Geithner may step down from the head of the Treasury.

As of 12:36 in New York, gold trades at $1,612.79 and silver at $40.05.

Look who’s predicting $1,900 gold by October

Predictions of lofty prices coming from regular hard-money advocates and gold bugs are certainly not hard to find.  Predictions of $2,000, $5,000, $10,000 and $100,000 targets for the top in the gold market are numerous.  But when a mainstream money manager of the highest esteem projects a major move higher in Wall Street’s most despised asset—gold, traders should sit up and take notice.

Speaking with Bloomberg on Wednesday, FX Concept’s founder, John Taylor, the man who pioneered the analysis of foreign exchange cycles, expects the gold price to soar to $1,900 by October, or a 20% rally from today’s price within a time frame of between 11 to 14 weeks.

Taylor sees gold as the ultimate safe haven asset while the developed nations deal with crushing debt loads; but he singles out the euro as the more likely currency in the U.S. dollar/euro cross to devalue against the other on the way down against gold during the next leg down in the global debt crisis, which he said could begin “within three or fours weeks time from now.”

Taylor also sees the euro dropping to $1.15 against the dollar during the next down leg.  And, if correct, then, he expects the gold price in euros to achieve 1,650 euros per ounce by October, which calculates to a nearly 50% jump in euro terms.  And it gets worse for the euro.  By next year, the euro is going to par with the dollar, he said.

When asked why the euro has held up so well up til now, Taylor quipped, “because the dollar is so weak.”  But as the euro zone flounders in the handling of Greece’s sovereigns, it will eventually become apparent that “the euro has to be restructured, and not just a little restructuring, but very, very significantly restructured to make it work,” he said.

But after the fireworks of new highs in gold in every currency, he expects the rally to turn ugly, as the second leg of the global debt crisis takes every asset down in a heap, including gold.  And how far will the gold price drop as the U.S. and Europe plunge back into a deeper recession?  Taylor believes gold will touch $1,100, a target which may seem incomprehensible during the gold mania, but will be the result, he said, of institutions and hedge funds scrambling to get liquid to meet redemptions.