A New Week Begins
Actually, it began last night at 6:00 pm EDT and we've already seen more action and volatility than we saw in the first four days of last week. Be ready for a wild week ahead.
First of all, I have to give you a chart of The Pig. When considering ole Pigatha, you must remember the convenience of expressing PiggyWiggy in terms of an index versus other fiat currency. That the dollar is "strengthening" is only another way of saying that it is currently some other fiat currency's turn in the barrel.
Regardless, that Porky is actually UP over the seven days since the announcement of QE∞ is a feat of structural engineering on par with Giza.
In the end, it matters little. Everyone else can worry about fiat. We'll stick with the only real currencies, recognized through millennia as true money.
True money has been under pressure for 24 "trading hours" now as gold has fallen about $30 and silver over $1.50. OK. Fine. Sure. Whatever. This is exactly the type of dip for which you need to be on the lookout. Because of relentless physical demand brought about by the ongoing fiat currency debasement, it is going to be very difficult for The Bullion Banks to mount an aggressive move to the downside. More likely, they'll let the HFT algos do all of the paper selling and then they will utilize any brief bouts of weakness to obtain allocated metal to deliver to insatiable London buyers. You should do the same. QE∞ means direct monetization of government debt and a permanent state of fiat decay. Buy all significant dips and take delivery. While you can.
Now for some reading material to help you through your day. First up, this interesting article from the WSJ. Feel free to disregard the source and some of the overt political stuff contained within. The economic message, however, is sound, regardless of what you think about the authors. Here's a snippet and a link to the full text:
"Did you know that, during the last fiscal year, around three-quarters of the deficit was financed by the Federal Reserve? Foreign governments accounted for most of the rest, as American citizens' and institutions' purchases and sales netted to about zero. The Fed now owns one in six dollars of the national debt, the largest percentage of GDP in history, larger than even at the end of World War II.
The Fed has effectively replaced the entire interbank money market and large segments of other markets with itself. It determines the interest rate by declaring what it will pay on reserve balances at the Fed without regard for the supply and demand of money. By replacing large decentralized markets with centralized control by a few government officials, the Fed is distorting incentives and interfering with price discovery with unintended economic consequences.
Did you know that the Federal Reserve is now giving money to banks, effectively circumventing the appropriations process? To pay for quantitative easing—the purchase of government debt, mortgage-backed securities, etc.—the Fed credits banks with electronic deposits that are reserve balances at the Federal Reserve. These reserve balances have exploded to $1.5 trillion from $8 billion in September 2008.
The Fed now pays 0.25% interest on reserves it holds. So the Fed is paying the banks almost $4 billion a year. If interest rates rise to 2%, and the Federal Reserve raises the rate it pays on reserves correspondingly, the payment rises to $30 billion a year. Would Congress appropriate that kind of money to give—not lend—to banks?"
And this is interesting. Despite all of his (empty) promises to end the 4-year silver investigation by "late September or early October", ole Thunderlips seems to be getting a case of "froze toes":
"The Commodity Futures Trading Commission is wrapping up its investigation of the silver market and while some sort of public announcement may come “in the near future,” nothing is “imminent,” said CFTC Commissioner Bart Chilton Friday." ( http://www.forbes.com/sites/kitconews/2012/09/21/update-cftcs-chilton-silver-investigation-continues-expects-something-public-in-near-future/)
I can certainly understand why so many of you have zero faith in this character. He certainly seems to relish being the "good cop" in the other four commissioner's "worthless cop" routine. We'll soon know for certain whether or not they have any integrity. I'm looking forward to finding out. (Images below provided for the sake of nickname clarity.)
And, oh boy, this one's a real eye-opener. All European Turdites (but in reality everyone) should read this interview/article: http://www.telegraph.co.uk/news/worldnews/europe/eu/9559937/Vclav-Klaus-warns-that-the-destruction-of-Europes-democracy-may-be-in-its-final-phase.html
OK, that's all for this morning. We are now 45 minutes post the London pm fix and prices are hanging in there quite nicely. Again, all I'm hoping for are NY closes back above $34 and something between $1760 and $1770 in gold. Given all of the containment efforts of last week, there's a reasonable high likelihood of a "Happy Tuesday" tomorrow. In anticipation of an exciting autumn, I actually added some fiat to my options account last week and I'm looking for an opportunity to buy some additional calls. I will, of course, keep you posted on any purchases I make. Have a great day!