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From: http://www.tickerforum.org/cgi-ticker/akcs-www?post=73060 all charts and graphs are at this link

Death By Numbers

Tuesday, November 25th, 2008.

WARNING: If you can not stand the sight of nuclear explosions, people being pulled limb from limb, or dogs sleeping with cats, then please read no further as the math you are about to see is extremely graphic in nature.

That’s right, death by numbers – as in fiscal suicide – hence forth to be known as committing a “Paulson” (I only wish I could commit Paulson!). You see, math, unlike Freidman economics, is extremely unforgiving. Simply put, MATH IS A [censored] when the numbers work against you! We’re not even talking about upper level algebra here, just plain old simple math. But for this math, ladies & gentlemen, you will need to put your pocket calculator away and tap into your latest Pentium Processor as your little TI-1785 will run out of digits before we even get half way to entering in our first denominator.

First a little flavor…

Yesterday’s close saw the largest two day point gain in history. This caused SRS (2x inverse of commercial real estate index) to lose 50% of its value in basically one trading session plus one hour! It left all of my short term stochastic indicators very over bought – usually a good entry point to go short, but I was careful knowing full well that we may be entering a more positive time frame, the ever elusive eye of the storm, a.k.a. Elliott Wave B up/sideways. The stochastic was overbought on the 5 minute, 15 minute, 30 minute, and 60 minute time frames, perfect for at least a scalp on the short side – so I took a poke at it just before the close. By the time I went to bed the futures were down more than 100 points – Booya baby, bread AND butter!

Oh, I can hear all of you 7th Day Economists thinking, “Evil short seller! Evil short seller!” But, frankly Scarlet… only Chris Cox gives a damn.

Then this morning I eagerly arose, spun up all three computers (now completely necessary to handle the math) and my jaw dropped to the floor with a THUNK when I saw the latest $800 billion headline! WTF, OVER? I regained my composure, and promptly sold my short positions. Now, normally I don’t just fold like a cheap suit, but come on, $800 billion? More?? This left me with only two options; attempt to trade this frenetic market – and probably give back some of my yearly gains, or sit on my hands and spend the day educating people about the horror show that is our economy… So here you go – Death By Numbers!

The latest $800 billion announcement created a new acronym to be added to the alphabet soup… you know, the TAF, the TARP, and now the TALF is the latest to be added in with all the other CRAP.

Here’s what the old ticker machine spat out about the TALF this morning:

*TREASURY SAYS AUTO, STUDENT, CREDIT CARD, SBA LOANS ELIGIBLE
*TREASURY SAYS CONSUMER ABS MARKET `ESSENTIALLY' STOPPED
*TREASURY SAYS TALF WILL IMPROVE ABS MARKET CONDITIONS
*TREASURY SAYS TALF MAY BE EXPANDED TO INCLUDE OTHER ASSETS
*TREASURY PROVIDES $20 BLN FOR CONSUMER ABS LENDING FACILITY
*NEW TALF FACILITY TO AID CONSUMER, SMALL BUSINESS LENDING
*TREASURY ALLOCATES FUNDS FROM TARP FOR NEW FACILITY
BULLET: FED: Federal Reserve says it will initiate program...>
*FED TO LEND UP TO $200 BLN TO INVESTORS IN ABS :FNM US, FRE US
*FED SETS UP TERM ASSET BACKED SECURITIES LOAN FACILITY :FNM US
*FED TO BUY MBS THROUGH ASSET MANAGERS, STARTING BY YEAR-END
*FED TO START BUYING GSE OBLIGATIONS NEXT WEEK :FNM US, FRE US
*FED TO BUY DIRECT GSE OBLIGATIONS THROUGH PRIMARY DEALERS
*FED PURCHASES OF GSE SECURITIES TO BE OVER `SEVERAL QUARTERS'
*FED SAYS SPREADS ON GSE DEBT HAVE `WIDENED APPRECIABLY'
*NATE SAYS PAULSON IS AN IDIOT, DOESN’T KNOW MATH – OCCAM’S RAZOR
*NATE SAYS PAULSON AND CENTRAL BANKERS COMMIT LARGEST HEIST IN THE HISTORY OF MANKIND – ZEITGEIST

So, I get to THANK HANK for ruining what was probably the perfect short entry. Thanks Hank, you’re a true… ahhh, patriot! Yeah, that’s the ticket… a patriot who is actually a traitor who deserves to be swinging from the yardarm! But I digress; we are here to talk about math. Let’s start by wrapping our minds around a trillion dollars… Rev up those Pentiums!

A TRILLION DOLLARS: $1,000,000,000,000

That’s twelve, count them, twelve zeros! Move your cursor over the little Microsoft flag, select All Programs, Accessories, then Calculator if you want to play along. It’s easy, just type in a 1 and then count to twelve while you pound the **** out of the zero key! That’s it, calming isn’t it?

Okay, let’s go through a little math exercise: Let’s say that you are standing next to a huge pile of dollars bills ($1 trillion) and in front of you is a bonfire. Now let’s say that you are going to reach over to that pile and throw a dollar bill into that fire at the rate of $1 per second. How long do you imagine that you’ll be standing there throwing dollar bills into that fire? Five years? Ten years? Thirty years? Will you get done before you die? How about before your K*ds die? Their K*ds?

To calculate an answer, let’s start by determining how many seconds there are in a year, that will tell us how many dollars per year get tossed into the fire and then we can divide a trillion by that number to come up with the number of years. Sound simple? It is truly easy math, you just need a calculator large enough!

There are 60 seconds in a minute = 60

There are 60 minutes in an hour… 60 x 60 = 3,600 seconds per hour

There are 24 hours in a day… 24 x 3,600 = 86,400 seconds per day

There are 365 days per year… 365 x 86,400 = 31,536,000 seconds per year

Okay, now we’re getting somewhere! Now we take 1,000,000,000,000 and divide by 31,536,000 to come up with… 31,709.79 YEARS!

That’s right; you would be standing there for nearly 32,000 years tossing bills into the fire.

Now, if you are being charged interest at the rate of 5% per year, you will need 1,585 of your friends standing by your side tossing bills in with you for ETERNITY, JUST TO PAY FOR THE INTEREST.
Oh yeah, sure… we could stack ‘em to the moon, drive 100 miles by a stack of dollar bills 4 feet high, etc., but you get the idea. It’s an enormous amount of money.

This is where the 7th Day Economists jump in to remind us all that, “They said the same doomish stuff about a billion dollars 20 years ago, and when you compare it as a percentage of GDP it’s not that bad!”

Seriously, someone in this conversation has an Alice in Wonderland fantasy in their head – and guess what? IT’S NOT ME. How long ago was it that the entire world was making fun of how much money our military spent on the B-2 bomber? Remember that? The joke was that it stood for the $2 billion bomber! We couldn’t afford them then and now $2 billion sounds like a JOKE compared to the type of figures we’re throwing around just a few relative years later. That type of number growth – from talking billions, to talking trillions – is HUGE. It’s GIGANTIC, in that is shows that the number game of money has truly gone PARABOLIC. If you follow my writings, then you know what happens to all parabolic curves (they collapse under their own weight).

So, yesterday the media finally added up all the money and guarantees promised in all the alphabet soup programs in the past year. The tally? More than $7.7 trillion! And this morning we learn we get to add another $800 billion for a new total of $8.5 trillion!

$8.5 trillion! How much money is that? Well, the 7th Day Economists say, “it’s only a little more that half a year’s GDP!”

And here’s my response to that: Yes, but let’s get out our calculators, shall we? Let’s divide $8.5 trillion by the size of the entire population of the United States…

$8.5 trillion divided by 305,160,073 (current as of today) = $27,854 FOR EVERY MAN, WOMAN AND Ch*ld IN THE UNITED STATES.

For my family of four? That’s $111,416! Let me ask you this? Can the average family support that debt? If the answer is no, where do you think this all ends? But wait, that’s just the debts and obligations of the recent alphabet soup.

And before I get too far, I want to remind people that when it comes to comparisons to GDP, my bull**** flag is flying a mile high! WHAT DOES DEBT HAVE TO DO WITH GDP ANYWAY? The answer is NOT A DAMN THING! There is NO relationship, no tie whatsoever between debts and GDP and to make that comparison is pure ALICE IN WONDERLAND.

Here’s the same Alice in Wonderland argument, but in a different way: Let’s say that you live in a neighborhood of 100 homes. You and your spouse earn $100K per year (which is way above average). In addition to the $500k you owe on your house, you owe another $1,000,000 on credit cards! But you say, “in comparison to the GDP of my entire neighborhood, that $1 million is just a drop in the bucket so it doesn’t matter!

HUH? You owe a million bucks in unsecured debt but only earn one tenth that? How does that compare to the output of your neighborhood? It doesn’t!

Now let’s go back to the U.S. and our debt to GDP comparisons. Our nation’s businesses and people, NOT OUR GOVERNMENT, create about $13.5 trillion per year in economic activity (as measured by phony government statistics). But our government only takes in about $2.7 trillion per year in taxes or INCOME. Thus, Paulson and company have just committed the people of the United States to 3.14 years (Oooo, Pi) of INCOME down the drain, and that’s without interest.

Back to our neighborhood… if your personal debts exceed your ability to service those debts, there’s a term for that, it’s called BANKRUPT. It certainly doesn’t matter how much your neighbors PRODUCE, or even how much they EARN, it is YOU who is responsible for your debts. What matters is DEBT to INCOME, not DEBT to PRODUCTIVITY.

Did I mention that there are TWO and only TWO ways to pay back debt? That’s right, you can pay it back (with interest) or you can DEFAULT. That’s it.

Now, let’s really get into the scary math. No, we don’t want to talk about derivatives yet, we have to work our way up to that! Let’s continue to talk about debt.

ADDING UP THE DEBTS:

The following site keeps track of the nation’s CURRENT account deficit.

http://www.brillig.com/debt_clock/

This is the number that is NOT based on GAAP accounting standards. You know, Generally Accepted Accounting Principles… the ones that your government requires you to adhere to but refuse to use themselves? Yep, that’s that one. GAAP accounting includes ACCOUNTS PAYABLE. For the U.S. that would include little things like Social Security and Medicare, but we’ll get to that in a minute. Here’s the latest from the debt clock site:

U.S. NATIONAL DEBT CLOCK
The Outstanding Public Debt as of 25 Nov 2008 at 08:12:50 PM GMT is:

The estimated population of the United States is 305,160,294
so each citizen's share of this debt is $34,968.08.

Uh, huh. Count the digits, there’s twelve of them following that 10! And, as you can see, the CURRENT account deficit is now up to basically $35,000 per man, woman, and Ch*ld. When you add that debt to the debt that was just produced by all the alphabet soup programs (yes, a little of it is already in this number, but not much), the total is now up to $62,822 per man, woman, and Ch*ld, or $251,288 for my family of four.

If you prefer to see the debt in chart form, here it is in all its beauty directly from the Fed:


Can you say, “parabolic?” Yes, I thought you could!

Oh, here’s a good one… note what’s been happening to the Federal Debt held by the pigmen (oops, did I use that term? I meant to say the banks that are actually privately owned, and not actually owned by the Fed. They are Fed in name only).



Federal Debt Held by Federal Reserve Banks: Hmmm… their Federal debts are going down while the nation’s debts are going up. Hmmm…

Okay, well our own Federal banks hold a half trillion in debt… gee, I wonder how much foreigners hold of our debt?



Ah ha! Foreigners hold nearly SIX TIMES the debt as our own “Federal” banks – niiice. So, we’ve established that this curve shape is parabolic, what happens to parabolic curves? Uh huh, that’s right! And what do you think will happen when this parabolic curve collapses? Think about it.

But I digress.

Now it’s time to talk about the future obligations of Medicare and Social Security. Before I get into the numbers, YES, WE CAN simply eliminate those programs and make them go away. WILL WE? YES, WE CAN cut our military spending in half to get back within some level of sanity… after all, we do spend MORE MONEY ON OUR MILITARY THAN THE REST OF THE WORLD COMBINED. But WILL WE? And again, who is the insane one in this fantasy that unfortunately is no fantasy at all?

Conservatively our own government admits that the obligations of Medicare and Social Security add up to about $56 TRILLION with Social Security being the much smaller problem of the two at “only” about $10 Trillion. Heck, President Bush spent more than $13 trillion with one signature when he signed Medicare Part D into law! By the way, when others calculate these obligations, they come up with numbers as high as $100 trillion, but let’s stick to the more conservative $56 trillion number, okay?

Now we’re talking some serious numbers, 56 followed by twelve zeros. Do the math, that adds another $183,510 for every man, woman, and Ch*ld in the United States!!

Add that figure to the previous and now we are up to $246,332 for every person or $985,328 for my family of four.

Guess what? We have yet to even discuss personal or corporate debts. Do we want to go there? Okay, what the heck, I’m a glutton for punishment, let’s go…

Here’s a chart showing the liabilities of the household sector. In other words, personal debts. Note the little hook at the end, this figure just stopped growing.



Gee, that’s a BIG number and yet another parabolic chart! That would be about $14,000,000,000,000! Count the zeros, YEP, that’s 14 more trillion that the people of the United States are obligated for. Guess what, it’s the same 305 million people who owe it all. That’s another $45,901 for every person, bringing the total now to $292,233 per person.

Now, let’s talk about corporate debt. Yes, the same 305 million people are ultimately responsible for corporate debt too. Their debts, like all debts can be repaid in two and only two ways.

Below is the latest chart from the Fed… oops, they stopped keeping track of the number back in 2002, gee, I wonder why? And note that it doesn’t include the debts of the financial sector!! What is the shape of that chart? Oh yeah, it’s parabolic too!



Let’s just be ultra-conservative and go with the figure on the chart. That’s another $3.3 trillion in debts or about $10,820 per person.

This brings the total debt in America up to an astonishing $303,053 per person, or $1,212,212 for my family and every other family of four in America. Can the average American family support this debt AND continue to produce enough to make headway?

The answer is clearly NO! The average American family cannot even service the INTEREST on their portion of the debt, let alone pay for food and clothing on top of it.

Now, you will say that there may be overlapping debts in there and that, ha ha, we might even “make money” on the crap the Fed is taking in (ha, ha, good one), and you say, that that figure includes futures obligations that the government will simply choose not to pay in the future. Okay, cut the figure in half… it’s still completely unmanageable! The math simply doesn’t work.

You can argue that we can grow our way out of it all you want, but math does not lie. The rules of economics are immutable, just as are the rules of physics and math. Now, let’s talk about the really GIANT numbers, the numbers of the shadow banking system.

DERIVATIVES:

Three decades ago modern derivatives did not exist. By 2006 the notional value of the world’s derivatives had grown to over $500 trillion and the highest report just prior to the latest collapse put the world’s notional value of derivatives at an astounding $1.4 QUADRILLION.

Now, just for comparison, the total output of all men and women of the entire globe last year was a GDP of a little over $60 trillion. $1.4 quadrillion is approximately 23 times global GDP! This is a very squishy number and is most likely much smaller now that the financial system is imploding, but it is still an unfathomably large number, in the many hundreds of trillions.

There is a notion going around that there are two parties, one on each side of the “bet,” and that those bets cancel each other out. That is true only to a limited extent. As all the bets unwind there will ultimately people who were not completely neutral and we WILL eventually find out who they are.

You see, not knowing who they are is one of the root causes of our financial problems, unserviceable debt being another.

As far as I’m concerned, there is NO LEGITAMATE reason for modern derivatives of any kind. In fact, 90% of our entire financial system provides NO service to society. My trading certainly doesn’t. Heck, writing this article is a FAR greater service to our society than my trading, that’s why I’m taking the time to write it. How many people do you think made it this far reading it?

Three years ago I gave our country a chance. We still had the option to do the right things that could have turned the math around. I no longer believe that option exists. Thus, OUR CURRENT FINANCIAL SYSTEM IS DOOMED. The debt will be defaulted and now that it has been transferred onto the taxpayer, you and me, we will default together, as in our entire nation. How long will it be? Let’s put it this way; you are not going to be passing these debts onto your grandchildren.

The people who know me, know that I am NO gold bug. Gold historically gets slammed during credit collapses as it has been during the first phase of this collapse, BUT our government’s actions are placing concrete boots on our currency and Paulson/Bernanke have thrown our currency overboard. That makes this a collapse something that’s on a higher level. I am now accumulating gold and silver and I’m going to give you one more reason why, just in case the above math doesn’t convince you…

In my last article I mentioned the mixed signals I’m seeing from my market indicators. Those mixed signals continue to indicate that the Fed could be buying up their own treasuries, in effect a stealth form of printing large sums. This is referred to as “quantitative easing,” which is just another way to say printing. Today saw a resumption of the 10 year bond moving down in yield while the dollar moved down and gold held on to its past two day’s of gains. Meanwhile the overall market treaded water and is working off short term overbought conditions. I am suspicious and am currently watching the markets from a safe distance.

I love America – it pains me greatly to see it and everyone suffer. I certainly do not enjoy passing along such gloom, but until we remove our collective brains from the Alice in Wonderland world in which we are currently living, real change cannot come. It is those who falsely claim to love her while they simultaneously **** and rob her that deserve your ire.

Solution: Print Money to pay for all of it.
Printing money is inflationary, that is why you normally avoid it.
However, what better way to counter the threat of a deflationary cycle than the inflationary effects of printing money?

Print money, print money, print money.

China wants to cash in on the bonds? Fine!
Print the money and say thank you very much,

Welcome to Germany Circa 1923

http://www.usagold.com/germannightmare.html

Germany 1923 the problem is Inflation, (rising prices) which is exactly the medicine we need for our current problem.

What we are worried about now is Deflation, (falling prices driven by a collapsing real estate market.)

In an deflationary environment, inflationary pressures are a good thing.

It is all about balance brother ...... The game they are playing is that the are trying to fight a deflationary collapse of our economy with Inflationary Government Spending and Money Printing.

http://www.321gold.com/editorials/saxena/saxena111408.html

Deflation Hoax

Puru Saxena
Nov 14, 2008

The markets continue to bounce along the lows in what seems to be a base-building period. On Thursday, strong buying came in during the last hour of US trading and this reversed the day's losses, resulting in huge gains. At the close of the session, the Dow Jones, S&P500 and Nasdaq were up by more than 6%. Now, it is too early to say whether we have seen the lows of this bear-market, but the benefit of the doubt can be given to the upside for as long as the US markets remain above the intra-day lows recorded on 10 October 2008.

In my view, the economic news will continue to disappoint in the months ahead, business activity will remain sluggish and corporate earnings will shrink. However, the financial markets are a discounting mechanism and I suspect most of the bad news has already been absorbed by this market. Furthermore, investor sentiment is horrendous today and we have witnessed genuine distressed selling in the past few months. So, I wouldn't be surprised if we get a rally from these oversold levels. Now, whether or not this rally will fail in a few months time is anybody's guess but I suspect the financial markets will be significantly higher in 4-5 years from now. I must admit that I don't have a clue about the short-term prospects (neither does anybody else) but I do know that stocks are now poised for above-average long-term gains.

Central banks and governments are printing TRILLIONS of paper currencies around the world, the US has now become a socialist society and all this money-creation should result in a huge inflationary tsunami in the future. In my opinion, those who are forecasting deflation, don't understand our monetary system. What we have seen in the recent past is not deflation but a contraction in asset prices due to liquidation. Today, governments and central banks have the ability and motive to expand the supply of money ad infinitum and you can bet your house that paper currencies will lose tremendous purchasing power over the next decade. So, cash and fixed income assets will probably turn out to be the worst assets to own. In fact, I would argue that US Treasuries are grossly overvalued today and they are likely to crash somewhere down the road. In a few years from now, long-term interest rates in the US will go through the roof as the US Dollar and its overvalued bond-market collapses.

In such an inflationary environment, commodities are likely to provide the best returns. Now, I am aware that most commodities have faced intense selling pressure in the past few months but it is worth noting that all assets have been sold indiscriminately over the same period. Despite the recent rout, the underlying fundamentals of most commodities remain strong. And even today, top-quality resource stocks are announcing record profits and cash flows. When the dust settles, the enormous amount of cash sitting on the sidelines (US$4.5 trillion) is likely to rush towards the only profitable sector within the economy.

A couple of days ago, the International Energy Agency (IEA) released its World Energy Outlook report. According to the IEA, our existing oil fields are depleting by a shocking 6.7% per annum and we would need to find an additional 60 million barrels per day of new oil supply in 20 years to meet global demand. Now, it is worth noting that it has taken our world roughly 100 years to produce 86 million barrels of oil per day and this includes crude oil, natural gas liquids, hydrocarbon processing gains and bio-fuels. So, it is highly unlikely if not impossible that we will be able to find new supply of 60 million barrels per day in 20 years time! Given the harsh realities of Peak Oil, I find it absurd that the price of oil has declined by roughly 60% in the past 4 months. In any event, I don't expect this correction in energy to last forever so this may be the final chance you'll get to load up on quality energy stocks which are being given away at today's prices.

Moreover, agriculture is another area worth looking at. Global stockpiles of food are at multi-decade lows, food usage is rising and supplies of agriculture should remain tight for many reasons. First and foremost, arable land is shrinking, we have water problems in several nations and shortages of farm equipment, energy, fertilisers and farmers. So, the recent decline in agriculture stocks could turn out to be a fantastic buying opportunity for the long-term investor.

Finally, I think it is only a matter of time before gold and silver power ahead. Precious metals were hit hard by global deleveraging and they should shine again; thanks to the money-printing abilities of the establishment. These ridiculous government bail-outs are hugely inflationary and will further erode the purchasing power of paper currencies. I urge you not to be fooled by the recent strength in the US Dollar. This is nothing more than a short-covering rally and the American currency is likely to witness an epic crash in the future. There is no way you can have a strong currency when you are the greatest debtor nation in the world (debt of US$54 trillion). Furthermore, the Fed has recently expanded its balance sheet by US$1 trillion and in my view, the US has now embarked on a hyper-inflationary road to nowhere. As the jokers in Washington continue to 'save' the US economy (i.e. bail-out their rich friends on Wall Street), the US Dollar will eventually become worthless or it may be replaced by another currency. So, I would suggest that you take advantage of the recent rout in the markets by converting more of your cash to hard assets. If you are fully invested, please do not buy into the deflation hoax and simply ride out this weakness which should prove to be temporary.

Puru Saxena

Saxena Archives
email: puru@purusaxena.com
website: www.purusaxena.com

Puru Saxena publishes Money Matters, a monthly economic report, which highlights extraordinary investment opportunities in all major markets. Money Matters is available by subscription from www.purusaxena.com.

Puru Saxena is the founder of Puru Saxena Limited, his Hong Kong based firm which manages investment portfolios for individuals and corporate clients. He is a highly showcased investment manager and a regular guest on CNN, BBC World, CNBC, Bloomberg, NDTV and various radio programs.

Copyright ©2005-2008 Puru Saxena Limited. All rights reserved.

http://www.321gold.com/editorials/degraaf/degraaf110408.html


Is It Inflation - Or Is It Deflation?

Peter Degraaf
Posted Nov 4, 2008

Almost daily I receive E-mails from subscribers who worry about deflation. Here is my simple answer: "Watch what they do - not what they say!"

The above chart (courtesy Federal Reserve Bank of St. Louis), is up-to-date. It reflects a monetary increase of 305 billion dollars into the US money supply in the short space of under 2 months. Nothing like this has ever happened in the USA before! The little bumps on this chart between August 2007 and August 2008 include Bear-Sterns, Northern Rock, Lehman Bros, Fannie and Freddie and AIG, yet none of those monetary shocks compare to what the FED is doing now.

This is inflation with a capital 'I'!

Quite often when the monetary authorities inflate the system, it takes a while before the newly created funds filter down, and before people catch on. Large numbers of people believe what the officials are saying (communications like: "we're more worried about deflation than inflation").

They want you to believe that 'asset inflation' (lower prices for stocks and commodities) translates into monetary deflation.

The two are quite different.

The current asset deflation is caused primarily by gross mistakes made by people in the banking industry. This 'assets deflation' continues while monetary authorities worldwide are adding to the money supply. Meanwhile fear then sets in and the decline in asset values continues till it exhausts itself.

As soon as enough people catch on to what is happening, scarce commodities, (and the stocks involved in bringing those commodities to the marketplace), will rise and rise much higher than most people anticipate.

It behooves those of us who understand what is going on, and to position ourselves to benefit from the rise to come by investing in gold, silver, oil, natgas, copper, coal, uranium and agricultural commodities. Just about anything that the government does not have the ability to produce. (Government's specialty is cutting down trees into thin slices, adding some ink, superimposing a picture of a former ruler and adding a number, and voila their product is ready for circulation).

Featured is the weekly gold chart, courtesy www.stockcharts.com The call-out boxes on the chart represent the 'net short' gold positions of the commercial traders. The report issued October 31st showed a decrease of 162,000 from the 247,000 at the top, to the current 85,000. This is where corrections end, and the next rise begins.

Price has found support just above the 200 week moving average (rising red line), and the target for this next advance in the gold price will be a challenge at the previous high of 1,030.00 attained in March 2008.

The RSI (top of chart) is turning positive, and the MACD (bottom of chart) is very much oversold at -.32 (the most oversold since the bull market began in 2001. In order to make a profit in any investment, it makes sense to 'buy low and sell high'. The time to buy low is at the bottom of a correction. The seasonal tendency is for gold to bottom in July - August and again in November. So here we are, just in time for the annual Christmas rally. If we are not at the exact bottom, we are no doubt very close.

Featured is the LIBOR chart, courtesy www.stockcharts.com

The watershed drop in assets that we saw in September and October was to a large extent fueled by the rising LIBOR rate. This rate reflects the trust or lack of trust, which banks have in so far as inter-bank lending is concerned. Near 4.6% all lending ceases. The rate is slowly returning to normal, as is the Ted Spread which opened today at 2.65 after having risen to 4.34 on Oct 15th. Investors around the world were spooked by the rising LIBOR and Ted Spread rates and began to sell just about everything, including commodities. With some degree of normalcy now returning to the markets, we can expect those items that have become 'oversold' to begin to bounce back, and after a while the commodities that I referred to in the opening section of this article to outperform everything else.

Please remember that the 'real rate of interest' (T-Bills less CPI), remains very negative. As long as the rate is negative, gold can and will rise (with hiccups in between).

Peter Degraaf
email: itiswell@cogeco.net

About Peter Degraaf
I am an on-line stock trader with over 50 years of investing experience. I issue a week-end report for my subscribers. A sample copy of a previous report is available upon request. I can be reached at itiswell@cogeco.net. At my website: www.pdegraaf.com you will find a number of long-term charts that are updated regularly. 47 pages of worthwhile quotes are proving to be a very popular attraction as well. Subscription information is also available at the website.

Man....you must like to type. Way too much to read. Sorry.

History declares that all major hyper-inflation started in depressive to depression type business conditions as a currency loss of confidence event.

The key is the word HYPER which means a total currency unwind.

Large inflationary periods are products of the mechanics that creates bubbles, but are not HYPER in nature.

Bubble-Inflation and Hyper-Inflation are two distinctly different events

All "Hyper-Inflation" events have occurred as a product of "Quantitative Easing."

The Fed has announced their move towards "Quantitative Easing" because of all that occurred so far in bailing out the good ole boys that caused the problems with their damn OTC derivatives, now known as "Toxic Paper.

LOL!

Me too, way too much turkey and rum in my system to absorb all that chicken little crap.

_________________
"Believe none of what you read, and half of what you see." Old Island Woman

Cut and Paste is REALLY EASY!!!

Falling Real Estate prices (Deflation) is what is destroying our credit markets.

Printing money is Inflationary, which mean prices go up.

No one wants hyper inflation. We just want enough Inflation to counter the Deflation Threat we face.

Like I said, it is all about balance. In a deflationary environment, the consequences of the government printing money are positive, when otherwise it would be highly negative.

Fire up the presses!!!

Falling real estate prices just exposed the pyramid scheme that the banks and brokers have been using.
Leverage is great at the bottom of the pyramid, but when the money stops coming in (banks and other institutions refuse to buy the securities) then it all falls down.
The banks will not lend to each other because they don't trust each other anymore (because they are all bankrupt).

When you add 8.7 trillion of new money (newest figure) it has to be inflationary, when the number goes up by a trillion or so a week you have to realize that the end of the printing may be a long way off.
The money printed so far has done nothing do fix the problem, citigroup proved that.
Just wait until GE financial finally comes begging, they were a much bigger player than AIG was.
What do you balance that large of an increase in the money supply with?

And as a result home prices were over inflated in relation to everything else. Now home prices are falling which has sent our financial system into ciaos.

Inflation is a good thing in this environment. The sooner that Home prices come into equilibrium with the prices of everything else, then our economy will stabilize.

The solution is to print more money and ramp up government programs to stimulate the economy to prevent the prices from bottoming out of everything.

Fire up the presses.

Since the pyramid scheme has been exposed, the total amount of over the counter derivatives comes into play.
The total is said to be 1.4 QUADRILLION (1400 trillion) That means printing money is spitting in the wind.
That also means that they will have to keep printing until the dollar isn't accepted worldwide anymore.
I still say that is hyper-inflationary, all we can do is prepare for the worst and hope for the best.

Maybe what you say is true. Neither you or I are economists. But if what you say is true than at the very least the government should take advantage of the opportunity to print enough money to pay off the Chinese and wipe out the national debt ......