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The bankruptcy of the United States is now certain
November 24, 2009
From Porter Stansberry in the S&A Digest:
It's one of those numbers that's so unbelievable you have to actually think about it for a while... Within the next 12 months, the U.S. Treasury will have to refinance $2 trillion in short-term debt. And that's not counting any additional deficit spending, which is estimated to be around $1.5 trillion. Put the two numbers together. Then ask yourself, how in the world can the Treasury borrow $3.5 trillion in only one year? That's an amount equal to nearly 30% of our entire GDP. And we're the world's biggest economy. Where will the money come from?
How did we end up with so much short-term debt? Like most entities that have far too much debt - whether subprime borrowers, GM, Fannie, or GE - the U.S. Treasury has tried to minimize its interest burden by borrowing for short durations and then "rolling over" the loans when they come due. As they say on Wall Street, "a rolling debt collects no moss." What they mean is, as long as you can extend the debt, you have no problem. Unfortunately, that leads folks to take on ever greater amounts of debt… at ever shorter durations… at ever lower interest rates. Sooner or later, the creditors wake up and ask themselves: What are the chances I will ever actually be repaid? And that's when the trouble starts. Interest rates go up dramatically. Funding costs soar. The party is over. Bankruptcy is next.
When governments go bankrupt it's called "a default." Currency speculators figured out how to accurately predict when a country would default. Two well-known economists - Alan Greenspan and Pablo Guidotti - published the secret formula in a 1999 academic paper. That's why the formula is called the Greenspan-Guidotti rule. The rule states: To avoid a default, countries should maintain hard currency reserves equal to at least 100% of their short-term foreign debt maturities. The world's largest money management firm, PIMCO, explains the rule this way: "The minimum benchmark of reserves equal to at least 100% of short-term external debt is known as the Greenspan-Guidotti rule. Greenspan-Guidotti is perhaps the single concept of reserve adequacy that has the most adherents and empirical support."
The principle behind the rule is simple. If you can't pay off all of your foreign debts in the next 12 months, you're a terrible credit risk. Speculators are going to target your bonds and your currency, making it impossible to refinance your debts. A default is assured.
So how does America rank on the Greenspan-Guidotti scale? It's a guaranteed default. The U.S. holds gold, oil, and foreign currency in reserve. The U.S. has 8,133.5 metric tonnes of gold (it is the world's largest holder). That's 16,267,000 pounds. At current dollar values, it's worth around $300 billion. The U.S. strategic petroleum reserve shows a current total position of 725 million barrels. At current dollar prices, that's roughly $58 billion worth of oil. And according to the IMF, the U.S. has $136 billion in foreign currency reserves. So altogether... that's around $500 billion of reserves. Our short-term foreign debts are far bigger.
According to the U.S. Treasury, $2 trillion worth of debt will mature in the next 12 months. So looking only at short-term debt, we know the Treasury will have to finance at least $2 trillion worth of maturing debt in the next 12 months. That might not cause a crisis if we were still funding our national debt internally. But since 1985, we've been a net debtor to the world. Today, foreigners own 44% of all our debts, which means we owe foreign creditors at least $880 billion in the next 12 months - an amount far larger than our reserves.
Keep in mind, this only covers our existing debts. The Office of Management and Budget is predicting a $1.5 trillion budget deficit over the next year. That puts our total funding requirements on the order of $3.5 trillion over the next 12 months.
So… where will the money come from? Total domestic savings in the U.S. are only around $600 billion annually. Even if we all put every penny of our savings into U.S. Treasury debt, we're still going to come up nearly $3 trillion short. That's an annual funding requirement equal to roughly 40% of GDP. Where is the money going to come from? From our foreign creditors? Not according to Greenspan-Guidotti. And not according to the Indian or the Russian central bank, which have stopped buying Treasury bills and begun to buy enormous amounts of gold. The Indians bought 200 metric tonnes this month. Sources in Russia say the central bank there will double its gold reserves.
So where will the money come from? The printing press. The Federal Reserve has already monetized nearly $2 trillion worth of Treasury debt and mortgage debt. This weakens the value of the dollar and devalues our existing Treasury bonds. Sooner or later, our creditors will face a stark choice: Hold our bonds and continue to see the value diminish slowly, or try to escape to gold and see the value of their U.S. bonds plummet.
One thing they're not going to do is buy more of our debt. Which central banks will abandon the dollar next? Brazil, Korea, and Chile. These are the three largest central banks that own the least amount of gold. None own even 1% of their total reserves in gold.
I examined these issues in much greater detail in the most recent issue of my newsletter, Porter Stansberry's Investment Advisory, which we published last Friday. Coincidentally, the New York Times repeated our warnings - nearly word for word - in its paper today. (They didn't mention Greenspan-Guidotti, however... It's a real secret of international speculators.)
Chinese Discover 5600 Fake Gold Bars, 400 oz., With Tungsten Core
Gold Finger - A New Take On Operation Grand Slam With A Tungsten Twist
Ive already reported on irregular physical gold settlements which occurred in London, England back in the first week of October, 2009. Specifically, these settlements involved the intermediation of at least one Central Bank [The Bank of England] to resolve allocated settlements on behalf of J.P. Morgan and Deutsche Bank who DID NOT have the gold bullion that they had sold short and were contracted to deliver. At the same time I reported on two other unusual occurrences:
1] - irregularities in the publication of the gold ETF - GLDs bar list from Sept. 25 Oct.14 where the length of the bar list went from 1,381 pages to under 200 pages and then back up to 800 or so pages.
2] - reports of 400 oz. good delivery bricks of gold found gutted and filled with tungsten within the confines of LBMA approved vaults in Hong Kong.
If anyone were contemplating creating fake gold bars, tungsten [at roughly $10 per pound] would be the metal of choice since it has the exact same density as gold making a fake bar salted with tungsten indistinguishable from a solid gold bar by simply weighing it.
Unfortunately, there are now more sordid details to report.
When the news of tungsten salted gold bars in Hong Kong first surfaced, many people
who I am acquainted with automatically assumed that these bars were manufactured in
China because China is generally viewed as the knock-off capital of the world.
Heres what I now understand really happened:
The amount of salted tungsten gold bars in question was allegedly between 5,600 and 5,700 400 oz good delivery bars [roughly 60 metric tonnes].
This was apparently all highly orchestrated by an extremely well financed criminal operation.
Within mere hours of this scam being identified Chinese officials had many of the perpetrators in custody.
And heres what the Chinese allegedly uncovered:
Roughly 15 years ago during the Clinton Administration [think Robert Rubin, Sir Alan Greenspan and Lawrence Summers] between 1.3 and 1.5 million 400 oz tungsten blanks were allegedly manufactured by a very high-end, sophisticated refiner in the USA [more than 16 Thousand metric tonnes]. Subsequently, 640,000 of these tungsten blanks received their gold plating and WERE shipped to Ft. Knox and remain there to this day. I know folks who have copies of the original shipping docs with dates and exact weights of tungsten bars shipped to Ft. Knox.
The balance of this 1.3 million 1.5 million 400 oz tungsten cache was also plated and then allegedly sold into the international market.
Apparently, the global market is literally stuffed full of 400 oz salted bars.
Makes one wonder if the Indians were smart enough to assay their 200 tonne haul from the IMF?
A Slow Motion Train Wreck, Years in the Making
An obscure news item originally published in the N.Y. Post [written by Jennifer Anderson] in late Jan. 04 has always stuck in my craw:
DA investigating NYMEX executive - Manhattan, New York, district attorney's office, Stuart Smith - Melting Pot - Brief Article Feb. 2, 2004 A top executive at the New York Mercantile Exchange is being investigated by the Manhattan district attorney. Sources close to the exchange said that Stuart Smith, senior vice president of operations at the exchange, was served with a search warrant by the district attorney's office last week. Details of the investigation have not been disclosed, but a NYMEX spokeswoman said it was unrelated to any of the exchange's markets. She declined to comment further other than to say that charges had not been brought. A spokeswoman for the Manhattan district attorney's office also declined comment.
The offices of the Senior Vice President of Operations - NYMEX is exactly where you would go to find the records [serial number and smelter of origin] for EVERY GOLD BAR ever PHYSICALLY settled on the exchange. They are required to keep these records. These precise records would show the lineage of all the physical gold settled on the exchange and hence "prove" that the amount of gold in question could not have possibly come from the U.S. mining operations because the amounts in question coming from U.S. smelters would undoubtedly be vastly bigger than domestic mine production.
We never have found out what happened to poor ole Stuart Smith after his offices were "raided" he took administrative leave from the NYMEX and he has never been heard from since. Amazingly [or perhaps not], there never was any follow up on in the media on the original story as well as ZERO developments ever stemming from D.A. Morgenthaus office who executed the search warrant.
Are we to believe that NYMEX offices were raided, the Sr. V.P. of operations then takes leave - all for nothing?
These revelations should provide a new filter through which Rothschild exiting the gold market back in 2004 begins to make a little more sense:
LONDON, April 14, 2004 (Reuters) - NM Rothschild & Sons Ltd., the London-based unit of investment bank Rothschild [ROT.UL], will withdraw from trading commodities, including gold, in London as it reviews its operations, it said on Wednesday.
Interestingly, GATAs Bill Murphy speculated about this back in 2004;
Why is Rothschild leaving the gold business at this time my colleagues and I conjectured today? Just a guess on my part, but suspect:
*SOMETHING IS AMISS. THEY KNOW A BIG GOLD SCANDAL IS COMING AND THEY WANT NO PART OF IT.
ROTHSCHILD WANTS OUT BEFORE THE PROVERBIAL "S" HITS THE FAN. BILL MURPHY, LEMETROPOLE, 4-18-2004
Coincidentally [or perhaps, not?], GLD Began Trading 11/12/2004
In light of what has occurred regarding the Gold ETF, GLD after reviewing their prospectus yet again, it becomes pretty clear that GLD was established to purposefully deflect investment dollars away from legitimate gold pursuits and to create a stealth, cesspool / catch-all, slush-fund and a likely destination for many of these salted tungsten bars where they would never see the light of day hidden behind the following legalese shield from the law:
Gold bars allocated to the Trust in connection with the creation of a Basket may not meet the London Good Delivery Standards and, if a Basket is issued against such gold, the Trust may suffer a loss. Neither the Trustee nor the Custodian independently confirms the fineness of the gold bars allocated to the Trust in connection with the creation of a Basket. The gold bars allocated to the Trust by the Custodian may be different from the reported fineness or weight required by the LBMAs standards for gold bars delivered in settlement of a gold trade, or the London Good Delivery Standards, the standards required by the Trust. If the Trustee nevertheless issues a Basket against such gold, and if the Custodian fails to satisfy its obligation to credit the Trust the amount of any deficiency, the Trust may suffer a loss.
The Fed Has Already Been Caught Lying
Liberty Coins Patrick Heller recently wrote,
Earlier this year, the Gold Anti-Trust Action Committee (GATA), filed a second Freedom of Information Act (FOIA) request with the Federal Reserve System for documents from 1990 to date having to do with gold swaps, gold swapped, or proposed gold swaps.
On Aug. 5, The Federal Reserve responded to this FOIA request by adding two more documents to those disclosed to GATA in April 2008 from the earlier FOIA request. These documents totaled 173 pages, many parts of which were redacted (covered up to omit sections of text). The Fed's response also noted that there were 137 pages of documents not disclosed that were alleged to be exempt from disclosure.
GATA appealed this determination on Aug. 20. The appeal asked for more information to substantiate the legitimacy of the claimed exemptions from disclosure and an explanation on why some documents, such as one posted on the Federal Reserve Web site that discusses gold swaps, were not included in the Aug. 5 document release.
The first paragraph on the third page is the most revealing. Warsh wrote, "In connection with your appeal, I have confirmed that the information withheld under exemption 4 consists of confidential commercial or financial information relating to the operations of the Federal Reserve Banks that was obtained within the meaning of exemption 4. This includes information relating to swap arrangements with foreign banks on behalf of the Federal Reserve System and is not the type of information that is customarily disclosed to the public. This information was properly withheld from you."
This paragraph will likely be one of the most important news stories of the year.
Though not stated in plain English, this paragraph is an admission that the Fed has in the past and may now be engaged in trading gold swaps. Warsh's letter contradicts previous Fed statements to GATA denying that it ever engaged in gold swaps during the time period between Jan. 1, 1990 and the present.
[Perhaps most importantly], this was GATA's second FOIA request to the Federal Reserve on the issue of gold swaps. The 173 pages of documents received for the 2009 FOIA request all pre-dated the 2007 FOIA request, which means they should have been released in the response to the earlier FOIA request. This establishes a likelihood that the Federal Reserve has failed to adequately search or disclose relevant documents. Further, the Fed response admitted that it had copies of relevant records that originally appeared on the Treasury Department Web site, but failed to include them in its response.
Now that Federal Reserve governor Warsh has admitted that the Fed has lied in the past about the Feds involvement with gold. It should now be very clear to everyone why the Fed is lying and the true nature of what they are hiding / withholding.
On Doing Gods Work
An important footnote to consider is the inter-twined-ness of the U.S. Federal Reserve and the U.S. Treasury [can anyone really tell them apart?] as well as this duopolys two principal agents J.P. Morgan-Chase and Goldman Sachs. When one truly grasps the nature of these highly conflicted relationships it gives a fuller meaning to words recently uttered by Goldman head, Lloyd Blankfein, who claimed,
Im doing gods work
Does this really mean that Mr. Blankfein believes that the Federal Reserve is god? You can judge for yourself. While the Fed prints money like no one else could - except god almighty himself [or Gideon Gono, perhaps?] I really doubt that was the intent back in 1864, when the U.S. adopted In God We Trust as their official motto.
And thats my two cents worth for today.
Got [real] physical gold yet?
We’re running out of gold: miners November 25th, 2009
MONTREAL — Gold production will continue to fall, despite a brief boost in 2009 and soaring prices, as deposits are exhausted and new discoveries remain elusive, say miners.
In terms of production, "2009 is the outlier as far as the trend," Omar Jabara, spokesman for US-based Newmont Mining, the second-largest gold producer in the world, told AFP.
Overall, "it's a fact that gold production from mines has been in decline since 2001 and has gone roughly from 85 million ounces to about 75 million ounces a year," said Vincent Borg, spokesman for number one producer Barrick Gold.
"It sort of goes down about one million ounces every year and our forecast is that it will continue to decline despite the higher price" for gold nowadays, he said.
Almost everywhere, mineral deposits are being exhausted and new deposits are not being found fast enough to replace them, these experts explain.
South Africa, which was once at the vanguard of world production, saw a 9.3-percent drop in production year-over-year in the second quarter, according to its Chamber of Mines.
Globally, "it's just that the assets are not there anymore," Tonya Todd, a spokeswoman for Goldcorp, Canada's second biggest gold mining firm.
"Just because gold reached a new high today doesn't mean we can send a message to our 26 mines saying produce as much gold as you can today because they are already," said Borg.
"It's not like a water tap you can turn on and it comes right away."
Barrick and Newmont expect nevertheless to continue increasing production next year by seven percent and five to 10 percent, respectively. But long-term, it's downhill.
Omar Jabara explained that it takes from seven to 10 years to start production of a mine after finding an economically viable gold deposit.
And "no significant new discoveries have been found in recent years, despite the higher gold prices and despite higher exploration budgets," said Borg.
What is already happening and is likely to continue is that the grade or quality of deposits industry-wide will be "on average lower than deposits discovered in the past," opined Jabara.
The global gold mine production is forecast to rise by 3.7 percent in 2009 to about 2,500 tonnes, but will satisfy only two-thirds of demand, which soared this year amid the global financial crisis to 3,800 tonnes, according to the World Gold Council.
Historically, gold recycling or the sale of central bank stockpiles made up for supply shortages.
But during the latest financial crisis, banks have been buying up gold in large quantities to protect monetary reserves against weakness in the US dollar.
Since the start of November, for example, India's central bank has scooped up 200 tonnes of gold from the International Monetary Fund, at market value for about 6.7 billion dollars.
Amid uncertainty in the stock market, small investors and hedge funds are also coveting gold, driving up demand for the precious metal.
With mine production sloping downwards, an increasing supply of gold must come from existing supplies -- such as coins, bullion or jewelry -- but it will be very limited.
"All the gold ever produced through history amounts to about 165,000 tonnes, which would barely fill two Olympic-size swimming pools," said Jabara.
Gold prices soared to a record above 1,180 dollars in London on Wednesday hitting 1,180.20 dollars an ounce in trading on the London Bullion Market, after striking a series of historic peaks in recent days and weeks.
DOCTORS IN THE UKRAINE ACCUSE PRESIDENT OF GENOCIDE
Doctors in the Ukraine have accused the President, Viktor Yushchenko, and his agents of committing genocide in a letter published on the Ukrainian website Rupor Info, sparking fears that the reports of the deaths of thousands of people from artificially created pandemics and vaccinations are true.
The doctors accused the Yuschchenko of deliberately creating "epidemics" in specific regions for political reasons.
By the ploy of pandemics, the doctors say Yushchenko was able to postpone elections he would have almost certainly lost, declare martial law and remain in power as president.
The doctors who signed the letter have been forced to withdraw it.
The letter has ignited fears that many more people have died inside the quarantine zones set up in the Ukraine than the government-controlled media is reporting.
Sources in Poland are reporting that many people who are sick in the Ukraine received vaccinations.
One source reported that 99% of the people who came down with an unusually severe sickness were vaccinated.
After a vaccination with what appears to be the seasonal flu with an HIN1 virus, they became sick in 2 to 3 weeks and infected their family.
According to sources, 200,000 people in the Ukraine got a flu shot, resulting in an epidemic of sickness.
An especially severe flu gripping Poland also appears to be associated with the seasonal flu jab, with an H1N1 virus, according to the package.
Last week a woman reported thousands of people had been killed by vaccines inside closed-off quarantine zones inside western Ukraine.
Plague or Plan? Ukraine's mystery disease 'burns out lungs'
Ukraine's Mutant 'Black Lung' Virus Spreading
1 and 1/2 million have already been infected and it is being compared to a black lung virus.
British scientists suspect that swine flu virus has mutated in Ukraine. Some doctors say that flu in the country has shown unprecedented symptoms, creating the effect of burnt lungs, the Daily Mail reports.
Paul Craig Roberts on The Alex Jones Show 1-3:The Ugly Truth
Dispatches investigates one of the most powerful and influential political lobbies in Britain, which is working in support of the interests of the State of Israel
The fall of the Republic, Obama's unkept promises and lies, the economic crisis as part of a bigger new world order strategy, the swine flu hoax, the fraud behind the fed - Alex Jones talks about all this in an exclusive interview with RT's Anastasia Churkina.
The Iraq Inquiry - is it a whitewash? Timeline by John Rees
Stop the War officer John Rees looks at the Iraq Inquiry and asks will it be a whitewash? The inquiry panel includes Sir Roderic Lyne, who shared the Bush administration's objective of regime change. Timeline is a series of programmes on political history presented by John Rees and produced by the Islam Channel