June 25, 2009 by Pennington.

Banks typically have 3% of their assets in cash in order to meet customer needs. Since 1960, banks have been allowed to use this “vault cash” to satisfy their reserve requirements. Today, bank reserve requirements have fallen to the point where they are now exceeded by vault cash, which means lowering reserve requirements to zero would have virtually no impact on the banking system. US banks are already operating free of any reserve constraints. The graph below shows reserve requirements falling to zero over the last fifty years.

Although, under current regulations, all depository institutions are required to maintain reserves against checking deposits, the reality is they don’t. The purpose of bank reserves is to absorb losses and add stability/liquidity to the financial system in times of crisis. The “vault cash” banks use to satisfy reserve requirements is not valid in absorbing losses because they are required for normal banking operations (think ATM cash).

In summary, today most depository institutions are satisfying their entire reserve requirement with this vault cash, which they hold to meet the liquidity needs of their customers and would hold even in the absence of reserve requirements. For these institutions, reserve requirements are effectively non-existent.

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June 22, 2009 by Pennington.

WHAT DO THE TEA LEAVES PREDICT

In 1999, at the height of the Y2K crisis and under the strain of record gold demand, the U.S. Mint produced 2,055,000 1-ounce gold American eagles.
In 2008, with the world embroiled in an unprecedented economic crisis and once again under the strain of record gold demand, the U.S. Mint produced only 710,000 1-ounce American eagles and 189,500 1-ounce American gold buffaloes — just under half its 1999 production.The Mint’s ability to keep up with demand in the ramp-up to Y2K played a key role in suppressing premiums on bullion gold coins. The Mint’s inability to keep up with demand in 2008 drove premiums to the double digits at one point and helped add 2 percent to the baseline cost of gold coin acquisitions in 2009. When the American eagle shortages first cropped up in August 2008, the Mint blamed the problem on its vendors, saying they were “not able to supply enough 1-ounce gold bullion blanks to meet the unprecedented demand.” The Mint promptly thereafter suspended all sales of the popular 1-ounce coins. To understand the full implications of the Mint’s production problems, two important pieces of information need to be taken into consideration.

First, all the 1-ounce gold blanks purchased by the Mint now come from one refiner in the western United States.

Second, with global refiners already running at capacity, Mint officials’ attempts to line up additional blank manufacturers are likely to be rebuffed.

I expect additional shortages later this year. A recent report on South Africa indicates that their mining industry is producing less than at any time in their history. This is significant. Output dropped 12.8 percent in February from the same month a year ago, Statistics South Africa said on its Web site today. 

Metal prices tumbled from records last year as the recession curbed demand and discouraged production. Platinum, mainly produced in South Africa, declined 40 percent in the past year, prompting producers including Lonmin Plc to suspend mines. This is one of the reasons why it is so difficult to obtain Platinum Eagles (or any Platinum coins for that matter). These same type of global shortages are also seen in gold and silver production. At the same time, mints and refiners are reporting record demand for all types of precious metal coins and bars. This dynamic must in the long term drive prices higher.

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April 10, 2009 by Pennington.

As the G20 meeting closed in London, it was announced that the IMF would sell 403 tons of their gold supply. The stated purpose was to raise cash to loan money for poorer countries????Of course, no one would state that the purpose was to trample the price of gold as demand around the globe continues to surge. But consider the amount of cash raised in this sale would only amount to about $8 billion. This is chump change for those familiar with US bailouts. The entire amount represents AIG’s cash deficit every month. How much impact can $8 billion have on the world’s poor? Another overlooked consideration is that the sale of this gold has a detrimental effect on the poor African countries that depend on gold mining as their most important industry. It drives the price of gold lower which results in the more marginal mines being closed down and workers get laid off. The only thing being accomplished with this announcement is a ploy to lower the price of gold. The IMF is being groomed to be the one world Central Bank of the future. Like the Federal Reserve in the US, they have to learn how and when to cap gold when it appears the gold price is about to take off. The truth is that this sale will have very little true impact on the price. Central banks from China, Russia, India, and the Middle East etc will probably compete with each other to buy the entire amount. It’s not like the IMF will show up at the COMEX one morning and start selling 403 tons of gold. 

In the past, the anti-gold cartel has used these announcements to achieve their own illegal purposes. Oftentimes, the sale doesn’t even take place. In fact, the 403 ton sale was actually first announced a year ago. The media doesn’t say that it takes a vote of 85% of their membership before the sale is even approved. As in the past, you can be assured that after a small blip down resulting from this, the price of the precious metals will resume their march upward.

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March 29, 2009 by Pennington.

The great Patriot and Orator, Thomas Paine, returns to comment on the Stimulus Package

http://www.youtube.com/watch?v=jeYscnFpEyA&feature=related

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March 29, 2009 by Pennington.

FOLLOW THE MONEY - The report, “Sold Out: How Wall Street and Washington Betrayed America,” shows that, from 1998-2008, Wall Street investment firms, commercial banks, hedge funds, real estate companies and insurance conglomerates made $1.725 billion in political contributions and spent another $3.4 billion on lobbyists, a financial juggernaut aimed at undercutting federal regulation. Nearly 3,000 officially registered federal lobbyists worked for the industry in 2007 alone. 

DEMAND FOR GOLD COINS EXPLODE AROUND THE WORLD - Demand for gold coins has risen sharply as interest in the precious metal soars on financial instability and investors’ appetite for assets seen as a safe store of value,. Demand for physical gold products such as coins and bars have been particularly strong, traders say. Mints in Canada, New Zealand, France, Germany and Australia all have reported the highest volume of sales ever. With rising demand and shrinking supply, the outlook for continues price appreciation for both gold and silver is excellent.  It appears that the bullion gold coin shortage has become a chronic problem and something gold owners and accumulators will need to keep an eye on in the months to come.

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March 29, 2009 by Pennington.

Did you ever wonder why all banks in the U.S. have been under extreme pressure, except one? GS has managed to be the only investment company, now bank, to avoid any problems at all. In fact, their stock is still above $100 per share. Of course, Paulson, Summers, Greenspan and many others came from GS. In fact, most of the Treasury Department is made up of former GS employees. They are the FED’s agent of record, and they make billions every quarter by trading on their own account before carrying out the specific requests of the FED. Their restrictions on profits only depend on their conscience not to be too obvious. GS was allowed to become a bank with unlimited borrowing at 0% interest without collateral so they could further their scheme. In addition, they got an exemption from the bank rules that state they cannot take part in commodities or other derivatives. The best part is that since they didn’t take any direct government funding, they are exempt from the bonus payout restrictions. Well done.

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March 29, 2009 by Pennington.

When you perform work or provide services for a debt-wracked spendthrift you should have a pretty good idea that their IOU’s are never likely to be honored, and are thus not likely to be worth the paper they are written on. The Chinese have been supplying the United States with vast quantities of consumer goods for years in exchange for Treasury Bills and Bonds. These instruments are a form of IOU, and the Chinese have been slowly waking up in recent months to the fact that they “have been had”. They recently broke out in a cold sweat as they realize that they have in effect been conned out of trillions. Thus they have been attempting to scale back their purchases of US Treasuries in an effort to stop throwing good money after bad, and have been accumulating more gold. This has increasingly threatened to pull the rug from under the Treasury market. The Chinese (and others) are in a “catch 22″ situation with regard to their vast holdings of US debt, as if they make any serious attempt to divest themselves of it in significant quantities they will collapse the market. They are therefore to a large extent stuck with it - all they can do is drastically scale back purchases and try to offload as much of it as they can clandestinely. However, the reduced demand resulting from their change of stance has nevertheless been threatening to bring down the Treasury market. The Chinese are going to lose big time, and last week the Fed decided the manner of their losing. They won’t lose as a result of falling Treasury prices - at least not for now - they are going to lose due to a severe devaluation of the dollar. The big danger to the Treasury market and to the United States by extension is that the Chinese and others put two and two together and, realizing they are about to be fleeced by a falling dollar, decide to cash in for what they can get ahead of the dollar collapse. This would cause the Treasury market to collapse rapidly, and the Fed, having last week “thrown down the gauntlet” would find itself having to buy up treasuries not just to the tune of a few hundred billions of dollars but by the trillions, all the extra money created for this purpose rapidly feeding through into the economy as a hyperinflationary meltdown. If they don’t buy the unsold Treasuries their price will plummet causing interest rates to spike to levels that would almost immediately bring the hugely indebted US economy to a dead stop. Since we know how their minds work - they take the path of least resistance - we know that they are going to create as much money as it takes to prop up the Treasury market, happy to push the ultimate cost of this on to the man in the street in the form of massive inflation or even hyperinflation

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March 29, 2009 by Pennington.

I was one of the first to give you the true story behind the crime organization AIG. All of this noise last week about AIG bonuses was nothing more than a magician’s distraction. Senator Dodd specifically went out of his way to put the $218 million in bonus money in the recently passed Stimulus Bill. The President and the Secretary and many in Congress (although no one read the bill) knew the bonuses were put in the bill in the stealth of the night. Why? First, because AIG was one of the largest contributors to Senator Dodd and President Obama. This is a matter of record. Like all crime families you repay a “favor” with a “favor”. Second, AIG laundered billions of dollars to Goldman Sachs and numerous other overseas banks. The government knew the American public would be outraged by these giveaways. Instead, they paid the funds through AIG who in turn paid these other favored institutions. It is now a well-known fact that AIG has a large component of intelligence operations. How else could anyone explain why $350 billion has been “given” to a company who has a total stock value of $90 billion? Here is a list provided by AIG given to Congressional aides: (Amount is in billions). Goldman Sachs Group $12.9Societe Generale 11.9Deutsche Bank 11.8Barclays PLC 8.5Merrill Lynch 6.8Bank of America Corp 5.2UBS AG 5.0BNP Paribas SA 4.9HSBC Holdings PLC 3.5Dresdner 2. 

These foreign banks had to be paid because American banks and companies criminally “screwed” these banks by selling them worthless paper. The billions paid out were profits the scumbags walked away with, and then were bailed out by the FED and finally their criminal activity was covered up the regulators. Third, the only people in AIG that received these bonuses were the ones in the Financial Division. The hard-working employees in the other divisions who actually made a profit for the stockholders received nothing. If it wasn’t so obvious, one might make the case that these bonuses were a hush money payment that no one will ever talk. I am tired of writing about AIG and so I promise this is the last time you will see those initials in future writings.

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March 29, 2009 by Pennington.

The Administration has already spent over $4 trillion in “gifting” bailout funds to the banks. Now, be prepared for more – we started with TARP, then went with TALP and now we have PIC. My friends this has simply been the greatest swindle in the history of the world. Taxpayer money is being used to implement a socialistic agenda no citizen would want if they knew what was really happening. This announcement tomorrow will be more of the same i.e. taxpayer money going to crooked banks that are regulated by sociopathic criminals. When all morals are ignored by our government, there are no longer any rules for people to follow.

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March 29, 2009 by Pennington.

Mark it down in your memory, last Tuesday March 17, 2009 will go down as the most important date in history. In its infinite wisdom, the FED decided to commit trillions of dollars to inflate the economy each year for the next 4-6 years. The inevitable consequence of this action is to guarantee a price for silver and gold that will exceed all our expectations. The FED’’s action is an act of desperation. It has never been tried by any destitute nation in the history of the world. Trust me when I tell you Ben Bernanke has no better idea than you or me whether this will prevent the looming Great Depression II. Even if it does work, it will create the greatest inflation the U.S. has ever seen, and there won’t be anything the FED can do to prevent the coming hyperinflation anymore than they were able to halt the current situation from occurring. As I have said on several occasions this is absolutely the worst thing they could do. You can’t cure deflation brought on by a debt bubble with more debt – huge amounts of debt! I ask you from a common sense perspective, WHAT SENSE DOES IT MAKE TO PRINT MONEY TO BUY YOUR OWN MONEY? The simple answer is that it doesn’t make any sense. China, Russia and other nations who have huge trade surpluses with the U.S. are very concerned that the dollar will soon be worthless and there trillions of dollars held will be worthless. They have mostly stopped buying our Treasuries and this is why the FED must step in to buy our own debt. It’s like grabbing a new credit card, borrowing as much as you can to make the minimum payment on all the other cards outstanding. It’s a losing proposition. This is why the world this past week has asked the G20 nations at their upcoming meeting in April to discuss a new one world currency. They want to convert out of dollars desperately. Of course, this has been part of the elite’s plans all along. So I look for real progress secretly being made on this one world currency discussion. If China and Russia are very concerned about the dollar, so should you. Got Gold?

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