It is estimated that the Fed is pumping roughly $80 billion a month into the US economy. This will amount to around one trillion dollars a year. The Fed's balance sheet is off the charts, and I conclude that "QE to infinity" will be considered both insane and unsustainable.
- Richard Russell, Dow Theory Letters September 27, 2012

My advice remains -- hold few, if any, common stocks. And if you must spend your money, spend it on bullion gold coins. Store the coins in your vault and forget about the price of gold. What you'll really be tracking is the number of dollars that it takes to buy just one of your gold coins.
- Richard Russell, Dow Theory Letters September 26, 2012

December gold was down 12 dollars to 1753, but still bullishly above 1700. December Silver was down 8 to 33.94 but still drastically underpriced compared to gold. One ounce of gold buys a bit over 52 ounces of silver. Many silver bulls believe the ratio can drop from its current 52 to 30.
- Richard Russell, Dow Theory Letters September 26, 2012

We will know when full valuation occurs. It is not anywhere near here.
-Jim Sinclair, In The News Today September 26, 2012

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Presenting Warren Buffett's "Gold Cube"

Submitted by Tyler Durden on 09/26/2012 13:35 -0400

Recall from Warren Buffett's 2011 letter to investors:

Today the world's gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce - gold's price as I write this - its value would be $9.6 trillion.... You can fondle the cube, but it will not respond.

Below is what said gold cube containing all the world's gold would look like, with distinctions for the various types of gold currently in existence:

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In The News Today

September 26, 2012, at 4:48 pm
by Jim Sinclair

My Dear Friends,

QE to infinity is going to work, but not in the way that talking heads and MSM assume by their negative economic commentary.

The impact of this political expedient will be colossal.

There is no other tool in anybody's toolbox so this is it.

Jim

Quantitative Easing Did Not Work For The Weimar Republic Either

Did printing vast quantities of money work for the Weimar Republic?  Nope.  And it won't work for us either.  If printing money was the secret to economic success, we could just print up a trillion dollars for every American and be done with it.  The truth is that making everyone in America a trillionaire would not mean that we would all suddenly be wealthy.  There would be the same amount of "real wealth" in our economy as before.  But what it would do is render our currency meaningless and totally destroy faith in our financial system.  Sadly, we have not learned the lessons that history has tried to teach us.  Back in April 1919, it took 12 German marks to get 1 U.S. dollar.  By December 1923, it took approximately 4 trillion German marks to get 1 U.S. dollar.  So was the Weimar Republic better off after all of the "quantitative easing" that they did or worse off?  Of course they were worse off.  They destroyed their currency and wrecked all confidence in their financial system.  There was an old joke that if you left a wheelbarrow full of money sitting around in the Weimar Republic that thieves would take the wheelbarrow and they would leave the money behind.  Will things eventually get that bad in the United States someday?

Of course we are not going to see hyperinflation in the U.S. this week or this month.

But don't think that it will never happen.

The people of Germany never thought that it would happen to them, but it did.

The following is an excerpt from a Wikipedia article about the Weimar Republic.  Take note of the similarities between what the Weimar Republic experienced and what we are going through today....

The cause of the immense acceleration of prices that occurred during the German hyperinflation of 1922-23 seemed unclear and unpredictable to those who lived through it, but in retrospect was relatively simple. The Treaty of Versailles imposed a huge debt on Germany that could be paid only in gold or foreign currency. With its gold depleted, the German government attempted to buy foreign currency with German currency, but this caused the German Mark to fall rapidly in value, which greatly increased the number of Marks needed to buy more foreign currency. This caused German prices of goods to rise rapidly, which increase the cost of operating the German government, which could not be financed by raising taxes. The resulting budget deficit increased rapidly and was financed by the central bank creating more money. When the German people realized that their money was rapidly losing value, they tried to spend it quickly. This increase in monetary velocity caused still more rapid increase in prices, which created a vicious cycle. This placed the government and banks between two unacceptable alternatives: if they stopped the inflation this would cause immediate bankruptcies, unemployment, strikes, hunger, violence, collapse of civil order, insurrection, and revolution. If they continued the inflation they would default on their foreign debt. The attempts to avoid both unemployment and insolvency ultimately failed when Germany had both.

When the Weimar Republic first started rapidly printing money everything seemed fine at first.  Economic activity was buzzing and unemployment was very low.

But as the following chart shows, when hyperinflation kicks in, it can happen very quickly.  By late 1922, the effects of all of the money printing were really starting to hit the German economy....

Once you start printing money it is really, really hard to stop.

By late 1922, inflation was officially out of control.  An article in The Economist described what happened next....

Prices roared up. So did unemployment, modest as 1923 began. As October ended, 19% of metalworkers were officially out of work, and half of those left were on short time. Feeble attempts had been made to stabilize prices. Some German states had issued their own would-be stable currency: Baden's was secured on the revenue of state forests, Hanover's convertible into a given quantity of rye. The central authorities issued what became known as "gold loan" notes, payable in 1935. Then, on November 15th, came the Rentenmark, worth 1,000 billion paper marks, or just under 24 American cents, like the gold mark of 1914.

Hyperinflation hurts the poor, the elderly and those on fixed incomes the worst.  The following is an excerpt from a work by Adam Fergusson....

The rentier classes who depended on savings or pensions, and anyone on a fixed income, were soon in penury, their possessions sold. Barter often took over from purchase. By law rents could not be raised, which allowed employers to pay low wages and impoverished landlords in a country where renting was the norm. The professional classes - lawyers, doctors, scientists, professors - found little demand for their services. In due course, the trade unions, no longer able to strike for higher wages (often uncertain what to ask for, so fast became the mark's fall from day to day), went to the wall, too.

Workers regularly got wage increases during this time, but they never seemed to keep up with the horrible inflation that was raging all around them.  So they steadily became poorer even though the amount of money they were bringing home was steadily increasing.

People started to lose all faith in the currency and in the financial system.  This had an absolutely devastating effect on the German population.  American author Pearl Buck was living in Germany at the time and the following is what she wrote about what she saw....

"The cities were still there, the houses not yet bombed and in ruins, but the victims were millions of people. They had lost their fortunes, their savings; they were dazed and inflation-shocked and did not understand how it had happened to them and who the foe was who had defeated them. Yet they had lost their self-assurance, their feeling that they themselves could be the masters of their own lives if only they worked hard enough; and lost, too, were the old values of morals, of ethics, of decency."

Of course not everyone in Germany was opposed to the rampant inflation that was happening.  There were some business people that became very wealthy during this time.  The hyperinflation rendered their past debts meaningless, and by investing paper money (that would soon be worthless) into assets that would greatly appreciate thanks to inflation, many of them made out like bandits.

The key was to take your paper money and spend it on something that would hold value (or even increase in value) as rapidly as possible.

The introduction of the Rentenmark brought an end to hyperinflation, but the damage to the stability of the German economy had been done.  The German economy went through several wild swings, which ultimately resulted in the rise of the Nazis.  The following description of this time period is from an article by Alex Kurtagic....

The post-hyperinflationary credit crunch was, not surprisingly followed by a credit boom: starved of money and basic necessities for so long (do not forget the hyperinflation had come directly after defeat in The Great War), many funded lavish lifestyles through borrowing during the second half of the 1920s. We know how that ended, of course: in The Great Depression, which eventually saw the end of the Weimar Republic and the beginning of the National Socialist era.

By the end of the decade unemployment really started to take hold in Germany as the following statistics reveal....

More...

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Jim Sinclair's Commentary

Neither of our candidates are stupid enough to allow the country and world to drop into a black hole they can prevent by simply kicking the can down the road. You do not need "Carnac the Magnificent" to know whomever is president this black hole will meet, be it a Democrat or Republican boot. This will be a 100 yard field goal but not with a football, rather a can. Nothing else is possible

The fact that nothing is yet done about this pending disaster proves how political the legislative is. The fact that it has not yet been approached is proof it will be kicked a year or more forward.

Obama vs. Romney: How they'd handle the $7 trillion fiscal cliff   By Jeanne Sahadi @CNNMoney September 26, 2012: 8:41 AM ET

NEW YORK (CNNMoney) - It's one of the biggest decisions facing Congress: what to do about the fiscal cliff - the $7 trillion worth of tax increases and spending cuts that start taking effect next year.

Two major sticking points: whether to extend some or all of the Bush tax cuts and how to replace the nearly $1 trillion in spending cuts.

Handled poorly, things will be a mess.

Handled smartly ... well, there likely will be just varying degrees of mess. That's because Congress has now left virtually no time to arrive at a thoughtful bipartisan resolution before the changes go into effect.

Lawmakers are too busy waiting for the results of the November election before they'll address the issue seriously.

So how would the two men vying for the White House in 2013 handle things?

Barack Obama: Tax on rich is key

More...

Jim Sinclair's Commentary

Here is a key element of QE3 to consider.

"The final end game of QE3 to infinity, with a month or two off from time to time, will be a product of the long term viability of the Federal Reserve Balance sheet and the impact on the dollar there from."

I might add with less than 2 weeks of "QE to infinity" being openly practiced and every numb-nut yelling QE 3 will do nothing inside and outside our gang, you have to know it is an operation to make the most in gold over the shortest time by the Muktars of Wall Street. That would just be a redo of 1979.

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THE FED IS TRAPPED - GOLD IS THE EXIT

Posted Wednesday, 26 September 2012

Darryl Robert Schoon

47% of US investors dependent on the Fed believe they are victimized by government, who believe they are entitled to enough liquidity to profit when risk is laid-off onto others, to society, to you-name-it...

On September 13th, the Fed announced QE3, a policy of open-ended bond purchases, which would add $1 trillion annually to the Fed's balance sheet. The Fed's decision to provide liquidity ad infinitum, i.e. QE etc., was framed in reasonable and carefully chosen language:

...These actions, which together will increase the Committee's holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative...

http://www.federalreserve.gov/newsevents/press/monetary/20120913a.htm

The measured wording gave the Fed sufficient cover to mask its increasingly desperate condition, i.e. how to keep its fatally-wounded credit and debt Ponzi-scheme functioning while searching for a solution that doesn't exist.

CAPITALISM'S CONSTANTLY COMPOUNDING DEBT IS THE DEVIL'S WHIP OF GROWTH

In capitalist economies, capital, i.e. money, is introduced by central banks into the economy in the form of loans; and because interest constantly compounds, economies must constantly expand in order to pay down and/or service those loans. This is why economists in capitalist systems are obsessed with growth.

Capitalism is, in actuality, a smoke and mirrors shell game where credit and debt have been substituted for money; and, as long as capitalism expands no one is the wiser because the fraud is so subtle. Capitalism, however, is no longer expanding. It is contracting.

Capitalism reached its peak in 2008 when Greenspan's historic credit bubble burst. What investors believed was a finely-tuned balancing act between credit and debt orchestrated by Fed Chairman Alan Greenspan turned out instead to be a speculative bubble fed by Easy Al's easy credit from the Fed's 24/7 discount window..

While Greenspan presided over the greatest credit expansion in the history of capitalism, Greenspan also presided over two of its largest speculative bubbles-the 1996-2000 dot.com bubble and 2002-2007 US real estate bubble. Greenspan would later refer to evidence of these bubbles as 'froth'; to those who lost homes and fortunes, it was blood.

THE 1990 JAPANESE NIKKEI - THE MOTHRA OF ALL BUBBLES

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How Gold and Silver Provide a Safe Haven in Today's Troubled World

The reasons for holding precious metals as a relatively safe haven for one's personal wealth are numerous. 

One common investing thesis for buying precious metals is that these intrinsically valuable commodities can hold their value in times of rising price levels. This characteristic can help American savers keep pace with credit expansion and paper currency debasement.

Diversify Out of the Dollar

For example, precious metals can provide a safe haven in terms of the diversification they offer relative to holding U.S. Dollars in cash or Dollar-denominated assets.

Physical gold and silver investments can take up a core position in an investment portfolio since they offer an easy way to have some wealth stashed out of Dollar-denominated assets. These hard assets also provide a viable alternative to holding foreign currencies or foreign equities.

Basically, precious metals allow investors to engage in a new way of thinking, where investment priorities are anchored to real value and permit advance planning for troubled times.

When the Dollar Bubble Bursts

In much the same way that market bubbles have been blown in various asset classes over the last 40 years, largely via Fed sanctioned interest rate manipulation, the overvalued U.S. Dollar seems like yet another bubble waiting to burst.

Basically, the value of silver has been artificially deflated in U.S. Dollar terms via price control implemented using contracts traded at global futures exchanges. The symbolic investigation of this so-called conspiracy by the CFTC just passed its fourth year.

Underpriced assets like silver will eventually lead the way back to what will very likely be the largest bubble the world has ever seen. The U.S. Dollar and the U.S. bond market appear destined for a long overdue crash.

Various factors point to this outcome. They include such things as:  intrinsically worthless paper wealth, high frequency trading, a world where MF Globals can exist, the threat of taxation, and rampant money printing - otherwise known as Quantitative Easing.

Competing With the Banks for Credit

Major international banks have benefited disproportionately compared to the individual investor from credit expansion in recent years. Banks enjoy better profits from cheap money and can buy future cash flows very inexpensively.

Meanwhile, consumer credit has contracted leaving consumers holding the bag in many cases. People are also unable to consume as much because of a rise in general price levels and the failure of the troubled financial system to purge itself of bad debt.

If at any point the American consumer and banks are equalized with additional credit infusions, the tide will then begin to turn. Consumers can then free up more discretionary income as America goes back to work.

Nevertheless, until the two groups are made equal, credit will neither expand nor contract. Instead, credit supplies will stay constant, although prices will continue to rise relative to consumer incomes.

Precious metals provide a safe haven investment that can often help compensate an investor for such price rises. Furthermore, if at any point the system balances and allows for credit expansion to extend to Main Street, then precious metals investors will typically benefit.

For more articles like this, and to stay updated on the most important economic, financial, political and market events related to silver and precious metals, visit http://www.silver-coin-investor.com

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Traveling With Precious Metals

Written by International Man

By Robert E. BaumanOffshore Confidential

Imagine you are docilely going through the long security line at John F. Kennedy International Airport, headed for your overnight flight to London Heathrow. As your carry-on bag goes through the X-ray, a burly TSA agent is called over to confer with the machine operator. He then looks at you and says: "Please come with me, sir."

As you are led to a small cubicle, you nervously try to think of what you might have done wrong. While you open your bag as instructed, the stern-faced TSA agent points to a small package and demands to know what it contains. Inside are antique, collectible gold coins that you intend to sell to the same British dealer from whom you bought them years ago, but now they are worth much more.

Now the agent says: "I'm sorry, sir, I will have to confiscate them, but I will give you a receipt. You have the right to file an appeal."

You stand there dumbfounded, the whole purpose of your journey destroyed.

Safely Transporting Your Coins or Precious Metals

Serious problems can arise when gold or silver coins (or any precious metals) are transported personally out of the U.S. to other countries by auto, airplane, boat or public transportation - or the reverse, when entering the U.S.

In May 2010, the Houston reported that U.S. Immigration and Customs (ICE) agents and Border Protection officers at Houston's George Bush Intercontinental Airport confiscated more than $250,000 in cash and almost $160,000 in gold and silver in 14 separate seizures from individual travelers during that one month alone.

At the time, I checked with several precious-metal experts and none had ever heard of government agents doing what these ICE agents did. It was news to them - and to me. And Houston, of course, is one of many international airports and entry and exit points in the U.S. So those figures could be multiplied many times over.

Because of the confiscations that already have occurred, I urge you not to travel with precious metals in any form, including coins. Any border crossing with more than $10,000 or more in U.S. dollars or foreign equivalent in any form must be reported on U.S. Customs Declaration Form 6059B. If you're moving U.S.-issued gold or silver coins, some advisors claim that you need to declare only the face value; $50 for a one-ounce gold Eagle, for instance, but that may cause trouble. Your friendly Homeland Security Administration agent isn't likely to be terribly sympathetic to this argument, and just might seize your coins.

Also, when you arrive in your intended foreign country you may face another Customs gauntlet. However, if you declare the gold as "cash," you'll hopefully be permitted to proceed.

If you must personally carry coins, my advice is to contact the nearest office of the U.S. Customs and Border Protection Agency, well ahead of travel, and explain what you propose to do and ask them how you can conform to the law. You should ask for and receive a written response so that you can show it if questioned by ICE agents. Also ask Customs if you need to notify them of your date and departure flight as a precaution against the very real possibility that a local Customs agent at the airport may not know the rules that cover this situation.

You will need to complete and bring with you a Census Bureau Form 7525-V, Shipper's Export Declaration. This form is required for exported commodities with a value exceeding $2,500. At current silver and gold prices, many coins would exceed this reporting threshold. Failure to file this declaration can result in seizure. The consequences for stating incorrect information are severe, including confiscation. They may also result in a fine of up to $10,000 and/or imprisonment.

If you have difficulty dealing with the U.S. Customs office, call the office of your local Member of the U.S. House of Representatives or one of your U.S. Senators and ask for their assistance. They should be pleased to help you.

There probably will be reporting formalities and Customs duties payable when you enter a foreign country. Most require you to fill out, sign and submit Customs Declarations upon entry, asking if you are importing currency or the equivalent. You should contact your destination country's embassy or consulate here in the U.S. to determine how they deal with silver and gold imports or exports.

Don't give them any definitive identification or travel information in case they put you on a travelers watch list.

If you intend to import gold or silver coins from offshore, it is advisable to hire a U.S. customs broker in advance of your travel. The customs broker can appraise the value of the coins and arrange for payment of the foreign country's Customs or other goods and services taxes. Your local FedEx or UPS office can advise you about how to contact customs brokers in your area. Of course, you should also bring with you proof of your ownership of specific coins or precious metals, as well as a statement of appraised value from a recognized appraiser.

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Paradoxical Quote of The Day From Ben Stein:

"Fathom the hypocrisy of a government that requires every citizen to prove they are insured... But not everyone must prove they are a citizen."

Now add this, "Many of those who refuse, or are unable, to prove they are citizens will receive free insurance paid for by those who are forced to buy insurance because they are citizens."

Think about it when you vote in November!

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No. 472: GDP Revision, August Durable Goods, Household Income, New Home Sales - ShadowStats.com

By: John Williams

September 27th, 2012

- Unusually Large 2nd-Quarter Revisions: Headline GDP Growth Dropped to 1.3% from 1.7%,

Theoretically Equivalent GDI Dropped to 0.2% from 0.6%

- Plunging Automobile and Commercial Aircraft Sales Savaged Durable Goods Orders

- August Household Income Took a Hit

Subscribe to Shadow Stats to read the full article.

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5 Min. Forecast

Wall Street: "We Want QE4" 5minforecast.agorafinancial.com

September 27, 2012

Alas, the markets have barely noticed. After three days of sulking, it seems Mr. Market is making a comeback... the Dow has leapt 102 points, to 13,516. The Nasdaq is up 44 points, to 3,137. The S&P 500 hopped up 16 points, to 1,449.

Oil is showing signs of life, jumping up nearly $2, to $91.88. Silver is up 64 cents, to $34.63... and gold has ascended to $1,777.80, up $24.50.

Regarding the price of gold, we were forwarded a curious chart. It depicts the rise in gold price versus the Fed's balance sheet + China's dollar-based reserves.

We're still trying to make sense of it. One interesting feature: When the Fed and China starting pairing back simultaneously, the gold price breaks out ahead of the curve... and then corrects. Only to start rising again when QE began again in earnest...

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