In further edited excerpts from their original report* Hoisington and Lacy go on to say:

One of the more common beliefs about the operation of the U.S. economy is that a massive increase in the Fed’s balance sheet will automatically lead to a quick and substantial rise in inflation. An inflationary surge of this type must work through the banking system in the form of an increasing cycle of borrowing and lending but as of today, however, excessive debt and falling asset prices have conspired to render the best efforts of the Fed impotent.

Understanding the Complex Monetary Chain
The link between Fed actions and the economy is far more indirect and complex than the simple conclusion that Federal asset growth equals inflation. In economic parlance, for an increase in the Fed’s balance sheet to boost the price level, the following conditions must be met:

1. The money multiplier must be flat or rising;
2. The velocity of money must be flat or rising; and
3. The AS or supply curve must be upward sloping.

The economy and price changes are moving downward because none of these conditions are currently being met; nor, in our judgment, are they likely to be met in the foreseeable future. The practical and straightforward fact is that GDP has declined in the face of a surge in M2 growth. The labor market equivalent of GDP (aggregate hours worked) has declined at a record rate over the last 18 months, the entire span of the recession. That is, the monetary surge was totally offset by other factors; thus, the recession deepened and inflation was nonexistent.

The conventional wisdom is that the massive increase in excess reserves might eventually be used to make loans and reverse the economic contraction now underway, or that the velocity of money might increase. There is a very good explanation for the surge in excess reserves:

1. The Fed now pays interest on its deposits, so banks have been incentivized to shift transaction deposits from riskier alternatives to the safety and liquidity offered by the Fed… [and, as such,] this “high powered” money is not available for making loans and investments.

2. Velocity (V), or the turnover of money in the economy, is far more likely to fall than to rise. This is because V tends to fall when financial innovation reverses downward. As this process continues excess leverage will eventually diminish and together they will lead V lower. This process has already begun in the household sector.

In addition, the Fed needs an upward sloping supply curve to get the economic ball rolling. Today we estimate that the AS curve is flat. The reason it is in this perfectly elastic shape, rather than upward sloping, is that we have substantial excess labor and other productive resources….Indeed, when excess resources are extreme, the AS curve is likely to be not only horizontal, but shifting outward, meaning that prices will be lower at any level of aggregate demand or GDP. Thus, even if Fed actions could shift the aggregate demand curve outward, which it cannot do under present circumstances, inflation would still be a long way down the road. Thus, theory and current evidence clearly point to deflation as the overwhelming economic risk.

Fiscal Policy a Drag on Growth
Over the next four years, the ratio of U.S. government debt will rise to somewhere between 71% and 80% of GDP, up from 41% at the end of 2008. The 71% figure, which is from the CBO, is probably understated. The CBO figures do not include the debt of Fannie Mae and Freddie Mac (now owned by the U.S. government), and their economic forecasts are probably too optimistic. None of these projections have incorporated the proposed health care bill which would raise the debt ratio considerably. This substantial increase in government spending far exceeds projected rising revenue sources such as the large marginal tax increase that has been suggested by the reversal in 2010 of the 2001 and 2003 tax reductions.

While the federal deficit is expanding, state and local government spending is being reduced and taxes have increased. It is highly unusual that state and local expenditures have actually decreased in current dollars in the past two quarters and, in real terms, spending is lower than a year ago. This is because state and local governments generally do not have the flexibility to incur deficits, yet they face potential deficits of about $121 billion for fiscal 2010. Therefore, the apparent thrust of federal policy is stimulus, while state and local policy is contractionary.

The Term “Federal Stimulus Spending” is An Oxymoron

a) Spending Multipliers
Many assume that the act of sending checks from the federal government sector to the private sector helps the economy through so-called spending multipliers. Multipliers take into consideration the second, third, fourth, etc. round effects from an initial change. Thus, multipliers capture the unintended consequences of policy actions. Although the initial spending objectives may be well intended, the ultimate outcome becomes convoluted.

Robert Barro of Harvard University and Italian econometrician Roberto Perotti of Universita’ Bocconi and the Centre for Capital Economic Policy Research have independently calculated that the government expenditure multiplier has remained at 0. Thus Barro and Perotti are saying that each $1 increase in government spending reduces private spending by about $1, with no net benefit to GDP. All that is left is a higher level of government debt creating slower economic growth. There may be intermittent periods when government spending will lift the economy, but offsetting episodes will follow. The best available empirical research suggests that the current federal policy of expanding spending will retard, not improve, the performance of business conditions.

b) Tax Multipliers
In addition to spending multipliers, however, there are also tax multipliers. A paper written at the University of California Berkeley by Christina D. and David H. Romer found that the tax multiplier is 3, meaning that each dollar rise in taxes will reduce private spending by $3.

Summary
Presently, the federal government is increasing spending that in the end may actually retard economic activity, and is also proposing tax increases that will further restrain private sector growth. In other words, fiscal policy is executing a program that is 180 degrees opposite from what it should be to stimulate the economy. How is it possible to get an inflationary cocktail out of deflationary ingredients?

Business Cycle Implications for Equities
The preferred way to answer the business cycle question of expansion versus contraction is to examine the four variables most integral to the economy’s performance: employment, production, personal income, and sales. For these variables to be consistent over time, the income and sales must be adjusted for inflation and personal income must exclude government transfer payments.

Recessions end when the National Bureau of Economic Research (NBER), the official arbiter of such matters, says they end but sometimes economic conditions suggest that the NBER miscalculated. Economic recovery occurs when these four indicators turn higher at about the same time. If the NBER’s cycle turning dates are aligned with these four indicators they have validity. Regardless of the NBER’s opinion, if the four indicators are not rising, a normal recovery will not occur. This seemingly esoteric point has important implications for the stock market… If a complete recovery of these four variables is still far in the future, then the current gains in the stock market cannot be sustained, just as rallies were not sustained in 2001. Furthermore, with total U.S. debt as a percent of GDP having surged to a new post 1870 record, the economy has become more leveraged even as the recession has progressed and an over- leveraged economy is one prone to deflation and stagnant growth.

The combination of an extremely overleveraged economy, ineffectual monetary policy and misdirected fiscal policy initiatives suggests that the U.S. economy faces a long difficult struggle. While depleted inventories and the buildup of pent-up demand may produce intermittent spurts of growth, these brief episodes are not likely to be sustained. In several years, real GDP may be no higher than its current levels. However, since the population will continue to grow, per capita GDP will decline; thus, the standard of living will diminish as unemployment rises. These conditions will produce a deflationary environment similar to the Japanese condition.

*http://www.investorsinsight.com/blogs/john_mauldins_outside_the_box/archive/2009/07/13/debt-and-deflation.aspx

Editor’s Note: The above article consists of edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered. (editor@MunKnee.com)

See larger image Deflation: Current and Historical Perspectives (Studies in Macroeconomic History) (Hardcover) List Price: $86.00 USD New From: $69.99 In Stock Used from: $82.37 In Stock

In further edited excerpts from the original article* Galland goes on to say:

At the peak of the last great U.S. inflation and corresponding gold bull run in the late 1970s, the government had a simple yet very effective tool to deal with the then prevailing problem of runaway inflation: aggressively raise interest rates, thereby contracting the money supply. Once inflation was tamed, the Fed was then able to steadily reverse course by lowering interest rates, effectively rebooting the economy and setting the stage for a protracted bull market.

In the current scenario, with everyone and every government up to their eyeballs in debt and interest rates already near 50-year lows, the problems the economy faces are distinctly different and far more intractable. Simply, there is no conceivable way the government can raise rates without destroying what’s left of the economy. Besides, in the absence of price inflation, why would it want to? Quite the contrary, using the lack of price inflation as its cue, it is going to great lengths to keep rates low in order to encourage yet more spending and more debt.

The hope is that, over time, the Fed will be able to manage the inevitable rate increases so they occur very slowly. That mindset cements in the cheap-money policies for as far as the eye can see, or at least until – again, it hopes – debt levels fall to the point where an increase in interest rates won’t be so devastating.

But there’s the rub – because at the same time the U.S. government is pursuing some of the most aggressive easy-money policies in its history, it is simultaneously engaged in historic levels of deficit spending thus, when interest rates ultimately start rising, they’ll be rising on an even larger pile of debt which, of course, the government will be even more anxious to avoid – because at that point they’ll only have one option: default on the debt, either suddenly or over time, with an even more aggressive dollar debasement.

All of which is to say that we are now in a classic negative feedback loop that can only have one outcome – a lot more currency depreciation and it’s gold that comes out the winner.

*http://www.howestreet.com/articles/index.php?article_id=11714

Editor’s Note: The above article consists of edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered. (editor@MunKnee.com)

See larger image The Inflation Crisis and How to Resolve It (Hardcover) By (author) Henry Hazlitt List Price: $14.00 USD New From: $9.99 In Stock Used from: $36.73 In Stock

In further edited excerpts from the original article* the author says:

Let’s find out:
Open
The opening time to trade in American stock markets is 9.30 am EST and closing is 4.00 pm EST. The market is operative from Monday to Friday, closed on bank holidays and weekends. The price of any given stock at 9.30 am EST is known as an opening price or generally termed as ‘Open’. Trading is also done in ‘pre-market’ hours i.e. from 8.00 am to 9.30 am EST and ‘after hours’ i.e. from 4.00 pm to 6.30 pm EST. The ‘open’ price is generally affected by these two trading sessions.

Prior Day’s Close
- the price of any given stock at 4.00 pm EST i.e. closing period. However, it’s not necessary that the price of a stock mentioned as ‘prior day’s close’ would be same as next day’s ‘open’ because the ‘after hours’ and pre-market’ sessions is operative in between.

High
- the highest price of any given stock in that particular given trading day.

Low
- the lowest price of any given stock in that particular given trading day.

Volume
- the quantity of shares of a specific given stock traded in any given day. It is an important piece of information noted by traders and investors because if the number mentioned in volume is quite high, it becomes easy to buy and sell shares and the prices are bound to fluctuate. However, if the number of volume is low, it becomes quite difficult to get or sell a stock at the price comfortable to you.

Average Volume
- the average of the quantity of shares traded of a specific stock during a long period, generally 365 days (or a year). Comparing this number with the ‘Volume’ of a stock at any specific day gives you vital information about the company. If the number is much higher than the ‘average volume’ then some significant information is or about to be revealed.

Market Cap or Market Capitalization
- the number of outstanding shares multiplied by the stock price. There are 3 categories under which the listed companies are divided: large cap, mid cap, and small cap. A company is considered as a large cap when the above calculation gets an amount between $10 and $200 billion. It is mid cap when between $2 and $10 billion, and small cap when it is between $2 billion and $500 million.

52 Week High
- the highest price reached by a specific stock anytime in the past 52 weeks.

52 Week Low
- the lowest price reached by a specific stock anytime in past 52 weeks.

Earning Per Share or EPS
- the company’s annual profit divided by the quantity of outstanding shares.

P/E or Price Earnings Ratio
- the prevailing stock price of a specific stock divided by the annual earnings of a share in the last 12 months. Price to Earning ratio can be used to compare the worth of like stocks, depending on the growth level.

FP/E or Forward Price to Earning Ratio
- the future P/E, specifically subsequent financial year, of any specific stock.

Beta
- a tool used to measure how volatile a stock is compared to the ups and downs of the market. Generally the figure of beta for any stock varies between 0 and 2 (excluding 2). If the volatility of the stock is in sync with the market, beta is 1. If volatility is more, beta is more than 1. If volatility is less than the market fluctuations, beta is less than 1. For instance, if the beta of stock ‘Z’ is 1.2 then the volatility of the stock is 20% more than the volatility of the market.

Dividend
- the part of the company’s profit that is distributed among the shareholders.

Yield
- the percentage of the annual amount a shareholder receives over the price he paid to buy the stock (stock price).

Shares and Shareholders
- [the piece of ownership of a company owned by a 'shareholder'.]

% Institutionally Owned
- the portion of quantity of shares owned by various financial institutions (mutual funds, insurance companies, pension funds, etc.).

[Now you know.] Read this article a couple of times and then watch CNBC tomorrow to test yourself on how much you remember.

http://www.financialculture.com/i-have-no-idea-what-you-are-talking-about/

Editor’s Note: The above article consists of edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered. (editor@MunKnee.com)

See larger image Why Are We So Clueless about the Stock Market? Learn how to invest your money, how to pick stocks, and how to make money in the stock market (Paperback) By (author) Mariusz Skonieczny List Price: $14.95 USD New From: $13.45 In Stock Used from: $13.00 In Stock

In further edited excerpts from the original article* Edelson goes on to say:

The U.S. Stock Markets
The S&P 500 … is due to top out in late April/early May … From there on out both the 24- and 40-month cycles should exert a strong downward bias to the market that lasts for up to a full year with no abating in selling pressure until April 2011. That does not mean we will see a re-test of the March 2009 lows at 6,469 in the Dow … but I would not be surprised to see the Dow fall at least as low as 9,000, before beginning to recover again going into 2012.

[As such, with] the broad stock markets getting close to an important top, if you’re long the market and have profits, I would strongly consider grabbing as many of those profits as you can and prepare to soon short the broad markets, via inverse ETFs, such as the ProShares Short Trust S&P 500 (SH).

What about all the bearish news out there right now? The sovereign debt crisis, the plunging currencies in Europe, the renewed collapse of housing sales, and more? Don’t they scream SELL right now? No, they don’t.

News should never be used to time your trading and investing … Markets and individual securities and asset classes follow their own unique trading cycles and rhythms, and if you try to time your investing and trading based on news alone, or even pure fundamental analysis, you will never make any decent money in the markets, let alone keep that money. The only, truly accurate and profitable way to invest in the markets is to understand and quantify the markets differing personalities, which is what the rigorous study of market cycles does for you. Right now, for instance, although we are starting to see more negative news come to the forefront (as compared to the last nine or 10 months where the market was rallying), I can assure, the negative news you are hearing will pale in comparison to the news that will come out in the months ahead as the 40-month cycle for stocks turns down.

The U.S. Dollar
The short-term cycles for the U.S. dollar are now in rally mode BUT — very importantly — they’re not likely to cause the dollar to rally much, because:
a) they’re short term, and therefore, by definition, weaker than the longer-term 15 year cycle that is pointing lower and, therefore, negatively impacting the dollar.
b) previous instances of the 10-, 19- and 39-month cycles have NOT produced substantial rallies.

The dollar is not yet ready to meet its final fate but, rather, is likely to experience wild swings both up and down for the next year or so, and then, plunge into a tailspin in 2012, which I believe will also mark the birth of an entirely new monetary system leading to a single world currency, at least for international trade purposes.

As such, for the next year or so, it’s ok to keep your basic cash needs (basic savings, working cash to pay bills, etc.) in dollars but. to the extent you can, you should be preparing for the eventual and inevitable demise of the U.S. dollar as the world’s reserve currency.

I expect the U.S. dollar to lose at least 50% of its current purchasing power by 2012 so, while the dollar is not yet in danger of a total collapse, now is the time to plan to move most of your assets out of the dollar, with the goal of being 90% out of the dollar no later than this time next year, March 2011. That’s a bit early according to the cycles, but I would rather be early moving my money safely out of the dollar, than be late and caught in what will turn out to be the biggest currency disaster of all time.

Moving out of the dollar can take many forms, including:
a) moving money out of the country into safe offshore banking institutions that give you flexibility to move your money in and out of foreign currencies, stock investments, and especially gold.
b) buying contra-dollar investments, such as gold, but also other precious metals, oil, and other natural resources.

In the meantime, suffice it to say that we are in the throes of the dollar’s last days, and while there is no need to panic right now, there will be if you don’t keep the above cyclic picture and timing for the dollar collapse at the forefront of your thinking!

Gold
Referring to the 8.6 year cycle chart for gold, it should pull back slightly into late April, but then take off again to a new record high in August of this year and continue to point decisively higher into the January to March period of 2013, and where I fully expect gold to reach at least $2,300 an ounce, if not much higher.

The above look into the future for stocks, the dollar, and gold — are not something to take lightly. They are your roadmaps for the future, and, they are fully consistent with the underlying fundamentals that are unfolding right before your eyes …
a) The sovereign debt crisis now hitting Europe, and which will eventually smash upon our shores.
b) The plunging euro, pound and other currencies, which will also eventually smash our U.S. dollar.
c) The flight to quality and safety that is now starting to send gold higher into its next rocket blast to $1,500, and eventually, to $2,300 and possibly much higher.
d) And there’s more, much more, chaos and wild market swings coming in the months and years ahead.

To be forewarned, is to be prepared.

*http://www.uncommonwisdomdaily.com/another-peek-into-the-future-8867 (Uncommon Wisdom is a free daily investment newsletter from Weiss Research analysts offering the latest investing news and financial insights for the stock market, precious metals, natural resources, Asian and South American markets. From time to time, the authors of Uncommon Wisdom also cover other topics they feel can contribute to making you healthy, wealthy and wise. To view archives or subscribe, visit http://www.uncommonwisdomdaily.com.)

Editor’s Note: The above article consists of edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered. (editor@MunKnee.com)

See larger image The Ultimate Depression Survival Guide: Protect Your Savings, Boost Your Income, and Grow Wealthy Even in the Worst of Times (Hardcover) By (author) Martin D. Weiss List Price: $27.95 USD New From: $11.04 In Stock Used from: $9.99 In Stock

In further edited excerpts from the original article* it goes on to say:

In its natural, unrefined state, crude oil ranges in density and consistency, from very thin, light weight and volatile fluidity to an extremely thick, semi-solid heavy weight oil. There is also a tremendous gradation in the color that the oil extracted from the ground exhibits, ranging all the way from a light, golden yellow to the very deepest, darkest black imaginable.

For the purpose of having a set, agreed upon “vocabulary,” the petroleum industry often uses references to “Geographical Locations” in order to descriptively classify crude oils due to the fact that oil from different geographical locations will naturally have its own very unique properties. These oils vary dramatically from one another when it comes to their viscosity, volatility and toxicity.

Viscosity
- relates to the oil’s resistance to flow – higher viscosity crude oil is much more difficult to pump from the ground, transport and refine.

Volatility
- describes how quickly the oil evaporates into the air. Oils that are naturally highly volatile need additional effort to ensure that temperature regulation and sealing procedures loose as little oil as possible.

Toxicity
- refers to how poisonous the oil and its refining processes are to local life, from humans, to flora and fauna as well as other environmentally fragile living entities and organisms. If an oil spill were to occur, each type of oil presents quite unique “clean up” challenges, procedures and priorities.

The four primary types of oil are:

1. Very Light Oils / Light Distillates
- Includes jet fuel, gasoline, kerosene, light virgin naphtha, heavy virgin naphtha, petroleum ether, petroleum spirit, and petroleum naphtha. These oils tend to be highly volatile and can evaporate within just a couple of days, which quickly diffuses and decreases toxicity levels.

2. Light Oils / Middle Distillates
- Includes most Grade 1 and Grade 2 fuel oils and diesel fuel oils as well as most domestic fuels and light crude marine gas oils. These oils are moderately volatile, less evaporative and moderately toxic.

3. Medium Oils
Most of the crude oil on the market these days falls into this particular category. Low volatility makes for messier and more complex “clean ups”.

4. Heavy Fuel Oils
- Includes the heavy crude oils, Grade 3,4,5 and 6 fuel oils (Bunker B & C) as well as intermediate and heavy marine fuels. These oils have very slow and little evaporation and therefore toxicity is highly increased. This not only means potentially severe contamination for fish, fowl and fur-bearing creatures, but possible “long term” contamination of water and soil as well.

There are over 160 different oils traded on the market theses days, but for simplicity’s sake, let’s discuss the three primary oils that get most of the serious attention in the news and in the markets.

The three primary oils are:

1. West Texas Intermediate Crude (WTIC)
- an extremely high quality crude oil which is greatly valued for the fact that it is of such premium quality, more and better gasoline can be refined from a single barrel than from most other types of oil available on the market.

The WTIC “API Gravity” is 39.6 degrees, which makes it a “light” crude oil, with only 0.24 percent sulfur, which makes it a “sweet” crude oil. The term “API Gravity” refers to the “American Petroleum Institute Gravity, which is a measure that compares how light or heavy a crude oil is in relation to water. If an oils “API Gravity” is greater than 10 then it is lighter than water and will float on it. If an oils “API Gravity” is less than 10, it is heavier than water and will sinks.

These combined qualities as well as location make WTIC a prime crude oil to be refined in the United States. The vast majority of WTIC oils are refined in the Midwest and Gulf Coast regions. Even with production of WTIC oil in decline, WTIC is often priced from $5 to $7 higher per barrel than “OPEC Basket” oil and on average, $1 to $2 higher per barrel than “Brent Blend” oils.

2. Brent Blend
- a combination of different oils from 15 fields throughout the Scottish Brent and Ninian systems located in the North Sea.

The Brent Blend “API Gravity” is 38.3 degrees, which makes it a “light” crude oil, but clearly not quite as “light” as WTIC. It also contains about 0.37 percent sulfur, which makes it a “sweet” crude oil, but then again, not quite as “sweet” than WTIC.

Brent Blend is excellent for making gasoline and middle distillates, both of which are utilized in large quantities in Northwest Europe, where Brent blend crude oil is most often refined. Brent Blend production, much like that of WTIC, is also on the decline, but it remains a major benchmark for other crude oils in Europe or Africa. Brent Blend is often priced at a $4 higher per barrel compared to the OPEC Basket price.

3. OPEC Basket
- a collective of seven different crude oils from Algeria, Saudi Arabia, Indonesia, Nigeria, Dubai’, Venezuela and the Mexican Isthmus. The acronym OPEC stands for “Organization of Petroleum-Exporting Countries” which is an organization that was formed in 1960 in order to create some common policy for the production and sale of oil within its jurisdiction.

Because OPEC oil has a much higher percentage of sulfur within its natural make-up and therefore is not nearly as “sweet” as WTI or even Brent Blend and since it is also not naturally as “light” as well, the prices of OPEC oil are normally consistently lower than either Brent Blend or WTI. Nevertheless, OPEC’s willingness or ability to quickly increase production when necessary makes OPEC a consistent “Major Player” in the oil industry.

*http://oilprice.com/article-a-detailed-guide-on-the-many-different-types-of-crude-oil.html

Editor’s Note: The above article consists of edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered. (editor@MunKnee.com)

See larger image Crude World: The Violent Twilight of Oil (Hardcover) By (author) Peter Maass List Price: $27.00 USD New From: $15.44 In Stock Used from: $10.00 In Stock Release date September 22, 2009.

The National Inflation Association goes on to say*:

Throughout world history, only ten times more silver has been mined than gold. If you go back about 1,000 years ago between the years 1000 and 1250, gold was worth ten times more than silver worldwide. From year 1250 to 1792, the gold to silver ratio slowly increased from 10 to 15 and the Coinage Act of 1792 officially defined a gold to silver ratio of 15. The ratio remained at 15 until forty-two years later when the ratio was increased in 1834 to 16, where it remained until silver was demonetized in 1873.

The gold to silver ratio remained between 10 and 16 for 873 years! It is only over the past 100 years that the gold to silver ratio has averaged 50. History will look back at the artificially high gold to silver ratio of the past century as an anomaly, caused by the dollar bubble and the world being deceived into believing that fiat currencies are real money, when in fact they’re all an illusion. This fiat currency experiment will end badly in a currency crisis. The wealthiest people will be those who bought silver today and were smart enough to research and pick the best silver mining stocks.

While the vast majority of the gold ever produced remains sitting in vaults, 95% of the silver produced has been consumed by industry for thousands of applications in such tiny amounts that most of it will never be recycled and seen on the market again. Nobody knows the exact above-ground supply of silver today, but most likely it is somewhere in the neighborhood of 1 billion ounces. That’s a total worldwide market value of only $17.4 billion, when the world has over $7 trillion in foreign currency reserves, mostly in fiat currencies that they will need to diversify out of due to rampant inflation.

Besides the fact that the world has been ignoring the monetary value of silver, silver prices are artificially low due to a large concentrated naked short position. It’s not a coincidence that the day silver reached its multi-decade high of over $21 per ounce in March of 2008, was the same day Bear Stearns failed. Bear Stearns was a holder of a massive short position in silver. In our opinion, this was likely a naked short position because there is nobody in the world who owns such a large amount of silver for Bear Stearns to have borrowed.

The reason why we believe the Federal Reserve was so eager to orchestrate a bailout of Bear Stearns, is because Bear Stearns was on the verge of being forced to cover their silver short position. Because the silver market is so small and tightly held, if Bear Stearns was forced to cover their short position, silver prices could have potentially risen to $50 per ounce or higher overnight. The world would have seen how economically unstable our country is and confidence in the U.S. dollar would have rapidly deteriorated.

JP Morgan still holds the silver short position they inherited from Bear Stearns. The concentrated naked short position in silver today is the largest short position in the history of all commodities, as a percentage of its market size. Eventually, JP Morgan will have to cover this short position or it could jeopardize their existence.

The best evidence that the short position in silver is naked and not backed by real silver, is the differential between what silver trades for on the Comex and what real people are willing to pay for physical silver on eBay. Every hour on eBay, there are dozens of one ounce silver coins selling for approximately $25. That’s about a 43% premium over the current spot price of silver. With so much demand for physical silver, we doubt the silver shorts in the paper market will be able to manipulate prices downward for much longer. A major short squeeze could be right around the corner and silver could take off in a way that shocks even those who are most bullish.”

The fiat currency experiment will end badly in a currency crisis. The wealthiest people will be those who bought silver today and were smart enough to research and pick the best silver mining stocks.

*http://www.commodityonline.com/futures-trading/technical/Silver-not-gold-is-the-best-investment-asset-13354.html

Editor’s Note: The above article consists of edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered. (editor@MunKnee.com)

See larger image Rich Dad's Advisors: Guide to Investing In Gold and Silver: Protect Your Financial Future (Paperback) By (author) Michael Maloney List Price: $16.99 USD New From: $8.00 In Stock Used from: $9.37 In Stock

In further edited excerpts from the original article* Nasser goes on to say:

A rising wedge pattern now indicates a sucker’s rally for the DOW (Dow Jones Industrial Average of the top 30 companies in the US, or the DJIA), has been confirmed. A break down through the lower limit of the rising wedge pattern has been confirmed across virtually every technical indicator – take a look at the DJIA at StockCharts.com to see what I mean. The index fell through the 50-Day Moving Average (50DMA) – and stayed there. Trading volumes were above recent averages. Various flavours of RSI and MACD all turned sharply negative.

In fact, the move is so bearish in tone that Simon has revised his forecast downwards. He says that the equity markets have turned more bearish this week and unfortunately the March 2009 lows will not hold which means that we have a long way to fall before we turn around. In fact, we could see a 40% – 50% wipe out. (There is a precedent. During the Great Depression there was a very similar move up to the one that we have just seen. Sadly, the ‘bottom’ did not hold – in fact the true market low was another three years in the making.)

Other markets are showing similar patterns. Both the Global DOW tracker and the All Ordinaries index have broken down out of their rising trends, signalling pain across the board.

China is in a fascinating position. The Shanghai Composite Index (SHASHR) actually peaked around the end of July 2009, had a sell off, recovered, and has been trending sideways since November. It too, however, has broken down out of this trend, but under a slightly different dynamic.

Worried about the vast amount of money that was pumped into the economy last year, the Chinese Government has started tightening credit in a bid to cool the market. It has increased reserve requirements, worried about an increase in loan default rates. It has also started to guide banks away from lending to over-developed and energy-intensive industries, and may start raising interest rates soon. Not surprisingly, that has led to a bearish sentiment in the market.

As David Caploe, our Chief Political Economist at EconomyWatch.com recently pointed out, a vast amount of negative economic news came out at the end of the year and was ‘buried’ in plain sight by being reported in the festive season. Add that to tightening in China, last year’s major growth engine, and you can see that we are in for a bumpy year.

It may not be that surprising then, that Simon sees a strengthening rally in the US dollar, a traditional flight-to-safety move, while the Euro and Australian dollar are turning negative. That other great defensive play, gold, had a great 2009 and many see it performing even better in 2010.

Until jobs start being created in the US and Europe, western consumers won’t start shopping, and China and other export-dependent Emerging Markets will have nowhere to export to. Without that kind of real economic growth, stock market rallies can only survive on vapour for so long before crashing painfully back to earth.

*http://www.economywatch.com/economy-business-and-finance-news/2010-crash-the-march-2009-lows-will-not-hold-28-1.html

Editor’s Note: The above article consists of edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered. (editor@MunKnee.com)

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In further edited excerpts from Slavo’s original article* he goes on to say:

Williams sees** the U.S. economic and systemic solvency crises of the last two years as just precursors to a Great Collapse – a hyperinflationary great depression. [To be specific] he sees:
a) a complete collapse in the purchasing power of the U.S. dollar,
b) a collapse in the normal stream of U.S. commercial and economic activity,
c) a collapse in the U.S. financial system as we know it, and
d) a likely realignment of the U.S. political environment.

Mr. Williams further maintains that the current U.S. financial markets, financial system and economy are highly unstable and vulnerable to unexpected shocks, the Federal Reserve is dedicated to preventing deflation and debasing the U.S. dollar. and that the results of those efforts are being seen in tentative selling pressures against the U.S. currency and in the rallying price of gold.

Looking at each of Mr. William’s points from a worst case scenario perspective, here are some things one can expect:

1. Collapse of Purchasing Power
Imagine stock markets initially rising to new highs. While many in the public will truly believe we are in a new boom time, the reality will be that prices on everyday goods will be increasing at a rapid rate. Hyperinflation will not be recognized right away, but eventually the public will catch on. Howard Katz has written that we can expect price increases of 70% within a year or two. Imagine gas at $7 – $8 a gallon, a can of tuna for $3 and your favorite flavored latte for $10. This will be the opening act and primary indicator that the system is getting to a breaking point.

2. Collapse in U.S. Commercial and Economic Activity
As the purchasing power of the dollar diminishes, foreign creditors and suppliers will become concerned. Even short-term credit extensions for essential goods like food and oil will collapse. When Iceland’s currency collapsed, the government was unable to purvey basic food goods from international sources because their currency was no longer trusted.

Expect to see store inventories slowly (or perhaps quickly) lower, from basic foods to apparel. If the dollar were to go Zimbabwe, then it would be nearly impossible for merchants and suppliers to accurately price goods, leading to daily, perhaps hourly price changes.

The effects of this type of currency collapse will infect every aspect of the economy, leading to mass layoffs and a sudden stop in transportation via trucks, rail and dryships. Trade goods will cease to move across the nation.

3. Collapse in the U.S. Financial System
If you haven’t read James Rawles’ book Patriots, do so. The opening two chapters deal with exactly the scenario forecasted by John Williams. As mentioned, we will see stock prices and stock markets probably go through the roof initially, in nominal dollar terms. Once it is realized that the dollar has been destroyed, along with all US denominated paper assets, we may see a shut-down of US Stock markets. While there may certainly be other signals, a freeze in the trading of stocks as a result of hyperinflationary pressure on the US Dollar should be a warning alarm to all of those with a bug-out location. Complete system collapse will not be far behind- — and we could literally be talking days, not weeks or months.

4. Realignment of the U.S. Political Environment
It may be hard to believe, but it is certainly not outside the realm of possibility. The political system as we know it, like voting for representatives, may deteriorate quickly, meaning that martial law may need to be implemented. Local law enforcement and emergency services will break down, as responders will opt to protect their own families. This will force the hand of the Federal Government, as there will be no police to deal with looting, violent crime, and civil unrest resulting from a collapse in trade and essential supplies.

If Mr. Williams’ forecast plays out as described, then preparation will be a key to survival. As Mr. Williams points out, and many observers feel deep down, the problems that have been pushed into the future have now come home to roost.

Indeed, pushing the big problems into the future appears to have been the working strategy for both the Fed and recent Administrations, yet the U.S. dollar and the budget deficit do matter, and the future is at hand. The day of ultimate financial reckoning has arrived, and it is playing out.

How much time do we have? Mr. Williams, has recently adjusted his timelines based on the data he is interpreting:

“The intensifying economic and solvency crises, and the responses to both by the U.S. government and the Federal Reserve in the last two years, have exacerbated the government’s solvency issues and moved forward my timing estimation for the hyperinflation to the next five years….The U.S. government and Federal Reserve already have committed the system to this course through the easy politics of a bottomless pocketbook, the servicing of big-moneyed special interests, gross mismanagement, and a deliberate and ongoing effort to debase the U.S. currency. Accordingly, risks are particularly high of the hyperinflation crisis breaking within the next year.”

For those who hope for change, we’re sorry to inform you that it isn’t coming, because it is too late: “The U.S. has no way of avoiding a financial Armageddon. Bankrupt sovereign states most commonly use the currency printing press as a solution to not having enough money to cover obligations. The alternative would be for the U.S. to renege on its existing debt and obligations, a solution for modern sovereign states rarely seen outside of governments overthrown in revolution, and a solution with no happier ending than simply printing the needed money. With the creation of massive amounts of new fiat dollars (not backed by gold or silver) will come the eventual destruction of the value of the U.S. dollar and related dollar-denominated paper assets,” says Williams.

Folks, if Mr. Williams and others are right about this, then I am afraid that we are going to experience something in the United States that will be written about for centuries in the history books. What can be done now? The answer is nothing. It is just a matter of time.

*http://www.shtfplan.com/headline-news/hyperinflationary-depression-no-way-of-avoiding-financial-armageddon_12152009
**http://www.shadowstats.com/article/hyperinflation-2010

Editor’s Note: The above article consists of edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered. (editor@MunKnee.com)

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In further edited excerpts from the original article* McKeough goes on to say:

There are ways to reduce your risk, however, and here are 9 “secrets” we use to pick junior mines which should help you find the gems among the rocks in this fast-changing industry:

1. Stay away from mining companies that operate in insecure and politically unstable regions like the Congo, Venezuela and Colombia. Also avoid those in countries with little respect for property rights and the rule of law, like Russia or Mongolia. That’s because mining is vulnerable to political instability. You can’t move the mine to another country, and local citizens sometimes believe that a foreign mining company is robbing them of their birthright, even though they need the foreign company’s capital and expertise to get any value out of the ground.

2. Look at environmental constraints where the junior mining companies are looking for minerals. In Europe and certain parts of the U.S., junior mines need a particularly rich find to justify the costs of overcoming environmentalists’ objections.

3. When looking at junior miners that only explore for minerals, give preference to those that operate in an area with geology that is similar to that of nearby producing mines.

4. Look for well-financed junior mining companies with no immediate need to sell shares at low prices. That’s because doing so would dilute existing investors’ interests. The best junior mining firms have a major partner who has agreed to pay for drilling, or other exploration or development, in exchange for an interest in the property.

5. Look for mining companies with strong balance sheets and low debt.

6. Look for positive cash flow, preferably even when commodity prices are low.

7. Even better, look for mining companies that have cash flow from an existing mine that is sufficient for, or at least contributes to, the cost of developing a second mine.

8. Look for mining firms with experienced management that has a proven ability to develop and finance similar projects by working with other junior-mining companies.

9. Avoid mining stocks that trade at unsustainably high prices because of broker hype or investor mania about the underlying commodity (such as gold). Instead, focus on reasonably priced mining stocks with favourable geology.

*www.tsinetwork.ca/daily/mining-stocks/discover-the-9-secrets-to-profiting-from-junior-mines/

Editor’s Note: The above article consists of edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered. (editor@MunKnee.com)

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