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The GoldBugg Report – December 02, 2008

December 2, 2008

WORLD FINANCIAL REPORT ON RADIO NOV 26 2008 SHOW

-Swamped by gold demand, Perth Mint stops taking orders. Fears of the unknown long-term effects from the global financial crisis have sparked a new gold rush.

-Platinum Tipped For Rally Next Year.

-Ted Butler silver commentary.

GOLD

-Swamped by gold demand, Perth Mint stops taking orders. Fears of the unknown long-term effects from the global financial crisis have sparked a new gold rush. With retail and wholesale clients around the world stocking up on the precious metal, the Perth Mint has been forced to suspend orders. As the World Gold Council reported that the dollar demand for gold reached a quarterly record of $US32 billion (A$50.73 billion) in the third quarter, industry insiders said the race to secure physical gold had reached an intensity that had never been witnessed before.

Perth Mint sales and marketing director Ron Currie said the unprecedented demand had forced the Mint to cease orders until January, with staff working seven days a week, 24-hour days, over three shifts to meet orders. He said Europe was leading the demand, with Russia, Ukraine, Middle East, and US all buying making up 80 per cent of its sales. One European client purchased 30,000 ounces for $33 million.

“We have never seen this before and are working right at capacity. And we are seeing it from clients in the shop buying one ounce, right up to 30,000 ounces from overseas clients,” Mr. Currie said. Robert Jaggard, manager of bullion and rare coins dealer Jaggards, said business had picked up strongly and he expected it to increase further.

“All around the world there has been a heavy run on physical gold and there is a shortage of supply,” he said. Mr. Jaggard, who has been dealing in gold for 40 years and is an agent for the Perth Mint, said some clients were buying up to $1 million worth of gold, paying a premium above the spot price. Read more here-http://www.gata.org/node/6910

-Gold soared $50 this past Friday Nov 21. It began the day at $748 and was trading at $800 when the day ended. It is rare for gold to achieve such a huge one-day gain. In fact, I checked my records for the past twenty years and found only one other instance when gold climbed $50 or more in a day. Interestingly, the other occurrence was on September 17, 2008, barely two months ago.

That rally also took gold back above $800. That these two rallies unique and rare in their magnitude occurred so near to one another is significant. Is there a message from these two events? Yes, indeed! Gold itself is telling us two things. First, there is an enormous short position in gold. Huge rallies occur for a reason, and short covering is always a factor. In order to limit their losses, shorts will bid up the market in a desperate attempt to cover their position.

The rule of thumb is straightforward the bigger the short position, then the bigger the rally. Second, and more importantly, these huge rallies are signalling that gold under $800 is too cheap. A higher price is needed to bring supply and demand back into balance. There is other, more than ample evidence to support this same conclusion. The demand for physical metal remains strong. James Turk-Read more here-http://www.goldmoney.com/en/commentary.php

-’I still like gold,’ says Marc Faber. “I still like gold,” Faber said, because it is cash and not the liability of someone else. Read more here-http://www.bi-me.com/main.php?c=3&cg;=2&t;=1&id;=27713

-Marc Faber Says Global Economy ‘Imploding,’ Favours Gold. Watch video here-http://www.bloomberg.com/avp/avp.htm?N=av&T;=Marc%20Faber%20Says%20Global%20Economy%20%60Imploding%2C%27%20Favors%20Gold&clipSRC;=mms://media2.bloomberg.com/cache/vhU1YsklcydQ.asf

-The real story of precious metals’ returns. Read more here-http://www.greenfaucet.com/?q=node/2048

Asset Performance (1970 Through July 2008)

-Got Gold Report-COMEX Commercial Short Positions Still Low For Gold, Silver. While equity markets were once again bludgeoned unmercifully this week, gold and silver fared relatively better. Perhaps that is in part because the largest of the largest futures traders continued to have the lowest COMEX futures net short positioning in years. Read more here-

http://www.resourceinvestor.com/pebble.asp?relid=48202

-Bring back the link between gold and the dollar. Read more here-http://www.ft.com/cms/s/0/ba673d22-b977-11dd-99dc-0000779fd18c.html?nclick_check=1 or http://www.gata.org/node/6916

-Keep Your Eye on the Prize! Buy gold. Read more here-http://www.321gold.com/editorials/degraaf/degraaf112408.html

-Elliott Wave Gold Update from Alf Field. Read more here-http://news.goldseek.com/AlfField/1227596760.php

-Gold Pressure near Breaking Point. The demand pressure slowly yet consistently building over the last year has created some remarkable pressure to the upside on the price of gold. With recent announcements by Iran that their foreign reserve holdings are being converted to gold, and the record purchase of $3.5 billion by unidentified Saudi Arabians over a two week period, it seems remarkable that gold continues range-bound trading in the low 700’s.

Recent coverage of the gold market by mainstream financial stations such as CNBC and Fox News indicate that the discrepancy between the COMEX spot price and the average price for gold bars and coins (US$900+ on Ebay, for example) is starting to make even the most stalwart feeble-minded news anchors see what two plus two equals.

So the forces building that will take gold through $1500 within the year and likely much further are compounding with every day that the global economy slides deeper and deeper into depression. The United States must continue its desperate efforts to saturate the economy with USD while its value is high because when the repatriation of those same dollars ebbs on the conclusion of the widespread and ongoing deleveraging-induced asset selling, the crash of the dollar will begin.

In my estimation, that will probably not occur until the New Year, because the Bush administration will be in full gear trying to salvage a favorable conclusion to 8 years of ham-fisted fiscal mismanagement. James West-Read more here-http://news.goldseek.com/GoldSeek/1227291310.php

-Australia’s 2008 gold output may fall to lowest level since ‘89. Read more here-http://www.miningweekly.com/article.php?a_id=148236

-The first significant fresh gold hedge of the year. Société Générale’s latest hedge book points out that the current financial environment will make it difficult for some miners further to reduce hedge cover by any means other than by delivery of mine production; also the complexion of the dehedging activity changed slightly in the third quarter. Read more here-

http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=73693&sn;=Detail

-The superiority of returns on Gold to investors over the miserable returns on paper equities would seem at some point to become an embarrassment to the purveyors of Stock Certificates of Negative Return. While US$ Gold is down from the high, so many other investors, living in other currencies, around the world have witnessed their Gold trading at all time highs. And now the message of financial salvation is spreading further. Stories of shortages of Gold coins are now widespread. Public participation in a market is sign of Wave V, which now may be unfolding.

Central banks, led by the Federal Reserve, are busy monetizing every item of debt possible. The balance sheet of the Federal Reserve, adjusted for circular transactions, is now 95% larger than prior to the financial meltdown. U.S. Congress, with encouragement from Obama’s team, is now talking about a $500-700 financial stimulation plan. Deficit of U.S. government over the past year is already in excess of $1.5 trillion. The additional debt necessary to finance a stimulus plan can only be financed by (1) gullible foreign investors, (2) foreign central banks, or (3) by Federal Reserve.

With foreign central banks needing to refinance their own institutions and stimulate their own economies, they may have little appetite for more U.S. government paper. Paper that may soon be downgraded to AA. As a consequence, the Federal Reserve will have little choice but to monetize most of this additional half trillion dollars of debt. The ramifications of further expansion of the Federal Reserve’s balance sheet should not be ignored.

With the Fed’s balance sheet approaching a double in size, U.S. money supply, M-1 SA, is already growing at a 25-30% annual rate. “Printing money” at that rate can only lead to a loss of purchasing power. Anyone expecting an increase in general purchasing power of the dollar, monetary deflation, is simply on the wrong track. Gold is the only historical defense against the coming dollar debacle. The financial risks combined with the most populist President in U.S. history, and perhaps the most inept since Wilson a hundred years ago, make Gold an absolute necessity for protecting wealth.

Some weeks ago the above chart was introduced in somewhat different format. The red line, using the left axis, is the inflationary component of U.S. money supply growth over the past six months. The green line is price of $Gold, and uses the right axis. Black triangles are buy signals on $Gold created from the inflationary money supply growth rate. Those signals occur when the inflationary money growth is negative and then turns positive.

These signals, while from a model not intended to be a precise timing model, suggest another good time ahead for Gold investors. In the past four plus years it has only given three other signals. Investors should not ignore the coming threat of excessive money creation, and buy Gold on all price weakness or dips. Wealth once lost to the tyranny of money, is never regained! Ned W. Schmidt-Story here-http://news.goldseek.com/NedSchmidt/1227624614.php

SILVER

-Total silver fabrication demand will drop as much as 10 percent in 2009 on tumbling photography and industrial uses as the global economy slows, a top official at precious metals research firm GFMS said. Philip Klapwijk, GFMS’s executive chairman, said he expected silver to rise to $13 an ounce next year as the metal will benefit from gold because of rising inflationary pressure and a weakening dollar. Read more here-http://www.forbes.com/reuters/feeds/reuters/2008/11/21/2008-11-21T181946Z_01_N21479729_RTRIDST_0_SILVER-DEMAND-OUTLOOK-INTERVIEW.html

-Ted Butler silver commentary. Read more here-http://news.silverseek.com/TedButler/1227634141.php

-Silver market update from Adam Hamilton. Read more here-http://www.zealllc.com/2008/silvcris.htm

PLATINUM-PALLADIUM

-Platinum Tipped For Rally Next Year. Market forecasters remain confident of a recovery in the platinum price to more than $1,000/oz next year despite wild gyrations in the price in the past week after good and bad news. Read more here-http://www.resourceinvestor.com/pebble.asp?relid=48228

-Despite spectacular fall, platinum has good long term outlook. Although souring sentiment caused PGMs to fall from grace, ScotiaMocatta foresees a good long term outlook for the precious metals. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page35?oid=73542&sn;=Detail

-Platinum price could rise “modestly” VM Group. The platinum price could rise slightly if further supply problems occur or economic gloom starts to lift. There is also hope for palladium as carmakers appear to have entered the market again. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page35?oid=73690&sn;=Detail

DEFINITIONS-QUOTES-QUICK HITS

-’Bailout’ is 2008 word of the year. The word was looked up on Merriam-Webster’s online dictionary so frequently during the financial crisis that the publisher says it was an obvious choice. Read more here-http://money.cnn.com/2008/11/25/news/funny/bc.wordoftheyear.ap/index.htm

-Disinflation. A slowing of the rate at which prices increase. Typically, this occurs during a recession as sales drop and retailers are not able to pass on higher prices to customers. Disinflation is not to be confused with deflation, where prices actually drop. Investopedia.com-Read more here-http://en.wikipedia.org/wiki/Disinflation_(economics)

-Stagnation. A period of little or no growth in the economy. Economic growth of less than 2-3% is considered stagnation. Sometimes used to describe low trading volume or inactive trading in securities. A good example of stagnation was the U.S. economy in the 1970s. Investopedia.com-Read more here-http://en.wikipedia.org/wiki/Stagnation_(economics)

-Great Depression. An economic recession that began on October 29, 1929, following the crash of the U.S. stock market. The Great Depression originated in the United States, but quickly spread to Europe and the rest of the world. Lasting nearly a decade, the Depression caused massive levels of poverty, hunger, unemployment and political unrest.

The NYSE crashed on October 24, 1929, a day known as Black Thursday. Thousands of people lost nearly the entire value of their investments, leaving them with next to nothing. The trend continued and the following Tuesday, Black Tuesday, the DJIA dropped 12%, marking the start of the great depression. International trade declined, along with personal income, tax revenues and product prices.

Many economists believed the Great Depression was evidence that capitalism, when left unchecked, is a dangerous ideology. This caused some nations to change their political structures, such as Germany, who adopted fascism. Investopedia.com-Read more here-http://en.wikipedia.org/wiki/Great_Depression

-Recession. A significant decline in activity across the economy, lasting longer than a few months. It is visible in industrial production, employment, real income and wholesale-retail trade. The technical indicator of a recession is two consecutive quarters of negative economic growth as measured by a country’s gross domestic product (GDP).

Recession is a normal (albeit unpleasant) part of the business cycle; however, one-time crisis events can often trigger the onset of a recession. A recession generally lasts from six to 18 months. Interest rates usually fall in recessionary times to stimulate the economy by offering cheap rates at which to borrow money. Investopedia.com-Read more here-

http://en.wikipedia.org/wiki/Recession

-Depression. A severe and prolonged recession characterized by inefficient economic productivity, high unemployment and falling price levels. In times of depression, consumers’ confidence and investments decrease, causing the economy to shut down. The classic example of this occurred in the 1930s, when the Great Depression shook the global economy. Investopedia.com-Read more here-http://en.wikipedia.org/wiki/Depression_(economics)

-The ultimate result of shielding men from the effects of folly is to fill the world with fools. Herbert Spencer, English Philosopher

-The massive inflation which will result from the Treasury having to print, print, print and the increase to the unemployment rolls provides us with the right scenario to signal the beginning of the next Bull Market phase for Precious Metals. Its time to be aggressively pro-active but do not overextend your ability to stay the course as the volatility day to day should be expected to continue. Precious Metals International

-Lets not forget the US Dollar. Now that US Treasuries are approaching a 0 to negative yield you can look for the Dollar’s recent strength to reverse and reverse sharply. Precious Metals International

-Make certain you don’t buy holiday Gift Cards or Gift Certificates from any Retailers that may not be there when your recipient goes to use them. Precious Metals International

-”The dollar is getting its teeth kicked in,” said Matt Zeman, of LaSalle Futures Group in Chicago. “You have big money flowing back into gold. The risk appetite is returning, and the dollar is getting decimated.”

Frank McGhee, of Integrated Brokerage Services in Chicago, pushed that analysis further, saying that, “The overall impact of what the bailout is going to cost will ultimately become very negative for the dollar. All this money that ran into Treasuries with no yield, and the government still has to go out and borrow money.” Casey Daily Resource

-”Hard assets for hard times,” said Frank McGhee, of Integrated Brokerage Services in Chicago. “Even with all the money central banks have thrown at the financial system, it’s not enough to stop systemic risk. People are looking for something that’s going to go up, and that’s gold.” Casey Daily Resource

-”Any steps to avert deflation would be bearish for the dollar and a signal for gold to rally in 2009,” analysts at Deutsche Bank wrote this week. “In the 1930s, a relatively quick solution to deflation in the U.S. was a significant depreciation in the U.S. dollar.” Casey Daily Resource

-The titanic struggle between massive deleveraging of speculative players and unleveraged buyers of physical bullion continues. The leveraged speculators won the first round with the unprecedented wholesale liquidation selling in futures markets but unleveraged physical buyers who are unencumbered by debt are showing themselves as very strong hands.

As the strong supply and demand fundamentals reassert themselves, physical buyers who shun the casino of the leveraged futures market and remain properly diversified will likely be handsomely rewarded in the coming months. Particularly if the increasing rumours of a default on the COMEX in the coming months come to pass. Gold.ie

-There are now potentially 100% more US dollars for each gold ounce than there were in total in 2003, and here’s the scariest part: there are now 50% more US dollars in the monetary base than there were seven weeks ago. Joanne Nova-Read more here-http://www.321gold.com/editorials/nova/nova112508.html

-Recession’s Grip Forces U.S. to Flood World With More Dollars. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aCqvVS7Zk7ZQ

-Whether it is “To be a Depression, or not to be a Depression” we clearly have a lot more adjustments to make in our lifestyles. For years we have been living in a world of illusion built on a sea of debt. The piper has now arrived and the payment will be steep. But as been shown so many times in the past Gold and bullion will once again be a panacea for global economic stress.

It has been demonstrated so many times in the past that when upheaval occurs as Europe has experienced in the past century or even as parts of Asia has experienced many times as well the one thing you take with you when you are uprooted is the Gold. Gold has been a currency for 3 thousand years. We expect it to be around once again through this crisis. David Chapman-Read more here-http://www.321gold.com/editorials/chapman_d/chapman_d_112408.html

-Buy one car get a second car for 1 dollar. Watch video here-http://www.youtube.com/watch?v=YGSFDT3UqP4

RARE COLORED DIAMONDS

-De Beers Group managing director Gareth Penny, whose company controls 40 percent of the global diamond trade, said company research showed that diamonds remained the most popular gift at Christmas in the U.S. market which represents 43 percent of all worldwide sales. “All our research shows that the consumer, particularly in America, wants diamonds more this Christmas than our research has ever shown, for us that’s very encouraging,” said Penny. AP

-Laurence Graff, chairman and founder of Graff Diamonds, which bought a 4.5 per cent stake in Gem Diamonds this month, is confident about the future of the diamond market. The billionaire, who has a necklace called the Lesotho Promise on sale for $75 million, said: “Top-quality gems are rare, hard to find and polish.

There will always be a demand for these high and top-quality diamonds, both to be worn and in which to invest. In the short term, their prices may fluctuate, but in the long term they retain their quality, unlike other commodities.” Business.timesonline.co.uk

-Christie’s Stresses Strong Demand for Colored Diamonds to auction off 35 Ct rare Wittelsbach Diamond in London. Christie’s expressed its confidence in the colored diamond market ahead of its London jewels sale in December. “The diamond market as a whole, like the international jewellery market, continues to be strong,” the auction house said in a statement about the upcoming event on December 10.

In particular, it explained demand for colored diamonds is high, citing a recent record sale it made in Geneva of a 13.39 carat fancy intense blue diamond for $8.9 million. Christie’s is hoping to emulate that feat when it presents the Wittelsbach Diamond, a rare 35.56 carat grayish blue diamond, VS2 clarity, at ‘Jewels: The London Sale’ on December 10. The stone, which dates back to Austrian royalty of the 17th century and is now part of a private collection, has an estimated value of about $15 million (EUR 11.3 million), a Christie’s spokesperson told Rapaport News.

While general demand for diamonds has waned in the past month or two on the back of the global financial crisis, exceptional stones have offered some sparkle in the rough. Rio Tinto recently reported strong interest at its annual Argyle Pink Diamond Tender which concluded in October, and Petra Diamonds said last week it sold a 39.19 carat special blue diamond for $8.8 million on tender.

The Wittelsbach diamond earned esteem in 1664 when King Philip IV of Spain selected it to be part of his daughter, Infanta Margarita Teresa’s, dowry upon her engagement to Leopold I of Austria, who later became the Holy Roman Emperor. Christie’s hopes that the romance of the diamond’s history combined with current demand for rare colored diamonds, will generate high interest in the stone amongst buyers. Story here-http://www.diamonds.net/news/NewsItem.aspx?ArticleID=23967

-In 1817, R.J. Hauy an eminent French mineralogist wrote “Gems are the flowers of the mineral kingdom fancy color diamonds are the orchids.” “Fancy color diamonds, like orchids, are truly exotic and rare beauties of nature.” Jewelryexpert.com

-”I have come to the realization that colored diamonds, or other gemstones, should first be considered as a unique and individual work of art, and second as a commodity to be analyzed, computerized, and categorized.” Stephen Hofer, 1998

-”Exceptionally fine colored diamonds have no fixed price, and as with fine paintings set rules do not hold.” S.H. Ball

-”Diamonds are nature’s art, nature’s most beautiful art. Every stone is a story, every stone tells a story.” Diamond DVD-PBS Nature Series

-”A colored diamond is a touch stone of the universe, a little something God created that man can’t always find, they are the last frontier of collectibles.” R. Winston

-”I remember that stone it was an incredible color, it had its own personality I have never seen another one quite like it.” R. Winston

-”After all, it really is an investment.” “It is only when the thing I buy creates a show for those around me that I get my money’s worth.” Evalyn Walsh McLean “Queen of Diamonds” Early owner of the Hope diamond

COMMODITIES-OIL-WIND

-Rogers Says Dollar to Be ‘Devalued,’ Buys Commodities. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aP5uFzsclsDQ or watch video here-

http://www.bloomberg.com/avp/avp.htm?N=av&T;=Jim%20Rogers%20Sees%20Dollar%20%60Devalued%2C%27%20Likes%20Commodities&clipSRC;=mms://media2.bloomberg.com/cache/vJzshG4o708g.asf

-BMO forecasts weak near-term metals price with recovery in H2/09. BMO Capital Markets predicts that the sharpest commodity crash in 36 years won’t be easing in the short term, but markets could re-energize late next year. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page36?oid=73653&sn;=Detail

-Oilman’s oil-free dream is blown off course by a nightmare on Wall Street. Read more here-http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article5192145.ece

WORLD FINANCIAL CRISIS

-Worst of financial crisis yet to come: IMF chief economist. The IMF’s chief economist has warned that the global financial crisis is set to worsen and that the situation will not improve until 2010, a report said Saturday. Olivier Blanchard also warned that the institution does not have the funds to solve every economic problem. “The worst is yet to come,” Blanchard said in an interview with the Finanz und Wirtschaft newspaper, adding that “a lot of time is needed before the situation becomes normal.”

He said economic growth would not kick in until 2010 and it will take another year before the global financial situation became normal again. The International Monetary Fund on Friday promised to help Latvia deal with its economic crisis after it assisted Iceland, Hungary, Ukraine, Serbia and Pakistan. But Blanchard said the IMF was not able to solve all financial issues, in particular problems of liquidity. Withdrawals of capital leading to problems of liquidity “can be so significant that the IMF alone cannot counter them,” he said, adding that massive withdrawals of investments from emerging countries could represent “hundreds of billions of dollars.

“We do not have this money. We never had it,” he said. The IMF had spent a fifth of its 250 billion dollar (200 billion euro) fund in the last two weeks, Blanchard added. He also urged central banks around the world to cut interest rates, after the Swiss National Bank made a surprise one percentage point rate cut Thursday. The central banks “should lower interest rates to as close to zero as possible,” he said. Story here-http://www.breitbart.com/print.php?id=081122230427.xqkurulg&show;_article=1

-IMF Loans Total $41.8 Billion in November, ‘Busiest’ Month Ever. The International Monetary Fund this month lent more money to cash-strapped governments than it has in the past five years combined.

The IMF agreed this month to $41.8 billion in loans, approving $16.4 billion for Ukraine, $15.7 billion for Hungary, $2.1 billion for Iceland and $7.6 billion for Pakistan. Financing is in the works for Serbia, Turkey, Belarus and Latvia, turning eastern Europe into a regional ward of the IMF the way Southeast Asia was a decade ago. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&refer;=home&sid;=aSCYZI5nYCsk

-US seeks 300 billion dlrs from Gulf states: report. The United States has asked four oil-rich Gulf states for close to 300 billion dollars to help it curb the global financial meltdown, Kuwait’s daily Al-Seyassah reported Thursday. Quoting “highly informed” sources, the daily said Washington has asked Saudi Arabia for 120 billion dollars, the United Arab Emirates for 70 billion dollars, Qatar for 60 billion dollars and was seeking 40 billion dollars from Kuwait.

Al-Seyassah said Washington sought the amount as “financial aid” to face the fallout of the financial crisis and help prevent its economy from sliding into a painful recession. The daily said the United States plans to use the funds to help the ailing automobile industry , banks and other companies suffering from the global financial turmoil. The four nations, all members of OPEC, produce together 14 million barrels of oil per day, around half of the cartel’s production and about 17 percent of world supplies.

The four states are estimated to have amassed close to 1.5 trillion dollars in surplus in the past six years due to high oil prices that rocketed above 147 dollars in July before sliding to just above 50 dollars. The daily also said that the United States has asked Kuwait to forgive its Iraqi debt estimated at around 16 billion dollars. Story here-

http://news.yahoo.com/s/afp/20081120/bs_afp/financeeconomyusgulf_081120072928

-Bernanke says he erred in gauging mortgage fallout. Federal Reserve Chairman Ben Bernanke acknowledges he was wrong in believing that there would be limited fallout to financial markets from risky mortgages that soured after the housing market’s collapse.

“I and others were mistaken early on in saying that the subprime crisis would be contained,” Bernanke said in an article in the Dec. 1 issue of The New Yorker magazine. “The causal relationship between the housing problem and the broad financial system was very complex and difficult to predict,” he said in the piece titled “Anatomy of a Meltdown.” Read more here-http://apnews.myway.com/article/20081123/D94KRSM80.html

-Icelanders demand PM resign during violent protests. Thousands of Icelanders took to the street in violent protests in Rekjavik, demanding the resignation of Prime Minister Geir Haarde and central bank governor David Oddsson in the wake of the country’s complete financial collapse. Read more here-http://www.france24.com/en/20081123-protests-geir-haarde-resignation-financial-crisis-iceland or watch video here-http://wjno.com/cc-common/news/sections/newsarticle.html?feed=244038&article;=4635529

-Shame, Shame, Shame: Lehman Brothers Collapse. This report shows a side of the Lehman Brothers bankruptcy that hasn’t been told yet. While CEO Richard Fuld is walking away with millions of dollars, some former employees say they’ve been left with nothing but broken promises. Read and watch video here-http://www.myfoxny.com/myfox/pages/Home/Detail;jsessionid=90BB69B49DB497102045B7F2F9A3A35E?contentId=7939247&version;=1&locale;=EN-US&layoutCode;=VSTY&pageId;=1.1.1&sflg;=1

U.S. FINANCIAL BAILOUT

-The U.S. government is prepared to lend more than $7.4 trillion on behalf of American taxpayers, or half the value of everything produced in the nation last year, to rescue the financial system since the credit markets seized up 15 months ago.

The unprecedented pledge of funds includes $2.8 trillion already tapped by financial institutions in the biggest response to an economic emergency since the New Deal of the 1930s, according to data compiled by Bloomberg. The commitment dwarfs the only plan approved by lawmakers, the Treasury Department’s $700 billion Troubled Asset Relief Program. Federal Reserve lending last week was 1,900 times the weekly average for the three years before the crisis. Read more here-http://bloomberg.com/apps/news?pid=20601109&sid;=arEE1iClqDrk&refer;=home

-The Federal Reserve took two new steps to unfreeze credit for homebuyers, consumers and small businesses, committing up to $800 billion. The central bank will purchase as much as $600 billion in debt issued or backed by government-chartered housing-finance companies. It will also set up a program of $200 billion to support consumer and small-business loans, the Fed said in statements today in Washington.

With today’s announcement, the central bank is starting to use some of the unorthodox policy tools that Chairman Ben S. Bernanke outlined as a Fed governor six years ago. Policy makers are aiming to prevent a financial collapse and stamp out the threat of deflation. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid;=agGWOuloIFxw&refer;=home

-Citigroup Gets $306 Billion U.S. Rescue From Toxic Assets, Cash Infusion. Citigroup Inc. received a U.S. government rescue package that shields the bank from losses on toxic assets and injects $20 billion of capital, bolstering the stock after its 60 percent plunge last week. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid;=aoAIRJWrcnO4&refer;=home

-Tracking the $700 Billion Bailout. Dozens of banks and a handful of insurers have applied for funds from the Treasury Department as part of the $700 billion Troubled Asset Relief Program. The Treasury has transferred capital to 30 of these companies and to A.I.G. More are expected to announce their participation in the coming weeks. See the companies and dollar amounts here-http://projects.nytimes.com/creditcrisis/recipients/table

-The Truth about Bailouts. As the Federal bailout bonanza prepares to spread beyond the mortgage and financial sectors to fill Detroit’s depleted coffers, few economic or policy analysts have spared a thought for the destitution of the U.S. government itself. Put simply, our government doesn’t have enough spare cash to bail out a lemonade stand let alone a bloated and failing industry that is losing tens of billions of dollars per month.

Washington can only offer funds that it has borrowed from abroad or printed. Unfortunately, the nation is in the grips of a delusion that money derived from these sources has the power to heal. But history has clearly shown that borrowed or printed money only has the power to destroy. Our standard of living must decline to reflect years of reckless consumption and the disintegration of our industrial base.

Only by swallowing this tough medicine now will our sick economy ever recover. By accepting a lower standard of living today, we will eventually be rewarded with a higher one tomorrow. Peter Schiff-Read more here-http://www.321gold.com/editorials/schiff/schiff112408.html

-The Fed Is Out of Ammunition. A discredited dollar is a likely outcome of the current crisis. With an estimated $4 trillion in housing wealth and $9 trillion in stock-market wealth destroyed so far in the United States, there is little doubt that we are witnessing a classic debt-deflation bust at work, characterized by falling prices, frozen credit markets and plummeting asset values.

Those who want to understand the mechanism might ponder Irving Fisher’s comment in 1933: When it comes to booms gone bust, “over-investment and over-speculation are often important; but they would have far less serious results were they not conducted with borrowed money.” Read more here-

http://online.wsj.com/article/SB122748912533552007.html

U.K. FINANCIAL BAILOUT

-Prime Minister Gordon Brown pledged the biggest round of tax cuts and spending increases in two decades to counter the U.K.’s first recession since 1991. The 25.6 billion-pound ($38.8 billion) package over two years will swell the budget deficit to 118 billion pounds in the 12 months through March 2010, Chancellor of the Exchequer Alistair Darling said today. At 8 percent of gross domestic product, the shortfall is the largest since at least 1970 and the biggest among the Group of Seven nations.

“I want to take fair and responsible steps to protect and support businesses and people now,” Darling said. ”My central objective is to respond to the consequences of this global recession on our country.” Brown is going further than counterparts in the U.S., Europe and Asia as he tries to limit the impact of the worst global slump in three decades. Britain’s fiscal package, which includes reducing the rate of sales tax by 2.5 percentage points to 15 percent, comes as Brown prepares for an election within 18 months.

The plans will force the U.K. to sell a record 146.4 billion pounds of bonds, or gilts this year, the Debt Management Office said today. That’s an 83 percent increase from the 80 billion pounds planned eight months ago. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a3zONhd6×9Ak&refer;=home or http://www.telegraph.co.uk/finance/financetopics/budget/3513516/Pre-Budget-report-National-Insurance-rise-adds-to-high-earners-woes.html

-Is Britain going bankrupt? Read more here-http://blogs.telegraph.co.uk/ambrose_evans-pritchard/blog/2008/11/24/is_britain_going_bankrupt

U.S. FEDERAL DEFICIT COULD HIT 1 TRILLION THIS YEAR

-The federal government’s ledger has gone from a surplus just seven years ago to facing a prospect of a $1 trillion deficit next year. Given those dire financial straits, President-elect Barack Obama said at a news conference Tuesday, “Budget reform is not an option. It’s a necessity.” But unlike his predecessor President George W. Bush, who in better economic times talked about returning to surpluses by 2012, “balanced budgets” were not in Obama’s vocabulary.

The government’s first obligation, he said, was to spark an economic recovery and put people back to work. To do that, the Democratic-led Congress is expected to have a new stimulus package, costing in the $500 billion range, ready to go when Obama takes office in January.

That’s on top of the hundreds of billions already spent or committed by Treasury and the Federal Reserve to revive the moribund financial markets. On Tuesday the government announced two new programs providing $800 billion to help unfreeze the market for consumer debt and to make mortgage loans cheaper and more available.

All that, in the short term, will send the deficit into the stratosphere. Budget hawks were stunned when the federal deficit hit a record $455 billion in fiscal 2008, which ended Sept. 30, more than double the previous year’s deficit. But now, even the fiscally conservative say another doubling, to $1 trillion or more, may be inevitable if the economy is to be rescued. Read more here-http://www.breitbart.com/article.php?id=D94M4T580&show;_article=1

3 MORE U.S. BANKS FAIL-MORE ADDED TO PROBLEM LIST

-Three banks in California, Georgia fail. Regulators close down two California thrifts and Community Bank of Loganville, Ga., raising the toll in the financial crisis to 22 banks. Read more here-http://money.cnn.com/2008/11/21/news/companies/bank_failure/index.htm or http://www.washingtonpost.com/wp-dyn/content/article/2008/11/21/AR2008112104099_pf.html

or http://www.latimes.com/business/la-fi-banks22-2008nov22,0,2185538.story

-FDIC adds 54 more banks to its ‘problem list’. The Federal Deposit Insurance Corp. said Tuesday the list of banks it considers to be in trouble shot up nearly 50 percent to 171 during the third quarter yet another sign of escalating problems among the institutions controlling Americans’ deposits.

The 171 banks on the FDIC’s “problem list” encompass only about 2 percent of the nearly 8,500 FDIC-insured institutions. Still, the increase from 117 in the second quarter is sharp, and the current tally is the highest since late 1995. “We’ve had profound problems in our financial markets that are taking a rising toll on the real economy,” said FDIC Chairman Sheila Bair in a statement, adding that Tuesday’s report “reflects these challenges.”

Banks across the country have been hurt and in some cases, devastated by the collapse of the subprime mortgage market and subsequent problems across the lending spectrum. As the FDIC report shows, the number of hobbled institutions is rising at a quickening pace, a trend that has already begun to reshape the banking industry.

The FDIC said total assets held by troubled institutions climbed from $78.3 billion to $115.6 billion a figure that suggests that the nation’s top 20 banks aren’t on the list, even though they are getting slammed, too, by the growing credit crisis. The FDIC does not reveal the names of the institutions it deems troubled. Read more here-

http://www.breitbart.com/article.php?id=D94M5AMG0&show;_article=1

STOCK MARKET

-S&P; 500 Index Drop Leaves 64 Industries With Losses. The worst annual decline in the Standard & Poor’s 500 Index since 1931 has dragged down every industry in the benchmark gauge and 96 percent of its stocks.

All 64 of the S&P; 500’s so-called level-three categories, groups such as “distributors” and “leisure equipment” with as few as one company, dropped in 2008. Four hundred eighty-two companies slipped as the 500-stock index slumped 46 percent, poised for its biggest yearly retreat in eight decades.

“There seems to be no bottom,” Laszlo Birinyi, who oversees more than $350 million as president of Birinyi Associates Inc. in Westport, Connecticut, said on Bloomberg Television. ”We have no tools that tell us where to go now.”

More stocks decreased in the current bear market than in the 49 percent rout after the technology bubble burst in 2000. The breadth of declines this year is leaving investors without defensive strategies to protect against losses that erased more than $8 trillion from U.S. equities in 2008. Read more here-

http://www.bloomberg.com/apps/news?pid=20601213&sid;=am1FNznC.tNE&refer;=home

-Bears Overwhelm Bulls With S&P; 500 Cheapest Since ‘88. Buying the cheapest U.S. stocks since Ronald Reagan’s presidency may be a sucker’s bet. Investors are paying $9.24 per dollar of operating profit forecast in 2009 for Standard & Poor’s 500 Index companies, half the two-decade median of $18.10, data compiled by Bloomberg show.

While that may suggest shares will bounce from the worst annual drop since 1931, managers at Key Private Bank, Morgan Keegan and the Hartford say equities may keep falling as earnings trail Wall Street estimates for 14 percent growth next year. Read more here-http://www.bloomberg.com/apps/news?pid=20601213&sid;=af6beaKUbQ_4&refer;=home

-Louise Yamada: We are in structural bear market for years! Watch video here-http://www.youtube.com/watch?v=M2HIM3HFXXI

-Hedge funds are about halfway done selling securities to reduce their use of borrowed money and may unload $200 billion more to complete the process, according to managers surveyed by Sanford C. Bernstein & Co. The survey found that 63 percent of hedge-fund managers said the sale of assets to cut leverage was at least half completed. Twenty-three percent said the process was three- quarters finished, New York-based Bernstein said.

Hedge funds, which borrow money in an effort to increase trading profits, have been forced to unload assets to meet client withdrawals and tighter lending requirements. That has amplified losses in the stock and bond markets. The Standard & Poor’s Index 500 Index fell 38 percent this year through October, while hedge funds lost an average of 16 percent, according to data compiled by Hedge Fund Research Inc.

“We estimate that roughly $200 billion will be additionally unwound,” Adam Parker, an analyst at Bernstein wrote in a Nov. 21 report to clients. The survey was based on interviews in the first two weeks of November with managers of more than 65 hedge funds overseeing a combined $100 billion. The amount of gross leverage used by hedge funds fell to 142 percent of assets from 175 percent in 2006 and 2007, the report said. Read more here- http://www.bloomberg.com/apps/news?pid=20601087&sid;=a3UlaRfevaA4&refer;=home

THE NEXT SUBPRIME CRISIS

-The Next Subprime Crisis Looms. The same people whose reckless practices triggered the global financial crisis are onto a similar scheme that could cost taxpayers tons more. As if they haven’t done enough damage. Thousands of subprime mortgage lenders and brokers many of them the very sorts of firms that helped create the current financial crisis are going strong. Their new strategy: taking advantage of a long-standing federal program designed to encourage homeownership by insuring mortgages for buyers of modest means.

You read that correctly. Some of the same people who propelled us toward the housing market calamity are now seeking to profit by exploiting billions in federally insured mortgages. Washington, meanwhile, has vastly expanded the availability of such taxpayer-backed loans as part of the emergency campaign to rescue the country’s swooning economy. For generations, these loans, backed by the Federal Housing Administration, have offered working-class families a legitimate means to purchase their own homes.

But now there’s a severe danger that aggressive lenders and brokers schooled in the rash ways of the subprime industry will overwhelm the FHA with loans for people unlikely to make their payments. Exacerbating matters, FHA officials seem oblivious to what’s happening or incapable of stopping it. They’re giving mortgage firms licenses to dole out 100-percent-insured loans despite lender records blotted by state sanctions, bankruptcy filings, civil lawsuits, and even criminal convictions. Read more here-

http://www.spiegel.de/international/business/0,1518,druck-591613,00.html

REAL ESTATE-FORECLOSURES

-Home Prices for 20 U.S. Cities Drop Most on Record as Foreclosures Mount. The decline in U.S. house prices accelerated in September and the economy shrank in the third quarter at a faster pace than first estimated as the grip of the credit crunch tightened.

The S&P;/Case-Shiller home-price index fell 17.4 percent from a year earlier. The Commerce Department said gross domestic product dropped an annual 0.5 percent as household spending slid the most since 1980. While consumer confidence rose this month, the Conference Board’s gauge remained near the lowest on record. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid;=agE8Sg.gs3l8&refer;=home

-Home prices keep plunging; L.A. sees some of the sharpest declines. Third-quarter figures show a 27.6% drop compared with a year ago. Phoenix, Las Vegas and San Francisco are also hard hit. Read more here-http://www.latimes.com/business/la-fi-homes26-2008nov26,0,4207973.story

-Home resales in the U.S. dropped in October and prices fell by the most on record, signaling a deepening housing recession going into 2009. Purchases of existing homes declined 3.1 percent last month to an annual rate of 4.98 million units, the National Association of Realtors said today in Washington. The median price fell 11.3 percent to $183,300 from a year earlier, the largest year-over-year decrease since records started in 1968.

Mounting foreclosures are pushing down home prices and adding to the inventory of unsold houses. Sales may slump further as the worst credit crisis in seven decades makes banks reluctant to offer mortgages. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aaVyYQi42_HA&refer;=home

-D.R. Horton Inc., the largest U.S. homebuilder, reported its sixth straight loss and cut its dividend as record foreclosures and tighter lending deepened the housing slump. The shares rose as much as 26 percent after the Federal Reserve took steps today to unfreeze credit for homebuyers.

The company’s fiscal fourth-quarter net loss widened to $799.9 million, or $2.53 a share, from $50.1 million, or 16 cents, year earlier, the Fort Worth, Texas-based company said today in a statement. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a4r1bEsMEbew

-Dutch Home Sellers Cut Prices in Market That Would ‘Never Fall’. Inge Fransen last month cut the asking price for her house in the Netherlands by 11 percent, as one of the final holdouts in Europe’s housing boom capitulates. “I’m concerned the whole market will come to a halt,” said Fransen, 45, who now wants 339,000 euros ($432,670) for her five- bedroom home in Zwanenburg, a town built on land reclaimed from the water seven miles from Amsterdam. “Everyone will stay put, not buying or selling.”

Eighteen months after real-estate markets in Spain and Ireland began to sputter, the Netherlands is following suit. Prices of properties including 17th century Amsterdam canal-side townhouses dropped in the third quarter for the first time since 1980 after doubling in the last decade.

The boom has left the Dutch saddled with the highest level of mortgage debt in the euro region just as the economy slides into a recession. As recently as the second quarter, the Netherlands was the only euro-area country among 11 surveyed by the Global Property Guide with rising property prices.

“In September, everyone still said the Dutch housing market would never fall,” said Klaske Woolthuis, 32, a communications adviser, who has been looking for a house outside Amsterdam for 18 months. “Now you see this changing. It’s becoming more of a buyer’s market.” Read more here-

http://www.bloomberg.com/apps/news?pid=20601109&sid;=aOrLBJ1TNreY&refer;=home

-Shopping malls are running on empty. Shopping center owners are struggling to fill an increasing number of vacancies. Read more here-http://www.latimes.com/business/la-fi-malls24-2008nov24,0,6965079.story

-London, Tokyo, New York Office Rents Fall First Time Since 2002. Office rents in London’s West End, midtown Manhattan and Tokyo fell in the third quarter for the first time in almost seven years as the global financial crisis cut demand, CB Richard Ellis Group Inc. said. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=ahWcGGxOpen0&refer;=home

-Foreclosures, delinquencies skyrocketing among ‘prime’ borrowers. Nationwide, 3.07% of prime mortgages were in foreclosure or at least 60 days late in the second quarter of this year, easily topping the previous record of 1.97% set in 1985. Read more here-http://www.latimes.com/business/la-fi-prime24-2008nov24,0,6174050.story

GEOPOLITICAL NEWS

-Russian analyst predicts decline and breakup of U.S. A leading Russian political analyst has said the economic turmoil in the United States has confirmed his long-held view that the country is heading for collapse, and will divide into separate parts. Professor Igor Panarin said in an interview with the respected daily Izvestia published on Monday: “The dollar is not secured by anything. The country’s foreign debt has grown like an avalanche, even though in the early 1980s there was no debt.

By 1998, when I first made my prediction, it had exceeded $2 trillion. Now it is more than 11 trillion. This is a pyramid that can only collapse.” The paper said Panarin’s dire predictions for the U.S. economy, initially made at an international conference in Australia 10 years ago at a time when the economy appeared strong, have been given more credence by this year’s events.

When asked when the U.S. economy would collapse, Panarin said: “It is already collapsing. Due to the financial crisis, three of the largest and oldest five banks on Wall Street have already ceased to exist, and two are barely surviving. Their losses are the biggest in history. Now what we will see is a change in the regulatory system on a global financial scale: America will no longer be the world’s financial regulator.”

When asked who would replace the U.S. in regulating world markets, he said: “Two countries could assume this role: China, with its vast reserves, and Russia, which could play the role of a regulator in Eurasia.” Read more here-http://en.rian.ru/world/20081124/118512713.html

-Report: U.S. Power Will Fade By 2025. Read more here-http://www.cbsnews.com/stories/2008/11/20/world/printable4622166.shtml

-Report Sees Nuclear Arms, Scarce Resources as Seeds of Global Instability. Read more here-http://www.washingtonpost.com/wp-dyn/content/article/2008/11/21/AR2008112100091_pf.html

-Russian Prime Minister Vladimir Putin will hold a live call-in show on national television next week, in what analysts say may signal the start of his campaign to regain the presidency. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=almi_GBAkMqc&refer;=home

-Russia’s Medvedev’s Tough Guy Act. New Russian President Seems To Be Reviving Adversarial Relations With The U.S. Read more here-

http://www.cbsnews.com/stories/2008/11/24/world/printable4631526.shtml

-Venezuela’s Chavez welcomes Russian warships. Russian warships arrived off Venezuela’s coast Tuesday in a show of strength aimed at the United States as Moscow seeks to expand its influence in Latin America.

The deployment is the first of its kind in the Caribbean since the Cold War and was timed to coincide with President Dmitry Medvedev’s visit to Caracas the first ever by a Russian president. Venezuelan President Hugo Chavez has eagerly welcomed the Russian ships for joint exercises with his navy, basking in the support of a powerful ally that has sold him billions of dollars in arms and has seen its own chill in relations with Washington.

Chavez wants Russian help to build a nuclear reactor, invest in oil and natural gas projects and bolster his leftist movement’s effort to limit U.S. influence in Latin America. Read more here-http://news.yahoo.com/s/ap/20081125/ap_on_re_la_am_ca/lt_venezuela_russia

-US to watch Russian-Venezuelan manoeuvres ‘very closely’. Read more here-http://www.breitbart.com/article.php?id=081124184807.xmj0nkq0&show;_article=1

The GoldBugg Report – December 02, 2008
Posted by Worldwide Precious Metals on Tuesday, December 2, 2008

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