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Auguries A Coin In The Hand


March 8, 2013

gold, banks, silver, us dollar

Silver Eagle: Metal beats paper.

Gold was down (at press time) $0.40 (-) for the week to $1,575.30, and silver was up $0.36 (+1.3%) to $28.96. Ole Hansen of Saxo Bank told Reuters, “The fact that the strongest economic data in a while failed to trigger a break below the recent low [has given] the [gold] market a bit of confidence.”

The economic data referred to above is Friday’s release of the US unemployment rate for January, which fell from 7.9% to 7.7%. A closer look at the data tends to vitiate its strength. Mike Shedlock reports, “The economy added a whopping 446,000 part-time jobs. Thus, the economy shed 276,000 full-time jobs. Those part-time jobs were supposedly ‘on purpose.’” And what counts as “part-time,” according to the Bureau of Labor Statistics? “At least one hour” paid employment in the week of its survey.

Furthermore, “Those not in the labour force rose by 296,000, and the labour force itself fell by 130,000. Those factors, coupled with the massive rise in part-time employment, explain the 0.2% drop in the unemployment rate.”

Those not in the labour force, the walking dead of the American economy, rose to “89,304,000, a record high, up from 89,008,000 in January,” CNSNews reports. But the headline rate—the only employment datum to which the MSM pays any attention—did fall, so President Obama and Bernancus Magnus have their bragging number.

And the cost of this good news? ZeroHedge crunches the numbers:

The first two months of 2012 saw a 582,000 increase in non-farm payrolls. In 2013: 355,000. But something else happened between February 29, 2012 and February 28, 2013… Oh yes, the US government issued some $1,198,397,883,967.30 in debt. Oh, and the Fed monetized about half of this amount and virtually all of the Treasuries issued to the right of the ZIRP period (ie, risky debt).

To summarize: $1.2 trillion in debt buys the US… 61% of the jobs created a year ago. But at least the Dow Jones is at an alltime high.

And so we hear once again that happy days are here again (or coming real soon now), and we can expect the Fed to start raising interest rates and staunch the QE geysers. At Seeking Alpha March 4, Albert Sung explains why this will not happen: “Since 2008, we have started a new era…the period of deleveraging. For more than half a decade, we had an exponential growth system in credit, but we have ended this period.”

Sung reports that “total credit market debt” (federal, state and municipal debt, plus federal debt to trust funds, business debt, household debt and domestic financial sector debt) is now $55.3 trillion, 350% of GDP. “The federal government has now almost a 30% share in the total debt in the system, and it is growing rapidly. Now, where have we seen this before? Right, in Japan.”

Sung concludes, “The only driver of the economy is the Federal Reserve, because it is trying to sustain credit growth. If it weren’t expanding its balance sheet, total credit market debt would implode; money in the system would disappear; and we would see a currency collapse.” In other words, QE Forever!

The Dow is the only other economic datum of importance to the MSM. In a March 4 Gold Report interview, Eric Sprott counters, “The one indicator you do not want to watch is the stock market because it is part of the financial fabric that the central planners are desperately trying to hold together.”

So, if things are so bad, why are gold and silver so (relatively) weak? Sprott points to “unusual things” in the markets. “For example, on February 19, nearly an entire year’s supply of gold traded on the Comex in a single day. The same volume of silver trading happened on the commodities exchange. You and I both know that the people selling that much metal cannot deliver it because it is just not available.”

Meanwhile, Hebba Investments reports March 4, “The US Mint’s full February sales numbers show unprecedented amounts of gold and silver Eagles sold.” The tension between paper bullion and the real thing is close to a breaking point. Hebba concludes, “In the battle between physical and paper, investors would be wise to pick the strong hands in this fight.”

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