Late last week through this weekend I started receiving numerous emails about gold backwardation theories, Amero sightings, Yuan devaluations, and all sorts of other stories that do not stand up to even the most casual of scrutiny.



Let's kick off the hit parade with Red Alert: Gold Backwardation



Gold going to permanent backwardation means that gold is no longer for sale at any price, whether it is quoted in dollars, yens, euros, or Swiss francs. The situation is exactly the same as it has been for years: gold is not for sale at any price quoted in Zimbabwe currency, however high the quote is. To put it differently, all offers to sell gold are being withdrawn, whether it concerns newly mined gold, scrap gold, bullion gold or coined gold.



Negative basis (backwardation) means that people controlling the supply of monetary gold cannot be persuaded to part with it, regardless of the bait. These people are no speculators. They are neither Scrooges nor Shylocks. They are highly capable businessmen with a conservative frame of mind. They are determined to preserve their capital come hell or high water, for saner times, so they can re-deploy it under a saner government and a saner monetary system.

Nothing Special About Backwardations

I have seen countless commodities go into backwardation for numerous reasons, the most frequent being a radical temporary divergence between immediate demand and overall demand. I have seen backwardations that have lasted years. The article is based on the assumption that a backwardation will necessarily lead to a breakdown of the delivery mechanism.



For every breakdown of delivery there have been thousands of backwardations. It is only if and when the actual breakdown occurs that the conclusions the author draws make any sense.

Gold No Longer For Sale At Any Price?

Mish: James what size bars of gold and silver do you buy?

Turk: Bars that meet the standards of the LBMA. Gold bars weigh approximately 400oz per bar, and silver 1000 per bar.



Mish: Any problems with deliveries?

Turk: Not yet, we buy in the spot market for cash. We have had difficulty though in finding bonded silver bars in London (i.e., bars in bonded warehouses which enables our customers to buy silver without UK's onerous 17.5% value added tax - by buying bonded bars, the tax is levied only if they take delivery of the bars). Consequently, we raised our fees in London to discourage buying there so that customers buy silver in Zurich instead, where we have had no problem finding bars.



Mish: What do you know about smaller sized bars and getting deliver of them?

Turk: Only what I have been reading, namely, that they are in short supply and premiums as a consequence have soared.



Mish: Can you address or speculate as to why manufacturers are not making smaller retail sized bars of silver and gold, as well as coins?

Turk: The manufacturers are primarily government owned mints. So one theory is typical government incompetence. There is another theory. Given that all government mints around the world are not meeting demand, the theory is that we are seeing a coordinated effort by governments to purposely not meet demand. Their objective is to keep people out of metal so that their money remains in the banking system.

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China To Devalue Renminbi?

"Rumors are flying that China and another nation are going to intentionally devalue their currencies within days by 30-35% in retaliation for the US (Henry Paulson and Heli Ben) having double-crossed the Chinese.



The rumor has it that the dynamic-duo promised the Chinese the US would bail them out of the hundreds of billions (trillions?) of garbage mortgage securities US bankers sold them over the past few years and would use TARP/EESA funds to do so. And, while making the case for the bailout before the Congress they used the threat of Chinese retaliation as leverage."

China ‘Highly Unlikely’ to Reverse Policy, Weaken Yuan

China is “highly unlikely” to favor a weaker yuan because the government will rely more on spurring domestic demand than exports to support the economy, a former adviser to the central bank said.



Twelve-month forward contracts rose for a second day as traders scaled back bets on depreciation after Assistant Finance Minister Zhu Guangyao said last week China will keep the yuan stable at a reasonable and balanced level. The central bank last week allowed the biggest decline in the yuan since ending its fixed exchange rate in 2005, prompting speculation it favors a weaker currency.



“It is highly unlikely that China will reverse its course,” Yu Yongding said in an interview via e-mail. “The export sector can and should be helped by means other than devaluation. Why should China do something that is not in its long-term interests and whose impact in the short-run is uncertain?”

Amero Nonsense

Please Think!

Amero Uproar



Neither the U.S. Mint nor the U.S. Treasury had a hand in creating these "Ameros." These coins are merely collectibles offered to the buying public by a private company in the business of manufacturing such curiosities.



On 31 August 2007, conservative radio host Hal Turner used images of the Amero tokens offered by Designs Computed as the basis for a far-fetched tale about his having been given a "real" Amero coin on the sly by an anonymous Treasury agent. In that story he claimed that a few days after he posted about the coin, a web site proclaiming Ameros to be fantasy coins (i.e., the Designs Computed site) was erected on the Internet as part of "a full blown effort to discredit my story and the images as fake." That was not the case. The Amero story was just another of Turner's outrage-provoking fictional tales.



In December 2008, Turner tried beating the same tired, apocryphal drum by claiming that he had obtained samples of Amero "paper currency notes."

Trump Sees Act Of God

Guess who is complaining that condominiums in Donald Trump’s latest big project are ridiculously overpriced. Donald Trump is. But he isn’t cutting the prices. He says the banks won’t let him.



The project is the Trump International Hotel and Tower in Chicago, which is to be the second-tallest building in that city (after the Sears Tower). By Mr. Trump’s account, sales were going great until “the real estate market in Chicago suffered a severe downturn” and the bankers made it worse by “creating the current financial crisis.”



Rather than have to pay the $40 million, Mr. Trump thinks the bank should pay him $3 billion for undermining the project and damaging his reputation.



Those assertions are made in a fascinating lawsuit filed by Mr. Trump, the real estate developer, television personality and best-selling author, in an effort to avoid paying $40 million that he personally guaranteed on a construction loan that Deutsche Bank says is due and payable.