Archive for July, 2009


July 30, 2009

Still wondering why you have to pay that hefty premium everytime you want to buy the physical stuff….?

“During our research into the inventory lists of the iShares SLV and London-based ETFS physical silver funds, we discovered multiple anomalies which cannot be easily dismissed. These included the presence of internal duplicates, rough internal duplicates, weight duplicates, statistical clustering, and cross-reference duplicates. Taken together, these anomalies are cause for concern, and we suggest that more capable teams conduct further research into these issues, as they effect price discovery within the precious metals market, as these ETF shares are being used for settlement and possibly price suppression on the COMEX.

If these problems are caused by accounting errors, they are disturbing and perhaps profoundly incompetent, and we suggest both these funds should have their senior management replaced.

 In our opinions, the only way for all of these anomalies to occur together as noted in this paper, is via systemic fraud or gross accounting error bordering on jaw-dropping incompetence.”

Full report.



July 29, 2009

“Despite everything, the Chinese economy has shown incredible resilience recently. Although its biggest customers — the United States and Europe — are struggling (to say the least) and its exports are down more than 20 percent, China is still spitting out economic growth numbers as if there weren’t a worry in the world. The most recent estimate put annual growth at nearly 8 percent.

Is the Chinese economy operating in a different economic reality? Will it continue to grow, no matter what the global economy is doing?

The answer to both questions is no. China’s fortunes over the past decade are reminiscent of Lucent Technologies in the 1990s. Lucent sold computer equipment to dot-coms. At first, its growth was natural, the result of selling goods to traditional, cash-generating companies. After opportunities with cash-generating customers dried out, it moved to start-ups — and its growth became slightly artificial. These dot-coms were able to buy Lucent’s equipment only by raising money through private equity and equity markets, since their business models didn’t factor in the necessity of cash-flow generation.

Funds to buy Lucent’s equipment quickly dried up, and its growth should have decelerated or declined. Instead, Lucent offered its own financing to dot-coms by borrowing and lending money on the cheap to finance the purchase of its own equipment. This worked well enough, until it came time to pay back the loans.”

Vitaliy Katsenelson

Here the whole article…


July 28, 2009

“….the situation today is comparable to changing the grading curve for a class of students so that managing to drink water without slopping it down the front of your shirt would earn you a hearty “Well done!” and a passing grade.

Doug Casey 


July 26, 2009

Every once in a great while, something big comes along to upset the status quo. Sometimes the change is long overdue and welcome. I think we may soon witness such a game-changer in silver.

As I briefly referenced last week, the new chairman of the CFTC, Gary Gensler, issued a statement on July 7, that I felt was very important. Click Here to read Upon further reflection and subsequent additional statements from Commissioner Bart Chilton, I am convinced that great change may be on the way. Click Here to read

The statement from Chairman Gensler is clear; he is deeply concerned about and is soliciting your input on the matter of speculative position limits. In a moment, I will suggest how you can participate in the coming great change.

The issue of legitimate speculative position limits is one about which I have petitioned the CFTC and the COMEX for more than 20 years. In fact, I consider it a signature issue and one in which there has been much public dialogue between myself and the CFTC. (Here are some samples from 2002, Click here and here) Simply put, speculative position limits are designed to prevent large futures traders from unduly influencing the price of a commodity, either on the long or short side. It goes to the heart of the silver manipulation. I have always maintained that if legitimate speculative position limits were in place and enforced in COMEX silver, then manipulation would not be possible. This is the clear intent of commodity law. Knowing this, I pressed the CFTC on this issue relentlessly. Unfortunately, the CFTC and the COMEX were equally consistent and they dismissed my arguments for more than 20 years.

Now the CFTC has done a complete about face. The new stance by the CFTC to review the entire issue of position limits is nothing less than ground shaking in nature. I know that many are skeptical about the Commission’s real intent, but this 180-degree turn by them holds profound implications for the price of silver. It is also my opinion that Chairman Gensler and Commissioner Chilton should be applauded for the steps they have taken. Since they will face much criticism and discouragement from changing the status quo, they must be supported in this endeavor at every turn. I intend to support them and I ask the same of you.

There are two aspects to speculative position limits. One is the proper level of the actual position limit in each commodity in contract terms. What is the maximum number of contracts a single trading entity is allowed to hold, long or short, in every commodity? The second aspect is what exemptions from the maximum number of contracts should be granted to trading entities with bona fide hedging requirements larger than the stated position limit. There has to be a legitimate economic reason, under commodity law, in the granting of these hedging exemptions. A desire to manipulate prices is not a legitimate economic reason.

The Proper Level of Position Limits

How does a regulator go about deciding what the proper level of speculative positions should be in each commodity? Setting limits too low would restrict market liquidity, and any unreasonable restriction should be avoided. Setting limits too high could allow futures traders too much price influence, which is against the very purpose of having limits in the first place. Obviously, a regulator would look at as many factors of an objective nature as possible in coming up with the proper level of limits.

The economic purpose of futures trading is for price discovery and to enable legitimate hedging. So the first place a regulator would look is to the level of actual production and consumption in the real world. Since futures trading is not supposed to set the price of a commodity, but follow the supply/demand developments of the actual commodity, speculative position limits must be set low enough as to not disturb real world commerce. Therefore, the most important factor a regulator would consider is the world production and consumption of each commodity. He would then apply a logical and consistent formula that would treat each commodity objectively. A regulator wouldn’t arbitrarily assign radically inconsistent position limits relative to actual production and consumption.

For the most part, the regulators have done a good job and have set the level of speculative position limits in a consistent method on almost all traded commodities. Quite frankly, I don’t see a problem with the level of position limits in most commodities. In fact, there is only one commodity where the level of the position limit is radically out of line with all other commodities. You guessed it – COMEX silver. (For simplicity sake, I am considering the accountability limits set by the NYMEX/COMEX to be the equivalent to the CFTC-set position limits on agricultural commodities)

Most commodities generally have a position limit which runs less than one percent of world annual production. This is even true with the accountability limits set on the NYMEX/COMEX in gold, copper and crude oil. But not in silver. As the following graphs indicate (courtesy of Carl Loeb), silver is way out of line with all other commodities, even gold, when it comes to the level of position limits relative to world production. Silver has an accountability limit of 4.5% of annual world production (30 million oz vs. 672 million oz). Gold has a limit of 0.8% (600,000 oz vs. 75 million oz), while crude oil has a limit of 0.07% of annual world production (20 million barrels vs. 30 billion barrels). Therefore, silver’s accountability limit ranges from being 5.6 times larger than gold to being 64 times larger than crude oil, as a percent of world production.

Here’s a very simple question – why is silver’s limit so out of line with every other commodity? The answer is also simple – there is no good reason and it should be reduced to a level consistent with all other commodities, including gold.

Some might say that you can’t compare silver to commodities like grains, or even crude oil or copper, because as a precious metal, there are large stocks of existing above ground inventories. This observation would obviously apply to gold as well, which also has large above ground inventories. But when you make an apples to apples comparison of the accountability limits in silver and gold relative to their respective above ground bullion inventories, a shocking picture emerges. Using one billion ounces as silver bullion inventories and two billion ounces as gold’s bullion inventories (silver conservatively high, gold conservatively low) relative to the 30 million oz silver position limit and gold’s 600,000 oz limit, silver has a position limit equal to 3.0% of world inventories. Gold’s limit comes in at 0.03%. In other words, silver has a position limit, relative to above ground bullion inventories, 100 times greater than gold’s limit. Once again, I ask why does silver have such a large position limit? Once again, there is no legitimate answer. Silver’s limit must be lowered.

In the matter of the proper level of speculative position limits, only silver needs to be radically reduced relative to all other commodities. If silver had an equivalent limit relative to world production as gold’s limit (0.8%), the proper limit in silver would be 1000 contracts (5 million ounces), not the current 6000 limit (30 million oz). If silver had an equivalent limit relative to above ground inventories as gold, the new silver limit would be only 60 contracts (300,000 oz). That’s too low, but 6000 is too high. What should the proper limit be in silver? In my opinion, somewhere between 1000 and 1500 contracts (5 to 7.5 million ounces).

Whatever the proper limit the regulators decide in silver, it should be consistent with all other commodities. The current sentiment is that position limits are generally too high and should be lowered. I don’t necessarily agree with that. But I would make the point that if the regulators do decide to lower speculative position limits across the board, then silver should be lowered below the 1000 to 1500 level I recommended. It’s all about consistency and fairness.

Exemptions to Speculative Position Limits

This second aspect to the position limit debate is more complicated and involves many commodities, including silver. While speculative position limits are an important component of commodity law, another integral part of that law grants exceptions or exemptions to those limits for bona fide hedging transactions. Remember, the economic purpose behind futures trading is to allow real world producers and consumers a market to transfer unwanted price risk to those speculators willing to assume that risk. Speculators are vital in enabling producers and consumers to have the ability to hedge price risks, but the economic legitimacy behind futures trading is not to provide a venue for gambling or for traders to dominate the pricing of world commodities. Therefore, it is appropriate for there to be limits on the amount of contracts that speculators may hold.

But that doesn’t mean that hedgers have a green light to trade in any amount they desire either. Even though commodity law allows hedgers to hold contracts in excess of applicable position limits, the amount they can hold is limited by demonstrated commercial needs. Here, commodity law is quite specific, generally allowing a producer or consumer to hold contracts in an equivalent amount no greater than 12 months production or consumption, or the amount of inventory at price risk. So even bona fide hedgers have some type of limit, although it may be greater than regular speculative position limits. The framers of commodity law intended for neither speculators nor commercial hedgers to unduly influence prices through excessively large long or short positions.

If commodity law is so clear and specific when it comes to position limits and exemptions to those limits, then why all the recent attention on position limits? The answer is because all sorts of exemptions, never intended under the original Commodity Exchange Act, have come into being. A consensus emerged over the past decade or so that allowed all sorts of traders, who were not real producers and consumers, to be granted exemptions to speculative position limits. All this was done under the belief that less regulation was better and that the exemptions would increase liquidity. Among the traders granted exemptions were index fund traders on the long side, and commercial and investment banks on the short side. Now serious questions are being raised as to the wisdom of granting those exemptions to non-producers and consumers of the real commodities. And for good reason.

Evidence has emerged that indicates that the index traders hold too large and dominant a long position in many markets and that their exemptions to position limits should be rescinded. Just because they represent large investment funds looking to invest in commodities, they are not true hedgers in the meaning of commodity law. So says the Senate Permanent Subcommittee on Investigations in wheat and other markets. This issue is what Chairman Gensler and the Commission are wrestling with.

On the short side, large commercial banks have amassed shockingly large positions under the guise of these being a hedge to other derivatives positions. But just like the index funds are not true consumers of the commodities they are long, the banks are not true producers of what they are short. Nor do they hold actual inventories. These banks sold a bill of goods to the regulators pretending they were truly hedging, when in fact they were just speculating across a variety of markets.

Nowhere has this bank shorting become more egregious than in silver (and gold). In the most recent Bank Participation Report, for positions held as of July 7, one or two US banks held a short position equal to almost 24% of the total world annual silver mine production. (160 million oz vs. 672 million oz). If a couple of banks held 24% of the world’s crude oil annual production, that would be equal to more than 7 million crude oil futures contracts, truly a preposterous amount. The amount held in silver is also preposterous.

This position held by one or two US banks is more than 32% of all COMEX silver contracts. (Three or fewer US banks held more than 31% of all COMEX gold futures contracts). The Senate report on wheat was concerned that a position held by 25 to 30 index traders for more than 35% of the market was a controlling position. If that’s the case, then what the heck is a position held by one or two US banks of more than 32% of the market? The answer is not just a controlling position, but a manipulative one as well.

The reality is that the level of accountability limits in silver is too large, by a factor of five or more compared to any other commodity (including gold). Even though the current limit needs to be reduced drastically from 6,000 contracts to between 1000 and 1500 contracts, the big shorts now hold a lot more than 6000 contracts each. One or two US banks hold a minimum of more than two and half times the obscene 6000 contract limit. If silver position limits were reduced to 1500 contracts, the big banks would be holding more than ten times that limit. That’s insane.

I am convinced that the CFTC now fully appreciates the position limit and manipulation problem in silver. Fix the position limit problem in silver and the manipulation is over. Let me repeat that. If the CFTC sets position limits in COMEX silver at 1000 to 1500 contracts for both longs and shorts and discontinues the phony hedging exemptions currently granted to the big US banks and other shorts, the silver manipulation is history. I think this is in the cards. I think this is what Chairman Gensler and Commissioner Chilton intend. But it won’t happen if the big shorts get their way. If they are allowed to continue to hold their manipulative short positions, then we must wait for the physical shortage to break the manipulation.

For more than 20 years, the CFTC has turned a blind eye and a deaf ear to the problem of legitimate position limits in silver. Apparently, that has changed. The new Chairman appears to be interested in the public’s opinion on this issue. It’s time for you to speak up. It’s time to be specific. The issue is position limits, not the budget deficit, not the dollar, not his previous employment at Goldman Sachs. He is doing what he should be doing and as such, deserves to be treated with respect. Ask him and the other commissioners to reduce the position limits in silver to between 1000 to 1500 contracts, or please explain why that limit is not appropriate. Ask him to do away with the phony exemptions granted to a few big shorts or make transparent the reason why they are short. Make it short, sweet and specific – lower the silver limits to equal all other commodities and disallow phony exemptions. Send this article if you want. This could be a game changer. Don’t delay.

Ted Butler

ndM – What is really amazing is that some idiots still are able to believe, in bona fide, without a hidden agenda, that there’s no manipulation in the silver futures market at the Comex.

Don’t hold your breath, however. While I encourage everyone to write to the CFTC asking for an end to that disgusting crime, those “three or fewer” US banks have probably the US government in their pockets.


July 26, 2009

Daily Bell: You have lectured on Microeconomics and History of Economical Thought. Can you explain the difference between Microeconomics and Macroeconomics within the Austrian discipline?

Dr. Ebeling: The distinction between Microeconomics and Macroeconomics developed out of the Keynesian Revolution of the 1930s. British economist, John Maynard Keynes, argued that Microeconomics focuses on individual market supply and demand conditions. Macroeconomics is concerned with analyzing the “economy as a whole,” that is, total employment, total output, and the general levels of wages and prices.

Keynes said that what determined the Macro aggregate totals had no direct relation to what was going on in the individual markets at the Microeconomic level. Hence, understanding what caused and what could cure economy-wide swings in output, employment, and prices could not be found in any study of Microeconomics.

The Austrian Economists have always insisted that nothing happens in society or in the economy as a whole that does not originate in the actions of choosing individuals. Thus, any supposed Macroeconomic analysis must be grounded in Microeconomic foundations.

They ask, what is the common element that is present in the exchange process of each and every individual market, such that if that element is tampered with the consequences can have serious ramifications throughout the economy?

They see money as that element. As the generally used medium of exchange, money is the one commodity that is one side of every transaction. We trade our goods for money and then use the money we have earned to buy the goods that others are offering for sale. Thus, something that disturbs money’s role in smoothly facilitating the buying and selling of goods can generate economy-wide imbalances.

The “key” to understanding the business cycle, the Austrians argue, is looking at how governments in modern society have misused and abused their monopoly control over the supply of money through central banking.

Daily Bell: What caused the financial crisis in your opinion?

Dr. Ebeling: The U.S. Federal Reserve dramatically expanding the money supply between 2003 and 2008, has caused the current situation. They flooded the financial markets with additional money for lending purposes. Adjusted for inflation, many key interest rates in 2003 and 2004 were near zero or actually negative. Even after 2004, real, inflation adjustment interest rates were abnormally kept low due to this monetary expansion.

To attract borrowers to take all this newly created money out of the banking system, financial institutions had lowered nominal interest rates and reduced their lending standards. As a result, savings and investment in the economy was thrown out of balance. The housing, investment, and consumer credit booms were unsustainable in the long run in relation to the real savings in the economy available to sustain all of these activities.

The housing bubble, in particular, was exacerbating by various government interventionist policies that artificially stimulated the housing market. This had its origin in government subsidization of low interest, credit unworthy borrowing by people in the high-risk category through loan guarantees and mortgage purchases by Fannie Mae and Freddie Mac.

The bubbles have now burst, and the economy must now go with a “correction process,” which merely means adjusting and adapting to the real supply and demand conditions of the market after the illusionary booms caused by monetary inflation.

But what is the government doing, first under the Bush Administration and now under Obama? It has been and is introducing policies that are delaying or preventing the necessary adjustments to restore a balanced and stable market for future sustainable growth. I will go even further. The policies of the Obama Administration are not merely retarding the market’s adjustment to the post-boom environment. The policies and regulations being implemented by Obama and the Congress are undermining the very existence of a functioning market economy.

We are now in a crisis of anti-capitalist policies not seen to this degree in America since the New Deal days of the Franklin Roosevelt Administration in the 1930s. Washington is literally taking over ownership of or control over entire sectors of the economy, by which I mean the automotive and financial markets.

Also, their planned regulations over industry in the name of the environment and fighting “climate change” will mean that government will have a directing hand of how virtually every product is produced; government will dictate with what technologies they are manufatured, and what their finished forms will be as consumer goods that the public will be forced to accept. This will include price and wage controls and caps, regardless of the names and rationales under which it is implemented.

We are heading down a road that leads to national socialism. That is, industrial fascism and socialist-style redistribution of wealth in the name of “social justice.”

Daily Bell: How will the financial crisis end?

Dr. Ebeling: If the government hadn’t so heavily meddled and intervened last year and this year, I would have said that recovery from the recession would likely to have been no more difficult and no longer than many of the post-World War II cycles of booms and busts.

But with the push towards economic fascism our problem is much more serious. In addition, the growth in government spending and the huge deficits as far as the eye can see are making any usual return to “normalcy” far more uncertain.

Under the Bush Administration government spending was out of control, and the Federal debt grew from around $5 trillion to over $10.6 trillion. Now the Obama Administration is planning to balloon this trend even more with national health insurance, greater government spending on all levels of education, huge financial bailouts that seem to have no end, and misnamed “stimulus spending” in a drive to “create jobs” before the 2010 and 2012 elections.

What I see is: higher taxes on the wealthy and the middle class; higher interest rates due to the huge budget deficits; a falling dollar on the exchange markets caused by foreign lenders having concerns about the future of the American economy; rising prices caused by Federal Reserve monetary inflation; and a sluggish economic recovery resulting from the Federal government’s very heavy handed intervention in the U.S. private sector.

But other than all of this, we are doing just fine!

Daily Bell: Will there be increased centralization of banking and regulation worldwide? Is this a good thing, in your opinion – the various remedies that have been put forth?

Dr. Ebeling: It appears that either individually or through some international consort, the governments of the major countries of the world will introduce new and more intrusive banking regulations and oversight. This should not be welcomed.

First, the financial markets in America and in Europe, for example, are not suffering from a lack of regulation. The regulatory hands of government and central banks have been and are very active in financial markets.

Second, more regulations will only reduce bank and investment flexibility and innovation that are essential for a growing and changing world economy.

Third, the more government intervenes in and regulates the financial markets, the more investment decision-making becomes politicized. Rather than banks and other financial institutions properly performing their necessary intermediation role guided by the prospective profitability of market-based investment opportunities, they are “influenced” or dictated to allocate society’s scarce and valuable savings and capital on the basis of political pull and ideological interest groups.

This undermines the working of a core sector of any functioning market economy.


what has not been defeated is the socialist critique of capitalism. That is, many people, and most especially educators, those in the mass media and the political arena, believe the socialist claims that capitalism, as an economic system, is inherently bad. It results in exploitation of consumers and workers; it doesn’t produce the goods and services that people “really” need; it is short-sighted and harms the environment; and it causes the boom and busts of the business cycle, resulting in innocent, ordinary people losing their jobs.

Thus, all current economic policies, and especially during this recession, are grounded in the idea that free markets have failed and only “big government” can save the economy and society. Now, of course, what we are actually suffering from is the failure of the interventionist state and misguided monetary policies that have gotten us into this mess. But, unfortunately, that is not how things are seen by most of those who mold public opinion and set government policy.

Dr. Richard Ebeling

The rest is here….


July 9, 2009

“Pirate hunting cruises along the African coast are being offered by private yachts in Russia. For £3,500 per day customers can sail along the coast of Somalia at low speed to entice a pirate into attacking.

Former special forces troops are on board to make sure no harm comes to the wealthy punters. If a pirate does take the bait, they are met with machine gun, rocket, and grenade fire. For an extra fee, customers can hire an AK-47 and join in.”


July 1, 2009

More detailed italian version…. 

Scientific Papers (not complete)….. 

Luigi Di Bella was born on Jul. 17, 1912 at Linguaglossa, a small Sicilian village near Catania. So poor was his family that, after completing his secondary education, it was only by virtue of the several scholarships he had won that he could attend the faculty of Medicine at the University of Messina. He was noted and sought as an intern by Prof. Pietro Tullio, Medicine Nobel prize candidate 1930 and 1932. At age nineteen, Luigi Di Bella associated his name to his master´s in their first joint paper, and prior to graduating in 1936, he had already published 9 works and won four national contests.

During the Autumn of 1936, he initiated teaching physiology and biochemistry at the University of Parma. In 1937 he was presented with a scholarship by the acclaimed scientist Guglielmo Marconi, then president of CNR (National Research Council). In 1938 he earned his second University degree, in Pharmacology, and the third one, in Chemistry.
With the rank of medical captain, he set off for Greece, where he was in charge of a Military Hospital. He was indefatigable in caring for the patients in his charge. So much so that he was eventually overwhelmed by the strain and, in 1943, sick with malaria and a severe hepatitis, he had to be discharged. After a brief convalescence, Luigi Di Bella resumed teaching and researching at the University of Modena and had several scientific works published. In the period 1937 through 1948 his name appears on as many as thirty-five papers, a number of which were based on his studies of aneurine, retinoids, ascorbic acid and on his research on hypothalamus and pituitary gland functions. In 1948 he won the Human Physiology and Biochemistry professorships.

Having to endure hindrance and rivalries in his research effort, he personally designed a private laboratory and went ahead with its construction, occasionally assisted by a few labourers. From 1951 onwards much research work was carried out in this “Private Laboratory of Physiology”. In 1969, after thirty years of research, Luigi Di Bella communicated to a national congress (SIBS) his first findings pointing to an innovative therapy of haematological pathologies, which he went on to practice with the collaboration of Prof. Edoardo Storti, a prominent haematologist. In December 1973, by invitation of clinical pathologist Domenico Campanacci, he referred to the Society for Medicine and Surgery of Bologna, Italy, on the results of his therapeutic approach, which were more extensively illustrated during the XXVI IUPS Congress 1974 in New Delhi. At the I EPSG Congress of Amsterdam, 1978, he presented a paper (Perspectives in Pineal Function. Prog Brain Res. 1979; 52: 475-478) outlining the rationale of his Method. He further explained his therapeutic proposal in 1980 at the International Symposium on Melatonin in Bremen; at the II International Symposium of Somatostatin 1981 in Athens (Somatostatin in cancer therapy); in 1987 at the Tübingen International Workshop (Melatonin in thrombocytogenesis. Gupta et al editors 1988 p.183-194) – where he met Prof. Derek Gupta.

He coined the definition “Biological Therapy of Tumours“, as opposed to the conventional cyto-toxic, cyto-reductive, tumour-focused treatments. Meanwhile, he continued to examine and treat, always free of charge, literally thousands of patients. In recognition of this professional and ethical endeavour, in January 1990 he was awarded the “Goodness Prize” by the top magistrate in Modena. When he retired from his academic activity, after teaching for forty-six-years, Luigi Di Bella continued to research at his “Private Laboratory of Physiology” in Modena”.
In 1996 he attained a vast fame, which he neither craved nor enjoyed, leading to his treatment of tumours (MDB – Di Bella Method, main components of which are: Somatostatin, Retinoids, Vitamin E, Vitamin D3, Melatonin, Bromocriptine) undergoing nationwide clinical trials in 1998. As a result, the Italian health authorities decreed that the MDB was not effective, although the criteria of the trials were deemed questionable by several observers (Müllner M, BMJ.1999;318(7178):208-209).

The last months of his lifetime were marked by intense suffering, that however did not prevent him from either attending to the sick or continuing his research work, as testified by the publication of his last paper (Med Sci Monit.2002;8(12):BR 527-431. Melatonin effects on megakariocyte membrane patch-clamp outward K+ current). His heart ceased to beat on July 1, 2003. His gravesite at Fanano, a small hill town in the Appennines near Modena, has seen a continuous stream of mourners, whether former patients or simple well-wishers. A posthumous review has recently been published by this very journal (Neuroendocrinology Letters, Volume 27, n. 4, 2006 ­ 425-432. “Key aspects of melatonin physiology: Thirty years of research). On dec. 12, 2006 the Linguaglossa City Council dedicated a square of the town to Luigi Di Bella and laid a commemorative plaque on his birthplace.