Monday, December 6, 2010

Silver Soars Over $30 as Europe Prepares for Bank Runs, Bernanke Lies

Our ongoing financial fantasy took a very real turn for the worse Sunday as Federal Reserve Chairman Ben Bernanke appeared in an "exclusive" interview by Scott Pelley on the "60 Minutes" broadcast. (The entire 15 minute report is embedded at the end of this post.

Bernanke has been widely criticized for many of his policies - mostly blunders which favor saving banks instead of liquidating them - but he's received far more criticism than ever before for his recent foray into another round of Quantitative Easing (or, QE2 as it's come to be known). Mr. Bernanke hinted at this move in September, providing upward grease for the equity markets, and than formally announced it in early November, implementing a series of daily permanent open market operations (POMOs) which commenced on November 12 and have continued daily - except for the days immediately before and after Thanksgiving - ever since, contributing 1.5 to 9 billion dollars daily in repurchases of Treasury debt from Primary Dealers (PDs).

What was most troubling about the interview was not what Bernanke said, so much, as how he appeared, trembling, quivering and crossing both his arms and legs at times, in the classic body language "double cross," indicative of those telling outright falsehoods. Bernanke lied that the Fed isn't printing money. He most certainly is, whenever the Fed repurchases Treasury debt. He also was largely lying when he mentioned that unemployment was an effect of education, saying that unemployment among collage graduates was only 5%, and higher for those without college educations.

Sure, he's right to some extent, but ask some of the recent college grads working at part-time jobs, or jobs for which they're overqualified or not working at all, what their job prospects look like. Many college-aged individuals have resorted to staying in school, pursuing post-graduate degrees, hoping that in two or three years the employment situation may be better. No, unemployment is not a function of education. It's a function of there being only one job for every five people looking, and the jobs offered being entry level or part time, at that.

Meanwhile, the Europeans have a new issue with which to deal: the widespread public outcry and rally for a bank run on Tuesday, December 7, promoted by soccer star Eric Cantona. While the banks are probably well-prepared and will likely close branches for a day or so if thing get out of hand, they're unlikely to fail, though the public will send a loud, unmistakable message.

Whether the officials at the control of the world's economy will listen is probably a moot point. They will not; they haven't yet, and probably never will.

Dow 11,362.19, -19.90 (0.17%)
NASDAQ 2,594.92, +3.46 (0.13%)
S&P 500 1,223.12, -1.59 (0.13%)
NYSE Composite 7,740.69, -10.89 (0.14%)

US stocks spent the day hugging the flat line, on low volume. Advancers beat decliners, 3032-2640. New highs bettered new lows, 241-32 on the NASDAQ, 259-8 on the NYSE. Nothing new there at all, with the same names being pumped or dumped for the better part of the past week.

NASDAQ Volume 1,633,755,875.00
NYSE Volume 3,694,626,75

The major news was in the silver market, which has experienced outsize gains over the past three months. Silver last printed at $30.13 spot, up 70 cents. Gold also made a new all-time high of $1422.90, up $8.40. Crude oil futures on the front end contract rose 19 cents, to a new 2010 high of $89.38.

How high can silver go? Most analysts see it doubling in three years, though prices of $100 per ounce and higher are being bandied about as the gold-silver ratio is expected to come back to its historical norm of 16-1.

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