By Jim Willie CB, Golden Jackass

The current spike in gold lease rates indicates that demand for physical gold is extremely high and growing quickly. We may well be witnessing the first seeds of the gold price breaking free from the short sellers and the end (death) of the gold carry trade.

The gold & silver futures markets are each hurtling down a dangerous path toward possible default. The artificial paper price has created enormous physical demand, and hampered supply production, if not delivery. The gap between the corrupted paper price and the legitimate physical price in actual trading markets has grown sharply, enough to force a breakdown like in any distorted market. When December contracts in gold & silver are demanded to be satisfied via delivery of the metal, we could easily see the COMEX fail in delivery. A default is highly likely.

The USFed cut the official interest rate again by 50 basis points, now to 1.0% on the Fed Funds target, in utter desperation. Other central banks did not join in rate cut exercises. The Euro Central Bank is expected to cut next week, reluctantly. So is the beleaguered Bank of England. The pressure is building on gold demand. Now with the official US price inflation at CPI = 5% or so, the real rate of money cost is minus 4%. The actual price inflation runs more like 10% to 12%, making the real cost of money more like minus 9% to minus 11%. GOLD RESPONDS TO NEGATIVE REAL RATES VERY FAVORABLY. Read more….

By Naomi Klein, AlterNet

The bailout has been designed to keep stealing from the Treasury for years to come.

In the final days of the election, many Republicans seem to have given up the fight for power. But that doesn’t mean they are relaxing. If you want to see real Republican elbow grease, check out the energy going into chucking great chunks of the $700 billion bailout out the door. At a recent Senate Banking Committee hearing, Republican Senator Bob Corker was fixated on this task, and with a clear deadline in mind: inauguration. “How much of it do you think may be actually spent by January 20 or so?” Corker asked Neel Kashkari, the 35-year-old former banker in charge of the bailout.

When European colonialists realized that they had no choice but to hand over power to the indigenous citizens, they would often turn their attention to stripping the local treasury of its gold and grabbing valuable livestock. If they were really nasty, like the Portuguese in Mozambique in the mid-1970s, they poured concrete down the elevator shafts.

The Bush gang prefers bureaucratic instruments: “distressed asset” auctions and the “equity purchase program.” But make no mistake: the goal is the same as it was for the defeated Portuguese — a final frantic looting of the public wealth before they hand over the keys to the safe. Read more….

By Diana Golobay, Housing Wire

With major banks owing billions to executives and some banks stubbornly resisting assistance in capital, House Financial Services Committee chairman Barney Frank (D-MA) announced Friday the committee will hold hearings on the inappropriate use of federal funds.

“I am deeply disappointed that a number of financial institutions are distorting the legislation that Congress passed at the President’s request to respond to the credit crisis by making funds available for increased lending,” Frank said. “Any use of the funds for any purpose other than lending — for bonuses, for severance pay, for dividends, for acquisitions of other institutions, etc. — is a violation of the terms of the Act.”

Major financial institutions receiving federal capital from the U.S. Treasury Department so far reported owing more than $40 billion in executive compensation as of the end of 2007, according to a Wall Street Journal report Friday.

Goldman Sachs Group Inc. (GS: 92.50 +1.53%) reported $11.8 billion, J.P. Morgan Chase & Co. (JPM: 40.06 +6.49%) owed an estimated $8.5 billion, and Morgan Stanley (MS: 18.37 +14.17%) owed from $10 billion to $12 billion. Financial institutions were not required to report the size of debts to their executives – Goldman being the exception – but the Journal reported that it calculated them by extrapolating from figures that the firms did disclose. Read more….

Although Goldcorp reported almost quadrupled 3Q profits, the majority was through a$240 million exchange gain without which there would have been a decline in earnings.

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Higher gold price and increased gold output helped Eldorado Gold to a significant earnings increase year on year in the third quarter

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Mike “Mish” Shedlock, MISH’S Global Economic Trend Analysis

The ticking time bomb of overpromised, underfunded public pension plans has finally exploded. Here are a few headlines to consider. My comments appear at the end starting with the bold heading “Future Expectations Too High”

Pension’s loss may add to San Diego’s money woes

SAN DIEGO, Oct 29 (Reuters) – The pension fund of San Diego, California, may have lost as much as $1 billion of its $5 billion in assets recently, potentially adding to the financial challenges weighing on the state’s second-largest city.

According to San Diego City Attorney Michael Aguirre, San Diego’s city pension fund for nearly 20,000 active and retired employees has lost at least $700 million between Dec. 30, 2007, and Sept. 30 — before the worst of the stock market’s recent crash.

PERA shares stocks’ pain

The largest pension fund for state and local public employees lost $10 billion in market value through mid-October, raising the specter of higher contribution rates or lower benefits in coming years if markets don’t improve rapidly.

Colorado PERA, which covers 413,000 employees and retirees, saw its assets plummet from $41 billion at the beginning of the year to $31 billion on Oct. 15. Read more….

By Ed Bugos, MoneyWeek

There are only two things gold bulls should worry about from this point forward, now that the general commodity correction is out of the way and the froth has been worked out of the market: deflation in the strict sense of the term (monetary, not asset deflation) or a suddenly brightening economic outlook, both of which, in this writer’s opinion, would require a political austerity hardly imaginable these days.

As far as deflation goes, we saw that the Fed inflated its balance sheet by an astonishing US$600 billion (almost 70%) in September, $170 billion of which ended up as an unsterilised liquidity injection into the financial system – also unprecedented any way it is measured.

It is almost as much as the entire US banking system created in the 12 months ending August 2008. It is about 20% of the cumulative amount of reserves the Fed has directly injected into the banking system since its inception in 1913. In one month, the Bernanke Fed “printed” MORE money than the Greenspan Fed in its entire easing campaign from 2001-03 – on top of which the banking system created $1.5 trillion.

Let me be the first to tell you that this represents a deliberate and abrupt change in monetary policy.
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By Chuck Butler, Pfennig

Good day… And a Happy Friday to one and all! A Happy Halloween Friday to boot! Boy, to be a kid again, and have what is forecast as a 70 degree day on a Friday for Halloween! We’ve been so busy at the Butler house that we didn’t even decorate our front yard with Halloween stuff this year. UGH! But, that’s OK, I guess, Alex is older now, and little Delaney Grace would probably freak out with the ghost that would fly across the front of our house, etc.

Well… The fog that was lifted from the markets came back with a vengeance yesterday, and once again it was the deep, dark, dangerous U.S. economy leading the charge. 3rd QTR GDP printed yesterday and even though it was forecast to be negative, when it actually printed negative, the trading theme returned. 3rd QTR GDP goes negative (and if you throw in inflation for good measure growth was REALLY negative!) and the dollar rallies… It’s the trading theme of the decade! (Ok, I exaggerate a bit there, as it has only been in place for 3 months now!)

And get this… Recall how 2nd QTR GDP (+2.9%) was goosed by net exports (because the dollar was weak)? Well… Apparently the dollar was still considered “weak” during the 3rd QTR because net exports added 1.3% to GDP in the 3rd QTR! I can’t imagine what the 4th QTR GDP number will look like, well, actually I can… And the big fat red figure doesn’t look pretty! Anyway, what I was trying to get at before my fat fingers started typing something else, is that 4th QTR GDP isn’t going to get any goose from exports, given the strength of the dollar these days!

So… As I left you yesterday, the euro had “gapped up” to 1.3145, and the stars were getting in alignment, the karma was flowing, and peasants were dancing in the streets, as the things seemed to be getting back, somewhat, to normal, and the fundamentals were back on the table. But, then the 3rd QTR GDP print brought the deep, dark, dangerous clouds/ fog back over the markets, and the trading theme kicked into place, with the dollar rallying and pushing the euro to 1.27! That’s some strong volatility there folks… Something, as I said the other day, I’ve not witnessed before… Yes, there was volatility in currencies, but not like these wild swings we see on a daily basis now. The “trading crowd” have to be pulling their hair out, as I think about how they put on trades and then add “trailing stops” at a certain percentage away from the current market. With these wild swings, they have to be seeing their trades “stopped out” almost instantly! Read more….

Investors shun Tier I gold stocks, preferring Tier II names, and also gold juniors.

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How is it that an African gold miner has moved into leadership position of the global listed gold stocks sector?

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