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The deliverable dealer silver inventory at the Comex dropped to another new low of 27.37 million ounces.
If the Comex runs into troubles with a temporary inability to deliver on contracts and approaches a de facto default, most of the regulators and pundits will say they 'never saw it coming.'
Well, here it is.
Hard to miss an almost 70% drop in deliverable inventory like this in a little over two years.
UBS remarked today that they see a choke on the supply in gold, but not in other metals.
Yes, there is plenty of silver available, but at higher prices. How high, only the market can tell.
At some point, even if it is for a brief period of time, silver bullion may not be available at any price, at least in dollars.
Just another day in the Pax Goldmana. "They create a desert, and call it recovery."
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I am not so optimistic about Europe, with the hedge funds and their Ratings Agencies dogging them. The saber rattling by Moody's at the US is merely to provide cover for the next assault on Ireland and Italy.
The solution is obvious, but difficult to achieve. A single currency for a range of economies is simply not feasible without transfer payments and a single financial authority as exist among the States in the US. Some states give more and others receive more as the necessary resolution of regional currency inflexibility.
A two-tiered system would work, as would spinning off a few of the PIIGs into a system which would allow them to devalue currencies as required. It would hamper the strong economies' regional exports, but that is the price they would pay.
The stumbling block is the CDS market and the debts owed to the French and German banks, and to a lesser extent the English and the Americans. This is why the Wall Street banks can ruthlessly press a default scenario as just another Goldman opportunity.
And in the meanwhile, Asia bides its time. The next eighteen months should be interesting.
MarketWatch
Stock index futures fall after Moody's warning
By Carla Mozee
July 13, 2011, 6:13 p.m. EDT
U.S. stock index futures fell Wednesday evening after Moody's Investors Service warned that it may cut its triple-A rating on U.S. government debt. Dow Jones Industrial Average futures recently fell 79 points, to 12,346 from its settlement Wednesday afternoon.
S&P 500 Index futures /quotes/zigman/1277190 SP1U -0.38% fell 9 points to 1,303, and Nasdaq 100 Index futures /quotes/zigman/876546 ND1U -0.48% shed 15 points to 2,330.
The U.S. dollar index /quotes/zigman/1652083 DXY 0.00% , which measures the U.S. unit’s performance against a basket of six other major currencies, fell to 75.01 and reached as low as 74.93. The benchmark was above 75 before the news. The euro /quotes/zigman/4867933/sampled EURUSD +0.44% and the Japanese yen each strengthened.
Moody’s said the review was prompted by the possibility that the U.S. debt limit will not be raised in time to prevent a missed payment of interest or principal on outstanding bonds and notes.
“As such, there is a small but rising risk of a short-lived default,” Moody’s said, adding that it considers the probability of a default to be low but no longer minimal.
“An actual default, regardless of duration, would fundamentally alter Moody’s assessment of the timeliness of future payments, and a Aaa rating would likely no longer be appropriate,” it said. If lowered, the rating would most likely be somewhere in the Aa range, said Moody’s.
Jeffrey Goldstein, the U.S. Treasury’s under secretary for domestic finance, said in a statement that Moody’s assessment “is a timely reminder of the need for Congress to move quickly to avoid defaulting on the country’s obligations and agree upon a substantial deficit-reduction package.”
Earlier Wednesday, a stalemate between lawmakers appeared to be breaking after Senate Democratic Leader Harry Reid lauded a proposal from his Republican counterpart to let President Barack Obama raise the debt ceiling on his own. Reid praises Republican debt-ceiling proposal.
I thank Blythe, for her enormous support for this rally in attempting to suppress the price of bullion through paper shorts and derivatives.
But I should also thank Benny, for blowing a big wet monetary kiss to the financiers and Wall Street today, and giving an extra lift to the metals.
By the way, Benny was technically very correct when he told Ron Paul that 'gold is not money.' As defined by currency, or legal tender laws, it is not. But he did say that gold is an asset, and in fact he is correct on this as well.
When one uses gold or silver to conduct a transaction these days, typically one converts the bullion into the local currency first and THEN makes the exchange. If gold and silver were money, there would be no conversion and no profit or loss realized on that conversion. Money is a denominator, a way of keeping score in a transfer of wealth, the oft heard 'medium of exchange.'
So I think some of my fellow metals people are jumping overboard on this one. When they say gold and silver are money, what they are really saying is that they have been and should be money again. If they were really money now as they were under the metals standards, the discussion would be moot. But they are correct in the broader historic definition. Indeed, gold and silver are the ONLY money in the more universal sense, across the sweep of history. Take your paper dollars to some time in the past, and I will take gold and silver, and we will see who obtains the greater value.
And as usual some of the blogs are going the Daily News and Drudge Report route with their headlines, posturing sensationalism for clicks. I thought Ron Paul could have asked much more penetrating questions of Ben. This is just a distraction. There are serious problems at hand.
The US is not prepared for a gold standard now any more than it is ready for austerity. Think of an accident victim in a hospital that needs to change their ways, but not by entering an Iron Man competition on release. The economy is out of balance, and fraud and excess still pervades the financial system. Austerity is a prescription for a heart attack. And stimulus is just a cosmetic, although in the right form it could help to get the patient back on its feet through infrastructure investment of the right sorts.
Gold and silver are not money, in the sense of currency or legal tender, at this time almost anywhere in the world. This is the purview of governments to declare. However, as a store of value, as a superior asset class, it is clear that they are among the best.
Gold and silver have been money, in various places and times throughout recorded human history. But they are not so now. They may yet be so again. And so the central banks still maintain their gold, although note that few of them hold silver. It is a traditional remnant at this time. Most do not exchange their gold in settlement of debts.
But as we saw today, the metals were a definite safe haven and reacted sharply to the reassurances of further dollar devaluation to come in order to resolve the collapsed credit bubble.
Support at 1307, the 50 fibonacci level, held again today. The 1295 level is the .618 as you may recall.
The market popped on Benny's reassurances that QE3 awaits the next stumble, but it did not stick, which is far from bullish action.
Friday is options expiration.
We are in earnings season, and the accounting and financing gimmicks may make them look rather rosy. But watch the guidance.
The US economy will absolutely not recover until the wager earners get back on their feet. This implies increased employment AND an increasing median wage. The headwinds against this are strong, and far from cyclical. The rentiers are sapping the life out of the working classes, and especially the middle class.
