Elizabeth Warren On the US Deficit Problem and Fair Taxation

Elizabeth Warren on the election circuit in Massachusetts.

She left out any discussion of the financial bailouts, probably in the interest of simplicity and brevity. But she ought not to do so.



Thanks to DailyKos

Gold Daily and Silver Weekly Charts - Bear Trap Developing in Gold?

There are high expectations ahead of the Fed's September announcement tomorrow afternoon.

Traders are betting the Fed will cap rates in Operation Twist. There are also even odds that the Fed will cut the rate it pays on bank reserves which it holds. The thinking is that it will give banks more incentive to lend. The downside is the view that if it becomes too close to zero, people will stop making markets in the shortest term Treasuries.

If they do lower this rate, I will view it as justification for the view I put forward over the past two years that the Fed interest payment on reserves acts as a bit of a drag on commercial activity by drawing funds out of the marketplace, in addition to being a tool for managing short rates around the zero bound.

Nice bounce in gold today, but notice it still has not broken the short term down trend. I expect that situation to be resolved one way or the other around 2:30 tomorrow afternoon. But that is the short term paper market. The broad sweep of the global physical market is another story altogether.

"...For what it is worth, this [leased central bank] gold goes right into an Asian vault and it is gone from the West permanently. This is having the effect of transferring Western solid assets over to the East, in size. This has the appearance of desperation because in the end this is really an attempt to save the too big to fail banks that are on the wrong side of a derivative play yet again. That is the reason this is being done.

Western central banks don’t really want that gold to disappear like that, they don’t want to sell that gold. They had to raise dollars in a hurry to pump liquidity into the system, but in the end, as I said, the gold is gone. In the old days the gold would be floating around the LBMA system, there would be a little bit of erosion, but today that gold is being sucked into the East.

This price action has had the effect of creating bearish sentiment, but meanwhile the physical buyers are just sitting there and constantly accumulating physical gold. There are massive orders for tonnage of gold, incredible amounts between $1,715 and $1,760. This has the effect of putting a physical floor under the price of gold. If they make a push to the $1,715 level that would be suicide in my opinion. There are simply too many massive orders for physical gold down to that level for that to be breached.

During this quarter this leased gold is supposed to be paid back, but how? As the central banks come to grips with the reality that the leased gold is gone, there may be a religious experience to the upside in gold and you will see the gold price break the $2,000 level."

London Trader: Massive Physical Floor Under Gold as Asia Buys What West Offers - KWN

This scenario tracks with my charts to an almost uncanny level. But let's see what happens. We still have to get past the FOMC monentary decision tomorrow and the Comex option expiration next week.

SP 500 and NDX Futures Daily Charts - Reversal Ahead of the Fed

Stocks were rallying today, when fresh jitters about a Greek default caused the afternoon trade to turn south, finishing almost even to slightly in the red.

I suspect quite a bit of that selling was due to traders squaring up their positions ahead of the big Fed announcement tomorrow.

Expectations of some action from the Fed are high. Reassuring words alone will not sustain the equity markets. If the Fed does nothing we might see stocks sell off badly.

US Housing Starts Stuck at Lowest Levels Since 1945

Charts courtesy of John Williams at Shadowstats.

The first chart shows US Housing Starts since the year 2000.

The second chart shows US Housing Starts since 1945.