We flew through the airport…got the express train. The whole thing took only a fraction

of the time it takes us when we fly into Dulles at Washington.

But London was in a sour mood when we returned.

“Decade of pain predicted for public services,” was the headline on Friday’s Guardian from London. The reason for the decade of pain is the obvious one. Tax receipts are down – because of the depression. Governments are caught in a bind. Their revenues go down just as their costs – offering bailouts, counter-cyclical stimulus, and handouts to the unemployed – go up.

Ireland and California have been in the news on this subject. But they’re hardly alone. It’s a problem for almost all governments in the English-speaking world. As for the rest of the world, we don’t know.

Ireland is facing its own decade of pain. So is California. This morning, California is in the news. Apparently, a deal has been worked out. The state will stay in business… and even pay off its IOUs. But it will mean cuts of ‘services.’

Here at the Daily Reckoning, whenever we modify the word ‘services’ with the word ‘government’ we feel we should warn readers that we don’t really mean it. Most government services are a disservice… like a government-subsidized business they are a fraud on the economy, absorbing valuable resources in order to provide a ‘service’ which is worth less than the inputs that were required to provide it. The service is a disservice to the broader economy.

And today too we find that England is sinking deeper into depression; it too will have to endure a decade of painful honesty.

“UK Slump Identical to that of 1930s” says Saturday’s headline in the Times.

A chart traces the decline… to minus 5.6% GDP growth over the past 12 months… paralleling the decline following the crash of ’29.

“The collapse is Britain’s economy now rivals the worst days of the Great Depression… ” continues the report.

If it continues following along on the 1930s track, the UK economy will continue to decline… and bottom out at 7% or 8% below pre-crisis output. Then, it will bottom out over a period of a couple years before beginning a recovery, back to pre-crisis GDP levels.

If that’s correct, we’re only about 2/3rds through the depression in terms of output… and only about 1/3 in terms of time. Remember, the first leg of the Great Depression lasted 43 months. So far, this one is only 19 months old. It probably has a ways to go.

The stock market has a ways to go too. The Dow was up 23 points on Friday, bringing it to 9093. Like the economy, the stock market runs in long cycles – from bull to bear and back to bull again. The first post-war bull cycle took the Dow from under 100 to nearly 1,000 in 1966. Then, the index shilly-shallied around for the next 16 years. Adjusting for inflation, investors lost more than half their money during that period.

Then began the big bull market that dominated our financial lives until 2007. But this bull market actually topped out in January 2000 – in real terms. Adjust for inflation and investors made nothing during the 2000-2007 period. So, the current bear market has been going on for 9 years already. But if it lasts as long as the typical major bear market of the 20th century, about 18 years, that means it is only about half over. Look for it to end sometime between 2015 and 2020.

Where will the Dow be then? We can make a guess. If the economy were to lose, say, 10% of GDP… the loss in incremental sales would probably erase about 50% of corporate profits. And the financial industry, which had been responsible for 40% of corporate profits at its peak, will probably go back to a more reasonable figure of 10% of corporate profits – so that’s a loss of 30%. Of course, there’s some overlap on these figures – and of huge dose of Daily Dead reckoning… .but maybe the loss of corporate earnings averages about 60%. So, if 2007 were a base of $100 in corporate earnings, we can expect only $40 sometime in the future.

The most important thing that happens in a bear market is that the multiples go down. Investors, who were prepared to pay $25 for a dollar’s worth of earnings at the peak of the bull market begin to think they’ve been too optimistic. As the depression deepens they begin to see things differently. They see earnings continue to fall and feel they should be more cautious. So they take down p/e ratios… from 25 down to as low as 5. But let us say the p/e ratio goes to 8… on Dow earnings that are only 40% of what they were in 2007. Where would that put the bottom? Dow 1600. Allow for a little inflation… .maybe 2,500.

The Small Business Administration reports that losses are rising. Last year, the SBA had to take back $2.1 billion in loans that it had guaranteed. This year, it looks like the total will be higher.

Normally, small businesses lead the economy out of recession. But this is no normal recession. This is a depression. And small businesses are getting crushed. An AP report says small businesses are not bouncing back as hoped.

Part of the phenomenon can be explained merely by the severity of the downturn. If this were a recession it would be a bad one – worse than any since the Great Depression. Consumers have rediscovered thrift. Households are cutting back. They do this by eliminating things that aren’t necessary. Small enterprises often provide things that people don’t really need to have.

Another explanation involves the feds’ response to the slump. Never before have they fought so hard to avoid a capitalist correction. But in their efforts to bailout Wall Street they not only ignore the side streets and back alleys where small businesses operate, they actually take away money from what might be called the small business economy in order to pay off their friends on Wall Street.

This is how you put the ‘great’ into a Great Depression – by depriving the small business sector of the capital and freedom it needs to innovate and grow.

*** “What kind of cattle do you raise in Argentina… at the ranch?” asked a friend in Vancouver.

“Well, there are three types of cattle,” we explained. “There are feed lot cattle…which are fattened up on grain. And there are grass fed cattle – which Argentina is famous for. But I’ve got sand-fed beef.”

“Sand fed?”

“Yeah, it’s pretty dry up there. Every time I go up I wonder what they eat. It hasn’t really rained in two years. I see almost no grass. I figure they must eat sand. We’ve got a lot of that…”

“What do they look like?”

“They’re brown and very skinny.”

“They don’t sound very appetizing…”

“They’re not…almost too tough to eat. But they have one big advantage.

“What’s that?”

“Very low cholesterol.

“Yes, it’s a selling point. Sand-fed beef is very low in cholesterol. And fat. And everything else. Calories too. It’s low-cal beef. We were thinking of calling it ‘zero beef.’ But we decided on ‘sand-fed’ instead. “

“Is it good…? Do people come back for more?”

“Not very often. They can usually only eat one steak. It wears their teeth down so much.”

Source: A Decade of Painful Honesty for Britain

In the space of just ten years, the percentage of GDP generated by the financial sector almost doubled – from 5.5% in 1996 to 10.8% a decade later. But now the whole sector is shrinking…along with bonuses…payrolls…and expense accounts.

And since Britain counted so heavily on the financial high fliers and their money…the whole country seems to have gone into a funk.

Tax revenues are collapsing. Deficits are soaring. The U.K.’s national budget deficit is already at 12%…about even with the United States. But if current trends continue, she’ll soon have the largest deficit in the developed world.

But here comes the bad news. Your editor didn’t mind when investor and speculators lost trillions. He barely noticed when the U.S. government practically nationalized the largest banks, insurance and automobile companies. He hardly blinked when $13 trillion of the nation’s treasure was committed to a foolhardy effort to combat capitalism. But now they are going too far.

In an effort to raise money, the British government is raising your editor’s taxes! Yes…your poor editor pays taxes in several countries. And now the Brits are raising their rates to levels that rival those of the highest tax jurisdictions in the world – Sweden, Norway and the Netherlands.

The trouble with this strategy is that your editor just bought a pair of Argentine boots. And these boots are made for walking. If these news taxes pinch too hard he – and thousands of other people working, vaguely, in the financial sector – is likely to walk right out of here.

But to where? Ah…there’s the rub. All over the world, governments are desperate to get out of the mess they’ve gotten themselves in. Argentina and Ireland just got handouts from the IMF. Other countries are getting in line. Having spent far too much in the past, they now spend more – hoping that spending will miraculously bring about economic growth. We say “miraculously” because there is no other way to explain it. When economic growth results from saving, investing and hard work you can describe it in terms of ‘cause and effect.’ But if you ever get economic growth simply by spending money, you can only refer to it as an act of God…or the devil. Black magic, maybe. Voodoo economics.

Hardly a day goes by without some abracadabra or hocus pocus announcement. The feds bail out the banks on Monday. On Tuesday, they take over the auto industry. By Wednesday, they’re passing out money on Wall Street. If any of these tactics result in greater wealth or more output – it will be a miracle.

One question that has so far been avoided by practically all the commentators and well-wishers is this: where’s the money come from? In the popular mind, if you can call it that, the government’s pockets are infinitely deep. Reach down far enough and you will pull up whatever resources you need. But the fact of the matter is a bit different. In time of war, a government can marshal the resources of an entire nation. People believe they must buy war bonds, collect old metal, use rationing coupons, forego salary increases, pay higher taxes, and sign up for the Home Guard. Every back bends to the job; better that than bending to the lash, people say to themselves.

But the war against capitalism is not getting the same level of popular support. People are not buying “war bonds” so the feds can bail out Wall Street or the City. They’re not likely to eat margarine so the bankers can slather real butter on both sides of their bread. And they’re not willing to spend less just so the government can spend more.

So instead of asking the whole population to suffer, the feds – both in Britain and back at home in America – have chosen an easy target…the rich!

In the public mind, ‘rich’ and ‘banker’ are inseparable. Like ‘corrupt’ and ‘politician.’ What’s more, the rich were at the scene of the crime when the financial crisis began. The rich were caught red-handed. It doesn’t matter if the ‘rich’ man earned his money from doing heart operations or selling vegetables. Every rich person is presumed guilty of the crime of the century. “Tax them!” screams the mob. Tax them! Tax them! Eat them.

And so, it will come to pass that ‘the rich’ are taxed. The money will be taken from them and given to…well…the rich. But these will be different rich people – bondholders…bankers…insiders…hustlers and anglers.

Now, we turn to Addison, who is busy deciphering the GDP numbers:

“Well, ‘less awful’ it is: The Commerce Department says first-quarter GDP dropped an annualized 6.1%,” writes Addison in today’s issue of The 5 Min. Forecast.

“That’s a tough number. Wonks, quants and analysts on Wall Street expected an annualized 4.6% decline. But the ‘official’ number is still a minuscule improvement over the 6.3% rate for the fourth quarter of last year.

“But lest you should strive to breathe easy, put the two quarters together and you have the weakest six months in the U.S economy since 1957-58. One more quarter of contraction and we’ll officially have the longest recession since the Great Depression.

“One caveat: Commerce issues three estimates of quarterly GDP growth, and this is just the first. Expect revisions.

“The GDP numbers form an interesting backdrop for today’s meeting of the Federal Reserve’s Open Market Committee. The Fed’s “deflation boogeyman” is retreating, for one. Personal consumption grew 2.2% in the first quarter… much better than the 4.9% decline in the previous quarter.

“So what will the Fed do? Predictions in mainstream financial media run all over the map. One says the Fed will hold off on any more purchases of Treasuries and mortgage securities as long as ‘green shoots’ (like the housing and consumer confidence numbers yesterday) keep showing up in the economic data.

“Another speculates some sort of loose-money measures are in the offing to fight the economic effects of the swine flu outbreak.

“We’re not going to venture a guess. We’ll only remind you that in the Fed’s fantasy world, interest rates right now would be at minus 5%. And go from there.”

Each weekday, Addison brings readers The 5 Min Forecast, an executive series e-letter that provides a quick and dirty analysis of daily economic and financial developments – in five minutes or less.

And back to Bill with more thoughts:

The Dow fell 8 points yesterday. Oil slipped below $50. Gold slipped too – below $900.

What gives? As far as we can tell, the rally that began in March continues.

While it might peter out any day, we continue to believe that this market intends bloody mayhem…and that it won’t stop until it has killed both the bulls and the bears.

The bulls will be killed in the classic way. A strong rally on Wall Street…or a series of minor ones… will lead them to believe that “the worst is over.” They’ll get back into stocks after a 20% or 30% advance – hoping to recover what they lost last year.

Then, the stock market will make a new dramatic move to the downside. This will probably happen several times…each time leaving bullish investors with more losses. Finally, the bulls will give up. They will sell stocks…driving prices down and dividend yields up. By the time the bottom is reached, former investors will neither know nor care. P/Es will be scarcely more than 5. Dividend yields will rise above 5%. The Dow will sink to 3,000 – 5,000.

Then, it will be the bears’ turn. When stock prices go down, they’ll sit smugly with their cash, Treasuries and gold. But gold will not resist the deflationary whirlpool. It could get sucked down violently…or might just float down gently, remaining low for a long time. Either way, the gold bulls will give up. Only the gold bugs will hold on. Cash and Treasuries, meanwhile, will look smart – for a while. Then, suddenly, they will look like the stupidest investment on the planet. In a matter of days…maybe weeks…the dollar could lose half or more of its value. Savers will suffer staggering losses.

No, dear reader, the months ahead will be a challenge. The world economy is telling a story no one has ever read before. Every day we turn the page just to see what happens. We have no idea how the story might develop. It’s all guesswork.

Still, when the final chapter is read out…the moral of the story will probably be familiar to us. It always is.

China has increased their gold holdings 75% in the last six years. They recently announced that the gold holdings have been transferred from the State Administration of Foreign Exchange (SAFE) books to the People’s Bank of China. PBOC. Our intrepid correspondent, Byron King explains what this really means:

“China is monetizing its gold!

“This SAFE-to-PBOC transfer marks a profound decision by Chinese government leaders. Obviously, the Chinese government has bought gold over the past six years. But in keeping with a nation where youngsters get their Sun Tzu with their mother’s milk, the Chinese went through an internal debate over whether to add the gold holdings to the official Chinese monetary reserves. That is, if the gold was not “monetary,” then it was just another nonmonetary investment commodity like iron ore or copper or petroleum.

“But now, with the announcement by the Chinese Central Bank, it appears that the debate is resolved. The gold has been added to Chinese monetary reserves.

“This action by China is part and parcel of an under-the-radar global effort to rehabilitate gold as a monetary reserve asset. Gold has not been a factor in global trade and currency exchange since the late 1960s. But there’s a powerful movement afoot in the world to reestablish gold as part of an international monetary system. It’s because the U.S. dollar has been so badly mismanaged over the decades. No, you won’t read about it in your local newspaper, or even in the standard, mainstream business media. But that movement is out there. It’s happening.

“So now the Chinese are primed to begin using gold as a monetary asset. What’s the practical impact? I expect to see central banks worldwide start to add gold to their monetary reserves. The floodgates are opening. The PBOC and other central banks from here to Timbuktu are going to become net purchasers of gold in the years ahead. In the future, only central bank suckers and losers will be net sellers of gold. (Take note, IMF.)

“And people who own physical gold, as well as shares in well-managed mining companies, will benefit greatly. Need I say more?”

The plane coming back from Buenos Aires wasn’t full. Air traffic is down 11% from a year earlier.

And this was before people began worrying about swine flu.

Today, commentators are fretting about how a serious epidemic would affect the “recovery.” They needn’t worry. First, because there is no genuine recovery to worry about. Second, because if a serious epidemic were to hit the world, economic growth would be the least of our problems.

Until tomorrow,

Bill Bonner

Source: Voodoo Economics

However, what little gains there were, evaporated by the close of New York electronic trading at 5:15 p.m. yesterday afternoon.

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Silver didn’t show much activity until 3:00 p.m. in Hong Kong yesterday afternoon. From there, it was an eleven-hour battle for it to add about 35 cents to the price…with the peak coming during lunch time in New York. From there it got sold off hard…and in the next four hours all these gains disappeared as well. One might have thought that there was some sort of prize for the traders from JPMorgan (NYSE:JPM) et al, for getting the Thursday closing prices in gold and silver as close as they could to the closing price on Wednesday.

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Yesterday was options expiry on the Comex for the April contract…and I believe that today is options expiry in the Over-the-Counter [OTC] market. That’s one of the reasons that volume has been so heavy this week, as traders are rolling their positions out of the April contract into June, in order to avoid having to take delivery. We will find out how many gold contracts are standing for delivery in April, when first notice day rolls around next Tuesday…March 31st…the last day of the month.

The boyz didn’t get the gold price down very much into this options expiry date. A lot of options expired in the money…and if these option holders wish, they can now convert their options into futures contracts and stand for delivery. It will be very interesting to see how many contracts will be in that position come Tuesday morning.

Today is also the last delivery day of the month for silver in the March contract. As of this writing, there are still about 180 contracts left to deliver…900,000 ounces. There were 99 contracts delivered yesterday…with the big issuer being Prudential Bache [98]…and there were eight different stoppers…each taking a little chunk.

Open interest changes for Wednesday’s big day were as follows. Gold o.i. rose 3,028 contracts…which is not a lot considering the volume and the price action. Silver o.i. actually fell 88 contracts. Upon checking the March 25th price swings [red line] on the silver graph above, I suppose anything was possible. Unfortunately, none of this activity will be in today’s Commitment of Traders report. We’ll have to wait until the COT report on April 3rd for that.

In other gold and silver news, I’ve already covered Thursday’s deliveries in silver. There were only a handful of contracts delivered in gold…and there might be a small handful delivered today as well. No changes in the U.S. Mint’s gold and silver eagles numbers. The Comex silver warehouse stocks were not updated for Thursday. There were no additions to GLD yesterday, but some of the huge amount of silver that’s owed to the SLV put in an appearance. The total added yesterday was 116.49 tonnes [3,745,000 ounces troy]…bringing the new record-high total up to 8,296.93 tonnes of silver. According to an e-mail I received from Gene Arensberg…”SLV has now exceeded the amount of silver foreseen in the Custodian Agreement with JPMorgan Chase, London. It currently holds 266,752,671.5 ounces. The custodian agreement was for up to 264,550,265 ounces. As of today, SLV has not filed either an amendment of the current custodian agreement or announced a new custodian or sub-custodian.” Gene was also kind enough to provide an updated graph of the current holdings of the SLV ETF since its inception. I thank him for that…and the associated commentary.

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And lastly, from the usual N.Y. Commentator, comes this bit of news…”Giving no particular reason, The Gartman Letter added a ‘unit’ of gold this morning, explicitly not hedging into the Euro, as its other two units are. Those familiar with the well-informed character of TGL would not have been surprised to see a serious effort to rally gold on the N.Y. open. Most would have been impressed though, by the fury of the selling response: estimated volume was 105,902 lots by 10 a.m., as efforts were underway to reverse the gain.” [Which they subsequently accomplished. - Ed]

Today’s first story is from the Financial Times in London. The headline reads: “Swiss banks ban top executive travel”…”because of fears they will be detained as part of a global crackdown on bank secrecy.” This short article is well worth the read, and I urge you to do so. I thank Craig McCarty for sending it to me. The link is here.

The next story was also sent to me by Craig McCarty. It’s a Bloomberg piece with the headline “Brown ‘Terribly Fragile’ After Bond Auction Flops”. “The notion that Brown is leading us to the promised land is laughable. He cannot get to grips with how other people see this country now, as the sick man of Europe,” said Ruth Lea, economic adviser to the Arbuthnot Banking Group Plc (LON:ARBB) in Solihull, England. The link is here.

In keeping with the last story, here is an incredible youtube.com video of the European Parliament speech by Daniel Hannan…Conservative MEP for the South East of England…and author of The Plan: Twelve Months to Renew Britain. He absolutely rips Brown a new one right in front of his peers…just destroys the guy. He and Ron Paul would be soul mates. There has to be a way for him to deliver the same speech to Obama et al! I thank Steven Talsness for sending it to me. It’s worth the listen….trust me! The link is here.

Today’s last offering comes from the website of National Public Radio. The name Frank Partnoy may not mean a lot to you…but it speaks volumes to me. “In his 1997 book FIASCO: Blood in the Water on Wall Street, Partnoy detailed how derivatives — financial instruments whose value is determined by another security — were being used and abused by big financial firms. Partnoy used his experiences as a derivatives trader at Morgan Stanley (NYSE:MS) to give the book an insider’s perspective.” If you really want to know how this derivatives disaster finally brought down Wall Street and the financial system, this is the article to read. I read the book when it first came out, so when the crash happened, it was no surprise to me. This is a long read…but well worth your time…and I thank Ted Butler for sending it to me. It’s entitled “Frank Partnoy: Derivative Dangers”…and the link is here.

The intervention we are seeing in the markets right now is blatant and strong — apparently hoping to convince J.Q. Public that the train is leaving the station. There is a strong and concerted effort by the Fed, the administration and their cooperatives to paint this tape higher and higher, without any pull back. – Dennis Slothower, Stealth Stock Daily…explicity citing Wednesday’s last-hour rescue rally at 3:00 p.m.

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Talking about the Dow’s Wednesday ‘last-hour rescue rally at 3:00 p.m.’…how about the Dow’s Thursday ‘last-hour rescue rally’ at precisely the same time!!! As for gold and silver…with options expiry out of the way…who the hell knows. Something seems to be afoot…but with the U.S. government up to its neck in market management these days…it’s anyone’s guess. And…if I said for sure one way or another…then I’d be guessing too.

Have a great weekend…and all of us at Casey’s Daily Resource Plus look forward to seeing you here on Saturday.

Source: And Then There’s This…Friday, March 27th, 2009

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Silver, as usual, was more volatile. It lost about 20 cents from the opening of trading in Sydney until the Hong Kong close…and then rose until shortly after the London silver fix [12:00 noon in London]. From there it came under fairly substantial selling pressure. It dropped 25 cents in two hours, but was off like a rocket [along with gold] at 9:00 a.m. Its peak price of the day came a little later than gold’s…before its price was capped as well.

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Open interest for Wednesday showed that gold o.i. dropped another 1,558 contracts to 369,763. In silver, o.i. shrank a smallish 379 contracts to 91,881. These aren’t big numbers, but as Ted has pointed out to me on several occasions, the true decline in the bullion banks’ short positions can be masked by spreads and the purchase of long contracts instead of covering their short positions. The COT report at 1:30 Eastern will tell us a lot. Ted Butler also pointed out to me yesterday, that Thursday was the third or fourth day in a row where March silver has been in slight backwardation to the May contract. It was two cents the ounce on Tuesday…but has narrowed to a penny and a half since then. It’s something that both he and I will be keeping an eye on as the month progresses.

In March Comex deliveries, there were only 89 gold contracts delivered and none at all for silver. Currently there are 135 contracts in gold still to be delivered in March…plus a rather healthy 827 contracts to be delivered in silver. This precludes any other deliveries in either metal that may be added between now and the end of the month. Over at the U.S. Mint, another 8,500 one troy ounce gold eagles were stamped out, bringing the March total so far to 55,500. There was no reported change in silver eagles. Silver inventories at Comex-approved depositories rose a smallish 116,887 ounces yesterday. The GLD ETF added 108,000 ounces yesterday to a new record high of 1,041.53 tonnes. The SLV ETF was unchanged. And the precious metals stocks put in a respectable performance yesterday.

The usual N.Y. commentator had the following things worth sharing yesterday…”An ongoing oddity in the world of gold recurred today with a Chinese announcement carried by Reuters that the country produced 60.461 tonnes of gold in February…up 107.6% from January. The Chinese Statistics Bureau said Jan/Feb ‘09 output was 14.3% above ‘08.” Then there was this…”This morning in a curious remark, The Gartman Letter, which is currently out of gold [Dennis dumped his remaining long positions on Tuesday. - Ed], said: ‘We are flat and we are nervous. We are nervous in that we fear always that gold shall simply choose to stand up and rush higher, leaving us behind. Why we are that nervous is another question for another time, but suffice it to be said that we are…and we give voice to that concern here this morning.‘…which casts an interesting light on this morning’s sudden $24+ jump.”

Yesterday was the second day in a row that gold pulled a little further away from the 50-day moving average. Is the bottom in? I wish I knew. Ted and I have had some rather lengthy discussions about this during the last couple of days. The big drops in gold and silver prices over the last two weeks have made no appreciable impact on the huge short positions carried by the ‘4 or less’ bullion banks in the Commercial category of the COT…so obviously there was no massive liquidation of long positions by the tech funds/small traders either. We don’t know if the bullion banks either can’t do it…or aren’t putting a lot of effort into the attempt. Maybe they’ve painted themselves into that proverbial corner and are really trapped this time. Ted postulates that maybe the players have changed in the Non-Commercial category…and these new players, instead of being ‘black box’ types that sell on moving averages, have been replaced by other participants with longer-term investment horizons. We shall see, as they say, in the fullness of time.

I note in a Dow Jones story [posted at Kitco] that January gold production in South Africa was down 8.7% from the same month in 2008. In a story about fourth quarter gold dehedging posted at miningweekly.com…”the value of the global hedge book fell by 2.13 million ounces, according to GFMS. Dehedging was concentrated among four main companies, led by AngloGold Ashanti (NYSE:AU) and Barrick Gold (NYSE:ABX). For the year as a whole, 11.52 million (delta adjusted) ounces were removed from the global hedgebook in 2008…leaving 15.52 million ounces left at the end of 2008…of which AngloGold Ashanti and Barrick hold two thirds of the remaining total.” GFMS went on to add that “Gold dehedging will slow in 2009, and a return to hedging is unlikely.” [Note to GFMS: "Unlikely"...ya figure? You guys certainly have a keen grasp of the obvious, as hedging was the stupidest idea ever invented. - Ed] And lastly, in a Bloomberg story headlined “Geithner Seeks ‘Forceful’ G-20 Action, More IMF Funds”…comes this old canard…”The Obama administration soon will also push Congress for legislation that allows the IMF to ‘mobilize’ its stockpile of gold, Geithner said yesterday.”

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Because my Thursday rant disappeared into cyberspace yesterday [mostly my own doing] I have quite a few stories today. On Wednesday, the Bank of England announced that it was buying ‘gilts’…British government bonds…so monetization is on in earnest in Britain. Today’s first story is from the Financial Times in London and was posted after the New York market closed yesterday. The headline reads “Swiss action sparks talk of ‘currency war’.” It appears that, in beggar-they-neighbour fashion, the Swiss National Bank has moved to weaken the Swiss franc by monetizing SFr corporate bonds. I thank Craig McCarty for the story. The link is here.

In a Bloomberg story from yesterday comes this headline…”China New Yuan Loans More Than Quadruple on Stimulus”. “M2, the broadest measure of money supply, climbed 20.5 percent from a year earlier, the fastest pace in more than five years, after growing 18.8 percent in January.” This is hugely inflationary. Once again I thank Craig McCarty for this story…and also the next one as well. The link is here.

And in yet another Bloomberg story comes this headline…”ECB Approaches Zero Rates by Stealth With New Weapon” “Trichet is allowing the ECB’s deposit rate, which lenders earn on overnight deposits with the central bank, to usurp the benchmark refinancing rate and become the main driver of short-term borrowing costs. At just 0.5% percent, the deposit rate matches the Bank of England’s key setting and is only a step away from the zero-to-0.25% range the Federal Reserve uses.” The link is here.

The last two stories are ones that disappeared into cyberspace in the wee hours of Thursday morning. The first is a Reuters story filed from Zurich. The headline read…”Swiss investors pile in on money markets, gold”…”data also shows that the fund with the highest inflows was the Zuercher Kantonalbank gold ETF which pulled in 523 million francs. The next major beneficiaries of inflows were individual money market funds. Julius Baer physical gold funds, ZKB silver and ZKB platinum also saw strong inflows. [These Swiss ZKB funds are the ones that I report the changes on every week on Monday or Tuesday. - Ed] The link is here.

In a story posted at platts.com is this headline…”Central banks were January net buyers of 1.1 million oz of gold: CPM”. It’s only five short paragraphs. The last paragraph is of interest, where the CPM spokesperson says “It seems highly unlikely that such large net purchases of gold by central banks will continue…” and then in the next sentence he goes on to say “Others are buying small volumes and considering larger purchases…” So is CPM bearish or bullish? [Note to CPM Group: So, Jeff...which is it? - Ed]. The link is here.

When you see that trading is done, not by consent, but by compulsion – when you see that in order to produce, you need to obtain permission from men who produce nothing – when you see money flowing to those who deal, not in goods, but in favors – when you see that men get richer by graft and pull than by work, and your laws don’t protect you against them, but protect them against you – when you see corruption being rewarded and honesty becoming a self-sacrifice – you may know that your society is doomed. – Ayn Rand, Atlas Shrugged (1957)

So…here we are. The die is cast. First the British, now the Swiss of all people…and soon all central banks…will be monetizing debt. The printing presses [or their electronic equivalent] will be running white hot. Save yourself while there’s still time. Buy all the physical gold and silver you can find…and afford. The hyperinflation of Zimbabwe is in our future somewhere.

All of us at Casey’s Daily Resource Plus look forward to seeing you here on Saturday.

Source: And Then There’s This…Friday, March 13th, 2009

As per usual, either [or both] JPMorgan (NYSE:JPM) and HSBC USA (NYSE:HBC) should be considered prime suspects.

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Both the gold [above] and silver [below] charts show where they pulled their bids on three separate occasions during the day, and whatever sellers there were…were forced to sell into a vacuum. It’s the ’same old, same old’.

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As I said on Friday, the 50-day moving averages had still not been taken out to the downside on either metal. And as I also pointed out, despite the $2 decline in silver prices in the last week or so, the COT in silver actually showed [unbelieveable?] deterioration…and I feared that because of the huge Treasury auction this week, that the boyz still had the ammunition [tech and small trader longs] to take gold and silver down hard. They may be in the process of doing just that. Will they? Can they?….sure, if they want to. Look what they did yesterday. A quick message to their floor traders to fold their arms…or the electronic equivalent thereof…and “Bob’s your Uncle!”

As of yesterday, the 50-day moving average for silver was $12.30…and for gold it was $901.34. These are chip shots for the boyz…and if they really play their cards right we could get a ’super spike’ to the downside in both metals. It wouldn’t last long, but it would be enough to force the tech and small traders holding longs, to liquidate them. Let’s see how the PPT and JPMorgan et al play this over the next couple of days.

Open interest changes for Friday, you ask? Gold o.i. rose 3,418 contracts to 373,399 and silver o.i. was down 198 contracts to 92,109. Another 119 contracts were delivered in gold yesterday…now up to 1,383 for the month. And in silver, another 135 contracts were delivered…with the Bank of Nova Scotia (NYSE:BNS) issuing them all…and JPMorgan [64 contracts] and Goldman Sachs (NYSE:GS) [39 contracts] being the largest stoppers. Comex silver warehouse stocks fell a hair over 500,000 ounces…and there were no changes to the GLD and SLV yesterday either. However, over in Switzerland, their gold ETF added another 50,011 ounces during the prior week…and their silver stash added another 1,189,590 ounces. Now don’t forget that in the ‘week that was’ the SLV took out about five million ounces at the same time that the Swiss were adding to their stockpile. No wonder Ted Butler thinks that something isn’t quite right with the SLV. I also noted that the U.S. Mint has once again updated their numbers for the gold and silver eagles. For March in gold, they are now up to 47,000…and in silver it’s now up to 1,075,000. And lastly…in an e-mail from Ted Butler yesterday morning came this little ‘nugget’…if you’ll pardon the pun…”I noticed some unusual trading in the March/May silver switch today…and see March closed a penny premium to the May. There was definitely demand for the delivery month [March] today.” Well, golly gee, if there was big silver demand yesterday…with silver slipping slightly into backwardation…that totally explains why the price got hammered by JPMorgan…LOL!!! Take the blue pill…then call me when you’re ‘10 feet tall’.

In ‘other news’…I see in a Bloomberg story on the weekend that Bernanke said that the Fed will deploy ‘all tools’ for economic revival. [Note to Ben: Does that include beating the crap out of the gold and silver markets? - Ed] I note that LIBOR and the TED spread are starting to sneak back up a bit. And I note that AIG played the Armaggedon card yesterday…give us another $30 billion “or else”. In a story at forbes.com “Zhang Guobao, head of the National Energy Administration, said that China should use part of its nearly $2 trillion in foreign exchange reserves to buy more gold, oil, uranium, and other strategic commodities.” In a story posted at The Independent out of the U.K…“A silent US$1 Trillion ‘Run on Britain’ by foreign investors was revealed yesterday in the latest statistical releases from the Bank of England. The external liabilities of banks operating in the UK fell by $1 trillion (£700bn) between the spring and the end of 2008, representing a huge loss of funds and of confidence in the City of London…Some $597.5bn was lost to the banks in the last quarter of last year alone, after a modest positive inflow in the summer, but a massive $682.5bn haemorrhaged in the second quarter of 2008 – a record. About 15 per cent of the monies held by foreigners in the UK were withdrawn over the period, leaving about $6 trillion. This is by far the largest withdrawal of foreign funds from the UK in recent decades – about 10 times what might flow out during a ‘normal’ quarter.” And lastly, I note with some alarm what appears to be the resumption of sectarian violence in Northern Ireland…something none of us want to see. And in a Financial Times story that I shamelessly stole from the King Report last night, I see that “North Korea has cut its military ‘Hotline’ between them and Seoul…and has put their one million man army at ‘battle stations’…ratcheting up tensions as south Korean and U.S. troops began war games that Pyongyang warned could spark open conflict.” Don’t sell your gold just yet.

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Because of the weekend, I have five stories today. The first one is posted at news.yahoo.com. The headline reads “Too big to fail? 5 biggest banks are ‘dead men walking’.” You will carefully note in the second paragraph, the names JPMorgan and HSBC Bank USA…the two U.S. banks that have 98% of all the precious metals derivatives…and are, without doubt, the ‘2 or less’ or ‘3 or less’ U.S. banks stated by the Bank Participation report as holding the vast majority of short positions against gold and silver on the Comex. Queston: What happens if they’re allowed to fail. The short answer is…I don’t know. So’s the long answer. The link is here.

The next story is from The Telegraph in London. This time it’s NOT written by Ambrose Evans-Pritchard. You’ve read and admired his work dozens of times. Now you can see and hear Ambrose Evans-Pritchard, international business editor of The Telegraph in London, as he talks about gold with the Robert Miller of Telegraph TV. Evans-Pritchard says gold has decoupled from commodities, has regained its position as an international currency, and likely will continue to do well as central banks strive to avert debt deflation. The link is here.

The third story is from Bloomberg TV [not Bloomberg USA...probably the Far East/Australia - Ed] In the video interview, doubts are expressed about the gold ETFs…and silver price management by only one or two banks. The interview [which is worth watching] is imbedded in a GATA release that is linked here.

The next story is from The Wall Street Journal and is headlined “Bearish Big Investors Catch Gold Bug”. Unfortunately, as the article goes on to state, these “big investors” are purchasing mostly paper gold…not the physical metal itself. I hope you, dear reader, have not fallen into this trap yourself. If you have, you should know better by now. The link is here.

And lastly comes a story from the Financial Times in London. The headline reads “Barrick founder sets no limits on gold price.” Chairman Peter Munk goes out of his way to qualify any enthusiasm he shows for the product his company has been mining for decades. It’s underwhelming to read…but you should anyway…and the link is here.

When the great ship Titanic made her maiden voyage across the North Atlantic and its blinded leader struck the iceberg, it would have been absurd to announce: “All hands on deck to man a bucket brigade; this ship is too big to fail!” To require men, women and children to try to bail out the Titanic until its final plunge, while its captain and officers took refuge in the few lifeboats is not unlike what taxpayers are being forced to do in this financial meltdown. Just as then, the correct response would be not “too big to fail,” but instead, “Too Big to Bail.” – Charles Schisler, Buenos Aires Herald, March 7, 2009

As I put this report to bed in the wee hours of Tuesday morning, I see that both gold and silver are under ‘pressure’ again…right from the open in Sydney…to the open in London. As I explained before, there is no secret as to why this is happening in the face of ‘the end of the world as we know it.’ Two U.S. bullion banks hold all the cards. When they’re through flushing out all the longs they can get…the ‘bottom’ will be in. The CFTC does nothing. Your gold and silver mining companies do nothing. And we, the investors, are left twisting in the wind.

See you on Wednesday.

Source: And Then There’s This…Tuesday, March 10th, 2009

Silver, which I mentioned yesterday was the metal that the bullion banks are really after, got it in the neck again. It traded exactly the same as gold through Far East trading…smallish rally into the London open…hit for 30 cents…and then proceeded to trade sideways until the London p.m. gold fix. From that point, the floor traders working for the big U.S. bullion banks in the Comex precious metals pits, got the word to pull their bids…and they did exactly that. Silver dropped 50 cents in three tiny little waterfall declines spaced over three hours and change. Silver gained about 20 cents back between the low and the close of Globex trading. The top for silver was the London open…and the bottom came shortly before floor trading ended on the Comex. As I said once before this week…no profit-maximizing seller ever trades like this…ever!

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In keeping with the other open interest numbers we’ve seen this week, the o.i. numbers in gold for Wednesday were once again from the Twilight Zone. Gold open interest was higher again. This time by only 642 contracts…but up nevertheless. Silver took a big drop…finally. It’s o.i. dropped a very large 3,165 contracts…pretty well negating Tuesday’s big jump in open interest. It was interesting [and a bit surprising] to see the HUI finish in the plus column yesterday.

The COT report will be issued at 1:30 p.m. Eastern time today…and to be perfectly honest, virtually nothing of what has happened this week will be in it. The bullion banks went to work on the prices on Tuesday…the COT cut-off date…but they have a cute habit of not reporting things on time…and it will of interest to see what, if anything, shows up in this report. We’ll have to wait until next Friday…March 6th…before we have a clear picture of what really happened this past week…and also [hopefully] including what happens on Monday and Tuesday of next week.

In other gold news…yesterday was the last delivery day for February gold…and 276 contracts were delivered, with Bank of Nova Scotia (NYSE:BNS) being the big issuer [209 contracts]…and Goldman Sachs (NYSE:GS), once again, being the big stopper [185 contracts]. The Comex warehouse silver stocks declined 306,504 ounces. GLD added 10,000 ounces and SLV added nothing. I see in arabianbusiness.com that a “Gold-backed shariah-compliant tradeable security is set for a Dubai roll-out next week.” And lastly, I mentioned yesterday that Dennis Gartman had gone long ‘one unit’ of gold on Wednesday. Well, he sold it on Thursday. Here’s the usual N.Y. commentator on the subject…”,The Gartman Letter abruptly sold the gold unit bought yesterday, disliking the day’s action. Abrupt moves by this party are usually significant.” We’ll see. Oops…one more thing! It’s been reported on the Net, and confirmed by my bullion dealer, that China is no longer making silver pandas.

The ‘other news’ yesterday was off-the-charts terrible. The world’s economic, financial and monetary system is imploding at a frightening speed. From the German paper ,i>spiegel.de, is this headline…”The Steep Decline of the British Economy”. In a story at marketwatch.com…”New home sales plunge 10.2% in January to a record low”…”The inventory at the end of January represented a record-high 13.3 month supply at the January sales pace.” And in another marketwatch.com story “GM fourth quarter loss widens to $9.6 billion”. Reuters…”U.S. jobless claims up, continued claims at record”. Reuters…”U.S. durable goods orders fall to 6-year low in January”. Reuters…”U.S. list of ‘problem banks’ soars nearly 50% to 252 in 4th quarter” reports FDIC. [Thousands of banks will fail before this is all over. - Ed] Bloomberg…”JPMorgan Chase & Co (NYSE:JPM) said it is cutting up to 14,000 jobs, more than previously disclosed, as it tries to reduce costs in the face of a slumping economy and higher credit losses.” And lastly…Bloomberg…the headline reads “California’s Newly Poor Push Social Services Network to Brink…The worst financial crisis in seven decades is forcing thousands of previously middle-income [$60-100,000 annually] workers to seek social services, overwhelming local agencies, clinics and nonprofits.

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The first story is about commercial real estate space in New York City. It appears that the biggest banks and security firms have already given up 8 million square feet of office space…and the situation is only going to get worse. The Bloomberg story entitled “Banks Vacate Towers Pushing Empty NYC Space to Record”…is linked here.

The next story is from Reuters out of Zurich. The headline reads “Swiss party wants to punish U.S. for UBS probe”…one of the things that the Swiss People’s Party [SVP] wants to do is repatriate all Swiss-owned gold that is currently being held in the United States. It would be interesting to see them try. The link to the story is here.

Apparently a story about gold that I ran yesterday out of The Wall Street Journal required a subscription to read…so all you got was the first couple of pargraphs. Here’s the whole story entitled “Gold coin shortage as demand soars”. The link is here.

And lastly, as I mentioned earlier, there was a story in the German Paper Spiegel about how quickly the British economy was falling apart. Here’s another story about that very thing. It’s from The Telegraph in London and is headlined “The people say they’ll keep calm and carry on…but for how long?” The link is here.

The popular notion that an increase in the stock of money is socially and economically beneficial and desirable is one of the great fallacies of our time. – Hans F. Sennholz

I see in the King Report issued at midnight last night that Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities, says that “U.S. GDP could conceivably drop 10% this quarter.” And Mervyn King, the Governor of the Bank of England, has said that it’s “impossible to say” how much capital will be required to shore up the British banking system.” The same could be said for the rest of the world’s banking system as well. As a matter of fact…nothing can save the financial system now. The world is going to hell in the proverbial hand-basket…and it’s only a matter of time until we see a total collapse…and probably not too much time, either.

Have a great weekend…and take part of it to track down as much physical gold and silver you can find…and afford.

Source: And Then There’s This…Friday, February 27th, 2009

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Silver was far more volatile. The price rise at the London open was impressive until it, too, ran into the same seller at the London a.m. fix. This time the decline was aborted at the Comex open, and the price rose once again. But every rally attempt was crushed, with the bottom…like gold…coming at the close of London trading. Silver finished up on the day, but it was never allowed to seriously challenge its highs of the London a.m. fix. As I’ve said so many times in the past…no profit-maximizing seller ever sells like this in either gold or silver…ever!!!

Tuesday’s huge rally in the gold price…that was stopped dead in its tracks shortly after London closed…had a disturbingly large increase in open interest to go with it…up 13,772 contracts to 331,507. That’s a lot! Was this the ‘4 or less’ bullion banks increasing their shorts…or the ‘9+ traders’ (Ted Butler’s raptors) taking profits on their long positions? Maybe it was a combination of both. Friday’s Commitment of Traders should tell us more…and I doubt I’ll be thrilled with what’s in it. In silver, o.i actually fell 674 contracts to 86,340…so Tuesday’s attempted rally in that metal had all the signs of short covering.

In gold news, I see in a story at ninemsn.com.au that Newcrest Mining in Australia reported a 21% fall in gold production in the three months to 31 December. Newcrest said it mined 382,584 ounces in the second quarter versus 456,618 ounces reported a year ago. And in a story at indiatimes.com, I note that there is yet another report as to how much gold was imported by India in 2008. This is the fifth number I’ve seen in the last three weeks on what gold imports into India were…all were different. This story says that “gold imports in India for 2008 dipped by almost 47% to 402 tonnes.” Maybe we’ll get another number next week. Watch this space! And in a story in the Globe and Mail (Toronto)…Kinross “unveiled a bought deal financing Wednesday that could raise as much as US$414.6-million.” Looks like they’re on the hunt for a cheap acquisition. And lastly, I see that the gold ETF, GLD (NYSE:GLD), has added another 7.65 tonnes to bring it up to another new record of 803 tonnes. There was no change in the silver ETF, SLV (NYSE:SLV)…but Ted Butler feels that based on volume, the fund is still owed between 2-4 million ounces.

In ‘other news’ I noted that along with Britain and the United States, Japan is about to fire up their printing presses. In a Bloomberg story just filed…”The Bank of Japan may today offer to expand corporate debt purchases to prevent a credit shortage from deepening the recession.” The new meaning of this is “quantative easing.” Debt monetization is just money printing by another name.

Like yesterday, I have four stories again today. The news from across the Atlantic is simply unbelievable. You couldn’t make up stuff like this! The entire banking system is done for over there. Many nations are on the brink…and some have already gone over the edge. Iceland and Ireland come to mind. You need a program just to keep up. I urge you to read all these stories when you have the time.

The first story is from The Telegraph in London. As usual, it’s from their international business editor, Ambrose Evans-Pritchard. The headline says it all…”Monetary union has left half of Europe trapped in depression”. The link is here.

The next story is from timesonline.co.uk. The essay is headlined “World Agenda: riots in Iceland, Latvia and Bulgaria are a sign of things to come”. [One can only hope that all citizens of all nations finally wake up to what's happening to them. – Ed] The link is here.

In this story, another from The Telegraph in London, the headline reads “Gordon Brown brings Britain to the edge of bankruptcy”. On Wednesday, investment guru Jim Rogers said: “Sell any sterling you might have. It’s finished.” The story, which is well worth the read, is linked here.

And lastly, another story from The Telegraph, and once again it’s an Ambrose Evans-Pritchard piece. This looks at the British banking crisis from another perspective, and it shows the untenable position that the British government finds itself in. No matter what option they choose…they’re screwed. The headline reads “U.K. cannot take Iceland’s soft option” and the link is here.

The country stands on the precipice. We are at risk of utter humiliation, of London becoming a Reykjavik on Thames, and Britain going under. Thanks to the arrogance, hubristic strutting and serial incompetence of the Government and a group of bankers, the possibility of national bankruptcy is not unrealistic. – Iain Martin, The Telegraph, January 21, 2009

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In case you haven’t got the message…the current world financial and monetary system is done for. That’s why the U.S. government is sitting on the precious metals prices at the moment. But it’s still the only game in town as far as wealth preservation is concerned…and you can’t own too much gold or silver bullion. They will be just about the only things left standing when the current system finally passes into history…however long that takes. And it won’t be much longer at the rate it’s going now.
All of us at Casey’s Daily Resource Plus look forward to seeing you here on Friday morning.

Source: And Then There’s This…Thursday, January 22nd, 2009

It is a government’s duty to provide its people with opportunity. So we must thank Alistair Darling for giving us with his wise words on Saturday what has to be the easiest money-making opportunity of the year: to sell the pound as soon as the markets opened on Monday. Not since Northern Rock a year earlier has such an obvious trade presented itself.

I said in MoneyWeek’s New Year predictions for 2008 that I wouldn’t rule out a sterling crisis later in the year. That moment is looking more and more likely. If it is the government’s intention to devalue sterling as quickly as possible, it’s hard to see how they could improve on the job they’re doing.

Then again they may just be incompetent.

The story behind the pound’s devaluation

Let’s start with some charts of sterling. Two pictures that each tell a thousand ugly words. The pound against the euro:

And against the dollar:

The downturn accelerated in October-November 2007, shortly after Gordon Brown announced that he would not be holding a November election. The horrid realisation must have dawned on forex traders that we had three more years of the bloke and they began hitting the sell button. But it was an orderly decline. ‘He can’t last three years, surely?’ they thought.

Then as August began, the grim reality hit home that not only was he coming back from his holiday, but that he had no intention of resigning, despite dire Scottish election results. We had what is known as a mad rush for the exit, punctuated by a brief moment of respite as somebody won another gold medal, then downwards into the abyss.

Just as you thought you could take a breather last Saturday – perhaps watch a bit of footy or take a stroll by the river – Darling has his Road-To-Damascus-Meets-Trisha moment and onwards and downwards went the pound.

Anything that you, me or my Aunt Joan own which is denominated in sterling has lost 15% of its value in a year in currency alone.

Devaluing sterling effectively devalues the Government’s debt, so you might think for a second it’s deliberate. But you know deep down it isn’t. It’s that old Labour favourite: incompetence.

The Government can’t hope to save the housing market

Do they honestly think they can save the housing market? With this new £175k stamp duty threshold, I feel sorry for anyone who is struggling to sell a property currently valued at £250k. Before you can say party political broadcast, they’re going to be getting a whole load of offers at £175k, plus some cash for curtains and white goods.

Interest-free loans to help low earners to get on the housing ladder! If they’re low earners, why are you trying to get them into debt? That is highly irresponsible, is it not? How will they pay that debt back? They might go on to become high earners, yes, but then they might not – and with this lot in charge of the economy the latter is more likely – and what then? This is imprudent lending – the very cause of the problem.

Read the full article

Source: How House Prices Could Fall by 75% from Here, in Gold Terms

Not only is the British economy about to get really nasty, but our personal finances have now fallen into even worse disrepair than at any time in our national history. Which means that the upcoming recession will bite a lot harder, and for a good while longer, than most peoples’ worst fears…

UK personal debt mountain has been growing at £254m per day

By the end of July this year, total UK personal borrowing had surged to an eye-watering all-time time high of £1.45 trillion, of which just over £1.2 trillion was mortgage debt, according to the money education charity Credit Action. The overall total has risen £93 bn – almost 7% – over the last 12 months. Another way of looking at it is that the loan mountain has been growing at £254m per day (including Sundays).

Source: Credit Action

In fact personal debt has now pulled well clear of Britain’s GDP of just over £1.4 trillion. In other words, the country no longer produces enough each year to pay off what its citizens owe personally, let alone all the debt the government’s racking up.

And though the growth in household borrowing has showed signs of slowing, Credit Action tells us that the average debt, including mortgages, has risen to over £30,000 per UK adult. Over the past 12 months the average interest bill paid by each household was some £3,900 – all out of an average wage of less than £25000 per annum, according to National Statistics.

This is where that debt mountain starts to look very menacing. Over the last 15 years personal debt has soared 260%, massively outstripping the growth in average wages of ‘just’ 75%. That didn’t seem too painful when the economy was going well, and of course interest rates are lower these days than they were in 1993. But as we’ve said at Moneyweek many times, the good times are very much at an end. Now Messrs Mervyn King and Alistair Darling are singing off the same hymn sheet.

Read the full article

Source: Our Personal Finances Are the Worst They’ve Ever Been

Things appear to be going from bad to worse over in Britain. The latest growth forecasts from the OECD say the country is already in recession, and is the only major economy to reach this dreaded condition…so far. Ben Traynor at Fleet Street Daily says the outlook is grim for the the economy, the FTSE index and the British pound. But there are still ways to make profits when times are hard.

This from Ben:

Theo Casey and I have been taken to task by a reader. He writes:”Please, don’t encourage politicians to lie or be economical with the truth. It should not be acceptable to let them lie.”

It’s a fair one. You’ll recall that on Monday we were talking about Alistair Darling’s weekend truth outburst. The chancellor had told the nation what we all already know – that the economic situation is bleak.

“What Darling has done is confirm fears,” wrote Theo. “Consumers, investors and businesses that were not previously worried, now are. They have been told from the highest office in the land that it’s time to cut back.”

If you regularly read Fleet Street Daily, you’ll be used to hearing that things are bleak (I don’t especially enjoy writing as much, but the way things are are the way things are). But, believe it or not, there are some people who still set store by the official government forecast that the economy won’t enter recession. So you’d expect negative talk from the chancellor to have an economic impact (indeed it did. The FTSE 100 and the pound fell hard on the back of Darling’s comments).

But I take our reader’s point on board. We don’t encourage the chancellor to lie. We’re just acknowledging that his moment of honesty has made a bad situation that little bit worse.

Not that it makes much odds this late in the game. Darling could talk the economy up, down or sideways for all the difference it would make now – as an influential new report demonstrates.

The Organisation for Economic Co-operation and Development (OECD) has published its growth forecasts for the G7 group of leading economies. Here’s what the OECD predicts for the rest of this year:

GDP Growth in the G7 countries (annualised quarter on quarter growth, %)

	2008 Q3	2008 Q4
Japan	2.4	1.4
United States	0.9	0.7
Canada	0.8	2
G7	0.8	0.7
Euro	0.4	0.8
France	0.2	0.6
Germany	0	0.1
Italy	0	0.6
United Kingdom	-0.3	-0.4

Source: OECD

As you can see, it reckons the UK has already slipped into recession. By the end of this year, according to the forecast, we will have posted two consecutive quarters of negative growth.

Alarmingly, the OECD reckons Britain’s is the only major economy that will hit recession this year. So if they haven’t already, the newspapers will soon be raiding their archives for those ‘sick man of Europe’ articles penned 30 years ago.

One thing is abundantly clear. Going forward, Britain will be a bad place to do business. This, we expect, will have a negative impact on investments.

But there is protective action you can take. We’ve already identified one major global trend which British investors can exploit. This trend is set to continue regardless of what happens to the British economy. Find out here how you could profit from this trend.

And later this week I’ll be unveiling a brand new report that offers you an alternative to stocks. We expect the investment we’ve identified will actually benefit as Britain’s economy weakens.

Source: Can Telling A Lie Save The Economy?