For PM investors, the past few days have been most trying and inexplicable.  Economic conditions have been almost perfect for a major move upward and yet in reality gold and silver have been attacked viciously.  Take today for instance, just hours before UBS issues a 19 billion write-down and terminates their CEO, while Deutsche bank issues a 3.5 billion write-down, gold and silver drop sharply in Asian trading.  The odds of gold dropping on these financial calamities are about nil as the precious metals market was subjected to a pre-emptive strike involving dishoarding of European central bank gold.  Even the Deutsche bank CEO conservatively stated today:  “conditions have become significantly more challenging during the last few weeks.”  Therefore, why has gold been sharply sold off during this same period?  According to Ron Paul today, U.S. inflation is currently running at 17% and yet commodity prices have been dropping lately??? 

With little fanfare yesterday, 279 tranches of Alt-A transactions were downgraded.  Remember it was only supposed to be subprime mortgages that were to fall off the cliff.  In chart 1 below, we see that delinquent Alt-A mortgages are rising sharply soon to be followed by prime mortgages as home prices continue to evaporate.  Also, it is now official that the city of Philadelphia has enforced the moratorium on foreclosures (http://tinyurl.com/yqejmd).  This action will be copied by other cities and provide further stresses to banks and initiate a huge wave of costly legal activity. 

To summarize, the central banks are in panic mode as they fight for survival.  They can only print money in an attempt to buy time while simultaneously disconnecting the golden alarm bell - repeated actions from uncreative simple minds!  The photo below exemplifies the true state of the U.S. economy as it is a typical line-up for the ever increasing demand for food stamps.  Do you think those people are impressed that the DOW is rising and how would they feel about the Wall Street bail-outs?? 

Regards - VHF