Talk about letting the wind out of the sails of the Euro party boat – as mentioned yesterday, considering the fact that EURO-TARP was worth nearly $1 trillion, the fact that the Euro opened the Sunday-evening session on its high and then pretty much went lower from there, was a sign that the market was signaling the problems in Euro land are not going away anytime soon. When a currency gaps higher and then sells off from there, it is the same thing as the Forex markets collectively slapping the face of the monetary and political leaders of a nation.

The authorities may have bought themselves some time and served to prevent an immediate meltdown but the ugly truth is that for all the fanfare, the underlying disease that caused the symptoms has NOT been addressed. The problem – too many Euro zone countries have too many people living off the public dole and they can no longer afford it. Exactly how is Greece, or for that matter, some of the other weaker Euro Zone countries, going to pay off any loans or are we to believe that they can just roll the debt over and over indefinitely into the future without getting their fiscal houses in order? The slightest attempt to impose austerity measures or at the very least attempt to scale back spending, produces riots in the streets as the addicts cannot do without their fix. Yet, without such reforms, their bonds are still going to decline in value.

Keep in mind that it is many of the big European banks who own those IOU’s. Here we go again – perhaps we need a new bumper sticker to go next to that “Save the Whales” one. It could read, “Save the Banks”, and show a nasty, evil, vile speculator beating a poor, helpless, bruised and bandaged bank building with a big, giant, spiked club. That might engender some sympathy on the part of the hapless citizenry who will end up being the ones paying to bail out these fools who stuffed their coffers full of this debt in the first place and then had the temerity to complain to the governments about their losses. It seems that no matter what, the big banks end up fleecing the public.

What appears to be happening, and this might just be wishful thinking on my part, is that slowly, and almost reluctantly, investors are becoming awakened to the awful realization of the gargantuan sums of indebtedness that the West is piling up. They are still reflexively running into US Treasury debt when crises arise but it is inevitable that at some point, the same sort of scrutiny is going to be turned onto the US’s increasingly untenable debt situation. The unfortunate by-product of this flight to “safety” in US Treasuries is that it beguiles Washington politicians into thinking that there are ZERO consequences to spending money that the government does not have and thus it keeps putting off dealing with the profligate spending habits of the political class until another day. Sooner rather than later, “the other day”, will arrive with a fury of its own.

While I am pleased to see gold moving higher I am also keenly aware that its move higher is signaling that the unpleasant fallout from years of excess is going to be arriving on our own shores as well. That troubles me greatly as a father whose children will reap the pain from the aftermath of the folly of our current leadership. Again, that is the reason that we own gold – we are attempting to protect that which we have spent a lifetime in procuring from the depradations of the parasitical banking class and their cronies in positions of power. My own view is simple – banks that make poor investment choices or take on risky trades that go south should be allowed to fail. Make no mistake about it – that is what EURO TARP is all about – bailing out the banks whose coffers are full of the sovereign debt of countries such as Greece, Spain, Portugal and Italy and who are concerned that those are the next dominoes to fall.

This would eliminate moral hazard completely. Those banks that are wise, thrifty, cautious and frugal, can then buy up any of their remaining assets that have quality and the show can then go on. Taxpayers, or as is currently the case, future generations, should not unwillingly, with no say so, be forced to pay for the poor decisions of greedy fools. Saddling a future generation with debt that they did not create is not only immoral, it is wicked.

Back to gold – you can notch up yet another new all time high in the Euro gold and British Pound gold price at today’s PM Fix. Euro gold is rapidly climbing through the €900’s coming in at £960.405 with British pound gold at £824.065. By the way, Dollar priced gold also set a new lifetime high at the London PM Fix today of $1,222.50, eclipsing the all time high fix of December 2, 2009. What this tells us is frighteningly terse – investors are losing confidence in the paper currencies of the West which is another way of saying that they have no confidence in both the ruling class and the monetary overlords.

Incidentally, for you silver buffs out there, silver priced in Euro terms set a new all time high today at the Fix coming in at 1451.54. It certainly appears that those in Europe who cannot afford €900+ gold are moving some of their wealth into silver. I don’t know whether or not silver is moving higher in response to an official investigation into that market or whether it is moving higher on the back of gold or a combination of both, but its chart looks very strong. It is pushing right up against the December 2009 on the weekly chart and should it finish strong this Friday, has a real shot at moving up past $20 and taking on the March 2008 high above $21. Anecdotally, in speaking with acquaintances about where to put their money during this time of uncertainty, I am finding that many look at the price of gold and say, “I cannot afford that”. They do want to own something however so silver looks good to them as it is affordable for the average person out there. It is this role of silver as “poor man’s gold”, which is really coming into play right now especially if you look at the other alternatives such as platinum and palladium which are at $1700 and $530 respectively. Neither of those can be considered affordable for the cash strapped citizen out there but silver certainly is.

On the technical charts, today’s session high in gold is the last barrier between it and a push into a new all time high at the Comex. Rising open interest is a good sign as managed money is still moving into gold with of course, the usual suspects on the sell side. The August contract will soon be front and center as traders roll out of the June. Guys who want to break the back of the bullion banks should stand for delivery and force these paper pushers to come up with the metal. I am still amazed that this is not done especially by those seeking larger amounts of gold. The physical market has it easily within its power to end the charade at the Comex. It could well be that some actually are grateful for the wasted effort of the bullion banks’ gold capping caper as it has made gold much cheaper to own than it would have been otherwise had the price been allowed to rise without all this official sector pressure.

As I noted on the >JSMineset.com