Dear Friends,

There is absolutely no question that the world financial system, most certainly the US banking and investment banking, are built on sand foundations. It is also crystal clear that “Operation White Noise” has taken advantage of economic statistics that are unreliable to say the least to paint the gold chart. As Dan characterized the CPI figures, to anyone’s honest review they are a sad cartoon of understatement. Those who find benefit in a CPI that states inflation does not exist herald it as if it was a figure handed down from infallible hands.

Gold is a thermometer of both economic concern and the dollar level. Sometimes when circumstances allow, as was the case today, gold is manipulated to the benefit of the shorts but more so to paint a chart. This is an effort to jump up and down on the thermometer in an attempt to break it, thereby preventing the registration of the increasing infection eating away at the banking, brokerage and investment banking system that is spreading rather than relenting.

This is nothing new to those of us who lived through the 1968 to 1980 gold bull market. Today’s gold market actions occurred many, many times during gold's march from under $40 to $887.50.

It is different now only in one aspect. That is that all the concerns about the potential ability of OTC derivatives to destroy the system are active realities. There is no means to offset this problem so therefore the strategy is to hide it.

What would destroy “Operation White Noise” would be the advent of a new FASB (Financial Accounting Standards Board) to take effect today that would require real valuation of structured products. That means the truth must be told or the audit signoff could not be given by the auditing firm or their liability to stockholders and all other interested parties would be 100%. That is a compelling reason why if the new FASB does in fact occur today the jig is up and the hammer will fall in a serialized event.

Action Alert No. 02-41
October 30, 2002
Updated 11/7/02
(The following are excerpts taken from http://www.fasb.org/action/aa103002.... )

"AcSEC documents.
The Board will meet with representatives of the AICPA’s Accounting Standards Executive Committee to: —Expected to begin at 1:00 p.m.

Consider clearance of a final AICPA Statement of Position (SOP), Accounting for Derivative Instruments and Hedging”

Summary of Statement No. 157
Fair Value Measurements

Summary
This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. However, for some entities, the application of this Statement will change current practice.

More…

The inviting assumption is that those who would be severely injured by having to tell the truth would violently oppose the advent of this auditing rule.

This rule has already been adopted to take effect today. I would say that from this point forward the quarterly and certainly the annual statements of companies involved will reflect what is in fact zero value to the portfolios covered.

November 15th 2007 will go down in history as the day that “Operation White Noise” faced its first real challenge, marking the beginning of the end.

It is therefore a perfect day to work the gold market so as not to reveal the monumental nature of this day.

On top of the rotting foundation of the financial system is the conditions to come as there is no question that tax revenues will fall, causing a significant growth in the US Federal Budget Deficit at a time when the International Capital Flows Report is on a downtrend path towards a negative position.

That is the bottom line of the Formula and will cause the US dollar to fall to and through .7200 and gold to $1650.

Having now even for myself reviewed the fundamentals, I have entered the market to further increase my position, as I will each day the lemmings continue to take their traditional leap.

Paint all the charts you want. Gold is going to $1650. The pundits of the top at $850 are the same top callers who pretend to be gold experts when in fact they are nitwits that are self-creating short term prophets that in retrospect will cost you a fortune.

The price of Gold is a product of the US dollar. The US dollar is a product of the following analysis.

1. First interest rates rise affecting the drivers of the US economy, housing, but before that auto production goes from bull to a bear markets.
2. This impacts many other industries and the jobs report. An economy is either rising at a rising rate or business activity is falling at an increasing rate. That is economic law 101. There is no such thing in any market as a Plateau of Prosperity or Cinderella - Goldilocks situations.
3. We have witnessed the Dow rise on economic news indicating deceleration of activity. This continues until major corporations announced poor earnings, making the Dow fall faster than it rose, moving it deeply into the red.
4. The formula economically is inherent in #2, which is lower economic activity equals lower profits.
5. Lower profits leads to lower Federal Tax revenues.
6. Lower Federal tax revenues in the face of increased Federal-spending causes geometric, not arithmetic, rises in the US Federal Budget deficit. This is also true for cities & States as it is for the Federal government.
7. The increased US Federal Budget deficit in the face of a US Trade Deficit increases the US Current Account Deficit.
8. The US Current Account Balance is the speedometer of the money exiting the US into world markets (deficit).
9. It is this deficit that must be met by incoming investment in the US in any form. It could be anything from businesses, equities to Treasury instruments. We are already seeing a fall off in the situation of developing nations carrying the spending habits of industrial nations; a contradiction in terms.
10. If the investment by non-US entities fails to meet the exiting dollars by all means, then the US must turn within to finance the shortfall.
11. Assuming the US turns inside to finance all maturities, interest rates will rise with the long term rates moving fastest regardless of prevailing business conditions.
12. This will further contract business activity and start a downward spiral of unparalleled dimension because the size of US debt already issued is of unparalleled dimension.