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Monthly Digger - June 2010


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gm-we are exactly on the same page, my worry in all of this is how do the masses act/react. are we heading for social unrest? mad max? would love to hear your take. i know how the gold story ends, its no mystery to me. its the other stuff that has me deliberating and worrying. and if history is any guide, this wont be pretty.

thanks

dharma

 

Dharma, as Samuel Clemens aka Mark Twain once commented about worry,

 

"I have spent most of my life worrying about things that never happened."

 

I take his comment to heart.

 

I once . . .

(My experience with worrying / fear . . . on second thought decided this story of a personal nature is probably not appropriate for this thread so it has been deleted.)

 

As for the future of humanity:

 

I draw upon conclusions reached from working with entomologists, Dr. Smythe and Dr. Healy at the Smithsonian Institute at Barro Colorado in the Panama Canal back in my youth beginning at the age of 15. After a couple summers of helping to collect data and recording such data on index cards, insect population after insect population, on the verge of destroying the very plant life habitat hosting their existence (after a parabolic, exponential population explosion) would contract a virus that decimated up to 70% of the population or so. The plant life would then begin to recover, the insect population also began to slowly recover as nature, once again, restored balance to the ecosystem.

 

I hope it doesn't happen that way, forced upon us by nature, but human population growth is on a collision course with planet Earth. Can the planet's critical mass of humans think and act accordingly in time to restore balance before Mother Nature does it for us? That is my concern.

 

Although I am doubtful, I've learned to always remain optimistic, even when everything looks hopeless. I can only be a part of the solution by practicing what I preach, and can only change myself.

 

Critical Mass / Hundredth Monkey theory anyone?

 

gooberoutfortheevening

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Please excuse me for popping-in out of the woodwork. I’m not sure why there are such harsh feelings against deflation. The M3 growth rate has been falling since early 2008, and is now contracting here in 2010. MZM and M2 aren’t growing, and it is debatable whether these numbers are even real or should be falling. Commercial paper and money market funds are contracting. Lee Adler and John Williams are great references for money supply analysis. To quote Lee: “My alternate measure of liquid money supply is down 21.9% since March 16, 2009 and 23.4% since January 1, 2009. It fell by $9 billion in the week ended May 17 making a new low in what has been an accelerating collapse.” There is no doubt that we are witnessing deflation.

 

What needs a little clarification is whether people are talking about inflation today, or inflation in the future. There’s no way to say there is inflation today when money supply is contracting. In the future, sure, there could be inflation. We’ll know it when money supply starts growing again. But even then, if money supply started growing, it would be questionable as to whether it is inflationary. Money that isn’t backed by anything, and can’t be cashed, isn’t inflationary. As Lee points out, there’s a lot of fictitious capital built into the money supply already.

 

I’m a career gold bug and own it for all the same reasons everyone on this board does. But that does not mean we have to bet on inflation to drive gold prices higher. Look at what’s happening now. We’re watching a debt implosion that is occurring faster than monetization. And with the realization that creating more debt will not solve the world’s debt problems, investors are raising cash and moving into precious metals. Note the recent currency swap program = there is a huge demand for dollars and not enough of them in the world. Also note that last year, for the first time, there was more gold demand from investors than from the jewelry industry. Cash and precious metals are the name of the game today. Deflation is driving the gold price at this time (it is increasing demand), and I don’t see what’s wrong with recognizing that.

 

As for inflation in the future, or hyperinflation, we’ll have to see what happens. I have a hard time giving odds on whether we get to that point. The assumption seems to be that central banks will have no choice but to print, and all this printing is somehow be inflationary. By definition, it is; but it assumes that the printing will somehow fill coffers world-wide and money/credit will start overflowing. Someone please explain how this is going to happen? I’m having a hard time seeing it. The entire financial system is insolvent. No one can lend because they all have too much debt already. There is simply way too much debt leveraged on too few assets (that are “depreciating”), and I doubt that monetization will make any difference at this point. Simply throwing more bad debt on top of bad debts isn’t going to do anything except create more bad debt. That’s not inflationary – that’s fuel to feed the deflationary debt spiral. To me it seems that it is more probable that we will watch this debt implosion run its course until the entire fiat system collapses and/or gets restructured. Anybody in the inflation camp, feel free to make your points on this as I would welcome some feedback.

 

Let’s consider this situation another way: Maybe we’ve already inflated/hyperinflated currencies around the globe, and now we’re watching a deflationary collapse? Hyperinflation on a global level may have occurred in a manner that we don’t recognize because it was not as clear-cut as isolated incidents like Weimar or Zimbabwe. Leave hyperinflation’s effects on prices out of the picture, and it seems possible that we have already hyperinflated the money/credit supply.

 

Through all my years studying the markets, I’ve learned that things never quite play-out the way I expect them to. Biases and pre-conceived notions are rarely beneficial. Remaining objective to the facts means questioning these notions when they conflict with reality. I’ve been expecting the printing and the hyperinflation like everyone else, but the reality today is that we are printing and deflating. “Asset depreciation” and “wealth destruction” are symptoms of deflation. It is happening, and at this point I am inclined to believe the deflation will continue. I have no doubt that central banks will print until the cows come home, but I can’t see how it will make any difference.

 

With all this being said, my point is that we own gold because we know the fiats are doomed. Why bother criticizing deflationists? Who cares if gold prices go up due to deflation or hyperinflation? Does it really matter? At this point in time it even seems silly to talk about gold in terms of dollar prices, and what price gold will go to next. Gold is invaluable in terms of worthless IOU’s from an insolvent Fed. Knowing that this is all going to end badly, one way or another, simply means that we need to make sure we’re protected. Inflation/deflation, it really doesn’t matter – own Gold!

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interesting analysis from bob hoye

http://www.321gold.com/editorials/hoye/hoye060310.pdf

chicago- last i looked this is a forum , which means all are welcome here

frankly- i got into gold because of all the sovereign debt.

my best guess is they inflate.

if it works or not remains to be seen, they do have considerable tools @their disposal.

i dont want to mention prechter, he has been wrong on just about everything for 2decades

dharma

bob hoye, interesting take

http://www.321gold.com/editorials/hoye/hoye060310.pdf

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GM,

 

Thanks for the heads up on Sandspring (SSP). I've been accumulating a bunch of shares under $1.30. Should go much higher when it gains some recognition.

 

Jaco

 

Sandspring Presents Updated NI 43-101 Mineral Resource Estimate for Toroparu Gold-Copper Project, Guyana; Drilling Continues

TORONTO, ONTARIO--(Marketwire - June 3, 2010) - SANDSPRING RESOURCES LTD. (TSX VENTURE:SSP - News; "Sandspring" or the "Company") is pleased to announce completion of an updated NI 43-101 compliant mineral resource estimate for the Toroparu gold-copper deposit in the Republic of Guyana, South America.

 

The latest Toroparu gold-copper deposit mineral resource estimate was independently modeled by P&E Mining Consultants Inc. as a potentially open-pittable deposit. The single Open Pit optimized pit shell model features an NI 43-101 compliant Indicated mineral resource of 3,692,000 ounces gold-equivalent (2,891,000 oz. gold and 288 million pounds copper) contained within 104,975,000 tonnes at 0.86g/t gold and 0.12% copper. An additional Inferred mineral resource of 1,078,000 ounces gold-equivalent (895,000 oz. gold and 66 million pounds copper) is contained within 38,829,000 tonnes at 0.72 g/t gold and 0.08% copper (Table 1). The full NI 43-101 technical report may be viewed and will be publicly disclosed by Sandspring at http://www.sedar.com/ and on the Company's website within 45 days of this press release.

 

Highlights include:

 

-- Confirmation of over 100 million tonnes of Indicated gold-copper mineralization within a single Open Pit optimized

pit shell on high ground that is presently road accessible to tidewater (Table 1);

 

-- Mineral resource sensitivities that feature potentially designable and near-surface open-pit minable grade shells

(Table 2). A higher grade Indicated mineral resource shell of approximately 38 Mt at an average grade of 1.47g/t AuEq

offers potential for design of a starter pit (subject to the findings of a proposed Preliminary Economic Assessment).

http://www.sandsprin...ate-for-Toropar...

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"Inflation/deflation, it really doesn’t matter – own Gold!"

 

*thumbs up*

 

There are many conflicting forces at work that you detail. Regardless of the path taken, the destination will be the same - all of this thrashing imbetween is the market doing what it does best...segregating/stratification/concentration of capital.

 

Disgusting:

http://rawstory.com/rs/2010/0602/month-oil-spill-goldman-sachs-sold-250-million-bp-stock/

 

Stay focused, prepare for the inevitable, accept and work with the [long] _process_ that is at work, keep Grinch close, and love and be loved.

 

-Agent

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Actually in a bit of conflict as to gold or silver. As to inflation or deflation - irrelevant.

My research suggests Silver is the better buy, but its so bloody heavy.

Canada's also problematic. Premiums are high.

Gold stocks are stock market creations (paper),self interested and very speculative compared to to physical.

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GM,

 

Thanks for the heads up on Sandspring (SSP). I've been accumulating a bunch of shares under $1.30. Should go much higher when it gains some recognition.

 

Jaco

 

Sandspring Presents Updated NI 43-101 Mineral Resource Estimate for Toroparu Gold-Copper Project, Guyana; Drilling Continues

TORONTO, ONTARIO--(Marketwire - June 3, 2010) - SANDSPRING RESOURCES LTD. (TSX VENTURE:SSP - News; "Sandspring" or the "Company") is pleased to announce completion of an updated NI 43-101 compliant mineral resource estimate for the Toroparu gold-copper deposit in the Republic of Guyana, South America.

 

The latest Toroparu gold-copper deposit mineral resource estimate was independently modeled by P&E Mining Consultants Inc. as a potentially open-pittable deposit. The single Open Pit optimized pit shell model features an NI 43-101 compliant Indicated mineral resource of 3,692,000 ounces gold-equivalent (2,891,000 oz. gold and 288 million pounds copper) contained within 104,975,000 tonnes at 0.86g/t gold and 0.12% copper. An additional Inferred mineral resource of 1,078,000 ounces gold-equivalent (895,000 oz. gold and 66 million pounds copper) is contained within 38,829,000 tonnes at 0.72 g/t gold and 0.08% copper (Table 1). The full NI 43-101 technical report may be viewed and will be publicly disclosed by Sandspring at http://www.sedar.com/ and on the Company's website within 45 days of this press release.

 

Highlights include:

 

-- Confirmation of over 100 million tonnes of Indicated gold-copper mineralization within a single Open Pit optimized

pit shell on high ground that is presently road accessible to tidewater (Table 1);

 

-- Mineral resource sensitivities that feature potentially designable and near-surface open-pit minable grade shells

(Table 2). A higher grade Indicated mineral resource shell of approximately 38 Mt at an average grade of 1.47g/t AuEq

offers potential for design of a starter pit (subject to the findings of a proposed Preliminary Economic Assessment).

http://www.sandsprin...ate-for-Toropar...

 

Should go much higher when it gains some recognition.

 

Hi Jaco, agree wholeheartedly. Eventually investors will seek out under-valued companies with viable plays in mining friendly jurisdictions and competent, trust-worthy management. SSP fits the bill in all categories. Good thing were in early before the rush to come later.

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Inflation/Deflation

 

I'll have to disagree completely with those that contend a basic knowledge of inflation and deflation has no bearing on investment success. In fact, I would say that the most important issue in today’s macroeconomic environment in determining which assets to allocate investment funds is the correct assessment and forecast of future inflation (period). An inflationary or a deflationary environment has specific investment implications, the first demands one set of assets, the second, a different set of assets.

 

Keeping it simple:

In a deflationary environment, prices of Equities, Commodities, and "risky" Bonds fall. Cash, "Cash equivalents," and so-called "safe" Bonds go up and are the investments to allocate funds to.

 

In an inflationary environment, Cash, "Cash equivalents," so-called "safe" Bonds, and most Equities lose "real" value for two reasons, the inevitable event of rising interest rates and the loss of purchasing power. As a result, Commodities, Gold, and other Tangible Assets become the winning investments.

 

But my contention since 2000 and motivation for accumulating Gold has been something very different than inflation. It has been stagflation, a term coined in the 70s. A contention that the US will suffer both higher monetary inflation as well as worse economic deterioration, not one or the other, but both. And so far I've got that right. Monetary expansion has gone through the roof to historic highs for everyone to see while the economy slid into severe recession, yes,

S T A G F L A T I O N.

 

And my opinion continues to be that those who buy into the deflation myth will continue to suffer the financial consequences. No, the US Dollar has not been rising in purchasing power over the years (Price Deflation), it has been doing just the opposite, falling in purchasing power (Price Inflation). And no the money supply (see charts of various measures) has not been falling over the years (Monetary Deflation), it has been doing just the opposite, expanding and currently stands near historic all-time highs (Monetary Inflation).

 

The greatest Bubble in history is now in existence, and it is called the US Treasury Bond Bubble denominated in the greatest of all currency bubbles in history, the US Dollar Bubble. The US Dollar reserve currency by its very nature remains over-valued by artificial demand from nations required to hold it in their currency reserves for purposes such as its energy needs and global trade. And the over-valued US Dollar is by no means over-valued based on its merits. In fact, of up most importance is to understand that the US Dollar reserve currency of the world is broken. That is what Gold has been signaling to us. Not that "Cash is King" or that the US Dollar's purchasing power is gaining. If you're invested in Gold because you think deflation is the problem then you're in the wrong asset, or else either confused, just plain lucky or both.

 

To repeat, falling asset prices does not constitute deflation. Since the inception of the institutionalized monopoly known as the Federal Reserve in 1913, the banking elite have gained firm control of not only the US Government, but also Congress. The Fed's primary mission has been to perpetuate the "deflation myth" enabling them to print more and more money (expand the money supply, aka Monetary INFLATION) for purposes of deficit spending. And using any on-line CPI calculator (despite the hedonically adjusted CPI lies) will verify just how successful the Fed has been at duping the public into believing the Deflation Myth throughout all these many years. As Greenspan warned, "Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard." The problem with falling asset prices is that it forces even MORE monetary inflation as the response as we've witnessed over the past couple years.

 

And it's a mistake to only focus on the United States' monetary policies, instead one needs to view the entire world's monetary policies. One has to screen out the "Bad News" stories that make headlines and pay attention to the important trends that continue emerging. As some would agree, bad news sells, good news dies on the vine. We seldom hear about all the good news stories of the massive populations of Chinese that have moved to the cities and being lifted out of poverty are now enjoying a much higher standard of living. That doesn't sell, too boring. No, instead for the past decade we keep hearing about the coming collapse of China because that sells. The deflationists thrive on these doom and gloom stories. Why do you think Prechter has sold so many books and is always grabbing the headlines? Those that bought into his fallacies lost out on the incredible gains made in commodities that were inflated in price as money supply grew by leaps and bounds and demand from burgeoning middle classes in "Chindia" continued growing.

 

Instead, the gloom and doomers have remained focused, thanks to the media, on the sovereign debt debacle, especially in Europe. The Prechter deflationists still can't get enough of it. But some of us continue to see opportunity on the other side of the world in places like Asia while the gloomers fail to grasp that finding enough raw materials to supply the economic engine of Asia is not an easy task (as prices continue to confound them).

 

In the interim, Asia continues growing at a healthy clip. And Asian investors, focused on growth companies, have been making bundles of money while Europeans and North Americans fixated on the illusion of deflation have been left at the station holding the bag missing out on those huge gains. I've posted many of charts since late Oct 2008 when I was pounding the table to buy Gold, Gold Stocks, Oil Stocks, Commodity Stocks, etc. For most of the ride up, the deflationists, focused on the end of the world, missed out.

 

Focusing on why the Crude Oil price remains at a lofty level would be a good start. That would lead to an understanding of how the global banking system actually works. How commercial and investment banks work with the Fed and US Treasury to take advantage of the interest rate yield curve. Then they may begin to understand why banks haven't been lending as there was no incentive to take on more risk (they were being bailed out with a sure thing, interest rate spread). Of course money velocity was destined to slip in the US. But what about money velocity in the Global Banking System and in what is known as the "Shadow Banking System?" Anyone paying attention to that? Sovereign Wealth Funds, Investment Banks, and Hedge Funds were busy diversifying into all kinds of Commodities, especially Crude Oil, while the rest of the market remained focused on the "End of the World" US money velocity. These investments were the prescription for hedging and offsetting the liabilities accumulated over the years on their accounting books.

 

Below are just a few suggested books (of many) to read that will help deflationists come to realize the wool has been pulled over their eyes.

 

•The Theory of Money and Credit iby Ludwig von Mises

•What Has Government Done to Our Money - Murray N. Rothbard

•America’s Great Depression by Murray Rothbard

•Exchange, Prices, and Production in Hyperinflation: Germany 1920-1923 by Frank Graham

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gm i admit it im no expert but i have to also admit to that you sure set the deflation people straight again. i agree that it matters alot to for are investments an very much more wether we have inflation or deflation or what you call stagflation. by the way gm thanks again for taking time to post cuz it sure beats just reading othere peoples web sites. tnx chuck

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gm i admit it im no expert but i have to also admit to that you sure set the deflation people straight again. i agree that it matters alot to for are investments an very much more wether we have inflation or deflation or what you call stagflation. by the way gm thanks again for taking time to post cuz it sure beats just reading othere peoples web sites. tnx chuck

 

"What needs a little clarification is whether people are talking about inflation today, or inflation in the future."

 

Chuck, thanks for your reply. Glad you agree. I think our view will continue to serve us well.

 

Here are a couple charts (uploaded the other day) that the guy above making that statement apparently missed. Just a few of the many long-term monetary growth charts demonstrating the rampant inflation that has been occurring for decades upon decades right up to the present month. Inflation that we been living through our entire lives, not just reading about a hundred years from now in some history text book.

 

The obvious answer to the above question is that we're not only talking about the inflation over the past century, the past decade, or about the inflation today, but we're also talking about the coming of even more inflation in the near future.

post-2021-12756258703316.gif

post-2021-12756258756116.gif

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