Silver Update Mid Morning 08/03/11

Submitted by: Francis Soyer

In the you can't make this shit up category here we have a story of a mental breakdown of none other than the Bernanke himself after getting hammered at a local bar in NE. Yes silver is up another 3.3 percent this morning. Given the commentary if true and the feel of it is no wonder. Story below:

Drunken Ben Bernanke Tells Everyone At Neighborhood Bar How Screwed U.S. Economy Really Is
 SEWARD, NE—Claiming he wasn't afraid to let everyone in attendance know about "the real mess we're in," Federal Reserve chairman Ben Bernanke reportedly got drunk Tuesday and told everyone at Elwood's Corner Tavern about how absolutely fucked the U.S. economy actually is.

Bernanke, who sources confirmed was "totally sloshed," arrived at the drinking establishment at approximately 5:30 p.m., ensconced himself upon a bar stool, and consumed several bottles of Miller High Life and a half-dozen shots of whiskey while loudly proclaiming to any patron who would listen that the economic outlook was "pretty goddamned awful if you want the God's honest truth."

"Look, they don't want anyone except for the Washington, D.C. bigwigs to know how bad shit really is," said Bernanke, slurring his words as he spoke. "Mounting debt exacerbated—and not relieved—by unchecked consumption, spiraling interest rates, and the grim realities of an inevitable worldwide energy crisis are projected to leave our entire economy in the shitter for, like, a generation, man, I'm telling you."

"And hell, as long as we're being honest, I might as well tell you that a truer estimate of the U.S. unemployment rate is actually up around 16 percent, with a 0.7 percent annual rate of economic growth if we're lucky—if we're lucky," continued Bernanke, nearly knocking a full beer over while gesturing with his hands. "Of course, if everybody knew that, it would likely cripple financial markets across the entire fucking globe, even in various emerging economies with self- sustaining growth."

After launching into an extended 45-minute diatribe about shortsighted moves by "those bastards in Congress" that could potentially exacerbate the nation's already deeply troublesome budget imbalance, the Federal Reserve chairman reportedly bought a round of tequila shots for two customers he had just met who were seated on either side of him, announcing, "I love these guys."

Numerous bar patrons slowly nodded in agreement as Bernanke went on to suggest the United States could pass three or four more stimulus packages and "it wouldn't even matter."

"You think that's going to create long-term economic growth, let alone promote job creation?" Bernanke said. "We're way beyond that, my friend. There are no jobs, okay? There's nothing. I think that calls for another drink, don't you?"

While using beer bottles and pretzel sticks in an attempt to explain to the bartender the importance of infusing $650 billion into the bond market, the inebriated Fed chairman nearly fell off his stool and had to be held up by the patron sitting next to him.

Another bargoer confirmed Bernanke stood about 2 inches from her face and sprayed her with saliva, claiming inflation was going to "totally screw" consumer confidence and then asking if he could bum a smoke.

Silver Update 08/03/11

Submitted by Francis Soyer

There are three things driving silver higher rite now. First is that the U.S. debt ceiling hike of 2.5 trillion will last the U.S. until December at which point congress will need to reconveen and hammer out another increase. So in essence what has occured this week is the U.S. balance sheet or debt to equity ratio has increased on the debt side by 17 percent e.g. diluted the value of the dollar by 17 percent give or take...And in December to get through 2012 the treasury will need to further dilute the value of the dollar by another 5 + trillion or 30% for a total decline in dollar value of roughly 52 percent. By December ish expect Dollar purchasing power to be cut in half especially for core inflation items such as Food and Energy.

Second is that given the above expect the U.S's credit rating to get cut thus making it harder for the U.S. to borrow and making treasuries no longer "Risk Free" as evidence of the CME's decision in margin requirement increases taking treasuries off the list of Risk Free assets.

Third is that Default for the U.S. and most of the European Union is also still a real and probable outcome. Where can investors shelter themselves from this type of environment? Many have fled to the Swiss Franc (which also is being considered to becoming backed by gold) or Gold and Silver itself. Unlike paper these metals can not be printed out of thin air are hard to mine and have a finite supply. Citi Group is looking for silver to be in the $100 range by year end. They are probably correct. In the interim on a six month basis our opportunities to acquire below VWAP prices (volume weighted average price) are over. Those who are a bit late to the game can still try and acquire on a 5 day basis such as in the chart below. The red line represents the VWAP price hence buyers should be looking to add at prices below $18.55.

Cheers

China Downgrades US From A+ To A, Outlook Negative

The U.S. House of Representatives on Monday approved legislation to raise the U.S. debt limit by at least 2.1 trillion U.S. dollars and cut federal spending by 2.4 trillion U.S. dollars, one day before a threatened default.

The downgrade is a result of fights between U.S. political parties over debt issues, which reflects the government's inability to completely solve the debt problem, said Dagong Global.

The interests of the country's creditors are short of systematic protection both politically and economically, said the agency.

China is by far the largest holder of U.S. debt, with holdings amounting to 1.15 trillion U.S. dollars as of the end of April.

Dagong announced last month that it had put the U.S. credit rating on negative watch for a possible downgrade on expectations of a long-term economic recession in the world's largest economy, partially caused by its economic governance and policies.

Dagong downgraded the U.S. rating from AA to A+ in November of last year after the U.S. government announced a second round of quantitative easing.

The agency said the approval to raise the debt ceiling indicated that there will not be any positive changes in factors that will influence the country's debt-paying ability in the long run.