The Moneychanger
Daily Commentary
Tuesday, 10 May a.d. 2016 Browse the commentary archive

Some few landmarks, like my 1991 interview with John Exter, stand above the landscape bringing us back to the simple grid that truly rules the world. Another essential landmark is found in the late 1945 speech by NY Fed Chairman Beardsley Ruml, "Taxes for Revenue Are Obsolete." Yes, that is EXACTLY what he said, out loud and published, 71 years ago: "The necessity for a government to tax in order to maintain both its independence and solvency is . . . not true for a national government. . . . [because of] the elimination, for domestic purposes, of the convertibility of the currency into gold" and a central bank. The rest of the article explains that taxes are for CONTROL, not revenue. Sure, y'all don't believe me. Here, go read it for yourself,

There is dumb, then there is government dumb, & lower than that is central bank dumb. Now when you combine government dumb with central bank dumb and add a debt bubble, why, Law! Ain't no TELLING how much havoc you can wreak, how many families destroy, even lay whole countries low.

The Chinese government, in a land literally smothering under an avalanche, a Rocky Mountain, a Himalaya of debt, announced today it would make available -- MORE debt. China's cabinet approved more bank lending, greater tax rebates, and support for export credits.

Government dumb plus central bank dumb equals cosmically dumb. At a time when China needs more than anything an erasing of debt, a jubilee of debt, & a colossal writing down of mal-investments spawned by the easy borrowing debt bubble, the Chinese government is doing just the opposite.

Suppose you find a man passed out nearly dead in the street. He has a tourniquet on his arm, and on the ground there lies a hypodermic needle. His arm is covered with needle tracks. "Oh," you conclude, "he has overdosed on heroin. Quick! Get more heroin into him. That'll save his life."

Laugh if you like, but that is PRECISELY what the Chinese government is doing to the economy. I reckon I might imagine something catastrophic, but I'd have to think on it a couple of weeks.

The morons playing stock market casinos around the world could care less that an economic tidal wave is speeding toward them. "The Chinese are supplying new chips! Deal me in, too!" No cure for debt-driven greed but a back-lashing with a cat o' nine tails in bankruptcy.

Thus stocks rose today in a drunken, frenzied drive to get closer to the bar. Dow rose 222.44 (1.26%) to 17,928.35. S&P added 25.7 (1.25%) to 2,084.39.

Bear market rallies are sudden, sharp, and short. Read that again. Fix it in your mind, lest you, too, become a victim of Wall Street.

THE US DOLLAR INDEX inched up a little more, 15 basis points (0.15%) to 94.26. Today carried it through the 20 day moving average (94.11). Looking only at the falling trading channel that has imprisoned the dollar index since mid-March, the dollar index has traded back & forth to the lower and upper boundaries of that range. Today's trading brought it again to the upper boundary. Time to fish or cut bait: dollar index must break through that upper boundary line, or prove itself a fraud and mountebank. Behold, Most likely it will keep rising. If it doesn't, if it turns back for three days, then y'all can be pretty certain the central banking criminals have made a deal to depreciate the dollar against the yen & euro.

Last few days the Japanese central bank criminals have been rattling their samurais about how they have plenty of stimulus measures left. In other words, they were jawboning the yen down, precisely when it is already weak, having broken out of a rising wedge. Does that gainsay my suspicion they may have made a deal to let the yen rise against the dollar? Nope. They would be stupid Nice Government Men indeed if they barged into a market & tried to manipulate their whole move at once. Up a little, down a little, feed out more line to the investor bass to hook 'em and reel 'em in. Yen today lost 0.83% to 91.51. Chart's here, Technically, the yean appears to have broken down from that rising wedge. Well, we will see.

Euro fell 0.9% to $1.1371 today, bouncing down from the top trading range boundary.

Silver & gold disagreed today, but so lethargically you needed to take their pulse to see if they were alive. Silver added -- why bother reporting it? -- one half cent -- to 1707.5¢. Gold backed up $1.70 to $1,263.90. All this took place within very narrow trading ranges.

Silver & gold have both lost upward momentum, and spent today in futile wheel-spinning. Does nothing but cover your car in mud. Both touched their 20 day moving averages, both look set to drop more.

As I said yesterday, the "Short Correction" outcome would last about a week and reach $1,245 and 1600¢. The "Long Correction Outcome" would last two weeks or more and carry to $1,225 & 1540¢.

It also appeareth here late in the day that for reasons not clear to me, my yesterday's commentary, that is, the one for 9 May 2016, did not go out. Why? Ask a computer. Now I'll go to my grave wondering what I said.

Wait, I remember this. By the grace of God, my surgery went well. I have only taken one pain pill so far, & that on Saturday. This becomes more amazing when I recall that while my foot was deadened but I was very much awake, the surgeon did 1-1/4 hours worth of vigorous pushing, cutting, grinding of bone, drilling, & finally, sticking a tablespoon into my foot. Susan was watching & took pictures, which I am not eager to view.

I am left with a half-inch of wire sticking out of my toe, which leaves me pretty chary of walking or getting near anybody or anything. Doesn't hurt, but the faintest touch focuses all my attention on that spot. I'll be walking on my heel for six weeks, and won't get rid of that wire until week 4. The yoke of immobility will gall my stubborn neck.

Thank you for your prayers. God is graciously answering them.

Argentum et aurum comparanda sunt —
Silver and gold must be bought.

— Franklin Sanders, The Moneychanger

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Market Snapshot See more charts and market data
10-May-16 Price Change % Change
Gold, $/oz 1,263.90 -1.70 -0.13%
Silver, $/oz 17.08 0.01 0.03%
Gold/Silver Ratio 74.020 -0.121 -0.16%
Silver/Gold Ratio 0.0135 0.0000 0.16%
Platinum 1,048.50 2.80 0.27%
Palladium 592.45 8.10 1.39%
S&P 500 2,084.39 25.70 1.25%
Dow 1,792,835.00 222.44 0.01%
Dow in GOLD $s 29,322.83 43.02 0.15%
Dow in GOLD oz 1,418.49 2.08 0.15%
Dow in SILVER oz 104,997.66 -17.72 -0.02%
US Dollar Index 94.26 0.15 0.16%
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SPOT GOLD: 1,267.10      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,301.31 1,309.55 1,309.55
1/2 AE 0.50 645.71 668.40 1,336.79
1/4 AE 0.25 326.02 340.53 1,362.13
1/10 AE 0.10 132.94 138.75 1,387.47
Aust. 100 corona 0.98 1,235.80 1,244.80 1,269.95
British sovereign 0.24 300.51 313.51 1,331.83
French 20 franc 0.19 238.34 242.34 1,298.03
Krugerrand 1.00 1,278.50 1,288.50 1,288.50
Maple Leaf 1.00 1,277.10 1,291.10 1,291.10
1/2 Maple Leaf 0.50 728.58 665.23 1,330.46
1/4 Maple Leaf 0.25 323.11 338.95 1,355.80
1/10 Maple Leaf 0.10 134.31 138.11 1,381.14
Mexican 50 peso 1.21 1,516.92 1,527.92 1,267.25
.9999 bar 1.00 1,271.53 1,279.10 1,279.10
SPOT SILVER: 17.13      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 22.50 26.00 33.99
VG+ Peace dollar 0.77 17.50 20.00 26.14
90% silver coin bags 0.72 12,780.63 13,066.63 18.28
US 40% silver 1/2s 0.30 4,933.88 5,095.88 17.27
100 oz .999 bar 100.00 1,737.50 1,762.50 17.63
10 oz .999 bar 10.00 172.75 177.75 17.78
1 oz .999 round 1.00 17.23 17.69 17.69
Am Eagle, 200 oz Min 1.00 18.63 19.88 19.88
SPOT PLATINUM: 1,048.50      
Plat. Platypus 1.00 1,063.50 1,093.50 1,093.50
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Warnings and Disclaimers

To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary trend is up, targeting 16:1 gold/silver ratio or $195.66; stock's primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold or 16 ounces of silver. US$ and US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down.

Be advised and warned:

  • Do NOT use these commentaries to trade futures contracts. I don't intend them for that or write them with that short-term trading outlook. I write them for long-term investors in physical metals. Take them as entertainment, but not as a timing service for futures.
  • NOR do I recommend investing in gold or silver Exchange Trade Funds (ETFs). Those are NOT physical metal and I fear one day or another may go up in smoke. Unless you can breathe smoke, stay away. Call me paranoid, but the surviving rabbit is wary of traps.
  • NOR do I recommend trading futures options or other leveraged paper gold and silver products. These are not for the inexperienced.
  • NOR do I recommend buying gold and silver on margin or with debt.
  • What DO I recommend? Physical gold and silver coins and bars in your own hands. For additional information, please see our Ten Commandments for Buying Gold and Silver.
  • One final warning: NEVER insert a 747 Jumbo Jet up your nose.

Explanation of Terms

The US DOLLAR INDEX is the average exchange rate for the US dollar against the Euro, Yen, Pound sterling, Canadian Dollar, Swiss Franc, and Swedish Krona, weighted for each country's trade with the US. It gives a general measure of the US dollar's performance against all other currencies.

The DOW IN GOLD DOLLARS measures the Dow Jones Industrial Average in gold dollars (0.048375 troy oz. by law). The DiG$ depicts the Primary (20 year) Trend of stocks against gold. When the DiG$ is dropping, gold is gaining value against stocks in a trend that should last 15-20 years. The DiG$'s chart is identical to the Dow in ounces of gold, but gives us one unvarying measure all the way back to 1896. Because it shows the primary trend ("tide") of gold against stocks, for investors it is the single most important financial chart in the world today. Since its August 1999 high at G$925.42 (44.8 ounces), the DiG$ has trended down, targeting a G$80-G$20 (4-1 oz. of gold will buy the whole Dow).

The DOW IN SILVER OUNCES shows how many ounces of silver are needed to buy the entire Dow. The DiSoz is trending down with a target of under 36 ounces.

The GOLD/SILVER RATIO is the gold price divided by the silver price, and shows how many ounces of silver it takes to buy one ounce of gold. The Ratio shows us the Primary (20 year) Trend of gold's value against silver. When the Ratio's trend is dropping, silver is gaining value against gold. This trend targets a gold/silver ratio of 16 ounces of silver to one of gold within the next 5-10 years. That implies that silver will massively, vastly outperform gold before this bull market ends. When both metals are rallying, the ratio often (but not always) drops, confirming the rally.

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