"Nothing will unnerve the paper gold shorts more quickly and do more to undercut their confidence than to strip them of the real metal and force them to come up with more hard gold bullion to make good on deliveries. "Stand and Deliver or Go Home" should be the rallying cry of the gold longs to the paper gold shorts." --Trader Dan Norcini

Dear Comrades In Golden Arms,

You are watching the biggest challenge MOPE (Management of Perspective Economics) has faced since 1990.

This 3rd quarter presents multiple challenges to the funding programs of the US economy. The demand for money due to the exploding Federal deficit must strain the US Treasury market.

Dress up manoeuvres for the US dollar are part of keeping the US bond market from breaking below the 28 year uptrend line, an event that would derail any hope for easy financing of the enormous bond offerings now in the Federal pipeline.

You must see that publishing gold and dollar time and price targets tend more to set targets for the Goldman Sachs type trading programs that are key elements in the Management of Perspective central planners now fighting desperately to keep the US Treasury financing window wide open.

You must recognize that the key element to success in the Battle Royal is the value of the US dollar. The key element in the gold price is the US dollar.

The most intense challenge in the ability to make markets camouflage economic reality is gathering momentum in present time.

Unemployment is approaching 10% in the USA with no STOP expected at that level. All the financial programs so far have been structured to bail out the Fat Cats of Wall Street. No bailout of any significance has had a positive impact on employment. The GM restructuring is a brilliant example of paper shuffling and worker elimination. Truth be known, it was the financial arm of motors that thrust the first bankruptcy stone.

The cancer of the OTC derivative, having turned a normal and modest recession into a total disaster, has spread its deadly tentacles down into the real economy where bankruptcies of previously sound businesses unable to withstand the decline in demand are occurring. Worker reduction in the real economy now stimulates the unemployment figures hardly likely to stop at 10% in the USA.

These deadly tentacles are strangling states, counties and cities in the USA where many are on the brink today. California has already passed the point of no return with an uncertain future and an economy larger than some countries.

Despite statements to the contrary, the BRIC nations are clearly lowering their dependence on US Treasury instruments as national reserves. It is the momentum change in buying that impacts the US dollar and treasuries trend-wise. A close on the USDX below .82 was the first crack in the dyke of the strong dollar policy. The next challenge to the US dollar is the 112-113 28 year up trend line of the 30 year US treasury instrument. When broken down, the event will represent the two measures of the US dollar's worth in a major down leg of their respective long term bear markets.

I feel for those making this gigantic effort to mask reality as they have an impossible job. The size of the demand for money means the ever increasing creation of larger and larger offerings of US treasury instruments into a market that, outside of the knee-jerk risk aversion crowd, witnesses declining non-US Federal demand.

What starts on the West Coast of the USA always migrates East.

What you see in California is New York soon.

The Battle Royal is to keep Washington from looking exactly like California, with the exception that via Quantitative Easing the dollar will continue to be manufactured albeit losing value significantly through USA IOUs.

Gold, as the only currency without a liability attached to it, is therefore the only method by which you can protect yourself from the inevitability of Washington being a California.

The Battle Royal today is MOPEs effort to camouflage the reality that the US sheeple may buy, but not the BRIC nations lead by China. The more that media mocks China the more perturbed China becomes. The more perturbed China becomes the closer we get to the neutralization of MOPE. Then the King dollar appears and the dollar is not wearing clothes of any value or worth.

Big banks to reject state's IOUs after today
Carolyn Said, Chronicle Staff Writer
Friday, July 10, 2009

(07-09) 19:26 PDT -- With the state's biggest banks poised to spurn California IOUs after today, state and federal officials stepped in Thursday to try to lessen the pain resulting from California's inability to pay its creditors.

California Treasurer Bill Lockyer cajoled banks to change their stance. Meanwhile, the Securities and Exchange Commission said it would regulate IOUs to thwart exploitation by investors buying them cheaply.

Cash-strapped California is churning out IOUs to pay taxpayer refunds and vendors. From July 2 through Wednesday, Controller John Chiang's office said it issued 91,213 IOUs totaling $354.4 million. The IOU total could hit $2.87 billion if the situation continues throughout the month. The IOUs mature on Oct. 2.

Bank of America, Wells Fargo, JPMorgan Chase and Citibank plan to stop accepting the IOUs after today. Some smaller banks and credit unions will still accept them for existing customers.

"Our office will be contacting the banks to try and convince them to extend the July 10 cutoff date," said Tom Dressler, a spokesman for Lockyer. "That would lessen the likelihood that recipients are going to suffer hardship after Friday."