so much happened this week that i'm not even sure where to start. citibank left the silver market, probably because it needs its captial to try to stay in business. other banks did even worse, as indymac closed its doors.

but the walking dead on wall street are nothing compared to fannie mae and freddie mac. between them, they own or guarantee $5.2 trillion worth of mortgages (which really aren't worth anywhere near that much.) given the default rate on mortgages these days, those two are about as broke as broke can be.

the fed has lent out half of the treasury bonds on its balance sheet, and is running out of ammunition. the producer price index could reach double digits later this year, even by the government's phony statistics, and yet the fed either can't or won't raise interest rates.

this news did not go unnoticed in the metals markets. one measure of the government's loss of control in the gold market is the price increase from $250 to $950 over the past several years. another measure is the change from the $6 rule to the 2% rule. for years, if the price of gold was up $6 on the day, a not-for-profit seller would dump gold on the market to make sure it went no higher. they can't afford that any more. now they wait until gold is up 2% on the day before they cap the price.

one more note: last week, bill murphy of gata spoke at a webinar and mentioned that he had addressed the chinese investment corporation. he didn't give any details, but now the chinese know what gata knows about market manipulation.

in 2005, after a russian economic advisor went to a gata conference, the price of gold ran up $300 over the next six months. the chinese hold far more us dollars than the russians, roughly $1.8 trillion. i think precious metals and related shares are a good place to be when money starts to diversify out of the us dollar. the expression "niagara falls through a firehose" comes to mind.