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John Hathaway: Welfare state democracy is sure to destroy the dollar

Section: Daily Dispatches

8:12p ET Wednesday, May 25, 2011

Dear Friend of GATA and Gold (and Silver):

Writing at the King World News blog, Tocqueville Gold Fund manager John Hathaway studies the age of the gold bull and concludes that the bull has longer to run because welfare state democracy has pushed the U.S. dollar past the tipping point. Hathaway writes:

"Welfare state democracy is incompatible with sound money, in our opinion. As just one example, we refer to a recent research study flagged by Pimco: 'The Liquidation of Government Debt,' by Carmen Reinhart and M. Belen Sbrancia. It concludes that 'the annual liquidation of debt via negative real interest rates amounted on average to 3% or 4% of GDP per year ... which quickly accumulated (without compounding) to 30% to 40% of GDP debt reduction in the course of a decade.'

"In other words, an essential mechanism for servicing sovereign debt has been the devaluation of investor claims by capping interest rates. That amounts to outright theft of wealth by government from its citizens and more recently non-U.S. investors.

"Negative real interest rates, less obvious than CPI inflation, are the stealthy pillar of welfare state finance. Gold prices correlate inversely with real interest rates, as we have been suggesting for the past decade. This relationship is one of the most reliable indicators of the macro climate for gold. Negative real rates ought to be a flashing green light for capital to seek out gold."

Hathaway, one fears, has it exactly right. His essay is headlined "Another Volcker Moment at Hand? An Appraisal of $1,500 Gold" and you can find it at the King World News blog here:

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


Lewis E. Lehrman on How to Solve the U.S. Debt Problem

Lewis E. Lehrman, chairman of the Lehrman Institute, sponsor of The Gold Standard Now project, advises that to reduce the $1 1/2 trillion U.S. deficit, the Republican Party must initiate an investment program.

Working Americans are not saving, which enables the banks to lead the country into a cycle of debt, leverage, boom, panic, and bust.

Lehrman says: "Eliminating the budget deficit of a trillion and a half dollars cannot be done overnight. The proposal by U.S. Rep. Paul Ryan was very dramatic -- one Republican called it radical -- but it was not happily received. The solution, of course, is to design an American program for prosperity, because you can solve these entitlement problems with a growing economy.

"We need a tremendous program of investment, and investment comes from savings. When you pay savers, middle-income professionals and working people, 0 percent at the bank, you are not going to encourage them
to save. Then we are left with a bank cycle of debt, leverage, boom, panic, and bust."

To read more and to sign up for The Gold Standard Now's free, noncommercial, weekly report, "Prosperity through Gold," please visit:

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Prophecy Resource Spins Off Platinum/Palladium Venture:
World-Class PGM Deposit in Yukon

Company Press Release, January 18, 2011

VANCOUVER, British Columbia -- Prophecy Resource Corp. (TSX-V:PCY)and Pacific Coast Nickel Corp. announce that they have agreed that PCNC will acquire Prophecy's Nickel PGM projects by issuing common shares to Prophecy.

PCNC will acquire the Wellgreen PGM Ni-Cu and Lynn Lake nickel projects in the Yukon Territory and Manitoba respectively by issuing up to 550 million common shares of PCNC to Prophecy. PCNC has 55.7 million shares outstanding.

Following the transaction:

-- Prophecy will own approximately 90 percent of PCNC.

-- PCNC will consolidate its share capital on a 10 old for one new basis.

-- Prophecy will change its name to Prophecy Coal Corp. and PCNC will be renamed Prophecy Platinum Corp.

-- Prophecy intends to distribute half of its PCNC shares to shareholders pro-rata in accordance with their holdings.

Based on the closing price of the common shares of PCNC on January 17, $0.195 per share, the gross value of the transaction is $107,250,000.

For the complete announcement, please visit: