Sunday, September 30, 2012

Helicopter Ben flies again

Big Changes Are Coming, But The World Will Not End

This is a must-read article by Robert Fitzwilson.
After a review of much of the last 2,600 years, we have concluded that we are not the historic anomaly that we surmised at the beginning of the journey.  In fact, we are simply repeating the same cycles and mistakes that all of our ancestors have made before us.  Every culture throughout history has done exactly what we are doing now.  The only difference is that this time it involves the entire planet.

As we read history, paper money was not designed to be an asset.  It was an intermediary between sellers of goods and services.  A seller might not have an immediate purchase in mind, so receiving a paper receipt that could be redeemed at a later time, and even at another location, was both efficient and much safer than receiving payment in gold or silver.

In our era, these receipts have taken many forms.  Even the cash in our pockets is a derivative.  In technical terms, it is a zero-coupon, perpetual obligation of the issuing government.  In essence, the writing on the paper currency is promising “somebody owes you something, someday”.

The post-WWII monetary system began at Bretton Woods, New Hampshire.  It began to unravel in the middle of the 1960s, but the mortal blow was struck by President Nixon with the suspension of dollar/gold convertibility.  It has certainly been a long “suspension”.

Almost every ugly chart relating to the growth of debt and money can trace it’s roots to 1971.  The evidence is incontrovertible.  The value of the ancient form of receipts has been sliding ever since.  The slide has not been linear over that 40-year period, but it certainly went into free-fall 12 years or so ago.

In the past, rulers created money out of something considered to hold value, often gold and silver.  Seignorage was the right of kings to make a profit on that money.  Unlimited seignorage was impossible as supplies of gold and silver came and went, and it was expensive to mint the coins.

With the use of paper and now electrons to create money, we now have unlimited seignorage.  Money is created out of nothing, and you can see how it has been abused in the post-1971 charts.  The abuse is accelerating on a massive, global scale.  Cash and other derivatives have replaced our markets.  Profits were to be made on creating and trading derivatives, not providing real goods and services.  The real aspects of our economies continue to function, but the derivatives dwarf the size of the real global economy.

Much has been written about the historic confluence of our population growth coming together with the exponential endpoint of our resources.  The same can be said for our money.  Our resources are finite.  The ability of our planet to sustain a population is finite. 

We are now witnessing the exhaustion of our savings and real assets and our ability to sustain an exponential growth in money and derivatives.  Unlimited derivates are hitting the proverbial brick wall, and their collapse will destroy everything based upon them, it is just history.  This cycle has been repeated time and time again.

For our portfolios, the message is clear.  Get out of paper assets that can be destroyed by the unlimited seignorage, and convert them into real assets.  The end of the fiat money system will come swiftly, and perhaps overnight.  It cannot be too far off at this point. 

Changes are coming, but it doesn’t mean the world will come to an end.  But financial regime changes do result in a massive transfer of wealth from those who own paper assets, to those that own real assets.  Historically, gold and silver are traditional safe havens.

The Source of High Inflation: Government Spending
Inflation is centered in particular markets - not finance, housing or small business, but wherever the government spends money: Schools, food, energy, medical care.

A Few Remarks on Elections

Is The Money-Laundering Driven Real Estate "Boom" Ending?

What's that expression?  What's good for the goose, is good for the gander.

LBMA Market-Making Members

The term "bullion banks" is often used by hard money enthusiasts.  Here is a list of them:

Percent Changes in Selected Price Indices, 2000 - 2011

How Bad Was The Great Depression?

Executive Orders by US Presidents

According to Jim Sinclair, the following data is true.  I haven't confirmed it, but Sinclair has been the most prescient pundit on precious metals I have followed, so he is credible--at least from my vantage point.

Teddy Roosevelt 3
FDR 11 in 16 years
Truman 5 in 7 years
Ike 2 in 8 years
Kennedy 4 in 3 years
LBJ 4 in 5 years
Nixon 1 in 6 years
Ford 3 in 2 years
Carter 3 in 4 years
Reagan 5 in 8 years
Bush 3 in 4 years
Clinton 15 in 8 years
George W. Bush 62 in 8 years
Obama 923 in 3 1/2 years !

Qatar says worried about value of dollar, euro: CNBC

Judge throws out CFTC's position limits rule

The status quo continues:  the foxes are guarding the hen house.  Price manipulation will continue unabated.  The rigging of markets is now officially institutionalized.

Saturday, September 29, 2012

Gold Close To A Major Breakout Which Will Send It To $1,900+

Broker Sent Oil Prices to Eight Month High in a Drunken Stupor

Tax Dollars At War

This is one of the main reasons why the GOP and the Democrats had to marginalize Ron Paul.

What Does QE3 Mean For The Gold Price?

Moody's downgrades $64 billion of U.S. muni debt

Moody's has downgraded the credit ratings of over a thousand local and state governments.  Why do we have to find out from a foreign news media outlet?  Where is the US media coverage of it?

Dramatic Federal Court Ruling Vacates CFTC Positions Limit Rule

Those familiar with or participate in commodities markets and derivatives will understand the plaintiff and defendant are both corrupt entities.  This should be fascinating theater.

Friday, September 28, 2012

Calif. Creates State-Run Private Retirement Plan

I'll bet this will be another boondoggle bail out, this time of the underfunded pensions, but again on the backs of taxpayers.

99 Problems (Explicit Political Remix)

This is not fair to Obama, and it's vulgar, but it's as funny as $hit.  Disclaimer:  this is not an endorsement for Romney--or Obama.  A friend forwarded it to me.

Greyerz - High Net Worth Investors Pouring Money Into Gold

Winners and Losers Since QE3
Two lessons are clear: Front-Run The Fed's action (every time) and Buy Precious Metals.

South African Strikes Halt 39% of Nation’s Gold Output

When some South African platinum mine workers went on strike, I predicted other platinum mine workers would follow suit, shutting down the mines.  I also predicted the strikes would spread to gold mines.  Both predictions materialized, and while some of the platinum mines have returned to operation, it is the gold mines that are now shutting down.  This has been another catalyst for higher gold prices.

Thursday, September 27, 2012

Plosser Says Fed is Prepared to Respond to Europe Crisis

This is code-speak for "we will bail out Europe too", as the Fed has for several years now--in the form of currency swaps.  This is beyond lunacy.

A Chinese Mega City Is On The Verge Of Bankruptcy

Those hoping for China's "soft landing" and bailing out the insolvent developed world are in for a rude awakening.

How Crony Capitalism (Or The 'Undiluted Lunacy' Of The Fed) Corrupts The Free Markets

The Food Crises and Political Instability in North Africa and the Middle East

The Fed continuously destroys the value of the dollar, in a futile attempt to stimulate exports.  All this does is create food inflation domestically--and globally.  This, in turn, causes riots in other parts of the world, where food represents up to 85% of a household budget in the poorest of countries.

Ergo, the Fed is causing social unrest worldwide with its continuing dollar devaluation.  The rest of the world knows this--that's why the impoverished are burning American flags in the streets.  It's not just about overthrowing evil dictator regimes.  It's about putting food on the table.

Only the American public is oblivious to this, distracted by the machinations of the war on terror propaganda.

How The Fed Crushed China's Ability To Join The Ease-Fest

Aahhh, the unintended blowback, er...consequences of a currency war.  The Fed's uber easy monetary policies have made ALLIES of China and South Korea, as they look to diversify AWAY from the USDollar with bilateral trade.  This is yet another nail in the coffin of the USDollar as the global reserve currency.

In previous eras, when a country had the cojones to jawbone down the USDollar as the international trade settlement currency, US foreign policy dictated that said banana republic (or OPEC member, whichever was appropriate) would be declared a rogue terrorist country, and some incidental event would conveniently trigger justification for invasion.  The natives are getting restless?  Just declare them freedom fighters and help them overthrow whichever current evil regime is in place.

However, China is unabashedly signing bilateral trade agreements with US allies, as well as our enemies in every continent, which means, the US is powerless to do anything about the dollar's demise as the "petrodollar."

Sounds benign enough.  So what's the problem?  Ummm, if and when the USDollar were to lose said reserve currency status, every single country holding dollars will have no need for them, and will be dumping them en masse.  The result will be soaring consumer prices domestically, crushing the US economy in the process.

But hey, no big deal.  The NFL football referees are coming back.  All is well.

Why QE Won't Create Inflation Quite as Expected

In order to expose both sides of the inflation/deflation argument, here is an opinion taking the non-inflation position.

Two no-brainer ways to play rising food prices

I've always posited the rising cost of food is the biggest reason why people take to the streets.

Fed's Trickle Down Plan?

Tom Cloud: Silver is the Hot Thing Now

Traveling With Precious Metals

U.S. Soldier Survives Taliban Machine Gun Fire During Firefight

This video is for video gamers who want to vicariously experience combat and gunfire wounds.  Thanks to Kitty for finding it.

Neil Barofsky: Another Financial Crisis All But Inevitable

Thanks to Kitty for finding this interview of Barofsky.

iNflation: Americans Spend Less On Food, Movies To Pay For Soaring Cell Phone Obsession

Quantitative Easing Did Not Work For The Weimar Republic Either

It appears the cost/benefit ratio for QE is asymmetric.  The upside is limited (a temporary reduction in bond yields), while the potential downside is gargantuan (a hyperinflationary economic collapse).

Wednesday, September 26, 2012

Asset price bubbles: What are the causes, consequences, and public policy options?

The Chicago Fed, led by Charles Evans, is probably the most dovish of the 12 regional Fed branches.  In other words, not only does Evans want QE, he wants much more of it.  Here is their latest full write up on asset bubbles, and I included an excerpt from their summary.

"We still do not have a good definition of an asset bubble; and we still do not know how to identify them, what causes them to grow or burst, or what their welfare implications are."
 WTF?  They don't know how to identify an asset bubble--yet, they insist perpetual printing money will solve it?  Did it occur to them that endless printing of more dollars CAUSES asset bubbles to form in the first place?  Apparently, a PhD in Economics from the University of Chicago causes brain paralysis.

Ralph Nader: President Obama’s a ‘war criminal’

Are JPM's COMEX Silver Positions Only A Hedge Against Physical in the Warehouse?

And now the rebuttal on whether JPMorgan truly has enough physical silver to cover their paper shorts.

The Cartel And Hedgies Are Short Paper, But Long Physical Gold

BofA Makes The Case For $3,000 Gold

Now that the big institutional investment firms are declaring a secular bull market in gold (better to be 11 years late than never), where were they in late 2008 when gold plunged below $700, post-Lehman flush?

Normally, if the consensus leans one way, I would tend to lean to the other, as conventional wisdom in markets is almost always wrong.  The article's tone is bullish for gold, so as a contrarian, one would consider exiting.  However, the first sentence is wrong in one key detail with this declaration:

"Everyone loves gold these days."

While more people may be AWARE of the inflation-hedging capabilities of gold, very few people "love" gold, and even fewer people actually OWN it.

See disclaimers in the side bar.  Perform your own due diligence.

China Buys North Korea Gold Reserves as South Korea Increased Gold Reserves By 30% (16 Tonnes); Paraguay Buys First Time

How much do you want to bet China is buying gold from North Korea with US Dollars?  It solves two problems: dumping the Dollar, and accumulating gold--which is essentially the anti-Dollar currency.

39% Of South African Gold Production Is Now Offline

As predicted, the worker strikes in South African platinum mines spread to other platinum mines--and gold mines.  And as predicted, said commodity market prices drifted lower, even while imminent supply constraints intuitively infer higher prices.  Marginally economic mines have been shut down due to artificially suppressed prices, further dampening supply.

Demand for precious metals is soaring, but the supply fundamentals may be the driver for higher prices going forward.

Globalist Think Tank Suggests Using Engineered Event As Excuse For War With Iran

Germany Does What The SEC Hasn't - Prepares To Ban HFT

Tuesday, September 25, 2012

Hathaway - Gold Shorts To Panic As This Key Level is Breached

The Declining Economic Freedom Of The United States

How A 12th Century Mathematician Just Doomed Bernanke's Wealth Effect

I just had a phone conversation with a friend today on Fibonacci math, centered around wave theory and physics.

Coincidentally, and as predicted, each iteration of QE is yielding a shorter half-life of diminishing returns.  Some posit we are on the negative return trajectory, as the Fed piles on more debt on top of previous debt.  Kinda like a $hit $andwich.

Spanish Protest Turns Violent

It's truly raining in Spain.

Five SAC Traders Implicated In Insider Trading Case

Deep Capture completely dug into the SAC saga years ago, against a torrent of death threats.  I guess they are no longer conspiracy theorists.

Quantifying The 6 Downside And 2 Upside Risks To Global Markets

This chart is instructive, but has two glaring omissions:  war in the middle east and in the far east.

Several Exponential Charts

Technical Trading: China Voracious and Hungry For Gold, A Yuan-Backed Gold Standard?

This is not speculation--this is exactly what China is doing--accumulating gold in order to have the yuan backed by gold.  This will insure the yuan's soundness, and increase its viability as a currency for international settlements.

As Clinton sounds interest rate alarm, does Congress think it's for real?

Let's assume you the reader are a progressive liberal, and while you're finally convinced debt and deficits do matter, you still believe in an activist Fed--a central bank which deploys massive quantitative easing, in an attempt to stimulate the economy.  The ol' "pile on more debt short-term to induce sustainable economic growth long-term" argument.

You ignore the warnings from the conservatives, the so-called deficit hawks.  Damn the Hoover Institute from Stanford University.  Reagan's trickle-down, supply-side economics were a colossal failure in your mind.

Full speed ahead!  What we need is QE to infinity to stimulate growth, growth, growth!

Here's a wet splash across the face from everybody's favorite Democratic former President Bill Clinton:

This Is Frightening & Destabilizing To The Financial System

Manipulation of the Gold Price

This essay not explains how the price of gold is manipulated, but also projects a collapse of paper gold prices due to a default on delivery of physical gold.


China’s Central Bank Injects Funds to Ease Cash Crunch

Don't kid yourselves--it's not just developed countries printing money.  So are the emerging countries determined to avoid a hard landing.  The result is a bonafide currency war.

Nearly a third of businesses in central Athens closed due to recession

They describe what's going on in Greece a recession?  An economic collapse is more appropriate.

Elderly at Record Spurs Japan Stores Chase $1.4 Trillion

This is why Japan's social welfare programs are underfunded and in serious trouble going forward.  There are too many retirees and not enough workers.  The same problem is brewing in the US.

Monday, September 24, 2012

Libya Attack and Federal Reserve Policy Illustrate U.S. Weakness

Nobody Knows What Is Holding Back The Economy
Richard Fisher, the CEO of the Dallas Federal Reserve Bank, told a Harvard Club audience in New York tonight that not a single official of the central bank or any of the regional banks or their staffs, has the foggiest idea what is troubling the U.S. economy and what policy, if any, can get the economy “back on course.”

Fisher was the sole member of the Board of Governors to vote against the introduction of QE3, an open-ended promise from Chairman Ben Bernanke to continue buying some $85 billion of bonds and mortgages until economic growth recovers sufficiently to create significantly more jobs for the millions still unemployed.

Fisher made a worrisome point when he reported that he asked CEOs whether they would spend more money on “job-creating expansion” if the cost of borrowing was reduced by 25 basis points or 1/4 of 1%– one of the stated goals of Bernanke’s decision to do QE3. The answer; 9 of every 10 CEOs said No!!!

The outspoken central banker shocked the audience by starkly declaring; “Nobody on the committee, nor on the staffs at the Board of Governors at the 12 banks, really knows what is holding back the economy. Nobody really knows what will work to get the economy back on course.”
I call BS.  I believe some know the destructive consequences of debt monetization, one of extend and pretend.  They just can't speak the truth until they are out of office.

Turk - There Is A War Going On In The Gold & Silver Markets

The greatest trick the devil ever pulled
In the words of veteran analyst Jim Grant, the Fed has evolved well beyond its origins as a lender of last resort and not much else, and now is fully engaged in the business “of steering, guiding, directing, manipulating the economy, financial markets, the yield curve…”

It is a wholly specious argument to suggest that the creation of trillions of dollars / pounds / euros / yen out of thin air will not ultimately be inflationary; it is like saying that storing an infinite amount of tinder next to an open flame does not constitute a fire hazard.

Admittedly, the explicit inflationary impact of historic monetary stimulus will not be fully visible until those trillions are circulating in the economy in private exchanges between buyers and sellers– rather than squatting ineffectively in insolvent banks’ reserves. But financial markets are nothing if not capable of anticipating future trends.

Investors, traders, speculators– call them what you will– are already weighing up the probability of a reduction in future purchasing power; the prices of alternative money such as gold and silver, as denominated in unbacked fiat currency, are already responding.

Financial repression, of course, is all about wealth transfer. Inflationism is the textbook response to a crisis of too much debt (even if you were the over-borrowed entity that triggered the crisis in the first place).
But one of the most grotesque ironies of our time is that western government debt– the asset class which is objectively the least attractive (as well as the proximate cause of the world’s financial problems)– is also the most expensive.

But just because sheep-like bond fund managers are providing a real time lesson in the perils of agency risk does not mean we have to follow them down the primrose path.

Cash, most forms of bonds, and fixed annuities all look like poor prospects for the years ahead. Productive real estate, defensive equities of businesses with pricing power, gold and silver all look like better alternatives.

The last Fed chairman with the guts to do the right thing for the economy rather than just its banks, Paul Volcker, has rightly observed that “monetary policy is about as easy as it can get”. Another round of QE “will fail to fix the problem”. That is in part because the Fed, along with its international peer group, is now the problem… masquerading as the solution.

Keep it Going

Click on Image to Enlarge


A big thanks to Kitty for finding this.

Sunday, September 23, 2012

We Have Entered A New & More Deadly Phase Of This Cycle

China's Zhou Yongkang visits Afghanistan's Hamid Karzai

This photo is a sure sign that American foreign policy is failing:  Afghanistan's Karzai is shaking hands with China's Zhou.  I hear Afghanistan is mineral-rich.
Click on Image to Enlarge

The Fed Has Another $3.9 Trillion In QE To Go (At Least)

Shadow bank leveraging (and deleveraging) will ultimately be the noose to our global economy.

Gold Seen Luring Wealthy as Central Bankers Expand Stimulus

Fake gold hits NYC

The initial reaction to news of fake, tungsten-filled gold bars for most people is one of trepidation--and a market sell-off would not be surprising.  I blogged about counterfeit gold bars showing up in the UK and German assayers <here> and <here> a couple years ago, and the media outlets treated fake gold bars as they would authentic gold bars--with scorn.

However, upon further reflection, the truth of the matter is this:  the actual amount of gold in vaults, both private and official, is smaller than expected, probably MUCH smaller.  Given that assumption (it's actually not just an assumption, since by definition, counterfeit gold bars signal someone or someone's thought they possessed real gold, and discovered they had very little), expect turmoil and volatility within the precious metals complex going forward.

The LBMA is the only source of "good bars" of gold, and even top experts can be fooled by counterfeit gold bars.  With a backdrop of counterfeit gold bars, and even good bars that quite possibly have been re-hypothecated, the unofficial and official inventory of gold is probably vastly overstated.

By extension, when supply is shorter than expected, what conclusion does one come up with regarding price of said "commodity"?  The big bullion banks have allegedly been running a version of a Ponzi scheme by manipulating and suppressing the prices of precious metals for years, if not decades.  Their persistent naked and concentrated short positions have artificially knocked down the prices of gold and silver, rendering economic mining of said metals uneconomic.  This only further constrains the supply side of the equation.  Again, what are the implications on price?

Eventually, the manipulators of the paper exchanges will get overrun by demand for physical metal.  The big shorts will be unable to stem the tide because demand from emerging market central banks and citizens will overwhelm the short-term shenanigans.  When inventory of the metals dissipates, physical prices will soar due to delivery only going to the highest bidders.

Saturday, September 22, 2012


As big institutions get wind of the paper chase collapsing, there will be a rush to hard assets--and hard currencies backed by hard assets (China and Russia come to mind).  Their currencies may soar, while other fiat currencies tank.  Of course, this will hurt their economies also, as Chinese exports become too rich, so they will devalue in blowback fashion--in what Jim Rickards penned a currency war.

This is the pre-avalanche phase.  It only takes one snowflake to trigger the avalanche, but no one knows which flake will cause it.  Is it China vs. Japan over the Senkaku islands?  Is it Israel vs. Iran?  Or China/Russia rushing to the defense of Iran, while the US defends Israel?  What about Syria?  Yemen? Libya? Sudan? Saudi Arabia?  Spain?  Greece?  Italy?  France? the UK?  Germany exiting the Euro?  or JAPAN?  Percentage-wise, Japan's public debt is 10 times worse than Greece's.  I'm going to bet the yen is about to lose its safe haven status.

With an increasingly complex and fragile global banking system, anything can trigger a cascading collapse.  It was subprime mortgage bonds securitized against some tranche of homes in California, Nevada, Arizona, or Florida that triggered the last crisis.  While there are multiple crisis points globally, the catalyst could be some catastrophe in some unexpected place like South Africa, Tunisia--or Egypt.

"It was the best of times, it was the worst of times; it ws the age of wisdom, it was the age of foolishness; it was the epoch of belief, it was the epoch of incredulity; it was the season of Light, it was the season of Darkness; it was the spring of hope, it was the winter of despair; we had everything before us, we had nothing before us; we were all going directly to Heaven, we were all going the other way." - Charles Dickens

Germany Eyes Gold Standard

As the concept of a gold standard gains traction in mainstream media outlets, the price of gold will be at much higher levels.  We're in the 4th inning of this decade-long bull market in precious metals time-wise, but the hockey stick curve is just beginning, trajectory-wise.

By the way, Germany may have large gold reserves, but 90% of it is stored in the US, at the New York Fed, specifically.  When the $hit hits the fan, good luck to the Krauts for taking delivery.  Even if the gold is there (and there's no guarantee it is), it could quite possibly have been re-hypothecated many times.

Peak Career Risk: Only 8% Of Hedge Funds Are Outperforming The Market

The smartest guys in the room aren't that smart.  In other words, a monkey throwing darts would have outperformed 92% of hedge fund managers in existence.

M-∞: How to Measure Strains Created by the New Financial Architecture

Head Of Iran's Revolutionary Guards: "A War With Israel Will Occur"

PIIGS In America: Is Illinois Preparing To Request A Federal Bailout?

Venezuela and China agree to team up to develop large gold mine

This is disturbing.  When Hugo Chavez nationalized Venezuela's mining industry, they basically confiscated the assets from Crystallex, a Canadian mining company.  Since then, they have signed an agreement with CITIC, a Chinese wealth fund, to develop the gold and copper deposits of the Las Cristinas mine.  This essentially is a sterilized transfer of wealth from Crystallex to CITIC, leaving Crystallex no legal recourse.  Call it theft, which is equally appropriate.

Thursday, September 20, 2012

The Central Planners Are Going To Need A Bigger Boat

The Only Way They Can Stop This Is Bring Out A New Currency

Popularity Of Greek Neo-Nazi Party Continues Surging

Holocaust observers continue to believe it could never happen again.  What they don't understand is when a country's economy collapses, all bets are off.  Nazi Germany didn't just arrive out of thin air.  It was a byproduct of the collapse of the Weimar republic and its paper currency in 1923.

CME Lowers Initial ES And Other Key Equity-Related Margins By 12%

Yes, it is obvious.  The CME and the powers-that-be favor certain commodities and asset classes.  Keep driving equities up, so the Fed's strategy to catalyze "animal spirits" and create a "wealth effect" (even though it is false prosperity), so people will open up their wallets again (even though they are broke).  Suppress bond yields to artificially prop up bond prices--and demand for said bonds (even though their "safe haven" status is questionable at best).

Meanwhile, when the energy complex (including crude oil) and precious metals (specifically gold and silver) begin spiking in price, do whatever it takes to take them down and teach all the "speculators" a lesson.

Bank of Japan, ECB and Fed in a “Race to Debase” Says Kilburg

Deutsche Bank: GOLD IS MONEY

I love it:  Gresham's Law is being mentioned in more articles.

Wednesday, September 19, 2012

Doug Casey on Profiting from Government Stupidity

Porter Stansberry: These events confirm my greatest fears

Embry - We’re Witnessing A Historic & Frightening End Game

The Trouble with Printing Money
For a while now, I have been expecting a coordinated, global central bank action that would seek to print more money out of thin air, or "QE" (quantitative easing), as it is now called.  Now we have two of the most important central banks, that of the U.S. (the Federal Reserve) and in Europe (the ECB) having committed to open-ended, limitless QE.

Since the very beginning of my public writings, I have leaned heavily towards the path of inflation, by which I mean money printing or its electronic equivalent, because even a cursory review of history will show that leaders have always chosen a little money printing today and the possibility of inflation tomorrow over the immediate pain of having to live within their means or with the consequences of their poor decisions.

That was just a fancy way of saying 'humans will be humans,' and while our technology has advanced tremendously over the past few decades, our DNA blueprints are virtually identical to those found in people living 50,000 years ago.  History can tell us much.

Our current predicament has its roots way back in the early 1980s, when something changed in our collective psyches that allowed us to abandon thrift and savings in favor of spending and borrowing.

While the Fed can wrap this magic act in all sorts of covering language about dual mandates, maximum employment, and price stability, the simple fact remains that money printed out of thin air cannot, has not, and will not ever lead to prosperity.  How could it?  It arises without any effort at all, no work performed, no goods transformed or lives improved, no land planted and tended well, no services rendered, and no capital formed.  It is just conjured into existence.

It is just new money tossed after bad debts, with both remaining to work their different insidious effects on the economy and our daily lives.  If printed money could lead to prosperity, trust me – some culture would have worked it out long ago, because people every bit as clever and determined as those alive today (and with the same DNA software installed) have tried it again and again.

If it could work, then we should just print every household up a nice $1,000,000 check each year and let everybody stay home, take vacations, and drive nice cars.
How does all this end?  Like it has every other time in history, with a final destruction of the currencies involved.  That's my best guess.

This is why I view all of the QE efforts to date, and those that will certainly follow, not only with suspicion but as a series of unforgivably narrowly-conceived efforts that will combine into one of the most colossal failures ever experienced by modern man.

Deposit Flight From Europe Banks Eroding Common Currency

IMF to Put Argentina on Path to Censure Over Inflation Data

This is an example of two wrongs not making things right.

1) the Argentinian government is accused by the IMF of fudging their official inflation data.  Ummm, that's what governments do--lie about inflation--ALL governments, some better than others.

2) the IMF is just a cabal of banks, more interested in returns on sovereign debt they own--than the sovereignty of said countries (see Greece).  They want to maintain the status quo--the illusion of "riskless" returns on sovereign bonds which, in reality, are fraught with risk.

In essence, you have two corrupt organizations taking swipes at each other, with the less powerful one (Argentina) taking it in the shorts when it comes to raising capital in global markets.

The take away message is the US is Argentina on steroids, with debt levels orders of magnitude larger than any other country--in the history of mankind.

U.S. ambassador to China caught in Beijing protest; car damaged

JPY10 Trillion Intervention Half-Life: 5 Hours; Full Fade: 9 Hours

Bond sceptic caught between devil and ECB

Can Saudi Arabia Really Lower US Gas Prices Ahead Of The Election?

French Magazine Portrays Prophet Mohammad Naked In Cartoons, Set To Further Infuriate Muslim World

Tuesday, September 18, 2012

Ben Bernanke's QE Printing Press

The Bernanke's keyboard:


Some Shocking Perspectives On Inflation And Currency Destruction By None Other Than The Federal Reserve

During the 20th century, the biggest threat to US national security was the Big Red Scare of communism.  Today, that same threat comes from the Fed itself.

Perspectives On Gold's "Parabolic" Catch-Up Phase

Global Retaliation To QEternity Begin: BOJ Considers Additional Easing

Actually, not only did the Fed re-deploy QE, but so have the ECB, the UK, and China.  Japan is just late in joining the party.  Oh that's right, not true--Japan has been printing yen out of thin air for over 20 years running.

Tungsten-Filled 10 Oz Gold Bar Found In The Middle Of Manhattan's Jewelry District

I blogged about counterfeit gold bars filled with Tungsten several years ago.  They showed up in Germany and Australia.  No problem, if you're an American, right?  Wrong.

Bond Wars: Chinese Advisor Calls For Japanese Bond Dump

Finance 101: when bonds are dumped, bond prices plummet, and bond yields soar.  Equals end game for Japan, Inc.
China is actively considering "using its power as Japan’s biggest creditor with $230bn (£141bn) of bonds to "impose sanctions on Japan in the most effective manner" and bring Tokyo’s festering fiscal crisis to a head." I.e., dump Japan's bonds en masse. 

Should this stunning recommendation be enacted, not only would it be the first time in world history that insurmountable credit is used as a weapon of retaliation, it would mark a clear phase transition in the evolution of modern warfare: from outright military incursions, to FX wars, to trade wars, culminating with "bond wars" which could in the span of minutes cripple the entire Japanese fiscal house of cards still standing solely due to the myth that unserviceable debt can be pushed off into perpetuity (as previously discussed here).

Fed Says Joblessness Would Be 7% With Less Consumer Doubt

Great, let's blame tapped out or even broke consumers for our economy's malaise.  Pinhead Ivy League economists really don't have a clue on basic household budgeting.  Uummm, when job prospects are poor to non-existent, when the costs of fuel, utilities, food, education, and healthcare rise incessantly, yes, households will hunker down.  Or does the Fed suggest consumers return to running up their credit cards to spend money they don't have?  Isn't that what got us into this mess in the first place?

Prepare for New ‘Currency Wars’ After QE3: Analyst

Iran deploys Russian-made submarine in Gulf

Ooops, how did this story leak to the AP?

Chaos, Inflation, $10,000 Gold & Silver In Triple Digits

New innovations boost silver demand, but could price be taken down again?

Armada of international naval power massing in the Gulf as Israel prepares an Iran strike

Meanwhile, back at the Judaic/Islamic OK Corral...the headline is certainly provocative--as if an Iranian first strike is imminent, which infers an Israeli first strike is justifiable?

If You Want to Help the Poor and the Middle Class, Encourage Deflation

Even Nigeria Gets It
Nigeria gets it. So why not our distinguished Princeton/MIT/Harvard edumacated PeeEichDees?
We give our own Politburo intelligentisa at least 3-4 years before they grasp what is now painfully obvious even in Africa.

The Spacious Sound Of Nothing
Liquidity provided must be paid back and if the banks and nations that receive it do not provide structural changes, reduce their deficits, decrease their borrowings then, ultimately, the gods of chaos are unleashed. At this point it is no longer the interest that is paid but the return of capital that must be paid that becomes the number one issue. Liquidity has its price and I submit to you today that the time is fast approaching when a world awash in liquidity overwhelms the barriers and the dike is breached. The applause of today may become the tears of tomorrow if the current course continues.

Chart Of The Day: Monetary Supply - It's Not A Marathon, It's A Steroid-Fueled Frenzy

e As The China-Japan Conflict Escalates, Whom Will The US Support?

When your biggest creditors are warring, it presents a dilemma for the world's biggest borrower.

Dollar no longer primary oil currency as China begins to sell oil using Yuan

Monday, September 17, 2012

Ghost warehouse stocks haunt China's steel sector
Chinese banks and companies looking to seize steel pledged as collateral by firms that have defaulted on loans are making an uncomfortable discovery: the metal was never in the warehouses in the first place.

As defaults have risen in the world's largest steel consumer, lenders have found that warehouse receipts for metal pledged as collateral do not always lead them to stacks of stored metal. Chinese authorities are investigating a number of cases in which steel documented in receipts was either not there, belonged to another company or had been pledged as collateral to multiple lenders, industry sources said.

In London and New York regarding gold and silver paper markets, this is dubbed re-hypothecation.  To the layman, it's called fraud. 

The Fraud of Negative Gold/Silver Lease Rates

Cyclical or Structural?

James Turk - Gold & Silver To Overrun Central Planners

Gold Will Soar As The World Sinks Further Into The Abyss

Friday, September 14, 2012

Greyerz - Silver To Surge 433% From Current Levels

QE3 Sparks U.S. Credit Ratings Downgrade From Egan-Jones

Thanks to Kitty for finding this.  The credit ratings agency Egan-Jones better watch its back.  If history is any indication, the US government will sue Egan-Jones for downgrading US Treasury debt.  Can't let the truth get in the way.{linkBack}_QE3_Sparks_U.S._Credit_Ratings_Downgrade_From_Egan-Jones

China's naval show of strength raises stakes in island dispute with Japan

With unrest in the Middle East accelerating, there is very little reporting by western media of the building conflicts between China and Japan over some islands and maritime interests in Asia.

How long before money collapses and what will it mean for gold?

The Long Wave Versus the Printing Press: Central Banks Go All-In

India gold demand jumps as jewellers buy at record price

China will likely surpass India as the world's largest buyer of gold this year for the first time in recent history, but Indians continue to purchase gold as a hedge against currency debasement.  The festivals for which gold is purchased for is incidental.  For centuries, Indians have innately understood gold's store of value against the insidiousness of a government's printing press.

Embry - We Are Seeing Mounting Shortages Of Gold & Silver

Inflation Expectations Suggest 5% Inflation Is In The Cards

What Does A $4 Trillion Fed Balance Sheet Mean For Gold And Oil

Crude Over $100

Fed insists politics did not affect QE3

Anybody who believes this headline should have their head examine.  Mitt Romney has already declared that Bernanke would be out of a job if Romney is elected President.  Hence, Bernanke wants Obama to win at all costs so Ben can hang on to his job.  Ergo, Bernanke will do whatever it takes to stimulate the economy in the short term--even if it will destroy the economy long-term.  Enter unlimited QE.

Arabian Fall Update: Egypt, Libya, Yemen, Morrocco, Tunisia, Sudan And Now Lebanon

Quote Of The Day: QE3 Should Have Been "More Stronger"

Dr Kevin And Mr Warsh: A Former Fed Governor Exposes The Fed

Fed governors tend to toe the party line when in office.  It is only when they are OUT of office do they start speaking the truth.

Bill Gross:"Buy Real Assets... Gold... A House!"

This advice is stunning, if not surprising.  It's not surprising because it is wise.  It is stunning because the advice comes from the world's largest bond investor.
Gross: to buy mortgages ‘til the cows come home. Think 7% unemployment, 2.5% inflation targets. Buy real assets…gold…a house!

Anti-US Protests Spread To India, Bangladesh, Indonesia
Did we say Arab Fall? We meant global fall.

Marc Faber: "Fed Will Destroy The World"

Get Ready For An Epic Fiat Currency Avalanche

This is Blowback

'Obama's Middle East Policy Is in Ruins'

CPM Group's Jeff Christian on BNN on eve of gold and silver explosion: Go short

Jeff Christian of CPM was wrong on gold--again.  In fact, the clown has been wrong for a decade. Why he is on financial TV, and why anybody would listen to this pathological liar is beyond me.

Here's a link to the video clip:

Jay Taylor: Canada's BNN doesn't want GATA mentioned on the air

Gold bugs haven’t lost the Midas touch

Norcini - A Violent Wave Of Short Covering In Gold & Silver

Miners Catching Up To Metals — Huge Run Coming?

Thursday, September 13, 2012

The Punchline In His Own Words: Bernanke Advocates Blowing Asset Bubbles As The Antidote To Depression

Felix Zulauf - Gold, Systemic Collapse & The End Of Fiat Money,_Systemic_Collapse_%26_The_End_Of_Fiat_Money.html

Fed Pledges Action Until Economy Shows Gains

As predicted, QE to infinity.

Bernanke Unleashes The Path To New All Time Highs In Precious Metals

China And Russia Are Ruthlessly Cutting The Legs Out From Under The U.S. Dollar

If you've been reading this blog for any length of time, the recurring theme of currency debasement is old news.  However, to accommodate new readers, I am providing a link to another article about the days of the USDollar as the global reserve currency being numbered.

US slips from No. 1 to also-ran in global economic rankings
The United States is losing its competitive edge.

So says a new report from the World Economic Forum which found the U.S. slipping in dozens of areas compared with just a few years ago. Perhaps most troubling is the conclusion that since 2008, the United States has slid from No. 1 in the world in "global competitiveness" to No. 7 this year. 
Out-ranking America are: Switzerland, Singapore, Finland, Sweden, the Netherlands and Germany. 
Sure, it's just a number. But the WEF's ranking takes into account a broad range of factors, from debt to corruption to regulation to red tape to education to health care.

And virtually across the board, the U.S. is falling behind.

Sentinel ruling may hurt MF Global clients

This is a dangerous precedent, because if the financial institution collapses, clients with segregated deposit accounts will have difficulty recouping their funds, as they are last in line as an unsecured creditor.  What was once considered sacred is no longer safe.
 "I don't think that's what the Commodity Futures Trading Commission had in mind" with its requirement that brokers keep customer money separate from their own, he said.

Futures brokers are required to keep customers' funds in dedicated accounts to protect them from being used for anything other than client business.

However, Thursday's ruling suggests that brokerages can use customer funds to pay off other creditors, Sentinel trustee Fred Grede told Reuters.

"It does not bode well for the protection of customer funds."
Worse, Grede said, is that the ruling suggests that a brokerage that allows customer money to be mixed with its own is not necessarily committing fraud.
Sentinel allegedly pledged hundreds of millions of dollars in customer assets to secure an overnight loan at Bank of New York Mellon, leaving the bank in a secured position but Sentinel's customers out millions.

Customer funds were allegedly moved from the protected accounts to other accounts so they could be used as collateral for loans to Sentinel's own trading operations.

The appeals court said that "perhaps the bank should have known that Sentinel violated segregation requirements" but agreed with the district court's earlier ruling that "such a lack of care does not rise to the level of the egregious misconduct" needed to reprioritize a claim.

"That Sentinel failed to keep client funds properly segregated is not, on its own, sufficient to rule as a matter of law that Sentinel acted ‘with actual intent to hinder, delay, or defraud' its customers," U.S. Circuit Judge John D. Tinder wrote in the ruling.
In other words, if the brokerage uses investor funds as collateral to gamble with its own funds, loses it all, and collapses, the client is ass'ed out.  And it's all legal.  This will not only happen.  It has already happened, with the collapse of Sentinel, MF Global, and Peregrine.  And economists and government officials don't understand why retail investors are exiting these already rigged markets.

How China Is Driving Federal Reserve Policy

Jim Rickards nailed recent Fed policy actions as well.

The More Gold And Silver Prices Are Suppressed, The Higher They Will Rebound

Monetary “Floodgates” And Geopolitical Unrest To Support Precious Metals

Ron Paul: U.S. Foreign Policy is Destabilizing the World 3/21/11

Thanks to Kitty for finding this video of Ron Paul on Libya--back in 2011.  He was spot on.

Global Economic Plunge, Money Creation & Soaring Gold

Wednesday, September 12, 2012

Jim Rogers: "Gold: I Won`t Argue With Human Stupidity"

Golden stability versus fiat chaos (Part I)

A Republic, Not a Democracy

The old Soviet Union was ruled by a few men, as was China.  It is still, to a lesser extent.  The US is headed toward that model.

1.5 million take to streets of Barcelona in support of independence

Rob Arnott - Major Defaults, German Court Decision & Inflation

Cui Bono Fed: Who Benefits from the Federal Reserve?
Any healthy political and financial system would have broken the fraud-based system and dismantled the failed banks en masse in an orderly fashion. One institution stopped this from happening: the Federal Reserve. Instead of allowing a failed system to collapse and establish a new one based on prudent lending, market-set interest rates, competitive banks and transparent regulatory structure, instead we have a failed system that has become even more politically powerful even as its Fed-backed excesses have increased systemic fragility.
The Fed exists to serve the banks. Everything else is propaganda. Ever-expanding debt leaves America a nation of wealthy banks and increasingly impoverished debt-serfs. Cui bono, baby.

Nigel Farage destroys Barroso's State of the Union

Watch the entire video for the retort.

Germany Can Ratify ESM Fund With Conditions, Court Rules

German courts just gave the green light for the ECB to print as many euros as deemed necessary.

Platinum Soars As Spreading South African Miner Strike Cripples World's Biggest Platinum Firm

Is The Federal Reserve The World's Worst Forecaster?

US Ambassador To Libya, Three Others, Killed

Tuesday, September 11, 2012

September 11 – Eleven Years Later (Selected Statistics)

Truman Show, Jim Grant, Gold & Economies Close To Meltdown

Hooters Looks to Catch Wife’s Eye as Tight Shorts Rule

U.S. has no right to block Israel on Iran: Netanyahu

Germany says U.S. debt levels "much too high"

Jailed UBS Employee Gets $104 Million From IRS For Exposing Swiss Bank Account Holders

Monday, September 10, 2012

Will The Baltic Dry Bounce Off Satan's Bottom?

As The Euro Tumbles, Spaniards Look To Gold

About the U.S. Financial Burden Barometer

I've posited the US true debt burden is higher than $100 trillion.  The official national debt exceeded $16 trillion recently.  Laurence Kotlikoff says it's actually $222 trillion here.  This latest article splits the middle, declaring our financial burden at $70 trillion.  When the number of digits gets that large, does it really matter?

Gold gets some powerful friends
LeMetropoleCafe’s Friday wrap-up included quotations from a remarkable Bloomberg interview with the famous bond fund manager Bill Gross of Pimco which expressed a preference for holding gold: “Gold cannot be reproduced. It can be taken out of the ground at an increasing rate, but there is a limited amount of gold. There has been an unlimited amount of paper money over the past 20 years to 30 years

“Central banks got out of the gold trade a few years ago. Just recently, they are coming back into that market…I think for the most part it is not a crowded trade yet even though the price has accelerated in recent quarters and recent years.”

These views, while quite normal for a guerilla gold bug, would have been career-ending heresy for an orthodox Wall Street not so long ago.

Another LeMetropoleCafe appearance was by fabulously successful macro-hedge fund manager Ray Dalio of Bridgewater Associates (via his latest client letter): “Gold is primarily an alternative to fiat currency and a storehold of wealth.
The main advantage that gold has over other currencies is that it can’t be printed…deleveragings strongly favor shifts from financial assets into gold and other tangible assets.

Central bankers and politicians are running out of ideas

Sunday, September 9, 2012

The Bill Clinton Myth
However this is a misunderstanding of the difference between spending by private individuals and political spending.  Government is incapable of being run like a business.  Enterprise is based off the principle of satisfying voluntary patrons with no guarantee of success.  Even in a hampered market economy where corporations receive special privileges via the state, the consumer remains the kingmaker.  On the other hand, government receives all income through coercive measures.  Profit and loss accounting is of little concern when losses are borne by the taxpayer and profits are immediately devoted to political projects.  Should the public Treasury run low, tax collectors can be sent forth to shakedown the unpresuming citizens.

When it comes to rational economic calculation, public officials need not worry about spending money effectively. To attribute increased revenue being taxed away from the private economy with robust growth misconstrues how wealth is created.  Government doesn’t create wealth; it merely transfers it between parties.  Similarly, it only consumes capital that has already been produced.  Because society existed before the state and because the state functions off of what it pilfers from society, public expenditures do not add to net wealth.  In order for one tax dollar to be spent, it has to be first taken from the pocket of a taxpayer.  Whatever subjective desires could have been achieved by that dollar become overridden to satisfy the whims of the political class.

The fact that the economy didn’t stagnate under higher taxes during Clinton’s term in office doesn’t demonstrate that taxation has no harmful effects.  Economies aren’t closed experiments where one variable can be introduced and the effects observed.  There are far too many factors at play.  Concrete theories based off certain truths must be applied in such a way to interpret date and wring sense out of it.  Good economic conditions weren’t a result of heightened taxes but instead prevailed in spite of them.  While the productivity gains from the newly widespread use of personal computers and the internet had a positive effect on growth, another factor often goes unmentioned.  The later-half of the 1990s may be looked back upon as golden years but much of the gains experienced by the stock market were not representative of organic growth.  A significant amount of investment came not from natural causes but from monetary manipulation by the Federal Reserve.

Like the decade that preceded the Great Depression, productivity gains which drove consumer prices downward masked the amount of monetary stimulus being pumped into the economy.  When the bubble collapsed, Greenspan once again turned to the printing press to bail himself out.  Instead of causing a bubble in the tech sector, the burst of inflation made its way into the housing sector.  By the time the housing bubble popped, Greenspan left the chairmanship of the Fed to great acclaim.  Milton Friedman writing in the Wall Street Journal declared Greenspan had “set the standard” for Fed chairmen in maintaining stable prices and growth.  In actuality, he and his colleagues of the Federal Open Market Committee were responsible for the continuation of the boom-bust cycle and current Great Recession.

Today, Clinton still takes credit for Greenspan’s manipulated boom.  His supporters on the left love nothing more than to point at his presidency as vindication of the backwards theory that higher taxes equal more growth.  Clinton wasn’t a policy wonk; he was a politician who dipped into the Social Security trust fund to give an appearance of balancing the budget while the national debt still climbed higher.

Through all of his financial scandals, womanizing, aggressive foreign policy approaches, and possible cover ups, it is actually fitting that Clinton is still looked to by the political establishment as someone worthy of respect.  He is representative of F.A. Hayek’s timeless lesson: in government the worst rise to the top and state power corrupts.

Saturday, September 8, 2012

99 Years Of Keynesian-Monetarist "Winning"

Fractal Analysis: Huge dollar devaluation will drive gold much higher

Here ya go with the crazy projections.  See the disclaimers in the side bar.
The Fractal Gold chart work is a direct comparison of Gold, today, to the late 70's Gold Parabola.  Thus, "timing" is taken directly from the late 70's cycle, with price targets created from a combination of the late 70's Gold price and different technical analysis techniques.  We developed a price target back in 2006/ 2007 for Gold to reach the $10,000 to $12,000 range during this Gold Bull.  Anything above that range would mean that the "Stagflation" comparison to the late 70's was exceeded and "Hyper-inflation" would become a real possibility.
I told you this fractal analysis was bat$hit-crazy. But who am I to say they are wrong?

Bank of America says gold could hit $2,000/oz by year end

B of A is joining the gold bullish camp, although with a target of $2,000, it appears conservative.  Wait for the targets on the next blog entry.

Silver steals the spotlight from gold
“Investors see precious metals like silver and gold as hedges against the debasement of paper currencies,” said Elliott Orsillo, co-founder and portfolio manager at Season Investments LLC.
Gee, I've never heard that one before.

Top 5 Places NOT To Be In A Dollar Collapse

Name The New Reserve Currency: China Imports More Gold In 2012 Than All ECB Holdings

The writing has been on the wall.  Whether Americans choose to read it is another story.

The Socialist Counter-revolution Begins: France's Richest Man Seeks Belgian Citizenship

Analyze this: The Fed is not printing enough money!

I would further expand the author's conclusion that at a certain debt-to-gdp threshold, taking on more debt creates diminishing returns.  I posit we are now at the point where adding debt has NEGATIVE effects on economic growth.