The Global Financial System Is Rigged To Fail And Destroy Currencies…And Business Cycles

https://kingworldnews.com/the-global-financial-system-is-rigged-to-fail-and-destroy-currencies-and-business-cycles/

If This Continues The Currencies Will Literally Collapse

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/4/17_If_This_Continues_The_Currencies_Will_Literally_Collapse.html

Central banks move into riskier assets

Emerging economy central banks are also allocating more gold into their reserves, which isn't mentioned in this article.

http://www.gata.org/node/12425

Norway Fund Flees Currencies Tainted by Stimulus Addiction

The Norwegian sovereign wealth fund sees what we see:  over-indebted developed countries will continue to debase their respective currencies as far as the eye can see in a currency war with no winners.

http://www.businessweek.com/news/2013-03-10/norway-oil-fund-flees-currencies-tainted-by-stimulus-addictions

John Embry on Gold, Silver, Currencies and Commodities

This is a must-read interview with John Embry.

http://www.24hgold.com/english/news-gold-silver-john-embry-on-gold-silver-currencies-and-commodities.aspx?article=3967100870G10020&redirect=false&contributor=Ron+Hera

Asia Buying Gold On Dips - “Empires May Fall, Currencies May Change... Gold Will Always Survive”

http://www.goldcore.com/goldcore_blog/gold-supported-euro-zone-contagion-risk-and-asia-buying-gold-dips

The precious metals power higher

http://www.fgmr.com/precious-metals-power-higher.html

I am often asked when it will be time to sell the gold and silver we are now accumulating as our savings to get us though the crisis as it continues to unfold in the years ahead.  I always respond that the end of this bull market will not be like the one that ended in January 1980.  When gold and silver eventually become overvalued at some future date, you won’t “sell” your metals; you will “spend” them. 

In other words, I expect that because national currencies are being so badly mismanaged, many will collapse – including the dollar, which was the conclusion of The Collapse of the Dollar that I wrote with John Rubino in 2004.  As a consequence of the dollar and many other national currencies collapsing, so little confidence thereafter will be placed in any government’s management of a currency that few if any national currencies will exist.  This watershed event will mark the end of the world’s reckless experiment foolishly started in 1971with fiat currencies backed by nothing. With the inevitable failure of national currencies, gold and silver will be the currency of choice.

Examples of hyperinflation

Taking a break from the deflationist agenda, let's examine hyperinflation:

http://en.wikipedia.org/wiki/Hyperinflation#Examples_of_hyperinflation

Note the many currencies which have suffered through hyperinflation. Also,

Governments will often try to disguise the true rate of inflation through a variety of techniques. These can include the following:

* Outright lying in official statistics such as money supply, inflation or reserves.
* Suppression of publication of money supply statistics, or inflation indices.
* Price and wage controls.
* Forced savings schemes, designed to suck up excess liquidity. These savings schemes may be described as pensions schemes, emergency funds, war funds, or something similar.
* Adjusting the components of the Consumer price index, to remove those items whose prices are rising the fastest.

None of these actions address the root causes of inflation, and in fact, if discovered, tend to further undermine trust in the currency, causing further increases in inflation. Price controls will generally result in hoarding and extremely high demand for the controlled goods, resulting in shortages and disruptions of the supply chain. Products available to consumers may diminish or disappear as businesses no longer find it sufficiently profitable (or may be operating at a loss) to continue producing and/or distributing such goods, further exacerbating the problem.

Of course, this could never happen in America, right? At least, not again.

BIS gold swaps

http://uk.reuters.com/article/idUKLNE66F03J20100716

My take away: central banks are running out of gold, so in lieu of outright selling their inventory, they are swapping it out for currency, with the hope of recovering the gold in the future. If they default, the BIS keeps the gold bullion, similar to a pawn broker.

See disclaimers in the side bar.

Disclosure: long gold and silver, long precious metals mining shares.

Why investors should resist gold frenzy

In an attempt to balance out opinions on financial assets, specifically gold, I have included the following article.

http://finance.yahoo.com/banking-budgeting/article/109557/the-gold-frenzy-why-investors-should-resist

Personally, these financial advisers demonizing gold missed the boat, and are rationalizing the missed opportunity on a decade-long bull market in gold. Their comments ring hollow and illustrate a complete ignorance of history, the role of currencies, and store of value.

Disclosure: long precious metals, and long gold and silver mining shares.

John Williams from shadowstats.com

http://www.mineweb.com/mineweb/view/mineweb/en/page72068?oid=103698&sn=Detail

If you look at those GAAP-based statements and include in the deficit the year-to-year change in the net present value of the unfunded liabilities for Social Security and Medicare, what you'll find is that the annual operating shortfall is running between $4 and $5 trillion; not $500 billion as we saw before the crisis or the $1.4 trillion that they announced for fiscal 2009. Now to put that into perspective, if the government wanted to balance its deficit on a GAAP basis for a year, and it seized all personal income and corporate profits, taxing everything 100%, it would still be in deficit. It can't raise taxes enough to contain this. On the other side, if it cut all government spending except for Social Security and Medicare, it still would be in deficit. With no political will to contain the spending, eventually the government meets its obligations by revving up the currency printing press.

Western currencies: a war of ugly sisters

http://www.businessweek.com/news/2010-04-26/dollar-euro-pound-are-all-ugly-sisters-hsbc-s-king-says.html

The U.S., Britain and some European countries are similar in that they all have big budget deficits that will require higher taxes and public spending cutbacks, King said. He said the advantage for the U.S. is that it can exploit demand for the dollar to fund its “enormous” borrowing.

Creditors of the U.S. will eventually sour on that arrangement, and may raise demands for other American assets or move away from the greenback as the world reserve currency, King said. He said the U.S.’s practice is similar to the Catholic church’s sale of indulgences in medieval times.

“You’re making a promise to people not for a wonderful afterlife, so to speak, but making a promise in this case that U.S. taxpayers in the future will pay you back,” he said. “The chances of that promise being met are actually quite low. And the difficulty with this is that eventually the creditor nations will begin to realize that buying IOUs from the U.S. is ultimately not in their interest.”

There is one currency which has kept its value for over 6000 years.

Jim Rogers on currencies

http://www.newsmax.com/video/?bcpid=36344180001&bclid=22770166001&bctid=79110788001

Jim Sinclair interview on markets, currencies, and gold

I suspect 1% of my blog readers will listen to this rather long, but incredibly insightful interview of Jim Sinclair, and I expect fewer people to even know who Jim Sinclair is, but I would also wager the other 99% within 5 years will regret not listening to him. The guy's track record is impressive, but his disseminated experience as a trader is invaluable. Click on the little microphone icon to hear the interview.

http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/2/15_Jim_Sinclair.html

The true story about him hiring an imposter to act like a big Saudi investor walking into the COMEX exchange was hilarious. "How do I turn these paper gold contracts into physical gold?" The big gold short must have crapped in his pants when he heard the question.

Sinclair's blog/website is linked in the sidebar as http://jsmineset.com/.

This time it's different...

http://usawatchdog.com/this-time-is-different-it%E2%80%99s-global/

Economists Kenneth Rogoff and Carmen Reinhart do a great job of researching various financial meltdowns in places like South America, Asia, Europe and the U.S. In every crisis, no matter where it took place in the last 8 centuries, people thought a big debt buildup could not end badly. The authors say “arrogance and ignorance” always pave the way to financial hell, no matter what country or what century.

The news gets worse because just about every other industrialized country in the world is facing record deficits and liabilities. Those countries will also print money to pay off debt.

Sovereign debt is being called into question with talk of national defaults on a scale unheard of before. Just this week, economist Dr. Mark Faber said, “…I am not interested in government or sovereign debt because all governments will eventually default, including the U.S.” Faber thinks governments will default, in part, by printing money to pay for their liabilities and debt. That prediction spells I-N-F-L-A-T-I-O-N on a global level. It is no surprise that Dr. Faber thinks gold will continue to outperform stocks.

So, the things that got us in this financial crisis are no different than the things that caused other financial meltdowns throughout history. I think what is different this time is the size of the debt buildup. It is on a scale never before seen in human history. Debt is overwhelming individuals, corporations and countries. This global debt will likely produce the biggest financial meltdown in history, deserving of the Volker expression “mother of all financial crises.”

John Embry on gold in January 2010

John Embry is one of my favorite analysts on currencies and gold due to his clear insight on fundamental economic laws. His stellar track record against a wave of naysayers certainly helps boost his credibility. This is a must read.

http://www.gata.org/node/8281

Emerging markets stepping up to the gold window

Foreign central banks are snapping up gold bullion for their reserves for several reasons. Foremost is their diversification away from the USDollar, as too much exposure to the sinking dollar has caused their asset values in reserves to decline. Their economies are stronger relative to developed countries, so they need to boost their gold reserves accordingly to reflect their newfound economic health. In other words, their strong currencies need to be backed by gold vs. the USDollar.

http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=8970ea5d-3ab9-4ad2-87a8-f76cca63c961

In the past, central banks could sell their gold holdings, in order to suppress the price of gold, as low gold prices enable sovereign governments to borrow at low interest rates. This support allows governments to run perpetual deficits and reduces their debt obligations in the form of low-yielding bond issuance.

But with mounting fears that governments worldwide are reckless in their deficit spending--debasing ALL currencies in the process, gold as re-emerged as a safe haven for monetary store of value.

In another article, the Reserve Bank of India hinted at buying the balance of the IMF's planned 403.3 tons of gold, of which 201.3 tons remain. India purchased 200 tons two weeks ago in a surprise move, as most observers expected China to buy the bulk of the planned sale. However, purchase of the IMF gold by ANY central bank is bullish for the yellow metal, as it further validates central bank net buying--not net selling.

http://www.mydigitalfc.com/plan/india-plans-buy-more-gold-imf-410

Buy gold, but try silver also.

I've posted a few blogs on why silver price will probably move higher than gold. Here's a disturbing, but bullish article on silver, and why owning shares of SLV, the silver Exchange Traded Fund (ETF), are problematic:

http://www.investmentrarities.com/ted_butler_comentary/06-16-08.html

With gold and silver, you're better off owning the physical bullion or coins. However, there are storage costs to take into account.

The ETF's are generally safe, and proclaim to be backed by the physical metal. However, in the case of a financial armageddon, all you may end up with are paper certificates with empty claims on silver bullion that may not exist. I'm not making a prediction it will happen, but in light of last year's financial meltdown and our current economic condition, I can't rule out any potential statistical outliers either.

Today, silver is pivoting around the $17/oz. price point, up 150% in just 4 years. It is real money, just like gold, and has no counterparty currency risk. It has to be explored and mined, requiring billions of dollars to bring to market. Paper currencies, on the other hand, can be created simply from a keystroke by some central banker. And lately, Ben Bernanke and Tim Geithner must be getting carpal tunnel syndrome.

Articles on what to do to survive 2009

Fundamental analysis of precious metals, US Treasuries, interest rates:

Tocqueville Asset Management

Technical analysis of precious metals and currencies:

http://finance.yahoo.com/q/bc?s=TBT&t=5d

Treasury Bonds--the next bubble?

I'm short longer-maturity T-Bonds. It's the last bubble, and bond holders are going to get crushed. I don't know if it's tomorrow, next month, or next year, but tying up your money for 30 years, and getting 2.6% for the privilege is going to prove problematic. It pisses me off that the Fed and Treasury can act unconstitutionally with no oversight, saddling us taxpayers with trillions of toxic debt. WTF? Having said that, I gotta do what I gotta do to protect myself.

Keynes is dead: the Fed thinks they can control the economy. All they've done is create one bubble after another--all unintended. Monetary easing created a tech bubble, at which point, Greenspan declared irrational exuberance and popped the bubble. He then did an emergency reflating to avoid a deep recession, and thus created a real estate bubble. Then he raised interest rates 17 times, popping that bubble. And now they are reflating like there is no tomorrow, deploying quantitative easing to try to save the world economy (bailing out broken industries), but in the process, creating a Treasury note bubble. The Treasury is printing so many dollars they are outsourcing to the Swiss the printing process--they've run out of domestic capacity! This will be the last time helicopter Ben and machine gun Hank will be able to hoodwink foreign investors. When investors flee in droves away from what they thought was safety (US government IOU's), they will flock to other vehicles, whether it's high-grade equities or the currencies of last resort: gold, silver, and the yen. Or their mattress, which will prove problematic when deflation turns into hyperinflation. Interest rates will soar, as investors (many of them foreign sovereign funds) will demand higher rates of return. Think 1970's...

Investors will continue to lose fortunes watching CNBC and Fox News. They report facts ex post facto. Debating whether GM should be bailed out or not is banal. The money has already been made or lost a year ago, before the 90% plunge in GM's share price. That's why buy and hold doesn't work. Our central banks are manipulating the markets with each intervention. It'll only drag out the inevitable recession. Japan did the same thing. Their Nikkei stock index in 1990 was 39,000. Today, in 2008, it stands at 9,000. And our credit default swap problems are orders of magnitude bigger and worse. Stop the bail outs. Let 'em fail. Quit trying to give good money from competent people (taxpayers) to incompetent people (GM and the UAW). The incompetents will just piss it all away again.

And with the public focused on equities, they will always lose. Hint: they should be following indicators from two much bigger markets--fixed-income and forex, watching their capital flows. Central bank interference is causing different asset classes to move parabolically up and down. They're debasing the US Dollar in the process, and sending most of us to the poorhouse.