The Golden Solution to America’s Debt Crisis

https://dailyreckoning.com/golden-solution-americas-debt-crisis/

Japan is 'adding a Ponzi scheme to a Ponzi scheme'

http://www.telegraph.co.uk/finance/economics/10045933/Japan-is-adding-a-Ponzi-scheme-to-a-Ponzi-scheme.html

Kyle Bass on Japan’s Debt Crisis: This Is How It Falls Apart

This is a re-print of an interview with Kyle Bass.  Anytime I re-post something, consider it a high-priority topic.

http://annual.cfainstitute.org/2012/12/07/kyle-bass-on-japans-debt-crisis-this-is-how-it-falls-apart/

Chart Of The Day: America's Debt Crisis - Who Really Is Responsible?

The answer is both parties.  Here's a homework exercise for readers.  Superimpose the chart for the price of gold in the last decade and compare its trajectory against US national debt, and ask yourself if there is a correlation.

http://www.zerohedge.com/news/2012-10-03/chart-day-americas-debt-crisis-who-really-responsible

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:

http://nbcpolitics.nbcnews.com/_news/2012/09/24/14071974-as-clinton-sounds-interest-rate-alarm-does-congress-think-its-for-real?lite&ocid=msnhp

Art Cashin On Bernanke's Secret Banker Meeting To Keep Europe Afloat

Don't be surprised if US taxpayers bail out Europe--again, at which point in the future, the focus will return to US shores before the general election, as the US debt ceiling is in danger of being breached in September--again.  Meanwhile, the Masters golf tournament starts today...

http://www.zerohedge.com/news/art-cashin-bernankes-secret-banker-meeting-keep-europe-afloat

Central Banks Take Joint Action to Ease Debt Crisis

This is why anyone short gold has lost and will continue to lose. 

http://www.nytimes.com/2011/12/01/business/central-banks-move-together-to-ease-debt-crisis.html?_r=1&emc=na

Debt crisis: live

http://www.telegraph.co.uk/finance/financialcrisis/8846201/Debt-crisis-live.html

14.00 An ECB member tells it like it is...

Governing Council member Yves Mersch has said that monetizing government debts "is tantamount to inflation" and "not feasible".

To use inflation to lower the fiscal burden "would reduce incentives for governments" to tackle their debt burdens and "would raise the risks of even higher future inflation and greater output volatility.

Uncontrollable wage-price spirals would be likely," Mersch said in a speech in Frankfurt.

He added that you cannot make the ECB as a "lender of last resort for governments" and that governments must live up to own responsibilities.

Martin Armstrong - Gold Upside Take Off Only Months Away

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/11/14_Martin_Armstrong_-_Gold_Upside_Take_Off_Only_Months_Away.html

“The politicians are not really willing to address the issues.  The real issue is the debt crisis and the politicians are hoping that everybody’s going to forget and they can get back to business as usual.  What this is really about is it’s the entire Western civilization that’s starting to crumble.”

Everything is falling apart and the politicians will not address it because it means having to change the system and that’s what they do not want to do.  The real big money that I speak to, they are really starting to look beyond Italy, Greece, Spain and Portugal.  They are starting to look at France and Germany.

“There is no plan B.  I can tell you, I was speaking to people in Congress who asked the Fed directly, ‘Do you have plan B if Europe falls apart?’  And the answer was, ‘We don’t think that’s going to happen, so, no, we don’t have plan B.’

On the US side, the talk is, ‘Let’s tax the rich and cut some social programs.  You can cut all of the social programs completely and you can take all of the money you want from the rich, but you still have to pay and service the debt.  And right now almost 70% of the entire national debt is interest.  

The way it’s going, eventually 100% of everything the government spends will go to interest and then how is it going to function?  This is a classic, historical moment.  I don’t want to get people scared because I don’t think we will get to that point, but this is like the fall of Rome.  That’s how serious things are.

They have borrowed year after year with no intention of paying it back.  The US had $1 trillion of debt when Ronald Reagan took office in 1980.  We are now pressing $15 trillion of debt.”

When asked about gold, Armstrong responded, “Basically what you are doing is you are building a sideways type of base.  Eventually gold is going to take off to the upside, but largely when people begin to see the Emperor has no clothes and we’re getting close to that.  I would only give it a few more months.”

EU calls emergency meeting as crisis stalks Italy

http://www.reuters.com/article/2011/07/10/us-eurozone-idUSTRE7691HM20110710

Former OMB Director David Stockman talks U.S. debt crisis

http://www.youtube.com/watch?v=yBtfktG3T2U&feature=player_embedded

"The essential distinction is that we had a clean balance sheet then - $1 trillion of national debt. Today we have $14 trillion in national debt.  We have used up all the runway, so to speak. We have piled our national balance sheet with so much debt that the government is at the very edge of a huge solvency crisis that isn't going to be addressed unless both parties dramatically change their position, and I see no sign of it.  So we're going to have a gong show."

"We have not had a two-way bond market.  We have had a rigged market that has been dominated by not just the Fed, but all the central banks.  Today over half of the $9 trillion in publicly-held debt is in central bank vaults. I call it the 'Monetary Roach Hotel.'"

US Finances Rank Near Worst in the World

$2tn debt crisis threatens to bring down 100 US cities

http://www.guardian.co.uk/business/2010/dec/20/debt-crisis-threatens-us-cities

State Budgets: The Day of Reckoning

Another financial crisis is looming.

http://www.cbsnews.com/video/watch/?id=7166293n

Europe's debt domino effect

EU rescue costs start to threaten Germany itself

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8160999/EU-rescue-costs-start-to-threaten-Germany-itself.html

The escalating debt crisis on the eurozone periphery is starting to contaminate the creditworthiness of Germany and the core states of monetary union.

"Germany cannot keep paying for bail-outs without going bankrupt itself," said Professor Wilhelm Hankel, of Frankfurt University. "This is frightening people. You cannot find a bank safe deposit box in Germany because every single one has already been taken and stuffed with gold and silver. It is like an underground Switzerland within our borders. People have terrible memories of 1948 and 1923 when they lost their savings."

The refrain was picked up this week by German finance minister Wolfgang Schäuble. "We're not swimming in money, we're drowning in debts," he told the Bundestag.

How hedge funds have profitted from QE

With the Fed and the Euro Central Bank applying QE, excess liquidity has to flow somewhere, and that somewhere is emerging countries with strong economies, sound currencies and trade surpluses.  This capital flow is causing price inflation, forcing countries like Brazil and China to impose price controls, which always ultimately fail.   But they have to do something to choke off the hot money.

Meanwhile, the savvy hedge fund managers (even the ones looking over their shoulders at the FBI) are buying emerging market equities and commodities, and plowing their profits into buying credit default swaps on European debt, profiting on sovereign debt crises in Greece, Ireland, Portugal, and Spain.  As the prospects for sovereign debt default increases, the CDS insuring said default appreciates in value.  In other words, these bond speculators are betting on these countries defaulting on their debt obligations.

These so-called bond vigilantes have no conscience:  when they smell blood, they drive up yields on these sovereign bonds, making it harder for these countries to service their debts, and practically ensuring a default.  Of course, the respective government officials will blame the speculators for driving their countries into the ground, but they conveniently ignore the fact that it was the government that recklessly spent money they didn't have, and hence, attracted the bond vultures in the first place.

The problem intensifies when the debt contagion spreads to Italy, France, and eventually Germany, the last stronghold in the Euro community.  The UK, Japan, and the US will not be far behind.

The "P" in "PIIGS" is about to collapse

Portugal is on the brink.

http://www.zerohedge.com/article/portugal-budget-discussions-break-down-government-collapse-imminent

As BBC reports, "the minority government of Portugal has failed to gain opposition support for its proposed austerity budget. A failure to pass the budget could plunge the country back into the debt crisis it had seemingly escaped since the summer." And this: "Prime Minister Jose Socrates threatened to quit if the budget fails, while the finance minister ruled out more talks." In other words, the Portuguese government is about to fall,...

Convoluted logic

After European finance ministers unveiled a $1 trillion bailout plan for Greece and other indebted nations, gold immediately crashed almost $30. Why did it crash if:

1) quantitative easing (money creation) is inflationary, and
2) gold is a hedge against inflation?

The answer is while gold is an effective hedge against inflation, it is an even better hedge against financial crisis (and eventual collapse). In light of the Club Med countries' fiscal problems, gold prices have been rising, as the possibility of bond defaults has become very real. Hence the correct flight to gold as a safety valve, and the incorrect flight to the USDollar as a long-term safe haven (I would agree the dollar may rise nominally in the short term--until the market figures out the USdollar is an impaired currency).

With the announcement of a bailout for indebted European countries, the markets perceive the possibility of a default has been taken off the table. Hence, the fear of a financial crisis subsided temporarily last night in Asian overseas trading. However, sober speculators realized quantitative easing is also inflationary, and subsequently drove the price of precious metals back up. Long-term, precious metals bulls will ultimately profit--whether inflation or financial crises occurs, probably both.

The Euro bailout is a precursor to more bailouts about to occur in the US. Attempts from both sides of the pond to normalize economic recovery will fail, as the bailouts are merely debt bandaids to major debt problems. I expect the Fed to "rescue" bankrupt states and municipalities, including currency swaps and quantitative easing as part of their monetary arsenal. The Fed certainly can't reduce short-term interest rates any further--we are already at zero.

In a related matter, European Central Bank (ECB) President Trichet last week declared the ECB would not resort to purchasing junk bonds from Greece, Spain or Portugal, in attempting to prop up the Euro currency. In a huge reversal last night, the ECB agreed to purchase said bonds. Talk about head fakes. In the process, the ECB slaughtered the bond vigilantes who were betting on the Euro collapsing, as well as the countries whose governments and citizens have been living beyond their means for decades. Ultimately, those bond vigilantes will be proven right, as the ECB has indeed extended the Euro zone life line, but they have done nothing to structurally resolve their debt problems. These bailouts merely delay the inevitable collapse; they do nothing to address the debt problems--if anything, they make them worse.

While current group think among economists, politicians, and academia have distorted Keynesian economics into its current monstrous from of government manipulation in markets, John Maynard Keynes for whom those economic theories have been named after, was absolutely correct with this comment:

"Markets can remain irrational far longer than you or I can remain solvent."

In other words, perfectly efficient markets with rational price discovery mechanisms are mythical in a world where markets are rigged and gamed to the advantage of a powerful few. I should correct myself: gold is not only a hedge against inflation and financial crisis, it also hedges an individual against a corrupt and reckless government money printing press. When one takes possession of physical gold, there are no counterparty risks. Thousands of banks have collapsed over the course of modern banking history. Thus, depositors and holders of derivatives have lost capital in our fiat currency financial system, unlike holders of gold, which have retained their store of value for thousands of years. With gold ownership, there are no other claims against it, and you won't get zeroed out.

The only way to be dispossessed is if the government confiscates it, which is exactly what Franklin Delano Roosevelt did by Presidential Executive Order 6102 in 1933:

http://www.wellsfargonevadagold.com/confiscation-order.pdf

See disclaimers on side bar.

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

US gold coin sales surge

As I've often posited: better early than late. No crystal ball predictions here, as we may be entering a temporary overbought situation, but treat precious metals as insurance against a financial crisis, not a money-making venture. And given the past and current debt problems domestically and offshore, the odds of a crisis have increased substantially. Good luck to all.

http://www.reuters.com/article/idUSN0762739220100507

See disclaimers on side bar.

Disclosure: long physical precious metals, long precious metals mining shares.