Monday, April 30, 2012

The Remonification of Gold.

I've written many times that the remonification of gold would be a given.  Look through my past posts and you will even see some of the signs that I believed we would see that would be important proof points that it is happening.   Recently, Jim Sinclair pointed out that a huge sign is happening right here, right now (as Jim likes to say), and it is taking the form of China paying for Iranian oil using gold.

It's no secret to say that the US has it in for Iran.  Part of the reason is probably the stated reason: fear of what Iran might do with an atomic bomb.  Or maybe it is just fear that Iran might be able to defend itself from illegal attacks by big militaries like that of the US or a US led coalition.  Truth is, we do have a reputation of shooting first and asking questions later in that region.  Some of it probably has to do with the fact that war is good business for scum bags and con men and the world is running out of countries to attack without the US being publicy thought of as a hotbed of war criminals.  Perhaps a bigger part of it than most people understand is that Iran is calling BS on the US dollar with its Iranian Oil Bourse which will accept payment for oil in anything EXCEPT US dollars.  Such things are not good for the USA's monopoly on monopoly money...

Whatever the reason, the US has led the economic sanctions against Iran using the excuse that Iran is trying to build a nuclear weapon.  The fact that Israel's top general is on the recent record saying an Iranian bomb is not a credible threat really doesn't seem to matter much.  The Bush-bama war mongering machine will never be satisfied until they get to kill more people and take more things that don't belong to them.  The first step, of course, is to use economic sanctions in order to starve the people into overthrowing their own government.  If this doesn't work then of course, the tanks will roll.

One aspect of the economic sanctions is to not allow Iran to clear any international payments made to it using the so called SWIFT system.  SWIFT is an acronym for the Society for Worldwide Interbank Financial Telecommunication.  In other words, it is an electronic money clearing house for international trade.  Think of it as PayPal for countries.  The US got SWIFT to kick out Iran's banks as part of the sanctions.  This leaves no easy way for other nations to pay for Iranian oil.  The US basically told Iran, "It's our money system and you can no longer play in it.  Go starve.  Go collapse.  Go whatever as long as it is away."

The arrogance of this action is obvious.  The US believes it can push everyone around, foreign and domestic.  But as is often the case, the law of unintended consequences is raising its head and tossing Iran out of SWIFT is having very important but unintended consequences.  You see, China is a major purchaser of Iranian oil and China is really not against Iran having nuclear weapons.  China knows that if Iran launches one weapon against China that China will obliterate the whole country in nuclear rain.  In other words, Iran cannot be a real threat to China (or to Russia or to the US for that matter).  China does not intend to stop buying Iranian oil just because the US said so.  But SWIFT payments no longer work so now China has taken to paying for Iranian oil using gold.  Doop!

As I have written many times, physical gold lives outside of the debt Ponzi.  It is real money, controlled by nobody.  This is why the Ponzi operators hate gold and call any gold standard a "barbarous relic".  Those who trade for goods using physical metal are beyond taxation, beyond sanctions, beyond the control of the evil bastards who are running the global Debt Ponzi.  Gold is money whether or not the US likes it and China is proving that right now by trading gold for Iranian oil.

This has got to be pissing a lot of self-important D.C. bureaucrats off big time.  First of all, China didn't vote for the sanctions so this is not a matter of "cheating".  Second, China is too important to the US to effectively start a trade war with.  China would be hurt but it would wake a lot of sleepy American sheeple up from their slumber if it caused store shelves that used to be full of low cost Chinese goods to suddenly go empty.  A trade war would certainly impact American quality of life in a negative manner.  And it's a way of life we aren't even working for - we just finance it all with debt that we have zero intention of ever paying back.  Messing up that scam will not be politically healthy for con men and politicians should they take on China.

Finally, Iran receiving gold for oil means they need to spend gold in order to run their oil operations.  It's not all pure profit you know.  There are expenses.  If Iran is getting paid in gold it has to be paying others in gold.  That means those people are not getting paid in dollars like the US wants them to.  It proliferates gold into the global economy as a means of exchange, a store of wealth and a unit of accounting.  If this goes on, then companies who have been indirectly supplying Iran with oil mining materials (many of which live in the USA) will start showing gold on their books as assets.  This action is actually speeding up the global remonification of gold even though I suspect that a big reason for doing the sanctions in the first place was to punish Iran for trying to abandon the dollar in it oil sales operations.

Iran is definitely getting the better end of this deal!  The US has suppressed gold prices which means China is paying a lot more gold to Iran than it would otherwise have to in exchange for oil.  This is pushing more gold into Iran and thus into the global trade than it would have done if gold was allowed to rise to a natural price of perhaps $3500-$5k per troy oz.  The US better be very careful about next steps.   Everything Sinclair stated in his article is true.  The past gold price suppression has left the physical gold supply much lower than it should be today.  Any sort of global shock that involves gold (i.e. the need for Iran to rapidly fund a war) could actually cause gold prices to skyrocket.  This alone would wreck more havoc upon the US economy than anything Iran could ever hope to achieve militarily even if it had a nuke!  Rapidly rising metals prices have always been a signal to the people that confidence is being lost in the fiat currency.  If the US isn't careful it could in fact start a stampede out of the USD with its continued economic attacks on Iran.

Sunday, April 29, 2012

Global credit is crashing. Markets will likely follow.

Mish is reporting on the most important economic data in the world today while sleepy sheeple are kept in the dark by the completely useless news at Google, Yahoo and Bing.   While it may not be as easy to understand as Lindsay Lohan's new role playing Liz Taylor, the fact that global credit is collapsing at a staggering rate is completely understood by anyone who knows how money works and who understands the eventual result if this continues.

First, please understand that the importance of this is directly tied to the fact that our money supply has no real money in it.  It consists completely of debt.  The dollar, the Euro, the Yen: all debt notes.  The US started the world down this fraudulent path in 1913 with the creation of the Federal Reserve and then sealed the world's fate in 1971 when Nixon defaulted on gold convertibility of the dollar.  Since then, all paper money in the world has had no backing whatsoever.  You might just as well call it "faith money" as fiat currency.  Another word for faith is "con".  As in con game.  More to the point, a global debt Ponzi scheme.

Once the value (i.e. the work needed to create new money into the economy) was removed from the currency then it was not difficult to game the system by creating seemingly unlimited amounts of credit in that system.  After all, if debts go bad in such a system, just print up new money, right?  Well the truth is that you don't even have to do that!  You simply change the rules to allow more loans on top of the reserve cash you already have.  So instead of loans being backed by 50% in cash reserves or even 10% cash reserves, they are backed by 3%.  In other words, leverage is increased by those who have been given special permission to create credit (i.e. the banks).  If asset prices drop by as little as 3% for many big bankers, all of their assets (and the assets of the people who stored their money with them) are wiped out.  If you don't understand this leverage, read up on Bear Stearns. As all of this was happening, the global money supply expanded mainly because of the expansion of credit, not primarily because of the expansion of actual money (aka the monetary base).  But the markets can't tell the difference between money conjured into existence by the Federal Reserve and credit conjured into existence by banks in the Federal Reserve system and so prices are pushed up across the board by the exploding credit supply.  Over time, credit becomes the major component of the global money supply.

Unfortunately for the con men running this scam, what looked initially like a "free money", "can't lose" scenario for them was actually a "guaranteed to blow up in your face eventually" scenario from the very start.  There are two reasons no con ever lasted (or will ever last) forever.  Either the con men wipe out all the patsies and there is nobody left to try to con (except other con men) or the patsies wake up, smell the con and run away.  In the case of the former, the patsies wish they could still play but they have been fleeced.  The casino has all their money and so they are out of the game not by choice but by circumstance.  As for the remaining players,  well,  you can't con a con.  So if all that are left in the game are con men then the con is ripe for collapse.  The con men will take to infighting, trying to run the con on each other, etc.  Equally matched, nobody can make further gains despite hundreds of millions invested in attempting to do so.  So they either go to war or they give up and go do something else.  In the case of the latter, the patsies have had enough.  They have gotten pounded and now they are afraid of losing everything to the scam.  So they are hunkering down.  They are saving instead of spending and what they do buy, they buy with cash. 

In either case, the credit / debt supply of the world begins to reverse course and with it the money supply contracts.  Governments try to counteract this deflation by printing up money from thin air but they have to be very careful because after a certain point the people realize that the government knows no constraints on money printing.  When the people finally realize this they run away from the scam of fiat currency itself.  This is what Ben Bernanke fears right now.  He sees the rising prices of gold and silver and he knows that the smart, educated money is taking this time to build a large store of wealth outside of the fraudulent paper money system.  He is monitoring gold purchases very carefully and trying to keep gold prices from going wild.  Unfortunately for him, China and others know that Ben's QEx efforts are screwing them out of the wealth that they have stored in USD denominated assets.  As a result, each time Ben and friends drive the price of gold lower, China and friends buy more of it on the cheap.

Ben knows the golden rule is still true: at the end of the day, he who has the gold makes the rules.  This is because educated people know that gold is money and everything else is credit.  Credit can be defaulted on but money cannot.  If Ben keeps trying to drive gold lower while at the same time printing more funny money dollars from thin air then China will build up a gold stash to rival the U.S. and what will follow is the rise of China as a world leader.  Not just as a place to buy low cost, high quality goods but as a global power that actually sets policy, wins disputes over lands and natural resources and other sovereign claims.  Elements of Chinese law would become global law.  Elements of Chinese culture would become global culture.  Chinese military power would settle arguments the way US military power does today.  In other words, the very concept of western dominance of the future of the world is at stake here.  Perhaps 1 in 1000 have even a clue about this but it is the story that has been told and retold throughout human history: he who has the gold makes the rules.

Because of this, Bernanke is being very careful about announcing any further stimulus.  It may just be that he thinks that if he announces QE3 then it will be the straw that broke the camel's back.  Many things Bernanke is saying lately tell me that he is fearful that such a move would drive so many people out of his funny money and into physical metals that he and his cohorts will not have the means to suppress the price of gold anymore.  If he allows that to happen, the gold price will skyrocket and the currency will crash.

At the same time, if he doesn't continue printing money to make up for the falling credit and debt supply then the overarching money supply will massively contract and there will be a greater depression globally than the world saw during 1929 and following years.  Without intervention, the math of the current system demands that deflation occur.   But, if the people stop trusting the current system and abandon it at the herd level then the historical result is hyperinflation.  I can't tell you how few people understand this delicate dynamic.  It means that very few people are factoring in the risks that are in play today.  I say again, deflationary depression is what will happen if Bernanke goes laissez faire on the system like he should do but that hyperinflation could rapidly result if he continues printing money or if Congress takes over the responsibilities of the Federal Reserve.  If Congress ever takes over control of the money supply, that's it, game over, hyperinflation is assured.

The above paragraph will confuse many and so I want to say some final words about it.  The main question from people will be how can we go from deflation to hyperinflation at the drop of a pin?  How can the whole thing possibly rest on a knife edge like that?  It is the basic lack of understanding about debt based money which makes people ask such a question.  So here is the answer: the money in your wallet, in your bank account, and in your 401k has no inherent worth.  Why?  Because it took no work for the issuers of it to conjure it up in the first place.  In the case of bank accounts and 401ks, nobody has even bothered to print up most of the paper bills to back it.  It's all just numbers in a computers.  Once the act of money creation is separated from the act of working to bring it into existence, the money is inherently worthless.  I didn't say that you didn't work to get it and I didn't say that other people won't still accept it in trade (key word: "still").  I said that the owner of the money supply, the Federal Reserve, didn't work or even collect taxes on your labor in order to get the money in the first place.  This did not used to be the case when the USD was gold and silver backed but that ended long ago.  So today, the only thing and I mean the ONLY thing that gives your US dollars any purchasing power in the market is faith and confidence.  If the faith and confidence in the issuing authority of fiat currency collapses, so will the purchasing power of the currency it issues.  Again, this is history talking.  It cannot be argued.  It is what it is.

As you can see, there is a lot more at stake here than the price of gas or US employment numbers.

Saturday, April 28, 2012

Bill Black: Our System's Fraud is Mathematically Guaranteed

I've referenced Chris Martenson several times in past posts but he probably deserved more of my attention because he really does "get it".  I'm sure he will get more of my attention going forward.  Today I want to point out his recent interview of Bill Black.  Bill Black was a lead regulator in investigating the 1980's banking crisis.  His Wiki entry is well worth a read.  Bill's concept of Control Fraud closely matches what I have been writing about for years: governments get in place initially to serve the people but over time they start looking out for themselves.  They begin to treat the people like chattel; property; a renewable resource to be harvested.  In order to do this, they, over time, systemically remove any safeties that limit their power grab.  They create more and more restrictive laws and they enforce them selectively.  If you are not a friend then you are an enemy and you are probably breaking some law.  At the end of the day everyone can probably be convicted of some felony. They hollow out the money supply and begin to run Debt Ponzis.  They reduce individual rights and freedoms all the while explaining how it is being done for the greater good, blah, blah, blah.

The reason that the United States became great over the past 200+ years was that people were free to work hard and to keep what they worked for.  Without extensive "social nets" or a nanny state, people just did the right and sensible thing in order to maintain themselves.  They did it because it was in their own selfish, self-serving interest to do so.  They did it in acknowledgement of the fact that it is the nature of man to be selfish and to look out for #1. With everyone working in their own best interest, GROUP productivity was high and GROUP prosperity followed. 

Unfortunately, not all people are created equal.  Some are smarter, some are natural leaders, some are physically stronger, some are harder workers and some are better looking.  In the past, people would take stock of their God given gifts and make the best of them.  Unfortunately, some people apparently have little to offer.  They are weak, stupid, ugly, boring, lazy, crippled, etc.  They either have to work extra hard within their God-given constraints to add value to society or they will not do well in life.  Steven Hawking is the  poster child for this.  He worked hard to overcome his God-given constraints.  He proved that his apparent disability did not stop him from contributing.  He did not need to be coddled.  This is the natural order of things: no free rides, period.  It is not a happy thing that this is the case but it cannot be denied and it cannot be changed by government mandates and "programs".  People must remain in charge of their own lives or society will eventually crumble and collapse.  When government tries to remain relevant by stepping in and controlling people's lives, it defies nature.

When Dubai created massive islands in the shape of world continents I laughed out loud and told my wife that if the ocean didn't put them there then they would not be there for very long.  Today those multimillion dollar islands are sinking back into the sea.  It is just ridiculous to do things that are so out of synch with nature because nature never sleeps.  Thus, the maintenance of these things begins to require unlimited resources.  In the end they collapse because nobody has limitless resources to maintain things.  This is the problem with big government and the nanny state, especially when such governments have access to seemingly endless amounts of credit.  It creates unnatural situations that are in government's own interest to perpetuate (bigger government) while being completely against the nature of man which is to profit from his own labor and to live in freedom and privacy while pursuing one's own view of happiness.  At some point the ability to take on more debt collapses and all of the artificial things that government was paying for using debt collapse as well.

For its first 200 years, the United States was the engine of global progress because our government was relatively new.  It had not had time to become infested with self serving bastards who actually think public money is their own piggy bank.  But now the whole damned thing is one big corrupt mess.  When some organization like the GSA gets caught partying too hard, the rest of the government slaps it down in a public show, but this is all just theater.  The real con men running the government are stealing billions through Control Fraud all the while convincing ignorant citizens that it's all for the better.  The fact that all of this fraud is being "paid for" with mounting debt seems to mean little to most people.  The fact that many cities and states are bankrupt also seems to have escaped people's attention.

Folks, it's time to revert to the natural order of things gracefully before an un-orderly reversion to the mean occurs simply because there is no other choice.  We need to honor hard working producers and reward them by letting them keep more of what they earned instead of uplifting people who have given up on the natural daily battle for existence and prosperity in favor of receiving government assistance.  Handouts for every special interest are now just assumed.  Nobody cares who pays for these but if you ask the proponents of them to bear the cost for their own special interest they would not like it and they will not pay it.  They shamefully want all of us to share their special interest.  They want to use rule of taxation laws to force us to participate in supporting their socialistic ideals even though history has shown time and again that they don't work.  They want to steal the profits of our work and redirect it for their own purposes.  The historical term for this is slavery.

Sorry folks, I have my own charities that I contribute to.  I don't want to contribute to yours and I'm not trying to demand that you contribute to mine.  When I see an able bodied homeless man on the street corner begging for cash I want to get out of my truck and give him a medicinal back hand and tell him to go get a fraking job - any job - just like the rest of us.  I don't care what their hard luck story is.  They are walking around just fine so they can work instead of begging.  When I see people asking for free needles for drug addicts, free condoms for children, free ANYTHING, it makes my blood boil.  Nothing is free.  Making anything free to some people is simply wealth transfer from other hard working people.  It is a form of theft.  History shows very clearly that all it does in aggregate is to encourage people to ask for more free stuff.  Government does this because it is playing on people's desires to receive something-for-nothing.  In other words, government is playing the nature of man against the citizens it is supposed to be representing.  It does this to the detriment of society for the sole purpose of buying votes so that useless bureaucrats can remain in power.

Along these same lines, I'm very sorry that it is the nature of man to grow old and to die. It is very unfortunate that we were not designed to live forever.  But it is the natural order of things and we all have to come to grips with it.  Creating a socialized medical system that promises old people unending medical care at exponential cost to be borne by the working class is mathematically unworkable.  It is a vote-buying scam propagated by politicians in order to stay in power.  If allowed to occur it will mean yet another burden on the working class to pay for something that will not be there for them when they get old. 

Social Security is the same thing: it is already bankrupt and all social security payments being made today are only possible because of the United States' ability to take on more debt.  This cannot last forever.  Someday people will recognize that we cannot pay our debt and indeed have no plans to do so.  At that point interest rates will skyrocket like they did in Greece and are now doing in Spain and Italy.  That is when people will be told that the programs they have been paying into all their lives must be abandoned.  That is when fools who have been supporting the nanny state will finally realize the actual degree of their ignorance and foolishness.  That is when people will finally figure out that government has been running a Debt Ponzi.

Friday, April 27, 2012

So you think fundamentals no longer apply?

Your view of the ongoing collapse of the Global Debt Ponzi is obviously going to be aided, colored or obscured by your understanding of how money really works, what money really is, how freedom and honest money are inextricably intertwined and of course, all the historical precedent on this matter.  For some people, we just have a rough spot in the economic road.  "These things happen", they think.  "It's a normal part of life, things will get better, they always do".  For other people, including me, a Debt Ponzi scheme is a scam even if it is run by governments and no scam ever ran forever.  They always collapse at some point.

We are living in an historic time economically.  The world has racked up monster amounts of debt that can never be repaid.  The entire global money supply is based on debt.  It is an incredible time; beyond the belief or understanding of most people.  Why?  Because it is beyond their experience.  Most people mainly learn from their successes and failures; they cannot just be told.  In order to learn from your experience you have to have done something already.  The world has never found itself in even remotely the economic state that it exists today.  The world has been turned on its head by a fraudulent money global supply which consists of fiat currency and fractional reserve banking:
  • Bankers used to be stodgy clerks and penny pinchers.  Now they live like rock stars and are regarded as the elite among our society.  They bought this position using money they did not earn.  They simply conjured it up from thin air and then loaned it out for interest.  It's the digital age spin on the original something for nothing scam called alchemy.
  • Gold is not thought of as money by most people but rather as "an investment", and in the minds of many people, a right risky one at that.  People's entire fortunes and retirement funds live in paper "assets" that didn't even exist 100 years ago, yet people feel assured that their stored labor is safe.
  • Honest men with 30 years of consistent behavior and messaging like Ron Paul are "kooks" while bold faced liars like Clinton, Bush, Obama, Romney and others are given respect and trust which is far beyond anything they have ever earned.  They all say what they think people want to hear.  They all have racked up or are promising to rack up debt like the world has never known. 
  • They all want endless war because they think it is good for the economy and because nobody puts them in jail for receiving bribes from "defense" contractors. 
  • They all want people to have less freedom and privacy.  They think TSA grope-downs are normal right along with heavy taxation and heavy handed law enforcement.  All of them except Ron Paul, and he's the "kook".  As I said, the world has been turned on its head.  Good is bad.  Honesty is a lie.  Fraud is truth.  At least for now folks.  At least it seems like that for now.
It's like the fundamentals that have governed human society no longer apply.  It's a brave new world.  Everything that used to be true in the past is wiped away and there are a whole new set of rules now.  Or so you might believe.  Me, I am far from convinced.  I think the Debt Ponzi has peaked and that we are on a big downhill slide.  I think a lot of smug bastards that think they have the world all figured out are going to find themselves out on the street wishing like Hell that they had any real skills or redeeming human qualities.  These are not things you just pick up in an instant.  If you have not been working on them for years then you lose them.  Bankers and moneymen at all levels have fallen into this trap. They will eventually be among the biggest victims of their own game. 

Sprott and Baker provide more concrete detail on the subject of fundamentals.  I agree with the title of their article: When Fundamentals No Longer Apply, Review the Fundamentals.  The article is well worth your time as it is a quick read.  Bottom line is that fundamentals always did apply but they were masked out, bought off if you will, by the societal and economic plague which is a corrupt money supply. 

Think jobless rates are going down??  Think again!  The con men are simply gaming the numbers through
the use of a new category which is "people who have given up on looking for work".  This is an absolute joke of a statistic to just write off large numbers of people like that as if they no longer matter to how society operates.  At some point in time, if you don't work, you don't eat.  For now, many of these people are joining the ranks of those living off food stamps but this entitlement will only last as long as the US can borrow money at nearly zero interest rates.   

If (when) the perception becomes that US debt (in fact, ALL government debt) is risky then interest rates will rise rapidly and rolling over the existing debt into higher interest bonds will make it obvious that the US is just as bankrupt as Greece is. 

What do people really think is going to happen when the government starts raising taxes in order to service the debt (not pay it down folks, simply to avoid defaulting on it) and to continue feeding millions of people who are learning to be dependents of government welfare?  Well, first off, the government will try to crack down on tax collection.  But the miniscule rise in income that it receives will be offset by the cost of collections.  Not only that, but the heavy handedness of the efforts will result in capital flight.  In other words, people with something to lose will take what they have out of the reach of government thieves. 

It's already happening big time in Greece and Spain.  In Greece, government is seizing people's bank accounts and accusing them of tax evasion, promising trials in the future.  What a joke.  The Greek government will collapse and any funds they have seized will be lost.  Or, Greece will return to the Drachma and any funds taken by government will be claimed as a casualty of the conversion process.  Either that or the money will be tied up in the legal system long enough for the Greek con men to have inflated away all the value.  One way or another, possession will again become 9/10ths of the law.  If you leave your money where government can steal it, that's your fault for being an idiot.  In both Greece and Spain, people are quite aware of this and are pulling their money out of the banking system at an alarming rate.  A collapse will soon occur. 

A collapse by Greece is bad enough but a collapse by Spain will quickly be felt across Europe and the across the world.  At some point the panic will set in broadly.  Markets will crash.  Asset prices will collapse.  Cash will be king and gold metal will be the king of cash.  Silver metal will be the prince of cash.  
Keep in mind that spot gold is not real gold.  It is a market price that is greatly influenced by the trading of leveraged paper positions of gold.  The coin price is the real price of gold.  You do not pay the coin price and then receive paper promises; you receive real, tangible metal.  Thinking people will see the increasing delta between physical coins and the "spot" price as a flight to gold by the smart money.  This is capital flight out of corrupt fiat currency and into the only true form of money that ever existed on this planet.  It is happening slowly at first but expect it to increase in speed as the collapse plays out.  J.P. Morgan's words will echo around the world once more: gold is money and everything else is credit.

Why must this be?  Simply because anyone with a brain in Greece or Spain has already pulled their money from any paper asset where the governments could swoop in and take it with the stroke of a pen and the click of a mouse.  Paper assets are soooooo vulnerable to government theft it isn't even funny.  Anyone in Spain or Greece that has a dime left in any bank right now is a blithering idiot.  Yet many people simply don't know what to do with their cash because they have been fooled into thinking that gold and silver are expensive now.  They can't put it into real estate because it is still plummeting.  So they sit there and take an economic baseball bat to the face because of their ignorance. 

The really smart people took their money out of the corrupt system long ago.  Again, it's called capital flight. They did it when gold was $800, $900, $1000 per troy oz.   They got out while the getting was easy.  Today, the getting is simply "just good", no longer "easy".  But hundreds of millions of people still don't get it.  By the time they do catch on it will be too late.  They will get stuck holding a paper bag full of worthless paper money.  It will only convert into a small fraction of the gold that they could receive today.  The increasing delta in price between coins and spot tells me that fundamentals do still matter.  I predicted this was going to happen several years ago and now the numbers are obvious.  As the something-for-nothing con of fraudulent money collapses of its own corrupt weight, the world will be turned back on its feet.  It will likely not be pretty but it is a healing nonetheless.  No addict ever kicked the habit painlessly and it's not going to be different this time for the credit-addicted world.

Sunday, April 22, 2012

Art Cashin: EU collapse would be "Cataclysmic"

Among the top headlines today on Google news are:
·         Results of the first round of the French elections.
·         Neil Diamond marries for the 3rd time.
·         Czech coalition government falls.
·         More firings over the Secret Service prostitution scandal.
Over at MSN, the top headline is similar: “Secret Service, April storms, and top fashions you can wear day or night”.
In other words, drivel straight across the board as the main stream media pushes meaningless, un-actionable topics down onto the sheeple.  All of it suggests that the world is business as usual, no real problems.  Nothing to see here folks, move along please.  None of it is news.  All of it is noise; white noise that keeps the herd from hearing the sounds of collapse heading toward us.
In a different part of the web, over at web sites run by “conspiracy theorists and goldbugs” I see a completely different class of stories.  Unfortunately, these stories involve money, math and the unavoidable coming global economic meltdown.  The guests on these sites are becoming more and more credible and the stories they are telling are understood by only a very few people; perhaps 1 out of 1000 have any clue is going on.
I’ve been reading King World News for some time now but I recognize that each story they tell is prefaced or post scripted by an offer to sell shares in “junior” gold mining stocks.  Not exactly a sure fire investment IMO and so I don’t often point people there.  But as many of Bob Prechter’s predictions of “Conquer The Crash” begin to come true I am seeing more and more big names show up at KWN telling their stories.
One extremely credible recent interview was with Art Cashin, Director of Floor Operations for UBS.   This should be a top story for everyone yet you have to go to a backwater blog to read his important insights. He says that a Eurozone breakup would be “cataclysmic”.  Art basically says that the sky looks like it is cracking and that any prudent observer would be afraid that it is going to fall but that market participants are acting like nothing is wrong because they believe the government will backstop any failures. 
This is the sad lesson that people seem to have learned from the last 4 years of government intervention in the markets: “hero” Ben Bernanke is economically omnipotent.  People have been led to believe that governments are more powerful than the market even though history has proven that this has never been the case for very long.  History also shows that the level of panic and civil unrest that is tied to the inevitable collapse is generally commensurate with how many people were taken in by the fraud and to what degree they lost out.  When everyone believes the government is omnipotent it is a recipe for disaster.
Cashin goes on to say, “There are no easy answers (to Europe’s problems), there are no clear answers to solving the problem. That is why we’ve been reduced to buying time. There is postponement, rather than resolution. “   He says this at the same time many people are under the belief that “hero Bernanke” has actually fixed the global economic crisis.  The sheeple are just going about their business, completely oblivious to the risks. 
Unfortunately, even this understates the problem.  The very meaning of the term “risk” has been watered down by continuous government intervention in maintaining the status quo.  Unfortunately, the math tells us that the outcome is a certainty and that the only risk is in predicting the date and the hour.  It’s akin to playing Russian Roulette with a six shooter loaded with one bullet while talking about the outcome in terms of “risk” while squeezing the trigger 6 times in a row.  Yes, there is a ridiculously low probability that when the hammer finally hits the primer of the bullet that there will be a misfire but only a moron would bet his future on such an outcome.   The fact is that the hammer will hit the primer of a bullet and that should have people very concerned.  It should be front page news.
Governments are certainly concerned.  Per Prechter’s 2002 predictions, there is a growing trend toward nationalism and protectionism.  When the easy credit was flowing we could all just get along.  Now that the debt Ponzi is going bust in slo-mo, we are falling out of love with our neighbors.  The U.S. was a leader here with our border fence to keep Mexicans out.   More recently France and Germany are talking about implementing border controls.  Thinking people have to ask why.  The answer is simple: the richer countries of a region are worried that an economic collapse will send waves of homeless and starving across the borders into their countries looking for humanitarian assistance.  Governments are quietly preparing for Armageddon while the sleepy sheeple go about their lives, mostly oblivious.

Saturday, April 21, 2012

Egon von Greyerz sees what I see.

A recent post over at King World News discusses what I have long said must be the eventual outcome as the Global Debt Ponzi works its way through the collapse phase.  There is simply too much debt and not enough productive labor has been created by the debt to pay down the debt.  Thus, the debt must default.  This is math, not opinion, not emotion.  When debt defaults on a massive scale it will result in an Elliot Wave 3rd wave which will arrive as a global economic shock.  Sheeple around the world (even those with Illuminati symbols on their web sites) will say "we never saw it coming".  It will arrive in such a way as to confound most people most of the time. 

That is what 3rd waves of the Elliott wave sequence are all about: a massive, sudden awareness by the herd that things are not what they were believed to be.  It causes everyone to head for the door at once.  The first few out can get out whole.  Those will be the ones standing near the door in the first place, the ones taking the least amount of risk and the ones who are holding money instead of assets.  Everyone else left in the game will lose a rapidly growing percentage of what they put into the game for every player that manages to get out before them.  By the time the room is half empty, those who already got out will have taken out with them all the value that was ever put into the scam. 

The remaining patsies will get fleeced of everything.  Their paperwork will indicate that they are still wealthy but the reality is that they will be nothing more than victims of massive government sponsored fraud.  They will whine and cry about how they lost everything but it will fall upon deaf ears because their debt will be with the government now that the government guarantees pretty much everything from pensions to bank accounts.  You can't collect from the government because the government has no money.  In order for the government to pay up it will have to tax people and people will reject the notion that they should work even harder in order to bail out those with lost pensions, 401ks, stock portfolios, annuities, etc. when most of the working class has none of these things. This is the basic nature of the scam which we call a Debt Ponzi Scheme.  The math associated with it requires it to end some day and to end in the fashion I just outlined.

Unfortunately, it is very difficult not to be affected by the debt Ponzi now that the government is the main player.  The government requires you to use their debt money and so anyone holding this fake money will certainly take a haircut in their purchasing power.  We are already seeing it with gas prices but this is just the start of the pain.  After the Great Deflation is over there will be a tsunami of money creation as debt again takes off on top of what is already a much larger monetary base.  Cost of goods will go up and salaries of all but the most productive workers will not keep up.  The only way to protect yourself is to keep a large amount of your personal wealth in a form that is completely outside of the debt Ponzi.  History teaches that physical possession of money metals is the best way to do this.  The goal is not to make a profit; that is for the con men and the speculators.  The goal is to keep the buying power of what you have already earned (a concept which is never spoken about by Wall St. con men or their government co-conspirators).

Truth is, a Ponzi scheme is bankrupt from day 1.  It is simply the belief that it is solvent and the desire to receive something for nothing (a behavior summarized by the single word, "greed") that keeps the participants coming back for more.  At some point it is clear that the whole thing is a scam and everyone runs for the exits at once.  Most people get screwed in the deal because the value associated with the scam has already been siphoned off over time by those who ran the game.  Ask Bernard Madoff if you are still fuzzy on the details.

von Greyerz's apocalyptic sounding view of the future is nothing more than a look back into history to see what actually happened before when the world put itself into this kind of position.  Those who forget the lessons of the past are condemned to repeat them.  Those who think von Greyerz is overestimating the carnage that is likely have clearly forgotten the lessons of history.  We have been conditioned to think nothing can go wrong...go wrong.. go wrong (tip of the hat to those who recognize that famous line from the old movie "Westworld").

When Spain and Italy default on their debt (and they both certainly will), then Germany and France will roll over too.  This is math and logic folks.  Spain is in a massive depression right now.  It's government is begging for more "loans" from the EU.  But the EU knows that any money it sends now is good money after bad.  So the EU has told Spain to jump through exceptionally painful hurdles if it wants any more loans.  As a result, the Spanish government is squeezing its people in order to comply because if Spain collapses then they are going to lose their jobs and perhaps their lives at this point.  They are in it to win it for themselves.  They have abandoned any semblance of honesty with the people.  Unfortunately, it will not matter.  Spain will collapse because the more austerity is forced onto the country, the greater of a depression it will slump into.  You cannot pay your bills if you are not working.  Thus, the more Spain complies with the EU austerity demands, the less credit worthy Spain actually becomes.  The EU knows this.  They do not plan on sending a lot more cash to Spain.  They would be best off right now just conceding default on the loans but they will play this game until it collapses.

Again, unfortunately, the EU and the Spanish government are breeding a new generation of terrorists.  This would be individuals who got screwed out of having a reasonable life by the con men and the moneymen and through no fault of their own.  They are enduring it for now but sooner or later they will believe they have nothing to lose and they will strike back in the only way that seems to have any effect: terrorism.  I don't hope for it but I don't ignore the lessons of history so easily as the con men running the show.  Look for high profile assassinations in Europe over the next 5 years.  It is coming because it will be seen as the only avenue for those who have been robbed of everything.  They will call themselves patriots and the establishment will call them terrorists.  Not unlike the U.S. a bit more than 200 years ago...

If you are running the show you can f$%k with all of the people some of the time and you can f$%k with some of the people all of the time, but you CAN'T f$%k with all of the people all of the time.  When you try to get away with that is when the people show the con men running the show who is really in charge.

Sunday, April 1, 2012

Non-foolish Grab Bag April 1 2012.

Things have been busy at work and relatively slow moving on the global economic front so I’ve refrained from posting for a while.   Here are a few of the stories that I think are worth watching even though they will come as nothing new to anyone following my blog.  Despite the fact that today is April fools day, none of the following are in the least bit funny:

- Spain is the next Greece.  The collapse in Greek sovereign debt was preceded by civil unrest, riots, firebombs etc.  The same thing is now happening in Spain.  The formula is simple: governments get in power and corporations make outsized profits by gaming the fractional reserve credit system so that anyone with a pulse gets credit to buy things they don’t really need.  A lot of this easy money gets pissed away and people get used to having a lot more than they deserve based on the output of their own labor.  Sooner or later the debt Ponzi goes bust and governments try to cut back on the credit excesses in order to save their corrupt system.  But they don’t cut back on themselves, they only cut back on the trickle-down to the people.  As a result the people get angry and threaten the lives of the con men in charge.  Sooner or later the government either has to turn fascist and force the people to back down using military and force or the con men in the corrupt government are run out of town.  The local currency collapses and everyone reverts to an economic state that is supported by their economic contribution.
Spain will default on its debt because it lacks the ability to pay.  All future value comes from the labor of man and general unemployment is about as bad there as it was in the US during the Great Depression (22%).  It’s hard to repay debts without a job.  Unemployment among the younger generation is over 50% now leading some people to declare them “Spain’s lost generation”.  Expect years and years of dissent, rising crime, rising domestic terrorism, etc. from these people.  The culprit is con men and their game of fiat currency and fractional reserve banking.  Every other explanation coming from PhD economen © and academics is just cover fire for the establishment.  There is nothing good about funny money and crony credit.
- China is going to roll over hard.  It’s recently reported that China’s growth for 2012 will only be 3.5%.  China is used to 8 or 9% and so 3.5% is going to feel like a recession to its people.   IMO this is just the tip of the ice berg.  China has been selling its products at cut rate prices to the rest of the world and it has been doing this on credit.  As Euroland (China’s biggest customer) rolls over, how can China not follow?  China also has to unwind a massive housing bubble that makes the US housing bubble pale in comparison.  There is no way to unwind this gracefully.  It’s a catastrophe waiting to unfold.  China will have zero or even negative “growth” in the coming years and its people will take to the streets.
- Mish reports what we already all know: Gasoline prices are hitting record prices in the US.  That oil prices should be skyrocketing in a US recession (and in many places around the globe, a clear depression) is counterintuitive.  Oil usage has collapsed (charts can be found here) yet the price of gasoline has continued to rise.  Money Morning reports that Saudis see the collapse in demand and know that it is happening because of the high prices.  As the old saying goes, the cure for high prices is high prices.  Oil exporters care more about the total revenues they receive each year more than they do about the price per bbl.  Why?  Because the bureaucrats running their show have made all sorts of ridiculous promises to their people based on set revenue levels.  The main purpose of the promises is to buy loyalty so that the elite can stay in power and be wildly rich and important without having done anything special to deserve it.  The fact the oil is a limited resource that they should get best price per bbl for while it lasts is not the current focus.
Mish correctly points out that the reason for high gas prices is simple: gas prices really haven’t gone up; The dollar has gotten diluted with massive money printing by the fed.   This graph from the federal reserve's web site tells the story: an explosion in money was created in order to stop the market from driving the excesses from the credit markets (primarily the housing credit market):
The fed needs to prop up the price of houses so that its corrupt banking system (which, believe it or not, we do NOT need) doesn’t collapse.  Housing is the largest component of their balance sheets.  If housing prices collapse even more then banks will eventually have to mark to market and a whole lotta friends of the fed will be out on the street looking for real work.  The fed is saving itself, not you.  The fed is the cause of high gas prices.  Banks don’t want to loan more money into an already overpriced housing market and so the new money printed by Bernanke has to go elsewhere.  This causes buying pressure in commodities like oil which leads to higher prices.
Of course, the real culprit for high fuel prices is we the people.  We are sitting on our collective a$$es or even applauding jerks like Bernanke out of ignorance and apathy.  As long as we continue to play the part of the willing patsy, expect Bernanke and the fed to make pastsies of us.  Bottom line: if you don’t educate yourself and push back on the federal reserve in every way possible then don’t complain about higher cost of living because this is the policy of the fed in order to pay for the banker bail out.  You didn’t get the bill all at once for that.  Instead, you will be paying for the rest of your life each time you consume anything.  In short, I have seen the enemy and it is We The People.  By the way, this is not “America Hating”.  It is simply the plain truth without any fake political correctness or sugar coating.  Get used to it.
- The Atlantic magazine jumps the shark by proclaiming Bernanke a “Hero”.  Of course, the truth is that Bernanke is either a con man or a child: he either knows that money-printing is a short term stop gap that will bail out banks and moneymen at the expense of the working class or he actually believes his own bull$hit.  I personally think he knows better but he gets paid a lot of money to act like he doesn’t.  I guarantee you that some day he will hang his head, having failed miserably just like Greenspan did, to turn massive debt into growth.  This age old desire to obtain something from nothing didn’t work for alchemists of old and it won’t work now, no matter how many patsies must get fleeced learning the lesson.
I predict that the Eurozone will eventually collapse and that Bernanke will need to print even more money in order to bail them out because we are all in this economic con game together.  Just like Germany is throwing money at Greece, Spain and the rest of the PIIGS in order to keep their debts from defaulting, the US will keep throwing money at the rest of the world in order to save our monopoly on printing monopoly money.  If (when) the world finally turns away from the US dollar as the global reserve currency, the negative effects on US prosperity will be severe.  The lifestyle which we all take for granted here will have to change.  There will be smaller cars, smaller roads, less choices in the market place and frequent shortages of everything.  Americans find this impossible to grasp right now but it is coming.  The math and the nature of the currency con both demand it.
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