The End of the Petro-Dollar is as Good as Gold!
On September 21, 2012, America’s Most Popular Investment Will Reach its Use-by Date
It will be a civilization-altering development…
The Coming “Megapolitical Earthquake” that Will Shake Civilization to the Ground
I’m so passionate and assured of my reasoning (and I believe you will be too once I present the evidence) that it has compelled me to come out of retirement to fire the distress flare about the titanic event that could erupt just weeks from now…
So destabilizing is this event that the biggest names in politics and finance have tried everything in their power to prevent it…and for some years they succeeded. But due to America’s weakening economic and military muscle, we are finally coming up against resistance from our neighbors and trading partners…
For generations, it appeared that the Empire’s power and reach knew no bounds. But in the past few years, we have been crushed under the monumental financial stress of policing the globe, launching failed wars, securing oil and other strategic assets and bailing out “buddies” and zombie banks.
And this has all been at a time when our Social Security and Medicare costs are sky-rocketing (Their unfunded liabilities have been growing by $5 trillion annually – at a rate of more than 33% of GDP – while the economy has grown at a rate of less than 1% annually over the past four years). And our tax revenues and T-Bill sales are plummeting…
In Short: We have lost our leverage…
We have reached the physical limit on our exercise of power…and we are no longer having as much success at bullying the world into getting what we want, whether it be oil, gas, credit, trading agreements or any other such strategic assets…
Our Bloated Empire is starting to feel the pains and consequences of Her Crimes of Consumption…
I have tapped into my contacts and my sources from across the global geopolitical plains, and gathered inside intelligence from some of the biggest money-movers-and-shakers in the business, and I have uncovered a pivotal development, which I believe will set off the most violent economic reversal we’ve ever known…
“Final Curtain for Capitalism”
Civilization is about to confront its greatest crisis ever.
It’s why I have been impelled to return from retirement…for I have been warning that this day would arrive for many years now.
And although this day will usher in one of the most tumultuous transitions in all of human history, it doesn’t mean you have to get crushed by it. If you understand the events going on in the world at the moment, including the fundamental reasons that are driving them, then you need not panic.
In fact, I believe more money will be lost (and made) in the 18 months following this event than ever before.
The Biggest Moment in Megapolitics is Upon Us
In an overlooked article published in the Tehran Times on January 12th, 2012 Iran (the world’s second largest oil producer) made a shocking announcement…one that the western media establishment has suppressed…
It stated that starting this Iranian calendar year, (which began March 20th) Iran would make its first dramatic move away from the Petrodollar…
This is a game-changing move…one that I believe will spread around the world like wildfire…and which I predict by the end of summer will bring an end to the 39-year secular bull market in dollars.
America’s most popular investment will have finally reached its use-by date.
And the consequences for every single American will be so dire, it will be difficult at first to accept, let alone believe.
It’s why Washington has spent over ten years and four trillion dollars trying to thwart it.
And until recently it succeeded (if only just)…
The preservation of Petrodollar Power was the real reason we went to war with Iraq.
It is the real reason behind all the strife we are igniting today with Iran…
It’s the real reason why all our trade and economic, information and military wars are now reaching a boiling point…
It’s the real reason why – in yet another history-making event – Wikipedia and over 10,000 other web sites recently went dark…
The Petrodollar Was the Ultimate Monopoly
The Petrodollar was a game-changing deal that Washington made with OPEC 39 years ago.
At the time OPEC wanted to create a Petrocurrency in which to trade its oil. This currency however was to be made up of a basket of currencies, which although was to include the dollar, was also to include gold, the Japanese yen, the French franc, the British pound and the German mark.
America had recently hit peak oil and had abandoned the gold standard.
After racking up enormous debts on a failed war (Vietnam)…we were fast running out of oil…of gold…and of money…
And the inflation monster, which had barely raised its head since World War II, was suddenly back from the grave…terrorizing the streets again…
Plus our supremacy was being challenged by the remarkable rise of the emerging markets of the East (like Japan, South Korea and Taiwan)…
Something had to be done.
And the powers that be, spied an ingenious little way to keep the empire’s engine running…
President Nixon convinced King Faisal of Saudi Arabia to accept U.S. dollars (and only dollars) as payment for oil. In exchange, he pledged to protect the Saudi Monarchy, and all its oil fields, from anyone who might choose to seize them…enemies like the Soviet Union, Libya and Israel, and many other interested parties.
The King agreed.
And by 1975, he had got all the other OPEC members to agree too.
The Petrodollar Was Born
And it was so successful that it made the dollar go viral…and mounted Capitalism’s biggest monopoly ever…
It was a Megapolitical innovation that won all kinds of special privileges for the Empire…and each and every citizen in it…
Megapolitics are the big events that change history.
They are usually either a technological or monetary innovation that tip the balance of power into the hands of its creators and alter the equation of the game.
Two of the greatest Megapolitical innovations of all time were gunpowder and Guttenberg’s printing press.
But they were technological innovations.
The Petradollar is a monetary innovation.
But its impact in the last 39 years has been equally as powerful.
It was the deal that would rewrite history and shift the balance of power back heavily into America’s favor.
What it did was essentially create a 39-year secular bull market for dollars…as all oil-importing countries would now have to stuff their Central bank vaults full of dollars so they could pay for their oil.
Now in order to acquire those dollars, they would either have to borrow them from America, or they would have to work for it, by manufacturing and selling all manner of goods and products to us…
The Japanese sold us Kawasaki’s and luxury cars. The Taiwanese sold us TVs, telephones and electronics. The South Koreans sold us air-conditioners, fridges, washing machines and all manner of modern conveniences. And the Chinese sold us toys and trinkets, gadgets and gizmos.
And while all these foreign oil-importing nations had to toil through sweat, blood and tears to earn their Petrodollars in order to pay for their oil, we merely had to print them…
A New World War Was Launched
But this war wasn’t a military one fought with guns and grenades.
This one was a consumer war fought with low-cost, unskilled labor and mega-manufacturing plants.
The goal was simply win the custom of the American consumer.
The reward was not kingdoms and countries, or gold and precious metals, but rather it was merely paper dollars, printed without limit, at virtually no cost, by the only institution in the world with the power to do so; the Federal Reserve.
It became like Christmas every day for the American consumer.
Santa would arrive at ports all over America, with sea-containers full of all sorts of goodies and gadgets, made by his worker elves at home…and sold at mercifully modest costs to the American consumer.
But it wasn’t just cheap goods that Americans won. We also won cheap credit!
You see all these nations who were competing to sell goods to us began to accumulate vast stores of surplus dollars in their vaults. And rather than let these dollars just sit there and gather dust, they decided to lend them back to America and collect the albeit pithy (yet better than nothing) interest rate we gave them on the loan.
And thus the phenomenon, now infamously knows as Petrodollar Recycling, was born.
And it was this phenomenon that gave birth to our unprecedented 30-year secular bull-market in U.S. bonds…one Warren Buffett is quoted to have dubbed as one of the most “extraordinary” bubbles in financial history…a bubble by the way that is just moment’s away from bursting…with terrifying implications for every single American, particularly retirees and baby boomers whose pension funds and retirement accounts are simply stuffed with them – whether they know it or not!
The Petrodollar Privilege Had Power
In short: It allowed us to live beyond our means…print unlimited amounts of money at virtually no cost…spend more than we earned…consume more than we produced…import more than we exported…
It allowed us to borrow excessive amounts of money at obscenely low rates… and build up enormous trade and budget deficits with few adverse effects…
It allowed us to build a mighty military machine and undertake expensive missions right around the globe…
We expanded our empire and extended its reign…
Seen in this light, the importance of the Petrodollar comes into perspective. You can see why we would be prepared to go to war over it. The Petrodollar is now the last thread that is holding the American Empire together.
But it’s about to go poof…
Capitalism is About to Find Itself Without a Currency
Iran has announced its historic launch of the world’s first commodity exchange that will trade oil in currencies other than the U.S. dollar….
The will mark OPEC’s latest attempt to move away from the Petrodollar.
In fact, in 2006, a report titled, Iran: Next U.S. Target, sighted the launch of the exchange as Americas #1 threat, hailing it to the real “economic weapon of mass destruction.”
The report was voted by alternative media outlet, Project Censored, as one of the top censored stories of the year.
By 2008, despite all U.S. efforts to crush it, Iran managed to successfully and silently get a version of this exchange up and running…
This first version of it, however, was merely to establish its validity on global commodity markets…So rather than actively engage in Petrodollar Warfare with America by selling its oil and gas in other non-dollar denominated currencies, it merely offered petroleum-based products instead…
But this year that is set to change.
Iran’s Oil Bourse will offer oil on the open market for the first time in currencies other than the U.S. dollar.
This is the real reason why we’re sending warships to the Strait of Hormuz, and why we’re accusing Iran of building Weapons of Mass Destruction.
But it doesn’t make any sense.
The IAEA (International Atomic Energy Association) has just completed a full inspection of Iran’s nuclear capabilities, and confirmed that there is no evidence Iran has decided to actually build nuclear weapons.
What’s more, we have 2,150 warheads. And even by the most ambitious of estimates it would take Iran about 10 years to build two at most.
And if Iran’s two nuclear warheads by 2020 are so dangerous, then why have we allowed North Korea and Pakistan to build literally hundreds of them!
So now Washington is bullying the entire globe to boycott all trade with Iran.
But that doesn’t make sense either.
For example, Iran has been trading with mega-economies like India, Japan, South Korea for over two decades. These are not relationships that are going to be severed anytime soon by third-party sanctions. They’ve been trading over hundreds of billions of dollars worth of oil and other commodities with Asia alone for a long time…not to mention dozens of other nations.
Iranian oil is an integral part of many nations’ lifeblood.
And while America is running around bullying everyone with sanctions and saber rattling, nations the globe over are quietly and silently doing their own private little deals…deals that are collectively worth over a trillion dollars…
The World Has Begun to Blindside the Dollar
China, Russia, Brazil, Venezuela, Argentina, South Africa, Malaysia, Indonesia, South Korea and Colombia, to name but a few, are all doing direct deals and swaps with one another.
For example:
The Dollar Has Drowned In The Yellow Sea! Hands down, Japan and China landed the biggest punch to the Petrodollar in December 2011 when the two G20 giants announced plans to dump the dollar and trade only in Yuan and Yen. Value: Minimum $339 billion.
The BRICS Are Now Glued Together! Brazil, Russia, India and China (South Africa too) agreed to establish mutual lines of dollar-free credit. According to IMF figures – Value: $170 billion.
You’ll Hear of Asian Contagion No More! Watch out for the “Chiang-Mai Multi-lateralized Initiative”! It is already in effect. And it links the economies of the 10 ASEAN nations – plus China, Japan, South Korea and the Monetary Authority of Hong Kong in a super-liquid juggernaut kitty of non-dollar credit and local currencies. Value: $120 billion.
Weeks Ago, Tsunami-Tattered Japan Threw India a $15 billion Lifeline. This “little” agreement gives India immediate access to $15 billion worth of yen to help it buy its Iranian oil.
And the Silk Road is Now Being Paved With Yuan and Dirhams. On Tuesday, January 17th, 2012, China threw the dollar into one more ditch, when it penned yet another “greenback-less” agreement – this time with the United Arab Emirates. Value: $5.5 billion. And this is just one of more than ten such deals that we’ve seen linked by the Asian Giant in recent years.
The world has begun to enter an unprecedented new era of monetary co-operation. Instead of raising voices and guns – they are raising solutions.
And U.S. sanctions to curb the flow of Iranian oil are now hitting a kink. Though you won’t hear about this from the mainstream media (where the word Petrodollar has been practically banned since 2007).
But the word Petrodollar and the details of new Swap Lines are bandied about every day on alternative media stations like RT, Al Jazeera and China Central Television.
And this is just the beginning.
Commerce is Freeing Itself of Fiat Currencies
We are re-entering a New Era of Barter and Exchange.
To circumvent U.S. sanctions, Iran and China, even back in 2010, started their own little “oil-for-refineries” program. You see, Iran is not only far from atomic; it’s also far from modern…
With its creaky and crumbling infrastructure, OPEC’s second largest oil and gas producer can’t even refine its most abundant natural resource: crude oil..to this day, it still has to export nearly all of its crude and later import it back as gasoline, kerosene and other petroleum products – and they usually do this at a loss.
What’s more, it has new Super Fields (that were discovered in 1999) that have boosted its country’s proven reserves to 150 billion barrels – but this “little” asset has still hardly be developed.
So as China’s thirst for Iranian oil continues to grow (49% last year alone) and trade mechanisms to pay for it keep getting cut off, the two are swapping oil for infrastructure.
China’s already signed up to build what will become two of the largest oil projects Iran’s seen in years.
And this is just but one example, where the dollar has been cut out of foreign trade, and has been replaced by good old barter and exchange.
Iran’s oil swaps with various nations are projected to reach 500,000 barrels per day once the third phase of an ambitious plan to further barter and refine oil is completed. That’s more energy than the Department of Defense (the world’s largest single oil consumer) burns each day! These new pumps and pipelines are slated to come online in the next 12 months.
But it’s not only foreigners that are dumping the dollar.
Americans, displeased with Washington’s fiscal recklessness, are dumping it too!
A recent report in The New York Times has announced the birth of an entirely new currency in the U.S. – the BerkShare.
Also, Jim Rogers (one of the world’s shrewdest investors) has denounced the dollar too, saying if something isn’t done soon to resurrect it, it will “lead to a huge decline in the standard of living of U.S. citizens like nothing we’ve seen in nearly a century.”
And Bill Gross, the world’s biggest bond investor, has advised all his clients that if they had just one investment idea, it should be an investment in non-dollar, non-euro currency.
As Brazilian economist and strategist Ricardo C. Amaral recently said: “The U.S. dollar served its purpose since the end of WWII and became the major foreign exchange reserve currency…(but) the days of the U.S. dollar playing that special role…has reached the end of the line…today that system is very sick.”
The Fiats are Falling
But all this is part of a much wider trend…one I predicted would occur in my book, The Sovereign Individual, in 1998.
In this book I alerted readers that we were about to go from an era of macro-states to micro-states (feudal systems).
Now Europe is down to 16 major states and one major currency.
But I believe the trend is about to reverse.
In fact, just like the break up of the Soviet Union, so too will we now see the break up of the European Union…and of the Euro…
But the greatest (and most shocking) event of all…the one that most Americans will not even be able to imagine, let alone believe…will be the break up of our own Confederacy, and of our own Currency…and of Capitalism itself. Sure the word will be bandied about, but it will take on a whole new form…
The Death of the Petrodollar is as Good as Gold
In my new report, I’ll show you how gold is about to become part of a whole new world monetary order.
While the U.S. may have dropped the gold standard over 40 years ago, gold is the one thing that every nation still has.
Hell, even Greece has gold.
In fact, the bankrupt PIIGS (Portugal, Ireland, Italy, Greece and Spain) have over $180 billion dollars worth of gold in their vaults.
The PIIGS may default on their debts. But mark my words; they’ll save some ingots for their oil. Sanctions, be damned!
And with China-like courage, India (the world’s largest democracy) is also setting the stage for a new “gold standard”.
If you want to subscribe to Strategic Investment, call 866-405-2348. You can claim two free reports – The Death of the Petrodollar is as Good as Gold! The Rise and Rise of the Last Great FREE Market, by calling the same number too.
P.S. Starting September 21st, 2012, our nation (along with its greatest export) will begin its final descent. This event will impact almost every aspect of your life: Where you live…how you live…where you go on vacation…the car you drive…the way you invest… the food you eat…the products you buy…maybe even the contents of your prayers. It will be the reversal of everything you’ve come to know. But you still have a small window to rescue what you’ve worked so hard for. I understand the timing of this is extremely urgent, and I plead with you to take action today – and not stand idly by and let your lifestyle be stripped from you piece by piece.
Sincerely,
David Schectman
Miles Franklin
The Velocity of Money Is Coming, Along With Big Price Inflation?
The Velocity of Money Is Coming, Along With Big Price Inflation?
Tuesday, May 01, 2012 – by Staff Report
Bernanke: Be Humble! … “Humble” is typically not an attribute associated with the Federal Reserve (Fed), especially in light of the trillions of dollars recently printed. Yet, in his latest press conference Fed Chairman Bernanke called for humility: we must be humble in setting monetary policy! The problem is, Bernanke’s definition of the word “humble” appears to be something entirely different from what – in our humble opinion – common sense might expect. – Axel Merk/Merk Funds
Dominant Social Theme: “We are humble because we are aware of the great monetary forces at work and will do all we can to triumph over them. Thank you. I am Ben Bernanke.”
Free-Market Analysis: Axel Merk of Merk Funds is out with another good analysis of the tremendous monetary inflation now inherent in the Western dollar reserve system and its eventual impact.
We have always argued … wait. Sooner or later there will be tremendous price inflation.
Does Merk agree? He is troubled, at least by the language that US Federal Reserve Chairman Bernanke is using in calling for “humility” and points out that Bernanke’s sense of it and a normal person’s is not the same.
This is, in fact, a kind of elite dominant social theme, in our view. It is the presentation of a fear-based meme that only top money minds like Bernanke’s can successfully manage what’s going on.
It is a kind of promotion as well, for what Bernanke and other central bankers are doing these days is nothing more than a kind of damage control. Today, having fully wrecked the world’s economies, central bankers want to appear “humbled” by the forces they have so destructively manipulated.
The idea may be to create “order out of chaos” – to build a fully globalized monetary system with a worldwide IMF money – and a worldwide central bank (also perhaps the IMF) as well.
But if there is actually occurring a takedown of the world’s economy by happenstance or on purpose, it is not necessarily prudent to proclaim it! Better to maintain “humbleness” – and that is the key word that Bernanke seems to have seized on, and that Merk has presented to us within his larger analysis.
The use of the word happened this way … Bernanke was asked at his recent press conference discussing the latest Federal Open Market Committee (FOMC) statement to contrast the US and Japanese experiences regarding current and past economies.
Bernanke (Merk explains) argued that the US avoided the Japanese experience because … “We acted aggressively and preemptively to avoid deflation.” According to Merk, Bernanke focused on the humility (whatever that means) of a move to recapitalize banks. He suggested …
“… that we will avoid some of the problems that Japan has faced. That being said, I think, it’s always better to be humble and just to avoid being too confident, and we need to continue to maintain strong monetary policy support to make sure that the economy continues on a recovery path and returns to a more normal situation.”
That is, Bernanke’s view of being humble means not to assume that deflation has been beaten, but to continue to ‘maintain strong monetary policy support.’ It is very consistent with what Bernanke has argued in the past: that one of the biggest mistakes during the Great Depression was to tighten monetary policy too early. The reason is the same: take the foot off the gas pedal too early and the economy might fall right back down.
We have previously argued that the only reason the Fed gets away with printing so much money is because that money doesn’t “stick” … Some economists argue that such policies don’t amount to “money printing” because banks haven’t done much with the money they received (the velocity of money has not shot up).
Our response to that argument has been that if you were to give a baby a gun, just because the baby doesn’t shoot anyone, doesn’t mean it isn’t dangerous. So, to us, being humble should focus on being most concerned about the potential side effects of monetary easing.
This really is the crux of the matter. We’ve previously argued two things regarding the trillions that Bernanke and other central banks have printed.
First, even though about US$ 15 trillion went out in short-term loans around the world in 2008, it’s unclear to us where this money is and whether it is in a sense still available, at least in part, to be circulated.
Supposedly, the money has been “paid back.” We’ll see. We once figured the total money that central banks had injected into the system since the dollar reserve system effectively died in 2008 was somewhere in the area of US$ 50 trillion.
We also stated that the world’s central banking system would eventually inject up to US$100 trillion to try to salvage the system. So we’re perhaps halfway there. Who knows?
Supposedly, central banks are required to keep accurate records of what they do and don’t do. But so much of modern central banking is tied up in power elite manipulations designed to maintain control of the world’s larger monetary system that it’s difficult to tell what’s really going on.
The system we have currently is not a monetary system per se but a kind of looting. It is based on the dollar reserve system itself that instructs the Saud family to trade oil for dollars and nothing else.
That is, the system is built on force, especially since the early 1970s when President Richard Nixon abrogated the last of the gold standard, though this is not widely acknowledged. “Market forces” are said to be in play. They are not, or at least not as advertised.
Merk’s big point, from our perspective, is one we agree with. The system IS flooded with money and eventually that money will circulate.
It is the CIRCULATION that begins the process of price inflation. And then, gradually, monetary velocity makes things worse.
But of course people have to be in the mood to borrow. Bernanke has effectively slowed if not halted the re-leveraging process by propping up a financial system that should have crashed long ago.
Bernanke’s humbleness is nothing of the sort. It is the arrogance of an elite representative who believes he can lie about money markets and everybody will believe him.
He has propped up a shattered system, turned what would have been a minor crisis in 2008 into a spiraling world depression and then has not been truthful with people about the way money really works.
The problems will really begin when people feel like using more money. But by the time they get around to doing that a worldwide depression may have set in.
Alternatively, price inflation will finally spike and Bernanke will raise rates hard, though Merk thinks the top of the rate raise cycle is only 6 percent today, versus over 20 percent in the 1970s, the last time we went through such a bear-market monopoly-fiat money cycle.
There is nothing humble about what Bernanke is doing or has done. He’s playing around with the lives and savings of billions. It’s impossible for a handful of good, gray men to manage a global economy of tens of trillions. It cannot be done.
Conclusion: It is arrogant to try, and it seems to us even more arrogant to speak of humbleness while doing so.
Doug Casey on the US Constitution
Doug Casey on the US Constitution
By Doug Casey, Casey Research
Legendary contrarian investor and the original International Man Doug Casey takes aim at the US Constitution, from its sneaky beginnings to its encroachments on individual liberty and free markets.
Louis: Doug, we’ve threatened to talk about the Constitution many times. Since there’s increasing interest in the country’s economic and political future, maybe now is a good time to put that into a fuller historical context..
Doug: Good idea. I confess I suspected this was coming up, so I just now read the Constitution again. This is actually something I recommend to everyone. Unfortunately, the Constitution is now a dead letter, but reading it is instructive in a number of ways, and it only takes about ten minutes. One should know the law of the land, even if it no longer applies.
That will probably be enough for one conversation, but we should probably also take up the amendments, especially the Bill of Rights, in a future conversation, and then maybe another on the Declaration of Independence – another short document everyone should read.
L: Well, some might argue that since the Constitution was ratified with the Bill of Rights attached, they really ought to be considered together, but I’d certainly agree that the later amendments – like the ones establishing and repealing Prohibition – should be a separate conversation.
Doug: Thank heaven for the Bill of Rights; it slowed the descent of the US considerably, while it was still taken seriously. So, where to begin…
L: How about with the fact that there wasn’t supposed to be a constitution? The Continental Congress authorized delegates to gather to amend and improve on the Articles of Confederation, not to replace them with a new form of government.
Doug: I’ve read that James Madison of Virginia showed up with a document called the “Virginia Plan,” bearing close resemblance to the current Constitution, except that it clearly described a single, national government. That didn’t sit too well with the more independent-minded delegates, so they struck the words “national government” and replaced them with “United States,” which went over a lot better.
Now, I wasn’t there – and the convention was held behind closed doors – so I hope readers will give me a little wiggle room if they read a book that tells a different story, but my impression has long been that the adoption of the Constitution was actually something of a coup. It replaced a confederation of separate governments with a single super-government. Many people didn’t realize this at the time, or they would have objected. The War Between the States demonstrated the reality of the matter, when people did object.
L: I think I’ve read the same books you have. Or maybe I’m just remembering our conversation on the Civil War.
Doug: People often gush about what a wonderful thing the Constitution is, but I’ve always suspected that US and world history would be different – and better – if those delegates had done as they were told and just smoothed over the rough spots in the Articles rather than replaced them with the Constitution. Greater independence among the states could have led to more innovation, and I doubt there would have been the unpleasantness of 1861-’65. People with differing ethical values and economic interests would not have been forced to obey the same laws.
L: Perhaps. But they did, and we’re stuck with the Constitution we have, for now.
Doug: For now. Sometimes I think those who’ve called for a new constitutional convention are on to something, because the one we have now has fallen into almost complete disuse. People talk as though it were carved into the sacred bedrock of the universe, but few people have actually read it, and most of those who have seem to spend their time trying to figure out ways to get out of the clear and simple rules it set out, rather than abide by it. People talk about how it should be a “living document” that evolves with the times. But those people almost always want to abolish what few limitations there are on the government. They want to change the actual working parts of the Constitution, the ones that define and shape the government, not the tedious pages with “Robert’s Rules of Order” type stuff governing how motions are passed in Congress and the like. Curiously, this trivia – about how the president of the Senate is elected and so forth – is the only part of the Constitution that the government still adheres to. It follows the trivia fastidiously but disregards the important parts that designate what the government may and may not do.
L: Ah, the irony. But a constitutional convention is a terrible idea, Doug; you know that if we had one now, we wouldn’t get anything like enumerated and restricted powers or the Bill of Rights. The average “educated” person in the US has been taught that the Great Depression proved that capitalism doesn’t work; and the average couch potato believes that work is a tedious imposition to be avoided, rather than a virtue. If a new constitution were drafted today, we’d get unlimited and expansive powers and a Bill of Entitlements.
Doug: [Sighs] You’re absolutely right. All institutions – countries, companies, clubs, whatever – inevitably degrade and become corrupt over time. That’s one reason why revolutions occur in countries.
But okay, let’s look at the one we’ve got. Some things stand out. Let’s start with the item you tripped over, the power given to Congress to regulate commerce with foreign nations, Indian tribes, and between the states. That was a problematical idea from the get-go. There should be separation of economy and state for the same reason that we have separation of church and state. And there should be a separation of state and education, and everything else that might be provided by society. Otherwise the state will insinuate itself and eventually try to usurp the whole area.
Even though the founders’ idea of “regulate” was very different from the current one of total control, it left the door open to misinterpretation. In those days it meant simply to “make regular” or to normalize. The idea, as I understand it, was to ensure a level playing field between the states, since some of the states had sweetheart deals with some states and trade barriers with yet others, greatly complicating business concerning them all. Over the years, this concept has devolved into a blanket power to control every minute detail of any good or service that might cross state lines – or might not even do that, but could affect prices in other states simply by existing wherever it is. What was a very reasonable intent has opened Pandora’s box. And now corporatists, lobbyists, bureaucrats, and influence-peddlers completely control the coercive power of the state and use it to destroy their competition and enrich themselves.
L: As opposed to beating the competition in a fair contest in the marketplace.
Doug: Yes; we’re told competition is supposed to be “fair,” not “cutthroat” – although both terms are ridiculous misnomers. But Article I, Section 8 is full of things that have been perverted or really shouldn’t be there to start with. It says the Congress has the power to coin money and regulate its value, as well as establish weights and measures. Any sensible person could have told the guys who wrote this that that’s like asking the fox to guard the henhouse. Money is a market phenomenon that’s quite capable of orderly evolution in a free-market environment. Governments are not necessary to establish money and should never be trusted with a monopoly power over money – when they have it, they always abuse it and debase the currency. It happened in ancient Rome and has happened again and again throughout history; it’s the easiest – but also the most destructive – way for the state to get revenue.
L: Fine, but you’re an anarchist, and the writers of the Constitution were not. They were practical men of their day, trying to set up a system they thought would work. Keeping the state’s grubby hands off the money supply was not an idea they would have been familiar with…
Doug: Not really. Bank notes back then were issued by private companies – banks, gold- and silversmiths, and such. They issued notes stating that so-and-so had X amount of gold or silver on deposit. Many people used all sorts of gold and silver not issued by nor regulated by their local governments for money. If memory serves, in the original colonies that formed the United States of America, Spanish pieces of eight were among the most common items used for money.
The framers of the Constitution should have known better. And maybe they did; the Constitution gives Congress the power to coin money, but it doesn’t forbid anyone else from doing the same thing. So anyone could have gone into the business of minting coins for use as means of exchange and stores of value. The market would decide which were the most reliable.
L: I wonder when and how competing with the government on that front became a crime.
Doug: I’m not sure it is, even today. What the government has done to people who’ve issued private money in recent times, like the creators of the Liberty Dollar, is to prosecute them for counterfeiting, which is spelled out as a crime in the Constitution – but only if you counterfeit the currency of the United States. During the War Between the States, a printer in Philadelphia hit upon the idea of counterfeiting Confederate currency and made a huge amount of money for himself. He was never prosecuted. Washington overlooked it because it aided its war effort. But by late in 1863 it was no longer even worth the man’s effort, because the Confederate dollar had lost so much value – due mostly to the foolish policies of the Confederate government in Richmond. I suspect that was a major, but generally overlooked, contributing factor to the collapse of the South.
L: I’ve long thought the North’s victory was largely economic, not military. “Unconditional Surrender” Grant’s bloody march into Virginia was an insanely expensive way to beat Lee. Anyway, you may be right about counterfeiting, but everyone has gotten the message: Money is the state’s turf, and woe unto ye if you trespass.
Doug: Yes, we live on a prison planet. Trapped here by the aberrations of human psychology.
L: So, what else would you list among Doug Casey’s top ten gripes with the US Constitution?
Doug: The provision to establish post offices and post roads. The post office is a paragon of inefficiency and bad service, was never necessary as a government function, and absolutely should never have been a monopoly. And the first roads in America were private toll roads.
L: I remember reading that Lysander Spooner competed with the US Post Office in the 1840s, and did a better job at lower cost until the government shut him down.
Doug: Once again, the power to establish post offices and post roads is given, but the authority to crush private competition is not. The first power was later interpreted to include the second, and so it’s been with everything in the Constitution ever since it was written. Things like this and the power to coin money were the camel’s nose under the tent flap; now the state camel has filled the tent, and there’s hardly any room for individual freedom.
L: Okay, what else?
Doug: The item setting up copyrights and patents was, at least arguably, another mistake along these lines, and for the same reasons. As a writer who wants to benefit from the effort I put into using words to communicate valuable information, I’m a bit ambivalent about that, but I don’t see how it’s possible for anyone to own an idea, and I’m sure getting the government involved is a bad move.
L: We published a conversation with our friend Paul Rosenberg on the subject of “intellectual property.” His conclusion was that the state’s involvement has become useless anyway. All creators can do now is adapt to the marketplace.
Doug: It’s interesting to me that in spite of all the hand-wringing on this subject, the ongoing demise of patents and copyrights has not stopped inventors from inventing, nor musicians or writers from creating. In fact, wikis and open-source projects have created many valuable things. Patents, copyrights, and trademarks really just turned into a bonanza for lawyers. I do want to benefit from my intellectual work, but I suspect Paul is right; all we can do is adapt.
It’s also interesting to me that aside from counterfeiting, which we’ve already mentioned, there are only two other crimes mentioned in the Constitution. One is piracy, and the other is treason. Today, nobody knows for sure how many crimes there are on the books, but it’s thought that there are over 5,000 crimes defined in federal law. I’ve read that the average US citizen breaks three federal laws every day, intentionally or otherwise. And now many federal agencies have armed – sometimes heavily armed – branches that round up people and prosecute them for these so-called crimes.
I suppose I could live with just three federal laws – piracy, counterfeiting, and treason would be easy to remember, at least.
L: But counterfeiting wouldn’t be a federal crime if we got the government out of the money business, as you suggest.
Doug: That’s right, and piracy could be handled by letters of marque and reprisal, as it was in the old days.
L: What about treason?
Doug: Well… you could look at that as the state’s right to self-defense – but let me just ask: when the state becomes unjust, what is a just man or woman to do?
L: On an ethical plane, the answer is clear, but on a practical plane, that’s a tough one.
Doug: Indeed.
Another thing worth covering is the power to declare war. The authors of the Constitution were rightly worried about leaders with the power of kings to plunge nations into war for personal or imagined grievances, so they gave the power to declare war to Congress. But like everything remotely sensible about the Constitution, that too has been set aside. The US has had numerous wars, one after the other, for decades – but the last time Congress actually declared war was World War II.
L: Really? I thought Korea was declared.
Doug: No, that was a “police action.” Technically, it was a UN police action against North Korea, but in reality it was a war between the US and China. At any rate, it’s just another example of how thoroughly ignored the Constitution is in the US. The president can now unilaterally send US troops anywhere to do almost anything. In fact, he can do almost anything, period… at least, if media lapdogs are able to justify and rationalize it.
L: Wasn’t it Henry Kissinger who said that doing something illegal was no problem and that doing something unconstitutional just took a little longer?
Doug: “The illegal we do immediately, the unconstitutional takes a little longer.” You’ve got to admit Henry is a clever guy. Come the day I write an obit for him, perhaps I’ll subtitle it: Comedian and War Criminal.
L: Okay, okay, I get the picture. I don’t think we need to go through every clause to see how far the US has fallen from the America That Was. That prompts me to say to those who think this conversation shows that we hate America that just the opposite is true. Personally, I love the idea that was America, and I still love the land of America, from sea to shining sea. What I loathe and despise is the corruption being visited upon her by the maggots in Washington, D.C. who’ve been gutting all that is good and noble about her.
At any rate, we’ve been saying for a long time that all is not well in Mudville. Are there any practical implications to this conversation? Investment implications?
Doug: It’s yet another sign that the US has gone way beyond the point of no return. You can’t make a sensible investment in a country, which doesn’t have the rule of law; you can only speculate – which is to say, try to capitalize on politically caused distortions in the market. There’s no way the US federal government can or will return to observing the Constitution; it’s just something it pays lip service to – and then only rarely. When you’re on a slippery slope that’s rapidly turning vertical, it’s no longer a question of if there will be a painful stop at the bottom, only when.
L: Does your guru sense give you any feeling for how close we are to that crash?
Doug: You know I don’t like to predict what and when at the same time, but I can’t make myself believe it can be put off too much longer – a couple of years at most. And it could still quite possibly happen this year.
L: In which case we invest for crisis, as you’ve been saying all along.
Doug: Yet another reason, yes. We’re headed for a genuinely historic time of troubles.
L: Roger that. Until next week, then.
Doug: Travel safe, and see you soon. Personally, I dread and despise the interrogation and searching one gets from ICE when entering the US. But I suppose it’s no more degrading than the grope from the TSA. No problem though – it must be somewhere in the Constitution. I better read it again.
L: Sure, Doug, it’s right next to the clause granting everyone free health care, free education, and a free lunch.
Doug: [Laughs]
[The government's trampling of the Constitution threatens to wipe out the wealth of countless savers, but you can protect yourself if you act in time.
$8,250/oz Silver and ONE BANK!
The silver markets are rigged. Every day. Every trade. Every option. Every derivative. The silver markets have been rigged since the early 1970′s when Alan Greenspan introduced computer market trading systems to the world beginning the long term commodity market rigging operation.
http://www.roadtoroota.com/public/101.cfm
Since that time there has not been a day when the silver markets have been “freely traded”. Nobody, and I mean NOBODY, knows the true “Fair Market Value” of silver!
But like all price suppression schemes, the silver manipulation must come to an end and we are on the brink of that moment. The only remaining question should be “What is the true value of silver in terms of money?”
First a little background to set the stage.
Computer Commodity Trading
Beginning in the early 1970′s, computers were introduced to control the order flow in financial markets. Order processing was drastically changed with the New York Stock Exchange’s “designated order turnaround” system (DOT, and later SuperDOT) which routed orders electronically to the proper trading post to be executed manually, and the “opening automated reporting system” (OARS) which aided the specialist in determining the market clearing opening price (SOR; Smart Order Routing).
Today we have algorithmic trading, auto trading, algo trading, black-box trading, robo trading…and the list goes on. Algorithmic Trading is widely used by pension funds, mutual funds, and other buy side institutional traders, to divide large trades into several smaller trades in order to manage market impact, and risk. Sell side traders, such as market makers and hedge funds, claim to provide “liquidity to the market”, generating and executing orders automatically. In “high frequency trading” (HFT) computers make the decision to initiate orders based on information that is received electronically, before human traders are even aware of the information.
Over the years computers have played an increasingly important role in everything related to our “free and open market system” such that today’s financial markets CANNOT function without computers. The Federal Reserve, US Treasury, Wall Street insiders and the Exchanges were all instrumental in the integration of computers but they also gained access to secret trading information before the order hit the open market. This information coupled with the fastest computers on earth made market manipulation easy.
This power, the power to control markets, was too much for anyone to resist. Over time those who were given the official key to the back office operations have used and abused their position to its manipulative fullest. Although some of the time they used this power in an official capacity (for the good of the country), more often than not it was used in an unofficial capacity… for the good of themselves.
Bernie Madoff, the ex-head of the NASAQ, was a great example of this public to private transition as his private trading firm was all computer algorithm based market rigging operations. There are many other ex-Exchange/Wall Street officers that went on to open computer trading operations. Many continue to thrive such as EWT, LLC which became a dominant trading/market making firm using “state-of-the-art technology and algorithmic models”. EWT was founded by Vincent Viola (ex NYMEX Chairman) and David Salomon (reported to Robert Ruben at Goldman Sachs) and are also an “Authorized Participant” in the iShares Silver ETF (SLV).
Are you beginning to see the problem? He who has the biggest, fastest and smartest computers (or programmers) can set the price and will ALWAYS WIN! No longer is there any kind of true supply/demand factors related to commodity exchanges or prices. Computer trading should be outlawed…the convenience and efficiency it provides does not offset the detrimental effects and potential for total and complete market manipulation.
CFTC Created to Cover Up the Manipulation
When the computer rigging programs were implemented there needed to be some kind of cover to ensure secrecy and maintain a false confidence in free markets. In 1974 Congress passed the Commodity Futures Trading Commission Act that overhauled the Commodity Exchange Act and created the CFTC as an independent agency with powers greater than those of its predecessor agency, the Commodity Exchange Authority.
From that moment the CFTC has been run by board appointees that showcased a revolving door of Wall Street insiders ensuring that the computer market rigging operations were not interfered with. The only notable exception is Brooksley Born who was fired by President Clinton when she found out the truth about our supposed “free markets” and tried to warn everyone. (see The Warning)
http://www.pbs.org/wgbh/pages/frontline/warning/view/
Listen to Brooksley Born explain the problems in her own words when she accepted her JFK Profiles in Courage Award in August 2009.
http://www.youtube.com/watch?v=0dVcic7czQ8&feature=channel
A while back I gave up my fight against the CFTC as I determined that they were NOT protecting the best interest of the investor but rather they were protecting the computer market rigging operations and the people involved. Here is one of my last articles on the subject:
Road to Roota III — Who’s the little man behind the curtain?
http://www.roadtoroota.com/public/133.cfm
Now that you have some background let’s get back to $8,250 Silver!
Historically, when any price rigging operation stops the violence of the ensuing price changes are determined by the length and scale of the manipulation as well as the underlying fundamentals of the item being rigged. Take for example the famous 1980′s case of the Hunt brothers trying to corner the silver market. From early 1974 the Hunt brothers started accumulating silver which ultimately drove the price from $6/oz to $50/oz until January 21, 1980 when the CFTC finally pulled the plug on their operation. Within 2 months the price of silver plummeted from $50/oz to $10/oz and the silver price was back under control of the US Government and Banking Cabal. An excellent account of what transpired can be found here:
http://www.gold-eagle.com/editorials_04/laborde012704.html
This account shows what can happen to the price of a manipulated commodity when the price manipulation is ended. In the case of the Hunt Brothers the manipulation lasted 6 years and involved approximately 130M oz of physical silver and 90M oz of COMEX silver contracts. This was an attempt at a Long Silver price manipulation but it was going on while the Short Silver Official manipulation was going on trying to keep the price down. The only way the Hunt’s accumulated so much silver without the price heading into the many thousands of dollars was the official computer price suppression operation.
The manipulation was ended when the CFTC stopped all COMEX Silver purchases and allowed only silver liquidation sales instantly driving the price down. In 1980 the US Government held 3B oz of silver and in order to maintain the lower silver price levels they sold the entire stock of silver into the market over the next 25 years. That excess supply combined with other governments divesting their silver was enough to continue the price suppression scheme for almost 40 years. That supply is now gone.
One Bank has the Hot Potato
So here we are 40 years after the official manipulation of silver began and the world is finally awakening to the situation. The CFTC, having investigated silver manipulation allegations twice previously, has had an open investigation into silver market manipulation for over 3 years. They have even stated that the investigation was moved to the “Enforcement Division” within the CFTC which pretty much tells you what the conclusion of the investigation revealed. The FBI has separately stated that they are investigating JP Morgan for silver market manipulation.
These two facts and the absolute SILENCE from JP Morgan were strong indicators that the long term manipulation of silver was about to end but on April 5, 2012 JP Morgan broke their silence about silver manipulation. The “Wicked Witch” of silver, Blythe Masters, (the head of JPM Commodities and the creator of the mammoth Credit Default Swaps complex) came on a scripted CNBC interview and denied that JP Morgan manipulates the silver price.
JPMorgan Not Speculating on Commodities: Blythe Masters
Of course she is lying through her teeth when she claims that JP Morgan only has neutral positions. The obvious “tell” is that JPM booked almost $3 BILLION in revenue from their commodities division in 2011! Either they have the highest commission structure in human history or she is LYING THROUGH HER TEETH! As a matter of fact, Blythe’s boss Jamie Dimon recently claimed that they need to get rid of the Volcker Rule so they can continue to offer their customers THE LOWEST prices possible…
Dimon on Price Wars, Volcker Rule, Stock Prices
Here’s the specific quote just over 2:00 into the piece: “When the client calls up JP Morgan, if we don’t give them the best price then we don’t get the business.”
So tell me Blythe…how did you make $3B off your commodity clients by offering them “the best price” and NOT trading for your own book?!
Looks like Blythe has cracked the age old secret for turning lead into gold…PILE ON THE PAPER DERIVATIVES!
*The REASON that Blythe gave this article is that they are about to be BUSTED for silver market manipulation and she is trying to start the defense early…nice try Blythe but you are about to be MELTED!
Ted Butler of Butler Research has been exposing the official manipulation of Silver for the past 25 years. His research was instrumental in exposing the gold/silver leasing operations and the massive concentrated short positions in both gold and silver. On September 3, 2008 Butler published a report entitled Fact Versus Speculation where he showed how one bank, JP Morgan Chase, took over the Bear Stearns Silver COMEX Short position of 30,000 contracts or 150M oz.
http://www.investmentrarities.com/ted_butler_comentary09-02-08.shtml
Since this report was published JP Morgan has continued its silver market rigging antics in an effort to get out of this precarious short position. After Butler exposed JPM as the culprit there have been wild orchestrated swings in the price of silver as JPM attempts to cover their massive COMEX short position. The price of silver has risen from $13 to currently over $30 in this time frame and the size of the short position held by JP Morgan has gyrated wildly between 30k and 40k contracts as they desperately try to shake the longs to cover their shorts. But even with this rise in price the short position is STILL around 20k contracts according to the CFTC’s latest Bank Participation Report.
http://www.cftc.gov/dea/bank/deaApr12f.htm
Add to this various silver market manipulation tools such as naked shorting silver ETF‘s, falsifying COMEX warehouse data, unallocated silver, leasing and swapping metal and you have a situation that dwarfs the Hunt brothers case.
Of course, JP Morgan is no ordinary bank because they are also the LARGEST derivative holder in the WORLD at over $75 TRILLION! Do remember Warren Buffett calling derivatives “Weapons of Mass Financial Destruction”? Well, JP Morgan holds the mother load when it comes to silver too with over $19 BILLION of Silver derivative contracts!
http://www.occ.treas.gov/topics/capital-markets/financial-markets/trading/derivatives/dq311.pdf
(OCC Report table 9: Classified as “PREC METALS”… might be a little platinum but not much).
This report was for the quarter ending September 2011 when the price of silver was slammed down to $30 from $42/oz at the beginning of Sept. Interesting: Had silver NOT been slammed down almost 30% in Sept 2011 then JPM would have had to declare silver derivative of close to $25B instead of just $19B. Talk about “painting the tape”!
At $30/oz silver the JPM $19B silver derivative position is representative of over 630M ounces of paper silver.
COME ON PEOPLE! I’m starting to think my $8,250/oz silver call is too conservative!
What’s going to happen when JP Morgan’s derivative monument comes crashing down?
Here’s where I get to $8,250 per oz for silver.
1) I know silver has not been freely traded in 40 years so today’s price if irrelevant.
2) I, like many, estimate there is only about 1B ounces in above ground physical silver for investment purposes.
3) I, like many, estimate there is only 5B ounces of above ground physical gold for investment purposes.
4) If the price of gold is not manipulated, like the banks claim, then the price of silver should be 5x the price of gold due to its supply/demand fundamentals.
CONCLUSION: The price of gold is around $1,650/oz so the true Fair Market Value of Silver should be around 5x the price of gold or $8,250/oz in a FREE market!
It’s simple, if you remove ONE BANK from the supply side of the equation the price of silver will SKYROCKET overnight.
ONE BANK controls the price of silver.
ONE BANK controls the fate of our monetary system.
ONE BANK is behind the curtain pulling the silver manipulation levers.
ONE BANK has control over a nation that was founded by “We the People”.
ONE BANK MUST GO AWAY TO SAVE OUR LIBERTY!
May the Road you choose be the Right Road.
Bix Weir www.RoadtoRoota.com
What Inflation Could Look Like in 2014
What Inflation Could Look Like in 2014
By Jeff Clark, Senior Precious Metals Analyst
Most economists, especially those from the mainstream, will tell you that inflation is widely expected to remain benign for the foreseeable future. And for those who think it could climb higher, it’s usually because they think it should be higher. History has a message for them: be careful what you wish for.
There are plenty of examples in history showing that once inflation takes hold, it can quickly spiral out of control. That’s the danger we face now. Here’s what I mean…
A recent article about sudden inflation by Amity Shlaes, a senior fellow of economic history at the Council on Foreign Relations and a best-selling author, provides some examples from the past century of US inflation that was at first subdued but then abruptly rocketed to alarming levels. I put them into a chart so you could see how quickly inflation rose within just two years from “benign” levels. I then made some projections for us today based on these historical examples.
(Click on image to enlarge)
According to Shlaes, US inflation was 1% in 1915 (based on an earlier version of the CPI-U). Over just two years, it hit 17%. As she states, it happened because the Treasury “spent like crazy on the war, creating money to pay for it…”
Given the fact that our spending and money-printing is now out of control, I projected what our inflation rate would be if we matched the inflation rates of these time periods. The first striped bar to the right represents what the CPI would register if we matched the 1940s rise. Inflation would hit 19% by 2014. (Yes, the CPI has been tinkered with many times, but this is at least what “unofficial” or “authentic” inflation would register.)
In 1945, the official inflation rate was 2%. It accelerated to 14% in 24 months. If we matched this percent rise, we’d hit 15% by 2014 (middle striped bar)..
And the example that kicked off the greatest bull market in gold and silver, the early 1970s. The CPI stood at 3.2% in 1972, a level close to ours today. It soared to 11% just two years later. Mimicking this rise, the third striped bar shows we’d also be at 11% in 2014. (Shadow Stats says we’re already at 10% based on 1980 methodology, so from this level we’d hit 17% in 24 months.)
Could we really have inflation that high within two years? Consider the following:
- Fox Business reported on March 7 that “wages grew much more quickly at the end of last year than originally estimated…” This is an important data point because most economists believe you can’t have higher inflation without rising wages.
- Commercial and industrial loans have risen 14% year over year, and business and consumer spending are in an uptrend.
- Home-building permits are at their highest point since October 2008. Existing home sales fell 0.9% last month, but that’s after January sales were up 4.6%.
- Jobless claims are coming down, retail sales gained the most in five months, and auto sales were up 16% last month. One report I read stated that we’ve had 24 consecutive weeks of stronger US data.
If the economy continues to improve and more money is sloshing through the system, it’s easy to see how inflation could grab hold. Yet, if you understand Austrian economics, you’ll look beyond how the mainstream views inflation and to its root cause: monetary debasement.
- The US monetary base stands at $2.72 trillion, a 168% increase since October 2008.
- The national debt in the US has risen by a whopping $4.9 trillion just since Obama took office. It now stands at $15.5 trillion.
- The US budget deficit this year is projected to be over $1.3 trillion, an obscene amount that exceeds the entire annual budget of just 20 years ago.
- According to ISI Group, there have been an incredible 122 “stimulative policy initiatives” from central banks around the world over the past seven months.
Remember, in these historical examples, inflation was initially low and therefore off everyone’s radar. But government tinkering with the monetary system lit the spark that led to a sudden and rapid rise in inflation. It caught many off guard, just like I suspect it would now. Don’t think there are no consequences to our unwise fiscal and monetary course; a potentially ugly tipping point is more likely than not at some point.
Given the abuse most fiat currencies are undergoing around the world today, coupled with obscene amounts of deficit spending, I think gold should be viewed not just as a potential moneymaker but as protection against the rabid inflation that will invariably damage our economy and dilute our pocketbooks. If you think deflation is next, I’ll accept that argument – for a time – if you accept mine, that the Fed would almost certainly panic at another deflationary event and print to the max. This is why we’re convinced that inflation, à la currency dilution, is inevitable. (Harry Dent, best-selling author of The Great Crash Ahead, is convinced deflation poses our biggest economic threat, while Currency Wars author James Rickards believes inflation is the real danger. You can hear them debate the issue – and participate as a member of the audience – during the Inflation-Deflation Face-Off program at the upcoming Casey Research Recovery Reality Check Summit.)
To those of you who say gold hasn’t always kept up with inflation, don’t kid yourself about what it would do in a highly inflationary environment: it would surely climb like it did in the 1970s. And those “productive assets” Warren Buffett prefers over gold? They would have a difficult time raising the prices of their products quickly enough to keep up with a rapidly escalating CPI. Gold may not perfectly track inflation when it’s low, but it is precisely a high-inflation environment where it serves one of its core purposes.
You may think high inflation is further away than 2014, but don’t dismiss the fact that it can happen suddenly. And keep in mind the possibility that a sudden shift in inflation – especially inflation expectations – could be the spark for a mania in precious metals. I can easily see this being the catalyst that finally pushes the greater public into our sector, causing a paradigm shift that eventually sends it into a bubble.
Either way, I think we’re all best served to heed the words of John Paulson, the preeminent hedge fund manager who oversees $14 billion in assets: “By the time inflation becomes evident, gold will probably have moved, which implies that now is the time to build a position.”
We agree. As we stated in the February BIG GOLD, if 10% of your total investable assets (i.e., excluding equity in your primary residence) aren’t held in various forms of gold and silver, we think your portfolio is at risk. And as Doug Casey reminded us last week, “Anyone who thinks they have any measure of financial security without owning any gold – especially in the post-2008 world – is either ignorant, naïve, foolish, or all three.”
This is the time to accumulate, while gold and silver prices are below their peaks. Buy a little every month and store it in a safe place. And for even better bargains, look to the undervalued stocks, which I would argue offer better protection against inflation than most other equity investments since their cash flow will climb commensurate with gold and silver prices. We identified the two best stocks for new money right now in the current issue of BIG GOLD, and you can get the brand-new pick from International Speculator – an African company that has built its first gold mine and is already working on its second.
If we match the inflation rates seen several times in the recent past, what will your savings be worth in a few years? We’ll have lots to worry about in a high-inflation climate, but our purchasing power can be protected by owning gold.
Central Banks Pile into Gold on Price Drop
Central Banks Pile into Gold on Price Drop
~ by Michael Lombardi, MBA
I’ve been writing about China’s desire to own more gold bullion in order to back its currency, the yuan.
Naturally, if you were China and you wanted to buy gold bullion, you wouldn’t advertise it to the world or the gold bullion price would rise in anticipation of the purchases. The People’s Bank of China would perform the operation quietly.
The Bank of International Settlements (BIS) is an institution created by the central banks around the world. The BIS essentially is a bank for all of the world’s central banks. Its aim is to foster financial and monetary stability globally.
When Ben Bernanke spoke on February 29, 2012, inferring that a third round of quantitative easing (QE3) was not likely, the price of gold bullion dropped over $100.00 an ounce that day. On that particular day of trading, over 1.4 times what central banks bought all of last year in gold bullion was traded!
Actually, physical gold bullion was not traded. It was mostly paper contracts. There are really two markets in gold bullion. The paper contracts that trade gold on exchanges and the investors who buy and take delivery of physical gold bullion.
It has been confirmed that, when the price dropped on February 29, the BIS stepped in and bought four to six tons of actual gold bullion worth roughly $250-$300 million. It’s certain that this purchase was made on behalf of a central bank, where physical gold bullion was delivered; however, we don’t know the identity of that central bank.
An educated guess would be the People’s Bank of China, but many of the emerging economies’ central banks are looking to buy gold, such as Brazil, Korea, India and Thailand, so it could have been any one of them.
I’ve been watching markets for decades and I can say that, even though it is not reported, my suspicion is that there was a lot more central banks buying physical gold bullion on that day, especially the People’s Bank of China.
Again, I don’t think the People’s Bank of China will advertise that it wants gold bullion for fear of driving the price higher. The other thing the People’s Bank of China cannot do is to just buy gold bullion, because the sheer volume of its purchases would move the market higher.
But on a day when trading volume just explodes—with volume that hasn’t been seen in years—you take the opportunity to buy actual physical gold bullion, because, among all that volume, no one will notice.
Yes, the price of gold bullion was taken lower on February 29. Whether the price of gold bullion will trade lower before it resumes its bull run is impossible to know. However, if you’d like to sell your gold bullion, dear reader, the People’s Bank of China and other central banks around the world would love to take the physical gold bullion off your hands, especially at this bargain price.
WHAT WILL IT TAKE TO WAKE PEOPLE UP?
Americans: The New Jews
“First they came for the communists, and I didn’t speak out because I wasn’t a communist.
Throughout my youth I remember wondering how what happened in Nazi Germany could have occurred and how so many otherwise good people could be fooled into going along with such an obviously evil system. I always wished I could go back in time to understand it.
Well, my wish has come true but unfortunately instead of going back in time the exact same thing is happening today in the US, Europe and many other places. If you cannot see the obvious signs of tyranny being constructed all around you at this point then you are purposely trying not to see it.
NEVER ENDING ATTACKS ON LIBERTY
It is actually becoming nearly impossible to keep up with the pace at which dictatorial controls are being put in place. Not a day goes by without some massive new attack on freedom by the US Government.
The Bill of Rights was declared null and void on New Year’s Eve with the signing of the National Defense Authorization Act and enabled the government to detain US citizens, trial free, indefinitely. Soon after, US Attorney General, Eric Holder, stated that the President of the United States has the power to kill anyone, including US citizens, outside the United States that he feels might be dangerous.. And then last week another Friday afternoon Bill was announced – Friday afternoon’s being saved for the most egregious of attacks – when Nobel Piss Prize winner, Barack The Bomber, signed a new Executive Order giving the office of the President complete control over all the resources in the United States in times of war or emergency. In case you’ve been asleep for the last century, the US is always at war and is always in a state of emergency.
Here is a snippet of the latest terrorist attack on liberty, under the latest Executive Order:
Section 101. Purpose. This order delegates authorities and addresses national defense resource policies and programs under the Defense Production Act of 1950, as amended (the “Act”).
(b) assess on an ongoing basis the capability of the domestic industrial and technological base to satisfy requirements in peacetime and times of national emergency, specifically evaluating the availability of the most critical resource and production sources, including subcontractors and suppliers, materials, skilled labor, and professional and technical personnel;
Yes, in case the US Government ever finds itself in the unusual situation of not being at war, it states that all of these powers can also be used in peacetime. The order also includes the absolute control over food, water, and the distribution of other resources.
And, in case that’s not enough, the order all but reinstates the Draft:
(2) upon request by the Director of Selective Service, and in coordination with the Secretary of Defense, assist the Director of Selective Service in development of policies regulating the induction and deferment of persons for duty in the armed services;
Now we know where all those millions of kids who can’t pay their student loans will be going. And if they don’t want to go, then we also now know what all the FEMA camps being built are for.
None of this seems to ever bother the majority of the dumbed down and drugged citizenry. Even the signing of the FAA Reauthorization Act in February with the planned implementation of 30,000 drones to be unleashed in the skies over the US drew nothing but a yawn from the sheeple.
If that wasn’t enough, the NSA will be bringing online, the largest data warehouse ever constructed. It’s job? To intercept and analyze every form of electronic comunication on the planet. From Wired:
The heavily fortified $2 billion center should be up and running in September 2013. Flowing through its servers and routers and stored in near-bottomless databases will be all forms of communication, including the complete contents of private emails, cell phone calls, and Google searches, as well as all sorts of personal data trails—parking receipts, travel itineraries, bookstore purchases, and other digital “pocket litter.”
WHAT WILL IT TAKE TO WAKE PEOPLE UP?
All of the infrastructure is now in place for the creation of one of the worst police states ever dreamt up by man. The cash sniffing dogs and Customs gestapo are set-up to search slaves at US international airports, US citizens have been stripped of their rights and the US Government now has the power to indefinitely detain or kill anyone it wants or to force you into the armed forces at its discretion.
What more do you need to see to realize things are about to get much worse in the US?
We are working to help US citizens and all citizens of western countries (most of which are following the US lead in nearly every facet) to get their assets outside of the control of their government and to get second passports to give themselves an escape route as things continue to spiral downward.
In some ways we are starting to feel like someone smuggling Jews out of Germany in 1939. Only this time it isn’t just Jews, it is anyone not willing to freely give up all their freedoms and assets to the state.
Don’t wait until it is too late. It is better 3 years early than 1 day late. Subscribe to The Dollar Vigilante today to keep abreast of all the best ways to internationalize your assets and your ass – including second passports and expatriation ideas.
Best,
Jeff Berwick
Reality Check: The Fiat Dollar is the real reason for high gas prices
Your U.S. Dollars are the reason for higher costs of living…
Copy Link to your URL: http://www.youtube.com/watch?v=S8WReKlUFP4&context=C46e03a6ADvjVQa1PpcFOOhSfZaQOcj2yhTdN96ZFyZ2jmRrLzG6A=
GOLD $10,000 Silver $500 – Stephen Leeb
Today acclaimed money manager Stephen Leeb told King World News what the Fed is doing right now is unethical. Leeb also said Warren Buffett is desperate and policymakers are scared to death. Leeb is Chairman & Chief Investment Officer of Leeb Capital Management. Here is what he had to say: “There’s really only one currency in this world and that’s gold, period. You’re going to need gold, eventually, to buy oil, to buy food, to buy real estate. Just those three (assets), if you look at the dollars that are now transacted in all energy, food and real estate, you come up with a number like $36 trillion a year.”
“All of the gold in the world is only worth $9 trillion. Looking forward three to five years, you have to come up with $10,000 gold. You have to. Everything else is being devalued. So you come up with very high targets for gold.”
When asked what is wrong with central planners letting gold advance to fair value, Leeb responded, “I think it would really frighten people. It would take the covers off what’s underneath, which is just a lot of junk that really cannot be valued appropriately.
It would take the blanket off of what is a broken financial system. There is an inevitability to this, but everyone fights change, Eric. This goes back to (Emile) Durkheim, the famous 19th century sociologist, who said, ‘The worst thing that can happen to people is change.’ They hate it.
“One of the examples he used, were of people who all of the sudden win a lottery. They too are suicide potentials because all of the sudden their identity has been changed. It’s natural, everybody fights change, but in the end it’s inevitable and it’s just the pace at which it (change) occurs. That’s all you are seeing with gold right now.
It’s not a question of whether you are going to get to $3,000, $5,000, $8,000 or $10,000 in gold and $500 in silver, it’s a question of the trajectory it follows. That’s all it is. If you see it down $100, you just buy more. Have a buying program every month.
Every time you see gold drop a little bit, everybody comes out of the woodwork and says it’s a relic. This is not the mood you see in a market that doesn’t have massive upside ahead of itself.”
Leeb also had this to say regarding recent central bank intervention in gold: “Of course it’s unethical. Anytime major banks get together and collude and try to affect asset prices, it’s unethical. There’s no doubt it’s unethical. It’s (also) unethical what the Fed is doing now.”
Leeb went after Warren Buffett: “I hate to say this because I’ve been a fan of Warren Buffet for so many years, but he lives and breathes the S&P. That’s his Bible, so to speak, stocks. He comes out and makes a comment (denigrating gold) that is so off base and so misleading, it sort of tells you even the best and the smartest are getting a little bit desperate in terms of trying to hide what is really happening to this world.
There is no doubt in my mind that if you were to ask Buffett straight out, ‘Let’s suppose, Berkshire Hathaway, someone makes you an off for the entire stock. Would you rather that offer be in dollars or in gold?’
Now if he tells you dollars, you say, ‘Mr. Buffett, read above where you point out that dollar values have gone down by 80% or 90% over the past 30 to 50 years. Down relative to what? Gold. So you (Mr. Buffett) are telling me despite dollar values being down and steadily going down, you would still rather take dollars than gold? Get real.’
My point here is when you get guys like Buffett so desperate that they are making these contradiction in terms (3 paragraphs from each section in the article) and seeing them contradict each other, people like that making those kinds of mistakes tells you there is a certain psychology of desperation. People are scared to death, especially policymakers.”
This was Stephen Leeb’s most powerful interview ever given on King World News. He went after the Fed, central planners, Warren Buffett and others and wasn’t pulling any punches.
Silver the Next Best Investment of the Decade?
You Can’t Beat Silver as an Investment
We can make a great argument that platinum is a great investment with soaring industrial demand. We can argue that gold is a great investment with soaring monetary demand. However, silver is the only metal in the world where both arguments can be made, silver is an industrial metal, jewelery, and a monetary safe haven just like gold.
What most people don’t know is that right now there is less above ground available silver than there is gold, that’s right, there is less silver than gold. This trend of consuming silver and hoarding gold isn’t going to stop, the above ground supply for gold will continue to grow, while the above ground supply for silver will continue to move us towards a physical silver shortage.
Silver is without at doubt the most important metal in the world, yet most people when they think about the uses for silver, think of jewelry, silverware, and photography. However, this barely scratches the surface for the uses for silver, in fact, we could write an entire book on just the different applications silver is involved in.
Below are some of the uses for silver that will help continue to grow demand for physical silver. FutureMoneyTrends.com wants everyone to understand that silver is all around you, whether you are talking on the phone, driving in your car, or looking for something to eat in your refrigerator, silver is in more products than you can imagine.
Silver Antibacterial Bandages
Silver has germicidal effects that kill many lower organisms. The colloidal or ionic silver is a silver solution that is an antibacterial product now sold on special band aids. For years, burn wards have soaked bandages in low concentrations of silver solution in order to prevent infection. Silver has been used to preserve and help save the skin of burn victims. Silver also promotes the production of cells, helping to heal wounds faster.
Washing Machines
Not what you are thinking, so please don’t start taking apart your old washing machine looking for silver. The silver we are talking about is in the new Samsung washing machines that inject silver ions into the rinse cycle in order to kill 99.9% of bacteria that causes odors. By using about 1 ounce of silver, these Samsung washing machines can sanitize over 3,000 loads, this means no hot water or bleach necessary, just a dash of silver.
Food Processing
Silver based food packaging liners that preserve food quality made by Agion. Using an active ingredient of silver zeolite, which is a delivery system that dispenses silver metal ions in a controlled release over time, the silver is able to disrupt microbe growth by interrupting ribonucleic acid that is needed for an organism to reproduce.
Water Storage
According to David Eaton, secretary of The Institute of Water Ionization Technologies in the UK, silver based water purification systems offer the most reliable and cost effective alternative to chlorine. In fact, both Russian scientists and NASA concluded that the best method for long term water purification was using silver as the purifying agent. Silver kills bacteria in the water and is able to help maintain the purity over a long period of time.
Have you ever wanted to store water? Put a few drips of colloidal silver and kill over 650 known bacteria that can grow in your stored water. On cruise ships and airplanes, they often make sure there is some silver in their water tanks for this very reason.
Silver was even used in the 1980’s in the United Kingdom to help stop the spread of Legionnaire’s disease, a disease named after Legionella pneumophilia, an aquatic organism.
Oxygen Machines
Since silver will not ignite, if you want to avoid a spark turning into an explosion, then you need to use silver. When it comes to hospitals handling pure oxygen at high pressure in liquid form, in order to avoid it becoming dangerous, the equipment used to transport the oxygen is made at least in part with silver.
Auto-catalyst
In 2008, Mitsui Mining and Smelting Co Ltd announced that it had developed a new catalyst for diesel engine cars. This new auto-catalyst replaces the use of platinum with silver, platinum as we write this is about 48 times more expensive than silver, so you can see that this will be a lasting change and new use for silver. At the time of the announcement, a spokesperson for Mitsui stated that “silver will totally replace platinum in this new auto-catalyst that we’ve developed.”
Cell Phones
There is about 80 cents worth of silver in the average cell phone. In fact, the metal contents in cell phones is very precious, having all 4 precious metals in them, platinum, palladium, gold, and silver.
Solar Panels
Approximately 1 ounce of silver is in each solar panel you see on residential roofs. Without a doubt one of the fastest growing industrial uses for silver is photovoltaic cells in solar panels, in 1999 the amount of silver used in this industry was so small there isn’t even an official reporting of the number. However, 10 years later that number hit 18 million ounces, and last year for 2011, 70 million ounces were used. David Morgan, editor of The Morgan Report who runs the website www.Silver-Investor.com feels that solar demand could reach 130 million ounces per year around 2014. In fact, Jessica Cross, CEO of the VM Group believes that “solar panels will probably be one of the leading industrial uses” for silver. Silver is crucial in photovoltaic technology, silver helps collect electrons for the electrical current and transports them out of the module for power use.
Architecture Glass
Silver is used in the windows of skyscrapers in order to reflect away over 90% of the heat from sunlight. Silver, more than any other metal is the best reflector of light which is one of the reasons it is used in mirrors.
Radio Frequency Identification Technology (RFID) Chips
This industry will one day replace bar codes, already being used at the largest retailer in the world, Wal-Mart. RFID tags have a very thin silver foil that is used as a high-performance receiver. This technology is basically a tag with a mini-antenna that saves data and is able to emit a radio wave in order to send information to a central processor. Basically, retailers and manufactures who want to know more about their products and have a more efficient flow of goods after leaving their possession, can now have these RFID tags placed on their products. For example, U.S. department of State uses RFID chips in all new American passports. Now the passports can be scanned by the authorities, who will see your personal information that should match the same information on paper.
RFID chips have been controversial for civil rights groups, however, ignoring that side of the RFID chip and just focusing on the silver content, you can see that these are becoming very popular and will add to the growing silver demand. We should note that the amount of silver in RFID chips is so small that once used to make one, the silver is literally gone, it will not be recycled or used for any other purpose.
Medical Uses
Silver compounds have a toxic effect on some bacteria, algae, fungi, and even some viruses. The use for silver goes back to the very beginning, the father of medicine, Hippocrates wrote that silver had beneficial healing and anti disease properties. Silver was also used to prevent infection during war time before antibiotics were used.
Batteries
Silver oxide-zinc is used in batteries for digital cameras, watches, and phones. Recently it was announced that all Apple products will be using silver oxide-zinc batteries.
Electronics
The use of silver in electronics is widespread and is used in almost all electronics you have in your home, from your television to your computer. Circuit breakers, switches, and fuses all use electrical components using silver. The odds are if something has a ‘power on’ button, then it has some silver in it.
Silver Bearings
Silver bearings in engines have become essential components in Jet engines. Steel ball bearings that are electroplated with silver become the strongest type of bearing in the industry. As noted before, silver is able to withstand high temperatures which makes it perfect for the bearings in jet engines. According to the silver institute, even in the event of an oil pump failure, silver-plated bearings provide enough lubrication to allow a safe engine shutdown.
Automotive
Throughout your vehicle you have electronics, from opening your windows to adjusting your seats. Your engine has silver and even your antifreeze has ethylene oxide, a compound made from silver.
The Uses For Silver List
The list for silver uses can go on and on and on. Silver is also used in lasers, satellites, robotics, high-tech weaponry, TV’s, refrigerators, wall switches, photography, glasses, brazing, soldering, cloud seeding, wood preservation, musical instruments, automotive industry, explosives, dental filings, methanol production, nuclear reactors, Xray machines, polyester, deodorant, disinfectants, catheters, and thousands of other applications.
Catalyst
One of the largest uses for silver is in industries like the production of plastics, where silver is used as a catalyst. Approximately 150 million ounces of silver was used last year in order to produce ethylene oxide and formaldehyde, both used to make plastics. Formaldehyde is the chemical that is the building block for plastic, so in order to produce plastic, you need silver.
So once again, the products of silver are all around you, even if they don’t have silver in them, that plastic cup you are drinking out of and the remote control in your hand, both needed silver in order to be created.
Silver Is All Around You
Where ever you are right now, take a look around you and think about how much silver products are in front of you. For me, I’m writing on an Apple Computer, my cell phone is on my desk, and a blue plastic cup is right next to my hand that has a silver wedding band on my ring finger. When I look around the room, I notice that I have a light switch, electrical outlets, and a television. In my desk, I have plastic pens, ink, and a small flashlight. Looking out my office window, I can see my car, in it a rear view mirror, side mirrors, rear window defroster, and of course under the hood is even more silver. All these products have silver in them, or needed silver in order to be created.
Now here is the fun part for silver investors, look at a map of the earth at night. Notice the intense light that comes from the U.S., Europe, and Japan. We want you to picture what the amount of silver it takes to produce this amount of light, think about all the other electronics these first world regions have surrounding those lights. As we just described, think about all the silver in bedrooms, vehicles, and on each person. Now look at China and India, with combined populations of 2.5 billion people. This doesn’t include the South American or other Asian countries, just these two specific countries. They are going to need skyscrapers, houses, condos, apartments, vehicles, cell phones, water sanitation facilities, and hundreds of thousands of electronics… including plenty of iPhones and iPads. Bullish for Apple, yes, bullish for silver, even more.
Silver has so many uses and so many customers, it is very easy to see that if the buyers of silver ever thought there was going to be a shortage, the price could have a historic run. We are not talking about individuals, we are talking about the Apples of the world, who in the future may come into the silver market in order to protect their own businesses from delays caused by a silver shortage.
20th Century
Most of these new uses for silver are from the 20th century. Prior to this, silver had a very limited role for industrial uses, silver was mainly used for money, jewelery, and in the 19th century photography. Of the 46 billion ounces of silver ever mined in history, only about 1 billion remains above ground. A very large amount of the above ground available supply of silver was consumed in the past 60 years. FutureMoneyTrends.com believes what we saw in the 20th century is nothing compared to what we will see in the 21st century, with electronics and 7 billion people all desiring to live the lifestyle of the west, the above ground available supply should get completely consumed over the next 10 years.
Silver Vs. Other Metals
As you can see, the arguments made for silver can’t be made for any other metal. That is why when people suggest to us to diversify into physical platinum or palladium, we always suggest back to them to buy more physical silver. If you want to own a precious or industrial metal, silver is King. If you think the economy is going to collapse and we will all be living in a mad max world, then you definitely want to own some silver to barter with, silver after all is the most used monetary metal in world history. If you think the economy is going to boom and the 1990’s is just around the corner, then you want to own silver. Industrial demand will soar as the rest of the world becomes industrialized. The Chinese want cars, cell phones, and other electronics just like the west, which means the largest population in the world needs a lot more silver. The entire world will need a lot more silver, so the question is, can new mining keep up with demand?
We don’t think so, though we are bullish on ALL metals, the fact is nothing will beat silver over the next 10 years.
The opportunity in owning silver and silver mining companies is epic.
Focus on the trends, share our emails with friends and family at www.FutureMoneyTrends.com