In 1913, the wealthiest European banking families created the Federal Reserve Bank to advance their own interests. When the US Dollar was delinked from gold in 1971, many said this action secured its inevitable demise as it would be inflated until its value became negligible. With the US economy now under powerful stress from so many different sources, we are witnessing the slow-motion collapse of the World's Reserve Currency - the US Dollar.
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Wednesday, September 28, 2011
Fireworks!
Gold Price
Silver Price
Well, I expect you‘re wondering what on Earth’s been going on in the gold and silver markets. These charts look like the contrails from a Flash Gordon dogfight in the ionosphere. I’ll give you my take on what I think set the fireworks off, but before I do, I’d just like to explain one or two pieces of technical jargon, for those of you who live in the real world.
It’s important to understand what is meant by whether investors are “long” or “short” and whether or not they are trading on “margin”.
Long – this means you buy something and own it before you sell it – i.e. you plan to hold it for a “long” period of time. Investors who go “long” benefit if the price goes UP.
Short – means you sell something before you buy it. That means you may have to scramble to buy it “last minute” to honour your promise to deliver. You only want to own it for a “short” length of time, if at all. Investors who go “short” benefit if the price goes DOWN.
“Margin” is that fraction of the full asking price which an investor has to cough up to a broker in order to control an investment. If an investor asks his broker to buy a silver futures contract (a silver futures contract means 5,000 ounces of silver bullion to be delivered at a date in the future), the full price might be £20/oz x 5,000 ounces = £100,000. If the broker trusts him, he may be allowed to trade on margin and may only need to cough up 10% of the full price, so that’s £10,000. Now, say silver goes up by £4/oz, then he sells the contract for £24/oz x 5,000 ounces = £120,000. The broker bought the contract on the open market for £100,000 and collected £10,000 from the investor, so he’s still owed £90,000. The contract finally sold for £120,000, so after settling his outstanding balance with the broker, the investor is better off by £30,000. He trebled his money, when the price only rose by 20%. Of course, if the price goes down, losses are multiplied in just the same way.
The biggest, baddest player in the silver market is JP Morgan (or JPM). They have a huge “short” position in silver – over 330,000,000 ounces – which they inherited from Bear Stearns when it collapsed in early 2008, and which they have been rolling forward ever since (swapping earlier settlement contracts for later ones, indefinitely). This is more silver than all the mines in the whole world can produce in one year – in other words, it’s an artificial, synthetic position in silver futures, but it will cost JPM to close this position. From a “free market” point of view, this is like having a whale in a swimming pool – they can make a huge swell at any time, which profoundly affects all other players.
This extremely concentrated short position in silver, and the licence extended to them by the regulatory body, the Commodity Futures Trading Commission (CFTC), has given JPM immense power to manipulate the price of silver via the main US silver futures market, the COMEX (operated by the CME Group, a company which JPM actually OWNS, by the way…). They do this by writing new “short selling” contracts at will, which looks to the market like a sudden jump in the supply of silver for sale. This knocks prices down, at which point they swoop in and write “long” contracts at the new discounted price. This is called “covering the shorts” – in their case, it means that they can reduce their ponderous short position AND make a profit on each trade as well AND take delivery of real physical silver, laughing all the way to the bank.
Most inconveniently, JPM has just been sued (again) for manipulating the silver price, but this time the main perpetrators have been named:
JPM may be running out of time because the CFTC has been placed under intense public pressure to impose sensible “Position Limits” on futures traders, and could be voting on these measures as early as 4th October. A position limit is the maximum number of contracts which any one party can simultaneously hold. One of the wisest old birds in the silver market, Ted Butler, has led a 20 year campaign to see position limits in silver of 1,500 contracts (7.5 million ounces).
On Friday 16th September, the CFTC relaxed reporting disciplines for large traders who may want to carry out physical commodity swaps, for reasons which would be plausible if we lived in a world of unicorns and rainbows. On Wednesday 21st September, the price of silver started to drop, volume ramped up massively and for 24 hours there was wave after wave of sell orders.
Then on Friday afternoon, after normal trading hours, the CME announced that the contract margins had been increased on silver and gold: silver margins rose by 16% and gold by 21% - this is how much more extra money a trader would have to put down just to maintain their existing position.
This is a staggering event, for the regulator to formally look the other way for the explicit convenience of the large traders only. Also, it is practically inconceivable that these major players had no advance warning of the margin hike, given that JPM effectively owns the COMEX and in view of the weight of historical evidence of apparent collusion between the CFTC, COMEX’s regulatory body, and JPM’s trading desk. These commentators put it very well:
The effect this had upon short margin players was disastrous. Immediately, the COMEX wanted more money from brokers to cover the margin hike, and the brokers, acutely sensitive to potential losses, either demanded substantially more collateral from their customers in turn to buffer against the loss, or they exercised their right to sell the underlying contract for its current value so as not to be out of pocket themselves. Selling reached a peak on Monday 26th, the deadline for coughing up the extra margin.
The driving force of the JPM short-selling machine, coupled with the margin hike, flushed out a torrent of speculative futures players, and the chain reaction accelerated to its final conclusion. Silver fell from about $40.50/oz on Wednesday 21st to $26 on the morning of Monday 26th. Yet barely a day later, the price had risen steeply to $32. (STOP PRESS: As I was writing this, I received news that the CFTC "Position Limits" meeting will now be delayed until 18th October – perhaps JPM didn’t reach its targets by knocking a third off the silver price and needs a bit more time to cook the books. Will it be a case of "rinse and repeat" in October/November?)
So there you have it. The cops are in the crooks’ pockets and have been induced to look the other way while the crooks make a leisurely escape. Once JPM has minimised its silver short position and the new position limits are finally put in place, we can expect not only something like normal trading to resume and prices to rise, but also an increase in interest from new investors as they wander over to see what all the fuss was about, adding to the already hungry demand for physical silver.
While the crooks play these “paper” games to influence the price of gold and silver futures, in the world of “physical”, dealers are charging high premiums over and above these massaged prices. When prices plummeted over the weekend, many dealers closed their doors. They simply refused to sell a valuable asset at stupid prices; they will wait till the price bounces back again, which will not be long. This price gap between “paper” and “physical” will grow until there is an acute shortage, especially in gold, at which point it may not be possible to exchange paper money for physical gold at any price.
Tuesday, September 27, 2011
Warning - Approaching Stall Speed...
BBC Speechless As "Trader" Tells Truth: "The Collapse Is Coming...And Goldman Rules The World"
BBC Releases Official Statement On Alessio "The Trader" Rastani: He Is Perfectly Legit And The Interview Was Not A Hoax
Statement on BBC News channel interview with trader Alessio Rastani
Date: 27.09.2011
The BBC have today issued the following statement regarding an interview with trader Alessio Rastani on the BBC News channel yesterday (Monday 26 September):
"We've carried out detailed investigations and can't find any evidence to suggest that the interview with Alessio Rastani was a hoax. He is an independent market trader and one of a range of voices we've had on air to talk about the recession."
BBC Press Office
Step Aside BBC "Trader": Head Of UniCredit Securities Predicts Imminent End Of The Eurozone And A Global Financial Apocalypse
Either the YesMen have infiltrated Italy's biggest, and most undercapitalied, bank, or the stress of constant, repeated lying and prevarication has finally gotten to the very people who know their livelihoods hang by a thread, and the second the great ponzi is unwound their jobs, careers, and entire way of life will be gone. Such as the head of UniCredit global securities Attila Szalay-Berzeviczy, and former Chairman of the Hungarian stock exchange, who has written an unbelievable oped in the Hungarian portal Index.hu which, frankly, make Alessio "BBC Trader" Rastani's provocative speech seem like a bedtime story. Only this time one can't scapegoat Szalay-Berzeviczy "naivete" on inexperience or the desire to gain public prominence. If someone knows the truth, it is the guy at the top of UniCredit, which we expect to promptly trade limit down once we hit print.
Among the stunning allegations (stunning in that an actual banker dares to tell the truth) are the following: "the euro is “practically dead” and Europe faces a financial earthquake from a Greek default"... “The euro is beyond rescue”... “The only remaining question is how many days the hopeless rearguard action of European governments and the European Central Bank can keep up Greece’s spirits.”...."A Greek default will trigger an immediate “magnitude 10” earthquake across Europe."..."Holders of Greek government bonds will have to write off their entire investment, the southern European nation will stop paying salaries and pensions and automated teller machines in the country will empty “within minutes.” In other words: welcome to the Apocalypse...
But wait, there's more. From Bloomberg:
The impact of a Greek default may “rapidly” spread across the continent, possibly prompting a run on the “weaker” banks of “weaker” countries, he said.
“The panic escalating this way may sweep across Europe in a self-fulfilling fashion, leading to the breakup of the euro area,” Szalay-Berzeviczy added.
Szalay-Berzeviczy has just arrived in Hungary from a trip abroad and can’t be reached until later today, a UniCredit official, who asked not to be identified because she isn’t authorized to speak to the press, said when Bloomberg called Szalay-Berzeviczy’s Budapest office to seek further comment.
And now, for our European readers (first) and everyone else (next), it is really time to panic.
Peter Oborne 'Idiot' Comments Prompts EU Spokesman To Storm Off Newsnight
Wednesday, August 10, 2011
The Fish Don’t See The Water
"Banking was conceived in iniquity and was born in sin. The bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of a pen they will create enough money to buy it back again. However, take away from them the power to create money, and all the great fortunes like mine will disappear, and they OUGHT to disappear, for this would be a happier and better world to live in. But if you wish to remain the slaves of bankers and pay the cost of your own slavery, let them continue to create money."
- Sir Josiah Stamp, former Director of the Bank of England
"We are completely dependent on the commercial banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system.... It is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it becomes widely understood and the defects remedied very soon."
- Robert H. Hamphill, Atlanta Federal Reserve Bank
“It is well enough that people of the nation do not understand our
banking and monetary system, for if they did, I believe there would be a
revolution before tomorrow morning.”
- Henry Ford
We are living in a financial environment which has been becoming more and more hostile towards ordinary people for a hundred years. The very medium of exchange – what we call “money” – is tainted at the source, and we are all contaminated by its use. The reason? The currency we use is borrowed into existence by governments from their Central Banks (at interest), which each control the supply of currency and credit (read: Debt) in their respective countries (read: National Debt) by creating it out of thin air. They have a monopoly on new reserves of this “thin air money”, so where does the extra interest come from to pay the National Debt? It comes from YOU and ME. It comes from the fruits of our work, as we strive to create value for other people, whose gratitude pays us. We create real value, which is then extracted as tribute by the money powers. Sadly, as not enough currency and credit exists to allow everyone to pay their part of the interest burden, some people go bust. At that point, their real and valuable collateral is taken from them in compensation, and the true nature of this subtle, elusive and fundamentally evil scam is exposed. Imaginary currency is used as the trap to steal real valuables from unwitting people.
Money used to be different. It used to be based on substance of real value, and was called asset-based money, rather than the debt-based currency and credit which masquerades as money today. The valuable thing was usually gold, and in most cases each new asset-based money system started off well enough, with good intentions and enough value tied up in the assets to allow all the paper currency in circulation to represent this value. The gold was normally stored in vaults, because it was so easily stolen if you carried it on you, and anyway, paper claims for the gold were normally just as good as the gold they represented – “as good as gold”. This is where the fabled words “I promise to pay the bearer on demand the sum of…” came from: once upon a time, you really could turn up to the gold store and exchange one of their valid paper receipts for an agreed amount of gold. Not any more...
Now if you’re not in business yourself, the next bit might be new to you and seem a bit abstract. Trust me: it is a real as going bust, and all healthy businesses spend a lot of their energy managing a thing called Working Capital. Working Capital is the liquid cash or credit you have at your disposal to buy things from suppliers and pay staff – it’s the “Readies”, if you like. Run out of Readies – you’ve gone bust. Today, most businesses run on an overdraft. If you go back more than 100 years ago, the Readies came from paper promises made by business people with real assets to back them. They were called Real Bills of Trading.
Real Bills were the perfect form of asset-backed, self-liquidating credit; they were also transferable and could function as real money in the economy, because they were backed by something which had real value. Real Bills were solid promises to pay (in gold) issued by a customer, with a term of 91 days (or 1 natural season, as much trade was literally “seasonal”); they could be passed from one person to another as an exchange of value. If an issuer of a Bill defaulted (“couldn’t pay his Bills”), they were made bankrupt and their reputation was ruined – there were no bailouts when the paper money was REALLY worth something. The invention of debt-based paper “Legal Tender” money in 1909, by the central banks of France and Germany, unleashed a process which rapidly destroyed the asset-based "Real Bill" as a vital medium of exchange, crowding them out of the marketplace with a flood of speculative bank paper. In common use, Real Bills could be “discounted” when transferred (i.e. you could sell them to the bank for, say 98% of face value in gold) so they could be used to pay raw materials suppliers and workers’ wages, well in advance of the original buyer’s final payment to the holder of his Real Bill.
This pool of “wages money” has been destroyed by paper legal tender money, and that is why there is permanent unemployment now – there never used to be before 1909. The banking system and their Legal Tender “debt” paper money has crowded out Real Bill “asset” money, at great social cost in terms of unemployment, business failure and reduced opportunity for ordinary people. However, for members of the Banking Club, it has been gravy all the way, and if a major bank should ever fail, their club membership nearly always entitles them to a bailout. After all, since modern money is worthless at source and it’s the banks who create it, it’s no cost to them to save one of their own.
And that's not all. Most of the funny money we play with nowadays was created by Clearing Banks, playing by Central Bank rules. If you're feeling strong, I'll tell you how it works in America (where most of the trouble comes from), via a fiendish, convoluted process dubbed as The Mandrake Mechanism and explained in the brilliant book The Creature from Jekyll Island. If you want to corroborate this information, refer to the (now out of print) article entitled "Modern Money Mechanics", originally published by the Federal Reserve Bank of Chicago and now available here.
The Mandrake Mechanism
GOVERNMENT DEBT
The federal government adds ink to a piece of paper, creates impressive designs around the edges, and calls it a bond or Treasury note. It is merely a promise to pay a specified sum at a specified interest on a specified date. As we shall see in the following steps, this debt eventually becomes the foundation for almost the entire nation’s money supply. In reality, the government has created cash, but it doesn’t yet look like cash. To convert these IOUs into paper bills and checkbook money is the function of The Federal Reserve System. To bring about that transformation, the bond is given to the Fed where it is then classified as a…
SECURITIES ASSET
An instrument of government debt is considered an asset because it is assumed the government will keep its promise to pay. This is based upon its ability to obtain whatever money it needs through taxation. Thus, the strength of this asset is the power to take back that which it gives. So the Federal Reserve now has an “asset” which can be used to offset a liability. It then creates this liability by adding ink to yet another piece of paper and exchanging that with the government in return for the asset. That second piece of paper is a…
FEDERAL RESERVE CHECK
There is no money in any account to cover this check. Anyone else doing that would be sent to prison. It is legal for the Fed, however, because Congress wants the money, and this is the easiest way to get it. (To raise taxes would be political suicide; to depend on the public to buy all the bonds would not be realistic, especially if interest rates are set artificially low; and to print very large quantities of currency would be obvious and controversial.) This way, the process is mysteriously wrapped up in the banking system. The end result, however, is the same as turning on government printing presses and simply manufacturing fiat money (money created by the order of government with nothing of tangible value backing it) to pay government expenses. Yet, in accounting terms, the books are said to be “balanced” because the liability of the money is offset by the “asset” of the IOU. The Federal Reserve check received by the government then is endorsed and sent back to one of the Federal Reserve banks where it now becomes a…
GOVERNMENT DEPOSIT
Once the Federal Reserve check has been deposited into the government’s account it is used to pay government expenses and, thus, is transformed into many…
GOVERNMENT CHECKS
These checks become the means by which the first wave of fiat money floods into the economy. Recipients now deposit them into their own bank accounts where they become…
COMMERCIAL BANK DEPOSITS
Commercial bank deposits immediately take on a split personality. On the one hand, they are liabilities to the bank because they are owed back to the depositors. But, as long as they remain in the bank, they also are considered as assets because they are on hand. Once again, the books are balanced: the assets offset the liabilities. But the process does not stop there. Through the magic of fractional-reserve banking, the deposits are made to serve an additional and more lucrative purpose. To accomplish this, the on-hand deposits now become reclassified in the books and called…
BANK RESERVES
Reserves for what? Are these for paying off depositors should they want to close out their accounts? No. That’s the lowly function they served when they were classified as mere assets. Now that they have been given the name of “reserves,” they become the magic wand to materialize even larger amounts of fiat money. This is where the real action is: at the level of the commercial banks. Here’s how it works. The banks are permitted by the Fed to hold as little as 10% of their deposits in “reserve.” That means, if they receive deposits of $1 million from the first wave of fiat money created by the Fed, they have $900,000 more than they are required to keep on hand ($1 million less 10% reserve). In bankers’ language, that $900,000 is called…
EXCESS RESERVES
The word “excess” is a tipoff that these so-called reserves have a special destiny. Now that they have been transmuted into an excess, they are considered as available for lending. And so in due course these excess reserves are converted into…
BANK LOANS
But wait a minute. How can this money be lent out when it is owned by the original depositors who are still free to write checks and spend it any time they wish? Isn’t that a double claim against the same money? The answer is that, when the new loans are made, they are not made with the same money at all. They are made with brand new money created out of thin air for that purpose. The nation’s money supply simply increases by ninety per cent of the bank’s deposits. Furthermore, this new money is far more interesting to the banks than the old. The old money, which they received from depositors, requires them to pay out interest or perform services for the privilege of using it. But with the new money, the banks collect interest instead, which is not too bad considering it cost them nothing to make. Nor is that the end of the process. When this second wave of fiat money moves into the economy, it comes right back into the banking system, just as the first wave did, in the form of…
MORE COMMERCIAL BANK DEPOSITS
The process now repeats but with slightly smaller numbers each time around. What was a “loan” on Friday comes back into the bank as a “deposit” on Monday. The deposit then is reclassified as a “reserve” and ninety per cent of that becomes an “excess” reserve which, once again, is available for a new “loan.” Thus, the $1 million of first wave fiat money gives birth to $900,000 in the second wave, and that gives birth to $810,000 in the third wave ($900,000 less 10% reserve). It takes about twenty-eight times through the revolving door of deposits becoming loans becoming deposits becoming more loans until the process plays itself out to the maximum effect, which is…
BANK FIAT MONEY = UP TO 9 TIMES NATIONAL DEBT
The amount of fiat money created by the banking cartel is approximately nine times the amount of the original government debt which made the entire process possible. When the original debt itself is added to that figure, we finally have:
TOTAL FIAT MONEY = UP TO 10 TIMES NATIONAL DEBT
The total amount of fiat money created by the Federal Reserve and the commercial banks together is approximately ten times the amount of the underlying government debt. To the degree that this newly created money floods into the economy in excess of goods and services, it causes the purchasing power of all money, both old and new, to decline. Prices go up because the relative value of the money has gone down. The result is the same as if that purchasing power had been taken from us in taxes. The reality of this process, therefore, is that it is a...
HIDDEN TAX = UP TO 10 TIMES THE NATIONAL DEBT
Without realizing it, Americans have paid over the years, in addition to their federal income taxes and excise taxes, a completely hidden tax equal to many times the national debt! And that still is not the end of the process. Since our money supply is purely an arbitrary entity with nothing behind it except debt, its quantity can go down as well as up. When people are going deeper into debt, the nation’s money supply expands and prices go up, but when they pay off their debts and refuse to renew, the money supply contracts and prices tumble. That is exactly what happens in times of economic or political uncertainty. This alternation between periods of expansion and contraction of the money supply is the underlying cause of…
BOOMS, BUSTS, AND DEPRESSIONS
Who benefits from all of this? Certainly not the average citizen. The only beneficiaries are the political scientists in Congress who enjoy the effect of unlimited revenue to perpetuate their power, and the monetary scientists within the banking cartel called the Federal Reserve System who have been able to harness the American people, without their knowing it, to the yoke of modem feudalism.
Wednesday, July 27, 2011
Update: Gold & Silver, Dollars & Euros
“The current talk in the mainstream financial media about gold being a bubble at $1,600 an ounce and of silver having already reached its top of its long-term peak at $50 an ounce is simply rubbish.
“A bubble is never defined by high prices, the perception of high prices or even a decade long rise in prices. What defines a bubble is a meteoric rise in price that is not supported by fundamental reasons.
“The fundamental reasons that have driven gold from $250 to $1,600 and silver from $4 to its current $39 – $40 range are even stronger today than they were at the beginning of this precious metals bull.
“Therefore, it is impossible for a bubble in gold and silver to exist at their current prices and at this current time.
“And for this reason, this is precisely why the global nuclear arms race has been replaced by a global physical gold race. Welcome to the new global war in precious metals.”
It was not gold itself, but the Gold Standard, which Keynes described as a “barbarous relic”. The Gold Standard went through many formats over the decades, but essentially it required US dollars to be redeemable for a “permanent” fixed amount of gold. It was unworkable: everyone tried unsuccessfully to resist the tension caused by keeping the gold price fixed while the number of dollars increased unchecked, especially during the Vietnam War. In 1968, the French central bank forced the issue by demanding US gold for their petro-dollars, and America refused. A couple of years later, Nixon formally severed the link between the dollar and gold.
World Bank President Robert Zoellick said in December 2010 that the world should change its relationship with money so that gold becomes the reference for value. In future, a fixed gold price would not work as this reference for valuing currency and credit in a new system. A floating price would, but it would have to be much higher than today’s price to represent enough value to support these new currencies, in whatever form they take. Some call this concept “Freegold”.
The current dollar system is falling apart, right in front of our eyes, right now. Although it is impossible to be accurate about the timing of how this crisis will unfold, my personal view is that the following key events are now inevitable:
The ruling American powers will increasingly allow the United States to be seen as a country which will default on its debt – even by the Federal Reserve Bank. However, this is manipulation of public perception; they have no intention of explicitly defaulting, as this would end their game. They will raise the debt ceiling and continue to debase the dollar, so that their unpayable dollar-denominated debt becomes increasingly worthless.
Because of this debasement, the US dollar will soon lose its status as the world’s reserve currency (this is happening already, as central banks are slowing down or ceasing their accumulation of new dollar-denominated assets).
Non-US owners of US dollar-based assets will want to exchange them for anything else which keeps its value more reliably.
There are more dollars outside the US than there are inside it. When these foreign dollars start to come home, the value of the dollar in the USA will plummet and the rate at which dollars change hands will accelerate. This is called hyperinflation.
Sovereign debt in the Southern European states will collapse and these countries will revert to their old currencies, devalued by up to 30%. The “Nordic” Euro as a currency will survive without them, for two reasons: firstly, it is not a national currency and secondly, it is supported at the European Central Bank by substantial gold exchange reserves: over 550 tonnes of gold bullion, plus other gold receivables, which the ECB revalues every 3 months using the actual market price of gold (gold and receivables valued at over €363bn on 30th June 2011). The Euro was deliberately designed from the outset to withstand the stresses that will destroy unbacked national currencies like the US dollar.
There will come a crisis point, which will be seen in retrospect as the “Great Reset”. The dollar, and many other national currencies, will be abandoned. At this point, gold will be artificially and collectively revalued upwards ONCE so that its new value is sufficient to back the new currencies. This gold revaluation will be very substantial, of the order of 5-10 times or more of its current value, and will be permanent.
Between now and the Great Reset, the price of silver will often rise faster than that of gold and will also be more volatile, as increasing numbers of people realise their national currency is an unsafe long-term store of value and will buy various precious metals instead. However, since central banks and very wealthy individuals hold gold in great quantity, but not silver, silver will not be used as the basis for a new money system, and will not be artificially revalued as gold eventually will.
So we might expect:
Prior to the Great Reset, silver to often outperform gold as an investment.
A single, huge and permanent increase in the value of gold.
A high, floating price for gold thereafter.
For these reasons, I would recommend you move anything you consider to be investment money into vaulted gold bullion. At times when silver looks set to rise faster than gold, sell maybe 30-70% of your gold (depending on how adventurous you feel) and buy silver bullion. When silver peaks, sell the silver and buy gold again. In this way, you will end up with more gold than your cash alone would have bought. You can do this very easily at BullionVault.
Holding a growing quantity of vaulted gold bullion indefinitely will give you great financial protection and flexibility. At any time, part of your bullion can be turned back into cash for immediate use; inflation will have no damaging effect on your store of value because gold prices are rising faster than inflation, and in the longer term a global gold price revaluation will give you an almost unimaginable return on your investment.
Tuesday, June 28, 2011
How QE3 will save the World
July will be a rotten month for bonds and precious metals, so that everyone gets the message that we need more QE. Once that is agreed, precious metals will rally strongly. In 2009, after the summer doldrums where the gold price fell over June/July, the price rose 15.7% between 1st August and 31st December. Exactly the same pattern occurred in 2010, with an Aug-Dec rise of 15.9%
The silver fraud is approaching the end game. The crooked banks most likely to be the subjects of an Interpol investigation would be the US and Swiss banks JPMorgan Chase, Union Bank of Switzerland (UBS), and Credit Suisse.
The Powers That Be are looking for a calamity situation, where the US Govt will clamour for QE3 (or Operation Twist 2 as it is becoming known) to save them. Likely financial events in July 2011 include stock market drops from June highs, a significant/scary drop in bullion prices, Greek bond meltdown contagion spreading to Europe and possibly USA. Non-financial events include flooding of nuclear power stations, freak tornadoes, earthquakes in active zones and possibly the limited imposition of martial law (for the protection of citizens). Phew! If these things all happened around the same time – what a dreadful coincidence; but surely, that would be disastrous enough to do the trick… however,America’s grain harvest will already be dire, as an enormous swathe of the mid-West is underwater. Food prices will increase to alarming levels, so this could already be bad enough.
Inflation of goods prices will come home to roost in the USA, after a long period when overseas suppliers were content to take US dollars and exchange them for their own currencies, so as to keep their exchange rates constant. They are now revaluing their own currencies so their goods will cost more in US dollars.
Following the legitimisation of the Muslim Brotherhood as political party in Egypt, control of the country will be transferred into their hands in short shrift. The same will soon happen in Libya, Yemen, Oman, Syria and Jordan. US citizens will be able to watch this choreographed political theatre with a sense of detachment until the final domino topples – Saudi Arabia, their main source of oil. Oil prices would probably double; US gasoline would cost $8-10/gallon.
Rumour will start to emerge, very tentatively at first, that there is a small possibility that the US Govt may default on their National Debt. The biggest single holder of US debt is the Federal Reserve Bank, who will act heartily displeased, although this is all going according to plan. The Fed will exercise its right to flex its Balance Sheet, which includes the ultimate rights of ownership over one million homes acquired via their mortgages when the Fed swapped new credit for MBSs held by poorly capitalised banks between 2008 and today. The Fed will become the biggest landlord in the world and would be able to put a large number of US citizens out on the streets, from where it is one short step into a FEMA “emergency” holding camp.
Sunday, June 12, 2011
What Can’t Get Fixed – Won’t
The US Powers That Be cannot fix their Dollar system – but then, they are not trying to. Americans get very upset about how “stupid” their government and central bank are, naively assuming that the main objective of these bodies is to fix the system for the benefit of the people. However, turn this on its head and assume instead that the banking Elite are actually planning a controlled crash of the dollar system to benefit themselves: then all their activities suddenly make horrible sense.
Imagine for a moment that, instead of trying to lead America to a new era of prosperity, Obama is the front man for a very well organised campaign to destroy free market capitalism in America and replace it with a banker-engineered form of authoritative socialism (this has NOTHING to do with liberating the proletariat). It would be achieved by means of a series of orchestrated crises, which would lead to the collapse of the state welfare system through an overwhelming burden of new claims upon it by desperate people. This subversive approach was first outlined by two socialist academics in 1966 (click link for Google seach on Cloward-Piven Strategy). It would certainly explain why the USA is utterly failing to address its massive government overspend - there is no intention to.
The purpose of Quantitative Easing (QE) is NOT to monetise the National Debt (i.e.create new dollars and exchange them for government debt). The main purpose is to fend off unscheduled dollar collapse by keeping interest rates low, so that the interest payments due from the US Govt on their bonds can remain as low as possible. In shock news yesterday, it turns out that practically NONE of the $600bn issued under the 7-month QE2 programme which started in November 2010 has gone to help recapitalise US banks - almost every dollar has been spent in propping up European Banks instead! (see Zero Hedge article). But remind yourself that the Fed is a private bank, with very wealthy European shareholders... and, once again, it all makes sense.
And while that continues, the Federal Reserve actually wants an “orderly” rise in the value of gold – say 10% a year – so that the dollar’s value is eroded over time and the US Govt debt commitment is diminished in real terms.
For political reasons, the Fed does not wish to appear weak, so they will not launch QE3 without being forced to by an agitated Congress. Their QE2 campaign officially ends on June 30th, so there will be no more official funds made available to their favoured (apparently non-US) primary dealers. This drying up of cash, coupled with weak second-quarter results for all big corporations which rely upon Japan, will very likely cause an immediate slump in US share prices. If this should coincide with some other non-financial crisis, such as more extreme weather, a nuclear emergency, seismic activity or aggressive foreign overtures, then most Americans will beg for “stimulus” to be restored.
The biggest problem will be if events should accelerate beyond the control of the central planners and the Fed's “orderly” process is derailed from its preferred path. Japan’s recent crisis and their sudden, acute need to sell their US Treasuries (they hold over $800bn worth) to pay for the tsunami recovery work, could well trigger this. Expect an unannounced initiative from the G8 countries to print money and buy US Treasures in a coordinated way, such that no one country drives the dollar over the cliff. There will be no publicity - but the evidence will be there on the accounts of central banks for those who care to look.
This is political dynamite because it's so big. It will dwarf the already enormous scale of what the Fed has done to date, and practically guarantees hyperinflation in most Western countries. You might want to call this Global QE, because despite the fact that this clandestine manoeuvre will not be given a public name, that is effectively what it will be.
Thursday, May 19, 2011
If Governments are supposed to be in charge...
Why is it that our so-called sovereign governments borrow their countries' money from privately-owned Central Banks (which charge interest) when they could each create all the interest-free money they need?
Where does the extra money come from which they need to pay down the interest as well? If that has to be borrowed too, then their debt just gets bigger... and bigger...
How can a money system, which can only function with perpetually accelerating growth, be used to build a sustainable economy? Isn’t it logical that perpetually accelerating growth and sustainability are incompatible?
What is it about our current system which makes it totally dependent upon perpetual growth? What needs to be changed to allow the creation of a sustainable economy?
Paul Grignon's Money as Debt - Mini Video Tutorials
