| | | Page 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28 | Watch, Its happening ,the global economic change.
| FHL(C)
User ID: 16134
11/21/2005 6:34 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
The Manipulation of the Gold Market
November 17, 2005
by Bill Murphy, Chairman
Gold Anti-Trust Action Committee
Financial Sense
The key to understanding the manipulation of the gold market, this enormous scandal and fraud, is that it can be compared to a murder trial. In the United States a murderer can be put to death if he is found guilty beyond a reasonable doubt. Many times murder defendants are convicted based solely on "circumstantial" evidence because a reasonable person could reach no conclusion other than guilty.
For seven years GATA has discovered one piece of evidence after another supporting our long-held contention that the gold market is managed by certain central banks and their agents, the bullion banks. It is a price-fixing case involving some very powerful people and institutions … in fact it is a Gold Cartel. The U.S. attorney handling the Samsung conspiracy conviction said in an interview this fall that the United States had experienced an "epidemic" of price-fixing cases in the late 1990s. All GATA has done is uncovered one of them, the grandest of all.
For one to appreciate how this can go on and on and not be brought to the attention of the public, one need only to reflect on Enron and Refco. Before its initial public offering of stock, Refco was audited by the most highly regarded firms on Wall Street and nothing wrong was discovered. Yet look at what was really transpiring behind the scenes. Now the company is bankrupt and under criminal investigation.
That said, GATA does have its "smoking gun." It has to do with derivatives and central bank gold. The mainstream gold world says the central banks have nearly 32,000 tonnes of gold in their vaults (minus a small amount that has been sold in recent years or is on loan to gold producers for their hedging operations). GATA says the central banks have less than half of that -- the difference being what was clandestinely fed into the market to suppress the gold price over the last 10 years. The work of three respected GATA consultants -- Reg Howe, Frank Veneroso, and James Turk -- each using different methodologies, supports GATA´s contention of vastly diminished central bank gold supply.
Veneroso made a presentation at GATA´s African Gold Summit in Durban, South Africa, on May 10, 2001, laying out why the central bank gold loans are far higher than generally believed. This presentation, "Facts, Evidence and Logical Inference ... A Presentation On Gold Supply/Demand, Gold Derivatives and Gold Loans," may be reviewed at: [link to www.lemetropolecafe.com]
Howe and Turk have done the same at their Internet sites:
[link to www.goldensextant.com] and [link to www.goldmoney.com]
Meanwhile the International Monetary Fund has instructed central banks to lie about their gold reserves -- to count gold loans and swaps as gold in their vaults. So as not to be so audacious without backup to validate our more than dramatic claim, let me explain. Canadian GATA supporter Andrew Hepburn posed the following question to the IMF in October 2001:
Why does the IMF insist that members record swapped gold as an asset when a legal change in ownership has occurred? See [link to groups.yahoo.com]
The IMF responded:
"This is not correct: the IMF in fact recommends that swapped gold be excluded from reserve assets. (See Data Template on International Reserves and Foreign Currency Liquidity, Operational Guidelines, para. 72, http:www.//dsbb.imf.org/guide.htm"
(For more on this, see [link to groups.yahoo.com] The IMF link mentioned above is no longer operating. It was in 2001 as noted in the GATA dispatch.)
Yet a footnote on the Internet site of the central bank of the Philippines contradicts the IMF´s claim and reveals it to be bogus:
"Beginning January 2000, in compliance with the requirements of the IMF´s reserves and foreign currency liquidity template under the Special Data Dissemination Standard (SDDS), gold swaps undertaken by the BSP with non-central banks shall be treated as collateralized loans. Thus, gold under the swap arrangement remains to be part of reserves and a liability is deemed incurred corresponding to the proceeds of the swap."(See [link to www.bsp.gov.ph]
The European Central Bank and other central banks corroborated exactly what the central bank of the Philippines declares about counting gold loans the same as gold in the vault.
The "smoking gun" part of this has to do with the gold derivatives on the books of the Bank for International Settlements in Switzerland. The gold establishment says the gold derivatives on those books have been associated with gold producer hedges. Yet in the last four years gold producers have reduced their hedges by more than 2,000 tonnes of gold, or more than 50 percent of their hedging at its peak. Consider this excerpt from a Reuters report from November 8, 2005:
"LONDON -- .... The Hedge Book report produced by Haliburton Mineral Services and industry consultants Virtual Metals said the so-called hedge impact of the global book fell by 1.0 million ounces to 52.8 million ounces. ... The global hedge impact in the July-September quarter was just more than half its level in the same quarter of 2001 when it peaked at 102.8 million ounces."
Meanwhile, gold derivatives have gone up during that period of time, not down. While these are complicated and technical, Howe updated GATA´s evaluation of the BIS gold derivatives in a report he posted at GoldenSextant.com in June, "Gold Derivatives: Skewing the World":
"On May 20, 2005, the Bank for International Settlements released its regular semi-annual report on the over-the-counter derivatives of major banks and dealers in the G-10 countries for the period ending December 31, 2004. The total notional value of all gold derivatives rose from $318 billion at mid-year 2004 to $369 billion at year-end. As subsequently detailed in table 22A of the June issue of the BIS Quarterly Review, released June 13, 2005, forwards and swaps increased slightly from $129 to $132 billion while options rose dramatically from $189 to $237 billion."
Howe´s report can be found here: [link to www.goldensextant.com]
The only explanation for the dichotomy between the reduced hedges and the increased gold derivatives on the books of the BIS is undisclosed lending of gold and writing of central bank call options associated with the price suppression scheme.
There is one other anecdotal point to make proving how right GATA has been all along and what it means for gold investors in the years to come. For years GATA has claimed that the key to the eventual surge in the price of gold was the rising physical demand for gold amid the diminishing supply of central bank gold used to suppress the price. The gold establishment has associated the rise in the price of gold over the years with the weakening of the U.S. dollar. GATA has claimed otherwise.
We said the Gold Cartel was using the action of the dollar for price-rigging purposes. GATA has said over and over that the price of gold could rise hundreds of dollars per ounce and the dollar do nothing relative to other currencies. We said it would happen when the gold cartel began to lose control of its price manipulation scheme.
Well. ...
The euro came into existence on January 1, 1999, at $1.17. The price of gold that day was $284. As this is written in mid November 2005, the euro approached $1.17 again while gold has rocketed $194 per ounce since the beginning of 1999.
Here´s more that helps to prove GATA´s case about the gold market. At the beginning of 2005 gold was $420 and the euro was $1.30. In mid November the euro was trading at $1.17. But the price of gold was $478. The argument that gold is tied to the dollar has gone the way of the Dodo bird. Of course, should the dollar crash, which it should, this can only help the gold price.
The price of gold is headed to well beyond $2,000 per ounce. GATA knows why.
Now you do too.
[link to www.financialsense.com]
[link to freewordofgod.yuku.com] |
| .
User ID: 43093
11/23/2005 7:19 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Mick
User ID: 8280
11/23/2005
5:47 am EST
Add to Favorites ????????? IS THE US ALREADY BANKRUPT ????????????
The United States Is In Deep Doodoo!
United States Congressional Record - March 17, 1993 - Vol. #33, page H-1303 - Speaker- Rep. James Traficant, Jr. (Ohio) addressing the House:
"Mr. Speaker, we are here now in chapter 11. Members of Congress are official trustees presiding over the greatest reorganization of any Bankrupt entity in world history, the U.S. Government. We are setting forth hopefully, a blueprint for our future. There are some who say it is a coroner´s report that will lead to our demise."
--------------------------------------------------------------------------------
Imagine for a moment that someone inherits a farm. Let´s say that the farm has good topsoil, a good well, good breeding stock, good seed, and excellent farm equipment in good repair. Prior to passing into the control of the present owner the farm did a good business selling vegetables, meat, and dairy products to the local market, and it made a small profit.
But let us suppose for a moment that the present owner of the farm doesn´t understand farming, or isn´t even really interested in learning. The present owner has no objection to standing around looking good, so he stays at the farm, standing in front of it, looking good to passers by.
Of course, the bills still come in, so our farmer puts them on his credit card. When that bill comes due he uses another credit card, Then another. Pretty soon the interest payments alone are higher than his bills and the banks get nervous and call him. No problem. Our farmer sells the tractor, takes the money around to the various credit cards, the food store, the utilities, and pays off all his bills. Then he stands around in front of the farm looking good to passers-by, the lord of his domain.
Will, the bills still come in. Again the credit cards get loaded up. So, this time our farmer sells the harvester. Then later on, the cattle, then the chickens, then the seeds, then he leases the well to his neighbor and finally sells the top soil from his farm to another farm down the road whose soil is getting tired. The cash is taken around to the various creditors, the food store, the utilities, etc.
Now at this point, our farmer thinks everything is okay. The bills are paid, he has a little cash in his pocket, and everything is fine.
Of course, you know better. The farm simply does not exist any more; it´s just an empty lot with a few buildings, and soon they will be gone as well. The path from the farmer´s present condition to seizure of the property for unpaid taxes is a foregone conclusion, even if the farmer doesn´t look far enough ahead to see it.
Poor, dumb, stupid farmer.
That farmer is our government, and our business leaders.
Just as our hypothetical farm has lost its soil, livestock, seed, and farm equipment, America has lost its manufacturing ability. Short sighted business leaders, with as little interest in manufacturing as our farmer had in farming, decided their own personal bonuses would be higher if they simply sold their factories rather that ran them. After WW2, the 27 American TV companies including Zenith, Emerson, RCA, GE, etc. led the world in TV technology. Then, the owners of the patents on TV technology decided they didn´t need to dirty their hands by actually making the TV sets themselves any more, and they started selling licenses to manufacture, which the Japanese bought.
By 1987, the only remaining American TV company is Zenith. The patent holders get their money, but the American products which can be sold overseas are gone, along with the jobs to make them.
The same happened in high-tech electronics. The integrated circuit was invented in the United States. But rather than focus on selling integrated circuits, the companies that owned that technology sold the machines to MAKE integrated circuits around the world, and now America sells very few chips anywhere. The patent holders have their money, but the cash flow from sales of manufactured goods, and the jobs that go with them, are gone. When Seymour Cray needed custom chips for his supercomputers, he had to order them from Japan.
The same thing has been happening in aviation. The airplane was invented in the United States, and through the 60s, we sold a lot of them around the world. But lately, all aircraft sales to foreign countries involve "offsets", a portion of the core technology that gets licensed to the purchasing nation and gets manufactured there. Bit by bit, the core technology gets bled off, taking with it jobs, and cash flow from the sale of those manufactured products. Along the way, the rights to manufacture American inventions outside America leak away on a steadily increasing basis. Even the mighty F-16 is now being manufactured overseas, under license.
To cover the loss of manufacturing jobs, our government has invented the catch phrase "service economy". This is the idiotic notion that we don´t need to actually sell manufactured products; that we can grow and prosper our nation by doing each other´s laundry. To conceal the loss of manufacturing jobs, the government has legislated into existence thousands upon thousands of useless paper-shuffling jobs, and declared their necessity by fiat. The most obvious is the income tax which has been so obfuscated by the government that half of you had to rely on an outside expert to figure out just what all those incomprehensible words really meant. By this device, the government has replaced those jobs that made products to sell with an equal number of jobs that produce nothing whatsoever of any worth, except to keep the unemployment figures down. This over-burdening of the American people with gratuitous regulations and paperwork has accomplished nothing except to obfuscate the loss of manufacturing jobs, and to transform the American character from innovators and inventors creating new products to that of minor clerks, peeking under each other´s seat cushions for lost change.
So, with most of our manufacturing now gone, just what DOES America make? Trouble, mostly. With 4% of the world´s population and 18% of the economy, we have 50% of all the lawyers, all looking to make a killing by looting those few industries that still call America home (like Microsoft). Kids don´t want to be scientists and engineers; they´ve seen how little such people are valued in our country. Based on recent history, kids see the "big bucks" are in corporate law, specifically investment banking, leveraged buyouts, greenmail, junk bonds, in short what other countries describe as "trying to make money grow by shaking it side to side".
With America´s ability to actually produce products that can compete on the open world market in decline, it´s no wonder that the balance of trade is the problem it is. Nobody buys our export products because we just don´t make that many any more, and like or not, we have to buy our appliances from the people who make them, which are NOT Americans. (When Ampex invented the VCR, they didn´t even bother trying to find an American company to make it, they immediately sold the rights to Japan).
So, what do all these countries on the plus side of the trade imbalance do with their surplus billions? Well, they have been loaning it right back to us!
Our government engages in a practice politely called "deficit spending". Other terms which would aptly describe the practice include "counterfeiting" and "check kiting", but it all comes down to the same thing; spending money one does not actually have.
What would be a jailable offense for a normal citizen was rendered legal for the government by the Federal Reserve Act. This was not a popular piece of legislation. In fact the Democrats had campaigned in 1912 on a platform of rejection of the creation of a private bank in charge of a fiat money system. Nevertheless, on December 23, 1913, taking advantage of the absence of congressmen opposed to the creation of a fiat monetary system during the Christmas break, the Federal Reserve Act was passed.
Years later, during the great depression, Congressman Louis T. McFadden (who served twelve years as Chairman of the Committee on Banking and Currency) asked for congressional investigations of criminal conspiracy to establish the privately owned ´Federal Reserve System´. He requested impeachment of Federal officers who had violated oaths of office both in establishing and directing the Federal Reserve -- imploring Congress to investigate an incredible scope of overt criminal acts by the Federal Reserve Board and Federal Reserve Banks. McFadden even suggested that the Federal Reserve deliberately triggered the great stock market crash of 1929, in order to eventually force the passage of the Emergency Banking Act of March 9, 1933, which suspended the gold standard.
In describing the FED, McFadden remarked in the Congressional Record, House pages 1295 and 1296 on June 10, 1932:
"Mr. Chairman, we have in this country one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board and the Federal reserve banks. The Federal Reserve Board, a Government Board, has cheated the Government of the United States and he people of the United States out of enough money to pay the national debt. The depredations and the iniquities of the Federal Reserve Board and the Federal reserve banks acting together have cost this country enough money to pay the national debt several times over. This evil institution has impoverished and ruined the people of the United States; has bankrupted itself, and has practically bankrupted our Government. It has done this through the misadministration of that law by which the Federal Reserve Board, and through the corrupt practices of the moneyed vultures who control it".
Why all the fuss over the gold standard?
Well it goes back to the original Founding Fathers and the meaning of the word "dollar". "Dollar" is actually a weight measure of silver, 371.25 grains, to be exact. Our American silver dollars are actually heavier, since other metals were added for durability. But that 371.25 grains of silver WAS the dollar, matching in weight an unbroken chain of accepted monetary units that reached back through the Spanish Milled Dollar, the Dutch Daller, back to the German Thaler; the product of a silver mine which sold it´s product in coins of an exact weight. The Coinage Act of 1792 defined our dollar to exactly match in weight the silver dollars in use around the world, and then defined the gold dollar to be that amount of gold which would equal the worth of silver in a silver dollar, 24.75 grains, 1/15 the weight of the silver in a silver dollar.
So, what´s wrong with this? Nothing really. When you, as a citizen, hold a silver dollar or a gold dollar in our hand, you hold that actual worth of metal. Nothing the government can do can change the worth of the money in your control.
Take the Roman Silver Denarius pictured above. The Roman Empire is long gone, but the money that Rome issued still has worth because the coins themselves had inherent worth. Long after the collapse of the empire, Roman silver coins were still used as money, because the silver in the coin itself did not depend on the issuing government for its worth.
Of course, carrying around too much coin can be bothersome, so many nation, including our own, issued paper notes as a convenience. But that paper currency of the nation was just a convenience. The gold and silver certificates were merely "claim checks" for the equivalent weight of gold or silver held in the treasury, and which would be produced on demand when the certificate was presented. But in the end, the lawful dollar of the United States was 371.25 in silver, or 24.75 grains of gold.
The problem with this system from the point of view of the government or the banks is that it limits the amount of money they can work with. When the bank runs out of silver or gold (or the equivalent certificates) it can no longer lend any more money with which to earn interest. When the government runs out of gold or silver (or the equivalent certificates) it can no longer spend money (just like the rest of us).
The immediate effect of ending the gold standard was that with the paper dollar no longer legally dependent on 371.25 in silver or 24.75 grains of gold, more paper dollars (now called "Federal Reserve Notes") could be printed, their worth no longer under the control of the citizens but under the control of the issuing central bank, based on the total number of dollars printed (or created as credit lines). The more dollars which are created out of thin air, the less each one is worth.
A federal Reserve Note.
The swindle of the system is simple. The Federal Reserve Bank hires the US Treasury to print up some money. The Federal Reserve only actually pays the treasury for the cost of the printing, they do NOT pay $1 for each 1$ printed. But the Federal Reserve turns around and loans out that money (or credit line) to banks at full face value, those banks which have exhausted their deposits then loan that Federal Reserve fiat money to you, and you must repay it in the full dollar value (plus interest) in work product, even though the Federal Reserve printed that money for pennies, or created it out of thin air in a computer.
As the Federal Reserve overprints more money, the money supply inflates, and too much money starts chasing too few goods and services, which means prices go up. But contrary to the charade put on by the Federal Reserve, inflation doesn´t just come and go due to some arcane sorcery. The Federal Reserve can halt inflation any time it wants to by simply shutting down those printing presses. It therefore follows that both inflation and recession are fully under the control of the Federal Reserve.
Over time, that excess of printing has destroyed the value of that dollar you think you have. If you want to know by just how much, go out and try to purchase 371.25 grains of silver right now. Usually, the deterioration is gradual. Sometimes, it has to be obvious, such as the 1985 devaluation (done to halt the trade imbalance) which triggered the Japanese real-estate grab in this country.
Many politicians have attempted to reverse this process. John F. Kennedy issued an Executive Order 11110, requiring the Treasury Department to start printing and issuing silver certificates for the silver then remaining in the US Treasury.
Kennedy decided that by returning to the constitution, which states that only Congress shall coin and regulate money, the soaring national debt could be reduced by not paying interest to the bankers of the Federal Reserve System, who print paper money then loan it to the government at interest. This was the reason he signed Executive Order 11110 which called for the issuance of $4,292,893,815 in United States Notes through the U.S. Treasury rather than the traditional Federal Reserve System. |
| .
User ID: 43961
11/26/2005 7:06 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Something´s gotta give in America
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By Alan Kohler
November 23, 2005
Page 1 of 2
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Gold´s switch in the past few months from being the inverse of the US dollar to going up with it is a sign of some big forces at work in global markets and economies. It may be "Pink sky in the morning" (the shepherd´s warning).
In the first half of this year the US dollar went up 12 per cent on the back of an interest-rate arbitrage play as it became clear the Federal Reserve Board in the US would keep raising cash rates until they were "neutral" (probably 4.5 per cent). At the same time gold fell 6 per cent, which was in keeping with its long-term position as an alternative "currency" to the greenback.
By the way, the mysterious appeal of gold, despite paying no yield, is based on its character as an asset that is no one´s liability, unlike all other financial assets. Liabilities can default or become devalued; gold is just gold.
Between November 2003 and January 2004, gold rose 10 per cent and the dollar fell 9 per cent; over the following four months those moves were reversed; in the second half of 2004 gold bounced 20 per cent while the dollar fell 12 per cent, and in the first half of 2005 the dollar regained the 12 per cent and gold fell 6 per cent.
Since September gold has risen 9 per cent to an 18-year high as the dollar has risen 7 per cent - which is virtually unprecedented. It has happened because oil revenues are being recycled as much into gold and domestic investments as petrodollars (remember them?), while Asia continues to recycle trade surpluses into US treasury bonds (and thus dollars).
So what´s the problem? It´s that the US dollar is overvalued and the country´s competitiveness has eroded to the point where the cash rate arbitrage will be pitifully inadequate to hold the currency. This has occurred because Asian central banks, led by China, have been buying US bonds at ridiculously low interest rates in order to keep their own currencies and improve their own competitive position.
US consumers and businesses have been buying their goods from - and outsourcing their services to - cheap currency countries, which has stopped what would have otherwise been a natural depreciation of the dollar. As a result, the US current account deficit is now pushing $US800 billion ($1086 billion), $US300 billion higher than when, as research house Bridgewater Associates puts it, "private sector capital gave up on the dollar in 2002". It is also the biggest financing task the world has ever known.
Meanwhile, Asian current account surpluses are declining and those of oil-exporting countries are rising. According to the ANZ Bank´s Saul Eslake, current account surpluses of the Middle East have quadrupled in two years to more than $US200 billion. Russia´s surplus is up to $US120 billion and even Latin America is running a surplus now because of oil from Venezuela. In fact, Australia is about the only commodity exporting nation still running a deficit (because we are bigger consumers). |
| .
User ID: 43961
11/26/2005 7:09 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Total trade surpluses of commodity exporting nations are about $US400 billion. Asian surpluses, meanwhile, have declined from $US370 billion a year to $US300 billion, so the most important financiers of America´s consumption addiction are no longer the Asian countries supplying the finished goods and services acting out of self interest - what Eslake calls the greatest vendor financing scheme in history. Commodity exporters, especially oil, are taking over, and they have an entirely different set of motivations.
Morgan Stanley´s chief economist, Steve Roach, is in the middle of a spin through Asia and the Middle East, and filed an interesting piece for his website from the Emirates Palace Hotel in Abu Dhabi. He quotes a friend of his who "shared what I believe is a very important insight on the recycling of the huge surge in oil revenues that has once again flowed into the region´s coffers - estimated at around $US300 billion over the past year by many accounts".
"Unlike the oil shocks of the past, which gave rise to the concept of the petrodollar - a recycling of windfall oil revenues into dollar-denominated assets - the current windfall accrues to a Middle East that is much better prepared for inward re-investment.
"Take a look at year-to-date returns in the stockmarkets of the region´s major oil producers - Saudi Arabia (+96 per cent), UAE (+179 per cent in Dubai and +85 per cent in Abu Dhabi), Kuwait (+84 per cent), Qatar (+77 per cent), and Bahrain (+32 per cent). Also take a look at the urban construction boom - Dubai is starting to look Singaporean in scale."
And they are investing in the other asset that is no one else´s liability - gold. Certainly the Arabs are less inclined to finance American consumers than the Chinese and are more worried, as investors, about the sustainability of the US current account deficit.
The US dollar is rising at present - along with gold - because of a short-term arbitrage on cash rates as the Fed continues to push them towards 4.5 per cent, whence chairman Ben Bernanke is likely to stop and sit on the sidelines for a while. Bond yields have also been rising gradually because global growth is surprising on the upside (not because of inflation expectations, which are not rising).
This situation cannot last. American financial assets will have to be repriced eventually, either directly or through a depreciation of the currency, or both.
And while there is little doubt that we are in the midst of a "Santa Claus rally" on Wall Street or that Australian stocks are generally not expensive, the timing and force of the American reckoning will be the key to investment markets in 2006. |
| Bullshit!
User ID: 32690
11/26/2005 7:14 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
"Can´t be long now"
Wow, nearly a WHOLE 12 MONTHS have passed, and we are STILL WAITING!! I guess FHL was a tad OFF on his predictions.
I predict that he will be wrong again, SOON (watch the skies). |
| .
User ID: 43961
11/26/2005 7:20 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
You a tad ignorant then arent you, as not long in financial terms can mean minutes or years.
The reason your are really primed to have ago at FHL(C) is that you hate his faith in YHVH and the word of God. |
| .
User ID: 43961
11/26/2005 7:22 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
And another thing, many analysts financial see it coming too. And where does it say its prophesy , i cant see it, or where does it say that its the end of the world or the financial system, again it does not. |
| Anonymous Coward
User ID: 43959
11/26/2005 7:34 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
look at the euro versus dollar . the correction is behind us because it allready happened .
you guyes know nothing about financiel markets so why bother to post? |
| FHL(C)
User ID: 44190
11/27/2005 11:08 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Thank you op and Fair use:
Paladin
User ID: 1349
11/26/2005
6:03 pm EST
Add to Favorites A PERPETUAL BULL´S ANALYSIS OF THIS MARKET
A PERPETUAL BULL´S ANALYSIS OF THIS MARKET
by Perpetual Bull
November 25, 2005
Given the unique and dangerous situation we are in (enormous debt and high leverage, skyrocketing energy costs, bleak western economy) why has the market since 2004 traded as if we are in a period of low risk, cautious but sustained optimism? I present my hypothesis.
Assumptions
First a list of things which should be indisputable.
Central banks and important funds and investors know there is a problem with the world economy. The literature from the central banks doesn´t hide it. Many well known investors are sitting in cash.
The partial crash in 2000 just about destroyed the American economy. It would have been much worse if it had not been ´rescued´ by low cost borrowing.
Large international financial institutions (C, JPM, etc.) are linked both to the federal reserve (government) and all industries. They have the largest market cap, wield the most leverage, and have the most cash to deploy.
If the stock/bond market or USD broke -- crash or even serious correction, the pain would be nontrivial. Near retirees would have lost all ´savings´. Pensions gone. Government would lose the world´s confidence and be unable to finance its activities (including defence). Government and industry grinds to a halt. This is nothing short of the apocalypse -- financially, it´s worse than getting nuked. In other words this disaster must be averted/delayed AT ALL COSTS.
Psychology
I don´t think it´s mindless retail bullishness keeping this market afloat -- they don´t matter much beyond providing mutual fund inflows (which are still important by the way). I think what is keeping this all going is the recognition of mutual benefit and interdependence among: government, banks, funds. The financials alone have enough power to moderate the market if they want, with government blessing, more so. The huge program trading, low VIX says it all.
So we ask, who is buying? While some private investors might be holding off, I think mostly everyone else in that pool of companies/organizations who have a common interest at stake are either neutral or buying. They´re so highly leveraged anyway, and it´s a ponzi scheme that doesn´t stop until it stops. Existing assets are used as collateral to acquire new assets. C and GE´s balance sheets show how the game works.
And this "collaboration" for mutual survival does not even have to be explicit. I think the situation spells it out on its own. If C or JPM said "that´s it, we´re selling the market", the whole thing collapses and C/JPM disappear the next day.
Most worldwide capital finds a home in US markets. It would literally be suicide for the Asians to pull out their money. No rational entity commits suicide.
So yes they are raising the stakes every day, but every day since 2000 these powerful entities have come to work and looked at two choices:
Put on that CNBC face, look happy (or at least don´t scare anyone)
Blow the whistle, trigger a selloff, and you die.
When governments and companies are faced with the decision, the choice is obviously the first. This doesn´t mean that individual wealthy PEOPLE are buying, I´m sure many of them are selling. But the companies, the governments and those controlling foreign capital are operating in the only mode that can guarantee their near term survival. It is a well known phenomenon that large organizations tend to make decisions that are beneficial in the short term even if the long term consequences are self destructive.
Risk
Low bond yields give us hints too. Large players have stopped worrying about whether a 10 yr yields more than a 2 yr. At least treasuries are a relatively safe place to park money. Capital flows into all parts of the bond market until it is saturated and the yield curve is flat across.
Earlier we pondered how investors could possibly tolerate such low yields. Remember that these aren´t retail investors moving the bond market. By accepting a 3% or 4% yield, an expert might be telling us: "I have considered the various places I can put this money, and I can not expect with relative safety to get better than 3% or 4% anywhere."
Of course, there is so much money out there (facilitated by easy credit and the derivatives game that helps it along) that all asset classes are naturally pushed up. Inflation is rampant, but preferred to the other option.
[link to www.financialsense.com]
Anonymous Coward
User ID: 1315
11/26/2005
6:19 pm EST Re: A PERPETUAL BULL´S ANALYSIS OF THIS MARKET
Has the DOW ever been this high?
Anonymous Coward
User ID: 1551
11/26/2005
6:24 pm EST Re: A PERPETUAL BULL´S ANALYSIS OF THIS MARKET
"As dreams of Sugar Plumbs danced in their heads"
stoner
sophia
User ID: 10413
11/26/2005
6:28 pm EST Re: A PERPETUAL BULL´S ANALYSIS OF THIS MARKET
My Big Lessons From Hong Kong
By Dr. Steve Sjuggerud
It was late 1993, and I was making way too much money…
I was a broker specializing in international stocks and bonds…and my customers were making a fortune.
It wasn’t any special skills that I had. It was just what we were buying…
Officially, we could buy stocks and bonds around the world. But the reality was, it was all about China. Since there was no great way to play China directly, it was all about Hong Kong and the surrounding emerging markets.
Hong Kong’s Dow… the “Hang Seng Index”, rose over 100% in 1993. But it was filled with big, boring stocks. If you took a little risk with smaller stocks, you could do even better. And our customers did.
By the end of 1993, our customers were no longer afraid. Business was fantastic. It was too easy… China was going to grow indefinitely, and we were going to grow rich indefinitely by investing through Hong Kong.
Every day, this belief was reinforced. There were only five down days in the Hong Kong stock market for the entire month of December that year.
The Hong Kong market just always went up. Until it didn’t.
Things started to go wrong fast. The Hang Seng Index lost 16% of its value in 8 days in early January.
We got a recovery in February… the Hang Seng Index climbed back near the old highs. That fooled us into thinking the end wasn’t here. But it was. And then March came…
It was awful. I wanted to crawl under my desk. March of 1994 was the opposite of December 1993. The Hang Seng Index went down on 70% of the trading days in March.
I didn’t even want to pick up the phone and talk to customers.
That’s when I learned that you’ve always got to cut your losses. That you are not as smart as you think you are. And that markets can go down farther than you can possibly imagine.
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The movie played itself out again a few years later. Hong Kong had recovered back to new highs in three years time, and by mid-1997 it was off to the races again.
Everyone forgot about risk again. And then another shellacking came:
[Editor´s note: Steve probably wouldn´t mention this, but I know that just before the Hong Kong bear market of 1997-1998, Sjuggerud and Stansberry were the portfolio managers of China Business and Investment, a high end financial advisory for institutions. In September of 1997, two weeks before the crash began, they recommended selling every single Hong Kong stock on their recommended list. The decision to get out was made solely on the basis of trailing stop discipline. To further protect subscribers, they also recommended buying puts on Telebras, the huge phone company in Brazil, which was the single largest emerging market stock in the world at the time. Those puts made over 400% in October of 1997 as emerging markets melted down. -- B.H.]
The Hang Seng Index lost half its value in a year. Hong Kong stocks were obliterated twice in less than five years.
What are the big lessons here? There are at least two:
Use a trailing stop, so you can catch the gains on the way up and get out without getting clobbered on the way down, and:
Find an indicator to let you know when everyone has forgotten about risk in emerging markets… to know when to get cautious. Here’s mine:
The chart below, from Jeremy Grantham, tells me all I need to know.
Chart source: www.gmo.com
This chart shows at what interest rate emerging market countries like Brazil and Russia can borrow money. Right now, emerging market countries can borrow at just 2.4 percentage points over U.S. Treasury bonds… a level not seen since the two shellackings I described above.
In late 1993, as the chart shows, everyone believed things couldn’t go wrong – that conditions were “perfect” in emerging markets like Hong Kong. Well, it turned out they weren’t.
Then in mid-1997, everyone once again believed that things couldn’t go wrong in emerging markets like Hong Kong. Once again, it turns out things can go wrong…quickly.
The lesson of Grantham’s interest rate chart is this: When investors forget about risk… when they are willing to lend money to risky emerging markets at extremely low interest rates (like 1994 and 1997), they lose their shirts soon after.
Right now, U.S. Treasury bonds are currently paying around 4.4% interest. Emerging market countries can borrow at a very low 6.8% interest.
It’s crazy, you’ve got to admit.
Everyone thinks conditions are “really perfect” in emerging markets… more perfect than ever. I say that history will repeat itself.
I’m an aggressive investor when the time is right. But now – particularly in emerging markets – the time is right to play it safe.
Since the 1993 boom in Hong Kong, where I was making a fortune (for me), and the subsequent bust (where I wanted to hide under my desk), I’ve seen a lot of bull and bear markets come and go around the world.
I’m speaking to you from experience. I have no agenda, of course, except to help you be a smarter investor. And my message is: Now is not the time to play in emerging market stocks in particular, or risky investments in general. If you must play, you absolutely must prevent the “catastrophic loss,” by using a trailing stop.
Having lived through it, I can’t stress enough that riskier investments like emerging markets usually get obliterated when conditions are like this. You really ought to pay attention, no matter what.
Good investing,
Steve
P.S. As I’ve shown in the Hong Kong example above, markets can crash quickly, erasing investment profits and then some. It’s these tough times that a bet AGAINST stocks can deliver large profits in a matter of months.
My colleague Jeff Clark profits from these situations all the time. Jeff scored a 1,285% gain in just two days this year by making this kind of trade.
To learn exactly how, I encourage you to check out th
Paladin
User ID: 1349
11/26/2005
6:39 pm EST Re: A PERPETUAL BULL´S ANALYSIS OF THIS MARKET
yes the dow has been this high.....even a little higher....
2001...it was over 11,000..
and we all know what happened then....LOL....can you say...dot.com... bust
[link to finance.yahoo.com]
MO
User ID: 11415
11/27/2005
10:23 am EST Re: A PERPETUAL BULL´S ANALYSIS OF THIS MARKET
Good article 1349
AC
User ID: 1264
11/27/2005
10:34 am EST Re: A PERPETUAL BULL´S ANALYSIS OF THIS MARKET
It will end badly - much worse than most can even imagine at this point. This market is not even a Greater Fools game - it isn´t going up but rather almost treading water. With all the exotic derivatives and liquidity being expended simply to keep the market flat - when the music stops there will not be nearly enough chairs
Shadow
User ID: 1315
11/27/2005
10:37 am EST
Send Private Msg
Add to Buddy List Re: A PERPETUAL BULL´S ANALYSIS OF THIS MARKET
Morning Paladin, MO, AC, found it here. 11723 on Jan 14, 2000.
[link to www.the-privateer.com]
[link to freewordofgod.yuku.com] |
| Paladin
User ID: 44358
11/27/2005 11:21 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Holiday shopping season off to flat start By Doris Frankel
Sat Nov 26, 4:34 PM ET
The U.S. holiday season´s first major shopping day got off to a relatively flat start compared to a strong 2004, despite special promotions, discounts and expanded hours, according to figures released on Saturday.
"With heavy discounting by non-mall retailers combined with the extended shopping season in 2005, consumers may not feel the pressure to shop early this holiday season," retail research group ShopperTrak said in a statement.
Shoppers lined up to grab early-bird specials as many stores opened before sunrise on the Friday after Thanksgiving -- known in the industry as Black Friday because it traditionally marked the date when retailers began turning a profit for the year.
Data from ShopperTrak showed Black Friday sales were flat, down a slight 0.9 percent from a year ago to $8 billion. ShopperTrak said sales in the South were particularly good with the Midwest coming in second. Major retailers will release November results later this week.
"While Black Friday is important to retailers, it´s not always the best indicator for consumer shopping patterns during the remainder of the holiday season, which should allow the retail industry to continue feeling optimistic," said Michael Niemira, chief economist and director of research for the International Council of Shopping Centers.
While it is still a big weekend for retailers, consumers are increasingly waiting until the last minute to shop, so the Saturday before Christmas has become the busiest shopping day in recent years.
As consumers grapple with steep energy prices and rising interest rates, investors are watching closely for any sign of a spending pullback.
Wal-Mart Stores Inc. on Saturday reported better than expected post-Thanksgiving sales as consumers snapped up discounted computers and toys at the start of the crucial holiday shopping season.
The November-December holiday season typically accounts for about one-fourth of annual retail sales, and the biggest chunk of profits for jewelers, electronics chains and clothing stores.
"If we see (after-Thanksgiving) sales growth over 5 or 6 percent, that´s a very positive indication of a good holiday season, if they can sustain it," said Darrell Rigby, head of the global retail practice for consultants Bain & Co.
Wal-Mart, the world´s biggest retailer, estimated that November sales rose 4.3 percent at its U.S. stores open at least a year, a key retail measure known as same-store sales. The figure was toward the high end of its forecast for 3 percent to 5 percent growth.
The retailer said demand for the day after Thanksgiving beat its expectations at both its namesake discount stores and the Sam´s Club warehouse chain. Computers and dolls were among Wal-Mart´s best sellers on Friday.
Department store operator J.C. Penney Co. Inc. said shoppers were in a spending mood on Friday and spent heavily on apparel, accessories and home gift items, adding it was optimistic for the rest of the season.
AGGRESSIVE APPROACH
"Friday was a record day for the company and clearly exceeded our expectations. We feel we have good momentum going into the holiday," said Ken Hicks, president and chief merchandising officer for J.C. Penney.
Wal-Mart this year launched its advertising campaign on November 1, the earliest in company history, and slashed prices across the stores. The strategy appears to have paid off.
"We were pleased with what happened yesterday in terms of sales and think the approach that we took in being aggressive on all levels was appropriate," Wal-Mart spokeswoman Gail Lavielle said.
Indeed, customers at an Orlando, Florida, Wal-Mart were so eager to land a bargain that they tussled over low-priced laptop computers, prompting security guards to step in, television reports showed on Friday.
Analysts are still waiting to see whether Wal-Mart´s strong performance came at the expense of rivals
[link to news.yahoo.com] |
| Paladin
User ID: 44358
11/27/2005 11:22 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
After all the hype about how well the holiday buying season was going to go, it´s looking like reality is quickly setting in:
It may cost hundreds of dollars more to stay warm this winter. In total, consumers will spend $150 billion more on energy than they did last year. American workers haven´t seen much of a pay raise this year. And a record number of consumers have just finished filing for bankruptcy.
Already, many retailers are offering sales they would usually spring on consumers within two weeks of Christmas. Wal-Mart, the nation´s largest retailer, has said it will match any other retailer´s prices. "On Black Friday, the bottom may fall out," says Richard Feinberg, director of the Purdue University Retail Institute and a professor of consumer sciences. "Retailers are selling more cheaply and sooner than they want to."
For retailers, this is by far the most important time of the year. The Friday after Thanksgiving is called Black Friday because it has historically been the time of year when stores go from operating at a loss (in the red) to making a profit (in the black).
A strong holiday season, says Mr. Feinberg, gives retailers the cash to restock their shelves in the new year. However, a weak season means the retailer has to borrow more, which means lower profits, less merchandise, and less hiring, he says. "If they don´t get the sales now, they can´t expand and buy merchandise for the spring and summer of next year," says the Purdue professor.
It doesn´t look like they are getting them - early sales campaigns or no:
[link to www.theleftcoaster.com] |
| .
User ID: 12073
11/28/2005 10:35 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
The Watcher
User ID: 1545
11/28/2005
10:32 am EST Greenbacks can save America once again
‘RETURNING THE MONEY TO THE PEOPLE’
by Ellen Brown
"Is it not obvious that there are serious defects in our banking system and our tax system that deprive most of us of fundamental rights and bestow enormous privileges on others? How many riots must we endure? How many prisons must we build? How many of our rights must we lose? How many of our young people must be sent away to fight in foreign wars before we decide that enough is enough?"
Robert de Fremery - (1916 – 2000)
One of the most remarkable admissions by a banker concerning the mysteries of his profession was made by Sir Josiah Stamp, president of the Bank of England and the second richest man in Britain in the 1920’s. Speaking at the University of Texas in 1927, he revealed:
"The modern banking system manufactures money out of nothing. The process is perhaps the most astounding piece of sleight of hand that was every invented. Banking was conceived in inequity and born in sin …. Bankers own the earth. Take it away from them but leave them the power to create money, and with a flick of a pen, they will create enough money to buy it back again …. Take this great power away from them and all great fortunes like mine will disappear, for then this would be a better and happier world to live in …. But if you want to continue to be the slaves of bankers and pay the cost of your own slavery, then let bankers continue to create money anfuck_tardredit."
The sleight of hand by which banks create money dates to the seventeenth century, when paper money was devised by European goldsmiths. Gold and silver coins, the standard currency in European trade, were hard to transport in bulk and could be stolen if not kept under lock and key. Many people therefore deposited their gold with the goldsmiths, who had the strongest safes in town. The goldsmiths issued convenient paper receipts that could be traded in place of the bulkier gold they represented. These paper receipts were also used when people who needed gold came to the goldsmiths for loans.
The mischief began when the goldsmiths noticed that only about 10 to 20 percent of their receipts came back to be redeemed in gold at any one time. The goldsmiths could safely ‘lend’ the gold in their strongboxes at interest several times over, as long as they kept 10 to 20 percent of the value of their outstanding loans in gold to meet the demand. They thus created ‘paper money’ (receipts for loans of gold) worth several times the gold they actually held. They typically issued notes and made loans in amounts that were four to five times their actual supply of gold. The townspeople wound up owing the goldsmiths four or five sacks of gold for every sack the goldsmiths had on deposit, gold the goldsmiths did not actually have title to and could not legally lend at all.
If the goldsmiths were careful not to overextend this ‘credit’, they could thus become quite wealthy without producing anything of value themselves. Since more gold was owed than the townspeople as a whole possessed, the wealth of the town and eventually of the country was siphoned into the vaults of these goldsmiths-turned-bankers, as the people fell progressively into their debt. As long as the bankers kept lending, the money supply would expand and the economy would be in a boom cycle. But when the credit bubble got too large, the bankers would raise interest rates and people who could not afford the new rates would default on their loans or would be unable to take out new ones. Their property would then revert to the banks, and the cycle would start again.
If a farmer had sold the same cow to five people at one time and pocketed the money, he would quickly have been jailed for fraud. But the goldsmiths had devised a system in which they traded, not things of value, but paper receipts for them. The shell game became know as ‘fractional reserve’ banking because gold held in reserve was a mere fraction of the banknotes it supported.
The Rise of the Central Banking System
Fractional reserve lending, in turn, became the basis of the modern central banking system. It allowed private banks to issue gold and silver notes that were many times in excess of the banks’ holdings. Although the scheme smacked of fraud, the new paper bank-notes were condoned and even welcomed by kings short of gold, because they gave the appearance of being backed by that scarce commodity. An expandable money supply was needed to fund the economic expansion of the Industrial Revolution. The coinage system had put undue emphasis on metals. Rapid industrialisation had led to repeated economic crises because the availability of precious metal coins could not keep up with demand.
The charter for the Bank of England was granted to William Paterson, a Scotsman, in 1694. Called ‘the Mother of Central Banks’, the Bank of England established the pattern for the modern central banking system. Paterson acknowledged, ‘The bank hath benefit of interest on all monies which it creates out of nothing’. The central bank had the legal right to issue notes (paper money) against the ‘security’ of bank loans made to the Crown. The Bank thus had the right to turn government debt into paper money, a debt on which the government owed interest to the Bank. The immediate purpose of the Act founding the Bank was to raise money for William of Orange’s was with Louis XIV of France. One of the Bank’s first transactions was to lend the government 1.2 million pounds at 8 percent interest for William’s war. The money was to be raised by the novel device of a permanent loan on which interest would be paid but the principal would not be repaid. (1) This device is still used by governments today. Funds are generated by borrowing money that has been newly created by the banks, with no intent that the loans will ever be repaid. The interest is paid, but the principal portion of the loan is simply rolled over (renewed) when it comes due.
In most modern central banking systems, a private central bank is chartered as the nation’s primary bank, which lends exclusively to the national government. It lends the central bank’s own notes (printed paper money), which the government swaps for ‘bonds’ (its’ promises to pay) and circulates as a national currency. Today in the United States, dollars are printed by the US Bureau of Engraving and Printing at the request of the Federal Reserve (the US private central bank), which ‘buys’ them for the cost of printing them and calls them ‘Federal Reserve Notes’. Today, however, there is no gold on ‘reserve’ backing the notes. The dollar reflects a debt for something that doesn’t exist.
The Bank of England was nationalised in 1946, but the coins and notes it issues constitute only about 3 percent of the money supply. Like in the United States, the rest of the money supply comes from commercial banks in the form of loans – loans created out of thin air with an accounting entry.
The House the Debt Built
The result of this illusive credit-money system is that today we’re living in a ‘credit bubble’ of ominous proportions. In 1959, when the Federal Reserve first began reporting the annual money supply, M3 (the widest reported measure) was a mere $288.8 billion.
Special Note: M1 is what we usually think of as money – coins, dollar bills and the money in our chequing accounts. M2 is M1 plus savings accounts, money market funds, and other individual or ‘small’ time deposits. M3 is M1 and M2 plus institutional and other larger time deposits (including institutional money market funds) and American dollars circulating abroad.
By February 2004 – in only 45 years – M3 had multiplied by over 30 times to $9 trillion. Where did this new money come from? No gold was added to the asset base of the country, which went off the gold standard in 1934. The answer to this riddle is that the money didn’t come from anywhere. It exists only as a debt. If that concept is hard to fathom, it is because it actually makes no sense. It is ‘a fiction based on a fraud’.
Robert H Hemphill, Credit Manager of the Federal Reserve Bank of Atlanta during the Great Depression, wrote in 1934:
"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. When one gets of complete grasp of the picture, the tragic absurdity of our hopeless position is almost incredible, but there it is. It is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilisation may collapse unless it becomes widely understood and the defects remedied soon."
With the exception of a few coins, all of our money is borrowed; and it is borrowed from banks that never had it to lend. Today the just create it as a data entry on a computer screen.
An aggressive experiment
Richard Duncan, writing in the London Financial Times on February 10, 2004, pointed to an even more disturbing development. The Bank of Japan was reported to be printing yen and using the money to buy US dollars, which were then invested in US government bonds. The United States was going deeply into debt to a private foreign bank – in debt for a loan of money created out of nothing.
Duncan called it ‘the most aggressive experiment in monetary policy ever conducted’. He wrote:
"Japan is printing yen in order to buy dollars in such extraordinary amounts that global interest rates are being held at much lower levels than would have prevailed otherwise …. Since the beginning of 2003, monetary authorities in Japan have created Y27,000bn with which they have acquired approximately $250bn. (This sum) would amount to $40 per person if divided among the entire population of the world. (It is) enough to finance almost half of America’s $520bn budget deficit this year …. Japan is carrying out the most audacious endeavour as conjure wealth out of nothing since John Law sold shares in the Mississippi Company in 1720."
US is now the world’s largest debtor
By the time the great Asian tsunami hit on December 26, 2004, the US federal debt was up to $7.6 trillion; and half of the privately-held portion was owned by foreigners. Just during the week of the disaster, the Federal Reserve reported that foreign central banks purchased another $5.6 billion in US government debt. How much is $5.6 billion? The United States promised to send $350 million abroad in the form of disaster relief. That means the United States took back to full $350 million it promised to send abroad in about half a day in the form of loans. The US is now the world’s largest debtor, borrowing an estimated 80 percent of the world’s savings annually. Moreover, the foreign investors who buy US bonds are essentially giving the money away, because under the existing monetary scheme the debt never will or can be repaid. (2) Why this is true, and why foreign central banks lend the money anyway, is complicated; but to validate the point, here is a quote from a noted economist, John Kenneth Galbraith wrote in 1975:
"In numerous years following [the Civil War], the Federal Government ran a heavy surplus. It could not [however] pay off its debt, retire as securities, because to do so meant there would be no bonds to back the national bank notes. To pay off the debt was to destroy the money supply."
That is one reason the debt can’t be paid off: our money supply is debt and can’t exist without it. But there is another obvious reason: the debt is simply too big. To get some sense of the magnitude of a $7.6 trillion obligation, if you took 7 trillion steps you could walk to the planet Pluto, which is a mere 4 billion miles away. If the government were to pay $100 every second, in 317 years it would have paid off only one trillion dollars of this debt. That’s just for the principal. If interest were added at the rate of only 1 percent compounded annually, the debt could never be paid off in that way, because the debt would grow faster that it was being repaid. (3). To pay it off in a lump sum through taxation, on the other hand, would require increasing the tax bill by about $100,000 for every family of four, a non-starter for most families.
The US federal debt hasn’t been paid off since the presidency of Andrew Jackson nearly two centuries ago. (4) In fact in all but five fiscal years since 1961 (1969 and 2998 through 2001), the government has exceeded its projected budget, adding to the national debt. When President Clinton announced the largest budget surplus in history in 2000, and President Bush predicted a $5.6 trillion budget surplus in 2001, many people got the impression that the federal debt had been paid off; but this was another illusion. The $5.6 trillion budget ‘surplus’ not only never materialised (it was just an optimistic estimate projected over a ten-year period, based on an anticipated surplus for the year 2001 that never materialised), but it entirely ignored the principal owing on the federal debt. Like the deluded consumer who makes the minimum monthly interest payment on his credit card bill and calls his credit limit ‘cash in hand’, politicians who speak of ‘balancing the budget’ include in their calculations only the interest on the national debt. By 2000, when President Clinton announced the largest-ever budget surplus, the federal debt had actually topped $5 trillion; and by March 2005, when the largest-ever projected surplus had turned into the largest-ever budget deficit, it had mushroomed to $7.7 trillion.
Financial Weapon of Mass Destruction?
For the foreign holders of US debt, this could be the ultimate ‘weapon of mass destruction’: they have the power to pull the plug on the US economy. Foreign central bans, concerned with the dramatic flip from a US budget surplus of $236.4 billion in 2000 to a deficit of $413 billion by the end of 2004, are quietly switching their reserves from dollars to Euros and yen. Mark Weisbrot, do-director of the Center for Economic and Policy Research in Washington, observed in January 2005:
"The timing of any drastic move by big players is very hard to predict. China and Japan for example, either one of those, can cause a complete crash, a total collapse of the dollar just by selling a small portion of their reserves. In fact, probably they won’t have to sell their reserves, all they have to do is stop accumulating or slow down their rate of accumulation and it will be dollar crash. (5)"
According to a January 2005 Asia Times article:
"All Beijing has to do is to mention the possibility of a sell order going down the wires. It would devastate the US economy more than a nuclear strike."
When China withdraws its support from the US account deficit, the US could be facing the sort of currency devaluation that ‘crashed’ the German mark and turned it into worthless paper in the 1920’s. If the United States has to declare bankruptcy, its foreign loans will dry up, and it will be thrown back on its own resources. But that spectre is not something new to the United States. The American colonists faced such a challenge in the eighteenth century, when they found themselves son the frontier of the New World without the precious metals that served as money in the Old World. The same solution the colonists came up with then could be used to extricate the country from its financial crisis today.
Returning the Money Power to the People
The American colonies were an experiment in utopia. In an uncharted territory, you could design new systems and make new rules. In England, paper money in the hands of private bankers was becoming a tool for manipulating and controlling the people; but in the American colonies, paper money was being generated by provincial governments for the benefit of the people. The colonists’ new paper money worked surprisingly well, financing a period of prosperity that was remarkable for isolated colonies lacking their own silver and gold. By 1750, Benjamin Franklin was able to write of New England:
"There was abundance in the Colonies, and peace was reigning on every border. It was difficult, and even impossible, to find a happier and more prosperous nation on all the surface of the globe. Comfort was prevailing in every home. The people, in general, kept the highest moral standards, and education was widely spread."
Different provinces experimented differently with the new paper money. Under the Massachusetts plan, it was issued by the provincial government and spent into the economy. The system worked well until the Massachusetts government got overzealous and issued too much, when the paper ‘scrip’ became seriously devalued. Despite that flaw, the Massachusetts scrip served to fund rapid economic development that would not otherwise have occurred. But it was the colonial scrip of the Pennsylvania provincial government that was the admiration of all. The Pennsylvania bank lent money into the community, to be repaid by borrowers at interest to the provincial government. Because the scrip was returned to its source, the money supply did not become over-inflated and the currency retained its value. It also returned profits to the government, sometimes funding half the province’s budget. (6) This paper money scheme, said Franklin, was the reason Pennsylvania "has so greatly increased in inhabitants" having replaced "the inconvenient method of barter" and given "new life to business [and] promoted greatly the settlement of new lands (by lending small sums to beginners on easy interest)."
The Real Cause of the American Revolution
The colonies thrived without silver or gold until 1751, when paper ‘legal tender’ was outlawed in New England by King George II. The result was to force the colonists to borrow the British bankers’ silver and gold (or their paper banknotes that were ostensibly receipts for it). In 1764, Parliament extended the ban on paper money to all of the colonies, and ordered that only gold and silver could be used to pay taxes. Only a year later, Franklin wrote in his Autobiography, the streets of the colonies were filled with unemployed beggars, just as they were in England. The money supply had been suddenly reduced by half, leaving insufficient funds to pay for the goods and services these workers could have provided. This, Franklin said, was the real reason for the Revolution. It was "the poverty caused by the bad influence of the English bankers on the Parliament which has caused in the colonies hatred of the English and …. The Revolutionary War."
The colonists won the Revolution against the British Crown, but they lost the right to create their own money to the British bankers and their cronies in America. The bankers won by stealth, propaganda, and misrepresentation concerning the nature of money and banking. In 1863, Congress under President Abraham Lincoln broke free and again issued its own paper notes, which were used to finance the North’s victory in the Civil War. But after the war was over, the ‘Greenbacks’ were withdrawn and bankers paper notes were substituted. In 1913, the exclusive right to issue the nation’s currency was usurped by a private central bank called the ‘Federal Reserve’, although it is not federal and keeps no gold reserves. In 1934, President Franklin Roosevelt took the country off the gold standard. Today, all of our money is ’fiat’ money (money ‘by decree’), issued by private banks as credit either to the government or to individuals and corporations.
The Greenback Solution
A $7.7 trillion debt tsunami is currently bearing down on the United States. Congress needs to liquidate it before it liquidates the United States. But how? The debt was created by sleight of hand. It can be eliminated by sleight of hand. Factional reserve lending can be abolished by legislative fiat. The Federal Reserve can be made what most people think it now is – a truly ‘federal’ institution – and the power to create money can be returned to the people.
The $7.7 trillion federal debt was created with accounting entries on a computer screen. It can be eliminated in the same way. The simplicity of the procedure was demonstrated in January 2004, when the US Treasury called a 30-year bond issue before its due date. The Treasury’s action generated some controversy, since government bonds are generally considered good until maturity. (7) But calling (or paying off) a bond before its due date is done routinely by other issuers. Corporations and municipalities buy back their bonds whenever it is advantageous for them to do so. When interest rates fall, they call their bonds in order to refinance their debt at lower rates. The difference between a bond called by a corporation and one called by the US Treasury is that the Treasury has the power to make payment solely with a bookkeeping entry, without ‘real’ money backing it up. And that appears to be exactly what was done in this case. The Treasury cancelled its promise to pay interest on these particular bonds simply by announcing its intention to do so (or by fiat, as they say in French). Then it paid the principal with an accounting entry. Here is its January 15, 2004 announcement:
TREASURY CALLS 9-1/8 PERCENT BONDS OF 2004-09
"The Treasury today announced the call for redemption at par on May 15, 2004 of the 9-1/8% Treasury Bonds of 2004-09, originally issued may 15, 1979, due May 15, 2009 (CUSIP No 9112810CG1). There are $4,606 million of these bonds outstanding, of which $3,109 million are held by private investors. Securities not redeemed on May 15, 2004 will stop earning interest.
These bonds are being called to reduce the cost of debt financing. The 9-18% interest rate is significantly above the current cost of securing financing for the five years remaining to their maturity. In current market conditions, Treasury estimates that interest savings from the call and refinancing will be about $544 million.
Payment will be made automatically by the Treasury for bonds in book-entry form, whether held on the books of the Federal Reserve Banks or in Treasury /Direct accounts." (8)
The provision for payment ‘in book entry form’ means that no dollar bills, cheques or other paper currencies are to be exchanged. Numbers will simply be entered into the Treasury’s direct online money market fund (‘Treasury Direct’). The investments will remain in place and intact and will merely change character – from interest-bearing to non-interest-bearing, from a debt owed to a debt paid.
Where did the government plan to get the money to ‘refinance’ this $3 billion bond issue at a lower interest rate? Whether it was from the private banking system on the open market, or from the Bank of Japan with notes printed up for the occasion, or from the Federal Reserve as the purchaser of last resort, the money was no doubt created out of thin air. As Federal Reserve Board Chairman Marriner Eccles testified before the House Banking and Currency Committee in 1935:
"When the banks buy a billion dollars of Government bonds as they are offered …. they actually create, by a bookkeeping entry, a billion dollars."
Treasury securities
If the Treasury can cancel its promise to pay interest on its bonds simply by announcing its intention to do so, and if it can pay off the principal just by entering number sin an online database, it can pay off the entire federal debt in that way. It just has to announce that it is calling all of its bonds and securities, and that they will be paid ‘in book-entry form’. No cash needs to change hands.
The usual objection to this solution is that it would be dangerously inflationary, but would it? Paying off the US federal debt by ‘monetising’ it would not change the size of the money supply, because the US money supply already includes the federal debt; in fact, it consists of the federal debt. Treasury debt takes the form of Treasury securities (bills, bonds and notes); and Treasury securities are a major component of the money market funds and other time deposits included in the Fed’s calculations of M2 and M3. Converting bonds (government promises to pay) into cash (actual payment) would not change the total of these money measures. It would just shift the funds from M2 and M3 into M1. Treasury securities are already treated by the Fed and the market itself just as if they were money. These are traded daily in enormous volume among banks and other financial institutions around the world just as if they were money. People put their money into highly liquid Treasury bills in money market funds because the consider this to be the equivalent of holding cash. Converting Treasury bills and other securities into actual cash (US Notes) would not affect the size of the money supply. It would just change the label on the funds. The market for goods and services would not be flooded with ‘new’ money that inflated the prices of consumer goods, because the bond holders would not consider themselves any richer than they were before. The bond holders presumably had their money in bonds in the first place because they wanted to save it rather than spend it. They would no doubt continue to save it, either as cash or by investing it in some other interest-generating securities.
A Newer Deal
In 1933, President Roosevelt pronounced the country officially bankrupt, exercised his special emergency powers, waved the royal Presidential fiat, and ordered the promise to pay in gold removed from the dollar bill. The dollar was instantly transformed from a promise to pay in legal tender into legal tender itself. Seventy years later, Congress could again acknowledge that the country is officially bankrupt and propose a plan of reorganisation. By simple legislative fiat, it could transform its ‘debts’ into ‘legal tender’.
Roosevelts’s plan of reorganisation was called the ‘New Deal’. In this ‘Newer Deal’, foreign creditors would actually be getting the best deal possible. They have enormous amounts of money tied up in US government bonds, which the US cannot possibly pay off with tax revenues. If America’s creditors wee to propel it into bankruptcy, the US government would have to simply walk away from its debts, and the creditors would be out of luck. If the United States pays off its debts with real ‘legal tender’, the creditors will have something they can take to the bank and spend in the global market. If it looks like a dollar, and feels like a dollar, it is a dollar. The only difference will be that the dollar will have been issued by the federal government rather than ‘borrowed’ from a bank.
One objection that has been raised to paying off the federal debt by ‘monetising’ it is that foreign investors would be discouraged from purchasing US bonds in the future. But once the government reclaims the power to create money from the banking cartel, it will no longer need to sell its bonds to investors. It will no longer even need to levy income taxes. It will have other ways to finance its budget.
A Modest Proposal for Eliminating the Personal Federal Income Tax
Returning the power to create money to the government and the people it represents would generate three new sources of revenue for the public purse:
1. The interest earned on loans would be returned to the government
Using the figures for 2002 (the last relatively normal year before the United Sates was at war in Iraq), total assets in the form of bank credit for all US commercial banks were reported to be $5.89 trillion. (9) Assuming an average interest rate of 6 percent, about $353 billion in interest income was thus paid to commercial banks. This interest was earned, not be lending anything of their own, but by advancing the ‘full faith and credit of the United States.’ Returning this interest to the collective body of the people to whom it properly belongs would thus have generated revenue for the government of $353 billion in 2002.
2. Congress could issue new interest-free US Notes (Greenbacks) to the extent (and only to the extent) needed to ‘grow’ the money supply in order to cover productivity and interest charges.
In the monetary scheme of Benjamin Franklin, paper money was issued ‘in proper proportions to the demands of trade and industry’. What is the ‘proper proportions’ of monetary growth? One way to approach the problem is to look at current growth. The money supply (M3) grew from $7.96 trillion in November 2001 to $8.49 trillion in November 2002, an increase of $529 billion or 6.6 percent. (10) Under the present system, the expansion in the money supply needed to keep up with productivity and interest charges must come from federal borrowing, since private borrowing zeroes out on repayment. If the government were to quit ‘borrowing’ money into existence, this source of growth would dry up, and there would be insufficient money to cover the interest due on commercial loans. Like in a grand game of musical chairs, some borrowers would have to default.
If the average collective interest rate is 6.6 percent, and if the government can no longer ‘borrow’ that money into existence, it will need to issue enough new Greenbacks to increase the money supply by 6.6 percent just to keep the system in balance. In 2002, that would have meant creating $529 billion in new debt-free US Notes.
3. If the government were to pay off the federal debt with new Greenbacks, it would no longer need to budget for interest on the debt.
Using 2002 figures, money paid in interest on the federal debt came to £333 billion. Paying off the debt would have reduced the collective tax bill by that sum.
Combining these three sources of funding - $353 billion in interest income, $529 billion in new US Notes to cover annual growth in the money supply, and $333 billion saved in interest payments on the federal debt – the public coffers could have been swelled by $1,215 billion in 2002. Total personal income taxes that year came to only $1,074 billion. Thus by reclaiming the power to create money from the private banking system, Congress could have eliminated individual income taxes in 2002 with $141 billion to spare. How much is $141 billion? According to the Unites Nations, a mere $80 billion added to existing resources in 1995 would have been enough to cut world poverty and hunger in half, achieve universal primary education and gender equality, reduce under-five mortality by two-thirds and maternal mortality by three-quarters, reverse the spread of HIV/AIDS, and halve the proportion of people without access to safe water world-wide (11)
REFERENCES
(1) J Lawrence Broz, et al., Paying for Privilege: The Political Economy of Bank of England Charters, 1694-1844 (January 2002), page 11, www.econ.burnard.columbia.edu.
(2) "How much are we giving to Asia? Nothing, Really"
Journal Inquirer (January 13, 2005)
(3) George Humphrey, Common Sense
(Austin, Texas: George Humphrey, 1998), page 5
(4) ‘The Presidential Facts Page’, The History Ring, www.scican.net/-dkochan.
(5) Mead McKay, ‘Central Banks Dump Dollar for Euro’, Asia Times, www.atimes.com (January 27, 2005)
(6) Stephen Zarlenga, The Lost Science of Money (Valatie, New York: American Monetary Institute, 2002), pages 367-71.
(7) ‘US Treasury Defaults on 30 Year Bond Holders’, www.rense.com (January 20, 2004)
(8) Department of the Treasury, ‘Public Debt News’, Bureau of the Public Debt, Washington, CD 20239 (January 15, 2004).
(9) Federal Board of Governors, ‘Total Bank Credit Outstanding’, see W Hummel, ‘Financial Data Current and Historical: Money Stock’, www.wfhummel.cnchost.com/linkshistoricaldata.html
(10) Federal Reserve Statistical Release, ‘Money Stock Measures’ (January 2, 2003)
(11) Jan Vandermoortele, Are the MDG’s Feasible (New York: United Development Program Bureau for Development Policy, July 2002)
Ellen is an attorney in Los Angeles, California and the author of ten books, including the best selling Nature’s Pharmacy, co-authored with Dr Lynne Walker. This article is drawn from her forthcoming book The Wizards of Wall Street and How They Are Bankrupting America. |
| .
User ID: 45215
11/30/2005 4:49 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
For just 30 pieces of Silver the Saviour of the world Yahushuah HaMashiach was traded for crucifixion!
me
User ID: 13150
11/30/2005
2:51 am EST For just 30 pieces of Silver the Saviour of the world Yahushuah HaMashiach was traded for crucifixion!
Woe woe woe to the evil silver shorters, your time is running thin.
WEEKLY COMMENTARY
November 29, 2005
TED BUTLER INTERVIEW
Cook: We hear a lot about Asian demand for silver.
Butler: And for good reason. It appears that Asian demand, particularly from China and India, is impacting every commodity.
Cook: How important are these two countries?
Butler: They have become the main factor in the world of commodities.
I think this is why we’ve seen oil doubling and copper tripling in a short period of time.
Cook: When will this impact the price of silver?
Butler: It’s already had an impact on both the supply and demand side. The Chinese government dumped some 300 million ounces from 1999 on, putting downward price pressure on the silver market. Now, those supplies appear to have dried up and Chinese demand is exerting upward pressure.
Cook: How does anybody dare to be short these metals knowing this?
Butler: Beats me. It would scare the dickens out of me. Being short natural resources on a consistent long term basis doesn´t appear to be an easy road to riches. Especially after the recent Chinese copper short news.
Cook: What news is that?
Butler: There have been numerous stories circulating how a Chinese trader shorted a couple of hundred thousand tons of copper that he couldn´t deliver, and the losses may reach $200 million. The trader was obviously selling short on a naked basis, meaning he did not have the real copper backing up his sales.
Cook: Isn´t this what you have been harping about in COMEX silver?
Butler: I can´t imagine a more appropriate analogy.
Cook: You recently told me that four or less big trading houses are short more silver than ever before. What do they know that you don’t?
Butler: I’m not sure it’s a question of knowledge, but rather a question of recklessness. Four traders are net short around 250 million ounces on the COMEX, the most ever in history. That’s more than all the known world inventory, and around 5 months of world mine production. People are discussing the default scandal on a naked short copper position by a rogue Chinese trader who was short a few days worth of world copper production. These four traders on the COMEX are short 5 months of silver production. The Silver Users are going crazy about maybe 130 million ounces being bought for the silver ETF, but no one says squat about four crooks being naked short 250 million ounces. If these four traders have the 250 million ounces in real silver, then where is it and why the big fuss about 130 million ounces?
Cook: You have claimed that these big shorts will be trapped some day by rising prices. How come they’re not worried about this happening? Doesn’t it poke holes in your argument?
Butler: Whether they are worried or not is beyond anyone´s knowledge. But let me set the record straight. I´ve said that the big shorts could get trapped any time the physical shortage kicks in. Physical will trump paper in the end. But in my mind, the explosion is more likely to occur when the dealers have covered a lot of their shorts.
Cook: The big boys must know something. You don’t give them much credit. Try to explain to us why they’re staying short in such a big way?
Butler: To the contrary, I credit them with controlling silver, at a low price for a long time. They stay short because they have no choice. If they could get long in a big way, they’d do it in a heartbeat.
Cook: Why can’t they?
Butler: For them to get net long, someone would have to go short in a big way. The dealers can’t buy unless someone sells. In silver, the value and fundamentals are so obvious and understandable that value investors would never go short silver. The only big shorts that could come into the market are the technical hedge funds who don’t care about value, only moving averages.
Cook: So, if the silver market explodes someday, as you suggest, these big players are going to lose hundreds of millions? Sounds far fetched.
Butler: Why would that sound far fetched? It just happened in copper.
Cook: I’m suggesting the big dealers are smarter than a rogue copper speculator. They must think what you predict can never happen.
Butler: I’m sure the Chinese copper trader also thought it could never happen. I’d like to expand on this point a bit. There is a big difference between what just happened in copper and what will happen, some day, in silver.
Cook: In what way?
Butler: There was absolutely no advance warning that there was a short in trouble in the copper market, while there is a clear warning in silver. In copper, the ratio of the total short position on the COMEX and LME was not out of line with world production and the short ratios that exist in other commodities. But in silver, the short position in COMEX futures is greater than the entire world annual production. This is something that has never occurred in any other commodity, and guarantees that someday there will be a big problem for the shorts in silver.
Cook: Won’t the commodities exchange step in and bail them out, like they did when they torpedoed the Hunt Brothers?
Butler: Yes, I would expect the regulatory authorities to do what they can to maintain orderly market conditions. After all, that’s their job. But there is only so much that they can do. They can’t hold back the tide. They cannot create physical silver out of thin air. Whatever they may do, those holding real silver should come out great. And remember, there are some 2 billion ounces less silver above ground than there was at the time of the Hunts.
Cook: So, if these big shorts can’t get off the hook wouldn’t they have to buy silver to cover their shorts?
Butler: I can’t tell you in detail how it will turn out. Maybe somebody will default, or the shorts can’t cover. I suspect there will be fireworks of some kind. The important thing is that those holding physical metal don’t have to worry about what the shorts will or won’t do. Your physical holdings are not dependent on a counterparty.
Cook: How will we be able to tell when a short squeeze is on?
Butler: You’ll see it in the price. A squeeze denotes a dramatic rise in price. You’ll also see more relative strength in the physical cash market, and nearby months. They will be priced higher than the deferred months. This is one of the biggest reasons to own physical silver. It will be priced higher than paper silver. Physical silver could be $20 and paper contract, deferred silver, could be only $15.00. That’s the current situation in copper.
Cook: Won’t that be a clear signal to buy as much as you can?
Butler: You want to buy it before that happens.
Cook: So, let’s say a physical shortage hits and a short squeeze develops. What do the industrial users do that have to have silver? What did they do in 1980?
Butler: There was no shortage in 1980, and the users didn’t have to do anything but wait it out. This time around will be different. There will be a shortage, and the users won’t be able to wait it out. The users will panic and try to stockpile silver.
Cook: How much would, or could, be stockpiled?
Butler: Very little. It’s the fight to get it that drives up the price. It goes to the highest bidder. The pie doesn’t get bigger. Whoever gets the silver deprives another user of that silver. The buying panic will be like a mile long string of fireworks going off.
Cook: Stockpiling is a form of hoarding, isn’t it?
Butler: When an industrial user buys it up, it’s called stockpiling. When individuals stockpile, it’s called hoarding.
Cook: What will stockpiling do to the price?
Butler: In the last sixty years no industrial user stockpiled silver. This will be a brand new factor with a profound impact on price.
Cook: Do you have any examples of stockpiling in other commodities?
Butler: When the Ford Motor Company stockpiled palladium a few years ago, they drove the price to $1100 an ounce.
Cook: Isn’t anybody stockpiling silver now?
Butler: Not that I’m aware of. That’s what makes it so bullish – it has yet to occur.
Cook: What evidence do you see that the supply of physical silver is tightening?
Butler: Rather than give you my signals, let’s examine what the Silver Users Association says. They claim we will be pushed into a silver shortage if the Silver Exchange Traded Fund is approved. The SUA has stated, for almost 60 years, that there is more silver around than could ever be exhausted. Now, after 60 years, they have done a sudden about face and are worried about a silver shortage.
Cook: I’m asking for any evidence that you see.
Butler: Progressive delivery tightness, continued deficits, longer delivery times and reports of delivery delays.
Cook: The price shows no indication of any kind of shortage. Don’t you agree that the price rise from $4.00 to $8.00 wasn’t because it reflected a shortage?
Butler: I agree that the price is no indication of a silver shortage, even though it has almost doubled. That’s what makes it such a great investment – the coming shortage is not factored into the price yet. It will be someday.
Cook: You theorized silver went up because one of the big shorts covered. Is that the only reason?
Butler: At the recent bottom, below $7, the tech funds were heavily short. Their subsequent buying to cover those shorts and get heavily long is what caused the price to rise. To me, that’s the only reason silver went up.
Cook: Maybe it’s just going up because gold is rising. Doesn’t silver follow gold?
Butler: Many people say and believe that, but I’m not one of them. I do think that the technical funds tend to buy and sell gold and silver at the same time, and that does cause similar price patterns. But gold and silver are very different commodities, and someday technical fund trading won’t be dominating price action, real supply and demand fundamentals will take over. When that occurs, I believe silver will say goodbye to gold. Not that gold won’t go up, mind you, but that silver will be moving so dramatically that gold will appear to be sitting still.
Cook: So you still think silver is a better long-term commitment than gold?
Butler: Absolutely. What it comes down to is relative performance. I am amazed at how many analysts admit they feel that silver will outperform gold, but are hesitant to come right out and say buy silver, instead of gold. Right or wrong, I don’t have that hesitation. As an investor, you have a responsibility to put your hard-earned money in whatever you feel will give you the best return. For me, that makes it easy to choose silver.
Cook: You’re so confident that the price will explode. What if there’s more silver out there than you suggest?
Butler: I am confident about the coming price explosion, but it’s not important if I’m confident or not. It’s up to the individual investor to convince him or herself if the facts and conclusions I’ve laid out are worthy of their confidence in the silver story. You have a deficit, evaporating inventories and a suppressed price. How could there not be a price explosion at some point?
Cook: But, what if there’s more silver than you think?
Butler: Let me remind you that I allow for there to be more silver than do most analysts. But even if there is more silver, so what? Not only would there have to be more silver, it would have to be in the hands of holders who were interested in dumping it at current prices. There’s very little left of that type of silver, in my opinion.
Cook: Would you give us a time frame for this big silver boom?
Butler: Why does when matter? Soon enough. In fact, I hope it sells off again, so everyone can fully load up.
Cook: Do you still think we could see $100 silver?
Butler: I don’t see how it can be ultimately avoided, considering the fundamental set up and the massive paper short position
Cook: I know you stress physical silver. Could the market get wild enough that a lot of stored silver won’t be there?
Butler: It has nothing to do with the market getting wild. The problem is that a lot of so-called stored silver isn’t there now. It just doesn’t exist. Period. But, you are correct that it won’t become obvious until the price goes crazy and people go to cash-out and collect. That’s why I keep harping on holding the silver yourself, or in ironclad professional storage. No pool accounts, no leveraged accounts, no unallocated accounts.
Cook: So, you expect some financial scandals in silver?
Butler: We seem to have recurring financial scandals in everything, so why should silver be exempted? In fact, the current extremes in the short position and the deficit almost mandates a financial scandal in silver. Because of that, everyone has a serious responsibility to be on guard against getting cheated out of their silver by phony storage programs or dishonest dealers. Putting hard-earned money in the right investment, watching it turn out as expected, and then, finding out you lost because the silver stored for you didn’t exist could be the heartbreak of a lifetime. That can be avoided. If people are storing 1000 oz bars, get the serial numbers and weights of the bars.
Cook: If the price rises the way you suggest, won’t a lot of people sell silver the way they did in 1980?
Butler: Not the people who sold then. While there will undoubtedly be other people selling to take profits, there will be people who are attracted by the rising price. The real question is will there be net buying or net selling.
Cook: Could enough silver be melted to fill the deficit?
Butler: Sure, on a temporary basis, but that’s not a long term solution.
Cook: What about India, won’t they flood the world with silver if the prices rise a lot? Butler: I’ve been hearing about India flooding the market with silver for as long as I have been following silver, and it has never happened. Not in the last 60 years have I ever seen evidence of Indian silver dishoarding. The Silver Users Association should not hold their breath waiting for Indians to sell.
Cook: Won’t the mining companies produce more silver?
Butler: They’d better. But, the question is how much, and by when? New mines take years to come on stream. If there is tremendous new production, a big surplus and the price is much higher, then silver may be a good sale candidate. But that isn’t the case now. The big increases in base metal prices haven’t resulted in big production increases yet in copper, lead or zinc.
Cook: Why has the deficit between supply and demand narrowed recently? The gap used to be 200 million ounces in some years. Now its under 100 million.
Butler: A deficit is still a deficit, but I have to tell you, I’m starting to question those that keep the statistics. I mean, we’re seeing deficits crop up in most base metals due to strong demand. Silver is getting that same strong demand, and the deficits are supposedly now shrinking in silver? That doesn’t make sense.
Cook: You pioneered a lot of the current thinking on silver. Any new breakthroughs coming?
Butler: You bet.
Cook: Anything you’d like to mention now?
Butler: No.
Cook: What do you think it costs to mine an ounce of silver these days?
Butler: Around $8.00 an ounce for primary production.
Cook: What would the price of silver have to be for the mining companies to make a decent profit?
Butler: Ten to twenty dollars, but, even at that, most won’t get rich.
Cook: The price of gold holds up because it’s a monetary metal. Central banks own it. Gold has a certain mystique. Does silver have any of that prestige?
Butler: Ask Warren Buffet. He bought silver, not gold. Silver is a precious metal with historic significance.
Cook: What do you think of the current gold to silver ratio?
Butler: It’s out of line. At a barebone minimum, it should approach the historical ratio of 16 to one.
Cook: Have you seen an uptick in interest in silver?
Butler: I’m hearing from a lot more people than ever before.
Cook: Are Americans buying more silver than in the past?
Butler: You could answer that better than I.
Cook: They definitely are buying more. Will this domestic buying impact prices?
Butler: On a cumulative basis, I think investors have taken a lot of silver off the market. It’s bound to have an effect over time.
Cook: Do you still believe silver is the best thing anybody can own?
Butler: Without a doubt.
Cook: Any final thoughts?
Butler: It’s my opinion that, with silver, you have the opportunity of a lifetime staring you in the face. I suspect we are going to be talking about the explosive events that are coming in the silver market for decades to come. My advice is to sit tight and hold onto your silver. It should be a wild but profitable ride.
naughty |
| Anonymous Coward
User ID: 43583
12/3/2005 1:53 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
It can´t be long now for the long awaited/expected stock market correction/s!
Any day now!!
10 hours or less!!! |
| Anonymous Coward
User ID: 46239
12/3/2005 1:54 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
Its a correction, you got that, right to the moon!  |
| Anonymous Coward
User ID: 47030
12/6/2005 7:56 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Larouche Interview: Chinese People Daily.
Optimistic Aussie from Perth
User ID: 2283
12/6/2005
5:15 am EST
Larouche Interview: Chinese People Daily.
For your interest.
FYI
This interview feature appears in the Dec. 9, 2005 issue of Executive Intelligence Review.
LaRouche to Chinese Daily: Humanity Depends on Eurasian Development
On Nov. 22, one day after President Bush concluded his visit to China, the government-controlled People´s Daily published on its English-language website an interview with U.S. economist and statesman Lyndon LaRouche, published under eight subtopics. While LaRouche is by no means unknown to the readers of People´s Daily (his economic and political comments are referred to regularly in its columns), this was perhaps the most sweeping exposé of his thinking and his activity yet to appear in a mainland Chinese publication. People´s Daily is presently not translating the interview into Chinese, but others have translated excerpts.
The interview was based on a two-hour interview which LaRouche had at his home in Virginia on May 8, 2005, with People´s Daily Washington, D.C. correspondent Yong Tang, who had previously interviewed him for shorter pieces on issues of economics and U.S. politics. The interview ranged over the whole gambit of LaRouche´s activity, including a lengthy section, where he was able to talk about his fight with the "secret government" apparatus after his success in getting President Reagan to adopt the Strategic Defense Initiative, the political machinations that led to his subsequent incarceration on trumped up "conspiracy" charges during the Administration of George H.W. Bush, and LaRouche´s creation of a growing youth movement to carry forward his ideas to the next generation. It also dealt with the role of U.S. intelligence in creating the network of Osama bin Laden during the Afghanistan War against the Soviet Union and the new "great game" being perpetrated by Cheney and Rumsfeld in Central Asia today. While it has not yet been published in Chinese, it proved to be the most popular news item of the day, ranking number one in number of "hits" on the People´s Daily-Online site. The interview begins with LaRouche´s observations on the unraveling of the international financial system, which was underlined by the People´s Daily headline, "Global financial crisis is coming."
Q: Your most recent forecast is that the global financial situation is on the verge of collapse?
LaRouche: It´s already happening. Because the whole system has been insane since 1971-72. We had the Bretton Woods system which was built by American President Roosevelt. It was a fixed-exchange-rate system with a gold denomination, a reserve system. Despite the attempt to sabotage the system, it worked. It was the basis for the recovery of the United States and Europe in the post-war period. And they destroyed it.
Q: In the 1970s?
LaRouche: First, in 1964, America started the war in Indo-China. That was the first mistake. The United States began to move in the wrong direction economically in 1964-65. By 1967, it was obvious we had made a turning point in technology. In 1971-72, with the Nixon decision on the monetary system, we entered a new monetary system which was a failure from the beginning. Now what happened is that because of our long-term capital investment in infrastructure and other things, we had a lot of technology, a lot of economic power built into the U.S. economy.
But today, we Americans have been exhausted. Our infrastructure has not been replaced. We have not replaced our power stations. Our railroad system is dead. Our economy is dead, in whole parts. Our people don´t have the skills they had 20 or 30 years ago. They´ve lost it. So we are disintegrating. Europe is disintegrating. We are a lost nation. We are a failure. Europe is a failure, in general. So the world economy has failed. We have a tremendous amount of financial debt that we can never pay.
Q: You mean—
LaRouche: Outstanding financial credits.
Q: You mean current account deficit?
LaRouche: More than that. The world economy is about $50 trillion a year in debt. We have hundreds of trillions of dollars of debt. We can never pay this debt. Because of the inflation of the debt, especially since 1987, the build-up of the financial derivatives speculation is so great. First of all, physically we are breaking down. We are at a point where, to maintain our economy physically, we would have to make large-scale investments. We have to replace the infrastructure. We are losing our water systems. We´re losing our power systems. We´re losing our transportation systems. We´re losing our health-care systems. All these physical things on which the prosperity of the economy had depended are now worn out. They´re gone. And we have tremendous debts. Our rate of production is collapsing. And therefore, we are at a point where the system is going through a systemic collapse. This is the biggest collapse in modern history, it is now occurring. And the idiots just deny it. They just deny it. If you admit you would have a problem then—
Q: It sounds too horrible.
LaRouche: It´s collective insanity, mass insanity. It´s cultural insanity. It´s how whole empires disappear. You say, this is a powerful empire and suddenly it collapses. How could this powerful empire collapse? It didn´t collapse because of external reasons, it collapsed because of internal reasons. And that´s what´s happening now with the United States and Europe. It´s the internal characteristics of the problem which are the cause of the collapse, not something external. Human beings naturally tend to be creative. If you have a good system, they will work, they will make improvements, they will survive. But if they adopt an idea which is a bad idea, they can destroy themselves, as ancient Greece did, as Rome destroyed itself. So you have a self-destructive policy. We have an insane policy. We are destroying ourselves. Europe is destroying itself.
In the interview, LaRouche was also asked about his role in the development of President Reagan´s Strategic Defense Initiative (SDI), and his rationale for developing such a program. The Soviet refusal to take up Reagan´s offer, led to, as LaRouche warned it would, the economic collapse of the Soviet Union.
LaRouche: I was involved within a back-channel function with President Reagan. I had had this idea about how to get out of this ballistic-missile problem, to work our way out by a new policy of defense. And I thought that with the Brezhnev period, it was possible that if the United States made a certain offer, the Soviet Union might accept it. And that is, instead of having a nuclear missile barrage, we could have a system under which we would cooperate to develop systems that would be able to prevent nuclear-barrage attacks. If we cooperate, we will share the technology and use the technology for other purposes rather than military, as well. I thought the Soviet Union had an economic crisis internally, an economic crisis that was building.
Q: How did you know that?
LaRouche: Because the Soviet economy in the military was very successful, because they used science. But the Soviet economy in the civilian sector was terrible because they didn´t use science. The typical case in the Soviet Union was the fact that you bring in a new machine tool but they wouldn´t use it. They want the old machine tool. So there was this opposition to technological progress. And the Soviet bureaucracy in industry was very stupid. They were very bureaucratic.
If the Soviet Union could stimulate the economic development to break the failure of the private sector, it could have developed quite successfully based on using science for the economy in the way they were using it for the military. And if the USSR and the U.S.A. cooperated, we could do that. We could bring nations together by cooperation about this idea, a technology-driver to improve the economy of all nations by technology, making technology available. Then we could bring about peace on the basis of the interest in common technology. So I was engaged in this. President Reagan was interested in my idea. So I became then a back-channel with the Soviet government under President Reagan. I was just a private individual, but I was working both ways. I would meet with the Soviet representatives, I would meet with the U.S. representatives, and we would talk. It was exploratory, just to see whether agreement was possible.
So in 1982 and 1983, I had this discussion with the Soviet government officials. And one day they came in and said, "Andropov says no." This was in February of 1983. I said, "You´ve got to change that. If they continue with the present military policy, the Soviet system will collapse for economic reasons within five years. Then, the next month, Reagan made the speech that made the offer. I told the Soviet government officials if Reagan makes the speech, and makes the offer, and you reject it, Soviet collapse is what will happen. Reagan made the offer publicly, and the Soviets rejected it. Andropov didn´t even negotiate. Soviet officials tried to talk to him. They said, "Talk with Reagan. He made an offer. Talk with him." "Nyet!" And they knew better. Okay, I won´t make any more suggestions. And that was it. And so that´s how it happened. The facts were clear to anyone who looked at the situation. And the Soviet collapse did happen then.
At the time of the interview, the GM crisis was just breaking, so the conversation turned to LaRouche´s warnings of the serious consequences a failure of GM would have on U.S. manufacturing capabilities as a whole.
Q: According to your system, you pay much more attention to the real economy than the virtual economy. And you also said that the American auto industry will die soon. Why do you think the American auto industry is going to collapse?
LaRouche: Because the management of it is insane. We are producing too many automobiles.
Q: Producing too many?
LaRouche: Even worse than that. In order to produce too many for this industry, we have set up a credit system which is insane in the auto industry. The people who are running the auto industry are insane, absolutely incompetent and insane. They´re only interested in money. The key thing is here. What you have in Europe and in the United States, in particular.
You have a section of the economy which is called the machine-tool sector. These are the people who make the machines that make the machines. You have, for example in Japan, a sector which has that kind of capability too, a machine-tool sector. Japan´s economic power, apart from whatever else it did, was from the machine-tool sector, the science machine-tool sector, which they adopted under the Meiji reforms which were designed by the United States in the late 1870s. So you had Henry Carey´s friend, Peshine Smith, who was sent to Japan from the United States to advise Japan, and that´s how Japan´s industrial revolution occurred in 1877-79. So this was realized later, when Japan developed a machine-tool industry, and they got into the auto industry and so forth. And Japan´s machine-tool technology is very good. They´re very advanced in this. On the outside Japan is very sick, but inside Japan, the old Japan, the industrial Japan, has a very good section in the machine-tool sector. Now the machine-tool sector is the key to developing any modern economy. The machine-tool sector is a small percentile of the total labor force. But it is the part of the labor force which actually develops the economy.
So, in the United States, we too have a small group of people who can make a completely new product within a year. Make all the tools and make the new product, design it and everything. So therefore, the small number of machine-tool people are the basis of the employment of the whole labor force in that industry. The U.S. machine-tool industry has two sectors: One is in the military sector, which is largely the Air Force, like Boeing. These have machine-tool capabilities for the aircraft industry. They are largely now concentrated in the military sector. The civilian sector is dead in that area. The military sector is the whole sector.
If we shut down the auto industry, which is threatened now, we don´t have a machine-tool sector. If we don´t have a machine-tool sector, we don´t have an economy. And the same thing is true with Europe.
The same is even true for a developing country, as in China. The key thing for China´s long-term economic development is the machine-tool sector. The machine-tool sector is science driven. It´s a science driver. The machine-tool sector turns science into machine tools and designs. Machine-tool designs make the industry, make the productivity. So without this strategic factor of the machine-tool sector, you cannot really have a self-sufficient modern economy. The auto industry is junk. It´s over-built. There are too many automobiles. But the auto industry can make locomotives. They can make rail systems. They can make all kinds of things, different kinds of things which are needed very much by society.
So if you diversify the production from just automobiles or concentration on automobiles to different kinds of things, things that are needed now, you´ve got a healthy industry again. So my concern is to diversify it, have the government put it into reorganization. Keep the people employed, but change the assignment. Because we have to build a railroad system again for the United States. We have to build dams. We have to build power stations. We have a lot of things to do. And the machine-tool sector is the means to do it.
LaRouche´s international renown has, in most recent years, been most closely connected to his proposal for establishing a New Bretton Woods system, an idea for which he is often cited in the Chinese press. In response to a question on how a New Bretton Woods would function, LaRouche elaborated on the American System of political-economy.
LaRouche: Now, in the American model, our policy is that money has no intrinsic value. Money is given value properly by government, and the government protects that currency by managing, managing prices and so forth, to prevent the currency from becoming crazy. Now, the basis for development is capital. You need long-term investment, you build a power plant, like the Three Gorges Dam, it´s a long-term investment. It´s going to take many years to get the value out of the Three Gorges Dam, but it´s essential. So a tremendous amount of investment goes into Three Gorges. Now you have to write on 30-year, 50-year investment before you have to start replenishing it, rebuilding it. So therefore you have to have investment.
But what happens if your prices go wild, go up and down? Then you can´t make long-term investments. Just the rate of borrowing costs, if borrowing costs fluctuate wildly, you can´t make long-term investment. Because long-term investment is generally 2% interest per year, maybe 3%. But if the prices fluctuate, then the interest rates go up, borrowing costs go up. If the borrowing costs go up, if the currency fluctuates in value, then international cooperation and development end. So therefore, you must have a financial system which has a fixed exchange rate over the long term. The borrowing costs among countries must be cheap. There must be guarantees to prevent the system from going wild. Then you could do it. We could get out of any mess by sufficient long-term investment in things that countries need. Long-term projects. Which means that we employ enough people so that we are producing more than we are consuming. We should make long-term investments in infrastructure. And we would survive just fine. Whenever we did that in the United States, we did well. Roosevelt rebuilt the U.S. economy. Hitler would have ruled the world if Roosevelt had not been American President. Roosevelt saved the U.S. economy. And without Roosevelt, Hitler would have been dictator of the world. So it was the right thing to do, because we had the power which enabled the victory over the Nazis during World War II.
As a matter of fact, we should go back to the American system, away from the British system. So my proposal is essentially what Franklin Roosevelt did at the end of the Second World War. At that time, the United States was the only country that had a stable currency. We used the U.S. dollar in the Bretton Woods system to set up a fixed-exchange system for the world. And under this fixed-exchange-rate system in the first 20 years after the Second World War, there was a great rebuilding of Europe and other parts of the world, with economic growth during that period. Then, starting from London, the British faction and their friends in the United States began to destroy the American system with the first Harold Wilson government in 1964-65. So we destroyed the Bretton Woods System, which Nixon did in 1971-72. And when that happened, we went crazy. And all of our economic problems came out of this change from 1964-65, the change of the monetary system from the Bretton Woods system of Roosevelt to this floating-exchange-rate system.
Tang asked LaRouche what formal role he was now playing in U.S. politics, after having run as a Presidential candidate so many times.
LaRouche: I´m just the head of my own association. But that´s the way it functions. You become a recognized political figure of the institutions of government. And you´re recognized as being a part of the Presidential system. So technically, I´m a part of the Presidential system. I´ve run officially and been qualified as a candidate. I´ve run as a candidate. I influence politics. I consult with people in all kinds of layers in politics. I consult with international people. I advise my government on various kinds of things, when it´s willing, from time to time. So I´m a part of the system of government of the United States, in this capacity. That´s the way our system works.
Particularly with the Presidential system, in which you become a permanent part of the actual government, without you actually holding any office. But you become, by common understanding, a part of the system. And I´m a part of the system of government of the United States.
Time and again, the interview would return to the problems of China and of Asia. Yong Tang asked LaRouche´s view of the tremendous influx of foreign direct investment coming into China over the last few years, spurring its present economic growth.
LaRouche: The problem is that the countries of Asia which are, in a sense, beginning to move up in a certain way, are caught in a world which is destroying itself. China, as I say, doesn´t really have the independent economic development it requires. It has development which it has brought into China, which is useful. But it is not entirely China development. It´s foreign devebunnying into China. Foreign technology coming into China. But what about the generation of technology within China by China? The country must have its own independent development.
Yes, bringing in outside development is good. Yes, you do that. You´d be foolish not to. But you must develop your own internal development—at least for the long term. And the problem is that the situation with India and China and the countries of Southeast Asia: They could not develop on their own if Europe and the United States collapse.
There was also a good deal of discussion on the question of culture in Asia. Tang asked LaRouche what he meant when he said that he was intent on saving a Western civilization that was dying? And what importance would this have for China?
LaRouche: Well, because, actually, the history of Europe contains a very important element for all humanity. It starts with Egypt, actually. Egypt, probably from about 8000 B.C., emerged as a product of a certain kind of culture which had existed as an international maritime culture, world maritime culture. Remember, you go back 20,000 years, and the northern hemisphere was dominated by big glaciations in which glaciers ran accumulations of hundreds of feet. In that period the oceans were 400 feet lower than they are today, so that the coastal areas then are 400 feet possibly below the sea level today on our coast. The development of river populations, as in China, for example, came later. River populations developed out of maritime populations which are sea-going populations, which, after the melting of the glacier, came up the rivers and began to move up the big thick parts of the rivers, and to get settlements along the side of the rivers. So you have the river development, which is the second phase; the first were the oceans.
Now, one of the developments was the Nile. The Nile at that time was a big river because Africa, during this period of the glaciers, was wet. North Africa was very wet. It had vast, vast rains. The desert is now a new phenomenon of the recent 10,000 years, like in the Middle East. So in that period, the mouth of the Nile was one of the big entry points for the settlement of maritime culture. So the culture of Europe came out of Egypt, out of this development in Egypt of a special culture which is based on a maritime culture, based on astronomy and astrophysics. So this culture went through various kinds of crises, but it had a continuity, as we see in the pyramids, the late pyramids of over 5,000 years ago.
So this culture then created Greek culture. The Greek culture of Thales of Miletus, the culture of the Pythagoreans, the culture of Plato, all came out of this. In this concept, there came the concept of man, of science, what became modern science, it started there. The idea of the nation-state as a nation of a people as opposed to a nation of conquered peoples, came then. So the important thing in European civilization is this thread of development, which actually started out of Egypt, on the effect on Greece, on Greek culture, of this idea of the nation-state, of the nation-state of all the people.
We didn´t realize such a civilization, such a state, until the 15th Century in Europe. But the idea of getting such a state was an important idea, the idea of science, the idea of this was of importance for European civilization. What has happened is, the opposition to this has always tried to destroy this, to corrupt it. We have the Roman Empire and so forth which are efforts to destroy this kind of thing. So therefore, what the world needs is a system of nation-states, it needs a system of sovereign nation-states. Asia needs that. All parts of the world need that. So therefore, what we have in European civilization is the idea of the sovereign nation-state. These ideas which are traced from Egypt into Greece are very important to humanity as a whole.
Look at China, for example, the question of how to rebuild China as a nation-state after what the British had done. It was the same thing. It was this idea. Sun Yat-sen was offshore Chinese, educated in Hawaii, became the hero of China, of China´s struggle, and had these ideas. These ideas were very influential among offshore Chinese at first, and then they spread back into the mainland. It was the idea of organizing a Chinese revolution, a Chinese republic.
So it is in that sense, that these ideas, which come from this European experience, are one of the precious assets of all humanity. Therefore, the important thing is not just the nations as such. The important thing is to save these ideas for humanity. Take the case of China today. What are we going to do about the many poor people in China? The very large part of the population of China is poor. How do we realize a solution to this problem with the aid of science? These ideas are very important. It´s important to get cooperation around such ideas among nations to solve this problem. Therefore, that´s the importance of Europe. It´s not just Europe as an area, it´s these ideas, the idea of mankind, the idea of a nation-state.
Toward the close of the interview, LaRouche underlined the importance of resolving the cultural issues posed as a prerequisite for implementing an economic development policy for Eurasia. In his concluding comments, which were somewhat abbreviated in the published on-line interview, he was quite explicit on this point.
LaRouche: All of humanity is going to depend upon the success of this. We have the long history of mankind. The problem of the challenge of Asian culture has to be yet solved. We have to solve the problem of bringing equity into Eurasian culture. That will be the future of mankind.
We have to make a change. Otherwise we´re going to have wars, troubles forever. We have to change. We have to go to a new kind of conception of mankind. It´s not a new one really, but it´s a realization of one. And what happens in China, what happens with India—to me this conflict and difference in culture between China and India is typical of all of Asia. This difference in culture, if you can bridge this difference, practically, and bring the other nations of Asia into it, together with Europe, now we have something worldwide, we have something which is good for the future. |
| .
User ID: 52311
12/11/2005 7:00 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
U.S. Foreign Money Addiction Means Trouble
By ELLEN SIMON, AP Business Writer Sat Dec 10,12:58 PM ET
NEW YORK - It's an addiction. Every day, the United States sucks in more and more of it from abroad, just to keep the nation going. We speak, of course, about foreign money.
ADVERTISEMENT
At our current rate of trade and budget deficits, foreigners need to purchase $2 billion in dollar-denominated assets each day just to keep the dollar stable, said Axel Merk, who manages $60 million at Merk Investments and runs the Merk Hard Currency Fund.
Over half the national debt is now financed by foreigners, according to Roger Ibbotson, chairman of the financial consulting firm Ibbotson Associates in Chicago and a professor at Yale School of Management. That's been true since 1980, but the difference now, he says, "is the scale of the game."
"I guess everyone wants to keep this game going," Ibbotson said. But if one of the countries we're most dependent on drops out, it could be "like a bank run."
David Wyss, chief economist at Standard & Poor's, is also concerned. "If this money stopped coming, the dollar would take a dive and U.S. bond yields would have to come up. That would constrain capital spending and housing and slow down the U.S. economy."
Foreign investments in U.S. bonds and equities set a record in September, the last month for which data is available.
Foreigners bought $1.01 trillion in U.S. securities in the 12 months ending in September, up from $866.6 billion for the same period in 2004, according to U.S. Treasury International Capital, which tracks foreign purchases of U.S. securities.
Why did foreign investors' interest in the U.S. intensify?
For one thing, investors can get a better return on U.S. bonds than they can in their home countries. Yields in the United States have been near 4.5 percent, while yields on Euro bonds are closer to 3.2 percent and yields on Japanese bonds are near 1.5 percent.
Second, our massive trade deficit has sent tens of billions of dollars abroad, as imports increased while exports declined, which has helped foreign business owners sock away plenty of dollars. And our budget deficit means the federal government keeps issuing more debt.
Then, there's our personal savings rate, which has been hovering near zero.
"We need the money because we're not saving any," Wyss said. "We need it from anyone who has a spare yen to lend us."
At the same time, economic growth in Europe and Japan has been weak, Wyss said. "The U.S. was the only large safe market where the yield looked reasonable."
The gush of foreign money "is critical to keeping the U.S. dollar from collapsing, because we have a large trade deficit," said Daniel Katzive, foreign exchange strategist at UBS. "If the deficit wasn't financed, the dollar would fall until it reached a level where U.S. assets were more attractive to foreign investors."
It's simple accounting, he said: Cashflow in must equal cashflow out. "If it doesn't, you have a big adjustment until you reach equilibrium."
Some argue that the waterfall of foreign money has also prettied up U.S. Treasuries. A study released as part of the
Federal Reserve Board's International Finance Working Papers Series asserts that the yield on 10-year Treasury notes would be a full percentage point less without abnormally high flows into bonds. That's because increased demand for U.S. Treasuries has pushed the yield on Treasuries lower than it would be otherwise.
Normally, Wyss said, foreign investors would be reluctant to stake so much on the Treasury market because they would be worried that a decline in the dollar would erode their returns.
But, in recent years, the Japanese and Chinese central banks have intervened to keep the dollar high.
"Central banks have trained investors that there's not much risk there," he said. "That scares me." |
| verminator
User ID: 52329
12/11/2005 9:20 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Sandalaphon - are you also at HC ???
---------------------------------
Note from Catherine on the Fed's Cancellation of M3
I have been asked by several network members to comment on
the cancellation by the Federal Reserve of the publication of its broadest
series of aggregate monetary statistics, known as "M3."
========================================
[link to www.federalreserve.gov]
Discontinuance of M3
On March 23, 2006, the Board of Governors of the Federal Reserve System will cease publication of the M3 monetary aggregate. The Board will also cease publishing the following components: large-denomination time deposits, repurchase agreements (RPs), and Eurodollars. The Board will continue to publish institutional money market mutual funds as a memorandum item in this release.
Measures of large-denomination time deposits will continue to be published by the Board in the Flow of Funds Accounts (Z.1 release) on a quarterly basis and in the H.8 release on a weekly basis (for commercial banks).
Last update: November 10, 2005
==============================================
In a nutshell, here are my thoughts:
1. The twelve federal reserve banks -- that together run the bank clearing and currency system -- are privately owned. If you call them up and write to them -- as I once did-- and ask who owns them, who manages their data and whether or not their owners have access to their data, you will be told that this is private information. Fed bank data is arguably the most valuable databank in the world.
2. The flagship Federal Reserve bank is the NY Fed. The NY Fed is the depository for the US government and manager of a powerful slush fund -- the Exchange Stabilization Fund.
3. Significant efforts have been made to ensure that ......
[link to www.solariactionnetwork.com] |
| .
User ID: 54540
12/18/2005 12:30 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
this has got to be one of the shortest and most revealing essays i have yet seen on what is wrong with the money system(and turning it into electronic bytes only delays the process, and taking the mark of the beast is a death sentence.
Anonymous Coward
User ID: 1294
12/18/2005 10:24 AM
Report abusive post HOW DEBT MONEY GOES BROKE
HOW DEBT MONEY GOES BROKE
by Steven Lachance
December 12, 2005
Most know debt is a byproduct of the finance-centered US economic model. Few, however, are familiar with how much debt the US credit system creates, let alone the implications. The upshot is financial decision making based on mainstream herding and hesitancy to take essential steps to preserve personal wealth.
How much debt?
According to the most recent Flow of Funds report from the Federal Reserve, total credit market debt (TCMD) expanded by $799 billion in the third quarter of 2005. At this rate, debt growth for a single year is $3 trillion, or 50% greater than total US industrial production. Since 1987, the year Alan Greenspan became chairman of the Federal Reserve Board, TCMD has more than tripled, from $13 trillion to $40 trillion, and now accounts for well over 300% of GDP. This debt growth is without precedent by any relative or absolute measure, evidence that the US has experienced a debt bubble.
Where does it come from?
Traditionally, savings finance debt. As the US savings rate has been anemic for years, many establishment economists, Ben Benanke among them, have claimed that US debt growth is supported by the inflow of surplus savings from abroad-the global savings glut thesis. Net purchases of US debt by foreign interests, though, are less than $1 trillion per year, far short of annual debt growth of $3 trillion. Some commentators are quick to point a finger at the Fed; it's printing money they say. This too misses the mark. As of 9 December, Fed credit was up just 3.8% YoY and the combined balance sheet of the 12 Federal Reserve Banks is barely $1 trillion.
The pump for the epic American debt bubble is neither foreign savings nor the Fed. For the $27 trillion of debt created during his tenure, Alan Greenspan can thank the private sector and the government-sponsored enterprises (GSEs). The Fed may be negligent for loosing control of the credit system, but it is not directly responsible for what has occurred since. The GSE's combined book of business, for instance, dwarfs the Fed balance sheet at nearly $3 trillion. Anchored by the money center banks, a vast constellation of financial entities, including mortgage lenders, consumer credit firms, and the financial arms of industrial enterprises, has blossomed to do with a vengeance what the Fed itself would not; create a seemingly unlimited quantity of debt out of thin air through loan origination.
Where does it go?
Debt is self-liquidating when used to generate future income, from which interest is serviced and principal repaid. Used for any other purpose, it is non-self-liquidating and results in payment obligations with no countervailing source of income. Of the $3 trillion in debt created this year, households used about 50% for mortgages and consumer loans, governments 25%, and companies 25%. Only companies incur self-liquidating debt, so at least 75%, or $2.25 trillion, of the debt has produced a future burden rather than an income stream. Companies, though, are no white knights. They have mostly used their $750 billion of the debt pie for purposes other than capital investment, namely to cover unfunded liabilities and buyback shares they liberally printed to reward management in the first place. The US is, thus, at or close to a situation whereby the percentage of debt financed by domestic savings is zero and the percentage of non-self-liquating debt is one hundred.
How does it end?
A debt-based monetary system has a lifespan-limiting Achilles heel: as debt is created through loan origination, an obligation above and beyond this sum is also created in the form of interest. As a result, there can never be enough money to repay principal and pay interest unless debt is continually expanded. Debt-based monetary systems do not work in reverse, nor can they stand still without a liquidity buffer in the form of savings or a current account surplus.
When debt grows faster than the economy, the burden of interest is bearable only so long as the rate of interest is falling. When the rate of interest reverses course, interest charges start rising faster than debt growth. This point was reached on 16 June 2003, the day the yield on the benchmark 10-year Treasury bottomed at 3.09%. Since then, debt grew from $32 trillion to $40 trillion, an increase of 25%. During the same period, annual interest charges rose by over 50%, from $1.28 trillion ($32 trillion at the prevailing average interest rate for debtors of 4%) to $2.0 trillion ($40 trillion at 5%). When interest charges exceed debt growth, debtors at the margin are unable to service their debt. They must begin liquidating.
Dipping into savings or running a current account surplus can offset liquidation for a time. The greater the pool of savings and the current account surplus, the longer an economy can endure liquidation at the margin without experiencing cascading cross-defaults. The US in the early 1930s and Japan in the early 1990s had such a liquidity buffer. In both cases, mobilizing domestic savings to increase government debt reversed the decline in total debt outstanding in two to three years and interest rates stayed low because savings financed the new debt. As a result, interest charges no longer exceeded debt growth and the need for marginal debtors to liquidate disappeared.
The US is now in a fundamentally different position than it was in 1930 or Japan was in 1990. Aside from a dearth of domestic savings, its vulnerability is compounded by a current account deficit. There is no buffer and no margin for error. Thus, when interest charges, now $2 trillion per year and accelerating, overtake annual debt growth, now $3 trillion and decelerating, liquidation will immediately trigger cascading cross-defaults. Without domestic savings to mobilize, the Fed cannot facilitate the expansion of government debt to fill the breach and simultaneously hold down interest rates. It cannot win the battle to keep debt growth greater than interest charges, the precondition for the viability of a debt-based monetary system. Once started, cascading cross-defaults consume all debt within an economy. The Fed has only two options: institute a new monetary system with a new currency or return monetary authority to the market and shut down. |
| captain obvious
User ID: 54607
12/18/2005 1:02 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
So much talk about money, the love of which Jesus advised was the root of all evil. I would say it was more of a symptom of the root of all evil, not the actual cause.
The cause is ignorance of truth. |
| Paladin
User ID: 54611
12/18/2005 1:07 PM | | .
User ID: 56147
12/23/2005 2:09 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
another scam is "to make money pay a negative nominal interest rate, by imposing some type of 'carry tax' on currency and deposits. A tax or fee on Reserve deposits of 1 percent per month, for example, would mean that those deposits, in effect, pay a nominal interest rate of roughly minus 12 percent." What?!?
But the idea is that you would spend all your money in a fit of consumption, rather than saving it, because you would be paying a 12% tax on it if you did! My heart is slamming into my ribs at the very thought that anyone would actually advance such a terrifying idea, much less the next chairman of the Federal Reserve.
**************
"Every bank account is an I.O.U. for cash, not cash itself. Needless to say, the $64.3 billion in cash in U.S. bank vaults and at the Fed is insufficient backing for the 38 trillion dollars worth of dollar-denominated credit outstanding, not to mention at least twice that amount in the implied promises of derivatives. The ratio is about 1 to 600. This ratio has grown exponentially under the easy-credit policies of the Fed and the banking system."
So, for every dollar of actual money, the banking system has multiplied it by 600? Hahaha! The things we let banks do! Hahaha! No wonder we are doomed!
**************
Lyndon Larouche:
"Today we Americans have been exhausted. Our infrastructure has not been replaced. We have not replaced our power stations. Our railroad system is dead. Our economy is dead, in whole parts. Our people don't have the skills they had 20 or 30 years ago.
"We are losing our water systems. We're losing our power systems. We're losing our transportation systems. We're losing our health-care systems. All these physical things on which the prosperity of the economy had depended are now worn out. They're gone. So we are disintegrating. Europe is disintegrating. We are a lost nation. We are a failure. Europe is a failure, in general. So the world economy has failed. We have a tremendous amount of financial debt that we can never pay. Our rate of production is collapsing. And therefore we are at a point where the system is going through a systemic collapse. This is the biggest collapse in modern history, it is now occurring. And the idiots just deny it. They just deny it."
How the hell did we get to this point? Well, I knew you were going to ask me that question, so I was going to launch into a long and boring discussion about the horrors unleashed by the Federal Reserve, but at the last minute you have been saved by Mr. LaRouche, who sums it all up perfectly when he said "It's collective insanity, mass insanity. It's cultural insanity." |
| .
User ID: 57480
12/27/2005 8:24 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
The Mess Greenspan Leaves
Stefan M.I. Karlsson
With Federal Reserve Chairman Alan Greenspan set to retire next month after more than 18 years on the job, it seems appropriate to summarize his performance. Greenspan has been the single most powerful individual in the world in the economic sphere.
By merely changing his choice of words between different speeches he has been able to rattle the markets. When he merely removes or add words like "measured" or "accommodative" somewhere in his speech, the markets either rally or panic. And through his words and his actions he has had a profound effect on the US Economy and the world economy as a whole.
Before he became Fed Chairman, some believers in sound money thought Greenspan might push for a less inflationary monetary policy. They pointed to his past as a close associate of Ayn Rand and author of the "Gold And Economic Freedom" chapter in Rand's Capitalism: The Unknown Ideal. In that chapter, Greenspan argued for a Misesian view of monetary matters, pointing to how monetary inflation lead to confiscation of wealth and destabilizing business cycles, arguing that only a gold standard could protect us from the predation of the state. This is why statists view gold as a "barbarous relic." He also described the events leading to the Great Depression in much the same way that Murray Rothbard did in America's Great Depression.
Murray Rothbard warned when Greenspan became Fed Chairman that we should not expect Greenspan to be any better than his predecessors, pointing to Greenspan's previous record, including his support for President Ford's imbecilic "Whip Inflation Now" buttons and his saving Social Security by raising payroll taxes. As it turned out, Rothbard was entirely right.
When Congressman Ron Paul reminded Greenspan of "Gold and Economic Freedom," Greenspan said he now realizes he had been wrong, and that as Fed Chairman he was able to pursue policies that mimic the gold standard.
That however is a preposterous claim. As Mark Skousen showed in his book The Economics of a Pure Gold Standard, the global supply of gold has historically tended to grow 1-2% per year. Since gold supply would be the basis of money supply under a pure gold standard (or at least the monetary base under the weaker version with fractional reserve banking), then it follows that under a "mimic gold standard" the money supply would grow at the same low rate. Yet between August 1987, when Greenspan became Fed Chairman, and November 2005, the monetary base rose from $233.5 billion to $782.5 billion, a 235% total increase or 6.8% at an annual rate. The M3 measure of money supply rose during the same period from $3.62 trillion to over $10 trillion, a 179% increase or 5.8% at an annual rate. Money supply growth has thus been far in excess of gold standard conditions.
In fact these numbers underestimate just how different things are from the conditions of a gold standard, because the Fed does not just manipulate the economy through increasing the money supply. It also manipulates the economy through the expectations of changes in the money supply.
Alan Greenspan has a record of repeated rescue operations during times of financial distress. From the stock market crash of 1987 to the S&L crisis of the early 1990s to the Asian crisis and the collapse of LTCM to the feared Y2K crisis to the bursting of the tech stock bubble, Greenspan has proven himself more than willing to bail out failed investors with additional doses of "liquidity" (the popular inflationist euphemism for inflation).
The result of this has been to increase the willingness of investors to participate in speculative bubbles because they know that if things go wrong and they are unable to get out before the bubble burst, their good friend Alan Greenspan will bail them out and limit their losses. Greenspan has thus been responsible for bubbles like the tech stock bubble and the housing bubble both by suppressing interest rates and providing the "liquidity" needed to create the bubbles, and also by reducing investors fear of losses after the bubble bursts by creating the expectations that the Fed will bail them out.
The consequences of this have been great. Instead of falling as a result of increased production, the consumer price index rose nearly 74% between August 1987 and November 2005, an average annual increase of 3.1%. This, together with the even greater asset price increases means that the purchasing power of the dollar has been sharply reduced, something which in turn has constituted large scale "confiscations of wealth," as the 1966 Alan Greenspan described inflation.
Moreover, the illusionary paper wealth created by Greenspan's bubbles has in turn greatly encouraged people to reduce their savings and increase their debts. The gross national savings rate has fallen since 1987 from 16.5% to 13%, and the net national savings rate from 4.5% to 1%. (During the third quarter this year it fell below zero due to Katrina-related damages). This decline in savings has come entirely in the household sector, as the household savings rate has fallen from 7% to -1%. Similarly, the private sector debt burden has increased from 120% of GDP to 153%. Again, this increase has been concentrated in the household sector where debt has increased from 77% of disposable income to 121%. Mortgage debt in particular has increased, from 51% to 91% of disposable income.
This has also had the effect of raising the current account deficit from the then record level of 3.5% of GDP to what will probably be about 7% of GDP this quarter. Greenspan's policy of inflating bubbles to counter the negative effects of the bursting of previous ones is like someone who remains on a sinking ship because he doesn't like to swim. We can see here how the policy of inflating bubble after bubble to avoid the recessionary implications of previous bubbles has resulted in ever greater imbalances, with the savings rate falling ever lower after each bubble and the debt burden growing ever greater.
Some may believe that Greenspan, who is not alone in deciding monetary policy, has been overruled by the other members of the Federal Reserve board - that perhaps he has been pushing for sounder policies, but to no avail. But Greenspan has in fact been highly active in pushing the rest of the board into the various bail-out operations, and it was reportedly Greenspan, together with a certain Ben Bernanke, who claimed that the old economic laws have been repealed and that the Fed can and should "accommodate" the tech stock bubble. Greenspan has thus been responsible for today's economic mess.
In this context, it seems appropriate to quote "Gold and Economic Freedom":
When business in the United States underwent a mild contraction in 1927, the Federal Reserve created more paper reserves in the hope of forestalling any possible bank reserve shortage. More disastrous, however, was the Federal Reserve's attempt to assist Great Britain who had been losing gold to us because the Bank of England refused to allow interest rates to rise when market forces dictated (it was politically unpalatable). The reasoning of the authorities involved was as follows: if the Federal Reserve pumped excessive paper reserves into American banks, interest rates in the United States would fall to a level comparable with those in Great Britain; this would act to stop Britain's gold loss and avoid the political embarrassment of having to raise interest rates. The "Fed" succeeded; it stopped the gold loss, but it nearly destroyed the economies of the world, in the process. The excess credit which the Fed pumped into the economy spilled over into the stock market - triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in braking the boom. But it was too late: by 1929 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence.
If you update a few of the specifics, like adding 70 years to the dates mentioned, and replacing "Bank of England" and "gold loss" with "Long Term Capital Management" and "the Asian crisis," this is a perfect description of what happened in the United States in the late 1990s.
Not that he would admit it. Because apart from inflation and economic imbalances, the defining characteristic of the Greenspan Fed has been its dishonesty. We have already seen how Greenspan claimed to have mimicked gold standard conditions. Moreover, instead of admitting how he was responsible for the tech stock bubble through the creation of moral hazard and suppression of interest rates, he blamed the bubble on "irrational exuberance." And instead of admitting his role in creating the housing bubble, he denied that there was such a bubble. Later, when he admitted that the housing bubble was real, he spoke out against it as if he had nothing to do with having created it in the first place.
Given Greenspan's obvious familiarity with Austrian economics, we can only conclude that he is consciously dishonest. In his tenure as Fed Chairman, Greenspan has acted precisely like the central bankers he attacked in 1966. The enduring legacy of the Greenspan era will be the large-scale confiscations of wealth and economic imbalances - all of it blamed on others.
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User ID: 57546
12/28/2005 12:12 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Global Gold Breakouts
Emotionally the financial markets are pressure cookers, great crucibles of concentrated greed and fear. But these dangerous emotions are wholly our own, the markets don't create them. Like a metaphysical mirror the markets simply reflect the strong feelings in our own hearts when we win or lose real capital.
While capital represents hard work and stored time from past labors as well as hopes and dreams for future prosperity, it doesn't have to be emotional stuff. The best investors and speculators strive to be emotionally neutral. True neutrality, while it is a difficult skill to master, enables accomplished investors and speculators to transcend the emotional morass of the markets and see things as they truly are. It grants them perspective.
Based on my talks with clients as well as trolling Internet forums since last Monday, it sure looks like this crucial perspective is missing in the gold world today. Without proper perspective, a destructive descent into an emotional whirlpool of poor decision making is inevitable. I am penning this essay in the hopes that it will help restore perspective and combat the spiking gold fears I am encountering today.
To start to understand what is going on emotionally in the gold world now, we have to revisit the past half year or so. In June, July, and August, gold traded in a rather uninspiring range between roughly $425 and $450. Then in September it broke above $450 and headed into a new range from about $460 to $475 for the next couple months. This range-bound behavior, despite new bull highs in September and October, left gold investors fairly frustrated.
Then in early November, just as gold looked like it was falling out of its two-month range to the downside, gold bottomed. It closed just over $456 on November 4th and then started resolutely marching higher. Over the next 25 trading days it barely retreated and a whopping 15 of these days witnessed fresh new bull-to-date closing highs. This incredible period of strength culminated with gold closing over $528 last Monday, December 12th.
Now on every single trading day in December up to the 12th, gold closed at consecutive bull-to-date highs. It was up 8 days in a row! An 8-day streak in the same direction in any market is rare. Random daily noise introduces enough variability to ensure there are down days even during strong uptrends. Having a price move the same direction 8 days in a row is similar to tossing a coin 8 times and getting heads every time. It can happen of course, but it is rare and is not the expected outcome per probability theory.
This magnificent 25-day run that saw gold blast 16% higher coupled with a statistically improbable winning streak in December led gold to become overbought. There was a little too much excitement and euphoria and the only way the markets could bleed this off was to correct. So gold corrected. Over the next four days it lost 5%. As of this week it closed at $494 the day before I wrote this essay, down 6%.
Now is a 6% pullback after a 16% surge higher the end of the world? Is the gold sky falling? Of course not! Gold ran up fast as it approached and eclipsed $500, it became technically overbought, and it fell back to retrace a fraction of its recent surge up. I always think it's ironic when investors get worried when a few down days string together in a row but these same investors think long strings of up days are totally normal.
Just four trading days, a trivial amount of time by any reasonable standard, of gold pulling back have led to a surge of dark fears in the gold world. At this stage I believe these fears are totally irrational. In order to combat them, I would like to share the latest charts of this secular gold bull in ten major currencies from six continents. When we have the big picture in perspective, the little stuff rightfully seems trivial all of a sudden.
If you are interested in the background and methodology behind these ten charts, I discussed it in depth in October's "Global Gold Highs" essay. In a nutshell they show the price of an ounce of gold in major currencies superimposed over these currencies' dollar exchange rates. Something truly wonderful is happening in gold worldwide as it breaks out concurrently everywhere. This is the single most important development in this entire gold bull to date.
Gold is decoupling from the dollar that has long oppressed it with dazzling speed, and entering Stage Two of its bull market. Stage Two witnesses gold rise across the globe in all major currencies which draws in legions of newly-interested investors who haven't yet contributed capital to fuel this bull. It creates a virtuous circle where higher gold prices draw in more investors which drive prices even higher. Fear at the dawn of Stage Two is just plain silly.
The reference chart of choice for this gold bull continues to be the usual dollar-gold chart. From early 2001 until earlier this year, gold could only move significantly higher when the dollar was falling. This led many foreign investors to rightly question whether there was really a gold bull or just a dollar bear driving up local US dollar gold. Note the strong inverse relationship between the dollar and gold up until last spring or so.
But gold's deference to the dollar's dominance radically changed in 2005. During Q2 gold held solid around $425 while the dollar continued its biggest bear-market rally to date. In Q3 and Q4 gold's campaign of dollar independence intensified dramatically when it started rising independently regardless of the dollar's machinations. This behavior was totally unprecedented in this bull market, a watershed event.
Gold's newfound independence as it was throwing off the dollar shackles led it to an upside breakout over its five-year secular uptrend channel rendered above. It blasted up to a 106% bull-to-date gain, its sixth major new bull high. Incidentally the six numbers above that mark each of these six dollar-gold highs occur in all the charts below at the same dates so it is easier to compare global gold highs with these particular times dollar gold was brilliantly shining.
After gold exploded vertically to burst above its resistance just under $500 and of course the psychologically mammoth $500 level itself, it is not the least bit surprising to see it pull back a bit. Unless a full-blown correction is underway which is pretty improbable given soaring gold investment demand worldwide, gold will probably bounce near its upper resistance line, in the $490s, before regrouping and heading higher.
You have to admit that within the context of an entire secular bull market gold's minor pullback in the last week really looks trivial. Perspective is everything! This gold chart is incredibly bullish and nothing short of a wicked correction that decisively breaks support (falls way under $440 or so) can change this fact. Gold looks wonderful despite the irrational fears the recent pullback has spawned among gold investors.
Due to exchange rates with the dollar (which are graphed in red on all these charts), our friends in the Great White North had not experienced a new bull-to-date gold high since early 2003. In fact, for all of 2004 and most of this year gold was actually in a demoralizing downtrend that is rendered above. But when gold started decoupling from the US dollar it pushed Canadian-dollar gold into a sharp breakout higher as well.
This breakout was so powerful that it blasted Canadian-dollar gold up to new bull-to-date highs above C$600! Of course Canadian-dollar gold has shared in the expected gold pullback after such a massive vertical spike, but new gold highs in Canada are very bullish. They will help convince more mainstream Canadian investors to take a serious look at gold. And the more Canadians who buy gold, the bigger global investment demand grows pushing gold even higher.
Brazil certainly doesn't have a strong currency by world standards, but relative to the horrifically poor currency records of all the Marxist dictators who flock to South America Brazil is doing fairly well. I used it here to represent the continent. Due to the Brazilian real crashing in 2002 Brazil gold's bull-to-date high was carved in early 2003. Despite the recent gold strength it has still not yet been able to break out of its downtrend in Brazil.
But it is getting closer. Brazilian-real gold just poked its head above its resistance line for the first time since its 2003 currency-crash top. And despite the lack of a new bull-to-date high in the last few years, Brazilian gold investors who deployed capital early on in this gold bull are doing well. Brazil gold is up 132% bull to date these days, considerably higher than the 106% gains with which we have been blessed in the States.
I believe this euro-gold chart remains the most important global gold chart. For years now I had been advancing the theory that euro gold breaking above its vexing €350 resistance would be the most likely catalyst to trigger Stage Two. This glorious euro-gold breakout finally happened in June and gold has not behaved the same since. The entire global gold market pivoted around the long-awaited €350 breakout.
European investors control vast amounts of capital and have a deep cultural affinity for gold so new euro-gold highs seemed destined to generate a surge of European investment demand driving gold higher. Indeed this is proving to be the case. Once gold hovered above €350 for a couple months to convince European investors that this gold bull was the real deal, they flooded in and helped drive gold higher in two sharp surges that witnessed it shatter its secular uptrend.
If you are a European investor, realize how magnificently bullish this chart is. Seven months ago your peers were worried that €350 would never fall, and now we just challenged €450! After such a blistering surge it is totally normal for gold to pull back and consolidate a bit. It needs to find a new range, a higher basing zone which unites buyers and sellers, before it surges again. This process is cause for celebration, not fear.
UK gold looks similar to euro gold in many ways. For nearly five years UK gold marched higher in the modest yet well-defined uptrend rendered above. And then the global gold breakout suddenly drove it not only through £250 but to £300 in the blink of an eye! Once again it is totally normal and expected for a pullback to occur after such a stellar breakout. UK gold will probably consolidate at a new higher level and form a base here.
Incidentally the knuckleheads running the Bank of England back in 2000 and 2001 that sold your country's gold near multi-decade lows are still involved in politics in the UK. In particular Gordon Brown comes to mind. This guy was Chancellor of the Exchequer and spearheaded a terrible injustice in liquidating the British people's accumulated gold at rock-bottom prices. If you live in the UK and vote, you ought to vote against any party involved in gutting British gold at a secular bear bottom. The gold they sold under £200 is now 70% higher!
Like Europeans the Japanese investors also have a strong cultural affinity for gold. Yen gold has broken out to dazzling new highs that would have been unthinkable earlier this year. Its secular uptrend that seemed so broad only months ago is now condensed down into a narrow little band with this expanded chart. Yen gold is now up 114% bull-to-date to nearly ¥65k per ounce! The weak yen has even accelerated this breakout compared to other currencies' gold charts.
Now the Japanese are world-renowned for their high savings rates and the terribly low interest-rate yields with which they have suffered for over a decade. If you were a Japanese investor frustrated at your lack of options and you witnessed gold, the world's safest investment, rocket over 30% in a matter of months wouldn't you get interested? It is not like you are earning fat yields in other investments so why not deploy some of your precious capital into the timeless safe haven of gold?
I suspect a lot of Japanese investors will make this decision in 2006. Japanese investment demand for gold should soar. Nothing begets investment demand like higher prices and these are capturing everyone's attention. The pool of capital available to chase after gold in Japan is so massive that Japanese demand alone could probably easily sustain this current gold upleg. It is silly to get fearful of a major gold correction when the Japanese are gearing up to invest in gold in a big way.
The Chinese of course are not as wealthy as the Japanese, but the raw power inherent in a huge number of investors each buying a little bit of gold is immense. Not only are Chinese investors witnessing new bull-to-date gold highs, but gold has broken out technically in yuan terms. This year alone yuan gold is up about 21%. Since the yuan was tightly pegged to the dollar until this year, Chinese bull-to-date gains are similar to US gains.
The Chinese not only have a very strong cultural affinity for gold, but they are trusting their oppressive government less and less. As the world shifts manufacturing jobs to China the average Chinese investors are growing more wealthy and have very high savings rates. With gold shining it is inevitable that Chinese capital will shift into it since it doesn't represent mere government promises to pay like paper money. Interestingly the Chinese government is even trying to encourage this by allowing new gold exchanges to open. It understands that gold is the most-important long-term store of wealth that makes a nation financially strong.
India is the biggest market for gold demand in the world because Indians also have a very deep cultural affinity for gold. Countless Indian families invest in gold and many actually wear their gold in the form of jewelry so they can enjoy their investments. Gold is a very important wedding gift in this country as well. In Indian terms gold has also just broken well above its long-term secular uptrend channel. This will interest even more Indians in gold.
The core message across all these charts is that dazzling new bull-to-date highs in gold are being carved worldwide. I have talked with investors from all over the world and investor psychology is the same everywhere. The higher the price of an asset rises, the more people want to invest in it. Indian investors are no exception. They will naturally shift more capital into gold in order to ride the bull market in the metal they already love.
The Australian-dollar gold breakout, like the Canadian one discussed above, just led to the first new bull-to-date highs since early 2003. Many Australian investors I have spoken with in recent years have expressed concerns that the bull market in gold was not extending into Australia due to its currency strength. Since the fall of A$650 in the last few weeks though all these concerns are rapidly evaporating. In Stage Two the gold bull erupts everywhere, even Australia!
Australian contrarians have long been watching and investing in gold, buts its mainstream investors have not. But seeing gold at new bull-to-date highs and big round numbers like A$700 is exactly the kind of thing that excites investors who have not yet "discovered" this powerful global secular gold bull. There is nothing that could be more potent for igniting fresh new Australian gold demand than the events of the last few months.
Finally we end our journey around the continents with South Africa. The rand isn't a particularly strong currency by world standards but it is pretty impressive compared to the rest of Africa. Because the rand crashed in 2001 and drove rand gold ballistic it has since been relentlessly grinding lower in a secular downtrend. That trend was broken earlier this year but the additional surge higher in recent months drives home the point that rand gold's downtrend is history.
Today gold is back above R3250 while the rand itself remains stable, a far cry from the similar rand gold levels witnessed in early 2002 while the currency tried to stabilize itself after great turmoil. Steadily rising gold prices in South Africa while the rand is just lazily meandering along like a normal currency will help spark interest in gold investing among mainstream South African investors.
After reviewing these charts of the global gold breakouts in the 10 most important global and regional currencies, I hope you feel some of the same sense of awe and wonder that I do. Despite gold's trivial little pullback in recent days the metal has performed phenomenally well across the globe. It is breaking out of long-term secular trends simultaneously all over the world, an unprecedented event in this bull!
Remember how excited we were in the States when gold closed over $500 for the first time in 18 years on December 1st? Huge psychological numbers like this one are falling like dominos across the globe as gold breaks out simultaneously worldwide. Stage Two is upon us, the middle third of a secular bull market where global investment demand replaces dominant-currency weakness as the primary driver of gold.
And the greatest thing about surging global investment demand for gold is it rapidly becomes a self-feeding phenomenon. Everywhere rising prices capture the attention of investors who have not yet made the plunge into a bull market. These new investors then buy gold, which drives its price even higher and makes them happy. This in turn entices in even more capital which creates a powerful, sustainable virtuous circle, a positive feedback loop.
These global gold breakouts also show that the fears surrounding gold's recent minor pullback in the US are totally irrational. The gains we are likely to see in Stage Two should dwarf those of Stage One and the global gold breakouts are confirming that Stage Two is here. This gold bull radically changed in fundamental terms in late 2005 and the opportunities it now holds for the future are likely to be nothing shy of tremendous.
At Zeal we have been riding this gold bull since its very beginning five years ago, through thick and thin. I have never been so excited about its prospects as I am today. We currently own gold stocks that are thriving and we have another 18 or so on our official Watch List, published in each monthly Zeal Intelligence newsletter, that we'd like to buy if gold stocks pull back far enough. These are thrilling times!
As you reflect on where to deploy your capital next year, realize that gold is shifting from a dollar-bear driven bull to a global-investment-demand driven bull right before our very eyes. The opportunities coming up in gold in the years ahead should be breathtaking. Please subscribe to our acclaimed newsletter and join us today for the new Stage Two gold bull. Fortunes will be won and we can't wait to uncover these opportunities.
The bottom line is gold is breaking out of multi-year secular trends all over the world simultaneously. The minor pullback in recent days that is spooking investors in the US and Europe is really trivial in the grand scheme of things. Keeping the big picture in mind, perspective, is essential to short-circuiting the dangerous emotions of greed and fear that lead to poor trading decisions.
We are now being blessed to witness something truly extraordinary in gold. With the metal rising in all major currencies concurrently and enticing in new capital worldwide it is not business as usual anymore. I hope you enjoy the new stage of this powerful bull as much as I will.
Adam Hamilton, CPA
December 23, 2005
So how can you profit from this information? We publish an acclaimed monthly newsletter, Zeal Intelligence, that details exactly what we are doing in terms of actual stock and options trading based on all the lessons we have learned in our market research. Please consider joining us each month for tactical trading details and more in our premium Zeal Intelligence service at … www.zealllc.com/subscribe.htm
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Thoughts, comments, or flames? Fire away at zelotes@zealllc.com. Due to my staggering and perpetually increasing e-mail load, I regret that I am not able to respond to comments personally. I will read all messages though and really appreciate your feedback! |
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User ID: 60350
1/5/2006 11:18 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
The Approaching War With Iran
January 4, 2006
Muckracker Report
On November 10th 2005, the Muckraker Report published an article that described one of the unspoken reasons why the United States had to invade Iraq; to liberate the U.S. dollar in Iraq so that Iraqi oil could once again be purchased with the petrodollar. See The liberation of the U.S. Dollar in Iraq
In November 2000, Iraq stopped accepting U.S. dollars for their oil. Counted as a purely political move, Saddam Hussein switched the currency required to purchase Iraqi oil to the euro. Selling oil through the U.N. Oil for Food Program, Iraq converted all of its U.S. dollars in its U.N. account to the euro. Shortly thereafter, Iraq converted $10 billion in their U.N. reserve fund to the euro. By the end of 2000, Iraq had abandoned the U.S. dollar completely.
Two months after the United States invaded Iraq, the Oil for Food Program was ended, the country’s accounts were switch back to dollars, and oil began to be sold once again for U.S. dollars. No longer could the world buy oil from Iraq with the euro. Universal global dollar supremacy was restored. It is interesting to note that the latest recession that the United States endured began and ended within the same timeframe as when Iraq was trading oil for euros. Whether this is a coincidence or related, the American people may never know.
In March 2006, Iran will take Iraq’s switch to the petroeuro to new heights by launching a third oil exchange. The Iranians have developed a petroeuro system for oil trade, which when enacted, will once again threaten U.S. dollar supremacy far greater than Iraq’s euro conversion. Called the Iran Oil Bourse, an exchange that only accepts the euro for oil sales would mean that the entire world could begin purchasing oil from any oil-producing nation with euros instead of dollars. The Iranian plan isn’t limited to purchasing one oil-producing country’s oil with euros. Their plan will create a global alternative to the U.S. dollar. Come March 2006, the Iran Oil Bourse will further the momentum of OPEC to create an alternate currency for oil purchases worldwide. China, Russia, and the European Union are evaluating the Iranian plan to exchange oil for euros, and giving the plan serious consideration.
If you are skeptical regarding the meaning of oil being purchased with euros versus dollars, and the devastating impact it will have on the economy of the United States, consider the historic move by the Federal Reserve to begin hiding information pertaining to the U.S. dollar money supply, starting in March 2006. Since 1913, the year the abomination known as the Federal Reserve came to power, the supply of U.S. dollars was measured and publicly revealed through an index referred to as M-3. M-3 has been the main stable of money supply measurement and transparent disclosure since the Fed was founded back in 1913. According to Robert McHugh, in his report (What’s the Fed up to with the money supply?), McHugh writes, “On November 10, 2005, shortly after appointing Bernanke to replace Greenbackspan, the Fed mysteriously announced with little comment and no palatable justification that they will hide M-3 effective March 2006.”
Is it mere coincidence that the Fed will begin hiding M-3 the same month that Iran will launch its Iran Oil Bourse, or is there a direct threat to the stability of the U.S. dollar, the U.S. economy, and the U.S. standard of living? Are Americans being set up for a collapse in our economy that will make the Great Depression of the 1930’s look like a bounced check? If you cannot or will not make the value and stability of the U.S. currency of personal importance, if you are unwilling to demand from your elected officials, an immediate abolishment of the Federal Reserve Act of 1913 and the fiat money scheme that the banking cartel has used for nearly a century now to keep our government and our people in a state of perpetual debt, than you are faced with but two alternatives, abject poverty, or invading Iran.
The plans to invade Iran are unspoken, but unfolding before our very eyes. The media has been reporting on Iran more often, and increasingly harshly. For the U.S. government to justify invading Iran, it must first begin to phase out the War in Iraq, which it is already doing. Next, it must portray the Iranian President, Mahmoud Ahmadinejad, as a threat to the region and the world. Finally, once naive American people are convinced the “weapons of mass destruction” that were to be found in Iraq are actually in Iran, coupled with the almost daily media coverage of Iran’s nuclear power / weapons program aspirations, and what we will soon have on our hands is another fabricated war that will result in tens of thousands of civilian lives being lost, all because the political elected pawns in Washington DC lack the discipline to return our currency to a gold or silver standard, end the relationship with the foreign banking cartel called the Federal Reserve, and limit the activities of the U.S. government to those articulated in Article I Section 8 of the Constitution for the United States of America.
When a wayward and corrupt fiscal policy and fiat currency, coupled with runaway government spending, forces a nation to only be able to sustain the value of its currency with bullets, the citizenry of the country involved in wars primarily to sustain its currency have historically first became slaves to their government, and then to the nations that finally conquer them. If you question the validity of such a premise, or whether it could happen to the United States of America, study the fall of the Roman Empire. If you read the right books on the subject, you’ll quickly discover that towards the end of the Roman reign, the Roman Empire was doing exactly what America is doing today; attempting to sustain a failed fiat money system with bullets.
Understanding fiat money is not an easy task, and the Federal Reserve, World Bank, and International Monetary Fund have purposely made it that way. They do not want the American people to realize that the money in their wallet loses its value with each new dollar that they print. They do not want people to understand that our money does not become money until it is borrowed. When the Federal Reserve has money printed, when it is in uncut sheets of paper, it is not yet money. After it is cut, bundled, and placed into the Federal Reserve vaults, it still is not money. It only becomes money once it is borrowed. Consequently, if all debt were to be paid, if the United States didn’t have an $8 trillion national debt and the American people were debt free, and if all loans of U.S. dollars made to foreigners were paid in full, there would be exactly zero U.S. dollars in circulation because it will have all been returned to the vaults of the Federal Reserve. This might seem hard to fathom, but it is the gospel of fiat money.
The major news media in the United States, fed by Washington DC which in turn is fed by the Federal Reserve, literally, has already begun conditioning the American people for invading Iran. Media accounts of Iran’s nuclear ambitions along with amplification of the potential instability and core evilness of Iran’s president, Mahmoud Ahmadinejad, is setting the stage to spring the invasion of Iran on the American people. There does appear to be a direct correlation between the winding down effort underway in Iraq and the increase of anti-Iran rhetoric. How American soldiers ultimately arrive in Tehran is uncertain at this time, but it is reasonable to expect that if the Iran Oil Bourse opens for business in March 2006 as planned, it will only be a matter of time before the United States will have to blow it up.
If the United States invades Iran, or if Israel starts military actions by launches missiles at Iran’s nuclear power facilities, which then opens the door for the United States to intervene, most Americans will believe that our military actions in Iran will be to defend freedom and liberty while spreading democracy, when the truth is that we’ll be fighting a war in Iran because of our nation’s relationship with the Federal Reserve, a so-called bank that is not owned by the federal government, maintains no reserve, and isn’t a bank at all, but a cartel. Just like our war in Iraq, Americans and foreigners will die in battle so that the historical power bankers and brokers; cartel members such as Rothschild, Morgan, Lehman, Lizard, Schrader, Lobe, Kuhn, and Rockefeller to name a few, can continue collecting interest on every single U.S. coin and dollar bill in circulation, while controlling the U.S. Congress to the extent that the U.S. taxpayer becomes the collateral and lender of last resort to cover bad loans and unpaid debts that these institutions create by loaning money to third world countries, some of which are devout enemies of the United States. Remember the $400 billion savings & loan bailout approved by the U.S. Congress during the Reagan Administration? America is still paying for it – you and me, and so will our children and grandchildren.
It is well overdue for Americans, every American, to do whatever it takes to fully understand the relationship between the United States and the Federal Reserve, along with the grave consequences of our current fiat money system; for even if the United States wanted to continue to sustain the supremacy of the U.S. dollar with bullets, it is historically, impossible. When bullets become the commodity to secure a currency, it is a clear sign of devastating calamity looming. To ignore the warning signs, is to suffer like you have never suffered before, or to die. Harsh words, but true.
[link to www.321gold.com] |
| Paladin
User ID: 60307
1/5/2006 11:42 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
people this is a great thread.....lots of good info |
| .
User ID: 60350
1/6/2006 1:44 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
You were killed by your own banks
Richard Daughty
...the angriest guy in economics
The Mogambo Guru
Archives
January 4, 2006
- I was, as I do every year, trying to get really stinking drunk after Christmas, trying to forget the bitter disappointment of Santa, who, as usual, brought me NOTHING that was on my list, including the stuff at the freaking TOP of the list, like a young and beautiful trophy wife who begs me not to hate her because she is rich, no frozen pizzas loaded with pork products, no flame throwers or armaments of any kind. I was still, unfortunately, still sober enough to be shocked when I saw that Total Fed Credit expanded by a whopping $9.2 billion last week, and my face drained of blood when I saw that Currency in Circulation jumped by an incredible $8.2 billion last week, too. Gulp.
Through bleary eyes I noted that the Required Reserves at the banks fell to an astonishingly low $41.8 billion. Being at the end of the year, perhaps it is customary to look back and see what bank reserves were a year ago. Hmmmm. It looks like it averaged about the same $41.8 billion! Now let's take a look at the assets and liabilities of the banks, against which these reserves are supposed to provide a cushion against loans going bad and depositors wanting their money back and The Mogambo cashing bad checks all over town. Hmmmm. I see that in Loans and Leases alone, the banks are up almost $2 trillion! About 50% more! In one year!
And savings deposits (which is the few paltry dollars that that we somehow managed to keep away from the luxuriating "family", all the time with their incessant whining "We're cold and hungry! We're cold and hungry! Waaa waaa waaa!" like I am supposed to, I guess, go out and spend precious money on food and heat, like I am some kind of Mister Moneybags or something), is up a cool trillion dollars in the last year, too. And yet, rubbing my forehead in a vain attempt to comprehend the situation, against all of this trillions of dollars of vastly increased risk exposure and liability, Required Reserves have not increased so much as a lousy dime? Nada? Zipola? It just goes to prove that The Mogambo was right when he said that financial crises are always caused by banks, the greedy, grubby and gangrenous banks, getting themselves in trouble by acting irresponsibly and allowing others to act irresponsibly, too, and ruining everyone and everything else in the process.
Speaking of banks ruining everything, thanks to ContraryInvestor.com we now have the Office of the Comptroller of the Currency noting that "But it's at the top of the credit cycle where stresses and weaknesses typically appear, so what we are seeing today should not surprise anyone." I jump to my feet and shout, "Not to anyone who has ever read history!"
Ignoring me, the Comptroller goes on "One of the striking findings in our 2005 underwriting survey was the breadth and extent to which banks had relaxed their lending standards."
There it is again! Banks acting stupid! And it is everywhere, as he alludes when he says "The trend toward increased credit risk is visible across the portfolio and across the country" he says, but "it really stands out in two product areas. The first is commercial real estate; the second, residential first mortgages."
Were you going to ask me how bizarre that is? Well, he says that "By some estimates, interest-only products constituted approximately 50 percent of all mortgage originations last year." Half of new mortgages make no payments towards the loan principal? Their debt never decreases? Hahaha! Idiots!
And it gets worse! "In the first half of 2005," he goes on to say, "IOs started to decline in favor of payment-option ARMs, which, according to one source, comprised half of new mortgage originations." Half of new mortgages are the kind where you wake up one morning and you say to yourself, "You know what? I think I'll use my mortgage payment to go to the mall and buy myself something nice! To hell with the house payment!" Now, when I try that crap, the bank comes all unglued and they call me on the phone and get all rude and demanding their money, which I obviously don't have because I went to the mall, as I just explained earlier in the paragraph, and they icily reply that they don't have time to read any of my damned paragraphs and they want their money, and we go around and around, and I end up paying them their damned money and we are enemies forever after.
But these new "payment optional" guys try that, and the bank gleefully says "Hey! No problem-o! We'll just add the missed payment to your mortgage balance!" They go deeper into debt! Gaahhh! I'm screaming in fear!
To add insult to injury, he says that "roughly every other mortgage these days is also a 'piggyback' or reduced documentation mortgage, which points to another development that concerns us: the trend toward 'layering' of multiple risks." To show you the stupidity of this, ask anyone who has ever loaned The Mogambo any money or thing of tangible value because they relied on my self-reported ability to repay the loan! Hahaha! Suckers! I even told them I had a job! Hahahaha! And they believed me! Hahahaha!
Ahhh! It felt good to laugh like that! But I am again sobered when I realize that this kind of rampant monetary inflation bodes ill, although it was, in a fit of Mogambo philosophical insouciance (MPI), in the larger picture, just a fitting end to a bizarre, bizarre year in the world of fiat money, omnipotent central banks and huge, huge, expensive, expensive governments. And, to tell you the truth, it would have surprised the hell out of me if the banks had NOT gone to such extremes.
- I got a lot of mail about medicinal silver, and how I ought to cool down my silver fever, to the extent that I now stop total strangers on the street to harangue them about getting rid of those stupid kids and put their money into silver, like this one here from Dave, who says, "Silver ions in the body combine with chloride (as in sodium-chloride or hydro-chloric acid (i.e. chlorine ion)) to form silver-chloride, an insoluble silver salt, and whose antibiotic action is not nearly as effective as elemental silver. What is wanted, therefore, is not ionic silver, but some other form." Well, so far, he has lost me completely, and I personally don't care, as what I am really interested in, right now, is making a little money on this silver thing.
But instead of telling me what I want to hear, he goes on to say "It is interesting to note that silver is classified as a toxic heavy metal. While it is an important trace mineral in human health (in wee small doses), getting too much of it can be a real problem. This is not an argument against using it, only in using too much of it." Memo to Dave; what I want is an argument for using WAAAYYY too much of it, which will increase demand, which will cause the price to rise, which is the whole freaking point of my interest in silver.
Then, to show you a neat little analogy, he first writes, "The idea that science & medicine are turning to silver now is a testament to the degree to which they are becoming hyper-alarmed at the resistance shown by microbes to pharmaceutical antibiotics." Then he amusingly says "The resistance is not as high as that shown by our private central bank to the private (ownership & use) of precious metals as a store of purchasing power."
Well, to be fair, the central banks are NOT interested in whether or not WE use gold to store purchasing power. For one thing, they can create money out of thin air, so what in the hell do they care about gold? And for another thing, they are not real bankers. If they WERE real bankers, they would know that their creating constantly more credit and money is insane, and they would be buying gold for themselves. That they are not doing this only proves that they are mere banking poseurs, out to make a fast buck and stick the government with the mess when it all explodes, as that is the New, Yet Timelessly Stupid, American Way.
As a further explanation of this silver thing, the F. family writes "It is precisely NOT the silver ions (electrically charged single atoms) that are desirable or effective. It is nano-particles of silver (small clusters of silver atoms) that have recently been demonstrated to be so effective. It is only the new techniques of nano-engineering that have made the production of these clusters possible."
Again, the blank look of dumbfounded non-comprehension and disinterest on my stupid Mogambo face (SMF) face alerts them to the fact that I have no idea what in the hell they are talking about and couldn't care less. Thankfully, they distill it to its essence: "Silver ions: BAD. Nano-particles (clusters) GOOD" Ahhh! At last something I can understand!
- Two questions seem to plague the minds of the two pathetic guys who read the MoGu, and I pity them that their drab, miserable lives are so devoid of interest that they would waste it by reading the idiotic Mogambo Guru newsletter. First they want to know "Is there something mentally wrong with you or something?" This is an easy one; Yes. Secondly, they worry about buying gold like I recommend, only to then have the government confiscate gold again, like that commie bastard FDR did in 1934, and then they will feel like coming over here and punching my lights out because they are ruined, and now their families are as hateful and vengeful as mine.
To them I say "Relax, mate!" in my new fake Australian accent that I hope will trick the bill collector the next time he calls, and I say this for two very good reasons (VGR). The first one is 1) by the time you get within range of the Mogambo Bunker Of Impregnable Defensive Posture (MBOIDP), police forensics experts will probably testify at the autopsy that they are sure you never felt a thing. Secondly, which I will cleverly signify with the numeral 2, 2) the total of the world's above-ground gold is a few trillion stinking dollars. The total amount of gold held by Americans is only around a trillion or so. Chicken feed! Hell, the damned Federal Government, alone, budgets itself to spend more than that much in one lousy year (OLY)! So confiscate gold? Hahaha! For what? Why in the hell would they do that?
Furthermore, since they have to pay you for the gold, which entails creating money, they would be much better off by just giving somebody the damned money, instead of going through all the hassle of not only giving people the money, but going through the additional expensive process of collecting gold and transporting gold and storing gold and guarding gold and accounting for gold.
But we Americans are increasingly alone in this "gold is a barbaric relic and only lunatics and idiots like The Mogambo are stupid enough to buy gold" world, as we read in an article by Sean Brodrick in the Red-Hot Canadian Small-Caps newsletter, who writes "The reopening of China's gold market to investment after 50 years of Communist suppression is one of the great forces driving gold today. So, it comes as good news that China is planning to loosen its import/export laws on gold."
So why in the hell should you care about Chinese import-export laws on gold? Well, I was just waiting for you to ask that, because I have this terrific answer! It's all about how a third of the world's population is being encouraged to buy gold, the same third of the world population that has a tradition of 3,000 years of historically high regard for gold, and how that means that the Chinese are going to be buying a LOT of freaking gold, and how supply, even today, is not enough to satisfy current demand except by central bank dis-hoarding, and how that means that gold will necessarily rise mightily in price, and then people who have gold will be rich rich rich! And I even had this fabulous tagline at the end where I say "The future of gold is golden!" whereupon I expected you to spontaneously break into wild applause with lots of cheering. But before I could gather my notes together or even open my mouth to speak, Mr. Brodrick jumps up like a little showoff and says "Since China already consumes more gold than it produces, this couldn't be more bullish for gold, in my view", which was, although brief, far better than the confused little speech I had prepared. So I sat down in a grumpy huff, and was in a bad mood for a long, long time.
So what are these new Chinese laws on gold? Real snippy-like because I am still sulking, I say "Ask Mister Expert over there!" Mr. Brodrick hears this and says "The People's Bank of China has recently published a draft of new rules which would allow any company with more than $3.6 million in capital to start a gold trading firm."
But this is not only about China, as Mr. Brodrick goes on to say "Meanwhile, in India, the Forward Markets Commission (FMC) said it would allow both foreign institutional investors and mutual funds to begin trading bullion futures at national commodity exchanges."
I guess Jas Jain heard us speaking about India, and he says "The Indian financial system will definitely collapse because of its bankers, who are desperately pushing debt for higher current profits, a common disease around the world but worse in India. Ignorance about the future consequences of debt-driven consumption is mind-boggling. Indian banks and governments will collapse one after another and there will be massive riots. Indians will pay the price for badly copying Americans."
Well, that's pretty damned spooky to have a nation with nuclear weapons be in that kind of shape, but as spooky as that is, if you recall, we were actually talking about gold. And in an odd way, he WAS talking about gold, as he goes on to say "Safety should be your number one concern in the coming years of the collapse of the current world economic and political order. The world could not have had two more ignorant and dangerous men in power than Bush and Bernanke." Man, I heard that loud and clear!
What is the one thing, the one sure thing, the one guaranteed thing that all people, of all generations, in all nations, in all of history have turned to when their governments destroyed their money and the world was on the brink of the "collapse of the current world economic and political order?" The Mogambo smiles as he says "Harken to me, my darling dudes and dudettes. Gold! Got gold? Get gold!"
Maybe that is why gold is on such a tear here lately. And speaking of gold, on Tuesday the gold lease rates exploded from another of their weird "singularities" into this big sudden spray of spread (which is hard to say five times quickly), where nearer rates were low and longer rates were high again, all spread out so neatly. Weird!
Thanks to Barb at 321Gold.com, we got a link to Neftegaz.ru, which is some kind of Russian site (although it is in English, so naturally I am suspicious as hell) that had an article headlined" Russian Gold Reserves Increased by $50bn" In the body of the text, we find out that "The Central Bank of Russia official said Monday that Russia's gold and foreign currency reserves have reached $173 billion" and that the "reserves have increased by $50 billion since the start of the year and would have grown by $70 billion if not for foreign debt payments."
We learn that inflation is going to increase a LOT in Russia, as we read that "The increase in gold and currency reserves has expanded the monetary base by 24%, whereas money supply has increased 40%, according to the bank official." With monetary inflation like this, price inflation in Russia (which is already 10.4%), is going to get a lot worse.
And speaking of Russia, apparently Putin, the President of Russia, cut off the gas to the Ukraine or something, just in time for winter, and there are all these serious explanations about politics, and revenge, and side-taking, and deal-making, and alliance-cementing, and blah blah blah. They are all wrong. It is about money. Everything is always about money.
Thanks to SafeHaven.com we linked to Kommersant.com, another Russian business daily, also in English, also suspicious, where we read the headline "Bank of Russia Will Re-Evaluate Gold" by Dmitry Ladygin. Hmmm! Interesting!
However, the reality is a lot more prosaic, and the Russian central bank is merely going to change the way they account for their gold holdings "Instead of previous fixed prices, the CB will start to appraise the precious metal according its own quotes, which are close to the market price." Mr. Ladygin, or Comrade Ladygin or whatever in the hell they call themselves, writes "For the first glance, it looks logical-currently the gold in state coffers is appraised by the CB fro $300 per ounce. The same quotes were in the market in 2002. Since that time, the price for gold went up by 1.7 times. For instance, yesterday prices for the gold on world market were $520 - $524 per ounce."
But the reporter sees something more than that afoot, and writes that "However, it looks like in reality the Central Bank (CB) is getting ready to buy massive amounts of gold, and the market prices will allow the bank to avoid accounting mistakes."
As grubby speculator trash, my sensitive Mogambo big-move detector (SMBMD) is going "beep beep beep! Beep beep beep!" I rush over to the printer, and the computer printout says that the salient point in all of that was "the Central Bank is getting ready to buy massive amounts of gold." Now, holding that thought in your mind, think about that basic cornerstone of economics, the demand/supply dynamic, and you will realize that a vastly increased demand, encountering a relatively static supply, is equilibrated by a higher price! I love this economics stuff!
- On Mises.com we read an essay by Stefan M.I. Karlsson, who is, he says, an economist "currently working in Sweden." He writes "The enduring legacy of the Greenspan era will be the large-scale confiscations of wealth and economic imbalances - all of it blamed on others." Hahaha! Exactly! Scapegoats will be found! And this is a cheap Mogambo lesson to foreigners (CMLTF); you are perfect scapegoats, and an easy target.
- You don't know my buddy Phil S., and so you probably think you don't owe him a thing. But if you are still a Young Mogambo Larva (YML), then you do, as he sent a graph from Ian McAvity's DELIBERATIONS on World Markets, which is, I assume part of Deliberations Research, Inc. Well, I don't want to go into all of that convoluted ownership/cross holding/ tax-angle mess, and so instead we will first concentrate on the work ethic of these guys, as the graph was dated 12/25/05, which means that these guys worked Christmas to get this information to you! What a nice bunch of people!
But it is more than some voluminous workaholic output, and Phil himself (who knows about these things) says "In my opinion, Ian's conception of the Dow/Gold Ratio years ago established the most important long-term guideline picture ever for critical investor awareness and successful planning."
But it is that graph itself that you obviously want to know about, as it is your Mogambo Guaranteed Path To Financial Bliss (MGPTFB). Anyway, it shows, finally getting to the damned point, the ratio of the DJI-Dow index/gold price index ratio plotted back to 1900, which was (as I finally determined after some tricky work with a calculator) 106 years ago.
What is so immediately interesting, so, riveting, so arresting is that the pattern is so regular, so perfectly saw-toothed, that it looks so fake. I mean, this is the Holy Grail of graphs, the kind that you desperately want because it is so reliable (but cannot find) when you want to speculate from a technical-analysis perspective and use it to make one hell of a lot of money with very little work and no heavy lifting. If only I could come up with a perfectly reliable indicator that would show, unambiguously, that once an identified trend is set in place (up or down), it just keeps chug chug chugging along, with you riding it the whole way. With such a graph, even a complete idiot like me could easily make a fortune!
Well, hold onto your hats, my little Mogambo buckaroos (LMB), because, in a nutshell, here it is! Here is the fabled "true path to an embarrassment of riches via technical analysis", because in 106 years there have been only three high points in the ratio, occurring in 1929 (18 ounces of gold to buy the DJI); 1966 (28 ounces of gold) and 1999 (about 43 ounces). There have been three lows in the ratio, too, and they were in 1900 (less than 2 ounces of gold), 1932 (2 ounces), and 1980 (one ounce).
And the beauty is that the path from low to high was, for all intents and purposes, never reversed until that final climactic moment, years and years hence, when the high (or low) was reached . Interestingly, it takes 25-40 years to go from low to high (stock market rising, gold falling), but only between 5-10 to go from high to low (stock market falling, gold rising).
Okay, now I assume that you are as retarded as I am, and that is why we always stupidly sit and scratch our empty heads, make funny faces at each other and giggle, covering up the fact that we don't know what in the hell these people are even talking about. But even new-born babies can plainly see that this graph clearly shows that during, ummm, the next 5 years (or so) the ratio will continuously fall to 1 again, meaning that one ounce of gold will cost the same price as buying one share of each of the companies in the Dow Jones Industrial Average, just like Richard Russell, of the Dow Theory Letter, says it will. Five years! So jump up out of your seats, contact the people who run your retirement plan and yell into the phone "The Mogambo was right! We're freaking doomed! Put everything into gold, immediately, if not sooner!"
Now, not being a whiz at math, I am still able to recognize that for the Dow/gold ratio to fall from 43 to 1, either gold has to go up (a lot!), or the stock market has to come down (a lot!), or both. More excitedly, we see that since 1999, it's done both, so the trend is already set. For the next five years or so, expect the exact same thing, but with increasing volatility, until the ratio again drops to 1. The graph shows that everybody who followed the lead of this graph for the last 106 years made a big freaking pot load of money.
Mark Lundeen has a ratio that he says is tops, too, and it so impressed Bill Murphy of LeMetropole that Mr. Murphy sent it out. His is the "currency in circulation" to gold ratio, or rather the, as he puts it, "indexed gold / indexed CinC"
He explains "Broadly speaking, when an economy's money supply expands at a rate slower than the goods and services produced, aggregate prices fall. When an economy's money supply expands at the same rate as the goods as services being produced, aggregate prices are stable. When an economy's money supply expands at a rate faster than the goods as services produced, aggregate prices rise. The Gold / CinC Ratio displays the relationship between the price of gold and US Currency in Circulation from January 1920 to the present. The logic behind The Ratio is compelling - if the Federal Reserve continues to create money and credit in unlimited quantities, gold's ability to revalue itself upwards in US dollar terms is also unlimited, given sufficient time."
Since I am tired of waving my hand in the air hoping in vain that he would call on me, I finally resort to the famous Mogambo Loud Aside (MLA) technique, where I stand up, turn around, and loudly ask a guy sitting in the back of the room "I wonder when the hell he is going to show me how to make money on this stuff, instead of giving me a damned headache with all of this Mister Math Whiz crap?"
Apparently, my subtly clever little ploy worked, as Mr. Lundeen immediately goes on to say that to get to the upper end of the historical range of this ratio "would require the price of gold to rise up to $5,200 an ounce." Whee!
Mr. Lundeen also sent along a witticism by Art Rolnick, Chief Economist for the Minneapolis Federal Reserve Bank, who supposedly said, "We make money the old fashioned way. We print it." I assume that this is supposed to be funny, but it mostly just makes me mad as hell, and the more I think about it the madder I get, until, suddenly, I usually lash out in a Mogambo Furious Rage (MFR), so it is best that I don't think about it..
- Hugo Salinas Price, big shot banker and the force behind the move to re-monetize silver in Mexico, writes that he accidentally read the Mogambo Guru newsletter and he still feels unclean from the experience. But the one thing that he did NOT hate in my whole newsletter was the thing about silver, and he says "The Mexican silver peso, of which 458 million were coined from 1920-1945, contained 12 g. of pure silver. At $8.88 US per ounce, that coin contains $3.42 US of silver. At $10.77 pesos to the dollar, that's $36.90 pesos worth of silver in those coins - still available. BUT, the actual price is really $36,900 pesos, because by sleight of hand, three zeros were knocked off all peso prices in 1993."
So, as I read this, and I'm thinking two things to myself: Firstly, if he thinks I am such an idiot, then why in the hell would he read my stupid newsletter in the first damned place? So who is REALLY the big stupid moron jerkface halfwit clown butthead around here? Smiling smugly to myself, I casually go on to my second point, which is, chronologically, secondly, "Who the hell cares about silver, OR Mexico, OR their stupid money, pesos or something, unless it has something to do with the price of some yummy tacos, or maybe a burrito, which it obviously does NOT? So screw it!"
He politely waits for me to finish my disrespectful little diatribe, and then you can almost hear the contempt in his voice as he says to me "So, since your august government is inflating in the very best Latin American tradition, you will soon have the very same Latin American effects: $8,000 Dollars for an ounce of silver, $40,000 dollars for an ounce of gold - ANY price is credible."
Oh, crap! Now, too late, I finally understand what he was talking about, and I look stupid again, just like he said I did. Crap.
Marc Faber is walking by and hears us talking about the price of gold, and while there is no telling how high gold could go, he is sure it WILL go up, as he is "convinced that the US Fed's monetary policies will lead to exponentially widening wealth inequity and impoverish the majority of US households, which will then lead to social strife, protectionism, war, and the breakdown of the capitalistic system." That's exactly what I think, too, although I stop myself from saying so out loud, as I am STILL getting hate mail from the last damned time I favorably compared myself to Mr. Faber.
So, instead, my legal staff informs me that I am allowed to say that I think that this bad stuff will happen because that is exactly what has happened every other time in history when some idiot government did these kinds of monetary and fiscal insanities, especially with the collusion of a central bank in control of all the other banks, and doubly especially with fractional reserve banking that has, currently, an essentially zero required reserve, meaning unlimited multiplication of every dollar in every bank, and triply especially with a fiat currency that can be created, literally at will, and spewed into the economy. And thus I am on solid legal ground when I say that both Mr. Faber and I agree with the entire corpus of the world's economic history, and although this does not necessarily mean he agrees with me, he actually does, and there is nothing he OR his snotty lawyers can do about it!
He says an ounce of gold could be worth a lot of money, and casually throws out the random figures "$36,000, $40,000 or $100,000" per ounce, although there is no knowing how bad things are going to get.
And speaking of fiat currencies and central banks, Robert McHugh of SafeHaven.com writes "For the past two weeks, the Fed added $93.5 billion to the money supply, a 24.0 percent annual clip. Over the past 6 weeks it is up $192.9 billion, a 16.7 percent Banana Republic hyperinflationary pace. Should be a fascinating storm in 2006."
- I was listening to the Stevie Wonder song "Superstition", and the words "When you believe in things you can't understand, then you suffer" rang in my ears as the perfect metaphor for the idiots in Congress, and in the universities, and in the banks, and in the economics profession, and the American people, who are all looking at the Federal Reserve creating all of this avalanche of money and credit, year after year, and us going deeper and deeper into un-payable debt, year after year, yet we all stand here with snot running down our chins and saying "Well, duuuhhhh! Umm, the bank says that we can get wealthy and, ummm, prosperous by going into debt to buy consumer goods! And then printing the money to pay the debts! Duuhhh! Sounds good to me!"
Well, it might sound good to those morons, but it does not sound good to everyone, as the essay "Doomsday for the Greenback" by Mike Whitney on OpEdNews.com clarifies. He says that "The greenback is the greatest swindle in human history; a worthless scrap of paper buried beneath a mountain of debt. It is only through the skillful mix of politics, diplomacy, and brute force that the grand deception is maintained. As America's fortunes grow more tenuous, the probability of attacks on the dollar will increase exponentially. Even now, nations are conspiring to knock the dollar from its towering summit and introduce a more equitable system."
- John Makin at aei.org reports, for all you budding econometricians out there, that the marginal propensity to spend out of wealth (the wealth effect) is 5%, or, as he says "about 5 percent of an increase in net wealth is spent by households." Now, being the curious type, you naturally want to know if there is also a corresponding marginal propensity to NOT spend in response to a FALL in wealth? I assume there is, so I will answer "Yes, there is."
He also reports that according to ICI, " In 2004, $2.1 trillion (or 70%) of retirement account mutual fund assets were invested in stock funds." Trying to show off a little, I put these two together because they are so handy; if there is a 10% fall in the stock market, then $210 billion in wealth will go poof? And that will engender a 10% percent fall in spending? I get the ten percent because the current extra 5% of spending caused by the marginal propensity to spend out of wealth will be gone, PLUS another 5% decrease in spending due to the marginal propensity to NOT spend out of loss of wealth, producing an additive 10%, roughly. And even roughly, this should be enough to scare the living hell out of you, economy-wise.
- Bud Conrad @ Financial Sense reports that things are getting strange in the gold trading pits. "Since the beginning of December, there has been a big jump in delivery notices by long speculators They now have 19,372 contracts (or 1,937,200 ounces) of gold called upon. This represents 42% of the registered gold in COMEX warehouses. (It was 38%)." So it looks like more people are deciding to take their gold home with them. This is added demand, which makes prices go up!
He goes on "The silver story is even more surprising The silver situation is even more extreme than the gold with the number of delivery contracts 8 times what they were in October. Delivery is now at 56% of registered ounces." Remember what I just said about how rising demand corresponds with prices going up?
Tom B. has been poking around, and writes that "the GLD ETF has added a huge amount of gold into the trust. For the four trading days last week it averaged a daily addition of 5.417 tonnes. If you take the 2004 world gold production numbers of 2478 tonnes and divide it by 365, the daily production was 6.789 tonnes. So, this one gold investment vehicle is now physically taking 80% of world daily gold production off the market place and storing it in a vault. Sounds like we're heading for a supply/demand crunch to me."
And there are weird goings-on at Comex, says Rob Kirby on FreeMarketNews.com, who writes "What is it that the Bank of Nova Scotia knows about gold that has required them [or their customers] taking ownership of approximately 1/6th of the world's most visible supply of gold in less than one month? Could it be, that investors who are amassing large stocks of precious metals through Scotia [and others] at COMEX - they intend to withdraw the physical [lock, stock and barrel] in the very near future - and suddenly there will be none? Investors should be aware that some serious accumulation is in fact occurring in the precious metals arena. Could this be foreshadowing another big move in the market?"
And then you look at how the price of gold has been zooming lately, and you slap yourself on the forehead and say to yourself "This supply/demand thing is everywhere!" Now, if you had earned the Investment Acumen merit badge as part of your regular Mogambo Scouting activities, you would see how you will be able to make a lot of money by buying gold and silver at these bargain-basement prices, and then you could buy all the damned merit badges you wanted, especially from all those guys who earned the badge but didn't do anything, and now it is too late, and from now on they will call me MISTER Mogambo instead of "Crudball", which I never liked anyway.
- As the denouement of all of the horrendous creation of money and credit unwinds into inflation and deflation and ruination and weeping and crying and screaming and The Mogambo standing at the street corner intersection, yelling at motorists stopped at the traffic light "Hahaha! You were killed by your own banks, you stupid morons!", you will increasingly see bizarre episodes like the New York City transit workers going on strike for more money, although their present pay and benefit package is already much bigger than the majority of people who ride the damned public transportation.
And to show you the seamy, sordid and lawless underbelly of the horror known as the modern unionized government worker, they went on strike, even though it was illegal. And because of the weird, socialist way that New York is, not only did they NOT get fired, as they should have, but their extortion worked! They got a boost in pay! And a promise of nice series of hefty boosts in their fabulous futures, too!
And let's not forget the budding blooming of the nascent "raise the minimum wage" campaign. Thus, inflation in costs means inflation in prices, as businesses have to raise their prices to pay for the increased labor costs. Thus, prices rise even further, canceling out the paltry gains in buying power provided by the raises, but also making life a lot harder for everybody else, especially those who do not even have jobs, which increases demand for government money and services, which means tax increases and/or more borrowing, and the creation of a more bizarre, distorted, mal-invested economy. We're freaking doomed.
Ugh.
***Mogambo sez: Although the Hulbert Digest did not report it, the performance of the Mogambo Guru newsletter would have been at the top of the heap again this year, seeing as how I have been consistently screeching about precious metals and commodities (especially oil)for the entire time, which are two of the top three big winners (the other being some foreign stocks), according to the Lipper Indexes. And to make it easy on you and the Hulbert Digest people, my top picks for THIS year are the same two categories, with a big old Mogambo emphasis (BOME) on gold, silver and oil.
Jan 4, 2006
Richard Daughty
email: scgcjs@gte.net
Daughty Archives
The Daily Reckoning
Richard Daughty is general partner and C.O.O. for Smith Consultant Group, serving the financial and medical communities, and the writer/publisher of the Mogambo Guru economic newsletter, an avocational exercise the better to heap disrespect on those who desperately deserve it. The Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning and other fine publications. |
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User ID: 60350
1/6/2006 2:07 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
China signals switch in reserves away from dollar
By Geoff Dyer in Shanghai and Andrew Balls in Washington
Published: January 5 2006 20:13 | Last updated: January 6 2006 02:43
Dollar and renminbiChina indicated on Thursday it could begin to diversify its rapidly growing foreign exchange reserves away from the US dollar and government bonds – a potential shift with significant implications for global financial and commodity markets.
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Economists estimate that more that 70 per cent of the reserves are invested in US dollar assets, which has helped to sustain the recent large US deficits. If China were to stop acquiring such a large proportion of dollars with its reserves – currently accumulating at about $15bn (€12.4bn) a month – it could put heavy downward pressure on the greenback.
In a brief statement on its website, the government's foreign exchange regulator said one of its targets for 2006 was to “improve the operation and management of foreign exchange reserves and to actively explore more effective ways to utilise reserve assets”.
It went on: “[The objective is] to improve the currency structure and asset structure of our foreign exchange reserves, and to continue to expand the investment area of reserves.
“We want to ensure that the use of foreign exchange reserves supports a national strategy, an open economy and the macro-economic adjustment."
The announcement came from the State Administration of Foreign Exchange (Safe). It gave no more details about whether this meant a big shift in the investment strategy for Chinese reserves, which according to local press reports reached nearly $800bn at the end of last year and are expected by economists to near $1,000bn this year.
The regulator also said it would end quotas on the amount of foreign currency Chinese companies can acquire to invest in overseas assets, a decision that removes a bureaucratic hurdle facing companies that plan to make international acquisitions.
The statement comes at a time of growing debate in China on how the reserves are invested. Some economists have called on Beijing to use the funds to finance infrastructure investment and clean up state-owned companies, or to invest in higher-yielding assets rather than financing US borrowing.
However, according to Stephen Green, economist for Standard Chartered in Shanghai, although the language was “vague”, Thursday's statement was the first time Safe has publicly indicated a shift away from dollar assets.
“It is a subtle but clear signal that they are interested in moving away from the US dollar into other currencies, and are interested in setting up some kind of strategic commodity fund, maybe just for oil, but maybe for other commodities,” he said.
The Group of Seven leading industrialised economies has repeatedly called for an adjustment in global trade imbalances, including a rise in the renminbi. The US has expressed frustration that China has not allowed its currency to rise significantly after last July’s 2 per cent revaluation. That saw China move from a dollar peg to managing its currency against a basket of currencies, potentially allowing the renminbi to rise against the dollar.
John Snow, US Treasury secretary, speaking earlier on Thursday, repeated his call for China to allow the renminbi to rise against the dollar. “The trade deficit is influenced by lots of things, differential growth rates, differential savings rates and investment rates and so on. But clearly, getting the [Chinese currency] more appropriately valued will be helpful to the global adjustment process,” he said.
However, some economists believe it would be a mistake for China to shift its reserves into domestic investment or other asset classes. |
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User ID: 61845
1/10/2006 8:44 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
Bush-America Seems Prosperous Only Because We Are Running Up The National Debt
Tell A Friend
Bush has increased our National Debt by 2.508 trillion dollars, or 44%, since he came into office in January of 2001.
by Rev. Bill McGinnis
[link to www.opednews.com]
Yesterday, Vice-President Cheney made a speech In Kansas City at the Harley-Davidson plant, where he broadly summarized the Bush Administration's new economic talking points. Claiming credit for the country's post-Sept. 11 "prosperity and security," he tried to justify continuing the obscene tax breaks/pay-offs they have given to the wealthiest segments of our population, at the expense of everybody else and their children.
Speaking optimistically, Cheney said, “The president’s strategy of cutting taxes delivered the pro-growth results we expected.” Then he went on to cite several statistical indicators which seemed to show that everything is just fine in the economy, and getting better.
You can read the original news story covering Cheney's speech at [link to www.kansascity.com]
What he did not say, however, was that the entire appearance of economic soundness is based on increasing the National Debt, just like a family running up the credit card in order to pay for their everyday living expenses. The economy today is artificially and deliberately "goosed up" to look good, by irresponsible Government borrowing to pay the bills, and by artificially raising the apparent value of houses, so that the "homeowner"/debtors feel more prosperous than they really are. (But if they sell their houses, where will they live, with all the houses priced too high? So it's a phony sense of wealth.)
Here are the official Government figures showing our skyrocketing National Debt since Bush came into office at the beginning of 2001.
Total Public Debt
End of the year 2005: $8,170,414,000,000 ( Read 8.170 Trillion Dollars)
End of the year 2004: $7,596,144,000,000
End of the year 2003: $6,997,964,000,000
End of the year 2002: $6,405,707,000,000
End of the year 2001: $5,943,439,000,000
End of the year 2000: $5,662,216,000,000
Source: See my table at www.loveallpeople.org/publicdebt.html, which I prepared from the official Government figures published by the Bureau Of Public Debt at www.publicdebt.treas.gov/opd/opdhisms.htm. You are invited to verify them for yourself.
So he has increased our National Debt by 2.508 trillion dollars, or 44%, since he came into office in January of 2001. This is borrowed money, friends: we have to pay it back. And who do we pay it back to? Maybe the Chinese . . . I haven't done the research on that yet, but we owe it to somebody! This is called "living in a fool's paradise."
And as far as "being more secure" against the terrorists: I don't know if I agree with that either. Maybe it's just the "calm before the storm." Millions of people truly hate us now, who simply didn't like us very much before Iraq. This cannot possibly be a good thing for our security.
So, all in all, I think the Cheney speech is total nonsense, and everybody should see it for what it really is: a fraud.
(P.S. If I somehow disappear, they came to get me and put me into one of
their secret prisons! God bless America!)
Blessings to you. May God help us all.
Rev. Bill McGinnis, Director
LoveAllPeople.org |
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User ID: 65046
1/20/2006 11:01 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
Hahaha! It's not IF gold will go up, my DLML...
Richard Daughty
...the angriest guy in economics
The Mogambo Guru
Archives
January 18, 2006
Countdown < - - - - - -
- I knew something was wrong when I woke up Friday morning. Not only was my Wall Street Journal missing, but my wife was acting real nervous and suspicious, and the damned kid was hiding behind the couch. What the hell is going on? I soon found out, and, as obviously predicted, was highly frightened to see that Total Fed Credit actually declined by $17 billion last week! The ability, or actions, of the banks in creating money out of thin air was, gulp, lowered by $17 billion dollars? In one freaking WEEK?
To be fair, reversing the excesses of the customary end-of-year monetary goosing by the Federal Reserve is pretty par for the course, as it happens every year about this time. But meanwhile, the money supply is still growing quite handsomely, as reported by Bill Bonner at DailyReckoning.com, who writes "In the latest reported week, more than $25 billion was added to the nation's money supply. If this were to continue, it would add more new money in 18 months than the present value of all the gold ever mined." Hahaha! The money supply is going up faster than the growth in the economy, which means that prices will increase (to absorb all that money), and the supply of money is increasing, in one lousy freaking year, more than the value of all the gold in the whole world? And now you wonder if gold is going to go up in price? Hahaha! It's not IF gold will go up, my darling little Mogambo larva (DLML), but how freaking MUCH it is going to go up in price! And I am betting gold will go up a LOT! And if it does not, then I will be surprised as hell (SAH) because this would be the first time in all of history when gold did NOT rise mightily in price when faced with the enormous economic idiocies, like the ones that currently bedevil us, especially when using a fiat currency as money!
But we aren't here to talk about gold and how freaking much money is going to be made in gold, although it is one of my favorite things to talk about. Instead, we were talking about the money supply, and almost as if by accident I happened upon the essay "The Fed's Money Supply Armament Is Underway" by Robert McHugh, which was posted on Financial Sense.com. He writes that the money supply figure known as M-3 "has been launched into outer space, up another $56.3 billion last week, up $92.4 billion over the past two. This is some real horsepower. Over six weeks," he says, M-3 is "up $177.8 billion. These annualized growth rates are 28.7 percent, 23.6 percent, and 15.3 percent respectively."
As soon as I read that, I gulped, suddenly nervous and edgy. He then soothingly adds that "Those are the seasonally adjusted figures." I think to myself "Whew! That was close! I coulda had a heart attack!" Now I am starting to relax a little, because adjusting "seasonally" and "annually" are two of my favorite statistical tricks. For example, suppose my wife starts up with that same old whining crap of hers, and says "You are a lazy, mean, worthless slob and I am sorry I married you, blah blah blah! And now I am going to make your life miserable, you smelly, horrible, disgusting creep blah blah blah."
In the past I would have suffered the humiliation like a manly Mogambo man (MMM), as she is (I am ashamed to say) right. But nowadays, things are different! Instead, I duck into a convenient phone booth, and emerge, seconds later, masked and caped, as Mogambo Statistician Man (MSM), whereupon I cleverly cut out her diabolical, hate-filled heart by brandishing real statistical proof (RSP) that she is a lying, hateful demon from hell.
"Wrong, hateful, lying she-devil (HLSD)!" I dramatically say. "I am NOT smelly, as I took a shower this morning! And adjusting the last few hours to an annual rate, I am thus proved to be ALWAYS fresh as a damned daisy, you hateful old crab!" If she is not soon reeling by this powerful statistical onslaught, then I hit her with my backup statistical proof, and triumphantly declare "And as for seasonally-adjusting, you nasty old biddy, since I took a shower today, historically this is very early in winter for me to be taking one. Seasonally adjusting the statistics, usually I have taken only 0.0042 baths so early in the year, and so I am waaaAAAaaayyy over trend here, so just shut the hell up! Shut up, shut up, shutupshutupshutup!" which does NOT, in case you are wondering, shut her up. Even though you just PROVED that she was an idiot who doesn't know what she is talking about! Sheesh! Women! Who can understand 'em, eh?
But this is not about how the heroic and long-suffering Mogambo tries so hard to be a good husband and father and how he is rewarded for his magnanimous efforts by treachery, although it DOES prey on my mind. Seeing that I am temporarily distracted, suddenly Mr. McHugh springs the trap, and says "The raw, non-seasonally adjusted, figure is up $293.3 billion over the past 12 weeks, on a pace to add $1.2 trillion in money to the economy." Bam! Right between the eyes! Stunned, I had to read that sentence several times, as my mind kept refusing to comprehend what I was reading, probably because I was screaming in fear. This kind of wild increase in money and debt gives me a case of the Screaming Mogambo Willies (SMW). Then he says, calmly, "Wow." That's it. Just "wow."
Outraged, I leap up and, utilizing my famous Mogambo Editor's Pen (MED), write in big, red letters on the wall, "Exclamation points missing! Exclamation points missing missing missing!!!" and I am angrily stabbing the wall with the pen for additional emphasis.
In fact, now that I think about it, this will be my entry into this year's hotly-awaited contest, the "International Most Egregious Lack Of Exclamation Points Competition"! In correct Mogambo literary style (CMLS), it should have read "Wow!!!!" which, when applied to economics, is your signal to buy more gold and wear a sidearm for the next couple of weeks, just in case. I urge these precautions because this kind of incredible, profligate, unbelievable monetary inflation means that we will get a corresponding price inflation after a just a little while, and people typically go berserk ("freaking bananas") when they can't afford to even live anymore because prices are so high, and then the kids start getting hungry and whiny and crybaby boo hoo hoo, and they think that just because I am their father that I am just going to, I suppose, voluntarily pay more money for food, like I have a magical money tree in the backyard or something.
But if you are sick of hearing me run my big, fat mouth and you want some hard, real evidence of inflation, then I can think of only two good sources. 1) Me grabbing you by the front of your shirt and screaming at you, while little drops of Mogambo spittle (LDOMS) hit you in the face, and your ears are ringing ringing ringing with the noise, and you cringe and struggle and cry, but I don't stop until you admit that you truly believe that inflation is up dramatically, up horrifically, up destructively and you agree that "We're freaking doomed!"
The other, less fun way, hereby denoted as 2), is to read things like the article entitled "Energy costs drive US inflation" on the BBC.co.uk website. It read, "Wholesale prices in the US rose at their fastest rate in 15 years during 2005, as the effects of soaring energy prices took their toll." The fastest rise in price inflation in fifteen freaking years? My hands shake at the prospect.
The actual numbers are no picnic themselves, in that "The Labor Department producer price index (PPI) rose 5.4% in 2005, driven by a 23.9% hike in energy costs. For December, the PPI - which gauges price changes before they reach the customer - rose 0.9%, the biggest jump since September's 1.7%."
Not only that, but "Food costs moved up by nearly 1% in December, following a 0.5% November gain." If you are a carnivore, then you're in better shape than those poor vegetarians, who got clobbered in December as the price of vegetables "soared 22% during the month, the biggest gain in more than a year." But even we vicious, meat-eating, super-predator omnivores are looking at inflation in food prices that are, annualized, 12% a year! This is the stuff of Nightmares on Federal Reserve Street, which is not a movie, but if it was, it would scare the hell out of you, and you would die of a heart attack just from watching the fearful effects of inflation caused by creating too much money and credit, which is why they don't make the movie.
And speaking of rising energy costs, Doug Noland passes on the news from the Financial Times, where Carola Hoyos writes that "The oil revenues of the Organisation of the Petroleum Exporting Countries, the cartel that controls 40 per cent of the world's oil supplies, will increase by 10 per cent to a record $522bn this year, the US Department of Energy forecasts."
Now, I am sure that you noticed that they didn't say that OPEC was going to be pumping 10% more oil, mostly because OPEC ain't a-gonna be pumping no 10% more oil. And in fact, if Peak Oil is here, they will probably be pumping LESS oil. So the increase in "oil revenues" that OPEC will be making must, by process of elimination, be because of higher prices. Yikes! So prices are going to be 10% higher?
Or, if you want more proof of inflation, how about Jeff Clark in the Rude Awakening column? He writes that "palladium and platinum are becoming so valuable, the St. Louis Post Dispatch reports, that they are become the target of thieves, who are stealing cars in order to extract these precious metals from catalytic converters."
So I raise my hand and say "Hey! Here's an idea! How about starting a company that manufactures booby traps for catalytic converters, so that if somebody tries to steal it, it blows their damned arms off?" A look of horror crosses his face, and taking a few steps away from me in disgust, he hurriedly goes on to say "The fundamental argument for owning palladium is growing stronger by the day. That's because industrial demand is growing stronger by the day. (And it probably doesn't hurt that commodity funds are continuing to pour money into the precious metals sector). Palladium can perform many of the same industrial uses as its sister metal, platinum. Therefore, in the palladium market, it is important to pay attention to the price relationship between these two metals."
"Hmmm!" I think to myself. "Is he talking about some linkage of the two metals that I can exploit? And maybe make a zillion dollars by exploiting this linkage between the two metals? And then maybe I can pay back some of the money I have borrowed from people all these years? Nah! But can I exploit the price linkage to maybe make a zillion dollars anyway?" Well, perhaps! Listen, as I did, as he explains, "Throughout the late 1990s, these two precious metals tracked each other pretty closely. But in 2000, the price of palladium spiked due to supply disruptions from Russia. As the palladium price soared, many industries began substituting other cheaper platinum group metals. So by the time Russia resumed shipping palladium, industrial demand had disappeared. The palladium price plummeted from more than $1,000 an ounce in 2000 to less than $200 an ounce by 2003. But palladium finally started inching up again late last year. This appears to be the start of something big." Why? He explains, "I expect industrial demand to continue booming, as long as the price spread between platinum and palladium remains as wide as it is currently." Oh! That's why; the linkage we were looking for, with which to make that zillion dollars! So buy palladium! I love this investing stuff because it is so easy!
Anyway, the bottom-line upshot of all of this is that today, right now, is the perfect time to buy palladium, as he more than intimates when he says "With platinum at $1,030 per ounce and palladium at $270 per ounce, the price differential between the two has reached a record-wide spread."
Bill Bonner abruptly comes out of his office, sniffs the air, and says "What in the hell stinks around here? Is the stupid Mogambo in the damned building again?" I pop up and say "Hi, Mr. Bonner!" and he demands to know who let me in, and I tell him we are talking about gold and palladium as I was just leaving. He looks me right in the eye and says that if you want to talk about gold, then we might be interested to learn that "The price has doubled since George W. Bush became president." Yes, that was sort interesting, but as an old-time Republican, I am ashamed and embarrassed to talk about it. Or Bush. Or neo-cons. As dispiriting as that is, my attitude is immediately improved when he goes on to say "Our guess is that it will double again before he leaves office"! Suddenly, without warning, the great grasping greed gland of The Mogambo (GGGGOTM) squirts out some hormone into my bloodstream ("squeeeshhhhh!"), and I instantly realize that 1) if the Constitution is still in force and 2) if the election goes off when planned, then 3) gold will double in a little more than two short years from now! Hahaha! And the shares of mining companies ought to, what? Triple? Quadruple? Hahaha! Bonanza! I love this investing stuff! It's so easy when central banks act so stupidly!
- Doug Casey, in an essay on the DailyReckoning.com site, gets into discussing government, and says "Frankly, I never expect anything good from government. And here I refer to the institution itself. How can you, considering that its main products are wars, pogroms, prosecutions, persecutions, taxation, regulation, inflation, and assorted idiocy?"
As if to prove the point, Bill Bonner reports that "Senator Max Baucus of Montana, along with many others, think there is something wrong. It seems to them that China must be getting away with something. They're not sure what it is that China is doing wrong, but they're determined to put a stop to it. 'Washington may take measures,' Baucus warned the Chinese."
Like what? Well, how about "Among the measures Washington may take is a trade tariff"? What is the effect of a tariff? It "would increase the cost of Chinese exports by nearly 30%." Hahaha! A thirty percent price inflation! Punishing the Chinese by making things more expensive for us? This idiot can't possibly be serious! I howl in my outrage! OwwwwWWWWwwww!
Bill Bonner is much more dignified when he says "What are the poor lumpenhouseholders to do? They pay more for energy. They pay more for healthcare. Their house-as-ATM financing strategy is breaking down. And they earn less money than they did two years ago. About the only thing they have left are those Everyday Low Prices on manufactured goods from China. And now, along comes a U.S. senator with a plan to force prices up."
But, then again, that is what government does! And it just keeps getting worse and worse because there is so much, so much, so much, so damned much government. And how big is the damned government, anyway? In a clever attempt to demonstrate with gestures, I stretch my arms out real wide and say "Bigger than this, even!" Carla Howell, writing the essay "Big Government Is Even Bigger Than You Think " on LewRockwell.com, laughs in contempt at my puny Mogambo efforts (PME), and has a better way of demonstrating how big the government is. "Federal, state, and local governments together," she writes, "directly spend a whopping $4.8 Trillion - every year." Assuming a $12 trillion dollar economy, this is 40% of GDP! Note the use of an exclamation point.
But then there is also the "off-budget" money. She writes "Conservative estimates give us total off-the-books federal, state, and local government spending of at least $700 billion annually. Add this to the on-the-books spending, and you get government spending of $5.5 Trillion - every year!" Again assuming a $12 trillion dollar economy, this is 46% of GDP!! Note the use of the rare double exclamation points.
"Big Government mandates - compels us to spend - another $1.5 Trillion to $3 Trillion every year. This is the externalized cost of government, i.e., the amount that governments force businesses, non-profits, and citizens to spend to comply with government regulations. Combined direct and mandated government spending may well exceed $7 Trillion." Yikes! The government spends more than half of the entire economy!!! Note the extremely rare triple exclamation points! This is big-time stuff in the category of "Economic insanity."
So how would you describe how big government is, but without actually using numbers? She thinks about it for a moment. "Big Government in America is so huge," she says, "it boggles the mind and numbs the senses."
And if you are thinking "What in the hell do they do with all the money?", then welcome to the club. Well, perhaps Robert B. can help enlighten us when he writes "The 10 Commandments: 179 words. The Declaration of Independence: 1,300 words. The US Government regulations on the sale of cabbage: 26,911 words. "Hahaha! Now you know what they are doing with their time!
- There has been a lot of consternation lately about whether another "confiscation" of gold, like FDR did in 1934, is right around the corner. To be accurate, I will quickly add that no gold was actually confiscated, as the owners of bullion gold took the gold (worth $20 dollars per ounce) to the bank, and the bank took the gold and gave them twenty bucks in cash for it. Remember, the purpose of rounding up the gold in 1934 was to "free up" idle wealth (in the form of gold tucked under the mattress) and put depreciating dollars in people's pockets, so that they would (theoretically and hopefully) spend some (increasing aggregate demand), and put some in the bank (creating bank reserves).
And another big, burning question for The Mogambo (BBQFTM) is "What about numismatic coins that are so rare that they acquire premiums over the melt value of the coin and were exempted from the FDR 'confiscation'?" The real reason that rare and valuable coins were exempted from the gold round-up was that the government would have to pay the higher prices, as the Constitution prevents the government from merely taking your coins, but has to pay full market price for them. So, paying $20 an ounce for 24K raw, bullion gold was plenty enough, but picking up one more stinking ounce in the form of a rare coin valued at $5,000 was another thing all together!
And besides, there weren't that many rare and valuable coins, and it wasn't worth the hassle nor expense, especially since Mogambo-hardened sharpies like you, seeing that the government had boxed itself in, would have colluded beforehand to bid up the price of rare coins, selling them back and forth between us, back and forth, around and around, driving the prices to astronomical levels, which the government would be, by law, required to pay. And THAT is why valuable and rare coins were exempted.
- I don't know why, but it struck me as real funny when Chris/Super says "That guy bringing all those gifts over the years wasn't Santa Claus, but a future bill collector wrapped in a China flag."
Glenn K also sent me the something else that confused me. It was a news bit from Reuters that read "Increased globalization has lessened the usefulness of concepts such as output gaps or capacity restraints for monetary policy-makers, Dallas Federal Reserve Bank President Richard Fisher said on Friday. The concepts of output gaps for economists or capacity constraints ... are rendered nonexistent." Huh? I am so confused that I don't know what to think. I include it because I am not only nonplussed and, thus, at a complete loss to even vaguely comprehend what he means, but also because it seems somehow important to know that such gibberish came out of the mouth of the president of a Federal Reserve Bank.
- Rick Ackerman of Rick's Picks actually used the phrase "global annihilation" in the context of something economic, like "We're freaking doomed to global annihilation, just like The Mogambo said we would! He is a god! Fall on your knees and worship Mogambo! All hail Mogambo!" Well, okay, truthfully, he did not, you know, actually use those EXACT words. But he DID use the phrase "global annihilation", which is bad enough!
Anyway, then he asked "Where is Klaatu when we need him?" Hahahaha! But is it entirely coincidental that Mr. Ackerman brought up Klaatu from the movie, "The Day the Earth Stood Still"? You be the judge: It is a little-known fact that if you play the famous phrase "Klaatu barada nictu" backward, you hear "Run for your freaking life, Klaatu! These people are freaking morons!" Which could, and probably does, explain why Mr. Ackerman mentioned both "global annihilation" and Klaatu at the same time!
- Adam Hamilton of Zeal LLC.com and appearing on SafeHaven.com hears me talking about gold, and says "prices trading near 25-year highs. The core tenet of successful investing is to buy low and sell high. So if an asset is trading at a quarter-century high-water mark, then odds are its price is pretty darned high at the moment and therefore a bad buy, right?" I silently nod my head like I understood what in the hell he was talking about.
Then he says "But gold, believe it or not, is still a great contrarian investment even at today's quarter-century nominal highs. How is this seemingly absurd thesis possible?" Everybody is suddenly looking at me to supply the answer, as if I had any freaking clue. But being the classy guy that he is, Mr. Hamilton saves my bacon and immediately goes on to say "The answer is the measuring stick for any investment pricing, the US dollar, has radically changed in the last several decades. A dollar today is worth vastly less than a dollar was 25 years ago, the last time gold closed over $550."
He says to take a look at prices in the early 1980s. "They were almost trivial compared to what we face today," he writes. "The median home price in the US was $76k. You can hardly even buy an empty lot in suburbia for this today, let alone a house. The median American income was under $18k. Today $18k is actually below the official US poverty line for a family of four! A first-class postage stamp ran 15 ¢. The average new car was about $7k. So a quarter century ago the $550 it cost to buy an ounce of gold went a heck of lot farther in terms of buying real goods and services than it would today." Exactly, my man!
Then, because he is such a nice person, I suppose, he sums it up by stating the truism "Anytime the money supply of a particular era or place grows faster than the supply of goods and services on which to spend it, general prices are inevitably driven relentlessly higher. This financial law is as immutable as gravity."
So, how is gold doing in terms of gains in buying power over the intervening, inflationary years? "Gold last closed above $550 nominal on January 23rd, 1981," he says, "almost 25 years ago to the week. Yet adjusted for inflation, an ounce of gold was really worth $1266 that day in purchasing-power terms. Thus, in order to truly see the quarter-century gold highs that the financial media is wailing about, gold in today's dollars would have to head north of $1250." So gold is priced at less than HALF of its record price! Wow! What a bargain! Hahahaha! It's like oil selling for less than $30 a barrel! What a freaking bargain!
And with the relatively-near future value of the dollar being an estimated 30% lower than it is now, then gold is so cheap (audience yells out, "How cheap, Mogambo?") that if you are NOT buying gold, then I laugh at you, and disparage the intelligence of your parents that you are so stupid, and insult your significant-other that they are so completely worthless that they have to love a stupid clot like you, because nobody with any smarts or standards would have anything to do with you or them. And it sounds like this: "Hahahaha!"
And since we are talking about gold in terms of its buying power, he further calculates that "From the mid-1970s until the mid-1990s gold rarely went below $500 in today's dollars, so $500 gold really is historically cheap. Today gold would have to challenge $1000 before it started getting expensive and it would have to rocket up near $2200 to hit all-time real highs."
Then, saving the best for last, he says "Assuming these growth rates are roughly correct, and compounding them for the 25 years since 1980, the world's money supply has ballooned by 5.4x. Meanwhile the global gold supply is only up 1.3x. Dividing these 25-year growth estimates yields a ratio of global-fiat-currency-supplies - to-gold-supplies of about 4.2x. Now there is 4x as much fiat paper floating around relative to gold as there was in 1980! The $850 spike high in January 1980 multiplied by this ratio yields an all-time gold high of $3570 in today's dollars."
My ears prick up when he says $3,570 an ounce, but by this time my brain is numbed to senselessness by all these numbers whizzing about, and in a state of stunned semi-consciousness I am drooling down the front of my shirt. Disgusted at the sight, Mr. Hamilton tries to distract himself by trying to think of a way to impress upon dullards, like me, at least the bare rudimentary essence of what he was trying to say. Finally giving up, he merely says "My core thesis that gold is cheap today in real terms."
And if you wanted yet another reason to buy gold (although I personally find it hard to stand upright under the weight of the sheer tonnage of damned good reasons to buy gold right now), then Julian Phillips of the Gold Forecaster - Global Watch newsletter has one for you. He writes that the gold market is changing, "Suddenly the Exchange Traded Funds took control. StreetTRACKS Gold Trust saw its holdings jump by an enormous 10% in the year to date (2006)! These volumes are sucking in all the Central Bank Sales and some. On the other side, no one wants to sell."
He then reports some impressive movements of gold into the Exchange Traded Funds. "The week to 2nd January saw them adding a 17.8 tonnes, followed by Wednesday, Thursday and Friday bringing another inflow of 23.5 tonnes, taking total gold holdings to 384 tonnes. This is an enormous rise." Yes, it IS enormous, Mr. Spina, and it means that demand is increasing dramatically, but since supply cannot increase, that means that the price will continue to go up and up and up as long as demand outstrips supply!
- From Doug Noland we get the chilling news that Bloomberg News reports "Venezuelan President Hugo Chavez said he plans to increase salaries for government workers by as much as 80 percent this year." I hate to be a stickler here, but notice the lack of an exclamation point, which one would naturally expect when the government has just announced that they are going to shoot you, and everyone in your family, with a machine gun. Oops! I mean, when the government has just announced that they are going to destroy the money and the economy, which is just about the same thing.
The point is that if you know anybody in Venezuela, tell them that The Mogambo has put out an Important Mogambo Bulletin (IMB) that was obviously censored by the media since nobody seems to have read it, that the money of Venezuela is going to get destroyed with price inflation and government-expense inflation, and that I'll bet that smart people in Venezuela are screaming "The Mogambo was right! We're freaking doomed" and are buying gold right now, and I mean right freaking now. Anyway, that's what I would do.
Ugh.
****Mogambo sez: Mogambo him say oil go up. Oil go up. Mogambo him say gold go up. Gold go up. Mogambo him say silver go up. Silver go up.
Mogambo him big medicine. Mogambo now say too buy heap big oil, gold, silver. |
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