‘Gold's advance to super cycle indicates demise of dollar, collapse of economy’

‘Gold's advance to super cycle indicates demise of dollar, collapse of economy’

By Jijo Jacob


The runaway rise in gold prices is here to stay. And that is not just bad news to the U.S. economy. A sustained gold and oil boom indicates that the dollar is slipping into grave danger and the economy closer to collapse.

"... when these commodities go up in price it is a sign that the U.S. dollar is dying and that our country is getting closer to economic collapse," Michael Snyder wrote in Daily Markets on Thursday.

In simple words, the gold and silver boom indicates that investors everywhere in the world are losing trust in the dollar and the U.S. government treasuries. And they seek out something they can trust more.

A Standard chartered Bank report on Thursday said dollar will further weaken against the Chinese yuan and Indian rupee.

Synder blames the quantitative easing for the loss of dollar value. He says the policy of pumping huge amounts of money into the financial system is highly inflationary and a form of cheating.

He says it is "like playing Monopoly with someone that reaches under the table and pulls out a bunch of extra money when they are almost broke."

"The U.S. has been running trillion dollar deficits for several years now, and this has created a lot of new money." And he says the rest of the world is now seriously doubting the sustainability of U.S. government debt. And this is reflecting in the commodities boom.

The Standard Chartered bank report said gold prices could reach $2100 by 2014 per ounce and that as high a price as $5000 per ounce by the end of the decade is possible.

Gold prices have currently crossed the new record peak of $1460, which is a manifold jump from a lowly $265 at the start of the decade.

The bank said gold prices are yet to hit the super cycle as demand from the emerging economies like China and India will scale to peak levels later in the current decade.

"We find that there is a powerful relationship between income per head in Asian emerging markets and the gold price, which suggests further significant upside for gold," the report says.

Besides gold, silver is inching to another peak of $40 and there is already talk that it will soon touch $50. While the rise of oil prices is owing to different a set of reasons, this also implies serious troubles for the U.S. economy.

Snyder says high oil prices are indicative of greater damage to the economy than high gold prices.

Deflationists & Blind Eyes

My forecast has been for a powerful Inflationary Recession to occur, a consistently laid out analysis, delivered during the last year or more in clear terms. That has been my call, and continues to be my call. The Deflationist camp is making more noises. They do not know their limitations, which are obstructed by a blind eye toward the monetary inflation. They do not understand it, so they ignore it, and attempt to encapsulate it into a convenient bottle set aside on the margin. Gonzalo Lira will be proved wrong about price inflation showing on the official Consumer Price Inflation index. So what? The prevailing price inflation will ramp past 12% easily as he also predicts. His style is wonderful, even if a mirror is a fixture at his desk. His details in argument are strong and cogent. An anger meter is a fixture at my desk. So what? Since the emergency G-7 Meeting held two weeks ago, the central banks have joined forces in a Global QE movement that will propel the Gold & Silver price much higher and render deep further damage to the USDollar. The Deflationists paid no notice, or did not notice, or did not comprehend the importance. They are a laughing stock crew of half blind shamans.

USFED MOUTHPIECE ECHOS

The Deflationists fail consistently to measure the flow or pace of inflation, seeming mouthpieces without realization for the USFed and Wall Street itself, whose incessant calls of dreaded deflation have opened the political floodgate for global monetary hyper-inflation. They do not even recognize their compromised subservient support role. The aberrant crowd of Deflationists have a blind eye to the dynamics of inflation, and how it transforms from excessive funds in the financial system, to reaction against the USDollar, to rising commodity prices, to rising cost structure, and finally to extreme pressures for end product prices, including higher wages. They dismiss each step of the way, and do not bother to explain their progressive errors along the pathogenesis pathway. The USFed has passively developed followers like a Pied Piper. They are just lousy economists in the Deflationist camp. A good technical analyst on chart interpretation in no way makes for economist qualification. They cannot integrate complex systems where both asset deflation and monetary inflation coincide, collide, and conspire to produce economic wreckage and price inflation. They act sheepish when what they predict will not happen, actually comes to pass. Recall they have been preaching for three years that crude oil and gold would descend lower in prices. They serve as the bell tower in an empty village. They have also been preaching that end product prices would fall also due to low final demand. They are consistently wrong, but never apologetic. Sadly, most Deflationists cannot adequate even define deflation, even when challenged. It is a catch-word they fixate upon, that permits them to dismiss anything and everything pertaining to the ravaging complex effects of monetary inflation, whose dynamics are beyond their scope of comprehension, perhaps even recognition.

Mine are not rants, but detailed arguments with numerous factors fortifying arguments put forth toward a thesis defended on many fronts in broad fashion for over five years. To be sure, my work includes some invective due to overflowing anger at the system having gone so far awry with deep fraud, coordinated media deception, impunity for those responsible, and elevated powers granted to them during reforms. Rants are shallow harangues. Mine is thorough analysis put to paper. These guys should consult a dictionary, as some of their own haughty dismissals fail to address or respond to much of anything my work has put forth. The word rant might invite an accusation of shallow in the mental process. They often argue in a circle under the pretense of confrontation, never addressing important points like the flow of the increased monetary aggregate, and its destinations with strong effects. One analyst in particular should really stick to what he does best, that being technical chart analysis. While the historical economics books of the past are indeed enlightening in theory, little truly applies to explain all that occurs in the profound intervention and rigged financial markets led by a criminal elite class whose main enterprise is clearly war and narcotics, followed by orchestrated chaos designed to permit broad elite powers. Their past excellent work should be kept on the wall for constant reminder of true market forces, true economic forces, all of which are opposed by powerful criminal actions and heavy handed monetary policy.

THE BLIND EYE TO INFLATION

My main ongoing criticism of the Deflation camp has been their blind eye to the human response to asset deflation. Obvious home prices fell and continue to fall, and related asset backed bonds have fallen progressively into ruin. That is not the point. Their camp has consistently ignored the central bank response with multi-$trillion monetary expansion. In round #1, the excesses were tucked away in the Federal Reserve interest bearing account for the big banks. They were essentially Loan Loss Reserves of those banks, which were removed from the big bank balance sheets only to be relocated on the USFed books. In round #2, the excesses went global with the entire commodity complex exploding upward in price. Purchase of USTreasury Bonds in the hundreds of $billions cannot be contained anymore than herding tiger cats. Most noticeable among commodity price rises was in food & energy. With most food items up 15% to 20% in price in a single year, and gasoline up 25% in several months, the pinch is on with powerful price inflation. But it appears on the cost side, as my analysis has mentioned numerous times. What the Deflationists miss from the start is that the extreme storm conditions come from the falling asset prices and wage effects on the one side to form a low pressure zone, meeting the rising monetary expansion and counter reaction by commodity prices against the debased USDollar in a high pressure zone. Thus the collision and powerful storm vortex, which they miss with blind eyes. Their camp never addresses the storm conditions, ever. The Deflationists show their blind eye by overlooking, or ignoring, or never noticing the storm itself, where natural collapse meets extraordinary monetary aggregate growth in reaction. They never mention multi-$trillion central bank expansion of the money supply, which debases the value of money, even making a total mockery of money, thereby adding to the cost structure in a massive way, pressuring prices and wages. The rising stock indexes serve as evidence of the monetary inflation, which they do not recognize.

My point made consistently is that wages will not keep pace with rising costs, even made a national priority to halt the secondary inflation effects on wages. In that sense, my analysis has joined the Deflationists, but only with one foot in their shallow pond of constructs, hardly qualifying as a School of Thought. Since wages do not keep pace with costs, the unemployment will rise and has risen, a point made consistently here. Therefore my work cannot be carelessly labeled as over the top inflationist. Sadly, most Deflationists do not understand how to read my analysis, because they operate with a blind eye to the many sided crisis, too focused on his narrow perspective that cannot adapt to the current complex situation. The Deflationists cannot integrate into their shallow thinking the combination of inflation on the monetary side and deflation on the asset (and wage) side, surely a difficult and extraordinary situation loaded with complexity. They lost my respect long ago, the entire clan. Most of their followers in paid subscription services suffered crippling personal financial losses. A few analyst newsletter writers from their camp have learned nothing and continue their tired saw with shallow analysis and a string of wrong-footed forecasts. So be it!

IMPORTANT CRUX OF THE MATTER

The heart of the matter is not the outcome, but the path to the end point. If a man and woman are destined to be placed in a cemetery crypt, is that a reason not to marry and enjoy a life together, filled with bliss and human challenge? Of course not. One should hate to be married to one of those Deflation Knuckleheads, a downtrodden and bleak crowd. The pathway is where fortunes are made and lost. The Deflationists have gotten it wrong for a long time. One should not be overly concerned about three years from now if an economic collapse takes place. That is the obvious outcome, not too challenging an issue at all. The Deflationists believe they offer wisdom in such a pronouncement. It is obvious. The wrong-footed Deflationists have focused on for a long time, with precious little elucidation of the path to the end. My concern is the extent to which the cost structure will rise, and then how much the end product & service price system will rise, and how much the wages will rise in compensation upon concerted demand. The Deflationists have ignored the pressure in 2007 and 2008 and never foresaw the entire Quantitative Easing movement, which was forecasted with ease in the Hat Trick Letter. The Deflationists consistently ignore the powerful effects of Quantitative Easing itself. They dismiss the human response to falling asset prices. The only conventional assets rising nowadays are stocks and farmlands. The thesis put forth that DEFLATION WILL PREVAIL BY SNUFFING OUT THE HYPER-INFLATION represents a cavalier avoidance of the entire sequence toward the end, reveals lack of comprehension of the extreme forces in conflict, and attempts to sit above the fray in arrogance beset by ignorance. Of more concern to me, and millions of people, is the important middle portion of the game, that happen from innings three thru eight. The ninth inning calls by wrong-footed blind eyed Deflationists pale by comparison to discussions on whether banksters take global control of governments, how the current monetary system is fracturing, whether new monetary forms are shoved down our throats, or how an alternative oppositional monetary system can overthrow those in regimes in power. They never discuss such lofty but important concepts, since they do not comprehend them, cannot perceive them, and cannot envision them. They retreat from such discussions.

The Deflationist themes ignore the Inflation story. The G-7 Meeting to adopt the Yen Selloff Pact was a veiled GLOBAL QE ACCORD. The pact has not even been discussed by the shallow Deflationist camp even though it is the most signficant policy directive since September 2008, more important than the original QE decision in March 2009. That is because it is Global QE, stamped and approved by the major central banks, monetary hyper-inflation gone global. The Deflationists live in a cave, unaware of such events or dismissive of them in arrogance. They instead continue to defend the wrong-footed construct of Deflation. In personal email and telephone exchanges, my habit is to constantly laugh at their pre-occupation with Deflation. On more than 40-50 occasions with certain contacts, my reply is simply WHAT IS DEFLATION?? Shallow responses come in return, unimpressive one and all. We will continue to experience and suffer both deflation of assets and wages, during a massive storm of hyper-inflation from central banks. The inflationary effect is a perverse factor toward the real game on stage. Do not expect wages to keep up with the rising costs. This has been a major point of mine all along, so a massive squeeze will continue. The Deflationists do not understand the reaction to the squeeze, focusing arrogantly on the endpoint. Their work is of little practical value, certainly of zero investment value. The squeeze will render harm to both households and businesses, with lost discretionary spending and lost profit margins. Their debate over which prevails misses the entire point. That is, the Deflation will continue in certain asset classes, especially housing and commercial property, while the Inflation will continue in monetary aggregate, TO MAKE A GROWING POWERFUL DAMAGING GLOBAL HURRICANE. Much end product price inflation will come. More end service price inflation will come. See shipping charges for a start. It seems obvious that the Deflationists ignore the battle and try to describe the outcome in narrow myopic terms. In a sense, they are the flat earth society.

ELOQUENCE LACED WITH IGNORANCE

Obviously, we cannot have a Weimar-style hyper-inflation. We do live in a credit based global economy. But the reasons why differ since the current global situation is different. The Weimar conditions were local to the microcosm that was Germany. It was enclosed. The current situation has its Weimar elements, especially endorsed by the recent March G-7 Meeting. That is global Weimar by any name, given its global coordination of USTreasury Bond purchase after broad discharge from Japan. The Deflationists cannot comprehend a global Weimar concept.

FURTHER REBUTTAL TO THE BLIND EYE

To begin with, 12 to 18 months ago the Deflationist camp claimed the price of crude oil and the Gold price would fall and dramatically so. Wrong on both counts. Curiously, the camp avoids defending their wrong-footed points as the months pass, while the crude oil price zips past $120 (Brent that is, since West Texas is the province of paper games), while the Gold price hurtles toward $1500. Have Deflationists not noticed? People are moving rapidly out of quickly debased paper money and into tangible goods. Conversion of USTreasurys has become commonplace among sovereign wealth funds. Have Deflationists not noticed? This is the basis of the commodity price rise and the basis of the precious metals price rise. The USFed has in fact picked up almost the entire slack in USTBond purchase during the massive conversion process. The movement is better observed outside the US Dome of Perception, where foreign USTBond creditiors have openly halted their USTreasury bids, replaced by the USFed printing pre$$ eagerly. Foreign sovereign wealth funds across the globe have openly expressed their dismay over the entire QE initiatives, anger of unilateral monetary policy decisions made in the United States with seeming contempt, and the consequent harsh effect on commodity prices. They have increased their gold (and even silver) purchases in conversion of US$-based assets. They have rebalanced their reserves. They have stopped bidding at USTreasury auctions. Have Deflationists not noticed?

Germany's financial collapse took several years. So is the US financial collapse, a long painful process. What began with a subprime mortgage problem in mid-2007 spread to a full blown housing decline, a bank insolvency problem, then a sovereign debt problem, then a monetary inflation solution with severe blowback, and now a monetary system discredit problem. The pathogenesis has so far spanned four years. Have Deflationists not noticed? Anyone who believes the US financial collapse could occur in a single week is a moron. Actually, such an observer would be a blind man and moron. The US banking system in my view suffered a death experience in September 2008. The coroner was overridden by the Financial Accounting Standards Board, thus declaring the corpse permitted to walk with props and to speak from a recorded message, pretending to be alive. After April 1st decree in 2009, the Zombies have roamed the US landscape freely. Have Deflationists not noticed? The big US banks have been operating with an Extend & Pretend policy that their crippled balance sheet overloaded with toxic credit assets will somehow recover in the next year. Instead, the Real Estate Owned (REO) residential homes on the bank books have ballooned to over one million properties. Almost half of all home sales are short sales and foreclosure sales. The entire process has been extended to the extreme over times. Have Deflationists not noticed?

Financial assets are indeed being shifted into hard assets, in particular the basic commodities. Nations are building stockpiles. The main focus has been on crude oil to the commecial side and to Gold & Silver on the financial side. But some speculation has come to the copper market (which JPMorgan seems interested in), to the coffee market due to problems in Africa, to the sugar market (which JPMorgan seems fond of), and to the cotton market from broad necessity. Financial mavens, news anchors, and hedge fund managers have all been touting their strategies in response to runaway monetary inflation commanded from the marbled offices of the USFed. They respond to the devaluation of money itself. The migration to hard assets is well along. Have Deflationists not noticed?

Did somebody say there was insufficient currency to drive up and power hyper-inflation? Excuse me, but that statement truly misses the 800-pound gorilla sitting at the Deflationist dinner table. The USFed has expanded its balance sheet to over $3 trillion. The USFed has printed over $2.7 trillion in QE programs, with much more to come. That figure does not account for their secretive monetary extensions, like grants without collateral to fellow central bankers and friends of the syndicate. In fact, the QE program will soon be announced as ended, since so offensive, when in fact it will be incorporated and melded completely into routine weekly activity. The Euro Central Bank, the Bank of England, and the Bank of Japan have all joined in the paper confetti production enterprise. Have Deflationists not noticed? The spillover from the banks who hoarded the USTBonds took place and the spilled funds hit the commodity market. The Deflationists claimed it would not happen, no spillover of any kind. They were wrong. The next spillover will be to end product prices, and to some extent wages. The Deflationists will be wrong again. But the wage hikes will not be adequate to manage the higher costs to come. The increase in money supply plays out symptomatically under their noses without much recognition or comprehension.

The next phase will be for Cost Push, which will introduce higher prices and smaller packages by vendors. Then come demands for higher wages with high pitched battles. Some will be won, many will be lost, especially given the state government union legislation that has bagun to ban collective bargaining. The workers will lose more than in the 1980 decade, when 10% and 12% salary gains were commonplace. The corporations are supposely flush with these $2 trillion in cash on their balance sheets. Let's see how much are devoted to commodity investments in counter action to the USDollar debasement (not noticed by Deflationists) and how much are devoted to labor concessions under demand of work action (not expected by Deflationists). My preference would be for capital investment and factory revamps, but the United States and its newfound marxism blended with fascism and oppressive regulatory impositions is not a place conducive for corporate expansion. These are some of the dynamics underway, which are not detected by those with blind eyes. The Deflationists prefer to cling to shallow arguments of a move straight to deflation without all the intermediary steps that cannot comprehend.

Cash held by the people and investors and hedge funds pension funds and elsewhere is in a massive migration to hard assets. Physical goods & tangible assets are rising in price. Have Deflationists not noticed? Witness the burgeoning demand for USMint coins, resulting in shortages and production shutdowns across the world. Have Deflationists not noticed? Amplifying the USFed money output parade, the troubles in Egypt with associated threats to the Suez Canal, followed by troubles in Libya with interruptions to output, have all contributed to the movement of funds into hard assets like crude oil. Have Deflationists not noticed? As for buyers, right now the only (or primary) buyer for USTreasurys is the USFed itself. Plenty of global funds continue to chase crude oil, industrial metals, grains, farmlands, cotton, coffee, sugar, as well as the King Gold & Queen Silver. Have Deflationists not noticed? The interesting opportunities will continue to be offered for wealth accumulation in defense of the unspeakable abuses of money. These are the middle innings of opportunity when it is still legal to build and hold wealth. Those years might be nearing an end, unfortunately as we near open confiscation after hidden confiscation. The money to bid tangible assets skyward, my blind fools, is from the collective gaggle of central banks which are in a panic printing money without the controls to direct it where they wish. This is not a rant, but rather a directed rebuttal of a shallow discourse laden with blind spots, shallow arguments, and arrogance. Let us gaze at the fool with a blind eye in a purple robe sitting on a self-designed throne, with zero authority and a track record of major missed events.

GOLD & SILVER REACTION TO MONETARY DESTRUCTION

Acute Silver shortages are in front of our noses, in the news, and point to extreme vulnerability in the USDollar, if not the USGovt debt condition. The USMint in possible illegal manner has at times suspended the production of Silver coins to be minted. They by law are commissioned to continue to meet public demand, which means they must bid up the Silver price if required. The COMEX shortage of Silver is so widespread and in the open, that futures contracts are being settled in cash, after the contract owner signs a waiver to permit the breach of contract itself. A 25% to 30% cash settlement bonus has become the norm. Such actions in policy have lit a fire under the Silver market and lifted its price. Angry from incessant charges of currency manipulation, the Chinese have responded by purchasing large truckloads of Gold & Silver. The real manipulation is by the USFed, whose debt monetization has gone global, whose USDollar effect is undeniable. That is blatant manipulation of not only the sovereign debt, but the currency denominated in it, extending to the entire monetary system. The group of major fiat currencies are all attached like a floating papyrus bound by threads. They are discredited in unison, weighed down by a debt burden and rotten paper.

The Euro is rising, despite its crippled condition. The ruse of a higher interest rate set by the Euro Central Bank is really amusing. Maybe they will come through with an inflation beater rate hike of a puny 25 basis points. How irrelevant? Both the US and EU have prevailing inflation rates over 8%. The cost of money remains 7% below the prevailing price inflation, maybe 12% too low for practical commerce. The appeal of the Euro comes from the totally obscene ruinous debased condition of the USDollar. The reverse beauty contest leaves the clownbuck as the gal left on stage seeking a dance partner. The toothless Euro at least has two dancing legs. The USDollar has none, nor teeth. The newest wrinkle in currency flows is the Arab investment in Euros, as they seek anything but USDollars. The US War Machine has targeted Libya, and turned its head from Bahrain. Just this week, Prince Turki of the House of Saud warned his princes that the Saudi Arabians must seek protection from other sources besides the United States. With the Saudis acknowledging security shortcomings, one must bring into focus the Petro-Dollar Standard, the defacto accord between the US and Saudi Arabia. They sell OPEC crude oil in US$ denomination only, and the USMilitary provides security protection for the royals in power as they accumulate great wealth. The accord is slowly disintegrating, with enormous potential impact to the USDollar standing. The US$ DX index is flirting with yet another breakdown below critical support. Each bounce off support is met by fresh selling. It seems military underpinning for the USDollar is slowly fading away like an old soldier after several decades.



The Gold breakout is clearly timid, lacking gusto and strong conviction. The Powerz have decided that they must contain the Gold price advance. The factors pushing up Gold are numerous. The sovereign debt decay process has led to lost integrity in the global monetary system organized as major currencies. They are all being debased by mammoth money printing initiatives with the full blessing of the governments and finance ministries. Each paper ambush led by naked shorting of the futures contract has resulted in a slingshot lift in Silver, a veritable nasty backfire in their faces. Those who cannot accept such a forecast of $100 Silver come from the same crowd that refused to believe last November that a $25 price would give way to a $40 price. But the Powerz cannot halt the powerful impressive advance of Silver, which will next take assault on the $50 mark. In two years, it will surpass the $100 mark, maybe sooner. The Gold price will make new highs in repeated fashion, and continue the upward movement, but it will be slow and steady toward the $2000 mark, inhibited the entire way. But Silver will be the impressive winner in the precious metals arena. At least one Silver substitute is already well over $1000 in price. That is the hint and clue of future price direction. Silver will take no prisoners while Gold shakes off its bondage. It has almost reached my $40 stated target, right on cue. One of the most profound changes that has come to the precious metals market is the shift, whereby price discovery has moved directly to the physical market. The paper futures market has been thoroughly corrupted.



The latest travesty is that JPMorgan is attempting to take delivery on a large portion of its short silver position. No misprint here. On their short position, that is, so that they can deliver it!! That is like making a demand to a credit card bank that the borrower intends to collect the debt from the creditor. Utterly absurd. That comedy is worth more to watch than the CFTC charade on position limits. The other profound change is that inflation expectations are being dictated by the Gold & Silver market, not the USTreasury Bonds any longer. The USFed Chairman has lost an enormous amount of credibility in his focus upon the long-term USTBond as an indication of price inflation expectations. The USGovt debt securities have lost their buyers. Not only is the USFed monetizing USTreasurys at a $100 billion clip per month, they are also purchasing the Treasury Inflation Protection Securities (TIPS). The TIPS are supposed to act as an inflation gauge. It too is corrupted.

A bigger fool than the Deflation Knuckleheads is the USFed Chairman Bernanke. He is a myopic professor who wrote a fine piece of revisionist history of the Great Depression, who now presides over a global monetary systemic collapse. Gold is reacting, but Silver reacts even more. As long as the insolvent big US banks remain in operation and are not liquidated, as long as toxic paper repositories rest under the USGovt roof, as long as the USGovt deficits remain well above $1 trillion annually, as long as Quantitative Easing legitimizes the debt monetization without checks, the GOLD PRICE WILL RISE INDEFINITELY. It is that simple.
http://www.kitco.com/ind/willie/apr072011.html

Harry Schultz’s last testament Commentary: Letter gives final investment allocation recommendation

NEW YORK (MarketWatch) — After 45 years, Harry Schultz has just published the last issue of his International Harry Schultz Letter. He’s superbearish but opportunistic.

Schultz, now 87, is one of the legendary characters of the investment letter industry: a hard-driving promoter who specialized in bold, radical high-concept stands. ( See Sept. 16, 2010 column.) I named him Letter of the Year in 2008, because he indisputably predicted the Crash (a “financial tsunami”) although paradoxically failed to benefit very much. ( See Dec. 28, 2008 column.)

But Schultz is also a trader, with a great respect for short-term trends. In this respect, if no other, he’s like the Aden sisters, to whose Aden Forecast he will be contributing occasional columns. ( See Dec. 30, 2010 column.)

The International Harry Schultz Letter has been something of a tsunami itself, with dozens of recommendations and opinions on an amazing range of subjects. Its relationship with the Hulbert Financial Digest’s monitoring system has been complex and sometimes strained.


But one thing is clear: In recent years, HSL has done brilliantly. It’s the third-best performer over the last past 12 months, up 39.65% by Hulbert Financial Digest count, versus 17.16% for the dividend-reinvested Wilshire 5000 Total Stock Market Index. Over the past ten years, the letter was up an annualized 8.94%, versus 2.5% annualized for the total return Wilshire 5000.

In his last issue, Schultz does not attempt a grand summing-up. But he does observe this:

“Roughly speaking, the mess we are in is the worst since 17th century financial collapse. Comparisons with the 1930’s are ludicrous. We’ve gone far beyond that. And, alas, the courage & political will to recognize the mess & act wisely to reverse gears, is absent in U.S. leadership, where the problems were hatched & where the rot is by far the deepest.”

He writes favorably of investment advice given in a recent interview by former Reagan Office of Management and Budget Director David Stockman:

“Stockman replied (to my huge surprise, coming from a former top government official) ‘Get some gold, beans, water, anything that Bernanke can’t destroy. Ron Paul is right. We’re entering a global monetary conflagration. If a sell-off of U.S. bonds starts, it will be an Armageddon.’”

About gold, Schultz retains his long-term bullishness. He quotes the respected Seeking Alpha service:

“For gold to match the growth in US M1, M2, public debt & budget deficit, gold will have to reach $1,800, $2,400, $7,800 & $13,200, respectively. While I can’t imagine gold going to $13k, these numbers tell me that calling gold a bubble is a bit premature. In my view, money supply, public debt & the budget deficit are in a bubble, not gold, not yet.”

Schultz’s comment: “Wake me up at $2,400 gold.”

But Schultz also retains short-term flexibility. Looking at a chart of iShares MSCI EAFE Index ETF (EFA 58.93, +1.27, +2.20%) , he notes:

“It’s a stock market index for Europe, Australasia and the Far East. Chart shows massive bullish base. If it breaks upside, these areas are where we should buy some new investments. Some modest pre-emptive buying in stocks there, having good chart patterns, is justified.”

Schultz’s final investment allocation recommendation:

• 5-10% Stocks (nongolds).

• 15-20% Commodities: via futures, commodity stocks &/or physical assets.

• 50% gold stocks & bullion: 15% blue chips, 5% junior, 5% bullion via futures, 25-35% in physical bullion.

• 0% currencies (“Close out ALL fiduciary time/call deposits, money market funds & municipal bonds, pension funds…”)

• 1-5% Cash in hand. (“Stored privately.”)

• 0-5% bear stock market protection via ETFs like ProShares UltraShort Dow30 (DXD 20.06, -0.02, -0.10%) .

• 15-20% Government notes/bills/bonds (“In 3-6 month T-Bills/bonds only — buy these only in Swiss Francs, Australian dollars, Canadian dollars, Brazilian reals, Singapore dollars, Chinese Yuan only).”

Harry Schultz’s final words: “Good luck to us all.”

Shock Events & Gold Breakout

One of the few certainties expressed on this blog has been that Gold and Silver are epic investments. I'd say that panned out and will continue to pan out.


by Jim Willie, CB. Editor, Hat Trick Letter | May 12, 2010


The events of the last 12 to 18 months have been as shocking as they have been instrumental in reshaping the global financial structures. In fact, the events have pointed out the fracture of the global monetary system and banking systems. The steady stream of events is accelerating in scope and intensity. The fractures are finally being recognized. The key to understanding the continuation of disruptive and chaotic events is the realization that nothing has been fixed, no remedy put in place, no reform agreed upon, no liquidation of impaired bank assets completed, and no work toward a more stable system. Instead, the old system has been subjected to a patchwork of futile efforts and initiatives that speak more of bilking the system, redeeming impaired assets, and channeling funds to those most responsible for the fractures. Instead of seeking solutions, the banking and political leaders revert to what has been their shelf of failed tools, since they know nothing else, stuck in the Keynesian box, painted into the 0% rate corner. The costs are horrific when solutions are not pursued. The beneficiary is gold, since all wayward policy costs money, which must be created, worsening the debasement. Gold rises with new money creation gone amok. $Trillion rescue packages have become the norm, in a cavalcade of debased currencies. Historical highs come for gold and silver, with gold fighting the political battles, but silver riding through the gates with high speed and raised dust. Central banks own no silver, and industry consumes silver.

The system cannot repair itself because those in charge at the helm making decisions caused the fractures and protect their power base. They live and operate within a system that no longer functions effectively. Reform would involve bankruptcy for the elite in charge. Remedy would involve liquidation of the balance sheets for the elite in charge. True crackdown would involves prosecution and jail time for the elite in charge. Changing of the guard would involve lost power for the elite in charge. Independent audits would involve revelations and disclosures of criminal fraud on a widespread basis. So the system lumbers along, broken. Nowhere has the brokenness gone more unaddressed than under-water mortgages for 22% of the American public. True remedy and crackdown would involve a mushroom of criminal allegations from bond fraud, revelation of duplicate usage for mortgage payment revenue streams, lost property titles, and counterfeit fraud. That is a major reason why Fannie Mae was nationalized, to keep the fraud under the roof of the greatest criminal organization on earth, operating under the United States Government, where the corruption, theft, and fraud can be protected by the numerous agencies. The global response has been and will continue to be a flight into gold, finally recognized as a zero risk safe haven. The global decline in trust for government debt is the death knell for the major currencies, the monetary system, and the central bank franchise system. It is also the harbinger for $2000 gold and $50 silver.

Review briefly the scattering of powerful events in just the last 12 to 18 months. History is being made before our eyes. The franchise system of central banks and paper fiat currency has failed before our eyes, but with no specific recognition. The flood of new money creation testifies to both failure and desperation. New debt within the USEconomy no longer produces positive economic activity. The events are so diverse that any competent analyst must conclude that the global financial system has broken in irretrievable, irrevocable, irreversible manner. If the following diverse topics of disruption, breakdown, malfunction, denunciation, incompetence, compromise, corruption, and contagion do not wake people out of their slumber, nothing will. If investors do not take action amidst the plethora of warning signals, they deserve to be gobbled up and ruined. Before long, personal self-defense activity will be declared improper, illegal, and even possibly terrorist in nature. Please pardon the brevity of each topic, but too many exist, and building an argument for each would require at least 2 to 3 pages. These topics of breakdown, failure, corruption, and contagion are covered every month in the Hat Trick Letter. Skim to the end to review the gold market summary, where new highs are being registered in almost every single currency on earth. The topics covered in brevity are the same ones covered in careful treatment for the last 12 to 18 months. The array of topics arranged in sequence serves to highlight the shocking events and the historically unprecedented desperation in response, all of which has led to a powerful gold rally based on respect, integrity, and standalone value.

REJECTION OF PETRO-DOLLAR & REVOLT

Last May 2009, the Saudis with Russians and Chinese at their sides announced the eventual end to payments for crude oil to be honored in USDollars. The concept was endorsed by Japan and Germany, whose counselors from Berlin might be far more integral in reshaping the global landscape than the US-UK aging power merchants are willing to concede. The disrespect shown the USDollar has turned to revolt, seen in G-7 Meetings. In fact, the G-7 has morphed into a country club meeting for former power brokers. The new G-20 Meeting is the forum of substance, where the Chinese, Russians, Indians, and Brazilians can have a voice and no longer sit in the hallways while decisions are made. The USDollar is on the butt end of a Global Paradigm Shift with extreme force. The beleaguered buck will limp along until alternatives in the planning stage are launched. That is soon, really soon, like before 2011 is too far along. Gold will compete well with both the USDollar and any newly launched currency alternative.

NATIONALIZED BLACK HOLES

The absorption of Fannie Mae and American Intl Group into the USGovt conglomerate of bureaucracy, fraud, waste, confusion, protection, syndicate wings, off-shore accounts, and printing press operations was an urgent step. It placed the corrupted mortgage finance structures and credit derivative framework under the USGovt aegis, where the syndicate agencies can provide both proper attention and protection from prosecution. The Black Holes will cost the USGovt a few trillion$, my forecast made in 2007 and 2008. Shifting ownership of securities and putting them under official stewardship has effectively eliminated the potential for lawsuits by investors foreign and domestic. Fannie Mae is the nexus of numerous criminal fraud rings whose total value is north of $3 trillion. It is the vast sewage pit replete with slush funds, where obscure accounts reside never to face scrutiny, used to balance the accounting without prying eyes. Gold will be viewed as the clean alternative to paper, especially the toilet paper mixed in sewage treatment plant vats.

INSOLVENT BANKS

Nowhere is the brokenness more evident than in the insolvent big banks. Not a one is solvent, all vampires in search of tangible assets, willing to trade worthless stock shares for assets. Lending is a thing of the past. Their loan loss reserves have vanished, as reserves are tucked away from the lending circles in the US Federal Reserve. Insolvent banks engage in minimal lending, since approval is inhibited by the lack of working capital. The banks are loaded down by an endless raft of foreclosed properties, kept from the market, not on the market. Speaking of insolvent, the USFed itself is in wretched shape. A mere 5% decline in their mortgage assets translates to a negative balance sheet. A more likely 40% decline in mortgage assets, in closer tie to reality, translates to hundreds of billion$ in negative balance sheet. This agency, this august USFed is supposed to lift the US financial structure from its underwater grave? Methinks not!

PHONY ACCOUNTING STANDARDS ENDORSED

On April 1st of 2009, the Financial Accounting Standards Board endorsed corrupt accounting of impaired assets. Banks were permitted to place any value they wanted, with clumsy laughable minimal justification. Enter the basis of the great US stock rally. What a joke! Shock waves like on May 6th will likely become the norm. Bond shock waves are in vogue. Without proper accounting, valuation exercises in US financial arenas becomes a farce, joke, travesty.

ENDLESS QUANTITATIVE EASING

The QE1 was welcomed. Vast new money printing for the purpose of meeting federal deficits, rescuing big banks, and providing vast slush funds was deemed necessary. The end of QE1 was heralded but a lie. Perhaps it was proclaimed at an end so that QE2 can be launched amidst fresh needs. The QE2 seems to be launched in Europe with a grand US conduit. In March, USFed Chairman Bernanke lied through his teeth to the USCongress about how Quantitative Easing had come to an end, that USTreasurys were not being monetized. In late April, Bernanke admitted his lie to the same US Congressional committee. Remove QE and the entire system grinds to a halt, then collapses under the weight of debt. Claims of QE removal serve as deceptive political clapptrapp, pure diversion from the reality. The QE is as crucial as the right leg. Uncle Sam cannot negotiate the mine field while skipping and hopping on one leg.

REACTIVE CREATION OF USTREASURY BUBBLE

You gotta love the denials that the USTreasury Bond complex is a bubble. Its needs have grown enough to demand a significant slice of the entire global savings. Actually, the global savers have lost their appetite for further USTBond buys. As a bubble, it is fed by accelerating sources of funds, mostly nowadays from printing press creation of money. The near 0% interest rate is a dead end with no reversal, since higher borrowing costs would bring about a cave-in for the USTBond bubble. The USTreasury Bond bubble is the sentinel signal for the gold market to release, find global acceptance as true safe haven, and find proper value over $2000 per ounce. A supposed safe haven can NEVER be a bubble. In fact, as the USGovt adopts one broken child after another like Fannie Mae and AIG, the US$-based obligations extend beyond federal debt to cover mortgage wreckage and credit derivative fires. To call USTreasurys a safe haven is like calling Al Capone a savior, calling Lloyd Blankfein a crusader for God, calling Alan Greenspan the architect of prosperity, or calling Franklin Roosevelt a friend to gold investors.

ACCELERATION OF BANK FAILURES

Banks are falling victim to death experiences at an accelerated rate. The bank failure rate grew in mid-2008. The rate grew again in mid-2009. In 2010, already the rate has accelerated again. Bank failures are picking up speed rapidly. The FDIC insurance fund is deep in the red. The bank fees were levied at 13-fold increases last year. Even advanced bank fees have been exhausted by the FDIC. Soon the FDIC will need more billion$ in funds. A new wrinkle is that commercial mortgages are killing banks, at a time when many assets are revealed as being held on balance sheets at double their true value. See the recent bank failures and consistent over-valued assets in liquidation. The problem is systematic and endemic.

UNENDING MORTGAGE DELINQUENCIES

Despite claims of a stabilizing housing market, the mortgage delinquencies and enormous inventory of bank owned homes is not being relieved. Fannie Mae reports still rising mortgage delinquencies. Prime Option ARMs are showing delinquency rates that rival the subprimes. Commercial mortgages are also showing delinquency rates that rival the subprimes. The newest wrinkle is Strategic Defaults, where people just stop paying their mortgages, an active decision, often by people with high RICO credit scores. Many are demanding the banks to produce their legitimate property title. Many are sick & tired of bank welfare, with Wall Street taking the lion's share of aid. Some suspect vast bond fraud. Civil disobedience a la Henry David Thoreau has entered the equation. With each new delinquency comes a default and more inventory. The entire USEconomic growth spurt in the 2002 to 2005 timeframe was founded on a housing bubble that was washed away. No new bubbles can be found of practical usage, only the USTreasury Bond bubble acting like a powerful black hole to inhibit capital formation.

REVELATIONS OF RIGGED METALS MARKET

In the last few weeks, the metals markets are abuzz over the revelations by Andrew Maguire that the London silver market is rigged from JPMorgan trading desks. Price suppression has come from naked shorting, otherwise known as selling silver contracts without collateral, without benefit of metal. The paper Ponzi scheme of the London Bullion Market Assn and the COMEX is slowly being unmasked. The concentrated short positions have no economic justification, and represent over a year of global mine output. The GATA organization is being vindicated, soon to be granted great respect. Without the outsized naked short position in silver, all completely illegal, all totally protected by the USGovt and its obedient regulators, the silver price would be north of $50 per ounce. The same rigged market exists in gold. Without the outsized naked short position in gold, the gold price would be north of $2000 per ounce. That is where both are heading.

PROSECUTIONS OF US TITAN BANKS

The Big Four banks in the United States had better grow accustomed to legal charges and lawsuits. For several years, they sold toxic assets, misrepresented asset sales, have engaged in naked shorting of metals, have sold bogus derivative products, have laundered counterfeit bonds of various types, have paid in collusion for debt ratings, have engaged in insider trading schemes, and much more. My sources tell of powerful Chinese interests and indirect agents putting tremendous pressure on the USGovt to enforce the law and enforce the regulations, which would effectively release clogged markets and force prosecution. They are ultimately USTreasury Bond creditors and Gold investors. They are angry. Watch the prosecutions and civil lawsuits continue like an endless parade. Watch for exposés and sting operations also.

REFUSALS FOR BANKING DISCLOSURE

The common practice of off-balance sheet usage is rampant. Various devices for temporary account ledger items are under fire. Banks place unsold home foreclosure inventory often off the balance sheet. Bigger banks place wrecked mortgage assets off the balance sheet. Loser credit derivatives and other derivatives routinely are placed off the balance sheet. The USTreasury funds its own USTBond purchases from agencies in the Caribbean, again off the balance sheet. The entire Enron operation, from its Harvard hatchery, its Citigroup funding, and its JPMorgan special purpose vehicles, was an off-shore enterprise also. Proper disclosure involves proper valuation. False accounting prevents the disclosure process. The motive is simple. The big banks are insolvent and do not wish to disclose their insolvency. Lending as a result suffers.

DEMANDS FOR USFED AUDIT

Imagine a nation whose central bank is part of a foreign owned syndicate, with full control of the monetary management, full control of channels to their favorite bank entities, full control of destinations for funds. The USFed is a paid consultant for the USCongress which refuses to disclose its gold inventory, refuses to disclose its currency management, refuses to disclose its disbursement of TARP Funds, refuses to disclose its monetization of USTreasurys and USAgency Mortgage Bonds, refuses to disclose its Wall Street fund swaps, and desperately conceals its money laundering for CIA narcotics funds that enter the Wall Street system. Demands for a USFed audit coincided with a May 6th freakish stock plunge, resulting in watered down language for power to audit the USFed itself. The new bill at least is a foot in the door. Let's hope it is size 22 like Shaquille O'Neal.

TRILLION DOLLAR USGOVT DEFICITS

After the 2008 fiscal year USGovt deficit was announced in the $1.5 trillion range, shock was felt. The American public was told of a lower $1.3 trillion estimated deficit for 2009. It also ended up in the $1.5 trillion range. Expect the 2010 deficit to again be at least $1.5 trillion. Federal revenue receipts are still trending down for both individual and corporate tax sources. Another stimulus bill is soon to be entered, unless the nonsensical story of a recovery is actually embraced and believed. Funding of the Fannie Mae and AIG black holes is costly. And never overlook the endless wars and defense (offense) programs. Their budgets are sacred, never debated, and always endorsed without delay. The end result is a continued flood of USTreasury creation, at a time when refunding rollovers are required. Gold competes with this travesty, competes successfully, seen as a carnival sideshow moved to center stage. Record debt issuance occurs each month.

MISSING USTREASURY AUCTION BIDDERS

The details of USTreasury official auctions have become a subject of open debate. Irregularities among direct and indirect bidders has attracted attention, bad attention. Simple calculations reveal how USTBond purchases by known sources account for less than half of USTBonds auctioned off, the difference made up by pure monetization in the typical secretive centers like the Caribbean bank centers. The Treasury Investment Capital (TIC) Reports continue to reveal a decline in most nations for USTreasury holdings, yet even more USTBonds are sent into the market. The monetization is the only answer to explain vast anomalies.

PLUMMETING MONEY VELOCITY

A new phenomenon, documented, explained, even with visual aids, was given in the May Macro Economic Report out last week. The monetary base is accelerating upwards at a mindboggling rate. The broad money supply in usage is actually falling, due to reduced lending and loan approval. The money velocity has fallen dangerously low, like to levels seen in the teeth of vicious recessions. Thus the monetary inflation, Bernanke's reason for being, has not been successful. The relationship between broad money supply and declining labor market is well known, tracked expertly by John Williams and his Shadow Govt Statistics staff. The conclusion is to expect a nasty recession to continue, to reappear, depending on your perspective and level of denial. Money is being thrust into the system, but it is not being put to work, as capital formation is non-existent. Think of a big car burning its engine, revving up wildly, but going very slowly down the road. Blown pistons and gaskets litter the roadway.

ABUSE OF EXCHANGE TRADED FUNDS

The Exchange Traded Funds are a system for Wall Street to control prices for key items. The natural gas ETFund has had little bearing on the natural gas price. The silver ETFund (SLV) inventory has diverged from the silver metal price, the lost correlation as testimony to corrupted management. The lazy investors prefer to own an ETFund out of unwillingness to research or manage the asset, preferring to open the door to corrupt management by Wall Street firms, the same ones who corrupted the mortgage bond market, the muni bond market, the oil market, and the entire stock market. The most corrupt of all ETFunds are the Street Tracks SPDR (GLD) gold fund, the Barclays (SLV) silver fund, and the Goldman Sachs (GDX) gold mining fund. Each of these funds serves an important role in the price fixing, price manipulation, and heavy handed leveraged control of price suppression. If investors are loaded with such ETFunds, then someday they will realize a divergence between the share price and the underlying prices, probably some lawsuits for impropriety and malfeasance, and likely forced liquidations without participation in the rallies observed. As Stewart Dougherty put it, "Big Money is going to be way too smart to buy the Exchange Traded Funds that have been pimped to retail investors as a way to sterlize their money and keep it out of the metals market for which it was internded." The solution is to own a gold or silver bullion account. See the Sprott (PHYS) fund which is given a 30% price premium, due to integrity.

POLITICAL REACTION TO FAILURE & COLLECTIVISM

The public disgust and anger is growing fast. The Tea Party movement has gained acceptance and vigor at the grassroots level. Some like Bill Clinton attempt to associate the Tea Party participants with terrorists, which is ludicrous. George Washington, Patrick Henry, Thomas Jefferson, John Adams, James Madison, and especially the outspoken Benjamin Franklin might be maligned if alive today, or at least harassed with tax audits. At least one might sit in a secret prison without criminal charges filed. The USCongress is distrusted more than Wall Street. Bankers are despised and disrespected. The people did not want a national Health Care program, but their desires are secondary. The USGovt had better beware of a blossoming of civil disobedience in reaction. One form is not to make mortgage payments. Another form is to drain investment accounts and to purchase gold & silver, coins or bullion, either way.

DISRESPECT SHOWN TO THE UNITED STATES

International prestige has vanished for the United States. The revolt that started against the USDollar two years ago has branched in multiple directions. US bankers are on the extreme defensive, the former ambassadors to economic export. The narco war and oil war have tarnished the US reputation. The military services fraud has tarnished the US reputation. The abuse of NATO airbases has tarnished the US reputation. The Wall Street toxic bond export on a global scale has tarnished the US reputation. The interference with foreign sovereign debt by Wall Street and US-based hedge funds has tarnished the US reputation. The heavy hand of IMF and World Bank leverage, pressures, and poison pills has tarnished the US reputation. The ratcheting trade war and stream of tariffs and complaints by the USGovt have tarnished the US reputation. The Madoff Ponzi Scheme has tarnished the US reputation. The numerous nationalized companies has tarnished the US reputation. The new prosecutions against Wall Street fraud have tarnished the US reputation. The flood of new USTreasury Bond supply has tarnished the US reputation. The lack of leadership in times of crisis has tarnished the US reputation.

FLASH TRADING EXPOSED

In the last two years, much attention has been given the Flash Trading, also called High Frequency Trading, even the basic name of Computer Program Trading. Estimates that 73% of the New York Stock Exchange trading volume is from program trading. So Wall Street is essentially deeply committed to circle jerk endeavors, or exercises to eat each other' lunch, certainly not producing anything. Paul Volcker accused the financial industry of one good innovation in 20 years, the automatic teller machine. He finds no value in either credit derivatives or computer program trading. In fact, much of the Flash Trading proprietary devices are elaborate insider trading mechanisms that view the order stream and front run. See the Goldman Sachs incident one year ago, when an employee stole the illegal software, but the FBI came to the rescue of GSax and kept the story and device under wraps. The Flash Trading was unleashed on May 6th again. A grand heist ensued, clearly motivated by insider information of a weekend European bank rescue and $1 trillion monetization package. Lack of liquidity is blamed, but so is lack of value. In today's world of high finance, a flash trade computer program device is a different form of pistol used in a holdup, gunning for the sell stops, filling them at absurdly low levels, mugged on the trading platforms. The Dark Pools in OTC trading account for $60 trillion in annual activity, versus a mere $5 trillion in monitored traffic. That translates to more back alleys for mugging than passageways well lit to prevent criminals at work.

SOVEREIGN DEBT REJECTED

Since late November when the Dubai debt went into default, the sovereign debt crisis has been unleashed like a relentless storm. Following Dubai was Greece, the common denominator being the London and West Europe banks. Denials are shallow minded and stupid when analysts claim that sovereign debt risk is fenced from one nation to another. Contagion will be the norm. Much of the Greek Govt debt is held by Swiss, London, and French banks. So a rescue of Greece is tantamount to a rescue of these big exposed banks. The rash of sovereign debts facing default, or pressure toward default, testifies to the failure of the monetary system. The usage of newly hatched money to fix problems from unbacked untethered unsecured money is lunacy. Eventually, a condition marred by debt constipation results. Uncle Sam needs to visit the toilet for relief but cannot, as his bowels are blocked by debt without benefit of healthy liquidity. His intestines are clogged with financial engineered vehicles, basic fur balls. The next nations to face the sovereign debt hammer of scrutiny and market retaliation are Italy, Spain, France, and then England. The fireworks are nowhere finished. With each new episode, the Gold price will rise further.

FAILURE OF CENTRAL BANK FRANCHISES

The sovereign debt crisis is actually a symptom of the failed central bank franchise system. The central bank had better hurry to produce new global reserve currencies backed and fortified by gold, also possibly by crude oil, or else the fires in the government debt will continue to burn. The end result will be ruined currencies, broken national banking systems, national budgets in tatters beyond remedy, economies ground to a halt, and eventually civil strife. We are witnessing the end convulsions of the fiat paper monetary system. The central banks are powerless to stop the crisis. The $1 trillion European bank bailout plan gave lift to the Euro currency for less than 24 hours. The USDollar is viewed as likewise wrecked and undermined as the Euro. In my view, the simple perspective is that their near 0% interest rates are like a minimal pulse on the banking system, a depleted body lying in the Intensive Care ward. The currencies are all dying. Gold will rise until given proper recognition, then it will rise even more.

GOLD SEEN AS ZERO RISK REFUGE

No charts are necessary. A thousand words might suffice, rather than six charts showing Gold breaking out to new highs across the world. Some major points scream to be told. Here is a list:
Gold is rising in every single major currency
Gold is not a hedge against price inflation, but rather against ruined monetary system
Gold is making new highs in almost every single major currency
Gold had consolidated in price for four months, the base for breakout
Gold will reach $2000 in price within the next two years time
Gold is desperately needed to anchor the failed fiat paper currency system
Gold is planned for a component role in the new Northern Euro currency
The sovereign debt crisis has fueled demand for Gold without the full realization that the central bank franchise system has failed along with the fiat currencies
Quantitative Easing is monetary hyper-inflation, the fuel of the Gold rally
Gold is urgently needed as a bank reserve to ensure proper function
Gold contains no inherent counter-party risk
Gold is in the midst of vast supply shortages
The Gold Cartel is seeing defections among its allies, who are buying gold bullion after the cartel knocks down the price
Nations are hoarding their gold mining output, the latest possibly Venezuela
Gold is seeing panic buying in parts of Europe, like Austria
Gold mining output is trending down for the past few years
Gold was by far the #1 investment asset in the entire 2000-2009 decade
The US Dow Jones Industrial Average is in multi-year decline, in Gold terms
Gold is protected from human corruption, except in its theft and hollow replacement
Gold market is receiving heavy scrutiny for corrupt metal exchanges
The London Bullion Market Assn has been in default since December, bribing on delivery demands to receive cash settlement with a 25% premium paid
The GLD gold exchange traded fund is a corrupt diversion from metal ownership
Hong Kong is soon to offer several exchange traded funds for Gold
Gold can and does rise in price concurrently with the USDollar
Future payment for oil shipments will require a gold-backed currency
New barter systems of trade will contain a gold core component
Gold is the ultimate safe haven asset
The USTreasury has no gold reserves, as Fort Knox is empty, since the Clinton-Rubin gang leased it and sold it all
PIGS nations have more gold reserves than the United States
Switzerland and Canada have almost zero gold in national reserves
The IMF gold sales are lies, actually closed out USGovt gold short transactions from past years when the Clinton-Rubin gang leased gold for sale
Gold leased from the Italian central bank was lost by LongTerm Capital Mgmt
Bear Stearns was targeted for a kill, since it was long in gold, defying Wall Street
China participates with the IMF sideshow game in order to buy its gold pledges
If Gold were revalued at 3x to 5x the price, many national banking systems would be restored to health and solvency
Price hyper-inflation is the likely next blemish on the US landscape, which will fuel broad public gold demand
Any attempt by the USGovt to confiscate gold would result in a gigantic backfire, with the gold price doubling in price, and US foreign assets subjected to freezes
Gold will reach its high range when US bankers along with London bankers face a Nuremberg style criminal trial on the global stage
Prepare for the arrival of a small group of new Gold-backed currencies, the USDollar death knell
As John Pierpont Morgan once stated under oath before the USCongress and the Pujo Commission in 1913, "Gold is money, and nothing else"

Copyright © 2010 Jim Willie, CB


Jim Willie CB is a statistical analyst in marketing research and retail forecasting. He holds a Ph.D. in Statistics. His career has stretched over 25 years. He aspires to thrive in the financial editor world, unencumbered by the limitations of economic credentials.

Jim Willie CB is the editor of the "HAT TRICK LETTER" Use the below link to subscribe to the paid research reports, which include coverage of several smallcap companies positioned to rise like a cantilever during the ongoing panicky attempt to sustain an unsustainable system burdened by numerous imbalances aggravated by global village forces. An historically unprecedented mess has been created by heretical central bankers and charlatan economic advisors, whose interference has irreversibly altered and damaged the world financial system. Analysis features Gold, Crude Oil, USDollar, Treasury bonds, and inter-market dynamics with the US Economy and US Federal Reserve monetary policy. A tad of relevant geopolitics is covered as well. Articles in this series are promotional, an unabashed gesture to induce readers to subscribe.

PEAK CLIMATE - - PEAK RESOURCES

by Andrew McKillop
Former chief policy analyst, Division A Policy, DG XVII Energy, European Commission
December 18, 2009

Depreciating Global Warming and Appreciating Real Assets

"Hockey sticks in the air!" well summarises the Climate summit debacle and face-saving attempts by Europe's hardcore political defenders of "imminent climate catastrophe" to breathe more hot air and illusion into the Copenhagen chill, as the COP15 conference winds down and out. The attempt by Europe's climate conscious leaderships to surf the wave of public concern on so-called runaway global warming, and generate new export markets for the continent's overlevered, high output cost renewable energy corporations and companies with recession hit domestic markets, looks unlikely to succeed. The same applies to Obama, faced by a recalcitrant Congress with low conviction that now is exactly the right moment to launch an additional big government, big spending spree with borrowed public money - much of it overseas, on projects outside the USA.

One sure winner will be real resources. That is oil, natural gas, gold, some other metals and minerals, and many of the agrocommodities. The linkage is clear and easy for oil, and for natural gas: the big spending push in renewable energy (RE) is now delayed, although already proven and economically viable RE will continue to power ahead. Fast uptake of RE in the lower income countries - which would only be possible with major aid and big soft loans from richer nations - will now take a lot more time.

Both China and India will continue their own, already large RE and Cleantech development programs, but this will have little spillover to the lower income developing countries in the near term. Along with rising but confused signs of economic recovery in the US if not in Europe or Japan, and continued strong economic growth in the big Emerging Economies, the bottom line for world oil demand is clear. Demand is likely to pick up through Q1 2010. Traders will anticipate this in a trading context marked by a return to selling pressure on the dollar (presently upstaged by a falling Euro),signaling higher oil prices from the short term. To be sure, events such as the December 22 OPEC meeting will generate their own price moves, but the new fundamental for oil is that global demand is likely to grow.

Unlike the recent past, natural gas futures will also tend to rise in synch with oil, rather than falling anytime Brent and WTI rise, and rising anytime Brent and WTI fall. Gas is the clear winner from attempts at finding cheaper, lower carbon substitutes to oil, but its price has languished this year. With restored oil price growth, natural gas will this time also gain.

The J-Curve

Exactly like the global warming Hockey Stick, but real, delayed response to converging news in the trading rooms operates a J-curve for short-term prices. While traders are out to lunch and deciding how to react, their first action will be trimming positions and paring risk before they go out to a sushi meal of near-extinct red tuna. Like the impact of dollar devaluation on the monthly US trade deficit, the first impact is a deepened deficit. For traded real resources, increased and complex news that should generate price rises firstly generates lower day closing prices.

The complex news from the Copenhagen climate summit through its long, laborious and heated sessions is that this "qualified success" will do less than nothing to rapidly trim fossil energy demand in the emerging and developing countries, and probably little in the OECD group of rich nations with one-sixth of the world's population but consuming one-half of world oil production. In the OECD group and especially Europe, however, climate change business has become Too big to fail which for energy will generate higher prices across the energy space. Returning from lunch, the signs for traders will be clear that real resources are better placed to show asset growth than most mainline Equities on many markets, of course with ample exceptions, and for as long the global economy shows credible signs of coming out of recession.

This is far from radical as a near-term read out, and is reinforced by another J-curve, the reserve/production ratios which apply to an increasing swath of the real resources, aka the hard assets.

We can state this simply: Gold, copper or any other diminishing fossil or mineral asset, including the fossil fuels is still faced with relatively price inelastic, and recovering or increasing demand. Exactly as for per capita oil and gas consumption in the OECD countries relative to China and India, and therefore CO2 emissions per capita, the same stepwise difference in consumption applies to metals and minerals. Increasing world production to enable equalization of per capita demand is, to be sure, a theoretical target for global economic development, but is not possible.

Obligation to Perform

The obligation to perform overrides the almost philosophical question of deciding if the party will continue, or rather when the party's rules will change, which they will but not at Copenhagen. Easily explaining why China and India will in no way agree to global binding commitments reduce CO2 emissions, but will act to slow their increase, this simply conforms with long term trends of economising resource utilisation, recycling and substitution rarer and higher cost resources with more abundant and cheaper resources. This is a long-term factor in human history and the world economy.

Break points are however certain in a free-for-all where each player is unsure of the resources held by the rivals, each player has an obligation to perform, and many natural resources are becoming rare. As many examples show, late arrivers are not at all necessarily the losers, witness Angola or Canada for oil, Kazakhstan for uranium, Zimbabwe for platinum, and the present and future bioresource and renewable fuels exporters of Africa and Asia. Depending on technology change and metal, mineral, or fossil energy substitution potentials, this now-or-later choice will increasingly impact day traded and near-term commodity prices as global potentials for radical output hikes increasingly shrink.

Rising real asset prices have an interesting self-limiting production impact, running alongside physical depletion and rising environmental impacts from their extraction and production. When their daily market price rises, the future value of presently unexploited reserves increases, and forecast production needed for a given revenue (of course in devaluing paper money) decreases. For gold and other PMG metals there is a measurable and predictable impact of rising prices on physical output capacity, basically due to milling capacity, with easily made comparisons in other fossil extraction industries. For gold and the PMG metals, when prices rise, and if a producer moves to lower grade ores they will for some while operate the same milling capacity. Due to this, total output will fall with rising prices, not rise.

This is a stealthwise change of physical output capacities, finally impacting the obligation to produce, and aiding the policy shift to a preference for slower exploitation of depletable resources. This shift is in fact nothing more or less than an update of the old-time wisdom of gold miners. This was a simple one-liner: Worst grade first, best grade last.

Despite the fact that other considerations also count, this one-liner is hard to beat. Ecology minded economists going as far back as Georgescu-Roegen and Daly, and in fact even further back can echo this wisdom, with multiple caveats, drawing on ecosystem behavior and functions. More than 90% of the trophic hierarchy acts this way, allowing just a few breakthrough and emergent alpha male species to act otherwise. To be sure there is one really large difference: natural ecosystems are close to 99% based on renewable energy, but the global economy is around 84% based on non renewable fossil fuels, and 100% dependent on non renewable metals and minerals including uranium, phosphates and all other one-shot, only partly recyclable resources.

Obligation to Deplete

Only one remedy applies to maximising output of non renewable resources that start depleting and fading away: energy. When or rather if there was 'unlimited energy' we could imagine all manner of science fiction, and economic fiction futures. In the real world and in all history, we have neither the time nor energy for this.

The above theoretical aside can be terminated by looking at the way major gold mining, fossil energy and minerals producer companies have cozied up to host governments, and through a long period of about 1985-2005 chose suicidal producing strategies. Accelerated depletion is surely one large, but hidden real world driver of the loud public statements that we face "climate catastrophe" if national budget deficits are not further raised, this time to finance Green Energy rather than bail out near-bankrupt finance sector players. Fighting depletion of energy and other real resources is the scarcely hidden message of OECD leaders, which failed at Copenhagen.

Brave words are advanced on the theme that accelerated depletion of fossil energy will 'jumpstart' innovation in alternate energy, and speed the 'modernization' of the economy. For the non renewable resource of gold, this innovation in fact has a long pedigree. Taking gold as a fiduciary money base, it can be substituted by silver, then bronze, then iron, and why not aluminium, paper, plastic and most recently electrons ?

Debate on whether we can sustainably extract oil from tarsands , or copper and other metals from sea water is basically a question of energy. This is due to energy needs spiraling as leaner and leaner orebodies and resources are exploited. Stepping down in orebody richness does not generate a linear increase in energy needed to extract the same amount of metal, but much much more, determined by many convergent factors we can call 'entropic'. This stepwise increase in energy demand is only partly covered by technology progress - and is a major physical determinant of rising prices for current generation resources, and a marker for the certainly rising capital costs of future energy and minerals supplies.

The 'Climate Catastrophe'

The re-valorisation of gold and other real assets is taking place at a time of surreal change in economic policies and policy making, symbolised by the strident calls for a massive and massively rapid shift away from fossil fuels, to the renewable energy sources and systems. Failure of the Copenhagen farce, however, will surely reawaken media and public opinion to the real, and very complex trends of both natural and anthropogenic climate change, along with anthropogenic ecosystem disruption, degradation, and destruction. In the same list, ongoing and rising pressure on natural resource supply capacities for constantly growing human population numbers and even faster growing urban populations will exercise a constant impact.

Extreme flights of fancy of the world's deciders, hinged on global warming, are likely to be put on the back burner, for example attempts to save the US dollar, through proposals to replace it as the world reserve money, with a "CO2 Bancor". This new plaything for FX traders and central bankers could be cobbled together from a shifting pile of carbon finance instruments, CO2 offset bonds for 'soft energy' loans to developing countries, carbon tax revenues and their derivatives, and other creative paper promises of future value built on the shaky struggle to fight climate catastrophe. This will signal a return to normal business, in a context where both Equities and Commodities are now completely interdependent and interchangeable trading chips - for traders and financial market operators.

This changes nothing on the ground, or rather underground. Long-term trends to more sustainable resource development - meaning long term production strategies - will be accelerated in a context of higher energy prices. For gold mining this is already clear: companies who want to remain in business for more than a few decades have already started to shift back to mining at the marginal grade. This raises production costs, and caps output, moving the threshold up for future price corrections on exuberant and always exaggerated trading floors.

Higher commodity prices effectively cause the marginal grade of every gold mine to drop. In the energy space this shift will be intense, as the world shifts to lower intensity, harder to use and higher capital cost renewable energy which can only increase slowly, after big capital expenditure. The net result is simple to forecast: as for gold output which has shown little or no responses to a tripling of the dollar price since 2002, world energy supply is set in a relatively slow growth, or no growth outlook, we can summarise as net energy and natural resource output falling as prices rise and because prices rise.


© 2009 Andrew McKillop

http://www.financialsense.com/editorials/mckillop/2009/1218.html

Climate deal 'good but not perfect', says Flannery

Copenhagen Climate Council chairman Tim Flannery says a draft climate accord reached by world leaders is ‘‘good but not perfect’’, and has described Prime Minister Kevin Rudd’s role at the summit as ‘‘outstanding’’.

Speaking in an online briefing from Copenhagen shortly after 11pm local time (9am AEDT), while final details of the draft accord were still to be announced, Professor Flannery said the science community believed the draft text was a few hundred gigatonnes short of ideal, but that he was ‘‘not entirely dissatisfied with the agreement’’.

Wealthy and key developing nations have agreed to limit global warming to two degrees Celsius, according to a US official, with each country required to list the actions they would take to cut global warming pollution by specific amounts.

‘‘We need a more aggressive reduction target by the US ... (we need) China to tighten up its emissions standards,’’ Professor Flannery said.

This, combined with a concrete agreement among European countries, he said, would ‘‘put us in a better position ... where we need to be’’.

But he said the talks in the Danish capital were ‘‘not the end of the story’’.

‘‘We’ve seen a huge advance at this meeting ... This is a step on a long road and I’m not entirely dissatisfied with the agreement.’’

The draft text was ‘‘good but not perfect’’, he said.

Professor Flannery said he was impressed by the direct and honest role played by Mr Rudd at the summit.

‘‘Our prime minister has played an outstanding role. I was at a briefing he gave on Thursday. He was frank and honest ...
He said he was doing his best but there was absolutely no guarantee of success.

‘‘He’s been working very hard the last few months,’’ he added.




http://www.smh.com.au/national/climate-deal-good-but-not-perfect-says-flannery-20091219-l67n.html

There is no question as far as this blogger is concerned that Gold and Silver remain the investment opportunity of a lifetime and the case for a stake only gets more compelling. News Kontent are gold and silver bulls and offering evidence for that case is the rationale for this blog.

An Unbelievable Opportunity in Gold

December 15th, 2009

Yes, there is no typo in the headline of this article. Today there is still an unbelievable opportunity to invest in gold that will disappear over the next several years as this monetary crisis deepens. Despite the general widespread sentiment of Western financial advisers that they have missed the run-up in gold and now it is too late to buy, this is not true at all. In fact, to illustrate how little people understand about the reasons to buy gold, of all my friends that I urged to buy physical gold more than six years ago when gold was less than half of its current price, I only know of one that has bought any gold, and it still took five years of my prodding, four times a year, for this single person to purchase gold. This is how incredibly misunderstood an asset gold remains today despite its enormous run higher in the past 8 years. This brief anecdote aptly illustrates the bias against gold and the foolish belief that gold is a bubble that persists today due to the massive propaganda and disinformation campaigns waged by bankers against gold. It is ironic today that public mistrust of bankers can be at such a high level at the same time that the public is still enormously willing to follow all of the bankers’ propaganda about gold. This great twist of irony illustrates just how powerful the bankers’ century long misinformation campaign about money and gold has been. Few people even understand how money is created let alone why gold is a protector of people’s rights.

Even if gold continues to correct this week, and the bullion banks, the US Treasury, the US Federal Reserve and the Bank of England are able to engineer a further decline in gold prices in the futures markets, this event will not be the bursting of the gold bubble as it will be, and always has been, described by many Western media sources. Even if gold loses another $120+ an ounce from its current price, this event would not mark the bursting of the gold bubble. The incorrect description of corrections in the gold markets, or downright meddling of Central Banks into the suppression of gold prices, as the bursting of a bubble is just as erroneous as the recent descriptions of rising stock markets as signs of economic recoveries. And this is the legacy bankers have created – confusing the masses to believe the exact opposite of what is true.

Though I’m not going to tell you the price point at which I believe gold will start rising again, it is not impossible to time markets as investment charlatans will lead you to believe as well. In fact, at the very beginning of this month, we told all subscribers of my Crisis Investment Opportunities investment newsletter to sell out of their precious metal stocks right before this steep correction in gold and silver occurred to lock in their profits and we’ll tell them to re-enter (or have told them to re-enter) when we feel that a low-risk, high-reward time to reposition our assets has materialized once again. By understanding the rigging game in gold and silver markets and in stock markets, we’ve more than tripled the returns of the S&P 500 this year. In all honesty, however, bankers have filled most investors’ heads over the years with so many lies about gold that for the majority of investors, it would be a futile effort to try to time the market anyway. Most would be better off just understanding the fundamentals behind why they need to own gold and to buy and hold on through the dips and rises until it reaches the mania stage.

Being able to predict the recent steep correction in gold and silver in advance of its occurrence merely requires understanding the manipulation and rigging game in these markets. Understand the rigging game behind gold and it is quite possible to repeatedly time the gold markets with a fair amount of accuracy. Subscribers to my services will vouch that I have called near perfect tops and bottoms in the gold and silver markets more than several times over the past several years. Even if you refuse to acknowledge the indisputable signs that the gold market is, and has been rigged for decades, you only need realize one thing – that despite the best efforts of the US Federal Reserve, the US Treasury and the Bank of England to suppress the price of gold, gold’s long term trend since 2001 when it bottomed at about $250 an ounce, has been up. And if you are astute enough to realize that the gold markets have been, and still are rigged, then observing gold’s rise from $250 an ounce eight years ago to more than $1200 an ounce just a week ago should give you the utmost confidence, that despite the best efforts of bankers to wreck gold’s price, its long-term trend will remain higher for quite some years to come.

Still, no matter what side of the “gold is rigged” debate you stand on (and there is lots of evidence to believe the “gold is rigged” side of the debate thanks to the tireless work of GATA.org), the public’s stated reasons for not owning gold are not only absent of logic but they are downright foolish. Two of the most frequently given reasons I’ve heard from Westerners as to why they will not buy gold are parroted banking propaganda that make absolute no sense. The first reason people often give as to why they are reluctant to buy gold is that gold pays no interest. People would realize how foolish this stated reason was if they only realized that all paper money is issued as debt. If there were no debts in the system, there could be no money, yet people gladly accept an instrument that is issued as a debt and believe that it is a pure asset. Secondly, they state, you can’t buy anything with gold. You can’t pay for many items with Euros in many American stores or buy items with US dollars in many European stores either, but that doesn’t mean the Euro is worthless to own if you live in America or that the dollar is worthless to own if you live in Europe. Both will still have some value in buying goods and services. Thus, to not own gold because “you can’t buy anything in stores with a gold coin or gold bar” is an answer devoid of any logic whatsoever.

Throughout history, gold has always been accepted as a form of money. In fact a gold coin in ancient Roman times would buy you about the same things today as it would have back then. With US dollars, you now need twice as many dollars to buy the same things today as you would have needed just 8 or 9 years ago. If a wealthy eccentric man walked into a Maybach auto dealership and insisted on paying for four custom made Maybachs with $2.4 million worth of gold bars, I guarantee you that the dealer would find a way to accept the gold bars and make the $2.4 million sale, knowing that he could choose to hold on to the gold or to convert it into Euros, Yen, Pounds or Dollars at a later point and time. Thus, there is no reason to believe that gold can not be used to purchase items. Gold may be an inconvenient form of money, but it will be much more inconvenient to watch your fiat money crash and burn and for much of your wealth to be wiped out when the second phase of this monetary crisis commences sometime in 2010 or 2011.

Secondly, psychology plays a huge role in the foolish bias of Westerners against gold. Were Westerners to live in China for just one year, where almost everyone knows multiple people that own physical gold, I guarantee you that their perception of gold, upon returning to America, would be drastically changed. They would be inclined to buy more gold just because of the sheep herd mentality that would make them much more comfortable purchasing physical gold after watching many of their friends and associates engaging in the behavior of buying gold for an entire year. Though in China, this herd behavior happens to be correct, just because everyone is doing the same thing, does not by default, make it the correct behavior. In fact, in investing, just the opposite is normally true. When everyone is doing (or not doing) the same thing, they almost always are wrong. Think of US hedge fund manager John Paulson and his enormous coup of earning $4 billion of profit for himself in 2007. Paulson stood on the opposite side of the subprime mortgage bet from the rest of all of Wall Street. Regarding a recent book based entirely upon Paulson’s enormously successful bet to short the US housing market, one reader stated: “The most amazing thing is that no one seemed to believe [Paulson] until the market crashed and by then it was too late.” Though Paulson was a lone wolf among very few lone wolves that existed at the time regarding his beliefs that the subprime mortgage market would crash and burn, he ended up being right and all of Wall Street ended up being wrong. With buying physical gold, it will also pay to think like a lone wolf if you are a Westerner.

However, here’s the lesson most investors still refuse to learn about Paulson’s enormously successful investment play. The majority of investors never take the next crucial step of investigating the reasons why no one believed Paulson’s comments about the US housing market. If the did, they would discover that the reason nobody believed in Paulson’s enormous bet back then was due to the propaganda of bankers like Ben Bernanke and politicians that assured the American people that the housing market would be fine. Many times the masses immediately accept a person’s statement as truth with no critical analysis of that statement just because that person is a public authority figure. But how naïve would you have to be to believe President Obama’s recent statement on the American TV show 60 Minutes that “[he] did not run for office to be helping out a bunch of fat cat bankers on Wall Street.” Goldman Sachs’s Political Action Committee was the second largest contributor to President Obama’s election campaign, so were it not for the money of “fat cat bankers”, Obama may very well not even have been elected as President in 2008. Knowing this, do you really believe that Obama has zero obligations to the second largest contributor to his political campaign?

Furthermore, were you to merely analyze President Obama’s financial decisions since he has taken office, the disingenuous nature of his above comment would be readily exposed. Almost every single financial policy decision of his administration has benefited “fat cat bankers” to the detriment of everyday US citizens. Again, those blinded by political or racial loyalties at the expense of logic will be sure to foolishly digest my statement as a politically-biased statement though there is no evidence to support that conclusion. Any reader can easily check my past history of public statements and discover that my criticisms of the foolish monetary and fiscal policies of the Clinton and Bush Administrations are just as numerous as my criticisms levied against the Obama Administration. If you are serious about never wanting to be fooled or bamboozled by a politician again, then never look to a politician’s words, but only to his or her actions, to unearth a politician’s true character and nature. Only a fool would ever accept a politician’s words as an accurate representation of a politician’s intent.

Likewise, you would be very wise to apply the above maxim to bankers as well. Investors should look towards bankers’ actions and not their words when trying to decipher their intent. Bankers are responsible for the propaganda that gold is a barbarous relic. Bankers are responsible for the propaganda that gold is a cumbersome asset to own because it pays no interest. These are their words. Yet if you look toward their actions, Central Bankers all over the world were net buyers of gold this past year. Shouldn’t that alert you to the fact that bankers are a bunch of conniving liars in everything they tell the masses about gold? When Paulson first assumed his position shorting the subprime mortgage market, it was not only bankers, but also chief executives at large commercial investment firms that derided him, stating that the subprime mortgage market would be fine. I personally heard many of the same criticisms when I started telling people to buy physical gold six or seven years ago – that I was crazy for thinking that the US dollar would get into trouble and that the US dollar would be fine, that owning gold was a stupid and foolish investment. People actually laughed at me for buying gold. A top investment strategist at Citigroup stated that gold was a bubble in 2005 when gold reached $500 an ounce. And now, even though the gold critics have been wrong now for eight years in a row now, they still use every gold correction as an opportunity to deceive Americans into believing that gold is a bubble and about to collapse. And amazingly, Americans continue to look not towards bankers’ actions but to their words only. The overwhelming majority of Americans believe the bankers’ WORDS that the US dollar will be fine, and foolishly point out every bear rally in the US dollar as proof that the dollar will be fine.

Ninety-five percent of what I’ve heard financial advisers state about gold is wrong. Ninety-five percent of what I’ve read in the public domain about gold is wrong. Ninety-five percent of what I’ve read from the Western media about the US dollar is wrong. And ninety-five percent of the arguments I’ve read against owning gold, even when filled with supposed “facts”, are wrong. Many of the arguments against gold sound convincing, even though they are deeply flawed because erroneous data are used to produce flawed conclusions. But this is the very definition of propaganda – arguments that use erroneous data presented as “facts” to draw convincing conclusions that are highly flawed, though to the undiscerning eye, they seem quite logical. The reason that bankers have always spread so much propaganda about gold is because gold is the kryptonite of bankers. Gold allows people to preserve their wealth against their fiat currency debasement schemes.

Hank Paulson, in testimony before Congress, stated that it was necessary to bail out Goldman Sachs through the bailout of AIG because the people, “were unhappy with the big discrepancies in wealth, but they at least believed in the system and in some form of market-driven capitalism. But if we had a complete meltdown, it could lead to people questioning the basis of the system.” If Americans really wanted to expose the fraud of the entire financial system, all they would have to do is to put just a tiny part of their entire savings into physical gold. If all Americans put perhaps as little as 5% of their entire savings into physical gold, this would likely be more than adequate to expose the fraudulent basis of the financial system by which firms such as Goldman Sachs reap such ungodly profits year after year. What frightens the bankers the most is the possibility that people will fully understand the basis of the system, and this is why Western Central Bankers continually wage so many disinformation campaigns against gold.

Consider this story about HSBC and its retail gold clients that was reported last month: “The British bank, which has sizeable vaults underneath its US headquarters overlooking Manhattan’s Bryant Park, has told retail customers – many of whom are middle-men and custodian services which store gold with HSBC on behalf of hundreds of their own clients – that all their gold must be out of its facility by July 2010. The decision has seen fleets of armoured cars laden with gold ferrying the precious metal out of New York. An HSBC spokesman declined to comment, but it is understood that the increased demand for physical storage of gold by corporate clients is behind the move to end the retail service, which HSBC inherited when it took over Republic Bank a decade ago.” With banks, it’s never about doing what’s best for their clients. It’s always about what’s doing what’s most profitable for their executives. For HSBC’s individual retail clients that were intelligent enough to own gold, HSBC most likely realized that larger, much more profitable relationships could be built with corporate clients that wanted to buy gold versus their retail clients. Thus, their retail clients got the axe despite the fact that HSBC knew that such a decision would be incredibly inconvenient for them.

Just as was the case with subprime mortgages when almost all of Wall Street got it wrong, the only reason anyone believes that gold is a bubble today is because people have forgotten how to think for themselves, foolishly believe that there are not hidden ulterior motives behind the beliefs spouted by Wall Street, and for some inexplicable reason, still internalize and accept all banker propaganda against gold while at they same time, they claim to distrust them. That’s why no matter how much further gold drops before this correction ends, if you don’t make the move to buy physical gold if you don’t own any, you will look back with regret five years from now and realize that you missed an unbelievable opportunity.

http://www.theundergroundinvestor.com/2009/12/an-unbelievable-opportunity-in-gold/#more-1314