Strange chart divergences... Coincidence?

Michael Panzer has posted a couple of interesting charts on his Financial Armageddon web site recently which show some interesting if not strange divergences.   The first is a chart showing the divergence between
the consumer confidence sentiment readings and the share prices of stocks which have historically depended on consumer confidence.  He calls the recent divergence "the dope gap" as in only a dope doesn't think something strange is going on here.  There are many reasons that this could be happening, but none of them are likely to be very sustainable over the long run.  The most obvious of the reasons is what Panzer quoted someone else as saying: "...the percentage of incomes provided by government transfer payments has remained elevated.  What this implies is that for a large segment of the economy, the government is subsidizing consumption levels."  Well Duh!  Government is subsidizing everything in the economy and they are using debt to do it with.  We have a fake, debt fueled GDP which will last as long as our government can borrow money cheaply.  When bond holders eventually demand higher interest rates, and they will at some point, the game will collapse.

Having said that, I'm not sure that so called Robin Hood "transfer payments" can really account for the gap in share prices vs consumer sentiment.  Transfer payments are a form of welfare.  They do not go into the stock market.  They go into filling the expanding gap between salaries and the cost of living.  Think "cash for clunkers", house purchase incentives and other monumentally stupid government driven programs. 

The more likely cause for Panzer's "dope gap" is that banks and other big money houses (insurance companies, etc.) have excess liquidity (elite-speak for fake money in the form of credit) that they are gambling in the markets with because US treasuries don't pay any interest that would make them attractive investments.  Keep in mind: banks have issued certificates of deposits and insurance companies have sold annuitites and pension funds have payout plans which promise returns that are significantly higher than what anyone can get from government bonds.  These Ponzi Promises require main street to participate in the stock markets so that there are suckers to fleece.  But when the middle class gets whacked there is less disposible cash for it to go into the markets with.  Also, who is going to invest in a falling market?  Money houses need, nay, require the markets to stay bouyed (somehow, anyhow) in order to attract new suckers so that they can be fleeced in order to meet all these outstanding commitments.  When the suckers run out, the money houses will be forced to admit that they are nothing but frauds and never have been anything but Ponzi schemes (just like Social Security). 

Another potential reason would be that the Federal Reserve might be secretly colluding with big US banks to prop up the stock markets.  In fact, the mechanism for doing this, if it is occurring, is probably the provision of excess liquidity to the banks in the first place.  In other words, Bernanke could be saying to the banks, "Here is a bunch of very low cost credit - almost free.  Take out a loan from the fed and recapitalize your bank, improve your reserves, make your bank less likely to collapse."  And then with a nod and a wink, "...and while you are at it, throw a couple of bucks into the stock market since everyone believes that higher stock markets drive more confidence leading to more spending".

Panzer's second chart points out a gap between the credit market and the price of the equities as referenced by the S+P 500.  The norm is that a good chunk of bank-lent credit ends up being used for speculation in the
stock markets but with bank lending down right now the S+P 500 is still mysteriously holding up.  With such unprecedented, unbridled government involvement in the economy and in the markets one can only guess that the government is responsible for this gap as well.

Lots of people believe that the government is capable of controlling the economy forever.  These same people actually believe the government creates real, sustainable, economically viable jobs as well.  They have nearly given their lives over to government control.  Truth be told, the government is trying to convince everyone that these attributes about it are true and that it possibly can maintain a viable economy, stable employment, and all the other spew that is listed in the Federal Reserve's so called "mandate".

The charade will continue, just as it did for the Greeks, the Spaniards, the Italians, and the rest of the Euroscammers until the price of credit associated with US government borrowing goes up to the point where just rolling over the existing debt is impossible, forget about taking on new debt.

It's a debt Ponzi, folks.  It will end some day like all Ponzis always have to end.

Volume changes precede price changes

In a past post relating to the Aussie real estate market (bubble), I reminded readers of the commonly known truth that volume changes precede price changes in markets.  In other words, if there is little trading in the prior direction of movement then the market for the item (stocks, commodities, housing, anything) is likely ready for a turn south.  Conversely, when the volume runs out of a bear market sell off, that signals that the herd is all run out of the market and that a buying opportunity is at hand. 

Today, Karl Denninger points out that the S+P futures market is seeing extremely low trading interest by market participants.  I've written many times that a con is over when either of two things occur:

• The patsy gets wise
• The patsy is fleeced so badly that he can no longer participate in the con even if he wanted to

The patsy in this con has always been the middle class and as the middle class shrinks there are simply less patsies to fleece along with the fact that the ones who have gotten whacked already are now gun shy.  Denninger’s conclusion: "The fraud, the phony bids and offers and the high-frequency ripoffs have driven everyone away."  

It cannot help that super-widely read economic blogger Mike Mish Shedlock is now writing, ”Embrace the fact: Banks cannot be saved”.  Mish is known for withholding his final call on a matter until there is enough evidence to support his conclusion in even the most cut throat debate.  When Mish makes such a definitive statement your odds are very poor if you bet against him.  The odds of another banking crisis in the next few quarters or years which is even bigger than the last one are very high.  When it happens the FDIC will be revealed to be bankrupt and people who foolishly believed government assurances about the safety of the banks will get creamed IMO. 

If that happens, don't look at me for a bailout.  I will wondering why you didn't heed the multiple warnings being given by the market.  I will be questioning why you didn't get out of the banks completely knowing that the FDIC is a bankrupt sham that cannot save itself much less insure your deposits in a real crisis.  I will also be concerned that you didn't store a significant portion of your personal wealth in something outside the global fiat currency scam (like gold and perhaps some silver). 

But not concerned enough to bail you out. 

The time is now to think and act.  Don't wait for the bottom to fall out and then whine for the sympathy of others because everyone will be in hard times of one form or another at that point.

Hysteria or healing?

It irks me to no end how, when everything is bubbling up due to the expansion of credit and debt, the mainstream media calls it "a miracle" while on the backside of the collapsing bubble it's called "hysteria" or "a panic".  Case in point: a recent article in The Telegraph which dubs as hysteria the push back by the German people against their government's attempts (aided by its central bank) to piss away more of the country's wealth on propping up the collapsing debt Ponzi/vendor finance scam in that region.  Dear Ms. Merkel: read my lips: Cut your losses and run.  The scam is in collapse.  The people have gotten wise to you.  Get out while you still can, con-girl.

That the German people did not want the European Union in the first place is a matter of historical record.  However, in order to ram it down their throats, the Euroscammers made unkeepable promises in the form of the Maastricht Treaty.  The four main rosy promises covered inflation rates, government finance (debt to GDP limits), exchange rates between members and long term interest rates.  Given these impossible sounding goals, intelligent people pushed back and so the framers of the Euroscam threw in another unkeepable promise in the form of Article 103, Section one, the clearly stated "no bailout rule":

"The Community shall not be liable for or assume the commitments of central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of any Member State, without prejudice to mutual financial guarantees for the joint execution of a specific project. A Member State shall not be liable for or assume the commitments of central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of another Member State, without prejudice to mutual financial guarantees for the joint execution of a specific project."

Given these worthless assurances, opposition caved and the German elite got to push forward with their creation of the great European vendor finance scam in spite of objections from informed and intelligent German people.  Of course, we now know that none of the 4 main principles of the original Maastricht Treaty have been kept and that the no bailout rule has also been proven to be the unkeepable promise that it always mathematically had to be.

How did the bailouts happen despite the no bailout clause?  Because government con men left themselves a backdoor catch-all bailout mechanism in the form of Article 100, section 2:

"Where a Member State is in difficulties or is seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control, the Council, acting by a qualified majority on a proposal from the Commission, may grant, under certain conditions, Community financial assistance to the Member State concerned. The President of the Council shall inform the European Parliament of the decision taken."

So what in essence the ruling elite did was to con the people by telling them that bailouts would be illegal while putting in place a mechanism for doing exactly that whenever they damned well felt the need to do so. 

I have to interrupt my own chain of thought here for a second to point out the wording used in that con-statement.  Read it: "Where a Member State is in difficulties or is seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control...".   Notice how they suggest that this clause, which is in effect a master override of all truth and honesty in the treaty, would only be put into effect if there was a natural disaster or some act of God which demanded it.  What a total red herring!!  I guess that just sounds better than saying "...when this debt / vendor finance Ponzi finally collapses under its own corrupt weight...".   And in what way is PIIGS over consumption of German and French exports beyond their control?  Of course consumption is under your control.  Not wanting to control debt based consumption is not the same as not having control of it.  The people who wrote this clause up clearly knew what they were doing and none of it was good for the rank and file worker.  It was a massive scam from day freaking one.

Let there be no doubt that the German government is not saving its own people with these bailouts of other EU countries like Greece.  The elite in German government is trying to save themselves.  They couldn't care less about the people who actually worked to build the country up out of the dirt.  If the debts are ever allowed to collapse then everyone is going to wonder what good the EU ever brought to anyone except leveraged producers (supported by bankers and politicians) in Germany and France.  If collapse occurs then it could again become time for pitchforks and torches in Euroland with elitist con men getting dragged into the streets and beaten or worse.  I mean "when" collapse occurs.   A collapse is mathematically guaranteed at some point.  It is the nature of a debt Ponzi to eventually collapse.

So is it hysteria that the German people are crying "Genug!!!" or is it a return to sanity?  Is it panic when people run away from government gone wild or is it merely self preservation?  It is criminal to question the ruling elite or just common sense?

The "Buy Like Buffett" game is wearing thin.

Wikibin Great Depression research recounts a tale of "leadership buying" by the banks in order to bolster the confidence of the people in the stock market con game that was collapsing back then:

"From the very beginning of Black Thursday, things went downhill... Across the country, boardroom tickers showed a frightful vertical collapse. By 11:30 everyone was trying to sell. They did not know what was actually going on and, it was a true panic. ... At noon, reporters learned of a meeting to be held at 23 Wall Street, the head quarters of J.P. Morgan. It would include the heads of all the major banks, who would meet to figure out how they could come together to put a stop to the panic.

They reached a decision in record time, and by 12:30 the bankers had gone to the Stock Exchange and began strategically buying stocks, in an attempt to stop the landslide. When the people saw the bankers buying on the floor they also began to buy; they were reassured by the fact that the banks had come together and formed a plan to stop the blood letting. The bankers also went out of their way to send high level, highly recognizable figures down to the floor to place the bids. Also, they acted very calm and self confident. It is not known how much the banks spent that day to try to keep the economy floating. It is estimated that it was $250 million collectively."

Of course, none of the efforts mattered in the end.  The people had grown wise to the fact that stock markets which do not pay a dividend are mainly a Ponzi scheme.  The Dow continued on from that day to crash 89% from its high before finally putting in a sustainable bottom. 

Well, we've come a long way since then even if it has probably been nothing more than progress in a great circle.  Warren Buffett seems to be taking the leadership role in calming the un-calmable herd this time.  $5 billion appears to be today's price tag for calming the herd (up quite a bit from $250 million of yesteryear) as Warren Buffett recently took a massive stake in Bank(rupt) of America.  In the first wave down of the crash, Buffett bought a similar stake in Goldman Sachs which has since been repaid.  Buffett looked like the hero on that one because shortly after his Goldman investment the government suspended accounting rules which meant that the big boys no longer had to admit they were bankrupt.  Buffett thus was able to recoup his investment in Goldman this year based on the dead cat bounce the rule changes created.  You can determine for yourself whether or not Buffett had advance knowledge of that coming action through his contacts in government and in the banking arena. 

But rule changes don't change the facts, they just change the group of people who know the facts.  Rule changes also pick new winners and new losers.  But most of all, the rule changes simply allowed the corrupt con men who ran their banks into the ground even more time and opportunity to spirit more money out the back door thus making the problems much larger in the future.  Nothing has been fixed, the can was simply kicked.

With his latest move Warren Buffett builds upon his recent and even more recent legacy of acting as a banking-government shill, trying to spread calm upon the people while telling us that higher taxes in any form are beneficial.  Buffett knows better than that.  He knows that any taxes paid to government will be in large part pissed away by waste fraud and abuse of the federal government and its military machine.  Buffett wants us all  to see him asking for more taxes even if it is only being done in order to save the corrupt system that he gamed into becoming incredibly wealthy.  He is trying to buy our confidence and our compliance.  It is the same type of "leadership spending" that the con men tried to do in the collapsing stock market that led to the Great Depression.  They all cry "follow me, men" and act like they are jumping out of the trench into the withering fire of a losing economic battle.  Of course as soon as they are done with the public show they slide back into the trench and run for cover leaving anyone foolish enough to have gotten conned into battle to take the bullet. 

Personally, I am having none of it and I suggest that everyone consider the stupidity of listening to advice from those captured by the system as well as the type of person who has been sucking value away from working people via his intuitive knowledge of how the scam works.  I also want to point out that uber rich minus more taxes still equals ridiculously uber rich.  Buffett's ramblings about giving up a billion dollars means nothing.  He's within 5-10 years of meeting his maker anyway.  He could give it all up except for 10 million and still live like a king for his remaining years.  When he gives all of it up and has no home, no car, no job, and no income then I might start taking his calls for more taxation seriously.  Until then his calls for higher taxes are nothing more than a disingenuous shout out to the patsies to continue participating in the con.  While foolish people will think that more taxes on the rich is a good thing they overlook that there is no such thing as just taxing the rich.  Once the additional tax gates are opened, everyone will be asked to "pay their fair share" toward keeping bloated government fat and happy.  Taxation of the rich is nothing more than a foot in the door.  We need smaller government and less taxes, not more taxes (no matter who pays them).  Smaller taxes and the cutting of debt based spending are the only ways to drive toward smaller government, more freedoms, more privacy.

Let me be a bit more clear: Warren Buffett is a workaholic.  I mean that in a good way.  He works hard, thinks hard, is practical and pragmatic.  He's not just intelligent - he's also calculating and cunning.  But in no way has he by his individual work contribution added billions of dollars worth of value to our economy.  One man simply cannot work that hard or that smart.  It is not within us to do so.  But still, he is worth billions somehow.  How did Warren get all that money?  Economically speaking it could only have happened by standing on the shoulders of other hard working people, not as their peer but as their overlord. 

In my past management of engineering teams we were able to accomplish some really cool things.  Yes, I was the leader and I had much of the vision for the work.  But I did not collect an outsized salary for this work even though I was often at it for 12 hours/day because management is just another function in the team.  I did not get to collect a portion of everyone's salary who was working for me because that's not how it works in an honest team working relationship.  All of the senior members of the team made about the same money because they all worked hard and contributed greatly to the success of the achievement albeit in different ways.  But Buffett somehow did get an outsized portion of the wealth generated by every person in each one of the companies that his fund owned.  He was effectively a king with the power of taxation. 

All new value is created by the labor of man and since Buffett is worth billions it means he has somehow received the payment associated with millions of man hours of work.  This is not possible in an equitable economy because no one man is so much better than another that his work is paid at a rate which is thousands of time higher than the rest of the workers in society. In short, Buffett conned the money out of other people.  It was an intricate con and one that used great leverage (a fine thing in casinos but not so much when people are all just working together trying to live and to care for their families).  IMO it was a con because Buffett fully understood the power of fiat currency and fractional reserve banking and the power of government to pick winners and losers.

I am NOT accusing Buffett of doing anything illegal at all because I don't think stooping to illegal acts is required in order to make huge sums of money given that the monetary system itself is so completely corrupt and fraudulent.  All you have to do is to understand that corruption and understand that fraud and to work within the rules of the corrupt, fraudulent framework.  Buffett has simply gamed the system very well while always staying within the law IMO.  Some might call him immoral for doing this because he knew he was fleecing those who were working hard but who did not understand the game.  Others might say that since everyone had the opportunity to play by these same rules that it is just sour grapes to complain when someone gets ahead.  I say that if a man cannot achive the value that he works each day for, something is terribly wrong and nobody should be happy with such a system.  Those calling to perpetuate the system are, like Buffett, the biggest beneficiaries.

Each healthy person was put upon this Earth with the ability to feed and clothe and shelter himself and his family.  He was also given enough gifts in his youth (physical strength, intelligence, energy, motivation, endurance, etc.) to produce enough wealth in his youth so that he could afford to live a reasonable life in his retirement years when his deteriorating body (and in many cases even his deteriorating mind) no longer allows him to compete with younger workers.  When we start to see that large numbers of people cannot follow this model because all of the wealth is concentrated into the hands of the few then we have to question how it can possibly have come to this point in an honest and fair system.  In truth, it cannot which means that the system itself is neither honest nor fair.

And so we should expect to continue to see disingenuous people like Buffett making a big show in order to perpetuate the Ponzi because they stand to lose the most if it collapses.  At the end of the day their efforts will fail because too many people have woken up to the truth about the great Ponzi supported by debt (aka fractional reserve banking) and fiat currency (yet another form of debt).  In other words, people will stop accepting Wimpy Promises in exchange for their labor as Buffett et al. would like them to do.  The awakening populace will continue to scramble to convert their paper salaries into tangible stuff (commodities) and into real money (gold and even silver).  Without people accepting promises instead of actual payment the uber wealthy will collapse under their own corrupt weight and will be discredited.  Buffett shilling for the government and the banks is speeding the fall of his crediblity and of his stature in world economics.

All the con men are falling under attack: Blankfein on deck.

Lloyd Blankfein, CEO of Goldman "Vampire Squid" Sachs, has reportedly hired big time defense attorney Reid Weingarten.  We really don't know what for at this point but it's not too difficult to hazard a guess.  Blankfein is an arrogant con man IMO but he's no fool.  He knows that the sheeple are awakening and they are pissed.  In line with the concept of con men turning on each other to curry favor with the very pissed off public during the collapse phase of the con, the government (the lead con player in the fractional reserve banking scam) is likely going to try to nail him with whatever charges they can just to throw some raw meat to the angry crowd.  Scapegoating is a sign that the Ponzi is in the collapse phase.

In a post from June of this year I wrote, "They [Bernanke and his criminal banker cohorts] are laughing now for having fleeced the sheeple so boldly but I actually feel sorry for them because they do not fully understand the anger that they have incited in the general population.  I'm talking Reeve Valkenheiser type anger towards moneymen.  Once the collapse hits then it will be open season on con men and bankers.  Perhaps I will be proven wrong but at this point I suspect that bankers and moneymen will have a very difficult time enjoying their stolen prosperity into old age. When you get a scammer like  Lloyd Blankfein smugly telling the people that Goldman Sachs is "doing God's work" one can only imagine the thought processes this set off in some of the less stable, less economically fortunate among us."

Personally, I am quite sure that a public hanging of Lloyd Blankfein will fix nothing; the past damage is done and that bill will have to be paid by the future labor and suffering of the people.  However, going forward the very fact that the government is pursuing him is an eye-opener to all the other would be con men out there.  If Blankfein gets taken down, no con man anywhere is safe no matter how much money, power or legal resource he might have access to.  Blankfein needs to be taken down if for no other reason than that.  Years ago, con man Blankfein (a label that is of course, just my humble opinion), was untouchable.  He was like Rumsfeld - a “made man” in the criminal organization that took over from the Capone type mobsters: the Military Industrial Complex gang.  Now it seems both Blankfein and rummy better lawyer up.  The public wants to see heads roll and so heads will roll.

Open letter to the good people of Japan

Dear Hard Working People of Japan,

It is with sorrow and respect that I bring you the sad news that your economy is bankrupt and your banks and major corporations will leave little doubt as to this fact in the coming months and years.  You don't need this kind of bad news after the tsunami and the Fukushima incident but bad news generally travels together as the saying goes.  As evidence of this coming collapse, I present Toyota Motors.  Toyota is a great company but it was built on unsustainable debt and as deflation takes hold there will be little to economically distinguish it from General Motors in the USA. 

How can Toyota be in trouble if it makes such good cars?  If you are asking this question it shows that you don't understand economics.  The question is, how much debt does Toyota have and can it afford to pay it?  IF the debt is too high then it proves that Toyota's manufacturing capacity was borrowed, not earned.  Borrowing to overproduce is the sin of every exporting nation in the world that is foolish enough to believe that exporting is a sustainable profit generation mechanism.  Like fractional reserve banking and fiat currency, it appears to work for a number of years but it eventually proves to be an unsustainable scam.  The scam of exporting as a mechanism of wealth generation is only made possible by the vendor finance scam.

As I have explained before, the only true value of exporting (another word for trade) is to achieve diversity of consumption.  Japan is darned good at making cars but it cannot consume all the cars that it makes.  It must export them in hopes of getting other things that it needs but does not produce internally.  The problem is that Japan has gotten so good at making cars that its customers can drive them for a very long time if they want to before buying another one.  In fact, it it is not difficult to get 200k miles out of a properly maintained Toyota.  At the same time, Korea and China have followed Japan's fine example and are now making quality cars of their own.  Competition for the small car market has never been more fierce.

The only fundamentals you need to know about Toyota right now are that they have $157 B-B-Billion in debt (and growing) and only 45 billion in cash according to Yahoo finance.  When I was telling people about the coming demise of TM a couple years ago it only had $125 bn in debt.  So it is accumulating debt about as quickly as the Japanese government itself.  At the end of the day, the Japanese government will default on its debt (which has recently exceeded 200% of GDP) and the default of Toyota Motors will probably precede that by some short period of time.  Toyota will go the way of General Motors before this economic
crash is over.  As to when this will happen, I fear it will be sooner rather than later.  The Elliott Wave model of the TM stock chart tells me that the sucker bounce is most likely (herd-watching is a game of odds, not certainties) over and that we are now into the C wave.  This is just a model so take it for what it is worth (which is no more than what you paid to read it).  However, if that red support line from 2003 breaks down then I think TM stock will be technically broken and looking to create a significantly lower low.

幸運と多幸をお祈り
-The Captain

Paper promises for GLD are not the same thing as gold

I believe that wherever there is an opportunity to bend the rules, cheat, sneak, commit quiet fraud, and so on, such happenings will occur.  It falls under the same classification as Bill Clinton's self proclaimed reasoning for futzing around with Monica Lewinski:  "Because I could".  It's just the nature of man.  There's an old saying, "don't tempt an honest man".  Fiat currency and fractional reserve banking have few rivals when it comes to their power to tempt men.  

This brings me to the topic of the GLD fund.  People have been told that it is "like gold" or that it "trades in step with gold" but since it is not gold wise people will be looking at it sideways wondering when the gold plating is going to wear off.  In short, paper promises for gold are not the same as gold in the hand.  In a fair economy where people don't have their heads up their a$$es, nobody would ever value paper promises for gold in the same way they would physical gold.  Why?  Because gold is a crisis haven and in a crisis possession often becomes 9/10ths of the law.

As the credit con collapses, people again return to their senses.   They begin to value what is honest and right, and they begin to look down again on things that are corrupt and worthless.  The credit con had that flipped completely on its ear, but with its ongoing collapse the healing process is upon us and so I expect to see lots of interesting stuff happen.

One thing I have always warned my family and friends to be on the look out for is when the GLD ETF begins to diverge from the price of physical gold.  Why should that ever happen?  After all, doesn't the GLD fund actually own enough gold to completely back investors in it?  Yeaaah, right.  To believe this is to ignore the nature of man as expressed at the top of this post.  The GLD fund allows certain people to tell everyone their gold is present and safe without actually having to prove it to anyone.  In other words, "trust me".  Only a fool trusts someone else to hold his money during an economic collapse.

So has the divergence been happening?  Yes, it has.  The divergence is still small at this point but it is steady.  At some point I expect that the divergence will grow rapidly, perhaps with exponential speed.  Here is a recent snapshot of gold vs. GLD:  As you can see, the average slope of that relationship is up and to the

right.  In December of 2009, the average ratio between spot gold and the GLD fund was 10.150:1 (its supposed to be 10:1).  Now it is 10.251:1 with an instantaneous ratio of 10.350:1.  That's a 3.5% divergece.   That may sound like a small number but keep in mind that GLD claims it has 66.14 billion USD in reserves according to Yahoo Finance.  3.5% of that is 2.3 billion with a B.  As in missing.  Gone.  Up in smoke.  Absconded with.  IMVHO of course.

Of course a billion isn't what it used to be but if certain things happen in the world, confidence could be lost in the GLD fund and it could diverge rapidly from the price of real, physical gold leading to very large losses for investors in it.  In fact, that is exactly what I expect that we will see happen in the coming years.

I suspect (as in it's just my opinion) that the GLD fund is a fractional reserve system.  It probably takes in money from investors, buys some of the gold it says it owns, and then buys options or some other leveraged paper claim on gold to account for the rest of its stated gold holdings.  There is no telling what the ratio of physical gold to paper promises is but the more of this they get away with, the more they will try to get away with.

Why would the GLD fund do something like this?  To try to increase profits of course.  It is not free to store gold metal (security costs, etc.), yet nobody who owns the GLD fund pays storage fees.  Investors think they are getting something for nothing but they are really just getting chiseled.  In fact, they might be getting "the business".  As in fraud.  As in the GLD fund could be taking the money they are not spending on physical metal and using it to gamble in other markets.  You can think of this as gambling with your money without you knowing about it which is, unfortunately, very similar to what fractional reserve banks do.  In fact, intelligent people understand that GLD is likely a way to fractionally reserve the physical gold stocks of the world, thus creating a fake, paper supply of gold that isn't worth the stock ticker it trades under.

So what is the end game for something like this?  In short it’s the same as the end game for fractionally reserved banks: a run on the bank.  In other words, customers wake up to the reality of the economic crisis and begin to fear that their money might not be safe.  As a result they withdraw their money leaving the fractionally reserved system even more fractionally reserved than it was before.  At some point there is a default (no gold left to return to those whose accounts say they have some on deposit) and people get stiffed.  Nixon in 1971, anyone?

What might a run on the world gold system look like?  Well, when you see big gold players demand their money back from the gold storage banks that they have used for years, that would be the best indicator.  In fact, the 15th largest gold holder in the world, Venezuela, is doing exactly that as I type.  They want all of their 200+ tons of gold that are stored in vaults around the world returned to them right now.  Gee, this is strange timing for that, ya think?

The final thing I will leave you with is this:  why would anyone choose to buy paper gold in the GLD fund instead of owning the physical metal?  Physical gold is nearly indestructible and it is very small and so easy to hide.  So why are sheeple lined up to plunk down their hard earned cash for paper gold?  The bottom line is that they still don't trust the physical metal because they have been brainwashed into believing that the only real money in the world cannot be trusted or is in some way "risky".  They want to be light on their feet so they can be the first one out of the "bubble" when it pops.  That's hard to do with physical items, but just a mouse click away with an ETF. 

All I can say about that is that it is the same thing Madoff victims thought.  They knew something was wrong with the outsized returns he was giving but they just thought they would be faster than everyone else getting to the door if a collapse hit.  But by definition, most people trying to exit a fraudulent situation have to lose out.  That is the nature of fraud.  I thus predict that before this crisis is over, GLD will prove to be a fractionally reserved fund to a significant degree (think 20% but it could easily be higher - they are short by perhaps 20% of the stated gold IMO) whose paper claims on gold are not worth nearly what people were promised they would be.  People in GLD will someday wish they hadn't tried to be slick dick market traders.  Keep your eye on the gold:GLD ratio.  It is the canary in the fractional reserve GLD fund coal mine.

Massive government corruption will be exposed by the collapse of the credit con

It's been my long standing view that the Military Industrial Complex is the new face of organized crime.  Instead of stealing from people outright, the new breed of criminal uses guile, sophistry, credit games, money printing, debt based wars, force of unconstitutional laws supported by illegal court actions, police state tactics like the TSA and a variety of other mechanisms in order to stay in power and to continue fleecing the people.  The main players here are the military, politicians at every level, bankers and moneymen of all sorts and corporate heads.

I've also predicted long ago that as the underpinning of the con - the great fractional reserve credit scam - collapses, many of those who were complicit with the scam will begin turning on each other.  They will do it to save themselves or to benefit personally in some way (once a scum bag, always a scum bag) but it will happen because that's often how criminal organizations fall.  In truth, many didn't want to be criminals but the money was just too easy.  They were moral-free, weak willed scumbags by nature and they just lacked any self control whatsoever.  Thus, when the money stops being easy to come by they will likely reach a point where many will likely become repentant.  Will they really be sorry or just sorry that the game is over?  In many cases they will simply be sorry they got caught.  I'm looking forward to watching them squirm in the sure and certain knowledge that no criminal organization can withstand massive truth-telling by insiders.

While the easy money was flowing, people like you and me around the world didn't care that things didn't seem quite right.  After all, we were getting "ours" and so why speak up?  In fact, many people actually became unwitting agents of the con.  As a consequence, those who tried to bring something into the light of day were immediately cast off by the  herd, ignored or laughed at no matter how much homework they might have done or how much evidence they might have access to.  But as the con collapses, a sort of mass awakening is occurring.  It's as if the credit con had hypnotized the people and now that the corrupting drug of easy credit is being pulled from the economy, people are coming out of their drugged stupors and they are not liking what they are seeing.

It's still a bit too early to tell where we are in this process but recent news suggests that it is later than most people probably realize.  For example, we are now being told that the SEC has been shredding documents illegally, that Moody's credit organization has been corrupted to the core, and that Donald Rumsfeld will be tried for authorizing torture for his involvement in the illegal confinement and torture of two people.  Think about the gravity of the Rumsfeld deal and how different it is than anything we have seen the past 40 years.  It shows what happens when the people finally begin to wake up.

It used to be that if you were up in the lofty position of Secretary of Defense (better named "War Minister" IMO), you were untouchable.  You could do whatever you wanted and the system would stand behind you and protect you.  You could hide behind layer upon layer of bureaucracy and operatives without one worry of ever being held accountable.  If someone got too close then he would have an unfortunate accident or a sudden and unexplained heart attack.  And if a con man was unlucky enough to get called out, he could expect a presidential pardon in exchange for his silence.  If Rummy is found guilty of these civil charges, criminal charges will not be far behind.  The difference is that this time there will be no pardon.  People will be chanting for his head and it would be political suicide to intervene. If Rummy goes down then it would be foolish for him to keep his peace.  He would spill his guts like a common criminal in order to save himself.  Criminals only get leniency by giving up bigger criminals which means Bush 2 and Cheney would then come under fire.  Again.  Sleepy sheeple with plenty of credit driven prosperity couldn't care less what the government did.  Angry, freshly awakened and impoverished sheeple will suddenly care a great deal and there will be a call for heads to roll.  History has spoken many times on that subject.

Of course there is still one massive shoe that still needs to drop and it will likely come (or be the cause of) the fastest portion of the Great Awakening that is coming and that is the real truth behind 911 (must watch video).  Even my friends who have finally figured out that I pretty much know what I'm talking about with respect to the economy still have not suspended disbelief on that point.  They now mostly understand that there are structural problems with the economy but they still believe there is no way that our government is that corrupt.  We are not talking about uneducated fools here but rather some of the smartest and most analytical people you would ever want to meet.  My response to them and to you is as simple as it is true: There is no way the credit bubble could have gotten as big as it has without this massive degree of corruption! 

A credit bubble has to be perpetuated somehow or it will collapse.   In order for this to happen, the people have to continuously agree to more and more debt based spending in their names.  The only way to do this is to create the illusion of a threat or to start wars that lead to real ones.  In the end analysis, someone at the top did some math to justify it all.  The equation seems pretty simple: if they let the credit Ponzi collapse then it could cause major rioting whereby property losses could be in the trillions and loss of life could be in the many hundreds of thousands.  Sacrificing 3-4k people in those buildings in order to start the next credit driven war makes sense both in terms of economics and in terms of human pain and suffering.  If you don't think that government hacks make this type of analysis, you really don't get it.  Of course, they are really just making excuses in order to stay in power.  I don't care what their math says, nobody has the right to pick winners and losers, those who will survive or those who will be sacrificed.  Numerical analyses cannot justify playing God with the economy or with human lives.

More con men turn on each other: Moody's credit rating service under fire.

A disgruntled ex-analyst has gone public with his condemnation of Moody's credit rating services.  Oh Gee.  Really??  The government-anointed credit ratings fixers are con men and liars?  Say not so!!  The blood letting is just getting started.  The criminals are going to turn on each other because that's part and parcel of the end game of the con.  Just like other aspects of organized crime, soldiers in the great credit con will spill their guts for any number of reasons:

• in order to take down the competition
• to get even for having been cut out of the con
• to avoid jail time that they suspect might be coming as the people wake up and realize they have been conned
• to avoid mobs of angry people breaking down their doors and dragging them out into the street for a necktie party.
• To cash in on notoriety from TV appearances and book deals, etc.  

Everyone who squeals is (or was) himself a con man and the only reason they know anything worth squealing about is because they were solders in the con before things went south on them.

The people are still just waking up as to just how corrupt and rotten the whole fiat money, fractionally reserved banking based system has become.  They are really going to be pissed when they finally understand the real end game.  You know, that's where a significant chunk of their savings tied up in government accounts (IRAs, 401k, insurance annuities, pensions, etc.) will get stolen some way, some how by government.  I'm not guessing this will happen, I know it will.  How can I be so sure (and have been writing it and saying it for at least 4-5 years now)?  Simple.  Someone has to pay for this mess. 

Just printing up money does not generate the value that is actually needed to pay debts.  But the money in retirement savings was earned through work and thus it can pay debts.  Besides, if I were a moral-free SOB knowing what I know about how money really works then that is exactly what I would do.  So the government and the bankers and the lawyers and the corrupt courts will certainly come up with mechanisms for stealing it along with explanations as to why it is fair.  If you have any way to pull your money from their possession, do it.  Pay the 10% penalty and lay hands on your 401k retirement if you can.  You will sleep better at night knowing that it is out of reach of the con men.

Gold is not a commodity.

There are ever more "experts" coming out of the woodwork to voice their opinions on gold these days.  You know, people who either had no clue where gold was going four plus years ago or, just as likely, were afraid to say anything about it for fear that the herd would look at them in a funny way.  There are just tons of opinions out there right now that fly in the face of economic fact but the one that I think is the most dangerous for most people is the story that gold is a commodity and thus it should trade like one.  They are saying this even as gold is not trading anything like a commodity.  In fact, gold is trading like cash.  In fact, it's trading better than as if it were cash.  It is outperforming every global fiat currency.  Gold is supercash.  At a time when everyone is worried about getting screwed from every direction, gold is the only thing that hasn't screwed any long term investor.

Here is one such "gold is a commodity" argument.  As is often the case, 80% of the information is true but that final 20% is just painfully wrong.  For example, one of the "experts" named Schenker is quoted as saying, “Industrial metals, precious metals, and energy commodities are all real assets that are consumed”.  He's clearly lumping gold in there as an also-ran.  Well, if he ever read my blog in the past he would know better.  Gold is the only so called "commodity" that is not consumed into nothingness which means that is is not consumed at all but rather hoarded.  Commodities are consumed but real money is hoarded.  Making jewelry from gold is not consumption.  Jewelry is an ancient form of money.  Chains were an invention, much like a wallet or a safe.  Chains were worn around the neck where they could be handy for trade and safer from theft.  Nice, regular links of the same weight each could be easily twisted off to pay for things and then the chain could be repaired by hand given the soft nature of the metal. 

Because gold is not a commodity it is crazy to treat it as if it is one.  Schenker also says, "no matter what happens to paper markets, physical commodities will still be in demand”.  Really?  I wonder if this "expert" thinks that people in the poorest parts of Africa or the far east would agree with him.  They barely have enough to drink and the smart ones pinch pennies today so that they will have something in their old age.  Because they do not have credit gone wild syndrome they gladly forego coffee and cocoa which Schenker acts are like necessities of life.  Dude, those things are for relatively rich people.  If the great deflation settles in then lots of people will not be too worried about coffee and cocoa.  At the same time they will realize finally that government cannot take care of them in their old age and so they will care about having some way to store their excess wealth, little though it may be, in some safe storage mechanism that cannot be stolen by government con men just by making some proclamation or signing some document (which is exactly what has devalued fiat currencies time and again in the past).

Deflation is what we are seeing and deflation will play Hell on commodities.  Deflation destroys consumption demand by reducing the money supply.  Less money in the hand means less to spend.  Everyone is still worried that Bernanke will create immediate hyperinflation but that cannot happen until all of the huge real estate debt has been assimilated by the economy and that could take years.  It has taken Japan well over 2 decades and they are still battling deflation. 

If you want to hear a voice of reason on the current economic situation and how that could easily relate to gold, invest about 90 minutes in this must-watch video from Mike Maloney.  I promise you that the truth of it will bend your mind.  His story is very similar to my own.  I got obsessed with economic study and for several years I spent more than 30 hours a week studying what is going on globally - way more because I had chosen to take an extended break from work in order to study it.  His video is well done and I don't see any bad logic (very rare!).  Now, he does have some sky high views on the potential for gold and silver prices that I would take with a grain of salt but I wouldn't write them off as impossible either.  Remember, the main driver of gold prices rising will likely be the debt based money that keeps getting nipped to pieces in the market.  It is looking for a safe home but there are no safe homes.  In fact there cannot be because there is too much credit based money floating around.  Anything it touches goes up in price.  Commodities like food and clothing and fuel are limited as to how high the prices can go before people start to riot and to take what they want instead of even trying to pay.  But gold will never suffer from this because people don't need it to live.  If gold were $20k/oz today, 90% of the people wouldn't care a hoot because they don't have any and never had any intention to buy some.

Major lesson from the great depression: move forward or perish.

I've often referred to the economic crash as a healing.  I'm not trying to be a phony "half full" person here even in the face of a plunging stock market (you ain't seen nuthin' yet.  Dow 6k will most likely be tested and broken before this situation is played out) and high unemployment.  I'm simply stating fact.  The great credit bubble is slowly healing itself despite government's best attempts to keep the Ponzi plate spinning.  They say they are doing it for you but believe me, they only have themselves in mind.  You and I are literally as dirt to most of them and if you don't get that then you don't get anything.  They know that if the economy crashes then they will blamed because they were stupid enough to make economic prosperity one of their promises (AKA "mandates") in the first place. 

But government cannot generate prosperity!  Only the labor of people can do that.  Was it more government or less government which made America strong after we broke away from the entrenched British bureaucracy?  Those lessons are now completely forgotten by Americans.  Each time the economy would get weak, the Fed has maneuvered for  itself a stronger mandate and the legal powers to try to carry it out.  In stark contrast, history always saw the concentration of power like this in the face of economic hardships as power grabs by those working to build fascists regimes, not steps designed to better the lives of the people.

The symptoms of the credit bubble were basically that some people got rich even though they didn't provide any economic value to society.  Con men and grifters ruled the day.  This was the give-away that a scam was taking place.  The con men legitimized and legalized and justified it all and protected themselves with selectively enforced laws and other ridiculously corrupt goings on by those who had installed themselves as our protectors. 

Stuff got built for which there was no need.  Wars got fought that didn't have to be fought.  Medical care that used to be reasonable is now out of reach unless you have a big corporate or government benefits package.  Sports players that used to play for peanuts because they loved the game now go on strike if they don't get more and more and more each year.  The stock market went up exponentially (can you say "massive bubble"?).  U.S. and other sovereign debt went out of control to the point where it is now un-payable and will have to be defaulted on one way or another.  Hard working labor became devalued even though it is the basis of any real economy.  The credit and debt which funded all of this stupidity is definitely on the decline.  It is global and it is structural. 

As the economy comes down off its credit high over the next several years all of these things will reverse themselves.  Deflation of the credit portion of the money supply will stay ahead of any government effort to reflate and a smaller money supply means that there is less money to go around.  Have you noticed lately that even big name Hollywood stars of yesteryear like Nick Cage (and many others) have filed for bankruptcy and have not been in any movies in quite some time?  Have you noticed that some big screen players have moved back into TV?  Those old Hollywood salaries were another beneficiary of the credit-infused money supply.  As the credit and un-payable debt evaporate back into the Ether from whence they came, all of these things that have been bid up by the bloated money supply will come back to Earth very quickly.

So it's a whole new ballgame and people should be thinking about it, especially those who draw fat salaries doing marginally important or minimally effective work.  At the top of that list sits government employees at the city, state, federal and military levels.  Sorry folks, we just don't need so many of you as there are.  It's not that we don't need as many because of the economy; it's that we never did need so many of you.  The economy is just making it more painfully obvious than it always was.  The economy is also going to shut that game down.  Nobody cared about bloated government payrolls as long as those salaries were getting paid for with debt instead of taxes.  But as government begins to raise taxes in order to avoid necessary cutbacks, the ire of the people will be made very, very clear.

So, changes are coming.  What can you do?  Sit and cry about it?  Go ahead but there will be little sympathy for self-pity going forward.  In fact, when the money runs thin, even those worthy of sympathy will get very little.  Hoping for a break or for sympathy is ridiculous.  But there are several things you can do to better position yourself:

·         Evaluate your current job (if you still have one).  Are you a meddling bureaucrat who hasn’t produced anything of real value in years or are you building things?  If so, it may be time to admit that you are economic road kill waiting to happen unless you find something to do that is of economic value.

·         If you are building something, is it something anyone really wants and needs or are you building second rate products to nowhere (the free market equivalent to building bridges to nowhere…)?

·         If you are actually building something that people want and need to live better lives, are you personally working on it or are you hiding in a team?  Can you stand up and say “I did this and that” without telling whoppers or do accounts of your contributions always begin with “we” or “the team”?  I have nothing against real teamwork but at least 25-30% of corporate Americans are just surviving within corporate teams, hoping that nobody will notice that they aren’t doing anything of value.  They would not be missed in the slightest if their jobs went away.  That is a losing strategy going forward.  Even those in high tech are not immune to the new reality.

·         Is your line of work dependent on lots of credit being available or upon government largess of some sort?  Does your corporate strategy require the government to be your biggest-or only- customer?  If so, it might be time to start looking for a real job.  The money that government has been using to pay you with was either stolen from the people or borrowed.  Both of these government activities will be greatly curtailed going forward because people are going to start becoming very vocal and very passionate about trying to keep what they earned.  Why do you think the price of gold has been going up for years?  It was driven by people’s simple desire to keep what they earned.

·         Are you a tenured education professional?  If so, please understand that your ability to negotiate that tenure crap was a direct result of a bloated money supply.  If you don’t understand that then no worries, the economy is giving lessons on this as I type.  Your tenure is a Wimpy Promise.  You wanted undue protections and privileges just for having hung around at a job long enough?  You will find that the market views this as increasingly preposterous with each passing year.  The concept of teacher tenure will be a bad memory within the coming decade.   

Some things you can do if you identify with any of the above:

·         Take online classes in up and coming fields.  Things that produce more real output with less direct human effort have the most economic value.  Think automation, tools, software and robotics.  Stanford is giving free classes on these technologies.  They are the skills that will be most sought after by the employers of the future.  Robots will be to tomorrow as the personal computer was to 1985.

·         Realize that deflation deflates the value of the old and commonplace, not of the new and value added.  It’s not that people are not willing to spend the little money they have but rather that they want to spend it more thoughtfully.  They want real value.  Commodity products and services and skills are marginalized under these circumstances.  Do something new and value added and useful and appropriate to the economic conditions and you can not only survive but also thrive.

Mother of all slippery slopes for France and Germany

The news reports that the con men (and women) who are running things in Euroland are thinking about creating a new "Eurozone Government".  This borders on hilarious for anyone who can see though the noise.  The scam of it is so obvious.  Desperate con men are doing desperate things to stay in power.  Their economic Ponzi is collapsing and so their answer to it is to consolidate and to concentrate power.  Please indulge me as I write an open letter to the working people of France and Germany:

Dear Good Peoples of France and Germany,

   I write to you today in a spirit of global kinship.  I have to tell you that I have always known that the EU was a scam and that the very concept of using exports as a profit generation mechanism is also an unsustainable scam.  It sounds good on paper if you ignore math and common sense but if you understand organized crime and fraud then it all makes perfect sense.  Welcome to your wake up call.

   Many of us have been conned as the fiat currency and fractional currency scam has been allowed to run wild but perhaps the most conned among us were the hard working exporters who were talked into working 12-14 hour days in order to be hyper-productive such that you could afford a nice retirement off the excess labor of your productive youthful work.  This story sounds good but look at the reality: your products went to people who chose not to work as hard as you did.  In exchange, they gave you worthless colored Euro notes.  Now those notes are being devalued as a matter of policy by your government.  You will never get to see that plush retirement because the whole thing was one big scam.  We have all been lied to by the proponents of fiat currency and fractional reserve banking.

   Sorry, folks, you have been conned.  They only thing to do after you realize this is to write off the losses (the money is already gone...) and then stem further losses by going after your leaders who were complicit with the scam the whole entire time.  Do you think they didn't know where this was going a long time ago?  Do you  really think they care about you?  Really??  Regardless of anything that has already happened in the past, what you absolutely must not do going forward is to allow them to form a super multi-sovereign government in the name of getting your debt paid some day.  All that will do is to throw your sovereignty and your freedom out the window right along with your lost investment.  Under no circumstances should you let the same fraking con men who got you into this mess make any more decisions or determinations about your futures.

   There is no question that the German and French people are the productivity powerhouses of Euroland but if you let your "leaders" (aka con men and liars) give away your sovereignty to some super-Euro sovereign then, folks, you deserve exactly what you are going to get out of it.  Your vote will no longer count and what you say will no longer matter because the con men will make decisions "for the greater good" which really means "for their own corrupt sake".  It will be a complete disaster because these people are just maneuvering to stay in power after already having failed at proper political management.

   This is the truth of the matter.  What comes next is up to you.  Your best bet is to cut your losses, run the con men who are leading you into their bureaucratic utopia out of town and trust in yourselves instead of in them.  All they do is promise and lie anyway.  How many times do they have to prove it to you before you wake up?

Most sincerely and wishing you the best of everything life has to offer,
- The Captain

Comments have been enabled for my blog

The game is getting interesting now and so I would like to hear what you guys are thinking.  Please keep it civil and real.

Thanks,
-The Captain

Rick Perry: Bernanke's money printing is "treasonous".

Rick Perry, newly self proclaimed candidate for president, is now on record saying, “Printing more money to play politics at this particular time in American history is almost treacherous — or treasonous in my opinion”.  I have to say that I am not amazed to hear this because I am on record saying very similar things about both Greenspan and Bernanke.  People who judged my comments back then as "outlandish" probably think Rick Perry's similar recent comment is over the top as well.

So let me take a second and defend the position but before I start let me say that I have no confidence in Rick Perry.  The fact that he is saying these things about Bernanke doesn't mean he is a good leader or a good man.  Rick Perry is just another status quo politician looking to cash in on the crash.  Where was he before all of the problems started?  Was he standing behind Ron Paul's condemnation of the global financial system?  Heck no!  Rick Perry was instead living in a ridiculously overpriced mansion paid for by Texans after some fool firebombed the Texas governor's mansion.  Rick Perry is an empty suit, a complete political hack that simply sees the opportunity to make a killing based on the current state of unrest.  When Greenspan was architecting the master scam, Perry was nowhere to be found.  As president, Perry would be no better than Obama or any of the other con men at the helm since Nixon.

So if I think this way about him, why bother quoting what he says?  Simply because my long standing observation of the collapse stage of the con says that the con men begin turning on each other, telling all the secrets, treating each other just as badly as they all used to treat the people when everyone and I mean everyone was still a clueless unenlightened sheeple (including yours truly).  When the con is collapsing, the con men are actually some of the best sources for truth because in an environment of plummeting confidence, they have to give up more and more of the raw truth about the system in general in order to build up people's confidence regarding the con man in question.  Still, you have to realize that a small measure of truth will be mixed with a large measure of BS and Rick Perry is no different in this regard.

So what truth did Perry utter in my view?  Specifically, that printing more money in order to buy prosperity for the here and now or taking on more debt for the same purpose is burdening everyone over the long run in order to make things look better today.  In effect, it's using the sneaky money supply game in order to tax the citizens to make one candidate more attractive to voters than would be otherwise deserved by his merits alone.  The ability to print money and or take on debt in the name of the American people is a powerful thing and it is completely unconstitutional to use this tool in order to get oneself re-elected.

Wiki states, "Oran's Dictionary of the Law (1983) defines treason as "...[a]...citizen's actions to help a foreign government overthrow, make war against, or seriously injure the [parent nation]."  I believe that printing money and taking on un-payable levels of debt is and has been the single most damaging thing that has been done to the USA since the country was founded.  I believe the potential implications include the eventual Soviet-style breakup of our country.  If it happened to the Soviets then what makes the US so special that we will avoid the same fate?  The Soviet Union collapsed mainly because it spent itself into oblivion.  Most empires throughout history have similar endings.  Given the potential social implications of carrying the fiat currency and fractional reserve banking scam to the levels at which it exists today, being a leadership element in the effort to have gotten us here certainly qualifies as treason.  In fact, I will be so bold as to predict that if we do get that type of collapse then many people who are right now foolishly laughing at the possibility of it happening will be among the loudest in calling for trials and stiff punishments against the con men in the aftermath of a collapse.

Yes, folks, it is treason to knowingly screw your country over for the benefit of the few elite who know how money and credit and leverage can be used to make themselves ridiculously wealthy at the long term expense of everyone else in society.  It is treasonous to steal the futures of our young people.  It is treasonous to line us up for wars with our creditors when it becomes clear we will not pay them because we cannot do so.  And make no mistake: the people in charge of getting us here are well schooled in history and in the particular technology that we call money.  Greenspan's pre Federal Reserve writings of the 1960's are prima facie evidence that he clearly knew and understood the dirty, corrupt linkages between the welfare state, fiat currency, freedom, and gold.  Con men like Greenspan have been gaming the monetary system for the benefit of their organizations, their friends and ultimately for themselves.  In my view of things, they are all traitors for what they have done to the United States: Greenspan, Bernanke, most of the presidents going back to Nixon, the heads of all major financial institutions and many heads of major corporations.

Mish: "Global Financial System is Bankrupt"

Mish is now reporting that he believes the global financial system is bankrupt.  I won't bother going back through all my posts to point out the many times I have stated this.  All of the major banks of the world are in the same boat.  Want to know how I can be sure of this without even looking at the numbers (even though in truth I have done that)?  It's beyond simple.  All you have to do is to accept that the whole fractional reserve banking system is a scam and it all becomes crystal clear.

The scam part of fractional reserve banking is that some special people get to create credit from thin air and then lend it out for real interest that has to be paid for with real work.  The bankers essentially start with nothing and they end up with something without having done any work to earn it.  Getting rich without doing any work is economically impossible in a true economy.  Such things only happen for gamblers and thieves.

Once you understand that this is the case then you also understand that the only way to become a big bank under these rules is to take on massive leverage.  It's a case where the bigger you are the more leveraged crap you had to be into in order to get there.  In other words, bank size is an excellent indicator of the level of fraud and leveraged corruption going on within it.  Let me put it another way.  How did Al Capone become an important gangster?  By doing petty crime?  Of course not!  The way to get big in crime is to go big.  The fractional reserve banking scam is a form of fraud and if analyzed by people with any economic sense they would realize that it is nothing but crime which has been legalized by corrupt politicians.  And they did it right under our noses because we failed to listen to the few honest people telling us the truth for decades like Ron Paul.  It's our fault; the people of the world are to blame.  We were getting our share of the goodies and so we said and did nothing.  We didn't care who got elected and didn't lift a finger to drive honesty back into our leaders.  We were lazy, preoccupied and ignorant.  Now it's done and the payment for our sheepledom is coming due.  Nothing and nobody can change that.

Still not convinced?  Let me remind you yet again of what Citigroup's ex-CEO Chuck Prince said: "When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you've got to get up and dance. We're still dancing."  Mr. Prince did not say "if the music stops" but rather "when the music stops".  "Liquidity" is con-man speak for leveraged debt.  Chuck knew it was a scam the whole time but he also knew that if Citigroup didn't get in there and steal as much as it could that the other thieving US pig-banks would just have more for themselves.  And if the US banks didn't do it then the foreign banks would have.  You don't put thieves in front of a big pile of money and then tell them to behave responsibly.  You have to be a moron to think that they won't do everything in their power to take the money.  Well, fractional reserve banking is NO DIFFERENT.   As long as the credit scam is running, having the legal authority to issue loans without any relationship to having reserves to back such loans with is as close to a free money machine as you can get.

Yes folks, the global banking system is insolvent.  When the big scammers topple over it will "contageon" to the smaller players which have been more conservative.  They will topple over and be crushed under the weight of the bigger pigs.  You know what that means?  It means that the global fiat currency system is worthless or nearly so.  All that remains is the realization of the facts by the people.  Straight talk is hard to come by these days.  Consider this straight talk from me a gift to you.  The right move is to get out of the global fiat currency system not in a fit of panic (like most people will be trying to do when the bottom finally falls out) but in incremental moves and over a period of time.  Don’t overthink it.  Just start moving into gold in a measured fashion.  At some point even $5000/oz. will appear cheap. That could take years to happen but it won’t matter if you bought at $1700/oz. or $1300/oz. in a big pullback.  What will eventually matter is that, in the words of Marc Faber, you become your own central banker because the ones running the global banks are all crooks and gamblers.

There is no such thing as a safe fiat currency when the con is in collapse.

I want to put to bed specifically and for good the notion that people can avoid the coming collapse by storing their paper wealth in some sovereign fiat currency.  The conventional wisdom states that some of them are "safer" than others and thus if you are worried about your particular currency then you can hide some of your wealth in the so called safe currencies.

Here is the truth of the matter: we let con men take over the global currency system and install fake money as currency.  This policy was was cemented into stone globally when the US defaulted on gold convertibility in 1971.  Since then, all currencies of the world are tied to each other at the economic hip.  If any of the big currencies collapse, all of them must follow suit.  No single currency or group of currencies can stand once the tipping point has been reached.  With the loss of AAA credit status for the US, the tipping point [sheeple recognition point of the con] has indeed been reached.

Why is this?  Simply because we are a global world now with huge dependencies on trade.  Any country that acts honestly with its money and does not devalue it is effectively telling the rest of the world that it does not want to trade with it.  The dynamics are simple: when one country fails to debase its own currency in locked step with its trading partners, that currency and the locally manufactured goods priced in it, become more expensive in terms of the other debased currencies.  We are now at a point where attempts to be honest within a corrupt global fiat money system will be met with great punishment in the form of collapsing exports. 

In light of this its no wonder that the famously "safe" Swiss Franc is now being threatened with a peg to the Euro.  In other words, the Swiss government is threatening all those who are seeking refuge in its currency (including its own citizen-savers) with being tied to a collapsing currency like the Euro.  Right now it is only a threat but you can take it to the bank that it will eventually happen because the Swiss exports will collapse unless it does.  Non-Swiss people will simply not be able to buy Swiss products because they will be priced out of the market by the strong currency.

As for the misguided Germans, they think their error was joining the Euro.  However, I assert that if the Germans still had their own currency they would effectively be in the same boat as the Swiss.  The German Mark would be soaring right now (just like their bonds are doing...) relative to sovereign currency of the PIIGS but at the end of the day the Germans would have to debase their currency too because their economy is too dependent on the scam of tryng to use exports as a sustainable profit strategy.  Given that the Germans are caught up in the Euro they have no currency to debase and so they are doing the same-money equivalent which is transfer payments to the PIIGS.  In other words, they are forgiving the debts of the PIIGS whether they want to or not.  The sin of Germany is not that they joined the Euro but rather that they bought into the scam of fiat currency and fractional reserve banking along with the rest of the world.  Their sin was compounded by the false belief that exports are the secret to prosperity when in fact the only true economic value of exports is the increase in life quality related to having diversity of consumption which is enabled by trade.

Early on in the collapse, the Germans are just trying to forgive a limited amount of debt but at the end of the day it will be full debt forgiveness because the money associated with vendor financed trade was gone the very minute they loaned it to someone who did not have the economic value generation capacity to make repayments.  In other words, if you loan money to a bum you should never expect to get repaid because the bum can never repay you.  Recording the payments to bums and freeloaders in your little accounting spreadsheet and acting like they owe you back that which you gave them changes nothing.  All you are doing is fooling yourself if you ever think that the bum will pay you back.  What cannot be repaid will not be repaid.  DEAR GERMANY: It is best to just forget about the debt and stop spending more money trying to keep the old debt from being invalidated.  When you start doing that you are effectively like a bank which has signed up to make the monthly payments on the house of a debtor who has decided to stop making payments while still living in the place.  The right thing to do is to evict as quickly as possible knowing that they are not even caring for the place even though the rent is free.