Jim Rickards and Peter Schiff on global happenings and gold.

Jim Rickards is always worth listening to but in this recent audio interview he touched on some points that I especially agree with.  As usual with any audio interview from King World News, just download the MP3 from the link instead of letting it stream to your PC and no, you do not have to install Quicktime software if prompted to do so by the web page.  Once the MP3 is downloaded you can skip the commercial and intro-babble up front and get straight to the meat of the Jim Rickards interview at 0:2:50 into the MP3.  For those short on time, the main points from Rickards are:

• ISDA declared the default of Greece a non-default.  In other words they changed the rules to screw the people looking to profit from negative credit default swaps.  It proves "the whole market is a scam".  My comment: these credit default swaps are supposed to be a form of insurance.  People often buy insurance in order to cover themselves when they do risky things. As people see that the rules will change in order to avoid paying insurance claims they will stop buying insurance and they will back off on the risky leveraged plays which they used to need insurance for.  Leverage is credit.  Destruction of leverage is clearly deflationary.
• The recent ISDA change was different than the silver rule changes during the Hunt Bros time as well as the more recent margin reductions in the silver market.  In the past, existing rules were simply enforced selectively.  Today the con men just make up new rules whenever the con is in danger of collapse.  My comment: making up new rules like this adds risk and the markets hate risk.  Fool me once, shame on you.   Fool me twice, shame on me.  The market learns and adapts. Making up new rules as you go along reduces appetite for leverage and is long term deflationary.
• EFSF is really a Germany controlled financial "ministry of finance" which is taking over Europe by money guile in the way that Hitler and prior dictators going back to the Holy Roman Empire could not do by force.  Rickards thinks the Greeks have not woken up to the fact that they are losing sovereignty and freedom by allowing their leaders to agree to this.  My comment: the EFSF and its gifts of lower short term interest rates will eventually be recognized to be a Trojan Horse.
• Geithner and the White House tried to create an artificial US default crisis using the debt ceiling and it backfired in their faces.  Obama’s team is famous for believing that it can only make progress on their agenda in times of crisis.  It is an old political trick to create crises where none exist in order to scare the herd into going into the direction you want them to go.  Unfortunately for the con men, the herd is not 100% predictable and herd reaction to stimulus is controlled by chaos theory.  Thus, pushing the herd around can and does lead to unintended consequences.
• Dollar weakness is not a unintentional or accidental mistake on the part of our government; it's pre-planned policy.  We have to trash the dollar in order to increase exports.  Government is doing this because nothing else is working.  As a result, gold is "the simplest trade out there".   My comment: government controlled currency debasement has always been a slippery slope.  It is very difficult to know when one more debasement action is the straw that broke the camel's back.  When people give up on the honesty of the government they just bail out of the currency into anything else they can find.  Once their minds are made up and the herd begins to stampede, no amount of sudden honesty changes their minds and re-asserts the status quo.  There is clearly a point of no return for dishonesty even if nobody knows exactly what that point might be at any given place and time. This is the true basis of hyperinflation and historically, when it comes, it does so very quickly leaving nobody any time to think or plan or react intelligently.

Gold is not in a bubble now.  Maybe at $7k/oz it might be but its not even close to being a bubble right now.  And even if gold hit $7k/oz that bubble analysis would have to be re-evaluated to account for how much additional money printing might have occurred up to that point.  Rickard's definition of gold bubble is when the market value of the gold holdings of the US government exceeds the official "money supply".  By "money supply",  I assume he means the monetary base which currently stands at $2.7 trillion.

In early 1980 the value of US government-held gold @ $800/oz was actually higher than the number of dollars outstanding in the US money supply.  In other words, we had the potential to re-back our currency with gold and there would even have been gold left over after every dollar was backed.  In a fractional reserve economy, monetary con men do not believe that even a 1:1 holding ratio of gold to government authorized money (the monetary base) is required.  Gold was a bubble at $800/oz back then because the cumulative value of US held gold was higher than all the US Dollars outstanding.  My comment: Rickards is exactly right.  The dollar of 1980 bears little resemblance of the dollar today from an economic standpoint.  The great scam is that something that looks the same and is called the same by government is in fact not the same simply by virtue of massive printing.  Going from $200 billion to $2.7 trillion is a massive debasement of our currency even accounting for population growth in the US from 225 million back in 1980 to 308 million in 2010.  It is foolish and ignorant to compare today's gold price of $1600/oz to yesteryear's gold price of $800/oz without factoring in the amount of money printing and new debt that the US has taken on in the mean time.

Shifting gears, Peter Schiff's recent analysis as to what might happen to the dollar denominated gold price under various scenarios that might play out is also worth a read.  One quote that I thought worth noting was, "No government in history has dug itself out of the hole we now face without defaulting. If Congress even tried to enact a plan like this, people would be rioting in the streets over their lost entitlements. And we'd suddenly have millions of unemployed soldiers. Not exactly a recipe for peace and prosperity."  I think his statements properly define the no win situation facing congress.  They have worked hard to create a people dependent on government.  They did this so that they would be in charge of everything even though they have no idea how to best run the country or our lives.  But now that the nanny state is running things, the people have expectations.  If reality falls significantly short of those expectations then it is foolish not to expect people to fight back. 

Unfortunately, the more helpless people feel, the more desperate they tend to become.  In their minds they do not want to take any responsibility for actively playing the part of the patsy.  They wanted to hear the fairy tales coming out of the mouths of the con men.  In contrast, they didn't like the honest, to-the-point approach of Ross Perot or the decades of constitutional wisdom from Ron Paul.  And so now when they finally realize that everything they believed in has been a lie they will feel justified in all sorts of uncivil behavior that is guaranteed to have a high cost in terms of lives and of property loss.  Of course, the bankers love this because then someone has to borrow more money to put it all back together again using their fractional reserve money supply scam. 

Mish: "It's not temporary".

Mish has been getting more and more negative on the global economic future as 2011 has worn on.  In one of today's posts he points out that the global numbers don't look good and that the only reason they ever looked good since the first wave of the crash ended was because of (unsustainable) government intervention.  Mish is generally to wordy to quote verbatim but I think this time there is little need to edit or comment on what he has to say:

"Canadian apologists say weakness is overstated and temporary. I say it's understated because few realize what is happening and how serious this is.  Global stimulus has faded. It's gone. Kaput. And that stimulus was the only thing holding this global economy together.  Strip out government spending, QE madness in the US, and unsustainable credit growth in China and you have a flat line global economy at best.  Europe is now in austerity-mode, US cities and states are cutting back, the odds of more fiscal stimulus in the US are roughly zero, the US might (and should) lose its AAA rating, Australia is a basket case on the bursting of its property bubble, Canada has the second or third largest property bubble next to China and Australia, the bond market is targeting Italy and Spain, Brazilian defaults are soaring, China is overheating and needs to slow, yet the average economist is looking for a robust second-half.”

What I do think is worth adding is that if the economy rolls over then asset prices will roll over as well.  That includes real estate right along with the buying power of your pension, 401k, and annuity.  Government is already trying to raise the tax rate because the falling asset values are reducing tax revenues.  Government has no problem collecting more taxes on inflated real estate valuations but is not so happy when values deflate (which of course leads them to change the rules while sleepy sheeple just sit and watch).  Metals could be affected downward in dollar terms as deflation sets in as well but I maintain that the buying power of gold (as opposed to the dollar denominated price) will remain intact because it has done so for thousands of years.  In other words, if gold tanks in dollar terms then so will the price of food, energy and everything else.

In my own financial planning I focus very little on the dollar value of gold and I expect it to vary greatly as the economy works through all of the credit based abuses that have occurred since we left the gold standard in 1971.  Still, for those who plan to sit and wait for the dollar cost of gold to fall because of deflation, it is far from guaranteed that gold will fall in a deflationary crash. Gold is not really a hedge against inflation but rather a hedge against government dishonesty.  If Bernanke opens up the QE spigot again (a clearly dishonest thing to do) then gold will go up rapidly in dollar terms IMO, probably far more rapidly than would otherwise be indicated by the amount of money printing he is actually doing.  This is because the dollar is already worthless and if people become convinced that the Zimbabwe-like printing will continue without end then there will be a mad rush to get out of the dollar and into real money.  Note: this would not be happening as much due to fear of the government printing presses as much as fear that one's fellow citizens might beat you to the door leaving you holding an empty bag.  Mish thinks more U.S. stimulus is not going to happen but I'm not nearly as convinced as he seems to be.

Mish does say one thing that I think is very true: few people really understand what a stinking ball of crap the global economy actually is.  It is a house of cards waiting for a stiff wind.  Nothing says a stiff wind must absolutely occur but it would be foolish to assume that a stiff wind will certainly not happen.  There are people out there with vested interests in a collapse who are doing the economic equivalent of aiming financial fans at the house of cards.  Perhaps the big players are not panicking yet because they all have "insurance" against catastrophic collapse in the form of credit default swaps.  In fact, I assume this is exactly what is happening given that nearly 1.5 quadrillion worth of these over the counter deals are currently in play.  People are paying lots of insurance premiums in order to buy this much insurance but they are idiots because if the stiff wind does happen it will blow away the derivatives market along with everything else.  It was, in fact, credit default swaps gone wrong that bankrupted AIG.  No insurance policy is worth the paper it is written on if everyone is trying to collect on claims at the same time.

Rand Paul can't vote for a budget plan that has no path to balancing the budget.

There are very, very few principled, honorable statesmen in our government.  Some appear to say the right thing one day but within a short period of time they reverse themselves or their true agenda is exposed.  One litmus test of dishonesty which can be broadly applied to either Dem or GOP "leaders" today is whether their plans count on and require the use of existing and future new debt to succeed.  Anyone whose plan does not include the rapid elimination of government deficit (and then, in short order, the debt) fails the litmus test of honest, truthful statesmanship.

Ron Paul has been telling the truth for decades.  He has been warning us that this day of reckoning would come and he has been teaching those who would hear what the reasons for the collapse would be.  He lives and votes by his principles.  He formally rejected the ridiculously generous congressional pension years ago and has waived his rights to the associated payouts.  These are not the actions of a con man or a liar.  This act of leadership by example is why I ever started to listen to Congressman Ron Paul in the first place. 

Now we have his son, Rand Paul, as a Senator for the state of Kentucky.  I applaud the people of Kentucky for their courage and wisdom - their act of voting in Rand Paul proves that Kentucky is a leader among US states when it comes to the subject of honest government.  Rand is following in his father's footsteps.  He is also proving that his vote is guided and even mandated by principle and that it cannot be bought for money or altered even by the real threat of consequences that must result from the eventual telling of the truth. 

Rand Paul knows that the discussion happening in the US government today with respect to the debt ceiling vote is a charade.  He knows that the cuts being mentioned include big sounding numbers but which are amortized across many years.  He knows that nothing being proposed by Boehner or Obama or any of the other con men in political office will ever result in a balanced budget.  As a result, he will not vote for any of it because he knows that a vote for it is a vote for attempting to fool the people a little longer and a vote to kick the can down the road once again.  Honest people will have none of it.

It's a difficult thing to tell the truth when the telling of it promises to collapse the inflated expectation of one's constituents.  Unfortunately, the only other option is to pile lie upon lie in order to delay the day when the people must be told the truth.  This might not seem a bad option for many people.  If you delay the pain long enough, heck, you might even out live it.  The main problem I have with that is that delaying the truth is not an impact-neutral path. By that I mean that it does not simply delay a problem of given size until later.  In fact, quite the opposite.  The longer we delay, the bigger the problem must become.   It is not "free" to anyone to delay the day of reckoning.

Why do I think this is the case?  Many, many reasons.  But the short list is:

• It costs real money to perpetuate the lie.  Papering over the problems is not free.  And lots of the money being spent to maintain the status quo is going to those who are most responsible for the economic abuses.  If I cut away all the noise, the perpetuation of the scam really boils down to government bribes paid to moneymen to keep the scam rolling.  They would have cut and run for their lives long ago without government backing of them to try to create a so called "soft landing".  But as long as government is standing between them and the wrath of the people, the moneymen will continue their parasitic activity.
• All of this is happening as boomers retire.  Boomers are stronger today both physically and financially than they will be in 5 or 7 or 10 years.  Allowing the collapse to occur today gives them the opportunity to rethink everything while they still have physical and economic energy to protect themselves.
• The weak economy is affecting the growth of young people around the world today.  They cannot get the jobs they need which will allow them to acquire the skills and experience that one cannot obtain in school.  This is most apparent in places like Spain where 45% of the people under the age of 25 are unemployed with no prospects for gainful employment.  By kicking the collapse down the road we are also kicking the recovery down the road.  As a result we are stealing the careers of young people the world over.  This is not just a "too bad for them" situation.  All future value comes from labor.  As the current generation retires it will need to continue consuming.  That consumption requires production by someone else, namely young people.  If that production is hampered then I guarantee you that the consumption by the retiring masses will also be hampered.
• The young will be saddled with unpayable debt OR more likely, will be pressed into wars in order to settle the debts using violence.

I do not want to be associated with any of the above.  I do not want it on my conscience.  I would rather the whole damned economic scam be allowed to collapse under its own corrupt weight.  I would rather have less for myself today than to go to my grave knowing I just went along knowingly with the scam.  I can't change anything by myself.  Violence is out of the question and those doing it to effect political change are worse than those who they seek to attack. This blog along with my small political contributions to those seeking honest government are my small way of dissenting.  If everyone did this same small level of contribution to fixing things then things would get fixed.  Feel free to do your part.  Talk to others about the problems.  Don't be put off by sheeple who would try to intimidate you into silence.  Suspend disbelief and suppress your herding instincts that tell you to lay back and not make waves.  Educate yourself so that when people rightfully question your views they are literally smothered with an outpouring of truth, knowledge, facts, reason and history. 

Unfortunately, at this point you cannot tell yourself that you don't know the truth.  You would not be reading my blog if you hadn't already taken the red pill.  You can no longer hide behind ignorance as an excuse for not doing your little part.

Gullibility checkpoint on deck: will gold react to more Wimpy Promises?

The eventual outcome of the economic debt Ponzi is clear.  Lots of Wimpy Promises have been made to people by businesses and governments which do not have the ability to keep such promises.  The result is that lots of people who currently think they are going to get something they were promised are going to find out over the coming years that they have been conned.  The reward for playing the role of the patsy is to get taken to the cleaners.  The only thing that is unclear is the exact path that this follows and how long it takes to play out.

This brings me to the point of today's topic which is that intelligent people will be watching how gold reacts to the coming deal between con men on the left and con men on the right in US government.  Informed people already know that there is nothing that these clowns and con men can actually do to change the eventual outcome of the dept Ponzi collapse.  They can talk and they can posture and they can legislate and they can make more unkeepable promises but at the end of the day they are powerless to turn a sow's ear into a silk purse.  Why?  Because despite all of it's meddling, government does not control the economy.  Intelligent people know this because they can do simple math and because they know how money works.  If government decides to cut the deficit in a meaningful way then not only the US but the global economy will collapse. 

The economy is so addicted to debt based spending that if such spending dries up there will be a wicked backlash upon everyone.  The debt Ponzi has become too big to shut down gracefully.  Anyone who attempts to do so risks triggering a sudden collapse which will leave that person unfairly blamed for causing the collapse.  Thus governments must try to look busy and to appear concerned but it's nothing more than a professional wrestling show for the cameras.  Unfortunately, neither can they continue to borrow and spend to prop things up because rising interest rates will make even servicing the existing debt unpayable as it is rolled over. 

The only thing to do now is just watch.  There are probably a lot of people who will be fooled into thinking a coming deal will actually fix things.  I see a lot of sheeple on Facebook and on Youtube asking the government to "work together" and to "show leadership" so that we can "move forward together".  Their eyes have not been opened or they are still in Kubler-Ross denial.  They don't understand that government is already working together to avoid the unavoidable collapse.  Each time a government puts on a big show and then kicks the can down the road, that is exactly what is happening.  The problem is global.  How many times, for example, have we heard that the Greek debt problem is "solved"?  How many times have I laughed when I read this?  You can't solve a debt problem by taking on more debt even if at a slightly slower pace than yesterday and that is all that politicians can possibly promise us at this point.

So watch how gold reacts over the coming weeks.  In markets, nothing goes straight up or straight down but gold has been on rails for some time now.  A significant pullback would be the pause that refreshes IMO.  I cannot guarantee that it will happen which is why I suggest that people keep an eye on it.  This observation will give some clues as to the general mind of the herd.  If gold pulls back strongly when the deal is announced then it likely means that the patsies are buying into the con.  Remember, gold is an inverted indicator of confidence in government.  So if gold pulls back then the people are saying they believe that the Titanic is going to miss the iceberg.  If on the other hand gold wiggles a little bit or, worse yet, jumps higher on the news then we can only believe that large numbers of people are not buying the con and they are using the false confidence boost of a debt deal to pile even further out of fiat currencies into real money.  

I personally would like to see a nice pullback in gold as it would suggest that me and my family have more time to prepare.  If gold does pull back significantly then you will know it is ready to turn up again by the headlines as they will probably begin to question whether gold is a bubble, etc.  But gold is not a bubble.  Gold is just an elemental metal.  The value of gold has never changed.  Only the buying power of fiat currency changes and it changes with the mood of the herd.  Government will continue to print fiat currency up out of thin air to pay it's bills and so eventually the herd will figure that out.  But the road could be long and twisty which is why I think it just makes sense not to try to time the markets for most people and to just store their long term retirement wealth at a steady pace into a mechanism which is beyond government theft.  The only thing that meets that definition is physical gold which a person has in his physical possession (with silver as it's more volatile sidekick).

So come on US congress, get on with the show.  We all have front row seats.

Marc Faber: Gold is very cheap

Marc Faber again goes on record saying gold is very cheap right now.  His reasoning?  Currency debasement (i.e. government money printing) is the only way out of the Great Global Debt Ponzi and so the more debt there is, the greater the need for governments to print new fiat currency out of thin air.  As funny money continues to be printed, people flee the fiat currency scam into real money which is gold (and to a lesser degree silver).  Thus, the value of gold as measured in a particular fiat currency is directly proportional to the amount of debt denominated in that currency.  The more sovereign debt there is for a particular country, the higher the price that gold will trade for in the fiat currency of that country.  This analysis rings true with me.

Faber is in no way fooled by the political con men and the big noise they are making on TV these days.  These con men don't really plan to lower either the deficit or the debt because if they do then the debt Ponzi will collapse.  So, like any good con men, they are making more unkeepable promises on top of the last failed promises but the new Wimpy Promises are no more valid than the last ones.  In terms of deficit reduction, token short term cuts will be made and token longer term cuts will be promised.  However, when it comes time to actually follow through with the promises that could actually change anything, the markets will fall apart in anticipation of the loss of government backing and government will have to delay the back end loaded reductions indefinitely.  Period.  In Faber's words, "They’ll iron out something with lots of compromises and with spending cuts that are backloaded, in other words they won’t happen immediately.  As we go along say in three or five years time when these spending cuts should occur and when the tax increases should occur, nothing will happen...".

What Faber predicts will happen is nearly 100% guaranteed to happen because the only other course is to come clean and tell the truth.  Honesty is a last resort measure for con men.  I have been writing this same thing for years now: politicians are caught up in the scam too. If they tell the truth then they don't get re-elected.  At some point telling the truth could even threaten their lives as angry people who have been lied to take up arms against the establishment. 

So what does Faber think people should do to protect their wealth?  He says, "They can invest in Canadian dollars, Australian dollars, New Zealand dollars, Singapore dollars and so forth.   But basically the ultimate currency and the ultimate safe asset is gold and silver."

I say that all fiat currency is a scam and that it is ridiculous to think that Canadian or Aussie or any other fake currency is going to stand while the Euro, Dollar and Yen collapse.  Let's say I put all my stored wealth into these currencies before the crash.  Who is going to take them after the crash?  Who in the US has ever even seen Canadian, Australian or Japanese fiat currency?  How would they know it is real?  How would they know how to value it?  Bottom line is that if the big major fiat currencies crumble then the entire global fiat currency scam will crumble along with them.  Now, think instead if you put your long term savings in gold and silver coins.  Seriously, close your eyes and take a second to envision this scenario.  Now, ask yourself who in the world would NOT want to take those coins in exchange for stuff they themselves might have in excess (i.e. food, clothing, services of all kinds, etc.)? 

It's clear that the question is completely flipped on its head when talking about honest money vs. fake government-promise "money".  Instead of funny money holders begging people to accept colored paper of no real value in trade for their valued goods, those with excess goods will be begging you and other real money holders to spend your real money on stuff that they have too much of.  In other words, with honest money you do not have to become an agent of the con.  You do not have to convince anyone that something that has no value indeed has value.  You don't have to convince anyone of anything at all.  When you lay your gold or silver coin on the table, shop keeper's eyes will get wide.  They will recognize the honesty of real, historical, commodity money which cannot simply be conjured from thin air at the whim of con men.

Again, I caution against a panic move of any kind.  This situation could take some time to play out and there could and probably will be significant turbulence.  The right way to handle the transition into gold and silver money is to do so over time in a measured fashion.  Just make it a habit to save for retirement from now on into gold and silver instead of into 401k or IRA accounts which you will never be able to extract the purchasing power back out of.  Forget all the noise and the commotion.  Move through Kubler-Ross gracefully and arrive at the acceptance stage without too much pain.  The governments of the world have been lying to us all along.  Is that really so hard to accept?  The only mechanism to distance yourself from their lies is to not use the fiat currency which is the basis of their lies and of their power.  Gold is the safe place over the long term.  If you still don't get it, re-read Alan Greenspan's explanation of it that he wrote in 1967 before selling out to the military industrial complex, and by so doing, betraying the people of the USA and of the world.

The New New Deal: take half or lose it all.

In a bit of news that, sadly, was completely expected and predictable, smaller cities are now giving their workers the bad news: give up half your pension voluntarily or lose it all involuntarily.  Go ahead and read it because it is the model for the future.  What cannot be paid will not be paid.  Wimpy promises of all kinds from the government literally aren't worth the toilet paper they are written on.  The people will probably lose it all anyway even if they give up half today because possession is 9/10ths of the law.  The city has the retirement money and the city is claiming ownership of it simply because the city has possession of it (at least in name). This was always expected to start with the marginal players and I have pointed out many times the significance of NJ Governor Chris Christie's statements that city (and state) employees who actually thought they were going to get what they were contractually promised by government are themselves guilty of listening to "fairy tale promises".  When a sitting governor of a state tells people that their government contracts are worthless because there is no money to pay them, well, you just can't intelligently ignore it.

The carnage isn't over, or even nearly over.  Folks, it's just getting started.  The carnage *should* be in full swing by now but Bernanke fired up the printing presses and changed the rules and did everything under the sun to delay (not eliminate) the day of economic reckoning. Trust me, he's running out of gas and the big public debate about the debt ceiling is proof.  All Bernanke has done is to make the carnage worse when it finally does come.  Of that I am 100% sure.  That con man is selling you, me, your children and all the peoples of the world down the river.  Bernanke is guilty of treason by reason of following through with traitor Alan Greenspan's grand scam instead of shutting it down like he should have done.

Every promise made to you by politicians, business, government, banks, insurance companies and other big dogs in the military industrial complex's grand debt Ponzi is suspect.  You have to be in the Kubler-Ross denial stage not to see it.  If everyone could get everything they were promised then nobody would lose anything which would mean that real, sustainable debt based prosperity is actually possible.  I'm here to tell you that it's not possible and that believing that it is possible just because some government con man says so is a fool's errand.  Thus, the majority of the participants have to lose something in order to pay the price.  They will not be asked to pay.  They will be told to pay.  The city workers of Central Falls, RI. are paying with at least half their pensions.  Everyone is going to have to pay something at some point and I'm talking major bucks here.  Remember, the amount you owe is about equal to whatever your pretax annual salary is.

Because of the amount of global debt that is out there which must collapse we will see cities and even states declare bankruptcy before the United States government itself has to bow to insolvency.  This is a given.  The only question is what will happen then.  This is potentially a very big deal that each person should take time to consider because nobody anywhere is free of the scam.  The putrid stench of fiat currency and fractional reserve banking can be smelled in every city, state and country in the world.  Why else would the Swiss - the owners of one of the most trusted fiat currencies in the world (it's like claiming fame for having the least stinky feet...) be discussing a parallel gold based currency.  Why else would the money-savvy LDS people of Utah enact laws reinstating gold and silver coins to be untaxable legal tender?  Do you think these people are all headed toward gold for their health?  Really?  REALLY???

People the world over are losing confidence in the con game at a very rapid pace.  I hate to say it but I don't think there is going to be any way to avoid significant violence, turbulence and disorder.  After all, people tend to get a little upset when someone tells them that everything they have been working for all their lives was a lie spoken to them by liars. 

Nobody knows exactly how the future will play out but things are looking pretty bad.  Smart people will take some precautions.  They will store some dry goods and nonperishable food stuffs.  They will ensure that they have a clean water supply even if the city water supply is disrupted due to strikes, terrorism or lack of money to keep it going.  They will have some honest money in the form of gold and silver coins and they will arm themselves in order to protect their families from those who didn't bother to make any preparations.  Desperate people do desperate things and people in America are so used to having so much that if the bottom drops out (like I think is very possible if not probable) they will say or do anything to get what they think they need.  In other words, buy a gun, learn how to use and store it safely.  Become a proficient marksman and store plenty of ammunition in your home.  I can't say that you will certainly need these things but you can't with certainty tell me you won't.  I'd rather err on the side of caution.

PS: It's still not too late to vote for Ron Paul in 2012.  He is the only politician who calls the government scam exactly what it is: a con game.

PSS: When it comes to money, In gold we trust.  Nothing else is money.

Beware partial good information mixed with the BS sales pitch.

I recently received an email from Wealth Daily's Brian Hicks which was supposed to warn us about the dumb ways to buy silver that we should avoid.  The article was entitled "The Best (and Worst) Silver Coins".  In my view, this is a good example of partially good information that leads you down the wrong path.  In this helpful sounding email we are told about all the stupid ways that people are being conned in the silver coin market but then at the very end the author throws out the suggestion (and a web site) to go buy “graded” silver coins.  While its true that graded coins can appreciate faster than un-graded coins, it's also true that they can be very risky unless you are an expert who is very plugged into the coin collecting scene.  The premiums paid for grades can and do vary greatly with market conditions and that is a level of additional volatility that serious metals investors will seek to avoid.

Now hear this: graded coins are for coin collectors, not those looking to store their long term wealth in metals.  Unless you are an expert, avoid using graded coins (or subjectively graded objects of any kind) as a mechanism for storage of wealth.  The problem with graded coins is that the grades become very speculative at the high end while the prices at the high end rise exponentially.  In other words, they are asking you to invest in someone’s opinion.  If the person selling you the graded coin pads his opinion by only 1 grade the price difference can be more than the price of a new un-graded coin (by perhaps many times).

That is like investing in diamonds because someone told you that a certain stone has a certain color and clarity.  The evaluation of these subtle characteristics can and do vary between stones.  When dealing with graded stones or coins the biggest problem comes when it’s time to sell.  This is exactly the time when you want there to be no problems at all!  With graded items, you need to find a buyer who is also a collector who will appreciate diamond color or fineness of unmarked coins.  Unfortunately, in a crisis the market for this type of collector becomes very thin.  The big market is and will always be people like me who place no value whatsoever in the grading process.  The vast majority of metals investors value coins by weight and purity alone.  Even if you can find a buyer of graded coins you have to be very careful with how the coins are stored and handled or you could degrade them (and the puffed up value of the coins will fall right along with the grade).  If you have bullion coins then people will not mind minor nicks and scratches that do not obscure the stamped maker, weight and purity of the coin.  Calipers and digital scales are the tools of the intelligent bullion coin buyer. 

Bottom line: don’t let the lure of the potential for big profits affect your metals buying plan.  Stick with bullion coins that sell at only a slight markup to the spot bullion price (it costs something to stamp raw metal into coins and you will get that premium back out when you sell).  Buy coins in bulk from a bulk dealer, not one at a time on Ebay where premiums of 25-40% on single coins are common.  Save up and buy 100 silver coins at a time from an online dealer and you will get the best price.  Avoid local coin shops for either buying or selling as they have to make a living somehow.  Be extremely aware going forward of the sales tactic of mixing a bunch of true info with a small amount of BS and then getting pointed to the BS part for your actual purchases.  Buy from Monex or other reputable sources and avoid even the reputable sources that are having any sort of legal problems which could temp them to cheat their customers.

Lots of good Euro-bond charts in one place tells the story.

Mish has a recent update on the 2 year sovereign debt interest rates for the PIIGS.  Just scroll down and look at the charts quickly.  Note the absolute interest rates (which compare to credit card interest rates for someone with poor credit) as well as the shape of the charts (which indicate that the problems are getting worse, not better).  The proper way to think about bond rate charts is that they are inverse indicators of trust of government.  The higher these charts go, the less trust people have in governments.  When trust falls to a certain level, the people revolt.  Why make it more complicated than it really is?  Debt based government spending of any kind is a con and no con game lasts forever.

While not pretty, it's entirely expected and predicted.  Bond holders are demanding un-payably high interest rates on government debt which means that any time debt is rolled over it will go from last year's low rate of 3-5% depending on the country we are talking about to something in the range of 10-30%.  No EU country is immune from this.  First the PIIGS will default and then the con men of Germany and France will have to admit that their economies were only strong because of debt based purchases (AKA vendor finance scam) by PIIGS. 

Sooner or later it will find its way back home to the king of the debt con which is the USA.  Count on it.  More importantly, prepare for it.  There will come a time of global turbulence where such preparations will be worth their weight in, well, gold.

John Williams of Shadow Stats sees future US hyperinflation.

A recent interview by King World News of John Williams is worth a quick read.  Not that long time readers will read anything very new in the short interview, only that they will read people other than yours truly saying it.  Confirmation by various sources is an important part of the awakening process.  For those who may not know who John Williams is, he is an economic data gatherer, a king of charting and economic analysis.  When it comes to economics, he is Mr. Facts.  He makes a living by selling his economic research.  Suffice it to say that he has many years of deep insight into the data.  When government stops publishing embarrassing statistics like the M3 money supply, Williams picks op the job of synthesizing that data for his clients.

Williams' main points from the interview:

• Debt level brinkmanship is just showmanship.  They HAVE to raise the debt limit because the money has already effectively been spent.  The minute they don't raise the debt limit is the minute that people lose faith in our government which is the real basis of hyperinflation.
• The cuts being bandied about by congress and the president are for show only.  They want to cut 4-5 trillion over ten years, and if you look at the details it is quite back end loaded.  So on an annual basis we are only looking at cutting the deficit by 10%.  This says nothing about the existing debt at all.   It just promises to get us far deeper into debt at a slightly slower pace.  I am 100% sure that when it comes time to make the big cuts the pain of it will be so great that they will find some other way to avoid making them.  If they fail to do this, the scam will collapse and the con men will have to find real jobs.  They do not want to do this as they now have no economically valuable skills.  BS artists are not in short supply for industry today and it will be even less so going forward.
• The greatest threat of hyperinflation is not triggered by infinite money printing but rather by events which cause loss of credibility of the government.  Keep in mind that fiat currency is already worthless.  The only thing that stands between it and actual widespread acknowledgement of its worthlessness is some trigger that causes loss of faith.  Debt default could easily be that trigger.  If you see rapidly rising interest rates on government debt then you know we are making progress toward the hyperinflation state.
• No cure has been put in place over the past few years.  All that has happened has been a temporary papering over of the problems with more debt, more currency debasement (as in the tripling of the monetary base over the past 3+ years in order to combat deflation) and of course my personal favorite con man tactic which is the suspension of the rule of economic law.  The con men like to refer to this as "regulatory forbearance" but in plain terms it just means changing the rules whenever following the rules would threaten the power structure of the ruling elite.  Since nothing has been fixed, the problems will come back to haunt us and we will see even worse turbulence over the long run than we would have seen if government had just allowed the free market to clear up the excesses instead of working as hard as it could to prop up the excesses.
• Government borrowing is nothing more than theft from the future.  It is spending tomorrow's money today, the wealth of tomorrow's people on today's people.   It is a total scam.
• Greenspan was the primary architect of the debt bubble.  He told everyone that real growth could be achieved by taking on debt.  He lied to us all.  Debt is to the economy like nitrous oxide is to an engine.  It causes a short lived increase in power output but if you keep pouring on the debt or the nitrous, the engine of the economy or of the car will eventually explode.  The problem with short lived power boosts is that they are addictive whether it be in an economy or in a car.  Greenspan told us that debt didn't matter and that debt was good and proper.  Greenspan was (and remains) a traitor not only to the US but to all citizens of the world.  He thinks he got away with it.  I think it will come back to haunt him as everyone else figures out what I have known for years: Greenspan is a criminal.
• The solution?  Get out of the dollar and into gold and silver.  Williams makes it sound like you should make this move rapidly but I think that it should be done over time.  Put retirement savings into physical metal that you have physical possession of instead of dumping your long term savings into government controlled accounts like IRA/401k.  When you put money into government controlled accounts, they have possession of it, not you.  At some point in the con, possession will become 9/10ths of the law.  Count on it.

With all due respect to Mr. Williams, I think the actual course of events to come is what I have been calling for years a "Super Nova" economy.  First a deflationary depression (which is still playing out) and then a massively inflationary or possibly hyperinflationary expansion.  Real estate is by far the largest asset class in the world.  As interest rates rise, the value of real estate must fall to the point where people can make the monthly payments.  As that happens, bank's balance sheets disintegrate and so they cannot loan.  It's hard to have hyperinflation if the banks aren't loaning money.  In fact, given that debt is the largest component of the global money supply, failure of the banks to loan ever larger amounts of money is quite deflationary.

Greenspan himself said there can be no bottom (referring to deflationary pressures) until housing bottoms.  What he did not say is what happens after that bottom is put in and the answer has to be massive inflation as lending picks up again but this time on a much larger monetary base.  Those who do not borrow again at the bottom will get left behind by those who do.  That is the scam of fiat currency (F.C.) and fractional reserve banking (F.R.B.).  It enables gamblers and market timers (i.e. the elite who have insight into such things) to get ahead without doing any work.  It leaves honest hard working people behind.  That's why F.C. and F.R. B. are anti capitalist in nature.  Capitalism is supposed to reward those who work hard and who work smart, not con men, grifters, scam artists, market timers and leveraged gamblers.

Economic drama in the US: Debt ceiling is just noise and distraction

The TV is abuzz lately with the story that Speaker Boehner called off debt talks with the president.  Of course, the sheeple in our society are following the story intently as they are meant to do.  They don't realize that it's just more noise and distraction in the ongoing and unavoidable collapse of the great global debt Ponzi.  In reality, both sides - Dem and GOP- want to raise the debt limit endlessly but they have to put on a good showing lest the bond vigilantes decide that we have given up on worrying about paying back our debt.  Bond vigilantes are those who have loaned or who plan to loan the US (and other sovereigns) money.  Their mechanism of protest against the debasement of sovereign currencies is to demand higher interest rates from government to compensate lenders for the risk that the buying power of their principal will evaporate over the term of the loan. 

And it is a very risky path they are following.  Make no mistake: the money they loaned to governments will never get repaid because it cannot be repaid.  It is mainly due to the bond vigilantes that government has to make a big show about raising the debt ceiling because that's what a con game is all about: baffling people with fast talk and BS in order to spirit their money away from them.  What's so ridiculous about the situation

is that neither GOPs nor Dems are focusing on one very simple avenue of spending reduction which is to cut "defense" (offense?) spending.  Instead they prefer to argue over the stereotypical left vs. right political ideals which are raising taxes on the rich vs. cutting entitlement spending on the poor.  Somehow, defense spending is sacrosanct in all this.  Yes, entitlement spending is higher than defense spending but if we cut the defense spending then we might be able to make smaller cuts to welfare and social security entitlements and we might be able to keep a lid on higher taxes.

It would seem that both sides should be quick to recognize that.  Intelligent people will ask themselves why this is not happening.  Why is military spending so sacred in the USA when we already outspend the next most militarily spendy country by 5x?  In fact, we spend more than everyone else in the world, combined.  What exactly is the motivation for such a large, standing, globally deployed military?  Perhaps we will have to wait and see what happens after the global debt Ponzi finally collapses but until then it is probably wise to review the words that were spoken by President Eisenhower during his farewell speech.  In that speech, he warned us in no uncertain terms to watch, monitor and beware of the Military Industrial Complex.  Notice the first word there is military.  Maybe Ike chose the ordering of his words carefully and with purpose. In any collapse, the marginal players get hurt the first and the worst.  If I decode Ike's message properly, he was telling us that the military is really running the show from behind the scenes.  Military is top dog in the complex.  Next in importance is industry.  Finally, comes everyone else including government, banking, academia (whose job is to provide marketing cover for the con) and finally the workers who are the patsies in the con.   According to this view, the order of those affected by the collapse should be in reverse order to their architected position in the scam which is pretty much what we have seen to date.

At the very great risk of boring you with repetition, I ask you to forget all the noise and just consider this: how would con men run their con without the benefit of fiat currency and fractional reserve banking?  It would be impossible.  The military industrial complex only has as much power as it can buy with money it did not earn.  Those aligned with it are only so aligned as long as they are getting paid more than they could make on their own and without having the support of the con men.  When the money runs out then the con must collapse.  Either a return to honest money or to a mandate against debt based consumption will cause the money to run out quickly for the con men.  Thus, they must avoid this outcome at all costs.  This is why no real solution to the debt problem will ever happen if left to the care of those running the show.  This is also why those at the top will push back against the use of honest money and will absolutely revolt at the thought of the elimination of fractional reserve banking.

Con men and morons take victory lap for extending Greek pain.

In a move that is about as surprising as U.S. government's re-raising of the debt limit, the Wall St Journal reports that a new deal has been reached to keep Greece in the con game of global debt.  Of course in order to sell the deal, concessions had to be made: private bondholders would have to agree to a partial default on the loan.  Of course the euro-cons make it sound like the debt reductions are all voluntary (happy even) but there really is no choice for the bondholders because something is better than nothing.  In addition, interest rates on the debt have been pushed down to 3.5% and repayment extended to 30 years.

And so the con men are out patting themselves on the back as if everything is just fine.  But everything is not fine.  Unless Greece can inflate away its debt to pensioners (which it can't since it doesn't control its own currency anymore), it will run a massively deficit government no matter how they reswizzle the existing debt.  Nothing has been saved or fixed.  The con men are just buying whatever time they can. The next step in the collapsing con will likely be the declaration of sovereign Greek bond default by the US credit rating agencies.  If they don't do it they can pretty much just close up shop and let the up and coming Chinese debt rating agencies control the game going forward.  The paper thin credibility of S+P and Moody's requires them to declare this situation a default.  Those who are holding credit default swaps will demand that it be so.  If government steps in and tells these people to play ball or else then it will destroy the credit system over time.  Why would anyone loan money to a government if they can't insure such investments with credit default swaps?

If the Greek people are stupid enough to let their rulers do this in their names then they deserve to become life long debt slaves.  I don't think that is going to happen.  I can already smell the Molotov cocktails being mixed up in Greek basements.  The Greek politicians will keep agreeing to debt pushouts and reswizzles because they know they cannot repay the debt.  But as long as there appears to a chance of success they can get people to continue to buy into the con.  The only real goal of the politicians. 

Obfuscation, lies and propaganda.

There was a period of time when I first started writing about the economy (and the con men who control it) that I wondered if I was having some sort of mid life crisis.  It had become clear to me that something was very wrong with the way things were working but I didn't know enough back then to state exactly what it was.  I could quote some of the symptoms but I really didn't understand the root cause.  What I saw looked exactly like a scam - something right out of a not yet made sequel to Robert Redford's, "The Sting".  For the longest time I just had to live like that, never really sure or not if I was prescient and insightful or paranoid and crazy.  The first time that I knew, 100% sure, not a single doubt in my mind that I had been right all along was when Alan Greenspan retired and began hawking his book which predicted the problems we are really just beginning to experience now.  In his own little elitist sing-song voice he admitted that his testimonies to congress were done in "Fed Speak" which he described as a language of purposeful obfuscation.  In other words, he admitted to bull$hitting congress.  Not only did he admit to it, he was clearly proud of it.

Well, if Greenspan was so bold as to basically baffle our congressional leaders with BS then it meant he had something to hide.  In fact, it was clear evidence that the whole economic system is a big scam which is run by and for the benefit of those who understand the con.  Greenspan would not have had trouble using plain English and straight talk if he could just tell the truth about an honest system that was having problems.  But since we have a dishonest system which must eventually collapse under the weight of its own dishonest corruption then his only option, given that he already chosen to betray the people of the United States at the highest level, was to Obfuscate, Lie and spread Propaganda.

Of course, the US government and its many agents are not alone in this.  In fact all major governments have the same problems but to differing degrees because they all have fiat currency and fractional reserve banking.  Not long ago the head of the Euroscam admitted that lying is the only strategy when the wheels are falling off of the con.  Of course he didn't say it just like that but he did say that he had to lie to the people for the good of the people.  Talk about your slippery slope of morality and honesty.  

Once government accepts and embraces the philosophy of screwing the people for their own good then the sky is the limit as to what they can get away with.  If your food and water were contaminated but government was worried that telling the truth might cause mass panic, all they have to do is tell you it's safe to eat and drink while they themselves take protective precautions.  Or maybe an asteriod is going to hit the Earth and they say nothing while they dig their underground shelters.  These are extreme examples but they are entirely in line with reality in the new decision making process.  The moral component of the decision is eliminated under the pretext that it will cause more problems for people to know the truth and to have a chance to defend themselves than to just lie about anything for any reason.  Of course, the real reason to lie to the people is not for the sake of the people but rather for the sake of the con men in charge.  If people know the truth then con men get chased out of town with pitchforks and some of them end up facing civil and even criminal charges.  In like fashion, France and Germany want to bail out the rest of the PIIGS not for the sake of the PIIGS but rather because they fear that a domino of defaults will result in their own default.

Unfortunately for the con men, organized crime rings are generally brought down from within, not from external forces.  The con men and criminals take to infighting about who owns the right to fleece the people.  The numbers of con men grow and grow until there is not enough fat on the sheeple to feed all the wolves and then the wolves start infighting.  Eventually some of them start telling on the other ones and the whole thing unravels.

Which brings me to the current state of things with Ireland.  Ireland is bankrupt and no amount of additional loans are going to change that.  Moody's credit rating service took some very hard hits for its part in the criminal housing bubble that the US is still reeling from.  As a result, Moody's credibility took a monster fall right along with the value of its stock.  That public undressing left Moody's with only two choices: continue lying about the state of the scam and then be liable to take the fall again when it all collapses even worse next time or start telling the truth, effectively ratting out the other con men just like a mob soldier rats out his good fellows when the pinch is on.  Needless to say, Moody's is now ratting everyone out.  Euroland con men wanted to put a gag order on the credit worthlessness of the dying PIIGS but Moody's is not having any of it and is singing like a bird about just how worthless the sovereign debts of the PIIGS really are.  The Euroscam response?  Create a new puppet ratings agency for the EU that will spew whatever propaganda that the overlords want spewed. 

Yep.  If you don't like the rules, just change them.  Rule of law is dying a slow, painful death in the world and is rapidly being replaced by rule by con men advocating short term, short sighted "solutions".  The longer that we, the global citizens of this planet put up with this crap, the worse it is all going to be when it collapses.

Is Goldman Sachs stock rolling over?

   Quick post today because I am traveling for the next 2 weeks but I did want to point out that the Goldman Sachs chart is looking very weak.  Goldman is of course the poster child for money manipulators who extract far more compensation from society than they work to add to the economy.  When the great debt Ponzi eventually collapses GS will certainly have a leadership role in the collapse, AIG style.   Right now these con men have everyone fooled into thinking that they are not part of the system but rather damned near the system itself.  Nothing could be further from the truth.  If they were so strong they would not have needed backdoor bailouts via the AIG scandal.  Goldman is using Art of War tactics.  It is acting strong when it knows it is very vulnerable. 

In the long run Goldman will be lucky to survive at all.  Once the big crash occurs those who have fallen in step behind it will turn on it just as Brutus turned on Caesar.  Knives will appear and it will get very bloody.  If they are not careful it could even turn into criminal charges (a very common occurence when a dictator falls).  The Goldman insiders know this which is why they have been paying themselves massive, even record bonuses.  They are sucking all the value out of the Goldman name while they can.  The above chart shows that the market is starting to question the value of Goldman.  The fact that their BFF Bernanke pumped all that QEx money into the economy and GS stock could not make a higher high is telling.  I would not be at all surprised to see GS stock start gapping down/cliff diving based on some new revelation of some long existing risks that had gone bad but which were papered over as long as possible.

How can I make such outlandish predictions?  Simply because Goldman is a parasite which does not create nearly as much economic value though the labor of work as it extracts from the economy.  Goldman is effectively another form of taxation.  It is a corporate grifter, a con man.  No con ever lasted forever and the Goldman con cannot stand on its own once the debt Ponzi collapses.  Their fates are inextricably but not inexplicably intertwined.

Markets which trade paper assets will be a victim of the ongoing credit crash.

On the surface, things appear to be getting better in many areas.  Engineering jobs are starting to return to the US and I am getting several inquiries per week from headhunters.  Still, I'm using this time to store away value for the future in the sure and certain knowledge that the Bernanke QE bubble, while not fully played out now and possibly not even in the next couple of years, will eventually succumb to the great credit collapse that is still clearly underway.  The rocket ship of re-flation is battling against the gravity of deflation.  The rocket ship has to burn fuel in order to make headway.  Gravity-like deflation just has to sit there and be patient in order to pull the rocket back down.  Deflation is the natural course of things in a technological society. If the re-flation rocket ship can go high enough and break away from the gravitational deflation, hopes commander Bernanke, we can head straight into the next big inflationary cycle without paying off the last one.  If he can do it then his fraudulent banking system will live to fight another day and live to rip off billions and trillions of dollars more from the unsuspecting inhabitants of planet Earth through the scam of fiat currency and fractional reserve banking.

Markets which trade paper representations of real things underpin the great scam.  In a real market, the buyer has to bring real money and the seller has to bring a real commodity and the marketplace is nothing more than a public place for them to make the trade in.  But in paper markets, buyers bring credit instead of real money and sellers bring promises to deliver commodities some time in the future.  It's like a real life version of Farmville or some other virtual reality game.

Over at Chris Martinson's web site there is a recent interview with Eric Sprott  that says many things I agree with, the main one of which is that paper markets will eventually blow themselves up because of all the inbuilt leverage, corruption and Wimpy Promises which are part and parcel of them.  Sprott is well respected in the metals business and I think his long standing viewpoint that people should just dollar cost average into real, physical things is going to prove to be advice well heeded on down the road. 

Our entire economy is literally built on a foundation of leveraged paper asset trading.  At some point one of the sides of this massive something-for-nothing, get rich-quick-without-doing-any-work scam is going to break down and that will cause the paper markets to break down.  By that I mean that either the buyers will take on too much leverage and be unable to pay off their lost bets OR the sellers will promise the delivery of more stuff than they actually have to deliver and then a series of "unforeseen events" will occur which will smash all their carefully calculated assumptions to smithereens and we will have LTCM part deux, turbocharged, on steroids and in 3D.  At that point, the only thing that will matter is physical assets and who it is that physically possesses them.  It won't matter what someone used to owe you if they have gone tits up.  The greatest bubble of all is the Big Bubble - the entire Virtual Economy itself.  It is built on leveraged debt and Ponzi Promises.  All bubbles eventually peak, reverse course and then collapse.

Having said all that, let me be so bold as to offer a couple of trigger points I am watching closely.  The bubble is not ready to collapse if that public indicator of human psychology, the stock market, can break out to new highs.  The old high on the Dow Jones Industrial Index was in the low 14,000 range.  If we break through that then Bernanke wins this round and massive inflation becomes a serious risk.  Having said that, I believe that the big bust must come sometime before the majority of the baby boomers are able to draw their value out of the system because in a Ponzi not everyone can win.  My view is that only about 20% of the people will win (i.e. take out of the markets more actual value/buying power than they put in), 20% will about break even, and 60% will get screwed.  20% of that last 50% will see significant damage to their retirements and 40% will lose virtually everything.  Rough numbers, of course, but that's just how Ponzis tend to work in my experience and so this time I don't think it will be different.

Smart people will use whatever time we have left (before the retiring boomers suck the life out of the economy) to store wealth in a physical, undisputable, un-taxable form that will help them weather the very hard times that must come when the largest economic Ponzi in the history of man finally collapses.  I'm not picking on boomers here at a personal level but when they stop adding value to the economy through their labor and when they indeed become a drain on the economy through their attempts to collect government medical and social security (Wimpy) promises we are certainly going to feel it as a nation and even at the global level.  The additional value they pumped into our economy via their labor when they were young and strong will be matched only by the additional value they suck out of the economy in their old age.  One medical operation costing $100k that is paid for by "the state" is worth more than a decade of hard work and savings for most Americans.

A sign of the times: LNKD

LinkedIn Corporation went public right into the end of the Bernanke QE2 stimulus.  Nice timing if you ask me.  The current market cap for this "asset" is nearly 9 billion dollars.  Who in their right mind is buying this stock? The fundamentals on this equity are those of a penny stock, not an 9 billion dollar behemoth.  The price to earnings ratio is as bad or worse than the worst offenders during dot bomb but this is what our government and our illegal Federal Reserve are doing to us.  Why "us"??  Well, we will never really know for sure who is the patsy here because there is not one institutional holder listed.  How exactly does something get a 9 billion dollar market cap without any institutional holders?  Maybe from day traders?  Yeah, right.  Believe what you want but something is not right about this and it will eventually go the same way all the dot bomb high flyers went.  Unfortunately, I believe that many institutions are indeed taking stakes in these bubbles simply because the con men running them have contractually promised the suckers invested in their funds returns of 8% or more when fixed income and stock markets are yielding far less and will likely continue to yield far less for a decade or more according to Mish.  That means everyone managing these funds has to be a gambler at some level.   If I am wrong about this then what does CALPERS need with a "Chief Risk Officer"?  Sounds to me like a better job title for this guy would have been Chief Ripoff Agent of Pensioners.  If I were a con man running the show then I would probably hire a chief risk officer only at a time when I was worried about the risks I was taking with my fund OR about the long term risks I had already signed up for.  In other words, I would try to hire an "expert" through whom I could distance myself from problems and who could serve as the fall guy during the final collapse.

Unfortunately these money managers are not gambling with their money, they are gambling with yours.  If you are owed a pension or own an annuity or any other Ponzi Promise then know this: the scammers running those funds have 2 choices right now: come clean that they have made unkeepable promises to you and default in a public way OR just keep on dancing while the music is playing.  If they come clean it will be clear that they knew where all this was going years ago but said nothing.  It will also be clear that they have been operating outside of their charters in order to appear as if they could actually keep their unkeepable promises.  They will be run out of their cushy, overpaid jobs at best, and hit with civil and criminal charges at worst.  Dictators never give up easily because as soon as they do the people begin calling them war criminals and thieves.  Why do you think they don't just leave when the people demand that they do so?  It's because they know that once they are out of power they will be held accountable in ways that could never happen while they controlled the shots, the media and the fates of dissenters. 

Big money managers are financial dictators.  They have your money captive and they are not letting it go.  They have the government enforcing their control over your money with laws that disallow you access to your savings until you meet constantly increasing age targets for retirement. They operate behind closed doors with only fake transparency.  What was supposed to be safe and sane will eventually be exposed to be a house of cards as unforeseen losses make them "embrace risk" in your name.  The LinkedIn IPO is just another symptom of a very sick economy.  It is a symptom of fiat currency and fractional reserve banking. Just like nobody could predict when dot bomb would collapse, I cannot say when LinkedIn and our Ponzi Economy will collapse.  All that can be said for either of them is that they eventually will do so.