Saturday, September 22, 2012

The next step toward the remonification of gold is happening right now.

Over the years I've been clear and consistent on several core themes in my emails and blog posts   I consider pretty much everything beyond these core themes either trivia or noise.  There is soooo much information running around out there that it is vital to understand the basics because these fundamentals must drive the long term direction of things.  This also allows you to quickly filter out noise and bull$hit regardless of what authority figure (AKA con man) is spewing it.  When you are personally aligned with the true major trend then the short term ups and downs are just (fully expected) noise and are easy to not lose sleep over.  The core points everyone must know are:
  • The global economy is one huge debt Ponzi.  Ponzis require ever-increasing inputs of their energy source in order to maintain the appearance of solvency.  For Madoff, that meant more suckers giving him their cash to "invest".   In the case of the Great Global Debt Ponzi, the energy source is debt of every kind (trust based economics). 
    • No Ponzi ever lasted forever.  It will not be different this time, period.
    • Every Ponzi requires several factors in order to continue to run: human nature, greed of the patsies, financial ability of  the patsies to participate (you can't shake down someone who has nothing and no ability to borrow), a cover story of some sort that can be sold and above all confidence in the con men running the show. 
    • Ponzis tend to collapse suddenly as the sheeple figure out en masse that they are headed for the slaughter house.  As everyone heads for the door at once, only those already standing near the exits (or those who left early) get out whole.  Everyone that remains for the collapse will lose some or all of their at-risk wealth.
  • The engine of the debt Ponzi is fractional reserve banking which is hyper-enabled by operating on top of a fiat currency system.  In short, there is literally no value in the system.  It's all promises and no reserves.
  • Gold is money and nothing else is.  Silver is a reasonable substitute at times but silver is also an industrial metal and so its scarcity is volatile based on industrial needs.  Real money is not volatile like that.
    • Because gold is the only real money on the planet, only gold has the power to call fiat currency a fraud.  Period.  Price rises of ANY other commodity can be blamed on the greedy farmers, the greedy Arabs (I guess we should attack them for being so greedy, yeah?), droughts, floods, supply chain interruptions, etc.  But gold is not of any significant use to man today for anything except the purpose of money and for that purpose there is and never was anything better nor even close.
    • Because gold draws attention to the con it is the enemy of the con men.  For the past 40 years bankers have been telling us that gold is a risky investment, gold is for fools, gold is for extremists, gold is not money, you don't earn anything on savings kept in gold and that a gold standard is a "barbarous relic".  At the same time, they all hold thousands of metric tonnes of gold in their vaults and the dollar price of gold has significantly outpaced any stock market "returns".  When the con men pay debts, they never pay in gold.  They always pay with printed paper.  For some reason nobody wants to part with their gold.  Do as I say and not as I do.
Any good con man knows when to change tactics.  Proper timing in a tactic change keeps the bankers ahead of the herd and in control.  One of the major signs of impending collapse that I have been looking for is when the banking cartel begins to admit that gold is money and in fact the only real money.  When they tell people that a gold standard is not only NOT impossible as many sheeple have been led to believe, but in fact fully possible and even required then I see it as a major sign of a coming shift in tactics.  I have written many times that a gold standard of some sort will be required in order to calm the angry herd that gets screwed by the collapse of the Ponzi.  The con men know it and they are acting on it.

And so we are seeing this today as Deutsche Bank ("DB") has put out a report entitled "Gold, adjusting for zero".  Now pay attention if you want to really understand something that only 1 in 10,000 understand today.   Lots of people are waking up to the con of fiat currency.  But few people understand that the real engine of inflation and then deflation is fractional reserve banking.  Fractional reserve banking allows con men to create credit from thin air and loan it into the economy as if it were money.  This is how the banking cartel rips us off.  The new money drives up the prices of everything (more buying power chasing the same amount of production will do that!).  Loans thus continue to get larger and larger and banks continue to rake in more and more profit in the form of fees and interest that generally are sold as a percentage of the financing, not as a flat rate fee.  Thus, the bigger the loans, the bigger the income without even doing more paperwork to earn it.  This is an obvious scam!

Fiat currency just makes it easier for bankers to leverage up their credit production.  Why?  Because credit offered by banks is supposed to be backed by collateral of some sort.  These are called bank reserves.  Fiat currency allows banks to carry paper in their vaults (or numbers in their computers) as if they are of actual value instead of something someone just conjured up from thin air.  So fiat currency really enables fractional reserve banking by allowing leverage on top of vapor but make no mistake: the real culprit of economic dishonesty is fractional reserve banking.

Read the article and gather this fact: DB isn't talking about going back to a gold standard for the fun of it or because they suddenly turned honest.  They are talking about it because their profits are crashing.  The confidence in the fractional reserve scam is collapsing and it means zero growth (more importantly, negative "growth" if they were honest - credit deflation).  Ability to originate new loans on top of impaired assets such as house notes, securities, government bonds and other overpriced/certain-to-default "assets" is waning. 

The con men thus need a "new" reserve asset on top of which they can make loans in order to keep the scam of fractional reserve banking alive.  If they don't do something, the whole thing will collapse within a few years.  At best, the con men will be out on the street with no skills to speak of.  At worst they will be hanged by angry mobs in the street for their complicity in the collapse of the global economy which would lead to riots, starvation and civil wars.  Bottom line, the con men need a confidence injection into their scam.  Gold is not an impaired asset.  Everyone knows that gold never went bankrupt.  Gold is something that people will accept as the basis for continuing on with the fractional reserve banking scam.  They will do this even if they know it is a scam if only to avoid the consequences associated with a massive deflationary Ponzi collapse (again, civil unrest or even civil war are the historical wages of letting the Ponzi collapse).  This, and only this, is why scum bag bankers are suddenly interested in gold.  PERIOD.  They have not one Troy ounce of honesty between any of them but they are very smart and they know it is time to change tactics.

With all of this in mind, think about what would be best for the bankers and you will know how to position yourself.  In other words follow the moneymen because until the people finally decide to wipe them out (which will happen someday but perhaps not in my lifetime), the moneymen are leading the global herd.  Thus, if you know what's good for the moneymen then you know where they must head in order to get that goodness they seek for themselves.  Know this and you can be 2 steps in front of them for once in your life instead of always feeling like you are the last one to the party.

So, the immortal words of Hans und Frans, "hear me now and believe me later" (look it up on Youtube if you don't get it ;  ):  Bankers want to create a lot of credit.  This means they need a big pile of reserves in order to fraudulently, fractionally reserve (AKA leverage) on top of.  The US has ~ 8k metric tonnes in round numbers of gold (supposedly).  That's roughly 250 million Troy Oz.  If that sounds like a lot of gold, consider the fact that the US has 330 million people.  That not even close to 1 Troy oz per person...   At today's market prices, it's only worth about 460 billion dollars.  If that sounds like a lot, consider that our annual deficit for the past several years has been well over $1 trillion per year.  Existing US government debt on the books is pushing $16 trillion.  Total government obligations are well north of $50 trillion (unfunded social security, medicare and other Ponzi promises) and some estimates are north of $100 trillion.  $460 billion is a drop in the bucket.

When these paper Ponzi promises come due there has to be enough currency to pay for them.  Whether in paper form or just accounting entries (more debt), the fractional reserve system has to somehow account for it all.  Trust me, with a gold standard based on only $460 billion, the banks are not going to be able to produce enough fractional reserve credit to cover all of the debts because at the same time they will be forced to maintain lower reserve ratios.  It was fiat currency that enabled ridiculous reserve ratio expansion to balloon from the historical 10:1 ratio to 32:1 in the forensic case of Bear Stearns to the 70:1 ratio of Fannie Mae and Freddie Mac.  When we return to some form of gold standard those ratios must come down.  

Putting it all together, the only way to create the needed amounts of fractional reserve currency in the new system will be to value the reserves very highly.  $1800 per Troy oz gold is not nearly high enough.  Not even close!  I won't sit here and try to predict the eventual gold price that will be needed for the bankers to continue their fractional reserve Ponzi.  But it's pretty obvious that they are already planning on using gold as the reserve basis for their next artificially induced wave of "gowth" (which is elite-speak for growth of fraudulent, credit based money supply...).  Again, refer to my prior post where I pointed out that gold is currently treated as a lowly tier 3 asset which means that only 50% of its market value can be used for fractional lending calculations today but that it is going to tier 1 status whereby it will become legal to use 100% of its value for loan generation purposes going forward.  The bankers are clearly setting us up, step by step for the return of gold as a major basis of our fractional reserve Ponzi.  As other asset classes collapse, they will be forced to (kicking and screaming the whole way) acknowledge gold as the premier reserve asset upon which they will run their fractional reserve lending scam.  They will not desire this.  They will require it.  It's either that or go find another job where you can get paid without having to add any economic value.  Those with eyes to see it will rest assured that it will lead to much higher gold prices in the fullness of time.

Here's another tidbit for you to  ponder.  Everything goes in cycles.  One day the entire concept of fractional reserve lending will collapse because it is a fraudulent, something-for-nothing scam.  That could be decades from now or right around the corner.  It all depends on the mood of the herd.  But everything that happens that is a step closer to honesty will only result in higher valuation of all things that are honest.  Gold is honest.  If, in order to gain more confidence in the collapsing scam, fractional reserve ratios are limited then it represents a step closer to honesty.  Thus, it will increase the value of gold. 

Another example: Greenspan legalized the nightly "sweeping" of checking accounts into long term savings (and unsweeping the next day) in order to reclassify your monthly food and rent money as if these funds were long term investable savings which banks could use as reserves in their fractional lending scam.  If that law is repealed then it will represent in another step back toward honesty and any move toward honesty will be positive for gold.  Why?  Because with smaller reserves to lend upon the bankers will have to create a story that will increase valuation of the good reserves that they do have which will be gold.  They won't want to do this but they will be left with no alternative.

Another example: Glass-Steagall dissallowed investment banks from handling the money of people who just wanted to use a bank for savings.  Greenspan repealed this in order to give more reserves to the banking system so that it could leverage up on top of a larger reserve base (AKA "growth"...).  If Glass-Steagall 2.0 is put into place then it will result in another step back toward honesty and thus another step up for the valuation of honest money which is gold.  The mechanism is the same: bankers will always need more reserves to make more loans which drives their definition of "growth".  But killing the concept of sweeps and reintroduction of Glass-Steagall take reserves away from banks.  Bankers don't want to do these things but the sheeple (especially retiring boomers) are awakening and they will make the politicians do it.  These "lost" reserves must be replaced by something or for sure the system will collapse.  Period.  As DB says, gold is the only thing on the horizon that can do this.

And now for my final point (finally): forget what you heard about deflation being bad for gold.  That is a myth.  All of the reserve reduction mechanisms I stated above are in fact deflationary.  Why?  Because they effectively reduce the amount of credit that bankers can produce and credit is BY FAR the biggest component of monetary inflation (a fact which, again, very few people understand).  At the same time, I've argued that gold will benefit from all of these deflationary acts.  The reason is exactly what Mish said: gold is money and everyone rushes into money.  I will add that the banks must lead the run away from paper assets into real money because they need hard assets to serve as reserves for their something-for-nothing fractional reserve scheme that they owe their completely out of line wealth and prosperity to.

Here's another hint for you about gold not going down as a result of credit deflation: when people who don't know anything about how money actually works or how the economy works past the drivel they hear on CNBC are commenting on gold going down as a result of deflation then smart people will consider the opposite to be most likely.  The herd is never right at major inflection points.  The "common knowledge" is eventually exposed to be what it really was all along: misleading propaganda.  When the people who are afraid of gold today at $1800/oz suddenly desire to go "all in" at very substantially higher prices, that is when I will be looking to buy things of value with my gold such as income producing assets like rental property, etc.  There's a time to save and a time to spend.  Right now it's time to save.

Saturday, September 15, 2012

The scam of the Dow Jones "Industrial" Average

Everyone knows that the DJIA exists and many (humans and trading robots alike) closely follow the price of the index.  When the DJIA is up, the herd is confident and the people spend money.  When it goes down, the herd gets panicked and save money instead.  But very few people that I talk to (including many who have very stong opinions despite their relative ignorance) have any real idea what the DJIA really is or how the numbers behind it are being gamed.  And so, as usual, I will try to shed some light on the scam.

First of all, the DJIA is an index of shares of only 30 companies.  30 measly companies.  And everyone looks to it like it's the end all be all.  But it's only 30 companies.  Second, the companies change based on unknown factors.  Most people have no idea of the shuffling that has gone on with that index in order to keep its price as high as possible.  Again, the con men like to keep the price of it high so that they can convince suckers to invest in stocks as if they have any intrinsic value.  I've said it before, I will say it again: company shares are as valueless as the scrip currency that used to be printed up by private banks in US economic history.  I don't care much if you don't agree with that.  I don't care much if you want to argue about it.  Those that don't get this fundamental fact have bought into the sales pitch of Wall St.  They are so invested (economically and emotionally) in the scam-ridden concept of corporate securities that they don't want to hear the truth and in fact they get angry when I say it.  But it will not change the fact that shares have no inherent worth and we are all going to get taught that lesson in graphic detail when all the boomers try to cash out of the markets en masse.

But back to the gaming of the index.  AIG (the bankrupt insurance company) used to be one of the 30 DJIA stocks.  When AIG crashed in value and everyone lost confidence in it, the con men running the DJIA kicked it out and installed Kraft Foods (symbol KFT).  That was back in June 2009.  At the time, Kraft's shares had gotten beaten down and it was clear to the con men that deflationary forces could be staved off by Bernanke, at least for a while.  That meant that a leveraged to the hilt company like Kraft could see big share price gains and help prop up the badly damaged DJIA.

By "leveraged to the hilt" I mean little cash and lots of debt.  Here are the number for Kraft as of this writing:
Balance Sheet
Total Cash (mrq):4.73B
Total Cash Per Share (mrq):2.67
Total Debt (mrq):30.74B
Total Debt/Equity (mrq):84.81
Current Ratio (mrq):1.23
Book Value Per Share (mrq):20.36

Yes, that's correct.  $30.74 billion in debt and only $4.73 billion in cash and this is happening as the American economy is rolling over.  This will mean that people migrate to the lower end food products and Kraft's earnings will collapse.  The con men running the show know this.  They watch the charts too.  They see that KFT shares have skyrocketed since being admitted into "the club": 

Insiders have been big net sellers of the shares.  They know that now is a good time to dump KFT from the DJIA index so that they can replace it with something that has better valuation in a post election deflationary environment.  And so now, seemingly out of the blue and for no observable reason, the con men running the DJIA has kicked KFT out on its worthless a$$ and replaced it with United Health.  Replacing it will be United Health which will probably do well as the boomers age and die.  More importantly, UNH has a far more manageable cash:debt position than KFT and thus will fare much better in a deflationary post election environment.
UNH Balance Sheet
Total Cash (mrq):14.43B
Total Cash Per Share (mrq):13.97
Total Debt (mrq):12.62B
But more importantly, the DJIA is getting out of KFT while the stock price is high.  While this might sound like just good old fashioned smart trading, don't forget that that was never the purpose of the DJIA.  It was supposed to reflect the strength of the US industrial producers.  Now it has clearly devolved into nothing more than a trading index which is gamed in order to make it look good rain or shine.  While you might not have a problem with that, the bottom line is that this type of gaming of the DJIA sends false confidence signals to the herd which results in irrational behavior (like buying stocks when it should be selling them).  In other words, the DJIA is nothing more than a mood control mechanism designed to herd the sheeple in for the eventual slaughter.
I hereby predict the following: KFT has peaked.  The pump is done, the dump will start soon and it will be a big collapse signaled by a massive declining double top on the chart.  The collapse of KFT will likely occur hand in hand with a collapse of commodity prices as China stops stockpiling commodities and indeed begins to sell them off in order to provide stimulus to its ailing economy so that the people do not riot and kill the leaders.   That fact that most people think massive inflation is immediately in the cards tells me that significant ongoing deflation is the more likely outcome after the election no matter who gets elected.  Run, do not walk away from KFT as debtors do very, very badly in deflationary times.  Second, the DJIA will one day zig instead of zag and it too will collapse because it does not represent a natural market selection anymore but rather the selection by central authority in order to game the herd in a legal, subtle but terribly effective manner.  
By the way, the selection of UNH is far from ideal given its already high share price.  This may be turn out to be a good case of zigging at the wrong time.  There is a lot less postive share price headroom potential in the UNH addition to the DJIA than was present for the KFT replacement of AIG.  Also, there is a high expectation about how much medical care will be paid for by retiring boomers just like there was a high expectation that boomers would all flock to Florida for retirement.  In other words, there is a ridiculous expectation that boomers will pay whatever price is being charged for healthcare goods and services even though the boomers are all counting on the government to pay for the cost of treatments.  Now hear this: boomers are retiring with very little cash on hand.  They do not have the cash  to afford endless medical procedures.  So they count on government to do it but this is happening at a time when government is finding itself without enough tax revenue to cover current expenses while unable to raise taxes in a meaningful way.  In other words, people simply are not looking at the math surrounding entitlement health care.  What cannot happen will not happen.  UNH might turn out to be a great disappointment for investors in it, including the con men who control the DJIA.

Thursday, September 13, 2012

Remonification of gold is a given.

Many articles like this one have come out this year about the de facto re-monification of gold but few of the rank and file have any clue what is going on or what it means.  Allow me to simplify.  The global money powers have been running a decades-long con which is now into the collapse phase.  In essence, the con men fooled people into thinking something other than gold and silver was money.  People believed it because it was convenient to do so and because they were ignorant of the consequences.  Money is power.  Someone has to be the leader in our society, right?  Smart, hard- working people should have the power and they should be the leaders because they are the energy source of progress for man.

But when fake money that you didn't have to earn is treated like real money that you did have to earn through smart, hard labor, power is siphoned away from those who actually deserve it and who would use it to better our species.  The power instead goes to con men and narcissistic sociopaths who think only  of themselves.  The result is society in decay.  Look around to see the result.  Of course, this is an unnatural situation and thus guaranteed to fail in the long run.  The long run is now upon us folks.  Anyone with eyes to see should look at the EU, recognize it as a marginal player in the fiat currency game and use its obviously impending demise as a warning that the whole global scam of fiat currency and fractional reserve banking is going bust.

It's very important to know who the marginal players are because in any collapse the marginal players are hit the first and the worst.  When you see them stumble it is always wise to treat them as canaries in the coal mine.  Smart miners have been using this device for centuries to know when they are in danger from gas (methane or carbon monoxide).  They don't look at the dying birds and think "OK, this kill-off is just happening to them, it will be different with me".  Instead they recognize that they are in the same sheep dip as the birds but only bigger and stronger which is why the miners haven't died (yet).  But they don't delude themselves about their strength; they know they will eventually keel over if they don't take prompt action.  In short, watch the marginal players for signs of ill health and when they look sick, take action.

Global bankers know that the coal miners are on to something with their canary strategy.  The bankers have been running a scam.  They know it's a scam.  They know how it works and the impending collapse of the EU tells them it is at great risk of coming to an end.  All this time they have been telling us that gold is for fools, that gold doesn't earn any income, that gold and a gold standard are "barbarous relics".  Such propaganda has been coming from people who wield power they did not earn.  They conjured up their credentials from thin air simply by printing up money and then leveraging endless credit on top of it.  But now that their fake money scam is collapsing they are scrambling to make sure they have gold on hand because it is the only thing that people will trust after the collapse of the fake money system goes global.

The global moneymen are transitioning back to gold in as organized a manner as possible.  First, they  stopped selling gold.  Then they recently became net buyers.  Now, the Basel III rules are indicating that gold will be returned to its rightful place as money and that for the purposes of lending it will be weighted at 100% of its market value as a tier 1 asset the same way government bonds and cash are today.  Currently, gold is treated as a risky tier 3 asset which only allows 50% of its value to be used as a backstop for making loans.

So banks are accumulating gold right now on the sneak.  As the gold price creeps up the bankers and financial elite tell us, "Nothing to see here, move along...".  Most people ignore it.  Unfortunately, most people will also get screwed because of it.  Why?  Because banks are accumulating gold right now while only 50% of its value can be used to backstop loans.  But one day, when the Bank for International Settlements (BIS) deems it is ready, it will change the rules so that gold is tier 1 capital with 100% of its value available to be used for making loans.  That means that any banks that are loaded with gold will see their ability to loan against that gold double.  Banks historically are allowed to loan at a ratio of about 10:1.  Most banks are far beyond that today because of "sweeps" rules implemented by the great con man Greenspan.  Thus, doubling the weighting of gold as a reserve against loans does far more for banks than to simply double their ability to loan.  It is in effect a back door way of recapitalizing dying banks.  That means more banks making loans and thus more credit inflation in the future leading to higher prices for fuel, food, clothing, etc.  In other words, a sneaky fleecing of the people.

Keep in mind that the vast majority of "money" in the global economy is not money at all but rather credit/debt.  Debt outweighs money by at least 10:1 in the economy and probably more like 30:1.  Debt is a faaaaar bigger driver of inflation than caused directly by Bernanke's money printing.  This is why he has tripled the monetary base over the past few years without tripling the price of everything in the economy.  This is the scam of fractional reserve banking.  Fiat currency is what you hear most of the newly awakening people complain about but fractional reserve banking is what really enables boom and bust bubble economies that are never without drama, pain, personal uncertainty and personal strife.

In case you didn't get the important parts of the con, I'll restate them:  Bankers have fooled people into thinking gold is not money but instead a risky asset.  That has kept demand for gold very low among individual savers.  VERY few people own any gold.  This is allowing bankers to load up on real money (gold) very cheaply by trading in their fake dollars for it just when the fiat currency scam is collapsing globally.  By the time that people at large figure out that they should have been keeping their retirement wealth in gold, the price will have climbed to the moon.

This little "do as I say and not as I do" deception would not be possible if gold was already treated as a tier 1 asset!  In that case, everyone would have been fighting each other for it all along and it would have gotten the attention of the common man that it deserves.  But as a 50% weighted reserve asset, government bonds seem a better deal, especially to banks who make money by making loans.  This sent a signal to everyone else to not care about gold as well.  I hope you can see how we are being set up here.  Today every leveraged bank/hedge fund/401k program/pension plan wants government bonds because they are treated like 100% tier 1 assets, same as cash and nobody wants gold because you only get accounting credit for half the money you spent on it to use as a backing for more loans (if you are a bank or margin bets if you are a hedge fund or pension fund manager).  Pay 100% of the cost of the reserve asset but only getting credit for 50% of it when trying to use leverage is a crappy deal for leveraged gamblers.  It was set up like that on purpose in order to convince people who know better to back loans and leveraged bets with collateral in the form of government bonds and government colored paper (aka dollars) instead of with real money (gold).

Those banks and other money institutions that load up on gold here while gold is still only treated as a 50% reserve asset will be able to wield huge amounts of leverage.  That means they will get rich because leverage is the fuel that drives income for moneymen.  US government bonds are at all-time lows in terms of yield which means they are near all-time highs in terms of valuation.  But when the yield starts to go up - that is, when interest rates begin to climb again, the market value of the bonds will go down which means that the amount of reserve capital banks that are holding them will go down.  This will be a crisis for many banks that only hold bonds because it means they can actually go bankrupt simply because the bonds go down in value.  Why?  Because in normal times banks must prove they have enough reserves to back their loans and if they don't then the FDIC can waltz in and put the bank into receivership.

So at this point there is pretty much no place for bonds to go sometime in the future except down and bankers will need some other reserve asset lest they all go bankrupt.  The con men see this shift coming and they are trying to get ahead of the curve.  The transition of gold from a 50% weighted asset to a 100% weighted tier 1 asset will be the de facto re-monification of gold and I would not want my retirement money to be in cash or bonds when that occurs.

Monday, September 10, 2012

Gold at important decision point

A couple of weeks ago I posted that gold and silver might be breaking out.  So far, that viewpoint seems to have been validated by chart action over the past couple weeks.  But now gold is facing its real test because it is now coming up against a strong multi-year resistance trend line.  The rise of gold signals the decline of confidence in the world's fiat currencies and in the politicians who are manipulating them for their own personal gains.  I think something fairly significant is going to have to occur in terms of more lost confidence before the market will decide to break through this resistance line that goes all the way back to 2006.

I believe that a break through will signal to many market watchers, with many of them being trading computers, that the next big move in gold is underway.  The two most important technical indicators will be first a breakout above the current resistance and then a rise to a new all time high.  If that occurs then my target price will be somewhere around $2200 per oz for spot gold and $2300 per oz for 1 oz gold Philharmonic coins.

Thursday, September 6, 2012

Ron Paul summarizes recent dollar Ponzi history

Long time readers of my blog and personal emails have read my view of global economic history vis-a-vis the dollar's hegemony.  In a post today on, Ron Paul is quoted regarding some of this.  While he misses a few key points about how the US was able to get control of the world's money supply in the first place and how we really invaded Iraq because Saddam was threatening to sell oil for Euros instead of dollars, he nailed the following points:
  • Since August 15, 1971, when President Nixon closed the gold window and refused to pay out any of our remaining 280 million ounces of gold (ed: in exchange for dollars like we promised we would), the U.S. dollar has operated as a pure fiat currency....  In essence, we declared our insolvency in 1971. 
  • Everyone recognized some other monetary system had to be devised in order to bring stability to the markets.  ...elite money managers, with especially strong support from U.S. authorities, struck an agreement with OPEC in the 1970s to price oil in U.S. dollars exclusively for all worldwide transactions.  This gave the dollar a special place among world currencies and in essence backed the dollar with oil.  In return, the U.S. promised to protect the various oil-rich kingdoms in the Persian Gulf against threat of invasion or domestic coup.
  •  In 2009 Iran completely ceased any oil transactions in U.S. dollars.  These actions by the second largest OPEC oil producer pose a direct threat to the continued status of our dollar as the world's reserve currency, a threat which partially explains our ongoing hostility toward Tehran.
  • Our greatest benefactors for the last twenty years-- Asian central banks-- have lost their appetite for holding U.S. dollars.  China, Japan, and Asia in general have been happy to hold U.S. debt instruments in recent decades, but they will not prop up our spending habits forever. 
While I'm sure that Dr. Paul in truth understands all the details about this sequence he probably left many details out in the sake of brevity (sheeple have very short attention spans and do not like to read) or because they sound too "conspiratorial" (God forbid anyone should point out the obvious conspiracies that happen every year in the halls of global governments).

The part I highlighted in red is very important.  While the US dollar is backed by oil because of the deals we made with the Saudis, the deal with the Saudis itself was backed by threat of military actionAnd so, at the end of the day, thinking people will concede that the US dollar is backed by nothing at all except the threat of war.  If you don't like what Uncle Sam is dishing out then he will kill you, your family and anyone else that gets in his way.  Sorry if you don't like the sound of that but it is the bottom line truth.  You either stay in the Dollar Ponzi or you die.  You are either with us or against us.  If you are against us you are a threat to our well-being and thus a terrorist.  It doesn't matter if you didn't really harm us, simply threatening to leave our corrupt money game terrifies the US leaders (as it should) and thus the people who do that are being branded terrorists.  Saddam wouldn't play ball so we killed him and invaded his country. 

This is not me being anti-American, it's me being pro American.  Real Americans tell the truth and they want to live or die by the truth.  Con men running the show in government are traitors to American ideals of freedom, liberty and truth.  In like manner I'm not afraid to say that "the Jews" own Hollywood.  And so they should since they conceived it and built it with the sweat of their labor.  They earned it and it is theirs.  Don't like it?  TOUGH!! Only a socialist thinks it is a crime to own something that you earned.  True Americans are proud of owning stuff they earned and they will do with it whatever they want because its their property.  True Americans do not begrudge property ownership of others as long as it was earned.  The dollar's reserve currency status is not earned, it is forced at gun point.  True Americans are disgusted by that and all that it stands for.

Back to Iran!  Iran isn't playing ball so the con men are trying to figure out how to take them down just like they took down Iraq.  Iran knows that defying the US orders to support the petro dollar is interpreted as an act of war by the US.  This is why Iran is Hell bent on creating their own nuclear bomb.  The US fears the Iranian bomb.  One bomb could take out all of New York City.  It would make 911 look like a walk in the park.  One bomb could bring down our whole financial industry.  So Iran wants a bomb for what are perfectly legit reasons to them (not having to put up with the global bully anymore) and the US wants to stop them for what are also perfectly legit reasons to the con men running the show (maintaining the real threat of military invasion as the underpinning for the US dollar to be the world's reserve currency).

Unfortunately for the US con men, the rank and file people of the US are not liars and criminals like the leaders are.  The people are watching the leaders closely right now and so the leaders are treading as lightly as possible.  Their first move against Iran was to use the Stuxnet virus on their bomb-making labs.  It was very effective but the Iranians reacted to that threat and as a result that dog won't hunt again.  It was a good way to buy time, nothing more.  At the same time, the Iranians are digging deep underground and setting up nuke-building operations there.  So pretty soon there won't be any bunker buster that can reach them either.

The right and fair thing to do, of course, would be to back the US dollar with gold right here, right now.  This would return honesty to the global money supply which is really what every dollar malcontent is bitching about.  Yes, it can be done if gold is $10,000-$15,000 per oz and then the US submits to global audits of the gold supply in order to prove that the stated ratio of gold to dollars is true.  This would shut the Iranian threat down over night.  But it would also skyrocket US fuel to $15 per gallon or more.  The lack of cheap fuel would kill our production (note that production = labor times tools times energy to run them) because the adjusted cost of products would be higher than people can pay for them.  This would put the smack down on the US economy.  At that point, people would stop buying our debt and the US-driven debt Ponzi would collapse.  This would kill our ability to fund a globally distributed invasion force (AKA dollar hegemony force) which we have today.  But at least we would avoid nuclear attacks on US soil.

The last card has obviously not yet been played in this Ponzi but no Ponzi ever lasted forever and no, it's not going to be different this time.

Sunday, September 2, 2012

We are coming to an interesting crossroad on the dollar and gold front.  On the daily chart below the dollar is again testing support.  The fact that gold and silver are likely early stages of a breakout quite possibly means that dollar support will not hold here.  
While the longer term trend on the weekly chart (below, right) is downward,  I was suspecting  
that the dollar would recover to the top trend line of the down sloping red channel.  If it cannot do that then it would imply more dollar weakness to come, and possibly even some panic.  Failure to hit the channel rails before changing direction would suggest that sizeable wealth is impatient and is willing to accept a bit less for their dollar than the trend would normally allow.  This generally happens as a result of fear of some sort.  In this case, fear that first Bernanke and then the US government will further ignore the cries of dollar holders to stop taking on more debt and to stop printing up more “shares” of the USA (AKA dollars) which dilute all existing shareholders (dollar holders).  Yes, it’s just like a struggling corporation trying to raise cash by issuing stock.  The lower the stock goes, the more painful it is to the existing shareholders to print up new shares.   The same can be said for dollar printing.
In any case, we’ll see very soon.  These kind of transition points do not happen very often in the markets or exist for very long when they do happen.  The herd generally takes a direction and goes with it until it has new data to use in selecting the new direction. 

We could also be at my long predicted point where both the dollar and gold rise at the same time.  As you know, they historically move in opposition to each other.  In my view, the mechanism behind this new and widely unexpected trend would be the de facto, market driven  remonification of gold. 
Despite the objections of everyone who thinks a return to some form of gold backed money is impossible, I’m convinced that it is both imperative and inescapable.  I can’t say exactly what form it will take but that is a less important detail.  Many forms are possible.  For example, it could be the result of a full and impartial accounting of the US gold reserves followed by a market based purchasing power valuation of the paper or electronic money.  Alternatively, it could be that the market will demand physical delivery of the gold in a mechanism similar to what the Swiss are thinking about: making coins with small amounts of gold in them (like 1 gram) for use in every day trading.  Personally, I think this a great idea as it will include the physical delivery of gold in every transaction.  Perhaps paper money which includes golden threads of an exact weight could also be part of the scheme. 
The key is that it has to be something that the people can believe in.  If this does not happen, they will stop using the funny money and find other ways to trade.  This cannot be allowed to happen or the government will lose its ability to collect taxes.  It will also mean the collapse of fractional reserve banking.  That means no more elitist control or government privilege, boondoggles, military adventurism, bridges to nowhere, propping up of corrupt banks, or ridiculous levels of welfare. 
Government does not want to return to honest money but it will eventually happen with or without government support.  Failure to do the will of the people will make current form of government irrelevant.  That the government appears to be in charge of the people has always been an illusion.  It seems true for awhile but only until the people get truly fed up and demand change.  When that happens, governments change either voluntarily or by force.  Period.  History is very clear on that fact.  And no, it's not different this time.
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