Without free money from the Fed, Mr. Market doesn't want to play anymore.

While it still might be a bit too early to call in the fat lady for a song, the events unfolding right now appear to be agreeing with my long term view that the rally since March 2009 has been driven by unsustainable government intervention, period.  People are contracting their spending and banks are shunning new lending.  The government tried to reflate everything in light of this massive de-leveraging.  As long as the government was playing this game, the markets were playing along.  But when Bernanke decided to end QE2, the smart money was already heading for the door.  Back in January I wrote, "Anyone who thinks the stock market rebound was normal economic activity is deluded, insane or worse.  All of the gains were driven by government intervention, period.  I'm not saying it couldn't go up even more but at some point government intervention is not real economic pressure.  It's all temporary because it's driven by debt, not real money."

Back in early July I noted that Goldman Sach's chart looked like it was rolling over.  The smart money was tip-toeing out the back door.   Today the Dow has fallen below 11,000 again.  The fall has been fast and furious.  Worse yet, the government is having the equivalent of a running gun battle with the S+P credit rating agency over their decision to downgrade US debt from its AAA status.  You have to keep in mind that it was government which actually put the credit rating agencies in power by requiring certain types of debt to have their ratings before it could be bought by certain types of government institutions.  But now that these rating agencies are taking all the flak they are fighting back with the truth.  It's now every con man for himself.  I wrote about this very thing not long ago, "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."  People are watching this fight and they realize that it means nobody is at the helm anymore.  Cool and calm is all but gone and all of our "leaders" have taken to infighting and finger pointing.  This is not good for confidence and confidence is a prerequisite for any con game to continue running.

In another post I wrote, "Of course, some of this is pretty easily predictable.  When Bernanke was printing money from thin air and dropping it on the economy from a helicopter, the economy started bouncing.  Unfortunately, so did gold and silver and gas and food prices.  Now that he is trying to pull back on the stimulus it is very unlikely that the recovery will continue.  The minute Bernanke puts the defib paddles down, the heart is going to weaken and stop.  This time it will likely happen much more quickly than the last time.  At some point the world is going to figure out that the heart is beyond saving and that's when the big global collapse will likely set in.  Unfortunately, these things often follow the laws of exponential awakening.  Most people think they will be OK until suddenly they are far from OK and there they sit, wondering what hit them and wondering what the heck to do next.  I urge people not to allow themselves to end up in that position.  Make some preparations.  If they never get used then consider it an insurance premium paid with no claim made.  The premiums are cheap right now.  If the global economy threatens real collapse again then the premiums will go up dramatically.  Complacency regarding this is just not a good Darwinian survival strategy right now.

When things begin to slow again, Bernanke will pull out the paddles for QE3 but I don't think it will work this time.  Exponentially more stimulus is having exponentially lower positive effects.  The global con is running very thin."

Nobody can predict the future to perfection.  Nobody should even try to unless done in the name of economic entertainment while waiting for the real show to begin.  But everyone should at least understand the fundamentals which are driving a very predictable overarching trend.  That trend is that the global debt Ponzi which has been enabled by the fraudulent money supply consisting of fiat currency and (especially) fractional reserve lending has now entered the collapse phase.  Don't count on government to save you because government doesn't give a $hit about you.  Government just wants to stay in power.  If half the people in the US had to die in order to achieve that, they would let half of us die.  I'm not saying they are out to kill us, only that if that was the solution to their problems they would gladly accept it in the name of "the greater good" or whatever other f-ed up excuse they could make up.  You and I are only as useful to government as that amount of wealth that it can parasitically steal from us.  This is the role of the patsy in the con.  If you still don't get it, let George Carlin explain it to you in very harsh language (RIP George).

By the way, don't be mad at the dems if you are GOP, and don't be mad at the GOPs if you are a dem.  BOTH SIDES voted into power a complete collection of lying A$$HOLES like Nixon, Bush, St. Reagan, Slick Bill, Bush2, and Obama.  None of these con men ever once told the truth to the American people.  They ALL used more debt in order to drive their policies.  They ALL pushed us to live beyond our means and WE THE PEOPLE applauded them the whole time for it.  Sorry, man, the truth is that you and I are to blame for this crap.  We the people laughed at the real world business sense of Ross Perot.  And we the people couldn't listen to the squeaky little voice of this century's most honest statesman, Ron Paul, because he was saying things we didn't want to hear.  He was trying to pull the punch bowl back and we were still drinking the Kool-Aid. 

Well, now that it's becoming clear that the person who made that Kool-Aid was the economic equivalent of Jim Jones, don't be a putz who blames everything on the next guy.  Take your fair share of the blame.  Stop electing leaders because of the way they look or sound or because of what goodies they are promising you.  You will never get those goodies anyway.  Vote for people who have stated principles and who walk the walk demanded by those principles.  I assure you, there is only one presidential candidate for 2012 that even comes close to fitting that description: Dr. Ron Paul.  He cannot fix what has already been done.  All he can do is allow the free market to do its job and unwind this mess quickly so that we don't have 20+ more years of stumbling and uncertainty.  Ron Paul can return us to real growth which is underpinned by people having real confidence that they will be able to keep what they worked for and that is only possible with a return to an honest money supply.  Ron Paul is a global expert in that field and nobody else in the 2012 presidency running is even close to his level of understanding of the root problem that must be solved.

People are seething the world over but they have no clue why.

Over in London, UK, young people are again rioting in the streets burning vehicles and buildings and looting whatever they can get away with.  Their excuses for civil unrest don't matter at this point.  They are pissed and they will be pissed until change happens even if they don't know what it is that they should be asking to be changed.

In Syria, the government continues to kill its own people just because the people have told the government to get lost.  In fact, the government there believes it owns the country and the people are livestock.

In Israel, things are heating up as the young people who know damned well they are getting screwed but who do not understand the mechanics of the scam, are taking to the streets by the many hundreds of thousands.

Back home in the US, everyone is finger-pointing at everyone else as to why the S+P downgraded our debt from AAA.  Various different parties are trying to assemble marches and protests.  As an example of how clueless these people are, one lady on the Coffee Party blog wrote that she was going to protest because all of the businesses and corporations were "threatening her ability to collect her rightful payments from the government".

A couple years before I went public with this blog I was telling my family and friends that the odds greatly favored this kind of global political unrest as the debt Ponzi went into the collapse phase.  Its not that I'm so smart but rather that I finally became enlightened regarding the value of history.  Since people don't really change in aggregate, what people did in the past under a certain set of circumstances is going to look pretty similar to what they will do in the future when presented with the same circumstances.

And so here we are.

Of course, the people are correct in protesting.  Its the right thing to do.  Politicians do listen when the masses come knocking at their doors with pitchforks and torches.  Unfortunately, the protesters are all asking for different things, none of which will actually set things right.  The GOPs want more debt to pay for wars and economic "growth".  The Dems want more debt to pay for their fat government retirement promises and to try to stimulate economic "growth".  Everyone is focused on getting what they want to the exclusion of everyone else.  Everyone has bought into the concept that government is an infinite source of wealth.  And everyone is essentially looking for something to be returned to them which they did not work to deserve in the first place.

Very few want to listen to the truth about the root cause of all the unrest.  That truth is that we are all getting screwed because of the dishonest money supply.  Government knows the truth of this but they lack the leadership and skill and the backbone to tell the truth.  Government wants to take no blame for the state of things because they are worried about losing their jobs.  After they lose their positions of power in a duress situation, the next step is to be taken to court on civil and criminal charges and their physical safety becomes a matter of real concern for them.  And so they will let the people fight it out in the streets and then hope we have some government left at the end of the day to clean up the mess.

I expect things to get a lot worse before they get better because nobody wants to listen to the people who know what they are talking about.  Doing so would mean admitting you got taken to the cleaners for having bought into the lies and for having given up control of your own destiny to those in government.  Doing so would be admitting that you have been the patsy in the deal.  But the truth is that we in the US have all been patsies ever since the Federal Reserve began controlling our money supply.  And the world became patsies when they agreed to abandon their own gold standards and to "peg" their money supplies to ours at Bretton Woods I.

The right thing to do now is just to admit that we got taken and to stop counting on the unkeepable promises of government con men.  We need to retake control of our individual lives and to let the free market decide what money is or is not.  Governments should not be allowed to control the money supply or interest rates or to take on debt in any way to pay bills ever.  Until we jointly figure this out as a nation and as a planet, I fear that the unrest is only going to escalate.

We will know that sanity is on the verge of being restored when some major power like China or (hopefully) the US returns to a credible gold standard.  Such an event would create great short term volatility and turbulence but it would sow the seeds of stability going forward as people once again find that they actually get to keep what they worked for, no more and no less.  For at the end of the day, that is really what people are rioting about.

My Elliott Wave model view of gold prices: pullback likely soon.

Before I get into any details, let me reiterate that over the long term I am bullish on gold simply because I think the fake money system of the world must eventually collapse.  Also, before I go on I must reiterate that trying to time markets is not something the average person should attempt to do.  People should invest on a regular basis in the long term trend and over the long term the trend is for fiat currency to devalue as a way of soft-defaulting on government spending.

Having said that, if someone is looking to put a lot of money into gold at once, now may not be the best time.  I base this view on 2 main observations.  First, nothing goes straight up or straight down in a trend.  The dollar has been getting pounded for some time now and it has accelerated into what I recently referred to as economic noise which was the downgrade of the US credit rating from AAA for the first time ever.   Trust me, it will not be the last time we see a downgrade but people have been piling into the electronic version of gold (the GLD fund) in anticipation of this news.  Markets often like to "sell the news", especially if the "big news" turns out to be non-news over the short term (which is what I expect the AAA credit rating loss to to turn out to be).  As a result it would not surprise me to see gold take a nice breather here which could be a good buying opportunity.

And then there is the chart analysis.  Elliott Waves are my preferred mechanism.  As you can see from the chart below I count 5 waves up as being near completion in the formation of the 3rd wave of an ongoing bull market for gold.  According to this model, the 4th wave should be a significant pullback and it will likely retrace 38.2% and potentially even up to 50% of its recent gains since wave 3 started in the $650/oz range.  For now I will assume it is just going to be 38.2% which would have it reverse back up into wave 5 to top out at perhaps $2000-$2500/oz.

Of course, all this is model based speculation.  Serious gold buyers who are trying to save for their retirements (instead of speculating and gambling on the monthly or even yearly swings in gold price) will probably be best served by continuing to buy more gold at regular intervals.  They will do this no matter what gold's dollar based price is.  As a result, sometimes they will buy the peaks, sometimes the dips.  But if you are someone who is beginning to panic at the state of the global economy, now is not LIKELY (a word meant to convey the chance associated with trying to time the markets...) the best time to make a big purchase.  One thing to look at on the chart below is that the buying pressure (represented by the red and white "candles" in the chart) has been extreme (nearly all white) during what I am interpreting as wave 5 of 3.  This type of panic buying is often an indicator of a top of some type.  So what to do with your wealth if you feel compelled to be a trader?  Well, cash might not be such a bad hiding place for awhile.

Of course, in a world run by dishonest money you should always consult with your costly financial advisor even though they have no better insight into the state of global economic affairs than your average blogger who works for free.  If the world was run by honest money, there would be no need for any of this foolishness because common sense would be a good indicator of reality.  Not so when funny money is running the show...

Switzerland and Spain - related?

As the Dow continues its recent breakdown today, the headlines read that Switzerland Takes Surprise Action To Weaken the Franc.  At the same time, con men from the Euro-scam exclaim that "Pressure in Italy, Spain 'unwarranted'".  Unfortunately, these things are absolutely tied at the hip by the scam of fiat currency and fractional reserve banking.

Let me start with the Swiss Franc.  Over the past many months I have commented several times as pundits have been talking down the dollar and suggesting that the Swiss Franc, which is historically a safe harbor during inflationary times, will again be a safe harbor this time.  My view is that the Swiss Franc is just another fiat currency that, while less abused historically than other fiat currencies, is still a scam.  Unfortunately, its worse than that because no fiat currency is an island in a global economy that revolves around fiat currencies.  Even if the Swiss government might not really want to debase their currency, global circumstances such as those in Spain are forcing its hand.

How does the pain in Spain force the Swiss to water down their money supply you might ask?  Well, everyone knows that Spain and the rest of the PIIGS are bankrupt despite talk to the contrary from con men with vested interests in keeping the Ponzi plate spinning (see above link to the PIIGS squealing about "unfair treatment", blah blah blah).  The truth is that the PIIGS are getting far better treatment than they actually deserve simply because nobody knows what to do about it. But while the sheeple are acting as deer-in-headlights trying to get through Kubler-Ross, the smart money is looking for an exit from the Euro. Unfortunately there is not enough stuff with a price that is pereceived to be low enough to safely run into. Gold is well over $1650/oz., copper and other commodities are at the high end of their ranges (in a slowing economy no less) but still there are wads of credit based money looking to exodus the Euroscam and the dollar scam.  And so a fair share of it has been running for cover into the Swiss Franc.

Unfortunately, a strong Franc means Swiss exports become uncompetitive in the global market from a price perspective and so the Swiss government feels the need to "do something" to help its exporters.   By debasing its currency it is actually screwing its conservative savers whose buying power actually increases with a stronger currency but those suckers don't have political clout nor do they provide kickbacks and campaign contributions like the exporters do so it's pretty clear who is going to get preferential treatment here.

In addition to all that, those who ran into the Franc because they foolishly thought it was safe are now getting debased by yet another government.  Meet the new boss, same as the old boss.  In a past post, I likened it to a bait ball getting picked apart by a school of tuna.  I still like that analogy.  So why is it different this time?  Why is the historical safe harbor of Swiss Francs proving to be no safe harbor at all?  My view about this is that the entire global fiat currency system is rolling over because the leader of that system - the USA - is rolling over.  In the past, fiat currencies of smaller players would rise and fall but the US greenback was a pillar of global strength.  People around the world could always count on Americans to do the right thing after having exhausted all other possibilities.  But this time it appears as if the US has completely lost its way and as a result global confidence in fiat currency is waning rapidly.

In short, no con last forever and fiat currency along with fractional reserve banking is absolutely a con.  It doesn't matter who owns the fiat currency.  All of them are structurally scams and all of them will suffer the same fate to varying degrees.  In the end analysis the best safe place to hide from a structurally collapsing fake money system is in the only real money that ever existed in the world which is physical gold in your physical possession.  Everything else is a Wimpy Promise that will, at the end of the day, let you down in some form or fashion.

Why does the market appear so jittery?

It's an open ended question to which nobody really knows the answer but let me venture my opinion in the form of a picture.  We are now at a point where the economy is stalled because the stimulus from the Federal Reserve has run out.  This was entirely predictable and in fact I predicted many times that this would be the case.  The fake economic bounce which began in March 2009 could only last as long as the free money was flowing from government. 

At this point, unless and until Bernanke gets back in his chopper for another cash drop (something which that loudmouth is going to be sorry he ever said), the markets are now likely to shake out the weak and the marginal.  We have a declining double top which was forming a rising wedge.  The lower support line of the wedge has broken down "with gusto".  The congress has proven to be useless.  Bernanke is probably out of gas.  The economy is at or near zero % growth and unemployment is stubbornly high.  Who in their right mind would stay in stocks which mainly do not pay a dividend looking for a greater fool to unload them on under these conditions?   Last one out of the stock market Ponzi scheme will likely be left holding an empty bag.  If the Dow cannot quickly move up to retake that lower trend line of the wedge (which has now turned from support into resistance) then the herd is most likely going to head south.  Bernanke must move quickly lest the herd build a head of steam.  Once the herd is moving south it will be very, very hard to turn it around again.  Of course, I'm not advocating that Bernanke do anything because all he can possibly do is delay the day of reckoning.  The Ponzi will eventually collapse no matter what he does because in the end analysis you really can't fool all of the people all of the time.

Ron Paul mocks Federal Reserve with laughable 1.5 trillion debt dismissal bill

In a move that could just as easily have come from the comic section of the Sunday paper as from a real, sitting congressman, Ron Paul proposed a bill today whereby the Federal Reserve should just cancel 1.5 trillion dollars worth of treasuries that it has been buying up over the past couple years.  After all, quipped Congressman Paul, if the Fed is indeed a government agency as it claims to be then we "owe the debt to ourselves".  Riiiiightttt???  If that is the case then we can just cancel it out and move on, Yeah?

If you don't see the humor in this then I'm afraid you still don't quite get it.  Ron Paul isn't serious here; he's mocking Bernanke using Bernanke's own logic.  At the heart of this poke into Bernanke's eye is the fact that the Federal Reserve is actually a private bank, not an official part of the government.  Shocked?  Don't be.  If you only knew half the crap that was going down right now you would hang your head and cry.  But to the point, the Federal Reserve is not a government agency.  It is a private bank which has special government backing.  It is the basis of crony capitalism in the US where banks and government wash each other's backs at the expense of the people.

Don't believe me?  Check out the Federal Reserve web site.  I did exactly that some time ago.  The Feds have moved links since then so the ones I created a few years back to point things out to family and friends are now broken but here is a site that pretty well summarizes what I found when I was scouring the Federal Reserve web site 3+ years ago.  The fed is not answerable to anyone which is why Bernanke laughs at Ron Paul when Ron Paul demands that audits be done.  The fed ownership is controlled by shares held by the 12 member banks which they cannot sell or use as collateral against any business deal.  Illuminated con men set the whole thing up from the start so it should not really be that shocking that the whole thing is a chocolate coated turd.

So when Ron Paul suggests that the fed just cancel 1.5 trillion in US debt they hold (i.e. treasuries), he is effectively challenging them to explain why they will never do it.  Of course Ron Paul knows that no private entity is going to willingly give up that kind of cash to the government just to provide credible proof regarding its long standing cover story that it is indeed a government agency of sorts.  When they fail to give up the cash, expect Ron Paul to begin to explain to the public why they won't do so.  The more the fed pushes back, the more people will know that Ron Paul has been right about everything for decades. 

The logic will be inescapable.  At the end of the day, the Federal Reserve will eventually topple once people figure out that the funny money it has been printing isn't worth the paper and the ink used to print it.  Unfortunately, lots of economically ignorant people are going to get creamed as a result and I don't just mean poor people who haven't gone to college.  From what I have seen, college graduates with good jobs will be the biggest losers because they have the most to lose and their college exposure to Keynesian (pronounced "canes-e-an", not "can-e-sian", economics majors.  The man's name was Keynes ("canes"), not "Ka-knees") economics has left them even more ignorant of the truth than someone who has never taken a college class in his life.

"Debt deal" is done, anyone with a brain is calling it a scam.

With the so called debt deal waiting for a rubber stamp in the Senate, here are just a smattering of what intelligent people are saying about the theatrical debt deal recently crafted by the con men in US government:


Mish calls the debt deal a "sugar coated Satan sandwich" which has no cuts and no new revenue.

Peter Schiff says debt deal is "gold bullish" and a "blank check"  Note: spot gold is $1637/ Troy oz. today.

Marc Faber explains that the debt deal solves nothing and that eventual hyperinflation is assured.

David Walker says we are less than 3 years away from becoming Greece.

Marc Oswald calls it a drop in the bucket and that we deserve a 2-notch credit downgrade because of it.

Ambrose Evans-Pritchard says debt saturation is pushing the world back towards gold.

And finally, con man Vlad Putin calls the kettle black as he labels America a parasite on the world.  For the record, Putin has always been complicit with the great debt Ponzi and inciting children into anger against America as if America is the only problem in the debt Ponzi smells very similar to Hitler indoctrinating the Hitler Youth.  The truth is that America definitely started the con with Bretton Woods and then kicked it into high gear with the default on dollar convertibility into gold but that Putin and everyone else in the world happily went along because they thought they were getting something for nothing in the deal.  Now that the con is collapsing their share of the scam will collapse first because they are marginal relative to other better players in the con like America, the Euro-scammers and the new comers to the adult table of the con, China.  That's like the loser of a game of cards that they thought they were rigging finding out that they have been out-foxed.  It's as sad for the good Russian people as it is for good Americans but Putin himself is no victim, he's just a second rate con man who himself has been out-conned.