Friday, October 31, 2008

A Season of Change

Hurricane season officially runs from June 1st through November 30th. I have read the analogy of the "Chrismas Tsunami of 2004" as it applies to the financial crisis. The tide has gone out and now those that did not seek shelter will soon be overtaken by the wave. This is a good analogy, but I may have a better one.

Someone asked me why I have been so quiet for the past week. It is because I have been quietly observing the writings of others, both in the mainstream and in the gloom and doom crowd. And I have noticed a divergence of opinions over the past week or two. Opinions are swirling fast, yet the markets seem surprisingly calm.

The inflation/deflation debate has picked up steam. And so has the bull/bear debate. I even heard someone on CNBC today say that the bear market clearly ended on October 10th and that we are now in the new bull market for stocks. Interesting.

What we are IN right now is the eerie calm that you experience in the eye of the storm.

Here's my analogy: We (everyone in the world) are all on an oil platform in the middle of the Gulf of Mexico. Somehow we managed to fit 6 billion people on a square mile of manmade real estate, but that's beside the point, it's called "suspension of disbelief". Anyway, we have just ridden out a major Category 3 hurricane. It washed away most of our supplies, wiped out much of our safety structure, demolished our satellite links and communications, and left us in a bewildered state of half-panic, half-relief. At the moment we can see blue sky overhead, and people are finally starting to come out of hiding.

As the people come out they are talking. And debates are forming in every corner of the platform. Some people are saying we survived the hurricane, let's call it Hurricane Hank. Other people are saying that we've only survived the first half of Hurricane Hank, and that we are right in the eye of the storm. Just over the horizon lurks the ominous eye wall as the stalled Hank gains energy and moves from a 3 to a 4 to a Category 5.

The Eyewall of a Hurricane

There are even a few in the group that think the storm is gone and have set out for land in the few small lifeboats that remain. Don't be surprised if they are never heard from again. I am here to tell you that we are currently sitting in the eye of the largest financial storm ever to come our way! Hunker down folks, because the next wave to hit is going to be unlike anything we've ever seen before. And it is coming soon. Remember, we are right, smack dab, in the climactic closing act of a season of "CHANGE".

I have a new mathematical equation for you. Here it is:

This ariticle + This post = FreeGold

"VALUE" is the term that I use to describe both real things that people want and need as well as the human effort that makes and gathers those real things. VALUE covers both goods and human effort. "FIAT MONEY", on the other hand, is only a temporary proxy for VALUE. As VALUE passes from one person to another, it must move quickly through the proxy FIAT MONEY, or else the exchange of VALUE between the people will favor one over the other. And for those that choose not to pass VALUE quickly, they sit exposed to the scam that is FIAT MONEY. And as FIAT MONEY is exposed as the scam that it is, it quickly moves into VALUE. This quick movement is called velocity, and it has the effect of raising the "price" of the destination.

"STOCKS AND BONDS" are proxies for FIAT MONEY, in the same way as FIAT MONEY is a proxy for VALUE. Actually, they are a "DERIVATIVE" of FIAT MONEY. And beyond STOCKS AND BONDS, there are "DERIVATIVES OF DERIVATIVES". This actually goes on and on much deeper than you would believe. But as each of these are exposed as scams, they strive to reach VALUE. So a DERIVATIVE OF A DERIVATIVE, must go into a DERIVATIVE, and then go into FIAT MONEY before it can finally reach VALUE. And right now we are in a stage of velocity where FIAT MONEY is the destination whose price is rising. But it is not the FINAL DESTINATION.

As Denninger's post shows, there is a revolution under way. It is a revolution against the scam of FIAT MONEY and DERIVATIVES. And Price explains how all VALUE exchanges happen in the present, not in the future. FIAT MONEY and DERIVATIVES are scams meant to trick you into giving up VALUE in the present for a promise of a return of VALUE in the future. That scam has now been exposed.

So as all the FIAT MONEY seeks VALUE the world over, it will ultimately end in FreeGold. That is my simplest explanation. To get there you must think through the amount of DERIVATIVES and FIAT MONEY that will be bidding on the limited supply of real VALUE. Remember, VALUE is real things and human effort. And your "savings" are the extra VALUE you create above and beyond what you need and want. Those "savings", the world over, will overwhelm the limited supply of gold.

And believe me when I tell you that this show is coming very soon to a theater near you!

In closing, I will leave you with a few ANOTHER (QUOTES!)...
The US$ is soon to become a " regular paper currency"! To this end, holders of US dollars and US$ assets, must make a decision that will impact all assets, worldwide! To this end, assets will move to "physical gold " and cash dollars" first, driving up the dollar against all currencies. Then the dollar will be sold as it is deployed into real things.

Everyone understands the implications of this. Or do they? In reality, when the US government needs money, it doesn't sell debt! It "TRANSFERS" the obligation of it's citizens to pay future real production ( taxes ) as a "backing" for it's newly printed currency! As this process has been going on for decades, it has built up a debt of "real production payments" that it's citizens can never pay. Further, as the world reserve, this currency is held thru proxy "by every single person on this planet" that uses paper to trade anything!

From the day of our birth we are taught to value all things using the one factor alone, currency! Can one contemplate the value of all possessions in other terms? Do you not have to think first as to "how many dollars is that worth" then "how many dollars is this worth" to compare two items? If it is deep within our mind, that we can know value only in terms of paper, to this I ask, can one know value at all!

Some say, "gold fall because noone was buying it". I say, "gold fall because many were buying it"! They buy as the "trading market" was made "much fat" with added paper! Understand this: The US$ price of gold could only fall if a market existed for paper gold priced lower each time of offer! If the price did not fall, this paper market "could not function" as "it would not be profitable to the writer"! It was, for many years, in the good interest of all, for the dollar to find a gold price close to production cost. That time has now much passed!

Think about that last one. Paper gold markets like COMEX are ONLY profitable to the sellers when the price is falling!

And finally...
This change in "World reserve currency" will be "the unfolding event of our time"! As in conflict, the deployment of forces/assets is never a final decision! But, for persons of simple thought, such as I, we do well to "follow in the footsteps of giants"! Today, this trail does show deep prints from the weight of GOLD! For myself and my country, I stand with the proof from the past, I stand with gold! I thank you for your effort, "for all your days, walk tall with wealth"!


Happy Halloween

Friday, October 24, 2008

Fractals, Chaos Theory and Black Swans

In Jurassic Park (the book), Michael Crichton introduced us to fractals and Chaos Theory through the character of Dr. Ian Malcolm, a mathematician and self-professed "chaotician," a title which he used to describe his work in applying Chaos Theory to practical real-life scenarios. Malcolm was played by Jeff Goldblum in the movies. His character explained, through fractals and Chaos Theory, how the "meddling" created such disastrous results.

In the video link at the bottom, you will meet a real life "Dr. Malcolm" in Benoit Mandelbrot. His Jurassic Park is today's economic crisis...

Start with this post today from Michael Kosares, the owner of USAGold, CPM (Centennial Precious Metals) and host of Another/FOA from 1998 until 2001:

MK ( 24October2008; 10:06)
Why gold ownership is so important. . .

“The next Fourth Turning is due to begin shortly after the new millennium, midway through the Oh-Oh decade. Around the year 2005, a sudden spark will catalyze a Crisis mood. Remnants of the old social order will disintegrate. Political and economic trust will implode. Real hardship will beset the land, with severe distress that could involve questions of class, race, nation, and empire.” — William Strauss and Neil Howe, The Fourth Turning, 1997

“We are in the midst of a once in a century credit tsunami. . .Those of who have looked to the self interest of lending institutions to protect share holders’ equity, myself especially, are in a state of shocked disbelief.” — Alan Greenspan, 10/23/08, Congressional testimony

“I don’t know… if we’re entering the most difficult period since, not since the Great Depression — since the American Revolution. . .Never in the history of the world have we faced so much complexity combined with so much incompetence and understanding its properties. Now you understand why I’m worried. I hope I’m wrong. I wake up every morning - actually I don’t wake every morning now, I start to wake up at night the past couple weeks hoping I’m wrong. Begging to be wrong. I think that we may be experiencing something that is vastly worse than we think it is.” — Nicholas Taleb, author, The Black Swan, PBS interview, 10/21/08


Taken together, these three quotes summarize the current situation, not just as an assessment, but as a call to action. Those of you who have read my writings over the years know that I put stock in the idea of fractals and chaos theory, though I think “chaos theory” a misnomer. There is a great deal of structure to the chaos Mandelbrot and Taleb describe. Thus, I was very interested in the interview linked here by gLod (Thanks, sir!).

In this context, an event like the Iceland breakdown, for example, is important not so much in that it will cause further, knock-on problems in the financial system. It is important because it is the result of circumstances which exist everywhere, i.e., provocative circumstances in place system-wide. Iceland becomes a template, by this this way of thinking, for what might occur elsewhere, and thus, not an isolated event. In essence, Iceland might be seen as a fractal. It follows then that Icelands may exist everywhere because of the global spread of fiat money systems — economies prone to stagflationary breakdown.

As I have said before, the first stagflationary breakdown of this type was the United States in the 1970s. The same sort of breakdown occurred in Asia in the 1990s, as well as in Mexico, Argentina and a host of others thereafter — same symptoms, same disease. And now — some 35 years later — we have come full circle back to the United States. In this wave, the number of state participants has risen, i.e., the nature of the crisis as Mandelbrot and Taleb point out has become global with global consequences.

I can see why Taleb is having trouble sleeping nights. He is not the only one. Individual investors/citizens should take note. In the same way, what is happening in the gold market is not an isolated event. Gold could be a fractal in its own right signaling what might happen in other commodities, most notably, oil, natural gas and foodstuffs if collapsing prices cause shortages. Be aware. This is not a time to beg off as a casual observer.

Here is glOd's post referenced by MK which contains audio and transcript links:

gl0d ( 23October2008; 19:21)
Black Swans & Mandelbrots

A short interview with Nicholas Taleb and Benoit Mandelbrot on NPR [mp3] [some transcripts]

Taleb: “I don’t know… if we’re entering the most difficult period since, not since the Great Depression — since the American Revolution”.


Sunday, October 19, 2008

The Currency War

Reality is a funny thing. It exists mostly in the Thoughts of men. During times of change those Thoughts will eventually coalesce into physical reality. Right now there are many different Thoughts making their way through the world. Everyone knows that we are in a time of change, but the reality of that change has yet to coalesce.

We are truly in the opening rounds of the "currency war" that Another spoke of:
If one closely follows "in the footsteps of giants" ( not the book ) , he will also be preparing for a "currency war"! Time passes, thoughts change, people consider and value is perceived differently. Persons say, "the seasons are all the same", but we know "the weather is never the same". A storm approaches YOUR SHORES from across the pacific! -Another, March 26, 1998

There is much talk circulating right now about "a new currency". Jim Willie hears talk that there is a plan to "kill off the US" with a currency basket that includes the Ruble, the Euro, the Yen and the Dinar.

Europe is presenting "a blueprint for a new worldwide currency system" to President Bush this weekend!

(Hat tip Randy)

The UAE is talking about "isolating" itself from "negative global sentiment".
The UAE stock markets must conclusively break their correlation with global exchanges to sustain upward momentum in the longer term...If this is achieved, the UAE could become a safe haven for overseas funds, especially now that the government has guaranteed all bank deposits.

On Friday, Bahrain denied rumors that it will depeg it's currency from the dollar.
"There is no change affecting the relation between the Bahraini dinar and the dollar, and we will maintain the ratio," he said.

Kuwait, the fourth largest OPEC producer, continues to struggle with high inflation exported by the US even a year and a half after depegging from the dollar.

Emerging economies such as China and India are now to be included in the November G8 "global bank reform summit" in the US.

Here is a short and interesting South African perspective.

And here is what I think is going on:

In hindsight, Paulson's "rescue plan" of the past 3 months comes into very clear focus. From the beginning it was a top-down confidence game (a con) on the rest of the world in favor of the dollar. The plan was to shore up a select few of the top financial institutions (the one's that Paulson could "count on") with other people's money, pay off a few of the most powerful victims of the fraud (perhaps China's central bank), and make the dollar appear to be strong.

And because the Euro has squandered its initial promise over the past decade in favor of the dollar faction, it was easy for Paulson to get the European central banks to cooperate which provided cover for his very self centered actions.

This mountain of money injections by Paulson and Bernanke have helped only a select few at the very top by removing the consequences of their bad bets and making someone else pay those consequences. Everyone else has been screwed. Americans have watched their 401K's evaporate and the rest of the world has felt equal or greater pain.

And the "smoke and mirror" efforts to make the dollar appear strong have caused grievous injury to almost every other nation around the world. If you listened to the Jim Puplava audio in my previous post, it is clear that these efforts began in great earnest on July 15th, 2008. Paulson, through the President's Working Group on Financial Markets, also known informally as the PPT (the Plunge Protection Team), which includes JPMorgan, Goldman Sachs and the US Federal Reserve, began a massive campaign of short selling gold, oil, and other worldwide commodities.

At the same time, Paulson banned the short selling of US Financial firms like JPMorgan and Goldman Sachs through the SEC. This had the effect of reversing the market trend of 2008 up to that point. It caused great losses in the net worth of many people who had been making correct bets in the markets, and it did massive damage to countries around the world who stake their international claim as suppliers of gold, oil and other commodities.

The dollar appears strong when less dollars can buy more oil, gold and commodities. That is the way it works. Also, by getting the European central bankers to adopt his tactics, he ensured that the Euro would continue to decline faster than the dollar, making the dollar appear to rise on the USDX which is a worldwide accepted gauge of dollar strength, even though it is mostly measured against the Euro.

So in other words, Hank Paulson "stopped the bleeding" on Wall Street by rescuing his friends (and his own retirement, scheduled to begin January 20th, 2009), paid off the most immediate threats (China dumping dollar holdings), and screwed over the entire world to create the false impression that the dollar is still the strongest currency on earth and should be loved and used by everyone because it is so great.

Now this might have worked except that it is soooo damn transparent that even a commoner like me can see what he did. And the clearest sign that his con job on the world has failed is all this talk now about a new world currency.

So that brings us to the Middle Eastern oil producing countries. They have something THE WHOLE WORLD NEEDS! Oil! And what do we have to offer in return? Paper! Do they need our paper? I think not. They are perfectly capable of making their own paper.

In fact, as it stands right now their valuable commodity, oil, is at the mercy of our "paper oil" in New York City. This was clearly evident on September 22nd when oil prices briefly spiked up 25% as buyers insisted on physical delivery and the sellers of "paper oil" had to scramble to find some "real oil" to deliver.

Now if I know this, don't you think OPEC does too?

Which brings us to this OPEC meeting on Friday in Vienna. What is the purpose of an OPEC meeting? The real purpose is the press conference after the meeting and the statement that they will make. It is this statement that affects the markets. Again, reality is in the Thoughts of men.

One thing all these players know is that whomever owns the press that prints the currency in which oil is priced and sold, owns something much more valuable than gold!

Ownership of that very printing press is what has made America into THE superpower.

The battle lines have been drawn. Talk of a new currency is "in the air". Who will print the new reserve currency? As Another taught us, it is the currency that prices oil that IS the reserve currency of the world.

Here are the faces of the Dollar/Euro faction:

And here are the faces of OPEC, as found in a simple Google image search of "OPEC":

Can you see the difference?

The world should pay close attention to the press conference after the OPEC meeting on Friday. My guess is that there is about a 25% probability that it will be VERY important.

One question still needs to be answered. On March 31, 1998, Another asked:
The world US dollar based economy is about to change, and America will find "no point" for warships in the Gulf. I ask you now, "who will defend Arabia"?

Does anybody know the answer?

Saturday, October 18, 2008

The City of Gold

This radio interview is an absolute necessity if you are following this blog. I give it my highest recommendation:

Audio Link

Transcript Link

Listen to Part 1:
*London Gold Pool - Revisited - with Jim Puplava
*Eric King with special guest: Ian MacDonald, Executive Director, Gold & Precious Metals Dubai Multi Commodities Centre
(Total Running Time: 1 hr. 4 min.)

This audio is from September 6th, but it couldn't be more appropriate if it was recorded today! It hasn't aged at all. It is a great supplement to my last two posts about "oil", gold and Dubai ("The City of Gold").

The first half hour of the show covers manipulations in all the markets as well as the reason for the physical gold shortage and the separation in pricing between physical and paper. The second part (starting 38 minutes in) is a wonderful interview with a government official in the Dubai metals market. Positively fascinating. It continues the same theme as the first half with Jim Pulava.

I found some of the statements by Ian MacDonald to be truly surprising. It confirms in my mind that the Thoughts of Another really are blowing in the wind right now.

Friday, October 17, 2008


Perhaps $70 per barrel of oil ($10 less than it was a year ago) is a truly scary thing for the rich oil producing countries. Perhaps (even though it just reached the high of $70 per barrel for the first time two years ago) this is so serious that they had to move up the meeting scheduled for mid-November by about 3 weeks to next Friday. Perhaps the thought of 3 extra weeks of lower oil prices due to a worldwide recession needed immediate attention.

But the fact of the matter is that the oil producers who are hurt most by 3 weeks of lower prices are the ones with the least influence within OPEC. The wealthy producers like Saudi Arabia and the UAE are "cushioned... by vast budget surpluses and foreign reserves...not all member states are facing such an acute squeeze. The UAE is still announcing big new construction projects in Abu Dhabi and Dubai. Saudi Arabia, easily the world's biggest oil producer and Opec's de facto leader, is comfortable with oil prices at a lower level." It is the weak members like Iran who need oil to stay near $100 per barrel. Link

So why the rush to meet? That is the question I am asking.

As I look around I see a potential opportunity for OPEC that goes far beyond 3 weeks of higher prices. I see that the world's banking system, currency systems, and credit systems falling apart. I see that big changes have happened in America in the last four weeks and that even bigger changes are right around the corner. For one thing, the American Presidential election is 3 weeks away. The final debate was on Wednesday, so there are no more obvious opportunities for major swings. Yesterday, Drudgereport featured a Gallup Poll with the two candidates in a statistical dead heat. Obama 49%, McCain 47%. 2% is within the margin of error. Today a second and similar poll was added.

So what if the big difference between the November meeting and the meeting next Friday is that the new meeting is happening BEFORE the election? What if the leading OPEC countries have calculated that it would be better to make a move now? For whatever reason?

And if so, what is that move? Just a drop in oil production? I doubt it.

On the surface, this OPEC meeting is what it is. What is much more interesting to me is what will be discussed in back rooms between select members. What move is one particular OPEC member planning that would require coordination with a few others?

These thoughts bring me back to Another. There were a few statements Another repeated many times. "Oil and gold will never flow in the same direction." "All paper will burn." ... and so on.

In all the media coverage of the current economic crisis over the past few months, the Middle East has been surprisingly absent. How many banks have failed in Dubai? How many Saudi hedge funds have gone under? How many bailouts have the Arabs had to endure?

Our entire western world is built and priced based upon full production of oil. Is it a coincidence that physical gold supply is so tight right now? Is the COMEX on the eve of a major default? Is "oil" aware of all of this?

I leave you with Another's very first post from October 5, 1997. In his first post, you would assume that he would summarize the principle (THOUGHTS!) he was trying to get across. I think he did. And to put OPEC's "emergency meeting" next Friday in the context of Another's first post raises a lot of question in my mind.
Date: Sun Oct 05 1997 21:29

Everyone knows where we have been. Let's see where we are going!

It was once said that "gold and oil can never flow in the same direction". If the current price of oil doesn't change soon we will no doubt run out of gold.

This line of thinking is very real in the world today but it is never discussed openly. You see oil flow is the key to gold flow. It is the movement of gold in the hidden background that has kept oil at these low prices. Not military might, not a strong US dollar, not political pressure, no it was real gold. In very large amounts. Oil is the only commodity in the world that was large enough forgold to hide in. Noone could make the South African / Asian connection when the question was asked, "how could LBMA do so many gold deals and not impact the price". That's because oil is being partially used to pay for gold! We are going to find out that the price of gold, in terms of real money ( oil ) has gone thru the roof over these last few years. People wondered how the physical gold market could be "cornered" when it's currency price wasn't rising and no shortages were showing up? The CBs were becoming the primary suppliers by replacing openly held gold with CB certificates. This action has helped keep gold flowing during a time that trading would have locked up.

(Gold has always been funny in that way. So many people worldwide think of it as money, it tends to dry up as the price rises.) Westerners should not be too upset with the CBs actions, they are buying you time!

So why has this played out this way? In the real world some people know that gold is real wealth no matter what currency price is put on it. Around the world it is traded in huge volumes that never show up on bank statements, govt. stats., or trading graph paper.

The Western governments needed to keep the price of gold down so it could flow where they needed it to flow. The key to free up gold was simple. The Western public will not hold an asset that going nowhere, at least in currency terms. ( if one can only see value in paper currency terms then one cannot see value at all ) The problem for the CBs was that the third world has kept the gold market "bought up" by working thru South Africa! To avoid a spiking oil price the CBs first freed up the publics gold thru the issuance of various types of "paper future gold". As that selling dried up they did the only thing they could, become primary suppliers! And here we are today. In the early 1990s oil went to $30++ for reasons we all know. What isn't known is that it's price didn't drop that much. You see the trading medium changed. Oil went from $30++ to $19 + X amount of gold! Today it costs $19 + XXX amount of gold! Yes, gold has gone up and oil has stayed the same in most eyes.

Now all govts. don't get gold for oil, just a few. That's all it takes. For now! When everyone that has exchanged gold for paper finds out it's real price, in oil terms they will try to get it back. The great scramble that "Big Trader" understood may be very, very close.

Now my friends you know where we are at and with a little thought , where we are going.

Thursday, October 16, 2008

FreeGold is In The Works

Here's a good radio interview with Jim Willie discussing some of the info from my previous post:

Click here for the audio.

I would like to discuss a couple of Jim's topics. First, from the first half of this audio, I want to take a look at the EU, Russia, (Japan?), and Middle Eastern plans to replace the dollar with something else as the world's reserve currency. I would like to put forth a theory that they all might be planning this... but only one of them has the Ace of Spades.

Now think about Dubai.

What do you know about Dubai?

Here's a little reminder:

Even Donald Trump is building a hotel there! Click Here

So what does Dubai have to do with FreeGold and Jim Willie? Well, Dubai has spent the last 10 years building "the future". And now the future is almost here!! Think about when Another was writing in 1997. Look at the "before picture" above. Do you understand? What Another predicted didn't happen back then. Now they are ready for it IN SPADES.

Dubai now has a fully operational stock exchange! Gold and oil will all be traded through this exchange.

The UAE has the Dirham, but they are supposedly close to a unified Dinar for the Middle East. (Many currencies in the ME are called the Dinar, derived from Greek meaning "give").

The point is that I believe we will soon have a big surprise out of Dubai, one of the seven emerates in the United Arab Emerates. Dubai is going to be the equivalent of New York City in the new world, as far as international commerce and glamour is concerned.

And in this world... FreeGold! Remember, they may get less gold per barrel under FreeGold, but all gold is worth more, and that includes the 200 Tonnes they have accumulated since Another's warnings were delayed by 9/11 and Alan Greenspan. Our folly has given them untold wealth in the past 10 years, while what WE thought was wealth was just a desert mirage.

I am sure Jim Willie's "source" is correct about the plans in Europe, Russia and Japan. But right now, the Arabs hold all the cards. They have oil, they have gold, they have a currency in the works, and they have a shiny new exchange and a shiny new city.

None of this was true when Another was writing. "Oil" has had ten years to prepare since Another first saw this coming. Now "oil" is ready, and the rest of the world is failing. The EU may have plans... Russia may have plans... but the Arabs have a shiny new city, currency and exchange to go with their oil and their gold.

Look out world... this is the hidden news of tomorrow! And you heard it here first.

The other thing I would like to discuss is Jim Willie's comments about silver versus gold. Jim has clearly placed himself in camp with the likes of Ted Butler and Jason Hommel. But this is in clear contradiction with what Another and FOA said, as well as a growing contingent.

With the gold/silver ratio at a record 83:1 today, this has become a hot topic. People like Jason, Ted and Jim are telling you to play the ratio... exchange all your gold for silver. DON'T DO IT.

Jim's rationale is that the CB's can't sell silver because they don't have any. Therefore, they can't drive down the price. Ted and Jason proclaim the relative scarcity of silver. But here are some messages about silver that were posted in the last 24 hours from people I respect... all in line with the (THOUGHTS!) of Another:

From Jim Sinclair:
10. Exchange Traded Funds will not return the assets upon which it is based to you.
11. Sliver will demonstrate the fact that it is more industrial a metal than precious.
12. Silver is not a currency because it is simply too HEAVY to settle debts or to be universally fungible.
13. Silver performs best when there is reasonable industrial demand and distrust of currency. When this happens rounding up the gang and their money will have a lot to do with which party is elected.

From USAGold:
Randy ( 16October2008; 15:03)
Some thoughts for Topaz

This is in response to your 4:17 commentary regarding silver’s market behavior being torn between “money” and “commodity”:

“Those who watch the red (or green) Ag line on it’s daily meander across the screen will be aware of her price tendency one minute to resemble and track Gold …and otoh at times to resemble her commodity cousins.
She just can’t seem to make up her mind - am I a commodity …or am I money!”…etc…
I’m going to put some thoughts out there as an opening premise that you might not immediately agree with, but just bear with them for a bit and we’ll see whether it all stitches together in the end.

You said, “If the free market held sway, I think you’d find it would come down squarely on the side of ‘money’…”

Since that premise leaves ample room for the consternation you’ve expressed, let’s simply try the other premise on for size — that silver is an industrial commodity first and foremost over any other role at which it may dabble. (And frankly I think it is appropriate to take this commodity-oriented view of silver because, whereas central banks are not shy about making use of gold reserves, they do not similarly hold silver.)

And with this premise being at odds with the one you initially hold, let’s gently ease into to by imagining it none the less remains a close race, with the commodity play dominating the monetary play by a slim margin of, say, 52% to 48% among bidders averaged over time.

For the sake of brevity and simplicity (but which I hope is still adequate to be instructive) we’ll limit our musings to what would be the naturally expected outcome of silver’s performance on the price-setting futures markets. Granted, it’s a dodgy business, but for the time being there is no getting around the fact that the futures markets hold sway with regard to the price quotes that make the headlines.

With central bankers pumping liquidity in the face of a credit seizure and an imminent economic downturn, there is certainly a mental tug-o-war in a silver investor’s mind regarding whether they should seek a monetary safe haven (from expectations of currency depreciation and/or financial system default) versus whether they should run away from a commodity that will almost certainly experience less industrial demand during an economic recession.

Looking at the downdraft in the wider commodity complex, our opening premise that silver is foremost a commodity goes a long way toward explaining it’s general price direction at the moment — with short sellers dominating the futures markets.

But we can’t forget that there is a significant camp of investors who steadfastly believe silver ought to perform more in line with its ancient (bimetallism) monetary kinship with gold. There are inevitably days in which the commodity camp players are largely on the sidelines according to the ebb and flow of economic and financial news, times at which the silver monetary camp can get the occasional upper hand in dominating the action on the futures market and thus setting the day’s price performance. These monetary silver boys would generally choose one of two alternatives. They would either simply go long silver, or more likely they would be bewildered by the current 83:1 silver:gold ratio (compared to the ancient monetary/currency kinship between 12:1 to 15:1) and would therefore go long silver while simultaneously shorting gold in an expectation that the ratio will eventually narrow.

This goes a long way toward explaining how you can witness the flip-flopping days of performance for its split personality.

But of course, with the majority of participants trading silver according to industrial commodity, downward pricing pressure will tend to win out in the current market environment. And on the other side, there is a larger (deeper pockets) contingent of participants who turn to gold as the foremost monetary safe-haven, thus putting upward pressure on the silver:gold ratio, overwhelming the silver camp’s lesser efforts at shorting gold. And eventually, in drips or in droves, the participants in the silver money camp capitulate their loss-making positions — they sell their silver contracts and unwind their gold shorts, thus driving the ratio to new heights, perhaps even to ratios large enough and tempting enough to lure in the next herd of silver monetary sheep to be unceremoniously sheared.

Steer clear of those meadows, or at least step nimbly, my friend, it’s a minefield out there!


Ender ( 16October2008; 15:48)
Sir Randy, can’t help but view your public thoughts

When the Ender looks at these two metals, it appears that there is a commodity - along with a monetary - function. IMHO, anyone would do well to hold either metal until the system breaks.

There is one significant difference between the two, one is a reserve asset on the books of the banks and the other is not. This is a significant distinction in the realm of monetary function. Gold stands ready to bailout the system, silver does not. If a bailout is required, CBs will not wait in line for Silver, but rather use what they already own – free and clear – to perform the job.

Silver will do very well if gold cannot perform the function.

Trade silver, save gold.

I must say that I agree with the above. I still have a considerable amount of silver myself. But it was all purchased BEFORE I discovered the truth that ANOTHER spoke ten years ago. And I would add that I have read dozens of opinions on this subject, and I find the opinion that Another spoke to be the most likely. Not just because it came from him, but because of thoughtful analysis based on all my readings.

That said, I would simply encourage you to not panic about the silver you already hold. It is much better than dollars or even Dinars. But I would encourage you to put all future efforts into gold. That's if you find what I say to be at least a little bit credible.

Silver may hold value, but gold will explode!

Remember, the future is known by nobody. It is only a collection of probabilities. And my goal is to identify the most probable of these.

I will post more later hopefully. Be sure to check comments if you are looking for updates. Sometimes will put new "finds" not worthy of a post in the comments section.

One final note. This does not make me in the least bit happy. I support Israel and I am at odds with these developments. But to survive in this world, you must look at reality without bias and then react. In this case, the only thing to do is to buy physical gold with any money you have that you do not need to live on for the next 6 months to a year. That's it. It is how it is and it is as simple as that.


Tuesday, October 14, 2008


Jim Willie, PhD has a source!

I have known something like this was coming for about a year now. But to read about it actually being planned in today's environment gives me the chills. Paulson is like the embattled exec who is frantically trying to save his bankrupt company, not knowing that the board of directors has already decided to fire him. If Jim Willie is right, then Paulson and all his plans are doomed. The only hope left for America is to remonetize gold NOW before the world dumps us.

I am glad that I have prepared, but even so, it is truly frightening to think about the events we will soon witness if Jim is right. First, like a hypothermic patient, all the blood will rush to the heart and the head, sacrificing the limbs. All federal money will go to pay Congressional salaries and the military (to keep up "appearances"). The sacrifices will first show up as a delay in checks to Social Security recipients and financial aid payments to states and local governments. Next we will see small and regional banks start to drop like flies. Then a couple of the big ones, the ones we thought were too big to fail... will fail. Without the rest of the world buying our TBills, we can no longer prop them up.

Then the pain will reach extremes. The bank runs will be in earnest and the FDIC will have no way to cover all the guarantees short of printing all new money. But now, without the rest of the world to sop up our excess printing, we will truly have a Weimar Experience. Bernanke's belief that "it can't happen here" is based on the dollar being a "worldwide currency". If Jim Willie is right, then we are months away from losing that. And then, all the printing just to save the FDIC and Social Security will leave us worse than Zimbabwe...

I got a great source of info who is involved in the current "Post-US World" planning, execution, positioning utterly frightening / jw

"some incredibly nasty "S" coming the USDollar is to be killed off, along with the USTreasury Bond it is to follow a plan, already agreed upon numerous global forces concluded and decided to kill off the US entirely since they could not separate the innocent from the crime syndicates they want to surgically cut off the Wall St guys, big bankers, arms dealers, Dept Treasury, a few global bank centers (IMF, WB) and more but they could not determine a method to do so, while sparing the US population


a new global currency has been agreed upon, a basket

it will be based upon the euro, ruble, yen, dinar notice the dollar and psterling are not included, therefore to become Third World Nations the common factor is that all four come from export surplus nations the dinar will be gold-backed and bring a sudden end to the Petro-Dollar the ruble is expected before long to also be gold-backed, but smaller in scope after Europe is forced to purchase all energy products from Russia in rubles, big changes word has come to me that a global basket will SOON displace the USDollar that will immediately kick the US into the Third World

the Canadian Dollar will survive ok since demanded to purchase commodities
the Chinese will want to keep it down somewhat, in order to render cheap their commodity bill
gold will be over 2000 by January, silver over 25
the paper gold and paper silver prices are now meaningless
the COMEX is setting up for a metals default
look for defaults in oil, gold, silver, and USTBonds before too many months
absolutely frightening nasty "S" is coming
/ jim

If we are going to survive this, much more drastic measures need to be taken by Congress NOW. And I'm not talking about more "liquidity". WAKE UP! It's over unless we change the paradigm OURSELVES. Otherwise it will be changed for us! And then you will wish you had bought a gun and gold while you still had the chance.


Sunday, October 12, 2008

A Message to CNBC

I don't usually like to simply repost stuff, but this one is just so on the money. It also sounds very similar to some of my recent posts. This is FreeGold by dictum! What I would suggest to Steve is that this same outcome can be reached through free market means by simply monetizing gold. But what the hell, if they will accept this plan, I won't complain:

The Golden Bailout Plan
(in answer to CNBC’s request for a plan)
By Steve Hickel - Posted on USAGold forum (Steve's writings from 1999-2000 can be found in this post.)

CNBC has asked business leaders, CEO’s to come forward with their plan to bailout the economy. They claimed that few were taking the challenge. Well here is a simple plan that may be crazy enough to just work.


Before any bailout plan can be implemented, it is a must that all financial skeletons be brought out into the light. If all the skeletons see the light of day, then transparency will reign. Confession is good for the soul and apparently ultimately financial markets. The problem is some financial entities hold secrets too powerful for the confession called the Public. Despite that, all time bombs need to be made known. Until that happens, we will not rise above the current financial debacle.

The most important confession of the day needs to be from the folks who are holding back the price of gold. They need to inform JQP (John Q. Public) how they have worked in conjunction with the Federal Reserve, the Treasury department, the Plunge Protection Team, and all the other cohorts involved in suppressing the price of gold to keep it from reaching its natural level. We just need a few insiders in the above “conspiracy” to come forward on the QT (quiet) and confess. They will feel better, I assure them.

Why is this particular confession important?

Primarily because the Dow to Gold ratio has seen a ratio of 2:1 or better in the last 100 years at least twice. We are currently in a third such correction of this ratio. In fact, we are well on the downward leg of this correction that promises – based on past performance – to be swift and brutal. As the Dow appears to be headed towards 7,000 (or lower), that would mean that gold will either raise to meet the DOW at $7,000 or the DOW will lower to meet gold at 860.

The author believes that most of us would prefer the DOW to not fall so low. Logic dictates that gold rise to the level of the DOW (and the sooner the better). Some have predicted that the DOW to Gold ratio will actual surpass historical corrections and go to a .25 to 1 ratio. That would mean that if gold holds its own currently, that the Dow will go to 200.

Ridiculous as this sounds, the confession of the gold suppressors needs to come as soon as possible. Once they have confessed to suppressing the price of gold, then those involved can reverse their position on the long side and keep the DOW from dropping further.

Once the skeletons expose themselves through contrition of those involved, it will be time for action.


In order to prevent the DOW from reaching 1000 (or less), the financial powers (that got us into this mess in the first place and who confessed and now feel much better) need to make an immediate adjust in the price of gold. What about the matter of free markets that would normally perform this function?

Well we know that such matters of free markets no longer matter in the current crisis. Besides, someone confessed to Gold not having been privy to a real free market anyway. So, stop kidding around. Raise the price of gold to a level that allows the US and Europe and the rest of G-11 countries to pay off their imbalances with gold and retain half their gold in the process. What level would gold have to “be risen” to in order to accomplish the above?

That is a tough question because we don’t even know if the US or Europe has the gold we think they do. So perhaps we should have a public inventory of the gold (since the above confession will have made the holders of gold feel better in the knowledge that all skeletons are in the public realm). Once we take an inventory of gold held (and owned) by the US and Europe and the remainder of the G-11 countries, we will then need a true accounting of all the debt that needs to be “paid off.” The author believes that these steps (inventory and an accounting of debt) should be done in parallel. Don’t wait to do one until the other is completed. Keeping the DOW from falling further is imperative.

As a point of discussion, let’s say that we limit our discussion to the US Debt levels (both on the books and any that might be confessed above to not be on the books – until now). Let’s just say that $20 Trillion is the actual number of US debt obligations. We will know more once the GAO or some independent organization let’s us know our real debt levels and the counters of US gold let us know the actual amount of Gold held free and clear in US depositories.

For argument sake (based on public domain information), lets assume that the amount of gold held by the US (free and clear) is 8,000 tons of gold. Eight thousand tons of gold equates to 8,000 X 32,000 troy ounces (there are 12 troy ounces in 1 troy ton). This adds up to 256,000,000 ounces. Current market value of gold (based on COMEX, the US-based futures market – which some folks believe is one of the culprits involved in the prices suppression scheme of gold – but this will already have been confessed so no worries) is $860. For some unknown or forgotten reason, US gold appears to be priced at $42.22 per ounce. So much the better for reasons explained below.

In order to determined what value gold needs to “be risen” to in order to pay off $20 Trillion in debt and still have one-half of US gold free and clear, we simply need to divide $20 Trillion by 256,000,000 ounces and double the value (keeping half – remember?). The author’s calculator suggest that amount to be $XX per ounce ($XX per ounce doubled). Or, if you prefer, divide $20 Trillion by one-half of 256,000,000 or 128,000,000 ounces. In any case, the answer is 20 trillion divided by 128 million = one hundred fifty-six thousand two hundred fifty or $156,000 per ounce.

We need to factor in the current value of the audited US gold at $42.22. Subtracting $42.22 from $156,000 gives us the amount that the gold needs “to be risen to” in order to pay of the assumed $20 Trillion in US debt and to keep half of US gold in the process. That amount is $156,182.78. To put this in perspective, gold needs to rise from $860 (current value last Friday) to $156,128.78 – that is a 181.54 increase in the current price of gold. If someone disagrees with the above math, please speak up now.
As far fetched as this plan would seem and to account for any variances that may arise due to European confessions and audits and accounting of debts and other countries such as China and Russia factoring their thoughts, it will actually keep the DOW from falling to 1,000 and will put the US and Europe and other countries on much more solid financials. DEBT Free!

If some financial institutions failed to confess that they may have been naked short gold as this process unfolds (and failed to go long), they may find having to buy gold at $156,128.78 per ounce daunting. In fact, it would most likely bankrupt them and their 3rd generation offspring. But that was what the process of confession was to accomplish – show us where all the skeletons are so we can deal with them prior to “having gold rise” to $156,128.78 per ounce.

Some may take exception here and state that this is the same as inflation rising by a factor of 181 times. They may also claim that it is the same as going on the gold standard. The author respectfully disagrees. He thinks that this a one-time adjustment. Raise the price of gold, pay off the debts, then figure out a better way to do things going forward.

In case the confessors believe that gold should be kept from the hands of the masses by attempting to confiscate gold or make it illegal for common man to own, the author believes they are missing the point. The points is to raise the price of gold one time very quickly to $156,128.78. Pay the debts public and private and come out the other end with a better system that those smarter than the author would know how to do.

The author is not sure why CNBC has not had any business leaders come forward to suggest the plan of Confession and Action but no one has heard of another better plan other than create more debt to pay off other debt. It is time to act NOW.

Saturday, October 11, 2008

The Thoughts of Another are Now Blowing in the Wind

Some of ANOTHER (THOUGHTS!) on the value of paper, circa 1997:
In essence, it is of the same value as the currencies, "the thoughts of nations, blowing in the wind".

How can one know value in currency, when paper does not lie still? It moves at night, where noone can see, and this we hold to prove our worth? Real things know not this paper value, for they hold tight in the earth. In this time, we do stand firm with value and watch as "thoughts of others change in the wind"!

All persons hold wealth as never before, but search in vain for "this measure", one that "blows not in the wind of thought".

Hold your worth firm on the ground as no storm will move a true value with weight, a weight for the winds of this season, gold!

How long do persons continue to make these paper claims to "bonds", "stocks" and "currencies" that are produced in numbers as the leaves on the trees? These seasons of spring and summer of twenty years time, have offered a harvest to gather wealth that lasts for centuries. When the economy of the dollar, becomes as your "Autumn" and arrives suddenly, they will pause from this foolishness. In that time, the savings for the future of their children will be as these dried "leaves"of winter, blowing in the wind!

Jump ahead to October 11, 2008:

AP: All that money you've lost — where did it go? By ERIC CARVIN, Associated Press Writer Sat Oct 11, 12:41 PM ET <--Link

Full text of the article:
NEW YORK - Trillions in stock market value — gone. Trillions in retirement savings — gone. A huge chunk of the money you paid for your house, the money you're saving for college, the money your boss needs to make payroll — gone, gone, gone.

Whether you're a stock broker or Joe Six-pack, if you have a 401(k), a mutual fund or a college savings plan, tumbling stock markets and sagging home prices mean you've lost a whole lot of the money that was right there on your account statements just a few months ago.

But if you no longer have that money, who does? The fat cats on Wall Street? Some oil baron in Saudi Arabia? The government of China?

Or is it just — gone?

If you're looking to track down your missing money — figure out who has it now, maybe ask to have it back — you might be disappointed to learn that is was never really money in the first place.

Robert Shiller, an economist at Yale, puts it bluntly: The notion that you lose a pile of money whenever the stock market tanks is a "fallacy." He says the price of a stock has never been the same thing as money — it's simply the "best guess" of what the stock is worth.

"It's in people's minds," Shiller explains. "We're just recording a measure of what people think the stock market is worth. What the people who are willing to trade today — who are very, very few people — are actually trading at. So we're just extrapolating that and thinking, well, maybe that's what everyone thinks it's worth."

Shiller uses the example of an appraiser who values a house at $350,000, a week after saying it was worth $400,000.

"In a sense, $50,000 just disappeared when he said that," he said. "But it's all in the mind."

Though something, of course, is disappearing as markets and real estate values tumble. Even if a share of stock you own isn't a wad of bills in your wallet, even if the value of your home isn't something you can redeem at will, surely you can lose potential money — that is, the money that would be yours to spend if you sold your house or emptied out your mutual funds right now.

And if you're a few months away from retirement, or hoping to sell your house and buy a smaller one to help pay for your kid's college tuition, this "potential money" is something you're counting on to get by. For people who need cash and need it now, this is as real as money gets, whether or not it meets the technical definition of the word.

Still, you run into trouble when you think of that potential money as being the same thing as the cash in your purse or your checking account.

"That's a big mistake," says Dale Jorgenson, an economics professor at Harvard.

There's a key distinction here: While the money in your pocket is unlikely to just vanish into thin air, the money you could have had, if only you'd sold your house or drained your stock-heavy mutual funds a year ago, most certainly can.

"You can't enjoy the benefits of your 401(k) if it's disappeared," Jorgenson explains. "If you had it all in financial stocks and they've all gone down by 80 percent — sorry! That is a permanent loss because those folks aren't coming back. We're gonna have a huge shrinkage in the financial sector."

There was a time when nobody had to wonder what happened to the money they used to have. Until paper money was developed in China around the ninth century, money was something solid that had actual value — like a gold coin that was worth whatever that amount of gold was worth, according to Douglas Mudd, curator of the American Numismatic Association's Money Museum in Denver.

Back then, if the money you once had was suddenly gone, there was a simple reason — you spent it, someone stole it, you dropped it in a field somewhere, or maybe a tornado or some other disaster struck wherever you last put it down.

But these days, a lot of things that have monetary value can't be held in your hand.

If you choose, you can pour most of your money into stocks and track their value in real time on a computer screen, confident that you'll get good money for them when you decide to sell. And you won't be alone — staring at millions of computer screens are other investors who share your confidence that the value of their portfolios will hold up.

But that collective confidence, Jorgenson says, is gone. And when confidence is drained out of a financial system, a lot of investors will decide to sell at any price, and a big chunk of that money you thought your investments were worth simply goes away.

If you once thought your investment portfolio was as good as a suitcase full of twenties, you might suddenly suspect that it's not.

In the process, of course, you're losing wealth. But does that mean someone else must be gaining it? Does the world have some fixed amount of wealth that shifts between people, nations and institutions with the ebb and flow of the economy?

Jorgenson says no — the amount of wealth in the world "simply decreases in a situation like this." And he cautions against assuming that your investment losses mean a gain for someone else — like wealthy stock speculators who try to make money by betting that the market will drop.

"Those folks in general have been losing their shirts at a prodigious rate," he said. "They took a big risk and now they're suffering from the consequences."

"Of course, they had a great life, as long as it lasted."

Just how often do we see this kind of an explanation being made to the public? The answer is not very often. I made a comment about this the other day:

FOFOA said...

This is what I think is hard for people to understand. Let's think about a stock market crash of 3000 on the Dow. That would be a massive bloodbath. But do any stocks disappear? No. All stocks that have been issued by companies still remain. If there were 100 Trillion shares before the crash, there are 100 Trillion shares after the crash.

So do dollars disappear? Nope. There are still the same amount of dollars in the world as there were before the crash. If there were $60 Trillion dollars before the crash (counting all currencies), then there are still $60 Trillion dollars after the crash!

So what just happened? There was such a bloodbath. So many people went broke. Suicides, chaos... But what actually happened? There are still the exact same number of dollars and the exact same number of stocks in existence.

What actually happened is difficult to understand. Money wasn't lost. If you lost something, it wasn't money. This is the key to everything IMO.


ps. This imaginary scenario is a real possibility right now.

October 5, 2008 12:50 PM

Ender said...
Perceived value is an interesting thing. It depends on another.

Functional value does not.

October 5, 2008 1:02 PM

It is interesting that over the years the public has been conditioned to be scared of this:
Back then, if the money you once had was suddenly gone, there was a simple reason — you spent it, someone stole it, you dropped it in a field somewhere, or maybe a tornado or some other disaster struck wherever you last put it down.

And then "they" gave us a more "secure" place to "put" our "money". And the icing on the cake? They called it a "security". How about this one... a "Mortgage Backed Security". And all the while, even to this day, they talk trash about gold, especially about the crackpots that actually hold physical gold in the security of their homes.

As Another said long ago, "My thoughts are as free as the wind", "Secrets are for fools", "All paper will burn", and "Time will prove all things."

Those are powerful words, especially if you consider, as I do, that Another might have been an actual European Central Banker, not unlike those meeting this weekend to plan out the future of paper.


Wednesday, October 8, 2008

A Message to Congress

This is not good.

But the worst news is not in the stock market. It is in fact in some of the other indicators in the market which were indicating potential capital flight, along with still-extreme levels of stress.

I must caution everyone - if you are not prepared for six months to two years of unemployment, you need to be. If you are dependent on credit to survive (that is, if you couldn't make it without your credit cards) you need to fix that now.

Like today now.

Several times I have said "raise cash, get out of debt, be prepared."

I must reiterate this advice and emphasize it, as we may see a bond market dislocation and concurrent stock market crash at any time, without warning. It could be as early as today, in fact.

No, what happened the last three days isn't a crash, although it has now hit my full "bear market" target - 1070 - and in fact exceeded it.

Unfortunately what happened the last three days forces me to reset that target to the 2003 lows, and perhaps as low as four hundred on the S&P 500, 4000 on the DOW.

Needless to say if that happens it will be on the back of an economic catastrophe of a scale similar to the 1930s.

Bernanke's latest load of crap with an "SIV" for commercial paper is just another example of "more of the same" stupidity.

Bernanke and Paulson need to be indicted and jailed for criminal negligence (at best) and put in the stocks where the people can serve up some rotten tomatoes.

This evening we were "treated" to both political candidates shooting their mouths off on matters economic, but saying nothing of substance. Neither candidate was willing to admit the truth - that this "bailout" hadn't worked, that in fact the market had crashed by 15% since it was voted on, and that there is a zero chance of it having any positive impact on one American household.

But no, not even the "moderator" was willing to ask those tough questions, nor was anyone present.

These "debates" are a sham, a fraud and a gigantic waste of time.

Never mind that McCain embarrassed himself by claiming to be a "maverick" and "against pork", when he had just gotten done voting for over $150 billion of it in the Bailout Bill - pork that was not present in the original house version.

Was that claim of being "against pork" good for a "no" vote? Nope. He voted yes, as did Obama.

To those who dismissed the six petitions (you can go over to and see the old ones) over the last year, how do you feel about it now?

To those who said that "subprime was contained", how contained is it now?

To those who said that deterioration in consumer credit wasn't going to be a big deal, would you like to revisit that belief?

To those who said that "the nation would not have a recession", do you have any regrets, apologies, or perhaps an outright retraction?

To those who told people to buy buy buy all the way down, how do you feel now that they've lost 30% of their money?

To those politicians from both parties who voted for the ESSA on the claim that it would "stabilize markets", can you show me where it has been, in fact, stabilized? If this is "stable" I'm somewhat curious as to your definition of "unstable".

There is chatter circulating, apparently, that "global equity markets will be closed after the emergency G7 meeting this weekend." That ought to induce confidence - just ask the Russians or Indonesians, both of whom have tried this and it has resulted in an instantaneous crash when they reopened (the Indonesian market was just closed AGAIN this evening, after literally imploding - down by more than 10% - within an hour of starting to trade.)

This is no longer a US problem, but the United States continues to refuse to lead. We continue to "trust" the idiot savants Bernanke and Paulson, both of whom have sung the same song since this crisis began more than a year ago, have been wrong 100% of the time, and yet have found an ear in Congress repeatedly willing to listen to and follow their insanity.

By allowing this action and indeed following the advice of these two each and every one of the 535 members of that body has taken unto themselves the responsibility for the calamity that now faces American investors and the public, as our economic system literally "folds back" and consumes itself. Americans will not be able to retire and have no economic security, and now are losing their jobs in increasing numbers. This will continue.

For more than a year I have tried to get the attention of Congress with petitions, phone calls and faxes. I have been ignored, as have others who have been consistently right in our expectations and beliefs, including "Mish" Shedlock, Nouriel Roubini, Charles Hugh Smith and others. Over 200 degreed economists urged that the "Bailout Bill" not be passed as submitted, including two Nobel Lauretes; all were ignored.

The people of this nation have sat on their hands and watched American Idol, now turning into the NFL, while lapping up the slop from Paulson, Bernanke and Bush about how the "economy is fundamentally strong", instead of showing up in Washington DC to protest or flooding the fax and phone lines demanding that Congress act to reign in the fraudsters.

Let me know how "fundamentally strong" the economy is when you're walking the unemployment line and waiting for your turn at the soup kitchen for something to eat.

Entitlements? Forget 'em. They're gone. Social Security? Medicare? Done. Not today, but in the not-distant future. China, having gotten its money from the $700 billion "bailout", will ditch our Treasuries and refuse to buy more, as they will no more need to sterilize export dollars as our economy collapses. We in turn will be left to twist.

We deserve it, because we could have (but didn't) stand up to their demands that we cover a private dispute instead of handing over $700 billion we don't have. When (not if) the foreign flow of funds inward disappears due to the lack of need for these nations to recycle dollars, we will suddenly find that we have a nearly $800 billion a year hole in our federal budget - a hole that can only be filled by chopping Social Security, Medicare and the Military. Congratulations Congress (and America in general); you didn't really think you'd get away with that, did you?

George W. Bush will go down in history as the President who held the office while we drove our nation's financial system off the cliff, laughing all the while about flipping houses. And despite his protests to the contrary, the history books will record that it was his administration that removed the 12:1 leverage limits, sued New York to prevent them from clamping down on predatory lending, and willfully stuck its head in the sand while Bear Stearns prepared to blow up, never mind ignoring the problem after Bear detonated in February.

Henry Paulson will go down in history as the Treasury Secretary who sold out our nation to the Chinese and London Bankers, then fled the country with $500 million he "earned" creating and selling the very credit instruments that later blew up and sunk the nation.

The members of the House Financial Services Committee, the Senate Banking Committee and the Joint Economic Committee will each have special places reserved in the history books for refusing to deal with Ben Bernanke's raw power grab after Bear Stearns, an act that will ultimately be judged to be the single most important element of the crisis, as it forever put the market in a mood to expect "rule changes" at any time, precipitously damaging trust and liquidity.

The "no short" rule will ultimately be cited as the reason that the market crashed, being that there were no shorts to cover and thus hundreds of stocks, on that fateful day, went "no bid" and had their prices collapse to zero - all at once.

Oil will collapse in price to $20/bbl. Unfortunately nobody will have any money to buy gasoline, or a car, so it won't matter. As in The Depression millions of automobiles will be scrapped after being abandoned by their owners for lack of insurance and registration fee money. Cheap scooters will become the dominant form of transportation for those with jobs, as they will be all most people can afford.

As credit collapses distribution of food and other essentials will break down. Unable to access credit, trucking companies will be unable to get goods to market. The current distribution system for food requires travel of over 500 miles from production to consumption; this is untenable in a market where stable credit is unavailable. Food distribution will be severely impacted and in some areas may break down below critical levels.

Unemployment will reach 25% within two years. Median income will fall by 30% nationally. Foreclosures will reach 20 million homes. The government will step in with HOLC-style remediation but it won't matter - the unemployed won't be able to pay irrespective of the price.

House prices will fall to well under $100,000 nationally on a median basis but with lending all but non-existent you'll need 50% down. A few people will make out like bandits near the bottom, being able to buy up homes for $10,000 each in blocks of 10 at a time - for cash. 60% of America will be renters; nearly half of all homeowners will ultimately lose their homes to foreclosure.

Civil unrest will break out in major cities when incomes fall but the cost of food and essential services fail to come down materially, leaving millions of Americans hungry, broke and homeless. Unlike in the 1930s America will not quietly stand in soup lines - instead they will riot, loot and burn. The National Guard will be called up but will find it impossible to exert meaningful control without shutting down all commerce in the affected areas. The decision will be made to cordon off the cities and deny entry to anyone who does not live in that specific neighborhood, essentially shutting down commercial activity. GDP will fall by 30%.

The S&P 500 will fall to 150 and flatline, a 90% loss. CNBC and Bloomberg will cease broadcasting. Volume will fall to 10% of former levels.

Bleak outlook?


Quite possible?


Can it be stopped?

Yes, but not for much longer.

The markets are perilously close to a tipping point where they will collapse, after which all of the above will come to pass, and Congressional action (or inaction) will be irrelevant.

Congress will then have to face the people, as will President Bush and his Cabinet, and may God have mercy on our Republican form of government, because history shows that when government mismanages things to this degree and refuses to respond to the will of the people, a "messiah" generally appears with a "solution" - but there will be "compromises."

Like your freedom.

To fix the problem trust must be restored. To restore trust you must stop the lying, expose the liars, prosecute and jail them all, and stop changing the rules in the middle of the game.

This must happen now. Today. Immediately. Not tomorrow, not next week, not after a series of hearings.

Right now.

Market participants must be able to know that when they engage in a transaction it will be transparent, handled fairly, and their rights will be protected.

Our politicians must stop demanding the impossible - that home prices "levitate." House prices cannot be maintained at more than 3x incomes - it simply can't be done. We must encourage home prices to contract to sustainable, affordable levels quickly and efficiently.

Mortgages must return to 30 year fixed notes, 20% down, no more than 36% DTI. No government-linked paper in any GSE may issue outside these guidelines. We must reliquify the mortgage market, and this is the only way to do it - by writing only sustainable mortgages.

Strong consumer protection laws must be written that bar negative balance auto and home loans. The practice of "rolling over" an old car loan into a new one, producing an instant 20% or more deficiency against the vehicles value, must end.

Usury laws must be re-imposed, limiting credit card and other consumer loan interest to no more than a reasonable spread over funding costs. Yes, this will limit credit to less-worthy borrowers. So be it. Unbridled credit got us here, and we must prevent it from happening again.

The excess, unsustainable debt in the system must be defaulted. Whether held by corporations or individuals, it must be purged from the system. Those firms and individuals that are bankrupt must be so declared and their assets liquidated, so they can start over and the market can clear.

People will say that what I ask is unreasonable, unable to be achieved, or "needs study."

You're free to study all you want, but if these actions are not taken immediately, right now, today, the above forecast will come to fruition.

You are seeing the global credit markets unravel in front of your eyes, and it is happening precisely because the fraud, avarice and outright theft has gone unpunished and left in place to siphon off wealth from the average American for more than 20 years, and our President, in that environment, went on national television and threatened the world with a global Depression unless his Treasury Secretary got a $700 billion blank check.

The markets, correctly perceiving there was a problem, did exactly what they did when this same gambit was run during the Fannie and Freddie debacle - they called the bluff.

The check is now on the table and we have but two choices - either pay it or suffer the consequences.

The above is from Karl Denninger. I would add one thing to the prescription... REMONETIZE REAL MONEY! This will begin a cascade of good things for everyone (except Paulson and Bernanke).

Oh, and mark to frickin' market the US Treasury's gold like the ECB does, instead of the ridiculous Marked-to-1973 price of $42.22 per ounce you are now using. Sheesh. Are you frickin' kidding me?


Tuesday, October 7, 2008


It's time for another edition of ANOTHER (QUOTES!). This is where I post quotes from Another, written in the late 90's that seem eerily apropos today. This first one is a classic. And considering we may be facing a COMEX default in the next few weeks, and that gold lease rates have shot up, this one seems like it could have been written today. Also, consider that mere weeks ago gold was at the current "production cost" value.

Someone once said, "noone wants gold, that's why the US$ price keeps falling". Many thinking ones laugh at such foolish chatter. They know that the price of gold is dropping precisely because "too many people are buying it"! Think now, if you are a person of "great worth" is it not better for you to acquire gold over years, at better prices? If you are one of "small worth", can you not follow in the footsteps of giants? I tell you, it is an easy path to follow! An experienced guide is not needed for this trail, look around you and see. The real money is selling ALL FORMS of paper gold and buying physical! Why? Because any form of paper gold is loosing value much, much faster than metal. Some paper will disappear all together in a fire of epic proportions! The massive trading continues at LBMA, but something is now missing? The CBs are no longer lending! They will not anymore! We have reached production costs. Oil will have nothing of "gold paper" if gold must stay in the ground! And a CB values the wishes of oil far above it's return of leased gold! Hear me now, "if gold tries to go lower than US$ $280 the BIS will buy it OUTRIGHT in the OPEN for all to see"! They must! They will! I know. For no currency system could stand if "Oil" were to bid for gold!

Oil has kept "the deal" as the CBs sold paper to lower golds price! All is fair. Asia will bid for gold not as in the past. They now know that the free flow of oil has more value than the Pacific economy. But the price that was paid may be more than the world currency system can endure.

To close:

The US$ has risen on a flight of fear. That will now end as the LBMA shorts are given to wolves. If this fire burns too hot, gold will turn and it's trading halted. The price of oil will explode as gold becomes the "world oil currency"! Even now oil has locked the IMFs gold, Asia will bid against them no more. We come to extreame times.

Risk not your wealth in paper, we enter a period of truth.

This next quote is about silver. FOA seemed to be much harder on silver than Another was. Personally, I own some physical silver. But since I discovered Another and FOA it has been only gold for me. I still hold my silver, and I am on the lookout for one of a couple possible scenarios where I will either trade it in for gold, or it will become quickly apparent that my silver will come in very handy.

This quote is also a classic. I believe it was the first time Another was questioned about silver versus gold:
Silver will always be part of "gold money". But, is far too small a market for large, modern economies. Silver will do far better than any paper asset, only it will serve better as a "personal holding" than as a major money. If it is of your way to balance wealth, then silver will show value.

Metals have not shown their true worth for many years as the world has done very well. This is very good. But, all things do change! As it is our time and place to live this change, our thoughts must view the future as it must be. Who can know the minds of men and countries as paper burns?

This next quote seems prescient given our current situation:
As you read this, persons buy companies thru your Dow Jones at values that reflect "the supply of cheap oil" and it's good effects for business in general. What they do not see is the undoing of the currency world that "good business" must have to operate. The "oil standard" created and held this currency world intact, thru much abuse. Today, the "derivatives", that require a long future of "good business", are being "devalued"! Look far and wide as you are, now , at the top of this hill! The world will head down this slope because it is not a machine and is subject to "thin air".

History has shown that as persons slip from a high stance, they grasp for items that are known to be secure! They do reach for real things! Derivatives offer not a solid hold. It is well known that the modern gold market is fat with contracts derived from "intentions to supply". It is also known that the US$ continues on the "oil standard" because of this paper. No doubt, oil will continue to flow, but what currency will take this supply as we "walk down the mountain"?

In that day, "good money" will become "bad money" and "derivatives" will be paid to the holders of "derivatives"!

As we stare at the possibility of an imminent "paper gold" default, this next quote gives us a formula by which we can "see through the curtain". I would be very interested if someone who reads this could apply this formula today...
Look to LBMA, for currency looking for gold! Compare the Comex average open interest with it's average daily trading volume. Now use average daily trading volume at LBMA and convert to open interest in London, using comex ratio. Here you will find "real currency" in "paid for" gold derivatives ( not futures ) ! This money is now looking to convert to physical! It is caught in this paper with no way out! Know that this amount covers not CB gold moved by big trader! That wealth is safe, as it is for the good of all in those countries!

This quote is Another's standard warning to those who would rather "trade" gold on the exchanges than to go to the coin dealer and buy some coins:
The price of "hunch" is very to high for investment! It is the reason so many paper gold buyers take on appearance of " to much sun"! I offer this, do not use the solid reasons for owning physical gold, as a purpose to trade it. Your profits from such trade, will, on the last day, in the heat of fire, burn as paper does! Sir, the world is going to change, and the rules of engagement will also change. Gold will be repriced, once! It will be enough for your time of life.

And finally, this last quote for today seems completely apropos considering the reference to the Great Depression, down the barrel of which we are right now staring. I will include the question to which Another was responding. Note that all the above quotes came from January and February of 1998!! This particular one was made on Valentine's Day, 1998. Was it wrong? Or are we just now being forced to face a reality that has been lingering over our heads for more than 10 years? As I have said before, read Another's comment slowly, and read it two or three times. I think you will be amazed...

Date: Sat Feb 14 1998 20:00
WetGold ( to: ANOTHER ) ID#243180:
This appears to be a monumental world crisis much worse than the depression of the early 20th century. Could U expand further ?

Mr. WetGold,
In the past, nations and states have lost all as " the world changed" and these entities lost the ability to trade, at a profit. It is as history, and happened many times. Today, it is not the same. The "wealth of nations" are held as "thoughts of value" not real value! And even these thoughts are "in debt" as they are owed to other nations. As it has always been, time moves the minds of people to change, and with this, the thoughts of value also change. In this day, as not in the past, the loss of paper value as a concept will destroy the very foundation of wealth that this economic system is built on. This drama has started and is well underway!

There are nations that will try to "resource a new currency" as the old financial system implodes. Oil or gold or both may be used. If it is done at the correct time, much will be gained by all! Fail this Attempt, and gold will never trade on an open exchange again, in our lifetime! We will see this end in our time. [He means FreeGold will be born! Gold "on an open exchange" is gold as a commodity. FreeGold is gold ONLY as a store of wealth!]

thank you.