To many, Capitalism, is what makes the world go round. But many others don’t really know what that is.
Where will all the food come from to feed these extra mouths?
So what is Capitalism?
Capitalism the word, derives from the word Capital – and Capital is…. “Savings”.
Of course savings, are generally stored in Banks, and that “capital” should generate interest. Of course interest is what the Banks give to the owners of Capital, and traditionally, the Bankers loaned out that capital to business people who would use that injected capital to increase profits, and those increased profits, would pay back the loan, and add value so that the expenditure of the capital is justified.
If we have a population explosion, such as happened after the second world war – the baby-boomers – we have a situation where fast approaching retirement the ‘boomers’ are now saving like crazy in their pension accounts, insurance or assurance policies, bank accounts and stock market brokerage accounts. Of course those who retire inevitably need income from their savings (some of which went into buy-to-let property which led to the boom, between 2002-2007) And yet interest rates have been lowered to zero per-cent or close to it, in Europe, the UK. and the U.S.
So as these savers are looking for yield from their savings, this has driven down Bond yields (A bond is a loan, to a country – such as aTreasury Bill, or Gilt – or a corporation, which generates interest to the holder.).And we know that to produce that interest, we need to generate growth – in the economy, and in the corporation.
BUT, all that growth relies on energy, and despite recent price falls in oil and gas, longer term, much of what happens in the sphere of energy is reliant on oil and gas production, which because of something economists are famiIiar with – EROI – Energy Return, On Energy Invested – we know that we are close to or past the Peak, and the energy cost of producing more energy, will lead ultimately to a collapse in the economy.
But few in the mainstream media, or among our politicians are willing to discuss this or how we might resolve this issue. Fracking is the U.S’s attempts, but as energy prices have fallen, the financial cost of Fracking is now placing undue strain on oil and energy suppliers, and upto 100,000 workers have been laid off in the U.S., and numerous oil companies are either in, or facing bankruptcy.
In the UK, the government has given corporations the power to search for oil and gas under homes, without the normal permissions processes, that the local community normally have, through the licensing process, and through local council control and planning laws.
This therefore begs the question, what should we be told, and if we should what we need to do about it.
This video over an hour long explains how we have been duped.
At almost two and a half hours long this video below gives a full picture of how those in power, are still duping us.
As these videos suggest, the rise of the corporation and its influence of the political process, suggests we are well on the way to neo-fascism along the lines of Hitler’s Germany. And the energy revolution I spoke of in a previous post can’t come soon enough.
And Michael Ruppert who you saw in the first film, was a man on the inside, who having been threatened and shot at by CIA operatives, left the police force to investigate how the world really works. Here he discusses his findings, shortly before his untimely death at his own hand.
According to one recent Reuters article, China has now decided to update the world with its Gold holdings on a monthly basis, and has informed us, that they have added another 19 tonnes to their holdings. Not a huge figure given what we have learned of imports and production in recent years, but perhaps it is an attempt to ratchet up pressure on those pesky western bankers in the IMF that have refused entry to the SDR currency basket?
Time you made some changes in your life?
Time to get some Gold? Or Silver? Or Crypto-currency?
Is this the calm before the storm? Some months ago, before Xmas, I floated the proposition that “The West” might be about to shoot itself in the head, heart, AND foot, just to make sure.
My reasoning was that I felt Russia, might be about to demand payment in Rubles for their gas, and other things, which would effectively shoot the west in the aforementioned organs, as the U.S. sought to ratchet up pressure on President Vladimir Putin.
The U.S. through its monetary influences and power in International Organisations – the IMF, BIS, Federal Reserve, and of course the ECB, Bank.of.England, U.N. and Bank of Japan. is waging war on Russia, and the Fed by its agents is waging that same war on both Gold and Silver too, in a vain attempt at defending and extending American Capital influence ostensibly to protect itself from the rise of China and a resurgent Russia.
However, having recently read some Russian blogs, I now know that Russia is using its dollars received for its energy, to buy Gold at the artificially low prices that are artificially low due to Fed manipulations, thus doing two things.
One is that President Putin is helping to relieve America, and the West of its Gold hoard, and two, he’s also ridding himself of those pesky dollars, that he doesn’t really want.
And China a little over week ago released its “ahem” Gold reserve figure, which appeared to all the gold watchers as an absolute falsehood. It just isn’t possible, that after importing 100 tonnes per month plus, for three consecutive years, and mining 3-400 metric tonnes per year, that the PBoC only increased its Gold holdings from 1,054tonnes, by some 600 tonnes over the 5years since its last declaration to 1,658 tonnes.
As it is, we will need to wait to find out just how big of a lie this really was.
On bloomberg yesterday morning (EST-July 29, 2015) we learned that Russia is stopping the purchase of foreign currencies, as the Ruble comes under renewed pressure. And later a talking head – Scott Bauer – Senior Market Strategist for Trading Advantage, in a face to face commentary with Julie Hyman of Bloomberg, suggested “Now is the time to dip a toe in the water” with regard to Gold bullion.
But as I was trawling the blogosphere, looking for additional information, I fell upon this recording of an interview between gold commentators with Dave Kransler and Rob Kirby of Kirby Analytics from a couple of days previously:
The key takeaways from the interview, are that the recent price fall in Gold, was as a direct result of manipulation, as $2.7billion worth of Gold Futures contracts, were sold short on Sunday evening EST, (Monday morning – Shanghai time) a full two minutes before the Shanghai Exchange opened, which if it was an attempt to get the best price for Gold – failed abysmally.
In fact Rob Kirby, thinks it was a warning shot towards the Chinese, via Asian markets to stop buying Gold. He then went on to quote fellow Gold Bug and commentator when he quoted – James Turk:
“We’re witnessing the Western World destroy its money”
And yesterday also, the Fed announced it was on course to raise interest rates sometime this year. One commentator on Bloomberg even went as far to suggest that it would be better to raise early, and then have ammunition if they fell back into recession, but I’m not so sure that they’re not already pushing on a string as the saying goes.
After the stock market crash of 1929, the Fed cut interest rates too, and then 8 years’ later in 1937, raised interest rates again, only to watch as the U.S. quickly fell back into recession, until the second world war which meant the U.S. had to turn some of its productive capacity over to war production. We shall see if a repeat of this is on the cards.
The beginnings of this financial madness began with the Soviet Union. The west in NATO, but especially the U.S., needed to outspend the Soviets with military spending, and the only way to do that, was with a flexible currency, and that meant, they couldn’t have a currency backed by gold, as that would limit the ability of politicians and the Fed to inflate the currency supply – remember Nixon closed the Gold window temporarily in August 1971, and this temporary closure has been in effect ever since.
At the end of the Soviet Empire, the European organisations made agreements with the Soviets, to not encroach into former soviet countries, yet many of those countries, in order to not risk re-colonisation, chose to either join the North Atlantic Treaty Organisation (NATO) or European Union. (E.U.). This was of course encouraged to strengthen the U.S’s Federal Reserve monetary system, which as I’ve mentioned numerous times is now no longer backed by physical metals but requires constant growth to feed the beast. At one point Russia even made overtures to join NATO.
But like the childhood game of “King of the Castle”, the U.S. right-wing group within government – the neo-cons – decided it wasn’t enough for the U.S. to win. The old cold war enemy – Russia, had to lose.
Dr. Paul Craig Roberts – Ex Treasury Secretary under President Reagan, says “The US Government is the most corrupt on Earth”.
“It’s like that film The Matrix… We live in a totally made up world”
– Dr. Paul Craig Roberts.
When this House of Cards collapses, real money will achieve its true value.
So, from a financial perspective, buying into Gold, Silver, and Gold and Silver miners at their current low valuations is beginning to make even more sense as most miners have fallen in excess of 70% in price, and Silver now trades below $15/ozt.
And if you’re wondering about the demand for metals, perhaps these two silver charts will reassure you of where the future lies…
And this, that shows how silver has been supplied by government sales that have come to an end…
To that end, I’d like to re-introduce you to a miner, that I have been following for some 12+years…
The company is predominately a junior gold miner, but has mineral properties in several countries in Sub-saharan Africa – Democratic Republic of Congo, Angola, South-Africa, Botswana and Zimbabwe…
Unfortunately for its shareholders, a number of events outside management control have had a dramatic effect on the company over the last decade, and its share price has suffered, this has also meant several management changes, particularly in early June of this year, when the most recent CEO was voted off the board by some large shareholders, as the share-price languished.
Shortly after, the company announced the Nominated Adviser (NOMAD) was to resign too, and a new one would be looked for.
This prompted much speculation amongst shareholders, that the new board would deliberately fail to appoint within the required timescale, and thus the listing on the AIM would be withdrawn under its rules, taking the company private.
However, on the final day before de-listing, a new NOMAD – Grant Thornton UK LLP – was announced, and a new broker too to come on board in the not too distant future.
The price prior to these announcements, had dropped like a stone, and halted at just 1.15p (GBP) before a small rebound to circa 1.35p.
However, in the last two days, the board has published its Annual Accounts, and laid out management plans for the future.
The mood of the newcomers to the board appears to have been, that things were happening too slowly, and that the necessary cost cuts, and financial re-organisation was long overdue, meaning Corporate Overheads were too high at a time of falling ore prices.
The Company owns several properties in Copper, Nickel, Diamonds, and of course Gold.
The principal producing Gold mine is flowing at the rate of just below 60,000 ounces of Gold per annum (a little over 1,000 ounces per week) (85% owned). Their subsidiary Nickel mine has been on care and maintenance as has the 75.4% owned Nickel smelter and refinery. Which is the only Nickel mine, smelter and refinery in the whole of sub-Saharan Africa, and to build from scratch would cost upwards of $500million. (some valuations have even suggested circa $750m)
Annual Revenue increased 6.9% to $152.3 million, with group net cash rising by 81.3% to $11.6m and EBITDA came in at $18.8m, with COP rising slightly to $1,067/ozt up from $959/ozt last year, with the all-in costs up to $1,259/ozt from $1,186/ozt..
The main mine – Freda Rebecca produced 57,799 ounces of Gold, slightly down on 2014 from 58,704, but given that a leach tank fell over duriing the early part of the year and was out of commission for a few weeks while a suitable replacement was found and repair carried out meant some lost production. The Company’s nickel production was also down slightly.
However, the company last year raised a $20m corporate bond, which now sits on the books as an asset, with $16.4m banked last year, and the final tranche some of which was recently received, and the rest to be received by the end of September this year.
This money will be used to restart smelter operations, at the Nickel smelter and refinery, which were put on care and maintenance during the nickel price collapse, and the collapse of the economy during the Zimbabwe hyper-inflationary period.
For these reasons, the company share price collapsed, but if a fair metals price and a stable political environment ensues, then a share price in the region of £0.50 – 0.90 would seem realistic, and that is a long way up from these depressed levels.
The Smelter’s excess capacity will be used to smelt ores from nearby miners to ensure full capacity, which is 17,000tpa, and to raise profitability, at least until the “Trojan” mine which is part of the group, can be brought back into full operation, and the massive ore bodies accessed. The existing nickel mine is one of four – Hunter’s Road, Shangani, Maligreen, and Trojan
which is due back on-line early next year, which together with two Gold mines – Freda-Rebecca, and Makaha (100% owned) which is an exploration property are Zimbabwe based.
In South-Africa, they have the Klipspringer Diamond mine. And in DRC, they are not yet mining, but are exploring on several properties, which are either wholly or jointly owned, with a 9kilometre rift, that has already had measured 2.9million ounces of Gold, with 6 of the nine kilometres still to explore.
Whilst I am not advocating anyone invest their pension pot in this junior, with political risk, not least from a President and his closest advisers, who seem to have a deep seated resentment for ownership of Zimbabwean assets by non-natives.
Despite this, a wind of change is beginning to emerge, as recognition that without access to expertise and finance from the best sources, that the economy cannot hope to flourish, but as Robert Gabriel Mugabe is now the oldest Head of State in the World, and its longest serving, when he departs the political stage, the political risk in this blighted country will turn, and the price of this small miner will explode to the upside, as happened several years ago when it was reported that he (RGM) was ill, I do feel that for those with a little risk tolerance, a small investment might be worth the inevitable risk. But nothing in life is a certainty…
However, if Gold explodes upwards to the prices I ultimately predicted for precious metals some years ago, of $8,500 for Gold, and $500 for silver, then all miners will benefit, but those who are highly leveraged with controlled costs, will benefit the most, and junior miners with good resources, will explode by multiples of this. In the last Gold bull market in the 1970s, some of the junior miners went up 100,000%.
And this miner is? MWA,- Mwana Africa.
In summary, the company Mwana Africa has operations in Zimbabwe and South Africa, has several exploration properties in 3 other countries, a controlling interest in a nickel mine, smelter and refinery estimated to be worth half a billion pounds, a well educated and trained workforce, 5+million ounces of Gold, A total of 2 million tonnes of kimberlite with diamond grades in the measured and indicated categories of 51 carats per hundred tonnes, a copper resource in DRC that is currently estimated to be in excess of 200million pounds, and 36million tonnes of nickel ore with a grade at 0.55%.
So, why is this company still valued at a Price Earnings Ratio of 7, and a valuation of just $17million?
In a word – Politics – at home and abroad. But the storm is approaching, which will give this junior a serious jolt of lightning.
NB: Nothing in this post should be considered investment advice. The prices of shares can go down as well as up, and those who invest should seek professional advice. The writer of this post has a small holding of this particular stock. And this is considered a long-term holding.
Most people don’t know it, but there’s a quiet revolution going on. A revolution in energy supply.
Ever since the dawn of the first industrial revolution, when wood burning gave way to the first water wheels and windmills, and lignite burning, peat burning and then coal, energy has driven the economy. The new energy materials and technologies spurred the industrial revolution, releasing and then capturing that energy made mass production possible, bringing consumer products to the masses.
A second revolution happened in 1901, as oil which had been used in lamps for centuries, and used in petroleum as early as 1870, became cheap enough to drive the second wave of energy use, when Spindletop reservoir in Texas gushed forth, and the U.S. oil supply doubled in an instant. The oil-well took nine days to bring under control, and supplied 100,000 barrels of oil per day, wasting almost a million barrels of oil. However, that spurred further exploration, and all that added oil, made the mass-produced car, the plane and the modern economy possible.
Diesels, plastics, pharmaceuticals and modern agri-business with its NPK based fertilizer, were all made possible from oil. The discovery and development of these new technologies enabled them to win both world wars as technological advantage in the form of military superiority and the cost of moving men, supplies and machines to their required location all worked in their favour. But the spike to $147 per barrel in 2007, plus the talk of “Peak Oil” which was prevalent during the early 2000s, ushered in research into alternatives. And the dominance of oil producers in the unstable Middle-Eastern region was a powerful driver.
Grexit Stage Left?
It has been a month since I last wrote, not because I had nothing to write about, but rather there were too many issues to discuss fully. What with, eastern Ukraine’s proxy war, Syria’s unrest sponsored by the CIA, Libyan boat people, Tunisian Terrorists, deaths in Kuwaiti mosques, French beheadings, a new Government in the UK., and Greece’s public spat with the ECB, Germany, the EU, the IMF and those behind the scenes pulling the strings. However, the potential Greek default appears to be the most concerning, and pressing.
As the Greek government approaches the end of the debt issue, by calling upon its citizens to vote in a referendum on the final offer on the table from the Troika (The EU, IMF, and ECB), we have to ask ourselves is the end of the road for this can kicking contest in sight?
The Greek people now have to decide in favour of its citizens by defaulting on its debt, and subsequently leaving the Euro or in favour of remaining in the Eurozone, and paying the Troika. Since 2006, Greek GDP has fallen by over 20%, and its debt is up by 50 percent to 320 billion euros.
If Tsipras, and Varoufakis and the populace, choose the Greek people, the question will then arise as to whether Greece leaves the EU, and NATO, and accepts a deal proposed by Russia.
The deal involves the Russians building a gas pipeline through the Black Sea, and either Bulgaria, or Turkey that will end in Greece. The pipeline would net the Greek government transport fees, and allow Russia to sell its gas to European nations. In the meantime, Russia would fund Greece’s public debts.
Of course, the U.S. doesn’t want this to happen, as any extra revenue for Russian Gas, only strengthens Putin’s hand.
The U.S. would prefer to build a pipeline from the Arabian Gulf, originating at Quassumah, in Saudi Arabia, through Iraq, Jordan, and Israel or if not Israel – then Syria – with President Assad finally out of the way…In other words – countries who are U.S. allies (or vassal states).
But this leads into a further fly in the ointment. Syria, has already signed an agreement from the same gas-field with Iran for just such a pipeline through Shia controlled southern Iraq, (which is why the CIA funded ISIS to attack Iraqi, and Syrian assets) only this particular nine-headed Hydra is outgrowing its masters to such devastating effect. (at least to French/British and other nation’s citizens)
America has been trying to cut off the finance from oil sales to Iran but has failed as China, and India, both rely heavily on oil from this oil-rich state.
Turkey too, as a muslim state, has paid Iran a great deal in gold for its oil, and has over the last five years bought gold from its citizens to pay for this liquid energy.
The gas field mentioned in the Arabian Gulf, found by Iran, who is the world’s largest gas holder with some 34 trillion cubic meters of exploitable reserves, allegedly holds some 11 Trillion cubic meters.
BUT, the powers that be – (TPTB) – (think – the Fed, and its Bank owners – the Rothschilds, Rockefellers, Seifs, Warburgs, Bakers and Morgans et-al) have overseen a staggering $113 trillion increase in total debt worldwide. The global debt load has increased dramatically from $87 trillion to $200 trillion just since the year 2000. And they’ll need growth in western economies to meet those payments.
The problem has got so big, yet TPTB, refuse to recognize the problem. They know that if they allow Greece to fail tomorrow, it will be Italy next, then Spain and Portugal, probably France then Belgium and eventually the entire financial system.
A Greek default would not just lead to the 320 billion euros disappearing from the system because the lending banks and institutions are all levered up to 50-times that amount. But even if we only take a figure of 20-times leverage, it would mean that over 6 trillion euros could disappear out of the system.
And yet, according to Dr Paul Craig Roberts a Greek default could – ultimately – prevent World War III.
We shall see, as this can maybe has reached the end of this particular road.
Central Bank Manipulations?
The reason Gold has not exploded yet, is because Gold as a physical asset, is undervalued in the West (in general), and highly valued in the East for historical reasons. (Partly as a result of Western Central Banks, having too much power, and thus ensuring regulation gets passed to limit Gold’s usefulness as a store of wealth and partly, because the Chinese had their education in paper currency back in the 11th Century, and others in the Far-East had their education more recently, with the currency crises of the late 1990s.)
As Gold heads east, it is in the interests of those who wish to accumulate it, to play devil’s advocate and allow the manipulations to continue. As I stated in my last post, both Russia and China, are unimpressed that when they sell goods on International Markets, they receive a depreciating currency, that can be conjured up out of thin-air [or to be more accurate – digits on a computer] by its manipulators…
When the Tide goes out (to borrow a phrase used by Warren Buffet) i.e. When Gold becomes part of the process for settling International Trade again, then we will see who is wearing no shorts – (i.e. a fast-reversal back to Bretton-Woods) i.e. which countries, are spending more than they earn – Internationally speaking – and who is managing their economy well, by exchanging physical goods, for physical goods (in the form of physical Gold, or a gold backed currency which can be exchanged for Gold)
China’s approach is therefore like an aeroplane coming into land, and on the approach path to forcing the world’s trading nations to stop using currency inflation to buy up scarce natural resources, and Gold will at that time achieve its real value.
That time will happen when the first country breaks ranks, and demands Gold for its goods, and has enough Gold to withstand a draw of its currency for International Trade, and the only country that comes even close to that is China (and perhaps Russia) and therefore when China finally – officially – releases its Gold holdings – which Pravda in a recent article suggested was 30,000 tonnes, (because they have re-smelted their Gold, and re-cast it into 1Kg bars) then the value of Gold will achieve the exponential rise we have all been expecting.
By end 2015, China, has to float its currency, (WTO regulations) so perhaps is hedging its bets, by holding huge Gold reserves to act as a floor under the value of their currency. Reference – http://english.pravda.ru/news/business/21-05-2015/130683-china-0/
That to me makes perfect sense. It will also mean those countries of Africa, South America and other developing nations, who sell raw materials, will experience rapid rises in living standards, and many will end up paying their political masters huge sums, unless the corruption that has been endemic in some of those countries, suddenly vanishes. (Just as happened during the 1970s which may in itself cause other problems as it did, during the decade and the one following.)
Of course, the poor westerner, will experience rapid price inflation for all their most important needs. And those countries who use the American Dollar as their currency system, would be well advised to consider a replacement.
Food, and raw materials, such as oil, gas, copper, tin, lead, zinc, and precious metals, too will all be more highly valued.
Those with good stores of these commodities, will flourish, those who depend on government largesse for their income, will not fare so well.
And paying for things internationally, will require some form of internationally accepted money – one I have been reading quite a bit about in recent weeks is BitGold.
This manages to marry the best of both crypto-currencies, and precious metals.
To widen your reading and viewing material, you might like to visit these channels on You-tube, and search terms and web-sites.
Recommended YouTube Channels:
Ron Gibson – WhatReallyHappened 2015 (Mike Rivero),
Mike Maloney – GoldSilver.com – WealthCycles,
YouTube Search Key Words:
Dr. Paul Craig Roberts,
Jim Murphy (GATA),
G. Edward Griffin,
John Williams, (or Shadowstats.com)
Catherine Austin Fitts,
Anyone who has followed this blog for any length of time, will know, I am a Gold, Silver and Crypto-currency nut (not literally but figuratively). And I’ve been predicting the demise of the dollar as long, though to be honest I wasn’t really sure what the trigger would be. At least, that is, until now.
And those who have read assiduously, will know that the current Gold, Silver and other commodities prices, are possibly (probably?) manipulated by huge American Banks – like JPM, and Goldman-Sachs, Bank of America, CitiCorp, Wells Fargo, Wachovia and the other huge American corporations on behalf of the Federal Reserve, and those who own it – the six or so founding families..
Many will not know why though. They may hazard a guess, but they are likely to be wrong.
The American Dream, has become something of a nightmare in the last few decades, for those at the bottom of the economic heap, as U.S. wages have been compressed for working folk, primarily because large American corporations began outsourcing manufacturing labour to Asia – Indonesia, Malaysia, Korea, India, China, Vietnam, and the Philipines et-al, in the 1980s.
Of course, we’ve all seen China grow at rates we could only dream of in the west.
China, was courted back in the Nixon era, eventually, it got most favoured nation status, and entered into discussions with the World Trade Organisation some years ago, which has involved opening up its markets, and freeing its currency to trade on international markets – which it must do by the end of 2015.
China’s ascendancy to industrial super-power since 2000, has been rapid, and it has been growing at between 7-12% since the 1978 proclamation, by China’s ruler – Deng Xiaoping, that: “there was no virtue in being poor”.
Of course, China now has the second largest economy in the world – after the U.S., and wants a seat at the table of major economies. And the entry ticket to this select club of nations: America, Japan, Germany, Britain, France, Italy and Canada – the G7 – is a hefty one.
China, India, Russia, South-Africa and Brazil, – the BRICS – as well as other smaller economic nations make up the G20, but those meet less often, and can influence matters much less.
China, wants a place at the top table and to do that their currency has to be International, and held in the same high regard as the others, and to do that, they need to hold a similar amount of their GDP in Gold reserves as those other nations.
The Americans, claim to have a little over 8,100 tons of gold, with a $16.5 Trillion economy, and Europe has over 10,500 tons – (Germany alone reputedly has 3,700 tons) of Gold. In percentage terms, these figures represent from 2.7% – 4% of their GDP in gold reserves.
However, according to Jim Rickards, those precious metals price manipulations, are done to allow China to accumulate enough gold for when the Renminbi(YUAN), becomes part of the SDR – “The Special Drawing Right.”
It is true that China, is obliged to un-peg its currency to the dollar by the end of 2015, so maybe buying all the gold it can, is an attempt to keep the Yuan, as close to the dollar as it can, however, Jim Rickards and Jim Willie, have a slightly different take on things.
If China IS trying to match the U.S. which would suggest a similar Gold holding of 8,000 tons then why have they also been buying up Foreign Gold mining companies, and buying the Gold from artisanal miners in Africa, at the rate of circa 40 tons per month, at spot prices?
As you may well know, back in April, 2009, China last disclosed its Gold holdings, at a mere 1,054 tons, which itself was a huge increase from previously disclosed amounts. But in recent years, China was buying over 100 tons per month, though how much they bought surreptitiously we can only speculate.
China intends to be one of the top dogs at the economic table, and its long term plan has been well researched, and intricately progressed, from their 1978 early beginnings, when then China’s ruler – Deng Xiaoping, issued his now famous proclamation.
Since then, China has increased its Gold holdings, slowly at first, but with increasing rapidity, and has been involved in using its dollar reserves to divest itself of some of the $3trillion dollars in value, and $1.4 Trillion in U.S. notes and treasury bills, it has accumulated in the last 15 years by buying Gold and other tangible assets.
Saudi-Arabia has its own plans too, ever since President Barack Obama offered the hand of friendship to the Kingdom’s sworn enemy – Iran – in an effort to reduce tensions in the middle-east, which have risen partly as a result of Federal Reserve policy, where loosing the printing presses on an unsuspecting world after Long-Term Capital Management fell under in 1998, caused rapid currency inflation.
The excess currency, has bid up all kinds of goods, but as usual, mostly food and other items for those on low incomes, and that inflation contributed to problems in the middle-east, which stoked old hatreds.
The source of these problems though lead back to that day in March 1973, when King Faisal of the Kingdom of Saudi-Arabia, met with Henry Kissinger, and the Secretary of State made the King an offer he could hardly refuse.
In return for the Saudis selling their oil in U.S. dollars, and investing those dollars in U.S. Treasuries, the U.S. would protect the Saudi Kingdom from all enemies, domestic and foreign.
And so the scheme of the Petro-Dollar was born. The Saudis got their protection from the Soviets, and others who might covet their immense oil-fields. The Americans, benefited by having a strengthening dollar, due to huge demand for them, and all the other OPEC nations were obliged to follow suit, especially if they wanted a strong currency for their oil, and a share of international oil business, which they did.
But after 42 years, is that all about to come crashing down around the U.S. and our ears. The King who made that agreement with the Americans is now dead, and the Saudis, are angry at the Americans cosying up to Iran, and also at U.S. production levels due to fracking. They’ve lost their biggest customer and gained a biggest competitor.
The Saudis, had a position of importance in the world, given the number of barrels of oil that they produce – circa 9.5 million barrels per day, they were the swing producer. When the world needed extra oil, the Americans could make a phone call, and the Saudis could turn on the taps, and the price would come back down.
But, with Russian production at similar levels, and the Americans now producing almost 10 million barrels per day, things have changed.
The Saudis want to protect their market share, and they are a cheap producer. Al-Naimi, the current Saudi Oil Minister, led the Organization of Petroleum Exporting Countries to its Nov. 27 decision to keep production unchanged, ignoring pleas for a cut in the group’s output by several countries: Venezuela, Algeria and other members that depend on higher oil prices to balance their budgets, saying: “If I reduce, what happens to my market share? The price will go up, and the Russians, the Brazilians, U.S. shale oil producers will take my share,” Al-Naimi told the Middle East Economic Survey last month. “Whether it goes down to $20 a barrel, $40 a barrel, $50 a barrel, $60 a barrel, it is irrelevant.”
U.S. exploration and drilling on fracking sites has exploded in the last few years, and the price of oil, as supply has increased, has exploded to the downside from its $147 high in 2007.
When all the unprofitable oil-wells close: the fracked wells, the tar-sands, and the deep water wells, and the exploration that has been postponed or cancelled lowers production, as low oil prices are affecting many highly leveraged players, the oil supply will fall too. And as output and the price falls, the only producers left will be the low cost ones, producing at less than $40/barrel.
The Americans are not giving up though, as they use technology, and lower headcount to lower costs.
BUT, the Saudis may be about to upset the U.S.’s apple-cart. And this is behind my prediction for the dollar.
News has reached me that the Saudis are conducting secret talks with China. This may be yet another of the 24 (so-far) bi-lateral trade deals that China has made to use Yuan for trade – eschewing the dollar for international trade.
If, as I suspect, the Saudis settle their oil-deals with China in each other’s currency, it will do two things.
The first is that they get a new customer, to replace their most reliable one for the last 5 decades, and one that will pay with a currency that is set to strengthen.
But, the other thing that happens is that most, if not all, of the other OPEC members will probably follow suit. And THAT will be the end of the dollar, and the U.S. way of life that they’ve known since the end of WWII .
As the dollar falls, interest rates will have to rise in the U.S. to encourage people to hold dollars or buy treasury bonds. Derivatives linked to the currency and the U.S. economy will collapse; Banks will fail; and we’ll get the bail-ins that have been legislated for, and tested in Cyprus.
International trade will collapse, house prices will follow as foreclosures take effect, the ripples will spread to Europe.
Spain, Italy, Greece, Portugal, Ireland, U.K., France, Belgium, Austria, Poland, Ukraine, might all experience bank runs.
Even China may experience some difficulties, and money will flood like a tidal wave into the only asset class, where no-one else is liable – Precious Metals.
In less than a month, we could see Gold and Silver prices balloon, and by Christmas, those 10,000 tonnes I suspect that China now holds, may be several times their current value. Any Treasury Bills held as security against other assets as collateral, will flood to be sold, and the dollar will lose its status as the World’s reserve currency.
If this happens, by 2016, China, will be the number one economy, oil will be back over the equivalent of $100 – possibly as high as $200-300, and the world will experience “Credit Crunch 2.0 – The Meltdown”
Middle-class Americans will lose the feather bedding that the Fed has provided for all these years, and the U.S., will be technically insolvent.
Jim Willie believes events coming to America, partly as a result of the AIIB, and the Chinese domination of Trade will force a Gold backed currency using gold Trade Certificates on international trade, and that will only add to the Dollar’s woes.
This will be a back-door introduction of a Gold Standard, and when that happens, it’s game over for the dollar.
See a recent interview here:
(April 2, 2015)
Jim Willie Quotes:
“Q.E. is a lie… It’s a bail out of Wall Street, and Corporate Banking” – and the AIIB is the creation of a BRICS’ Central Bank.
AIIB Founder Members – U.K., Australia, encouraged others in the Western sphere. France, Germany etc..
Turkey – the gateway to Afghan narcotics production.
Greece & Turkey – end of the pipeline for Russian Gas.
Yuan/RMB Trade swaps – Non-dollar denominated.
Iran/China worth $150 BILLION in trade…
Final word? “Game Over for the Dollar”
In order to protect yourself, you need to do several things. But buying precious metals, silver, gold and digital currencies that no country can inflate away – crypto-currencies – will help.
If you think that this is unlikely, it is, but it is possible. And if that scares you, it should – it does me.
See the links above right.