Gold

When the Music Dies…

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Long, Long time ago,
I can still remember,
How the music used to make me cry.
I can’t remember if I cried,
when I read about that widowed bride,
but something touched me deep inside,
the day the music died.
So, “Bye Bye, Miss American Pie.
Drove my Chevvy to the Levy but the Levy was dry.
Them good ol’ boys are drinking whisky and rye.
Singin’ this’ll be the day that I die.
This’ll be the day that I die.
The day, the music died.”

The Gold market is at the moment a bit like the old parlour game of yesteryear, when we all played ‘Musical Chairs’ after dinner on sundays, before wall to wall TV, and other distractions began to isolate us from each other – except via digital means.

The game – for those who don’t know – involves putting together enough seats for all the participants, while playing music, and then removing one chair.

When the music stops, the last one to sit, is out.

The game continues until all the participants are out as each turn gradually reduces the number of chairs to one.

The gold market is gaily playing the game, blissfully unaware that the gold (Chairs) are being continually reduced and one day soon, the Bullion Bank Gold Vaults, will be empty, and one of the big players will want to walk away from the game, with their chair, (Gold) and the chair won’t be there.

The day that that happens, will be like the day in the song above.
For those unaware, the song was a reference to the crash in 1959, when Buddy Holly, and the other musicians Ritchie Valens, and J. P. “The Big Bopper” Richardson were killed in a plane crash near Clear Lake, Iowa. They disappeared off the radar on a snowy journey on February 3rd.

The evidence is stacking up for all to see. Those with even a small stash of Gold and silver will be the lucky ones.

Exhibits A, B, C, and all the rest are from a web-site I visit on occasion, but which in recent days has been just full of evidence that the number of chairs is quietly, and incessantly being reduced, as the Chinese take all the chairs east.

The day the music stops, will be like the story of the Emperor who was wearing no clothes, until the small boy pointed out the truth.

Gold (and silver) will be worth a whole lot more, no matter what Harry Dent Junior says:

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The Eighth Wonder of the World… And a Curse.

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“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” [Albert Einstein]

EyeOfTheStorm-Now

  1. 2008 – 2012
  2. 2012 – 2016
  3. 2016 – ? (2018-20?)

We are emerging from the eye of this particular storm…into more turbulent times ahead.

Uncertainty in politics, breeds uncertainty and volatility in economics and markets. People postpone major purchases until they have a clearer idea of how things will unfold. And businesses too, judge the future and make investment decisions accordingly. But the Debts built up during the 2008 crisis, have still to be repaid, and will now begin to unwind, or lead us into hyperinflation.

Having money in a bank account, that earns interest, is a distant memory for many people, as interest rates around the world have been reduced, eliminated or worse.

Britain’s and Western National Debts, have an interest charge levied on them, which is being, at least in part, controlled by the Federal Reserve, who came to Europe’s aid (again!) when it loaned $15 trillion during the heat of the last financial crisis. Britain too loaded itself up to the neck with debt, to help its banks, and latterly, International Banks from Greece, Spain, Ireland, and Portugal. and its current account is, as I have mentioned an enormous debt of — £1.7 Trillion. At a modest 0.0025% (¼%) that translates as …

Drumroll… £4,250,000,000 per year. (£4.25 billion…) However, even a modest increase to say 2% p.a. over the next 2 years, will likely kill the British economy, and with it, any hopes of a full recovery.

At 2% our debt repayments are: £34,000,000,000 – (£34 billion) enough to build approximately 50 new hospitals and staff them for a few years. Who said being a banker was easy?

But this image from Raoul Pal, tells the even bigger picture (even if it is a couple of years old).

Debt-2-GDP-Ratio

Whose debt is biggest?

The debt to GDP ratio includes pension and other obligations.  Is this why Britain’s politicians are so keen to import foreigners, to help pay off this debt?

Those savers who have worked hard all their life, and tucked away a little for their retirement, are earning precious little from their savings. Funds that perhaps they have ear-marked for a retirement home, a secure retirement future knowing that their money is safe in a Bank, or where they can get at it quickly, in the event of an emergency, to meet unexpected bills are shortly going to experience the greatest loss of value in their lives, through inflation.

In a world where money is finite: interest rates serve the function of allocating money to its competing potential users. Those that require investment money will bid for this scarce resource, driving up interest rates, in times of high demand. This rising interest rate trend signals to the business community, that there is high demand for money, and this can indicate that businesses are expanding, or that competition is increasing (usually early in the market cycle) and those who seek to spend for their current enjoyment, begin to realise that they cannot afford higher payments, and thus this slows the economy as spending is curbed.

When currency is infinite as is with Fractional Reserve Lending: the only brake on increased amounts is the Banker’s concerns as to whether they will get paid back, or not – and thus it might threaten their balance sheet. This leads to booms… and busts.

This has been the state of affairs ever since this practice was formed, but became worse when the world left the Gold Standard, and the U.S. finally severed the last remaining link to Gold on August 15th 1971, when Richard Milhous Nixon, closed the Gold Window.

Almost three years later Louise Auchincloss Boyer, fell from her 10th story window, just days after a story that she was alleged was to be the source of, that “All the Gold in Fort Knox has gone.” Her death was judged suicide… (Link: You can read the full story – Here )

Britain’s debt is even worse than I feared.

Late on Saturday night, I was researching Britain’s National Debt, and to my surprise and horror, I found it was even worse, than I suspected.

Anyone who has a mortgage, or variable rate loan, ought to be on pins and needles, as interest rates are set to rise, for a number of reasons.

Deutsche Bank’s chief economist David Folkerts-Landau just released a scathing report, aptly titled: “The ECB Must Change,” in which he calls the ECB out from a banker’s perspective, which is now eerily similar to a layman’s.

“After seven years of ever-looser monetary policy there is increasing evidence that following the current dogma, broad-based quantitative easing and negative interest rates, risks the long-term stability of the eurozone…

…Already it is clear that lower and lower interest rates and ever larger purchases are confronting the law of decreasing returns…. but the ECB’s response is to push policy to further extremes. This causes mis-allocations in the real economy that become increasingly hard to reverse without even greater pain. Savers lose, while stock and apartment owners rejoice…

Thereby ECB policy is threatening the European project as a whole for the sake of short-term financial stability…. The longer policy prevents the necessary catharsis, the more it contributes to the growth of populist or extremist politics…

A returning to market-based pricing of sovereign risk will incentivize governments to begin growth-friendly reforms and to tackle fiscal stability. Flagging the move should dampen adverse reactions in financial markets.

We believe that normalising rates would be seen as a positive signal by consumers and corporate investors. The longer the ECB persists with unconventional monetary policy, the greater the damage to the European project will be.”

Japanese Rate Rises?

And even in Japan, interest rate rises are being discussed:

Bank of Japan policy board member Takehiro Sato went public in a speech to business leaders two weeks ago. Here are some key quotes showing what amounts to complete opposition to the Bank of Japan’s current course:

“When there is a negative spread, shrinking the balance sheet, rather than expanding it, would be a reasonable business decision… leading to restraining loans to borrowers with potentially high credit costs and raising interest rates on loans to firms with poor access to finance.”

As for those borrowers, think SMEs, entrepreneurs, everyone from the middle-class down, and virtually everyone but the corporate interests that have succeeded in regulatory capture worldwide.

“A weakening of the financial intermediary functioning could affect the financial system’s resilience against shocks in times of stress.”

He also said:

“There is also the risk that financial institutions that have problems in terms of profitability or fiscal soundness will make loans and investment without adequate risk valuation… I detect a vulnerability similar to that seen before the so-called VaR (Value at Risk) shock in 2003.”

Taken together, Mr. Sato is essentially saying that negative rates are stunting the chances of economic growth, removing any chance to soften the blow when it comes, and is setting us all up for wealth destruction across the board, giving policy makers no capability to react if a downturn begins.

Japanese politicians seem to be taking the ball and running with it. A key policy chief of the opposition party is now calling for Prime Minister Abe and the BoJ to begin raising rates.

In particular, the new platform cites how these policies hurt savers, along with its failure to boost inflation, wages, and has a negative crash in trade balances.

And in America too, are Interest Rates set to rise?

Gerardo Del Real, the Outsider Club’s newest expert, is spot on on how this will pan out for the U.S. . Just last week, he had this to say, which bears repeating:

“So what to do? Understand that the big money, the portfolio managers, pension funds, and insurers cannot continue to invest exclusively in negative-yielding assets.

Understand that a trickle of the trillions they manage will work its way to the U.S. markets, the dollar, and gold. Not because they’re gold-bugs, but because they will have no choice.

Understand that of those three options — the U.S. stock market, the dollar, and gold — gold is the smallest market and therefore the most susceptible to the largest moves.

Within the gold market, the junior resource market — especially the junior gold companies — has been absolutely decimated, and provides the best risk-reward proposition.” (See my last post – Apocalypse Now)

Few people are more reviled by everyday people than bankers, and rightfully so.

They hide usury in the fine print and send Court Sherriffs to evict you from your home in their stead.

They distort and manipulate markets for their own gains, from LIBOR, to the gold fix, to silver prices, to exchange rates, and on and on.

Then, with the corruption of a wink and a nod, they use regulatory capture to remove all risk and collect cushy bailouts while manufacturing and commercial jobs disappear, wages shrink, and with it the tax base as neighborhoods fall into squalor.

Throughout the 80s, the North of England – Northumberland, Merseyside, Greater Manchester, South Wales were all hit hard as deep mined coal pits closed, and the industries that had grown up with them, went with them.

A piece written just over 100 years ago, after a Banking Panic in the U.S., brought about largely by the tactics of the Banks, and which surprisingly, our recent “Credit Crunch” appeared to be a mere replication writ large goes as below.

The writer, George Howard Earle, Jr. of the Real Estate Trust Company, in 1908 wrote:

A Central Bank as a Menace to Liberty

The solution of the problem of a central bank, with power to control the currency of the United States, to be at all adequate, must depend upon and be controlled by ultimate political principles.

The same principle that underlies the never-ending conflict between the advocates of a strong centralized government and what are called “states rights,” governs this question.

Taught in the school of experience and adversity, the early English and American patriots learned the salutary lesson that the development of peoples, as well as their happiness, depended more upon liberty – that is, the power to control and govern themselves, rather than to be controlled or governed by anybody else – than upon any other single thing; and they, therefore, in drafting our Constitution, always viewed government as an evil made necessary by the weakness and defects of human nature, and never extended it beyond that necessity.

Under the plan of freedom, of self-reliance, self-dependence, self-government, we have become the greatest, the happiest, the most powerful people of the world; but notwithstanding these proofs to justify the work of the Fathers, we have more and more concluded that we could have done a great deal better.

We are rapidly tending in the opposite direction, which must 506 inevitably destroy liberty by vesting all discretion in some form of central government, rather than in the people as individual, independent entities.

Starting with the theory that government but existed because of the defects of mankind, and was but an evil wherever it exceeded the necessity of restraining evil human tendencies, we have now reached the higher light wherein we produce schemes of regulating everything, until liberty is but a name, and we govern ourselves by theories entirely independent of the characteristics of the people to whom our systems are to apply.

It is difficult to find any one, nowadays, who has not some “counsel of perfection,” and founded on it, some theory of government that would work perfectly with a perfect race, in whom neither self-interest nor passion existed and that, consequently, did not need any government at all.

The same could be said of any central authority, whether in Britain, or further across Europe.

All control passed to others, means they will meddle. And in meddling, they will postpone the inevitable, but each time they postpone, the crisis merely gets bigger, and more unstable. Eventually, there is no-one big enough to stop it.

We will shortly find out, if this will be in the next credit crisis. Those who have salted away bit-coins, gold and silver, will fare best. Those who have borowed to feed their insatiable habit to spend, will not surprisingly, not do well.

Money, real money (Gold and Silver) takes time to make, is hewed from the ground at great expense, and whilst its value varies with the day, the month and the year, it’s value never disappears totally and increases over time – even if in fits and starts..

Credit created out of a Banker’s pen, printing plates, or these days computer, can disappear in a cloud of smoke. Over 200 currencies have disappeared since the dawn of the printing press, and fractional reserve lending, but Gold and Silver are still an ounce of Gold, and a Pound of Sterling Silver, from which Britain’s derived its name, and now our currency takes its name.

Central Bankers, therefore are more the problem, than the cure.

Here, Daniel Hannan – discusses the implications for the future with Emma Reynolds who puts forward the case to remain.. Daniel Hannan puts forward his reasons for wishing to leave.

A vote to Remain is a vote for…
Big Government
BIG Corporations
BIG Banks
and BIG BROTHER.

Britain, grew into the world’s superpower, in the 1800s, and now leader of the 64 nation Commonwealth, by extolling those things that we Brits hold dear. The law grew up from natural laws – “Common Law”, where people devised the behaviours they supported, and those they despised. Law was a higher source of guidance in man’s affairs, and it wasn’t handed down from  “on high” – i.e. from those holding the reins of power – as has been the case in most of the world – and particular the Eurasian legal systems – Roman Law, Napoleonic Law, or Regal Law.

This piece lays out the historical context.

Apocalypse Now?

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GlobaDebtlPyramid

The image above shows how all the wealth of the world, is really built on an inverted pyramid of real wealth. That means, all those products above the green zone, are not real wealth, but paper claims on wealth. When the next financial crisis occurs, the value of all those products, will equal the value of those in the green-zone. They’re all derivatives – which means either the derivatives lose their value, the Gold and Silver raises its value, or some combination of the two.

Our figure heads, whether of Royal Blood, Presidential or Prime Ministerial appointees, have a large coterie of advisers, and those who pull the strings and influence events, behind the scenes.

Since, I began studying Markets, Politics, and Economics, in my student days in the 1980s, there has been a growing awareness of the Deep State. And those bankers who are part of it, manipulate the currency for their own ends. LIBOR, EURIBOR, COMEX prices and even asset values.

See: Banking Puppet-Masters

The power behind the throne, goes back far longer though, than most people recognise, and this group of people dictate the way that democracy, and politics is carried out from behind the curtain, particularly in the U.S. and the British upper class, who before them, were essentially the experts at this behind the door control.

During the early days of Banking, many of these Banking families – Rothschild, Morgan, Chase, Barclays, Seif, Warburg, Baring, and others, provided the finance, that allowed (or denied) what those figure heads could do.

In the days of the Royal Households of Europe, this essentially meant the ability to raise finance to fund an army, and wage war. For the financiers, it often meant funding both sides, and backing both horses in a two horse race.

It was usually a winning proposition for the bankers, whoever won the war. The debt remained, due to capitalism’s basic principle – “The Law of Contract” – even if the basic tenets of contracts have been watered down over many years, to allow people (mostly women) to change their minds… as on-line retailers are currently finding to their cost.

Baron Rothschild, famously got wind of Wellington’s win at Waterloo in 1815, ahead of the rest of the City of London, and sold off his holdings. Only for those who saw him, to react in his wake and follow suit. Rothschild then went on a wild buying spree, buying up assets for essentially “pennies on the dollar” as the Americans might say. When the dust settled, a huge transfer of wealth had occured from those shareholders who sold to the Baron and his family.

And so the model that bankers follow has remained to this day. Bankers know more about the inner financial position of their clients, than any other group of individuals. They wouldn’t use that knowledge to strike, when the iron is hot… Would they?

Banks loan out currency driving up property and corporate asset prices to unsustainable levels, only for the the currency supply to tighten, and thus cause a crisis, so that assets get sold off on the cheap. In the most recent example, we saw house prices rising inexorably, as Banks increasingly lent to those who might be considered high risk – the “sub-prime” market many have heard of. They then took advantage as the dead hand of property – mortgage holders took advantage as buyers defaulted on their mortgage payments, and the banks got thousands of homes on the cheap. Hank Paulson, allegedly made $5 billion in the sub-prime mortgage debt bomb. In a world without fiat currency, interest rates would adjust according to monetary demand, and cool things, or only allow those projects with highest return to be funded.

As an example, in the last crisis, bankers loaned to businesses such as Neil Mitchell, who bought a hotel, using finance and set about redeveloping it. In the final weeks before opening, his Bank, HSBC, used their restructure arm – and removed his financial support, causing his business to fail before it had even begun trading. They took the mortgaged asset (his hotel), completed the minor works still left to do, and now run a Hotel making them an income from all Mr Mitchell’s hard work. Imagine how frustrating it is for him, and all the other business owners like him who don’t have access to the information, that the Banks have, and withold from their sheep, waiting to be sheared in the next financial crisis.

During the final stages of the previous supercycle of commodities, that lasted from the mid 1960s to the early 1980s (about 18years) prices of most commodities rose manyfold. and in the Banking Sector, quite a few mid-size Banks folded in the 1973 Banking crisis. Then the UK. FT-30 stock market famously fell 83% reaching 156 and the UK government felt obliged to prop up failing industries and nationalised many of them – British Steel, British Airways, British Leyland, to name but a few.

Since the early 1980s, the thinking has changed – failed businesses should be sold off to their stronger competitors, as the Banks and other financial institutions – AIG, Fannie Mae, Freddie-Mac, Bear-Stearns, Lehman Bros, Lloyds, TSB, RBS, Northern Rock, and others were. (Though recent news regarding Bear-Stearns may concern many of its former investors.)

I’ve been thinking something similar to the 1970s will happen again, ever since I began studying this commodities super-cycle at the start of the millennium…Back then, Gold, and Silver went up just as it did in the 70s. Inflation took off in the late 60s, and early 70s, rising almost 8-fold for Gold, before pulling back by almost half.

Over the next 4-5 years (1974-79), prices fell first by close-to 50%, and then from 76 onwards, began rising, shallowly at first, but with increasing momentum, rising 8-fold again from the mid-cycle lows to peak at $850/oz in 1981 for Gold, and close to $50 for silver..

That, by my reckoning, if repeated, would take us to circa $8,500 for Gold, and $500 for silver by 2018/19 or in the years either side of these..

I put that forecast into print (on-line of course) as long ago as 2005. But as Jim Rickards and James Dale Davidson state, the next FOMC meeting on June 16th, will be critical. If they raise rates, this will suggest that the economy is healthy (Ha!) If not, we may see a major sell-off in the markets, preparation for QE4.. and that will probably send Gold (and Silver) eventually skywards…

Jim Rickards has even gone on record as suggesting a price for Gold of almost $14,500 for Gold. Wherever it goes, the price will be multiples of where it is now.

And this image below – compares the cycles from 68-76, with the period from 2000 – 2014. Anyone cannot fail to notice the similarities, merely the length of time is different.

Gold Price - 1968-2014

It has often been said, that history repeats itself, and many say that it doesn’t repeat, but it rhymes. The difference is, this time it really IS different… In the 1970s the super-cycle was essentially limited to Europe and the English speaking peoples – North America, Australasia, Southern Africa, and the suppliers of those commodities in Africa, who borrowed heavily as commodities rose, and then had control of those assets sold when commodity prices inevitably fell in the early 1980s causing national solvency crises in those indebted countries…This time the whole world, with 2.5 billion Asians and another several hundred million South Americans will be involved.

IF, or rather WHEN, the global meltdown begins, the governments and their Central Bankers, will have two options…

1. Do nothing (Unlikely)
2. Intervene with more monetary stimulus.

It is my view (and that of many others) that they will intervene.

What might trigger the Global Collapse?

As I’ve said before, a decision by Saudi-Arabia to sell oil in a currency other than dollars will bring an end to the agreement put in place in 1975, which propped up the dollar, and made it King Dollar.

The decision by the KSA, might (almost certainly, would) incur the wrath of the US of A, so along with an agreement to sell in an alternative currency, would also need some other nation’s military to back it up… China? Perhaps, but unlikely – at least not yet. Iraq’s leader Saddam Hussein, and Libya’s leader Colonel Muammar el-Qaddaffi, both attempted to sell oil in currencies other than dollars, and the outcome is there for all to see. A similar situation might prevail in the Saudi peninsula, which could trigger a spike in oil prices if major oil facilities were involved, and this would disrupt world markets and possibly trigger the meltdown.

Another potential trigger is a major nation defaulting on a payment to the Central Banks and the bond holders – such as triggered the Cyprus banking collapse, and the next domino Greece which put the PIIGS in jeopardy as the Banking crisis unfolded…

Another potential trigger is a major bank becoming insolvent. This could be caused because a business or country, with bank support, and perhaps large outstanding loans, fails, causing a major loss, over and above the banks ability to absorb those losses, causing a cascade.

It might be a major loss on a trade by a trader (similar to the London Whale) which affected JPM-Chase costing it $6.2billion in 2012, or as was directly the cause of the Barings Bank failure in February 1995, when Nick Leeson lost £827 million (circa $1.19 Billion at current exchange rates) a Bank that had held the English Monarch’s finances since King George V.

However, less well known according to Wikipedia, is the allegation that Barings Bank’s near insolvency in November 1890, as a result of a debt crisis in Argentina, caused the credit crisis of the early 1890’s and quoted from a book by John T. Flynn – written in 1932 “The preceding year [in 1890] the great Baring failure had shaken London and the rest of the financial world. America was shielded from its most virulent effects because of a bountiful wheat crop. But the following year all the forces of business disturbance were assembling, though the country as a whole hardly realized it. Gold was leaving the country at an alarming rate.”

As usual, when the financial world faces a crisis, Gold [and silver] is the safe haven of choice of large swathes of the investing world. And this sudden interest, drives prices higher… often much higher.

Barings also stands accused of supporting the south in the American civil war, and the Louisiana purchase, plus supporting France in the Napoleonic wars. As I have said, Banks will support whatever is in their interest, whether that is good for the rest of us – or not.

A solution going begging?

In my last post, I referred to a producing junior Gold miner, quoted right here in the UK. A company, I have been following for some 12 years. A company that has seen many twists and turns as management changes, and investments in different countries and ore bodies has impacted the scale and ownership of this company’s assets. But Geopolitics has also been a major factor. However, with the only mine, smelter and refinery of its type in the whole of sub-Saharan Africa, which to build such a facility from scratch, would run to $500-750 million.

The company has land holdings in 5 countries – with 2 producing mines. Not all of which are wholly owned, but like in many jurisdictions, jointly owned to a greater or lesser degree with state governments.

The producing Gold mine, comprises a shallow underground operation, currently mining at a depth of circa 200m and processing ore through a single facility utilising a combination of crushing, conventional sag milling, combined gravity and CIL process, electro-winning and bullion smelting.

A recent fund raising, to allow phased refurbishment of plant ran in two phases: the re-capitalisation of the mining fleet and refurbishment of one of the two mills, brought the mine back into production targeting a production rate of 2,500 oz of Gold per month (about 30,000 oz per annum). This was exceeded with Gold production re-commencing in October 2009, and the production for the financial year to end of the Financial year 2014 was almost 59,000 oz of gold, down slightly, from the previous year. Figures for 2015 are due in several weeks, and thus will give us an indicator of current affairs and cost structure.

The second phase of the programme included, refurbishment of the second mill and expansion of the leach circuit. In June 2011, the Company announced that the Phase 2 construction programme was completed with Mill 2 being successfully commissioned on time and within budget. Further, in March 2014 a pilot plant to recover gold from 13Mt of tailings was commissioned.

In its current mines, it holds reserves and resources totalling in excess of 3million ounces, in 2 countries, with controlled costs, and evidence of more potential in several of its holdings.

A recent management change has also reduced costs, such that all-in costs (C3) are now almost at break-even (@ circa $1250/ozt) Though of course, Gold’s NY price rose, earlier in the year, breaching $1300 before Janet Yellen’s dovish speech suggested that a rate hike was on the cards, and the markets saw this as an opportunity to buy the dollar. This strengthened the dollar on international currency markets, and Gold fell back as a result. Currently close to $1210/ozt (02-Jun-16). But, if the expected rate hike doesn’t materialise, it will also be taken by the markets as economic weakness, and a sign that more QE may be required. That may cause a sell-off in the dollar, and will send Gold up again.
Few opportunities exist in life to make huge sums of money, but this is one such time.

If you want to know more about this junior miner, and its prospects then respond in the comments box below, supplying your e-mail, and I will supply a fuller picture, details in reply.

The Road To Serfdom?

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0311_china-gold-hording_416x416
China’s Gold Hoard – is bigger than they claim – MUCH bigger.

In the last 12months, the World economy, has taken a distinct turn for the worse…Starting last summer, the Federal Reserve announced it would begin normalising interest rates. (read: raising them, by baby steps)

They intimated in FOMC minutes, last year that they expected to increase rates by 4 times in the next twelve months. As it is, some nine months later, they have managed to raise by just 0.25% and they now feel that they will manage only 2 increments by year end.

As the Fed Funds rate was raised by 25 points last year, the DJIA fell from its new all time high at almost 18,300 in early May 2015 to 15,670 in August 2015, and early February this year, before bouncing higher on interest rate movement

However, several commentators – Doug Casey, Jim Rickards, Bill Bonner, James Dale Davidson and others have commented that many large corporations are actually borrowing money at low interest rates to buy back their own shares, to maintain the illusion of prosperity, by reducing the number of shares in issue, which increases the value of those shares that remain.

The FT100 which peaked at just over 7,100, for only the second time since 2000, in 2015, has generally bounced around in a downward direction, reaching 5,500 in February this year, before some of the Brexit talk began in earnest, in recent weeks, and bouncing up to 6,400 mark in April. However, recent Brexit fears have again driven markets down towards 6,250 (6,262.85 as I write), and the trend appears down.

Indices around the world rose yesterday, except in Turkey, Argentina, China and Colombia where they continued their downward slide. Several Economies in the Americas – notably Brazil and Venezuela, are experiencing rising inflation. Indeed, a Sky News report, quoting the IMF suggested inflation in Venezuela, could rise to 4,500% over the next 3 years, unless something is done to change things.

Socialism, is once again being proven to be a failure. This has echoes of the 1970s, when Britain too faced its own crisis. And America too seems to be heading down this road.

See this:

A Letter to America… Don’t follow the European model… Daniel Hannan – MEP.
(A warning also to Remainians?)

In Venezuela, as Britain then, they have huge reserves of oil, but as new exploration, and fracking – particularly in American states, raised production, their levels last seen 30-40 years ago, at around 9-10 million bopd.

Prices went from $121 bbl to $28, over the winter period, but as the traditional summer driving season begins in America, coupled with rising vehicle numbers in India and China, and some slacking off of production, as several American oil producers have succumbed to the lower prices, oil has bounced back to the $48/barrel mark, and should remain in this $50-70 region for the foreseeable, unless, some of those new producers collapse even at these prices, and demand remains firm.

Both Brazil’s and Venezuela’s oil industries have suffered partly to corruption issues, but also there appears to be some involvement by America’s dark state, at least according to Nomi Prinz, ex Goldman-Sachs employee, and now author of several books as she appeared with Max Keiser, on the Keiser Reporton Tuesday.

All it will take is one large domino to fall in the next few weeks, and the prediction by James Dale Davidson (See Pic) will no doubt come to fruition.

EconomicPrediction-May-24th-2016

The IMF appears to be very concerned about world events spinning out of control, as the chief plate spinner extraordinaire – Madame Lagarde – appears to be struggling to keep all the world’s plates from crashing. She will undoubtedly have to run to keep all these increasingly unstable plates on the top of their poles.

Talk in the markets has also begun discussing QE4… Is this likely, as Gold has stumbled at the $1300 level, and pulled back? From a trading perspective, the Gold (AU) RSI (Relative Strength Index) hit 70, which suggests a temporary over-bought status, but this pull back will prove ephemeral too – perhaps lasting until the end of summer.

As George Soros, Hank Paulson, China, India, and many American Billionaires wiith their finger on the pulse, sense the mode shift, and begin buyng Gold again, while mainstream buyers sit on the sidelines – for now. However, the World Gold Council reported the strongest first quarter on record for Global Gold Demand. And the COMEX ratio of owners to ounces hits an new all time high – 500:1, meaning only the first person in 500 will get physical possession of their physical ounces, if they demand delivery. The rest will go begging.

When the general public gets involved, in this new gold bull, this will translate into direct increases to the bottom line for Gold miners, and the sector that gains most on such moves are the juniors. One such junior producer in Africa, has already experienced an almost 100% improvement over the last 5months from its extreme lows.

Although four nations already have taken steps down the road of Negative Interest Rates (NIRP) – Japan, Switzerland, Sweden and Denmark, with the U.S. also now considering this, if this happens, the rush to Gold (And by association – silver) will ensue, and the rise I predicted some years previously to happen in the 2018-19 period will come true..

I will be discussing the above miner in more detail in a future post.

But Jim Rickards latest prediction for the Gold price is over $14,400 per ounce.( See below)

EconomicPrediction-May-25th-2016

I think he may be slightly over pessimistic, but not by much.

And all other commodities will rise in similar fashion. If you haven’t got Gold, then your Dollars, Pounds, Yen or Yuan, or whatever currency you use, will be worth concomitantly less. and even a median income will feel like serfdom.

Time to put circa 20% of your wealth into precious metals. (in my humble opinion.)

But here Daniel Hannan, explains how the English speaking peoples made the world. (Even if some of them, are out to steal it from us)

 

Until next time.

When the money (Gold) runs out…

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As governments have used their ammunition in fighting to retain power for their Fiat currencies, the price of Gold and the Exchange Traded Product (ETP) or Exchange Traded Fund as it is more commonly called for Gold – the GLD has fallen.

But there comes a time in every charlatan’s performance when those watching no longer believe in the power of the magician pulling the strings behind the scenes.

In this case the arm of power behind the throne – the Central Banks – have sold or leased much of their Gold to Bullion Banks, who have sold this gold on the markets as their futures contracts came to an end, and the buyers took delivery, rather than as might have happened previously – settled in cash – it is increasingly obvious that as the number of contracts increase and more and more gold heads east to China and India, and north to Russia, and to numerous other central banks worried about their gold held in U.S. vaults, and have begun to increase their holdings, and repatriate their gold from overseas vaults, that it couldn’t go on forever.

And then this piece caught my eye…

http://www.kitco.com/commentaries/2015-09-29/Not-Enough-Gold-To-Pay-All-Holders-Of-Gold-Obligations.html

So what will happen when the gold does really run out?

Initially, I suspect Bankers will settle for cash, but probably have to pay a premium to do so, as those who own the metals contracts extract their pound of flesh. This will probably be under the radar, at first, but it will eventually leak out, and as more and more people have to settle for cash, the premiums will rise. This will feed through into the published prices, as the disconnect between the paper price and the settle price increasingly becomes obvious.

According to figures I’ve seen there are between 100 and 200 contracted ounces, for every real ounce in existence. This is how the Bankers came to dominate the world and its economies. The left hand not letting the right hand know the truth or what it was upto.

Fractional Reserve Lending meant lending out upto 10times the amount held on deposit. Of course this assumes they hold ten per-cent in reserve. BUT in the last ten years, those same bankers have had as little as 3 per-cent and that means they were lending out in excess of 30x their reserves. And that is the reason for the boom, and the bust when we had our Bear Sterns and Lehman moments.

If the Bankers persist in this lending and futures contracts binge, then it will end in disaster for the banks (and us) but at that point, the price of gold – both official and unofficial, will explode to the upside.

Of course in the meantime, as Harry Dent has stated on several occasions, the price may fall in the meantime, as first deflation due to demographics, and his convergence waves take hold, but as has been mooted on Bloomberg today, perhaps QE4 is but a printing press away?

And if it happens, when all that money leaks into the economy?

Can you say Boom?

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Digital Currency – The Last Refuge of a Banking Scoundrel?

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In the news over the weekend, we heard the story that Andrew Haldane, the chief economist and executive director for monetary analysis and statistics at the UK’s Bank of England, has tried to run up the flagpole, the prospect of a digital only currency. America too is discussing this.

Now, why would a Banker do this?

What is a Bank? Primarily it stores savings (Capital) for its customers, and loans out this money (well we’ll call it money for now) to businesses and others to finance the development of new products and services, which add value, assist in growth, employ people, and spread prosperity throughout the nation (or currency union).

However, when a country has excess savings, these are liabilities on the bank’s books, and has been touched on several times throughout the time of this blog, these have to be paid back. However, there may be times when there are fewer good opportunities to loan money out for the banks, with huge amounts of money sitting in savings and today is one such time.

The driving force behind this excess savings is demographics. Demographics is the study of populations. The studies look at birth, and death rates, gender etc, and at how those births and deaths impact the society, and the economy. Where we build schools, hospitals, and even infrastructure like industrial parks.

After the second world war, all those returning service personnel got busy making babies. It happened in America and the Pacific region in ’47, it happened in Europe in ’46, as those two major conflagrations came to an end.

Twenty years later in the sixties, those babies, now young adults drove the swinging sixties, and Carnaby Street, the music and fashion scene as they all began doing what young people do. The children of those people reached maturity 20 years later, in the 80s and early 90s, driving Punk music, New-wave and the New Romantics, the “Acid house” scene, and the Brit-pop and Indie scenes of the 90s. This was the shadow boom as you might call it. These children of the baby-boomers are driving the economy now, as they reach their 40s, and lead consumption spending, but soon this too will slow.

Of course the baby-boomers as they are known, those born after WWII, are now frantically saving for their retirements, buying buy-to-let properties, and investing in their pension funds and therein lies the rub. All that capital going into savings has led to several booms; in Technology, in Housing, and since the 2009 credit crunch, the stock-markets in general. But since early 2012, the baby-boomers have been retiring in droves at the rate of circa 8-10,000 people per day, in the U.S. alone, and because of the low interest rates, and the drive to “save the economy” the Central Banks have loaned the people, and their representatives (governments) huge amounts of money.

America has an $18 Trillion public debt. Britain is in an even worse situation (person for person) with a public debt of £1.4 Trillion ($2Trillion+) And those Bankers are now worried that they might not get their money back.

And what IS money? When money was just Gold and Silver, the Bankers got rich, by lending pieces of paper, that were exchangeable for Gold and Silver, that they had mysteriously created out of nothing more than paper and ink. This fractional reserve lending, grew their power, and grew their immense wealth.

The Houses of Rothschild, Morgan, Seif, Rockefeller and others who ran or owned Banks became the powers behind the thrones of more countries than could be imagined.

Digital Currency Drawbacks?

If we can just take our money “out of the banks”, this should force Bank Presidents to be prudent with it, or, as we saw with Northern Rock, we get a run on the Banks. When our money (or rather currency) is just digits on a Bank Balance sheet, we cannot. This means Bankers can fund whatever they want, without worrying about us cutting off their drug supply.

But a purely digital currency has several other drawbacks too.

With a purely digital currency, EVERY transaction will register on a computer somewhere. Tax Authorities will therefore be able to trace every transaction – And TAX it. That tax goes to pay salaries of government employees, but it also pays for those in politics, who may not always disclose where that money goes: Funding Wars overseas, providing incentives and making deals in private rooms under the guise of “National Security”, and it pays off the loans that bankers make to governments – all made possible by greater tax taking.

But a further worry is that the account details of every person will also need to be held somewhere too, making the prospect of 1984 as written about by George Orwell a frightening reality.

The informal economy disappears too.

Tipping a waiter, a Cabbie, a Pizza Delivery boy or even the Bin-man come Xmas time, becomes almost impossible. The loss of these ways of showing appreciation, potentially makes poor service a given, as with no financial incentive to provide excellent service, these people may offer mediocre service at best, or even leave the industry making many restaurants forced to pay higher wages forcing up costs, and thus reducing the number of visits per week, per month or per year. Giving someone a £50 note for a Birthday present, or Xmas present becomes impossible too. Teenagers everywhere will suffer, and grand-parents will actually have to get to know them and find out what their kids actually need – or want – and they may get a few unusual requests or worse…

But, the one big drawback for everyone, is not zero interest, it is negative interest rates. Which means charging you to hold your money. Anyone with savings in an account, or perhaps as the result of a house sale, becomes just another potential donor to a Banker’s lifestyle.

BUT the ultimate issue is one of liberty and trust. A business deal of old, demanded nothing more than the money, and a handshake. This relied on trust of the money, and the person. In a digital world, all trust comes down to is your credit rating, and your government granted identity number. Perhaps ultimately your radio frequency identification (RFID) chip implanted under your skin, so you don’t even need to carry a bank card.

But it also opens up a world of potential to deny you access to things the government thinks you shouldn’t see, or get access to. In effect WE become slaves to government, and the people who pull their strings, instead of government working for us. And that is the most important reason, why it should NEVER be considered the only way to pay.

“Bank paper must be suppressed and the circulation restored to the nation to whom it belongs.
“The power to issue money should be taken from the banks and restored to congress and the people.
“I sincerely believe that banking establishments are more dangerous than standing armies.
“I am not among those who fear the people. They and not the rich, are our dependence for continued freedom. And to preserve their independence, we must not let our rulers load us with perpetual debt.”

Thomas Jefferson – Former President of the U.S. of A.

And in his farewell address to the people, March 3, 1837, President Andrew Jackson solemnly warned the people against the Banker’s power, after the recent financial crisis; as the “Credit Crunch” is still ringing in our ears, it appears VERY apposite

“We are not left to conjecture how the moneyed power, thus organized, and with such a weapon in its hands, would be likely to use it. The distress and alarm which pervaded and agitated the whole country, when the Bank of the United States waged war upon the people in order to compel them to submit to their demands, cannot yet be forgotten.

The ruthless and unsparing temper with which whole cities and communities were oppressed, individuals impoverished and ruined, a scene of cheerful prosperity suddenly changed into one of gloom and despondency, ought to be indelibly impressed on the memory of the people of the United States. If such was its power in a time of peace, what would it not have been in a season of war, with an enemy at your doors.

No nation but the freeman of the United States could have come out victorious from such contest; yet, if you had not conquered, the Government would have passed from the hands of the many to the hands of the few; and this organized money power, from its secret conclave, would have dictated the choice of your highest officers, and compelled you to make peace or war, as best suited their own wishes. The form of your Government might for a time have remained, but its living spirit would have departed from it.”
(Read more at: The Coming Battle 2013 )

And Finally, if the above comes to pass, what will our International trading partners make of a currency, that can be conjured up on a computer by a banker? If China sells us Cars, Computer Equipment, Smart-phones etc, and all they get in return is a ledger entry on a computer, what confidence will they have that those digits will be worth anything, when they decide to spend them, possibly years later. What would you do if you were China?

If we are ever to have international finance based on trust, then there is only one solution – currency must be in the final analysis, backed by precious metals. and those metals represent true value, even if their value may vary from time to time – but Gold is still gold, and Silver is still silver. Platinum, and Palladium too are useful – usable in catalysts, jewelry and other uses. Silver is usable in 10,000 uses and rising, and its value and availability are about to get a whole lot rarer, and a whole lot more expensive as a result.

So if this does come to pass, who is really in charge in the UK? The Government? or its Financiers?

If you want to move your money out of the Bankers’ way? Then Click Here to get started.
PS:
After posting this I discovered a video clip by Max Keiser of the Keiser Report, which mentions the speech by Andy Haldane. Let me know what you think below.


W.

Chinese Torture?

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Anyone over 50 (at least in the UK.) will no doubt have learned of so-called Chinese Water Torture, which was discussed in the playgrounds of schools the length and breadth of the country during the 50s, and 60s – perhaps this misplaced discussion was just childish minds being over imaginative, or the result of the war films that were the standard fare of the era, or perhaps just the result of propaganda by a biased media, or just by ill-educated professionals, who had been mis-informed and we juniors picked up on it – we can but speculate.

According to the stuff of legend, this involves suspending a bucket or other recepticle full of water in which a small hole has been punctured, such that water will drip out at a fairly consistent rate over a fairly lengthy period of time.

The torture victim, is placed under this recepticle, and strapped in a fixed position. The slow but monotonous dripping, at first appears to offer no threat to the intended victim, but over time, first becomes an inconvenience, then a minor irritation, then an annoyance, then a major irritation, then downright torturous.

The slow drip, drip, drip, ratchets up the pressure on the intended victim…

Applying the Torture?



So, this analogy brings me to the reason for this tortuous piece.

As I wrote some weeks ago, China informed the world, back in May, that they had improved their Gold holdings over the previous six years from April 2009 at 1,065 tonnes to 1,658 tonnes (allegedly – since many commentators think this was significantly under-reported)

According to reports, China announced it had purchased an additional 19 tonnes in July, but news released a few days ago, says they have also now added an additional 16 tonnes in August. This now brings their total to 1,693 tonnes, and according to silverdoctors.com, they’ve imported “a whopping 112 tonnes” so far in the first half of this year from the LBMA, up from the 110tonnes in the whole of 2014.

So is this “Drip, Drip” of additional purchases the equivalent of the torture method mentioned earlier for the FEDs?

China sold some $94 Billion in Treasury Bills, which might also be sending a signal to those in the non-BRICS Banking world.

And according to Alisdair Macleod, who referenced a Zero Hedge article, he said that if nothing else, it confirms the gold market is plagued by disinformation, not limited to Comex. Besides the conflict between the bears in the futures market and the physical bulls, on one day we are told of record Indian gold and silver imports at 126 and 1,400 tonnes respectively for the month of August (Koos Jansen), and of Indian gold demand “remaining weak” (HSBC). The former is a hard number, the latter an opinion, but it is opinions that are quoted most in the mainstream market commentaries.

Also in August, Chinese public demand reported on the Shanghai Gold Exchange totalled 265 tonnes, so between India and China identified demand exceeded the world’s monthly mine output by about 56% – Over half. Given anecdotal evidence of increasing physical demand from elsewhere in Asia and also in western markets by the general public, the drainage of physical gold previously available to cover futures and forward contracts, as well as unallocated bullion bank accounts is at very high levels. No wonder there is so little registered gold in the Comex vaults.

Alisdair Macleod September 3rd 2015, interview…

Now we hear via Jim Willie interviews, that the Tianjin explosion, may MAY, have been a Langley (i.e. CIA) inspired or managed incident. Remember, this was in an industrial park, port, and the home of a chinese super-computer, which according to JW, managed not only financial transactions of the emerging Chinese Banking and Financial Services Industries, but Chinese Military, and with a footprint of 1,000 square feet is HUGE. Within days of the explosion, the whole of the North-East of the U.S. Airline databases went down. Was this a revenge attack by Chinese hackers? We shall never really know, but we can speculate.

As things stand, the British, German and American Financiers, who essentially rule western industry and politics, will have control wrested from them, when the Chinese wrest control of the Gold market, and Precious Metals are priced in Yuan/Renminbi (RMB) and Chinese currency will be required in most trade deals, and many east-asian nations may, MAY only accept Renminbi for their products, and that will help seal the fate of the dollar.

As things stand now, 32 nations have currency swap facilities with China in Chinese currency, as I suggested some months ago, when Saudi-Arabia began discussing oil deals with China, as a way of balancing the emergence of the changes in the oil markets which have driven down oil prices largely because of fracking, and deep water production made possible by cheap money loaned out in the form of Corporate Bonds, we may see oil wars, but therein lies the problem.

As oil prices have collapsed from their 2007 high of $147/barrel, those corporate bonds, and finance raised to drill for shale oil, will come due, and many of those companies, are now struggling to make money. According to Jim Willie, the oil bond market collapse could be greater than the sub-prime crisis, that exploded onto our screens in 2008.

And at this particular point in time, the world credit markets stand on $700 TRILLION worth of derivatives. When the derivatives market collapses, perhaps as a result of those oil bonds, we could be seeing the end of the dollar empire, and thus the end of Western hegemony.

But this is of course all speculation…

However, when this collapse happens those who have savings in Banks, Savings in Stocks, Savings in Pension Funds, IRAs, SIPPs and bonds, will all suffer. When all those savings – excess savings as “Conant” once in the late 1890s called them, sought out productive assets overseas, in the round advocating a dollar Empire in the process, rush for the exits, from assets with counter-party risk, to assets with none, then the long awaited price reset in Precious Metals will begin.

And this price reset, will cause a spike in metals prices as many of those manipulators, who are currently shorting the price using leveraged shorts in such products as ETFs, ETPs, Options, Covered Warrants, CFDs, Spread-Betting accounts, and Binary options accounts, will all be rushing for the exits at the same time.

And where will the carnage lead them? To the one asset class with no counter-party risk.

Have you got yours yet? The sand in the hour-glass may be fast running out, as reports emerge of severe shortages in small denomination coins and bars. 100 Kilo bars are still plentiful in Silver, and larger bars. This may be a fabrication issue – i.e. refineries struggling to keep up with coin and small bar demand, or it may be that there is an emerging shortage of silver in the supply chain. If you were a miner, would you sell your ore into a falling market?

Remember, no-one will sound the bell identifying that now is the time to act. If you haven’t already begun to prepare, time may be fast running out.

It will be prudent too if Jim Rickards and Bill Bonner are correct, who have been following this inevitable crisis from its inception in the 1970s to its current conclusion, advise us to take currency from our bank account, and keep it outside the banking system, while we still can. About a month’s currency should suffice.

The banking crisis in Cyprus, in 2013, and Greece in 2014/15 were just stepping stones on the way to this one. Legislative changes forcing European Banks to seize their depositors’ currency rather than hit tax-payers for another bailout have been put in place. The digits on the banks ledgers are now theirs, not yours. You have been warned.