Precious Metals

The Last Chance Saloon…

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Then… and NOW…(upto 2014)

The big decline in the precious metals prices from 2011 to today, punctuated by a sharp reversal beginning in early 2016, appears to already be undergoing a final exhaustive bout of selling. The big decline remains to be the most important development for gold and silver investors. Why? Because this decline’s end is likely to present the ultimate buying opportunity for precious metals and for PM mining stocks over the next decade.

Before elaborating on this all-important issue, let’s briefly discuss the current events. The USD Index has rallied as it moved higher recently, due in large part to Fed jabbering about rate hikes, and the final 0.25% rise recently, after Gold reached its March 2016 interim high, with further talk of 3 more rate hikes in 2017, this dampened enthusiasm in the paper markets ensuring those with derivatives on their side could short the metals and thus drive down the price to interim lows, but the New Year will probably reverse that, as the festive season ends.

I’ve previously said that it was possible that we would see something like that in the short term. That’s exactly what happened – metals and miners moved a little lower especially in recent weeks. BUT, just before Xmas is when people are buying gifts for friends and family, not thinking about their portfolios, so markets quite often, soften at this time of year. So, for the brave, a VERY good time to buy metals and/or stocks (as I did today) in those companies with good assets, strong management and good fundamentals, with a longer term strategy for improvement in what should be a rising market for PMs – especially as the Trump win, will probably mean rising inflation for that nation in the medium term – if he keeps his promises.

Those companies who report in British Pounds, will also have a major boost to their bottom line, as profits reported in pounds sterling will reflect the recent decline in the pound’s value versus the dollar, in which many commodities are priced on international markets.

I’ve discussed the final bottom target for gold in previous posts, at circa 50% of the most recent high ($1925 – in 2011) – Here we discuss WHEN gold is likely to bottom.

Today’s price of $1129.85 is not quite at the lowest point – that was $1065 in the middle of 2015, but this pull back from the $1320 area of a few months ago, serves to mark what could be the nadir of a cup and handle formation on the Gold Chart, though it might more likely resemble a shallow bowl, as this decline extends for another year of the secular bear, in a longer term Bull market.

What may seem odd, on a quite different chart – is the one I’ve posted several times since the start of this blog, featuring the comparison of the last two decades with the late 1960s to 1981.

Why? Because, in a globalized economy with interconnected financial markets, no asset can move totally independently from other ones – and this is especially the case with gold and the Dollar. In most cases when the USD plunges a lot, gold is likely to rally a lot and when the USD soars, gold is likely to decline substantially. That’s likely to change in the final stage of the precious metals bull market, but it doesn’t seem we are quite at that point yet.

Therefore, the million-dollar question can be asked differently: when is the USD Index likely to form a very important top in the near term?

In my opinion, it’s most likely to happen in late January or early February 2017, with the second half of January being the most probable target. Trump’s Presidency begins at the peak of a long bull market in DOW stocks, due to Fed Funds Rates being as low as they are, with ESF (Exchange Stabilization fund) intervention and interest rate rises, which will begin to affect costs of doing business, in America, which will add to those corporation’s costs, yet do little to stimulate consumer spending which features so large in the overall picture in the U.S..

Let’s start with the discovery. What was the key thing that happened in the USD Index in the past few years? It rallied sharply and broke the all-important 100 level, or rather – it tried to – break above it, but failed and declined substantially. There were other attempts and they failed as well and were followed by an even bigger decline.

Since history rhymes, the big question is: “When did we see something similar?” Almost 20 years ago – in 1997. That’s the only time in the past 20+ years, when the weekly RSI was well over 80 (besides late 2014 and early 2015). This fact alone is something that should get your curiosity, but the big number of other similarities and how precise the key one is, should get your attention.

After the USD Index initially moved above 100 in August 1997, it declined sharply and it took several months before the next rally begun. The rally started after the USD moved to the 50-week moving average. That’s exactly what we saw in the more recent past – in 2015. What happened next in 1998? The USD tried moving above 100 a few more times, but finally declined substantially and this time the decline took the USD to a new low. Again, the same thing happened in 2015 and 2016. The shape of the rallies and declines was not identical, but it’s nothing to call home about – after all, very different events accompanied both time frames.

Up to this moment, the above analogy can be viewed as interesting, but perhaps not particularly important. What changes everything is an additional analogy – the size (in terms of both the price and extent) and shape of the 1975 – 1977 Gold price decline. The entire price trend, from 1968-1975, you would be able to guess by looking at the chart above, is eerily similar, to the period from 2000 to 2016, just merely extended over a few more years in these latest charts. Of course, the moves are not 100% identical, but are so close that we can view them as such.

In light of such significant similarity, we simply can’t ignore the likelihood that what followed the previous USD bottoms are going to follow these as well – especially as, so far this similarity is playing out near-perfectly.

Plotting the 1998 – 1999 rally on the current situation provides us with approximately 104 as the USD next target, but let’s focus on something different. How is the USD Index moving after the bottom?

Back in late 1998, the USD Index moved sharply higher, above the trend line and topped close to 97. Then it declined below 94, but the key thing is that it declined below the target line by approximately as much as it had previously rallied above it (in other words, the trend line continued to rally through the middle of the short-term decline). The bottom was formed more or less at the rising support line based on the previous important bottoms.

What happened earlier this year? Pretty much the same thing – the USD Index moved sharply above the rising trend line (the exact copy of the line from 1998 – 1999), then it declined below it by approximately as much as it had rallied above it previously, and bottomed. The bottom was formed more or less at the rising support line based on the previous important bottoms. The similarities are indeed extraordinary and the implications are very important. As far as the shape of the upcoming rally (the way the USD gets to its target) is concerned, we don’t have to see identical performance, just as the way in which the USD tried to move above 100 in 1998 wasn’t very similar to the way it tried to move above the same level in late 2015 and early 2016.

Still, the rally is very likely to end in a similar way to what we saw back in 1999 in terms of length and the size of the rally. So, when and how high is the USD Index likely to move? At the first sight we see that the target is at approximately the 104 level.

As far as time and the WHEN question is concerned, we saw the bottom in the dollar on May 3, 2016.

In technical analysis terms too there’s a big indicator. It’s the target based on the big reverse head-and-shoulders formation that started to form in late 2015 and was completed just a few days ago.

The size of the “head” in the head-and-shoulders and reverse-head-and-shoulders patterns is the size of the rally that’s likely to follow. We already saw the breakout (at about 96) so we can use this technique. We mark the size of the “head” and the target based on it. As discussed, this technique points to 104 as the next major target.

Given the likelihood that we’ll see a big rally in the USD Index in the coming weeks, there is a very good possibility that we’ll see gold at new lows. It seems that we still have time to prepare for the ultimate buying opportunity in gold, silver and mining stocks, but this time is rapidly running out. New Year’s Eve may be your last best chance.

So, will gold continue to plunge if the USD continues to rally, like it did in 1999 – 2001? Not necessarily. If could very well be the case that prolonged strength in the USD Index will not really be due to the inherent strength of the USD (or the U.S. economy), but due to weakness in the Euro (if the latter continues to exist, that is) and in other major currencies. George Soros, has reported that Brexit may cause the break-up of the Euro-area, and I have a sneaking suspicion, on this (as on many other things) he maybe right.

If this is the case, gold is likely to rally due to the demand from these other country’s Central Banks and investors fleeing the Euro. Consequently, the discussed analogy has important implications for the next few years.

The USD Index could continue to rally, but not necessarily due to the demand for dollars, but the lack of demand for other currencies. Especially if the EU implodes, then all bets are off.

One other thing that happened in recent weeks, was the events in India, where the Premier Modhi, used vague worries about the Black Market and Terrorism to attack both the currency markets, and the Gold markets simultaneously,… The abolishment of the 1,000 and 500 Rupee notes, and the slap down of the Gold markets were a sign that those behind the financial systems are terrified, that we the people will not give the government their taxes to pay down the debt, and these banksters might actually need to work for a living instead… (he said cynically)

Summing up, while the short-term indications for the precious metals sector remain range bound, the medium-term trend remains bullish and it seems that the final bottom will be formed in the first months of 2017, with the second half of January 2017 being the most probable time frame.

Meanwhile, it seems that any potential profits on my long positions will stagnate further before this trade is over and the up-trend resumes.

Here’s how we got here…

And, here, we hear how it will play out from one of the world’s best investors…

If you like this piece give us a like or share it to your FB page. (Click the buttons below)

After posting this, I came across this item in King World News web-site, that draws a similar comparison, to the one, I spotted some several years ago…

http://kingworldnews.com/worried-action-gold-silver-just-read/

In it we see the image below…Note: The image uses a logarithmic scale on the left, not Gold price… And suggests the 8-fold price rise we saw last time, from trough to peak, will be less than the next mania phase… We might conclude that it might be 10 x the low price of last year, taking the Gold price to circa $10,000… Remember where you heard it first…

kwn-goldpricecomparison1970-2000-20161021-1024x665

And Alex Jones is in sparkling form, as usual…

W.

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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.

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.

Profit Taking… When and Where?

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Those who have been reading this blog for some time, may remember I have posted some commentary on Precious Metals miners, and energy suppliers over the last 12 months.
Oil prices - where will they stop?

In one of my missives, “Transition Vamp? Or “How the Crash will be won!”” I suggested that you might like to explore one or two companies in these markets.  In the one linked to above, I suggested that a junior miner on the London AIM market [JLP] with a major platinum resource in South-Africa, could be worth a punt.   If you had decided to do your due diligence, and bought some within a few days of this, you could have bought shares in this particular junior at the miserly price of 1.3p per share.

Today you would be glad to know, the price is a more realistic price of 3.78p. If you have bought, then I now suggest taking some profits, and leaving the rest to run – essentially for free. It is possible that the price has run up a little too far, too fast, and a pull back may ensue, which may support topping up or using your profits to buy back more than you originally held (Top-up at below 2.5p).

At 3.78p, your investment will have returned a nice 190% profit. The other company mentioned back then “Lightbridge” is unsurprisingly not doing so well, though as I recently said in my last post, this company is moving its business forward, but its price has languished, falling in line with the general market for commodities. The price if you had bought in October last year would have been $1.85 (give or take 5 cents), and today’s price is now a very lowly $0.80.

The fall in Uranium prices coupled with a fall in oil, due in part to Saudi-Arabia not cutting back production in late 2014, has meant the price differential between various energy sources is not as stark as expected. This situation is likely to turn around as the glut in oil due to fracking, and the end of the START treaty uranium glut disappears, meaning the fall in prices of these materials begins to turn around. This differential in energy costs will lead Nuclear facility operators to look for ways to be more cost effective as materials, and wages begin to eat into profits, and Lightbridge’s recent revenue falls should rebound.

It might be prudent to add to this position if/when oil breaches the psychological $60/bbl mark, and Uranium prices begin their rise again – as I expect within the next 6-12 months.

W.

We’re all slaves now…

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Over the previous weekend, I bought a DVD, of a film, I’d been hoping to watch for some time. I would have gone to the cinema, but my wife prefers Rom-Coms, to historical dramas, and my friends all live disparate lives, so I had to watch it home alone.

It featured that giant of the acting world – Daniel Day-Lewis, in a role he was nominated, and won an Oscar for, having been directed by Steven Spielberg – Lincoln.

The film tells the story of Lincoln’s finals months, as he negotiated with the Confederates who were on the point of being beaten in the Civil War, and also with his own Congress to add the 13th amendment to the constitution. Sally Field played his wife, and her part conveyed the pain that she and Lincoln had to endure as their sons enlisted, or were killed, and as his wife blamed him for their loss.

The 13th amendment effectively brought an end to slavery, and set forth the proposition, that all men were created equal in the eyes of the law, and thus the ownership of another human was contrary to God’s Laws.

The final debates took part in January, and after some political back-slapping and chicanery; The vote, took place, if the film was at all accurate, on 31st January 1865 – almost exactly 150 years ago. The Civil War ended barely three months later and the peace treaty was signed in April of that year.

I mention this, because as a resident and citizen of the U.K, like so many U.S. citizens, the politicians have so indebted us, as to effectively make us all debt slaves to the banksters.

When a Central Bank creates money out of thin-air, to buy up assets, the Bank owners effectively are able to buy assets on the cheap, that they can either sell later at inflated prices, or use to earn income from as a “Rentier”. Bonds being the case in point.

The term “rentier” derived from the French term just prior to the French Revolution, when the various kings, but especially King Louis XVI granted privileges to certain nobility and others who were similarly closely connected to the money power. These privileges granted (for example) the right to collect a toll on a bridge, river crossing or road.

The right to be the monopoly supplier and thus to extract monopoly profits from the citizenry, who became increasingly disenfranchised, dissolute and the poorer while the idle rich were kept in the lifestyles to which they felt obligated.

However, these changes over time, slowly strangled the economy to the point where free trade was stifled. To paraphrase Mrs Thatcher who once intoned something akin to – “They know the price of everything, and the value of nothing.”

These changes ultimately led up to the Revolution, and the former wife of the king – Marie Antoinette issuing her now infamous phrase. When she asked the king why the people were revolting – his reply was “they have no bread” (or words to that affect) to which her reply has become the stuff of legend: “Well let them eat cake.”, though historians suggest this was just “journalistic cliché”

Although these events were important, it wasn’t the real source of the revolution – that was probably because of the financial situation. John Law, a Scot, had introduced in the early 18th century a financial system that inflated land and property prices, disenfranchising those without property, though the economy was also not healthy due to poor harvests, rising food prices, and an inadequate transportation system (due to those privileges mentioned) that made transporting of goods costly and therefore food even more expensive.

The sequence of events leading to the revolution involved the national government’s virtual bankruptcy due to its poor taxation system and the mounting debts caused by numerous large wars between the British and the French.

However, the Americans too once were being bled dry by over taxing authorities in the form of taxes from King George III, and this led ultimately to the Boston Tea Party, where British Cargo Ships were boarded in the dark of the night, and their cargoes of tea bound for England were thrown overboard into Boston Harbour. Thus began the American Revolution.

Which leads me to today.

In the world of offshore asset protection and personal finance, you nearly always come across the claim that there are only two countries that actively tax their residents’ worldwide income: the United States and Eritrea. All other countries only tax income earned at home, though the UK is making steps in that direction.

But, that rule is apparently no longer true.

It turns out that in the early 1990s, Chinese tax officials went on a series of fact-finding missions around the world. One team enjoyed what The New York Times describes as a “long visit” with the IRS, and came away with “a two-volume bound copy of the U.S. tax code and a five-volume copy of I.R.S. regulations.”

After reviewing the materials, the Chinese government decided to write a tax code that would allow them to tax their residents’ worldwide income … the only problem is, they had no idea how to enforce it. And then FATCA came along. Now China knows how to achieve the same.

And given the recent spending on saving American, and other nation’s Banks, the Federal Reserve, have now indebted the people of America and the customers of Europe’s bailed out Banks, to the tune of more than $30 trillion.

With just 325 million Americans, and according to recent evidence, only 63% of the population actively engaged in the workforce, paying that debt has only two possible outcomes – little possibility, and no possibility.

Roughly, 180 million taxpayers, will need to pay almost $95,000.00 each, plus interest (whenever interest rates begin to rise) to pay down this debt, and that’s before any further spending by the successors to Obama’s legacy, or of the unfunded liabilities in medicare, medicaid, pensions or social care.

This indebtedness, is the basis of modern slavery. The UK debt per household is not quite as bad, but is bad enough. the last time I calculated it, it was a mere £76,000 per household of four, but when you break it down to taxpayers, it goes way up.

So you can be forgiven for trying to protect yourself. In the years that follow, I expect governments on both sides of the Atlantic to come after retirees pension pots. We hear so much of how political parties have learned their lessons in regards to spending, but people have short memories, and the parties have too often broken promises, then asked for forgiveness afterwards.

But, one of the ways that you can protect yourself, is with precious metals.

I know, you’ve probably heard this too many times over the last 15 years… You’re probably thinking – “What makes you think precious metals are the answer? “, or “Yeah, right!”.

In the last 15 years, Central Banks have again begun buying Gold, after 30+ years of sales, and falling interest rates, many have asked for their Gold back – Venezuela, Holland, Austria, Germany, or asked to audit their holdings – like Australia.

China has been buying up Gold like there is no tomorrow. India, has historically been the world’s largest buyer, but this has now been overtaken by China’s insatiable lust. And China has been covertly buying from its wholly owned miners, as well as using its huge dollar reserves to buy on the open market, as the Gold price has fallen from its high of 2011.

In fact Jim Rickards has mentioned that he believes that the intention is to protect its huge dollar reserves as the expected dollar collapse occurs, and they’re buying using the dollars they’ve earned selling to the U.S., and loaned the U.S. buying up the Treasury Bonds that have been issued over the last 8+ years but it appears they are now, along with Russia, net sellers of Bonds, and as Jeff Opdyke, Investment Director of Sovereign Society has regularly posted, when China announces its official holdings to the world – all hell will break loose. (though that was done last year in 2015, and to little fanfare)

Because now, they’re increasingly worried about the value of those dollar bonds, and as so many attest, the Chinese are masters of the long game.

It is even possible that China, through the BRICS Development Bank, which Britain recently joined, is seeking to back its currency (at least partially) with Gold, giving it the status that the U.S. has hitherto had.

As inflation begins to pick up in the years ahead, the urge to buy gold, to protect large dollar holdings, will gain traction, and all assets that rise in value with inflation will be chosen as the protection of last resort. But any asset that is the liability of someone else, that may fall to zero, will be sold. And what happens to any asset when everyone wants to sell at the same time?

As interest rates rise, loans will get more expensive, Bond values will fall, and loans will get called in.

Asset values, secured against loans, such as mortgages on property, will fall in value, just as they did in 2008, and that will mean we are back where we were in the “Lehman moment”. Except now, the debt load worldwide, has risen to such a size, that there is no-one big enough to bail out the Central Banks of the world.

Then governments will do what they have always done – seize their citizen’s wealth. (Chancellor Denis Healey famously remarked, he would ” Tax the Rich, until the pips squeaked.” in 1974)

Banks that fail, will seize their depositors money – Cyprus times ten – and Deposit Insurance will not be enough to save the Bank or its Depositors – too Big to fail.

Only precious metals held in the hands, or in secure vaults as custodian assets in safe political environments, with a history of ensuring the sanctity of custody and ownership – not deposit boxes, which governments have now legislated are Bank’s assets, will be safe.

Overseas held precious metals miners too, will mean an opportunity to increase your wealth as the coming collapse unfolds.

One junior miner with assets in at least four countries in Africa, with 18% of a Diamond mine in South-Africa, a 75% ownership of a Nickel mine and smelter in Zimbabwe, a similar ownership of a Gold mine and refinery in the same country, Diamond assets in Angola, and a growing asset base in Democratic Republic of Congo, with a huge gold-copper find there.

To-date, this 9 kilometre rift has only had 3 kilometres explored, and already 2.9 million ounces have been defined as a resource. This miner has a P/E of just 4 (meaning the company earned a quarter of its share value in one year)

Anyone, who has studied markets for any length of time, knows that on average a healthy PE ratio of about 15 is considered normal. Values in excess of 20 are considered expensive, and values below 10, are considered cheap. So a value of 4, means that if the value of the company increases 3 fold, it would still be cheap. I’ll leave you to draw your own conclusions…

And this mysterious company is? ASA Resources on two exchanges – London (AIM: ASA.L) and was  targetted for a hostile takeover, when its board were removed, and its name changed from Mwana Africa (MWA.L).

Of course, this is not a recommendation to purchase, but perhaps an instigation to do your own research…

And if silver is more your thing… One company I have followed for several years which to be honest has only just managed to survive the onslaught of the falling silver prices from the highs of 2011 down to the current silver price of around $16 might be worth your investment research. For many silver miners, the current silver price is below operating costs, but this miner, which was a producer for several years using a toll-mill agreement (i.e. Leasing someone else’s mill and smelter) has managed to survive after divesting itself of some assets, after a failed financing agreement had to be called in and payments went unmade.

There are many, who feel that the silver price, that has fallen so low, will equal the price of gold, as Silver’s industrial uses rise, silver has a wide range of applications. It is found in jewelry, electronics, batteries, mirrors, solar energy, and water purification, just to name a few (10,000 and rising) and the amount of available silver falls. Seventy five years ago, as U.S. president FDR, confiscated that nation’s silver (and Gold), the above ground stocks of precious metals had a 5:1 ratio in favour of silver. In 2013, that ratio had totally reversed, and there was now a 5:1 ratio in favour of gold. Furthermore, there are those who think we may run out of available mine-able silver – TOTALLY – by the mid 2020’s.

Silver is used in small amounts, so small, that recycling would be so costly as to make it almost impossible to achieve economically. And we currently use circa 680 million ounces each year. Though demand in recent years has risen so far, and so fast, with U.S. Silver Dollar Eagle sales rising to previously unheard of levels, that the current price of silver, which is widely believed to be manipulated to protect the dollar hegemony is likely to rise spectacularly, when the price can no longer be held down.

There are a number of reasons why silver may begin its meteoric rise this year. It has already risen from the low $14.00 range to $17, and most of that came in short bursts in February, and April.

India is the single largest consumer of bullion in the world. As the silver price went down globally, consumption went through the roof in India. India’s first quarter 2013 silver demand was up to $1.78 billion — a 311% increase from the previous year. In the first eight months of 2013, silver imports in India reached 4,000 tons, more than doubling imports during the entirety of 2012.

There were two driving forces behind this trend. First, India placed extremely tight restrictions on gold imports. As a result, sentiment in precious metals shifted towards silver. The second factor here is inflation. With the Indian Rupee inflating a staggering 9.3%, it’s no wonder the nation was buying as much silver as they can get their hands on. The peak silver import hit 5,819 tons in 2013, which was the all-time highest it had ever been.

Industrial applications for silver make up nearly half of global silver consumption, and a rebound in global manufacturing is going to drive up demand. The JP Morgan Global Manufacturing PMI has indicated growth for 19 months straight, while factories in the U.S., UK, and Asia reported increases in activity.

In 2013, there were two devastating landslides at Rio Tinto’s (NYSE: RIO) Bingham Canyon mine in Utah, one right after the other. Over 165 million tons of rock went down to the mine floor, suspending production indefinitely.

This event was, without exaggeration, a catastrophe. It was called the biggest non-volcanic landslide in the history of the United States, and is considered the first landslide to have triggered earthquakes (instead of the other way around, which is common). Fortunately, no one was injured by the slide.

The Bingham County mine is the second largest silver mine in the U.S. and accounts for a staggering 16% of national silver production. So we’re talking about four million ounces of silver per year that have essentially vanished — a strong catalyst for a rise in prices

Silver hit its peak value in 2010, going from $16.94 per ounce all the way up to $49. Since then, the price has come down, but demand hasn’t – it has only grown.

In the first quarter of 2013, silver ETFs purchased 20 million ounces of silver.  And in June of 2013, the world’s largest silver fund added a record of 572 tons to its inventory — more than all of its 2012 purchases combined.

This is incredibly important, because it shows us where smart money is going in the market.

And the company I was telling you about has a property in Zacatecas in Northern Mexico, a historical silver mining district. Four rounds of drilling have identified 50 million ounces in the proven category, and 80 million ounces in the probable category, The company is Arian Silver (AIM: AGQ.L)  with  113.69 million shares in issue, at 1.25 pence, when the silver price rises to $100.00+ I have been expecting, this company will rise with it.

 

However, I have also learned of another Copper, Gold and Silver miner, with huge reserves, and the cash to develop it, though some political interference from the government has squashed some of the enthusiasm, and taken some of the shine off it in Mongolia, which does not have a history of stable political institutions and a threat to improve the 30% government holding by an incoming President, brought the share price down thundering from its highs of $27, to its currentlevel. Turquoise Hill Resources though (TRQ.TSX) has huge resources, and is off the radar for many investors at the moment. A fresh rise in metals prices will bring this miner back into focus, and with such huge reserves, and a major corporation in Rio-Tinto, and with the share price at £1.91(C$3.52) as at 26/4/16 these are set to rise

TRQ - Moonshot in the making?
Production figures show rising production at a time of rising prices…

Inevitably we can not know when the Gold and Silver prices will rise to that extent, but it is my sincere view, that we are about 3-5 years away from the steepest rises, but that we may see smaller rises over the period between now and then.

You pays your money, and takes your choice.

Money for nothing, and their clicks for FREE.

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Stagnation, Inflation, Deflation, Dis-Inflation – and more – Hyper-inflation?

Back in 2010, in October, William H. Bonner of Agora Financial, a Baltimore based Financial Publishing house and regular commentator on the Financial Markets, released the following piece. Since then, the markets have boomed in some areas, and bust in others. But the real value of many of life’s essentials: Food, Clothing, Shelter and the basic necessities of life, and many of life’s “nice to haves” – Copper, Tin, Zinc, Nickel, Iron, Gold, Silver and of course Oil and Gas, have all experienced significant price changes. But are the prices accurate? Do they reflect the effort and cost of capital needed to extract them, or of their true value, if we run out of them? We may live to find out…

That’s the trouble when you start printing money for nothing, the people who get it first make the most profit, and the further it spreads out from the central bank, the less profit it appears to make. But the good Central Bankers, will do everything they think they can to make things better. The only question is: “For whom?”
Read on to find out.

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Plaza II Accord

Bill Bonner – Friday, October 15, 2010

Keynes was right about one thing…

Peace talks broke down last weekend. Observers had expected the IMF meeting on the weekend to result in the equivalent of the Peace of Amiens or the Surrender at Appomattox. But Treasury secretaries and central bankers went home, unpacked their bags, and resumed their premeditated mischief.

The dollar went down. Why would anyone pay 100 cents for an old, worn out greenback when the Fed promises to create trillions more of them, brand spanking new? Europe and Japan resumed firing with their new QE guns. Asian nations sent out snipers to intervene in the currency markets directly. And China and the US resorted to “trench warfare,” reported The Financial Times, neither apparently ready to give up an inch; that is, neither was prepared to allow its currency to buy more today than it did yesterday. In America, China has become an election-year bogeyman. The electorate seems convinced that any nation that stockpiles $2 trillion worth of America’s I.O.U. greenbacks must be up to no good.

So, the war goes on. But it is an ersatz war. All the combatants really want the same thing – to debauch their currencies at the expense of savers and creditors. Sooner or later, they’ll conspire to get the job done. A full 93% of US financial professionals believe the Federal Reserve Bank is on the case. It is expected to launch major debauch in November. Investors have run up almost all asset classes in anticipation. The Dow passed 11,000 on Friday. Soft and hard commodities hit new highs. And if, on a given day, gold does not set a new record, it is probably because the markets are closed.

What a remarkable period in financial history! We can hardly believe our luck. Absurd things are happening. John Maynard Keynes was wrong about practically everything. But he was right about this:

There is no subtler, surer means of overturning society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction and does it in a way that not one man in a million is able to diagnose.

And we get to see it live. And probably dead. The US dollar fell under the control of the debauchers, partially, in 1913…when America’s central bank was formed…then fully, in 1971, when gold backing for the dollar was completely eliminated. In the 100 years before the Fed was formed, the dollar lost not a penny of its value. In the almost 100 years since, it has lost almost all of them. If the greenback were to lose another 5% of its 1914 value, there would be nothing left at all.

Such slow larceny bothered no one. As long as the dollar slid gradually, and peacefully towards worthlessness it seemed almost natural, even healthy. Central bankers could mix with polite company and hold their heads up. None was arrested, as far as we know. None was so tormented by his crime that he had to be restrained or sedated. But now central banks are committing their felonies in broad daylight. Economists argue for more. But investors are confused and worried. Today, they buy gold. Tomorrow they may buy shotguns.

But what else can the managers do? After increasing for 61 years, the volume of credit in the US – and hence, the volume of sales – is no longer expanding. This leaves householders with debt to pay down and exporters with no alternative but to fight for market share. What to do about it? Lower the value of the currency! But in a correction, the natural thing is for prices to go down with a decline in demand. So, money tends to become more upright just when the managers would most like to see it slouch.

The poor central bankers. They are victims of their own delusions of competence. They have never actually managed anything successfully. When the economy is expanding, they exacerbate the boom. When it is contracting, they slow down the correction. And now, they fight a currency war not of their own choosing, but of their own making. The war is their response to the correction, which results from the bubble, which was caused largely by the managers themselves.

And now they’re looking for a hotel where they can do it again. It was at the Plaza Hotel in New York in 1985 that they managed their Treaty of Versailles. It ended the currency war of the early ’80s…and prepared the way for an even bigger war later on. Back then, Japan was the go-go economy. Like China today, Japan was the world’s leading exporter. It wanted to keep the yen low. The US meanwhile, was losing market share. James Baker and the other US managers threatened sanctions. Japan gave in. By early the following year, the yen was 40% higher against the dollar and Japan’s GDP growth rate had been cut in half. But the managers fixed that problem as they fix them all. In Japan, they cut rates 4 times in 1986, creating a flood of hot money. Four years later, Japan was the envy of the entire world. In January of 1990, the Nikkei Dow hit a new record – 4 times higher than it was when the Plaza Accords were signed. Then, the bubble popped. You don’t need to be reminded of what happened next. The Nikkei crashed. Real estate crashed. Everything crashed. The economy went into a 20-year tailspin, failing to create a single new job in two decades. Neither stocks, nor real estate, nor the economy ever recovered.

No one wants to follow the Japanese down that road. Ben Bernanke manages the dollar, desperately trying to avoid it. And Premier Wen of China said it would be “a disaster for the world” if Western nations tried to force China in that direction. He’s right. But he needn’t worry about it. Disaster is coming anyway. The managers will make sure of it.

Regards,

Bill Bonner,
for The Daily Reckoning
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And once more, the Banks are mired in controversy. Late on 12th June 2014, we heard that the UK., Chancellor of the Exchequer, will outline new laws to regulate the largely unregulated Foreign Exchange markets (For-Ex).
Every day, over $4 TRILLION changes hands globally in these markets, but several Big Banks – those closest to the Central Bankers, have been allegedly manipulating these markets for their own ends.
The Chancellor will make manipulating these markets a criminal offence.

I welcome the attempt to rein in the worst effects of the bankers actions, but it is a brave policeman, or Financial Conduct Authority, who will apply the new legislation, as Bankers have historically threatened governments of all political persuasions with dire effects if they apply regulations too rigidly.

If you don’t believe me, after the scandals that have come to light in the last five years, including LIBOR, Silver, Gold and other events such as the London Whale, then perhaps you need to read my free E-book, all 633 pages of it – “The Coming Battle”, which documents the worst excesses of these “Wizards of Oz” who pull the political strings from behind the curtain. These bankers who threaten governments, who manipulate stock-markets, Foreign exchange markets, Precious metals markets, and use their financial muscle, to wreak havoc when they fail to get the outcomes they feel they deserve.

But who can take them on?

The latest news from Iraq is ISIS appears to have taken control of parts of Western and Northern Iraq, and Eastern Syria.

Their goal it appears, is to create an Islamic Fundamentalist State. Part of me feels they deserve everything they get. BUT I should point out to all, and any who think that we ought to intervene again in the Middle-East, that our last attempts probably created this hotch-potch of anti-western sentiment – rapidly becoming a “Holy War”.

Besides just by ignoring the problem, these radicals will burn themselves out. Apart from the oil-fields in Northern Iraq, what do they have to sell? Oranges? Lemons? Mangoes? I am at a loss to call to memory anything that is exported from the middle-east apart from oil and/or gas. And therein lies the crux of their problem.

A modern economy has to pay for things that others have to sweat to build. German Engineering comes at great expense, and organisational and engineering expertise. British know-how in Financial Markets comes from a few centuries of having travelled the globe, and of having access to a large capital base, and expertise in how to make use of that. (And maybe that’s another topic of discussion for the future). Jamaica has the right climate for sugar cane, and so uses it to make Jamaican Rum. Mexico, has Silver mines, America has its software and computer hardware. Kenya has its tea and coffee plantations, and Japan, its electronics businesses. Each taking advantage of that country’s strengths.

Adam Smith the father of all economists, called it “comparative advantage”. What he meant was that each country should learn to make the best of its natural resources, and use its natural advantages to their fullest.

But as the world becomes more intertwined, the fruits and bounty of this planet will have to be paid for with real money, not money you can just print up at will. Money (Gold and Silver) has to be dug from the earth, smelted, refined into bars and coins, and thus the labour stored up in them – the knowledge, skills, ore, blood, sweat and tears, becomes a tradeable and valuable commodity. Pieces of paper with pretty pictures on, printed in their billions will not.

Education, research, and expertise gained over long periods gives countries an advantage in particular spheres. And asking the Lord Almighty, in whatever guise you see him, will not cut it anymore.

The Lord helps those who help themselves is a phrase I was brought up on. It is time for the middle-east to wake from its 1500 year slumber, and broaden its economic base through acceptance of certain verifiable truths.

Men are the captains of their own destiny not an all seeing prophet, or god from on-high. Such thinking should be reserved for the home and hearth.

Science, and the application of science – truths in physics, if you will, will improve the lot of the many. A country of fundamentalists, however ruled, who do not realise that they can only pay their way in the world by exchanging things of value, will, if ignored, like grapes of wrath, wither on the vine.

Forcing people to live a particular theocratic life in poverty, will mean they will take the first opportunity to leave. And the oil and gas will stay in the ground if others refuse to buy from these tyrants.

In the meantime, those oil and gas producers outside the middle-east, will be reaping the rewards as the oil price rises once more. Two small producers, I have had a smallholding with for over a year, for just such reasons are: Lenigas and Oil (AIM:LGO) and Sound Oil (AIM:SOU). Both have had good news of late and I believe are multi-baggers from here.

LGO operates in Spain and Trinidad and Tobago, and SOU operates in Italy.
As the world price of oil and gas rises due to the increasing political risks, these small businesses will find their product adds increasing amounts to the bottom line, and thus their prospects will rise alongside it.

Eventually, the public will wake up to the fact that the notes and coins in their wallets, and their bank accounts don’t represent real wealth, and demand alternatives to the currency dictated by governments. Alternatives that have stood the test of time, such as Gold and Silver, and newer alternatives such as the crypto-currencies, I’ve mentioned many times will stand out as value and wealth preservers – Bitcoin et-al, and Gold and Silver, will achieve their true place in the realm of matters economic just as they have always done when governments do stupid things like debauch the currency.

If you liked this post, please like it or even just copy and paste saying where from.

W.

99 Years and counting down…

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So, tomorrow is a VERY special birthday. The Fed set up by a cartel of banking families, in total secrecy is 100 years old tomorrow.

The Fed grew out of a crisis that occurred in 1908. The whole story would take far too long to describe fully here, but suffice to say, the financial crisis we’ve just experienced, is widely accepted to have been as a direct result of excessive lending on property which in a market that was growing due largely due to demographics, but also because spurts in population growth occur at regular intervals.

If you have access to that data, you can time your entry to the market with precision, or even take advantage of the panic when it occurs.

Of course when you are a Bank, and you have personal data on birth-dates on hundreds of millions of accounts, that data can prove invaluable. You can agree to lend, driving up house prices, then when they begin to rise, you can relax your lending, giving 4, 6, 8 or 10 times current incomes, driving prices up even more. Then as house price inflation rears its head (as it inevitably must) you can raise interest rates driving hundreds of thousands into negative equity, as property prices become depressed.  Of course only a conspiracy theorist, would think they would do that… Wouldn’t they?

The 1908 Banking Crisis

The crisis of 2008 had several outcomes. Property prices would crash, many would lose their jobs, and politicians would agree to more spending. All (they say) to overcome the further progression into recession – depression even. 

Exactly a hundred years ago, a similar crisis occurred. Are we to believe we have learned nothing? Are we to believe that our leaders have not read anything on Political economy, have not read any Economic History, have no advisers who have? Or are they only concerned with their own political futures?

To see, we need to go back a hundred years, perhaps even a little further. to find the cause of the crisis.

The turn of the century ushered in the era of the Oil revolution. A second wave of the industrial revolution, that was originally brought about by the use of coal in steam engines. OIl would enable greater productivity, and usher in the era of the motor-car. Yes, oil had been found before, and was in widespread use since 1859, oil had been used in oil lamps for lighting, given away by Standard Oil – the baby of the Rockefellers.

But in 1901, a new well in Texas spudded. On January 10th, 1901, Spindletop oil well in Texas gushed forth, reaching peak production of over 100,000 barrels of oil per day. It took over a week to bring it under control. Over the next few years over a hundred oil companies would be formed, and thousands of new wells drilled. The wealth created spread out into the wider economy, and the Bankers who had loaned these new corporations the capital made hundreds of millions in new profits. Then, just as now, people speculated on these corporations, and bankers pay became the stuff of legend.

F. Scott Fitzgerald, who would later write the great novel – “The Great Gatsby” would bring this world to a wider audience, but in 1906, a crack in the world – along the San Andreas fault would usher in a period of tumult. 

An earthquake at just after 5:10 am on April 18th, measured by various estimates as between 7.7 and 8.25 on the Richter scale shook San-Francisco and the state. The Newspapers all wrote a collective piece the following day headlined: “The City that was”, as almost 300,000 of the 400,000 inhabitants were left homeless. Barely a building was left untouched.

The epicenter of the quake was reportedly two miles off-shore, but it radiated up to almost 300 miles away, as its effects were felt as far north as Oregon, and as far east as Nevada. The loss of output from San-Francisco, and the disbursements laid out by insurance companies, who had to collect on their own insurance through the re-insurance markets led ultimately to a shortage of capital which helped precipitate the shortage of funds in the markets for speculative purposes.

And that caused the crisis. but its what happened next that matters.

To be continued…