Russia

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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WHY has the Gold price NOT Risen exponentially – YET?

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BoE

Central Bank Manipulations?

The reason Gold has not exploded yet, is because Gold as a physical asset, is undervalued in the West (in general), and highly valued in the East for historical reasons. (Partly as a result of Western Central Banks, having too much power, and thus ensuring regulation gets passed to limit Gold’s usefulness as a store of wealth and partly, because the Chinese had their education in paper currency back in the 11th Century, and others in the Far-East had their education more recently, with the currency crises of the late 1990s.)

As Gold heads east, it is in the interests of those who wish to accumulate it, to play devil’s advocate and allow the manipulations to continue. As I stated in my last post, both Russia and China, are unimpressed that when they sell goods on International Markets, they receive a depreciating currency, that can be conjured up out of thin-air [or to be more accurate – digits on a computer] by its manipulators…

When the Tide goes out (to borrow a phrase used by Warren Buffet) i.e. When Gold becomes part of the process for settling International Trade again, then we will see who is wearing no shorts – (i.e. a fast-reversal back to Bretton-Woods) i.e. which countries, are spending more than they earn – Internationally speaking – and who is managing their economy well, by exchanging physical goods, for physical goods (in the form of physical Gold, or a gold backed currency which can be exchanged for Gold)

China’s approach is therefore like an aeroplane coming into land, and on the approach path to forcing the world’s trading nations to stop using currency inflation to buy up scarce natural resources, and Gold will at that time achieve its real value.

That time will happen when the first country breaks ranks, and demands Gold for its goods, and has enough Gold to withstand a draw of its currency for International Trade, and the only country that comes even close to that is China (and perhaps Russia) and therefore when China finally – officially – releases its Gold holdings – which Pravda in a recent article suggested was 30,000 tonnes, (because they have re-smelted their Gold, and re-cast it into 1Kg bars) then the value of Gold will achieve the exponential rise we have all been expecting.

By end 2015, China, has to float its currency, (WTO regulations) so perhaps is hedging its bets, by holding huge Gold reserves to act as a floor under the value of their currency. Reference – http://english.pravda.ru/news/business/21-05-2015/130683-china-0/

That to me makes perfect sense. It will also mean those countries of Africa, South America and other developing nations, who sell raw materials, will experience rapid rises in living standards, and many will end up paying their political masters huge sums, unless the corruption that has been endemic in some of those countries, suddenly vanishes. (Just as happened during the 1970s which may in itself cause other problems as it did, during the decade and the one following.)

Of course, the poor westerner, will experience rapid price inflation for all their most important needs. And those countries who use the American Dollar as their currency system, would be well advised to consider a replacement.

Food, and raw materials, such as oil, gas, copper, tin, lead, zinc, and precious metals, too will all be more highly valued.

Those with good stores of these commodities, will flourish, those who depend on government largesse for their income, will not fare so well.

And paying for things internationally, will require some form of internationally accepted money – one I have been reading quite a bit about in recent weeks is BitGold.

This manages to marry the best of both crypto-currencies, and precious metals.

To widen your reading and viewing material, you might like to visit these channels on You-tube, and search terms and web-sites.

Recommended YouTube Channels:
SGTReport,
TheDailyCoin,
SilverDoctors,
ChrisMartensondotcom,
USAWatchDog,
X22Report,
AMTV,
TruthNeverTold,
SchiffReport,
BrotherJohnF,
Ron Gibson – WhatReallyHappened 2015 (Mike Rivero),
Gregory Mannarino,
FinanceandLiberty,
HyperReport,
Mike Maloney – GoldSilver.com – WealthCycles,
GoldSeek,
RT BoomBust,
RT KeiserReport,
NextNewsNetwork,
Cambridge House,
TrendsJournal.

YouTube Search Key Words:
Dollar Collapse,
Dr. Paul Craig Roberts,
Alasdair Macleod,
James Turk,
Chris Powell,
Jim Murphy (GATA),
G. Edward Griffin,
Peter Schiff,
Marc Faber,
Jim Grant,
Jim Rogers,
Rob Kirby,
Jim Sinclair,
David Morgan,
John Williams, (or Shadowstats.com)
Catherine Austin Fitts,
Bill Holter,
Ellen Brown,
Nomi Prins,
Andrew Hoffman,
Ron Paul,
Axel Merk,
John Rubino,
Mike Maloney,
Jim Willie,
HiddenSecretsOfMoney.

HIGHLY RECOMMEND:
ZEROHEDGE.COM

W.

A New Russian Winter, or the Calm before the Storm?

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Some weeks ago, before Xmas, I floated the proposition that “The West” might be about to shoot itself in the head, heart, AND foot, just to make sure.

My reasoning was that Russia, might be about to demand payment in Rubles for their gas and oil and other things, which would effectively shoot the west in the aforementioned organs, as they sought to ratchet up pressure on President Vladimir Putin.

The U.S. through its monetary influences and power in International Organisations – the World Bank, the IMF, BIS, Federal Reserve, and of course the ECB, Bank of England, U.N. and Bank of Japan etc, is waging a war against Russia, in a vain attempt at defending and extending its influence in the middle-eastern region, and throughout the near east, ostensibly to protect itself from the rise of China and a resurgent Russia. (more of which later)

The beginnings of this madness began with the end of the Soviet Union. The west in NATO, and through European organisations made agreements with the Soviets, to not encroach into former soviet countries, yet many of those countries, in order to avoid the risk of re-colonisation, chose to join the North Atlantic Treaty Organisation (NATO) and/or the European Union. (E.U.). This was also of course to strengthen the U.S’s Federal Reserve backed monetary system, which as I’ve mentioned numerous times is now no longer backed by physical precious metals.

Of course, when the U.S., under its attempt to extend its influence in the region, encouraged the western larger part of Ukraine to throw off its recently elected leader as it were, to rub Putin’s nose in it, and incurred the wrath of the Crimean Russians, and the Russian speaking ethnic Russians east of the Dneiper River, it essentially wandered into Russia’s back-yard, and that was the straw that broke the camel’s back.

The Crimeans, who are predominately ethnically Russian, were backed into a corner, as the new western backed government in Kiev, made the Russian language illegal.

Imagine if you were a Welsh speaking Welsh person, and the incoming British government, made your language illegal? Or Irish? or Highland Scottish and they tried to make Gaelic illegal?

You’d be pretty PO’d too…

The Crimeans, who felt Russian, spoke Russian, and historically WERE Russian – If we remember our history – Balaclava, near to Sevastopol, on the western coast of Crimea, is where the British Light Brigade, charged the Russian guns, to such detrimental effect, in 1854, and it is remembered in the rousing poem by Alfred, Lord Tennyson. So, a hundred and fifty years ago, this part of the world, was as Russian as it surely is today.

The President, of Russia, kept a low profile recently, and even disappeared from view for ten days, prompting mass media speculation by western media about his health. Of course, when he reappeared, the President issued a wry smile, and joked about “gossip”.

But behind the scenes, the Russian bear is fighting back against the Dollar hegemony. Of course the war of words is being ratcheted up as American military conduct war games in Estonia, this week-end, a former Soviet satellite nation, and right next to the Russian mainland.

Guyane Chichakyan a journalist for RT, posed an interesting question to one of the U.S. government’s PR spokespersons today (Saturday) when she asked Jeff Rathke of the U.S. State Department: Why was it that when Russia conducted military exercises on their own soil, it was supposedly raising tensions, but when Americans conducted military exercises several thousand miles away from home on Russia’s borders, it was in the guise of international peace and security.

The PR guy nearly choked on his reply, denying that they had ever said such a thing, to which, RT showed a clip of Jen Psaki of the U.S. State Department, on August 14th, 2014, doing just that, when referring to events in Ukraine and close to the Ukrainian border. As I mentioned some months ago, the next world war has already begun as a war of words, and for people’s hearts and minds. Every channel, both public and private will be used. It will in all inevitability end in a military war, though perhaps not on such a full-scale as the last one in 1939.

But perhaps also the anti-U.S. state of mind is gathering steam… As I mentioned some weeks ago, Britain applied to become a founding member of the AIIB (Asian Infrastructure Investment Bank) the alternative to the U.S. dominated World Bank and IMF, and we hear from the New York Times, that now Germany, France and Italy wish to join in defiance of U.S.’s (cough) “requests”.

Perhaps the dollar’s end as a major world currency is finally coming to an end, as a result of the mass Q.E. exercise of recent years.

It is time we all engaged our brains.

And then last week, I read this… http://russia-insider.com/en/2015/03/19/4696 which discusses just that.

If a shooting war does begin in earnest, money – hold in your hands money – will allow you to survive the inevitable inflation that will ensue, and the grey market will offer up far more than the government enforced, and controlled ones. If you value your freedoms, liberties, and the health and well-being of your family and friends, I strongly suggest you begin preparing – if you haven’t already.

Gold and Silver coins and widely accepted silver and gold ingots of widely known mints will prove to be good ways to secure your own future “essentials”. And Bitcoin, and other [Alt-coins] will enable international transactions. You can begin your own FREE collection of these precious [Alt-coins], when you set up an account by merely supplying an e-mail address.

Russian Roulette – Is the west about to shoot itself in the head, heart and the foot – just to make sure?

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The west shoots itself in the head, heart AND foot.
Shooting themselves in the foot, head, heart…That should do it.
One year on, as the Federal Reserve celebrates another birthday, both Gold and Silver were beaten down in the London aftermarket close, while trading was at its lowest. And the Russian Rouble was similarly attacked by those behind the curtain.

As the Russian Rouble recovers some of its losses of the last week, in the last few days, I have been re-visiting some of my reading matter, of the last few weeks.

Ever since Russia annexed Crimea, ostensibly to give citizenship to ethnic Russians, but many feel it was to save its only warm water port, “The West”, has been ratcheting up the tension and the rhetoric on Russia.

The NATO block has interfered in Ukraine, too many times. The American led organisation the IMF, has been interfering, with its money, and the West has provided IMF led financial support to the Ukrainian Government and military, and rumours abound, that the IMF and its minions have taken Ukraine’s Gold – some 40 tons apparently – as a surety. (Rumoured to be the source of Holland’s recently returned 127 tons of Gold).

According to Bloomberg today, Ukraine has sold more of its Gold holdings, reducing its holdings from 26.1 tons, to 23.6 tons (2.5 tons) and Russia has bought more rising from 1,168.7 tons to 1,187.5 tons (18.8 tons).

But Russia is not the one in trouble – the Fed and the U.S. is. Russia’s Debt to GDP ratio is roughly 11 percent. What is the Debt to GDP ratio in the United States? According to the IMF it’s 112 percent. What is the Debt to GDP ratio in Japan? It’s a staggering 230 percent. And Russia is sitting on a lot of reserves of very valuable natural resources.

So Russia is not going to fold because of some pressure coming from the United States or NATO. And the real tragedy of all this is the collapse of the rouble is really hurting the Russian people. This is being done by the West as a method of financial warfare. The latest sanctions against Crimea are just hurting the people of Crimea.

According to Dr. Paul Craig Roberts, Russia could unleash possibly one or more “Black Swan” events. For those not familiar with the term, it is a reference to the fact that most swans are White, but occasionally, one is born Black, but is so infrequent as to be impossible to predict, and here is the scary part.

Both Russia and China now don’t believe in the cold war rhetoric of Mutually Assured Destruction – or MAD as it was known.

Now both appear to be willing to make a “First Strike”.

He also recently said about the Gold and silver markets…

“The downward manipulation of the prices of precious metals prevents the “crisis warning transmission system” from properly functioning. More important, the decline in the price of gold/silver vs. the U.S. dollar conveys the illusion that the dollar is strong at a time when, in fact, the dollar should be under pressure from the over-issuance of dollars and dollar-denominated debt.

What we have been experiencing since the 2008 crisis is not only the subordination of US economic policy to the needs of banks “too big to fail,” but also the subordination of law and the financial regulatory agencies to the interests of a few private banks. The manipulation of the bullion markets is illegal whether done by private parties or on public authority, and so we have the spectacle of the US government supporting a handful of banks via illegal means. Not only has economic accountability been set aside, but also legal accountability.”

What people also don’t know, is that the Russians are ready to shelter the majority of their population in major cities in the event of a nuclear war. By contrast, the United States only has facilities for the elite and key personnel in the form of roughly 234 underground bases. These bases are referred to by the military and the elite as Deep Underground Military Bases (or DUMB).

And reports are surfacing from U.S. food processors about huge orders of food by U.S. government agencies to be delivered to these underground bases. The key is the government has requested immediate shipment of this food so that it can be stockpiled. While this stockpiling, has been going on, reports have also surfaced from store managers from all over the country, that a large selection and quantity of food is disappearing from grocery store shelves in states where these underground bases are located such as Kentucky, West Virginia, Kansas, Pennsylvania, etc.

Also, in 2008, the U.S. government ordered 600 million rounds of soft-nosed hollow-point ammunition – 2 rounds for every person in America to be delivered over 6 years.

These are the type of preparations that would be taken if it appeared that civil unrest, world war, or a possible nuclear exchange was on the horizon.

Meanwhile, the Chinese are buying factories, farms, mines, fresh water resources, etc. Other Far Eastern and Middle Eastern sovereign wealth funds are also accumulating these key resources. The Chinese and the Russians understand that at the end of the day it’s all about natural resources and being able to deliver these natural resources to a market that has the money or gold to pay for these key commodities.

A cyber attack on the West’s Banks could close down the banking system for days or weeks. What would that do to the West’s economies? Just think Sony, only ten or a hundred times worse…

If Russia was attacked or provoked more seriously, they could respond by dumping U.S. Treasuries and Dollars, or by asking for delivery on gold futures contracts forcing a default at the COMEX, and/or LBMA.

Or they could just ring up all the leaders in Europe, and tell them, they won’t sell any more Gas/Oil except in roubles, or sell any to NATO members. Germany, France, Italy, and even the U.K., would cave in a heart-beat.

People used to think that those who were preparing for disaster – “Preppers” – were crazy. Now we see the United States government ordering survival kits for employees of every major bank as well as key personnel at the Office of the Comptroller of the Currency.

On this side of the pond, Europe teeters on the brink of a financial disaster. And if Russia simply stated it would not repay loans it has taken from European and U.S. banks (at least not yet) then it might force a rerun of 2008 which would seem like it was a nice day at the shops by comparison.

The European Parliament, as UKIP’s Nigel Farage is so fond of saying, has become a talking shop, a mouthpiece with no teeth. It also hasn’t had its accounts signed off for several years, making monitoring its politicians all but impossible. It has been called a gravy train.

Finally, I ran across two great quotes from the past. They are food for thought.

“The Roman Republic fell, not because of the ambition of Caesar or Augustus, but because it had already long ceased to be in any real sense a republic at all. When the sturdy Roman phlebeian, who lived by his own labor, who voted without reward according to his own convictions, and who with his fellows formed in war the terrible Roman legion, had been changed into an idle creature who craved nothing in life save the gratification of a thirst for vapid excitement, who was fed by the state, and directly or indirectly sold his vote to the highest bidder, then the end of the republic was at hand, and nothing could save it. The laws were the same as they had been, but the people behind the laws had changed, and so the laws counted for nothing.”

– President Theodore Roosevelt

“It is high time for me to put an end to your sitting in this place, which you have dishonored by your contempt of all virtue, and defiled by your practice of every vice; ye are a factious crew, and enemies to all good government; ye are a pack of mercenary wretches, and would like Esau sell your country for a mess of pottage, and like Judas betray your God for a few pieces of money.

Is there a single virtue now remaining amongst you? Is there one vice you do not possess? Ye have no more religion than my horse; gold is your God; which of you have not barter’d your conscience for bribes? Is there a man amongst you that has the least care for the good of the Commonwealth?

Ye sordid prostitutes have you not defil’d this sacred place, and turn’d the Lord’s temple into a den of thieves, by your immoral principles and wicked practices? Ye are grown intolerably odious to the whole nation; you were deputed here by the people to get grievances redress’d, are yourselves gone! So! Take away that shining bauble there, and lock up the doors.

In the name of God, go!”

– Oliver Cromwell – To the Long Parliament – 20 April 1653.

And tonight Sky News got into the fray, when it ran a programme called “The Doom Boom”, suggesting that those who are preparing for the forthcoming crash are somewhat crazy, or slightly unstable, yet the evidence above would suggest, that they may be just doing the only sane thing they can.

We wish all those who have read this over the last year, a Happy Christmas and Festive Season, and a safe and prosperous New Year.

1, 2, 3, . . . 100 – Coming, ready or NOT!

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I am reminded of the above childhood refrain from days spent playing “Hide and Seek”, with regard to the economic malaise that I and many others foresee coming to a country near you in the not too distant future – whether YOU are ready or not.

Harry Dent, of Dent research, thinks we are in for a period of deflation, and even prophesizes that the markets and Gold price will tank with Gold possibly heading down to $750.00/oz, with a major stock-market correction in 2014.  And Goldman-Sachs has re-iterated its forecast that Gold will drop to $1050.

Seven years ago, Mike Maloney of GoldSilver.com, had a more nuanced grasp on monetary matters, even if Harry Dent perhaps understands economics and Demographics better. Mike Maloney suggested we would have minor inflation first, followed by a period of deflation, which will initiate a Central Bank helicopter drop of currency, and THAT would bring about the final epic period of inflation which will bring about the new financial order and even perhaps the New World Order, that so many seem to have been prophesizing.

Former Fed Governor, Ben Bernanke was famously called Helicopter Ben, for suggesting that in extremis, a committed government or Central Bank could create inflation by dropping currency from a helicopter. It is a tag he has never quite lost. And Janet Yellin seems to be Bernanke’s biggest protégé.

For me, I choose to follow my instincts and try to wind my way through the differences of opinion. I am also a great believer in history repeating itself. Especially when the same or similar circumstances prevail.

Demographics drives personal spending patterns, as Dent has proved,  but Central Banks and Governments have a habit of reacting to those events. Some, like the Americans and Europeans, lend that newly minted Central Bank money to the Senior Banking sector, in the vain hope that the banks will lend that money into the economy. (Or merely to prop up those banks?)

Governments spend money on infrastructure projects, which they are pretty certain will boost the economy. Witness the Tory Government of Margaret Thatcher giving the go ahead on the Channel Tunnel project during the 1980’s, and Britain’s New Labour Government giving the go ahead to the group that built the “Millennium Dome” (now the O2 Arena). And the current coalition’s attempts to make big infrastructure gestures with the HS2 – High Speed rail Link from London to the North West, and a new Airport for London, or an extra runway at London’s Heathrow are also in the mix.

But of course we know that when politician’s spend with one-hand, they take in taxes with the other. And that usually means you and me get to spend less on things we consider important to us.

Of course there can be an antidote to all this, and that is to improve one’s lot by saving and good investing, particularly in tax efficient investments.

The last time we had a similar set of circumstances was in 1975/76, as the inflation rate that had risen to almost 27% the previous year, fell to 8-9%, considered acceptable by many at the time.

Of course back then, this inflation prompted Tesco, to ditch the Green Shield Stamps of yesteryear, and to plan a new strategy with deep discounting, which was planned for 6th July 1977 in “Operation Checkout”.

Over the Week-end of the 4th and 5th all their stores were re-priced, and the stores became like a light to moths and other night-time flying insects. Turnover all but doubled in many stores. But of course it was the demographics that was driving the economy.

Given TESCO’s recent results, will they repeat this exercise to compete with the new kids on the block – Lidl, and ALDI?

During the late sixties, western countries had large numbers of retirees, born at the turn of the century in the late Victorian and early Edwardian eras, who fought in the 1914-18 war, and again in 39-45.  These 60+ year olds were now retired and retiring in droves, spending their retirement proceeds,  as they sold their pension accounts to buy bonds, driving down interest rates and stock prices with equal aplomb. These retirees who had fought – some in TWO World Wars, felt they deserved the relaxed retirement that they were promised. The world fit for heroes.

However, just as recently, in April 2012, the number of retirees in the U.S. reached 10,000 per day as those born in the aftermath of the second world war – the baby-boomers, began retiring in huge numbers, but the early retirers had already been selling their stock portfolios (or their pension companies were) as early as 2003, as the oldest ones retired at 55 or just after.

Those with a fixed lump sum to spend, put deposits down on the already rising property market, and helped in the “buy-to-let” boom of that period, and just as the profits made by the NASDAQ investors in the late 90s, also put their winnings into property, Banks were lending outrageous multiples to people in low income areas.

The Fed and government’s actions have been an attempt to mitigate these affects on the economy since. And foreign wars in foreign lands (as long as not too many of “OUR” boys get killed), is one way of keeping the economy ticking along. Economists call this the “guns and butter economy”, as an economy cannot direct resources to both with equal measure.

Anyway, as I was reading another blog, that talked about investments and the US Bond Markets, it mentioned the Fed’s requests to other nations – Belgium – to be precise – who apparently have been pressed into supporting the dollar by buying T-Bills, in the absence of the Fed, to keep interest rates from spiking, which would cause another recession, but as I read this, something crossed my mind.

What if Russia and China now decide to abandon the dollar for commodities sales to non-western aligned countries – say with Vietnam? Iran? Or how about Brazil? India? And what if others followed suit causing a run on the dollar?

This could cause an all out dollar crisis, necessitating a hike in interest rates, that would be painful to watch. But it might also stress the system and induce the hyperinflation that many fear – myself included.

Of course, if you read the book “The Coming Battle” you will know that the Fed made surreptitious loans to 20 major Banking groups in Europe of $15 TRILLION, in total – interest FREE, during the heat of the last financial crisis, and they may be now calling in that favour – requesting that these Banks buy Fed debt, to support the dollar, keeping the Gold price in check.

See:(King World News)

But, if Russia decides to avoid the dollar, then all bets are off

In my last post, I mentioned that Gazprom, would under different circumstances be possibly a good investment opportunity, and then I remembered the sage advice of Baron Rothschild in his oft quoted phrase:  “Achetez aux canons, vendez aux clairons”.

For those who don’t speak french, it means figuratively – Buy on the sounds of the cannons, sell on the sounds of triumphalism (or trumpets). Put more simply, “Buy when the war starts, sell when it ends.”

Now I’m not suggesting you put 100% of your portfolio into Gazprom. But if you do your due diligence, and research the MICEX,(Moscow International Commodities Exchange) there will be opportunities, and/or some of the other Russian behemoths, that might benefit from “the return to the mean”, and there could be money to be made.

Anyone who has been investing for any length of time, knows, or will have heard, that on the average, stock prices rise in line with growth in the economy. When they temporarily exceed this price, they fall, and where they are below the average they will at some point return to the average (the mean).

Of course as many of my recent posts will no doubt have showed, the amount of currency being injected into the economy at any particular point in time, can affect certain asset prices. Of course when cash is tight (as in a recession) bank lending goes down, and thus asset prices reflect that lowering of available capital. And when banks have money to burn (so to speak) then lending goes up, and so do asset prices – particularly stocks and property.

Of course the banks take advantage of this, by lending when asset prices are cheap, and forcing foreclosure (where they have to) when interest rates become high. (which of course, they control)

Warren Buffet also known as “The Sage of Omaha” advises to buy when an asset is cheap, and to sell when the asset is dear, and has said – “Be greedy when others are fearful, and fearful when others are greedy”.

Of course the good sage also buys businesses that will never be sold, but ensures good management manage the business and give a good return on his investment. His last maor purchase that I am aware of was H. J. Heinz, of 57 varieties fame.

He also made major purchases in American Rail infrastructure, in light of the production of tar-sands, and shale oil and gas from the Bakken oil fields in Montana, and Wyoming, and north of the border in Canada which will have to be moved to refineries in the south.  And given the size of the finds, this will guarantee regular shipments for years to come.

Another of Russia’s behemoths, and one slightly less well known than its bigger brother but also worth a look is Rosneft.

However, a precipitous fall in the dollar will force many stocks into freefall on international valuations, and force those who hold dollars to flee the dollar also, but into what? Probably GOLD and SILVER.

Grant Williams, who is portfolio manager of the Vulpes Precious Metals Fund, also spoke about exactly what will cause this historic rise in the gold price, as well as what it will mean for the global financial system.

There are reports out this week that the BRIC nations are going to set up a version of the IMF and a BRICs Development Bank, which could trigger the collapse. The amount of trade now being done in Yuan directly between the Chinese and their trading partners, is all a move away from the dollar, which will over time weaken the dollar’s rule as world reserve currency, and with it the U.S. Empire.

Williams also thinks the Russians want to swap oil for gold because they want to bring back gold as a monetary asset. They just want gold, and rather than swap their oil for dollars or roubles, they would rather have gold for it, and they are absolutely right to do that.

From the view, from 30,000 feet as a Central Bank, they can make those decisions. And Williams guarantees the Russian central bankers, who are in charge of their gold policy, are not worrying about whether the price of gold is $1,300, $1,200, or $1,500. They don’t care about that. They just want to own the gold. And so they are going to keep doing these deals that enable them to acquire more physical metal.

At some point, when all the smoke is cleared in the paper markets, like it did during the London Gold Pool in the late 1960s, once that gets righted, then we will know what the right price is for gold.”

We know the London Gold Pool ended finally when France and then Britain asked for $3billion dollars worth of Gold in place of the depreciating dollars, just 4 days before Nixon closed the Gold window for good (even though, he said it was temporary).

Will that happen this time? I doubt it, the U.S. and European Banks are too intertwined.

But Russia’s and China’s Banks?

Now they could do some serious damage.

But an even bigger threat comes courtesy of a number of major actors in the formation of the internet – though they didn’t know it at the time…

For the Bankers – the Four Horsemen of the Apocalypse are – Gold, Silver, the Internet and Bitcoin

 

W.

The Coming Battle

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As events in Ukraine spiral out of control, it is possible that in the absence of a thawing of relations between Russia and the U.S., over the Ukraine, a new cold war could be about to emerge.

Particularly as the Ukraine, gets its gas from Russia, and currently owes the Russian Gas Giant – Gazprom over $2.2 BILLION in unpaid bills.

However, all this turbulence in eastern Ukraine, with Russian defenders of their cultural identity, that have stormed Local and Regional government offices, will possibly force Putin’s hand to defend these ethnic Russians which could draw in western forces to defend its supported government in the west of Ukraine.

For Ukraine whose currency has depreciated in value by 27%, since the troubles began, this could spell disaster for the country and its people. The gas bought from Russia was purchased at the highly advantageous gas prices that Gazprom gave to former CIS/Soviet states.

As Gazprom increased its prices to above market rates to Ukraine, to reflect the risk of failure to pay, and to recoup lost income, it is obvious that naturally Ukraine would be upset. Wouldn’t anyone if their energy bill went up 300%? And this has implications for Ukrainian industry, already not as well developed or efficient as their western counterparts.

Aleksey Miller – CEO of Gazprom, Russia’s biggest energy supplier, which in different circumstances would be a huge investment opportunity, suggested that Russia should abandon the Dollar and use the Euro for the international sale of GAS.

Even Christine Lagarde, Managing Director of the IMF, weighed in on the subject of Ukraine, by admitting in an interview on 2nd April, that the problems in Ukraine could affect the global economy.

Of course the Soviet state, went through its own internal challenges in the late 80s, as the commodities prices fell.  Russian tanks and soldiers were embroiled in Afghanistan, and the Soviets spent more than they earned,  the end result was the end of the Soviet Empire.

Are there parallels today for the U.S. empire? I suspect so – only their printing press has saved them. But will Chinese Gold cause the U.S. empire to collapse? We shall see…

As American and other nation’s troops are stationed in the Far East to – as Hilary Clinton put it – pivot Washington to the Far East, which drew the statement from a senior Chinese military figure, that “Chinese containment” was not possible.

As the raw materials of life have become more important, both Russia and China have used different strategies to achieve similar results.

Russia and the Global Metals Supply Chain

Both Russia and China have large land-masses, and the potential for commodities production. Russia is an important commodities giant. and Russian output is critical to the global supply chain for many items.

Russia is a major producer and exporter of oil, natural gas, ores, refined metals and industrial minerals. According to a recent analysis by the British firm Roskill, the extractive, energy and chemical sectors are vital to the Russian economy and accounted for an estimated 80% of Russian export revenues in 2013.

It’s important to recognise though, that Russia’s commodities are important on several levels. Russia is more than a major producer and exporter of energy and materials; Russia is an important player within Western supply and product chains. So, targeting Russian companies has the potential to provide blow back on Western businesses and economies.

For example: Nickel is much more than a 5 cent piece in people’s pockets. Nickel is critical to manufacturing stainless steel and a lot more. Nickel prices have pulled back in recent years as supplies have had to adapt to lower global demand, but picked up in recent weeks as commodites prices turned around, and Indonesia, imposed restrictions on exporting raw ore.

One of Russia’s big players, Norilsk Nickel, extracts ore in Russia but refines its product in Finland. Overall, Russia is the world’s second-largest producer of nickel, after China. But since China consumes most of its nickel domestically, this leaves Russia as the world’s key “swing” supplier. In 2013, Russia accounted for 26% of global nickel cathode exports, or around 13% of total world consumption of nickel. Without Russian nickel, the world’s steel industry would be quickly disrupted and prices on international markets would rise, possibly steeply.

Cobalt: Although Cobalt is found in many African countries, Russia is an important supplier. Cobalt, is used in steel and alloys increasingly with military applications as it is used to harden steel based alloys for armour piercing shells, and military vehicles as armour re-inforcement.

Russia accounts for about 6% of global mine output of ore and 3% of global refined output. Most Russian cobalt production is related to Norilsk operations in Finland, where cobalt comes out of nickel production. At 6% and 3%, as noted, Russian cobalt numbers are relatively low overall, but the point is that if Western sanctions somehow choke off Norilsk operations in Finland, we’ll see the impact on global availability of refined cobalt which would only add to military hardware costs.

Vanadium: Russia is the world’s third-largest producer of vanadium – providing about 10% of the world’s supply. Vanadium is critical to hardening steel and other alloys and is a key element for the future of utility-scale storage batteries. If vanadium supply takes a hit, all manner of metal and energy projects could be disrupted. Though a small miner – American Vanadium – is about to commence mining operations in the U.S..

Tungsten: Russia is the world’s second-largest producer of tungsten (behind China) and accounted for about 6% of global supply in 2013. Don’t be fooled by that low raw number, though, because about 70% of global tungsten is a Chinese play. So that Russian 6% “global” statistic is really about 20% of what’s available to the world outside of China. Tungsten is critical to building machine tools as well as manufacturing drill bits. In essence, tungsten is used for requirements that call for hard, dense metals with high melting points. Europe is a major tungsten importer from Russia, and much European industry will have to scramble to make up for any loss due to sanctions.

Titanium: Russia is a large supplier of aerospace-grade titanium to both the U.S. and Europe, accounting for about 12% of imports. Two important buyers are Boeing and Airbus, whose operations could be slowed by lack of titanium supply, certainly in the short term. I’m guessing you can see a trend here?

Rare Earth metals may also be included in this list of essential resources that modern economies cannot do without and that are sourced, at least in part in the former Soviet Empire.

Will Russia Look More to the East?

I could go on with other energy and materials that come out of Russia, but you get the point. Western politicians may feel like they have to “do something” about Russia annexing Crimea. but they have to be careful to not bite the hand that feeds them.

For our purposes, on the investment front, one potential result of Western sanctions will be to give Russian leadership even more incentive to look east, toward Chinese markets. China is a major consumer of many raw materials and refined products and would likely be able to buy and use Russian materials that no longer move west.

Different commodities will move in different ways, of course; some more than others…

Is China’s growth story about to unravel?

David Stockman writer for the Daily Reckoning, says: China is in the greatest construction boom and credit bubble in recorded history. An entire nation of 1.4 billion has gone mad building, borrowing, speculating, scheming, cheating, lying and stealing.

The source of this demented outbreak is not a flaw in Chinese culture or character – nor even the kind of raw greed and gluttony that afflicts all peoples in the late stages of a financial bubble.

Instead, the cause is a kind of monetary madness with an oriental face. Chairman Mao was not entirely mistaken when he proclaimed that political power flows from the end of a gun barrel – he did subjugate a nation of one billion people based on that principle. But it was Deng Xiao Ping’s discovery that saved Mao’s tyrannical communist party regime from the calamity of his foolish post-revolution economic experiments.

Just in the nick of time, as China reeled from the Great Leap Forward, the famine death of 40-60 million people – depending on whose figures you use, and the mass psychosis of the Cultural Revolution, Mr. Deng learned that power could be maintained and extended from the end of a printing press – just as Western Bankers did 200+ years ago.  And that’s the heart of the so-called Chinese economic miracle. Its not about capitalism with a red accent, as the Wall Street and London gamblers have been braying for nearly two decades; its a monumental case of monetary and credit inflation that has no parallel.

Will Hutton who wrote “The Writing on the Wall.” (an ironic play on the Great Wall of China) suggested back in 2007, that the mixture of capitalism and political direction, would eventually lead to a collapse in China’s economy, when investments, and prices were centrally controlled, because the market mechanism of the free flow of information in markets – the price signal – and “Contract Law” is a requirement for all modern capitalist economies to function properly.

Perhaps our own politicians and Bankers would do well to remember that too, as they force Bullion Banks into manipulating currency prices by manipulation of interest rates, and precious metals prices, but I digress.

At the turn of the millennium, credit market debt outstanding in the US was about $27 trillion, and they’ve hardly been slouches in attempting to borrow their way to prosperity. Total credit market debt is now $59 trillion; so America has been burying itself in debt at nearly a 7% annual rate.

But America has been out-banked – to coin a phrase.  In 2000, China had about $1 trillion of credit market debt outstanding, but after a blistering pace of “borrow and build” for 14 years it now carries nearly $25 trillion. BUT, this stupendous 25X growth of debt occurred in the context of an economic system designed and run by elderly party apparatchiks who learned their economics, when Chairman Mao was still alive. That said, the country sent highly educated senior communist figures around the world to study other cultures, and political and economic systems, so it is possible they have learned something since then.

However, it is probable, that there is no legitimate banking system in China – just giant state banking bureaucracies which are run by party operatives and a modus operandi of parcelling out quotas for national credit growth from the top, and then water-falling them down a vast chain of command to the counties, townships and villages.

There have never been any legitimate financial prices in China – all interest rates and Foreign Exchange rates have been pegged and regulated to the decimal point; nor has there ever been any honest accounting either – loans have been perpetual options to extend and pretend. Even the Yuan was pegged to the dollar at 8 to the dollar, until an agreement to enter the World Trade Agreement meant they had to freely float their currency by 2015, and China  has allowed the Yuan to strengthen to circa RMB6.5:$1 – and is also behind their drive to collect as much gold as they can.

However, in two short decades, China has erected a monumental Ponzi economy that is economically rotten to the core. And, needless to say, there is no system of financial discipline based on contract law. China’s GDP has grown by $10 trillion dollars during this century alone — that is, there has been a boom across the land that makes the California gold rush appear pastoral by comparison. Yet in all that frenzied prospecting there have been almost no mistakes, busted camps, empty pans or even personal bankruptcies. When something has occasionally gone wrong with an “investment” the prospectors have gathered in noisy crowds on the streets and pounded their pans for relief – a courtesy that the regime has invariably granted.

Since 2000 China has 1.5 billion tons of steel capacity, but “sell-through” demand of less than half that amount and, on-going demand for sheet steel to go into cars and appliances and rebar into replacement construction meaning the other half is produced merely to go into surplus storage – once the current pyramid building binge finally expires.

The same is true for its cement industry, ship-building, solar and aluminum industries – to say nothing of 70 million empty luxury apartments and vast stretches of over-built highways, fast rail, airports, shopping malls and new cities.

Will this ultimately lead to a price and economic collapse? Probably, but WHEN?

In short, the flip-side of the China’s giant credit bubble is the most massive malinvestment of real economic resources – labor, raw materials and capital goods – ever known.

Effectively, the country-side pig sties have been piled high with copper inventories and the urban neighborhoods with glass, cement and steel erections that can’t possibly earn an economic return, but all of which has become “collateral” for even more “loans” under the Chinese Pyramid scheme.

China has been on a wild tear heading straight for the economic edge of the planet – that is, monetary “Terrain Unknown” – based on the circular principle of borrowing, building and borrowing. In essence, it is a giant re-hypothecation scheme where every man’s “debt” become the next man’s “asset”.

Thus, local government’s have meager incomes, but vastly bloated debts based on stupendously over-valued inventories of land. Coal mine entrepreneurs face collapsing prices and revenues, but soaring double digit interest rates on shadow banking loans collateralized by over-valued coal reserves.  Shipyards have empty order books, but vast debts collateralized by soon to be idle construction bays. Speculators have collateralized massive stockpiles of copper and iron ore at prices that are already becoming ancient history.

Is this factored into China’s Plans for Empire, so that if – IF – a third world war begins, most of the materials will already have been purchased and produced, and once their currency is re-flated due to their large Gold holdings, they can buy what they need with the world’s strongest currency?

So China is on the cusp of the greatest margin call in history? Or the precipice of the biggest long term plan for global domination the world has ever seen?

Only the Chinese political class know the answer to that one.

But a Chinese market collapse would seriously affect all the world’s economies, and the Chinese have the biggest savings on the planet.

Cracks began showing in this edifice when a bank run began at Jiangsu Sheyang Rural Commerce Bank last month, as worried citizens clamoured for their money when a withdrawal for RMB200,000 (about $32,000) was refused at the Sheyang branch.

This was on the heels of the failure of several shadow banking institutions whereby several rural co-operatives and Farmer’s Credit Unions failed in recent months.

However, once asset values starting falling, these pyramids of debt will stand exposed to withering performance failures and melt-downs. Undoubtedly the regime will struggle to keep its printing press prosperity alive for another month or quarter, but the fractures are now gathering everywhere because the credit rampage has been too extreme and hideous. Maybe Zhejiang Xingrun Real Estate which went belly up last week was the final catalyst, but if not, there are thousands more to come. Like Mao’s gun barrel, the printing press has a “sell by” date, too.

Worryingly, a Chinese man was arrested for spreading rumours/information about these financial problems.

Of the more than US$562 million (RMB3.5 billion) that it owed to debtors, US$112 million was borrowed from 98 private parties with annual interest rates of up to 36%, according to recent revelations from Chinese media. Under that kind of pressure, the only surprise is that the default didn’t happen sooner. The company struggled to find capital for years; the chairman is suspected of borrowing up to US$38.6 million with “fake mortgages.”

But before Xingrun gets branded as China’s worst small, private homebuilder, it’s important to understand how it ended up in the mess in the first place, and what specific factors brought the operation down, or at least to the brink of collapse (local government officials insist it hasn’t officially defaulted yet).

Xingrun’s business in Fenghua, a county-level city that is part of Ningbo in a manufacturing belt on China’s east coast, ran into trouble through a renovation project starting in 2007, Chinese media pointed out. The company attempted, after securing government support and taking over for another distressed local property company, to build high-rise apartment blocks in a village called Changting. The project required the company to build homes for the original residents before the existing village could be torn down and the new buildings built. Construction was slated to start in the first half of 2012. Xingrun projected that it could pay off its debts within three years.

The project never got to the construction phase. In fact, the small village homes are still standing. Xingrun built the replacement homes for the villagers but there’s no sign of its main housing product, high-rises. Nothing has happened because the residents of the village have tangled the project and the company in a lawsuit that has stretched for years.

High risk is something no one seems willing to stomach these days – in stark contrast to just a year ago. That explains why Xingrun was unable to pay back its loans. But why has it come so close to keeling over now? Its troubles with the Changting project persisted for years but the company simply rolled over loans and borrowed at high rates from private lenders.

One problem for capital-strapped developers in the Ningbo area is that private lenders no longer want to lend to highly risky companies. In fact, they are calling in their loans. This is just one of the problems afflicting Xingrun. The value of property in some areas of Fenghua is decreasing and that trend has lowered confidence in developers’ ability to pay dizzyingly high interest rates.

Banks aren’t hot on lending to this kind of developer either. In the past, a developer such as Xingrun could ask the local branch of a commercial bank for more credit. The local branch would take that risk because loan officers there knew that, somewhere much higher up the chain, officials promoted the lending.

That support exists no longer. Now, when small developers beg local banks for credit, they will likely be turned away. Local bank managers are reportedly being told that they may lend to risky borrowers if they wish, but they will be held accountable.

High risk is something no one seems willing to stomach these days – in stark contrast to just a year ago.

Fenghua is a small town, and Xingrun’s reach beyond that area is limited. Analysts have come out strong in saying that such a default has little systemic risk. The bigger picture in the region, however, can’t be ignored.

Xingrun’s woes are still the woes of the local authorities. The default will add US$305 million (RMB1.9 billion) to Fenghua province’s non-performing loan portfolio, pushing up the rate of toxic assets to 5.27% and making it Zhejiang province’s most indebted government, according to calculations by The Economic Observer newspaper.

Add Fenghua’s problems to those of the The greater Ningbo Liberty Silver region. The area reportedly has at least six years of housing stock either sitting empty or under construction. The massive buildout will put small developers under great pressure to pay back loans, especially if private debtors are calling in high-interest loans. A slowdown in property prices won’t help either. Without a rescue from provincial-level banks, Fenghua won’t be the last local government stuck in a jam.

So what is The Coming Battle?

It will be between depositors (the people) and the Bankers when the next economic collapse occurs – far sooner than most people think.  Crypto-Currencies, do not rely on Banks to transfer value between individuals, or between people and businesses, and will increasingly mean the Banks wield less power over the economy, and the state, but this means that many governments will want to outlaw them. However, if you feel you want to find out a little more on the subject at Review Outlaw.

And, you can get some free currency – HERE.

Of course if you have spare capital, putting some of it into precious metals with no counter party risk – that is – hold in your hands metal… would be considered sound advice, and if you want to know where you can buy these wonderful metals – try HERE.

W.

Addendum: 12 April 2014

Since this piece was researched and written, the PBoC (People’s Bank of China) has agreed to provide RMB1,000,000,000,000 (1 Trillion – Renminbi/Yuan) about $153 Billion to provide increased infrastructure in rural communities, improving roads, agriculture and local amenities. So the end speculated on, won’t be happening soon; but someday the spending has to stop. (or not rise quite as much) to rein in inflation, which will probably now happen circa 2018-20.

The west too will probably make one last attempt to stave off the inevitable collapse, resulting in the final outburst of inflation. Bankers will be held to account by the people, and the result will not be pretty.

And the final analysis, will compare Precious Metals with the number of Dollars, Yen, Yuan, Pounds, and Euros in circulation.

Silver which is my favourite precious metal, is so oversold as to be the best buying opportunity for anyone with money to invest, and time to wait.

The above chart tells its own story. The MACD (Moving Average Convergence Divergence) shows when we can expect a turn in prices. When it’s high, the price turns down, and when it is low, the price turns up… You have been shown the future.

The below film, tells of  The Coming Battle.

And here’s more evidence of what’s likely to follow.

http://www.caseyresearch.com/meltdown

 “There are none so blind,

as those who will not see.”

What do YOU see?

Crisis Overload

Posted on Updated on

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/KWN_DailyWeb.html

It has been two weeks since my last post, and to be honest, I am not quite sure, which of the many topics, that are concerning me, (and perhaps you), that I should devote my attention to.

Since I last wrote, the Crimea has indeed seceded from Ukraine, just as I suspected it would, and Kaiser Putin, has signed a treaty granting citizenship to the Russian speakers of that particular peninsula. And the Tartars, and Ukrainian nationals who resided there – but NOT the Ukrainian military members, who were stripped of their munitions, and sent packing back to the motherland. Was all that to ensure the Russian Black Sea port of Sevastopol remained in Russian hands?

Those other former CIS satellite nations with large ethnic Russian populations will no doubt be preparing themselves for similar secession requests, and perhaps even more military turmoil that has beset that particular part of the world.

The financial commentators, watching over the financial health of the economy in China, have in some ways been almost apoplectic as China’s GDP growth, fell to a mere 6.5% p.a. against the Political class’ expectations and demand for 7.5% (Oh, that Europe, Britain and America should suffer such a poor growth rate) and the expectation there is that this may cause a financial calamity as some large financial institutions succumb to the stresses and strains of a planned economy.

In Europe news arrives of a rash of Bankers committing suicide – King World News interviewed Gerald Celente, who discussed a Wall Street Journal story, about a Mr Brokesmith a senior executive of Deutsche Bank who was found hanging in his home, with several suicide notes being found – but their contents kept secret by the media – who it is believed are colluding with senior bankers to keep these stories under wraps. And over forty such deaths have been noted, though largely unreported in mainstream media, but as the Financial Regulators finally do their jobs and scrutinize the actions of these Banks some are obviously running scared.

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/3/27_Banker_Suicides%2C_Cover-Ups_%26_A_Criminal_Syndicate_Of_Banks.html

Celente, who founded Trends Research, is also seriously concerned at the amount of unrest arising around the world as interest rates start to rise, and the Bankers extract their pound of flesh severely constricting economies as money disappears from the economies of the West and has created a new organisation he refers to as the “Occupy Peace” movement.

Last year, the largest Banks of the U.S. – the big six – JPMorgan Chase, Goldman-Sachs, Citigroup, Wells Fargo, Morgan Stanley and Bank of America, earned collectively $76 billion, just shy of the peak attained in the last boom year of 2006, just before the market seized up, and the world monetary system almost ground to a halt. Just before Bear Sterns, Lehman Bros, Fannie Mae (FNMA – Federal National Mortgage Association), Freddie Mac (FHLMC – Federal Home Loan Mortgage Corporation) Royal Bank of Scotland, Lloyds TSB, Northern Rock and all the other smaller banks disappeared or were bailed out,  in the frenzy that followed.

The Banks we must remind ourselves have paid $100 billion in legal settlements since the start of this crisis some 5 years + ago, and we must ask ourselves WHY senior banking figures have not been prosecuted. Despite rising evidence of market manipulations of several market sectors – LIBOR, Gold, Silver, and other commodities forcing several funds into negative situations for the last few years.

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/3/26_The_Wests_War_On_Gold_Is_Raging_%26_There_Are_New_Casualties.html

And in America class action law suits have been filed against these market manipulators, who lest we forget, are allegedly doing this at the behest of the Federal Reserve. As these law suits come to court, perhaps we will hear more from the mainstream media, or perhaps we won’t, until it is too late .

Some commentators are already suggesting a market peak is close and a full-blown market pull-back is eerily close. Gold and Silver have reacted to those who want to keep those two precious metals from showing their true value against a currency that is being inflated by Senior Banks.

Portuguese citizens are calling on their Government to renege on their international debts and to use that money to support the citizenry in Education, Health and other social systems.

I suppose they see Iceland, who put some of their Bankers on trial, and avoided many of the problems besetting the west by avoiding the requirement to meet the interest rate returns demanded by the bankers, as the model they should follow. Incidentally, I heard recently that Iceland has created a crypto-currency, and is distributing it to all Icelandic citizens free of charge so that people can become knowledgeable, and use these new currencies uncontrolled as they are by Banking Institutions – The wave of the future?

And one of RT’s flagship financial news programmes – Keiser Report – hosted by Stacy Herbert and Max Keiser, commented on how the Bank of England’s Governor – Mark Carney,  who is the former governor of the Bank of Canada and a senior executive of Goldman Sachs let slip that it is not the Central Bank that creates new money, but the Senior Banks themselves who do so. Every time a citizen arrives at a senior bank to borrow some money – say for a mortgage – or to buy a company, that money gets created as a credit on the borrower’s account and a debit on the Bank’s account. The Bank gets an asset, and the debtor gets a liability. Thus a debt becomes both an asset and a liability – each taking their role in the scheme of things.

That money that then gets paid to the seller of the property, and deposited elsewhere in another Bank. As a result, the deposited funds are loaned out into other uses – People, borrow it for cars, and furniture, caravans and holidays and those car showrooms and furniture stores deposit it in their banks, who lend it out to… (You get the idea) Thus this initial borrowed money grows both the debt and the economy. This is the multiplier effect, and all currency in existence is a leverage on debt.

However, every debt has to be repaid with interest. And the more debt, the more interest is taken from the general population to go to fund the lifestyles of senior bankers and to pay off this debt. And eventually this will destroy the economy, and the population. At no time in history has this ever – EVER – ended otherwise.

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/3/27_This_Is_What_Is_Going_To_Destroy_The_Worlds_Financial_System.html

The only antidote to this, is for all people to save their wealth, not in Bank-notes sitting on a Bank’s ledger (that don’t in reality exist) but in hold in your hands physical metal – GOLD and Silver. Most people fail to realise, that as depositors in a Bank, they are all unsecured creditors, and even in some cases the Insured element of their deposits is at risk in the event of a full economic collapse as might be coming your way.

The Chinese and the Russians, the South Africans, Turks, Iranians, Vietnamese, Indians, Indonesians and many others recognise this, and when the inevitable happens, the dollar’s role as world reserve currency will cease.  But temporarily, the Chinese want a strong dollar, because at the moment the Chinese hold $4trillion in currency reserves, most of which is denoted in either dollars, or dollar bonds. So the Chinese are effectively hedging their finances with enough gold so that when this happens, they will not lose the value that their success has earned them.

Some time ago, I predicted that Gold would ultimately rise to around the $8,500/oz level.  In the Jim Rickards audio below, he mentions $9,000 Gold. Are we both so far from the truth? And if so, what of Silver‘s ultimate high? It is not outside the bounds of possibility this will reach the dizzying heights of $500 as Gold and Silver return to their historic ratios of around 16:1. Though given how little Silver is being mined, this could get as close as 10:1, which is in line with the ratio coming out of the ground.

And with it, much of the unrest that is promulgated behind the scenes by shady political characters for their own ends by people who don’t have to pay for things with REAL money, will cease. Recent reports have also emerged that Turkey, perhaps aided by some of those same forces, was planning to raise a “False Flag” event in an attempt to give them reason to enter Syria, to assist in the overthrow of President Assad, who has steadfastly refused to stand down in spite of provocation, and much western criticism of his policies, particularly as has been mentioned previously of the agreement to allow a pipeline from Iranian controlled gas fields to the Mediterranean, through his country, and Lebanese controlled territory.

Perhaps a few words should be borrowed from John Lennon, Paul McCartney, George and Ringo all those years ago when we faced similar circumstances: – “All we are saying, is give peace a chance” – Save Gold and Silver.

W.

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