As I walked into the gym this morning, lo and behold
gold was UP, a rare occurrence in recent weeks. But then I saw it was
up 1.95% and had to laugh, as I knew I had likely seen the high for the day,
just minutes after waking up. Thanks to Cartel-imposed limits, gold is
rarely up more than 1% in a day, and has been held below 2% gains for 99% of
ALL TRADING DAYS over the past decade, per the excellent work of GATA icon
James McShirley, who submitted his final 2011 post
The methodology is the
On December 29th, 2010 Comex silver closed at $31.03, and the CME's spec margin
was $10,462. Exactly one year later we now have silver at $26.70, with spec
margin at $24,975. While silver dropped 14% y/y the CME actually raised
margin by 246% Or put another way leverage has
been reduced by 64%, from 14.83-1 to 5.34-1. This alone is the principal
reason why paper silver has been so so easily
pushed around lately. One should be looking at the methodology and tactics of
the cartel, rather than the current price. Judging by the CME's brutal
de-leveraging they are very much terrified of physical availability. The MF
Global swindle proved too that when push comes to shove they'll just walk
away from any physical obligations.
The only purpose for the CME
ever allowing higher silver leverage has been to lure in gullible spec longs
to be crushed. There has never been a time that I recall where higher
leverage ever worked out for the longs. Now that the whole physical supply
has dried up it is more prudent for them to just de-leverage and force
everybody out. You'd have to be insane to carry margin funds for silver
futures contracts not knowing if your money, or even
physical silver was safe. You'd also have to be insane to not keep physical
PM's as your protection against Wall Street thieves and scurrilous banksters. Judging by the cartel's scare tactics we must
be getting close to an explosion in PM's. Let's all raise a glass and toast
to that happening in 2012.
How many times have we seen the typical "up day
pattern," which we are all supposed to celebrate about, with gold first
being stifled at EXACTLY 3:00 AM EST as it attempts to make an early
parabolic move, then again stopped cold at a 2% gain, sometimes before the
COMEX open if gold attempts to spike further as it did today...
...followed by a WATERFALL DECLINE the second
the COMEX opens, no matter what is going on the world (today = NOTHING).
And don't forget the typical Cartel tactic of making
sure whatever outperformed the prior day - in this case silver - all of a
sudden contracts cancer the very next day. Since "OPERATION PM
ANNIHILATION II" commenced December 8th, to the minute
the mysterious, later retracted headline that the Fed, BOE, and BIS were
selling gold, PMs have been walked down EVERY DAY right after the NYSE close,
in the absolutely thinnest market hour of the day, when literally NOTHING is
Remember that the Dow fell 139 points on Wednesday, then recovered 138 yesterday based on absolutely NOTHING,
while silver recovered just half of Wednesday's whopping $1.60/oz, or 5.5% loss, also based on NOTHING. Note the
red line below at EXACTLY 4:00 PM EST, when suddenly silver started falling,
losing more than half its $0.80 gain in the two thinnest hours of the day, as
gold ROSE by roughly $5.00/oz! THIS is how
the Cartel has been able to destroy PM sentiment this month, to the point
that such indicators suggest the highest level of PM pessimism since the
BOTTOM of Global Meltdown I in late 2008.
Think about it, the BOTTOM in late 2008, after gold
had fallen 30% to $700/oz, silver 60% to $8/oz, and the Dow 40%+ to 8,000. Today, gold is just
18% off its ALL-TIME HIGH, 11% higher than a year ago. Silver, though
down sharply from its ALL-TIME HIGH care of the "SUNDAY NIGHT PAPER
SILVER MASSACRE" on May 1st, is just 7% below last year's
level, and more than 3.5x higher than the 2008 low. The PPT-supported
Dow is actually UP for 2011, and oil prices are flirting with $100/barrel
despite the worst global recession in generations, getting worse each
day. Yet PM sentiment is so low, by all measures, that "Mr.
Gold," Jim Sinclair, has been forced to do more handholding than I can
remember in ten years.
The Depth Of Despair In The Gold Community
When I say "sentiment indicators" are at
lows, I am referring to surveys regarding investors' general PM outlook, such
as the "MarketVane's Bullish Gold
Consensus," regularly highlighted by MarketWatch's
3-Year Low in Gold Sentiment
...and stock specific indices such as the "Gold
Miners Bullish Percent Index," which fell to a shockingly low 10%
yesterday, 65% BELOW the low registered at the depths of Global Meltdown I
three years ago. Wow, that is bearish, occurring during perhaps the
most gold bullish fundamentals in memory.
By the way, the key to understanding gold and silver
suppression is NOT in the price levels themselves, but the RATE at which such
price levels are achieved. In other words, the Cartel couldn't care
less if gold reaches $2,000, so long as "gold mania" doesn't set
in, the most dangerous outcome for a group of "elites" interested
in controlling the masses with an oppressive, inflationary, fiat dollar-based
As long as the "dollar index" is stable
(no problem when the Euro is on the verge of collapse), the Dow steadily
rising, price inflation not eminently visible, and "Ministry of
Truth" propaganda unchallenged, the price of gold is not an issue.
However, as Richard Russell repeatedly reminds us, "there's no fever
like gold fever," a unique, self-perpetuating condition fed by both
GREED and FEAR. Once it starts - and I assure you it WILL - it will be
GAME OVER for the Cartel, just as the London Gold Pool in 1968, EXACTLY why
they cap gold's daily gains and closely monitor indicators that public
sentiment is getting too bullish.
For instance, I came across this chart yesterday,
measuring the amount of Google searches for the term "gold price"
this year, using the January 1, 2011 level as the baseline. Notice that
each major Cartel attack occurred when this level rose, starting with the
"SUNDAY NIGHT PAPER SILVER MASSACRE" when this "Fear
Index" rose in late April. Of course, in late April the PM rise
was clearly silver-led, not due to a "crisis" that caused either a
major gold spike or Dow decline, so that smash was focused principally on
Next, the Fear Index surged in late July during the
"debt ceiling debacle" (ah, the "good old days" when a
$14.3 trillion debt ceiling was a concern, compared to the complete lack of
interest in today's $16.4 trillion ceiling). Gold surged during
August in this environment, aided, of course, by the impact of GATA's London
Conference on 8/04 - 8/06, which I was privileged to attend. However,
the Fear Index subsided in late July and early August as maniacal QE
operations, both OVERT and COVERT, caused Treasury Bonds to surge
despite the debacle and subsequent S&P rating downgrade. You know, the same QE operations that have Treasury Bonds
priced at ALL-TIME HIGHS as we speak despite the largest foreign dumping last
Foreigners Dump Record Amount Of US Treasurys
In Past Month
In the latter half of August, the European financial
crisis EXPLODED, causing the Fear Index to rise coincident with gold surging
to a new ALL-TIME HIGH of $1,920/oz. Thus, the Cartel was forced to
mobilize "OPERATION PM ANNIHILATION I" just minutes after
the Labor Day weekend ended, ironically minutes before the Swiss
National Bank devalued the Franc. PM's fought through two months of
hell before surging anew in late November and early December, causing the
Fear Index to again rise as gold fought back to $1,800/oz. Thus, the
commencement of "OPERATION PM ANNIHILATION II" on December 8th,
perfectly timed to coincide with the quietest, most uncontested period of the
year, when most market participants are on vacation and/or have closed their
books for the year, focusing principally on tax loss selling and NOT taking
new, major positions.
The funny thing is that my PM sentiment has
never been higher, the secret being I no longer own MINING SHARES, the most manipulated securities on earth with the most enemies,
the most volatility, and the most potential hazards. I KNOW bullion is
going higher, so this drop - while being 100% IRRITATING - provides me an
opportunity to POUND THE TABLE on PHYSICAL gold and silver, particularly gold
as - SNEAK PEAK at my 2012 predictions - it will NOT remain below its 200 DMA
Moreover, given yesterday's Japanese tax law change,
requiring bullion dealers to report all gold and platinum transactions of
more than $25,000, I am even more motivated to pound the table to
potential U.S. investors, as at some point in the future such laws will
obviously be passed here (and in fact, were openly discussed a year
Japan's new tax law
I believe this week's holiday-thinned news flow and
trading activity is congruent to what we experienced in late August, just
before market participants (the few that haven't been wiped out) returned
from summer vacations, and when they do, CHAOS is likely to return to global
markets, focused anew on Europe, which I do not believe will have the same
governmental structure a year from now.
Before I get to my RANT topic, "2012
EXPECTATIONS," I want to go over today's list of "horrible
headlines," which surprisingly is VERY LONG considering we are amidst
the seasonally slowest week of the year. Clearly, bad news does not go
away during Christmas, but the fact that so much has been reported
indicates how dire the situation is, whether or not the PPT is able to close
the S&P 500 in the black for the year (up 0.3% as we speak).
Nothing in Asia, but TONS in Europe and the United
States of Corruption, not to impugn University of Southern California alumni
by associating "USC" with the vileness of American bankers and
politicians. First off, look at these two headlines, highlighting
European trading yesterday and today, obviously influenced by the same
bonus-hungry, PPT-supported bankers as in the States. Stocks rally
while sovereign bonds continue their plunge into the abyss - makes perfect
sense, at least in the Bizarro World
of manipulated markets.
European Credit Weakens As Stocks Rally
European Stocks Surge As Sovereigns Slump
Next up, the continuing mad dash of European
bank funds OUT of the banking system and into the relative safety of the ECB
itself. Ladies and Gentleman, THIS is what a freeze-up in interbank
liquidity looks like, and I assure you it signifies one thing, and one
thing only - surging recognition that "the system" is
insolvent, on the verge of COLLAPSE any minute, supported ONLY by exponential
growth in ECB and Fed money printing.
European Banks Close 2011 With Near Record Cash On Deposit At ECB,
€9 Billion Overnight Increase
If you want to see what I mean graphically, take a
look at this chart, showing how 12 of the 17 European Union members are
ALREADY above the "austerity" limits proposed by the new
"treaty" discussed at the failed EU summit on December 8th,
not uncoincidentally the same day "OPERATION
PM ANNIHILATION II" commenced. The austerity limits of the 1992 Maastricht
Treaty were butchered beyond recognition, yet we are expected to believe
these imploding, squabbling nations will all of a sudden find religion (let
alone CAPITAL)? ROFLMAO.
New Fiscal Compact, Or More Of The Same For
And speaking of Fed money printing, it looks like
its "swap facility" has reached $99 billion in just four weeks, ten
times larger than initially anticipated, as banks AROUND THE WORLD
desperately grab at the essentially free, PRINTED money. And what's
this - the BANK OF JAPAN was a major borrower this week?
Just wait until the new year, my friends, just
Fed Swap Lines Jump 59% In A Week As Japan Shows Its Hand
Back to the U.S.C., I have a long trash list to
share. As in Europe, I'll start with trading activity, highlighting how
prevalent the government's various PPT groups are. As noted above, U.S.
Treasuries continue to soar despite record foreign selling, care of MASSIVE,
largely COVERT money printing care of the ongoing, unreported,
accelerating QE that keeps the Fed's "digital printing presses"
Similarly, the Dow is the ONLY major stock index on
the planet to rise in 2011 (by 6% as I write), thanks to the most MASSIVE,
concerted, sentiment-protecting, Dow-supporting PPT activity of ALL
TIME. Can you imagine, during the worst economic crisis since the Great
Depression, with the public withdrawing $135 BILLION from the equity markets,
the Dow RISING?
In PPT land, anything's possible.
$135 Billion Redeemed From US Equity Mutual Funds In 2011, 34 Of 35
Consecutive Weekly Outflows
And how about this brain-dead article, suggesting
the market is "pricing in" upcoming QE announcements. Yes, by
taking down GOLD $230 in three weeks, absolutely.
Is Today's Market Pricing A Forthcoming Reactionary-QE By The Fed?
In geopolitics, the war drums beat louder.
Sorry if I keep bringing this up, but clearly Iran's Straits of Hormuz war
games, prompting yesterday's U.S. retaliation threat, is quite ominous.
Here's another prediction, free of charge - if ANY violence breaks out in
Iran, World War III is right around the corner. And you can bet TPTB -
bankers, politicians, and the military-industrial complex alike - are licking
their chops at the prospect.
Jim Rickards - US to go to War with Iran,
Oil & Gold to Spike
As for the U.S. economy itself, despite the
unrelenting "economic recovery" headlines permeating the airwaves
for the past three years, the situation grows more dire
each day. Today we see Sears/Kmart announcing 79 store closings,
yielding thousands more layoffs, particularly in the financial war zone of
Florida. Another prediction preview - data fudging or not, REAL
unemployment will soar in the coming years.
Florida hit hardest by Sears store closings
And don't forget American Airlines - you know, the
world's fourth largest airline - which announced BANKRUPTCY last month, with
76,000 employees. No need to worry, the Dow is UP!
NYSE to delist American Airlines parent next week
As for the accelerating downward spiral, no one will
feel it worse than municipalities, which spent like drunken sailors
for the past 20 years, and now will need to be bailed out by the bankrupt,
but still money-printing capable, Federal government. This story below
is sickening, as Michigan is one of 27 States owing a cumulative $39 billion
to the Federal government for borrowing money to pay extended unemployment
benefits, which will have to be extended indefinitely, per my prediction
More appalling is that Michigan, perhaps the worst
basket case of ANY U.S. state, with crumbling cities and median home prices
under $10,000 in its largest city, is able to borrow at a rate of 0.24%,
underwritten by "quasi-Federal agency" Citibank. NO ONE in
their right mind would invest in two-year Michigan bonds at 0.24% unless they
were backstopped by the Federal government, in my view suggesting yet more
COVERT money printing, right under our noses, without any public outrage or
Michigan Borrows Record $3.3 Billion in Debt to Repay Unemployment
Speaking of weak home prices, here's an interview
with Robert Shiller, co-producer of the Case-Shiller Real Estate Index, which earlier this week showed
yet another significant decline amidst a four-year bear market destined to
last deep into the decade, if not longer.
Case-Shiller: Housing Downturn Could Last
And finally, the "granddaddy of data
manipulation experts," John Williams, discussing the U.S. governments'
$100 Trillion of debts and unfunded obligations. Which, by the way,
includes $5+ trillion of REAL, CURRENT debt by the nationalized real estate
sewers Fannie Mae and Freddie Mac, conveniently kept "off balance
sheet" so the U.S.'s published (i.e. fudged) debt/GDP ratio
remains at 100%, instead of the monstrous 133% it should be shown as.
John Williams: The US Has $100 Trillion in Debts & Obligations
How exciting, I get to make 2012 predictions, and some
of you might even pay attention. Not that I'm unqualified to make
educated guesses, but I've never had a fondness for rote forecasts of what
will happen next year.
I mean, who knows what will happen? There are
simply too many moving parts to gauge, as the global economy is a
"living system" comprised of volatile, unpredictable human beings
and, in today's world, increasingly dangerous computer algorithms capable of
reeking incomprehensible damage by accident. Thrown in the wrath of
Mother Nature, who in recent years has been on the warpath, and the largest
unknown of all, that of collective human confidence, and such
forecasts become comical at best.
weather disasters smash US record for 2011
Will 2012 top
2011 for record weather disasters?
Nearly all "2012 forecasts" I've read are
simply extrapolations of what we see today, a psychological trait common to
all human activity, particularly in financial markets where for centuries
investors have bought high and sold low, following the near-term trend
instead of understanding the bigger picture.
Given these constraints, and exponential growth in
government market intervention, both OVERT and COVERT, I will not attempt any
wild predictions, "pulled out of my arse"
as some might say. Instead, I will cite general trends that I expect to
continue, if not accelerate, in the coming 12 months. Forgive me if I
too, fall victim to the "extrapolation bias."
And here they are:
1. The European debt
crisis will dramatically deteriorate - No matter what TPTB
say and do, and how much they manipulate the markets and media, European sovereign
yields will continue to rise, pressuring the entire, worldwide banking
sector. At some point in 2012, I expect the first dramatic action to be
taken, potentially the expulsion of one or more of the Euro Currency
Mechanism's weakest links. Such events will have dire ramifications due
to the monstrous size of the CDS "insurance" market and the risk of
hyperinflation in the expelled countries.
2. The U.S. Economy will weaken - Holiday season BLS
employment report trickery will quickly die on the vine, as U.S. housing and
manufacturing activity faces the strongest headwinds since the 1930s, only
this time such forces are GLOBAL, with all fiscal and monetary weapons
exhausted except the pure printing of money.
3. "Global QE" will
become increasingly OVERT - Facing rapid economic deterioration, Central
Banks such as the Fed, ECB, BOE, and BOJ will be forced to stop
"pretending" they are holding back, announcing broad, forceful QE
measures aimed at buying enough time for more draconian power grab
initiatives to be drafted.
4. Gold will rise for the
12th straight year - Gold is ending 2011 up 11% despite the most
vicious Cartel attacks in the eleven year bull market. Gold has risen
in each of these eleven years, up against essentially ALL global currencies
and stock indices, and given the "OPERATION PM ANNIHILATION II"
attack this month, to a level below gold's 200 DMA, a 12th
straight gain in 2012 is all but assured.
4. Gold will not remain
below its 200 DMA for long - my only short-term prediction,
I find the concept of gold remaining below its 200 DMA for more than a few
weeks to be ridiculous. Gold has only been below its 200 DMA 17% of the
time over the past 11 years, and 5% or more below its 200 DMA just 5% of the
time, the last time being the BOTTOM of Global Meltdown I in late
2008. Given increasing stresses on the global financial system, and
rapidly declining confidence in its viability, it is hard to believe
gold will trade at this extremely depressed valuation for a material period
5. The gold/silver ratio
will decline - Given that it is a far smaller market than gold,
and thus more manipulatable, silver will continue
to be more volatile than gold. However, physical tightness is becoming
more acute, and in a rising gold price environment, it is hard to believe
silver will not again outperform, as it has in essentially all rising
gold price environments over the past decade. Moreover, at any time
such tightness could yield a price explosion, and if and when silver pushes
its way past the all-time high of $50 an ounce, we could see the most
explosive "triple top breakout" in financial history.
6. Market volatility will
EXPLODE - Since the U.S. debt
downgrade in August, equity market volatility has doubled, the result of
heightened fear and exponential growth in HFT algorithms, the large
majority of which emanate from government computers seeking to manipulate
markets and thus, investor psychology. Invest in the financial markets
at your own financial - and mental - risk.
7. "Survivalism" will grow, worldwide - Propaganda or not, the
innate survival instinct is powerful, and will express itself fully in the
coming years. Precious Metals, "guns n' ammo", emergency food
provisions, and electric generators - you name it, and sales will be up.
Social unrest is here to stay, and in time - perhaps 2012 - it will
become a dangerous, ubiquitous part of American society.
8. The 2012 U.S.
elections will break all records of campaign contributions, lies, smear
campaigns, and SURPRISES - Due to rapid deterioration of the U.S. economy,
which should considerably worsen in 2012, the rift between Democrats and
Republicans has NEVER been larger at any time in the nation's 236-year
history. With both the Presidency and Senate up for grabs, I cringe at
the thought of how ugly, ruthless, and nationally divisive the 2012 campaign
will be. The wild card in the equation is Ron Paul, who at 77 years of
age is attempting the nearly impossible, which in my view is quite possible
if the global economic crisis accelerates in the first half of the
year. That said, even if elected, it is hard to see him command the
respect and co-operation of the vultures circling him in Congress and the
9. Most investments will
be deadly - Continuing a theme I have written about for some
time, I believe the HFT-dominated, government-manipulated stock and bond
markets are disasters waiting to happen for investors, both on the long and
short sides. Additionally, I expect unrelenting pressure on real estate
prices, and losses on the great majority of illiquid, "alternative"
Readers, enjoy your weekend and the New Year's
holiday. It has been a privilege writing for you in 2011, and I look
forward to doing so in 2012. I will continue to focus on the need to
PROTECT YOURSELF, i.e. to lower expectations regarding your finances and
standard of living, prioritizing decisions enabling you to SURVIVE what could
be the most important inflection point in human history, and hopefully to
THRIVE in its aftermath.
And finally, I want to present, as an addendum, the
year-end forecast of my good friend and fellow economic commentator Bill Holter, of GATA fame. No one crams so much opinion
into so few words, and his 2012 forecast does it as well as anyone I know:
It has been quite a year, next year will in my opinion be not only quite the
year but the "wrap up" to the global fiat system as we have known
it nearly all of our lives. Basically, governments have spent all year
(most all of the last 3 years) digging financial holes for themselves.
These financial holes are now too deep for any country anywhere to
escape. As it turns out, recent news of "payment of interest deferrals"
in various Chinese entities highlight the "not so miraculous"
escape from the laws of financial gravity. My point here is that even
China, the deep pockets of the world, is now succumbing to the natural laws
Global equity markets
this year are basically flat to down (hard in the case of China).
Gold is up nearly 15% or so, Silver is flat while the mining
shares have taken a drubbing with a few being bought out at substantial
premiums. The sentiment amongst precious metals investors is dreadful,
maybe the worst I have seen since the bull market began back in 2001.
Think about it, Gold was $900 and Silver $14 just two years ago yet many PM
investors are ready to jump out of tall buildings. It does not make
sense to me but it is what it is.
We have spent nearly the
entire year going from one proposed bailout to the next,
none have really been implemented because none have a chance at truly
working. The bailouts have also gotten more comical with time, the latest proposed Euro bailout takes the
cake. This one proposes that the overindebted
sovereigns make payments into a pool that can be leveraged and then lent back
to the insolvent entities that loaned capital in the first place. This
is beyond farce and unbelieveable that investors
still keep their heads in the sand. Even more unbelieveable
that precious metal investors are living in fear of
loss, do they not know why they invested in this sector in the first place?
Silver has been smashed
hard at least 3 times this year with the help of margin hikes while Gold was
taken down when central banks decided to PAY borrowers to lend
them metal. This was and still is hilarious! Sprott management has proposed adding $1.5 Billion more
Silver to their ETF, this amount is more than the COMEX even purports to have
for delivery. With a mere $5 Billion, the COMEX inventories of both
Silver AND Gold would be wiped clean of inventory. To put this number
in perspective, the U.S. borrows roughly$4 Billion per day to keep the
doors open, in less than 2 days worth of federal
deficit, the COMEX shelves would be stripped bare.
"purported" inventories above because we don't really know.
Kyle Bass wanted to view his COMEX held Silver and was pushed back on until
he insisted, the to find out that his Silver is not
even held together in one place. Treasury Gold has not been audited in
nearly 60 years yet we are told "don't worry, trust us".
Trust has had a serious haircut this year and will not in my opinion carry
all the way through 2012. Thank you MF Global, investors have found out
that their funds were co mingled and even if you
had non margin accounts and/or warehouse receipts, your funds and or physical
holdings disappeared! So while the PPT has done a fabulous job scaring
the bejesus out of precious metals holders, MF Global has knocked another leg
out from under the "stool of trust". Short term, what the PPT
has done has and still is working, medium term, trust will collapse
taking everything fiat with it. How long will it be until investors
start pulling everything they have from the brokers? I don't have the
answer but I cannot imagine it will span more than a season or two now that
investors have seen others liquidated.
As I have said before,
trust is very easy to lose and nearly impossible to gain. Trust is the
ONLY thing left holding the system together. Trust is the only reason a
Ponzi scheme can ever exist, once lost the game is over. Now that MF Global
has occured, where are the regulators? Who
has been arrested? This was not some liquor store holdup or breaking
and entering, this was outright fraud AND theft. I read recently that
the authorities are fearful of doing their
jobs because they might start a panic or "bank run" so to speak
with investors yanking deposits from fiduciaries of all sorts and
types. This may very well be true but isn't there supposed to be
confidence exactly BECAUSE of laws, regulators, punishments AND the enforcement
of these? Again, this tactic may work short term but I cannot see
people remaining in their complacent cocoons while they watch as other
peoples accounts get stolen from, zeroed out and the regulators just
shrugging their shoulders.
Many times over the last
few years I have said that no solution would work because mathematically the
debt cannot be paid back. "Officially" the U.S. debt has just recently surpassed 100% of GDP, in reality
it is probably 600-700%. In other words, game over. While reading
Zerohedge yesterday I came across the following
brilliant way to look at the situation. I am somewhat pissed at myself
for not thinking of this on my own since I have said so may
times that the addition of "zeroes" is where we are headed, why I
didn't think of subtracting a few zeroes for an illustrative way for the
human brain to wrap around this, I don't know.
/ Simplistic view"
This rather brilliantly
cuts thru all the political doublespeak we get.
This puts it into a much
better perspective .
This shows how long daddy
government can still fund the banks messed up behavior:
* U.S. Tax revenue:
* Fed budget: $3,820,000,000,000
* New debt: $ 1,650,000,000,000
* National debt: $14,271,000,000,000
* Recent budget cuts: $ 38,500,000,000
Let's now remove 8 zeros
and pretend it's a household budget:
* Annual family income:
* Money the family spent: $38,200
* New debt on the credit card: $16,500
* Outstanding balance on the credit card: $142,710
* Total budget cuts: $385".
Simple huh? But
wait, there's more! This uses the total debt figure of $14 Trillion
(now over $15 Trillion) but in reality if you include the "off
books" debt, the total is over $100 Trillion. So using this example
above, the family making $21,700 per year has a credit card balance of
roughly $1 Million! Of course the credit card's interest rate is at the
very low current "teaser rates" but what will happen to this family
( US, as in all of us!) when the teaser rates expire and are replaced with
modest market rates of say...6 or even 7%? At 7% interest rates, a full
one half of government tax revenues will go to paying off interest...and ONLY
Now do you see why I have
sounded like a broken record and written at least 100 pieces over the last
few 5 years stating that "mathematically there can be no
solution"? The Treasury debt and thus the U.S. Dollar is
backed by this "full faith and credit of
the U.S. government", so where does that leave us? Where does
that leave the rest of the world's central banks and currencies that are
backed by these Treasury securities and Dollars? This is like 2 drunks
holding each other up telling each other that they will take the breathalizer test for the other and "everything will
be fine". How can anyone look at this budget situation and come
away with anything other than "game over" while wondering how we
could have gotten here in the first place? This is where we are right
now, FLAT BROKE, anyone saying differently are either living in a fantasy
world, lying or just plain ignorant!
Fraud and deceit have
become the normal way business is done and regulators look the other
way. When the situation becomes untenable, the government steps in with
promises of a sleeping taxpayer's future burdens and makes good right
now. If the problem is too big? "No problem", just
change the rules! If your assets have dropped in value? Don't
mark them down, mark them UP as they did in
2009! With the previous in mind, you know that it is only a matter of
time before the ship hits the sand, I personally don't believe "it will
just all of a sudden happen one day". No, the powers that be will
need SOMETHING to point their fingers at so as to deflect the blame from
where it squarely belongs. I am speaking here of some sort of
"false flag" event that will be called a 100 sigma black swan event
that surely "no one could ever have seen coming".
As for the coming year, I
have read many prognostications both bullish, bearish and extremes at both
sides. I do not believe 2012 will pass much if any past midyear without
the banking and monetary systems having a total seizure. I continue to
firmly believe that we will have a "banking holiday" that will last
at least a week or two and maybe even for 6 months or more. If I
absolutely had to guess what the "black swan event" will be?
It would be the supply of oil. This would surely do it AND appease the
hawks who stand to gain from more war. One
thing I can say with 100% confidence is that we will see more QE (the
printing of more and more unbacked currency) in
amounts not previously seen. This is not a bold call, QE MUST expand
exponentially OR the system dies. QE will expand up until the investor
population shuns this currency or that one and finally shuns the
Dollar. The funny thing here is that the final "shunning"
(that of the Dollar) will probably be the result of another bailout
announcement where QE is the tonic. Ironic? No, but
We are directly in front
of unprecedented times, never before have ALL governments (and thus
currencies) on a global basis been strapped and insolvent at the same
time. There are no "White Knights" left to save the day this
time around, that scenario has already played out and been proven false since
2007-08. The problem is that "stuff", even at these
artificially low and nonexistent interest rates will no longer pay for
themselves. The bubbles have just gotten too big to be carried, even by
sovereign governments. While all this is going on, precious metals
investors have gotten sick to their stomachs and gone through another regurgitation. It is so sad to watch because
they are running 180 degrees from where they should be. Investors are
being given a mathematically sound gift, yet they are too scared and overcome
with their stomachs to use their common sense and minds!
This is it folks!
2012 is exactly 99 years after the creation of The Federal Reserve, I don't
believe it will take until 2013 for the last remaining vestiges of
"perceived" value to evaporate.
The Dollar has been a 100% fiat and unbacked
currency for 40 years and the world went along with it. Those left
holding this hot potato when the system resets will start over with only
their mental or physical abilities as their capital will have vanished.
You can try to out think this and be 100% physical metal or 100% mining
shares going into the reset. I say and have said, "don't try to be
a hero" and figure out what will make you "King or Queen of the
world", own both and spread your risk around geographically. I
have also espoused "going into a shell" and to stop trading.
Yes there are those who can do it successfully, then
there are the other 99% of us. DO NOT trade and suddenly find yourself
out of place at the very moment that you need to be 100% invested. What
is coming will defy ALL technical indicators and "conventional
wisdom". What is coming, is and has
been for quite some time now, 100% mathematically predictable. Policy
response cannot be 100% assured because the "chauffers"
are human and as they say "desperate people will do desperate
things". What is assured is that the current monetary system will
not survive in it's
current form and that Gold (Silver) will again attain monetary status
and in some fashion "anchor" whatever new currency(s) that are put
I think it best, right
now to prepare mentally for even more volatility than we have already
experienced. Volume, though contracting steadily throughout this year
will probably explode at some point with people either rushing the exits in
panic or the entrances should currencies implode. Nothing,
and I do mean NOTHING that happens this year should shock nor surprise
you. This is especially so for the precious metals. You can
bet that every kitchen sink in existence will be thrown at the metals.
Please keep firmly in mind that even though
your butcher may advertise .99 cent per lb. filet mignons, this doesn't mean
he actually has them to sell to you. The very same phenomenon will in
my opinion become public this year with both Gold and Silver. Just
because there is a quoted price in the newspaper or on TV doesn't mean
there is any real metal available for sale at these prices (or maybe any
price?). These markets are "fractional reserve", this in reality means that when a fraction (maybe even
less than 1%) ask for their metal, there is no more. The other 99% are
just plain out of luck. Once this gets going, the panic for delivery
will put any and all bank runs throughout history to shame.
The entire system is a
fraud, scam and sham, at the very epicenter of it all is the fact that
physical metal has been sold over and over again to the point where there are
maybe 100 claims to the same ounce. Maybe 2% of the population has
invested in either Gold or Silver. Of this tiny portion it is highly
probable that 98-99% of these investors have paper promises that will not be
fulfilled. You have the opportunity to be 1 or 2% of the 1 or 2% who
believe they have invested in precious metals to actually have a real,
touchable, very rare and valuable holding. DO NOT under ANY
circumstances, let market action seperate you from
your insurance. Gold and Silver will be the only insurance left
One last area that I
would like to touch on is that of "society". 2011 saw civil
unrest, protests and even riots make their way around the globe, I believe
2012 will see much much more of this. In
fact, I would give it better than 50/50 odds that we see a literal breakdown
in the coming year. 100 years ago the worlds' population knew how to hunt, fish and grow crops. Barter was done on a
regular basis and the banking system was a place to "save" because
you knew that your currency would not be debased. Your only worry was
the potential failure of your bank. Today and 180 degrees away, no one
can hunt, fish or grow crops. Barter is mostly unknown and people
now "save" in the stock market. Today, banks are a huge part
of everyday life and has it's fingers in everything
from the "fields to your local grocery shelves", distribution
cannot happen without the banks. The banks are everywhere you look and
society cannot survive (immediately) without them. The banking system
has already failed and only breathes daily breaths because governments have
bankrupted themselves to prop up and prolong the banks. Once the banks
fail...and they will, "every man for himself" will take on a new
meaning. Please make sure that you are prepared for this type of event
because 2012 is more than ripe for it to occur.
I wish everyone a healthy
and safe New Year, I will resume commentary
next week. Best
regards, Bill H.