|
|
With a fresh
round of "balance sheet money" petrifaction and conversion into
"base money" through QE seemingly on the horizon, it may be time to
take a fresh look at the most important and frightening situation that the
Western public simply does not get. That the Fed and the ECB have been
postponing (and ONLY postponing) the total collapse of our debt-driven
economy and the entire international monetary and financial system (the
$IMFS) that, without their actions, would have already collapsed.
This postponement has been effected only by piling on more of the same debt,
on top of an already-too-big mountain of debt. Sterilization schmerilization.
If the Fed and the ECB had not intervened on such a massive scale, everybody
in the entire Western world would have already lost their illusory wealth two
years ago.
How can the Western public possibly imagine what is coming? Some imagined something back in September and October, 2008, but
then it didn't come. Now it is much worse, yet no one sees it coming this
time. Western paper wealth is a complete mirage, more now than ever, yet they
sit tight after receiving the gift of two more years to understand and
prepare.
FOA wrote back in April of 2001, "My friend, debt is the very essence of
fiat. As debt defaults, fiat is destroyed. This is where all these
deflationists get their direction. Not seeing that hyperinflation is the
process of saving debt at all costs, even buying it outright for cash.
Deflation is impossible in today's dollar
terms because policy will allow the printing of cash, if necessary, to cover
every last bit of debt and dumping it on your front lawn! (smile) Worthless
dollars, of course, but no deflation in dollar terms! (bigger smile)"
"Buying it outright for cash" is exactly what QE is. "Dumping
it on your front lawn" is what the Fed and the ECB are doing right now.
Not literally, of course, but they are dumping non-contractible, petrified
base money on top of your paper wealth, diluting it in ways you will only see
once, once it is too late to do anything about it, that is.
Bernanke wrote in 2002, "The US government has a technology, called a
printing press, that allows it to produce as many US dollars as it wishes at
essentially no cost" in a speech entitled "Deflation: Making Sure
It Doesn’t Happen Here." Today he is putting his theories to the
real-world test, doing exactly what he said he would do back in 2002.
Optimistic deflationists like Ambrose Evans-Pritchard and Andrew Roberts at
RBS see this as a good thing. Pritchard writes, "The only plausible
escape route for the West is a decade of fiscal austerity offset by helicopter
drops of printed money, for as long as it takes." And Roberts says this is the Fed tack "which I personally
prefer". [1]
More realistic (in my opinion) deflationists see the necessity of credit
contraction, economic contraction and defaults to cleanse the system. But
what all deflationists seem to miss is the fragility of the US dollar as the
linchpin holding the entire global financial system together. And what they
seem to either not realize or completely ignore, or perhaps avoid, is that
Bernanke is testing the strength of this rusty old pin with every move he
makes.
Gargantuan efforts have been made to extend the mirage and pretend it is
real. It is not. And although this façade of paper wealth is accepted
at face value by the vast majority, the rot suffered underneath through the
process of extension is nearly complete.
Most readers do not understand the serious nature of what I write. They still
react with a skeptical mind to my story, and to the story presented by ANOTHER
and FOA, as if they were some kind of a speculative exercise for investors.
All the so-called expert economists won't dare to present today's
historically dramatic situation in its correct, very alarming context. And
those who do understand what is actually happening should be utterly -
speechless -. People, including the experts, just don't want to believe what
they are seeing. And they refuse to analyze the true implications of this
dire situation.
"We're
heading towards a double-dip recession," said Chris Whalen, a former Fed
official and now head of Institutional Risk Analystics. "The party is
over from fiscal support. These hard-money men are fighting the last war:
they don't recognise that money velocity has slowed and we are going into deflation.
The only default option
left is to crank up the printing presses again." [2]
Never mind that money velocity can reverse in one day when panic is involved.
[3] The above is, in a nutshell, the
$IMFS. "The only default option left is to crank up the printing presses
again." Read that sentence a few times more just to be sure you get it.
This is exactly how the $IMFS reacts to each and every mole that pops its
head up. They react so quickly that they forget the last mole never actually
went away. It disappeared from view, therefore we carry on and pretend it is
gone. This game of printing press Whack-a-Mole gives off the paradoxical
feeling of safety, as if nothing ever crashes.
Can you see yet how ridiculous this whole paradigmatic façade is?
How about all this "gold bubble" talk? I will remind you that there
were very few people that even knew what a bubble was back in 1999 and 2000
when the US stock market was hitting its ALL TIME HIGH and gold was at its
ALL TIME LOW.
Then along came ANOTHER and FOA with over 1,000 delicious, free pages
explaining exactly why physical gold taken into your own possession was the buy of the century. The general
public completely missed this opportunity (so far) and now they provide the
"bubble talk" necessary to cast doubt on the truth of the
situation. Yet these same people are still trapped in their loss-making Ponzi
bubble paper, with nary a glance at gold's outstanding performance.
And remember, to date this is only paper gold that is performing. Paper with
only a fragile and fractional parity attachment to the real thing. Physical
gold HAS NOT EVEN HAD ITS DAY IN THE SUN YET.
But even if you are blind to the real story of physical gold, and are simply
following the technicals of the paper-gold bull-run, the signs are everywhere
and amazing. Just have a look at Jesse and his fantastic charts. (And I am
not saying Jesse is blind to the physical gold story. He most certainly is
not.)
So we seem to
have almost ten more years of upside ahead of us, and could be considered to
be at the halfway point.
Gold has been gaining, on average about 70% every three years. So what is the
end point?
Just for grins, I would expect gold to hit $6,300 near the end of this steady
bull run, but the bull market will end in a parabolic intra-month spike
towards $10,000. This is likely to occur around 2018-2020.
Long term forecasts are fun, but there are so many exogenous variables that
it is very hard to say what will happen even a few years out. Let's see how
this breakout goes, and where we are at then end of this year first. The
charts will inform us of any major trend changes. Charts provide perspective
more than prediction.
Exogenous variables indeed! The above is, of course, the "paper gold
story." It is the best case scenario for the powers that be and the
paper-bugs. It is what the technicals indicate to a "gold bull"
should the whole rickety paper gold structure hold. But what it doesn't take
into account is the "gap up" when the physical gold market severs
its parity relationship with processed, bleached pulp promises.
If Jesse's technical signs were aimed at paper-Ponzi investments, people
would be lining up at the Ponzi window. But in gold, alas, it must be a
bubble.
So what is necessarily implied by the failure of paper promises to deliver
physical gold during a financial panic? And from the other side of the coin,
what is necessarily implied by an overnight 50X revaluation in only one,
single, physical asset? Please think about these questions.
The Fed, in all its wisdom, is now telling us "Economics is Hard." And the BIS
says, "powerful measures have strong side effects, and their dangers are beginning to become
apparent."
The BIS goes on to say, "The financial disruptions in the first half of
2010 have brought the fragility of the industrial world’s
financial system into stark relief: a
shock of virtually any size risks a
replay of the events we saw in late 2008..."
"...Unlike then, however, we [Central Banks] have hardly any room for manoeuvre. Policy rates are already at
zero and central bank balance sheets are bloated." [4]
Here is the situation: The system would have collapsed, paper wealth would
have burned, your savings, pensions and paper promises would have
disappeared, and physical gold would have gone to the moon two years ago if
the Central Banks had not taken extraordinary measures. But these actions
only made the system more fragile and raised the risks to new heights. And
today the Central Banks have "hardly any room for manoeuver," so
says the Central Bank of Central Banks.
Even our own Fed is saying, "Economics is hard." Sheesh!
Does this sound scary? A little creepy perhaps? It should. If you really take
the time to understand what is happening, you should be utterly - speechless
-.
But on the flipside, holding physical gold in your own possession will convey
to you a sense of security rather than that sense of fear and loathing
brought on by the system. Holding gold brings calm and peace of mind. Holding
gold brings the power of money creation back to the people. The old saying
really is true – he who holds the gold makes the rules. So please, in
this time of great uncertainty, hold gold, and make your own rules.
[1] RBS
tells clients to prepare for 'monster' money-printing by the Federal Reserve
[2] Ben
Bernanke needs fresh monetary blitz as US recovery falters
[3] What
Obama Does Not Know
[4] BIS 80th Annual Report
FOFOA
FOFOA is A Tribute to the Thoughts of Another and his Friend
Donations are most
appreciated, just click
here
|
|
