Saturday morning cartoons

(But) look at these sexagenarian dogs! Their dog-teeth get sharper at every moment. The hairs drop from the fur of an old dog; (but) see these old (human) dogs clad in satin! See how their passionate desire and greed for women and gold, like the progeny of dogs, is increasing continually! Such a life as this, which is Hell’s stock-in-trade, is a shambles for the butchers (executioners) of (the Divine) Wrath; (Yet) when people say to him, “May your life be long!” he is delighted and opens his mouth in laughter.
He thinks a curse like this is a benediction: he never uncloses his (inward) eye or raises his head once (from the slumber of heedlessness). If he had seen (even as much as) a hair’s tip of the future state, he would have said to him (who wished him long life), “May thy life be like this!”
–Rumi, The Mathnawi, Book VI, circa 1270 A.D.

The cartoons at the link below should be required viewing (and understanding!) in school, especially any history or economics class. These cartoons are all from 100 years ago or more. They clearly describe the cementing into law–pending at the time– of the rigged banking, currency, and stock markets that financially enslave almost everyone on the planet to the endless hunger for humongo-profits of the few. They show that at least a some people understood the game then. Sadly, few understand the game even now. How do we get this understanding to everyone so that we can end this vicious travesty? How do we bring in the logic and compassion that clearly show the primitive and self-defeating nature of systematically-enshrined greed? Continue reading

A major change, Part 1

A significant change has taken place. A pressure seems to have been lifted from members of the so-called Elites. This can be seen by two effects:

1. Some of these System Controllers are taking a look around and are none too pleased with what they see.

2.  Some of them realize they can now speak more freely.

Here are some examples. The first is a set of quotes from the Chief Investment Officer of Allianz, by some metrics Europe’s largest insurer, and the third largest insurance company in the world:

The fundamental problems are not solved and everybody knows it.

Let’s hear that again:

The fundamental problems are not solved and everybody knows it.

Wow, for the last five years, one had to peruse surly blogs to hear that truth, but this is from Maximilian Zimmerer, the guy in charge of the assets for one of the 20 largest corporations in the world. He also stated that the “euro crisis is not over.” With that latter quote, he just told us that all those Euro-pols running around saying the “euro crisis is over” and “Europe has been fixed” are very mistaken and/or very full of it.

Next, someone let the Wall St Journal know that the US Federal Reserve has been railing about extreme problems at Germany’s top bank, Deutsche Bank:

In a letter to Deutsche Bank executives last December, a senior official with the New York Fed wrote that financial reports produced by some of the bank’s U.S. arms “are of low quality, inaccurate and unreliable.”

It said examiners found “material errors and poor data integrity”…The shortcomings amount to a “systemic breakdown” and “expose the firm to significant operational risk…”

So what’s the US central bank doing castigating Germany’s largest commercial bank? DB has large US operations; we showed here that half of the Fed’s money printing went to European banks, so DB probably has a lot of that cash, that is, from the Fed’s point of view, they had to bail out DB before, they don’t want to have to do it again; and, drumroll please, DB has the largest exposure to derivatives of any bank in the world. Again, what are derivatives? They are highly leveraged bets on every imaginable financial price movement. Here’s what ZeroHedge says about DB and derivatives:

Recall that as we have shown for two years in a row, Deutsche has a total derivative exposure that amounts to €55 trillion or just about $75 trillion. That’s a trillion with a T, and is about 100 times greater than the €522 billion in deposits the bank has. It is also 5x greater than the GDP of Europe and more or less the same as the GDP of… the world.

And here is that text in chart format:

So that’s Germany’s total economy in green on the left; Europe’s economy in blue in the center; and Deutsche Bank’s derivative bets in red on the right. So when it becomes clear that DB has a serious problem, it will be way too big for Germany to handle; probably way to big for Europe to handle; and possibly way too big for anyone to handle, that is, it could be game over, system down, everyone start from scratch. What the US Fed is saying is that DB’s recordkeeping and reporting is so bad that it results in “significant operational risk.” We likely won’t know till after DB goes down the tubes whether this was error or intentional obfuscation on their part. My guess is it’s probably a lot of both: their business is so huge, they have little understanding of many of its parts, some of which likely have twenty-something rogue traders putting on huge derivative bets; and they have plenty to hide.

Next, the Bank for International Settlements (BIS) has overtly questioned the sanity of just about all central banks and just about everyone participating in the financial markets. So why should anyone care? Perhaps you’ve been blessed during this lifetime and have never heard of the BIS. It is the organization that was described as follows on Bloomberg:

It was especially useful to the Nazis.

Though headed by an American during World War II, the BIS adhered to a priestly neutrality…in order to continue dealing with all sides in the conflict. Unfortunately, this put the institution squarely in the position of abetting Nazi terror.

The BIS accepted plundered gold and made it possible for Germany to acquire desperately needed war materiel. It even permitted Germany, once it had invaded Czechoslovakia, to confiscate that nation’s gold reserves.

I can just hear you saying: “Oh that BIS.” Anyway, from such disgusting beginnings, the BIS has continued its traditions and thereby has risen to be the central bank above all other central banks, that is, if you are the head of a major central bank in the world, you get a seat at the table at the BIS. Here it is, what some call the Tower of Basel, such a friendly-looking nuclear plant cooling tower place:

I’m told that if you’ve got a war to finance or a lot of drug money to launder, the BIS is your one-stop-shopping place. But I digress. In this article:

     BIS Slams “Market Euphoria”, Finds “Puzzling Disconnect” Between Economy And Market

you can find the Financial Times summary of the latest BIS Annual Report:

The Bank for International Settlements has warned that “euphoric” financial markets have become detached from the reality of a lingering post-crisis malaise, as it called for governments to ditch policies that risk stoking unsustainable asset booms.

While the global economy is struggling to escape the shadow of the crisis of 2007-09, capital markets are “extraordinarily buoyant”, the Basel-based bank said, in part because of the ultra-low-rate monetary policy being pursued around the world…calling for policy makers to halt the steady rise in debt burdens around the world and embark on reforms to boost productivity.

In its annual report, the BIS also warned of the risks brewing in emerging markets, setting out early warning indicators of possible banking crises in a number of jurisdictions, including most notably China.

So there you have it, the ultimate insider organization saying what the surly blogs have been saying for years: stock and bond markets are wildly detached from economic reality, central banks are keeping interest rates too low and printing too much money, expect banks to fail all over the world, especially in places like China, etc.

Next, speaking of bank failures, the EU, US, and UK (I think an appropriate pronounceable acronym for this particular axis of evil is EUUSUK) have decided to “show us their feelings” about bank bailouts and have come clean about their attempt to get all countries to go along with their scheme to replace bank bailouts with bail-ins, through which, if you have money in a bank that fails, they are going to steal a bunch of your money to save the bank, like they did in the test case, Cyprus:

     Bank Of England Leads Push For Deposit Confiscation – Japan, China, Russia Against Bail-Ins

They are pushing all major countries to go along with this plan for an obvious reason: Let’s say you are a global corporation or a gazillionaire and can place your money in whatever countries you choose. Why would you keep your money in countries where you could lose a lot of money in a bail-in? You wouldn’t be such a fool, of course, you’d move that money to safer countries, or into safer forms such as gold. However, the EUUSUK axis is being brutally honest here about their intent. Perhaps people living within the axis will be helped by the reluctance of the Asians and Russians to go along with this draconian plan to continue saving reckless banks by theft from regular people; but I doubt it.

Let’s call it a day and save more of this new-found realism and truth-telling for Part 2.



Actual democracy

How often do you hear of a referendum where there is huge voter turnout and 90% vote in favor? We just saw two, both with the theme of secession:

     Crimeans vote in referendum on whether to break away from Ukraine, join Russia

Crimean election Spokesman Mikhail Malyshev said the final result was 96.77 percent to rejoin Russia and 2.51 percent against.

That was with an 83% voter turnout.

     Venice votes to split from Italy as 89% of the city’s residents opt to form a new independent state

In Venice, 73% of eligible voters cast ballots. The last time even 60% of voters turned out for a US Presidential election was 1968.

And it’s fairly clear that, despite attempts to quash it by the national government, Catalonia will vote to secede from Spain on November 9:

     Spain Says Catalonia Can’t Vote for Independence, But Catalans Will Go Ahead Anyway

Last September 11, Catalonia’s national day, hundreds of thousands of Catalans formed a vast human chain across the region to call for independence.

According to a site that tracks all of the current wars on the planet, there are 33 other states working to gain independence from their national government. That’s in addition to the 534 militias-guerrillas and separatist groups who are actively fighting their own national government in 60 countries.

Perhaps people are just a bit tired of the confiscation of a huge chunk of their earnings by massive government bureaucracies that: use that money to spy on their own citizens; pass laws that clearly favor their interests over the interests of the people, including laws that apply to regular citizens but not to the lawmakers; jail people for stealing $500 from a convenience store but give rich cronies like Jon Corzine a free pass when they try to steal a billion dollars; start wars ruining countless lives and costing trillions of dollars, indebting current and future generations, wars that very few people want:

     Americans Think the Afghanistan War Was a Mistake, Just Like All the Other Wars Since 1950

It took two years or less for public opinion to turn on the wars in Korea, Vietnam, and Iraq.

that pad their own salaries when regular people are struggling, as shown here:


When benefits such as health care and pensions are included, the federal compensation advantage over private workers is even larger, according to the BEA data. In 2012, federal worker compensation averaged…74 percent more than the private-sector average.

that create trade agreements such as the TPP, written in secret by corporate lobbyists, covered here by Bill Moyers:

     The Top Secret Trade Deal You Need to Know About

that continue playing global power games while people in the US lose basic services:

     US Prepares To Provide A Billion To Ukraine As Detroit Plans Mass Water Shutoffs Over $260 Million

Oh how, as we all know all too well, this list could go on and on. The more the powermongers try to centralize all control, the more they are creating resistance as people rightfully try to bring real governance back to their communities. Charles Hugh Smith has been doing some excellent writing recently on how the huge lumbering centralized structures created by government are a very poor match for the complexity (and speed, I would add) of today’s world (The Incompetence of the Federal Reserve and Deep State Is Unavoidable):

The incompetence of these organizations is not a reflection of the competence or intelligence of their managers–it is the intrinsic consequence of their limited control of complex systems. If the system has reached the point of being ungovernable, even the most brilliant and experienced managers will fail because it’s not the managers who are incompetent, it’s the organization itself that is incompetent.

I consider this move toward secession to be trend, not anomaly. Expect acceleration. In these votes for secession, people are getting just the smallest taste of actual democracy, so–and this is the true anomaly in today’s world where the political process has been captured by large corporations known as political parties, giving many people the correct idea that their vote counts for little or nothing–the turnouts are huge and the votes decisive.

I would go even farther: Today’s political process is intentionally designed to funnel the beautiful and brilliant energy of people’s good will–via voting where the choices are poor, monetary contributions, letter-writing campaigns, emotional attachments to issues and politicians, etc–into a black hole of ineffectiveness so the power elites can exercise ever-increasing control. They will fail spectacularly.








A Cycle that Says “Get Ready”

There haven’t been many posts here lately, in part because it looks to me like we are on the precipice of major changes. So I’ve been spending some time finalizing my own preparations in terms of food (backup supplies and the infrastructure for growing more), electricity, water, and so forth. (Hint, hint.) Many think (hope?) that The Powers That Were can keep this all going for years. With the clear acceleration of infighting among the elites, to me that seems like a very bad bet.

So I found this post from Deflation Land to be interesting in terms of us being right on the cusp of major changes:

     Why I stopped worrying and learned to love the currency collapse

“For the past 300 years, the historical pattern has been for the era marked by a century to continue into the following century by fourteen or fifteen years.

“Let me explain. Everyone knows that the 19th Century, its uprightness, its optimism and sense of purpose, the halcyon days of British Empire, came to an end with World War I, starting in 1914 and building to a nasty crescendo by 1916. The 20th Century had arrived, and it had some real horrors in store for us.

“But if we return back another hundred years, we notice that the 18th Century ends in 1815 with the final defeat of Napoleon, that final project of the Enlightenment and of the French Revolution.  With the Congress of Vienna in 1814-1815, we have a new Europe along the lines of Metternich’s plan, and the 19th Century at last is here.

“In 1713 and 1714, we have the Treaties of Utrecht, Baden, and Rastatt, bringing an end to the era of Spain as a major power, and the rise of the Habsburgs.  Louis XIV dies in 1715, after reigning for 72 years.  The Baroque period is over, and we are now firmly in the 18th Century.

“We still live in the 20th Century…We still live in an era of Pax Americana, the old republic very much a strained and tired Empire now, with the U.S. Dollar as the world’s reserve currency.

“That is going to change.

“The next task for History is to dismantle the untenable structures and institutions put in place by late Modernity, which have been extended now as far as they can go. Our debt-based monetary system will collapse, our unbacked fiats will be worthless. The debts and unmeetable obligations will all default.

“There are ironies and great contradictions as the former home and hope of Liberty becomes viciously unfree and increasingly despotic. Our leaders no longer govern, but try instead to rule us — they are less legitimate with each passing day, their laws corrupt or worse. They are nearly finished, and will be swept away with the tide.

“Just as in 1914, the internationalist system will break down, dashing the hopes of the would-be first-world nations. We will probably have a pretty good war as well, or many local ones worldwide. These transitions tend to involve war.”

*  *  *  *  *

Combine the above with the Wheeler War Cycle and other war cycles discussed here, and it looks like our current faux stability–in which the gears of government and the economy grind on and on with little progress in any direction–will, within months, be a memory. The full Deflation Land article is here.

Update on Metals, Deposit Confiscation, and Capital Controls

…one goal is to get to the point where all market participants understand with certainty that if a large SIFI (systemically important financial institution) were to fail, the losses would fall on its shareholders and creditors
–Governor Jeremy C. Stein, US Federal Reserve Board, Regulating Large Financial Institutions, speech at a conference sponsored by the International Monetary Fund, April 17, 2013

* * *

“Bank creditors,” as it happens, is a class of people that includes bank depositors. Everything about the rhetoric of banking is designed to obscure this. You deposit money in your bank account…But what you’ve really done is loaned the money to the bank…

A big price drop in the precious metals. So let’s see, on Thursday, April 11:

     CEOs of biggest U.S. banks to meet with Obama on Thursday

and the big selling in metals took place on Friday, April 12 and Monday, April 15.  No chance of any causation in that correlation. Nah. Move along. As Leslie Nielsen said, “Nothing to see here.

Anyway, with all that selling, there must be lots of inventory of coins around. That’s what they teach in Econ 101, right? That if a price is plunging, it’s because people are dumping large quantities of that item onto the market.

But there isn’t lots of inventory. Inventory is very tight, sold out in many cases. Delivery lead times are out to five or six weeks, and that’s if you can even place an order for what you want.  Big-volume dealers like are entirely out of one-ounce silver coins minted by any country, and they have been since April 15. You can scroll down this page at their web site to see how many items they normally sell are currently sold out.

And these people make a living buying and selling lots of coins. They really want to do a lot of business. And they are happy to buy right now, but they can’t sell lots of items because there aren’t any available.

This scramble to buy physical bullion coins is going on worldwide.

In Australia:

     Golden times for Perth Mint

The volume of business that we’re putting through is way in excess of double what we did last week,” Treasurer Nigel Moffatt said, without giving precise figures. “There’s been people running through the gate.”

In Japan:

     As global price slumps, “Abenomics” risks drive Japan gold bugs

But on Tuesday, buyers outnumbered sellers by a wide margin. At Ginza Tanaka, the headquarters shop of Tanaka Holdings, gold buyers waited for as long as three hours for a chance to complete a transaction.

In India:

     India’s Response To The Gold Sell Off: A Massive Buying Frenzy

In China:

     Chinese Gold & Silver Exchange Society Runs Out of Gold…Importing from Switzerland and London

Now we discover that the Chinese Gold & Silver Exchange Society has essentially sold out of gold bullion, and must wait until Wednesday for shipments to arrive from Switzerland and London.

     Gold Buying Frenzy Continues: China, Japan, And Australia Scramble For Physical

In the US:

     US Mint Sells Record 63,500 Ounces Of Gold In One Day

According to today’s data from the US Mint, a record 63,500 ounces, or a whopping 2 tons, of gold were reported sold on April 17th alone, bringing the total sales for the month to a whopping 147,000 ounces or more than the previous two months combined with just half of the month gone.

     Bullion Shortages Develop As Retail Demand Skyrockets

…on Monday there was such chaos in the markets that some of the larger wholesale dealers had to shut down at various times because of the massive demand on the buy side… Gold and silver buyers are still outpacing sellers by a stunning 50 to 1.  There were premium increases on everything bullion related.  The wholesalers are now telling us four to six weeks on silver maple leafs, and wholesalers quit taking orders on one ounce silver rounds.

In Canada and Europe:

     Massive Run On Physical Gold & Silver At UBS & Scotiabank

At the Bank of Nova Scotia in Toronto the gold window has been absolutely swamped. I have confirmed there were people lined up in droves recently for multiple-hours at a time to buy gold and silver bars and coins….

“I then confirmed with UBS today in Zurich, Switzerland, that they are experiencing exactly the same thing. They told me people are waiting in long lines for bullion related bars and coins. The physical market is incredibly tight…

In Switzerland:

     Refiners Can’t Keep Up With Massive Global Gold Demand

If you look at our company, as just one example, we did not have one single seller in the last few weeks.

So during this takedown in gold and silver there wasn’t one single seller, only buyers….

If we turn to the Swiss refiners, Eric, the premium over spot for physical gold is rocketing. Swiss refiners are unable to keep up with the demand for immediate delivery. They are working flat out, including the weekend, and still can’t keep up.

The Swiss refiners are seeing global demand coming in from everywhere, especially from the Middle-East and the Far-East. So, again, this proves that the artificial manipulation of paper gold has nothing to do with the physical market.
–Egon von Greyerz, Matterhorn Asset Management

So, with all that buying interest in real physical gold and silver, why has the price been falling? Because the two largest trading venues on the planet for metals, the LBMA (London Bullion Market Assoc.) and the COMEX in the US, are the places where the price of gold is currently set. And 99% or more of the trades there that are said to be related to gold are not for the physical metal, they are futures contracts that are traded for cash, not physical gold. In other words, these are very large trading casinos. But like the banks, they are fractional reserve systems. In other words, if everyone who had a futures contract for gold actually wanted physical gold for their contract, there would not be anywhere near enough gold to go around. Even supporters of the LBMA admit there is maybe 1% physical gold backing all these contracts. So that’s even more leverage than is used at most banks. A lot more.

Monday, April 15 was a good example. Andrew Maguire–an LBMA trader and whistleblower who the Powers That Be ran down, but did not kill, with a car in 2011 right after Andrew gave testimony on silver price manipulation to the authorities—reported that on Monday, there was a period during which 155 tons of gold was sold on the LBMA in one hour. I can tell you for sure that no one who owned or was the custodian for 155 tons of physical gold would sell it in a panic into a falling market. This was selling of futures contracts that will be settled in cash. They have little or nothing to do with physical gold. People in charge of 155 tons of real gold do not sell in a panic. If they wanted to sell—and such a thing would be quite unusual these days when even central banks are net buyers of physical gold—they would do so carefully, trying to get the best price. They would sell on days when the price was rising, not falling. This is the way anyone with a strong profit motive sells, they hire good traders to sell over time when they can get the best price. They do not panic dump their holdings regardless of price.

In fact, Maguire reports that central banks picked up 55 tons of physical gold during that one hour period when 155 tons worth of paper gold contracts were sold.

Here are Maguire’s comments about Monday, April 15.

At some point, this charade will fall apart. The price of physical gold will separate from the price quoted in these paper instruments. This is already visible when one needs to buy coins at a premium above the spot price of the metal. During these smashdown selloffs (we’ve seen these before in 2006 and 2008), the premium above the quoted spot price for physical gold and silver rises, sometimes to as much as 50% above the spot price if you want prompt delivery. During those periods, the price for physical coins is not the quoted spot price, it is the spot price plus the premium, and that price can be substantially higher. These are the indications of the separation of the paper and physical gold and silver prices to come.

The press duly reported nearly the same quote from representatives of all of the banks. Yes, reps from those same banks that met with Obama on April 11. “Gold has lost its safe haven status. “ “Gold is no safe haven.” And on and on. They should have dressed them up in silly costumes and they could have danced and sang together, at least that would have been entertaining.

So why do they want to scare you out of, or away from, gold and silver? Two main reasons:

First, so that you cough up your goods so they can buy them on the cheap.

Second, when they go to “Cyprus” your accounts, that is, when they want to confiscate some of your money, they want it easily available with a few keystrokes. Confiscating gold and silver coins would be inconvenient at best, dangerous at worst.

Do you think “they’ll never do that here”? Here is the overall order of events in Cyprus:

1. On Feb 10, the Financial Times published the plan for the confiscation of depositor money in Cyprus called Radical rescue proposed for Cyprus.

2. On Feb 11, the Central Bank of Cyprus posted a letter shown at this link saying that the Financial Times article was incorrect, that confiscating depositor money was against the constitution, etc.

3. In mid-March, the confiscation of depositor money was announced.

4. The Cyprus parliament voted against it.

5. The central bank of the EU overruled the Parliament of Cyprus and went ahead with the confiscation. So democracy and the constitution were thrown out the window along with the promises.

On the day after the confiscation, the new head of the EU finance ministers, Jeroen Dijsellbloem, gave not one, but two interviews in the mainstream press in which he said the Cyprus bank resolution was a new template for such actions. From Reuters:

A rescue programme agreed for Cyprus on Monday represents a new template for resolving euro zone banking problems and other countries may have to restructure their banking sectors, the head of the region’s finance ministers said.

The rest of the EU and IMF politicians nearly had a baby on the public stage. For the next three weeks, all they would say was that Cyprus was not a template. We should have put them in a chorus line too. Even Dijsellbloem tweeted that he didn’t say what he said.

But then a member of the US Federal Reserve Board, Governor Jeremy C. Stein, said that if a Too Big to Fail bank failed, that private investors and creditors would have to bear the losses. His speech was on April 17, well after the Cyprus event wherein depositors were ruled as “creditors” of the bank. These people choose their words carefully. I hope everyone out there listens to them carefully.

And it’s worth remembering this: In the US, for example, the bank insurance fund held by the FDIC has $25 billion. That’s the amount insuring $9 trillion worth of deposits.  So that’s 370 times more deposits than the amount in the insurance fund. And the insured banks have an additional $297 trillion in exposure to derivatives. So that’s almost 12,000 times more than the amount in the insurance fund. Very safe and sound, eh? Now you know why the authorities have just hinted that banks won’t be simply bailed out anymore; people’s deposits will be bailed in. Just remember, they’ve put you on notice now that you need to determine whether or not your bank is safe. People who spend their whole lives trying to do that can’t figure out which banks are truly safe anymore, but so what, you are now supposed to be able to do that. You can see a chart of the FDIC situation here. And you can find out a little about the safety of any US bank at the Safe and Sound section here. I am not aware of what is available publicly available for bank analysis in other countries.

Also part of the Cyprus event were strong restrictions on how much money a person could take out of Cyprus, the dreaded capital controls. This is also part of the template. When that happens, people are stuck in their own currency even if it tumbles mercilessly in value. When people tried to switch their money into the electronic currency Bitcoins because it recognizes no borders, it doubled the price of Bitcoins in a few weeks. TPTB then smashed down the price of Bitcoins as well, to show people that there is “no safe haven.”

Throughout history, currency devaluations, capital controls, and asset confiscations are denied until after they have happened. Governments typically say, “Sorry, we didn’t want to do that, but we had no choice.” You need to either anticipate them or be a connected government crony. Here’s a chart of monthly deposits into and withdrawals from the Cypriot banking system. The large withdrawals in January and February show the strong likelihood that some people were given advance notice:


Most people were not given advance notice; if the time comes, you and I will be in that group.

Lots of people are showing that they understand. As the stories above show, people were waiting in line for metals at these prices across the globe. We have seen this play before. Sometimes the elites smash down the prices of metals. Did I see it coming? Nope. Can they do it again? Yep. But as the rising price of gold over the last 12 years proves, they can’t push it down too far. If they do, the Asians and regular people will end up owning all of the gold. And the banksters won’t like that at all since they know the financial (per)version of the golden rule: he who has the gold makes the rules.

Lots of regular people on the planet take these price smashes as a gift. I think these people are smart.

Here is Jim Sinclair’s latest comment on the topic: The US Will Be Cyprused & We Will See $50,000 Gold.

And the recently-released video The Secret World of Gold, while not perfect, has Andrew Maguire briefly explaining how gold and silver prices are manipulated, and brings up the interesting question of whether there is any real gold (and not just gold-plated tungsten bars) at the US gold depository at Ft Knox. Channeled information agrees that Ft Knox is empty of real gold.  It will be a very interesting day when the world finds out about that.


Gold Goes Mainstream

Gross: Stock and bond managers today must be alchemists: turn lead into gold. NOT likely. Too much lead (bubbled assets).
–Tweet from Bill Gross, Founder of PIMCO, which manages $1.8 trillion


“Do you own gold?” “Oh yeah. I do…There’s no sensible reason not to have some.”
–Ray Dalio to the Council on Foreign Relations

This is being written to put the precious metals market in a larger context for those people who still see the world proceeding much as it has proceeded in the past, a world without the large financial and supply chain disruptions that we foresee.

Strong multi-year upmoves in the price of any asset, aka a secular bull market in that asset, go through three stages:

  1. The speculative, early-proponent phase during which the mainstream investment community ignores or derides the potential of that asset.
  2. The mainstream phase, where the mainstream decides that exposure to that asset is a good idea for just about everyone.
  3. The mania phase, where just about everyone feels that they must own that asset and will tell you so when you meet them by chance in the supermarket.

Phase 1 for gold has been marked by derision from the mainstream investment community. Quoting Keynes, they call gold the “barbarous relic.” Otherwise-intelligent economic commentators such as Nouriel Roubini have been calling for a price top in gold for several years. Some who are old enough to have experienced the gold bull market of the 1970s have been saying, “We heard all this before in the 1970s, anyone who buys gold now will regret it later.” All of these people have been wrong all along as gold and silver have powered higher in price.

During most of Phase 1, the major central banks of the world have been sellers of gold, preferring to buy government bonds of various countries (such as Greece and Spain!) to “get a return” on their money. Gold has been a far better investment for the last 12 years. Over the last three years, central banks have become net buyers of gold, to the tune of hundreds of tons per year. Most but not all of this buying has come from Asia as the western central banks have been preoccupied with printing money in a mad scramble to keep their markets afloat.

Gold has been in Phase 1 since 2001. Most in the financial community regard it as an annoyance when their clients ask about it. The price increased from $256 in 2001 to $1,911 in August, 2011.

A couple of weeks ago, Ray Dalio gave a presentation to the CFR. He was asked if he owned gold, and he said, “Oh yeah. I do.” This marked the start of Phase 2, the mainstream phase.

Who is Ray Dalio? Most people in the investment community respect him as the best active hedge fund manager on the planet. We mentioned his firm, Bridgewater Associates, in a previous post. They manage about $140 billion. Ray is highly respected in both financial and political circles.

And the CFR is the Council on Foreign Relations. If you had to pick one organization that has the most influence on the mainstream political thought in the US, it would have to be the CFR. It was founded by the Rockefellers. You have to apply for membership. There are currently 4,700 members, including Bill Clinton, Robert Zoellick, Janet Yellen, Paul Wolfowitz, Lloyd Blankfein, Jamie Dimon…in other words, the CFR is the public face of The Powers That Be/Were.

Now that all of these mainstream movers and shakers have heard from what some consider the smartest money man on the planet that owning gold is a good idea, well, if we haven’t yet convinced you to get rid of a mainstream financial advisor such as a broker, said broker is likely to be calling you in the not-too-distant future with their “innovative” idea that you should get some gold. Of course, being mainstream, they will likely advise you to own it in paper rather than physical form, which will be a big mistake, but that will be their advice. And they will advise that you put a maximum of 5% of your assets into gold or gold mining stocks. In normal times, this would characterize the mainstream phase for gold, during which its price would rise steadily for years.

More evidence that we’ve entered the mainstream phase comes from Bill Gross, known to many as the “Bond King.” Gross founded PIMCO, which manages over $1.8 trillion. Yes, that’s trillion with a T. Almost all of the money is in conservative bond funds. But here’s a tweet this week from Gross:

Gross: Stock and bond managers today must be alchemists: turn lead into gold. NOT likely. Too much lead (bubbled assets).

Note that Gross, the Bond King, is saying that stocks and bonds are bubble markets. That money managers should turn that lead into gold. Though he also says that’s not likely.
Those who hate gold claim gold is in a bubble. Great examples of bubble markets are internet stocks in 1998 through early 2000; or real estate running up to 2006; or government bonds now. Gold, on the other hand, has had a nice steady rise for years, nothing meteoric or bubble-like at all. And here is someone, Bill Gross, who may know more about bonds than anyone on the planet, saying that bonds and stocks are the bubble, not gold.

Gold can’t possibly enter a bubble until it enters Phase 3, the mania phase. During this phase, you will be regaled on a regular basis from media sources and individuals with stories of people who got rich from gold and silver. Like the stock day traders of the year 2000, or the real estate flippers of 2006, there will be lots people trading gold on a daily basis, probably at gold trading shops like the day trading shops that were operating in 1999. People will be quitting their jobs to trade precious metals to “make their fortune.” 90% of people who talk about gold will assure you that it is the surest thing on earth to guaranteed riches. CEOs of gold mining companies will be like rock stars, getting interviewed by Charlie Rose. That’s what a bubble looks like. How many people do you know who own gold and silver?

Now, with the acceleration that is all around us, it is unlikely that we will proceed through these three phases of a secular bull market as we would in normal times. It is far more likely that gold will have a meteoric rise quite soon. But if you think that the world will proceed in a conventional manner in the years to come, we have outlined the path of the precious metals for you.

Beware the False Flag Attack

Cruisers, aircraft carriers and minesweepers from 25 nations are converging on the strategically important Strait of Hormuz in an unprecedented show of force as Israel and Iran move towards the brink of war.
The Telegraph

What do Daniel Ellsberg, Zbigniew Brzezinski, former high-level CIA officers Robert David Steele and Michael Scheuer, Seymour Hersh, and the Brookings Institution have in common? All have warned of the possibility of a false flag attack staged by the US and/or Israel to make it look like Iran has attacked and killed US citizens. This is covered in its usual excellent way by Washington’s Blog: “What I Fear The Most Is a False Flag – Something Happening Where One of Our Ships Goes Down, Or … a Plane Goes Down, And of Course It HAD To Be The Iranians, You Know, For Sure, For Certain”

A false flag attack is a war operation carried out by a government against its own people but appearing to be carried out by another group or nation; or an attack about which a government knows in advance but which it allows to freely proceed to demonstrate the evil nature of an enemy it wishes to attack.  The World Trade Center attack on 9/11 and the Japanese attack on Pearl Harbor are excellent examples of false flag attacks.  If there is anyone still left on the planet who thinks 9/11 was what the US government says it was, please see the following documentary aired recently on PBS: 9/11: Explosive Evidence — Experts Speak Out.

As the US marks its eleventh year of war in Afghanistan, where 2,000 US soldiers and far greater numbers of Afghanis and Pakistanis have died, many as “collateral damage” from unmanned drone attacks, we think it appropriate to sound the warning because we are convinced that the Powers That Be are aiming to ramp up war to a much greater level.

Why do we think that a large false flag attack is on the way?

To gain public support, large increases in war-making are typically preceded by a false flag attack that is devastating enough to be an emotional shock for in the citizenry. The shock makes people sitting ducks for war propaganda against the alleged perpetrators. People are confused by the shock and are then told precisely where to channel their rage, fear, dismay, etc.

Governments faced with insoluble financial predicaments often try big war as a way out. And many governments, including that of the USA, are in precisely such a predicament.

People and governments around the world are clearly on tenterhooks as shown by recent rioting in many countries, acrimonious borders disputes between Turkey and Syria, China and Japan, etc.

In a few days, the US will have three aircraft carrier groups in the waters off Iran.

And the war propaganda machine is in high gear, in both blatant and subtle ways. Here is a perfect example of the war propaganda machine in its more subtle form. This was the lead story on the front page in a recent USA Today: Defense cuts starting to pinch economy.

First, the idea that war helps the economy, propaganda that most of us were fed in school and which fallacy is still perpetuated by economists such as Paul Krugman, has been debunked by many. Washington’s Blog has covered this topic in great detail: Proof that War Is Bad for the Economy.

Second, while the US Department of Defense (DoD) and its military contractors claim defense spending is falling, others see it, well, otherwise.  Here’s the chart of US defense spending from wikipedia, not including black ops for which no budgets are published:

The bottom area is the budget for the DoD. Above that are other categories of defense-related expenditures that are not included in the formal DoD budget. Both the formal DoD budget and the combination of all expenditures have been rising strongly in unison, even while we have had a Nobel Peace Prize winning president. Also note that most numbers to the right of the vertical dotted line, numbers for the future, are projected to decline. But wikipedia has some honesty here. If go to detail page for this chart, you’ll see previous versions of this chart from prior years. In each of those previous charts, future expenditures were projected to drop. But they never did. When future becomes present, these expenditures always rise strongly. In other words, there are threats of defense expenditure cutbacks, but since the Clinton years, they have never materialized.

Third, whether or not war is good or bad for the economy is clearly a topic of debate. We think it is horrendous, but others claim it is good. So what USA Today is doing here is taking sides in a debate in what was printed as a Page 1 news story. This article is an editorial disguised as news. As such, it is a lie.

Fourth, how about a little common sense. The article, by linking military spending with the concept of a “good economy,” is telling you that war spending is good for you. Tell it to more than a hundred million people who died in wars in the last 100 years.

Fifth, how about some more common sense. The following countries each have one operational aircraft carrier: Russia, UK, France, India, China, and others. The US has eleven operational carriers and three more under construction. Can it really be “good for an economy” to spend trillions on hardware that is very rarely actually used, which is paraded around the world with an armada of other ships in what is called a “carrier group” devouring incredible amounts of fossil fuels, and which hardware is ultimately scrapped when it is deemed obsolete? Does the US really need eleven carrier groups?

This covers just the tiniest slice of the war propaganda machine. But you get the idea. We ask that whenever you hear a report about war, military spending, the countries that are said to be our enemies, weapons systems, or people who go off and get killed or maimed being characterized as heroes rather than as people who were duped by politicians, that you recall this little post and ask: What is really being said here? What is the real point? Who is the actual enemy?