The Big Short

Posted on January 6, 2016 by Thundering Heard

People told me they liked the recently-released movie The Big Short based on the book of the same name by Michael Lewis, so I did go to see it at a theater, something I’m loathe to do these days because the theaters seem determined to crush all human sensitivity out of their patrons during the overlong and overloud Coming Retractions segment that precedes the main show. Seems to me that earplugs are a better theater accessory these days than 3D glasses.

Anyway, the movie has been well-received by both critics and audiences. It is a well-crafted dramatization of the true story of a few traders who foresaw the collapse of the housing bubble and figured out how to make large profits from that event. It shows aspects of the lead-up and crash that are not well-known by the public. And it shows the vitriol and threats directed at anyone who sees important events sooner than the general public, especially when what they see means that people are going to lose some or all of their elusive spondulix.

The main character is Michael Burry, who not only foresaw the coming real estate bubble collapse, but had a very good idea of just how devastating it would be for the economy. It’s exceedingly rare for the hero of a movie to be someone as intelligent as Burry.

But more important than the movie is what Burry is doing these days. Remember, Burry does intelligent things before the crowd. He’s a rather private fellow, but has made a few public appearances, one on 60 Minutes, and this one on Bloomberg where he talked about what he was currently buying–farmland with water on site, and gold:

Here is Burry giving a fabulous commencement speech at UCLA in 2012. Burry’s speech starts at the 2:15 into the video:

Selected quotes:

It’s an age of infinite distraction, for those so willing. You are the generation that has had instant messaging, Facebook, Twitter, an angry bird nagging your fingertips at every moment. It’s been arguably as addictive as any drug throughout history, and I do imagine, it took some terrific will power during your studies … to study.

…

In 2010, I published an op-ed in the New York Times posting what I thought was a valid question of the Federal Reserve, Congress, and the President. I saw the crisis coming … why did not the Fed? Never did any member of Congress, any member of government for the matter, reach out to me for an open collegial discussion on what went wrong or what could be done. Rather, within two weeks, all six of my defunct funds were audited. The Congressional Financial Finance Inquiry Commission demanded all my emails and lists of people with whom I conversed going back to 2003, and a little later the FBI showed up. A million in legal and accounting costs and thousands of hours of time wasted – all because I asked questions. It seemed they would pump me at gun point or not at all. That summer the Federal Reserve put out a paper that concluded nothing in the field of economics or finance could have predicted what happened with regards to the housing bust and subsequent economic fallout. Ben Bernanke continues to backfill this logic and I fear that history is being written wrong yet again. The ignorance is willful.

And here is an interview he gave a week ago ago:

**Michael Burry, Real-Life Market Genius From The Big Short, Thinks Another Financial Crisis Is Looming**

Selected quotes:

I am shocked that executives at some of the worst lenders were not punished for what they did. But this is the nature of these things. The ones running the machine did not get punished after the dot-com bubble either — all those VCs and dot-com executives still live in their mansions lining the 280 corridor on the San Francisco peninsula. The little guy will pay for it — the small investor, the borrower. Which is why the little guy needs to be warned to be more diligent and to be more suspicious of society’s sanctioned suits offering free money. It will always be seductive, but that’s the devil that wants your soul.

…

The zero interest-rate policy broke the social contract for generations of hardworking Americans who saved for retirement, only to find their savings are not nearly enough. And the interest the Federal Reserve pays on the excess reserves of lending institutions … handcuffed lending to small and midsized enterprises, where the majority of job creation and upward mobility in wages occurs. Government policies and regulations in the post-crisis era have aided the hollowing-out of middle America…These changes even expanded the wealth gap by making asset owners richer at the expense of renters. Maybe there are some positive changes in there, but it seems I fail to see beyond the absurdity.

…

All these people found others to blame, and to that extent, an unhelpful narrative was created. Whether it’s the one percent or hedge funds or Wall Street, I do not think society is well served by failing to encourage every last American to look within.

…

Americans have so much natural entrepreneurial drive. The caveat is that it is technology that should be a tool making lives better in the real world, and in line with the American spirit of getting better and better at something, whether it’s curing cancer or creating a better taxi service. I am less impressed with the market values assigned to technology that enhances distraction.

So folks, do you have your farmland with water on site and some gold? Are you looking within and working like mad to avoid formidable distraction? Or are you following a path designed by what Burry calls “society’s sanctioned suits” offering free money and a million tantalizing distractions?

The deflationary wave intensifies

Posted on December 14, 2014 by Thundering Heard

Little darling, I feel that ice is slowly melting

Little darling, it seems like years since it’s been clear

Here comes the sun, here comes the sun

And I say it’s all right

–George Harrison, The Beatles, Here Comes the Sun

Most people have probably heard by now that world crude oil prices are in a dramatic plunge. In the futures market, the price is down 47% since June, from $107.68 per barrel to $57.49. The scuttlebut is that prices in the cash market are even lower as desperate countries and companies get what prices they can.

And it isn’t just crude oil prices that are crashing. Think stuff that China used for its “economic miracle,” like the price of iron ore (used in making steel), which has been cut in half since 2013.

But this current wave of deflation has taken on a new intensity. ZeroHedge summarized the most recent week quite well in Crude Carnage Contagion: Biggest Stock Bloodbath In 3 Years, Credit Crashes [my explanatory remarks in brackets]:

WTI’s [oil] 2nd worst week in over 3 years (down 10 of last 11 weeks)
Dow’s [stocks] worst worst week in 3 years
Financials [stocks] worst week in 2 months
Materials [stocks] worst week since Sept 2011
VIX’s Biggest week since Sept 2011 [VIX is a fear index, it rises when people are afraid]
Gold’s best week in 6 months [Gold is real money, solidified sunlight 🙂 ]
Silver’s last 2 weeks are best in 6 months [Silver is also real money!]
HY Credit’s worst 2 weeks since May 2012 [HY = High Yield (aka junk) bonds]
IG Credit’s worst week in 2 months [IG= Investment Grade bonds]
10Y Yield’s best week since June 2012 [10Y = US 10 year note]
US Oil Rig Count worst week in 2 years [Rigs are for drilling/fracking]
The USDollar’s worst week since July 2013
USDJPY’s worst week since June 2013 (USDJPY = US$ priced in Japanese Yen]
Portugal Bonds worst week since July 2011
Greek stocks worst week since 1987

So, why the intensifying deflation? Because, as has been explained here on several occasions, the world is groaning under an increasingly fierce debt load. The central banks have printed up $11 trillion in new money in the last 5 years to try to fend off deflation. Why? Because when debt loads get too large, some people and companies can’t pay back their loans, so they default, and the money they owe disappears. If they are companies, their employees lose their jobs. So their households spend less. Putting pressure on more businesses because of lost sales. Leading to more layoffs and more defaults. It’s a vicious cycle, an economy in reverse, and economy that is deflating. Remember, because all of the money in the system is debt, the economy must always grow to pay the interest on that debt. If the economy stops growing, the interest can’t be paid, defaults arise, and the deflationary cycle ensues. People tend to associate deflation with falling prices, but the falling prices are the result of deflation, not its cause.

So the central banks tried to ease the debt load by lowering interest rates to zero or lower. But one of the results was that all that cheap money financed all kinds of projects that would never have been created without this almost-free money because they weren’t very good ideas to begin with, such as the stories we’ve all heard about China having 3,000 companies all basically in the same business–how can they all make money? They can’t. Such overcapacity makes life tough for all of the companies, which all have to lower their prices, which start laying off employees, which can’t pay back their debts, etc. etc. as explained above. So this lowering of rates might seem to work for a short time, but when it’s carried on for years, it’s deflationary!

The second thing the central banks did was create this new $11 trillion to buy more debt! So they are trying to fight a problem of too much debt by creating more debt! Historians will marvel at the lack of logic by an entire academic profession. The reason for this pervasive illogic is that academic economists have for years purged from their ranks anyone who brought up the topic of gold as real money, ridiculing and marginalizing them. So they banished logic from their own ranks.

But let’s get back to the big deal of the last several weeks, the crash in oil prices. Cool, you might say, I’ll be able to pay less when I fill up my car with gas. True. But it might be wise to consider why oil prices are crashing:

World Oil Demand Outlook Cut Again; Sub-$60 Price Seen Holding

Any hope that global demand would provide a floor for oil’s freefall was dashed as the leading energy forecaster cut its outlook for the fourth time in five months and crude extended its tumble.

Frankly, I don’t think I’ve ever heard of one of these international organizations like the International Energy Agency cutting their forecast four times in five months. So what’s happening is collapsing demand for oil.

Several recent financial statistics that measure changes in the economy are reporting levels of decline “last seen in 2009.” Recall that in 2009, a lot of people thought the world economy was not just staring into the abyss, but was about to fall in.

PPI Slides, Misses Estimates, After Finished Goods Prices Tumble Most Since July 2009

Short-Term Inflation Expectations Have Crashed To 5 Year Lows (In The US)

Now how does this relate to yet another “miracle” discovered by the pom-pom and short-skirt-bedecked economic and political cheerleaders, the “US shale miracle”? This is the miracle by which the US will allegedly frack its way to energy independence.

For the last three years, the US shale drillers have been borrowing $1.50 for every $1.00 in oil and gas that they pull from the ground. And that was with oil prices above $100 per barrel. The industry as a whole expected to get to breakeven–instead of losing money hand over fist, which is what they have been doing with oil just above $100–with oil above $120 per barrel. But now the price is under $60, which is less than half of the price needed for them to break even. (Chris Martenson’s group has done a great, clear video on this if you want the details.)

All told since early 2010, these energy producers have borrowed at least $550 billion. Remember that the size of the sub-prime mortgage problem was around $1.1 trillion, and the collapse of that sub-prime mortgage market nearly took down the whole system. These oil frackers have borrowed over a half trillion just since 2010 and now it looks like a lot of that borrowing will not get repaid, that is, they will default.

Now that $550 billion was a lot of spending for purchasing equipment and creating jobs to use that gear. It turns out that 1/3 of business capital spending in the US in recent years has been for energy exploration and production. And some estimate that 90% of new jobs created in the US in the last five years are related to energy production.

But now suddenly, no one wants to lend the frackers cheap money to create more overcapacity in the shale patch (because the lenders know there is a good chance they will never get paid back.) So now there will be a huge drop in equipment purchases and lots of job layoffs, leading to, you guessed it, more deflation!

If you don’t think this will happen, check this headline:

Exclusive: New U.S. oil and gas well November permits tumble nearly 40 percent

Plunging oil prices sparked a drop of almost 40 percent in new well permits issued across the United States in November, in a sudden pause in the growth of the U.S. shale oil and gas boom that started around 2007.

Data provided exclusively to Reuters on Tuesday by industry data firm Drilling Info Inc showed 4,520 new well permits were approved last month, down from 7,227 in October.

So, the “US shale miracle” will be proven to be another fable, along with the US energy independence it was supposed to engender. It was fueled by a supply of ultra-cheap money that has now dried up. One aspect of fracked wells is that they lose 70% of their production capacity in two years, and 80% to 90% in three years. So to keep more oil flowing, these fracking companies have had to borrow more and more money to drill more and more wells. As described above, it wasn’t a very good business model and would not have existed were it not for the cheap money being provided to Wall St by the central banks.

So while you may be able to buy cheaper gas for your car, the US economy is likley to take a serious hit relating to jobs and business spending from the oil collapse.

And the US is supposed to be the bright spot in the world economy. Japan is in recession yet again. The Eurozone perennially flirts with recession, and is being dragged down by the US-led sanctions against Russia, which itself has fallen back into recession. China claims to still be growing, but the hard evidence of the falling prices mentioned above, falling real estate prices, and stalling growth in the use of electricity in China argues otherwise. From Deutsche Bank:

…the global financial system is still extremely fragile and not sustainable…2015 will be the 9th year of highly unconventional central bank policy and…we’re no nearer to finding a sustainable solution…
–Deutsche Bank

But not to worry: Uber, the emerging ride sharing service, is said to be valued at $40 billion. (Those must be some rides!) And Jessica Alba’s new diaper-cleaning service company is apparently valued at $1 billion!

No Bubble At All: Jessica Alba’s Diaper-Delivery Startup Is Valued At $1 Billion, Prepares For IPO

So I guess everyone will get rich (again, like in the year 2000) from internet startups?

Historically, deflation is rather unkind to stock prices. World stock markets are currently being floated by the free money from the central banks, but how long can that last? And this deflationary trend has supports beyond the overload of debt, such as the end of several cycles, including the the 26,000 year precession of the equinoxes, which tends to really clear the decks on this planet.

Now, will this deflation crash the price of gold? Not at all likely. Historically, gold increases in purchasing power during both inflationary and deflationary periods; these are periods during which people start to think that governments are losing control, so people opt for real money over government-issued scrip. Gold loses purchasing power when people think everything is, to put it technically, hunky-dory, and that their government is doing a great job. Most people don’t see it that way during bouts of deflation. Intelligent observers are still stacking real coins:

Sales Of Silver American Eagles Rise To Record High For Second Consecutive Year

and likely hanging onto their hats to get ready for a very wild ride. Because sometimes, in reaction to deflation, governments really ramp up the money printing presses, and people lose all confidence in government money, which is known as hyper-inflation.

Whatever it is that’s coming, it’s good to know that our bank regulators will be well protected:

Why Is The US Treasury Quietly Ordering “Surival Kits” For US Bankers?

The Department of Treasury is spending $200,000 on survival kits for all of its employees who oversee the federal banking system, according to a new solicitation. As FreeBeacon reports, survival kits will be delivered to every major bank in the United States and includes a solar blanket, food bar, water-purification tablets, and dust mask (among other things). The question, obviously, is just what do they know that the rest of us don’t?

Currency Balloons

Posted on October 7, 2014 by Thundering Heard

Given the state of most media reporting, it’s sometimes tough to know whether to laugh or cry. Here’s a story from last week about a surge in gold bullion purchasing in Germany in August and September:

German Bullion Dealers Report Major Increase in Sales

Christian Brenner, Chief Executive of Philoro Edelmetalle GmbH: “Already in August we noticed an increase on orders compared to the previous months, but September… September beats it all. From a German viewpoint it’s the strongest month of 2014.”. At their head office in Austria they also register an “overproportional high level” of revenue.

At the end of the article, there is a stumbling attempt to explain the recent surge with no mention of its real reason. Here’s a chart of the Euro showing it losing over 7% of its “value” in August and September, in the context of a 10% loss since May:

It would seem clear that at least some people in Germany and Austria noticed that someone was letting the air out of their Euros and decided to convert to real money.

It was the same for the Japanese in August and September, but much worse overall since the Japanese government has been hellbent on devaluing the Yen for two years. Here’s a chart showing the loss in “value” of the yen of more than 31% in the last three years:

Since these losses in “value” are measured against the biggest balloon of them all, the US Dollar, this is the source of what you may have been hearing lately about the “strong Dollar”! In other words, the “strong Dollar” is simply the result of other major governments succeeding in intentionally letting air out of the balloons known as their currencies.

They are doing this in an attempt to create inflation! Unlike regular people, who like it when prices drop and they can get good deals, governments, being the largest debtors on the planet, want inflation so that their debts can be repaid in cheaper and cheaper currency as time passes. In case you haven’t noticed, that’s a form of grand theft: I’ll borrow money from you today, and pay it back with cheaper money later.

Well so what, you might say. If they are all doing that, what’s the big deal? Continue reading →

A brief comment on the metals

Posted on May 11, 2014 by Thundering Heard

This is strictly an opinion piece, I will not try to prove my case with links, charts, and so forth. An attempt to prove the case would be seriously lengthy, a project for which I don’t currently have the time and which I doubt most would want to read.

There is a very bright golden light on the horizon for precious metal prices, but that light is on the horizon (let’s say the first half of August), not right here. In other words, I think prices will drop first before they start rising in a serious way. I see four separate price, time, and trend patterns that include an expectation that price falls first before it takes off to the upside in a big way. And these patterns are supported by the seasonal pattern for gold which shows prices typically falling in the Summer and then turning up sometime in August.

So for anyone who has savings to deploy in the metals, the setup is ideal: you should get lower prices over the next couple of months for your buying, with an expectation that your buying will be followed by the start of a major price rally, that is, the prices available over the next several weeks should be quite a bargain.

For those of you who bought your metals years back–hopefully at prices that are still well below where they are now–and who have no additional buying power, you’ll need to be patient here, but as implied above, a price drop dead ahead will be an elegant completion of major recognizable patterns (based on four entirely different types of calculations) that have an exceedingly high probability of being the end of this general price downmove that started in late 2011. These patterns all clearly indicate that the bull market in metals that started early in this century still has many years to run, and that the best upward price movement is definitely still ahead of us.

Of course this could all be wrong if some huge war breaks out, in which case prices could go up and never look back. But if things are allowed to work out with “only” the normal amount of accelerating instability that is the most important trend of our time, then these reliable price, time, and trend patterns are likely to complete as outlined above. In any case, no matter what, prices should turn up for good later in the Summer.

This post is an attempt to keep emotions out of the precious metals picture so that as many of us as possible own some when we will all truly need them down the road. (I am serious about the word need; my repeated posting about gold and silver has nothing to do with an “investment scheme” to get rich quick or with having the “right asset class in your diversified portfolio,” I am talking about what people will soon need.) As their propaganda on this topic and their dirty tricks clearly show, the Powers That Were want you to get emotional and make the mistake of avoiding or selling physical metals so that they can accumulate more metals for themselves at low prices. I’m hoping that everyone who reads Thundering Heard is well prepared to fend off, or even capitalize on, their tricks.

What’s up with the metals? Part 2

Posted on March 5, 2014 by Thundering Heard

Someone asked me whether I “was still in favor of gold.” The answer is an unqualified Yes. One easy reason is that almost every country on the planet is trying to drive down the value of their paper currency. So if you live in the US, it looks like this, and this is based on the US Government’s statistics for price inflation and we all know that they have every reason to play games to make this number look a lot lower than it really is, so you can safely increase each of these number by 50%:

The first column, CPI, says plenty: That if you live in the US, since the year 2000, the purchasing power of your money, of your salary, has lost 39%. And this is during a period that they claim has had “low inflation”! And the US Federal Reserve is currently on record as saying they are trying to create more inflation. So when you own US Dollars, or items denominated in Dollars such as US stocks and bonds, or items in currencies pegged to the US Dollar, realize that this is only going to get worse. The same is true for the purchasing power of the other currencies.

* * *

The post What’s up with the metals? Part 1 showed that some notable gold bears had turned bullish and that unprecedented demand for physical gold continued. Despite the strong demand, gold then had the bargain price of $1,237 per ounce, having just bounced up from $1,181 on the last day of 2013. Price went to $1,355 Monday and has pulled back to $1,338 today.

The strong demand for physical bullion, coins, and jewelry, documented in Part 1, has continued. Despite record-breaking demand in 2013, Chinese demand year-to-date is 51% higher than demand to this point in 2013. Mints around the world are working overtime:

U.K. Royal Mint Runs Out of Sovereign Gold Coins on Demand

The U.K.’s Royal Mint, which traces its history back more than 1,000 years, ran out of 2014 Sovereign gold coins as prices near a six-month low led to “exceptional demand.”

Gold Mint Runs Overtime in Race to Meet World Coin Demand

Austria’s mint is running 24 hours a day as global mints from the U.S. to Australia report climbing demand for gold coins…

Austria’s Muenze Oesterreich AG mint hired extra employees and added a third eight-hour shift to the day in a bid to keep up with demand. Purchases of bullion coins at Australia’s Perth Mint rose 20 percent this year through Jan. 20 from a year earlier. Sales by the U.S. Mint are set for the best month since April, when the metal plunged into a bear market.

Global mints are manufacturing as fast as they can…“The market is very busy,” Lang said. “We can’t meet the demand, even if we work overtime.”

So, if demand for physical gold is so strong, how could there possibly be such a price drop as happened in 2013? The answer is simple really. They have created a paper gold market that is hundreds of times larger than the physical gold market. By larger I mean in terms of the dollar value of trading in these two markets. People trade paper that has more or less of a connection with gold (sometimes none at all), and it is in these large markets that the price of gold is set. Most of the participants in these paper gold markets believe that they could, if they wished, convert these pieces of paper into physical gold, that the pieces of paper are claims on real gold. But in reality, only a tiny fraction of them could succeed in converting their claims into real metal. There just isn’t enough metal to go around.

If you think I exaggerate, check this chart, which I’ll explain below. It describes the action at the COMEX, the primary gold price-setting exchange in the US:

The key phrase on the chart is “Owners Per Ounce,” which for the COMEX is now at 111 owners per ounce of gold in the vault! That is, for each ounce of gold in the COMEX vaults (the blue line in the upper section of the chart), 111 contracts exist that allow the owners of those contracts to demand delivery of that single ounce of gold. We all understand that banks operate with only a little cash on hand for all the deposits they’ve taken, called a fractional reserve system. The COMEX is the same, worse actually: percentagewise, they keep a lot less gold around than the banks keep cash on hand.

(Please skip this paragraph if you already understand what 111 owners per ounce means!) Let me explain: The COMEX is a futures trading exchange where people trade gold and other commodities. Futures exchanges were created to be a meeting place between producers of a commodity and its end users. In January of any year, for example, a producer of wheat can agree to sell wheat in the future, in September, at a specified price to a cereal company. Both the wheat farmer and the cereal company know that they can make a reasonable profit on their operations if the farmer supplies, and the cereal maker takes delivery of, wheat at the pre-arranged price when that wheat is ready in September, so they make the deal. That’s called a futures contract. It promises both delivery and payment in the future at set price, and that’s great. But the futures exchanges are now dominated by big money speculators who have no intention of producing or taking delivery of anything. The chart above reflects this reality. The COMEX vault is supposed to have gold to back up the gold trading that takes place on that exchange. As you can see in the upper panel of the chart, back in 2006 they had over 5 million ounces backing up the contracts. Now that amount has fallen by 93% to only 370,000 ounces as more people realize that they better stop trading paper and get their hands on the real stuff. Currently, for all the futures contracts to buy and sell gold on the exchange, they only have 1 ounce for every 111 contracts in existence. These contracts are paper gold, a huge synthetic supply of fake gold. If everyone decided to make their claim for real gold (similar to a run on bank), only 1 ounce would be available for every 111 claims. Such an attempt would drive the price of physical gold into the stratosphere. On a typical day last week, 55,000 of these paper contracts traded hands. That represents 5,500,000 ounces of paper gold traded each day just at the COMEX. That trading sets the price for gold in the US. But it’s possible that no one demanded delivery of gold from the COMEX on that same day. So the trading that sets the price is really for cash, not for gold. And this paper trading involves a lot of borrowing, that is, leverage. One can easily prove this crazy situation by contacting a futures broker and creating an account with $8,000 in that account. One could then buy or sell (they call it selling short) a futures contract for 100 ounces of gold. At today’s price of $1,338 per ounce, 100 ounces of gold is worth $133,800. So as far as COMEX is concerned, you are using your $8,000 gambling stake to control $133,800 worth of gold. And this “gold” can be sold, driving down the price. Seems crazy, but it’s literally true.

So if you or I can control 100 ounces for $8,000, imagine what JP Morgan and Goldman Sachs can control with the many billions of printed money they receive from the Federal Reserve, printed money that has not been lent out to boost the economy but is being used as collateral for trading. They can push markets in whatever direction they want. The same is true for central banks, but on an even greater scale: They have no limit on the amount of cash they can print up, so they can overwhelm any market anytime they wish.

The COMEX sets the price in the US. In London, it’s the LBMA (London Bullion Market Association) which is more than 7 times larger than the COMEX in terms of the dollar value of daily paper gold trading. The LBMA admitted a couple of years ago that, like the COMEX today, their leverage ratio was over 100 to 1. And the gold market in Switzerland is just as large as the LBMA, but it is run privately by the Swiss banks, so they publish no statistics. All told there are 40 futures exchanges in the world for trading paper gold.

Another form of paper gold is certificates for gold accounts with banks. Several of these banks have been caught charging people fees for storing gold when they are actually storing nothing at all. The banks figured they could quickly meet any claims for the gold, but when the claims came in, it took them weeks to procure the gold in the open market.

And there are stocks that hold gold, options on both those stocks and on the futures described above, gold leases, and swaps contracts. The latter are private contracts and they may actually dwarf all of the rest of the paper gold claims in terms of their stated dollar value (their “notional value,” as it is called) because the central banks, like the US Federal Reserve and the Bank for International Settlements, often use swaps for their trading. What, central banks trading gold? In September, the French Central Bank admitted:

We are still active in the gold market for our own account…meaning that we are in the market nearly on a daily basis.

In that same paper, the Bank of France said they owned 2,500 tons of physical gold and that they had no plans to sell it. So what are they trading daily? Paper gold, for profit.

Sometimes people go way too far with these contracts. People thought that Bear Stearns went bankrupt in 2008 because of the mortgage market. But the astute article What Really Happened to Bear Stearns by Ted Butler explains that it was actually bad trading in gold and silver that took them down: they had massive bets that the prices of gold and silver would go down, but instead the prices shot up by a lot over a few months instead.

The chart above is the price of gold from 2004-2008. Notice how the price was moving up strongly prior to the collapse of Bear Stearns. Guess who picked up all of the assets and trading positions of Bear Stearns as it went bankrupt. Why our “good friends” at the company implicated in, and fined for, manipulating just about every market around since then: JP Morgan. They picked up Bear’s assets for about 6 cents on the dollar. Notice the smashdown of the gold price as soon as Morgan was in charge. The price smashdown was even worse in silver. Here’s the chart from 2004-2008 for silver:

It sure makes one wonder whether JP Morgan was involved in both moving the price up to bankrupt Bear Stearns, and then smashing it down once they had taken over Bear and inherited all those bets that the prices of gold and silver would drop.

Getting back to our discussion. All of these contracts taken together are called derivatives because they derive their value from the underlying value of gold. Guess who owns most of them now:

Market Cornered: JPMorgan Owns Over 60% Notional Of All Gold Derivatives

What? Isn’t it illegal to corner a market? Don’t the regulators come down hard on anyone trying to corner a market? Yes, but as long as it isn’t gold or silver. JP Morgan is allowed to corner gold and silver because it serves the interests of those who still want the US Dollar to dominate the world so that the US can continue to exercise its “exorbitant privilege” of printing paper to trade for the real goods of other countries. So if someone like Morgan and the central banks weren’t suppressing the prices of gold and silver, it would make the Dollar and the other paper currencies look bad, and those in charge won’t allow that.

To show you how off base these government people and economists are, when Nixon took the world off of what remained of the gold standard in 1971, his chief economist was the “great” Milton Friedman. Friedman told Nixon and others that gold was deriving its value from the US Dollar, not the other way around, and that as soon as Nixon severed the link between gold and the Dollar, that the price of gold would actually fall quite a lot. He was entirely wrong, as government economists so often are, as gold never looked back again at its then-current price of $35 per ounce.

These government types have always hated gold for one reason: it inhibits their ability to wage war. We’ve covered it before: governments started going off the very-successful gold and silver standards in order to fight World War 1. That war would have been over in a few months, but that wasn’t good enough for the warmongers, they had to kill off millions of people over four years to serve their greed.

We’ll talk more about governments and gold later, including their failed attempts to suppress gold in the past, in Part 3. But you know that comment above about the gold price going into the stratosphere when people with all these paper contracts rush to convert them to physical gold? That will happen. It’s inevitable, as more and more people lose confidence in governments, banks, and the blizzard of paper claims they have created. That COMEX chart above–where it shows that the physical gold backing up the paper trading is down by 93%–says that the process is already well underway. Best to get your gold and silver before all those folks with the paper contracts try to get some because, at that point, it will be tough to find real gold at any price.

What’s up with the metals? Part 1

Posted on January 4, 2014 by Thundering Heard

First, a digression right off the bat: let me say that I hope everyone who is interested in the precious metals is doing their own research on this topic so that they can make truly informed decisions, especially since I am not a registered financial advisor of any type, these are just my views of the world. One of the best ways I know to become informed on the metals is to get the free e-mails issued by GATA, the Gold AntiTrust Action Committee. You can sign up for their e-mails here. They send out links daily pointing to the best articles about gold and related topics from across the web. OK, end of digression.

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Since I was wrong last Spring about when gold would make its next move up, let’s look at the views of three very capable market commentators who were correctly bearish on the gold price during 2013, that is, they thought that the price would drop. They were right, and perhaps their analytical work will continue being right. So let’s look at what they are saying now, and throw in the opinion of the head of the largest gold refinery in Switzerland as well.

Tom DeMark

The first analyst is Tom DeMark. Tom has been a trading advisor to the big institutions for decades. It’s rare for him to give his advice in advance to us commoners, though in his defense, he has published many of his techniques for those who wish to spend the time to learn them.

What DeMark said on December 16, 2013 about the metals is in the last minute of the short interview at this link. He said:

We’re looking for a huge move in gold next year, beginning next year. We think the bottom will occur with the tax loss selling this year.

So what he is saying is that, as soon as those who want to take trading losses on their gold positions for tax purposes (to balance off other gains they had) finish that activity, then price will begin that “huge move” up that his firm is expecting. His price projection, for a long time, for the downside in the gold price had been $1180. In the interview, he said they had revised that to somewhere between $1155 and $1180. The price went down to $1181.40 on the last day of 2013, the last possible day for tax loss selling for the 2013 tax year. That’s probably plenty good for meeting his price target, but we’d have to be institutional clients of DeMark to know whether he now thinks price might still move down to $1155. In any case, by DeMark’s famous work, the price low is already behind us or will be here very soon. There will be evidence below that JP Morgan may have been following DeMark’s advice precisely.

William Kaye

The second fellow who was right about the gold price dropping in 2013 is veteran money manager and former Goldman Sachs employee, William Kaye. Kaye repeatedly gave interviews in 2013 on King World News where he would point out movements of physical gold in the markets that indicated the next phase of price manipulation down by the Fed and the big banks would happen promptly. And it would unfold as he predicted. In this December 31, 2013 interview, Kaye said he thought the gold price could be manipulated down one more time in January, followed by a large, fast move up for the gold price to somewhere between $2,000 and $2,500 in 2014:

My guess is we are now looking at mid-to-late January of 2014 as a probable and absolute bottom, after which it is going to be difficult for sidelined investors to gain a position because gold and silver will then move very, very quickly in the other direction. That is why most people are going to miss this move…

While all of the Western media is filled with anti-gold stories, China continues to buy virtually all of the available physical gold at these levels, and will continue to do so on any further price declines. Also, the flow of gold into India has continued because of increased smuggling. But none of the smuggled gold is being reported in the official import numbers.

One of the primary reasons this gold flowing into India is not being reported is because the politicians themselves control the smuggling rings. The reason India has such a large current account deficit and a loss of confidence in the Indian currency is because of the bad government policies. The people of India see this and so they seek refuge, as they always have throughout history, in gold…

As you know, Eric, I have extremely good sources and contacts in India because we’ve done business there for years. If our sources are correct, this year the gold imports into India are very close to 1,200 tons, which is a staggering figure.

On top of that, we have the Chinese importing a mind-boggling 2,200 tons of gold for 2013. That figure actually totals the entire global mine supply for all of 2013 outside of China…

You also have to remember that we have enormous demand from other countries around the world such as Russia, Brazil, just to name two…

Regardless, 2014 is going to be an extremely good year for the precious metals. I believe we could easily see new highs in nominal terms in both gold and silver. We may see $2,000 to $2,500 in gold, and $50 to $60 in silver, maybe even higher. The bottom line is that 2014 will be the year that the cartel gets broken.

Martin Armstrong

Our third commentator is Martin Armstrong. The guy has done some of the best financial cycles work in modern history. As examples, due to his real estate cycle work for the US, he was telling clients–in the 1990’s to give them ample time to act–to be out of all US real estate investments by February, 2007; that real estate prices would then fall from 2007 into 2012, then rise into 2015 in a snapback rally that would sucker a lot of people back into real estate, and then fall again through 2033. (Yes, real estate folks, you read that right, a 26 year bear market in real estate that started in 2007.) A summary of that work published in 2009 is here, and a look at the chart from the first page tells the story very well:

To say that this was good advice, at least so far, would be quite an understatement. Also in the 1990’s, he told his clients that interest rates/mortgage rates would fall till January 2013 and then start an inexorable rise for many years to come. He was only off by six months, interest rates went to their lowest level in mid-2012 and have been generally rising since.

So the guy is very smart. But I don’t have a link to his site on the Thundering Heard home page because it is nearly unbearable to read him daily. Anyone else’s views on anything, he calls those opinions, and pelts them with ridicule and insults if they disagree with his own opinions, which he claims are not opinions, but actual facts. His cycles work is fabulous, his knowledge of history is formidable, but when he strays from those, as he often does, you have to put your boots on and wade through it. That’s a worthwhile exercise, but you have been warned.

Anyway, Armstrong is our third analyst who was bearish on gold all year, to the point where he called anyone advising buying gold during 2013 to be a fool, criminal, and worse. But all year, he has expected a Directional Change (his capitalization) for gold in this month of January, 2014.

So with DeMark, Kaye, and Armstrong, you have three very capable analysts who think this price downmove is over, or will be in over in this month of January. If I were a person with savings denominated in fiat currency, I would be jumping all over this opportunity. But of course, people need to make their own decisions. As mentioned above, getting the free e-mails from GATA is a great place to start. And no, they don’t sell your e-mail address to others.

So what does the head of the largest Swiss gold refinery have to say about all this?

Alex Stanczyk: Physical Supply Never Been Tighter

I’ll let the article speak for itself:

Refineries in Switzerland are still working 24 hours a day to cast bars for China, sometimes having difficulties sourcing the gold…

We met with the managing director of the largest refinery in Switzerland and spend about two hours talking to him…Now, this gentleman we were talking to probably has a better idea of physical gold flow than anybody else globally. He sees what is coming from the mines, he sees what is coming from the UK, and all over the world, as well as where its going. He indicated the price didn’t make sense because he has got so much fabrication demand. They put on three shifts, they’re working 24 hours a day, and originally he thought that would wind down at some point. Well, they’ve been doing it all year. Every time he thinks its going to slow down, he gets more orders, more orders, more orders. They have expanded the plant to where it almost doubles their capacity. 70% of their kilobar fabrication is going to China, at apace of 10 tons a week. That’s from one refinery, now remember there are 4 of these big ones [refineries] in Switzerland.

…At this Swiss refinery there have been several times this year on which they were unable to source gold, this shocked me. They’re bringing in good delivery bars, scrap and dore from the mines, basically all they can get their hands on. This gentleman has been in the business for 37 years, he was there during the last bull market in the late seventies. I asked him when was the last time this has happened, that he was unable to source gold, he said never. And I clarified it, I asked: let me make sure if I understand what you’re saying to me, in the last 37 years you’ve worked in the gold industry this has never happened? He said: this has never happened.

When do think the price is going to rise?

“I’m not comfortable to put a time on this. What I do know is that we are on the threshold of a situation that has never occurred before. A squeeze is imminent, it could take 3 months or 6 months, but all I know is that it’s coming, and I know that with 100% certainty.”

What Stanczyk is talking about is shown on the next chart, which has only been updated through the end of October. Hong Kong has imported more gold from Switzerland in 2013 than in all prior years combined!

(Chart source: China Mainland Gold Import Accelerating )

Here’s a way to look at the overall Chinese gold imports from Hong Kong:

(Chart source: China Imports More Gold Via HK In 2013 Than 2011 & 2012 Combined)

And here is a chart of total Chinese imports from Hong Kong by month since Autumn 2011. And this chart doesn’t show imports from other sources or China’s own mine production, which is now the largest of all countries and which is keeping six large refineries busy in China. There have been reports (blatant lies is what they are) in the Western media that Chinese gold imports have been falling. Does this look like falling to you? Each of those numbers are tons.

(Chart source: China October Gold Imports Surge To Second Highest Ever)

Despite strong government disincentives to buying gold in India, as we heard from Kaye above, the flow of gold can’t be stopped. Here’s a typical story:

Smugglers smile as NRI carriers bring gold into country legally

It was evident last week when almost every passenger on a flight from Dubai to Calicut was found carrying 1kg (2.2 pounds) of gold…

This strong buying is a worldwide story:

Scarcity of Gold in Mexico

Including Canada, Australia, and the US, as reported here by the Wall Street Journal:

Sales of gold coins are booming even as the metal’s price is falling…at mints and coin shops around the world, gold continued flying off the shelves…

Sales of Gold Maple Leaf coins by the Royal Canadian Mint surged 82.5% to 876,000 ounces in the first three quarters of 2013 from the same period of 2012. The Perth Mint, Australia’s national coin and bar producer, saw sales rise 41% to 754,635 ounces last year, while the U.S. Mint sold 14% more American Eagle gold coins than it did in 2012, along with a record amount of silver coin.

Even JP Morgan, big sellers of their own horde of physical gold earlier, which helped to drive prices lower, has been rebuilding their cache, perhaps guided by Tom DeMark’s work, or perhaps to simply be the manipulating elephant that they have been caught being in so many other markets:

JPM’s Quiet Scramble To Refill Its Gold Vault

In Part 2, we’ll talk about how it is possible to have extraordinary worldwide demand for physical gold and still have a falling price.

An Important Whistleblower Event in the Metals

Posted on September 15, 2013 by Thundering Heard

The news came out Friday at 2:00pm (circled on the chart below) that two JP Morgan employees have submitted to the government strong documentary evidence about how JP Morgan illegally manipulates prices in the precious metals markets:

Morgan Whistleblowers Confess Bank Manipulates Gold & Silver

As you can see on this chart of Friday’s price action in gold from Kitco.com, those few traders who remained at their posts late Friday afternoon thought this was a big deal, and they ran the price of gold up $20 in the final three hours of trading:

They are right. This is a big deal. Why?

1. The last time compelling evidence of JP Morgan’s price suppression of the metals emerged into public view was March, 2010 when London trader Andrew Maguire told everyone that he had submitted hard evidence to the government about such manipulation, including sitting with them and showing them in real time just when and how the manipulation is carried out:

It was no coincidence gold didn’t look back from that day and it moved up over $800, from under $1,100, to (over) $1,900. And silver moved up (an astonishing) $33, from under $17, to almost $50 in the same (time) period.

Someone tried to run Maguire down with a car two days later; he was hit by that car, but survived.

2. Many people have supplied evidence of manipulation of the metals to the US government agency that is supposed to take action about such crimes, the CTFC (Commodity Futures Trading Commission), but none, at least not that I know of, were employees of JP Morgan with direct inside information.

3. The CFTC has stonewalled the evidence received to date by staging an investigation of these allegations. The problem is, it’s been in progress for almost five years now. They haven’t taken a single action from this “investigation.” And why should they? Anyone known by Wall St to support such an action would be prevented from entering the “revolving door” and getting a cushy and highly-paid job at one of the Wall St firms as soon as their CFTC gig is over. And it is more than highly likely that the government itself is in collusion regarding the suppression of metals prices, so how can a lesser known agency point out that the US Treasury and Federal Reserve are involved in the scheme. But what was revealed Friday was that the CFTC received the data from the Morgan employees more than a year ago, in June 2012, and still they have taken no action. This will substantially increase pressure on the agency to take at least some sort of public action.

4. Allegations of price suppression in the metals markets have long been greeted as conspiracy theory by the mainstream despite the fact that government participants from the infamous Gold Pool of the 1960s admitted that they manipulated the gold price on a regular basis, though as with almost all government people, they only admitted to this after retirement or posthumously. But with so many conspiracy theories recently being shown as conspiracy fact, and with JP Morgan getting caught in multiple illegal actions over the last few years, it is now getting tougher for anyone to claim that Morgan is not acting illegally in any market in which they participate.

The “paper gold” market (futures, options, ETFs, etc.) has been used for years to manipulate prices in the physical gold market, so much so that increasing demand for physical gold is often met by a falling paper gold price, turning all economic theory of supply and demand upside down.

The Powers That Be of the USA will do whatever they can to maintain what is rightly called the “exorbitant privilege” of having the US Dollar as the world reserve currency, which enables the US to print money to purchase real goods from the rest of the world. Part of their strategy has been to suppress the price of the precious metals to mask the deteriorating value of the Dollar. Another aspect is to keep the price of the metals very volatile to scare people out of the metals; they want to make the metals look unstable and the Dollar look comparatively stable.

Last year, the State of South Carolina considered adding gold as an investment to the state’s coffers and rejected the idea because their research showed that the precious metals are a manipulated market so they could not trust the metals as an investment. The state treasurer told the legislature this:

“Similar to other commodities, the value of gold and silver is determined by supply and demand, as well as speculation. The Federal Reserve, London Bullion Market Association, JP Morgan Chase, and HSBC Holdings have practiced fractional-reserve banking and engaged in naked short selling causing artificial price suppression.“

So this testimony from JP Morgan employees is a major step toward gold and silver trading freely without government interference. No matter how old you are, gold has traded freely during your current lifetime for at most a few months at a time on a couple of rare occasions. If you hang in here for awhile longer, you will see it trade freely. And its price will be, to quote a great friend, magnificent.

War

Posted on August 31, 2013 by Thundering Heard

Despite a rare display of intelligence shown by a group of politicians, with the British parliament rejecting their Prime Minister’s call for war, at least for now; and despite serious questions raised by the likes of a former NPR reporter with years of on-the-ground experience in the Middle East who states that eyewitnesses say it is the Saudis who supplied the chemical weapons to the rebel forces; it seems almost certain that the US will be waging war in Syria, likely beginning with attacks launched from US naval vessels.

Most people might think this will be another “Libya” type of war with US techno-hardware pummeling the country for a couple of months and then it will be over. A bunch of political posing and sniping. Lots of discussion about whether annihilating people is legal! Little or no direct inconvenience to anyone in the US or Europe. And little consideration of the reality of those who will hold someone they love in their arms and experience the agony of seeing their beautiful friend demolished.

Why is this war less likely to be a brief campaign and more likely lead to World War 3?

1. There are 30,000 Russians living in Syria. If some of these people are killed, do you think Russia will just say, “Oh well. No problem.”

2. Russia is a long-time ally of Syria. They have a naval base there. They sell lots of arms to Syria. If Assad is toppled, Russia loses big strategically and economically: they wil likely lose their naval base; they lose a good arms customer; but most importantly, a new regime might be quite happy to allow the Qatari’s to build a natural gas pipeline across Syria to supply Europe with natural gas, breaking the Russian monopoly on the European natgas market.

3. Iran is an ally of Syria. Both countries are well aware that they are on the list of countries whose governments the US planned to topple as early as 2001, as reported in this required-listening two minute video interview with General Wesley Clark:

So I came back to see him a few weeks later, and by that time we were bombing in Afghanistan. I said, “Are we still going to war with Iraq?” And he said, “Oh, it’s worse than that.” He reached over on his desk. He picked up a piece of paper. And he said, “I just got this down from upstairs” — meaning the Secretary of Defense’s office — “today.” And he said, “This is a memo that describes how we’re going to take out seven countries in five years, starting with Iraq, and then Syria, Lebanon, Libya, Somalia, Sudan and, finishing off, Iran.”

And Iran is an ally of China.

4. Cycles: Manfred Zimmel, whose excellent forecasting work we have discussed here and here, has for many years been predicting that the period from 2013 to 2018 will be “the War Years.”

5. Cycles: The uncanny Wheeler Cycle of War and Political Change, discussed here, arrives again at its most intense point for the risk of major war in 2014:

6. Cycles: Michael Mau’s books predicted world war for this period unless humanity can stand up to being manipulated into war yet again. Mau’s books contain detailed discussions regarding who manipulates politicians and populations into war. So this is a big test for humanity: do people want war or have they truly had enough of it?

7. Cycles: August 2013 was given here as a major potential economic turning point. Oftentimes, people and nations play their part when a big cycle is ready to turn.

8. The US badly needs a distraction from the revelations of illegal spying that arrive almost daily.

9. The US badly needs distraction from its financial failures and its upcoming battle over the debt ceiling. Even researchers from within the US Federal Reserve have admitted that the Fed’s money printing has had little positive effect, and they have announced that they would like to gradually stop printing so much. (Perhaps the White House will basically force them to keep printing to support a war?) And even that gold-bashing defender of the status quo, the Financial Times, began an article with this quote:

The world is doomed to an endless cycle of bubble, financial crisis and currency collapse.

And included this sentence in the same article:

A stable international financial system has eluded the world since the end of the gold standard.

(Side note: Numbers 8 and 9 are partial indications that things have not been going so well for the US lately. This too is a result of a specific cyclic influence, so if you are confident that a US war foray will be quick and successful, you might wish to contemplate what the news flow has looked like for the US for the last several months.)

10. There are always those powerful groups who stand to profit greatly, financially and politically, from war, as described so well by US Marine Corp hero General Smedley Butler in his booklet War Is A Racket.

So what’s it going to be, folks? Have we had enough of war? Or do too many still want war, or not care one way or the other? Whatever the numbers, it seems that humanity still does not understand that the advice “Do unto others as you would have them do unto you,” contains the idea that what you do to others you are doing to yourself. Humanity is one, though it appears that few are aware of their awareness that such is the case.

If you have chosen to have preparations in place for when it really hits the fan, and if you have not completed those plans, my suggestion would be that you wrap them up now. Not in a state of fear, not in a panic, but with definite persistence and logic. Perhaps the status quo in this world can hold on till 2014, or even 2015. But betting that way entails some serious risks. Besides, preparing for a life independent of the theftocracy–that is, working with gardens, greenhouses, plug-in vehicles, solar arrays, water wells, and so forth–is a lot of fun.

Waterfall of Emerging Truth

Posted on June 8, 2013 by Thundering Heard

Really, what’s happening is, it’s a change in the rules of the game, which means that your cash is increasingly at risk of ending up in the government’s hands.
–Philippa Malmgren, former Special Assistant to the President of the United States for Economic Policy

So, acceleration of US government scandals, acceleration of truth emerging from the shadows into the mainstream, acceleration of clear signs of governments desperate to hold onto power. Wow, if you’ve been reading the news, you know that things are starting to move very quickly:

—NSA collecting phone records of millions of Verizon customers daily

—NSA PRISM program taps in to user data of Apple, Google and others

–The US has extensive offensive cyber warfare capabilities. According to a US intelligence source, “We hack everyone everywhere.”:

Obama orders US to draw up overseas target list for cyber-attacks

–Youtube gets a video of a former Canadian Defense Minister saying that UFOs and extra-terrestrials are real, that some of them work in and with the US government, and that there is a worldwide cabal that runs the planet for their own purposes:

Who are these vested interests, and what are they up to? …I have broadened and deepened my definition to cabal, and the cabal comprises members of the Three Sisters—the CFR, Bilderbergers, and the Trilateral Commission—the international banking cartel, the oil cartel, members of various intelligence organizations, and select members of the military…who together have become a shadow government of not only the United States, but of much of the Western world. The aim of the game is a world government comprising members of the cabal who are elected by no one and accountable to no one. And according to Mr. Rockefeller, the plan is well advanced. Does this help you to understand why our civil rights are being taken away from us?

–And weather wildness continues to accelerate, Oklahoma seems to get more than its share:

The National Weather Service reported Tuesday that the killer tornado that struck near Oklahoma City last Friday was a ferocious EF5 twister, which had winds that neared 295 mph… The weather service also said the twister’s 2.6-mile width is the widest ever recorded. According to the National Severe Storm Laboratory, the tornado blew up from one mile to 2.6 miles wide in a 30-second span… There have only been eight F5/EF-5 tornadoes in Oklahoma since 1950, the Weather Underground reports, and two of them have hit in the past two weeks. The other hit Moore on May 20, killing 24 people.

We’ll have more comments on all of that government stuff soon, but today, as part of observing this waterfall of emerging truth, let’s review material from an interview with a true insider. As stated in the post Accelerating Truth, more insiders seem willing, finally, to speak publicly about what is going on.

The insider for this post is Philippa Malmgren. She has served in the White House as the liason between the White House and the Federal Reserve, as the person responsible for all financial market issues for the President, and perhaps most importantly for our discussion today, she was part of what is officially called the President’s Working Group on Financial Markets, but which is known on the Street as the Plunge Protection Team. The PPT was created in early 1988 in reaction to the stock market crash of 1987. This crew goes to work when markets aren’t doing what the White House wants them to be doing and they interfere in whatever way they deem necessary. While the details are not disclosed, these people are said to have access to a very large pile of cash to push markets where they want them to go.

Philippa gave an amazing interview this weekend to King World News. Here are some quotes:

…the magnitude of the debt that is held by the United States, and indeed by all of the industrialized economies that have a debt problem, is so great it cannot be paid down. The human suffering involved would be so far beyond our capacity to withstand, so it has to be defaulted on.

* * *

Look, we are in a world where every major industrialized government doesn’t have the funds to deliver on the promises they’ve made to the public. So they are going to reach for the public’s cash in different ways…. Some of it is through higher taxes. Some of it is what I would call ‘expropriation,’ although taxation and even inflation are a version of that. But for example, Portugal, about a year ago, announced that they were nationalizing three of Portugal Telecom’s pension funds and placing the assets on the government’s balance sheet so that the government’s balance sheet would look better for the purposes of negotiating with the EU.

Now, were those pensioners expropriated? Yes. It made page 14 of the Wall Street Journal and the Financial Times, as if it was a non-event. But I think what we saw in Cyprus, a really overt expropriation, we are going to see that come in lots of different forms (going forward). Some of it will be obvious like Cyprus. Some of it will be subtle like Portugal, but what’s sure is that it’s happening.

So, yes, we have a really important political, philosophical battle now as states (and governments) try to find a way to take your cash in order to fund themselves, and not necessarily to the citizens best interest.

Really what’s happening is it’s a change in the rules of the game, which means that your cash is increasingly at risk of ending up in the government’s hands. So this is what we need to be alert to around the world.

* * *

You just have to whisper at it (the price of gold), and you can move it big time. Are governments good at that? Yes, they are good at that.

* * *

It is true that governments hate it when gold starts going through the roof, especially when they are in the midst of the largest devaluation, currency debasement strategy ever known…. We have never seen so many large industrialized economies all adopt this strategy simultaneously.

* * *

…this is one reason that many of the institutions that I’m advising are very wary about gold is because they do feel it’s subject to manipulation. That (as a result) the volatility is too heart-stopping to withstand.

And they are looking at other options. One option is definitely the world of diamonds. I see lots of private wealth moving in that direction. That’s one reason we see diamonds hitting absolutely record high prices. It’s because you can move an immense amount of value across a border with this thing in your pocket that a metal detector cannot find.

By the way, I was in charge of anti-money laundering policy for the U.S. government, so I’m not condoning this. I’m just saying it’s a fact. In a world where inflation pressures are definitely ripping through emerging markets, people want to move ‘value.’ And in a world where currencies are being debased, they want to hang on to value.

I’ve said a number of those things on this site, some in almost precisely the same words. The web sites listed on the Blogroll for this site published most of these things earlier than I did. These things are not complex. They are easy and clear. But I thought that perhaps these things would mean more to readers if they heard it from a true big-time insider. Let’s summarize:

1. Governments made lots of financial promises they cannot keep.

2. Governments have borrowed way more money than they can ever pay back.

3. They will try to disguise Points 1 and 2 by printing a lot of money because they see this as the most palatable way to default on their obligations, that is, they will pay their debts in money that is worth less and less and less…

4. Governments are going to do whatever they can to confiscate money from people to remain in power, in both subtle and overt ways.

5. Governments who are debasing their currency hate it when the gold price rises as a direct reflection of people trying to defend themselves from the money printing and the confiscations. So they will try to keep you in their confiscation system by scaring you away from gold. By having the price of gold and silver move wildly when priced in dollars, what governments are trying to do is to convince you that an unbacked currency that can be created digitally in infinite quantities is stable…and that gold and silver, honored as money for thousands of years, is not.

Philippa mentioned diamonds for wealth preservation and that has not been mentioned at all on Thundering Heard. The reasoning is threefold: I am not an expert on diamonds; I have heard of other non-experts who attempt to preserve wealth via diamonds and get fleeced by those who are experts; and the diamond market is a cartel run by DeBeers and the Russians where price is falsely supported by these suppliers withholding huge supplies of diamonds from the open market, so in my view, if their cartel ever gets broken, the price crash in diamonds will be epic.

However, Philippa is right: at least for now, for hiding portable wealth, diamonds are very tough to beat. And her clients are large institutions, sovereign wealth funds, etc. These people can afford to hire experts to make sure they don’t get fleeced when they buy diamonds. So if you have such expertise yourself, or access to it through friends, diamonds might be a very good way to go. But if you do not have access to such expertise, in my view, gold is far better because if you buy minted bullion coins from a reputable dealer, you don’t need to be an expert. Though I guess it is best to mention that the following quote was the advice for getting through the financial collapse from a book mentioned in What is the Transition? Conclusion, that is, the Sanctus Germanus Prophecies Volume 1, published in 2003:

Buy minted gold and silver coins, other precious metals or color gemstones. This is your 100 percent guarantee against the financial collapse. Store them in a safe place other than a bank, as bank failures will multiply. Few, if any, will survive. The US and other country currencies will collapse just as the Confederate currency did after the Civil War in the US.

The overall message here is: if you have savings in bank or brokerage accounts, governments are trying to figure out how to grab that money. They are making this very clear, as I will show shortly in separate posts on the threats to bank accounts and brokerage accounts that have recently been clearly announced by governments.

Accelerating Truth

Posted on June 1, 2013 by Thundering Heard

Most people have been trained to internalize only those ideas that come from honchos, that is, political and religious big shots, “experts,” very rich people, celebrities, etc. The powermongers capitalize on this when faced with criticism of the system by often resorting to what the logicians call ad hominem attacks, that is, they deflect attention from the criticism by attacking the person delivering it, attempting to undermine that person’s credibility. They characterize the malcontents as crazy, unpatriotic, uninformed, uneducated, or as crackpots, charlatans, imbeciles, demons, and so forth, while never addressing the issue at hand.

So for a more general public understanding of the nature of our system, it helps when people considered to be honchos start publicly discussing what is in fact going on. Other honchos are less likely to try to pull the ad hominem attack on one of their own. In other words, truth about the nature of our system needs to emerge from the blogosphere and into the mainstream. This process is accelerating.

Below is a link to an amazing video showing Columbia Professor Jeffrey Sachs speaking to a conference organized by the US Federal Reserve:

Columbia Economist Dr. Jeffrey Sachs speaks candidly on monetary reform

He begins by reporting that he was just at a meeting with foreign ambassadors at the UN who were asking:

“Why are we taking advice from the people who have managed the financial system so badly?”

He goes on to say that while people expect economists to talk about statistics and monetary issues, that the real problem with the system is as follows:

We have a mountain of criminal and fraudulent behavior…The amount of utter criminality and financial fraud is absolutely enormous…This is what’s called the American financial system at the moment. It’s an unregulated essentially lawless environment…

This is a profound failure of government…

I regard the moral environment as pathological…

We have a corrupt politics to the core. Both parties are up to their necks in this. It really doesn’t have anything to do with right wing or left wing. The corruption, as far as I can see, is everywhere.

Sachs follows that by saying that he meets with the top Wall St CEOs on a regular basis and the common feature he observes is that these people believe they can do anything they want, legal or not, with impunity. And that given their takeover of the politicians and regulators, they are correct!

Now this isn’t coming from MIT’s Prof. Noam Chomsky–who, let’s face it, was decades ahead of all of us in pointing out the criminality of the corporate/political system–it’s coming from a highly respected Columbia professor.

For a few years now, the money printing central banks such as the US Federal Reserve (the central banks have directly printed at least $16 trillion and counting) have been told by bloggers that this money is not supporting jobs and the economy, but rather that it is going to the rich who are bidding for financial assets and causing bubbles in multiple asset markets including stocks, bonds, and real estate. People like Ben Bernanke, his henchman, and academic and Wall St economists have denied this.

But now we find out, from a Freedom of Information Request by Bloomberg and from a leaked Fed document, that the banking insiders who advise the Fed are finally saying the same thing that the continuously-discredited bloggers have been saying all along: that the money printing is creating bubbles in farmland prices and student loans, and:

There is also concern about “an unsustainable bubble in equity and fixed-income markets given current prices.”

And for years, bloggers have said that the central banks cannot possibly stop printing more and more money or the whole edifice will crumble, another charge that is roundly derided. The Fed has claimed repeatedly that it has the tools to undo all the money printing so that it will never cause a problem. But now their own banker advisory panel says that if the Fed stops printing, it “may be painful for consumers and businesses…” and that “the Fed may now be perceived as integral to the housing finance system.” In other words, if the Fed stops printing, the “housing finance system” will collapse. Which it would. In a heartbeat.

People like Matt Taibbi of Rolling Stone have been stalwart in documenting the ongoing manipulations in the interest rate, municipal bond, derivatives, and oil markets. And others have offered very strong evidence of manipulation of the stock market and precious metals markets. Taibbi recently wrote that “everything is rigged.” The US Bond market, the largest in the world, is certainly rigged: the Federal Reserve itself buys 75% of the bonds issued by the US Treasury. And the Fed announces, at the start of each month, which days it will be buying bonds through the Wall St firms in the coming month. The stock market always rises on those days. Always. Why? Because the Wall St firms take that money, leverage it up by further borrowing, and buy stocks. The Fed wants exactly that: they believe that a rising stock market makes people feel a “wealth effect” and therefore they will go out and spend more money in the real economy.

So finally, along comes one the largest banks in the world, Deutsche Bank, saying:

We would stress that we fully understand why the authorities wouldn’t want free markets to operate today as the risk of a huge global default and unemployment cycle would still be very high.

And a recent member of the Federal Reserve Board, Kevin Warsh, said that their money printing is not working and they are losing credibility:

…over the last several years, [the Fed] has over-promised and under-delivered, and the bank’s most important asset – credibility – is under attack.

One would think that, if their strategy isn’t working, that they have other tools they can bring to bear. That’s what they tell us. But Warsh says, “There is no Plan B.”

Bloggers have been warning that European banks are insolvent and getting worse all the time. Now the European Central Bank itself admits that the “euro zone’s slumping economy and a surge in problem loans were raising the risk of a renewed banking crisis.”

Here is an interview with the President of the Chicago Mercantile Exchange, that place where they trade paper and electronic instruments that have an increasingly tenuous connection with physical things like gold, silver, copper, oil, etc. From the interview:

What’s interesting about gold, when we had that big break two weeks ago we saw all the gold stocks trade down significantly, we saw all the gold products (ed: futures) trade down significantly, but one thing that did not trade down, was gold coins, tangible real gold. That’s going to show you, people don’t want certificates, they don’t want anything else. They want the real product.

Then there is the supposed eternal juggernaut of the Chinese economy that will keep all the other floundering countries afloat. Much of that juggernaut has been propelled by debts taken on by local governments to promote the economy in their areas. But now the Financial Times reports this:

A senior Chinese auditor has warned that local government debt is “out of control” and could spark a bigger financial crisis than the US housing market crash.

Zhang Ke said his accounting firm, ShineWing, had all but stopped signing off on bond sales by local governments as a result of his concerns.

Last but not least, an insider is finally speaking up about nuclear power plants in the NY Times:

All 104 nuclear power reactors now in operation in the United States have a safety problem that cannot be fixed and they should be replaced with newer technology, the former chairman of the Nuclear Regulatory Commission said on Monday…

The position of the former chairman, Gregory B. Jaczko, is not unusual in that various anti-nuclear groups take the same stance. But it is highly unusual for a former head of the nuclear commission to so bluntly criticize an industry whose safety he was previously in charge of ensuring.

This system is coming apart at the seams. Insiders and whistlebowers are finally describing the details. The US Government realizes this and is desperately trying to keep whistleblowers from telling the truth by filing charges against them and trying to ruin their lives. Ultimately, it won’t work. I just hope that everyone reading here takes those actions they need to take. By the time the collapse is on the television Nightly News and Page 1 of the newspapers, with the system honchos all claiming “No one could have seen this coming,” it will be too late.

Thundering Heard

Toward Clarity in this Time of Major Transition

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