Currency Balloon Madness

Posted on January 15, 2015 by Thundering Heard

Today’s headline from GoldCore:

Market Chaos as Swiss Franc Surges 30% In 13 Minutes, Gold Rises Sharply

Historians will not look kindly on the financial titans and politicians of this period. They’ll have little trouble understanding the deceptions, but one wonders how they will account for the derangement. As some blame lead in the water for the demise of the Roman Empire, they’ll probably blame it on pharmaceuticals in our water supply, or electromagnetic pollution, or maybe, using the same data set cited here in Your daily dose of poison, they’ll blame it on a pesticide:

MIT Researcher’s New Warning: At Today’s Rate, Half Of All U.S. Children Will Be Autistic By 2025

But let’s get back to a major world currency, the Swiss Franc, rising 30% in 13 minutes. As pointed out in Currency Balloons, it is best for one’s financial health if they don’t say, “The Franc rose 30% in value in 13 minutes,” but instead say, “The Franc rose 30% in price in 13 minutes.” The concept of value has–for anyone who is not thinking clearly and carefully about it–been distorted beyond all recognition in this world where currency units are tethered to nothing real and Trillions of them can be conjured up (or lost!) with a few keystrokes.

So what happened with the Swiss Franc? Lots of Europeans, foreseeing the inevitable bankruptcy of Eurozone governments, were trading their Euros for Swiss Francs, driving up the price of the Swiss Franc relative to Euros. The Swiss central bank didn’t like this because, whenever a currency rises in price these days, the corporations in the country don’t like it because their products appear more expensive when they export them. So the Swiss central bank printed and spent hundreds of billions of Swiss Francs and sold them to buy Euros to artificially peg the price of the Franc to the price of the Euro.

But they ran into a problem. The price of the Euro has been, let’s put it nicely, diminishing, losing 16% versus the US Dollar in the last several months. So all of their Euro positions keep losing money. So despite saying just last week that they would keep pegging the Franc to the Euro, that they would print unlimited amounts of Swiss Francs to keep going, today they announced that they wouldn’t, that they were throwing in the towel. (By the way, with all currency resets, this has always been the case–they lie about their intentions right up to the last minute. You will never get an advance warning from the authorities about anything like this. You must make decisions about such things in advance on your own; or live with their decisions, which benefit them, not you.)

Such is the world of paper/electronic debt currencies these days, intimations of their inevitable demise. Very few people think through what is happening here. Why do people value money? Because they believe that they, or their descendants, can use it to acquire something real. But what does it mean when those in power (governments and banks) can conjure as much of this “money” as they see fit, Trillions at a time? All who end up with that currency believe that they can use it to acquire what is real.

But emergencies show the reality. When an earthquake or a storm hits, within hours or even minutes, store shelves are empty; what is real is gone, there’s none to be had. Then people realize that what is real is what has value: real actions, real goods, real knowledge; and that the concepts of price and currency-denominated wealth are increasingly unreliable in our money-mad world.

Saturday morning cartoons

Posted on October 18, 2014 by Thundering Heard

(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 →

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 major change, Part 1

Posted on July 23, 2014 by Thundering Heard

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.

More on the stock market

Posted on April 22, 2014 by Thundering Heard

I’m fairly sure that no one in the stock market cared much about my negative comments about stocks from three days ago:

83% of these new stock offerings over the last three months are money-losing companies…That almost equals the all-time record for such madness of 84% in the year 2000 during the internet/tech stock bubble.

But what about when David Einhorn, probably one of the five most successful hedge fund managers ever, says basically the same thing, which he did in a report issued today. Einhorn says he is selling short (that’s betting on a price decline, that is, Einhorn will make money as the prices of these stocks go down) a basket of overvalued tech stocks:

Our criteria for selecting stocks for the bubble basket is that we estimate there to be at least 90% downside for each stock…

So he thinks there is a good chance that the prices of these stocks will decline by 90% or more. Think that can’t happen? Einhorn again:

There is a huge gap between the bubble price and the point where disciplined growth investors (let alone value investors) become interested buyers. When the last internet bubble popped, Cisco (the best of the best bubble stocks) fell 89%, Amazon fell 93%, and the lower quality stocks fell even more.

For anyone interested, Einhorn’s full report is embedded in this article:

David Einhorn: “We Are Witnessing Our Second Tech Bubble In 15 Years” – Full Letter

Here’s another perspective that should make anyone with money in stocks promptly head for the hills (that means sell!). In 2002, after tech stocks crashed, Scott McNealy, co-founder and CEO of Sun Microsystems, gave a famous interview in Business Week. Sun was one of the many tech sock darlings. They made and sold high-powered workstations favored by the scientific community, Wall St, oil and gas engineers, etc. At its peak, the market valued his company at 10 times company sales. Not profits (that’s what is left over after all expenses), but sales, the amount of money that comes in the door prior to all expenses such as salaries, rent, supplies, etc. McNealy described how absurd it was for the market to value his company at 10 times sales:

But two years ago we were selling at 10 times revenues when we were at $64. At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends…That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are?

Well, in mid-March of this year, there were forty companies valued at 10 times sales or higher. The list, compiled by Goldman Sachs, is at this link:

America’s Most Overvalued Companies Are…

On average, these forty are valued at 15 times sales! To quote David Einhorn from his report: “After all, twice a silly price is not twice as silly; it’s still just silly.”

Silly is a direct result of money printing by central banks. The chart in the bottom panel below shows how, since the start of 2008, when the Federal Reserve was printing money (the color-shaded areas on the chart) stocks rose and rose and rose. Anytime they weren’t printing money, stocks fell promptly. So they keep printing. It doesn’t help regular folks, whose real incomes have been declining through this whole period, but it sure helps wealthy stock market investors:

(Chart Source)

It’s very obvious that the sheep are getting set up for another shearing, just as they were in 2000 and again in 2007. When exactly will this shearing take place? I claim no expertise on that score. Can the stock market go higher still? Sure. Clearly it depends on how much money the Federal Reserve prints, how long traders believe in the effectiveness of that printing, and how big the many wars in the world get. But I can tell you for sure, when the shearing happens, “silly” will not be the word on the minds of investors.

I don’t like being shorn, so I have nothing to do with stocks these days. I don’t want my savings anywhere near a brokerage account for reasons described under Lie #6 here. So I don’t have to guess about when the next shearing will take place. If I did want to guess, I would closely follow the work of Jeremy Grantham since he has a multi-decade real-time excellent track record of predicting future returns from stocks. His firm publishes a quarterly newsletter at their web site and Grantham’s comments are followed at web sites like ZeroHedge and King World News. Here are some recent comments:

Jeremy Grantham’s GMO: “The S&P Is Approximately 75% Overvalued; Its Fair Value Is 1100”

Grantham on stocks:

Grantham: We do think the market is going to go higher because the Fed hasn’t ended its game, and it won’t stop playing until we are in old-fashioned bubble territory and it bursts, which usually happens at two standard deviations from the market’s mean. That would take us to 2,350 on the S&P 500, or roughly 25% from where we are now.

Q: So are you putting your client’s money into the market?

Grantham: No. You asked me where the market is headed from here. But to invest our clients’ money on the basis of speculation being driven by the Fed’s misguided policies doesn’t seem like the best thing to do with our clients’ money.

We invest our clients’ money based on our seven-year prediction. And over the next seven years, we think the market will have negative returns. The next bust will be unlike any other, because the Fed and other centrals banks around the world have taken on all this leverage that was out there and put it on their balance sheets. We have never had this before. Assets are overpriced generally. They will be cheap again. That’s how we will pay for this. It’s going to be very painful for investors.

Grantham is a smart fellow and one of the few Wall St people who is honest about the food crisis brewing in the world and certainly one of the very few to quote Bob Marley. He wrote a detailed report on the topic, from the point of view of a numbers man, which he is:

Welcome to Dystopia! Entering a long-term and politically dangerous food crisis

We are five years into a severe global food crisis that is very unlikely to go away. It will threaten poor countries with increased malnutrition and starvation and even collapse. Resource squabbles and waves of food-induced migration will threaten global stability and global growth. This threat is badly underestimated by almost everybody and all institutions with the possible exception of some military establishments.

As I’ve said before on other topics: be careful out there.

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.

A Cycle that Says “Get Ready”

Posted on November 4, 2013 by Thundering Heard

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.

US Government shut down, except…

Posted on October 6, 2013 by Thundering Heard

The US Government claims to be shut down, but that doesn’t apply to the military complex:

Hagel Orders Civilian Pentagon Workers To Return to Work

So 350,000 civilian contractors will rejoin active duty soldiers, to whom no shutdown was applied.

And apparently the Department of Defense granted 94 new contracts on the day prior to the shutdown.

Recently, the US Federal Reserve threatened to slow down, to taper, the money printing, but they backed off on that idea at the last minute. And now the military is at full strength despite a government shutdown. Seems they are making it pretty obvious about what’s on tap. This is a very simple logical progression that has happened before:

1. An economy based on money which is debt must always grow or the interest on the debt cannot be paid.

2. When too much debt is accumulated, the economy groans under the burden, interest and principal on some of the debt cannot be paid, and the economy begins to implode.

3. Authorities put money printing into hyper-drive to try to fill the holes, to overcome this collapse, but this tactic fails. Currently, the money printers themselves are dismayed about the poor results from all that printing.

4. So to stimulate an economy in end-of-cycle death throes, the authorities resort to war.

In my view, this too will fail.

In early September, when the Military Times surveyed US troops on whether they supported US air strikes on Syria, 75% were opposed. And they were opposing air strikes; it seems highly likely that there would be even greater opposition to an invasion. US politicians have been running these troops ragged with one campaign after another, and it is taking its toll in terms of suicide and substance abuse:

In fact, prescription drug abuse doubled among U.S. military personnel from 2002 to 2005 and almost tripled between 2005 and 2008.

Alcohol abuse is the most prevalent problem and one which poses a significant health risk. A study of Army soldiers screened 3 to 4 months after returning from deployment to Iraq showed that 27 percent met criteria for alcohol abuse…

Drug or alcohol use frequently accompanies mental health problems and was involved in 30 percent of the Army’s suicide deaths from 2003 to 2009 and in more than 45 percent of non-fatal suicide attempts from 2005 to 2009.

Many people are increasingly aware that most major US war participations were preceded by false flag attacks, for example, the Lusitania for WW1, Pearl Harbor for WW2, the Gulf of Tonkin for Viet Nam, and 9/11 for the War on Terror. Many are weary of the repeated war campaigns that promise to bring democracy and bring only death and chaos. And people are increasingly aware that the economy–to which so many bow down as some kind of Moloch that must be served now no matter what the human and long-term costs–is a system for enslaving many for the mega-profits of a few. How long before people realize that murderous warmongering is simply an extension of that profiteering?

It seems clear that they will start a major war. They will have to counter war weariness among both civilians and military, and we all know how they do that. And they do need people’s support to carry this out. So once the war has started, the question will be: how long will people support it? Will people go along with these dark forces of war–for emotional reasons, or to get and keep a job in the war economy–or will they stand up and put an end to it?

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.

Thundering Heard

Toward Clarity in this Time of Major Transition

Tag Archives: money printing