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ECONOMICS AND ESOTERICA FOR A NEW PARADIGM

Posts Tagged ‘banking fraud

David Galland: The System is coming unglued

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by David Galland
from Casey Research
Posted September 9, 2011

Our video host Stefan Molyneux speaks with Casey Research Managing Director David Galland about the debt situation in the US and whether the federal government can do anything about it… assuming they’d even want to.

TRANSCRIPT

Stefan: Hi everybody, it’s Stefan Molyneux, host of Conversations with Casey. I have on the line David Galland. Thank you so much, David, for taking the time to chat today.

David: Nice to be here.

Stefan: So, we are seven-tenths of the way towards fascism in the United States. I wonder if you could expand upon that. I sort of get a sense that that’s probably true, but you have a little bit more than my gut instinct – you actually have some pretty professional opinions to work with on that.

David: Well, all the elements for fascism are in place. We have a monetary system that is accountable to no one and that’s a very good start. If you think about it, the way that the monetary system is structured, the government at this point can literally spend money on anything. They talk about capping the federal deficits and all that, but they’ll get past that in no time at all. Probably by the time the viewers are watching this they will have announced a big deal, you know, that they have raised the debt cap. And you know, once you have – if you pin your money to nothing, if you have a monetary system that is based on nothing, then you can afford anything. You can afford all the wars you want, you can afford all the bureaucracy you want; and so they have. That’s a first step.

I mean, we’ve – just as an example, here in the little town in New England where Casey Research is located, they have a – they’ve just finished building a massive new Homeland Security center. This is a town of roughly 4,000 permanent residents; it’s a tourist town. It’s the kind of place where the worst crime you’ll ever see is somebody stealing skis from a ski slope, and yet we have something like 36 policemen. We’ve got this huge, brand-new Homeland Security center. Why? Well, because after 9/11 and the overreaction of 9/11 the government made this money available because it could make the money available, because there is nothing stopping it from doing that. And there’s all these local police departments, which should have an “Andy of Mayberry” type police force, took the money and they spent it, and now we’ve got a semi-militarized local operation. So this has gone on and this is multiplied right across the country… and the world.

Stefan: And of course, the decisions that people make in expanding the public sector have immediate implications in payroll, but I think what America is really facing are the long term implications of unfunded pensions that just run into the hundreds of billions of dollars. It’s a lot of the stuff that is not really counted in the public calculation of the debt, which is more immediate obligations, but the unfunded liabilities run $75 to $100 trillion according to many estimates. That’s not something that you see, which makes the whole conversation about should we have two trillion here or there ridiculous to anybody in the know.

David: Oh, absolutely. Again, on the point about whether we’re sort of on the way to a fascist state – and I – this isn’t just the US – it’s important that, you know, people understand this is all over the world. At this point, none of these governments is operating on anything that remotely resembles sound principles. They’re operating on a number of different priorities and a number of different interests – self-interests, because politicians after all are just people. So whatever it takes to kick the can down the road, they’re going to do. You mentioned $75 trillion in unfunded liabilities, absolutely. Because at this point, this is essentially sort of a rising tide of bureaucracy over the last hundred years that is cresting at this point. And they have done this because there are no real operating principles other than buying the votes that they need to get re-elected and to stay in office for as long as they can, and then they pass the baton to the next bureaucrat and the system continues. But it’s reaching the point where, I think, within a relatively short period of time it’s got to come to an end.

Stefan: Now you’ve written an article recently which I found very interesting – I just shared it through my Facebook as well – it’s called The Greater Depression. So you have the Great Depression and now we’re looking at the Greater Depression. I wonder if you could talk about the mechanics and the future as you see it as we go into this abyss.

David: Ultimately, what we’re faced with right now and this is, I think, just some fundamental principles – because there are so many aspects of what’s going on in the economy today that it makes it for most people – for virtually all people – it makes it very hard to really understand what’s going on. So sometimes you just have to sort of step back and ask a few questions to try to get some sort of a compass, if you will. And first and foremost the crisis we’re in right now is caused by debt, too much debt. As you mentioned before $75 trillion in government obligations – everybody knows that money is never going to get paid. So we’ve been brought to this point of extreme government borrowing. Who would have thought we’d see $1.5-trillion deficits? I mean, nobody – five, six years ago if you would have asked anybody on this planet if the US government could run a $1.5-trillion deficit they would have said no way. Well, here we are. So all of the conditions of what this – you can call it a debt-induced depression, all of the conditions that sort of brought us to this place have not improved since the beginning of this crisis; they’ve only gotten worse.

So what’s the ultimate outcome of this? Well, what’s the one thing that a heavily indebted person or an entity like the government can’t handle? And it’s rising interest rates. You can’t afford for the bank to bump your payments up to, you know, 20% because you’ve missed a payment. Well, the same thing’s true of the government and we are now – we are still – the US interest rates are still bouncing around, you know, all-time lows. It’s completely – it’s a complete aberration. And it can’t last. So why things are going to get worse is because interest rates have to go up. Even if they return to sort of a more normal five to six percent range, from a historical standpoint it would be devastating to the US economy. So the government is doing everything it can to try to get out of this trouble but there really is no way. They have very limited impact on long-term interest rates and if it wasn’t for the fact that Europe was such a basket case and that Japan was such a basket case right now, interest rates in the US would already be taking off but I don’t think we’re going to have to wait long for that and then things are going to get interesting.

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On perpetual ZIRP

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by Bruce Krasting
Posted August 9, 2011

I HAD THIS TO SAY LAST WEEK:
The Fed could easily attempt to buy some market peace by issuing a statement that the policy of zero interest rates would be extended for a minimum period of one year. I consider this to be a “high probability” to happen in the next 30 days.

I got it right, but I got it completely wrong. I feared that the Fed could extend the ZIRP language for as long as a year. Not in my wildest dream did I think they could take the extremely risky move of guaranteeing that interest rates will remain at zero for another 24 months. Having been shocked, my thoughts:

• This action is indefensible on economic merits. This move is not motivated by sound monetary policy. It’s motivated by politics. This is a payback to Obama. Shame on the Fed for mixing politics with money.

• We will not go two years with this monetary policy without inflation (measured by core) exceeding the previously stated commitment by Bernanke that policy would not be allowed to rise above 2%. Bernanke and the dove members that signed onto this policy have lied to the American people. Bernanke has done it on 60 Minutes. He has done it to Congress. Shame on all of them.

• The Fed has taken away its ability to react to a situation that would require them to tighten. We are now on a one-way street. There is no way to turn around anymore. I believe the Fed has abdicated its responsibilities under the dual mandate. The have no ability to react if inflation should pop up in a year from now. Even worse, they have no policy options should there be a run on the dollar. The possibility of a run on the buck has gone up exponentially as a result. Should that happen, the Fed will have left us economically defenseless. Shame on the Fed for making us more vulnerable to a speculative attack.

• The stock market run up this afternoon is the Bernanke Put at work. Lets be clear on the consequences of Perpetual ZIRP. From this day onward every buy and hold investor who acquires Treasury debt with maturities of less than five-years is GUARANTEED TO LOSE MONEY. So if you accept that, then stocks have to look better. Shame on the Fed for debasing money and punishing savers.

• We have only one monetary policy. Juice stock multiples. This is the farthest thing from “Progressive” economics as you can get. We have a policy in place that is designed to make wealthy people wealthier. At some point there will be a social cost to this. The fires and riots in London were triggered by a shooting. Underneath is a rage between haves and have nots. Shame on the Fed for rigging the outcome for fat cats. Double shame on them for when our streets are filled with rage.

• Zero interest rates also means Zero risk. I think the change in Fed language will exacerbate recent short-term funding liquidity. I think we will see this appear (again) sooner versus later. I think Zero interest rates discourages leveraged investing. This policy will dry up liquidity in the asset backed market (Shadow banking system). I’m looking for evidence of this in the Euro Dollar funding markets. I am also looking for it to occur in the Term Commercial Paper market. Shame on the Fed for setting us up for this systemic risk.

• Brazil, Argentina, Korea, Indonesia are going to scream bloody murder over perpetual ZIRP. Russia is likely to get downright ugly with their rhetoric. I wouldn’t be surprised if they took this opportunity to vote with their feet and just abandon the dollar as a reserve holding. China will also make noise. They will make more calls for a new international currency to replace the dollar. The Central bankers in Japan and Switzerland are puking in the trashcan over this. Bernanke is exporting US deflation to them. Shame on the Fed for pursuing beggar my neighbor policies. They deserve all the global criticism they are about to get.

• Bernanke bills himself as a student of the Depression. He has said over and over that he would not make the mistakes that the Fed made in 1937 when a tightening of monetary policy triggered another wave of deflation. I think the history books will look at the Fed and August of 2011 and draw a similar conclusion. At a critical time in history the Fed has taken action. The mistake of 72 years ago DID cause a recession that lasted a few years. The mistakes of 2011 will mark a point in history where America turned a corner downward. One that will take a few decades to recover from. The history books will shame Ben.

You want to fix the U.S. economy? Here’s a start…

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by Charles Hugh Smith
Posted July 19, 2011
on Of Two Minds 

A SIMPLE 8-POINT PLAN WOULD RESTORE BOTH THE BANKING and the real estate sectors, and end the political dominance of the parasitic “too big to fail” banks. Craven politicos and clueless Federal Reserve economists are always bleating about how they want to fix the U.S. economy and restore “aggregate demand.” OK, here’s how to start:

1. Force all banks to mark all their assets to market at the end of each trading day, including all derivatives of all types, including over-the-counter instruments.

2. Allow citizens to discharge all mortgage and student loan debt in bankruptcy court, just like any other debt.

3. Banks must mark all their real estate to market weekly as defined by “last sales of nearby properties” adjusted for square footage and other quantifiable measures (i.e. like Zillow.com).

4. Require mortgage servicers and all owners of mortgage-backed securities to mark every asset within each pool to market weekly.

5. Any mortgage, loan or note which was fraudulently originated, packaged and sold, including the misrepresentation of risk, the manipulation of risk ratings, fraudulent documentation by any party, etc., will be discharged as uncollectable and the full value wiped off the books and title records without recourse by any of the parties.

If a bank fraudulently originated a mortgage and the buyer misrepresented material facts on the mortgage documents, then both parties lose all claim to the note and the underlying asset, the house, which reverts to the FDIC for liquidation, with the proceeds going towards creditors’ claims against the bank.

6. Any bank which misrepresents marked-to-market asset values will be fined $10 million per incident.

7. Any bank which is insolvent at the end of a trading day will be closed and taken over by the FDIC the following day, and liquidated in an orderly manner via open-market auctions of all assets, including REO (real estate owned).

8. All derivative positions held by the insolvent bank will be unwound immediately, and counterparties who fail to make good on their claims will also be closed, given to the FDIC and liquidated.

You know what this is, of course: a return to trustworthy, transparent accounting.
And you know what the consequences would be, too: all five “too big to fail” banks would instantly be declared insolvent, and most of the other top-25 big banks would also be closed and liquidated.

At least $3 trillion in impaired residential mortgage debt would be written off, maybe more, and $1 trillion in impaired commercial real estate would also be written down. Derivative losses are unknown, but let’s estimate it’s at least $1 trillion and maybe much more.

If $5.8 trillion of fantasy “value” is wiped off the nation’s books, that’s only a 10% reduction in net household and non-profit assets, which total $58 trillion. Even an $11 trillion hit would only knock off 20%. If that’s reality, if that’s what the assets are really worth in the real world, then let’s get it over with. Once we’ve restored truthful accounting and stopped living a grand series of debilitating lies, then the path will finally be clear for renewed growth.

The net result would be the destruction of the political power of the “too big to fail” banks, the clearing of the nation’s bloated, diseased real estate market, and the restoration of trust in institutions which have been completely discredited.

Bank credit would flow again, and we could insist on a healthy competitive system of 250 small banks instead of a corrupting system of 5 insolvent parasitic monsters and 20 other bloated but equally insolvent financial parasites.

Those who lied would finally get fried. At long last, those who misprepresented income, risk, etc. would actually pay some price for their malfeasance. Criminal proceedings would be a nice icing on the cake, but simply ending the pretence of solvency would go a long way to restoring banking and real estate and ending regulatory capture by TBTF banks.

What’s the downside to such a simple action plan? Oh boo-hoo, the craven politicos would lose their key campaign contributors. On the plus side, the politicos could finally wipe that brown stuff off their noses.

So, what are you going to do about it?

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by Wayne Razzi
Posted on Rick’s Picks, June 3, 2011

[More than the torrent of fundamentally worthless money the central bank has pumped into our financial system, it is lies and delusions that have so far sustained prosperity’s dying gasp.  In the guest commentary below, Wayne Razzi argues that there are worse things to fear than economic collapse itself – namely, the loss of basic rights and freedoms as hard times causes politicians to seek radical solutions. –Rick Ackerman]

MY LAST PREDICTIONS HERE COULD LOOSELY BE summarized as follows: “Why what should happen probably won’t because they’ll do whatever it takes to achieve their outcomes…” The recent replay of the 1980 Silver Heist, with its curiously-timed margin hikes, reinforces the suspicion that Their playbook hasn’t changed in the interim.  I reference it only because it appears that the powers that be are about to enter another phase during which they’ll need to work their old plays aggressively.

As I survey the sphere, I see something resembling reality attempting to intrude upon the farcically engineered state of stock-market utopia that’s been presented for our consumption by the ever-reliable mainstream media (MSM). I feel embarrassed to write this, but is it still possible that a correction could be allowed to occur? It certainly seems overdue. Dig around a little and you’ll find that the GDP is closer to 0.5%  – and likely on its way to below zero in real terms if you strip out all of the government life-support contributions and tune out the illusions.

I can no longer enthusiastically offer economic and market prognostications as I once did. Doing so seems as pointless as the staged events and staged reforms that will surely follow. The reason? Dark clouds. These are what preoccupy me almost exclusively, for they figuratively represent one of the most important questions of these times.

A quote from the French economist Frederic Bastiat is appropriate here: “When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it.” And here’s another from John Madden, coach of the Oakland Raiders at the time:  “Everybody says the Raiders cheat. OK, we cheat. So, what are you going to do about it?

We and many at other forums and alternative-media sites, know They cheat. We also know, in many cases, how egregiously They cheat. So, what are we going to do about it? All of us should now know that we wake up every day, consumers of a fraud slickly packaged by the MSM. Economist Paul Craig Roberts quit attempting to bring the truth to light after decades of failed efforts that he ultimately described as futile. He said the American public was not able to believe their own eyes, ears and minds.

 

So where does that leave us?  At the moment, we are prisoners laboring in futility. Hyperbole? Not at all. The Powers That Be could change the rules at any time, altering property rights and basic freedoms as they are wont to do – and which they will soon find themselves needing to do radically. Check out the new and improved Patriot Act to get a sense of where things are headed.

Exploitation of humans by other humans has a much longer history than a mere few centuries. Under the circumstances, an off-the-grid solution, although highly attractive in some ways, remains vulnerable if not executed in conjunction with many like-minded neighbors. And even in that case, it remains far from a sure thing. This effectively forces an unavoidable confrontation between those who cherish true liberty and those who are willing to deploy coercion in its many forms to restrict liberties. And although what we face is nothing new under the sun, it might be the most important question of these times: “So, what are you going to do about it?”

This is not economic theory; this is simple common sense

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from Jesse at Jesse’s Café Américain
Posted originally June 3, 2011

THE RECOVERY WILL NOT BECOME ORGANIC and sustainable until people receive a living wage, able to buy a lifestyle consistent with a democratic republic based on their labor without onerous rents from debt. 

This is not economic theory; this is simple common sense. If you want to have a consumer based economy, you cannot debilitate the consumers until they become serfs, because then one has obtained a different form of governance. Unless of course one can persuade the many to love their servitude and think hell is a heaven. The public policy argument revolves around the relationship between the distribution of power, and therefore the accumulation of economic power, as it always does throughout history. That is another matter. I am treating the economic argument and prognosis.

As for employment growth, the longer term ‘trend’ has not yet turned lower, and seems consistent with a stagflationary outlook. It is obviously in danger of rolling over, but it has not done so just yet.

America had been adding jobs for over twenty years with stagnant wage growth. And this was a result of the partnership between corporate America and the wealthy few with the government policy makers, especially including the Greenspan Federal Reserve. Warren Buffett called it a class war and there is no need to guess which class controls the discussion through the concentration of ownership in the mainstream media. The public cannot even mount a serious reform effort without it being quickly co-opted and used against their interests by a well-heeled propaganda machine.

As Simon Johnson famously observed, there was an economic coup d’etat in the States and it is still having its way with the public and much of the world at large. The financiers have breached the walls, and are sacking and looting the city. Neo-liberalism is little more than a resurgence of the corporatism of the earlier twentieth century, with the jackboots more selectively deployed overseas, at least for now.

And the global reaction against the Anglo-American banking cartel, and their infamous economic hitmen, is the substance of the ongoing currency war, the long standing struggle against colonialism. It is remarkable how with all the change, nothing of substance really changes, at least in regards to human behaviour.

A structural reform of the system is what is required, not short term stimulus or austerity at least for now. And in particular not austerity or more tax cuts for the wealthy which is the hallmark of an intellectually bankrupt theory.

The US economy is severely distorted after years of managerial abuse with an outsized financial sector and a bias towards domestic jobs destruction through an abandonment of long term public policy decisions and investments in favor of short term corporate profits and the public be damned. And there is no reform because the political administration of the system and those who observe and report on it has been generally captured and corrupted, and is stuck in a credibility trap.

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Above taken from a longer article originally entitled About the Non-Farm Payrolls and the Birth-Death Model–Credibility Trap

 

How Global Elites steal resources and technology

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by James Jaeger
Posted originally May 04, 2011

As many of you old-timers know, my colleagues and I have been working to expose the fraud of the Federal Reserve System for many decades, not only in our movie, Fiat Empire featuring Ron Paul, but at places like the MIND-X and The Daily Bell.

When I first invited artificial intelligence enthusiasts at the MIND-X to read The Creature From Jekyll Island by G. Edward Griffin many apologists, who are either naive or who live off the fiat-currency system, fought me and argued for at least ten years. Given that this subject is now in the mainstream every day: I hope these people will now acknowledge that the issue has merit and the Federal Reserve – the FED – is an instrument of unjust enrichment.

As Ron Paul says – and many others now acknowledge – it’s become common knowledge that the Fed “prints money out of thin air” and this activity inflates the money supply, thus causing the hidden tax of “inflation” and a destruction of the dollar’s purchasing power. It is thus the Federal Reserve System that is the CAUSE OF THE CURRENT GREAT RECESSION, THE 2008 FINANCIAL MELTDOWN, THE LINGERING UNEMPLOYMENT and THE MULTI-TRILLION DOLLAR DEFICITS we are now experiencing.

That bit of housekeeping done, allow me to say further: the Federal Reserve’s MONETIZING of debt – now known by the euphemism of QUANTITATIVE EASING – and its practice of FRACTIONAL RESERVE BANKING have allowed an elite class of people to emerge, a class that has exploited the American middle class, if not driven many of them into bankruptcy. This has happened because the major corporations – majority-owned by this class – have sought ever bigger profits provided by exploiting cheap foreign labor and military services. The American Middle Class is justifiably getting REALLY pissed-off.

GLOBAL FRAUD:

The banking class – and the corporations that do business with this class  – have reconfigured U.S. laws to enable them to facilitate massive mergers and acquisitions over the past several decades. This consolidation took massive financing, so where did the money come from? It came from the Federal Reserve Member Banks as loans driven by fiat currency and fractional reserve banking. In other words, the major banks created trillions out of thin air and gave it to their cronies in corporate America in exchange for stock in the consolidated multinational corporations.

These multinational corporations, having driven most of their “free market” competition out of business (as a result of their access to fiat money) were now in a position to fund the campaigns of many congressmen. In exchange for campaign finances, many congressmen were behooved to relax anti-trust laws and provide all manner of special privileges. Such resulted in, for instance, the “financial services” industry whereby banks, stockbrokers and insurance companies were able to commingle their business plans to maximize market share and profits. The conflicts of interest that were created as a result caused the global financial meltdown which started in 2008 and proceeds more covertly to this day.

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$5,000 Gold and $300 Silver are credible numbers

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by James West
Posted originally April 19, 2011
MidasLetter.com

Q: What do CNBC, George Soros, Warren Buffet and every other mainstream investment commentator on the price of gold have in common for the last ten years?

A: They are all wrong.

All the time, every year, ten out of ten years in a row. If you continue to pay attention to such disinformation, you will lose money. Definitely. No question. Guaranteed.

Each and every year, their vapid comments on the future gold price prove to be complete bollocks, yet year after year, and day after day, millions of readers, watchers and listeners tune in for another dose of horribly incorrect information. These days, the number of perpetually inaccurate predictions forecasting an end to the gold boom are thoroughly drowned out by the now multitudinous voices screaming from the rooftops for gold to go much higher. About 90 percent of that is the herd mentality at work. Early predictions for $1,000 gold, which seemed extreme and outlandish just two years ago, turned out to be very conservative. So its easy now to lay claim to being “the one who predicted the gold bull market”.

Bandwagon riders aside, there are compelling reasons to support a much higher gold price, and more importantly, a narrowing of the ratio between the gold price and the silver price. One year ago, the silver to gold ratio was 63 ounces of silver for every ounce of gold. Today that ratio is 35:1. Its fallen by nearly half in one year.

In terms of pure performance, whereas gold has delivered a solid gain of 26.51% in the course of the last year, silver has outshone gold spectacularly, turning in a gain of 123.55%, making it the commodity trade of the year by far. The effect of that performance is to dramatically alter the perception of investors in terms of its desirability as a precious metal. Its long been a psychological barrier to silver’s progress, in my opinion, that a precious metal could be had so cheap.

But as the prices of both monetary metals grows, and their price differentials narrow, investors want an idea of where the future is heading in terms of these prices. Can they continue to grow so dramatically in price, or is there a point at which their price appreciation curve will level out and become more incremental? Or, is there a point at this the upward price curves will plunge steeply downward? And at what point, if every, will the price curves of silver and gold converge? What exactly is the appropriate ratio of gold versus silver? Do we buy bullion, coins, ETF’s, Gold Funds, Senior Miners or Junior Explorers? Which is safest? Which is riskiest?

First let’s consider the ratio question. If the ratio suggested in the title were to become reality, that would mean a ratio of only ten ounces of silver to buy one ounce of gold. If the ratio curve were to continue climbing in favour silver at the present rate, it would approach 10:1 within another year.

But if the ratio were to reflect numbers pegged to certain fundamental realities, then perhaps we could deduce a more rational price differential with better certainty. According to John Stephenson’s Little Book of Commodity Investing, there is 16 times more silver in the earth’s crust than gold.

So on that basis alone, the correct price ratio is arguably 16:1. Silver bulls like to point out that silver is unique among monetary metals because of its wide ranging industrial applications, as well as in photography and jewelry. As the silver price continues to consolidate its price differential with gold, it is likely that process modification and substitution will occur wherever possible in the manufacturing supply chain to replace silver, which will dampen industrial demand. Thanks to silver’s unique chemical attributes, however, that effect will be muted.

2009 statistics from the Silver Institute show that global supply of silver was more or less equal to the global demand for silver from all classes including manufacturing and bullion minting. Government stocks of silver are estimated to have fallen by 13.7 million ounces over the course of 2009, to reach their lowest levels in more than a decade. Russia again accounted for the bulk of government sales, with China and India essentially absent from the market in 2009. Regarding China, Gold Fields Mineral Services states that after years of heavy sales, its silver stocks have been reduced significantly.

If the silver ratio is heading to 16:1, that implies a near term price range of $90 – $100 per ounce.

If gold goes to $5,000 an ounce, and the silver/gold price ratio remains 16:1, there’s silver at $312.50 per ounce.

And what, pray tell, is coming down the pike to support a gold price of $5,000?

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