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ECONOMICS AND ESOTERICA FOR A NEW PARADIGM

Posts Tagged ‘Precious Metals

Why gold and silver prices will more than double again even from current “expensive” levels

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by J. S. Kim
SmartknowledgeU
Posted August 4, 2011

THOSE THAT ARE  FAMILIAR WITH MY WRITINGS ABOUT GOLD AND SILVER for the last six years know that I have said gold was cheap at $500, $600, $700, $800, $1000 and $1,200 a troy ounce and know that I have said silver was cheap at $11, $12, $14, $16, $25, and $30 a troy ounce.

Today, I will reiterate that gold is still cheap in the $1500 to $1600 range and that silver is still cheap in the $40 range because the largest movements in gold and silver prices as well as gold and silver mining stocks have still not happened and will materialize over the next four to five years.

Again, this doesn’t mean that gold and silver can’t or won’t correct or consolidate again in the future because both PMs always do. I have written publicly so much about this topic over the years (and even in much greater depth to my subscribing members) because I truly believe it is insanity not to participate in one of the best ways to invest in gold and silver today – the ownership of physical gold and physical silver.

Hundreds of millions of investors worldwide, influenced by the propaganda of Western bankers, have consciously made poor decisions not to own a single ounce of physical gold and physical silver today. One of the first realities an investor must understand about the gold and silver market is that the Economics 101 concept of price being set by physical supply and physical demand is an utter lie. In today’s world of banking and financial industry lies, the price of gold and silver are NOT set by the physical demand and physical supply of either of these metals, but rather by the artificial supply and demand of paper contracts predominantly backed by no physical metal.

By now, the following facts are very well known by seasoned physical gold and physical silver buyers but likely still unknown to the average investor worldwide. A CPM Group document released in the year 2000 stated, “With the start of the London Bullion Market Association’s release of monthly trading data, the market has become aware that 100 times more gold and silver trade hands each year, just in the major markets, than is produced or used. Some market participants have wondered aloud how 10 billion ounces of gold could trade via the major markets each year, compared to 120 million ounces of total supply and demand, while roughly 100 billion ounces of silver change hands, compared to around 628 million ounces of new supply.”

Thus, one can see that the fraud perpetrated by bullion banks in the silver futures market exceeds even the fraud they commit in the gold futures markets. Take the figures provided above, and a quick calculation reveals that bankers were trading nearly 160 times of paper ounces of silver every year than the annual physical supply of silver mined from the earth.

However, break down these numbers even more and the fraud becomes even more astounding. While in 2000, about 628 million ounces of new supply of physical silver came to market, in 2010, mine production of new silver supply was slightly higher at 735.9 million ounces. Net government sales accounted for another 44.8 million ounces, old silver scrap provided an additional 215 million ounces, and producer hedging accounted for the final 61.1 million ounces. Thus a total annual supply of roughly 1 billion ounces of silver existed in 2010. However, industrial usage, photography and jewelry used up nearly 78% of the one billion ounces of physical silver supply in 2010 and left less than 100 million ounces available for minting in the form of silver coins. (Source: The Silver Institute).

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Five things you need to know about the economy

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by David Galland of Casey Research
Posted  August 3, 2011

AT ANY POINT DURING THE RECENT NEGOTIATIONS IN WASHINGTON over the debt, did you seriously think for even a second that the U.S. was about to default?

Of course, in time the U.S. government (along with many others) will default. However, they are highly unlikely to do so by decree or even through the sort of legislative inaction recently on display. Rather, it will come about through the time-honored tradition of screwing debtors via the slow-roasting method of monetary inflation.

Yet most people still bought into the latest drama put on by the Congressional Players – a troupe of actors whose skills at pretense and artifice might very well qualify them for gilded trophies at awards banquets. Instead, rather than glittering statuettes, these masters of the thespian arts settle for undeserved honorifics and the pole position at the public trough. Followed by lifelong pensions.

But to the heart of the current matter, do I think that the latest antics out of Washington will have any more lasting effect on the trajectory of the economy than what I had for breakfast this morning (raw oats with a dab of maple syrup, milk, a sprinkling of strawberries, and half of a banana, sliced)?

Absolutely not. Sorry to say, but the trajectory of the economy at this point is well established, and closely resembles that of a meteor streaking through the night sky. What’s left of the solid matter of the nation’s accumulated private wealth is fast being burned off by an unstoppable inferno of government spending, inevitably leading to an earth-shaking crash.

I make this dire prediction not out of an aberrant psychology (I hope), or in an outburst of self-promotion for Casey Research because the big-picture scenario we have so long warned of is unfolding according to script, but rather due to certain fundamental truths about our current situation. And that brings me to the five things you need to know about the U.S. economy (much of which also applies to the other large developed nations)…

1. The U.S. remains in the grip of a debt-induced depression.

While personal levels of debt have eased somewhat since the crash, most of the improvements have come at the expense of debt repudiation, and are offset by the steep decline in housing prices that have left something like 50% of mortgages underwater. Meanwhile the debt on the balance sheets of the U.S. government and the country’s largest financial institutions remain at record highs – and much of that debt is toxic. So, what’s the one thing that the heavily indebted – individual or institution – most fears? Answer: Rising interest rates.

2. Interest rates can’t stay low.

Despite the debt, interest rates remain near historic lows – which is to say, well below the norm. At some point they have to at least revert to the mean, which would push the 10-year treasury rate north of 5% from current rates below 3%. But in reality, the levels of monetary inflation, the nature of the debt, and mind-numbing scale of the government’s other financial obligations – in total upwards of $70 trillion – all but guarantee that interest rates must go much higher than 5%. That in turn torpedoes the half-sunk real estate market and risks kicking off a debt death spiral as higher interest payments suck the financial juice out of the economy and causes debtors to demand even higher rates. Say hello to Doug Casey’s Great Depression.

The last time the U.S. economy found itself in such dire straits was back in the 1970s, when the problem was raging price inflation. Back then, though, the debt levels were considerably lower than they are now. Then, Fed Chairman Paul Volcker had the latitude to raise rates and by so doing helped to choke out inflation. By contrast, today the Fed is virtually helpless. Rates certainly can’t be pushed lower by any appreciable amount, and the Fed sure as hell doesn’t want them to go up. While the Fed has been a primary factor in controlling interest rates up to this point in the crisis, in the near future the direction of interest rates – particularly long-term rates – will increasingly be determined by skittish market participants. Specifically, the sovereign and institutional buyers whom the U.S. Treasury so desperately needs to keep showing up at their auctions.

To use a metaphor, the situation today is akin to a bunch of gunfighters facing off in a dusty street, hands poised over their six-shooters, eyes nervously shifting this way and that – to the eurozone, to the housing markets, to the situation in Japan, to the U.S. government spending, to the crumbling balance sheets of the banks, to the Fed. Everyone is anxiously watching, waiting for someone else to start making the first move. The standoff can’t last – and when the lead starts flying, there will be few places to hide.

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Gold and silver: We were right – they were wrong

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by Brandon Smith of Alt Market
Posted July 25, 2011

ONLY NOW, AFTER THREE YEARS OF ROLLER COASTER MARKETS, EPIC DEBATES, and gnashing of teeth, are mainstream financial pundits finally starting to get it. At least some of them, anyway.

Precious metals have continued to perform relentlessly since 2008, crushing all naysayer predictions and defying all the musings of so called “experts”, while at the same time maintaining and protecting the investment savings of those people smart enough to jump on the train while prices were at historic lows (historic as in ‘the past 5000 years’).

Alternative analysts have pleaded with the public to take measures to secure their hard earned wealth by apportioning at least a small amount into physical gold and silver. Some economists, though, were silly enough to overlook this obvious strategy. Who can forget, for instance, Paul Krugman’s hilarious assertion back in 2009 that gold values reflect nothing of the overall market, and that rising gold prices were caused in large part by the devious plans of Glen Beck, and not legitimate demand resulting from oncoming economic collapse.

To this day, with gold at $1600 an ounce, Krugman refuses to apologize for his nonsense. To be fair to Krugman, though, his lack of insight on precious metals markets is most likely deliberate, and not due to stupidity, being that he has long been a lapdog of central banks and a rabid supporter of the great Keynesian con. [And he a Nobel Prize winner!] Some MSM economists are simply ignorant, while others are quite aware of the battle between fiat and gold, and have chosen to support the banking elites in their endeavors to dissuade the masses from ever seeking out an alternative to their fraudulent paper. The establishment controlled Washington Post made this clear with its vapid insinuation in 2010 that Ron Paul’s support of a new gold standard is purely motivated by his desire to increase the value of his personal gold holdings, and not because of his concern over the Federal Reserve’s destructive devaluing of the dollar!

So, if a public figure owns gold and supports the adaptation of precious metals to stave off dollar implosion, he is just trying to “artificially drive up his own profits”. If he supports precious metals but doesn’t own any, then he is “afraid to put his money where his mouth is”. The argument is an erroneous trap, not to mention, completely illogical.

Numerous MSM pundits have continued to call a top for gold and silver markets only to be jolted over and over by further rapid spikes. Frankly, it’s getting a little embarrassing for them. All analysts are wrong sometimes, but these analysts are wrong ALL the time. And, Americans are starting to notice. Who beyond a thin readership of mindless yuppies actually takes Krugman seriously anymore? It’s getting harder and harder to find fans of his brand of snake oil.

Those who instead listened to the alternative media from 2007 on have now tripled the value of their investments, and are likely to double them yet again in the coming months as PM’s and other commodities continue to outperform paper securities and stocks. After enduring so much hardship, criticism, and grief over our positions on gold and silver, it’s about time for us to say “we told you so”. Not to gloat (ok, maybe a little), but to solidify the necessity of metals investment for every American today. Yes, we were right, the skeptics were wrong, and they continue to be wrong. Even now, with gold surpassing the $1600 an ounce mark, and silver edging back towards its $50 per ounce highs, there is still time for those who missed the boat to shield their nest eggs from expanding economic insanity. The fact is, precious metals values are nowhere near their peak. Here are some reasons why…

Debt ceiling debate a final warning sign

If average Americans weren’t feeling the heat at the beginning of this year in terms of the economy, they certainly are now. Not long ago, the very idea of a U.S. debt default or credit downgrade was considered by many to be absurd. Today, every financial radio and television show in the country is obsessed with the possibility. Not surprisingly, unprepared subsections of the public (even conservatives) are crying out for a debt ceiling increase, while simultaneously turning up their noses at tax increases, hoping that we can kick the can just a little further down the road of fiscal Armageddon. The delusion that we can coast through this crisis unscathed is still pervasive.

Some common phrases I’ve heard lately: “I just don’t get it! They’re crazy for not compromising! Their political games are going to ruin the country! Why not just raise the ceiling?!”

What these people are lacking is a basic understanding of the bigger picture. Ultimately, this debate is not about raising or freezing the debt ceiling. This debate is not about saving our economy or our global credit standing. This debate is about choosing our method of poison, and nothing more. That is to say, the outcome of the current “political clash” is irrelevant. Our economy was set on the final leg of total destabilization back in 2008, and no amount of spending reform, higher taxes, or austerity measures, are going to change that eventuality.

We have two paths left as far as the mainstream economy is concerned; default leading to dollar devaluation, or, dollar devaluation leading to default. That’s it folks! Smoke em’ if you got em’! This train went careening off a cliff a long time ago.

If the U.S. defaults after August 2, a couple of things will happen. First, our Treasury Bonds will immediately come into question. We may, like Greece, drag out the situation and fool some international investors into thinking the risk will lead to a considerable payout when “everything goes back to normal”. However, those who continued to hold Greek bonds up until that country’s official announcement of default know that holding the debt of a country with disintegrating credit standing is for suckers. Private creditors in Greek debt stand to lose at minimum 21% of their original holdings because of default. What some of us call a “21% haircut”.

With the pervasiveness of U.S. bonds around the globe, a similar default deal could lead to trillions of dollars in losses for holders. This threat will result in the immediate push towards an international treasury dump.

Next, austerity measures WILL be instituted, while taxes WILL be raised considerably, and quickly. The federal government is not going to shut down. They will instead bleed the American people dry of all remaining savings in order to continue functioning, whether through higher charges on licensing and other government controlled paperwork, or through confiscation of pension funds, or by cutting entitlement programs like social security completely.

Finally, the dollar’s world reserve status is most assuredly going to be placed in jeopardy. If a country is unable to sustain its own liabilities, then its currency is going to lose favor. Period. The loss of reserve status carries with it a plethora of very disturbing consequences, foremost being devaluation leading to extreme inflation.

If the debt ceiling is raised yet again, we may prolong the above mentioned problems for a short time, but, there are no guarantees. Ratings agency S&P in a recent statement warned of a U.S. credit downgrade REGARDLESS of whether the ceiling was raised or not, if America’s overall economic situation did not soon improve. The Obama Administration has resorted to harassing (or pretending to harass) S&P over its accurate assessment of the situation, rather than working to solve the dilemma. Ratings company Egan-Jones has already cut America’s credit rating from AAA to AA+.

Many countries are moving to distance themselves from the U.S. dollar. China’s bilateral trade agreement with Russia last year completely cuts out the use of the greenback, and China is also exploring a “barter deal” with Iran, completely removing the need for dollars in the purchase of Iranian oil (which also helps in bypassing U.S. sanctions).

So, even with increased spending room, we will still see effects similar to default, not to mention, even more fiat printing by the Fed, higher probability of another QE announcement, and higher inflation all around.

This period of debate over the debt ceiling is liable to be the last clear warning we will receive from government before the collapse moves towards endgame. All of the sordid conundrums listed above are triggers for skyrocketing gold and silver prices, and anyone not holding precious metals now should make changes over the course of the next month.

What has been the reaction of markets to the threat of default? Increased purchasing of precious metals! What has been the reaction of markets to greater spending and Fed inflation? Increased purchasing of precious metals! The advantages of gold and silver are clear…

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Printing and Propaganda

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From Mike Krieger of KAM LP
Posted May 19th, 2011

Desolate and without purpose
Radiating from so many septic sources
Forming the fabric of a wayward people
Disappearing as the vestiges of our past

Scratched like tartan into virgin soil
A substrate for progress and disarray
A spreading network of broken dreams
Searching for a thoroughfare to take us away

Just a little tale from the streets of America
Sparkled promises paved with pathos and hysteria
Trenchant, weary native sons
Step back, step back
And see the damage done
Shoot straight to the horizon
The streets of America

– Bad Religion, “Streets of America”

A nation that is afraid to let its people judge truth and falsehood in an open market is a nation that is afraid of its people.
– John F. Kennedy

AS I HAVE BEEN SAYING FOR THE PAST SEVERAL YEARS, the misguided Keynesian witch doctor central planners unfortunately in charge of our economic fate are attempting a grand experiment on us based on completely insane and nonsensical theories that have no chance at success. These clowns claim to have all sorts of “tools” but in reality they have nothing. When faced with a complete credit collapse of proportions never seen before in recorded history there were and are only two “tools.” It’s the two P’s: Printing and Propaganda.

While I have written about both of these “tools” before I am going to focus on the propaganda part today since it is the most applicable to the current state of the financial markets. We all know by now that the centrals planners believe the tail wags the dog. So the economy doesn’t lead to higher stock prices but higher stock prices will lead to a better economy. Insane? Absolutely. Is it their religion? 100%. The other important thing for investors to be aware of now when they are comparing the current state of affairs to what many lived through in the 1970’s is that the central planners have learned some lessons. What we must always remember about central planners is that they will never renege on their core philosophy which is that an elite academic and political class in their wisdom are better stewards than free humans interacting in a marketplace.

That said, most people do not share their worldview for obvious reasons (who wants their lives micromanaged?) so the trick of the central planners is to micromanage your life while you think you are in charge. As Goethe said “None are more hopelessly enslaved than those who falsely believe they are free.” He didn’t just make up this clever quote, it is a tried a true method of the most successful control systems throughout history.

So even the brainwashed masses out there understand that price controls were tried in the 1970’s and failed. We also know why. Therefore, the last thing the current group of central planners will want to do is announce price controls. That doesn’t mean they don’t attempt them anyway. They have been rigging stocks in the United States consistently for the past two years and most people get this and accept it as a part of the current state of disunion we are in. However, as I wrote last week we have now entered Phase 2.  This was represented by the raid on commodities.

A tried and true strategy that TPTB have used in precious metals for years has been to create such tremendous volatility in gold and silver and especially the shares that most investors stay away since they can’t stomach it. This strategy is now seemingly being employed to a much wider spectrum of commodities, hence my warning on trading futures last week. The entire game was perfectly summarized by a quote in the most recent 13D report where it was stated:  “Unfortunately, this battle between finding a safe haven and the authorities’ desire to render it ‘unsafe’ is only in its earliest stages. Our mantra since 2007 – governments can and will do anything to survive.”

The Bernank Bluff    

So part of the propaganda “tool” used by the central planners is the manipulation of financial markets, which seems to increased in emphasis in recent weeks. The other consists of outright lies and disinformation. Put yourself in The Bernank’s shoes for a moment. This guy loves printing more than Hewlett Packard. He is despondent beyond belief that the markets and an increasing amount of financial commentators have criticized his precious QE insanity. Meanwhile, the economic data is starting to roll over and housing looks set to launch into another spiral lower. So what is a Bernank to do? Bluff the heck out of the markets. He knows that the only way he can have cover for his printing party is to smash commodities because the rise in commodities is the biggest point of contention amongst the masses.

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A golden tipping point: University of Texas takes delivery of $1 billion in physical gold

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by Tyler Durden
Posted Zero Hedge on April 16, 2011

TIPPING POINTS ARE FUNNY: FOR YEARS, DECADES, EVEN CENTURIES, the conditions for an event to occur may be ripe yet nothing happens. Then, in an instant, a shift occurs, whether its is due a change in conventional wisdom, due to an exogenous event or due to something completely inexplicable. That event, colloquially called a black swan in recent years, changes the prevalent perception of reality in a moment.

This past week, we were seeing the effect of a tipping point in process, with gold prices rising to new all time highs day after day, and the price of silver literally moving in a parabolic fashion. What was missing was the cause. We now know what it is: per Bloomberg: “The University of Texas Investment Management Co., the second-largest U.S. academic endowment, took delivery of almost $1 billion in gold bullion and is storing the bars in a New York vault, according to the fund’s board.”

And so, the game theory of a nearly one hundred year old system of monetary exchange has seen its first defector, but most certainly not last. With an entity as large as the University of Texas calling the bluff of the Comex, the Chairman, and fiat in general in roughly that order, virtually every other asset manager is now sure to follow, considering there is not nearly enough physical gold to satisfy all paper gold in existence by a factor of about 100x. The proverbial Nash equilibrium has just been broken.

From Bloomberg:

The fund, whose $19.9 billion in assets ranked it behind Harvard University’s endowment as of August, according to the National Association of College and University Business Officers, added about $500 million in gold investments to an existing stake last year, said Bruce Zimmerman, the endowment’s chief executive officer. The holdings are worth about $987 million, based on yesterday’s closing price of $1,486 an ounce for Comex futures.

Years from now, when historians attempt to define who may have started it all, one name may emerge…

The decision to turn the fund’s investment into gold bars was influenced by Kyle Bass, a Dallas hedge fund manager and member of the endowment’s board, Zimmerman said at its annual meeting on April 14. Bass made $500 million on the U.S. subprime-mortgage collapse.

“Central banks are printing more money than they ever have, so what’s the value of money in terms of purchases of goods and services,” Bass said yesterday in a telephone interview. “I look at gold as just another currency that they can’t print any more of.”

In summary: the fiat tide is now going out. And among those who will first be observed swimming naked are the very same people whose fate has been so very intrinsically linked to the perpetuation of a flawed regime (and who coined this very saying). In the meantime, hold on to your hats: should a scramble for delivery ensue, the recent parabolic move in various precious metals will seem like a dress rehearsal for what is about to transpire.

Gresham’s Law Squared – Gearing up for game over

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by Paul Mylchreest
Thunderroad Report
Originally posted Feb 24, 2011

It’s getting serious, Gresham’s Law is kicking in and this isn’t any “run-of-the-mill” Gresham’s Law either – it’s “Gresham’s Law Squared”. Not only is there huge hoarding of gold and silver, but it is being compounded by the simultaneous transformation of the gold and silver markets themselves. Having been dominated by paper claims to bullion, all that matters now is ownership of the physical metal itself.

The price of gold and silver on your Bloomberg screen is actually a HYBRID price of physical bullion and a larger amount of “paper” bullion, e.g. unallocated gold and silver, exchange traded futures, OTC derivatives and some ETFs. The paper bullion price and the metal price are still the same, but this market structure (which had successfully channelled much of the demand away from physical metal) is now breaking down.

When the screen price accurately reflects the prices of physical gold and silver per se, they will need to be FAR higher than you see today. Right now, the frontline in the battle between “real” money and paper currency is in the silver market, but most remain blissfully unaware of the significance of what is taking place. The world’s financial system, as currently configured, is falling apart. The vast majority, including bankers and brokers (who should know better), don’t appreciate it – a sort of tragi-comedy really. The bubble this time is in the money, so nobody will be spared. Buying gold and silver is the fear AND greed trade!

So here we are, waiting for the “event” which triggers a loss of confidence across the system. Will it be a sovereign, a US state, a bank, QE3 or QE5, the oil price, Chinese fixed investment, a false flag event (a convenient distraction/excuse) or a revolution? When it happens, the speed at which capital will move in today’s over-liquefied world will take people’s breath away. Where will it go? This is the global end of normal (baby) so that, first and foremost, it will go into the strategic assets: gold/silver, energy, food/agriculture, rare earths, etc, (as well as the equities of the financially strongest economies).

Bernanke’s QE2 is nothing short of economic warfare, in the form of a wave of inflation, directed at the rest of the world and even his own population (at least anybody without a large stock market, commodities or precious metals portfolio). This inflation is not temporary, as per the false reassurances, it’s baked in. Here is Martin Armstrong recently talking about the US budget deficit:

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Commodity Inflation: “You Ain’t Seen Nothing Yet”

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by Michael Krieger
Posted originally January 13th, 2011

Gold is the money of kings, silver is the money of gentlemen, barter is the money of peasants – but debt is the money of slaves.
Norm Franz, Money and Wealth in the New Millennium

As soon as you’re born they make you feel small,
By giving you no time instead of it all,
Till the pain is so big you feel nothing at all,
A working class hero is something to be,
A working class hero is something to be…
When they’ve tortured and scared you for twenty odd years,
Then they expect you to pick a career,
When you can’t really function you’re so full of fear,
Keep you doped with religion and sex and TV,
And you think you’re so clever and classless and free,
But you’re still fucking peasants as far as I can see,
There’s room at the top they are telling you still,
But first you must learn how to smile as you kill,
If you want to be like the folks on the hill
–John Lennon, Working Class Hero

Thanks, Ben… You have destroyed the social fabric of the World

HISTORY IS LITTERED WITH THE CARCASSES OF MEN THAT IN THEIR EXAGGERATED HUBRIS attempted to stop the forces of nature and the markets only to fall flat on their faces. We tell the stories of these men in history books and myths from prehistory, but it never stops those of successive generations from trying it all over again.

What the current political class the world over (at the behest of Wall Street financial terrorists and other big corporate interests) are doing falls into the same exact formula of prior historical failures. Some of the historical figures that attempted to beat back nature were great warriors or kings that just reached too far. Some of them were evil megalomaniacs whose desire was nothing short of absolute power in their hands over any of the unfortunate human beings that happened to be in the way.

Ben Bernanke is neither of these. He is a just a little dweeb with an electronic printing press. Tragically, because of modern technology and the way the monetary system works today he has the ability to cause more damage than any other one person in the history of mankind and he is doing it. I shudder to contemplate the ultimate effects of the inflationary holocaust he has unleashed on the six billion mesmerized and helpless souls present on earth at this time. The signs are starting to show up again just like in early 2008. Food is becoming scare at a “reasonable” price in many parts of the globe and the symptoms of this are starting to bubble up to the surface.  For example in recent days we have witnessed food riots in Algeria and Tunisia where at least 14 people are reported to have died in each country.

These types of events were easily predictable and have been predicted by people like me and many other whose views will never be seen in the mainstream media.  Fortunately, the alternative media is taking over (which is why the Obama administration is certain to increase its crackdown on the internet) and people are becoming very informed and linked all over the world.  The divide and conquer strategy that has worked so well for millennia will be much harder to pull off this time around.

Inflation:  There is no putting this cat back in the bag

Probably the most misleading thing Bernanke said in his Sixty Minutes interview a few weeks ago was that he could snuff out inflation in 15 seconds (this was the most misleading thing, not the biggest lie, which goes to his “I’m not printing money” statement). This comment (“snuffing out inflation“) is so misleading because it is true he can do what he says but he never will because at this point the effect of raising rates or tightening credit would immediately bankrupt every single part of the gigantic TBTF banker run ponzi scheme also known as the global economy.

The world’s Western governments are loaded with more debt than before the crisis and many of these, including the U.S. and Japan, could not handle even a moderate increase in interest rates let alone what Volcker had to do in order to end the inflation of the 1970’s. Think about it. Other nations own our debt and currency in the form of their FX reserves. China just came out with its latest FX figures and guess what?  You got it, a new record! $2.85 trillion to be exact, which is up 19% year-over-year.

I want to reiterate a point I made earlier in the year on this. With their FX reserves up 19% year-over-year they needed to boost gold reserves 19% just to keep their puny 1.6% of gold at a steady percentage. If they actually want to increase the share, which they do, they need to buy far more. This goes for every other nation as well since FX reserves have been exploding across the emerging world.

You see, this is the great game: The West and Japan and major debtors that know they can never pay it off and have no intentions of trying.

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