By Peter B. Meyer – 19th of May 2013
The contents of Chris Weber’s book, ‘Good as Gold’, and an investigative report written by Chris Martenson, justifies the title of this essay. In 1949 the greatest amount of gold ever-assembled in one place – Fort Knox – saw at least 80% of that gold go overseas. This was caused in pursuit of a policy that even the most Keynesian of Keynesians thought was wrong, as clarified the great free-market economists Hayek, von Mises, Schumpeter, c.s. Officially the US still has the most gold of any nation, estimated at 7.000 tons, but no one knows that for sure, as even the quality of what is left is doubtful too. Since 1933, there has been never an independent public audit,increasing the suspicion that something must be hidden. “There's growing concern that a lot of official gold has been leased out into the market and that sooner or later, as happened back in the late 1990s, one or more parties, perhaps bullion banks or a metals exchange, would run into difficulty trying to meet a physical gold delivery. If a lot of gold has been leased out, - it will have to be rebought, and difficulties may emerge if the gold cannot be rebought in sufficient quantities without creating mayhem within the financial system by causing a very large hike in the price of gold.”
Sprott Asset Management did a recent and thought-provoking study regarding gold leasing in March. After accounting for all known flows of gold into and out of the US over the past 22 years, the Sprott team arrived at a figure of nearly 4,500 tones of gold that cannot be accounted for.
Gold is not consumed and never misplaced, there has to be a balance between gold supply and demand. It cannot be printed out of thin air, and it is this inconvenient fact that really matters the most here. Depending on how much private demand is estimated, the shortfall could be double or even higher.
Official statistics show that the US has exported vastly more gold than it has imported, while that gold had to come from somewhere. This is why Germany seeking to repatriate their gold accepts a delivery time of seven years. What if that gold has already been leased out or plainly sold?
“To put it mildly, any whiff that the world's central bank gold is not where people think it is would really be an enormously unsettling admission to have to make.”
Suppose for the sake of argument that the US is missing 4,500 tones of gold that has been leased out, and it's time to either admit that it's been lost to the world or get it back somehow. That is, the bullion banks will have to pay back the gold they borrowed with cash, or come up with the gold.
Chris Martenson comes to a conclusion: “The main point I want to make here is that if 4,500 tones has been leased out by the Federal Reserve, it could not have been done without the Federal Reserve leasing out either gold belonging to the US Treasury (i.e., US citizens) or belonging to other countries for whom the Fed is holding gold "in custody."
How can I be sure? Because the Fed does not have any other gold listed anywhere else on its balance sheet. If it's holding some as an asset, it's hiding it, and I just don't think that's the case. The Fed is holding a lot of gold for other countries as a custodian, but that's a liability of the Fed, not an asset.
So the conclusion is simple enough: The Fed has leased out the gold of US citizens, other countries, or both. One other possibility is that the Treasury Department did it directly, but they, to my knowledge, have never been involved in gold leasing, nor have I heard even the first hint of rumor that they might have been involved. Any gold leased into the market belonging to the US Treasury was almost certainly conducted via the Federal Reserve.”
Recently, there was a big splashy show of claiming that the United States' gold had been audited. Not only was it all there, was told, but we learned it was more pure than previously thought!
But carefully analyzed by Chris: “… the audit confirmed that at least 5% of the nation's gold is safe and sound. But that's all we know. Because every audit request by former Congressman Ron Paul to check in on the gold held in deep storage has been utterly rebuffed. An independent third party has conducted no such audit in many decades. So we really don't know. But we are still left with Sprott's unexplained data showing that the US has exported 4,500 tones more than it has imported, and perfectly sane logic leads us to conclude it had to have come from the Fed, the Treasury, or both.”
“Now, suppose again that the 4,500 tones are missing and that either an audit or a collapse in the bullion-leasing game would reveal as much. If you were in charge of that potentially nightmarish scenario, what would you do? If it were my job, I would do everything possible to scare that gold back into the markets where I could purchase it, preferably at a cheap rate and on the sly, with the hopes that I could get that done before anybody was any the wiser.”
“The alternative – a breakdown in the gold delivery market – would create massive price spikes, panic, immediate demands by other central banks for their gold, and quite possibly a lot of financial instability at a very, very vulnerable time in financial history. I should remark that there's never really a good time for such an event, but now would be especially poor timing, given the state of things.
If indeed the US is short 4,500 tones (or 145 million ounces), then for every dollar that the price of gold is dropped, $145 million of potential losses are avoided on the repurchase of the leased gold.
This could be the story of the decade, maybe century, if the Sprott data is remotely accurate. If it is, then when all of this has to finally be undone, my prediction is that agreements will be broken, allies will be stiffed, and the Fed will not willingly part with whatever gold actually remains, no matter who thinks they own it (Germany, et al.) or how many times Bernanke says that the Fed holds it merely out of tradition. The level of secrecy surrounding gold, gold leasing, and the complete lack of a full audit of deep-storage gold all suggest there's something to hide here – not the opposite.”
It creates the impression that something is very wrong behind the scenes one should be worried. Finally some interesting could happen. The era, in which the gold price is manipulated or distorted by official actions and volatility to unbelievably low levels, is probably over.
Finally Chris concludes: “Along with this feeling of unease, one line of thinking I have is that gold and silver are getting closer to the day when you or I will not be able to purchase physical bullion at any price. Were a major bullion bank to openly renege on its lease commitments, or the LBMA or COMEX were to declare force majeure and fail to deliver physical, all domestic stocks of gold and silver bullion would evaporate for all practical purposes.”
When queried about what would happen if even 10% of the US population decided to access the physical bullion market, one large dealer told, “it would just break the system. It's a very narrow pipeline that delivers relatively few rounds, bars, and coins to a very small population of bullion holders. Any big flood and the 5-6 week wait times we now see will certainly get longer. Not many dealers and/or wholesalers will want to honor such long lead times when/if prices are volatile or skyrocketing higher.”
Warning: more certain than ever holding physical gold and silver is a must-do for everyone who wishes to preserve his or her purchasing power and to survive till the end of the crisis.
By Peter B. Meyer – 12th of May 2013
Effectively this is materialized by the Illuminati of the Council on Foreign Relations (CFR), that is in control of national governments and multinational corporations; they promote one world government through control of media, foundation grants, and education; and controls and guides the issues of the day; they control most options available; they have the financial powers, to promote the "New World Order", as they are doing for about a century.
The key to their success is that the international bankers control and manipulates the money system of a nation while letting it appear to be controlled by the government. This statement echoed one made in the eighteenth century by the patriarch of what would become the most powerful banking dynasty in the world. Mayer Amschel Bauer Rothschild famously said in 1791: “Allow me to issue and control a nation’s currency, and I care not who makes its laws.”
The operational arm of the CFR is the Trilateral Commission (TLC), founded in 1973 by David Rockefeller, and is the latest sign of the international conspiracy that is trying to create a one-world totalitarian state, or at least a New Economic Order. The TLC is the follow-up organization of the Dutch Bilderberg Group founded in 1954 in The Netherlands with the late Prince Bernhard as co-founder, and today under the chair of former Queen Beatrix.
The TLC entails three sides, North America (US and Canada), Japan, and the EU. It is established to create a vehicle for multinational consolidation of commercial and banking interests by seizing control of political governments.
Senator Barry Goldwater wrote:
“David Rockefeller and Zbigniew Brzezinski (in 1973 the two founders of the TLC) found Jimmy Carter to be their ideal candidate. They helped him win the nomination, and the presidency. To accomplish this purpose, they mobilized the money power of the Wall Street bankers, the intellectual influence of the academic community - which is subservient to the wealth of the great tax-free foundations - and the media controllers represented in the membership of the CFR, and the Trilateral.”
“Seven months before the Democratic nominating convention, the Gallup Poll found less than four percent of Democrats favoring Jimmy Carter for President. But, almost overnight - like Eisenhower before him - he became the candidate."
This is probably one of the very best illustrations of the great power of the Elite. They can make or break any president or candidate for president. They made Jimmy Carter in his efforts to become president, and broke Senator Barry Goldwater in his failed attempt.
”The TCL membership is made up of present, and past Presidents, Ambassadors, Secretaries of State, Wall Street investors, international bankers, foundation executives, Think Tank executives, lobbyist lawyers, NATO, and Pentagon military leaders, wealthy industrialist, media owners, and executives, university presidents, and key professors, select Senators, and Congressmen, and wealthy entrepreneurs.”
Key members of the Trilateral Commission groomed Obama for the presidency. According to Researcher: Sarah Maddox at Sonoma State University: “Barack Obama appointed eleven members of the Trilateral Commission to top-level and key positions in his administration within his first ten days in office. This represents a very narrow source of international leadership inside the Obama administration, with a core agenda that is not necessarily in support of working people in the United States.”
“According to official Trilateral Commission membership lists, there are only eighty-seven members from the United States (the other 337 members are from other countries). Thus, within two weeks of his inauguration, Obama’s appointments encompassed more than 12 percent of TLC’s entire US membership.”
Closer to home in the EU, one may have wondered how quickly an unknown quantity became over night the PM of Italy. Here is the answer: “In the game of Italian prime ministers: the Trilateral Commission’s European Chairman Mario Monti is out; and Trilateral Commission Member Enrico Letta is in. Long lives the Trilateral Commission!”
It seems that there is just nothing any country in the West can do to free itself from the shackles of the Global Power Masters and their Mega bankers. No matter what elections are held; no matter what mass demonstrations bring citizens on to the streets; no matter how many signs are shown on millions of TV screens accusing the Mega bankers of being the worst crooks, the truth is there for all to see: the Global Power Masters have taken over governments in country after country, enslaving all nations to their Megabanks.
The mainstream media broadcast it; the alternative media point out the sheer inhumanity of it all, even in the EU where double-digit unemployment is rampant, banks are fraudulently ‘bailed-in’ by stealing account holders’ money, and millions of workers’ houses are foreclosed on.
There just doesn’t seem to be anything anybody anywhere can do about it. It all basically boils down to the vast majority of working people in just about every country suffering the most perverse, unfair and blatant discrimination of all: when small but extremely powerful, unelected and illegitimate minorities discriminate against the vast majority of disorganized and as-yet-unaware citizens.
This is not a “conspiracy theory” or any such nonsense. This is something that’s right before your eyes. All you need to do is look in the right places, see who are running this “greatest show on Earth”, and then think with your own commonsense mind-setting, instead of letting the public media like CNN or Rupert Murdoch do the ‘thinking’ for you.
After three-time premier Silvio Berlusconi sank Italy to new depths of decadence where its workers have been sucked into an economic Eurocratic turmoil that finally led to his resignation in November 2011, the Mega bankers decided at the time to take over Italy outright and to put in charge their man of the TLC.
That was when they replaced Berlusconi with Mario Monti, the chair of Trilateral Commission in Europe, as Italy’s prime minister. Now, after Italy’s recent elections we saw its aging President Giorgio Napolitano return. A Rockefeller/Rothschild Boy, be put in power, because Enrico Letta too is a Trilateral Commission member. And to make sure that traditional Italian political mafias duly supplement Mega bankers’ theft, as Letta’s coalition government includes members of Berlusconi’s party. After all, Enrico Letta’s uncle Gianni Letta is Berlusconi’s right-hand man.
So all the efforts made by the leader of the anti-establishment 5-Star Movement Beppe Grillo with 25% of the votes the largest homogenous single party in Italy, called on his "millions" of Italian followers to protest against Napolitano's re-election, which he called correctly a "coup d'état" were completely ignored by the media.
PD leader Pier Luigi Bersani announced that he would quit after the new president was elected, leaving the largest force in parliament obviously rudderless and making prospects for broader political stability possible, as most likely was pre-arranged behind the scene in advance? Now we know how the world is manipulated and that elections as democracies are a farce too. Poor citizens of Europe get united in a better way than the EU!
Who are these TLC people? “The Trilateral Commission brings together Rockefeller, Morgan, Warburg, Rothschild, Lazard, Goldman Sachs and Soros banking interests under the aegis of global power elite geopolitical planners like Sir Henry Kissinger, Zbigniew Brzezinski, Dominique Moïsi, Richard Perle, Philip Zelikow and Paul Wolfowitz, amongst many others. Notably, both PMs, the outgoing Mario Monti and incoming Enrico Letta, serve the Trilateral Agenda shoulder-to-shoulder with the top-brass from such global megabanks as CitiCorp, HSBC, Barclays, Nomura, Banco Santander, BBVA Bank, UBS, NM Rothschild, Deutsche Bank, BNP, Commerzbank, Goldman Sachs, Lazard, Mediobanca, Morgan Stanley, Warburg Pincus, Bank of Nova Scotia, Bank of New York Mellon, and Bank of Tokyo-Mitsubishi and Overworld banking agencies like the International Monetary Fund (IMF), Federal Reserve Bank, Bank of England, European Central Bank, Dutch Central Bank, Bank of Greece, and Bank of Japan.”
For example, to illustrate that this is the most powerful high-ranking money club ever existed: “At 70, Monti is an elderly man; at 46, Letta is a promising young politician.” In Italian politics it seems that the more things change, the more they stay the same. The key question that should once again be on every Italian’s mind is: will Enrico Letta work to improve the plight of the Italian people or to promote bankers’ interests? Former Argentine President Juan Perón once said “that all nations’ presidents and premiers have a foremost decision to make: they either govern to promote and protect the interests of their people over and above those of the global mega bankers, or they merely work for the global mega bankers and against their own people.”
Finally, some interesting notes for the gold bugs:
"The short sellers' dream has been shattered by buyers of physical gold worldwide," the South China Morning Post reports, "such as Chinese mothers, who seized the opportunity to buy cheap gold."
The Chinese gold bonanza narrative is gathering pace... this time with some interesting figures to ponder.
"On Thursday," MarketWatch writes, "the Shanghai Daily, reported on a 'Voice of China' radio program that claimed Chinese housewives are propping up gold prices. The program said those women reportedly spent 100 billion yuan ($16 billion) over the past two weeks, buying up 300 tons of gold and helping keep prices steady at around $1,468 an ounce."
Also, as Mineweb points out, the 300 tons purchased "represents more than 10% of annual global mined gold production purchased in a two-week period alone. That figure is staggering."
"Putting it all into perspective nicely," MarketWatch goes on, "blogger Max Keiser notes that while Chinese housewives were out scooping up gold, Americans sold $16.6 billion worth in the first four months of the year" by dumping the GLD ETF. That is, every ounce of paper gold dumped by an American has effectively ended up in the hands of a Chinese housewife.
"We don't care about the wild swings in global gold prices," Gu Jiahui of Shanghai sums up the Chinese sentiment to the South China Morning Post. "If the banks keep short selling gold, we will keep buying more. I have more faith in gold than the yuan."
Gold's performance became more visible, the metal was securitized via ETFs and sold to the masses that wanted in on the rally. Greed took hold. Every fund on Wall Street needed exposure to gold. “We Buy Gold” advertisements interrupted television programs on all of the major networks. Does this not register as a mania to you?
The herd isn't waking up to anything. It is simply chasing performance. That's what it has always done. Now that gold is underperforming, the herd is losing interest...
By Peter B. Meyer – 5th of May 2013
Austerity doesn’t work. Austerity in the EU has reached the limit, focusing on growth is becoming the priority. EU nations like Ireland, Greece, Portugal and Spain tried it. They cut spending. They fired people, and increased taxes that have shown, not to increase but lower revenues. But they got nothing from it in return except extending the recession to over six years with no end in sight, resulting in more unemployment and larger deficits. The budgets are still far out of balance, with deficits way above the 3% limited that is demanded by the European Union, and a necessity to keep the EU bureaucracy alive. The required debt reductions never will materialize, and debt extensions will be applied over and again. Unemployment goes up, and GDP goes down. Default and debt restructuring, or the return to a currency pegged to gold, will cure the crisis.
Now you understand that the BIS in Basel Switzerland pulls the strings of the world’s monetary system, you also understand that they have the ability to create a financial boom or bust. “Reversing the logic that a sound banking system should lead to full employment and developmental growth, BIS regulations demand high unemployment and developmental degradation in national economies as the fair price for a sound global private banking system.”
Recall, how this is implemented: “BIS regulations serve only the single purpose of strengthening the international private banking system, even at the peril of national economies… The IMF and the international banks regulated by the BIS act as a team: the international banks lend recklessly to borrowers in emerging economies to create a foreign currency debt crisis, the IMF arrives as a carrier of monetary virus in the name of sound monetary policy, then the international banks come as vulture investors in the name of financial rescue to acquire national banks deemed capital inadequate and insolvent by the BIS.”
The prime objective is to fill the pockets of the elite; “The BIS is where all of the world’s central banks meet to analyze the global economy and determine what course of action they will take next to put more money in their pockets, since they control the amount of money in circulation and how much interest they are going to charge governments and banks for borrowing from them…”
It must be clear that an end to this crisis will be an illusion, as the banking system isn’t interested it. As décor, the European central bankers now commence to agree that they didn’t fully realize that their austerity policies instigated by Mrs. Merkel, could have nasty side effects, and need to slow the pace of budget cutting and focus on growth and creating jobs, but that’s a smoke screen. The one purpose only, is extending the crisis, for filling banker’s pockets.
One of the keenest promoters of austerity in Europe, Merkel’s pal Wolfgang Schaeuble, the German Finance Minister, said; “fiscal and financial sector adjustments remain crucial to regain lost credibility and strengthen confidence.’’
And worse, EU’s second largest economy, France missed its deficit goal in 2012 that stuck at 4.8% of economic output, as EU data showed. France is now appealing to the European Commission, which is to decide on whether to give France more time to bring their deficits down towards the EU limit of 3 percent.
Spain also failed to meet the target deficit as the shortfall totaled 10.6% of GDP, above the European Commission's forecast of 10.2%. Spanish banks hold at least €250 billion Euros worth of unsold and partly half finished property and underperforming property loans on their books. Mortgages are easy to calculate but who appraises the underlying property value? Banks are walking away, leaving thousands of homes vacant because they don't want to be responsible for maintaining them, they should take property ownership by foreclosing and thereafter paying the back taxes, homeowner's dues, and other expenses, now are saying no thanks. The math just doesn't work. Here very big problems can arise, as ‘assets’ are usually the last thing to be written down by banks. What is Spanish property worth today? Well, if bankers offer you, what they claim is worth 100 billion Euros; I would first bargain to get a lower price.
Spain announced last week that unemployment hit 27.2% for the first quarter. That's the highest since 1976 and represents about 6,2 million Spaniards without a job, while youth unemployment is over 57%.
Adding to Europe's woes is the first downturn in Germany's private-sector output since November. Financial research firm Markit released a report this week saying the country's commercial output is at a six-month lows. Both manufacturing and service sectors contracted during April. Manufacturing dropped the most and the fastest.
The EU itself also had moments of idiocy. To enter the single currency project, governments effectively audited themselves. So when Greece presented its data - presumably on the back of a gilded cigarette packet to mark such a momentous statistical moment - the EU officials could only ask “are these figures correct?” When the Greek official looked mistrustfully, and said “of course!” the EU let them join the Euro.
Another EU member, Slovenia was badly hit too by the global financial crisis and fell into recession last year amid lower export demand and a fall in domestic spending caused by budget cuts. Unemployment is at a 14-year high, and is expected to rise further. Slovenia was the first republic to dismantle the great country of Yugoslavia. Now, they could be the first to dismantle the EU.
Contrary to this doom and gloom is Iceland, which took a devastating blow in the 2008 economic crisis by defaulting, and is now
Mr. Barroso, chairman of the EU commission, prefers now to give austerity nations more time to rein in their budget deficits. For those, even the EU self, struggling to follow economic reality, is a bit like telling a dying patient the painful tourniquet will be slightly less tightened to let them bleed to death more slowly. It’s longevity but hardly quality of life.
Mr. Barroso also suggests more spending but what can a deeply indebted government spend? Without Euros, EU nations have no currency of their own, while bond investors have buyer fatigue. Without defaulting, leaving the Euro simply raises the debt burden in their new devalued currency...
Greedy bankers, particularly in France and Germany, grew rich buying PIIGS bonds myopically rated as collateral equal in quality to that of fiscally prudent issuers. Now Mrs. Merkel is squeezed in a corner. Damned if she shovels cash through the bailout opening, she will be damned by her collapsing financial sector if the PIIGS default on the truly junk bonds, which for a decade western banks swallowed like vodka with caviar.
European Central Bank officials decided for a rate cut
of 0,25% to improve the economy, and said the ECB is ready to act if more is required. Where are all these troubles originated? “Austrian Economic Scholars generally argue that inherently damaging and ineffective central bank policies, including unsustainable expansion of bank credit through fractional reserve banking
, are the predominant cause of most business cycles, as they tend to set artificial interest rates too low for too long
, resulting in excessive credit creation, speculative "bubbles
", and artificially low savings. Low interest rates are a kind of push around. They take money from savers and redistribute it to debtors. Borrowers, such as the big banks, get money at a preferentially, artificially low rate. While savers pay the price.”
Most likely, the current economic crisis in the EU will lead to a split. “There is absolutely no way that the Eurozone could last forever. They may keep it going for a few more years by invoking even more extreme measures. But ultimately the Eurozone is going to break up. It may be the economics, civil disobedience or violence on a large scale that eventually get some of the Mediterranean countries out. And after that the big question will be what is the EU for? I think the alternative model is Europe based on cooperation, trade, and nation state democracy. I think that vision is one that can only grow in support as years go by.” Said Nigel Faraga in a recent interview.
Actually living beyond your means is no longer politically or socially acceptable. You have to live within your means. The only question left, is ‘who will pay for all this debt’? The answers to that question are not easy. When debt levels were low, the answer was probably ‘future generations of taxpayers.’ At today’s debt levels it is unlikely that the debt will ever reach future generations. And with so much of the debt taken up by the central bank the burden shifts, from lenders to borrowers, to taxpayers and consumers. Eventually the rescuers will be default, as debt restructuring is politically out of the question.
“Governments won’t be able to fulfill the promises made to their citizens. The grand bargain of the modern, social welfare state will begin to look more and more like a bad deal. Young, unemployed people will become increasingly fed up. They will look for radical solutions, while more radical leaders provide answers that most likely are wrong too. To be responded to by Governments with inherently reactionary answers in the best of circumstances, to finally react with repression, not too peaceably executed.
Governments will cultivate their zombie clients, like the Ancient Regime did, by protecting them. The defense industry, for example, will probably successfully direct citizens’ rage against imaginary foreign enemies, and thereby increase its own power and wealth. Whether the Boston tragedy, like 9/11 was an inside job or not, it is clearly and sadly being exploited to revamp the “War on terror”, justifying the police state apparatus in the US and other Western countries, and legitimize attacks on our rights and liberties, to counter inevitably turmoil, revolution and chaos. The recent wars were based on lies and their costs are staggering, ironically all in the name of “justice” and to combat “terrorism” taking innocent lives of people across the world with the objective to cultivate the defense industry and its zombie clients.
Real prosperity can't come until all the "poison" is out of the economic system. The result of underestimating these cycles is catastrophic, and a force much more powerful than any government can control. So the real economy will weaken. Revolution will begin. Finally, the middle class will be broke the poor were already broke and the country will be ruined by the Elite. Eventually, the government you have counted on to "save" you can't even save itself. This is not easy to accept. Despite being in the back of your mind, most people will simply choose to ignore it, hoping it goes away on its own. Hopefully you are meanwhile smarter than that.
Whether gold looks expensive or not, it is prudent - or even necessary - to own some as insurance, which is the truth. You have to hold gold and silver as the entire global system of paper money and central banking is in the process of self-destructing. And maybe in a relatively short period of time – perhaps five or 10 years – the existing monetary system will collapse. During this period of turmoil, expect that gold and silver will maintain their purchasing power, while all forms of paper money will be rendered worthless.
Gold and silver are a form of savings - a universally recognized form of money that is no one else's liability. In that way, it is far superior to any other form of money currently available today. The price of gold for the time being will be volatile, it may well fall this year again – even significantly. But the value of gold won't change at all.
Eventually, the current monetary system will make speculators out of everyone, as interest rates stay zero. The current monetary system allows the central banks to "bail out" the banks that make terrible lending and borrowing decisions. And as we know meanwhile you can't trust governments to maintain a sound currency, you're less likely to park your savings in that currency. You're more likely to make risky bets on stocks, real estate, and bonds. Less sophisticated people are more likely to gamble with their money in lotteries and casinos. And when you observe the major indexes, you’ll see already the proof in reality.
Soon, Mom and Pop are about to buy stocks big time. They can't live on zero-percent interest. Out of necessity, they will migrate into stocks, away from ultra-low-interest investments, like cash and bonds. And that will kick the market into a major boom phase. Next come the banks and create a bust by selling their assets on a grand scale, to make sure that people won’t have money left to survive on their own. Period.
Finally an interesting note for the Gold Bugs:
"Buyers Scour Asia for Physical Gold," proclaimed a headline in the Financial Times — in a story buried on page 18, because it relates favorably to gold and gold bugs. Though it was exiled to newspaper Siberia (Section II, to be precise), the Financial Times article vividly detailed a scramble across Asian markets for the yellow metal.
Indeed, per the Times' report, “Asia is witnessing one of the strongest waves of physical gold buying in thirty years.” The Times article used terms like “feverish buying,” as well as “gold rush,” just a week after a massive selloff of paper gold…
Wasn't the apparent selloff supposed to mark a turning point for gold? Isn't the tide receding for what every good student of Economics 101 has learnt is merely a “barbarous relic,” per John Maynard Keynes? Yet strong Asian gold demand is contrary to Western convention. When the price of something falls, goes the rule, it's because people are selling product, not buying it, right? Then again, what exactly tumbled in price last week? There's a new truth apparent in the marketplace. There's paper gold, reflecting so-called “contracts” that change hands on a trading venue operated by CME Group, called COMEX. And then there's the real McCoy of physical metal, which trades hands on gold exchanges across the world. These are two quite different things.
Leaders of two of the world’s largest criminal organizations the World Bank and the IMF gathered in Washington, D.C. last week for their Spring Meeting. The, on invitation, Financial Mob party was attended by all the usual suspects, central bankers, trade secretaries, finance ministers, policy wonks and assorted other rogues, braggers, and degenerates.
After the meeting the numerous pledges sounded nice enough: The Fed, the BoE, the ECB and the BoJ are together providing a massive “tsunami” of freshly inked currencies to their respective economies, hoping to prop up optimistic asset prices. However this rate of expansion is “unprecedented in world history” says Bill Bonner.
The Central Planners are at it again. Greasing the gears, feeding the engines, and racing towards the next crisis. The US plans to force overseas banks to hold billions of dollars more capital, have drawn a sharp reply from the EU’s top financial regulator, who warns it could “spark a protectionist reaction” and damage the global economy.
Michel Barnier, the EU commissioner responsible for financial services, is demanding that Ben Bernanke, the Fed chairman, to rethink his clampdown requiring banks such as Deutsche Bank and Barclays to park extra capital in their US operations. In a strongly worded letter, he argues that the Fed plans are a “radical departure” from past US policy and stands in “substantial contradiction” to efforts to harmonize global rules.
U.S. Treasury Secretary Jack Lew called for “universal women’s empowerment.” World Bank President Jim Yong Kim called for “universal education.” And the IMF’s Managing Director, Christine Lagarde, had ideas of her own: “What we need is a full-speed global economy,” she told the audience, “growth that is solid, sustainable, balanced, but also include and is very much rooted in green developments.” Why stop there? Why not promise free meals for the elderly, and winning lottery tickets for all unprivileged families, or high-speed Internet connections for the rest of Africa? It’s so easy to make growth pledges, to promise everything for nothing. The hard part however, comes in actually paying for it all. As everyone knows, free meals; free lottery tickets, and free high-speed Internet connections don’t come cheap!
Anyhow this nonsense talk comes from the Financial Mob who on their turn are ruled from behind the scene by the elite that apply their own secret agenda, to play the crisis to their liking, and that’s one Central Bank with a global currency, full stop. Meanwhile the world is heading full-speed in that direction:
“The world is a step closer to a global currency, backed by a global central bank, running monetary policy for all humanity.” Which naturally raises the question, who or what will serve as this global central bank, cloaked with the power to issue the global currency and police monetary policy for all of humanity? When the world’s central bankers earlier on met in Washington, they discussed what body might be in a position to serve in that awesome and fearful role. A former governor of the Bank of England stated:
“[T]he answer might already be staring us in the face, in the form of the Bank for International Settlements (BIS… The IMF tends to express its warnings about economic problems in very diplomatic language, but the BIS is more independent and much better placed to deal with this if it is given the power to do so.”
And, if the vision of a global currency outside government control does not set off conspiracy theorists, putting the BIS in charge of it, surely will. The BIS has been scandal-ridden ever since it was branded with pro-Nazi leanings in the 1930s. Founded in Basel, Switzerland, in 1930, the BIS have been called “the most exclusive, secretive, and powerful supranational club in the world.”
For better understanding: In 1944, the American government backed a resolution at the Bretton-Woods Conference calling for the liquidation of the BIS, following Czech accusations that it was laundering gold stolen by the Nazis from occupied Europe; but the central bankers succeeded in quietly snuffing out the American resolution.
“[T]he powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world’s central banks which were themselves private corporations.”
The key to their success was that the international bankers would control and manipulate the money system of a nation while letting it appear to be controlled by the government. The statement echoed one made in the eighteenth century by the patriarch of what would become the most powerful banking dynasty in the world. Mayer Amschel Bauer Rothschild famously said in 1791: “Allow me to issue and control a nation’s currency, and I care not who makes its laws.”
Mayer’s five sons were sent to the major capitals of Europe – London, Paris, Vienna, Berlin and Naples – with the mission of establishing a banking system that would be outside government control.
The economic and political systems of nations would be controlled not by citizens but by bankers, for the benefit of bankers. - And so is it still today. - Eventually, a privately owned “central bank” was established in nearly every country; and this central banking system has now gained control over the economies of the world. Central banks have the authority to print money in their respective countries, and it is from these banks that governments must borrow money to pay their debts and fund their operations. The result is a global economy in which not only industry but government itself runs on “credit” (or debt) created by a banking monopoly headed by a network of private central banks; and at the top of this network is the BIS, the “central bank of central banks” in Basel.
“The prime value, which also seems to demarcate the inner club from the rest of the BIS members, is the firm belief that central banks should act independently of their home governments… A second and closely related belief of the inner club is that politicians should not be trusted to decide the fate of the international monetary system.”
“The BIS is where all of the world’s central banks meet to analyze the global economy and determine what course of action they will take next to put more money in their pockets, since they control the amount of money in circulation and how much interest they are going to charge governments and banks for borrowing from them…
“When you understand that the BIS pulls the strings of the world’s monetary system, you then understand that they have the ability to create a financial boom or bust in a country. If that country is not doing what the money lenders want, then all they have to do is sell its currency.”
“[N]ational banking systems are suddenly thrown into the rigid arms of the Basel Capital Accord sponsored by the Bank of International Settlement (BIS), or to face the penalty of usurious risk premium in securing international interbank loans… National policies suddenly are subjected to profit incentives of private financial institutions, all members of a hierarchical system controlled and directed from the money center banks in New York. The result is to force national banking systems to privatize…
“BIS regulations serve only the single purpose of strengthening the international private banking system, even at the peril of national economies… The IMF and the international banks regulated by the BIS act as a team: the international banks lend recklessly to borrowers in emerging economies to create a foreign currency debt crisis, the IMF arrives as a carrier of monetary virus in the name of sound monetary policy, then the international banks come as vulture investors in the name of financial rescue to acquire national banks deemed capital inadequate and insolvent by the BIS.”
“Reversing the logic that a sound banking system should lead to full employment and developmental growth, BIS regulations demand high unemployment and developmental degradation in national economies as the fair price for a sound global private banking system.”
And that is where the conspiracy theorists should come in. Why did the BIS not retract or at least modify Basel II after seeing the devastation it had caused? Why did it sit idly by as the global economy came crashing down? Was the goal to create so much economic havoc that the world would rush for relief into the waiting arms of the BIS with its privately created global currency? The plot stinks!
After reading this essay you must be shocked, and question what can I do to protect myself? There is one way left to go, and that is, change as much of your paper currency for the precious metals gold and silver, in coins, bars and bullion, which the financial mobs cannot alter to their benefit.
Panicked sellers, leveraged investors, and other folks who didn’t own gold with conviction supported the organized recent retreat in gold. But for people who understand that gold is essentially the only form of money that is nobody else's liability and protects against rampant money printing by governments, don’t sell anything, untill the crisis is over. The price decline was a healthy correction, and perhaps a gift if you were looking to acquire more.
According to the Financial Times, Asia has seen, thanks to this price decline, one of the strongest trends of physical gold purchases in 30 years. Hong Kong banks and jewelers don't have enough gold to meet demand. The gold exchange in Shanghai saw volumes hit a record on last Monday.
Gold traders in Asia said premiums have more than doubled in recent days, signaling demand far outpacing supply. While the government and market can move the price of gold, the value doesn't change.
Knowing what is going on behind the scene, at least you are warned. All efforts are made by governments to manipulate the public mindset with propaganda, distracting attention from what is really happening and keeping people obedient to let them admire their leaders who provide peace, and save the people from -terrorist- destruction. Of course all are lies just to keep you happy and quiet with empty promises. The government isn’t people’s friend when the hour of truth arrives. Keep your senses and set your own course for action.
By Peter B. Meyer – 20th of April 2013
Was Cyprus the beginning of the collapse? No, it is just part of the process. The collapse began in 2007 with the demise of the subprime mortgage market. That led to the collapse of the prime mortgage market in 2008, which led to the collapse of Lehman Brothers and Bear Stearns. Cyprus, it turns out, needs to find another $6 billion to meet the terms of its bailout deal. Under the original deal, the EU & IMF were going to lend Cyprus $10 billion as long as the government could shore up $7 billion. That's why they're taking a hefty cut from uninsured bank deposits. But, that's not going to be enough: A "debt sustainability analysis" by the European Commission says the actual figure Cyprus has to cough up is $13 billion.
So! $13 billion from the government, plus $10 billion from the EU and the IMF -Cyprus' bailout is now more than the entire country's GDP! How all this money has to be paid back is still a greater mystery. And where the extra $6 billion is supposed to come from, no one is saying. The Cypriot central bank has a gold stash of 13.9 metric tons and the European Commission is "suggesting" they unload about 10 tons of it. Which would raise all of $523 million - a laughing matter if it weren’t so serious.
Christine Lagarde M.D. of the IMF asserted the Cyprus crisis was driven by the bloated banking sector, which exceeds the country’s GDP by a factor of 7- and for this reason, it was ‘unsustainable’. But that’s a peanut compared to Luxembourg’s banking sector as those exceeds its GDP by a factor of 23. Cyprus and Luxembourg aren’t the only countries in the EU with a grossly disproportionate banking sector. Austria, and Malta have big banking sectors too, relative to their GDP. Luxembourg is the largest international private banking sector in Europe and is home to over 150 banks, including the European Investment Bank- a financial institution of the EU. Along with Austria, it has often been referred to as one of the Eurozone’s biggest champions of banking secrecy. But lately, Luxembourg a founder member of the EU and the euro will now with Austria ‘open’ its banking information on its assets to other EU member states, which total more than $1 trillion.
"Recent quotes from numerous politicians and experts seem to show a complete misunderstanding of what a bank investor is. "They seem to view stockholders, bondholders and depositors -particularly large depositors - all as investors in the bank.” A depositor is not an investor in a bank. Rather, the depositor is a consumer of the bank's financial services and expects to be protected by the banking regulators from fraud. When you deposit money in a bank, you do not view it as an investment in the bank. You are depositing it to consume the bank's services, to keep your money safe.
If it weren't for the government printing press, the world would have seen a global run on the dollar and a collapse of the global banking system. We're still suffering the consequences of these things today. It is not known where we are in terms of the timeline - maybe halfway? But when this process ends, we'll see a total flight from the U.S. dollar, as the dollar reserve world’s currency underlies the entire banking system, whether in Cyprus, the EU or the U.S., all reserves are in dollars. Eventually, people will flee the dollar system as a whole.
Are you safe holding large deposits of cash in your account? The Cypriot government is going to take 60% of deposits in accounts of more than €100,000. And that might even not be enough! In contrast; it is estimated the dollar has lost 25%-40% of its purchasing power over the last four years. So every person holding dollars, or likewise euros, during that time was subject to a 25%-40% haircut, in other words, a loss almost as bad as a depositor in Cyprus.
To make things worse, it's not as though the actions of our central banks are a secret. The Fed and the ECB have flat out said, "We're increasing the monetary base here by 30% or as much as necessary." Well, if you increase the monetary base by 30%, sooner or later, you increase the amount of money in circulation by a much larger measure. That trend is going to continue, and it's going to get worse. If you hold more dollars or euros than you absolutely need to pay your bills, you're a fool. What is the best suggestion? It depends on your cash needs. But "don't hold a lot of dollars."
EU and US are bankrupt and are insolvent except for the printing press. They increase of the money supply by around $1 trillion each a year – all this paper money is massively inflationary. They steal the purchasing power you've accumulated in your savings. By holding on to large amounts of dollars or euros or any other paper currency, you have solicited to be robbed by your government. Talking about how much money is safe to hold in your checking account, the answer is just enough to cover your obligations.
You shouldn't have cash in the bank, period; it is useless to look for a "safe" bank in your own country. Then you better look for a safe currency, like gold and silver, or real estate as productive assets, apartments or farms.
If you need a bank for your savings one way or another, take one outside your country of residence if you live in the US or EU. For example, there are still Swiss banks that will open an account for a foreigner, if you can convince them to do it. But you definitely do not want a Swiss or Liechtenstein bank that has any presence in the US or EU. Alternatively think about Malaysia, or Thailand. These are completely non-tax-haven types of places – and that might make them suitable.
“The Keynesians are right, governments of the world have cured what ails the global economy with their virtual printing presses, and the next boom is a done deal.” That doesn't mean gold can't or won't go lower - just that if it does, the fundamentals say it's a buying opportunity. Experience has shown that when gold sells off for the wrong reasons, unless you can persuade yourself that governments around the world can print money forever with no adverse consequences, gold and silver usually bounce back, so nothing has changed, except for our opportunities. Better be prepared for the opportunity that now is shaping up, and don't hesitate when you see your desired price target arrive, to change your worthless paper money for the real kind.
Remember the long-term trend is still up. It’s that whole “ever growing money supply” thing. And you don’t buy gold to get rich, you buy it to stop from being poor, to preserve our wealth. It’s the great equalizer, against the government’s money printing machine. Over the long-term for hundreds and thousands of years, holding gold has paid off. Last week’s selloff has done little to change that.
Remember what was written in my previous essay about short selling: “The volume is without precedent and has all the characteristics of a panic liquidation driven by naked short selling. There is no way to know where or when the liquidation will end, but it will inevitably do so, probably sooner, rather than later."
As written in a comment earlier: “You don't need a crystal ball to anticipate how the global fiscal and monetary mess will shake out; you only need to understand the system as it is today and the political ‘wishdom’ and ‘incentives’ that drives the system. All signs point to continued government deficits, stimulus, no entitlement program reforms, chronic zero interest rate policies and austerities. Only when these facts change, it will be time to sell your gold and silver. These facts have not changed.
By Peter b. Meyer – 14th of April 2013
Imagine if governments had to do business in a gold-backed currency instead. They would have to borrow less, spend carefully, and pay back their debts on time. Now in its place of controlling themselves, they try to control your access to gold instead. Unlike the dollar and euro, etc., gold is no slave to someone else's balance sheet. Nobody can downgrade 5,000 years of history. Gold has never gone to zero. Stocks and paper money can't make that claim.
Simply put, the “value” of money is declining. “The market is flush with cash and it doesn’t need your savings”, says the Fed. If you're not careful, you'll have your future stolen from right under your nose. But by owning gold and silver to protect your self, and those eventually with certainty will rise against any paper currency. Why? Governments can't "make" gold. Contrary to paper wealth, they can create that overnight. But they also can destroy it overnight. That gives them a lot of freedom they shouldn't have.
Well, for sure the world's money system is being deliberately destroyed. And so, the monetary signals that guide the markets – which in a free market are supposed to represent the supply and demand decisions of billions of people – all signals became totally wrong. Despite frequent denials these distortions in the markets are the result of intentional manipulations of currency values around the world by central bankers, crafted in response to the demand for competing export opportunities, easy money and cheaper credit for governments. The world is indoctrinated to believe that paper money - the symbol of wealth can deliver all the benefits of the free market. Which of course is nonsense.
When gold prices hit $1,917.50 an ounce on August 23, 2011, a gain of more than $500 an ounce in less than 8 months, capping a rise over a decade from $272 at the end of December 2000, the Federal Reserve panicked. With the US dollar, the world’s reserve currency, losing value so rapidly compared to the world Gold standard for money, the FED’s policy of printing $1 trillion annually in order to support the impaired balance sheets of banks and to finance the federal deficit was placed in danger. Who could believe the dollar’s exchange rate in relation to other currencies when the dollar was collapsing in value in relation to gold and silver?
As gold topped $1,900, Washington put out the story that gold was a bubble. As the Elite finances the media they fell in line with this propaganda. “Gold looking a bit bubbly” declared CNN Money on August 23, 2011. “Their attack on bullion is an act of desperation that, when widely recognized, will doom its policy. So, the Fed used its dependent “banks too big to fail” to short the precious metals markets. By selling naked shorts in the paper bullion market against the rising demand for physical possession, the Fed was able to drive the price of gold down to $1,750 and keep it more or less capped there until recently, when a concerted renewed effort on April 2-3, 2013, drove gold down to $1,557 and silver, which had approached $50 per ounce in 2011, down to $27/ounce. Allowing the FED to extend the time that it can print money to keep the house of cards standing.”
“The Fed realized that its massive purchase of bonds in order to keep their prices high, and thus interest rates low, was threatened by the dollar’s rapid loss of value in terms of gold and silver. The Federal Reserve was concerned that large holders of US dollars, such as the central banks of China and Japan and the OPEC sovereign investment funds, might join the flight of individual investors away from the US dollar, thus resulting in the fall of the dollar’s foreign exchange value and thus collapse in US bond and stock prices.”
Nevertheless educated people could understand that the US government could not afford the long and numerous wars and realize what was in the cards, those used the bargain opportunity to exiting the dollar for gold and silver. So, for the Russians and Chinese, whose central banks have more dollars than they any longer want, and for the 1.3 billion Indians in India, the low dollar price for gold that the Federal Reserve has engineered was the best opportunity they ever could have imagined. They realized that the Federal Reserve has given them a splendid discount of $350-$400 an ounce for gold much less than it was two years before.
The manipulation of the bullion market is illegal, but as government is doing it the law will not be enforced. However the orchestration against bullion cannot ultimately succeed. It is designed to gain time for the Federal Reserve to be able to continue financing the federal budget deficit by printing money and also to keep interest rates low and debt prices (bonds) high in order to support the banks’ balance sheets. Debasing the currency has been the preferred method of kings and princes throughout the centuries. It is politically easier. The United States and the rest will default on its current obligations via this method.
“When the Fed can no longer print due to dollar decline which printing would make worse, US bank deposits and pensions could be grabbed in order to finance the federal budget deficit for a couple of more years. They will do anything to stave off the final catastrophe.” It is obvious clear that the concerted attack on gold and silver is the warnings sign on the wall that trouble is approaching. The values of the dollar and financial assets denominated in dollars are in doubt.
“Evidence of how badly the situation has become can clearly be seen in how the price of the petro-dollar, the post-Bretton Woods, post-Nixon’s closing of the ‘gold window’ in 1971 price of oil has not been allowed to trade - NOT according to free market principles - but rather the dead-market interference of Wall St. and Washington insiders who profit mightily from this rent-seeking corruption.”
“Iraq, Iran and Libya all wanted to trade oil outside of the Saudi-American petro-dollar fixed pricing scheme and all paid dearly for it.” It's logical to assume that when you create more of something, you dilute the value of what's already in existence. That's exactly what has happened to the US dollar since the 2008 financial crisis hit.
But one cannot spend more than is earned; commentators, and economists tell you, austerity or stimulus is the proper path to "recovery." The argument is fraudulent. Neither will work. If you owe more than you can pay, you can neither save nor spend your way out. When debt is bad, it is bad. Un-payable. Terrible. Useless trying it.
However Governments will do whatever they need to do, to stay in business. But in the long run, all governments get themselves into Cyprus-like messes. And all governments have one overriding concern: to remain in power.
Governments are nothing more than instruments used by insiders to take advantage of the outsiders the people. Those who control the government (insiders) use its police power for their own purposes. That does not mean that they can get away with anything they want. Ultimately, they depend on the sheep-like complacence and credulity of the masses to maintain their authority.
But the insiders risk losing everything if they run out of money. Without money, they cannot buy votes. They cannot continue to divert resources to themselves. And they cannot afford their phony programs and humbug redistribution systems, either.
In short, without access to money, everything falls apart. So a government, such as Cyprus, will do anything – including stabbing its major industries in the back – to keep the cash flowing. Cyprus is a tax haven and a money center. Clipping bank accounts is ruinous for its business. But if that's what it takes to stay in business, that's what the Cypriot insiders will do. But this brewing Cyprus issue is far bigger than anyone imagines. Wait till: “the orchestrated reopening of Cypriot banks creates two euros despite claims to the contrary.”
The “deposit tax” the EU and IMF imposed on Cyprus, was a condition of a bailout loan. Politicians in northern Europe, including German Chancellor Merkel, need to convince the voting public that bailouts won’t cost them a cent.
“It will be interesting to see how, exactly, the Cypriot government plans on ever reopening its banks. A devastating bank run is exactly what to expect immediately after banks reopen. Permanent psychological damage was done the moment the deposit tax (theft) was proposed. Cyprus’ role as an international banking hub is finished. So to mitigate a run of depositors out of Cyprus, government authorities will feel they have to impose capital controls."
Depositors in Spain and other PIIGS countries will be watching closely. “If EU and IMF officials think they can control a panicked crowd of depositors -- now that they’ve opened Pandora’s box -- they are mistaken.”
Spaniards, Greeks, Portuguese and Italians should fear capital controls as much as a deposit tax. Some depositors will run for the border -- just in case capital controls arrive in their own country. “Spain’s banks have not yet been properly restructured, and until they are, the problems won’t go away.” The government has a massive majority but, like France, barely seem to grasp they are supposed to lead. “As befits the land of Machiavelli, Italy has bypassed the leadership problem completely by failing to form a government at all.”
Greece festers in depression, in Ireland, and Portugal they want debt relief, and just obtained debt extension for a 7-year period. If they would have gone broke the EU would have broken up. While Portugal’s post court intervention implicates, the government must immediately find an additional 1.3 billion Euros in cuts or face the consequences. After having already cut some 13 billion from the budget. Thus therefore another debt relief is in the make!
When it comes to Germany; “there is a mild-mannered Professor Bernd Lucke in Hamburg who is no populist but apparently very, very popular. An economics scholar who has created the “Alternative for Deutschland” Party which is not merely anti-Euro but coolly coherent in its well-considered plans to engineer Euro-euthanasia - end the bailout death spiral and reduce simmering north-south tensions.”
With some polls indicating their support might be about 25%, the simple metric is that they must hold above 5% by the autumn elections to enter the German Parliament. This milestone alone ought to sufficiently splinter the vote to unseat Mrs. Merkel...The Euro crisis has reached a new stage. Things are now multilateral.
As a “progress report suggests all may not be quite on the road to recovery that has been previously reported by the EU.”
In short: “The Eurozone probably won’t collapse due to one massive calamitous event. Rather, the single currency, having been built on sand, is increasingly likely to be subject to that slow slicing terror of death by a thousand cuts...”
Cyprus said it would finance its bailout by selling €400 million in gold reserves, Reuters reported.
And store your physical gold and silver offshore – outside the EU - in a place with a strong tradition for protecting international investors’ property that could risk upsetting other countries for relatively little reward. This makes it a harder target for confiscation by your government.
By Peter B. Meyer 7th of April 2013
Be convinced, we live in a dangerous time, actions by governments, finance ministers, and officials across the globe have left us on the brink of a very serious collapse that will end with currency turmoil, food shortages, panic, social unrest and a total shakedown of average citizens. Following, the EU has taken the unprecedented step of seizing private funds of depositors in Cyprus. The next time around your account deposit is in danger too. Please take note and forward this message as a serious warning to your friends. Jim Rogers suggests that time is running short and that those with the means to do so should get ready for the worst. He gives you this warning:
It's pretty scary what's going on in Europe…when they start taking money out of people’s bank accounts. I, for one, am making sure I don't have too much money in any single bank account anywhere in the world. Now there is a precedent… The IMF has said loot the bank accounts. The EU has said loot the bank accounts. So you can be sure that other countries, when the problems come, are going to say… let's do it too. They're going to go crazy the next time around...
“When politicians are saying ‘You don’t have to worry’… Please, you better hurry, you better run for the hills. I’m doing it anyway. I want to make sure that I don’t get trapped.”
Think of all the poor souls in Cyprus they thought they had a simple bank account. Now they find out that they are making a ‘contribution’ to the stability of Cyprus. “Don’t trust any government. If you’re going to listen to government, you’re going to go bankrupt very quickly.”
Be assured that the confiscation of deposits in Cyprus won’t remain the one-off case; many governments have already changed their constitution or are preparing doing so, allowing them to steel your money when the need comes.
Confiscating the customer deposits in Cyprus banks, it seems, was not a one-off, desperate idea of a few Eurozone “troika” officials scrambling to salvage their balance sheets. A joint paper by the US Federal Deposit Insurance Corporation and the Bank of England dated December 10, 2012, shows that these plans have been long in the making; that they originated with the G20 Financial Stability Board in Basel, Switzerland (discussed here); and that the result will be to deliver clear title to the banks of depositor funds.
Spain, The Netherlands, and New Zealand have already similar directives in place. Indicating that this isn’t just an emergency measure for troubled Eurozone countries. “The New Zealand Government is pushing a Cyprus-style solution to bank failure, which will see small depositors lose some of their savings to fund big bank bailouts.”
Our leaders and politicians are worried about the wrong thing. They are calling any potential depositor losses a "seizure" or "tax." But this presumes that bank customers are otherwise guaranteed the return of all assets on deposit. While this may be the conventional wisdom nowadays, it is economically illogical. Depositors losing money is exactly what is supposed to happen when a bank collapses!
Why do depositors or bondholders think they are entitled to interest without risk? That is not how markets work. We earn interest on these investments because we are loaning our assets to the bank. If the bank cannot repay us, we lose.
Unfortunately, to support the illusion of bank invincibility, most Western governments have turned to massive wealth transfers in the form of direct subsidies to banks, financed by the hidden tax of inflation. In fact, the inflation tax hurts savers twice: once by the lost interest from suppressed rates and again by the sapping of purchasing power. While the former only hurts depositors, the latter harms everyone holding and using the national currency, not just depositors.
Cypriots, Europeans, and investors in the whole world, for the first time in generations, are getting the message that deposit risk is real. Banks are not endless fountains of profit set on unshakeable concrete foundations. In fact, fiat fractional-reserve banking system that inherently is unstable.
The kleptocratic intentions of the EU - rulers that use political power to steal from their country's resources - will not go unnoticed and a confidence crisis will result both within and beyond the two-tier Eurozone. Meanwhile Spain has a weak government, Italy has no government and the French have something that is more like a group of middle-aged student idealists squatting in the Elysee palace until a leader comes along. And the German Bundesbank launched an investigation into claims that Deutsche Bank hid billions of dollars of losses on credit derivatives during the financial crisis.
The EU has the European Stability Mechanism (ESM) committed to bail out failed banks in the EU; they now have shown their second thoughts. As on March 25th, Dutch Finance Minister Jeroen Dijsselbloem, who played a leading role in imposing the deposit confiscation plan on Cyprus, told reporters that it would be the template for any future bank bailouts, and that “the aim is for the ESM never to have to be used.”
“Confiscation of deposits to recapitalize the banks is far different from a simple tax on taxpayers to pay government expenses. The government’s debt is, at least arguably, people’s debt, since the government is there to provide services for the people. But when the banks get into trouble with their derivative schemes, they are not serving depositors, who are not getting a cut of the profits. Taking depositor funds is simply theft.”
Are you safe, then, if your money is in gold and silver? Apparently not – if it’s stored in a safety deposit box in the bank. Homeland Security has reportedly told banks that it has authority to seize the contents of safety deposit boxes without a warrant when it’s a matter of “national security,” which a major bank crisis no doubt will be.
Meanwhile because lack of sufficient funding; deposit insurance has failed, and so has the private banking system that is depended on it for the trust that makes banking work! Can they legally steal you money? “Although few depositors realize it, legally the bank owns the depositor’s funds as soon as they are put in the bank. Our money becomes the bank’s asset, and the savers become unsecured creditors holding IOUs or promises to pay.”
Until now the bank has been obligated to pay your money back on demand in the form of cash. “Under the FDIC-BOE plan, savers’ IOUs will be converted into “bank equity.” The bank will get the money and we will get stock in the bank.”
With any luck you may be able to sell the stock to someone else, but when and at what price? Most people keep a deposit account to have ready cash on hand and to pay their bills. However in the US, depositors have actually been put in a worse position than Cyprus deposit-holders, at least if they are at the big banks that play in the derivatives casino, like now at the suspected Deutsche Bank! If you have your saving account in this bank, you better hurry to go elsewhere.
“The regulators have turned a blind eye as banks use their depositaries to fund derivatives exposures. And as bad as that is, the depositors, unlike their Cypriot confreres, aren’t even senior creditors. Remember Lehman? When the investment bank failed, unsecured creditors (and be aware, depositors are unsecured creditors) got eight cents on the dollar. One big reason was that derivatives counterparties require collateral for any exposures, meaning they are secured creditors. The 2005 bankruptcy reforms made derivatives counterparties senior to unsecured lenders.”
“One might wonder why the posting of collateral by a derivative counterparty, at some percentage of full exposure, makes the creditor “secured,” while the depositor who puts up 100 cents on the dollar is “unsecured.”
After reading and understanding this in depth information you must be scarred to death to leave too much money in your bank account, at least not more than you need for paying your bills, an amount that won’t endanger your livelihood if things turn sour.
While barter and high-tech alternatives like Bitcoin compete for the attention of the newly "unbanked," I presume individuals, institutions, and governments are re-learning that gold and silver are the ultimate monetary assets. With every shock to the fiat system, more investors awaken to this fundamental truth.
As students of history and economics, both Rogers and Faber understand that major cities are not the place to be when modern-day financial and convenience delivery systems fall apart. Be as far outside of the blast radius as possible. It’s going to’ get ugly.
Rogers’ opinion, as an advocate of personal self-reliance and farming, since before the start of this crisis, has once argued that in the future it’ll be farmers who will be driving Ferraris, rather than Wall Street bankers. Like Faber, who lives in the remote hills of rural Thailand, Rogers also owns property outside of major cities and says hard assets (commodities like gold and silver) will be one of the few safe havens during a major crisis. Keep in mind that gold and silver tend to moves in anticipation of inflation – think of it as inflation insurance. By the time inflation is "high," the big moves in gold and silver will have most likely already occurred.
Over the last 12 months, the price of gold bullion has fallen by about 3%. Many readers worry about the price of gold and silver that are going down. Right now the gold price is floundering under $1,600 per ounce, just slightly more than the price of platinum. Silver prices are in the $27 per ounce range. "The time to buy gold stocks is when nobody wants to buy them… when even you don't want to buy them."
Could precious metal prices tumble? Well, anything is possible, especially if the global economy unwinds in a positive sense -- always a possibility.
Still, the market has badly underpriced the fact that central banks across the globe (except for dumb ones in the developed world, like in the U.S. and Britain) are buying gold and silver. If the U.S. had smart policymakers, the nation would be buying gold and be bragging about it.
Indeed, China's central bank is breaking records and (quietly) accumulating gold hand over fist, while Russia is also building a gold stash -- and they are not bragging about it.
By Peter B. Meyer – 30th of March 2013
What a time to be alive. The global economic spectacle gets more spectacular every day. Of course, there is one constant that remains serenely reliable: that the leaders’ prescription one-size- fits-all policy is adept at “getting it wrong.” Now the bailout in Cyprus... tomorrow-another debt ceiling debate in the US Senate, but the real “problems” facing the debt-fueled economies are sacrosanct and will stay untouched. Since the global financial crisis began, there’s been a stream of poor economic decisions from policymakers scrambling to bring in more revenue to cover their overspending. Rather than streamlining regulations to facilitate trade and flow of funds and cutting back on welfare programs, they’d rather maintain the status quo, by demanding austerity and increased taxes.
What absolutely is clear are the extreme measures the ECB has shown to take, these are solid evidence that demonstrates how shaky things are - how close to the crumbling edge of the abyss the whole world is. Even if the theft of Cypriot bank deposits does not spark a bank run across Europe, it won't change this fact. The ECB will certainly admonish us all to pay no attention to the fact we now have seen the real truth.
The question to ask is not, "How can we be certain?" That is easy to answer: we can't be. The question to ask is, "What do I risk if this is it, and I fail to prepare for the hell that's coming two steps behind?" The alarming idea that is spreading is; the next could be Spain:
Spain, it would appear, has changed constitutional rules to enable a so-called 'moderate' levy on deposits. New legislation in New Zealand suggests that depositor funds could be used to bail out banks there, too. And who more? “Most amazing small savers are no longer sacred.”
"The Cyprus crisis has opened up some precedents that will make investors more worried about how future euro zone crises will evolve," said Steven Englander, of currency strategy at Citigroup Inc. in New York.
“Europe's crisis fighters are spreading the net wider as taxpayers across northern Europe balk at the cost of rescuing their cash-strapped neighbors. That shows there may be few taboos left,” said Charles Goodhart, emeritus professor at the London School of Economics.
"They will swear black and blue that Cyprus is a unique case but so was Greece," he said in an interview. "You can talk about the inviolability of insured deposits but the problem now is would anyone believe you."
“The first use of capital controls by a euro-area member may also pose a challenge to countries such as Malta, Luxembourg and Estonia whose banks also boast large foreign deposits,” said Jacques Cailloux and Dimitris Drakopoulos, economists at Nomura International Plc.
Capital controls may seem not that serious, as many probably don’t understand the extend and its harm on people’s daily life, in this respect F.A. Hayek formulated the influence on our liberty as follow:
“The extent of the control over all life that economic control confers is nowhere better illustrated than in the field of foreign exchanges. Nothing would at first seem to affect private life less than a state control of the dealings in foreign exchange, and most people will regard its introduction with complete indifference. Yet the experience of most Continental countries has taught thoughtful people to regard this step as the decisive advance on the path to totalitarianism and the suppression of individual liberty. It is, in fact, the complete delivery of the individual to the tyranny of the state, the final suppression of all means of escape—not merely for the rich but for everybody.”
The Cypriot saga may also give more ammunition to populist leaders across southern Europe; those say –correctly - the political elites running crisis management don't care about ordinary savers. Italy's political system is gridlocked and Greek voters are signaling mounting support for the opposition Syriza party, which wants to renegotiate Greece's bailout program.
In return for robbing its depositors, Cyprus will receive a 10 billion-euro bailout from the EU. But none of that money will be used to recapitalize the Bank of Cyprus; it is just the latest manifestation of socialist banking guarantees. Whether a bank held its deposits conservatively or squandered them on risky loans makes no difference to depositors. The government guarantee and protects their capital in either case. So the banking system is free to act recklessly. But apparently no longer after the Cyprus crisis!
Jeroen Dijsselbloem – the Dutch finance minister and president of the EU finance ministers' committee, known as the Eurogroup – said rightly this Cyprus bailout could become the template for future EU bank failures: Bondholders and depositors must critically select their bank and investments on the basis of solidity, and not based on higher interest rates, so justifiably they would be responsible for the loss of their chosen bank, this finally shows some sound healthy change for the better as bankers act irresponsible and think their losses are compensated by governments that are broke themselves, and unjustifiably taxpayers are fleeced for bailout money. Regrettably, after opinion turned sour, it was reported that Dijsselbloem's office had "clarified" his position and that he now views Cyprus as a "special case." Apparently, someone must have explained to him there's no place for responsibility by bankers and "holding people accountable" in a sophisticated, modern economy! “Despite the deal Cyprus will remain at risk of default and a Eurozone exit for a "prolonged period," believes Moody's Sarah Carlson.
This case is unprecedented. Cyprus lost 25 per cent of its GDP almost two years ago with the haircut of the Greek debt. And there has been no compensation for that. If these ideas are implemented – there will be another haircut of Cyprus’ GDP, which will be around 40 per cent. It’ll be impossible, to get out of such a mess. It will be extremely difficult for this to be viable; the next few months will show the world how viable this bailout is.
People should not kid themselves into thinking that this is just a one off case and exclusively a European problem; in today's global economy, every country would get hurt by a banking and economic collapse in Europe. Those who think Asia will save the world must remember that the EU is China's largest trading partner.
With a fractional reserve banking system, it doesn't take a majority of bank depositors to decide to withdraw their cash to put their banks out of business. If 10% of depositors decided to withdraw all of their money, banks would be in real trouble - and even if only a smaller percentage were to initially decide to keep their cash at home, they could spook the required fraction into panicking and pushing the banks into insolvency. In stable times, fractional reserve banking may seem like free goodies for all, but during unstable times, it makes banks that much more precarious. Things have to be pretty dire for an entity like the ECB to demand action that could spark such a panic.
So what to do? Consolidate your assets into things that will hold value under all circumstances. The single best asset class for doing this is the precious metals: gold and silver. A substantial amount should be in cash form – thus in coins. This is where you put your savings now.
In the coming years, the world is likely to change as radically as it did entering the industrial revolution - major change will impact everything: economy, politics, technology, demographics, social customs etc. Everything. This is a good time to look around and ask yourself what goods and services you can provide that people will need in the future. What worked in the past and today, won't work in the future - you have to think creatively, and it will be worth it. Life today is immeasurably richer than it was 100 years ago, and it will become better beyond our ability to comprehend. Maybe let say in just 25 years after the collapse, it will be beyond most people's belief. So become a forward thinker.
There's a clear and present opportunity in the Cyprus crisis, the cat is out of the bag in respect how the EU regards peoples' savings, and that could lead to the next leg up in the gold market. If the whole system does topple over the edge of the abyss, it should spark a gold mania such as never have been seen before, not even during the famous spike of 1980.
Remember that holding or buying gold is much more than just price action. As too late, citizens and account holders in Cyprus are quickly learning now, the monetary world we’re used to can change instantly. Where once it was easy to draw your money from the local ATM or use your credit card to buy groceries, today you can’t in Cyprus. In fact, banks have been closed for 2 weeks; meanwhile the economy has turned in a cash only environment. The verdict is still out as to what’s going to happen when they do open. Central bankers tend to over estimate their perception on a situation like this one, but highly underestimating the power of ripple effects in free-markets.
When the decision was made to make a heist of personal bank accounts it is doubtful all the consequences were sufficiently evaluated. But now, people of Cyprus are truly worried and taking any precautions necessary – like stocking up on groceries. See this as an example for yourself.
The Euro is in real trouble. The currency is slowly burning and much of the EU is facing similar suffering to that of Cyprus. Out of control spending, reckless monetary policy, a faltering economy and high-energy prices won’t end well for Europe. The monetary plague doesn’t stop at Cyprus; more problems are to come in 2013.
As the euro burns and more national banking systems head down the same road as Cyprus, European investors will want more than the U.S. dollar can offer. Many will turn to commodities, gold and silver in particular.
Imagine what it means, living in a nation with an economic time bomb, teetering on the brink like Cyprus, similarly Greece, Spain, Italy and others that are closely following suit. It’s only a matter of time before the latent demand for hard assets boil to the top – expect to see the first indications as soon as Cypriot banks open again! Over the next three months and into the summer a lot more demand for gold will come.
“But unlike the past two failed attempts to sustain a rally above the $1,800 mark, this year we could see the right confluence of events – not the least of which we’re seeing unfold before our eyes in Europe.”
“The fundamentals and the charts are lining up for gold’s next run to $1,800. Keep an eye on a sharp move to $1,650 to get this next rally started. By the time everything is said and done for 2013 we could see gold knocking at the door of $2,000.”
But what does this all mean for the euro? And, more to the point, what does it mean for the EU? Chris Mayer answers this question for you. “While we’re always cautious with predictions, we tend to [think that] the Cyprus debacle may indeed be the proverbial match that sets European banks — and thus the EU itself — aflame.”
And once this flame catches and sets everything ablaze, there’s one asset class that stands to do quite well. “We also [think] that adding to one’s position in physical gold is particularly timely, both as a trade and as a long-term store of value. This position only makes sense given the current “print first; ask questions second” mentality that produces increasingly risky paper currency.”
If anything the Cypriot bank crisis shows us that gold and silver in the hand is worth more than your euros in the bank! With each passing day $1,600 gold or $28,50 silver is looking like more of a bargain.
Irish journalist Vincent Browne confronts the ECB's Klaus Masuch demanding to know where the (robbed) money is going. See for yourself how clear and sound his response is below….......
By Peter B. Meyer – 23rd March 2013
“Cash is King,” if not left in the bank as learnt in Cyprus, after the HUGE money heist on behalf the EU, the legality of this deposit grab is extremely questionable. The grab undermines the deposit insurance system and that makes it awfully dangerous. The entire banking business is based on TRUST: banks take in deposits and lend them to borrowers, but this system only works if depositors don’t demand their money back in cash all at once. The deposit insurance system was established to provide extra reassurance to depositors, so to undermine it threatens the very foundation of the entire European banking sector. This Cyprus deal is a forthright bank violation of the spirit of deposit insurance, which betrays those with the most to lose and the least to answer for.
Many Cypriots took to the streets in protest. Presumably after stopping at an ATM to remove whatever they could get from their bank accounts. Banks are closed to avoid any anticipated bank runs.
Maybe it’s just Cyprus’ turn. Since 2008, we’ve seen a variety of “crisis stories” arise under the umbrella of the EU — the so-called “PIIGS” nations chief among them. Maybe next we’ll see Malta and Estonia fight it out — or worse, whose “duty” it will be to save the euro at the next turn. Pity for the poor Cypriots, many of them could have little or no savings left. And all for the good of that seemingly sacrosanct currency they call the “euro.”
“The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks.” - “Power corrupts, and absolute power corrupts absolutely.” Lord Acton 1834 - 1902
Government leaders – including the European Central Bank, the Cypriot government, and the International Monetary Fund – decided they would steal from the nation's savers in order to bail out its cripple financial system. Talks led by Nicos Anastasiades, president of Cyprus, are currently underway to amend the proposals… Potential amendments include lowering the levy on accounts of less than 100,000 euros to 3% and increasing the burden on larger account holders.
“An interesting thing to consider… Cyprus' banking system has around 70 billion euros. Meanwhile, the country's entire economy is only 18 billion euros. And Cyprus is a banking hub for Russian oligarchs.”
The bank levy will raise 5.8 billion euros. Cyprus is receiving another 10 billion euros in bailout funds from the ECB and IMF. That's still short of Cyprus' estimated 18 billion-euro gap. And barring capital controls, it ensures a run on Cyprus' banks.
“The world's global banking system runs on trust… Depositors trust a bank with their savings in the belief they can access those savings on request.” That trust is broken now. And it will have severe consequences for the euro and European banks. “The bank levies in Cyprus are simply the latest move toward global socialism… the entire debacle (is) the abuse of paper money”.
It’s the ridiculous out of nowhere, they now want to tax bank deposits. So anyone with cash in a Cyprus bank could lose up to 9.9% or even more of his or her money. It’s as if Europe is engaged in some sort of defiant act of self-sabotage. The past two years of turmoil, austerity, bickering and riots just haven’t gone on long enough.
The bailout itself doesn’t matter. Europe is already blundering with damage control measures and might even back its way right out of this mess. It’s the waiting game that will get tricky. Now that the idea of bank runs throughout Europe has been planted in the heads of savers and investors around the world, renewed distrust quickly will be seen in equities, popping up all over the place.
This crisis will cause a massive collapse in trust in the global monetary system. But there still is time to buy real assets like gold and silver, real estate, agricultural real estate, timber, and oil and gas reserves. These kinds of investments will survive the ongoing global currency "reset." This crisis won't go away until all the debts are handled. The political class will do almost everything but deal with the root of these problems.
“People equate government with the economy,” says Doug. “They are entirely two different things. The only way to revitalize the economy is through both vast reductions in taxes and vast reductions in government spending. Instead, these idiots are arguing over how much to raise taxes and how little they can cut spending.”
“All pretense is now gone that central or global bankers can 'securitize' growth by packaging and repackaging debt; by hypothecating and re hypothecating debt; by regulating and deregulating debt. Since the bond market rally began in the early1980s, each crisis has been met with an increase in debt and an extension of the debt's maturity by central and global bankers – the IMF, EU and ECB, to name a few – and their Wall St. and City of London brethren.
“The result has been – as of 2007 – the biggest mountain of on-balance and off-balance sheet debt in history: A staggering $220 trillion in debt in America's $14-trillion economy alone (when included all public, private and contingent liabilities of unfunded entitlement programs). Deals in the global debt derivatives market now stand in excess of $1 quadrillion (1015), galloping above a global GDP of approximately $60 trillion.” To put the world debt in better perspective: Total worth of assets for the entire world is estimated $1 quadrillion! It’s clear that this staggering amount of debt never ever can be repaid!
“But starting in 2007, and then becoming spectacularly apparent in 2008 with the Lehman collapse, the ability of the world's taxpayers to pay either the interest or principal on this debt has hit a brick wall. And for several years now, governments around the world have tried the same old tricks of 'extend and pretend. 'Repackage and extend the maturity, and pray that tax receipts start picking up enough to pay some of the debt off. It didn't work.
The debt bomb just got bigger. Now in Cyprus the inevitable next phase has arrived: CONFISCATION to pay off the debts that were incurred to finance the biggest wealth grab by the Elite in history, via central and global banking institutions around the world, a trend to grab people's money from their 'insured' bank accounts.
“We should have figured out this was coming when JP Morgan (read: Jamie Dimon) reached in and illegally stepped ahead of customers at MF Global and grabbed over $1 billion, with the help of his crony pal Jon Corzine.
“Have we learned our lesson yet? They have more debts to pay than there is money in all the bank accounts in the world. This means that chances are, you – whoever you are, and whatever country you live in – will have a sizable percent of your savings stolen by banksters. Put as much money as you can in gold and silver. Warning: The only money you should keep in a bank account is money you're willing to lose.
The government gets revenue three ways. The first is by confiscating the wealth of citizens through taxes. There are hundreds of different taxes, and they all are quite high right now. The second way is by borrowing. Governments are incredibly over indebted and un-creditworthy now, and those debts will never be repaid. The third way is by printing money.
They will continue to print money because; it is the only way out left. So, politicians keep telling; printing money is a good way to stimulate the economy. Which meanwhile amply proved is a lie.
The most practical thing the average person can do is to have a significant position in precious metals. They should own the metal physically. In years to come, when governments have blown up their currencies, gold and silver will be reinstituted as money.
According to Westin: Politicians are “unpredictable" so one shouldn’t take on faith European MP’s promises the Cyprus deposit raid won’t happen in other countries.
“Even though we have parliamentarians in Europe saying that this is a one off. The problem is will the depositors in Italy, Spain and Greece believe this and will this cause a renewed massive crisis in Europe? Interestingly, people are looking at the size of the countries – when Greece hit the headlines, people were saying Greece is just 2 per cent of the Eurozone’s GDP and it’ll be a limited isolated effect. But it spread very quickly. Cyprus is ten-times smaller, but again I think we know that in this case size isn’t important.”
Still most Europeans continue to believe the state owes them a living and that the rich should be eaten to finance that. That attitude will not be changed without real tumult. There is no impetus for gradual change or reversal in Europe.
Byron King concludes. "At the very least, I believe that we'll see Russia -- both its central bank and rich oligarchs -- step up purchases of gold, versus depositing their cash in offshore banks. Other nations in which wealthy people tend to... umm... move money offshore will also likely step up their gold buying. Gold has the potential to hit $2,600 within a matter of weeks.”
This all may seem like a distant scenario. And there will be retreats along the way, based on the false appearance of economic recovery — but these will just be last-gasp buying opportunities. Don’t worry about the timing. Whatever happens in the near term, the global economies cannot avoid the fallout from currency abuse indefinitely. History has repeatedly shown this. It isn’t known whether the shift to price inflation will be sudden, occurring in fits and jolts, or appears in a slow dawning, but escape from it for sure is not possible.
By Peter B. Meyer – 16th of March 2013
When the dollar loses value, it causes the nominal price of stocks and the nominal amount of earnings to go up. In short, a weaker dollar is one path to a higher stock market. But it's not the path to prosperity or wealth. It's just a sign of more dollars in the system.
Some of the best examples of the decline in the purchasing power of the dollar is domestic-manufactured items. The Ford F-150 is the bestselling vehicle in the United States. The base F-150 model retailed for $18,275 in 2007. Today, it retails for $23,670, a 30% increase. Perhaps the most telling indicator – albeit a slightly foolish one – is the Big Mac index,
popularized by the Economist
magazine. McDonalds hamburgers are available in many countries and their prices reflect the cost of food, fuel, commercial real estate, and basic labor. The price of a Big Mac, therefore, can be used to compare the economies of different countries – or serve as a bellwether of inflation in a single country. Since the recession ended, the cost of a Big Mac in the U.S. has risen from an average of $3.57 to $4.37, or 5.2% a year. And then there is the hidden inflation; no food supplier wants to be the first to increase their prices, so beef is replaced by cheaper horse meat, alcohol content in beverages is reduced, fish and chicken manipulated to increase water content, to make up for the same weight. Packages content are reduced while providing the same look as before.
The real-world data shows pretty clearly that the value of the dollar has fallen by a substantial amount. Estimated between 20% and 40% of its purchasing power has been erased. But of course, there are other measures that matter, too. For example, how has the dollar fared against other currencies? Actually, since 2007, it has strengthened against both the yen and the euro – as those currencies have seen even greater purchasing-power losses. What about gold? Gold has gone from $832 per ounce to around $1,550 per ounce. That represents an enormous decline in the dollar's purchasing power of over 50%.
As the dollar has fallen, debts have continued to grow – at a faster and faster pace. Total U.S. federal debt has gone from $9 trillion in the fall of 2007 to more than $16 trillion today. That's an increase from 65% of GDP to more than 103% of GDP.
“The total debt in the US economy has grown from $55 trillion to more than $58 trillion. Meanwhile, the government continues to take up more and more of the credit in the economy. Likewise, as a percentage of GDP, federal government spending has grown from 19% of GDP to more than 24%. States spend another 15% of GDP on top of this, pushing government in all forms to more than 40% of GDP. The U.S. equals France in debt.”
So, don't regard new highs in the stock market as a sign that the recession is over due to runaway government spending. Instead, a collapse in the purchasing power of the dollar is making stocks appear to be worth more, because their prices, in nominal terms, have gone up. In reality though, all that's happening is that the dollar is falling in value.
The one who should know about this impact is Jerry Murray Wal-Mart's Vice President of Finance and Logistics. Who wrote in his confidential email: “In case you haven't seen a sales report these days, February MTD (month to date) sales are a total disaster... [t]he worst start to a month I have seen in my ~7 years with the company." And he wasn't the only one who's worried. Cameron Geiger, Senior Vice President of Wal-Mart U.S. Replenishment wrote: "Where are all the customers? And where's their money?" - "Their money" went to the government as the payroll tax cut was reversed.