Gold and Silver Poised to Surge on Ticking Debt Bombs By James West | July
15, 2011
Gold and silver are threatening to break
new ground driven by one simple fact: Nearly all wealthy
nations are labouring under one form of debt/monetary inflation
issue or another. Ireland and Greek bonds have now been
reduced to junk, Japanese bonds became safer than Chinese
as reports of China’s massive deficits internally
offset the rosy picture supported by 9.5% performance in
the Chinese economy. Italy is looming large as the next
bailout candidate, and the United States prioritize political
brinkmanship over problem solving. Gold and silver are seeking
new highs and threaten to break out strongly – especially
now that the Fed has acknowledged a willingness to launch
QE3.
The ridiculous posturing by Democrats and
Republicans in the U.S. over the imminent rise in so-called
borrowing makes it almost embarrassing to be human. They
can’t even get out of the way of their own political
agendas to solve a problem threatening to make politics
obsolete. Certainly, I’d be embarrassed to be American.
But on that point, I’d be embarrassed to be English,
Irish, German, French, Swiss, Portuguese and especially
Greek, Italian or Spanish. Stand close to any of the Davos
men who constitute these nations’ finance ministers
and you are immediately struck by the impression that you’re
in the presence of the best-dressed con artists walking
the globe.
But the creative rhetoric that has resulted
in 2 + 2 equalling –4 since the deficit spending party
got underway with the end of the Bretton Woods Agreement
by the hand of Richard Milhouse Nixon is starting to disintegrate
under its own inertia. The novelty and creativity of the
formulas and structures, and subsequently, new language,
required to continue funelling artificial dollars into broken
down debt vehicles is yet insufficient and the charade is
reaching its unavoidable and imminent end. Is it a coincidence
that the debts, currencies, and economies of the top European,
Asian and North American countries are all accelerating
towards the brick wall of default at the exact same point
in history? I smell a rat, or rather, a whole pack of rats.
I think the ruling class, which is without a shadow of doubt
corrupt beyond redemption, have figured out that if you
bury your theft in a mountain of debt, it will never be
found and you can ride off into the sunset undiscovered.
Its time for the politicos and their brainwashed over-educated
economists to disclose publicly both the amount of taxes
paid on their sources of worldwide income.
But that’s another story. It amazes
me, and then again it doesn’t, that there are no culprits
in this grand global forum of doublespeak. The Greeks are
guilty, but not a single Greek person has been named as
responsible for anything that might constitute a transgression
of fiduciary duty. The American president blames the Republicans,
who blame the democrats. Again, nobody is fingered as the
leader or treasury secretary or central bank chairman who
is guilty of a crime, or even of towering stupidity. Greenpspan’s
taking some heat, but he rode off into the sunset, and so
in his dotage is a safe target. If corporations are the
beard for the unsavoury acts of businessmen, then government
is certainly the place to hide for leaders who seek to enrich
themselves at the expense of the general public.
SELF DELUSION AS DESIRABLE SKILL-SET
It’s true that People tend to embrace
the convictions that serve their circumstantial requirements.
A cancer patient believes unequivocally he will beat the
disease. A gambler believes just as forcefully that he can
beat the house. An athlete believes he will win, and a judge
believes he is qualified to pass judgment and sentence on
the lives of others. In the United States, the President
and Congress believe it is both their right and their obligation
to pretend that the inevitable will only occur according
to their political conditions, and fail to recognize that
the inevitable will happen because its inevitable. Both
sides know that there is absolutely zero chance of a compromise
not being reached, and both sides plan to hold out for their
respective demands until the very last possible second.
Obama promises the Biggest Deal Possible, and Republicans
are obliged to proclaim a Little Tiny Deal.
That means the solution will be the equivalent
of little tiny band-aid on a gaping wound in a rain storm.
It might slow the tide of the larger inevitability –
the collapse of the U.S. dollar and the U.S. financial apparatus
– but only temporarily. And then, maybe not at all.
Where the boundaries of reason have long ago been surpassed
by the astonishing ridiculousness of the economic ruling
class, the average intellect is at a loss to opine where
the relentless plunge into the apparently bottomless abyss
of debt might end. Can we really keep ‘refinancing’
and ‘rolling over’ and ‘reinsuring’
our way into infinity? Is the next debt ceiling measured
in quadrillions, and then quintillions, and so on?
At the end of the day, these vast sums being
loaned into existence by the collusional participation of
elected officials and their appointees is a smokescreen
for skimming the national take and paying the minimum tax.
But the scheme has evolved into a scam,
and the scam has gotten so mature, that like any Ponzi scheme
it needs to replace old investors with new ones to keep
the balls in the air. It looks like the principle product
of our globalized pyramid economy – indebtedness –
is about to collapse, because all the participants are maxed
out; there are no new investors to keep the scam going.
The central banks can’t create money fast enough to
make even the interest payments on these colossal debts.
We could theoretically amp up the rate of money issuance,
but even with zero interest rates, that’s too much
for the already over-inflated financial system. The value
of national currencies is in terminal decline relative to
real goods, and we are witnessing the birth of the first
global hyperinflation in history. Which brings us back to
the main thrust of this story, which is that we are on the
verge of a major chronic meltdown.
The acuteness of the self-inflicted austerity
measures that Obama has as his only bargaining chip, versus
the depth of relinquished tax breaks which is the only bargaining
chip of the Republicans, is all that remains to be negotiated
in America. That and the numerical name of the next debt
ceiling. In Europe, the game is slightly different. On multiple
fronts, the banks and the governments are negotiating austerity
measures as if they were carbon credits. And just as carbon
credits are easily counterfeited, or cancelled, or fraudulently
re-sold, the promises will be modified by political expediency,
the CDO spreads and interest rates will be adjusted to suit
the reality required by all the vested interests, and the
numerical names of the next bailouts, puny in comparison
with America’s, established.
CHINA AND JAPAN
The news yesterday that China grew by 9.5%
in the second quarter of 2011 appears to have allayed fears
that the Chinese Tiger was growing a little bit tired and
threatening to lie down for a while. But not before the
Chinese bad news triggered a warning from Moody’s.
According to the Wall Street Journal:
China on Monday failed
to sell some of the 50 billion yuan ($7.73 billion) in local
bonds offered at a regular auction. It was the first time
one of these Ministry of Finance auctions failed to sell
out since they began in 2009. Local governments can’t
issue bonds directly so the ministry auctions the bonds
on their behalf.
Ratings firm Moody’s Investors Service warned last
week that local-government debt posed an increased risk
to the central government and the banking system, and
said a National Audit Office estimate putting the debt
at 10.7 trillion yuan understated the actual amount by
some 3.5 trillion yuan.
With Europe squabbling over
where to meet next, and Obama sticking to his guns for concessions
on tax breaks, the bigger picture is looking an awful lot
like gold and silver will be the ultimate beneficiaries of
all this debt stupidity.
When the bombs go off and the delusion can no longer be
supported, we’ll wake up and understand that defaults
on all fronts have been ongoing for quite some time. Then
the stampede will really begin into gold and silver.