Gold
Price Breakout, The Ominous Silent Canary By Jim Willie CB
| Sep 16, 2010 - 04:33 AM
Alan Greenspan had full knowledge of his
betrayal to the principles of sound money. He wrote early
in his career about the only legitimate basis for a monetary
system, namely Gold. His published works from four decades
ago read like an indictment against his career for monetary
crimes against the nation. His accommodation, giving the
financial sector what they wanted, betrayed his mindset.
He knew the nation courted disaster with a long delayed
fuse. His quote is being circulated frequently and broadly
lately, "Gold is the canary in the financial coal mine."
Exactly, precisely, perfectly. Greenspan proved to be a
great handler of the politicians, offering them obfuscation
of the most erudite variety. They were so confused by his
drivel to be immensely impressed.
The Jackass was not impressed, not after
the 2000 events unfolded to reveal the US as a naked asset
bubble blower. Not after the same events revealed Greenspan
to be an inflation engineer specializing in serial asset
bubbles blown to wreck the nation. My attitude years ago
was to listen to his topics of debate, to ignore the words,
and to anticipate a crisis event in the sector he mentioned.
It worked every time. What Greenspan brought to the nation
was a nearly complete interruption to the process of capital
formation by virtue of the asset bubbles he engineered.
His policies undermined and destroyed capital itself. He
puffed up the finance sector at the expense of the tangible
economy. Industry was forfeited in the pathogenesis of managed
inflation.
THE WAR FACTOR
To be sure, the war machine, immature during
the Vietnam War, more mature for the advanced Iraq and Afghan
Wars, accelerated and completed the process of saturating
the nation with debt. The combination of domestic asset
bubble development and war machine maturity conspired to
gut the nation of industry and force it to depend upon a
sequence of asset bubbles. They all busted. Few analysts
dare to point a finger at the war costs, deemed sacred,
rarely debated, always funded. Half the national debt of
$12 trillion is attributed to war spending, hardly defensive
anymore. The USMilitary expansion has become servant to
its own gargantuan appetite, no longer driven by security
motives. Expansion of war to secure supplies for the nation
might be better explained as the global stretch of the military
complex in order to secure supplies for itself. The complex
is a vibrant independent enterprise. It might require new
wars to secure its own supply chain in order to sustain
its own operations, which increasingly depart from the objective
of the people, and increasingly conform to the Syndicate
objectives.
Deception of war motives and war purposes
is replete with the same sort of deception inherent to USEconomic
statistics. In Iraq, supposedly masses of troops are heading
home. Those not heading home reveal a convenient reclassification.
The soldier title of HBCT (Heavy Brigade Combat Team) was
changed to AAB (Advise & Assist Brigade). Presto! Far
fewer combat troops, but same duties, same operations. It
reminds a person of economic statistic deception, relabeling
what makes for an unemployed worker. The soldiers are mere
accounting ledger items. The soldier death count is another
statistical deception. The actual death count is at least
triple the official number posted by the USMilitary. The
official count is of soldiers who died on Iraqi soil, not
those who were moved to hospitals outside of Iraq, like
other Persian Gulf nations, a ship on the Gulf itself or
the Mediterranean Sea, or even Germany. The best statistical
accounting deception in the gold world is the USTreasury
reporting. Gold on the USGovt balance sheets is accounted
for as Deep Storage Gold, as per ore mined but not processed
in a mountain. More tricks. For those Americans who engage
in reading novels, the book "1984" is relevant.
The Jackass has a controversial forecast,
initially made in autumn 2008. Expect the pressures to build
eventually until the USMilitary complex, including the defense
contractors and the military service contractors, are led
to splinter off into a private corporation. Its business
will be arms dealer and mercenary provider, with a core
narcotics business segment. Those who deny this inevitable
path must be blind, must be dumb, or prefer to wear underwear
bearing the stars and stripes. In their wake will be a nation
they once served sliding into the Third World. In their
foreground will be vast wealth accumulated by the Syndicate.
THE FINAL BUBBLE
In the aftermath of the tech telecom bubble
bust ten years ago, Greenspan actively pursued the next
bubble. Historical precedence dictated that a housing decline
would come in 2001 and 2002. But such an event would have
spawned a powerful recession that would have killed the
banks, whose main diet had become credit derivatives. The
lack of regulatory oversight enabled this queer racket to
expand into a mammoth hidden business, a giant casino where
the Wall Street banks actually placed billion$ bets against
their own clients, against the major corporations of America.
To say that constituted a conflict of interest is the understatement
of the decade. Its scummy effects are slowly coming to fore
in the United States and Europe, in the mortgage market
and sovereign debt market. The awakening has led to great
anger, harming the banker image irreparably, when combined
with home foreclosure disgust.
Greenspan encouraged a housing revived
bubble ten years ago. He actively lobbied the financial
markets to believe that full support for a USTreasury rally
and mortgage bond rally would ensue, given the full beneficial
power of monetary policy. He spoke at conferences.
He gave press conferences. He interviewed with the press.
He leaned on Wall Street. He preached to the USCongress.
He finally swayed the financial markets. The result was
that a typical housing market correction was averted. Instead,
a powerful housing market rally took place, a climax rally.
It sucked in every conceivable vagrant buyer, including
a homeless bum in St Petersburg Florida who bought two homes
without income or assets, full exploit of the NINJA loans
(no income, no job or assets). What a travesty and blotch
in American financial history. Even Fannie Mae entered the
act, advertising on television with minority actors to encourage
the last buyers to fall into the bubble trap. They succeeded,
and minorities became the first victims of the wrecked,
dispossessed, and bankrupted citizens.
The subprime mortgage chapter was
a planned event, not by Greenspan, but by Wall Street firms.
They went far beyond what Mr Magoo planned. They needed
fresh meat to feed upon. Unqualified buyers served as cannon
fodder to Wall Street bond merchants, offering hefty fees
in bond securitization. Foreign investors were lined up
like toy soldiers on a table for execution. The backfires
are a plenty. The MERS database for title registration,
intended and designed to handle the rapid trading of mortgage
bonds, has been declared in several states to have no legal
standing. Thus MERS has turned into a crowbar that intelligent
enlightened emboldened homeowners can use to apply pressure
on the banks and mortgage firms to avoid foreclosure, and
live rent free in a home while still holding title. The
strategic mortgage default practice, simply not paying,
has spread like a mild virus.
Greenspan built the next asset bubble with
full motive. It was a doubled chambered asset bubble, which
enabled him to retire before a deep intractable crisis struck.
The housing bubble grew leaps and bounds, doubling prices
in some regions, called the Sand Bubbles. Arizona, California,
Nevada, Florida, they all expanded, and now have contracted.
The city of Miami has hosted a national jamboree for the
foreclosure victims, another blight much like the tent cities.
New home prices in the Phoenix area have been cut in half.
Talk about the wings being burned off the rising bird, which
fell hard to the ground! Millions each year have been tossed
onto the national dump of foreclosures, left with no savings,
no homestead, often with no job, and too often with no pension,
and clearly no hope. The other bubble was mortgage finance.
A great majority of the Wall Street business model transformed
into leveraging profits off mortgages, either from fees
off bond securitization or nasty gains from insuring against
bond failures as clients lost arms and legs. The parade
of client lawsuits has replaced the parade of clients seeking
bond issuance. Talk about wings being burned off the financially
engineered bird!
Even though gone from the scene of the crime,
Greenspan ensured the final asset bubble. Perhaps unwittingly,
perhaps expectantly, no matter. When home prices inevitably
and inexorably fell, the great housing bubble would transform
into a charred ruin. Note the contrast in Time Magazine
covers. What a difference five years can make. The Jackass
forewarned back in 2005 that a great train wreck would happen,
severe enough to render the entire US banking system a ruined
victim, from a guaranteed insolvent condition. It happened
as prescribed. So behold the final bubble implicitly and
passively designed by Greenspan, the USTreasury Bond. It
has gained attention as a bubble, but again no asset bubbles
are bad until they are broken. Wall Street encourages asset
bubbles, as that is their reason for being. They then exploit
the bubbles as professional vultures. As the housing wreckage
and the mortgage wreckage unfolded, the safe haven was grabbed
and sought in USTreasurys. The current situation actually
finds the bond rally to be proof positive that symptoms
scream of systemic failure. The USTreasury complex is the
only game in town that seems to offer investment gains inside
the paper realm. Gold is the rising star on the tangible
realm. Gold has begun to distinguish itself from the commodities,
since the realization has come that GOLD IS MONEY.
The arrival of systemic failure was guaranteed
by the Clinton Admin decision to grant Most Favored Nation
status to China, our next trade rival and current bitter
trade enemy. That the US nation could send industry to China,
enjoy the benefits of Low Cost Solutions in sustained profit
margins, remove legitimate income, replace it with debt
off asset bubbles, and expect as economists promised a continued
decade of prosperity testifies to the lunacy, stupidity,
and heretical guidance of US economists. The US corporate
sector seemed to grasp at a decade extension of economic
good times. The result was the rise of China, the grand
accumulation of $2.5 trillion in reserve assets, and the
encirclement (aka strangulation) of the American body by
Chinese investment and partnerships the world over. The
decision to partner with China has not been questioned much,
even now.
Witness on this side of the Pacific Ocean
an embraced USTreasury Bond bubble, blessed as good, regarded
as the ultimate in safe haven. In the next several months,
watch a radical change unfold in the perception of the USTreasury
asset, from safe haven to next broken bubble, even a tragic
path toward debt default. My sources tell of a 2006 Christmas
effort to devalue the USDollar by 50%, but the plan blocked
by China. Watch for the 50% devaluation to be pushed and
pushed until it sticks. Boycott of USTreasurys will go global.
The USTreasury auction process will turn into a fraternity
celebration of onanism. In fact, with the proliferation
of high frequency flash trading on the stock side, the isolated
monetization of USTreasurys and good ole boy nether relief
practices will mark a complementary bond style perversion.
Such lone hand satisfaction requires isolation and often
darkness. Talk of Greek Govt bond default will turn into
a fever. Next will be Spanish Govt bond default. We will
see a parade of them, including Great Britain. The year
2011 will be tumultuous, as a new currency is introduced.
Germany will lead the way, and the once formidable USTreasurys
will be treated to an American sunset.
THE GREAT ANTI-BUBBLE
Behold the powerful Gold ascendancy. What
great amusement comes from watching the squirming of financial
anchors and their guests, the confused banter, the ideological
pretzel contortions, the shallow discourse, the nitwit criticism,
the self-serving errant banter, the fiat paper ideological
warfare propaganda, the abject vacancy dressed in monetary
mental monotone. The struggle to comprehend the rising Star
of Gold by the financial media is much more amusing than
frustrating. Five years ago with the advent of the Hat Trick
Letter, a frequent stream of curses was directed at the
television screen during interview of supposed experts.
These past weeks and months, a smile comes during interviews
of the same compromised deacons committed to the ideological
priesthood, striving for a piece of the paper pie. It will
not come. Instead, a pink slip of paper will arrive on desks,
to the tune of 80 thousand jobs to Wall Street firms, according
to Meredith Whitney, the former Oppenheimer analyst. Such
reductions would comprise 10% of current workforce levels.
The structural decline in Wall Street profits over the last
three years began with busted bubbles, but continues with
a perverse replacement of stock and bond issuance by client
lawsuits. The damage extends to Europe and England. See
Barclays, Credit Suisse, and Royal Bank of Scotland Group.
Bear in mind that the USTreasury Bond bubble has sucked
most capital from the world, as even bond offerings struggle
and spreads widen.
Behold the powerful Gold ascendancy. What
great amusement comes from watching the minimization of
the gold price advances by financial anchors and their guests,
the envious avoidance, the denigration from the loser corner,
bizarre bubble accusations. The anchors seem not to show
much respect for a 300% return on investment for gold in
the 2000 decade, the clear victor among asset groups. It
is only gold, the pesky yellow metal. It does not really
count as an investment, since it is not an approved vehicle
within the paper fleet. The 1973 movie "Paper Chase"
with John Houseman and the subsequent television hit series
in the following decade was cool. It featured a group of
Harvard Law students struggling to succeed in a rigorous
program made more difficult by a surly but competent professor
not prone to smiles or displays of human tenderness. It
was a favorite weekly show of the Jackass, young at the
time and developing unorthodox iconoclastic tendencies.
The gold community has turned away from the Paper Chase,
the Wall Street game, the fiat charade, the heresy on paper
wheels.
One key family member of mine shunned the
advice given in 2001 to invest 25% of life savings, my future
inheritance, in a gold investment. In 2010 after the quadruple
was complete, the same person expressed satisfaction in
NOT having invested in gold over those same ten years, since
it seemed risky and went against the grain of the system.
He comes from a different age, with engrained trust for
the system, a veteran of a war long ago, one who prefers
not to contemplate the threats made against his son by USGovt
agencies. Little satisfaction comes to the Jackass except
from personal colleagues and trusted friends in the gold
community who get it. One might expect similar lack of satisfaction
when preaching the gold theme to family members and close
friends for other people, other gold warriors. My view is
that acceptance of the Gold theme is much like politics
or religion, should not be forced, but other opinions need
not necessarily be given too much respect. A progression
has been well noted of family and friends in response to
the sequence of crisis events, full shock, and personal
impact to them. They go through their defining moments,
their watershed decision points, but usually continue committed
to the paper trail. They tend to express hope that the nation
can pull out of the current morass of problems. My stern
replies of worsening forecasts go unheeded, each dismissed
like the last, despite the string of correct systemic breakdown
forecasts. Conclusion: make new friends, stick with the
gold friends, as we will rule the earth, all in time. Family
and friends might be given some help later, from a different
pecking order.
Gold reacts to many things not seen by the
mainstream. It reacts to the extreme distress of the creaking
dying financial system. It reacts to the failure of debt
denominated monetary system. It reacts to the insolvent
US Federal Reserve. It reacts to the moribund environment
for capital formation. It reacts to the debt saturation.
It reacts to the burgeoning federal deficits. It reacts
to the 20 months of 0% that cannot kickstart the USEconomy.
It reacts to the still declining housing market. It reacts
to the tragic march of home foreclosures. It reacts to the
tragic march of the unemployed. It reacts to the 20% of
the homes mired in negative equity. It reacts to the reluctance
to serve remedy, reform, or restructure by the big banks
who have the USGovt finance ministry in a choke hold. It
reacts to the wars that exhibit a cancer upon the presidency.
It reacts to the absence of industrial base, dispatched
to Asia. It reacts to the hidden lack of comprehension for
the consequences of unsound money. It reacts to the ugly
aftermath following two decades of falsely priced cost of
money. It reacts to the failed central bank franchise system.
It reacts to the end of the road for additional bubbles
to blow on the American landscape. It reacts to the growing
despair extended from the dark clouds hanging over the current
environment. It reacts to the lack of comprehension of money
itself by the brain trust posing as bank leaders. It reacts
to the lack of comprehension of economics itself by the
brain trust posing as economists.
GOLD & SILVER BREAK OUT
The mainstream financial press networks
cannot grasp the meaning and potential of gold. They hate
it. The broader comprehension of gold is superficial. They
recognize the excess of government deficits and debt issuance,
but not their permanence. They recognize the fast vast creation
of new money, but not the need for repeated episodes of
more creation, to the point of total debasement. They recognize
the need for safe harbor, but still cling to the notion
of USTreasury Bonds offering that safety. They recognize
the need for inflation to return, but not how a chronic
dependence upon inflation brought the current wreckage.
They recognize the inevitability of further debt burdens,
but not the certainty of debt default. They recognize the
need to reduce the US debt to manageable levels, but not
the wicked foreign response in global revolt. They recognize
the foreign angst over the USDollar and its teetering condition,
but not the global revolt against it. They recognize the
missing collateral reserves in the banking system, but not
how gold used to serve that purpose. They recognize the
sickness of the debt based monetary system, but not the
ultimate requirement for a complete overhaul of the monetary
system. They recognize the rise in the gold price, but not
its identification as money in a moneyless world. They recognize
the broken system, but believe it can be righted, if only
naively by the passage of time. They confuse legal tender
with money. They do not understand gold, but they will,
probably when it is too late. GOLD IS BOTH THE STORE OF
VALUE AND THE BALLAST IN THE BANKING SYSTEM. It offers stability,
but seems like dead weight to the ignorant.
The gold price has broken out to new highs.
This is just the beginning. The silver price has broken
out to new highs. This is just the beginning. The mainstream
has no idea how high the gold & silver prices can reach.
My response is simple. No effort has come to reform the
financial foundation. No effort has come to bring remedy
the broken platforms. No effort has come to restructure
its workings. The first steps involve liquidation of the
vast swaths of badly impaired, often worthless bonds that
clutter the banking system like discarded rags in a sewer
pipe. No effort will come either, since orders to repair
the financial platforms would bring about sudden death to
the big banks that control the USGovt and its finance ministries.
Gold understands all this very well. Gold realizes that
no Big Fix can come without trashing the entire power structure,
turning the system upside down, and giving invitations to
criminal prosecution. The Gold price is constantly and steadily
fed strong nourishment.
The gold & silver prices have broken
out to new highs. Tremendous heights will be achieved. We
will see $2000 gold, then later $3000 gold. We will see
$40 silver, then later $70 silver. It is pre-ordained. It
is written. It will be done. Nothing is fixed nor will be
fixed. Much money has been wasted, and more will be wasted.
Each round of economic stimulus pushes the gold & silver
price higher. Each round of big bank bond redemption pushes
the gold & silver price higher. Each round of sanctioned
official debt monetization pushes the gold & silver
price higher. Each round of inaction from political delay
or stalemate pushes the gold & silver price higher.
The only lack of satisfaction from the leaps higher in precious
metal prices comes from knowing that the world as we know
it will change, as the landscape shows evidence of economic
scars. Supply chain disruption, price inflation, lost financial
security, social unrest, and growing chaos will make it
difficult to enjoy the strong purchasing power from a high
gold & silver price from personal holdings in investment.
But the alternative is so much worse than not holding them
in investment. Gold & silver are a vote of no confidence
in the paper system. Gold & silver are vast life boats
during a tsunami. Gold & silver are a stake in the future.
Gold fights the big political
battles, but silver takes the greater spoils. Behold gold
on the verge of a powerful breakout. Gold is not an inflation
hedge, but rather a monetary system failure hedge. Gold
is not a dead asset, but rather the ultimate form of money.
Gold is not an investment without yield, but rather the
a store of value serving as ballast for the global banking
system. Each round of stimulus, bond redemption, bank aid,
and annual government deficit lifts the gold price potential
another $1000, and the silver price another $20. Silver
is favored on the supply side of the price dynamics, and
silver is favored on the demand side of the price dynamics.
Massive supply shortages are being reported and realized.
Just this week a private off market silver sale took place
in the multi-million$ at a $24.50 price, according to an
information source. The disparity between the physical market
and paper market will remain wide, even as both price structures
move higher.
JPMorgan is on the extreme
defensive. While the new Financial Regulation Bill might
have caused some disarray of the price suppression gamers,
the bill surely has emboldened precious metals investors.
By the way, a deep contact informs that Bank of America
suffered a death experience on the weekend of July 24th,
the same weekend that the London Bullion Market Assn went
dark on reported data. Around the same time the Bank For
Intl Settlements was fumbling around with phony stories
regarding their 340 ton Gold Swap contract. The truth is...
the BIS bailed out the London metal exchange, on the edge
of default, which has suffered repeated gold raids. They
have been forced to defend against a sequence of coordinated
raids, all legal, demanding vast gold bullion and obtaining
it. The BIS bailed out not commercial banks, not the Portuguese
central bank, but the London metal exchange. The LBMA is
struggling to avoid completely empty inventory. More BIS
backdoor supply handoffs will come. Expect the gold raids
against London to continue until the corrupt Anglo bankers
are plowed under like a weeded lawn laced with rubbish.
Soon a big bank will fall, from the incremental drain from
losses defending the gold price without success. My guess
is Bank of America. It will be absorbed by the titans on
Wall Street, the corrupt monoliths. Eventually only two
will stand, by the time the USTreasury default approaches.