July 6, 2022

Yellen’s Remarks to Senate Committee Constitute an All Out Buy Signal for Gold and Silver

money printingFed Chairman Yellen’s less than sparkling performance before the Senate Banking, Housing and Urban Affairs Committee on Thursday constitutes a complete affirmation for continued purchases of gold and silver.  The Chairman’s testimony was so disjointed that two major news organizations published completely contradictory headlines of her stuttering remarks.

Tapering – will she or won’t she was the question on everyone’s mind regarding future actions of the Fed and here’s the yes and no answer to the big question based on Yellen’s testimony.
The Wall Street Journal reported that Yellen Says Rethinking Bond Pullback is Possible.

Federal Reserve Chairwoman Janet Yellen said she isn’t sure how much of the recent deterioration in U.S. economic growth is due to weather, adding the central bank might consider a pause in its reduction of bond buying if the weakness persists.

“Asset purchases are not on a preset course, so if there’s a significant change in the outlook certainly we would be open to reconsidering, but I wouldn’t want to jump to conclusions here,” Ms. Yellen told the Senate Banking Committee Thursday.

“A number of data releases have pointed to softer spending than analysts had expected,” Ms. Yellen said. “That may reflect in part adverse weather conditions, but at this point it is difficult to discern exactly how much.”

Since Feb. 13, U.S. economic data has shown signs of weakness. The softness has been broad-based, with retail sales falling 0.4% and industrial production sliding 0.3% in January. The recovery in housing, a crucial gauge for the success of Fed policies, has also shown signs of fraying. Some economists have blamed harsh winter weather for the slowdown.

Meanwhile, Yellen’s remarks were viewed in a different light by a Bloomberg headline stating that Yellen Repeats Fed Likely to Keep Trimming Asset Purchases.

Federal Reserve Chair Janet Yellen said the central bank is likely to keep trimming asset purchases, even as policy makers monitor data to determine if recent weakness in the economy is temporary.
Yellen repeated the Fed’s statements that the central bank intends to reduce asset purchases at a measured pace, and she said in response to a separate question that the bond-buying program was likely to end in the fall.

Does Yellen have a dissociative identity disorder (DID), commonly referred to as a multiple personality disorder? According to Wikepedia, DID is characterized by two identities or dissociated personalities that alternately control a person’s behavior. The disorder is a controversial subject in the field of psychiatry and there is no consensus regarding either diagnosis or treatment so we can give Yellen a pass of this one.
Here’s the facts we do know about Yellen and Fed policies and they all represent some of the best reasons for increased ownership of both gold and silver.

2013-gold-eagle
The Fed stands ready to increase its $4 trillion balance sheet at the slightest sign of weakness in the stock market or the economy despite the lack of conclusive evidence that their money printing spree has helped the real economy.

The money surging out of the Fed has created multiple asset bubbles which will eventually pop, prompting further asset purchases with printed money to contain the damage and the cycle stays on auto repeat until the entire empire of debt and printed money completely collapse.

The Fed is firmly committed to an annual inflation target of at least two per cent to combat the threat of deflation.   The Fed is terrified of deflation since it increases the value of money and decreases  the ability of borrowers to service their debt burdens relative to income.   Deflation would make it difficult and eventually impossible for governments to continue borrowing to stay current on their mountains of debt and entitlement obligations.

Inflating away the debt is the Fed’s solution for keeping U.S.A. Inc. in business.  The Fed’s inflation targeting will help the U.S. government from being overwhelmed by debt but long term it guarantees that the future purchasing power of the dollar will continue its relentless decline and the downward spiral in real inflation adjusted wages will continue.

There will be a “next recession” and when it comes the Fed’s only option is money printing since short term rates are already at zero.

1881-CC-Morgan-Dollar
Yellen has acknowledged that she has a soft spot in her heart for the unemployed. The Fed’s conflicting mission of ensuring a stable value of the dollar and promoting employment has morphed into a full blown effort to create economic wealth and jobs through higher inflation and printed money.

Courtesy: zerohedge

The monetarist fools at the Fed, lead by Yellen, seem fully committed to solving every economic problem with more monetary printing. This policy may keep the wheels from falling off in the short term but guarantee disastrous long term results.  Bernanke had his critics but Yellen seems like a novice by comparison – maybe she should grow a beard.

17 Questions About Gold and Silver The Federal Reserve Needs to Answer

Yikes!  We Have to Look at This for the Next Four Years

Yikes! We Have to Look at This for the Next Four Years

By: GE Christenson

1.  Germany requested that the NY Federal Reserve return the gold that Germany shipped to the United States decades ago. If the gold were physically in the vaults, it would be relatively simple to ship the gold back to Germany. It has not been returned, which begs the question, where is Germany’s gold?

2.  If Germany’s gold is “missing,” what about other gold from other countries that is supposedly stored at the NY Fed?

3.  Does the U.S. gold supposedly stored at Fort Knox and at the NY Fed still exist in those vaults?

4.  The U.S. believes in paper dollars and an unbacked debt based currency. Such currency can be created with little more than a few keystrokes on a Federal Reserve computer. Would the Fed and the U.S. government sell gold into the world market to slow the inevitable weakening of the U.S. dollar? Would the Fed and the U.S. government ship (via intermediaries) substantial quantities of gold to China to prevent dumping of T-bonds and dollars? Are gold sales a “delaying action” to extend the reserve currency status of the U.S. dollar?

CPI INFLATION

5.  If China is converting their excess of dollars and T-bonds into gold, buildings, land, businesses, mines, and so much more, what do they believe is the real value of those dollars and T-bonds?

6.  If much of the German, Italian, French, English, and U.S. gold is “missing” and is now in very strong hands, is the price of gold too low and likely to rise?

7.  What will happen to world bond and stock markets if confidence in the financial system evaporates? Would confidence in the financial system be damaged if the world became aware that most of the gold supposedly stored in government and central bank vaults in the western world is “missing?” Is this the primary reason why the U. S. gold vaults have not been audited for over 50 years?

8.  Why are China and Russia buying large quantities of gold from the western world as well as all of their domestic production?

9.  Paper dollars were, years ago, backed by gold or silver. They are no longer backed by either. Why?

feature-300x200

10.  JP Morgan testified before congress in 1912 and stated, Gold is money. Everything else is credit.” Do you understand what this means?

11.  You have $100,000 to invest today into either gold or S&P 500 Index ETFs. Which investment do you believe will purchase more gasoline in three years?

12.  If you had $100,000 to invest into either gold or Confederate paper money and Confederate bonds in 1862, which would have been the better investment 20 years later?

13.  Voltaire stated about 3 centuries ago that “paper money eventually returns to its intrinsic value – zero.” Most paper money systems throughout history have failed. The current paper systems seem likely to fail in the future. What is the intrinsic value of 80 ounces of gold (about $100,000 at today’s prices)? What is the intrinsic value of 5,000 $20 bills ($100,000)? Which seems likely to purchase more food in three years?

14.  Mayer Rothschild supposedly stated, “Give me control of a nation’s money and I care not who makes its laws.” Was he thinking that if he can create the currency and the legislature can be “influenced” with currency, then he can buy the legislation that his banking interests needed? Was he also thinking that if he can create the currency and he can trade that currency for physical gold, he had procured real wealth for his family?

15.  Nixon closed the gold window in 1971 and assured us that it was only temporary. Since then the (official) U.S. national debt has increased from approximately $398 Billion to over $17 Trillion – up by a factor of over 40. Interest must be paid on that debt. Was the creation of $17 Trillion in debt beneficial for the majority of the people and the economy of the U.S. or only for the political and financial elite?

FEDERAL DEBT

16.  Is the current U.S. paper money experiment going to end differently from any other failed fiat currency system?

17.  In 1971 gasoline in the U.S. cost approximately $0.35 per gallon. Today it costs approximately $3.50 per gallon. The rising national debt correlates with the rising prices of gasoline, tuition, health care, postage, coffee, stocks, gold, copper, rent, food, and so much more. Some of those prices have risen faster (others slower) than the debt, but the trend is the same since 1913 and especially since 1971 – all up substantially. Do you think this is a coincidence? Do you think the ongoing increase in national debt will continue to cause consumer price inflation or that it will, somehow, miraculously, cause prices to go down, in spite of 40 + years of contrary experience?

Conclusions

Is this the end of the world? No! But it is past time to realize that a debt based financial system is largely detrimental to most of the people outside the political and financial elite. Such a debt based system has a limited lifespan and a reset seems both imminent and inevitable. Actions to consider:

  • Eliminate non-mortgage debt and reduce the amount of other debt.
  • Convert variable rate mortgage debt to fixed interest rate debt.
  • Be wary of a stock market that has risen for almost five years and seems to be based more on QE, hope, and artificially lowered interest rates than upon earnings and the health of the economy.
  • Convert paper and digital dollars to gold and silver and store them in a safe depository outside the banking system.
  • Be careful in this increasingly dangerous world.

GE Christenson, aka Deviant Investor

The Ultimate Irony – Gold Bullion Is a Poor Investment According to “Too Big To Fail Banks”

coinAnalysts at the “Too Big To Fail” banks are unanimously predicting lower gold prices and telling their clients to dump gold.

On January 12, 2013 Goldman Sachs predicted that gold could fall to as low as $1,000 this year due to a less expansive monetary policy by the Federal Reserve.

In a report to clients this week Morgan Stanley analysts cut their price targets on gold for both 2014 and 2015 citing a strong global economy, rising interest rates and a reduced need for safe haven assets.

Not wanting to miss out on the “gold is dead party” Wells Fargo chimed in this week with their opinion that investors should eliminate their gold exposure on any rallies.

banks gone wild

The irony of the herd mentality on gold by the Too Big To Fail banks is beyond incredible.  Yes, these are the same “Too Big To Fail” banks who were selling billions of A rated mortgage backed securities to clients in 2007 that suddenly all defaulted in 2008.  Cynical types who remember the financial meltdown in housing of a few years back may also recall that the same banks now advising clients to dump gold were telling home buyers with shit credit and no income that, yes, you can afford that $800,000 house.

The big banks analysts seem to be engaging in a major group think exercise that justifies their dire predictions for future gold prices based on nothing more than an extrapolation of the gold price over the past two years.  We won’t even get into the part about how everyone at the big banks that almost blew up the financial world wound up getting bonuses instead of jail terms.

bankers

In any event there are many people who are ignoring the sage advice of the “Too Big To Fail” banks and buying gold anyways.

Japanese investors, who are growing increasingly alarmed by the concerted efforts of Prime Minister Abe to put Japan back on the “right track” by creating inflation with printing press money, are buying gold at a frenetic pace.

Gold sales by Japan’s biggest bullion retailer surged 63 percent to a five-year high as prices slumped and investors sought refuge from Prime Minister ShinzoAbe’s campaign to stoke inflation and weaken the yen.

Sales of bars to local investors by Tanaka Kikinzoku Kogyo K.K. soared to 37.3 metric tons in 2013, from 22.9 tons a year earlier, the Tokyo-based company said in a statement today. Sales exceeded purchases for the first time since 2004.

Demand for physical gold in China is also exploding as investors seek a safe haven asset that cannot be produced in infinite supply by the central banks of over indebted nations.

Increased demand in China, which probably overtook India as the world’s largest consumer last year, helped gold rebound from a six-month low of $1,182.52 on Dec. 31. China imported 1,017 tons of gold from Hong Kong in the first 11 months of 2013, almost double 2012’s total, Hong Kong government data show.

With the universally bearish outlook for gold by big money managers don’t be surprised if gold outperforms all other assets classes in 2014.

14 Tough Questions Gold Investors Have for the Federal Reserve

Liberty-EagleBy: GE Christenson

“Those who cannot remember the past, are condemned to repeat it.” George Santayana.

1. What mistakes from the past are we condemned to repeat?

2. Since unbacked paper currency systems have always failed in the past, why have bankers and economists promoted an unbacked paper currency system since 1971?

3. Would the Federal Reserve, which is owned by private banks, seek to enrich its member banks and the financial elite by implementing monetary policies such as QE that purchase distressed bank assets and boost the stock and bond markets?

4. Janet Yellen is the new leader of the Fed and new leaders are almost always confronted with a financial crisis early in their term. What should we expect during the next 18 months?

economic collapse

5. ALL paper money systems have eventually failed due to excessive “printing” of the paper currency. How many years of “printing” $85 Billion per month qualifies as excessive “printing”?

6. Human nature changes very slowly if at all. Politicians have lied to most of the people most of the time during the past several thousand years to serve their own self-interest. Are politicians currently lying about ObamaCare, strength of the economy, employment, the NSA, big banks, the IRS, Syria, and so much more?

7. Why does gasoline currently sell for approximately $3.50 per gallon even though it cost only $0.15 per gallon about 50 years ago? Why does a cup of restaurant coffee no longer sell for $0.10? Why do $20 gold coins containing nearly an ounce of gold now sell for over $1,250?

8. The S&P 500 Index is trading near an all-time high and is by most measures and sentiment severely over-bought on a weekly and monthly basis. Is it ready to correct downward?

9. Why is the official unemployment rate falling even though fewer Americans are working and the labor participation rate is at 30 year lows?

10. The Federal Reserve has been levitating the stock market and bailing out banks. Is it possible the Fed policies will backfire and those policies will eventually accomplish the opposite of what the Fed wants?

11. If the national debt of $17 Trillion can never be repaid, and if the U.S. government must borrow to pay the interest every year, and if the Federal Reserve must “print” those dollars, what is the real value of that debt? Is it $17 Trillion or perhaps a great deal less? The economist Hyman Minsky called this “Ponzi Finance” – the final stage of a debt based economic system when payments on the debt must be made from additional borrowing.

money printing

12. If a soaring gold price encouraged people to question the value of the U.S. dollar, and if the U.S. government had the means to suppress the price of gold, would the U.S. government manipulate the price of gold lower?

13. Germany requested their gold be returned from the NY Federal Reserve vaults about a year ago. It has NOT been returned. What happened to the German gold? Further, how much, if any, of the gold supposedly stored in Fort Knox is physically there and not “leased” or otherwise encumbered?

14. Gold has been money – a store of value, divisible, a medium of exchange, a unit of accounting, and intrinsically valuable – for 5,000 years. Paper money has usually been little more than a politician’s promise of integrity and responsibility. Which do you trust – gold or a politician’s promise?

These questions and their answers suggest that:

Drastic restructuring of the current monetary system seems inevitable, whether or not it is imminent.

Before the system resets it seems likely that governments around the world will scramble to locate and nationalize assets in order to maintain their power for a while longer. Capital controls and financial repression via artificially lowered interest rates are already in place. Pension plans, savings accounts, and IRA and 401(k) plans seem vulnerable to partial confiscation, bail-ins, or mandatory investment in government bonds. Such confiscations and bail-ins have already occurred in other parts of the world and could easily happen in the United States.

toned-morgan-dollar

Gold and silver have protected purchasing power and assets for 5,000 years. In this twilight period of the current debt based monetary system it seems likely gold and silver will increasingly be necessary for protection of purchasing power and assets. Are you prepared?

GE Christenson

aka Deviant Investor

Is a Monster Rally Brewing in Gold and Silver?

herbert-hooverBy: GE Christenson

The year 2013 was a great year for the S&P and a terrible year for silver and gold investors. There are many indications that it is time for a reversal.

If a market moves too far (up or down), too fast, or for too long, expect a reversal. Examples:

  • The S&P 500 index has moved MUCH higher during the past 57 months – a very long time. Expect a reversal soon.
  • Silver prices rose from $8.53 in October of 2008 to almost $50 in April of 2011, and then crashed (with help from JP Morgan and others) to under $19 in June and December of 2013. More currently, silver was priced about $34 just 13 months ago and is now down over 40% in that short time. Expect a reversal soon.
  • The NASDAQ 100 Index rose from under 1,100 in October of 1998 to nearly 5,000 in March of 2000 and then collapsed to under 800 in October of 2002. This was a mania and crash reversal.
  • Crude Oil rose from $51 in January of 2007 to $147 in July of 2008, and then collapsed to $36 that same year. What happened here? It was NOT a change in fundamentals!

The fundamentals for these markets did not change from normal to fantastic to terrible in a short time. It is clear that High Frequency Trading (HFT) algorithms, speculators, momentum players, the Fed, and others pushed the markets higher or lower to unsustainable levels and then reversed those markets.
How do Silver Prices Compare to the S&P?

Examine the data back to 1975 and calculate the ratio of the price of silver to the S&P 500 index. We see that:
1. SI / SP Ratio 38 year average: 0.029
2. SI / SP Ratio 38 year low: 0.003 November 2001
3. SI / SP Ratio 38 year high: 0.365 January 1980
4. Last 8 years average: 0.016
5. Last 8 years low: 0.007
6. Last 8 years high: 0.038 About 1/10th of 1980 high
7. Current ratio: 0.010 December 2013
8. The ratio declined from 1980 until 2001 during the silver bear market and the bull market in stocks.
9. Since 2001 the ratio has been rising along with the renewed bull market in silver.
10. Excel calculated a linear trend line for the ratio during the last eight years so that the deviation of the ratio, above or below, averages to zero. See the SI / SP Ratio and Linear Trend graph.

11. Plot that deviation, above or below the linear trend line, and it is easily seen that the ratio was very high in April of 2011 (silver too high) and is currently quite low – yes, silver is deeply oversold. See the Silver vs. Ratio Deviation From Linear Trend graph.

12. When the silver to S&P ratio increases to the average ratio since 2006 then the ratio of silver prices to the S&P should nearly triple – silver prices should rise substantially while the S&P is likely to fall.
Silver Prices are Too Low Compared to the S&P 500 Index

What else supports that analysis?

  • Silver prices have been going down, on average, for 32 months while the S&P has been rallying, on average, for 57 months – a very long time for both trends. A reversal is due.
  • In the shorter term, silver is oversold and the S&P is overbought, based on their 200 day moving averages. Silver is about 10% BELOW its 200 day moving average and the S&P is 10% ABOVE its 200 day moving average. Prices will regress to their means – higher for silver and lower for the S&P.
  • MANY other oscillators confirm that silver is oversold and the S&P is overbought. Expect reversals.
  • The U.S. national debt is huge – over $17 Trillion and doubling approximately every 7 years. Over the past three decades the smoothed prices of silver and gold have correlated with the national debt. We KNOW the national debt will continue increasing so we can be assured that, ON AVERAGE, the prices of silver and gold will continue to rise.
  • The S&P has been levitated by QE money printing, continual hype about the “recovery” and High Frequency Trading. Margin debt is at an all-time high, similar to just before the 1987 and 2000 stock market crashes. A trend change is due. An S&P crash is certainly possible.
  • Paper gold and silver prices have collapsed in the past year while demand for physical gold has risen to multi-year highs. Normal and honest markets do not operate this way for long. We can plan on continuing or increasing demand for gold in China, India and Russia as they trade dollars and T-bonds for hard assets. Expect gold prices to accelerate higher in 2014. Silver will follow.
  • Compare the price of silver to its 40 week moving average over the past eight years. See the Silver vs. Deviation From 40 wk MA graph. The deviation above/below the 40 week MA indicates that silver is oversold and due to rally.

Confidence in the silver market is low and only “die-hard” silver investors in the U.S. seem interested. Market sentiment is terrible and that suggests a trend change is likely.
Silver cycles: I understand that in our current environment (HFT, currency wars, manipulation of paper prices by JP Morgan and others, and QE) the prices of gold and silver can be easily pushed higher and lower. Consequently I trust cycles only a little, but consider:

Silver Long Cycles

Date Comment Time since last low
Feb. 1993 Important low
July 1997 Low 4.4 years
Nov. 2001 Important low 4.3 years
Aug. 2005 Low 3.7 years
Oct. 2008 Important low 3.2 years
June 2013 Important low 4.7 years
(Average 4.1 years)

It seems likely that the June 2013 will not be broken, or if it is, only briefly.

Silver Shorter Cycles

Date Comment Time since last low
June 2006 Intermediate low
Aug. 2007 Intermediate low 14 months
Oct. 2008 Intermediate low 14 months
Feb. 2010 Intermediate low 16 months
May 2011 Intermediate low 15 months
June 2012 Intermediate low 13 months
June 2013 Important low 12 months
(Average 14 months)
Conclusions

Silver and gold prices have been forced lower in the paper markets while the S&P has been levitated with zero-interest rates, HFT and QE. The financial powers-that-be, the political and financial elite, Wall Street, China, India, Russia, and the U.S. Treasury have all benefitted from the suppression of gold and silver prices. Most have also benefitted from QE and the S&P levitation. The surprise is not that gold and silver prices have been pushed lower after their 2011 blow-off rallies, but that the “smack down” has lasted so long in the face of such strong physical demand.

Regardless, regression to the mean is relevant, even in manipulated markets. Expect a trend change in 2014 and much higher gold and silver prices as they rally above their 200 day moving averages.

The ratio of silver prices to the S&P is back to 2008 levels and substantially below the linear trend since 2006. Expect the ratio to regress (rise) to its mean while silver prices rally substantially from here.

Both long and short term time cycles indicate that an important bottom occurred in June of 2013. It appears that a double-bottom occurred in December of 2013. If this double-bottom holds, time cycles suggest that silver will rally strongly in 2014.

GE Christenson aka Deviant Investor

Gold and Silver Can Defeat Government Taxes, Corruption and Theft

gold-buffaloBy: Vin Maru, TDV Golden Trader

As everyone rings in the New Year with a toast and a cheer for a prosperous 2014, Wall Street started celebrating many months ago and is ringing in the New Year with a glass of Dom Pérignon. They surely have a reason to celebrate as 2013 brought them good fortune and financial prosperity, having rung in the New Year with new all time highs on many of the US-based major indexes.

While there are many ways to measure prosperity, for Wall Street it’s all about profits and the bottom line. They only know one thing, how much wealth they can steal from others by “gaming” the system. I say “steal” because today’s markets are no longer about valuations and true price discovery. It’s more about computer algorithms, access to unlimited funds, having insider knowledge on buy and sell orders, front running the average investor and the ability to extract risk free profits by gaming the system. Of course this is nothing new for big Wall Street investment houses; over the last decade they have mastered the art of investing by gaming the system and extracting wealth from others.

Financial prosperity in today’s world means having the Federal Reserve central bank in your corner ready to bail you out in case any of your bets go bad. Becoming “Too Big to Fail” is a necessity to financial survival and having the regulators in your pocket also helps. Of course, we can’t forget about using extreme leverage, derivatives, credit default swaps and futures to squeeze some additional profits from the system.

With all these tools and means to game the system, investment banking for profit becomes a game of how much wealth you can steal from others before you get caught with your hand in the cookie jar. Of course when you do get caught, all you get is a slap on the wrist in terms of fines and penalties. If you get caught laundering money, rigging interest and foreign exchange rates — no problem, there is a fine for that, as long as you are one of the “Too Big to Fail” banks.

Today’s financial system is setup to steal your wealth. The bankers steal from you by rigging the system for their gain, and then the government fines the bankers for stealing. In order to maintain banking control and growth, the bankers have to resort to rigging the game even more so they maintain profit growth. This corrupt system of theft is definitely a win win situation, a win for the bankers and a win for the government, it’s only the average person who loses by having their pockets picked.

We can’t blame all of this on the bankers, the corruption in the Western financial world runs right to the root of the problem, government. By allowing central banking to exist, governments can ensure their own financial safety net and survival from having a system which continuously prints money to fund deficit spending. To remain in power, Government’s control only exists and grows because of taxation and the rules and regulations they impose on their citizens. Take France for example, their constitutional council and highest court just gave the green light to Hollande to introduce a top tax rate of 75 percent on earnings over one million Euros.

Of course, the most corrupt government in the world is the United States. Having the status of the world’s currency reserve empowered them to build the biggest army, thus giving them the ability to bully any other nation state by way of force or death. And if they don’t attack you directly, they surely will spy on you electronically via the NSA and they will definitely tax and fine you for non-compliance to their rules and regulations.

I always wondered if the US will ever get their deficits under control and how they will reduce their debt burden. One way for sure is that the US will tax and regulate their way out of financial debt by taking wealth that was hidden from them. After reading an article on how Swiss regulators recommended banks take provision for US tax deal, it became pretty obvious that all international bankers will be forced to comply with the US regulators or get shut out of their system.

The real irony of the situation is how this system is gamed right from the beginning to end, which then comes full circle to help governments. The bankers have been cashed up via the central banks and are making tremendous profits trading rigged markets. All this new wealth now on the banker’s balance sheet will be heavily taxed over the coming years and used to pay off fines imposed on them by governments and regulators.

proof-silver-eagle

In short, the corruption in US banking to help government finances, spending and debts goes like this:

  • The Federal Reserve central bank print money from nothing.
  • The CB then gives this newly printed money to big banks to buy US debt.
  • The “To Big to Fail” banks then sell the US debt back to the Fed (for a nice profit) and receive more money.
  • The big banks who are now cashed up, conduct proprietary trading to rig markets for even more profits.
  • All this extra ill-gotten cash sitting with the banks is then taxed, and/or regulated and fines are imposed for illegal rigging of markets.
  • This money is then given back to the US government which probably helps extinguish some debt or pays for gov’t expenses.

In this system of corrupt Western finance, the only people that lose are the people or entities who don’t see it happening or can’t take the necessary steps to avoid the theft and confiscation, and then actually profit from it happening. Anyone with savings will also get burned by either the devaluation of fiat currencies or outright theft of deposits at the banks by way of bail-ins or nationalization of retirement savings. Either way, the average person is at a disadvantage in a no win situation if they leave their assets in the western financial system.

The window to get your wealth out of the traditional western financial system is closing. Anyone who does so now will be saved from the ever growing corruption and theft that is coming down the road. Precious metals are one of many assets that should be continuously accumulated now and on any further pullback. At this point the rigged price of the metals is not as relevant as the number of ounces you own and hold outside the financial system, and that window is rapidly closing.

This is why I researched and wrote the special report for TDV called “Getting Your Gold out of Dodge”, to help you protect your precious metals assets. If you are also interested in coverage and trading opportunities in precious metals and technology, you can sign up for the TDV Golden Trader newsletter.

How Gold Could Plunge to $500

coinBy GE Christenson

Yup, that is the story. The following arguments explain why Charles and I think gold will plummet to around $500 per ounce. Also, after my luncheon date with Elvis, I have a large bridge for sale. If you are interested and willing to make a SERIOUS OFFER, see below.

The price of gold has roughly followed (up, up, and away) the growth of the U.S. national debt since 1971. The national debt is rising like 8% per year or like $1,000,000,000,000 per year. But don’t jump to the conclusion that gold prices will continue rising along with the debt! Charles Ponzi and I have faith in congress, lobbyists, and the sincerity of the budget process. We believe the national debt will rapidly fall due to the positive economic stimulus from ObamaCare, from actual budget cuts, and therefore gold should drop to new lows. Mr. Ponzi thinks it could go real low – like $450 or $500.

courtesy: www.michaelianblack.net

courtesy: www.michaelianblack.net

The other day an out-of-work economist friend and I had lunch. He is a bright guy and he used to work for one of them central banks, or maybe a rating agency, or the IMF. Anyway, the subject of economic forecasting came up, he got this “far-away” look in his eyes, and he started babbling. Perspiration formed on his forehead, and his left eye started twitching. The mood was weird, like really, really strange. I ordered a fourth martini for each of us and gently suggested, “Show me how it is done.” He pulled out a handful of bones from his coat pocket and tossed them onto the table. He babbled something about magic Emu bones from the 19th century. Then his eyes bugged open wide and he started panting. He studied the bones for at least a minute and then pronounced, with a slur in his raspy voice, gold will drop to $496 by the end of 2014. Now folks, that was the most compelling forecast I have ever heard. Gold is going much lower, say to $496, fairly soon. Believe it!

It has been widely reported that nearly 50,000,000 people in the U.S. are receiving food stamps or, as it is now called, the SNAP program. I figure those people need the program to help buy food, and that means their job market is still weak. No jobs, no excess cash. No excess cash, no gold purchases by food stamp recipients. No gold purchases, and the price drops. Simple! This is one more reason why the price of gold will drop much lower – back down to the $450 – $550 range.

I read that the recent agreement with Iran was a breakthrough in middle-east politics – sort of a win-win for all parties involved, except for maybe the native tribes of northern Canada. I checked my perception with a bartender friend who works in D.C. where congressional staffers get drunk and hustle lobbyist funding. Based on what he overheard from staffers, he agreed. But I needed confirmation, so I called the White House and read several editorials in liberal newspapers and they all confirmed the triumphant break-through. Stay with me here! If the mid-east problems are solved and the political premium on the price of crude disappears, then gasoline will be a lot less expensive, people will have more confidence in the economy, and, like totally obviously, they will sell gold and buy lots more stuff. I figured I had another big winner – sell gold, sell oil company stocks, and buy consumer stocks. This new mid-east agreement is another big reason why I think gold will drop below $550 per ounce in the upcoming year.

pm high-relief-gold

Congressional approval ratings are so bad that I bet I can find more people who have had lunch with Elvis than who think congress is doing a bang-up good job. I figure it is high time for Elvis to make a comeback national tour and for congress to better manage the economy and the dollar. Hence, gold should drop to new lows. Look for $450 – $500 and a new Elvis love song.

Everybody knows the Chinese have been buying all the gold they can grab for the past several years. Even with all their buying, the price of gold has dropped a bunch. Now this is simple – if the price dropped when the Chinese were aggressively buying, how much further will it drop when they slow their buying or totally stop buying gold? Why do I think the Chinese will stop buying gold? Simple – they have bought so much in the past five years, they gotta stop soon – the world might even run out of gold. I figure 2014 is the year they give up on gold purchases and that will cause the price of gold to plummet, maybe even below $400.

I also saw an article in a newspaper called the “D.C. Rag” about a new gold rush. The story ranted on about this scandal of insider democrats buying land in California. They didn’t want the land but they wanted the massive deposit of gold that had been recently discovered there in a shallow mine. The “Rag” mentioned that the only problem was the area was overrun by the native Sasquatches, but I’m confident those congressmen will figure something out and get the gold. More gold mined, more supply, lower prices! This stuff is not difficult. Gold is going down!

ST G

So there you have it! Gold is gonna drop hard in 2014. Why? Simple! The national debt will go down because Charles Ponzi believes ObamaCare is a good plan and that congress will cut the budget and actually produce a surplus, a weak job market is limiting gold purchases by the people on food stamps, an economist predicted that gold will drop to $496 in 2014, we expect peace in the mid-east, the Chinese will reduce their purchases of gold in 2014, and a new supply of gold has been discovered in the Sasquatch zone of California. I figure it is “an open and shut case.” Gold prices are going through the floor, and I just proved it, with help from Elvis, Charles Ponzi, my economist and bartender friends, and simple logic.

Now, about that bridge I have for sale, I can give you a 30% discount if you act today. Serious offers only! Send your information requests to:

GE Christenson
aka Deviant Investor

U.S. Marches Down the Road to Financial Perdition – No One Cares Until It Matters

american-gold-eagleBy: GE Christenson

The reality is relatively simple even though the appearance is complicated and confusing. What are we talking about?

  • Wars that are hugely profitable for a few individuals and businesses
  • Unauditable Pentagon accounting
  • Government debt that will never be repaid
  • Levitation of S&P and bond markets
  • Gold price suppression
  • So much more

We all know “something is wrong” but we keep riding the same corrupt “gravy train” because it works for many powerful people. Consider the interlocking complicity involved in the following:

Iraq and Other Wars

The previous administration produced “evidence” that Iraq had weapons of mass destruction and then claimed it was necessary to invade Iraq, distribute oil contracts to American and British oil companies, initiate “no-bid” contracts to politically connected American military contractors, massively increase government debt, and create huge profits for selected companies and industries. Those profits flowed back to the financial elite, agreeable congressmen, others in government, and to many American workers.

Even though it is now generally agreed that Iraq had no weapons of mass destruction and no means of launching those non-existent weapons against the United States, a great many connected people and businesses benefited financially from the Iraq War. Interlocking complicity worked well to promote the war and to profit from it.

Pentagon Accounting

About 12 years ago, Secretary of Defense, Donald Rumsfeld revealed that $2.3 Trillion was “missing” from the Pentagon books. (“War Racket Update” by acting-man.com – site down temporarily)

“A number of knowledgeable observers admitted that the Pentagon’s ‘books are cooked’ and that in essence, a giant cover-up was going on. A mixture of waste and theft on a truly breathtaking scale was and still is underway.”

It has been my experience that bad or fraudulent accounting is enabled, encouraged, or actively created by management. We can safely assume that the many highly intelligent people who work at the Pentagon could more accurately and transparently manage their operations if they wanted to do so. Hence, fraud and theft exist because management wants it – many people benefit while accountability is neither encouraged nor beneficial to those who are actually in charge. The powers-that-be, congress, the administration, and military contractors are complicit in working the system so that all parties benefit, other people pay the costs, there is minimal accountability, and the necessary payoffs are made. Interlocking complicity works well for those in charge of Pentagon funds and for those receiving the funds.

money printing

Government Debt

Congress has not passed a budget in five years and has been deficit spending for decades. The shortfall between revenues and expenses is borrowed with the understanding that the debts will never be paid – just “rolled over.” The financial and political elite benefit, government pays out massive amounts for military contracts, health care, prescription drugs, retirement programs, Social Security payments, Medicare, unemployment, aid to states, and it goes on and on. That explains how the U.S. government is officially in debt over $17 Trillion and has accrued another $100 – $200 Trillion in liabilities that have been promised but are not currently funded. Since most Americans are benefitting from one or more of these government distributions, most Americans are complicit in this giant borrow, spend and print Ponzi scheme. Because so many people benefit, few individuals or businesses want the process materially changed. Of course many people talk about balancing the budget, cutting spending, and fiscal accountability, but it is only talk. Because Congress has been unable to pass a budget in five years and must borrow a $Trillion or so each year there will be no accountability or budget cutting anytime in the near future. Interlocking complicity rules while we ride the giant government gravy train.

mart1

QE and the Levitation of Stock and Bond Markets

Even a quick glance at the last five years of market prices shows that QE has been a huge benefit to the stock and bond markets and that much of the funny money being “created out of thin air” by the Fed finds its way into those markets. Hence the stock and bond markets have been levitated while “main street” and the bottom 90% (those who have little of their net worth in stocks and bonds) have derived minimal or no benefit from QE. However, most of us realize that the US government cannot limit spending to only the revenue it collects, and that QE greatly benefits the financial and political elite. Interlocking complicity dictates that QE will continue as long as possible, even though “printing money” and debasing the currency have never successfully worked throughout history.

mart2

Central Banks and Gold Price Suppression

Central Banks (Bank of England, Federal Reserve, ECB) have sold or “leased” gold into the market, via bullion banks, to suppress the price of gold and to promote the idea of Pound, Dollar and Euro strength. Since central banking rules allow them to claim that gold is still their asset, even though it is physically gone, this process can work until the central banks are unwilling or unable to sell or “lease” additional gold. The Chinese, Indians, and Russians have purchased the gold directly from bullion banks, or taken delivery on futures contracts, shipped the gold to Switzerland where it has been melted down into kilo bars, and then moved it to the Eastern countries. A huge amount of gold has left the west where it is undervalued and now is vaulted in the East where it is better appreciated.

During the past several years the Chinese have vastly increased their gold holdings at favorable prices while dumping some of their depreciating dollars. The Western central banks further the illusion of value in unbacked debt based paper money while claiming gold is in a bubble, gold and the gold standard are barbarous relics, and enabling paper currencies to survive for a while longer. Interlocking complicity in the gold leasing and gold price suppression scheme currently benefits both the eastern and western countries.

Summary

The Pentagon cannot account for $Trillions. Since there is little incentive to stop the fraud, waste, and phony accounting, and since there is a large incentive for it to continue, expect the graft, corruption, black budget items, and payoffs to continue. Interlocking complicity works especially well at the Pentagon.

The US government does not want to cut spending and has a limited ability to increase revenues. Expect borrow and spend politics to dominate until a “reset” occurs and then expect a crisis and many speeches from important politicians who just noticed what has been obvious for decades. Interlocking complicity works well for congressional payoffs, reelection speeches, increasing power to the administrative branch, and, of course, massive profits to the industries that benefit the most from deficit spending, such as military contractors, banking, health care, pharmaceuticals and others.

Gold price suppression benefits western governments and central banks while the Chinese and Russians benefit by purchasing valuable gold with increasingly devalued dollars. Expect gold price suppression to continue until the west runs out of gold that can be melted down and shipped east. However, demand for physical gold is quite strong while supply is limited. Expect gold to trade MUCH higher in the next few years.

Interlocking complicity produces a degree of stability as it helps maintain the status quo, which is very important to the powers-that-be. Interlocking complicity ensures that accountability, oversight, and ethical practices are low priorities, while payoffs and no-bid contracts will maintain their important role in government operations. Interlocking complicity ensures that little change will occur until it is forced upon us.

Ask yourself

  • Are you prepared for a reset of our financial and social systems?
  • The Chinese are trading increasingly less valuable dollars for increasingly more valuable gold and silver. Should you do likewise?
  • Can a government spend more than it collects in revenue – forever?
  • Debasing the currency has never worked well in the past. Will this time be different for Japan, Europe and the United States?
  • Will Wall Street, Congress, military contractors and the pharmaceutical industry lobby for what is good for you or for them?

GE Christenson
aka Deviant Investor

Statistically Speaking Gold Should Have Been Strong In November – What’s Next?

gold1November has traditionally been a kind month for gold investors.  Since 2004 the price of gold during November (as measured by using the SPDR Gold Shares (GLD) as a proxy)  has been up 75% of the time with an average return of almost 5%.

As shown in a chart by @RyanDetrick, statistically speaking, the price of gold should have been up in November.

Instead of rising this November the GLD dropped from $126.95 to $120.70 for a price decline of 4.92%, the worst November for gold in 35 years.

GLD NOVEMBER

Conclusion?  Don’t rely on historical data to make current investment decisions.  Gold is in a downtrend and the selling is so overdone that the current market price of gold is below the production costs of most gold miners.

When will the price of gold recover?  No one can perfectly time price moves, but markets that are brutally oversold can come screaming back in a heartbeat when sentiment changes.  Long term gold investors only need to remember one important fact – the Federal Reserve is committed to a campaign that will continue to destroy the purchasing power of the dollar thus making gold a solid long term investment strategy for wealth preservation.

DOLLAR PURCHASING POWER

Monetizing Government Debt – Bernanke Says No, Common Sense Says Yes

2013-w-gold-eagleBy: Axel Merk

Fed Chair Bernanke vehemently denies Fed “monetizes the debt,” but our research shows the Fed may be increasingly doing so. We explain why and what the implications may be for the dollar, gold and currencies.

What is debt monetization? A central bank is said to monetize a government’s debt if it helps to finance its deficit. The buying of Treasuries by the Federal Reserve is a clear indication that the Fed is doing just that, except that Bernanke argues the motivation behind Treasury purchases is to help the economy, not the government.

The no-taper decision increased the Fed’s monetization of US debt. Gold may be more than insurance. Brace yourself for an escalation of Currency Wars.

To what extent does the Fed monetize the debt? The below chart shows that since the onset of the fall of 2008, the Fed has purchased enough Treasuries and Mortgage-Backed Securities (MBS), together, “quantitative easing” or (QE) to finance a substantial part of the government deficit. Indeed, by deciding not to “taper” off its purchases, the Fed is engaging in sufficient QE to purchase all debt issued and then some.

Shouldn’t one exclude MBS purchases in analyzing debt monetization? Buying MBS may provide the appearance that the Fed is not monetizing the debt when in fact it is. Don’t take our word for it, but the market’s: in a recent presentation to the CFA society in Melbourne, Merk Senior Economic Adviser and former St. Louis Fed President Bill Poole points out that the spread between 30-year fixed-rate mortgages and 10-year U.S. Treasury bonds have been virtually unchanged as a result of MBS purchases; from 1976 to 2006 the average spread was 1.74%. From May 2011 to April 2012 it averaged 1.76%. As such, the direct impact of QE on spreads has been extremely limited. If it sounds surprising, consider that investors have an array of choices that are highly similar: aside from currency risk, how different are German Treasuries versus U.S. Treasuries? Highly rated U.S. corporate issues versus U.S. Treasuries? They all have distinct risk profiles, but there’s a good reason why absent of issuer-specific news, these securities tend to trade in tandem. As such, the Fed is really just sipping with a straw from the ocean: setting rates may be more a result of communication (the “credibility of the Fed”) rather than the actual purchases.

gold-bullionIf rates are set by words rather than action, doesn’t that prove the point the Fed is not monetizing the debt? We agree that talk is cheap. But talk doesn’t always move the market; as confidence in the Fed’s ability to control rates erodes, policy becomes ever more expensive: cutting rates, emergency rate cuts, Treasury purchases, Operation Twist, and moving to an explicit employment target are all escalations of a policy to “convince” the market to keep rates low. And along the way, the Fed has to spend more money. Ask the Fed, and they’ll tell you their operations are profitable. Clearly, as the Fed creates money out of thin air to buy income-generating fixed income securities, the more the Fed “prints”, the more profitable it is. Except that there’s no free lunch and pigs still can’t fly. By all means, no central bank in their right mind would start out with a policy to monetize debt. But as the chart above shows, the Fed now spends over 150% of government deficit to hold rates down, suggesting that its firing power is eroding. If and when we come to the stage that the Fed were to explicitly monetize the debt, it may need to buy a high multiple of what it currently does and might still fail to keep rates low. It’s a confidence game.

What happened when the Fed decided not to “taper” its bond purchase program? As the chart above shows, something went wrong, very wrong. As tax revenue has picked up throughout the year, government deficits have come down. As such, reducing QE would have been warranted. By choosing not to “taper,” one can argue that QE has actually increased, as the Fed is buying above and beyond newly issued debt. Note the Fed will push back yet again, arguing it cannot buy debt directly from the government only in the secondary market. But that may well be semantics. As a large bond manager has pointed out: in the absence of QE, we might have to sell debt to one another, rather than to the Fed.

rooseveltWhere’s debt monetization heading? The way we see the dynamics playing out, this confidence game will go on for some time, yet we may increasingly be seeing cracks. Lower government deficits may be a short-term phenomenon as over the long-term the cost of entitlements and interest payments may rise substantially, highlighting that deficits may not be sustainable. In 10 years from now, the Congressional Budget Office (CBO) estimates the U.S. government may be paying $600 billion more a year in interest expense alone; indeed, if the average cost of borrowing went back up to the average cost of borrowing since the 1970s, the government may need to pay $1 trillion more per year in interest expense alone. To us, this suggests the biggest threat we are facing may be economic growth. That’s because the bond market has been most sensitive to good economic data; yet, should the bond market sell off (increasing the cost of borrowing), the cost of financing U.S. government deficits may escalate. We already have a Fed that has indicated interest rates will stay low for an extended period. In some ways, the Fed has all but guaranteed that it will be slow in raising rates. We interpret that as the Fed being slow to rising inflationary pressures that are likely to increase should the economy ever pick up again.

This is all too abstract – how will this play out? If you think this is abstract, think Japan. Let the Japanese be successful with their policies, let them achieve sustained economic growth. What do you think will happen to Japanese Government Bonds (JGBs)? JGBs might plunge, making it difficult, if not impossible, to finance Japan’s massive government debt burden. Few observers doubt that the Bank of Japan (BoJ) may step in to help finance government deficits. That’s debt monetization. We think the valve for Japan will be the yen that won’t survive this. When we discuss this with investors, most agree that this is a real risk for Japan. But don’t kid yourself: even if we may be able to kick the can down the road for longer in the U.S., we think it may be hazardous to one’s wealth to ignore the risks posed to the dollar due to a toxic mix of monetary and fiscal policy.

paper moneyHow do I prepare as an investor? The way we look at the world is in terms of scenarios: if a scenario is sufficiently likely, we think investors should take it into account in their portfolio allocation; professional investors may even have it as their fiduciary duty. To us, the short answer is that there is no such thing anymore as a risk free investment and investors may want to take a diversified approach to something as mundane as cash. Investors may want to consider throwing out the risk free component in their asset allocation. That’s because the purchasing power of the U.S. dollar may be at risk.

Is gold the answer? Gold has performed rather poorly this year and is increasingly being written off. Yet, those writing off gold should think twice about where they see the economy and the Fed heading. If one believes we will return to a “normal” environment and we’ll live happily ever after, maybe those gold naysayers have a point. But keep in mind that incoming Fed Chair Janet Yellen stated during her confirmation hearings that we shall return to a normal Fed policy once the economy is back to normal. To us, that’s an oxymoron: we cannot return to a normal economy when the Fed prevents risk being priced by market forces. To us, gold is more than “insurance” to adverse scenarios as some say, as we find it difficult to see how we’ll be facing positive real interest rates for an extended period over the coming decade.

Is a basket of currencies the answer? The Chinese government diversifies its reserves to a basket of currencies, clearly adding currency risk to their portfolio. Conversely, U.S. investors may want to consider diversifying to a basket of currencies if they believe we ultimately have the better “printing press” than the rest of the world?

But isn’t it more complex than that? In some ways, yes. Governments won’t give up without a fight. We believe policy makers want to do the right thing, except that the road to hell might be paved with good intentions. Just consider if Japan truly has a problem: Japan is no Cyprus, meaning that shockwaves of a Japanese government in turmoil might be felt around the world. Aside from cash not being “safe,” political stability may also continue to erode throughout the world, as citizens worldwide dissatisfied that their wages don’t keep up with an increasing cost of living elect ever more populist politicians. The only good news we can see is that our policy makers may be predictable and an investment strategy based on staying a step ahead of policy makers might be worth considering. Think currency wars, and think diversifying on a more pro-active basis. We are not suggesting investors become day traders, but we think the currency markets may be well suited to take positions on how one believes these dynamics may play out.

Axel Merk
Axel Merk is President and Chief Investment Officer, Merk Investments,
Manager of the Merk Funds.