It reminds me of an arm-wrestling contest: one participant nearly wins, then it reverses and the other one nearly wins then they end up back with neither one in control. Sooner or later, one of the two will prevail. That’s what the gold market looks like lately. The neutral point and the battleground is $1,600. It’s above, it’s below. Which way will it move? If Sinclair is right, it will move UP, although it could, for a very short period, touch the $1,580 range. If Larry Edelson is right, it will collapse down to the low $1,500s or lower. Stay tuned. Tuesday gold closed at $1,599.50. That’s a classic example of “painting the charts.” They do it because the CLOSE is the only price that matters. Meanwhile, silver is along for the ride.
Yesterday, I was talking to a buddy who is in our industry. He lives in an exclusive community and most of the people there are very, very wealthy. He was at a cocktail party and one of the people he met asked him what he did for a living. He said he was in the precious metals business. Of course, the gentleman had no idea what it was all about, so my buddy gave him a copy of a book he wrote (on the flaws in Keynesian economics and Liberal socialistic politics). It’s a great book. I’ve read it. Anyway, when he saw the gentleman a few days later, he asked him what he thought of it. The man replied, “I read a few pages and never finished it.”
Obviously, he wasn’t impressed. I have had similar experiences on three different occasions here in Florida. It is next to impossible to get wealthy people, especially muni bondholders, to listen to hard money arguments.
[Muni bond portfolios (used for income and safety) previously made sense when the possibility of a depression or hyperinflation was a distant thought. That said, most investment decisions, usually directed by a Wall Street money manager or a highly touted money manager, are the result of the Fed’s actions. And the Fed, with their zero-interest rate QE to Infinity policy have made it very difficult to live off of the low returns due to the low interest rates. At least tax-free munis are a viable option – and that’s why so much money is pouring into the stock market. Not because of robust economic growth, but because it’s impossible to make realistic gains from interest-bearing investments.]
But, if John Williams (Shadowstats) is correct, we could be facing both a depression, and hyperinflation within 16 months, which would wreck havoc on this type of portfolio – especially one without the balance offered by a position in precious metals in their portfolio. But these people will not balance their bond portfolios with gold and silver. It will never happen. They usually tell me that they have an inflation hedge with growth stocks. Never gold. The people who favor a muni bond portfolio will be the last ones to accept or admit these events are even possible. It appears, the people with the most money will be the last to move to gold. Their smugness and certainty will be their undoing – IF things work out as they should. These people, though well informed in many areas, really don’t understand gold’s role as money or its value during periods of rising inflation. And “if” they did, they would deny that inflation is a problem because they rely on the mis-leading BLS inflation numbers, which are just one-fourth of the numbers presented by John Williams. They still think that inflation is rising prices and ignore the real definition of inflation as a RISE in the MONEY SUPPLY beyond growth in goods and services.
Our (Federal) debt is growing at the rate of well over a trillion dollar a year, and the money supply has to keep up with the debt growth to keep the economy form retrenching. The Fed knows this and that is why they are pumping $85 billion a month of NEW money into the economy. Inflation is here, right now, in a big way, but these people refuse to see it. It’s the elephant lying on the floor in the living room that no one notices. Until it steps on you.
I am not a doom-and-gloomer, as some would say. Backwoods Jack accused me of that the other day. He says my views are un-American. He says Americans have always found a way to work through their problems. He says the stock market will soar, the economy is strong, the buffoons in Washington will figure things out. He says, “I know many wealthy and successful people in all walks of life and none of them agree with you. His views have always been consistent with the views of most wealthy people. They WANT to believe that America and their money will always be safe. Hope and faith are a wonderful thing. But they should be based on reality.
I try and keep an open mind and look at different possible outcomes and both sides of an issue. I am willing to change my mind if facts dictate I should. Frankly, I have not seen a compelling reason to ignore the views of Jim Sinclair, John Williams or Eric Sprott (and others of a like-mind). I, along with Andy Hoffman and Bill Holter, have all reached the same conclusion. The math is working against us. Hope and faith in America’s future is a wonderful thing. The question is – is it justified? There are so many black swans out there. Cyprus is a perfect example. What happens when the problem banks and their problem bond portfolios fail – in Spain, Italy, and the rest of the PIIGS? What happens when savers and investors around the world pull their money out of the banks and the bond markets? What happens when foreign holders of US bonds decide to sell, and the dollar drops? You say, “It can’t happen?” I say it can! (Actually, I say it will, it must.)
Who’s right? Since that question will only be answered AFTER THE FACT, I say, who can afford not to have gold and silver as a balance until these questions are resolved? Using the real numbers on the growth of our debt and money supply, which we have featured on this site over and over again, should convince anyone who wishes to see the truth – that we all need much more than hope and faith in The American Way. We need a gold and silver safety net. Actually, we also need a clean start and a sound currency. It wasn’t always this way. The American Way looked pretty good after WW2.
Speaking of WW2, did you know that WW2 still costs taxpayers $5 billion a year? And we haven’t closed the books on the Civil War yet. Family members of the survivors of WW1 get $20 million a year. The Korean War costs $2.8 billion a year and the Vietnam vets rake in another $22 billion a year. The Middle Eastern wars will prove to be the most costly of all. It is wise to remember that the cost of the Vietnam war drove this country into double-digit inflation and prompted gold to rise from $35 an ounce to over $850 in a decade. The stock market tanked in the 70s, due to the high interest rates that were the result of the high inflation.
This time around, interest rates are NOT being allowed to rise. That is what QE to infinity is all about. The Fed is printing money (and it will lead to rapidly rising prices) to hold interest rates down. What other choice do they have? With the national debt moving toward $17 trillion, a measly one percent increase in interest rates adds $170 billion to the deficit and the national debt, where it is compounded! That’s just one percent. What if interest rates had to rise to 10% or 14%, which is what it was in 1980? Do the math.
This is what I am talking about, when I say if you look at the numbers, we are in trouble and no one is offering a workable plan to avoid the pain. The Fed can’t QE trillions of dollars a year, every year, to hold down interest rates. QE is the major cause of the pending inflation. You don’t cure a cocaine addict by giving him larger doses of cocaine. If creating more money causes the inflation (rising prices, after the fact), then creating even more money too keep the economy alive is the last thing one should do. It’s throwing gasoline on the fire. The only possible hope is for our economy to grow dramatically, but how will we do it? We have lots of brainpower in America and come up with lots of new ideas and technologies, and always have, yet our trade deficits are counted in the hundreds of trillions. We buy more than we sell, so where will the huge growth, necessary to fund the monster debts come from? The last time I looked, our GDP was in the 1% to 2% a year range, and that is calculated using inflation numbers that are ridiculously low (around 2% instead of Shadowstats near 10%). If an honest inflation number is used, there is NO growth; we are falling further behind every year.
Does it make me a doom-and-gloomer to point this out? Am I a doom-and-gloomer because I warned people the stock market would crash a year in advance? Or that I wrote about the mega-problems we faced with un-regulated derivatives in 2007? Or when I told my son Andy to sell his house in 2007 and rent, (which by the way he did, and invested his equity into gold, which has nearly tripled since)? But nobody wants to hear “I told you so.”
I haven’t been 100% right. I didn’t see the pullback in precious metals coming 18 months ago. But it shouldn’t have happened, and wouldn’t without massive intervention by the Fed, with the help of the bullion banks and the hedge funds, who blindly follow their moving averages and try and profit by shorting the downward manipulated markets. The manipulation is nothing new, but the intensity of it, after gold was approaching $2,000 and silver $50 was startling. The Fed was scared to death that the fiat currency rig was about to unravel and the dollar would lose appeal, as it did in the 1970s when foreigners dumped the dollar and rushed to gold and silver. However to hold back the price of gold and silver has been a massive transfer of PHYSICAL metals to Asia.
The Chinese are the “put” to the price of gold, the backdrop. The lower the price goes the more they accumulate. And the Russians and Indians are right there with them. The manipulation is a PAPER, highly leveraged manipulation. It will not work much longer. Sinclair says, and he has been there before, the paper market will go to cash. There will be NO margin on Comex gold and silver contracts. In other words, buyers may as well go to the physicals because without “margin,” there will be no reason to hold paper contracts. The Hunt brothers were brought down when the silver market went to cash. This time, when it happens again, it will be something to behold. And if you think the bullion banks (JPM and friends) will get their due, Sinclair has said for years that they will be the ones who are LONG when it happens and make the most money off of the swing. I guess that leaves the hedge funds holding the bag, because it is a zero-sum game and for every long there is a short. It will be something to see, and a wonderful thing to be a part of, if you are on the right side of the move. I say, if you’ve got two or three years to wait, you will probably see it happen.
We’ve been warning our readers not to keep their gold and silver in a bank safety deposit box. It is far safer to store it in a private, offshore non-bank facility, like our precious metal storage program with Brink’s, in Canada.
Am I being an “alarmist?” It’s all there if you look. You can start by checking out the following articles below.
Miles Franklin Ltd.
GOLD BANK RUN BEGINS? DUTCH BANK ABN AMRO HALTS PHYSICAL GOLD DELIVERY! – SilverDoctors.com
March 25 2013
*Breaking The Cyprus/ Eurozone crisis has just intensified, as Dutch Bank ABN Amro has sent a letter to clients this weekend informing them that they will halt extradition and physical delivery of their clients’ gold holdings effective April 1st!
No worries however, Amro ensures its clients that there is no need to panic or do anything rash (such as remove your phyzz prior to April 1st:
We ensure that we have your investments in precious metals now the new way to handle and administer
Forget traditional imminent deposit bank runs in Cyprus, has a physical gold bank run begun?
Continue reading on SilverDoctors.com
The following is from Jim Willie of the Hat Trick Letter:
THE C.I.A. CONFISCATION HAS BEGUN AT BANK SAFETY DEPOSIT BOXES. THE REPORTED SEIZURES ARE NOT YET WIDESPREAD, BUT EXPECT THEM TO BE SO. THE PATRIOT ACT LEGALLY PERMITS THE THEFTS, WHICH WILL PROVIDE AN ADDITIONAL SUPPLY OF GOLD FOR THE WALL STREET BANKER ROBBER BARONS.
A Steve Quayle subscriber has reported that the two-dozen gold Krugerrands he kept stored in his safety deposit box have been taken in a bold swipe. The Fifth Third Bank is located in Cincinnati, the site of the sanctioned theft. After the confiscation, the bank manager sheepishly informed the man that a CIA agent was the culprit who cleaned out his supply of gold coins, but all the stored USDollar bills were left untouched in the safety box. Recall broad warnings concerning the rules delineated within the Patriot Act, which forbids usage of bank safety boxes to hold coins, jewelry, or any metal items of wealth. Only documents, contracts, papers, photographs, and other non-metallic objects like a treasured scarf are permitted. They have finally struck, thefts sponsored by the USGovt and its security agency overseers. Expect the location of thefts to grow much wider, with more prevalent reports. See the Silver Doctors article (CLICK HERE).