| sep 17 2006 | | 2015 The End of the World. | Now I bet that got your attention. No, this isn’t going to be about the coming apocalypse, although that event could be linked with this one. What we are looking at here is the financial meltdown of western economies, the consequences and what you should be doing to protect your wealth. The simple answer is to pay down debt and accumulate gold. The good news is even if I am 100% wrong you will be better off but if I am 10% right you will put me on your top bloke list.
Before we get to the analysis I want to give you a picture of America post-collapse. This is easy; just watch the movie “The Levee Broke” documenting the aftermath of hurricane Katrina. This is what happens when the government cuts the people off to fend for themselves. Now consider the whole of America without any funding for social programs, no welfare, no medi-care, no food, no water, no hope. Bush left the bloated dead bodies lying on the freeway for days because they were black or poor. America is the richest country in the world and can do anything it wants. It all comes down to which decision “they” want to make. America is also the most indebted country in the world but more of that later. The depression of the ‘30s will look like a church outing. The funds for homeland security have been well spent. The holding centres have been built and I somehow don’t see them being filled with terrorists. Not scared yet? Read on.
“It’s all about the money.” I don’t care what the subject is that is being debated, in essence it come to one thing. Show me the money. Find that and every conundrum is made clear. All answers are easy.
Wait a moment I can hear readers, in Canada, Europe, Australia and the rest of the world all clicking there favorite’s button to get back to another website because they feel this has nothing to do with them. Well wait up. Number one you will certainly get a comment which directly impacts you and secondly don’t you realize that everything of importance in this world is priced in dollars, whether it be my favorite element Au, oil, freight rates, if the dollar sneezes the rest of the world catches pneumonia. Well the current dollar has immune deficiency so the rest of the world economies will be minging.
While we are on the subject let’s check out the sick ward. This is from a report produced by the CIA.
The country with the best position is Japan - with a current account balance of plus $165 billion. China is in the number two position, with almost as much. Germany is the third most 'profitable' country in the world - with a positive current account balance of $115 billion. Then the list goes into various oil producers, watchmakers, and assorted national curiosities...such as Algeria...with - would you believe it - has an $18 billion surplus! Even tiny Hong Kong ended last year nearly $20 billion to the good.
But between Swaziland and the Comoros (which, we believe is an island nation somewhere off the coast of Africa) the figures make the kind of transformation that can only be likened, in the material world, to going from light to darkness, or in the sentient world, from life to death. That is, they go from positive to negative. The numbers which were such a comfort to Germany and such a delight to Japan become an embarrassment.
Poor Burkina Faso, perhaps the most God-forsaken hole on the surface of the whole planet, suffers a $438 million deficit and still manages to hold its head up in public.
Burkina Faso is far from the worst on the CIA's list.
The rest of Africa follows...and then come the Banana Republics of Latin America...and finally, guess who makes the end of the line-up? Guess who has the worst current account deficits in the entire world? Guess which countries spend more than they earn - regularly and spectacularly?
Last in line are the nations of the Anglo-Saxon, English-speaking debt-based empire! New Zealand has a deficit of nearly $10 billion. Then, South Africa...and India...and Australia all have deficits too. Among the major former colonies of the British Empire, only Canada seems to have any sense. It runs a surplus. The others are all debtors. The UK itself is third from the bottom with a $57 billion negative current account balance.
For no reason we can think of, the penultimate on the list is Spain. And then comes the worst of all...the United States of America, with a current account balance of a minus $829 billion. Add up all the deficits of the entire world and you get a figure barely half of the U.S. total. The U.S. economy makes up a quarter of the world total...that it should have more than half of the world's current account deficits is a spectacular success - only made possible by its great wealth and status.
Source Daily Reckoning. Sept 13th 2006
Random Fact: There are $250 trillion dollars of derivatives in the market. Most bankers don’t understand them. They are a form of quantum financials. Before 2001 for example there virtually no credit derivatives, by 2005 there were $17.3 trillion. Who knows how many there are now and does anyone claim to understand the magnitude of the numbers? These are just a series of noughts on a computer. The number is beyond comprehension so our mind shuts off. What does Warren Buffet have to say on the subject; after all he is a giant in the world of finance? Well he referred to them as “financial weapons of mass destruction.” In 1995 Nick Leeson brought down Barings Bank founded in 1762 with a $1.4 billion futures contract that the banks regulators didn’t understand. That is peanuts.
You can no longer believe any government statistic that is issued. Before they are made public they are all subject to a better going over than any Turkish masseur could give. Why did the US Treasury stop putting out the M3 figure (M3 is the official measurement of total money supply of dollars in circulation?) There is only one reason. Because they do not want us to know.
So why buy gold. Gold keeps bankers honest. That is why they got rid of the gold standard. The result is they can print as much money as they want, provided other countries will accept it. This is fiat money, pieces of paper with no backing, that are only worth what someone is prepared to value them at.
The Oracle of Omaha Warren Buffet explained, "We were taught in Economics 101 that countries could not for long sustain large, ever-growing trade deficits. At a point, so it was claimed, the spree of the consumption-happy nation would be braked by currency-rate adjustments and by the unwillingness of creditor countries to accept an endless flow of IOUs from the big spenders. And that's the way it has indeed worked for the rest of the world, as we can see by the abrupt shutoffs of credit that many profligate nations have suffered in recent decades. The U.S., however, enjoys special status. In effect, we can behave today as we wish because our past financial behavior was so exemplary - and because we are so rich.
Right on Warren, remember the collapse of Argentina, Brazil, the Asian meltdown, the Russian default. Those currencies imploded with much smaller debts than America. As usual the common people paid the price in lost savings, lost jobs and austerity measures. Meanwhile foreigners keep buying dollars and dollar denominate bonds to give the States the funds to pay the interest on their loans. The biggest Ponzi scheme in history and back by the government of the United States of America in connivance with the world’s major central bankers. http://en.wikipedia.org/wiki/Ponzi#The_Ponzi_Scheme
So who keeps buying these worthless dollars? Why do they buy these worthless dollars? If we look at the holders of dollars then Japan has by far the largest central bank holding. The second largest holder is China. Then all the other countries of the world that hold dollars to trade the commodities they need. Remember most commodities are prices in dollars so as a central bank you need to hold sufficient dollars to ensure unobstructed trade. The other reason is that most central banks want to see an orderly controlled reduction in the value of the dollar, which is official US policy. Firstly they hold these dollars and it does not help their economies if their central bank holdings are worthless, plus the last thing they want is a collapse and the consequences that follow. So to maintain stability they have to hold a depreciating currency because the alternative is too terrifying. That does not mean all central banks are beholding to this ideal. China is amassing a huge amount of dollar holdings and some generals have written about the opportunity to topple the States in an ‘economic war’. By dumping their dollar denominated holdings they would put the dollar in free fall which required a huge upward spike in interest rates and required the world’s central banks to intervene on the forex markets to try to mop up this sea of dollars. Of course the Chinese would lose as well a bit like one of those zero winner results.
Gold is once again, true to its nature, reasserting itself as a currency and not just a commodity. This is what many gold debunkers miss.
Greenspan is the other powerful figure in my thinking this week. Back in the late 90’s he made the famous statement about Central banks standing ready to lease vast amounts of gold to keep the POG down, to keep the fiat game going and maintain “confidence”. His only caveat was this burning question that keeps my mathematical mind racing… “However, what happens when we run out of gold to sell?”
Neil Charnock. Kitco sept. 15th 2006
Adjusted for inflation gold should be at least three times its current value. Why does it not reflect this? Read the material produced by GATA.org which shows clear manipulation of the gold price over the years by central banks protecting the value of the dollar.
The housing bubble is leaking air faster and faster. The consumer is running out of credit. The American economy is headed into a recession. The dollar will drop, gold will rise. All these things will come to pass. Because of the protectionist measures taken by the feds in the last couple of decades, the coming fall will be harder and more violent than it would have been if they had allowed it to play out. It will last longer and have serious consequences. It may happen tomorrow with some financial scandal but could take longer, hence up to 2015. It will make the Long-Term Capital Management hedge fund meltdown in 1998 of $5 billion look like change. It will make the Enron bankruptcy of $100 billion look like pocket money. When it starts happening you will be overwhelmed. There may be precipitous drops follow by false rallies, followed by further drops. Do not be in the market. Now is the time to make preparations.
In the last four years gold has doubled. Within the next two years it will double again. Two factors will affect its rise. One is the decline in the dollar its denominated currency, this is an inverse relationship, as the dollar declines gold goes up to preserve its value. The second factor is the “flight to safety” factor which makes gold the most prized asset. When all other financial metrics fail gold remains true as a wealth preserver.
The feds have also put in place the PPT. This Plunge Protection Team intervenes in the market to ensure an orderly market. http://en.wikipedia.org/wiki/Plunge_Protection_Team
So you have the world’s central banks and the Presidents PPT who have over the decades being the invisible hand tinkering with the free market with good intentions. We all know how good intentions can screw up any situation. Plus this veneer of control and safety will strip away to reveal forces beyond the control of all nations. Reminders me of the nursery rhyme, “all the kings’ horses and all the kings’ men couldn’t put Humpty together again.”
With the fall of the Berlin Wall and the collapse of communism the United States found itself the biggest game on the block with no contenders. CONPLAN 8022 was devised by the neo-cons as a strategy to ensure this void of competition was never to be filled by any other country or group of nations. It specifies benign world domination and pre-emptive takedown of any country that looks like it poses a threat. This situation will not continue without a major world conflict. It does not matter whether it will be about oil, water, or the attack on a country like Iran who have built allegiances with China and Russia, history shows us there is never a drought when it comes to flash points.
Gold will be the place to be.
| | Respond... |
|
|
 |
|
