Breath-Taking Collapse

http://www.kitco.com/ind/Wiegand/aug152008.html

Kitco Essay
Roger Wiegand, August 15, 2008

Breath-Taking Collapse


The speed and volatility of credit and share
markets’ collapse this week has been astounding.

While tout TV, international banksters and market manipulators did their level best to hide it, prime supports are caving-in with scary rapidity. Most all global stock markets have posted the arbitrary 20% declines, or more taking them “officially into recession.” The USA was there long ago but has not been recognized for several nefarious reasons. Canada is the last major nation not in official recession. Stock markets tell us the future for months in advance and it’s not at all pretty. Bond markets take it a step further as these traders forecast credit standards and interest rate trends with remarkable accuracy. In many respects, the bond traders predict more than the manipulated shares’ markets. As we’ve been shaken and rudely reminded by the bond boys; credit, bonds and cash are driving the bus not share markets.

We were hoping Chopper Ben and nervous Hank could hold it altogether with Federal Reserve and US Treasury chewing gum and bailing wire. It’s only not working but it appears another soon-to-be-named monster corporation or global bank is going over the falls into a gigantic smash. Worse yet, Australia, a leading commodity indicator and shining light mining provider had a big bank post a massive derivative write down ala Merrill Lynch. This super nasty event sets the credit quality bar infinitely lower than their credit system can manage. As in America, they are on the edge with a cataclysmic firestorm at their backs.

In the worlds’ of trading and finance, exiting holders of small positions have little affect on price. But when a nation has six dominant banks mutually holding piles of derivatives and one sells out with a BK-like discount what do you suppose the other five banks’ stuff is worth? All it takes is one and they all cave-in with massive write-downs and a falling domino lack of confidence in this paper.

It appeared earlier this week that new bottoms were found in commodities including our favorites. We’ve been snake bit before years ago when being a tad too eager. This is why our forecast for a new beginning was either 8-15-08 or, 8-18-08 for this new rally. Considering more damage done yesterday overseas and a large trading error in silver last night, the repairs might take even more time.


We checked with our broker this morning and he figured somebody had a large silver futures order posted with thousands of contracts and didn’t meet a margin call. The broker had to close ‘em out and silver skidded $2.00; a rather large negative move to say the least. Since this apparently happened in the night during thin electronic trading, there was nobody on the other side of this failed trade to help.


Silver fell from roughly 14.30 to 12.30 on the December, 2008 futures. This morning it came back to 13.19 by 10:16am and we predict it could close at 14.32 to 14.48 for this Friday, if it can recover. Monday is another day and hopefully better realigned after this mess to base and rally some more. We would suggest the worse case recovery could now be in the last week of August or after Labor Day next month. The only caveat would be if some other outlier or Black Swan (vulture) came flying in out of nowhere and hit us again.


Currency Disruptions Real and Accidental

Central banks of the world including the USA noticed the August 15, 2008 breakout time was due for precious metals on the historical cycles and Mr. US Dollar was looking pretty punk. Further, there has been an increasing storm of foreign whining (deservedly so) about the dollar’s sinking valuations. Lots of folks have been increasing upset about taking dollars for manufactured stuff and then watching their newly acquired paper skid toward trash levels. This is why Asia, Europe and others, forced to take US bonds, notes and currencies have been spending it with vigor to purchase hard assets of value.

The intake of dollars into China, Japan, India, Europe and Middle East for oil has been offset with follow-on trades for exiting those dollars. First these nations moved dollars into stronger currencies but now those formerly stronger currencies like the Euro are sinking, too. Next secret sovereign banks used dollars to buy US shares. The embarrassment of riches is too much so any hard asset is the last resort and that is where off-loaded dollars are moving right now.

Currency traders yahooed the new dollar rally saying it had improved. Wrongo! The dollar is just as crummy as before, it’s just that the Yuan, Euros and others dumped over and are selling BRIEFLY, faster than our dollars. This is a temporary re-jiggering of currencies in the marketplace. Soon the dollar resumes its skid into oblivion. None of these fiat currencies is backed by gold so the next great trade is toward the Swiss Franc, long considered the premier, blue chip currency, yet un-backed by gold.

These so-called superior credits of US Treasury bills, notes and bonds have already posted lower credit scores as somebody wrote two weeks ago the USA national credit is AA not AAA. Traders need to keep currency valuations in perspective to get a better handle on speeds of up-down trading, overall volatility and relationships in dominant groups.

For example, the UK’s British Pound has been hammered as they are suffering a housing bubble and related credit mess even worse than in the US if you can imagine that one. Now that Australia has tripped and our F&F Fannie and Freddie specious rescue plan’s in place, it seems everybody is going one notch closer to Armageddon, or at least crash city.

The End Game

We’ve watched this rolling disaster with unblinking amazement as Benny and Hank furiously stomp out the weekly forest fires. We’ve learned throwing mountains of taxpayer cash is not a solution. With each succeeding fire, it takes more credit, more lying, and more taxpayer robbery to snuff the latest conflagration. These credit firemen are about out of water as next they face the largest hurdle of all-consumer collapse.

The entire saga goes back first to give-away real estate lending and related companion derivatives. Since consumers have been the traditional locomotive of America’s economy we now reside in some really deep pasture piles.

The green guy pumped real estate to avoid a recession after 2000 when the Nasdaq dumped. It worked but made things much worse only delaying the inevitable.

Foolish unqualified consumers got nearly free money not only for houses but subsequent crazy inflation enabled them to buy lots more stuff using the follow-on transparent, phony ATM house equity.

New York seized the moment packaging and re-packaging mortgages, selling them several times into a derivative abyss.

Everybody loved the game. Consumers got a freebie new home and lots of Monopoly Money. Banks and brokers got rich on fat fees and derivative peddlers got really rich selling billions of this crap. The latest scorecard this week says the banks must payback $50 billion collectively but the real damage was more like $350 billion; or worse.

As in any 60-70 year Bubblemania event, the bubbles burst and we all fall down. It’s called the Kondratieff Cycle. We think it keeps happening as the last bunch that went through it died of old age. So the new and inexperienced bunch learns the same lesson all over again-the same old hard way.

After bubble time is over governments are dealing with a depression, angry Sheeple, and finger pointing becomes the new indoor sport. From there government must invent a catastrophe to start a war as a war is the monetary engine of recovery. It puts everybody to work or fighting this new war effort working in the factories. Roosevelt did it when he jumped into Europe and ignored the warnings about Pearl Harbor after cutting off Japanese oil and gas. He gave them no choice but to fight.

Since the US is busy in Iraq, Afghanistan and maybe next in Iran, we would suggest all western nations including the US stay extra vigilant for another manufactured event ala Reichstag in Germany in the early 1930’s. Could we see another 9/11? I think it’s entirely possible. I doubt our country would mount such an illegal event but would they stop one if it could be used for political gain? Probably not. These are very harsh criticisms of the west and others but if you suggest I’m full of prunes read history and not the homogenized phony versions either. War profiteering is very big business. Those making the big money never send their sons into battle. They make better arrangements ahead of time.

What’s Next? This is 1938.

Read history about Europe, Asia and the United States from 1920 to 1945 and expect a re-run with some new nasty twists. Further, if you think the government will be there to bail you out after they mess everything up forget it. You are on you own. Either get busy and take intelligent measures to protect your family, home and self or try to endure years of misery. The western world’s standard of living is falling and the spoiled American brats will be hurt the worst. We wish we were wrong on all of this stuff but we read a lot and we know how to count. This simply doesn’t add up. Be careful out there.

As they say so often when lightening bolts hit us out of the blue; “This too shall pass.”

Gold and silver traders, shares’ investors and those with enough foresight to prepare, will endure this mayhem without too much disruption and can in fact be handsomely rewarded.

Late Summer Buying Cycle Arrives Near August 18-September 8, 2008

Watch for new rallies in most all commodities markets after the current profit-taking event. Channelized mini-rallies in gold and silver are completed. Now its time to buy. Our late summer forecast is a completing haircut in most stock shares including precious metals. The only action to prevent selling is our stunningly time-worthy Plunge Protection Team who had multiple recent failures propping shares. Will they win during the summer-fall push-‘em-up event? We think with all the other market dangers they will prop their little hearts out and not permit the Dow and S&P 500 to get out of control. In our newsletter, Trader Tracks, we provide weekly guidance and extra e-mail alerts to report our best new trades and offer suggestions for trade management. Visit our website at webeatthestreet.com for more information on our spectacular futures and commodities trading record.

Whatever you do, make a concerted effort to stay with the trend and hang onto your core holdings of preferred shares, cash, and coins. Physical gold should never be sold or, traded but rather accumulated steadily on a monthly savings plan and squirreled away. Big traders are always ready to buy on the dips and normally never sell their gold and silver. You would be amazed how quickly your physical gold and silver will accumulate using this strategy. -Traderrog

There was a time in this country when those who advocated a Fiat Monetary Standard were considered certifiable crackpots, monetary quacks and dangerous interventionists set on domination of both the political and economic processes in this country, the roles have been reversed and those who advocate sound money are assigned such epitaphs of derision. Fortunately, that will change and at this point in time, change rather rapidly as the true nature and inherent problems of fiat money become evident to the people themselves.

At one time, Classical Liberalism promoted the ideals found within the principles of a sound monetary unit that not only provided stability economically, but also provided for the spread of real prosperity and liberty. The cornerstone of Classical Liberalism was private property rights and the cornerstone of all private property rights was, and is sound money, money that is actual real property, solely owned by the individual who labored either by the sweat of his brow or the sharpness of his creative mind. Such money was not owned or controlled in any significant way by government except in trust through the regulation and verification of the fineness of coinage in purity, weight and measure. Otherwise, money was the property of the individual, or legal corporation, just as any other property of which legal title may be held.
Along with the ideal of private property rights, Classical Liberalism, which could just as easily be called Jeffersonian Liberalism, promoted a confidence in the market economy, as free as possible from all interventions, especially from the government. They held, and still hold that private property rights, in all aspects, provides for the best means of production and distribution of prosperity within society with a system of economic organization organic in both concept and operation. It was, and is, the best system to secure the broadest means of prosperity and individual protection within a society for it assigns the individual consumer the power to choose which producers provide the best quality at the lowest possible price for the consumer's needs and desires. The principles of sound money and free, unencumbered markets were just some of the foundation stones that help create this wonderful and I might add, successful experiment in the broadest spectrum of individual freedom and liberty the world had experienced: These united States of America under an mutually agreed Constitutional Compact between the people and their government.

The Founders of our country realized that the main challenge facing such a liberal system of government and society was how to control the only real danger that would ever face the country, the government itself. The goal of the Founders was to institute a government so cumbersome, so divided in function and authority that all power would be distributed between the general government and the independent State Republics; the best description could be called a Republic of Republics, functioning in a cooperative compact. Then, of course, they implemented further divisions within the general government itself, once again dividing function and authority to ensure that power could not easily be concentrated or consolidated.

In essence, the general federal government was simply a reflection of the will of the people through the agency of their respective State Republics. So, the main problem, in the minds of the Founders, was how to prevent those who are entrusted to govern by consent from becoming despots, endangering and enslaving the citizenry in their stewardship. The layers of defense for individual liberty was obviously the primary goal in the institution of our system of governments and the focus of each layer of defense was the broadest application of individual freedom and liberty possible within such a system. What an absolute shame that we have allowed ourselves and our country to devolve far from such a very workable, very efficient ideal.

Today, there are few who seem to realize or understand that within all the defenses for individual freedom and liberty laid out by the Founders, was the principle of sound money. It is absolutely impossible to understand the full meaning and import of sound money without understanding that one of the primary purposes of sound money is the protection of individual freedoms and liberty, private property rights, as well as a protection against government intrusion. Sound money is politically and ideologically in the same strata as our Constitution and our Bill of Rights, and it is just as important to our freedom and liberty. It was, and should be considered, the most essential restraint upon arbitrary government expansion and the potential for unbridled consolidation of power.

The principle of Sound money has a dual purpose, one positive, one negative; in the positive aspect it provided for the greatest degree of individual freedom and liberty while providing for the broadest spectrum of free market choices. On the negative side, its aspect was one of governmental restraint, an abutment of reckless expansion, potentially dangerous debt aggregation and of course eventual despotism. In such a system, only actual coinage was to be considered loose legal-tender, all tokens, scripts and types of "paper-money" were to only represent the real money and only served as fiduciary mediums, which upon demand of the holder, were completely redeemable in lawful real money. "Real money", it definitely has a wonderful ring to it, doesn't it?

I wonder how many in our government, or in the Federal Reserve for that matter, finds the term "Fiat Money" as oxymoronic as I do? Money, by definition, is a store of value; fiat, by definition is simply a decree without intrinsic value. Fiat money is an impostor, giving the impression of value without retaining a store of value as a medium of exchange. With the dedicated assistance of the Federal Reserve, this country is in now in a state of irreversible collapse, technically bankrupt for several years, it will absolutely be unable to climb out of the horrible pit these criminals, both in the Federal Reserve and the government, have share in taking this country to the precipice of disaster and they are still pushing.

"... the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation." –Ben Bernanke 2002

Today, we are so far-removed from the concepts of sound money that it is totally foreign to our understanding; we have been convinced that the only monetary system that is acceptable or applicable is the one we current have imposed upon us and that is the fiat monetary system. Sound money is an alien concept, so much so that we don't realize just what we are missing, it doesn't enter our minds, for the most part we are totally unaware of the benefits of a sound monetary system. Of course, a fiat monetary system requires ignorance, equalized with confidence, in the general population to function properly, without widespread ignorance or confidence, the system fails, as we will see.

The fiat system not only relies upon widespread ignorance and misplaced confidence, but it also relies heavily upon government intervention and regulation. A sound money system, on the other hand, doesn't rely upon such numerous variables in order to function; actually it is extremely simply and straightforward in both functionality and application. A sound money system can easily operate independently of all government policies and the pressures of political intrigues, including very divisive party politics. Such a system also helps to prevent government officials, and representative assemblies, from using various tricks to elude their budgetary and fiscal responsibilities to the people and the country.
Since the rather subversive introduction of the fiat monetary system in this country, there has been little room for the consideration of a sound monetary system. The proponents of the fiat system have for the most part, effectively exiled it from economics and serious monetary studies for good reason, for it poses the greatest danger to the fiat system and those who enormously benefit from that system. The various proponents and schools of economic thought have yet to consider the precarious position they are in because they have failed, utterly failed to contemplate that all their theories are based upon a monetary system inherently doomed to failure. Such a foundational flaw will always ultimately distort all conclusions associated with it, especially when the flaw is not considered to exist. Today, our country is fraught with what could only be considered "Crypto-Despots", eager to maintain their position as well as their power, the prime impetus of which has been the introduction of a system of fiat money for it provides them with medium of control over society that they crave.

So, there are few questions asked and the questions that arise are based upon incomplete assumptions because the foundational structure of the economy is completely based upon a system that contains two divergent fault lines, which will, in time converge in disaster. The first fault line consist of the inherent terminal life span of all fiat monetary systems due to the systemic accumulation and exponential multiplication of debt, the second fault line consist of requirement of absolute widespread public confidence in fiat money itself.

Eventually, these two fault lines converge and the system collapses. Such collapses are not preventable any more than the system itself is sustainable without massive government and central banking interventions. The system lends itself to those who require the benefits of inflationism, this trait, of course, is welcomed and enhanced by both government and central bankers who are all too eager to utilize such a trait to their best advantage. What need is there to operate within budgets, to maintain expenditures by within tax revenues since, according the a former Chairman of the Federal Reserve of New York: "taxes for revenue are obsolete", and indeed they are obsolete within a fiat monetary system. I have found that the full import of that statement has yet to be realized, especially within the minds of the majority of economists and their feeble schools of economic theory fashioned around the fiat monetary system, a system that is inherently flawed.

Eventually, of course, the people, the economists and the politicians will become painfully aware of just how flawed the fiat monetary system really is as the very harsh reality rises into view, affecting everything and everyone within this country. Like all fiat monetary systems, ours is destined to go through the same stages of failure as all others before it, and our economy will, at that moment, collapse under the weight of massive insolvent debt, upon which the system is created.

Inflation is an easy tool in the hands of the government as long as they can maintain it at gradual incremental increases over long periods of time, but the moment a rapid increase occurs, the ruse becomes far more difficult to maintain. In the first stage, the people will begin to witness the rapid increase in prices for both goods and services. While at that point they simply believe the government when it states that commodity prices are rising for various reasons; the government of course, always has a plethora of reasons on hand to justify such price increases, all in the hope of maintaining the charade.

At this stage, there will be a few people who actually realize just what is going on in the economy, but unfortunately the majority will remain true to their conditioning and while they may gripe, will not question the true cause of their financial pain or the culprit behind it. The majority will continue living their daily routines as though the inconveniences of higher prices will be a passing phenomena, continuing to misplace their trust in a government that was in on the damnable ruse from the beginning as it shifts all blame to something or someone other than itself.

While, at this stage, people may wish to make certain purchases, they think that prices will eventually retreat so they put off the purchases in the short-term until a later date. This common attitude is relatively short lived because as prices continue to rise, at unprecedented levels over longer, consistent periods of time, people will begin to think that because prices are so high that they will then put off a purchase for a year or two, perhaps then prices will once again subside to more normal and manageable levels for their income. The last stage abruptly hits and the entire system then faces catastrophic collapse when the people begin to think that they had better make a purchase, any purchase immediately because they realize that the purchasing power of their fiat money is rapidly loosing its value of exchange.

So, the people, in a panic, will withdraw, if they are allowed, their bank deposits, cash in their stocks, redeem any bonds for cash to exchange for commodities or merchandise they feel will retain value even if they have no real needs for the commodities or merchandise they are buying. As the panic spreads, shortages being to take shape, manufacturing slows to a halt, unemployment skyrockets, and public services breakdown and in the last stages chaos ensues. The government seeks to assert itself, but to no avail for even the government under these circumstances, in this present age will prove to be as impotent as the fiat money they so ardently promoted, to solve the problems faced by the country and the people.

While it is easy to see the conclusion of such a system as a failure, the truth of the matter is that entire system, and the polices created to sustain it, were failures from the beginning. The purpose of the system is not, nor has it ever been throughout history, for the benefit of the people; its sole purpose is to provide the government with unlimited, unrestrained finance and the central bankers with an incredible profit machine without much oversight or regulation to impede their government authorized monopoly.
So, the system of government and central banking fiat money, dependent upon intentional deception of the population to remain viable comes to an abrupt end, it is no longer a manageable system of exchange, nor will it provide the government with a free financial reign. There are no solutions to the problems inherent within our government's fiat monetary regime even though the government economists continue to heap unabashed praise on both the system and the polices required to maintain it, that will become more and more difficult as the system reaches its terminal point.

Historically, fiat inflation was realistically deemed extremely dangerous to the economic, social and political safety of a country, but as usual, the temptation for the unleashed power and the ability to use the fiat system to convert the labor of a population to unlimited wealth for those in charge of the money has always proven far too great to resist. Of course, the campaign to demonize sound money has been unrelenting, primarily from those who benefit the most from the fiat monetary system, and those who have been duped into believing it was the source of all economic troubles prior to the advent of the Federal Reserve System, of course, it wasn't. Those pro-inflationist, those fiat-philanderers have vowed to forever prevent sound money from raising its head in this and other countries again, but their faith will be shaken soon enough.

In Liberty and Eternal Vigilance,
Republicae-Seditionist

Kitco was a great site, at one time, but there were allegations that they were attempting to manipulate the paper gold prices, and since then (was it June 2008?) their readership has dropped somewhat.
I personally believe that Kitco was one of the targeted websites by the DHS, along with Rense and RevolutionMarch.

My PERSONAL belief is that Kitco, while HONEST, is as of yet UNINSPIRED by a 'higher power', and simply points out what has ALREADY happened, in order to try to 'predict' what is to come.

If you are reading this posting that I am commenting on, you will notice the reliance on what has already happened in attempting to predict what is happening in REAL TIME, right now. Sometimes (40%+-) this is correct---

Gold and Silver physical holdings will only help you personally for maybe 6 months after the collapse of this nation, when the Sheople figure out that this system is also corrupted from within.

Lead, food, water, and the like will be the best investment at that time, physically, in the six-month 'hindsight' of what is coming NOW---