LIVE Gold Prices $  | E-Mail Subscriptions | Update GoldSeek | GoldSeek Radio 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page 

 GoldSeek.com >> News >> Story  Disclaimer 
 
Latest Headlines

GoldSeek.com to Launch New Website
By: GoldSeek.com

Is Gold Price Action Warning Of Imminent Monetary Collapse Part 2?
By: Hubert Moolman

Gold and Silver Are Just Getting Started
By: Frank Holmes, US Funds

Silver Makes High Wave Candle at Target – Here’s What to Expect…
By: Clive Maund

Gold Blows Through Upside Resistance - The Chase Is On
By: Avi Gilburt

U.S. Mint To Reduce Gold & Silver Eagle Production Over The Next 12-18 Months
By: Steve St. Angelo, SRSrocco Report

Gold's sharp rise throws Financial Times into an erroneous sulk
By: Chris Powell, GATA

Precious Metals Update Video: Gold's unusual strength
By: Ira Epstein

Asian Metals Market Update: July-29-2020
By: Chintan Karnani, Insignia Consultants

Gold's rise is a 'mystery' because journalism always fails to pursue it
By: Chris Powell, GATA

 
Search

GoldSeek Web

 
Witches Brew: Fingers of Instability!



-- Posted Thursday, 18 July 2013 | | Disqus

By Theodore (Ty) Andros

At no time in my career (30 years) have economic fundamentals deviated from asset prices as they are doing now. The developed world economies are in FREEFALL in REAL terms as centrally planned economies implode under the iron grips of the socialists, banksters and bureaucrats who control them.

Either fundamentally economies must explode higher (REAL wealth creation, not printed and borrowed from the future) or asset prices must collapse to reflect REALITY (destroying the financial system which whose BALANCE SHEETS rests upon these MALINVESTMENTS and worthless sovereign debt they call ASSETS).

Financial asset markets ARE NOT a reflection of the REAL economy. They are a Potemkin façade, liquidity created and driven pure and simple. This series (4 parts) will outline
the real facts of the matter and how the convergence of the financial world and real world will happen. It is only a matter of time.

A man-made disaster is unfolding in the developed world welfare states and the ultimate denouement/debacle/ economic/societal collapse is UNAVOIDABLE. The only question is the path (ups and downs) our world takes to that DESTINATION. The reform of governments, regulations and tax systems required to restore growth is a pipedream. It hasn’t occurred till now and won’t until our societies ERUPT in protest from being RAPED by those who control the systems: bankers, governments and special interest elites.

What are fingers of instability? They are areas of the economies which have been taken to extremes using leverage and money printed out of thin air which INVITE SYSTEMIC instability. Many years ago John Mauldin described a study of sand piles created one grain at a time which were quite stable as they began and became unstable as they grew in size. Creating the large zones of instability PRONE to COLLAPSE under their own weight. Fingers of instability are a perfect description/metaphor of our fiat currency and credit based financial systems.

As each dollar has been PRINTED and LENT into existence the greatest experiment in leverage and financial HOCUS POCUS (swaps, shadow banking, OTC derivatives, rehypothication, plunge protection team and bankster manipulations, etc.) has unfolded.

“Since we’re dealing with markets that are being manipulated by Central Bank policies, there is no such thing as economic analysis anymore.” -Jeff Gundlach

ALL creating a something out of nothing houses of cards, built upon one another but in reality NOTHING IS THERE except an illusion of wealth. It is not real collateral. It is a DANGEROUS/ catastrophic illusion. The majority of the people of the world live in the functional equivalent of the matrix movie (I urge you to view all three).

The deleveraging and reform of economic policies to restore REAL growth MUST occur before any ECONOMIC recovery can take place. This is the result of decades of poor stewardship by our elected leaders and financial systems who have led/ used their respective BANKING fiefdoms to their benefit rather than to build and maintain societies at large. Bankers at most levels have become undisguised PREDATORS on the private sectors and citizens with the BLESSINGS of whatever government holds power in the respective country.

“Insanity in individuals is something rare-but in groups, parties, nations, empires and epoch’s, it is the rule.” -Friedrich Nietzsche

Globally REFLATION is the order of the day as CENTRAL BANKS fund insolvent elites, crony capitalists, banking systems and governments. To give you a glimpse of the absurdity the Bank of Japan and Federal Reserve are printing out of thin air approximately, $59,737 dollars per second, $3.584 million per minute, $215.053 million per hour, $5,161.290 million ($5.161 billion) per day & 160,000 million ($160 billion) per month & 2 million million dollars ($2 Trillion) over the next year.

“The best way to destroy the capitalist system is to debauch the currency. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. By
a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. The process engages all of the hidden forces of economic law on the side of destruction, and does it in a manner that not one man in a million can diagnose.” -John Maynard Keynes, 1920

Japan and the US are planning on increasing their respective monetary bases 50 to 100% in the next year:

This is a 92% year over year rate of change commencing about January 1, 2013 (thank you Bert Dohmen of the Wellington letter, www.dohmencapital.com  I highly recommend it).  This number will be WELL OVER $4 trillion dollars early next year.  This is why the nominal economy is not crashing under the poor/destructive economic policies of developed world socialists.

Incredibly, this probably is not enough to RESCUE the sovereign and financial systems of the respective countries.  Fiat currency and credit financial systems DIE in waves of insolvency and print/borrow their way to worthlessness.  As each wave unfolds it is met with something out of nothing FAKE MONEY printed out of thin air until the populations REVOLT against the monetary/economic monopolists aka socialists in disguise.

I PREDICT this will be INCREASED by a factor of 2 over the next YEAR as the Bank of England, China and ECB hit the gas pedals or their governments, credit dependent economies and banks will sink into the abyss of systemic insolvency.

Quoting the Oracle of Omaha:

“I feel sorry for people that have clung to fixed-dollar investments,...Bernanke had tough choices to make, but he decided to step on the gas pedal, in terms of monetary policy, and he brought down rates to virtually unheard of levels, and kept them there. And he’s still got his foot on the pedal and that really does hurt savers. It has made it extremely difficult for all kinds of people who live on fixed-income investments,” - Warren Buffet

The ECB president is aiming to join the fray as yesterday in Italy he said this (thanks to the Gartman letter www. thegartmanletter.com for this quote):

“For the southern European countries, a Euro above 1.30 would be too high for their economies. Among major central banks, the ECB is not expanding its balance sheet, but it likely to consider such a step” -Mario Draghi

That’s a PROMISE from the ECB. For people trying to store wealth in paper think: the killing fields of Cambodia directly ahead. They have been and are going to be SLAUGHTERED and their wealth transferred to the government and financial systems to fund their MORAL and FISCAL insolvency!

ALL Government policies are political solutions to practical problems. Designed to consolidate and grow GOVERNMENT/ financial system control of economies rather than foster ECONOMIC growth. The verdict in the minds of those who must create the ECONOMIC growth (entrepreneurs) to end the global financial crisis is NO MAS (No more)! Investment in the future has and will continue to COLLAPSE!

We are now going to take a trip into George Orwell’s: 1984 and Animal farm. Where white is black and truth is fiction. Something for nothing societies are in full roar seeking something for nothing, believing this fairy tale and never having enough.

It’s been almost 5 years since the Global Financial crisis began and we are still looking for REFORM of GOVERNMENT policies which discourage, penalize and prohibit economic RECOVERY. Would someone please show me just ONE new policy that rewards prudence, hard work, risk taking, personal responsibility, reduces costs of production, self-sufficiency, hiring new workers? Just one?

Instead we have HIGH and RISING policies which penalize all of these VIRTUES as government refuses to reform
itself or any of its special interest constituencies in ANY MANNER. The Keynesian economic model of consuming wealth (counting that as GDP) rather than creating it has
now consumed the developed world’s wealth: lock stock and barrel. Until the Capitalist economic models are UNTIED and restored the collapse will continue RELENTLESSLY.

I call it socialists smelling the end zone by collapsing economies and seizing what’s left of the private sector to SAVE YOU. That is the DEFINITION of AUSTERITY! Constant crisis creates constant opportunities for official POLITICAL victimization presented as policies to SAVE/protect YOU.

The common plea at this point is to cease austerity when there has been no REAL austerity to begin with. Governments have used the CRISIS to explode themselves larger while savaging and robbing the private sectors (small/medium
size businesses and successful individuals) of any and all REWARDS for producing economic growth. This kills the very elements of economies which need to lead the renaissance of economic growth and revival.

Meanwhile crony capitalists have colluded with socialist progressive government to regulate demand to themselves and put their smaller competitors OUT OF BUSINESS. Let’s take a look at government budget increases since the crisis began courtesy of www.zerohedge.com:

No reduction in SPENDING has occurred, in fact it is compounding at 3 to 6% per year depending on which government you choose.

Honor, justice, and humanity, forbid us tamely to surrender that freedom which we received from our gallant ancestors, and which our innocent posterity has a right to receive
from us. We cannot endure the infamy and guilt of resigning succeeding generations to that wretchedness which inevitably awaits them if we basely entail hereditary bondage on them.” -Thomas Jefferson (1775)

He is talking about inextinguishable and unpayable DEBT. Government expenditures in the US (not shown) have grown approximately from $2.275 trillion to $3.8 trillion PER YEAR over the same time, an astounding 73.4% increase in YEARLY spending since 2007 and dwarfing the Eurozone increases. US debt GROWTH has gone BALLISTIC from (April 30th 2008):

TO TODAY (APRIL 30TH 2013);

A STAGGERING 73.3% increase in 5 short years (versus the previous 230 years) since the chosen one took power and corrupt supermajority’s passed the Affordable care act (aka Ob@m@care or ACA), the stimulus bill (permanent expansion of government from 19 to 24% OF THE ECONOMY) and Dodd Frank.

That money is future growth and the income of your children BROUGHT FORWARD and spent today by something for nothing societies in the developed world. At this point they are borrowing over $12.5 dollars for every dollar of GDP, the growth appears once and the $12.5 dollars of debt is paid and owed FOREVER with interest.

 

Take a longer term look at how the amount of NEW debt must be created to create a dollar of GDP, also note at how debt has diverged since unsound money was IMPOSED (Bretton Woods II in 1971) on the developed worlds citizens:

 

Debt growth is now exponential while NOMINALLY economic growth can barely grow. This is a picture of a PONZI economy. In REAL terms economic growth is DECLINING
as you will see later in this series of commentaries. Looking around the G-10 (10 largest world economies) the story is the same:

What you see above is the definition of a PONZI scheme which the developed world economies have become since Bretton woods II (Unsound money) and the inculcation of socialism which began at that time.

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” - Ludwig Von Mises

It was just reported that the US government is spending directly or indirectly $50,000 plus per household per year, this is in an economy where average household income is $50,000 per year and those that make the average effectively PAY NO TAXES so ALL this foolishness falls on those that do!

With much more to come:

The Dodd-Frank financial reform: enshrining too big to fail, political control of the allocation of credit while burying the small community banks with mountains of NEW mandates and regulations (killing them). This makes them RIPE for takeovers by the crony banks on Wall Street. The stimulus bill permanently expanded government to 24% of GDP from 19%. Five percent of GDP transferred from the wealth producing private sector to the wealth destroying government.

Dodd Frank and the affordable care act have been wrapping themselves around the financial and medical industries like the pythons they are. A 2700 page bill has now morphed into 20,000 new pages of regulations on its way to 40-60,000, written by bureaucrats and special interests (they exempted themselves) who know NOTHING about the industry they are trying to manage. These regulations PROHIBIT new and better ways of doing things to reduce costs and enshrine methods GUARANTEED to RAISE them.

Look how government regulations have exploded like a volcano since Bretton Woods:

 

“A government can’t control the economy without controlling people. And they know when a government sets out to do that, it must use force and coercion to achieve its purpose. They also knew, those Founding Fathers, that outside of its legitimate functions, government does nothing as well or as economically as the private sector of the economy.” -Ronald Reagan

Those pages take money out of the economy, put it into
a straightjacket and it represents UNSEEN government spending as it has RISEN to 15% of GDP (and growing at 10 to 20% per year) which is CONSUMED indirectly complying with REGULATIONS (state, municipal and federal).

How much do runaway regulations cost to the economy?

 

And what does it cost you in lower wages?

  

And not much is left as a REWARD for productive wealth creation in the private sector.
Keep in mind that public servants have exempted themselves from most of these laws and regulations while criminalizing the public in many ways. This allows government to explode in size from 5-10 to 55% or more of GDP today. This was NIXONS greatest CRIME: Bretton woods II and the CORRUPTION of MONEY!

Have you ever heard of a regulation being REPEALED? Power and control given back to the people? NEVER. Whether
they are effective or destroy wealth once in place they are set in stone, INFLICTING PERMANENT DAMAGE to the FREE MARKET economy. (Hint: it hasn’t happened since Reagan was president.) Take a look at the monster which has JUST BEGUN to squeeze the life out of your medical care:

 

The government TAKING over 1/6th of the economy, attempting to manage it and SOCIALIZING it is INSANITY. Senator Harry Reid called the ACA just the menu, now they must pass everything else. Can you say megalomaniac? Washington DC is attempting to MICRO-MANAGE the medical industry according to the ideas and to the benefit of the special interests and crony capitalists which CONTROL them.

They will be writing new regulations FOREVER (think the tax code) as goodies/benefits are bought and sold in Washington DC (District of corruption) and the COST is sent to the public and the benefits sent to their crony’s. It is redistribution of income and demand of the WORST SORT. You won’t believe the final cost of a FREE benefit. The ACA is just going to be the most visible IMPEDIMENT to Economic Growth and employment.

Dodd Frank will challenge the ACA in complexity, politicized destruction/direction of credit allocation, runaway regulation (aka crony capitalism) and financial complexity in every manner. Just about 1/3rd of Dodd Frank has been implemented and Rick Santelli just reported that the time to comply with new regulations which have already been written will take 24,180,000 hours; this NEW cost will be transferred right onto YOU to SAVE YOU.

The financial industry is 8-9% of the US economy and reaps 24 to 28% of ALL corporate profits (can you say the fleecing of Amerika?). Dodd Frank will be MICRO managed by Washington DC (District of Corruption), the Federal Reserve and the Too big to fail banks to their OWN benefit.

Twin POLITICAL pythons working their way throughout the economy and squeezing the life out of it as they are implemented.

As Business/capital investing and confidence in future growth has collapsed so have prospects for real growth, wealth and job creation due to Washington and EU policies (www.gluskinscheff.com):

This is why the RECOVERY is, has been and will be the WEAKEST since World War II. Investing in the future has CEASED! No new plant and equipment means no new jobs, and businesses which cannot grow or compete INTERNATIONALLY for future economic activity. Now let’s look at economic growth in the US and Europe since the GFC began in 2008:

 

CAN you SAY NO GROWTH while DEBT is compounding at 4 to 8% annually since 2008? Don’t be fooled by the U.S. number, the wizards in the district of corruption had to BORROW, PRINT and SPEND the equivalent of 30% plus of GDP ($6 trillion dollars plus) to get that FAKE print of 3% GDP ($450 billion nominal growth).

It works out to $13.33 of new debt for each dollar of positive GDP. The GDP is there for a brief moment but the debt hangs around forever (unpayable and inextinguishable as government borrows from the future and sends the bills to future generations). Now let’s take a quick look at the banking systems throughout the World:

 

These assets to GDP are politically correct numbers, the real numbers in the Eurozone are much higher. For instance in Switzerland UBS and Credit Swiss alone are over 500% of GDP, in the UK the banking system approaches 700% of GDP. Don’t be FOOLED by the low U.S. number as $200 trillion (200 million million) of off balance sheet liabilities are NOT SHOWN. A 5% move on those off balance sheet obligations in the US WILL WIPE THEM OUT!

The chart on the right shows where the banks are the most vulnerable and the depositors risk being CYPRESSED (confiscation of deposits). So they are primed for BANK runs. France is a bomb waiting to EXPLODE!

EVERYTIME you see interest rates tick higher the assets values on their balance sheets roughly tick lower in lockstep. Creating new requirements to MAINTAIN what solvency they currently have.

“I think you all should be ready, because rates are going to go up,” - Jamie Dimon, the chief executive of JPMorgan Chase

These banks are the primary financial systems of BANKRUPT governments. Some can print (US, UK, JAPAN) and many can’t. The insolvencies of the periphery economies will roll uphill to the core developed world economies. You can count on it.

The Eurozone banks are ZOMBIES, aka the walking dead. Most if not all of Eurozone banks are operating at 40 or 50
to 1 leverage, are stuffed to the gills with worthless sovereign debt and politically correct lending. A REAL survey of assets will reveal losses up to 20% on assets which means over $12 trillion dollars must be created (PRINTED OUT OF THIN AIR) to restore solvency.

There is one big problem with that. The countries of the Eurozone GAVE UP Seigniorage (the ability to print money) and now stand at the mercy of the ECB which refuses to do so. You have to understand the ECB is the child of the BIS in Switzerland. The Euro is a tool to gather power over individual countries and convert the citizens to debt slaves of the banks.

“Let me issue and control a nation’s money supply and I care not who makes its laws.” - Mayer Amschel Rothschild, Founder of Rothschild Banking Dynasty

Those countries will BOW and surrender for access to the printing presses before this episode in bankster dominance is complete. In exchange for money printed out of THIN AIR! Just ask Greece, Cyrus, Ireland et al about that. They are going to ROLL UP the Eurozone and yoke the debt slaves for generations. YIKES!



Worldwide the manufacturing sectors have been in declining for almost 2 1⁄2 years (underwater in Europe for almost 2 years).

 

Can you say SYNCHRONIZED global slumps in the 4 largest economic zones (Japan not shown) in the world? It has been over 2 years since EUROPEAN manufacturing has printed a POSITIVE growth number over 50 and the rest of the world is now right at 50 denoting month over month positive growth. These numbers represent large and growing output gaps throughout these regions. GDP is following the same pattern across the globe:

Properly adjusted for inflation, regulatory creep and exploding debt the United States economy has been in a SECULAR BEAR Market since Bretton woods II (UNSOUND MONEY) unleashed Leviathan government, central planning, runaway regulation, debt fueled spending counted as growth and spawned nominal rather real data reports. Look at it and weep:

To end this edition of ‘Fingers of Instability’ we will leave you with a picture of the twin towers (30 year bombs er bonds and the S&P 500) of BABEL falling over (courtesy of www.dshort.com and Kimble charting solutions):

Did the Bomb er bond bubble just POP? Very possibly! A HUGE active head and shoulders TOP in the 30 year bonds (built over a 1 1⁄2 year period) that projects a drop of over 20% and a trend line break off the November lows in the S&P500. Buckle your seatbelts turbulence DEAD AHEAD. Until those patterns are negated SELL ALL RALLIES!

IN CONCLUSION:

The world’s Socialist welfare economies continue their spirals into an economic abyss as public servants, crony capitalists and banksters destroy the private sectors which must support them and foster economic recovery. This period will be studied for centuries as insanity spirals out of control.

Unsound money is the master thread and it is meeting its inevitable demise along with the financial systems which rest upon it. But there is a long way to go before we hit BOTTOM. Europe’s banking systems are insolvent but their respective governments have given away the keys to the printing presses needed to print the new capital to underpin them. The Eurozone crisis is still YOUNG and will reappear soon.

Fiat currency and credit financial systems die in waves of insolvency, as they strike Banks, governments and crony capitalists attempt to print and borrow their way to salvation until the public wakes up to the fact that the FIAT currency will be printed endlessly and abandon it as a store of wealth.

This unfolding economic and societal chaos can be the greatest investment theme in history or extremely damaging to your wealth if you are invested looking into the REAR view mirror.
Don’t miss our breakout sessions to learn how to approach these challenges.

If you are waiting for an economic recovery DO NOT HOLD YOUR BREATH! Spend the time preparing/diversifying your portfolio to prosper as this unfolds as it is a historic opportunity.

Nominally don’t expect the taper (slowing QE) to happen, the world has begun its next leg down in economic activity and the preferred inflation indicator of Bennie and the Feds is at year lows.

The hot air to date has punctured many markets (Bonds and Stocks) unsustainable UP trends to name a few. FIREWORKS dead ahead, that bond top is SIGNIFICANT to financial asset values and SYSTEMIC banking system stability, and it is active and will be hard to reverse.

Taper talk has pricked the financial asset bubbles short term. Mission accomplished so now it’s back to the serious business of the printing presses to fund insolvent governments, crony capitalists and banks.

www.traderview.com

DISCLAIMER AND TERMS OF USE: While TedBits strives to present accurate and useful information, we make no guarantee of accuracy
or completeness. All information and opinion expressed herein is subject to change without notice. Opinions and recommendations contained herein should not be construed as investment advice. Under no circumstances does the information in this column represent a recommendation to buy or sell any securities or commodities. Do

not assume that any recommendations, insights, charts, theories or philosophies will ensure profitable investment. The information contained herein is for personal use only.

Gold and silver backed means that various commodity options strategies in gold and/or silver may be used. When buying options, you may lose all of the money paid for the option. When selling options, you may lose more than the funds received for selling the option. Strategies using combinations of positions, such as spreads
or straddles, may be as risky as taking a simple long or short position. A high degree of leverage is used to buy or sell a sufficient quantity
of options and/or underlying futures contracts equal to the value of
the entire portfolio. The high degree of leverage can work against
you as well as for you and lead to large losses as well as large gains. Absolute-return is not meant to imply that a positive return can or
will be achieved. Absolute-return describes investment strategies which are designed to have the potential to succeed in rising, market- neutral and falling market conditions. Gold and silver backed and absolute return investments do not mean the investor will take actual physical possessions of any precious metal. Nor should any promise or guarantee be implied that such investments will perform better than any other investment in any possible future scenario described herein nor that such investments can or will preserve or protect in such possible future scenarios.

TedBits may include information obtained from sources believed
to be reliable and accurate as of the date of this publication, but
no independent verification has been made to ensure its accuracy
or completeness. Many of the statements and views made are the opinions of the author. Opinions expressed are subject to change without notice. This report is not a request to engage in any transaction involving the purchase or sale of futures contracts or options on futures. There is a substantial risk of loss associated with trading futures, foreign exchange and options on futures. This letter is not intended as investment advice, and its use in any respect is entirely the responsibility of the user. Past performance in never a guarantee of future results.


-- Posted Thursday, 18 July 2013 | Digg This Article | Source: GoldSeek.com

comments powered by Disqus



 



Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to GoldSeek.com

 news.goldseek.com >> Story

E-mail Page  | Print  | Disclaimer 


© 1995 - 2019



GoldSeek.com Supports Kiva.org

© GoldSeek.com, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of GoldSeek.com and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on GoldSeek.com. This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer


Map

The views contained here may not represent the views of GoldSeek.com, Gold Seek LLC, its affiliates or advertisers. GoldSeek.com, Gold Seek LLC makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of GoldSeek.com, Gold Seek LLC, is strictly prohibited. In no event shall GoldSeek.com, Gold Seek LLC or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.