Right on cue, as spot gold and gold futures twice took out 930 on both Monday and Tuesday, down came oil just as we predicted. Those with the oil shorts we suggested just made a handsome profit which they can add to the gargantuan pile they made from their protective derivatives such as stock index puts. The cartel has run out of bullets. The Fed is out of credible threats for rate hikes and the cartel is out of both gold and silver. Gold sales under the Washington Agreement are over until late September. Ted Butler has figured out that Barclays is allowing naked short sales of SLV shares to avoid shortages of physical silver for those who utilize actual physical silver in manufacturing in order to avoid a mad panic to acquire silver inventory that would blow out the silver shorts on the COMEX. It was either take oil down or continue to destroy the stock markets and scare money into bonds and treasuries to support the dollar. Since this is an election year, the choice was easy. As usual, the yen was weakened to provide liquidity. Note how the yen is weaker by two yen per dollar and two yen per euro from a week ago Tuesday morning in support of the stock markets after their plunge into Bear Market Land, where, in reality, the stock markets have been since the twin whammy of the dot.com and 911 debacles.
As all this transpires, a substantial number of bank failures is on the horizon, the credit-crunch and real estate debacles worsen, actual (as opposed to official) inflation rages near 13%, M3 remains a lofty 16% to 18%, layoffs continue in the tens of thousands and the second quarter earnings season threatens to be one of the worst ever due to sky high energy and input costs. And let's not forget about consumer spending, that will soon become non-existent as the stimulus package, which generated zero stimulus after adjustment for inflation, peters out. Home equity withdrawals have been slowed to a trickle as real estate values plummet and rights of withdrawal are terminated. Credit cards have been maxed out. Defaults in every category of loan continue to escalate. Then there is the hapless, helpless, irrelevant Fed which holds as the ECB hikes, starting the next round of currency wars that will send the dollar deep into the financial toilet bowl for a long, wet "swirly." And don't forget that a fresh round of jewelry demand for religious and wedding seasons is right around the corner. Then, as our economy explodes and goes down in flames, throw in the imminent and inevitable breaking of dollar pegs by the Gulf states, rampant foreign investment in hard US assets as dollar-denominated treasuries are shunned and direct monetization of treasuries as the Fed's general collateral is exhausted in exchange for toxic waste in order to round out the formula for achieving maximum possible hyperstagflation. For good measure, add the warning of chief Illuminist financial advisors about a pending stock market meltdown to the pile of cheerful news. Doesn't all this wonderful news fill you with boundless enthusiasm? It should if you own gold and silver! Could there possibly be a more bullish situation for precious metals? If there is, then we simply can't imagine it! Is it any wonder that gold and silver have hardly flinched as oil was pile-driven for 10 dollars per barrel over the course of only two days?
The dollar is sputtering again as the impact of stock sell-offs continues to wain and markets recover on declining oil prices. We see some Fed cuts instead of rate hikes in the future. They care only about Illuminist interests on Wall Street, not about the dollar or its holders, such as big forex owners, retired people on CPI-pegged social security payments, pension and profit-sharing plans, insurance company reserves, endowment funds and other totally unimportant minutia.
We are on the cusp of an explosion in precious metals, so make sure you own some before the detonator goes off!
That's right, Goldman Sachs, short gold for 2008! Such sage and preeminent advice leaves us speechless. We wonder what will they do for an encore!
…
Well, the Fed finally decided to do something about all those rascally mortgage lenders and their poor, dumb, ignorant borrower-sucker-dupes. Where were they four or five years ago, which is when they should have addressed this? We'll tell you where they were. They were dropping interest rates to a ludicrous one percent and encouraging variable rate, no down payment teaser loans for people who should never have owned homes in the first place just before boosting rates inexorably upward to make sure the borrowers got screwed good and hard. That created a mountain of defaults with perfect timing as our economy imploded from free trade, globalization, off-shoring and outsourcing. Is this the sort of leadership we can continue to expect from the Fed as Hanky Panky Paulson asks for more Fed regulatory power over a broader segment and cross section of the financial markets? Only in America. You just can't make this stuff up.
You just have to love it! The bungling henchmen of "Chaos" have just pulled yet another magnificent boner. Who needs a movie take-off from the old "Get Smart" series when you have the Illuminist henchmen blowing mission after mission right in front of you on a daily basis. The latest blunder comes as the PPT's and CFTC's "Chaos" teams have allowed oil prices to be run up to unsustainable heights by bank speculators exploiting the Enron loophole to save burning balance sheets while trying to maintain their duplicitous system of free trade, globalization, off-shoring and outsourcing coupled with legal and illegal immigration. Now, all those cross border marketing and production strategies are blowing up in everyone's faces because all the cheap labor is being more than offset by increased transportation costs. Who'd of thunk it! Could the problem have possibly been more obvious? Already half the shoe manufacturers in China have gone out of business as morons continue to pour their "hot" money into an imploding economy whose stock market has lost more than 50% of its value in less than a year as inflation continues to worsen despite rate hikes by the Chinese central bank! What does that say about the US economy if the "hot" money is going to China despite its myriad of problems? Scary, scary stuff. That's right men from "Chaos," just keep jaw-boning the potential Iran attack until we get $200 oil and the entire world economy will implode into a worldwide depression. World markets will be destroyed even without $200 oil. What are the evil forces of "Chaos" trying to do, beat a dead horse with an oil stick? Apparently, that is the plan. Gold and silver are headed for outer space.
Be on the lookout for a bigger push toward the North American Union and the Security and Prosperity Partnership as US transnational conglomerates seek cheap labor closer to home in order to save outlandish transportation costs. What a bunch of morons.
And how about those wonderful emerging markets that were supposed to come to the rescue of imploding western economies as the free trade, globalization agenda, hyperstagflation, a credit-crunch, worldwide market crash and quadrillion dollar financial engineering "miracle" from the "geniuses" on Wall Street threatened to take down all of western civilization into a hellfire of anarchy, social upheaval and revolution? While the hapless Western stock markets are off about 18% to 20% since the US Dow peaked on October 9, 2007, Chinese, Indian and Asian stock markets have been destroyed to the tune of losses ranging from 24% to 51% during that same period! Such stunning support! Could it be that free trade and globalization are not working and have simply taken horrible regional problems and evolved them into a worldwide disaster? It sure looks that way to us.
Oil may spike up higher, but not for long. Wait until you see what ever higher oil prices do to the world economy. First, non-oil producing western economies will implode. Then the non-oil producing countries who sell to the imploded western economies will go down. Next, the demand for oil will plummet as factories are closed and massive unemployment grips the globe and moves to cut oil usage accelerate. Afterwards comes the implosion of the oil producers as oil drops to a fraction of its current price. The world economy is on the brink of destruction already, and only a minute percentage of the colossal damage to the anchoring US economy has been revealed. Wait until the whole enchilada is dropped on an unsuspecting world economy already rife with hyperinflation, out-of-control central bank infusions of money and credit and huge currency and monetary imbalances which will continue to spiral out of control while the dollar gets vaporized. As usual, the Illuminist "geniuses" haven't thought things through and now both they and we are going to have to pay for their momentous blunders. In the final analysis, only those who possess gold and silver will survive. Everyone else will be wiped out.
The days of easy money are over. That is why you have to be relatively debt free. Businesses at the high-end especially are going to be hit hard and will have to restructure. Cash flow is eroding and spending for expansion is not going to be there. Adjustments are on the way. There are going to be massive layoffs that even the government cannot hide with their bogus bookkeeping.
The credit that was available previously will no longer be there. We are deeply into a credit crisis. Manufacturing was hit badly over the past six years by free trade, globalization, offshoring and outsourcing and now it is services turn to bite the bullet. These are lower paying jobs that now make up 80% of our economy. Starbucks is a good example. They are shutting 600 stores and firing 12,000 workers. This is just the recognizable beginning. Most of those shops that housed stores with luxury items such as retailer, health clubs, especially high-end restaurants, hotels, leisure destinations and casinos will fell the pain deeply. The easy money is gone. The investment boom in consumption is over. What once was 72% of GDP is about to return to the norm of 64.5% and with that economic balance comes recession.
The inflation of real estate, collectables and the stock market are over. The removal of equity from vastly priced real estate is over. The house as an ATM card is over. There is no additional purchasing power left. Household income is going to contract not expand, as inflation further erodes purchasing power. The money and credit being created at a rate of 18%, which will shortly give up 15% inflation, is being poured into the financial institutions to keep them from bankruptcy.
The generation of endless new financial claims will no longer be possible. The profits will no longer be there for corporations then the layoffs will really begin. The misallocation of assets is over. This is all as we forecast. The perils of over borrowing at all levels, which we warned about over and over is about to begin taking its toll. Americans have no savings and that means they have no backup. One minor problem and it’s over. They are in serious trouble. Starbucks is a symbol of what went wrong. Travel will be cut by 30%. Leisure is already off 10% to 20%. That will drop 30% to 50%. There is a tough road ahead. You had best prepare yourself.
We have recently entered a period where after almost a year the credibility of the Anglo-American banking system has come into question and rightly so. Anyone knows, who understands anything about business and finance, that the financial system is broken and that a new model has to be set in place. The old model no longer works. The Illuminists abused it so badly via their greed. We are about to enter another period of failure much worse than what we have seen over the past year. This is one of the reasons that Congress, at the behest of the bankers and Wall Street, are trying to set preparations for exchange controls. This way they can allow funds to come in but not leave the country. This again would end foreign exchange trading, except by the government or by designated firms operating in behalf of the government. During this second period de-leveraging would continue as the Fed continued to support the financial system. The system is insolvent, so what must happen is that the Illuminists have to create a new system and on a parallel basis implement it while the old system slowly collapses. The debt being borne inside the system and in foreign countries is worthless. All the inside players already know this. We do not believe they can get the job done, and eventually the system will collapse. A good current example of this failure in the system is in the area of municipal bond insurers, who are all broke and will go under. That means all those assets being carried by banks and others do not exist and it also means the collapse of the municipal bond market, which we told you would happen months ago. There will be no new mortgage insurance. That capital isn’t available unless government becomes insurer of last resort. That kind of event would send inflation even higher. No matter what the outcome it will mean a further tightening of the system. We see no way out short of a purging of the system. That purging will come and your only real assets will be gold and silver.
...
