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Found 8 results

  1. I would really appreciate some feed back from the members here on this article -- Your breakdown in layman's terms of what is stated and then your educated opinion - What does it all mean exactly and what "could" happen -- I know it is a lot to read - but how else are you going to ever know anything if you don't read??? Thanks in advance for those that are willing to read and comment -- UNEEK THE RESET HAS ALREADY BEGUN! Author : Bill Holter Published: January 19th, 2015 For several years there has been talk of a financial and economic “re set” coming, this is no longer speculation as the reset has already begun! The Swiss have suppressed the price of their currency, the franc, since late 2011. They pegged the franc versus the euro with a “floor” versus the euro at 1.20. After confirming this floor publicly on Monday, they abandoned it Thursday only to see the euro depreciate through the par level. What you saw on Thursday and Friday was the work of Mother Nature as the Swiss decided they would be better served by no longer battling her. The ramifications of this move by the Swiss are almost infinite when you consider the chain reactions they have now started. Several large FOREX firms including the largest retail firm in the U.S., FXCM, were rendered bankrupt overnight. Even Goldman Sachs and Citi admitted to being offside and sustained large losses. As of right now, we have no idea who “won” and who “lost”, nor do we know “how much?” We heard almost nothing from Swiss or European banks on Friday, “who what and how much?” will begin to surface this coming week. As I have written for years now, if the loser goes bankrupt, the winner does not get paid…thus turning the winner into a loser. This is a very big problem the markets ignored on Friday but will not be able to ignore as the dead bodies begin to surface. Think about this point very seriously, many investors (and firms) went to bed Wednesday evening with no stress at all on their portfolios (or their business), in just five minutes Thursday morning they were insolvent. Just FIVE MINUTES! We are only talking about “investments” here, how many other real businesses in the import and export area are now broke? Broke because they hold euros but need francs or they export from Switzerland or import to Europe and now their business model makes no sense? How is this even possible in just five minutes time? Another aspect to what and how the Swiss moved on Thursday is that of “central banks” themselves. Did the Swiss not know they were going to float the franc on Monday when they confirmed the peg publicly? Did they or did they not inform the IMF prior their actions? What about the BIS which is headquartered within their borders in Basel, surely they tipped them off? Christine LaGarde claimed in an interview with CNBC that she had no prior notice, really? If this is true then it shows the Swiss central bank has moved in an “every man for himself” type of action. It also shows the “united front” of central banks is not so “united” anymore! If Ms. LaGarde is not telling the truth and in fact the IMF did have prior knowledge, what would this mean? It would mean the central banks are finally losing control of the rig. It would also mean the central banks have distorted currencies, interest rates etc. so badly that once Mother Nature takes over, we can expect repeat performances all over the world and amongst all assets and currencies. How can I say this? I would simply ask if it is “normal” for two trading currencies to revalue 30% in five minutes or if it is not normal, what was the cause? We of course know, the cause was the actions of the ECB and SNB over these last three+ years. We have already speculated the Swiss made this move for one of two reasons. First, they may have decided the amount of euros necessary to purchase (and thus the amount of francs created) will go exponential this coming week when the ECB goes full on QE (printing). We also know that euros already make up more than half of their balance sheet. The other possibility is they know the Greek election is coming up, (the Greek banks are already experiencing bank runs) and they see the very real possibility of the Eurozone fracturing or even dissolving. Another possibility is maybe they just decided “their first loss is their best loss”? Maybe they have watched as the core of Europe has asked for their gold back and understand that “trust” amongst central bankers is waning? Maybe they simply decided to front run the obvious and necessary re set and do it on their own terms? It is very hard to say what exactly the motivation was, the important thing to understand is their action has started a re set in motion which will not be stopped! In plain English, the Swiss just yelled FIRE …while standing in the exit! I have several other questions but first I want to point out the obvious. Oil was cut in more than half in dollars over 6 months, could you say the price of oil was “re set”? How about copper? How about other foreign currencies? Could the huge moves in so many assets qualify as being “re set”? The collapse in oil and copper prices are black swans pointing to a rapidly slowing global economy. The Swiss removing their currency peg is another black swan event and in reaction to the ECB moving toward hyperinflating their currency. My biggest question now is this, what will happen when China allows their currency to float? The Swiss are one thing, China is whole different story! Think of the ramifications when it comes to trade? Another, maybe even more important question is what will happen when the Chinese “force” the price of gold and silver to trade freely? Let me explain this further. The Chinese know full well that gold IS money, otherwise they would not have spent the last several years buying almost every single ounce that came from the ground. They know it is artificially priced by New York and London. They can “float” gold in several manners. First, they can simply bust the COMEX and LBMA by bidding for and purchasing both their entire inventories within a 24 hour window. Another possibility would be to simply put out a “global bid” and state some price (much higher than current) they are willing to buy any and all gold, presto, COMEX and LBMA would be busted without them doing it directly! I recently wrote of a “Global Margin Call” where because oil and other assets, currencies, etc. have moved so rapidly, many derivatives traders have surely been thrown “offside”. This move by the Swiss is nothing different except it was done “officially”. Actually, the funny thing is they moved to suspend what they were “officially” (and artificially!) doing. The move by the Swiss has only made the global margin call that much bigger! The global re set which was already in the works is now publicly and officially happening before your very eyes. You can close your eyes or not believe this fact, it will not make it go away, nor will it insulate you financially from what is coming. To finish, and I plan to follow up maybe even tomorrow, the most important re set will be that of gold and silver prices. I say “most important” because these are the only “tools” available to you as an individual to protect your wealth. If the Swiss franc and the euro can change in value by 30% within five minutes, what do you think the revaluation of gold and silver will be when the 100 ounces of “paper metal” come looking for the real thing? At what price will the market clear? Add a zero? Two zero’s? Please understand this, when the margin call is issued worldwide, there is only one money where the call will work in reverse, precious metals. The “call” will be for real, yet non existent metal. Gold had already sniffed this margin call and re set out a couple of months ago. No matter how much paper was thrown at it, it simply stopped going down. Even while the dollar strengthened synthetically, gold went higher versus the dollar. Gold has clearly been THE best money, what do you think will happen to real metal when it turns out that 99% of the supposed global supply is proven as counterfeit? We will soon witness the greatest margin call in all of history. We will also witness the greatest transfer of wealth and re set in all of history! My only question is whether what so far has been “rolling re sets” becomes an official market/bank/finance closure and announced …or, do the markets continue to trade and force re sets in market after market. As an additional note, we have one last question to ponder which may or may not be connected. Koos Jansen put forth a “mystery guest’s” theory that the Swiss went short gold in Sept. 2011 which marked the top in gold. He asks in the following link, “did Switzerland just cover their short“? https://www.bullionstar.com/blog/koos-jansen/guest-post-i-have-a-theory-on-the-swiss-franc/ I believe there may be some credence to this theory but would go one step further. Zerohedge asks the question and speculates Japan may be the next “Switzerland” and pull the plug on Abenomics. Personally I see it a little differently, more importantly, what if the Chinese were to react to the coming QE4 by doing two things? What if China just walked away and sold their dollar holdings …and at the same time revoked their current peg of the yuan to the dollar? Will China some day ratio back their yuan with gold? I think this is likely. Would the dollar collapse 30% like the euro just did versus the franc or will the re set be much larger? Of course the next question would be “how high would gold be marked up”? An unpegging of the yuan by China would be more important and (current) system ending than nearly anything else I can imagine. For China to break their peg, the paper short positions in gold and silver would finally be exposed for what they are, counterfeits! Regards, Bill Holter BILL HOLTER, Associate Writer, Miles Franklin Precious Metal Specialists Website: www.milesfranklin.com Prior to joining Miles Franklin in 2012, Bill Holter Worked as a retail stockbroker for 23 years, including 12 as a branch manager at A.G. Edwards. Later, he left Wall Street to avoid potential liabilities related to management of paper assets. In 2006 he retired and moved to Costa Rica where he lived until 2011 when he moved back to the United States. Bill was a well-known contributor to the Gold Anti-Trust Action Committee (GATA) http://blog.milesfranklin.com/the-reset-has-already-begun
  2. 19 Of The Most Expensive Substances In The World 19. White Truffles Cost: Up to $5 per gram or $2,000 per pound What you do with it: This seasonal mushroom can be shaved over pasta, steak, eggs, and rice and infused in oil to sprinkle on almost anything. 18. Saffron Cost: $11.13 per gram or $5,040 per pound What you do with it: Saffron is a flowering plant that can be used in natural remedies for everything from depression to menstrual cycles. 17. Iranian Beluga Caviar Cost: $35 per gram or $1,000 per ounce What you do with it: Also known as "almas," these costly fish eggs are eaten cold and in small bites as an appetizer and on unsalted crackers or bread. 16. Gold Cost: $39.81 per gram What you do with it: In addition to its uses in jewelry, the ancient metal can be used for electrical conductivity and resistance to corrosion. 15. Rhodium Cost: $45 per gram or $1,270 per ounce What you do with it: Rhodium is mostly used in three-way catalytic converters to reduce a car's carbon emissions. 14. Platinum Cost: $48 per gram or $1,365 per ounce What you do with it: Platinum can be used as a catalyst in scientific experiments, worn as jewelry, and taken in anti-cancer drugs. 13. Rhino Horn Cost: $55 per gram or $25,000 per pound What you do with it: The prized tusk is rumored in Vietnam to cure cancer. Its supposed medical uses also include treating fevers and other ailments 12. Crème de la Mer Cost: $70 per gram or $2,000 an ounce What you do with it: Rub this so-called miracle cream daily to look ageless. 11. Heroin Cost: High-quality heroin can cost you up to $110 per gram What you do with it: The opiate is injected, snorted, or smoked and is meant to alter the subconscious. It can also cause convulsions or even comas. 10. Methamphetamine Cost: $120 per gram or $1,600 per ounce What you do with it: The highly addictive drug can produce euphoric effects and is often popular with teenagers. 9. Crack Cocaine Cost: Up to $600 per gram What you do with it: Some say party, others say develop a problematic habit. 8. LSD Cost: The crystal form of LSD costs about $3,000 per gram What you do with it: Popular in the 1960s, this substance is known to cause hallucinations. 7. Plutonium Cost: Roughly $4,000 per gram What you do with it: It makes things nuclear. There are two kinds of plutonium that can be used, for either military purposes or nuclear reactors. 6. Taaffeite *Cost: Anywhere between $2,500 to $20,000 per gram or $2,400 per carat What you do with it: The mauve-colored gem is thought to be more than a million times scarcer than diamonds. And while it's a bit too durable to use often in jewelry, if you're lucky enough to find one, don't let your hands off it. *FYI: A carat = 0.2 grams 5. Tritium Cost: $30,000 per gram What you do with it: Tritium is used in self-luminating EXIT signs found in theaters, schools, and office buildings. There are more than two million tritium EXIT signs in the United States. 4. Diamonds *Cost: A colorless, 1-carat can cost more than $65,000 per gram, or $13,000 per carat What you do with it: Buy engagement rings. *FYI: A carat = 0.2 grams 3. Painite *Cost: $300,000 per gram or up to $60,000 per carat What you do with it: Thought to be the rarest gem mineral, it can be used in crystal healing or just make a pretty collectible. *FYI: A carat = 0.2 grams 2. Californium 252 Cost: $27 million per gram What you do with it: The Californium isotope is used in devices that find layers of oil and water in oil wells. 1. Antimatter Cost: $100 trillion per gram What you do with it: Antimatter could possibly fuel spaceships to the planets, and maybe the stars, in the years to come. http://www.businessinsider.com/most-valuable-substances-by-weight-2014-9#19-white-truffles-1
  3. METALS-Copper Rebounds After Encouraging China Factory DataHarpreet Bhal Tuesday, 23 Sep 2014 | 6:20 AM ETReuters * China manufacturing unexpectedly picks up in Sept * Copper deficit narrows to 27,000 T in June - ICSG * U.S. Markit manufacturing PMI for Sept due at 1345 GMT (Updates prices, adds comment, detail; previous SINGAPORE) LONDON, Sept 23 (Reuters) - Copper prices recovered on Tuesday, bouncing off three-month lows hit in the previous session, as encouraging manufacturing data from top consumer China helped allay some fears about the outlook for demand. Benchmark copper on the London Metal Exchange (LME) traded at $6,743.75 a tonne at 0951 GMT, up 0.4 percent. It had fallen to a three-month low at $6,707.25 in the previous session. China's manufacturing sector unexpectedly picked up some momentum in September even as factory employment slumped to a 5-1/2-year low, reassuring investors who had expected weaker numbers from the world's second-largest economy. The metal used in power and construction is still trading more than 8 percent lower so far this year, weighed down by a combination of demand concerns and rising supplies. "It is good that the Chinese economy isn't collapsing but a weaker PMI (purchasing managers index) number would have raised the likelihood of further stimulus from China, which would have given a boost to copper," said Caroline Bain, senior commodities economist at Capital Economics. "The property and construction sectors in China are still not showing any signs of recovery. That, coupled with signs that copper mine supplies are ramping up, have led us to expect prices to fall further by the end of the year." China accounts for as much as 40 percent of global demand for refined copper. "I think they (metals) have been oversold. But obviously, picking the bottom on these things is difficult when sentiment is changing so quickly in the market. Investors' positioning is definitely on the bearish side," said commodity analyst Daniel Hynes of ANZ in Sydney. "If we did see a couple of positive data points, then the market is certainly ripe for a short-covering rally," Hynes said, adding that physical buyers had been largely sitting on the sidelines. Also helping to push metals prices higher was a rise in the euro against the dollar, after a business survey showed Germany's economy probably expanded in the third quarter. A weak dollar makes commodities priced in the U.S. unit cheaper for holders of other currencies. Weighing on sentiment, however, was the expectation of more copper supplies entering the market. The global refined copper market's deficit narrowed to 27,000 tonnes in June, compared with an 88,000-tonne deficit in May, the International Copper Study Group (ICSG) said. The copper market is expected to be in a 226,000-tonne surplus by the end of 2014, rising to 285,000 tonnes in 2015, a Reuters poll in July showed. PRICES Three month LME copper Most active ShFE copper Three month LME aluminium Most active ShFE aluminium Three month LME zinc Most active ShFE zinc Three month LME lead Most active ShFE lead Three month LME nickel Three month LME tin (Additional reporting by Lewa Pardomuan in Singapore; Editing by Dale Hudson) http://www.cnbc.com/id/102024126
  4. Top News London Metal Exchange opens clearing house, to add China currency Mon, Sep 22 14:05 PM EDT By Eric Onstad LONDON (Reuters) - The London Metal Exchange (LME) on Monday launched its new clearing house, which plans to add the Chinese currency as collateral by year's end to lure more business from the world's top metals consuming nation. The launch of LME Clear is a key step by LME owner Hong Kong Exchanges and Clearing Ltd (HKEx) to generate profits after paying $2.2 billion to buy the LME in December 2012, a price which many analysts regarded as very high. The 137-year-old LME set out to build its own clearing house three years ago to take over from LCH.Clearnet, allowing it to collect fees not only for transactions on the exchange, but for clearing them. Over 2 million existing LME positions were transferred over the weekend from LCH.Clearnet to LME Clear. The LME, the world's oldest and largest market for industrial metals such as copper and aluminum, declined to say how much cash the clearing house would bring in. But Jefferies said in a note in July that the new venture would add about $80 million a year in revenue. Revenue from HKEx's commodities business, which includes the LME, rose to HK$645 million in the first half from HK$608 million a year earlier, HKEx said in August. Expansion in China, which accounts for 40 percent of global copper demand, is another key LME strategy, so LME Clear is moving quickly to allow clients to use the renminbi as collateral, LME Clear Chief Executive Trevor Spanner said. "We definitely know there's latent demand for renminbi," he told Reuters. "As more Asian-based members join the LME and LME Clear, they'll be looking to make use of that renminbi facility. We plan to get that up and running in November, subject to the Bank of England's approval." LME Clear is also looking into extending its opening hours into Asian hours, he added. The LME's electronic trading platform is open from 1am to 7pm London time while LME Clear operates from 7:30am to 8pm London time. "This morning, we had over 20,000 trades in the queue, which we processed in about 10 minutes," Spanner said. Adding new products is another way HKEx plans to make money, which will be easier by having its own clearing house and being able to plan specifications for both trading and clearing. The LME has said it plans to launch a new aluminum premium contract in the second quarter of next year and steel rebar and scrap contracts further in the future. LME Clear will also be in a good position to clear over the counter (OTC) products due to the complex structure of LME futures with daily prompt dates. Regulators are keen to shift OTC clearing to established venues to promote transparency. "There's a lot of activity which is not on exchange at the moment. People are interested in clearing solutions for OTC business," Spanner said. The new clearing house also plans to expand types of collateral to include warehouse warrants, ownership documents for metals stored in LME warehouses. Currently, cash and bonds are the only collateral allowed, but since LME contracts are physically settled, LME members requested the addition. (Editing by Michael Urquhart) http://mobile.reuters.com/article/idUSKCN0HH1BR20140922
  5. Gold currently sitting at $1,335.50 per Oz thats a jump of almost $40 today alone. I just hope we've seen the bottom and this is where it turns around ...... chart below http://www.kitco.com/charts/livegold.html
  6. WORLD BANK WHISTLE-BLOWER: “PRECIOUS METALS TO SERVE AS AN UNDERPINNING FOR PAPER CURRENCIES” http://silverdoctors.com/world-bank-whistle-blower-precious-metals-to-serve-as-an-underpinning-for-paper-currencies/#more-26232 WORLD BANK WHISTLE-BLOWER: “PRECIOUS METALS TO SERVE AS AN UNDERPINNING FOR PAPER CURRENCIES” MAY 7, 2013 BY THE DOC I had the opportunity yesterday to speak with one of the western world’s most courageous and astute women, Karen Hudes, Former Senior Counsel to the World Bank—now turned whistle-blower. It was a powerful conversation, as Karen spent 20 years with the World Bank as an attorney and economist, before being “let-go” after reporting internal fraud and corruption. During the interview Karen indicated that the world is rapidly changing, with western power structures breaking down, economic & political influence gravitating to BRICs nations, all amid a pending currency transition which will highly favor precious metals. Hudes stated: “All of the countries of the world are going to allow precious metals to serve as currency, and this will be an underpinning for paper currency, as we’ll have both systems at the same time.” From Tekoa Da Silva: Starting out by discussing the shocking centralized power she witnessed while working at the World Bank, Karen explained that, “A study done by three [swiss] systems analysts who used mathematical modeling [shows] how the [world's] 43,000 transnational corporations were being controlled through interlocking corporate directorates. There’s a group of 147 companies, most of them are financial institutions, and what they’ve done, is through the interlocking directorates, they control 40% of the net worth of these [43k] companies, and 60% of their earnings…so that group has been using the presidency of the World Bank as kind of a puppet to dominate the world—that’s [now] finished.” A major shock to that centralized power base, according to Karen, was the recent move by BRICs nations leaders to bypass the World Bank for their financing needs, by establishing their own development bank. “As the BRICs [nations] economic power grows,” she explained, “they’re not going to be strangled anymore through the grabbing [of] their resources…So their decision to start their own development bank was their way of letting [world] governments know…that its time to end this corruption.” Major moves toward monetary independence are also being made by growing numbers of U.S. states, Karen added. She explained that, “The states are starting to have legislation recognizing gold and silver bullion as legal currency. This is [also] a very strong signal the states are sending to the federal government, that the time to get serious about ending the corruption in the financial system is now here.” When asked her thoughts on what this all means for the world monetary system, Karen said, “What’s going to happen, is we’re going to have all the countries of the world, sit down and figure out what’s going to be the best, most orderly transition from the current system that we have, [which has] profound imbalance and unsustainable deficits…[this change] is going to happen as each country makes its preference known, because the system we have now is not transparent, and the biggest change [in the new system], is that there’s going to be transparency.” That transparency may be found through a gold-backed currency system, Karen noted, as, “All of the countries of the world are going to allow precious metals to serve as currency, and this will be an underpinning for paper currency, [as] we’ll have both systems at the same time. This is my guess, as I mentioned—I am an economist.” As a final comment speaking towards her difficult journey as a World Bank whistle-blower, Karen said, “I’ve been struggling now for years, to tell the American public what’s [been] going on. I haven’t gotten through, because this [financial] group has bought up the press and has been spreading disinformation systematically. That undermines the whole point of a democracy. How can voters vote without an informed opinion, without the information that they’re entitled too? So this strangle-hold on information is going to end in very short order.” —— This was a powerful interview conducted with a great American patriot and honorable world citizen. Karen is setting an example for the history books, and her interview is required listening for global thinkers and market students.
  7. http://www.zerohedge.com/news/2013-04-29/qbamco-precious-metals-and-coming-great-resetQBAMCO On Precious Metals And The Coming 'Great Reset' Authored by Lee Quaintance and Paul Brodsky of QBAMCO, Volume Triage Last Sunday we closed the macroeconomic portion of “Imperial Constraint” with the following: “So we ask again, are there really unpredictable market shocks or are investors paid not to care? To us, all signs point towards the next currency reset. We think monetary authorities are compulsively destroying the current global monetary system; they simply have no choice if they are to keep it afloat in the short term. We further think they will have no choice but to replace it with a gold exchange standard they oversee (i.e., a gold-standard-light, “Bretton Woods” type reset). Perhaps this explains the current redistribution away from unreserved paper gold to physical gold? We would not be surprised if, in 2014, someone like Larry Summers or Tim Geithner takes control of the Fed and oversees such an operation.” Two days later the Fed announced Ben Bernanke would not attend the Jackson Hole summit, for the first time in twenty five years. A couple days after that the New York Times (on the first page, no less) ran an in depth profile of Janet Yellen, the heir apparent to run the Fed. Beneath her profile there were three other candidates “being discussed:” Roger Ferguson, Tim Geithner and Larry Summers. We normally do not spend time handicapping presidential appointments. In this case; however, we think the choice for next Fed Chair may have profound economic implications, and that it would not require expertise in econometric modeling, credit policy management, and maintaining the public perception of economic stability. As we wrote last week, we think the next Fed Chairman will oversee a conversion of the global monetary regime. A thick skin, diplomatic skills, and strong relationships with global banks and monetary policy makers will be the skill set most needed. We think Tim Geithner (with Bill Dudley as an alternative) will take over the Fed when Ben Bernanke steps down next January, and it seems by all indications that the table is already being set. We attended a small dinner party a few years ago at which an iconic financier (and major Obama supporter) let it slip that he questioned one of Obama’s most senior aides just prior to the 2008 Democratic convention about taking over the economy when it was imploding. The aide waived it off and exclaimed; “oh don’t worry, Bobby has it covered!” Most of the table was relieved that Bob Rubin still had their backs and that banks would keep priority. Such was, and remains, US economic policy. Neither growth nor austerity nor gloom of night will stay these currencies from their appointed devaluations. Bank balance sheets must be preserved; ergo sufficient inflation must be manufactured. We think the dull but persistent economic malaise amid increasingly aggressive monetary intervention policies will soon engender fear among the not-so-great washed – net savers. This happier band of brothers cannot maintain an edge when the real economy contracts and interest rates are already at zero. Base money is already being manufactured in the form of bank reserves and the total money stock is not growing because there is very little natural economic incentive among the rest of us to consume (much) or take risk. Something and someone new is needed. Ben Bernanke seems like a brilliant political economist and a decent guy, the top of his field in terms of comportment, academic credentials and specific competence in understanding historical monetary policies during a counter-cyclical (i.e., de-leveraging) period. Perhaps Janet Yellen is too? But such qualities are not what we think will be preferred by the powers that be now that global resource producers are openly questioning US, British, Euro and Japanese monetary policies and reserve holders are realizing their stash is being methodically turned to trash. Meanwhile, aggregate leverage is growing and real economies are withering. Does anyone believe that Ben or any other monetary authority has been proactive, or that any fiscal authority has enacted legislation that promises to help achieve “escape velocity?” Can’t we all agree that the rationale for economic policy may be boiled down to the counterfactual: “yes, but imagine if they withdrew liquidity or enforced true austerity – it would be worse!”? Is there a serious analyst who still believes economies can grow their ways out of being over-levered without leveraging further? Whether or not contraction has to come-a-knocking prior to a monetary reset is anyone’s guess, but it would be difficult to imagine monetary system change without a generally-recognized economic tragedy that precedes it. This implies disappointing GDP prints, declining corporate revenues and maybe even a swoon in stock and real estate markets. We have already begun to experience the first two. Now that we read global central banks have begun buying equities, perhaps equity prices may be controlled too (as are the level of interest rates via large scale asset purchases like QE and relative currency exchange rates via timed interventions)? Negative output growth and asset price busts would certainly open the door for our hero to enter. The role of a central banker in the late stages of de-leveraging seems to be volume triage, as they say in intelligence circles – reacting to an increasing barrage of events as they occur, wherever they may occur. In economics as in policing, the bad guys always get to take the first shot. From the central banker’s perspective, the bad guy in the current regime is the real economy. If it continues to shrink, as we think it must, then TPTB must change the way they do business. We think the box we drew in Imperial Constraint is the key metric in understanding the forces behind economic growth and market pricing. An inflationary leveraging perpetuates imbalances while deflationary deleveraging threatens the survival of the banking system at large. Hopes for organic credit growth, which would promote the former, are now fleeting. This, in turn, engenders the threat of the latter. Continued ZIRP, increasing asset purchases and a steep decline in the universal efficacy of it all suggests the time to press the reset button is quickly approaching. May to December 2013 may turn out to be the darkness before the dawn; a time we look back upon and choose to forget. All in all we think the most efficient Fed Chair in advance of a reset would be Paul Krugman. He seems willing to destroy the current global monetary system with swift dispatch, without consultation, declaration (or second drafts). Alas, capitalist economies in liberal democracies require level-headed responses to market forces. There is no place for rogue pro-actionists. Institutions like the Fed are meant to appear as first responders working on behalf of the societies their banks serve. And so we think that circa 2070, our children will write and read (140-word) biographies about how Timothy Geithner saved the world from economic darkness. Geithner will save the day and bring glory to the Obama presidency by reducing the burden of debt repayment while maintaining the nominal integrity of debt covenants and bank balance sheets. The only way to accomplish this would be by destroying the currencies in which those debts are owed. Net debtors will rejoice and net savers (all 1% of them?) will suffer, finally realizing their unreserved currencies and levered financial assets were never sustainable wealth in the first place. Our little narrative could certainly turn out to be wrong, but we discuss it here (against all political wisdom) because we cannot find another one that better fits current macro and market pricing trends. If we are wrong about Mr. Geithner, we think it would imply that TPTB (raise your hand if you think the Fed’s shareholders do not choose/approve the Fed Chairman) believe a clear-headed and decent academic political economist can figure out what all past ones could not: how to support asset prices beyond ZIRP and central bank asset purchases. (Ben is gone, long reign Janet!) That is not our projection. When and if it becomes clear that Tim Geithner will ascend the steps at Eccles, we think it would already be too late to buy physical gold and resources. The only play remaining for financial asset investors looking to get full value after the reset would be shares in precious metal miners and natural resource producers holding reserves in nature’s vault. Properly held bullion and shares in precious metal miners would act as the most efficient store of purchasing power over the course of the devaluation and conversion. (Worst to first? Get ‘em while they’re cold!) Futures, ETFs, unallocated bullion holdings and other fractionally reserved claims on physical reserves easily replaced with cash would not participate. If our scenario comes to pass, then bank, government and consumer balance sheets would be quite healthy following the reset and would be ready to expand. We would think consumable commodities and shares in their producers would lead equity markets higher and that interest rates would remain low, as further inflation would be mitigated by the discipline of a full or partial peg to precious metals. We think all should question whether we are 100% wrong. If not, then prudence dictates some allocation to properly held precious metals. (Presently, it is less than 1% of all global pensions.)
  8. http://www.wealthdaily.com/articles/a-150-increase-in-this-silver-companys-dividend/4013
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