Sunday, September 30, 2012


I have talked several times recently about Spain in the context of its financial difficulties. The only solution for Spain, other than leaving the Eurozone completely, devaluing its currency and defaulting on its obligations, is to be bailed out by the ECB. As already explained the only means by which the ECB can do such a thing is by printing enormous amounts of new money and lending to Spain against little or no security. The amounts of money involved are many times greater than the €60 Billion stated by the Spanish government. The reality is that staying requires hundreds of billions of euros in order to stabilise, but not even improve the situation, where massive budget deficits stretch way into the future. Other countries such as Italy will soon require similar immense amounts of money, otherwise it too will fall victim to the bond vigilantes and sooner or later need a bailout.
The bailout funds available in Europe, if and when they come into existence,  are totally inadequate to refinance Spain and Italy. Mr Draghi knows this full well so when he says he has fully adequate means, he is clearly not thinking of thinking ESM and the EFSF but rather another source of funds. 
This can be achieved by Central Bank currency swaps, notably from the Fed, a solution which was used in the middle of the 2008 crisis. At that time the Fed provided massive, multi trillion USD liquidity to the ECB, which then distributed to other central banks on a discretionary basis totally outside the control of the US congress and the EU. 

Therefore the endless futile haggling between Germany and the other bankrupt European countries must soon come to an end. If finally there is an agreement, then the ECB must print trillions of euros. The consequence of this is to destroy the value of the currency, by putting so many more euros into circulation. The pretence that these funds will not end up in the system and cause inflation is completely illusory. 
The Swiss National bank will also be on the wrong side of these events, as the ECB's race to the bottom with the Euro currency continues, and the Swiss National  Bank with the currency peg, will be the only organisation standing in the way.

The USA  recently announced unlimited quantitative easing, running at amounts of up to US$100 billion per month. In addition they announced a zero interest rate policy as far as the eye can see. This is a deliberate move to destroy the value of the US dollar and make it competitive in export markets, while importing inflation which will be paid for by the American middle classes.

In Japan we are also seeing large-scale quantitative easing, as they are an export-based economy, and must also devalue the currency to remain competitive.

In the UK quantitative easing has been going on now for some years and  sterling has fallen significantly in that period.

So what does all this unlimited co-ordinated global quantitative easing actually mean?

There is an ongoing global currency war,  effectively a trade war by proxy, with each major economic block trying to gain advantage in the world marketplace, and also reduce the true cost of repaying their debts, by the systematic debasement of their currencies, without serious concern for the consequences, most particularly in human and inflation terms.

The power of the central banks to wage wars between themselves, but also against the citizens, who have been prudent savers, by destroying the value of their savings and paying no interest on their capital, should for those who understand it, be a cause for major concern.  
None of those who run central banks have been elected by anybody, they are not accountable to the electorate, who pay the bills for their mistakes, and most people do not even know the names of those wielding such extraordinary uncontrolled powers.
The question then is, not how to change the world overnight, but how best to defend oneself against these unfolding events, and preserve one's assets, when the actual but undeclared government policy is to destroy individual  citizens net worth to save themselves.

It can be seen that the most recent round of quantitative easing,  has once again short-term favourably impacted the stock market. However if no money reaches small businesses, who are the main job creators, no sustainable growth is possible, and the consumer driven recovery in an environment of rising employment levels, is mathematically impossible.

This means that whatever temporary boost comes in the stock market, helping the rich get richer, is not something that can be sustained by a genuine recovery, and is only achievable by money pumping into the asset class.

Mr Bernanke said that he would like to see real recovery in the property market, but once again  we are in dreamland , as new house buyers firstly need to have savings, not student loan debts,  and regular jobs, in order to join the housing ladder.

Much is made of the commodity sector where price increases have been very substantial, however much of this is inflation related, and once again this is very dependent on economic growth. We are seeing a slowdown everywhere in the world, including Germany and China, and the likelihood is we will see a falling off in commodity prices in coming months.

The only logical place that remains for investment, that should prove to be inflation proof, is in the precious metals area with gold and silver.

However the central bankers and central planners do not want you to invest in these markets, they want to keep you inside their game, propping up the equity markets, while they regularly fleece you with flash trading, front-running, insider trading,  excessive fees,  Iibor rigging, and general market manipulation, to  line the pockets of the banks the bankers and their cronies.
The greatest fear of the central planners is a major bond and stock market crash. They have been unable to prevent the collapse of the internet  and real estate bubbles, so now they have created two new markets which are in a bubble, namely the bond markets and the stock markets.
In order to sustain the bubble it is the necessary to reduce bond interest rates close to zero, and shorten maturity durations. The financing costs based on normal interest rates, would be unbearable for most economies on the government bonds. While the bond market collapse, at least in the US, does not appear imminent, the bubble will eventually burst. 
The stock market is the only remaining wealth effect available to investors, who are frequently highly  leveraged, so a crash would wipe out huge amounts of household net worth.

Hence there is a massive ongoing effort to herd investors into these asset classes,  and a strong government and media propaganda machine is in operation, to discourage investors from acquiring real assets such as land or gold and silver.

In particular gold and silver are subjected to daily manipulation by central planners using JP Morgan and HSBC as their agents. This intervention is so flagrant that a simple examination of the daily charts show the moments of intervention,  and so extreme that in a recent attack on these markets, the equivalent of 1 years US silver production was dumped in the form of naked short sales  in a period of less than 15 min, to drive prices down and investors out of the market.

The other trap for those unwary investors, who wish to invest in gold and silver, is to purchase the GLD and SLV, ETF's, which are a paper form of gold and silver, not 100% backed by physical inventory. If investors ever requested delivery of physical metals, they would be lucky to get anything, only a paper claim for non existent precious metal,  in the event of a run on these ETF's.

This is a sobering analysis but regrettably the truth, and the regulators in these markets are complicit with the bankers. Indeed all regulators practically without exception come from the major banks they're supposed to regulate, and will return there to much better paid jobs when their "government service" is complete.

If you wish to preserve your wealth in a world where governments and banks, for their own survival, are determined to inflate it away, steal from you through zero interest rates, high taxes, fraudulent activities, or outright theft, then you must hold real assets be it land, gold and silver, art collections, etc.  completely outside of the banking system and as far away from government intervention as possible. 
For many people this will be way outside their comfort zone, but those who analyse the facts and the alternatives, will come to realise that there is little choice and will position themselves well to survive and thrive in the imminent financial holocaust. 

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