An Open Letter to the Plunge Protection Team

First of all, there is no such thing as the Plunge Protection Team.  It’s the super-hero nickname for the Working Group on Financial Markets.  In case you haven’t noticed, they haven’t exactly been living up their moniker lately.  All jokes aside, I truly love this country, as I’m sure those in charge do.  What follows is what I think might be a win-win solution (although I hate that phrase).

You’ve Got Problems…

What started out as a seemingly contained problem with sub-prime mortgages has metastasized into a full blown financial meltdown. There is now a very real crisis of confidence in Capitalism in general and America’ future.  You can’t blame anyone who doesn’t want to deploy new capital.  We see record amounts of money in money markets and shorting stocks.  I hate to be the one to tell you this, but we don’t trust you. 

I understand that you need the financials re-capitalized (make that we need the financials re-capitalized).  You are asking a gigantic leap of faith.  The risks are great and the rewards most likely modest.  Do you actually think we’d would give money to the very same morons or crooks (take your pick) that enabled this mess?   

As Eric Cartman would say, “Screw you guys, I’m buying gold.” 

I’ve Got Problems…

Like many others, I’ve invested in gold (sort of), via ETF’s.  In order for me to get physical gold at this point I’ve got extraordinary tax consequences and pretty hefty premiums to convert my US dollars to metal and back.  This is not even addressing the issue of safe storage.  So I’m as screwed as the next guy in a Mad Max scenario. 

There’s more to it than that.  I am conflicted because gold by it’s nature, is anti-growth, and doesn’t really help anything.  It doesn’t build better infrastructure or create jobs.  You can’t eat it or power your car with it.  It just sits there, collecting dust instead of interest.  It does however, appeal to the conspiracy nut in me. 

Let’s Make a Deal

Here’s my big idea. Bonds backed 100% by Gold.  Interest bearing securities that can be redeemed for physical gold to capitalize our most troubled sectors.  They should be a minimum holding period before redemption.  Purchasers will have the option receiving US dollars (with interest) or shiny metal.  Fannie and Freddie would be a great place to start.  It is beyond the scope of my limited mental capacity to fully design these products, but I would caution you to keep it simple, make supply tight and do it soon!

The rumors and conspiracy theories that swirl around gold only add to the sense of mistrust that is so prevalent today.  If gold is irrelevant in today’s world, then sell it all.  The fact that the bullion depository at Fort Knox is one of the most secure facilities on Earth leads me to believe you don’t feel that way.  If you are holding gold in case of emergency, guess what? 

I expected turbulence in financials this year, but not like this.  I think we are staring at runs on banks now.  I can’t really compute what that means, given the printing press and all, but I’m thinking it’s not good.  I can only speak for myself, but if you will guarantee me easy conversion to physical gold at my local bank, I’m in.

Parting Shots

I refuse to believe that there is no common ground between Ron Paul and Hank Paulson, conspiracy theorists and central bankers.  I am not proposing a magic pill for all the problems we face, but I am sure that Divide we fall.  One more thing; don’t think I’m the only on noticing the diminishing “helicopter drops” every time you guys are on TV.  We need super-heroes now.  

Comments

[KellyLieberman]

I have been long on GLD, SLV and precious metals in general as soon as I saw the crooks getting rewarded for losing middle class America's retirement funds...
Oil is risky business, and it profits those who clearly wish to do us and most of the stable world the most harm. Bush and his cronies have lost the war on terrorism by feeding our wealth to the very nations that support the terrorism and weapons of mass destruction that they claimed were there in the first place. The stupidity astonishes me.
But these are Texas oil guys, "bring on the 10 gallon hats, and let's shoot each other in the arses!!". While they rake in their oil profits they will leave behind a country in ruins. There will be no place here to spend and enjoy their wealth so they might as well move to Dubai!
Give us the next 20 years of civil unrest and poverty to work out the mess you good ol' boys created on your watch while you blame the Democrats from your perch in Saudia Arabia....

[bowman711]

The roots of this financial situation LONG pre-date the Bush administration.

[rhymes]

Careful, We're looking at a potential Depression here... If it's really true, a Depression is a re-pricing of *ALL ASSETS*...

Price of every asset gets repriced down. A destructive cycle of lower demand driving lower prices driving lower jobs driving lower demand will start.

In that scenario, Gold is *NOT* the store of wealth you think it is. Nothing is immune, as whatever "money" someone will pay for a "thing" is going to be less, as the system simply has less money in it.

Good news is everything will be cheap at the end of this process -- bad news is everyone will be poor.

[buffaloxray]

Anyone who knows anything about the gold market knows fort knox has no gold. The US gold was stolen by the federal reserve long ago as Reagen found out when he ordered an Audit of Us gold holdings.

[jse17]

No offense Mark but what is your foundation for denying that a Plunge Protection Team exists? Again, no offense but what reasonable reader would not accept Mark Lebovit’s claim supported at least by a notebook chock full of available research that Lebovit has accumulated (see The Money Show Video’s search).

In fact, the PPT likely will be in commando action after today’s early plunge (07/11/2008).

[rhymes]

Going back to the gold standard is a gold-bug's wet dream. It ain't going to happen.

There's a simple way that the current crisis of confidence with USA will resolve to USA's benefit.

It's a question of Relative Reputation and Image.

USA looks bad now because it has screwed up and is losing a lot of money -- relative to other countries who appear to not be screwing up as badly.

Is it really?

Or is it that the whole world is on a roller coaster, tipping over a "peak" and USA the first train? In that case, the first train appears to be crashing, and the rest seems to be moving up.

If this is so, and the decoupling theory is a bunch of crap, then this the crisis of confidence will quickly be resolved when USA finds a bottom and the other economies are still crashing.

[effiiciency]

Boy..........would I love the debate whether the PPT exists versus the GLD ETF acutally being BACKED by physical gold dollar per dollar. But (grammatical error) it would take too much typing with nothing to gain.

But (another grammatical error) you'd be right if you indicated there's no Good Tooth Fairy, Santa Claus, or Easter Bunny.

[DiverCity]

What you apparently forget or simply don't understand, hc, is that gold is money. Hence, I'm not so concerned about what someone will pay in some fiat currency for my gold in the dystopian future you posit. Rather, the reason to own gold is to be able to survive using gold to pay for necessities. Jeesh!

[mark mchugh]

Thanks, efficiency. I think you might be the only person who actually read the article. I promise to brush up on my grammar.

[opinionated]

"Good news is everything will be cheap at the end of this process -- bad news is everyone will be poor."

Thanks for this golden nugget on the process of deflation.

It says it all in less than 25 words!

[GMiki]

Deflation? Inflation? Gold is untarnishable. It's really good stuff. Silver tarnishes, but it's nice, too.

Actually, I think it will be deflation on the high end with people trying to sell what they own that's expensive or manufacturers/retail trying to dump inventory, and inflation on the basic, everyday end: food, fuel, and such.

[phinsuntanning]

PPT exists, HQ is in Houston
and is buying lots of oil futures
with your green pesos @ 2%

[ussmls7]

Out in rual America, folks know how to grow healthy food & store by canning & old fashion smoke houses,city folks only know to go to the local food store or dineing place! Farmers in my smal rual hometown bring new vegs & fruit to vactant lots, in high traffic intersections. I am disabled, so I have plenty of time to see both sides unfolding, as the dollar loses more buying power! When I set with 2 brothers that have been selling now for over 7 yrs, they ask many coustomers if they have Silver coins or Gold they would like to sell! They also bring a daily print out from coinflation.com, showing what a pre 1965 silver coin face value in dollars is for that day, & also a blue book for buying coins! In the last 14 months, more 90% silver dimes,quarters,halfs have been traded for fresh food!! Morgans & Peace Dollars are coming out in huge amounts,coin dealers only offer melt, but these 2 farmers & I have bought some great hard to find rare coins & paid a fair price to the growing amount of people that are spreading the word,getting more for their coins & junk jewerly that TV adds! What started out as a way to give good fresh food to locals, has turned into a way for me to buy rare coins at a fair price, in turn selling or trading them for Bullion! Plus lots of great freash food below wholesale prices & not worrying about where it came from!
How does this fit into all the above post,this only proves, that Gold & Silver is real money,it has been for all through history, & ever Nation that has chose fiat over money backed by Gold & Silver have faded away! Right now a 1964 Washington Quarter will get 1 gallon of gas, but it take 4 1 dollars bills to do the same! The Federal Reserve,over the years,have used Barclays,Goldmans,JP Morgan as Bullion Banks to flood the world with Gold to keep the price surpressed, they are useing ETFs in the same way, but they are now backed in a corner, & that is when they are the most dangerest! The Fed did not bail out Bear Sterns, it Bail out JP Morgan Chase,Freddy & Fanny took all the worthless paper of Goldmans, so Tax Payers are the ones that will feel the Pain for many years to come! Goldman has direct control over Fed Action, by looking into past donations to Dem members of Congress, not only has Goldmans got the power in Congress,but that makes it easy for the Fed to get a pass for actions it does! As the Fed takes the dollar to zero, those holding fortunes in dollars, will be poor, but those with real money Silver & Gold will be the new rich.
To make a point, take a 1964 quarter to a small town, offer it to the owner, for a gallon of gas, see the reaction, then have 7/11/2008 printout of coinflation.com results what a quarter dated 1964 is worth in dollars, I think both will be surprized!!
1 90% present = $3.3854 compare to a 2008 quarter =$0.0538210, Silver closed at $18.72 oz ,so if you tried to buy a roll of 1964 Quarters, I found the cheapest was $142.99 for $10.00 of 90% silver mixed coins, if the Fed combined efforts to surpress Gold & Silver Prices, by use of Naked Short Selling at Comex & in ETFs, then $142 for $10.00 will be cheap, Share holders of GLD & SLV are at risk of loseing all due to default, the FBI could have a hay day just in SLV alone! The next Presidend & Congress will find that the laws put forth since 1913 untill now, may be the worst thing this Nation has ever faced & fixing it will be tough on all!

[Victor Berry]

I too hate the phrase "win-win" because it ignores the fundamental law of nature: "the conservation of wins and losses." For every winner, there is a loser. Ergo, for every "win-win" there is a "lose-lose". And I should know because I always seem to end up on the "lose-lose" end of the "win-win" deal.

[mark mchugh]

Thanks all. Victor, you gave me a good laugh (even though I can totally relate).

Special thanks to ussmls7, fascinating stuff. Got any room for one more wherever you are? Abundant food and hard money sounds great to me.

What I had hoped to discuss here was more "how do we fix this?". I'm not necessarily proud of "parking" my money, but given the current circumstances, what alternatives do we have? Let's face it, the real return of bonds is horrible given the inflation/currency collapse scenario we're looking at. If everyone moves into metals, or cash, the wheels of commerce grind to a halt.

I often have trouble distinguishing my good ideas from the bad ones. So, I thought I'd throw this one out there for discussion. My bio should tell you, I'm not running for president.

[bearfund]

mark, you write that "If everyone moves into metals, or cash, the wheels of commerce grind to a halt". True. You know how to prevent that? Raise interest rates. If you want to use my money to build a bridge, expand a factory, or start exporting widgets to France, you need to offer me a decent return. Junk is yielding 10% right now; that's basically zero after inflation and all the risk is still there. I'll start buying dollars with my gold when 10-year Treasuries yield 10%. Until then, you're simply not offering me enough for my money. Lower interest rates spur growth? Not when the Fed is the only willing lender at those rates. All that does is kill the dollar and make existing investments less valuable. If the powers that be want to stimulate growth, they will raise interest rates into positive territory. Until then, you call can bloody well go to hell.

[johndaniels123]

money is what someone will take for a service or item.

one of the legs of possible recovery, tech, had failed...as we see earnings misses here in Q2. Meanwhile, these tv pundits are slapping each other on the back because citi only lost 2b this Q. merrill missed HUGE.

You can forget about an interest rate hike. There is no economic recovery, and we havent even hit the recession yet! they like to say we're getting throgh it, but it aint even started yet!

this is why the metals deflation over the last few days ammuses me. I suppose this is real dollar strength? sure feels like a manipulation by etf's or something, and not true dollar strength. besides, i'm not going to list the reasons why the dollar will weaken; we all know them.

the the only way the dollar can strengthen is ....it can't. there is too much debt, and no menas of creating more 'debt money" to keep the systme going.

so the dollar rally over the past couple days is flash in the pan...much like the rally just after the bear stearns fall...

i think the street is working on 2 very outdated, 'baby boomesque' premises:

1. the market will always go up; i.e. a general sense of optimism and forward thinking towards investments like stocks and real estate.

2. entitlements that will weigh down the system, and they actually expect the 'me' and the 'x' generations to support them?


lol.

[gollwoods22]

if you don't trust them with your dollars why in the world would you think your gold would be in good hands

[batmando]

OK, so one has now gone mostly to cash (with some GLD, CEF and SLW) and those dollars are sitting on the brink of a downhill slope.... (precipice?)
Converting low six-figures into physical metal has practical impediments to say the least, not the least of which, the tax consequences...
What's a safe haven?
e.g., distributing over multiple foreign currency etf's?
I'm fresh out of ideas

[Did U ThinkThe PonziSchemeWould Last?]

"I am conflicted because gold by it’s nature, is anti-growth, and doesn’t really help anything. It doesn’t build better infrastructure or create jobs."

Gosh, where to start. Do you think that trading stocks speculatively "causes" growth?? Dude, stock speculation is a pyramid scheme based on greater fools theory with some pompus structure wrapped around (brokerages, metrics such as P/E, P/S, etc.) it to give it an air of civility and credibility. Unless you are value investing, in other words, unless you are investing in dividend bearing stocks, then you are SPECULATING and that is a win-lose greater fool scam, PERIOD. Win lose is unsustainable because sooner or later the winners will have all the money and the losers will be broke. A sheeple can only be sheared so closely.

Today's stock market, which is mainly a speculation (gambling) tool, does not create value, it just redistributes it from the dumb money to the "smart" money. When stocks rise exponentially (like the Dow has over the past 10 years) it is not the creation of additional value but rather a measure of exponential inflation of the money supply which was done by fractional reserve banks creating credit from thin air which eventually found its way into every nook and cranny of our economy.

Anyone who doesn't understand that this must deflate now that credit is being withdrawn from the market at warp speed is going to get seriously disfigured by the markets over the next 2 years.

Let me put it a different way. The stock market has not created any value. The share prices are higher because the federal reserve has hollowed out the dollar and given part of it back to the economy and thus back into stocks. You have LESS value in the markets than 10 years ago and that is readily seen by looking at the chart of the Dow priced in gold instead of the dollar.

Despite appearances, nobody is making any value in the markets. They are simply getting taxed on the inflation of their dollars. They buy the shares for price A. Price A would be able to buy a certain amount of stuff (food, gas, clothing, gold). While invested, the dollar gets hollowed out by the fed (actually, the past actions of the fed at this point) and then back into the market which is used to buy more shares. Shares appreciate to price B and the sheeple think they have gotten ahead (received additional value). They sell the shares for price B. You pay taxes on A-B even though price B buys the same amount of stuff that price A did originally. YOU MADE NO VALUE. Instead, you just paid taxes on inflation.

How does it feel now that you know just how badly you have been getting scammed?

If you want to STORE wealth choose physical gold and silver.

If you want to INVEST then buy shares of equities which pay dividends greater than the rate of inflation. Same for bonds but you get the coupon instead of a dividend. Good luck finding a company which does this while at the same time not being a great risk to your principal.

If you want to SPECULATE and GAMBLE that you can find a greater fool to buy your shares in a bear market, buy most stocks.

If you want to figure out how much you really don't know about money and the economy, go read up on Ron Paul. He will open your eyes regaring the scam which is fiat money and the fractional reserve banking system.

[mark mchugh]

Dear Rambling Idiot,

I've read plenty of Ron Paul, so don't lecture me, dude.

Thanks especially for the CAPS LOCK EMPHASIS. I really highlights the POINT that you don't know ANYTHING.

Trust me on this, your post shows a complete lack of COMPREHENSION from one paragraph to the NEXT (I hope for your sake that you're drunk), so it really doesn't matter what you think you've read....

Keep mashing those keys though, if you keep at it you may eventually produce something coherent.

[Did U ThinkThe PonziSchemeWould Last?]

mark mchugh,

You attacked my style which is fine. But you could not attack the substance of my post. I suspect that you didn't understand any of what Ron Paul is trying to teach you.

Don't get caught up in your little web of political correctness for too long. The sugar coating is melting off that turdcicle you are sucking on.

[mark mchugh]

News Flash:

I'm already sucking on pure turdcicle here. Of course any one who actually read this thread knows that. Not you though, you read a sentence and started slappin' away at the keys. Good work, genius.

It's not my job to get you caught up, so you don't look retarded when you post. The "substamce" of your post is psycho pre-K and if you spent more time reading you'd know that.

I only wish that the Ponzi scheme collapsed before SPECULATORS put up the money to create the jobs, that developed the technology that connects dingleberries like you to the world.

Take you meds.