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Jeff Nielson is from Canada and is a writer/editor for Bullion Bulls Canada (http://www.bullionbullscanada.com/#content). He has a personal background in law and economics. Bullion Bulls Canada provides general macro-economic and political commentary, since the precious metals markets are among... More
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  • Bank ‘Reform’ Makes All Oligarchs Permanently Too-Big-To-Fail

    The Obama regime must feel like a jilted-lover, as Wall Street has chosen to expend the vast majority of their politician-buying dollars buying Republicans in the next election. After all, the Democrats have demonstrated that they can serve the bankers at aleast as faithfully and unreservedly as the Bush regime did before them.

    The crowning achievement of the Obama regime in serving its masters is the so-called “bank reform” in the Dodd-Frank bill – arguably  created by the Democrats’ two most dedicated banker-servants (outside Obama, himself). The goals for this so-called “bank reform” were numerous and explicit.

    There was supposed to be “regulation” of the derivatives market. There was supposed to be both the authority and the practical means of shutting-down the too-big-to-fail Oligarchs. There was supposed to be greater “oversight” (as in more than zero). There was supposed to be an end to reckless, bankster risk-taking. And overall, markets in general and the financial sector in particular were supposed to be made more stable (i.e. protected from reckless, bankster gambling).

    None of those goals has even remotely been accomplished. Indeed, it is arguable that the Obama regime (and Dodd and Frank in particular) actually managed to make things worse in every respect. No one has been watching both the bankers and the farce of bank “reform” closer than Gretchen Morgenson of the New York Times.

    In a detailed piece titled “Count on Sequels to TARP”, Morgenson explains the Democrats’ most-important failure - in the derivatives market. The “clearinghouse” which was created in the new legislation does virtually nothing to either regulate derivatives, nor to make them more transparent. Indeed, all it really accomplishes is to increase “liquidity” for the bankers – which always translates into the banksters simply ratcheting-up their leverage even further.

    As if this wasn’t bad enough, instead of merely having the implicit backing of the U.S. government in back-stopping the reckless gambling of the Oligarchs, an explicit government guarantee has been created for this “clearinghouse”.

    In other words, all the clearinghouse actually accomplishes is to create an explicit, unlimited “tap” of government funds – directly from the printing-press of the Federal Reserve and/or the coffers of the Treasury Department. Having “guaranteed” (and nationalized) the entire U.S. mortgage market, having provided a (literally) infinite “guarantee” on Fannie and Freddie’s endless losses, the U.S. government is now explicitly backing the $1.5 quadrillion derivatives market – which is more than twenty times larger than the entire, global economy.

    The Obama regime (and their apologists) will disingenuously point to the “resolution authority” that was created in the so-called reforms. It is obviously totally meaningless. Governments could pass the “resolution authority” to end poverty, hunger, violence, or even to fly to another galaxy. Creating the authority to do something is irrelevant when there could never be a practical means of exercising such authority.

    Specifically, in every meaningful way, the Obama regime has made the Wall Street Oligarchs even more “too big to fail”. To begin with, all of the Oligarchs (except AIG) are much bigger than before – having not merely been allowed to cannibalize many of their former brethren, but receiving $trillions in government hand-outs/guarantees/loans (mostly from Republicans) to facilitate their rapid expansion.

    Those funds provided to Wall Street were explicitly given in return for the Oligarchs’ pledge to increase lending in the U.S. economy. The Oligarchs did the exact opposite – greatly reducing their lending, and spending all the money on buying-up other bank assets and increasing their reckless gambling – with the derivatives market having roughly doubled in size since the Wall Street-induced “financial crisis” began.

    So, the Oligarchs are much, much bigger. They have doubled their reckless gambling, and now the U.S. government is explicitly backing their private casino: the derivatives market. What this means is that in the next systemic crisis created by Oligarch-greed, the argument which will be advanced (by both Republicans and Democrats) is not that the Oligarchs have to be saved because they are “too big to fail”. Even for the apathetic sheep of the American electorate, this would be too great an outrage.

    No, in the future, unlimited and infinite funding of the banksters’ gambling will be provided by the U.S. government because with the U.S. now “guaranteeing” an amount which exceeds twenty times global GDP, it is the solvency of the United States, itself which is now directly on the line in each-and-every future crisis created by these bankers.

    Thus, the political “spin” which both halves of the two-party dictatorship will use to “justify” TARP II, TARP III, and TARP XX is that they must give the Oligarchs anything and everything they ask for to prevent the United States itself from being bankrupted from these future “crises” (i.e excessive Wall Street gambling). Obviously, if you ever intend to “cure” gambling-addicts, “guaranteeing” all their future gambling-debts is not the way to do it.

    In short, the U.S. government has made itself into a direct subsidiary of Wall Street: one which shares in 0% of the profits, but backstops 100% of the risks and liabilities. And with each and every current and future scenario, it is the entire United States economy itself which is now being “leveraged” by the Oligarchs in their gambling.

    It becomes harder and harder to feel sympathy for the American people. Instead of doing anything to prevent their serial-rape at the hands of the U.S. two-party dictatorship, all they ever appear interested in doing is to simply let the rapists “take turns”, with the Republicans about to be given their turn to do most of the “screwing”.

    As I made explicitly clear in my last commentary, there isn’t the slightest mystery as to the goals of the Wall Street Oligarchs, and the ultra-rich aristocracy they represent. They want all the wealth, all the land, and all the power. Meanwhile, the American people do nothing but meekly submit: to being nothing more than serfs.

    Having done nothing while the banksters’ took all of their government’s wealth (i.e. their own wealth), there are nothing more than a few, sporadic whimpers from the serfs as the banksters begin to steal all of their land. They had already taken all of the “power” in the U.S. many years before.

    Had the U.S.’s “Founding Fathers” been able to see into the future, and see the herd of complacent, American sheep give away anything and everything they fought for, one can only assume that they would have laid-down their arms and surrendered to the British – since the “King George” who ruled Americans in the 1700’s was a much more benign ruler than the “King George” and “King Barack” of the 21st century.

    [Disclosure: I hold no position in AIG]



    Disclosure: none
    Oct 24 2:02 PM | Link | 5 Comments
  • Profit, Policy and Propaganda

    Roughly a year ago, I wrote a two-part feature on the U.S. housing sector. I explained how this entire economic catastrophe was a massive, deliberate scheme on the part of the Wall Street Oligarchs. I pointed out how these fraud-factories methodically created the largest Ponzi-schemes in human history – so that they could scam all their victims (i.e. investors) on the way up, and steal tens of millions of homes from their other victims (U.S. homeowners) on the way down. The articles received little attention.

    Given that this massive, bankster fraud is now totally out into the open, I’m assuming that there will be a larger and more interested audience when I illustrate this again – armed with the benefit of hindsight.

    The first point to make to readers is with respect to mortgage securitization, as without this key element of their scheme, the Ponzi-schemes Wall Street could have generated would have only been (relatively) nickel-and-dime fraud – like Bernie Madoff. With mortgage securitization, the banksters were able to erect a $1+ quadrillion mountain of fraud (roughly equal to 2,500 “Bernie Madoffs”).

    Typically, U.S. banks had previously been allowed to leverage themselves by an average of roughly 10:1. In other words, every time a dollar was deposited with them, they would lend-out (or “invest”) ten dollars (invented “out of thin air”). While this is a reckless amount of leverage (and money-creation) to allow into any system which is supposed to remain “stable”, it did not represent a systemic threat to the entire financial sector.

    Then the banksters went to work. First, they convinced their weak-minded servants in the U.S. government that mortgage securitization was “a good thing”, which (supposedly) would reduce overall risk in the system – by spreading debt across a larger number of “players” in the market.

    In fact, the banksters never intended to reduce risk, but rather their plan all along was to dramatically ratchet-up leverage. In other words, instead of simply spreading-out the same amount of debt amongst more entities (which would have reduced risk) they used all the chumps they lured into their schemes as a means of piling-up much more debt – with everyone leveraged-to-the-max.

    However, the banksters were just getting started. The leverage being created via mortgage securitization was much more dangerous than anything which had ever previously been allowed to exist in any financial system – because not only was the total amount of debt much greater, but it was all interconnected. In the event of a crisis, banks and investors would be nothing more than debt-dominoes – where the failure of one resulted in the failure of all. To pacify so-called “regulators”, the banksters pretended that they were “insuring” all of this debt, which (they claimed) would eliminate any and all “systemic risk”.

    The pretend-insurance they created is called a “credit default swap”. These are the most-leveraged financial products ever invented in the history of human commerce. A handful of Wall Street Oligarchs (with only $billions in operating capital) claimed to be insuring $60 trillion of the banksters’ other scams – an amount equal to total, global GDP.

    Through the combination of mortgage securitization and credit default swaps, the Wall Street Oligarchs – instead of “reducing risk” (i.e. leverage)  – had tripled their leverage, to an average of 30:1 (across the entire U.S. financial system). By itself, this ridiculous level of leverage screams out “Ponzi scheme”, but that was literally only half the picture.

    To create all of this reckless leverage in their Ponzi-schemes, Wall Street had to round-up enough chumps to borrow all of the paper they were creating out of thin air. The problem: real wages for the average American had already been falling steadily for thirty years. Americans were barely able to cope with the level of debt they held before these scams were commenced – meaning they weren’t creditworthy enough to justify lending-out one dime more (let alone trillions of dollars).

    The Oligarchs had a “plan” for that, too: they simply tore-up all lending standards across the entire U.S. financial system. The servant-regulators – and most-notably, New York Fed President Tim Geithner – did nothing. This alone was the greatest regulatory failure in human history. Geithner’s “punishment” for serving the banks, instead of the American people? He was promoted to Treasury Secretary, where instead of simply being told to go for a very long nap, he was now given the “privilege” of writing blank-cheques for his Masters.

    With no lending standards (and no regulators), U.S. financial institutions lent-out three times as much money to the same group of people (Americans), despite the fact they knew it would never be possible for that debt to be repaid. Trillions of dollars of fraudulent mortgages were written-up, which were 100% guaranteed to fail.

    Both individually and collectively, the banks (and the regulators) knew there would be defaults at a level which dwarfed anything else in human history. For all the banker-apologists out there – still pretending that the largest asset-bubbles in human history (by a factor of ten) were just an “accident”, we have proof: MERS (“Mortgage Electronic Registration Systems”), which was created just prior to the beginning of this “wave” of securitization.

    There could be no possible reason or justification for the creation of MERS, except as a means of “expediting processing” (if you like euphemisms), or expediting fraud (if you don’t). MERS was intended to “process” mortgages (and later, foreclosures) like a fast-food restaurant.

    The bankers call MERS a “registry”, but it is nothing of the sort. A “registry” is a system for the filing of verified documents. In the case of our land-title registry, this was a meticulous system which our societies have spent hundreds of years perfecting – precisely to eliminate fraud and uncertainty in our real estate markets.

    MERS, on the other hand, was nothing more than a data-receptacle. All it contained were the unverified claims of bankers with respect to property titles – with this same receptacle being owned and operated by those same bankers. While our land-title registry was a mechanism designed to eliminate any possibility of fraud, MERS was an entity which obviously facilitated fraud.

    Given a large enough computer, any reader out there could ‘become’ MERS – assuming you also had a fax-machine. You receive a print-out from a particular bank claiming to hold title to a particular property (and/or the mortgages accompanying that title), and “bingo” the bank is “title-holder”.

    To illustrate the concept in simpler terms, suppose I decided to create my own “neighbourhood MERS” – an electronic registry designed to “track” the titles of properties in my neighbourhood. My reason for doing this would be to “expedite transactions” – and save on all those pesky “filing fees” and “notarizations” which the stuffy clerks at the land-title registry insist upon.

    My neighbours could just send me e-mails to let me know who owns what, as well as notifying me when a sale took place. It’s much more efficient, and since I know that none of my neighbours would ever lie to me, it’s “win/win” for everyone. Of course if even one neighbour were to tell me a lie, then all the “efficiencies” instantly disappear – and all that remains is enormous uncertainty, and the unlimited potential for fraud.

    There could have never been any possible justification for creating MERS, unless the bankers had already (collectively) decided to create (first) “mortgage mills”, and (later) “foreclosure mills”.

    Thus, when Wall Street lent-out three times as much money to the same population – knowing they couldn’t individually or collectively repay those loans (primarily mortgages) – this was not simply a large group of very greedy individuals “running amok” (i.e. perpetrating fraud individually on a scale never before seen in human history). This was a collective scheme to first scam investors by selling them $trillions of “mortgage products”, knowing those mortgages would fail – and then once the mortgages failed, the banksters would swoop-in with their foreclosure-mills, and steal tens of millions of homes from American homeowners. Those were (and are) the “profits” which the Oligarchs intend to reap.

    To cover-up those crimes as long as possible, and to engage in stalling-tactics once the fraud was out in the open, the U.S. government has put every policy and propaganda-tool in its arsenal at the banksters’ disposal.

    With every “policy” adopted by the U.S. government to supposedly reduce the damage or even “fix” the U.S. housing sector (going back to the first, feeble efforts by the Bush regime), my own reaction has been immediate and unequivocal: none of these proposals was ever intended to “help” U.S. homeowners. Rather, all of these policies were stalling-tactics, intended to pretend to “do something” – when in fact the only people being “helped” by these housing band-aids were the bankers. Hindsight has demonstrated that my pronouncements here were 100% accurate: practically no one has been helped, and nothing has been fixed.

    Just as the U.S. government had a crucial role to play in stringing-along the American people with one totally ineffectual band-aid after another, so too does the U.S. propaganda-machine play an important role. Clueless and/or corrupt media talking-heads would regularly proclaim “bottoms” in this bottom-less market, while heaping praise on “government efforts” to (supposedly) clean-up the mess created by the bankers.

    With MERS and the banksters’ foreclosure-fraud now totally exposed, such propaganda is now completely transparent. The subservient “free press” of the United States of America publishes totally gratuitous and self-serving denials of wrong-doing by the bankers, by the dozen, every day.

    They quote bank-CEO’s claiming that all their foreclosures are “legal”, despite many documented instances where fraud and wrong-doing were 100% conclusive: such as the attempts by Bank of America to “foreclose” on homes which do not even have mortgages.

    They quote bank-CEO’s claiming that “all legal procedures are being followed”, while their foot-soldiers in the foreclosure mills openly admit in court testimony that they routinely committed thousands of fraudulent acts every day/week/month.

    Furthermore, the “denials” being published by media-shills are conclusions of law – uttered by bankers with no understanding of the law. In other words, their personal opinions have no relevance. Thus, what we have with the U.S. mainstream media are a collection of “journalists” who routinely publish statements which have already been 100% contradicted by known facts; and conclusions of law, uttered by people who know nothing of the law.

    Has the media done the same thing as Wall Street’s foreclosure-mills: hiring hair stylists and fast-food workers and students as their “professionals”? If not, the only conclusion open to us is that the U.S.’s corporate media has torn-up all standards of responsible journalism in the same manner that Wall Street banks first tore-up their lending standards, and then tore-up all legal procedures for foreclosing on their victims.

    I know there are still skeptical readers out there, wanting to live in the fantasy-land created by Wall Street’s servants in the government and media. To those readers, I offer Wall Street’s “play-book”, written many years before their securitization-scams began: “The Bankers Manifesto of 1892”.

    “…Capital [i.e. the bankers’ wealth] must protect itself in every possible manner through combination (conspiracy) and legislation.

    The courts must be called to our aid, debts must be collected, bonds and mortgages foreclosed as rapidly as possible.

    When through the process of law, the common people have lost their homes, they will be more tractable and easily governed through the influence of the strong arm of the government applied to a central power of imperial wealth under the control of the leading financiers. People without homes will not quarrel with their leaders…”

    Plans have also been made for Americans after they lose their homes. While all other U.S. construction has died out, “private prisons” are being erected all over the U.S. – where the poor can be “warehoused”, and used for slave-labour, in fine, Dickensian fashion.

    While many U.S. judges are corruptly rubber-stamping the banksters’ fraudulent foreclosures, other corrupt judges are ensuring that these private prisons are never short of “occupants” – resorting even to locking-up innocent children as their slaves.

    Incredibly, even after all of this fraud, corruption, and malevolence has been exposed, there are still large numbers of Americans who are siding with the banks – totally oblivious to all bankster fraud, and only worried that their neighbour(s) might get “a better deal” then themselves.

    The “Bankers Manifesto” predicted that too:

    “…By thus dividing voters, we can get them to expand their energies in fighting [each other] over questions of no importance to us, except as teachers to the common herd…”

    Of course the bankers didn’t dream-up “divide and conquer” – that’s a war-strategy many centuries older than the “Manifesto”. It’s simply been incorporated into a new “war”: class-warfare between the bankers (and a small number of their ultra-wealthy clients), and everyone else.

    [Disclosure: I hold no position in Bank of America]



    Disclosure: none
    Oct 22 1:59 PM | Link | 1 Comment
  • How High for Gold and Silver? Part II: Hyperinflation

    In Part I, I presented readers with a very strange scenario.  We have had the price of gold and silver surging higher for a decade – as a response to unprecedented currency-destruction by our desperate and reckless central bankers, and endorsed by our political “leaders”, who serve those same bankers.

    Thus, the surge in bullion prices has had little to do with the (absolute) “value” of gold and silver rising, and everything to do with the crisis of our paper-money being relentlessly driven toward zero. The monetary phenomenon where currencies approach zero is referred to as “hyperinflation”.

    The Wikipedia “definition” of hyperinflation notes that there is no consensus on a definition of this term, but puts the most emphasis on the particular definition of “at least” 50% inflation per month (and compounding). This equates to well over 1000% per year, or roughly 100 times as much as almost any of us has experienced in our lives. Many precious metals commentators (including myself) have warned that hyperinflation in one or more Western economies (starting with the U.S.) is a highly likely result – if not a near-certainty (and yet few of us endeavour to specifically define it).

    Now we get to the “strange” part. As a matter of simple arithmetic, we know that as a currency goes to zero, the price of goods (such as gold and silver) goes to infinity. Yet despite a plethora of hyperinflation warnings, when we look around for estimates/predictions of the future price of gold, we see numbers that go no higher than about $10,000/oz. Even those who never excelled at math know there is a gigantic gulf between the number 10,000 and infinity (starting with millions, billions, and trillions).

    There are only a few ways in which we can attempt to resolve/explain this logical paradox. The price-targets could be only “medium-term” rather than long-term price targets, but I personally don’t recall seeing use of the phrase “medium-term” in most such analyses. The price-targets could be the “predictions” of these commentators if-and-only-if hyperinflation does not occur. Again, my own recollections are that most other authors are not making this distinction.

    This leaves only one other possible explanation for this logical disconnect: precious metals commentators (including myself) are unable to truly understand hyperinflation, and therefore our “predictions” for future prices are a reflection of this lack of comprehension. I will argue that this is not only the obvious answer, but the only answer which fits – given our level of comprehension of such economic (and mathematical) phenomena.

    While hyperinflation is a term with which most people are familiar, familiarity in no way implies comprehension. We’re familiar with the stars in the sky. However, none of us are capable of envisioning an object either as large, or as hot as these infinite number of other “suns” above us. Indeed, what we are most incapable of understanding when we look up into the night-sky are the number of stars, themselves: infinity. I doubt that I will get many objections when I say that the human mind is unable to grasp the number “infinity”.

    If I were to ask some highly-intelligent stranger whom I happened to pass by on the street to “define” infinity, most likely I would receive some sort of dictionary-definition in reply. However, if I asked the same person to describe infinity, the response is fairly predictable. The other person would pause, and then confess an inability to do so – citing the fact that we lack the words in our own language necessary to embody that concept.

    Clearly it requires some intellect of near-infinite capacity in order to genuinely “understand” (and thus be able to explain) what the mathematical concept known as “infinity” really represents. Not being able to grasp infinity, this immediately means we are unable to understand ½ of the hyperinflation “equation”: prices (including the price of gold and silver) going to infinity.

    Getting back to the Wikipedia definition (or any of the alternatives), we encounter a fundamental problem: what is the use of a definition which none of us can really comprehend? Can anyone imagine weather 100 times “hotter” than the hottest day of our lives? Can we envision and comprehend sound 100 times louder than the loudest rock-concert?

    A definition which no one can understand is, in fact, no “definition” at all. This leaves us with another paradox: trying to define something beyond comprehension. Clearly any useful definition must be in terms where comprehension is at least possible for most members of society.

    This leads me to a definition which is accessible, if somewhat imprecise: hyperinflation is an economic phenomenon where prices cease to have meaning. Whether we are referring to the the miniscule, residual value of a currency, or the exponentially spiraling prices of all goods, once the progression of such numbers has expanded beyond our ability to firmly grasp their relative value, we can safely conclude that we have entered a hyperinflationary spiral.

    Some will argue that whatever my “definition” gains in terms of being accessible, it loses for lack of precision. My rebuttal to that is that we appear to already have some crude “demarcation point” for when the hyperinflation spiral begins: when the price of gold hits/approaches $10,000/oz. While some will argue that this is nothing more than a convenient (and arbitrary) “round” number, in an economic phenomenon as massive as hyperinflation, simply being able to identify the correct “order of magnitude” for when hyperinflation may/will begin is about the highest level of certainty which we could reasonably seek to attain.

    Before I proceed further in this analysis, there is the flip-side of the hyperinflation equation: our paper-currencies going to zero. Here, if I try to argue that no one “understands” this half of the process, I am certain to get an argument.

    Everyone understands “zero” (or will claim to), and so most people would (erroneously) assume that they could “understand” the process of our currencies moving toward zero. This is the logical distinction which will be difficult for many to grasp. While we may have a crude grasp of the numerical significance of zero, this in no way implies that we would understand the process of something shrinking to such a minute size that it almost equates to zero.

    Remember that we are merely examining the flip-side of hyperinflation: prices go toward infinity while the currency plunges toward zero. Having already established that we cannot grasp the upward movement in numbers toward infinity, it is logically absurd to then claim that we do understand the exact opposite phenomenon: the plunge toward zero.

    For stubborn readers out there, who refuse to accept the logic of this proposition, here’s a question for you: can you really claim to “understand” how big an atom is? Or, how “big” is an electron, or a “quark”? If we acknowledge being unable to understand the size of objects millions of times larger than anything we can experience in our everyday lives, we must equally acknowledge the incapacity of our minds to comprehend objects which are the tiniest fractions in size of objects with which we are familiar.

    In short, if we are unable to visualize atoms and electrons and quarks, then this lack of comprehension must equate to being unable to comprehend currencies which are worth only the tiniest increment of their current value. While some readers may consider this some useless exercise in philosophy, there is “a method to my madness”.

    Having demonstrated that none of us is capable of truly understanding hyperinflation (and numbers moving extremely rapidly in opposite directions), it stands to reason that none of us is capable of properly preparing for hyperinflation. In other words, if we try to “think” of what we need to do, and what sort of financial “insurance” we need for such a catastrophe, we must acknowledge that our planning will be defective. More specifically, since we are unable to understand the severity of this economic phenomenon, this directly implies that we will under-prepare for it.

    Immediately, prudent individuals out there will begin to mentally review their own preparedness for this possibility – and hopefully revise such planning to some degree. Yet, as alarming as it is to suggest to even informed readers that they are likely “under-prepared” for what lies ahead, this is only a minor shock, in comparison to a much greater horror.

    We are being “led” by people who (we now know) are totally incapable of understanding hyperinflation. Yet, simultaneously these esteemed heads-of-state and bankers are willfully engaging in reckless monetary policy where the “goal” is to take us to the brink of a hyperinflationary spiral – and then to pull-back on such recklessness.

    We have a century of detailed history to provide us with empirical evidence of the skill/success which these bankers have had in administering just the “right amount” of monetary medicine for a variety of economic scenarios. In virtually every case, these “experts” over-shoot their “targets”.

    Until now, the recklessness and gross incompetence of these bankers has had only relatively minor (negative) consequences on our lives and economies – and these failures occurred with respect to sets of parameters which (supposedly) these expert-bankers completely understood. What should we expect today, where the same bankers are responding to totally unprecedented economic events with reckless (and totally untested) monetary policies – designed to take us only to the “brink” of a much larger, much more horrifying economic event, of which they don’t have the slightest comprehension?

    To refer to current, global economic policy as “the blind leading the blind” is clearly an insult to those individuals who have lost their sight – in a number of ways. First of all, many blind people learn to “navigate” their lives with a much greater level of success and expertise than our central bankers have displayed in “navigating” our economies with their monetary policy.

    More importantly, blind people realize they must adopt a higher level of prudence in their lifestyles – through being robbed of the sensory perception which alerts us to many types of risks/threats to safety. Central bankers have no such comprehension – as they pathetically stumble about, merely pretending to understand what is happening, and pretending to understand their own “solutions”.

    Imagine taking the two, worst drivers in the world, putting them behind the wheel of a car, and then having them play a game of “chicken”. Now imagine these same two drivers being goaded-on (if not whipped into a frenzy) by a large group of spectators who are betting on this game (lets call them Wall Street bankers). Is this a scenario which is likely to end well?

    Fear of the “unknown” is a very common reaction in our species. This fear manifests itself in a nearly infinite number of ways. We tend to fear people who are different from us, with this fear being so magnified in many members of society that it constitutes a mental “condition”: xenophobia. Similarly, we have many other “fears” in our day-to-day lives, with most of us having at least one form of “phobia” – or excessive fear with respect to some aspect of our life-experience.

    We recognize such fears as being irrational in origin, and stronger-minded members of society will tend to try to overcome such irrational fears. While fear is generally an emotion which is a purely negative facet of our lives, rational individuals will never attempt to suppress or ignore all such fear – to the point where they abandon all prudence in their lives. And yet this is exactly what our governments are intent on accomplishing.

    A metaphor comes to mind: a submarine, traveling deep under-water, with nothing but a tiny periscope to guide it – and absolutely no “radar”. In our economic metaphor, we know there is no radar, because we lack the technical capacity to construct “radar” capable of “seeing” hyperinflation ahead of us.

    Damn the torpedoes, full-speed ahead!” shouts Admiral “Helicopter” Ben Bernanke.

    Which way are we going?” asks First Mate Tim Geithner.

    Who knows? Who cares?” snarls Admiral Ben, “Let’s just get there as fast as possible…”

    I have provided readers with a long list of rational, carefully constructed reasons as to why we all need to “insure” our economic well-being with precious metals – real “physical” bullion which we can still purchase at reasonable prices, and which is a tangible form of wealth, beyond even the destructive capacity of our leaders and bankers.

    Today, I will break with that pattern, and advise people to protect themselves based upon fear. However, the “fear” which I’m asserting as a reason to engage in further protective measures is not some irrational, or unquantifiable fear of some unknown economic future. No, the “fear” which should motivate us to increase our own preparedness is the fear of the clueless idiots who are in charge of our economies.

    Dealing with economic problems of which they have not the slightest understanding, using the most-reckless economic policies in history (and thus totally untested ones) to try to “fix” those problems, and arrogantly rejecting even the possibility of a much greater catastrophe (hyperinflation) – which they comprehend even less (if that is even possible) is the scenario facing us. Even the most-depraved minds in Hollywood are unable to devise a “horror story” any more frightening than that.

    There is an opposite psychological phenomenon to fear: mania. While rational readers would probably express a desire that our leaders not be overly fearful – since timidity can also lead to negative repercussions – I think it is safe to say that no sane reader out there can possibly be comfortable with the collection of literal “maniacs” who lead us today.

    In many respects, we have no one to blame but ourselves for the reprehensible condition of our economies, after all, in our pseudo-democracies we are the ones who have put these maniacs in charge of us. Sadly, ridding ourselves of these ignorant, arrogant, incompetent, and oh-so reckless leaders will prove much more difficult than putting them in charge in the first place.

    This strongly suggests that the harm being caused by these maniacs is still in its infancy. Meanwhile, hyperinflation looms before us, like the Mother-of-all-Icebergs. For all those who expect our current collection of leaders and bankers to skillfully navigate our economies around that iceberg (using nothing but their own, tiny periscopes), just sit back and relax – while humming the tune “Happy Days Are Here Again!”

    For everyone else, buy gold and silver.



    Disclosure: none
    Tags: GOLD
    Oct 18 2:16 PM | Link | 7 Comments
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  • Fixed-income investments are totally insane in the current environment, and we can't hold all our wealth in gold and silver bullion.
    May 5, 2009
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